Subscribe
Share
Share
Embed
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 retirement questions. My name is Mike Decker. I'm a licensed financial advisor and fiduciary. And with me in the studio today is my colleague, David Franson, who will be reading your retirement questions. As always, you can submit those questions to (913) 363-1234.
Mike:Again, that's (913) 363-1234. David, what do we have for today?
David:Hey, Mike. With all that is going on, is now still a good time to retire?
Mike:I would say so. So there's an expression I love. I forget it's a Swedish author that came up with it, and it says there's no such thing as bad weather, just bad gear. So what does that mean? Is it a bad time to go camping?
Mike:If you have the wrong gear, then, yeah, you don't wanna just step out the door and go camping. If you have the right gear, you've got the right meal prep, everything's good to go, then who cares what the weather is? You're prepared for that weather. Being a Boy Scout way back when, some of the most fun and enjoyable campouts I've ever done were the ones where we climbed up a side of a mountain in January 2000. In Washington State, dug a hole into the mountain in the snow, built a snow cave, and slept in there.
Mike:Those were actually some of the warmer campouts I can remember aside from the summer ones. Very enjoyable, very fun, but we had the right gear. We knew how to handle the terrain and the situation. There was one time this is a true story. We were doing a snow caving camp out, and I put a cooler on my snowboard, hiked it in with all my other gear, and we had ribs.
Mike:We had ribs on the side of a mountain in January. Now I I I smoked them previously, so we just had to warm them up there, but we were all prepared. And we're sitting here having a nice cookout on a ski slope outside of our cave while everyone else has warmed up their little tin cans of of whatever soup. You can live the best of times. You can enjoy yourself regardless of market conditions, tax conditions, inflation conditions, if you have the right plan in place.
Mike:But if you don't have the right gear and you're out in the world and the storm hits, that's like Warren Buffett's expression. You know who's swimming naked when the tide washes out. Many people right now are swimming naked, and they have no idea. Many people have gotten comfortable with this just buy the S and P 500, and there you go. Many people have gotten comfortable with this idea that they can invest on the apps Robinhoods or does Acorns do invest?
Mike:I don't know. There's all these brilliant apps, and I don't wanna speak ill of the apps. I encourage people to invest. I encourage people to research their stocks to get acquainted with this. What I'm saying is markets go up until they don't, and it's not a problem until it is a problem.
Mike:And do you have the right gear for when the markets go down? Not if, but when. And maybe they go down this year. Maybe they don't go down for another five years. No one knows, but no one can time the market.
Mike:Do you have the right gear in place so that regardless of the weather, the conditions, you can still live the life that you want. And there's so many ways. I actually did a webinar this last week about this. So it was the first five years of retirement. Here's kind of what I talked about.
David:Okay.
Mike:If you know when you're gonna retire, you can protect those first five years of retirement, so you're not worried about taking income out of an account that's lost money. Let's say you wanna retire in three years. K? You know for sure that's when you're gonna retire, and you're concerned if the market's crash and all of your assets are in the market. Well, what if you bought a treasury that matures in three years, and that's your income for the first year?
Mike:And then you bought another treasury that matures in four years, and that's your income for the second year. You've now given yourself a principal guaranteed account that allows you to retire at that time. And if the markets do crash, that's okay. You've given your asset time to recover, because you're not taking income out of an account that has accentuated losses. That's called sequence of returns risk.
Mike:I think most people understand the concept, though. You don't lock in your losses. That's how you hurt yourself really, really bad Okay. In retirement. There's more dynamic ways you could do this.
Mike:So you could say, I don't really know when I wanna retire. I wanna keep up with the markets, but I just know that I I wanna get there. Maybe you put some assets into buffered ETFs, so you've got maybe a little bit more growth potential. It resets every year. You can't go backwards with these.
Mike:But it's like, okay. Well, maybe it's three years, maybe it's five years. You're still trying to outpace inflation. You've got that flexibility, but maybe you're like, no. I don't want one or two years protected.
Mike:I want, like, five years. There are fixed indexed annuities that have a clause in their contracts called a five year period certain. So what that means is when the time is right, you can turn on a five year payout, annuitization, the original definition of annuitization, not lifetime income, but let's say you put in, I don't know, $3,400,000 of your $1,500,000 portfolio, and that $3,400,000, its purpose is to take care of the first five years of retirement regardless of market conditions. So it's got growth potential. So when the markets are going up, you're making money.
Mike:But when the markets are going down, you're not losing money, so you're you've locked in your gains, your wins. And then if the markets were to crash, whatever, you're not going backwards, and you can turn on that income, and it gives you it's kinda like a CD ladder. It just gives you payments then for the next five years.
David:So this sounds like you mentioned, like, do you have the right gear for when you're camping? This sounds like maybe one of the pieces of quote, unquote gear that you could use.
Mike:It's a tool. Yeah. It's a tool for some people. It's not a tool for everyone, because everyone seem I shouldn't say everyone, that's absolutism. But many people are just taught, okay.
Mike:Well, hey. Buy these annuities, and then when you're ready, you'll turn on lifetime income. Well, what if you don't want lifetime income, but you just wanna guarantee the first five years of your retirement? Mhmm. And you want the growth and the flexibility later on.
Mike:That's what I like. Yeah. That's that's kind of my preference. I do like some protection in the portfolio. That's why we have that reservoir strategy that you can't go backwards for a part of the portfolio, but I want growth.
Mike:I want future flexibility. I wanna be able to adapt to my lifestyle to how things change over time. I don't wanna lock things into I mean, look at the legislation that's going through congress and that has been discussed over the past couple of weeks. There's a lot of tax changes that if you didn't lock yourself into a lifetime income stream, you can utilize. But if you just sign up for lifetime income, you can't optimize much.
Mike:It's stuck. It is what it is. You are completely reactive. But if you wanna guarantee, like, the first five years or maybe even the first ten years, you can buy and ladder out these fixed or period certain time frames while your other accounts have time to be optimized to grow and have flexibility. There's just other tools out there that I do not hear being discussed enough.
Mike:Buffered ETFs, structured notes, annuitization for period certain, whether it's five years or so on, just for these moments in time. When you diversify by objectives, what you're really doing is you're taking different parts of your plan, and you're saying, how do I solve for that period of time? And then take a part of your portfolio to solve for that period of time. So the part of your portfolio you're not gonna touch for ten years, no problem if that's in stocks, ETFs, and it's invested for growth, because you don't need to touch it for ten years. But the first five years, you're probably gonna treat that differently.
Mike:And you might think, well, I don't know if I wanna retire this year or next year or in seven years. Let's just see how it goes. Then maybe that five year period certainly is a more appropriate tool for you. Maybe it's not. Maybe you've laddered out buffered ETFs.
Mike:Maybe you've got a rolling CD ladder. They all have their own unique benefits and detriments associated with each strategy, but the point being is you shouldn't time your retirement based on the market conditions, the inflationary conditions, the legislative conditions, or the geopolitical conditions, or whatever conditions you're looking at. Time is your most precious commodity. So to retire on time means it is the right time emotionally and economically for you regardless of anything else. The trick is you've just and I can't say this emphatically enough.
Mike:You've got to have the right gear. 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.
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.