Education Day: Retirement Planning for the Unexpected – Barbara Armstrong 3-13-19

Jason 0 Comments September 2, 2023 Retirement Planning

Hey, welcome back, everyone. TD Ameritrade’s Investor Education Day. My name is Ben Watson. This is our seventh year of providing Investor Education Days on a variety of topics. Our focus today, retirement planning. We’ve got a great presentation coming up really quickly from Barb Armstrong, Planning for the Unexpected. Because you know nobody expects the Spanish Inquisition. So speaking of that, unexpectedly, Pat Mulally has just dropped into the studio. Pat, you’ve been listening to Investor Education Day all morning long. Yeah, fantastic. What’s your take so far? Fantastic. The back and forth, the dynamicness– is that a word, dynamicness– anyway, has been really great. What I really thought about that last segment was the systematic drawdowns, right? And those systematic drawdowns, they’re not linear. The closer you get to possible leaving this earth, the faster that money draws down. To your plan expiration. That’s right. So, you know, you hit 90 and then suddenly, the drawdowns start, the velocity of the drawdowns start to speed up. So the decay of your account, that’s a very important thing to think about.

Right. Hey, so along the way, we’ve had a lot of I think kind of interesting mindset shift ideas. Right? The idea that, hey, we get very focused on planning for, and planning for, and planning for retirement. Right. But we don’t necessarily always think about what it means to now start to spend that down. Exactly. We’ve been very comfortable with knowing what’s in our retirement account and feeling good about that. It’s a good friend. You open up your account. There’s a total amount. Look at it. Oh, isn’t it nice? It’s growing. It’s growing. And then you start to spend it down and that maybe creates panic for some people. And so I think that’s one of the things that Christine and Matt did a phenomenal job of expressing and talking about some of those challenges. Now, one thing I want to remind everybody, Pat, is that these presentations are being recorded. Right. They are archived. They will be available at a later date for everyone to review and watch. We’ve got lots of great stuff coming up still.

As a matter of fact, Barb Armstrong is here in the studio milling about getting ready to go. We’re going to be ready to go in about one minute or so with Barb Armstrong. Any last words, Pat, before we get started with Barb? Time segmentation buckets. Yeah. Be aggressive– be conservative on the first bucket, aggressive on the last few. And grow the accounts as you go along. It’s a wonderful thing. That’s awesome. People never think about that. Fantastic stuff. OK, great stuff. Now, you’re going to be listening to the rest of Education Day. We’re going to bring you back in for a little bit more color commentary.

But as we get ready to roll here, Barb Armstrong walking into the studio. She is up and ready to go. We’re going to be talking about planning for the unexpected. The things you don’t recognize might be over the horizon, you walk down the street and who knows? You know, a piano could hit you on the head, right? So let’s get ready to start here with our next presentation in TD Ameritrade’s Investor Education Day starting right now. Welcome back to TD Ameritrade’s Investor Education Day. My name is Ben Watson. And I’ll be your host all day long, keeping things going with our retirement discussion today in our seventh year of Investor Education Days here at TD Ameritrade.

I am joined in studio by Barb Armstrong, one of our education coaches here at TD Ameritrade. We’ll meet Barb in just a moment. But we are going to jump on in here really quick. Planning for the unexpected. And as we talk about this today, a couple of things to keep in mind. Remember, this presentation is for educational purposes only. It is not a recommendation or an endorsement of any particular investment or investment strategy. Remember that past performance does not guarantee or indicate future success. Discussion of returns are purely hypothetical. They may not include the impact of commissions and fees. Keep those in mind. Remember that returns will vary. And all investments involve risk, including the loss of principle. TD Ameritrade does not make recommendations or determine the suitability or strategy of any security for individual traders. Any investment decision you make in your self-directed account, solely your responsibility.

Remember of course also that this is a copyrighted broadcast. So no part of this presentation may be copied, recorded, or rebroadcast in any form without the prior written consent of TD Ameritrade. And let me introduce you to my friend and fellow education coach, Barb Armstrong, who is a very knowledgeable investor and coach. She is passionate about introducing clients to the world of investing. Teaches a number of our educational webcasts throughout the week. Barb, it is all yours here at TD Ameritrade’s Investor Education Day. All right, thank you so much. It has been awesome to be listening in this morning to all the great information being shared. I am really excited to be part of this. I joined TD Ameritrade as a client– actually, TD Bank back when I lived in Toronto– at the age of about 18.

And I’ve been a fan of all things Toronto dominion oriented ever since. So thank you for joining me today. We have a lot of information to cover. And it’s great to see the passion with which everybody is approaching this, lots of great stuff. I get the honor of talking about expecting the unexpected. And, you know, although one can think that that may not be a very sexy thing to have to spend time on, you’ll be really grateful that you did, if one of these events happens to come your way, whether it is the to your income, whether it’s an unexpected expense risk, long term care risk, which we’ve already talked about this morning, health care risk. Risk to your market returns and timing can be so critical with respect to market returns, and inflation risk. So we’re going to spend a few minutes talking about each of these things.

With respect to unexpected early retirement, we really have two buckets we can look at. One is the happy bucket, where people are leaving the workforce early. And about half of retirees end up leaving the workforce earlier than they had planned. And 24% of the time that’s because they were really diligent in their planning. And they felt they were able to be able to afford to retire early. And then you’ve got about 10% who wanted to take on something else. So they’ve retired to move on into this next inning, if you will. Unfortunately, we’ve got about 40% of the people who end up leaving because of health issues or disability, which all of a sudden makes disability insurance look more appealing when we look at these kinds of numbers potentially.

There’s a lot that are also job related. It could be a job loss due to downsizing or a company closing. It could be the need to care for a spouse or a parent or another family member. You know, I know someone whose son was just in a really critical accident. And she has spent most of the last three months living in a hospital. And that certainly wasn’t something that any of them had planned for. There can be other work related reasons also. Maybe your business is being moved to Chicago or Baltimore.

But you really like living in Texas or Oklahoma or wherever you happen to be. And you don’t want to make that move. So all of a sudden, you find yourself in transition. And then there’s that need to keep updating skills. And sometimes that thing that you have expertise in a company may just no longer require. So we need to take that into account. And we’ll talk in a few minutes but how we might plan for that. We talked earlier in the day with Christine and Matt about the shock of unexpected expenses. And it’s really interesting because major home repairs, like a tree falling on your house as Christine mentioned earlier in the day, or upgrades that you want to make now that all of a sudden, you’re not working and you may be spending more time at home, those things that you didn’t notice so much all of a sudden these are projects that you want to tackle.

So 28% of people were looking at major home repairs and upgrades. 24%– this one surprised me– major dental expenses. And Pat Mullaly said like, isn’t that what blenders are for? But hey, if you don’t want to be living on food that’s come out of a blender and these expenses come up, you know, you need to have the money to take care of them. Out-of-pocket medical and prescription expenses can be higher than anticipated. And then there’s long term care insurance. And we’re going to talk more specifically about that. But that’s come up already a lot this morning. Divorce is another thing that is just part of the reality of the world that we live in today. About 50% of marriages end in divorce. So if you spent many, many years creating this giant heap and then you end up with half a heap, that can impact your planning.

And providing major support to children, to grown children, either having them move back in or need support in an unexpected way, these are just some of the things that can come our way as we enter retirement or while we’re enjoying retirement that can put a dent in one of the buckets that we take care of. You know, and one in five retirees said that they not only encountered one of these types of shocks, they encountered four or more. So many of us plan, you know, or there are some at least that plan to retire. And, you know, they think that business is going to go along, life is going to go along as usual. And then these things come up. And it really knocks the wind out of our sails. When we look at long term care risk, it’s interesting. A study done by the Society of Actuaries found that most people are concerned about long term care. But they haven’t either set aside money for it, nor have they purchased long term care insurance. And if you are a woman who is 65 years of age today, your chances are two out of three that you could require long term support, long term care support during your lifetime.

And 20% of those who need it, may need it for five years or longer. So that’s not an insignificant blip, if one hasn’t planned for that. Because the average number of years that long term care is needed, if it’s needed at all, is years for women and just over two years for men. So when you get out there into the marketplace and you look at costs, your average monthly costs for semi-private nursing home care is over $7,000 a month. That’s $88,000 a year. And if you’re in an assisted living facility, in a one bedroom type place, you’re looking at over $3,500, $3,800 actually. So that’s upwards of $50,000 a year. And so when you look at this and think, how do I plan for this? I noticed in the chat earlier, someone had said that their long term care insurance ranged somewhere between $4,000 and $7,000 a month. And depending on when you look at that– and this isn’t a product I believe that TD Ameritrade provides– but you might want to consider self-insuring and look at bucket number four or bucket number five as perhaps providing the income if it’s needed for that.

So and I can’t speak to this. I’m seeing questions come up on the chat on long term care insurance. I’m not licensed for insurance. And I’m certainly not a specialist in this arena. But when it comes to planning– and I love the approach they talked about earlier, Christina and Matt with the five buckets– if you could say with bucket four and five, maybe we ought to plan for this and take a look at some of the numbers and what things may cost.

And if you’re going to self insure say, OK, well, if I’m planning on for years at potentially this kind of money, what type of income do I want to have in bucket number four? So anyway, that’s just a thought on that one. When we take a look at returner market risk– and one of the things that we were cautioned about earlier is not to overreact. And one of the ways that we can feel more secure and be less likely to overreact is if we have that emergency fund set aside. And I think that Matt mentioned six to 12 months of living expenses. But timing is so important. If you were looking to retire in 2010 for example, you may have been hyperventilating after going through 2008 and ’09, which was particularly devastating in the marketplace. And you may have considered extending out your last day of work because of that. Where if you’re looking at it now at the end of a 10 year recovery after the devastation of 2008 and 2009, you may look at things differently.

So when we take a look at this, if you’re currently trending and you’re ahead of the game, you may want to consider, just consider, decreasing your risk. So that if we see another major pullback in the market, the wallop is less painful. Or at least put systems in place to manage your risk. And if you’ve experienced periods of underperformance, you might want to consider altering your plan. Inflation is one of those things, where particularly right now we’re looking at inflation rates that aren’t super high, we still have to consider the fact that– you know, I know people who are older than I am that paid more for their last car than they paid for the home that they’re living in.

The average home in 2000 cost about $167,000. Today it’s more than double that. When we look at car expenses– and I noticed somebody had put into the chat that car expenses can be a real expense that sometimes people don’t plan for. Well, if you’re planning on driving, you need to take into account that you want to have a serviceable vehicle. It doesn’t have to be the latest Mercedes or the latest big Suburban perhaps.

But it’s got to be something that’s going to get you where you want to go and in the style that you want to get there. So when we take a look at hospital costs too, I mean, again, from 2000 to today, those numbers have pretty much doubled as well. So it is still a real part of our futures. So the good news after all of that sobering information is that the targets you set for retirement are up to you. And the question I ask is, do you have a target? And a target for the amount of assets that you want to have going into retirement, do you have a target date? And where are you today in relation to that? One of the questions that has come up many times in the chat today is, how do I find this information that we have been referencing throughout the morning? And so I’m bringing up the TD Ameritrade website here. And we just signed into a demo account. And we’ve clicked on this tab called Planning and Retirement. And you can click on the Overview.

Or you can pick whichever segment is the most appropriate for you. But you’ll see that we have a couple of things here. One is the income planning worksheet that Matt had brought up images of earlier. And I mean, if you’re going to meet with somebody at TD Ameritrade, which is certainly something that you have the opportunity to do at your local branch, and they don’t charge you for that first visit to help you figure some of these things out. You can put things into buckets and like he said, essential and discretionary. And this is estimating your retirement living expenses. I know for some people what they do is they’ll use this as a template to make a note of what they’re spending now. So that they can better estimate their living expenses going into retirement. And then you can also fill this out and have a look at where are you now with respect to quote unquote your giant heap.

So going back, we can also then click on this retirement calculator. And we certainly don’t have time to walk through that today. But you can do several scenarios with this. You can go through with your current numbers. You can put information like, are you planning on downsizing your home? And how much money will you be adding to your nest egg when you do that? Are you getting an inheritance? Are you planning on working to 65? But in hearing that some people end up leaving the workforce earlier, maybe you want to run your numbers planning on retiring at 60 and see if you’re still going to be OK.

So you can put in all kinds of great information. And you can run this as many times as you like. You can run it as a single person, a married person. You can be 30. You can be 59, male or female. And it brings up average life expectancy rates and all of that also. So I just wanted to share that with you. So that you know where you can go get that. Also, since I’m here, I’d like to spend just a minute on the Education tab. Like if we come to Overview, you can access a course. And so let’s do that. It will bring up a recommended learning path for you. And so you can decide do you want to build a nest egg for retirement? So you can click on that. And if you do, it’ll bring up all kinds of information that you can tap into. So there’s a new course that we have just debuted called Simple Steps for a Retirement Portfolio.

There’s a webcast half an hour every week, Building Blocks for a Self-directed Portfolio. There’s another webcast on managing a self-directed portfolio. There’s one on investment fundamentals. If we come back up to the Education tab and we click on Webcasts, you’ll see that you have access to over 45 webcasts a week. I saw in the chat somebody saying, I really like REITs, or real estate investment trusts. There’s a class every Tuesday at Mountain, Eastern that we talk about REITs and bond ETFs. Someone else mentioned different option strategies that they like to use. So if we take a look at the webcast calendar, you can see that you’ve got all kinds of choices. There’s a Getting Started with Options.

So if you’re thinking options are scary and it’s something that you really are unfamiliar with, you may want to start here. We cover 10 or 11 different strategies. And then you can pick just one that you think resonates with what your goals are. If you’re already a seasoned investor, there’s lots of stuff you can tap into. And I know that many people in the chat today participating in the retirement day already do that. So lots of education here for you to tap into. I’m getting a little bit ahead of myself. Because that’s one of the things that I’m recommending, is that you continue to invest in yourself. So anyway, where are you relative to today? And then what kinds of things might you want to adjust? And when you’re going through without retirement calculator, you can adjust all kinds of things and see what kind of impact that will have on your potential long term success.

You may also want to make an appointment with somebody at a local TD Ameritrade branch, or if you’re working with someone already, make sure you have a strategy that one, you understand and that– OK– that one, you understand and that you have an investment plan to make sure that you are on target. Plan on enjoying three decades of retirement. I love the smile analogy that they came up with today. Because although a lot of people think that once they retire that they’ll spend less, the reality is that 50% of us when we hit retirement actually spend more. And that makes sense. I mean, we finally have time to do all the things we wanted to do. So we want to travel and we want to do that project around the house and all of those things. And then you kind of settle into a period where you’re spending less. And then as we hit the end of that last trimester, so to speak, we can end up with– I’m trying to read the chat here as I go, so that I can answer questions, and I’m sorry I’m getting a little distracted– and the .

Matthew Canadian so that’s part of my Canadian accent. So I’m sorry if that’s distracting for you. In any event, as we get into that last trimester, those last buckets, if we choose to go with that bucket approach, can help us in those years where health care may play a more predominant role in our spending. So our plan should include protections, protections against those things that we weren’t expecting, but hopefully we now can be prepared for. What if we have to end our career earlier than anticipated? What if there’s something in our family dynamic that causes us to have to either leave the workforce to care for an older parent or help fund that? Do we have plans in place for both ourselves and our spouse, if that’s appropriate? You may want to consider evaluating whether disability or long term care is appropriate in your situation. I’ve seen lots in the chat today also– and I love this– take care of your health. Your future self will thank you. Mark has just typed it in again, health is the new wealth. I have a friend whose tagline is if you don’t take care of your body, where will you live? And I think investing in getting out of bed earlier, as I did this morning to hit the gym before I came in, going for that walk around the block, all of those things will make that 30 years that hopefully you will get to experience in retirement that much more fun.

Because you’ll be able to put on your list the traveling that you want to do in the way that you want to do it, or the skiing, or the hiking. Can you tell the things I like to do? The skiing, and the hiking, and the biking and all of that. So an investment in that today may seem small, but it can pay off big time down the road. I applaud each and every one of you for being here today and for continuing to invest time in becoming more knowledgeable about investing in the markets. Consider working with a financial investor and plan for the worst and hope for the best. So– Wow, Barb, great stuff.

Well, thank you. Yeah, I mean, I think that’s one of those things. And really quickly, great job addressing some of the questions in the chat. And thank you for showing the education page, where people can go for more information, which is phenomenal. And again, coming up really quickly here we’ve got Michael Fairborn talking about rising interest rates. But I think you did a great job of tying back to what Matt and Christine were talking about this morning in their deeper dives. Right. You know, what to do as your life span maybe is longer, the length of time that you have in retirement is maybe a little bit longer than you were planning for. Or maybe expecting as things, you know, medical science continues to advance and things happen that we may end up living longer than we expect that we might. Right. And we want to make sure we have the resources to enjoy it. Absolutely. Well, thanks again, Barb Armstrong. You’re very welcome. And again, we’ll look forward to seeing you in the webcasts and maybe on Education Day again going forward. So thanks again, Barb, appreciate it. Awesome. Enjoy the day.

All right. Hey, guys, stick around. We’re going to be right back in just about five minutes or so with Michael Fairborn talking about what to make of rising interest rates. Coming up next on TD Ameritrade’s Investor Education Day. Again, really quickly, the reminder that any investment decision you make in your self-directed account is solely your responsibility. So stick around. Don’t go anywhere. We will be here all day long with TD Ameritrade’s Investor Education Day. Oh, hey, look who’s coming back into the studio. It’s Pat Mullaly. Hey. Pat, what did you think of Barb’s presentation? It was a lot of great stuff. And it hit home very closely to me.

And you know this better than anybody. You know, I was in great shape, went to Italy for a yoga retreat. Did I say yoga retreat? I was going with my wife. Yeah. That’s right. She was going to the yoga retreat. You were eating pasta. I know that. I got some kind of a virus that went into my spine. And you know for a year it took a long time. Antibiotics four hours a day That can hit. Unexpected things can happen. Absolutely they can. And so it’s important to keep that in mind. Hey now, coming up next, we’ve got Michael Fairborn talking about rising interest rates. And I think this is going to be an interesting discussion. Because we have so long been accustomed to thinking about interest rates only going in one direction. And that is up. We’ve been thinking about a rising interest rate environment. One of the other things that we might bring into this discussion is well– and I think Michael Fairborn will talk about this– is the idea that what do we do if interest rates stay the same or in fact even drop over the period of time that we’re looking at in our investment account.

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