The #1 Retirement Fear That You Must Be Ready For

today we're diving into the number one stress you will have in retirement and that is running out of money according to a recent survey about 75% of retirees face this fear the fear of running out of money and it's warranted so the fear is real but there are some ways to alleviate this fear which I'll talk about later in this video that will help you walk through it create a solution and also just mentally wrap your head around what you can do to make sure that you don't live in this here every single day because retirement is supposed to be enjoyable you've worked 30 40 maybe 50 years to build up to this point and to sit in retirement and fear this is detrimental to you it's not going to help you there are ways around it so let's break this down while running out of money is obviously the big concern I think it backdrops on to the fact that we're living longer in fact if you're a 65-year-old couple the chances that one of you live into your 90s is over 50% so they data is there showing that we are living longer and the fear of living longer means our money needs to last longer for us so that if we live into our 90s maybe even into our hundreds that we're going to have money there the second backdrop to this fear and this is a legitimate one cuz I see it every single day I have four young kids and my grocery bill has tripled in the last 3 years now my kids are getting older they're eating a little bit more food but the cost of groceries it's the cost of living in general to do anything has skyrocketed as you're entering into retirement you say well Adam like I'm going to live longer than I expected and just to put food on the table cost an extra 50 or 100% than it did just a few years ago and those two things drive that fear and again it's a legitimate fear but it's on the top of your mind and for a lot of you you're not actually enjoying retirement because of this fear and that's what I want to break down here and give you some tools so that you can push through this now the two other things that are a bit of a backdrop here are health care cost people are very uh aware and concerned about down the road I may need health care and I mean may need inhome care or I me may need to go to a care facility obviously there could be large costs that again do your research talk to people that have gone through that but most of you won't need a care facility and most of you if you do it's not for a long period of time and I think we over emphasize it um but again we all hear that story of someone that was in a care home for 15 or 20 years years and it costs you know $8 to $10,000 a month that is not the rule that's the exception so again do your research obviously there can be some cost to that but build that into your plan which I'll touch on here shortly the fourth backdropparty in the stock market and you know as you're in that accumulation phase and building up for retirement it's much easier because when the market drops guess what you're putting more money in and you're buying stuff at a discount right we all want to go to the store and get a sale and in the accumulation phase we get sales in the stock market all the time right if I can invest when the Market's down that's great I bought the same stock I bought a while ago on sale that's a win but as you enter into retirement all we're doing typically is drawing money out and so as stocks fluctuate over time you know if we're hitting at the bottom of the curve and we need money and we haven't planned properly that means that we're actually selling our items on the discounts like we're having a garage sale with our hard-earned assets that we've saved up for many years so we need to avoid that so the fear of stock market fluctuation again a lot of you fear that but there are ways around it and I'm going to touch on that right now so the way to avoid that stock market fluctuation over time is to have a proper plan and know your cash flow needs everyone calls it something a little bit different cash bucket cash Reserve whatever you want to call it but if you know what your cash flow need is I.E you know how much money you're going to need out of your Investments for the next 1 2 3 years you can plan for that so whether you're putting into a lad GIC an individual Bond just a cash account whatever it is but that money is safe and aside so you know we're sitting in 2024 right now let's say 2025 you need $20,000 out of your riff is that $20,000 invested in the stock market and if the market drops 20% are you still going to be able to pull out that 20,000 are you selling at a loss how how is that working for you probably not very good so what you want to do is make sure that $20,000 isn't something that's not tied to the stock market we're fortunate right now that you could have it in like a GIC and actually get a decent rate of return and you want to do this for 2 to three years out so 2025 2026 and ideally 2027 so if you're doing your own management or you have someone doing that for you make sure that it's mapped out because then if the market drops 20% guess what that doesn't matter you're going to give it time to ride back out and if you look at any graph typically it takes less than 18 months to rebound and that's why if you have 2 to 3 years of cash flow aside you have time for that to rebound again any graph longterm of the stock market grab whatever index you want it goes up over time but there's obviously this roller coaster along the way preparing for cash flow will help alleviate that stress you know it's there you don't have to worry about it our clients that we kind of build this plan and and work with the investment Council firm on we that for them so we say okay here's your cash flow for the next 2 or 3 years yeah we know the market will go up over time or historically has we assume it will over time but your cash flow you need that you need to put food on the table you only have so many go go years in retirement we don't want you to miss them right we don't want you to delay that family trip to Europe or whatever it is because the stock market is down 20% like why would you not plan for that so make sure you're planning and that takes out the fear out of stock market Market fluctuation out of retirement completely and I've seen this firsthand for the last 18 years with our clients it is possible you just need to implement it on your ENT so tip number one to help you alleviate that fear of running out of money in retirement is around cash flow so again make sure you plan for that cash flow the second thing is to look at your income sources so you might have a pension from work you might have rsps TF faades you might have a l from an old company plan and then of course most of you will have both CP and old age security Now for those of you that fear running out of money which again legitimate fear it's about 3/4 of you watching this video statistically have that fear yet most of you are taking your Canadian pension plan between 6065 so you're taking your CPP early you're guaranteeing yourself less money going forward and you fear running out of money like there's a complete disconnect here and you can write all the comments you want down below but the data is the data delaying your CPP will give you more money I've shown it again and again and a lot of you say Adam but if I delay my CPP to 70 versus taking it at 60 I've lost 10 years of income no no no that's when you draw down your other accounts and create tax efficiency and again showed in other videos I'll show it in future videos but here the point is if you're fearful of running out of money don't you want the most guaranteed income sources kind of later in life as long as you have enough assets to kind of tie you over now and give you the required income to enjoy that go- go phase delaying your CPP and potentially delaying your old AG security is going to give you more money for the rest of your life guaranteed so if you live in your 80s 90s hundreds your CPP and OAS is there for you it's guaranteed it's adjusted to inflation it's a great asset to have in fact most of you don't have a defined benefit pension plan but we all want one right I want one you want one if you have one lucky you but we all wanted to find benefit pension plan because guess what it's guaranteed income for the rest of your life adjusted to inflation it's a golden ticket yet we all have that golden ticket in CPP and old age security yet we all take or most of us will take less than we could possibly get work through the numbers with your financial planner but if you're someone us fearful running not of money and your thought process is taking CPP early there's there's a complete disconnect here you haven't gone through the process you haven't actually done your research you need to look at the num the data behind it a lot of you are making emotional decisions and your one emotional decision to take CPP early is really amplifying the fear of running out of money the third way to alleviate this fear of running out of money is just to have a proper plan have some scenarios run for you again timing on CPP how to draw down your rsps how to enjoy that go- go phase of retirement again you're income and retirement should be latter there should be a go-go phase a a slowo phase and a no-go phase those are the three phases of retirement that I like to talk about and typically retirement age 75 is your go- Go 75 to 85 is your slowo meaning that you can still travel and do things they just slow down you don't do it as much as often you're not spending as much and then 85 Plus is a no-o if you know anyone 85 or older you know that they're not spending much money in fact most Canadians could probably live on their CPP in old age security 85 onwards as long as they didn't take their CPP at 60 and reduce that amount again if you've taken it later in life then it's probably enough to live off of in your 80s and 90s make sure you have a plan make sure you understand why you're doing things in retirement again when we build plans for our clients we want them a to see the differences but B understand why they're doing things again I'm a numbers person I'm a stats guy I want to know the numbers but then I want to know why I'm doing something a lot of you can't explain why you're making decisions in retirement it's just an emotional one if you let emotions drive your retirement decisions guess what else Pops in the fear of running out of money and I think that's why 75% of you have that fear you haven't had a proper plan done right and yes it might cost you some money but guess what that money is well spent I promise you we've done hundreds maybe thousands of plans now over the years and we've never had someone come back and say like that's a terrible plan that's a terrible idea we've run scenarios for you we've looked at what's the optimal way you want to do this with your financial planner if you need help with that reach out to our office we're happy to help we offer fee for service financial planning for people Coast to Coast so if you're a Canadian anywhere in Canada or even living abroad planning to move back to Canada for retirement we can help you out reach out to our office parallel wealth.com planning see if we're the right fit for you but you need a proper plan again let's alleviate this fear of running out of money and the way to do that is to have a road map a GPS one comment I always get on this Adam it's pointless getting a retirement plan in place because there's too many variables we don't know what the stock market's going to do inflation how long I'm going to live I get it there's assumptions made in a retirement plan but wouldn't you like to get in to retirement with at least an idea of Direction Where to go like what's the most optimal way there's going to be tweaks along the way some might be major some might be minor we did plans for clients 10 15 years ago and they've had these minor tweaks along the way but essentially they followed that same plan and has worked really well for them you may have a big financial event good or bad and you need an adjustment to the plan that's fine but get moving in the right direction again people say I don't want to plan there's too many variables and then they take their CPP at 62 well wouldn't you have like to run the thought process of taking CPP a little bit later what does that look like how does that work how does that benefit me you should run these things again talk to your financial planner if your financial planner doesn't do in-depth planning then hire someone to do that those options are out there again our office does it there's other options out there as well across Canada but get a plan in place because a proper plan knowing what you're doing why you're doing it will help alleviate that stress of running out of money now the last thing I want to touch on here is that fear of running out of money with regards to health care costs later in life like Adam I like the go go slowo no-o phase but the noo doesn't make sense to me because I think I'll need the most amount of money later because I'm going to go to a care facility the reality is you're probably not and if you do it's not for long and I think we overestimate the cost of it there's a lot of great public systems uh there's some good private ones that aren't that expensive again do your research everyone's looking for something different I have a family member that works at both public and private facilities in Alberta and she said I would never be a patient in the private facility I'll go public all day better service better so it again depends where you're at what kind of facilities are around everyone's going to have a different story and experience but do your research here's how I recommend building a retirement plan to kind of buffer for that what if I do need care later on in life for most of you it's your real estate if you build a plan and never touch the real estate that's an asset there it's a buffer in the background I always call it it's going to be there for you if you need to go to a care facility or you need in home care there's an asset that you can lean on to to support that care if you're someone that rents in retirement you you don't own that property then yeah you might you know if this is a fear for you then build in that buffer within your overall retirement plan there's nothing wrong with that just be aware that the chances are you're not going to spend all that buffer that you build up and is it costing you some enjoyment earlier in the go- go phase of retirement again that's something you have to wait so if you don't own real estate create a bit of a buffer if that's a concern build it to the point that the fear is gone you know you have enough money enjoy retirement in whatever capacity you can but the the idea here is to get rid of that number one fear in retirement which is running out of money again legitimate fear but these steps that I've talked about in this video will help alleviate those fears and again if you're sitting there still saying Adam I I think I have a good plan kind of done all this stuff and I still fear it I would say you probably don't have a really good plan then cuz a really good plan should completely alleviate those fears again the cash flow plan the structure all this stuff really does matter Maps out and should allow you to sit back and say look I've worked for 40 years I've saved up all this money it's time to enjoy it so go enjoy that money

Channel: Parallel Wealth

Views: 15,933

Keywords: Financial Planning, Retirement Planning, Estate Planning, Retirement, Tax Planning, Investing, Real Estate Investing, Stocks, Bonds, Savings, Passive Income, RRSP, TFSA, Wealth, Parallel Wealth

Id: gZVV5nqobcQ

Length: 14min 42sec (882 seconds)

Published: Fri May 31 2024