5 Key Tips to Help to Get Your Retirement Plan Back on Track

Around 82% of Americans said their finances were affected by the pandemic and the fallout according to a recent Fidelity survey.

If you’re planning on retiring in a few years, that can be a really scary thing.

I want to share a resource that can help you get back on track with your retirement plan! 

The 5 Years Before You Retire: what Key Steps You Need to Take

How comfortable do you feel about your retirement? 

You’re not alone if you’re worried about it.  That Fidelity student I mentioned at the top also noted 36% of Americans are more concerned now than at the start of the pandemic on their ability to maintain a nest egg in retirement. 

The good news for most of us is that there is time to get back on track.

Today’s bonus episode is focused on helping you reset things and worry less about retirement. 

That's why I'm thrilled to have Emily Guy Birken on.

She is a former educator, lifelong money nerd, and a Plutus Award-winning freelance writer who specializes in the scientific research behind irrational money behaviors.

She’s also the author of several wonderful books including  End Financial Stress Now and The Five Years Before You Retire, which has been updated and released today.

I got an advanced copy and really enjoyed it. I actually ordered a copy for my mom.

Emily covers everything you need to do in the next five years to maximize your current savings and create a realistic plan for your future.

During our chat, we get into:

  • The two biggest mistakes people make when it comes to retirement planning
  • How to assess where you are with your finances now
  • Understanding social security 

Hope you enjoy! 

Resources to Keep Your Retirement on Track

Here are some fantastic resources to set things up and help you plan for your retirement together.

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Support for this podcast comes from Coastal Credit Union! If you’re living in the Raleigh Durham area and looking to bank better, come check out Coastal today.

Note: Transcript below edited for clarity and length.

What You Need to Know and Do The 5 Years Before You Retire

Elle Martinez: Thank you so much for joining me.

Last year many people have been affected; either directly with COVID or like the fallout from it, whether it was the restrictions or the way certain industries just shut down because of this.

So great timing on updating your book five years before you retire, because this is just on the minds of so many people, in particular, those who are hopefully gearing up towards retirement.

There's this big question mark now, like, ‘how am I going to be affected?

For me personally, my mom – I consider her young – but she's getting to that point where she's thinking about retiring in a few years.

That she's thinking about now because we just survived 2020 and there's a lot of people that are trying to figure out where do we go from here?

The Two Biggest Mistakes People Make with Their Retirement Investments

Elle Martinez: I wanted to start off with the two main reactions.

I loved your book. You got a lot of great information but I'm going to start towards the end, which is the common pitfalls that people have with retirement, either overreacting to the market volatility, which we saw and then the other side, which was doing nothing.

Why and how are those big mistakes when it comes to retirement?

Emily Guy Birken: So those are both really common mistakes. They come about in part because we forget that money is emotional.

The overreacting is where, you know, particularly if you're close to retirement I write about this stuff and I looked at my 401k.

I think it was in late March of 2020. I told my husband, you are not allowed to look at our portfolios right now Because I tend to be much more even keeled than he is about money.

It's overwhelming and you have this fear like, Oh my goodness, what if this is the start of something bad and it's just going to keep going down, and then there's going to be nothing?

And all of a sudden it's a catastrophe in your head.

The thing is generally, everything will bounce back if you give it time.

If you take money out of the market after there's a sudden downturn, all you've done is locked in those losses.

So it's really overwhelming to deal with those kinds of market volatility; particularly when you are within those five years before retirement.

You're likely to be looking at it more often then, because you're still doing those calculations.

You're doing those, it's really important to kind of take your, your okay, where am I now? What can I live on per year now? Okay. How's it doing?

Blah, blah, blah. So your finger off the sale trigger-

Elle Martinez: Yes.

Investing for Retirement

That's the thing to remember is even if you're within five years of retirement, you're not going to stop investing on the day that you retire.

-Emily Guy Birken

Emily Guy Birken: -and just kind of like, okay. Anything that I need to do will still be a good idea in a week.

You don't need to treat this like you're at the craps table, in Atlantic city where, you know, take the money and run it.

This is a long-term thing, not a short-term thing. So, that's the thing to remember is even if you're within five years of retirement, you're not going to stop investing on the day that you retire.

That's something that people often forget. We feel like, okay, we're going to set money aside and invest, and then we're going to retire.

Then we're going to put all the money in a vault and swim in it. Then just take money out of that as we need it.

You're still investing for the longterm, even when you're 65, even when you're 75, because you should still have some money put into the higher risk, higher return investments that you don't need to touch for 10 or 20 years.

That's the sort of thing if you take a deep breath and go like, this is a blip.

We're going to be talking about this blip later, but it's not going to be a permanent thing. That's something that's important to do.

Then the flip side of it also, the overreacting to market volatility is when things go through the roof like we saw with-

Elle Martinez: Yeah,

Emily Guy Birken: -Dogecoin, or I don't

Elle Martinez: -dogecoin and game stop.

Emily Guy Birken: And all of those things. So seeing that and going like, Oh, well, that's a, that's a can't fail. I need to get in on that. Without having a good sense of the underlying investments, like I can't even pronounce the doge coin correctly. So clearly this is not investment for me.

So that's another kind of overreaction, the market volatility that that is common is if you see something going gangbusters and you think like, well, I need to get in before it gets too expensive and it's stratospheric and I miss out.

The thing is, again, if you're investing for the long-term. Don't need to worry about those things.

Now, if you want to take a couple of hundred bucks, you can afford to lose and play around with that stuff have at it, have fun, but recognize that that's what that is. That's not your retirement plan.

Sticking with Your Retirement Plan During a Crisis

Elle Martinez: Yeah. I want to nail a few good things that you've mentioned and things I've appreciated in your book.

One finance doesn't happen in a vacuum and I know even on this podcast, I encourage you to try to be as objective as possible, But the reality is when you're dealing with a pandemic that could be affecting your industry.

Two like it's on the news. I remember with my husband and you and I are in the same boat in this, in the sense that we're like we're in the personal finance space and still, it was like, Okay. We gotta stick with a plant.

Like I had to remind myself because they would do like these drops and yes, there were definite and significant drops, but even with smaller amounts with the stock market, which would the normal fluctuations, the way it was highlighted, definitely can kind of pull at you.

If you're closer to retirement, it definitely affects you. So I love that in your book. You address that you acknowledge that and give some practical tips on, okay, let's take a step back. Let's look at historically, what are the chances that things are going to get better?

The other part was, you've mentioned, you're still going to be investing in retirement.

I think that doesn't get discussed as much. We're told as general advice, save and invest for retirement.

One, sometimes we talk about what's investments. I know index funds. I'm a big fan of those, but what do you do afterwards? Like how do you actually set up your numbers and finances to go through retirement?

So I loved how you talked about the layers and even broke it down, like have this much for cash, and investment, because that makes a difference.

I think part of what is a little frightening or nerve wracking is you don't have a plan or you don't know how you're supposed to plan.

I know we're gonna talk a little bit more, but I just wanted to pause on that and saying, I really appreciated that in the book.

Breaking Your Retirement Plan Down Into Manageable Steps

Emily Guy Birken: Well, thank you. Yeah. One of the things that I think gets a little overwhelming for people, particularly when it comes to money, is that it's as big a morphous thing.

You don't know how to grab hold of it. One of the things that I want to try to do with my books and with my writing is kind of like, okay, you know, it isn't as big amorphous thing.

It sounds scary, but really it's just a series of tasks that you're going to need to complete.

If you're not sure what those tasks are going to be, here you go here, start here and then you kind of start and get the ball rolling and you can handle these series of tasks.

Whereas if you're just like, okay, plan for retirement, that's got people hiding under the desk in the fetal position.

Elle Martinez: Yeah, it is. It's very intimidating. It's almost embarrassment to say, okay I've made it this far. I don't want to admit, like maybe I don't know what my next steps are.

I love how your book does lay that out. It breaks it down like five years, this is what you should do.

You know, two, three to five years start thinking about this. Having that framework can be a tremendous help.

Emily Guy Birken: Yeah. Yeah, definitely. I have, I have some friends who the wife is a lawyer.

The husband is a professor of engineering. So these are very intelligent people. Talking to them about like what they do for retirement and how like the first time they met with someone, they got overwhelmed and it's okay.

It's okay to, to recognize for one thing, the financial industry is kind of opaque on purpose.

You know, that provides for job security for a lot of people. That opacity like turns a lot of people off. Even people who are very well educated, know how to research and ask questions.

I feel like I don't know what to do, and I'm afraid that I'm going to screw it up.

That's something that I really want to kind of take that fear away and, and recognize there are many paths to getting it right also. It's not like you have to choose one specific path to get it right.

There's many ways to get there. And just get started and put things in order as, as you work that we'll do so much to get you ready for retirement and feel free.

Elle Martinez: Yeah, and I wanted first digging into steps, especially like getting your finances squared away, but I do want to, as a note is huge red flag for any advisor.

Like you mentioned, sometimes, so ‘advisor' doesn't mean they have your best interests at heart necessarily.

If you have a question and they get angry or they intimidate, or they belittle when you are trying to understand their advice, then that is a huge red flag. Find someone else.

The best planners, the best financial help I've received are from those who have just this teaching mindset, they want to help their clients.

They consider their clients partners. They don't see as talking down. So that's really key.

How to Review Your Finances

Elle Martinez: Getting back into that, those steps where you're thinking, okay, How bad is the damage and you're a little afraid.

What would you advise a couple for how to approach that and how to kind of get a general overview of how their finances are now?

One year later?

Emily Guy Birken: The first thing that I would recommend is like taking stock and the thing is That can take a little while.

That's one of those things where a lot of the advice in the personal finance realm is just like, okay, take stock. Now that you've done that move on. And it's like, you know what?

I do this for a living, but my husband and I did a recent taking stock. It took couple of weeks for us to get all the different things together from our different jobs had to reset passwords, you know, all of those things.

The first thing you do and take some time and like have, have a glass of wine with it or something, because it's also not your favorite task, like let's do this one Saturday night.

Find all of the information you have, get it together and get a sense of where you are and get a sense of, how much you have set aside for retirement how much you can expect from social security.

Running Your Numbers for Retirement

If you are going to be receiving any pensions, I know those are very rare these days, but you know, some people in certain professions may still be getting some sort of pension and get all of that together to get.

A sense of what your number is going to be based on what you have right now. Once you have that, that gives you a lot of information to play with.

Rather than it being this like, okay, I gotta figure out what to do and you don't know where to start. You're like, okay, no, I have this much in retirement.

I can expect this much per month from social security and that pension from that job I did for 10 years in my twenties, it's not gonna be much, but I'll get this much per month.

Then you can start like, well, okay. If I don't add anything more to this. What am I, what's my life gonna look like, how much am I going to be making per year?

How much am I going to be bringing in per month? And then you can start kind of fiddling with things like, okay. If I turn this dial up and that dial down so for instance, okay.

What if I moved to a lower cost of living area? What if I save aggressively between now and retirement? What if I make this change or that change?

I am one of those rare people who finds that very fun.

Elle Martinez: I'm with you, Emily. I like it.

What If Scenarios

Emily Guy Birken: It's like that where it's just like, yeah, all of this is fun. Like if I plan out this stuff and for me, it's kind of like I dunno, it's like writing your own life story.

You're imagining what your life story is going to be like. So like, okay so if I retire to the beach, that's going to cost this much.

This is what that's going to look like, but I'll be living on canned tuna fish, because so like, do I like that version of me?

That's the sort of thing where like, again, if you bring a sense of playfulness to it, which I know can be hard because money can be a very fraught subject for a lot of people.

Bring a sense of playfulness to it, and a sense of like how can I afford the things that are most important to me?

Then it's going to be a lot more rewarding than just like plugging numbers into a spreadsheet, which is what people assume retirement planning is supposed to look like.

Taking the Stress Out of Your Finances

Elle Martinez: Yeah and I will say not in every case but I've talked to a lot of people and then also personal experience having a concrete or a clear idea of how you're doing financially. That in itself is like a stress relief.

When I started and Looked at the debt, I'm not excited to see the debt, but it actually felt better knowing, okay, this is what I have.

I can come up with a plan. I can deal with this. Versus not knowing.

It was just, I remember losing sleep at night you know, dealing with the car loan, the student loans and the credit card debt, it just at least having a plan. And for some people they may discover that they're not as bad off, especially a year later.

You know, if they didn't panic, With the investments say they may find that they're in a pretty decent spot, better than maybe they've anticipated.

Emily Guy Birken: Absolutely. It's the not knowing like is, is it's harder than knowing. A lot of times people will avoid it because they're afraid of a bad results.

Like you said, even if you look at your numbers and they're not great, it's going to feel better because you can do something about it. It's not gonna be hanging over your head.

So I tell the story my brother-in-law was deployed in Bahrain for 18 months and so my sister made a plan to take my my niece to visit him over gosh, winter break, 2019, before everything went down.

She had gone to the state department websites and nowhere on there did it say you both parents for the child's passport.

So she got all those, she had taken half a day off work, gotten all the way down there and found like this isn't going to work. They were leaving in like 12 days.

Yeah, so like she called me, she's like, I'm freaking out. And I'm like, okay, I get that.

You're freaking out. And she's like, I'm going to have to take my knee. She was going to send her daughter, my niece out of school for half a day to bring her down and they needed to coordinate something with my brother-in-law to fax it over on it.

So I said to her like, okay, deep breaths, this isn't ideal, but it's just a series of things to do. That's all it is.

You have a deadline because you've already got the plane tickets. You have like specific things that, you know how to do and what to do, and it will be taken care of you we'll get it done. So that's kind of how I feel about things like retirement.

It's stuff like that.

It's it. You get this kind of a morphous, like, Oh my goodness. I'm not gonna be able to do it. And it's like, no, you can, you just need to know what you need to do.

It's not gonna be pleasant necessarily, but you'll feel good taking care of it and checking those things off the list and feeling more prepared and feeling like you can do it.

I think that a lot of times we avoid stuff. I'm a master procrastinator.

A lot of times, I'm sure you've had that thing where like you procrastinate on something for like three weeks and you finally do it. It takes you eight minutes and you're like, why was that hanging over me for so long? That's very common with financial tasks and just doing it will feel so good.

Just to have it done and it doesn't have to hang over you anymore.

Elle Martinez: Yeah, absolutely. I know that talk of unknowns and there's so many things with retirement planning, but it should be discussed.

Roger Whitney, who is a [certified] financial planner, He even says like, it's our best guess.

There is no absolute guarantee for any plants so having that mentality can help you loosen up and you just try to go for the best case scenario.

Understanding Social Security

Elle Martinez: One of those unknowns, social security, which could be its own book. I know you wrote the book, but you get into this just within this book, which is a huge help it figuring out with social security.

Years ago was trying to, just talk with my mom and try to figure out. I was just like, Oh my goodness.

I can tell her this or that because like when to take it and benefits to maximize, but you lay it down.

I know we're not going to be able to go in complete detail on that, but like what advice do you have? For couples in particular about figuring out what's the best Avenue, or running the numbers with different scenarios to sort of come up with a basic plan?

Emily Guy Birken: So particularly with couples, the thing that people often don't think about is they'll be thinking about like how much money will I be getting per month?

How much money will we be getting together per month? They're not necessarily thinking about how much will a surviving spouse be getting.

If when one of us passes away and that's I think an important consideration because in general, the longer you wait to take your your benefits, the better off your surviving spouse will be because that will increase the spousal survivor benefits. So I'm really fun at cocktail parties.

Because it's very hard for us to wrap our heads around the idea of the party will go on after we've left. You know, we w we don't really think about that. But that can be one of spouse is a way of having money that they can count on, even as they grow older and older.

The thing with social security is a lot of times people are worried that they are not going to get the most out of it. There's people are like, I need to take it early because then if I die young, then like, I want to make sure I get, get the most possible out of it.

The problem with that is that in order to win, you need to die young. That does not sound like a game I would want to win.

The other thing is the thing that you really need to worry about in retirement is not dying young it's that you would live to be 120 because it's very hard to make sure that you have enough money to last as you reach triple digits.

Something that I recommend is hold off, getting social security as long as you possibly can. Now for some people, that's going to be tough. You need the social security to keep the lights on.

If that's what you need, that's what you need. If you have the ability to have the resources to put off getting social security, at least until your full retirement age or if you can, until age 70 that increases your benefits by 8% per year, approximately.

And that's guaranteed. The stock markets generally returns about eight to 10% per year, but it's not guaranteed in some years it returns negative 34%. So you're never going to get a guarantee like this, that you'll get 8% per year. So holding off on getting your social security, as long as you can is one of the best bets you can make.

Again, that's that sets you up for guaranteed income, no matter how long you live and that also sets you up for a better survivor benefit for a surviving spouse.

Working Together with Retirement Planning

Elle Martinez: Yeah. Some of these conversations, we avoid because one it's either it's far off or it's Talking about things maybe we're not so comfortable talking with, but like you mentioned in a way, this is a way to show that you care, especially with couples taking care of their finances, that you want to make sure that each other you're taking care of each other.

Emily your book has a ton of information, but what I like about it, it is like very easy to read.

In terms of you pick up a chapter, you got a to-do list. You can tackle that you can move on. It felt more, I wouldn't say like a workbook, but it felt like, Hey, I can, I can do this.

It is coming out today. I'm excited and if you're listening and you're about to retire or you're retiring in a few years, definitely pick this up.

And if you're like me, you have a parent who is approaching retirement, pick this up as a gift for them. I'm getting one copy from my mom.

Thank you so much, Emily, for coming on. I really appreciate it.

Emily Guy Birken: Thank you so much for having me. I really enjoy it.

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Music Credit

Our theme song is from Staircases. Additional music by various artists from Audiio.

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