Our next guest says that the most commonly asked question he and other financial advisors get is, "Will I be okay?” Or, “Do I have enough money to get me (or me and my spouse) to the end of life?” Mike Switzer interviews Noel Swain, a certified financial planner with ProVest Wealth Advisors in Spartanburg, SC.
TRANSCRIPT:
Switzer: Hello and welcome to the South Carolina Business Review. This is Mike Switzer. Our next guest says that the most commonly asked question he and other financial advisors get is, "Will I be okay?" Or rather, "Do I have enough money to get me or me and my spouse to the end of life?" Noel Swain is a certified financial planner with ProVest Wealth Advisors in Spartanburg, South Carolina, and we have him on the phone to help us with this topic. Noel, welcome back to the program.
Swain: It's great to be here.
Switzer: So now tell me, do you sometimes ask that question first when the client comes into your office? Do you ask them, are you guys going to be okay? Are you comfortable with your life plans on your money?
Swain: Well, a lot of times that's what gets the conversation started. there's nothing any more important. And if think of it, there really isn't anything more important than that to know that you've done what you need to do to be financially secure for the rest of your life. I think that that is one of the, I think the big kahuna of questions.
Switzer: And so where does the answer start?
Swain: To be honest, financial planning is just a combination of math and emotion. Because if you've done what you need to do, then, you know, the math is there. Now the emotion is, how are you going to go about distributing your money for the rest of your life? How are you going to invest it? How are you going to use it? You know, you think starting with the math part. Usually you have several different forms of income after you retire. Most people have their Social Security. Some people have pensions. Other people have residual income, like say, a house that you own that you rent out or something get income from. And then you have your savings, you have things like your 401k, you've got annuities, you've got CDs, you've got brokerage accounts, things that can add together to provide you the income. And so my what I look at is, you know, when someone comes in, let's just say they've got a lifestyle of, and they need $100,000 a year to live in retirement. And you know, we figure up their Social Security and it's $35,000 and, and they've got a pension of, say, $30,000, and that's a, total of $65,000 that they've got. Now what do they need to be able to live the way they want the rest of their life? They need another $35,000. Well, what do you need in an account if you're taking a 4% income off of it to provide that $35,000. Well, the math tells us $875,000 will provide you a $35,000 a year income. That's a 4% withdrawal rate. Now, you always want to make a little bit more than that 4% because you don't want to draw down on your principal. In fact, you want to add to the principal so that you can get raises in the future. Because, you know, inflation doesn't stop whenever you retire. In fact, it sort of speeds up a little bit. And so we look at the normal financial planning standard is a 4% income, and we hope to make 6 to 8% so that that can add back to the principal and keep on going.
Switzer: And I guess at the beginning of this math formulation, you also have to factor in that inflation number that you might expect over the time frame of between, you know, when you're starting the planning and when you are retiring.
Swain: Absolutely. Because you know that if you're 20 years away from retirement, then, a retirement income of $100,000 a year today is going to be more than that $100,000. It may be 120 or $130,000 by the time you get to retirement. And so you do have to plan on that. You've got to. What did Wayne Gretzky say, when they were asking him about, about why he was so good? He said he didn't skate to where the puck was. He skated to where the puck was going to be. Well, that's what you've got to do when you're, when you're looking at, down the road for your retirement. You've got, you got to save for the amount you're going to need, not the amount that, that you would need if you retired today.
Switzer: Well, Noel, as always, great information. Thank you so much for sharing.
Swain: It has been my pleasure, Mike. Thank you so much for asking me on.
Switzer: Noel Swain is a certified financial planner with ProVest Wealth Advisors in Spartanburg. Remember, you can hear this show again at our webpage, SouthCarolinaPublicRadio.org just look for our show. And remember, you can find us wherever you find podcasts. With the South Carolina Business Review. This is Mike Switzer.
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