Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future, so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith. Welcome to another program of Retirement Unpacked. I want to thank you for tuning in. Last week, we talked about the psychological roadblocks to managing your money well and also saving for retirement. And I’m going to continue with a little bit of that, but I also want to let you know that a lot of the people I’ve been visiting with have severe financial difficulties, difficulty saving, difficulty with debt, just financial difficulty for a variety of reasons. And depending on how deep that financial pit goes, it can be difficult to climb out of it. But there are a lot of reasons that people end up in financial difficulty and find themselves unable to save and have the discipline in order to accumulate wealth making their retirement easier. And there are a lot of those roadblocks. I’m going to talk a little bit more about a few of those and some examples that I have come in contact with. And some of the situations where people knew what they were doing wrong, but hadn’t taken the steps necessarily to prove that. Some people, for example, if they get low or depressed, they lack the motivation to manage their finances well. And some people may find that an antidote to feeling lower depressed or something like that is spending. And then if that individual or the couple or whoever it is, if they overspend, then that can ultimately cause a guilt or bad feelings. But the bottom line is regardless of the emotions that are attached to those behaviors, the end result is that money that you or she or they had intended to save doesn’t get saved. And another great example of some of those psychological problems are procrastination. I know sometimes when I’ve spoken with people and we talk about setting aside money for some particular purpose, there is, oh, well, I’m going to do it after I pay off the car or I’m going to begin doing it after this or after that. It’s sort of like couples who think in terms of, well, we’ll have a child right after we don’t pay for the new windows or we’ll have a child right after I get that raise that I’m anticipating. And if children were only born after certain goals were met, then the population would be much smaller than it is right now. So I think what’s important is that you look at this in terms of goals, but goals that need to be followed, I believe that everything we have, all the blessings we have come from God. So I believe that the first fruits should be provided back to God. That means the church can mean in addition to that, it could mean missions or places where you can give back for your heart is, where your savior is and so forth since that’s where everything came from. That’s where all of our blessings come from. So I think that’s the first place your resources should go. Next you should pay yourself first. Excuse me, by paying yourself, I mean setting aside money for the future. And I don’t mean necessarily retirement only, but younger people, if they’re driving a vehicle that they know isn’t going to last 10 years or something like that, then it would be wise in addition to saving for retirement to set aside money so that when you want to upgrade that vehicle, instead of walking away from the dealership with a $700 or $1,000 a month car payment, and they’re that, not that unusual. I’ve met someone who’s in the car business that said the average car payment is $700 a month. Now if you want to put that in context, let’s say if you were between 25 and 30, what would that look like if you saved $700 a month? Well I don’t have the numbers crunched right here in front of me, but if you would extrapolate that for 40 years, it’s not going to be maybe $100 or $200,000. It’s going to be a much bigger number than that, especially if it’s invested and you get a reasonable return. And I’ll crunch that number and have it for you next week, but I’d be willing to bet it’s between half a million and a million dollars, even if you don’t start with a lump sum. The point is there are psychological barriers that make it difficult to save. And some of those barriers are emotional. Some people have certain difficulties with setting aside money and some people also have a difficulty with what we call, it’s the terminology, post-poning gratification. That is a skill or a habit or whatever you want to call it, that to some degree is lacking in a lot of the younger generation. Have you ever met anyone who said I’m saving up for a new cell phone? Of course you haven’t because all the cell phone companies realize that people have a great desire to have the newest cell phone, a shiny object with all the features. It may be one that folds in half, it may be one that takes incredible pictures and can blot out the things out of the picture that you don’t want there. But the bottom line is those costs, oh, anywhere from $1,000 to $2,500 and people don’t save up for cell phones. They take advantage of AT&T and Verizon and the T-Mobile and the companies who say, well, if you turn it in here, we can just put this into your 36-month contract and instead of paying only $70 a month for your two lines, you’re going to be $150 and now you’ll have this new shiny object and that is not going to help you if you want to save for your children’s education, for your retirement or for a vehicle to replace that one that you know isn’t going to last you for another 10 years. So a lot of things to think about and one of the articles that I was reading talked about getting to know your own money and emotional and spending patterns. For example, are there certain times when you’re more likely to spend money? Are there times when you’re more likely to save money? How does it feel when you spend money? You feel differently when you’re spending and saving. What are the emotions and feelings you think of when you think about money? What aspects of dealing with money make your mental health worse? For example, it could be things like attending appointments, opening envelopes, confrontation or being misunderstood. Now those may all seem a bit silly but there are a lot of emotions attached to our financial habits. And I think when we have a real clear picture of what that looks like, we’ll be in a better position to make the right decisions. And it requires discipline to save. There’s no question about that. And I think once someone starts that and creates some goals for setting aside money on a regular basis, they can look at the statement they’re getting from Charles Schwab or they’re getting good returns from bank CDs. And if you reinvest that interest rather than take the bank interest and spend it, then you’re taking advantage of compound interest. And I think you’ve heard me mention before that Einstein said the eighth wonder of the world is compound interest. So I think wrapping up what we talked about last week, the psychological roadblocks or hurdles or whatever we want to call it to a saving for retirement, I think in the absence of saving for retirement, there are a lot of negative things that rare, they’re ugly heads. And for the balance of the program, we’re going to talk about some statistics. I know nobody likes just crunching a lot of numbers and so forth. But when it comes to the financial health of the people of our country, I think we need to pay attention to some of those numbers. Because when people are not in a good financial situation later in life, it creates a desire for a lot of those in government to create a lot of government programs. And I think if we were more independent, we would need fewer of those government programs and so forth. But I’ll run by some of the statistics that I have learned about the financial health of our country, especially when it comes to retirement. For example, 20% of people between 55 and 60 have less than $100,000 in their total savings and retirement. 10% of people over age 65 are in poverty as defined by part of the labor and so forth, whatever they define as poverty, that’s the low end of the economic scale. Half of the people between 55 and 64 would not be able to handle an emergency of $2,000 or more. Now, I know everyone listening has had a vehicle where the engine went out or the transmission went out or the furnace and their home went out, the air conditioner and the home went out, they needed a new roof. A lot of things can occur that will result in an expense exceeding $2,000. That’s why basic financial planning requires people to, in addition to saving for retirement, to have an emergency fund to handle things like this. And I think it’s pretty clear that many people don’t because you can’t turn on TV or listen to the radio without hearing about plans that will extend the warranty on your automobile and something that really didn’t occur much five or ten years ago and similar warranties for all of the appliances and things in your home. And if most people had significant emergency funds, then businesses like that would not have risen. The other thing, if it were truly not profitable for companies to provide these kinds of things, they wouldn’t be doing it. So in other words, it’s going to be better if you save money for either automobile repairs or appliance repairs in your home. And so things like that are important, no question. According to a survey, 47% of people felt they were not on track, ones who were between 55 and 64, but 39% of those 65 to 74 felt they were not on track. So some of the older folks felt they were in better shape being on track for retirement. And that’s according to the Federal Reserve. I’ll have some more numbers to crunch after the break and I’ll have some stories that go along with the numbers. About half of all retired people will need long term or in-home personal care at some point. And now Smith with Golden Eagle Financial will help you be ready for it. No one wants to think about possible health issues, but they can put a big roadblock in your dream retirement plan if you are not prepared. Al knows how important it is to include a plan for long term care in your overall retirement strategy, whether you need it in home provider, medical equipment, or any other care. Al gets to know you and your goals deeply. He gains a comprehensive understanding of your preferences, so he can best advise you and make sure you’re prepared for any care that may be needed. Stay in charge of your retirement by contacting Al Smith today. At klsiradio.com/money and get your free no obligation consultation so you’re ready for whatever retirement brings. Investment advisory services offer through Brookstone Capital Management LLC, a registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered in soul through individually licensed and appointed agents. Welcome back to retirement and back. Retirement unpacked earlier, we were talking about some of the psychological roadblocks to saving for retirement. The balance of the show, we’re going to talk about some numbers and some statistics that are the result of people either saving and accumulating wealth for retirement and some of the stories and statistics about those who haven’t. A third of Americans have zero nada no savings at all. That’s an enormous number. 61% of Americans, however, are investing. That’s a good thing. Of those people and some of these statistics aren’t specifically related to retired folks, but Americans in general. Also struggling because when you find yourself in debt, I’ve met people who get multiple credit cards and are literally robbing people to pay Paul, which is not a good thing, but that’s a consequence of the struggling that takes place. One third of people, and this I find to be an alarming statistic, one third of people who earn $100,000 a year are living paycheck to paycheck. At one time, $100,000 a year was thought to be, boy, that’s a really hefty income, but with interest rates being higher and home costs being higher, a couple whose income is $100,000 a year can barely afford a home with the interest rates the way they are right now, unless they have a pretty significant down payment. The mother number, a 65-year-old person can expect to spend $157,000 on health care during the balance of their lives. Now, when they say health care, a lot of these companies that put statistics together, they lump health care into one big pile. A lot of health care is similar to what a caregiver would provide, which is maybe making meals, helping someone from a bed to a wheelchair, things like that. That is not really health care, that’s personal care, but I think what they’re talking about here is not paying for medicine and surgeries and things like that. They’re talking about personal care. 50% of people have no retirement plan, none at all. The average amount in an IRA account and keeping in mind, if you’ve had statistics, you probably know what an average is. If you had 10 items of different values, you add all those numbers up together and you divide by 10 to come up with an average. When they say the average IRA is 135,000, I think what can alter that is there are many, many IRAs that are perhaps under $50,000, but some of those IRAs that are 700, 800, 900,000, 1.2 million, whatever they are, they offset that average. I think a better statistic to be used for looking at some of these things is a median. What a median is, if you had like 10 or 12 items, it’s the item that’s right in the middle. In other words, a median IRA, if it were $135,000, that would mean that half of the IRAs would be larger than that and half would be smaller. According to a survey, nine out of ten people who were in retirement felt that inflation was their greatest concern. According to the most recent census, the median retirement income, and remember median, is the number right in the middle. This means half of the people, their retirement income, is going to be less than this. Half of their retirement income will be higher. $47,620. That’s probably four years ago because that’s when they did the last census. Here’s a good statistic. The top 1% have an average financial net worth of 2.7 million. That’s why I say that average number can be out of whack compared to looking at a median number. Why do people need so much money in retirement? Well, one of the biggest reasons is life expectancy. In 1940, someone aged 65 could expect to live 14 years. That’s to age 79. Now, someone aged 65 can expect to live 20 years. For women, it’s closer to 24 years. Not only that, but inflation is higher than it was 20 years ago. Not only do we have to prepare for living longer, but we have to prepare for things going up in cost as we move into retirement. And supposedly one resource that I looked at said that a couple needs to save $315,000 in order to save for health care. I think what they’re also talking about, like I already mentioned, is personal care. Because with Medicare and supplemental insurance that goes with Medicare, I don’t think those expenses are directly related to health care as much as they are personal care. And most people do things independently by themselves, but when you get to a certain age, you may need assistance to do things that right now are really easy. Things like going up the stairs, things like making meals, things like doing your laundry, things like taking care of your home, cleaning your home. These are falling under that health care category, but they really are talking about personal care. And that’s a component of retirement saving that should be paid attention to. If you’d like to take a look at a way that you would have the right resources to take care of that, call my office. We can have a conversation about if you’re on track for retirement. And if that includes money for personal care, my office number is 303-744-1128. Alzheimer’s and dementia cost an average of $48,000 a year. And if you haven’t noticed, Alzheimer’s and dementia is not what we would call uncommon. 67% of people who move into retirement, they expect that they’re going to work. Now though it, those who expect they’re going to work actually only 27% will actually work in retirement. So when people retire, well, where does their money come from? 49% comes from Social Security, but the average Social Security benefit, again, this is average, not the median, is about $22,000 a year. And we all know you really can’t live on that. 16% of people’s income and retirement comes from pension, 12% personal savings, 11% from investments, only 7% from 401(k)s and 5% from others. Now what’s interesting about retirement plans in 401(k) and so forth, the average contribution to a 401(k) is 7.4% of income. So let’s say if somebody’s making $60 or $70,000 a year, that’s maybe about $5,000, $6,000 a year. Well, it’s certainly better to save that than not to save that. However, the maximum is 23,000. For people over age 50, you can put as much as 30,000 into a 401(k). And obviously, if you have children still at home or a mortgage to pay and things like that, that becomes difficult, but the capacity is there to put more money into your 401(k). Well, how much do employers contribute? 4.5%. That is the average employer contribution. And that’s important to know. Now one of the very basic questions I ask people when we have a conversation about people who are participating in the 401(k) is, are you contributing up to the level where the company matches? Because if you don’t, you’re missing out on a 100% return. And the company matches, you’re automatically getting a 100% return. Now here is the statistic that you should pay close attention to. The average 401(k) return is 4.9%. The reason that’s important is because if you are already contributing to a 401(k), but you have additional investable resources, you can have an IRA in addition to that. If your income is incredibly high, you can still do that by using a backdoor IRA. All right, rather a backdoor Roth. Because for people who are somewhat younger, I recommend Roth IRAs over traditional IRAs. And there’s an income limit to contribute to a Roth, but to contribute to a regular IRA, there’s not a limit. Well there’s a few more statistics left, but we are out of time. If you’d like to learn if you’re on track for retirement or if you have financial questions and would like to come into my office, give the office a call at 303-744-1128. God bless you, thank you for listening, and let’s continue to pray for our country, our leaders, and the folks in Israel. Thank you for listening to Retirement Unpacked with your host, Al Smith, of Golden Eagle Financial. Set up a free consultation with Al today at klsiradio.com/money. Find your purpose in retirement with Golden Eagle Financial. Investment Advisory Services offered through Brookstone Capital Management LLC, a registered investment advisor. Vcm and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM but are offered and sold through individually licensed and appointed agents.