Hello, and welcome to lunch on the go lesson number two. Once again, I'm Tony Kinsey or and In this lesson we asked the first four of the eight questions I told you about in lesson one. Again, my comments will exceed what you see on the slides. Here we go. Question one. At what age do I want to retire?

First, a little history. Retirement as a social concept started some 200 years ago as the Industrial Revolution became an economic reality. Before then you typically work somewhere until you died, or you stopped working and hopefully someone was there to look after you. Here in the US, the Social Security Act was passed in 1935, with age 65, chosen as the age to start receiving retirement benefits. In those days, men were the nation's primary breadwinners with a life expectancy of about 58 if you live beyond that, and had work credits Age 65 you could expect some help paying your bills. It was considered a safety net put in place for older people who, for whatever reason, didn't have enough money to sustain themselves.

Today, about 85 years later, modern medicine has taken life expectancy out past age at each of the eight questions requires an answer or a resolution. As you ask them of yourself, it's important that you write down your answers. In each case, your answers may change, but you need a starting point. Having an answer written down gives you the necessary targets based on where you are in your journey toward retirement. These days, some people retire early and some never retire. It's very important to start with a specific reference point as you begin to build your strategic financial roadmap.

Question number two, how long will I live? Obviously this has to be a guess. But the question is important. Living too long has the potential to really mess up your retirement if you're not ready for it. The real question is, when will I die, which may be a little harsh, your assumption should be that you'll live to age 100. This chart Well, a few years old, shows average life expectancy in the US compared with Japan in the United Kingdom.

For men in the US, it's about 76 and 81 for women, which is why you see 78.74. But these are just averages. That means 50% are already dead, and 50% are still alive. If you're reading this and are male, the number is above 76. If you're female, it's above 82. Again, it's an average.

But in the US women typically live six years longer than men among the wealthy industrialized nations on the planet, the US now ranks last on the life expectancy list. But if you identify by gender, race or state of residence, the numbers are all over the place. As a financial planner, I used to use average life expectancy as a planning goal with clients. That was a mistake. Today, we should assume we'll all live to be 100. Some of you will shake your head or give me the evil eye.

But every year new statistics suggest more and more of us will live beyond age 100. Let's say you reach age 85 you've reached your slow go years and realize you spent too much money in your gogo years. It may have been traveling or just following not following a budget. It now occurs to you that you could run out of money before you run out of life. What happens then? I can say with certainty that no one is going to show up at your front door and give you a bucket of free money.

It's on you to figure it out. Question number three. How do I plan for unexpected healthcare costs in retirement? In Lesson One, I talked about new financial challenges that appear in retirement. significant health care costs is one of them. It surfaces when the need for what's known as long term care or LTC appears.

If this happens, it can turn your retirement plans upside down. We know modern medicine is keeping us alive longer and longer. Unexpected health care costs often become an existential threat to our ability to pay our bills. We'll still need food, transportation, a place to live, utilities, recreation, all the things that make life worth living. Suppose you have a spouse that survives you, how will your healthcare costs affect their financial life going forward? If we live beyond the gogo and slow go years, the cost of health care has the potential to bankrupt us.

It's because you may need someone to come in and help look after you. Other than a few days at the beginning. Medicare doesn't pay for long term care US performs what are known as activities of daily living or ADLs. Things like bathing, preparing food, taking medications, and even getting dressed. If for some reason you cannot perform two of them, it becomes a need for long term care. It means you can no longer fully look after yourself and need help to get through the day.

Your family may realize they can't look after you without some help. A qualified caregiver or health care professional must be hired. As you can imagine, those folks don't work for free. Yes, there are federal programs like Medicaid, but they come with a catch. To qualify you first have to spend down almost all your assets and reserves. This chart is a projection of LTC costs where I live.

Less than 20 years from now you're looking at a possible $80,000 a year or more. since none of this is provided by traditional health insurance, it becomes an out of pocket expense if you aren't ready for it. These expenses have the potential to bankrupt you and your family. Question number four, how much investment risk can I accept and not be afraid? People normally associate investment risks with something bad happening. When it comes to our retirement money.

Many of us assume risk is a bad thing and something to be avoided. This is because personal financial decisions are inherently emotional decisions. They involve our future comfort levels, our freedom, our independence and peace of mind. It's hard to be objective when it comes to our money. However, as a longtime financial professional, I will tell you that investment risk is not a bad thing. It only becomes bad if you don't, or are unwilling to learn how to manage it.

Investment risk is essential if you expect your financial resources to grow over time and keep pace with inflation without risk your chance Maintaining purchasing power over time are slim to none. Yes, there may be bad outcomes from time to time, but to the extent you manage and minimize the risks you can avoid, you greatly increase your chances of success. Unfortunately, there's another risk out there that's almost impossible to anticipate. Here's a chart that demonstrates an example of what we call sequence of returns risk. It's largely a function of when you were born, of which you had absolutely no control. On the left side is client a.

She retired in 1991. At age 67. She had $100,000 invested in the s&p 500 and began to withdraw 4% annually for 10 years. At the end of the 10 years, the account had grown to 332,300 despite 4% coming out every year. On the right is client B, who retired in 2001. He also started with $100,000 and withdrew 4% annually for 10 years.

However, the sequence of investment returns over his 10 years was very different. His account shrunk to 76,482. All because of the timing of his retirement. Client B's financial future is far less promising than client A's. His 4% withdrawal income was less than client A's. And going forward, his ability to pay his bills will be dramatically worse than client a look for something in the resource vault called the car and how story he describes something that can result in better outcomes for either of them.

These first four questions should have raised your awareness and started you building your roadmap. And lesson three, we'll talk about the next four questions. See you there.