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 adviser and fiduciary. And joining me here, Mr. David Franson.
Mike:David, thanks for being here.
David:Yep. Happy to be here.
Mike:As always, we're gonna answer your questions. Text them to (913) 363-1234. And remember, this is just a show, not financial advice, so make sure to do your research and follow-up with whatever we talk about. David, let's begin.
David:Hey, Mike. I'm having a hard time getting started with my retirement plan. Where should I start?
Mike:I appreciate these more existential questions than just what is an IRA? What is a Roth?
David:Oh, yeah.
Mike:And the reason is it allows me to expose some of the hypocrisy within the financial services space. Recently had a conversation with an individual, very nice man. He's partially retired, still working part time mostly for fun, and he's trying to figure out what he wants his retirement to look like. He already has enough to retire, but he doesn't know how he wants his retirement to look like, so he doesn't have a plan. Is it appropriate to say, well, you should be in this investment or this product, or, well, let's just solve your income today, and here's how we're gonna solve it.
Mike:No. It's not. It is not at all appropriate to talk about investments or products until you know what you're solving. And so questions like this, I believe, really come from, I don't wanna commit to an income plan, or I don't wanna commit to a tax plan, or I don't wanna commit to anything, because I don't know exactly what the future's gonna look like. I'm still trying to figure that out.
Mike:And so when I think of these types of questions, my mind immediately goes to the fundamental retirement planning questions, which by the way, for everyone listening right now, if you're driving, listen to this via podcast or or you're in the car, make sure you go back to YouTube and look up this episode and go down this checklist. This is your primary question. So, David, have you heard of principle based thinking or first principles? I don't know that I have. No.
Mike:So it's very common with engineers, very common with structured positions, but you boil down a complicated situation to the most fundamental questions. Tesla's an easy example because we all know what it is. It's an electric car. When Elon allegedly was thinking about how do you solve electric vehicles, it boiled down to they had a battery problem. They had to figure out how to make a better battery to then charge a car that would be able to do what the Tesla does today.
Mike:It wasn't a car problem, it was a battery problem. That's kind of first principles thinking. Okay? It's boiling it down to the most fundamental problem, and then starting there.
David:It's kinda like whenever you watch the postgame after, like, you know, NFL game or NBA or whatever, and they're asking the coach, oh, what went wrong? And then they just say, oh, we just gotta get back to the fundamentals. Right?
Mike:Yeah. It's like sort
David:of a cliche.
Mike:What are the fundamentals here? Yeah. So what's the purpose of retirement, really, to live a certain lifestyle? What's that lifestyle? Usually, it's, well, I don't know.
Mike:I continue to breathe, and I receive an income of this amount because that's what I'm used to. That's not a good answer. And too many times, we don't know what we want in the future. We don't really we don't know how to solve this existential crisis, which retirement is an existential crisis for many people. There's a a lot of retirees that when they retire become depressed because they don't know how to transition to retirement.
Mike:Well, we're trying to create a course specifically on how to emotionally transition to retirement for this very reason. So the first question is, okay. Let's just break down what's your cash flow? What are your expenses? You know, get those things in order.
Mike:If you don't know how to do that, just download the last three months of your bank statements, your credit card statements, and figure out how much is spending on fun, how much are your basics, and then divide it up between discretionary and essential expenses, and just kind of break that down so you have an idea. Because if you have more time on your hands because you're not working, then you're probably gonna spend more money. And you wanna understand how much of your spending could be discretionary. It's actually common that people increase their spending in retirement. So you wanna understand that.
Mike:Then you need to start defining what would you do if you had more time. So common answers are, well, you know, maybe I'll teach the local bible study class at my church. Maybe I wanna do more fishing. Maybe you wanna do more golf. Work on that golf game.
Mike:But notice how a lot of these well, the bible study I think is a wonderful endeavor. But fishing, golf, sewing, and a lot of people do a lot of quilting as well. I mean, all of these are intro spectrum, or they're selfish hobbies. I'm not saying it's selfish to go golfing, but it is all about you when you go golfing. And, yeah, there's a social element, or fishing.
Mike:Yeah. There's a social element. But fun is a great way to have a hollow life to end up depressed. So then you have to ask yourself, okay. Well, what's the purpose?
Mike:What's gonna get me out of bed? When you work, you've got a purpose. It's to do a certain job. It's to solve a problem. It's to support other people.
Mike:It's to work with other people. You're working as a team to accomplish something. What is the problem you wanna solve in retirement? Is it working with a charity? Is it working with a church?
Mike:Is it working with your community? Is it supporting maybe your kids in a certain way that you're now the babysitter because they can't afford childcare services or whatever it is? Right. Maybe instead of it being more volunteer, maybe you start a hobby business. Love hobby businesses, because there's still a reason to get up in the morning.
Mike:You're still creating something. That's beautiful. Maybe, and this is extremely common with engineers, by the way. I'm not picking on engineers. I love working with engineers because they're so detail oriented.
Mike:But it's almost unanimous. When an engineer retires, they take art classes. They want you to learn, and that's like the polar opposite. They never got to experience what art really was. Some do, but a lot of engineers don't.
Mike:So they want to explore the opposite of what it is. It's not selfish, but you're learning. You're exploring. You're you're trying to develop something new. These are conversations you need to start having to figure out what that is.
Mike:Then you need to figure out how do you shape the life. Are you gonna move? Are you not gonna move? Are you gonna move maybe in five years? Do you need a new house in five years?
Mike:Are you gonna downsize? Are you not gonna downsize? Do you need new cars? Then you start shaping the expenses of the life, the location, and the lifestyle and what that looks like, but it all needs to be primarily driven by the service and the development that you're aiming towards so that you have a reason to get out of bed. It's not just, oh, well, this is how much I currently make, so we'll just maintain this thing.
Mike:No. Please no. Please please don't do that. And the reason why I say this is slowing down and having a more methodical conversation can be very helpful. Too many times, I have heard about people, or they end up coming to the office, and we're having these conversations, and they say, well, you know, I've got a retirement plan.
Mike:I say, well, what's the retirement plan? They show me, and they say, well, we put a plan together, and they put assets to illiquid products. They're kinda set up on fixed income for the most part, and there's very little flexibility here. And they're saying, yeah, but we kinda wanna move, but now we can't really afford it. We don't know to free up the cash.
Mike:If we freed up this cash right here, it might they put the cart before the horse. This is about lifestyle planning, and then you figure out the cash flow and income to support that lifestyle. And sometimes it actually would be better that we slow down and figured out the emotional or lifestyle side of it before you solve the economic or financial side of things. That is how you avoid product sales pitches. Mhmm.
Mike:That is how you avoid oversimplified plans. That is how you can help avoid these situations to where you end up getting stuck. You wanna maintain your freedom. You wanna maintain your flexibility, but you gotta know what you're solving first, and that's so important. That's all the time we've got for the show today.
Mike: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 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.
Mike:Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to ww.yourwealthanalysis.com today to learn more and get started.