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Which is better, lifetime income from an annuity or a bond? · How to Retire on Time

• 0:00
  Mike: Welcome everyone to How to Retire On Time. The Retire On Time q and a held every Thursday at noon central time. The purpose of this really is to open up the, I guess the entry point. We we don't want that oversimplified advice. We wanna get into the nitty gritty.
• 0:13
  We want you to to to ask us these direct questions and give you context, some clarity into the very complex Narnia of the retirement planning space. We did just make a decision also internally that we're gonna focus just on you every Tuesday and not have a show that's then repurposed for all these different things. So this is this one's for you, and all the people that have downloaded the book and so on. For those who don't know me, this is your first time, my name is Michael Decker. I'm the author of the book, How to Retire On Time.
• 0:39
  I'm joined by my colleague, David Franson, who well, you've been here since the company started. We appreciate all that you've done.
• 0:46
  David: Well, hey.
• 0:47
  Mike: The many hats that you wear.
• 0:48
  David: Yeah. Yeah. Yeah. My hat stack is getting very tall, but.
• 0:51
  Mike: Yeah. That's okay.
• 0:52
  David: You can roll with that.
• 0:53
  Mike: We're gonna be talking probably about health care a little bit today too. And so David's the guy when it comes to Medicare answers. Submit your questions in the chat before we get started. I'm gonna talk about some retirement leaks. Something that really bugs me in the industry.
• 1:06
  We'll go through that about ten, fifteen minutes or so. That's kind of our monologue, if you will. The the thing you might not know to ask. And then we'll be taking your questions one at a time. So submit those in the chat.
• 1:17
  Let's get going. Shall we everyone? All right. So so here's the deal. Okay.
• 1:21
  Stop the screen share and we'll go from there. The retirement planning space or financial services, think it's fundamentally flawed. I do. And the reason is back in the seventies, you had to go through an advisor to buy a stock or a fund, a mutual fund. Right?
• 1:38
  And then they had to say, okay, well you want this great. There's an order. They're calling someone over. They're placing the order. And then there's a confirmation long arduous process.
• 1:45
  So you're invested. So back then, like you didn't want to be trading often because it was so hard and expensive. And the other part is just like, I mean, information wasn't dispersed as quickly. Right. Right?
• 1:59
  So it was very much a an investment mindset. You buy and held it for a long term period of time. And if something drastic happened, you tried to get out. But there was that gateway. And then we invented this thing called the internet.
• 2:10
  David: Oh, remember. I'm familiar with that. Yeah.
• 2:12
  Mike: Yeah. Heard of that. We're on it right now. Riding Yeah. The internet waves.
• 2:16
  David: This is pretty good.
• 2:17
  Mike: And this is called creative destruction, by the way. What we're talking about here, creative destruction. It's a very important part of the investment cycle. So the internet pops up. We way overdid it.
• 2:28
  And then that's why two thousand, oh one and two, the markets went down because we overdid it. It's called capital expenditure. And then, you know, the dot com bust hit. It was horrible. We recovered all as well.
• 2:40
  And then there's these new companies that started coming out called like E Trade. Remember the baby commercials?
• 2:45
  David: Lots of Super Bowl commercials, right?
• 2:46
  Mike: Those are great.
• 2:47
  David: The babies and the crib doing his trades.
• 2:49
  Mike: Now think about that from a marketing standpoint. It's so easy a baby could invest. It was quite brilliant. Anyone could open an account and you could invest. I think they had minimums at the time, but no one really has an account minimum anymore, really.
• 3:02
  And that became a thing. And then as the years passed, you had these other apps like Acorns. Acorns was a bit problematic at the beginning. They couldn't afford the transaction snots once a month. You put the nuts in your savings account as they say it.
• 3:16
  Oh. Or Robinhood, you can trade on your phone. So let's just ask a question. Okay. We now are so technologically advanced that we can trade on our phones casually as we're, you know, anywhere in the world.
• 3:32
  Yeah. Twenty years ago, you had to call someone to place a trade to buy that stock. And the fee structure hasn't changed in in twenty, thirty years.
• 3:46
  David: That that actually paints a really good picture of of how sort of antiquated, right, and how one part hasn't caught up with the other.
• 3:52
  Mike: Yeah. The back back in the seventies, the more money you had, the harder it was to move assets. It was very difficult. Okay. And then we're used to seeing like, oh, well, Buffett and, Drunk Miller and Soros and Ray Dalio and all these fund managers and how they manage money.
• 4:09
  The reality is that's that's a very different different type of management of money. Most people get a static allocation of this much in large cap, mid cap, small cap. And if you don't know this, that's okay. Because it's jargon. It's intended to confuse people into being in a fear based position to say, well, my guy's doing it.
• 4:27
  Nice. Or my my lady's doing it. You know, you've got an advisor. Fine. But then they just take that system and they rebalance once a year and they're collecting a fee every year for it.
• 4:38
  It's as easy as them clicking a button, which you could do from your phone too. So this is a big part of my frustration with the industry. Let me know in the chat if if if this is resonating at all with you, by the way. So to, to paint that picture, let me take a step back. Okay.
• 4:56
  We just had some people in our office to hang up a TV. I know how to hang up a TV. I wasn't being lazy about it, but in our office walls, the studs are metal. My tools are not able to put the right drills into the wall to penetrate the the metal studs to hang a TV properly. So if I did it, I'd probably do it wrong.
• 5:19
  The TV would probably fall and it'd be a horrible mess. Yeah. There are some situations where you hire a specialist for certain things. But I'm not paying these folks every month for a job they did once. They hung the TV.
• 5:33
  That's it. That's the whole transaction. Yeah. Okay. I go to Jiffy Lube or Midas or, you know, any change the oil.
• 5:42
  That's a one time transaction because I didn't want to. And I can change the oil. But that was a convenience factor. I want someone else to do it for me. So when we define where is your money being spent?
• 5:53
  What is the obligation of that? What's the complexity of that? And is the ongoing fee worth it? That's I think that's a reasonable conversation.
• 6:03
  David: Yeah. Do we have financial guys that kind of do that, like just fee for service one time transaction?
• 6:09
  Mike: Other than that, there are a few out there. Flat fee advisors. I think a big problem of that space though, if I'm to criticize it already, is that a lot of them want to do a plan, but they don't want to talk about certain investments or products because they're not licensed to recommend them or they don't understand it. So it's kind of like building a house with blinders on. That's kind of a problem.
• 6:29
  But it's still, that's the idea. So I wanna talk about fees for a second. And how you might even wanna, like if you're, some of you might be clients of ours already and how you might wanna replace us. That's an odd thing to say. But if we're fiduciaries, we're legally bound to do what's in your best interest, which means having a frank and open conversation to anyone.
• 6:51
  David: Right.
• 6:51
  Mike: So let's talk about that. Okay. What are you paying for? Really? What are you paying for?
• 6:55
  If you're charging 1%, you've got a million dollars to paying 1%. You're paying $10,000 Let's do the math. $10,000, not 1%. 1% small.
• 7:05
  David: Yeah. 1% sounds meaningless. Like,
• 7:07
  Mike: oh. Pennies.
• 7:08
  David: Yeah. I can handle that.
• 7:09
  Mike: The 1% of 10 of a million dollars is $10,000. 1% of $2,000,000, dollars 20,000. 1% of $5,000,000, $50,000.
• 7:20
  David: Now that's significant.
• 7:21
  Mike: You get three three, five friends. This will be funny to see if there's a reaction on this. You get three or five friends. Let's say you all have $5,000,000. Just hire one guy or one gal dedicated just to you all.
• 7:31
  That's all they do.
• 7:32
  David: Mhmm.
• 7:33
  Mike: They're getting a pretty good salary and they are focused on just you. That's an interesting concept, isn't it? Yeah. But the other part too is of this is, what are you getting in exchange for this? But also acknowledging the markets are what make you money, not financial advisors.
• 7:49
  I mean, just think about that for a second.
• 7:51
  David: Right.
• 7:52
  Mike: You're in the market. The markets grow. That's what made you money. That's like the government saying we created jobs. No, you didn't.
• 8:02
  Yeah. You created an environment where entrepreneurs went out, took a risk, and were able to create jobs.
• 8:09
  David: Right. But there's always our our friends in Washington like to take credit. Right?
• 8:15
  Mike: They love taking we we made jobs. No, you didn't. Yeah. You you did not you you created an environment that was more friendly for the jobs. But I digress.
• 8:25
  And that's not a criticism of Trump. Every politician on both sides of the aisle do it. Absolutely. So so to put this in perspective, let's say you're retired, you got a million dollars.
• 8:36
  David: Okay.
• 8:37
  Mike: Okay. You're gonna take following the 4% rule about, 4% of million dollars, $40,000, let's say from your IRA of income.
• 8:46
  David: Alright. That's my annual income.
• 8:48
  Mike: General income. And then you've got about 60,000, you and your bride, of social security. That's a $100,000. If you get rid of state taxes just for a second, I don't know where everyone is, in your states. But let's say Texas, Nevada, Washington state, something like that.
• 9:04
  Your tax bill's up around $4,000 total. Your advisory bill is $10,000. So
• 9:12
  David: I'm paying my adviser more than I am to my my
• 9:15
  Mike: The government. Yeah. And to make things interesting, the adviser might say, well, we need to do some IRA to Roth conversions. Let's max out that 22% or 24 tax bracket where you're paying now $2,030,000 dollars in taxes for two years to get to a lower tax bracket later. You actually destroy your retirement in some sense.
• 9:38
  Because you accentuate the losses by paying a higher tax bill that you didn't need to have when you could have pulled back and been patient and just not done that. That's a whole another conversation. Maybe that'll come up with the questions about tax planning
• 9:49
  David: Yeah.
• 9:49
  Mike: For a million dollars or less. Because if have you less than a million dollars, your tax planning is fundamentally different than if it's a million dollars or more, but we follow blanket statement advice. Uh-huh. But I digress. The point being is if 4,000 is all you pay in taxes, and that's coming out of your side, you need to acknowledge that you're not following the 4% rule.
• 10:09
  You're following really the 5% rule. Because That's 4% to you, 1% to your advisor, that's 5%.
• 10:15
  David: Oh. Yeah.
• 10:16
  Mike: One out of every $5 leaving your account, your life savings is going to your advisor. And I'm not saying that that's wrong. I'm saying, is it worth it? Because in my opinion, that we're kind of in a let's let's divide the groups for a second. If you have 2,000,000 or less, a one time plan, a proper one time plan could replace your advisor and save you money and fees.
• 10:42
  Yeah. So Ain't that ain't that crazy?
• 10:47
  David: For some people, it is worth it. Right? And and for for others, we want to just we wanna plant that seed to consider because earlier today, we answered the question, yeah, it was worth it for us to hire out the TV being hung on the wall. Right? We could have struggled in there.
• 11:03
  We could have gone to Home Depot and bought like a better, like a more powerful drill or gotten a different bit to to make it through the the the different kind of, you know, studs in the wall. But we felt like, no, it's worth trading this amount of money for that service and we're we're happy. Well,
• 11:21
  Mike: if you can follow a system, like if you can follow a recipe, do you need the chef? No.
• 11:26
  David: No. Right.
• 11:27
  Mike: You might want the chef, but you don't need the chef. That's a that's a clear distinction. Yeah. Now for those that have $23.05, $7,000,000, you might have more tax issues. But then you just have to ask the question, well, on.
• 11:41
  Take a step back for a second. How much does the job actually cost? That's where I think that the flat fee there's a there's a resurgence or a a renaissance happening in the industry about flat fee advisors charge a monthly amount regardless of how much or how little you have. We're one of them. I I think that's that could be worth it.
• 11:57
  So if you're if you're paying point 1% of all of your assets because it's a flat fee, that might make a difference. But everyone's different. Everyone is different. Let me say it one more time. Everyone is different.
• 12:12
  And so you don't wanna do a blanket statement. Everyone should have an advisor or not. Mhmm. The the basis of all this is going down to a one time plan. Do you have a comprehensive written plan that's the recipe for success?
• 12:26
  Once you have that, then you have the ability to say, I want this done for me or not. Yeah. You can't say yes until you can say no. Like that's just how it is. Yeah.
• 12:36
  So let me give you the three steps to replace your advisor and potentially save you a lot of money in advisory fees, including us.
• 12:43
  David: Okay.
• 12:44
  Mike: This is just honesty. And we're one of the few people that are so open about how this works. I think that's why people attend these Q and A's. And then fill in the chat with any questions if you're just joining us late. I see a lot of you just popped in too.
• 12:58
  Step one, I highly encourage people to hire a financial advisor for a one time plan. If they say, well, you know, you gotta move the assets over and we'll help you. Nope. You don't need to move assets over for a one time plan. Well, you know, we're only do a plan if we do this, that or the One time plan that's a product pitch, that doesn't work.
• 13:22
  A one time plan is a written document that tells you everything that you need to do, and you're paying them an hourly rate or basically a flat rate, a fixed rate, whatever the deal is. That's how it works.
• 13:34
  David: For people that you've met, like, you know, people who are new to Kedrick and they come and have an initial meeting with you. How many of those people actually have had a one time plan already? Like, that maybe they brought it in because they don't like it or One. A single person?
• 13:48
  Mike: One person in the last five years had a written plan. Wow. People people have a plan, but what they typically have is an Excel sheet of projections. Or here's a bunch of products and their income products. So they bought some some bonds and they're gonna just live off the income for the bonds.
• 14:08
  Or they bought some annuities. They're gonna live off the annuities and just invest the rest. And what they don't realize is the tens, if not hundreds of thousands of dollars of missed opportunities of leaks in their not plan, but they're just general projections or a product first portfolio that kind of mismatches and assembles together. Let me know the chat. I'm curious if if any of these are in your category.
• 14:31
  It's okay to admit it. Yeah. We're just here having fun.
• 14:34
  David: Yeah. So that's their plan. Their plan is I'm gonna have just take lifetime income from this, or I've got this.
• 14:40
  Mike: Yeah. It's a product pitch. Uh-huh. Doesn't make the tool wrong. But when you start with a product and then you go to strategies, the product might get in the way of the strategy that was right for you.
• 14:51
  Let me give you an example. Okay. When we do our planning process, it's it's planned first or the projections, then the strategies, then the products. So one of the first, iteration of it, what we look at is, what's the flow of the money? And then what are the different seasonalities?
• 15:06
  For example, 60 to 65, the golden tax window. That could mean we need to do more IRA to Roth conversions, delay social security and get in front of a large IRA bill. Why? Pretax dollars, RMD risks, for the higher net worth, that might be a situation we look at. But for those that might have a little bit less saved, they still have a lot of money saved.
• 15:27
  They can self fund their retirement.
• 15:28
  David: Mhmm.
• 15:29
  Mike: They just don't need $20,000 a month to live off of. For them, it might be, well, hold on. You're retiring at 62 years old. We don't have a required minimum distribution issue later in life, but you have some brokerage funds. You got about two, three hundred thousand in your brokerage account.
• 15:46
  That's the taxable amount. You know, it's invested in some stocks or, you know, SPY, you know, S and P 500. Mhmm. Well, what if we just took income from them? You got a $100,000 of gains you could realize at 0% taxes.
• 16:00
  What if we segmented, took income from that source for a couple of years and then went over here and took income from a different source from 65 on. See right there, we could maybe save $20.30, 40,000 a year in taxes. Now imagine instead of you paying less in taxes, it's kind of like say extra savings. It's just extra money in your portfolio that can grow. They can go to legacy.
• 16:23
  They can be more in spending. You don't get those opportunities if you do a product first. You don't get those opportunities if you just kind of have this portfolio of ambiguity and project it out. So the first step is hiring someone that knows the right questions to ask, whether it's us or someone else, that's up for you to decide.
• 16:42
  David: And are they saving that 20 or 30,000 because they're not taking it out of their IRA to live on?
• 16:47
  Mike: Well, yeah. So they're not paying income tax from the IRA. They're doing in this example that I gave, they're taking income from long term capital gains. All right. Yep.
• 16:56
  So the first 100,000 of gains is tax free.
• 17:00
  David: That's a decent deal.
• 17:01
  Mike: And the basis is tax free. Yeah. That opens up about 30,000 if you're married, filing jointly. That's about 30,000 that you could then roll over from IRA to Roth tax free. And you might want to have a little bit of tax in there so the government doesn't increase your audit.
• 17:17
  So maybe you have 25,000 of ordinary income that's taxed in this situation, But most of your income was tax free. It's very small amount in the 10% tax bracket was taken out of the IRA. But you divided and conquered in this situation, paid very little in taxes. And guess what? You just qualified for all of the affordable care act subsidies.
• 17:39
  So that's 20 or so thousand, whatever your state is, whatever insurance you want. That's like 20,000 potentially off your affordable care act premiums, plus the taxes you didn't have to pay. It's a double whammy situation for your benefit.
• 17:53
  David: Wow.
• 17:53
  Mike: But you don't get this if you start with a product. Right. You know, the one that wants to sell you 1% a year. Yes. Or whatever.
• 18:00
  So you have to work with someone that has no incentive other than starting with the plan first, illustrating the projections, and then looking for the different seasons and phases and opportunities. And then you start to pick out what strategy makes sense for you. Because if you don't know the strategy you wanna implement, you can't possibly know the tool that you need to implement that strategy. And we could spend hours on this, by the way. Then, then once your plan is done, so you know your it's like a recipe.
• 18:37
  Yeah. You know your projections, your guidelines, right? The landmarks you wanna hit along the way.
• 18:42
  David: Okay.
• 18:43
  Mike: You have the strategies you wanna implement and you know when to implement that at different phases of of your retirement. And then you pick out the right investments and products. So you know this much should go into your reserves. So assets that have growth potential, but no downside risk. And if you haven't downloaded my book yet, retireontime.com.
• 19:01
  You can download the book, the whole planning kit for free. We give you the book, the workbook, the audio book, the checklist, all of it's free. Retireontime.com. Get it today. But, so we have our portfolio structured and there's always a part of the portfolio that's intended for growth.
• 19:17
  David: Yeah. Cause we want to offset inflation or maybe we have a big health thing that we have to pay for. I don't know. Just something unexpected. Yeah.
• 19:26
  Roof. Right.
• 19:27
  Mike: So you need long term growth because your retirement's probably gonna be twenty to thirty years for most people at least. So the growth mechanism, that's where people go, well, I need a financial advisor for that. That's true. And you might you might find one that's really good about growing your money. Mhmm.
• 19:43
  Or you can keep it really simple. And this is step two, find your investment system. You could subscribe to like The Motley Fool. Oh yeah. A number of newsletters out there that give pretty insightful like ideas on what you could invest in.
• 19:58
  That's a flat subscription rate. For us, cash flow and capital, it's included in our basic subscription, our KDRC model that you could just implement on your own. No 1% fee attached to it. Just implement on your own. Your Vanguard, your Fidelity, your other accounts.
• 20:15
  If you wanna get fancy, you can go to TimerTrack. TimerTrack is a little known place where anyone who has a model, they verify it through TimerTrack. So third party verify the of the performance. Oh. And then you could then pay like, it's like $130, 150 a year.
• 20:32
  Access their database and you can shop for your own models.
• 20:36
  David: Oh, really?
• 20:37
  Mike: Like there's all sorts of things you could do. Yeah. It's be very careful about new models though. If they've been invented over the last five years, like you kind of want a model that's experienced a market crash or someone that's managed money in a market crash or else it's too utopic.
• 20:52
  David: So the model says like, here are the investments and then this website TimerTrack will see how that did.
• 20:57
  Mike: TimerTrack's a library of a bunch of people and their models.
• 21:01
  David: Oh, okay. Oh, I see. I see.
• 21:03
  Mike: Just different ways you could find an investment system. Because what's your advisor really doing for 1%? An investment system. Is he, well,
• 21:10
  David: he's taking my money. He's putting it in SPY.
• 21:13
  Mike: Yeah. Well, it's Yeah. SPY is some bond funds. It's diversified and they just rebalance over and over again. Mean, really, you could probably hire an advisor for one month, figure out what their allocation is, fire the advisor, and then just rebalance that allocation once a quarter.
• 21:31
  Oh yeah.
• 21:33
  David: Oh, we just gave it away.
• 21:35
  Mike: I mean, if the emperor has no clothes, let's stop pretending, you know? Right. So, and then the third part here is, you'll appreciate this since your wife's a dentist. Schedule your annual appointment with the advisor that did the one plan. Yeah.
• 21:52
  Just have some sort of check-in. I call it the dentist appointment or the oil change.
• 21:56
  David: Right.
• 21:56
  Mike: Just a check-in. It might be nothing. But if there's something, that's how you can kind of stay on top of the plan adjustments, tax changes, and so on. Just to kind of check-in. Yeah.
• 22:08
  In my mind, this is the this is where things should go, but the industry does not want it to go this way. And so we will need to experience a pretty ugly phase of creative destruction to where enough people say, I'm done paying the participation award to an advisor who really isn't doing much. Now there are some advisors that are active managers that are brilliant. I'm not criticizing blanket statement the entire industry. I'm saying, I think the model's broken.
• 22:37
  And if you wanted to self manage, those are your steps. Hire a an advisor for a one time plan that has to be written instructions on how to maintain that plan. A recipe. Mhmm. So you don't need to pay for a chef to cook you every meal.
• 22:52
  You know how to cook. I mean, maybe some of went to college, maybe some didn't. I remember going to school and realizing that most of my roommates had no idea how to cook. They could barely cook top ramen. That was kind of sad.
• 23:05
  Yeah. It's not a criticism of them. They just never learned. I think more people could manage retirement if they were given a actual written plan and just sat down and kind of read it. Yeah.
• 23:17
  It's just no one wants to teach them how to fish because that's how the money's made. Right. And then find your investment system, whether it's our KDRC model, very simple rebalance. Whether you're going to someone like The Motley Fool for stock tips or a combination of all of the above, that's up for you, but the system. Follow systems, not sentiment.
• 23:36
  And then just make sure you have that check-in. The dentist appointment. Yeah. With a flat fee advisor. So for all of you that are here, by the way, if you're going, never thought about that way.
• 23:48
  Look, it's it's whether you wanna fire your advisor or not, whether you're looking for an advisor or not, whether you're trying to figure out your plan or not, a one time plan usually pays for itself. Just on the tax planning side alone. Most of our private clients, the ones that pay us for an ongoing relationship, a lot of it's for tax reasons. It's not for the investment advice. Though some of it, it's both.
• 24:10
  And we're proud of our models and what we do, but if you wanna explore what those options are, go to retireontime.com/call and schedule a call. So that's I'll put in the chat here as well. Retireontime.com/call. Go there, schedule a thirty minute call. Here's how it works.
• 24:27
  It's real simple. You schedule the call. We're gonna ask you a bunch of questions. Those questions early. What do you want your retirement to look And what would you want from a financial advisor?
• 24:35
  It's okay if you don't know. You could say, I'm just trying to figure this out. Whatever it is, we take that information and we we run your retirement leaks analysis. We wanna show you all the different places you could be losing money. The inefficiencies in your plan.
• 24:50
  The things, the questions you didn't know to ask that might help you get more out of your money. That simple report, whether you work with us or not, you're gonna walk home with that. No cost. That's free. After that report's given, if you want to then go through the planning process, about $2,000 to go through the whole process, which is like what?
• 25:10
  A fraction of the cost you'd pay an advisor for the 1% for your the annual like, so it's a fraction of the cost to significantly open your eyes of what could be and all the different strategies, different ways you can get more out of your money. That plan printed, written, we build it together and then we send it to you And that could replace any advisor that you ever work with. If you wanna take us up on that, look, there's no money upfront. Schedule the first call thirty minutes only. That's it.
• 25:38
  Doesn't cost you a dime. The retirement leaks analysis to show you all the different places you could be losing money from tax inefficiency, healthcare planning inefficiency, even portfolio inefficiencies. And then you decide at the end of all that if you wanna proceed or not. Retireontime.com slash call is how you get that. If you haven't done this yet, make sure to download our Retire On Time Planning Git.
• 26:02
  That's also free as well. Why is it free? Because I got tired of people asking the wrong questions. Because they just didn't know. I got tired of AI leading them down the populous path as opposed to some critical thought of challenging those assumptions.
• 26:16
  All this material doesn't say everyone should do this exact one thing. It says, here are the guiding principles. Here's how you put your plan together, and here's how your plan structures the portfolio so you don't get caught up in that sixty forty, fifty fifty arbitrary allocation.
• 26:33
  David: Yeah. An allocation that may there was a time and place for it. Right? But things in the world changed the market, the environment. We've talked about the environment on this show before.
• 26:41
  Mike: The environment changed. I mean, in 2010, very different portfolio structure, in my opinion, what should be done as opposed to today. Mhmm. Very different environments, very different situations. And these are things you wouldn't know to look at.
• 26:55
  But once you see it, you can't unsee it. And you're so glad that you see it. Right. So go there retireontime.com/call. If you wanna schedule that call.
• 27:03
  We'd love to have that conversation with one of our advisors here that can help you put your plan together. A plan that's designed to last longer than you. A plan that's designed to replace any advisor so you don't have to work with an advisor. If you choose to, it's because you want to, not because you have to. That's I think that's the appropriate positioning for this space.
• 27:22
  One last thing, we do have tomorrow night, kind of a fun, event. If you have an RSVP to it, you can go to retireontime.com/class. This is the the workshop that I'm doing tomorrow night at 06:30 central time. Will my money outlast me? We're talking longevity.
• 27:40
  We're talking healthcare. We're talking the widow tax. If you don't know what widow tax is, when a spouse passes, the surviving spouse is often in a worse off situation. We're gonna be talking about how two identical plans, one can completely fall apart and the other can survive the durability here. And no, it's not buy an annuity and call it good.
• 28:03
  That's a tool. Maybe you want it, maybe you don't. It's okay either way. But where annuities give guaranteed income for life, which gets rid of market risk, they fail at inflation risk. There's no such thing as a perfect investment product or strategy.
• 28:18
  So I'm trying I'm putting this on to get rid of the assumptions people have and to kind of open up the conversation on how to build a plan that's truly designed to last longer than you. That's a plan first. Then we dive into the strategies, and then you pick the right investments or products. There'll be a fun conversation about that. Tomorrow night, September 9, 06:30 central time PM.
• 28:42
  How to create a retirement plan that's designed to last longer than you. Two different plans identical. We'll talk about that. Why I think the 4% rule falls short. They're calling it 3% rule now.
• 28:52
  Ain't that wild?
• 28:54
  David: So, yeah. Why why why are we why have we gone from four to three?
• 28:58
  Mike: Because the markets are overvalued and the ten year projection this is important. Listen up. The ten year projection of the S and P 500 is a total return of 3% according to the CAPE ratio.
• 29:10
  David: Oh, that sounds kinda like flat market territory.
• 29:12
  Mike: Uh-huh. Oh. Which a lot of people don't know that even is a possibility. Mhmm. That's not This isn't my opinion.
• 29:20
  This is Doctor. Schiller from Yale. You ever heard of Yale? I mean, people know the Yeah. Whether you like Yale or not, like they know a thing or two.
• 29:30
  David: Yeah.
• 29:31
  Mike: They've got a great research team when it comes to the markets. I mean, doctor Schiller, you've got, doctor Ibbotson. These are brilliant minds. And it's their research saying, yeah, the markets could be a total return of 3%, including dividends reinvested. That's not a promise.
• 29:50
  Yeah. It's historical data and patterns.
• 29:53
  David: So we need to be prepared to react to that should that happen.
• 29:57
  Mike: Yeah. And you know what the industry says? Well, we're gonna charge you 1%, but you need to take your 4% and go to 3%. It's like, hold on. Now I'm paying you 25% of my life saving income to manage this?
• 30:10
  What's the strategy? Well, we're gonna give you a diversified portfolio allocated with small cap, mid cap. I'm willing to bet of all of you here, not 10% of you can explain why we have small cap, mid cap and large cap and what that even is. Yeah. And that's not your fault.
• 30:26
  Right. It's jargon that's intended to confuse people into a codependent relationship on an adviser who's gonna charge you 25% of your life savings as income. So you get 3%, they get 1%, and you should be thanking them for their good deeds and services. Mhmm. Maybe it's worth it for them.
• 30:43
  But I I even in a flat market cycle, four or 5%, I think is just fine if you have the right structure. And that boils down to the simple philosophy of a prepared reaction is better than a risky prediction.
• 30:55
  David: Let
• 30:57
  Mike: me say that again. A prepared reaction is better than a risky prediction. If you know what to do before the markets go down and you're prepared for it, then you could potentially take advantage of the next market crash.
• 31:08
  David: Well, yeah. Because aren't we buying at a discount if the markets go down? If that's like, that's a good time to buy?
• 31:14
  Mike: Well, yeah. Let's say, let's say you're like, you know, markets are up. I'm going to start protecting some of my assets, but bond funds stink right now because rates keep going up. So bond funds keep losing money. That's a real thing.
• 31:24
  So maybe you put 20% of your assets in buffered ETFs. Still got upside potential. Markets crash. You sell those without losing money. You buy the dip.
• 31:32
  It's a prepared reaction strategy. You're not trying to time the market. You want to be prepared for when you need to act based on a future time. Just some thoughts for you today. Yeah.
• 31:45
  That's why we do the planning process. That's why the plan is so important. It's a series of strategies. It's knowing what to do when the markets are up and how to react and still benefit from when the markets are down. Because if you put your plan as, based on what the markets will do, you've got no control over your retirement.
• 32:03
  You are gonna react to the market your entire life. That's a crappier situation to be in in retirement.