Are You Ready to Retire?

Full Transcript:

Ryan: Whether it's a part-time job, whether it's considering moving, I will say I've had some clients that have made the choice to move outside of California, to move to another state where there's a lower cost of living. So there's different things to consider there, for sure.

Announcer: When it comes to financial planning, you need to cut through the jargon so that you can understand how to achieve your own retirement success. This is Candid Conversations: Retirement Talk with Ryan Cravitz of Cravitz Financial and Insurance Solutions.

Ben: Welcome in to Candid Conversations Retirement Talk with Ryan Cravitz at Cravitz Financial in Irvine, California. Glad to have you on the show again today. The big question I'm sure you get a lot, Ryan, is, "Am I ready to retire?" You probably hear that quite a bit from people that come into your office for the first time.

Ryan: Absolutely. We talk about it all the time.

Ben: So we're going to help you answer that today on the show, and talk through some different things to be considering to help you determine whether or not you are ready to retire. But of course, you can't get a thorough evaluation through the podcast only, so you always want to sit down with the financial professional to help you with that. We'll also have a couple mailbag questions coming up a little bit later in the show as well, so stick around for those. I think you'll get something out of that as well.

So, are you ready to retire? That's the common question anybody asks when they meet with an advisor for the first time. You want to know, "When can I retire? How long is it going to take me to get there? What do I need to do?" There's a lot of people, Ryan, that have reached that retirement age, who say they don't want to retire. Do you find that's usually because they don't enjoy their job, or do you think that's more of a defense mechanism because they feel like they can't retire for financial reasons, so they just use that as an excuse?

Ryan: I think it's a combination of different things. I think for some people it definitely is a defense mechanism. They feel trapped, maybe they feel like, "I don't think I've saved enough." Maybe in their heart of hearts, they just don't think that they could pull the trigger and retire and really be able to afford to do so. Again, it's that defense mechanism to say that, "Well, I like working and I don't know what else I would do, so I'm just going to continue to work." But for a lot of people, I don't think that that's the case.

Now, on the other side of the coin though, I find that there's a lot of people that really enjoy doing what they do day in and day out. Some people just have a job that they love. A lot of times though, I find it's somebody that might be self-employed, maybe in some sort of service business of some kind. Maybe it really is a passion of theirs, something that they enjoy. Had a client of mine who's a real estate agent, and I remember her telling me, "Yeah, I can't picture myself ever retiring. I enjoy what I do. Maybe I'll slow down a little bit, but..." Even if she was fully financially independent, she wanted to just keep working. And for her, I totally believed it.

Ben: Yeah, I guess it works multiple ways why somebody has that feeling. But for those people that don't have the confidence, but maybe they are actually financially able to retire, where do you think that lack of confidence comes from?

Ryan: I would say it's by not having a retirement plan. Not having an income plan. I met with somebody just a few weeks ago, and I remember him telling me that he planned to continue to work for another year, and I asked him what was the reason that he wanted to work for another year, and he said, well, that's when his full retirement age was for social security. Now, this guy had other resources as well, IRA accounts, other investments, different things, in addition to social security that was going to come in. But for some reason, he had it in his thoughts that he shouldn't retire until that full retirement age.

But the reality is, when we start put together the retirement plan and work through the income plan and start to figure out, okay, what are your expenses and where are you spending it, that's always big, and what do you have? What are your income sources? And then figuring out the best way to utilize social security... He didn't have a pension, but that would be one of the things we're going to look at. And then looking at the big picture to decide that, "Okay, here's all your income sources. These are all your assets. We know what your expenses are. Let's see if you could pull the trigger, if you could retire tomorrow or today."

Based on the planning, he was in good shape. And I gave him the go ahead. I said, "Look, if you want to go ahead and retire, as your advisor I could tell you, you absolutely can. I feel a hundred percent confident that you're going to be just fine." And it's interesting, because he felt great knowing that, but he also told me that, "Well, I don't know that I'm quite ready to retire. I'll keep working, but I got to tell you, knowing that I could retire if I want to, I can go into work every day and if I finally decide, 'Hey, I really don't want to do this anymore,' that I could resign, I could make that decision..."

So that's a good place to be. It's a strong position to give you that confidence to know that hey, you can retire tomorrow if you want to.

Ben: I think that's what everybody wants to hear. And I'm sure people often are surprised sometimes when they come in and actually sit down. And we always talk about, "Hey, you want to be doing your planning," and yes, you do want to be doing your planning to find out what you need to do. But sometimes, you actually have done enough in a lot of cases, or maybe more than you realize you have. So there's a nice surprise on that side.

But on the other side of the coin, I'm sure there are some people that you sit down with that are ready to retire. They come in, say, "Hey Ryan, I want to retire. I wanted to retire yesterday. So what do we have to do to get there?" But they're just not in a financial position to do it. I'm sure that happens too, right?

Ryan: It is, and to be quite frank, I want to give somebody the go ahead that they can retire. If I know that they want to, I want to be able to do that, and there are definitely situations where I can't. And typically they know. They know that they're not at a point where they could pull the trigger and go into retirement. So that's where I like to get creative.

For instance, one guy that I was talking to, he was working at a place, making a good income for him, and he was only there because he needed the money. He wasn't at a point where he could financially afford to retire. But I also said, "Well, what if you retire from that job, but then instead you get a different job that just doesn't pay as much, but maybe the plan is to work for a longer period of time? So maybe it's a part-time job, but it's something that you enjoy doing. It's closer to home." That was another issue. He had to travel, had to drive quite a ways.

I said, "What if you get another job where it's part-time and it's closer to home, you really enjoy doing it, and you know what? Maybe instead of only planning to work another three or four years, maybe you do work longer than that, but at least you're doing something that you enjoy doing every day." I said, "In fact, if you did retire, what would you do every day?" He goes, "I don't really know what I would do every single day. I just know that I don't want to be working where I'm working."

I said, "So maybe you actually would just enjoy working part-time somewhere, and that would be a part of what you do while you're retired. At least for a certain period of time, a certain number of years." So I definitely like getting creative there and seeing what we can do. Whether it's a part-time job, whether it's considering moving, I will say I've had some clients that have made the choice to move outside of California, to move it to another state, where there's a lower cost of living. So there's different things to consider there for sure.

Ben: It's always good to hear those kind of stories, Ryan, because I think it helps people that maybe are unsure where they stand, or maybe are hesitant to go meet with an advisor because they think they're maybe a little further behind and don't have any solutions, and don't want to have to go in and hear the bad news. But there are ways to work through some of those issues, if you do have them, and help you get to retirement.

So again, it's never too late to begin your retirement planning. If you haven't done so yet and want to find out where you stand, you always want to reach out to an advisor, and you can always get in touch with Ryan at CravitzFinancial.com, or over the phone, (714) 462-9155. What about a couple mailbag questions? Do you want to answer a couple questions today, Ryan, before we get out of here?

Ryan: Sure, let's do it.

Ben: Okay. Let's start off with one from Dana, who is actually in Lake Forest. Says, "My husband and I are getting divorced and deciding how to split up our assets. He'll owe me about $200,000, which I could take from his 401(k), or just take that amount from cash in our money market account. Which should I choose?"

Ryan: Well again, everyone's situation's going to be different, but the key things to consider here is, that 401(k), presumably that's all pre-tax. So when you go to withdraw that money, that's all going to be fully taxable at ordinary income tax rates. The 200,000 that's in cash, that money's already been taxed, so you don't have to worry about it. I'll tell you for me, I'll take that $200,000 in cash so I don't have to worry about paying taxes on it.

Ben: Interesting. It's a good question, Dana. Sorry you're having to go through that, but definitely the right questions to be asking, so thank you for sending that in to us.

Here's one also from Mary. Says, "I had kids later in life than most people. I'm almost 60. My twin boys will be heading to college in a few months. I really want them to be able to finish college without any huge student loans, but I'm not sure that I can pay for both of them to get through school without hurting myself financially. I'd like to retire eventually, obviously, so which should I place a higher priority on, their education or my retirement?"

Ryan: My rule of thumb here always is that you can always borrow for college. You could take student loans, not to mention there might be grants or scholarships or other things that may be available to the kids, but you can always take out student loans, but you can't borrow money for retirement. If your retirement is set, you know that you're going to be fine financially all throughout your retirement years, then at that point you want to contribute money to your kids' college? Absolutely. Go for it.

Ben: All right. Thank you for that question, Mary, appreciate that. We appreciate all the feedback we get on the show, but if you have questions for us, you can always send them in via the website, CravitzFinancial.com. But also jot down this number if you want to call Ryan, ask about your retirement readiness, if you're there yet or not. You can always do that as (714) 462-9155. And again, take advantage of Ryan's retirement ready checkup. This is what you have it for, right Ryan? For people that ask that question. That's why you put them through that checkup, correct?

Ryan: Absolutely, that's the starting point.

Ben: There you go. So take advantage of that. Again, CravitzFinancial.com. All right, we will get out of here on that note. Thanks for listening to Candid Conversations: Retirement Talk with Ryan Cravitz. Ryan, as always, thank you for your time, and we'll talk to you soon.