What To Do If You Think You Are Behind For Retirement?

Phil Francois (00:00)

Alright, welcome back everyone. Phil Francois, ⁓ financial planner here at Foundation Wealth Planning. And we got a good topic today. What we're talking about is what happens if you find yourself behind on your saving for retirement or you think you're behind or you're concerned or you want to at least stay on track. I think we're gonna have some practical tips. A little just a discussion here. I've got Darin DeLozier back. Darin, how you doing today?

Darin DeLozier (00:25)

Doing great. How are you doing, Phil?

Phil Francois (00:26)

doing fantastic. And Darin is a financial planner here at at financial wealth planning also has a long history at Catholic answers. And so he brings a great financial resource as well as some great discussions on interweaving faith and finance on this channel. if you like it, maybe a quick reminder, maybe give us a like, follow the channel, try to provide these, these videos, trying to get on more of weekly cadence. So Darin, this is pretty exciting.

Darin DeLozier (00:54)

That's right, yeah, we're recording weekly now and ⁓ it's been fun, so we'll see where it goes.

Phil Francois (01:00)

Okay, so ⁓ behind retirement, someone comes to you and says, hey Darin, I think I'm behind. ⁓ What's your first ⁓ course of action? What do think we should talk about in a step-by-step process? Where are we starting first if someone thinks they're behind on retirement?

Darin DeLozier (01:22)

Someone comes to me and says they're behind on retirement. ⁓ think first step is simply see where you're at. ⁓ What do you have? What kind of assets do you have for savings? And also, where's your, in kind of financial planner languages, where's your cash flow? Are you bringing in more than you're spending every month or are you bringing in less than you're spending every month? And those are kind of like the two.

big picture, the big equations to look at, to gauge where you actually are. Because some people might be more behind than they think, or they might be actually not as far as behind as they think they are.

Phil Francois (02:06)

Yeah, I could not agree more. I, you know, when we dive into just building out a balance sheet, when I'm working with clients, and this actually applies if you're watching the video and you don't feel like you're behind, but you're just looking for some practical financial planning tips, having that balance sheet built down, I found is eye-opening both from my perspective to be able to give advice, but clients love to see it. And most people have never...

just kind of organize and put together their full balance sheet of, here's all the assets that I have, the different accounts, they usually spread out all over the place. Here's all the debts that I have. Again, maybe there's multiple between cars or student loans, things like that mortgage. And we haven't kind of put all that onto a balance sheet. And just having that as a quick pulse check, even doing that sometimes alleviates some of the anxiety when you see, yeah, my, my network's actually a little better than I thought it was going to be. ⁓ or sometimes it's a wake up call and they realize, well, wow, geez, I actually have way more debt than I thought I did.

And so it can, I can act on both places, but really just getting a good pulse check and building out that balance sheet is, is really important. That's always one of the first steps that we would work through in a planning process is just kind of getting together all the data and laying it out in an organized fashion. And it's amazing how much you can glean from that as to where, we're strong, where we're and where we can get, where we can do better.

Darin DeLozier (03:23)

That's right. And, ⁓ you know, well, you mentioned net worth statement for anybody who's not familiar. That's just, put into one column, everything you own, all your assets and another column, everything you owe all your loans or ⁓ anything, any money that you owe somebody else, you kind of, you balance them out and whatever's leftover. That's, that's your net worth. ⁓ sometimes called a statement of financial position or balance sheet net worth statement. And that's.

really kind of like if you want to boil it all down to one number to track where you're at, that's where that is. That's the number, your net worth. ⁓ So it's kind of, it's a snapshot of where you are. It's not a gauge of over time, it's a snapshot. Here on this date, ⁓ of like here's where I am on this date. And so if you track that over time, you can kind of, you see the line starting to form. Is that line kind of going up?

Is it just kind of staying steady? Is it going down? And then you kind of project that line out into the future and we can get a reasonable idea of where you're going to be when you want to retire.

Phil Francois (04:37)

Yeah, absolutely. And it's tied, like you mentioned, the statement of cashflow. They're kind of tied together. Basically what your budget is, you people who use budget or expenses, ⁓ income versus expenses. Basically what are you bringing in versus what are you out for? And so those are typically lined up, you know, stacked one on top of each other or side by side or whatever, however you're organizing it. But you have your balance sheet on one end, which just shows again, the snapshot, like you just said, where we are, how much we've saved thus far and all that.

And then having that as ⁓ a ⁓ tag along as to what's our, are we building on that or how are we digging into a further hole? Right? I mean, if we can't, if we can't cover our bills, then, then obviously we may be going backwards. And sometimes that's a temporary point in time. ⁓ or there'd be some big bills that just came up or you had to set back an income for a minute. And then that's, but, but you have a plan to kind of change that so that it's all dynamic. Maybe that's one thing we can.

we can agree upon is that this stuff, there's not ever set in stone, right? You could be behind one minute, but by changing a few things and really focusing on some intentionality, that can change really rapidly. And you can also, a couple bad decisions could set you back quite a bit. So it's all done in, but none of this is, you're not a good or bad financially, and that's just like where you are forever. ⁓ This is a constant thing, ⁓ maybe kind of has some correlation to our spiritual life.

Right. But it's, it's, it's always, it's always, ⁓ evolving and moving. And I think that's just something I always keep in mind. So you might be, it might feel like you're behind right this second. ⁓ but taking that, that cashflow and that balance sheet by making a few tweaks that could, that can flip very rapidly if you really focus on it.

Darin DeLozier (06:24)

Yeah, yeah, you really can. ⁓ To ⁓ reveal a little bit personally about myself, I started tracking my net worth about five years ago. And I think it's healthy to do it on a regular basis. You don't have to do it every day, that's overkill. But ⁓ for me personally, I track it on June 30th every year. I just take my snapshot.

a little tab in my spreadsheet on June 30th and a little snapshot on December 31st. And so now I have 10 of those snapshots since I've been doing that for five years. And it's really cool to kind of see where I've made progress on half years where I didn't make progress. And ⁓ it gives me ⁓ kind of a sense of security.

At least knowing, well, I'm not, you know, certainly not ready to retire, ⁓ but I'm at least heading in the right direction. ⁓ So, and then I can start with that baseline of, okay, I'm heading in the right direction. Is there anything I can do to get me ⁓ heading in a direction ⁓ in a way that's going to be fast enough for me to...

Phil Francois (07:26)

You

Darin DeLozier (07:51)

retire when I want to retire.

Phil Francois (07:53)

Yeah, absolutely. That's a great idea to be tracking things. ⁓ Twice a year is great. think obviously minimum annually would be a year over year increase. Ideally is where we're going. You can kind of see how rapidly it's going up and it starts off slow, right? If you're just getting started or you're young or you feel like you're behind, so you're getting started at a later date, it works on an exponential basis.

Right? We're just, if you ever see one of the exponential graphs, it just kind of goes flat line for a little bit with a slight up, up creep. then once it starts building, that's when it starts to get pretty fun because it, it kind of the compounding of, of your net worth, ⁓ if done properly can, start to become a, you know, get that, that bolder rolling downhill instead of pushing up the hill. If you, if you can have that visual.

Darin DeLozier (08:20)

Yes.

Exactly. It's kind of like a snowball.

When you're first rolling it, it's not, you you're just getting a little bit. But then once you have this huge snowball and you're rolling it, it's taken on so much snow that ⁓ you get to the point, I'm not at this point, but you know, I've seen people reach the point where their earnings on their investments are more than their income from their job.

Phil Francois (08:54)

Mm-mm.

Mm-hmm. Yep.

Darin DeLozier (09:10)

And, but yeah, it starts off slow, but at which I think could be kind of discouraging for somebody who is starting out. But, ⁓ but really that's the crucial part. You're building that core and it just know that it, ⁓ it's getting, ⁓ it's getting better. Continually, you know, one, you know, every quarter by quarter that is going to be more.

I guess you'd say productive for you.

Phil Francois (09:41)

Right? Yeah. And really the tracking of it is a piece that really helps make that progress, right? If we don't track it, then it's hard to know if we are making progress and really how to make progress. intentionality is a big piece to all this, right? If we're intentionally doing the things we need to build for the future, that's going to help us down the road. And when we think about that, there's...

Really only a couple levers that we can pull, So maybe first of all acknowledging we've come to we've talked about the first page. It's got to lay out where we are budget wise, net worth wise, and maybe even acknowledge why we think we're behind, right? Did we, did we go to school a lot longer than someone would normally would? Did we make a lot of really bad financial decisions? We got a mountain of debt. Did we just frivolously spend and not save for years on end, but now, but we've got the income that we could.

Do we need to raise our income? There's, there's obviously a lot of factors, kind of just acknowledging what maybe was the reason why we're in this position so that we can then again, look forward and find out how we could, how we could change that. And, um, and one thing, a lot of times the spending piece that I look at is if somebody, if you haven't really tracked your spending, I always like to recommend a spending audit. And there's obviously a lot of digital tools now that can help you kind of assess your spending, but there's something about a, um,

doing it manually that I find to be helpful. And that's just printing off your credit card and bank account statements for the last three months. And you just go through it line by line and kind of what you spent on, what category that you would put that in and really figure out how much you actually spent versus how much you made. And it can be eye-opening. It's kind of grueling, ⁓ but it is a ⁓ worthwhile experience if you haven't done it or if haven't done that in a while.

because again, getting that snapshot in time to what have we done in the past? So we know how we can change it. I find that to be a practical way to get started. If you have, because a lot of people have truly no idea what they spend versus what they make. And so if you're in that situation, there's obviously a lot of tools and apps that help with that. But sometimes that it doesn't always register how bad it is unless you're, you got the pen to paper. There's just something out of brains working in this technology age. I think that that's helpful. Sometimes just sit down and write it out the first time.

using technology moving forward and tracking it is great, but just getting that, that actual budget down and looking through what we did is, I think it was a big piece because we've got to have the cashflow right in order to get the train on the tracks to go where we want to go in the future. What say you, Darin?

Darin DeLozier (12:19)

Yeah, I think, I think almost anybody is going to be surprised at something. You know, when you do that spending audit, whether it's a subscription that you've forgot about and you've been paying for and not using for the past year or ⁓ dining is it often one that surprises people and it. Yeah. Yeah. I mean, that's actually, yeah, there's some, when we're talking budgeting, there's, there's some,

Phil Francois (12:37)

Yeah, we eat our budget a lot of times, yeah.

Darin DeLozier (12:48)

adjustments we can make that move the needle more than others. And I find that, you know, the big ones are obviously going to be housing, automobile, things like that. But another one that often moves the needle for people is dining. With kind of one commitment, you can slash that expense down quite a bit.

Phil Francois (13:12)

Yep. I could not agree more. And then once we've got that, then we can really kind of start building brick by brick towards the future that we want, right? We kind of lay out the goals of where we see our vision and you know, cause there's only, there's only a certain levers we can, we can pull on this whole thing. But if we, if we know what our balance sheet is, we know where our debts are, how much we're spending, well, then we can focus on, you know, our savings rate and how much are we saving and kind of start building forward, right? We always want to make sure that we've got.

a consistent savings rate on this whole thing. Obviously, where we're saving, how we're doing it, we can talk maybe some practicalities of some of that. But the big key is, we putting money, is there a margin in our budget where we have more money than we're spending? If there's not, is there a reason for that in the short term? Or can we fix that, whether that be raising your income or cutting your spending or a combination of both?

Darin DeLozier (14:12)

Yeah, that's basically what it comes down to. You've increase income or cut expenses. And if that's the goal, to increase your cashflow. And I think the higher potential there, I mean, you can do a lot of, you can move the needle a lot with cutting expenses. ⁓ I think a lot of times people just kind of stop there and forget about the other side of the equation, increasing your income. ⁓ I know...

much of my life and I think for a lot of people that kind of the default is, well, that's, that it just is what it is. Can't do much about that. But, ⁓ it, you can't often increase your income on a, on a short term, just I decided to do this, but you can take steps to really increase the income that your income a lot in the medium to longterm. And that, that can make all the difference. That can.

make a huge swing in your retirement planning.

Phil Francois (15:15)

Yep, absolutely. Yeah, so if you need, ⁓ if there's additional job training or certifications, I wouldn't necessarily advocate going all the way back to school unless the job you need really requires that. But there's so many jobs now or ways you can increase your income by gaining skills or certifications or things that are less time and money intensive than going all the way back to get another advanced degree or what have you. Sometimes that's needed, but that's a full course, correct? It maybe requires a little more.

reflection and just make sure that's where you want to go in your life. But there's definitely a number of things we can focus on. really, I mean, there's only a few levers to pull here, right? If we really are behind, right? We either need to come to terms with the fact that we're going to work a little bit longer than we thought, right? ⁓ Spend less than we thought both now and in retirement, like our during retirement spending might be less, but that's maybe how we have to make it work. ⁓ Or, you know, we try to save more now.

to help offset that in the future. And that's done by both decreasing expenses now and increasing our income, right? So there's only a few levers that we can pull in FDR behind. Cranking on those levers in different ways can really change the results. And sometimes that might just mean, hey, I want to work a little bit longer. there's reasons for that too. Keeping yourself young, you have more to give back to the world. mean, sometimes just the idea of wanting to fully retire and sit on the beach is, that's like a new modern idea. That's not even really a...

historical idea of retirement. ⁓ But if you have enough, maybe you shift more into mentorship and volunteering and things like that. But nonetheless, maybe come to grips, say, just maybe I work a little longer than I thought. I can't retire at 60 and just do nothing the rest of my life. Maybe we have to build more purpose and more direction on that back end. But in the meantime, as we're trying to still build our net worth, we can focus on increasing income and just saving that additional money that we have.

Darin DeLozier (17:13)

And also ⁓ that piece that's left over that we have left over to invest and save, ⁓ we can make sure we're taking optimal steps to make sure ⁓ that is doing the most work it can for us. So making sure if you have a company 401k, making sure you're taking full advantage of that match, ⁓ making sure you can...

you're investing in those tax advantaged accounts and, you know, maybe an HSA health savings account if that is available to you, things like that. And we want to make sure you're not doing something where, oh, yeah, the money's going into the 401k, but in a lot of cases, it's not actually being invested. It's just sitting there in cash in the account.

We've to make sure all the pieces of that flywheel are working.

Phil Francois (18:16)

Yeah, absolutely. I could not agree more with that assessment. And the cash piece, making sure you're as fully invested as you can be. So there's a fine line between having money set aside for emergencies, but you can also have too much cash. So you gotta thread the needle, make sure we have enough set aside for things that may come up so you don't derail your progress. But also I've seen a lot of people that...

that have actually done good savings, but they just let too much cash sit around for too long. And that's obviously losing a losing strategy over the long haul. So making sure that we've got optimal cash, both in our investment accounts and in our bank account and not too heavily in cash either way.

Um, do you ever talk through, there's, there's certain scenarios and I, I was, I actually had a little chart pulled up because I wanted to make sure I got them right. But you ever, you ever talk with people about just some of the benchmark numbers? There's a lot of those out there about like by a certain age, you should have a certain amount saved up. And if that's it, do you ever put much stock into those numbers or how do you think through those various benchmarks that they've, they, they float around out there and a lot of different sites have them out there.

Darin DeLozier (19:27)

Yeah, I'd say those numbers can be somewhat helpful, but I wouldn't say they're absolutes. In some sense, they might be kind of a keeping up with the Joneses type of mentality. Well, you know, this article on Forbes says I should have 400,000 in my 401k by now, and I only have...

Phil Francois (19:53)

Mm-hmm.

Darin DeLozier (19:57)

I only have 200,000, so therefore I'm behind. Well, based on whatever age you are. ⁓ Okay, but personal finances is personal to you. ⁓ Let's see how much you are gonna need in retirement, at what age you would like to shoot for retiring at, and then we can kind of create a benchmark for you.

Phil Francois (20:26)

Yeah. Yeah.

Darin DeLozier (20:28)

that's based on you and not some article. What do you think?

Phil Francois (20:32)

Yeah, I, I, I tend to agree. I w w w for working in a, in a personal, you know, planning relationship and we're helping playing for retirement. The benchmark numbers don't really mean much to me. Um, if I'm talking to somebody that's just kind of wants some, uh, guidance and they're not really in an official capacity, but they just want a little bit of a, am I, am I somewhat close to a little pulse check? They can be somewhat helpful in terms of, we have some idea that we're close?

And, um, but, that's, but if we're, if we're talking to actual capacity of helping someone plan for their retirement or their future, I don't put too much stock into those, but, I was looking at these numbers, uh, and, and I, these float around all the time. I, I pull it up on, one web page and there might be slight differences, but this one has it where by age 30, ideally you'd have, you know, half of your salary, you know, saved and invested, um, which is pretty decent, right? I think this assumes you start investing at 35, at 25.

So if you're saving 10 to 20 % of your income, that's kind how that builds up to be roughly half of your annual income. And then by 35, one to one and a half times your salary, and then by 40, one and a half to two and a half times. And obviously goes up from there. If you buy 50, they're saying three and a half to five and a half times. And so I think those are reasonable metrics. I do think it's fair to use your income because...

Again, most people don't want to take a step back in retirement. They finally leave their job, right? If you kind of base it based on income, it's, it's assuming that you're going to try to keep your same lifestyle in retirement. So someone that doesn't make as much three times their salary is not as much as someone that makes a lot more. ⁓ but you're learning to live on less than the person that makes a lot more. So again, there is some correlation. think it is kind of helpful for just a quick pulse check, but I would, I would definitely stray far away from saying this is the absolute end all be all.

and should have a personalized advice just like you talked about. But it is interesting to see kind of where these are and some of it's kind of fun to stack yourself up ⁓ even though it is dangerous game like you said, keeping up with the Joneses. So I wouldn't get too worked up about it.

Darin DeLozier (22:42)

Yeah. Phil, I have question for you. How do you, how would someone even, I mean, I know what I'd say to this, but how would you walk through somebody knowing how much they need? You know, if they think they're behind, then how do you, how do you walk through somebody knowing ⁓ what that end goal, I mean, numbers goal is?

Phil Francois (23:07)

Yeah, great question. Again, it's a personalized thing. So there's obviously certain tools and metrics that we can use. You know, you can run financial calculations out to see, based on what we're saving, we expect to have, you know, X number of dollars at retirement. And then based on how much you want to spend, we can kind of run those numbers back out to see, is that sustainable based on market conditions and things like that? There's a lot of

a lot of variables that go into it. So, yeah, and there's, there's Monte Carlo analysis and different things like that. So in Monte Carlo, we could, that could be a tangent itself, whether that's reliable or not. but again, kind of give some guidance towards where we are. ⁓ one thing that I look at again, and this is an educational deal. This is not personalized financial advice, right? For anybody. But if I'm just giving an education to give someone a ballpark, there's something called the 4 % rule.

which, which again gives a guideline. And again, there's, there's a lot of people out there that have torn the 4 % rule apart. This was a study that was done many years ago that showed, uh, based on a 30 year investment time horizon and retirement and based on assumed market conditions, what's a sustainable withdrawal rate on our portfolio to say, are we going to have enough money left at the end? And, uh, the 4 % rule came out in that study a long time ago that this is a pretty reasonable withdrawal rate, meaning

If you have a million dollars, that would be $40,000 per year that you could withdraw with the million dollars invested, right? When you make sure you're invested properly, you could take out the 40,000 per year and more than likely, given the majority of market scenarios, you would probably still have money left over 30 years from now, which is approximately when you probably pass away. that gets you at least, again, we're talking ballparks here, because we're not in a personalized situation. That's a pretty good, it gets you close.

And you can, you can back into that really easily by just taking your desired income spend and just multiply it by 25. And that gets you the number you need to, have the 4 % rule. So if you, if you think you want to have, um, you know, a million, a hundred thousand dollars, right? Let's just do that. A hundred thousand dollars is easy math to spend. Multiply by 25. You need two and a half million dollars in retirement. Again, that is a very broad based.

discussion and ⁓ educational in terms of kind of giving you some benchmark numbers, but that's how that would work in that scenario. ⁓ Do you have anything that you would add to that in terms of a pulse check, ways that you would think about it, yay or nay on the 4 % rule? Any thoughts on that, Darin?

Darin DeLozier (25:48)

No, I agree with you 100%. I've done so much reading on the 4 % rule and there are very kind of financial nerd heated arguments about whether it's really 3.5 % or 4.5 % or, you know, and I think even the guy who did the original study of the 4 % rule or what became known as the 4 % rule, I think it was called the Trinity study.

Phil Francois (25:59)

Right, right, yeah, yeah.

Really?

Yeah.

Darin DeLozier (26:14)

He has even chimed in on this. in financial planner world, it's kind of ⁓ entertaining debate. ⁓

Phil Francois (26:21)

Yeah, we're a bunch of nerds

arguing with each other about it. ⁓ nonetheless, yeah, go ahead.

Darin DeLozier (26:25)

About half a percent.

But no, it's a I mean, it's a great starting point. And then you dig into the details with a particular person and say, well, they have this actually, they actually live super frugally and not a whole lot of expenses. just a million different factors can come in and...

Adjust that rule for any individual person.

Phil Francois (27:01)

Yeah. Yeah. And it's, it can be skewed either way. So I think we just putting the disclaimer out there that the 4 % rule again, is a ballpark. And in certain situations of market conditions and inflation rates and things like that, it actually might make you actually might need to be more at 3%. And then there's other scenarios where if you only spend 4%, you're going to end up with a gigantic sum of money at the end and you probably should spend more or you have freedom to spend more or give away more or whatever the case may be. But

the four kind of gets us a ballpark, but yeah, in some scenarios that's way low and you could do more in another scenarios that overshoots it. And some of that depends on what age you actually retire. And like you said, your spending and what market conditions are doing during your 30 or 40 year retirement timeframe. So, ⁓ a lot of variables, but the key would be once you get to that point is just doing a continuous check on your assets, how they're doing in relative to your spending needs and everything like that.

And obviously working with a qualified advisor will help you with that process. ⁓ if you're doing it on your own, it is a little bit challenging, but you certainly could, you could certainly try to work through those waters yourself, but just make sure you're at minimum annually reassessing that. But that's on the backend. ⁓ so that's, that's something to be aware of. Once you do get to that point where you feel like you can actually retire any, any final points or things that you think would be key for someone still in that building stage. And this could be.

Maybe if you want to tie something more relevant for someone that's 25 or words of wisdom, someone that's 45 and trying to, trying to get the train rolling. Anything that you think would be a word of the wise as wrapping it up.

Darin DeLozier (28:39)

I mean,

for somebody who is ⁓ in that building stage, I think the main thing is Just start if you're not saving right now ⁓ Figure out the cash flow situation where you can start saving and then start small goals ⁓ You know

increase your savings by 1 % a year if you can do that. Get that going for a while. Once you're settled into that, increase it by another 1%. You know, just kind of get on the path and get small goals to make progress.

Phil Francois (29:18)

I like it. I like it. That's a great, it's a great practical tip for sure. And I always like to reiterate for you, like you just said, just start early. Intentionality, I think I mentioned it earlier, but maybe just recircling back on that. So much of what I see when I work with clients and the mishmash of their strategy towards their goals, it's again, having that layout of where we're trying to go and just being intentional with.

our actions, right? Having success in any area of life doesn't typically just happen on accident. mean, sometimes I guess it does. You fall into a real force of situation, but more often than not, there's a lot of intentionality that went into that hard work on the back end. And so that's not any different on your financial life. You're not ever going to build a substantial net worth and be able to support yourself and support the church and your family if we don't have intentionality behind it. And that's focusing on increasing our income.

trying to cut down expenses and just then saving the difference and then investing wisely. And if we can do that, stack that up year after year, brick by brick, you know, it doesn't matter if you started a few years late to the party, you can still do it. Just you got to start now is the whole point.

Darin DeLozier (30:35)

Yeah,

the best time to start investing is always yesterday. And the second best time is today.

Phil Francois (30:38)

Mm-hmm.

Absolutely could not agree more Well, this was great. I I think that we gave some at least some practical Educational tips again not financial advice if you want some specific advice regarding to your specific situation Please reach out. We'd love to help you here financial wealth planning and ⁓ Darin or I'd be happy to assist in any capacity whether you're building for retirement or you think you're getting close Please reach out. We'd love to help.

foundationwealthplanning.com and connect with us there.