Wishful Thinking with Your Finances

Today’s Prep:

Planning to “live off the interest” or be in a lower tax bracket in retirement? Eric breaks down some of these concepts and points out what’s realistic vs. wishful thinking on today’s podcast.

Equipping Points:

Some people might think these financial concepts are true, but is it really wishful thinking?

For instance, is it realistic to live off the interest and never touch the principal? Eric says this is where people confuse rate of return and interest. Rate of return is the growth on an asset, like a stock. The interest is money you receive for loaning your money to somebody like on a CD or bond. Eric walks us through the math of how much you’d have to have in order to live off of the interest. What you need to prioritize is generating income in retirement.

Some think they will be in a lower tax bracket once they retire. But this isn’t often the case. If you’ve saved all of your assets in a 401(k) or other type of qualified plan and want to maintain the same type of lifestyle, you’ll be taxed on that money. Not only that, but tax rates are likely to go up from here.

While the idea of caring for each other in old age might seem noble, is it realistic? There might be health barriers or logistical reasons why this might not be possible. It’s important to have a plan to cover healthcare needs and expenses.

Think you’ll spend less money in retirement? Think again! Even though you aren’t paying for the same things as when you were in your working years, you might find yourself spending more as you fill idle time. Things like hobbies and trips add up. When you’re not generating income, you’re spending income. You might spend a bit more in the early years of retirement as you do things, so it’s critical to have a budget or spending plan to know how much you’re going to spend.

While the market has been good overall for a while, we can’t always project it will stay that way. Have you stress-tested your plan? At some point, the market will drop. Will you be able to withstand some market volatility? You need to create safer, smarter places for your money to come from. That way, you have the time needed for the market to get back. Reach out to a financial advisor today to make sure your plan accounts for possible market downturns.

Listen to the entire episode or skip ahead using the timestamps below.

1:03 – Can you live off the interest?

3:30 – I’ll be in a lower tax bracket when I retire.

5:20 – Can we simply take care of each other in old age?

7:16 – I’ll spend less money in retirement.

9:00 – I’ll keep getting good returns from the market.

Today’s Takeaway:

Income is what drives everything in retirement. So, how can I generate income from assets? Not just the rate of return or the interest I’m earning, how can I generate the most income in the most efficient way possible?

-Eric Peterson

More From Eric:

The host: Eric Peterson - Contact - Call: (515) 226-1500

Subscribe To The Podcast:

Apple Podcasts  -  Google Podcasts  -  Spotify  -  Stitcher  -  iHeartRadio  -  TuneIn

Check out some other recent episodes

What 400+ Advisors Say Really Keeps Retirees Up at Night

April 3, 2025

What are Americans really concerned about when it comes to retirement? In this episode, we unpack the results of an insightful survey from Financial Advisor Magazine, which was completed by over 400 financial advisors. We’ll also compare these answers with the real-world concerns we hear every day from the clients in our own practice.

Read More

Bracket Busters and Stock Flops: The Risky Game of Picking Winners

March 27, 2025

March Madness is here, and just like filling out a bracket, picking individual stocks can feel like a thrilling gamble. But the odds of winning big are slim. In fact, history shows that most stock picks, like most brackets, end up busted.

Read More

Are Hidden Fees Draining Your Retirement Savings?

March 20, 2025

In this episode, Eric reveals the true cost of investing and how to protect yourself from unnecessary financial drains.

Read More

What Game Night Can Teach Us About Financial Planning

March 13, 2025

In this episode, Eric breaks down the surprising financial lessons hidden in classic board games, offering valuable insights to help you navigate your retirement strategy.

Read More

Mailbag – Upsizing, Financial Advisors & Business Owner Planning

March 6, 2025

Join us as we answer questions about the challenges of downsizing, the emotional aspects of planning for family gatherings, and the realities of transitioning into a financial advisory career.

Read More

Planning for Unique Situations in Retirement

February 27, 2025

While many face the same general retirement concerns, each individual’s situation is unique, requiring tailored solutions.

Read More

Planning for Kids, Grandkids, & Your Future

February 20, 2025

As many nearing retirement age are discovering, adult children and grandchildren can significantly influence financial strategies, making it crucial to understand how to navigate these relationships effectively.

Read More

Financial Planning Conversations for Couples

February 13, 2025

This episode is focused specifically on that planning we do with couples with insights on how we help them navigate tricky conversations about money and retirement.

Read More

Is Your Retirement Based on Wishful Thinking?

February 6, 2025

Many people fall into the trap of wishful thinking when it comes to what they expect will happen in retirement, but a successful retirement isn’t built on hope and assumptions.

Read More

Spending With Confidence in Retirement

January 30, 2025

Eric shares strategies to help retirees enjoy their savings while ensuring financial security.

Read More

Leave a Comment