X% of Americans Will NEVER Retire… featuring Erin Talks Money!

0:00This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics, and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

0:45Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required, compatibility and availability varies 18+. What if we told you that almost 70 % of Americans don't think they'll ever be able to retire? You might be thinking, should I be worried? Brian, I am so excited to talk about this because we get to work with hundreds of retirees every day here at Abound Wealth. We know what makes them successful, but not only that, we are so excited today to be joined by Erin from Erin Talks Money. Thank you for having me. I'm so excited to be here.

1:21I'm stealing your line. I also run a personal finance channel here on YouTube, and I'm hoping today we can dive into a recent study from JPMorgan Chase, where they studied 5 million retirees, looking at their spending habits, and we can kind of break it down.

1:42All right, but first we have to level set because this is not a generational issue. A lot of folks think that it's Gen Z or millennials that are worried about retirement. But we know that right now, one in four adults over 50 do not expect to ever be able to retire. So this is a widespread issue right now. I think if you actually got in the numbers, 55 % of Gen X, that's my generation, they don't think they'll be able to retire. One in three millennials say that they're not confident in their ability. And not to tell on y 'all's age, but that's you guys. 44 % of Gen Z say they feel behind in their retirement savings goals.

2:19So man, oh man. I mean, it feels like this is a universal struggle that everybody's kind of nervous about. I think that's the biggest question in personal finance. Like, will I ever be able to walk away? And so the question is, okay, JP Morgan has this great stuff. What are the things that we learned from this study and what can you take away in order to set yourself up for successful retirement? The very first thing I thought was wonderful is that successful retirees know the value of their time. JP Morgan has a great visual on this. If we have an investor who started investing at, say, 25, invested to 35, just that 10 years, invested$200 a month, by the time they got to 65, they'd have$293 ,000.

3:01I mean, that's amazing, right? Especially when you think about they only put in$24 ,000. I'll take that return any day. But what if we have somebody who started later in life? say they started at the age of 35, but then invested all the way through the age of 65, you think they'd come out ahead, right? They'd save for a lot longer. They're going to have to have more money. It turns out they only have a quarter million dollars. So they have less money than somebody who invested for 10 years. Even though they save more, they save three times as much and ended up with like$40 ,000 less. So it's almost like that.

3:29We all think about when we're in our twenties, we know that money is just scarce. And so when somebody, you watch content like this and you're in your twenties and you're broke as a joke, you're like, why should I even start? This is kind of your motivation because yes, you might be broke, but even little sacrifices can create huge results because your friend, if you think about it, if you flip the script and you said, okay, I'm going to procrastinate and wait until I'm in my thirties before I save and invest, it doesn't always get the same reward as just doing a little bit in the beginning. But Beau, Aaron, we know there's actually a better way.

4:03Instead of having to be an either or of somebody who says, hey, I'm young and I'm going to quit or being the person that says, hey, I'm older, but I'm committed. What if there was somebody who said, let's get it in and let's just be consistent, automatic for the people and automate the process? What happens with that situation, Erin? If you stay invested from 25 to 65, investing that$200, you'd end up with nearly$600 ,000, just 200 bucks. It's unbelievable that if you can start early and you can stay consistent, it is so much better than the person that does either or. And so as we kind of looked at this study, there were some key takeaways that we want you to know.

4:40And the very first one is you get to choose your heart. Because a lot of you are going to say, you've already alluded to this, Brian. Man, I'm young. I'm in my 20s and money's tight and housing is expensive and rents are expensive. And it's just, it's going to be difficult. But you can either choose. you can make life hard now and figure out how to save 20 bucks or you wait until you're in your fifties and sixties. And then you have to make some really hard decisions to make up for not doing it earlier. And there's actually, I love our illustration because we always talk about the power of discipline.

5:10And this is the thing. Remember I had that high school teacher that got me all excited because he made what seemed impossible, seemed right. And right in front of me and easy is that the high school teacher say is a, if you could just save a hundred dollars a month, you'd be a millionaire. Well, we can see the data is for a 20 year old, if you could just save$95 a month, you're on your path to being a millionaire. And so a lot of you guys are, like I said, you're 20 or you're in your twenties and you're broke as a joke. You're looking at this and you're going, okay, maybe I could do a hundred dollars, but this is why we want to get you even more excited because think about the 30 year old.

5:44Yes. Now that same thing that a million, that a 20-year-old had to save$95. The 30-year-old has to save$340. That's almost four times harder, that much more commitment. If you wait until your 40s, I'm over 40. You guys fortunately haven't crossed there yet, but you still got time. But it is amazing that you have to save now$1 ,000 a month,$1 ,052 a month. That is 10 times harder than the 20-year-old. This is the power of exactly with what we set up. You choose your heart. I know that you're broke in your twenties, but it doesn't take just pennies on the dollar literally will do more by putting that money to work.

6:24And we have these stories that we tell ourselves. We say, Oh, when I'm 30, I'll make more and it'll be easier. When I'm 40, I'll make more. It's not easier. You have kids, you have a house like life. It does not get easier. The money doesn't have more breathing room, whatever you can save. Even you said save 20 bucks. It doesn't matter if you can't hit 95, save anything. And we get it. Look, this is hard, but there are things that you can do because the next takeaway that came from the JP Morgan piece was that you can sandpaper the friction. You can figure out how do I remove the stuff that makes this hard?

6:54Maybe the way that you're going to save is you're just going to say, you know what? My employer says that if I put in X percent of my pay, they're also going to put an X percent. So at a minimum, I'm at least going to do that. No matter what, I'm going to avoid Starbucks. I'm not going to eat. I'm going to do whatever. I'm going to get my employer matched so that I can get my money working. If you can make the good habits as easy as possible, and then maybe make the bad habits as hard as possible. Maybe I'm not going to get a credit card yet, or maybe I'm only going to have one credit card, or maybe I'm not going to swipe for everything, or maybe I'm going to give myself a cooling off period, whatever that may be.

7:24If you can implement those strategies, you can set yourself up to make that hard decision early just a little bit easier. Well, I always like the four scarcities. You get pay raises Because I like that part where you said make the good habits as easy as possible and the hard habits or the bad habits that much harder. When you get a pay raise, why not just go ahead and automatic for the people set up a portion of 60 % of that pay raise going towards investing. Now you've made it that much harder to get access to that money, but you've automatically set it up for wealth building. Man, I love a good for scarcity plan.

7:59And you said it right there. Automatic. Make it automatic. Just set it up so it's a percentage of your pay. That way, even if your pay does increase, you're automatically contributing more total dollars, just automatic. And then the other thing is another key takeaway is we want you to save early and often. I mean, that's kind of the whole the whole headline of this piece is that if you can start early and if you can say stay consistent, you're going to set yourself up. But saving is only one part of it. You have to save and you actually have to put that money to work far too often. And we see people who flex that muscle and they get the savings done and they live on less than they make.

8:34And they just see their checking account get bigger and bigger and bigger and bigger. You actually have to put that money to work. And if you need some motivation on why you should do that and why you should have your money working for you, we have a great illustration, Brian. We talk about it all the time called the wealth multiplier. Yeah, I'd encourage everybody. Go to moneyguy.com slash resources. You can also look at the wealth multiplier. And this does show kind of the math behind the backing of how does a 20-year-old turn a$95 investment into a million? It's because every dollar that comes into their control at 20 actually has potential to turn into$88 at retirement.

9:09For that 30-year-old, it's$23. For the 40-year-old, it's$7. A lot of you, you're like, I don't fit into those nice five-year increments. What's my number? That's okay. That's why I would encourage you, go out to our website. We actually let you go to our Wealth Multiplier tool. You can play around with the calculators and see specifically for your age. It doesn't matter if you're 23, 37, 52. We're going to have your wealth multiplier so you can see how you maximize your opportunities. I love your guys' wealth multiplier. I get so excited when I see that it's$88. But now that I hone in on$40 and I see that it's$7, I just wish I could have saved more.

9:46I wish you could have done more, right? Can I go back in time? We say this all the time. The absolute best time to start investing was yesterday. day. So absent that, the second best time to start investing is right now today. So if you can figure that out and you can start early, you can set yourself up for success. Now, the second takeaway that successful retirees realize is not only do they recognize the value of their time, they also recognize that consistency is key. J.P. Morgan has a wonderful case study on this. If we look at the returns of the S &P 500 for the 20-year period going from 05 to 2024, if you just stayed invested, if you had$10 ,000 from this period, you would have had an annualized rate of return of over 10%.

10:31Unbelievable. Can you imagine that$10 ,000 turning to close to$72 ,000? That's wild. Returns I would take any day of the week. But that's if you stay invested, if you got scared, if you sold. If you missed just the 10 best days, this$70 ,000 would be cut to nearly$33 ,000. If you missed the 20 best days, 20 best days in a 20-year period, you'd be$20 ,000. If you missed the 60 best days, hard to miss, but you'd have a negative return. You'd have about$4 ,000,$5 ,000. What's amazing to me is that people see this illustration, and we just turned a 10 % annualized rate of return. If you miss 10, it's down to 6.

11:09You miss 20, it's down to 3.5. You miss 30 a month of that period, it's down to 1%, basically less than cash. is that I always see trolls crawl out from underneath the bridge. I've seen this illustration before. We all talk about missing the best days. I would miss the worst days too. Because I'm that good. And this is why it gets back to the whole point and the key takeaway here is consistency is key. Look, to be a good investor, you get to be lazy. You don't have to do anything. You just have to set the behavior of saving and investing and then just grin and bear. I've heard, Aaron, you talk about put on your blinders is just hang in there through the whole process.

11:48To actually miss the worst days, you've got to nail it on two different sides of it. You have to actually sell before the markets go down. And then you have to buy back. Now, Aaron, I've seen in this data, isn't there something about that these things are all interconnected? So you really couldn't time those worst days, could you? The best days and the worst days are usually within a week or two of each other. So trying to get in and out is just, it's a fool's game. We all have day jobs. We're not doing that. That's not what we're going to do with our full time. So the question becomes, okay, well, what do we do with this?

12:19What is the key takeaway? And one of the things we like to say around here is we don't want you to squeeze the sponge before it's fully soaked in. Far too often we see people say, okay, I understand. I'm going to start investing. I'm going to get my money working for me. But a year goes by, two years, three years. I think, man, I'm not a millionaire yet. I've saved most of the money in my account is what I've saved. Or maybe there was a downturn and actually less than I put in. and they end up bailing out far too early. But we know that if you can give it time and you can let the money stay in, you can let compounding interest take hold, it turns into something amazing, but you have to give it time to get there.

12:55You have to actually let your money start working for you. What I always worry about is the quit. It's because people get motivated. I'm sure you look at your data too, Aaron. I know like last month, close to a third of our audience was brand new people to the channel. And so I know that we're inspiring. A lot of people probably go fund your Roth IRA the first time. But there's also a lot of people that are going to get excited, but then that first downturn is going to happen, and they're just going to quit. Because none of this works without the consistency. So that's why one of the behaviors that I talk about and get really excited about sharing with people is what I call ABB.

13:34Always be buying. If you just can automate the process and set it and forget it, you will protect yourself not only from those downsides coming and scaring you to death, but you're going to see it as an opportunity because you're going to be buying into that volatility and making money even when things are going up and when things are going down. Like you said, put the blinders on. And also in the beginning, I always like to remind people, we are doing the grunt work. The market's not yet carrying us. So if you do the grunt work, you put your legs in it, you're climbing the stairs. You're not taking the elevator.

14:05So in the beginning, we get the good legs, we get the good glutes, you put the work in. You hang in there, you don't bail. Good legs and good glutes. That's what we're here for. Way to pull in, because I always tell people, don't skip leg day. Because everybody, if you get into the whole workout routine, you always know the worst workouts are leg workouts, and that's why you see people all muscular on top and all skinny on the bottom. We're all about building up the glutes and the legs. I love that. And so one of the ways that you can make sure that you're able to stay consistent is have a plan that you believe will be successful both before the volatility happens, while the volatility is going on, and even after the volatility has passed.

14:42If you're someone who gets skittish and is afraid of the markets, maybe going out there and buying a triple levered ETF is not the way that you need to start your investing journey. If you're someone who even the thought of just the stock market in general concerns you, maybe you should think about a solution like a target retirement index fund, where all you have to do is answer two questions. How much can I save? And when do I think I might need that money? And you can literally set it and forget it and always be buying and purchase that every single month, whether the market is up, whether the market is down, and you don't have to waste mental calories, creating opportunities for you to not be consistent.

15:17And I always, I've been investing for probably 25 years at this point. I don't know, it's been decades. But when there is volatility, I don't check it. That's my rule. So the market's down, went down a thousand point. I'm like, I don't care what my account's doing. I'm still going to need this in 20 years time, 30 years time. Today doesn't matter. That is a great outlook. But I think a lot of people, back to those new investors, they're probably like, okay, this sounds great, but I don't even know, should I be funding emergency reserves? Should I be funding Roth IRAs? Where am I at in my financial journey?

15:47And that's why we love, I reached down for it. It's almost like there is a system that will tell you what to do with your next dollar so you can go ahead and triage your personal situation. and figure out exactly where are you in your financial order of operations. Again, we're talking today about what successful retirees know and traits that successful retirees have in the midst of the fact that 50%, one in four Americans over the age of 50 doesn't think they'll ever be able to retire. And we want to change that today. We want to alter that. And so another thing that successful retirees know is they have a very clear understanding of what is in their control.

16:27I mean, we all know in this world, there are unknown unknowns, but there are very much some known knowns and there's some things we can control and successful retirees understand the differences in those and how to focus on the ones that they can actually impact. And I feel like so much of it comes down to knowing and focusing on the things you can control. Because if you start focusing on the things that are outside of your control, you just get kind of panicked for no reason. That's right. And you're kind of lost. JP Morgan kind of broke it down to looking at the things we can control, things we can kind of control, things we can't control.

17:01And what's most within our control is how much we spend, how much we save and where we put these dollars. I love that they want you to focus on that. They don't because what you did not hear in there is market returns. I can control what the stock market does or maybe tax benefits and tax policy. Well, I can't control if I pay this much in capital gains rates or that much in capital gains rates. And those are the things that make headlines. Right. Exactly. The things that the financial media wants you to clue into are not actually the things that you can't control, but it gets none of the press and it probably matters way more than all the other stuff.

17:33Yeah, I think there's an in-between as well. The anxiety stuff, of course, like the market returns tax policy, try to, as Aaron said, put on your blinders on those things. But I really do want everybody to lean into what do you save versus spend? What is your asset allocation? And then, you know, in the long term, you also do have limited control on, hey, can you go earn more money? Can you make your shovel a little bit bigger? And then also making sure that the longevity starts saving and investing as early as possible so the army of dollar bills has that much compounding growth working for it in the background.

18:06This episode is brought to you by Accenture. When your advertising operations fall out of sync, everything else follows. Spotify and Accenture are working together to reinvent the rhythm of ad sales, using automation, analytics and smarter workflows to simplify campaign delivery and access better data across the business. The result? Less time spent on operations, more time connecting brands with the moments and fandoms that matter most. Learn more at Accenture.com slash Spotify. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome? That's new. It can help you with practically anything on the web, like restoring a vintage motorcycle from a 50-page restoration block, or finally break down that long article you've had open for weeks.

18:52Gemini and Chrome is here for it. Ready to make anything online make sense? There's no place like Chrome. Check responses set up required compatibility and availability varies 18+. You think about, like, setting yourself up for a successful retirement. We want you to tighten the bolts of your financial plan before you start blaming the wind, right? Don't focus on the external factors that could potentially impact the stuff if you've not already done the hard work of focusing on the things that you can control. Because at the end of the day, your behavior is most likely the biggest difference maker in your financial outcome, not the extenuating circumstances outside of the things you get to choose.

19:31I think your behavior gives you the confidence. If you have a solid plan, you're like, these are the things I've done. This is my checklist. This is what I focus on. You know you're good. If you're like, oh, this is how the market's performing. This is how Congress is passing new tax changes. You always feel out of control. That's right. Well, and I love, you know, once again, all those new people coming in. You're probably going, looking at this, and you're hearing the content, and you're like, well, how much should I be saving? And that's the good, here's the good news. Go to moneyguy.com slash resources.

19:57We have a great illustration on how much you should save. So it's a, you cross-reference what's your age versus your, in an intersection with your savings rate. And you'll very quickly see if you figure out this content in your 20s, your money goes a long way. You'll more than likely replace more than 100 % of even your working income in retirement if you really hit the ground running. But don't worry. This is why we can save saving 25 % of your gross income in your 30s all the way up to your 40 years of age. You're probably going to be okay. Now, if you discover this, we have something. We're an open tent, big umbrella here.

20:33if you're somebody who discovers this and you're in your 40s or 50s, it doesn't mean your opportunities passed you by. It just means you might need to save a little bit more. So go use this resource to kind of figure out where you are and spot check yourself. These resources are so good. I've used them for years. So yes, tell everyone to go download them. And I'll give both credit. He has, we have really fancy spreadsheets. Some good macros to kind of that power these things. Another thing that I think is so interesting, not only do you need to focus on the internal things that you can control and really think about your behavior, but one of the ways you can even use your behavior to impact your strategy is thinking about, okay, how am I going to tactically do this?

21:16Like, what are the decisions that I can make that while it may not affect the entire picture in a grand scale, these small degree changes can have impact, like where I invest. We talk about all the time, Brian, that as someone's financial journey is progressing, like early on, you want to focus on the stuff that matters. But as the portfolio gets bigger and bigger and bigger, small tweaks and paying attention to small things, while you may not be able to impact tax policy, you do recognize that taxes impact your portfolio. So even how I think about where I'm putting my money from a tax perspective can have a significant impact.

21:51Yeah, I love that you can, maybe it's my CPA background, but I love that you can legally manipulate how you structure your accounts. And that's why we're always talking about the three bucket strategy. For somebody who's brand new to this, look, a lot of you are going to get into your 401k and yes, you might be funding your Roth portion, but your employer historically has been in that pre-tax. So you'll have your pre-tax buckets, which are going to be taxed at ordinary income when they come out. So that's why we typically see in a portfolio retirement type assets like bonds and things that are going to be taxed at ordinary income.

22:23We load up in those accounts tax-free. This is your Roth accounts. When you fund your Roth IRAs and so forth, we like to get a little growth going here because we want to maximize that tax-free growth opportunity. So load up those Roth IRAs, the Roth 401ks, the health savings accounts after you cover your deductible. And then there's the after-tax accounts. This is like your taxable brokerage accounts. There's nothing wrong with filling these up because they're also tax favored. Your dividends are going to be taxed better. Your capital gains rates are going to be better. And I also love the liquidity.

22:53These are great bridge accounts. If you decide you're part of the fire movement or fine movement and you want to have some opportunities to do things a little more flexibly, these accounts are going to be those bridge accounts that let you have access earlier. I think you said it with speak to the CPA and you. It's not just about your taxes today. And it's not just about your taxes in retirement. If you utilize these buckets throughout the course of your entire career and in retirement, you can lower your lifetime tax bill and you get to keep more. And it's about how much you get to keep. It's about how much you get to keep over your life.