Retirement Spending Strategies: Mastering Distribution with Confidence

June 20, 2024

In this episode, Matt Blocki and Chris Pavcic explore an often-overlooked aspect of retirement planning: spending your savings with confidence. As many retirees struggle with the transition from saving to spending, they discuss various strategic approaches to managing retirement distributions effectively.
They dig into common retirement withdrawal strategies, such as the 4% rule, systematic withdrawals, the bucket approach, and the guardrails approach, which Chris and Matt particularly advocate for. They discuss the psychological hurdles that the best savers face when it comes time to spend their hard-earned retirement funds and the paradox that these excellent savers are often reluctant spenders.
Matt and Chris also unpack the reasons behind these challenges, emphasizing the psychological shift required to move from accumulation to distribution. They provide insights into how they guide clients through this transition, focusing not just on the financial aspects but also on the emotional and psychological readiness to enjoy the benefits of many years in the work force.
The episode will help listeners gain a deeper understanding of why certain strategies, like annuities, may not always be advisable, and how a tailored approach that includes dynamic guardrails can offer both security and flexibility and a stress-free retirement.

Episode Transcript

Welcome, everyone, to this week’s Finlyt by EWA podcast. Excited to be joined by Chris Pavcic. Today we’re going to talk about how to give yourself permission to spend as a retiree who is looking to develop a retirement distribution strategy, we’re going to talk about. If you just google this, several rules come up. There’s the 4% rule, there’s the systematic withdrawal rule. There’s the bucket approach. There’s something called the guardrails approach we’re a big fan of.

 

So there’s many aspects of this. Some people say, just put all your money into annuity so you never have to. What’s that thing called? Sleep well at night philosophy. I see you’re grinning there, Chris. Obviously not something we believe in, but so today we want to give one what our perspective. Cause we’ve helped many clients transition into retirement and now are managing the retirement distribution strategy. So I want to give some perspective on the struggles, not from a money perspective, but really from the psychology perspective, and then how we’ve worked to get around this, where encouraging clients to spend versus just, you know, keep doing what they know, which is accumulating money. So, Chris, let’s first talk about the issue, the common issue that we see. So the worst, I love the phrase, the best savers are often the worst vendors.

 

Can you expand on that for us?

 

Yeah, I think by nature, a lot of the people that we work with, they’re good at saving. And that’s a habit that you build over many years. You gotta be disciplined to keep saving each year, and that’s a habit that you build. So whenever you get to retirement, you’re not working anymore, so you’re no longer saving. And then to take it a step further, now you have to withdraw from that savings. Really uncomfortable for a lot of people is what we see.

 

Absolutely. And so it’s two habits you’re breaking. You’re breaking the habit of, if you’re someone that’s like a successful physician or executive, so you’ve been saving your whole life, you go to retire, you have to break that first habit, which is catastrophic, like mentally. And then the second thing is you have to stop looking@your.net worth grow and now start withdrawing from it, which is a second, we found almost impossible thing to do and causes a lot of strife between spouses, causes a lot of stress. When you’ve worked hard your whole life to enjoy a comfortable retirement, now, don’t necessarily want to pass it to your kids because you helped them through college and post grad and all these things, and now they’re doing great. But it’s a huge paradox we see. And when you google this, there’s so many opinions out there.

 

So let’s first start with the 4% withdrawal rate. So just, Chris, give us an example. Someone’s got $3 million entering retirement. Historically, what is a 4% withdrawal rate meant? And then why is it 4% if the market’s doing six, seven, or 8%, etcetera, just set the stage for us.

 

So if somebody has $3 million, that rule would tell us they could safely take out 120 a year from their portfolio. This is just an industry, what’s almost become an industry benchmark with distribution planning. And like you said, if the market’s doing five, six, or 7%, the thought is what you’re taking out isn’t enough to, what the portfolio is generating is enough to sustain what you’re taking out, plus maintain your principal and adjust for inflation.

 

So just to use that example, if you’re 3 million, if you got $3 million in a portfolio, so let’s say Social Security is probably paying you and your spouse combined. If you’re high income earners, let’s say you’ve been maxed out in your Social Security, probably net of taxes and Medicare surcharges, is you’re probably pocketing like five grand a month, right? So that’s assuming taxes are being withheld. That’s assuming Medicare and the Irma is getting withheld as well. So five grand a month’s coming in. So the 4% safe withdrawal rate would say, okay, I’ve got 3 million, I can take out 120, which would be ten a month after a blended tax rate. If that’s an IRA, you know, pre tax IRA, Roth IRA, and taxable account, we’re managing that properly.

 

That’s probably 8500 a month, of net of taxes, because we can take some basis out, some tax free money out, and then obviously show income, depending on tax brackets. So, all in all, this person’s collecting 13,500 a month. But the whole idea behind the 4% is, you know what? We need that portfolio to grow because we want that 4% to be off of a little bit of a higher number in the future. So, as our groceries and our bills start getting more and more expensive throughout retirement, we can adjust for that. Right now, some problems we’ve seen with this. Now, this was built by someone named William Bingen. That’s pronouncing his name right. But to give him the credit, that essentially tested this in the early 1990s, based upon historical market data at that time, it really.

 

It showed that over certain periods of time, based upon life expectancy at the time that this worked. Now, what’s happened since then is there’s been some periods where we call them the really smart, like, nerdy people, which we like to think we’re nerds as well. There’s been periods over, longer periods because people are living longer. This was initially built off of certain type of portfolio with some fixed income. And now interest rates have dropped. Not recently, but if you look back a couple years, and so there have been some periods where this hasn’t worked, which has caused some people to say, well, what’s a safe withdrawal rate? Is it 3%? Is it 3.2%? And then you have tv personalities like Dave Ramsey, who is telling people they can withdraw 12% a year.

 

And there’s, like, now there’s, like, social media keyboard warriors going after each other over, you know, what’s right. Is it 3.2? Is it four? Is it twelve? And just to address the twelve real quick, I mean, like, literally, you could take Dave Ramsey’s recommended portfolio, I think it’s four funds. And you run that over a couple simulations, and you can see, like, sometimes within, like, 15 years, if you do that, you’re totally out of money, depending. So that’s. That’s absolutely. It’s not. I can’t even give him the credit. That’s not advice. That’s just him, you know, get graining his tv audience. It’s. It’s not advice. It’s just him, you know, vomiting information out that’s not accurate. So, just to address, don’t take 12% out if you’re.

 

If you’re a retiree planning on, but do so, Chris, if you’ve got a good financial plan in place, is 3.2 a good number now, or is 4% a good number? What do we believe?

 

I think in some cases it could be, but we take a dynamic approach, something called the guardrails strategy. So, essentially set a lower and an upper limit on those distributions. And then based on what the market’s doing or what the portfolio is doing, do we need to adjust this up or down?

 

Absolutely. What I believe is a financial plan is really dynamic. And every. If you look at how many times your life has changed during your working years, you probably moved a couple times, changed jobs a couple times. The plan’s got to change. And in retirement, it’s no different. Just because you’re retired doesn’t mean. Okay, here’s our plan. It’s never going to change. It’s going to change the market. Go up 20%. We got to reevaluate. Unless your goal is, a, leave a ton of money to your kids, or b, become the richest person in the graveyard in history, like, let’s adjust that. Like, let’s figure out philosophically how to spend more money. So, a guardrail approach is something. It’s a constant calibration. And so in normal years, like, we can take out 6%. So if you’ve.

 

If you got $3 million, we’re saying, we’re encouraging you to take out 15 a month. But separate from that, we’re saying, let’s have a complete fail safe of years worth of safe assets that could be cash, that could be treasuries, that could be, you know, short term duration bonds. And if we have to sell out of them, there’s, you know, not interest rate risk of us selling at a loss. That could be cash inside of life insurance. And we found if you have that separate from your equity portfolio, six, even 7% is completely safe. If you’re able to skip one out of every seven years, let’s say, because the equity markets go down, we’re able to skip that and pull from our safe money to let that recover. Well, now we have a six or 7% safe withdrawal rate, which we could.

 

We’ve tested this through 2020, which includes, essentially a 50% drop in the SB 500 during the tech bust of 2001, includes the global financial crisis, of the housing crisis of 2008. This includes the brexit. This includes trade wars. This includes the COVID drop of. So if you look at. I mean, that 20 years, there’s so many big drops. And if you have that safety net where there was five years there, you want to skip over that 20. You’re like, you can take out 7% a year. If you’re asset allocated and diversified, and you’re able to skip those five years, you still. Let’s say you start with a million or 3 million, you take out 210 a year. Except those five years. What? After the 20 years, you still have your entire principle in place. Yeah.

 

Now we use 6%, obviously, to be conservative and not go set. But just to prove a point, like you could, you can stress test this during. So essentially our approach is dynamic. It’s calibrated. We want to make sure that you have all risk recovered. And the risk, obviously the number one risk is you run out of money. That’s never an option. We’re going to make sure it’s calibrated to. That’s never. We’re not going to be the captain of a sinking ship ever. But the second risk is we don’t want you to have regret when you’re 90, looking back at 60 and say, why the heck didn’t you tell me to spend my money? I don’t want to leave money to kids or the government. Like, why didn’t I take those trips? Or do this bucket list item? So that’s also a failure.

 

And then being stressed out of your mind over the 30 years every year is also a failure. So we’re really balancing those three aspects of let’s make sure you’re always financially secure, healthcare could come, a certain inflation could become a concern, let’s make sure there’s no regrets in the future, and let’s make sure we remove stress. And so to do those things, I don’t think there’s a one size fits all, but having a guardrail system, having a safety net to back up those bad years, and then having a consistent accountability system of conversation to make sure that your life is supporting your life by design can be crucial to make sure that you reach all those goals.

 

Right.

 

I’m sorry.

 

I think that last part’s the hardest part. Honestly, what you just said about the conversations to. I feel like with a lot of our retiree meetings, and correct me if I’m wrong, I think a lot of times we’re trying to politely say that you could spend more and get pushback on that. Yeah, I think all the stuff with having the safe backup, this five, seven years worth, that’s great. I think all of that’s kind of like the table stakes. And then I think the tough parts, like managing the decision fatigue on people, it’s so uncomfortable psychologically to pull from the portfolio that I think that’s the tough part, is guiding people to actually do something like, you know, buy it, like buy a house or a car, whatever it is. I think that’s kind of the tough part of navigating it.

 

But what do you think?

 

Yeah, no question. No question. And then there’s the. There’s the whole conversation around legacy. So typically we see. So let’s just go through it like an example. Like we. I have a sample client here who, you know, they’ve got a net worth of about 5 million and they’re spending about ten a month. Social Security is paying them half of that. So, you know, off of 5 million, like, they could easily pull, based upon this, like, gross 2025 a month, what are they pulling? They’re pulling five a month. Right. And so this one spouse wants to spend more. One spouse is like, loves, like, seeing it grow. Neither of them really has a goal to leave money to kids or charity.

 

So this is a real life scenario where it’s like, okay, you could literally triple or quadruple your safe spending rate, but why are we not. And so every year we get them a little bit, get them to convince them to spend a little bit more, but if they continue the current track, like, their net worth is going to be over 10 million when they pass. And that’s assuming, like, we’ve also discounted market returns and saying, okay, here’s what historically asset allocation is done, we’ve taken that down by a third and you still have over 10 million. So if we look at what’s called a Monte Carlo analysis, and this is the other important thing about financial planning is based upon what the market does in your early years.

 

So if you look at all multiple, like thousands of simulations of their plan, specifically that small of a withdrawal rate based upon their net worth, they have 100% probability of success. Based upon history, the average scenario is they’re left with nine above average markets, 80% above 16.6 million, and then below market, the bottom 20%. Worst case would be 4.8 million. So I think a good financial plan is making sure that, you know, what we don’t know is we don’t know what kind of healthcare concern you’re going to have. So I think in present value, you’ve got to set aside if someone in this net worth, you’ve always have to protect about a million each for healthcare concerns. Because like right now in today’s dollars, good, you know, nursing home could cost 150 a year. Average day, we’ll say is three to four years.

 

So just rounding up, to be conservative, we need a million bucks per spouse at a minimum. But above that, we don’t know how long you’re going to live. So we do believe there’s a balancing work of you should protect some principle because we don’t know certain things like inflation, taxes, healthcare, how long you’re going to live, et cetera. But above that, why are we growing and growing. A growing principle. If you’re trying to maximize wealth, transfer to your kids, great. Then we should be getting out of your estate, setting up trust, making sure it’s protected under circumstances. And if we’re not trying to do that, then there has to be some difficult conversations and hopefully stress free conversations about how to combine this academic research and take the best out of it to apply it to changing market conditions.

 

The guardrail approach, the bucket approach. Combining those we found is not easy because it’s a full time job. And so obviously you would need a manager yourself or hire an advisor. Could be easy. As a person, say, okay, I’m gonna retire. I’m gonna call whatever company and say, just send me 4% of my portfolio. That’s easy. But if you look at, you know, historical simulations of doing that versus, let’s skip this year because the market was down, don’t send me 4%. Let’s pull that from a different bucket. Let’s go up this year and down. You’re going to get a ton more money in your pocket for you to spend, and you’re going to have a ton left over if you take a much more hands on approach or you’re able to delegate that to a trusted financial team.

 

Right? Yeah, totally agree. I think. Yeah. There’s so many ways it would be so easy to just kind of show up and check the box to a lot of these situations because they’re on track. Like you said, the Monte Carlo, 100%. Be super easy to show up and say, here you go, you guys are good. But I think an important thing, especially with retirement, specifically, your time’s the non renewable, the only non renewable resource. So it’s like, if we get to 90 and we look back with regrets, who cares if we have $10 million in the portfolio? It’s like, what was it even for?

 

So I think having the intention, understanding the client’s intention and helping them understand that themselves through asking good questions, I think are probably the most important job whenever it comes to working with retiree clients, other than making sure they don’t run out of money, of course.

 

But absolutely. So let’s talk about some general rules of thumb, how people can position themselves for this. So let’s just go through some real life examples. So, first of all, the question is, what should my stock to bond ratio be?

 

Yeah, I love that question, because if you google it, you’ll get, let’s google it right now. How should my portfolio be allocated at 65? I’m curious to see what it says. It says 60% stocks, 35 bonds, 5% cash. So that’s just kind of a blanket statement from this resources, the first thing that comes up before you even click on an article. So that could be the case. But like you were leading into earlier with the backup, I don’t think that, and we as a firm don’t think that your allocation should have anything to do with your age, but more so, what’s the context of your planning? What’s your actual situation look like? So in your example, if you have $3 million, you gotta spend, you gotta take out, say, five a month. We look at that.

 

So at five a month or 60 a year. So we wanna keep at least seven to ten years of that withdrawal.

 

And you gross it up for taxes. Yeah, let’s say that 80 a year, right, times ten would be 800, right?

 

Yep. So that’s what we would want to keep in bonds, cash equivalents. Like you mentioned, cash value inside of a life insurance policy, anything that’s not going to be extremely volatile.

 

So real quick, under that example, if someone’s spending, if someone’s got five a month coming from Social Security, and they just say, you know what, Matt, we’re happy with ten a month net of taxes, we’ve got $3 million, right? So if we just back the napkin math and just went quick, in my head, that person would want to be a 73% equity investor, 27% bond investor, because 27% of 3 million would be 810,000. 810,000 would be ten years of 80,000, net of taxes, 60,000 a year. So literally, there’s no time in history where if we ask allocated and diversify that it’s taken, like, portfolio’s gone down and taken longer than seven years to come up. So we have ten years of literally catastrophic, never seen before market volatility.

 

Well, they’re still able to live that lifestyle that they’ve told us is important while their equities are going up and never have to take a loss in that. And so 60 40, and that would be, they’d be putting a lot of money on the table, subject to inflationary risk unnecessarily. I mean, they’d be so safe and they’d still be able to have 73% to 75% of their money in equities, no questions asked. Right.

 

Which I guess if you’re somebody that’s not, like, if you’re doing it yourself and you’re relying on Google, I guess that’s a good, like, you’re not going to get hurt if you’re 64, you’re not going to get hurt in terms of losing money, but you’re going to get hurt and kind of robbing yourself a future. Like, you know, what you could have, I guess.

 

And so. And the other thing, too, with that, Chris, is if you’re. That allocation recommendation is assuming that you have a proactive approach where you’re choosing which bucket you’re pulling from during market ups and downs.

 

Yeah.

 

If you’re just, like, setting it and forgetting it. Like, hey, pull out of all nine funds I have every year the same amount.

 

Yep.

 

Then sure. Like, set a 60 40 and do it, because that’s like the lazy forget it approach.

 

Yeah.

 

And that’s gonna have a lower fail safe than a 75 25 if you’re just. If you’re not executing it properly, which we found, like, 90% of the population is calling their custodians, saying, I need 5000 a month, and that custodian is just selling, literally, in equal shares across their funds. And, like, in 2022, that’s a bad year. You shouldn’t be pulling from a ten year duration bond that just dropped 15%. You shouldn’t be pulling from an equity fund that dropped 20%. That’s where that cash comes into play. That’s where you should skip, let that portfolio recover, which it did in 2023, but most people took their 4%. Took their 4%, and so they’re realizing losses that year. So that’s a whole different ballgame. But if you have a proactive monitoring of this, then we find the stock to bond ratio.

 

There’s no one size fits all. It’s. Tell us, what are your goals for retirement distribution? What are your goals for, obviously, financial security? What are your goals for legacy? That’s how we back into your. Your allocation decision making on a. On a year to year basis. Right. That makes sense.

 

Yeah, absolutely. I know you guys did a episode, I believe, on target date funds. Like, we’ve. We’ve had people that have like a couple million bucks in a target date fund that’s just a blend of all these things. So you don’t even have. You don’t even have the option to sell out of what’s performing well. You’re just blindly selling.

 

You got $3 million in one target fund, which underlying holds ten, and you say, I want 100 grand that year, they’re going to sell out of all the underlying holdings to get you grand. So you’re naturally going to be selling some stuff high, some stuff low first. If you hold that stuff individually, you can just sell the stuff high and let this low stuff recover. Common sense. Right. Okay. So let’s talk about some other stuff. So how would one want to allocate their investments? Ideally, to navigate inflation, we have equities, historically outpaced inflation. To navigate tax risk, we always talk about the two thirds, one third minimum ratio. So, Chris, explain us. Yeah.

 

With Roth versus pre tax, right?

 

Yeah. Roth or any other asset that would be available tax free, like your basis or whatnot. Yeah. What is this and why is it.

 

The two thirds, one third approach? So, ideally, whenever. So if you look at the tax rates, it’s a tiered. Tiered structure. So the first, you know, it goes 1012 22 24. So what we want to do is with those pre tax accounts where every distribution is taxable to you as income, we want to ideally fill up those low rates with Social Security. If you have a pension and then depending or not, if you’re in RMD years, we want those taxable distributions to fill up the ten and 12% and then avoid 22 24. Or if we’re not able to avoid the 22, at least avoid the super high, like 32, 35% rates.

 

So it’s kind of a, it’s a balancing act where before, really before those RMD’s start, we want to make sure that we have the right mix where we’re not thrown into a high tax bracket or a high Medicare. Medicare premium.

 

These are my charges to climb quickly. And then if you go from a happily married two spouse retirement, one spouse passes, all those limits get cut in half. But your income doesn’t get cut in half because typically all that happens, all the assets transfer over, your expenses don’t get cut in half. Maybe they get cut down by 20% or maybe they go up. We’ve seen that as well, where some spouses like, oh, he was so frugal, like, now it’s time for me to spend money. And so the expenses will go way up. But anyways, the only thing that drops off is, like, the Social Security payment for the one spouse, the higher of the two stays. So now we have half the Runway for taxes, federal taxes, half the Runway for Medicare, but we have a similar income.

 

And that can, we’ve seen it can be some huge surprising. We call it the widow penalty, because then that surviving spouse ends up paying much higher Medicare taxes and much higher taxes unless they have the right planning in advance of that by having that two thirds, one third ratio, at least one third of money of their net worth, and something that’s available tax free, whether that’s Roth IRa, froth, 401K, megaback to a Roth, or basis in a non qualified account, or basis or loans through a cash value and life insurance contract, et cetera.

 

Definitely a balancing act for sure.

 

No question. So the other big mistake we see is clients get sold, not our clients, but I mean, before clients are our clients annuities. So there’s a reason annuities are sold. Typically, they’re not purchased. Now, right off the bat, like, if someone’s spending 20,000, let’s just talk about what an appropriate annuity would be. So, fixed annuity, that’s joint with rights of survivorship, with a 20 year period, at least here, you’re giving it a contract, you know, giving your money to annuity company. Typically, you want that annuity company to have a good book of business of life insurance and annuities, because that way that company will be in existence. If people live too long, they’re gonna be paying people these annuity payments for too long, they’re gonna get hurt.

 

But if they have life insurance on their books, then they’re keeping that money, those premiums, they don’t have to pay those death benefits out till later. So it’s a way for the company to be diversified, and they’re, no matter how long you live, etcetera, you want to make sure the company is obviously AAA rated, has a strong balance sheet, etcetera. But if you do this, typically, the purpose of it would be, let’s say you need to spend 20 a month and ten of a month of your expenses are non negotiable. They have to happen. Literally, they’re payments. You have to make utility payments. Just basic lifestyle. And let’s say Social Security’s only giving you five.

 

It may make sense to give away if you have $5 million, a little bit of your portfolio to boost up that guaranteed income payment, which then your gap goes down. And so instead of keeping, I’m just making this up, $2 million of your 5 million as safe. Now we can keep 1 million safe because we have a higher floor of guaranteed income. How we’d achieve that, though, is really, you have to be really careful. Fixed annuities with 20 year period certain, at least, and with a joint to your survivor if your spouse, great. Where we find, just typically steer clear of if they’re index annuities that are sold like, hey, put your entire portfolio here. There’s many red flags.

 

We’ve already created tons of resources on why not to do these high fees high surrender fees, you don’t participate in dividends of the S and P 500. The market doesn’t work in the way that the company sells it to you. The list goes on and on. But would it steer clear in general, of moving any substantial amount of your assets into annuity under retirement? A little bit into the right kind of annuity? No problem with that. If it’s in the context of a financial plan. If you have life insurance and annuity, you’re playing both sides. If you live too long, you’re protected. If you die too soon, you’re protected.

 

Those two coincide together really well, and there’s lots of academic research that those two together can actually, you can give yourself permission to spend other assets, because then if you live too long, you still have the income source. If you die too soon, the life insurance is going to pay, and that allows you to take more calculated risk and more heavier spending, kind of similar to the safe money. But taking a large amount of your assets, like more than ten or 20% of your, and putting it into any kind of annuity just right off the bat, that’s a huge red flag. Strongly recommend against that, because it’s gonna limit your options and flexibility. Most of these are, they’re not liquid once you do them, or there’s huge penalties if you want to make them liquid again.

 

And you’re just limiting your optionality, your flexibility, all because some salesman told you’re gonna have gonna sleep well at night? Yeah. Yeah. It’s crazy, but just want to address it very strongly. And it’s a very detailed conversation that we get onto on a case by case basis. But Chris, what are your thoughts on that you’ve seen in real life?

 

I’ve seen that usually, more often than not, misplaced, unfortunately, because with working with retirees, I think obviously, the biggest concern is that I’m going to run out of money. So I think people prey on that. And on paper, a lot of these annuities look good until you read into, really, the fine print, specifically with the fees and then caps for. Because usually what’s sold is the floor. What’s called the floor is meaning you can’t lose more than x percentage or you can’t lose anything at all. And then they say, and then the upside’s capped at x percent, too. And you’re like, okay, that makes sense.

 

But then these annuities generally have what are called mortality and expense fees, administrative fees, underlying investment fees, because these are annuities that still invest in sub accounts, those underlying investments have internal fees, and then there’s rider fees, but the biggest one are surrender charges. And then so oftentimes we’ve seen some of these are from two to 2%, all the way up to 5% of just fees that you’re getting sucked out of your account. And the biggest thing is whenever, like you said, the purpose of this is your safe money. And a lot of times, whenever you need it, you can’t even get the money out because there’s limits on what you can take out. There’s surrender charges if you need the money.

 

So it sounds great in theory that you’re preserving your money, but it comes back to what’s the intention of having safe money? And the purpose is to have it there when you need it. And oftentimes, yeah, the annuity checks the box of preserving capital, but it doesn’t check the box of liquidity, which is the whole purpose of having the safe money.

 

Yeah, well, that’s great perspective, Chris. Let’s get into what does a really good financial plan look like? So a retirement plan specifically. So let’s just pick, you know, doctors who are very heavily tied to their careers. They’ve tons of respect for physicians. They spend, you know, four years of undergrad, four years of medical school, you know, three years of residency, maybe another three to six years of specializing. And so then they get into their careers in like, their mid to late thirties. And so they’ve got this tight window. Then they have to really balance the demands of their patients. The changing landscape of healthcare, people are living longer, meaning, you know, more care is going to become available.

 

If you look at statistically, this 2024 is to be like the first year, I believe, with more people over 65 than people under 15 in the US, which people are having kids. No pressure, Chris, but, no, I’m just kidding. But in all seriousness, if you look@the.net. Worth of people over 65, 85% plus of money in America is with people who are 65. So you have to figure out, okay, where is money going to be spent? Well, healthcare is a huge thing. So there’s lots of, the point is there’s lots of demand on physicians. So they put all this time and effort and career into their careers. They get to retirement.

 

And so my advice is you have to put as much effort and time into thinking through your retirement as you did your career, because if not, you’re going to be, it’s going to be so hard to get rid of that identity, to shift your identity from what, you know, that demanding of time and resources, attention into, you know, not doing that and figuring out with your time what you’re gonna do. So you have to put in time. And if you don’t do that, because a lot of times we find for physicians, like, the money became a crutch, kind of a stress management system of like, oh, this day was really bad. At least I know I could retire. And so then the thought process becomes of, like, everything. I just have to protect that. Even when they retire, I have to protect.

 

I have to protect, I have to grow it, and no money will ever be enough. So. Right. With a good financial plan, I would describe as, like, have the guardrail systems in place, give yourself permission to spend. But we really, the most important part is we need to create the next chapter. We need to create, how are you spending your time? Maybe you’re still working or giving your time in your career in some path because you want to, not because you have to. Maybe it’s more time with kids, grandkids. Maybe it’s, you know, having the tough conversation and realizing you. You go through a stage of go years in the first five to ten years and the slow go years and maybe the no go years in the end, and.

 

And no time is better than now to start living your life that you put off for so long. So the psychology aspect of giving yourself permission to spend is so important. But I can tell you having a strong financial plan that you can see on paper and talk to someone about consistently, multiple times a year, is going to relieve that stress as you’re going through this huge identity shift of giving up everything, you know, the transition to the next part of life. So I would say a couple, like, rules of thumb. The one third, first of all, have a very crystal clear picture of how you’re going to spend time. There’s 24 hours a day. How literally detailed, what’s my routine going to be? Because typically, if you’re a high income person, you’ve gotten there through discipline and routines.

 

And so just going to the next stage with no routine or no idea can be catastrophic. And that’s why I’ve seen some studies, like, people die within two years of retirement. Let’s avoid that at all cost. So create that life by design. And then secondly, we need to get the technical aspect of this right, the one third, two third tax ratio, the equity to bond ratio, the guardrail system in place, and someone to monitor that also with the years of backup money, and then someone to monitor that. And as you are helping your kids purchase their house, you’re helping your kids get married, you’re helping. You’re doing that project on your house that you put off for the last 30 years.

 

You’re going on that big vacation, figuring out how to navigate those bigger expenses in the early years, all while making sure that you feel good. Your entire retirement from a health and a money temperature perspective is crucial. But the point is, it’s an individual, tailored plan and it’s not just a one set and forget it. It’s a constant calibration to make sure your money is supporting your life design and you’re not missing life because of the fear of what your money will or will not do. Yeah. Anything else you’d add to the retirement transition or during retirement recommendations?

 

No. I think going back to your original question, like, what’s the best retirement plan look like? I think it’s one with clear intention. I think one of the best things that I’ve learned from you is walking people through, like, literally drawing a pie chart that represents your time. With 24 hours, you sleep for eight. If you work for ten or whatever, how are you spending the remaining six? And then draw a second one but take away the work. So now instead of 6 hours, you have 16. So, like, all the technical stuff’s great. I think that’s. That should be a non negotiable, especially if you’re working with financial advisor. I think the best one is one with just clear written intentions. Like, we try to really take good notes and have.

 

We have a live Google sheet with all of our clients where we write down, literally, what are your goals, what are your intentions? And if you have kids, I think it’s super important if you’re on track to have a legacy. I’d say a few times a year we’re in here with parents and kids that are maybe just coming out of college, starting their careers. I think it’s really important to have open discussions so that there’s not mistakes. Like, you’ve seen the statistics of legacies that are spent within the first generation. Second goes quick.

 

If those conversations are 97% of legacy money is gone by the third generation. Doesn’t matter if it’s a billion dollars or $1, it’s always 97% of it’s gone, right? Yeah. It’s crazy.

 

So I think the best ones have an intention with how are you going to spend your time going back to only get one shot at this. Don’t want to look back when you’re nine, you know, in your nineties regrets and then second is educating your kids on how’d you get this? You know, guiding them through either, you know, preserving and passing those values down to their kids one day or helping them, you know, build it from there.

 

So no question. Yeah, no question. Well, Chris, I appreciate you joining me today, and any questions, please reach out and look forward to catching everyone next week. Thanks for tuning in to our podcast. Hopefully you found this helpful. Really hope this is as beneficial and impactful to as many people across the nation as possible. So hit the follow button, make sure to rate the podcast, and please share with any friends or family members that would also find this beneficial. Thank you very much.

 

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