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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 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, we can pretty much discuss it all. Now that said, please remember this is just to show.
Mike:Everything you hear should be considered informational as in not financial advice. If you want personalized financial advice, then request Your Wealth Analysis from my team today by going to www.yourwealthanalysis.com. With me in the studio today is my colleague, mister David Fransen. David, thanks for being here.
David:Yes. Thank you for having me.
Mike:David's gonna be reading your questions, and I'm gonna do my best to answer them. You can send your questions in by either texting them to 913-363-1234, or you can email them to hey mike at how to retire on time.com. Let's begin.
David:Hey, Mike. Is it ever okay to dip into your principle?
Mike:Yes. It is. Now this is very controversial because we've been conditioned for our entire life. Never touch your principle.
David:What do you touch then instead?
Mike:So this is where the nuance comes into play. Old school sentiment would have you not touch principal because you're receiving income from dividends. So in that sense, you would never touch principal because you need to hold your blue chip stocks, your municipal bonds, your whatever is paying you the dividend because you're living off the dividends. Now dividends are becoming less and less competitive. So some people would venture out into maybe taking income from growth.
Mike:So think about this way. Take stock ABC, who's gonna pay you a 4% dividend. I'm just making very simple numbers. You can think of a bond a b c that pays you a 4%. Some sort of investment pays you a 4% dividend.
David:Okay.
Mike:Or you have a company that grows, let's say at 4% this year and you take out 4% from the growth. What's the difference, really? Berkshire Hathaway is a very popular mutual fund. They don't pay dividends because they take their own dividends and reinvest them. They're trying to grow their portfolio.
Mike:So you need to understand how the portfolio is structured. And is it a portfolio that's built to give you income through dividends? Is it a portfolio that's built around giving you income from growth? Or is it an income plan that's built around annuities? So you can, for example, grow assets, put it into an annuity and have it pay out for 5 years or for 10 years or for a lifetime.
Mike:And that investment or that product annuities are really more of a product than an investment, is giving you your money back, but they've guaranteed the income for a certain period of time while your other assets grow and offset the losses. So imagine you take 60% of your assets. K. You put it into a bunch of income focused products where you're gonna spend down the principal. K.
Mike:It's focused on growth. It's focused on maybe annuitization, whatever it is. And you take the 40% of your assets and you try and grow it. So it becomes a 100% of your assets in, let's say, I don't know, 10 years. And then you could rinse and repeat.
Mike:That's a different way you could structure it. There's a lot of ways you could structure this. But to assume that all of your assets have to follow one strategy, I think, is an oversimplification. I think spending down your principal can be appropriate when it's the right season of your life. So protecting principal, let's say, from your sixties to seventies might make sense.
Mike:You have a long duration left in your life. But if you're 85, 90 years old
David:Mhmm.
Mike:And your health is going down, you might consider gifting some of your principal or some of your money at that point to the grandkids that might need it to help them buy their first house. They're gonna maybe get it anyway.
David:Yeah.
Mike:Maybe you give to your kids. They're just going through a hard time because at some point someone's gonna spend the money. Yeah. And so everyone's different, but is it okay to spend your principal? Yes.
Mike:It just depends on how well your plan is structured. Remember, plan first, then look at the strategies, and then understand the portfolio. But dipping in your principle I don't think is an issue as long as the plan is built around it.
David:It makes sense.
Mike:The question really is what lifestyle do you want to live? What legacy do you want to leave? And how do you accomplish that? Did I miss anything?
David:I think that was well said, and, I followed along.
Mike:If you're just tuning in, I'm Mike Decker along with David Fransen, and the show you're listening to is how to retire on time. That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to
David:it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built
Mike: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.