Approaching Retirement? 3 Things to Know

by Wells Fargo
Wells Fargo

Podcast Transcript

Host: Chelle Gonzo, Director of Business Strategy, Wells Fargo Private Bank
Guest: Evan Anderson, Wealth Planner, Wells Fargo Private Bank


People often believe that if you gather significant assets during your lifetime or your career, you don't have to worry about living comfortably in retirement. But in an environment where medical costs are rising and markets are constantly fluctuating, is that true?

I'm Chelle Gonzo, Director of Business Strategy for Wells Fargo Private Bank, and this is "Your Financial Journey," a podcast series that explores important financial topics. Today I am joined by Evan Anderson, a Wealth Planner with Wells Fargo Private Bank. Welcome, Evan.


Thanks, Chelle. It's good to be here.


Evan, is there such a thing as being "wealthy enough" to not have to worry about maintaining my standard of living in retirement?


Great question. What we've seen is that it's more about the spending than the assets, to be honest. Spending more than the income your assets generate is one of things that can trip wealthy individuals up if they haven't planned for it sufficiently.

As you would expect, retirement is unnerving to many, regardless of the level of wealth. The challenge that all preretirees and retirees face is having enough income to maintain their lifestyle for a long period of time. Most people assume that their costs will go down when they retire, but day-to-day expenses — like food, utilities, home insurance — that remain unchanged may rise at or above the rate of inflation. In addition, needing to cover basic expenses, you may have expensive hobbies such as art collecting, for example, or foreign travel, so you'll want to keep these spending considerations in mind as you think about retirement income.


Yes, those are good reminders. You're saying it's important to be realistic and frankly honest with yourself as you think about what you'll need in retirement. So the health care factor is also a big unknown, Evan. We're living longer than ever, and that means potentially higher medical costs, and health insurance, and the possibility of long-term care. How do you plan for those kinds of variables?


Medical and health care costs are a huge concern of our clients and certainly can be quite costly as clients age. With today's medical advances, we suggest that you'll want to plan for your income to last 20, 30 years or more, or you may end up outliving your assets.

And your retirement plan needs to be flexible to allow for unexpected situations, such as major health issues, or changes to your family, or economic factors like a more rapid rate of inflation or perhaps a market downturn. These factors can have a significant impact on retirement assets and income. So retirement is not a "set it and forget it" type of plan — you'll want to make it a living, breathing document.


So in other words, you're saying plan for a very long period of time — it strikes me that may be as long as your working life — and then make sure your projections include a lot of variable items. So let me shift gears a little bit, Evan. If I'm a business owner, are there different things that they should be thinking about as they retire?


Good question, Chelle. I have helped a lot of business owners, advising them on their succession plan and retirement plans over the years. In many cases, the owner has saved money outside of the business, but it's not uncommon they are still dependent on the business enterprise for a portion of their cash-flow needs.

So to give clients appropriate advice, I really help them think through and quantify their retirement needs and wants with a reasonable amount of accuracy. That applies whether you're a business owner or not. But many business owners also need to think through the succession plan for that business. For example, will they sell it? Transfer it to family? If so, how, and over what period of time? Understandably, this information is essential to developing a plan that meets their retirement cash flow and business succession goals.


Yes, those are a lot of elements to think about. We actually did record a podcast just for business owners and some of the things they should be thinking about as they think about selling their practice. So how would a retirement plan help me as a business owner to address some of the things that you're bringing up?


I think with a business owner it's typically a more unique situation. They have a number of different cash flow sources that they can leverage during their retirement years. They are often able to diversify their income streams by drawing on multiple sources — for example, maybe real estate income from real estate lease back to the business, or the retention of some ownership in the business where they get dividends or distributions, possibly income from consulting work they may do for the company, board fees if they're serving on the board of directors, or maybe a marketable securities portfolio they've established outside the business. Also possibly from cash flow that might be generated by wealth transfer or charitable strategy they've implemented over the years. Accounting for all these elements can get complicated, but makes for a more predictable plan. I would also advise that clients regularly review the plan to see if adjustments are needed.


So as a business owner, it sounds like it's even more important that I have a retirement plan in place. Those are some great thoughts. So to recap whether you're a business owner or an individual planning for retirement, I'm hearing you say there's three things to think about:

1. Be realistic about your retirement and your spending patterns. And plan for a long period of time.

2. Create diversified income streams especially if you're a business owner.

3. Revisit your spending plan regularly. A retirement plan is not a "set it and forget it" type of plan. You got to make sure you're still on track and that plan is still realistic.

Did I get that right?


Chelle, you got that exactly right.


Great. Evan, thank you so much for sharing your expertise and your long experience working with clients on these things. And thank you to our listeners for joining this podcast. Please join me next time, when we'll discuss funding education goals.

This is "Your Financial Journey."

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