Eric Zizich:
It’s now time for 4 Your Money. We’re joined by Nate Kreinbrink, financial advisor at NelsonCorp Wealth Management. Welcome back, Nate.
Nate Kreinbrink:
Appreciate you having me again.
Eric Zizich:
Well, retirement, it’s a big topic on the show, whether it’s taxes, investments, social security, to name a few. So looking at the landscape, what do you think people need to know to be financially secure going into it?
Nate Kreinbrink:
Well, it’s one of the more common questions that we get when we sit down with individuals kind of, “What kind of shape in my end for retirement?” Or simply, “When can I retire?” People think it’s just a simple answer saying, “Okay, this is what I have. This is what I need. Am I able to do that?” Well, we all know in financial world that there’s a lot of complexities that kind of come into it, so how do you really measure that instance to say, “Okay, is someone really able to make that decision?”
Nate Kreinbrink:
I think we’ve got a graphic here that kind of goes through some of the framework of just three of the scenarios. The one thing is the first one is the 4% safe withdrawal rate. Now this is basically focusing on your investments saying that you can take out 4% or less of your investments on an annual basis and historically saying, that this will last you 30 plus years as far as in your retirement to be able to take that out. Now again, this is focusing on your investments, so it’s kind of forgetting about some of those other cashflow things.
Nate Kreinbrink:
Probability of success; this is basically used with the computer is what we call the Monte Carlo situation where they take tens of thousands of different scenarios and they run them through a test to say, “Okay, what is the outcome going to be? Is it positive, is it negative?” So if they run 10,000 different scenarios and 9,500 of them come back positive, you have a 95% success rate as far as making that happen. The only downside with this one is that it’s really not looking at the magnitude of either success or failure. Are we short by a dollar or are we short by a half a million dollars? That’s a big difference, but it really doesn’t take that into consideration when it does those outputs.
Nate Kreinbrink:
Then the last one is simply funded status. This is looking at a net present value, but it’s also taken into context your longevity; how long are we actually going to live or how long do we need these assets to last over our lifetime? Bringing that all together and basically, giving us a funded status. Now for probability of success and funded status, the higher that percentage to a hundred or above, the better off we’re going to be. So three different scenarios, kind of all focusing on different aspects of the overall retirement.
Eric Zizich:
So lots of options, lots of nuances to those options. What should viewers know as they consider?
Nate Kreinbrink:
Well, I think really, just understanding exactly which aspects are more prevalent throughout your retirement planning. There’s social security tax planning, does that have more of an impact? Do our investments have a bigger impact on what I’m going to need to retire? Because each one of these scenarios that we went over definitely looks at it in a different way and gives you a more accurate output as far as what we’re looking at.
Eric Zizich:
Is there anything else viewers should know as they begin their planning?
Nate Kreinbrink:
Well, I think simply is that any scenario that you won is never going to be 100% accurate just because of all the assumptions that we’re using in the time span that we’re using. So with that, we need to make sure that this isn’t a one and done plan, that we’re going to do it. Just when I’m entering retirement, I’m going to do a plan and I’m good to go. We want to always make sure that we’re constantly looking at this to make sure we’re still on track, any law changes, how that’s going to impact our plan, and again, making sure that we stay on course throughout our retirement, not just at the very beginning.
Eric Zizich:
And getting great advice throughout the entire way.
Nate Kreinbrink:
That’s exactly right.
Eric Zizich:
Definitely. Nate, thanks so much for joining us.
Nate Kreinbrink:
Appreciate you again for having me.
Eric Zizich:
If you missed any of our conversation, you can find it all, it’s on a website: OurQuadCities.com.