2033: How to Build a Forever Paycheck in Retirement

Farnoosh Torabi (0:00)

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SPEAKER_2 (0:55)

Sorry, you're in the wrong place. Seeking profound ways to live a richer, happier life.

Jean Chatzky (1:04)

My mom was 63 years old when my dad died, and she was nicely situated. She had a paid-off apartment. She had social security, his because it was greater than hers. She had a small pension that he had from his years as a teacher. She had a long-term care policy, which definitely hung out in the background and made her feel more comfortable.

She had a retirement account.

Over the next 20 years, that was how long she lived. My brothers and I watched as she spent her social security, she spent the pension check, she spent the income that spilled off of those retirement balances, but she would not spend the principal, despite the fact that she had three kids saying to her mom, we do not need your money. You know, this is your money, we don't need it. She couldn't do it. And turns out she's pretty typical.

Farnoosh Torabi (2:09)

Welcome back to So Money, everybody. I'm Farnoosh Torabi. You know, we're taught our whole working lives to save. Save, save, save. Few people teach us how to stop saving, and almost no one's teaching us how to spend our money in retirement, right? That's the blind spot my guest today has spent the last several years staring down. Jean Chatzky has been one of the most trusted voices in personal finance for as long as I've been in this business. And she just published what she says is the best of her 14 books, because it's solving a problem she's actually living through herself. Her new book is called A Forever Paycheck, and it's about the moment nobody plans for, the day the direct deposits stop and you're left staring at a lump sum that has to somehow last the rest of your life. Turns out most of us are terrible at this. Even people who did everything right, who saved diligently for 40 years, they freeze up when it's time to actually spend the money. Jean found that people with guaranteed income streams spend nearly twice as much as people sitting on identical savings, and that confidence to spend is tied to better health and longer life.

In our conversation, we get into why our brains treat a shrinking balance like a loss, even when it's working exactly as intended. What Jean is doing with her own money at age 61, and the uncomfortable math behind long-term care that almost nobody wants to run. Here's Jean Chatzky.

Jean Chatzky, welcome to So Money.

Jean Chatzky (3:34)

Thank you so much. Great to see you.

Farnoosh Torabi (3:38)

So, audience, I knew Jean when, I knew you when, and I think when was maybe your third book was coming out, maybe your fourth, and now you've written, I think it's 14, and you've said this is your favorite, so I got to ask why.

Jean Chatzky (3:57)

This one solves a problem that I am having right now, and I think it solves a problem, I know, nothing like a little me search. I think it solves a problem that so many people are having right now, Xers and Boomers specifically, older millennials will come up to it pretty quickly. You and I have lived in the same sea of personal finance for such a long time, for decades.

Personally, I feel like I have spent most of my years encouraging people to save for retirement, encouraging them to pay themselves first, and max out their contributions if they have a 401k, and grab all the matching dollars that are on the table, and invest the money in a way that's risk appropriate for them, and just accumulate, accumulate, accumulate. Eventually, we get to this point where the earning stops, either because you choose it to stop or it stops for another reason, and then you have to take all this money and figure out how are you going to make it last for the rest of your life. That is a really complicated question, it turns out. It's a complicated math question, and it's a complicated emotional question. And so many people just don't have the tools. So I'm really excited about this one because I feel like it's a problem solver.