On this week’s episode we talk about the common misconceptions on retirement, and the benefits of starting early. We talk about how to strategically plan for retirement and the inverted yield curve. Email us at laminatemoneypodcast@fjellcapital.com for questions or suggestions for future topics. Subscribe to Tired and Rich, the newsletter for tired parents, at https://www.tiredandrich.com?utm_medium=social&utm_source=fjellcorporate Become a client of Fjell Capital https://www.fjellcapital.com/start-here Want to know A Better Way to Budget? https://www.newsletter.tiredandrich.com/p/investfirst Show Notes: Introduction: What happened in markets: Markets hit a road block, but not the whole market. Tech no longer has the lead on the stock market. Utilities, financials, and good ole consumer staples have kept the market propped up, being the best performing sectors this year. S&P 500 is still only 3.9% off it’s all time high.https://sherwood.news/markets/stock-market-today-sp500-stocks-hit-the-skids-semis-fall-by-most-since-2020/The first trading day after Labor Day, like the past seven years, was a negative one. It kicked off a month that has historically been weaker than the others.The S&P 500 reported a 11.3% earnings growth year over year (best since Q4 of 2021)https://insight.factset.com/earnings-insight-infographic-q2-2024-by-the-numbers Jobs, the Fed, and inflation have the markets on edge. The 5 year breakeven inflation rate is under 2%https://www.cnbc.com/2024/09/06/jobs-report-august-2024.htmlThe yield curve un-invertedhttps://www.commonwealth.com/insights/what-does-an-un-inverted-yield-curve-mean https://www.cnbc.com/2024/08/28/buffetts-berkshire-hathaway-hits-1-trillion-market-value-first-us-company-outside-of-tech-to-do-so.html The insurance index is up 28.18% this year. QUESTIONS TO ASK TOM Retirement as a Process: You mentioned that retirement is a multi-year process. Can you explain what that process looks like from the initial planning stages through the first few years of retirement? The Mental Shift: Switching from saving to spending can be challenging for many retirees. What advice do you have for easing into this shift in mindset?Practice Makes Perfect: You recommend practicing retirement before fully retiring. How does this practice help people better prepare financially and emotionally for retirement?Overspending Risks: What are some common warning signs that retirees might be overspending early in retirement, and how can they adjust to avoid running out of money?Working Longer: You’ve talked about the benefits of working longer to improve retirement plans. In what situations do you recommend people consider extending their careers?Dealing with Unexpected Changes: Retirement rarely goes exactly as planned. What are some practical ways retirees can adapt to unexpected changes, whether related to health, family, or the market?The Long Game of Investing: How should retirees approach investing in the long term, especially with the likelihood of living through multiple bear markets?Retirement Careers: Many people are choosing to work in retirement. What kinds of jobs or careers are popular for retirees, and how do they impact financial planning?Navigating Social Security: You mentioned that clients often ask when to start drawing Social Security. What factors should people consider when deciding the best time to claim their benefits?Real-Life Retirement Lessons: What are some common misconceptions about retirement you’ve encountered from working with clients, and how can listeners avoid making the same mistakes? Tired & Rich Morning everyone, We're going to dive into retirement today. Many of you are on the back nine of your career, meaning retirement is getting closer. It's getting real. You check your 401k balance and occasionally receive an updated Social Security Statement, and you're wondering how it will all work. Can you swing it? Can you retire when you want to? How best to plan the next ten years (or whatever you have left)? Well, today, we're doing just that. This edition will be more of a cliff notes version than a deep, exhaustive dive. I want to give you a dose of reality. Because there's what your friends say it's like, how your parents did it, what you read on the internet, and how it actually works for you. First of all, I am a massive advocate of not winging retirement planning. Over the years, I've worked with too many families who come to Fjell late in their careers to get serious about retirement planning. They almost always say, "We should have done this sooner," we say, "Sure, but we can't change the past, only the future. Let's get you a plan to crush retirement." There are many reasons why kicking the can down the road happens, but I want to start with a firm reminder: Don't let that be you. This quote sums this up nicely - fail to plan, plan to fail. Don't wing it 🙂 Now, onto the retirement tapas menu. #1 While there is a day that you will quit working, retirement is actually a giant, multi-year process. It's a process to retire, and once you are retired, it's a process to get used to retirement and fine-tune your investments and spending strategies. I recently had a conversation with a client who has been retired for a few years and just turned on social security. I remember the "Should I retire a few years early?" conversation, and now, years and years later, the conversation of "Is now the time to pull Social Security?" happened. Retirement is a process. Just like your career is/was a process. It takes time to dial it in. The day you quit working is your "retirement date," but it really starts years before. #2 Second, retirement is a mind trip. It's weird to spend your entire career, like 40 years, saying we need to add to our investments accounts, then, overnight, you say, "We need to start pulling money out of our accounts." The shift from saving your money to spending your money is difficult. And that is why I like to remind people that retirement is a process and to give yourself some grace to figure it all out. While I love a tight financial plan and specific numbers to offer families (for example, you can spend X dollars per month, given your portfolio), retirement is far from the linear nature of modern financial planning software. It's hard to go from save save save to spending your own money you worked so hard to accumulate. #3 Third, like everything in life, practice makes perfect. You should 100% practice retirement while you are working. Put your paycheck into your investment account, pay yourself a fixed income for six months, and see how you do. Whatever you want to do in retirement, practice it while you are working. Why is this so important? Once you hand in your notice, sell your business, or transition out of your job, it's almost impossible to get back in. So make sure you are ready to quit before you quit. Practice retirement because this next part is tricky. #4 Overspending early in retirement can quickly derail a retirement plan. I often spend time with clients who are nearing or in retirement. One thing I am particularly interested in is their spending ratios. If spending is too high early on, it's a danger sign to me. Here's why. Let's say you spend $10,000 / year too early in retirement. You are 67, and your money should last for another 25 years (the early to mid-90s is usually the age you want to plan for.) If you keep spending and make no adjustments, you'll spend an extra $250,000 in retirement. If that math doesn't work out, you'll run out of money early. Running out of money, no matter what you start retirement at, is the nemesis in retirement planning. That's why I mentioned practicing retirement is so important. You need to have a great budgeter to have a comfortable retirement. #5 Work longer. Over the years, I've noticed that working in retirement is becoming increasingly common. While we celebrate breakthroughs in medicine, those breakthroughs make us live longer. And living longer is expensive. Hence, more people have adopted "retirement careers." If you are short on your funding goals or want to improve the math in your plan, work a year, two, or three more. I won't go too deep into the math of this, but working a year, two, or three longer than you want usually dramatically improves the overall health of your retirement plan. If you are nervous, the market crashes, or need to shore up your accounts, working longer is always the best option to enhance your retirement plan quickly. This works if you have $100k, $1m, or $5m+. #6 You change, the world changes, your family changes, your car decides to break…. You get it. But what does that mean? It never goes to plan. Let me give you an example. I can't tell you how many people have told me, "I want to die in my home. I hate nursing homes and don't want to be there, ever." I respond that almost 100% of the families I have worked for sell their family home, move to an independent living facility at some point, and invest the home proceeds in the municipal bond market to help pay rent. They plan one thing earlier and later, and they get really tired of finding someone to mow the lawn, clear the driveway, etc. The plan changes. Health scares, market turmoil, family drama, and aging all show up in strange and unexpected ways. Taking them in stride, in the context of your well-thought-out retirement plan, is critical because retirement never goes to plan. #7 Retirement is the long game. You've heard it here many times. The long game is the game to plan. Another example. Many online articles will point to investment strategies for nearing or recent retirees. While I read these articles and have had many investing conversations with families around retirement, these articles offering blanket investment advice to anyone with an internet connection can be quickly taken out of context. They're almost always written by journalists, not financial advisors in the trenches, with actual families doing the retirement planning. Here's the deal: Modern retirements last 20-30 years, and historically, there are bear markets (bad market drops), on average, every four years. The equity markets, though, go up