Review of a DIY Retirement Plan: EDU #2636

Speaker A: The retirement denier ratio represents the words and views of the show hosts exclusively and should not be construed as investment, legal or tax advice. All information is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy. All economic and performance information is historical in nature and is not indicative of any future results. Any indices mentioned on the show are unmanaged and cannot be invested indirectly. Diversification and asset allocation strategies do not assure profit or protect against loss. Never make any investment or financial decisions based on information offered on this show without first consulting your financial, legal or tax advisor. Financial planning services offered through Jim Solner Associates LLC. Uh, a registered investment advisor.

Speaker B: This is the Retirement and IRA show coming to you from beautiful northern Colorado. Join us as certified financial planner Jim Saulnier as well as Colorado State University finance instructor and certified financial planner Chris Stein teach you about IRAs, 401s, annuities, uh, Social Security, pension plans and estate planning in a fun and enjoyable show. Whether you are listening live in Colorado or streaming from their website or itunes podcast, Jim and Chris want you to know that they're available to help you plan for your retirement. Just visit their website@jimhelps.com that's Jim H E L P S.com and click the Meet the team button on the homepage. Now here's Jim and Chris with today's show.

Speaker A: Hello and welcome to the Retirement and Ira Show Edu edition. For this week we're going to pick up where we left off a couple of weeks ago. Um, we kind uh, of had a segue with a conversation with Jacob, uh, in the office about positioning, um, which is an approach to asset allocation that we use in the firm. And we had done a series a while back and talked about that specifically. We've, uh, um, interrupted though a conversation that Jim and I were having about the fun number approach to retirement planning. And we kind of walked people through, through a few shows how one might on their own come up with what we call the fun number, which is the purely disposable part of your portfolio with no other job but to give you more fun experiences in retirement. And there's a process involved in arriving at this fun number. And we had started to share some feedback from other listeners who were implementing in some way the concept of the fun number approach to retirement planning within, uh, their own do it yourself retirement plans. And uh, we had left off two weeks ago with a teaser that we were going to get to, kind of a lengthy email where a listener shared a lot of what she's trying to do in their retirement planning process that involves a fun number type concept. So I'll bring Jim in. He's uh, always the uh, the lead as we walk through one of these emails and um, I guess he'll share any updates he wants to share with us before we dive in. I'm, I'm deep back, uh, teaching at Colorado State. Our semester is fully underway. Um, fall semester at CSU is kind of treacherous. I'll share one thing I guess before I turn it over to Jim. That uh, after Labor Day weekend, which is what we just experienced, then we have absolutely no breaks, uh, in the teaching schedule until fall break, which is the week of Thanksgiving. So it's always kind of a long haul between. Now, uh, we're recording this on the 8th of September, uh, labor, uh, day was just yesterday. But uh, I was just looking at my wife this morning and said, well brace yourself. We got a long ways without any days off, uh, until Thanksgiving week. So anyway, it is what it is. It's uh, beautiful start to the semester. We're entering into the best parts or the best weather, uh, here on the Front Range of Colorado. Still a little warm, but I can feel it changing a little bit. It's definitely taking on more of that, that early fall, late summer feel, which is excellent. So Jim, how are you doing?

Speaker C: I'm doing well. But I don't understand why CSU does not honor Columbus Day or ah, Indigenous People Day as they now call it, um, in October, October 12th.

Speaker A: You know, back way back when those of us who grew up in the west, you know what we'd always have in the, in the fall hunting break, they don't do that anymore, but we would have a long weekend, like a four day weekend. Growing, uh, up when I was in school and it was for people, um, it was for, you know, the hunters and there was lots of them. So it was uh, a thing and none of that. Now I have students who miss to go hunting still, but it's just a few of them and of course the whole university doesn't shut down for that. But there's uh, but you're saying CSU

Speaker C: itself does not honor Columbus Indigenous People Day. It's a federal holiday.

Speaker A: No, there's a lot of federal holidays that we, if we honored every federal holiday, we'd have way too much disruption to the teaching schedule. So they just, they, they're very lean on. Literally in the fall semester there's nothing. And President's President's Day, when it rolls around in, in the springtime we don't honor that either. So there's, there's a bunch of those that we just have to push on through, if you will.

Speaker C: Wow. The, the trials and tribulations of being a instructor at college.

Speaker A: Yeah.

Speaker C: All right, well, bummer that you don't get that off. Maybe, uh, I'll have to tell everybody that, hey, uh, Chris has to work, so y' all are working as well. Instead of getting the day off with pay, we'll make them work. Since CSU is making you work, it

Speaker A: seems fair everyone should work. Just because. Just because I have to.

Speaker C: You have to. So everybody else. Alrighty. But, uh, welcome, folks. This is the first show after the Labor Day holiday. I hope everybody had a good Labor Day here in Colorado. We patiently waited for some rain. If you want, uh, a weather update, Chris can fill in. If Fort Collins got anything here in the Bertha bubble, folks, I got one heck of a downpour that lasted, I would say, three to maybe five minutes. That was, was one. Just, it came out of nowhere. Just piss ass rain for about three, maybe five minutes. And that was it for the whole weekend. And they had this whole weekend, uh, not, not on Saturday, but Sunday and Monday they'll be prepared to bring things indoors. Blah, blah, blah. Nothing. So did you guys get anything up there in Fort Collins? Uh, you were an info call.

Speaker A: Even less.

Speaker C: Are you up near Redfeather?

Speaker A: I was. We had a little hint of a sprinkle, but it was more south towards where you were and down into the Denver and Colorado Springs area where they got wet. So I, I didn't get much up here.

Speaker C: I wouldn't put my three to five minute downpour, uh, in the. Wow, it rained this week. Well, for Colorado, that was raining. I'll give it that much.

Speaker A: That gives your lawn a nice drink.

Speaker C: But, uh, yes, south of Denver, between. What's that called? Manual Hill, not Manual Monument. Uh, Hill. Uh, there's an area south of Denver all the way almost to northern Colorado Springs. They get a lot of rain in that area. Ah, if I, if I stayed in Colorado, I would probably move back to that area. But then you all hear me bitching about all the hail that ruined my garden every year. Yeah, because not only do they get rain, folks, they get serious amounts of hail in that corridor. And as a gardener, okay, great, I got some moisture, but on the downside, I got no plants left.

Speaker A: Right.

Speaker C: So anyways, it just, it gets frustrating though, sometimes to watch the news and all this rain happening and, and it's very dry here, but typical dry Although they said we're going to have 90 degree weather about two or three more times this week. And then the weatherman this morning kind of painted himself into a corner.

Speaker A: So that'll be it.

Speaker C: That'll be it. He said, I'm thinking from the long forecast, this will be it for the 90s for us. And if it is, even though it has been dry, which it has, has been one of the driest years ever, it did not break the record for the most 90 degree days. I didn't realize that 2020, uh, Covid year, um, broke the record for the most 90 plus degree days.

Speaker A: Yeah.

Speaker C: All right. Anyways, folks, this is the edu version of the retirement and IRA show and we're going to continue kind of a dialogue, but it relates to the series we've recently done on the fun number approach to retirement planning. And we openly share with you the, the process that we do in our office to help people determine, uh, the fund number or to be able to project their retirement in, in the concept of the fund number rather than the 4% safe withdrawal rate way of doing it. We believe in what we call the fun number approach. This person sent us a nice dialogue email. I'm going to read through it. Chris can opine in at any time. Uh, I usually don't, but I sent him the email ahead of time because it is lengthy. I wanted him to be able to, to review it. So hopefully he had a chance to review it and he has things that he wants to say. But let's just start reading the email and go from there. So it begins. Hi Jim and Chris. We should get the required disclosures over with first. Well, thank you, listener. They say I am not a client, which they are not that I have not been compensated in any way for this email or for the nice things that I might say. So she began this email not quite sure if she was going to say anything nice or not, I guess so as we read, we'll see if she says anything nice. She forgot one element of the disclosure though, Chris. There's three elements. Are you a client? Were you compensated? And what's the third one?

Speaker A: Are there any possible conflicts of interest to be identified?

Speaker C: Exactly. So if you're going to try to get the disclosure done with, uh, at this get go. Perfect. Don't forget that third one. Everybody forgets the third one. Okay, she continues. My husband and I will retire next August in 2027 in preparation, um, and she says, really, this is me as my husband takes no interests in financial matters or planning and we see that quite often, folks. It's not just the men who take the initiative. Many, many times the woman in the relationship takes the initiative.

Speaker A: But, uh, what's real common is that there's usually one more interested spouse and the other one is less interested. Not, not maybe completely disinterested, but there's usually one spouse that kind of takes the lead. It's also rare to find two spouses that are fully, fully engaged in all things financial planning for the household. I don't know if that's by choice, so that it reduces conflict, which might be a good marital strategy, or if it's just totally personality driven. Uh, so probably a little bit of both of those things.

Speaker C: I agree 100% with what you just said. Uh, okay. She continues. About 10 years ago, when I started seriously planning our retirement, I had two goals that were based on the common rules of thumb that I read in articles about personal finance. And they are, number one, plan on spending about 75 to 80% of your annual income each year in retirement. I don't know who came up with that rule, Chris. I see it constantly being written about. Um, I disagree with it from a standpoint, especially as fun goes, you're going to spend much more on fun and you're going to spend 100% pre or, uh, post retirement on minimum dignity floor for the most part than you did while you were working. I think you might find some wiggle room on some of the categories, but for the most part, your MDF is going to be 100% whether you're, you're working or not. Your mortgage, your rent, your utilities, they pretty much are the same. Maybe your food is a little different because when you're working you might eat out a little bit more, I don't know. But there's a lot of places we

Speaker A: don't really do it around here, but there's, there can be significant commuting costs in some areas of the country which we don't even, you know, we don't think about so much around here because we don't have that. But that could be something that changes.

Speaker C: So she said that was the first rule of thumb that she used to pay a lot of attention to. Plan on spending 75 to 80% of your annual income in retirement when you first retire. Again, I disagree with that because we want people to really front load spending on fun. And to me, the biggest expense, and I concede what Chris says, there could be some commuting costs that go away. But nowadays with many, quote, unquote, commuters working remote, that's becoming less and less of an issue. But I think where most people can see a significant cut into their pre retirement spending, and I use air quotes for that, is the amount of money that you are saving for your retirement. Especially if you are maxing out your 401ks and doing the mega contributions and doing separate Roths to the side. If you could those dollars all of a sudden become available or those expenses all of a sudden go away whichever way you want to look at it. But I often see anecdotally and I haven't delivered plans in five years, so maybe things have changed. Chris still delivers them so he can chime in. But to me, I have seen people spend more, more in retirement, at least initially. Even after adjusting for the money you're no longer using on commuting costs or saving for your retirement, it's being eaten up by real fund spending, which is the whole point of our fund number approach to retirement planning. Once you find the fun number, we tell you, do what with it, folks. Spend good 70, 75% of it during your go go years, which for most of you will be 6 to 12 years in length. Spend on fund there and you generally will see your expenses early in retirement much higher than they were pre retirement. If you look at expenses combined of fund and mdf, do you still see that nowadays, Chris?

Speaker A: Yeah, I think so. For the most part. I haven't, I don't do a ton of planned deliveries, um, directly anymore. Jake takes, uh, the vast majority of those. But um.

Speaker C: But you knee deep in projecting everyone's retirement.

Speaker A: Absolutely, yeah, yeah. Ah, absolutely. So I think it's uh, that really hasn't changed over the years. That's something that's been, we've seen that pretty consistently.

Speaker C: All right, so that was rule number one. Rule number two that she always felt she would pay attention to was to save enough to live off of 4%.

Speaker A: Right.

Speaker C: That was HER2, which still I think

Speaker A: is a decent rule of thumb if you're trying to ask yourself what's a reasonable amount to have amassed. Um, but it certainly doesn't answer all the questions that a rational person should have entering retirement.

Speaker C: Absolutely. So now she wants to share everybody with what she's amassed over her working career. She says as of June 30, our savings totaled 4.6 million. Now here she references them folks as buckets. I don't know if she's adopted some type of bucketing plan. We'll find out together as we read through all her email. But she says bucket one are two four 1Ks with 3 million, two 401Ks and one HSA. She doesn't separate out the HSA, but there could be 100,000 or maybe even less than, I don't know, uh, two 4 1Ks and one HSA with 3 million. So here's what I want you all to pick up on. She has 4.6 million in assets. Let's just say the HSA, uh, we occasionally see 100,000, $200,000 HSAs, but they're not common. But even if she had a 100 or $200,000 HSA, what this is saying out of her 4.6 million, 2.8 million or uh, more than half approaching 60 plus percent of their dollars are in always taxable account. We often see that. And that's just how the government encourages everyone to save for retirement, that hey, we'll defer, meaning the government, we will defer taxing you for now, save as much as you can and grow it and we'll just nail you on the way out. Then she continues. We have bucket two, Roth IRA number one, 675,000, bucket three, Roth IRA number two, 650,000. So she has about 1.3 million, maybe a little bit more than 1.3 million in Roth and then 300,000 in a brokerage account. So she has some tax diversification. They do have a good amount of money and never taxable. Rob Roth, they have the least amount of money in maybe taxable brokerage. One of the things I do like that I see Chris, and then I'll let you chime in as just sharing her assets again. To me I picked up majority of her assets, always taxable, but good diversification with a fair amount, 1.3 million of uh, never taxable Roth, little bit of brokerage assets, not much. She mentions no cash savings. So I'm earmarking the brokerage perhaps as that. But what I do see folks, and Chris, is a good potential for what we call the liquidity account. As ah, she enters retirement, she's going to need to do some tax planning. They're going to have a limited window between retirement and when RMDs begin. And that window is really the tax planning window as well. And they have to weigh spending more on fun early, but also optimizing their biggest asset which is nearly 3 million of always taxable dollars. They don't certainly want to spend down just the Roth early, which would give them a wonderful tax free early retirement. I won't dispute that. But then they'll Leave even a bigger tax nightmare. So I saw a, uh, good tax planning window that's going to be here. A fair amount of Roth assets that will allow them to manipulate tax brackets, perhaps qualify for aca, or avoid Irma tears and encourage them to actually spend this Roth. They have it, might as well spend it. But I also see a great liquidity account, which many people do don't have, and the liquidity account that we reference listeners and when we talk about it at our firm is not only is it liquidity in the traditional sense, it can be immediately and, and painlessly turned into spendable cash. That's kind of the industry jargon for liquidity. But we go one step further without negative tax implications. So money inside a Roth can come out tax free, no negative tax implications there at all. And inside the Roth, she can easily use a, uh, brokerage cash reserve. She can open up a Roth at a high yield savings account if she wanted. Or you can use the 1 to 3 month laddered ETFs with expense ratios less than 10bps that invest in T bills. And very, very liquid, very, very safe, great cash alternative. You could have that inside the Roth, or, uh, she could have it in her brokerage account. The point is to spend at uh, your heart's content early in, throughout retirement, not just early every year, and just do sound tax planning every fall on the best way to refill the liquidity account. And if that liquidity account is in the Roth, you refill it via conversions. If it's inside the brokerage account, you can refill it via, uh, distributions, all from your always taxable account. That's what I picked up on the first two paragraphs. What did you pick up, Chris?

Speaker A: Yeah, and I think even though she has a lot of always taxable because she's blessed with, you know, substantial savings, $4,600,000, her percentage in the quote always taxable category, which we can't clearly because as you mentioned, she bundled together 401ks and HSA. So we're not sure how big that HSA could be, but it's probably not enormous. That's very odd to see that, uh, oftentimes we see people with 80, 90% in always taxable. So that's very little tax diversification, giving you less flexibility in managing your tax life. Um, she has a much lower percentage of that. It's like maybe 70% or. Which, uh, um, as a result of her either filling directly or having done prior conversions to get those Roths built, that she's got, as you mentioned about 1.3 million in the Roth, uh, accounts. And then as far as a liquidity account, um, having a, you know, at its most basic version, bank cash is kind of what people might think first of as a liquidity account because it does check all the boxes, right, Fully liquid, um, it's principal, uh, protected and has no tax consequences as you take the money out to spend it. But not everybody has one of those naturally, especially of the size that one might want to consider having entering into retirement where you might have some fairly significant distributions over a year or two and you want to have, you know, a couple years or maybe more sometimes of intended distributions ready to go in this, what we're calling liquidity account. And I think uh, we should continue to point out that a Roth, if you have it, can also be an appropriate liquidity account. Um, because it has that same, you're able to position it for ready access in a cash like investment choice. And because it's in the Roth, it has no tax consequences as you take, uh, out money to spend from it. So that's always a good backup plan. If you don't naturally have a bank asset based liquidity account, that's appropriate.

Speaker C: And when Chris and I both talked about a Roth, everybody please understand, we get it, it has to be a qualified distribution. So it is potential that if you didn't have the Roth for five years, there could theoretically be some tax implications. We are assuming that you are taking a qualified distribution. Your Roth is more than five years old and you are either a over 59 and a half, b dead doesn't help you, helps the beneficiaries, uh, A, B, C disabled or D buying a first time home and taking out no more than 10,000 of interest. Here we're assuming she has a roth more than five years old and she's over 59 and a half anyways or someone would have wrote and said, hey, you said there's no tax implications. There could be. We understand that, but we're just assuming she's qualified this so she continues. Folks, I started listening to your retirement podcast and others, so not just ours. And we encourage you to listen to others as odds isn't the only approach to retirement planning. About five years ago, your podcast has completely changed my assumptions and plans. Some of my new guidelines that I have adopted are the following. Now she continues, she has five new guidelines from the first two that she always thought 10 years ago were going to be the ones she was going to pay attention to. She has five more things that she's Trying to build into her plan. She says one, realize your health and physical ability to have fun will constantly decline during retirement. And so available funds should account for this. It seems so obvious that I'm embarrassed that I did not think of this before. I now assume the basic understanding of go, go, slow, go, no go phase of retirement. We already feel the slowing down as we, um, are both age 64. I feel it too. Listen, I'm not quite 64 yet, but I worked outside a long time yesterday in the yard and garden and yeah, I felt it. Couple of things Chris and I did not coin. Go, go slow, go, no go. Another gentleman named Mark Stein or something. Mark Stein, uh, from Colorado, who I think passed away in the 70s or 80s or 90s.

Speaker A: No, more recently than that. Yeah.

Speaker C: Oh, is it okay?

Speaker A: But I think this came out in the 90s. Yeah.

Speaker C: Okay.

Speaker A: Yeah.

Speaker C: And he coined gogo slogo no go. As different phases of retirement, Chris and I apply it solely towards fun. And she's picking up and I like how she realizes that the health and physical ability to have fun will decline as you go through go, go slow, go, no go. It's just a common fact of life. And I point that out to you all the time. And I tell you repeatedly that at any point in time you will become the other guy. We all will. Sadly, here at the office. Many people we work with have experienced, quote, unquote, other guy scenarios this year. And Chris this morning when we just had another one happen, uh, pointed out, he says this is a fact when you deal with retirees as we solely deal with. And it's just been a difficult year for us with the amount of other guy scenarios that are happening to people throughout country, because we work with people throughout the country and someday this will happen at any point in time. And it's why we encourage people to spend on fun. But it's one of the reasons, uh, Dr. Snyder comes on the show now as a regular guest and he'll be on, I think in the next week or two, uh, again for another appearance. Trying to get you to understand about health span and lifespan. Everybody keys off of lifespan, especially when you use a 4% safe withdrawal rate that's projected to cover a 20, 25 or 30 year retirement. Instead, we try to concentrate on the go, go slow, go, no go to fun, or what Dr. Snyder calls the health span. The amount of years as you enter retirement, which is the last third of your life or less. It could be the last 20% of your life, but it's the tail end we don't like hearing it, but it is the truth. And the amount of years are not all enjoyed equally. The best years for nearly everyone is the first few years, and it does begin to go downhill. Anything you want to add to her number one point, Chris?

Speaker A: Uh, no, I think, uh, we've talked about that go, go, slow, go, no go concept enough that, um, people should be paying attention to it, right? If they, if you, if you didn't come to the podcast already, uh, hopefully you've heard it enough and it makes sense because that's, you know, how people's lives progress. They don't. It isn't the same year after year after year. You might have spent some a long time with kind of a very similar mental and physical capabilities, but at the beginning of your life, things evolved very much so year to year, towards the end of your life, they're going to evolve as well. Some might call it devolve, but it's, it's gonna, there's gonna be changes and that's going to affect how you live your life. And how you live your life drives the financial situation for yourselves. So it's, it's gonna look something like the go, go, slow, go, no go. We just never know how long each of those phases lasts, right?

Speaker C: And we freely concede, listeners, there's anomalies on both ends of that bell curve. The, the worst anomaly that we personally have seen in our office is the other guy happening 11 months into a client of ours retirement. 11 months in, they were handed some horrible news for one of them, and it resulted in one of them passing away extremely early in retirement. And then there's the other end of the spectrum. I talk openly about my friend Ned, who I have hiked or walked with on a regular basis, who's 19 years my senior, and he hikes and walks at a pace that I struggle to keep up with. And he freely admits he's an anomaly. He's a freak of nature. You would never imagine this guy is 82 years old, but for most people, we fall in between that realm. That's where the bell curve is. The majority of us fall in. And it ties into her second new realization. She says, to realize your mental abilities to manage money will decline as you age. I have enjoyed being a do it yourself investor, but I accept a day will come when I am not able to understand all the details and my husband has no interest in this. Therefore I'm trying to keep it simple. Why don't you talk, Chris, about. We've been, We've Been preaching this for years and it uh, began with a study from Harvard that impacted me greatly many, many years ago. I can't even remember when this study came out. But then a quote unquote newer study that didn't attempt to disprove Harvard, it actually attempted to take Harvard one step further. But those two studies have been crucial in my thinking as I designed the fund number approach to retirement planning. And what are those studies, Chris? And I get it listeners, you're not, it's always going to be someone else. You are going to stay sharp as a tack. But Chris, what are these studies referencing?

Speaker A: Yeah, so the original Harvard study tried to determine at what point in your life had you reached maximum competence in your brain's ability to understand financial concepts. That, ah, that part of your brain that had both the quantitative skills and the experience. Right. We, we learn a lot and become smarter about something simply by living life and, and, and having experiences. Uh, they wanted to figure out where, where are humans typically reach the pinnacle of their abilities in that area. And they found that it was um, you know, obviously in the population the average is 53 years old and that uh, leading up to that you're going uphill, you moving, you're gaining more experience and computational power in this regard. Uh, and after 53 there's a decline. Now of course these are averages, always exceptions and you don't drop off a cliff at 53. But uh, uh, as you age the acceleration downward, uh, increases. So that is problematic. Which is why people late in life struggle maybe to think about things, complex things involving numbers or finances with the same level of confidence and accuracy that they could maybe 10 years prior. The follow up study by Texas Tech discovered that people's confidence in their abilities in these areas don't change. And that combination of those two things I think goes a long way of explaining why there is elder fraud. There are so many people as they age that get taken advantage of by scammers and schemes and, and nefarious actors of all types because they don't realize their processing power has diminished and so they don't second guess themselves or reach out for help or what have you and they just get taken advantage of by people who target these individuals. So it gets very dangerous. And so uh, there are so many people you hear stories of, I'm sure everyone out there listening, either as firsthand knowledge or not too far from you, uh, someone who's been taken advantage of and oftentimes when you hear who it is, you're thinking, how can that possibly be they were so smart. There's no way someone tricked them. There was no way they fell for this scheme or scam. But they did. But they did. And these two studies, there's a real decline, especially the deeper and deeper you age past 53, uh, and the treacherous part of the really, really scary part is the decline in your confidence doesn't happen. So you don't realize it. You don't have enough, you know, self reflection to understand that these, these uh, powers you used to have, these abilities you had are, ah, greatly diminished now. And it's just the perfect recipe to be taken advantage of. So that's what really builds a core component of our approach to retirement planning. Keeping it simple, simple to manage. If things are simple and straightforward and easily understood, then there's much less chance for mistakes. It doesn't have to be a scam. Some people just make a silly mistake. But you can avoid it. Not prevent it completely, but hopefully lessen the chance of mistakes, of the complexity itself, sucking you into someone taking advantage of you because you don't know why things are structured the way they are, that type of thing. So keeping it simple is, is a very powerful part of any viable plan as you age.

Speaker C: Excellent. And it kind of ties into something called Sutton's Law. Have you heard of Sutton's Law? You might heard of Willie Sutton, but they sometimes call it Sutton's Law. Do you know who Willie Sutton is?

Speaker A: No, I don't think I do.

Speaker C: Willie Sutton, he denies ever saying this, but the reporter says, oh no, he did say it years ago. I think it was in the 1950s. A reporter asked a fame, uh, well, he was famous now, but he wasn't famous at the time. Repeated, um, bank robber, why do you rob banks? And he was alleged to have said, that's where the money is. Later he said he never said that. And the reporter made it all up. I don't know, but it's been attributed to him. His name's Willie Sutton. And Sutton's Law pretty much says to go where the opportunity is, go where the easy money is, go where the opportunity is. That's what it's come to mean. And Sutton's Law does apply. And it's something that drives me as the owner of this firm into what we're trying to do. I've shared many times that I don't feel my firm is quite at the level I want it to be as a full retirement planning practice. We have major changes coming on board now. We'll share more as time goes on. So if you're an existing client, you'll start to see some major changes being announced. But one of the final things that I want to get to is a way to offer advocacy, even more advocacy than what we currently offer to protect you from Sutton's Law. Because there's no surprise why more fraud, financial fraud happens to seniors. They have the money and they don't have the mental capacity anymore to protect themselves and they lose money more. So I once heard a, uh, quote, I don't know if this was based on statistics or not, that said more money is stolen from a senior through a power of attorney than at the barrel of a gun. And what they're saying is a lot of times it's your own family who is stealing from seniors. And we constantly in the industry hear stories from the, the uh, industry related, uh, magazine, they're not magazines anymore, but online services talking about fraud that happens to clients of advisors. And sometimes the advisor can pick up on it, other times they can't. But a lot of time the fraud happens from family members, especially when your family members get dispersed throughout the country. But one family member is still close to mom or dad, so they have the poa and the other siblings are just happy that someone is there to help. And meanwhile that person is robbing the parents blind. But not only that, if it didn't happen from your own, uh, flesh and blood, if you will. Seniors are often the victims of fraud. I have my mom's phone set up. She don't listen to the podcast so I can say it where a number that's not on her contact, uh, list will not ring through. Because when I was at her house not too long ago, over a year ago, but to me that's not too long ago, her phone rang constantly and it was just these junk scam spam calls. We all get them. I have my phone set up for the same thing and every day I have to delete two or three voicemails that went straight to voicemail, promising me this, that or the other thing. But now I recently read an article on AI and how this is just tremendously raised, uh, the stakes because it can quickly and efficiently and effectively create websites that look so real. Voicemails that sound like they came from someone the senior knows. It's, it's horrible and it's not going to get any better. That's Sutton's law. Go where the opportunity is. And these sobs should be strung up by the you know what's and hung there. But right now that's not happening. And they are Stealing repeatedly from those who can no longer protect themselves mentally as they used to. But as Chris pointed out, they don't feel they can't protect themselves. Oh, talk about being stubborn. Try talking to my. I had to do it behind her back. She wouldn't let me talk. I don't want you doing that. I'm not going to fall for these things. Okay, Mom, I believe it. Can I say, see the photos? I wanted to see the pictures of jigs again. And then I set a setting on there so she doesn't get these calls. And we just have to do what we need to do to protect those we love. And this woman is picking up on it and saying, hey, I get this. I'm kind of into it now, but I'm not going to forever. And I'm glad that she's accepted that and admitted to it. You can't plan for a problem until you admit there's a freaking problem. And any of you who are in our age bracket, this woman is around my age bracket and Chris's age bracket. We know we're not the same. I was watching college football this weekend, and I forget which game I was watching. They're all blowouts. It might have been the, um, Ohio State one, but the, the. The kick holder, the holder for the. For the field goal kicker. He had to keep going up and down, up and down, up and down. They had a re. Kick a couple of times, and another time there's a timeout called and I would watch. This kid had to be, what, 18 to 21, 22 years old, just be kneeling down and didn't even need his hands to push himself up. Just jumped right back up like it was nothing. Up, down, up, down, up, down. I can't do that anymore. I can get up, but I got to push myself up or pull myself up. He was effortless. And every time I see young folk do this, yes, I'm in awe. But it also makes me realize that was you. They're not doing anything, Jim. You couldn't do yourself 40 freaking years ago. Can you imagine now where you're going to be 20 years from now? I know mentally I am not as sharp as I used to be. I can't tell you how many times I struggled to find a word. And after. What's that? Where's the word I'm looking for? Or I walk into the back room or into my pantry, tell I come in here for again, I take a second or two. Uh, that's right. That's what it was. Sometimes even talking on this show or talking to staff, I don't talk to clients anymore. I'll lose my train of thought if I'm trying to think of two things at once. But in the olden days, I could. Our brains do not think twice, two things at once. But they used to be able to switch so quickly between each thought. To us, it seemed like we were thinking two things at once. Well, that switching doesn't happen too fast anymore. So you have to accept that this is coming and plan for it, whether it means trying to. To eventually say, hey, I'm going to hire someone to help us or find a family member, uh, but have another family making sure they're checking that family member. Just, you have to put something in place for the inevitable that is likely to happen. And again, we call this, or, uh, I call it now, advocacy. And I try to tell my staff, here are the changes that are going to happen over the next 12 months. And Chris is hopefully shaking his head because he knows there are major changes coming. I have shared with everyone that the cocoon is done. The butterfly is ready to come out. I've talked about this a couple of years ago. We'll share more as time goes on. But the point is, I told them one of the big things is going to be advocacy, is to try to help as best as possible to prepare as people we work with and people who have trusted us begin to decline, myself included. That's why I called G2, the younger folk who are going to take over for Chris and I, we're not going to be able to do this forever. Number one, we spend our lives helping people retire. Don't you all think we should retire, too? But number two, I'm not naive. I'm slowing down mentally and physically. And I don't know, in another 10 years, to what degree am I going to be able to do this? And I have to start looking at, okay, you guys are taking over. Call it the G2 here in the office. And it's something I always knew when I started my own practice that sooner or later I got to pass it on. I get to sell it, close it, or die holding it. I hope it's not the latter. But we have to prepare. I have to prepare the firm for it. You have to prepare yourselves for it. And I think that's the big takeaway I got from this woman. I don't know if she got that through listening to our show or others, but that's her number three thing. Excuse? Her number two thing. Her number three thing. And this Is something I. This definitely is from our show, unless there's other people who say it, but none that I know of. She wrote, and she puts in quotation marks, I can't tell you what to do with your money until I know what your money must do for you. Close quotation marks. Then she writes, this simple principle has helped me as I consider our retirement savings. That comes back solely to me. Kris knows this. I shared with this. And it's one of the reasons I always said I cannot just take on asset management clients. We have to do a plan for them. First of all, we're retirement planners. But how can I used to. This was my exact quote when just going back 20 plus years, I would say to people, how can I or any financial advisor tell you what to do with your money until I know what your money has to do for you? And that meant so much to me because you don't know how many times I would be working with people and they say, oh, yeah, I have an advisor here. He put me m in. In this annuity or, uh, they put me in this. Or this private real estate thing or whatever. They just had all these investments, and I asked, what are they for? How did they come up with it? I don't know. They just told me, well, where's the plan that they used to determine this? What plan? Oh, my God. That just drives me nuts, folks. How can anyone tell you what to do with your money until you know what your money has to do for you? Or until they know what your money has to do for you? You guys are, uh, diyers. How can you invest your money until you know what your money has to do for you? That somehow resonated with this woman, and she's going to great lengths to try to put her plan together so she can determine this. Anything you want to add on number three before we get to number four?

Speaker A: No, I think that's key. I think it's. If you ever have somebody telling you what to do with your money and they haven't asked you, wonder why they came up with that. I mean, it's particularly important in the distribution phase, but even during the accumulation phase, I think there needs to be a reason that's justifiable for any suggestion. As far as your investments go, number

Speaker C: four for this woman. Remember, she's replacing what she thought were the two rules of thumb with five rules of thumb. She's number four. Know how much you need to spend each year on the basics of life and safeguard those assets to meet those needs. That's very, very close to what we call your minimum dignity floor. She, she calls them the basics of life. We call them mdf. Food, utilities, transportation, housing and health care and safeguard those assets to meet those needs. She doesn't explain how she wants to meet the needs and that's fine, she doesn't have to. And it ties into what we call here the uh, minimum, minimum dignity floor. Delay period. We have the minimum dignity for delay period need and post delay period need with the delineating factor or the delineating. No, what's that word? Don't. Don't help me out here. Um, the delineation line. Did I get it?

Speaker A: Mhm. People know what you're talking about. Yeah.

Speaker C: Well, how do you. Well fix it? You know, you can say my, my native tongue. So how do you say it's not delineation there it is.

Speaker A: Yeah.

Speaker C: Oh, so I said it right? Did I said delineation? No.

Speaker A: Well, you just did. But you were didn't say that before you said delineating line, which could work pretty good. Thank you. Yeah, it was pretty good.

Speaker C: The delineation between minimum dignity for delay period and post delay period is around age 70. You all know that from this whole series we're doing. I don't know how she determines it. That's how we determine it. I just like the fact that she's picked up on this and she's kind of said to herself, hey, there's a core group of expenses. She calls them the basics of life. And I need to make sure I put enough money aside for those needs. And that's what we believe in. The delay period and post delay period. If none of that makes sense, go back to I think the second show in this series, which would be about six, seven weeks ago now. And listen to that. We talk about those two time frames. The delay period MDF shortage, the post delay period MDF shortage. The whole point of that exercise is to help you identify two of the main debits, or we call them positions or toys from the toy box, if you use my metaphor. The main amount of dollars that are going to come out of your portfolio initially in retirement, as you try determining your fund number are ah, to satisfy those two numbers, if you will. Delay period, MDF shortage, post delay. And then the fifth thing that she keys in on, after all the planning and separating funds according to their purpose, what's left is fun. I think she's on to something there, but I want to make sure because she kind of glosses over it. Separating funds according to to their purpose. I hope she's addressing seal. That's our new verbiage for savings for emergencies, aging and long term care. After you take care of the minimum dignity floor delay period, minimum dignity floor post delay period, guaranteed inheritance for those of you who need it. Very few of you will, but some of you definitely, if you have a special needs child, will have a guaranteed inheritance after those three. The optional one is the savings you want to put aside for emergencies, aging and long term care. I think she kind of sums it all up in there, even though she doesn't identify it. Chris on number five, what say you on her number five?

Speaker A: Yeah, just make sure when she says after all the planning. So she didn't enter in her other four rules of thumb up top. She didn't really mention a lot of the things that should be considered, which is, you know, prepare for, you know, survivorship, if there's any survivor impacts, any obligations that you put above, more fund spending for yourselves, like legacy goals or really anything, anything that you put in the priority list above. Fun needs to be addressed with your assets. And it's only then once you've uh, once you've addressed everything that you decide is worth addressing and we have our own thoughts on that to include things like Seal, like Jim mentioned, but once you, once you do that, then what's left over could be considered for fun. Uh, you know, like you. I've noticed she didn't mention specifically some of those things we would likely want people to consider up above. But it's kind of implied with this phrase after all the planning, you know that, uh, true. After all the planning of all the things to be worried about, what's left is fun.

Speaker C: She says after considering those five, she says based on all these principles, I have now modified our retirement planning as follows. We no longer assume 75 to 80% annual income to be our spending goal in retirement for the last four years. I have tracked our total annual spending, which includes a good amount of fun, and assume 100% will be needed each year in retirement to meet our needs for a quote unquote good life. So she is saying, hey, after actually being retired for four years and doing this and tracking our, uh, spending, we're not spending 75 to 80, we're spending pretty much 100% of our pre retirement income. And that's the point I was trying to make. Fun will eat up the two main savings, or I don't want to call it savings, but cash flows that will be adjusted downward early in retirement. Commuting costs and savings that you were putting into your retirement accounts. Those two don't disappear. And that's what this 75 to 80% rule of thumb that I don't know why it exists and why it's being touted all the time, but that is just assuming. Hey, you're not going to be spending the money on commuting. You're not going to be spending the money on savings for retirement. So you don't need it. No, you're going to turn around and spend it on fun. What the hell, you're retired now. It's a permanent vacation. What do you do on vacations? You spend freaking money. Retirement is a permanent vacation, especially in your go go years. I was surprised she said she's been spending 100% of her pre retirement income for four years. I'd have spent more. I have every intention of it when I finally quote unquote retire, which is going to be a lot different than the retirement you all think. But when I do finally retire, I hope to be sharing with staff since G2 will be taken over. Hey, I'm. Don't even try reaching me. I'm gone. I'm. I'm in Alaska for a week fishing or somewhere doing something. Anyways, that was her rule number one, the, the modification number two. I have allocated our different retirement accounts for different purposes. And what she shares with us now folks is her version of investment positioning. Is that what you kind of got when you looked through how she, she did this? It's kind of her version, huh? She, she does it by account, right? We, we don't. When we do investment positioning, which is spending segmented investing, it is simply investing your money based on the risk capacity and your, to a lesser degree, your risk tolerance, but mostly the risk capacity of those dollars. So money that is going to be spent early has a low risk capacity. Money that is anticipated to be spent later in retirement. Maybe the L of the seal reserve the long term care. If you retire in your 60s, you kind of hope you're not going to need that money until well into your 80s. Or for those of you who do have the growth and legacy position. And we shared about that on this previous series. We just did. So go back and listen to show I believe it's three and four where we talk about that growth and legacy position. The one with Jacob on it. He definitely nails the growth and legacy position. But do keep in mind, we believe once you find your fun number, you had to subtract all these dollars from your portfolio. Portfolio already. Mdf delay Period mdf, post delay, period, guaranteed inheritance if it applies fun vision, not the fun number which gives you an initial go go, slow go and no go. Breakdown your seesaw assets that get pushed to the left or the right of the seesaw. None of this makes sense. Go back and listen to the earlier shows in this series. But once you've done all that, what is left is your final fund number. And we just believe if you take in all this time and effort to identify all this spending, why throw it all back in and use a total return portfolio where you have no clarity in your dollars anymore and you're just looking at one big ass portfolio that might start going down because everything doesn't go up all the time. And it's going to make you nervous if you see this portfolio dropping and you might not spend on fun. So by keeping it very visual see through portfolio, it will hopefully help you overcome the emotional difficulty of spending, especially spending on frivolous fun. Because at any time you could become the other guy. She borrows from this strongly and I like what she's done. We'll share our thoughts, but she does it more at account levels, whereas we do it at the actual spending level. And this does not surprise me. It's because right now I know of no retail software that will allow a, uh, DIYer like yourself to be able to map specific investments held in specific accounts and be able to look at them across the board and say, how did these six investments held in these four different accounts do collectively and did they beat the targeted spending inflationary rate that I'm trying to beat for this particular investment position? That software doesn't exist. We have it. I shared with you the company and they didn't even know they had the ability to do this. They really stumbled into it after listening to Jacob and I for two years bitch to them that they told us we could do this when we were thinking of hiring them, only to be told once we did sign a five year contract with them. Oh no, it doesn't quite work that way. I was ticked off. Jacob will tell you that. And you all know the whole story. I was out there with them in, in Florida and Jacob was with me and I was very upset and voicing it and boom, it like hit this guy on the side of the head. It's like if it was a cartoon, a little light bulb would appear above his head and he says, come with me. And he snaps his fingers and he starts walking away. Jacob and I shrug our shoulders, we go with him. He goes to another Guy, he starts talking and lo and behold they find found a way to do what we want to do on a feature that they had long ago programmed in to their software. Long roundabout story to say, hey, this software doesn't exist. And we just kind of stumbled into it. So it doesn't surprise me that she hasn't broken her investment positions across multiple accounts as much as she has in each individual account. That said, I like what she's done, but I have a couple of caveats and I'm sure Chris does as well. So she says my bucket one, which is to be a good life, she says, will be covered by our, uh, always taxable 401ks. So she appears to be entering retirement or in retirement where she wants to spend the always taxable 401ks first. And she writes, based on tracking our annual spending for the last four years, I assume that our total spend for the first year will be about 140,000 with an assumed inflation rate of 3%. And I will not turn on any secure retirement income. And she puts in parentheses all what she has is Social Security until age 70. I estimate our total delay period spending will be $800,000. Very easy to figure out, folks. She has the cash flow. She's not taking any income until 70. She just added those cash flow items up during her quote unquote delay period, which goes from retirement until all her secure income is on, which for her will be age 70, Social Security. She just added it all together. She gets 800,000, she says, so I have this covered plus a buffer to bring it to 950,000. And we hold this inside our two 401ks inside money market accounts. She probably has them in a stable value fund, but maybe they are true money markets. The remaining 2 million is invested in low cost ETFs. I don't believe ETFs are in 401ks yet, folks. So she most likely has low cost funds. But irrespective she's using low cost index options inside her 401k. Anything so far with what she said there, Chris? No.

Speaker A: A lot of 401ks that allow you the what brokerage link option in there would give you access to individual securities. And um, so maybe she has a, and it might not be technically a 401K. I know the 401A's oftentimes provide you access to individual securities and um, therefore ETFs. So she might actually have ETFs in

Speaker C: there or she could have a brokerage account option in her 401k where she can go out and buy what she wants.

Speaker A: Yeah, that's what I'm talking about.

Speaker C: ETFs themselves are generally not available. In 401ks, there's a move to make them, um, available, but they generally are not available. So I don't want to read the entire paragraph, but in a nutshell, she goes on to say, hey, based on this, the remaining $2 million I project will grow to about 2.75 million when I'm age 70. So she just said, Hey, I got 950,000 off to the side in money markets to cover me until 70. On the the basics life in her spending that she wants to do during that time, as I'm spending that 950 down, my remaining 2 is projected to grow, I meaning her projected to grow to 2.75 million. She said, then I can turn on my Social Security. I also anticipate my expenses will be 170,000. At that point, subtract out the 60,000. For my Social Security, I'm going to need 110,000, which just happens to be close to 4% of uh, 2.75 million. So she feels she has the post delay retirement period covered as well. But she does admit this isn't guaranteed lifetime income. It's not simple. It's going to require management. And she said at that time, we'll decide if we want a spear or continue with our, uh, methodology. And I'm perfectly fine with that. We've often said on this show when we come up with the dollar amount to reserve for the post delay retirement period that has no end date, the delay period does. That's why we can easily. She did. She came up with 800,000 and she built 150,000 buffer it. 950,000. That was easy for her to figure out. The post delay is hard because she didn't know when her and her husband are going to die. None of us do. And because of that, that's when we like to cover with lifetime guaranteed secure income. But we've often said, you don't buy the annuity until the time comes. And the decision is not yours to make. It's the older you. And I like what she's doing. She's saying, hey, I've got, this is my reserve. If I want to do it with a safe withdrawal rate, I think I can. But if I want to do it with an annuity, I'll consider it later. So I like what she's done so far. What say you, Chris?

Speaker A: Yeah, I think it's and I guess it's coincidence or convenience that she kind of has in her 401ks naturally about what she needs to cobble together minimum dignity floor protection for both the delay period and the post delay period. Not everyone will have such a nice clean puzzle piece that drops in there. She just, I don't know if somehow she manipulated or did something with these numbers to, to make that case, but it's uh, it did work out nice and cleanly for her that she had just the right amount in those 401ks. So it kind of became the, the logical place to consider the source of your minimum dignity floor protection is, is your combined 401ks just nice and clean that way like that.

Speaker C: And as an aside, she shares for those of you who are curious, because I certainly was, she shares that about with everything that she's described. About two thirds of it is true what we would call minimum dignity floor. And one third is a portion of her fun. And we, this just kind of ties into a question we had recently where someone wanted to share with us that they annuitized they actually bought an annuity to cover some of the fun. It made him feel comfortable. And Chris and I have no problem with it. And she has covered a chunk of her fun in this income plan and we have no problem with that. If it works for you, go for it.

Speaker A: Yeah. And I think that's why she calls it a good life. This is the good life basics, uh, stuff, uh, instead of our true minimum dignity floor concept which under its, you know, most clean definition does not include fun in what we call the minimum dignity floor. But I'm totally open to people who want to build in some mundane fun. We'll call it just kind of the day to day, month to month stuff you might want to do that hopefully you can do until the very last day you're on the earth. Um, so you can make the argument that I'd like to protect that as well just in the same fashion that I do true minimum dignity floor. And therefore I'm going to lump them together. And I don't think there's anything inherently wrong with that at all. Uh, it's definitely a place. That's how you put your own spin on how we approach things.

Speaker C: Perfect. Now, she continues. Bucket two is Roth IRA one and she said she has this earmark as her seal reserve savings for emergencies, aging and long term care. She writes with our quote unquote good life covered by a 401k. I will set aside the $675,000 in Roth IRA1 as our reserve for emergencies, aging and long term care. And also to cover any mistakes in all of this planning I'm doing. That's a whole paragraph. I have no problem with that. But I want to point out just one thing. We always tell people that we work with when we're putting their positions in place, especially with the investments. Because we can easily, again with the software that we can use, put some of this position's investments in this Roth, in this IRA and in this brokerage. We can spread it all out that way. But we often tell people these positions are etched in Jell O, not in stone. We have to reserve the dollars. We're going to reserve them, um, in what makes sense to us today. But when the actual spending happens, we very well may take from a different tax style account. Because remember, when you do anything in retirement, you should do annual tax planning every fall. Try to figure out what do I do to optimize my taxes this year, delay any more spending into next year, pull next year's into this year or anything in between. I don't mind at all how she's mentally accounting Roth IRA 1 as bucket 2 specifically for her seal reserve savings for emergencies, aging and long term care. But if either her or her husband need long term care, she may take it from the ira. I say may because I don't know what the future is going to bring. But the reason is even with the seven and a half percent, um, hurdle if you will, a bogey if you're a, ah, football, not a football player if you're a golfer, sorry, a bogey of. Before you can deduct the, the medical expenses, most true long term care expenses will be deductible and if they are at the time, she doesn't have to make any changes right now. This is something that the older you is going to have to remember or as you pass on to someone else, you let them know, hey, um, if I actually need some of this money for long term care, even though I told you it's inside my Roth, really look every year and take out what we can tax free. Because of the deductibility of many of these expenses, take them out from my IRA even though they weren't specifically earmarked for that. That's the only thing that I would share there. What about you, Chris?

Speaker A: Yeah, I think it's worthy of maybe taking that look at the tax implications of this. It is another. She just has another position that kind of cleanly fits one of her accounts. So I Understand the logic and the, you know, simplicity of it. But um, yeah, you might add one. One complexity here is you might carve off some out of the 401ks for this and bring Roth over so you make it more accessible. Although one can make the argument what better asset to inherit for kids if they don't end up needing it and hopefully they don't need anything for emergencies or long term care or mistakes and errors in the plan. So um, there's not just one way of doing this right. You can, whatever makes most sense to you and you're most comfortable with is totally fine. But I think it is worthy always of thinking about, you know, the tax implications, uh, of having lots of deductible medical expenses if you actually do need long term care. So the more appropriate reserve might be in something that's uh, pre tax dollars since you'll likely be able to access a lot of those dollars without tax due to the deductibility of um, medical expenses.

Speaker C: All right, Bucket three, or she calls position three, charitable giving and other shouldn't say what that is covered with our brokerage account. With our good life covered by bucket one and our reserve seal reserve covered by bucket two, our $320,000 brokerage account will be used for charitable giving so we can avoid capital gains which are about 35 to 40% of the current value of our brokerage account. It can also be used as a second reserve buffer as needed for other things. We used to be able to play sound effects and if there was the ability to keep doing that, I would tell Chris to press the button. I have a huge issue with this and I want to encourage her to rethink. Think it. Your charitable bequests, if they're at death, need to be part of bucket one, your IRA. Excuse me, 401k, not brokerage assets that can be inherited by a human with a step up in basis tax free. Also, when you become 70 and a half or your husband, you have two 401k, so I'm sure one's for you, one's for him. When you guys become 70 and a half, if you want to keep the 401k, you can, even though I don't feel you should. But that, well, I don't want to word it that way even though I feel moving it to an IRA has other benefits. It's whatever you want to do, not what I say, but you can do QCDs from an IRA, move some or all of the 401k at 70 and a half and if you Were going to do annual charitable donations. You're saying you're trying to give to charity to save the 30 to 40% cap gains that you have embedded in your brokerage account. Why don't you let those cap gains keep growing and get a hundred percent step up in basis at death or use them as a true last ditch emergency. If your Roth assets, which are significantly greater, 1.3 million as opposed to 300. If you go through all your Roth assets with an emergency, who gives a damn about any taxes that are owed at that point on your brokerage account? There's a major emergency going. But it would make far more sense if you do annual gifting to charity to take it from position one bucket, one, whatever you want to call it. Your large 401ks. You just can't do a QCD from a 401k. You got to get that asset into a IRA. You don't have to move at all, but move enough into the IRA to do a full 100% QCD. There's no taxes owed. No taxes at all owed. You don't want to leave the IRA or 401k to a human if you can avoid it. It's the majority of your money. But the IRA or 401k is IRD to the IRS. You don't want to leave IRD income with respect to a decedent to a human, because that human is always going to have to pay income tax on it. A brokerage account would receive a step up in basis, at least on the current tax law, and the human pays no taxes on it. So that would be my one thing I would rethink, think using brokerage assets for charitable bequests and instead look at the 401k which would have to have some or all of it move to an IRA to do QCDs. But I think from a tax perspective, QCDs are going to make much more sense.

Speaker A: Yeah.

Speaker C: What do you think, Chris?

Speaker A: Yeah, once again, I think bringing a little more of the tax story into some of these positions makes some sense. And QCDs, uh, can be very powerful for the charitably inclined. Uh, there's no more efficient way of moving money to a charity where no one ever paid taxes on the dollars, which is talk about a beautiful situation. There's very few things in life where there were no income tax implications. And having earnings that were tax deferred, turning those into charitable donations that were also not taxed, uh, you can't get much cleaner than that. So yes, I think once again, a little more little More tax thought on this might change, uh, opinion on, on a couple of these things. Perfect.

Speaker C: And her final position, because y' all have been keeping track, you say, wait a minute, there's still one more Roth. Exactly. Roth number two, she said, is bucket position number four entirely for fun. And I have no problem with that one at all. None whatsoever. It's a great liquidity account in the sense she can take money out whenever she wants. If it's invested appropriately, it's not going to be subject to market volatility, or at least the money that she anticipates spending in any given year is protected. The rest can be your mark for growth. And it's not going to have tax implications, it's not going to push into higher IRMAA brackets. It's perfectly great place to have a fun position. I have nothing against it, but I would encourage her to do annual tax planning just to see from a tax perspective, especially if you still have room in the 12 bracket, and I'm not sure you would, but if you ever did for one reason in any given year, might make sense to take some of the fun out of the 401k. Even though the 401k is not earmarked specifically for fun, it's earmarked for your minimum dignity floor or what you call the basics of life. Again, I have no problem with it, just as Chris rightly pointed out. Just, just bring annual tax planning into the equation a little bit. But I have no problem with, with Roth 2 being bucket 4 for her or position 4, as she puts it. What say you, Chris?

Speaker A: No, I think, um, having that Roth, first of all, it's nice as part of your fun number, because the whole idea is you want to be able to spend it as fast as you want, which means maybe significantly debit that account for some bucket list items or really thrilling activities that you might do early in retirement. And, um, what might dissuade people from doing that? The tax consequences of such a large distribution. So having that access accessible in the Roth actually sounds, uh, freeing. Right. Gives you permission a little bit more to uh, to, to spend from it. So I think that's actually from a, from a psychology of retirement planning aspect can be quite powerful.

Speaker C: Right? And she wraps up by saying they don't need a guaranteed inheritance. And we didn't assume they did. Few people do, but sometimes they do. We do not need a guaranteed inheritance for our son, daughter and grandchildren. And I also feel fairly certain there will be sufficient leftovers from all we have for them. Plus we Own our home and anticipate having 500,000 of equity also available. So there's a good little pool right there folks, for the L in seal savings for emergencies, aging and long term care, especially at the death of the first spouse. At the death of the first spouse, the surviving spouse may be a little bit more amenable. Correct. To going in. See? See, I was going to say amendable, but it's not. It's amenable. A little bit more amenable to going into perhaps assisted living at that point. And we often use home equity as an available asset for the widow or widower. So she has a lot of flexibility here folks, with another half million dollars of asset, the equity in her home that she hasn't even accounted for. She's not trying to optimize. She says our tax ordering number is 210. My only saying on that part of her email, make sure you ran some projections for survivorship to see if there will be a widow or widower tax penalty, especially if one of you passed away early in retirement. We generally have people when we do this scenario, we have someone dying five years into retirement or age 70, whatever is longer. That's when we have the first person pass. The first person passing at 90 is there's no widow widow penalty probably at that point to the degree of the surviving spouse doesn't have too much longer to live themselves.

Speaker A: Probably.

Speaker C: But when someone dies early in retirement, five years into retirement or age 70, what does that look like from a tax perspective and a survivorship perspective? I think with your assets you'll be okay. I'm more concerned with the two one zero ordering number. Just make sure it truly is two one zero and not one two zero. Look to see if there would be a widow widower tax penalty, a meaningful one that perhaps pushes you into another IRMAA bracket or subjects and significantly amount more of your assets to compressed tax brackets. Remember that 401k which by your own admission at 75 years before RMDs even begin, is going to be 2.75 million, perhaps could be more, could be less. By 75 when your RMDs begin and I don't know how old you are and your husband is, but if you're similar in age, those RMDs are going to be fairly steep. But at, uh, death, especially if the two of you are close in age 1, 2, 3, 4 years away, the RMD is going to be nearly identical whether one or both of you are alive. But at death, those dollars are being jammed through Much tighter brackets. And you also have a loss of Social Security. One of the two Social Security is. The smaller of the two goes away so you have less secure income. Higher taxes, it's a double whammy. You're losing secure income and you're giving more money to the uncle. So make sure you're looking at that. I have nothing against 2, 1, 0. And if you don't understand tax ordering number. When you do tax planning, folks, just like she began with saying, how can I tell you what to do with your money until I know your money needs to do for you? You can kind of turn that around to tax planning and saying, how can I tell you how to do tax planning until I know who the hell I'm tax planning for? Am I tax planning for two of you as a couple, one of you as a widow widower, or none of you as an inheritance? 2, 1, 0. She's made it clear the kids, even though I'm sure she loves them dearly, are, uh, no longer her top priority. They get what's left over. And she admits, and I agree, there'll be some money left over. Instead, she needs to make a determination. Should it truly be two or let's look at the one. That's all I'm saying. Look at the one and see what that could potentially look like. And it may make you change your mind on some of your tactics planning anyways. So she admits, this may not be quite the way you do it, but it kind of works for us. And she says, I know I still have more homework to do. She says, I still have to figure out what to actually buy as my investments. Yes. And we don't share on this show what you should buy. So, yes, you do have to do that. She does say, I know we have to optimize for tax efficiency. Our tax number is 2, 1, 0. Perfect. It's there. I already spieled on that same thing with your, your charitable bequest. It's all about tax efficiency and tax planning. And Chris shared on that. She said, but number three, I need to make sure my husband can understand and follow this. If I'm not able to. I'm considering hiring a retirement planner ahead of time and walk him or her, I guess, through in my absence. I have nothing against that. And I shared openly that I think eventually many of you DIYers will want to hire someone. I would be careful if the person you hire is going to be an uncapped Aumer and is going to try to put all this uniqueness together for you, but charging you based on your wealth rather than the complexity of your situation or based on the actual time it's going to take him or her to do the work. That would be the only thing when it comes time to hire in someone. You all know. I despise the AUM model. I think it's a, uh, horrible, horrible thing. It's a wonderful thing for RIAs and investment advisors. They make a ton of money off of it. It's not so good, in my opinion, to the client at all. So I have nothing against you hiring someone in the future. Just make sure you understand how you're going to actually pay them and that they believe and understand what you're trying to do. But I would share openly. Make a video to your husband. Very easy to do nowadays. Sit at your laptop, sit in front of it, share the screen, walk them through it. Talk to him. You don't even have to tell them it's there. Just say, hey, click this file. If something happens to me, don't write it out. Talk to him. Show him. Explain it to him. Your rationale, your reasoning. I think he'll love hearing your voice. I listened to my dad's recordings. I. I started saving. I shared this with you all. My parents and my mom's, to this day, doesn't know I save. I have much more from her than my dad, but I listen to his old voice messages to me all the time. I love hearing his voice. And someday, when I truly feel comfortable and feel it's not too weird, I intend to teach an AI bot to speak in my dad's actual voice by uploading his actual voice and telling them, you are an expert on the New England Patriots. Analyze the game with me after every game because I miss to this day doing that with my dad. But I'll be able to in the future because I have his voice. Save the voices of those you love, folks. And I think for you, I think you could share a video with your husband explaining how you have it all laid out. The rationale, the reasoning, walk them through it. I think that would be a wonderful thing to do. And if you haven't hired an advisor, tell him, hey, when you hire an advisor, make sure they do it this way. And warn him because he's not into this. Make sure you pay attention to what they're going to charge you. And if you have no problem with uncapped aum, fine. But if you do have an issue with it, warn him on this. So that would be my summary. You can wrap this up, Chris. And take it home.

Speaker A: Yep, sounds good. So, uh, we appreciate people sticking through this series.

Speaker B: Right.

Speaker A: There's always, we kind of do those occasionally on the show throughout the year. Uh, I will. I did want to give people a heads up that this next uh, Q A show we're going to have Dr. Snyder back on. So we've got a reservation, uh, for him to uh, record with us and he's going to go through some of the emails we got, uh, post his last visit. So those of you who've been waiting for a further conversation with Dr. Snyder on, on health related, um, aspects of retirement years, uh, right, uh, 60 plus I guess one might say, uh, stay tuned for that. So I wanted to let people know that. And uh, yeah, I don't have much else to say on this particular one. It's nice to hear somebody uh, kind of putting things together, listen. Sounds like they listen to a number of different podcasts and put their own thoughts together and I really appreciate them laying it out for us and allowing us to share with you all out there in listener land. So I think the, the basic structure of what's going on here seems very uh, promising. And uh, that's half the battle is putting something together that makes sense to you, it's something you can follow and addresses the concerns that you personally have in retirement. And as long as the plan does that and has some reasonable assumptions built into it that can provide you the structure that you might need for uh, proceeding through this fabulous era of your life called retirement. So thanks everybody. Thanks Jim. Uh, we'll be back with you next week with a brand new show.

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Speaker B: This podcast episode includes a discussion on annuities, which are insurance products that involve fees, expenses and investment risk, including the possible loss of principal for variable annuities. Annuities often have complex featuressurrender charges and holding period requirements, and withdrawals may be subject to taxes and penalties. Any references to protection, benefits or lifetime income generally refer to fixed insurance products, not securities or investment products. Guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. This content is for informational purposes only and should not be considered investment advice or a recommendation to purchase any specific product. For additional information regarding annuities, please consult a qualified financial professional to determine what may be appropriate for your individual situation. ETF and Buffered ETF Disclosure this podcast episode includes a discussion on Exchange traded funds. ETFs are investment products that trade on an exchange and involve risk, including the possible loss of principal. ETF values fluctuate with market conditions and may not track their underlying index exactly. They can also trade at prices above or below net asset value. Some ETFs use strategies such as leverage options or other derivatives, which may increase risk and volatility. Buffered ETFs are designed to provide limited downside protection and capped upside returns over a specific outcome period. Returns may be lower than the broader market due to the cap, and the level of protection may not fully prevent losses. Investors should be aware that selling shares before the outcome period ends may result in greater losses than anticipated. Investors should carefully consider the investment objectives, risks, charges, expenses and for buffered ETFs, specific outcome period details, all of which are described in the Prospectus and Summary prospectus available from your financial advisor. This content is for informational purposes only and should not be considered investment advice or a recommendation to buy or sell any specific security. Please consult a, uh, qualified financial professional to determine what may be appropriate for your individual situation.