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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.
When you're uncomfortable spending your money, it's because you don't understand that your money is able to grow and pay for your other expenses. Welcome to the retire on time podcast, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is all about getting into the nitty gritty. That said, remember, this is just a show.
Mike:Everything you hear should be considered informational. This is not financial advice, so do your research. As always, text your questions to (913) 363-1234, and we will feature them on the show. David, what have we got today?
David:Hey, Mike. I want to retire, but I'm having a hard time spending my money.
Mike:This is common because your your history or the experiences you've had shape your behavior or kind of your habits. Your habits are with the habitat or what you exist in, right, your state of mind. So a lot of people will have a hard time because they think if I spend my money associated with their savings account, that it's going to go down. Because every month, we spend money and our checking account lowers, and the income is what replenishes it.
David:Right.
Mike:So and and there's a disconnect because what they see is, oh, I'm spending money and the accounts are going down while there's this arbitrary investment account over here that keeps growing. So even though their net worth is increasing, the associate was spending and that their investment account will start acting like their checking account. So this is called a cognitive distortion, and it's it's basically when you distort reality to fit a narrative that you want to believe. Whether you want to believe it because it's pleasant or not, it's it's internally there's a bias that's distorting the perception. You've heard the expression your perception is your reality.
David:Mhmm.
Mike:That's kind of where this comes from.
David:Mhmm.
Mike:So the the way you do this, this is a very simple exercise, is you say, okay, well, how much income do I need and where is it going to come from? So let's line up your Social Security. Let's say you're gonna get 40,000 from Social Security as a household, whatever that I'm just arbitrary number. Sure. Okay?
Mike:And you need 20,000 more from your portfolio, and let's say you've got a million dollars. Okay. So now you run situations. So you can you can say, okay. I need 20,000 gross.
Mike:Let's forget about taxes just for a second. Okay. 20,000 gross, that means your portfolio needs to grow by 2%. Do you believe your portfolio can grow by 2%? Yes.
Mike:Okay.
David:Especially in today's world. Yeah.
Mike:Now let's adjust for inflation too.
David:So let's
Mike:let's add an extra 3% in there. Alright. So by 5%, do you think your portfolio can average 5%? Probably. Okay.
Mike:Now that you've more than offset a lot of the inflationary issues and the income, let's just run the calculations each time. And I have them go through this. I'll say, okay. So and I'll just do it myself, pull up the calculator here. K.
Mike:Million dollars, k, times 1.05, and I'm using a very conservative projection number right now.
David:Alright.
Mike:So 1.05, so we're at 1,050,000. And then you minus your 20,000 that you want, and you're at million 1,000,003 30,000. And say, okay. So what happened there? Well, my account went up.
Mike:Got it. Can can you can you handle that? Yes. Okay. Let's let's do it again.
Mike:And we'll do this over and over again, and then I'll say, alright. Now let's put a market crash in there. Okay. And this is where they panic. Alright.
Mike:So markets are gonna go down. So we're gonna we're gonna times it. Million dollars, 30,000. K? Times point six.
Mike:Now you're down to 618,000. How do you feel? I say terrible. That's why I can't retire. I got it.
Mike:So do you wanna keep all of your assets in equities and stock market in the S and P 500 like you've been talking about because that's how you grow your assets? Or do you wanna get more strategic with it? They say, well, what do you mean? I'll say, well, what if you didn't go down by 40%? I picked an arbitrary number.
Mike:What if you went down by 20%? I'd still feel bad. Okay. Do markets recover? Yes.
Mike:They've recovered how many times? Have they never not recovered? They'll ask.
David:Mhmm.
Mike:Yeah. They they've always recovered. As long as you're not stock picking, the indexes so q q q, right, or the the Nasdaq one hundred recovers. S and P five hundred recovers. The total market index recovers.
Mike:The Russell two thousand recovers. The the Dow Jones Industrial recovers. They all recover over time.
David:And stock picking would be like, oh, I'm just gonna invest in this one. It's literally you're picking a few stocks. Yeah. You're just holding those.
Mike:In nineteen nineties, you say, well, boy, this company Toys R Us, they're killing it. Yeah. You buy that, well, they're not around anymore. Yeah. Okay.
Mike:So if you picked that one, then you'd be hurting. Yeah. But if you bought the S and P 500, they I think they were in the S and P 500 for a while. Great. Now they're not.
David:Yeah.
Mike:They're they're done. Yeah. Blockbuster, I think, was a part of the S and P 500, but the S and P 500, it it cycles through stuff for you. Yeah. Standard and Poor's is kind of like a passive money manager in that it picks different stocks, 500 roughly, stocks to be a part of its index.
Mike:It's, I mean, kind of a way to look at it. So so I'll say, okay. So how do we handle this? And she'll say, well or he'll say, well, I don't really know. And I say, well, okay.
Mike:Well, what if I start with the extreme? What if you just had guaranteed income for life, 20,000?
David:Mhmm.
Mike:Would you sleep better? I don't wanna lock up my money, but let's let's entertain it just for argument's sake. What if so 20,000. What if we put roughly $300,000 into an annuity for lifetime income? This isn't financially in your best interest.
Mike:This is you have a guaranteed income stream. Would that give you permission to retire and spend your time, your most precious commodity, how you want? Like, would would that help you? Because then we could take the 700,000 and just grow it and not need it. So if the markets go down, there's plenty of time to recover.
Mike:We just simulated your paycheck that you need. They probably were earning more than that, but they maybe have, you know, what what is this? 60,000. Maybe they're earning a $60,000 salary right now. They're gonna get I'm just making up numbers, right?
Mike:Mhmm. To prove a point. But maybe they're when they retire, they're not gonna spend as much money, and that's all they needed. Whatever this everyone's different. But the point being is, we could just take part of their money, give them their paycheck, guaranteed for life.
Mike:It's not financially prudent. They're still subject to inflation risk. They're still subject to tax risk. But on an emotional level, it might help them. Or we could say, well, shoot.
Mike:You need 20,000. K. Let's times that by five. What if we put a $100,000 into CDs, buffered ETFs, and or a fixed indexed annuity for a five year period certain payout? So when the markets go down, these don't, and this is your income like a paycheck that allows your other accounts to recover.
Mike:Now, how would you feel? And then we run simulation after simulation. They go, yeah, that makes sense. This is how you solve it. When you're uncomfortable spending your money, it's because you don't understand that your money is able to grow and pay for your other expenses.
Mike:And if you do understand that, then it's the market crash. How do you solve for the market crash? This is the bear market protocol. When markets are up, you prepare for a bear market so that not if, but when the next market crash happens, you have a protocol in place. So we follow systems, not sentiment, and that you know your income's gonna come from and allows your other accounts to recover.
Mike:I mean, anyone that's retiring today has been through a couple of market crashes.
David:Yeah. They were probably in, what, like, the early two thousands?
Mike:Oh, yeah. 02/2001 and o two, three years down. Yeah. 2008. Uh-huh.
Mike:2020. And even 2022 was a rough year. 2022, 2023, markets kinda went down. Yeah. I think we forget about that slow burn.
David:Yes.
Mike:So, you know, we've been through it. They just had a paycheck to simulate it. What if you simulated a five year paycheck or a three year paycheck or a seven year, whatever you want? What if we simulate the paycheck? So the markets go down, you could turn that on, you don't accentuate losses, and you have sufficient time for your other assets to recover.
Mike:So it's it's running through scenario after scenario after scenario, and the mind sometimes, as I understand it, I'm not a neuroscientist, but if you can envision it over and over again, you're able to start rewiring parts of your brain and you can become more comfortable with the idea of retirement and how you're able to take income. I mean, maybe you enjoy your job and you wanna keep working for the rest of your life. That's not a bad thing. That's actually quite healthy. Yeah.
Mike:But if you hate your job, okay, well Yeah. There are other ways to plan around it. It's not just financial planning. Financial planning is the easy part. One plus one is two.
Mike:It's the strategies and your comfort level that are really gonna to create the ability to give yourself permission to retire. Can't have your cake and eat it too. So you have to pick pick a path, have a couple of strategies, and then go from there. That's all the time we've got for today's show. If you enjoyed the show, consider telling a friend, leaving a rating, but make sure you subscribe to us wherever you get your podcast and or on YouTube.
Mike:For the best experience, do go to YouTube as we're doing a video cast moving forward in the the year 2026 and beyond. So stay tuned for that and more. As this channel and this show gets bigger, so will the resources. So make sure you tell your friends as we continue to put out more and more resources to help you retire on time. As always, text your questions, (913) 363-1234.
Mike:And if you want help putting your plan together, just go to retireontime.com and click the button that says discover what's possible. On behalf of everyone here at the Kedrick Wealth Studio, we wanna thank you for spending your time, your most precious asset with us today. We'll see you in the next episode.