top of page
  • Writer's pictureBridget Sullivan Mermel CFP(R) CPA

Number One Financial Skill for Retirement | Plus How to Make it Easy!

The number one financial skill for retirement means what you need to have mastered before you give up your job. It's not about investments. It's not about when to take social security. It doesn't have to do with IRA distributions. All of these can be important. But on today's episode we'll talk about the one thing you must know and be able to do before giving up your job.

And you can practice this before you retire!

What is it? Financial planners can't tell you what you spend. Only you can figure that out. We'll talk about why this is so important after you retire, while it might not matter as much before you retire. And we'll talk about an easy way to figure it out.

We'll also talk about why you (or your partner) might resist figuring this out. Heck, Bridget shares her own experience with why she doesn't want to do this herself.

00:00 Welcome

00:49 #1 skill

03:30 John’s 5 start tip

Here are some recent videos we've done on retirement:

Emotional Hurdles of Retirement: Two Surprising Challenges:

Happy Retirement Planning: 4 New Ways to Plan Your Happiness Now!

Is it Best to Pay Off Mortgage Before Retiring?

John's firm website:

For advisors around the US:


John: On today's episode of Friends Talk Financial Planning, we're going to share with you the number one financial skill that people need in order to prepare for retirement. And it's not about your investments. It's not about claiming Social Security. It's not about required minimum distributions, but by the end of this episode, you're going to know what you need to practice in order to be fully prepared for retirement. Hi, I'm John Scherer, and I run a fee-only financial planning practice in Middleton, Wisconsin.

Bridget: And I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois. Before we start, let's ask everybody to please subscribe. It helps us with YouTube. Okay, John, let's start. The big reveal What's the number one skill?

John: We're not going to make people wait till the end to hear that. So the number one thing that we have for people that is something that they don't really know and can be really challenging is knowing how much they spend and how to project that into retirement. It sounds simple when you say that, but thinking about that, that is really a challenging thing. It's the number one thing that we can't help people with, in that we can tell you how much to save.

We can tell you how much you are able to take out of your portfolio. We can help you make that decision about Social Security claiming, about RMD planning, meaning required minimum distributions. The only thing that your financial advisor can't tell you is what you spend. We're going to talk about that here today, but that's the biggest factor.

I'll get people that ask, “Hey, do I need a million dollars to retire? If I have a million dollars, can I retire?” Well, it depends. If you spend $30,000 a year, probably. If you spend $300,000 a year, probably not. It's that really big factor. And so often in our world, the focus or the media anyway, the talking heads like you and I, talk about investment return, what to do about inflation and interest rates and all those things. But the driving factor is, hey, how much do you spend. And being realistic is really important. It sounds so simple, but it's not easy.

Bridget: Right. And it's something that in large measures is within your control, too.

John: It's one thing you can change, right?

Bridget: Yeah, exactly. However, it's hard for a lot of people. There’s just a big hurdle to figuring out what that number really is. And I go all Jack Nicholson, when I'm thinking about this—and I'm serious—I can't handle the truth. I don't even want to know how much I spend. And while I'm earning money, I can earn my way out of it.

John: It’s different when you're spending in retirement.

Bridget: Yeah, but when you're retired, you can't earn your way out of it.

John: And we'll have people that say, “I really need to have a budget, I really need to develop a budget.” And my answer is, “Well, if you want to, that's great, but are you spending more than you're making? Are you doing your savings goals?” And the same thing plays into retirement. Having that budget sort of gets baked into our mind.

And I appreciate what you said, “Am I sure that I want to know what happened with these things.” And then even if I don't know, I want to know how to figure that out. And the traditional way is, well, here's a list of things and fill in all your expenses. And I mean, not that that doesn't work in some fashion, but golly, that's really hard to go and break down those things. So the one thing that I do…

Bridget: And disgusting…😊I don't want to know how much I spend on this or that.

John: Right. So sort of the five star tip I have for folks is to say, listen, these days so much of our lives is on the credit card, so if you have one, two credit cards, three credit cards, print off those statements and put together a really quick spreadsheet or write it down on a piece of paper. January. How much was the billing in that month? How much of it was charged that month? And then February, and all the way down. Now you get twelve months of spending.

And I don't necessarily care how it breaks down. At the end of the year, a lot of credit cards will say, this is what you spent on travel, and this is what you spent on food, and if that trips your trigger, if it's important to you, great. All I really care about, though, is that sort of 30,000-foot view, asking, “How much went out the door each month?”

And then mark down that number. Most of us have a checking account that pays the majority of our bills, maybe two of them. And we've got some things on auto pay, and we got a few checks, less and less these day. It’s not like in the old days where there were two or three pages of transactions. Now there are simply a handful of transactions. And what we do with it is say, “Listen, we've already counted the credit card in there, so what is not on the credit card? Golly, maybe my mortgage.

And I wrote a check for my property and casualty insurance, and I wrote a check for my real estate taxes.” And again, not necessarily dividing those things out to figure out what it was, but just what went out the door. So this went out the door for my credit card. This went out the door for my wife's credit card. This went out the door from our joint checking account and maybe three, four or five lines. Add those numbers all up, and that tells us that's what went out the door last year. That's what we spent.

Bridget: Right. And I would say that some people use a debit card, and they don't use a credit card. Okay, fine. Lean on your bank and your bank information. The other thing is that I would say is that you're making it sound really easy, because I know that online, with my credit card, I can get the whole year; I can do a whole year statement. They'll tell me what I did to my annual spending report. Again, this is something I don't want to look at, even though I'm financial planner. For me, the way I approach it is usually by saying, “If I'm saving enough, then I've earned the right to not worry about it.”

John: To spend. I love that.

Bridget: But again, when I'm retiring, I need to shift gears a little bit and do the projections, so that I actually know what my spending amount is.

John: I appreciate you sharing. First of all, people often say, “I don't like looking at this stuff,” the whole Jack Nicholson thing, right?

Bridget: Right.

John: And from a professional standpoint, I don't have any judgment. And I encourage you, if you choose to do this at home, it’s a great exercise, but it is what it is. It's not a value judgement necessarily. Now, you can take a look at that and say, “How do I feel about this? Do I feel like, okay, that's cool, or holy moly, I didn't realize what went on.” Sometimes we get it in both directions. We've got folks that say, “Yeah, we really don't spend very much.” And then you look at and they go, “Oh, look at that.”

Bridget: For a lot of people, it has no relation to what they think. So people say, “Oh, I don't spend much.” And then they start seeing…

John: what they spend.

Bridget: There're the three clubs that they belong to.

John: Awareness. It's being aware. Here are the facts. Okay, then we can do something with that. And when you don't know it is really hard to plan for retirement, and if you don't know what the spending number is, how can we do those things, so getting that is key. And it sounds kind of weird to say, “This is a skill, but it's really hard.”

We both have decades of experience and say, “No, this is challenging.” And it's the one thing that other people can’t tell you, that you've got to be able to come up with on your own. So track what you spend. One point I want to make, too, is that it can be easy to push aside the details. I call it, “Don't fool yourself.” Because you look back and you say, “Holy smokes! What happened that month?” And then you think, “Oh, that was a one-time thing. Oh, that was a one-time thing.”

Bridget: There goes the furnace.

John: Well, if you have all these one-time things—and I actually do this for myself; I’ve tracked it over the years—you go, “Yes, there're all those one-time things.” And guess what? They're not one-time things. For example, the cost of homeownership, those sorts of things.

Bridget: Well, what about things like gifting to your loved ones? And this is kind of going back to the millionaire next door. They talk about giving money to family and so how do you handle that? What are your thoughts on that?

John: I'm glad you brought this up. This is super. I appreciate this question; I had forgotten all about this. The answer is: it depends. There you go. Thanks for that answer, right? But it does. So in the situation for some folks who say, “Hey, listen, I'm going to give money to my kids, my grandkids, set up a Roth IRA for my grandkids, that sort of thing. That could be completely discretionary, meaning it's nice to do, but I don't really care.

Bridget: Okay, right. My one-time rehab expense to my kid in rehab.

John: And the answer is, it depends. There are some things, I think that are truly one-time expenses. We've got some friends of ours that took the trip of a lifetime for their 30th wedding anniversary. It's not like this is a recurring thing. No, there are some legitimate one-time things. Listen, you've got to pay for a rehab stint. That's probably not going to be an ongoing thing, hopefully, anyway.

And so, one of the examples that I use in that circumstance is think about your health care. If you fell off your bike and it was a freak thing, and you don't really even ride your bike that often, and you had a $50,000 expense, is that a one-time thing? Yeah, that could be reasonable. If you've got some health concerns, you got a bad heart, and periodically you've got these things that come up. Guess what? That's probably not a one-time thing, even though you don't have it every year. So it's this sort of art mixed with science on things.

Bridget: Well, it gets back to is it really one time or is it you can't handle the truth?

John: Yeah, right. Don't lie to yourself. Like this might be what it is. There are some challenges in there to think about with that. And so, it's that sort of thinking. I love that example. Here's the other thing, though, for things like travel, things like gifting to family, is it discretionary? I can choose to do this, and it's a onetime thing, or if I can't do that, that's okay. And you think travel sounds like a luxury, but maybe taking your annual vacation for a week is not optional for you.

Maybe that's part of your core happiness level. Maybe taking the trip to Europe is something that if you don't do that you could live without that. It just depends on your situation. For some of our clients gifting money to family is not optional. That is one of their core values. Cool. That has to fit in. For others, they go, “Periodically I'm going to give money to my kids and grandkids.” It doesn't have to be a fixed cost for those folks. So that's where some of this art does come in.

Bridget: Great! It seems like that's a great time to wrap it up, John. I'm Bridget Sullivan Mermel, and I've got a fee-only financial planning practice in Chicago, Illinois.

John: And I'm John Scherer. I've got a fee-only financial planning practice in Middleton, Wisconsin. Both Bridget and I are taking on clients at our practices, but if you're looking for an advisor in your area, we're both members of the Alliance of Comprehensive Planners, so if you're looking for an advisor that thinks like us, check out

Bridget: And please subscribe.

At Sullivan Mermel, Inc., we are fee-only financial planners located in Chicago, Illinois serving clients in Chicago and throughout the nation. We meet both in-person in our Chicago office and virtually through video conferencing and secure file transfer.

15 views0 comments


bottom of page