5 Retirement Killers No One Warns You About

Pre-retirees have the fear of running out of money in retirement with more Americans living longer and the pandemic disrupting financial plans. This is a common concern. Here's the brutal truth. Your retirement plan is likely designed to fail and you won't realize it until it's too late.

If the thought of running out of money has ever crossed your mind as it relates to retirement, keep watching. What I'm about to show you could change your entire future. And guess what? If you're relying on outdated advice or a one-size-fits-all retirement plan, you're gambling more than you think.

Now, when it comes to retirement, many people think the most significant risk is a bad investment or stock market crashes. Wrong. The real danger, according to a lot of surveys, is running out of money. That's the greatest fear today. And it's because people are realizing their plan was built on fairy tales and outdated math, maybe even blind trust in the wrong adviser.

But in this video, I'll show you exactly why so many retirees are blindsided and what the wealthy are doing differently to make their money last for 30 or more years in retirement. After 33 years of building retirement plans for our clients, we identified five preventable reasons that cause people to run out of money during retirement. And number five is what separates a smart retirement plan from a stupid one.

Here's why this fear is valid and is growing. According to Allianz Life's retirement risk survey, 61% of Americans fear outliving their money more than they fear death. Let that sink in for a minute. What do you think? Is this fear well-founded?

Consider these points. We're living longer. Health care costs are skyrocketing. Market volatility is the new normal. And most retirement plans, yours is likely no different, assume you'll die on a schedule. In during life, you will have predictable returns year after year. These points are not conjectures. They are facts that require everyone to build a better retirement plan. And if you already have a plan, are you sure that it's battle tested? It's never too late for a second opinion.

But even with these points in front of you, there is more to what causes people to run out of money in retirement. Let me give you the five biggest that we've identified and most preventable reasons people go broke in retirement. We call these the big five retirement killers. Miss one and your money may not survive you.

Number one, poor pre-retirement discipline. Now, I see this one all the time. You can't spend 30 years living beyond your means and expect to flip a switch at age 65. If you didn't build the habit of saving, of saying no to lifestyle creep. Trust me, retirement is going to expose those weaknesses. Retirement planning starts 20 years before retirement. And no advisor can fix decades of understating plan.

Number two, overspending, especially in early retirement. In early retirement, we call this the go-go years. People retire, they spend like they just won the lottery. Travel, home upgrades, helping family, and it feels good until you look at the math. And remember, retirement's not just about the money. It is all about the math.

One couple that I worked with, they burned through 20% of their portfolio in just 3 years. Now, they weren't necessarily reckless. They just underestimated how fast their expenses for travel and hobbies and family support would accumulate, and they ignored our recommendation for budgeting repairs. This is precisely why building a comprehensive plan and sticking to it is so important.

Number three, it's inflation. From about 2010 until 2022, everyone got spoiled on low or no inflation. But just a few years ago, everyone was awakened by severe inflation. Today, that inflation is still affecting consumers across the country. And prices are still rising, albeit at a slower pace. That's a good thing.

Did you know that a $100 grocery bill in 2004 now cost around $200? That's not hypothetical. That's inflation eroding your spending power. And the cost of a home or home repairs has gone through the roof. Keep in mind, it's not the parts for these repairs, it's the labor. People need to earn more to keep up, and that cost hits your wallet. Remember, your purchases become another person's paycheck.

Most advisers still use 2% inflation in their models. I think that's just short of malpractice. Your retirement planning needs should set inflation at 3.5% or maybe more.

And number four, health care and long-term care. Did you know that a healthy 65-year-old couple today will need, according to experts, $315,000 for out-of-pocket medical costs, not including long-term care. Does your retirement plan consider long-term care or assisted living? That could cost another, say, $100,000 per year per person, and it could be a lot more.

There is a bit of good news here. The likelihood of both spouses needing this level of care is relatively low, but the chance of one of you needing it is pretty high.

And finally, number five, it's blind withdrawal strategies. Now, I saved this one for last because it is so important. So, let's say that you retire in 2025 and the market tanks and you're pulling 4% annually because you need it for income. That combo could destroy your portfolio staying power. It's called the sequence of returns risk. And if your withdrawal strategy isn't prepared for this, you're in trouble. This isn't theory, it's math. Bad timing early on with your withdrawals can crush even a well-funded plan.

The 4% rule came from a study in the 1990s using historical data. Interest rates, market volatility, and lifespans were so different then. Today, 4% might be too high or it might be too low. Everyone has different needs. That's what's so important to understand here. So, it depends on your tax mix, your spending patterns, and market returns, and the sequence of those returns. Yet, most advisers, they're still parroting this rule like it's the gospel.

Here's what the smart retirees do differently. Whether they have $500,000 or $5 million, they live within their means before and after retirement. Somehow, they understand retirement is a math problem. They also understand that it starts with behavior. In other words, if you're addicted to upgrades, retirement will be a painful detox.

So, these people often use a bucket strategy. What is a bucket strategy? Think of it in three layers. Cash for the next, say, 1, two, three, maybe even as many as five years. Fixed income for the next 3 to say 7 years. And then growth assets for long-term needs, say 7 years and beyond.

Now, this is just one of the strategies used by people who never run out of money. It's designed to provide stability in those bear markets in the early years and growth over the long term. Best of all, it can reduce or eliminate panic selling. No fire drills here.

Tax diversification. They always consider this one. I see traditional advisors piling everything into pre-tax 401k plans. Then you retire and you get hammered with taxes because every dollar withdrawn from those 401k plans, it is taxed as ordinary income. No way around it.

I hope you're working with a seasoned planner who takes advantage of tax flexibility. Things like Roth accounts, taxable brokerages, HSAs, so that you can choose where your income is derived during retirement. This has a massive effect on the spendable income and long-term success of your plan. Taxes can be a huge drain.

Another strategy they use is dynamic withdrawals. That means when the markets dip, they tend to tighten their belt. When markets are roaring, they harvest gains to fill or replenish other buckets. I'm not saying that static withdrawal plans are rubbish, but they tend to be a short path to trouble rather than to a more predictable outcome.

They stress test their plans. This one's huge. You probably need a new adviser if your adviser is not doing this. Good planners, seasoned planners, and financial advisers, they don't just assume seven or 8% return with smooth sailing. What they do instead is they test and they test a lot.

Some things that our team considers include what if inflation hits 5, six, or more percent. What if the markets drop 30% in a year or maybe more? What if you need long-term care at age 80, for example? These are just a few of the things that we do and they barely scratch the surface. I'm not saying that all advisers miss these things, but we know that it happens. We know it because we see it when a new client onboards with our firm.

Here's where most advisers are dropping the ball. They treat retirement like a sales pitch. Here's your pie chart. Here's your annuity. Sign here and away we go.

They don't plan past age 85. Why is that? Because making the numbers look successful is easier if you have a shorter lifespan. So they stop at age 85. But what happens if you live to age 98? What happens if your spouse needs memory care for 6 years?

Then they ignore taxes. This usually happens when advisers don't understand how taxes fit into retirement. How about the discussion of Roth conversion, social security taxes, or Medicare brackets? If these things are not considered and measured, then they're not planning for you.

They give everyone the same plan. We call it boilerplate, the one-size-fits-all or the cookie cutter version. If your retirement plan looks like that of the guy next door, something is wrong. You need to be asking questions. Your goals, your risk tolerance, your family, taxes, none of this is a template. Your financial footprint is just that. It's yours.

I want to quickly give you an action plan that you can start today to begin preparing a better retirement plan. But before I do, if you're serious about building a plan that works in the real world, subscribe to our channel and like this video. Drop your questions in the comments section. We review everyone and we love hearing from our listeners. You can also reach out to us by visiting omnistarfinancial.com. Now, we build plans designed to last, and we'd love to help you, assuming you need the help.

Now, here's what you can do today to avoid outliving your money when you reach retirement or if you're already there. Audit your expenses now. Don't wait. Just do it. You'll be glad that you did. Are you living on less than you earn? If not, your retirement plan is already hemorrhaging.

Build multiple income sources. Things like social security, rental income, dividends, annuities, pensions, all of those could fit. Give yourself options.

Work with a fiduciary, not a salesperson. Working with a fee-based fiduciary will likely eliminate biases and focus on your needs, not theirs. That's how it should be. You don't need products. What you need is a plan that works under pressure.

Plan like you'll live to 100. You just might. If you don't, great. You can leave something behind.

Retirement isn't always about the number. It's about freedom and keeping it. So ask yourself, is your plan designed to survive you? Or is it designed to just look good on paper? If you want to know how some people retire early, even if they started late or made mistakes, click or tap the screen now so you can watch our video on how to retire early, even if you're starting from behind.