Retirement Revealed

David Blanchett discusses the survey results that reveal a building crisis among near retirees who are unprepared for retirement.

When we hear “midlife crisis,” we usually think of people making drastic changes like buying a sports car or changing careers. But when it comes to retirement, the stakes are even higher. A financial midlife crisis can significantly impact how well you live out your golden years. So, what’s going on? Why is this happening, and more importantly, how can you avoid it?

My guest on this week’s episode of “Retirement Revealed” is David Blanchett, Managing Director, Portfolio Manager and Head of Retirement Research for PGIM DC Solutions. David shared that a recent survey by Prudential Financial brought this crisis into focus. The results were alarming but not surprising. Many Americans over 55 are feeling financially insecure, and they are beginning to worry if they’ll be able to retire comfortably, if at all. Interestingly, the survey showed that while older adults, like those in their 70s, tend to be more financially stable, those in their mid-50s are caught in a whirlwind of financial uncertainty.

A big part of the problem? These individuals are often feeling squeezed by multiple financial pressures: rising healthcare costs, providing care for aging parents, and often, supporting adult children who haven’t yet gained full financial independence. It’s no wonder that many 55-year-olds feel like they’re in the middle of a financial storm.

One of the most common things David hears from clients in their mid-50s is, “I wish I had learned about this earlier.” Whether they’re talking about saving more, investing smarter, or working with a financial advisor, the sentiment is always the same: the earlier, the better. Many even express regret for not instilling better financial habits in their own children. David’s research echoes this, showing that those who start financial planning earlier—whether by themselves or with the help of an advisor—tend to feel more secure as they approach retirement.

It’s clear that proactive planning is crucial. But what does that actually mean for someone in their mid-50s? What actions should they be taking?

Another layer of complexity for many midlifers is the role of caregiving. Many people in their 50s are caring for aging parents, while still trying to prepare for their own retirement. In my conversation with David, we discussed the immense financial and emotional strain that caregiving adds to an already challenging situation.

One of my previous podcast guests, Danielle Miller, shared her own experience of providing care for her grandmother while still early in her career. Her story highlights a growing reality: caregiving responsibilities are falling on younger generations, often when they’re least prepared for the financial and emotional demands. What makes it even more challenging is the fact that women are more likely to bear the brunt of caregiving duties. Societal expectations and personal circumstances often leave women shouldering the responsibility, further complicating their financial planning for retirement.

Another major issue facing midlife Americans is the risk of outliving their savings. As David mentioned, many people focus too much on maximizing their income in the short term—getting the most out of Social Security or squeezing as much as possible from a pension. However, the real challenge is making your money last for your entire lifetime, and this is where things get tricky, especially for women.

If you’re part of a couple, it’s often the woman who outlives her spouse. Statistically, women tend to live longer, and this presents unique financial challenges. Traditional pensions, for instance, typically provide only partial payouts to surviving spouses, often cutting benefits by 25 to 50%. Without proper planning, a surviving spouse can face a significant drop in income.

That’s why it’s essential to consider products like joint annuities, which can provide a more secure income stream throughout both spouses’ lives. Right now, in the summer of 2024, the pricing for joint lifetime annuities is quite favorable. These products help mitigate the financial risks of longevity and can provide peace of mind for the surviving spouse.

If you’re in your mid-50s and feeling the weight of financial uncertainty, you’re not alone. The good news is that there are actionable steps you can take today to improve your financial outlook. David provides some keys to how individuals, financial advisors, and employers can address the midlife retirement crisis:

One of the best concepts that came out of Prudential’s research is the “Retirement Red Zone.” This refers to the critical years just before and after retirement when financial decisions are incredibly important. Mistakes made during this period can be costly and difficult to recover from, especially since you only get one shot at some major decisions, like filing for Social Security or choosing a pension payout.

For example, if you retire at 65, you’ve probably had around 1,000 paychecks in your lifetime. Each of those represents a chance to make financial adjustments. But when you file for Social Security or choose a pension option, you may only get one chance to get it right.

As David pointed out, being in the red zone means that every financial decision counts. That’s why it’s crucial to make informed, strategic choices during this time.

Navigating the midlife retirement crisis isn’t easy, but with the right planning, it’s entirely possible to come out on top. By taking proactive steps—whether through saving more, working with a financial advisor, or making thoughtful decisions about pensions and annuities—you can ensure a more secure and comfortable retirement.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

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Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Understanding the options available to civil servants entering retirement under FERS.

If you’re one of the 2 million people in the federal workforce, this post is designed to help you make the most of your retirement plan by understanding the Federal Employee Retirement System (FERS). As we head toward the end of the fiscal year, it’s a great time to revisit how FERS works and how you can maximize your benefits.

Before we dive into the details, let’s recap the basic structure of FERS. There are three main components that federal employees need to pay attention to:

When thinking about retirement, it’s essential to plan not only for when to start your FERS pension but also when to tap into your TSP and file for Social Security. The coordination of these three components can make a big difference in your retirement income.

Recently, I was asked by Money Geek how federal employees can maximize their retirement benefits. Two key strategies stand out:

There are some important distinctions to be aware of, particularly if you retire before age 62 or with fewer than 20 years of service. For example, retiring at 61 with 19 years of service gives you only 19% of your high-3 salary as a pension. However, waiting one more year to reach age 62 and 20 years of service increases that to 22%—a 15% boost in your pension for life! That extra year could be well worth it.

Your pension is based on your high-3 average salary, which is the average of your three highest consecutive years of earnings. While this is often your final three years, it’s not always the case. It’s important to accurately estimate your high-3 salary when planning your retirement.

Additionally, if you’ve had military service, you can potentially add military service credits to your federal service time. This could increase your pension benefit, so be sure to check your service record to ensure all your years are accounted for.

Certain federal roles, such as law enforcement officers, firefighters, and nuclear materials couriers, are eligible for enhanced pension benefits. For example, they receive 1.7% of their high-3 salary for the first 20 years of service, compared to 1% for most employees. Members of Congress are also eligible for the 1.7% rate, making it important to know which category you fall into.

As you approach retirement, there are four steps you should focus on to ensure you’re on track:

Over the years, I’ve seen federal employees make several common mistakes in retirement planning. One of the biggest is failing to adjust their TSP investments as they approach retirement. Many people keep their TSP allocation at the same risk level they had in their 20s, even when they’re nearing retirement age. Be sure to reassess your risk tolerance as your retirement date approaches.

Another frequent mistake is not planning for the transition from a paycheck to a pension. It can take several months for your FERS pension to start, so having a financial cushion to cover this gap is crucial.

As you prepare for retirement, whether you’re a federal employee, military personnel, or transitioning to corporate work, the same principles apply: know the rules, do the math, and follow the plan.

By maxing out your TSP contributions, understanding your full retirement age, and working with a knowledgeable financial advisor, you can ensure a smooth transition into retirement. Remember, the choices you make in the years leading up to retirement will impact your income for the rest of your life. Make sure you’re making informed decisions based on your specific situation.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Chet Bennetts shares insights on the study that highlights the challenges facing the average American seeking financial literacy.

When it comes to retirement, knowledge truly is power. The more you understand your financial situation, the better you can navigate the complexities of retirement planning and make informed decisions. In this week’s episode of the Retirement Revealed podcast, Chet Bennetts–program director of the CFP®/ChFC® Program at The American College of Financial Services–shared his insights from a comprehensive survey of over 3,700 people about their retirement knowledge. The findings were eye-opening, but they also provided guidance for what knowledge is lacking or obscured for the average retiree or near-retiree.

One of the key takeaways from Chet’s research is that Americans are quite knowledgeable about inflation and housing—two critical factors that heavily influence retirement outcomes. It’s encouraging to see that people are aware of how inflation can erode purchasing power and the importance of managing housing costs as they age. As Chet pointed out, these are areas where individuals have a significant amount of control, and it appears that many are making smart decisions to adjust their spending and housing situations in response to economic challenges.

This resilience in the face of inflation and rising housing costs is a positive sign. It shows that when retirees encounter financial obstacles, they often find ways to adapt and thrive. For instance, I recall working with a client about ten years ago who was eager to retire at 55. We ran the numbers, and the reality was that their income would drop by about 70% if they retired immediately. Despite this, they decided to go ahead with their plan. They made significant lifestyle adjustments, including taking on part-time jobs, which helped boost their income slightly. Today, nearly a decade later, they’re enjoying retirement and living comfortably on a reduced income. This experience highlights how important it is to be flexible and willing to make changes when necessary.

While the survey showed that Americans are knowledgeable in some areas, it also revealed significant gaps in others. The topics where people scored the lowest included annuities, investments, long-term care, life expectancy, how to generate retirement income, and taxes. These are all critical components of a successful retirement strategy, and yet, they are the areas where many people feel least confident.

This lack of knowledge is concerning because these topics play a major role in ensuring financial security in retirement. For example, understanding annuities and how they can provide a steady income stream is crucial, as is knowing how to manage investments to avoid outliving your savings. Long-term care is another area that is often overlooked, but it’s a significant expense that can quickly deplete retirement funds if not planned for properly.

However, the good news is that these are precisely the areas where a good financial advisor can add value. Working with an advisor who can educate you on these topics and help you develop a comprehensive retirement plan can make a world of difference. As I always say, if you’re looking for a financial advisor, find one who prioritizes education. The goal should be to empower you with the knowledge you need to make informed decisions, not to overwhelm you with complexity.

The survey also uncovered some demographic disparities in retirement literacy. For example, there was a five-point gap in retirement literacy between men and women, and a seven-point gap between different racial and ethnic groups. This is unfortunate but not entirely surprising, given the historical and societal factors that have contributed to these disparities. However, these gaps can be overcome through targeted education initiatives and by working with a financial advisor who understands the unique challenges faced by different demographics.

One promising finding from the survey was that working with a financial advisor can significantly boost retirement literacy. There was an 11-point increase in literacy among those who worked with an advisor compared to those who did not. This underscores the importance of seeking professional guidance when planning for retirement, especially if you’re feeling uncertain about your financial knowledge.

If you’re looking to improve your retirement readiness, there are several steps you can take. First, consider taking advantage of education initiatives designed to boost financial literacy. For example, Thrivent offers a program called “Money Canvas”, which provides free budgeting sessions. Another excellent resource is Dave Ramsey’s Financial Peace University, which offers comprehensive financial education.

Second, don’t hesitate to seek out a financial advisor who can help you navigate the complexities of retirement planning. A good advisor will take the time to explain your options, help you understand the risks and benefits of different strategies, and work with you to create a plan that meets your unique needs.

Finally, remember that retirement is a journey, not a destination. Your needs and circumstances will change over time, so it’s important to stay informed and be willing to adjust your plan as needed. By taking proactive steps to increase your financial literacy and working with a trusted advisor, you can feel more confident about your retirement and make better decisions that will lead to a secure and fulfilling future.

The road to retirement is filled with challenges, but it’s also full of opportunities. By learning more about your money, you’ll feel better about your financial situation and be better equipped to make the right decisions for your future. 

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Exploring the concept of “Infinite Banking” and comparing life insurance retirement plans to traditional retirement strategies.

If you’ve been browsing TikTok, Facebook, or LinkedIn, you’ve likely seen posts promoting life insurance as the “ultimate retirement solution”. But is it really the best way to go about planning for your retirement? Let’s explore.

Recently, I was asked to provide some insights for an article on life insurance retirement plans on Medium.com. This request led me to revisit the concept, particularly through the lens of Nelson Nash’s book, Becoming Your Own Banker. Nash’s work advocates for the idea of using dividend-paying whole life insurance policies from mutual insurance companies as a financial strategy, often referred to as the “infinite banking” concept.

As social media goes, once I began to research life insurance I was flooded with videos and articles online that all seemed to present life insurance retirement plans as not just an option, but as the way to save for retirement. This approach often positions these plans as a replacement for traditional retirement accounts like Roth IRAs or 401(k)s. But before jumping on the bandwagon, it’s essential to understand what these plans offer—and what they don’t.

One of the most popular products being promoted is the indexed universal life insurance (IUL) policy. These policies are often sold with the promise that you can participate in market gains without the risk of market losses. 

Sounds great, right? But let’s dig a bit deeper.

The interest credited to an IUL policy is based on the performance of a stock market index. However, unlike direct investments in the stock market, these policies don’t deliver the same returns. Research shows that the returns from IULs are much closer to what you’d expect from bonds, not stocks. Why? Because insurance companies primarily invest your premiums in bonds, making it challenging to generate stock market-like returns.

The real question isn’t whether life insurance should be your primary retirement vehicle but whether it should be part of your overall retirement strategy. Life insurance can play a role in retirement planning, but it’s crucial to approach it with a clear understanding of its strengths and limitations.

One of the biggest dangers with the current trend of life insurance retirement plans is the notion that this is the only way to plan for retirement. This one-size-fits-all mentality can lead to missed opportunities in other, often more flexible, retirement savings vehicles like Roth IRAs, 401(k)s, and brokerage accounts.

The truth is, the best retirement plan is one that incorporates multiple strategies, tailored to your unique financial situation. There’s no single product that will solve all your retirement needs.

Let’s return to Nelson Nash’s infinite banking concept. Nash’s idea is to use whole life insurance policies to “become your own banker,” effectively recapturing the interest you would otherwise pay to banks. The concept hinges on the idea that by borrowing from your life insurance policy at a lower interest rate than what banks charge, you can save money in the long run.

Nash’s strategy made a lot of sense in the 1980s when interest rates on traditional loans were as high as 23%. During that time, borrowing from a life insurance policy at 8% was a no-brainer. However, in today’s environment, where mortgage rates are around 6.75% and personal loans average 12%, the advantages of borrowing against a life insurance policy aren’t as clear-cut.

Moreover, Nash’s assumption that life insurance policies would generate returns of 6-8% is increasingly difficult to validate today. Current policies are more likely to yield returns closer to 4.5%, which is roughly on par with what you might expect from a certificate of deposit (CD). The key difference is that CD interest is taxable, while life insurance growth is tax-deferred.

Another crucial aspect to consider is the long-term nature of life insurance policies. Nash correctly points out that it takes about seven years for a whole life insurance policy to break even. During this time, your contributions are essentially covering the cost of insurance and other fees, meaning your cash value is growing very slowly, if at all. This isn’t a get-rich-quick scheme—it’s a long-term commitment.

When someone pitches a life insurance retirement plan, ask them a few key questions: How long does it take to break even? What’s their commission on the sale? These are important factors to consider because they can significantly impact the overall effectiveness of the plan.

So, should you include life insurance in your retirement plan? The answer is, it depends. Life insurance can be a valuable tool, especially if you’re looking to protect loved ones from the loss of income due to your passing. It can also offer tax-deferred growth and, if structured correctly, a tax-free death benefit for your beneficiaries.

However, it’s crucial to view life insurance as part of a broader strategy. It’s not a replacement for traditional retirement accounts, nor is it a substitute for a well-diversified investment portfolio. The best approach to retirement planning involves a mix of strategies, tailored to your unique goals and circumstances.

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Examining the 5 reasons an earlier retirement might make sense for you.

When you originally planned for retirement, chances are you spent a lot of time focusing on the cold hard dollars and cents, calculating the optimal timing for your finances and adjusting your calendar accordingly. 

My guest on this week’s episode of the Retirement Revealed podcast, Ashley Micciche, suggests that there might be more reason to retire earlier than you originally thought. Ashley breaks down 5 reasons to consider retiring as early as possible based on her experience with retirees.

One of the most compelling reasons to retire early is to spend more quality time with loved ones. As we age, our relationships with family and friends often become our most cherished assets. Ashley pointed out that many people, particularly grandparents, find themselves yearning to spend more time with their grandchildren.

For many of Ashley’s clients, the pull towards a more relaxed lifestyle where they can be more present in their families’ lives is powerful. Retirement offers the flexibility to travel, to visit family who might live far away, and to build stronger bonds without the constraints of a demanding work schedule. This aligns with findings from the Harvard Study of Adult Development, which suggests that the quality of our relationships is a key determinant of both our longevity and the quality of life as we age.

Retiring early also allows individuals to make the most of their healthy, active years. The stories of generations of retired people often cite the toll extending their careers had taken on their health, some to the extent that they aren’t able to enjoy retirement the way they had hoped to while they were still working.

This is a common scenario that many retirees face—by the time they stop working, they are too physically exhausted or their health has deteriorated to the point where they cannot take advantage of the freedom retirement offers. Retiring early can provide the opportunity to travel, explore hobbies, and engage in physical activities while you are still in good health.

I recently saw this play out at our gym with a very active man in his early 70s who suddenly had an unexpected medical emergency and passed away during a workout. It was a stark reminder: we can’t predict how long we will remain healthy, and it’s important to enjoy life while we can.

In today’s world, retirement doesn’t necessarily mean the end of work. Many retirees continue to work part-time, consult, or pursue passion projects. This flexibility is a relatively new development, as Ashley noted, contrasting it with her grandfather’s experience when retirement meant a complete stop to work.

Now, with the rise of the gig economy and the increasing demand for experienced professionals, retirees can choose to work on their own terms. Whether it’s working reduced hours, consulting, or starting a small business, there are many ways to stay engaged and productive without the pressures of a full-time job.

For those who are not ready to fully retire, this middle ground offers the best of both worlds—maintaining a sense of purpose and engagement while also enjoying the freedoms of retirement.

Another critical point Ashley brought up is the need to shift our mindset from accumulation to fulfillment. Many people are driven by the idea that more wealth will lead to more happiness. However, as we approach retirement, it’s crucial to ask ourselves, “How much is enough?”

Ashley brought up the latin concept of memento mori, which beautifully addresses this question. Translated as “remember you must die,” memento mori is a reminder to focus on what truly matters and to not get caught up in the endless pursuit of wealth, which can often lead to delaying retirement unnecessarily. Instead, the goal should be to live a life of fulfillment, making the most of the time we have rather than accumulating assets we won’t be able to enjoy.

Finally, it’s essential to focus on maximizing your happiness, not just the numbers on your spreadsheet. This idea echoes the sentiment of the book Die With Zero, which encourages readers to think about life in terms of experiences rather than just financial security.

If you’re always waiting for the perfect financial moment to retire, you might find yourself working longer than necessary, missing out on the joys of life that retirement is meant to provide. It’s important to strike a balance between ensuring financial stability and taking the time to enjoy life’s precious moments.

The choice to retire ASAP is not just about leaving the workforce; it’s about embracing the opportunity to live life on your own terms. Whether it’s spending more time with family, enjoying your healthy years, or finding fulfillment beyond work, there are many reasons to consider an early retirement. As always, it’s important to approach this decision thoughtfully, ensuring that you’re financially prepared while also recognizing the value of time and the experiences it can bring.

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

5 keys to preparing your retirement plan to withstand a stock market crash.

As you step into retirement, one of the biggest concerns you might face is the potential for a market crash right at the start. It’s a valid worry—after all, you’ve spent decades saving and investing to secure your future. The last thing you want is for a sudden downturn to wipe out a significant portion of your nest egg. Today, I want to dive into how you can prepare for this possibility and safeguard your retirement savings.

One of the most critical concepts to grasp is something called “sequence of return risk.” It’s a fancy way of saying that the order in which you experience returns matters, especially when you’re withdrawing money in retirement. Even if your investments average 8% over time, a few bad years early on could have a disproportionately negative impact if you’re taking withdrawals at the same time.

Imagine this: you have a few great years of returns, followed by a significant loss. If those losses happen early in retirement, you’ll have less money left to recover and take advantage of potential gains down the road. This is why the timing of returns can make or break your retirement plan. When you’re adding money to your account during your working years, market downturns aren’t as concerning—after all, you’re buying shares at a discount. But once you start drawing down, those downturns can be devastating.

One popular way to mitigate this risk is through a bucketing strategy. This involves dividing your investments into different “buckets” based on when you’ll need the money. You might have a cash bucket for the first few years of retirement, which isn’t exposed to the stock market’s ups and downs. Then, you’d have a growth bucket for long-term needs that can ride out the market’s volatility.

The key question is: how much should you keep in each bucket? It’s helpful to think in terms of years rather than months. For example, many experts suggest having at least three to six months’ worth of expenses in your cash bucket as an emergency fund. For your retirement plan, we take the conventional suggestion of “months” for an emergency fund and turn it into “years” for retirement. 

Back in 2008, Warren Buffett famously advised that if you need money in the next five years, keep it safe in the bank. For money you won’t need for five years or more, keep it invested. The five-year mark is a useful rule of thumb because it took about five years for the stock market to recover from the dip it took after its 2007 peak. When you hit retirement you can adjust how much you have in safer assets based on the level of risk you want to take.

Another way to prepare for a potential market crash is by adjusting your investment portfolio before you retire. As you approach retirement, you might want to gradually reduce your exposure to riskier assets like stocks and increase your holdings in safer investments.

For example, if you’re planning to retire in five years and your goal is to have seven years’ worth of expenses in your cash bucket by then, start shifting money gradually. Don’t wait until the last minute or after the market drops to make these adjustments. It’s all about being proactive rather than reactive.

Flexibility is another crucial element. The traditional 4% rule, which suggests withdrawing 4% of your portfolio annually, adjusting for inflation, works well—in theory. However, if the market crashes, sticking rigidly to this rule could mean taking withdrawals at the worst possible time.

Instead, consider adjusting your withdrawals based on market conditions. If your investments have had a good year, you might take a bit more. If they’ve had a bad year, tighten your belt and take out a little less. By being flexible, you can stretch your savings further and give your investments more time to recover.

It might sound counterintuitive, but borrowing money during a market downturn could be better than selling investments at a loss. For example, you could borrow against your cash value life insurance policy, tap into a home equity line of credit, or even borrow from yourself by drawing from a savings account that you intended to keep intact.

The idea here is to give your investments time to rebound. Once the market recovers, you can repay the borrowed funds. It’s a strategy that requires careful planning and a solid understanding of your financial situation, but it can be a creative and powerful tool to protect yourself in the right circumstances.

Finally, having a source of guaranteed income can provide peace of mind during market turbulence. This could come from Social Security, a pension, or even an annuity. Research shows that retirees with guaranteed income streams feel more comfortable spending their money and are less stressed during market downturns.

When you know that a portion of your income is secure, regardless of market conditions, it can make it easier to stick to your investment plan and avoid panic selling.

Market crashes are an inevitable part of investing, but they don’t have to derail your retirement. By implementing strategies like bucketing, adjusting your investments, being flexible with withdrawals, considering strategic borrowing, and building guaranteed income, you can create a robust plan that helps you weather the storm.

The goal isn’t to predict when a market crash will happen—it’s to be prepared for when it does. With the right approach, you can turn the uncertainty of the markets into an opportunity to strengthen your retirement plan and ensure that your savings last as long as you need them.

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Discovering how the “Retirement Spending Hatchet” provides a problem for the 4 percent rule and why Derek Tharp suggests risk-based guardrails offer a more dynamic way to respond to risks in retirement.

The 4 percent rule gained steam through the mid 1990s as a way to ensure your retirement lasts throughout your retirement years. I sat down with Derek Tharp, Ph.D., CFP®, CLU®  assistant professor at the University of Southern Maine also known as the “Retirement Professor”, to discuss why he believes in a more dynamic approach to retirement spending. 

The 4% rule has long been a staple in retirement planning. It’s based on the idea that you can safely withdraw 4% of your retirement savings annually, adjusted for inflation, and not run out of money over a 30-year retirement. This rule was derived from historical data and designed as a conservative estimate to ensure retirees wouldn’t outlive their savings.

However, Derek argues that the 4% rule is more of an academic exercise than a practical tool for real-life retirement planning. He points out that it’s based on assumptions that don’t align with how retirees actually spend money. One of his key insights is what he and his coauthor, Justin Fitzpatrick, call the “retirement distribution hatchet.” This concept visualizes retirement spending patterns not as a smooth, linear drawdown but as front-loaded—heavier in the early years before Social Security and pensions kick in, creating a shape similar to a hatchet.

This observation is critical because it shows that many retirees’ spending needs are not constant but vary significantly over time. For instance, retirees might spend more in their early years when they’re still active, then spend less as they age, only to see spending increase again due to healthcare costs later in life. The 4% rule, with its focus on a steady, inflation-adjusted withdrawal rate, fails to account for these variations.

Many financial advisors aim for plans that boast a high probability of success—often 90% or more—which essentially means that there’s a 90% chance that the retiree won’t run out of money.

However, Derek suggests that this focus can lead to overly conservative plans. A high probability of success might sound reassuring, but it often means that retirees are underspending—saving too much for a rainy day that might never come. To put it another way, a 95% probability of success actually implies that 94% of the time, you could have afforded to spend more.

This focus on probability of success can also create anxiety, especially during market downturns. Retirees might panic if they see their plan’s probability of success drop, leading them to make unnecessary adjustments. 

So, if the 4% rule and probability of success have limitations, what’s the alternative? Derek advocates for risk-based guardrails, a more flexible and responsive approach to retirement spending. This method allows retirees to set initial spending levels and then adjust them based on the performance of their investments, all within predefined “guardrails.”

For example, if your portfolio performs well and exceeds a certain threshold (the upper guardrail), you might increase your spending. Conversely, if the market underperforms and your portfolio drops to a lower threshold (the lower guardrail), you’d reduce your spending to stay on track. This approach provides a structured yet adaptable way to manage retirement income, focusing on actual financial health rather than arbitrary success probabilities.

One of the key benefits of this method is psychological. Knowing that you have a plan for both good and bad market conditions can reduce the anxiety that many retirees feel when they see market fluctuations. You’re not left wondering if you’re spending too much or too little—you have clear guidelines that tell you when to adjust your spending.

At the end of the day, retirement planning should be about making the most of your retirement years, not just ensuring you don’t run out of money. Derek’s approach of using risk-based guardrails is about finding a balance—allowing you to enjoy your retirement while being prepared for whatever the market throws your way.

It’s about planning for life’s uncertainties with flexibility and understanding that your spending needs will change over time. Rather than sticking rigidly to a rule developed decades ago, or chasing the highest probability of success, it’s about creating a retirement plan that evolves with you and your circumstances.

Your retirement goals should be at the forefront of your retirement decisions–if your goal is to avoid every risk. Instead of making your plan look good on paper, make your plan work for the life you want to live in retirement. The traditional 4% rule and the fixation on high probabilities of success might not serve you as well as a dynamic, responsive approach using risk-based guardrails.

Your retirement should be about enjoying life and having peace of mind, not just about making sure your plan is “successful” by rigid, outdated standards.

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Breaking down the 4 steps of the “live to 100” strategy as life expectancy increases and conventional retirement wisdom struggles to keep up.

Average life expectancy in the United States rises with each generation, and with that trend comes a lengthening of years lived after average retirement. As age 100 becomes more realistic for many people, how can you make sure your finances are set up in a way that takes care of you through your entire lifetime? This discussion was sparked by our recent podcast episode with Steve Sanduski, where we explored how financial planning needs to adapt as people routinely live healthy lives into their 100s.

One intriguing concept is the “retirement spending smile.” This theory suggests that you tend to spend more at the beginning of retirement, less in the middle, and potentially more again later on due to increased healthcare costs. If you stay healthy until 100, your expenses might not follow the traditional downward trajectory and could spike due to medical needs.

Shortly after our discussion with Steve, I came across an article in the AARP magazine about making your money last until age 100. It got me thinking: if you live to 100, it’s crucial to ensure your money does too. With advancements in healthcare, it’s becoming more likely that many of us will reach this milestone. Therefore, it’s essential to approach both your expenses and income with this long-term perspective.

Let’s start with managing your expenses if you anticipate a long life. Knowing your biggest costs in retirement is key. From my research, housing, taxes, and healthcare are typically your top three expenses.

Now, let’s talk about your income strategy to make it last until 100.

If you plan to live to 100, you’ll need to manage both your expenses and income proactively. On the expense side, focus on reducing housing costs, diversifying your tax status, and planning for healthcare expenses. On the income side, consider delaying Social Security, working part-time, and exploring annuities for a reliable income stream.

By taking these steps, you can ensure that your money lasts as long as you do, providing a secure and fulfilling retirement. Remember, it’s not just about surviving until 100 but thriving with financial peace of mind.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Jeremy Keil and Steve Sanduski explore retirement trends by generation and examine what happens to financial planning when people start to live healthy routinely to age 100.

People are living healthier and longer, and it’s showing in the rising longevity averages in the United States. My guest in this week’s episode of “Retirement Revealed”, Steve Sanduski (Steve Sanduski Advisor Network) and I discuss how these trends and generational approaches are affecting the future of retirement and retirement planning.

To set the stage, let’s consider some historical data. Back in 1900, the average life expectancy was about 47 years. Fast forward to today, and we’re looking at an average in the upper 70s. While the COVID-19 pandemic temporarily reduced this figure, advancements in technology, medicine, and our understanding of health and wellness suggest that people will continue to live longer, healthier lives. In fact, it’s not unreasonable to expect that many of us will live well into our 90s, or even reach 100 in good health.

Steve sees this trend reflected in his own family. Both of his parents are in their 90s and still maintaining their health. Their experiences in retirement are quite different but equally enlightening. “My dad had a traditional retirement, leaving his job at 58 with a pension and never working another day for pay. He has enjoyed a long retirement, filled with personal satisfaction and stability.”

Steve’s mom, on the other hand, retired from her career but found she needed to stay busy. She took various part-time jobs for about 20 years, moving in and out of the workforce. This contrast highlights the varied approaches people can take to retirement, depending on their personal needs and desires.

At 62, Steve doesn’t see a traditional retirement on the horizon. Instead, Steve envisions a gradual transition, slowing down his work over time rather than stopping abruptly. Steve hopes this approach allows him to stay engaged and active, leveraging good health and passion for his work. Many people can’t wait to retire, but it’s crucial to consider what you’re retiring to, not just what you’re retiring from. Having a purpose or goal in retirement, such as spending more time with family, is key to a fulfilling retirement.

The traditional three-stage life model—learn, earn, and adjourn—is evolving. Today’s younger generations are adopting a multi-stage life model, moving in and out of various life phases. They might work for a while, take a sabbatical, return to school, or travel. This flexibility reflects changes in societal norms and economic conditions. Younger people today have witnessed events like the Great Financial Crisis and the opioid epidemic, shaping their views on life and retirement.

Understanding generational differences involves more than just looking at birth years. The cohort effect examines how shared experiences shape a generation. For instance, baby boomers grew up during a time of economic prosperity, while millennials and Gen Z have faced more economic volatility. Period effects, such as 9/11 or the 2008 financial crisis, impact everyone alive at that time, influencing their perspectives and decisions. Lastly, the life cycle effect considers how people’s needs and priorities change as they age.

Entrepreneurship is more accessible today than it was in the past. Steve shared an interesting story about how entrepreneurship was talked about when he was growing up. As a young adult, Steve internalized conversations about the meaning of an entrepreneur is that you simply couldn’t find a job. Today, it’s celebrated as a path to success and independence. More people, especially younger generations, are taking control of their financial futures by starting their own businesses. This shift is partly due to the decline of defined benefit plans and the rise of defined contribution plans, putting more responsibility on individuals to save for retirement.

While we should plan for a long retirement, we must also acknowledge the uncertainty of life. A poignant example is Jonathan Clements, a long-time personal finance writer just recently diagnosed with cancer at 61, with only 12 to 18 months to live. His situation reminds us not to delay enjoying life. Many younger people today are choosing to experience life fully, taking trips and pursuing passions while they are still young and healthy. This approach might mean working longer but ensures a balanced and fulfilling life.

As we navigate these changing times, it’s essential to stay flexible and proactive in our retirement planning. Whether you’re nearing retirement or just starting to think about it, consider how you can blend work, leisure, and personal growth throughout your life. Remember, retirement is not just an end but a new beginning. 

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.

Exploring the rules & options for how to handle the Social Security survivor benefit in the event of remarriage.

Today, we’re diving into a critical question: Will you lose your survivor Social Security benefits if you get remarried? There are more layers to this question than many people realize. Let’s peel these layers back and explore the options available for Social Security in remarriage.

When discussing Social Security, survivor benefits often stand out as a crucial decision point. Many people work hard to maximize these benefits for their spouses. However, mistakes can occur, sometimes due to errors by the Social Security Administration itself. Dr. Larry Kotlikoff, who appeared on our podcast back in the fall of 2022, has written a book on Social Security horror stories, many of which involve widows being underpaid. I’ll link to his book in the show notes so you can avoid such situations.

Here’s the scenario: a woman’s husband passed away at age 64 in 2017 while collecting Social Security disability benefits. She began collecting his benefits at age 64 because they were higher than her own. Now, at 70, she plans to remarry in August and wonders if she’ll still be able to collect these benefits.

Let’s assume this widow’s full retirement age (FRA) is 67. It’s crucial to understand the distinction between survivor benefits and spousal benefits. When it comes to survivor benefits, the amount you receive maxes out at your full retirement age. If you start collecting before reaching your FRA, you’ll receive a reduced amount.

For example, if her survivor benefit is $2,000 at FRA and she started collecting at age 64, she’d face a 20% reduction, receiving $1,600 instead. If her own benefit at FRA is $1,500, she wisely chose the higher survivor benefit.

The critical point here is remarriage and its impact on benefits. If you remarry before age 60, you lose your survivor benefits from your previous spouse. However, remarrying after age 60 allows you to keep these benefits. I recall a couple thanking me after a Social Security presentation because they learned that marrying after she turned 60 allowed her to retain her survivor benefits.

In this podcast’s example case, she’s already over 60, so her remarriage will not affect her survivor benefits. Additionally, once she’s been married for a year, she could potentially switch to her new spouse’s benefits, although this is unlikely to be beneficial compared to her current survivor benefits.

Here’s where many people miss out: While collecting survivor benefits, your own retirement benefit continues to grow. By delaying your own retirement benefits until age 70, you can receive an 8% increase per year up to your FRA.

Using our example, if her own benefit at FRA was $1,500, by waiting until 70, it could grow by 24% to $1,860. Therefore, at age 70, she should switch to her own retirement benefit if it exceeds her current survivor benefit.

Another client of mine faced a similar situation. She started collecting survivor benefits at age 62 and planned to switch to her own retirement benefits at age 70. Interestingly, at age 69, Social Security informed her she could receive a slightly higher amount by switching to her own benefit. However, by waiting just one more year until 70, she’d gain significantly more per month for the rest of her life.

This highlights the importance of considering all scenarios and benefits before making a decision. Using tools like the Social Security Analyzer can help ensure you maximize your benefits by evaluating all possible options.

Survivor and spousal benefits, along with the impact of remarriage, can be complex. It’s essential to understand all the nuances and coordinate your benefits effectively. When you have all the information, you can make the decision that makes the most sense for you and your new spouse.

Don’t forget to leave a rating for the “Retirement Revealed” podcast if you’ve been enjoying these episodes!

Subscribe to Retirement Revealed to get new episodes every Wednesday.

Apple Podcasts: https://podcasts.apple.com/us/podcast/retirement-revealed/id1488769337

Spotify Podcasts: https://bit.ly/RetirementRevealedSpotify 

Additional Links:

Connect With Jeremy Keil:

Disclosures:

Content

Results and figures presented within the above links are hypothetical, unaudited and are intended for illustrative purposes only.

Liability

Keil Financial Partners assumes no liability or responsibility for any errors, omissions, or other issues with the links and their respective contents. This includes both the website content and any potential bugs, viruses or other technical threats.

No Tax Advice

Keil Financial Partners does not provide any tax advice. No information or results from the links should be interpreted as tax advice. Please seek guidance from a qualified tax professional for any and all tax-related matters.

No Investment Advice

The content and information provided through the links should not be interpreted as being investment advice or a recommendation of suitability for any particular security, portfolio of securities, transaction, or investment strategy, or related decision. Please seek assistance from a qualified investment professional for any and all investment matters.

Investment Risk

Investments may increase or decrease significantly. All investments are subject to risk of loss.

General Disclosure

Advisory Persons of Thrivent provide advisory services under a “doing business as” name or may have their own legal business entities. However, advisory services are engaged exclusively through Thrivent Advisor Network, LLC, a registered investment adviser. Keil Financial Partners and Thrivent Advisor Network, LLC are not affiliated companies. Please visit our website www.keilfp.com for important disclosures.