Better Financial Health in 15 Minutes (or less!)

Beyond the Magic Number: Understanding Retirement as a Timeline

• Stacey Hyde

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Ready to rethink everything you thought you knew about retirement planning? Forget the simplistic "magic number" approach—retirement is actually a timeline that could span 25, 30, or even 40 years of your life.

Most retirees follow a predictable spending pattern: those first golden years tend to be surprisingly expensive as you finally tackle bucket list dreams and long-postponed projects. That European vacation? Kitchen renovation? Workshop in the backyard? They all happen early, creating a significant upfront expense. Then spending typically levels out before rising again in later years as healthcare needs increase. This timeline perspective transforms how we should prepare financially.

For those already approaching retirement, I break down the essential three-bucket strategy: your spending bucket for immediate needs, your income bucket generating regular returns, and your growth bucket fighting inflation over decades. Without proper growth investments, your retirement income won't keep pace with rising costs. Younger listeners facing student loans and other debts shouldn't be discouraged by seemingly impossible retirement targets. Start small by focusing on replacing just one year of income at a time.

I also bust a persistent myth that drives me crazy: carrying credit card balances does NOT improve your credit score! Paying in full each month while maintaining low balance-to-limit ratios actually creates better credit outcomes without wasting money on interest.

The power of compound interest means your initial savings efforts will eventually be dwarfed by your money making money. But you have to start somewhere. Whatever financial mistakes you've made, stop digging that hole today. We can't change the past, but better decisions now create a more secure tomorrow. Ready to reimagine your retirement journey?

Envision Financial Planning. 5100 Poplar Avenue, Suite 2428, Memphis, TN 38137. (901) 422-7526. This communication is strictly intended for individuals residing in the United States. Advisory Services offered through Envision Financial Planning, a Registered Investment Adviser.

Speaker 1:

Hi, I'm Stacey Hyde and I'm back for another episode of Better Financial Health in 15 minutes or less, and today I want to talk about something that comes up a lot in meetings that we have at client workplaces how much money do I need to retire? Well, I'd like to turn that a little bit on its head and focus on the timeline of retirement, because retirement is not just a number, it's a timeline. And if we look at what most of our retiree clients timeline looks like is, the first few years of retirement are kind of expensive because there's this sort of pent up demand for taking a trip, things I've always wanted to do. You know, I want to get a shop built or I want to remodel my kitchen, I wanted to go visit this big trip to Europe, but I've never had time, and so it tends to be pretty expensive in those first few years. But then as those things get done and taken care of and sort of checked off the proverbial bucket list, expenses sort of trend downward over time and sort of level out and it's not to say that you don't still travel, but generally speaking it's not as much and in many times not quite as expensive. And then as we get older, then expenses start popping back up.

Speaker 1:

So one of the things that you need to realize and sometimes I have a hard time convincing people of this is you really do need to plan for 25, 30 years in retirement. And if you're one of those folks that's like I want to retire at 60 or 59 and a half or even 55, well, you're potentially looking at a 40-year retirement, because the statistics show that a 67-year-old couple, there is a greater than 50% chance that one of them lives to 90. That's a pretty big number, and so you don't know which one's going to be you. So you need to plan for that, and one of the things you can do for that if you're already retired is sort of put your money into buckets. You have your spending bucket, you have your income bucket, that's, your investments that are going to generate income, and then you have your growth bucket, because, guess what, as you spend from the first two, you need the growth in that third bucket in order to replenish so that that cycle can continue. Because if you don't have growth, chances are your income is not going to keep up with inflation. We did have a lot of years where we didn't have a lot of that, but it is important to look at it. The other way you can generate your income is if you're lucky enough to have a pension you worked for the military and if you did thank you for your service, you're a teacher or you worked for some government agency likely you have a pension and that's what I refer to as mailbox money, like your social security that shows up every month.

Speaker 1:

Some people will look at annuities. Just understand those have trade-offs. Most annuities don't increase with inflation, but most pensions don't either. Unless you work for a government agency or the military, those will have an inflation adjustment in most cases. So that's the way we look at it for folks that are already retired or looking at retiring very soon. But what about for our younger listeners?

Speaker 1:

You may be thinking you know the idea of ever accumulating a million dollars. When I'm staring down the barrel at $50,000 of student loan debt, I can't even imagine saving for a house. I've got a car payment and I'm upside down on my car. I'm trying to figure out how to dig out. Well, what you need to think about is not the $1.7 million or whatever some calculator tells you, it's just look at trying to do what you can do today and looking at replacing one year of your spendable income. So you want to take advantage of that 401k at work? Definitely get the match dollars, but don't stop there.

Speaker 1:

You want to continue to save, you want to fund your Roth IRA, but first of all, always, always, always, have $1,000 at least in your emergency fund so that, if something comes up and happens, you don't wind up paying a lot of money in credit card debt. And because I cannot pass up this opportunity, because I'm just amazed at the people who think that they have to carry a balance on their credit card in order to have perfect credit, the answer is you don't. As long as you pay your credit card bill in full every month, you don't have to pay any interest and you will still have a perfect credit score. It's more important that you pay your bills on time and you don't carry a big balance relative to your credit limit. That's what factors into your credit score. So just do those little things.

Speaker 1:

And so what you're trying to do is replace one year of spending, then you concentrate on the next, and then what's going to happen and I think you're going to be surprised at how fast it happens is you're going to save up and for the first year or two that you're saving, it's going to feel like it all came from you, because pretty much it did. But then as your balance grows and as you earn money on your money, the interest and the growth in your accounts are also going to pick up and fund some of those years. And as your account grows, the more interest and the more earnings you're going to have that come from your earnings. So that's the power of compound interest for your benefit. So don't be discouraged. Just take that first step.

Speaker 1:

And if you haven't already listened to our episode on 1%, go back and give that a listen, because it's got a lot of good tips for how you can get there. And the thing to remember if you said I've made a bunch of mistakes, quit digging. Just start from where you are and go forward. We cannot fix the past, we can only move forward. So look at your situation and make better decisions today so that you will have a better financial future tomorrow. Thanks for tuning in. This has been another episode of Better Financial Health in 15 minutes or less.