May 29, 2025 • 24 mins
We explore eight common retirement planning myths that could potentially derail your financial future and explain why these outdated beliefs may no longer apply to today's retirement landscape.
• The 4% withdrawal rule from the 1990s has been updated to 2.8% by Morningstar research, meaning you need significantly more savings to generate the same income
• Social Security isn't going bankrupt, but its trust fund may be depleted by 2032-2034, potentially reducing benefits by about 20%
• Social Security was designed to replace only 40% of pre-retirement income, not the 70-80% many retirees depend on it for
• Keeping all investments in cash during market uncertainty may mean missing recovery periods and growth potential
• Modern long-term care planning offers alternatives to expensive traditional insurance through integrated financial tools
• Financial planning is a strategy for everyone, not just wealthy individuals, as those with modest savings can also need guidance to maximize resources
• Estate planning can apply to people at all asset levels, and outdated wills may not address digital assets or modern financial considerations
• It's important to review financial plans on a regular basis, as life circumstances, tax laws, and economic conditions evolve
• Many retirees don't drop to lower tax brackets due to required minimum distributions, loss of deductions, and potential tax increases
Visit masterplanretire.com to schedule your complimentary consultation where we'll run retirement outlook reports and stress test your plan, or call 770-980-9262.
Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Evan (00:06):
Do you believe a retirement planning myth that is
endangering your retirementplan?
Hey folks, thanks for joiningus.
Welcome back to RetirementRoadmap with MasterPlan
Retirement Consultants.
My name is Evan.
With me, as always, retirementplanner Mark Fricks.
We have a series of retirementplanning myths to discuss, some
of which could derail yourretirement.
(00:27):
You may be surprised to findout.
You've been believing a mythfor a while.
Mark (00:31):
We come across many myths and just beliefs that are
either old and outdated or justcompletely unfounded.
Quite often, yeah, it's all about everything from what
we used to believe, because mygranddaddy retired that way.
It could be something that hasjust been spread around the
radio so long, or magazinesnowadays.
Social media, water cooler talk.
.
.
the modern water cooler aswell.
(00:53):
So there are a lot of things andyou know, when we teach a class
or we're face to face with aprospect for a client, those
will come up almost every timeand we're like, hey, I hear what
you're saying, but think aboutthis and try to steer them in
the right direction, Because itis typically a long-held belief,
maybe from their parents andgrandparents as well.
Evan (01:10):
Sure, so we're going to kick it right off with one that
is probably originated in the90s.
There was a study back in the90s known as the 4% rule, so the
myth number one is everyoneshould follow the 4% rule.
So basically, the 4% rule again.
It's been around since themid-90s.
It's a popular retirementsavings strategy.
It suggests retirees canwithdraw 4% of their total
(01:32):
retirement savings every year,adjusting for inflation, and
their retirement dollars shouldlast roughly 30 years.
Mark (01:38):
Yeah, that's one that still keeps getting spread
around, and what they'rebasically saying is, if you've
got this equity account with amixture of even some bonds and
things like that, that, if youtake out 4% a year of that
balance, you've got a prettygood chance of your money
lasting 30 years 90 something,percent, 97% or whatever, which
(01:58):
is fine.
But a lot of things havehappened since 1993, I believe,
is when the study was done andso they redid the study, they
being Morningstar, one of theworld's largest researchers of
investments.
Every investment has beenaround all of that kind of good
stuff, and so what they foundwith their new study was what we
(02:18):
now call the 2.8% rule.
So now you need about a thirdmore money for the same math to
work.
So instead of maybe 700,000 toget 30,000, now you need over a
million dollars to get the samethirty thousand dollars, and
even still it's not guaranteed.
So that's why we and manyplanners have moved away from
(02:39):
stock market based income modelsinto other kind of models that
produce better income than 2.8.
Every model we use produces atleast 4% to 5%, many of them 6%,
and almost all of themguaranteed at that percentage,
and so just be careful.
I still hear it on the radio.
Sometimes I still hear itaround social media or whatever.
(03:00):
A lot has happened over thelast 20, 25 years from a
standpoint of market volatility,and so that's what's changed
that rule, more ups, more ups,more downs.
So when you're taking money outand we hit a 30% bear market,
you are just sucking the lifeout of your principal, and so
it's going to disappear muchquicker.
Evan (03:18):
Yeah, people refer to the 4% rule as a rule and it really
was never meant to be that inthe first place.
It's more to be a guideline.
So if you consider the factthat, yes, now it's actually
2.8%, which I guess doesn't flowoff the tongue quite as quickly
, as easily as 4%, but if it's2.8, that also doesn't account
for individual circumstances,unique circumstances to that
(03:39):
client or account, marketfluctuations, personal spending
habits.
It's more of a guideline, of astarting point for folks to kind
of wrap their head aroundincome and retirement.
Mark (03:49):
And think of it this way.
If you are, you know you've gotone big bucket of money which
used to be your 401k or yourthrift savings plan or your 403b
.
Most people have one or twolarger buckets and you're using
that like that.
Even if you're doing 2.8%,things come along.
It's not just monthly income,it's that roof that you might
need to replace next year.
(04:10):
Well, that's another 20 grandcoming out.
I just read this weekend heatingand air systems are going to go
up by 35% because of newregulations that the new
administration is trying to getrid of.
But they want to move to ahigher level of refrigerant
which only two companies in theUS have a patent for.
And it's just things like this,I mean.
But you replace these things,whether it be a house, whether
(04:31):
hey, I wouldn't like to take anice trip type of thing, or
whatever.
So that kind of just piles ontop of that 2.8.
So that's why we, as part ofour planning technique is
splitting off that income sourcefrom the other things we need
periodically, and that way wecan really measure how much we
can take out for those extrathings.
(04:51):
Hey, I want to reward myselfthis year and go to Europe
because we've made good money inthe market this year, not so
much.
I think we'll go to Duluth orSnellville or somewhere like
that, which is which are niceplaces, by the way.
That's that's.
that's a positive.
Yeah absolutely Myth numbertwo, and you're going to like
this one.
We get this one a bit (05:07):
Social security is bankrupt.
Mark (05:13):
Yeah, we've tried to straighten this out a couple of
times.
I still hear it a lot Socialsecurity is not bankrupt.
It's not going bankrupt.
To explain that, let's dig justa little bit.
So Social Security is actuallyfunded three ways.
Number one is funded by currenttaxes.
So when I work I pay into FICA.
(05:34):
That goes into Social Security.
Some of the money that peoplethat are getting Social Security
pay in taxes goes into SocialSecurity.
So two of the feeders of SocialSecurity are current taxes.
The third feeder is what theycall the trust fund.
I call it a big savings account.
So for many years there were 16or 18 people working for every
(05:56):
retiree.
Now that's down to about two totwo and a half, and so they're
having to take money not borrow,but take money out of that
savings account to make thedifference.
The savings account isshrinking.
It will be gone.
Not borrow, but take money outof that savings account to make
the difference.
The savings account isshrinking.
It will be gone, they think, in2032 to 2034.
And so what will happen ispayments will be cut by
approximately 20 percent becausethey no longer can use the
(06:17):
trust fund.
That's all that is.
They are trying to fix it.
There are about seven proposalson the table.
I have faith in our Congressthat they will come together and
get that fixed, because I don'twant anybody getting a 20% pay
cut, including me.
Okay, but it's not going away.
I've had so many people say I'mgoing to go and take it because
it might not be here.
(06:37):
No, it'll be here unlesssomething super drastic happens,
and if something that majorhappens, we have bigger problems
than that.
So I cut in funding or theamounts you might get, but it's
not going away.
Evan (06:51):
Yeah, there was a study by Nationwide and turns out that
about three in four think socialsecurity will run out of money,
the fear that social securityis going bankrupt.
The problem with that is thatit may push people on the verge
of retirement to startcollecting their benefits
earlier than they maybe wouldhave, which doing so would
result in a reduction of up to30 percent in their monthly
(07:13):
payments, since you cangenerally get a bigger benefit
if you delay your socialsecurity.
Mark (07:17):
Yeah, and, of course, it all depends on life expectancy
and all that kind of good stuff.
We have a lot of discussionswith our clients about this.
Uh, there's more than one way,especially if it's a married
couple.
Take one a little bit earlier,one later.
Whatever, there are reasons fordoing that.
Also, are you working part-timein retirement?
You take it too early, you losesome of your social security
benefits, so why take it?
So a lot of factors come intoplay, so please get help on this
(07:39):
.
This is not a Google solution.
There's too many things comingtogether and it's all based on
what your needs are in your life, and so get help with a
fiduciary that has training insocial security benefits, which
we do.
Evan (07:52):
Myth number three is also social security related
security will cover most of myexpenses.
Mark (07:59):
Yeah, I'm sure you've got some stats that I don't memorize
, but so many people are relyingon it almost for 100%.
Evan (08:06):
Yeah, and it was never meant to replace your paycheck.
It's designed to replace about40% of your pre-retirement
income.
Mark (08:14):
So what are people relying on it for?
Now, the average, do you havethat number Like 70 or 80%?
That supplies like 70 to 80% oftheir income, that they need.
Evan (08:24):
No, it's intended to only replace 40%.
I'm not sure what it actuallyis.
Mark (08:28):
I think I've read it's about double that.
That is what people are actually, the average person is actually
depending on from socialsecurity, which is why it's so
vital that they not get a paycut, because we've leaned
further and further on this poolof money that is beginning to
run dry.
So that's why you know, takeinto account your own, you know
responsibilities when it comesto retirement.
(08:50):
If you need to work a littlebit longer to fund your 401k a
little bit longer, if you wantto maybe work part-time for a
while, I myself, if I ever doretire, I don't know that I can
sit at home.
Most people can't.
Most people need to be doingsomething productive, whether
you're getting paid for it orvolunteering or something.
But yeah, be careful with that.
With Social Security again,some of the changes that may
(09:14):
come would be cost of livingincreases.
So if you're relying on it for80% or 90% of your income and
you don't get much of a bump oneyear even though inflation goes
up, you're getting further andfurther behind.
So lots of things affectingthat.
Please, it's never too late tostart saving money.
Evan (09:29):
Yeah, some of the misconceptions, I mean they've
been around for a long timeabout how much Social Security
is actually supposed to replace.
But back in the day we hadpensions and Social Security,
two reliable sources of income.
Well, we know that pensionshave largely gone away at least
the vast majority of them andthey've been replaced with a
401k, which is not a guaranteedamount, a set amount of money,
(09:49):
and that responsibility is nowin your hands, folks who have
the 401ks, the TSPs, the 403bs,all these good things.
It's up to you now to determinehow to make that money work for
you over 25 plus years inretirement.
It's no longer reliant on yourpension and your former company.
Mark (10:06):
And that's why a lot of times I'll refer to it as my
grandfather's retirement versustoday's retirement.
Again, he had a great pension.
He worked 30-something yearsfor the mill, right, you know,
he had a mill house.
It was a very nice little house.
It was perfect for them.
It was paid for after a while.
Cds were paying 5%, you know,savings accounts were paying
(10:27):
well, and nobody was in themarket.
I mean, in the 50s, 60s and 70sthe IRA and the 401k had not
come out yet.
So the middle American mostlythey were not participating in
the market because they didn'thave that easy conduit into it,
and so they were again just kindof riding this three, five, 6%
wave of money.
But again, that pensionprobably covered 50, 60, 70% of
(10:51):
their needs, and then socialsecurity kicked in the next 40
or 50,.
They were in good shape, youknow.
And then they passed away right, I mean life expectancy much
earlier, and so maybe they werefive years in retirement, maybe
10.
But nowadays we've got people20, 30 years in retirement, and
because we're living so long,guess what Health issues those
are cropping up more and more.
(11:12):
We didn't live long enough to.
I'm not even sure Alzheimer'sexisted.
It was probably called gettingsenile or something like that
Just a different world we livein, and it's not something that
I would encourage anyone to doon their own.
Evan (11:28):
Yeah, and on the social security conversation if you
have not visited ssa.
gov, downloaded your own socialsecurity estimate to see where
you are, I highly recommenddoing that, especially in your
pre-planning stage forretirement.
While you're online, you shouldalso go to masterplanretire.
com.
There you can schedule yourcomplimentary consultation with
(11:48):
one of our advisors.
That's an opportunity to run aseries of retirement outlook
reports for you.
It's essentially a 10,000-footview of your own retirement and
then we will stress test thatretirement.
We will test your retirementagainst bear markets, against
higher taxes, against thepassing of a spouse and many
more items.
That's completely complimentary.
Feel free to take us up on that.
(12:08):
We'd love to hear from you.
MasterPlanRetire.
com or 770-980-9262.
You ready for myth number four?
Mark (12:17):
Real quickly on social security.
Another great reason to checkout your statement.
Actually, look at the statement, don't just look at the little
readout on the initial login.
Pull up your statement becauseit will give, on page two or
three, all your years of historyof earning and we have found
over and over again that socialsecurity will miss a year.
(12:37):
And so it's 35 top earningyears.
Okay, earned income over 35years.
If you're missing four or fiveyears, those are zeros and that
will lower your average as well.
Get it fixed, the sooner thebetter.
Do a check, do a self-audit,double check that for yourself.
Evan (12:53):
Number four
In times of uncertainty, manypeople liquidate their holdings
and move to cash.
They're betting that it's saferthan being beholden to the
whims of the stock market.
May move funds to CDs, bonds,money markets, things like that.
Mark (13:08):
Which is fine if you've got clear signals that the
market's going down.
You haven't waited until themarket's gone down.
You want to sit on thesidelines.
Our money managers do thatfairly often.
But they get the signals, theyget the algorithms and they can
see hey, we need to rest some ofour money.
They never go all to cash.
I don't have anybody that evergoes all to cash, but even our
(13:29):
government workers.
We'll advise them maybe move toG Fund for a few months.
We'll give you another noticewhen we get more signals and let
you know to get back in.
But we have seen.
I can remember after 2008,.
It was years where I'd seepeople sitting in almost all in
cash eight and ten years later,which means they totally missed
the recovery, plus another 40 or50 percent on top of that.
(13:51):
Don't let fear drive yourdecisions.
If fear is a problem, if greedis a problem, let somebody else
manage your money.
You know I have a little bit ofhard time managing my money.
I hire money managers to hire,you know, to manage it because
again it takes that emotionalaspect down of it.
I trust them.
They have a long track record.
Evan (14:10):
Let them do their job and they'll work their way through
the windings of the stock marketand make money long term, yeah,
a portfolio of all cash is notgoing to keep up with inflation,
over 30-year retirement, withrising health care costs,
inflation, cost of livingincreases.
It's better to have moneyspread out inflation, cost of
living increases.
It's better to have moneyspread out stocks, cash and
bonds.
And again we have thisconversation all the time.
(14:31):
It's what the account needs todo.
What's the account's job?
Of course, if you needimmediate income, that's not
going to be in an aggressiveportfolio, but maybe your
long-term 5-10 year bucketthat's for long-term growth can
remain in the market and remainmore aggressive even in more
volatile times times
Mark (14:47):
Again over time, the market makes money.
Evan (14:55):
Myth number five: long-term care insurance or
nothing.
Mark (15:02):
What I hear you saying is that's our only choice Long-term
care.
We have steered folks away frombuying the insurance because it
has got to be very difficult toget.
It's very expensive and clientsthat have bought it years ago
still get letters every two orthree years where the cost is
increasing.
That happens four or five, sixtimes over a 10 or 12 year
period.
They can't afford it anymore,so they paid for it for 20 years
.
Now they drop it.
(15:22):
So there are tools out there andagain, if you've got a planner
that specializes in retirementplanning, they will know of some
tools, just like we do that youcan incorporate long-term care
coverage into other tools sothat you're not just paying for
long-term care insurance.
It's just almost like a triggerthat gets triggered and whether
it's built into an income plan,whether it's built into a life
(15:45):
protection plan or whatever, Ilove those tools because I don't
feel like I'm spending aclient's money.
We're utilizing a client'smoney and for many purposes.
Built into one tool, thatlong-term care rider is a very
powerful tool.
Evan (16:04):
Yeah, absolutely, and it doesn't even have to be a
long-term care rider.
It can just be a specificbucket, specific account with a
certain timeline.
You do need to prepare, butwe've seen how many clients who
have been paying in for a longtime with these long-term care
policies that they had beforethey've ever met us Several, are
being offered a buyout.
One of our clients was offereda buyout of $50,000.
Mark (16:23):
I think it was $50,000, $40,000.
Evan (16:24):
They'd had it for 25 years , which, if you consider that
amount, that's about half howmuch a long-term care has cost.
Mark (16:30):
They probably paid in $60,000 to $70,000, but that
didn't count the fact that theycould have made money on that
money.
So they're trying to buy themout because they don't really
understand or know.
They don't have a good handleon how long people are going to
be in in facilities.
(16:51):
It seems to be getting worseand worse because we are keeping
them alive, we're trying togive them a quality of life, but
it's also costing a lot ofmoney, and so it's just I don't
know where it's going to come toyou.
I really don't.
I'm hoping the governmentdoesn't have to get involved,
but people are just flounderingwith some of these issues.
So make sure, especially ifyou're middle to upper middle
(17:13):
class, you make a little bitbetter than average income.
You don't want to lose all ofyour assets to Medicaid and not
have a legacy to leave yourfamily or your spouse enough
money to live on because thestate came and used up all your
money for long-term care.
Evan (17:31):
And now this is also not a recommendation by any means
that if you have long-term careinsurance, that you should drop
it.
Not at all, because it actuallycan be a huge blessing for you,
especially when you find somefolks who've had it for a long
time and it's still a goodpolicy, one of those stronger
carriers.
We're not saying get rid of it.
In fact, many people have greatexperiences with it when it
(17:53):
pays out the way it's meant to.
However, when you'restrategizing, moving forward,
the landscape has changed, soyou really need to have a fuller
viewpoint on your long-termKnow your options.
Yeah, know your options.
Myth number six (18:05):
financial plans are for rich people.
Mark (18:09):
Wow, that's a good one, yeah, so.
So it's almost like saying youknow, only really really healthy
people need to go to the doctor.
That's good.
You need to go, period.
You know we have people we workwith that have very little in
investments, in investable money.
They need help more thananybody.
We need to squeeze every dollarout of there and really show
(18:31):
them what they can spend.
Maybe they need to budget,Maybe they need to work
part-time or whatever, but havea plan.
No matter how much money youhave, you certainly need one if
you have a lot of money.
Wealthy people are afraid ofrunning out of money.
The wealthier people we workwith, but that middle class,
somebody that worked at Lockheedfor 30 years, somebody that
worked at Southern Company for30 years or whatever they've
(18:53):
saved all these years.
They've got a decent nest egg.
They go well.
I'll just turn on my socialsecurity at this age.
I'll just take money out of my401k over the next 30 years and
we should be okay.
Should's not a plan, Hope's nota plan.
So put it in writing.
You know what it does, Evan.
As you've heard our clients say, it gives them absolute peace
of mind knowing that they've gota lifetime of income plus
(19:15):
growth over here, and plans forhey, if I lose my spouse early,
if taxes go up.
These are all strategies we puttogether.
Why not have that peace of mindto have a plan?
So don't be afraid to.
You know, I know as a guy andspeaking for a lot of men, a lot
of times we're afraid to lookfor help.
Many times it's the female thatdrives the couple to see us,
you know, and that's okay, youknow, but yeah, yeah, don't be
(19:44):
afraid to at least have a chatwith us.
Evan (19:45):
Yeah, that's good.
Myth number seven (19:46):
estate planning doesn't apply to me.
So estate planning, includingeven drafting a will, is one of
those things people just put onthe back burner or think, oh, my
assets aren't large enough toneed any of this.
But you're not considering, notonly the trouble you're leaving
your heirs but the costs thatit might eat into your legacy.
Mark (20:08):
I consider this in two steps.
Step one is having the rightdocuments.
That's a good step in the rightdirection, but it also needs to
be incorporated into youroverall financial plan.
That's what estate planning is.
It's not just creatingdocuments.
So make sure you work.
So we have attorneys as part ofour team because we do some of
the planning with them.
They give us advice on how toset that up, they write the
documents, but now it'sintegrated with your other
holdings.
It's integrated.
(20:29):
You know, do you need a trust ora will?
Have you updated some of yourbeneficiaries because they don't
go through the will or trustthey go through.
They don't go through probate.
That's a better way to put it.
So it needs to be an overallplan and also we're beginning to
see more and more of thesewills that people do online or
do through some cheaper attorneywebsite or maybe done by an
(20:51):
attorney that's not an estateplanning attorney are not
working.
They look good, you know theyfeel right, and then they get a
probate and the judge says Ican't accept this because of
this or that.
So it's up to the probate judgeto decide if the document is
any good and maybe it waswritten 30 years ago and that
maybe was no good.
I have somebody come in herewith a three-page will.
I already know it's no good.
(21:13):
There's just not enoughlanguage in there for today's
digital assets and getting intopeople's bank accounts and other
things that have not beenaddressed in the past.
So getting into people's bankaccounts and other things that
have not been addressed in thepast so many people's will was
done 30 years ago when theirfirst child was born or
something like that.
So not only that, getting itupdated, but making sure it
integrates with everything.
So I think if you've got ahouse and $50,000, that's still
(21:40):
going to be a mess for somebody.
If you don't have a will,You're dying without a will.
It's a much longer process,more expensive process.
Evan (21:49):
Myth number eight, we've just got a couple minutes so
we'll try to knock these lasttwo out fast.
Myth number eight (21:52):
I can set my financial plan and forget it.
Mark (21:57):
Yeah, you can, you shouldn't.
But you can.
Things change, life changes.
That's why we meet with ourclients officially once or twice
a year, because we understandthat things change.
Sometimes they'll call us thishas changed.
We need to see y'all makeadjustments.
It's not in concrete, it's notin stone.
It's designed to be flexible.
Hey, if I lose a spouse, myincome just dropped.
(22:18):
I've got to take a littledetour If this happens or that
happens or whatever.
We've talked about it, we'veplanned for it, but now we
actually got to change thosewidgets or change those levers
or whatever to make sure that itkeeps up with the evolving
lives, evolving tax laws, all ofthis.
It is always something you gotto keep up with.
That's why we love working withfolks, because we help you keep
(22:42):
up with it.
It's not like you've got to sitdown on New Year's Day and make
a bunch of changes.
We've got that plan and weguide you through it, pretty
much like your CFO.
Evan (22:51):
Last one.
We'll try to plow through itwhile we still have time: I will
be in a lower tax bracket inretirement.
Mark (22:58):
Yeah, almost never happens .
Most people want at least 80%of their income coming in at
retirement.
Most of them want 100%.
You've got to remember whenyou're working, you've got money
coming out for health insurance.
You've got money coming out foryour 401K or thrift savings
plan, and so what is your netincome and do you want to
maintain that?
That's going to be a differenttax bracket, plus, as tax laws
(23:20):
change, it could be higher.
The fact you've got to takerequired minimum distributions.
You're forced to take money,have an ira that can put you in
higher tax bracket.
If you lose a spouse, you're ina higher tax bracket.
A single tax bracket is higherthan a joint.
So there's so many things andwe rarely see somebody stay the
same or get a lower tax bracket,especially with taxes going up
(23:41):
in the future, so much moneybeing spent.
So, yeah, don't let that bepart of your philosophy.
Make sure that you keep up withthat.
Evan (23:49):
That's good.
Folks, thanks again for joiningus today.
Remember, check outMasterPlanRetire.
com to schedule yourcomplimentary consultation.
Mark (23:57):
We've enjoyed today, I hope this has been helpful for
you.
Until we see each other again,remember plan well and prosper.
Take care.
This was Retirement RoadmapRadio with Mark Fricks of Master
Plan Retirement Consultants.
To schedule a complimentaryconsultation, go to
masterplanretirecom or call770-980-9262.
(24:19):
Thanks for listening andremember plan well and prosper.
Thank you.
Do you believe a retirement planning myth that is
endangering your retirementplan?
Hey folks, thanks for joiningus.
Welcome back to RetirementRoadmap with MasterPlan
Retirement Consultants.
My name is Evan.
With me, as always, retirementplanner Mark Fricks.
We have a series of retirementplanning myths to discuss, some
of which could derail yourretirement.
(00:27):
You may be surprised to findout.
You've been believing a mythfor a while.
Mark (00:31):
We come across many myths and just beliefs that are
either old and outdated or justcompletely unfounded.
Quite often, yeah, it's all about everything from what
we used to believe, because mygranddaddy retired that way.
It could be something that hasjust been spread around the
radio so long, or magazinesnowadays.
Social media, water cooler talk.
.
.
the modern water cooler aswell.
(00:53):
So there are a lot of things andyou know, when we teach a class
or we're face to face with aprospect for a client, those
will come up almost every timeand we're like, hey, I hear what
you're saying, but think aboutthis and try to steer them in
the right direction, Because itis typically a long-held belief,
maybe from their parents andgrandparents as well.
Evan (01:10):
Sure, so we're going to kick it right off with one that
is probably originated in the90s.
There was a study back in the90s known as the 4% rule, so the
myth number one is everyoneshould follow the 4% rule.
So basically, the 4% rule again.
It's been around since themid-90s.
It's a popular retirementsavings strategy.
It suggests retirees canwithdraw 4% of their total
(01:32):
retirement savings every year,adjusting for inflation, and
their retirement dollars shouldlast roughly 30 years.
Mark (01:38):
Yeah, that's one that still keeps getting spread
around, and what they'rebasically saying is, if you've
got this equity account with amixture of even some bonds and
things like that, that, if youtake out 4% a year of that
balance, you've got a prettygood chance of your money
lasting 30 years 90 something,percent, 97% or whatever, which
(01:58):
is fine.
But a lot of things havehappened since 1993, I believe,
is when the study was done andso they redid the study, they
being Morningstar, one of theworld's largest researchers of
investments.
Every investment has beenaround all of that kind of good
stuff, and so what they foundwith their new study was what we
(02:18):
now call the 2.8% rule.
So now you need about a thirdmore money for the same math to
work.
So instead of maybe 700,000 toget 30,000, now you need over a
million dollars to get the samethirty thousand dollars, and
even still it's not guaranteed.
So that's why we and manyplanners have moved away from
(02:39):
stock market based income modelsinto other kind of models that
produce better income than 2.8.
Every model we use produces atleast 4% to 5%, many of them 6%,
and almost all of themguaranteed at that percentage,
and so just be careful.
I still hear it on the radio.
Sometimes I still hear itaround social media or whatever.
(03:00):
A lot has happened over thelast 20, 25 years from a
standpoint of market volatility,and so that's what's changed
that rule, more ups, more ups,more downs.
So when you're taking money outand we hit a 30% bear market,
you are just sucking the lifeout of your principal, and so
it's going to disappear muchquicker.
Evan (03:18):
Yeah, people refer to the 4% rule as a rule and it really
was never meant to be that inthe first place.
It's more to be a guideline.
So if you consider the factthat, yes, now it's actually
2.8%, which I guess doesn't flowoff the tongue quite as quickly
, as easily as 4%, but if it's2.8, that also doesn't account
for individual circumstances,unique circumstances to that
(03:39):
client or account, marketfluctuations, personal spending
habits.
It's more of a guideline, of astarting point for folks to kind
of wrap their head aroundincome and retirement.
Mark (03:49):
And think of it this way.
If you are, you know you've gotone big bucket of money which
used to be your 401k or yourthrift savings plan or your 403b
.
Most people have one or twolarger buckets and you're using
that like that.
Even if you're doing 2.8%,things come along.
It's not just monthly income,it's that roof that you might
need to replace next year.
(04:10):
Well, that's another 20 grandcoming out.
I just read this weekend heatingand air systems are going to go
up by 35% because of newregulations that the new
administration is trying to getrid of.
But they want to move to ahigher level of refrigerant
which only two companies in theUS have a patent for.
And it's just things like this,I mean.
But you replace these things,whether it be a house, whether
(04:31):
hey, I wouldn't like to take anice trip type of thing, or
whatever.
So that kind of just piles ontop of that 2.8.
So that's why we, as part ofour planning technique is
splitting off that income sourcefrom the other things we need
periodically, and that way wecan really measure how much we
can take out for those extrathings.
(04:51):
Hey, I want to reward myselfthis year and go to Europe
because we've made good money inthe market this year, not so
much.
I think we'll go to Duluth orSnellville or somewhere like
that, which is which are niceplaces, by the way.
That's that's.
that's a positive.
Yeah absolutely Myth numbertwo, and you're going to like
this one.
We get this one a bit (05:07):
Social security is bankrupt.
Mark (05:13):
Yeah, we've tried to straighten this out a couple of
times.
I still hear it a lot Socialsecurity is not bankrupt.
It's not going bankrupt.
To explain that, let's dig justa little bit.
So Social Security is actuallyfunded three ways.
Number one is funded by currenttaxes.
So when I work I pay into FICA.
(05:34):
That goes into Social Security.
Some of the money that peoplethat are getting Social Security
pay in taxes goes into SocialSecurity.
So two of the feeders of SocialSecurity are current taxes.
The third feeder is what theycall the trust fund.
I call it a big savings account.
So for many years there were 16or 18 people working for every
(05:56):
retiree.
Now that's down to about two totwo and a half, and so they're
having to take money not borrow,but take money out of that
savings account to make thedifference.
The savings account isshrinking.
It will be gone.
Not borrow, but take money outof that savings account to make
the difference.
The savings account isshrinking.
It will be gone, they think, in2032 to 2034.
And so what will happen ispayments will be cut by
approximately 20 percent becausethey no longer can use the
(06:17):
trust fund.
That's all that is.
They are trying to fix it.
There are about seven proposalson the table.
I have faith in our Congressthat they will come together and
get that fixed, because I don'twant anybody getting a 20% pay
cut, including me.
Okay, but it's not going away.
I've had so many people say I'mgoing to go and take it because
it might not be here.
(06:37):
No, it'll be here unlesssomething super drastic happens,
and if something that majorhappens, we have bigger problems
than that.
So I cut in funding or theamounts you might get, but it's
not going away.
Evan (06:51):
Yeah, there was a study by Nationwide and turns out that
about three in four think socialsecurity will run out of money,
the fear that social securityis going bankrupt.
The problem with that is thatit may push people on the verge
of retirement to startcollecting their benefits
earlier than they maybe wouldhave, which doing so would
result in a reduction of up to30 percent in their monthly
(07:13):
payments, since you cangenerally get a bigger benefit
if you delay your socialsecurity.
Mark (07:17):
Yeah, and, of course, it all depends on life expectancy
and all that kind of good stuff.
We have a lot of discussionswith our clients about this.
Uh, there's more than one way,especially if it's a married
couple.
Take one a little bit earlier,one later.
Whatever, there are reasons fordoing that.
Also, are you working part-timein retirement?
You take it too early, you losesome of your social security
benefits, so why take it?
So a lot of factors come intoplay, so please get help on this
(07:39):
.
This is not a Google solution.
There's too many things comingtogether and it's all based on
what your needs are in your life, and so get help with a
fiduciary that has training insocial security benefits, which
we do.
Evan (07:52):
Myth number three is also social security related
security will cover most of myexpenses.
Mark (07:59):
Yeah, I'm sure you've got some stats that I don't memorize
, but so many people are relyingon it almost for 100%.
Evan (08:06):
Yeah, and it was never meant to replace your paycheck.
It's designed to replace about40% of your pre-retirement
income.
Mark (08:14):
So what are people relying on it for?
Now, the average, do you havethat number Like 70 or 80%?
That supplies like 70 to 80% oftheir income, that they need.
Evan (08:24):
No, it's intended to only replace 40%.
I'm not sure what it actuallyis.
Mark (08:28):
I think I've read it's about double that.
That is what people are actually, the average person is actually
depending on from socialsecurity, which is why it's so
vital that they not get a paycut, because we've leaned
further and further on this poolof money that is beginning to
run dry.
So that's why you know, takeinto account your own, you know
responsibilities when it comesto retirement.
(08:50):
If you need to work a littlebit longer to fund your 401k a
little bit longer, if you wantto maybe work part-time for a
while, I myself, if I ever doretire, I don't know that I can
sit at home.
Most people can't.
Most people need to be doingsomething productive, whether
you're getting paid for it orvolunteering or something.
But yeah, be careful with that.
With Social Security again,some of the changes that may
(09:14):
come would be cost of livingincreases.
So if you're relying on it for80% or 90% of your income and
you don't get much of a bump oneyear even though inflation goes
up, you're getting further andfurther behind.
So lots of things affectingthat.
Please, it's never too late tostart saving money.
Evan (09:29):
Yeah, some of the misconceptions, I mean they've
been around for a long timeabout how much Social Security
is actually supposed to replace.
But back in the day we hadpensions and Social Security,
two reliable sources of income.
Well, we know that pensionshave largely gone away at least
the vast majority of them andthey've been replaced with a
401k, which is not a guaranteedamount, a set amount of money,
(09:49):
and that responsibility is nowin your hands, folks who have
the 401ks, the TSPs, the 403bs,all these good things.
It's up to you now to determinehow to make that money work for
you over 25 plus years inretirement.
It's no longer reliant on yourpension and your former company.
Mark (10:06):
And that's why a lot of times I'll refer to it as my
grandfather's retirement versustoday's retirement.
Again, he had a great pension.
He worked 30-something yearsfor the mill, right, you know,
he had a mill house.
It was a very nice little house.
It was perfect for them.
It was paid for after a while.
Cds were paying 5%, you know,savings accounts were paying
(10:27):
well, and nobody was in themarket.
I mean, in the 50s, 60s and 70sthe IRA and the 401k had not
come out yet.
So the middle American mostlythey were not participating in
the market because they didn'thave that easy conduit into it,
and so they were again just kindof riding this three, five, 6%
wave of money.
But again, that pensionprobably covered 50, 60, 70% of
(10:51):
their needs, and then socialsecurity kicked in the next 40
or 50,.
They were in good shape, youknow.
And then they passed away right, I mean life expectancy much
earlier, and so maybe they werefive years in retirement, maybe
10.
But nowadays we've got people20, 30 years in retirement, and
because we're living so long,guess what Health issues those
are cropping up more and more.
(11:12):
We didn't live long enough to.
I'm not even sure Alzheimer'sexisted.
It was probably called gettingsenile or something like that
Just a different world we livein, and it's not something that
I would encourage anyone to doon their own.
Evan (11:28):
Yeah, and on the social security conversation if you
have not visited ssa.
gov, downloaded your own socialsecurity estimate to see where
you are, I highly recommenddoing that, especially in your
pre-planning stage forretirement.
While you're online, you shouldalso go to masterplanretire.
com.
There you can schedule yourcomplimentary consultation with
(11:48):
one of our advisors.
That's an opportunity to run aseries of retirement outlook
reports for you.
It's essentially a 10,000-footview of your own retirement and
then we will stress test thatretirement.
We will test your retirementagainst bear markets, against
higher taxes, against thepassing of a spouse and many
more items.
That's completely complimentary.
Feel free to take us up on that.
(12:08):
We'd love to hear from you.
MasterPlanRetire.
com or 770-980-9262.
You ready for myth number four?
Mark (12:17):
Real quickly on social security.
Another great reason to checkout your statement.
Actually, look at the statement, don't just look at the little
readout on the initial login.
Pull up your statement becauseit will give, on page two or
three, all your years of historyof earning and we have found
over and over again that socialsecurity will miss a year.
(12:37):
And so it's 35 top earningyears.
Okay, earned income over 35years.
If you're missing four or fiveyears, those are zeros and that
will lower your average as well.
Get it fixed, the sooner thebetter.
Do a check, do a self-audit,double check that for yourself.
Evan (12:53):
Number four
In times of uncertainty, manypeople liquidate their holdings
and move to cash.
They're betting that it's saferthan being beholden to the
whims of the stock market.
May move funds to CDs, bonds,money markets, things like that.
Mark (13:08):
Which is fine if you've got clear signals that the
market's going down.
You haven't waited until themarket's gone down.
You want to sit on thesidelines.
Our money managers do thatfairly often.
But they get the signals, theyget the algorithms and they can
see hey, we need to rest some ofour money.
They never go all to cash.
I don't have anybody that evergoes all to cash, but even our
(13:29):
government workers.
We'll advise them maybe move toG Fund for a few months.
We'll give you another noticewhen we get more signals and let
you know to get back in.
But we have seen.
I can remember after 2008,.
It was years where I'd seepeople sitting in almost all in
cash eight and ten years later,which means they totally missed
the recovery, plus another 40 or50 percent on top of that.
(13:51):
Don't let fear drive yourdecisions.
If fear is a problem, if greedis a problem, let somebody else
manage your money.
You know I have a little bit ofhard time managing my money.
I hire money managers to hire,you know, to manage it because
again it takes that emotionalaspect down of it.
I trust them.
They have a long track record.
Evan (14:10):
Let them do their job and they'll work their way through
the windings of the stock marketand make money long term, yeah,
a portfolio of all cash is notgoing to keep up with inflation,
over 30-year retirement, withrising health care costs,
inflation, cost of livingincreases.
It's better to have moneyspread out inflation, cost of
living increases.
It's better to have moneyspread out stocks, cash and
bonds.
And again we have thisconversation all the time.
(14:31):
It's what the account needs todo.
What's the account's job?
Of course, if you needimmediate income, that's not
going to be in an aggressiveportfolio, but maybe your
long-term 5-10 year bucketthat's for long-term growth can
remain in the market and remainmore aggressive even in more
volatile times times
Mark (14:47):
Again over time, the market makes money.
Evan (14:55):
Myth number five: long-term care insurance or
nothing.
Mark (15:02):
What I hear you saying is that's our only choice Long-term
care.
We have steered folks away frombuying the insurance because it
has got to be very difficult toget.
It's very expensive and clientsthat have bought it years ago
still get letters every two orthree years where the cost is
increasing.
That happens four or five, sixtimes over a 10 or 12 year
period.
They can't afford it anymore,so they paid for it for 20 years
.
Now they drop it.
(15:22):
So there are tools out there andagain, if you've got a planner
that specializes in retirementplanning, they will know of some
tools, just like we do that youcan incorporate long-term care
coverage into other tools sothat you're not just paying for
long-term care insurance.
It's just almost like a triggerthat gets triggered and whether
it's built into an income plan,whether it's built into a life
(15:45):
protection plan or whatever, Ilove those tools because I don't
feel like I'm spending aclient's money.
We're utilizing a client'smoney and for many purposes.
Built into one tool, thatlong-term care rider is a very
powerful tool.
Evan (16:04):
Yeah, absolutely, and it doesn't even have to be a
long-term care rider.
It can just be a specificbucket, specific account with a
certain timeline.
You do need to prepare, butwe've seen how many clients who
have been paying in for a longtime with these long-term care
policies that they had beforethey've ever met us Several, are
being offered a buyout.
One of our clients was offereda buyout of $50,000.
Mark (16:23):
I think it was $50,000, $40,000.
Evan (16:24):
They'd had it for 25 years , which, if you consider that
amount, that's about half howmuch a long-term care has cost.
Mark (16:30):
They probably paid in $60,000 to $70,000, but that
didn't count the fact that theycould have made money on that
money.
So they're trying to buy themout because they don't really
understand or know.
They don't have a good handleon how long people are going to
be in in facilities.
(16:51):
It seems to be getting worseand worse because we are keeping
them alive, we're trying togive them a quality of life, but
it's also costing a lot ofmoney, and so it's just I don't
know where it's going to come toyou.
I really don't.
I'm hoping the governmentdoesn't have to get involved,
but people are just flounderingwith some of these issues.
So make sure, especially ifyou're middle to upper middle
(17:13):
class, you make a little bitbetter than average income.
You don't want to lose all ofyour assets to Medicaid and not
have a legacy to leave yourfamily or your spouse enough
money to live on because thestate came and used up all your
money for long-term care.
Evan (17:31):
And now this is also not a recommendation by any means
that if you have long-term careinsurance, that you should drop
it.
Not at all, because it actuallycan be a huge blessing for you,
especially when you find somefolks who've had it for a long
time and it's still a goodpolicy, one of those stronger
carriers.
We're not saying get rid of it.
In fact, many people have greatexperiences with it when it
(17:53):
pays out the way it's meant to.
However, when you'restrategizing, moving forward,
the landscape has changed, soyou really need to have a fuller
viewpoint on your long-termKnow your options.
Yeah, know your options.
Myth number six (18:05):
financial plans are for rich people.
Mark (18:09):
Wow, that's a good one, yeah, so.
So it's almost like saying youknow, only really really healthy
people need to go to the doctor.
That's good.
You need to go, period.
You know we have people we workwith that have very little in
investments, in investable money.
They need help more thananybody.
We need to squeeze every dollarout of there and really show
(18:31):
them what they can spend.
Maybe they need to budget,Maybe they need to work
part-time or whatever, but havea plan.
No matter how much money youhave, you certainly need one if
you have a lot of money.
Wealthy people are afraid ofrunning out of money.
The wealthier people we workwith, but that middle class,
somebody that worked at Lockheedfor 30 years, somebody that
worked at Southern Company for30 years or whatever they've
(18:53):
saved all these years.
They've got a decent nest egg.
They go well.
I'll just turn on my socialsecurity at this age.
I'll just take money out of my401k over the next 30 years and
we should be okay.
Should's not a plan, Hope's nota plan.
So put it in writing.
You know what it does, Evan.
As you've heard our clients say, it gives them absolute peace
of mind knowing that they've gota lifetime of income plus
(19:15):
growth over here, and plans forhey, if I lose my spouse early,
if taxes go up.
These are all strategies we puttogether.
Why not have that peace of mindto have a plan?
So don't be afraid to.
You know, I know as a guy andspeaking for a lot of men, a lot
of times we're afraid to lookfor help.
Many times it's the female thatdrives the couple to see us,
you know, and that's okay, youknow, but yeah, yeah, don't be
(19:44):
afraid to at least have a chatwith us.
Evan (19:45):
Yeah, that's good.
Myth number seven (19:46):
estate planning doesn't apply to me.
So estate planning, includingeven drafting a will, is one of
those things people just put onthe back burner or think, oh, my
assets aren't large enough toneed any of this.
But you're not considering, notonly the trouble you're leaving
your heirs but the costs thatit might eat into your legacy.
Mark (20:08):
I consider this in two steps.
Step one is having the rightdocuments.
That's a good step in the rightdirection, but it also needs to
be incorporated into youroverall financial plan.
That's what estate planning is.
It's not just creatingdocuments.
So make sure you work.
So we have attorneys as part ofour team because we do some of
the planning with them.
They give us advice on how toset that up, they write the
documents, but now it'sintegrated with your other
holdings.
It's integrated.
(20:29):
You know, do you need a trust ora will?
Have you updated some of yourbeneficiaries because they don't
go through the will or trustthey go through.
They don't go through probate.
That's a better way to put it.
So it needs to be an overallplan and also we're beginning to
see more and more of thesewills that people do online or
do through some cheaper attorneywebsite or maybe done by an
(20:51):
attorney that's not an estateplanning attorney are not
working.
They look good, you know theyfeel right, and then they get a
probate and the judge says Ican't accept this because of
this or that.
So it's up to the probate judgeto decide if the document is
any good and maybe it waswritten 30 years ago and that
maybe was no good.
I have somebody come in herewith a three-page will.
I already know it's no good.
(21:13):
There's just not enoughlanguage in there for today's
digital assets and getting intopeople's bank accounts and other
things that have not beenaddressed in the past.
So getting into people's bankaccounts and other things that
have not been addressed in thepast so many people's will was
done 30 years ago when theirfirst child was born or
something like that.
So not only that, getting itupdated, but making sure it
integrates with everything.
So I think if you've got ahouse and $50,000, that's still
(21:40):
going to be a mess for somebody.
If you don't have a will,You're dying without a will.
It's a much longer process,more expensive process.
Evan (21:49):
Myth number eight, we've just got a couple minutes so
we'll try to knock these lasttwo out fast.
Myth number eight (21:52):
I can set my financial plan and forget it.
Mark (21:57):
Yeah, you can, you shouldn't.
But you can.
Things change, life changes.
That's why we meet with ourclients officially once or twice
a year, because we understandthat things change.
Sometimes they'll call us thishas changed.
We need to see y'all makeadjustments.
It's not in concrete, it's notin stone.
It's designed to be flexible.
Hey, if I lose a spouse, myincome just dropped.
(22:18):
I've got to take a littledetour If this happens or that
happens or whatever.
We've talked about it, we'veplanned for it, but now we
actually got to change thosewidgets or change those levers
or whatever to make sure that itkeeps up with the evolving
lives, evolving tax laws, all ofthis.
It is always something you gotto keep up with.
That's why we love working withfolks, because we help you keep
(22:42):
up with it.
It's not like you've got to sitdown on New Year's Day and make
a bunch of changes.
We've got that plan and weguide you through it, pretty
much like your CFO.
Evan (22:51):
Last one.
We'll try to plow through itwhile we still have time: I will
be in a lower tax bracket inretirement.
Mark (22:58):
Yeah, almost never happens .
Most people want at least 80%of their income coming in at
retirement.
Most of them want 100%.
You've got to remember whenyou're working, you've got money
coming out for health insurance.
You've got money coming out foryour 401K or thrift savings
plan, and so what is your netincome and do you want to
maintain that?
That's going to be a differenttax bracket, plus, as tax laws
(23:20):
change, it could be higher.
The fact you've got to takerequired minimum distributions.
You're forced to take money,have an ira that can put you in
higher tax bracket.
If you lose a spouse, you're ina higher tax bracket.
A single tax bracket is higherthan a joint.
So there's so many things andwe rarely see somebody stay the
same or get a lower tax bracket,especially with taxes going up
(23:41):
in the future, so much moneybeing spent.
So, yeah, don't let that bepart of your philosophy.
Make sure that you keep up withthat.
Evan (23:49):
That's good.
Folks, thanks again for joiningus today.
Remember, check outMasterPlanRetire.
com to schedule yourcomplimentary consultation.
Mark (23:57):
We've enjoyed today, I hope this has been helpful for
you.
Until we see each other again,remember plan well and prosper.
Take care.
This was Retirement RoadmapRadio with Mark Fricks of Master
Plan Retirement Consultants.
To schedule a complimentaryconsultation, go to
masterplanretirecom or call770-980-9262.
(24:19):
Thanks for listening andremember plan well and prosper.
Thank you.
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