I read a CNN article this morning that inspired the message of today’s newsletter. The article highlights how psychologically difficult it is to shift from saver to spender in retirement, especially when you are not working and bringing in a paycheck. (Article referenced here: A surprisingly hard part of retirement: Spending what you worked so hard to save | CNN.) This inspired me to share a true story about clients of ours getting ready to retire. For privacy-sake, let’s say their names are Jason and Clare. Jason is 66 and has a fairly physically demanding job. He is retiring in Fall 2022. His wife, Clare, has already started training her replacement for her Spring 2023 retirement at a large local accounting firm. Naturally, these clients are concerned about the timing of their retirement with the markets acting the way they are this year. Jason and Clare want to make sure they have enough money to retire and they want to be confident they know how much they can spend. … Now let me back up. Over this past Summer, I read a book that stirred many ideas on how we can improve our financial firm. The author, a CFP in Seattle-area, suggested something called an Income Guardrails Strategy to better communicate to clients how much they can spend in retirement. For more information on guardrails strategy click here. I dug into this approach and found sophisticated software that is a wonderful compliment to the financial planning tool that we already use with our clients. From Jason and Clare’s financial plan that we already had on file, I reminded them that they have a 99% Probability of Success for retirement. (In case you’re wondering, this is very good!) With my new Retirement Income Lab program, I was able to tell them that they can spend $6,700/month from their portfolio in retirement . If their assets drop 25%, I told them how much they need to reduce income. If assets go up 5%, I told them how much their spending can go up. Retirement spending is a moving target. By having this additional tool in my toolbox I was able to ease their concerns and give them confidence they can retire. That made me feel really good!
Whether you are a client with our firm or not, if you want more clarity around how much you can spend in retirement, please contact us. I would be honored to sit down with you and put my tools and Certified Financial Planner™ certificate to work for you and your family.
Market Update from Schwab
In a Schwab Market talk on Tuesday of this week, Liz Ann Sonders, Chief Investment Strategist, suggested that cracks are starting to appear in the labor market, which is what the Fed is trying to achieve to bring down inflation. In the Job Openings and Labor Turnover (JOLTS) report released on Tuesday, job openings decreased to 10.1 million on the last business day of August. Also, the Purchasing Managers Index (or PMI Index) was also down. The PMI Index summarizes economic activity in the manufacturing sector in the US. A PMI above 50 suggests expansion in manufacturing while a PMI below 50 suggests shrinking or contraction. Last month’s PMI was 52.8 and currently it’s at 50.90. … In a way, this could be interpreted as Good News (at least the stock market seems to think so anyway as I write this on Tuesday 10/4). Liz Ann Sonders said that frankly, the sooner we get through this likely hard-landing recession, the sooner we may be out of it. Also, the sooner the stock market perhaps goes back up.
Medicare Premium going down in 2023
On September 27th the Centers for Medicare and Medicaid Services released the 2023 premiums, deductibles, and coinsurance amounts. Click here to see the Medicare premiums for 2023. Good news: The standard monthly premium for Part B will be going DOWN to $164.90/month, a decrease of $5.20 from $170.10 we experienced for 2022. As a reminder, enrollment for Medicare begins October 15th and ends December 7th. If you need help navigating your Medicare options, supplements, drug plans, advantage plans, etc .. let us know. We have someone in our office, Amanda Fisk with Fisk Insurance Agency, here to educate and help navigate your options.
Happy Fall to everyone!