January 2026
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Ep. 34 ChatGPT vs. Financial Advisor
Ep. 33 Maximizing Your Credit Card Points
I figured that the age of this crowd was going to be a little bit younger because of the topic. We're going to talk about defining your number and how to kind of figure out what's that number that you need for retirement. For those of you that don't know me, I'm Chris Galeski, the director of growth and advice.
Joining me are two of my partners, Joe Seetoo and Kevin Rex. We have a lot of fun around this topic, and we even talk about like what our number is here. Hopefully you'll have some good takeaways in terms of what it means to define your number for retirement and a couple of those myths that are out there. So just by show of hands, how many people kind of know what the number they need to retire is?
More than you. How you're in the same boat as me. I like that. I'm not alone.
So, I thought I'd start the conversation with Kevin and Joe. In terms of talking about, have you guys defined what your number is?
Do you want to start? All right. Yeah. So so, my wife and I have. Right. But the way I look at it really is more I think of it more as a process. It's actually funny. When we first got married, she's like, what? You're going to put me on a budget? And, which I know that really wasn't the case, but it's…
So that's the divorce.
Exactly right. The, But the reality is, I think it is important in the sense that, you know, I'm getting ready to turn fifty. She's been with the sheriff's department now for a number of years. And so having that framework around, you know, juggling kids, her mom lives with us, you know, balancing current me, versus future us.
You know, I tend to be a little bit more of a worrier/planner by nature. That's why I'm a financial planner. She's a little more like, hey, let's go enjoy the memory bank and fill it up today. And, you know, certainly saving’s important to her, but but it allows us to see eye to eye in terms of, like those hard conversations around, you know, making the important decisions today versus tomorrow.
You know, we talk about our number all the time. Probably too much, actually. We always joke we’re on like a romantic date and yeah, you know, dinner shows up, you have wine, and we're just talking business the entire time. So, it's either talking kids or talking business. But what's interesting about our number, when we started sitting down and running the calculations and figuring out where we need to be, the number for us today is substantially larger than what that number needs to be in the future.
And I think intuitively it makes sense. But I didn't really understand how much bigger and our largest expenses currently are our mortgage and our children specifically like education costs and those things. Every year that we go down the road of working, not only are we saving more, so our accounts are getting bigger, but we have one less year to pay for.
And so when we talk about when do we want to retire? Understanding what that number is at different stages and how quickly we want to work to get there. Because if we want to retire next year, it's going to take a lot more work and honestly, a lot more luck than if we want to plan out for ten or fifteen years, which then allows, excuse me to make different decisions around what we spend, what we save and what we do.
So knowing the number is not just, hey, my number, is this it? It could change.
I'm in a similar boat as Kevin. Like when I was defining my number, I thought I had a pretty good idea. We had dual income, no kids on a good path, and then. Surprise, my wife's pregnant, and now I have a five and a half year old and a two and a half year old. So the number that I thought I needed is way different because they're both girls.
I've got like weddings, other things. I mean, the amount of princesses dresses that you can have at five and a half is amazing and it's expensive. Have any of you ever heard of the rules of thumb around retirement? One of them being the 4 rule, okay. And the other one being if you save twenty times your income, you're probably going to be in a good spot.
Have you guys heard that one? So if my annual income or if my expenses are one hundred thousand dollars a year, if I've saved two dollars million, I'm probably in a good spot. The 4% rule means I've saved one dollars million that could generate about forty thousand dollars a year for me to live off of. Those are two common ones that are in our industry.
I'm going to walk through a couple case studies here as to why those numbers are extremely accurate and so wrong at times, because they only work if they only work. If you understand the expectations of the future. And if you're only going to be around for about thirty to thirty-five years because the weird things in life that can happen depending on the type of account you've saved in and the unforeseen events that actually happen can drastically shift that number.
Now we've had inflation hit us over the last four or five years. How many people in this room feel like they're spending a couple extra thousand dollars a month more today than they were five or six years ago? I'm going to show you the impact of even just that as well. All right. You're looking at here is going to be two scenarios of sixty-five year old couples that have saved two dollars million.
So on the left hand side, they're sixty-five years old. They've saved two dollars million. We have their income from Social Security. We have their expenses, and we assign a growth rate. And you can see over time they have saved enough money to be on that retirement landscape. They actually have a little over three dollars million left over at age one hundred.
That's why the blue bars go up over time. Okay, that's the 4% rule. But what if we're wrong? What if all of a sudden we wake up and we get slightly lower growth rates than our expected, and inflation happens, and we end up needing to spend a couple thousand dollars more a month than what we were expecting.
They lose three dollars million very quick and potentially run out of money at age ninety-five. Now, I don't mean to be doom and gloom with this, because if we run a scenario and a cash flow plan and we look at it regularly, we're going to see any issues long before there happen. This person saved money through a trust account.
Okay. Now we'll take the same couple. They're sixty-five years old. They saved two dollars million. But instead of saving money in a trust account, they saved money into their retirement plan. And it's all in an IRA where every dollar they have to take out, they have to pay taxes on it. Same growth rate, same income, same expenses, same unforeseen event.
Where up. We're going to have to spend a couple thousand dollars more a month. What happens? Potentially run out of money at age eighty-eight. The reason why this is so important is because the number that you need to retire is based off of two very important variables, and this is why you can't be like, oh, well, my neighbor, we're kind of in the same spot.
They did it. We can do it too. It depends on how much money you need to live, what your expenses are and what type of account you actually saved money in, because taxes can erode that a little bit.
And just jump in here, too. Chris. And I think this is a what we really want to try and get across to. And I think the well-heeled clients have been with us for years. You know, this is one of the reasons why we've embraced financial planning over the year. But, you know, the old Yogi Berra quote, if you don't know where you're going, someplace else.
And I think that's one of the critical reasons why making sure like it's just not the investment strategy, the dollar number, but it's the planning and the projections that are critical to ensuring you have financial security as you're going into retirement. So.
Kevin, anything you want to.
Yeah. The other thing that's really important when it comes to financial planning, obviously we all want to make as much money as we can. The more money we make in the portfolio, the less we have to save, the more we get to spend now. And when we run through these projections and we can start playing with different numbers, it allows us to understand how much do you need to make from a return standpoint?
Most people walk in the door and they say, I hired a financial advisor so they can make me as much money as possible, but I think there's a little bit of a miss there. Oftentimes, financial advisors might get you the same return that you can get on your own sometimes, but with a significantly less amount of risk. And so if you can retire and only need to earn 5%, does it make sense to shoot for stock like returns and try to get 10%?
Well, if you have a goal like buy a boat or travel more, you have reasons why you want to make more money then taking that risk might make sense, but don't take unnecessary risk. And so by going through this financial planning process, it's really easy for us to identify. I know you want these returns. You only need these returns.
How do we get that with the least amount of risk possible?
I love the way that you brought that up. I mean, many of us talk to our friends, family members. You're like, oh, I made 12% this year and we're proud of that number. We should be good return. But being able to make investment decisions, knowing the amount of return that you actually need to get in order to live the life that you'd like is a very important one.
It helps you make right strategic decisions in terms of what should I invest in? Is this helping protect me meeting my goals? And so you can sort of have your cake and eat it too. You can have years like this year where you make 12%, or you can look at it and say, well, I'm still okay if I only get five or six.
Talk to us about some client scenarios where you've helped them go through this process and the impact that it's made on them.
So one that comes to mind for me as a client that I've worked with for, probably about fifteen years, she was the breadwinner. The husband made good income, but they really were dependent on her career. It was pretty high stress profession. And when we met in two thousand eight or nine, it was like, I want to be able to retire at a certain point in time.
And so over the years, we were doing the financial projections. She was naturally more of the warrior as well, just in terms of their personality types. And so I was like every year running those calculations. She was very diligent about saving for retirement. And I can distinctly remember when she actually, you know, hung it up in terms of her career, the elation that she had was palpable.
This stress level like that literally came off of her was tremendous. She actually improved physically in terms of her health, her mental health. She was able to be more present with her kids. Her grandkids actually went into coaching, which really sort of filled her bucket as well. So for me as an advisor, being part of that journey was just so inspirational and one that I it holds dear to my heart of.
Yeah, the client I was thinking through, it's you have this process of our entire lives savings, savings, savings. So you're watching your accounts get bigger, and then the mental shift to go from, putting money in to all of a sudden I need to take money out is something that we deal with every day with clients. They they're like, hey, can you send me a little bit of money?
Or like, how come you didn't do. That's why I didn't want to ask for money or, you know, it's your money, right? But it's just this hurdle for them to overcome, like actually taking money out because it's going to jeopardize their future. And so knowing your numbers one piece and I'm going to get to my client here in a second.
So we we went through I was sitting down with this client in particular. They had worked their entire lives. Not a huge spender. Really diligent at saving, had amassed a really nice net worth. And we had talked about retirement. And he was like, I'm gonna retire at sixty-five. And that way I can start taking Social Security. And there's going through this whole process of he thought retirement was an age, and then the whole process starts.
We went through the financial planning process and is pretty excited for this. But you're two years away from retirement. You could actually retire at sixty and thinking he's going to be like, this is amazing. And the amount of stress and fear that that kind of cause was like, oh wait, I'm really that close to retirement. Good news. Two years later, he got to sixty.
He still had his number, had a little bit of a cushion, was totally good. And what do you think happened? You think he hung it up and walked away? He didn't. He was like, well, if I stay to toward the end of this year, I get a fifteen thousand dollars bonus. And if I wait another two years, then I can do this or they'll, they'll they kept having him hang on a little bit longer and a little bit longer.
He didn't hold on all the way to sixty-five. We got him to to cut the cord. But similar to what Joe was mentioning, just the time that he's spent traveling with his family and enjoying the wealth that he worked so hard to create. But it's still for those first couple of years, were for sending him money and saying, hey, this is going to be in your account, spend it, don't send it back to me.
And that hurdle is so hard to overcome. So just because you know your number and you reach your number, we still have to work with our clients on spending that number.
His time in real quick too, because I think, like there's the math of knowing your number, but you we find the sort of the emotional the psychological component, whether it's retiring or in for years. I mean, the muscle you build of like saving and accumulating. It's forty years of a habit. You as much as we think, like I'm just going to switch it on and all of a sudden start pulling out, you come to realize as an advisor it is a lot harder to change that mindset.
It's something what we seem most retirees actually sort of ease into often as well. So I'm just sharing that with in terms of like, don't underestimate. If it's a struggle, it's okay. It's natural, but it is. It is a four. It's a it's a change behavior over time.
Yeah. I love the stories that you guys shared. And obviously we're lucky to work with people that have been successful in their life, their career savings and investing. But I mean, I've run probably a thousand financial projections in my career over the last sixteen years. I've seen people be able to retire with less than one dollars million. I've seen people to be able to retire with a few million dollars, and I've seen people with ten dollars million that cannot retire.
It's all because of how much you need to spend. That is the most important variable. And so when we look at it from a budget standpoint, budget sounds like you have to cut costs. That is not the life I want to live. I don't want to work for forty or fifty years. Hope I don't have to work for fifty that probably day to go.
I don't want to work that long. And then all of a sudden say, well, I really enjoy that, but now I can't do that anymore. Think of it in terms of a spending plan. What is the life that I want to live? What does that cost? Come work with us and we will figure out whether or not you're at that number.
Because again, your number is different than your neighbor's number or your friend's number, because you spend money in different ways on the value that you, you enjoy. We've talked a little bit about basic numbers for people that are not business owners, business owners, it can be a lot more complex. So you want to share with us a little bit about what that experience it looks like and how we help navigate those conversations.
Yeah, I.
Think so with business owners. And Kevin, you're married to one as well. And you know, we're all business owners as well. But in terms of, you know, the owner operator mindset, you're just simply they have more variables going on in their lives. And so because of that you're going to have a wider range of potential outcomes. One is we find that oftentimes they're making good income from their business.
Right. And so what happens is their lifestyle goes up. Then some of them are using it like an ATM machine where they're just pulling the cash out. But invariably that oftentimes puts them into a position of dependance on the business, which long term is a challenge. They may not have a clear line of sight on what they actually need as well, because a lot of them are running maybe some of their personal expenses through their business.
Are they able to monetize the business at some point? For a liquidity event that's a different variable than a W-two employee has to contend with? The other thing we'll see there as well is that usually when a deal is if it's sold to a third party, it's not all cash paid at closing, right? You may have an earn out where you have payments over a period of time.
Based on your performance, you may be required to roll your equity into the acquiring company. What does that do to your cash flow plan? As you're transitioning to retirement? Right. So those are all of the various factors that we need to start to think about and why you have to do projections with owners to give them that clarity and alignment around how to better prepare themselves, both in the business, and in their personal lives, to give them confidence in their path forward.
Yeah. I mean, there's a lot of there's a lot of triggers that we need to pull for anybody that's looking to retire business owners. It's obviously a little bit more complex. Do I take cash today? Do I have it paid out over a number of years? Is it all going to be liquid to me? All of those things, if you can think it, we can model it.
We can figure out tax strategies to minimize taxes, help you feel more confident in your decisions. I didn't mean for my slides to be so, you know, dramatic, but I kind of did because I wanted to get a point across of saving money in in one particular account versus another. Put some roadblocks in the decisions that you have to make.
And so having tax diversification, whether it's through the accounts that you're saving in or the decisions that you can make when you're selling a business is crucial. Kevin.
Yeah, the other thing here on the business owner side that I worry about with my wife, she left so I can talk to talk freely, but business owners, that value is locked up in the business. So that business might be worth a million, five million, twenty dollars million, but it's not accessible. And you kind of have the lottery winner mentality.
All of a sudden you move ten dollars million into an account and you get that life. That's a good point. You were talking about where they look at the number. They're not used to seeing that. And it's like, oh, we can do whatever we want. And so it becomes accessible. So there's I mean, just to reemphasize, business owners have a lot of additional complexities and levers that that make a big difference.
The other thing I do see, and I'll just add on to this, is that they're really potentially good at being an operator running their business or their skill or their craft. And like to your point, it was it's an illiquid asset, but they know how to manage it. They know how to grow and scale it. And then all of a sudden it's liquid.
And it's like maybe they think they're good at trading crypto or trading options, or they're friends of the country club or town. Their latest stock. Right. And so those skills aren't necessarily transferable from an operating business right into, you know, managing a large sum of money.
Yeah. But the entrepreneurial mindset doesn't leave them, right.
They know exactly what they can control.
And they want. So there's those things that we.
Work through totally.
Have you ever seen anything negative come from somebody kind of running these projections and figuring out what their number is?
The answer is really no other than the stress that the clients see when they're like, oh, I can retire like the good, the good side of it. But running a financial plan and having knowledge, the knowledge is power. It allows you to make better decisions, which ultimately gives you better outcomes.
Yeah, I think the only negative thing is that experience of actually filling out that spending plan and being like, I really spent three thousand dollars on dry cleaning like that. Wasn't that fun? But that that's the hardest stressor in terms of being able to run this type of analysis, to figure out what number you actually need. There are some people that say, hey, we don't want to include Social Security in the analysis.
We want to assume that we retire, and all of a sudden we go into a recession. How does that affect us? All of these components challenge those two sort of industry rules of thumb of, you know, if you have one dollars million, you can generate forty thousand dollars a year of income and you're likely to be okay. And the answer is maybe for if I spend one hundred thousand dollars a year and I've saved two dollars million, I'm probably fine.
The answer is maybe. I know that no one likes that. Maybe. And it depends. But they are good rules of thumb to actually gut check yourself from a high level standpoint of saying, am I on track for where I'd like to be? Just remember to add in Social Security pensions, other guaranteed sources of income, because otherwise you're reading those articles, you're not including that income stream.
And you're you're thinking you need five million to retire and you need two and a half. It can be drastically different. Any, any follow up points? We got about sixteen seconds, I guess.
You nailed that right on time, Chris.
I tried.
Yeah.
I've only done this for three years now.
Right.
Any questions from from the group?
There's one in back.
Yeah.
So if you're not defining the numbers, then what? What would you do for the group? What could you give them as a tool for themselves to even look at close to what the number might be?
Yeah, it goes back to your expenses. If you know that you need ten thousand dollars a month to live off of. Right. That's one hundred twenty thousand dollars a year. Let's say you've got sixty coming in from Social Security. So now you're going to need to spend, you know, another sixty to eighty-five thousand dollars depending on taxes out of your own pocket.
You're probably pretty safe, you know, two dollars.five million plus Social Security to live that lifestyle. That's not a bad way to gut check. Like, hey, am I on track that? Did that help break it down in terms of how to define your number? If you don't want to run, projection like this?
Yeah. I mean, I would encourage you. I mean, anyone who's real serious like that, there's nothing that substitutes doing the homework and actually putting it through a plan, because ultimately what you get as a range, right will typically show sort of upside scenarios or clients want to see of, you know, extra travel, you know, whatever it is really aspirationally that's in alignment with their values.
But then stressing it to the downside of, God forbid, a long term care event, a premature death of a spouse who may be working whatever might be extra spending because of inflation. That's the most bulletproof way to actually get the number. But then, you know, you can do the back of the envelope calculations like Chris just did. If for whatever reason, doing the legwork isn't sort of in your wheelhouse at this point.
So I'm twenty-nine and I think about future when I retire. There's also an interesting concern of Social Security.
That's my number I'm putting away. But at the same time, I know my parents are getting… but I can't. Yeah.
Sure. Kevin or Chris, you want to?
Do you want me to? I mean, I'd be happy to. I'm, unfortunately, an eternal optimist. Social security is a system that I think politically, you're going to have a hard time pulling the rug out from under you and keeping your your job in the future. But that's not to say that there won't be changes to Social Security.
You could fix change. You could fix Social Security overnight by not having a cap on income. I think that cap right now, don't hold me to this, please. But it's probably around one hundred sixty-eight thousand dollars. The top end.
Come, come.
Yeah. So want to start making over one hundred sixty-eight thousand dollars of income in a year? You've stopped paying into Social Security. You could do away with that. You could come to me. I'm forty-five years old, and you can say, Chris, full retirement age for Social Security is no longer sixty-seven. It's seventy or seventy-two. Let me say thanks. Preciate the thirty years heads up.
And those two things right there would drastically change the economics for Social Security. And it's happened before. It happened in the mid two thousand, financial crisis. They moved full retirement age from sixty-five to sixty-seven. I'm not saying that you should. I'm not saying that you should count on Social Security as as a sole income source, but I do believe that part of it will be there.
If you're twenty-nine years old, you have time on your side. So if you're saving somewhere between fifteen to 20% of your income, you're well on your way, especially if your company has an employer match other things. You're well on your way for being on track.
That's also why scenario analysis is important where you can do it, you know, assuming zero Social Security and sort of a worst case scenario or some reduce benefit or let's assume in a very optimistic scenario, it actually is there. Right. And that would help give you a again, a range of outcomes.
Okay, Joe, Kevin and I will be around. I promise to answer more detailed questions if you have it. I know the defining your number is an important reason why many people came here.
I hate to disappoint and say it depends. It it's just so crucial on a couple of particular factors what you're saving into and how much you actually need to spend. Those are the two critical points. And then defining your number can be a little bit easier from there. I want to thank you all for today. And, we'll wrap up.
