Retirement's not a math problem. It's a strategy issue. It's not about being the richest person in the graveyard. It's about getting through the ups and downs. Welcome to the retire on time podcast, a show all about your retirement questions.

Say goodbye to the oversimplified advice you've heard hundreds of times. This show is all about the nitty gritty. Now that said, remember it's just a show. This is meant for educational purposes, not specifically for you. As always, text your questions to (913) 363-1234, and we will feature them on the show.

David, what have we got today?

Hey, Mike. I have less than $1,000,000 saved for retirement. How does that change things as I prepare for retirement?

Yeah. So I think people gloss over the idea of you know, you could if you take out 4% from your portfolio, you you're fine. 5%, you're pushing it, but you're okay. And if you have, let's say, 500,000 and you could take out 4% from that, and you've got also, you know, your Social Security that you're okay. The the issue I have with this is there are some things in life that affect all of us equally.

Okay. So another way of saying that is the more money you have, the more you can adapt and absorb the basic needs of the cost of living. So let me let me explain that differently. All humans eat food. We need sustenance, and there's a certain calorie amount that we all need.

So if you have less income in retirement coming in, you've saved less for retirement, food inflation's gonna affect you more than someone that's going out to eat often, but maybe doesn't have to, and they can just make a few adjustments later on. So do you see how less income, less in savings is more susceptible to basic inflationary costs?

Okay.

Okay? Someone who's buying all the fanciest ingredients in their current lifestyle could easily go to more basic ingredients. Someone who's living off of the most basic ingredients is going to struggle with these inflationary risks more.

Mhmm.

Someone who maybe has less in income is gonna still pay the same hospital bill, all things being equal, as someone who has more income if they were to go to long term care facilities. I know how Medicaid works, and I get Medicare, and I get all but the hospital bill is still a hospital bill.

Mhmm.

You're not absorbed of all the risks there. You could get hit by health care inflation more so if you have less income coming in. So the point being is if if you have if you've saved less for retirement, you may not want to really dial in a spend all your money down to zero. You may wanna just leave a little extra left over for health care costs, for inflationary risk, or whatever it else might be. You don't wanna play that one too close.

Mhmm. If you've saved millions of dollars, you could probably do a more aggressive, you know, let's do a max income plan, so to speak, situation. You just gotta be mindful of these other risks because we all need to eat, we all need to sleep, we all should exercise. We have some basic needs. Taxes are gonna go up.

Property taxes are can go up as well. So it's just be aware of that. Also be aware of the compounding effect of sequence of returns risk. So if if you've got $5,000,000 and the markets over the next two years go down by, let's say, a total of 50%, your $5,000,000 is 2,500,000.0 Mhmm. You could still live a simple life with 2,500,000.0 even with that huge hit.

Now let's say you've got 500,000. Markets have gone down over two years. You've got 250,000 left. You still have some basic essentials that have to be covered, and you need this to grow or recover as well because well, there's just a number of reasons for it. So my point being is be cautious about overspending to be overaggressive if you've saved less.

You may want to have a larger, you know, proportionately speaking, buffer or excess money just in case things were to happen. You know, the price of a car is the price of a car.

Which has been going up. Right?

Yeah. The price of food is the price of food.

Yeah. That's gone

up. There there are just certain basic expenses. You know, the price of a Netflix subscription is the price of a Netflix subscription. Yeah. So just be mindful of the essential expenses as opposed to the essential and luxury expenses.

Luxury expenses are much more flexible. Essential expenses affect everyone. The less you've saved, the more aware you need to be of those potential risks.

You know, some people might hear this and say, well, if I don't have a million dollars, that means I can't retire.

Oh, you can absolutely retire. It just depends on how much income you need, how much you have saved, and how do you how do you coordinate the two. Retirement's not a math problem. It's a strategy issue. Uh-huh.

What do you do when markets are up? What do you do when markets are down? How are you going to take income in a tax efficient way? Those are the simple versions. Right?

Do you do IRA to Roth conversions? Do you not do IRA to Roth conversions? What's the long term consequence of that? When is when do RMDs start? If your income is already the level of what your RMD, your required minimum distribution is, then why would you do higher to Roth conversions?

Well, I wanna get to the zero tax bracket. What's the negative consequence of getting to the 0% tax bracket faster when you could preserve assets, have a higher dollar amount, which could grow more money, and you're still in a tax efficient tax bracket.

Mhmm.

These are things you have to consider. Mhmm. It's not a math problem. It's a strategy problem. And you can't just have one strategy.

You need, in my opinion, a series of different strategies. And based on if you have less money, middle amount of money, more money, or a significant amount of money, you still have money problems which require strategies on how to solve them.

Yeah. So did we answer the question then? So if you have less than 1,000,000 saved for retirement, how will that change as you prepare? Do you just need to try and save more, or are you okay? Don't panic?

Do you just change your strategies? The more

risk you have, and this could be considered one of them, I think the less in long term growth you have. So there's a rule of 100 which suggests that your age is the percentage of assets you should have in bonds or bond funds or protected assets. Protected being a less risky asset is probably a better way to say that.

Alright.

In my opinion, your age is irrelevant to your suitability. In that, how much income do you need? How much have you saved? What's your emotional capacity for the ups and downs? And what's the right allocation between long term growth with risk and growth with less risk or whatever products or investments you're you're choosing, and what's the right percentage of your assets for that?

That might be 70% low risk or no risk, as in you can't go backwards. It might be 50%. It might be 40%. It depends on your plan. Start with the plan.

Explore the strategies. Design the portfolio. And those and these situations might have less risk as they design their portfolio, and that's okay. It's not about being the richest person in the graveyard. It's about getting through the ups and downs.

That's all the time we've got for today's show. If you enjoyed the show, don't forget to like and subscribe. As always, go to retireontime.com for resources and more. Maybe you'll attend one of our workshops. But last but not least, we wanna thank you for spending your time, your most precious asset with us today.

We'll see you in the next show.