profile

Taylor Schulte

Your Guide to Retirement

Published about 2 months ago • 4 min read

Hi Reader,

Each spring, J.P. Morgan releases a helpful document they call Guide to Retirement.

It's packed with interesting ideas and data that are all focused on retirement.

While I think the entire document is valuable, I've handpicked eight charts that I think can help us make better retirement decisions.

I've also added some commentary that I hope you'll find valuable.

Let's dive in.

(Note: If you want to download the entire 53-page guide from JP Morgan, click here.)

1.) Focus on What's in Your Control

I talk a lot about focusing on the things you can control.

So, naturally, I love how the visual below captures the level of control we have over various issues.

I want to specifically point out those in which we have zero control:

Market returns and broad retirement/tax policies.

The only intelligent way to address things we don't have control over is to think probabilistically.

Why?

Because historical probabilities are the only basis on which we can make educated planning decisions.

2.) Having a Plan for How You Will Spend Your Time Is Often Overlooked

In my experience, people spend more time thinking about the financial side of retirement than they do about how they might spend their time.

You could argue that the latter is just as important since how you spend your time is how you'll spend your life.

As you plan your transition to "six Saturdays and a Sunday," I want to encourage you to follow the acronym PUSH below.

The PUSH concept can help you create purpose in your day-to-day life by helping you think through how to use your time wisely.

A helpful mental exercise is to use these four building blocks as a guide for answering the question:

"What does an ideal week in retirement look like for me?"

The more time you spend thinking about this question, the more likely you are to have a fulfilling retirement.

3.) Generally Speaking, Spending Declines Over Time

There's a helpful retirement catch-phrase that divides your retirement years into three distinct groups:

They are your "go-go years, slow-go years, and no-go years."

At its core, this phrase captures how you will likely spend your time and money throughout your retirement.

As just one example of the truth of this phrase, you're more likely to travel the world at age 70 than 90, which is one reason we tend to spend more early in retirement than later.

Obviously, how much your spending will change is unique to you, but the data offers a benchmark for how budgets evolve over time for many retirees.

4.) You'll Probably Live Longer Than You Think

If you ask someone nearing retirement how long they think they'll live, most will probably respond early to mid-80s.

This makes sense since it's their individual life expectancy.

The problem with this assumption is that, from a planning perspective, it misses the critical factor of "joint life expectancy."

As a reminder, "joint life expectancy" is:

The age at which the second spouse would finally pass.

Surprisingly, for most healthy, non-smoking couples, life expectancy extends well into their 90s.

More specifically, the data shows a 73% probability that at least one spouse will live to age 90 and an almost 50% probability of living to age 95.

And there's ~20% probability of living to age 100!

This is why I continually encourage thinking long-term when it comes to portfolio management in retirement since retirement may very well stretch 3+ decades into the future.

» Check out these other 9 Fun (and Useful!) Facts About Retirement

5.) Social Security Breakeven Points

There's quite a bit of confusion around the age at which you might "come out ahead" based on when you file for social security.

Below, you'll find this information in visual form.

The short answer is:

People who wait until age 70 to collect benefits are ahead of all other filing options by about age 81.

Those who wait until Full Retirement Age are ahead of those who filed at age 62 by about age 77.

That's not to say that everyone should delay taking Social Security.

But, considering the life expectancies in the previous chart...

...waiting can often be a prudent financial decision, especially for the higher-earning spouse.

» Learn more about When to Take Social Security (and How to Fix a Common Mistake)

6.) The Longer We Live, the More Likely We Are to Need Some Level of Care

Most people underestimate the likelihood of requiring some level of care.

Remembering that at least one spouse may live well into their 90s, it's notable that almost 50% of people will be unable to accomplish two or more activities of daily living at age 90+.

In case you're curious, there are six activities of daily living:

Bathing, eating, dressing, toileting, transferring, and continence.

The life expectancies noted above + the probabilities below are precisely why retirees need to have a plan for these events.

It's not a fun topic of discussion, but it is clearly important to be mentally and financially prepared.

» Find out if you can Skip Buying Long-Term Care (LTC) Insurance

7.) Being Flexible With Your Spending Can Help Your Money Last

Setting the proposed allocation below aside, adjusting your spending based on market conditions can help your money last longer.

It can also provide more total spending throughout your retirement years.

I suspect most people would consider this to be a worthwhile tradeoff.

» Learn more about using Dynamic Retirement Income Strategies

8.) Equity Volatility Has Historically Been a Short-Term Risk

I want to draw your attention to the bottom half of the graphic below, which shows returns since 1950.

As you can see, equity volatility is high in the short term with a wide range of historical returns.

But over longer time periods—even considering periods as short as 5 years—the historical negative volatility of equities is very much in line with other asset classes.

Given that many retirees will experience a 30+ year retirement, it's worth reminding ourselves that the short-term volatility in stocks has rewarded investors with attractive long-term benefits.

I hope these charts offer some clarity and optimism as you address your retirement planning needs this year and beyond.😊

As always, hit reply to this email with any questions.

And if you would like to learn more about our retirement planning services, schedule an introductory phone call.

Stay wealthy,

avatar
Taylor Schulte, CFP®

Taylor Schulte

Retirement and tax planning tips...in plain English.

I'm the host of the Stay Wealthy Retirement Show and founder of Define Financial, an award-winning retirement and tax planning firm. When I’m not helping people lower their tax bill, you can find me traveling with my wife and kids, searching for the next best carne asada burrito, or trying to master Adam Scott’s golf swing.

Read more from Taylor Schulte

Hi Reader, Social Security is a touchy subject. Over the years, I've observed the attitude toward Social Security becoming increasingly negative due to its perceived insolvency. Due to this perception, it's not uncommon for retirement savers to question if (or how) they should include it in their future planning. While the overall health of the Social Security program is not great, it's still better than many people realize. In today's email, I want to share some important updates about the...

6 days ago • 3 min read

Hi Reader, One of the most popular investing books of all time is The Intelligent Investor by Benjamin Graham. Originally published in 1949, it has been updated multiple times and continues to be a best-seller today. In case you haven't heard of Benjamin Graham, he was Warren Buffett's teacher and mentor. And Buffett has said that he considers The Intelligent Investor to be "the best book on investing ever written." I'm not necessarily encouraging you to read the book (candidly, it's a bit...

13 days ago • 3 min read

Hi Reader, Today, I'm sharing some of my favorite investing and economic charts from the past month. These charts cover topics like: Market Drawdowns The Middle East & Geopolitical Risk Politics & Investing Before we dive in...did you catch this week's podcast episode? 👉 How to Protect Yourself From Financial Scams (+ New Resources) In this week's episode, I share a story about a couple who lost $2 million to an investment scam. I also sharing (new!) resources to help protect your personal...

27 days ago • 2 min read
Share this post