Stephanie McCullough (00:06):

This is Take Back Retirement, the show that’s redefining retirement for women. Retirement is an old-fashioned cultural concept. We want to reclaim the word so you can make it your own. I’m Stephanie McCullough, financial planner and founder of Sofia Financial, where our mission is to reduce women’s money stress and empower them to make wise holistic decisions so they can get back to living their best lives.

Stephanie McCullough (00:29):

Kevin Gaines is my longtime colleague with deep expertise in the technical stuff: investments, taxes, retirement plan rules. He’s a little bit nerdy and quantitative, I’m a little bit touchy-feely and qualitative. Together, through conversations and interviews, we aim to give you the information and motivation you need to move forward with confidence. We’re so glad you’re here.

Stephanie McCullough (00:50):

According to a recent survey, the typical American saver is on target to have only 78% of the income they need to cover their expenses during retirement. Today, Kevin and I are going to dig into the results of this survey and share our insights.

Stephanie McCullough (01:18):

Coming to you semi-live from the beautiful Westlakes office park in suburban Philadelphia, this is Stephanie McCullough and Kevin Gaines of Sofia Financial and American Financial Management Group. Say hello, Kevin.

Kevin Gaines (01:29):

Hello, Kevin.

Stephanie McCullough (01:30):

You know, there’s all kinds of financial companies that do surveys periodically to gauge how Americans are feeling about their financial situation, and this one is particularly called The State of Retirement Planning, which I’m sure you’re not surprised to hear interests me and Kevin greatly.

Stephanie McCullough (01:53):

Now, we talk to our clients all day, every day. So, we have an idea of how people are feeling, but of course, our clients are a much smaller sample set than the folks interviewed in a survey like this. So, it is interesting to see not only the state of people’s feelings about things, but also, the trends.

Stephanie McCullough (02:15):

What I like most about the approach of this survey is that the goal was to examine the extent of planning Americans have taken to reach their retirement goals. And as you know by now, Kevin and I, always say retirement in quotes, because we don’t have that traditional version of work, work, work, work, work, get to age 65, stop, and just sit in a rocking chair the rest of your life.

Stephanie McCullough (02:40):

Your retirement is however you define it. We would like for all of you to get to a point where you don’t have to work for money anymore, where you have the option, or at least you have the option to reinvent, to change, to do something differently.

Stephanie McCullough (02:56):

And not surprisingly, because we are financial planners, we do see value in planning. So, that was some of the interesting things, Kevin, that I saw from this study.

Kevin Gaines (03:09):

So, yeah, what I like about the stat about people having confidence in their retirement if they’ve done the planning, is if for no other reason, at least they have a better grasp of what they’re dealing with. And we’ve made this point in several other episodes. Just being aware of what’s going on can get you a long way to identifying where you want to be, and what other steps you need to take. I think that’s important for that reason.

Stephanie McCullough (03:45):

What I see all the time with clients is that they’ve got this general anxiety about the future and that they haven’t been paying as much attention as they think they should to their finances, to whether they will be able to stop working at some point.

Stephanie McCullough (04:00):

But that general level of anxiety isn’t enough to push them to do the planning, because the planning feels scarier. And yet something a switch gets flipped at a certain point, it’s going to be a different trigger for each person. But then they come in, they’re like, “You know what, I just can’t deal with that unknown anymore. I want to at least face the numbers, understand what I’m looking at, and then I know if I have a prayer of stopping working.”

Stephanie McCullough (04:30):

If I need to be saving more, if it’s unrealistic to think I can move to the beach, or do the snowbird lifestyle, whatever it might be. That getting some clarity, like you said, Kevin, on what the possibilities are and what action steps you can take, which is why we always suggest the earlier you do this planning, the better off you are. You don’t want to wait until you’re 62 thinking you’re retiring at 65 to do this stuff.

Kevin Gaines (05:00):

And you also need to be honest with yourself, and I think this is one of the reasons some people put off the planning until later. Which is this perception that, “Oh, I’ve got to know everything, or I’ve got to have everything established in my mind, what I want to do before I do this.”

Kevin Gaines (05:22):

Stephanie, you and I could both say how many times the “plan” has just been thrown away, because all of a sudden (well, not all of a sudden) clients say, “You know what, I no longer want to travel the world, I now want to live in a cabin with just my family,” or vice versa.

Kevin Gaines (05:47):

“I no longer want to just have a nice, quiet, peaceful retirement, I now want to go, go, go. I want to travel the world,” or any number of other ways that what you thought your retirement was going to be 5, 10 years ago, is not what you’re thinking it’s going to be today. So, I really want to stress this more than anything to people: don’t get hung up on perfection.

Stephanie McCullough (06:16):

Yes.

Kevin Gaines (06:17):

And that it’s a single one-time decision. Neither one of those is even remotely true. To that point, if we look at another one of the surveys that we’re looking at in this episode, some of their questions was, “How did the pandemic impact your planning?”

Kevin Gaines (06:36):

But in 2019, who of us, even us professionals said, “Oh, you know what we should build into our planning conversations? What happens if the entire globe shuts down for a year, year and a half?” None of us had that. Again, don’t get hung up on thinking that we have to have everything decided from day one.

Stephanie McCullough (07:08):

Yeah, we definitely traffic in guesses, and there’s still value in making the guesses. You don’t have to get the guesses perfect, but at the same time, it’s valuable to try to put your arms around what you think things might look like.

Stephanie McCullough (07:27):

So, one of these stats in this survey here from Fidelity, The State of Retirement Planning, it’s interesting, they said one in four people who answered the survey are now less confident than they were before pandemic about their retirement prospects.

Stephanie McCullough (07:44):

However, 91% of those who had a “retirement plan” meaning something in place where they had done some planning and tried to get their arms around things. 91% of those people feel at least somewhat confident, that’s a big number.

Stephanie McCullough (08:02):

91% of anything tells you that something’s going on here. So, going through the exercise of doing some planning increases your confidence. And yet, Kevin, there was a little stat on here that surprised neither of us about the difference between men and women when it came to confidence. You want to share that one?

Kevin Gaines (08:27):

No, because my side of the population doesn’t look too good on this one. So, yeah, so one of the stats that came out was the percent of people who are very confident in their preparedness for retirement, for men, it was 43%; for women, it was 33%.

Kevin Gaines (08:50):

And you may say, “Oh, well, that just means men are doing a better job.” I guarantee you, Stephanie, how quick could you find any random survey showing how routinely men are overconfident in literally filling the blank on any topic?

Stephanie McCullough (09:09):

Oh my gosh.

Kevin Gaines (09:09):

Especially when it comes to investing in finances?

Stephanie McCullough (09:13):

Totally, I mean, I’ll just mention a couple. So, there was this experiment done with men and women, and they had people take a quiz on their knowledge about finance and investments. So, the last question on the quiz was, “How do you think you did on the quiz?”

Stephanie McCullough (09:30):

And the funny part to me is that men scored themselves higher. They thought they did better, but they actually scored lower on the quiz. Whereas, the women got a higher score on the quiz, but they thought they had done worse. So, yes, women are less confident about these things.

Stephanie McCullough (09:49):

Also, one of my favorite book titles out there is Warren Buffet Invests Like a Girl: And Why You Should, Too. And that highlights that men are more prone to overconfidence when it comes to investing specifically. So, no, we’re not shocked that more of the men are very confident about their retirement. Keep in mind, confident doesn’t mean right.

Stephanie McCullough (10:15):

So, one of the other things that the survey did that is also of interest to me and Kevin, is they look at different generations and how things differed among the generations. Kevin and I are both Gen X, so we like to look at that.

Stephanie McCullough (10:27):

So, one of the questions was about how confident people felt about being able to meet their long-term financial goals, such as retirement. So, Baby Boomers came in at a 90%. Now, some Baby Boomers are already retiring. So, 90% of the boomers were either somewhat or very confident that they had enough to meet their long-term goals.

Stephanie McCullough (10:52):

Gen X, it was only 79%, that’s a big drop-off for our generation. Now, it might be generational characteristics, but I think also, we are getting to that phase of life where retirement is on the horizon, it’s closer than it had been before.

Stephanie McCullough (11:10):

So, maybe it feels a little bit more real. Maybe we have seen people in our lives who’ve been forced to retire earlier than they expected, either from layoffs or health consequences, and we’ve seen people perhaps struggle. Kevin, what do you think might account for this lower confidence among Gen Xers?

Kevin Gaines (11:29):

I’m a little bit more, I don’t know, if optimistic is the right word. But I think part of it is our generation is just now getting to that point where we’re thinking about retirement. Prior to now, a lot of us have been focused … I mean, this is a human trait. We’re more focused on what’s happening immediately as opposed to what’s happening 30, 40 years down the road.

Kevin Gaines (11:55):

And more immediate for a lot of Gen Xers has been establishing a home, raising the kids, getting the kids in college, getting promoted at work, a lot of these now type things. But what’s just now becoming the new now for us is retirement.

Kevin Gaines (12:24):

And if we’re just now starting the planning process, if we’re just now starting to really think about this, getting back to my first point of having all these unknowns and this cloud of uncertainty, we’re now realizing, “Holy crap, we don’t know squat.”

Stephanie McCullough (12:45):

So, perhaps not surprisingly, Kevin, to your point of we’ve had a lot to do in life, and of course, for families, with kids, women tend to be the primary caregiver. So, the survey says that 62% of Gen X women have yet to create some kind of plan for their retirement.

Stephanie McCullough (13:08):

Now, that’s a big number, 62%, and it doesn’t surprise me from my anecdotal conversations with women, from just living through it myself. It does still kind of feel unreal far away. And then all of a sudden, you’re like, “Oh, shoot, I’m in my mid-fifties,” maybe it’s not that far away.

Stephanie McCullough (13:33):

So, what I want to say is, please, we never go back and should on our past selves, that is not productive. It’s not helpful, it certainly doesn’t make for a happy state of being. We don’t want to guilt and shame ourselves for what we haven’t done in the past. When you know better, you do better.

Stephanie McCullough (13:52):

So, knowing that it is valuable to take some steps towards coming up with some kind of guess, AKA, plan, it’s not a roadmap that you’re going to follow no matter what. It’s taking some steps to have some ideas of what it’s going to look like. That’s a valuable exercise.

Stephanie McCullough (14:14):

And I encourage everyone to be gentle with themselves and start going through the exercises, start thinking about it, start having conversations. If there are special people in your lives, whether romantic partner or otherwise, start talking about it. Maybe get some friends together. Start thinking about, “Hey, have you thought about this thing called retirement?” Whatever it might mean.

Kevin Gaines (14:39):

There’s actually one more stat I really want to make sure we touch on. In the Fidelity survey, they asked, how much should you take out or how much do you think you have to take out of your retirement account each year? So, about 20% of the respondents in this survey said the withdrawal rate from their savings is going to be about 10 to 15%.

Stephanie McCullough (15:11):

Ah, per year.

Kevin Gaines (15:14):

That is significantly higher than anybody who’s actually looked at these numbers would tell you to take. There’s a whole thing, the 4% rule, and that’s what most advisors are going to tell you, is use 4%. Now, lately there’s been some document-

Stephanie McCullough (15:35):

Somewhere around.

Kevin Gaines (15:37):

Should it be as low as 3, could it be as high as 5? But again, it’s around that 4%. It sure as hell’s not 15%. And if 20% of people are thinking that’s the number, getting back to 62% of women who haven’t started planning, or 29% who haven’t even thought about it, whatever other survey numbers we’re talking about, this underscores that.

Kevin Gaines (16:09):

Because frankly, I would like to think if you’ve started this planning process, whether on your own or with a professional, you have figured out at this point, a 15% distribution rate from your 401(k), that’s not going to work very long.

Stephanie McCullough (16:29):

That might last you seven years. If you know you’ve only got seven years to be on this planet, okay. Otherwise, yikes. And that’s what gives pause to some of these ideas of confidence. If that’s what people are thinking, maybe they’re confident when they shouldn’t be.

Kevin Gaines (16:49):

Once again, frequently wrong, never in doubt.

Stephanie McCullough (16:54):

So, one of the quotes that comes out of this survey that I really like is that planning creates power and power leads to purpose. So, again, the planning, being a verb, not a noun, but taking steps to secure your financial resilience in the future is an empowering act, and it gives you purpose with your dollars.

Stephanie McCullough (17:28):

If you can start to value your future self and your future state of your family, whoever is important to you; as much as you value your present day self, it gets to be a little bit easier to put some money away to deny yourself current spending in favor of having more options, more flexibility in the future.

Kevin Gaines (17:52):

And speaking to my fellow Xers and this will be a whole another episode – but we’re actually entering the sweet spot when it comes to retirement planning and savings in as much as a lot of the tax code encouragements shall we say, to save, kick in once you get over 50 with catch up provisions, availability of other savings.

Kevin Gaines (18:24):

Also, some of these previous expenses in our thirties and forties are done, or at least capped. Our kids are graduating from college, we’re done with the house is hopefully getting closer to being paid out, paid off. We don’t have as many of these family expenses as we did when we were in our thirties.

Kevin Gaines (18:55):

There are some other ones that are coming up that may inhibit some of our savings that happen to worry about our parents, things along those lines. But really, this is an ideal time for us to be saving more, as long as we can answer the question, “Do I need to save more or more likely, how much more do I need to be saving?”

Kevin Gaines (19:19):

So, I really want to stress there’s a lot of opportunities here. So, even if you haven’t started the planning process, there’s quite a few options out there that can help you catch up, for lack of a better phrase.

Stephanie McCullough (19:39):

And hearkening back to our episode 62, on what women need to know about longevity, I think that bears at least mentioning here, because we still live in this culture where there’s this kind of idea that retirement equals age 65. And then when I remind people that their full retirement age for social security is 67, they’re like, “Oh, okay, then I retire at 67.”

Stephanie McCullough (20:05):

But if a lot of us are going to live to be a hundred and more, is it really realistic to think that we’re not going to earn any other income besides social security for that many years? Have we saved enough to support ourselves? That’s a big question, it’s something that we look at one-on-one with clients.

Stephanie McCullough (20:25):

But all that to say, we encourage people to think about some kind of, whether it’s a reinvention, some new career option, or a way to make a little part-time money or project-based work using your long-time expertise. With clients, we’re often talking about what can you find out today about your options down the road for when you want to stop being a full-time person, but maybe you’d like to still make a little money?

Stephanie McCullough (20:59):

Is there some part-time opportunities at your employer? Is there consulting that might be attractive? Could you be a public speaker? Could you write a book? So, you want it to be something that appeals to you and that feels fulfilling, but hey, earning a little money helps the financial plan, I’m just going to say.

Kevin Gaines (21:19):

Well, and to your point, it doesn’t have to necessarily be a whole lot of money, it might just be a way of reducing some of your expenses.

Stephanie McCullough (21:28):

Everyone’s situation is different.

Kevin Gaines (21:30):

Absolutely. But also, another number from this survey that echoes what Stephanie and I are talking about here, is they did a comparison of a couple major financial purchases, for lack of a better phrase. Retirement isn’t a purchase, but …

Stephanie McCullough (21:52)

Financial goals, maybe.

Kevin Gaines (21:53):

Expanding expense, whatever you want to call it: vacation, buying a house, whatever. And they looked at the percentage of people who were motivated to plan for this and the percentage of people that were excited when it actually happened.

Kevin Gaines (22:13):

And not surprising, most of these events, people were more excited for them to happen than they were motivated to plan. Except for retirement, more people were motivated to plan for retirement or said they were than they were actually excited to retire.

Kevin Gaines (22:35):

And we could read this a few different ways, but one way you could read this is not everybody is excited to “retire” at 65, at 67. We plan, “Alright, what happens if I do retire at this date because … But I really don’t want to stop working.”

Kevin Gaines (23:00):

That’s one of the main messages of our podcast, is this is your life, don’t get hung up on any of these preconceived notions. Do what you want to do, just make sure you understand what you’re wanting to do. Make sure you plan, and then if you want to retire at 65, great, we can work that out. If you don’t want to retire until 75, knock yourself out.

Stephanie McCullough (23:29):

The last point I want to pull out from this survey is the finding that Americans tend to be investing more conservatively now than pre-pandemic, and that they’re actually contributing less money towards their retirement. And of course, neither of these things is necessarily a good move.

Stephanie McCullough (23:52):

So, I understand that the world feels uncertain and scary, and it always has risks, there’s always reason to feel uncertain and scary. But what I’m thinking is that investing more conservatively as one gets towards retirement is kind of that conventional wisdom, like, “Oh, if you’re retired you should invest conservatively.”

Stephanie McCullough (24:19):

But back to the reality that a lot of us are going to live a very long time, if you’re lucky enough to retire in your 60s, you might live 40 years. So, while some of your money should be conservative, if you’re going to be using it in the next few years, a lot of that money is still long-term.

Stephanie McCullough (24:40):

So, we firmly believe that changes in the environment in the world should not dictate changes in your investment strategy, it’s changes in your life, changes in your need for money. And of course, as we age in near, using some of our assets, some of them are going to become short-term, but a lot of it is still long-term money. So, I would push back a bit on the idea that people should become more conservative.

Kevin Gaines (25:09):

I absolutely agree. By definition, we’re always going to have some stuff that’s going to be short-term. But who cares what age? You could retire at 90 and even if you don’t earn another dollar within your savings, your savings doesn’t earn another dollar for you, and you live to a hundred, think of it this way …

Kevin Gaines (25:36):

By definition, half of your money is still five years or more down the road before you are going to use it. That’s a lot of money to have sitting “conservative,” not knowing what inflation can do, how your spending can increase, or things along those lines.

Kevin Gaines (25:57):

So, yes, don’t get hung up of, “Oh, I’m retired, I now have to own nothing but bonds.” Depending on your situation, that actually might be a good strategy, but probably not for the vast majority of us.

Stephanie McCullough (26:11):

So, we love a good survey, especially if it gives us a chance to hold forth on our favorite topics and reinforce our messages. Please, the big takeaway is there’s value to doing the planning. No matter where you are in your career path, no matter what age you are, if you’re feeling some anxiety about your finances, doing some planning will help, I promise.

Stephanie McCullough (26:36):

We hope you found this helpful, thanks so much for being with us. We’ll talk to you next time. It’s goodbye from me.

Kevin Gaines (26:45):

And it’s goodbye from her.

Stephanie McCullough (26:49):

Be sure to subscribe to the show and please share it with your friends. Show notes and more information available at takebackretirement.com. Huge thanks for the original music by the one and only Raymond Loewy through New Math in New York. See you next time.

Disclaimer (27:03):

Investment advice offered through Private Advisor Group, LLC, a registered investment advisor. Private Advisor Group, American Financial Management Group, and Sofia Financial are separate entities. The opinions voiced in this material, are for general information only and are not intended to provide specific advice, or recommendations for any individual security. To determine which investments may be appropriate for you, consult your financial advisor, prior to investing. This information is not intended to be substitute for individualized tax advice. Please consult your tax advisor regarding your specific situation.