Is age 65 still the right age to retire, or has that idea become outdated? In this episode of the Wise Money Show, we break down the key retirement milestones like 55, 59.5, 62, 65, 67, and 70 and explain how Medicare, Social Security, 401(k) access, and healthcare costs all impact your decision. More importantly, we walk through the five factors that truly determine when you can retire with confidence. If you’re wondering when you can realistically step away from work and not worry about running out of money, this episode will help you build a smarter retirement plan.
Season 11, Episode 26
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Transcript: What’s The Best Age to Retire?
It’s time for Wise Money with Korhorn Financial Group with certified financial planners Kevin Korhorn, Mike Bernard, and Josh Gregory.
Segment 1: Welcome to another episode of the Wise Money Show with Korhorn Financial Group, where every week we’re helping you take your next wise step in your financial life. Thanks for being here, friends. My name is Mike Bernard. I am your host. I’m also one of the certified financial planners on the program. And with me in the KFG studios, my business partners and fellow CFPs, Kevin Korhorn and Josh Gregory. For many people, age 65 has long been a target retirement age because of its link to Medicare and Social Security benefits. But is 65 still the magic age? Does an ideal retirement age even exist? What age would your own retirement confidence be high enough for you to step away from work? We’re going to be discussing those questions and how you can answer them in your own financial life. That and more on this episode of the Wise Money Show. All right. When do you want to retire? Just like just just think about it for a second. And and I don’t know, maybe it’s crystal clear. Maybe you’re already counting it down. They’ve got a bunch of apps for that. Makes it kind of cool. Maybe you’re like the most common answer and that is uh yesterday. Um but but yeah, realistically, when do you want to be done? And then is there an ideal age where if you get past that age, it just gets easier. There’s less pressure. We’re helping with all that right now. If you have a question for the program or need help with your retirement planning, we are here for you. Call or text us 574222000. That’s 574222000 online. Wisemoneyshow.com is where you can engage with us that way. And then all over social media, wherever you’re at, we are there as well. Search the WiseMoney Show. Guys, has there been an an average or the what’s the most common age you’ve seen people retire at in your career? Just anecdotally, you don’t need to look it up. Like what would you say has been the most common retirement age? Well, it is it has evolved over time because when I started my career in 1994, people didn’t have a lot of money in their retirement accounts. People that had hundreds of thousands of dollars in their retirement account were kind of an anomaly. And now um it’s not uncommon that we work with people that have millions of dollars in their retirement accounts. So it’s just with the advent of the 401k in the 80s or kind of the recognition of that part of the tax code and then as uh companies adopted that model where it’s no longer a pension, but you’re actually going to be funding it yourself. Um things have changed. And so are you saying people are retiring earlier? I’m saying people have options now that they didn’t have because back in the day as soon as people hit 62 they wanted to retire. So like okay I’m 62 I can start drawing social security let me retire. The problem there was a couple problems. Number one is they might not have had quite enough money to to have the probability of success for their retirement plan. But the other main consideration was healthcare. Yeah. So then what typically would happen is it was just kind of a foregone conclusion that you were going to work until 63 and a half and then you’d get 18 months of COBRA and then you’d hop on Medicare and you’d be fine. So 63 and a half is really kind of the earliest you could consider retiring because if you didn’t have a health insurance solution if you didn’t work for a big company that had retirey medical benefits and just as I started my career uh all of these companies were stripping these types of benefits. M so they said oh well you know when I started we had retiry medical benefits but they took that away and so um it’s just changed um the and the and the freedom and and the volume of money that people have been able to accumulate it’s different now you said a word in there that was at the tip of my tongue as well and it’s the word options you know I I think it’s fair to say that the clients that we work with are a skewed part of the population. These are as a whole on the whole folks who got started early. They were pretty intentional about uh planning for their future and that’s why they were seeking advice and uh wanted a coach to help guide them and and help improve their outcomes and everything. And because of all of that, they do have options. And it’s interesting to me though, I can just think I’m picturing faces right now of people who could have been done working maybe in their late 50s, early 60s who chose to keep going until age 65 and it was still tied to health care as you said. And that’s after the Affordable Care Act exists where people could walk away from their employer, go onto a marketplace policy and ride that for a few years until they get to Medicare. But I’ve just had a bunch of people say, “Yeah, I just don’t want that expense.” Yeah. I I don’t want to pay for that. I know I could afford it. Or I try to persuade them that they could afford it, but they’re like, “I don’t want to pay for it.” Yeah. And so there’s maybe I I don’t know if I’m stereotyping too much with our clients, but many of them they’re frugal, you know, they’re they’re costconcious and even if they could afford to spend the money, uh maybe they choose not to. And age 65 still maybe that was burned into their minds early on in in their working career. I don’t know. But 65 is still the one that I see the most often. Yeah, I would say probably maybe if I were to average it or most common maybe 64 maybe still with that same old thinking Kevin that you mentioned and and getting close to Medicare. I mean, health insurance, it really does drive a lot of the retirement age decision, but the other one was, “Hey, I’m getting paid really well and I like what I’m doing.” And I I I think I’m going to stick it out for I mean, there was there I can think of a few clients where every year it was you going to retire this year because you can, you know, I’ve been telling you you could for the past three years. Yeah, it might be this year. And then we get to the end of year it might be next year. You know, so so 65 sort of used to be the magic number. it’s not as much these days and I guess curious of the trend and just to just to state what I think you guys were saying is the trend are there are more options and so even though some people are still retiring closer to that 65 more and more people are aiming for a younger age is that right because of health insurance or I don’t know that I would observe that I actually think more and more people are saying ages that are even older than 65 interesting and maybe that’s just younger generations expecting that I’m probably going to have to work longer because I’m going to live longer, you know. Uh but I don’t know. It’s hard to paint with too broad of brush strokes because everyone’s situation really is different. Yeah, I think I I would go back to your point, Joshua. We we do end up working with a bit of a skewed segment of the population. They might not have been that skewed segment when they showed up, but if they’re working with a financial coach and they’re getting financial planning help and they value professional advice, the results that they get are pretty amazing. And we’ve just seen that over and over and over again. And I remember um early in my career I was meeting with a Notre Dame professor and his wife and I said, “So when do you guys want to retire?” And he looked at me like I had a third eye in the middle of my forehead and he’s like, “What do you mean retire?” I’m like, “Well, you know, like be done working.” And he’s like, “No, we never.” Yeah. Like, so I do think it depends on what your occupation is because some occupations I think of a college professor um I know some professors that are in their 70s and are still going strong. I think of uh pastors, preachers, uh people in the ministry, they uh they’re able to go even if they no longer have specific uh responsibilities for a specific church, they like what they did all along and they don’t want to do it. You know, one one area and so my mom was a school teacher. A lot of my family is in education. That one does not seem like it’s going longer. It feels like teachers if you’re in if you’re in the school systems, you are wanting to get out like 55 maybe if I can make it that long. And so that one seems to have trended lower and younger. So there’s a lot of ages now that that’s where I’m curious your guys’s perspective. I have my own as well and it feels like people have been my pers my perspective feels like people have been wanting to retire sooner and sooner. Maybe you guys are seeing something different, but there are more ages that you need to consider now. Or maybe because you’ve got more options and it’s less pension dependent and more your own savings, some of these ages now come to life more than just 63 and a half and 65. I want to run through each of these ages again and as we pursue, well, is there an ideal retirement age and what would be the ideal retirement age for you? So, we’re going to go in in chronological order. I mean, one potential inflection age is the year you turn age 55. Not even age 55, the year you turn age 55. Guys, why is that? Well, for some people, your 401k at work might have built in to the rule book. Um, that allows you if you retire after age after you turn age 55, you’re able to uh get access to your 401k without a penalty, without the 10% penalty. you still pay taxes on those distributions, but it just means that a pool of money that you’ve been accumulating for a long time is now accessible to you without a haircut attached to it. And and just getting into the weeds and I know there’s uh there’s a lot of nuances. You know, the the Internal Revenue Code and tax laws here in the US are full of rules and then exceptions and then exceptions to those exceptions and exceptions to those exceptions. But yeah, it’s technically if you retire or terminate employment in the year that you’re going to turn 55, even if you’re not 55 yet technically then then uh it’s the year you turn 55. It’s not well I retired at 54, but I’ll wait to start drawing out until the year I turn 55. No, no, no. You’ve got to be aware of those rules. Work with your CFP on that. That’s just one of the ages. We’ve got that and more coming up here on the Wise Money Show with Korhorn Financial Group.
Break 1: Hello YouTube. Thanks for being here. This is the Wise Money Show. Oh, what you’re watching right now is our weekly 1-hour talk show that airs right here on this channel 10:00 a.m. Eastern time every Saturday morning and also on podcast at the same time and also on a couple local radio stations at the same time as well, which is why the content’s broken up the way that it is and has segments and all that’s for radio station and and we record that here for you as well. Uh, if you’re looking for content that’s shorter and more direct and and not a talk show, not the banter and so on, we’ve got all that for you as well. Nearly 2,000 videos, I believe, right here in the channel history as well. So, make sure you turn that uh hit that subscribe button, turn on notifications so you are made aware every time we drop new content. You can leave questions and comments right here. We’ll get back to you on that as well. We appreciate it. Yeah. During or after the calendar year that you turn 55, right? It’s And it’s, as you said, it’s terminating your employment that year, not starting to draw. Like, you can’t leave your employer at 53, wait around to age 55, and then start drawing. Right. Correct. or the year of age 55. Super confusing. Yeah. And I also believe this is hardcoded into plans now. I think 401ks I think they’re all I think so. That’s interesting. Uh I’m not going to state that again exceptions and then exceptions to exceptions and exceptions to but I’m not even sure you’ll be able to find a confident answer there. I I think it’s all plans now. 401k plans. Oh, dude. You can definitely find a confident answer. The question is wrong. Yeah, you can. It’ll it’ll be confidently wrong or right and and they both look the same. All right. My guess is we’re still going to be talking through these ages throughout this entire segment. So, let’s have some good dialogue about it. And yeah, it’s a statutory rule. Okay. Confidently. Maybe, maybe, maybe, maybe not. All right. Here we go.
Segement 2: What age do you want to retire? And then is that is that like the uh I’m it’s right right on the edge. I hope I can make it. And is there an ideal age? Is there an age where when you get there the pressure is is off or maybe it’s much less and really you can retire with less stress and more confidence. Uh what’s that age? We’re helping you figure that out right now. This is Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard. with me in the KFG studios, Kevin Korhorn and Josh Gregory. H stay up to date on all Wise Money content. Find us online. Wisemoneyshow.com. It’s where you can find us in all over social media wherever you’re at. We are there as well. Search the Wise Money Show. Not sure why I’m having a hard time saying social social. I don’t know if you noticed that, but it is what it is. Uh so, what do you want to redone? When do you want to be done? When do you want to retire? It it used to be very clustered around age 50 or excuse me, 65 because of Medicare. And just ask the guys, they’re saying, well, you know, old habits die hard. It’s still pretty fairly clustered around 65, but people do have more choices. Age 55 could be an inflection point because you can get access to your 401k starting the year you turn age 55. If you terminate employment the year you turn age 55, you can start drawing dollars out and not have a 10% early withdrawal penalty. So, if you’ve saved up a lot of resources and believe you’re financially independent, you’ve done your five factor plan and believe that can work. That could be an age that is maybe an inflection point or an ideal age for you. 59 and a half though, that’s the other one. I actually I mean that’s been a rule my entire career. I don’t see a lot of people when we talk about hey when do you want to be done? I don’t hear a lot of people say well by age 59 and a half. I you know by the you know once the early withdrawal penalty once I’m past that that’s when I want to be done. I don’t think this is a big ideal age or inflection point. What do you guys think? I agree. No one says that that’s when they want to walk away from their paycheck necessarily, but it is when again a a pool of money that they have been sheltering into IRA uh and and it’s been growing tax deferred. Now all of a sudden they can pull money out of those accounts without the 10% penalty again. And so it matters what age you retire, but no one comes in saying, “Oh yeah, my goal is 59 and a half.” Yeah, I don’t think I’ve ever I don’t know why they came up with that. I mean, why why the half ages? Doesn’t even And why 59 and a half? Just make it 60. Gosh, it doesn’t make any sense. So anyway, it doesn’t seem like a big inflection point. And and honestly, there are a lot of creative strategies around that 59 and a half. Again, if you terminate employment or leave employment in the year you’re turning age 55 or or after, you can leave some dollars in your 401k. Draw off of those penalty free. You can set up some other section 72T uh the the uh the Internal Revenue Code and there’s some options where you can withdraw dollars and not pay the penalty and avoid the penalty. And and especially if you’re financially independent by that age, hopefully you’ve got tax diversification. My folks retired very very early. They had zero tax diversification. Zilch. All of the money was pre-taxed. All of it. And that maybe is a little bit just points to when they retired. But hopefully if you’re looking to retire in your late 50s, mid to late 50s, you’ve got tax diversification. There are ways around it. And so, all right, the next big one though, age 62. That that I would say is an inflection point and one Kevin you mentioned a lot of people do aim for. Yeah. Well, 62 is when you can begin drawing social security. And if you have um this is the thing, it’s it it’s so unique to everyone because you say, “Well, this is what happens on average.” But no one is average. And so if I had health issues and I didn’t think I was going to live a long life uh beyond 62, I’d retire at 62, draw social security, and try to enjoy what uh what I have thought of as, hey, this is the American dream, right? We’re going to do a little bit of retirement. We’re going to travel. We’re going to do the Alaskan cruise. We’re going to um maybe hit the rest of the 50 states that we haven’t hit or see the national parks, whatever that is. uh that that floats your boat. Maybe I just want to go spend time in a cabin in Northern Michigan. So, um yes, I do. Yeah. So, whatever that thing whatever that thing is that you define, you might want to start it early. You what what we’ve seen a lot of folks doing and again things are different now because people have been able to prepare differently. Folks that have very satisfying work tend to say, “Hey, I I I’m happy doing this work for a long time.” And what I want to do is I I want to kind of sprinkle in some of the things that I might do in retirement while I’m working. So, for instance, I’ve got six weeks of vacation. So, I’m going to take a 4-week block of vacation and do something that I would typically do in retirement. So you do that so that because um we’ve all seen the guy that retired and died within the first month or first few months or the first year right after retirement. I’ve seen um when I started my career at American Express Financial Advisors, there was an adviser that had retired and then he died just a few months into retirement. And so all of the old guys were afraid to retire. Oh wow. cuz they thought that’s that’s what caused it or something. That’s my destiny. If I like as soon as I retire, I start the clock ticking and you know, I thought you were going to say that they all rushed into retirement because they were afraid it wasn’t going to be long enough or something. No. Well, isn’t Well, it it is funny what you might think uh and and yet what people do. Is 63 and a half still an age? People still focus on 63 and a half? Is that an inflection point? It can be. I mean, you you talked about your folks having no tax diversification. Yeah. Why why was that? Well, the Roth wasn’t around for most of their working career if it was That’s right. at all. Yeah. Not really. So, there were a lot of financial tools that they didn’t have access to as they were in their accumulation phases. Um, it really depends. I mean, we were working in case class yesterday and we were talking about, hey, these folks are in their mid-50s. If they do it right, we can build some tax diversification between Roth money and pre-tax money and uh completely non-qualified money. And and let me make make the point I think you’re making because 63 and a half used to be well when you retire and you’ve got group health insurance, you can continue that insurance for a period of time. For most people it’s 18 months, sometimes certain circumstances 36 months. And so that Cobra would be a bridge to Medicare that which would start at 65. So 63 and a half was a big deal. If you’ve got tax diversification and you’re proactive with your tax because of healthcare.gov, you may be able to get health insurance at a much cheaper rate than than COBRA. And because and I know that is that is changing right now because the the you know there was originally an an ACA cliff. Sorry if this is jargon. We’ve talked a lot about it. If your income’s $1 over a certain level, you don’t get any of those tax benefits. That’s how it was originally designed. They changed it during the COVID years and then now that it expired. There’s going to be jockeying all this year like there was last year to try and change that. We’ll see what happens. But if you’ve got tax reversification, you can make your income look pretty low uh for a few years before Medicare and be able to get health insurance at a very very affordable rate through healthcare.gov. So, I don’t see 63 and a half being talked about much at all anymore. Nope. 65 still very much is. And and I mean obviously I I mean it’s no longer connected to full retirement age for social security, right? Delaying your social security and and delaying from 62 to 65, you’re certainly going to see a much higher benefit for sure. And at age 65, you are eligible for Medicare. So that still seems like a a very popular age. Correct. uh for all the reasons that we were saying that if you could leave your employer’s uh health insurance benefits and go immediately onto Medicare, no gap in there, no having to figure out Affordable Care Act or a marketplace, don’t have to go on COBRA. It’s just pretty seamless. And a lot of people want that kind of easy button for their health insurance. But just because you retire at age 65 does not mean that you have to start your social security at that same time that you begin uh the the health insurance benefits through uh Medicare. You know, maybe if if you have other resources that you can be drawing off of, uh maybe you planned ahead and you’ve prepared for a gap between your last paycheck and when you start social security because you’re wanting social security to keep on accumulating. Um, so just because you retire at age 65, maybe Medicare is the driver there and social security isn’t for some people. Mhm. Is 67 an age people are targeting? Well, that that would be it. It could be a full retirement age. So depending Yeah. I mean, we’re right now in the All right. Is it is it 66 and a half? Is it 67? Where is my full retirement age? Um, I think it could be. Um, again, depending on what your what your situation is. And I still see a lot of people aim for 70. I want to retire, you know, professors. I I do and folks that are really in a not a physically taxing job, one that is mentally stimulating, and one that they enjoy and feel at the top of their game. I I love that. Keep you sharp and and uh and looking to retire at 70. So, those are the inflection ages. What’s your ideal retirement age? How do you know that? We’re helping with that coming up here on the Wise Money Show with Korhorn Financial Group.
Break 2: All right, that’s where we’re going next. Just Okay, guys. After all those ages, is there an ideal age that you would just coach maybe even a 20-year-old to say, “Hey, I’d probably shoot s have your sights set.” S’s are really tripping today. struggling and it’s because uh I’m on cup number three and it is early a boy. So I didn’t sleep well last night and uh and so then I didn’t wake up and work out so I’m even more tired because I didn’t have my morning routine and didn’t get enough sleep. And yeah, it’s a butterfly effect. Yeah, it’s not not great. All right, let’s go. Third segment and talking five factors and then maybe that means four segment getting into questions. So, I don’t know whoever wants to take the line share of the five factors, but we can all mix in. I think you and Josh do it. wisemoneyguides.com. Yeah, I think you and Josh can split that one. Well, well, I’m happy to start with advice of a 20-year-old. All right, here we go.
Segment 3: If you’re early in your career or maybe you haven’t, you don’t have your heart set on an actual retirement age just yet. You’re still preparing and you I’ll get there. I’ll get there. Is there an ideal retirement age for you for your situation? One that we would say, you know what, I would just put in your mind, aim for this. and and really how would you know what’s the process for you to find the ideal retirement age for your situation? That’s what we’re helping with right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard with me and the KFG Studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show is on podcast. Wherever you listen, just search the Wise Money Show. Subscribe to the show there. Follow us there and rate the program there on that uh podcast platform. We appreciate it. It’s helpful feedback for us. talking about an ideal retirement age and the various ages that now are inflection points, you know, Medicare eligible eligibility, being able to start social security, delaying your social security to full retirement age, all those ages. Guys, just if you were to coach someone that hasn’t already defined this is when I want to be done, what would you say would be an ideal age that a if you can make it to this age, your retirement plan likely is going to it’s going to be easier, less pressure, that sort of thing. Is there is there Yeah, go ahead. Well, I was just going to say I don’t think I’ve ever proposed an age to anybody. Um, but instead I I almost wonder if it would be better to just create your own checklist of what are the conditions that need to be in place for retirement to be a go. You know, I’m I’m picturing the movie um was it Apollo 13? uh where you know NASA is uh check going through all the checklist before the rocket launches and uh all these systems have to be go before we would actually give it the green light here. What are those systems for you? Um you know it may be a health concern like you need to have the right health and health care options in place. Maybe there are certain lifestyle things that you want to be able to do. If you wait too long you might not be able to do those things. if you go too early, you might not be able to fully be ready. Um, are there certain longevity assumptions that you’re you’re playing into this? And then of course financially as well, but I I’ve had a lot of clients where man, they are all systems are ready to go except for maybe a lifestyle one where they just don’t know what they’re going to do with their time. They don’t they don’t want to walk away from their job because that gives them purpose and a social connection and it’s part of their identity and they just don’t want to waste the weeks as time goes on. They haven’t figured that one out. But whatever your checklist is and I’m not proposing that this is the checklist or these are the items, but have those figured out and then let that drive what age is all are all these items a green light? Yeah, when I started my career, I said, “Okay, I probably should have some financial goals because I’m talking to clients about their financial goals.” So, I set out to retire at age 50. And I looked at the necessary sacrifice and um it wasn’t possible. Um it would have taken uh much too much. And then I got to a point where I realized, hey, I could be on track to be financially independent at age 50. And then I thought, well, and at 50, I still had kids at home. I mean, I had like I I my life was full of things. And I’m like, well, what would I do if I did retire at 50? And now at 57, I still look and say, um, no, I still I still have a lot of things that I haven’t accomplished at work that I’d really like to see done. So that is intriguing to me and it kind of pulls me along. But if I were talking, so I would say the only thing you know for sure about your financial goals is they’re going to change, right? If you were young and you needed an age, I would tell you, hey, plan on age 70. Shoot for 70. be and here’s why the if you said give me a financial plan that works the the I have a guaranteed foolproof financial plan that works 100% of the time and that is work until you die don’t retire don’t ever retire now you people say well that’s not really what I was hoping to do I was hoping to do some more so I say well shoot plan on plan on having skills that’ll get you to age 70 and plan on updating your skills. So, because things are changing, AI’s eating the bottom rungs of the ladder, it’s all kinds of interesting things that are happening. But, so get yourself in a position where physically you could work until 70, skill-wise, you could work until 70 and then work on um financial independence. What would it take to replace my income and get my balance sheet in a position where I could just be done working if there was a health event if there was something in my family where I had to take care of one of my folks? Fill in the blank. I I love that advice, Kevin. You’re you’re saying uh make sure that you have the longevity to keep going in your career further than what you your financial plan might even call for. get yourself financially ready or to have options to be done sooner than that. Uh and you know, I had someone approach me at church uh just last Sunday. He uh is a listener to of the show and he pointed out that man, his employer is bankrupt and he was going to be in that week or this past week. He wanted to talk to his financial adviser to find out, can I just be done instead? you know, I wanted to keep going for another year or so. There’s some other things I could achieve in my financial life if I did, but could I just be done? And um that doesn’t happen by accident. You know, pe people put themselves in a position where they have the flexibility to be done a little bit earlier, but he had the uh the skill set, the willingness, maybe even the enthusiasm to keep working longer if all of the conditions allowed for that. But um I I I love that you you’re advising that people keep their skill set up for the long term. You have to keep on reinventing yourself professionally so that you could go all the way to age 70. Maybe be ready to go um sooner if financially you were you were capable. Yeah. Yeah. I I I wouldn’t disagree with any of that. I I think young folks these days do target I I Kevin, you know, you mentioned um American dream and and connecting that to retirement. And I think part of the American dream is each generation has a little bit better than the previous generation. And when it comes to retirement, I think this can be confusing because well then in in order to have it better, I need to work less. I need to be retiring a little bit sooner. I think in this instance it’s going to mean you’re going to live longer and hopefully your quality of life is going to be greater and therefore I wouldn’t peg well things are working if I retire sooner than my parents. Yeah. I think it might mean well I set your sights on working a little bit longer because you’re going to have you know greater health and hopefully greater longevity. The truth is here that the age, the ideal age for you is not the same as the age that might be appropriate for your colleague or your sibling or your folks. And age is just one of the primary factors that all need to be considered when you’re trying to figure out what is the ideal and successful retirement plan for your situation. Age is that first variable that you need to consider. And yeah, what’s your hopeful age? What’s your ideal age or or whatever? That’s certainly going to be a discussion point when you’re talking to your your CFP and building out your five factor retirement plan. But it’s just that first factor. The second factor, hang on. Can I say something about age as well, and you kind of alluded to this, but more and more I feel like it is appropriate for people to plan for three different ages. Yes. Maybe you have your target. You have a wouldn’t it be awesome if we could be done a little bit earlier? Or maybe even as a the story I just shared. What if circumstances force your hand and you need to be able to walk away from a paycheck a little bit earlier? But then also, what’s a fallback position? If somewhere along the line as you’re tracking your progress towards this goal and you’ve got that target age in mind, but things go off track, maybe something happens financially, you’re recovering for from some sort of crisis or or whatever, and you need to change the goal a little bit and buy yourself a little bit more time to be available. Well, how many extra years would you be willing to go? And can you be mentally prepared for that? So, I I’d encourage you to be thinking about three three different ages. One being the target and the other two being if you had to go early or you had to stay a little bit longer. I I think that is a that is very wise Josh because we’ve all seen in our careers where folks come in and they are so emotionally attached to an age and if the fin if the if the other factors don’t allow for that age to be the one that has the right level of success. It’s just devastating and they end up making a mistake. Well, this is the age. I’ve just had my heart set on it. I this has to be the age. And so starting out of the gate saying, “No, no, no. Have three ages.” I think that helps hedge against that emotional attachment and helps you be more nimble to, you know, financial change. When you define it as a range, to miss that target is no longer failure. You’re you’re trying to land somewhere in this range of ages. Yeah. I I I love it. And but but yes, age is just one of the five factors. And these factors are interrelated. They’re interdependent. Changes in one will impact the other. So, what are those five factors? How can you have the right process to have a successful retirement? That more coming up on the Wise Money Show with Korhorn Financial Group.
Break 3: Yeah. Really good. How’d you phrase that, Josh? I have no idea. A I think you said a target and then you said, “Wouldn’t it be great? Wouldn’t it be nice if you could a fall back, right?” Yeah. I’ve heard it said a little bit differently and I didn’t like how it was said. So, yeah, it’s good. Are we going to number four? Yeah. Oh, boy. landing the plane as and didn’t you just say that last week? Did I tell you guys I’m sore today? Um I’m assuming we’re getting to get we’re going to get into questions, but it might be a little clunky, too, because it’d be a sharp right turn. So, we’ll see. If you have stuff to say, good content, stories, I’d say share it right now. Yeah. To make sure we feel the whole uh That’s right. Yeah. Cuz if if we run out of this topic at 8 minutes, Yeah. I would say that’s not probably not going to work. I’d like to just watch you tap dance a little bit. Okay. So, are but it’s all tap dance. So, are you going to do uh are you going to do the five factors? Yeah. And and tell people where they can access that. No, you are. You volunteered for that. So, all right. Here we go.
Segment 4: Thanks for being here. This is the Wise Money Show with Korhorn Financial Group. My name is Mike Bernard with me in the KFG studios, Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show as well as a lot of other content is right there on the Wise Money YouTube channel. Go to YouTube, search the Wise Money Show, subscribe to it there, turn on notifications everywhere every time we drop new content and you can leave questions there. You can leave comments there. We’ll get back to you. You can share episodes. You can all that sort of stuff. So go to YouTube, search the Wise Money Show, subscribe to it there. We appreciate it. All right, we’re into the All right. Well, what’s the what’s the ideal retirement age for you? Obviously, this is all circumstantial. There isn’t one ideal retirement age that’s going to fit for everyone. I’d encourage you consider working a little bit late or aiming a little bit later. Odds are you might need to retire a little bit sooner. There’s a change in work, change in health, change with family, and I want you to be prepared. So, just air a little bit higher. But that’s that’s age. Okay, that’s the first factor. The second factor, I would argue, we’ve had this debate before, is the most important of the five, they’re all very important. That’s why we’d sort of tease each other about this, but but your retirement spending, your retirement lifestyle. How much do you expect to spend in retirement? Josh, you mentioned like uh you know, we’re green for launch, we’re go for launch, that sort of thing. For a lot of people, it could be mortgage paid off. I I my ideal retirement is one where I have less pressure on the amount of income I need to draw off of my portfolio because I no longer have debt that needs to be serviced. That’s that’s we’re go for launch. Exactly. I mean, if debt payments are part of your spending in retirement, what if debt could be completely eliminated and now you’re just thinking about food and travel and clothing and just paying taxes, healthcare, that sort of thing. not uh you know running from the bear somewhere, you know, paying off car loans or uh or mortgage or whatever. And spending when when we do uh comprehensive financial planning with our clients and we help them build a retirement forecast, what we’re stress testing is uh their their plan, their five factors. Does it work financially for them with a high probability of success? And one of the the most sensitive things that you can change in a plan to drive up or down your probability of success is the spending assumption. And spending it it is all forms of spending. It could be yes paying some debts if they follow you into retirement. It can be your health insurance or or health care costs. It can be fun travel or replacing cars more frequently because you just like to drive nice stuff. It could be uh major home repairs or or maintenance. And it could even be giving. Giving is a form of spending in the sense of it’s cash that’s leaving your retirement portfolio. It’s no longer available to help uh meet your lifestyle needs. It is a form of of spending. And so it just takes a bigger pool of money to live off of $100,000 a year than it would $60,000 a year. I think that just makes intuitive sense to to everybody. And we can quantify that. But the age that you retire may then have an impact on what you could afford to spend. And so if we’re trying to answer the question, well, is there a magic age? You can’t answer that without paying attention to, well, what is your lifestyle goal? What does your spending need to be for you to feel like this is a retirement worth pursuing? And and so often Josh, many people when they hear retirement spending, they think, “Oh, that’s just the money I’m spending.” No, you mentioned the other things that are part of that number, one of which is healthcare. So if you if you are running your own financial analysis and you do not have health care as an expense and an educated assumption of what health expenses are going to be in your in in your retirement plan, you it’s not adequate. You you need a plan that’s going to that’s going to account for that. So that’s and don’t lose sight of inflation as well. That is uh the the silent killer of so many people’s retirement lifestyle. life just gets more and more expensive as time goes on because your dollars don’t go nearly as far. They are worth less to you uh in your spending power with time. And um that’s why you need to pay attention to things like, hey, what’s the Fed doing uh lately with interest rates and what has inflation actually been averaging because it has a real effect over the long haul. Yeah, I I just had an argument with the guys in case class because we were talking about the Medicare Part B premium and I said it’s $177 bucks. It’s $22.90
per month for Medicare Part B per person. Yeah. Every year that has continued to climb within inflation. It is it is incredible. Uh so that’s retirement spending. That’s the second that’s the second factor. The third factor is your retirement income. Retirement income sources. So, how are you going to optimize social security? Do you have a pension? Do you have other income sources that you expect to to be part of retirement, early retirement? You know, are you going to work part-time? You going to do some consulting? And I would say with this, make sure you’re realistic, but not too optimistic. I see a lot of people that say, “I’ll be able to retire because I’m going to be working part-time for five years.” And then they get there and say, you know, I I don’t want to do that. I I don’t like it’s inconvenient. I thought I’d have the pick of the litter as far as options for part-time income and I I really don’t want to do what is available and can I just retire without it? And so be realistic. That’s retirement income. The fourth factor, what how much you have saved up for your investments. That’s the that’s uh that’s I think where a lot of people just focus. What’s my number? How much do I need to have saved up? No, that’s just one of the factors. So, it’s your retirement portfolio, your nest egg, but also how much you’re contributing each and every year. If you reach a point where you believe during your career you’re going to be able to contribute even more, factor that into your plan. Don’t be overly optimistic, but factor in the reality of that. That’s the fourth factor. Yeah, you do have to be careful to not assume that all of your biggest savings are going to be out there in the future because out there in the future, you’re going to have other priorities. You’re going to have other things you want to be doing. So don’t put the sacrifice all on the future self. Make sure that you get started early because the the sacrifice um is just less over your entire working career the sooner that you get going on the right amount of savings. Yeah. And then the fifth factor is the amount of risk you’re comfortable taking with those investments. And there is a relationship between risk and potential long-term return. And it it doesn’t mean that well you’ve got to be speculative or no you’re supposed to be very very high risk in retirement. No, no, no. But there is a there is a relationship. If you say by the time I get to retirement I’m going to start drawing out some of these dollars and therefore I don’t want to have anything in the market or I don’t want to take a lot of risk. That’s going to reflect the amount of return you can expect and that’s going to influence again that’s retirement plan that this one I mean all of them. There’s just countless examples of how you can see that these are interrelated. But if you say, and I’ve I’ve had uh folks share this um that yeah, by the time I get to retirement, I do not want to worry about market volatility. I don’t I want as close to no risk or very little risk as possible. That simply means and that is fine. There’s no value judgment. That just means that that’s the fifth factor that you might need to work longer. the first factor. You might need to spend less in order to make that work. You might need to have other sources of retirement income. You might need to have more saved up. So, there are tradeoffs to each of these factors. They’re interrelated. Yeah. And so, I I would say the exact same thing. I don’t want you to worry about market volatility when you get to retirement. But at the same time, what if that really was best to be at least exposed to it? You may encounter it some with part of your portfolio because you need certain investments that can continue to grow and keep pace with uh with inflation ultimately. This is part of the reason why we just say man getting started investing especially in the stock market when you are very young. It it’s almost like exposure therapy you know like if this is your major fear in life watching investments decline well then I want you to experience a whole bunch of ups and downs over over time so that you become less fearful of it because it really does need to characterize your portfolio for the long haul. Even in retirement, you have to have some growth investments that are on the up and down roller coaster ride of the stock market because of the compounding effect that it can bring to your portfolio. On average, you’re going to see a 14.2% decline in the S&P 500 intrayear. So, be ready for it. And the folks that we meet that are in their mid-40s that have a couple hundred,000 in their retirement accounts, they haven’t moved out of the market when the market went down. Those same people in their mid-50s have a million bucks in their retirement account and in their mid60s have a couple million bucks. So stay the course. Stay the course. Y all th those are the five factors that determine they’re interrelated that determine are you on track for a confident and successful retirement. What is your ideal retirement age? You can get started. If you haven’t done that five factor work yet, you can get started by going to wisemoneyguides.com. Download our guide. It’s going to coach you through and talk you through some of those variables so that you are ready when you sit down with your CFP and start building out that five-factor plan and doing those trade-offs. You’ll be prepared. So, work with your CFP on that. That is all the time we have for today. On behalf of Josh Gregory, Kevin Korhorn, all of us at Korhorn Financial Group. Have a great weekend. We’ll see you next Saturday for the Wise Money Show with Korhorn Financial Group. Securities offered through Silver Oak Securities, member FINRA/SIPC. Advisory services offered through KFG Wealth Management LLC. Join business as Korhorn Financial Group. KFG Wealth Management LLC and Silver Oak Securities Incorporated companies are unaffiliated.
