Transcript Episode 130: Spending More

In This Podcast:

• How to spend your money wisely in Retirement
• Retired? You now have 2000 extra hours per year at your disposal.
• Traveling: Is this an affordable expense?
• Going on vacation? Segregate that money in advance.
• Moving, Downsizing and Relocation expense
• Donate to Charity – Tax Efficiently
• Health Care: Transitioning to Medicare Part B
  • Tiered Medicare premiums depend on taxable income
  • Supplemental plans: older people tend to have more doctor’s visits.
• 401K‘s and 403B‘s Required Distributions: What if I don’t need them?
• Distribution is a “totally different animal” from accumulation.
  • How, When and Where to take money out when transitioning into retirement

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Narrator

This is Retire South Shore Radio, a weekly program designed to educate you on all your retirement options and introduce you to Mark Rowlette, founder of South Shore Retirement Services for the latest on free seminars. To obtain a report or to set up a consultation, please visit RetireSouthShore.com for Retirement Services and real-world retirement solutions. Looking at the whole picture to design a complete strategy, including retirement planning, Medicare decisions, and legal documents. Now, here’s Mark Rowlette. And your host, Jordan Rich.

Host Jordan Rich

Greetings. Welcome once again to another edition of Retire South Shore Radio. I’m Jordan hosting the show along with Mark Rowlette, founder and president of South Shore Retirement Services with a beautiful office in Hingham, but with clients now throughout the area and beyond. And Mark, it’s great to see you. You’re wearing a t-shirt today in the studio that I think we need to share, because we always jive you a little bit with the fishing thing even though you’re catching monster fish. What does the t-shirt say?

Mark Rowlette
It just says “Catch fish, not COVID”.

Host Jordan Rich

I’m glad we can laugh about that to a certain extent. And it’s good to keep a positive attitude. And that’s part of the show’s theme on a regular basis, being positive. But today’s topic fascinating is most topics are things that end up costing us more in retirement – things that we may not think about.

Mark Rowlette
Yeah, People when they get into retirement, I think the general assumption is “Oh, yeah, we know health care is going to go up as you get older.” And we’ll talk about that a little bit. But there are a lot of other things that you don’t necessarily think about when you go into retirement.

The old saying that kids are expensive. I know this because I have three kids, but retirees can be expensive, too. I have hundreds of retirees (clients), and see what they do when they go into retirement. So between travel, fitness, utilities, giving money, whether it’s voluntarily to your family or forced to give money away in taxes to the government. It gets expensive. You just don’t want to get caught off guard. And I wanted to talk about some of the things that maybe you want to think of or think about that you may be spending more money on in retirement. and you know, the what-to-does to get ahead of it. Because it doesn’t mean you shouldn’t do it. It just means you should prepare just like anything else in life, for those expenses before they come up.

Host Jordan Rich

For those who know the operation and know how you work. It’s called the All Hands Analysis approach. What I love about these topics in these shows, particularly, is the fact that these are things about life that we have to think about – not just the facts and figures and the numbers on the page, but life and how it impacts us. So let’s start with that. Is there one particular one that tops the list that people should be aware of?

Mark Rowlette

Yeah, that that’s probably always on everyone’s hit list, most talked-about thing that you’re going to spend more money on. And the reality is, now that you’re retired, you have essentially for most people 2000 extra hours per year at your disposal. So 2000 extra hours per year of not having your head to the grind and working, frees up a lot more time to spend money.

One of which, again, probably the top one is you’re going to spend more money on traveling, right? It’s the top of most people’s lists. You’ve worked for 30 or 40 years, and yes, you probably traveled, you probably went on vacation. You go on vacation for a week. The first day, two days, you’re winding down from work, you enjoy the next three days. And then the last couple of days, you’re thinking about going back to work and it’s different in retirement. The thing that people worry about in retirement when they’re traveling is, “Is this an affordable expense?” And if you plan ahead for it and think about “Alright, how much is it going to cost? What am I going to do? How am I going to segregate that money?”

Do I disagree with some of what I was researching about, advisors saying you should budget for that in a monthly basis? In our office, we disagree. You’re most likely going to know in advance when you’re going on vacation. We’d segregate that money because the budget monthly indefinitely for annual or biannual vacations is just not realistic because you’re not going to do it all the time.

And sometimes these are big bucket-list events. You know, I want to spend three weeks in Italy or I want to go to Australia for a month and a half. I won’t say their last names but Kathy and Paul are clients of mine who go on cruises. Now, when I say they go on cruises. I talked to them they were leaving in the middle of July to go on a cruise and they will be back in November. And they’ll come back for about a month and then go on another cruise, again, for about another four or five months. They spend most of their time on the water.

But whether you’re doing these huge trips, or just weekend getaways, you just want to have the best plan in place. So you know can afford it so you can enjoy it.

Host Jordan Rich

One note on the vacation deal, and cruises and Disney and all that. The thing that people are thinking about is I want to do this with my grandkids, I want to do this with my kids. Oftentimes grandpa (take it from one who knows) is expected to treat, or helps out or wants to help. I’m just having fun with this. But the idea is, we want to do things that we’ve never had the time to do. You just mentioned 2000 hours never thought of it that way.

Mark Rowlette

I think, to echo what you’re just saying – you’re dead right. There are lots of clients that want to go on these trips, and things maybe they couldn’t have afforded to do when their children were little. And now maybe they can afford to do them when the grandchildren are little. So the advice would be assign a cost to it, how much is this going to cost you and think about it ahead of time.

Make sure that it’s not going to impact other necessary future costs you’re going to have. And then most importantly, if all of those stars are aligned, which generally they do, do it. Go on the trip. Don’t say “I’d love to do something like this,” do it! Go book the trip. Our business is helping people build their wealth, grow their money, navigate the taxes inside of most of their accounts. People get really surprised in our office that our job is to help them spend their money, which is kind of a fun job. You’re like, “Oh, yeah, I have a client that did this”. And if you’re going to this place, you should go here,” because you hear all the stories from the clients when they come back about where they were, what they saw and what not to do.

Host Jordan Rich

Yeah, you’re very familiar with the retirement lifestyle and the goals and aspirations and the successes of these folks.

Well, let’s take a pause for just a minute because there may be people out there who have specific questions. They hear the show and wonder how they can get a quick answer to a question or at least a start of one. And the best way to do that is with the 15 Minute No Obligation Strategy Call. It’s something that started about the time the pandemic did, and it’s a really useful tool that Mark and his team have kept going. So if you have a question you’d like to get answered, or at least get some information 781-836-4214 or set up your appointment for this free, no obligation call at RetireSouthShore.com. All right. So let’s continue. We know about travel, and I’m excited about that. Believe me, I’m one of those who can’t wait to go. What else tops the list?

Mark Rowlette

Well, I mean, the other obvious one that we already mentioned a couple of minutes ago, was spending more on health care, right? As you start going into retirement,not everyone, but most people had have had a job where the employer has heavily covered their health care costs. And yes, they still had some premium obligation towards that. But when they’re transitioning into retirement, if they’re under 65, they’re carrying their own health care. And that’s very expensive, not to the point that you shouldn’t necessarily do it, and I often say that to clients. When they say, “Well, I’d love to retire at 63. But I have to wait till Medicare,” I’m like,”Well, why?” “Well, it’s so expensive.” I’m like, “Well, if you can afford it, do you think maybe you want to entertain it because you get two extra years of retirement?”

When you do transition into retirement at around age 65 and beyond, when you have to start going on to Medicare Part B, that that has an expense too. And that has sometimes an expense that goes up through no other reason.

But you did really well with your money. And what do I mean by that is Medicare is tiered, right? There are different premiums, depending on how much taxable income you have. It’s not a different Medicare Part B. There’s not a “concierge version” of Medicare Part B. It’s based on how much money you’re actually deriving as taxable income.

Some of our clients and many, many people who listen to the show, have done incredibly well in their 401K‘s and their 403B‘s. And as a result of that those accounts have gone up. Then they hit that age of 72. Now they have to take required distribution, though maybe they don’t need it. Maybe they have lots of other income sources, and their Medicare premiums start to go up.

Then you look at supplemental plans. Then you look at the fact that you’re going on maybe more doctor’s visits, because people tend to go on more doctor’s visits when they get older, and when they get into retirement.

I’m not a doctor, but one of the things is slowing down and going from 40, 50, 60 hours a week to not working that has obvious change in your body, right? Your body is used to going one way for 30, 40 years, and then it changes. And maybe that creates some sort of issue. I mean, we don’t wish it upon anyone. But that would just logically make sense. If you do something completely different than what your body is used to maybe that creates something. Now all of a sudden, you’re going to the doctor four or five times more per year and they all have costs associated with them.

It’s not a deal breaker, not a reason not to retire. It’s just a reason to understand what the cost is going to be for you, or you and your spouse, not “Well, my friend said it’s around this amount of money.” Don’t just assume that’s what it’s going to be for you.

Host Jordan Rich

Yeah, don’t listen to hearsay or the neighbors chit-chatting about what happened to them because you really want to get the full picture. That’s where Stu Millard, one of the members of the All Hands Analysis team comes into play. He seems to really know what kind of advice to give when it comes to choosing your Medicare options.

Mark Rowlette

Stu is a fantastic addition and benefit to our clients. To be able to take all that guesswork out and sort through what they do need and what they don’t need. The unfortunate thing for many folks is that they don’t realize something they needed wasn’t covered by their insurance until a point in time beyond which there’s nothing you can do about it, because you’re actually needing to utilize it at that point.

Host Jordan Rich

So what we’re talking about is a constant theme. It’s a shift in lifestyle, but also a shift in income. Income is not being earned by work income is now there because you work and it’s time to distribute that income. It’s time to use it.

Mark Rowlette

Yeah, I think the resounding fact is that you have more time on your hands and listen, if even if you’re not retired, and you’re listening, we’ve all already had practice with this, right? You mentioned the 15 Minute Strategy Call that we started in the pandemic. The reason for that is that we weren’t getting together face to face with people, people were at home, locked down. And pandemic plus lockdown equals Internet, equals shopping, equals spending more money, equals the next thing that I was going to talk about.

“Oh, that forest for the trees! That makes sense.” Your utility bills will go up. And when we were all working from home, we didn’t really work from home in my office for very long, because we were considered essential.

But for lots and lots of clients that were still working from home, their utility bills went up from the perspective of they were home more, right? You have your air conditioning running longer, your heating running longer, you’re using all of the utilities in your home for at least an extra 10 hours a day, right? If you work an eight-hour day and you take out the two-hour commute that you have round trip.

The positive of more in utilities, (if there is a positive) in retirement, is that a lot of people when they transition into retirement, their mortgage is either paid off or about to be paid off. So their income need is less because their debt obligations are less as well. Having higher utility bills, while it might sound arbitrary for me to be talking about something that maybe you think is a couple of hundred bucks a month, could be really important to you, or to a particular couple or person going into retirement so you just want to be aware of it.

Host Jordan Rich

Certainly, now as the temperatures continue to hit summer highs, and we need that air conditioning and we need heat in the winter and all that. You’re right. We’re home more than 2000 hours of free time means a lot of time at home.

This is great conversation and if you’d like to follow up of course you can make that 15 Minute No Obligation Strategy Call appointment anytime go to RetireSouthShore.com Also check out the various seminars and the webinars that we’ll be telling you about, and much more information is available at RetireSouthShore.com and we’ll be right back.

[Begin pre-recorded segment]

Narrator
One of the biggest stressors when it comes to retirement is the obvious one will you ever have to worry about running out of money in retirement?

That is the key question and proper retirement planning. Working with the All Hands Analysis team can truly help. Here’s Mark Rowlette, founder and president of South Shore Retirement Services.

Mark Rowlette

Most of our clients have a person when, we meet with them, somebody who has helped them accumulate their wealth during their working lives. But distribution going into retirement, starting to take money out of these accounts is a totally different animal. It’s not just about returns. Returns are important, but strategizing on what’s the best way to take this money out how you should take it out when you should take it out and where you should take it from is critically important when you’re transitioning into retirement.

Host Jordan Rich
Schedule your FREE 15 Minute Strategy Call today just visit RetireSouthShore.com That’s RetireSouthShore.com investment advisory services made available through EA Wealth Management LLC, AEWM. AEWM and South Shore Retirement Services are not affiliated companies. This is Jordan Rich reminding you that South Shore Retirement Services offers a number of ways to learn about a happy and safe retirement with frequent evening seminars at local fine dining establishments. You can find the complete schedule and register for the seminars at RetireSouthShore.com.

There are also regularly scheduled webinars. There’s the Retire South Shore podcast series and the South Shore Retirement Services newsletter. Information is power, and the All Hands Analysis team at South Shore Retirement Services is ready to inform, educate and reassure you in retirement. Again, visit RetireSouthShore.com.

[End pre-recorded segment]

Host Jordan Rich

You’re listening to Retire South Shore Radio and we welcome you every single week and have been now for the last four years I believe, and this is Jordan. Always fun to sit down with Mark Rowlette, the fisherman, and much more. He’s actually the president and founder of South Shore Retirement Services, all about retirement planning, planning that makes sense that provides you with solace and an opportunity to enjoy a happier and healthier retirement. So, Mark, we talked about a couple of things that are pretty obvious – travel, health care costs, things like this that go up naturally when you retire. And even utilities. Let’s talk about moving because a lot of people say, okay, mortgage paid, kids are out of the house. I’m retired. I want to downsize or maybe upsize, let’s see how things go.

Mark Rowlette

I wanted to move away from the utilities because, before the break, you mentioned air conditioners. I started cringing because my own air conditioner is broken at the house. It had a slow leak before we got it fixed. We repaired the whole basement, which was damaged. When I got home last week, I went downstairs to check it and walked across the carpet, and got that squelching, feeling and you’re like, “Oh my God”. So yeah, get away from utilities.

Host Jordan Rich

That’s why he spends as much time as you do on the boat in the open ocean just to cool off.
Now, what about the relocation expense?

Mark Rowlette

Yeah, empty nesters tend to think about changing their current living situation and basically “take flight”. They want to go and do things. As downsizing people start looking at their four-bedroom house and their kids are going on and like “we don’t need this house anymore. I don’t want to do all the yard work.
I don’t want to keep up the maintenance.” So they look to downsize, move – not always downsize, financially, but downsize in the house size, right? And there’s always obviously costs associated with that.

Some clients will sell their primary residence in Massachusetts and buy a place more warm, and they want to be snowbirds. But there’s a cost associated with getting your home ready. There’s moving costs. If you have multiple homes now and you’re back and forth. You’re flying back and forth more than you maybe were while you were working, furnishing, appliances, all of these things come at a cost. And there’s the setup cost associated with them.

For a lot of people, they do spend more money in retirement on the moving expenses, the relocating expenses, and even after they’ve relocated – the ongoing expenses to fly back and forth. I was emailing with a client that I have a Zoom with next week. They’re actually currently living in Nevada, and they’re moving to Oregon, and that’s going to be an expense.

They bought the other home and now they’re getting ready to put their own primary residence on the market. Then they have the moving costs. And from where they told me they’re moving, the moving has to happen quickly because when the winter sets in, you can’t get through the pass to where they’re living. I asked, “Are you living in a country in western movie?” They said “no, it’s just it snows and you can’t get in there.” So they’re under the gun to try and get it done as quickly as possible.

Host Jordan Rich

I have friends who are just retired and they realized, “You know, the roof does leak. I hadn’t noticed it when I was working. But now that I’m home …” I mean things like that occur, and you just have to be ready. And we all realize that, but we think about it academically. But we don’t think about it as if it’s really happening. So it’s good to plan in that regard. There’s another very important issue. And I say this, knowing the people who are listening, the kinds of people who are listening, (and present company included, you and me) that you want to devote some time in your life to giving back and charity is a big part of the retirement process for so many, Mark.

Mark Rowlette

Yeah, absolutely. Lots and lots of our clients are very charitably inclined. They say charity starts at home, and they want to help their kids out. They talk about “I want to leave the money, but I don’t want it to be to the detriment of what we’re going to do in retirement,” but they still give them money.

I think that’s great, and we want to help them facilitate that. But you just want to make sure that you’re not putting yourself out later in life by something that you did earlier in life. You’re also not maybe looking at it from the perspective of what’s the smartest way, what’s the smartest money to give to the family when you’re dealing with charities. What’s the I mean that it’s a personal preference, which charity you’re going to leave money to.

But when we look at it, when people have more time, they’re spending more time either going to their church or wherever they worship. They’re thinking, well, I I’ve seen these people more and now I feel like I have to give more and there’s nothing wrong with that at all, but you just don’t want to do it to the detriment of your own retirement income.

And then when we start looking at the estate planning side of it, which is part of the All Hands Analysis and looking at the legal aspect. People just look at it and, for example say, “When I pass away, I’m going to leave 25% of my money to the church.” Well 25% That’s wonderful. But maybe there’s better money to leave to the church versus better money to leave to your family.

And what do I mean by that? If 25% of your money across the board is IRAs, the house, all of these different assets, brokerage accounts, Roth IRAs, maybe you want to segregate 25% of your estate, and have it all be the IRA, because it’s a charitable organization, and they’re not paying taxes on that.

So that’s a better asset to leave the charity, leaving more of the assets that maybe are tax free, or have what’s called stepped-up basis and leaving that money to your family, because they’re not a technical charity. I say that laughing because I think of my three girls who stand with their hands out like this.

Funny side story, Reese was over at Derby Street with one of her pals last week. And she texted me, she said, “Could you put a couple of dollars on my green light, which is the debit card that I can control?” You know what they’re spending and whatnot. And I said, Okay, I’ll put $25 on there. So I did that she gets to the store texts me back and said, “Oh, God, everything’s gone up so much.” And I said, “That’s inflation, honey, these are hard times” then she goes, “I don’t even know what that means!” Like “you do now, because you can’t afford to buy what you want.”

Host Jordan Rich

So Reese is definitely aiming for her own show on Radio at some point. She’s got a personality that doesn’t stop. She’s amazing. No, I think that point about charities is very important, because there are many, many important key vehicles and prospects that you can identify and introduce people to. You even work with charities, understanding what they need and what they would appreciate. So you bring the two parties together, and everyone makes out feeling better about the situation.

Mark Rowlette

Yeah, I have clients that work for the American Cancer Society, the American Red Cross – multiple charities across the board. I have clients that we’ve looked at setting up their own foundations, donor-advised funds, different ways to give back and make a difference and have an impact on the world after you’ve passed away.

It’s wonderful. So yeah, I think it’s really important. I encourage clients. If that’s what they want to do, let’s figure out what’s the smartest way to do it. But again, you just want to know that there are better assets to leave the charities and better assets to leave to families, if that’s something that you’re planning to do, look at it proactively.

Which kind of brings me into my final point. One of the things that you’ll spend more money on in retirement is financial planning. You’ll spend more money on your money, because now your money is the money that’s creating the money for you. That’s a lot of money words. But that’s the reality. Like when people are working in accumulating money, it’s fantastic. They’re using employer sponsored plans, and they’re not really thinking about it too, too much. When they start thinking about going into retirement, and that nest egg that they’ve been building up, it’s time to start using that egg, I guess it’s time to start making something out of it. And people get anxious that they’re going to do it wrong.

The client that I mentioned a minute ago moving from Nevada to Oregon, I’ve worked with them for a few years, I actually worked with his father before his father passed away. In his email, he said to me, “I’ve been saving money for 30 or 40 years. Now I’m retired. I have no idea how to spend the money. And I assume that’s what you’re going to help me do.” Meaning that he has no idea how to take the money out. What’s the smartest way to do that.

So when people go into retirement, it’s critically important that, obviously, I feel that they work with a professional organization, or person or people to help them navigate through. But if you’re going to spend money on it, spend it wisely. Make sure that the people that you’re working with, that their business model is what you need now.

There are lots of fantastic brokers and advisors out there, but they just don’t focus on the big picture, planning how your distribution should be taken out and when they should be taken out. What are the implications for that? Obviously, I can’t give tax advice. But that’s why I have our team who can. We build tax strategies for clients. How is that going to impact my health insurance on my Medicare?

And then ultimately, how’s it going to impact my family if I die – or if I don’t and I become incapacitated from a legal perspective. So if you’re going to work with a team, we obviously hope and wish every person worked with us in retirement. That’s not realistic. You don’t want to assume that you have the correct advisor in case you’re wrong.

Host Jordan Rich
For those people who are just tuning in and joining us for the very first time (and we have regular listeners, of course) but for new listeners. The touchstone of all of this is that we talk a lot about life in this segment and that’s what happens in the office, too. We’re joking about all the people you know who are traveling or moving – the snowbirds who go away in February? Yeah, they make fun. But it’s true.

This is really not just about numbers. It is of course key. But I say it every time we get into a topic like this, I can relate. People can relate to this. We have kids, we have grandkids. We have concerns about our health. We want to travel. We want to build out our house or move to a different location. We want to do things that we’ve earned the right to do. That’s the overarching goal, to make people feel that they’re real people here, not just numbers on the page.

Mark Rowlette

You hit the nail on the head. In the financial world, we don’t lose sight of our clients and the people that we meet, right? The money is obviously important, but they’re not just another account, moving them in, moving them out and getting them trucked along. And even from the perspective of “here’s your account, here’s your income, you’re all set. So we’ll talk in a year.” These are real people, right? They have lives, they have families, they have grandchildren, they have things that they want to do.

They come into our office and their assumption is that, “Hey, these people know what they’re talking about.” And they get that, but in my opinion, there’s a really nice way to do it. And it’s a very, tactical, strategic way to do it. I think if you can mirror both of them or marry both of them together, you can have retirement planning. You can have it in such a way that you don’t feel forgotten. You don’t feel like you’re dialing an 800 number and having no notion who’s going to answer the phone on the other side. That, again, it sounds cheesy and corny, but our clients truly become part of like the bigger-picture family of things.

I’ll catch a fish on the weekend, and I’ll text it to a handful of clients that I know are into it. I have our phone numbers. So I text it to them, or they come into the office and talk to Holly or Nancy or Carol. They know it’s five minutes beyond the time that I should be sitting in the meeting with them. I’m like, “Are you guys done talking now?” “No, just a minute or two” because they’re just catching up. It’s a really nice way to for me to make a living. And it’s a really nice way to reassure a client that the people they’re working with are actual people as well.

Host Jordan Rich

Indeed, I’ve seen it up close and personal as I’ve been many times to the Hingham office. For more, you can call 781-836-4214 or just visit RetireSouthShore.com. So much information there. Mark. Thank you as always, good luck with Reese and her spending, and we’ll see you next week.

Mark Rowlette

All right, sir, take care have a great one.

Narrator
You’ve been listening to Retire South Shore Radio, a presentation of South Shore Retirement Services for the latest on free seminars. To obtain a report or to set up a consultation please visit RetireSouthShore.com. Stay tuned for more real-world retirement solutions – RetireSouthShore.com.

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