Retirement Planning

Episode 26 of The Smarter Money Show delves into retirement planning, guiding listeners on building a nest egg to support their dream lifestyle, regardless of age or income. It emphasizes starting early, as saving $5,000 annually at 7% from age 25 yields $1.1 million by 65, compared to $254,000 starting at 45. Key strategies include maximizing tax-advantaged accounts (e.g., 401(k)s, Riester pensions), investing in diversified ETFs like VOO, and planning for healthcare costs ($315,000 for a U.S. couple).

The episode highlights global challenges, like strained pension systems in Germany, and offers solutions like diversifying income streams with REITs or dividends. A practical roadmap helps listeners estimate needs, set savings goals, and review plans annually to ensure financial security in retirement.

Episode Transcript

Speaker 1 (00:00):
As always before we begin, this podcast is for informational
and educational purposes only. It is not financial advice. Always
do your own research and consult with a licensed advisor
before making any investment decisions. Welcome back to the Smarter
Money Show. I'm your host, and this is episode twenty six.
Picture this. You're sixty five, sipping coffee on a sunlit porch,

(00:22):
free to travel, pursue hobbies, or spend time with loved ones,
all without worrying about bills. Sounds like a dream, right.
That's the power of retirement planning, and today we're diving
into how to make that dream a reality. Whether you're
twenty five, forty five, or already nearing retirement. No matter
your age or income, this episode will show you how

(00:43):
to build a nest egg that supports your ideal lifestyle
without the fear of running out of money. Retirement planning
isn't just about numbers in a bank account. It's about
crafting a financial roadmap that gives you freedom and peace
of mind in your golden years, whether that means backpacking
through Europe, starting a small business, or simply relaxing with
family In a world of rising costs, strained pension systems

(01:05):
and unpredictable markets, Planning ahead is more critical than ever.
Over the next forty plus minutes will guide you through
the strategies, tools, and mindset to secure your financial future,
no matter where you live or what you earn. Here's
our journey today, a real life story to show why
retirement planning is a game changer. The core pillars of
a retirement plan, from savings to income streams. How much

(01:28):
you really need to retire, backed by data and global perspectives.
Actionable strategies to save, invest and protect your nest egg.
Global challenges and solutions for retirement planning mistakes that can
derail your plan and how to avoid them. A practical
roadmap to start or refine your retirement strategy. Let's begin
with a story that brings it all to life. A

(01:51):
retirement wake up call. Meet Sarah, a forty year old
teacher who always assumed social Security and her modest pension
would cover her retirement. She saved sporadically, figuring she'd deal
with it later. At fifty five, she ran the numbers
and realized her savings would only last ten years in retirement,
forcing her to work longer or cut her lifestyle drastically

(02:13):
contrasts that with her colleague, Mark, who started saving three
hundred dollars monthly in his twenties. By fifty five, Mark's
investments grew to seven hundred fifty thousand dollars, enough to
retire comfortably with thirty thousand dollars annually from his portfolio
plus pensions. Sarah's story isn't unique. A twenty twenty three
study by the Employee Benefit Research Institute found that forty

(02:35):
percent of US retirees run out of money within twenty years,
often due to poor planning or unexpected costs like healthcare.
In Germany, an aging population strains at rent in versus Cherung,
covering only fifty sixty percent of pre retirement income. In Canada,
rising living costs mean even cpp Canada pension plan isn't enough.

(02:56):
Mark's success shows the power of early, consistent planning. A
lesson will unpack today core pillars of retirement planning. A
solid retirement plan rests on four pillars. Estimating income needs
determine how much you'll need annually to maintain your lifestyle.
The seventy eighty percent rule suggests you'll need seventy eighty

(03:17):
percent of your pre retirement income. For example, if you
earn eighty thousand dollars annually, aim for fifty six thousand
dollars sixty four thousand dollars per year in retirement. Factor
in housing, travel, and hobbies. Setting a savings goal, use
the twenty five x rule. Save twenty five times your
annual expenses. For sixty thousand dollars in annual expenses, you

(03:40):
need one point five million dollars. This accounts for withdrawals
and inflation. Identifying income sources combined government pensions for example
US Social Security one nine hundred dollars monthly average in
twenty twenty five, employer pensions four hundred and one KKs iras,
or personal investments like dividends or rental income. Building an

(04:03):
investment strategy. Grow your savings with a diversified portfolio to
outpace inflation and taxes. A mix of stocks, bonds, and
alternatives ensures growth instability. These pillars adapt to your life stage.
A twenty five year old focuses on growth, a sixty
year old prioritizes preservation. Wherever you are, Aligning these pillars

(04:24):
with your goals is key. How much do you really need?
Estimating your retirement needs requires data and realistic assumptions. From
nineteen twenty eight twenty twenty three, A balanced portfolio sixty
percent stocks, forty percent bonds returned eight point five percent
annually per Vanguard, or five point five percent after three

(04:46):
percent inflation. The four percent withdrawal rule withdrawing four percent
of your portfolio annually adjusted for inflation, suggests a one
million dollars portfolio provides forty thousand dollars per year for
thirty years, with a ninety five success rate per a
nineteen ninety four Trinity study. For example, a couple needing
sixty thousand dollars annually after twenty thousand dollars from social

(05:10):
security requires a one million dollars nest egg forty thousand
dollars slash four percent. In Germany, where pensions cover fifty
sixty percent of income, a sixty thousand dollars income might
need five hundred thousand dollars seven hundred fifty thousand dollars
in personal savings to bridge the gap. In Canada, CPP
and oas provide fifteen thousand dollars twenty thousand dollars annually,

(05:32):
requiring additional savings for higher lifestyles. Healthcare is a wild card.
Fidelity's twenty twenty three estimate pegs US healthcare costs at
three hundred fifteen thousand dollars for a sixty five year
old couple excluding long term care. In countries like Canada
with universal health care, costs are lower but still significant,
for example, one hundred thousand dollars for supplemental care. Globally,

(05:56):
inflation three four percent annually double living costs every twenty
twenty four years, emphasizing the need for growth oriented investments
actionable strategies to build your nest egg. Here's how to
save and invest for a secure retirement. Maximize tax advantage
accounts US contribute to four hundred and one KS twenty

(06:19):
three thousand dollars limit in twenty twenty five or iras
seven thousand dollars WROTH. Iras offer tax free withdrawals, ideal
for younger savers or those expecting higher taxes and retirement.
Canada use RRSPS thirty one thousand, five hundred and sixty
dollars limit in twenty twenty five for tax deductions or

(06:40):
tfsa's for tax free growth. Germany leverage reser pensions or
betriebliche alters VORSORG for tax benefits and state subsidies. Example,
maxing out a four h one K for twenty years
at seven percent grows to eight hundred seventy thousand dollars,
covering fifty eight percent cent of a one point five

(07:01):
million dollars goal. A German saver using reser with two thousand,
one hundred euros annually can build two hundred thousand euros
by sixty five. Invest for growth in stability. Early career
twenties thirties allocate eighty ninety percent to stocks for example
Vanguard S and P five hundred ETF VOO for growth,

(07:21):
ten twenty percent to bonds for example Vanguard Total Bond
BND for stability. Mid career forties fifties shift to sixty
seventy percent stocks thirty forty percent bonds to balance risk.
Pre retirement sixties use fifty percent stocks, fifty percent bonds
or alternatives for example rii ES for preservation. Example, a

(07:45):
five thousand dollars annual investment in Voo at eight percent
from age twenty five to sixty five grows to one
point four million dollars, covering ninety three percent of a
one point five million dollars goal. Automate and prioritize savings.
Set up automatic country aributions to retirement accounts, for example
five hundred dollars monthly from your paycheck to remove temptation

(08:06):
to spend. Treat savings like a non negotiable bill. Diversify
income streams. Combine pensions, rental income, dividends, or part time work.
For example, a one hundred thousand dollars riit portfolio for
example VNQ yielding four percent adds four thousand dollars annually,
while a dividend ETF like SCHD three percent yield provides

(08:29):
steady income. Plan For health care and longevity, US use
HSAS one hundred and fifty dollars limit in twenty twenty five.
For tax free medical savings. A four thousand dollars annual
HSA contribution at five percent grows to two hundred thousand
dollars in twenty five years. Global budget for supplemental care
or long term care insurance, especially in countries with limited

(08:52):
public health care. Adjust for inflation. Invest in stocks, real estate,
or tips treasury inflation protected securities to outpace three four
per cent annual inflation. For example, a fifty thousand dollars
stock portfolio growing at eight per cent doubles to one
hundred thousand dollars in nine years, preserving purchasing power. Global

(09:13):
challenges and solutions. Retirement planning varies globally due to economic
and policy differences. US social security faces funding concerns, potentially
reducing benefits by twenty per cent by twenty thirty five
per The SSA solution rely on personal savings four hundred
one keyas iras and diversify with rates or dividends. Germany,

(09:37):
the rent in Versika HUM covers fifty sixty per cent
of income, but an aging population strains the system. Solution
use rester or private investments to bridge the gap. Canada,
CPP and OAS provide modest income fifteen thousand dollars twenty
thousand dollars annually. Solution max out rrsps and tfsa's and

(09:58):
consider rental income for five flexibility. Emerging markets in countries
like India or Brazil, pensions are minimal and inflation is
high five ten percent. Solution invest in global ETFs for
example VXUS and local real estate for growth and stability.
For example, a Canadian saver might combine ten thousand dollars

(10:20):
annual RRSP contributions with a fifty thousand dollars r EIT
investment to generate two thousand dollars in annual income. Supplementing CPP,
a German saver could use research subsidies to boost savings
by ten fifteen percent. Mistakes that can derail your plan
Avoid these common pitfalls Underestimating expenses, overlooking healthcare three hundred

(10:45):
and fifteen thousand dollars for a US couple, or lifestyle costs.
For example, travel can deplete savings budget conservatively adding ten
twenty percent for surprises starting late. Delaying savings from age
twenty five to thirty five has your nest egg. A
two hundred dollars monthly contribution at seven percent from age
twenty five grows to two hundred and sixty two thousand

(11:07):
dollars by sixty five. Starting at thirty five yields one
hundred twenty two thousand dollars. Over Reliance on pensions, social security,
or rent in versision room may cover only thirty sixty
percent of needs. Build personal savings to avoid lifestyle cuts.
Ignoring inflation. A three percent inflation rate doubles cost every
twenty four years. A fifty thousand dollars lifestyle today costs

(11:29):
one hundred thousand dollars by twenty forty nine. Invest in
stocks or real estate to keep up chasing high risk bets.
Allocating one hundred percent to crypto or speculative stocks risks wipeouts.
In twenty twenty two, crypto investors lost sixty eighty percent.
Diversified portfolios lost fifteen to twenty percent. Mitigate these by
starting early, diversifying, and reviewing your plan annually with a

(11:53):
financial advisor or tools like morning Star. Your retirement roadmap.
Here's a practical, step by step plan to build or
refine your retirement strategy. Visualize your retirement, define your dream lifestyle, travel,
hobbies or relaxation, and estimate annual costs for example, sixty

(12:13):
thousand dollars. Use the seventy eighty percent rule for guidance.
Calculate your nest egg. Multiply annual expenses by twenty five
for example, sixty thousand dollars equal sign one point five
million dollars. Factor in pensions to adjust your savings goal leverage,
tax advantage accounts max out four hundred and one, says

(12:34):
IRAS RRSPS or RESERP plans. Automate contributions for example, five
hundred dollars monthly. To stay disciplined, build a diversified portfolio.
Invest in low cost ETFs, vo B and D or
alternatives VNQ with an age appropriate mix eighty percent stocks, twenties, thirties,

(12:57):
sixty percent stocks forty's fifty fifty percent stocks sixties. Secure
income streams combined pensions, dividends for example SHD, rental income
or part time work. A fifty thousand dollars dividend portfolio
at three percent yields one thousand, five hundred dollars annually.

(13:17):
Plan for risks, budget for healthcare one hundred thousand dollars
three hundred and fifteen thousand dollars and inflation consider HSAS
or long term care insurance, review and adjust. Check your
plan yearly, adjusting for income changes, market conditions, or new goals.
Use apps like Personal Capital to track progress. For example,

(13:37):
a thirty year old earning sixty thousand dollars might save
six thousand dollars annually in a roth IRA VIOO, three
thousand dollars in a taxable account VNQ and budget one
thousand dollars for an HSA building one point two million
dollars by sixty five plus. Social security retirement Planning is

(13:58):
your ticket to a life of freedom and security, no
matter your starting point. By visualizing your goals, saving consistently,
investing smartly, and preparing for risk like inflation and healthcare,
you can build a nest egg that supports your dreams.
It's not about earning a fortune, it's about planning early,
staying disciplined, and letting time and compounding work their magic.

(14:18):
As a reminder, this podcast is for informational and educational
purposes only. It is not financial advice. Always do your
own research and consult with a licensed advisor before making
any investment decisions. If you found this episode inspiring, follow
the Smarter Money Show, leave a review, and share it
with someone who wants to secure their financial future. They

(14:38):
might find the motivation to start today. In our next episode,
we'll explore behavioral finance, how to master your emotions and
avoid costly investing mistakes that can sabotage your wealth. Until then,
stay smart, stay patient, and stay invested.