Help Me Retire Podcast - Episode 27

Live long and prosper

Show notes:

Here’s the good news... you’re probably going to live longer than you think... almost certainly longer than your ancestors...

The challenge is... keeping your finances... your health... your independence strong for as long as you live?

Some insights... in this episode of The Help Me Retire Podcast...

This is the Help Me Retire Podcast… with your host… Mike Brown… Senior Wealth Advisor with Raymond James Financial Services… and head of Brown Family Wealth Advisors…

Mike is the best-selling author of Your Way to True Wealth: How to Make It Happen, Make It Last, and Make It Matter…

He and his team have been helping clients pursue their dreams of financial independence for the past 30 years… and in the Help Me Retire Podcast… he’ll share his best ideas with you…

And now… here’s Mike…

This episode is not about adding years to your life... science... technology... and clean living are taking care of that...

Today... we’re talking about adding life to your years... with a longevity plan...

When we think about retirement... most people plan for about a 20-year window... retire at 65... and planning through age 85...

But longevity statistics tell a different story...

According to research at RBC Wealth Management and Capital Group... for a married couple in their mid-60s right now... there’s about a 50-percent chance that one of them... will live past age 90... and there’s a very real possibility... that at least one of them will reach 95 or beyond...

Do the math...

That means your retirement could last 30 years or more... for many people, that’s longer than their working careers...

Now, the financial industry calls that... longevity risk...

But I’m one of those glass-is-half-full people... I prefer to think of it as a... longevity opportunity...

Because living longer is only a risk... if you’re unprepared...

So, today... let’s break it down into three areas...

Financial longevity... helping to sustain... your income... and your nest egg... for potentially decades to come...

Health longevity... maintaining your body and your brain... so you can enjoy all you’ve worked for...

And lifestyle longevity... staying connected... purposeful... and adaptable... as life changes...

Most retirees may focus too much on the first one... their money... and ignore the other two... but all three of them are connected...

Good health helps reduce costs and gives you freedom...

A fulfilling lifestyle supports mental sharpness...

And strong finances may help make it possible to live longer... and live better...

One of the biggest mistakes we see in our practice... is how people perceive... “average live expectancy”...

They look at that number and say... okay... I need to make sure my money lasts for the rest of my... average life expectancy...

But you understand what average means...

It means you’re just as likely to live beyond that number... as you are to die prematurely...

And if you’re one of those lucky people who do live longer than average... well... now you could be looking at an income gap later in your life... right when it’s hardest to adjust...

So, when we build financial plans... we begin with the assumption that you might live into your 90s... and then we want to make sure you’re financially equipped if you do...

The goal is to help make sure that no matter how long you live... that you may not outlive your income... or your sense of financial independence...

Longevity planning starts with a mindset...

Instead of asking... “what if I live that long?”... ask... “what would I want life to look like if I do?”

That simple shift turns longevity from something you fear... to something you embrace...

Now, let’s get practical... how do you design an investment portfolio... and an income plan... to last for decades?

Remember this: When you retire... the game’s not over... it’s halftime...

And retirement isn’t a finish line... it’s a transition... into something that could... and should be even better...

That transition needs an income plan that adapts over time... and here’s a seven-step process to create one...

First... your income plan needs to be... dynamic... not static...

The way you spend money in retirement... will evolve... higher in the early go-go years... more steady in the slow-go years... and probably rising again late in life... which some refer to as the no-go years... as healthcare costs increase...

So... think about your finances in three key components...

You’ve got your current income sources... Social Security... pensions... maybe rental income...

Then there’s the portion of your investments I call... the Reserve...

This is where we escrow the next five to ten years’ worth of planned spending... in high-quality fixed-income investments...

The Reserve... is your buffer...

And then there’s the Equity part of the portfolio... long-term investments designed to outpace inflation... and create a rising stream of income that you’ll use to replenish the Reserve as you withdraw from it...

The Reserve will give you confidence to spend money from your portfolio... even as markets fluctuate... because you’re not being forced to sell stocks when they’re down... to fund next year’s expenses...

Step Two... adjust everything for inflation... the silent risk...

Many retirees underestimate how much inflation can hurt them over the rest of their lives...

Even a modest 3-percent inflation rate... will cut your purchasing power in half over 24 years... so the longer you live... the more it’s going to affect you...

To protect against it... your portfolio needs to be generating a dependable... rising stream of income...

Step Three... understand something called sequence-of-returns risk...

The first few years of retirement... when you begin drawing investment income... can actually determine how long your money lasts...

If you get poor market returns in those first few years... withdrawals can compound your losses...

That’s why we have the Reserve... enough money to last you five or ten years... without having to sell stocks at the worst time...

Step Four... Social Security optimization...

Social Security is one of the few income sources that increases with inflation... and lasts for life...

The longer you live... the more sense it could make to postpone Social Security benefits to help get additional increases...

But in some cases... it might sense for one spouse to draw earlier for income balance... while the other delays to help maximize the couple’s long-term security...

We can help you make that decision... based on which combination works best for your situation...

Step Five... you’re going to need a good long-term tax strategy...

Taxes don’t go away just because you stop working... and if your retirement lasts 30-years... how you manage your tax brackets can make a big difference...

Look at strategies like... Roth IRA conversions... sequencing withdrawals... maybe qualified charitable distributions... or QCDs... all designed to help reduce taxes on your required minimum distributions in the future...

Step Six... don’t neglect long-term care planning...

The cost of extended care late in life... can derail even the best-laid retirement plans...

You’ll need a care funding strategy... whether it’s long-term care insurance... hybrid life insurance... or a plan to self-insure if it’s feasible...

And finally... Step Seven in your longevity plan... keep everything current...

Review your plan annually... and re-run the numbers anytime a major life event occurs...

Don’t think of longevity planning as a one-time decision... it’s a series of small course corrections that keep everything in line over time...

Let’s start wrapping up this episode... by talking about... the human side of longevity...

Having lots of money might make you rich... but in truth... it’s not what makes life rich...

The third and final piece of your longevity plan... is about staying connected... purposeful... and prepared... for the later chapters of your life...

A 2023 report from the U-S Surgeon General has identified something that can shorten your lifespan in retirement... as much as smoking 15 cigarettes a day...

Do you know what it is? It’s loneliness and social isolation... true...

Purpose, on the other hand... can add years...

So that question becomes... once you stop working... what will give you a reason to get up in the morning?

For some, it’s volunteering... or mentoring...

For others... travel... learning... faith... or family...

A good longevity plan includes an emotional... and a social plan... not just a financial one...

So... who are the people you most want to stay in touch with?

What activities give you a sense of growth and contribution?

What does a great day look like... ten years from now?

Your answers to those questions... help shape everything from your spending priorities... to your charitable giving... even your healthcare decisions...

Now... speaking of health...

Longevity also depends on maintaining your health... and not just your physical condition...

Cognitive decline is one of the biggest threats to independence later in life...

That’s why we need things like trusted contacts... and powers of attorney in place... people who can step in should you ever need help managing financial and other decisions...

It’s not about expecting the worst... it’s about building a safety net that protects your dignity... and your wishes...

We also encourage our clients to think proactively about housing and lifestyle...

If you love your current home... how will you make it... age-friendly?

If you plan to move somewhere... what community features matter most to you?

It’s easier to make those decisions early... when options are plentiful and emotions are calm...

A strong longevity plan also prepares your family... again, not just financially but emotionally...

Give them access to the information they will need one day...

Where your documents are stored... who your advisors and decision-makers are... and what matters to you... in medical and financial decisions...

Having those conversations early... when there’s no deadline... can help you avoid confusion later... and gives everyone a better feeling...

And finally... I’ve said this already... longevity is a... mindset...

Most of the truly happy retirees we know share one thing in common... a sense of gratitude...

They see their long life not as something to manage... but as something to celebrate!

They view money as a tool for freedom... not control...

They use their time for what matters most... family... learning... giving... living fully...

So, what’s your longevity plan?

It’s more than an age... more than a number...

It’s the sum or your finances... your health... and your frame of mind... all working together to help you live life your way... for as long as it lasts...

Forgive me if you’ve heard me say this... it’s on the last page of my book... Your Way to True Wealth... and so many of you mentioned this to me since you read it... It’s my wish for you...

May you wake up every morning with something to look forward to... spend each day learning something new... and go to bed each night... with one more thing to be thankful for...

Such is the meaning... of True Wealth...

I’m Mike Brown... thanks for joining me today on... Help Me Retire...

Until next time... here’s to your health... your wealth...

And your longevity...

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Securities offered through Raymond James Financial Services, Inc., member FINRA/SIPC.

Investment advisory services are offered through Raymond James Financial Services Advisors, Inc.  Brown Family Wealth Advisors is not a registered broker/dealer and is independent of Raymond James Financial Services.

Any opinions are those of Mike Brown and Brown Family Wealth Advisors and not necessarily those of Raymond James. This material is being provided for informational purposes only and is not a recommendation. There is no guarantee that these statements or opinions will prove to be correct. Investing involves risk, and you may incur a profit or a loss regardless of the strategy selected. Past performance is not indicative of future results. Prior to making an investment decision, please consult with your financial advisor about your individual situation.

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