Transcript

[00:00:00] Intro: Welcome to Retirement Unlocked with Larry Heller, your life, your way, unlimited possibilities. Join us as we explore how tailored financial planning and investments can help you navigate life transitions with confidence. Let’s dive into this week’s episode

[00:00:21] Bill Tucker: And welcome back to Retirement Unlocked with Larry Heller. You know, many retirees spend decades focused on saving, investing, and preparing for retirement.

But once retirement finally arrives, some struggle with the unexpected challenge of actually spending their money. In this episode of Retirement Unlocked, Larry discusses why some retirees underspend despite being financially secure, the behavioral and emotional reasons behind the fear of spending, and how s- scarcity mindset can carry into retirement even after years of successful [00:01:00] savings.

Larry, good to be with you. How are you?

[00:01:02] Larry Heller: I’m doing great. How you doing, Bill?

[00:01:04] Bill Tucker: I am great. And I, if I didn’t know you this well, I would take issue with you, because I think a scarcity mindset in retirement is probably a pretty good thing. But tell me why it’s not.

[00:01:14] Larry Heller: Yeah. So we- we’ve- we’ve covered this before, um, prob- you know, a few years ago, but I- I think this is, one, so critical, and two, o- one of the real benefits you get by working with a, with us or a, or a wealth manager, retirement planner, who could really kinda show you what you can spend in retirement and, one, be able to enjoy the fruits of your labor, but two, also not really worry about it.

Yeah. So w- we’re gonna cover a lot of ground today, but that’s such a critical thing, and one of the, the things that give us a lot of purpose when we can do this, and when we sit in meetings and we tell people that, “Spend more money, because you can.” And we show them the numbers. Well- And it’s really well.

And you’d be surprised. I would [00:02:00] say that 80 to 90% of the people that we do these projections for are spending less than they can be. So it is definitely a phenomenon out there. There’s a lot of reasons why, and we’ll talk about some of those, uh, some of those now, and maybe give you some tidbits on how you can spend some more money in retirement.

[00:02:21] Bill Tucker: Oh, that’d be great, because, I mean, there is no point to having money if you don’t use it, if it doesn’t bring you fun, if you can’t enjoy it, so I’m all ears.

[00:02:28] Larry Heller: Yep. So many retirees end up dying, believe it or not, with more money at the end of retirement than they did when they started in retirement. So, um, and then, you know, people that are even well off, have plenty of money, financially secure, they, they hesitate to, to spend.

So it’s not just the, the numbers and the math. Part of it is just emotional, behavioral, how they were brought up. We’ll talk a little bit about that. Um, and it’s really difficult. You’ve been [00:03:00] working for so many years, and now you got your need to kinda transition from the accumulation mode to the decumulation mode, and it’s harder than many people expect.

[00:03:11] Bill Tucker: Yeah.

[00:03:12] Larry Heller: So, you know, you’ve been, you know, told, “Don’t overspend. Delay gratification. Save more.” And this has been going on and on and on, sometimes for 40 years. And now all of a sudden you’re supposed to, like, change everything? So- So it’s, it’s a hard mindset. It’s a mindset that you’ve gotta kinda get used to.

Yeah. Uh, because I don’t care how much money you have, when the faucet of the m- new money stops coming in, and you may see some ups and downs in your portfolio, you get really nervous to spend money. But it’s okay to spend money, but it’s also really important to know what’s the right amount to spend, because obviously you don’t wanna overspend and run out of money.

You wanna have protection against, um, you know, long-term illness. So you want, you wanna have some guardrails in [00:04:00] place. Um, and there are people that do spend more than they should, so not everybody needs to be spending more money. Some people need to be spending less. But it’s a, it’s a great exercise to go through and try to figure out what is the right amount of money that you can spend in retirement.

[00:04:17] Bill Tucker: Well, you, you… for me, you hit on it when you said that, that spigot of incoming money, because when you’re not retired, you’re really not so much worried about overspending because you know you’ve got a paycheck that’s coming in all the time, and you can see that. But yet, when you retire, that, that retirement c- account can fluctuate, and so There’s a huge fear of running out of money.

[00:04:39] Larry Heller: Yes. So there are a few fears. I mean, the biggest one is, what if I run out of money during my- Yeah … lifetime? Uh, people are living longer, um, so, uh, than the previous generations. Um, and then there’s unknown cost. Um, you know, healthcare, long-term care. Yeah. Um, you know, h- how you’re [00:05:00] investing your money and possible market downturns, inflation.

So how do you kind of account for all those needs to be, you know, factored in? And it’s one of those, you know, fears. And then really the emotional side. Um, you know, the, like I mentioned, the market volatility can trigger fear and cause retirees to spend too much money, or they put a plan together that’s way too conservative because they’re worried about the ups, you know, the ups and downs.

So there’s a, a real, you know, a real emotional aspect- Oh, yeah … of that. So, so, you know, couples with strong retirement savings, the ones, sp- you know, especially have a nice portfolio, they have their pension, and maybe their house is paid off, and they’re still reluctant. We see this, uh, time and time again when we come in there and they, and it’s working, and then we talk about some of the things that they wanna do that’s gonna give them enjoyment in their, in their second act, as you may, as I may, you know, refer to it from time to time.

Um, and one of those is travel. [00:06:00] And, you know, how much they should travel, but also the type of travel that they should do. Um, you know, can they do a little bit more high-end? Can they book that first class ticket? So, uh, so people sometimes are reluctant to, you know, to do that. Um, or, you know, upgrade a home or buying a second home.

Um, you know, can they afford to do it? We’ve had clients actually call us from where they’re gonna be buying a second home and saying, “Can you rerun those numbers and just make sure that I’m not, you know, doing too much?” But- Yeah … that’s the whole idea, that you’re planning for it so you don’t overspend on a second home, but you can afford to, and by going through a process, you can make sure that you won’t run out of money.

And some of the other things that, uh, you know, we see and we talk to people about, you know, sometimes helping with family while you’re alive. Why wait until death sometimes when the money’s just gonna grow, and, and maybe it’ll end up being taxed or estate taxes, when you can give some of that money away [00:07:00] during your, during your lifetime?

And how can they do that? Whether it’s annual gifting, whether it’s one large gifts, um, can you, you, you do that and afford to do that? And then really enjoying kind of a life experience. I mean, that’s what it’s all about. Um, you know, we have m- some clients that we talk, “Oh, I’m turning a big number, and I wanna take everybody away and do that, and oh, but I can’t afford it.”

And like, well, we run the numbers and, yeah, you can afford it. So that’s what this is all about. So getting over some of those fears, um, to really enjoy what you’ve accumulated all this money during your lifetime.

[00:07:36] Bill Tucker: Yeah, uh, you, you make a lot of sense. But talk to me about this scarcity mindset, which I a- admittedly am a little bit sympathetic to.

What do you run into when you’re, when you’re talking to your clients?

[00:07:48] Larry Heller: Well, you know, one of the things is, you know, some people that have grown up, um, and they might have not had money when they’ve grown up, they, you know, worry. They’ve seen the [00:08:00] economic uncertainties, they worry about that. They see recessions that they might have- Mm-hmm

have o- over their, their lifetime. Um, they might have or their parents might have been through the Depression. So, uh, so, you know, some of those type things have an impact on you, on how you were able to, how you were able to do and enjoy your li- your life, and they’re, they’re, they’re kinda wired that way.

So, you know, can you change some of those wires? These habits that have helped them create maybe, you know, some wealth during their, their lifetime, um, now maybe become obstacles in, in retirement. So, uh, you know, so you wanna kinda, you know, maybe get out of that mindset a l- a little bit. Don’t feel guilty after spending m- uh, mo- um, some of this money.

Avoid enjoying the experiences. Um, a- and, you know, not always cur- constantly searching for the cheapest or the, the, the, the least affordable way to go and maybe step it [00:09:00] up a little bit, you know, and, and enjoying that. Because this s- scarcity mindset, you know, can persist even when you’re really financially secure.

[00:09:09] Bill Tucker: Well, yeah, and I think that that really underscores the value of having a financial advisor because there’s somebody you can run these numbers with, you can get reassured And you can see that it’s there, and you can tell your clients that, “Yeah, you can do this. It’s okay , you know?” But it is difficult making that transition from being a saver to a spender.

So how do you do that besides assuring your clients, “Yeah, you can buy that second home. Yes, you can take the family on this vacation”?

[00:09:40] Larry Heller: Yeah. So let’s, we, we kind of start with a core idea that retirement isn’t just a financial transition, it’s an identity transition. You’re now, you know, your, your identity might have been your job, your career.

Mm. And now you’re retirement, what are you gonna do in here? We’ve, we’ve… I’ve had s- some podcasts talking about not just the financial [00:10:00] aspect of retirement, but the non-financial things that maybe get, get you up every day is just as important there. So really becoming the core identity of what you’re gonna be in, in retirement and what that’s gonna look, look at.

And then we start talking about some different points. And, you know, during your working years, you have your paychecks that are re- replenishing your accounts. You’re saving. You see your savings growing. But now it just reversed in retirement. You see some of that money starting to flow out- Yeah … instead of flowing in.

So there are a couple things that we do in retirement that m- starts from this emotional standpoint, and one of them is creating a paycheck. Yes, creating a paycheck just while you were working. So now your money is flowing from your bank accounts and your, your investment accounts, uh, maybe your Social Security, your pension, and creating the, the amount that duplicates the amount that you were getting while you were working or even more, and doing that each month.[00:11:00]

So you don’t feel like you’re taking money out of your portfolio and drawing it down. You feel like you’re spending what you’ve, what you’re, what you’re earning. So it’s just an emotional aspect that we find really helps. Not to say that you can’t take more above that paycheck from, you know, for specific items, but it, it definitely, it definitely helps.

Uh, and, and then also we, we create type of a, you know, a bucket strategy. Again, we’ve done a podcast on this. Uh, but when you see the different buckets, you’re able to put together a portfolio which will allow you a little bit more comfort in retirement So, you know, the emo- the emotional challenges sometimes of seeing the account balances.

I remember 2019 when accounts were going, you know, going down, or

2008 r- really was the big time.

[00:11:48] Bill Tucker: Mm-hmm.

[00:11:48] Larry Heller: Mm-hmm. And people were like, “I just wanna stop the bleeding.” And y- if you have a plan in place, if you go through those and you have enough money to ride those down t- terms out, but it’s an emotional aspect. [00:12:00] So you wanna make sure that your, your plan is properly designed to meet your distributions over your lifetime, over any type of changes that may have in the market or in interest rates.

Um, so because spending a retirement is not failure, it’s the purpose of the plan. That’s the whole idea that you saved all this money- … is to enjoy it at that particular point. Of course, you always got these, some of, some of the other people that say, “You know what? I wanna die with a dollar. You know, I, I wanna spend everything along those lines.”

Of course, they’re kidding. Um, and e- even if you don’t have children to pass on, you wanna do that, you can’t do that ’cause unfortunately, nobody knows how long they’re going to live- Right … or if, whether they’re gonna have a long-term illness. So there really is a big difficulty of transitioning from saver to spend- spender, and that’s kind of one of the things that we really thrive upon when we’re going through that and really showing that really makes a difference in somebody that’s coming to us.

[00:12:56] Bill Tucker: Well, you know, I think… Can you give us some practical [00:13:00] strategies in terms of- Being able to spend confidently and know it’s gonna be okay

[00:13:06] Larry Heller: Right. Well, the first thing is to have, you know, mainly not a written plan these days, a digital retirement income plan. Mm. A strategy, an investment strategy, an income cashflow we talked about, and the paycheck.

So you want… When you have a plan, you’re more apt to feel comfortable about that. You’re more apt not to worry about that. You’re more apt… We tell p- we tell people whether they’re retired or not, you know, when the market’s down, turn the news off because we can create a plan and not so you don’t have to worry about that.

[00:13:33] Bill Tucker: Yeah.

[00:13:34] Larry Heller: So, so you really kind of wanna, you know, put a plan together, and really understand a few different things. Understand, well, well what’s the gu- what guaranteed income do you have? I mean, the Social Security, assuming Social Security is will, will be here, and I’m I’m pretty sure it will be. Um, pensions, do you have some pension income?

Um, and then what is your withdrawal strategy? You know, some people, what they say is, “Oh, I just wanna live off the interest and the [00:14:00] dividends.” And yeah, that’s great, um, but that means you’re not gonna be using any of the principal, or that means you’re gonna ha- have a portfolio that may not keep up with inflation.

Mm-hmm. So you wanna have the right investment portfolio, but you also wanna have the, the right withdrawal strategy. Um, and as part of that strategy, and a big part of that strategy, is tax planning. You know, with the pushing back of the RMDs to 73 and 75 gives us a lot of opportunities to do some tax planning in the years before your required minimum distribution.

So it’s really critical and can mean hundreds of thousands of dollars in not having the correct tax planning or some, uh, some other strategies in there. Uh, and finally, your cash flow needs. You know, making sure that your cash flow matches what your expenses are gonna be. And if you are- Mm … gonna purchase a second home or a travel, um, or wanna make sure that you- your cash flow will account for one spouse dying [00:15:00] or a long-term illness, so really understanding your cash flow.

And we go through all these step-by-step, so if you really have a plan and you understand all these different strategies, it really gives you the confidence from the clarity of- Mm … of making such a plan

[00:15:15] Bill Tucker: What about, does it help to be purposeful in what you spend, Larry? I mean-

[00:15:20] Larry Heller: Yeah. I mean, you know, experiences, relationships, you know, often create greater satisfaction rather than just simply accumulating a wealth or buying big-ticket items- Yeah

or doing that. So we really talk about that and, and, and try to encourage and say, “Yes, you can, you, you can do that.” I mentioned the, the one time, um, you know, of events and, you know, taking people, uh, families on big cruises or- Yeah … renting a r- renting a home now, especially with the Airbnbs and the VRBOs out there, renting a house for, you know, for a few weeks with all your, you know, your, your [00:16:00] family, your children, your grandchildren.

So really tho- those things and talking about, you know, what’s purposeful for you in spending. And we got some people that, you know, charity is a really big purpose in their life. So really asking those questions, finding what that is. And of course, this is not a one-time plan and goes away. You- Yeah

retirement planning is ongoing. You, you need to kind of look at this, and we look at this, like, every year and make sure that what you’re planning on doing, your ideas, your goals, does it, you know, do they change? Do we have to adjust your plan i, in this? Do you have, you know, a, a new grandchild that you wanna help or a child that’s going through a tough time?

Um, so you, so adjustments, you know, will be made and will be looked at on a year-by-year basis.

[00:16:44] Bill Tucker: Makes sense. Can you tell us a little bit about common regrets that you’ve seen from retirees that they’ve, they’ve shared with you?

[00:16:52] Larry Heller: Yeah. So, uh, uh, again, just kind of the opposite of the things that we’ve talked about of, of wanting to do and, you know, not helping their children, their [00:17:00] grandchildren with their life.

Being overly conservative and, and waiting too long and say, “Oh, I’m now too old. I can’t really do that trip that was really my, on my bucket list- Mm … that I really wanted to do, and I just… ” You know, the time has passed by, and you, you really don’t wanna hear that from, from, you know, from, from people. So you wanna make sure that you obviously have enough money, um, to last through your lifetime, have enough money in case of an unexpected e- expense, but you also wanna protect your…

So you wanna protect your future while still enjoying the present.

[00:17:32] Bill Tucker: Makes a lot of sense, Larry. So w- as we wrap this episode up, give us some key takeaways that we can take with us.

[00:17:39] Larry Heller: Yeah. So one, retirement spending is often more emotional than mathematical. So really understanding the emotions, really understanding.

I think that’s al- usually what we start with. Uh, you know, I usually ask somebody, you know, “Paint me a picture of your, uh, of your life in the next year, the next three years, the next five years, 10 years, and then what’s important to [00:18:00] you?” And we start to uncover. Now, sometimes we get different answers from the husband and the wife-

and we’ve gotta kind of figure that out, but that’s really where we really wanna start and really get those emotional, um, impacts, those really goals, because w- as they achieve them, that’s really what makes them happy. Um, and two, you know, fear and scarcity mindset can prevent retirees from really, really enjoying their retirement, and can we create a plan, a strategy that will allow them to enjoy their retirement to the fullest?

Uh, three, the goal of retirement planning is simply, is not simply to die with the largest amount in your account balance. Um, that’s really not the, you know, not the game plan. The game plan is to make sure that you can kind of enjoy the second act of your life. So finally, a good retirement plan should create confidence so you can spend responsibly and really enjoy your retirement years.

[00:18:56] Bill Tucker: Yeah. You know, you saved that money. You did good. You did the [00:19:00] plan. It’s yours. Don’t spend retirement being miserable. That’s my walkaw- that’s my takeaway from all of this. Thanks, Larry. And thank you, listeners, for listening to Retirement Unlocked. We hope you have a better understanding of why, as a retiree, you should perhaps be spending more.

After working hard and being financially smart, it’s time to enjoy your retirement. As always, if you wanna review your retirement plan, schedule a complimentary 20-minute call with our team. And please note that Heller Wealth Management is now a part of Savant Wealth Management. Savant is a registered investment advisor.

This content is provided for informational and educational purposes only, and should not be construed as personalized financial advice. Thanks for [00:20:00] listening.