Retirement Answer Man

Retirement is often the time when people begin to think more about estate planning. On this episode in the Estate Planning series, we’ll talk about giving. You want to be able to give to your loved ones but you also don’t want to rob them of their problems. That’s why we’ll discuss how you can give without enabling and you’ll discover how to optimize the impact of your gift. You’ll also learn how to decide whether you have enough to give. When you begin to think intentionally you’ll see that there are so many ways to give. 

Do you have enough to give?

It would be amazing to be able to give to your loved ones before you pass, but how will you know whether you have enough? The first hurdle in giving is being comfortable giving away your assets. What if you need that money later on? Actually that’s not so hard to figure out. Often times you’ll see that deciding how to give is less a money question than a mindest question. To be comfortable giving away assets you need to understand your level of fundedness. Are you underfunded, constrained, or overfunded? Once you understand this then you can begin to put a plan in place for giving.

How can we give intentionally?

We give for many reasons. A gift is an item that you give someone without an expectation of payment in return. Giving is a way to express feelings and emotions and share those feelings with the receiver. You may not want your gift to your heirs to come in the form of a check from an attorney several months after your death. There are more intentional ways that you can give so that your family can feel the love behind that gift. 

Enhance don’t enable

As parents, we would love to solve all of our children’s problems for them, but then we would be robbing them of that learning opportunity. One of the best gifts we can give our kids is not robbing them of their problems. We need to find ways to help them but also allow them to figure things out for themselves. There are ways that we can give to them that enhance their lives rather than enabling them. 

There are many ways to give before you pass

Create memories - I think this is a fantastic way to give and to be able to enjoy that gift as a family. You could rent a house at the beach and help subsidize the family trip. Spend money to bring the family together. 

Annual gifting - You can give anyone $15,000 per year without reporting it. You could help fund their Roth IRA or help buy them a house. You might be surprised when you find out how much the lifetime gift exemption is. 

The gift of education - There are many ways to give for education. You can pay for college tuition directly. You could fund the grandkids 529 plan and allow the money to grow tax-free. You can also use up to $10,000 per year to fund a pre-college education if your grandkids are in private school.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [2:20] What is a gift?

PRACTICAL PLANNING SEGMENT

  • [6:50] How do you give more intentionally?
  • [10:45] We don’t want to enable we want to enhance
  • [14:55] Retain optionality
  • [16:12] Ways to give
  • [27:43] What is a trust?

Q&A SEGMENT WITH TAYLOR SCHULTE

  • [36:59] Should we be investing in ESG funds in the “new normal”?
  • [44:08] A rainy day fund question
  • [52:18] A tax bracket question

TODAY’S SMART SPRINT SEGMENT

  • [60:06] How do you want your assets to be distributed?

Resources Mentioned In This Episode

Stay Wealthy podcast with Taylor Schulte

Define Financial

CuriousHistory.com

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM333.mp3
Category:general -- posted at: 6:00am CDT

One important aspect of retirement that not everyone is prepared for is estate planning. People avoid estate planning for various reasons, but a properly done estate plan is more than just documents. An estate plan is a way of continuing relationships and loving those people you leave behind in ways that you may not even imagine. Today we are kicking off our monthlong series on estate planning and we are starting with the basics. Listen in to hear what kind of documents you should have in place but also why they are important. 

What is estate planning?

Everyone knows they should have an estate plan, but very few have or understand what estate planning really is. Estate planning is the process of anticipating and arranging the management and disposal of your financial and legal life. The good news is that if you don’t have an estate plan the government has one for you. The bad news is that it probably won’t reflect your wishes. Done correctly, estate planning can be an important gift that you leave to those you care about. 

Why have an estate plan?

Some people may be fine without a plan and having the state doling out their worldly possessions. The purpose of an estate plan is to close out your financial life. When you pass away you probably don’t want to leave your loved ones with a financial and legal mess. Planning your estate in advance is one way to give a gift of elegant simplicity to your family. 

What does an estate plan involve?

  • Probate - When you pass away the process by which the state goes through closing out your legal and financial life is called probate. 
  • A will - A last will and testament is a document that designates where your assets will go, but there is quite a bit of paperwork involved so an executor is named to manage the paperwork and distribute the assets based on your wishes. 
  • Beneficiary driven accounts - These accounts have beneficiaries chosen when you set up the account. Beneficiary driven accounts include 401K’s, 403B’s, IRA’s, etc. The benefit of having a beneficiary listed on these accounts is that they get out of probate quickly and transfer quickly and directly.
  • Power of attorney - Another important document to have in place is a durable power of attorney. This gives a specified person the power to make decisions for someone who is incapacitated. 
  • Healthcare power of attorney - This document allows you to appoint someone to make healthcare decisions for you should you not be able to. If you don’t have one in place it could delay treatment. You can also specify specific situations in which you may not want life-saving actions. 

How often do you review your estate plan?

There is more to estate planning than just having these things in place. I am not a professional estate planner. Think about talking to an estate planner to help you plan your estate. And remember that it is important to periodically review your will and beneficiary driven accounts. Do you have an estate plan in place? When was the last time you reviewed it?

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [3:06] What is estate planning?

PRACTICAL PLANNING SEGMENT

  • [4:34] An example of why estate planning is important
  • [9:14] What are the basics of estate planning?

Q&A WITH TANYA NICHOLS

  • [21:58] Should a woman seek to work with a female financial planner?
  • [26:49] Should you plan leveled withdrawals in retirement?
  • [35:09] How to factor secure income
  • [45:41] Why do we use average rather than the median in market assumptions?

TODAY’S SMART SPRINT SEGMENT

  • [51:02] Review your estate planning documents

Resources Mentioned In This Episode

Align Financial

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

 

Direct download: RAM332.mp3
Category:general -- posted at: 4:23pm CDT

Do you think your own behavior affects your retirement investment management? If you said no, you may want to think again. The most significant risk to your finances is not market volatility or inflation, it’s your own behavior. Over the past several episodes we have explored how our own cognitive biases affect our financial choices and this episode continues that journey. On this episode, you will learn what you can do to make better decisions to ultimately protect your money from its own worst enemy: yourself. 

What is heuristic?

A heuristic is a psychological term for a mental shortcut that allows an individual to make a decision, pass judgment, or solve a problem quickly with minimal mental effort. Our brain constantly uses so much energy that it always looks for shortcuts. Renowned behavioral finance expert, Dr. Dan Crosby, calls this bumper sticker thinking. The 4% rule is a good example of a heuristic used in retirement planning. We need to learn to work around our mental shortcuts and truly think things through. 

Behavioral risk is the most significant risk to your finances

In finance, there are many kinds of risks. We often worry about volatile markets or inflation. We use diversification to help us lessen the market risk but we often ignore the greatest risk to our finances. The biggest risk to your financial security in retirement is your own behavior. If you can’t control your investment behavior especially during challenging times then your retirement portfolio will suffer. Listen in to learn how to manage your cognitive biases and set yourself up for financial success in retirement.

Tips for managing investment behavior

  • Investing is a crapshoot. That’s why we diversify, in essence, diversification is an act of humility. When you diversify you are admitting that you don’t know what will happen. 
  • Put a premium on optionality. As life unfolds you need to have the ability to make changes to your plans. 
  • Don’t white-knuckle it. If you can’t sleep during volatile times then you are taking too much risk. 
  • Listen to differing points of view. Cultivate a knowledge base with diverse opinions. 
  • Redirect your energy. Once you identify your cognitive biases, set up systems to redirect your natural tendencies. 
  • Consistently receive feedback from others with different points of view. Be careful to cultivate diverse opinions. 
  • Force yourself to consider the opposite case of any decision you make. Learn to see an issue more fully from both sides. 
  • Use personal benchmarking to compare your finances to a set standard. This will allow you to look inward at what matters to you personally 

How I manage behavioral risk with clients

When I work with my clients I have to help them manage their own behavioral risks. I do this by considering process, strategy, and tactics. Consider what you want your life to look like. What is important to you? 

Before making any decision, slow down and ask yourself some questions. If you slow down and center yourself you can think through any decision. Think about the decision from all sides. What does success look like? What does failure look like? What are some alternatives that you can consider? Listen to this episode of Retirement Answer Man to hear how you can manage your own behavioral risks.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [1:20] What is heuristic?

PRACTICAL PLANNING SEGMENT

  • [3:45] Managing behavior is the most significant risk you have to your finances
  • [7:04] Be nimble as life unfolds
  • [12:36] Create personal benchmarks
  • [14:23] How I manage behavioral risk with clients as well as with myself

COACH’S CORNER WITH B.W.

  • [21:41] What is the Rock Retirement Club?
  • [22:35] Do we make rational decisions?

TODAY’S SMART SPRINT SEGMENT

  • [34:02] Practice your decision-making framework

Resources Mentioned In This Episode

My article on Kitces.com

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center




Direct download: RAM331.mp3
Category:general -- posted at: 6:00am CDT

We all have cognitive biases that we have to account for when retirement planning. Although we can never shed ourselves of these biases we can manage them. In this episode of Retirement Answer Man, we continue to explore behavioral finance and how it affects retirement planning. Our minds like to play tricks on us and prevent us from making rational decisions. Listen to this episode to learn how to be aware of those tricks and overcome them so that you can rock retirement. 

What does bias mean? 

Before we further explore the subject of the cognitive bias we need to have a clear understanding of the term. Bias means that we prefer one side over the other. We all have our preferences for certain things, sometimes we aren’t even aware of them. Cognitive bias is a systematic error in thinking when people are processing or interpreting information. Cognitive bias can affect our judgment. It is especially important in finance to be aware of these errors in thinking. The biggest obstacle to rocking retirement is a cognitive bias. 

These 7 types of cognitive bias can impact your retirement planning

There are several different types of cognitive biases that can affect our decision making and impede our judgment. 

  • Confirmation bias is when we look for information to support our conclusions rather than looking at all the arguments in an objective way. Our minds are often overloaded with information and use confirmation bias to make decisions easier. Confirmation bias provides the mind with a quick shortcut to come to an answer that you already ‘know’ to be true.
  • Loss aversion explains people’s tendency to avoid loss rather than seek a gain. Psychologically the pain we feel when we lose outweighs the joy we feel when we gain. 
  • Oversimplification tendency helps us to find simple explanations for complex matters. Retirement planning is one of those complex problems. It takes a lot of energy to think out complex solutions to complicated issues. We love those rules of thumb to help us simplify matters, but the truth is we need to seek to understand the complexity. Only then can we discover the elegant simplicity of our own unique retirement plan. 
  • Memory bias impairs us from understanding past lessons. Instead of looking back in the long-term, we look to more recent decisions to guide our plans. 
  • Recency bias is similar to memory bias. Recency bias is the reason most people buy high and sell low even though they ‘know better’. When the markets are up we become more optimistic about life. 
  • Information bias brings out our tendency to continually seek out information even when it doesn’t affect the action. It becomes a way of procrastinating to delay making decisions.
  • Parkinson’s law of triviality means that we spend more time focusing on trivial details rather than the important issues at hand. 

Good investments plus good behavioral habits will help you rock retirement

The worst part about these biases is we don’t even realize that we have them. The first step in overcoming a problem is to realize that the problem exists. None of us have this retirement thing all figured out. But if you can create good behavioral habits and pair those with good investments you will rock retirement. Be sure to tune in next week to learn how to create a framework to manage your cognitive biases and become a better critical thinker.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [1:52] Check out the Grandpad to stay in touch with elderly family members

WHAT DOES THAT MEAN SEGMENT

  • [4:35] What does bias mean?

PRACTICAL PLANNING SEGMENT

  • [6:40] You have so much information coming to you
  • [13:43] The goal of retirement planning is to find the elegant simplicity
  • [16:48] We become optimistic when the markets is doing well
  • [21:21] Good investments plus good behavioral habits can help you rock retirement

Q&A SEGMENT

  • [23:44] What can you expect to pay as an individual for Medicare?
  • [26:55] The number of publicly traded companies has declined over the past few years
  • [34:10] Be cautious of booking travel due to the potential of travel company bankruptcies

TODAY’S SMART SPRINT SEGMENT

  • [35:40] Examine a past investment decision you have made to look for one of these biases 

Resources Mentioned In This Episode

Grandpad

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM330.mp3
Category:general -- posted at: 6:00am CDT

Life planning is one of the hardest things about retirement. Deciding when to retire can be challenging and is a decision based on more than just money. There are various types of mind tricks that we play on ourselves to talk ourselves out of making life big changes. In this episode of Retirement Answer Man, we continue the behavioral finance series by taking an in-depth look at rational decision making. Come join me to learn how you can make more rational decisions so that you can rock retirement.

Our biases often get in the way of our life planning

There’s a difference between being rational and rationalizing. We, humans, tend to choose the latter. Our minds often play tricks on us. Instead of making simple choices, we tend to complicate things by letting our biases get in the way. We use different types of biases like status quo bias, anchoring bias, information bias, and sunk cost fallacy to guide our decisions. 

Many times you know that change is coming, you can see it a mile away, but you still have a hard time navigating that change. Retirement is one of those changes. You have been preparing for it all of your life, but leaving the safety of what is known and what is easy can be hard to do. Don’t let yourself get lulled into the status quo.

Has anchoring bias got you stuck in the same place?

Anchoring bias is another common bias seen in retirement. People often don’t know how to live a life without constraints so they simply choose to stay in place. They choose not to see the myriad possibilities that are out there. Embrace the total freedom of retirement by exploring all of your options. Listen in to hear an interesting parable to help you understand all the opportunities you have waiting for you on the other side of retirement

Are you waiting for more information?

Other people are always seeking information to guide their choices. While making informed decisions is important, some keep delaying their decision to retire due to their lack of information. They think that once they have all the information they will finally be able to pull the trigger and retire. But the reality is, we will never have all the information. There is always a gap between the known and the unknown. 

Do you want to create memories or regrets?

The sunk cost fallacy is another way people tend to rationalize themselves out of making good decisions. At your age, you have a lot of sunk costs. Don’t let those get in the way of living your life to its fullest. 

In the Rock Retirement Club, one of the first things that we discuss with new members is the 5 most common regrets from people on their death beds. Those regrets are:

  1. I wish I had the courage to live a life true to myself.
  2. I wish I hadn’t worked so hard.
  3. I wish I had the courage to express my feelings.
  4. I wish I had stayed in touch with my friends.
  5. I wish I had allowed myself to be happier.

You don’t want to die thinking about all of those things you wish you had done. Using rational thinking and consciously stepping away from your biases can help you live your life to its fullest so that you can look back at a life full of memories rather than regrets. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

  • [1:58] The more difficult the decision the more likely you are to choose the status quo
  • [9:02] Sunk cost fallacy can also influence our decisions

Q&A SEGMENT

  • [13:24] The transition from an employer-sponsored account to your money can be scary
  • [17:20] Do you still need an emergency fund in retirement?
  • [22:00] The difference between Medicare and Medicare Advantage
  • [25:05] Concerns about municipal bonds 

TODAY’S SMART SPRINT SEGMENT

Resources Mentioned In This Episode

PODCAST - Retirement Starts Today with Benjamin Brandt

BOOK - Who Moved My Cheese? by Spencer Johnson

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM329.mp3
Category:general -- posted at: 6:00am CDT

This month on the Retirement Answer Man show we are diving deep into behavioral finance. Do you consider yourself a rational person? Most of us think we are rational people, but according to Frederick Nitzsche rationality is impossible. However, without rationality, we are bound to make poor financial decisions. That’s why today we’re going to explore our humanness and focus on how we can make better decisions. Listen in to learn how to make better financial decisions so that you can rock retirement.

What is behavioral finance? 

Behavioral finance is an area of finance that attempts to understand and explain observed investor and market behaviors. One question behavioral finance seeks to answer is why do investors sell during bear markets and buy during market peaks? Behavioral finance tries to explain how our humanness affects the markets. When we study behavioral finance we have a better understanding of those things about investing that don’t make sense. 

How do traditional finance and behavioral finance differ? 

On the flip side, traditional finance assumes that investors are rational, optimizing market players. Modern portfolio theory is based on the premise that every investor is going to try to maximize returns and minimize losses in their portfolio. The sweet spot that every investor seeks is called the efficient frontier. So, according to traditional finance thinking, an investor would never deviate from the efficient frontier. Traditional finance assumes that an investor can filter information and assess the tradeoffs in order to maximize utility. But the reality is, self-deception and social influence have a huge impact on our decision making. 

What does Maslow’s Hierarchy of Needs have to do with finance?

Maslow’s Hierarchy of Needs plays a role in our decision making as well. Many of us have learned how quickly we can move down the pyramid from self-actualization to base needs during the recent turn of events in the world. Our own pessimism and optimism have so much to do with where we lie on this psychological chart. We use self-deception, irrationality, and bias to block our ability to make rational decisions. This month my goal is to help you learn to make reasoned decisions even with all of your cognitive biases. 

Should market volatility affect plans to rebalance?

A listener asks if she should continue her plans to rebalance her portfolio amid the recent market volatility. There are two different ways to approach rebalancing. Some choose to rebalance according to a date on the calendar. Others choose the threshold approach which means they rebalance when their portfolios begin to tip too far in one direction or the other. David Stein recommends choosing one approach and sticking with it. Listen to this episode to see what he has to say about rebalancing, taxes, and other listener questions. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [1:11] What is behavioral finance?

PRACTICAL PLANNING SEGMENT

  • [2:05] Why is behavioral finance important to understand?
  • [8:12] Maslow’s Hierarchy of Needs

Q&A SEGMENT WITH DAVID STEIN

  • [16:25] David Stein thinks that loss aversion is the most prevalent bias that people have
  • [18:54] Should Wendy take a lump sum or payments?
  • [23:40] A rebalancing question
  • [27:22] What could John do to lower his capital gains tax?

TODAY’S SMART SPRINT SEGMENT

Resources Mentioned In This Episode

BOOK: The Behavioral Investor by Dr. Daniel Crosby

BOOK: The Laws of Wealth by Dr. Daniel Crosby

Money for the Rest of Us podcast with David Stein

BOOK: Fix This Next by Mike Micalowicz

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM328.mp3
Category:general -- posted at: 6:00am CDT

It’s easy to say don’t live your life based on assumptions. But how can we do that in retirement when assumptions are our way of managing uncertainties? Assumptions are basically just guesses at things we don’t know. And we need to make some assumptions to create a retirement plan. So today we’ll finish off the setting your retirement assumptions series by exploring 5 rules for setting and managing retirement assumptions. Join me to learn how you can make good assumptions so that you can rock retirement.

5 Rules for making and managing assumptions

  1. Recognize the assumptions you need to make. Even if you don’t like to make assumptions, you still have to make some to effectively plan your retirement. It’s important to recognize the assumptions that are important to retirement planning. There are obvious ones like inflation, rate of return, and longevity. But some may not be as obvious. Spending rhythms are difficult to understand in retirement and challenging to predict. You also may not understand how to live a life without the boundaries that have constrained you for your whole life. 
  2. Investigate the data surrounding your assumptions. Don’t just assume blindly. Do your research. It’s good to start with historical data, but you can also think about more personal factors. One example is with longevity. You should consider your personal health and family history when estimating your own longevity.
  3. Beware of making extreme assumptions. This one can be challenging in the times of COVID-19. We tend to start believing in extremes when faced with extreme situations.
  4. Determine which assumptions have the biggest impact on your life. Next identify which ones you can control. Where those two meet is precisely where you want to focus your time and energy.
  5. Don’t trust your assumptions. Although we need our assumptions to help plan for retirement, we can’t trust them fully. This is where being agile comes into play. When you are agile you can find the blips on your dashboard and then readjust your model accordingly. Agile retirement planning can help you keep your model up to date and relevant as life changes.

Why is identity such a big issue for retirees?

When you retire you lose your work identity and your identity as a wage earner. It can be easy to become lost. But instead of lamenting the loss of what was you can instead take this opportunity to create a new identity that you choose. You can create this identity based on who you really are. So give it some thought, who do you want to be in retirement?

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

  • [3:00] 5 Rules for making and managing assumptions

COACHES CORNER

  • [16:10] Why is identity such a big issue for retirees?

TODAY’S SMART SPRINT SEGMENT

  • [28:00] Go through these rules think about how you will manage your retirement assumptions

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM327.mp3
Category:general -- posted at: 6:00am CDT

Once again we are tackling your retirement assumptions on Retirement Answer Man. This week we’ll discuss market assumptions. You are modeling 30 years out, so the market assumptions that you make can easily overestimate or underestimate the amount of money you will need. What kind of market assumptions have you been making with your models? 

What are capital market assumptions?

Capital market assumptions are the assumptions that investment managers or asset allocation software use to design your pie chart. It will include what the expected returns are for the asset class. The factors include what the return assumption is, what the standard deviation is, and how each ingredient reacts with each other. We can refer to these factors as return - volatility - correlation. We try to manipulate these assumptions and put our own views on top of them. It is important to note that these are the components of your pie chart asset allocation forecast. 

It’s different this time…

We always think that this time is different. Each major crisis has been unique. The Great Recession of 2008 hit us all hard and changed paradigms. During The New Economy of the 90s, many threw caution to the wind because they just knew that returns were always going to be 20%. But this time is different, right? This pandemic, it’s personal. The safety of our families is at stake. You can’t leave your house. But this time just like all the rest one thing stays the same. It is difficult just to try and be reasonable. 

What kind of historical market assumptions do you use to plan your retirement?

Many people like to use the 10% number to plan their retirement model. But why do they choose 10%? Is it a nice round number? The last 5 years’ stock market returns were 7.7%. During the past 10 years, they were 15%. Over 50 years that number drops to 8.4%. And over 94 years it averages 10%. We often use these historical numbers in our models, but these numbers don’t factor in the lumpiness. These numbers vary wildly from year to year which is why linear models fall apart over time. 

Find the answers to your retirement questions

In our Q&A segment, you’ll hear the answers to questions like, should you consolidate all of your assets in one place? How should you rollover your pretax and post-tax dollars? How hard is it to get a mortgage in retirement (even if you have a pension)? Should you use withdrawal strategies in retirement? Listen in to the end to hear all of these questions answered on this episode of Retirement Answer Man. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN? 

  • [1:02] Capital market assumptions

PRACTICAL PLANNING SEGMENT

  • [2:50] It’s different this time…
  • [7:05] What are your assumptions that the stock market will do going forward?
  • [10:32] It is easy to overestimate the viability of your plan

Q&A SEGMENT

  • [19:15] Should you consolidate all of your assets in one place?
  • [23:30] Is qualifying for a mortgage in retirement challenging with a pension?
  • [29:16] Should you use withdrawal strategies in retirement?

TODAY’S SMART SPRINT SEGMENT

  • [31:20] Reexamine your market and inflation assumptions

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center




Direct download: RAM326.mp3
Category:general -- posted at: 6:00am CDT

One of the biggest assumptions you can make in retirement is in your spending. Spending is one of the greatest financial pieces of retirement planning. On this episode, we’re talking about spending. How do you track your spending? How do you know how much you will spend in retirement? Will your spending change after you retire? Listen in to hear how to break free from your retirement assumptions so that you can not just survive retirement but rock retirement. 

Americans want to keep working remotely

American views are changing amid this Corona disruption. According to a recent study done by IBM, 54% of Americans would like to continue working from home and 70% would like to retain the option to work at home. Major events like the one we are experiencing accelerate social trends. We are all learning a new rhythm of life and many of us like it. If you are enjoying working from home it’s time to consider, what does this make possible? Would working from home give you access to more time freedom? Would it cut down on your wardrobe and commuting costs? Listen in to brainstorm with me how you can use this new trend to perhaps extend your working life. 

You can’t rely on averages to plan your own spending

There is a rule of thumb in retirement spending. People who make close to $50,000 per year spend about 70-80% of that in retirement. But conversely, as your wages go up your retirement spending goes down. Those making over $100,000 per year spend only about 55% of that in retirement.

Another generalization about spending in retirement is household spending by age group. People under 55 spend about $57,000 per year. Ages 55-64 spend approximately $59,000 each year. But then the numbers begin to go down once people reach ages 65-74. This demographic spends $47,000 and finally those in their golden years who are 75 and older only spend $35-37,000 per year. 

We can look at averages and facts and figures all day long but they don’t mean anything. These averages aren’t yours. The data is a good place holder to use as you plan far into the future but in the short-term, the only figures you should be concerned with are your own.

We all have different categories of spending

Everyone has different ideas about what essential spending entails. I like to customize retirement spending into 3 categories: needs, wants, and wishes. Obviously the needs category includes food, clothing, shelter, and healthcare. But it is important to include a bit more than the basic rice and bean budget. Your needs category is your firewall. You want to make sure that you can really live your life on this level. The wants category may include more travel and discretionary spending. The wishes category is where you get to dream big. I encourage you to create different retirement budgets based on these 3 categories. 

Two ways to estimate your budget

There are two approaches to create a retirement budget. If you are still a way out from retirement, one easy way to project your spending is to do a top-down budget. A top-down budget is where you estimate all of your income sources and then subtract the money you save. This will give you a ballpark figure for your current budget. 

As you get closer to retirement you’ll want to create a more accurate model. You can do this by forming a bottom-up budget. This is where you will get a real handle on each category of your spending. This type of budget takes a lot of work, but it’s important to be as accurate as you can as you approach retirement. 

One way you can really dial in your budget is to live on your projections for a year and see how that works for you. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [1:21] Americans want to keep working remotely

PRACTICAL PLANNING SEGMENT

  • [10:45] Spending assumptions
  • [15:56] You can’t rely on averages to plan your own spending
  • [17:20] Health care costs vary per age as well
  • [23:45] We have different seasons of life
  • [35:36] Healthcare assumptions
  • [39:35] Two ways to estimate your budget

Q&A SEGMENT

  • [43:49] An asset dedication question
  • [47:41] An IRMAA correction
  • [49:02] RMD’s for 2020

TODAY’S SMART SPRINT SEGMENT

  • [52:33] Revisit your retirement cost assumptions

Resources Mentioned In This Episode

Jasnon Aten’s article in Ink magazine

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

 

Direct download: RAM325.mp3
Category:general -- posted at: 6:00am CDT

 What retirement assumptions do you have? In retirement planning, we rely on assumptions for just about everything. This may seem like a small thing, but this topic is so big that we are taking the whole month of May to talk about it. Today we tackle the life assumptions: how much you plan to spend, how long you plan to work, how long you think you’ll live. Join me as we consider the different assumptions we all make when planning for retirement. 

What is an assumption? 

Your assumptions are your windows on the world. An assumption means assuming something is true, taking it for granted. In retirement planning, we must make assumptions. Assumptions must be made to plug into the models. We assume for inflation, spending, costs, markets, longevity, and health. As you plug these numbers in, the range of potential outcomes gets wider and wider the farther out you project. And often in retirement planning, we plan as far as 40 years out. You can never get the assumptions just right but you can try to get as close as possible.

We often have incorrect assumptions about how we will spend money

We need to make assumptions about how we will live in retirement to be able to plan accordingly. One of the biggest inputs into the retirement plan is spending rhythm. Many people assume that they will continue to spend in retirement as they do now. But retirement spending is lumpy. It doesn’t have an even flow. In the go-go years at the beginning of retirement, we often spend a lot, then that spending slows down as life slows down. It’s hard to imagine yourself at age 70 or 80. But try to think about how you’ll be living your life at that age. 

We assume that retirement is like turning off a light switch

One day we’re working and then the next day we stop. Right? Wrong. Retirement doesn’t have to be that way. Most people actually work for a period of time in retirement. You can take that light switch and make it a dimmer switch. If you are willing to rethink work and rethink income then you can still work and have the time freedom that you seek. You can choose pretirement and slowly But oftentimes it’s not that way. And it doesn’t have to be that way. 

How will longevity affect your plans?

Be careful with statistics, they can fool you. We often look to statistics to plan our longevity outlook. But your health is not average and it’s not based on statistics. You need a more personalized plan. Consider where you really fall on the longevity timeline based on health, fitness, and family history. We also often assume that our mental capacity will remain the same. You may want to factor in some kinds of systems to help keep your finances running smoothly if your mental function begins to diminish. These aren’t things we have fun thinking about but they are important. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT’S THAT MEAN SEGMENT

  • [2:54] What is an assumption?

PRACTICAL PLANNING SEGMENT

  • [6:00] We often have incorrect assumptions about how we will spend money
  • [10:02] We assume that retirement is like turning off a light switch
  • [14:32] Is your plan dependent upon you working in retirement? 
  • [17:07] Will helping your kids impair your retirement plans?
  • [18:38] How will longevity affect your plans?
  • [23:44] You also need to consider your mental capacity
  • [26:02] Consider your assets

Q&A SEGMENT

  • [29:20] A super backdoor Roth question

Resources Mentioned In This Episode

John Hancock longevity calculator

Nova Article by Kate Becker

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

 

Direct download: RAM324.mp3
Category:general -- posted at: 6:00am CDT

Beachwalker, the rockin’ retirement coach is in the house today. He joins us once a month on the show to give some helpful tips on how to create an awesome retirement. Today we’re talking about attitude. Attitude makes a huge impact on your retirement, your health, and even your longevity. Listen in to hear how a positive attitude can affect your life and stick around for the Q & A segment to hear the answers to questions you didn’t even know you had. 

Attitude isn’t everything, but...

It’s a huge component of rocking retirement. Attitude is an important determinant of the quality of your life now and it will be so even more in retirement. The definition of attitude is a settled feeling about someone or something that is reflected in behavior. So what comes first the chicken or the egg - a great retirement or a positive attitude? What do you think?

Attitude has an even bigger factor on longevity than your health

People are living so much longer than they used to. 80 is the new 60. With this newfound longevity, it’s important to create a positive mindset. You can’t let every ache and pain get you down, find a way to deal with that so you can move on and make the best of your life. Studies have shown that a positive attitude impacts your balance, your mental health, and even your longevity. Aging is inevitable, being old is a choice. 

Robo advisors and target-date funds in retirement

If you are young and accumulating your savings, target-date funds are totally fine (even though I like allocation funds better). And robo advisors are able to put your portfolio on autopilot by automatically rebalancing whenever you need it. But these tools are not set up for managing your assets in or nearing retirement. In retirement, they can lead you astray since they are not geared for distribution. 

How do you determine whether to take a lump sum or an annuity?

Choosing between taking a pension or a lump sum is a tough call. There are many factors to consider. One factor you should think about is what other assets do you have? A pension offers flexibility if you have other assets in place. But if you are underfunded for retirement taking a lump sum would create investment risk at a time when you need to have guaranteed income sources. When planning for retirement, I like to first create a process, then a strategy, and lastly, I choose the tactics to use. You can create your own model at home using your own process, strategy, and tactics. Try modeling both choices and see where you end up. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN SEGMENT

  • [3:00] Attitude isn’t everything

COACHES CORNER SEGMENT

  • [5:22] People who have a more positive perception of aging live longer

Q&A SEGMENT

  • [10:30] Robo advisors and target-date funds in retirement
  • [12:43] Why isn’t catastrophic long-term care a thing?
  • [14:30] Lump sum or annuity?

TODAY’S SMART SPRINT SEGMENT

  • [19:27] Ask yourself, what does this make possible?

Resources Mentioned In This Episode

BOOK - Younger Next Year by Dr. Henry Lodge

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM323.mp3
Category:general -- posted at: 6:00am CDT

Retirement planning will never be the same. Actually there are many aspects of our lives that will never be the same. The Coronavirus disruption has been exactly that, a disruption of our everyday lives. It has affected everything from education, to work life, to retirement planning. Find out how staying intentional and agile will help you rock retirement on this episode of Retirement Answer Man. 

Disruption causes trends to accelerate

Normally we see new trends happening but they take time to really take root. But once some kind of disruption takes hold those trends begin to accelerate. Remote working and online learning were two trends that were coming along in the world but they never really took hold until the Coronavirus disruption. These two trends have been fueled by this disruption and education and the workspace will never be the same. 

How do you define retirement?

If you look retirement up in the dictionary it can mean several things. But none of those ring true for most people in the various stages of retirement planning. We all have our own definitions, our own versions of how we want to spend our golden years. Many of us feel that the most important thing to consider in retirement is time freedom. We want to have control over our own schedules. Plenty of people want to continue to work, but for a different purpose. The compensation may not be the same. Instead, they choose to work to give or to make an impact in the world. So what does retirement mean to you?

5 ways retirement planning is changing

School and work aren’t the only aspects of life that are changing. Retirement planning is changing as well. This field has its own trends that will be accelerated by the Coronavirus disruption as well. Here are 5 trends that I see changing retirement planning.

  • I think we were all starting to value experiences over things and that will continue to accelerate when all this is said and done. 
  • Retirement planning generally starts out as a mathematical formula and we often forget life outcomes. I think retirement planning will become less investment-focused, and more focused on creating the outcomes that are right for you
  • Matching our assets with our liabilities will increase in importance in retirement. This is what retirement planning actually is.
  • People will become more focused on short-term volatility risk and may forget about long-term inflation risk and decreased buying power. Since inflation has been so low for so long we frequently ignore its risk. 
  • Pretirement will boom. Pretirement is an excellent bridge between full-time work and retirement. It doesn’t just give you cash flow in retirement it also gives you:
    • Time freedom
    • A purpose or something that interests you
    • A way to help mentally ease into retirement
    • A transition in your social network
    • Agency and a sense of power 

What trends do you think might accelerate from all of this? Let me know by responding to the 6 Shot Saturday email. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [0:40] Disruption causes trends to accelerate

WHAT DOES THAT MEAN?

  • [3:20] What does retirement mean?

PRACTICAL PLANNING SEGMENT

  • [5:35] 5 trends in retirement planning

Q&A SEGMENT

  • [20:28] How should Mitchell roll his pension so that he doesn’t get taxed for the lump sum?
  • [22:00] What kind of stress tests can we do to prepare for retirement?
  • [25:38] How to prioritize what’s important in stressful times
  • [30:28] How to pursue a second act

TODAY’S SMART SPRINT SEGMENT

  • [33:24] What can you do to treat yourself?

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM322.mp3
Category:general -- posted at: 6:00am CDT

So, we’re not in a recession yet, but these are definitely challenging times. Now is a great time to learn how to navigate a recession in retirement. A recession is a temporary economic decline with a fall in the gross domestic product over successive quarters. Although we technically aren’t in a recession right now, we can stay agile by preparing ourselves for what is to come. Join me today to learn how you can navigate a recession in retirement. You’ll learn 6 areas in which you can play offense or defense to help you be prepared for what may lie ahead. 

6 areas of defense or offense to prepare yourself for a recession in retirement

  1. Maintain a mental edge - What do you do to stay mentally agile? Self-care is so important during challenging times. Exercise and journaling are 2 great ways to practice self-care. Find a healthy way to vent if you need to let off steam. It’s also important to limit the news you watch and avoid the bait of commercials and sales pitches. Be careful with those sales pitches, everyone is trying to take advantage of the situation to make a buck. 
  2. Evaluate what is important to you - Right now we are experiencing unprecedented times where we have an opportunity to really think about what is important to us. So give it some thought. What are your life goals? What is important to your life? 
  3. Consider your cash flow - Another opportunity presents itself to stress test your retirement plan. Review your liquidity. Do you have enough laid out in cash reserves? Take this time to evaluate the sustainability of your retirement plan. Build a cash floor, moderate your wants and wishes
  4. Look for opportunities - Since interest rates are at an all-time low, consider refinancing your mortgage. Now is also a great time to find flexible travel deals look for travel deals. 
  5. Examine your portfolio - This is a good time to simplify your investments in a tax-efficient way. Examine your asset allocation. Is your portfolio doing what you expected? You don’t need to take action right now if you want to change, just make a note of it for better times. Examine your risk tolerance. We’re used to riding risk while accumulating assets, not while we’re in the decumulation stage of life. You also have an opportunity to do some tax planning this year. You may be able to take advantage of tax loss harvesting. Also consider whether it makes sense to do some Roth conversions. 
  6. Help the family - Now is a great time to gift shares of stock or cash. Many people are experiencing challenging times with job losses. Remember you can gift $15,000 per person. You could also consider making an interfamily loan to someone who just needs help weathering this storm. These loans have no requirements other than you must charge a minimum applicable interest rate which is low right now. 

How will you stay agile?

You may never be 100% prepared for a recession in retirement, but you can be agile. Think about the ways you can maneuver and look for opportunities. Although it is important to consider how to defend your assets it’s also important to stay on your toes and be proactive. So what will you do to stay agile in the coming weeks and months?

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [2:00] What is a recession?

PRACTICAL PLANNING SEGMENT

  • [3:22] 6 areas to help you navigate a recession 

THE Q&A SEGMENT

  • [24:30] Where should you invest a chunk of money?
  • [28:40] Evaluate the things you own
  • [31:55] How to best utilize tax brackets
  • [34:33] No one knows how to file for unemployment as a contract worker

TODAY’S SMART SPRINT SEGMENT

  • [38:00] Do something to manage your stress and anxiety

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM321.mp3
Category:general -- posted at: 6:00am CDT

If you are nearing retirement you may be hyper-aware of the corona disruption. With all this extra time on your hands, you may want to spend more time planning your retirement. But don’t overthink this. Listen to this episode to hear my take on 6 years of Retirement Answer Man plus hear the answers to several listener questions. 

6 lessons from 6 years of Retirement Answer Man

Thanks for 6 years of Retirement Answer Man! Last week I entitled the episode 6 Retirement Lessons from 6 Years of Retirement Answer Man and then I forgot to mention the lessons or the fact that 6 years have gone by. So here are 6 of my takeaways after 6 years of producing the show.

  1. It’s all about the money. Many think of retirement as being a math problem, but it’s not. There are too many unknowns for retirement to be as easy as a math problem. Retirement is the problem that cannot be solved that easily. 
  2. Going from accumulation to decumulation is hard. After saving your whole life, switching gears is a challenge. Not only are you no longer earning, but so much else in your life is changing as well. Your social networks, your purpose, your relationship are just some of the things that change alongside transitioning from being an earner to living off your savings. 
  3. Your attitude is critical to your success. Attitude is everything. You can have the attitude: what does this make possible? Or, why is this happening to me? Don’t let the circumstance determine the attitude, let the attitude interpret the circumstance. 
  4. The traditional system of retirement planning is broken. This system is based on sales of products and investment portfolios. Financial planning is evolving though
  5. Little actions are critical. What can you do next? Create the momentum to take advantage of opportunities and mitigate risk. Agile financial planning is a journey. 
  6. Trust that everything will be ok. Take action, but understand that your path will be revealed. 

What retirement lessons have you learned on your journey? Let me know!

How to time the bottom of the market

One listener writes in with a question about timing the bottom of the market. He had the foresight to pull out when the virus hit China. But now he wants to get back in near the bottom. He is worried that he might miss the upswing. 

Planning the bottom of the market is pretty challenging. I am not a market timer. I prefer to have a process and strategy where I develop my tactics. Without a process, our choices are fueled by emotion rather than logic. Do you have an investment process? Listen in to this episode to hear more listener questions

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [2:45] 6 lessons from 6 years of Retirement Answer Man

PRACTICAL PLANNING SEGMENT

  • [13:43] Recommendations on buying gold
  • [19:12] How to time the bottom
  • [23:40] How to build a fixed income source for your pie cake

TODAY’S SMART SPRINT SEGMENT

  • [28:02] What are you going to learn over the next 7 days?

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM320.mp3
Category:general -- posted at: 6:00am CDT

Making the choice to retire and actually stepping away from the comfort of your long-time career can be so difficult. It takes a lot of courage to make that leap. On this episode of Retirement Answer Man, we’ll be analyzing how you can create a strategy to step off that train and get started on your retirement. Listen in to hear how to start planning for the retirement that you know you want. But first, let’s talk about this stimulus package. 

What does the CARES Act mean for you?

In a landmark piece of legislation, the CARES Act was recently signed into law. Roughly 90% of the population will be receiving a direct deposit into their bank account courtesy of Uncle Sam. The qualifications will be based upon your most recent tax return. If you are married and made less than $150,000 then you will qualify. Another perk of the CARES Act is that in 2020 there will be no required minimum distributions. Listen in to hear about 401K loans and hardship distributions which were also covered in the bill. 

It can be hard to retire

Sure retirement sounds exciting, but actually stepping away from a longheld career and living off your savings can feel like jumping off a cliff. At this point in your life, you are probably at the top of your game. You are probably making more money than ever before. You are the captain of your universe. How can you step off that money-making train and into the unknown? 

Some strategies to help you prepare to retire

So how do you garner the courage to give up your income, live off your savings, and step into this unknown world? There are some tactical strategies that you can use to help you prepare for this change in life. 

  • Set a deadline for retirement - not just in general, set a specific date to pull the plug.
  • Create a compelling vision of where you want to go - Use process strategy tactics to prepare and organize your resources.
  • Pretire - set yourself up to make a little bit of income. Now is a great time to prove to your employer that you can work remotely. Pretirement can be a great way to gain time freedom without giving up all of your income
  • Flock with birds of the same feather - get to know people that are walking the same path but a bit ahead of you in their journey. The Rock Retirement Club is a great way to share ideas and conversation with people in the same boat. 

Now more than ever it is important to remain agile in your retirement planning. Listen in to hear listener questions and to find out how you can prepare to retire. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [1:18] What does the CAREs Act mean for you?

PRACTICAL PLANNING SEGMENT

  • [7:41] It can be hard to retire
  • [13:43] Some tactical strategies

LISTENER QUESTIONS

  • [17:10] This whole month is dedicated to your questions
  • [18:00] Will the stimulus package end up causing inflation?
  • [21:54] How to rebalance at this time

TODAY’S SMART SPRINT SEGMENT

  • [28:35] This is the perfect time to get ready

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM319.mp3
Category:general -- posted at: 10:01am CDT

We chat with Fritz Gilbert, founder of the Retirement Manifesto blog and author of Keys to a Successful Retirement, Staying Happy, Active and Productive in Your Retirement Years.

Direct download: RAM_Special_Edition.mp3
Category:Finance -- posted at: 7:13am CDT

Choosing where to live in retirement can seem daunting to some and exhilarating to others. On this final episode of the Where to Live in Retirement series, we hope to teach you how to take steps to navigate a transition to create the retirement and the life that you really want. If you listen to this show that means that you are preparing to rock retirement. Listen in to this episode to hear how to take intentional action to plan where you really want to be in retirement. 

Let’s acknowledge the crazy things going on

We can’t begin this episode without acknowledging the crazy life-changing events that are happening all around us as we live through this Coronavirus disruption. I have talked to so many worried people in the past few weeks; clients, Rock Retirement Club members, and listeners who are all concerned about the effects of the Coronavirus. They want to know what they can do to mitigate the financial damage. To address everyone’s concerns, share tips, and answer questions, I’m hosting a town hall tomorrow 3/26 at 7 pm central. You can sign up for this webinar at my website: rogerwhitney.com just click the ad at the top of the page to register. 

How to avoid bad decisions during the Coronavirus disruption

Stop! Don’t do that! It’s important that you don’t make large, rash decisions in the middle of a crisis. Unfortunately, the Coronavirus has disrupted many aspects of our lives. Although you shouldn’t make big decisions at this time, you can take small actions. Cut some discretionary expenses, have a positive attitude, bring in some extra income. Most importantly, ask yourself what does this make possible? Find out what is possible during this challenging time and lean into it. 

Open your mind to the possibilities of where to live in retirement

How to begin to decide where to live in retirement? First of all, you need to open your mind to the myriad possibilities. The world is your oyster. Where can you envision yourself living? Try this exercise separately from your spouse. Have a seat and write down 3 places to live or even styles of living that you would enjoy. List the pros and cons of living in each place. Then each of you can present them to each other. This is an exercise in healthy communication. 

How can you have the best of both worlds?

You and your spouse may not have the same lifestyles or places written on your list of places to live. Think about how you can have the best of both worlds. Could you rent a place a few months out of the year? Buy a second home? It’s important that both of you make your voice heard. Think about the creative ways that you can live your ideal retirement. Listen in to hear how you can navigate the transition into retirement and decide where to live. You’ll also hear listener questions that could help you up your retirement game. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

COACHES CORNER

  • [3:30] Open your mind to possibilities
  • [7:45] How to avoid bad decisions

Q&A SEGMENT

  • [12:10] How to verify expense ratios?
  • [15:24] Should he track information in a spreadsheet?
  • [19:35] Cash value or pension?
  • [20:34] An unusual retirement plan

TODAY’S SMART SPRINT SEGMENT

  • [28:58] Realize you have choices to create the type of environment you want

Resources Mentioned In This Episode

Dan Crosby

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM318.mp3
Category:general -- posted at: 6:00am CDT

Direct download: RAM_Special_Episode.mp3
Category:Finance -- posted at: 12:25pm CDT

Over the past several episodes we have been discussing how to decide where to live in retirement. After listening to the previous episodes in this series, you have been able to acknowledge your own status quo and build a framework to decide the kind of place that you want to live in retirement. Now is the time to experiment and decide what makes the most sense for you and your situation. Listen in to hear different ways you can experiment and choose the right place to retire.

Is the grass really greener somewhere else?

All this talk of packing up and moving can get you ready to pack your bags and drive across the country to start a new life. But before you do that, think about if that is what you really want. Our thought experiment is really meant to get you thinking. So now examine where you are right now. What would happen if you decluttered the house or even remodeled it? Would it feel more liveable? What if you reexplored your own city? Check out the museums, parks, and trail systems. You may find there is more to love than you thought. 

How to experiment and decide where to live in retirement

How do you know where to even begin? Deciding the right place to retire can seem like a daunting task, but just like any other research project, you can start with the internet. Think about the aspects of a place that are important to you to get a profile of what you are looking for. Country or city? Beach or mountains? North or south? You’ll also want to think about factors such as affordability, proximity to airports and family. 

Keep your ear to the ground

Once you find a place that intrigues you start chatting with friends and colleagues about that location. Keep your ears open and you’ll hear plenty about that place. Another way to investigate places to live in retirement is to test the waters. Use your vacations to explore the places you are thinking of. Instead of buying a new place right away consider renting for a year to see if it’s somewhere that really suits your needs. 

Test the waters

Remember the whole point of this exercise is to have you analyze your status quo to see if it will still fit your desires in retirement. After doing this you may find that you are exactly where you want to be. So build your framework and put it to the test. Test the waters to see what may work for you. Continue to flush out your living profile to research and experiment on where you are thinking of settling. Try booking a vacation there or testing the waters. This will help you decide what is right for you. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [2:00] What is huzzah?

PRACTICAL PLANNING SEGMENT

  • [3:00] Is the grass really greener somewhere else?
  • [7:44] How do you research and explore
  • [11:45] How these decisions are made in my home

Q&A SEGMENT

  • [17:45] How to evaluate when you will be ready to retire
  • [25:35] Should you hold onto a stock?
  • [30:55] How to protect yourself against identity theft when working with a planner?

TODAY’S SMART SPRINT SEGMENT

  • [38:15] Continue to flush out your profile to research and experiment

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM317.mp3
Category:general -- posted at: 6:00am CDT

In this episode, I share some perspective to help you navigate this crazy market

Direct download: Special_Edition_on_Bear_Market_3.13.20.mp3
Category:general -- posted at: 9:12am CDT

Creating an ideal living profile will help you build a vision of your retirement. On the Where to Live in Retirement series, we’re not giving you a list of top places to retire, instead, you will learn how to build a framework to help you understand where is the right place for you. On this episode, you’ll consider questions to ask yourself and your spouse to create the ideal living profile for your retirement. Listen in to learn how to build a vision of what you want your retirement environment to look like.

Would you move across the country if it meant you could retire 2 years early? 

Moving can often lead to a completely different lifestyle. If you live somewhere with a high cost of living then moving to a state with a lower cost of living could completely change when and how you retire. Some people are completely happy with where they live and even identify with that place, and if that is you, then great! But for those that may be considering a change, make your decision intentionally. Don’t base your choices on the status quo. Consider your right answer. 

How to create your retirement living profile

How do you feel about your living environment? Our living environment sets us up for success and happiness. To create an ideal living profile there are many things that you can consider. Consider the climate. Do you like consistency or do you like change? Are you someone that wants to see the seasons change or would you prefer warmer weather all year long? Would you prefer to live in the city, suburbia, or out in the country? Would you enjoy the conveniences of a planned community? What kind of amenities do you like to be near? Listen in to hear what you should consider when creating your ideal living profile. 

What tools can you use to create your ideal living profile for retirement?

Now that you know what kind of questions to ask yourself, it’s time to actually build your living profile. There are many different ways that you can do this. One way is to create a vision board. A vision board is a way to use pictures, words, and ideas and arrange them in a visual way. You could also use a mind map to help you create your retirement living profile. I use a mind mapping app called Mind Node that helps me create mind maps. Make sure you’re signed up for 6 Shot Saturday to receive a mind map example. 

Create a conversation

When considering where to live in retirement it is important to check your status quo at the door. As you work through this exercise of creating your living profile make sure to do it separately from your spouse. Define what is important to you individually. After you have both created your living profiles you can use them to spark an ongoing conversation. You want to make sure that both of you express your feelings. Use this exercise as your Smart Sprint this week and start the conversation with your spouse.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [1:40] What is a bond ladder?

PRACTICAL PLANNING SEGMENT

  • [3:38] Would you move across the country if it meant you could retire 2 years early?
  • [7:07] How to create a living profile
  • [15:44] What are some tools you can use to create your living profile?
  • [19:42] Next week: how do you experiment with your decision?

Q&A SEGMENT

  • [21:50] Roth conversions and making use of your tax brackets
  • [27:15] What are the pros and cons of using a bond fund vs. using a bond ladder?
  • [31:15] Target-date funds

TODAY’S SMART SPRINT SEGMENT

  • [35:06] Start thinking about the environment where you want to retire 

Resources Mentioned In This Episode

The Pie Cake episode

Mind Node

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM316.mp3
Category:general -- posted at: 12:59pm CDT

Retirement is one of those life changes that gives you the opportunity to reevaluate and set yourself up for the next stage of life. On this monthlong Retirement Answer Man Series, we’re going to think about how to decide where to live in retirement. This will not be a list of the top ten places to go, but instead, I want to help you build a framework to weigh your decisions. In this episode, we’ll get you thinking about your own status quo so you can evaluate whether it’s right for you. Listen in with an open mind and really think about whether your in the right place or if you’re just comfortable. 

The Coronavirus and market corrections

I can’t sit by and ignore the recent market correction due to the Coronavirus. The whole situation can seem scary, While I can’t assess the health risk of the illness, I can discuss the market risks. Nobody knows how this event will slow down our economic system overall or how it will affect the profits, growth, and earnings of individual stocks. What you can do is consider whether you have the right structure in place. If you have done your planning then you need to sit down and remember that the money you have in the market right now won’t be touched for 5+ years. Relax and remember that this too shall pass. 

Are you getting trapped by what is?

The status quo can be quite comfortable. But instead of sitting back and letting life pass you by you can use the status quo as a baseline to help you consider what could be. How did you come to live where you do? Think about what that journey was like. Have you lived there long? What ties you there now? Retirement is a unique time in life where you don’t have the ties of work or kids to influence where you should live. Acknowledge your status quo but don’t simply accept that life must remain the same. Consider whether a change would improve your life. 

What are the pros and cons of selling stock by specific shares?

I recently got a great question about selling individual stocks by specific shares to manage one’s tax bracket. If you are looking to manage your tax bracket when selling stocks that were bought at different periods of time then it’s a good idea to do multi-year tax projections. Think about what your spending will be like and what your income will be. Where will you obtain that income? What will your tax bracket be? Map it out and model it. Listen in to hear the full explanation of how you should handle selling stocks by specific shares. 

What can average people do about long-term care?

Another listener sees long-term care insurance as a luxury since prices range from $3000-$7000 per year. He is wondering what people with average incomes can do to help with long-term care. Unfortunately, there is no good answer. First off you need to really consider if it is a luxury for you. Can you exchange a different expense like life insurance for long-term care insurance? Is there a way you can mitigate the odds and make some lifestyle changes? You’ll also need to begin discussing this issue with your family. Find out why having this discussion sooner rather than later is important by listening to this episode of Retirement Answer Man. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [2:53] The Coronavirus and the markets

WHAT DOES THAT MEAN SEGMENT

  • [10:00] What is status quo bias

PRACTICAL PLANNING SEGMENT

  • [11:02] How did you come to live where you do?

THE Q & A SEGMENT

  • [17:08] What are the pros and cons of selling stock by specific shares?
  • [23:50] Buying long-term care is a luxury, what can average people do?
  • [27:55] The goal is to not use long-term care insurance

TODAY’S SMART SPRINT SEGMENT

  • [29:44] Start having this conversation about where to live with your spouse

Resources Mentioned In This Episode

Ask me a question! - RogerWhitney.com/AskRoger

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM315.mp3
Category:general -- posted at: 5:00am CDT

Today as we close out the long term care planning month, Steve Cain returns to the show to discuss hybrid long-term care insurance policies. On the previous episode (#313), Steve Cain gave us the key facts about traditional long-term care insurance and today we explore some alternatives to the traditional long-term care insurance route. This episode will help you understand different options in the long-term care insurance realm. I’ll also answer some listener questions and have our retirement coach, B.W., 

The subject of long-term care can be a tough one to address

This entire month we have discussed how to cope with long-term care risk. While this is not the most exciting or even upbeat topic to learn about it is something to consider. It’s important to address potential risks while we are still of sound mind rather than while we are dealing with them. Examining your options now will lead to better decision making and peace of mind. Listen to this conversation with Steve Cain to arm yourself with knowledge so that you can better weigh your options when it comes to long-term care. 

Hybrid long-term care insurance policies manage risk from a different angle 

The long term care insurance industry has had a lot of trouble in the past and they don’t have the best reputation. But the hybrid long-term care insurance policies are an alternative to the traditional long-term care insurance policies. These policies don’t really have a proper name and can be called a number of things like; hybrid, life with long-term care, asset-based long-term care, or combination long-term care. Even though they don’t have a decent name in place they are an exciting change from traditional long-term care insurance. These policies are life insurance-based products with long-term care riders or additions. Unlike traditional long-term care policies, with these, you are more likely to get something in return for your money. 

There are different types of options in hybrid long-term care

There are many different types of hybrid long-term care options on the market. One is a long-term care solution that is actually rolled into a life insurance policy. Essentially it is whole term life insurance with a separate long-term care component. This insurance has separate buckets of money designated for different purposes. It is a bit more expensive than a traditional long-term care insurance policy but the benefits are guaranteed. Listen in to hear more about this type of hybrid long term care insurance policy and a few others. 

Who needs long-term care insurance?

Long-term care insurance isn’t for everybody. There are some who are affluent enough to be able to self-insure, many more won’t be able to afford this type of insurance. But there are plenty in between those extremes that can consider this type of insurance. There are many different types of insurance and ways to plan for your potential long-term care needs. The key is to have a plan. Be sure to include your family in this discussion, since long-term care is an issue that affects the whole family. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

  • [3:05] Hybrid policies approach long-term care insurance from a different angle
  • [6:30] The long-term care solution atop a life insurance policy 
  • [16:38] What is the return to the premium option?
  • [19:22] Can you repurpose your traditional life insurance policy?
  • [24:35] Who needs long-term care?

COACHES CORNER

  • [27:25] What to do when you are thrown into the role of caregiver

LISTENER QUESTIONS

  • [36:00] A question about annuities
  • [44:10] How to handle holding onto stuff in retirement
  • [49:44] How to evaluate a portfolio manager

TODAY’S SMART SPRINT

  • [60:03] Think about your potential long-term care needs 

Resources Mentioned In This Episode

BOOK - Winning the Losers Game by Charles Ellis

To check out the annuity series start here

Steve Cain

Steve Cain on Twitter@SteveCainLTC

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM314.mp3
Category:general -- posted at: 6:00am CDT

You may know that I am not a fan of traditional long-term care insurance. But that is why we are exploring this topic together. It is important for me to reexamine my biases periodically to see how they hold up. On this episode of Retirement Answer Man, Steve Cain, from LTCI joins me to examine traditional long-term care insurance. I have plenty of questions for him so that we can learn how traditional long-term care insurance works and examine our own risks. Join me by listening to this conversation to learn more about long-term care insurance so that you’ll have the tools to determine if it is right for you. 

How to plan for risk 

There are 5 basic strategies to address a risk and shockingly, ignoring the risk is not one of them. No one likes to think about long-term care, but instead of burying our heads in the sand we need to think about how we will confront this risk. These are the 5 strategies that risk management professionals consider. 

  1. Retain the risk - this means dealing with it yourself
  2. Avoid the risk - not really a possibility in this situation
  3. Mitigate the risk - lower the odds of the risk
  4. Share the risk - use insurance to help to share the risk
  5. Transfer the risk by using insurance to own all of the risk.

Keep these strategies in mind as you listen to the show so that you can begin to consider which one you’ll want to use to consider long-term care.

Is traditional long-term care insurance right for you?

Deciding whether to use traditional long-term care insurance is a difficult decision. The long-term care insurance industry is still in its infancy and there are many factors to consider as a consumer. The industry doesn’t have the best reputation, but Steve Cain is here to help us consider whether traditional long-term care insurance is the best option for our potential long-term care needs

Will the long-term care insurance company be around when we really need it?

We’ve all seen the headlines, long-term care insurance companies raising their rates, or even worse, companies going out of business. How do we know if the insurance company is going to be around when we really need it? Despite the history of problems in the industry, Steve Cain feels that the newer generation of long-term care insurance policies are more stable than the first generations. He feels that the industry has evolved and adapted by learning from the mistakes of the past. Find out why Steve feels the newer insurance policies are more stable than those of the past. 

How are the policies structured?

To get a long-term care insurance policy you’ll have to go through several steps. The companies want to ensure that you won’t need long-term care for a number of years, so they do check your medical history. There are many factors to consider when choosing your policy. The amount you can afford is an important factor. But you’ll also want to consider your lifetime maximum benefit, the maximum benefit amount per month, and you’ll also want to factor for inflation. Find out what else you should consider before you think about getting long-term care insurance. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN SEGMENT

  • [3:00] Lifetime maximum benefit

PRACTICAL PLANNING SEGMENT

  • [7:53] The long term care insurance industry is in its infancy
  • [14:40] What happens to a policy when the company becomes insolvent?
  • [20:30] How does a long-term care policy get crafted?
  • [29:17] The elimination period used to be bigger than it is now
  • [37:14] What is the average premium?

LISTENER QUESTIONS SEGMENT

  • [40:44] Tax diversification in retirement
  • [47:44] A sequence of return risk question

TODAY’S SMART SPRINT SEGMENT

  • [51:30] Consider your long-term care risk

Resources Mentioned In This Episode

Steve Cain

Steve Cain on Twitter @SteveCainLTC

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM313.mp3
Category:general -- posted at: 6:00am CDT

There is a 50% chance that you’ll need long-term care at some point in your future so let’s learn how to mitigate your long-term care risk. Sure, you can always try the long-term care insurance route, but with it being an emerging industry, the underwriting doesn’t have enough data to provide the insurance that you need at a consistent cost you can afford. Long-term care insurance policies still aren’t as robust as home owner’s insurance policies. If you plan to self-insure against long-term care you’ll need to know the risk factors and what your personal risk of needing this type of costly care will be

How to determine your long-term care risk and build a financial framework

One of the scary parts about needing long-term care is that your resources are finite. At that point in life, you won’t be able to fill the gap by working if something happens to you. When self-insuring for long-term care you’ll need to start with the worst-case scenario. The worst-case scenario in a long-term care situation generally means dementia or Alzheimer’s. 

Alzheimer’s care can cost up to $350,000. So this worst-case scenario is how we’ll start to build our framework to self-insure. Next, you need to consider your risk factors to determine the likelihood of the worst-case scenario happening to you. After that, you’ll want to build a plan and stress-test it. Listen in to hear how I simulate financial plans and stress test them. 

What is the difference between dementia and Alzheimer’s? 

For years, Alzheimer’s and dementia were terms that were used interchangeably, but finally, we have gotten to the point where we clarify them. When discussing dementia, we are describing symptoms. But there are more than 200 diseases that can cause symptoms of dementia. Alzheimer’s is a specific disease that presents with symptoms of dementia. 

How to lower your risk for Alzheimer’s

Everyone wants to know what they can do to minimize their risks for Alzheimer’s. The good news is that dementia and memory loss doesn’t happen overnight. Since it is a long, slow process there are little changes we can make to combat the risks. Unfortunately, no one knows what to believe since there is so much fake science on the internet. That’s why Dr. Marc Milstein has joined me today. He is here to give us some actionable items that we can implement to lower our risk for Alzheimer’s. 

5 keys to lower your risk for Alzheimer’s

  1. Sleep is an essential piece of the puzzle. Without proper sleep, our brains build up a type of trash. Proper sleep washes away that trash build up each night. But constant disruption impedes the brain’s ability to get a good cleaning. 
  2. Learn difficult things. Any learning is great, but when you learn something difficult your brain really gets a workout. Challenge your brain in a different way: try learning a foreign language, a new sport, or a new instrument. Train your brain the way you would your muscles at the gym. 
  3. Hearing is important too. If someone is not hearing they are not learning and they are not engaged. Over time the person becomes isolated without even realizing it. Hearing loss is easily treatable with a hearing aid. It helps you stay engaged. 
  4. Stay engaged. Social interaction is good for the brain. 
  5. Treat inflammation. Inflammation is like a fire in the body. Many of us experience inflammation due to poor diet or autoimmune conditions. This inflammation can cause the brain to become inflamed and damaged as well. If you have an autoimmune condition then do whatever you can to lessen the inflammation. 

Listen to this fascinating interview with Dr. Marc Milstein to hear more about what you can do to lessen your chances of getting Alzheimer’s.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN SEGMENT

  • [1:30] What is underwriting?

PRACTICAL PLANNING SEGMENT

  • [3:33] Let’s build a framework
  • [8:45] Long-term care insurance is still an emerging industry
  • [12:43] How powerful is the Alzheimer’s gene?
  • [15:33] What is dementia?
  • [19:00] What can you do to take action to lower our risk of dementia and Alzheimer’s
  • [31:25] What is a good implementation plan?

Resources Mentioned In This Episode

DrMarcMilstein.com

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement

Direct download: RAM312.mp3
Category:general -- posted at: 6:00am CDT

Long-term care is an issue that is really hard to grapple with and talk about. Yet it is an important one that we all need to think about. You may have dealt with it with your own parents or you may be dealing with it now. On this episode, Christine Benz, director of finance with Morningstar and author of 30 Minute Money Solutions, joins me to discuss long-term care, long-term care insurance, and what’s in store for the baby boomers who are now living longer than anyone in history. 

What are ADLs?

When discussing long-term care and long-term care insurance you may hear the term ADL thrown around. Checking someone’s ADLs is a great way to assess if someone is really up to independent living or if it is time to seek assisted living. ADL means activities of daily living. They include tasks such as; personal hygiene, dressing, eating and preparing food, maintaining continence, and mobility. Not only are these indicators an important way to decide if you or a loved one needs long-term care, but they are also used by insurance companies in the same capacity. 

What is a long-term care event?

Often when we think about long-term care we may immediately jump to thinking about dementia, but the reality is that long-term care is needed by people in many different situations. Since the daily care of an ailing elderly male is often shouldered by his spouse, women tend to have more need for long-term care than men. We also tend to think of a long-term care event as being a sudden thing, but more often than not, people graduate up through different levels of care. 

Let’s talk long-term care insurance

The obvious answer to the exorbitant costs of long-term care is to purchase insurance. But the reality is that it’s a broken marketplace. Long-term care insurance holders can suddenly find their rates increasing by 30%-50% or more after paying in for many years. Long-term care insurance is still a relatively new product and the insurers discovered that they initially underpriced their product. Learn about what the future of long-term care insurance may look like and some long-term care insurance alternatives by listening to this interview with Christine Benz. 

Long-term care is scary

Yes, the thought of needing long-term care is scary on many levels. The thought of becoming vulnerable and losing control of your functions at the end of life scares the wits out of us all. But the financial ramifications can be just as scary as well. One way to help ease your mind into this fearsome territory is to plan for it in advance. Listen to this series on long-term care to help you prepare for any eventuality. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [2:45] What are ADL’s?

PRACTICAL PLANNING SEGMENT

  • [5:44] Christine Benz joins me to discuss long-term care
  • [8:07] What is a long-term care event?
  • [16:35] Let’s talk long-term care insurance
  • [19:40] We’re at the beginning of the wave of baby boomers

LISTENER QUESTIONS SEGMENT

  • [26:45] How can Charlotte minimize health insurance costs before Medicare kicks in?
  • [29:21] Can the inherited IRA RMD amounts over 10 years be different or do they have to be the same over that stretch of time?

TODAY’S SMART SPRINT SEGMENT

  • [31:56] Check out the link in 6-Shot Saturday that contains all the data that Christine Benz refers to

Resources Mentioned In This Episode

Healthcare Before Medicare (If you have questions about this topic, start here!)

BOOK - 30 Minute Money Solutions by Christine Benz

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM311.mp3
Category:general -- posted at: 6:00am CDT

Investing in retirement is different than any investing you’ve ever done. The asset allocation that you’ve been doing your whole life won’t cut it in retirement. On this episode, you’ll learn what comes after asset allocation. You’ll also learn how to manage market risk. And BW joins us in the Coaches Corner to discuss how to survive bear markets in retirement. You’ll definitely want to listen in to hear my pie-cake analogy, don’t miss it!

What is asset-liability matching?

Have you ever heard of the term asset-liability matching? This is a term typically used in the pension management world but we can apply it to our own retirement. Asset liability matching is the process of investing in a pool of assets so that cash is available when you need it to cover consumption. It is when you take a pool of assets to cover the short-term but you also need that pool to cover expenses in the long-term as well. This is a good term to refer to how we must cover our retirement expenses. 

Asset allocation is not the only way of investing in retirement

You’ve been told your whole life that you need to focus on your asset allocation when investing. Asset allocation is so important to the accumulation stage of retirement planning. But in retirement, asset allocation is not the only thing to consider. Rather than sowing your seeds for growth, in retirement, you are now reaping the rewards from a lifetime of hard work. So now is the time to rethink your asset allocation strategy. 

The pie-cake analogy

We often refer to asset allocation as a pie. You’ve seen all of those pie charts with different percentages of stocks, bonds, and cash. But instead of a pie, in retirement, what you really need is a cake. One of those big, multi-tiered cakes, like a wedding cake. But the cake you need is actually made of pies. Yep, that’s it! A pie cake! You’ll want to create your cake with 3 or 4 layers and the pies will be made of different things. You really need to listen to hear how amazing this analogy is. 

What should your pie-cake look like?

So you’re all ready to build your pie-cake, but what should it look like? Sure there are layers, but layers of what?

  • Layer 1 - this bottom layer is full of funds that are to be used in the next 2 years so it needs to be made of cash or cash-like investments
  • Layer 2 - this second tier will be funding years 3-6 You’ll want some stability in this layer, but also some income. It could be made of bonds that will be maturing, stable value funds, and some cash.
  • Layer 3 - this layer will have a very different looking pie than the bottom layers. The time frame of this layer is 6-10 years. There will be growth but it will be moderate growth. The objective here is income. A good mix could include bonds, real estate equities, but also consider growth. 
  • Layer 4 - now we are talking 10-15+ years ahead. This is the pie where you can get aggressive. You’ll want this pie to be growth-oriented with more risk and less bonds and cash. 

Listen in to discover how you can build your cake-pie and eat it too!

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN SEGMENT

  • [2:12] Asset liability matching

PRACTICAL PLANNING SEGMENT

  • [3:55] Why asset allocation is not the only way to invest in retirement
  • [6:46] How to figure your asset-liability matching

COACHES CORNER SEGMENT

  • [12:50] How to survive a bear market in retirement
  • [16:26] How we live our life can reflect how we react to a bear market
  • [19:22] What can we do in a bear market?

TODAY’S SMART SPRINT SEGMENT

  • [22:00] Relisten to the pie-cake analogy and think about the tiered approach

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM310.mp3
Category:general -- posted at: 6:00am CDT

Protecting your retirement lifestyle is an important part of retirement planning. You want to know that if everything falls apart you’ll still be able to live the life you want. Well, unfortunately, nothing is absolutely certain and there is no way to protect yourself against everything. However, proper planning can help give you peace of mind. If you’re wondering what on earth you’ll do in the event of a bear market or market crash, listen to this episode to help you understand how to set yourself up for success in retirement.

Retirement is asymmetrical

The 4% rule looks great on paper, but it really isn’t practical when applied to life. Retirement is lumpy and asymmetrical and returns on investment are asymmetrical as well. There are always going to be unexpected expenses. Sometimes expenses will come in the form of opportunities and sometimes the expenses won’t be as much fun. The only thing that is certain is that life is always uncertain. So it is important to prepare for the unexpected. When planning your retirement, you need to remember that life will get in the way. 

It’s all about finding balance

In retirement, you need to find that balance. On one end of the spectrum, you have that near-term market loss and on the other end, you have a loss of purchasing power. 

Let’s learn how to keep the tension between the two of them. 

  1. Know what your spending forecast is. Understand your needs, wants, and wishes. Build a model retirement budget and then categorize your spending in those 3 different categories. 
  2. Determine your fundedness. Are you underfunded, constrained, or overfunded? Know where you fall on this spectrum. The strategies you take will depend on how funded your retirement savings are. Listen in to hear the different strategies to use based on your fundedness. 

The best way to protect your retirement lifestyle

How can you protect your retirement lifestyle? Try using your superpower longer. What is your superpower, you ask. Your human capital. The longer you can continue to bring in income the better off you’ll be. Retirement doesn’t have to be like a light switch. You don’t have to simply turn off the work button. Try pretirement to gain time freedom and flexibility while still maintaining a bit of an income. Pretirement is the best strategy you can use to protect yourself from whatever life throws at you. 

How much is enough?

A listener writes in with a question, how will he know when he has enough to retire? This is such an important question and one that we all struggle with, but it’s not only an external question of how much you have in the bank. You need to go through a process to determine the retirement that’s right for you. Here are some steps you can follow to help:

  1. Determine how much the retirement lifestyle you want will cost.
  2. Create a model retirement budget based on your needs, wants and wishes.
  3. Know what your resources are and strategize from there. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [1:06] Retirement is asymmetrical
  • [3:03] How do we balance near term market loss on one end with loss of purchasing power on the other end?
  • [10:28] Tips to protect yourself

LISTENER QUESTIONS SEGMENT

  • [13:44] BC is wondering whether he should pay off his mortgage
  • [16:50] How much is enough?
  • [24:02] Should gold be a part of your portfolio?

TODAY’S SMART SPRINT SEGMENT

  • [28:05] Revisit your premise that retirement is binary

Resources Mentioned In This Episode

BOOK - Stillness is the Key by Ryan Holiday

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Direct download: RAM309.mp3
Category:general -- posted at: 6:00am CDT

Market crashes are black swans. No, not those black swans, unpredictable events beyond what is normally expected with potentially severe consequences. You can probably name all of the market crashes in the past 100 years since they have had an impact on the way we invest. On this episode of Retirement Answer Man, we’re learning about market crashes and the lasting impact they can leave on our psyches. 

Market crashes can leave you with emotional scars

Even though market crashes are not as important to worry about in retirement as bear markets. The real problem with market crashes is the effects they leave behind. Whereas bear markets are long and drawn out, market crashes are sudden and devastating. Similar to a car crash, a market crash can leave emotional scars. We haven’t had many market crashes in recent history, but the ones we have had have left an imprint on our collective memory. 

Market crashes are certainly memorable

You may have seen the long-lasting effects of the 1929 market crash on your parents or grandparents. It changed the way people thought and behaved. The ‘Black Monday’ crash of 1987 drove the market down by 23% in one day. The NASDAQ fell from 5000 to 1000 during the bursting of the dot com bubble in 2001-2002. And of course, more recently, there was 2008 of which many of us still haven’t recovered. 

In retirement, market crashes can be even more traumatic

Does your retirement plan prepare you for a market crash? In retirement, we need to build a system to where a market crash won’t derail our lives. That system should give us enough emotional currency to help us understand that we will be okay no matter what. You don’t want to let a market crash derail your decision making. Does your financial plan account for market crashes?

How would I design a high school finance course?

One listener who is a high school teacher asks, how I would design a financial literacy course for high schoolers. This was a fun question to answer. I hope that financial literacy becomes a course that every high schooler can take. There are several fabulous resources out there that teens can enjoy and learn from. I don’t necessarily think that teaching stock market training is as important as building healthy financial habits. Find out which resources I recommend by listening to the Listener Questions segment of this episode.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN?

  • [2:20] What is a black swan?

HOT TOPIC SEGMENT

  • [3:30] Let’s talk about market crashes
  • [9:37] In retirement market crashes can be even more traumatic

LISTENER QUESTIONS SEGMENT

  • [11:10] A listener correction about Social Security and COLA
  • [13:08] A question about all Roth contributions
  • [16:20] How would Roger design a high school course?

SMART SPRINT SEGMENT

  • [21:40] Increase your savings rate (or lessen your spending rate) by 5%

Resources Mentioned In This Episode

BOOK - Atomic Habits by James Clear

BOOK - The Richest Man in Babylon by George Clason

BOOK - The Black Swan by Nassim Nicholas Taleb

Episode 306

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

 

Direct download: RAM308.mp3
Category:general -- posted at: 6:00am CDT

The thought of bear markets in retirement can be so scary, but they can be a bit less frightening if you have a plan. That’s why we’re taking this month to discuss market downturns and how they affect retirement plans. Every couple of years there will be a 10% correction in the market but this isn’t a bear market. A bear market is at least a 20% decline in the markets. The more you learn the more you’ll be prepared for any eventuality in retirement. Listen in to learn more about bear markets and how they could affect your retirement investments. 

What is a bear market? 

You may have heard the term bear market thrown around loosely, so before we dive in to discuss how they’ll affect you we need to define what a bear market really is. A bear market is a condition or period of time when securities fall 20% or more from recent highs. There is usually a lot of negative sentiment surrounding bear markets. The stock market is usually what we’re talking about when we discuss bear markets but we could be discussing any kind of securities. 

There are 2 types of bear markets that we usually talk about. The cyclical bear market is the more common type. This signifies a short term downturn. There is also a secular bear market which refers to a long-term timeframe of below-average returns. 

A history of bear markets

We have had 12 bear markets since 1945. The average drop was 33%. The most famous bear market was during the great depression and suffered an 86% decline over a 34 month period. The most recent bear market is still fresh for many of us. The 2008 crash lasted 17 months and saw a 56% decline in values. Unfortunately, bear markets don’t all perform the same since past performance is not an indicator of future results. But there are some things we can learn by looking back at history. Listen in to find out what you can learn by looking at bear markets throughout history. 

Bear markets and investing for retirement

The 4% rule is talked about all the time as a retirement strategy. It’s popular because it works very well in a spreadsheet. On this episode, I’ll compare how the 4% rule holds up throughout different bear markets throughout history. Listen in to learn how the 4% rule holds up through various historical models. You’ll learn what you can do to reduce your risk and lessen the impact of a bear market in retirement. 

When to dial back risk

Cathy has an audio question for me. She has enough assets to cover her retirement expenses already, so she wants to know when is the right time to dial back her risk. Obviously, this is a matter of personal opinion and risk tolerance. But there are some things you can consider to gauge how much is enough. First, you should consider if you really have enough. Enough for what? Think about how you could live your best life. Next, you should isolate the excess. During the listener questions segment, you’ll hear the full answer to Cathy’s question as well as 2 more listener questions. Discover whether you should pay off the house or do a Roth conversion and how to assess when it’s time to consider a long term care facility. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

WHAT DOES THAT MEAN SEGMENT

  • [2:20] What is a bear market?

PRACTICAL PLANNING SEGMENT

  • [4:20] A history of bear markets 
  • [8:02] what does this mean for you in retirement?
  • [15:50] what lessons can you learn from history?

THE LISTENER QUESTION SEGMENT

  • [17:41] When to dial back risk
  • [25:14] Pay off the house or do a Roth conversion?
  • [29:35] Bill asks how to assess when to enter a long-term care facility

TODAY’S SMART SPRINT SEGMENT

  • [32:33] What is your asset allocation?

Resources Mentioned In This Episode

Morning Star’s Instant X-Ray tool

WealthOfCommonSense.com

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM307.mp3
Category:general -- posted at: 6:00am CDT

The way you invest changes in retirement. Rather than being in the accumulation stage of life, now it’s time for the decumulation stage. But how do you flip that switch? How should your investment strategy change to reflect this new period in your life? During this monthlong series, we’ll be learning how to deal with bear markets and crashes in retirement. You may be thinking, why should I worry about bear markets when 2019 was so hot? Well, that is precisely why you should begin to consider how you would handle a bear market or a crash in retirement. Learn to be prepared for any eventuality by listening to this episode of Retirement Answer Man now. 

Are you trying to fit a square peg into a round hole?

Certain decisions are larger and more important than others. Retirement is one of those high stakes decisions. You’ve got a lot to learn if you are going to get it right. 

Investment strategy is typically built on the idea of accumulating wealth. That’s what you’ve been trying to do your whole life, right? But investing in retirement is quite different than any other kind of investing. When investing in retirement people often try to fit a square peg into a round hole. Listen in to learn why investing the same way you have for your entire adult life won’t work in retirement. 

5 ways that investing in retirement is different than any investing you’ve ever done

  1. The math changes. You have had plenty of time to invest which has allowed you to outperform by investing your money consistently. Unfortunately, retirement turns the tables. Now, instead of investing systematically, you are taking money out of the market systematically. 
  2. You have lost your superpower. You no longer have the ability to earn income. This can really affect you psychologically. When you were working you could simply earn your way out of many financial missteps. 
  3. Fear of missing out. Do you feel like you're missing out on the next best thing?
  4. Statistics are good at lying. We tend to think in statistics, but unfortunately, statistics aren’t very good for decision making.
  5. You only get one shot at this. Unlike the accumulation phase of life, there are no do-overs. 

The Secure Act passed!

In a rare act of unity Congress actually got something done! We’ve discussed what the Secure Act might mean for you in previous episodes, but now it has officially become law. This means that there are changes coming to a retirement near you. This bill has changed RMD’s, IRA limits, 401K’s, and done away with Stretch IRA’s. Find out what the Secure Act could mean for your retirement by listening to this episode of Retirement Answer Man.

What does sequence of return risk mean?

When researching retirement you may have heard the term sequence of return risk thrown around. But do you really know what that means? You may plan on getting 5% returns, but steady returns on investment rarely happen. You could get 0% one year and 12% the next. Find out how bad returns at the beginning of your retirement can impact the viability of your overall retirement plans. Make sure you’re signed up for 6-Shot Saturday to see plenty of examples of sequence of return risk. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

  • [4:28] 5 ways that investing in retirement is different than before 

PRACTICAL PLANNING SEGMENT

  • [18:05] Our words for the year
  • [23:06] The Secure Act passed!

LISTENER QUESTIONS

  • [27:48] How to maintain a balanced portfolio in a bear market

WHAT DOES THAT MEAN?

  • [34:43] Sequence of return risk

SMART SPRINT SEGMENT

  • [37:25] What is your word for the year?

Resources Mentioned In This Episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center



Direct download: RAM306.mp3
Category:general -- posted at: 6:00am CDT

1