Latest news with #Robert'Bob'Powell
Yahoo
7 days ago
- Business
- Yahoo
Inside the silver tsunami: 4.2M Americans turning 65
Are you part of the record-breaking cohort of people reaching retirement age this year? On this episode of "Decoding Retirement," Robert 'Bob' Powell speaks with Fiona Greig, global head of investor research and policy at Vanguard. Fiona discusses how to generate steady income to last through your golden years, and sheds light on helpful tools like auto-enrollment in company retirement plans and asset calculators to give your retirement a boost. Yahoo Finance's Decoding Retirement is hosted by Robert Powell. Find more episodes of Decoding Retirement at
Yahoo
27-05-2025
- Business
- Yahoo
College is pricier than ever– here's how you make it cheaper
College has long been seen as a ticket to the middle class, but does that still hold true when paying for college seems more and more out of reach for the average American family? On this episode of "Decoding Retirement," Robert 'Bob' Powell speaks with Tricia Scarlata, head of education savings for J.P. Morgan Asset Management. Both being parents of college-age children, Bob and Tricia talk about the importance of saving early in tax-advantaged accounts, being realistic about financial aid, and how retirement savings are often affected by paying for your child's education. Yahoo Finance's Decoding Retirement is hosted by Robert Powell. Find more episodes of Decoding Retirement at College matters. It can lead to higher income and lower unemployment, but tuition costs are rising and so knowledge of financial aid and 529 plans is essential to making college more affordable. And here to talk with me about that is Tricia Scarlatti. She's the head of education planning at JPMorgan Asset Management. Trisha, welcome. Thank you. So I want to start not with that so much, but with recent news, uh, right now wending its way through, uh, the House of called the Student Success and Taxpayer savings plan. There are two elements to it. One called the repayment assistance plan, and then there are some borrowing limits that are being proposed, not law yet, but can you provide any insight onto this? Sure. I mean, look, this administration said they were going to try to tackle financial aid, and so they are trying to tackle it, you know, they are simplifying it. This particular proposal is simplification, know, what does that mean? That means that some of the flexibility that was there before it would go away. So that would be like save and IBRs and public loan forgiveness. That's correct, yeah,yeah, and, and, and I think what they're also trying to do is they're trying to eliminate this, you know, ongoing debt that the debt keeps going on and on. I think that's what the goal is, you know, some say the goal is to, you know, help the and some say the goal is to make people more aware of exactly what they're getting into and really hopefully maybe trying to get these institutions to look at what they pay because you know it's like anything else the institution gets more expensive people take out more loans. Who knows what's going to happen. These things evolve. We saw it time and time again with forgiveness. I'm not sure that this is going to pass, but we'll see. We'll keep an eye on it, right? I mean, just on the topic of debt for those who go into of the cost and and the benefit of going to maybe a school where you incur that debt, is that problematic per se on the face of it, you know, I think it, look, I think that the standard or the school of thought, right, is that you really shouldn't take out more debt than you expect to earn in year one, you know, so if you think you're going to earn $50,000 or $60,000 in your first year, you really shouldn't be taking out more debt than if you start to look at the percentage, so you don't want to really go higher than 10 to 15% of your gross income, right, because that payment starts to get hefty. You're talking $500.06 $700 a month. You're just getting out of school. That's a lot of money, right? So that, decision has to be made when you're a senior in high school before you commit. I think you've got to be really starting to have that conversation a lot earlier, Bob. I think, you know, we just talked about there's so many options. You don't have to go to the most expensive school. I mean, these, there's, you know, state schools are a fraction of these private schools or, you know, in our college planning essentials guide, one page that we have in there is the community so you could reduce your total cost by almost half if you went to a community college for the 1st 2 years and then the last 2 years go to wherever and have that experience. Look, these conversations need to happen really early on because it's very hard for parents, and we know this to say no and that's when we get in trouble. It'shard, but I can tell you firsthand we have a cousin whoTo a community college for 2 years and then went to Columbia for 2 years and it worked out perfectly fine there, right? No one knows about that community school for the most part, you know, certainly when you, you do a job application, you have to say the schools you went to. But at the end of the day you're writing on that resume Columbia. I graduated from Columbia, so it's where you got that diploma. Yeah. So the other thing when my, we have 4 children in my case, triplet uh we had hired a consultant who ultimately said to us, you want to apply to schools where you'll be in the upper quartile of incoming freshmen based on your standardized scores and your GPA. That's where the most merit aid is not enough people know that. No, and, and I do talk to families about that quite often because if you look at what the averageFamily got last year in aid. It's about $12,000 not a ton, but the most money you can get, and that's averages and we know how averages work, right, but the most dollars you really can get are those merit dollars and so yes, if you have a child to, you know, if you have a Yale student, a Yale student, someone who could go to Yale, wonderful, that student applied to somewhere like Providence College, let's use that as an example, Providence is going to give that kid a lot of money and so I always encourage families to not just apply to a school that you think your kid's going to get into and schools that are a reach, but also apply to those schools. Same if you're if you're applying apply to a private school that you know is a guarantee get in because you can use that to help leverage and get potentially more money from some of the other institutions but then you can make an educated decision. Hey Bob, you're getting $30,000 from here you're getting nothing from here so do you want us, do you want to take on, you know, $50,000 of debt or do you want to take on 100?It's an educateddecision. Yeah, it's in a number of books that I've read, either they talk about it as paying either wholesale or retail or fully funded versus full price. Exactly. I mean, and and again, it's, it's really knowing what that number is going to be, and I encourage families to not only know the cost, what that number is. My son went to Fordham. I think Fordham's $92,000 now. Thankfully I do not pay $92,000. But then look at what could you potentially get in aid. So will your child get merit? My son got merit from Fordham, so got a very nice scholarship. Again, Fordham was not a reach for him. It was, you know, a target got that money and knowing that number is how you can begin to plan and so most people just kind of don't do that extra research and a good way to look at it is just go to the institution and go to their net cost calculator. So if you went in and Googled Fordham University net cost would be able to, you get right to their net cost calculator and you could quickly find out what that institution will cost for you based on a couple inputs. Yeah, you know, a lot of folks you recommend that I do because you can school, their high school, where were people previously that got in and ask that question at your high school. I remember, I, you know, I wanted my son to go to Villanova and I remember he would never have gotten in unless he ED'd. So I'm, I, you call that guidance counselor and you asked that guidance counselor last did the ED students that got in, what were their stats, and they can tell you that. They can't tell you the student's name, but they'll say, you know, one kid was a 92 GPA with a 1400, another kid was a 90, you know, whatever those stats are, you can find that out and you can also get it on Naviance. Yeah, look, you got to figure out a way to make yourself stand out. It's just like in a job. So if you'reApplying to a competitive school, you know, and your and your child's in high school, how can they stand out? You know, there's so many athletes, there's so many kids with goodgrades to Costa Rica. It's tough. It look, it's tough, but we both know as parents, they always wind up where they should be they should be and if they make the most of it, it doesn't really you go, absolutely that is 100% correct. 100% on where you go. The other thing that I think sometimes gets lost in the discussion is that people can appeal the aid that they're getting and maybe don't do that often enough. I have an anecdote where a friend of mine, his daughter got into UConn and Syracuse. Syracuse didn't offer a lot of money, so UConn seemed like the more affordable they appealed not once but twice and made it as affordable as UConn. Appeal, appeal, appeal. I did the same thing and it does work. Look, there's going to be a point where they're going to say no, that's it, but this is where you use leverage, you know, where, you know, I remember encouraging my son to apply to another private school that know, a tear down again just as I mentioned before. So let's use that as leverage because you can't, you can't use a private institution and a public institution. So you can't say my kid got into Binghamton and Binghamton's only going to be 25, and for them, I want you to be 25. They'll say that's not apples to apples, but you should absolutely appeal. What you want to do is for financial aid, true want to go to the financial aid office. If it's merit dollars, you want to go through admissions and don't just send an email. Hey, I need more money. We all need more money. Tell them what you specifically are looking for and be realistic. If you go in and say I need another $30,000 and they've given you 250, it's not happening. Be and go to the right, go down the right pathwaysto the right folks. This is really helpful. I, and I have to say it spans the gamut. My daughter ended up going to the University of Wisconsin in Madison, and you would say we live in Massachusetts. There's no way that she's going to get any sort of aid at all. But lo and behold, they have an alumni association that gives out, right, grants and undergrads and it was a surprise because otherwise my daughter would have ended up at not a bad choice. UMass Amherst, not a good school, but yeah, but it made UW Madison as affordable as UMass Amherst. So interesting, you know, and I tell families all the time, Bob, leverage your again, go to your guidance office. There's a lot of community-based, that kids can kids can be applying for. Some of it's just essays. Yeah, it takes a little bit of work. It takes a little bit of work. Talk about essays. So my wife does some coaching on essays, and in one case, a student that she worked with uh went to University of Rochester and in her, um, a letter of acceptance they actually which is the first time, right? So somehow, some way someone actually read the essay and it resonated. Wework very closely with a couple different private counseling firms, um, that counsel families on how to get into whatever the college of their dream is and, and, and sometimes we'll go and present on how to get in, or how to afford it, how to save and invest for it, but then also how to get in, right?And so they tell us that they read these essays, and that could be the deciding factor. I would take them very seriously. I really would. So when you think about helping kids with essays, does it matter that they get some help aside from their guidance counselor, that they go to outside help? Or look, I thinkyou need not, like, look, I think a lot of help. I will tell you, you know, I, I sent my son's essay to forward them around to not professionals but to colleagues, to friends, just take a look at.I think that's OK, but I think, look, the story needs to be realistic. They're no dummies. They know when somebody else is actually writing this, and I think the more authentic, exactly. Well today that that wasn't even an issue when he applied so much, but you know, I think the more authentic you can be, it's not that it has to be this, you know, far-fetching idea. You just need to be authentic in it and tie in something about that is that institution the place for you in your story? So, so I remember with him specifically he used sort of the the theme of the school, and I can't even remember what it was, but he tied that into the story that he was telling, and I think it was quite effective, you know, I hope it was, I guess it was, but I really do instruct people to make sure they're somehow tying into what they want to do somebody may be talking about, you know, I know somebody that's child talked about learning to ski and and doing sort of the, the, know, your French fries and pizza, French fries and pizza, and this particular child was applying for engineering and so tying that into engineering, sort of that thought around process, how do you learn being process oriented and achieving your goals. So think about that. How can you relate that essay back to what your degree is and what that institution provides? Yeah, I could talk about essays. I know, me too,me too. We're going to take a short break and when we come back I'll ask you all these questions. Tricia, don't go back to Decoding Retirement. Hi, talked to Trisha Scarlatta. She's the head of education planning at JPMorgan Asset Management. we would spent the whole first half talking about things that aren't even on my cheat sheet here. Get in isimportant, but I, I want to talk about the thing that I think troubles most parents when they think about saving for retirement and saving for their children's college education at the same time, which is to say two competing demands on your money and finiteresources. You know, I, I, and I know you know my colleague Mike Conrath talks about very similarly, you know, knowing that number, right? So, so your retirement number, what's your retirement number so what do you need to get to and how do you get there, but it's, it's kind of the same with college. So, so knowing what that number is and the number is going to be different for everybody because obviously schools costs are different but also not everybody's looking to 100%, so one family might only be able to pay for 50% or 25%. Another family is at 100%. So understand what that number is and not today's number, because you and I both know that tuition goes up 5 to 6% every year. So, so look at not where today's number is, but what, where, when your child goes, what that cost is going to year and then obviously you want to multiply it by 4 and then think about what part of that you want to cover is it 100%, is it 50% but also you know really be realistic about aid be very realistic about what you think you're gonna get. I mean I tell families all the time go to and and do the simulator. There's an estimator on there you can calculate what you may get as of today, um, and that know what that net number is, you know, look, families are doing a really good job saving. They are putting money away, but they're not necessarily planning and investing for college, which they are doing for retirement. With college they're not taking that next step, and you know my goal is to always talk about how if you're not investing and you're not potentially leveraging a 529 account, you're missing out on that tax and compounding over time and that ability to take that money out for qualified distributions or withdrawals tax free and cash is just not going to get you there. And so, you know, investing and leveraging that tax-free benefit is really what we try to encourage peopleto do, you know, it's we had Olivia Mitchell on from Wharton a little bit ago and then she had just published a paper on 529 plans and that theLack of knowledge that people had around 529 plans and choosing the wrong one made a big difference in how absolutely, absolutely. I mean, if you just look at the two accounts side by side.A taxable and a non-taxable account, all things being equal, you make a $10,000 contribution up front and then you subsequently put in $500 a the end of 18 years you have almost $42,000 more in the tax-free account. That's a big amount. That's in today that's almost 2 years of a public institution and so we've got to spread that word and 529 plans are very accessible. You know, you could some of them are $15 to get started and you have to think like I think people get discouraged because it's so expensive and they just feel like I'm not gonna do anything and and I'm not gonna take that next step, um.I encourage people to take the next step, leverage those benefits, because every dollar you put away today is less in debt in the future. Yeah, it's a great report, but one of the things that's mentioned in there is that 55% of families are delaying retirement by 5 years to pay for college costs. And, um, you know, I know there's been research that says, oh, it's worth delaying retirement by 2 years to make up for inadequate savings, but 5 years. 5 years is a long time. I mean, if you think about it, 65 to 70, 70 to 75, you know, those are meaningful years as we get older and I know I'm getting closer to those, those that age and, and so, you know, look, it's a family decision it's a family decision and what we have that parents do not jeopardize their college savings fund. They almost never take those dollars out early. They wait till that child goes to college and then they withdraw. What we do find is a lot of them are borrowing against their pay those tuition bills and that's where I always get concerned because when you start to borrow against your retirement or your 401k what we see is that most people then don't contribute and so a lot of times they're missing out on that company's that's free money, so you want to at least be doing up to that um and getting that, you know, that company match and, and, you know, to borrow against it, you know, isn't always and and and and and look we talk about in the guide for every $10,000 you borrow, you know, it winds up being $32,000 less. These parents are also taking out parent plus loans and retiring with those loans with those loans and, and look, those loans, the interest rates are high. You're looking over 9% for some of those, you know, so yes they are. I mean last year the average family graduated with about $55,000 in parents were, you know, closer to 30. The kid was about 25, so, you know, pretty split between the two. It's a lot of money to take on as you're inching towards retirement, and that's the age. I mean, I have a child that's graduating this this next weekend, you know, and you know, hopefully I'm getting closer to retirement. Yeah,exactly. Um, so the other thing that's new and different is I think it was secure at 2.0 where we had the ability to convert your 529 to a Roth IRA. There are all kinds of restrictions of course, of course, maybe talk about the opportunity that exists there. Sure. The one thing that this Roth IRA rollover has done is, I think opened more people's eyes to 529 plans because for whatever reason people think I'm so restricted. If I go into a 529 plan, my go to school. I'm stuck and so this is kind of giving folks a little bit of a comfort that I could always then roll it over to a Roth IRA. So let's talk about it. So the max amount that can be rolled over in a lifetime is $35,000 right? So, so it's $3,500,035,000. It you the account has to be open for 15 years, right? So they're, they're not letting you open this account and roll over. OK, so, so it has to be established for 15 years. The is the when you're rolling over that has to be the same beneficiary, so the Roth IRA has to be and so if I, if you were my beneficiary, your Roth IRA would be yours, not mine, um, and so, so the other thing to think about is you can't just roll over 35,000, right? So the max you can put into the IRA this year is 7. So if we use this year as an example, it would take you 5 years, right, to roll that over. But what a blessing, you know, I mean, so, so there are some around it, but we have another page in the guide that just shows like if you're able to do that $35,000 over 5 years, you know, and starting when the child is not child but the adult is 23, at 65 it's almost $400,000. What a blessing. What a blessing. I mean, otherwise the money would stay in the 529 plan and would have to either be given to next of kin or I mean there were beneficiaries. You can make yourself the beneficiary, so there's there's a lot of now you also have this, the ability to do that roll over and we are getting a lot of questions. I actually just got a question yesterday from an adviser just wanting to reach out to clients because they're, you know, all his clients whose children are graduating, letting hey, they, they have access in their account. You can roll it over now. So it's a, it's a true, it's a tremendous benefit. Yeah, so we have a little bit of time left, Trisha, and I'm curious, we've talked a lot about college. There are some high school students who won't go to college this year or perhaps ever. What advice do you have for them in terms of the skills and knowledge and abilities that they have to sort of enter the workforce andGet income and not be unemployed. Yeah, I mean, look, I, I, I speak, I go to Fordham a lot and talk to the students there, which I love, and they have the greatest questions and um it's so raw and real.I think a college degree matters, you know, I really believe that it matters and it's, it's $40,000 of more income versus, you know, a high school graduate versus a college graduate. So if you think about that $40,000 and you think about what the average family had in debt coming out of college, it's not that much more than that difference in income. So it's what, 15, we said $55,000 was the average family graduated with last year, the debt, but you're earning $40,000 more with that pretty powerful. So I still believe that a college degree is very important, and I think, look, today these kids have the world is the limit, much more so than you and I. We were told if I do AI. But we were told, you know, get a degree and go into a profession and that's what you have to do, be a lawyer, a doctor or whatever you and I are, um, these kids have so many options so but I still believe you need that degree. I'm a firm believer in the degree. Look, you mentioned earlier the unemployment rates are 50% for those who have a degree versus those who do not. So when it, when times get tough, you're better off having that degree. your human capital, right, your lifetime earnings will be all the greater, not all the greater, right, not just the and look, I have a child who I mentioned to you earlier, you know, I never thought he'd go to college and now he's a tremendous musician and he's going for music, you know, I don't know that my parents would have sent me for music, but these, there's so many degrees today. I mean there are so many different things out there. This, like I said, the sky's the limit for these kids. The education is really important, we've run out of time unfortunately, but, um, and there's lots more in the in the CPE that we planning we'll have you come back on and share more knowledge and wisdom about that in the future if you don't mind. Absolutely my pleasure. All right, that wraps up this edition of Decoding Retirement. We're glad you joined us and we hope that we provided you with some actionable advice to help you plan for or live in you can listen to or watch us on all your favorite podcast platforms, and if you've got questions about retirement, email us at yfpodcast@yahoo This content was not intended to be financial advice and should not be used as a substitute for professional financial services. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
What will "the new retirement" mean for you?
The new administration has made some people uneasy about the future of Social Security and whether or not it will remain solvent when they expect to retire. On this episode of "Decoding Retirement," Robert 'Bob' Powell speaks with Andy Smith, executive director of financial planning at Edelman Financial Engines, about facing retirement with a "one-size-fits-none" approach. Smith emphasizes maximizing tax efficiency for your income withdrawals, being realistic about your goals, and the impact of longevity on your retirement. Yahoo Finance's Decoding Retirement is hosted by Robert Powell. Find more episodes of Decoding Retirement at There's a new commissioner of the Social Security Administration, and we're going to talk about that and then some with our guest today, Andy Smith, who is the executive director of financial planning at Edelman Financial. Andy, welcome to Decoding Retirement. Well, it's, it's great to be here. Thanks for having me here. Oh, it's a pleasure, and I want to start off with the news of the day. Uh, we now have a new commissioner of the to me, there are a couple interesting things that he has said during his testimony before Congress. One is that he's not going to touch benefits, he's going to work hard to protect personal information, and that he's opposed to, uh, privatization of Social Security. I'm curious if you have any reaction to the news. Well, you know, clients have been asking about Social Security in different ways for, gosh, a number of years here. I think with this news, it kind of brings into focus, um, your, your first point specifically, right? We're not going to touch benefits. When I talk with clients, they see the news, they're trying to understand what's going on around them. And so the first things that I try to do is say, look, this is what's you talk about those different points. You talk about working away from privatization. You work, you talk about what's happening or not happening with benefits. So people want to know what's going on, but ultimately people want to know what that more importantly past that, people want to know what that means to them. So they see these news headlines. It could be Social Security, it could be tariffs. It could be any piece of data coming out of DC. Ultimately, people want to know, what does this mean for me right now? How do I need to be adjusting my plans based on things that are so entirely out of my control? Help comfortable with this. So I think these are good first steps. I think these are good 1st 1st notes from this new appointee. Um, ultimately time will tell and ultimately time will tell how people kind of feel about this and adjust their own plans so that they feel comfortable no matter what additional news comes out. Yeah, I don't think he talked about this in his testimony, but it's been floated around by the Treasury secretary that the possibility exists that Social Security will not be taxed and apparently about half of Social Security beneficiaries are now taxed at some level, and I suppose for them that would be good news, but there's some unintended consequences that I think people are unaware of, one of which is the fact that those taxes on Social Security benefits ultimately are used to help pay for Medicare Part A, and who knows what that means if um that money goes away. Well, I think it helps when people understand that, you know, over the history of the Social Security program there already have been changes, right? When, when the plan first started, you weren't taxed on any of the benefits, then up to 50% of your benefits could be taxed. Then up to 85% of your benefits could be taxed. So people hear these different news items, they see this different news come out of the, the, the new you know, ultimately people want to know what do I need to be doing now, if anything. Uh, a lot of the question is just what happens if different things happen to my benefits going forward. The idea is kind of run to the news, run to the trouble, figure out what it means, but then build that back into the plan so that regardless of whatever happens they're going forward, you know, ultimately what it meansto you. Yeah. And I think one of the biggest what if's, uh, Andy, if you don't on this is this notion that come 2033 benefits get cut by 20% if Congress does nothing. So I'm of the mind that people should be planning for the possibility of a 20% cut in benefits. Maybe not everyone, maybe those who are 50 and older and you don't need to do that. But if you're younger than 50, perhaps you need to start thinking about you may not get 100% of your promised benefits. I think it's appropriate. I mean this is just one example of what's appropriate in any sort of planning conversation, right? You have this baseline strategy. What's, what's going to be my income? What will be my expenses, um, what do I need to adjust for regarding inflation or taxes? And then you start building these what if scenarios. What if we see an across the board reduction in benefits of 10%?What if my expenses go up drastically? What happens if I lose my spouse 1015 years ahead of what we expected, and then you're adjusting Social Security benefits even then? So this is just one example where this, you know, these plans that people need to be putting together, these are them on the shelf, forget about them forever, pat yourself on the back that you went through this process sort of thing. These are active living breathing documents that you have to be understanding what happens when you change these different variables. So I want to talk about some of the research that you all have done at Edelman Financial recently. One of the things that I think is interesting is that you that you have found that people are moving away from this traditional retirement to a a new retirement. What does that look like from your perspective? I think it's important that people remember that there is no one size fits all solution to retirement, to retirement planning. There's no one right way to retire. So historically, we heard a lot about this desire to focus on relaxation and family time. Well, our everyday wealth in America report, what we found was that nearly 4 in 10 Americans, about 39% of respondents said that they want this adventurous retirement.42% of respondents said that they wanted to stay active. There is this growing number who are thinking about or even envisioning this minimalist or even nomadic lifestyle. So what that forces retirees or soon to be retirees to do, I think what that forces planners and advisors to do is that it requires everybody to think about how we're planning for these expenses so what I mean by that is, are you going to phase your retirement or will it come all at once? Meaning, are you gonna have part-time income? Are you going to be consulting, contracting as you're, as you're all over the United States, as you're all over the world, that travel that you're considering, you know, how much travel is it? When is it through the year, and you have to account for those regular and recurring so I think, you know, before it was, I think I'm gonna need this amount of money. We run that all the way through and we adjust for inflation, we adjust for taxes and everything else. I think with this concept of an adventurous or a nomadic retirement, it forces the conversation into periodic chunks. What are you going to beDoing for the 1st 3 to 5 years? What are you gonna do for the next 3 to 5 years after that? And if people can see how that kind of manifests over time, then they can feel a lot more comfortable about spending different dollars in different ways. Yeah. I'm all about this nomadic retirement. I have a dream of being in an RV and going from one national park to another. Um, unfortunately, my wife doesn't want to join me, so I, I think I'll be going alone, but that's OK for now. And that, and that's totally fine. But the thing is, have that conversation, talk about that, build that into the plan, because the last thing that you guys want to do is your T minus 1 from your collective retirement and you're still thinking one thing, she's still thinking the other. It's more like, how are we gonna make this work so that we're matter what happens infront of us. Yeah, that conversation is really important. One of the findings from your most recent research is interesting to me, you found that half of the people would choose a million dollars in retirement savings over 5 extra healthy years of life. And I think that this is somewhat interesting becauseUh, one, it shows some anxiety about maybe not having enough money to fund their desired standard of living throughout whatever period of time that might I also think it means that people are sort of overlooking the fact that they may in fact live that much longer in life. I just came back from the pension Research Council at Wharton University, and that was this the discussion of every single researcher was you're going to live a long life and planning for a 30, 35 year time horizon is imperative, especially if you are upper income, highly educated, etc. Um, I think it, absolutely. I mean, think about what the MIT Age Lab has been banging the drum about for years and years, right? People are living longer, what does that mean? How are you going to account for that existence in a different way than maybe your, your parents did or definitely your grandparents. So this trend that we're seeing, you know, people are afraid of outliving their savings. You know, there's nothing wrong with being old. There's nothing wrong with being you are old and poor, you can't ever make one wrong decision because the stakes are too high. You don't have those, those years, those seasons to unwind any potential issue. So these conversations that we're having around longevity, it's, look, do I have enough money? What happens if I don't have enough money? Am I too late in getting ready for retirement? And if I am too late, what does that mean?So then once we kind of analyze and and categorize those specific thoughts, people want to know what do I need to be doing. And so we had uh in April of this year, we had a, we did some tax research and what we found was that about half, about 45% of Americans, yes, they're prioritizing, you know, personalized professional advice on tax planning for retirement, but where they on age was a little bit different. The younger people felt much more comfortable about how they were going to approach things. The older respondents said that, look, I, I don't think that this is something that I need to be worrying about. So I think that that suggests that there's this educational gap that that we as an industry have to bridge and people need to plan for all aspects of their to be like, I just want a million dollars or I just want $1.5 million by the time I retire. Saving is important, investing is important, but people need to understand this long term plan is more than just what investment am I using and when do I want to retire. It's what am I going to be what am I going to be pulling, how much am I going to be pulling, and where do I pull my different investments from so that I can have a paycheck all the way through retirement. Yeah, so it's interesting because I always think that saving for retirement is easy. Living in retirement when you have to think about which account do I pull from in order to create tax efficient income is a quite a bit more difficult, and I'm curious, do you have some tax optimized withdraral approaches that you typically recommend for folks? Uh, we do. So I think the first thing that's important for people to understand is that if you, if you have put together this retirement plan, if you have put together this kind of holistic financial plan, hopefully,You have finally been able to see everything that has a dollar sign attached to your life. So it could be what's your income right now, what is likely to be your Social Security or pension income, uh, part-time income, how much does it cost you to live? These different investments maybe that you've been collecting over time, pre-tax, uh, 401ks, IRAs, Roth IRAs, brokerage you don't have that plan, the first thing that you have to do is put together this picture of what everything looks like, because until you know how much you have and where you have it, you're not going to be able to, to appropriately build that tax efficient drawdown strategy. And by tax efficient drawdown, I you first retire, and if you have yet to claim Social Security, if you have yet to claim pension, you might be in an incredibly low tax period, right? It, it could be the lowest bracket that you've ever been in in your entire life. What you pull out dollar wise and where you take those withdrawals might be different in that retirement to Social Security it will be once you start claiming Social Security or once you and your spouse start claiming Social Security. So it could be that you're taking money out of pre-tax 401ks or pre-tax IRAs. Yes, before required minimum distribution age, but you do that because you're able to take out money up to a certain point and not blow yourself up tax-wise. Once you claim Social Security or if you're working part time, if you have pensions, that may change to brokerage your any gains out of the brokerage account would be taxed at that long term capital gains rate, 15%. But here's the thing with that if you are single and earn less than 40 around $48,000 a year, or if you're married, filing joint and earn less than about $96,000 a year, there's a possibility that your capital gains rate might be, might be zero. So what do you take out? When do you take it out?All the way through up to and past requirement required minimum distribution age, but the idea is you have to figure out what you have and how much you have before you can ever build this sort of road map. Right? Eddie, we have to take a short break, but when we come back, I want to talk about more about your wilderness, um, adventures, so don't go back to Decoding Retirement. I'm talking to Andy Smith. He's the executive director of Edelman Financial, and before we took a break, I sort of teased the fact that we were going to talk about wild wilderness emergency medicine. And Andy, my understanding is that you have a background in wilderness emergency medicine, and I'm curious one, what that was and what are the parallels between that and preparing for planning for retirement. As he sounds like somebody's done their research. Uh, yes, there was, there was one point in my life where I was, um, I was working towards, uh, considering being a mountain guide. And so the first thing that I wanted to do was, um, go through the wilderness, uh, emergency medicine, um, kind of background. And so, uh, the march of, gosh, many, many years ago, I spent the month of March in the White Mountains in New thosearen't the White Mountains behind you, though, I don't think, are they? No, thoseare not the White Mountains, no, um, but, uh, it was, it was great, right? So in the mornings, you had the, the labs and then in the afternoons you had all the practical stuff and so you're doing all of these that you were studying in the morning. And so I think that there's, yeah, I mean, you, you, you talk about some parallels. I think there's definitely parallels, right? Um, one of the things that we were always taught was you plan for the worst, you hope for the best, but don't be disappointed with averages. And so these plans that we're talking about, people need to be putting together. Yeah, put everything together, build these different scenarios so that you can see in front of happens if this or this or this happens in these market environments or these economic environments or I lose my spouse 20 years before I thought that that was gonna happen. So you plan for the worst, you hope for the best, but don't be disappointed with those averages because if you can have those averages and understand what that does inside the plan, those are going to be the things that help you continue to move forward all the way through retirement. Uh, we were big on planning your work and working your it's not so much you going through this process and building this cash flow and retirement and financial plan. These are not set them on the shelf and forget about them sorts of plans. These are living breathing documents that you go back to, you revise based on your changing situation, based on the, the economic, the market situations that are changing around you. And the big thing that we always worked on was don't just build it, test what looks good on paper, what looks good in a classroom doesn't always work on the side of the mountain when it's 10 degrees below zero. So, have these plans, talk with people, you know, build this group of counselors and advisors around you want to work with people where this is not their first rodeo. You want battle tested advisors and counselors on your side because you may never have seen this before. You may never have been carried down the side of the mountain in a litter, but you want the people who have done this at least, you know, 1020, 100 different times. Yeah. I, I take it that you've climbed up Tuckerman's ravine at Mount Washington then? Well, there was, uh, so real quick, there was one time, uh, one afternoon where the, one of the instructors just patted me on the shoulder and said, come with me. And so we're out in the middle of absolutely nowhere. We are in and around the area that you're talking about, and basically they just left me for dead. And they said, put the pack over your head, we're gonna cover you with, with who knows what. And so you're out there and if you want to know what like, and if you want to know what tiny feels like, have somebody cover you up and hope that somebody finds you in the next 3 hours. Uh, not my cup of tea, but not, look at me now. This, I, you know, I am on this side of the mountain. Yeah. All right, so you mentioned financial advisors and before we took the break, what was interesting as you're describing how someone needs to create tax efficient income. You've got Roth accounts, pre-tax accounts, HSAs, Social Security, taxable, on and on and requires the help of a financial advisor or or team of advisors, including perhaps a CPA to help you with this. So there's not only on the income withdrawal side, but, but also sort of on the income strategy side, right? There are so many different strategies that people can choose from. I can choose a bucket or the 4% rule or a mix of, uh, annuities and, uh, and 4%, uh, and systematic withdrawal you have a sense of, one, the use and value of a financial advisor in helping you figure out the tax uh withdrawal strategy, but also the income strategy? Um, I think it's imperative that people absolutely consider working with a professional, you know, this is your first time planning for retirement. This is your first time taking that step into your first retiredday. And you only get one shot at it, right? I mean, this is like not the law of large numbers, right? This is the law of one number. Absolutely. And the thing is, people always need to remember that retirement is a one none approach. I remember I had two clients. I have two clients, brothers, and so they kind of lived down the street from each other, could not be more different in terms of how they think about money, how they approached money, how they've saved. So here are two people with similar backgrounds, similar parents, similar kind of histories with money, but they approach their own retirements so entirely so it's, I think it's important that you have these planners, these advisors, these tax professionals, attorneys, um, you know, around you, because like you said, you get one shot to get this right. So when people are thinking about, you know, if they're not working with an adviser, if they're not working with a planner, there's very specific things that that I always like them to ask. Number one is, you know, are you a fiduciary?Fiduciaries are required to place their customers' best interests before their own. And so I'm a fiduciary. Edelman Financial Engines were fiduciaries because we're doing what's in our client's best interests first, um, you know, how much is it gonna cost? What's the total cost that it's going to be to work with you? It's not just fees, it's fees plus investments plus transaction costs and everything else. You know, why are you doing this? If something happens to you, what happens to me?Take that and go off to the side, especially when it comes to the tax considerations. This is not just an investment management sort of game anymore. This is holistic financial planning because if it has a dollar sign,This is gonna be pretty important for you to to to try to figure out because as you retire, you have this wealth that you have spent a lifetime building. Now it's your job not to continue to save that and earn that, but how do you draw that down? Where do you pull the money? How do you pull the money? when and and where and how much?Taxes are a part of life, but to the extent that you know how the taxes work, where you're pulling dollars from, you have that tax efficient drawdown plan. That's why you need to work with investment managers, financial planners, you know, tax accounts or, you know, tax professionals, accountants, attorneys. You have to have all of this understood before you step off into retirement. Yeah, Andy, we have a little bit of time left and I'm curious for the 20-30 somethings that are listening to our podcast are just in the workforce and maybe saving for retirement in a target date fund oftentimes they may not have the assets uh to work with an advisor. What advice do you have for those folks who are saving for retirement but and primarily using a target date fund? Yeah, uh, first of all, congratulations. You are so far ahead of the game because you understand that you have to save. You have to think decades and decades down the way. I like people to remember two things when they're starting out. Number one, there is no one magical is going to solve all of your problems, right? So don't be suckered in by this hot stock or that hot stock or this annuity or that particular fund. The idea is you have to save as much as you can for as long as you can. And those target day funds that you talk about, right, this one investment that invests in different stocks, different bonds, and those allocations change as you get closer and closer to a particular date, i.e. your a great way for people to start out because it removes a lot of the thought from that entire process so that all you have to do is save as much as you can for as long as you can. But as people age, a lot of times their situations become much more complex. That's when the target date fund, it may work, it may need other things because your life is completely different now than it was 123 decades ago. it looks like we've run out of time for our discussion today. I so greatly appreciate you coming on and sharing your knowledge and wisdom with our listeners and viewers. Uh, thank you for being on the show and, and hopefully you'll come back in the future. I would love it. Thank you for having me. This has been great. Great. So that wraps up this episode of Decoding Retirement. We hope we provided you with some actionable advice to help you plan for or live in retirement. And don't forget you can listen to or watch us on all your favorite podcast platforms, and if you've got questions about retirement, shoot us an email at YF podcast@yahoo This content was not intended to be financial advice and should not be used as a substitute for professional financial services.
Yahoo
22-04-2025
- Business
- Yahoo
Key retirement plan adjustments you need now
With the current volatility in equities, people approaching retirement age are feeling nervous. Are they right to worry or can this newfound risk be effectively navigated? On this episode of Decoding Retirement, Robert 'Bob' Powell speaks with Chris Littlefield, President of Retirement Income Solutions at Principal, to discuss adjusting your portfolio to match the moment, common retirement mistakes, and how to tell when it's the right time to retire. Yahoo Finance's Decoding Retirement is hosted by Robert Powell. Find more episodes of Decoding Retirement at Given today's economic uncertainty, what are some adjustments you can make to your retirement plan if you're in your 40s and 50s? Well, here to talk with me about that is Chris Littlefield. He is the president of retirement income Solutions at Principal. Chris, welcome. Thank you, Bob. Appreciate it. Thanks for having me. It's a pleasure to have you here and it will be a pleasure to have you answer the very first question I posed, which is, given today's economic landscape, the uncertainty that people are facing, what are some adjustments, the most impactful adjustments that people, especially in their 40s and 50s, who have some time to make adjustments, can start making with their retirement plan today? Yeah, you know, I think,I think obviously with the uncertainty, the market volatility, I, I, I think there's, you know, the people that have got a financial plan and should stick to their financial plan and not overreact to what's happening at the market at any particular those who don't have them, they should, they should get a plan. They should be working with somebody. And obviously, there's lots of ways for people and Americans in the workplace to get advice. They can either speak to their employer, the retirement plan service provider, or they can also speak with an advisor. You know, I think, you know, everybody would benefit from some advice and holistic advice about how to address uh the needs that they have in but I, I think, you know, if you've got a good plan and you're saving regularly, I think the one, the biggest mistake that I see people make is they try to market time. They either try to make adjustments in their asset allocations, and the challenge with that is there's two decisions that you make. It's one thing to sell, but you also have to figure out when to when people are making these decisions, if you're out of the market in the first couple days after the market rebounds, you miss a very large percentage of the returns. So if you've got a good asset allocation, you've got a good plan of savings, stay the course. Don't let the short term news affect what is a long term you're in your 40s and 50s, particularly if you're older than 50, take advantage of all the opportunities to save on a tax-free basis in your 401k plan and make sure that if you can afford to do so, make those catch up contributions. There are significant opportunities for you once you achieve the age of 50 to save even more than the limits that are provided by the 401k plan. So, you know, I think it's just really important for people to have a some advice because confidence is increased as they talk to somebody, and, and don't overreact to market volatility they may experiencefrom time to time. Yeah, so when you think about having a plan, I sometimes think that having an investment policy statement is the plan to have, especially when we talk about saving for or living in I just went through this exercise. I serve on my town's retirement board. We managed $100 million and we just yesterday approved our investment policy statement for this $100 million retirement plan. And what we have is, uh, an asset allocation, some in large cap stocks, some in mid caps, some in small caps, some in international, some in bonds and government bonds, etc. then we have bands around which we say we will rebalance if things get overweighted or underweighted. And you know, do individuals need that kind of sophistication with their with their plan uh investment policy statement that says this is how much I'll allocate to this sort of investment and this is when I'll rebalance given these uh uh limits I have on, on my asset allocation. Yeah, I mean, I obviously it's a best practice, but very few of us are equipped to do that on our own, right? But I think that's where the professional advice that you get in something like a target date fund uh provides exactly that. It allows you to have professional asset allocation, a rebalancing, uh, over time, and exposure to a lot of different asset classes. You can also get that through a managed account vehicle as well, which is a vehicle where you have somebody who's advising on the asset allocation is helping you with the I think an individual needs it? Yes, ideally, but there have been innovations in the industry, particularly in the retirement space, like a target date fund that actually offer that in a very simple turnkey way that most people can connect with, as opposed to coming up with their own IPS or investment policy statement, figuring out what their weightings are, what their tolerance is, they have too much equity, it's not enough. A lot of that, most overwhelms them. And so it's easier to go into something like a target date fund that does thatfor them. Yeah. I, I'm curious, Chris. I, I often think that for people in their 20s and 30s, where perhaps their finances aren't that complicated, the target date fund works perfectly fine, but maybe as you get into your 40s and 50s, uh, a managed account may be the more appropriate solution. Maybe talk a little bit about the pros and cons of each approach and, and how you might transition from, say, target date funds to a managed account. Yeah, and that's a great question, Bob, and sort of you've seen some innovation in the industry. So let's just talk about generally, the target date fund works very well over a long term, but the, but one of the challenges, one of the criticism of target dates, it really only uses age, right, and to define your asset allocation. So more equity heavy in your early years as you get close to retirement, they add additional more fixed some of that risk away, uh, as you get close to retirement. And that, that has worked really, really well. What we're seeing, uh, people innovate now and uh certainly Principals, one of the people that are that are coming up with these innovations is a more personalized targetta that uses factors in addition to age. And so we can look at at the right data we have if you've got a defined benefit, benefit, if you've gotA lifetime annuity already, your exposure to equities can be higher than somebody who may not have a guaranteed income option. So there's a way to personalize that. And the same thing happens in a managed account. It's able to have an advisor that sort of looks at you, your personal circumstances, your personal needs for income, or what your own financial goals and obligations are, and being able to tailor an asset allocation for interesting thing you're seeing in target date now is you're also seeing what what people are calling hybrid target dates, right? Target date fun until you reach the age of 40 or 45 or 50, and then it's converts to a managed account option. So you have an asset all asset asset accumulation for 2025 years. But then when you get starting close to when you might need to start planning for retirement, it gets you into more personalized, it takes into account your as opposed to just your age. And I think that's been a really uh significant uh uh approach. Now there is a cost difference to that. There is a cost for providing that advice, but in many cases we see the people that pair up a target date fund with the managed account have better overall retirement income outcomes because that managed account is able to be personalized for their specific and uniquecircumstances. Yeah, if I think about one of the historic sort of of plan providers is this notion of that you have eyes on someone's defined contribution or 401k plan, but maybe not on their other assets, maybe, maybe they have rental income from a uh an apartment that they own. Maybe they have a lot of um uh stock from the company that they work at or maybe they have a lot of money in a taxable account. But so being able to have eyes on all their assets is really important as you think about building a plan that works for them. Yeah, I, I think that's right, Bob, and I think what we're seeing in the workplace in particular is for a long time people were OK with getting sort of retirement savings advice because they were really focused on accumulation. It was like, OK, how much should I be setting aside and how much should I save?And what we've seen with this wave of people that are retiring is, wait, now I'm ready to turn that accumulated savings into some sort of income for life. How do I think about that? How do I think about my asset allocation differently? And how do I think about it more holistically? So what we've seen is a switch in a demand from employers and employees around notJust retirement advice, but more holistic financial advice. Like, what do, how do I handle my debt? How do I deal with dependent care, whether that's an adult child, a child with special needs, a parent? How, how do I handle all of these potential challenges that come my way in the course of life, and being able to provide more holistic advice than just, hey, how much should I say? How how should I allocate myThat's, that's great for accumulation. When it comes to actually the spend down or the decumulation phase on your lifetime, it's much more personalized and everybody's circumstances are sounique. Yeah, increasingly, it seems like plan sponsors are being noticed for having uh advice delivered in the workplace as sort of a cutting edge feature of 401k plans. Is that something that youSort of would recommend or see that the future is one in which we deliver personalized advice, you know, boots on the ground, either in person or virtually by a human. I, I think so, yes, and, and so I think there's been a change, certainly over the last 10 years in terms of, there's a period of time when plant sponsors would sort of say, we don't actually want you talking to our employees or or giving them advice. We want you just sort of just do the record keeping and don't talk to them about the advice. You know challenge there's there's a demand pull from employees that said, I need help. I want help. INeed to feel more financially secure. Otherwise, I'm not going to be as productive in the workplace because I've got all of these challenges. And so we've really seen, probably starting in the large market first and then migrating down to smaller employers is there is definitely a recognition by employers that their people need help, that they need to be able to provide them that help, otherwise they're going to be more distracted with their own personal situations and may actually leave Um, and so this demand is coming from employees, and many more, I'm not sure I'd call it a cutting edge benefit. I think it's becoming much more common. I, I would say in the large market first, but what generally tends to happen in the larger employers tends to migrate down over time. So I would expect to see those more advice offerings happening, uh, more broadly over the next severalyears. So, Chris, you mentionedThe word challenges, I think one of the challenges that people face when they're planning for retirement is this notion of competing demands. They may be paying down debt, a home equity line of credit or student loans or credit card debts or auto loans at the same time that they're saving for retirement and it's always an interesting debate which should I pay down my debt or save for retirement, both a little of this or a little of that. Do you have thoughts on that?Yeah, you know, it's really hard to provide a a general rule on that just because everybody's circumstance is different. The interest rates that they may be charging if it's heavy consumer debt could cause you to want to pay down the debt faster than saving for a time. There's a lot of factors that go into it. What I would say is, it's really, it's really important for people to take a balanced approach to their financial wellness, and not focus on any one particular goal, because if you've gotDebt, you've got to manage your debt. If you've got retirement savings, you got to deal with that. And you've also got to save for potential future healthcare or dependent care obligations. So I think our, our view has generally been, it's, it's better for one person to seek the advice and get advice that they need because their circumstances are so individualized. But secondly, take a balanced approach and just don't focus on any one thing. We see in the past many people that have focused onUh, for example, saving heavily for college for their children, right? And that's their sole focus. And then when the children are out of the house in their mid to late 40s or early 50s, they start wondering, OK, now I've got to start saving for retirement. Well, by then you've lost all the opportunity to save, you've lost the power of the time value money and it's really hard to catch up at that point, which is why again, we believe a more to dealing with debt, all of your obligations, and not postponing retirement, given the power of the time value of money over a long time is really So you mentioned maybe one mistake that people make. Can you talk about other mistakes that people make and how they can avoid them or correct them? You know, not taking advantage of the tax-free nature and the tax benefits there exist to them in their, in their workplace retirement plans. You know, we still see about roughly in the industry a little bit over 50% participation rates. It changes depending on the type of employer, but broadly. And so there's certainly is a percentage of population that that just has a hard time meeting their daily activities. There's a lot of people that just aren't I think that that challenge has been recognized and was recognized in the most recent legislation, the Secure 2.0 that was passed just a couple of years ago, to sort of now require mandatory enrollment in automatic enrollment in retirement plans as an an employer sponsored part uh employer sponsored retirement can always default out if they want, but we've seen in our data, Bob, that when you're automatically enrolled in a plan, about 90% of the people stay in the plan. So you do have about a 10% that will opt out, but all of those things that we're learning about human behavior, but participating in the plans, taking advantage, even withoutThe match, and you know, the ability to save on a tax deferred basis is powerful. Uh, and so, you know, not before you even talk about the ability to maximize an employer match. So we see a lot of people, I mean, 50% across the industry of people, a little, maybe a little less than 50%, are not participating at all, and that that's a challenge. So, uh, Chris, one of the questions that I think financial advisors get most commonly, especially from people who are on retirement's doorstep isAm I financially ready for retirement? And, and oftentimes if they don't have an advisor, maybe they're relying on some rule of thumb like I need 10 to 12 times, uh, my salary set aside in my retirement nest egg to make sure that I can fund the 30 years or 35 years of retirement. Uh, what's your thought on how folks, uh, ought to determine if they have enough? Yeah,um, you know, it's interesting, you know, we, we recently, uh, conducted a survey where we had people expressing a great deal of confidence in their readiness for retirement, over 60% expressed a, a, a comfort and a confidence in their retirement. But then when we asked them, like, how much do you think you'll need to save for retirement, they were way off in their in their recognition of, well, I might, I, I think we had over 60% of the people answered that they thought they needed 30 times their to save and retire, which would be wonderful if you can do it, but the general industry standards, somewhere in the 10 to 12 range, uh, is gonna be sufficient when you add in the benefits of Social Security that will be able to be able to replace your income in so, you know, again, you know, I think if people can get to, you know, 12 times uh their their annual salary, they should be relatively comfortable. We try to encourage participants to find a way to try to save at least 15%.Of their of their pre-tax income, uh, you know, in for retirement, that would include the employer match. So there's many people that can achieve that. We've seen a number of people on our plans have been able to achieve that level, but, but it's difficult. Not everybody, not everybody can getthere. uh, in the second half of our show today, Chris, I want to talk about the living and retirement phase, but as you think about the planning for retirement, are there some things that we haven't touched on that you think would be important for people who are in that stage of life to think about?I, I think theonly thing I would touch on is that, you know, oftentimes, uh, we're sitting here talking about it as though it's a financial what we've learned pretty clearly, and I certainly you've had guests that have talked about it as well, it's more than just a financial exercise. It's a, it's a, it's a change in life, it's a psychological, it's a social, it's an emotional, and oftentimes those factors get de-emphasized while people focus on the dollar amounts and the income, without taking into account how your life changes when you decide to sort of go do something else. andWe've certainly seen, and I think you've had other guests talk about this increase in phased retirement. People are unretiring, people are coming back. They may not want the full 9 to 5 corporate job, but they are finding ways to find purpose and meaning in their day to day lives, uh, you know, that you have the Japanese, you know, notion of Iy guy, right? What is their purpose? What is their meaning? What's going to give them that reason to wake up in the morning beyond just having enough money tolive. Yeah. It's so interesting when we talk to, you know, you and other guests that we've had on the show, there's always this notion that people want to retire the term retirement because it doesn't mean what it used to, right? Because people have oncore careers or second careers or they're doing volunteer work or whatever the case may be, but it's not that classic image of sitting in a rocking chair, uh, reading the evening newspaper or the two people sitting in on the what looks like beach the graphic to your your bob games, right, right, that's one view of retirement, but I think we that most people that may not necessarily be their picture of retirement, that they, they want to go do different things and find that sense ofpurpose and meaning. Chris, we're gonna take a short break and when we come back, we'll talk more about living in retirement and some other things like Social Security and how to convert your assets into uh income. So don't go back to Decoding Retirement. I'm speaking with Chris Littlefield. He is the president of retirement income Solutions at Principal. Chris, when we left off, I promised that we would talk about how people can protect their retirement savings against different kinds of risks that they might face in retirement, specifically inflation and longevity. Thoughts?Yeah, thanks Bob. You know, um, this, that is the that is the seminal challenge for for people to deal with the life cycle risks in in retirement. I think, you know, I, I think there's aThere's no easy answers, but there's lots of different tools for people to use, whether they want to look at tips, uh, treasury with inflation protection, if they want to look at annuities, more and more annuity options or having some sort of cost of living adjustment in them. If they want to look at some sort of combination of equity and fixed, uh, fixed income portfolio that helps, uh, you know, the equities can help uh fight uh the impacts of inflation on their portfolios, are good. I, I think there's a lot. There's just, uh, that is the challenge and staying exposed to equities, I think it is going to be important. The people, I think the people that convert everything to a fixed income annuity with no adjustment or everything to fixed income, I think that's really challenging over the long term. So again, I probably say a balanced approach, talking with your advisor about the different tools that are available for them to deal with inflation. Yeah. So when you think about converting retirement savings into sustainable income, I think of it this way, that what you want is reliable income, sustainable income to maybe at least match, if nothing else, your essential expenses. And if you have more than enough, maybe you don't need more sustainable income. But you, can you talk a little bit about like how people should think about that question of converting assets into sustainable income? Yeah, and that's, and that's the, that's the challenge that we have right now, right? Because we've done a fantastic job on accumulation for a lot of Americans. What we haven't done is train people how to turn and accumulated savings into lifetime, uh, into lifetime income. I, I think, you know, again, I'm, I'm not a CFP. I think you're a CFP, Bob, um, but so, uh, you know, I would say I think essential expenses are the you know, a lot of people might have dependent care obligations, obligations for a parent. Um, there are a lot of factors that go into how much income they're going to need, and it really is highly individualized. I do believe that the industry is coming up with many more innovations about how to get people lifetime income annuities is one, you know, we've had annuities in a safe harbor bridge for implant annuities and retirement plans for a long time. The takeup is still not very high because of the fiduciary risks about plant sponsors having to pick one or a couple. But I do think that you're seeing is you're starting to seeing them being built into target date I think that is the way that that we're gonna solve this problem. We're essentially we're we're essentially recreating all the benefits of BB automatic enrollment, professional investment advice, and lifetime distribution DC plans with auto enrollment, professional advice through target date funds, the last horizon that we haven't yet figured out and solved for Americans is how to convert their retirement savings into lifetime income. Yeah, um, so last question, uh, everyone is talking about Social Security these days, and what role do you see it playing in someone's retirement income plan and given theSort of the state of affairs with Social Security, how dependable do you think it will be for folks today and tomorrow? know, I, I, I, I, I believe Social Security will be there. I think if you're at the beginning of your career, you might have a little bit more concern about what Social Security might look like in, you know, 30, 40 years, but I, I think Social Security is, is a benefit that will be there for a long time. When we talk about Social Security going bankrupt, we're talking about Social Security trust fund, it's about 25% of the payments overall. So I, I, I think there's a lot of social need and weWe do have a retirement crisis in the, in the US where people just haven't saved enough for retirement. And it's hard for me to imagine that there won't be some benefit there. But I think it's not wise to only rely on Social Security, particularly at higher income levels because Social Security won't be enough to replace the income that you've experienced pre-retirement for people that at higher income levels. But I, I, I believe there's a lot ofSupport for some sort of social security system. You might see things like means testing or other things come in as we get down over the next decade, as we get closer to the trust fund being uh depleted, uh, but I, I, I think we believe Social Security will be around as a program for quite sometime. Yeah, you, you mentioned that Social Security is a smaller percentage of someone's retirement income if they're in a higher income I think my research shows that somewhere around 15% is what Social Security represents in terms of retirement income for someone in an upper income category. So it's not a lot, but it's certainly not nothing either. So, right. So Chris, uh, uh, we've run out of time unfortunately, and I want to thank you for sharing your knowledge and wisdom with me and our viewers. It's so greatly appreciated and with hope you'll come back on a future episode, we'll talk more about my favorite topic, retirement. I would love to. Thank you and and thanks for this podcast, but it was a great, it's a great opportunity to talk aboutthese issues. Yeah, thank you so much, Chris. So that wraps up this episode of Decoding retirement. We hope we provided you with some actual advice to help you plan for or live in retirement. And don't forget, for the latest retirement news and expert analysis, check out Yahoo This content was not intended to be financial advice and should not be used as a substitute for professional financial services. Sign in to access your portfolio
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15-04-2025
- Business
- Yahoo
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Reverse mortgages have been called risky and confusing - but what if everything you thought you knew was wrong? On this episode of Decoding Retirement, Robert 'Bob' Powell speaks with Don Graves, Founder of the Housing Wealth Institute, to find out the surprising ways reverse mortgages could supercharge your retirement income. Find out how it could change your golden years forever. Yahoo Finance's Decoding Retirement is hosted by Robert Powell. Find more episodes of Decoding Retirement at Sign in to access your portfolio
