Listen to John Knowles bust retirement myths with host Michael Liersch and share actionable information to help you to plan for your second act.
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[Michael Liersch:] Hey, humans, I’m Michael Liersch and this is the About Money Podcast, presented by Wells Fargo. I’m a behavioral scientist with a PhD in cognitive psychology, who loves openly discussing money to help humans better understand their money behaviors. By understanding our money behaviors, we all have the opportunity to make better money decisions.
This season we’re going to talk about jobs money can do for us. Jobs? You might ask. Yes, money does many jobs for us, such as helping us with our family, lifestyle, the community, aging, travel, investing, and more. We have a great lineup of guests for you, so let’s get into it.
In this episode, we’re going to speak with John Knowles, who’s responsible for training many of our advisors around retirement readiness at Wells Fargo. You may be asking yourself, what does that mean? Well, John spends much of his time thinking about retirement and how advisors can help humans make the most of their money, especially when those humans are no longer working. I’m so excited to speak with John because he can help us answer the question that we’re asking in this episode: How do I make money work for my lifestyle and in retirement?
To answer this question, we’re going to discuss what retirement means, including any myth busters and how you can prepare for retirement. And what you can do to be successful when you’re retired.
John, welcome to the Wells Fargo About Money podcast.[John:] My pleasure. Happy to be on your show. It’s great. [Michael:] So tell us, John, when you’re working with advisors and clients – because everyone wants to know what you’re hearing because you hear from so many people what do they say retirement really means to them?
Because I think we need to hit on this word retirement. It’s so loaded. So unpack that a little bit for us, so when people are listening, they say, okay, that’s my version of retirement, so they want to keep listening.[John:] Yeah, well, I think it’s different for almost everyone. For some, it’s an ending. You know, wherever they’re currently working, they can’t wait to be done. It’s been a grind. On the other hand, it’s also sad and scary. Their job, their career, it’s everything they’ve ever known.
And there’s always been this paycheck next Friday; now there isn’t.
For others, it’s a brand new beginning. Their world is now wide open with time and excitement of what’s next. And they can’t wait to move or travel or spend more time with family. It’s the beginning of possibilities. And a theme that, you know, I profess all the time, Michael, is we want to help clients get their answer, not just an answer.
So in that context, when I’m working with advisors and clients, as you asked, what I really want to help define is what’s that person looking for and what they think retirement means for them, those hopes, dreams, everything that goes along with it.
And finally, just separate the event that is retirement, you know, where you get the big party and the new phase of life that we call retired.[Michael:] So when we think about this idea –And I love the idea of giving people their answers, John, rather than some, you know, status quo scaled answer like, here’s what retirement should mean to you. [John:] Mm-hmm. [Michael:] You’re asking, well, what does it mean to you? And this idea of striving to really understand that from the perspective of the human beings that you work with. So within that framework, you hit on one key misperception, which is retirement means the same thing to everyone. Which I think now we intuitively probably all know as listeners is a misperception. In another words retirement doesn’t mean the same thing to everyone.
So any other misperceptions or myths you want to hit on or debunk before we get into, you know, the core of retirement, these ideas of accumulating enough money, not spending too much, saving more, longevity.[John:] Yeah, number one on my list would be is, you don’t always get to choose when you retire, you know. You might think, well, I’m going to work till 65. I know it to be true personally that many people get retired. [Michael:] Yeah. [John:] You know, it’s either an abrupt end to their job. They’ve got health issues of their own or maybe a family member. And we all know someone that this has happened to.
Number two is you might not be done working. Many people move on to another thing. They’re working part-time. They’re consulting, volunteering. I don’t talk to too many retirees that are bored. They’re all busy with something, and they just don’t have the stress of their previous job. They’re looking for that purpose to keep them going.
And number three, Michael, retirement isn’t short. This isn’t surprising, but humans don’t contextualize the amount of time they’ll be retired. We all know someone over 90. That person has been retired for 30 years. And 30 years from now, that’ll be more the rule than the exception, right?
To put that in context, you know, think back, Michael, 30 years ago in your own life, what was the world like? What did things cost? How did you pass time? What are the things that haven’t even been invented yet? That’s a reality check, right? So retirement isn’t the event. It’s a transition to another way of living.[Michael:] So think of someone who, let’s say, is like me, John. I’m 45. I’m trying to accumulate enough money to eventually maybe go into that state that you talked about. Maybe it’s that state where I say, okay, I’m going to, you know, retire, stop, you know, working as much, maybe transition to another type of work.
How do I know if I’m accumulating enough, John, for retirement? Or what are the things I need to think about when accumulating money?[John:] Well, my best advice, you know, Michael, is if you haven’t started saving, start now. And if you have, ask yourself if you are you saving enough to get there? [Michael:] And where do I save, John? [John:] So if you’re trying to accumulate, most people are doing it, and they really don’t even realize it. And that’s called Social Security. We pay into this every year.
Number two, if you’re working, do you have an employer-sponsored plan, a 401k, a 403b, whatever that might be? And most importantly, do they match, or do they add something for you? That is the one thing I see a lot of folks do all the time is if their employer has a match and they’re not at least contributing up to that match, they’re giving up those additional savings they could look at.
And then you look outside of those. You know, you could be looking at an IRA. You could be looking at a personal savings account or brokerage account. It’s important to diversify what you’re investing in, of course. You know, not everything in one type of investment. But it’s also important to diversify where you save as well.
Taxes being what they are and how they might change down the road, having different tax diversification in terms of where you save could be just as important as what you’ve saved in.
Does that make sense, Michael?
And then where you live can have a big effect on retirement, as well as taxes and things like that, are different all around the country. So a lot to consider —[Michael:] Sure.
So let’s go to then this idea of spending.[Michael:] Mm-hmm. [John:] And so we talked a little bit about accumulation, some of the dynamics to think about there.
And of course, you know, we could spend hours on this topic. But let’s go to spending because I think that’s probably people’s biggest fear when they think of retirement am I spending too much?
And now there’s narrative, am I spending too little just because I’m so afraid of spending too much and not really enjoying myself? So you hear a lot of, you know, older people may be actually focusing spending on spending less on things like essential food items and things like that which can have health consequences for them.[Michael:] Right. Really being focused on spending is critical to a lot of our listeners. Do you have any tips there in terms of how to think about spending in retirement? [John:] Well, I think the first thing you want to do is kind of track what you’re spending money on, you know. And whether you’re pre-retirement or even in retirement that can have a big impact on that –answering the question that you just asked.
So everyone, let’s take stock. What are you — what are you spending money on? Are those needs essential, or are they discretionary? Is it a need or a want? And then, are there things that are going to stop in terms of cost? Is your mortgage almost paid off? Do you have a child that will be finishing college? What things are likely to continue like utilities, taxes, food?
Health care is something that a lot of folks don’t realize how quickly that will ramp up. Health care traditionally is inflated about twice the rate of normal inflation. And we all know, the older you age, the more health care is going to come into the situation.
The last thing I’ll say about spending, Michael, is avoid keeping up with the Joneses, right? We’ve all heard that before. When you see people around you spending money in a certain fashion, I always caution people about this. Just because your neighbor bought a new RV, your first thought shouldn’t be, well, I’m retired I should do that too. You know, decisions should be based on your situation. Don’t let others influence what you do.[Michael:] So that’s a really important call just for humans in general, John. And this is something that comes up often in terms of social comparisons. Well, I see this person over there is doing X, Y, or Z, or at least that’s what I can see.
But to your point, you can’t see necessarily the numbers behind what they’re doing, their balance sheet. Are they borrowing —[John:] Exactly. [Michael:]– to live that life, right? Are they overspending? And you likely won’t know that information. So you can’t really rely on conversations necessarily to give you all the facts and the information that you’d need to make decisions for yourself.
So with that idea, and you alluded to this in some of your comments you just made, when we think about this idea of spending and how long we need to spend on things like essential and more discretionary needs, as you put it. And when you think about health care, which you brought up too, and not just for yourself but a spouse or a partner —[John:] Correct. [Michael:] — or other family members, that longevity idea comes up a lot. And I get a lot of questions, what does longevity mean?
I don’t get what the focus is. Like, I get we’re all living longer but are you meaning we’re living longer as less healthy people? Are we living longer as healthier people, right? Those have different dynamics associated with it. So you can just share with us when the word longevity comes up for you, John, what do you focus on when you talk to advisors and clients?[John:] Yeah. I’m really, really glad you asked me this because when you research, let’s say, risks in retirement, you read articles they commonly reference five things. Some of those things we’ve already talked about like spending, health care. But there’s also inflation, market volatility. And the fifth one they always bring up is longevity as a risk. And I just don’t like it when they say that. I get the first four, but longevity isn’t a risk. It’s a gift. We hope for longevity. It isn’t bad.
You made this statement, you know, sometimes we’re living longer because we’re healthier.
But we’re also living longer, unhealthier. And with those things come expenses that just certainly need to be planned for a little bit and have some discussions around.
The other thing about it, I’ll say, is more positive, purpose. Purpose in life extends life. It extends longevity. We’ve seen this before. If people have reasons to live on, they will live on, right? So having that, whether it’s that job, that volunteering opportunity, the things that you’re going to do, whether it’s grandkids or something else. Those reasons to live extends longevity, which is exactly what we’re all looking for and want.[Michael:] So that’s a really good callout. And then it addresses things also that come up, especially as we age, like loneliness which we’ve covered in other episodes as well. So thank you for highlighting that too, John. So let’s shift to action. So highlight three ways in which you feel like listeners can really take immediate proactive action to successfully plan for their retirement today, no matter what stage in life they’re at. [John:] You know, the first thing I would say is, if you’re in a relationship, talk to your spouse or your partner and see if you’re on the same page. And I’ll give you a plug, Michael. If anyone out there needs help with that, go back to Season 1, Episode 3, How to Talk About Money with Your Spouse. Make sure you and your partner are on the same page with this journey that you are going on. You want to make sure that you’re both understanding what direction you’re going in.
You know, I said this before, if you’re a long way away, save. And if you can, save more. And as we’ve talked about homing in on those big picture items.
And for those folks that are already retired, I think this is number three. You know, maybe you’re not actively saving now. But certainly, look at what your money is currently doing and how it’s working for you. What income is it providing? Can it be optimized? And then also, what’s changed? You know this is not a set it and forget it type journey. There are new things that have come up. There are new things you want to accomplish. What are the new jobs or goals that you want? What are your legacy plans?
And those priorities and goals change all the time. So I think it’s always about reassessing where you are, no matter if you’re 20 years from retirement, 20 months from retirement, or you’ve been retired for 20 years. I think there’s just always time to take stock and figure out where you’re at.[Michael:] Which brings us back to your initial point in answering the question, which is to have conversations — [John:] Yeah. [Michael:] — about it with someone that you trust, a partner, a spouse, a family member. And making that, it sounds like, an ongoing dialog instead of action items. And so that’s really sage advice, John. I really appreciate it.
So, John, if someone needs to get help right now and there’s a lot that sometimes triggers that whether it’s a health event, whether people are in transition into retirement and they just know they need that retirement readiness and that certainty whether they’re pre-retirement, they want to know, what could do now? Or they’re in retirement, and they say, uh, do I have enough?[John:] Yeah. [Michael:] Or do I have too much? Am I making the most of my retirement and enjoying my life? Where should they turn first? Please tell us so they can get kick started today. [John:] Yeah, well, talking is always good. So those friends, family members, it’s good to just kind of see where they’ve been and what maybe mistakes they have made that they could help you not repeat. Make sure it’s a trusted resource, someone you can talk to. If you’ve got a financial advisor, you know, that’s a great person to bounce ideas off of. They’re helping folks with this each and every day.
You mentioned online, if you go to WellsFargo.com, at the top of the page in the navigation area, there’s a section called Investing in Retirement. And it’ll help you find a ton of info. And we break it down of where you’re at in life, whether you’re in your 20s or your 30s and you’re just starting to save, if you’re nearing retirement, in your 50s and 60s.[Michael:] Got it. So at a minimum, there are web resources. There are resources that you can access in your own family. I do really like this idea. And I’ve done it before, John, myself with my mother actually, asked her what she wished she would have done — [John:] Yeah. [Michael:] — to prepare for retirement and didn’t end up doing. And that actually helped me in my early 20s get started on the path that you highlighted, which was start now essentially. [John:] Mm-hmm. [Michael:] And she highlighted all the areas in which she would have like to engage in her employer-sponsored plan, got signed up for the credit union she was a part of right away, you know, set up my IRAs. So I’m with you completely. That can be a huge way to get started and get that great sage advice.
So with all that, I wanted to close this out, John, in terms of thanking you for your time today. I always love talking to you. I could do it all day long because you have such useful insights. And also just really quick tips that I feel like a lot of us maybe intuitively know we should be doing, but we aren’t.
And tell me really quickly, though, before we close out, why do you care so much about this topic, John? Why are you so passionate about it?[John:] This is the easiest question you’ll ask me during this whole show, Michael. Because someday, I want to retire and continue a meaningful life.
You know, I live in a small town, and I know people that are just going to get by. I know people that are going to do quite well. And I know people that, and we work with them every day, that are never going to have to worry. And they all still have the same basic questions about this phase of life.
And at a turning point a few years ago, a few good friends of mine, some advisors, they taught me that when they work with their clients, they manage a portfolio of goals, not investments. And that struck me very hard. And it’s just so right, Michael. I look at — I look at it like a doctor does.
When a patient comes in with medical issues, and the doctor doesn’t start off with the entire list of medications that people might take and say, well, what looks good to you? No, they listen. They test. They diagnose. And they provide that proper medication, that course of treatment that suits that patient and that ailment.
And then, most importantly, you know this, Michael, they do checkups all the time. Retirement planning is like that, too, with the checkups.
I started saying I want to help clients find their answer, not just an answer. That’s what we do. Everyone listening to this podcast is unique. And their wishes and their needs are unique too.
It’s just my joy to kind of help them and be a part of it.[Michael:] That is just absolutely the right way to end this episode, John. Thank you again. I really appreciate it.
And to all our listeners, we can see why John is such an inspiration to our clients, our advisors, and Wells Fargo. So thank you, John, for joining us and for all that you’re doing. [John:] My pleasure. [Michael:] That’s it for this episode of the About Money Podcast. Please email us with the topics that you would like us to address at AboutMoney@WellsFargo.com. And if you really liked the episode, share it with family, friends, and anyone who listens to podcasts.
About Money is produced by Wells Fargo. You can learn more about ways to work with us at WellsFargo.com forward slash About Money. I’m Michael Liersch, asking you to talk about money today.
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