Retirement Starts Today

Has the Covid pandemic caused you to reevaluate your life and consider early retirement? If so, you are not alone. Now that we are starting to emerge from the pandemic, many Americans have a new 'life is short' mindset. This, coupled with an upswing in investments and home values is leading many affluent Americans in a rush to retire.

Check out the retirement headlines segment where we explore a recent Bloomberg article that explores this topic. Then, stick around for the listener questions where I answer a question from Randy about paying off his mortgage with a Roth IRA and if you stay until the very end you'll hear the story behind the Retirement Starts Today theme song.

Outline of This Episode

• [3:22] Affluent Americans Rush to Retire in New 'Life-Is-Short' Mindset
• [7:47] There is a downside to the loss of older workers
• [9:32] Should we consider paying off our home loan with a Roth IRA?
• [16:21] The story behind the theme song

Participate in our annual listener survey

Every year I send out a listener survey to our Every Day Is Saturday newsletter subscribers to give you all the opportunity to guide the content over the next year. In the past, I have made changes based on your answers and I look forward to hearing your thoughts this year.

If you haven't yet subscribed to the newsletter you can do so here. In addition to being able to participate in the survey, the newsletter also contains all the links from the show each week, as well as free book offerings from the authors I interview, and all kinds of useful retirement tips. If you want to complete the survey now, simply click here.

Many affluent Americans are ready to retire

One of the most surprising aspects of the pandemic has been the unprecedented surge in the stock market. Investors have enjoyed double-digit returns and this swell in portfolio values has led many to reconsider their retirement plans. This is in stark contrast to those on the opposite end of the spectrum that had little savings and lost their jobs over the past year. Life for affluent Americans is looking good and many are taking advantage of the situation by considering early retirement.

Changes in work environments are another reason for the mass exodus

Another reason people may be considering early retirement is the toll that the past year has had on workers. The pandemic has changed the way that many companies do business. Zoom fatigue and stressful work environments are also contributing factors in the rush to retirement. Teachers and healthcare professionals are experiencing record levels of burnout. While this mass exodus is positive for those ready to retire, there could be a downside.

As the most experienced and productive workers exit the workforce, businesses are experiencing labor shortages. Older workers have higher productivity, lower absenteeism, and usually train the newcomers so this loss significantly affects companies.

Life is short, enjoy it!

I love to see the newfound freedom that many are experiencing post-pandemic. Life is short and we should enjoy it fully. To do so, make sure to have a written retirement plan to help guide you.

I also recommend taking a practice retirement before you actually retire. This can help you get a feel for retirement and help you build retirement routines. This trial run will also show you if you are mentally and emotionally prepared for retirement.

Have you been thinking of retiring early? If so, what have you been doing to prepare? Listen in to hear how a retirement rehearsal could help you prepare for your retirement journey.

Resources & People Mentioned

• Annual Listener Survey
• Bloomberg article on Americans Rush to Retirement
• Limbeck
• Silver Things

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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Episode 200! I can't believe I've made it to this landmark episode. Thank you all for joining me on this journey and I hope you'll join me for the next 200.

I enjoy looking back and reminiscing on previous episodes, but I don't have to go too far back to find my most recent favorite. Episode 199 is one of my most recent favorites. In it, I interviewed world-renowned Disney expert, Lou Mongello, to discuss multigenerational Disney trips. Check it out if taking the grandkids to Disney is on your bucket list.

In this episode, we're covering two retirement headlines. The first is from Investment News and it describes how some leading retirement experts question whether advisors should rethink their assumptions about retirement spending when creating financial plans. The 2nd retirement headline is from HumbleDollar.com titled Secret Sauce. This article describes the aspects of work that we want to hang onto, those that we might not, and it outlines six steps to design a successful and ideal retirement.

Outline of This Episode

• [2:22] How we should rethink our assumptions about retirement spending
• [9:30] How to plan your retirement withdrawal rate
• [11:20] To have a successful retirement, you need to have an understanding of work

People in retirement live differently

Mary Beth Franklin recently wrote an article for Investment News about retirement spending. She sourced a study completed by the Employee Benefit Research Institute (EBRI) which analyzed the spending of 2000 retirees. The study found diversity in the way people live in retirement based on financial status, retirement goals, demographics, and spending habits. Mary Beth's article focuses on the results for those that were classified as affluent and comfortable retirees.

Not many affluent retirees plan to spend their savings

In the article, affluent retirees were defined as those with financial assets exceeding $320,000 and an annual income of $100,000 or more. Most of them were also mortgage-free with zero debt. Their most common sources of income were defined as employer benefit plans, Social Security, and personal savings. They reported that they feel they have saved enough for retirement and only 1 in 3 plans to spend all or a significant portion of their savings.

Comfortable retirees may spend only a small portion of their assets

Comfortable retirees had mid-levels of financial assets between $99,000 and $320,000 and an annual retirement income of less than $100,000 a year. Many still had a mortgage and other debts. Most of these people cited workplace retirement savings and Social Security as their major sources of income. Almost 75% of these comfortable retirees said that their retirement savings are sufficient or more than meet their needs, however, more than half of them plan to grow, maintain, or spend only a small portion of their assets.

Why are affluent and comfortable retirees hesitant to spend their retirement savings?

The study found that the Baby Boomer generation wishes to retain assets rather than spending them down. So the question is, why don't these retirees wish to spend their retirement savings?

This may be due to the fact that their Social Security income or pension provides enough to meet their expenses, but it could also be due to an inability to switch gears from accumulation to decumulation. Another reason may be that many retirees don't know how to determine a sustainable withdrawal rate that considers future uncertainties, and this lack of knowledge makes them wary to spend their nest eggs.

I think the key to confidently spending and living off your savings is to understand how much it costs for you to live for a year in retirement. Listen in to hear how you can learn how to calculate your spending so that you can determine your sustainable withdrawal rate in retirement.

Resources & People Mentioned

• Retirement Repair Shop with Mary Beth Franklin
• Investment News article
• Secret Sauce from HumbleDollar.com
• Employee Benefit Research Institute study

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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What is the number one travel goal for people approaching retirement? Disney! People young and old alike love to go to Disney. In my 15 years of retirement planning, I have discovered that a multi-generational trip to Disney is at the top of most people's bucket lists. That is why I have brought the world's foremost expert on Disney travel, Lou Mongello, on to Retirement Starts Today for an interview. Lou and I discuss all things Disney: the must-see attractions, when to go, how to plan, and what is so special about Disney.

Outline of This Episode

• [1:52] What's so special about Disney?
• [4:29] What are the must-see attractions?
• [8:45] When to go
• [12:53] Plan in advance
• [15:56] Lou's favorite thing at Disney

What's so special about Disney that everyone wants to go there?

Since Disney is the number one bucket list item for many people there must be something extra special about it. When I ask Lou why it is so special, he is unable to quantify this phenomenon. He chalks it up to the way Disney makes us feel. If you have been, you know what he means.

One way that Disney is able to give us those warm fuzzy feelings is with its customer service. Disney's level of service is unparalleled. They always go beyond expectations which is why everyone remembers Disney with such fondness. No other place in the world enjoys such a level of brand loyalty.

What are the must-see attractions?

There is so much to do at Disney. In Orlando, there are not only the 4 main theme parks but there are water parks and resorts to enjoy as well. It can be challenging to figure out what to do when there is so much to choose from.

There is something for everyone at Disney. Lou recommends the classics from Magic Kingdom in addition to some of the newer attractions. Grandma and the littles are sure to enjoy It's a Small World and the Jungle Cruise. The Haunted Mansion is another Magic Kingdom classic. At Hollywood Studios, the Tower of Terror and Rock n Roller Coaster are fun for the thrill-seekers in the family. And Frozen and Toy Story are hits with the kids. The Animal Kingdom safari also brings joy to the entire family.

When to go?

When planning your Disney vacation it is you'll need to consider when to go. This will depend on your family's schedule, but there is more to consider. Disney has different travel seasons. The peak season includes major holidays and summer. The off-peak times are the rest of the year. During the off-peak times, you can find values on food and lodging prices.

One tip to use while planning your Disney vacation is to use a Disney travel agency. Many don't realize that Disney agents are free to the consumer since they get paid by Disney. When planning your Disney vacation make sure to take advantage of these experts. They can help you make the most of your holiday.

What is the best age to go to Disney?

There is no bad age to go to Disney. There is so much to do that appeals to every age group. That is what makes Disney such a great multigenerational vacation getaway. Not only is there something for everyone, but there is a wide variety of accommodations and food choices. You can customize your vacation to your family's specific wishes. The most important thing to do is plan ahead. Much like financial planning, planning before you go to Disney will ensure that you get the most out of your family holiday.

Resources & People Mentioned

• Stacking Benjamins

Connect with Lou Mongello

• Lou Mongello on Facebook
• Lou's podcast - WDW Radio
• LouMongello.com

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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Have you ever thought about your relationship with work? As retirement looms ahead, many people become fearful of the unknown that it brings. A common way to express this fear is to worry about money, but this fear goes beyond money. The real fear that people have about retirement is about how they will spend their time when they no longer have work to fill their days.

In 2017, Paul Millerd changed his relationship with work. After climbing the corporate ladder for 10 years he decided to slow down and become a freelancer. Listen to this conversation to hear what Paul learned from this experience and how his wisdom can help you prepare for retirement.

Outline of This Episode

• [3:22] What kind of benefits do people see from a long break in work?
• [5:16] Taking the first steps towards a sabbatical
• [8:15] How can we use the curiosity that emerges with a sabbatical to explore retirement?
• [11:01] Did Paul always think this way?
• [13:17] Are there any types of careers that sabbaticals wouldn't work for?
• [16:24] People will refuse to take into account what they spend

What defines a sabbatical?

I often ask my clients to take a couple of weeks off of work before retirement to explore what they will be doing when they retire. I liken this exercise to a practice round of retirement. A sabbatical can be a similar experience, but it goes even deeper. The time frame of a sabbatical isn't strictly defined and can extend anywhere from 2 weeks to 2 months or more. The biggest difference between a sabbatical and a vacation is that a sabbatical is more of a change in mindset.

How is a sabbatical different from a vacation?

Paul explains that vacations are packed full of activities, much like a workweek. People try to pack as much into a vacation as possible. However, a sabbatical is like taking a vacation without ever going into vacation mode. To try out a sabbatical, Paul suggests staying at an Airbnb and simply living there. Cook your meals rather than eating out, shop locally, and simply bike or walk around your new surroundings. Try to discover a state of non-doing. This can be challenging and can even become uncomfortable for many people. The result of this contemplative state is self-realization and a newfound curiosity.

How can we use the curiosity that emerges from a sabbatical to explore retirement plans?

Taking a sabbatical can completely change your way of thinking and may even disrupt your plans for retirement. We have worked so hard our entire lives for a future payoff, so it can be hard to stop delaying gratification. By taking a sabbatical, it allows people to take the time to explore the work and hobbies that inspire their passion. In doing so, people can get a better understanding of the ways that they can spend their time in retirement.

A sabbatical can prepare you for retirement

If you have been working your way towards burnout, perpetually delaying gratification, or even if you simply need a retirement trial run, you may want to try taking a sabbatical. Listen to this interview with Paul Millerd to hear how a sabbatical can provide you with a shift in mindset and truly prepare you for retirement.

Connect with Paul Millerd

• The Case for Sabbaticals
• Think-Boundless.com

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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We've all been sitting at home for the past year and now everyone is getting the travel bug. That's why today we're kicking off the Summer Travel Series with an interview with Lee Huffman. Lee hosts a podcast called We Travel There and he writes a frugal travel blog at BaldThoughts.com. I've been curious about the world of travel hacking, so I have plenty of questions for Lee about using travel points, how to find the best travel resources, and, of course, where to travel. Check out this interview to help you plan your summer vacation.

Outline of This Episode

• [1:32] Where should we get started?
• [5:45] What should one look for in travel points?
• [11:02] How saving miles and points are like saving for retirement
• [13:00] The go-to resources to use
• [17:53] Places to check out

How should we all get started traveling again?

The pandemic has left many of us homebound for over a year, so now that many people are fully vaccinated, everyone is ready to get on the road again. The big question is: how should we get started?

Lee recommends using the travel credits that you may have accrued from canceled vacations over the pandemic. Those credits and vouchers may have expiration dates, so be sure to check the fine print to ensure that you don't lose out.

He also suggests getting your summer trips booked ASAP. The sooner you book, the sooner you'll be able to find reward availability and lower prices. The more people begin traveling the higher the prices will rise.

What about international travel?

Travel within the U.S. is on the rise, but people are also itching to travel internationally. Since the vaccine rollout has been different in each country, it is important to carefully investigate the specific travel rules for the country you wish to go to. Each country has its own pandemic rules and regulations. Some countries require negative Covid tests upon arrival and others may require you to be fully vaccinated. It is also important to remember that if you travel internationally, you will need a negative Covid test to enter the U.S. again, regardless of your vaccination status. Listen in to hear how many hotels in Mexico are helping travelers with this requirement.

What are the best ways to earn points?

You can earn travel points and rewards even when you are not traveling by using a credit card. Lee recommends the Capital One Venture Rewards card to get started. You can get cash back or earn extra miles with each purchase that you make. Listen in to hear how you can get started with the Capital One Venture rewards program to start traveling this summer.

Lee compares saving miles and points with saving for retirement. He states that the two best days to start saving your miles are 10 years ago and today. He also mentions the importance of using your miles periodically. You don't want them to become devalued over the years.

How to use your travel miles

There are more ways you can earn travel miles than just making purchases. There are apps that you can use like Dosh to help you earn extra miles on each transaction.

If you have had a travel rewards card for years but find it difficult to use, you won't want to miss this interview with Lee Huffman as he explains how you can best use your hard-earned miles. He not only mentions how to use your miles, but he also includes fantastic resources that you can check out to help you find availability so that you can actually use the points that you have accrued.

Make sure to check out Lee's podcast, We Travel There, to get inspiration for your next travel destination. He interviews locals to help his listeners understand how to get there, where to go, what to do, how to get around, and where to stay.

Resources & People Mentioned

• Dosh rewards app
• Juicy Miles - app for redeeming rewards.
• Capital One Venture Rewards card
• Frugal Travel Facebook Group with Holly Johnson

Connect with Lee Huffman

• BaldThoughts.com
• WeTravelThere.com

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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Nobody wants to think about becoming a widow or widower, but unfortunately, if you are married, there is a 50/50 chance that you could. In addition to the crushing grief that comes with losing a spouse, there are many details to take care of in that first year alone. This is why I want to share an article with you from NextAvenue.org.

The article, written by Anna Byrne, outlines 7 steps that you can take to help manage that first year on your own. Anna was only 28 years old when she lost her husband, so she has firsthand experience with this overwhelming stage of life. Her professional estate planning experience also lends practical tips to the article. Don't miss this episode so that you know what you can do to help keep your head above water during that first year alone.

Outline of This Episode

• [2:22] 7 steps to take to manage the first year of widowhood
• [8:34] My top 2 tips for a new widow or widower
• [10:26] A question on the ACA subsidy under the American Rescue Plan

7 steps to manage the first year of widowhood

There's no doubt that losing a spouse will cause overwhelming grief, but on top of that, there is so much to do in the wake of this personal tragedy. To help you wrap your head around all that there is to do, Anna Byrne from NextAvenue.org came up with 7 steps to help you through this challenging time.

Step 1 - Take care of immediate things. The small steps matter early on. You'll need to notify family members and advisors right away. You'll also need to make decisions about organ donation and funeral arrangements. Lean on family and friends if possible.

Step 2 - Find and organize key documents. Whether you want it or not, you are now in control of all aspects of your finances. You'll need to find and organize important documents. Make sure to call your estate planning attorney if you used one since they will have the original will in their office. They will also have useful information to guide you through this process.

Step 3 - Take inventory of your financial situation. This is a good time to take inventory of your assets. You'll want to create a list of all assets and debts owed by you and your partner. A good place to start is by looking at your tax returns since they detail itemized income and list the financial institutions. Look for bank accounts, retirement accounts, pensions, life insurance, real estate deeds, and Social Security information.

Step 4 - Pull the pieces together. Every state has different laws and procedures regarding wills and probate. Familiarize yourself with the probate process in your state. You'll also want to have a good understanding of the value of your spouse's assets at the time of death since this is how estate taxes are calculated.

Step 5 - Build a team of trusted advisors. Having a financial and legal advisor that you can count on will help you navigate this process and avoid difficulties down the road.

Step 6 - Plan for your immediate future. Create a new household budget and develop your own financial and retirement objectives.

Step 7 - Plan things for your loved ones. Now it's time to get your own affairs in order. This is a good time to update your will, power of attorney, and health care directive. Update your beneficiaries and create trusts as needed.

Listen in to hear my own top two tips for a recent widow or widower. Stick around for the listener questions as Linda asks about the ACA subsidy under the American Rescue Plan.

Don't miss our summer travel series!

Over the course of the summer, we'll sprinkle in travel episodes among the usual retirement planning content. When I was working with my clients for their May tax planning, the number one non-tax-related topic on their minds was travel. Everyone is excited to start traveling again. This is why I've been reaching out to folks in the travel blogging space, so we can all learn tips and tricks to make the most out of travel. If you are looking for travel hacks, rewards programs, and budget travel make sure to tune in this summer.

Resources & People Mentioned

• Next Avenue article on widowhood
• Estate Tax Law article from Next Avenue
• Advisor Perspectives article on health insurance under the ARP
• Healthcare.Gov - Find local help

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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Do you consider being rich and being wealthy the same thing? In the book by Morgan Housel, The Psychology of Money, the author argues that these words mean two different things. In this episode of Retirement Starts Today, we'll explore the difference between rich and wealthy as well as the connotation of the word money.

Outline of This Episode

• [1:42] A review of the psychology of money
• [4:30] The difference between being rich and wealthy
• [6:13] How to declutter the filing cabinet

Thank you for 1 million downloads

I want to thank you all for helping me hit an exciting podcasting milestone. In May of this year (2021), we hit 1 million lifetime downloads. Wow! When I started this podcast several years ago I was thrilled to reach 100 listeners a month, so this kind of reach boggles my mind. Thank you for joining me on this journey.

To celebrate this milestone, I have an extra heaping helping of retirement headlines today. Both articles hail from the Wall Street Journal. The first article, written by Jason Zwieg, is a review of the book, The Psychology of Money, by Morgan Housel and it explores the different mentalities of the rich and the wealthy. The second article will reveal the best way to declutter your filing cabinet.

The Psychology of Money

Have you ever thought about what money really is? Money is more than a way to show the value of things. Money is also a carrier of emotion, ego, hopes, fears, dreams, heartbreak, confidence, envy, surprise, and regret. There is so much of ourselves that we wrap up in the concept of money.

This is one of the central arguments in Morgan Housel's new book, The Psychology of Money. The author juxtaposes two stories of two different men with two very different outlooks on money, and in doing so, he reveals that great fortunes can be built from old-fashioned values like delayed gratification.

Have you ever thought of money from a values perspective?

What is the difference between being rich and being wealthy?

Housel explores the differences between those who are rich and those who are wealthy in his book. He describes being rich as having a high current income and being wealthy is having the freedom to choose not to spend money. He explains that many rich people aren't wealthy because they spend much of their high income to show others how rich they are.

How the difference between rich and wealthy can figure into retirement

"The ability to do what you want, when you want, with whom you want, for as long as you want pays the highest dividend that exists in finance." This is what many people are looking for in retirement. Most people think of retirement as a time when you stop working, however, retirement could mean, "the ability to do what you want, when you want, with whom you want, for as long as you want."

What are you looking for in retirement? Are you ready to give up working completely or do you simply want more freedom and flexibility?

Resources & People Mentioned

• BOOK - The Psychology of Money by Morgan Housel
• Wall Street Journal article - The Difference Between Being Rich and Being Wealthy
• Wall Street Journal article - Declutter the Filing Cabinet
• H&R Block - My Block
• Intuit's Turbo Tax
• Jackson Hewitt
• Fireproof Document Bag
• External Hard Drive
• Adobe Scanning App
• Microsoft Lens

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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Are you one of the many that are being held back from early retirement by the exorbitant cost of health insurance? If so, you won't want to miss this episode. This week's retirement headline comes from Carolyn McClanahan at AdvisorPerspectives.com and it outlines the enhanced health insurance subsidies that stem from the American Rescue Plan (ARP).

You'll want to stick around for the listener questions segment if you are a fan of retirement podcasts. I have a treat for you all as I crowdsource the answer to John's question about asset location. Listen in to hear 4 different answers from voices that you may recognize.

Outline of This Episode

• [2:12] Could the American Rescue Plan be the answer to your health care before Medicare question?
• [5:05] What do you need to do to act?
• [8:49] An asset location question from John
• [10:01] Peter Lazaroff's answer
• [12:02] Roger Whitney's answer
• [15:45] Taylor Schulte answer
• [18:44] Chad Smith's answer

Could the ARP be the answer to your health care before Medicare question?

The number one issue that holds back potential retirees from retiring early is how to find affordable health care before Medicare. If this sounds like you, then the American Rescue Plan may have the solution that you have been waiting for. Carolyn McClanahan's article is geared toward financial advisors, but we'll take a look at it and see if the ARP could help you solve this common problem.

How can the ARP help lower the cost of health insurance?

With the ARP, you may now be eligible for enhanced health insurance subsidies. The Affordable Care Act (ACA) subsidies have been limited to those with a modified adjusted gross income (MAGI) of less than 400% of the poverty level. However, the ARP has lifted these levels with a credit that is based on the cost of the second-cheapest silver plan available in any person's given area. Unlike the previous credit under the ACA, it isn't suddenly wiped out when someone's income jumps over the income limit. Instead, it is phased out gradually.

What do you need to do to qualify?

To qualify, you must purchase your health insurance via www.healthcare.gov. The open enrollment period lasts through August 15, and the tax credits apply only for the months a person is using a plan from the ACA. Therefore, the sooner you apply, the more savings you will receive.

Additionally, anyone who has received even one week of unemployment benefits in 2021 and is without access to affordable insurance through a family member will qualify for a silver plan at no premium cost. They also will qualify for cost-sharing subsidies to help lower their deductible.

You can utilize the calculators at www.healthcare.gov or the Kaiser Family Foundation to determine your tax credit amount. States that have opted out of the healthcare marketplace may operate differently, so you'll want to work with a local health insurance agent to help you navigate the process.

The ARP also offers COBRA subsidies

If you lose employer-based coverage due to job loss or reduction in hours, the ARP provides COBRA premium subsidies from April 1 to September 30, 2021. After that, you can continue coverage at full cost. It is important for you to weigh whether you should accept this benefit or choose an exchange-based plan. Will take advantage of the benefits offered in the ARP to retire early?

Resources & People Mentioned

• Article from AdvisorPerspectives.com
• www.healthcare.gov
• Kaiser Family Foundation
• IRS Coronavirus Tax Relief
• Retirement Podcast Network
• BOOK - Making Money Simple by Peter Lazaroff
• PODCAST - The Retirement Answer Man with Roger Whitney
• PODCAST - Stay Wealthy with Taylor Schulte
• PODCAST - Financial Symmetry with Chad Smith

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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I'm sure you've all heard about the 4% rule for retirement planning. This rule is great for speculating your likelihood of success, but it isn't always the best rule to follow in practice.

Druce Vertes at AdvisorPerspecives.com offers a different approach to implementing the original 4% Rule. On this episode of Retirement Starts Today, we'll dive into his technical article which explores the idea of making the normally rigid 4% rule more flexible to maximize spending for different levels of risk aversion.

I'm always looking for innovative ways to help you turn your retirement portfolio into income and that's exactly what we're exploring this week. Tune in to hear how to tweak the 4% rule and maximize your spending in retirement.

Outline of This Episode

• [2:52] Infinite risk aversion
• [9:04] Constant relative risk aversion
• [14:06] Thoughts on 401K rollovers

What exactly is the 4% rule?

The original 4% rule was theorized by Bill Bengen in the 1990s. This rule is handy for napkin math but doesn't allow much flexibility and it may be overly cautious.

The 4% rule states that you can invest an equal amount in stocks and bonds and withdraw 4% of your starting portfolio during each year of retirement. As long as you adjust for inflation each year, you would never exhaust your money over the course of a 30-year retirement. Have you used the 4% rule to help you calculate the likelihood of financial success of your retirement?

How can one make the 4% rule more flexible?

Our retirement headline this week is titled Beyond the 4% Rule: Flexible Withdrawal Strategies Using Certainty-Equivalent Spending. It examines what would happen if we explored options beyond Bengen's 4% rule. It asks, what flexible rules would maximize spending for different levels of risk aversion? The author used the programming language Python to maximize certainty-equivalent spending. This led him to three generalized rules based on one's risk tolerance.

3 rules for 3 separate risk tolerance categories

For those that are completely risk-averse, Bengen's 4% rule is the safest bet. The fixed constant withdrawal level never experiences a shortfall or reduction in withdrawals.

The next category is for those who don't mind plenty of risk in their portfolio. This is why this rule is not recommended for most people. It finds the withdrawal amount that historically maximized spending irrespective of market volatility. This risk-neutral category is for those that can tolerate reductions in spending or shortfalls in some years as long as they are offset by gains in other years.

For those that fall somewhere in between the two ends of the risk tolerance spectrum, different rules apply which trade off higher mean withdrawals against the risk of lower withdrawals.

Using some of these rules, a retiree could achieve more than the 4% expected withdrawal rate. All of these models are simplifications, but they are useful and allow you to visualize the choices between different rules that have varying levels of risk tolerance.

Visualize your retirement spending

The author strived to create a simple model to help people understand strategies that may improve on a fixed withdrawal at varying levels of risk aversion. You can test out the different rules by using this online tool which allows you to try out and visualize each one.

It's always refreshing to learn about new ways to live off your retirement savings. Vertes' idea splits the difference between the 4% rule and a dynamic distribution plan. This hybrid plan would allow for higher spending in good markets and a scientific way to gradually reduce portfolio withdrawals when the market dips.

Listen in to hear how each of these rules could play out with concrete examples using actual numbers. You'll also hear Joe's question regarding multiple 401Ks.

Resources & People Mentioned

• Advisor Perspectives article
• Python programming language
• Online tool to help visualize the different rules

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
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As you prepare yourself for retirement, you probably have a vision of your retired self traveling, spending more time on your hobbies, or with loved ones. Retirement will give you time for all that and more.

I read an article recently that describes the 6 phases of retirement. I had never defined it that way before, but this was an interesting way to delineate a natural progression of this time period. Press play to learn what these 6 phases are.

Outline of This Episode

• [1:42] There are 6 identifiable phases in retirement
• [4:25] If you retire mid-year, is it better to reduce pretax and post-tax deductions?
• [7:06] What should we do if our RMD rules violate our safe spending rules?
• [11:04] What about using the 4% rule?

The natural progression of retirement

Have you ever thought about the natural phases of retirement? This week's retirement headline is written by Andy Millard from AndyTheAdvisor.com. In the article, Andy mentions that much like the 5 stages of grief, retirement can also be broken into 6 identifiable phases. These stages don't take the same amount of time and can vary from person to person.

1. Honeymoon - This is likely the most active phase of retirement and probably the one you have been looking forward to the most. People are likely to use their newfound freedom to pursue hobbies, take trips and classes, and do home improvement projects. This stage will get you out and about in the world.
2. Rest and relaxation - After enjoying the hustle and bustle of the honeymoon phase you may be ready to settle down a bit. This is the time to sit back and relax into the new slower-paced lifestyle. This stage may also bring on some introspection. You may reflect on a life well lived and think about what brought you to this point.
3. Disenchantment - During this phase, people begin to realize that the changes they've made to their routines are permanent. You may begin wondering about your purpose in this part of your life. This can be an emotional time period for many and consist of both physical and mental adjustments to a new way of life, whether it be a change in spending habits, a move to a new community, or changes to health.
4. Reorientation - Hopefully the disenchantment won't last long and you can quickly move onto the reorientation phase. This is a time when people begin to adjust to retirement and realize that there's still more living ahead of them. Some examples of things that happen during this period are new marriages, learning new artistic disciplines, or finding new interests and hobbies.
5. Retirement routine - This stage is inevitable since humans find comfort in and crave routine. Whether it be club meetings, volunteering at your favorite charity, or a weekly coffee chat with friends, your new reality becomes your new normal.
6. Termination - Unfortunately, at some point, retirement will end for everyone. This is--hopefully--a peaceful phase where people reflect on their life's journey, their accomplishments, and whatever the next season holds.

Do you recognize these phases? Have you noticed them from your parents or older friends' retirements? What are you most looking forward to in retirement?

Check out the newsletter for more links and retirement learning opportunities

Be sure to listen until the end of this episode to hear what to do if RMD rules violate your safe spending guidelines. I'll also include links to the Guyton-Klinger rules in the Every Day Is Saturday newsletter. Head on over to www.retirementstartstodayradio.com/newsletter to sign up if you aren't on the mailing list. The newsletter focuses on sending out relevant retirement information to educate you on your next phase of life.

Resources & People Mentioned

• AndyTheAdvisor.com - The 6 Phases of Retirement
• The Financial Ghost - Guyton Klinger Rules
• Decision Rules and Maximum Withdrawal rates the original Guyton-Klinger article
• RMD tables

Connect with Benjamin Brandt

• Get the Retire-Ready Toolkit: http://retirementstartstodayradio.com/
• Follow Ben on Twitter: https://twitter.com/retiremeasap
• Subscribe to the newsletter: https://retirementstartstodayradio.com/newsletter

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Apple Podcasts, Stitcher, TuneIn, Podbean, Player FM, iHeart, or Spotify