I’ve met a lot of people over the years who have over prepared for retirement, and I’ve met others where I had to say, I’m sorry, you need to keep working. Unfortunately, I’ve seen good hardworking people, people who have saved, invested, and tried their best. They’re still unable to retire, and the question’s why?
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Retirement Budget Calculator – Your Retirement Recipe
Transcript:
461: Four Reasons Good People Fail at Retirement—and How to Avoid Them
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Welcome back America to Sound Retirement Radio, where we 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, America. Welcome back to another round of Sound Retirement Radio.
So glad to have you tune in into this episode. The title is. Four reasons good people fail at retirement and how to avoid them. But before we get started, I always like to start out by renewing our mind, and I have a verse here from Acts chapter two, verse 28. You have made known to me the paths of life you’ll fill me with joy in your presence.
I told my luggage that we’re not taking any trips this year. Now I’m dealing with emotional baggage.
So I’ve met a lot of people over the years who have over prepared for retirement, and I’ve met others where I had to say, I’m sorry, you need to keep working. Unfortunately, I’ve seen good hardworking people, people who have saved, invested, and tried their best. They’re still unable to retire, and the question’s why?
Today I wanna share the four biggest traps that can keep people from retiring and how you can avoid them. I was at a speaking event recently and I asked the audience, who here likes chocolate chip cookies? Hands shot up. Then I asked them to name the ingredients and everybody knew they’re throwing out things like flour and sugar and eggs, vanilla butter, chocolate chips.
One person even said nuts. But then I asked one man who had never baked cookies, how much to use of each of these ingredients. What was his recipe? He said, a cup of baking soda. Four cups of sugar, A quarter cup of vanilla. Can you imagine how those cookies would taste? The point is he had the ingredients, but he had no idea how to put them together.
No idea how much of them to use. And that’s just like retirement. Most people have the ingredients, social security, savings, investments, but they have no recipe. And that’s why we created the retirement budget calculator. It’s your recipe for retirement. Okay, so let’s get into the four traps. Number one is too much debt.
Debt keeps people chained to work, car payments, credit cards, boats, RVs, sometimes even mortgages. When every paycheck is going to payments, there’s no freedom. There’s no opportunity to accumulate wealth. Wealthy retirees still often use credit cards for the points for the travel, but they pay them off every month.
Too much debt in retirement, they just don’t mix. Now, I have seen instances where people continue to have a mortgage in retirement because they’re paying 3% on their mortgage interest, and they’re earning much higher than that in their investments, and so they’re, they’re willing to take that trade off now, they could write a check anytime they wanted and pay the mortgage off.
But they choose to keep it because of the arbitrage. The second trap is no clear spending plan, and you must know what you spend every month. What are your essential expenses? What are your discretionary expenses? Your spending number is the foundation of your retirement plan without a spending number.
You’re just guessing, and one of the things I really don’t like is something like a 4% withdrawal rule. This was brought to us by the investment community to try to understand what’s a sustainable withdrawal, but it really doesn’t answer the question of are you gonna run out of money in retirement?
Because the withdrawal rate is all about portfolio withdrawals. It’s not about having a good. Financial plan, a good retirement plan. If you wanna be able to answer the question, have you saved enough? Are you gonna run out of money in retirement? Can you retire? You really need to understand your spending.
Number three is misunderstanding your assets. I’ll never forget one time a couple came in and this gentleman had put together this really complex spreadsheet and he had added up his net worth and then he took a percentage of that net worth and said, okay, here’s how much, uh, he could spend every month.
And of course. In that net worth was the equity in his home, which was a huge mistake. I mean, he wasn’t planning, they weren’t planning to sell the house, but they had included that as an uh, spendable asset. And so when they came back in for the second meeting and I had to show them that they were actually on a collision course for running out of money that.
You can imagine that conversation didn’t go over well, but many people don’t separate their net worth from their liquid assets and, and you can’t retire on home equity loan if you have a $2 million home. But no retirement accounts, no savings. Your house rich and your cash poor retirement requires income producing assets.
Not just impressive numbers on paper, retirement is all about income and cash flow, and that’s why people who retire with a pension and social security are usually some of the most secure people in retirement. They can live on their guaranteed income alone and then they never have to touch their investments, or if they touch their investments, it’s for an extra trip to Europe.
To, you know, go to the places they’ve always wanted to go, but they’re not depending on those investments for day-to-day living expenses. The fourth trap is treating, investing like gambling. Some folks speculate they day trade, they follow hot stock tips, they subscribe to expensive newsletters, and I’ve seen people lose hundreds of thousands this way.
At first, it feels exciting, like you’re smarter than the market, but over time, for most people, speculation destroys wealth. Retirement investing should be boring, diversified, disciplined, and designed to provide steady income. At the end of the day, what you really wanna understand is what’s the rate of return you need to earn in order to make sure that your money lasts for the rest of retirement.
Now, in the retirement budget calculator, we give you historical returns. We give you Monte Carlo analysis so that you can see what your portfolio would look like using those different assumptions. However, I always like to say hope for the best, plan for the worst. So if you just have something like a, a simple 4% rate of return every year and 3% inflation assumptions, then you can really model out conservatively if your money’s gonna last.
And then you can also apply some of these other historical and backtest and Monte Carlo analysis to see what the numbers might look like. So the four roadblocks, the four mistakes, the four ways that people mess up retirement, the four traps, if you will, are having too much debt, no clear spending plan, misunderstanding your assets and not separating your home equity from your liquid spendable assets.
And then treating, investing like gambling. If you want to retire with confidence, you wanna avoid those four mistakes. Now, remember that cookie story, the ingredients aren’t enough. You need to have the right recipe, and that’s why we built the retirement budget calculator. It helps you see your spending, your income, your assets, and create a plan that you can trust.
Right now, we’re offering something that we’ve never done before, which is a complete 14 day free trial. You’ll get the calculator access to Fin, who is your AI financial assistant, a private community with other smart people where you can share best ideas. And we have flow charts and checklists for retirement.
And then you also have all the scenario tools to test your plan against real life changes. Like when should you start Social Security and Roth conversions. And Monte Carlo you can even, uh, stress test against something bad happening like a long-term care event. Retirement isn’t about having the biggest number in your 401k.
It’s about clarity, confidence, and freedom, and knowing that you can spend to the end without worrying about running out of money in retirement. Thank you for tuning in to Sound Retirement Radio. For articles, links and resources from today’s show, visit sound retirement planning.com. If you enjoy the podcast, share it with a friend and give us a five star review.
Ready to kickstart your retirement planning head over. To retirement budget calculator.com. Need assistance with investment management, explore our services@parkerfinancial.net. Information and opinions 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 LLC, an independent fee-based wealth management firm. Located at 9 2 3 0 Bayshore Drive Northwest Suite 2 0 1, Silverdale, Washington. For additional information, call 3 6 0 3 3 7 2 7 0 1 or visit us online@soundretirementplanning.com.
