Building an Income Plan


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Transcript

Zach:

Welcome back to retirement today. I’m your cohost, Zach Holcomb. And alongside me, we have Michael Reese certified financial planner, founder of the prosperity planning system and president and CEO of Centennial advisors located right here in Austin, Texas on today’s program. We’re talking about building a plan for retirement, maybe your two, three, four, or five years out. We talked about what retirement can potentially look like for you, but not just about spitting money and you know what you do with your savings. You know, what do you want to do in retirement? You have travel dreams. Do you have hobbies? How do you want to spend your time? But those things cost money. So now we’re going to talk about building an income plan to actually make those things a real,

Mike:

Yeah, by the way, I remember as you talk about that, Zach, I remember another client. I had their big dream. When they retired, they wanted to go on one of these around the world cruises. Like they want to take whatever it took. Like I think it was four months. Sure. They want to take four months off, like just get on a boat and cruise around the world and stop it like a hundred different locations or whatever the number was. And that was their goal. But they never knew. Number one. How much is it going to cost? I remember when they first came and talked to me, I’m like, well, what’s that going to cost you? Right? What did they say? I don’t know. I don’t know. I know we just want to do it, but we haven’t really dived into the details. I said, well, step one, you got to figure out what it costs.

Mike:

Right. But they, I think part of the problem is they were kind of scared that they couldn’t afford it. Right. It’s like they have this big dream, but if they, if they actually took the time to figure out what it would cost, if they found out that they couldn’t afford it, they were, they were thinking, I suspect that in the back of their mind, they’re like, man, I don’t even want to find out what it costs because if I can’t do it, then if I can’t afford it, then I know I can’t do it. And you know, I’ll be bummed out. Right. Right. Well, in any event, I did say, how much do you think it would cost? And they said, oh, probably a hundred thousand dollars. Which, and you know, they had saved about 1.2 million. I think it was. And in their case, by the way, when we did their planning, we did, they were able to afford a hundred thousand, which was kind of cool for them.

Mike:

So that when we did the planning, right, they found, oh, we can’t afford it. Right. So then they actually started calling. They found, no, it wasn’t a hundred thousand. Yeah. At the time it was like 60,000. And then because they were, you know, several months in advance, they were able to get a deal. They got that thing, they got it down to like 43,000 plus they got upgraded to this nice big, you know what you call the bedrooms on these cruise ships, like you know, cabin, right. They got a nice big cabin. They were I mean, it ended up being awesome for them. It was the most awesome experience. But here’s the thing. It all started with a phone call, right. It all started with a phone call. They were listening to our radio show. They came up, they said, oh, I’m going to call them.

Mike:

You know, we’re, we’re coming up on retirement. And it started the phone call. We started helping them with the planning and so on. And so what I want to talk about now, I want to kind of, we talked about what do you want it to look like? Right, sure. We gotta start putting numbers on it. We’ve got to start putting numbers on it. You know, you need to think about what do you want your lifestyle to look like? And here’s a good starting point for you. Right? Nobody I talked to Zach is super excited about retiring into a reduced lifestyle.

Zach:

I don’t think I’d want to reduce my lifestyle.

Mike:

Yeah. People, they just kind of want to keep living like they’re living. Right. And so one way to start thinking about putting dollars, you know, numbers on a piece of paper, if you will, what are you taking home? What’s your take home pay, right? That’s a good place to start, because think about it. Let’s say you’re making a hundred grand a year, right? You’re making a hundred grand a year, but maybe 15,000 of it is going to taxes. So you’re left with 85, but then you’re like, wait a minute. No, I’m saving 10% of my saving of my salary. I’m saving 10%. That’s 10,000. If you’re retired, you don’t have to say that anymore. But now we’re down to 75 and then you’ve got insurance and all these other things, and you might be taking home like you’re, you’re grossing a hundred K. You might be taking on 5,000 a month. Okay. If that’s the case, step one, maybe that’s a starting point for you. Maybe if you could figure out a way to generate 5,000 a month from your retirement savings and social security and any rental income, et cetera, that might represent a work optional position, right? You can stay in the same standard of living. And, and work is now optional, but here’s the problem. So Zach, you talk to people all the time. They’re getting ready to retire.

Mike:

When people get ready to retire, do they just want to hang around the house usually? Or do they want to maybe travel a little bit?

Zach:

Oh, they talk about traveling all the time.

Mike:

All the time. A lot of times when people retired, that’s their opportunity. It’s like they haven’t had time to travel. Now they’ve got time. I want to go travel is travel free.

Zach:

Unfortunately, it’s not. We learned from that cruise. It’s not free

Mike:

The COVID period, by the way, you could get on airplanes almost free. Right? But anyway, the point is no travel is not free. It costs money. And you might want to look. I have clients. They, they, their idea of travel is they say, we’re selling the home. We’re buying an RV. And we’re just going to cruise around the country for a couple of years. That’s very inexpensive to do that might actually be cheaper than, than what you spend today. I have other clients say, no, no, no. We want to live in the same home for us. Travel means once or twice a year, we want to go overseas and some really nice trip. Well, that’s going to cost some money. Sure. And when you go overseas, are you going to fly? Coach? Are you going to fly first class? I promise you. You want to fly first class. I also promise you that it’s a little more expensive by not a little bit sure. To fly birds class, right? Yeah. Where are you going to stay? What are you going to do? You know, when you travel? So a lot of times, here’s what I want you to start thinking about. I want you to think about using your take-home pay as a starting point for what you want your income to look like your base income in retirement.

Zach:

So having my number, this is a great place to start figuring out what that might look like.

Mike:

And by the way we have we have for free, we have these worksheets, you can always give us a call. We can send you a worksheet to help you like a budget worksheet and retirement to help you figure out what your expenses might look like. But, but you need to think about, I recommend start with your take home income. That’s a good starting point. Now, if you’re saving money on that, you’re saying, man, Mike, I’m taking home more money than I’m spending. Well then maybe you could adjust it and say, I could live on less and that’s fine. But that’s core income. That’s base income, figure out what that number should look like for you. But then if you want to travel, maybe what you do is you say, okay, my base income, I want this. But in addition to that, I’d really like to have a travel budget.

Mike:

I’d like to have 10 or 15,000 a year to travel. And you know, you’re not gonna need that forever. Right. Because are we going to be traveling when we’re 89 years old? More than likely not. Yeah. I mean, if you retire at say 60 or 65, probably you’re gonna travel for 10, 15 years. And then it’s probably going to slow down a little bit, start thinking about that. What’s that going to look like? Right? How long do you see yourself traveling and just set yourself a little budget. So this is how you put numbers to your retirement. You start by saying, Hey, where are we now? Right. What am I? What’s my take home now. And am I comfortable on that? Am I saving on that? Maybe you’re maybe, you know, I had someone the other day they’re taking them their big earners. Right. They were taking home almost 20,000 a month and they were spending like 8,000.

Mike:

So, I mean, they were saving like crazy. Right, right. But what, you know, what’s, what’s your comfort level for your lifestyle. Then if you want to travel at a travel budget I had some people, they actually added a present or a gift budget for the grandchildren. It’s these are luxuries. Well, they have like eight grandchildren and they wanted to say, look, we want to spend, we know we want to spend, you know, Christmas and birthdays. We want to spend like maybe $500 per grandchild each year with eight grandchildren. That was like $4,000 a year. We just want to have 4,000 a year set aside for children’s presents birthdays, Christmas.

Zach:

I hope my grandparents are listening. Cause I like this gift budget idea.

Mike:

There you go. Yeah. Right. and maybe there’s college, like I’ve also had families where, you know, they’re, they’re retiring. They have children, they have grandchildren. They say, you know what? My children, they don’t have the same opportunities that I had. And so they’re actually helping, they want to help with the grandchildren’s college funds, which is great. Right. And, and then of course you have those children that are doing better than you’d ever do. Right? the point is, start getting numbers on paper. That’s key. Now, do you need help with that? Is this something you’re like, oh my gosh, that makes sense, Mike. And you’re trying to make it simple, but I could use a little bit of help. You can always give us a call. Right? We always invite you if you’re sitting there and you’re within that two, three, four years of retirement, maybe you’re seven, eight years from retirement.

Mike:

You’re saying, you know, I got to get my, I gotta get my ducks in a row. I got to get my planning put together. Guess what? You’re like everyone else at your stage of life, hardly anybody actually spends the time to really, really think this through, but don’t be like everybody else. Right? Let’s get your act together. Let’s and I want to help you make a simple, easy step to get you started in the right direction. It’s nothing more than a phone call. I want you to pick up the phone, give us a call. Let’s set up a 15 minute conversation. Let’s see if we can help you at least get started on the right path.

Zach:

Yep. That number is five one two eight eight, six 58 50. Again, our number here at the show is five one two eight, eight, six 58 50.

Mike:

Yeah. What happens? Give us a call. Here’s what you should expect. You call us. You’re going to get our answering service because it’s after hours and they’ll just set up a 15 minute call. It’s free. It’s easy. Why wouldn’t you do that? You’ve got to get started on the right path because here’s the thing, as we talked about earlier, this is going to come to you. I mean, it’s going to come faster than, you know, it think back five years ago and, and think back five years ago to today, it’s in the blink of an eye right in play. It just happens like that. So five years in the future, it’s going to happen just like that. Let’s not wait till the last minute. Right? Don’t be that person make smart choices. Now the smarter choices you make today, the easier it’s going to be for you to transition and make work optional for you tomorrow. So again, as we wrap up this segment, our number again, Zach, let’s get it out there.

Zach:

Five one, two eight, eight, six 58 50 again, five one, two eight, eight, six 58, 50, stick around. We’ll be right back. Continuing our discussion on planning for retirement.

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