084: Monetary Moments – Your 40s and 50s

Full Transcript

Intro:

Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments, here are your hosts Josh Robb and Austin Wilson.

Austin Wilson:

All right. Hey, hey, hey, welcome back to The Invested Dads Podcast, the podcast where we take you on a journey to better your financial future. Today, we are going to be continuing our series called Monetary Moments. And today we’re going to be talking about what could arguably be one of the most important parts of your life when it comes to your financial planning.

Josh Robb:

That’s right. We’re going to be talking about when you officially become able to wear New Balance white shoes as a dad.

Austin Wilson:

So that was like 10 years ago for you?

Josh Robb:

I mean, I love those things. Rock those all the time.

Austin Wilson:

My dad always, he says, “You kids, you have to keep me off of the white New Balance train.” He’s like, “If I go somewhere rogue with my wardrobe, pull me back, pull me back.” So I give him a hard time once in a while, but he has yet to fall into the white New Balance.

Josh Robb:

Nah, I never got that trend because as a dad, keeping shoes white would be an impossible task. So, there’s no way.

Austin Wilson:

Right, you’ve got to mow and everything.

Josh Robb:

No way. I don’t think I’m ever going to wear white shoes like that.

Austin Wilson:

But for real, today we’re going to be talking about what you need to know about money in your forties and your fifties. So therefore, at that point, all the good years are behind you… Wait, Josh, you are right on the cusp, you’re on the cusp. So I mean, actually you’re in the prime of your life.

Josh Robb:

Yes.

Austin Wilson:

This is the prime of your life. And we’ve got some things to think about as it relates to this time in your life. So Josh, go ahead and get us started with kind of what a lot of people have a lot of emphasis in, and a lot of effort has gone into getting them this far in their life.

Josh Robb:

Yeah. So if you remember, we started with the twenties and thirties and we were working up through this year, entry into your early part of your career.

Austin Wilson:

Correct.

Josh Robb:

It’s a lot to say together.

Austin Wilson:

Yeah. This was getting your career started-

Josh Robb:

– entry level career. You’re getting started. You’re probably, in maybe a job that’s maybe not your ideal spot, but you’re in the career or the path that you want to be on. Forties and fifties, you probably have done well, you may have switched companies, but you’re probably in the career you like. You probably have advanced a little bit. Chances are, these are the forties through the fifties. So, this would be 40 to 59. That’s a good gap, two decades, but that’s probably, like you mentioned, highest earning years of your career during that timeframe, because you’re going to get promotions, you’re going to advance. You’re going to have experience, which is key.

Austin Wilson:

Yep. But you’re not on the way out where you don’t get those big raises and opportunities. So, this is key earning time.

Josh Robb:

Ideal. That advancement brings a lot of things. It brings opportunities. It also brings some more incentives and motivation in forms of like you said, raises or maybe other perks available for you. The other thing along with that, when it comes to your job is during this timeframe, some of those additional benefits are actually more valuable to you. If you think about it, as a 20-year-old, you could probably find relatively cheap insurance, comparatively, as a 20-year-old. As a 50-year-old, your insurance, on your own, is going to be pretty expensive. But if a company plan is offered to you, that’s a nice benefit.

Austin Wilson:

Absolutely.

Josh Robb:

That would save you quite a bit of money. Same is true with… Like a lot of companies offer life insurance. And we’re going to talk about life insurance in a little bit, but if you’re offered it there, it’s usually cheaper than you can go out and get elsewhere. Some of them may even include it as part of your compensation and say one times your salary or whatever. Well, those are benefits that are more valuable the older you get because the cost for you to go out and get it on your own, it increases with time. So those are all things when it comes to your job or your career, to think about as you’re in your forties and fifties.

Austin Wilson:

So, we kind of touched on it, but yes, this is the time of your life, where you probably have the most money coming in than you’ve ever known before. And probably the most you ever will, as you go into retirement and your lifestyle may change, your income needs may change. Whatever that looks like. This is probably peak income and also probably peak spending. Right? But the key here is with that highest income that you’re probably ever going to have in your life during this period, it’s crucially important to watch and control your spending, not just watch and actually control it. But just watching it, you can watch it go up. Yeah. But control it because the more that you control your spending, so the money going out, the less actual income you’re going to have to replace by dipping into your nest egg in retirement. That’s called, you’re avoiding that lifestyle creep, right?

So, we talked about it before, but you maybe will be getting raises, getting promotions, getting new jobs. You’re earning more money throughout this period in your life, probably in decent sized chunks at this point. When you get these raises, when you get whatever that may be, try not to let your monthly spending increased by that amount. It’s easy to say, “Hey, I had a really good promotion. I got a 10% raise. I’m doing great. Wow. I can all of a sudden get a new car and a new, bigger house and I can start eating organic.” Nope, don’t do that. What we like to recommend, and I’m going to ask you to elaborate on it because this is your jam, Josh.

Josh Robb:

I love it.

[5:16] – The 50-50 Rule

Austin Wilson:

The 50-50 rule, we’re going to say 50-50 rule. So, go a little bit on a tangent for 50-50 rule.

Josh Robb:

Yeah. So, what you do is you go to your nearest high school sporting event. They’ll be handing out tickets and they’ll say, “This is a 50-50 raffle.” No, I’m just kidding. Do not do that. The 50-50 rule for what we’re talking about is you take the… Say you get a 4% raise. We’re going to use that because it’s easy for me to do math that way. 4% raise. The 50-50 rule says, you take half of that raise, so 2%, you add it to your monthly spending because things go up in cost. You get to reward yourself and have some additional spending in your budget. The other half, the other 50%, goes into your savings. So, the 50-50 rule just says, half of every raise, goes to savings. The other half goes to your budget and your spending.

And that does like Austin mentioned, slows down the increase of your spending. And the reason why that matters is one, it gives you more money to save because you’re not eating it all on your budgets. But two, it keeps your spending down. So when you go into retirement, your starting withdrawal needs are lower because I’m needing to live on less. And that’s huge. That has one of the biggest impacts on your success of retirement, is how much am I going to spend once I stop working?

Austin Wilson:

We’re going to call this the double-edged sword of goodness.

Josh Robb:

Sure.

Austin Wilson:

Because you get to increase your investing or your saving. That’s edge number one, it’s really good. And you’re cutting your spending.

Josh Robb:

Yep.

Austin Wilson:

You’re doing two good things by a good thing that you were given. So double-edged sword of goodness, right?

Josh Robb:

Honestly, this 50-50 rule applies to everybody, in your twenties and thirties. You’re going to get raises. If you can do this during that whole timeframe, you’ll really slow down your need for spending, and it really impacts your overall success. So this isn’t just a forties and fifties thing, but it becomes a bigger deal in your forties and fifties as those raises are on a higher percentage, right? 5% raise on $10,000 is a little different than a 5% raise on 100,000 dollars. So there’s two different dollar amounts we’re talking about, which really matter from a budget standpoint.

Austin Wilson:

Yeah. That’s why these years are so important because the percentages, maybe even closer to the same, from when you were in your twenties and thirties, however, the dollar impact is much larger. And that’s why it’s good to just really cramp down on those things. I think it’s probably also worth pointing out that your spending is going to look a lot different in your forties and your fifties than it did in your twenties and your thirties. So, your life probably looks a lot different. In your twenties and thirties, maybe you were single and renting and driving that beater car from college and whatever, all these things are eating ramen, who knows what you were doing. Maybe in your forties and your fifties you’ve got some kids, which as you know, aren’t free.

Josh Robb:

They’re not cheap, that’s for sure.

Austin Wilson:

They’re not cheap. So, you’ve got kids and that’s a big timeframe that we’re talking about here, to forties and fifties, but you could be having older kids. And I remember, especially, as boys, so my brother and I were in the house, same time as teenagers, they will eat you out of house and home.

Josh Robb:

Oh yeah.

Austin Wilson:

So that’s something to think about, but there’s just… Your budget looks a lot different. Your housing budget looks a lot different. Your car budget looks a lot different. Your everything budget looks a lot different. So keep that in mind. It’s not going to look the same, it’s not supposed to look the same.

Josh Robb:

And talking about that spending, here’s a couple things to keep in mind. So, we talked about the kids. They’re probably going to be one of your largest expenses during your forties and fifties.

Austin Wilson:

And you can’t get rid of them at this point, you’re stuck.

Josh Robb:

Let’s say you had a kid at 22, right? They’re not turning 18 at 22 years old. They’re going to be 40 when they turn 18, right? And so we’re talking about this right here. They’re going to college at the beginning part of this stage. If you’re 30 when you have a kid, you’d be 48 by the time they’re heading to college. And so that’s why this window of time is a pretty big deal when it comes to spending for your kid. Paying for college, maybe in the forties, you’re saving for college, maybe in the fifties is when you’re spending it out, depending on, again, when you have kids, but throughout that timeframe, college costs are expensive.

Austin Wilson:

And they’re going up by the way, throughout the whole thing.

Josh Robb:

It is. It is getting expensive. Along with that, midlife crisis. So, forties and fifties are realistically a midlife. If you look at life expectancy sometime in there, and some people during the midlife crisis time period make purchases, and you just got to be careful that those do not impact your long-term goals. There’s nothing wrong with splurging. There’s nothing wrong with doing a once in a lifetime thing, if that fits within your plan. So, I’ve known people that have said, “You know what that’s about when our kids are at a certain age where we would like to do this big family vacation. It’s going to cost us more money than we normally do, but this is something I want to plan for and do. But at that point, they’ll be old enough to all enjoy it.”

Austin Wilson:

Correct.

Josh Robb:

And so those are the things you just got to keep in mind and plan for because your spending will look different. You’re not wanting to take that lifetime trip when you have a two-year-old, because one they’re not going to enjoy it. And you probably won’t enjoy it as much either.

Austin Wilson:

Well, this isn’t probably a good time to… Though your credit may be excellent, spend $250,000 on a Lamborghini.

Josh Robb:

Yes.

Austin Wilson:

It may put you back in your financial plan. So, ear piercings, those are affordable. You can have those as midlife crisis, tattoos. Yeah. Those are affordable

Josh Robb:

Henna ink and then it’s not even… It’s a temporary one.

Austin Wilson:

It’s like a $50 midlife crisis. I just wanted to try it out.

Josh Robb:

Maybe it’s not even a midlife crisis, but this is also a point where people who are looking for a vacation home, this is about the timeframe where you start to see those things show up in retirement planning is, “Okay, when I’m this age, I’m going to be able to get a vacation home or do those types of things.” So, all those things need to be planned for and accounted for when you’re looking at it.

[10:40] – Debt

Austin Wilson:

So, we hit on it last episode, we were talking about our younger years, twenties and thirties. Debt looks a little bit different as well in your forties and fifties. So hopefully, with your higher income that you’ve had since you’ve grown up a little bit out of those in twenties and thirties, and you’re in your forties and fifties, your debt burden or your debt level is reduced, or hopefully, maybe even eliminated. But it’s not uncommon for, we would say this is probably an okay time, if you have a mortgage you’re not behind the curve, right? A fixed rate mortgage, we would say, pretty normal. But other things, specifically credit card debt, hopefully you’ve got paid off. Student loans, hopefully you’ve got paid off. Any car loans, those are things trying to not have them at this point is probably our advice.

Josh Robb:

I would say that student loans is probably the biggest one because it usually carries into the late thirties, early forties for a lot of people, depending on what kind of education you got. But this is the timeframe where you’re knocking some of those debts that you’ve been kind of paying on throughout your twenties and thirties. But now you have some extra income and you’re going to get rid of those just in time to get student loan debt for your kids or whatever. But in general –

Austin Wilson:

Just trade one for the other.

Josh Robb:

The debt is a good spot. This is a timeframe to really focus in on it. And we’ll talk in a minute about some of that extra cashflow, what you do with it. About mortgages, depending again when bought your house, but we’re talking about two decades. So you’re knocking down that mortgage and you could be paying it off near the end of this timeframe or somewhere during that. If you get the 15-year mortgage, again, you’re probably seeing that paid down. So just being aware of those debt burdens. And then again, if you get extra cashflow when things get paid off, not to just let that be absorbed into your budget, but being mindful of what you want to do with that extra money.

[12:14] – Insurance

Austin Wilson:

Mm-hmm (affirmative). Next up is insurance. We kind of hit on this earlier that we’re going to be talking about it, but this is a good time in your life to be reviewing your life and disability insurance. We talked about it last episode that you should be getting it, but your needs probably look a lot different as your income and lifestyle has increased at this point. Also got to remember, inflation is real, especially now, right? Costs are going to continue to go up as you age, and you need to be prepared for that. But your financial situation, when you look at your, specifically your assets and your liabilities, hopefully your liabilities are less, and your assets are more.

And you’re probably in a lot better financial situation, were something to happen to you, whether that be, through an untimely death or through disability, that your needs may be a little bit lower than they were when you were younger. Or that you need to hold those shorter. There’s a shorter time period that you’ll need those benefits. And there are ways that we talked about in our life insurance episode, where you can kind of ladder out some of those policies to get needs met and stuff like that. But this is just a good time to revisit that.

Josh Robb:

Yeah. And along with that, we talked about umbrella insurance. We’ve talked about that in a prior episode.

Austin Wilson:

Should be pretty cheap to insure. Umbrellas are pretty affordable by themselves.

[13:46] – Estate Planning

Josh Robb:

You need one, so you’ve got to have one. Umbrella insurance though covers everything outside of your car insurance or home insurance. And that’s important again, as your asset level grows, to protect those assets you worked hard for. So, an umbrella insurance would be another policy in your forties and fifties you might want to consider adding to your portfolio. Last of this grouping things to consider, is estate planning. So hopefully you set up a will or something simple in your twenties and thirties. And again, we talked about that, is making sure that if something were to happen to you, your wishes are set up.

Austin Wilson:

Yep.

Josh Robb:

Forties and fifties, your wishes may change. Your kids may be older.

Austin Wilson:

You may have kids now.

Josh Robb:

You may have kids, may not have had them before. They’re different situations that you’re going to want to make sure that your estate plan matches where you’re at. Maybe your assets in your mid-forties, late fifties, as you’re heading into that time period, a trust may be worthwhile because at that point you can help dictate what happens post your passing with that money. It could be spread out and gifted in certain ways. And so an estate plan is something worth looking at in your forties or fifties. Hopefully you already have something in place, but it may be updated or tweaked as it goes.

[14:35] – Dad Joke of the Week

Austin Wilson:

On that morbid note, Josh, I have a dad joke of the week for you. And this is kind of funny.

Josh Robb:

Just kind of funny?

Austin Wilson:

It’s kind of funny. How many eye doctors does it take to change a light bulb?

Josh Robb:

I don’t know.

Austin Wilson:

Is it one or two? One or two?

Josh Robb:

I love it.

[14:52] – Investing

Austin Wilson:

So, there you go. All right, next up in our discussion points about what to do in your forties and fifties is investing. We like investing. We talk about it week in and week out, it’s kind of our passion in this business. So I’m going to start with some statistics, okay? So this is from a survey from Fidelity, one of the world’s largest custodians. So, they have a lot of data and this is talking about 401ks. So, the average balance in your forties in a 401k plan is $103,000. The average balance in your fifties is $174,000.

Josh Robb:

Okay.

Austin Wilson:

And the average contribution rate in your forties is eight and a half percent and 10.1% in your fifties. So, looking at those numbers, it really depends on your income and your goals, whether those are good or bad. But as we generally think about now, this is only the 401k piece of the contribution rate, but eight and a half percent, 10.1%, not real great numbers, pretty low. And we would advise people to strive for more than that. And depending on your salary level, those balance numbers seem a bit low.

Josh Robb:

So, let’s talk about that. So, we’ve talked in the past, a way of judging where you’re at is looking at your salary, right?

Austin Wilson:

Yup.

Josh Robb:

Because if you were a doctor and earned $1,000,000 a year, your savings need to match what your spending is. You may have higher life expenses.

Austin Wilson:

Right.

Josh Robb:

If you’re making $50,000 a year, your savings in your income is going to be a little different.

Austin Wilson:

That’s why percentages and multiples mean so much more in this business. So, we ended the last episode talking about what you want by 39, right? Twenties and thirties. 39, the goal was three times your salary, before you turn 40, or when you turned 40 or whatever.

Josh Robb:

And that’s three times your salary in investment accounts for retirement. Not just your overall net worth.

Austin Wilson:

Correct. That is investment accounts that you will not touch until retirement. So-

Josh Robb:

And you can’t say, “Hey well, my house is worth..,” nope that’s not what it is.

Austin Wilson:

Nope that does not count. So, at a high level, big round numbers, because we like them. Say that when you turn 40 or 39 and a half, turning 40 or whatever, you make $50,000 a year in income. Three times your salary, we would say in your retirement account umbrella, which would be maybe Roth IRA. It could be your 401k, whatever that may be. Rollover IRA from a previous employer, all of these added up that you cannot and should not touch until retirement, should be $150,000, right?

Josh Robb:

Makes sense. That three times.

Austin Wilson:

So by 50, so 10 more years. So when you turn 50, so this is really the end of your forties here, that should be more than double in dollars, but it should be six times your salary at 50. So, your salary is going to increase. But suppose your salary didn’t increase, then it’d be $300,000, right? Six times your 50-year-old salary. And then by the time you turned 60, another decade down the road, and you’re inching towards retirement, which we’re going to have a special episode about your sixties because that’s the most important retirement choice period. But by the time you turn 60, eight times your salary, so that’d be another $100,000 on that 50,000. So, if you make 50 grand, you’re looking at $700,000 at that point. Is that right? Did I say that right? 150, 300. Oh, that would only be $400,000.

Josh Robb:

That sounds better.

Austin Wilson:

Now my math was a little off on that. So anyway, it’s a multiple thing, right? As you mentioned before, depending on your occupation, depending on your income level, that really determines your budget, and that’s that budget that you’re trying to make continue through to retirement, right?

Josh Robb:

And then the way these numbers work, you say, “Well what’s eight times…” And again, the end spot is to get about 10 times your salary is the goal at the end. And the reason why that works is the assumptions that Fidelity is using in these calculations are that, you’re going to spend a little less in retirement on average is about 70, 80% is what they’re using. And they’re saying, “Okay, if you can get a balance of this, your withdrawal rate could sustainably match for the next 30 to 40 years, that reduced amount.” And that’s again, why savings matters because if you’re going to spend less, you better be living on less. So it’s not a weird adjustment in retirement.

Austin Wilson:

Yes. So those are kind of some goals, high-level goals. And again, look at it with percentages and multiples so that you can, no matter who you’re talking about, no matter how much money you make, it’s all easy to think about and compare.

Josh Robb:

You said the average is eight and a half percent for 40-year-olds and 10% for 50-year-olds.

Austin Wilson:

Right.

Josh Robb:

What do we think it should be like?

[19:19] – Setting Aside for Retirement

Austin Wilson:

Yeah. So we would aim to be working towards, so really through your twenties, in your thirties, into your forties and your fifties, you’re probably not going to be able to do the very beginning, but work towards setting aside for retirement, 20 to 25% of your gross income. Now caveat meaning that includes your contributions and your employer contributions.

Josh Robb:

Total savings going into your account.

Austin Wilson:

Total savings going into all of your accounts.

Josh Robb:

20 to 25%.

Austin Wilson:

So that can be Roth IRAs, whatever. That can be your 401k or 403b or whatever that may be, including employer contributions, 20 to 25% is what you should work towards. And that’s why that 50-50 rule is so important because when you’re just starting out, we advised last episode, do whatever it takes to get your employer match.

Josh Robb:

Get the minimum.

Austin Wilson:

Get the minimum, pay off some debt, do those kinds of things, then increase it from there. But as you’re doing that with that 50-50 rule, boom, you’re increasing, you’re starting with X percent and then you get a couple more percent every year, a couple more percent.

Josh Robb:

Let’s say you just get a 2% raise every year. That’s… If we look backwards over the last 10, 15 years has been about 2%, roughly. So, let’s just say you kept up with inflation. So, every year you did 1% to your budget. 1% to your savings from your twenties to thirties, that was 10%. thirties or forties now you’re at 20% savings forties to fifties now you’re… So again, you can see how just doing that slowly over time gets you where you want to be.

Austin Wilson:

And your lifestyle is going to be great. You’re going to be getting a little bit more money in your pocket every year. But the most important thing is that you’re not letting all of it go to your budget because you’re then throwing it into your investments, which is how you can easily get to 20, 25%. So that’s awesome. And that’s the way we would say that. So, let’s kind of talk about priorities. And we talked about this a little bit in our account types episode a while back, and we can link that in the show notes below, but let’s talk about like how you would waterfall this money to get to that 20, 25%. So first of all, didn’t change from last episode, do what it takes to get your, whatever that percent match at your company retirement plan is.

Josh Robb:

100% return.

Austin Wilson:

No brainer. You’re going to do that.

Josh Robb:

Free money.

Austin Wilson:

So that’s first and foremost, and you should do that no matter what stage of life you’re in, no matter what. So number two, then after that, go straight to open up a Roth IRA, you can do that through a variety of mediums. You can do it online with electronic robo-advisors, whatever. And they’re very affordable. You can work with an advisor and that’s often a great option, especially as you’re at this point in your life and you have some assets to work with. They can really help you put together your financial plan through that. But max out that Roth IRA, and as of 2021 that limit is, Josh?

Josh Robb:

$6,000.

Austin Wilson:

Or?

Josh Robb:

Once you turn 50, then it’s an extra thousand dollars.

Austin Wilson:

Exactly. So max that out and that is by social security number. You get that much. So you and your spouse or whatever, can both do that. So that’s the next bucket. So once you get maxing that out, then you go back and add to your 401k more up until the IRS maximum, which is about $19,500.

Josh Robb:

Yup and then once you get past 50 again, you get an extra $6,000 in there. So you can put up to almost $25,500 there. So you get a good chunk of money in both of those spots and that those are all tax deferred or tax-free growth, once they’re in those two buckets.

Austin Wilson:

Right so you get two different angles of tax sheltering, I guess, is the way you could look at it.

Josh Robb:

Maybe your 401k offers a Roth IRA or Roth 401k. That’s an option too.

Austin Wilson:

Yes. So in your 401k or 403b or whatever it is, if it’s not the Roth option, that’s pre-tax money. So you’re really saving on today’s taxes, which at this point in your life is really good because higher tax bracket, but then that Roth IRA, if your income allows it and income limit, Josh, is?

Josh Robb:

About $180,000, give or take.

Austin Wilson:

So if your income level allows it at this point, that is, you’re putting it in post-tax, and it grows tax-free. So that’s another great tool to have. And that’s why we like talking about different buckets, having different options there. So once you max out your 401k, so after your max out your Roth, you go back, you max out your 401k, you can then do whatever you want. Right? Nope, got goals. These goals are then going to be probably to open up a taxable account is going to be your next option and ultimately the most flexible option.

So any more of your assets that you want to invest at that point, you can do in a taxable account and yeah, it’s taxable, but you can do whatever you want whenever you want with it, which is a super great thing. But another nugget I want you to not forget about, is you can really be socking away money into your HSA during this point. If you don’t need your HSA, HSAs have great tools all around but-

[23:58] – Health Savings Account

Josh Robb:

That’s a Health Savings Account.

Austin Wilson:

Yes. If you don’t need to use that to fund your health needs, healthcare needs, as you’re going along, you can save and invest that money and use it for, what’s likely to be probably pretty high, healthcare costs in retirement. Healthcare need cost, not healthcare plan cost.

Josh Robb:

That is an account that’s triple tax savings.

Austin Wilson:

Triple. I love it.

Josh Robb:

You get a tax deduction on your contributions. Grows tax-free while it’s invested. And if you use it for the right expenses, health care expenses, then it’s tax-free on the distribution. It’s a great asset to have. You can put about 7,200, I think in a year.

Austin Wilson:

7,000 I think, for a family at this point.

Josh Robb:

Yeah, something right around there. And they allow you to put that in per year. And again, you get a deduction on those contributions and it grows tax-free. I will say we’re talking about, this is retirement savings. So like a taxable account, depending on what your goals are, you may open one up before you max out your 401k if you have shorter term goals. It’s all about what your goals are and what the best account structure is for that. But you’re right. That 401k because it’s pre-tax, it’s a great long-term savings vehicle in a great spot and it allows for automatically adding to it, which we know habits matter. And so if you could just have it automatically taken out of your paycheck, it’s a great way of automating that savings.

[25:15] – Asset Allocation

Austin Wilson:

True. So Josh, something you’re very passionate about is making financial plans.

Josh Robb:

Yes.

Austin Wilson:

And looking at financial plans, analyzing them and tweaking them, right? So at this point in your life, what should you be considering in terms of your asset allocation?

Josh Robb:

Yeah. You’re in your forties and fifties, so 40 to 59, like you talked about Austin. What you’re doing is you’re starting to prepare for that next transition, that phase in life, where you go from your working career into retirement. And we’re going to spend a lot of time in our next episode, talking about that retirement phase. But in your forties and fifties, you’re preparing for that, right? You want to get in the right mindset and getting the right asset allocation. So the asset allocation is, as you are investing and growing, you’ll want to be as aggressive as you can tolerate to get that growth while you’re working. But as you’re getting closer to that retirement phase, it may be prudent to reevaluate that risk. Is it still worth those volatility of the short term for my goals? In other words, if I’m entering my late fifties and I’m hoping to retire in my sixties, maybe I open up a taxable account and be a little less aggressive.

And that becomes my first bucket I get into. There’s a whole thing about sequence of return risk and having bad returns early in retirement that has a drastic impact on your success. So if I can eliminate that risk by having some very conservative money in a bucket, it’s helpful. And so there’re the things you can start thinking about, especially mid to late fifties where you’re saying, “Okay, what can I do to start preparing for the next phase?” And then, we’ll talk about all that and then sixties about as you transition, what that looks like. The other thing that you’re doing through this timeframe, when you’re looking at the planning, is really fine tune those goals. Because in your twenties, you may say, “Ah, I’d want to retire in my sixties. I want to do this. I want to do that.” Well, life has happened.

Austin Wilson:

Now you’re there.

Josh Robb:

And now you’re in your forties or fifties to say, “Okay, let’s actually really sit down and think through those goals. What realistically will make me happy about retirement? What are the things that’ll make me feel fulfilled and gave me that sense of purpose when I’m making that transition?” And so forties and fifties is the best time to start thinking about that. You have to start dreaming for it. Gives you something to, that light at the end of the tunnel as you’ve been working hard to say, “Okay, I can see it. I know what I’m doing. I know why I’m going to work everyday to get to that point, to get to that goal.” So that’s a great time to do it. I love having meetings with people in their forties and fifties, as they’re starting to have those more serious retirement discussions.

We talk retirement with 20-year olds, but it’s kind of pointing them in the right direction. But now it’s actually, you can see it. You can get more tangible about what are some of those actual things you want to do and accomplish.

Austin Wilson:

Like open a taco truck.

Josh Robb:

Like open a taco truck and drive around.

Austin Wilson:

I just love tacos, Josh. I eat them all the time.

Josh Robb:

That’s right.

Austin Wilson:

It’s my favorite food.

[27:48] – Job Transitions

Josh Robb:

Now we will say, you see job transitions in the forties and fifties as well. And it doesn’t mean it’s going to set you back. There may be a thing where you’re saying, “You know what? I’m passionate about this. Now I’m at a point in my life where I can make those adjustments.” That’s great. It’s a part of that freedom thing is making those changes to say, “You know what? I’ve worked in X career. And I learned a lot of experience, but you know what? I really enjoy doing this.” Taco trucks.

Austin Wilson:

Tacos.

Josh Robb:

I don’t even care. Maybe you like tacos, but I’m at a point where I can make that transition. Now again, you want to make sure you’re clear on those goals and where they go, but you see a lot of that in the forties and fifties, people make those transitions.

Austin Wilson:

Yeah. And that’s where if you sit down with someone who knows what they’re talking about, financial planning wise, they can look at your picture. And when you’re in career one and say, “Okay, here’s where you’re at. Yeah, we can make this work. And here’s what you need to do going forward.” And then you have some great options at that point because yeah, it’s not the end. It could be the beginning of something totally fun and totally new. And okay, something we didn’t really talk about is a lot of people continue working far beyond these years.

Josh Robb:

And we’ll talk about in the sixties and seventies of what that looks like.

Austin Wilson:

So this is just kind of standard ages of when these things happen. But a lot of people do things before. A lot of people do things after. So it really depends on your situation.

[29:10] – Are You on Track?

Josh Robb:

Everybody’s always asking, one of the most often questions I get is, how do I compare? Am I on track? Am I like everybody else? Right. And that’s where those salary, well are you in your forties? Okay, let’s try to shoot for six times your salary. By the time you get to 50. Oh, you’re in your fifties? Let’s shoot for eight times your salary, when you get to 60. Those are the things that are tangible. You can say okay, here’s the average, here’s what you’re trying to do. Where are you at? Because if someone comes and says, “Hey, I earn X amount of dollars and I have X amount saved. How do I compare?” Well, it’s a hard comparison because what are your goals? Are they different than the next person? But you can use those percentages and use those kind of salary goals as a way of at least giving you a benchmark to shoot for.

Austin Wilson:

Two things to wrap us up here. Number one, it’s still not too late. And it won’t be too late until December 31st, but you can still join our second annual Invested Dads second half stock draft. And-

Josh Robb:

We need to get a shorter name than that.

Austin Wilson:

We have got to get a shorter name than that. But check out our episode a few ago where we actually put our picks out and how to enter your lineup for that and how you can be a part of that. Number two, as always check out our free gift to you. It’s a brief list of eight principles of timeless investing. These are eight overarching investment themes meant to keep you on track to meet your long-term goals. These are some great things we’ve talked about today, and these are surely part of that list. Josh, how can people help us grow this podcast?

Josh Robb:

Yeah. Make sure you subscribe. That way you can get our new episode every Thursday and then also leave us a review at Apple Podcasts. It’s great for us. It helps more people find us. If you have any questions, thoughts, if you’re going through your forties and fifties and wanted more details on something, shoot us an email at hello@theinvesteddads.com. We’d love to interact with you and help you out. And then also if you know somebody going through that time period, think this would be helpful, share this episode with them.

Austin Wilson:

Well until next week where we talk about your sixties, have a great week.

Josh Robb:

All right, talk to you later.

Austin Wilson:

Bye.

Outro:

Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future, doesn’t have to. Head over to theinvesteddads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode. Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guests, are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein, will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.