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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.
You don't need the arbitrary million dollars to retire. This could work just fine. Can you follow a system or will you be taken over by your sentiment? Welcome to the Retire On Time podcast. I'm Mike Decker here with David Fransen.
Mike:As always, this is a show answering your retirement questions that you've submitted. Just remember, this is not financial advice, just friendly information for you to enjoy. As always, text those questions to (913) 363-1234 so we can feature them on the show. David, what do we got today?
David:Hey, Mike. Can you retire with 250,000?
Mike:Yeah. You can. So let's break down the system real
David:quick, and
Mike:I'm kind of workshopping a little bit of this. So hear me out, okay?
David:All right. I am ready.
Mike:So first off, there's a proper sequence we have to for everyone, we have to go through. The first one is not, hey, let's buy annuity. Let's let's talk about products. Hey, here's a sixty forty split, and and you could take out 4%. Like, that's the wrong way to go about this, especially in a situation like this because you might need to do some some adjustments to bridge certain gaps and to find the efficiencies.
Mike:Okay? So with that said, 250,000, we wanna preserve the portfolio generally speaking. I don't know what their age is. So let's say they're 65 years old. Arbitrary.
Mike:Okay? Okay. So the first thing you do is you do the plan. The plan is just the projections. That's it.
Mike:People have way too much effort into the perfect plan and not understanding that your plan is broken after a week. Because the markets are gonna go up or they're gonna go down. There's a different sequence than the average portfolio return that you've done. There's a different inflationary rate than the average inflationary rate you've put into your plan. There's so the plan is meant to be just simple projections on the direction you're going and do the numbers work out.
Mike:Okay. So in that, in this situation, we'll probably assume, okay, 250,000, put that in the portfolio, let's say all pretax. Not bad. Okay.
David:That means it came from like a four zero one k or a traditional IRA.
Mike:Four zero one k. You pull money out, you're going to pay income tax.
David:Yes.
Mike:Okay. And then let's say it's a couple and they've got they both have Social Security. Because we got that in the back of our mind. We could file right now. We could file in two, three years.
Mike:Okay. So we want to be mindful of that as well. Okay? So generally speaking, let's let's assume the numbers work out. Okay?
Mike:Alright. Maybe these are arbitrary numbers, but 20,000 is coming from one of their Social Security, 25,000 from the other one. So 45,000 of Social Security income's coming in. Great. Then you've got, let's say, 250,000.
Mike:Let me just pull out a quick calculation here. Let's just say I'm not saying this is the right amount. I'm saying let's just say they're gonna pull out 4.5%.
David:Okay. Out of their portfolio. Portfolio.
Mike:Okay. So the 4% rule roughly, but let's just say 4.5%. So they're gonna take out 11,000 from their portfolio a year or so. Is that the right amount? No.
Mike:It's just it's an arbitrary number. Are we in the ballpark? So could this couple with 250,000 live off of 45,000 of Social Security income? Gross. We gotta figure out the taxes on that.
Mike:And then you've also got 11,000 of
David:income from
Mike:from your IRA.
David:In
Mike:way or the other. Notice we haven't talked about income. We haven't talked about anything. Or we haven't talked about in any investment or product. We're just saying, do the numbers work?
Mike:Yeah. And I'm willing to bet if they're taking out about $1,112,000 for their portfolio and we project a 6% growth, the numbers would probably work out roughly. Right? Now inflation is the other factor there. I'm doing this on my head.
Mike:So that's why you run the calculations, the projections, but that's probably a good spot to be. So 45,000, 10/12000 or so, that's $55.06, 57,000 a year. Can you live off that? Let's say 60,000 for easy math. Okay.
Mike:Could you live off of 60,000 a year of income? Some people can. Yeah. Some people can't. It probably can also depend on where you live.
Mike:So let's say you live in Seattle. It's a tax efficient state from income tax standpoint, right? There's no state income tax.
David:Okay.
Mike:There are other tax issues there, but they might not affect you as much. Okay? So not bad. But the cost of living in Seattle is very, very expensive. Well, what if your kids have left the Seattle area?
Mike:And let's say one lives in Texas, one lives in Kansas, one lives in Tennessee, one lives in New York. Okay. You're probably not you probably wanna live near one of them. Maybe. I don't know.
Mike:That's up to you. So living in Seattle is gonna be expensive to travel all that. Maybe you live by one. Probably not the one in New York. New York's tax expensive.
Mike:Maybe not the one in Texas. Texas has high property taxes, which can really get you. Kansas is a pretty tax friendly state, all things considered. Or Tennessee, which is even more tax friendly. So maybe you moved to the person in Tennessee, and you're not in a city, you're in a suburb, and now your dollars just stretched exponentially more.
Mike:You got to factor in also the cost of of the move. Is it worth it? But now you're kind of looking at the lifestyle plan of it all. Where do you wanna retire and all that? So if the numbers work out, maybe 60,000 works in Tennessee.
Mike:But all of that matters. Okay. Yeah. So now we go to strategy. Okay?
Mike:David, do you remember what the standard deduction is roughly this year?
David:For married filing jointly? Yeah. I think it's 34,200 or something.
Mike:So if you're taking, I don't know, let's say $1,112,000 dollars Mhmm. From your IRA that's taxed as income, how much would be taxed after the standard deduction? I guess none. Do they have any tax planning needs? No.
Mike:No. Like, maybe they take the $1,112,000 a year. Uh-huh. Okay? And then they do 20,000 of an IRA to Roth conversion because in the standard deduction, all of that's tax free.
Mike:So that was wiped away. And now you've got your 45,000 of Social Security income. K? For 45,000 of Social Security income, the provisional income tax, which is how they calculate the taxes, you take half of that, you're at 22 or 23,000 or so Okay. Of that.
Mike:You're probably getting very tax efficient Social Security. And whatever would be taxed, if anything, could be canceled out by the standard deduction afterwards anyway. So this couple that did no tax planning is already in a tax free environment.
David:Okay.
Mike:How profound is that? So when I hear people saying, well, I got to IRA to Roth conversions and I'm going to put a 100,000 of my assets from IRA to Roth because we're in a friendly tax environment. No, this person should not. Absolutely should not. And the reason is you're paying dollars to move IRA assets to Roth.
Mike:They're going to the government, which deplete your accounts. K? So there's less money. If you have less money, it's harder to grow less money.
David:Yes. Because if you if you're paying the taxes also out of your IRA, that's just further
Mike:It's lowering the account. So it's like 250,000. Mhmm. You're you're gonna have a better a better effect of the compounding interest Mhmm. With 250,000 than let's say 200,000.
Mike:Yeah. Those things matter. If you have less money, you want to slow down your IRA to Roth conversions or just completely ignore it. If you have more money, you might want to speed it up. Context is king when it comes to tax planning.
Mike:But that's kind of the the first part of it. So you you the the thing on workshop is called build. Wanna build your reserves right? Or no. I'm sorry.
Mike:I'm sorry. We'll get to that in a second. But so you've got you've got the projections, then you've got to explore the strategies.
David:Mhmm.
Mike:So we're talking tax strategy here. In this taxable situation, they're probably within the 400% of the federal poverty line. I guess they're in Medicare anyway, so it wouldn't matter. Yeah. They're not gonna run into Irma issues.
Mike:That's the surcharge of Medicare. So we don't have to be worried about Medicare costs and all that. So so we're in a good spot. Okay? Now, the the one strategy we haven't talked about is long term care.
Mike:And if you need it, probably can't afford it. And if you can't afford it, you probably don't need it. That doesn't mean this couple should go out and buy long term care, even though they probably can't afford it. Maybe not maybe it doesn't make sense. Mhmm.
Mike:Also, means they probably shouldn't buy a life insurance policy. They need to grow their money.
David:What it
Mike:what it means is they might consider perhaps not taking the 12,000 or 11,000 or so, and maybe just taking 8,000 as income and purposely leaving more in their accounts that within these standard deductions gonna be converted from IRA to Roth so that their Roth can grow and kind of act as their long term care policy. Now, Roth growth isn't guaranteed. You've got to be wise about how you're investing your money. That means you don't just put it all in the S and P 500 because the S and P 500 can go flat for ten years. Which means your health benefits or what you're going to pay for health costs isn't growing.
Mike:So you want to be very smart about how you're managing those those assets. But the point is, you might need to have less or more you might need more money in your portfolio to help pay for future health care costs.
David:So you're saying you could you could put money into the Roth, it stays there for many years, and then if you needed a surgery or something, you just take it out of the Roth to to pay for that?
Mike:As best you can.
David:Yeah. Okay.
Mike:Because you can grow it tax free. It pays out tax free. It's it's it's a way to do it. Now, is that a guarantee it's gonna pay everything? No.
Mike:But long term care doesn't guarantee it's gonna pay everything anyway.
David:Right.
Mike:And if you look at long term care policies, the asset based ones that I typically see, if you get sick in the first ten to fifteen years, it's typically a pretty good deal. But if the insurance company knows you're gonna get sick or you're already sick, you're probably not getting approved.
David:Yeah. Right. So Or you have a high premium maybe.
Mike:It's very expensive. And so there's a break even. You're transferring health risk to an insurance company when the odds are always in their favor. Uh-huh. Because no one knows the future, but the present, the the present information means the odds are gonna be in the insurance company's favor.
Mike:So you gotta be aware of that. You gotta understand the the the nuance of that. So that's why I say, you might wanna lower your income and keep more in your portfolio that's being managed very mindfully so that you're leaving assets there for future health care costs because you don't know what's gonna happen in the future. So just be mindful of the health care, how you're solving it, how you're hedging against it. Because you can't sign up for something that just takes care of everything for you.
Mike:That's not how insurance works. Investments aren't guaranteed. And so you have to be very mindful of that balance. Okay? Then you could look at Social Security from this standpoint.
Mike:Now, it is true if you file for Social Security later, you're going to have a higher benefit. Yes. So if this couple wanted to work from 65 to 70 for a higher benefit, that may help them. If they just can't for whatever reason, or they just hate their job, like their job is slowly killing them, or at least it feels that way, which happens. It's a very real thing.
Mike:Yeah. They might consider filing Social Security early to preserve the portfolio. As in, you don't you you wanna minimize the distributions of the portfolio so there's more money that stays in there, the and more money that stays in there can help for future health care costs. Mhmm. There's a balance.
Mike:If you file too early, your income could be hurting. But if you file too late, you could be hurting your estate. In this situation, the estate is also kind of their health care buffer, if So you that's just quick glance some of the strategies for someone in this situation, trying to live within their means. So let's assume we're gonna file for Social Security at 65. We've got about 10,000, let's say, coming in there.
Mike:So they've got 55,000 of income and they're slowly doing IRA Roth conversions in their portfolio. All that's great.
David:Now
Mike:we can look at the, let's just say the, what we call what I'm calling the build now. I'm workshopping this. So I haven't published this anywhere other than in this show. This is the first time I'm I'm Okay. Talking about I've tried to structure how to do the reserves.
Mike:So in the book How to Retire on Time in chapter four, I talk about reserves. Real simple. Just like a city has a reservoir of water, in case of a drought, I believe every retiree should have some sort of protected asset. Because if the markets go up, you can take income anywhere.
David:Mhmm.
Mike:But if the markets go down, you need to take it from a protected source so that you don't accentuate losses. Mhmm. That's it. That's it. Real simple.
Mike:So of the 250,000, how much should go in a reserve?
David:Yeah. Good question.
Mike:This is the tricky one because there's really three kinds of ways you could solve it. So that's where the acronym BUILD comes into play. Okay?
David:And have we revealed what BUILD stands for?
Mike:Never said it before. It's the first time I was workshopping this on my flight in.
David:Okay. Okay.
Mike:So the first one is baseline. Baseline reserves. What are baseline reserves? It's any sort of guaranteed for life income stream. So you got three options.
Mike:You've got Social Security. Check. We know we're getting 45,000 from Social Security here. Yep. You've got pension.
Mike:Let's say this couple doesn't have a pension. No problem. Not everyone has a pension. Most people don't have pensions today. And then you have annuity income stream.
Mike:So in today's rates, today, time of this recording Yeah. This is gonna change. But if you put money into it, you might get around 7% back at the age of 65. That's roughly what I'm seeing today. I'm not quoting a particular product.
Mike:I'm not saying that's gonna be the rates tomorrow. In 2015, 2016, it was like four percent. So it's whatever rate they're gonna give you when you enter into the contract.
David:Okay.
Mike:So your contract, your policy doesn't change. So the baseline is you might say, well, I I want 30,000 just as as more baseline, just more of a guaranteed baseline because that's gonna help me sleep better at night.
David:Mhmm.
Mike:That's why we solve that one first. And it's usually what's the baseline you need when Social Security kicks on. Okay? In this situation, you might say, okay, well the couple has 10,000. So 65 years old, 10,000, not quoting any sort of investment or product, just arbitrary bit.
Mike:10,000 a year divided by point zero seven. You might put a 142,000 in an annuity to bridge that gap guaranteed for life.
David:So you give the insurance company the 142 k. Is that what we said?
Mike:142,000 or so, and you might get around that.
David:You might get around that back.
Mike:You gotta yeah. Guaranteed for life. So that that is not going to increase with inflation. It's a flat income stream. Right?
Mike:So here's what gets my go. Okay? There's nothing wrong with lifetime income if it makes sense. In this situation, the majority of their income is coming from Social Security. Do they need the 10% baseline?
Mike:Probably not. 142,000 of their 250, that's like half their money. Yeah. And we're trying to grow it to help hedge against future health care costs.
David:Right.
Mike:I'm not sure in this situation this is going to make sense. And then someone's gonna probably put in the comments, oh, well, but you can buy an annuity and there's an income doubler. So if you get sick, you get double the income. Okay. Great.
Mike:So you went from 10,000 a year to 20,000 a year to help pay for your medical care expenses. And that, by the way, typically goes away when the cash value associated with the policy goes away. So if this were me, I would probably not go down the route of doing any baseline because there's enough baseline with the Social Security, and Social Security increases with inflation, which is gonna help hedge their base with inflation. So I'm not sure lifetime income's gonna make sense for this situation. Yeah.
Mike:Do you see how I got there?
David:Yeah. I mean, we we it sounds like we were we're going away from that that baseline of annuity income just because their their portfolio balance is just not high enough.
Mike:They they need to keep the portfolio balance where it is. In my opinion Grow
David:and compound?
Mike:So yeah. There's just more flexibility in the future for future health care costs. I'm concerned about their expenses in their eighties, not at 65. Yeah. And we're not taking too much from the portfolio that I think the portfolio can handle handle it if it's built correctly.
Mike:Yeah. So it's context between now and the seventies and in the eighties and what you need. And I think they need probably more cash in the eighties because health care inflation is a very real thing. Okay. Yeah.
Mike:So that's where my mind goes. Now, everyone's different. You're allowed to have a different opinion. And maybe that was right for one in ten people just to have maybe a 100,000 goes in there, and they have 7,000 of the 10,000 there. That just helped them sleep better at night or whatever.
Mike:Everyone's different. Mhmm. But based on my research, based on how I would probably do this without the input of someone else, that's I would lean probably against guaranteed income for life with an annuity because they have that set up. Yeah. Now the next one is unrealized reserves.
David:Okay. So baseline and then unrealized.
Mike:Unrealized. So unrealized assets in your brokerage account. See, let's let's just pretend for a second that of the 250,000, a 100,000 of it is would be oh gosh. Apple stock. They just bought Apple stock.
Mike:They inherited Apple stock
David:Okay. Which was part of their portfolio. So this is in a taxable account?
Mike:Taxable accounts. If you sell it, you pay capital gains. Well look it. Their income is around just shy of 60,000. Long term capital gains, not the full sale, just the gains that are taxed for a married filing jointly is just shy of a 100,000.
Mike:So in theory, they could have tax free income. So hear me out. Okay. You could do your IRA to Roth conversions within the standard deduction. That's tax free.
Mike:Okay. Okay? And that's so you're taking the IRA assets to Roth. Then you've got also your Social Security, which is very tax free. And so you've incorporated all those together.
Mike:So basically, you're tax free of the income, but you need income. You got you need 10,000 of income. So you've got your Social Security, which is paying out roughly tax free with the standard deduction. You've got IRA to Roth conversion, so you're slowly minimizing it. And you're just you need $10,000 of income.
David:Okay.
Mike:So you just sell $10,000 of your Apple stock. And that's where you're spending your money, keeping more assets in the IRA to Roth situation, the qualified accounts because those grow without capital gain issues. Yeah. What I did is I took unrealized assets. So the stock that you'd think, oh, I've got to pay taxes if I sell it.
Mike:In this situation, you wouldn't. Because? Because the long term capital gains bracket is 0% until about a 100,000. Oh. So they're tax free for a couple of years.
David:So if it's tax free to 100 k and they're only taking 10,000, now they still have another 90,000 to go in theory?
Mike:Well, it's yeah. Good question. So your taxable income starts first and then your gains or whatever's on top of that. So it's laddered. And in this situation, yeah, they have a lot of room.
David:Okay.
Mike:So they could realize those assets, better diversify their portfolio, and take income out and be tax free. So that's why I say you want to focus on the baseline first because that's that's more emotional, not in a negative sense, but what's gonna allow you to sleep at night? What's gonna allow you to retire? Yeah. Once you understand what that is for every person, which is different, then you look at, okay, what from a tax standpoint do I have just sitting there that I wanna tap into?
Mike:Those are the unrealized assets, unrealized gains.
David:And can you just explain that too? Like what what makes something realized versus unrealized just that we're all on
Mike:the Unrealized, same you haven't touched it. Realized, you've sold it and now you've the asset.
David:Oh, okay.
Mike:So realized means you've sold it, you've realized the gains, and now you're doing something with it, and that's more on brokerage assets.
David:So it's it's unrealized when it's sitting as like this paper in theory asset like in your account, but then once you sell it and have the cash in your hand, that's when it gets realized?
Mike:Yep.
David:It's like a magic trick. Yeah. I've realized this cash. Yeah.
Mike:Okay. It became real to you because now you have money to do something with.
David:Alright. I get that now.
Mike:Yep. So yeah. Thank you. So so baseline then unrealized insurance. So we've already talked about long term care insurance.
Mike:There's really long term care and there's there's a death benefit. So like term life or universal life or whole life.
David:Okay.
Mike:So let's just break it down. What's the purpose of insurance? To transfer a risk to an insurance company. We already talked about how I don't think long term care is gonna make sense here.
David:Mhmm.
Mike:What about cash value life insurance? It's gonna take ten years before the fees are gone and it makes more sense. They're 65. They probably don't have enough time for it to make sense. So index universal life insurance, there's no reason for the death benefit probably with all of these associated with it.
Mike:The cash isn't gonna increase for the first ten years because there's heavy fees in this situation with less assets. If you've got more money, you might really wanna do it for legacy purposes. But in this situation, they don't those benefits are irrelevant to them. So if they were concerned about a spouse passing and the surviving spouse in the single tax bracket, which isn't that bad in this situation, all things considered, maybe you buy like a term life insurance policy for cheap. But even then, like, I don't know how much it would do.
Mike:But I I know some people like that will retire at 60 years old, and they buy an expensive life insurance policy because they're trying to delay Social Security until 70 years old. But if a spouse passes before 70, they want some term to offset the missed Social Security opportunity.
David:Okay.
Mike:In this situation, I don't see that. So I don't see an insurance play here. It's important to at least review those options. Yeah. Do you want to transfer a risk to an insurance company?
Mike:What is that risk and why do you want to transfer it? That's the conversation.
David:And even those term policies when you get up in age a little bit, they can They're It can be a lot of money. Yeah. I've seen that firsthand.
Mike:And you don't buy it hoping you're gonna die. No. So, like, people don't understand this part of insurance, and this works for anything cash related, it works for anything health related, it works for everything from a healthcare standpoint related, the odds are against you. Insurance companies cannot remain solvent if the odds are in your favor.
David:Right.
Mike:Like, that's how they go bankrupt. Yeah. So you're putting more money in that you're likely gonna get out, knowing that if an improbable event happens against you, that that's when you're covered. That's the definition of insurance. It's not wrong.
Mike:It's just misquoted. Because we have this silly idea that, well, I pay x amount in health insurance, and so they should cover everything.
David:Right. No. No. No. We we love to hate on the insurance companies.
David:We all do, but maybe not justified.
Mike:Yeah. We could talk about that for a while. Yeah. But so that's that's the I. Then the l in build, if you're building your reserves, you're exploring these different options.
Mike:The l is laddering. So sometimes you might retire early before Social Security. So let's say in this couple, let's say that they want to delay their Social Security till 70.
David:Okay.
Mike:Those are higher withdrawals at age 65, 66, 67, 68, 69 years old. And if the markets go down, you have destroyed your retirement. That's a risky part of your your retirement planning. So even though there's less pressure on your portfolio because you have a higher benefit at 70 years old, you gotta bridge this gap. And so typically, the bridge is a laddered income.
Mike:So you might say that you're gonna have a one year CD. Okay. Right? That's that's gonna pay out your income next year. And then you have a two year treasury that pays out the income that you're after.
Mike:And then you have a MIGA, multi year guaranteed annuity at a fixed rate, which is basically a CD from an insurance company, really. And that's gonna pay out in year three. So we're laddering out the income. Mhmm. And we know exactly where it's gonna come from.
Mike:It's gonna come from a principal protected source. So we might look at laddering. In this situation, I'm gonna go back to, I don't think they need to ladder anything. I think they should probably file further benefits at 65 years old and preserve their portfolio assets. Again, for health care reasons in this situation.
Mike:So all of that being said, the last one, D, dynamic reserves.
David:Okay.
Mike:So they need around $10,000 of income from their portfolio. Right? Simple. Yeah. If markets are up, you can take income anywhere.
Mike:If markets are down, you want to have probably around 50,000 of their assets to a 100,000 of their assets in some sort of protected account that has growth potential. K? Well, what's a 100,000 of the of 250,000? It's about 40% of a portfolio. Okay.
Mike:Well, there's this thing called a sixty forty split. 60% stocks, 40% bonds. I didn't plan this, but it magically kind of fulfills a sixty forty split. But instead of bond funds, which can lose money, you might look at buffered ETFs, for example. Because buffered ETFs have growth potential, but buffer out some of the downside risk.
David:Alright.
Mike:Okay. So this is I'm not quoting a specific product because these rates will change, but maybe you get up to 7% of income, or not income, up to 7% growth
David:Okay.
Mike:If the S and P is up. And maybe the first 50% of losses are are are hedged or buffered out. So if the market go down 40%, you don't really lose anything, just the expense ratio. If the markets go down 60% and you have a 50% buffer, maybe you lose 10%. Not the end of the world in that situation.
Mike:Right? So maybe the 100,000 you've put in some in buffered ETFs or maybe you've used indexed annuities. So instead of the 7%, maybe you get eight, nine, 10%. Slightly more upside potential. 100% downside protection, but you have to ladder up the liquidity a little bit or know how to pull money out.
Mike:Okay? So and that that's a whole nuanced situation, but you could increase your growth potential as long as you're willing to give up some liquidity. That's just how it works in all of finance. Yeah. Right?
Mike:You've got growth protection, liquidity. Pick two. Yeah. So if you want growth and protection, you've got to give up liquidity at least for a little bit of time. That's not wrong.
Mike:Just make sure you you explore and understand which index annuity you'd be buying if you went down that route.
David:Right.
Mike:Okay. So a 100,000 in these bond fund alternatives, that makes it really simple. You've got your growth portfolio and you've got your reserves. So if markets go down, great. You've got ten years of reserves.
David:Mhmm.
Mike:That's like two or three market crashes that you can sail through without accentuating losses, allowing your other assets to recover.
David:Yeah. You just leave everything alone in the portfolio and take income from these protected sources for all those years. That's it. And and we know the market's going to recover. We just don't know when.
David:Right?
Mike:Yeah. And that's important. The market will recover. Yeah. Doesn't mean your stock picking's gonna recover.
Mike:Uh-huh. I mean, Cisco and Intel recently just recovered from their losses in 2000. That's twenty six years ago. Yeah. If you're if you're in this situation, you probably shouldn't be picking stocks.
Mike:You probably should be looking at funds that diversify, that allow you to not have to Mhmm. Figure out, is this stock ever gonna recover? Right. That's a long time to wait. And in retirement, you need to have this as income.
Mike:So so that's kind of the portfolio structure of how to figure out how do get the most out of your money, understanding what you have and where it would go and how it be implemented. But notice one is we fall in the first rule. And the first rule is never take income from an account that's experienced significant losses. We've got these these reserves in place. When markets go down, we can take an income from a protected account and sell through it.
Mike:Right? The second one is that everything has a deliberate purpose. We diversify assets by objectives, not investment ambiguity. 60% long term growth for future future health care costs or needs or income needs and so on. 40%, still targeting more growth than bond funds.
Mike:That's the goal. Can't go backwards, so it's the income during the down years. So we've structured the objectives of it, and they're all liquid enough, by the way, that we can do IRA to Roth conversions and all the money can slowly move over tax efficiently. So that's a good deal too. Yeah.
Mike:And then the third rule is you want to plan your strategies ahead of time. Right? So it's easier in the future if you know what you're going to do before you have to do it. Alright. So if you have a plan for when the markets go up next year and how you're going to take income, and you have a plan for how to take income and what you're going do next year if the markets go down, are you losing sleep?
Mike:No. You prepared for it. So everything written in the book here, this is all of it. The BUILD part of it, that acronym I just recently created, whether we use it or not in the future, it's intended to explore all of your options and figure out the right blend for you. There is more than one way to do this.
Mike:What's right for you? What's the right path? That's the question. And so the conclusion here is I think flexibility with growth is gonna be important for them. If they can afford to live off 60,000 or less as income, they're in a very tax efficient place.
Mike:Their tax planning is pretty DIY friendly. You could do this on your own. So the question is just setting it up, getting the right investments and products in place, and then can you follow a system or will you be taken over by your sentiment? If you can follow a system, you can afford, you're gonna live within those means, yeah, you don't need the arbitrary million dollars to retire. This could work just fine.
Mike:Alright. Isn't that wild? Yeah. And this is the tip of the iceberg of what retirement planning is. I just did this off the top of my head.
Mike:Granted, I've done it for over a decade, but when you get into the tax planning software, when you get into the actual nitty gritty of the planning software, when you get into the nitty gritty of Social Security, there is so much more we could uncover here. This is fun. I
David:hope I hope everybody else thinks it's as fun as we do.
Mike:Yeah. Well, you know, that's why we're all different. Yeah. We just wanna celebrate our differences and use the each other's strengths.
David:So Agree.
Mike:I think that's all the time we got for this question. That was a lot, but there you go. If you enjoyed it, make sure to subscribe wherever you're getting the podcast and or on the YouTube. Go to retireontime.com to gap grab a copy of the book, the checklist, the planning list, the workbook, all this, and so much more. All at retireontime.com.
Mike:We'll see you in the next episode.