Ken Moraif  

Hello everyone, and welcome back to the Retirement Planners of America Podcast, and this time, we’re going to talk about a checklist to get ready for retirement. Okay, one of my favorite things to talk about with people, just like with an airline pilot, right? You want to have a whole checklist of things so that when you get to that point, when you’re in the air, you know you’ve covered all the bases, and that’s super important. So let’s get started. Let’s talk about them. So number one is decide where you plan to live. So this is really interesting, because your cost of living, in our view, when we do retirement plan, is the most important variable of all. When it comes to your retirement plan, how much it costs you to live determines how much return on your investments you need to make, how much money you need to support that lifestyle. So all of those things are the ones that impact your ability to your financial plan. So one of the biggest components is housing. You know, where do you live? So we have, you know, we had one client who decided that they could move to another state, downsize and live on a farm that they bought and their cost of living dropped by almost half. That’s means that now they need half as much money to support their lifestyle as they would have needed if they stayed in the city. So the first thing is, decide where you want to live. You want to downsize, move out of state, move next to the kids, whatever you want to do. Okay, number The second thing then that we look at is, you know, what will you do when you retire? Okay, start thinking of that in advance. One of the things that happens to people, if they don’t think about it in advance, is that they it becomes like a very stressful event. Okay, you’ve been working. You’ve been that’s been your social life. You know that’s where you’ve been. You’re there every day. You have your friends, you have lunch with you know, you have meetings after after work. You know work becomes your social life, and suddenly, now you’re retired, and that’s all gone, and your identity is gone too. You may have been a highfaluting executive, and now your your spouse is telling you to take out the trash, you know. So, so you’ve changed who you were as well. So what will you do during your retirement? Think about that and maybe even practice it. You know, we’ve had, we’ve had clients to say, you know, I want to teach or I want to volunteer at the church. I want to, you know, there’s lots of things that you can do, but start thinking about that in advance. Don’t wait till the very last second, because then it becomes super stressful. If you thought about it in advance, then it becomes a natural transition for you. And that’s really the most important thing, is that it’s easy to do and that you can enjoy, you can enjoy the transition. The third thing that we have on our checklist is to pay off your mortgage. Our belief system is that if you are retired, so should your debt be retired? Okay, so the thing about being having no debt is that you’re very bulletproof at that point. You know, because if you have no debt, then think about it, if you really, really, really needed to, if things were in a if this was the Great Depression all over again, you could live your utility bill could be the candle that you have on your coffee table, and you know what you eat could be, you know, the fruit that you grow in the backyard, or something like that. So you could live on practically nothing if you absolutely had to. But if you have a mortgage or you have debt, then the person or the landlord or the bank, they’re not going to say, well, we get it. It’s a great depression. You have, you know, you don’t have to pay your mortgage anymore, and you don’t have to do you know, no, you got a lot of so. So paying, we believe again when you retire. So should your debt be retired? The next thing is consider cutting down on the risk with your investments. You know high risk should produce higher returns, but as we’ve often said, and one of our core values of investing is that it is once you should all. You should take only as much risk as is necessary to accomplish your financial goals. So once you are retired, right? You’ve worked, you’ve accumulated, you’ve taken the risk to get there. Once you are retired, or few years beforehand, think about ratcheting down on the risk, because now you won’t have your wages. You won’t be going back to work anymore. So at that point now, your investments need to support your lifestyle, and that being the case, taking less risk is probably appropriate for you. The next thing is to consider what income you can expect. So what I mean by that, once you’re retired, what income are you going to get? So for most of you, you’re going to get social security. But some of you may say, You know what, I’m going to work part time, or I’ve got, I don’t know, rental properties that will give me some rental income. You know, there’s a variety of other reasons, but know what your income is and know what your expenses are. Okay, this is really important, because. I said before cash flow is what drives your retirement, your cost of living, less your expenses, your that part of your expenses. When we design a plan for your retirement, we’re basically designing a plan to support those expenses. What is your cost of living? So you also want to look at what is your income. So those two are very, very important numbers to get a handle on. And, you know, for many people that we meet with, we give them that assignment, and what they tell us is that it’s actually a very constructive exercise. You know, it was really good for me to sit down and really look at, what are my sources of income, what are my expenses? What’s the net of all that that’s super important when it comes to building your financial plan. All right? The next thing is to look at health care. Very, very important, obviously. So will you continue to get health care through your company? Some, some companies offer retirees, you know, health care plan for the rest of their lives. Very rare these days. But some do you know, are you going to have to buy a bridge between the time that you leave your company and now you’re going on Medicare? You know, there are lots of decisions need to be made, but health care. Do not take it for granted. Do not let anything expire. Do not let any gaps in coverage happen, not even one single day. You know, what is it? Murphy’s Law, right? The worst thing will happen, and at the worst possible time, if there’s one day of gap in your health care, then what’s going to happen is that’s going to be the day when you have a big expense and you have no insurance to cover it. Do not let anything so make sure you’re looking at the continuum of that. The other thing also is to make a budget. Now this one is kind of it’s kind of interesting, because what we look at when we say make a budget is not what you might be thinking. So in other words, what I’m saying is what we don’t do is say, Okay, go home and figure out, you know what, you’ve got, all your expenses and this and that. Because what we found is that if you’re spending money on it, you want it okay? And what I’ve seen is that it devolves right. In my office, I have a husband and wife there, and the husband goes, well, you should cut this out. She goes, Oh yeah, well, you should cut that out. Oh yeah, well, you should cut this out. And it devolves into this argument. I’m like, kids, calm down, stop. Okay, let’s not do this. So what I found is a better idea when I say determine a budget, is once we know what your income sources are, and we know your investment return and risk associated with that, then we can back into that. How much can you spend? And now that becomes your budget. And the interesting thing about doing it that way is that once we’ve determined how much money you should be getting, you’d be amazed at how quickly your expenses will reconfigure to fit that. I’ll give you a quick story. And again, I’m dating myself here, but I remember back when Jaws, the movie about the big shark. Was a was a huge thing, and everybody was terrified of going swimming. It’s like, if anything was moving in the water, it’s like, oh my god, is it a shark, including me. Seaweed scared the crap out of me. I don’t need to run out of the water because there’s a piece of seaweed there. But we were in Florida, and because it was so popular, the fishermen were catching lots of shark and they were there. It was horrible, but they were the jaws of the shark became a thing that people wanted to buy and shark teeth. So what they did was they had these kids, like 10 year old kids, and they would have them swim the chum on the end of a hook all the way out to the sandbar. So you’d see these 10 year old kids with this big handful of bloody stuff swimming this thing out, and you’d see the shark doing all this around them. They’re like, my goodness, that little boy, that little boy’s gonna get killed by the shark. But anyway, they would drop it, and then that would catch the shark, and then they’d reel it in, and they bring it up onto the onto the wharf, onto the pier. And we were on this pier, and what they did was, in this one particular occasion, and please forgive me, this is graphic, so you know, have your kids leave the room, but when, when they cut it open, this one particular shark, these Baby shark, came out, and, you know, I was like, whoa. And these things are ready made. I mean, they are already snapping away. And the lady that was that did that, you know, I got to talking to her about these Baby shark and what she said was, you know, they’re shark are one of the most interesting animals in the whole world, because they’re such an adaptive creature. And she said, you know, if you took a babe, this Baby shark right here, and you put it in a swimming pool, it will only grow big enough to fit in that swimming pool. It won’t get too big so it dies. And then if you take it out of the swimming pool and you throw it out into the ocean, then it’ll grow to its full size. Well. I kind of try to think of everything in terms of financial planning. So your expenses are just like that. If you limit the pool size, you’ll figure out how to spend within that. If you open it up, you’ll spend more. If you shrink it down, you’ll spend less. You’d be amazed at how easy it is to live within a budget, but one that’s been determined, as I said, not by you arguing with your spouse about, hey, you spend too much on x Oh, yeah. Well, what about you and your ex? Right? We don’t want that. What we want to do is determine how much should your budget be, and then let’s work our way into it so that over time we get there, and it may take a year, may take two years, but at least we have a goal to get you to the spend that is appropriate for the amount of money that you have. And then finally, well, I got two more make sure that you apply for Social Security three months early. Okay, don’t wait for the last second, because it takes some time to process and all that. So apply for Social Security three months early. And then the last one is to and this one is not in every single circumstance. Okay, so I just want to be clear that it’s not always a good idea, but most of the time it’s a good idea, and that is to roll over your 401K into an IRA. Why? Because in most cases, you have way more choices in terms of your the investments choices that you have. You have way more ability to manage how it is bought or sold. You have a lot of more flexibility. And in many, many cases, your expenses will be lower in an IRA than they are in a 401K. But that doesn’t apply to everybody, so I’m going to kind of give the big caveat on that one, there are circumstances where you do not want to roll over your 401K to an IRA, but that’s for a different podcast. So that’s our checklist. I hope you enjoyed watching it as much as I enjoyed bringing it to you. I hope this video finds you healthy, wealthy and wise, and we’ll talk soon retirement planners of America.