What are 7 money mistakes made by those over 50?

[00:00:00] Ralph Estep, Jr.: So I'm going to start by asking a question today, and it's really pretty simple. Are you over 50 and you worried about your financial future? Imagine reaching your golden years only to realize you've made financial decisions that now threaten your retirement. It's a scary thought, isn't it? But don't worry. I'm here to help you navigate these treacherous waters and steer clear of some common money mistakes. That's right. On today's show, we're diving into 7 money mistakes that could derail your retirement dreams. Stay tuned to learn how to avoid these pitfalls and secure your financial future.

[00:00:40] Ralph Estep, Jr.: Well, let me remind you about yesterday's episode. Yesterday, we talked about 8 common reasons for getting audited by the IRS. It was really an eye-opening episode. If you missed it, I'm going to encourage you to go to askralph.com. You can catch up on all of our episodes and trust me, that was information yesterday you don't want to miss because, guess what?

[00:01:00] Ralph Estep, Jr.: Two certainties in life, death and taxes. So you're going to have to file taxes. So you want to make sure you don't get yourself in an audit mess.

[00:01:11] Ralph Estep, Jr.: I received this message from Bethany. She writes this.

[00:01:13] Ralph Estep, Jr.: "Dear Ralph, I'm turning 55 next month and I'm starting to worry about my retirement. I've always been careful with money, but I can't shake the feeling that I might be making mistakes without even realizing it. I've heard some horror stories from some friends at work and some have even retired then had to come back to work because they were struggling with making ends meet. I certainly don't want that to be me. What are some common financial missteps people my age makes, and how can I avoid them?"

[00:01:42] Ralph Estep, Jr.: Well Bethany, let me start by thanking you for your question. I am certain that one resonates with many of our listeners, and I am super happy that you're being proactive about your financial future.

[00:01:52] Ralph Estep, Jr.: So I'm going to answer that question for you today. And before I get too deep into this, remember, this show is all about answering your questions. That's why we call it, Ask Ralph. So keep those questions coming. As always you can send them to me at ralph@askralph.com or you can visit our website. That's askralph.com.

[00:02:11] Ralph Estep, Jr.: And when you get to the website, you'll see a little microphone icon down at the bottom. Just click on that and tell me what's on your mind.

[00:02:21] Ralph Estep, Jr.: Well, I am thrilled you're joining me today as we explore the world of finance through a Christian perspective. I want to remind you, as we just talked about, to visit our website again, that's at askralph.com and I want you to join our community. I also want you to share the show with others who might benefit from this information.

[00:02:37] Ralph Estep, Jr.: Now I'm going to give you a bonus for doing that. When you join our email list, you get a free copy of my book. It's called Mastering your Finances. Now, if you were to go buy this book on Amazon, which you're welcome to do, and I encourage you to buy some for your friends, but if you sign up for our email list, we'll give you this book absolutely free just for joining our community. So that's something you don't want to miss.

[00:03:00] Ralph Estep, Jr.: Well, let's ground ourselves in scripture. I found a particularly relevant verse today, and it comes from the book of Proverbs. And it's from 27:23-24. And it says this, and we've used this before, but I thought it was so perfect for what we're talking about today. And that is this.

[00:03:16] Ralph Estep, Jr.: "Know well the conditions of your flocks, and give attention to your herds, for riches do not last forever; and does a crown endure to all generations?" That's a question. Now this verse reminds us of the importance of being attentive to our finances. Just like I've got to be attentive to this herd of black Angus cows out here on the farm, we've got to not take our resources for granted, especially as we approach our later years.

[00:03:46] Ralph Estep, Jr.: Well now, let's dive into the heart of today's episode. That's the 7 money mistakes made by those over 50. And listen, I've seen these mistakes countless times in my years as an accountant and advisor, and I want to share some real-life stories that illustrate just how impactful these errors can truly be. Let's start with the first one. This one is a big-time issue and that is not having a retirement plan. Let me tell you again, I always use fake names, but I want to tell you about my client.

[00:04:16] Ralph Estep, Jr.: We'll call him Tom. Now, Tom was a successful small business owner. He thought his business was going to be his retirement plan and he poured everything back into the business year after year. He made an assumption that someday he'd sell it for a tidy sum and then he'd be able to retire. Well, fast forward a bit. Tom came to see me. He had just turned 62 and he was in a full-fledged panic. Unfortunately, Tom's industry had changed dramatically. And unfortunately as well, his business was worth far less than he always anticipated it would be. And the other problem with Tom is he didn't have any other savings to fall back on.

[00:04:56] Ralph Estep, Jr.: So, what do we do? We worked quickly and we create a retirement strategy. Now, what that meant for Tom is he had to drastically adjust his expectations for retirement. So what's the lesson here? The lesson is pretty simple. Don't put all your eggs in one basket. You have got to have a diversified retirement plan that doesn't solely rely on one source of income.

[00:05:19] Ralph Estep, Jr.: Let's move on to number 2, and this one I see time and time again in my practice, and that's underestimating healthcare costs. So let me introduce you to my client name, Linda. Linda was meticulous about her finances, but she made one critical mistake. She severely underestimated her healthcare costs, what they were going to be in retirement. And at 68, unfortunately, Linda was diagnosed with a chronic condition. This condition required her to get ongoing treatment. And unfortunately, some of those treatments weren't covered by Medicare. So she found herself having to dip into her retirement savings much more quickly than she anticipated.

[00:05:58] Ralph Estep, Jr.: She was a victim of her medical expenses being more than she anticipated. So let me give you a tip. To avoid Linda's situation, it's crucial to factor in potential health care costs when planning for retirement. I say this to clients just about every time I meet with them. You've got to figure, as you transition into retirement, the monies that you were spending for other things are going to have to be reallocated to medical.

[00:06:23] Ralph Estep, Jr.: That is by far the biggest expense I see my clients having to deal with. So one of the things I'm going to say here is you might want to consider some long-term care insurance, and you've got to, got to absolutely got to make sure you understand what Medicare covers and what it doesn't cover and look at maybe buying some supplemental plans. That's a topic for a whole another show.

[00:06:43] Ralph Estep, Jr.: Let's move on to number 3. And that is taking debt in retirement. It's kind of like dragging that old suitcase with you. So let me tell you about my clients, Bob and Carol. Now when Bob and Carol retired, they were debt-free. But then one day Bob and Carol were sitting at the breakfast table, and they were going through their magazine, and they saw this absolutely gorgeous dream vacation home. And they said to each other, you know, we've scrimped, we've saved. We’ve done all these things to provide for our retirement. We're debt-free. And Carol said to Bob, she said, Bob, why don't we buy this dream home? So they made a decision. That decision put their entire financial security at risk. They bought that dream vacation home. They assumed that their retirement income would easily cover the payments. I mean, he looked at it and said, well, if our accounts continue to grow as they are, we're going to be able to afford it. But the problem was they didn't account for some of the additional costs because now all of a sudden, they were maintaining two properties.

[00:07:43] Ralph Estep, Jr.: They had their primary residence, and they had their dream home. Their particular dream home was at the beach. They also didn't anticipate a big market downturn. That market downturn reduced their investment income substantially. And what ended up happening is they found themselves struggling to make ends meet. So what's the takeaway here? This one is tough sometimes, but you've got to avoid taking on new debt in retirement if possible.

[00:08:08] Ralph Estep, Jr.: And if you do, I want to stress this, make sure you stress test your budget to ensure you can handle the payments even if your income decreases. I'm not trying to take away that dream home, but you've got to be realistic and say to yourself, if my income or our income drops substantially, are we going to be able to afford to make those payments?

[00:08:29] Ralph Estep, Jr.: Let's move on to number 4. This is a pet peeve of mine, and that's helping adult children at the expense of retirement. This one is going to hit home for many of us. So let's talk about my client, Susan. Now, Susan was widowed. She's a mother of three, but she had a huge heart. I mean, this woman is a great person.

[00:08:47] Ralph Estep, Jr.: She's always looking to help people out. But the problem is her retirement accounts started to shrink. Why? Because she couldn't say no to her adult children. Whenever her children needed financial help that may be, she paid off her daughter's student loans, she'd helped her son with a down payment on a house, Susan was generous, and listen, that's admirable. But it's misguided at this point, and it took a little bit, but Susan realized the impact on her own financial security and her savings had been significantly depleted because she wanted to help out her kids.

[00:09:21] Ralph Estep, Jr.: And that's a great thing to do. I have no issue with that, but you've got to look at helping yourself out first. So I'm going to say this. Remember, you can't loan money for retirement. It's okay to help your children, but not at the expense of your own security.

[00:09:36] Ralph Estep, Jr.: Let's move on to number 5. And this one I see frequently and that's ignoring estate planning. So let's talk about my client Frank. Now, ironically, Frank is actually an attorney. But he never got around to creating his own estate plan. He thought, you know, I've always got more time. I've always got more time. But then Frank passed away at 67. He's a young guy and his family was left to navigate this complex, legal and financial maze.

[00:10:02] Ralph Estep, Jr.: I got involved in trying to help them. But his assets, because he didn't have that estate plan we're tied up for probate. I think it was like five or six years. And what did that do? It causes financial strain, but bigger than that, man, I saw these family members attacking each other. It created this huge family conflict.

[00:10:21] Ralph Estep, Jr.: So I'm going to stress this to you. I'm not an attorney. But don't make Frank's mistake. No matter what your age is having an up-to-date will and estate plan is crucial. And listen, it's not just about distributing assets, it's about making things easier for those loved ones during a difficult time. I've talked about that on the show before.

[00:10:40] Ralph Estep, Jr.: Let's move on to number 6. And that's failing to adjust your investment strategy. This one's a big one too. Let me tell you about my client, Martha. Now Martha was a savvy person. She always listened to my advice. She's a savvy investor. But as she approached retirement, she made one of those critical errors. She failed to adjust her income investment strategy. So at 60, and think about this she's 60 years old, she was still invested in aggressively growth-oriented things in her portfolio. Well, that's not where you want to be at 60 because your time horizon to recover from a problem is smaller. Well guess what happens? The market took a significant dip. So just as she was preparing to retire, again, I said she was 60, her nest egg shrunk dramatically.

[00:11:27] Ralph Estep, Jr.: I mean like 20 to 30%. And what that resulted she had to postpone her retirement for several years just to make up those losses all because she was in that growth oriented, aggressively growth oriented, mind framer or mindset. She needed to talk to her investment advisor. So the lesson here is clear. As you near retirement, it's important, it is absolutely vital to gradually shift your investment strategy to protect those assets. Now, this doesn't mean that you're going to abandon your growth entirely. You want to talk with your investment advisor, but it does mean finding the right balance. And I use the word balance intentionally between growth and security.

[00:12:09] Ralph Estep, Jr.: You got to find that sweet spot or that balance. So let's look at the last one and that's number 7. And that is not planning for taxes in retirement. I wish I could tell you that this doesn't happen. But it happens all too often.

[00:12:22] Ralph Estep, Jr.: Now, let me talk about my clients, Jim and Diane. Now, Jim and Diane were great savers. They diligently put money into their 401k throughout their careers and truth be told, they had accumulated an impressive sum, but guess what? They too made one critical oversight. They didn't plan for the tax implications of their withdrawals.

[00:12:41] Ralph Estep, Jr.: So they started taking those 401k distributions, they came in to get their taxes done, and they couldn't believe it when I told them that they owed money. They were shocked. This was an unexpected expense, and guess what? They didn't have the money to pay it. So, what did they have to do? They made the problem even worse because they turned around and took more money out of their retirement plan, which pushed their income even higher. And this depleted their retirement savings quickly.

[00:13:08] Ralph Estep, Jr.: It accelerated that depletion because not only did they have to take the money to live on, they had to take the money to pay the taxes at the same time. So this is one we'll tell you how to avoid this and to avoid Jim and Diane's predicament, it's important to understand the tax implications of all your retirement accounts and plan accordingly. I did a show a week or two ago about that, you know, what is your strategy for taking money in retirement?

[00:13:32] Ralph Estep, Jr.: And I'm going to encourage you to go check that out, because maybe you want to consider something like a Roth conversion to help manage your tax liability in retirement.

[00:13:40] Ralph Estep, Jr.: Well now let's talk about some strategies to avoid these mistakes. And we've talked about those mistakes, but I want to give you some positive things.

[00:13:46] Ralph Estep, Jr.: I want to talk about some unique approaches that some of my clients have taken. The first one was this and that's start with a comprehensive retirement plan. I think I kind of nailed this one. I have a client named David and he took an interesting approach. He uses what's called a retirement vision board and David's a visual guy, right. So he visualized his retirement lifestyle.

[00:14:06] Ralph Estep, Jr.: He thought about, you know, would he be traveling? What kind of car would he be driving? What kind of home would he be living in? And what does his life look like? What does his health look like? And that allowed him to set concrete goals, and it motivated him to save and plan accordingly. Another thing.

[00:14:21] Ralph Estep, Jr.: And I alluded to this earlier. You might want to consider some long-term care insurance. I have a client, Mary. Now Mary purchased long-term care insurance at 55, which is a great time to buy it because she saw it as an investment. It meant her independence and it meant peace of mind. Now it was an additional expense, but here's the deal. It significantly reduced her anxiety about those potential healthcare costs in retirement. So Mary made a good decision. Another thing I'm going to tell you to do is create multiple income streams.

[00:14:52] Ralph Estep, Jr.: I have a client named Jack. Now Jack loved woodworking and he, it was really a hobby for him. Well, Jack actually converts that into what we call these days a side hustle or a small business. And he started selling his creations online. Now, this was a great thing for Jack because of two things. Number one, it brought in extra income.

[00:15:12] Ralph Estep, Jr.: And the biggest thing though, it gave him a sense of purpose. One of the things I see a lot of my clients deal with is they get that point of retirement. They're so excited to retire. And then after they retire, they find this like, what is my purpose now? And that's a real Christian thing, you know, maintain that purpose.

[00:15:28] Ralph Estep, Jr.: But this guy, Jack, like I said, this woodworking thing, it gave him a purpose. Another thing I'm going to recommend, and that is to set clear boundaries with adult children. You know this is a pet peeve of mine. I worked with one couple, let's call them the Johnsons, and they came up with this novel approach to do it, does a novel approach or whatever you want to call it. So they set up this thing and I thought it was perfect.

[00:15:49] Ralph Estep, Jr.: They called it the loan fund. And this loan fund had clear terms. There was a repayment, they clearly set out expectations. And this allowed them to help their kids at the same time, protecting their own financial future. So you might want to consider setting up that loan fund for your children. Number five. Make estate planning a family affair. Now, some people will disagree with me on this one, but my client dismissed it, they took an open approach to their estate planning, and they involve their adult children in the process.

[00:16:18] Ralph Estep, Jr.: They all went to the meeting with the attorney, and they discussed all of their wishes. But bigger than that, they talked about the reasoning behind those decisions. They wanted this transparency because they knew when they passed away, they wanted to avoid potential conflicts and the best way to do that was to make sure that everyone is on the same page.

[00:16:39] Ralph Estep, Jr.: That was really a great idea. Number six, you've got to regularly review and adjust your investment strategy. I have one client who studies what he calls a portfolio review day. He does this every quarter. He treats it like it's an important business meeting. I mean, this dude has an agenda. He has action items.

[00:16:57] Ralph Estep, Jr.: He goes and meets with his financial advisor. He meets with me. We talk about the tax strategy, but this regular review helps him stay on top of his investments and he can make timely adjustments. So he doesn't find himself in that position where he's not prepared for a market downturn or some kind of downturn in the economy. And this one's a big one.

[00:17:17] Ralph Estep, Jr.: You've got to work with a tax professional. This might seem a little bit biased because this is what I do but let me tell you about my clients. The Wilsons. Now the Wilsons started working with me five years before they even planned on entering retirement. And we were able to develop a tax efficient withdrawal strategy. And I'm happy to report we have saved them thousands because we were able to decide in what order to take those retirement distributions. So here's what I'm going to tell you. Remember, it's never too late to take control of your financial future. You could be 50, you could be 60 or even beyond. There are always steps you can take to improve your financial situation and get yourself into a place with a secure and comfortable retirement.

[00:17:58] Ralph Estep, Jr.: That's what we all want. To recap those 7 money mistakes. We talked about not having a retirement plan. We talked about underestimating those healthcare costs. We talked about taking debt on in retirement. We talked; I gave you that warning about helping adult children at the expense of retirement savings. We talked about ignoring estate planning. We talked about that sad situation if you don't adjust your investment strategy. And then finally we discussed taxes, like I said, at the beginning, there's two certainties in life and that's death and taxes. So you've got to plan on taxes in retirement. But the truth is this. By avoiding these pitfalls and implementing some smart strategies, you can set yourself up for a secure and bigger than that fulfilling retirement.

[00:18:40] Ralph Estep, Jr.: And remember this, if you need personalized advice, maybe you're feeling overwhelmed after listening to this, you're thinking, Ralph, I don't know even where to start. You have scared me. You've alarmed me. The bells are going off and I'm going to say, I'm happy that I did that because if you're not secure, then you need to sit down with me.

[00:18:56] Ralph Estep, Jr.: I want you to schedule an appointment, do it right now. You can go to askralphpodcast.com/store. You pay me $150 consultation fee. I don't care where in the world you are, we will work together to improve your personal finances. Maybe you've got a business, and you want to know Ralph, how do I take my business to the next level?

[00:19:15] Ralph Estep, Jr.: How do I manage my business, finances better? I am going to help you achieve all of your financial goals. I'm going to be that coach that you need. So I want you again, schedule it today and let's create a personalized plan for you. Now tomorrow, we're going to be discussing what are 5 tips for choosing an insurance agent or broker. Again, I've always said you want to surround yourself with a dream team.

[00:19:38] Ralph Estep, Jr.: The people that can help you get to where you need to go. So make sure you tune in tomorrow. Remember. My passion is to help you achieve financial success. I want you to live out your dreams and I want you to grow in your faith. I know that together we can master your finances from that Christian perspective.

[00:19:55] Ralph Estep, Jr.: So as I always say, stay financially savvy, and God bless you.