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. Hey, everybody, welcome into the podcast. Another edition of Money Chic, women and Retirement, with Sherry Rash and myself Talking investing, finance and retirement. We're going to talk about guessing at retirement this week on the show when we guess at some of these important questions and maybe it doesn't work out so well. So we'll talk about some ways to hopefully not guess and why you should be doing that. We're going to get into that in just a second with Sherry as well. But, as always, if you've got some questions, make sure you always check with a qualified professional before you take any action on anything you hear on our show or any other. Sherry is a financial advisor and money coach at Greenway Wealth Advisory. You can find her online at GreenwayWealthAdvisorycom. Sherry, what's going on? How are you?

0:01:14 - Speaker 3
I'm doing well, thank you Starting to see signs of spring, so I am happy. The flowers are popping up, the trees are budding, so it's good. It's a good time.

0:01:25 - Speaker 2
I'm with you there. This is our first podcast in March, so we'll have one more here later on this month, in a couple of weeks. So we're doing this about a week before St Paddy's Day. Are you a St Paddy's Day type of person? Do you enjoy wearing green or having green beer or any of that kind of stuff?

0:01:41 - Speaker 3
I do do both of those things, and the leprechaun does visit our house.

0:01:45 - Speaker 1
He's pretty naughty.

0:01:48 - Speaker 3
He'll hop around. He does leave some treats around the house, but he likes to make his presence known, so we always enjoy seeing what the leprechaun got into on St Patrick's Day morning.

0:02:00 - Speaker 2
I like that that's fun. That sounds like a fun tradition. Well, my wife definitely is in that same camp. She's like I can't do the green beer, I don't know why, I just can't do it, it just weirds me out. But anyway, let's talk about guessing in retirement. Hopefully everybody has a good St Paddy's Day, because our next edition will be just after that. So I'm sure we'll follow up a little bit with that conversation.

But let's talk about guessing in retirement, sherry, because most people, when trying to plan for retirement, they tend to guess about these things, especially if they're not working with someone like yourself, right? So it's important to really sit down and think about this and I'm going to kind of take this kind of stance with some general same numbers, so it kind of makes sense as we go through the different questions. But we're going to start with monthly income. So many people just kind of feel like, well, whatever it is that I'm making now, that's probably what I'm going to need, you know. So let's say 5,000 a month. So I guess that'll be good when we get to retirement. Maybe they kick it up a little bit and we're going to talk about why that's wrong a little later on as well. But guessing at the income amount. Just it's a bad idea, especially when you can find out very easily.

0:03:03 - Speaker 3
Correct. It's funny that this is actually one of the hardest questions that my clients have to answer. It's a very simple question, but it tends to be a hard answer when okay, how much income should we plan for in retirement? And I think the default is for them to assume well, I'm just, I'm going to need less, I'm retired.

0:03:27 - Speaker 1
I'm not going to spend as much money.

0:03:29 - Speaker 3
But that's really not true. People underestimate how much income they'll need or want in retirement and I say, unless something really dramatic in your life changes or your expenses change, you're probably going to need close to that same amount of money. Your property taxes don't change even though you're retired. The cable company doesn't care that you're retired cell phone company. So there's a lot of expenses that you'll have. That'll be exactly the same Now if your mortgage is paid off by the time you hit retirement or if that's something you want to achieve before. Yes, that's a large bill that's going away. But then another way to think of that is you're no longer going to have that mortgage interest deduction, so you may end up paying slightly more taxes since you don't have that deduction. So I think a good rule of thumb is just a plan for what you're living off of now, what your income earning is right now, pre-retirement.

0:04:29 - Speaker 2
Right. And so if you think about a couple of ways to look at this, typically people do it and they're wrong, and they wind up living on a smaller budget than they anticipated because they think they're going to need less.

0:04:38 - Speaker 1
They didn't to your point or it could go the other way it could work against you the opposite way, right.

0:04:42 - Speaker 2
You could keep working longer than you really wanted to, thinking you need more money. And then you find out I could have retired three years ago or something like that. Right, because you've been trying to hit this goal or this number that maybe you didn't need, you could have made your plan work for less. So, either way, a true income plan helps you avoid guessing and making a big mistake. Now, how do you feel about the conversation, sherry, between emergency fund and major purchases? Different advisors look at it different ways. I've heard all kinds of different things. Is the emergency fund truly the emergency type things, and do you view major purchases in retirement separately, or do you kind of put them all in the same category? Talk me through that a little bit.

0:05:22 - Speaker 3
When I work with my clients, an emergency fund is exactly just that the quick cash that you need access to for something big that happens that will prevent you from going into debt to pay for it. So whatever that may be and everyone has a different comfort level with how much they want into an emergency fund I say rule of thumb three to six months of expenses is what should be in your emergency fund, and that's like daily living expenses, right Making sure you can buy food, pay the bills, pay the lights.

0:05:57 - Speaker 2
yada, yada yada.

0:05:59 - Speaker 3
Correct. So having that three to six months of what you spend your money on set aside in a bank account and you pretty much just forget it's there, that's how I think of emergency funds. Then if you know something major is going to come up you're going to need a new heating and air unit, you're going to need a new roof, your daughter's getting married that's where I like to implement supplemental savings accounts. So socking money away for the short term, short to intermediate term, when you know that big expense is going to come up, because we can see those big expenses in the horizon and we can plan accordingly for them. Now let's say something comes up and my client doesn't want to drain their emergency fund or they'd rather make a withdrawal from their account to pay for the purchase or the expense and they're in retirement.

That's where I utilize my bucket approach. So I've talked about my buckets on many different episodes, but bucket number one is what we're using for right now income and income for the next five years. So ideally that bucket will last for five years. It's invested pretty conservatively so market fluctuations don't negatively impact it. But if a client needs quick cash I'll take it If they don't have that secondary fund set up in addition to the emergency fund. That's where it will come from. It'll come from bucket number one.

0:07:36 - Speaker 2
Yeah, and I get the conversation, sherry, and a lot of that makes a ton of sense, but I do get where sometimes people say, well, wait a minute. I mean, if I need a new heating and air unit, I didn't expect that to happen, and I think that's the difference of it dying unexpectedly versus you know it's 25 years old and you're working as you're getting closer to retirement. Maybe you should start budgeting for the fact that at some point during retirement you're going to need to replace this. I think that's kind of the difference between the emergency aspect of something failing versus knowing we should do some planning ahead of time. If you have kids, you plan on adding money to their wedding fund. Plan for that. Make that part of the major purchases versus saying, oh, they decided to get married. Well, you should have figured that was coming at some point, right. So I can see the difference though.

0:08:19 - Speaker 3
It's taking a step back and thinking about events that can happen and how to prepare for them. And if it is the, you know, your HVAC unit dies unexpectedly, use the emergency fund, but then you do need to pay the emergency fund back right Because odds are. Something else is going to have been shortly thereafter?

0:08:41 - Speaker 2
Yeah, exactly. So I get the conversation, but it's definitely. I mean again, why guess at it when you can strategize for it so that we're not failing to factor in these potential big ticket items into the retirement plan? All right, so we have to talk about the fact. If you're guessing, well, what's the impact of inflation Now? Right now it's. The impact is ridiculous and everyone is super hyper aware of inflation currently. But let's look at this, Sherry, just from the standpoint of normal inflation. Let's just say 3 or 4% over the course of you know your retirement. I go back to my analogy of $5,000 earlier on. Many people just don't factor inflation into their you know their budgeting. So that five grand that's fine, maybe for a couple of years, but 10 years later that five grand is maybe 7500. 20 years later it's 10,000.

0:09:28 - Speaker 3
It's a lot of money. It's a big difference. If you're not factoring inflation and your income is not growing by inflation, your purchasing power is going to be a lot less, but then probably what will happen is that you will then need to take big withdrawals from your accounts to kind of make up for the fact that you've been living off of a lot less, year after year after year, right?

And then it kind of all hit you at once. So, definitely factoring in inflation, we always use 3% inflation because that's what it has historically been. But I was speaking with a client on Monday who retired at the beginning of the year and I was speaking with him about the three risks of retirement retiring in a down market, inflation risk and longevity risk and he hit up the first two.

0:10:14 - Speaker 2
Yeah, he was probably not happy, right.

0:10:16 - Speaker 3
Yeah, yeah, but so that's that's why you need to have a plan to address these things. And we know inflation is not going anywhere. Inflation is, up to a certain point, healthy. It is good to have 7%, not so much, but factoring it in is definitely important when creating a plan or thinking about retirement.

0:10:39 - Speaker 2
Yeah, and again, it's one of those things where and I've said this many times and I'll keep saying this I think it works really well. Inflation is most of the time treated by most of us like calories. We know they're there, you know, we know it's there. We just tend to forget about it most of the time, unless we're feeling a little overly conscious in this case, about our weight or something, and we're watching calories or it's reminding us in periods like now when we're at the 7% or 8% you know inflationary period that we're going through due to some you know mitigating circumstances. So, but that aside, you still got a plan for the just general impact that inflation is going to have on you. I mean, if you throw $100,000 in your safe and you didn't touch it for 20 years when you took it out, it didn't grow while it was in the safe, it's still 100 grand right it's still 100 grand.

0:11:24 - Speaker 3
It's just buying you.

0:11:25 - Speaker 2
Yeah, what you can buy now $85,000 worth of stuff today. Exactly, Yep exactly.

0:11:30 - Speaker 3
What I recommend doing when it comes to it's hard to. I think inflation is also hard to think about, because it Everything is impacted by inflation, right?

Everything goes up in cost over time. But what I actually do is I have just a couple of things that I have the price of it memorized, and so I can kind of follow how it has increased over time and do a gut check on. Okay, is this? Is the store pricing this item appropriately? And you're going to laugh. It's milk and it's bread, but a very specific bread. It's called Dave's Killer Bread.

0:12:06 - Speaker 2
I love Dave's.

0:12:07 - Speaker 3
Yes, okay, so good, but years ago, when it first came out, it was like $5 a loaf which is crazy, but it's really good. Toast Dave's Killer Bread with Kerry Gold Butter. You'll thank me later.

0:12:23 - Speaker 2
It's delicious.

0:12:24 - Speaker 3
But when it was $5, I'm like man, that's a lot of money for one loaf of bread. So if it was on sale it would go down to like $4.50 or sometimes $4, and I'd buy a few of them. And then, but over time I saw the price increase for this bread. And now I'm seeing it and it's $6 a loaf and it's like wow, that's quite an increase over just a five-year period of time. So that's one item that I look at and kind of get a vibe of inflation and what it actually means. And then the second is milk. I have four young kids. We go through a lot of milk and I was buying organic milk. When I went to the store a few weeks ago. There was a gallon of organic milk for $9.00. And prior to that it would be $5, creep up to $6, $7, but $9.00.

0:13:19 - Speaker 2
That was like a big, big red flashing light of how inflation is impacting just those two items that I buy often, yeah, and many people use different things to do it, and it could be something current, it could be through the years or whatever the case is. But yeah, dave's has good stuff. I don't know if you've tried their bagels, but I've been addicted to their bagels lately, so Okay, I haven't had the bagels yeah.

The plain and the everything are pretty darn good. So a little little extra tip for you this week on the podcast. I'm hungry.

0:13:50 - Speaker 3
There you go Right.

0:13:51 - Speaker 2
Let's do one more of the War. Wrap it Up with Sherry. We'll go have a bagel, all right. So how much will healthcare costs us? A lot of us are guessing at this and you could maybe make the argument that that's a little more fair to say because it's just all over the place. But if you think about healthcare costs in general, even again with normal inflationary times, healthcare has been outpacing that.

0:14:12 - Speaker 3
Right. 6% is generally what healthcare is. Inflation adjusted each year, 6% so, which is higher than what everything else as far as inflation goes with just our day-to-day living. So thinking about healthcare is very important, especially the rising costs of it Doctors, visits, home healthcare, assisted living, nursing homes you need to think about how those costs are going to increase over time and factor into it, and that's where additional insurances may be beneficial for you to help supplement some of those rising costs.

0:14:51 - Speaker 2
Yep, definitely so. Guessing, you know, not the greatest idea when it comes to your retirement plan. So a lot of us wind up doing it, and there's just ways to avoid that by simply sitting down and having a conversation. So if you need some help as always, check in with Sherry Reach out to her online at GreenwayWealthAdvisorycom. That's GreenwayWealthAdvisorycom. Don't forget to subscribe to the podcast on Apple, google, spotify, iheartstitcher, whatever platform you like to use. Simply type in Money Chic, women in Retirement in the search box of any of those apps. You should find it that way, for example, in Apple or Google or something like that. Just type in the search box of the podcasting. App Should pop right up, and I think it's the heart button most of the time. That gets you subscribed, or maybe it's the follow button. Depends on the app of choice, and you can find it all at GreenwayWealthAdvisorycom. That's GreenwayWealthAdvisorycom. Sherry, thanks for hanging out with me. I appreciate talking a little bit about guessing and retirement. You want to go have a bagel?

0:15:46 - Speaker 3
Let's go. I'm going to have toast. You can have a bagel. Okay, sounds good.

0:15:49 - Speaker 2
Well, we'll see you next time here on the podcast. Folks, thanks for tuning in and joining us. We'll be back in a couple of weeks to talk more with Sherry Rash here on Money, chic, women and Retirement. Thanks for watching. Sorry, I used a bit of an awkwardgasp my hands are not working.

0:16:04 - 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.