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Peter, hello. Good to see you. Welcome back, everyone. Let’s do some myth-busting today. Seven retirement myths, and let’s bust them. So, when it comes to retirement, some of the biggest financial mistakes aren’t caused by the markets, they’re caused by common misconceptions. So, today, let’s separate fact from fiction. Starting with, you know I have talked about this many times, social security won’t be there for me. We just recorded a video Peter recently about how the trust fund
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will be depleted in 2032. So, a lot of people say, I just can’t count on this. >> Yeah, and Congress is working to do something about it. They just have introduced a measure basically saying that they are putting into law or proposing putting into law the fact that they will be required to do something about it before that time comes. So, nothing like a goal with no deadline, right? Yeah, so who knows when that is actually going to be, but there are several ways that the social security trust fund
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shortfall could potentially be addressed. The sooner they start acting, the better, but ultimately, it’s not that you’re not going to have social security. It’s that it would be a pay-as-we-go system, whereas before we had this trust fund funding the shortfall of revenue being brought in to what is being paid out. Well, when that exhausts in 2032, and that keeps getting closer both because we are getting closer to the date and the they keep moving the date closer as well, but when that happens,
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it’s not that we won’t have social security, it’s that the trust fund will not be there to cover the shortfall, and so we go to a pay-as-we-go system. So, I talked to a lot of people who are in a big hurry to to go out and claim and collect before we get to that date and so they are making individual decisions to take benefits early and therefore reduce their lifetime payout. Well, if you make an individual decision that reduces your own individual payout and then the system has to come back later
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and reduce payouts. Now that’s a a double whammy in the wrong direction against you. You have reduced an already reduced benefit. So it’s important that you really think through your Social Security decision and make sure that you are making a good decision regardless of what happens with the system or any potential fixes that they might come up with. >> Right. Myth number two, I don’t need a long-term care plan because I will stay in my home. The cost of long-term care, Peter, as you know, makes your eyes pop
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out of your head. This is in your area right now projected out about 10 years annual costs ranging from $80,000 all the way up to nearly $200,000. >> Yeah, it is expensive and somewhere between seven and 10 to eight and 10 of us. I think you said 80. I I know that several years ago that number was closer to 70% but we we are living longer but not necessarily healthier long lives and more and more of us are needing some element of care. And listen, it’s everybody’s kind of ideal situation that
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well, I’m just going to age in place and remain in my home but that may or may not be realistic. There is only so much burden that a family can can bear or that they’re qualified to provide. Some people need assistance above and beyond what family can provide for them and some people need more assistance like around the clock than what family can provide. And so, you know, talk to your your spouse and and see if they’re even physically capable of providing that care for you. >> Picking you up. Yeah.
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>> Yeah, picking you up off the floor and and getting you to and from a the the bathroom and then monitoring you when you’re in the bathroom. If there was some incident where there was a slip, how are they going to remedy that situation? This is where, you know, help is often required and children don’t necessarily have the time. They’re busy in their peak earning years doing doing their own lives, trying to make their own progress. So, the the ideal thought of staying in our home, and I get it. I
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I I mean, I’ve experienced this in my own family. There was nothing uh more that my my wife’s grandparents wanted than to be in their home, but but that level of care was not possible in their home. And and so, just think through that and all potential possibilities of the level of care and have a plan for it. That’s what this myth is all about is people don’t have this plan. You need to have a plan. Everybody should have a documented plan for how you intend to and would like to address the potential
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for the care that you might need. >> Right. And the updated stat is from the Center for Retirement Research, putting it at 80% of retirees who will require some form of long-term care. On that note, this brings us to myth number three. “Medicaid will cover my long-term care costs.” Medicaid and Medicare, myth. >> Uh myth. Yeah, Medicare does not cover long-term care. Medicaid does cover some element of long-term care, but you have to spend yourself down to essentially a poverty level. The government views it
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that if you have money, if you have access to funds, then you should be responsible for establishing your own care. And quite honestly, you would want to establish your own quality of care. Medicaid is basically health care welfare, and the government gets to determine the level of care that you will get once you go on their dole. And so, if possible, you need to have a plan to provide for the funding for the care that you might require as well. Now, as you’ve said, Aaron, and showed the figures there, that’s kind of
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astronomical numbers. There’s I don’t think any approach that is absolutely 100% bulletproof for how to cover these potential costs. Um but there are strategies to provide some leverage for dollars. More and more, the traditional form of long long-term care insurance has kind of gone away. In fact, the federal government isn’t even offering that to federal employees any longer. They stopped that a a couple years ago, and many of the companies that used to offer it have shifted away from it. But
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there are strategies to provide some leverage for your dollars. And I do meet some people who say, “Well, I’m self-insured.” And what a fantastically confident statement to be able to make. Uh but, at the same time, for a fraction of the growth that those dollars are generating in a given year, you can probably provide leverage to protect the dollars. And if I’ve got a paid-for home, I don’t stick the value of my home in a bank and say, “I don’t need homeowners insurance anymore because I’m
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self-insured.” It’s just not the most effective way to do that. So, you know, explore these other options and alternatives to provide leverage, to provide the protection that we might need to cover these expenses. >> Myth number four, now that I’m retired, long-term investment returns no longer apply to me. Abandoning stocks in favor of cash or other low-yielding bonds may feel safe, but this introduces the very real risk of outliving your money. >> Well, there is a time and place for this
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one as well. I will say this one is kind of a half myth, uh because there are uh uh uh definitely a a time and place in our portfolio where lower risk and lower volatility can produce more reliable results. But, at the same time, we do still need some growth on our money because the future is more expensive than it is today. So, this is where we often implement a bucket strategy. You need to have some money that is safe and available and accessible in case of emergencies or short-term needs that may
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arise, unexpected expenses. You need a bucket that is dedicated to income and income generation because when you’re retired, uh we we’re no longer working and earning the paycheck. So, now some of our money has to be designated for that purpose. And this is where the lower returns, but the higher probability, that’s the bucket that it falls into, that income bucket. But, that can’t negate having something there in the growth bucket on the on the backside as well because the future, again, more
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expensive than it is today. Expenses do arise, and we don’t know what may come. And inflation is going to be a factor that we’ve got to address. So, some of that growth money might spill back over and into that income bucket at some point in time into the future. >> Mhm. All right, our next myth, I shouldn’t spend from principal. A lot of retirees want to live off the interest their portfolio generates. I think it goes back to the number one fear, Peter, of running out of money.
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>> Yeah, and and it also hearkens back to that bucket strategy. I I I do think that in an ideal world, if we could protect the principal, live off the interest, and then eventually pass along the principal that we have been living off of to our beneficiaries, that would be fantastic. But, interest rates fluctuate widely. I mean, we’ve gone from a 0 to 1% interest rate environment for more than a decade to all of a sudden like a 5 or 6% interest rate environment. They could creep back down,
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they could go up. Just because we’re protecting principal and living off the interest, it doesn’t mean that we have a steady, reliable amount of income. And therefore, it’s not a way to really structure the plan in its entirety. Now, it can be a piece of the plan. And again, going back to that bucket strategy, maybe this is part of our income bucket where we’ve designated some core piece of it to a protect the principal and live off of the interest kind of approach. But that also doesn’t
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mean that in lower interest years, we’re not scraping some off from other places. And and and maybe that’s the growth bucket again. We’ve got to kind of structure that out, see what kind of risks people are comfortable taking, see how much interest and income we could generate in a more conservative approach, evaluate, and it’s on an ongoing basis that we have to continue to monitor what the interest rate and the market environment are going to present for us. >> I’m glad you mentioned income because
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that brings us to myth number six. My income taxes will be lower in retirement. A lot of people assume since they’re not working, they’re not going to be generating an income, so their taxes will be lower, but that’s not always the case. >> Not always the case. This is another one that might be kind of a partial myth though. In retirement, what a lot of people are surprised by is that their income is still taxable, right? That we have not foregone the tax code or the IRS once we retire. We We do not get to
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circumvent them. And most people have saved a good chunk of their money in tax-deferred accounts. That’s all taxable. Pensions are all taxable. Social Security does present us with a small discount. A maximum, as tax law stand today, of 85% of your Social Security is taxable. It could be tax-free if it’s your only income, but for most people, Social Security, 85% of it is taxable as income. But, in retirement, we also lose some potential deductions. And the kids are grown and raised and
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out of the house, so we don’t have dependents anymore on our tax returns. Maybe our home’s paid off. We don’t get to deduct mortgage interest. So, we got to get a little creative there. Now, the one big beautiful bill gave us this extra deduction on social security of up to $6,000, but some people don’t get that because their income eliminated and that provision of the one big beautiful bill actually goes away uh after 2028. And so, yeah, a lot of people are surprised that in retirement they’re
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paying as much in taxes. And then, RMDs kick in, which is the required minimum distributions on our IRAs. And that actually bumps many people into even higher tax brackets than they were paying during their working years or in the first several years of retirement. >> Okay, we have come to myth number seven. I need to hit a specific number to retire. This is speaking to all those headlines that say, “I need a million to retire.” Or 1.5. I mean, it keeps going. >> a lot more.
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>> Yes, right. So, why is this a myth? >> Well, I don’t think there’s any arbitrary number that tells you if you’re truly financially prepared for decades of unemployment. It’s not how old you are. It’s not how long you’ve worked, and it’s not the lump sum amount that you have in your portfolio. What you need to really focus on is the ratio and mapping out a plan to fill your income need. Retirement is not about replacing 100% of our working career income. It is about withdrawing only
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what is needed to cover living expenses and allowing the rest of the portfolio to maintain and sustain and hopefully continue to build and grow. But, the number that you have on day one of retirement is a finite amount of money and it’s got to last an unknown amount of time. And if you’ve not specifically sat down, mapped out, and blueprinted how to fill your income gap, you don’t know what the number is that you might need. Now, we can get kind of a general ballpark of what that number is, but
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it’s going to be different for every person. If you’re a couple spending only $3,000 a month, then that number might be very different than a couple spending $20,000 a month. And I’ve I’ve I’ve seen both within the same week. I I I had a couple come in that said, “We’re spending $2,500 a month.” And I said, “Wow, how do you do that?” And then I had another couple come in saying, “We’re spending $20,000 a month.” And I said, “Wow, how do you do that?” You
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know, but that’s your number, your lifestyle, your comfort, what you’re used to. You need to have a plan that reflects your needs. And the lump sum is not the front side of the equation. That’s That’s the back side of the equation. We reverse engineer that to figure out what the lump sum needed to fill that income gap is going to be. >> Right. We all just like to have like maybe if I can just measure myself against this metric or hit this number, then I have peace of mind. You know,
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Peter, talking through these myths with you is so much fun and it’s easy to understand why a lot of these are just misconceptions, but also you said there’s some gray area in all of them. So, if somebody would like to talk through creating a retirement plan, busting through some of these myths, making sure that they’re not depleting their nest egg in retirement, what’s the best way to reach you? >> and that’s what we do. That’s what we strive to provide people with the
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optimized retirement plan. Everything from optimizing your social security to controlling and minimizing taxes, determining where and when and how much risk is necessary, you know, all the items on this list, we arrive at a concrete conclusion for you specifically and individually through going through the process of designing that optimized retirement plan which we offer on a complimentary courtesy service for listeners to the show viewers of the podcast. So just give us a call. We’d be happy to talk with you answer any
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questions and of course extend the invitation to come in meet with us and get your plan structured and put together. If you’d like to start that conversation give me a call 919-300-5886 919-300-5886. You can also visit online on the website rashanplanning.com. That is rich on planning is what it looks like. It’s my last name Peter Rashan rashanplanning.com. We have been named best of the best in wealth management by the readers of the news and observer two years in running looking to close maybe a third straight
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year hopefully here in the near future but come talk to us and and and see the reason why the voters and our clients put put that faith and trust in our abilities and capabilities and the kind of confidence that you can have from having that plan in place. >> Congratulations Peter well deserved. >> Thank you. Thank you Erin. >> Thank you. >> Take care. >> [music] [music] [music] [music] >> com, run your numbers on the retirement tax bill calculator. >> This has been Planning Matters Radio.
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