Meeting with a Financial Planner: what to expect
Key takeaways:
- 2025 will have the most people ever turning 65 years old in America, with 4.18 million people reaching that age
- The average 401k balance at the end of 2023 was $272,588
- The average Social Security check for a 65-year-old in the US was $1,782 per month
- When planning for retirement, it’s important to look at income sources (401k, Social Security) and expenses
- Delaying Social Security can increase benefits by 8% per year up to age 70
- Retirement planning should consider potential changes in expenses, such as travel, home renovations, or “aging in place”
- It’s crucial for clients to provide accurate expense information for better retirement projections (“garbage in, garbage out”)
- Retirement plans should be flexible to accommodate unforeseen changes
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Meeting with a Financial Planner: what to expect – Transcript
Just gonna dive right in. We are recording this at the end of 2024, but 2025 will have the most people ever turning sixty five years old in America.
So There were four point one million people that turned sixty five this year That number is gonna go up to four point one eight million this time next year in 2025 and then it’s gonna average about four point one million for the next five years.
This is this is my bucket!
This is your wheelhouse.
Yeah.
What do what are people who are turning sixty five years old What do they need to be thinking about What’s on their financial plate so to speak when they turn sixty five years old?
I I will just say all numbers and all kidding aside I think people when they approach sixty, they start to see the finish line and they say, oh I I’ve got to get serious about this now Yep And it takes on more impact more meaning and this is why we focus on people within say five years of retirement because this is really where the rubber meets the road in the sense that we wanna make sure that you’re getting your numbers right so that not stressed out going into retirement.
It’s also from a planning perspective, it’s a more concrete and I think more useful for people to do it in that you know two to five year window of retirement Because if we’re outside of that window We’re making a lot of projections we’re making a lot of assumptions and it doesn’t really give you the real picture of you know what the dollars and cents are gonna look like when you make that change into retirement.
And just think back five years ago if you’re watching this in 2024, Think back to twenty nineteen no one had even heard of the word COVID.
None of that was even on our radars five years ago So a lot of things can happen over a five year period and a lot of things can change.
And uh you know the whole idea of work from home That was never even really a serious option in twenty five years ago twenty nineteen Yep That’s a good point So I have some average numbers here um for things like, you know uh four zero one k balances and Social Security, just as a jumping off point here Like I said their averages So these numbers might look different for you but uh according to Vanguard’s uh study on how people retire, the average four zero one k balance at the end of 2023 was two hundred seventy two thousand five hundred and eighty eight dollars.
And the average Social Security check for a person turning sixty five years old in the United States was one thousand seven hundred and eighty two dollars a month which works out to eighteen thousand five hundred and twenty dollars per year.
So again average numbers but Tom let’s say a couple comes in to see us and they…the husband and wife both have these types of numbers They have about six hundred k in retirement accounts, and they stand to collect about forty thousand dollars per year In Social Security.
How would a conversation go with someone Where would we start What would we talk about um, share a little bit of that with us here please?
The first thing that I’m thinking about as the planner going into this meeting is if a husband and wife team have each let’s just make it easy and round it to three hundred thousand each They’ve got six hundred thousand dollars in a four zero one k They’re going to be receiving…say eighteen hundred dollars, uh in the primary or the average social security Do we know what the spouse would get We we’re not really sure.
Um but even if we were to just use an estimate and say that they’re going to get fifty percent of what a working spouse would get.
Social Security income would be about twenty seven hundred If we’re gonna use say a three percent withdrawal rate on six hundred thousand dollars in retirement accounts we’re talking about eighteen thousand dollars So this is income that’s going to be thirty thousand We could press it and use four percent as a withdrawal rate from retirement accounting.
Four percent on six hundred thousand gets you to twenty four grand a year, plus the um, Social Security income which would be uh twenty seven hundred a month That’s uh, thirty two thousand I’m doing this without a calculator So you’re talking about fifty sixty thousand dollars worth of income that’s going to come in So I know going into a meeting these are the sources that we’re going to replace your paycheck with fifty or sixty thousand dollars worth of income taxable income, pre tax.
We wanna get a good look at what your expenses look like today, and then we want to uh do a little bit of modeling to see which expenses are gonna fall away You’re not gonna be contributing to a four zero one k anymore.
Um which things are not going to be maybe you are gonna finish paying off your mortgage.
Uh we wanna project into the future at least over the next three four five six years to see what the first few years of retirement are going to look like and then also pack in some inflation numbers because we know things will always cost more in the future.
Right. So your expenses aren’t gonna be a stagnant They’re probably gonna grow you know like you said over twenty thirty years They’re they might double or you know towards the end They they’re gonna they’re gonna move around a lot but I think you know when…Someone comes in as like hey I have this I have x in savings and I’m gonna get this per month Like can I do this Can I retire Yeah The first question we ask is well how much are you gonna spend? Because that is really the driver of all of the decision making and you know whether or not you’re gonna be okay.
Also wanted to point out in this example…these folks wanted to take Social Security at sixty five which is not their full retirement age That’s gonna be before full retirement age So like I said they’d be getting eighty six point seven percent of their Social Security benefit.
If you wait till full retirement age, which is sixty six or sixty seven for most people, you’d be getting a hundred percent.
If you wait until age seventy, you stand to it grows by eight percent per year.
So you’d stand to get about a hundred and thirty percent of your benefits. So something else that we might wanna talk about these talk about with um with these folks And you know see if if they can delay social security if they can stand to you know maybe work another year or two If they can defer social security that eight percent per year guaranteed is is pretty good.
And uh, yeah just another option uh another wrinkle in the retirement equation.
I think the uh the big discussion is okay we know we’ve got these sources of income over here We know our expenses are over here I’m raising my hand over here.
How are we going to fill that gap? Where is that going to come from And so we have to come up with a source your investments and pick a…some kind put together some kind of plan where we’ll be drawing down…your assets and also factoring in what the taxation on these, uh, what the taxation is going to be when you’re pulling money out of a brokerage account and investment account or the bank.
Uh and so when we do that, we kind of lead into what Casey was referring to in the sense that Hey once we have these factors on paper we can start to manipulate the numbers and say okay What if we did, uh defer Social Security to full retirement age What would the numbers look like then What if we were to figure out a way to defer at least one party’s, uh social security until age seventy where they would get the max, um compounding.
Yeah So we want to run through these numbers but we can’t do it without having a handle on what your expenses look like And let me just add one more comment uh when we’re talking about expenses We’re not asking people to go on a diet when we do this We’re not asking them to build a budget and stick with it We wanna know what your expenses look like now…we know that at some point in the future you’re gonna take trips yet.
You know you’re retiring You have the time to do this stuff.
Uh you’re gonna you’re gonna buy a car You may need to buy a car when you…at a bad time You never know.
So we wanna build these things into the discussion and not feel like people have to start, um you know eating broccoli Yeah Definitely no judgment there We just have to we have to know to be able to know give you a good answer of whether or not this is feasible We have to be at least directionally right We don’t have to be exact because, like we know over a twenty or thirty year retirement things are gonna change We’re gonna make tweaks to the plan along the way So nothing set in stone but we have to be headed in the, uh in the right general direction.
So And we’ve had some folks that have gone through the process with us and the they will give us these nonsense answers Like let’s just put down ten thousand dollars a month for expenses.
Yeah.
It’s tough I know it’s people don’t like to track their expenses They might not wanna look at it themselves, um but I think if uh if you’re working with us to get to get retirement projections and you want a a firm good answer or as best of an answer as we can come up with then you need to do your part And like we say all the time it’s a participation sport So the better information we have the more uh exact we can be with our with our projections.
Well it’s said another way It’s garbage in garbage out.
Yeah.
Soif you don’t put in the details it’s gonna be really hard for us to, uh get down to actual facts and figures that we can we can all work with and we can all live with We understand that…Things change Like I was referring to a few moments ago five years ago we had no one had even heard of the word COVID, uh before
We understand that when you’re retired you’re going on a new leg of the adventure.
You’re going you’re starting a new chapter. It’s a big change And things are going to change.
We’ve had some people that have said “hey we wanna buy a house in Barbados!” Or, “we thought we would travel – but we didn’t think we would travel this much. And we’re really enjoying it. We want to figure out a way to do that. Or I “want to buy a lake house in upstate New York,” do home renovations or something like that.
Or you know wanna spend more time at home and make yourselves comfortable there. One of the things that we’re hearing a lot is people are saying “hey I thought I would be going to Florida,” you know, “sell my house in New Jersey and buy something in Florida. But I think I’m going to…” the term that they’re using is “age in place.”
And they say “you know what, I think I’m gonna spend a few bucks and really fix up my place.” We’ve had we’ve had some clients that have put in elevators in their homes.
We’ve had other folks who have just said “you know what – we still have the paneling on the wall from 1974. We’re going to finally fix it up. And it’s gonna be for us.
And we want everyone to be able to do those things. We want everyone to be able to spend their dollars how they want to with like we said no judgment from us We want you guys to lit to live the life that you that you want to live It’s our job to answer the question of is it a good idea or not?
And I think you know the more conversations we have the better information we have, the better prepared we are to answer that question.
