Transcript
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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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I'm going to post this article, which includes
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this chart that I'm talking about right now
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in the show notes.
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So if people want to go and read
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the entire article and dig into the chart
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as well, they can certainly do that.
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So if you look at the 50%
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equity weighting and you go over to 30
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years, that brings their suggested or their model.
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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.
