The broken 4% withdrawal rule

Episode Transcript

Speaker 1 (00:00):
Welcome to the hidden world of wealth, where secrets of
the affluent become accessible to you. You are listening to
Your Money Matters, the most provocative financial radio show on
the airwaves. You are about to start your educational journey
here on Your Money Matters with your host, Drew Prescott,

(00:22):
President of Prescott Private Wealth and Chartered Retirement Planning Counselor.
Drew will unlock the complexities of the financial landscape with straightforward,
powerful insights. Whether you're planning for retirement, managing in a state,
or looking to grow your wealth. Consider this your exclusive invitation.
Turn up the volume, lean in closer. Let's navigate the

(00:45):
hidden paths of prosperity together. Your financial enlightenment begins now.
Securities all produce a terror Financial Specialists LLC Member fen
the SIPC reservices offered through Setara Investment Advisors LLC so
TERA firms are under separate ownership from any other named entity.

(01:06):
Four five to one sixth Street, Troy, New York one
two one eight zero.

Speaker 2 (01:10):
Not much you can do and the feeling is gone.
Moavid Blue Skies Bok.

Speaker 3 (01:21):
It's cool.

Speaker 2 (01:23):
When you love some rock.

Speaker 3 (01:31):
Welcome back to your Money Matters. I'm your host, Drew Prescott,
chartered retirement planning counselor and accredited wealth management advisor and
President of Prescott Private Wealth. And today we're talking about
retirement on the rocks now, not the kind with a
beach and an umbrella drink, more like the kind where

(01:55):
your retirement income strategy is crumbling beneath you like a
bad flay. And before we dive in, let me tell
you a quick story about something else that really has
not aged well, and that's Fry Offer cookies. So if
you grew up around here, you know exactly what I'm
talking about. Remember as a kid, those cookies, they're legendary.

(02:18):
They had those crispy edges, the soft centers and that
little hint of salt, and I think that that's really
what made them like absolutely perfect. But in the last
ten years, can I be honest with you, yeah, there's
nothing to write home about. You know. I'm always excited

(02:39):
to see that they're on sale. And then when you
get them in your mouth and you think cheapers, you know,
it leaves a little something to be desired there. I mean,
let's be honest, Airport pretzels have more soul than those things.
But the other day a couple of weeks ago. Actually, boy,
I had I just had such a deep craving for

(03:01):
the real deal of a fry offer cookie. You know,
the old g fry offer cookies, you know, the ones
that they could really make it. Just sit up in
your chair and appreciate life a little bit more in
my opinion. And folks, I'm proud to say that I
now have the original, the original nineteen sixty nine recipe

(03:23):
in my possession. Now, I know they came out well
before that, but I've been told, I've been told that
this is the real deal. So naturally I had to
give it a shot. And here's the thing.

Speaker 1 (03:36):
I get all.

Speaker 3 (03:37):
I get everything together, and I got the kitchen laid out,
super excited about doing this, and I said to Stace, Babe,
where's the where's the flower? And she says, oh, it
should be right there and the flower container. I said, no,
we don't. We don't have any. And she said, oh,
there's some in there. It's in a bag. So I

(03:58):
look and I said, said, this is bread flower? Is
that all right? Can I use bread flower? Now? Listen,
you have to understand when I tell you that I
made these cookies I'm a complete lame and I don't
know what I'm doing, but I can follow directions right
to a degree. So I whipped these things up. Let
me just tell you that they looked like bond bonds,

(04:23):
but they tasted like heaven. They were really incredible. Now,
the texture was all it was different, right, I can't
say it was wrong. It was really just the look,
but the flavor pure nostalgia. And it brings me to
today's show, because, my friends, here's the thing, the four

(04:43):
percent rule that you hear other advisors talking about. It's
like using the wrong flower in your retirement plan. It's
really it's a recipe from another era that people still
try to follow today even though the ingredients have changed.
So I want to cover that with you today. Why

(05:04):
the four percent rule is outdated. So first, let's start
off with when the four percent role was first cooked up. Well,
that was during a time where we had high interest rates,
the market was more predictable, and life expectancies were shorter.
But today we're seeing market volatility and it's like a

(05:27):
roller coaster at a time with no seat belt. And additionally,
you know, we're living longer, which means that four percent
withdrawals might leave you eating some ramen noodle at the
end of your life, or maybe even earlier, maybe at
eighty five. And inflation, let's just say, the cost of
living doesn't stop rising just because you stopped working. So

(05:51):
in this episode today, we're going to break down why
the four percent rule is an outdated recipe and it's
our recipe for disaster. So what you should be doing
instead to make sure that your retirement doesn't fall flat
like a bad batch of cookies. I'm going to walk

(06:11):
you through that today. And Hey, between you and I,
if you want the real fry offers cookie recipe, I
might know somebody that has it and he is me,
and I might be willing to share it with you.
Just reach out, okay. But if you want the real

(06:33):
deal for retirement, look at stick with me. I've got
that recipe for you too, Okay, because I've got a
better plan than that four percent rule and it does
not involve guessing. So let's get started first, up the
four percent rule. So, for decades, this rule of thumb

(06:56):
has been used as basically a guideline for retirement withdrawals,
suggesting that retirees can safely withdraw four percent of their
portfolio annually and still have a high probability of their
money lasting for thirty years. So anytime you see one
of those gadgets on your desktop through your four to

(07:18):
one K and such, they're most likely using that four
percent rule. Okay, now, very simple to give you that illustration,
and it's and it's a it's a tool. It's a
it's a good tool to use. Is it the perfect
tool to use?

Speaker 4 (07:33):
It?

Speaker 3 (07:33):
No, it's it's not the perfect tool to use. And
at first glance, you know it really sounds simple. But
here's the reality. What worked in the past decades does
not necessarily work today. The financial landscape has changed dramatically
and the assumptions behind the four percent rule don't always

(07:56):
hold up under today's conditions. And before or we break
down the two major challenges that make this approach outdated
and even risky. I want to tell you that I
put on my website if you go there, PRESCOTTPW dot com.
As soon as you get on, I have a nice

(08:17):
pop up there and it is the same one that
we talked about two weeks ago. It has just gotten
a great response and the feedback that I'm getting from
people about how they're finding value in this is very
encouraging to me. We take a lot of time putting
together what we perceive will be valuable resources for you

(08:41):
as listeners in addition to prospective clients. And this white
paper that's there right now is how to avoid six
common tax errors. And it's a great white paper. It's
a nice read. You're definitely going to find value in it.
So take the opportunity go over there and click on that.

(09:05):
Fill in your first name, last name, email. We don't
ask for a whole lot and uh, we'll get that
over to you immediately.

Speaker 2 (09:12):
Not much you can do when the feeling is gone.
Maybe blue skies balk, but it's cool. When you love
some rocks, they say.

Speaker 3 (09:36):
They want welcome back to your money matters. I'm your host,
Drew Prescott, chartered Retirement Planning Counselor, Accredited Wealth Management Advisor
and President of Prescott Private Wealth. And today we're talking
about retirement on the rocks. No, not the kind with
a beach and an umbrella drink. We're like the kind

(09:56):
where your retirement income strategy is crumbling beneath you like
a bad soup flee. But before we dive in, let
me tell you a quick story about something else that
has not aged so well, which is Fryhwfer cookies. If
you're like me and you grew up around here, you
know exactly what I'm talking about. As a kid, those

(10:18):
cookies were legendary. They had the crispy edges, the soft centers,
and that little hint of salt that made them just
absolutely perfect. But in the last ten years, have you noticed,
there's nothing to write home about? And I mean even
our chocolate chip cookies that we had in high school
they had more soul than these things. But the other

(10:41):
day I had this deep craving for the real deal,
and I thought, man, I wish I knew what the
recipe was for those original fry Hoffer cookies. So I
asked around was able to get my hands on it.
And what they say it is okay, And this is

(11:03):
supposed to be the one from like back in the sixties,
and those are the in my opinion, those old ones,
and they could really make you just sit up straight
in your chair and appreciate life a little bit more.
And folks, I'm proud to say that I do have
what I believe to be the recipe from the nineteen
sixties in my possession. So that being said, naturally I

(11:26):
had to give it a shot and make some. But
here's the thing. We all that we had was breadflour,
and I figured, well, I guess, hey, how different could
it be. Well, let's just say these cookies ended up
looking like bond bonds, but they tasted like heaven, so

(11:47):
I can't knock them. The texture was all wrong, with
the flavor pure nostalgia. And that brings me to today's show, because,
my friends, the four percent withdrawal rule that everyone talks
about in your retirement to use for the di y

(12:08):
retirement plan is like using the wrong flower in your
retirement plan. It's a recipe that's from another era that
people are still trying to follow today and even though
the ingredients have changed. We're going to talk about why
the four percent rule is outdated, and we're going to

(12:29):
get to that shortly. But before we do, let me
just give you an overview on the markets and why,
and well I should say what we can expect next week. Okay,
So this past week, if you were paying attention, we
saw some major moves in the market, and I think
intra day there was one day where we had about

(12:52):
a five hundred point swing throughout the day, and we
saw the sm P five hundred dropped one percent, closing
at nine and fifty four. Small dip, but after a
strong January, investors were feeling a little bit jittery with
that number. We also we saw the Dow Jones climbed

(13:14):
one percent, closing at forty three thousand and eight forty
and that's, you know, a little bit more stability thanks
to the strength and the industrial and the energy stocks.
And then with the NASDAC, we saw that went down
by about three and a half percent, So that closed
out at eighteen thousand and eight forty seven. Because the

(13:34):
tech stocks took a good of a bit of a
beating here, and I'll tell you why in just a moment. Okay, Now,
while the Dow held steady, the tech stocks dragged down
the Nasdaq. So the big question here is is this
a correction or is this an opportunity? So I want
to break down the four big reasons behind this week's

(13:57):
roller coaster ride for you. Well, first, we had inflation data,
so the we're asking ourselves now is this was this
good news or was it just a mirage? And the
PC price index, which is a key fed in inflation gauge. Here,
that showed some slight cooling and that calmed investors at first,

(14:18):
but then optimism started to fade when other factors started
to hit. So we have talk now of new tariffs
on Chinese goods, which would kind of revive fears from
the two thousand and eighteen twenty nineteen year where people
are concerned that higher costs for businesses could happen, which,

(14:42):
in turn, if a business feels a squeeze an investors
starts sweating a little bit here. But we also saw
Nvidia stumble and the tech giant took a hit, and
the AI sleeve here fell about eight and a half percent.
That's that's a sick, magnificant number. And you know, that's

(15:04):
just a good reminder for those of you who are
heavily concentrated in a singular stock that no stock, no
matter how hot, it does not go straight up forever.
So keep that in mind, even if you think that
you've got the best stock in the world. So, as
you know, markets hate surprises, and this week we've definitely

(15:26):
got plenty of them. But does this volatility mean that
it's time to panic and That's the question that I
want you to ask yourself continuously, okay, is throughout your
life and throughout your investment journey. Here, the question you'll
always want to ask yourself is what does this volatility mean?

(15:49):
And I'm going to help you answer that in a moment.
All right, So what's on deck for this coming week
is we have a lot of data that could really
shake things up even more. So. We have on Monday,
March third, the construction spending from January, and then we
have the ISM Manufacturing PMI for February, which will give

(16:12):
us a pulse on the factory sector here. Then we
have our ADP National Employment Report on Wednesday, which is
a preview of Friday's big jobs report. And then on
Friday we have our February jobs report, which is really
the most important number of the week because if hiring
stays strong, the FED may delay some rate cuts, but

(16:36):
if job growth slows, then the cuts could come sooner
than expected. So the key takeaway here is that markets
will be really kind of hanging on every word from
these reports and watching for any signs that could shift
the Fed's next move. So with all of this noise,
how should you be thinking about your investments. That's the

(16:59):
question that I want to address. So first I would say,
just stick to your plan because volatility is normal and
the worst thing that you can do is make emotional decisions.
And the most successful investors are the long term investors
and they ride these waves out. And that is where

(17:21):
either a fortune is one or lost is in that
one discipline. Okay. Also look for buying opportunities. When great
stocks start to pull back, especially in tech, it can
be a buying opportunity. And you're going to want to
stay diversified because a resilient portfolio has a mix of

(17:43):
assets and that's how you sleep at night during these
weeks that are like this. Okay, Now, if you're so
heavily concentrated in like an Nvidia, well you're definitely going
to have more heartburn. So that's why we always want
to make sure that you have a well diversified portfolio. Now,
with all of this in mind, I want to get
back to where we started and which was I want

(18:05):
to talk about this four percent withdrawal rule and why
it's outdated.

Speaker 1 (18:11):
So.

Speaker 3 (18:13):
In full transparency, I want to The reason that this
is very important to me is there's many facets to this.
Number one is that this is the go to rule
of thumb for all do it yourself individuals that are

(18:34):
going about putting together their own retirement plan. And I
want to send off a warning flare here for people
that are using this rule of thumb. Okay, it's very outdated.
Now I want to piggyback on top of that with
just a couple of weeks ago, I heard another advisor

(18:57):
that shares the airwaves with me pushing this and when
they did, they also have it all wrong because they
tied it to they said that as a part of
the modern portfolio theory. My mind just went when I

(19:18):
heard them say that, I couldn't believe it. It has
absolutely nothing to do with modern portfolio theory. So folks,
make sure that you're choosing the right financial advisor, okay.
And it's very important that you understand exactly what you have,

(19:41):
why you have it, and don't get tossed around in lingo.
And you also want to understand for yourself what these
things mean. And so again, modern portfolio theory has absolutely
nothing to do with a four percent with your four

(20:01):
percent withdrawal rule is something that was created years ago
to create a safe withdrawal rate on your assets to
provide an income that you can depend upon and not
be in fear of running out of money. So what
I'd like to do is, first let's review when this

(20:22):
four percent rule was first cooked up. And at that time,
interest rates were higher. Okay, they were very high, and
the market was a little bit more predictable, and life
expectancies were shorter as well. But today we've got market
volatility that is like a roller coaster with no seatbelts

(20:43):
at times. We're living longer, which means that that four
percent withdrawal might leave you eating some ramen noodle later
in life. And inflation, well, let's just say that the
cost of living doesn't stop rising just because you stopped working.
So in the episode, we're going to break down why
the four percent rule is an outdated recipe for disaster

(21:06):
and what you should be doing instead of instead to
make sure that your retirement doesn't fall flat like a
bad batch of cookies. Okay, and hey, like I said before,
if you want the real Fryhoffer cookie recipe, the one
that actually works, I'll share it with you. Just reach out.
You can email me at Drew at PRESCOTTPW dot com Now,

(21:29):
if you want the real deal for your retirement, stick
with me because I've got a better plan than the
four percent rule and it does not involve guessing. So
let's get started first up. For decades, this rule of
thumb has been used as a guideline for retirement withdrawals,
and it suggests that retirees can safely withdraw four percent

(21:53):
of their portfolio annually and have a high probability of
their money lasting thirty years. So when you look at
this at first glance, it sounds really simple. But here's
the reality. What worked in the past decades doesn't necessarily
work today because the financial landscape has changed dramatically and

(22:16):
the assumptions behind the four percent rule they don't always
hold up under today's conditions. So let's break down two
major challenges that make this approach outdated and even risky. Well.
First would be that the stock markets volatility exists and
the sequence of returns risk because in the past, markets

(22:40):
were more stable, as we already discussed, and retirees they
could generally rely on steady growth to sustain their withdrawals.
But today we're seeing some wild swings, We're seeing unexpected
recessions and some major geopolitical events, all of which significantly
impact investment returns. So here's why that's dangerous. First, let's

(23:05):
start off with the sequence of returns risk. Now, what
this stands for is it's the order in which market
gains or losses occur and how they can have a
profound effect on how long your money lasts. So, for
an example, let's say that you were to get a

(23:28):
start in retirement and the first year out of the gate,
you're down twenty percent, and you take your withdrawals and
then you get five percent and then a ten percent.
And then if we flip that on its head and
we say when you first retire you have a positive

(23:49):
ten percent return, a five percent ready to return the
following year, and then a negative twenty percent, Well, the
two account values are going to be very differently, are
going to be very different based upon how you have
withdrawn the money through different market conditions. So that sequence

(24:11):
of return is a risk that you have to be
aware of. And if you're just focused on this four
percent withdrawal rule and you don't have some other stability
for yourself to account for these types of things, then
you could get hurt. Now, what that means is that
you could potentially be selling assets in a bear market.

(24:31):
So if you're withdrawing four percent annually and the market
is down twenty percent, you may be selling assets at
a loss. Additionally, you have increased volatility. So even though
the market has historically trended upwards, which we always talk
about on the show, short term fluctuations can really be
devastating for retirees who are actively drawing down on their savings.

(24:54):
So think back to two thousand and eight for a second.
We saw millions of retire who saw their portfolios taking
massive hits. Now, if they were relying solely on that
four percent withdrawal rule, then they may have been forced
to sell some stocks at rock bottom prices just to
cover their living expenses. And for those of you who

(25:19):
are just joining us, you're listening to your money matters.
I'm your host, Drew Prescott, chartered retirement planning counselor and
accredited wealth management advisor at Prescott Private Wealth, and I
also want to share with you that a couple of
weeks ago I put on a new white paper up
there for you. So if you want some quality information

(25:42):
to help you make some better decisions, financially. Go to
Prescott PW dot com and when you first get to
the homepage there, you're going to see a pop up
and it is how to avoid six common tax mistakes.
Go ahead, put your first, last name and email address
and we'll send it to you instantly. We've gotten some

(26:05):
wonderful feedback on this. People have enjoyed this very much
and have shared it with their friends and family, so
a lot of positive response to that white paper. Feel
free to help yourself there, and thank you for listening.
Today we're talking about the four percent withdraw rule and

(26:28):
kind of talking about the dangers of it. Okay, so
if we were just relying solely on the four percent
withdrawal rule, as I said, they may have been forced
to sell some stocks at rock bottom prices just to
cover their living expenses. But that's why depending entirely on
market based investments for retirement income is a risk that

(26:49):
many cannot afford to take. Also, keep in mind, longer
life expectancy and increased expenses are going to play a
part in this, because we're living longer than ever before,
and that's great news. We're very thankful for that. But
what does it come with, Well, it means that your
savings will need to last you longer. It means that

(27:09):
medical expenses are going to increase significantly with age. Inflation
is going to steadily erode your purchasing power as well.
And one of my favorite studies to point to is
that a few years back, Fidelity estimated that a retired
couple today will need over three hundred thousand just for healthcare.

(27:31):
That doesn't even include your long term care, and at
just a three percent inflation rate. If you were someone
that needed fifty thousand dollars a year in annual spending
in today's rates, that could require one hundred thousand dollars
in the future just simply to maintain the same lifestyle.

(27:53):
So when we consider longer retirements, rising healthcare costs, and
market violence utility, it becomes clear that this four percent
rule is not a one size fits all solution. So
let's talk about why relying on this four percent rule
is entirely too risky in today's economy. Well, some financial

(28:17):
experts now are recommending lowering the withdrawal rates to three
percent or even less. And it's funny because it's always
like whatever the flavor of the week is will always
leave us, and then it always seems to come right
back around in time. And I remember when I first
got started in the industry, there was I think it

(28:41):
was Forbes. Maybe it wasn't Forbes, but I know it was.
Wall Street Journal was one of them. I forget what
the other what the magazine was one of them was
talking about the four percent withdrawal rule. Then the same
day Wall Street Journal was debunking it and saying, well,

(29:02):
four percent withdrawal rule is not safe any longer, and
you need to go to a three percent withdrawal rule.
And then I believe it was about a year later
Wall Street Journal posted another article about saying that the
four percent withdrawal rule was on the table. So if

(29:25):
it ever goes in and out of season like this,
then I always say, you need to have a better plan.
You need to have something that's a little bit more
concrete for your foundation. Okay, so what is the best
solution for you? Well, every financial picture is different. We

(29:47):
know that, and what we don't want to have happen
is that if you've done a good job saving and
you've been massed enough wealth for your retirement, well we
don't I want to restrict your spending even further and
just make your money last. Just go into it with
the mindset of it lasting. So instead of relying on

(30:11):
outdated rule of thumbs, the better strategy is to focus
on dependable, guaranteed income streams that provide security regardless of
the market conditions. And that means incorporating strategies like the
proper timing of using your pension, your social security, your annuities,

(30:35):
and also having tax efficient retirement planning to maximize your
after tax income. And then you want to look at
smart investment allocations that balance growth and security. Now, the
bottom line here is we need to have strategies in
place that not only hedge against inflation but also the

(30:59):
rising healthcare costs. And by shifting the focus from market
dependent withdrawals to diversified income streams that have guarantees associated
with them, retirees can create a more secure and stress
free financial picture. So what are the alternatives to this, Well,

(31:22):
that's what we're going to explore next. We want to
talk about how to build a retirement income plan that
not only ensures that your needs are met and that
your lifestyle is protected, but that your money lasts as
long as you do. Now, This is a difficult thing
to do, and it requires compartmentalizing some of your retirement assets,

(31:47):
but the benefit in doing so is that we can
address the fact that people are living longer lives in
addition to increased expenses. So one of the things that
people don't take into consideration when doing their planning, which
I like to always talk about, is that when if

(32:11):
you think of retirement, let's just use the age of
sixty five as a standard benchmark for a second. At
sixty five years old, most people are very full of
life at that time. They're able to get around, they're
still having fun. Maybe you're golfing, a little plan, some
pickle ball, you're hiking, but you're still pretty spunky, right,

(32:35):
and you still feel young, and you're thankful to be
able to get out there and do what you want
to do. Now, when you get to seventy five, you know,
most people slow down a little bit. Maybe you're not
traveling as much, maybe you enjoy just kind of sitting
around the house a little bit more. But one thing

(32:57):
that we do know is that when you get to
around eighty years old, you're certainly going through life in
a lower gear, which means that financially, you typically do
not need as much money. So when we put together

(33:19):
a financial plan, we always explore the possibility that with
looking at the longevity of your family and the genetic
traits of how long your family lives and so on,
and the lifestyle that you want to live. Sometimes we

(33:41):
do like a stair step approach, where in the beginning
you'll have more money that you want to access for travel,
for gifts and everything, maybe weddings, and then as you
get a little bit older, you know, if you end
up anything like my grandmother, you know, around eight years old,

(34:02):
you know, eighty five, I should say about eighty five,
because she lives about ninety three, But about eighty five,
the only thing she really needed was her readers, digest
some hardtack candy in a warm blanket, and she was
pretty happy. So we want to take that into consideration.
Maybe at that point it's more about preservation and estate planning,

(34:25):
so that's important to remember, okay, and we would take
that into consideration. Now, the longer that we live, the
more of a problem this becomes. Now, as we talked,
we're all it looks like in the States people are
living longer than they ever did before. But the great

(34:47):
news here is that we're living longer, but we also
need to plan for retirement that could last for twenty five, thirty,
or even forty years, where in the past people didn't
live that long, so we didn't have to project retirement
out that far. And when you use that four percent rule,

(35:08):
which was originally developed back in the early nineteen nineties,
the life expectancy was lower, health care costs were significantly
less burdensome. But today that's really no longer the case
because the key challenges here are longevity risk. Now retirees

(35:29):
today have to plan for a longer lifespan and that
savings needs to last longer than the previous generations because,
as we were just saying, a withdrawal strategy that worked
for a twenty year retirement using this four percent withdrawal rule,
that may not hold up for a thirty or forty
year retirement, primarily due to the fact that we have

(35:52):
these rising health care costs. Because these medical expenses increase
significantly with age, and they often rise faster than in
flo So if we keep in mind that study from Fidelity,
we need to address that three hundred thousand dollars elephant
that's in the room for healthcare that we need to
have set aside. Now, remember this has nothing to do

(36:14):
with long term care. So if you don't have a
plan for long term care insurance, or you do not
have long term care on your mind, I would strongly
encourage you to start to do some research on that
and look at the costs that are associated with it.
Let me see if I can find you this calculator

(36:35):
that I really enjoy using. All right, so let's see. Okay,
here it is all right, So it's care scout dot com. Now,
if you go into this website, you'll see a map
here on the right hand side, and you can enter
your location. So if we just type in let's say Troy,

(36:59):
New York, okay, and we can look at this and
say select a cost period. They allow you to choose
if you want hourly, daily, monthly, annually. And what we're
trying to do here is find out what is the
cost of care for long term care in our area? Okay. Now,
every different county, every county is different, And this one here,

(37:23):
if we use Troy, is gonna give our monthly medium
costs in the Albany area, So monthly as of twenty
twenty three says that the home health aid someone coming
into your home is about seventy two hundred and forty

(37:44):
five dollars a month. Now, if you needed to go
into a nursing home facility, a semi private room which
means that you're gonna have a bunk mate, is fourteen
nine and thirty five dollars a month. A private room
is fifteen thousand, two hundred and eight dollars a month.
And if you don't believe me, just go on care

(38:06):
scout dot com and check it out. Okay, Now, if
you are somebody that is a snowbird and you decided
that you wanted to receive your care, let's say down
in Fort Lauderdale, all right, let me just pull this
up quick. Fort Lauderdale, so less expensive. Right, the in

(38:31):
home care with a home health aid is fifty seven
twenty and a private room is thirteen nine sixteen. So
you know, a pretty good swing on the in homecare,
not as significant in the nursing home facility. But either
way you're talking that you need this year. Last year,

(38:56):
I should say one hundred and sixty seven one thousand
dollars just in Florida for nursing home facility. So let's
take a peek. Let's fast forward this, and this is
a beautiful little chart here. You can you can go
out and fast forward ten years. Okay, So in two
thousand and thirty three, they're projecting that this cost in

(39:18):
Florida would be two hundred and twenty four thousand, and
if we go back to Troy, let's take a peek here.
Hopefully you're finding value in this. This is very interesting
to me. If you look at Troy in two thousand
and thirty three, the nursing home facility for a private

(39:40):
room is going to run you about two hundred and
forty five thousand dollars per year per year. That's a
stiff number. So if you don't have a plan for this,
I would tell you call me. I will walk you
through what your options are. I used to have a

(40:02):
designation that I gave up that really kind of basically
what it did was it pushed certain insurance products. And
I'm not one to subscribe to being pushed any one direction.
So I'm a free thinker. I'm a critical thinker. I

(40:23):
like to think outside of the box and help clients
think outside of the box too, So If this is
something that you're interested in learning a little bit more about,
please call. We'll set up a time to get together
and we'll design a plan specifically for you. So remember,
we've got a couple of pieces here. We've got that

(40:43):
component that we just talked about, which is a long
term healthcare cost. Then we have that if you're let's
just use fifty thousand for a round number here, If
you need fifty thousand in retirement today, fast forward in
the future, that fifty thousand to have the same impact
act in your lifestyle, you're going to need about one
hundred thousand several years out.

Speaker 1 (41:04):
Here.

Speaker 3 (41:05):
We also have that component of the three hundred thousand
in today's dollars that you're going to need set aside
just for healthcare. So you can see there's a strong
demand on your dollar. And that's not even talking about
the taxation. So when we consider the longer retirements, the
rising healthcare costs, in addition to market volatility, it really

(41:27):
becomes clear that this four percent rule is not a
one size fits all solution, and frankly, relying on this
four percent rule is risky, very risky in today's economy.
And as I said, I know some financial experts are
calling to lower the rate to three percent or even less.

(41:47):
But I can show you a way to solve this
without worrying about that, and without worrying about spending all
of your money down and running out of income. But
if you don't do that, you're going to find yourself
in a situation where you're going to end up restricting

(42:07):
your spending even further in retirement, just simply to make
your money last. And I have a better approach and
I want to share that with you. So call us
at five one eight two zero three one nine eight
three and schedule a time with us, or go to
Prescott PW dot com and if you scroll down the page,

(42:27):
you'll see a section that says schedule a time, grab
a time on the calendar. Love to talk to you.
We have a lot of faithful listeners that have called in.
We do some zoom meetings from face to faces, and
I've yet to have anybody tell me that they have
not enjoyed their time with us and have found value

(42:48):
in this. Okay, So we were picking up some new
clients through this, and Michael, first and foremost is to
be an educator. I want you to understand what you
have and kind of to roll over the rock so
that you could see if there's any snakes under there,
to make sure that we keep you out of danger. Okay,
so what can you do to help reduce some of

(43:13):
these situations here that would leave you running out of money? Well, again,
we would explore the right time for you to take
your social security, the right option for your pension, and
discuss the annuities that you may have in place, or

(43:34):
if there's a need for you to purchase an annuity
which would guarantee lifetime income as well. So if you
have these components that have a guaranteed income coming into them,
there's a fella that's in my industry. I really enjoy
this line that he uses. But he always says that

(43:55):
we want to have a paycheck, which would be our
social secure already, our pensions, our annuity income, and then
we would want to have our play check. And so's
that's the difference between being rich and wealthy. A rich
man has and woman has all of their assets tied

(44:20):
up in a place that they really cannot spend the
way that they would like to, and a wealthy person
has the luxury of being able to not only know
that they have amassed the wealth, but also permission slip
to live the lifestyle that they want to live. So

(44:41):
we want to look at tax efficient retirement planning to
help you maximize that after tax income, talk about smart
investment allocations that balances growth and security, and look at
strategies to hedge against inflation and rising health care costs.
So by shifting the focus from market to pennant withdrawals

(45:02):
to diversified income streams with guarantees, retirees can create a
more secure and stress fee stress free I should say
why I'm having a hard time here. I don't know
about you guys, but sometimes I feel like if I
don't drink enough water, my thoughts are just not as clear.

(45:23):
And I think I need to get back to focusing
on drinking some more water here, so that way, there,
I don't have to grapple with my words. And it's
important for me to be sharp when I'm doing a
radio show here, So I apologize, but let me get
back to what I was saying. I was saying that
retirees can create a more secure and stress free financial future.

(45:44):
So what are the alternatives for you? And that's what
I want to explore with you. Next is how to
build a retirement income plan that ensures that your needs
are met, your lifestyle is protected, and that your money
lasts as long as you do. And for those of
you who are just joining us your list listening to
your money matters. I'm your host, Drew Prescott, chartered Retirement

(46:04):
Planning counselor, accredited wealth management advisor and president of Prescott
Private Wealth, located at four to fifty one Who's Ex
Street in Troy, New York. The phone number here is
five one eight two zero three one nine eight three.
And also just a little uh bit of information here.
If you go on Prescott PW dot com, you can

(46:27):
download a wonderful white paper that I put together put
up about two weeks ago about the six common mistakes
that people make with their taxes. Feel free to go
on there download a copy for yourself, and I know
that you will really enjoy that. And it's going to
go grab a water quick and take a short little break.

(46:49):
I'll be right back with.

Speaker 4 (46:50):
You at Prescott Private Wealth. We understand your financial picture
is unique. Don't get lost in the noise of mixed advice.
Visit us at four or five to one Who's Sixth
Street in troyew York or online at Prescott PW dot com.
Led by Drew Prescott, our team offers comprehensive solutions from
investments and retirement plans to risk management around insurance and

(47:11):
estate planning. At Prescott, we're fully licensed to safeguard and
grow your wealth Prescott Private Wealth, where your financial future
is secure. Visit PRESCOTTPW dot com today.

Speaker 3 (47:23):
All right, welcome back. So before I left you, we
were talking about how to build a retirement income that
ensures that your needs are met, your lifestyle is protected,
and that your money lasts as long as you do.
But did you know that Social Security benefits are designed
to replace only forty percent of your pre retirement income.
That means that if you were earning one hundred thousand

(47:45):
per year before retirement, social Security may only provide around
forty thousand per year. But that's before taxes and your
Medicare deductions. Now, for high higher earners, the replacement is
even lower, and the challenge here is social Security's uncertain future.

(48:07):
I would encourage you to do what I do Every
year when I get my statement, I always like to
look at the print and it always talks about when
they expect the trust fund reserve to be depleted. So
at this point, the warning is two thousand and thirty four,
so we're talking nine years out. Okay. That means that
future benefits may be reduced if we have no legislative

(48:28):
changes here. And for those reasons, relying on social security
alone is an incredibly risky retirement strategy. Instead, retirees should
really look to build additional income sources to supplement their benefits.
So bridging the income gap is what we want to

(48:51):
do instead. So if avoiding the stock market is in
your cards, let me just tell you that's a bad idea,
and relying solely on social security that's not going to
be enough. So what's the best approach? Well, I like
a multi source income strategy, and the key to a

(49:11):
long term financial security and retirement really is diversification, because
you want to have a mix of income streams that
provide both stability and growth. And I want to share
with you a few essential income sources that can help
you fill the gap. First, to have guaranteed income from annuities. Now,
annuities are one of the only things out here outside

(49:34):
of social security and pensions, and by the way. You
know what a pension is, it's an annuity. Well, you
can buy a personal annuity, and this personal annuity would
provide a steady stream of guaranteed income for life, no
matter what happens in the stock market, and they're an
excellent way to supplement your social security and your pension.

(49:54):
They also help ensure a baseline of income to cover
essential expenses. Now, don't get me wrong, I'm not telling
anybody to go and put a majority of their money
into one of these. That would not be prudent. Okay,
if someone ever tells you that, run all right, everyone's different. Now,

(50:15):
you would also want to consider using some dividend paying stocks. So,
unlike a traditional stock, we have these dividend paying stocks
which generate income and they come in a form of
a regular payment, and this allows retirees to benefit from
stock market growth while they're still receiving a consistent income. Additionally,

(50:36):
you may want to look into owning some real estate investments.
Now we know that rental income from investment properties provides
a steady cash flow, and real estate also acts as
a hedge against inflation because property values we see them
increase over time and in turn, so does rental income
and they tend to rise over time. So that's another

(50:58):
good source. One that's not talked about much any longer,
which should be is a cash value inside of your
life insurance plan. Because permanent life insurance policy is like
a whole life policy or a universal life contract. They
have cash value inside of them that can be generated
for tax free withdrawals and retirement. Now, this offers a

(51:21):
flexible income source that isn't impacted by market downturns. Now again,
I gotta tell you, there's a fellow that I used
to work with that continues to advertise on Facebook and
it's I agree with it wholeheartedly. He is basically out

(51:44):
there promoting people to take loans to fund a life
insurance policy because he said, well, if you can only
afford x amount a month, let's just say five hundred
a month to buy this policy. Well, if you take
out a loan, it would double the amount that you

(52:07):
could pay. Keep paying the same payment on the loan,
but you're able to put so much money in up front. Well,
what a disaster. That is the worst scam that is
out there. I'm disappointed to see that this individual keeps
on posting that that's a terrible thing. Do not get

(52:30):
into that, Okay, And if you want more details on that, again,
feel free to call me. There's the right way to
structure these life insurance policies, and you can do it
where you're kind of getting rid of as much of
the commission as possible, because that is where a lot
of this growth would be lost. Okay. Most of the

(52:51):
people that I know that are in that industry work
at it the opposite way. Now, there are a couple
of very talented and great technicians in that area that
I know personally, and I respect them immensely. But there
are some out there that are advertising on Facebook as
a way to take a loan to fund your life

(53:16):
insurance policy and telling you that it's a Swiss army
knife and it takes care of everything, that it's the
only tool that you would need. It's really disgusting. Bothers
me incredibly. But also another way that you could have
some additional income is part time job or some passive

(53:37):
income streams. Now, many retirees find fulfillment in consulting, some
freelance work, or even small businesses and passive income sources
such as royalties for online businesses So the bottom line
is be proactive, don't be passive, okay, and there are
some wonderful opportunities for you. So with that being said,

(53:59):
I don't want to burden you with this knowledge and
have you feel like, well, great, Drew, you just kind
of poop pooed my plan. Here what am I supposed
to do about it? So here's what I'd like to
offer you. I'm going to do a special offer. It's
for a financial plan. I'm going to do it for
a one thousand dollars Okay. This doesn't include a state planning,

(54:21):
it doesn't include investment strategies. This is a stress test
on your financial picture. And what it's going to do
is it's going to help you identify risks to optimize
your income sources and ensure your financial security for decades
to come. So, if you're ready to take action, reach
out to us Prescott PW dot com, schedule a time

(54:44):
or qual us five one eight two zero three, one
nine eighty three. Again, it's one thousand dollars. This is
a very short term offer. This offer will expire on
Friday of this coming week, and I want you to

(55:06):
make sure to get out there and take the opportunity
here because your retirement should be a time of relaxation, fulfillment,
and enjoyment, not financial stress. And by avoiding these common
pitfalls and taking proactive approaches to income planning, you can
secure the retirement that you deserve. So thank you so

(55:27):
much for listening to me today. I hope to have
you back here next week, and if you have any
questions in the intern, feel free to call five one
eight two zero three one nine eight three And again
you're listening to your money matters. I can be heard
here every Sunday at eleven am on WGY Radio eight

(55:47):
ten and one oh three one FM, and until next week.
May God bless you and may God bless your family.

Speaker 4 (55:54):
Take care live's toughest financial decisions don't have to be
faced alone. Scott at Prescott Private Wealth is here to
guide you, whether it's settling in an estate, planning for retirement,
or making your final walk from your career into a
well earned rest. Don't let uncertainty weigh you down. Ask yourself,
did I do this right? Am I missing anything? With
Prescott Private Wealth? The answer is clear, You're on the

(56:16):
right path. Visit us at four or five one. Who's
six Street in Troy, New York, or online at Prescott
PW dot com. Prescott Private Wealth your partner in navigating
life's financial journeys.