Retirement Answer Man

July 2022
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Wed, 27 July 2022

Dealing with a bear market after the trials and tribulations of the past 3 years may have you feeling like you are being punched while you are down. Many of us are feeling burnt out and are wondering when the punches will ever end.

In this episode of Retirement Answer Man, we’ll discuss how we can deal with this issue. Kevin Lyles joins me in the Coach’s Corner to offer his perspective on dealing with burnout. I’ll also answer some fantastic listener questions that range from how to decumulate during a bear market to how to plan for retirement with a disengaged spouse. Don’t miss this episode especially if you feel like you might soon be down for the count.

It seems like the world keeps punching us while we’re down

The past 3 years have dealt us one blow after another. Covid took us all by surprise in March of 2020 and was followed quickly by the fastest bear market in history, a total economic shutdown, quarantines, work-life disruptions, and so much worry about our health and the state of the world.

2021 wasn’t much better with the political polarization of the election, Covid’s continuation, mask and vaccine questions, and more

2022 brought raging inflation, rising interest rates, war, and worldwide instability. And still, Covid rages on.

Our normal rhythm of life has been disrupted. Without that rhythm, it's hard to create stability to ground yourself. No wonder so many of us are feeling burned out. We have more than our fair share of dents in our armor.

Incremental changes are often the best course of action

It makes sense if you are feeling worn out, but how you respond to these stressors is important. It may seem like drastic action is the best action to take, but during challenging times, often incremental changes are the best course of action. Small changes can help you avoid major unforced errors.

You may want to take a cue from Muhammad Ali and take the punches while you are pinned against the ropes and conserve your energy until you have the opportunity to react.

Steps you can take to deal with burnout

If you are feeling the effects of the past 3 years weighing down on you conserve your energy and then see if you can take these steps to take action.

Acknowledge what you have been through. Give yourself some grace for all that you have suffered.
Bring past successes to mind. You have the capacity to get through hard things. Think about your past experiences to remind yourself of your resilience.
Reexamine those around you. Search for people who are doing what you want to do. You won’t be able to follow their exact path, but you could find ways to integrate some of their strategies into your life. Walk with the wise to become wise.
Surround yourself with support. Surround yourself with people who encourage you and are supportive of your journey. This includes your network of friends and acquaintances as well as the media you choose to consume.
Build the confidence to punch back. Take care of yourself and your energy. Simple self-care is important when you are getting pummeled. Exercise, practice gratitude, and help others. Self-care will help ground you when you are burned out.

Make sure to check out next month’s series on how to build a heroic retirement. Don’t forget to reply to the 6-Shot Saturday newsletter if you have any advice for Anna on planning retirement with a disengaged spouse.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

[1:30] We have all been taking a beating over the past few years
[7:23] Rhythms ground us
[11:25] Steps to take to deal with burnout

LISTENER QUESTIONS

[19:38] Should I reallocate during a bear market?
[28:50] How to decumulate during a bear market
[34:17] How to decide between taking a pension in a lump sum or monthly payments
[38:46] How to deal with a disengaged spouse

COACH’S CORNER WITH KEVIN LYLES

[46:21] Reframe your negative thoughts to find a positive outlook

TODAY’S SMART SPRINT SEGMENT

[55:14] Acknowledge how much you’ve been on the ropes this year

Resources Mentioned In This Episode

Boomer Benefits - check them out at no cost to you!

BOOK - The Expectation Effect by David Robson

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement by Roger Whitney

Roger’s Retirement Learning Center

Direct download: RAM445.mp3
Category:general -- posted at: 2:00am CDT

Wed, 20 July 2022

Will My Social Security Benefit Be Impacted by My Divorce?

Does navigating this bear market in retirement terrify you? If so, you are not alone. No one can (or should try to) predict what will happen next.

A financial advisor’s advice during bear markets is often ”stay the course,” however this can leave one feeling powerless. On this episode of The Retirement Answer Man, Tanya Nichols and I analyze what you can do if you are feeling terrified in a bear market, you’ll also learn how to navigate Social Security and an ex-spouse, and how to use retirement funds to self-insure long-term care. Press play to hear Tanya and I answer these listener questions and more.

What to do when you are terrified about your financial future

It is easy to be terrified about the future when every day you watch the value of your accounts drop precipitously across the board. Everywhere you look the markets are getting worse: the Nasdaq, the S&P 500, and even bonds are plummeting. The vision of the future that seemed so bright just months ago is no longer so optimistic. The words “I’m terrified” are not an overstatement when you are no longer working and you’re living on your life’s savings.

What you can do in a bear market besides “stay the course”

Tony is worried about the current market volatility and wants to do something besides “stay the course.” He understands that markets bounce back, but he also realizes that his time horizon may be shorter than it takes for the market to bounce back. He feels his dream retirement slipping further and further away.

Unfortunately, no one can predict what the future will bring, so it is important to try not to beat the system during a bear market. If you jump out of the market at the wrong time your accounts may never recover.

Instead of trying to calculate what will happen, it is important to build a framework to navigate these difficult financial situations. When you are confident in the framework you have built you’ll be able to think through challenges thoughtfully and avoid overreacting one way or the other.

Your framework can help you map out where you want to go and how to get there. If you are feeling terrified, now is a good time to revisit your plan of record. Is it feasible? Is it resilient? Making small iterations while sticking with your carefully laid out process will ensure that you make it through these unsettling times.

Doing something during a bear market provides a sense of agency

Creating an action item can help give you a sense of agency when you have so little control of the big picture. That action item could be something as small as canceling Netflix, checking your net worth statement, or even reassessing your risk tolerance. However you choose to take action, remember to consider how that action fits into your overall financial plan.

Using retirement funds to self-fund long-term care

Long-term care insurance is expensive which can make planning for a long-term care event challenging. As with any financial plan, it is important to plan for long-term care in an organized way. Rather than writing off long-term care insurance as too expensive, consider all the options. One resource you can use to explore the various possibilities is LTCI Partners.

Listen in to hear Tanya’s guidance on rebalancing, Social Security, and tax rates. Don’t miss the answers to all kinds of listener questions.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

[2:08] Feedback from my recent conversation with Amy Bloom
[6:48] Why I’m terrified

LISTENER QUESTIONS WITH TANYA NICHOLS

[15:40] Claiming Social Security based on an ex-spouse’s benefit
[17:24] What to do when you are terrified about the future of retirement
[26:18] A tax rate question
[28:21] What to do with a CD to pay for a parent’s assisted living
[30:19] On using retirement funds to self-fund long-term care
[37:17] Guidance on rebalancing

TODAY’S SMART SPRINT SEGMENT

[44:38] Review your net worth statement and think about what you can do

Resources Mentioned In This Episode

LTCI Partners - take the long-term care insurance questionnaire!

Align Financial

Behavior Gap with Carl Richards

Vanguard white paper on rebalancing

Episode 442 with Amy Bloom

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement by Roger Whitney

Roger’s Retirement Learning Center

Direct download: RAM444.mp3
Category:general -- posted at: 2:00am CDT

Wed, 13 July 2022

Should I Prepay the Mortgage on My Rental Property Before I Retire?

This month we are answering your listener questions. If you have a question that you would like answered on the show you can jump the line a bit and take the fast track by submitting an audio question. Head on over to RogerWhitney.com/AskRoger and hit record to submit your question.

Today I answer questions on a broad range of topics from paying off a mortgage on a rental property to determining the right balance for investment when there is a significant pension to whether to use a loan to pay for life while the market picks back up. Listen in to hear my thoughts on these questions so that you can not just rock retirement but rock life as well.

Update your net worth statement (even if it is painful to look at)

How often do you update your net worth statement? It is important to do so annually or every 6 months. I recommend this exercise because your net worth statement is a fantastic tool that shows you the financial impact of the decisions you make.

However, due to the recent market volatility, opening your monthly investment statements isn’t as much fun as it used to be. Regardless of this fact, it is still important to understand where you stand financially so that you can work to improve your financial decisions.

Should Tyler pay off his rental property mortgage?

Tyler is still young, has no debt besides his rental property, and is a great saver. He is wondering if he should pay off the mortgage on his rental property. The traditional wisdom is to keep the mortgage. Since he has a low-interest rate, mathematically it doesn’t make much sense to pay it off. But that doesn’t mean he shouldn’t pay it off.

These types of decisions are rarely about math. It is important to factor in personal feelings as well. Tyler needs to consider all the factors involved and come to a decision that is uniquely his own. There is no wrong answer to this question. What is most important to consider is which choice will give him peace of mind.

Should all of Adam’s investments be in equities since he’ll have a pension?

Adam will soon retire from the military with a $70,000 per year pension. He feels that the traditional 60-40 retirement portfolio won’t be aggressive enough since he has such a large pension. So, he is wondering if all his investments should be in equities.

Instead of building your portfolio first, start by creating a retirement plan of record to forecast what you need to live a great base life. Consider your income from social capital (Social Security, pension), financial capital (investments), and human capital (work).

Once you understand how much financial capital you will need, then you can build your pie cake which consists of an emergency fund and a secure income floor with 5 years of spending. Since you have 5 years of prefunded income, then you can invest as aggressively as you would like. This system is a fantastic way to help guide your spending in retirement.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT

[2:25] Opening your monthly statement isn’t as fun as it used to be

LISTENER QUESTIONS

[5:00] Should Tyler pay off his rental property mortgage?
[9:40] Should all of Adam’s investments be in equities since he’ll have a pension?
[16:50] Is there a method for deciding the best location to move to in retirement?
[23:44] Using a loan vs. cashing out on stocks during a bear market
[29:40] On reframing old age
[31:38] Pros of cons of timing retirement

TODAY’S SMART SPRINT SEGMENT

[37:00] Update your net worth statement

Resources Mentioned In This Episode

Boomer Benefits

Ted Lasso

Episode 412 - What Is a Retirement Plan of Record?

Episode 310 - Investing in Retirement: The Pie Cake

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement by Roger Whitney

Roger’s Retirement Learning Center

Direct download: RAM443.mp3
Category:general -- posted at: 2:00am CDT

Wed, 6 July 2022

Can I Count on Average Returns and Inflation for Retirement?

Many people are concerned about markets and inflation right now, but rather than focusing on this in today’s episode, I’ll answer your investment strategy questions. I choose to focus on strategy because if you can create a feasible, resilient retirement strategy, you’ll be able to weather all kinds of economic uncertainties.

Make sure to stick around until the end to hear an interesting interview that may challenge you to rethink your preconceived ideas. You won’t want to miss it if you are open to hearing different perspectives.

If you are looking for a fast pass to get your retirement question answered, record an audio question at RogerWhitney.com/askroger.

Unfortunately, you won’t win retirement

I have some bad news for you. You aren’t going to win retirement. There is no way you will figure everything out because there is no right answer.

Despite this fact, you will be okay. By intentionally working through your decisions you’ll be able to enjoy retirement to its fullest. Not everything will turn out the way you want, but if you work through the decision-making process with the spirit of a scientist, you’ll continually improve. When faced with the results of a poor decision, take time to dissect what went wrong so that you will be able to improve your decision-making the next time around.

Learning from your mistakes instead of stressing over them will help you improve your decision-making process so that you’ll achieve better results in the future.

How to account for uncertainty in retirement?

When creating a retirement plan, any room for error is scary. Even a 1% uncertainty can be unsettling. So what kind of market returns should one anticipate when using retirement calculators?

The problem with retirement calculators is that you can’t believe the calculator. None of the scenarios that the calculator proposes will actually happen. This makes long-term planning hard to predict.

It doesn’t matter how much you analyze your future spending, more accuracy will not improve precision.

You can’t know what your spending will be in 10, 20, or 30 years, which means that you can’t make life decisions based on an imagined future. Rather than trying to completely remove uncertainty, make reasonable assumptions to manage that uncertainty. Managing uncertainty is the essence of retirement planning.

A feasible, resilient plan will see you through retirement

Once you figure out the basis that you need to live a great life in retirement then you can organize a feasible plan around that great life. Give yourself optionality by making your plan resilient. With your feasible, resilient plan you can use long-term calculations to plan for the short term.

By creating a resilient plan you’ll create slack in the system so that you can change your mind as you change over time. Managing uncertainty instead of trying to eliminate it will give you agency and build confidence in your retirement plan.

Listen to the answers to all sorts of retirement strategy questions and make sure to listen until the end to hear the riveting interview with Amy Bloom.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

LISTENER QUESTIONS

[4:50] Should Jennifer count on an average market in retirement?
[13:52] Should I worry about poor investment returns or look for alternatives?
[23:42] What about using laddered ETFs rather than a bond ladder?
[25:07] On my language usage
[26:40] On using a 72T before age 59.5
[30:45] Should Dan continue to hold a life insurance policy if his house is paid off?
[35:03] How to leave behind your life story