The 5 Retirement Conversations That Matter More Than Investments

As retirement approaches, the biggest financial risks may have less to do with investment performance and more to do with the planning decisions you make about your money. In this video, Shane Tenny, CFP®, managing partner at Spaugh Dameron Tenny, explores five often-overlooked areas of retirement planning: spending, estate planning, healthcare, long-term care, and debt.

In This Video

• Why some of the biggest retirement mistakes have little to do with investment performance
• Why retirement spending should be based on your desired lifestyle rather than a standard percentage of income
• How estate planning should be stress-tested to anticipate what could happen when circumstances change
• Why healthcare and long-term care costs deserve a place in every retirement plan
• How debt, including mortgages and home equity loans, can affect retirement decisions
• Why successful retirement planning requires coordinating income, taxes, healthcare, estate planning, insurance, debt, and investments

For a deeper look at what your financial advisor should address as retirement approaches, read Is Your Financial Advisor Preparing You for Retirement?

Transcript:

[00:00:04.27] 
The biggest retirement mistakes rarely have anything to do with investments. Let me tell you a story. Jim and Carol, not their real names, but they are real people, uh, thought they were doing everything right. We first met about 6 months ago. Jim is 63, Carol is 61. They'd gotten married later in life and were looking forward to retiring together.

[00:00:27.11] 
For more than a decade since they were married, they'd been working with a respected national investment firm and their portfolio had grown. They met with their advisor regularly. By every measure, they looked ready. But a mutual friend had suggested they meet with us for a second opinion.

[00:00:44.05] 
And during that meeting, Jim said something that caught my attention. He said, "We think our investments are okay, but we just still have a lot of questions." Now, I'll be honest, based on the reputation of the firm they'd been working with, I expected we'd simply confirm that everything had been covered. But instead, what we found was that there were some really important conversations that had never happened. Here's the surprising part: none of them had anything to do with picking better investments for the portfolio.

[00:01:14.11]
I think this is one of the biggest misconceptions about retirement planning. People spend decades focusing on building a portfolio, but as retirement gets closer, the biggest risks often have less to do with investment returns and more to do with planning decisions.

[00:01:31.05] 
Let me tell you the 5 things that show up all the time. The first is spending. So many people and investment advisors just kind of estimate that you're going to need 70% or 80% of your current income because you heard that rule somewhere.

[00:01:45.18] 
Saw it on the TV commercial. But retirement isn't a percentage, it's your lifestyle. The first 10 years are often the most expensive. You travel, you renovate the house, you take care of children or grandchildren, you have time to enjoy life and spend. And a good retirement plan shouldn't guess what you'll spend, it should help you calculate what you actually need for the lifestyle you want.

[00:02:11.15] 
Second is estate planning. Jim and Carol had updated their wills and trusts, and so everything seemed fine. The investment advisor had asked, "Do you have wills?" But when we modeled what would actually happen if Jim died first, we discovered that the trust, which understandably would leave the majority of things to his children, unintentionally left Carol with far less than she might need. The documents weren't necessarily wrong. Their intentions weren't wrong. They'd just never been stress-tested or modeled.

[00:02:44.20] 
There is a big difference between someone saying, "Oh, do you have a will or estate documents?" and actually saying, "Hey, let's look at what would happen if these kicked in."

[00:02:54.04]
Third topic is healthcare. Almost every retirement projection includes inflation. Most include taxes, but surprisingly, very few account for the change in healthcare costs. Healthcare expenses don't happen evenly over time, and they can dramatically change a retirement plan. Hope isn't a strategy, preparation is.

[00:03:17.04]
Kind of related to this, the fourth one is long-term care planning. And the point isn't whether or not you decide to buy long-term care insurance, the point is having a plan. Too often I hear, oh, We hadn't thought of that. We haven't talked about it yet. That's not a strategy.

[00:03:33.16] 
But finally, debt. Even successful retirees carry mortgages or home equity loans or other debt into retirement. Should you pay it off? Should you keep the debt? Should you refinance the debt? The point isn't that there's a one-size-fits-all answer on how to manage debt. Surprisingly, many retirement plans never address the question at all.

[00:03:56.01] 
Here's my point: investment management is important, but retirement planning is much bigger than just managing a portfolio. It's about connecting every piece of your financial life—your income, taxes, healthcare, estate planning, insurance, debt, and investments—into a coordinated strategy.

[00:04:18.29] 
That's what Jim and Carol were looking for, and that might be what you're looking for. Not just the right investments, but better planning. If you're within 5 or 10 years of retirement, here's a question I'd encourage you to ask yourself. Have we looked beyond our investments at the planning decisions that will shape our future? Those conversations will almost certainly uncover the most significant factors that will impact your retirement.

[00:04:49.27]
I'll see you back here next time.