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 by going to www.how to retire on time.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 adviser, insurance agent, and tax professional, which which means when it comes to financial topics, we can pretty much discuss it all. Now that said, please remember this is just a show.

Everything you hear should be considered informational as in not specific financial advice. If you want personalized financial advice, then request Your Wealth Analysis today from my team by going to www.yourwealthanalysis.com. With me in the studio today is my colleague, mister David Fransen. David, thank you for being here.

Yes. Thank you for having me.

David's gonna be reading your questions, and I'm gonna do my best to answer them. You can submit your questions at any time by texting them to 913-363-1234, or you can email them to hey mike@howtoreontime.com. Let's begin.

Hey, Mike. What's something you see missing in many people's plans when you first visit with them?

I appreciate this question in the openness of looking for what they don't know. Now this is a classic Dunning Kruger situation. What don't I know that could hurt me? Okay. So to answer the question, I think there's 2 parts to this.

The first part, I think there's too much focus on a single type of plan. Let me break it down. There's really 2 retirement plans that I see. 1 is the asset allocation retirement plan which is a beautiful diversified portfolio of stocks and bond funds that follows the 4% rule. What's the 4% rule?

The 4% rule is where you're gonna take out 4% from your assets every year. And if your bonds or bond funds average, let's say, 4% or so and your stocks average 7 or 8% year over year, then you should be fine. Right? In theory, that would work. But the reality is it's just it's not that simple because stocks, ETFs, mutual funds, they're all at risk.

Even bond funds, they have risk associated with it. And that's an inherent problem. The second one is the the annuity sales plan, the income plan guarantee for life. I'll talk about that one in a second. But let's talk about this asset allocation situation.

K? And I wanna tell it through a story. So David, just imagine you and your bride are, traveling to this destination hotel in, I don't know, Arizona. Okay. It's gonna be a nice week long trip.

Sounds really good.

And you're driving there and you see that there's a sign that says 100 miles until the next gas station. Yeah. You look at your gas meter and you see you've got 130, 140 miles till empty. We're fine. Right.

blow past this gas station. Right? You blow past it. All is well. Well, after like 20 miles or so, your spouse says, as any spouse would, hey, how are we doing on gas?

Are we gonna make it? Or have you misread the, the meters? Or did the indicators, you know, not give you the accurate You're all we're fine. We're fine. We're fine.

20 miles go by and the stress kind of builds. Are we gonna make it? Are we gonna make it? Maybe some of the projections weren't exactly right. And and there's just the stress kind of builds up over and over.

Then finally you get to the hotel, you walk in and the person says welcome to this hotel. By the way, how was that drive? And you say, what do you mean? And they say according to what whatever a war magazine that was one of the 10 most beautiful drives in the world and you missed it completely because you were stressed about gas. The reason why I bring up the story is when all of your assets are at risk in a stock bond fund portfolio, all of your assets are at risk.

You might miss the comfort of retirement. Should all of your assets be at risk? In my opinion, no. That's why I created this reservoir strategy that a portion would be principal protected. So I think that's one of the first things is people don't realize how much risk they're taking.

Now let's do the opposite. The income from an annuity. And in this situation, I think it's more of a we do income planning. You know, we're income planning specialists and we're you're gonna come in here. We're gonna we're gonna do plan your income and all is gonna be well and we'll take care of everything and you don't have to worry about Wall Street and the Wall Street blah blah blah and the risks and the roller coasters and we're just gonna smooth all of that out.

And you say okay well taxes are a concern. We'll take care of that. Well well what about x y z? Well we're gonna take care of that. And then they sell you an annuity which an annuity isn't necessarily bad.

It's just a tool just like the stock and bond fund portfolio is a tool, but they over correct and just sell you a bunch of annuities. Here's why this bugs me. If you buy a bunch of annuities and let's say, you just turn on that guarantee for life income, it's flat income in this situation, then it might feel good for the first couple of years, but inflation is gonna slowly erode your ability to afford your life. What can you do? It's flat income for life.

And this is a true story. I actually heard an advisors. I I said, how do you do tax planning? They said, well, we just sell them an income annuity. We sell them an annuity.

We turn on the income and the the income takes care of their taxes. It takes care of their income needs. It takes care of everything. What if taxes go up? Well, you know, it's fine.

We expect a little bit of tax increase. Oh, you expect a little bit but you don't have a clue what's actually gonna happen in the future. Right? So it's like people go all in on risk or all in on annuities with this idea that they can just anticipate and assume and guess the future. You can't.

You can't do it. So why are we going on these extremes? Because they're simple to understand. Most people's plan that I have seen at least are oversimplified plans that they signed up for because they could understand it even though they didn't know maybe all the risks they were taking when they signed up for it. And that's what gets my goal.

So what are some things I see with people's plans and what they're missing? I see that inflation usually is not properly accounted for at least in the income planning side of things if you buy too many annuities. I see other risks like if you're married. What happens when one spouse dies? So you've got, you know, social security income that might go missing.

Your taxes are gonna go up. How do you offset that? There's there's a number of layers in their inflation which I already mentioned before. Oversimplified plans tend to ignore several risks that you may not even know exist. I could probably come up with 20 or 30 risks that are often missed when putting together a plan.

So here's the big takeaway. Income's not the only thing to plan for. You need a comprehensive plan that's gonna cover all the other intricacies. Your tax planning, your income planning, your estate planning or legacy planning, your health care. How are you gonna afford rising cost of health care?

How are you going to plan for market risk? And this list goes on and on and on. I'm probably not doing this question enough justice. The risk that I'm probably more concerned about than any other risk for retiree is flat market risk. It's exactly as it sounds.

Recently, Goldman Sachs has confirmed what I was already saying. So they caught up to me. And what Yeah. Flat markets are periods of time where the equities market, so stocks k. Have gone flat for 10 plus years.

Happened in 2000 to 2010. Mid 19 sixties, we entered into another flat market cycle. 1929 was the beginning of a flat market cycle. 1906 was a flat market cycle. It's really hard to retire in a flat market cycle.

So if you look at the average returns of the S and P from 2,000 to, let's say, 2020, it's okay. You know, 6 or 7%, I think, around there. Okay. Depends if you would reinvest the dividends or not. But if you look at it from 2,000 to 2,010, it's 0.

And then if you look at it from 2,010 to 2020, it's like 14. Mhmm. Well, hold on. You need to make money every single year to keep up

Yeah.

With cost of living, with your expenses, with your ability to provide income, to offset inflation. I mean, the list goes on.

Right.

So these oversimplified large numbers of averages kind of buffer out the things you probably ought to see. And the scary part is I coach financial advisers all over the country, and it's scary how many times I've had to explain to financial professionals about these risks. They had no idea. Yeah. So the flat market cycle is a way that you suffocate your ability to stay retired.

It's quite difficult. Down markets, sure. Those those are risky, But flat markets, that's the one that really I think is a concern. Something that you see missing in many people's plans, it's the ability to tackle risks or to incorporate multiple strategies for multiple situations to hedge against those risks while maintaining the focus of growing your assets in up markets, down markets, or flat markets. Because if you grow your assets, you've got more flexibility in the future.

And in the future, you need flexibility to dynamically be able to adjust for whatever life throws at you. There's there's no way you can plan for when you're gonna get sick or when you're gonna die. There's no way you can plan for, oh, the flat market cycle is gonna happen in this period of time or the markets are gonna crash here. There's no way you're gonna plan for, oh, well, this position's really good, but how long is it gonna be good? Get a comprehensive plan.

Yes. Work with someone that could file your taxes, comment on security, so actual parts of your portfolio, and have an objective and neutral conversation about insurance products. Because if they can't offer it all, there's a conflict of interest that can compromise your ability to retire and stay retired. That's my opinion. It's like, why do doctors work together?

Because they all have specialties.

Mhmm. Yeah.

Right? You're not gonna have a brain surgeon do your foot surgery.

Makes sense.

But maybe you need brain surgery and foot surgery at the same time. Let them do their specialties. Yeah. But luckily, in finance, you don't need to train for 30 years or 20 years or 10 years, depending on your specialty in medicine. Finance is a little bit different.

But when you get someone that's licensed in all three tax insurance and securities, then you can have a more honest open and comprehensive conversation about these risks and how to hedge against them. It's hard to ask a butcher advice on nutrition and salad. Yeah. It's hard to ask a securities adviser about taxes. It's hard to ask a securities adviser about insurance.

It's hard to ask an insurance agent about securities or taxes. You need that full scope, in my opinion. 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.

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.