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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice. This show's about getting to the details so you can determine what is right for you. My name is Mike Decker. I'm a licensed financial adviser and fiduciary.
Mike:With me here is David Franson. He'll be reading your questions, and I'm gonna do my best to answer them. As always, text your questions to (913) 363-1234. David, let's begin.
David:Hey, Mike.
David:Can you set realistic expectations for someone who gets a plan and then manages it on their
Mike:own? So I wrote an article years ago, a year ago maybe, and it was called how a comprehensive plan could replace your adviser and save you money.
David:This is on Kiplinger. Right?
Mike:It wasn't on Kiplinger. That one went on Yahoo Finance and Market Insider, so Business Insider
David:Okay.
Mike:And a couple of other places. It got kinda syndicated a little bit. We put it as a press release technically, and a lot of people picked it up. The point is many people, if you have a system that you can follow, are fine. So let me give you a couple of examples because that this will help illustrate it.
Mike:Because you wanna follow systems, not sentiment. You don't wanna wing it. You wanna know if the markets go down, you do x y z. If the markets are up, you do a b c. That's how a kind of a system would function.
Mike:You've already decided your strategy before it happens. Okay? Yeah. It's like in chess, I move here. If they respond this way, here's your reaction.
Mike:If they respond that way, that's your reaction. That's how you play chess. You're not moving and then saying, okay, what happens? And then you're just kind of guessing your way through. You have a strategy that's multiple moves ahead.
Mike:So for your typical retiree, let's say they've had a million dollars saved up or less. You've got Social Security. K? That's pretty easy. At some point, you'll need to turn on Social Security.
Mike:When you turn it on, that's gonna be a concerted effort on, you know, '67, '70, '62, or whatever it is. Maybe you've got a pension, maybe you don't have a pension, but determining when if you have a time frame to turn on the pension or it just turns on. A lot of them, it's just one time you turn it on when you retire, that's it. That's fine. Then you've gotta figure out how do you fill in the gaps, cracks, and crevices.
Mike:How do you need your portfolio to generate income? Now your portfolio, your investable assets, you've got stocks, bonds, mutual funds, ETFs, buffered ETFs. You've got CDs, treasuries, bonds, not bond funds. You can use fixed annuities or fixed indexed annuities, which a fixed annuity, by the way, is a CD from an insurance company. A fixed indexed annuity, as long as you don't turn on income, it's kinda like a buffered ETF or a structured note from an insurance company.
Mike:When people hate annuities, it's because they're thinking typically of a variable annuity. Or they bought it, and they just bought a bad annuity. That happens. You can buy a CD today for point 5% or around 5%. Maybe 4% now.
Mike:Things have shifted. Yeah. So you don't wanna take a single experience and assume that's the whole thing. But I wanna define things as they are. Okay?
Mike:You can buy rental property, but you've gotta figure out then what portfolio are you working with, and how do you take income out when the markets are up, and then when the markets crash. Okay? Why? So if the markets go up, then you can take income from your profits, you're good to go. If the markets go down, and you take income, you accentuate the loss.
Mike:Here's the quick example. If the markets go down 30%, you need to have a 43% recovery to break even just to get back to where you were. You don't wanna go down on principle, at least for the first couple of years. So if the markets go down 30%, which they do every seven or eight years, and then you take out 4%, let's say, because you need to pay the bills, you're now down 34%. Now you need a 50%, five zero recovery just to break even.
Mike:That might take a couple of years. That's rough.
David:Well, what did the markets go down earlier this year? Was it like March, April 2025?
Mike:Yeah. They went down pretty hard. Pretty quick.
David:Yeah. Yeah. They went down it wasn't 30%, was it? I don't know.
Mike:Look it up real
David:quick. Okay.
Mike:Yes. Okay. So year to date, top to bottom, it was around an 19% drop. So it's fairly significant. It was a fake crash.
Mike:Oh. So a crash is 30% or worse.
David:Oh, okay.
Mike:A correction is kind of within the 10 to maybe 20% based on how I look at it, and then it recovers in how long? A couple of months? One, two months, really? That's not really a crash. Uh-huh.
Mike:That's a correction. And then you've got the other crash from 2022 to 2023. That was slow and steady and rough. That was 20% or so. That's not a real crash.
Mike:We haven't had a real crash since 02/2008. And a lot of it is from quantitative easing. A lot of it is from manipulation of the Fed. A lot of it is manipulating our economy. A lot of it is a lot of things that you can't keep doing forever.
Mike:At some point, we've gotta pay the piper. And the same thing happened when you look at 1987, Black Monday. The markets crashed quickly, and then they recovered. And then we had 1990. It was a quick crash again when I evacuated Kuwait.
Mike:We manipulated things, had a new economy, the.com, the Internet, and that grew exponentially for ten years, and then we had ten years of nothing. Do you see the parallels here? So the point being is you're not looking to just outgrow your assets. What do you do when the markets crash? We called a reservoir.
Mike:We're kind of starting now to call this a bear market protocol, but here's what it is. When the markets go down, you have to have, in our opinion, a part of your portfolio that is principal protected.
David:Meaning?
Mike:It can't lose money.
David:Okay.
Mike:So if let's say, just for easy math, 40% of your portfolio wasn't in bond funds, but let's say it was in buffered ETFs. K. A buffered ETF in most situations, if it's a max buffer, so a 100% buffer, and these these do change from time to time, but if the markets go up, let's say seven percent, or you can get up to 7% of the growth, but no downside risk. K? That's not always downside risk.
Mike:It can go from, like, a 100% to maybe 60% for things like that. It fluctuates. I don't wanna call it principal protected. It can change, but for the most part, the downside's protected. Okay?
Mike:Probably making this more complicated than it needs to be. But you've got, let's say, 40% in something that if markets go down at the end of the year, it kind of resets, you don't lose money, but you've got up to 7% of the growth.
David:Okay.
Mike:K. So if the markets go up 10%, you get 7%. If the markets go up 4%, you get 4%.
David:So it's a little bit of a trade off, like, hey. I won't lose a ton, but that prevents me from gaining fully, but it's your trade off.
Mike:Yeah. It's not gonna make you rich. Mhmm. It's gonna help you stay rich. It's gonna help you keep your wealth.
Mike:So if the markets go down and you've got 40% of your portfolio that can't lose money, that means your portfolio hasn't lost as much as the market. That's a good thing, number one. The markets go up, it still made money. That's a good thing, number two. But if the markets go down and you need income, that's where you take your income, because that allows the other part, the 60% of your portfolio, to have time to recover.
Mike:You see how that works?
David:Yeah. And this is especially good for people who are retired and need to draw income, right, from their if it's someone younger and the market's crashed, you keep
Mike:You working don't really need this.
David:I don't need this money until, you know, thirty years from now, right, or twenty years.
Mike:Oh, well, if the markets are crashing, you'd be buying. Uh-uh. You're buying everything on a discount. Right. So you have a part of your portfolio in retirement protected, and here's the protocol.
Mike:It's real simple. And so I think a lot of people can do this. When the markets are down, this is where you take income. When the markets are up, you take income from these places. There's a little bit of everything.
Mike:Most people can handle that. And when we build a plan, we write out those instructions. When the markets are down, this is your reservoir. This is your bear market protocol. Do this.
Mike:And because we can ladder things out between buffered ETFs, maybe structured notes, those are a bit more complicated, maybe some fixed index annuities because and this is I'm not quoting any sort of product, but if a buffered ETF can offer you up to 7% with no downside risk, maybe a fixed index annuity could offer you up to 10% of the S and P, but no downside risk. And the difference is a buffered ETF is liquid, a fixed index annuity is not, so it can give you a little bit more upside, but you gotta keep it in there for a little bit longer. So you have to ladder out liquidity and things like that. That's our job is to set that up. And then we can say, hey.
Mike:You don't need to pay us ongoing fees. Just do this. Now for someone that's a million dollars or less, the fees that you might be paying your adviser, you might not be getting the value worth the fees because it's a very difficult situation when everyone's kind of promised roughly the same relationship, but some are paying three times more in price on fees. They're either gonna get more attention, or they're just paying more for the same service. But if you're paying less, you might not get as much attention.
Mike:When do you really need the attention? Now whether you realize that or not, I mean, ask yourself, when's the last time your financial adviser has called you in to review your taxes, to project your income for the next year on how you're gonna take your income in a tax efficient manner, to review your brokerage accounts and the different nonqualified positions, and and how they might affect your capital gains and your Social Security taxes and your income taxes, and are there opportunities to take some income from a long term position within a zero or 15%? When's the last time someone's really done that? Probably not. So you might be paying a fee to have them manage a portfolio, but maybe you could manage a portfolio on your own that's very similar.
Mike:Again, you follow certain instructions. Buy these positions, and don't touch them for a while. And when the markets go down, you take income from here. When the markets are up, you take income from there. Most people seem to be able to do that.
Mike:It's very simple. And then if you need help, if you need an update, you just pay for our time. It's the open market. You can hire any adviser that's willing to do it as a fixed fee. It's just most don't.
David:Right.
Mike:Most advisers want the ongoing relationship for 1% or 2% of of your assets, and they keep you in the market. So for people that have a million dollars or less, getting a plan set up to where you just follow the instructions and then come in for the oil change or the update or whatever you wanna call it Mhmm. Might be actually a really good option for you. And you could buy some annuities to guarantee kind of your Social Security plus a little bit extra just to kind of guarantee that foundation, and then have these other strategies on, you know, here's the portfolio. Here are 10 stocks you're gonna buy.
Mike:Here are the indexes you're gonna buy. Just hold these positions. Now the risk of that is you do need to keep an eye on your portfolio to see if there's any substantial change. I've talked about FICO as a nice case study. Oh, right.
Mike:They were a great investment until they worked. Yeah. So if you're managing your portfolio on your own, even though the intention is to hold it for a long term period of time, you do need to keep an eye on these companies. You do need to keep an eye and see if there is a significant change, and if you need to make a change in your portfolio or not.
David:And so, yeah, so your adviser could check-in If you
Mike:are managing it yourself, it's your responsibility. That's the risk. Yes. So you're not paying fees. You've got a good system.
Mike:And maybe your portfolio is just on indexes, so you're not having as much risk to keep track of companies. Maybe you do have have a couple companies. But maybe those companies are like, I don't know, Microsoft and Allstate. Those are maybe not as volatile companies as, you know, take your AI stock pick as example. Sure.
Mike:Some could argue that Microsoft is kind of an AI like company, but they've got a lot more going on. Right. So you've got that kind of situation that you'll need to understand. What was the question again? Yes.
Mike:Oh, realistic expectations for someone who gets a plan to manage it on their own? I think most people can do it on their own even without a financial background, because at least for us, the instructions are so clear. Because they have the opportunity to also come in for one time. You're just paying us like, you pay your CPA an hourly rate, past hourly rate for the updates. And maybe you check-in every two, three years or so.
Mike:A lot of those are pretty simple situations, but you have to be responsible for keeping an eye on your portfolio, which means you have to build a portfolio that you're comfortable maintaining.
David:And then follow the protocol.
Mike:Follow the protocol. Because if you're looking to have a plan built for you, odds are you probably don't wanna be a trader, that you're buying and holding these positions for a long term period of time. Odds are that there is some sort of income mechanism that's helping you structure out your income for the first five to seven years. Here's an example. Maybe your first year income comes from a CD or a treasury or a money market.
Mike:Because you're retiring next year, the CD or the bond instrument matures, and that's your income for that year. And then maybe in two years, you've got a five year payout from an insurance company. It's not a lifetime income because you don't want that for inflationary reasons, but maybe you got a five year payout from there. At that point, you hold the securities in the market for now six to seven years, and you've got your income structured, so you don't even need to see the adviser, really, until maybe year three, four, or five. And then you come back in and get a checkup, and then you move on.
Mike:Right. And this is so foreign to the financial services space, but it's the honest truth. You could do this. You can trade on your phone. You can manage a portfolio on your phone.
Mike:You can ask Grok or ChatGPT for market updates, and it's pretty good about accurate assessments. I'm not saying you should take trading advice for it, but this might come as a shock to a lot of people, but it's the honest truth. Now if you have over a million dollars, your situation probably gets a little bit more complicated from taxes. Tax laws are changing or where you take it just takes more work. Where do you take your income to maximize your efficiencies in the market, in the income, and so on in a shifting environment?
Mike:That's where, in my opinion, it starts to make more sense for a net of fee performance. Are you able to get more out of your assets by paying a professional than trying to figure it out on your own? TurboTax isn't really gonna do that for you. They're gonna tell you what happened. They may not show you as well of what could happen in the future.
Mike:And the tax planning softwares are quite expensive. So you have to ask yourself, what am I really paying for? And is the plan gonna set me up for success? Can I manage it on my own, or is it worth spending money, I think, for a fixed rate? How much does it cost to do the job?
Mike:That is the most honest question, and that's what people should be paying, not a participation award of the total assets that you've saved because, you know, they're gonna charge you more because you saved more. That doesn't feel right to me, personally. Yeah. Any follow ups on this? No.
Mike:No. I I I we nail it.
David:Yeah. We've set it up so that to put a cap on it, I mean, if you feel like, hey, I I think my situation is, I don't know, basic enough,
Mike:is that the right term? Boring is good.
David:Yeah. If it is, then I I get this one time advice from a professional, help me design this plan, and then I just stick to the protocol for a decade or more, and it's doable.
Mike:It is doable. They just need a good guide to at least get them in the right direction.
David:Yes.
Mike:The people that are calling, at least coming into our office, they're smart people. They don't have a financial background, but they're smart people. Mhmm. And so when you can just decrease the learning curve and just say, here's how it works. Here are the risks.
Mike:They go, oh, that makes sense. Here's how you do it. They say, oh, I can do that. It's a very cool experience. Yeah.
Mike:And for those that just want someone to do it, that's fine too. But you should have the option of that you can DIY your plan, that you can do it with someone. Like, so we it's that done for you option. We're gonna build a plan for you and then teach you how to fish, or the done with you, the ongoing relationship, where it's just done, but you're a participant of it. I like it.
Mike:That's that's the reality here. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcasts. Just search for How to Retire On Time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist.
Mike:Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility. This is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to www.yourwealthanalysis.com today to learn more and get started.