FEI Daily spoke with Social Security Optimization Expert and author Beau Henderson about the advice he gives millenials, the questions to ask yourself before retiring, and what the "RichLife" means to him.
FEI Daily: According to new census figures, by 2017, there were 25 Americans 65 and older for every 100 people in their working years. What kind of effect does this have on pensions and Social Security?
Beau Henderson: One of the things that I'm seeing systematically is that pensions are decreasing. That puts the responsibility for retirement savings or planning for retirement back on the individual. One of the questions I get all the time is ‘is it viable? Is it going to last?’
What I think we'll see is they'll continue to raise the amount of income that's taxed for social security purposes. I think we'll continue to see them push the age back, so say instead of 62, we might not be able to start early retirement in the future until 64. But I think they'll keep incrementally pushing that back. The effect on the demographic within 10 years of retirement, I don't see that significantly changing any benefit for planning purposes, so it's not as dreary a scenario as you might think.
One of the things that’s important to point out, too, is the system needs to change. This was created when people really didn't live until 65 for the most part. As a whole, we're living into our 80s on average. So, it's got to be adjusted one way or the other.
FEI Daily: Your books focus on “The RichLife.” What does that mean to you and to the people you advise?
Henderson: It's absolutely crucial that we get the mathematical financial piece right to be successful in life, to be successful in retirement, and I don't want to take away from that. That is a key component. But if we're not getting crystal clear on what it is that life looks like that makes it meaningful and fulfilling to us, it's not going to be a successful retirement.
What I mean by that is I have had plenty of people I met with, with plenty of financial assets, plenty of funds, that didn't have a successful retirement because they really didn't plan for a life that they were excited about.
You've been busy raising a family, growing a career, now let's do all the things you always wanted to do and never had time to. Let's create a plan for something that actually excites you. I see so many people become depressed when they get to retirement, because they haven't planned for anything. They just don't work in one day and then they're there trying to figure it out.
FEI Daily: What advice do you give millennials and Gen Z in the workforce?
Henderson: One of the benefits those younger groups have is they're actually very opposed to debt, so I see less and less debt, because they saw what their parents went through.
Also, many of them are carrying big student loans and realize that it's going to be an issue, so one of the biggest things I advise is to start a Roth IRA as soon as you have earned income, and let it compound and work for you. The reason I'm so big on making sure we're looking at Roths, is we have a real risk of higher taxes in the future. They're about as good as we'll probably ever see right now, so if we can accumulate buckets of assets that are going to be tax-free in the future, that's going to put us in a lot better position to deal with that risk.
FEI Daily: And what about Gen Xers?
Henderson: The biggest thing with Gen X, at this point, is responsibility. Most of us aren't going to have pensions, like maybe our parents did or our grandparents did. I like when people look at retirement 15, 20 years out and start saying, ‘Okay, well what do I need to do, what do I need to accomplish, what do I need to be saving every month to be able to viably make retire at 62, at 65?’
My message to Gen Xers would be: be proactive because it's going to be your responsibility.
FEI Daily: What are some of the non-financial pieces of advice that you give to two groups?
Henderson: One of them is identity. So many of us are so involved and get so much of our identity and even our self-worth from the work we do, we haven't thought about who are we in retirement. ‘Am I a philanthropist? Am I starting a new business? Am I going to go write my book in the mountains and be an author?’
I've seen people that were very connected to their careers get severely depressed, have a lot of isolation. There are usually some things that you just don't think about, because we see the commercials and they talk about retirement and people on the yacht with their hair blowing in the wind. It's beautiful and amazing, but sometimes that's not really what the case is and they don't talk about what you don't see sometimes.
Another I see is relationships. A lot of times the majority of our relationships are tied, and even our social activity, are tied to people we know or connected with through work. And a lot of that goes away when we retire, so we have to think about, ‘Am I establishing, am I building relationships outside of work?’ Because one day that won't be there.
And even your relationship with a significant other or spouse. I've had a lot of cases where you spend a couple of hours in the evening with a spouse for 30, 40 years, and then one day you're together all the time, you need to have those conversations ahead of time. ‘What do I think retirement should look like? What do you think?’ Because if not, unfortunately, the statistics spike that there are a lot of divorces that happen in retirement.
I’m not saying it's a human model or math model. It's both. It's integrating all the pieces to create the most effective and efficient strategy specifically to you, and the reason I say specifically is I see a lot of cookie-cutter approach planning going on out there, and that's just not the way it should be. Everybody's individual with individual circumstances, with income, expenses, goals, timeframes, and it needs to be very customized to you.