Most people who are well-prepared for retirement have convinced themselves they're behind. In this video, I walk through 9 signs you're actually doing better than most American retirees — even if it doesn't feel that way.
If you know what you spend, carry no debt, and have multiple income streams, there's a good chance your biggest retirement risk isn't running out of money. It's holding back from actually living it.
00:00:00
Hey, welcome to another episode of Retirement Made Simple.
00:00:03
I'm your host, Kevin Lum. I'm a certified financial
00:00:05
planner based in Los Angeles, and this podcast is dedicated to
00:00:09
helping a million people retire without worry.
00:00:12
As a quick reminder, every episode here comes straight from
00:00:15
our YouTube channel. So this is just the audio so you
00:00:18
can listen while you're walking, driving, or living your life.
00:00:21
Let's dive in. I had a call with someone the
00:00:23
other day who started by telling me all the things they had done
00:00:27
wrong, right? They hadn't saved enough money
00:00:29
for retirement. They were behind other retirees.
00:00:32
They had started Roth conversions too late, right?
00:00:35
They went through a whole long list of things.
00:00:38
But once I dug into their situation, I realized they were
00:00:41
doing great. In fact, they were ahead of a
00:00:45
lot of people. And so today I want to help you
00:00:47
actually know how you're doing in comparison to the majority of
00:00:52
American retirees because there's something in the back of
00:00:55
her head that kind of wonders, like how am I doing in
00:00:57
comparison to everyone else? So I'm going to walk you through
00:01:00
9 signs you may be doing better than most retirees.
00:01:04
And here's why this video matters.
00:01:06
Because often the people who are in the best positions are the
00:01:10
ones who've convinced themselves they're not right.
00:01:12
They are overthinkers. They are analytical, like many
00:01:16
of you watching this channel. And you always kind of feel like
00:01:18
you're behind or I should have done this better.
00:01:20
I could have done this better. And so today, I want to pull
00:01:23
back the curtain a bit and give you some insight into how you're
00:01:25
doing in comparison to other retirees.
00:01:28
Every week I sit down with people who are near retirement
00:01:31
or who are in retirement. And over and over, I see the
00:01:35
same pattern. People who are generally well
00:01:38
positioned for retirement are often living anxious,
00:01:42
underspending, and holding back, not because the math isn't in
00:01:46
their favor, but because they've convinced themselves that
00:01:49
they're behind. And so today I'm going to give
00:01:52
you a framework or some signs that you were doing a lot better
00:01:55
than a lot of other retirees, or at least better than you
00:01:59
thought. And and #3 in particular, I
00:02:03
think is a really key sign, but I don't want to get ahead of
00:02:07
myself. So let's dive in #1 It sounds
00:02:10
simple, but it's one of the clearest signs that you are
00:02:12
doing better than most retirees. And it's this, you know,
00:02:17
specifically what you spend each month.
00:02:20
Not a guess, not around $5000 or so.
00:02:24
You know the actual number. I've talked about this in other
00:02:28
videos, but so many people have no idea how much they're
00:02:31
spending. And when you don't know what
00:02:33
you're spending, it puts your retirement plan in a very
00:02:36
precarious position. And this matters because
00:02:39
retirement planning knows how much money is going out the
00:02:42
door, right? Not just how much is going out
00:02:44
the door, but how much is a fixed expense, right?
00:02:46
Like life doesn't go on. You can't eat, you're going to
00:02:49
get your house taken away from you if you don't have this
00:02:51
amount of money. And then there's another bucket,
00:02:53
which is the discretionary spending.
00:02:55
And so having a sense of what those two buckets are, I did a
00:02:58
whole video showing how getting this number wrong by 1000 to
00:03:01
$2000 can make a dramatic difference in the success or the
00:03:06
failure of your retirement plan. People reach out to me all the
00:03:09
time and I want to know like, how am I doing?
00:03:11
Can I retire? And my question is always, well,
00:03:13
how much money are you spending? And more often than not, the
00:03:16
answer is not really sure. And that makes it very hard to
00:03:20
answer the question, how am I doing on my retirement journey?
00:03:24
Clarity about spending is a symptom of a healthy financial
00:03:28
life, or maybe for the purposes of this video, I should say of a
00:03:32
healthy retirement. If you don't know what you're
00:03:34
spending and you want to be ahead of most retirees, get
00:03:38
clear on what you're spending #2 now that you know what you're
00:03:42
spending. If you're guaranteed income
00:03:44
already covers most of your basic or core living expenses,
00:03:49
you are playing a very different retirement game than most people
00:03:53
think about. What guaranteed income mean for
00:03:55
guaranteed income is something like Social Security or a
00:03:58
pension or maybe some type of annuity.
00:04:01
But This is Money that shows up every month whether the market
00:04:05
is up or whether the market is down or whether the market is in
00:04:08
a complete free for all right. You don't have to do anything.
00:04:11
You don't have to sell investments at the worst
00:04:13
possible time. You don't have to stress about
00:04:17
sequence return risk. You don't have to stress about
00:04:20
whatever's going on in the news. The money just arrives.
00:04:23
And it makes almost every other decision in retirement easier.
00:04:28
If you have guaranteed income that covers most of your core or
00:04:31
basic expenses, you're able to draw from your portfolio on your
00:04:36
terms, right? You're not forced to draw from
00:04:38
it at the worst possible time. That means you can afford to be
00:04:42
patient. That means you can afford to sit
00:04:45
through a market drawdown. You can take more risk or you
00:04:48
can take less risk, depending on your goals, depending on what
00:04:52
you're trying to solve for in your retirement.
00:04:55
You're not forced into it. Now, the reality is that many
00:04:57
people who are doing quite well in the retirement plans are
00:05:00
going to have guaranteed income, and they're going to have to
00:05:02
pull money from their portfolio. And they can structure that
00:05:05
portfolio in such a way that they are not forced to sell into
00:05:09
market panics and they are able to protect against the secret
00:05:12
return risk. But the more guaranteed income
00:05:15
you have in your plan, the easier it becomes to manage the
00:05:20
withdrawals from the portfolio. And those withdrawals become
00:05:23
less scary. That's the second sign that
00:05:26
you're doing better than a lot of retirees #1 you know what
00:05:29
you're spending and #2A lot of your core basic expenses are
00:05:34
covered by guaranteed income. It just makes your retirement
00:05:37
plan that much more secure #3 This one is a big one.
00:05:42
The average American between the ages of 65 and 74, they carry a
00:05:47
credit card balance and unpaid medical bills.
00:05:51
Senior debt has tripled in the last 30 years.
00:05:55
So if you are entering retirement with no credit card
00:05:58
debt, no car payments, or no personal loans outside of maybe
00:06:01
a low rate mortgage, you are increasingly the exception, not
00:06:06
the rule. You're better off than many
00:06:08
other retirees because it allows you to have more control.
00:06:12
It allows you to have options, right?
00:06:13
Going back to what we talked about with number one, right,
00:06:15
Knowing how much you're spending and #2 having guaranteed income,
00:06:19
that covers a lot of your base expenses.
00:06:22
When you don't have credit card debt or have personal loans that
00:06:25
have to be covered, it allows way more flexibility in your
00:06:28
base or your core spending, which just gives you more
00:06:32
options. So having no debt debt outside
00:06:34
of a low interest loan, it just puts you ahead of most retirees.
00:06:38
Here's a number that might put things in perspective for some
00:06:40
of you. 25% of retirees are living solely off their Social
00:06:45
Security. And for 67% of retirees, Social
00:06:48
Security makes up more than half of their income.
00:06:52
That means the majority of American retirees are heavily
00:06:55
dependent on Social Security. And so if you have multiple
00:06:58
sources of income, right, maybe you have a portfolio or a
00:07:01
pension or part time work or a small business or some other
00:07:06
additional income stream, it's a major structural advantage to
00:07:11
your retirement plan, right? Having Social Security and a
00:07:15
portfolio is just it gives you a leg up on most other retirees.
00:07:20
That's a major advantage over just having one source of
00:07:23
income. If you have multiple income
00:07:24
streams or multiple pots of money to pull from, it just
00:07:27
gives you a more secure retirement.
00:07:29
Before we get to the next slide, I want to just stop for a second
00:07:32
because if any of those, those first four resemble you, you're
00:07:35
like, Yep, I know how much I spend.
00:07:36
Yeah, I've got a lot of guaranteed income.
00:07:38
I've got multiple income streams, no debt.
00:07:40
Good chance that the biggest retirement risk for you is not
00:07:44
going to be running out of money, right?
00:07:45
In fact, for many of you watching this channel, that's
00:07:48
not your biggest risk. The bigger risk is that you
00:07:52
don't actually spend what you could.
00:07:55
You've so habited yourself to be someone who is ahead of most
00:07:59
retirees, but what you find is that the transition from being a
00:08:02
saver to a spender is harder than you realized.
00:08:06
And the research is clear. Baby Boomers, who you know our
00:08:10
our audience is some baby boomers and some Gen.
00:08:12
X Baby Boomers are the wealthiest generation in
00:08:16
history. Full stop.
00:08:17
And they are the most financially anxious retirees
00:08:22
ever studied. That's not a coincidence.
00:08:25
It's a pattern. And it's costing people in their
00:08:29
retirement. And so it's why it's something I
00:08:31
return to over and over again to the point where I think some
00:08:35
people probably are getting tired of it in my videos.
00:08:38
But it's a real issue that we see.
00:08:40
And so as you're watching this, you're like, yeah, I am ahead of
00:08:42
most retirees. Let that sink in as you think
00:08:45
about it, right? How do I shift from being
00:08:47
someone who accumulated and done all the right things to now
00:08:51
actually allowing myself to enjoy my retirement?
00:08:54
Let's finish the list #5 you have money saved for retirement.
00:08:57
Nearly 40% of Americans aged 65 and older have no retirement
00:09:01
savings. NO4O1K, No IRA, No 4 O 3B, No
00:09:06
TSP. And if you are one of the people
00:09:08
who have one of these accounts and you've been consistently
00:09:11
contributing to it over the years, even if your balance
00:09:15
doesn't feel like enough, right, you look at your balance.
00:09:18
Once you open up Schwab or Fidelity, like I wish I had
00:09:20
more, you are still ahead of 40% of other retirees.
00:09:23
If you get 50 bucks in the account and hear this, the
00:09:26
balance matters, but even more important to the balance that
00:09:29
particularly in retirement, is the habit of building that
00:09:33
retirement wealth matters. It matters that you are the type
00:09:36
of person who is disciplined enough to save money and live
00:09:39
below your means or live below what you could spend in order to
00:09:44
put money into retirement account.
00:09:46
So just having a retirement account put you ahead of a
00:09:49
significant number of retirees. I know many of you out there,
00:09:53
you're feeling like I'm so far behind.
00:09:55
I don't have the numbers that I read about other people having
00:09:58
you are way from their head. Then you may even realize,
00:10:01
number six, nearly 40% of people cannot cover a $400.00 emergency
00:10:07
without borrowing money or selling something.
00:10:10
Having a cash cushion, whether in a retirement or outside a
00:10:14
retirement is an incredibly powerful tool because it means
00:10:17
you don't have to go into debt because your roof needs
00:10:20
replacing or the car broke down. Now, in reality, most of the
00:10:24
people we work with, they have more than enough money in their
00:10:26
retirement accounts that they don't need an emergency savings
00:10:30
outside of the retirement account.
00:10:31
They could just pull the money from the retirement account.
00:10:33
But here's something interesting.
00:10:35
Even for clients who have a significant amount of money in
00:10:38
the retirement savings accounts, right?
00:10:40
More than enough to cover any expense that may ever arise.
00:10:43
I still recommend that they keep an emergency savings account of
00:10:45
three to six months of living expenses outside of the
00:10:48
retirement accounts purely for behavioral purposes, especially
00:10:52
for married couples. Here's why.
00:10:54
Typically, one spouse knows to a penny how much money is in their
00:10:58
retirement account, right? They are refreshing Schwab or
00:11:00
Fidelity every single day, right?
00:11:02
1 Oh no, the market went down today, 1 right?
00:11:07
They know to a penny how much they have.
00:11:09
The other spouse has no idea how much is in the retirement
00:11:12
account. Maybe they check it once a year,
00:11:14
but they do know how much money is in their bank account and
00:11:17
their savings account. And when that number gets too
00:11:19
low and there's no buffer or there's no margin, it can trick
00:11:23
their mind into a scarcity mindset and it makes them scared
00:11:27
to spend the money they have. So I found it's often helpful
00:11:30
for one of the spouses in their relationship.
00:11:32
Or if you're single, you might be the person who has no idea
00:11:35
how much money is in your retirement account.
00:11:36
All you do really is you look at your bank account and if you
00:11:38
don't have enough buffer there or enough margin there, you can
00:11:41
begin to feel a scarcity mindset.
00:11:43
The story I tell related is, and I've told the store probably 10
00:11:45
times to this channel, but it, it really illustrates the point
00:11:49
that you know, the client who I don't know, they probably had 40
00:11:51
to $50 in Social Security benefits and they wanted to know
00:11:54
if they could go on a trip. And I was like, of course you
00:11:56
can afford to go on the trip. And they're like, well, you
00:11:57
know, it's $5000 and only make $40 or $50 a year.
00:12:01
And I was like, yes, but you have $4 million in your
00:12:04
retirement account and you don't spend hardly end of it.
00:12:06
And, and they're like, well, yes, but that's for retirement.
00:12:09
Like you are in retirement. This is the time to spend that
00:12:13
money. And so if you were that person,
00:12:15
it was often helpful to keep some buffers from emergency
00:12:19
savings of three to six months of living expenses in your
00:12:22
savings account or your checking account because it really helps
00:12:25
you feel less scarcity in retirement.
00:12:27
So having an emergency savings account, not only does it put
00:12:30
you ahead of a lot of other retirees, but it can be a real
00:12:32
life hack. The feeling less scarcity in
00:12:34
retirement #7 many people claim Social Security early or they
00:12:38
take it at age 62 or at their full retirement age because it
00:12:41
feels like they're getting what's theirs, right.
00:12:44
I'm not can't let the government keep that money any longer, but
00:12:46
if you delay to say age 70 or age 67 or 68, you lock in a
00:12:51
larger inflation protected benefit for the rest of your
00:12:55
life. Now there are 1 videos
00:12:56
on YouTube talking about when you should claim Social
00:12:59
Security, right? There's all these things like
00:13:01
depending on your life expectancy and all these
00:13:03
different pieces that go into it.
00:13:06
But as a general rule, going back to the second point, the
00:13:09
more guaranteed income you have coming at a retirement, the more
00:13:12
secure and the better off you are.
00:13:15
One of the ways you can do that is by delaying your Social
00:13:18
Security payment which creates a larger guaranteed income floor,
00:13:22
which can just make the rest of your retirement plan easier.
00:13:26
So #7 delaying Social Security, it can put you ahead at least
00:13:30
delaying one spouse, right? If you're married, maybe you
00:13:32
claim one spouse as early and you delay the higher earning
00:13:35
spouses Social Security payment as long as possible #8 This is
00:13:39
one of the most overlooked signs on this list.
00:13:43
Only 31% of Americans have a formal will, and 55% have no
00:13:50
estate plan at all. The people have a will or a
00:13:53
trust or beneficiary designations.
00:13:56
They've done the hard work at looking clearly at their
00:13:59
financial life and making decisions about it.
00:14:02
There's some intentionality about it, and that mindset is
00:14:06
worth more than the documents themselves.
00:14:08
You need the documents. You need a power of attorney.
00:14:10
You need a medical directive. You need all those things.
00:14:12
But partially having those documents means you have forced
00:14:16
yourself to sit down and think about those decisions and being
00:14:21
able to do that puts you ahead of nearly 50% of other
00:14:25
retirement household. Make sure you take the time and
00:14:29
your intentional to think about your estate plan.
00:14:32
Not just the documents but about your wishes #9 is what I call
00:14:35
lifestyle discipline. As people accumulate wealth over
00:14:40
a career, the natural temptation is to allow their lifestyle to
00:14:45
inflate along with their growing wealth.
00:14:48
Bigger house, newer car, more stuff.
00:14:52
And there's nothing wrong with that, right?
00:14:54
There's nothing wrong with spending.
00:14:56
I believe in spending. I push people to spend.
00:14:58
In fact, I've been talking to you in this video.
00:15:00
You should probably be spending more.
00:15:02
But the people I see consistently in the strongest
00:15:05
financial positions, particularly in retirement, are
00:15:08
the ones who spending grew slower than their wealth.
00:15:12
I have a whole video talking about quiet wealth, who kind of
00:15:15
talks about this lifestyle, right?
00:15:17
These are the people who didn't allow their lifestyle to inflate
00:15:20
with every raise and every market gain.
00:15:23
They found a life that felt good and they stayed there.
00:15:27
And the gap between what they earned and what they spent is
00:15:30
what funded their retirement, right?
00:15:33
This is what puts in the head of most retirees.
00:15:36
And if that sounds like you, you're further ahead than most
00:15:39
people ever realize. But again, coming back around to
00:15:42
the point I made earlier, if that is you, you are head of
00:15:46
most retirees. Good for you.
00:15:48
But you also may need to make a mindset shift and give yourself
00:15:51
some permission to spend some of that which you saved.
00:15:55
Because at the end of the day, we can't take it with us.
00:15:57
I tell people all the time, money is a tool.
00:16:00
It is a means to an end. It is not a scoreboard.
00:16:02
The question is, what are you going to do with that tool?
00:16:04
You may want to leave it to a future generation or to fund
00:16:06
charitable institutions or whatever it might be, which is
00:16:09
great, but at least give it a purpose.
00:16:12
Decide what you want to do with your money, because otherwise
00:16:14
you might get to the end of retirement and realize there's
00:16:16
some things you want to do. You want to go ahead and allow
00:16:19
yourself to upgrade to business class on that international trip
00:16:23
and you didn't do it. And now you have more money than
00:16:25
you can ever spend. And so you have to be careful as
00:16:28
you give yourself permission to spend that you don't allow
00:16:30
lifestyle creep to take over, but at the same time give
00:16:33
yourself permission in a very structured and goal oriented way
00:16:37
to spend some of what you've saved.
00:16:40
OK, I'm going to end it there. I went on a bit too long.
00:16:42
I'm curious if you've recognized yourself in any of these.
00:16:45
But also there's a real chance that you are way better
00:16:48
positioned then maybe you even realize.
00:16:51
And I don't say that just to make you feel good.
00:16:53
I say it because I've seen what happens when people don't accept
00:16:57
where they're at, right? They spend their retirement
00:17:00
holding back, not taking trips, not helping their children or
00:17:04
their grandchildren, not enjoying what they built.
00:17:08
Because fear doesn't go away on its own, right?
00:17:11
When you've habited yourself to be a person who is a head of
00:17:14
most retirees, that transition to becoming someone who actually
00:17:18
gives yourself some permission to spend is really hard.
00:17:22
The antidote to fear or anxiety for many of you is not more
00:17:25
money, right? If you have two million, if you
00:17:28
had 4 million, you're going to feel Justin's nervous.
00:17:30
It's about having a plan, a plan that shows you with actual
00:17:34
numbers, right? What you can spend, what your
00:17:36
risk is, what's your safe withdrawal rate, what's
00:17:39
possible, what's your income capacity so that you cannot just
00:17:43
survive your retirement, but you can thrive in your retirement
00:17:47
and do all the things you always dreamed you might do.
00:17:50
Hey, thanks for listening. If you enjoyed this content, if
00:17:52
you do me a favor and just leave a review on whatever podcast app
00:17:55
you're using, Apple or Google or Spotify.
00:17:58
And also you can find us on YouTube.
00:18:00
Just search Foundry Financial or Retirement Made Simple.
00:18:03
You should be able to find us by searching both and then you can
00:18:05
find ourwebsite@foundryfinancial.org.
00:18:08
Thanks for listening.