I'm A Retirement Advisor: Here's What I Tell Every Client At 62

I've sat with 100 retirees, and the biggest regret almost never has anything to do with a bad investment.
 
It's something I call the momentum trap. At 62, every single signal tells you to keep going, and almost nobody sees it coming until it's too late to get those years back.
 
This video is what I tell every client who walks in at 62, the trap, the blind spots, and how to actually manage what comes next.
 
We're going to cover:
 
- the momentum trap that convinces smart, disciplined people to keep working long after they don't need to
- why delaying Social Security to 70 could quietly force a 7.5 percent withdrawal rate the moment you retire
- the life insurance policy from your 30s you're probably still paying for and don't need anymore
- what a long term care event does to your spouse after you're gone, even with a healthy portfolio
- the tax planning window that opens the year you retire and closes faster than you think
- why the clients I think about most aren't the ones who ran out of money

Learn the tips & strategies to get the most out of life with your money.

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Transcript

The Momentum Trap

SPEAKER_00 0:00

After advising retirees for years, I can tell you the thing they regret most has almost nothing to do with a bad investment or missed returns. It's something that's come up over thousands of conversations that most people at 62 don't see coming. They traded their best, healthiest years for money they didn't even need. By the end of this video, you'll know what I tell clients at age 62: the traps, the financial blind spots, and how to manage your retirement. At age 62, everything signals keep going. Social Security grows every year you delay. Medicare is almost here. The kids are off the payroll, and your portfolio seems to keep growing. Now, each of these individual signs is compelling enough, but when you combine all of them, it feels as if there's this gravitational pull that's very difficult to resist. And it's something that I like to call the momentum trap. Now, on the surface, it seems harmless. In fact, in some cases, it seems good. But here's the reality: it's this momentum trap that ultimately is going to be the thing that leads to the regrets you have looking back one day when you realize you sacrificed your best, healthiest years for money you didn't even need. Here's what's really interesting. The numbers say they could stop. But the people who fall into the momentum trap, they already know that. So why can't they? It's not really about the money. It's about something much harder to actually put down.

Identity Keeps You Working

SPEAKER_00 1:17

Here's the reality. After decades of being a builder, a provider, a saver, an investor, that creates an identity. And that identity might be attached to I'm a teacher, I'm an attorney, I'm a business owner, I'm an engineer, whatever the specifics are, that identity is very difficult to set down. And not just a professional identity, but also the identity of you, the person who's a saver, who's frugal, who makes good decisions. That's something that's very difficult to relinquish. And it's why stepping away at age 62 feels like a loss. You've built your whole life, your whole career ultimately to get to this point. And it's at this point where your income's high, you're respected, you're in charge of others. How are you supposed to let that go? Now that's genuinely hard. That's not a weakness. And that mindset did a great job of getting you to this point. But if you're not careful, that's the same mindset that may lead to loads of regret in the future. And here's why. The goal isn't retirement, per se. The goal is designing the life that you want to live. So the real work is shifting from what you do to who you want to be. And that is much easier said than done.

Blind Spots Overview

SPEAKER_00 2:24

Those first two regrets are the ones that people talk about. But the third one is the one that people never see coming. And it's the one that can undermine everything, even if you've done everything else right. There are four financial blind spots all of you have, and these are the things that set that regret up. I'm going to tell you how you can handle them now so that you can enjoy peace of mind and confidence when you actually

Build an Income Plan

SPEAKER_00 2:44

retire. The first is build an income plan. Most people never build an income plan, and here's why. Your whole life, this was done for you. You have a salary. That salary gets direct deposited into your account. From there, you use that money to spend on whatever you need to spend money on. That changes in retirement because your income plan is no longer a paycheck. It's something you need to construct yourself. And not only are you constructing it yourself, you might be constructing it from multiple different sources. If you have Social Security in a 401k, in a brokerage account, in a Roth IRA, in an HSA, maybe even a pension, how do you sequence where you're pulling money from? That's what an income plan is. Let's use an example. You want to spend $10,000 per month in retirement. How do you get there? Well, you need to construct a plan that takes all those sources of income and puts them together in such a way that you now have $10,000 per month coming in. Maybe you and a spouse combined have $5,000 per month coming in from Social Security. What that means is the remaining $5,000 would need to come from your portfolio. $5,000 per month, that's $60,000 per year. But where do you pull it from? Do you pull it from your brokerage account? Do you pull from your traditional IRA? What about your HSA or your Roth IRA? That's the concept of building an income

Social Security Timing Risk

SPEAKER_00 3:54

plan. Now here's a big decision that's going to drive a huge part of this. What do you do with Social Security? A lot of people see Social Security and they say, well, if I need to spend this amount, I'm going to delay Social Security until 70 because now a big chunk of that total amount I want to spend is covered by Social Security. In a lot of cases, that might be the right call. But let me point out one in which that might be a disaster to your income strategy. If you're retiring at 62, you need to fill that income bucket for eight years before Social Security even kicks in. Now you might be saying, James, I know, but I'm going to live until 90 or beyond. Because I have longevity in my family, I take good care of myself, I know I'm going to have a long life expectancy. Let's assume we could guarantee that. That still might be a mistake to collect at 70. Here's why. You have a $2 million portfolio, let's say your social security and your spouse's social security doesn't kick in until 70, which is eight years down the road. So that $10,000 per month, that all needs to come from your portfolio. That's $120,000 per year, but that's after taxes. Let's just use a simple number and assume that you need $150,000 per year before taxes. So you can pay $30,000 in taxes. I'm just making up an arbitrary amount there to illustrate the point, and then left with $120,000 per year or $10,000 per month after that. Well, $150,000 per year divided by a $2 million portfolio, that's a 7.5% withdrawal rate. Now, if the market's really good for the next eight years, that might not be a problem. But what happens if you retire and six months in or 12 months in, the market drops 20%, 30%, 40%? What do you do then? Now that 7.5%, it's not just 7.5% on a $2 million portfolio. You're taking that same dollar amount, $150,000 per year, let's say on a lower portfolio amount, let's say $1.5 million, because there's a 25% downturn. Now all of a sudden, that same withdrawal rate that represented 7.5% at the beginning of your retirement now represents a 10% withdrawal when the market has taken your portfolio down to $1.5 million. Not just that, but every year you're taking that withdrawal, you're digging a deeper and deeper hole. So an income plan looks at a couple of things. It looks at when do you collect Social Security? Because in a case like that, you might want to pull it forward to protect your portfolio against being fully withdrawn in a down market. Then from there, it looks at what order do you pull money from the different types of accounts that you have. And then finally, it looks at what specific investments do you put in each account based on what you're pulling first and based on what you want to grow. Now, this can get a little complex, but it really matters. If you want to see how we implement this system at Root Financial, click the first link in the description below or the pinned comment below called the Sequoia system. That will show you more context on that. But that illustrates to you the difference between an income plan and your working years compared to an income plan when you're

Tax Planning Window

SPEAKER_00 6:50

retired. The second financial blind spot is leaving years of tax strategy on the table. Here's the theme I notice in conversations I have with retirees when we start talking about tax strategy. They say, James, I hear you, of course, I'd love to pay less in taxes, but I'm a W-2 worker. I know I have my 401k. Maybe I contribute money to an HSA. There's only so much I can do in terms of lowering my tax bill. I'm not a business owner or I don't own real estate. I know there's tax strategy there, but what can really happen for someone like me that doesn't have a super complex financial life? Well, here's the reality. In your working years, you are absolutely right. There's only so much you can do to lower your tax bill. In your retirement years, that completely shifts. In your retirement years, you get the decision in many years as to what your tax bill is going to be. It's not as if you have one salary and that salary pushes you into a certain tax bracket. You get to make your salary. And what I mean by that is when you choose how much you're going to spend, let's say it's 10,000 per month, is that coming from Social Security plus brokerage account plus IRA? Is all that coming from IRA? Is some coming from Roth IRA? Is some coming from capital gains versuming from dividends? All of these things are taxed differently. So the right tax strategy is the one that says if this is how much income we want to create, where should we pull income from to create it? Because there's different ways to do this, and the difference could be tens or hundreds of thousands of dollars if you make the right decision. And not just that, but typically the year you retire, a window opens up. It's called your tax planning window. Your W-2 income from your job drops and required distributions from your IRAs typically hasn't started yet. When that does start in the future, your income will pop right back up. So think of this as a valley or a window where do you do Roth conversions? Do you keep income low for subsidies? Do you do tax gain harvesting, where you realize long-term capital gains at a 0% tax bracket? Those are the decisions that need to be made. And if you don't have a tax plan to make those decisions, you could be leaving a whole lot of money on the table.

Insurance Coverage Checkup

SPEAKER_00 8:51

The next blind spot is with insurance. Now I think you might start to see the theme here, where the theme is that what worked in your working years does not work in your retirement years. But people continue with whatever coverage they had. And that coverage is often either too little or it's too much. Let me explain. Let's assume that you have a life insurance policy and you bought that life insurance policy when you were 35 years old because you had kids at home, you had a spouse that depended upon you, you had a mortgage, and if you passed away, you would need a lump sum of money coming in to support your family while you were no longer there. Then let's assume you work for the next 25, 26, 27 years, you're now 62 years old. Well, you have a $2 million from life insurance policy, let's assume. And at 35, you needed that. But now you have over $2 million in your investments by themselves. And now your mortgage is paid off or almost paid off. And now those same kids that were young in your 30s are now grown and out of the house. So, yes, as tragic as it would be if you passed away, you probably don't have the same insurance need today at 62 as you did in your mid-30s. Now, some people they just keep paying the insurance because it's emotionally easier for them to know that something's there. And if that's the case, that's fine. But recognize that every additional cost you go into retirement with is additional strain that you're gonna put on your portfolio. So we just have to ask ourselves that question. Is the cost of this still worth what it's going to do or the trade-off you're gonna have to make in other areas of your retirement? So this could be life insurance. This could be disability insurance, this could be insurances like that that maybe you don't need any longer in your retirement years. But as often as I see people who no longer need coverages there, there's other areas where people might be underinsured. Property and casualty or umbrella insurance is one that I see very frequently. You have property and casualty insurance on your home, on your vehicle. Maybe you have an umbrella insurance policy that covers limits beyond that. And what happens when you get those policies is you lock in a certain amount of protection. You say, my net worth is this, so I need to protect above that. And you're good when you get the policy. But then what happens is your net worth grows. The value of your home grows, the value of your investments grows. And while your insurance coverage was pegged here, your net worth continues growing above that. And everything above that is now liable. Everything above that is what's now exposed. So if you haven't reviewed your coverages in a while, you might want to do so. Because one of the things we need to think about is as you look forward over the next 20 to 30 years, when I stress test a plan, I'm trying to figure out what could possibly make this plan not happen. The obvious ones are things like market downturns and inflation and big expenses. What people don't think about is some of the liability they are exposed to. So make sure that you're looking at those coverages to ensure that you've got a

Long Term Care Stress Test

SPEAKER_00 11:43

plan. And then the big one in people's retirement years beyond just healthcare is long-term care insurance. What would happen to your plan if you had a long-term care event? And here's the thing: if you are married, the long-term care event, as bad as it is for you, is typically even worse for your spouse. So let's walk through what happens in that case. You need assisted live in, maybe you're there for a couple years or three years. Now, this portfolio that you and your spouse had, it's being drained to cover those expenses. Sometimes fully drained, and now you're even pulling money from the house, a reverse mortgage, selling the home, whatever the case might be. Now you ultimately pass in that facility after a couple few years of support. Not good for you. But also think about your spouse. They're still living. They might have another 10, 15 plus years of retirement, but that nest egg that you built, that's now gone. So what do they do in that situation? This is another example. If you're not fully stress testing your plan, it might not be you that pays the price, but your spouse. Make sure that you're looking through all these insurance coverages and saying, how does not having the appropriate coverage here expose me to a potential risk? Now, that doesn't mean everyone needs long-term care insurance. There are ways of protecting against that that don't require a policy, but you need to look at it. This is a blind spot far too many people don't deal with.

Give Your Portfolio Purpose

SPEAKER_00 13:02

Then the fourth financial blind spot is this. They let their portfolio keep growing with no purpose. I want you to think about why your portfolio exists. All money is for consumption, either current consumption today or future consumption when you need it on the road. Now, consumption could be a lot of things. It could be paying your bills, it could be gifts, it could be legacy for family, it could be any number of things, but it's designed to be spent on something, to be consumed on something. So we get that intuitively, but then we just keep growing our portfolio. And we get addicted to that growth almost. That growth itself becomes like the thing that we are pursuing. And we hit our portfolio number, we say, this is pretty fun. So we keep contributing and it keeps growing. Then we hit another number. So this feels pretty fun. And if we're not careful, all of a sudden that becomes the goal of seeing our portfolio balance grow all the while our life is starting to slip us by. That portfolio, it's not going to go with you. That portfolio, unless it's translated into income, and that income then supports what you want to do, it doesn't have much value. So think of that as consumption. How much consumption could that provide you today or in the future? Again, it doesn't just have to be for you. It could be her family, it could be for charity, it could be for any number of things. But what is that intended purpose? Too often people let their portfolio keep growing and they keep working so that it can keep growing, but they've never done the work of saying, what do I ultimately want this to support? Now, that work, of course, doesn't start with a portfolio, it starts with you. And what is your version of a life well lived? What is your version of a happy retirement? Design that, quantify that, visualize that. Is it travel? Is it golfing? Is it sailing? Is it playing pickleball? Is it spending time with loved ones? Is it going on walks every day? You get to decide that. You and only you. But once you do design that, then you can quantify what are each of those things going to cost. And once you quantify what each of those things costs, you can work backwards and decide how much of a portfolio do I need to create that income. But if you're not doing that work, you're funding a lifestyle that you've never quantified. And so that portfolio just keeps growing. And it's a terrible thing to see when that goes wasted. When people make that the goal instead of the thing they could have done with that the goal. So don't just let your portfolio grow aimlessly. Design it for a purpose. Have an intention with it, because if that's growing, but your life's not, you're doing something

Stop Optimizing for Later

SPEAKER_00 15:21

wrong. So what I want to impress upon you as we start to wrap this up is the best years of your retirement aren't going to happen at 75, 85, and 95. They're going to happen today. So stop planning to keep optimizing for your late 70s and 80s when you're failing and neglecting what you could be doing today. The clients I think about most aren't the ones that run out of money because that rarely actually happens. It's the ones that ran out of time. They were always optimizing for tomorrow, but never for today. And of course, there's a balance there. We need to be prudent about the future, but we also need to enjoy what we can do today with what you have built

What to Do at 62

SPEAKER_00 15:54

to get there. So, what should you do at 62? Well, you need to start reframing what retirement is. It's not a destination to be achieved. It's a place where you now have freedom. But that freedom doesn't last forever. Health will deteriorate. We're not going to live forever. So make sure that the things that you've spent the last 40 years accumulating are translated into something that's going to allow you to live the life you want

Final Resources and Next Steps

SPEAKER_00 16:17

to live. At Root Financial, we serve over a thousand families, helping them to do exactly this. And if you'd like to see exactly how that works, click the link to the Sequoia system video in the link below. Also, if you want to see the Social Security decision and how it impacts you, check out this video right here. I work through collecting Social Security at 62, 67 versus 70 so you know what details matter most to you in your decision to collect.