Navigating the Retirement Landscape

Jessica Quindlen: [00:00:00] Welcome back to the Sound Cents podcast. I'm Jessica Quindlen. Today, we are discussing navigating the retirement landscape. I have our Senior Manager of Community and Workforce Well-being, Bree Shellito. Hello, Bree.

Bree Shellito: Hey, Jess.

Jessica Quindlen: And our Financial Coaching Supervisor, Emma Protsik. Hello, Emma.

Emma Protsik: Hello.

Jessica Quindlen: Can you start, Bree, by explaining why retirement planning is so crucial and at what age people should start thinking about it?

Bree Shellito: Of course, because all aspects of life is expensive, and so thinking in terms of the difference of your expenses and your income when you reach that retirement age is key.

So when we're thinking about that, we want to start planning as early as possible, but recognizing that as you age, your interests change, how you spend your time changes. So just thinking about that and planning for that future, what will it look like in retirement? The one area that I know a lot of folks forget about is the social aspect.

Because you spend a lot of hours at work—I know remote work has become much more prevalent—but if you spend a lot of time socially around people, even on Zoom or Teams [00:01:00] calls, that social aspect can be a big game changer for people. So, planning early is important for a lot of different reasons.

Jessica Quindlen: Great. I love that. And I'm a social gal myself, so I got to keep that in mind. Emma, what are the key components of a comprehensive retirement plan?

Emma Protsik: Step number one is going to be setting those goals overall. Bree mentioned some things to consider but figure out what you want that lifestyle to look like.

For me, I want to have that traveling worked in. Traveling is expensive, so I know that my retirement goals might be a little bit higher than some other people, but it's about sitting down and thinking about what your spending might look like. Once we figure out those goals, it's good to assess the current financial situation that we're in. What do you already have saved for retirement, if you have started already?

Bree Shellito: If you haven't, you're not alone. But do get started.

Emma Protsik: So, figure out where we're at, what everything's looking like. And then from there, we can really look at our budget to see if we can save a little bit more anywhere in retirement.

For instance, cutting different expenses, maybe reallocating the type of savings that you're putting money [00:02:00] into already. And then once we think about our current budget, you can start to think about what that budget looks like in retirement. So again, we might need to do some guessing here—making the most educated guess possible about what those expenses might look like.

Bree Shellito: Your housing, your transportation, all those costs are going to change as you retire.

Emma Protsik: Absolutely.

Jessica Quindlen: Great. So, there are several types of retirement accounts available. Can you walk me through the differences between 401k, IRA and Roth IRA?

Bree Shellito: There's a lot of them, but the main ones that you mentioned, that 401k, that's an employer sponsored plan. So that is one you're only going to get if your employer offers it. It does also have higher limits. In 2024, you could actually contribute up to $23,000* to a 401k. So that's the 401k.

For the IRAs, those are individual retirement accounts. Those are ones that you'd open an account for usually at a bank or credit union. Sometimes that's also through an investment representative, so lots of different options there, but those are individual retirement accounts that you are putting money [00:03:00] into.

The traditional IRA that we're putting money into before it gets taxed. So, it's pre-taxed income. The Roth IRA is the opposite of that. The taxes are coming out first, it's going into the account after it's been taxed, so you won't be taxed on it when it comes out.

Depending on what your earnings are now, and what your earnings are at retirement age, and whatever the tax system will do at that point, that's really what's going to make a difference. But remember compound interest is huge too. So those amounts that you're putting in pretax, you're earning interest on that money. Depending on what the interest rates are, those are all things to consider and choose for your plan.

Jessica Quindlen: How much should individuals aim to save for retirement and what percentage of their income should they be contributing?

Emma Protsik: Absolutely. This again is going to be dependent on the individual so that lifestyle. Name of the game is really trying to figure out what percent of your current income that you're trying or need to replace. Bree, let's see if you remember the stat. What is the average retiree? Is it 80%?

Bree Shellito: It's 60%.

Emma Protsik: [00:04:00] 60%.

Bree Shellito: Experts recommend 80-90%, which is a lot because those are going to change, but 60% is what the Labor Bureau of Statistics said they actually utilize.

Jessica Quindlen: So, when you say the 60-80%, is that the percentage of your income contributing, or I should be saving so that I could live off of 60-80% of what I make now?

Bree Shellito: That second one.

Jessica Quindlen: The second one. Yeah, that's what I thought because I was like, you expect me to have 80% of my income going to retirement?

Bree Shellito: And live off of 10% of what you earn. So depending on that lifestyle, what you're looking to aim towards Jess. is 5-15% of your income. That's what you're putting towards retirement. So certainly not that 80%, 5-15%, depending on what you want your lifestyle to look like and what your plans are set up to be today.

Jessica Quindlen: And certainly looking at what is your employer contribution as well, because you might be able to get to [00:05:00] that. But you're actually getting to 15 because of employers.

Bree Shellito: That's so key. If you have a 401k where your employer sponsors a number of dollars, do what you can to reach that max, because if not, you're leaving valuable dollars on the table that could be helping you in retirement.

Jessica Quindlen: I love that. All right. So how does Social Security fit into the retirement puzzle? And what should people know about claiming those benefits?

Bree Shellito: So it sounds complicated at its face. So definitely speaking to some experts, we actually partner with a phenomenal partner in the community, the Pikes Peak Area Agency on Aging.

And we have recorded sessions from the past, but we have additional sessions for the future. So check out our website.

Social Security, the way that it's funded is by people working today. So it comes out your payroll taxes. It's eligibility is based on your work, your earnings over time and how long you've worked. If you can hold off, the best thing you do is hold off until you're 70. That's when your benefits are going to be the richest.

If you start pulling out at [00:06:00] 62, you can start pulling from Social Security at that time, but it is going to cost you. It's going to be a permanent reduction in what you receive for your remaining days, because you started reducing from that early on. If you can wait until 70, that's ideal.

It's based on a number of factors, your earning history, your retirement age, spousal benefits and then also divorce spouse benefits.

Jessica Quindlen: That's fantastic and good to know I never knew about that 70 thing. So that's really fantastic.

Emma Protsik: One thing too, just to add with Social Security, I think a lot of people have that as their retirement plan and it's really difficult to live off of a fixed income. Whenever you start to do withdrawals, like Bree mentioned, that is what you will be getting each month, so don't just rely on social security for that retirement.

Jessica Quindlen: All right, let's say, we've retired and we're looking for maybe some more money. What are some potential income sources during retirement that people should consider that is not going full speed ahead back into a career?

Emma Protsik: Yeah. A couple different things to look at. A lot of this is doing the planning beforehand. When you're still working, not in that retirement stage, different government [00:07:00] organizations, pensions, of course, are a thing. If you can meet with a financial advisor, they can talk to you about a lot of different investment vehicles you can use for retirement.

One that I recently learned about Health Savings Accounts. Those can actually be used as a triple tax benefit tool in retirement. So definitely schedule some time with an advisor if you want to learn more about that.

And another thing too, is when you do enter retirement, there is that ability to work part time or maybe doing some consulting things. So, you can still get social security benefits. There's a certain amount of hours you're allowed to work in a week to be able to do that.

Bree Shellito: But that is a little different, so check that social security website.

Emma Protsik: If you have regular investments, so not tied to a retirement account, just the dividends you get back from that can be it. Rental properties and other thing that individuals might be looking into retirement to get a little bit more cashflow.

And then if you ever do find yourself in a spot that income is tight, and you are in retirement, reversed mortgages, or HECMs is what they're known as, is another home equity conversion mortgage is another option [00:08:00] for folks 65 age or older. We do not offer those at Ent, but we could point you in the right direction if you wanted more information on that.

Jessica Quindlen: That's fantastic. What are some common mistakes people make when planning for retirement and how can they avoid them?

Bree Shellito: Not starting early enough.

Jessica Quindlen: I knew you were going to start with that.

Bree Shellito: That's a key one because you put it off, especially those who aren't quite sure if the place that they're going to work at is where they're going to stay. You can roll those over. So, if you start a 401k in an organization, there's an amount of time you have to be there to qualify, but you can roll it over to your next employer and it's actually pretty simple to do that.

You'd work with the new employer's plan to do that. So don't let that be why you hold off, especially if they have a match.

Underestimating expenses and not counting for inflation. In the past several years, inflation has been tough. We're hoping it's not going to maintain quite the same level and it shouldn't. Over the last 50 some years, it's been around that [00:09:00] 3% mark, so we're hoping it's going to tailor off, but making sure to know things are going to be more expensive. When we're talking about replacing your income today, that's going to need to be a higher amount.

Withdrawing money too early, not having a plan and not diversifying things like your investments or those different accounts, putting all your eggs in one basket. So having everything in one product, like a 401k, one type of investment, especially if it's risky.

As you start aging, you're going to want to pull that back depending on your risk tolerance. That's different for everybody, but if you have it in a very risky product and something happens, which we've seen a lot of that in the last several decades, that money could be wiped out very quickly. Whereas if you put it into a less volatile product, you're a little safer as you get closer to the time you're going to need it.

Jessica Quindlen: Anything else to add on retirement?

Bree Shellito: Review and readjust constantly. This is not a set it and forget it. You want to look at it. You want to consider your lifestyle changes. You want to consider things like family size. There's so much that goes into it, but consider [00:10:00] those changes.

Emma Protsik: Absolutely. And then we've talked about a little bit, but especially when it gets into retirement, meet with a professional. Whether that's a CFP, retirement advisor, it can be beneficial to get that overview. And then again, to help you make those tweaks and adjust as you're reevaluating.

Bree Shellito: And one of our free financial coaches, it's helpful. Even a friend, a family member, talk to them about lifestyle, what that looks like. Sometimes you have an idea of what you're going to do, but until you talk to someone about it, that's when it really happens.

Over the years, we've seen so many folks that, “Oh, I'm going to buy an RV and retire in that and travel around.” Not saying that's a bad idea. That's up to each person, but there's more that goes into it than you think. Even certain insurance requirements. Just looking into those, not just having this broad scope plan, but getting into those details on what that's going to look like and how much it's going to cost.

Jessica Quindlen: That's great. That brings us to the end of our show. Emma, Bree, thanks so much for being here. It was wonderful having you.

Bree Shellito: Thanks for having us.

Jessica Quindlen: And now for our [00:11:00] new segment brought to you by Dave Logan, the iconic voice of the Denver Broncos.

Dave Logan: Hi, this is Dave Logan, and it's time for your 2 Minute Money Drill. A quick tip to help you make smart money moves fast. Whether you're planning to save or looking for ways to get ahead, here's a financial play you can put into action right now.

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Jessica Quindlen: Thank you for listening to Sound Cents from Ent Credit Union. Be sure to follow our podcast as well as rate and review us. I'm Jessica Quindlen. I will see you in two weeks. Same time, same place.