Retirement Optimism On the Rise

Today’s episode of the Retirement Solutions Show begins with a conversation on retirement optimism. Fifty-seven percent of people surveyed by CNBC say they feel “more confident” about their ability to retire than they did just three years ago. Why the sudden spike in optimism?

Kevin Hassett, chairman of the Council of Economic Advisers, thinks it comes down to two factors: income growth and a strong performance from equity markets.

In our first segment, we discuss whether this retirement optimism is justified and tips for navigating the current economic situation.

Here’s what you’ll learn from this segment:

  • [1:53] Income growth and the strong performance of the equity market could be contributing to retirement optimism, according to Kevin Hassett, chairman of the Council of Economic Advisers. In addition, we are seeing more encouragement from the media to have a financial plan. Ralph Hicks believes having a plan gives you more confidence.
  • [5:00] Should we be optimistic when looking at the current economic situation? Though optimism is great, Ralph suggests you remain realistic. Your financial life should not be driven by emotions.
  • [8:49] We tend to follow crowds when it comes to complex situations like retirement planning. When the news tells us the market is booming, we want in. When we hear how well our friend’s portfolio is doing, we want what they have. However, failing to account for personal factors like your age, risk tolerance, and financial goals could put your future in danger.

More key takeaways from this episode:

  • [10:30] According to the Motley Fool, one of the lesser-known facts about Social Security is that the program is designed to pay you the same amount of lifetimes benefits, regardless of when you file your claim. Is this true? Ralph says there are a number of factors to consider before deciding whether to take your Social Security benefits.
  • [13:14] Ryan Gilmore advises you not to look at your retirement accounts in isolation. Instead, you should look at how all the pieces fit and work together.
  • [15:14] There can be a lot of moving parts that make up your retirement plan. It is important to have an advocate who will help you make the right decisions.
  • [18:30] Democrats and Republicans are working together on something good. It’s called the SECURE Act, and it’s a bill that, among other things, will allow you to save for retirement longer by pushing back age for required distributions. The guys share some of the high points of the new bill, as well as some of the possible issues it could encounter.
  • [25:35] How much money do you waste each month? A survey from TD Ameritrade says the average baby boomer spends $638 per month on non-essentials. Ralph emphasizes the importance of developing a spending plan that works towards your goals while allowing you to have fun with your money. Ryan shares the story of how saving a few hundred dollars extra a month helped one couple drastically improve their probability of success in retirement.
  • [38:22] If you are over 50 and still working, there’s a 56% chance you’re going to be laid off before you retire, according to a recent study by ProPublica and the Urban Institute.
  • [45:16] Inflation is a real risk to retirement. It needs to be built into your strategy and woven into your plan. Social Security has a built-in inflation strategy, but does your pension or your 401(k)?
  • [47:25] Have you heard of the bucket approach to managing your money? This approach encourages you to have 3 types of money: liquid, conservatively invested, and aggressively invested. The guys share whether this is a smart approach to retirement planning and how it could work as a tax strategy, as well.

Links mentioned in this episode:

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