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.

(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.

(00:54):

In financial planning, the big question that we’re trying to answer is how to put a client’s resources to work to give them the best chance of meeting their goals, their financial needs and wants for the rest of their lives. And in so doing, there’s a lot of things we have to guess about. We have to guess how much life is going to cost them, what inflation will do in the future, what investment markets are going to do. Heck, they’re guessing what they’re going to want. How can you really know 20 or 30 years ahead of time what you’re going to want? But one of the biggest things we have to guess at, and it has a huge impact on the outcome of the calculations that we’re doing and it’s totally unknowable, is how long are you going to live? Coming to you semi-live from the beautiful Westlakes Office Park in suburban Philadelphia, this is Stephanie McCullough and Kevin Gaines of Sofia Financial, an American Financial Management Group. Say hello, Kevin.

Kevin Gaines (01:58):

Hello, Kevin. Of course, we can’t possibly know. Let’s be honest, many of us don’t even want to know. There’s a few of us out there who probably do. But yeah, most of us, we probably really don’t want to know when our number is up. But when we’re trying to plan, really knowing when the number is up, so to speak, pun intended, makes the difference in the success or failure of a plan. If you only live until 65 or 70, then yeah, fine, you may have a lousy retirement, but chances are you’re going to have enough money. But if you live till 130, 150, other than maybe Bill Gates or a few others, the finances may get a little stretched thin, shall we say. And there’s just no good answer. Right, Stephanie?

Stephanie McCullough (02:55):

Yeah. One of the big things that we have to look at in our financial planning practice is risks. What are the risks that our clients face? And it seems odd to talk about it this way, but one of the risks is longevity, living too long, which means living longer than your money does. But that’s really only one part of it.

Kevin Gaines (03:22):

Yeah. It’s not just making sure you have enough money, ideally, it’s making sure you have enough health. Health isn’t something you can buy. Well, maybe in some circles you can. But if you successfully plan to live to 100 and you do, but the last 15 years is, unfortunately, you’re needing round the clock personalized care, if you didn’t plan for that part, you’re still going to be in trouble even if you did get the age right.

Stephanie McCullough (03:56):

And yes, we want to plan for the financial aspects, but we also want to make sure that you’re living a life worth living, you’re enjoying as much as possible your time. We talk about, yes, physical health, also mental health, relational health. There was a giant study that just came out this month, an 85-year-long study by Harvard that talked about the number one thing that makes us happy in life and helps us live longer. It’s guess what. Solid relationships. That’s an aspect of it as well.

Kevin Gaines (04:37):

It’s difficult, Stephanie, to figure this stuff out because you may do everything right and still find yourself in a less-than-ideal situation. There’s a TV show, and it actually got rebooted a couple years ago, called All Creatures Great and Small about an English vet up in North Yorkshire. And it’s got a couple characters in there. It’s based on real-life characters. The one character in real life dies by suicide. He was in his 80s. And what had happened was his wife was dead, all the other real-life characters in the book of who he was close with, a younger brother and best friends, they were all dead. He was basically alone and didn’t want to deal with it anymore. He figured, hey, I had a good run. It’s depressing as hell to think about. But I hate to say it, we love talking about how to spend the retirement money doing fun stuff, unfortunately, yes, we do have to talk about some of this downer stuff that nobody enjoys talking about. Hell, I hate bringing this up when talking with clients, but it is important.

Stephanie McCullough (05:54):

Yeah, yep. It’s part of the work that we have to do, having frailty, the possibility of needing care, cognitive decline, loneliness. And we heard certainly since the pandemic loneliness has hit epic proportions and elder abuse, which happens a lot more frequently than we want to think about.

(06:16):

Going back to an earlier episode, we talked about a structure for thinking about one’s needs in retirement. And we referred to our friend Dr. Wade Pfau, who’s an excellent retirement researcher. And he talks about the four Ls. When you think about your retirement needs, segmenting them into these four categories. And the first of the Ls is longevity, by which he means having the ability to cover your basic living expenses for as long as you’re going to be around. And that’s the big unknown piece of that L. The other Ls being lifestyle, which is living the life you’d like to live as opposed to bare bones. The third one is liquidity for the unexpected expenses, which might mean healthcare expenses, needing long-term care expenses, and then legacy if it’s important to you to leave money behind. That was episode five. But that ties it in here too. You can’t separate the health and the wealth. The money stuff impacts our health, the health stuff impacts our money.

Kevin Gaines (07:21):

As you may have seen from my name that I have a few letters afterwards, one of which is R-I-C-P.

Stephanie McCullough (07:27):

What does that stand for?

Kevin Gaines (07:28):

Retirement Income Certified Planner. And in the training, to get that certification, one of our base materials was something called the 18 Risks of Retirement. And in looking at those, easily seven or eight can be connected to the risk associated with living longer than planned or aging. It’s definitely not just this, yeah, as long as I get the number close, I’ll be fine. There’s a lot of other things associated with it to be aware of. Like you were already saying, Stephanie, elder abuse, nobody thinks about, frailty risk. Nobody thinks about this stuff.

Stephanie McCullough (08:17):

Unless you’ve had a family member go through it, probably.

Kevin Gaines (08:19):

Exactly. One trend you may have noticed with the guest we’ve had on talking about the different issues is they’ve been through these things, so they have not just knowledge, but the experience to say, “This is how it looks, both good and bad. But this is what we’re going to be dealing with, and here’s some hints to maybe be a little better prepared because benefit from our experience.”

Stephanie McCullough (08:51):

And several of them, like Mim Senft from our just previous episode, episode 61, created a whole service and a solution to help others going through a situation that she saw. One of the things I find so fascinating is that our life expectancy has gone up significantly over the past, I don’t know, let’s say century. It’s definitely increased, and yet so many of our cultural norms and expectations have not. When the social security system came out and retirement age for social security purposes was 65, average life expectancy was lower than 65. And now it’s, what, in the mid-80s, right?

Kevin Gaines (09:33):

Right.

Stephanie McCullough (09:34):

And yet we’ve still clung to that idea of, oh, retirement is at 65. Well, of course we’ve got to have more financial resources if, quote, unquote, “retirement” is going to last longer. Kevin, years ago, you and I went to a conference, and there was a woman from Stanford; I think it might have been Laura Carstensen from their Center on Study of Aging. And she talked about how, “Hey, science has given us so many more years of life. Isn’t it interesting that we chose to put them on the end?” And that one blew my mind a little bit. I’m like, right. Just because the whole lifespan’s longer doesn’t mean old age is longer. Maybe we need to readjust some of our thinking.

Kevin Gaines (10:18):

And part of it is the government’s fault.

Stephanie McCullough (10:20):

True.

Kevin Gaines (10:20):

Let’s blame the government. That’s always fun. Medicare, 65. Social security starting at 66, 67 depending on your age. You can start withdrawing from your IRAs and 401K without penalties at 59½. In many ways, the tax code is setting us up to start retiring mid to late 60s, but chronologically it’s not necessarily the best starting point.

Stephanie McCullough (10:51):

One of the things that we have to go through with our clients when we’re coming up with this financial plan, action steps to try to set yourself up to have enough for as long as you’re going to be around. We have to make some guesses about how long you might be around. When I heard about a recent study from a professor at Wharton and a professor at the Hebrew University of Jerusalem, it’s called the Financial Regret at Older Ages and Longevity Awareness. This really struck me because it lines up a lot with what we hear when we talk to clients.

(11:23):

They conducted interviews with like 1,700 people over the age of 50, and they discovered these giant numbers. 57% of people regretted not having saved more money, 23% of people regretted not claiming social security benefits later, 37% regretted not having worked longer, and there’s some others. 33%, not having some kind of lifetime income payment. But the cool thing that really hit me was the researcher’s hypothesis on why. They believed that the reason for the under-saving for retirement was that people really didn’t understand how likely they were to live a long time in retirement. The fact that we’re underestimating our own life expectancy leads us to make decisions that we might regret down the road.

Kevin Gaines (12:21):

And again, I’ll blame people other than ourselves. I’ll blame popular media for part of this because you hear, say, “Oh, life expectancy is 70-something point something or another.” The problem is that measure is based on everybody who was born. If you’re thinking of retirement, you’ve survived childhood issues, you’ve survived the stupidity of your youth or unluckiness or what have you. If you’re 65, how long are you going to live? And the numbers go up a little bit every year, except recently because COVID skewed the numbers, but the trend is still intact. If you’re a man, you’re going to live on average 84.3 years. And if you’re a woman, 86.6. But here’s the problem with focusing on that number is the word average. By definition, over half of us are going to go above that number, whether it’s one day – whether it’s one day above or 30 years above, we don’t know, but half of us will be above that number.

Stephanie McCullough (13:48):

I want to make sure we get this right. You’re saying if a woman is 65 years old today, average life expectancy of a 65-year-old woman is how old?

Kevin Gaines (13:56):

86.6.

Stephanie McCullough (14:00):

86.6. That’s, what, 21½ years? And half of them will live longer than that. When we get to the point in the financial planning software where we have to make some guesses around life expectancy, so many people say, “Oh, I don’t want to live that long.” Well, okay, that’s nice. Someone’s going to. What do you mean you don’t want to?

Kevin Gaines (14:24):

Let me put it another way. From the same series of statistics, one in four people are going to reach 90 years old, one in 10 are going to go over 95. Now, you may easily say, “Oh, hell, that’s not going to be me.” Well, hell, let’s take me for example. I don’t think I’m going to do it; way too much red meat, way too many cigars, and more than a healthy amount of bourbon, and not the greatest exerciser in the world, but still 10% chance I may do that. Fine. You know what? People buy lottery tickets. Hell, I buy lottery tickets with worse odds than that. But if you’re not planning to live that long, you still got to account for the possibility, “Hey, I might be underselling myself.”

Stephanie McCullough (15:16):

There’s a really fun website. Well, it might be fun or not, depending on how you take it, but it’s called livingto100.com. And they ask more questions. The stats that Kevin just reeled off were, again, the averages of all women age 65, all men age 65. But what this website does is asks things like your lifestyle and do you smoke? And where do you live? And your level of education. Because once you get into more stratified statistics, the numbers maybe skew even further. Yes, the numbers can be quite sobering. And it is, it’s still a puzzle because we don’t know for sure that you’re going to live that long, but once you get out there, you’ll be happy that you made some provisions for that possibility.

Kevin Gaines (16:02):

Okay. All right, the horror part of the show is done. Now we come to the solutions. Unfortunately, it’s still a little intimidating because there are no hard, fast, guaranteed success tools here.

Stephanie McCullough (16:22):

No, never any guarantees.

Kevin Gaines (16:24):

And even the tools that you do use are going to have… there are very few free lunches in this subject. Wouldn’t you agree, Stephanie?

Stephanie McCullough (16:34):

Oh my gosh, completely, completely. There’s always trade-offs, and you have to make the most informed ones you can. And we don’t want to live 100% for the future, we want to enjoy our lives at the moment too so it’s always a balancing act. The first one might sound self-evident, but I think start to accept that, as a society, we are living longer. Maybe start to adjust your frame of reference that you might be around into your late 80s, into your 90s, into your centenarian years, that Willard Scott in his day might have announced your name on television as living to 100 or more. Even that subtle mind shift can make a big difference into how we see today and how we see our actions and the impact they might have down the road.

Kevin Gaines (17:21):

Well, Stephanie, actually, that was a great point, or it reminds me of a great point talking about Willard Scott. I remember in the beginning when I first saw Willard Scott, every couple days there was somebody turning 100. Then it was every day somebody was turning 100. And then by the time the man retired, I think they did at least two or three every day. And not everybody wrote in to Willard Scott. Just anecdotally, you can see this trend. If no other way, then rely on the original Ronald McDonald to explain to you how long people can live.

Stephanie McCullough (18:03):

Huh?

Kevin Gaines (18:04):

Willard Scott was the original Ronald McDonald.

Stephanie McCullough (18:08):

You mean he dressed up in the costume with the clown makeup and everything?

Kevin Gaines (18:12):

Yeah, he was the original pitchman.

Stephanie McCullough (18:14):

I did not remember that. No wonder he wanted to make people happy.

Kevin Gaines (18:19):

Okay, accept that you’re living longer, you may want to make sure you’re enjoying living longer. Look after your health. Again, seems obvious. And again, based on what I said earlier, maybe hypocritical coming from me, but make sure you get out, get a little bit of exercise, eat a little healthier, just move around. It’s amazing how much the little things will contribute to improving your health, the quality of your health.

Stephanie McCullough (18:55):

What do they say? It’s not the big thing you do one day, it’s the little thing you do every day?

Kevin Gaines (18:58):

Yes. You can find different things on the internet. And yes, anything you find on the internet, always take a grain of salt. But a couple articles I’ve seen here lately, they’re talking about micro exercise. Instead of doing a big 20, 30, 45-minute session, just get up and walk 10, 12 times around the house or around the office or just up and down the street, and that is going to make positive changes into your health.

Stephanie McCullough (19:34):

Well, and we’re certainly not fitness experts. This is not what we do for a living. And yet one of the things I saw was when you stand up from your chair… Kevin and I lead very sedentary lives. We spend our days in a chair in front of a computer. But when you stand up, stand up and down 10 times. Each time you stand up, that’s good for your flexibility, that’s good for your mobility, it’s good for your muscles. All of that is a good thing. Parking that further spot from the parking lot, we’ve all heard these things, it’s the doing of them that makes the difference.

(20:06):

Looking after your health is certainly important. The other thing is we touched on a little bit the problem of loneliness, the problem of having relationships and support around you. And that’s one of those things that takes time to build. You want to think about it ahead of time. You can’t just wake up one day and say, “Oh shoot, I need friends. I need people.” That might include things like where you’re going to live, it might include just forming relationships, heck, joining a club, finding some community of people that does things that you’re interested in. But it’s one of those things you have to invest in along the way for it to pay dividends. Oh no, now I’m using investing metaphors for talking about having a community of people around to support you, both your emotional needs, but also potentially other needs.

Kevin Gaines (21:03):

That doesn’t sound like a whole lot, but I’ll tell you what; I’m actually working with a client right now to try to figure out how he can afford a slightly higher rent at his current apartment complex because that’s where his friends live as opposed to having to move even just a few miles down the road and not have that immediate network. And good news is it’s going to work out that we’re going to make a tweak here and there and it’s going to happen. But it sounds minor, but this is the stuff that makes life worth living.

(21:38):

What can you do now before you’re running around trying to figure everything? Elder care planning, it’s got a big fancy title. But we had Cathy Sikorski on, and she was talking about a lot of this stuff, getting your documents in place, updated, making sure people know where to find them. Again, talking about Mim from our last podcast, she too was talking about this. And the service they do helps you get all this stuff together. And while this, in particular, may not give you long life, it’s definitely going to remove stress, which doctors have been telling us for how many decades now? Definitely will shorten your life, so take that under advisement. Think about what you want to do under these different situations. Think about how you’re going to handle when you need care, you need the nurse to come in to visit, or if you have to go to a rehab facility or something like that, how is it going to be paid for? Might be as simple as understanding how Medicare… And whether it’s Medicare Advantage or Medigap, how all that stuff fits into the plan. Or do you need additional resources? These are all part of those conversations. And I know you have a lot of these conversations too, Stephanie.

Stephanie McCullough (23:04):

Yeah, I do, that’s for sure. So the name of our podcast is Take Back Retirement because we want to redefine the term. We think this old-fashioned notion of hanging it up at 65 and doing nothing for the rest of your life, it’s not really pertinent at the moment, and so many of the people we talk to are interested. Well, this is a part of thinking about your longevity too. Even if you are going to say goodbye to your main career somewhere in your mid-60s, is there a way that you can plan for now or at least plant the seeds that you can stay active, that you can stay fulfilled, connected, and hopefully maybe even earning some money down the road into the future? Because whenever we do this financial planning and our projections, any dollars coming in after, quote, unquote, “retirement” extend the life of the, quote, unquote, “plan.” Increase the likelihood that you’re going to have enough. Because $1 coming in that you’re earning is $1 of your own that you’re not spending. If I’ve got $10,000 coming in, that’s 10,000 less I have to pull out of my assets in any given year. Are there some other income sources that you could look at? But again, not just for the income, for the connections, for the activity, for the fulfillment, for, heck, use using your brain.

Kevin Gaines (24:28):

Yeah. Hell, I’ve made this reference before; part of my retirement plan is, at least the intention anyway, is to work at a golf course after I retire, be one of those course rangers or starters. It won’t be a whole lot of money. It’ll get me out of the house, which will keep me alive longer because my wife will be less likely to kill me. But also, you get out in the air, you get to engage with people.

Stephanie McCullough (24:54):

Get that vitamin D from the sunshine.

Kevin Gaines (24:57):

And hopefully you get a discount on green fees.

Stephanie McCullough (25:00):

There you go.

Kevin Gaines (25:01):

There you go. Reducing expenses, increasing health and activity. What could go wrong?

Stephanie McCullough (25:07):

I want to see you driving that little cart with the cage on it that picks up the balls on the driving range and everyone’s aiming at you. I think that’d be-

Kevin Gaines (25:15):

Hey, you know what? That actually sounds like a lot of fun. That’s some of the softer stuff, but some of the dollars are also going to help. First and foremost, social security. Think through before saying, “Oh, I’m definitely going to claim it at this age.” It may not be the best plan and it may not be the best plan for your spouse. Keep that in mind. It’s not just you who may live a really long time, what if your partner does? And what if they depend on your social security benefits for part of their retirement plan? The nice thing about social security is you get that widow benefit, meaning when the higher earner dies, the lower earner gets to step up to that dollar amount.

Stephanie McCullough (26:15):

See episode 15, What Women Need to Know About Social Security.

Kevin Gaines (26:18):

Right. And if you delay by six, 12, maybe even three years, the claiming those benefits-

Stephanie McCullough (26:25):

12 years?

Kevin Gaines (26:27):

12 months, let’s go with 12 months. Well, you could delay 12 years. It doesn’t make a whole lot of sense, but I did mean to say 12 months. Anyway, it is a bigger benefit and you may not be around to collect it for a very long time, but your partner might be, and that can be a big help in this situation that we’re talking about here.

Stephanie McCullough (26:50):

Heck, even if you don’t have a partner, remember that social security is one of those few income sources that has an inflation adjustment on it. And the higher the number you start with, the higher it’s going to get going forward when you get that inflation adjustment each year.

Kevin Gaines (27:06):

Right. Just look at the recent headlines from back in the fall. Sometimes those cost of living adjustments can be quite tasty, shall we say. Yeah, so don’t dismiss. And let me just say it one more time just for effect; cost of living adjustment is a huge benefit when we’re talking about retirement. Most everything else we’re talking about is this pot of money that maybe it grows because of good investment choices, but that can also go down. Social security guaranteed income with a guaranteed adjustment because of inflation.

Stephanie McCullough (27:46):

Hard to beat.

Kevin Gaines (27:47):

You’re not going to find that many other places, which is why it’s the base of any type of retirement income strategy that we’re working with clients on. Social security is probably the first thing we always look at, I believe.

Stephanie McCullough (28:01):

Yep, yep. And the same time, social security is not going to cover all of your needs. It was never intended to be one’s only source of retirement income. Hearkening back a little bit to episode three, Turning Your Retirement Savings Into Retirement Income, one of the next steps you want to look at is looking at your assets, like the things you have saved up, for your financial accounts. You want to think about diversification. And normally when we talk about diversification in the investment standpoint, we’re saying you don’t want to own only stocks, you want own stocks and bonds. And you don’t want to only own stuff in the US, you want to own US and international. But I’m also talking about, in this case, diversifying your assets by the risks they’re designed to address. Kevin made a mention of those 18 retirement risks. And Kevin, we really need to do an episode on that. But one of the risks is longevity. And a pot of money in your 401k might not be the best thing designed exactly to address longevity. See our episode on annuities that we just did.

Kevin Gaines (29:09):

Episode 60.

Stephanie McCullough (29:11):

Not saying it’s a loose solution for everybody, but it’s something to think about. And you never want to put all of your assets in that type of thing. But understanding the mix that you’ve got, a mix of tax treatments, a mix of how you get the money out and when and the behavior and whether or not they’re connected to the investment markets is an important piece of the puzzle.

Kevin Gaines (29:36):

Yeah, I was just thinking of it like this. The more tools you have, the more different variations of where you’ve parked your money, the easier it is to just, as tax laws change, as your situation changes… I’ll tell you, we had a situation several years ago; a client on the advice of her attorney made rather large gifts to her children and grandchildren because, hey, there was minimal estate taxes and she had a lot of money. And it was a good decision at that point, she was already in her 90s, but longevity kicked in. She lived to 108. And that last year, year and a half, we were watching the dollars a little bit closer because her expenses were going up and she didn’t have as many resources. This is the flexibility that we’re talking about, annuities. Like you just mentioned, Stephanie, yes, guaranteed income is a wonderful thing, but it does subtract from that one L, liquidity, that money, in most situations, is going to be tied up. It’s not available as you need to adjust your situation, for example. That addresses a lot of the income… or some of the income possibilities. But Stephanie, there’s also ways to protect you on the expense side, correct?

Stephanie McCullough (31:08):

Yeah.

Kevin Gaines (31:09):

Especially if health declines.

Stephanie McCullough (31:11):

Yeah. One of the things that I think everyone should have a plan for is long-term care expenses because the statistics show the majority of people are going to need some type of care. And if you’ve got someone in the home to provide care for you, that’s great, but, as we talked about, again with Mim, no one can take that job on 24/7, so chances are you’re going to need some type of paid care at some point. And most of my clients are women on their own, so there isn’t a default caregiver in the house. Thinking about that potential need for care and how to cover the expense is an important piece of the planning process.

(31:54):

And we’ve got to look at long-term care insurance. I’m not saying everyone has to buy it, but everyone should look at it and understand the options and see if it makes sense to include that in the overall plan. Again, it’s designed to address a particular type of risk that can blow up the plan. That’s what insurance is for, to cover the things that could financially devastate you, and long-term care is certainly one of those.

Kevin Gaines (32:18):

At the end of the day, when it comes to insurance, none of us ever want to use it.

Stephanie McCullough (32:22):

Yeah, totally.

Kevin Gaines (32:23):

But when it’s there, it’s a big assist. I know we probably didn’t give you a whole lot of great answers today, but that comes with the topic… is there’s not a whole lot of great, simple answers, but hopefully, we got you thinking about what this could look like. And hopefully, you’re asking the question, “Have I thought about this? Shocker, what if I’m wrong on one of my assumptions?”

Stephanie McCullough (32:56):

Yes. You always got to think about that. How long might I actually live? And how do I want to live? How do I want to live when I get there? What can I do today that my future self will thank me for?

Kevin Gaines (33:09):

And really, at the end of the day, that’s what we want our future self to say, “Hey, I didn’t completely screw up everything, I did some things right.” At least, that’s my philosophy.

Stephanie McCullough (33:21):

“Thanks, past me!” Well, hopefully, as always, we’ve given you a little food for thought. We’ve given you some questions to ask, because remember, you don’t have to know the answers, you have to know the questions to ask and have the guts to ask them. Thanks so much for being with us. We’ll talk to you next time. It’s goodbye from me.

Kevin Gaines (33:37):

And it’s goodbye from her.

Stephanie McCullough (33:41):

Be sure to subscribe to the show, and please share it with your friends. Show notes and more information available@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 (33:56):

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.