0:00:00 - Speaker 1
Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra, sipc Advisory Services through Cambridge Investment Research Advisors Inc. A registered investment advisor Cambridge and Greenway Wealth Advisory are not affiliated.

0:00:20 - Speaker 2
It's time to dive into some insider secrets of investing and retirement planning. To make your retirement as smart and as elegant as possible. This is Money Chic with Sherry Rash.

0:00:31 - Speaker 3
Hey everybody, welcome into the podcast. Thanks for hanging out with us here. On Money Chic with Sherry Rash, we're going to talk about income planning this go around and of course the idea of the podcast is to get some insider secrets about women and money and just hopefully help you along the way towards your retirement and financial goals With Money Coach Sherry Rash from Greenway Wealth Advisory. Sherry, welcome in. How are you?

0:00:52 - Speaker 4
Doing great. How are you?

0:00:53 - Speaker 3
Doing pretty good. We were just chatting right before we started that we both have gas, but we weren't aware of the gas shortage at the time, or I guess the issue at the time we're taping this podcast. We've had these. I guess these hackers cause some issues to the pipelines and that's made for some interesting panic buying here around the area, at least recently.

0:01:10 - Speaker 4
Yes, giving flashbacks to the toilet paper crisis of 2020.

0:01:15 - Speaker 3
Yeah, exactly, I think you'd said you think we would learn something, but you know what? I guess that's kind of silly on our part to think that, because what? Every time there's a snowstorm or something like that, right, people run to the market and they buy everything of everything, right, all the milk, all the eggs, you know stuff like that.

0:01:30 - Speaker 4
To make the French toast, exactly Exactly no bread, eggs.

0:01:33 - Speaker 3
Cause you gotta have. Yeah, you have to have that, apparently, for every snowstorm, so anyway. So I hope you're doing well and I hope our listeners are doing well, and we're going to talk about income planning this week on the podcast, as I mentioned, so let's just jump right in and start talking about it. It's been said that if you don't have an income plan, you don't really have a retirement plan. Do you agree with that statement?

0:01:52 - Speaker 4
I do, I do. When people think about retirement, they think about all the fun stuff they're going to do, or all the stuff they're not going to do anymore, which is the way it should be. You should be thinking about the fun things spoiling your grandkids, traveling to places you've dreamed about, playing golf three times a week, enjoy not being tethered to your cell phone or computer. That's what retirement's about. But people seem to forget that you do need a plan to finance all of those awesome things. And people retire usually with a pile of money, and retirement and this pile of money are, I feel like, almost treated in as two separate islands. So I have this pile of money on money islands and I want to retire. And now what? So a bridge needs to be built between the two, and usually most people, I think, are missing that bridge.

0:02:46 - Speaker 3
I like that. I want to go to Money Island. Can I get some tickets to go? All right now? This is probably going to be hard for you to do exactly, but just think about your current clients and try to remember when they came into your office for the first time, maybe when you started to initially help them. What percentage would you ballpark it for us of those folks had a true income plan the first time they came to see you?

0:03:08 - Speaker 4
It's easy, zero Zero.

0:03:10 - Speaker 3
OK, because we have a collection of stuff right and we don't really know what to do with that stuff, kind of like you said a minute ago, kind of that pile of money. We often have a collection of these things we've accumulated through life maybe some life insurance, maybe a 401k account, maybe an orphaned one from a prior job or whatever and we just kind of have this basket of goodies and we go how do I use this?

0:03:29 - Speaker 4
That's exactly right. If the client felt that they had a true income plan, they probably wouldn't have come into my office to begin with.

0:03:37 - Speaker 2
Fair point.

0:03:39 - Speaker 4
So you're right, we have all of these things, all of these accounts, these items, these insurances and they're kind of these puzzle pieces scattered about, and really what I view myself as an advisor is putting all of those pieces together and what I find is that when clients are entering retirement or thinking about retirement, they don't really know how much income they're going to need. They don't know where it's going to come from. They know it's going to come from something, one of their accounts or piles of money that they have, but they're not exactly sure where it's going to come from or what that process would look like. They may have an idea of when they're going to take Social Security, but even that we need to discuss. I just can't take their word that they know when they're going to take Social Security and that's what it's going to be.

0:04:27 - Speaker 3
Sure, yeah, yeah. Well, a lot of times we you know we were just talking about the gas situation we panic by a lot of things and social security almost kind of falls into that category, from what I've seen over the years as well as people think, well, I'm 62, I can turn it on. I best go ahead and turn it on, right Versus? Is it actually the right time? Is it the effective time for your strategy? Maybe it is, maybe it's not, but I think we tend to lean towards that. Let's just do it now, while we can.

0:04:54 - Speaker 4
Hey great. I agree, Social security can actually be almost an emotional topic. People look at it as that's my money, I want it back. I've been contributing to it for my entire working life and now it's time for me to get mine back. And they so they may just think well, and it's been ingrained in us to hear 62, I can start taking social security at 62.

So I'm going to and it's not talked about of well, it might not make sense. Yes, I understand you want your money back at 62, but could it be worth it to wait a few more years to get potentially more of it back, or also have more of it back for you, but also for your spouse potentially? So it is an emotional topic, definitely talking about social security.

0:05:41 - Speaker 3
Well, and we'll definitely spend more time on that down the way, but for today we're going to. I'm going to circle it back to the income planning conversation that we're doing, and that's part of it as well, obviously. But why do you think so many people are unprepared? We were. I was just asking you about the percentage. You said it's easy at zero. Why do you think so many of us are unprepared in the arena of retirement planning? Just the lack of? Well, we don't do a very good job in our educational system of teaching folks about money.

0:06:04 - Speaker 4
Anyway, I think it's because no one talks about it. Most people were raised thinking money, talking about money, as taboo, and one of my missions is to stop that type of thinking. I'll give you a perfect case in point. Just this weekend, my husband and I we hire a landscaper to cut our grass, and they're not super reliable. Sometimes they'll show up at the very inconvenient Saturday afternoon when we're trying to enjoy our backyard, or sometimes they don't come at all, but they're cheap. So our pro con is well, they're really cheap, but we don't necessarily get our grass cut every week when we expect it to.

So both of our neighbors and this totally is relevant, I promise to both of our neighbors use the same landscaper and they come every Wednesday evening, cut the grass for both their lawns and then they move on and we're like, oh, should we really? Maybe we should go over to them, knowing it's going to be a lot more expensive. My husband said, well, do you think I can ask our neighbor how much they pay? Is that weird? So why not? Why can't you ask? It's not personal, it's sure yeah it's just a question.

It's landscaping affects everyone, so why not? And I think most people are very uncomfortable talking about money or money topics in general, because that's, I think, been ingrained in us. But I'd like to make it a point to stop that. I don't think that you should talk about how much money you make at the neighborhood barbecue or how much you have in your 401k at happy hour, but money things that affect everyone I think are fair game to talk about. And social security, like we mentioned, affects every single American. Retirement affects every single person. So just by bringing up the fact of, hey, now I'm retired and I have to pay myself instead of having a paycheck come from my employer, that can be a very simple conversation and easy conversation amongst friends. To you know, talk about retirement. He's not. You're not talking about how much money you're paying yourself or how much money you did make, but talking about stuff like that can actually help people because it gets their thoughts out there and gets someone thinking about something that maybe they never thought about before.

0:08:23 - Speaker 3
Very true, although the idea of everyone talking about their 401k at happy hour could make for an interesting happy hour, that's for sure.

0:08:31 - Speaker 4
All right.

0:08:32 - Speaker 3
So what are some steps that folks should take to put together an effective retirement income plan? What are some of the categories? Or give us some bullet points, if you will.

0:08:40 - Speaker 4
So I think, when you're creating a retirement, an effective retirement income plan, I explained to every client that there's three risks of retirement. There's sequence of return risk, which I define as retiring at the wrong time when it comes to the market. So think about 2008. Think of March of last year, those people that retired at that point in time not only was it a volatile time in our country, but also a volatile time in the market. So they could have seen their money disappear by about 20%. And I think when people retire, they mostly think about that. They mostly think about what the market's going to do when they retire. But there's also inflation risk. Stuff just costs more. $100 at the grocery store today will not buy you the same amount of stuff 10 years from now or 10 years ago, yeah, and we're seeing inflation right now, for sure.

Exactly, exactly. And healthcare has huge inflation as well. It's about 6.7%. So that's something else you need to think about with retirement income planning. And also longevity risk living longer than your money. People are living longer, which is awesome, but that also means your money needs to last as long as you do. And then, lastly, the threat of retirement income are taxes. We're in a low tax environment right now. When you're low, there's only one place to go, and that's up, so accounting for taxes is also very important when it comes to retirement income planning, and these are the pillars of income planning and retirement planning that you're talking about here, sherry, and so all these pieces have to come together.

0:10:22 - Speaker 3
You said earlier, puzzle right? You take these different pieces and you build the puzzle. So I think that's a great way of looking at that. That's how most of us, hopefully, are looking at it, and we've obviously seen a very big DIY movement over the last couple of years. People are doing all kinds of things themselves, right, whether it's home flipping or whatever the case is. But it's also been the case in the financial industry and I think to a degree, technology has helped some of that. But when you're talking about the accumulation of wealth and just growing your nest egg, that is a little bit easier, in my opinion anyway, than the distribution phase, that preservation phase that is retirement. You've got all these things. There's a lot more moving parts and pieces to retirement than I think, just like the accumulation phase. Would you agree with that?

0:11:06 - Speaker 4
Absolutely, absolutely. A mistake people make, I think, is that when they become retired, they take their pile of money and they make it conservative, or they put it in the bank because they're thinking well, I need to be able to access this money, and that's not bad thinking. If you don't have inflation risk, longevity risk or taxes. You can bat sequence or return risk by doing that, because your money's not in the market anymore, but you leave yourself open to the other risks and threats to retirement income. So it is a very systematic approach you need to take when creating a retirement income plan.

The first thing is and this is usually one of the hardest questions that my clients need to answer is how much money do you need? Right? I? Almost every time I'm creating a retirement income plan with my clients they can't answer that easily for me and that it could be as simple as just looking at your household budget, which means they may not have had a household budget, which is okay, that's fine, but we need to know what we're solving for. So, by crafting a budget looking at past household expenses, will they stay the same? Will there be new expenses coming up that we need to account for? And it doesn't have to be set in stone, but we at least need an idea. We need to know, we need to have a starting point, and when we look at the money out going out, we then determine how much we need coming in, and that's the income that we're solving for.

0:12:43 - Speaker 3
Yeah, I heard us saying I thought was really good, the income is the outcome. I like that right, Because without the income your outcome is not going to look very good. Exactly, Exactly. We have to have those pieces.

0:12:55 - Speaker 4
And there's lots of ways to get the outcome, to get that income to the client. You have money coming in from many different places. We talked about social security, pensions, annuity income, if applicable, business income, rental properties. All that stuff's coming in to the household. So I call that the base income. It's money that when you wake up January one of every year, you know what's coming into you no ifs, ands or buts and then you have the money you need, the money you're striving to achieve, and usually there's a gap in between them, between your base income and the money you need. And that's where your investments need to solve for and that's what I help my clients to.

One not only maximize base income, but also social security. One is the best time to take it. Pensions usually have a few different payout options. If you choose single life, then when the pension recipient dies, the pension dies with that person. Is that okay? Or is it worth potentially receiving a few thousand dollars less a year to have that pension last for two lives? So that's all part of the retirement income planning process and usually, like you said it, with the DIY, if you're doing it yourself, you don't have a sounding board to ask you those questions or bring up those issues.

0:14:17 - Speaker 3
Well, I mean, I think the sounding board is a great way of putting that, sherry, because that's one of the key the relationship really is. The I think to me is the key factor in working with a financial advisor, financial professional, is because it gives you that person to bounce some things off of that you might not know yourself and you think, hey, this sounds like a great idea.

And then, of course, you can learn more about it and realize, oh, that was not a good idea. So I'm glad I didn't do that and you have that sounding board to help you there. So, as we wrap up the podcast this week here, do you have maybe a recent case or something you could kind of share with us where you took someone, as I said earlier, when the K-man didn't have a plan at all, and you helped them put that income plan together and just kind of saw that difference in them. They felt really good about where they were at.

0:14:57 - Speaker 4
Yeah, I do. I have a client who is planning on retiring next year and she started working with me just a couple of months ago and she did not have any plan for retirement. She just knew when she wanted to. So we went through the steps of my retirement planning process. We had the date in mind. So that was the first step. But the second step was how much income do you need? And she made the assumption that she just needed what she was making now, but not looking at budget. You know, commuting costs could be different, eating out costs could be different. So you need to almost think she needed to think about her working life and budget and then post-working life and what the budget was, and we actually figured out together she doesn't need as much money as she thought she did, which then also relieved some of the anxiety or stress of entering this retirement phase.

0:15:55 - Speaker 3
Well and I think that's what we're all looking for is to relieve some of that stress and anxiety and just enjoy those golden years. So that's going to do it this week for the podcast. Thanks for spending some time with us here on Money Chic. Are you Money Chic Confident, healthy, informed and capable? If you're not, or if you want to learn a little bit more about it, take the Money Chic quiz online. You'll find that in the show notes on the podcast. And don't forget to subscribe. We've just got this started, so we would certainly appreciate it if you'd like to hit that subscribe button on Apple, google, iheart, spotify, stitcher, whatever platform you like to use. You can find us on all of those different ones. Just type in Money Chic in the search box of those apps or go to Sherry's website at Greenway Wealth Advisory dot com. That's GreenwayWealthAdvisorycom. Sherry, thanks for hanging out with me this week. I appreciate it. I hope you have a great week and look forward to talking to you soon.

0:16:43 - Speaker 4
Thank you.

0:16:44 - Speaker 3
We'll see you next time here on Money Chic with Sherry Rash from Greenway Wealth Advisory.

0:16:55 - Speaker 1
Discussions in this show should not be construed as specific recommendations or investment advice. Always consult with your investment professional before making important investment decisions. Securities offered through registered representatives of Cambridge Investment Research Inc. A broker-dealer member, finra SIPC advisory services through Cambridge Investment Research Advisors Inc. A registered investment advisor Cambridge and Greenway Wealth Advisory are not affiliated.