Do you use index-based investments? There is a trend towards passive investing as people are stepping away from high fee managed funds. There are many positives in passive, index-based investments, but there are some downsides too. In this classic episode, we explore the downfalls that can come with index-based investments. If you are on the passive investing bandwagon you’ll want to discover what the negatives are to have all the information and make intelligent decisions. 

Should we all move to passive investing?

Passive based investing seems to be taking over the investment management world. In 2000 only 12% of stock market investment assets were passive based. In 2005 that number rose to 17%, in 2010 it rose again to 25%. In 2016 the percentage of passive based investments rose to 42%. Although the number of passive investments has still not caught up with active investments, the trend is heading that way. 

Over the past 10 years, the S&P 500 outperformed hedge funds. Active stock managers have failed to beat their indexes over the previous years and they continually lose money. Since they charge high fees and lose money does that mean we should all move to passive investing? 

Does index-based investing make the market less efficient or more efficient?

We know how efficient index-based investments can be. Taking out the middle man of stock managers streamlines the entire process and make investing much less expensive. But is it actually more efficient? Might passive investing be less efficient because if so much of every dollar is going into the same indices? The average buyer is buying without respect to any fundamentals of investing.

We also need to consider that all of this money is going to the same companies. The largest companies have the largest influence on the index. 20-30 companies influence the whole index. More and more money is flowing to fewer and fewer stocks as index-based investing gets bigger. 

What will happen when we enter a bear market?

We all know that markets rise and fall. After being in a bull market for so long we know that a bear market is sure to follow. But if all of our assets are funneled into fewer and fewer stocks what will happen when the bottom falls out? In bad markets investors sell. This will cause these large companies’ stocks that are tied to these investments to all even further. You’ll want to consider a solution I have for continuing small-fee, indexed based investing. Make sure to listen in to find out what you can do to protect yourself in a bear market and still passively invest. 

Should Tyler use future raises to pay down debt?

What should you do when you get a raise? How do you allocate that money to support your family? One listener is considering what to do with new income when he gets a raise. 

I encourage you to think about income from a net worth perspective. There are only 5 things you can do with money: spend it, give it away, pay down debt, save it, or invest it. It’s helpful to think of things in that order. Look at your net worth statement ot identify where the imbalances might be. Focus on what you can control because we will always be living in uncertain political times. Listen to this episode to hear more great listener questions.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

• [3:36] Should we all move to passive investing?
• [8:00] Does passive investing make the market less efficient or more efficient?
• [10:59] What will happen when we enter a bear market?
• [12:45] What are the solutions?

PRACTICAL PLANNING SEGMENT

• [16:32] Should Tyler use future raises to pay down debt?
• [22:45] What are red flags to look for when hiring a financial advisor?
• [32:22] Should Keith pay off mortgages or save for retirement?
• [34:33] Timothy has an RMD question

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

Are work and retirement mutually exclusive? Here at the Retirement Answer Man world headquarters, we don’t think so. On this classic (throwback?) episode, we revisit the idea of pretirement. Pretirement is the concept that you can work and retire at the same time. If you aren’t ready to hang up your hat and sit on the park bench of life, you’ll want to explore the concept of pretirement. Listen to this vintage episode of Retirement Answer Man to ponder the idea of work and retirement and discover if this is the right concept for you. 

Hard-at-work-October is progressing beautifully

Are you ready for the most amazing, comprehensive retirement course ever created? All of us here at Retirement Answer Man HQ are busy creating a life-changing course that will help you rock your retirement. The good news is, this retirement course will be an exclusive benefit for everyone that has joined the Rock Retirement Club. If you’re not a member yet, make sure to join before November 1 to lock in your low lifetime price. 

Are you one of the millions of Americans in a sad state of retirement readiness?

Pick up any news article on retirement and you are bound to read about the fact that Americans don’t save or invest enough to support themselves over the course of retirement. We are healthier and living longer than ever before and our savings numbers just don’t work. But what is the right amount of money to have saved anyway? Whether you are worth $50,000, $500,000, or $5 million there will still be the feeling that you just don’t have enough. 

Do you think of retirement as a light switch between work and retirement?

According to a recent survey among Retirement Answer Man listeners, freedom is the number one aspect to retirement that you all look forward to. Be strategic about how to put a plan in place to slow down your working pace. Pretirement is the strategic phase in which you still earn income (maybe less than before) but you gain the time freedom that most seek from retirement. Rather than seeing retirement as an off-switch to working, pretirement is more like a dimmer switch. 

What are some benefits of pretirement?

• It takes the pressure off of you to save everything you can
• It takes away the worry about the economy
• At the beginning of your retirement, your skills are still relevant and you still have a network of work contacts
• Your longevity risk and market risk are the greatest at the beginning of retirement. Pretirement eases these risks
• The retirement transition is a period of significant change, pretirement can ease you into that change 
• You don’t have to dip into your savings so soon so your investments can continue to grow
• You can delay taking Social Security which increases your benefits
• You may experience a reduction in healthcare costs

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

• [6:46] Most Americans feel that they are not retirement ready

PRACTICAL PLANNING SEGMENT

• [9:15] What excites you most about retirement?
• [16:09] Why is pretirement important?
• [19:42] What are the benefits of pretirement?
• [27:22] What are some qualitative benefits of pretirement?
• [33:28] Tips to start planning pretirement
• [36:48] Some examples of pretirement work

TODAY’S SMART SPRINT SEGMENT

• [38:09] Think about what you might want to do for pretirement work

THE HAPPY LAB SEGMENT

• [38:58] You have a choice about how you respond to things

Resources Mentioned In This Episode

BOOK - The 100 Year Life by Andrew Scott and Lynda Gratton

BOOK - Built to Sell by John Warrillow

Couple Money Podcast

Stacking Benjamins

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

In all of your planning, have you planned for happiness in retirement? Many people just look at the facts and figures in their retirement and they don’t stop to think about how they will create their own happiness in retirement. On this classic episode of Retirement Answer Man, we revisit an oldie but goodie. Listen to this episode to see if you can discover why this was the one that made Nichole decide once and for all that she wanted to come work with me!

Are you ready for the most epic retirement course ever?

During this hard at work October the Retirement Answer Man team is busy creating The Most Comprehensive Retirement Course EVER! (Yes it’s that great that it needs to be capitalized!) Our Rock Retirement Course will be the most comprehensive retirement course in the history of retirement courses. This course will be your roadmap for creating a rockin’ retirement. Also, don’t forget that we are in the last few weeks for you to take advantage of the low price of the Rock Retirement Club. Starting November 1 the price for the Rock Retirement Club goes up, so sign up today to become a member of the most awesome group on the internet. 

Why planning for happiness in retirement is even more important than financial planning

When you sit down and plan for retirement most people consider the normal questions. How much do I have? How will I disperse my money? This is what we think of when planning for retirement. Most people don’t stop to think how will I be happy? Retirement is a time of great change in your life. It is much like leaving college to start your career. The trajectory of your life will completely change. So this makes it a great time to consider who do you want to be for the rest of your life? Once you know that then you can think about how you are going to build the life that you want to build. Discover how to map out a meaningful life in retirement on this episode of Retirement Answer Man.

Why you need a life of congruence

Congruence means the state achieved by coming together. It is a state of agreement. If you say you value A, B, and C are you living your life that is congruent with your values? In my younger years, my actual life did not reflect my values at all. I had a great job, wife, and kids. But I was often a jerk to those I loved the most. I had to sit down and define my values before I could begin to live a life that was congruent with them. Have you sat down to define the values in your life? Now is the time to consider your core values so that you can live a life that aligns with your values and find real happiness. 

How I define my top 10 values

1. God - I have a strong relationship with God and talk to him every day.
2. Quality relationships - I value deep friendships. I love listening and going deeper with my friendships rather than just brushing the surface.
3. Adventure - I love being open to new experiences, ideas, and emotions. I always strive to experience new things.
4. Service - I believe I was put on earth to help change the concept of retirement. This is my service to others.
5. Continuous improvement - I don't want to have a fixed mindset, a growth mindset helps me continuously improve as a person..
6. Fitness - Staying fit helps me not just physically but mentally. 
7. Laughter - Although I am intense, I love to laugh. I am more engaged and optimistic when I laugh more. 
8. Positive attitude - A positive attitude is empowering. It can help create an incredible life.
9. Freedom - I value living life on my own terms.
10. Bravery - Bravery gives me the strength to live out my values even when it is easier not to. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

• [3:34] Who do you want to be for the rest of your life?

THE HAPPY LAB SEGMENT

• [13:39] What happens when you live a life congruent with your values? 

PRACTICAL PLANNING SEGMENT

• [18:24] How I brought my life into alignment with my personal values
• [20:02] My 10 personal values

TODAY’S SMART SPRINT SEGMENT

• [34:15] Identify your personal values

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

Have you ever heard of the rising equity glidepath? If not, you’ll definitely want to listen in to this interview with Michael Kitces where he debunks a common retirement myth. Michael Kitces is the man behind the Nerd’s Eye View, a financial planning blog that seeks to improve your financial situation no matter where you are in life. Michael Kitces shares with me on this Retirement Answer Man classic episode recent research which debunks common retirement planning advice. You’ll definitely want to listen to this interview and consider whether his advice lines up with your own retirement asset allocation strategy.

Hard at work October

During this whole month, we are hard at work here at the Retirement Answer Man world headquarters. We are busy planning for the next year as well as working on the Rock Retirement Course. This will be the most epic course on retirement and you won’t want to miss it. We are also giving our listeners a heads up. The price for the Rock Retirement Club goes up November 1. So if you have been thinking about joining head on over to Rock Retirement Club and join now to ensure that you get your membership costs locked in at the current price. 

Do you follow the conventional wisdom regarding asset allocation?

During the withdrawal stage in life, people want to take less risk with their money. 100 minus your age is what you should have in equities. Right? That is the traditional asset allocation benchmark. As you age the amount that you own in stocks should decline, or so goes conventional wisdom. Really what this means, is that you should own your age in bonds and less in equities. This is one of those general rules of thumb that sounds great but then when you break it down it doesn’t hold water. 

Is there ever a good time in retirement for the market to head south?

The first 5-10 years of retirement are crucial to your future financial security. Markets go up and down, so your retirement savings will go one of 2 ways. The market will go down then up or up then down. The order in which the markets go up and down can drastically change your financial situation in retirement. The problem that crops up is that you take distributions out as you proceed through retirement. So if you get bad returns for a decade and then good returns and you took out too much money during the negative return years then you will run into trouble. You are much better off if you have a good market at the beginning of retirement and then it goes down toward the end of your lifespan. 

What is the rising equity glidepath?

Using the traditional asset allocation advice if you have bad returns early on in retirement you will feel a double whammy when the markets finally bounce back. Instead of using conventional asset allocation wisdom, what happens when you flip it on its head? What if you start your asset allocation at a more conservative level and then work your way up as you age? Listen to Michael Kitces explain an alternative to the traditional advice as he describes the rising equity glidepath and how it can help you achieve financial security in retirement. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

• [3:55] How will you allocate your investment assets in retirement?
• [8:05] You will be much better off if you have a good market at the beginning of retirement 
• [16:34] What is an equity glidepath?
• [20:39] The rising equity glidepath is a risk minimization strategy

Resources Mentioned In This Episode

Nerd’s Eye View

Should Equity Exposure Decrease in Retirement?

What Returns Are Safe Withdrawal Rates Really Based On?

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center

Your net worth statement is the first building block for creating a great life in retirement. On this episode of Retirement Answer Man, we revisit a classic episode to reiterate the importance of net worth statements. You’ll learn the importance of having a net worth statement, how to create a net worth statement and how to determine your own net worth. Listen to this episode to find out why having a net worth statement is the foundation for creating your ideal retirement.

Have you joined the Rock Retirement Club yet?

If you have been thinking of joining the RRC now’s the time to act. Not only are we putting together the Rock Retirement Course which will be the most comprehensive course on retirement ever created, but starting November 1 the membership price will go up. The added benefit of joining now is that you can join us on November 2 for the Retirement Rodeo Round-Up. We have over 30 people joining us for fellowship and retirement education. Join before November 1 to lock in your membership price for a lifetime.

What exactly is a net worth statement?

A net worth statement is basically a statement of your financial health on one simple page. This document can provide you with a brief look at your financial situation any time you need it. You can easily see where you stand by tracking your assets and expenses. With your net worth statement in hand, you can get a real look at where you stand on achieving your retirement goals. Are you ready to learn how to create your own net worth statement? Listen in to find out how. 

Creating your own net worth statement is easy

To create a net worth statement you will list all the things you own that have value as your assets. You can further categorize those assets by whether they are tax-free, tax-deferred, etc. Then you will include your liabilities. Subtract your debt from your assets to find your net worth. With a net worth statement, your financial well-being is right there at your fingertips. Use it as a dashboard to examine your financial health. Check out the ‘Build Your Net Worth Statement’ worksheet in the Retirement Learning Center to help you get started on building your own net worth statement. 

How do you use a net worth statement to help you plan your retirement? 

Your net worth statement is a snapshot in time with which you can measure your progress. This document is your starting place. Once you understand your net worth you can then begin to plan how to rock your ideal retirement. You’ll understand just how far you have to go to achieve your financial goals. Your net worth statement won’t lie to you. It cuts through your best intentions and shows you where your values truly lie. Use your net worth statement to get intentional about your financial decisions.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

HOT TOPIC SEGMENT

• [7:20] What exactly is net worth? 
• [11:55] How can you use your net worth statement to plan retirement?

PRACTICAL PLANNING SEGMENT

• [17:40] What does Kim’s net worth statement look like?

THE HAPPY LAB SEGMENT

• [49:15] Be careful how you handle stress

TODAY’S SMART SPRINT SEGMENT

• [47:10] Make a note of where you keep your important documents

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