foreign welcome back to the retirement income show I'm Mark Elliott here with the CEO and founder of Oak Harvest Finance group we're talking about the retirement success plan once it's in place it's not done it's not finished it's always changing and evolving with you and your life so it's really important to get this in place to have a plan give you more confidence and and be more comfortable in retirement with maybe hopefully not so much stress about where you are again that number is 800-822-6434 to learn more 800-822-6434 Troy's breaking down what is exactly the retirement success plan so it starts with the investment plan then it's the income plan then it's a tax plan then it's a health plan and then it is the estate plan so I want to kind of tie together why that sequence is is important just briefly but if you don't understand if you don't have a proper risk management structure in place obviously you open the potential for losses beyond your willingness to stay the course now it's not just stay the course with the Investments it's stay the course with your retirement success plan with your financial plan so we have to Define what those guard rails are first this is the process of understanding where your risk limitations are so if you think about you're going down a highway and of course you have guard rails on each side and if you go off the highway those guard rails are there to protect you from going into the opposing Direction on the freeway now in retirement when we're talking about managing risk when we can identify these emotional guardrails so are you willing to see and I and I'd like to Define risk in terms of dollars not percentages and I'll tell you why in a minute but let's say you have a million dollars saved for retirement if all that money is in your 401k first and foremost we have to realize that it's not really a million dollars because every dollar in there is tax deferred so we have to understand we're going to address that as part of this process but when we talk about risk we have to understand that not all of those dollars are yours you have a junior partner on that account we want to keep them a junior partner we don't want Uncle Sam to become a senior partner or a majority share owner of your retirement account but just understanding that that not all of that money is yours that you do have a junior partner in that account it ties into this risk management discussion a little bit so when we talk about risk in terms of dollars are you willing to see your account go down two hundred thousand just a question could be yes could be no it doesn't there is no right or wrong answer but by asking these questions we can start to Define where your emotional guard rails are because the number one thing that you can do when it comes to ruining a financial plan or a retirement plan is to have more risks so your accounts go down more than you can mentally tolerate emotionally withstand and then you sell get out sit in cash for two or three years miss the rebound and now you're you're in a you know you're in a bad bad bad spot I can't tell you I mean we've been through this so many times with clients and conversations about you know Troy I've been watching the news I think we're going into recession we need to get out of the market we need to do this or my accounts are down 10 or 20 or when covid hit we there's a plan for for a proper plan accounts for the markets being down 20 or 30 percent so when we talk about risk management and we're asking you these questions the reason why is because we're already planning for recessions we're planning for potential Market crashes this is part of life okay we cannot avoid these things unless we completely stay in cash and if that's the case you might as well bury the money in the backyard and just spend whatever you can and hope you don't run out and eat rice and beans for for for retirement and that's not how most of our clients that's not how most of you want to spend you know after working for an entire career you want to spend your life so are you okay with a 200 000 decline by the way which is 20 and the reason why I Define it in terms of dollars is because a long time ago I had a client come in well it was a prospective client at the time and like most financial advisors we would talk about it in terms of percentages and and we said are you okay with a 10 or 20 decline he said you know what 20 is pretty much my Max and he had around a million dollars so then I I just happened to put it in terms of dollars and I said okay so if your accounts go down two hundred thousand dollars you're okay with that and he said he said no Troy he said I would fire you on the spot and so that you know for me it connected a Big Dot It was kind of a big evolution in my career when I was younger because I realized I'm a financial guy I do this every single day I think in terms of percentages and statistics and and but most people think in terms of dollars so when we ask you that question you say yes I'm okay with a 200 000 or 100 000 or maybe it's not even close to that or maybe it's much much much more what that does for us is it helps to Define what type of portfolio we need to construct so emotionally there's a small probability that it is going to hit your your downside guard ramp and if we can go through retirement and not ever hit that downside guard rail well there's a very good chance from our experience that you're going to stay the course you're going to stick with your plan and if you can stick with your plan you have a much higher probability of success in retirement this is why we call it the retirement success process this is why we call it a retirement success plan this is what we want to deliver to you so now I said I wanted to talk a little bit about the sequence and why risk management in investment planning comes first if we don't and in most simple terms if if your money let's say you have a million bucks and you never had to take anything out if you average four percent versus nine percent at higher rates of return you obviously can expect your accounts to grow to a larger value that means the income planning is impacted that also means that now your tax planning is impacted so we can't build an income plan or a tax plan without first understanding an estimated reasonable expected return for a combination of Securities inside a portfolio so step one has to be this risk management discussion which then can lead us to the investment construction of your portfolio which then gives us a pretty good idea of expected return upside downside deviation so we can now start talking about income planning we can actually project and do a sensitivity analysis on tax planning based on different account levels let me break that down for you before we get into the tax planning section later on the show if you have a million dollars in your IRA you are forced to start taking a certain percentage out it's around four percent at age 72 but as you get to be 74 76 77 you're required to distribute a larger and larger percentage so if your million grows to 1.5 you take let's say four percent of that out that's a that's a number that is less than if your IRA grows to 2 million so the more aggressive your portfolio is or the higher expected return the more we should anticipate that require minimum distribution being a larger number that rmd is the amount you're forced to take out and pay taxes on we've seen clients I I'd like to phrase this for prospective clients because we address this with you as a client this is part of the retirement success process and the retirement success plan but so often when someone comes in here and they've done a pretty good job saving they have eight hundred thousand they have a million they have two or three million when we start to do this analysis if you don't address this tax problem and it is a tax problem it can be you know a tax nightmare for many of you those rmds when we get out to be 75 and 77 or 78 a hundred thousand hundred and fifty thousand two hundred thousand now you're taking that money out you're probably not spending that much on top of Social Security on top of any rental income or real estate income or pension or dividend or interest or any other income that you have outside of your retirement account and we've seen many people be in a much higher tax bracket and have much more income in their 80s than they ever had throughout their entire life up to that point and it's because of a lack of planning so that's what we're trying to get ahead of so we have to understand the risk structure of our portfolio and how we manage that risk so we can keep you on course we can keep you on schedule with your plan that then gives us an idea of a range of expected returns based on basic financial planning Concepts from there we can develop that income strategy and income is not just Social Security it's not just how much to take out don't get me started on the four percent rule but it is also from which accounts and then we get into the taxes so if you don't have a retirement success plan give us a call 1-800-822-6434 we're going to walk you through this process if you become a client you will have this plan in place that deals with risk Investments taxes income along with the rest of the retirement success plan 1-800-822-6434 Oak Harvest Financial Group check out the website check out the YouTube channel Oak Harvest Financial Group so we're talking about the retirement success plan Troy still got a lot to get to stay with us we're back in one minute investment advisory services offered through Oak Harvest Financial Group LLC Oak Harbor's Financial Group is an independent Financial Services firm that helps people create retirement strategies using a variety of insurance and investment products investing involves risk including the loss of principal any references to protection benefits or lifetime income generally refer to fixed Insurance products never Securities or investment products insurance and annuity product guarantees are backed by the financial strength and claims paying ability of the issuing insurance company Oak Harbor's Financial Group LLC is not permitted to offer a No statement made during this show shall constitute tax or legal advice you should speak to a qualified professional before making any decisions about your personal situation we are not affiliated with the US government or any governmental agency this radio show is a paid placement foreign [Music]Read More
So you're 60 years of ages you've saved a million dollars for retirement as well as you have the large concerns can you retire how much can you spend just how lengthy will your money last how do you pay much less tax obligation and also if something takes place to you will certainly your family members be okay we're most likely to go via all those different inquiries in this video appearance at contingency planning social safety and security tax obligations earnings all the things that i call the light bulb moment that turn on when you realize all the decisions that you need to make as well as just how they all interact with each other we're going to undergo this situation with you today so sit back and appreciate [Music] Hi, I'm Troy Sharp, CEO of Oak Harvest Economic Group and certified financial coordinator expert, as well as host of the retired life earnings reveal. Maybe you are close to retirement, maybe you're a few years away, and maybe you're also enjoying this video. Maybe you retired a couple of years ago. In any case, when I discussed the “light bulb moment” initially of this video, I wanted to take a second just to speak about what that is. It's the minute when you realize you're leaving the accumulation phase as well as going right into the circulation stage, and all of a sudden you move from the saving, conserving, and saving frame of mind to, Oh, my. now i need to spend whatever that i have actually saved my whole life as well as then it begins to hit you what if the marketplace goes down just how much earnings ought to i take out of my profile oh my benefits for the first time anywhere i take my earnings from it affects just how much tax obligation i pay and also what regarding not simply this year just how do every one of these decisions impact me over the following 20 as well as 30 years and all of an abrupt you type of feel like you're on an island all on your own as well as you recognize exactly how vital these choices that you have to make are that's the light bulb moment so the function of this video is simply to help you start to comprehend exactly how all these variables communicate with one another and just how making these choices coupled with various other choices that you need to make in retirement how they all collaborated to supply you safety or the opposite might occur place you right into a placement to where you endanger the the your capability to remain to maintain your requirement of living light bulb minute if you have not reached that 2-3 year before retirement mark or maybe you have not also thought of it it's yet to happen to you maybe you will retire and also you get on youtube looking for video clips and also this is why you're right here viewing this one or possibly you recognize specifically what i'm discussing due to the fact that you retired a couple of years ago regardless you're going to obtain a great deal of details from this video as well as i enjoy to share it with you so initial thing i wish to begin with are some of the criteria that i'm going to undergo for this hypothetical pair in this video so couple both 60 years of ages the concern is can i retire now they've conserved up a million dollars you know they're tired of going to work they don't intend to sit in website traffic.
can i retire the following question typically becomes well if i do retire just how much money can i spend and it's not simply can i invest that cash it's can i keep as well as sustain my requirement of living while staying on par with rising cost of living as well as additionally having sufficient cash later on in life to make sure i do not run out and to spend for clinical costs so in this instance we're going to consider what we call a go-go slo-go and no-go earnings plan so we This is a really, really common revenue strategy that we'll establish for individuals. The go-go years are the initial ten years from 60 to 70; we're going to look at taking a hundred thousand dollars a year out. The slogo years are from 70 to 78, or 71 to 78, if you take 75 000 out, and after that, 50 000 from 79. This is a little infinity indicator until the end of life. Both couples in this example have lived to age 90, but we can check out some different life spans. All right, we're going to check out social safety and security at various ages. What happens if the market collapses? What takes place if I have a long-lasting care requirement? What occurs if one partner predeceases the various others? If you've seen my video clip, the 4 things individuals don't tell you about retirement One of the largest, uh, preparation errors or at least things that we don't consider when it comes to retirement preparation is that if one spouse predeceases the various other partners, we're going to lose a social security check. A lot of us recognize that, but when you go from the wedded filing jointly tax obligation brackets right into the single brackets, as well as often, it can create a large increase in tax obligations in addition to a loss of revenue keeping that social safety and security check vanishing, so we're going to consider some different contingencies. Again, my goal right here is to simply get you to begin believing and connecting those dots. we've rested with thousands of families for many years i can't potentially look at each and every single circumstance there is available the primary goal is simply to get you thinking obtain you to link those dots and also comprehend that choices need to be made and also there are effects for these choices as well as usually those effects will not be understood till 10 20 years down the roadway all right checking out these revenue goals once again since we're creating right here a go go slow go no go your go go years you're spending more your slogo you're decreasing yet you're still going out to dinner you're still doing points in the no go you're actually simply not going anywhere maybe to the medical professional's workplace however you're investing a great deal of time in your home currently all of these numbers are mosting likely to pump up significance in one decade so the method we take a look at this is 50 000 is the base living cost number then this 50 000 takes place top of it for a period of 10 times or ten years so it's a hundred thousand for the first 10 years after that this set goes away as well as now this set starts a 25 000 spending objective on top of the base costs of 50 000 so every one of these are mosting likely to blow up meaning in today's bucks this is what we wish to be investing however rising cost of living erodes our buying power in time so if we want to invest a hundred thousand bucks a year we need to be pulling a bit much more out each year to maintain our buying power in today's dollars currently we use a 2.25 percent inflation rate for this instance i know rising cost of living in the economy is presently higher than that however we do not expect that inflation to last for the following 20 to thirty years.
in fact the marketplaces if we look at the 10-year treasury rate which the bond market is a fantastic kind of soothsayer allow's let's allow's call it of what rising cost of living is expected to be in the future the 10-year treasury price now as as of tape-recording this video is at about 2 and also a half percent that coincides rate as before covid the exact same price when president trump obtained elected as well as also the same rate when head of state obama obtained elected for his second term so the marketplaces are informing us that they do not anticipate rising cost of living to be a serious factor to consider over the following a number of years they do anticipate like the fed claims it to be more transitory currently that's what we're finishing with inflation right here okay for social safety we're checking out this first instance both of them taking it at 67 . We have john and also jane john's is 36 thousand bucks a year jane's is 31 000 715. financial investment accounts so in jane's 401 k she has 250 000 in john's he has 700 000 and also they have 50 000 below in financial savings now something to aim out here a lot of this money is in what's called professional pension that suggests they've obtained a tax deduction for putting money into that account but in retired life every single time they require cash because they just have fifty thousand in financial savings they go to take it out they're mosting likely to need to pay revenue taxes now i would certainly have liked to see an extra diversified what we call a tax obligation diversified structure leading right into retirement significance we're saving much more in this after-tax pail ideally we have some cash inside a roth ira yet this isn't still this isn't poor if you're in that million dollar array 1.2 800 000 someplace around there anything much less than that it's not as poor as if you have two or 3 million inside that 401k that becomes a problem for tax obligations down the roadway so this is in fact fine I'm great with this money being in the qualified buckets, but if it starts to get a substantial quantity higher, we certainly want much more tax obligation diversification. okay currently we're going to look at the monte carlo simulation so this runs a thousand different simulations of numerous market returns to make sure that indicates one year could be plus four percent plus twelve percent minus fifteen plus eighteen minus 6 plus 9 that would be one simulation that series of returns we're gon na take a look at a hundred of those different simulations to determine a probability that this couple retiring at age 60 spending a hundred thousand for 10 years after that seventy five thousand for 8 and after that fifty thousand forever intended expiry both of them at age ninety and also rising cost of living at 2 as well as a quarter percent bear in mind all this revenue is going to boost with rising cost of living at that 2.25 percent annualized price moving into the future all right so this thousand simulations a number of things to mention here first it is available in at 80 percent so 80 is in the eco-friendly it's not a terrible number it's much better than 50 or 60 . That's for certain it's not 90 95 99 though one huge thing i wish to note right here and simply genuine fast what this suggests is if you were to retire a thousand times in concerning 800 of them you need to be all right you must pass away with money the green lines these stand for a different simulation out of those 1000 so if i click here we die in this particular highlighted simulation with a little over five hundred thousand dollars left below with 443 873 a truly great one 1.7 million several of these simulations that 20 percent we do go out down right here.
however below's a huge big big takeaway in this example the in all of the simulations essentially the properties are invested down in the starting so this places us into a precarious position perhaps if in these beginning years where the accounts are dropping because we're spending much more remember this couple hypothetically is retiring at age 60 . So they can't turn on social security, yet they have to draw from their pension. They're most likely to pay taxes on those withdrawals, so we really need to take out even more than $100 in this spending objective scenario, and we're extremely prone to the sequence of returns. Okay, once more if you're new to the channel, the series of returns threat is the combination of taking revenue out of your portfolio with market losses. If you secure five percent and also the market goes down 15 you're down 20 so your 1 million goes to 800,000 yet to obtain that very same level of revenue in the list below year you have to now take a hundred thousand bucks out but you only have eight hundred grand left so it's a higher portion that you need to get. That's the series of returns. Take the chance that if you shed money in the initial couple of years, you dramatically decrease the chance of success in retired life, so I intend to talk a little about Roth conversions now. Due to the fact that this couple has all of their cash inside their retirement accounts, there's truly no excess cash outside besides the $500,000 in cost savings to pay the taxes on any type of Roth conversion. Additionally, because they're retiring more youthfully, they're compelled to take out even more cash from the portfolio. In this certain circumstance, I probably would not encourage any kind of Roth conversions, although all their money is inside that tax-ravaged pension. the factor is if we do a conversion where we have to compose the federal government a check one it would certainly have to come out of the 401k or the individual retirement account so we need to take more out pay taxes on that particular send it to the federal government whatever's left to pay tax obligation on the conversion but we're taking more cash out of the account which leaves us much less to earn passion on we're already in a vulnerable position here if the marketplace drops hey real quick while we're on the subject of tax obligations we're going to be doing an online stream on this channel when head of state biden passes his new tax obligation legislation this is going to be a game changer for retirement it really genuinely is i believe we're going to undergo the regulations we're mosting likely to utilize our resources we're mosting likely to consolidate it to bite-size pieces What is most likely to influence you, but to go to that online stream, you have to register for the channel, so make sure to subscribe. So in this particular situation, if we have an actually good year out there and the accounts go up to 300 000 this year, next year, and the following year, and we're sitting at 1.5 as well as now that they're a bit older, fine, extremely possibly we're going to re-look at that, we're most likely to re-look at it yearly, however, that may put us right into a position where it makes even more sense to do a Roth conversion now. one more reason i wouldn't consider concern be bothered with roth conversions for this certain pair is also though you have a million dollars in this instance the among the huge reasons you think about roth conversions is due to the fact that you have so much in the retired life accounts that as soon as you obtain to RMDA age which is 72 called for minimum distributions you're forced to start taking cash out of that account as well as pay taxes on it that can place you into a very high earnings tax obligation bracket a lot greater potentially than you were in in the working years if you likewise have a pension plan if you have any rental earnings if you have a substantial source of various other revenue from various other areas having a lot of money inside pension can place you right into very high tax obligation brackets when r d start it's a little under four percent that you should disperse at 72 but it goes up from four five six seven eight nine 10 11 as you age throughout your 70s 80s as well as into your 90s so if we look below this theoretical instance their tax obligations aren't substantial these aren't killer taxes currently of course we have some pending tax modifications upcoming with some regulation this is considering the existing tax obligation code if they maintain their word in congress and also not increase tax obligations on individuals in this income range it should not be a huge bargain for this family members down the roadway so we see if we theorize out into the future or or look out their tax obligations they are they're not massive this isn't anything as an economic consultant as a retirement coordinator that i'm ultra worried about i ‘d much instead maintain the cash in the account.
gaining interest as opposed to writing look for conversions and sending it to the government due to the fact that they are currently in an at risk setting retiring young so not a huge bargain here fine currently i intend to check out a visual depiction of the costs objective compared to the social protection revenue as well as recognize the shortfall this is a very crucial action when we're income preparation we have to not only identify the shortage certainly but we have to identify what is the very best economic device to create that capital which tax obligation buckets need to it come from your individual retirement accounts or your non-iras normally talking yet the very first action in doing all of that is recognizing where the shortages are so this is the rising cost of living adjusted go go slow-moving go no go spending earnings plan and also we see it begins at 100 000 since of inflation it rises to 120 slogo slogo years 70 or 71 this starts for for this pair still boosting with rising cost of living and after that the no go years where they're not going anywhere social protection fine this is the only resource of secure revenue we have in the prepare for this household we see social security remember i stated it's most likely to start at age 67 for both partners it stands for a respectable chunk of the revenue specifically on these out years however they're not taking it for 6 as well as a half seven years in this example so one of the huge challenges below are the shortfalls in the beginning this is why they obtain right into a susceptible placement because in order to spend more in the go-go years as well as retire at 60 they have to pull more money out of the profile so we're taking out we have the shortage here quite considerable shortage so typically what i'll see if a person is available in to take a seat with me or one of our experts we're doing planning for an instance like this nearly 70 80 percent of the time the family's mosting likely to claim troy i'm simply going to take social security sooner as well as in theory that makes sense since you're most likely to take social safety which is mosting likely to decrease the need for profile withdrawals and what's what is for some individuals that is the appropriate technique for others it's not it simply so various items interacting together truly needs this kind of extensive evaluation however i simply intended to explain right here the shortfalls prior to i dive into the social safety analysis to allow you recognize where the shortfalls are once again if we check out these numbers they're pretty huge particularly in the initial pair of years now for the social safety and security evaluation so we're going to take a look at advancing earnings received if they make it up until life span yet additionally fairly talking what are the yearly earnings numbers received if they take it very early versus complete retired life age no need in this example to wait until 70 due to the fact that they're retiring early only have a million dollars they're most definitely going to take it at 62 or 67 or somewhere in between so here are the chances just to be fast concerning this it's really and i do not see this frequently 82 across the board regarding likelihood of success despite if they take social security at 62 or 67.
One thing to point out they take it at 70 it drops to 58 now that means 58 of the time they're going to not run out of money but 42 of the time they would run out of money and only be left with social security later in life that's not a good thing now annual income and cumulative income received versus taking it at 62 versus 67 for john 25 200 versus 36 000 and then for jane 22 2 versus 31 715 1.374 million received from social security from 62 until 90. 1.625 million received from social security from age 67 until 90. this assumes they both make it to 90. now a couple of things to consider first if one spouse pre-deceases the other unexpectedly the smallest social security check goes away and the family is left with the larger of the two if one spouse is unhealthy or not expected to live as long or one spouse is expected to live much longer it may make sense to do some combination strategy here where the highest earning spouse with the largest social security defers as long as possible that way if he passes away that higher social security check will stay in the family now that's one thing to consider the second thing to consider here is in the real world when we're sitting down with you and going through and doing a review let's say you retire at 60 one of the things we're going to be talking about when we sit down and do reviews is what is the portfolio doing what is the forecast for the economy what is your entire situation what are you actually spending we track this progress over time in this plan and our clients actually have access to the plan digitally so we'll sit down and we'll talk to you about it so in the real world if the portfolio is up 30 or 40 percent let's say over a three or four year period and we hit 62 and you're not very aggressive with the portfolio for example let's say we felt good about things we decided to tilt it a little bit more aggressively in the beginning years of retirement we say you know what maybe let's defer social security because that's a guaranteed lifetime income and guaranteed growth to that payment and let's take some of those profits out of the portfolio that reduces the risk let's reduce your equity exposure and let social security defer one more year so in the real world it's not just about the math it's about so many other things and this is again the light bulb moment once you start to realize all the decisions that you have to make and all of the variables out there we can never make 100 percent the best decision 100 percent of the time we have to make the best decision as frequently as we can but looking at all of these different variables and then talking it out and having a conversation it's not retirement planning financial markets taxes income all this stuff it's not necessarily always black and white there's a lot of gray this is why working with someone who understands these nuances can help provide better information so you can make a more intelligent decision all right now we're going to look at what is called the play zone so our clients love this because they can actually log in and start to move this little slider around especially if they're not retired and see the impact of working one more year or retiring one year sooner so what i'm going to do now is let's say john says you know what i don't hate my job and i don't really know what i would do if i retire i think i'll probably go to 62.
Well all these same variables that we've looked at it jumps now from 80 82 percent up to 95 96 percent now let's say john absolutely doesn't want to work anymore he's fed up he hates his boss he doesn't like the commute he just is tired 82 i'm not comfortable with that i like to have a little bit higher what if in the go-go years we only spend we target spending 95 000 for the first 10 years okay that jumps it up to 90.
Okay well what if we then couple that with reducing our slogo spending okay now i'm up to 95. now john's feeling pretty good about pulling the cord and retiring all we had to do was connect him to what his spending meant for his portfolio longevity and show that hey if we just plan on spending somewhere between that 90 to 95 000 range instead of 100 much more comfortable probabilities now in the real world again we tend to find people spend more money in the first couple years of retirement this is typical but then it will also typically reduce no one's going to spend exactly a hundred thousand dollars a year for the next 10 years this is why it's so important to be connected to your money to do reviews to have a relationship with a financial advisor who understands retirement we're going to do this analysis every single year when we have conversations with you this is what our job is the market goes down the market does really really well we can spend more we may have to spend less all of these pieces are connected now we're going to look at a really cool feature and this is what are you afraid of so we get this all the time so most of our clients just simply don't want to see their portfolio go like this throughout retirement they want steady predictable streams of income coming from multiple different places increasing income sources the market crashes they don't want to lose 40 or 50 percent of their money but they're also concerned about taxes and inflation and long-term care so this module right here we're going to look at what are you afraid of so let's say we're wrong about inflation okay let the bond market as i said earlier is telling us that inflation long term is not a concern that's what the bond market's telling us but congress is spending a whole lot of money the federal reserve has printed trillions and trillions and trillions of dollars maybe we're wrong maybe the bond market's wrong what happens to this plan if inflation goes up to 3.25 from the 2.25 well this is the problem for this particular plan now everything that we had earlier in the play zone where we reduced that spending possibly worked a little bit longer those changes are not affecting this right here we're still at that 82 probability the base case but again this assumes that inflation is 3.25 now and remains that way indefinitely until planned expiration but i do want to show the power of inflation how that can destroy the purchasing power and reduce the probability of success for your retirement what if this is one we hear a lot social security gets cut let's say your benefits get reduced by 15 it drops it to 62 percent in this particular example now i do not believe your social security is going to be reduced i guess it is possible if you are in this means-tested category that congress may come up with in the future let's say if you have x amount of dollars or if you have this amount of income maybe they'll say you don't need your social security with some of the things that we have pending in this tax legislation right now in the reconciliation bill i wouldn't doubt it honestly if that's a consideration down the road i would assume it's not going to impact the majority of people in retirement so just my gut most of you probably do not have to worry about social security cuts but it's something that could happen okay low returns this is the biggest one i think most people are in jeopardy of because in retirement once you cross it's like a line of demarcation once you cross over from the accumulation phase and you enter the distribution phase the retirement years volatility in the market again this is from my experience working with thousands of families over the course of my career we get more sensitive to volatility the average investor tends to make bad decisions with their portfolio selling at the wrong time can cause your portfolio to lose 10 15 20 of its value that it that it otherwise would have extrapolated out over many years we could very easily see a reduction in average returns of one percent drops it to 73 one of the worst things we can do is allow the news the noise out there dictate what we do with our investment portfolio we don't have crystal balls and there's so many emotions tied into investing if you take your money out every time the market drops five percent because you're scared of it going down 30 percent you're making mistakes you're costing yourself money long term and you probably shouldn't be in stocks probably shouldn't what happens if you die early live long let's say john dies at 79 but jane lives to 94.
it's not good drops it to 53 percent that's one social security check going away now again in the real world we would adjust for jane the spending keep her connected to the portfolio make sure that she understood how much she could spend and also uh it's just it's just being connected that's the big thing in that particular moment long-term care home health care these expenses are a big concern for our clients so if we stress test it for home health care long term care let's say john passes away naturally no need for long-term care but jane does have a concern that at age 85 she may need let's say eighty four thousand dollars a year seven thousand a month probability drops to sixty six percent so these are some of the let's call it a sensitivity analysis or contingency test to determine how some of these variables that we're just looking at as statics throughout the plan generally speaking how anyone individually or we can look at a combination of these at the same time how they impact your retirement plan so everything that we do on these videos everything we do with clients when we're looking at this type of analysis it's very important to keep in mind that it's just a snapshot in time next year everything's going to look a little bit differently your portfolios will have changed you will have spent different levels even emotionally things may be different as far as our goals and what we're trying to accomplish our belief in this the markets etc so we have to stay connected this is what retirement planning is about it's not just here's your plan see you later manage the investments it's not a retirement plan that's not helpful that's not anything that anyone should do i hope you enjoyed today's video got into some of the nuances some things that we have never covered before if you have any questions comments put them down below and we look forward to seeing you on the next video [Music] youRead More