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Retirement Reality Check

In this recently published article, Mike Fogarty, Founder of the 50+ lifestage platform Brightly, interviews our Founder, Ramsey Smith, about the key first steps in the retirement conversation.

How much money is enough? Have I done enough to prepare? To pay tuition, invest, retire, care for my mom? Head to Fiji?

In midlife, we face hard questions — and while we’ve got wisdom on our side, we also know by now to expect the unexpected. That combination of insight and uncertainty is a powerful incentive for a reality check. Are we on track for our goals? Are our goals even the right ones?

Ramsey Smith, founder of ALEX.fyi and a financial professional with over 25 years of experience on Wall Street, is a true believer in the importance of education when it comes to empowering consumers. He specializes in financial strategies for consumer 50+, so we asked Ramsey about a midlife financial health check up.

What should we be doing at age 50+ to assess and improve financial health?

The biggest lesson I’ve learned is that, despite financial services being a quantitative industry, personality and behavior issues drive decisions. You can look at all the calculators and financial models in the world but they’re all just estimates, and because you can’t predict the future, they’ll never be exactly right. So, what you need to do first is have the most important conversation you can have about money — and that’s with yourself.

As strange as it may sound, you need to ask: Am I ready to look at myself in the financial mirror and be ok with whatever I’ve done in the past, and be ready to focus on the future? This is a disarming notion and, especially for couples, it’s hard not to dredge up past decisions or missed opportunities. It’s not that you’re not going to deal with the effects of past financial decisions, but you have to be ok with it all, forgive it all, and set your sights on the future.

Your first step is to allow yourself — without self-judgment — the opportunity to make a fresh start in the direction of your own goals.

What advice do you have for rethinking goals at midlife?

Well, first you want to set a clear, big picture track for yourself. For example, many people make the big decision that they never want to be a burden to their kids. Others weigh questions like “Do I want to live my life to the fullest and leave nothing behind?” or “Is it important for me to leave something for my heirs?” No path is right or wrong; you just have to consider which one is right for you. It drives what comes next.

I love a line from Richard Thaler, who is a Nobel Prize winner for his work in behavioral economics and co-wrote the book, Nudge, with Harvard professor, Cass Sunstein. He says — and I’ll paraphrase — “The greatest bequest that I can leave to my kids is not having to move in with them.” That’s not an inconsequential commitment. We’re all living longer. Life gets more expensive, especially when one’s health starts to suffer. So that’s a clear decision about a gift you can give to your kids. The point is, it doesn’t happen by accident.

What should we factor into a new financial plan at this lifestage?

The good thing about reaching midlife is that you’ve accumulated lots of information and input — the kind you never could have had at 30 or 35. An example is kids. If you have kids still at home, you know whether or not they’re going to college and what that’s going to cost, whether you’ve begun a 529 or have other plans for financing. You likely have a house, you know what the mortgage is. You know where you are in your career, and what might be next. A career pivot, a promotion, a side-hustle, a wind-down. You can develop a good sense of your financial picture and what your 401K, for example, is likely to translate into. You’ve got so many facts by age 50 or 60 — now you can start to put them in the context of where you want to end up, and how long that is from now.

Will you be an empty nester and downsize? Move to Cape Cod or Florida, where life will be cheaper? All these questions are opportunities for inputs to make a new plan. If it’s daunting, that’s ok — I think of it as an “A-ha!” or “Uh-oh” moment, one that rarely happens at 35 or even 45. Suddenly there’s this trigger point where we recognize time horizons and, combined with all the inputs and info we have at midlife, this is a powerful combination. If you’re ready to take action, this is incredibly empowering.

Is there one thing you recommend above all for taking more control over your financial future?

The one thing everybody should do is get spending under control. This is hard, no doubt. But if you really figure this out, the rest is so much easier. And less stressful.

Ask yourself and really force yourself to answer in a new way: What do I need to spend money on? Do I need this big house? Do I need that extra car? Do I need a big yard I’m paying someone to mow? So many of us associate success with having a lot of stuff, but if you commit to figuring out what things in life really make you happy, and adapt to that, you will be amazed at the results.

Just think about it — the returns on reduced spending are bigger and way more tax efficient than any kind of investment. You’ve got to pay taxes on investments, right? If you make a dollar, you’re going to pay tax on that. But if you spend a dollar less, you keep all of that. Not only that, it can be invested to grow and accrue.

Getting spending under control is key. And it’s hard. But it’s job number one. After that, I always recommend — no matter how savvy or experienced you are — really consider some help. Most everyone benefits from help thinking about their personal finances and that includes financial professionals. Even a lawyer needs a lawyer when they go to court. Even a doctor needs a doctor when a problem is outside their specialty. The ROI on good financial advice is typically high.

 

Ramsey Smith is the founder of ALEX.fyi. With over 25 years of experience on Wall Street, he is a true believer in the importance of education when it comes to empowering consumers. He was previously a managing director at Goldman Sachs.