Jason Parker interviews Jane Bryant Quinn on Retirement Planning

Below is the full transcript:


Voiceover: Welcome back, America, to Sound Retirement Radio, where bring you concepts, ideas and strategies designed to help you achieve clarity, confidence and freedom as you prepare for and transition through retirement. And now, here is your host, Jason Parker.

Jason Parker: Seattle, Tacoma, Olympia, Gig Harbor, all the good people right here in Kitsap County, and for those of you tuning in from around the world, thank you so much for listening to Sound Retirement Radio. I oftentimes say that I feel fortunate and blessed to be in the position to bring experts on to this program who we believe can add significant, meaningful value to your financial life. We have a guest this morning that I’m going to bring on to program, Jane Bryant Quinn is a leading commentator and author in this space of personal finance. Jane Bryant Quinn, welcome to Sound Retirement Radio.

Jane: Hi, Jason. I’m happy to be here with you.

Jason Parker: Yeah, it’s great to have you back. You know, Jane, you being a guest on the program in the past was one of our top podcast downloads, so thank you for being back here.

Jane: Well, thank you, I’m delighted to hear that, and I thank the audience.

Jason Parker: As we get started here, Jane, one of the questions we want to just start out with is retirement.  We’ve got a lot of-, most of the people we serve are people who are getting ready to retire or who are already retired. What are some of the things those folks should be thinking about as they’re preparing for retirement?

Jane: Well, there are a lot of things you should be thinking about. I guess I’ve got two things on my mind. One of them is emotional preparation. I know I’m supposed to be talking about money and finance here, and I will in a minute, but lots of people retire and they’re really excited and they say, oh, I’m going to do all of things, and some people succeed. Then others after they’ve cleaned the closets and they’ve done a few other things, they get a little depressed. So there is a depression cycle associated with retirement. All of the sudden you say who am I? I used to be X and now who am I?

 You need to have some kind of a plan what you’re going to do, how you’re going to fill your day. It’s really important to develop and work on that emotional side. Because who you’re going to be is a concerned citizen of the United States of America, but you’ve got to get from your old title through this middle period, and then you move on to the period that’s going to work for you. That’s probably not the answer you expected.

Jason Parker: No, but that is such a powerful, powerful answer. I tell you, I write a blog post every week, one of the top Google searches that bring people to the blog happens to do with a post I wrote called Overcoming the Fear of Retirement. Not only is it relevant, but it’s one of the top items that bring people to our blog. There’s a lot of people with this concern. I’m really glad you brought that up.

Jane: It’s something certainly a lot of my friends have been retiring, and it’s something that I’ve noticed very strongly.  You know, kind of struggling with who am I and what am I going to do? You need a financial plan for retiring, that’s for sure. You need to know how to turn your assets into your income. But you really also need a human and emotional plan, and you’ve got to do it with your spouse. You can’t do it all by yourself if you’re married.

Jason Parker: That is really great. So that was the first thing you wanted to bring to our listeners. What was the second one?

Jane: Just thinking about your finances. I mean there are so many things, Jason. You cover them. I cover them. But I’m thinking a simple thing to do but something really critically important is what I call decluttering. The older we get, at first we’re really sharp. We’re basically pretty sharp up until our sort of early 70’s, and then things start going maybe not so well for some people. It’s really, really important to get your finances in sort of a clear and simple shape so that you’re not trying to figure things out and wondering where all the slips and all the papers are. If you’ve got money in several bank accounts, put it all together in one account. It’ll probably save you some fees. If you’ve got 20 mutual funds, you shouldn’t have 20 mutual funds anyway, but you should think about getting a simple investment plan for yourself that’s well diversified and sort of collecting all of these 20 mutual funds into the same place.

 IRA’s. You know, a lot of people have sort of IRA’s hanging around from former jobs and they’ve never really rolled them all together. That’s another really important project, because you can lose track of these things.

Jason Parker: Boy, you sure can, and you know-

Jane: It’s a decluttering project is what I’d say.

Jason Parker: Simplify. Boy, that is just such great advice. Two really important things. You’re right, Jane, nobody else that we have been bringing on, we bring a lot of experts on to this program to talk about financial issues. Nobody that we have brought on to the program has talked about emotional preparation or simplifying your financial life. You would think that it is so foundational to a good retirement plan. Thank you for bringing both of those items up.

 Just a moment ago you used the word diversify. Sometimes people think they’re diversified or they wonder if they’re diversified, and because they own 20 mutual funds they assume they are diversified. Can you speak for a moment, what does that word mean to you when you’re talking about having a good diversified plan.

Jane: To me it means probably owning maybe four or five, maybe even six mutual funds. You should have funds in something like blue chip stocks which would be like a Standard and Poor’s Index Fund, for example. A 500 stock index fund. You should have an international fund. You should have a U.S. Small Cap Fund because the S&P is more large caps. You should diversification of, a REIT is a pretty good diversification or a real estate investment trust funds, again, so you’re well diversified. Then on the fixed income side, you should have some short term and some intermediate term. I would call that pretty well diversified, because you are covering a lot. You could add something on emerging markets if you want to. They’re collapsing right now and that always seems to be a time when most people run, but the smart people buy.

 I would say that that is the maximum.  If you have even roughly equal amounts in all of those equity funds or maybe tipping a little more heavily toward the US large caps, you are going to be well diversified. You’re going to understand what you’ve got and you’re not going to have like three growth funds of five value funds that are all basically the same thing.

Jason Parker: Yeah, and we see that. We see people who think they’re diversified. They come in, they have seven different mutual funds, and they’ve basically bought the same one in every single one of the mutual funds because they don’t really know what they own. But, you know-

Jane: And a lot of it, by the way, Jason, it has to do with getting a type of fund. Saying I want a tech fund, and then I want another tech fund, and you don’t realize that if you buy an Index fund or if you buy a Small Cap fund, you will have tech stocks in those two funds, but you will also have other stocks. Whereas if you, yourself, are just buying tech funds, you’ve just bought one tiny piece of the market.

Jason Parker: Yeah, that’s a great point. You know, when it comes to retirement though, Jane, we’ve got folks who are, they’re making this transition, they’re looking for more confidence as they prepare for retirement. You look out in the marketplace today, you mentioned emerging markets are on the fritz right now. We’ve seen just in the past week a lot of volatility in the stock market. We’ve got a bond market that’s not really compensating people a whole lot for owning fixed income. So there’s a lot of concern right now as people are making this transition into retirement. What should people be thinking about as they’re trying to construct a portfolio that’s going to hopefully take them through the rest of their life. How do they do this?

Jane: One thing is that you shouldn’t fall back on the idea that you’re going to live on interest and dividends, because unless you really have a lot of money, you’re not going to get enough from interest and dividends to support your lifestyle, unless you also have a very fat pension, but a lot of people don’t have pensions anymore. My thinking is that first you should be at least 50% in equity stocks. Stock owning mutual funds. I never mean individual stocks. That’s something else we can talk about. You should have at least half of your money there and maybe more. Because when you think about retirement, if you are let’s say you’re sixty and let’s say well, I’m going to live until 90. I don’t know, my mother is almost a hundred, but let’s pick 90.

Jason Parker: Wow.

Jane: Living until 90. So you’ve got 30 years of retirement you’re planning for. Okay, so maybe you want to put half of your money, spread it around in thing that seem safer to you, but then what about the money you’re going to start drawing on 15 years from now in the second half of your retirement. That’s the money that you should be putting into stock owning mutual funds. I see because so many people have been so frightened about what has happened to the stock market, they remember the collapses, but they don’t remember the big bull market we’ve had the past couple of years. They’ve putting less and less in stocks, and as they get older, they put less and less in stocks. That is a typical approach that you should get safer and safer investments as you get older, but I’m not sure that that is in fact true.

 I think maybe your safe investments should be for the money you plan to spend in the next five or ten years, and that money that you plan to spend supporting the rest of your retirement should probably be invested in well diversified stock owning mutual funds.

Jason Parker: Boy, that’s a good point. You kind of touched on something that we’ve big proponents of here which is kind of diversifying your portfolio by time. So when you’re actually going to need the assets. Is that something that you’ve ever looked into more of a time segmented approach. Your safe money is money on the short and and your-

Jane: Yeah, kind of a bucket approach. One bucket for my current expenses for this year and next year maybe and then the next bucket is for expenses three to eight or nine years and then the next bucket for further out. Then you’ve got sort of cash and bonds, intermediate, short term, and then stock funds. So actually, yes, you can think of them in terms of three buckets. Here’s one thing that I think is interesting, Jason, and that is that that doesn’t mean that you keep that exact allocation. You can, you can have a fixed allocation and draw, you know, 4% or whatever percent you want out of it per year, but here’s a very interesting idea that I’ve been playing with lately, and there’s some good research to support it. That is, you’ve got your buckets, you’ve got some cash and you’ve got this group of bonds for the money you’re going to spend in year three to eight or something like that, and the rest is in stock owning mutual funds.

 When you’re taking your four percent or whatever you’re taking out every year, instead of taking part of it from stocks and part of it from bonds, keep on taking all of it from your bond fund and don’t entirely rebalance. What this means is that over your retirement, instead of having fewer and fewer stocks as you get older, you actually have more and more stocks, but there’s a lot of research that says you would do better handling it that way. That’s something that I’ve been looking into and writing about a lot, because there’s, it’s a new idea for older people. It’s a new idea for me, but I’m finding it very interesting, and I’m finding the research quite persuasive.

Jason Parker: That’s very fascinating, Jane. I know our listeners are going to want to hear more. We need to take a quick break, and we’ll be right back after this.

 Alrighty folks, welcome back to another round of Sound Retirement Radio. I’m your host Jason Parker. As always, I sure appreciate you being a guest on the program or a listener for the program today. It’s really my good fortune to have Jane Bryant Quinn on the program. Jane Bryant Quinn is a leading commentator on personal finance with books and columns read and trusted by millions. Her bestseller, Making the Most of Your Money Now is a comprehensive guide to personal finance. She writes a monthly column for the AARP bulletin and blogs at her website Jane Bryant Quinn dot com. She recently cofounded The Daily Voice, which brings local news to communities online. She has written and broadcast for Newsweek, The Washington Post and CBS Morning and Evening News. Jane Bryant Quinn, thank you again for being a guest on our program here today.

 A moment ago when you were talking about having a diversified portfolio, you talked about Real Estate Investment Trusts or a mutual fund that tracks those. One of the concerns that I have right now, Jane, and I was hoping you would comment on this. You know, with yields being so low on things like bank CD’s or even US Treasury Bonds, I see people reaching and taking a lot more risk. One of the financial tools that we see people at least in this community people that are being referred to are these non traded, these public non traded REITS. Would you take a moment and share with our listeners your thoughts on those vehicles specifically in terms of a diversification tool?

Jane: It will only take a moment, Jason. I hate them! I believe in REITs and Real Estate Investment Trusts mutual funds as a diversification, but they have to be funds whose price you can follow on the market. These non traded funds, you have no idea what you’re going to get. You buy them and then they say well, in ten years you’re going to get X and in the meantime we’re going to give you a payment of whatever, 7, 8% looks fabulous. What you’re getting is your own money back. Now, you’re not necessarily earning 8 or 9% that you think you’re earning on your capital. They’re paying you partly with your own money back. Then at the end of the term, they say well, either we will register and we’ll go public and then you can trade the shares, or they say we will sell our underlying real estate and you’re going to make all this money.

 There have been a lot of problems with these non traded REITs that have gone through that and they haven’t, they’re real estate problems, they couldn’t sell them for what they expected, yields have been lower than people thought. But you know, you can’t find out until the end. You can’t find out your yield, you can’t find out what the costs are. You don’t know even if at the end of the term they will go to a situation where you can trade the shares. So I hope I’ve made myself clear. I love Real Estate Investment Trust mutual funds as long as you can follow their prices in the paper every day or online every day.

Jason Parker: You know, Jane, one of the things I enjoyed about having you on the program last time and this time also is that you are very bold. I mean you just come out and say it, say what you believe!

Jane: Well- [laughs]

Jason Parker: You know, I have to tell you, I agree with you, and I’m concerned, because we do see a lot of people, you know, 7 and 8% yields are, or supposedly yields on these things do sound really attractive. Boy, I’ve just seen more people burned by those tools than others, so it was interesting to hear your take on them.

Jane: The thing is you know they’re not really yields. You somehow because someone says to you 8%, you think oh, that’s 8% return on my investment. No, they may be giving you 8% of what you originally put in, but part of that might be your very own money back. You’re not earning 8%, and that’s very confusing for people.

Jason Parker: Thank you for clarifying that. A moment ago you talked about not relying on dividends and interest to provide income for your portfolio because most people probably don’t have enough cash to be able to support that type of a structure because of the yields that are so low on these other financial vehicles that are available to us all today. Then you talked about a 4% withdrawal rule. There’s been some reports recently, especially these came out after 2008, after the big financial market downturn where people said maybe 4% is too high. Maybe 3% is a safer withdrawal rule.

 When people are thinking about their overall portfolio and they’re starting to take distributions from their portfolio, what is a reasonable expectation? How much can they take out of that portfolio without having to worry about running out of money in retirement?

Jane: I just happened to have been looking at this, Jason, because of course it’s a very hot subject and all of the financial planning magazines are coming up with various types of ideas of various types of withdrawal rules. One guy I respect a lot says it should be 3.5% and then another guy I respect a lot says you can go up to 5.5%. The man, Bill Bengen, who created the 4% rule, he-, the Great Depression, he looked over various bull and bear markets, these whole long periods of time. Basically 4.3, 4% works over a 30 year retirement. If you’re looking at a 20 year retirement, you can probably go up to 5%. But I have done a lot of looking and interviewing and talking to see if in my mind I can unsettle the 4% rule, and frankly, I have not. So I would still say you start with 4% of your total financial assets and in the second year you have 4% plus an inflation rate, and the third year you have what you had in the second year plus the inflation rate, and I think that works.

 If you luck into some really good markets, then maybe you can start taking a little more.  This isn’t something that is fixed in stone for the rest of your life. But when you’re doing your planning…oh, and if there’s a bad market, maybe you can pull back and say I’m not going to take the inflation adjustment this year. We all have rolling changes of mind, if you will. But for your personal planning, I have not been able to dislodge 4%. That’s what I’m still saying.

Jason Parker: I want to ask you about a topic now that’s a little bit controversial, and so I’d be curious to hear your bold response here. When people are looking for income today, there’s a lot of people who are proponents of annuities. There’s obviously a lot of different types of annuities, so I know it’s hard to lump all of these together into one general reply. For somebody that’s looking for cash flow or income, tell us your thoughts about annuity contracts. If people are going to consider annuity contracts, what kind should they look for, what kind should they stay away from?

Jane: For cash flow and this is something that I like very much, I like the immediate pay annuities or the inflation adjusted annuities. There are just a couple of them around, but I think that they are probably well worth doing. If you have money that you’ve been keeping in say bond funds or CD’s and it’s paying practically nothing, if you take that piece of your money and you put that, you buy an immediate pay annuity that starts paying you income every month, you are going to get a higher income than you were getting from your bond fund or that you were getting from your CD. If you don’t need it right away, you can do a deferred immediate annuity which means okay, I’m, and you put less in this. I’m putting out money now ten years from now I’m going to get regular fixed payments. Those are simple annuities, they are low cost, and I think that they are a very reasonable choice if you want to put part of your money in a guaranteed cash flow. The you can put the rest of it, since you’ve got a guaranteed cash flow, you can put the rest of it more aggressively into stock owning mutual funds.

 The other annuities which are very widely sold are, they’ve all got fancy names, but they come with what they call guaranteed living benefits. The idea is that we’re going to link you to stocks in some way, your returns, and maybe you can get, we’re going to guarantee you 4 1/2 or 5% income for the rest of your life, no matter what the market does. If your investments turn out to be better than 4 or 5%, then we’ll guarantee you something higher.

Jason Parker: Is this kind of like the variable annuity? Is that how you would …

Jane: Yeah, but it’s based on a variable, it’s a variable annuity with a guaranteed lifetime withdrawal benefit.

Jason Parker: Okay.

Jane: Those are called living benefits. Some of them are called guaranteed minimum income benefits. But yes, you start with a variable annuity which is your investment, and on top of it you put this income rider. So that looks really good, because you’ve got this income for life. Now these were actually pretty good before the financial collapse because the insurance companies were giving you 6, 7 and even in some cases 8% on those. That was a pretty good deal. Since then, they’ve raised the price, they’ve lowered the returns, so now you’re getting maybe 5%. And again, 5% is 5% of your own money back every year once you start annuitizing. It’s not a 5% return on your investment. I think that these annuities are currently not priced well enough. I think if you buy that kind of annuity hoping to get a higher investment return, you probably won’t. You will get this fixed income for the rest of your life whenever you start it. If you are happy with that as a fixed income for which you are paying a high fee, I might add, then that’s fine. But you shouldn’t go into these things expecting to have a higher investment return. The fees are too high. You can’t make that work.

Jason Parker: That’s a great point. When it comes to fees, what is a reasonable expectation? I mean obviously there’s always going to be fees involved for people. When does it become excessive? When is a fee too high?

Jane: Well, if we’re talking about getting planning advice, I would probably say 1% would be my top, and less if you have a lot more money. If you’re talking about mutual funds, well, you could buy, if you have $250,000, you could buy mutual funds with fees of 2% and then you would be paying $5,000 a year for those. On the other hand, if you bought VanGuard low cost index funds you would be paying 0.2 and you would pay $60 a year. Now you think well, do I want to pay $5,000 a year for my funds or do I want to pay $60 a year for my funds? That is a pretty clear answer to me. I’m a huge believer in low cost index funds simply because the one thing that you can correlate with better performance is lower costs.

Jason Parker: That’s great. That’s a great point. Jane, I can’t tell you how much we enjoy having you as a guest on the program, because you just, you’ve got a great reputation out there. You let people, you’re trusted, you let people know exactly how it is. I know Jane Bryant Quinn dot com is a place where you’re adding value all the time. Tell us about this new thing that you started, The Daily Voice. What are you doing there?

Jane: Well, this is a little different, of course, but as you and I and every journalist in America knows, print is going out of style. Young people do not read news on paper, they read news on their devices, whatever the device is. So when you’re trying to bring news to people say up to 40, 45, you know they’re not reading the papers and the magazines. They are getting their news on line. The local newspapers are going out of business right and left. My husband and I, my husband is a publisher and spent his life in community news, we started a online community news. Right now we’re in two counties around New York City. This is a new venture. We’re going to communities that have not had a local newspaper in years or lost their papers or whose papers are down to just 2% of nothing once a week, and we feel very strongly that a community needs to know what’s going on. You want to know what’s going on in town. So we are doing this online because that’s where all news is going to be in the future.

Jason Parker: That’s great. I want to, we only have a couple of minutes left here, but when you think about retirement, what’s the biggest mistake people should avoid as they’re preparing for or transitioning through retirement?

Jane: Well, I guess you think about retirement as a number. If I have X thousand dollars or one million dollars or whatever, I can afford to retire. That’s not the way to look at what you’ve got. You have to say here are whatever assets I have, how large an income will these assets throw off, and how do I get that income? During the accumulation phase you’re all just caught up with how much you’re saving or how much you’re making in the market or whatever, but all of the sudden the number doesn’t matter, what matters is how much income it throws off, whether it’s from your investments, whether it’s from an immediate pay annuity, from your home equity, whatever, social security, pension, and is that income enough to support the way you want to live. That is exactly the calculation you have to make

Jason Parker: One of the things we’re fond of telling our listeners is that retirement is really all about cash flow. It’s not your net worth that will determine your lifestyle, it’s your income.

Jane: That’s for sure, and it’s about cash flow, and a lot of that has to due with reducing spending.

Jason Parker: Budgeting. Getting back to the basics. I was just talking with a good friend of mine this morning. If you don’t know, I think it was Benjamin Franklin said that a small leak will sink a great ship. So if you don’t know where your money is going, you’d better get a good handle on that before you retire. Jane Bryant Quinn-

Jane: Hear, hear [inaudible 00:28:21] it again.

Jason Parker: I just really appreciate you taking time out of your busy schedule to be a guest on Sound Retirement Radio. Any parting thoughts, bits of wisdom you’d like to leave with our listeners before we let you go this afternoon?

Jane: Oh, I don’t think so. Mostly I hope that people will make some sound judgement when they’re looking at what their cash flow is as they approach retirement and think of what they’re going to do right afterwards. Make some money, start a business, all kinds of things you can do. But for a good retirement, I’d really like you to have that emotional plan as well as the financial plan.

Jason Parker: I sure appreciate you being a guest on Sound Retirement Radio. Thank you for all of the good work you’re doing and for helping to educate our community right here and those people that are tuning in from around the country on the podcast, thank you, Jane.

Jane: Great to talk to you, Jason.

Jason Parker: You, too, take care.

Jane: Bye.

Jason Parker: Alrighty folks, there you have it. We just had Jane Bryant Quinn on the program. Of course my name is Jason Parker. I’m the host of this program. Jane Bryant Quinn, what a treasure to have her as a guest on the program. She’s just a wealth of knowledge. She has an excellent reputation. Her book, Making the Most of Your Money Now is, I tell you when a couple of years ago her publisher sent us a copy of that book before we brought her on the program for the first time, and the thing comes in, it’s bigger than an encyclopedia, I mean, or a dictionary. It’s just this massive textbook, basically, on everything that you need to know as you’re trying to make financial decisions.  If you’re looking for more information on Jane Bryant Quinn, again, visit her website, Jane Bryant Quinn dot com. She just has a wealth of knowledge. She’s a trusted source, and she’s really looking out for the little guy.

 There’s a couple of things that I wanted to recap though as a result of this conversation. First and foremost, I got all excited about the fact that we were bringing Jane on the program, and I forgot to share my joke for the morning, which I have one for you. So I know our listeners would just be horribly disappointed if they didn’t have some joke to share with their grandkids later today. So here’s my joke for the day. What do you call a baby potato? Small fry! [laughs] I asked my office administrator for a quick joke before I came up here to record the show today, so there you have it. A baby potato is a small fry.

 Jane said something in our interview today that just really resonates with me, and if you’ve read my book you know that one of the core concepts that we teach our community is that retirement is really all about cash flow. It is your income that will determine your lifestyle in retirement, not your net worth. One of the reasons that I say this, folks, is I’ve met with people, a lot of people over the years that are preparing for retirement, and I’ve met with people that have a net worth of millions of dollars, but when it comes to income, they don’t have enough cash flow to support their lifestyle.

 A lot of times the folks that are in this predicament, a lot of times their wealth is tied up in real estate, and it’s real estate that’s not producing any income for them. So one of the core components if you’re getting ready to retire is to make sure, like Jane said, you want to have a really good cash flow plan. It’s at this point in your life when you’re getting ready to retire, it’s no more about how much you’re saving every month, it’s no more about how much you’re making every month. Those two things become much less important and it becomes all about how do you create enough income to generate and last for the rest of your life?

 Like she was saying, if you’re 60 years old today and you live to be 90, imagine, that’s 30 years of unemployment. So when we’re doing an income plan, and that’s really what this gets down to, when you make the shift from working to retirement, what you need is an income plan. You don’t need an investment strategy, you don’t need some complicated how do I buy options in the market, you don’t need the best financial product or tool, what you need is a plan. You need somebody that can sit down with you and say okay, this is the path that you’re on, and they’ll let you know is it sustainable or not.

 The thing that I’ve learned is there’s a lot of different ways to skin a cat. There’s a lot of different financial products available to you that can help support your plan, but really if you don’t create the plan first, then it’s almost impossible to recommend the right financial products. Unfortunately, a lot of times what I see when I meet with people is they will sit down with somebody who is a professional mutual fund salesperson or a professional annuity salesperson, or a professional REIT salesperson, and they make a very good argument for the product that they’re selling, but they don’t tie it into the financial plan. I think that people are, if your advisor isn’t sitting down with you and saying, look, here’s your financial plan first, now we’re going to go find the right tools, the right products, the right financial vehicles to support the plan, I think it’s a disservice. I don’t know how you can make a recommendation for the best investment unless we know what it is we’re trying to accomplish.

 I equate it to building a house. If I were your contractor and you came to me and you said you wanted a house, of course part of that process, the initial part of the process is to figure out what the house is going to look like. What is it that you want? Then we have an architect that draws up the plans and an engineer that helps us design those plans, and then we figure out okay, where do we buy our lumber, what sized nails do we use, blah, blah, blah, blah. But you don’t go and say hey, I want to buy a house and somebody just starts nailing boards together. That would be insanity. It would be insanity if you were building a house that way without any preconceived plan of what it was you wanted in the first place. So the same thing with your financial life. You don’t go build a financial, you don’t buy financial products until you understand what the plan calls for.

 The other thing is when we’re doing income planning, it’s very, very important that we understand that budget. You know, I meet with a lot of people who they’ve made really good money their whole life, so they’ve had this flexibility where they haven’t really needed to budget, because the money comes in, it goes back out again, they live comfortably and that’s fine. But when you’re retired and you’re living on on a fixed income or you only have a certain amount of money to spend, the last thing you want to do is be in a position where you find yourself without enough money at the end of your life. I’ve met with folks just recently where they thought they were going to be in great shape heading into retirement. They had a pretty big pool of money to draw from, and they lived really well for about 15 years into their retirement, but now 15 years later, they’ve almost depleted all of those assets down and they’re saying, Jason, I wish we would have met with somebody early on that would have helped us understand what rate of return we need to earn, what are the best financial tools to invest in, how much can we spend without risking or jeopardizing our retirement plan.

 I mean boy, that’s a crummy place to be if you think about it. You’ve worked hard your entire life, you finally get to this place where you’re going to retire, and now because you don’t understand how much you can afford to spend, you just go out and spend too much. There are a lot of tools out there to help you come up with a good budget. At our blog, Sound Retirement Planning dot com, you can visit Sound Retirement Planning, that’s where I write a weekly blog. I don’t know if many of you know that out there, but in addition to Sound Retirement Radio, we have Sound Retirement Planning. Under the resources tab, we have a budget data gathering form. For the people that like kind of the old school approach, you just want to have a piece of paper that you print off the computer and you sit down and you start figuring out where are we spending money, this is a really good exercise to do before you actually retire, by the way. Better to do this before you retire than after the fact.  Fill that form out. Go to Sound Retirement Planning, go to the resources, get the archive and start working on putting together a really great budget.

 If you’re a little bit more comfortable with technology, I know that like one of the credit unions in our community, they have some neat financial tools built right into their online platform to help you understand your spending. But there’s a free tool that’s available that I’ve used for years now called mint dot com. M-I-n-t dot com. I believe it’s owned by Intuit, if I’m correct. Mint dot com is free because they show you advertisements. So they’re looking to examine your financial spending and then be able to show you relevant ads that could bring value to your life. So there is a cost associated with it in the sense that you’re being advertised to through this platform. But, I’ve really found it to be a great tool. You have to be comfortable with technology, because when you create an account at Mint, they’re going to ask you for your login information for these different financial resources you use.

 If you have a bank account or a credit card, you would enter that information to Mint and then what Mint does is it goes out and it grabs all of this data. My wife and I went through this process when we were putting together our last budget, and we exclusively we used our debit cards for purchases. We didn’t use cash at all, because we wanted to be able to record every single transaction. By running our debit card only, and usually for most people if you do this for three to six months, you can really get a just fantastic picture of where all of your money is going. You need to make a couple of adjustments for things that are annual only expenses like property taxes or insurance, but for the most part, you’re really going to understand that picture.

 I was amazed when my wife and I went through this process of just how much money our local grocery market was getting every month. We live up in North Kitsap and we’ve got this wonderful, wonderful grocery store that I just love. It’s kind of, it’s almost like a magnet for people in the north end, it’s called Central Market, and people come from all over the place just to shop at this one store. But it’s a little bit, we were just surprised at how much money we were giving to Central Market every month. Now we feel that Central Market provides great value, so we’re happy to give them our dollars, because I guess it comes down to trust. We feel like they provide a really good quality service, the best produce and their meat department is great, so … kind of getting off on a tangent here on Central Market, but I really do like that grocery store.

 Anyhow, you want to have a good budget, you want to understand where your money is going. Mint is going to help you do that. Now here’s the thing I want to say about budgeting. My experience has been that if you want to live within a budget, it’s very hard to do that using debit cards or credit cards, because debit cards and credit cards allow you to spend money that you don’t see. So while it’s a great tool for figuring out where your money is going if you’re putting together a budget, the reality is and this is just again from my personal experience, if you want to stick to that budget, if you want to make sure that you’re not over spending, cash is still the way to go. I’m going to tell you a little bit more about how to come up with a good cash plan here in just a minute. We need to take our next break.

Voiceover: …years or older, and have at least $500,000 of investible assets, if so, this message may be beneficial for you. Are you confident that you will be able to retire and not run out of money? Are you concerned about higher inflation, higher taxes and what market volatility will do to your portfolio? If you answered yes to any of these questions, then I encourage you to take advantage of this offer. Jason Parker, the author of Sound Retirement Planning and president of Parker Financial, is offering a free report titled 10 Things to Know About Planning Your Retirement Income that may provide you answers to the above questions and much more. Call his office at 1-800-514-5046 to receive your report free of charge. Again, call now at 1-800-514-5046.

Jason Parker: Alrighty folks, welcome back. This is Jason Parker, host of Sound Retirement Radio and I sure appreciate you tuning in. I can’t believe that we’re at almost five years now since I started this program. It’s been a wonderful journey. We’ve met some incredible people as a result of doing the radio show. We have people from all over the country that request to be a guest on this program, and I will tell you that we are very selective on who we bring on to the program. We want to bring on trustworthy people who we think can add significant meaningful value to your financial life.

 That being said, the reason that I bring certain people on to the program is because we’re sitting with folks all the time that are retired. So we’re listening to what their concerns are, and then we’re trying to bring guests on. If there’s a specific topic that’s of interest to you and you would really like more information on it, by all means, contact us, visit Sound Retirement Radio dot com and send us an email right from the website or you can call me at 1-800-514-5046. If you have a guest that you think would add real value to our listener’s lives, or you have a topic that you’d like more information on and you’re just not sure where to get that information from, sometimes we have resources available to us that we can plug in, and if it helps you, it’s probably going to help a lot more people, too. You know what they say, you can’t ask a dumb question. There’s no such thing as dumb questions. If you have the question, other people probably have the same one.

 We were talking about budgeting. Here’s what I’ve learned. My wife and I for years we only used our debit card, and no matter how much money we were paid every month, it just seemed like we spent every single penny that came through the door. Debit cards make it really easy to do, and banks like it when you use those debit cards, because they know that it gets money flowing and of course they’re making fees on those accounts. What I’ve learned is that cash is a great way to controls pending. So while I like tools like Mint dot com for figuring out how to put together a budget, what I prefer to do for our family is I go to the bank, I pay, deposit my paycheck like anybody would, and then I take out cash. We use the old envelope system. We have different envelopes for different things. We still pay a lot of our normal bills on line, like a mortgage, for example. We’re just going to do that through online bill payment. There’s no reason to have cash to make a mortgage payment or an insurance payment or something of that nature.

 But when it comes to things like groceries, we take our cash, we stick it in the envelope for groceries, and that’s all that we use for groceries. When the cash is gone, we’re done buying groceries. So it keeps us accountable. It’s a system, my wife and I sat down together and we put together this budget based no our spending, based on what Mint helped us understand, and I tell you, it just really reduces stress, it reduces conflict. There’s no question where the money is going. What I’ve found is we actually save more money as a result of just being intentional about how we’re spending. I’ve had people over the years say Jason, we want to be good stewards of our resources, and that’s important to me, as well. And stewardship means that you understand that what you have doesn’t really belong to you in the first place. You’ve overseeing something, protecting something of value and managing it appropriately and accordingly. If you’ve just got money going out, sure, maybe you can afford to spend it, but is that really being a good steward of those resources?

 For me the answer was no, I needed to be able to at the end of the day, at the end of the week, at the end of the month say this is how much we allotted to this and we stuck with that. You know there’s that old saying you either tell your money where to go or you wonder where it went, and I’d rather tell my money where to go than be sitting around wondering where it went at the end of every month. I really encourage you to consider the old school envelope budgeting system after you get a good budget together.

 The other thing I just want to touch on briefly, if you’re getting ready to retire today, most baby boomers, one of the biggest components of a guaranteed retirement income plan is going to be Social Security. As you know, we’ve brought experts on to this program several times over the last five years that really know Social Security planning. This is a core component of everything that we do. I set up a new website at Social Security-Planner dot come. Social Security-Planner dot com. If you’re thinking about retirement, Social Security is probably going to be a core component of your plan. I would encourage you to come to one of our webinars or one of our live presentations of how to, when you should start Social Security, and especially if you’re a married couple, how to maximize those benefits. I’ve found that how and when you start Social Security, especially for married couples, can mean the difference between a hundred thousand dollars of additional lifetime income just by understanding that.

 It’s a huge component of a good retirement income plan is understanding Social Security. As many people know, you can start it as early as 62. Most Baby Boomers can start their full benefit without any reduction or without any permanent reduction in their benefits at age 66, and the most of you know that if you wait all the way to age 70 you earn delayed retirement credits of 8% per year up until age 70, not adjusted for the cost of living increases that Social Security is well known for. Sot here, while if you’re a single person this isn’t as hard of a formula, because then it’s really just a break even analysis, how long are you going to live and you can kind of back into the numbers that way. But for married couples it comes much more complicated because there’s a lot more moving parts.

 Again, if this is something that you’re thinking about, if you want to have a good retirement plan, maybe you’re in your late 50’s and you’re saying, you know, I’m eyeing retirement and I think we could do this at 62, rather than leave it a guessing game, put together a plan, work with somebody, find somebody in your community that’s really an expert where all they do is retirement planning, somebody that can put together a comprehensive plan for you, somebody that’s willing to say look, I know that there’s no magic bullet to this whole thing. There’s a lot of different financial vehicles out there, there’s a lot of different ways to skin a cat, and what you want to do is you want to find somebody that’s willing to help you develop a plan that is done the way that you want it done. Jane Bryant Quinn, she’s a big fan of low cost index mutual funds, as am I, or exchange traded funds, ETF’s, I think those are great tools. But you know what, some people don’t like them. And for those people that don’t like those tools, you shouldn’t have to use them.

 Some people are big fans of annuities. I can be a big fan of annuities if they’re good annuities and they’re not some of these crummy ones like Jane was talking about, the variable annuities. I think, well, I think you need to be really careful. I shouldn’t lump them all together and say they’re all crummy, but there’s a lot of them that are pretty crummy that tend to have high fees like Jane was saying, so you want to be careful with annuities. But there are some really good ones out there for creating a guaranteed retirement income plan. So find somebody that can say hey, you know, here’s some good annuities. But if you’re one of these people that says I don’t want to use annuities in my plan, well, darn it, that advisor that you’re working with should respect that and say okay, well, let’s figure out how to do this without annuities.

 If you’re somebody that is looking for these alternative investments, things like Real Estate Investment Trusts, you know, what’s the best way to go there? Jane was pretty bold in her statement about these public non traded REITs. She’s not a very big fan of them. She says she hates them, and I can understand that. I’ve seen a lot of people burned by those. But, you know what, if that’s the financial vehicle you want to use, if you really understand all the ins and outs, the lack of liquidity, the high fees associated with them and you still want to use those contracts, then your advisor should help you get those if that’s really what you want to do. Just make sure it’s something that you want and not just being aggressively sold to because it’s what pays your broker the most commission.

 Folks, as always, I sure appreciate you tuning into Sound Retirement Radio. We’re going five years strong. One of the things that’s really encouraging to me is that we see the number of people who are downloading this as a podcast just growing exponentially. As most of you know, we brought Sound Retirement Radio to a bigger radio station this year so that we have a stronger broadcast strength to better serve our community and serve the people right here in Kitsap County in the Seattle region that we serve. Thank you so much, as always, I sure appreciate you tuning in. If want to hear from you if there’s something that’s important that we should know about, please give me a call at 1-800-514-5046. Join us at Sound Retirement Radio dot com, follow my blog at Sound Retirement Planning dot com, or if you’re getting ready to start Social Security, take a look at Social Security-Planner dot com and sign up for one of our upcoming webinars. Until next week, this is Jason Parker, signing out.

Voiceover: …expressed here are believed to be accurate and complete, for general information only and should not be construed as specific tax, legal or financial advice for any individual and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program. Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims paying ability of the company. Investing involves risk. Jason Parker is the president of Parker Financial, and independent fee-based wealth management firm located at 9057 Washington Avenue Northwest, Silverdale, Washington. For additional information, call 1-800-514-5046, or visit us online at Sound Retirement Planning dot com.