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 means when it comes to financial topics, well, we can pretty much cover it all. Now that said, please remember this is just a show.

Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, request your wealth analysis by going to www.yourwealthanalysis.com. With me in the studio today, mister David Fransen. David, thanks for being here.

Yes. Glad to be here.

David's gonna be reading your questions, and I'm gonna do my best to answer them. You can text your questions in at any time this week to the number. Save this. Put it in your phone right now.

913-363-1234. Again, that's 913-363-1234, or you can email them to hey mike at how to retire on time.com. Let's begin.

Hey, Mike. How can you really know if you can afford to retire or not?

The truth is you can't. No one can know the future. And you could say, well, I could get guaranteed income. That's true. You could buy a bunch of annuities and have that, but you don't know what the future looks like.

You don't know what inflation looks like. You don't know if there's a significant life change that's in your future. You don't know if there's, some significant medical risks ahead of you. There are enough unknowns that there's no way to get out of a guaranteed riskless retirement. It does not exist.

That is the truth. And anything anyone else would say otherwise, they're selling you something and they're probably selling it pretty hard. Finances, retirement, all of this is taking calculated risks. The risks that you're comfortable taking. So for example, technically, you you could walk down the sidewalk and get hit by a car.

There is a risk associated with that, and there's a low probability that would actually happen. Every time you get on an airplane, there is a risk associated with getting on the airplane. But we're okay taking the risks. The key here is understanding the risks and preparing for them. What I mean by that is when you put together a plan, you you need to understand that you don't just put together a plan with the arbitrary 6%, let's say, growth potential of the portfolio because that's a conservative portfolio growth amount.

7%. That's you know, we've been doing that for several years now. We're gonna be just fine. Okay. Well, build your plan.

Have some fun in Excel and then go to 2,000 and then copy 2,000 to 2020 and copy those returns every single year the S and P did. Your 6% average will be drastically different. It is a huge wake up call when someone sees their 6% projected returns, which is probably the best you can do when you're looking at planning projections. And then you'd simulate a 2,000 financial crisis, a flat market, and you see that you run out of money pretty quickly because a typical plan accentuates the losses. They don't look into the details, and and so on and so forth.

So where I'm going with this is you can't get out of risk, but there are certain risks you are comfortable taking. You just need to know what to see, what questions to ask, and how to solve them. So here's an example. K. If you invest in the market, there's a risk the market's gonna go down.

Mhmm. You've got 2 options. You could not sell or you could sell. If you sell and use it as income, you accentuate your losses. It's more difficult to recover.

If you don't sell, you've got a better chance of recovery. The markets have recovered 100% of the time. We just don't know if the recovery is gonna be 6 months, a year, 2 years, 3 years, or whatever it is. That's a very important part of this, is understanding the risks you're taking and being okay with it. The joke I have with a lot of people I meet with about long term care insurance.

I've been licensed to offer it for a long time. Mhmm. I've never, to date, ever sold a long term care policy. And the reason is if you need it, you can't afford it. Probably, you can't afford it.

And if you can afford it, you probably don't need it. From a cash standpoint, around 10 to 15 years, if you don't get sick, it would have been better just to put the money in the market and used your own assets to self insure for those costs. Because long term care insurance isn't covering all of your needs. It's just giving you a predetermined payout for a certain period of time to help absorb the costs. So, I mean, yeah, if you know that you're gonna get sick in 2 years, then maybe long term care would be great, but you could know that.

And if you did know that, they're not gonna insure you. Right. Because insurance is basically saying, hey. It's probably not gonna happen, and so we'll insure you. If it's probably gonna happen, we're not gonna insure you.

That's how it works. So here are some tips when it comes to how to put a plan together where you believe you can afford to retire. We would believe that you could afford to retire And kind of the how to read the tea leaves that it should be a good situation. First off, don't plan to 0. So there are some people that will generate their income and basically make it.

So at age 100, they hit $0. Oh, okay. That's what you mean by that. And they're saying, well, I want my last check to bounce. It's a fun expression.

But, you know, tell me the day you're gonna die and every expense you're ever gonna have in life. And we can solve for that. No one could do that. So you're you're going to have leftover money and you've got to have I mean, depending on people's situation, at least 600,000 probably left over if you want to self insure, if health care is a concern for you. And if you don't have that, how do we plan so that your principal, your assets are growing to hedge against the medical costs that would happen maybe in 10 to 15 years?

Do you see how that's that's different? You don't need to have it all solved today. Yeah. But you could solve it by instead of maxing out your income, that you're taking the income you need while it still grows in anticipation for the expenses in the future. Because the reality is the first couple of years you retire, you're gonna spend a lot of money, then it tapers off.

And then the last couple of years of retirement, you're gonna probably spend a lot of money. So you need to anticipate these things. Alright. And there are ways to do that, but you wanna solve for that. I already talked about long term care and kind of the nuance of that.

Maintaining a reasonable amount of money in the portfolio is gonna be important. Having a reservoir set up so when markets go down, you can draw income from principal protected sources so you don't accentuate losses. Let the growth side of your portfolio really grow. So I had a couple of calls this week, and they all asked a very similar question. They said, look.

We're funding the reservoir, so I can take more risk in my growth money. Right? I said, you get it. Instead of let's say you've got a $1,000,000 and you put 500,000 in the reservoir. Okay.

You shouldn't. You don't really need bond funds anymore. I mean, really, half your money is in a bond fund alternative. It can't go backwards. It's got growth potential.

So the other half, maybe you put a small amount of bond funds, but the rest of it could be in equities for long term growth that you don't need to touch for 10 years. Yeah. You gotta look at the whole portfolio. What what happens, and this is this is a trap, is people will have one adviser that's investing in one way and not tell about the other adviser who's investing in a different way. And maybe they don't tell either of them fully with full transparency.

They have, you know, a a bunch of CDs at the bank as well. You gotta look at the portfolio as a whole, as a household. Mhmm. And then you can make better decisions moving forward. So, I mean, the answer is you put the plan together first.

You don't get greedy with income. You know, how much does it cost to be you? How much does it cost to to live the life you want? Maybe a little extra. That's okay to have a little extra.

Many people have extra, and that's fun. Explore the strategies that help you get more out of your money and then build a portfolio so that you can hedge against the potential risks now and in the future. You just can't solve for risks you don't know exist. So what do you do? You work with someone that can open your eyes.

Ask friends. Hey. What are some things that are going on that I need to be aware of? Your friends might not know everything. Even financial professionals, many of them might not know.

I I tell you what. When I wrote the article for Kiplinger last year about the flat market cycle, I got a lot of attention from financial advisors saying, what? This exists? I mean, I know 2,000 was a flat market cycle, but I had no idea. 1965, flat for over 10 years.

1929, flat for over 10 years. 1906, flat for over 10 years. People don't realize that was not a one off. Every now and the markets grow, they have to digest. So and if I'm gonna be very forward about this, that's why we stopped charging $500 for the wealth analysis.

It was to help more people understand the risks they were taking so they can make a more informed decision. You can't say yes or no to something you don't understand or you don't see. Why do we go to the doctor to get a checkup? To see if there's something we need to know. Yeah.

Why do we get analysis? It's to understand what we don't know. 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.