Chapter 1 - "Why It's Different Over 50‪"‬ Control Your Retirement Destiny

In this episode, podcast host and author of “Control Your Retirement Destiny” covers Chapter 1 of the 2nd edition of the book titled, “Why It’s Different Over 50.”
If you want to learn even more than what there is time to cover in the podcast series, you can find the book “Control Your Retirement Destiny” on Amazon.
Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.
 
Chapter 1 – Podcast Script
Hi, I’m Dana Anspach, the founder and CEO of Sensible Money, a fee-only financial planning firm that specializes in helping people transition into retirement. I’m also the author of the books Control Your Retirement Destiny, and Social Security Sense.
My passion for helping people make the best retirement decisions possible is what led me to write Control Your Retirement Destiny and I’m honored by the incredible 5-star reviews it has received. I wrote it because I wanted people to see what a real retirement plan looks like – and the book spells it all out, step by step.
Today, I’m thrilled to bring to you this podcast where we will discuss highlights from the book. In this episode, I’ll be covering Chapter 1 of the 2nd edition of the book titled, “Why It’s Different Over 50.”
If you want to learn even more than what we have time to cover in this podcast series, I encourage you go to Amazon.com and search for Control Your Retirement Destiny. Or, if you are looking for a customized plan for your retirement, visit us at sensiblemoney.com to see how we can help.
Let’s get started.
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So, why is it different over 50? Sure, your joints ache more, and you can no longer read menus, but, do the financial aspects of life change too?
In many ways, yes, they do.
Think of it like this…
Imagine you’re planning for a road trip. This road trip has two phases.
The first phase is the accumulation phase. This occurs during your working years where your focus is on saving for retirement. You have a set point in time you are saving for – a destination you want to reach by a specific age.
The second phase is the decumulation phase of the road trip. This will be the point in time where you will “live off your acorns”. You have a lot more flexibility in this phase, but also, a lot more unknowns.
Let’s look at each phase more closely.
First, the accumulation road trip.
Assume for this portion of the road trip, you’re not going too far, only about 300 miles.
Your gas tank holds 18 gallons and you didn’t have an electric car, so you only get about 20 miles per gallon.
Taking 18 gallons x 20 miles per gallon, you can estimate you’ll get about 360 miles per tank. Since your destination is 300 miles away, it’s pretty easy to figure out you can get to there on one tank.
This type of calculation is simple and easy to do. When you’re young and actively saving for retirement, this type of calculating helps you figure out how much to save.
For example, if you’re age 40, and you want to save $1.5 million by age 65, how much do you need to put away each year?
The answer is about $24,000 a year – that is assuming you earn about 7% a year on your investments.
This type of math is relatively easy to do using a spreadsheet or a financial calculator. It’s easy because you plug in specific data, such as 25 years and a 7% return.
Now, let’s start the second part of your road trip – the decumulation phase – and see how the math gets harder.
As you start the decumulation phase, here are some of the questions you have.
How long is your road trip going to be?
What terrain will you be driving over?
What will the weather be like?
Are they any gas stations along the way?
What will the price of gas be?
These are all unknowns.
Let’s break these unknowns into four risk categories.
The first category is called “Longevity Risk”. You don’t know how long you’ll live. So you don’t know how many total miles you’ll be driving. Instead of kn