In this episode, I sit down with certified financial planner Ariel Ward. As a personal financial strategist and advisor, I ask Ariel the most common questions my clients have about retirement. Our discussion aims to answer the question, “Is retirement an age or a number?” We also debunk myths and propaganda that lead to feelings of overwhelm and confusion for women when planning for their future.
First, we start by addressing conflicting information about retirement. How much money do you need? When should you start saving? What age should I retire? This revolving stream of questions and misguided pressure to achieve arbitrary milestones puts unwarranted pressure on earners, especially high-achieving women who don’t have the support of a trusted financial planner.
Wherever you are now is the perfect place to start learning and planning for your future. There is no cookie-cutter approach to retirement. Your age, current income, future earning potential, and lifestyle goals all affect when and how much money you need to retire comfortably. The best way to create an achievable and sustainable plan is to align your feelings about money with your values and aspirations.
I hope this discussion eases worry and shame around retirement and that after listening, you feel more empowered to take control of your financial future.
During this episode, Ariel and I answer key questions around retirement such as…
[00:09:43] Is retirement an age or is it a number?
[00:13:30] What should we be considering as we are earning more overtime and how that would impact our retirement number or our age?
[00:20:05] Can you retire on a million dollars?
[00:30:44] What would you say are steps someone could take to determine if they were on track for retirement?
Tune in to this episode of Money Files as we address common concerns and questions about retirement.
Are you ready to start planning for retirement? Apply to work with me, and let’s start working towards your financial goals.
IF YOU LOVED THIS CONVERSATION ON IS RETIREMENT AN AGE OR A NUMBER?, CHECK OUT MY EPISODE ON HOW ASKING FOR HELP ALLOWS YOU TO BECOME THE BEST VERSION OF YOURSELF!
Transcript for ” Is Retirement an Age or a Number?”
Keina: Hi and welcome to Money Files. I’m Keina Newell from Wealth Over Now, I work every day with professional women and solopreneurs to help them get out of financial overwhelm and shame, so they can experience more flexibility and ease with their finances. Are you ready to gain confidence and learn to manage your finances intentionally? Tune in and grab financial tips that will help you master the way you think about and manage your finances.
Keina: Hi and welcome back to another episode of Money Files. Today I am joined by Ariel Ward. Hi, Ariel.
Ariel: Hi Keina. It’s great to be here. Thank you for having me on your show.
Keina: Thank you. Do you want to just go ahead and dive in and introduce yourself?
Ariel: Sure. My name’s Ariel Ward. I am a financial advisor, certified financial planner, and I do financial planning for clients who are looking for ways to build their wealth, accomplish their personal and financial goals, and just have a better system for managing their money.
Keina: I love it. And we met actually, because I feel like you followed me on Instagram and then we had a coffee chat, and now you’ve worked with a couple of my clients, or at least one I know for sure. And I’ve sent a couple people at least to have conversations with you. So just wanted to say that I have a relationship with Ariel and I love knowing certified financial planners that like partner well with the work that I do.
Ariel: Yeah, that’s exactly right. I reached out to you because I love seeing the work that you do with talking about, all the things around money psychology that lead us to make different decisions with our money or to not maybe sometimes to make the decisions that’s going to lead us away from our goals. And I love the content that you created and so it prompted me to reach out and see what kind of clients you are working with and really just what I could learn from you and the type of work that you’re doing with the people you work with.
Keina: I love it. And then women talking about money is also very important.
Ariel: Absolutely. Yeah.
Keina: You mentioned something when you introduce yourself and you said, I’m a financial advisor and certified financial planner. Can you tell people what’s the difference between or why you might have both titles?
Ariel: Yeah. So financial advisor is really an umbrella term and it can mean a lot of, it could describe a lot of different roles. So a financial advisor in general is somebody who gives financial advice. And that could look like several different things. The way I describe myself, which is I am a certified financial planner, meaning I have completed the CFP coursework, completed and pass the CFP exams, and also the hours of experience that goes along with that. So I’m a professional who gives financial advice on everything from retirement planning, investments, insurance, estate planning, cash flow, taxes, all of that in one comprehensive picture. So looking at it all together and how it relates or you could be a financial advisor and be someone who sells insurance or solely focuses on investing money or maybe helps to manage a 401k plan. So financial advisor is really an umbrella term within the finance industry. And then there are just different ways you could use that title depending on what your specialization is.
Keina: Thank you. I feel like that’s like a common question. People don’t pay attention to, if there’s letters, additional letters, I would say after that person’s name and don’t know necessarily about like the CFP board and the CFP exam. So how did you get into financial planning?
Ariel: Well, I really would say my interest started probably my senior year of college. I was completing a degree in economics and I really didn’t know what I was going to do with it. I definitely knew I loved talking about money and I loved talking about all the different ways that our government system is what they do with money and how they make decisions around money, personal decisions around money, family decisions around money, business decisions around money. So I had that very broad area that I wanted to do some work in. But my senior year we had someone, a female financial advisor come to speak to a class that I was in and she was talking about how she helped her clients make decisions around money and how they were going to invest their retirement funds, how they were going to make different, basically, I didn’t know the term yet, but different financial planning decisions for their lives.
And so that made me, I started looking for jobs in that area. How could I get involved in that because that sounds really interesting, being able to work with individuals and help them make better decisions with their money, help them grow their money and do more with it. So that led me to, I took a job with a smaller investment company that we did. We helped clients manage their retirement accounts, basically really just giving advice around investments versus the whole financial planning pitcher. And from there realized that I wanted to expand on that. So if there’s more to retirement than just investing your money, there are decisions you make today with whether you’re going to spend or save money, how you’re going to put money away into an account that you may save taxes if you make a contribution to like an IRA, or you could put it at an account where you’re going to, it’s just going to grow over time. You’re going to pay taxes on it.
So all the different little pieces, I wanted to learn more how that worked together to get you to your final goal. That led me to look into the CFP, course work, exam certification and ultimately brought me to where I am today working for Abacus Wealth Partners as a financial planner, helping clients make financial planning decisions and work towards their financial goals.
Keina: I had no idea you had a degree in econ. All I remember are my macro and micro classes in college, and I was like, yep, supply and demand. I’m good. Got it guys.
Ariel: I mean, that’s the basics.
Keina: I feel like I didn’t need to know anything else. I’m like, it’s like a checkbook. I know how to write a check, I know how to balance it. However they taught us in elementary school, I don’t need anything else. I’m great, so what did you originally think you were going to do with your econ degree? Did you have a plan?
Ariel: I think originally I thought I was going to go work for Goldman Sachs. That was my pie in the sky. Like, oh, that’s what people do. They go work for a big investment bank. But if you asked me in college if I understood what that meant, I had no idea. But it’s just so many things you learned from the age of 22 about how the world works and what jobs look like. That was kind of my thought.
Keina: I love it. But it’s fascinating. So we were talking before we started, I’m from Oklahoma and you’re from Arkansas. And I feel like, I wouldn’t have thought, I don’t even think I knew about Goldman Sachs living in Oklahoma. Just like even thinking about versus when I moved to the East Coast and moved to DC where I started to learn about the people that were getting their MBAs at Harvard, etcetera. And I’m like, oh, they go to New York and they’re like working for these like large financial corporations and just seeing that whole other world, which in like Oklahoma people are oil and gas. So the fact that you knew about Goldman Sachs, I’m impressed. As someone who was relatively close to you in proximity where we live.
Ariel: Well that, I mean, that’s a very good point. I would say probably one of my professors introduced me to that idea as just like, oh, here’s something you could do with it. But I grew up in a very small town in Arkansas, so even in economics, like going back home to where I grew up and telling people what I was majoring in, they’d be like, oh, home economics. And I’m like, no. So just like that, from where I was to like, where even like my last year of college, my understanding of what you could do with money and with finances.
Keina: With a degree.
Ariel: Totally, like I knew a thousand times more at that point than from what I had grown up in.
Keina: Where did you go to college?
Ariel: I went to a small private school called Lion College. It’s in Batesville, Arkansas. And I mean, it was a great experience going from a small town to a small college versus College with like 50,000 people.
Keina: Yes, I totally, I never wanted to be a number, so I totally understand that. Well, I did not have you on the podcast so we could talk all about econ, not in that regard. I reached out to you because I saw an interesting post on social media and I felt like I’ve had personal retirement conversations with my financial advisor, but oftentimes, like when I’m talking to clients or just talking to other people about retirement, I feel like it’s this thing that nobody really knows what it is. It’s like something we’ve heard about, but nobody’s entered that realm. Mainly because when I think about it, at least personally speaking, my parents live off of retirement from a military, so they didn’t have to save for 401k and 403b.
My grandmother was fortunate enough where she worked at one of those companies where you have a pension and stocks and so you just have this magical money that you acquired versus like, when I think generationally where I sit and a lot of my clients sit, there’s like the 401k, 403b. And so anyways, the post on social media was like, is retirement an age or is it a number? So that was the big ar overarching question that we want to talk about today. So like, what’s your response to that question? Like, is retirement an age or is it a number?
Ariel: I think that’s going to be a very personal answer. I mean, it’s one of those questions, the only answer is it depends. If you’re someone like you just described, like your parents or your grandparents maybe who had either a pension basically. So in the military, if you stay in the military long enough, you could have a pension that pays maybe 50% of what your earnings had been every year for the rest of your life. So in that Casey, if you have a pension and you know how much you’re going to earn based on that pension every year in retirement, it definitely could be a number. If your lifestyle expenses fit within that, sure. Whenever that pension kicks in, there’s your retirement age. I suspect that for the majority of people, that’s not going to be the right answer though, because pensions, unless you’re in the military or some other maybe federal government, they’re kind of a thing of the past.
So if we’re talking about younger people, it definitely is going to be a number. So thinking about, it’s getting multiple numbers, actually. So there’s going to be what’s in your retirement account. And there’s also going to be the question of do you know how much it costs to live your life? Do you know how much it’s going to cost for certain things in retirement, like paying for healthcare? Are there things that are important to you that you want to be able to do when you finally have more time and you’re not working? Like maybe it’s having some kind of expensive hobby. Maybe it’s doing lots of traveling. So I would say for some people it could be an age, and for some people it’s going to be a series of numbers. and an age as well.
Keina: Well, and I mean, I like the classic, it depends. Because I think it brings up the question for anybody listening. It’s like, well, let me explore both sides of this for myself. What do I have in front of me when it comes to thinking about retirement? Like maybe I do have access to a pension. Let me figure out what it is. I know I have a couple clients that have pensions or maybe I don’t have a pension and I have a traditional retirement vehicle like 401k or 403b. And so now I can think about where is that number right now. And then answer some of those other questions like, what’s going to be the cost to live my life? Because I don’t think we think about, oh yeah, I’m going to still have healthcare that I need to pay for or I’ve said I want to travel when I retire, but like, what’s the actual number for what that actually looks like?
Ariel: And so those are things that you can’t just reach age 60 and then suddenly determine if the number’s there. It’s stuff that you need to work on when you’re 20 or 30 or 40, doesn’t really matter what your age is. Those are questions you could be answering now and figuring out right now, which are also going to lead you into that, if you know how much it costs to live your life and you know how much you’re bringing in, there’s your answer on how much you can save.
Keina: I was thinking as I was preparing for this, I was thinking about how I’ve made, like as a teacher, when I first started, I was making like $30,000 a year in my twenties. And so like if you think about living off of my retirement income, say my income stayed within that range, that’s a very different number than thinking about people who have made career shifts. So like maybe at some point you were making $30,000 a year and then you were making 50 and now you’re making $150,000. What should we be considering as we like earn more over time and how that like impacts our retirement number or our age?
Keina: Well, and I mean, I like the classic, it depends. Because I think it brings up the question for anybody listening. It’s like, well, let me explore both sides of this for myself. What do I have in front of me when it comes to thinking about retirement? Like maybe I do have access to a pension. Let me figure out what it is. I know I have a couple clients that have pensions or maybe I don’t have a pension and I have a traditional retirement vehicle like 401k or 403b. And so now I can think about where is that number right now. And then answer some of those other questions like, what’s going to be the cost to live my life? Because I don’t think we think about, oh yeah, I’m going to still have healthcare that I need to pay for or I’ve said I want to travel when I retire, but like, what’s the actual number for what that actually looks like?
Ariel: And so those are things that you can’t just reach age 60 and then suddenly determine if the number’s there. It’s stuff that you need to work on when you’re 20 or 30 or 40, doesn’t really matter what your age is. Those are questions you could be answering now and figuring out right now, which are also going to lead you into that, if you know how much it costs to live your life and you know how much you’re bringing in, there’s your answer on how much you can save.
Keina: I was thinking as I was preparing for this, I was thinking about how I’ve made, like as a teacher, when I first started, I was making like $30,000 a year in my twenties. And so like if you think about living off of my retirement income, say my income stayed within that range, that’s a very different number than thinking about people who have made career shifts. So like maybe at some point you were making $30,000 a year and then you were making 50 and now you’re making $150,000. What should we be considering as we like earn more over time and how that like impacts our retirement number or our age?
Ariel: That’s a great question. So one thing that often happens when you’re earning more overtime is lifestyle creep. I’m sure you talk about that with your clients as well, is that maybe you got that raise or your company’s growing, but if your lifestyle is going to expand with that, what it means for retirement is you’re going to have to save more. If we’re talking about the person who’s in their twenties earning $30,000 a year. If you are in that for the rest of your life, maybe the percentage you need to save over your lifetime is going to stay about the same to get to your goals. If your lifestyle fits in that 30,000, then the next, in your thirties earning a hundred thousand dollars a year, there’s probably going to be some changes in how much you need to save for retirement. Assuming that along with the hundred thousand dollars a year salary, you also have maybe, rent’s more expensive or you have a mortgage now that it costs more.
You bought a nicer car, you’ve changed, you have travel and work, you want to maintain those things, you’re going to have to consider them as well. You don’t want to go, it’s not likely that you’re going to go back to that age 20, 25 standard of living on the $30,000 a year salary.
Keina: Yeah. Because I always think about when I’m talking to clients, especially with the shifts in their income is like, let’s say for instance they’re putting 5% of their overall income away. And I think about the difference of like, what does that look like at $80,000 a year versus $160,000 a year. I’m just like throwing out numbers and I know like, I’m not talking about investments with my clients, but I always try to get people to consider, I’m like, pay yourself first when you experience these bigger leaps because then it’ll just be on autopilot. It’ll be like the thing you do. So then the money that you’re spending, I feel like is like actually money that you can spend because you’ve actually invested in this other, like in the future version of yourself as well.
Ariel: Right. Yeah, I agree with that too. Like if you know that you’re going to get a raise, go ahead and start planning around that. Sure, some of it can go towards something fun to reward yourself for the hard work that led to that raise. But before you even get that first check or earmarking, hey, you know, 50% of this raise amount is going to go towards savings so I can grow my wealth. It makes it easier to fit in those in a guilt-free way. Makes it easier to fit into those other things you want to spend money on because at least you’re checking off that box, I’m saving enough for retirement or whatever other goals you might have before you start enjoying the raise.
Keina: Yeah. And it’s also for when I’m working with people, I’m like, that’s why I want you to ask for more money. Like if you’re getting a $10,000 raise and that can be very exciting, but when I’m talking to people about thinking about the life that they want to live, I’m like, does that person fully contribute to their 401k? And so if that’s true, don’t you think you should just ask for triple of what you’re asking? Like just getting people to kind of think about the expansion that can happen. Because I know for a lot of the people that I’m working with, sometimes they forget about their retirement and they’re like, oh, so it does make sense for me to earn more because that’s actually going to help my future self. Versus kind of, especially with money stories that people have about feeling shame for earning a lot of money and a lot is very subjective to what that actually means.
Ariel: Yeah. And that’s something I like to do with clients as well. I work with a lot of business owners who, if they’re expanding their business, that’s one thing we’re talking about. If you’re going to grow your business and you already know what it costs to live right now, but you have this goal, you want to be able to max out retirement so you could retire at age 60, but you also want to be able to take a big trip every five years. Those all become part of this goal for your business now. So you need to be able to earn X amount to cover your expenses. An additional amount for retirement. Some more to save for travel. And then we got to add taxes on top of that. So now that’s your income goal.
So the more you can build it in is an expectation of like, hey, let’s put this all together before you go out and start growing your business and setting goals for how much you need to earn or before you go talk to your boss and ask for that raise. The more planning you can do, the more knowledge you have about what it’s going to take to get to your goals, the better position you’re going to be at the end of it. Maybe you don’t get everything you asked for, but at least you’re going to get close enough to hit some of those targets.
Keina: And you’re grounding in a number that like means something to you. I think that’s really important because I feel like I see a lot of people, they have like arbitrary goals and they are based in making more, but they don’t have like a why, it’s not attached to anything. It doesn’t have roots.
Ariel: Right. Yeah. Like, I’m going to have a business that makes a million dollars a year, what for and what are you going to do with it once you have a million dollars a year? What does that even mean to you? So that may not even be achievable if you don’t have the why or you don’t have the motivation of like concrete things you’re trying to accomplish once you make a million dollars a year.
Keina: I just had that conversation with someone that I went to lunch with on Friday and it was like, what’s the why, do you want to employ other people? Like what’s your impact and thinking about this grander vision instead of just thinking because I think sometimes people think like a million dollars feels icky, especially women. But it’s like, what does that million dollars allow you to create in the world and like your business to create in the world. So it’s a healthy conversation. I feel like everybody should ask themselves that.
Ariel: Yeah. I think that’s a good way to frame it too, because you’re right, people have so many associations around money that come from how they were raised or the messages they received from the media that it is good. Like it’s more than just a dollar amount. There’s good that can be created in the world and the people, like the people that you’re hiring and impacting through the work that you do.
Keina: Yeah. That’s how I’ve started to think about it. And it’s fun when you’re thinking about it in that way. Because you get to think about like, wow, like I get to say yes to helping this certain type of person because I would be able to employ them and provide these certain types of benefits and like that’s really exciting to provide that type of opportunity. Shifting back to like the concrete retirement conversation, can you retire on a million dollars?
Ariel: My answer again, it depends.
Keina: If you live in a tree house.
Ariel: It depends. I think you could retire on a million dollars in 2023. What it’s going to depend on is how old are you now? What do you think your life expectancy is? Do you have other sources of income? So social security, that’s the big one we could think of. But maybe you’re willing to work part-time and retiring for you is just dialing back. You’re going to work 15 hours a week, so you’re going to have some income there. It depends on how’s that money invested? Is it earning your return? Is it just sitting in your bank account? What does it cost to live? That’s the big one. And then also it’s going to depend on, inflation’s going to be another factor there. So I think it’s possible. And this is where like having a financial plan where working with somebody who can help you put this all together and say, alright, we know what inflation is. We know what you can expect to earn on your money.
Here’s what we think your life expectancy could be based on, wherever you’re getting the data, social security. Putting all those together and you can create an answer from all those pieces of information. So it’s possible. And it’s also possible to know the answer at the end of the day. It’s not possible to, I don’t think one million’s going to work for everyone. There are people out there where it costs a million dollars a year to live because that’s what their lifestyle is.
Keina: I mean the reason I ask that question is because I feel like it’s plastered everywhere. Like a million dollars for retirement when I break down the numbers, I’m like, that’s a hundred thousand dollars over 10 years. I could easily spend that in a year. And so just thinking, I know for myself, like I said, if I live in a tree house, yes I think I could do it, but I don’t want to live in a tree house. But I think that there’s that information out there and if we never stop to investigate the answer for ourselves, then I think now is the perfect time. Like I love that you said earlier, like if you’re in your twenties, your thirties, your forties, whatever that number is, like actually take time to sit down and answer the question of what is going to be the cost to live when I want to retire? Like what is my lifestyle? How do I want to spend my money? That’s going to let you make more informed decisions right now and you have time on your side regardless of where you’re starting. Unless you’re retiring tomorrow.
Ariel: Yeah. Even for someone who’s in the situation where they’re surprised you’re retiring tomorrow because either your company is downsizing and this is the end of your career or there is some kind of health event that forces you to retire. You may not be where you wanted to be, but there’s probably some type of plan you could figure out that would make that number work. It could be that you have to cut back on your spending or it could be that you’re going to need some help from a family member. So I think there’s all kinds of puzzle pieces you could put together to come up with a retirement that works. I think the other part that I didn’t mention and the other just the first answer is that it also depends on your personality and your own history with money because you don’t want to set up a retirement that gives you no room for error.
So anytime you’re thinking about planning for retirement, you want to, most of the time we’re talking about 20 or 30 years that you have to have this money last for. So over 20 or 30 years, if we all look back the past 20 or 30 years a lot has happened. We can just expect that if you’re looking down a retirement of 20, 30 years, there’s a lot that can happen. There are things that can go wrong that can come up unexpected. So anytime that you’re setting up a retirement plan, whether you’re like on the verge of retirement or you’re 20 years away, you want to make sure that you’re creating room for error, but then you’re planning and your thoughts around money as well. One mistake is not going to make it all fall apart because you planned for it.
Keina: Yeah. You said something about family members, which made me think about people that aren’t ready to retire. So your twenties, your thirties, your forties, but maybe your parents are retired, how do you encourage your clients to talk to their parents or family members that are maybe nearing retirement age? Because as I see it, like sometimes that can impact someone that is in their twenties, thirties or forties. So do you encourage our clients to like have conversations with their family members about retirement?
Ariel: Yeah, absolutely. I think a good way to approach it is asking your family member, how long do you plan to continue to do the work that you’re doing versus saying no outright, are you going to retire soon? What does retirement look like? Because I can, you know, imagine that it feels like a very loaded question when you’re somebody in your sixties. Like, are you asking me that because you think I should retire? I’m not good at my job anymore. Are you asking me that because, why are you asking me that? So I think a good way to start the conversation is like, are you still enjoying the work you’re doing? Is this something you want to continue doing for 10 more years? Just to kind of gauge where are they at. And that may lead to other conversations about, hey, no actually I don’t really want to keep doing this work but I can’t because we’re not quite financially ready for retirement.
And from there, a good place is sometimes our family members don’t know like what resources are available to them. So have they checked social security? So online you can create an account with the Social Security administration and find out what’s my expected benefit for retirement age or if I take it early versus age 70. Another thing is just, are there organizations like if your family member has like a 403b, do they offer a financial advisor that you come talk to once a year to find out like, where am I at in terms of being able to take income from this account? How long would it last? So really dig it into like what resources are available currently to this person. That’s a place that you can help and actually have the conversation be a more helpful thing versus something that might not go in the right direction.
And I think another important thing that is sort of tied to retirement. So you have a family member who’s at retirement age is also talking to them about do they have any kind of estate planning in place? So by estate planning, I mean do they have a will that outlines what happen with their assets, what they want to happen with the assets, but more importantly, do they have a financial power of attorney that would outline if that person’s unable to make decisions, financial decisions for themselves, who would they like to put in charge of decisions? And the same thing for healthcare. So who do they want to make decisions for them if they aren’t able to make their own health decisions? Those things are really important because nobody really wants to think about them, but when you actually need them, you’re in a position where it’s a little bit too late to put them in place.
So I think like conversation kind of goes together because all of those, as we age, as our family members’ age, those decisions become really important. And especially having people around them that can help them make the best decision with their assets.
Keina: Those are the conversations I’ve started to have with my parents. I’m like, excuse me, I’m coming home for Christmas. And I have two brothers. So even just knowing where our parents have money, what are their sources of retirement, which I feel like my parents have always been pretty financially transparent. But like asking, I know for myself it’s also been asking questions like what happens if my mom passes first? Or what happens if my dad passes first? Because that could be a change of income. So I just encourage people to have those conversations. They’re like kind of morbid because you’re talking about like when somebody leaves the earth and I know how close I am to my parents. I like don’t want to think about that, but at the same time I want to know that everything is taken care of. Or even like if I need to have money for some situation that I’m also kind of factoring that into my overall financial plan.
Ariel: Yeah. I think that’s absolutely true and it is, I mean there’s no denying it, depending on your relationship with your family, it could be an awkward conversation, but the way I like to frame it is eventually the conversation is going to be had. And maybe you don’t want to be having to make decisions for your family member when maybe they’re really ill. Maybe they are in hospice and worst case scenario they’ve already passed away and you on top of having to make those financial decisions for them or health decisions, you’re also feeling all the emotions that go along with the situation. So like that’s going to be so much more difficult to be in the frame of mind where you can make the best decision for them versus when everybody’s happy and healthy and maybe you’re having an awkward conversation about money and death and end of life care. It’s awkward but at least you’re in a good frame of mind.
Keina: Yeah. That’s so important. Thank you for talking about that. I feel like, I mean, whoever’s listening, please pencil in to have a calendar conversation with your family and keep having it if they aren’t taking action. Like my father who is trying to pretend like I didn’t ask the questions I asked.
Ariel: Yeah. Or sometimes like maybe we’re not as the close family member or child, we’re not the best person to provide the advice, but we can connect them. At abacus we do pro bono financial planning services. So people can sign up on our website and do a onetime session with the financial planner. So I’ve had a lot of my clients who say, hey, I’m in this situation with my family, but it’s so hard to talk to them about it, being able to send them that link. And this is like for anybody listening can do this as well, like connecting them with somebody else who can talk to them that you know is a qualified expert and there are lots of places out there where you can get that kind of one time help pro bono.
Keina: Yeah. Well I’ll make sure we put that link in the show notes. So I’m using my baby girl energy to get my dad to do what I need him to do. I’m like, do you want me to be distraught daddy? I’ll sign him up and be like, just take the phone call.
Ariel: Yeah. Whatever works.
Keina: So we’ll try different angles. I’m still very motivated. So in thinking about like this retirement conversation and people listening, what would you say are steps someone could take to determine if they were on track for their retirement?
Ariel: I think the first step would be if you’re not already tracking your spending, start tracking your spending. Figure out what does it cost to live the way I’m currently living. The next step would be in terms of saving for retirement, what vehicles are available for you? So what types of accounts? And generally when we talk about retirement savings accounts, we’re talking about something that has a tax-qualified status. So you could either make a contribution to it and you get to deduct it from your taxable income or you can make a contribution to the account and it grows tax free. So in the case of a Roth IRA or Roth 401k, the money would grow tax-free. You can take it out tax free in retirement. So what’s available to you, maybe you have something through work like a 401k. And then from there does your employer make a matching contribution?
At least start with that. So if they’re going to put in 3% if you put in 3%, start there, the other parts of it is again, if you have a 401k provided by your company, you may also have a financial advisor that’s managing that. Or if it’s a larger company like Fidelity or Vanguard, they may have. Once a year you can talk to somebody and talk through like, hey, am I on track based on the way I’m investing, based on how much I’m putting in every year, how much could I have as income at age 60, 65, whatever? So I think getting those pieces of information and then figuring out what’s missing here? Am I under saving? So should I be saving more? Maybe I need to save more than 3% so even though my company’s putting in 3%, maybe I need to be putting in 15%. If it doesn’t fit in your budget yet, that’s where going back to the cash flow, is there something I can cut or that conversation we were having earlier about talking to your boss.
Can I earn more? And what are the ways I can do that? What am I going to do with it once I’m earning more? So I would really start with those ideas, taking a look at where you’re spending, how much is available in your budget to save for retirement and then what’s available in terms of like saving for retirement, putting away money. Who do you have on your team that you could talk to, already somebody you have a relationship with? And if you don’t have somebody, that’s not the situation you have or you have a financial advisor linked to your 401k. I definitely recommend looking for a fee only financial advisor. Meaning a financial advisor person who gives financial advice for a fee. You pay them whatever dollar amount they charge, they give you the advice, you take it or not, that’s fine. Versus you could have a financial advisor where you’re paying, they’re telling you to buy something and they get paid because you buy it. So there’s a little bit of a conflict of interest there. So I think that’s a good starting point.
Keina: I love it. Thank you. What do you say to people, I feel like sometimes there’s a conflict, like if you’re in debt you should stop contributing to your retirement, to pay off your debt. Like do you have one piece of advice or do you have a it depends statement there?
Ariel: So much of financial planning is, it depends because it really does. Everybody’s situation is different, the debts are different. All debt isn’t bad debt. I would say let’s talk about what’s the interest rates you’re paying, if you are paying really high interest rate. And to me, I know interest rates are high right now because of the point of time we’re in. Anything going over 8%, let’s really take a look at that and consider paying that down before you’re tackling other investment savings goals. And my thinking behind that is if you’re paying, 8%, 9%, even 20%, if it’s like on a credit card, we do the math at the end of the day, the cost of that likely is going to outweigh any amount you can be earning on investment account.
So we don’t want to put you in a situation where you’re maxing out retirement with your debt, the interest payments you’re making actually outweigh the earnings you have. So at the end of the year, maybe you actually haven’t grown your net worth at all because of that. So I’d focus on paying down those high interest debts first. And then from there so anything that’s maybe your mortgage or you have a car payment within a reasonable interest rate, I would start looking at first, going back to, is your employer putting a contribution in if you contribute so they have a matching contribution, fully take advantage of that. And then maybe from there I would evaluate some of this other debt, car payment, thinking about the car versus like a mortgage. That might be something to pay down a little faster. But overall I’d really compare what am I paying an interest versus what is this investment expected to return. So that’s kind of my thinking around it.
Keina: I feel like it’s also knowing people’s behaviors at the same time. So I do agree with your, it depends response because I’m thinking about some people that won’t contribute to their 401K because they’re paying down the debt. But then the debt doesn’t actually decrease because they don’t know their cash flow. Like I’m thinking about that unique situation and how there’s an intention there, but there’s not a follow-through on the plan, which I think comes back to like have a plan, know the plan and actually making sure that you’re working the plan so that you’re able to feed whatever goal that you have. If the goal is to pay down debt, like am I honoring those choices or am I just pretending that I’m doing it, but really I don’t know where my money’s going.
Ariel: Yeah, absolutely. You’re right. There are and that’s where like having somebody on your team that is holding you accountable to what you said you wanted to do can be helpful. So if your intention is to pay down debt or save more for retirement, how are you following through with that? If you’re not going to hold yourself accountable, do you have somebody else that you can talk to about this and say, hey, I just want to check in and see are you making progress? I know you had a lot of credit card debt and you wanted to pay it down, that was one of your goals this year or I know you wanted to really start making progress in a retirement savings. Are you putting more away into your retirement account? So I think that’s a good thing to put hand in hand.
Yeah. You need to know what your cash flow is and what you’re earning so you can know how much there’s available to put away for retirement or say pay down debt. But you also, none of us are fantastic about holding ourself accountable for some of those things so it might be helpful to have an outside party to talk with it about.
Keina: I’m always like, I need to pay somebody else to hold me accountable because it’s not something I can do for myself. I need to tell you what I ate this week so that way you make sure that’s the thing that I ate. Well thank you Ariel. I’m trying to see if I had any other questions for you. Oh, I know one other thing that I wanted to ask is like, I’m thinking about people that might be listening to this and they’re thinking like, oh my goodness, I’m behind. Like, how do you encourage and support your clients from a mindset piece if they may be like overwhelmed because they feel like they’re behind when it comes to retirement?
Ariel: I think always, when I’m talking to somebody, that’s having any concern around money, I first want to know like what’s important to you. Because sometimes that behind feeling, I’m behind on whatever it is. Do I have enough saved for retirement? How much should I have saved at age 40 versus age 50? Whatever. Some of that feeling comes from what we are hearing about money from the world around us. What we learned about money from our families. So I really would want to start with what do you want for yourself? Do you enjoy the work that you’re doing? What do you want in retirement? What do you want your life to look like? So starting with that and then we can build into like the numbers of, are you behind or not when it comes to what you have in your account versus what you need in your account.
I think that’s a better place to start versus the numbers because the numbers can seem really intimidating. What if we find out you’re behind and you actually need to save $40,000 a year to be where you should be? For most people, assuming you don’t have the extra $40,000 a year in your budget, that’s going to be really discouraging. So I want to start with, let’s focus on what it is that you want out of life and what you want to accomplish and build into the numbers. You may not be able to achieve that 40K that you need to save every year until retirement right away. But we can take small steps. Let’s set a small goal. Maybe you could max out your Roth IRA this year. So for 2023 you can put in $6,500. That’s a much more attainable goal.
And then we’ll start talking about, okay, well then what do you need to do next year? How are you going to get there? If you need to save more next year, maybe we need to talk about what can you do at work this year to put yourself in a position for a raise? What do you need to do in your business to put yourself in a position for the kind of growth you need to have to save more for retirement. So I think that would be my first advice, is like step back for a minute from the numbers and really think about like what it is you want. And keep focused on that. Instead of getting stuck on the number, a specific number can be a roadblock for a lot of people.
Keina: I love that. Like, just being able to break it down because I think then you have a win, right? It’s like, okay, I could do this and now you can add something to it instead of kind of having this like all or nothing approach.
Ariel: Absolutely.
Keina: Well thank you Ariel for joining me in this conversation. I am using April to talk to women on my podcast that can add value to the women’s lives that listen to me because I feel like women don’t talk about money enough and there are a lot of male voices when it comes to finances. And so just being able to hear from women and feed different parts of like what I see as the missing links when it comes to managing, being in a place where you feel like confident and empowered to manage your finances. So thank you for joining our conversation.
Ariel: Well, thank you for having me on the call. I really enjoyed it and I hope that your listeners take something away from it that can impact their lives and help them move towards their financial goals and feeling like you described, feeling more empowered about their decisions. I think I do agree with you. I think it’s really important that women talk about money and feel more comfortable asking questions where they don’t know the answer and sharing with their friends and encouraging people in their lives to open up about money.
Keina: Yeah. I mean, I think it parallels to that Roth IRA contribution example you just gave. There’s 20,000 questions we don’t know the answer to when it comes to finances, but I think if you just ask one a week, like you feel a little bit better about asking a new question every single week. So that’s the thing that I want people to take away from any one of my podcasts is like just having a new question that they can ask, whether it’s of themselves or someone in their circle. So thank you.
Ariel: You’re welcome. Thanks for having me.
Keina: You’re welcome.
Keina: Thank you so much for listening to Money Files. If you’re ready to take the next step to reach your financial goals, head to www.wealthovernow.com/appointment and let’s get started.
