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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.
How do you want to spend your time, your most precious asset? That is critical, mission critical. The absence of work is not retirement. That's just the absence of work. Welcome to the Retire On Time podcast.
Mike:I'm Mike Decker here with David Fransen. We're gonna be answering your questions about retirement. This is all about the nitty gritty, not the oversimplified advice you've heard hundreds of times. As always, you can text them to (913) 363-1234. But remember, this is just a show.
Mike:It's not financial advice for you specifically. Keep doing your research. Alright. David, let's dive in.
David:Hey, Mike. Can you walk through your planning process order and why you believe it needs to be that way? I'm a dividend investor, and I'm building my plan around my portfolio, which you say is not the right way to go about it.
Mike:So it's not that your portfolio is wrong, it's that it may be limiting towards your overall lifestyle abilities in retirement.
David:Okay.
Mike:So you know how a square is a rectangle, but rectangles are not always squares? Oh. You might have the right plan. You might have the right portfolio, but it's either going to be a conclusion. It's like, oh, well it happened to end up this place, or it's like, oh, I maybe should make some adjustments.
Mike:Here's why the order I have is as such. Now it's this is not the full retire on time planning list that's very long and and there's a lot of detail there, but this is the general, what I think this person's asking, question.
David:K.
Mike:K. So the first thing you need need to establish is really your lifestyle goals. Not your legacy goals, your lifestyle. You're you're alive now, your legacies later.
David:Okay.
Mike:How do you want to live your life? If you hate your job, maybe your life looks like not working at that job. If you don't like your job but you enjoy work, maybe retirement for you isn't necessarily not working because you can't define something by the absence of. Maybe it's just getting the job that you really wanted but didn't pay the income that you wanted. Mhmm.
Mike:So for example, I know someone that worked at Microsoft for many, many years. When they retired, they worked as a park ranger. Oh. Now the incomes of the two are very different.
David:Sure. I can imagine. And they had a great
Mike:time at Microsoft. Microsoft was a wonderful company. Their experience was fantastic. I'm not criticizing Microsoft, but they are a cutthroat company. You know, they they have a culture of of great work ethic.
Mike:Park Rangers, just a different vibe. Yeah. Okay.
David:Alright. So this person wanted to be in Park Ranger, and eventually they were able to get there.
Mike:And so you need to define how do you want to spend your time, your most precious asset. Right? That that's that is critical, mission critical. And it's not about busying yourself. So when I talked about the absence of work is not retirement, that's just the absence of work.
Mike:Because if you retire and then you do nothing, you're gonna busy yourself with house projects. Maybe you'll take a couple of trips. Maybe you'll adopt your grandkids as the the free babysitter.
David:Oh, yeah.
Mike:Now you're creating all sorts of situations that you get stuck in, and you're not receiving that that fulfillment. You know, it's it's funny we would say, you know, you gotta retire with purpose. That's an existential crisis kind of conversation. No, you don't need to have purpose. I think that it's good to have purpose in life.
Mike:But it's not like you're gonna retire and become, I don't know, a pilgrim for some random tribe in the, I don't know, the Galapagos. There's no one on the Galapagos Islands.
David:This is really big guys.
Mike:It's Papua New Guinea or something. Some place out yonder. Okay. That's not what retirement really is. Retirement is that you're redefining how you're gonna spend your time, but you need to be very careful about how you're spending your time and if you're going to have the sense of purpose.
Mike:Notice the difference. Sense of purpose is different than purpose. Your purpose is to live your life.
David:Mhmm.
Mike:Whatever that means. The sense of purpose, as I define it, and I'm going down a rabbit hole here, is the ability to have healthy levels of dopamine, oxytocin, and serotonin. Those are all happiness and fulfillment drugs your body produces. K? If you don't have healthy, constant flows of those three, basically, endorphins or chemicals your body produces, your retirement's gonna suck.
Mike:You're gonna feel sad, lonely, and depressed. And you know what happens when you feel sad, lonely, and depressed, or bored, or whatever? Cognitive decline.
David:Early
Mike:death. Cognitive decline, physical decline. You speed up your date of death. Uh-huh. You regret retirement.
David:Uh-huh. So you don't back to work. You might end up back at work. Yeah. Yeah.
David:And maybe at a
Mike:place Or you don't wanna lesser job, lesser position, less less challenge. So you don't want to retire and then try to figure this out. You want to, as you prepare to retire that's why the book that's coming out soon, How to Prepare to Retire on
David:Time Oh, nice plug.
Mike:Talks about yeah. Shameless. Talks about the the purpose portfolio is what I call it. Now, let's use golf as an example.
David:Alright.
Mike:K? A lot of people, stereotypically guys, wanna golf when they retire. And what typically happens is one of two things. One is they actually wanna get better at the sport. They're critically engaged in the sport, the chipping, the technique.
Mike:They're hiring a golf pro. They're learning about it. Whatever. Mhmm. And so when they get two or three strokes off their game that might be a lot.
Mike:I I'm a I'm a casual golfer. I don't know. I like to go out there, but I'm not, like, trying really hard right now. But is two or three strokes I know that if that's a lot off your Let's assume that's a normal thing. You're gonna the wrong guy.
Mike:Let's assume you're a terrible golfer.
David:That's me. Okay.
Mike:Okay. And now you got two or three strokes off your game. That's maybe more reasonable.
David:Oh, yeah. So Good improvement?
Mike:You'd feel good about that. Right? Huge. You're gonna get a healthy amount of dopamine. You're out there with people, so there's oxytocin Mhmm.
Mike:The connection. K? That that's how you structure it to be fulfilling. Now let's say you go out there and you just get drunk. You just hit a ball, you get drunk, yet you get pissed that you're not hitting it well, whatever it is.
Mike:And you're not trying to improve your game. You're just wasting time. In that situation, golf's probably a horrible idea for your retirement. So do you see the difference?
David:Mhmm.
Mike:Any activity, whether you wanna retire and you wanna be involved with church or quilting or learning a new skill set or volunteering at a charity or whatever it is, all of those activities can be done in a healthy way or in a not so healthy way. And what's interesting about this is when if you don't do it in a healthy way, k, you have the absence of dopamine, serotonin, and oxytocin. That absence, you're gonna wanna get a larger hit from it.
David:Okay.
Mike:So you want spikes of all of these chemicals if you can manipulate it. And that that creates a problem to where then you're now opening the door for addiction. Oh. And so now you've entered into retirement healthy, there was an absence of fulfillment of these endorphins from a healthy level. And so what do you do?
Mike:You try to correct it and you get heightened levels of it. And now you've created this feast or famine situation of retirement, and it just derails everything.
David:Mhmm.
Mike:And you end up like an addict, a behavioral addict, searching for fulfillment, and you're spending more money than you might want to. You're ending up more depressed than you probably thought you would, and you regret the whole decision entirely. So until you and I'm being a bit verbose here. Until you actually figure out how you want to spend your time in retirement, I don't think you can retire. And I don't think we can do an appropriate plan until you know what that is.
David:Even if you had all the income solved, you still still shouldn't retire if you don't have the other part.
Mike:That's the question. What's the income that you need? What if your income in retirement needs to increase to live the life that you want? What if it decreases? And if it decreases, could you retire earlier than you wanted to?
Mike:You can't know that unless you define your lifestyle.
David:So that's the the order then. That's the first priority.
Mike:So this dividend investor. Okay. They got dividends. Great. Are you going to force your life around the dividend income stream that you want?
Mike:Or are there gonna be seasons of your retirement? Seasons of different, When I say missions, missions of you're gonna learn this hobby, or you're gonna do this activity. Maybe there's a season of aggressive engagement, and then there's a slower how does all of that look? Because this dividend bit right here is just a stream of income, and you've gotta force it to work. Well, what if some of the dividends you kept, others you sold, and then you had to increase your go go years, as many of it call I I I say your travel years, your casual years.
David:Mhmm.
Mike:Travel years are really just your more expensive years. And you took some of the income, and you you front loaded your retirement plan, and then the other dividend income kind of sustained you. You can do things like this. It all boils down to how do you want to live your life? Then, are there legacy intentions that are there?
Mike:And if there's leftover money for legacy, then you can say, okay, well then, what do I need to know in ten years, twenty years, thirty years? How would that pass? And how is that then going to go to stage two? Does the plan work? Now that we've defined what the plan needs to do, does the plan work?
Mike:This is financial planning. One plus one is two. K. We're not doing strategies yet. We're not looking at products yet.
Mike:If you take out x amount of money each year and your portfolio averages, let's say 6% each year growth these are oversimplified projections
David:Sure.
Mike:Do you run out of money or do you not? Do you have a surplus? Does one plus one equal two? Does the plan work out? And an easy fun calculator we put out there, you can go to freeretirementplanner.com.
Mike:That will redirect you to one of our calculators that you can use. It's publicly available. Anyone can use it. Freeretirementplanner.com. Go there.
Mike:Check it out. And does one plus one equal two? If the answer is yes, then you have to go to the next level, which is strategy. Because I I tell you right now, your plan is not gonna hit 6% every single year for the next thirty years. It's gonna have some good years.
Mike:It's gonna have some bad years. Tax laws are going to change. So when people say, well, I I I'm I here's my plan. Usually, what it means is here's the products that I have purchased, and here's how I'm going to make it work. Oh.
Mike:Dividend investing. That's a product. That's not a strategy.
David:Oh. Yeah. Elaborate on that a little bit. A product versus a strategy.
Mike:A product is something that you subscribe to and you cannot change. So if you're a dividend investor during flat market times because it pays a reasonable dividend, the markets are kind of flat, you're generating income, but when markets go up, you then put a part of your portfolio into the growth side and you're see, that's dynamic. That's strategy. Product is I'm gonna do this and I'm not gonna change Product is sixty forty portfolio and a rebalance every now and then. I'm not gonna change it.
Mike:Product is buy an annuity, turn on a lifetime income, and I'm not gonna change it. Product is static. Strategy is dynamic.
David:I like that.
Mike:And this is a a fun difference too. People plan they say they're strategic planners. That's ridiculous. Okay?
David:Who says that? Like, the the the consumer or like
Mike:The consultants. Oh, know. You know, I'm a I'm a whatever. Yeah. I'm a strategic planner.
Mike:Those are two completely different outlooks. Oh. Okay? Yeah. So let's define it.
Mike:What is a plan? It's what you want to accomplish. What is a strategy? How you go about accomplishing that that plan? So a plan is you wanna retire, and here are the numbers, here are the projections.
Mike:The strategy is the interworkings and the dynamic adjustable parts of your plan. So some years you take income from maybe this source, some years you take income from that source. On this year because of tax law, you're gonna make these actions. That is the dynamic nature that is its job is to fulfill the plan. In other words, let's talk about chess.
Mike:Love chess. I'm not good at chess. I just love the game.
David:Okay.
Mike:The plan is to move your pieces around to get
David:checkmate, queen or king. Some
Mike:royalty figure. The queen's the good one. The king's one you get rid of. The queen's the one that can move everywhere.
David:Alright. Yep.
Mike:The plan is just to get rid of the queen. That's it. Mhmm. Knock the king over, checkmate, you win. The strategy is how you go about it.
Mike:It's, I'm gonna move over here. And I don't know, you know, all of the different moves. Again, I enjoy the game. I'm not good at the game. But, you know, are you gonna go heavy with the rooks?
Mike:Or the knights? Are you gonna go heavy with bishops? Are you going to move are you gonna do like a kind of a side thing? Any chess player's probably going, this guy's an idiot. Look, I again, I enjoy the game.
Mike:Yeah. I'm not saying I'm good at it. Tell me the King's Gambit, the Queen's Gambit. I don't know what that means.
David:I know that one of those is a show on Netflix. Yeah.
Mike:Yeah. Yeah. But it's the Queen's Gambit is a strategy on how to, I believe, start. It's not how you finish. There's introductions, there are mid game strategies, and there's end game strategies.
Mike:So even that, again, I don't know much about. But the idea is in retirement, I guess we could draw the narrative there. There are strategies for when you start your retirement. How are you gonna draw income? Well, protect yourself against market risks and so on.
Mike:Maybe for the first ten years. Then you've got the second ten years. How do you adjust that? Because you could die in two years or in twenty years. So there's a lot of things you gotta consider there.
Mike:And then the end of life, now you're really investing just for a few more years of your own income plus the legacy components. Those are different strategies, and you've got to evolve. If you're a dividend investor, you might miss out on one of those different phases of retirements.
David:I see.
Mike:So a plan is one plus one is two. A strategy, the income and how you take income each year, the tax minimization, how you minimize your taxes each year, how do you coordinate your income and your tax planning with your health care. Those are all strategies. Does that make sense, the difference?
David:Mhmm.
Mike:How can you know what strategies you want to implement if you don't have a plan, which is a baseline or a direction? And how can you have a plan if you don't know what do you want? What does your lifestyle look like?
David:And so you get this plan, you have it recorded, and you can refer back to it throughout your retirement. And then if you need to change it, then
Mike:And you don't wanna update it every Okay.
David:Yeah. Yeah. What's the what's a good frequency to update? Five years.
Mike:Oh, yeah. I think five years or so. Unless there's a significant shift in policy or tax law or something. But Or health. Or health.
Mike:Yeah. Those those are lifestyle. Not the markets. So if you if you run a plan that's, let's say, 6% year over year on the growth. K?
Mike:The first year, it goes up 20%. Just gangbuster year. Okay? Don't rerun your plan with the assumed new growth. Say, great.
Mike:Now we're ahead of schedule. And then the next year, maybe it's like 5%. You're still ahead of schedule. The next year, it's like a 30% crash. Now you're behind schedule.
Mike:So then maybe you want one or two more years, there's a recovery, and you're you're just trying to set a baseline and then dance around it.
David:Okay. Yeah. Yeah.
Mike:Yeah. That's the goal. And if the markets are up or down, you're gonna implement different strategies.
David:And that's all baked into the plan ahead of time. It should be. These contingencies Yeah. In case there's a really bad market.
Mike:So going back to this, that's why we don't wanna put the cart before the horse. The horse pulls the cart. The lifestyle goals is what drives the plan. The plan then gives you the constraints by which you can then implement strategies. And then those strategies will determine which investments or products you want to implement or purchase or use.
Mike:So I I I do feel very strongly that there's a very important sequence when it comes to putting the plan together, and that's that's how I consider it there. And you may end up that that the dividend portfolio is perfect for you. You may not. And as if this person has the workbook, if they don't, you can go to, you know, retireontime.com and buy the book, the workbook, the planning checklist, the AI prompts, all these different resources. But you'll quickly realize there are other tools in the toolbox, and you might want a larger toolbox as you approach and retire, as you approach retirement and retire.
Mike:Now that's all the time we've got for today's episode. If you enjoyed it, don't forget to like and subscribe. Most importantly, subscribe on YouTube where our best case studies and where we actually show you what's going on. Make sure you subscribe on YouTube. If you want to work with us in one capacity or the other, joining a workshop of ours or working one on one, just go to retireontime.com and click the button that says discover what's possible to see your resources and work with a professional in putting your retirement plan together.
Mike:But most of all, thank you for spending your time, your most precious asset with us today. We'll see you in the next episode.