February 24, 2025 • 30 mins
Is 80% enough? – Chris Boyd and Jeff Perry explore the question of how much you
will likely be spending in retirement. The pair begins the conversation with the age-old
rule that retirees only need 80% of their pre-retirement income in retirement. Chris and
Jeff explore the “retirement smile” and how it can be a good predictor of retirement cash
flow. More than just a podcast about money, Chris and Jeff discuss the various ways
many retirees over and under spend their expected retirement funds. Chris puts the entire
episode into why having an annual review with your financial planner is critical to
staying on course in retirement.
For more information or to reach Chris Boyd or Jeff Perry, click the following link:
https://www.wealthenhancement.com/s/advisor-teams/amr
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome, everybody.
Thanks for being with us for another episode
of Something More with Chris Boyd.
I'm here with Jeff Perry.
We are both of the AMR team at
Wealth Enhancement Group and our show today.
(00:46):
We're going to talk about a variety of
things, but the first of them is about
this 80% thought process.
I'm going to call it the 80%
rule, but that's exactly what we might call
it, but we'll come back to that in
a second.
Before we get started, I wanted to ask
you all to please share our show with
(01:07):
someone else.
We love doing the show and we'd love
to help more people and reach more people.
Your ratings and sharing of the show is
really the best way for us to reach
more people.
If you find the show helpful and enjoyable,
share it with someone else.
(01:27):
Give us a rating on where you like
to listen.
If you're not, by the way, watching us
from time to time, do you know that
we are now posting our shows both on
YouTube on the Wealth Enhancement Group page and
on our webpage, which you can find at
somethingmorewithchrisboy.com.
(01:48):
From time to time, join us on video
as well as the audio podcast.
You can find the audio podcast wherever you
like to listen to audios.
Hopefully you have and that's how you're listening
right now.
Jeff, I wanted to at least mention that
from time to time.
No, it's good.
I appreciate it.
It definitely works.
The more people share and like and rate
(02:09):
our shows, the more it gets into the
algorithms and so more people can see it.
So, that being said, 80%.
What the heck are we talking about?
I thought it was a 4% rule.
What's this 80% thing?
80% is a B minus.
Is that good enough?
Yeah.
(02:29):
Oftentimes when people think about retirement and what
they're going to spend, there's this rule of
thumb or perspective that you're not going to
spend as much in retirement as you do
while you're working.
Why is that?
Well, you might not be commuting.
(02:49):
You'll spend less on your car and all
that goes into the maintenance and the gasoline
and so forth.
Oh, your costs go down.
That's one reason.
I won't need to spend as much on
my wardrobe.
Yeah, dry cleaning, right?
Dry cleaning or I got to get a
new suit now and then or whatever it
is, right?
Yep.
So, that's part of the rationale.
(03:12):
No more business lunches if they weren't reimbursed
or there's a lot of things that will
come up.
That you spend money going out to lunch
more often or something.
Yeah, good point.
So, okay.
Well, let's talk about that for a minute,
Jeff.
Is that true?
Will my expenses go down?
Absolutely true if you're just going to sit
(03:33):
on the couch all day.
And you're not driving anywhere.
You're not going out to eat.
You're not going to get any new clothes
for your retirement life.
You're not going to have any hobbies.
You're not going to do anything at all.
Yes, that is accurate.
So, in other words, that's not really probably
accurate.
(03:53):
Because we do have other things we want
to do with our time when we're not
working.
We do other things and those things can
add costs.
Now, sometimes it's just out and about and,
oh, we go out to breakfast more.
We go out to lunch more.
We have more social engagements.
(04:13):
Maybe we just go shopping more.
I see and I live in Florida.
I live in a...
It's not a per se retirement community, but
there's lots of retired people.
And I see shopping as entertainment for people.
That's right.
Shopping, going out to eat is entertainment.
That's what they do to break up the
day.
To pass the time.
And so, is it true?
(04:34):
I think we have to be a little
bit skeptical of that notion.
Now, if we want to get granular, because
let's say we think in terms of our
expenses and we say, well, I've got it
almost set up that my mortgage is going
to be paid off about the time I
retire.
Well, that's practical.
(04:55):
That's relevant.
Okay.
Maybe that's a good example of an expense
reduction because you've got that paid off.
So, that's a possibility.
That could be downsizing.
Things like that that are really concrete.
You can say, I'm not going to have
this $2,000 mortgage or I'm moving to
(05:17):
a less expensive home.
My expenses on a home will be...
Therefore, my energy costs, my upkeep costs, et
cetera, plowing and so forth, whatever.
The upkeep outside, inside might go down.
That's a good point.
So, I think we have to get specific
(05:37):
as we think about some of these considerations
when we put our numbers together.
I was doing this financial plan as a
project thing with a group of planners and
the case scenario was assuming 75% expenses.
I was like, well, wait a second.
How are we coming up with that?
(05:59):
Now, in this case study, the people stopped
contributing to their work investment plan.
Okay.
All right.
If you're considering that an expense, then yeah,
you're not going to be investing the way
you did pre-retirement.
So, that's a reduction in expenses if we're
(06:20):
calling that an expense.
I think I'm air quotes, fingers moving.
Cash flow, right?
Yeah.
Coming out of your cash flow.
So, investment, there's a number of considerations of
how people might have extra money going into
investment.
And if we're considering that as part of
that reason, we're going to have reduction in
(06:42):
expenses.
Okay.
I get that.
If we're only looking at our expenses, what
we're really spending, then it's a different story.
I don't think you're really going to be
spending 75, 80% of your expenses because
you still have priorities.
And then you may do new things.
I want to travel.
(07:03):
You said hobbies.
I might take up golf or something else.
Pickleball for Jeff here, right?
At least I picked one that doesn't cost
much money.
It's not a big, expensive hobby though.
After you get your paddle.
You get a paddle and a couple of
balls, you're good to go, right?
Maybe sneakers.
Some shoes.
Yeah.
Oh, and a shirt.
Wait a minute.
(07:23):
I got to pay the money to enter
the tournaments.
There you go.
Campus bag maybe to carry your stuff.
And drinks after, of course.
So you get the point, right?
Even an inexpensive hobby has a few costs.
But look, I think the point is you're
going to do stuff with your time.
(07:45):
And some of those are expensive hobbies.
I think of golf as being a little
more pricey.
You can do it in a way that's
reasonable with where you go and how you
do it.
But yeah, let's face it.
There's some expense in these things.
And so whatever that may be for you.
It's usually like pent up dreams or demand,
(08:08):
we'll call it.
Like when I retire, I'm going to travel,
right?
You'll see the world.
That's right.
And that can get, I mean, I hope
you do.
That's why.
Yeah.
Or even the, oh, I'm not going to
go.
I don't need to go to Europe.
I'm going to see this country.
There's plenty to see here.
Well, you end up getting the RV or
the trailer or something, right?
(08:30):
Or renting.
You end up doing things that have costs.
So 80%, our thought process here is be
very careful of making a general assumption like
that.
Unless you're getting into the weeds a little
bit and saying, oh, well, the reason I
(08:51):
say 80% is I'm not contributing 15
% to my retirement plan, 5% to
her retirement plan.
And we're not saving for outside the retirement
plan, et cetera, et cetera.
Okay.
That could really get that.
Oh, our mortgage has gone away, et cetera.
(09:12):
Okay.
Now we're getting somewhere where I can see,
oh, that's why we're saying there's a reduction.
Outside of that, I would actually argue you're
probably going to spend a little more.
We talked about the retirement smile, Jeff.
Right.
Sure.
So if you picture a smile, just draw
an air smile, and you see the two
(09:33):
highest points upward are at the beginning of
the smile and the end of the smile.
Meaning when you start your retirement, your spending
is likely to be at a higher rate.
Or elevated.
A little elevated.
Maybe these vacations are things you want to
buy or hobbies or whatever it is.
And as you are in your retirement, the
cost goes down, down, down.
(09:55):
With the theory near the bottom of your
cost is you're still reasonably healthy, but you're
not doing as much.
You're into more routines.
Maybe you've done it and now you're more
content to just in your routine.
Yeah.
And then thinking the smile is going back
up, you're getting older.
Maybe you need some assistance with things you
used to do yourself.
Or maybe you need some help in the
(10:15):
house.
Or maybe you need a caregiver.
Maybe you need assisted living.
Whatever the situation is.
So according to the retirement smile, at the
end of your near the end of your
life, your expenses are high.
Not for the vacation reasons, but maybe for
some extra help.
Different costs that you might have related to
health care.
Yeah.
Good point.
So, you know, I think as you approach
(10:40):
retirement, as you get into retirement, uh, going
through retirement, it becomes important to not think
of your plan as static.
And, um, you know, I, I think when
we start, it's one thing to start with
a number and, uh, what can happen is
over time we find what really happens.
(11:02):
You know, we're making an assumption of what
we're going to do, but then we need
to keep updating the plan and revising it
and reviewing it to say, does it work?
Uh, is this, am I on a path
that is sustainable?
And, uh, if not, well, I might need
to take some action.
And if so, we're good.
We're good.
We're doing our thing.
(11:23):
You know?
Um, so that kind of brings us maybe
Jeff to talking about, um, with clients, why
do we do an annual review?
Why is it important?
Absolutely.
You know, we, we, we have this plan
throughout our accumulation phase.
We're going to contribute so much to our
retirement account, to this and that we're going
(11:44):
to pay down our mortgage, all these things
that we're trying to do to get ready
to reach that land of critical mass or
what's your number.
And you get there and that's, that is
definitely, and you meet with your advisor, see
how you're doing tracking your debt reduction and
your investments.
Yeah.
And then you feel comfortable, you retire, but
(12:05):
that is certainly not the end of the
story when you need to like be on
top of your numbers and in top of
your plan, because this next phase is somewhat,
I can argue more critical to have these
reviews and make sure you're on a plan
because you don't have the ability to increase
your income so much.
Right.
Yeah.
(12:26):
I have to tell you, it's not uncommon
for people to sort of set out their
plan saying, I'm going to spend X and
they start down the path to retirement.
And as they get a little more granular,
well, you know, that the house needs a
little bit of this and that.
(12:46):
Well, we did want to take that trip
and it turns out maybe their expenses are
materially different than they expected.
Absolutely.
And so as we look back over a
few years and say, wait a second, you
know, when you retired, you were thinking you're
going to spend X, but now you're spending
(13:07):
two X or whatever.
That's a different plan.
And how are we going to deal with
that?
Right.
And that can be, that can be just
your cashflow you projected wrong, or you've been
too generous to yourself, perhaps.
Or it can be that something's happened that,
(13:27):
you know, maybe that we talk about when
we do our financial planning, the what ifs
of life, you know, what happens, you know,
good or bad things.
So one of these, what ifs may have
happened.
Yeah.
Something.
Good examples, like a divorced and now they're
got a financial dependency on you for some
(13:47):
help for a time, or I don't know,
what's another common example?
Well, you know, a lot of people go
into, they leave their full-time job, but
their plan is to work another 10 years,
make half the amount of money.
And maybe somebody's got a health issue or
a disability that they didn't expect.
For whatever reason, they're not working.
So that extra income to support the plan
(14:09):
or your investments, maybe you were too aggressive.
Maybe you weren't working with somebody who was,
you know, had your risk tolerance, right.
And you were taking too much risk or
even the opposite.
Maybe you're doing your own DIY planning and
you said, all right, I'm retired.
I'm coming totally out of the markets.
Now I'm putting it in to this money
(14:30):
market fund that's getting 6%.
And then all of a sudden interest rates
go down.
And that 6% return that you thought
you could live on is 2%.
Yeah.
So a lot of things change every year.
And, you know, I think the annual reviews
are people, we tell our clients this and
many of them participate.
(14:51):
Some don't, they don't want to do it.
Or they're just feeling like, oh, I'm happy
with the way things are going.
Not much has changed in my life, you
know, that kind of thing.
But we still would like to have that
meeting anyway.
We would.
I am surprised.
One of the things, I've been doing this
four years with you, Chris, but in some
things are surprising still.
(15:13):
One of the things I'm surprised about is
how we, you know, we get new clients
and many of them are from other advisors.
And I'm surprised that the number one reason
is I haven't heard from my advisor in
six years or, you know, pick a number,
right.
And they haven't had, they haven't been doing
these annual reviews and the advisor hasn't asked
(15:35):
or they missed the communication or whatever the
case is.
But these are really, the annual reviews are
really critical.
It's an opportunity to meet with your advisor,
even if everything, even if the annual review
is 45 minutes and everything's fine, that's a
reassurance.
That's a sense of peace to you, right.
That it's okay.
(15:56):
But sometimes life events come up or you've
done something that you didn't think would impact
your plan.
You were, you know, you did a gift
to the family member that wasn't in your
plan, or you decided to buy that RV
that you referenced that wasn't in your plan
or on the good side.
Well, not the good side.
I'll say you won the lottery that I
was going to say an inheritance, but that's
questionable.
(16:16):
You had money coming into your plan.
Unexpected wealth arrives.
That's right.
So to update your advisor on the life
changes, good or bad, and to just see
if you're still on track, your cashflow is
where it goes.
Unfortunately, that doesn't happen as much as people
would like.
No, it's usually the challenges that present themselves,
but not always.
(16:37):
No, that's true.
And I think, yeah, there's a variety of
circumstances that can arise.
One is, like you said, it could be
new money.
I'm not spending as much as I thought.
I've got an accumulation.
What should I do?
Great.
That's a great issue to discuss.
Sometimes it's my health has changed.
(16:59):
I may have materially different concerns because of
that.
How does this play out?
What happens if?
Maybe it's a little bit about we've had
unexpected expenses that we need to deal with.
(17:23):
Where should we take it from?
Right.
And that's an important question.
Even if you're deciding to go outside of
your cashflow plan and it's a what if,
or it's a I didn't see this one
coming, where you access those funds and how
you access those funds can be a really
key component to the overall success of your
plan.
(17:45):
Sometimes it's about tax planning.
Hey, I'm not making as much.
I'm not taxed as much.
I've got this window where I haven't had
to turn on my required minimum distributions.
I may not yet have turned on social
security or when should I turn on social
(18:06):
security?
I want to do it now.
I can use the money.
Should I do it now?
Or I'm in this window where I don't
have either social security or required distributions, but
I'm drawing from my investments.
Does that present any tax opportunities, tax strategies?
(18:27):
The idea of a Roth conversion comes to
mind.
There can be a variety of things that
we could look at and say, well, what
are some of the windows of opportunities or
risks that we need to be planning around
and reviewing?
And sometimes it's related to tax considerations.
Sometimes it's, hey, I have this pension decision.
(18:50):
We're turning on a pension.
Should I include the spouse?
Should I not include the spouse?
Should I take a lump sum?
Should I take an income stream?
I'm just throwing out a whole range of
things that have come up over the last
six months.
We've talked about all these things with clients.
What comes to your mind, Jeff?
(19:11):
Things, unexpected decisions.
We're talking about your annual review with your
advisor.
I'd love to see, not just in the
annual reviews, but I'd love to see before
an annual review or anytime during the year,
if a client has a thing they're thinking
about.
There's so many things that we don't expect
(19:32):
we're going to do.
But a little forethought is bubbling up of,
I'd like to.
It could be, we planned on keeping this
house, but it's really too big.
Or gee, our kids moved to Arizona and
they just had babies.
Maybe we should move to Arizona.
(19:55):
Or let's travel the country.
Let's buy that RV.
You name it.
If you have a good advisor that you're
working with, you can reach out to them
and say, this is what I'm thinking.
Can we model this?
Can we project, if we have this added
expense, or if we have this reduced expense,
or if we want to buy this thing,
(20:18):
does it impact the likelihood of success of
our financial plan?
You can do it at an annual review,
if it's just something that's not imminent.
You're just thinking about something you might want
to do in a few years and model
it out and make adjustments.
But even if it's just something that comes
up and you want advice and you want
(20:40):
model, how will this affect my plan?
It could be a gift too.
I'm thinking about helping my child buy their
first house.
If I give them $50,000, I'm not
talking about gift taxes right now, but if
I give them a sum of money, does
it affect my plan?
All these things, it's just critical.
(21:00):
You pay your advisor to not only manage
your portfolio, but you hopefully pay your advisor
to get advice on these times and to
keep you on track.
I have to say, to echo your point,
we love when people bring up that stuff
with that planning kind of mindset.
I'm contemplating, what do you think?
(21:20):
How much?
Absolutely.
Is this a good move or what do
you think?
Sometimes it's about, I'm thinking about some real
estate, either investment property or vacation home or
something.
Second home.
Is that a good idea?
Depends.
Sometimes it is.
It's diversification a little bit.
(21:42):
Maybe there's some utility that's an attractive element
to it, but how much will it add
to your expenses?
It's not only the outlay, it's the upkeep.
What's that mean?
How does that change the trajectory of your
plan?
Oh, but I plan on retiring to that
house later on.
Oh, okay.
(22:02):
That's relevant.
Then we're going to end this cost, maybe
the cost associated with this house, and then
we'll be able to free up that capital.
All right, let's model this.
Let me see how this plays out.
That kind of thing.
You can see some virtues to that.
The idea of, I want to help the
family member with a gift or something.
(22:24):
It's an important time for them.
They could really use it as a parent.
Parents just want to help their kids.
No matter how old they get.
All right.
Well, all right.
That's a value.
That's something we value to want to help
our family.
(22:46):
Let's make sure it doesn't adversely impact your
outcome.
You reminded me of something I want to
add to this conversation.
You said value.
I know you were talking about value being
added to the client, but values as well.
A good financial advisor should not be giving
(23:08):
you value judgments.
Not what you want, not what they think
is right for you.
They should be informing you, giving you counsel.
Not just saying, here's what you need to
do.
(23:29):
But give you information and help in the
process so you can decide what's empowering you
to make the decision you want to make.
Yep.
Just making sure that your eyes are wide
open, you have all the information, you know
the impacts.
I can tell you times I've had this
happen, Jim.
Client is deceased now, but definitely wanted to
(23:52):
make a move.
The math was just like, that's not really
a good idea.
But it was something they felt was going
to add to the quality of their life
because it's a better location for where they'd
be in the heart of the community they
wanted to be in.
So they found a way to do it
with family, that kind of thing.
(24:13):
But it's challenging because then things change.
Family doesn't always have the resources that they
thought they would have.
So it's one of these challenges that you
have to, but what's my role?
My role is not to say, oh, I
told you so, or you shouldn't have, and
say, all right, what do we do now?
How do we figure this out?
(24:34):
How do you consider moving?
How do you consider a reverse mortgage?
Would these be tools that could resolve that
shortfall that we might be then having?
These are the things we run into, and
ultimately, our role is just trying to help
you figure it out.
(24:54):
What's the best way to deal with it?
And sometimes the best counsel we can give
is, maybe you should consider downsizing.
Maybe you should consider relocating.
And it seems so obvious.
I've been in many meetings with you that
we get so constrained by our perceptions and
(25:19):
our preconceived intentions.
We don't consider all the options.
Some of them you're mentioning now, and other
ones, some of these things are available to
you.
Have you thought about them?
It can't be that simple.
And sometimes people say, no, I don't want
that.
It's a value.
Okay, that makes sense.
Okay, you thought of it.
(25:40):
It's not something you want to do.
But sometimes I've had clients, this was a
long time ago now, 15 years ago, maybe,
we did the financial plan and the projections,
and they told me they wanted to move
to Florida in a few years, maybe five
years out.
And I kept doing all these calculations and
(26:00):
basically came down to, you know what?
You should go now.
The math was like, your numbers aren't going
the right direction.
Doing it sooner is better.
Time for the move.
And they did.
And they've been happy.
It was a good fit, good choice.
(26:20):
But when you know that kind of stuff,
I think a lot of times we get
focused on the portfolio.
Sure.
And I think clients do too.
Yeah.
We talk about what's happening in the markets.
We talk about, oh, these days it's all,
you know, what are tariffs going to do
and all that kind of stuff.
Some of these variables that are in the
(26:41):
news that we're all focused on.
And those are relevant.
We have to pay attention to those things.
But sometimes it causes us to not put
as much attention on to the other aspects
of land, the financial planning considerations.
And sometimes those can add even more value
than the financial portfolio management decisions, which, you
(27:08):
know, these are foundational, all of these, but
they're all interrelated.
And sometimes it's important to step back from
the, the focus on the portfolio.
Yeah.
The review of the statements, right?
Yeah.
And, and, and all that's going on in
the economy and the Fed and etc.
(27:31):
And trying to think about that.
And sometimes we need to step back and
put it into context of what else is
going on and all that that can add
value with.
That's maybe outside the scope of, should we
have more equities or less equities or whatever,
shorter term bonds or longer term bonds, you
know, whatever.
(27:51):
And that's why a financial review is so
important because it's just a, it's just a
point in time, at least once a year
that you go in for your review and
all these, the things you're focused on, the
things you're not focused on, but we talk
about them all, you know, we'll, we'll go
through the portfolio certainly, but we'll talk about
life changes and how you're tracking on your
(28:13):
plan.
We'll probably ask you if anything's changed in
your estate planning, right?
Anything's happening there.
Any family.
You have fisheries once in a while.
That's right.
I know.
Can't tell you how often we find just
something's not what it's intended to be.
Right.
Some of the mundane things are good to
(28:34):
review too.
That's right.
And it's an opportunity for these things to
come up because the conversation spurs these things
and it's, you know, an hour or two
of your time and it's very well spent.
You know, we go to the doctors for
checkups, right?
Yeah.
We get the oil changed in the car
because we want it to keep running.
Right.
And all these, you know, we get the,
(28:54):
the sidewalks power washed and we do all
these home maintenance things.
It's something as important as your financial plan
and your financial security for the next year,
five, 10, 30 years.
It's definitely worth your time.
(29:15):
If you're not, if you are doing it,
you see the value of it and you're
going to keep doing it.
And I'm positive that if you're not doing
it, I think you should be.
Yeah.
Give it a try for a little bit.
I think you'll find value.
And if you're not getting that kind of
help from where you, you know, who you
turn to for that kind of advice, consider
(29:36):
talking to us.
We'd be happy to talk to you in
any case, Jeff, thanks for the topic.
Good information.
So two things we talked about today, reconsider
that 80% question and don't overlook an
annual review until next time.
Everybody keeps trying for something.
Thank you for listening to something more with
(29:58):
Chris Boyd.
Call us for help, whether it's for financial
planning or portfolio management, insurance concerns, or those
quality of life issues that make the money
matters matter.
Whatever's on your mind, visit us at somethingmorewithchrisboyd
.com or call us toll free at 866
-771-8901, or send us your questions to
(30:20):
amr-info at wealthenhancement.com.
You're listening to something more with Chris Boyd
financial talk show wealth enhancement advisory services and
Jay Christopher Boyd provide investment advice on an
individual basis to clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
The information given on this program is general
financial comments and cannot be relied upon as
pertaining to your specific situation.
(30:42):
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
Welcome to Something More with Chris Boyd.
Chris Boyd is a certified financial planner, practitioner,
and senior vice president and financial advisor at
Wealth Enhancement Group, one of the nation's largest
registered investment advisors.
We call it Something More because we'd like
to talk not only about those important dollar
and cents issues, but also the quality of
life issues that make the money matters matter.
(00:22):
Here he is, your fulfillment facilitator, your partner
in prosperity, advising clients on Cape Cod and
across the country.
Here's your host, Jay Christopher Boyd.
Welcome, everybody.
Thanks for being with us for another episode
of Something More with Chris Boyd.
I'm here with Jeff Perry.
We are both of the AMR team at
Wealth Enhancement Group and our show today.
(00:46):
We're going to talk about a variety of
things, but the first of them is about
this 80% thought process.
I'm going to call it the 80%
rule, but that's exactly what we might call
it, but we'll come back to that in
a second.
Before we get started, I wanted to ask
you all to please share our show with
(01:07):
someone else.
We love doing the show and we'd love
to help more people and reach more people.
Your ratings and sharing of the show is
really the best way for us to reach
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If you find the show helpful and enjoyable,
share it with someone else.
(01:27):
Give us a rating on where you like
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If you're not, by the way, watching us
from time to time, do you know that
we are now posting our shows both on
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somethingmorewithchrisboy.com.
(01:48):
From time to time, join us on video
as well as the audio podcast.
You can find the audio podcast wherever you
like to listen to audios.
Hopefully you have and that's how you're listening
right now.
Jeff, I wanted to at least mention that
from time to time.
No, it's good.
I appreciate it.
It definitely works.
The more people share and like and rate
(02:09):
our shows, the more it gets into the
algorithms and so more people can see it.
So, that being said, 80%.
What the heck are we talking about?
I thought it was a 4% rule.
What's this 80% thing?
80% is a B minus.
Is that good enough?
Yeah.
(02:29):
Oftentimes when people think about retirement and what
they're going to spend, there's this rule of
thumb or perspective that you're not going to
spend as much in retirement as you do
while you're working.
Why is that?
Well, you might not be commuting.
(02:49):
You'll spend less on your car and all
that goes into the maintenance and the gasoline
and so forth.
Oh, your costs go down.
That's one reason.
I won't need to spend as much on
my wardrobe.
Yeah, dry cleaning, right?
Dry cleaning or I got to get a
new suit now and then or whatever it
is, right?
Yep.
So, that's part of the rationale.
(03:12):
No more business lunches if they weren't reimbursed
or there's a lot of things that will
come up.
That you spend money going out to lunch
more often or something.
Yeah, good point.
So, okay.
Well, let's talk about that for a minute,
Jeff.
Is that true?
Will my expenses go down?
Absolutely true if you're just going to sit
(03:33):
on the couch all day.
And you're not driving anywhere.
You're not going out to eat.
You're not going to get any new clothes
for your retirement life.
You're not going to have any hobbies.
You're not going to do anything at all.
Yes, that is accurate.
So, in other words, that's not really probably
accurate.
(03:53):
Because we do have other things we want
to do with our time when we're not
working.
We do other things and those things can
add costs.
Now, sometimes it's just out and about and,
oh, we go out to breakfast more.
We go out to lunch more.
We have more social engagements.
(04:13):
Maybe we just go shopping more.
I see and I live in Florida.
I live in a...
It's not a per se retirement community, but
there's lots of retired people.
And I see shopping as entertainment for people.
That's right.
Shopping, going out to eat is entertainment.
That's what they do to break up the
day.
To pass the time.
And so, is it true?
(04:34):
I think we have to be a little
bit skeptical of that notion.
Now, if we want to get granular, because
let's say we think in terms of our
expenses and we say, well, I've got it
almost set up that my mortgage is going
to be paid off about the time I
retire.
Well, that's practical.
(04:55):
That's relevant.
Okay.
Maybe that's a good example of an expense
reduction because you've got that paid off.
So, that's a possibility.
That could be downsizing.
Things like that that are really concrete.
You can say, I'm not going to have
this $2,000 mortgage or I'm moving to
(05:17):
a less expensive home.
My expenses on a home will be...
Therefore, my energy costs, my upkeep costs, et
cetera, plowing and so forth, whatever.
The upkeep outside, inside might go down.
That's a good point.
So, I think we have to get specific
(05:37):
as we think about some of these considerations
when we put our numbers together.
I was doing this financial plan as a
project thing with a group of planners and
the case scenario was assuming 75% expenses.
I was like, well, wait a second.
How are we coming up with that?
(05:59):
Now, in this case study, the people stopped
contributing to their work investment plan.
Okay.
All right.
If you're considering that an expense, then yeah,
you're not going to be investing the way
you did pre-retirement.
So, that's a reduction in expenses if we're
(06:20):
calling that an expense.
I think I'm air quotes, fingers moving.
Cash flow, right?
Yeah.
Coming out of your cash flow.
So, investment, there's a number of considerations of
how people might have extra money going into
investment.
And if we're considering that as part of
that reason, we're going to have reduction in
(06:42):
expenses.
Okay.
I get that.
If we're only looking at our expenses, what
we're really spending, then it's a different story.
I don't think you're really going to be
spending 75, 80% of your expenses because
you still have priorities.
And then you may do new things.
I want to travel.
(07:03):
You said hobbies.
I might take up golf or something else.
Pickleball for Jeff here, right?
At least I picked one that doesn't cost
much money.
It's not a big, expensive hobby though.
After you get your paddle.
You get a paddle and a couple of
balls, you're good to go, right?
Maybe sneakers.
Some shoes.
Yeah.
Oh, and a shirt.
Wait a minute.
(07:23):
I got to pay the money to enter
the tournaments.
There you go.
Campus bag maybe to carry your stuff.
And drinks after, of course.
So you get the point, right?
Even an inexpensive hobby has a few costs.
But look, I think the point is you're
going to do stuff with your time.
(07:45):
And some of those are expensive hobbies.
I think of golf as being a little
more pricey.
You can do it in a way that's
reasonable with where you go and how you
do it.
But yeah, let's face it.
There's some expense in these things.
And so whatever that may be for you.
It's usually like pent up dreams or demand,
(08:08):
we'll call it.
Like when I retire, I'm going to travel,
right?
You'll see the world.
That's right.
And that can get, I mean, I hope
you do.
That's why.
Yeah.
Or even the, oh, I'm not going to
go.
I don't need to go to Europe.
I'm going to see this country.
There's plenty to see here.
Well, you end up getting the RV or
the trailer or something, right?
(08:30):
Or renting.
You end up doing things that have costs.
So 80%, our thought process here is be
very careful of making a general assumption like
that.
Unless you're getting into the weeds a little
bit and saying, oh, well, the reason I
(08:51):
say 80% is I'm not contributing 15
% to my retirement plan, 5% to
her retirement plan.
And we're not saving for outside the retirement
plan, et cetera, et cetera.
Okay.
That could really get that.
Oh, our mortgage has gone away, et cetera.
(09:12):
Okay.
Now we're getting somewhere where I can see,
oh, that's why we're saying there's a reduction.
Outside of that, I would actually argue you're
probably going to spend a little more.
We talked about the retirement smile, Jeff.
Right.
Sure.
So if you picture a smile, just draw
an air smile, and you see the two
(09:33):
highest points upward are at the beginning of
the smile and the end of the smile.
Meaning when you start your retirement, your spending
is likely to be at a higher rate.
Or elevated.
A little elevated.
Maybe these vacations are things you want to
buy or hobbies or whatever it is.
And as you are in your retirement, the
cost goes down, down, down.
(09:55):
With the theory near the bottom of your
cost is you're still reasonably healthy, but you're
not doing as much.
You're into more routines.
Maybe you've done it and now you're more
content to just in your routine.
Yeah.
And then thinking the smile is going back
up, you're getting older.
Maybe you need some assistance with things you
used to do yourself.
Or maybe you need some help in the
(10:15):
house.
Or maybe you need a caregiver.
Maybe you need assisted living.
Whatever the situation is.
So according to the retirement smile, at the
end of your near the end of your
life, your expenses are high.
Not for the vacation reasons, but maybe for
some extra help.
Different costs that you might have related to
health care.
Yeah.
Good point.
So, you know, I think as you approach
(10:40):
retirement, as you get into retirement, uh, going
through retirement, it becomes important to not think
of your plan as static.
And, um, you know, I, I think when
we start, it's one thing to start with
a number and, uh, what can happen is
over time we find what really happens.
(11:02):
You know, we're making an assumption of what
we're going to do, but then we need
to keep updating the plan and revising it
and reviewing it to say, does it work?
Uh, is this, am I on a path
that is sustainable?
And, uh, if not, well, I might need
to take some action.
And if so, we're good.
We're good.
We're doing our thing.
(11:23):
You know?
Um, so that kind of brings us maybe
Jeff to talking about, um, with clients, why
do we do an annual review?
Why is it important?
Absolutely.
You know, we, we, we have this plan
throughout our accumulation phase.
We're going to contribute so much to our
retirement account, to this and that we're going
(11:44):
to pay down our mortgage, all these things
that we're trying to do to get ready
to reach that land of critical mass or
what's your number.
And you get there and that's, that is
definitely, and you meet with your advisor, see
how you're doing tracking your debt reduction and
your investments.
Yeah.
And then you feel comfortable, you retire, but
(12:05):
that is certainly not the end of the
story when you need to like be on
top of your numbers and in top of
your plan, because this next phase is somewhat,
I can argue more critical to have these
reviews and make sure you're on a plan
because you don't have the ability to increase
your income so much.
Right.
Yeah.
(12:26):
I have to tell you, it's not uncommon
for people to sort of set out their
plan saying, I'm going to spend X and
they start down the path to retirement.
And as they get a little more granular,
well, you know, that the house needs a
little bit of this and that.
(12:46):
Well, we did want to take that trip
and it turns out maybe their expenses are
materially different than they expected.
Absolutely.
And so as we look back over a
few years and say, wait a second, you
know, when you retired, you were thinking you're
going to spend X, but now you're spending
(13:07):
two X or whatever.
That's a different plan.
And how are we going to deal with
that?
Right.
And that can be, that can be just
your cashflow you projected wrong, or you've been
too generous to yourself, perhaps.
Or it can be that something's happened that,
(13:27):
you know, maybe that we talk about when
we do our financial planning, the what ifs
of life, you know, what happens, you know,
good or bad things.
So one of these, what ifs may have
happened.
Yeah.
Something.
Good examples, like a divorced and now they're
got a financial dependency on you for some
(13:47):
help for a time, or I don't know,
what's another common example?
Well, you know, a lot of people go
into, they leave their full-time job, but
their plan is to work another 10 years,
make half the amount of money.
And maybe somebody's got a health issue or
a disability that they didn't expect.
For whatever reason, they're not working.
So that extra income to support the plan
(14:09):
or your investments, maybe you were too aggressive.
Maybe you weren't working with somebody who was,
you know, had your risk tolerance, right.
And you were taking too much risk or
even the opposite.
Maybe you're doing your own DIY planning and
you said, all right, I'm retired.
I'm coming totally out of the markets.
Now I'm putting it in to this money
(14:30):
market fund that's getting 6%.
And then all of a sudden interest rates
go down.
And that 6% return that you thought
you could live on is 2%.
Yeah.
So a lot of things change every year.
And, you know, I think the annual reviews
are people, we tell our clients this and
many of them participate.
(14:51):
Some don't, they don't want to do it.
Or they're just feeling like, oh, I'm happy
with the way things are going.
Not much has changed in my life, you
know, that kind of thing.
But we still would like to have that
meeting anyway.
We would.
I am surprised.
One of the things, I've been doing this
four years with you, Chris, but in some
things are surprising still.
(15:13):
One of the things I'm surprised about is
how we, you know, we get new clients
and many of them are from other advisors.
And I'm surprised that the number one reason
is I haven't heard from my advisor in
six years or, you know, pick a number,
right.
And they haven't had, they haven't been doing
these annual reviews and the advisor hasn't asked
(15:35):
or they missed the communication or whatever the
case is.
But these are really, the annual reviews are
really critical.
It's an opportunity to meet with your advisor,
even if everything, even if the annual review
is 45 minutes and everything's fine, that's a
reassurance.
That's a sense of peace to you, right.
That it's okay.
(15:56):
But sometimes life events come up or you've
done something that you didn't think would impact
your plan.
You were, you know, you did a gift
to the family member that wasn't in your
plan, or you decided to buy that RV
that you referenced that wasn't in your plan
or on the good side.
Well, not the good side.
I'll say you won the lottery that I
was going to say an inheritance, but that's
questionable.
(16:16):
You had money coming into your plan.
Unexpected wealth arrives.
That's right.
So to update your advisor on the life
changes, good or bad, and to just see
if you're still on track, your cashflow is
where it goes.
Unfortunately, that doesn't happen as much as people
would like.
No, it's usually the challenges that present themselves,
but not always.
(16:37):
No, that's true.
And I think, yeah, there's a variety of
circumstances that can arise.
One is, like you said, it could be
new money.
I'm not spending as much as I thought.
I've got an accumulation.
What should I do?
Great.
That's a great issue to discuss.
Sometimes it's my health has changed.
(16:59):
I may have materially different concerns because of
that.
How does this play out?
What happens if?
Maybe it's a little bit about we've had
unexpected expenses that we need to deal with.
(17:23):
Where should we take it from?
Right.
And that's an important question.
Even if you're deciding to go outside of
your cashflow plan and it's a what if,
or it's a I didn't see this one
coming, where you access those funds and how
you access those funds can be a really
key component to the overall success of your
plan.
(17:45):
Sometimes it's about tax planning.
Hey, I'm not making as much.
I'm not taxed as much.
I've got this window where I haven't had
to turn on my required minimum distributions.
I may not yet have turned on social
security or when should I turn on social
(18:06):
security?
I want to do it now.
I can use the money.
Should I do it now?
Or I'm in this window where I don't
have either social security or required distributions, but
I'm drawing from my investments.
Does that present any tax opportunities, tax strategies?
(18:27):
The idea of a Roth conversion comes to
mind.
There can be a variety of things that
we could look at and say, well, what
are some of the windows of opportunities or
risks that we need to be planning around
and reviewing?
And sometimes it's related to tax considerations.
Sometimes it's, hey, I have this pension decision.
(18:50):
We're turning on a pension.
Should I include the spouse?
Should I not include the spouse?
Should I take a lump sum?
Should I take an income stream?
I'm just throwing out a whole range of
things that have come up over the last
six months.
We've talked about all these things with clients.
What comes to your mind, Jeff?
(19:11):
Things, unexpected decisions.
We're talking about your annual review with your
advisor.
I'd love to see, not just in the
annual reviews, but I'd love to see before
an annual review or anytime during the year,
if a client has a thing they're thinking
about.
There's so many things that we don't expect
(19:32):
we're going to do.
But a little forethought is bubbling up of,
I'd like to.
It could be, we planned on keeping this
house, but it's really too big.
Or gee, our kids moved to Arizona and
they just had babies.
Maybe we should move to Arizona.
(19:55):
Or let's travel the country.
Let's buy that RV.
You name it.
If you have a good advisor that you're
working with, you can reach out to them
and say, this is what I'm thinking.
Can we model this?
Can we project, if we have this added
expense, or if we have this reduced expense,
or if we want to buy this thing,
(20:18):
does it impact the likelihood of success of
our financial plan?
You can do it at an annual review,
if it's just something that's not imminent.
You're just thinking about something you might want
to do in a few years and model
it out and make adjustments.
But even if it's just something that comes
up and you want advice and you want
(20:40):
model, how will this affect my plan?
It could be a gift too.
I'm thinking about helping my child buy their
first house.
If I give them $50,000, I'm not
talking about gift taxes right now, but if
I give them a sum of money, does
it affect my plan?
All these things, it's just critical.
(21:00):
You pay your advisor to not only manage
your portfolio, but you hopefully pay your advisor
to get advice on these times and to
keep you on track.
I have to say, to echo your point,
we love when people bring up that stuff
with that planning kind of mindset.
I'm contemplating, what do you think?
(21:20):
How much?
Absolutely.
Is this a good move or what do
you think?
Sometimes it's about, I'm thinking about some real
estate, either investment property or vacation home or
something.
Second home.
Is that a good idea?
Depends.
Sometimes it is.
It's diversification a little bit.
(21:42):
Maybe there's some utility that's an attractive element
to it, but how much will it add
to your expenses?
It's not only the outlay, it's the upkeep.
What's that mean?
How does that change the trajectory of your
plan?
Oh, but I plan on retiring to that
house later on.
Oh, okay.
(22:02):
That's relevant.
Then we're going to end this cost, maybe
the cost associated with this house, and then
we'll be able to free up that capital.
All right, let's model this.
Let me see how this plays out.
That kind of thing.
You can see some virtues to that.
The idea of, I want to help the
family member with a gift or something.
(22:24):
It's an important time for them.
They could really use it as a parent.
Parents just want to help their kids.
No matter how old they get.
All right.
Well, all right.
That's a value.
That's something we value to want to help
our family.
(22:46):
Let's make sure it doesn't adversely impact your
outcome.
You reminded me of something I want to
add to this conversation.
You said value.
I know you were talking about value being
added to the client, but values as well.
A good financial advisor should not be giving
(23:08):
you value judgments.
Not what you want, not what they think
is right for you.
They should be informing you, giving you counsel.
Not just saying, here's what you need to
do.
(23:29):
But give you information and help in the
process so you can decide what's empowering you
to make the decision you want to make.
Yep.
Just making sure that your eyes are wide
open, you have all the information, you know
the impacts.
I can tell you times I've had this
happen, Jim.
Client is deceased now, but definitely wanted to
(23:52):
make a move.
The math was just like, that's not really
a good idea.
But it was something they felt was going
to add to the quality of their life
because it's a better location for where they'd
be in the heart of the community they
wanted to be in.
So they found a way to do it
with family, that kind of thing.
(24:13):
But it's challenging because then things change.
Family doesn't always have the resources that they
thought they would have.
So it's one of these challenges that you
have to, but what's my role?
My role is not to say, oh, I
told you so, or you shouldn't have, and
say, all right, what do we do now?
How do we figure this out?
(24:34):
How do you consider moving?
How do you consider a reverse mortgage?
Would these be tools that could resolve that
shortfall that we might be then having?
These are the things we run into, and
ultimately, our role is just trying to help
you figure it out.
(24:54):
What's the best way to deal with it?
And sometimes the best counsel we can give
is, maybe you should consider downsizing.
Maybe you should consider relocating.
And it seems so obvious.
I've been in many meetings with you that
we get so constrained by our perceptions and
(25:19):
our preconceived intentions.
We don't consider all the options.
Some of them you're mentioning now, and other
ones, some of these things are available to
you.
Have you thought about them?
It can't be that simple.
And sometimes people say, no, I don't want
that.
It's a value.
Okay, that makes sense.
Okay, you thought of it.
(25:40):
It's not something you want to do.
But sometimes I've had clients, this was a
long time ago now, 15 years ago, maybe,
we did the financial plan and the projections,
and they told me they wanted to move
to Florida in a few years, maybe five
years out.
And I kept doing all these calculations and
(26:00):
basically came down to, you know what?
You should go now.
The math was like, your numbers aren't going
the right direction.
Doing it sooner is better.
Time for the move.
And they did.
And they've been happy.
It was a good fit, good choice.
(26:20):
But when you know that kind of stuff,
I think a lot of times we get
focused on the portfolio.
Sure.
And I think clients do too.
Yeah.
We talk about what's happening in the markets.
We talk about, oh, these days it's all,
you know, what are tariffs going to do
and all that kind of stuff.
Some of these variables that are in the
(26:41):
news that we're all focused on.
And those are relevant.
We have to pay attention to those things.
But sometimes it causes us to not put
as much attention on to the other aspects
of land, the financial planning considerations.
And sometimes those can add even more value
than the financial portfolio management decisions, which, you
(27:08):
know, these are foundational, all of these, but
they're all interrelated.
And sometimes it's important to step back from
the, the focus on the portfolio.
Yeah.
The review of the statements, right?
Yeah.
And, and, and all that's going on in
the economy and the Fed and etc.
(27:31):
And trying to think about that.
And sometimes we need to step back and
put it into context of what else is
going on and all that that can add
value with.
That's maybe outside the scope of, should we
have more equities or less equities or whatever,
shorter term bonds or longer term bonds, you
know, whatever.
(27:51):
And that's why a financial review is so
important because it's just a, it's just a
point in time, at least once a year
that you go in for your review and
all these, the things you're focused on, the
things you're not focused on, but we talk
about them all, you know, we'll, we'll go
through the portfolio certainly, but we'll talk about
life changes and how you're tracking on your
(28:13):
plan.
We'll probably ask you if anything's changed in
your estate planning, right?
Anything's happening there.
Any family.
You have fisheries once in a while.
That's right.
I know.
Can't tell you how often we find just
something's not what it's intended to be.
Right.
Some of the mundane things are good to
(28:34):
review too.
That's right.
And it's an opportunity for these things to
come up because the conversation spurs these things
and it's, you know, an hour or two
of your time and it's very well spent.
You know, we go to the doctors for
checkups, right?
Yeah.
We get the oil changed in the car
because we want it to keep running.
Right.
And all these, you know, we get the,
(28:54):
the sidewalks power washed and we do all
these home maintenance things.
It's something as important as your financial plan
and your financial security for the next year,
five, 10, 30 years.
It's definitely worth your time.
(29:15):
If you're not, if you are doing it,
you see the value of it and you're
going to keep doing it.
And I'm positive that if you're not doing
it, I think you should be.
Yeah.
Give it a try for a little bit.
I think you'll find value.
And if you're not getting that kind of
help from where you, you know, who you
turn to for that kind of advice, consider
(29:36):
talking to us.
We'd be happy to talk to you in
any case, Jeff, thanks for the topic.
Good information.
So two things we talked about today, reconsider
that 80% question and don't overlook an
annual review until next time.
Everybody keeps trying for something.
Thank you for listening to something more with
(29:58):
Chris Boyd.
Call us for help, whether it's for financial
planning or portfolio management, insurance concerns, or those
quality of life issues that make the money
matters matter.
Whatever's on your mind, visit us at somethingmorewithchrisboyd
.com or call us toll free at 866
-771-8901, or send us your questions to
(30:20):
amr-info at wealthenhancement.com.
You're listening to something more with Chris Boyd
financial talk show wealth enhancement advisory services and
Jay Christopher Boyd provide investment advice on an
individual basis to clients only.
Proper advice depends on a complete analysis of
all facts and circumstances.
The information given on this program is general
financial comments and cannot be relied upon as
pertaining to your specific situation.
(30:42):
Wealth Enhancement Group cannot guarantee that using the
information from this show will generate profits or
ensure freedom from loss.
Listeners should consult their own financial advisors or
conduct their own due diligence before making any
financial decisions.
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