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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 everyone to How to Retire On Time. I'm Michael Decker here with David Fransen from Kedrick Wealth. As always, this show is about you and answering your retirement questions. Not the oversimplified advice you've heard hundreds of times. We actually want to get into the nitty gritty.
Mike:Submit your questions to www.retireontime.com slash ask anytime during the week. We collect them and we address them one by one here on the show. As those are coming in live here on our private Zoom, I guess, show that we do. I asked an interesting question here as we got started. And that's what are your top concerns about retirement?
Mike:So as those polls are coming in, it's very interesting. We assume that everyone's focused on one concern. But really, I think the dynamics are actually quite different than a lot of people assume. It's like you hear the talking points on the radio or on the news channels or on Kipling or anywhere that you'd research it. Oh, that's the big concern.
Mike:That's someone else's concern. But my concern is different. And these assumptions oftentimes will skew people in the wrong direction. So I wanna take a moment today and talk about your relationship with money and how that is going to have a significant impact on your retirement plan. Let me give you an example.
Mike:How well do you know your neighbor, David?
David:Fairly well. I mean, they haven't been over for dinner, but we've talked to them a lot over the years.
Mike:Okay. No names. I don't wanna know who they are, but
David:That's right.
Mike:A neighbor, so we don't wanna single anyone out.
David:That's right. We have many that we know.
Mike:Yeah. So if you were to assume your neighbor and what they want, how would that different from you? Just from a personality standpoint. Like is your neighbor more aggressive? Are they more conservative than you?
Mike:Like Right. Walk me through that just for fun here.
David:Yeah. I mean, so obviously, you know, all of our neighbors come from from different backgrounds. They have different tastes, different hobbies. They they might not want to go hiking in Colorado. Right?
David:Or or maybe they'd rather be on the beach or maybe So they have They're gonna wanna fund different ways of maybe living in retirement?
Mike:They're gonna live a different lifestyle.
David:They are, yes.
Mike:And would you imagine their investments are gonna be different than yours? It's such a leading question, but I'm going somewhere with it.
David:Yeah, definitely they would be different. I mean they have different family sizes, different family dynamics. They have a big family or a little family? Smaller, littler.
Mike:How many kids do you have?
David:Five.
Mike:Okay. Yeah. As your kids grow up, you might That might be a part of your retirement. It might not be as big of a retirement for them because they All these little things are gonna factor in. Mhmm.
Mike:What is the thing that everyone wants in their investments? If you had to guess, I mean, you see these appointments, what do people ask for?
David:Yeah. So there are there are a few things that they that it's probably pretty universal. Right? People want liquidity. They they wanna be able to access cash.
Mike:Whenever they want. Yep. Wherever they want. Classic.
David:They want growth. Mhmm.
Mike:Make money. Yep. So they
David:want they want their their nest egg to grow, but they also want protection.
Mike:Yeah. So They don't wanna lose money.
David:You don't wanna lose.
Mike:Which is kind of funny. You know Warren Buffett's rule, don't lose money. What's the second rule? Don't forget, number one.
David:Yeah.
Mike:It's like easy It's easier said than done. Yeah. Because the problem is, you can't really get all three in any investment or product. It doesn't exist.
David:So,
Mike:this is where we read all these things. I'm kind of trying to weave all this together in one coherent thought. But we see our neighbours. They have different amounts of kids. They have different interests.
Mike:Some want to travel. Some don't want to travel. Some are comfortable with market risks, some are not comfortable with market risks. So we see those and they, them, not necessarily your neighbors, but the articles, all these other things are influencing what you're trying to decide on. And you're trying to figure out, well the wealthy doing?
Mike:Or what's the right thing to do? And it's so out of context. Because there is no such thing as a perfect investment product or strategy. It doesn't exist. Nothing does everything well.
Mike:And so you have to develop a portfolio where some of your assets are going to have growth and liquidity, which means there's risk, there's no protection. You've got some that have growth and protection, but you lack liquidity. So you have to sort through that laddering structure and however you want to create that architecture in your plan. And then you've got some that's got protection and liquidity, but it's not gonna grow, you're losing to inflation. And so, how do you do that?
Mike:How do you structure it? And then how do you then figure out what's right for you? And after a decade of doing it, I've come to the following conclusion.
David:Alright.
Mike:There are things you can control, and there are things you cannot control. So, let me give you some examples. Things you can control. What investments or products you pick? That's obvious, Yep.
Mike:How much income you want? How much have you saved? I mean, you can't really go back in time, but you've controlled how much you've saved. Yep. Did you sacrifice the present for buying your future?
Mike:That's what savings is, buying your future and so on. All these things you can control. How you wanna do your tax plan, you can control that. How much is gonna go into growth and protection without the liquidity? How much is gonna go into growth with liquidity without the protection?
Mike:All these things you can control. Yes. But here's what you can't control.
David:Alright. The
Mike:market. Tax rates. Health care costs. Inflation.
David:Yes.
Mike:And so, when you understand what you can control, and you accept that, and you accept what you cannot control, you then go to a position where you understand a prepared reaction is better than a risky prediction.
David:And
Mike:your reaction is going to be different than someone else's reaction.
David:Yeah. What is a risky prediction? What kind of risky prediction can we make?
Mike:Yeah. Don't do this. Okay. But it's saying AI is the future and so I'm gonna put all my eggs in the AI basket. So you just buy Nvidia and Broadcom and a couple of these AI companies.
Mike:Yeah. And I say AI companies like the chip manufacturers, the semiconductors or energy that feeds into it. Those sorts of things.
David:Okay. Yep.
Mike:I do believe AI is the future. I'm not discounting that thesis. But the .com was the future. And if you did a bunch of those .com companies, some of them went bankrupt to zero. They went to zero.
Mike:The stock price went to zero. Mhmm. Some of them went down 80%. Like Cisco, which was the largest company in the early two thousands. The largest company in the world lost 80%.
Mike:These are called risky predictions because you're banking your future on something you cannot actually control.
David:Right.
Mike:This is where greed comes in. That's a problem. So, this is where you have to then ask yourself the harder questions. And this is a part of our planning process. So as you know, we always do the plan first.
Mike:What do the projections show? Then we go down to the next level and explore strategies. Where are there leaks in your projections? There's an inefficiency here. There's an inefficiency there.
Mike:Okay, let's flag that and let's address it. And then you pick out the investments or products. When you're going to the first and second step, the planner, the projections, and then the strategies, always ask yourself, okay, let's say in seven years, eight years, nine years, you filed for Social Security. This is how much income you need from your portfolio. So that's your portfolio stress.
Mike:These are the load bearing walls. Okay? And let's say you've got $2,000,000 projected in your portfolio at that point, and you're looking for, I don't know, dollars 80,000 from your portfolio. Okay. That's within the 4% threshold.
Mike:That's not that big of a deal. Okay? You know, 4% of 2,080,000.
David:Okay. Right.
Mike:Right. But if the markets tank, let's say $2,000,000 now worth $1,000,000 Your withdrawal is now 8%. Does that affect your lifestyle? Are you willing to take an 8% withdrawal or are you gonna change your life accordingly? Now, ideally you're not all at risk like that in the market.
Mike:You're not all in equities. Yeah. Right? So if you're not all in equities, there's bond funds, there's real estate, maybe you don't go down 50%. Maybe you go down like twenty five, thirty percent.
David:Okay.
Mike:And now your withdrawal is like 6%. Okay. That's a lot of math, but here's where I'm going. When you take income from your account, when it's down, you are locking in losses, making it more difficult for it to recover. So what's the strategy you wanna implement for when the markets go down?
Mike:A prepared reaction.
David:Okay.
Mike:That's the first step. And then the second one is, even if reaction, you had a strategy that was built for times like these, would you still change your lifestyle? And if the answer is yes, it's the wrong prepared reaction. Do you see how the Like there's a difference?
David:Yeah. So you can just keep on going however you plan to live your life no matter what the market does is one way, right? And then the other way is, oh because the market did x, then I have to change my life. Yeah. And then why?
Mike:Some people have saved enough. If the markets go down, they don't need to flinch. Uh-huh. We have a portfolio model called the KDRC model. It's simple.
Mike:It's built for flat markets. It's designed to handle the ups, the downs in every which way the markets go. It's a risk dial that as the markets are going protective state. It's designed to do this. So people that follow the system, if the markets are down, you should still be fine.
Mike:If you're listening in on this and you're going, gosh, I wanna do on my own, I just want some guidelines. Look, if you go to retireontime.com, subscribe to our newsletter, you'll be a part of our first wave of our public subscribers. This is something we've held for our private clients. This is something we've been holding for a very special group of people, but we're making it more public for for anyone that wants access. We're gonna be launching that.
Mike:You just have to subscribe to get first access to us. So go to retireontime.com, click subscribe to our newsletter and you'll get access to the first wave of the public access to our models, the KDRC model and so much more. All of it is intended to help you make better decisions as you prepare for retirement and retire. But some people still say, well gosh, but the markets are down. My accounts are down.
Mike:I need to live less. This is a classic sign that your money owns you. I'm not trying to mince words here. Put in the chat if you disagree. Happy to have a little little debate here.
Mike:Yeah. But if you're reacting to your money, your money owns you. Because you could have a prepared reaction on something you cannot control. You can get through those difficult times and the system, as long as the system's implanted correctly, you should be just fine. Yeah.
Mike:Markets are down one, two, three years, as long as the plan is built right. You have protocols for this. But even if the protocol scares you, then we've discovered it's the wrong protocol.
David:Let
Mike:me know on the chat if you think, if you think, I mean if you disagree or not, but it's it's as simple. This is why in chapter four of my book, How to Retire on Time, I talk about the reserves. The protocol is that you have protected accounts that you can tap into when markets are down so you don't accentuate losses, so you can sail through the market turbulence. In fact, you could actually take advantage of the market turbulence. You could start buying the dips.
Mike:You could start doing more IRA to Roth conversions when markets are down or some of your accounts are down because that helps you get IRA assets to Roth faster.
David:Okay.
Mike:See, it's not about good or bad. It's about two different market conditions and how to have a positive reaction to both. Alright. And this is so commonly missed. Because what are we used to?
Mike:We are used to growth with some growth with more growth. That's what the markets have done for the last fifteen years.
David:It's been a great strategy for a little while, right? Yeah.
Mike:Well, yeah. And even our model has, mean, it's yeah. Market growth. Let's do it. Yeah.
Mike:Right? Now this year, we've been a little bit more cautious because of how overvalued the market is. But we're still in the market. So the point being is you've got to have that prepared reaction and it has to be the right reaction for you. Let me give you a few examples.
Mike:Okay. Some people I know do not look at the market at all. They have blind trust to their advisor. Now, I'm not talking about the bias of my clients. I'm talking about other friends and associates, you know, people that I've interacted with through my life and how they're doing it.
Mike:They don't look at all ever at the market.
David:So they don't have like a little widget on their dashboard? They don't log in with their app? Don't look at their positions?
Mike:Said, okay, the system works. Keep doing it and call me if there's an emergency, but I'm just not gonna
David:Okay.
Mike:I don't know if that's necessarily healthy. I'd argue that it's not healthy, but that's one kind of category.
David:Alright.
Mike:So how does that work? Oh, sorry, you need to change your It's a problematic situation. But it's putting your head in the sand and some people do it. Then there's another one that says, hey, I just need to be aware of what's going on. I trust this system.
Mike:And you work through that. This is a common thing that we do actually, is walk through different simulations over and over again. Hey, the markets are down. What do you do? Hey, markets are up.
Mike:What do you do? Hey, markets are down three years in a row. What do you do? Because from a psychological standpoint, if you wanna change your behaviour and your relationship with money, you've got to be able to create new experiences or simulate experiences to practice. So that when it happens, you are prepared.
Mike:That's all the time we've got for today's show. If you enjoyed the show, thanks for tuning the podcast. Don't forget to subscribe, leave a rating, and as always, tell your friends, the larger the subscribers are, the better the content can be that fuels your preparation for retirement. We'll see you in the next show.