In this highly informative podcast, your hosts Kevin Whelan and Christian Rodwell take you on a comprehensive journey through the risks that demand careful consideration as you approach retirement. Kevin and Christian share the critical importance of safeguarding your financial future. In this episode, they address outliving your savings, preparing for unexpected costs, protecting your purchasing power and much more! Whether you're approaching retirement or already enjoying it, this episode will equip you with the knowledge and tools to navigate potential pitfalls and ensure a comfortable and worry-free retirement.
In this highly informative podcast, your hosts Kevin Whelan and Christian Rodwell take you on a comprehensive journey through the risks that demand careful consideration as you approach retirement.
Kevin and Christian share the critical importance of safeguarding your financial future. In this episode, they address outliving your savings, preparing for unexpected costs, protecting your purchasing power and much more!
Whether you're approaching retirement or already enjoying it, this episode will equip you with the knowledge and tools to navigate potential pitfalls and ensure a comfortable and worry-free retirement.
Resources In This Episode:
>> WT198: 3 Essential Insurance Policies You Should Consider w/ Paul Brooks
Next Steps On Your Wealth Building Journey:
>> Join the WealthBuilders Community
>> Join the WealthBuilders Academy
>> REGISTER HERE FOR ACCESS TO FREE RESOURCES
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Speaker 1 0:01
The purpose of wealth talk is to educate, inform, and hopefully entertain you on the subject of building your wealth. Wealth builders recommends you should always take independent financial tax or legal advice before making any decisions around your finances.
Christian Rodwell 0:20
Welcome to Episode 204 of wealth talk. My name is Christian Rodwell, the membership director for wealth builders joined today by our founder Mr. Kevin Whelan. Hi, Kevin.
Speaker 3 0:29
Good to be with you. Once again, Chris, on episode 204. Well, I don't know about you. But I've not been feeling my normal self this week. My wife said to me, Kev, you don't sound your normal self today. And you know what, Chris? She's right. I wonder if our listeners can guess what's different? This? What on earth was that?
Christian Rodwell 0:50
Who was that
Speaker 3 0:51
have been cloned? That's Dolly the sheep. I've been cloned. Do you know what that's a risk, isn't it? You know, my wife could be very confused if somebody gets on the phone too. And we're using that.
Christian Rodwell 1:04
Well, we've been playing around. I've been having a little play around with some of these AI tools. Kevin? And yes, I did see if I could clone you and wonder if we followed any of our lessons there.
Speaker 3 1:14
Well, there'll be somebody listening, walking the dog and they weren't paying attention, right. But But yeah, it's interesting, you've got relatively close and it'd be six, seven out of 10. Probably useful, maybe good for us to be thinking about using AI to do sort of an animated care version, long after I'm gone. So you can build that longevity and Chris, yes, to keep me going when I'm no longer here. Well, if you're retiring, I'm not talking about retiring. Now, I'll keep going until they drag me out in a wealth builder box. But nonetheless, this whole concept of retirement risk is looming very large. For so many people these days is the baby boomers fast approaching all of them being 65. Now, and as a result, I thought it would be a good idea. Again, just to look at what you know, the AI is saying about retirement risk and sci fi can take a fundamental different view or make a distinction that is very much a wealth builder distinction. I think, when you did the research on it, Chris, it makes some good points. And I like what AI does. And I think it's fascinating. It's becoming quite a theme for us now. And I know we're using AI to help us create quizzes and other things that will be useful to help people understand the type of person they are particularly around. Raising money savvy kids, you know, and we'll talk about that probably for the rest of our lives now, about the things we do today will affect the financial security of our children in the future. But as they say, an all good aeroplanes secure your own oxygen mask first, before seeking to help others and I wouldn't mind spending a little bit of time just doing a bit of retirement dangers, retirement things should think about, and then give you a wealth builder twist, which should give a big distinction for those people who follow wealth builders and in which we know they do in their 1000s. Chris,
Christian Rodwell 3:23
yeah, definitely. And following our theme of sevens, which we we love seven pillars, seven freedoms. And today we're looking at seven different risks that people might consider when they're approaching retirement. So where should we start, Kevin?
Unknown Speaker 3:38
Well, what is Chuck? So?
Christian Rodwell 3:40
Well, yeah, I'm using chat GPT regularly, in fact, every day in different guises. But yeah, helping with the podcast structure. And certainly it did suggest a few of these risks risks, Kevin, and first one that suggested was understanding longevity risk, so really outliving your savings?
Speaker 3 4:01
Certainly, that's a big one. We touched on that a few times now, in recent podcasts, particularly around children living now when the expectation is live, on average 200. And that's a long life challenge. For those of us who are all there is we probably won't most of us live to 100. But we'll still have many, many years in retirement maybe 2530 years in retirement if we retire at 65. And most people are living to 8590. So if you think about a 30 year retirement is an example. Wow, you know, that's that's a long life that you have to fuel. And that fuel historically came from state pension and final salary pensions, and therefore you don't have to worry about your own longevity, because you are paid till death. So that's the end of your longevity. But these days that risk is being trans suffered increasingly to ourselves, state pension coming in later now, state pension will decrease over time. I've talked about that in the past. And I think the big issue is how do you manage a braving a desire an absolutely fundamental need for certainty of income. So you can live a good life, beyond a working life where you're trading time for money in a job or a business. So we're being simplistic. How do you do that? When life is so fundamentally uncertain? Where do you create certainty from where traditionally the asset that most people rely on and I guess most people listening, Chris, the asset they will be relying on will be the asset of a stock market. And it's very difficult to create certainty from there. Because there's so much volatility and so much uncertainty in there. And when you're looking at how to do that, you've got to almost find a way to be able to project the income that you need. Build in so much flexibility against future events. And I guess, chat will raise one of those, possibly around health, and then get to a position where you understand exactly how, how much income you do need, and how do you make the asset, or the the money you've got in the stock market, continue to eke that out. And that's that's a very, very difficult thing. Typically, when people go to retirement, I always make sense to to get some guidance, or certainly some advice. There's a difference between the two, I give guidance or don't give advice, because advice comes with a responsibility to maintain the outcome that someone seeking, we can't take that responsibility and whirlpools. But I phase generally will get involved with that. And they'll typically say, you can probably, if you're in the stock market draw about 4% per year. And it's almost become enshrined in like almost like that they call it a principle of the rule of 4%. But it isn't a rule, because there's no guarantee the stock market will deliver 4%. Because you get events like 2008, stock market crash, you get events like COVID, stock market crash, there'll be other crashes to come. And that becomes very critical, is you need to build in the expectation that somewhere the market will crash. However, what the iPhone said when they back test this and they go back for decades, if you draw 4%, you probably will be able to stay in your money. Well, if you think about 4%, Chris, how much do you need? If you you want 100 grand a year? How much do you need two and a half million, most people don't have two and a half million 50 grand a year, you know, half of that 1.25 Most people are not going to get anywhere near a decent level of income, even kind of average earnings of say, whatever that 35,000 even say 40,000 a year, you need 25 times that it's almost impossible to build a pot big enough if you're relying exclusively on the stock market. And that's where I think the big risk is that people have a mismatch of understanding between the pot size they've got and what that will deliver in terms of income. So in terms of almost if you imagine, Chris, retirement is a transition, it's one of the biggest ones you'll ever face. And it's like going on a journey. You and I've talked in the past about our love for holidays and going to nice places and I remember having a bit of a laugh about my experience in Scandinavia when they wouldn't take any money off me. Well imagine this is a retirement journey in your you need to spend retirement pounds or retirement dollars, or retirement Bart or whatever you're spending, you're spending retirement something you've got to know the conversion rate. And if the conversion rate is 4%, you need a lot of money, or you need a better way. You need to find a way this is the wealth builder twist and I'll give a twist everywhere I can find ways to give you a safer secure, more predictable way to get higher than 4%. So if you can be involved with your money, get a return on that interaction of you participating adding value to what you do. And you do that by understanding different pillars. Pillars will always come into this the seven Pillars of Wealth and dealing with those, particularly around property, business, intellectual property, joint ventures and collaborations. There's scope, while incredible value, and in some cases double or triple that without taking more risk. It's just your participation and your commitment to add value that makes a difference. So I would say, you know, Chad GBT, right? To say longevity is a risk. But the way that most people expect to deal with that is fundamentally flawed.
Christian Rodwell 10:34
Okay, well, that was a comprehensive answer there. Thank you, Kevin. And shall we look at the second risks that go with it might consider, which is based on some of the things you've just talked about, and you know, money being in the market, the market fluctuates, and what about market volatility affecting your retirement savings?
Speaker 3 10:56
Well, we've just touched on that one, but I think the one that probably has got the most to say is what was called sequencing risk.
Christian Rodwell 11:05
And that's the, the danger of timing the withdrawals is that
Speaker 3 11:10
it's the danger of something happening at the very point you start. So if you imagine you were retiring in 2008. And all of a sudden your pot was, let's say, it's half a million quid, has gone down to 300 grand, you can't recover from that. If you need to draw income. And sequencing risk is absolutely fundamental to what you do. And again, it's the same point you avoid sequencing risk, having a devastating crash. If you have other assets, that work in a different way, the big problem with the marketplace, Chris genuinely now, is historically there's been a belief that there's a correlation, a relativity between risk and reward. That if you take a higher risk, you get a higher return, that you invest in something and you diversify in terms of the stock market, and you get a better return. If you do that. doesn't work anymore, it only works, that principle only works. If things work in different directions. We saw just recently, stock market fell, bonds fell, you know, interest rates were low, everything you could rely on for an income went down. You know, so when you call that systemic risk, when our system shuts down, when the whole system breaks down, you've got a problem. And that's because you're not in control of the macro picture. You think about the world is the difference between what you can control and what you can't. And let's call that macro, big picture. Micro, you can control personal economy, big economy, and you control the stock market. And you control inflation. No. Can you control who's in government when you can vote? But no, can you control? Tax? No, but you can influence your tax. So you can only deal with what you can control. So once you get into a place where you have to understand what's going on in the world, like for example, right now, there's this, there's a whole thing around pensions and the lifetime allowance. And the lifetime allowance in that amount of money, you can have a new pension with where everything is completely tax free, was just over a million is now unlimited. But with Labour come in, will they bring it back. We don't know any of these things. But we have to be intellectually fleet of foot when it comes to these things because they could fundamentally affect our income. So we need to be tuned in. And you can't be tuned in if the only tune you're listening to is the dissonance of the TV. And what you hear on the radio or money box or something, you've got to tune in and be part of a community where these things have been discussed otherwise, in isolation, you can't sift through the noise. It's just impossible to sift through all the bloody noise that comes through Chris day after day after day. How do you deal with that? Unless you're part of something that says, hey, this is important, you should understand it. You might not be able to control it, but you can put it in to your wives. You can put that into risk mitigation. So when you're moving from a when you want to move from uncertainty to certainty, you've got to put all of those things in and factor them in almost like a huge melting pot where you're beginning to assess well what if this then what do I do about that? So being able to react, being response, having a response is response able, so that's responsible being was sponsible able to respond his fundamental in a new world, which is based on uncertainty. So yeah, sequencing risk market fluctuations onto anything about those unless you plug into the market where there are some techniques, and we're going to go into them here, Chris. But there are some techniques where you can involve yourself and interact with your money, so that as the stock market grows, which it will do, you can bank some of the gains, so you lock them in in something else. And when you lock them into something else, that works differently. That's called counter correlation. So you're building staircases, you're not just building a sort of an uncertain pathway that ebbs and flows like a tide, you're building little staircases, that's when you can start to compound the value. And you can also protect yourself on the downside. When things are going down, you can stop the market crashing in your life, because you can put in things called stop losses. And we've got people in our coaching community, Chris, who teach all this, but those who are interested, if you're not interested in mitigating stock market risk, then have less money in the stock market, or build more assets that are not stock market only based. So hopefully that deals with the issue of market timing, market volatility and sequencing risk. Yeah, yes, we're chat takes us next.
Christian Rodwell 16:30
Let's have a look. So another of the points is inflation. Of course, we all the talk of inflation at the moment in the news, but how does inflation pose a risk to your retirement savings? Kevin?
Speaker 3 16:43
Well, clearly in your retirement pounds scenario, the conversion rate is affected by things that will reduce it, well, they're going to be taxed for one, inflation would be the other one. And it's wow, I mean, that's a really tough process to try and beat inflation. Except if you look at, again, how to build other assets and take inflation into account that will grow with inflation, let's say, or alternatively, your, your building just different ways that you can draw more than the 4%. So pretty much what I was saying a little bit earlier on, but you have to be aware of what inflation is. And in some cases, for those people who've got state pensions, which will be inflation proofed, final salary, pensions will often be inflation proved. So wherever you've got those, you know, maintain those if you can, if that's important to you. But there's a risk as a trade off, if you've got an inflation proof pension with a big company, but then you run the risk of if you die, you lose half the income to a spouse, and zero income to children. You're having to play off, you know, a risk reward scenario. And this is an important thing. I believe everybody should understand the risks that they're participating in. And by understanding means you can make a decision, you can say, what is the risk? Do I accept the risk? Do I partly mitigate the risk? Or do I should insure against the risk and where you can insure against it? You should, if it's important enough, but you can't insure against inflation, unless you're building inflation proofed assets, and that's virtually impossible, other than state pension plan, salary, pensions, and even those will limit the amount of inflation protection you've got. So the best way to protect yourself inflation, have more assets and have more money than you actually need. There's nothing you can do about
Christian Rodwell 18:48
that one. Right. Okay, here's another one. So preparing for unexpected costs, and in particular, health care. So, you know, how can you plan for that when obviously, you don't know exactly what might crop up, but
Speaker 3 19:04
it's the same principle, Chris, that it's a risk that you can see. Now, we just as life expectancy, there's longevity risk. But some people will live a short life like my father who died in mid 40s. Some will live a long life, way past 100. But statistically, we know what the average is. So we can kind of use that I generally when I'm talking to people say, expect to live to 100. An expected some time there'll be a health issue. Now, obviously, we're living longer, but we're living healthier. There is more focus. So clearly, it's got a lot to do with finance, possibly with wealth building, but everything to do with health building. I'm certainly not an expert in in health billing it all. But I would say more and more people are paying attention to keep taking care of their health so that they've got less risk so that they're living longer but living in ALC, and that's great. But where you get a health challenge, then if you've got assets, your health isn't affected by that, if you've got a flow of money coming in from multiple assets, even if you're unwell, the income will flow. So we'll remove any pressure from you having to do things. One of the challenges that we're seeing now, versus we're seeing more over 70 year olds going back to work than ever before, only if they can work. What if you've got a level of income, you can't maintain it, you take on another job in order to maintain it, then your health goes, and you're not able to do that. So the issue with healthcare is being aware of how your assets will work. If you need long term care, that that's fundamentally different. So when you need long term care, one of the things you can do to mitigate against a loss of an asset to pay for that something we do in the roof, Chris, which we call tenancy in common, where you own your home, instead of owning it as joint tenants, it's a bit of a weird word, because when you own a home, it's called tenancy, but it isn't really, because you own it, you know, tenant. But in law, it's called joint tenants if you own it together, tenancy in common, if you own, let's say, two hearts. So if you're on a property is two halves, then if you need if you as an individual go into long term care, and you're married, then one of the things that you can do is by having the property as tenants in common, then your property can't be considered as an asset, because you only own half a house on a full house. So there are things you can do to protect. But if you get ill, there's nothing you can do to prevent that. But again, you have to build in mitigation for how we're going to pay for the costs, if it's an expensive treatment, and we're going to pay for the travel and all of those sorts of things. So in the same way as you might plan at the beginning of retirement life, to have disposable income that you plan to travel more and enjoy more, and so on, build that same thought process as you get older, when you're going to travel less, but you're probably going to be travelling more to hospital and back than you are to anything else, you know. So I think it's just building in margins. So well, my baseline expenditure is x. My expected expenditure for real pleasures or real healthcare challenges is another x. What does that need to be then? So in the same way, as we ask people to forecast, what do you need to be part of a life that's completely financially independent, but what does that need to look like in retirement and be generous with the money because that will give you a much better understanding of what you need to do to get there than if you just ignore it and say, hey, I can live on X 1000 a month. And then the challenges start coming at you from the stock market, from your health, from inflation, from increasing tax, and so on. And this is where you get your death by 1000 cuts in your retirement becomes far from a pleasure, it becomes a misery and a life of uncertainty and anxiety. And that's the last thing we want. Because if you do that, then your final years are going to be really in a place where your children are seeing you miserable. And you can't really leave a legacy. So it's a desperate place that people are finding themselves in Chris, and forgive me for being passionate about it. But this is our life's work is to help individuals and families avoid these challenges by building stronger asset base, and do it now while you fit in. You're healthy if you are.
Christian Rodwell 23:42
And on this point, I'll point our listeners back to Episode 198, where we had Paul Brooks talking about three essential insurance policies that you should consider. So that definitely would be one to check back in on if you haven't already heard that. And I'll link to that in today's show notes.
Speaker 3 23:59
Yeah, yeah, very good. Insurance is an important thing when you're looking at risk because you know, if you're if you're able to deal with the risk, and it's an it's a very comfortable risk, you self insure. But if you can't deal with the risks, then you insure against the risk. So it may be different ways you can do that. I was talking to somebody just recently and they said the company's paying for that and Paul, Paul talked about that. So I'm, I'm paying for insurance because I believe are needed if this happens, well, if the company can pay for it, then that's a tax deductible expense. So being tax savvy is really important. I mean, crumbs are actually worked out. I read an article recently, Chris, that the average person the average individual, over their lifetime, on average income will pay over a million pounds in tax. And higher earners from over 100 grand will pay more than 2 million in tax. So you're not having a tax strategy in your life, which is why we put it very squarely in the beginning of our work, and wealth builders and debits, and really, really focusing on tax, in all the ways you can do that. Today is not the best time to talk about the ways you can do that. But there are countless ways you can use pre tax environment to pay for things. And one of the best ways to do that is to have a limited company. So if you've got a limited company, you can use that limited company to do things. I just love the idea of one of one of my clients, Chris has got a fabulous place in Portugal with a Portuguese business, essentially, which means the family could go to Portugal, they can have a board meeting in Portugal, and they can claim everything back on expenses. I mean, you get smarter with your retirement planning, and many people like to have a holiday home and why not think about how you could do that construct and the way that some of those things will be will be tax deductible that just smart, isn't
Christian Rodwell 26:06
it? It sure is. I like the sound of that most. Oh, you might Yeah. Well, look, Kevin, I'm not sure if you've got any further risks still to come. But before we conclude, let me just head over to Trustpilot quickly and share one of our reviews that's come in this week. And we've had a review from Stuart, who says, I was fortunate enough to win an initial meeting with Christian following their podcast contest connected to the update of our website, that was episode 200. And the price included an online assessment of my wealth dynamics and was followed up with a short review of my current financial position, the call covered some good ground. And if you're a regular listener, many familiar items, clarity further enhanced from the call, true to their word, there was no selling involved at any point of the call. And this would be true of any other review court, I would imagine. And if you're interested in becoming financially stable, and for the mid and long term, giving your family much greater security, then wealth builders lays out the method, and you will find your way to them to carry you further. And with stability to reach your goals. Thanks for the call. And if you are on the fence, I believe you can arrange a similar call and would not have to navigate any selling of services, which you will find your natural home. So there's the review in full from Stuart, thank you.
Speaker 3 27:23
That's a long review for a short experience with us. But you know, I'm glad he's echoing some of our values. And one of the things that we see is people sitting on fences. Sitting on fences is not good. If you get splinters up your bottom, you definitely do not want to sit on fences, make a decision to build wealth, don't make a decision to retire by chance. Some quick add ons Chris, if chats had its day, is don't forget to find those lost pensions. You know, we had a we didn't have a review. But we've had a review from this lady before. Erica, who previously mentioned we'd saved a substantial amount in fees. And that's another point, isn't it? You think about the fees that you're paying, if you're predominant in the stock market will be a massive take more than the tax take, in fact, but you sent me an email just the other day and said, I did my debits again, which is this process of reviewing. And she said it's something you know we do regularly. I thought I had 5000 pounds in a pension. Now that suddenly increases the value, yet there's 27 billion unclaimed. So what does that mean? It means somebody else, like a financial institution is being able to pay the directors of that company and the shareholders, substantial profits and bonuses for money that belongs to somebody else's retirement. That shouldn't happen, ladies and gents out there. And most people just switching off with the whole concept of pensions. So if you're switching off your pension, yet, we've just talked about all the risks of getting it wrong, you're probably gonna get it big style. Wrong. Right? Because you're disconnected most people disconnected, disenfranchised, just not interested in what's happening in their pension life. Yet, for most, it's the most important asset they've got in their life, unless they meet us and they build the other pillars on top of that. So tune into the podcast, find out what the seven pillars are Chris, maybe we can sign phones to book again and give people a free copy of that. Because that's the best way to retire in style. That's the best way to live a life that you can live well and leaving absolutely incredible legacy with giving the best lessons and the best stewardship you can to the family you leave behind. And that means You can you can bring them wisdom instead of anxiety. So that would be my final point, Chris.
Christian Rodwell 30:07
Great idea. Yeah, yeah, the Seven Pillars of Wealth ebook that you wrote Kevin, I will link to that. So if you're listening right now, and you've not got a copy, click on the show notes, download that for free. You'll be able to read that over a cup of coffee in in less than an hour, Kevin, but it's absolutely packed full of fantastic insights and information. And of course, describes our seven pillars model and everything we've been talking about today as well. So that was great. And hope you enjoyed listening to today's episode as well. We will definitely be back again. And if you'd like to share today's episode with a friend someone you think might get value then please do hit the share button. We'd appreciate that. And Kevin, you and I will be back here same time, same place next week. Oh, we've got a glitch in the system.
Speaker 3 31:01
I knew he wouldn't be able to make it all the way through the episode without running out of steam. Good job. The artificial Kev is ready to step in when required. Well Until next week, Chris see you.
Speaker 1 31:15
We hope you enjoy today's episode. Don't forget that we are constantly updating our resources inside the wealth builders membership site to help you create build and protect your wealth. Head over to wealth builders.co.uk/membership right now for free access. That's wealth builders.co.uk/membership