The Five Things That Will Make You Financially Secure In Retirement

in this video i discuss the five things that will help you become financially secure in retirement coming up next on holy schmidt holy schmidt this video is probably long overdue for a number of reasons but the primary one is what the video doesn't contain this video won't discuss the next big investment trend why rental real estate is the only way to go in retirement or why cryptocurrency operates outside of central government control and is therefore the truest form of currency out there that last point is not entirely true by the way if you went to 47th street the diamond district between 5th and 6th avenue in new york city you'd find that more diamonds move through that one city block wholesale diamonds than the total revenue of the mcdonald's corporation in any one given year and diamonds are by their very nature unregulated hard to track and transfer easily from one person to another and let's be honest on that last point there are a lot of videos out there particularly on cryptocurrency and another video for me won't help you and for those of you that watch my video why you should not invest in cryptocurrency in retirement i don't believe that cryptocurrency is appropriate for 95 maybe even 99 of retirees i said it then when bitcoin was 47 000 a coin and i say now when it's 23 000 a coin don't get me wrong there are people that make money off of cryptocurrency but they are the ones that are selling when other people are buying enough said let's jump into the five things that will make you financially secure in retirement we're going to start off from some that you may have heard before and are pretty impactful all the way to the end the last one is one that you probably haven't thought about or if you have you haven't thought about it outwardly anyway you may have wondered about it and this last point is a game changer for a lot of people also if you think i missed one that you think is important put it in the comments section below so that other people can see it and learn from it as well as always i'll remind you at the end so that you don't need to stop the video all right let's go number one is knowing when to take social security one that you've heard of before no doubt for most people they have nine different years to take social security and within those years as well the longer you wait the larger your payment but the less payments you receive the gamble is on how long you will be drawing social security i.e how long you're going to live so one of the key deciding factors around this particular point is your health the health of your family your ancestors and what you think your longevity might look like another point in this category is that you just need the funds and you can't wait you need the funds now the third point under the social security umbrella is unlocking benefits for others your social security is the primary social security oftentimes and those that draw off of your benefits need to wait for you to claim social security before they can claim social security the next point of this category is if you're working part-time you can only earn so much and draw social security so if you are earning an income make sure that you understand the earnings limits the next point is understanding the spousal benefit and the interplay between the spousal benefit and the primary insured benefit this is particularly important if both you and your spouse worked and one can participate as the spouse on the other and then flip to their own social security at some point in the future number two on the list of things that will make you financially secure in retirement is getting rid of your debt basic math says that if you are paying 15 on your credit card you need to bring in 15 plus tax on that 15 to pay that credit card debt at least as a minimum and that assumes that you don't pay any principal off at all and that's not possible frankly in my video why you should not pay off your mortgage early i make a case why in today's interest rate environment paying off your mortgage might not be the right decision it revolves around having a low interest fixed mortgage on a relatively high principal amount in an inflationary environment in a rising interest rate environment that scenario that particular scenario may suggest on your mortgage you might not want that to be the first thing you pay off most of the comments were quite supportive many of the retirees that commented and others frankly indicated that the logic makes sense to them but for them it wasn't the right decision of course everything we do here and everything we talk about is based on what you consider to be the right decision for you not what we're talking about on this video use what you like discard the rest but the most insidious type of debt is not mortgage debt it's credit card debt credit card debt is unsecured that means that it's not attached to a house which brings down the rate it means it goes up when the interest rate environment is going up which means your payments will be going up eventually though whether it's credit card debt personal loan debt even your mortgage you want to end up with no debt this is because the cash flow that gets freed up from those payments goes to your quality of life there's a statistic that says that forty percent of retirees have debt and on average those that have debt pay forty percent of their cash flow their free cash flow to service that debt imagine what you would have if your cash flow and retirement was 40 higher the way that cash flow works by the way is that the beginning dollars go to pay obligations things like your electric bill if you have a mortgage or mortgage payment etc the ending dollars go to lifestyle in good months you might have five or ten percent left over at the end of the month to spend on lifestyle in bad months you might just get by now imagine if you had forty percent more cash flow your discretionary spending would go up between four and eight x in many cases which of course means that you can spend between four and eight times as much on things that you enjoy rather than obligations you get the point point number three is having a spinning plan and sticking to it here's a sad statistic according to mint.com 65 of the people that they polled have no idea how much they spent last month i'm not talking about setting up the system to monitor every dollar that goes in and out of your accounts i'm talking about having no idea how much went out the door now you could argue as one gets older that number goes from 65 percent down but the fact is a very large number of retirees have no idea how much they spend in a given month this doesn't mean that they don't know part of it 250 a month for the tennis club 2 000 a month for rent 500 for an airline ticket they know that because it is a purchase that they made and they remember but if you ask them how much they spent on dining out gifts co-pays personal care they would have no idea the reality is knowing what you spent and what you spend it on will reduce your spending if for no other reason that you're aware it's called cognitive awareness having a spending plan and knowing how you're doing against that plan will help you spend a lot less there are a lot of programs that you can do it online there are some that you can do on paper i will have a video on this at some point in the future to help you set up a plan and stick to it point number four is knowing the difference between cash flow and investment growth last week i was reading about a well-known billionaire's money problems this individual is all over the news you probably know who he is because he is quite public and his views are quite publicly disseminated throughout a lot of social media platforms one of the comments he regularly makes is that although he is really really wealthy he's cash poor a lot of people don't know what this means and because of this they think the world overestimates how much this person is worth after all how can you be a billionaire and rent your home this doesn't make a lot of sense the reason by the way is because if he sells his primary asset that shares in his own company he loses control of his company if he sells enough of them all of his money is in that stock and it is a non-dividend paying stock so there's no cash flow coming in but being cash poor is not just for busy billionaires people often mistake having a high net worth with having a great quality of life in retirement the most obvious example is your home your home has value it has a lot of value in most cases but if you were to sell your home tomorrow you would have no place to live you'd have cash but you'd have no place to live so if you purchased your home in 1992 you took out a 30-year mortgage and your home was 121 500 that was the average price in 1992 by the way you would purchase that same home today for 416 000 that's the average price of a home in 2022 but that home in 1992 would have had a 30-year mortgage a 30-year mortgage would be paid off so your net worth would now be worth 416 000 plus or minus depends on what town you live in and what part of the country you live in without doing something as drastic as taking out a reverse mortgage you could not monetize the value of your home therefore that home even though it has value has no cash flow coming to you and candidly with the interest rates going up even the prospect of a reverse mortgage gets expensive same holds true if you are a rare art or rare french wine aficionado or you own something like a tax lien certificate you can only realize the cash flow on these investments when you sell them in the case of art wine and potentially tax lien certificates it may take a while sometimes as long as a decade or longer before you realize the profit on that investment rental real estate is a little better but even with rental real estate oftentimes you don't realize positive cash flow until years after the investment this depends on how much you pay for the property and of course how much you put down the larger your down payment the more likely it is that you'll have positive cash flow early the final point is knowing and fully understanding and living by marginal utility let me explain anyone who knows me knows that when i am presented with someone who is purchasing something extravagant or even looking at something extravagant myself from time to time i ask one basic question i'll usually say something like that seems like a lot of money where will you use this purchase admittedly the items are things that i don't necessarily know a lot about think purses designer nike shoes and cars as an example people do this all the time think about people that are newly wealthy they've worked very hard they've built really good careers and they have a lot of cash flow coming in oftentimes you'll see that they want to celebrate the cash flow but do they get three times the enjoyment three times the marginal utility from an aston martin vantage v12 versus a one hundred thousand dollar jaguar f-type r if you don't know what either one of those cars are that's okay neither do i but i do know that if you put them side by side to an untrained eye they look remarkably similar my guess is they both have that wow factor that the owner is looking for and does the aston martin get six times the enjoyment versus the alfa romeo giulia which is a beautiful car that runs about fifty thousand dollars also quite exotic looking probably one that not a lot of people own and it would turn heads as it drives down the road as well the point behind all of this is that utilizing marginal utility means that you know that spending the additional dollars will give you the same percentage of additional enjoyment satisfaction health whatever it is you're buying for most people the answer is no by the way the exception might be if you're not comparing and contrasting two different choices even then it might is it worth a year's salary to go to antarctica for a lot of people the answer is no admittedly that's quite cool but for a lot of people it's not worth a year's compensation to go to the most southern point on the planet as a reminder if there's something that you feel makes you more financially secure put it in the comments section below also check out my last video on why many people think that inflation cpi and frankly the cost of living adjustment many people consider that number to be too low and doesn't reflect what's really going on in the world this is jeff schmidt thanks for watching

Channel: Holy Schmidt!

Views: 249,896

Keywords: financially secure in retirement, financially secure in retirement, financial advice for retirees, financially secure, retirement security, when to take social security retirement benefits, full retirement age for social security, how does social security retirement work, retirement planning, financial planning, how much to save for retirement, 4% rule, social security retirement, retirement planning at 60, retirement planning at 50, safety in retirement

Id: Y65wAesV1PY

Length: 13min 7sec (787 seconds)

Published: Fri Jul 22 2022