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Matthew Tuttle on Retirement Planning
Matthew Tuttle, a certified financial planner, is the author of Financial Secrets of My Wealthy Grandparents. He is also a partner in the Private Client Group LLC, a firm that specializes in designing wealth-management practices for accounting firms, law firms, and property and casualty firms and the President of Tuttle Wealth Management, LLC (an investment management strategic alliance of the Private Client Group LLC). Tuttle is a frequent contributor to Forbes.com, The Wall Street Journal, Smart Money and Dow Jones Newswires, writing about retirement issues, and is a frequent guest on BusinessWeek TV and has been interviewed numerous times on CNN talking about investing issues. He shares his thoughts about saving for retirement.
Once you decide to start planning for retirement, is it wise to make a budget so you know how much you can afford at the outset?
I’m not a big fan of budgets. They are like diets because you eventually are going to blow them. You may be able to suppress your spending for a while, but sooner or later something will happen that will throw you off course and you will go back to your old ways. And, with spouses, I’ve never seen a budget where both spouses agree. Even if you are single, budgets are still pretty hard.
What should people do then?
What I prefer is to have people track their spending. Start by making a list of everything you spend money on [and do it] for seven days. At the end of those seven days, look at [your spending] honestly and determine what you needed and what was extravagant. If you look at all the things you are buying, you may realize that there’s a lot you really don’t need.
How do you figure out how much you should put into retirement savings?
It depends on what type of lifestyle you have and what you want when you are older. There is no one rule of thumb. I don’t believe you need 70% of your income as some say. I think that’s ridiculous because now from 9:00 to 5:00 you are not going into work and chances are you are going to fill that time with something. There’s golf, which is expensive. Travel, which is expensive. I don’t think that’s an accurate number unless you are going to move to somewhere cheaper. And you probably won’t be able to plan that step when you are so young. You need to go through all of your yearly expenses and figure out in retirement how much of those would you still have and what other things you would add [like travel]. Then it’s a process of constantly reviewing those numbers to decide whether they need to be raised or lowered.
What can you recommend for people in their late-40s and 50s to do when they first start planning, since they are starting later than they maybe should be?
There’s no magic answer for this. Obviously you are going to need to save more if you are starting late. You need to make a commitment to save and probably will have to give up some of the things that you are used to. Figure out what your goals are, figure out where you are now financially and create a plan that gives you the best possible chance of bridging the gap between where you are and where you want to be.
When people first start thinking about planning for retirement, many are confused about how money works for them when they are older. What is the overall endgame you are looking to achieve for comfortable retirement?
You’re right [about the confusion]. You may not realize when you start how the money will work for you. Looking at your portfolio, I figure you can safely withdraw 4% to 4.5% without eating into your money. If you have a million-dollar portfolio, that’s going to generate maybe $40,000 to $45,000 a year and you add that to social security and any pension you might have, and that’s pretty much what you can expect in retirement. If you think that amount will be enough, you know how to set your goals over the course of your lifetime. As I said, you really need to figure out what you want and where you want to be. Then, you can figure out what you think will be enough.
Expanding on the first 30 days, what do you have to do in this period if you want to save successfully?
Set up the mechanisms and make those mechanisms automatic. For instance, the 401(k) is usually the best way. You can have the money deducted every month from your paycheck and you won’t ever see it, smell it or touch it. It’s always easier to save money if you don’t have to move the money from one place to another. This way, it’s done without hassle and without you thinking of other ways to spend that money.
What is the belief you personally go to during times of change?
I see change as opportunity where things will always change and you can’t predict how, you can look at it as “oh my god” or find the good in it.
The best thing about change is…
…it creates opportunity. If things didn’t change, life would be boring.
What is the best change you have ever made?
I would say leaving the insurance-company world and setting up my own firm.
For more information on Matthew Tuttle, visit www.matthewtuttle.com.