How much can I take?

How much can I take? – How retirees determine a safe withdrawal rate is one of the most frequent questions clients ask their financial advisors. Chris Boyd, Jeff Perry, and Russ Ball review a recent Morningstar article (see link below). The...
How much can I take? – How retirees determine a safe withdrawal rate is one of the
most frequent questions clients ask their financial advisors. Chris Boyd, Jeff Perry, and
Russ Ball review a recent Morningstar article (see link below). The conversation
includes the pros and cons of relying on the standard rate of 4% as well as the risks of
using stagnant rules in financial planning. Jeff raises the concept of cash flows as
suggested by the “Retirement Smile” concept and Chris highlights the need for
determining an annual withdrawal amount in the context of a comprehensive financial
plan.
https://www.morningstar.com/retirement/how-retirees-can-determine-safe-withdrawal-
rate-2025
For more information or to reach Chris Boyd, Russ Ball or Jeff Perry, click the following
link: https://www.wealthenhancement.com/s/advisor-teams/amr
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Welcome to Something More with Chris Boyd.
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Chris Boyd is a certified financial planner practitioner
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and senior vice president financial advisor at Wealth
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Enhancement Group, one of the nation's largest registered
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investment advisors.
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We call it Something More because we'd like
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to talk not only about those important dollar
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and cents issues, but also the quality of
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life issues that make the money matters matter.
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Here he is, your fulfillment facilitator, your partner
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in prosperity, advising clients on Cape Cod and
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across the country.
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Here's your host, Jay Christopher Boyd.
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Welcome to the program.
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Glad to have you with us.
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We are available on video as well as
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audio.
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You might be used to listening to our
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podcast, available wherever you like to listen to
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podcasts, but we're also posting our videos not
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only on YouTube, but on our own web
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page.
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You can find that by going to somethingmorewithchrisboyd
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.com as well as the Wealth Enhancement Group
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YouTube page.
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Well, that being said, Jeff, let's introduce our
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topic today.
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We've got, inspired by an interesting Morningstar article,
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but you know, I was thinking the topic
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here, we've labeled it, How Much Can I
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Take?
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And I started thinking people might be thinking
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we're just fed up.
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I'm mad as hell and I can't take
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it anymore, you know, kind of a thing,
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you know.
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They could think that, but that's the beauty
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of the title, right?
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When it has more than one meaning.
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Yeah.
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So that's not really what we mean.
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Chris isn't mad.
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Mad.
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Although you could, are you mad?
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Are you mad?
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Yeah.
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All right.
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Let's hope not.
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But it is a common question.
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Like, I mean, people and during their accumulation
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phase of their lives, they're saving their 401ks
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IRAs and saving in brokerage accounts and investing
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and, you know, paying their way, building their
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pay, hopefully paying off their mortgage, all these
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things that people are trying to do to
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get to this retirement dream.
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Right.
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And so they, what's my number?
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How many times do our listeners hear that?
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Clients want to know what their number is,
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meaning how much do they need in their
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retirement assets to be able to retire?
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And that really means is how much can
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I take from my retirement assets on a
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regular basis to replace my income so I
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can live that retirement lifestyle that I've worked
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my tail off to be able to do?
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Because if you, that's the goal, right?
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That's the dream.
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That's the dream of retirement that I can
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accumulate enough assets or cash flow from other
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sources to be able to live 20, 30,
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who knows how many years, maybe longer, in
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a lifestyle doing the things that I want
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to do, spending, back to the previous episode,
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recent episode, spending my time doing things that
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I want to be doing.
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And I think most, most of our listeners
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are probably educated listeners, meaning I don't think
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you listened to us, unless you just came
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across this for the first time, which if
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you did, welcome.
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But most of our regular listeners are, you
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know, students of this, right?
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They're clients who want to know what we're
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doing, or they're people who are thinking about
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hiring an advisor.
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But I think most of you...
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Pay attention to financial issues, personal finance, one
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type or another.
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I think most people have in their head,
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if they're somewhat educated, or have done some
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reading is all right, well, I can take
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4% a year, there's an old study
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that says I can take 44% a
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year and adjust for inflation.
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And my money has a good percentage of
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not running out over a 30 year period.
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High probability of running of being in and
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that that 4% rule that we often
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talk about was originally designed around a couple
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age 65.
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Right.
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And the notion of how long they would
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live.
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And it wasn't necessarily that you wouldn't spend
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down on principal, it was just that you
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wouldn't run out of money before you passed.
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Right.
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And so thinking about the joint life expectancy.
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Well, over the last decade, there have been
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a lot of maybe less than that, even
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there's been a lot of renewed attention to
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this question, particularly when interest rates were, you
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know, near zero.
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And does that affect what people can do
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as a withdrawal rate?
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We've had in the midst of the last
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decade, you know, the 2000s, I guess that's
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more than a decade, sorry, the first decade
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of the 2000s, where we had disruptions in
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the markets and we had then the financial
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crisis.
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And, you know, was there essentially this lost
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decade of equity performance?
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You kind of look at those kind of
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considerations and people were saying, oh, I wonder
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if maybe that that same 4% rule
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applies to add to that the complexity that
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people are living longer.
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Right.
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There's more people turning age 100 than we
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used to have.
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You know, I mean, there's that issue of
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longevity.
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And of course, with longevity comes, you know,
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the potential for higher costs for health care,
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you know, long-term care considerations.
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But putting that aside.
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Recently, we had this bout with inflation.
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And we've had inflation at some point.
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So costs are going higher.
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So people want to withdraw more.
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There's a lot of different approaches to this.
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You know, we don't talk about guardrails or
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any of these kind of things, but just
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this notion of withdrawal rate is one that
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Christine Benz, in this article, we're fans of
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Christine Benz.
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She's been on the show, right.
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And does a great job when talking to
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people about personal finance.
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We kind of parrot some of the things
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she talks about with buckets, you know, that
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notion that we buy into that notion as
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a way to think about varying degrees of
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risk as we think about how people want
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to structure their access to capital and their
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investment strategies and so forth.
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So in any case, she had this topic
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revisited in this article on Morningstar about how
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much one can think about a withdrawal rate.
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And I think one of the challenges becomes,
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you know, do we think about this in
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generic broad terms?
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Oh, what's that rate?
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Is it 4 percent?
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Well, first off, they do seem to offer
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a, well, what's the new number, you know.
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But then there's a little more nuance of,
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well, how old are you?
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How long are you going to live?
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How much risk are you taking?
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Some really interesting things.
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So even in the original 4 percent rule,
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you know, I think as I opened it,
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my comments were most people probably have heard
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of it, but they don't know that you
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started at 65, right?
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Yeah.
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They don't know the asset allocation model that
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was assumed underlines, which was a 50-50
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portfolio.
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So it's a good point.
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She goes into some good detail about the
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different levels of equity investment.
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And it's, you know, before I read this,
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I had the assumption of, well, if you're
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taking more risk, then the theory would be
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you'd be able to have a higher percentage.
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And if you took real low risk, your
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percentage would be really low because you wouldn't
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be getting the growth out of the equities
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over a long period of time.
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But that's not exactly what the article came
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out with.
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That was really interesting.
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Russ, you mentioned there was some thought process
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behind why it was that higher equity weights
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might not be given as much room for
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withdrawal as Jeff was just describing you'd expect.
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Do you want to elaborate on that?
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Yeah, I think they use their Morningstar capital
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assumptions for the next 30 years.
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And some of those numbers return assumptions have
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come down a little bit since last year.
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So I don't have the numbers in front
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of me, but I think for large cap
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growth equities, it was around seven, seven points.
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Where is it?
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I don't see here.
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It was around seven or seven and a
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half percent for large cap growth and a
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little bit higher, a little over eight percent
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for large cap value.
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Which is a little bit of a disruption
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from, and I think a big part of
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that, I'm just going to elaborate a little
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bit, is because of valuations.
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We look at, we talk about this a
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lot, like the PE ratio associated with some
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of these large cap names is pretty extended.
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And I think that's a part of that
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assumption that they're overstated.
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There's going to be a reversion to the
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mean and therefore their performance will not be
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as high as we might have expected, given
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that we've kind of already gotten some of
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those returns is the concept.
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OK, so the question becomes is, will the
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innovation allow that to be greater than expected
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or to move that rate higher than it
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has historically been?
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Everyone's always reluctant to say this time is
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different.
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That notion that it's going to be different
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than it used to be.
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So that being the case, there's an assumption
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of lower returns from a higher equity weight,
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perhaps, than maybe historically being the case.
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And with higher degree of equity comes a
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greater degree of volatility.
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And if there's a higher degree of volatility,
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the probabilities of success get impacted.
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Right.
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So the reason they're choosing where this success
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rate is getting diminished is because of that
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potential for a higher degree of volatility, maybe
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not as much income return as historically has
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been the case because of the perception of
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extended valuations.
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It's interesting dynamic to evaluate.
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Yeah.
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Yeah.
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So.
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So let me put an example on that,
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if you don't mind, Chris.
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Yeah, go for it.
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So we talked about the 50-50 model
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that was used in the 4% theory,
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right?
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Yeah, over 30 years, right, was the now
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the common analysis.
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So if you go to their chart and
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00:11:42,990 --> 00:11:45,350
I'm going to post this article, which includes
266
00:11:45,350 --> 00:11:47,310
this chart that I'm talking about right now
267
00:11:47,310 --> 00:11:48,110
in the show notes.
268
00:11:48,190 --> 00:11:49,930
So if people want to go and read
269
00:11:49,930 --> 00:11:52,530
the entire article and dig into the chart
270
00:11:52,530 --> 00:11:53,990
as well, they can certainly do that.
271
00:11:54,070 --> 00:11:55,590
So if you look at the 50%
272
00:11:55,590 --> 00:11:59,270
equity weighting and you go over to 30
273
00:11:59,270 --> 00:12:02,830
years, that brings their suggested or their model.
274
00:12:03,770 --> 00:12:08,310
With all rate, the purpose, the rule, the
275
00:12:08,310 --> 00:12:10,590
4% rule now would be the 3
276
00:12:10,590 --> 00:12:15,370
.7% rule and that notion that you
277
00:12:15,370 --> 00:12:16,090
could withstand that.
278
00:12:16,150 --> 00:12:17,310
You know, one of the things I often
279
00:12:17,310 --> 00:12:19,770
wonder and I don't recall the details of,
280
00:12:19,930 --> 00:12:22,870
does that mean, Jeff, do you and Russ,
281
00:12:22,970 --> 00:12:25,270
you might know if.
282
00:12:26,810 --> 00:12:29,250
I start off with a 3.7%
283
00:12:29,250 --> 00:12:29,730
rule.
284
00:12:29,730 --> 00:12:30,290
Sure.
285
00:12:31,470 --> 00:12:35,950
And the portfolio value declines as I erode
286
00:12:35,950 --> 00:12:36,530
principle.
287
00:12:37,450 --> 00:12:40,110
Does that mean I'm taking a 3.7
288
00:12:40,110 --> 00:12:42,370
% on a smaller amount or am I
289
00:12:42,370 --> 00:12:44,530
taking the amount I started out as 3
290
00:12:44,530 --> 00:12:48,670
.7% annually over the 30 years in
291
00:12:48,670 --> 00:12:49,230
this case?
292
00:12:50,010 --> 00:12:52,190
Well, as I understand it, you first of
293
00:12:52,190 --> 00:12:55,150
all, you pick a date like the end
294
00:12:55,150 --> 00:12:56,110
of the previous year.
295
00:12:56,450 --> 00:12:59,470
So in our example here, if you, if
296
00:12:59,470 --> 00:13:03,110
you pick 3.7 in 2024, you would
297
00:13:03,110 --> 00:13:04,830
have an account balance at the end of
298
00:13:04,830 --> 00:13:08,450
2024 and then you would adjust the 3
299
00:13:08,450 --> 00:13:12,050
.7 to inflation and then you would take
300
00:13:12,050 --> 00:13:13,910
the 3.7 based upon that.
301
00:13:14,030 --> 00:13:16,450
And if the market went down, I believe
302
00:13:16,450 --> 00:13:18,970
that the 4% study rule is that
303
00:13:18,970 --> 00:13:21,290
you would take the 3.7 if you
304
00:13:21,290 --> 00:13:23,790
were on a stagnant rate, whether the market
305
00:13:23,790 --> 00:13:24,570
went up or down.
306
00:13:24,570 --> 00:13:26,550
So you'd take the rate, not the dollar
307
00:13:26,550 --> 00:13:26,970
amount.
308
00:13:27,310 --> 00:13:27,630
That's right.
309
00:13:28,010 --> 00:13:29,850
And I think that's a challenge for a
310
00:13:29,850 --> 00:13:31,270
lot of people, right?
311
00:13:31,570 --> 00:13:35,090
Because they would be willing to adjust their
312
00:13:35,090 --> 00:13:37,710
rate, you know.
313
00:13:38,030 --> 00:13:39,650
And the other thing is, too, I mean,
314
00:13:39,670 --> 00:13:41,810
it seems that doesn't seem to jive with
315
00:13:41,810 --> 00:13:44,130
me because as I think it's got to
316
00:13:44,130 --> 00:13:46,270
be somewhere that there's a fixed number, because
317
00:13:46,270 --> 00:13:48,970
as time passes, you wouldn't have the worry
318
00:13:48,970 --> 00:13:54,630
of asset depletion if you're always only taking
319
00:13:54,630 --> 00:13:55,810
3.7 percent.
320
00:13:56,230 --> 00:13:57,950
But you do adjust it for inflation and
321
00:13:57,950 --> 00:13:58,870
that's typically up.
322
00:13:59,330 --> 00:14:00,410
Oh, yeah, that's a good point.
323
00:14:00,650 --> 00:14:00,830
All right.
324
00:14:00,870 --> 00:14:01,530
I'm following you.
325
00:14:01,730 --> 00:14:02,130
Yeah, right.
326
00:14:02,210 --> 00:14:02,690
So.
327
00:14:04,370 --> 00:14:07,270
So we talk about this in shorthand, right?
328
00:14:07,510 --> 00:14:07,750
Right.
329
00:14:07,910 --> 00:14:09,490
And say, oh, OK, therefore I can take
330
00:14:09,490 --> 00:14:10,090
X dollars.
331
00:14:10,850 --> 00:14:13,310
And rarely do we have people then say,
332
00:14:13,390 --> 00:14:15,690
I'm going to reduce my dollars I take
333
00:14:15,690 --> 00:14:17,090
because of inflation.
334
00:14:17,310 --> 00:14:19,510
They always say, OK, that I could just
335
00:14:19,510 --> 00:14:22,610
for simplicity, a million dollars of three point
336
00:14:22,610 --> 00:14:25,110
seven, that's thirty seven thousand dollars I can
337
00:14:25,110 --> 00:14:27,110
take per per year.
338
00:14:27,130 --> 00:14:27,470
Right.
339
00:14:27,670 --> 00:14:30,650
And then, OK, next year I'm taking three
340
00:14:30,650 --> 00:14:34,110
thirty seven thousand plus inflation and so on
341
00:14:34,110 --> 00:14:36,970
and so on and so forth, eventually eroding
342
00:14:36,970 --> 00:14:38,850
my million dollars.
343
00:14:39,270 --> 00:14:41,210
In this case, you're saying, no, no, you'd
344
00:14:41,210 --> 00:14:44,870
have to say it's three point seven percent
345
00:14:44,870 --> 00:14:48,050
plus, you know, two percent on the inflation.
346
00:14:48,330 --> 00:14:51,310
So that's three point nine or whatever, whatever
347
00:14:51,310 --> 00:14:51,990
that really is.
348
00:14:52,050 --> 00:14:55,870
But you follow the point and then on
349
00:14:55,870 --> 00:14:57,810
on whatever the value is on that year.
350
00:14:58,230 --> 00:15:01,510
So my my rate might incrementally increase each
351
00:15:01,510 --> 00:15:05,030
year by a modest percentage to adjust for
352
00:15:05,030 --> 00:15:05,510
inflation.
353
00:15:06,210 --> 00:15:09,450
But the dollar amount is going to be
354
00:15:09,450 --> 00:15:11,770
subject to what's what's the starting principle?
355
00:15:11,930 --> 00:15:14,370
What's the starting value of of the account
356
00:15:14,370 --> 00:15:14,930
that year?
357
00:15:15,290 --> 00:15:16,610
I got a little bit in the weeds
358
00:15:16,610 --> 00:15:16,790
there.
359
00:15:16,890 --> 00:15:17,070
Sorry.
360
00:15:17,470 --> 00:15:18,910
I don't know if that made sense to
361
00:15:18,910 --> 00:15:19,230
people.
362
00:15:19,750 --> 00:15:20,470
It does.
363
00:15:20,570 --> 00:15:23,370
And it emphasizes, you know, that this is
364
00:15:23,370 --> 00:15:24,650
a dynamic thing.
365
00:15:24,770 --> 00:15:26,910
I think it's I don't think anyone should
366
00:15:26,910 --> 00:15:29,730
just set a rate and assume it's going
367
00:15:29,730 --> 00:15:30,050
to work.
368
00:15:30,130 --> 00:15:32,010
You have to monitor, you have to look
369
00:15:32,010 --> 00:15:33,570
at this in your annual review with your
370
00:15:33,570 --> 00:15:34,430
financial advisor.
371
00:15:35,390 --> 00:15:38,070
And nothing in life is 30 years predictable
372
00:15:38,070 --> 00:15:41,530
with absolute certainty, including your own cash flow.
373
00:15:42,570 --> 00:15:45,850
Yeah, I mean, I think we use we
374
00:15:45,850 --> 00:15:48,070
use different approach often in terms of thinking
375
00:15:48,070 --> 00:15:48,530
about this.
376
00:15:48,750 --> 00:15:50,650
We we do talk about this as shorthand
377
00:15:50,650 --> 00:15:54,870
for people as a relevant, you know, something
378
00:15:54,870 --> 00:15:55,730
to have in mind.
379
00:15:55,970 --> 00:15:58,970
But as a practical reality, we like to
380
00:15:58,970 --> 00:16:02,390
model it out on financial planning software and
381
00:16:02,390 --> 00:16:03,530
update that as we go.
382
00:16:03,650 --> 00:16:03,830
Right.
383
00:16:03,870 --> 00:16:07,250
As the numbers change, markets rise, markets fall,
384
00:16:07,910 --> 00:16:09,630
account values will adjust.
385
00:16:09,630 --> 00:16:12,190
Withdrawals have taken, you know, their toll.
386
00:16:12,390 --> 00:16:14,150
And we want to look at how does
387
00:16:14,150 --> 00:16:17,910
this forecast routinely of are we going to
388
00:16:17,910 --> 00:16:18,410
have enough?
389
00:16:18,530 --> 00:16:20,330
Are we going to meet our goal, which
390
00:16:20,330 --> 00:16:22,010
is to say most people's goal is not
391
00:16:22,010 --> 00:16:22,710
to run out of money.
392
00:16:23,710 --> 00:16:25,730
You know, maybe even to have something left
393
00:16:25,730 --> 00:16:29,170
over, depending on their their state wishes, you
394
00:16:29,170 --> 00:16:30,790
know, they want to be able to pass
395
00:16:30,790 --> 00:16:31,390
money on.
396
00:16:32,510 --> 00:16:33,770
We talk about this.
397
00:16:33,950 --> 00:16:35,270
We haven't talked about in a while, but
398
00:16:35,270 --> 00:16:36,890
it's probably worth bringing up now is the
399
00:16:36,890 --> 00:16:38,690
concept of the retirement smile.
400
00:16:39,630 --> 00:16:43,910
Yeah, where most I think most people, not
401
00:16:43,910 --> 00:16:45,590
all, but most people have a couple of
402
00:16:45,590 --> 00:16:46,630
periods in their.
403
00:16:47,870 --> 00:16:50,510
Retirement that they're spending more or spending less,
404
00:16:50,570 --> 00:16:53,490
if you will, when you first retire, I
405
00:16:53,490 --> 00:16:56,570
think you're I think you're going to spend
406
00:16:56,570 --> 00:16:59,790
more because you have built up demand for
407
00:16:59,790 --> 00:17:05,550
activities, for vacations, for renovations, for whatever it
408
00:17:05,550 --> 00:17:07,849
is, you know, you've been planning for this
409
00:17:07,849 --> 00:17:10,450
date of retirement and you've been excited about
410
00:17:10,450 --> 00:17:10,630
it.
411
00:17:10,869 --> 00:17:13,930
And usually not always, but usually those things
412
00:17:13,930 --> 00:17:16,069
that you're excited about have a cost to
413
00:17:16,069 --> 00:17:16,329
them.
414
00:17:16,650 --> 00:17:18,569
You know, I'm going to Europe for a
415
00:17:18,569 --> 00:17:18,750
month.
416
00:17:18,770 --> 00:17:20,410
I'm putting a new addition on the house.
417
00:17:20,490 --> 00:17:21,550
I'm buying a new car.
418
00:17:21,750 --> 00:17:25,650
I'm taking up this hobby, whatever it is.
419
00:17:26,609 --> 00:17:28,910
So the the kind of concept of a
420
00:17:28,910 --> 00:17:31,050
smile, if you can draw a smile with
421
00:17:31,050 --> 00:17:33,950
your finger wherever you are, the the beginning
422
00:17:33,950 --> 00:17:36,190
of the smile and the end are higher.
423
00:17:37,170 --> 00:17:40,430
And so that the theory behind it is
424
00:17:40,430 --> 00:17:42,010
you're spending more in the beginning of your
425
00:17:42,010 --> 00:17:44,450
retirement and more at the end of your
426
00:17:44,450 --> 00:17:47,570
retirement and the the end smile may not
427
00:17:47,570 --> 00:17:49,770
be happy, but the end smile is that
428
00:17:49,770 --> 00:17:53,390
you probably have more uncovered medical issues, things
429
00:17:53,390 --> 00:17:54,750
that aren't covered by insurance.
430
00:17:54,770 --> 00:17:56,010
So maybe you need some help in the
431
00:17:56,010 --> 00:17:58,830
house from someone to help you clean to
432
00:17:58,830 --> 00:18:01,390
maybe even some home care or long term
433
00:18:01,390 --> 00:18:01,810
care.
434
00:18:02,090 --> 00:18:02,210
Yeah.
435
00:18:02,410 --> 00:18:04,390
And these cause your expenses to go higher.
436
00:18:04,390 --> 00:18:04,950
Right.
437
00:18:05,550 --> 00:18:07,330
I think you're right, though.
438
00:18:07,930 --> 00:18:12,350
We we routinely find that when we talk
439
00:18:12,350 --> 00:18:15,550
to clients about their expenditures, their planned expenditures,
440
00:18:15,810 --> 00:18:18,830
I'm I'm fairly sure most people kind of
441
00:18:18,830 --> 00:18:24,510
overestimate their expenditures by saying some of their
442
00:18:24,510 --> 00:18:29,930
expenditures by saying what, at least for some
443
00:18:29,930 --> 00:18:32,050
of their goals, they'll say, oh, I'm going
444
00:18:32,050 --> 00:18:36,570
to spend X dollars a month for travel
445
00:18:36,570 --> 00:18:37,910
or a year for travel.
446
00:18:38,790 --> 00:18:41,010
And will they really travel as much as
447
00:18:41,010 --> 00:18:42,950
they like have their goal number?
448
00:18:43,150 --> 00:18:44,410
Well, I see don't.
449
00:18:44,530 --> 00:18:44,670
Yeah.
450
00:18:44,850 --> 00:18:46,090
Oftentimes they don't.
451
00:18:46,190 --> 00:18:46,390
Right.
452
00:18:47,470 --> 00:18:49,450
On the other hand, you know, they might
453
00:18:49,450 --> 00:18:50,650
say, well, I'm going to spend X dollars
454
00:18:50,650 --> 00:18:54,330
on a car, but maybe cars costs go
455
00:18:54,330 --> 00:18:56,350
up more rapidly than they might expect.
456
00:18:56,350 --> 00:18:58,870
So, you know, there might be some offset
457
00:18:58,870 --> 00:18:59,330
there.
458
00:19:00,370 --> 00:19:03,030
But what we do find is, to your
459
00:19:03,030 --> 00:19:06,370
point, is that as people settle into retirement,
460
00:19:08,290 --> 00:19:11,850
some of their costs of living have gotten
461
00:19:11,850 --> 00:19:13,390
more modest, right?
462
00:19:13,490 --> 00:19:15,650
They're they're they're just not spending the way
463
00:19:15,650 --> 00:19:16,370
they did.
464
00:19:17,510 --> 00:19:19,910
You know, they're they just have a more
465
00:19:19,910 --> 00:19:24,810
modest need relative to what they might have
466
00:19:24,810 --> 00:19:25,310
expected.
467
00:19:26,290 --> 00:19:28,870
That being said, too, I would I would
468
00:19:28,870 --> 00:19:32,370
say , you know, I've come across some
469
00:19:32,370 --> 00:19:34,710
academic stuff where they say, oh, you know
470
00:19:34,710 --> 00:19:35,810
how much you're going to need.
471
00:19:36,590 --> 00:19:38,250
And I find a lot of times people
472
00:19:38,250 --> 00:19:39,910
will say, oh, I'm only going to need,
473
00:19:40,010 --> 00:19:41,930
you know, 75 percent of what I'm going
474
00:19:41,930 --> 00:19:43,390
to spend now.
475
00:19:44,250 --> 00:19:45,450
And I think you have to really be
476
00:19:45,450 --> 00:19:46,330
careful about that.
477
00:19:46,430 --> 00:19:47,210
You know, what is what?
478
00:19:47,390 --> 00:19:48,090
Why is that?
479
00:19:48,890 --> 00:19:50,410
What what is going to change?
480
00:19:52,510 --> 00:19:56,310
Is it because you're you've paid off your
481
00:19:56,310 --> 00:19:58,150
mortgage and now you don't have the mortgage
482
00:19:58,150 --> 00:20:00,150
and you just timed that so that you
483
00:20:00,150 --> 00:20:00,770
could do that?
484
00:20:01,030 --> 00:20:01,450
All right.
485
00:20:01,450 --> 00:20:02,810
Maybe that's legitimate.
486
00:20:03,090 --> 00:20:03,270
Yeah.
487
00:20:03,470 --> 00:20:05,670
OK, if that's the case, maybe a lot
488
00:20:05,670 --> 00:20:07,270
of people just keep a mortgage for a
489
00:20:07,270 --> 00:20:08,670
really long time into retirement.
490
00:20:09,310 --> 00:20:11,410
And that's probably not going to you know,
491
00:20:11,410 --> 00:20:13,110
you're not going to be dropping 75, you
492
00:20:13,110 --> 00:20:15,150
know, to 25 percent of your costs.
493
00:20:16,250 --> 00:20:17,510
Well, I won't be commuting.
494
00:20:18,630 --> 00:20:20,810
OK, not going to be commuting, so let's
495
00:20:20,810 --> 00:20:21,710
go somewhere, though.
496
00:20:22,970 --> 00:20:24,790
But you've got more time on your hands,
497
00:20:24,830 --> 00:20:25,030
right?
498
00:20:25,630 --> 00:20:26,430
What are you going to do?
499
00:20:26,430 --> 00:20:27,810
You're going to spend some money.
500
00:20:28,270 --> 00:20:29,890
And usually those things you do cost money.
501
00:20:30,230 --> 00:20:31,570
Yeah, exactly.
502
00:20:31,830 --> 00:20:33,110
Or a portion of them.
503
00:20:33,730 --> 00:20:34,110
Exactly.
504
00:20:34,330 --> 00:20:34,710
You know this.
505
00:20:34,870 --> 00:20:36,210
There's a reality, you know, we're going to
506
00:20:36,210 --> 00:20:36,970
go out to lunch more.
507
00:20:37,070 --> 00:20:39,970
We're going to do we're going to go,
508
00:20:39,970 --> 00:20:42,690
you know, have some fun at some occasion.
509
00:20:43,410 --> 00:20:44,770
There's usually some cost.
510
00:20:45,130 --> 00:20:45,390
Yeah.
511
00:20:47,710 --> 00:20:49,830
So just that's one of those things that
512
00:20:49,830 --> 00:20:51,850
I think is a challenge, like the four
513
00:20:51,850 --> 00:20:52,490
percent rule.
514
00:20:52,590 --> 00:20:55,030
You know, people that assumption of how much
515
00:20:55,030 --> 00:20:55,890
do I how much am I going to
516
00:20:55,890 --> 00:20:56,270
spend?
517
00:20:56,430 --> 00:20:58,570
Oh, it's less than you did in your
518
00:20:58,570 --> 00:20:59,250
working years.
519
00:21:01,250 --> 00:21:01,690
Maybe.
520
00:21:01,690 --> 00:21:02,350
Maybe not.
521
00:21:02,470 --> 00:21:04,330
I like to try to plan for if
522
00:21:04,330 --> 00:21:06,430
people have a lifestyle, what they spend.
523
00:21:07,130 --> 00:21:09,210
Let's presume they're going to spend something similar.
524
00:21:09,910 --> 00:21:10,010
Yeah.
525
00:21:10,570 --> 00:21:13,110
And then, yes, if we want to say,
526
00:21:13,210 --> 00:21:15,830
oh, we got the mortgage ready to expire
527
00:21:15,830 --> 00:21:16,530
on a certain date.
528
00:21:16,570 --> 00:21:18,070
OK, we can we can plug that in
529
00:21:18,070 --> 00:21:19,510
properly so that expires.
530
00:21:20,230 --> 00:21:21,410
Out of their cash flow.
531
00:21:21,770 --> 00:21:24,030
And then, oh, they have a car payment,
532
00:21:24,150 --> 00:21:25,410
but then it stops and then they buy
533
00:21:25,410 --> 00:21:26,710
a new car and we can we can
534
00:21:26,710 --> 00:21:29,190
model those kind of things where they actually
535
00:21:29,190 --> 00:21:31,390
get added in and out of the cash
536
00:21:31,390 --> 00:21:31,670
flow.
537
00:21:33,130 --> 00:21:34,850
How often do you buy a car?
538
00:21:35,450 --> 00:21:38,150
You know, every five years, every 10 years.
539
00:21:38,250 --> 00:21:40,090
Well, differs from one family to another.
540
00:21:40,790 --> 00:21:42,790
But, you know, these kind of things, you
541
00:21:42,790 --> 00:21:45,290
have to give thought to what's what's realistic.
542
00:21:45,670 --> 00:21:48,330
I think clients are they understand those.
543
00:21:48,450 --> 00:21:50,290
They can focus on when do you buy
544
00:21:50,290 --> 00:21:52,150
a car and, you know, when does your
545
00:21:52,150 --> 00:21:53,250
mortgage get paid off?
546
00:21:53,250 --> 00:21:55,790
Some of the ones that they seem to
547
00:21:55,790 --> 00:21:57,950
struggle with is do you plan on helping
548
00:21:57,950 --> 00:21:59,810
your family, anyone in your family?
549
00:22:00,730 --> 00:22:03,070
They kind of they usually look at each
550
00:22:03,070 --> 00:22:04,890
other and like, maybe we should have talked
551
00:22:04,890 --> 00:22:05,670
about this.
552
00:22:07,570 --> 00:22:10,530
And those can those we see, you know,
553
00:22:10,910 --> 00:22:14,730
we see some difficult situations where people can
554
00:22:14,730 --> 00:22:17,710
be too generous or they can be too
555
00:22:17,710 --> 00:22:18,930
eager to bail out.
556
00:22:19,130 --> 00:22:22,410
Not literally, but maybe to bail out.
557
00:22:22,410 --> 00:22:25,410
Figuratively, anyway, to step in, to assist a
558
00:22:25,410 --> 00:22:28,590
child, adult child who had a setback, right?
559
00:22:28,930 --> 00:22:31,450
Whether it's a divorce or a job loss.
560
00:22:31,570 --> 00:22:31,790
Yeah.
561
00:22:32,230 --> 00:22:33,490
Rush, you got any doubt to that?
562
00:22:34,910 --> 00:22:37,930
Yeah, I mean, I see it a little
563
00:22:37,930 --> 00:22:40,250
bit in my family and people in my
564
00:22:40,250 --> 00:22:43,510
life that we've talked about this recently, that
565
00:22:43,510 --> 00:22:46,050
as I'm not a parent myself, but as
566
00:22:46,050 --> 00:22:48,730
parents and the parents I know will bend
567
00:22:48,730 --> 00:22:50,210
over backwards for their kids, a lot of
568
00:22:50,210 --> 00:22:50,390
them.
569
00:22:51,050 --> 00:22:52,210
Yeah, we see it a lot.
570
00:22:52,390 --> 00:22:54,430
And sometimes, you know, to their own detriment
571
00:22:54,430 --> 00:22:57,230
or the detriment of their financial plan and
572
00:22:57,230 --> 00:22:59,530
having a big picture view where they're not
573
00:22:59,530 --> 00:23:00,190
going to run out of money.
574
00:23:00,450 --> 00:23:04,410
So adding all those those pieces into the
575
00:23:04,410 --> 00:23:05,690
equation is really important.
576
00:23:05,870 --> 00:23:07,310
And that's that's what we do with a
577
00:23:07,310 --> 00:23:07,850
financial plan.
578
00:23:07,910 --> 00:23:08,950
We can look at it and we can
579
00:23:08,950 --> 00:23:12,110
say, OK, is this going to be a
580
00:23:12,110 --> 00:23:14,110
sustainable level of support that you're providing for
581
00:23:14,110 --> 00:23:14,550
your child?
582
00:23:14,730 --> 00:23:17,510
Or is that something if that's something that
583
00:23:17,510 --> 00:23:19,110
the client would like to do?
584
00:23:19,110 --> 00:23:21,010
Let's see how that would work or let's
585
00:23:21,010 --> 00:23:21,910
see what that would look like.
586
00:23:22,130 --> 00:23:23,590
Maybe it's something they hadn't thought of before,
587
00:23:23,630 --> 00:23:24,390
but they would like to do.
588
00:23:24,950 --> 00:23:27,010
So one of the challenges for us is,
589
00:23:28,370 --> 00:23:30,010
you know, we can look at something and
590
00:23:30,010 --> 00:23:33,370
say, oh, that's not a good financial decision.
591
00:23:34,610 --> 00:23:36,850
And we you know, we can try to
592
00:23:36,850 --> 00:23:37,790
offer counsel.
593
00:23:39,310 --> 00:23:41,930
But our role isn't to be the decider
594
00:23:41,930 --> 00:23:46,150
or the and we can't create magic either.
595
00:23:46,610 --> 00:23:47,370
You know what I mean?
596
00:23:47,370 --> 00:23:51,390
But so our role isn't to be the
597
00:23:51,390 --> 00:23:53,850
one who says you have permission or not.
598
00:23:53,850 --> 00:23:55,310
Yeah, it's not a value judgment.
599
00:23:55,590 --> 00:23:58,930
It's ultimately their money, their decisions, their values.
600
00:23:59,270 --> 00:23:59,470
Right.
601
00:24:00,830 --> 00:24:03,510
But it becomes challenging at times when you
602
00:24:03,510 --> 00:24:06,010
see someone's on a path for a problem
603
00:24:06,010 --> 00:24:09,050
and you want to try to warn them
604
00:24:09,050 --> 00:24:10,850
off of that path.
605
00:24:11,090 --> 00:24:13,330
But ultimately, you know, let's face it.
606
00:24:13,330 --> 00:24:15,310
A lot of family, a lot of family
607
00:24:15,310 --> 00:24:18,430
comes first and people are prioritized that and
608
00:24:18,430 --> 00:24:21,370
and they want to do all they can
609
00:24:21,370 --> 00:24:23,830
to get their family members on track and
610
00:24:23,830 --> 00:24:25,970
help them out out of difficult times, going
611
00:24:25,970 --> 00:24:28,270
through a divorce or getting off, you know,
612
00:24:28,270 --> 00:24:30,830
getting launched, you know, that kind of thing.
613
00:24:31,630 --> 00:24:33,270
So, you know, you can you can see
614
00:24:33,270 --> 00:24:34,350
how that happens.
615
00:24:34,910 --> 00:24:39,310
But at the same time, it becomes one
616
00:24:39,310 --> 00:24:41,630
of these things where, you know, we've we've
617
00:24:41,630 --> 00:24:42,430
we've all talked about this.
618
00:24:42,470 --> 00:24:44,310
We've done shows on this topic where just
619
00:24:44,310 --> 00:24:47,090
there's times when you just see the the
620
00:24:47,090 --> 00:24:49,950
risk that people are putting themselves into for
621
00:24:49,950 --> 00:24:51,370
their own financial security.
622
00:24:52,230 --> 00:24:53,870
And, you know, the challenge of how do
623
00:24:53,870 --> 00:24:58,270
you help them navigate this is often difficult.
624
00:24:58,310 --> 00:25:00,990
But it comes back to this topic of,
625
00:25:00,990 --> 00:25:05,270
you know, withdrawal rate and, you know, responsible
626
00:25:05,270 --> 00:25:08,810
use of funds and how much we will
627
00:25:08,810 --> 00:25:12,730
talk to people at times about deviating from
628
00:25:12,730 --> 00:25:17,750
a responsible withdrawal rate, for example, for maybe
629
00:25:17,750 --> 00:25:20,350
the early start of their retirement with the
630
00:25:20,350 --> 00:25:23,670
intention of saying spend a little more now
631
00:25:24,390 --> 00:25:27,010
and you'll have to spend less later because
632
00:25:27,010 --> 00:25:29,170
your social security or pensions or whatever will
633
00:25:29,170 --> 00:25:32,130
kick in with more that it can be
634
00:25:32,130 --> 00:25:33,250
desirable to delay.
635
00:25:33,650 --> 00:25:33,770
Right.
636
00:25:33,890 --> 00:25:34,030
Right.
637
00:25:35,070 --> 00:25:36,530
Counterintuitive to a lot of people.
638
00:25:36,710 --> 00:25:39,210
But it's for many, it's the right thing
639
00:25:39,210 --> 00:25:39,630
to do.
640
00:25:41,470 --> 00:25:44,790
So ultimately, though, our role is to just
641
00:25:44,790 --> 00:25:47,790
try to give you knowledge and power, you
642
00:25:47,790 --> 00:25:49,390
know, that notion of like that.
643
00:25:49,510 --> 00:25:51,830
Once you know what the options are, that
644
00:25:51,830 --> 00:25:53,810
can be empowering to you to make decisions
645
00:25:53,810 --> 00:25:56,390
and help you to navigate some of these
646
00:25:56,390 --> 00:25:58,010
challenging choices.
647
00:25:58,950 --> 00:26:02,210
But ultimately, these are choices that are our
648
00:26:02,210 --> 00:26:05,570
clients and will give you guidance and our
649
00:26:05,570 --> 00:26:09,150
our best judgment and how we can based
650
00:26:09,150 --> 00:26:11,330
on what you decide how can we help
651
00:26:11,330 --> 00:26:13,950
you figure out what's the best path, what
652
00:26:13,950 --> 00:26:14,630
to do next?
653
00:26:14,850 --> 00:26:15,690
You know, that kind of thing.
654
00:26:16,110 --> 00:26:19,850
But ultimately, these are choices that come down
655
00:26:19,850 --> 00:26:22,330
to the client's preferences and priorities.
656
00:26:23,630 --> 00:26:24,310
Yeah, absolutely.
657
00:26:25,070 --> 00:26:30,090
It's and sometimes it's behaviors, you know, not
658
00:26:30,090 --> 00:26:32,850
everyone has, you know, I think sometimes we
659
00:26:32,850 --> 00:26:36,490
end up finding ourselves having made choices and
660
00:26:36,490 --> 00:26:37,950
we go, oh, I wish I thought about
661
00:26:37,950 --> 00:26:39,710
that differently or maybe I shouldn't have done
662
00:26:39,710 --> 00:26:41,410
that or whatever, right?
663
00:26:41,790 --> 00:26:42,010
Right.
664
00:26:42,250 --> 00:26:44,430
And that's that's kind of past tense.
665
00:26:44,890 --> 00:26:46,690
So it doesn't you can't live in the
666
00:26:46,690 --> 00:26:49,270
what if if only whether it's, oh, I
667
00:26:49,270 --> 00:26:50,590
should have saved more, I should have spent
668
00:26:50,590 --> 00:26:53,930
less or, you know, some particular any of
669
00:26:53,930 --> 00:26:54,610
these kind of things.
670
00:26:54,810 --> 00:26:56,190
You got to go from where you're at.
671
00:26:56,630 --> 00:26:58,550
And how do we how do we move
672
00:26:58,550 --> 00:27:00,890
forward given where we're at?
673
00:27:01,530 --> 00:27:01,670
Yeah.
674
00:27:02,110 --> 00:27:02,410
Yeah.
675
00:27:02,930 --> 00:27:03,170
Yeah.
676
00:27:03,310 --> 00:27:05,490
I think this article was good because it
677
00:27:05,490 --> 00:27:08,130
discussed many of these topics, including the one
678
00:27:08,130 --> 00:27:10,710
you're talking about, spending more early in on
679
00:27:10,710 --> 00:27:11,270
your retirement.
680
00:27:11,510 --> 00:27:13,650
It's also important to think about.
681
00:27:15,010 --> 00:27:17,470
Your own health, your own family history.
682
00:27:18,370 --> 00:27:19,690
These things are really relevant.
683
00:27:20,470 --> 00:27:22,250
No one can predict, you know, the day
684
00:27:22,250 --> 00:27:24,650
we're going to leave, leave this earth, but
685
00:27:24,650 --> 00:27:26,090
it's important to plan for it.
686
00:27:26,230 --> 00:27:28,110
And how many times, Chris, have we heard
687
00:27:28,110 --> 00:27:29,790
I'm not going to live that long?
688
00:27:30,590 --> 00:27:30,770
Yeah.
689
00:27:31,150 --> 00:27:32,990
You know, so I mean.
690
00:27:33,170 --> 00:27:35,250
And I've heard that many times from people
691
00:27:35,250 --> 00:27:36,290
who lived a lot longer.
692
00:27:36,290 --> 00:27:37,270
That's what I mean.
693
00:27:37,350 --> 00:27:37,550
Right.
694
00:27:37,670 --> 00:27:38,030
Yeah.
695
00:27:39,330 --> 00:27:41,650
So a lot of dynamics here in this
696
00:27:41,650 --> 00:27:46,030
rule for which is, you know, commonly the
697
00:27:46,030 --> 00:27:46,510
rule.
698
00:27:46,710 --> 00:27:49,710
Yeah, it's it's OK to use it as
699
00:27:49,710 --> 00:27:50,290
a guidepost.
700
00:27:50,510 --> 00:27:52,650
But, you know, all these rules of thumb
701
00:27:52,650 --> 00:27:54,570
are very individualized.
702
00:27:54,650 --> 00:27:57,390
And really, you shouldn't rely on them to
703
00:27:57,390 --> 00:28:01,050
structure your own kind of DIY financial plan.
704
00:28:01,130 --> 00:28:03,050
You should really get some help and model
705
00:28:03,050 --> 00:28:04,890
it and look at these many other things
706
00:28:04,890 --> 00:28:07,030
and many that we haven't touched on to
707
00:28:07,030 --> 00:28:09,470
see how it would really impact your your
708
00:28:09,470 --> 00:28:10,670
own individual plan.
709
00:28:11,190 --> 00:28:12,950
Because the last thing you want to do
710
00:28:12,950 --> 00:28:14,470
is not have money.
711
00:28:15,650 --> 00:28:17,770
You know, later in life, you find your.
712
00:28:18,030 --> 00:28:18,190
Yeah.
713
00:28:18,530 --> 00:28:20,090
When you might need it and you might
714
00:28:20,090 --> 00:28:21,770
have to downsize when you don't want to
715
00:28:21,770 --> 00:28:22,450
downsize.
716
00:28:22,630 --> 00:28:24,810
You might not be able to help somebody
717
00:28:24,810 --> 00:28:26,770
you thought you could help or whatever the
718
00:28:26,770 --> 00:28:27,630
situation or not.
719
00:28:27,730 --> 00:28:29,070
You might not have the help at home
720
00:28:29,070 --> 00:28:30,790
and you might have to make another alternative,
721
00:28:30,790 --> 00:28:34,170
which is something you really didn't want to
722
00:28:34,170 --> 00:28:34,350
do.
723
00:28:34,610 --> 00:28:35,490
So, yeah, yeah.
724
00:28:35,550 --> 00:28:36,770
Get some help with this decision.
725
00:28:37,250 --> 00:28:39,010
And it's not a stagnant decision.
726
00:28:39,110 --> 00:28:40,810
It was one that it's one that needs
727
00:28:40,810 --> 00:28:44,290
to be reviewed annually anyway or periodically to
728
00:28:44,290 --> 00:28:45,270
make sure you're on course.
729
00:28:45,970 --> 00:28:46,090
Yeah.
730
00:28:46,430 --> 00:28:47,050
Good points.
731
00:28:47,890 --> 00:28:48,770
Really good points.
732
00:28:48,990 --> 00:28:51,610
So thank you for bringing this article out.
733
00:28:52,010 --> 00:28:53,430
Check it out in the show notes.
734
00:28:53,430 --> 00:28:55,050
As you said, I think people will find
735
00:28:55,050 --> 00:28:59,510
that chart or grid or whatever in the
736
00:28:59,510 --> 00:29:00,570
middle of the article.
737
00:29:00,570 --> 00:29:02,550
As interesting as we did.
738
00:29:03,610 --> 00:29:06,730
However, you know, keep in mind how it's
739
00:29:06,730 --> 00:29:08,870
supposed to work, you know, and that also
740
00:29:08,870 --> 00:29:11,770
that notion that none of us knows how
741
00:29:11,770 --> 00:29:12,750
long we have.
742
00:29:13,270 --> 00:29:16,030
So you want to pad your numbers probably
743
00:29:16,030 --> 00:29:19,170
to make sure you don't plan, you know,
744
00:29:19,170 --> 00:29:22,470
assume a life expectancy or a time horizon
745
00:29:23,230 --> 00:29:25,690
that's different from what you might really want
746
00:29:25,690 --> 00:29:26,130
it to be.
747
00:29:26,130 --> 00:29:26,490
All right.
748
00:29:26,550 --> 00:29:28,550
With that, thanks, everyone, for being with us.
749
00:29:29,070 --> 00:29:31,490
Don't hesitate to reach out to us as
750
00:29:31,490 --> 00:29:33,710
we can be a resource for people dealing
751
00:29:33,710 --> 00:29:36,350
with financial planning and portfolio management.
752
00:29:36,490 --> 00:29:39,430
We're happy to to speak with you when
753
00:29:39,430 --> 00:29:40,290
the timing is right.
754
00:29:40,610 --> 00:29:43,470
Until next time, keep striving for something more.
755
00:29:45,050 --> 00:29:46,990
Thank you for listening to something more with
756
00:29:46,990 --> 00:29:47,710
Chris Boyd.
757
00:29:47,930 --> 00:29:50,170
Call us for help, whether it's for financial
758
00:29:50,170 --> 00:29:54,090
planning or portfolio management, insurance concerns or those
759
00:29:54,090 --> 00:29:56,130
quality of life issues that make the money
760
00:29:56,130 --> 00:29:57,230
matters matter.
761
00:29:57,230 --> 00:29:58,590
Whatever's on your mind.
762
00:29:58,730 --> 00:30:00,830
Visit us at something more with Chris Boyd
763
00:30:00,830 --> 00:30:03,570
dot com or call us toll free at
764
00:30:03,570 --> 00:30:06,690
eight six six seven seven one eight nine
765
00:30:06,690 --> 00:30:07,690
zero one.
766
00:30:07,950 --> 00:30:11,110
Or send us your questions to AMR dash
767
00:30:11,110 --> 00:30:13,550
info at Wealth Enhancement dot com.
768
00:30:13,930 --> 00:30:15,670
You're listening to something more with Chris Boyd
769
00:30:15,670 --> 00:30:18,290
Financial Talk Show Wealth Enhancement Advisory Services and
770
00:30:18,290 --> 00:30:20,430
Jay Christopher Boyd provide investment advice on an
771
00:30:20,430 --> 00:30:22,010
individual basis to clients only.
772
00:30:22,190 --> 00:30:24,130
Proper advice depends on a complete analysis of
773
00:30:24,130 --> 00:30:25,330
all facts and circumstances.
774
00:30:25,330 --> 00:30:27,410
The information given on this program is general
775
00:30:27,410 --> 00:30:29,430
financial comments and cannot be relied upon as
776
00:30:29,430 --> 00:30:31,030
pertaining to your specific situation.
777
00:30:31,230 --> 00:30:33,210
Wealth Enhancement Group cannot guarantee that using the
778
00:30:33,210 --> 00:30:35,210
information from this show will generate profits or
779
00:30:35,210 --> 00:30:36,330
ensure freedom from loss.
780
00:30:36,530 --> 00:30:38,670
Listeners should consult their own financial advisors or
781
00:30:38,670 --> 00:30:40,790
conduct their own due diligence before making any
782
00:30:40,790 --> 00:30:41,550
financial decisions.