Retirement Answer Man

Welcome back to the Retirement Answer Man show. This month we have stepped away from our typical monthly themes, and instead, we are tackling your listener questions regarding retirement. Make sure to listen in July as we discuss retirement withdrawal strategies and join Tanya Nichols and me in August to discuss women in retirement. 

Check out this episode to hear how you can create your retirement lifestyle framework, how to source your retirement paycheck, and whether it is best to keep the cash or pay down the mortgage. 

Finding a retirement lifestyle framework

A big part of beginning your retirement planning is finding a retirement lifestyle framework that you agree with. Many are drawn to the simplicity of the 4% withdrawal rule, but it doesn’t take into account your retirement lifestyle. 

One member of the RRC explained that he was looking to maximize his lifestyle given his assets. This is what we are all looking to do, but it’s not as easy as you think. Many people think that you can simply come up with a base number that you can spend each year, but this is based on the assumption that your lifestyle will not change over time. 

How to design your retirement lifestyle framework

Without a framework in place, people tend to grab onto any random retirement planning strategy and that will drive all of their retirement decision-making. 

Instead of asking yourself, how much do I need? A better way to design your retirement framework is to ask yourself how much do I need for this lifestyle?

To define this you’ll need to ask yourself more questions. Where do you want to live? Define the location where you will be the happiest. What activities do you want to do in retirement?

Asking yourself these questions will help you to create a plan of record. This is a more organized way of considering your life after work. You won’t get it perfect, but it will put you in a much better position to be able to iterate and change your course as needed.

How to source your retirement paycheck 

One listener wants to know how to source her retirement paycheck. Traditional retirement planning dictates that you drain your after-tax assets first, then move to Roth, and lastly, tax-deferred assets. 

I don’t think this is a very efficient way to source your paycheck. First, determine how much you need from your financial assets over the next 5-10 years. Then, estimate what your required minimum distributions will be. (Check out the 6-Shot Saturday newsletter for a handy RMD calculator. Next, look at your 5-year income estimate. What kind of income will you have each year? You’ll always want to consider multi-year tax planning in retirement.

Keep the cash or pay down the mortgage?

Another listener wonders whether he should keep the $100,000 in cash that he has or should he pay down his mortgage. It is common to think of these decisions by themselves, however, you should build your retirement framework first. This will help you create a feasible plan for retirement. After creating your retirement framework, then you can create a what-if scenario. Creating the process first will allow you to be able to see the question from a big picture perspective. Listen in to hear why you may not want to zap all of your liquidity. 

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

RANDOM THOUGHTS

  • [2:30] Find a retirement lifestyle framework that you agree with
  • [8:02] Questions to ask yourself

LISTENER QUESTIONS

  • [12:33] Sourcing your retirement paycheck
  • [16:27] Keep the cash or pay down the mortgage?
  • [21:22] Is 3% average return on investment a good conservative average?

TODAY’S SMART SPRINT SEGMENT

  • [23:45] Go take a purposeful walk to think about what you want out of life over the next 3-5 years

Resources Mentioned In This Episode

Cal Newport

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: RAM383.mp3
Category:general -- posted at: 5:00am CST

You’ve got retirement questions; I’ve got answers. This month I’m tackling your listener questions. I’m also taking time to reflect on random thoughts I have about the retirement scene. Join me for this laid-back month with no set theme to learn the answers to questions from listeners like you. 

Random thoughts on the retirement scene

  • Retirement planning is not about optimizing returns. It is about securing outcomes so that you can feel confident that you can live the life you truly want.
  • You can accomplish anything if you can just get over yourself. 
  • Life happens in the inefficient moments. 
  • Building long-lasting relationships requires making deposits along the way. 
  • “If you don’t change direction you may end up where you are heading.” -- Lao Tzu
  • There are quality, highly competent, and collaborative financial advisors out there. The industry is changing away from a salesy, male-centric attitude to becoming a true profession.
  • Life changes, so it is important to stay agile. Make sure to adjust your plan accordingly so that you can adapt.

Should you get more conservative with your portfolio as you enter retirement?

Conventional wisdom dictates that as you approach retirement you should become more conservative with your investments. In investment speak, this means having a bigger portion of your asset allocation in bonds or fixed income than in equities. 

However, not every person needs to follow traditional wisdom. Rather than consider your retirement portfolio from an asset allocation standpoint, consider the time frame. In retirement planning, your time frame matters. Think about how to match your assets to your retirement liabilities or yearly expenditures.

You’ll want to be more conservative with the money you need in the short term but you can let your long-term assets run wild. Listen in to hear how a bucket or pie-cake strategy can help you plan your asset allocation in retirement. 

How to calculate pension on a net worth statement in retirement

Getting a good overall idea of your financial assets is an important part of the retirement planning process. To help you do so, you’ll want to create a net worth statement so that you can better understand where you stand financially. One recent listener asked where his pension should go on his net worth statement. The answer is nowhere. 

Since your net worth statement is a list of your assets and liabilities, a pension would not belong. A pension is neither an asset nor a liability, instead, it can be described as social capital. The 3 sources of income in retirement are social capital, human capital, and financial capital. A net worth statement only takes into account financial capital.

Rather than include your social capital on a net worth statement, you can instead put it on a household balance sheet where it can be classified as the net present value of cash flow. You can download a household balance sheet by clicking on the resources tab at RogerWhitney.com. While you’re there check out the other resources we have available to help you get started on your retirement plan.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

RANDOM THOUGHTS

  • [2:46] Retirement planning is about securing outcomes
  • [6:22] Have you had a bad experience with a financial advisor?
  • [9:07] If you don’t change direction you may end up where you are heading

Q&A SEGMENT

  • [10:26] A withdrawal rates and returns question 
  • [21:20] Should you get more conservative with investments in retirement?
  • [27:22] How to calculate pension on a net worth statement in retirement

TODAY’S SMART SPRINT SEGMENT

  • [32:50] Go do something fun!

Resources Mentioned In This Episode

Tanya Nichols

Andy Panko

Taylor Schulte

Benjamin Brandt

PODCAST - Wild at HeartSummer Recovery Plan 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: RAM382.mp3
Category:general -- posted at: 5:00am CST

This month on the Retirement Answer Man show, we are tackling your listener questions. Although we don't have a monthly theme like we usually do, I am also sharing my random thoughts from the retirement scene. If you miss the monthly theme, you can look forward to July and August. 

In July we’ll be discussing your withdrawal strategy for retirement and August will be a month dedicated to women in retirement. Since I can’t speak to being a woman, Tanya Nichols will join me then to share her wisdom. Make sure to join us for those month-long topics. 

If you have been enjoying the show, please head over to your favorite podcast app and leave a review!

Random thoughts on retirement

  • Real financial planning takes time and isn’t scalable.
  • Should is a dangerous word. Be careful how you use it. 
  • Generating income to live off of is not a good retirement strategy. Rather than thinking about generating income in retirement, think about total return instead. 
  • In retirement, taxes are all about timing. Limit your taxes by choosing whether to pay them sooner or later.
  • You can't actually control your emotions, desires, fears. However, you have the choice of whether to nurture them or let them drift by. 

What about rental properties in retirement? 

Where do rental properties fit into a retirement plan? Rental properties can be fantastic for generating income, but they can also be a lot of work. Of the many people that have rental properties, some choose to continue renting their properties well into retirement. Whether or not you choose to continue as a landlord in retirement should be based on whether you enjoy the work. If you opt to continue having rentals in retirement, they will have their place in your retirement plan just like any other business. 

Keep the books in order

Just like any business, rentals have revenues and expenses. Make sure to keep a separate set of books on your rentals to understand their cash flow. Keeping the books in order will help you understand the income they generate and how the rental properties fit into your net worth statement. This practice will help you explore how lucrative the properties are and whether you would like to keep them as a way to generate income in retirement. When you understand where you stand with your rental properties you can be more strategic in building your retirement plan. 

Incorporating rental properties into your retirement plan

With the books and net worth statement in order, you can start building your retirement plan. Consider how your retirement plan would look with the rental properties in place and also what it would look like if you sold them.

When creating your retirement plan, you’ll want to consider your social capital, human capital, and financial capital. Since the retirement properties are a business that generates income they are considered human capital.

This type of planning will give you a framework to consider whether to sell the properties or keep them. You should also consider your experience.

Do you enjoy keeping rentals or is it work that you dread? What kind of experience have you had with rental properties? Do you plan on keeping your rental properties in retirement?

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

RANDOM THOUGHTS

  • [2:20] Real financial planning isn’t scalable

LISTENER QUESTIONS

  • [6:52] What about rental properties in retirement?
  • [12:39] Is it better to buy slower growth dividend stocks now or in retirement?
  • [16:05] What to do with RMDs that are more than you need?
  • [21:05] If you have twice the assets, why pay an advisor twice as much?

TODAY’S SMART SPRINT SEGMENT

  • [33:30] Estimate what your RMDs will be with our RMD calculator included in the 6-Shot Saturday newsletter

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: RAM381.mp3
Category:general -- posted at: 5:00am CST

Over the next several episodes I’ll be answering your questions. Rather than having a central topic for the month, I am dedicating each episode to tackling your burning retirement queries. You can head on over to RogerWhitney.com/AskRoger to leave a voicemail or you can send an email. Enjoy hearing my response to questions like where do I start and how do I max out an HSA in the same year that I retire? Press play to discover the answers. 

5 tips from the retirement scene 

Consistency is key. Do you feel like you jump around from one process to another in your retirement planning? Whether you are changing your financial planning or investment management process, if there is no consistency in your decision making it’s like you have no process at all. It’s one thing to tweak your process a bit to adapt and stay agile, but don’t change the process completely. 

Trying to estimate future market returns is a fool’s game. It’s impossible to tell what future returns will bring. There is no reason to try and guess what they might be. Instead of trying to predict the market, focus your time and energy on the things you can control. 

Retirement planning shouldn’t revolve around your investments. Instead, your life should be at the center of your retirement planning. 

Learn to say no. It’s okay to say that doesn’t work for me. Don’t allow many different things to put demands on your time. 

Don’t depend on the 4% rule. People tend to focus on the 4% rule since it estimates a sustainable withdrawal rate, but if you base your retirement planning on this rule you’ll likely end up with way more money than you had expected. Not only that, but you’ll miss out on life experiences in the process. 

Where to start?

One listener recently started listening to the show and was wondering where she should start first. It’s hard to say since that all depends on what you’re looking for. One way to begin is to listen to the Retirement Plan Live series. These case studies can help get you thinking about what you should do first in your retirement planning. Do you have any suggestions on where she should begin? Send me an email so I can let everyone know where they should begin listening. 

Learn from my cautionary tale

I have shared the tale of the RV that I purchased with my brother-in-law several years ago on past episodes and now I can finally bring that anecdote to a conclusion. I share my experience with you as a cautionary tale of keeping something around simply because I wasn’t in urgent need to sell it. For 7 years I have been paying to store this RV and not once has it been used. Listen to my story to learn how to recognize the changing seasons of life so that you don’t end up spending $6300 to store something you’ll never use again.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

RANDOM THOUGHTS

  • [3:20] Random thoughts on the retirement scene
  • [9:04] Learn to say no

LISTENER QUESTIONS 

  • [12:34] What do I do first?
  • [16:10] Steve is excited and scared at the same time
  • [17:17] HSA plans in the year of retirement

LESSONS LEARNED

  • [22:20] I just got rid of the RV that I bought 7 years ago
  • [28:25] Lessons learned from my cautionary tale

TODAY’S SMART SPRINT SEGMENT

  • [32:37] Identify one thing to clean out this week

Resources Mentioned In This Episode

Episode 259 - How to Live Without a Paycheck 

January’s Retirement Plan Live episodes start here 

BOOK - Basic Economics by Thomas Sowell 

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: RAM380.mp3
Category:general -- posted at: 5:00am CST

1