Don’t Retire If This Is You - 5 Warning Signs

You can hit your number, be fully financially ready, hand in your notice, and still end up miserable. Or worse, running out of money.
 
In 15 years as a retirement advisor, I've watched it happen again and again, and it almost always comes down to one of five warning signs. Most of them have nothing to do with how much you've saved.
 
If even one of these is you, it's not a no. It's a not yet, and I'll show you exactly how to fix it.
 
We're going to cover:
 
- the story of a client we'll call Bob, who retired early to move across the country with his new wife, and kept calling us saying he needed more money
- why two people can retire on the same day with the same average return and end up with completely opposite outcomes
- the real reason depression and divorce rates are so high among retirees, and it's not about money at all
- the conversation most married couples never actually have before one of them retires
- what happens after the retirement honeymoon phase wears off, and why so many people feel lost when it does

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Transcript

Five Retirement Red Flags

SPEAKER_00 0:00

My 15 years as a retirement advisor, I've learned something that people aren't prepared for. And that's you could be financially ready and still not be fully ready for retirement. I've watched people hit their number, be financially ready. They hand in their notice, and in a few years, they're miserable, or even worse, running out of money. And it almost always comes down to one of five warning signs I'm going to tell you in this video. The scary part is most of them have nothing to do with how much you have saved. So before you retire, make sure you are not in one of these five scenarios. If even one of them is your case, don't worry. I'll tell you exactly how to fix it so you can be fully ready for your retirement. Let's get

Warning #1: Blind Spending

SPEAKER_00 0:37

into it. The first mistake is you don't actually know how much you're going to spend. Let me tell you a story. My first job as a financial advisor out of college, we had a client. And this client, we'll call him Bob. Bob came to us and said, Hey guys, I've recently been remarried, and all of a sudden I know I was planning to work a little bit longer, but I'm ready to retire now. I want to spend time with my new wife. We're going to move across the country to where her family is. He was excited. So we said, okay, let's run a projection. We asked Bob, we said, How much do you think you're going to spend in retirement? We already know your portfolio value and your pension sources and your social security sources, but what do you think you're going to spend if you retire? And he gave us a number. Let's call it $6,000 per month. So we said, okay, Bob, we went to the drawing board, we ran the projections, we tied in where social security came in from. What about pension, portfolio? Dialed in everything. We came back to Bob and said, Bob, really great news. If this is the amount you want to spend, you're good to go. So Bob sees this projection and says, Great, and he retires. A few months goes by and Bob says, Hey guys, I need more money. And we say, okay, what happened? What's up? And he said, well, I had property taxes and I had a whole bunch of travel expenses I wasn't accounting for. Okay, we send Bob the money. A few more months goes by. Bob calls and says, Hey guys, I need more money. He said, Hey, what's it for? Well, there was this expense I wasn't accounting for, and this is actually a little higher than I was originally thinking it would be. So we say, okay, Bob, when we send the money. Then a couple months later just goes by and says, hey guys, I need more money. And we say, okay, Bob, let's have a deeper conversation here because we ran the projection and you were good. But now all of a sudden there's a lot more expenses that maybe we weren't factoring in, that maybe we didn't know about. And what we learned was that initial number that Bob gave us was kind of just drawn out of thin air. He looked at how much had he spent last month and he told us that. And his entire retirement projection was based on a dramatically underestimated monthly expense number. And so the implications of that is we had a hard conversation with Bob saying, Bob, you you can't stay retired if these are the amounts that you're actually spending. So the key lesson from that story is yes, everything looked good on the projection, but there was one variable that was wrong. And that variable was the amount that Bob was actually spending. So how do you account for that?

Budgeting One Off Costs

SPEAKER_00 2:33

Well, you need to understand how much you want to spend. And this cuts both ways, by the way. You have the instances like Bob, where if you underestimate, then you're in real risk of running out of money. I've seen other people who didn't ever get around to estimating how much they're actually going to spend or tracking how much they want to spend. So they end up working way too many years past when they otherwise could have retired simply because they never actually knew that number. So they just kept thinking about make more money, save more money, that will be okay. But here's where people get tripped up is people look at monthly expenses and say, okay, here's how much I spend on food, here's how much I spend on utilities, here's how much I spend on insurance. And they think that's it. But it's the one-off stuff that really gets them. The property taxes twice a year, the Christmas gifts at the end of the year, the car breaks down and the big expense needed to pay for that. And it's those one-offs that can drain a portfolio. So this is the number one mistake people make as they don't actually know how much retirement is going to cost, which means all the projections you do aren't actually based on reality. So I go back to Bob. He said to us, You said I could retire. We had to say to him, you can on $6,000 per month, but you're spending way more than that. So don't make that same mistake when you retire. Have an understanding of how much you're gonna spend so the projections you run are based on reality.

Warning #2: Your Portfolio Is Not Ready

SPEAKER_00 3:48

The second warning sign that should prevent you from retiring is if your portfolio is still built for accumulation. Now here's why this matters. When you are working, the only thing that matters about your portfolio is your average rate of return. It doesn't matter if the market's way up and way down. Yes, that's maybe not fun, but you're continuing to put more money in your 401k. You're continuing to say that's not really hurting you. All that you care about is what's the average return over the time that you're investing. But the day you retire, that flips because the real risk to you in your retirement years isn't a low average return. It's a poor sequence of returns. Let

Sequence Risk Explained

SPEAKER_00 4:24

me explain. Let's assume that you and I are both retiring on the same day. We're retiring right now, we're both 60 years old, and we both have a portfolio that's gonna average 7% per year in retirement. Now let's assume my portfolio goes up, up, up the first few years. Let's assume your portfolio goes down, down, down the first few years. Now keep in mind, they're both gonna average 7% over the duration of our lifetime, but very different experiences at the beginning of retirement. I am gonna have a much higher likelihood of having a positive outcome in retirement and you are gonna be much more likely to run out of money. Why? Well, because it's not just that the portfolio is going down on your end and mine's going up in the first few years, it's that we're both actively spending from our portfolio. So if your portfolio is dropping 10%, then 20%, then 5%, it's not just that. It's that you're also pulling out 3, 4, 5% of it. And when the market's going down and you're pulling money out of your portfolio, you're digging yourself a hole. And that hole becomes harder and harder to climb out of the more it goes down. So if you have an accumulation portfolio, which is typically going to be thought of as investing more growth-oriented stocks, growth-oriented investments, that can be great for your working years. Those down years, if anything, they're opportunities. But if that continues and that's all you're invested in in your retirement years, when that portfolio drops and you're spending from it, you might be digging yourself a hole that you just can't get out of. So here's the thing:

Build Stability Buckets

SPEAKER_00 5:47

what I'm not saying is get out of the growth investments. You absolutely still need a portion of your portfolio to be positioned for growth because if you have a 20 or 30 year retirement in front of you, inflation is going to go up dramatically, which means you need a portion of your portfolio outpacing inflation so you can maintain your purchasing power over time. You can still afford eggs when eggs get more expensive. You can still afford food when food gets more expensive. You can still afford you fill in the blank when it gets more expensive. But we need to have a portion of our portfolio that's not invested that way. A portion of our portfolio that's not prioritizing growth, it's prioritizing stability. That stability is going to be the thing. But when the market drops, not if, when. And when it drops big, you don't have to touch it. You don't have to be selling your stock investments when they're down 30, 40, 50%. You can dip into the conservative portion of your portfolio, saying this is a portion that stayed stable, maybe even grown a little bit. That can be where your income comes from, which gives time for your portfolio to recover. So your retirement portfolio has to do two things. It has to keep up with inflation over the next 20 to 30 years, and it has to support your short-term needs even when the market's declining. That portfolio looks very different from an accumulation portfolio. So if you have made any tweaks to your portfolio from the time that you're working until the time that you retire, it's not a good sign going into your retirement. Now, those two warning signs were about money, but the next three, they have nothing to do with your portfolio. And they're where most of the regret actually lives.

Warning #3: No Vision

SPEAKER_00 7:18

The third warning sign is you don't have a clear vision of what you're actually retiring into. Here's the blunt truth. Depression rates, divorce rates, they're at an all-time high for retirees. You can attribute this to a number of different things, but one of the main things is people don't actually know what they're retiring into. They retired away from work, but not toward anything. And when you retire away from work, in many cases, you're retiring away from your identity. And even if you don't like it, now all of a sudden you're left with this emptiness. There's a sense of loss, there's a sense of confusion, there's a sense of anxiety of what am I supposed to do? And who am I now that I'm not an attorney, a doctor, a school teacher, whatever the case may have

Design Your Ideal Days

SPEAKER_00 7:55

been. So what do you need to do? Well, you need to pick what you're gonna prioritize. What do you want your life to look like? What's important to you? Now there are a few things that should be universal. Health. Are you prioritizing your health? Relationships. These can be family relationships, these can be friend relationships, these can be relationships with those around you. Are you prioritizing your relationship? That's gonna be a huge determining factor of are you enjoying your life in retirement or not. Then there's other things, hobbies, travel, giving. What are the things that are actually important to you? So start by picking what to prioritize or what things to prioritize, then do something with it. Just saying maybe I'll travel, that's not good enough. Putting the date on the calendar, do that. Try things, be willing to do things even if you're not totally convinced that it's what you're going to want to do. No one knows exactly what they want to do. You spent the last 30 to 40 years of your life committed to something, committed to your career, committing to raising a family, committed to saving money to get to where you are. Now all of a sudden, it's a blank canvas. And maybe you've got a sense of what you want to do, maybe you don't. Regardless, the goal is to try things, experiment, do new things, push yourself out of your comfort zone. That is what's going to be the thing that separates those that fully enjoy their retirement and those that feel really lost and have no idea what to do with their life. A quote that I really love is thoughts are disentangled over speaking lips and pencil tips. So so often we have these vague ideas that we want to do. Here's what I encourage you to do talk to someone about it or write it down. What do you actually want your life to look like? Yes, you have some vague idea of that, but sometimes those thoughts aren't clarified until we either speak them, speak them to somebody else, or we write them down. But just starting to think about, okay, fast forward 20 years. You're 60 years old today, you want to retire. You're looking back at your life when you're 85 years old. What happened for you to feel like this next season of your life was everything you wanted it to be? Tell somebody that. Write it down. What did it look like in terms of your health? What did it look like in terms of relationships? What did it look like in terms of hobbies, in terms of your faith, in terms of the volunteering, in terms of all the things you want to do? So start there. What would 85-year-old you look back on and say, that's what you should have done today? Six-year-old James, six-year-old Frank. And then with this, what specific actions can you commit to today that would make yourself at 85 look back and say, yeah, those are the actions that are going to lead to you being able to look back in your retirement one day and say, you did it right. You did exactly what you should have done. You spent decades planning the money. Can you spend just a little bit of time now planning the life?

Warning #4: Spouse Alignment

SPEAKER_00 10:32

The fourth warning sign is you and your spouse haven't actually talked about what life looks like together. Obviously, this only applies if you're married, but if you're married, this is far more common than you think. You maybe have one spouse that's working and they think, okay, when I retire, it's going to be golf, it's going to be relaxing, it's going to be time spent with friends. The other spouse thinks, okay, we're retired, we're going to be traveling, or we're going to be doing a whole bunch of home improvement projects, or it doesn't matter what it is, but those visions are very different. And if one of you wants to travel and the other wants to relax, or one of you wants to golf and the other wants to do home improvement projects, if that's not spoken, there's going to be real conflict in your marriage when you actually retire. So none of this is right or wrong. But as long as that goes unspoken, there's going to be a collision at some point. Better to have those conversations before retirement happens so that when you actually retire, you know what your expectations are and you know what your spouse's expectations are. So this is that same vision point, but times two. Those visions don't have to be perfectly the same, but you do have to communicate them. Because there's no reason you can't do all of that. But being on that same page is going to make this retirement years much better

Warning #5: Running Away, Not Towards

SPEAKER_00 11:37

for you. This last regret is the one that ties them all together. And it's the difference between the retirement you love and the one you quietly regret. And it's this you're running away from something, not towards something. Here's the thing removing a bad thing doesn't automatically put a good thing in its place. You know what you don't want. All of us know what we don't want. You don't want the alarm clock, you don't want the deadline, you don't want the horrible boss, you don't want the annoying coworkers. Those are the things you don't want. But simply removing those doesn't automatically say now all the things you do want are perfectly in place. So I'm going to tell you, this is the reality you're going to experience.

Honeymoon Phase And Purpose

SPEAKER_00 12:12

You're going to retire and you're going to have a honeymoon phase. This is very widely documented. When you do get rid of those things, when you are past those things that you don't enjoy, it feels really good. And you're saying, I don't know what you're talking about. I'm sleeping in, I'm doing what I want, when I want, all my days are mine. It's going to feel really good during the honeymoon phase. That might last three months, that might last two years. But at some point it wears off. And it's at that point that you're going to feel lost. Just because you don't have those bad things in your life doesn't mean you now have purpose in your life. And the thing you're going to want in your life is purpose. This doesn't need to be some grand vision, some grand purpose of changing the world, but what are you doing? Why are you doing it? What's actually important to you? So this is where I go back to the third point that I made of find that thing that you want to be, find that thing that you want to do. Don't be worried if you don't know exactly what it is yet. In fact, for many people, it's very unusual to know exactly what they want to do. And the reason, as I mentioned before, is you spent your whole life committed to something, sacrificing your priorities, what you want to do, your freedom, because you're being responsible, because you're working, you're raising a family, you're paying off a mortgage, you're meeting deadlines. All that quietly starts to push out the things you want to do to the side. Then you wake up one day and say, okay, what do I actually want to do? And you realize it has been 20, 30, 40 years since you've actually asked yourself that question. So you're rebuilding that muscle. You're rebuilding that muscle of saying, I'm going to try new things. I'm going to see what I like. And if you can commit to trying, if you can commit to experimenting, you're going to find that thing. But that thing's not going to magically appear just because the alarm clock and the deadmatch

Wrap Up: Money And Life

SPEAKER_00 13:45

are gone. So two of these things are about money and three are about life. And what I find is people obsess over the money part and completely ignore the life part. But that's where almost all of the regret actually lives. And as I mentioned before, if any of these feels like you, it's not a no, it's just a not yet. All of them are fixable before you actually hand in your notice. But getting retirement right means getting both halves right, the money and the life. The financial side, especially, is one you don't want to guess at, knowing what you'll actually spend, design a portfolio that's built to last. That's the difference between a retirement that holds up financially and one that doesn't. If that resonated, this is the next video that you're going to want to watch called I've never seen so many retirees make the same mistake. And if you want a free assessment that shows you where you stand today relative to your retirement goals, comment quiz below. I'll send you a free quiz that you can take to get that assessment.