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Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income, taxes, Social Security, healthcare, and more. This show is an extension of the book How to Retire on Time, which you can grab today on Amazon or by going to www.howtoretireontime.com.
This show is intended for those within 10 years of their target retirement date or for those are are currently retired and are concerned about their ability to stay retired.
Welcome to How to Retire on Time, a show that answers your questions about all things retirement, including income taxes, Social Security, health care, and more. This show is an extension of the book, How to Retire on Time, which you can grab today on Amazon, or you can go to www.howtoretireontime.com. My name is Mike Decker. I'm the author of the book, How to Retire on Time, but I'm also a licensed financial advisor, insurance agent, and tax professional, which means when it comes to financial topics, we can pretty much talk about it all. Now that said, please remember this is just a show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request your wealth analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my, esteemed colleague, mister David Fransen. David, thanks for being here. Yes.
Mike:Thank you for having me here. David's gonna be reading your questions, and I'm gonna do my best to answer them. You can send your questions in right now or anytime during the week. Just save this number, (913) 363-1234. Text them in, (913) 363-1234, or you can email them to heymike@howtoretireontime.com.
Mike:Let's begin.
David:Hey, Mike. Is there one right way to plan for retirement?
Mike:What do you think I'm gonna say?
David:There's definitely not one right way. There that's, we just use the word today, oversimplified. Right?
Mike:We don't want imperatives, absolutes. Yes. You don't want them. David, I'm gonna ask you a question.
David:Okay.
Mike:It's so funny. This came up on my I don't really go on Facebook or LinkedIn or x much. Uh-huh. But when I do, there's everything I've subscribed to, it's like funny dad jokes.
David:Okay. Sure.
Mike:And so here is one that I came across. It wasn't really dad joke, but this is a funny kind of comment. So King Charles Uh-huh. Was born in 1984, raised in The UK, Married twice, lives in a castle, and is wealthy and famous. Yep.
Mike:And you've heard of King Charles before?
David:I have.
Mike:Ozzy Osborne was born in 1948, raised in The UK, Married twice, lives in a castle, and is wealthy and famous.
David:I mean
Mike:Should they have the same plan?
David:Yeah. On paper, both being born the same year, same country, same experiences. Yeah. You would think so, but they've obviously had different, experiences in life. Yeah.
Mike:They might have different objectives on how they wanna live their life. Yeah. They might have different health issues. They might have I mean, the variability is infinite
David:Mhmm.
Mike:Essentially. And so the idea of, oh, if you have a million dollars, here's how you retire. Or Mhmm. If you've got $20,000,000, here's how you retire and do charitable gifting and your tax planning. It's like, well, hold on.
Mike:Yeah. What's your lifestyle supposed to look like? There are so many cliches out there, and I can't stand cliches. I appreciate them because they give us a general consensus of how people feel. But as an individual, you might not feel this way.
Mike:Mhmm. I know people who live for fishing. I know people who feel like they're supposed to fish in retirement, but secretly hate it Mhmm.
David:And are
Mike:trying to figure out a way to not continue to fish. Mhmm. I know people who are excited to travel, and I know people that they wanna just do one trip. They just wanna go to the Europe, do a quick, like, month trip, see some of the sites Yeah. And that's it.
Mike:They're home bodies. But they feel like they have to do this trip Oh, right. For whatever reason. Yeah. I know people that love the Sprinter van, and what they really need is just a way that they can maintain the cash flow coming in, and someone managing their investments because they're not connected to Internet most of the time.
Mike:I mean, maybe they got Starlink now, and they can Mhmm. Do more. Do you see how the variability of a life plan is so different?
David:Yeah.
Mike:I I knew someone years ago that didn't need much money. They just they amassed a lot of wealth. They wanted some income, but a lot of it was for legacy planning because when she retired from a prominent company in Washington that deals in tech, you may think of who that is.
David:Mhmm.
Mike:They've got a window into technology.
David:Okay. Alright.
Mike:She wanted to be a park ranger for the next ten years. So she did that. And her room and board was basically taken care of. Food was cheap, and she had a ball. So these ebooks and these simple packets that say, here's how you solve retirement or here's how much you need, I think is a disservice to people because we latch on to the simple ideas so that it can give us hope that we can accomplish what we're supposed to accomplish in the future.
Mike:And I say forget that. How do you wanna live your life? First off, how much is a year of your life worth?
David:Mhmm.
Mike:Second, what does a year of your life even look like? Mhmm. And third, how do we make that happen? It's the funniest thing. When people come to our office or they're going through our analysis, they're geared up for some sort of sales pitch of what product we're gonna sell.
Mike:Yeah. And they're almost disappointed, I think, that we haven't talked about any investments because they typically go, well, do you like this portfolio or do you like it's like, well, hold on. Yeah. Can a doctor prescribe medication until they know what's going on?
David:Right.
Mike:Is an architect able to build you a house unless they know what you want your house to feel or what it was supposed to accomplish? You gotta build your plan first, and then you've gotta do an emotional suitability questionnaire, which I don't think any quiz can really do. You know, you ever seen those, alright. Here's here's my net worth. Here's the income I want.
Mike:Beep bop boop boop done. Here's your portfolio.
David:Right.
Mike:Talk about oversimplification. Yeah. What does the plan look like? And when I say the plan, let me be more specific. Do you want to front load your income?
Mike:Let's say you you need $7,000 of income after taxes, and you need that number to increase by 2% each year.
David:This is, like, 7,000 a month.
Mike:Yeah. 7,000 a month. Okay. And it it's slowly increasing by 2% to offset inflation. K?
Mike:There's our there's our baseline for fun. But in the first five years, you want an extra $5,000 a month just to go ham just to travel. Maybe you really get into a couple of hobbies. You need extra money for the gear. You're gonna be a, a fun amateur photographer Mhmm.
Mike:Or whatever it is. Maybe the first year, you need to just blow a hundred and $50,000 in buying property, a hobby farm, you know, whatever it is.
David:Okay.
Mike:Bake that into the plan. Yeah. But do you see how much variability that is?
David:Right.
Mike:We need to have an emotional conversation. Markets are going to crash in the future. I'm willing to bet my bottom dollar that in the next thirty years, we will experience at least 130% or greater crash. And based on history, that's pretty much always happened. So are you okay if all of your money were to go down?
Mike:Well, no. I that that would keep me up at night. Okay. So let's say your $1,500,000 became 750,000. Is that no.
Mike:I I couldn't handle that. Okay. Could you handle a 20% correction? What if all of your assets only went down 10%? What's that look like?
David:Yeah.
Mike:Would you be okay if half of your assets were subject to a market crash while the other half were protected? Well, that would help. Okay. And what if you know that the market money, the money that's in the market that is subject to risk, that can lose money, what if you don't need to touch that for seven years? What if you don't need to touch that for ten years?
Mike:Yeah. Would that help you sleep better at night? Do you see the multidimensional suitability that we're doing here based on someone's emotional comfort level. It's much easier for someone to say, well, I don't need to touch this for ten years. So I guess if it goes down, I'm not concerned about it.
Mike:Or someone that says, it's okay if this goes down for a little bit, but half it won't go down. So I'm only gonna lose half of the money in the worst years, but everything has growth potential in the up years. This is how you talk through retirement planning. Mhmm. Because there are so many ways that we could structure a plan that we're able to let typically two spouses who are on different suitability spectrums, who have different comfort levels, find the middle ground that works for both of them.
Mike:This is how we bring emotional intelligence, if I can use the word, into financial planning Okay. Which seem like they should be opposites. Right. Can you see that the beauty of customized planning, comprehensive planning, holistic planning?
David:Right.
Mike:And ways to do that, by the way, you could have and this is a bit more nuanced, so forgive me, but I sorry, not sorry. These are things people need to know Uh-huh. Because they don't know what they don't know. So you could have, let's say, 20% of your assets that are in CDs and treasuries. They're just rolling over every year.
Mike:But let's say, if the markets were to crash, it gives you three years, that you could draw income allowing your other accounts to recover.
David:Mhmm.
Mike:For some people, that's enough protection that it gets them through, and hopefully, the markets recover in time. And at that point, then they would refill this little, what we call a reservoir or principal protected accounts. For other people, it's like, woah. That's way too much risk because what if it doesn't happen? The flat market cycle, the equities market makes no money for ten years, freaks me out.
Mike:Okay. Maybe we take the first five years and ladder out income from principal protected sources. So it's like a small bucket strategy
David:Okay.
Mike:Where we have the five year income bucket. We've laddered that out, and then we have income from year six on that's more dynamic.
David:Okay.
Mike:So if markets go up, you're fine. But if markets go down, you've got enough from principal protected accounts that are liquid enough that they could get you through allowing your other accounts to recover.
David:Okay.
Mike:This is called the reservoir strategy, and it's what we do here at Kedrick to allow all the different variations of income planning to work. You wanna put your assets in the market and take out 4%? Great. You wanna take out five percent? No problem.
Mike:You just gotta have the reservoir. If you wanna do a dividend portfolio, great. No problem. Gotta Gotta have the reservoir because dividends aren't guaranteed income. You wanna buy a bunch of ETFs that do covered calls?
Mike:Great. Gotta have the reservoir in case the markets move too much in one way or the other and those covered calls stop paying an income. And if you wanna go to the other spectrum and buy a bunch of annuities, turn on guaranteed for life income, fine. You just need to have some assets in the market to grow so that you can potentially offset inflation in the future. There's no right way to solve this.
Mike:The right way is what's your comfort level look like, what accomplishes your goals, and how do we put the plan together first. Once we put the plan together first and you say, yes, I can live with those numbers, then we can explore these strategies, like how to hedge against these risks, how to do the tax minimization, which is a whole conversation unto itself. But those are fun things. This is how you get more out of your money while being able to sleep well at night.
David:Yeah. So if I'm hearing you right, there is no one way to plan retirement. And it depends on what your what you wanna do in retirement. Maybe you do wanna sit at home. Maybe you wanna just work out in your garden or maybe you wanna travel.
Mike:Look. I mean, do you ski?
David:I don't ski.
Mike:That's normal for someone in Kansas. Not many ski slopes here.
David:No. K.
Mike:I'm an avid skier. You better believe in my retirement plan, which I'm thirty five years away. So everyone listening, by the way, I'm one of the guys that won't outlive your retirement. Because my career is at least thirty years extended the future.
David:So
Mike:I won't retire with you because anyway. Yeah. But in my retirement plan, I intend to ski a lot. Yeah. Oh, I I I look forward to that.
Mike:And, yes, I can ski my sixties and seventies because I'm taking care of my body now. You better believe hiking and exploring is gonna be a big part of my retirement plan. You better believe everyone's gonna be different. Right? What do you wanna do if if you didn't have to work?
Mike:What's your big thing? For me, it's it's being on mountains.
David:Yeah. I like mountains too. I like to go camping in the mountains. I like to go hiking in the mountains.
Mike:A cyclist. I like
David:to ride bikes in the mountains. Well, I I I ride bikes around here in the Midwest. On the trails. Yeah. On the trails.
David:But and then that's kinda different than true mountain biking, but I I wanna do it. There's thousands of people listening right now to kind
Mike:of hear their story and the thing they like to do. We know what makes them tick.
David:Yeah. The
Mike:problem is many people are are being sheep dogged into a silver simplified plan that doesn't give them the room to be their authentic self, that doesn't give them the room to put their plan that supports their life together. They might think that they've got it worked out. The amount of detail that we go into, at least here, for a comprehensive and holistic plan to emotionally prepare for the market crashes, to emotionally prepare for the tax rates that can vary and so on, the health care preparation, it's extensive, and it's on purpose.
David:Mhmm.
Mike:Because we don't want the external influences, things we can't control to influence the life we wanna enjoy. We wanna be able to enjoy our life regardless of these market conditions. 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 podcast. Just search for how to retire on time.
Mike: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. 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.