Your Retirement Budget with Jason Parker

george grombacher 0:02
Well, I’m left with this is George G. And the time is right. welcome today’s guests strung apart with Jason Parker. Jason, are you ready to do this?

Jason Parker 0:08
George, I am so excited. Thank you for the opportunity to be a guest on your show again, this is awesome.

george grombacher 0:13
Yeah, excited to have you back on let’s go. Jason is the author of sound retirement planning. He’s the author of, or the host of sound retirement radio, and he is the founder of the retirement budget calculator. Jason excited to have you back on tell us a little about your personal life’s more about your work, why you do

Jason Parker 0:31
what you do? Well, my personal life you and I were just talking about the fact that my new hobby, starting last year in 2022, is pickleball. And so I’ve really, really been having a blast with that sport. I dislocated my shoulder this past weekend. So you know, trying to dive for a shot. I also took up riding electric bikes last year, so riding electric bikes, and playing pickleball. That’s, that’s, that’s where all the fun and the joy is occurring. And then from a work standpoint, you know, I get to walk life with people as they’re getting ready for retirement. And as you mentioned, Sandra, Herman radios podcasts I’ve been doing for a long time, we’ve got over a million downloads now. My new book came out. So my first book was sound, sound retirement planning, my new book is called retirement calculator. How much money do I need to retire? That’s on Amazon. But one of the things I found, you know, as the audience has grown George, I just didn’t have the capacity to help people one on one, all the people that wanted help, and a lot of the people that listen to the podcast or more of the DIY crowd, the do it yourself crowd. And so several years ago, I said, How can we start building tools, not just education, because that’s what the books and the podcasts do. But how can we actually start building tools to simplify some of this for them to take the mystery out of it to help them do this on their own. But instead of making these complex spreadsheets that they could, you know, mess up a formula. And we we’ve built it all in an app software as a service that lives in the cloud. And it just helps them crunch their numbers. So that there’s three things we want people to take away from any of the work that we do, whether it’s the podcast, or the book, or the software, we want people to experience three things clarity, to know what’s most important in their life, confidence to know the numbers are going to work as they’re making this transition into retirement. And ultimately, when you have those two things, you get to experience freedom, freedom from worry, and freedom from greed, and freedom to spend your time with the people that are most important to you making an impact in this world and really doing significant meaningful work besides just you know, watching your money all day. And so that’s, that’s what I’m really excited about, we get to touch a lot of people’s lives. And it’s, it’s a lot of fun.

george grombacher 2:40
I love it. So, I, I am a huge fan of, of giving people easy to use tools, and sort of go through a process of self discovery and whether or not they come back to get their questions answered, or if they need to have some kind of a thing fulfilled, if it’s a product, whatever it might be or advice. I think you’re just really giving people the autonomy and the tools to be able to do that. How has it been received?

Jason Parker 3:11
Oh, that’s awesome. We’ve had 1000s of people sign up for the calculator, the calculator is a freemium tool, meaning there’s both a free version and a paid version. So on the free side of the equation, I wanted to make sure that everybody, regardless of their situation, could really put together a strong budget, or really understand their spending in detail. And so for free, everybody can build the budget piece. So whether or not you’re 20 years old, and just getting started or you’re just getting ready to retire. One of the things that we all know anybody that’s in the personal finance space knows that the most important lesson you’re ever going to learn about money is telling your money where to go. At the beginning of every month, instead of waiting till the end of the month to ask the question, what what happened to all my money, so you want to tell it where to go at the beginning of every month instead of wondering where it went. So that’s the budgeting tool. Now, if you want to use any of the forecasting tools, then there’s a fee to pay for the calculator to either $95 A year or $9.95 a month. And the forecasting tools let you look into the future to understand whether or not you’re going to run out of money in retirement. And that’s really the number one question most people have. But we also have federal income tax calculations built into the calculator. So people can model things like Roth conversions, or they can answer questions like, do I dip into my brokerage account first or my Roth account first or my IRA first, and so my thought process is just go out and help as many people as you can. And some of the people are going to want the free version, some of them are going to want the paid version. Some people after using the calculator will reach out to our firm to inquire about investment management to you know, help them walk life with them. from an investment standpoint, a lot of people don’t really know what they’re doing when it comes to investments and so we can help people from that way as well. And that way Well, but yeah, but I’m really excited about the calculator, one of the things we built into the calculator is a community portal. So once it’s what’s one of the premium features, but once people sign up for the calculator, they get access to the community portal, which are other people that are on this retirement journey together. And so they can ask one another questions about how to use the calculator, or when did you start Social Security or we can talk about travel, or we can talk about life goals, and what’s most important, so it just gives people the opportunity to connect, I like to think we’re smart people coming together to help one another on this journey on this path. And so that’s a that’s a neat feature of the calculator. And then one of the other non financial elements that we bought built into the calculator is this goals tracker. I heard Jerry Seinfeld once said, when he was getting started with his current career as a comedian, the way that he got good at writing jokes is you’d hang a calendar on his wall. And every day that he would write a new joke, he would put an X on the calendar, and he said, Don’t break the chain, that was kind of his methodology, see how many days you can go in a row without breaking the chain. So we built a gold tracker into the calculator to help people with these types of things. So if you’ve got daily goals, like you want to do 10, push ups a day, or drink a glass of water a day, you can start getting a visual for seeing the progress that you’re making. So we’ve got it broken down by daily, weekly, monthly, annual and lifetime goals. And so I like to think of the lifetime goals as the bucket list things. It’s like when we get to the end of our time, can we how can we know that we really lived our best life. And so that’s kind of a non financial element to the calculator, but a very important element with with helping people live their best life. So we’ve got community, we’ve got goals, and then we’ve got a calculator to help crunch all the numbers to help people see if they’re going to be okay. And really, at the end of the day, that’s what people want, they just want to know that they’re going to be okay, that they’re not going to run out of money in retirement, that they’re not going to become a burden to their family physically or financially. And so, you know, this is, it’s really exciting work to think that we can have an amazing impact on so many people’s lives. And I would say the calculator is really designed for people that are within five years of retirement. So it’s, it was really designed for a very specific audience. Like I say, younger people can use it, but it was it was really designed for those people that are trying to answer this question, are we going to be okay, can we retire?

george grombacher 7:20
I love it. And I appreciate the thoughtfulness and the time that you put into adding those additional features above and just above and beyond just these are the numbers, obviously, that’s really important. But it’s more the other stuff that you’ve been describing, which is really what people want and what makes life worth worthwhile. What are some of the key differences if there are any between your pre retirement budget and then post retirement budget?

Jason Parker 7:46
That’s a great question. Well, you know, one of the things, one of the reasons that our calculator is so much different than most of what is put out in the world today, most of the investment community is focused on withdrawal rates, dynamic withdrawal rates, rates of return, asset allocation, diversification. And when I built the calculator said, you know, the most important thing here is not any of that. I mean, that’s all important, but the most important thing is, how much do you spend? And so we built the calculator to be able to say, you know, how, how much do you spend, and then use that spending number to determine whether or not you’ve saved enough. And so there’s a lot of things that are different in retirement, one of the one of those being is that a lot of times when people first retire, they tend to spend more, there’s a lot more discretionary spending on travel and those types of things. As people get into their 80s, they start to slow down, they don’t want to travel as much they split a meal, when they go out, they drive one car, you know, life just starts to get kind of simple. And then towards the end of retirement, life starts to get expensive again, because a lot of times people experienced medical issues towards the end of life. So you know, you start out high with your spending, you kind of dip down, you go back up, they call it the spending smile. And that’s one of the things we let people do and the calculators model these different, these different cash flows. The other thing is inflation is a big deal. But not all of your expenses go up at one single inflation factor. So people going into retirement with a mortgage, for example, the principal and interest doesn’t go up with inflation, so you wouldn’t want to over inflate your expenses. So you know, we let people assign a different inflation factor to every expense. And then the other thing I think that’s really important that we do, we have something called the secure income score. And what the secure income score does is it looks at how much of your guaranteed income do you have coming in over your lifetime. So from the time you retire till the end of life, life expectancy, how much guaranteed income so Social Security pensions, we include rental property, rental income in there because it’s usually pretty stable for most people, annuity income, so any kind of guaranteed income that they’re going to have. And then we compare that to their essential expenses over their lifetime. So when you retire, as you think about your spending, it’s good to break it down between you know how What do we need to keep the lights on, kind of pay for the basics of living, versus the discretionary stuff where the travel or the Netflix or the Amazon Prime things you could live without if you absolutely had to. So we let people tag expenses as either essential or discretionary, then we compare their guaranteed income over their lifetime to their essential expenses. And we provide them with the secure income score to say, you know, how much of those essential expenses are covered by guaranteed income. And what we’re looking for is 80% 80% of your essential expenses to be covered by guaranteed income. And again, that just gives people a lot of confidence, because it’s one thing to say, hey, we’re not going to take that trip this year, versus Hey, we can’t pay the electric bill. And so you know, we just, again, clarity, confidence and freedom, you want to know the numbers are going to work. But if you had to cut back, you could probably maybe, you know, cut back on the travel. But there’s other things that you need to make sure that you’re getting right.

george grombacher 10:58
That strikes me as very desirable, that that I as when when I’m 80 years old, I want to know that 80, if not 90, or 100% of my essential expenses will be covered by guaranteed income. Because I just can’t think of a scenario where I’m around that age, even 75 or beyond that, where I want to be looking at my investments and trying to figure out where I’m going to pull from and worrying about taxes and stuff like that. I just can’t picture myself doing that. So therefore, maybe I can’t imagine other people want that either. But maybe I’m wrong.

Jason Parker 11:40
Yeah, I, you know, life changes. And I think a lot of the anxiety that people have is around this transition from working into retirement. But I tell you, most of the people that I’ve met over the years, by the time they get to 80, they really don’t have these financial concerns anymore. They have them when they’re starting out at retirement, but they don’t really have them by the time, but for most people now, some people do. And you know, there’s all kinds of tools being developed for people that get into their later areas of life, and they find themselves running out of money. And so you know that we’ve got things like the home equity, conversion mortgages, reverse mortgages that have lots of regular, a lot of them have a lot of regulations from the federal government to make sure that people are being counseled and making wise decisions. So you’ve got those, you know, to let people to dip into their home equity as a way to help keep them going if they run out of money early, or you probably heard of the secure Act, the most recent secure act, these ideas for these qualified longevity annuity contracts where people can annuitize a portion of their retirement accounts because Congress is looking at this and saying, geez, we want to make sure people aren’t running out of money in retirement. So they’re putting in into play tools specifically for people to help them navigate this. But the reality is, retirement is an exercise in cash flow, there’s only really three numbers that people need to know, to retire. Number one, is they need to have some idea for how long they’re going to live. And so the way that we do that is we we built a we put on the Social Security mortality tables, so you put in your birthday, and it’ll tell you based on averages, what average life expectancy so that gives you a starting point for life expectancy. And then of course, you can make a hereditary adjustment. So if everybody in your family lives to 92, maybe you want to adjust it to 92, or a lot of people will use age 100. And just you know, say what if I live to 100 Are we going to be okay, so number one is you gotta know, have some idea how long your money needs to last how long you’re gonna live. Number two, you need to add up everything that you have in terms of all of your assets, your liquid investable assets that you can pull from to you know, create that cash flow, and other assets, such as, you know, equity that you have in your real estate. And then the last number that you need to know are your your expenses, your spending, and make some projections about what that looks like now and be able to model say, hey, you know, I’m going to spend more on travel the first 10 years of retirement, we’re going to see that expense drop down later. So instead of just taking like one number and just inflating it forever, or using a rule of thumb, you know, you kind of hear people say, well 80% of your pre retirement income is how much you need to plan for retirement that the problem with rules of thumb is we all have different size thumbs and and it doesn’t provide for much confidence as people are heading into retirement if they haven’t really done the work. This is the biggest financial decision of somebody’s life is making this transition from working to retirement not working anymore. It’s worth it to spend a little bit of time to make sure that you’re going to be okay rather than just winging it. And that’s what we have the ability to do today more than ever.

george grombacher 14:49
Love it. That makes a ton of sense. You know, it’s weird to think about living too long as a bad thing, but it you know, could be catastrophic. Like, you don’t want to outlive your money.

Jason Parker 15:02
Yeah, even more so than money, though. I mean, as I’ve walked life with people, there comes a time in people’s life when they’ve lived a good life, and trying to eke out a few more years really is not. I mean, it’s weird to think this way. But a lot of times, you know, a lot of people that people lose their friends and they lose family members, and they, they’re kind of isolated and alone, they don’t have the ability to do what they used to be able to do. And, and so it and then when your health starts to fail you or you start to experience things like dementia. And, you know, in those instances, it life can get pretty hard. And so I just as I’ve walked life with people, I see where they’re ready, you know, and a lot of people that we serve, believe that there’s something greater for them. And so they’re there. They’re not dreadful. They’re not fearful of the end of life. They’re like, Man, I know that I’m going to be going to heaven. That’s a good thing. So yeah, like, it’s been a lot of a lot of peace of mind about what happens next.

george grombacher 16:05
Yeah, yeah, I certainly appreciate that perspective. How common is it? You know, you hear about, you hear about people that that are not saving, and how Americans are struggling, or living paycheck to paycheck, so on and so forth. How do you counsel people when you get to interact with them for the first time to see you know, what, Jason? Geez, I feel like I’m so behind. Is it ever too late?

Jason Parker 16:34
Well, I’m in a unique perspective, because most of the people that I’ve walked life with one on one, so now, I’m not talking about the calculator now. But when I’ve actually done advising for people, a lot of times the people that are hiring us have done really well, financial aid life. So I don’t tend to meet people, I tend to meet people that are just getting ready to retire. And so I’m not necessarily talking to people that are 3040 20 years old, trying to, you know, trying to save for retirement, a lot of the people that have reached out to us have done done really well. One of the interesting things too, is you know, the calculator, we designed it in a way because hiring a financial adviser can be expensive, hiring an investment advisor can be expensive, a lot of people can’t qualify, they don’t have enough resources to hire an investment advisor, they can’t afford a higher end advisor. So I had thought when we built the calculator, I was like, you know, this is cool. This is a way to democratize retirement planning to give everybody access to a better financial future. And they just have to spend, you know, an hour plugging information into the calculator, and it’ll help them see where they’re at. And so I was thinking that we would be able to help people maybe that don’t have as many resources, what I found is that, and maybe it’s because people that do well, you know, they tend to, they tend to pay attention to these things. But we found that a lot of people using the calculator are, again, they’re on the upper end of life. I mean, they’re not there, these are generally not people that are struggling financially.

george grombacher 17:59
I appreciate that. I like it.

Jason Parker 18:03
But I have to tell you, though, George, I had the opportunity to talk to a group of high school kids recently. And even you know, I’ve, I’ve noticed some of the folks coming out of college, their, their vocabulary, their understanding of personal finance is very limited. And it’s almost like you spend the first 10 years after you get out of college, just figuring out what you should be doing. You know, people make a lot of mistakes, and but the vocabulary, and the education is so limited. And so when I was talking to these high school kids, I was like, Look, you guys, if you start with $200 today, and you put $200 in, and now these kids are 17 years old, I said by the time you’re 57 years old, and if you just put it all into like a s&p 500 index fund that’s averaged, you know, you can say that the markets average about 10% per year, over a long period of time, I said, you know, $200 to start and $200 a month, you end up with $1.1 million. When you’re 57 and ready to retire. If you wait until you’re 27. To get started, you start with $200, you start putting $200 away, you only ended up with a little bit less than $400,000, about $398,000. So these kids that have a lot of time on their side, they don’t have to hit it big. They don’t have to buy crypto and gamble and go to the casino and do this crazy stuff. They can just be disciplined and really have a great life just by making one small adjustment and for for today for kids these days. $200 in a month, I mean they can make that money pretty easily. And so it’s not like you have to be a rocket scientist. You just have to have time. You have to have optimism because people that go around thinking the end of the worlds come in and you know, things are just getting worse and you know, they have no no belief in the future so they don’t make any preparations for the future. So in order to be an investor you have to To be an optimist, you have to believe that the future is going to be better than the present. And and then you have to be disciplined. And you know, one of my favorite, one of my favorite quotes around discipline comes from Abraham Lincoln, Abraham Lincoln says discipline is understanding the difference between what you want now versus what you want most. Maybe you can’t stop at Starbucks every morning, because that’s what you want now, but what you want most is financial security. So you know, discipline, another great. Another great quote around discipline comes from Jim Rohn. He says, All people will experience pain, the pain of discipline, or the pain of regret, the pain of discipline, the pain of discipline weighs an ounce in the pain of regret weighs a ton. And so, you know, it’s just having a little bit of vision, the verse says, where there is no vision, the people perish. And so we have to have them with a vision, that’s optimistic, that’s hopeful that’s looking into the future that says, I can be more in the future than I am today, the world is going to get better, it’s not going to get worse. And just really get get people thinking about how good things can be. And then having a little bit of discipline sprinkled in there just to make sure that they’re going to meet their goals. And like I said, it doesn’t have to be big, it can just be little bits over time.

george grombacher 21:18
Those are powerful. Thank you. Jason, thank you so much for coming back on. Where can people learn more about you? Where can they? Where can they check out your podcast? Where can they find the books? Where can they find the calculator? Yeah,

Jason Parker 21:30
that’s what I’m most excited about right now is the calculator. So retirement budget calculator.com. If you want to sign up for free, try a free account and see if you like it. Of course, sound retirement radius, a podcast, and the books are sound retirement planning and retirement calculator. How much money do I need to retire? But yeah, a great place to start is just plug into the calculator, create a budget for free, tell your money, where to go, you know, don’t don’t make it overly complicated. Don’t worry about all these little nuance things like rate of return and asset allocation and diversification and withdrawal order. When do I start so security just start with this, most of the simplest piece, which is your spending, it’s where you have the most agency, it’s where you have the most influence, it’s where you have the most control. You can’t control what the market is going to do, but you can control your spending. And so it’s just a great way different way than with the way the world would tell you to live. But it’s it’s in my way, I think a better way.

george grombacher 22:28
Well, I think that that’s great in a world of overwhelm, and too much that is a wonderful and logical and simple first step. So you enjoyed today, as much as I did. So Jason, your appreciation and share today’s show with a friend who also appreciates good ideas, go to retirement budget calculator.com And take advantage of the free resources and just get started. Check out the sound retirement radio podcast. Pick up a copy of Jason’s books, the retirement calculator. I’ll list all those in the notes of the show. Thanks again, Jason.

Jason Parker 23:01
Thanks so much.

george grombacher 23:03
And until next time, remember, do your part by doing your best

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