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At The Money: Planning Your Retirement? · Masters in Business

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  Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
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  Speaker 2: Out of the tree of Life, I just pick me plumb.
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  Speaker 2: You came along and everything started into hum. Still it's
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  Speaker 2: a real good bet. The best is yet to come.
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  Speaker 1: Have you thought about retiring? Do you know what you'll do,
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  Speaker 1: how you'll spend your time and income? I'm Barry Ridhelts
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  Speaker 1: and on today's edition of At the Money, we're going
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  Speaker 1: to discuss your retirement. To help unpack all of this
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  Speaker 1: and what it means to you, let's bring in Christine Bens.
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  Speaker 1: She is the director of Personal Finance and retirement Planning
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  Speaker 1: at morning Star. She's published numerous books on the subjet,
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  Speaker 1: most recently How to Retire Twenty Lessons for a Happy, successful,
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  Speaker 1: and Wealthy Retirement. So let's start with the basics, Christine.
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  Speaker 1: In your book you talk about you need to define
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  Speaker 1: your purpose in retirement.
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  Speaker 3: Explain purpose is super important to us throughout our lives,
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  Speaker 3: very and that's true as we age. The problem is
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  Speaker 3: is that a lot of people do receive some sense
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  Speaker 3: of purpose from their jobs, and so when they step
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  Speaker 3: away from work, they're stepping away from part of themselves.
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  Speaker 3: So the idea is, as you approach retirement, make sure
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  Speaker 3: that you're being super thoughtful about how you will replace
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  Speaker 3: that sense of purpose that you derived from your work,
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  Speaker 3: that you should kind of prepopulate your activities to find
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  Speaker 3: some that do provide you a sense of purpose. Jordan Grummitt,
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  Speaker 3: who is the last chapter of the book, has a
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  Speaker 3: whole book about purpose called The Purpose Code, and his
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  Speaker 3: point is that there's a lot of purpose anxiety out
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  Speaker 3: there that you say you find a purpose and people
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  Speaker 3: think really big. They think, oh, I need to write
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  Speaker 3: a book or start a foundation, or climb everest or
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  Speaker 3: something like that. And maybe you do things like that.
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  Speaker 3: But his point, I think is really comforting, which is
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  Speaker 3: that small pee purpose. He calls it like bird watching
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  Speaker 3: or gardening, or you know, cooking meals for your family,
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  Speaker 3: smaller things that bring you joy. Those are just fine
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  Speaker 3: too well. So while you're trying to cook up what
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  Speaker 3: your big pee purpose might be, just find those things
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  Speaker 3: that bring you joy, that give you that animating force
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  Speaker 3: for your days.
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  Speaker 1: So daily goals and activities up film and not just
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  Speaker 1: kill them. Onjaro. So let's talk a little bit about planning.
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  Speaker 1: How important is it when should people start playing? Is
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  Speaker 1: this something you do five months before you retire or
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  Speaker 1: is this something you do fifteen years before you retire.
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  Speaker 3: I've really concluded that this idea of retirement has a
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  Speaker 3: hard stop where we're not really thinking about it except
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  Speaker 3: for like the months leading up to retirement. It's a
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  Speaker 3: terrible model. And I know why it happens that, you know,
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  Speaker 3: the way we work in this society is so intense
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  Speaker 3: that people show up in retirement totally depleted and they
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  Speaker 3: haven't really been able to envision anything besides like Netflix
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  Speaker 3: or traveling or whatever. And those things are all great,
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  Speaker 3: but you should ideally start I think age fifty is
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  Speaker 3: kind of a good marker, start thinking about this vision
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  Speaker 3: for your later years. Perhaps you will continue working a
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  Speaker 3: little bit longer. And I love the idea of people
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  Speaker 3: at that life stage being super thoughtful and trying to
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  Speaker 3: direct the work that they do, taking an inventory of
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  Speaker 3: the things that you still enjoy, taking inventory of the
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  Speaker 3: things you don't enjoy as much. I have a stop
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  Speaker 3: doing list on my desk of things that I don't
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  Speaker 3: enjoy as much that I have to remind myself to
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  Speaker 3: stop saying yes to. But I think that that is
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  Speaker 3: a great way to segue very gradually into retirement. So
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  Speaker 3: that the complexion of your work is that you're doing
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  Speaker 3: more things that you enjoy and you're shedding some of
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  Speaker 3: those things you don't like as much.
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  Speaker 1: So let's talk about income while you're in retirement. What
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  Speaker 1: are some of the more common forms of retirement income.
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  Speaker 1: We automatically think of stock diven ends or bond yields.
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  Speaker 1: How do most people generate the sort of income they
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  Speaker 1: need to enjoy a retirement.
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  Speaker 3: I think it starts with non portfolio sources of income.
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  Speaker 3: So being thoughtful about how you are maximizing social security potentially,
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  Speaker 3: you know, I've warmed up to the idea of using
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  Speaker 3: simple income annuities to augment what someone might get from
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  Speaker 3: Social Security. So the idea is that you you're trying
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  Speaker 3: to address your basic living expenses with those non portfolio
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  Speaker 3: sources of income, then it just gives you a ton
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  Speaker 3: more flexibility with your investment portfolio, and it puts you
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  Speaker 3: in a better position to put up with what will
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  Speaker 3: be the inevitable ups and downs in the market. You
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  Speaker 3: mentioned bond income and dividend income ary and certainly retirees
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  Speaker 3: love the idea of subsisting on organically generated income. I
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  Speaker 3: think that that can be actually a huge trap. From
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  Speaker 3: a portfolio construction standpoint. I can't tell you how many
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  Speaker 3: weird looking portfolios I've seen that have been assembled in
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  Speaker 3: the name of kicking off whatever amount of income someone wants.
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  Speaker 3: I'm a big believer in assembling a total return portfolio
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  Speaker 3: and then maybe annually taking a step back and saying,
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  Speaker 3: what is the best source of funds for me in
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  Speaker 3: this year. For the past few years, it has been
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  Speaker 3: trimming large growth stocks, I think for a lot of retirees.
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  Speaker 3: But the idea is that it's a dynamic approach. It's
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  Speaker 3: not a one and done I'm going to source my
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  Speaker 3: income through the portfolio and never think about it again.
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  Speaker 1: I like the idea of the dynamic approach. We're going
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  Speaker 1: to come back to portfolio organization in a moment. But
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  Speaker 1: since you brought up social Security, I always get asked, Hey,
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  Speaker 1: what's better. Do I start taking Social Security as soon
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  Speaker 1: as I'm eligible, or if I could get by, do
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  Speaker 1: I wait until I have to take it and generate
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  Speaker 1: the maximum monthly income? How do you answer that question?
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  Speaker 3: We had seen this steady trend toward people delaying over
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  Speaker 3: the past several years, but that seems to have reversed
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  Speaker 3: itself a little bit recently as some of the scary
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  Speaker 3: headlines about potential adjustments to Social Security have been predominant,
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  Speaker 3: And so delaying is a really good strategy for people
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  Speaker 3: who can of for to do that, who can afford
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  Speaker 3: to subsist on their portfolio income prior to social Security starting.
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  Speaker 3: And everyone's heard the reasons, but you know, you get
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  Speaker 3: a guaranteed pickup and benefits for every year that you're
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  Speaker 3: able to delay past your full retirement age, and that
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  Speaker 3: benefit is also inflation adjusted, so even if you haven't
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  Speaker 3: yet claimed, the benefit that you eventually receive will be
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  Speaker 3: inflation adjusted to reflect whatever inflation increases have come along.
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  Speaker 3: So it's a terrific strategy, especially for the high earners
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  Speaker 3: in a household. If you've been the main earning partner
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  Speaker 3: or the high earning partner, it's often a great strategy
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  Speaker 3: for you to delay in order to enlarge for the
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  Speaker 3: whole household that social Security income. For a lot of couples,
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  Speaker 3: that's maybe, you know, kind of divide and conquer, where
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  Speaker 3: one claims it full retirement age and the other weights
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  Speaker 3: until age seventy. I often recommend the open Social Security
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  Speaker 3: tool is kind of a good basic and free tool
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  Speaker 3: for people.
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  Speaker 1: And since you brought up portfolios earlier, let's talk about
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  Speaker 1: I do like the idea of being dynamic and flexible,
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  Speaker 1: where you can look at, hey, we're up twenty percent inequities.
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  Speaker 1: I could peel that off rather than draw something else down.
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  Speaker 1: But how do you advise people organizing structure their investment
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  Speaker 1: portfolios from maximum cash flow during retirement.
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  Speaker 3: I've become a huge evangelist for the bucket approach to
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  Speaker 3: retirement portfolio planning. I remember talking to Harold Dvinski, the
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  Speaker 3: financial planner, probably twenty years ago, and I was asking
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  Speaker 3: him how he sources cash flows for his clients, and
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  Speaker 3: basically he said, I run a total return portfolio, and
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  Speaker 3: I bolt on this cash bucket. And he noted that
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  Speaker 3: having that cash ear marked for down markets really gave
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  Speaker 3: his clients a ton of peace of mind with the
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  Speaker 3: long term portfolio. They weren't bugging him about losses in
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  Speaker 3: that portion of the portfolio because, as they knew, in
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  Speaker 3: a down market, they could pull from the cash. So
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  Speaker 3: I love that idea of having very liquid reserves, maybe
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  Speaker 3: amounting to a couple of years worth of portfolio withdrawals,
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  Speaker 3: then maybe fixed income assets accounting for another five to
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  Speaker 3: eight years worth of portfolio withdrawals, and then the rest
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  Speaker 3: of the portfolio in a globally diversified equity portfolio. I
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  Speaker 3: think it's kind of a simple way to think about it,
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  Speaker 3: and I always say, even for financial advisors who aren't
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  Speaker 3: using buckets, it's a wonderful client illustration tool. My senses
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  Speaker 3: that people really get it and they're on board with
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  Speaker 3: the acid allocation. It doesn't seem so black boxy to them.
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  Speaker 1: And just to clarify, when you say cash, in my
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  Speaker 1: mind's eye, I immediately think money markets with just last
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  Speaker 1: summer were paying over five percent some form of investment
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  Speaker 1: grade corporates or treasuries. And then depending on the tax
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  Speaker 1: bracket and the state people live in, munis, how do
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  Speaker 1: you think about quote unquote cash.
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  Speaker 3: So I would think of cash as being more or
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  Speaker 3: less pure cash, money market fund, some sort of high
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  Speaker 3: yield savings account. The idea is that you aren't monkeying
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  Speaker 3: around with any potential losses. These are your cash flow
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  Speaker 3: needs and so you don't want any volatility whatsoever. I
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  Speaker 3: would put fixed income assets in that second bucket, and
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  Speaker 3: I would kind of stair step at my risk level
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  Speaker 3: where maybe I have very short term bonds, just kind
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  Speaker 3: of a step beyond cash and then moving into intermediate
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  Speaker 3: term bonds. MUNI certainly, if pulling from the taxable portfolio
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  Speaker 3: is part of the equation, you would want to think
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  Speaker 3: about them, especially for people in higher tax brackets. But
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  Speaker 3: I'm kind of a purist about that cash bucket, and
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  Speaker 3: I think of it as kind of a zero risk
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  Speaker 3: portion of the portfolio, probably a federal money market fund
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  Speaker 3: or maybe AMMUTI money market fund for higher income folks.
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  Speaker 1: So we started out talking about what actually retirement is
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  Speaker 1: and how people should define their purpose. What about those
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  Speaker 1: who want to keep working part time? How does that
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  Speaker 1: transition go from full time to part time or even
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  Speaker 1: from full time to fully retired. It seems like that's
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  Speaker 1: a challenging time period.
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  Speaker 3: It's a beautiful model. What we see when we look
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  Speaker 3: at the data is that working is really good for people.
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  Speaker 3: That people who are able to work later in life
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  Speaker 3: do tend to be healthier and wealthier, And of course
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  Speaker 3: it's a little bit of a cause and effect puzzle
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  Speaker 3: there that the healthier and wealthier people are probably able
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  Speaker 3: to continue working longer. And it's important to note that
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  Speaker 3: the spoils of being able to work longer are not
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  Speaker 3: following equally in our population, that that wealthier people are
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  Speaker 3: able to continue working longer and they need to less.
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  Speaker 3: But it is a really great model for people who
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  Speaker 3: like some aspects of their jobs. So, Barry, I think
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  Speaker 3: you're probably a perfect example. I'm a good example of
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  Speaker 3: this where I really like a lot of what I
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  Speaker 3: do and want to continue doing it longer. Have that
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  Speaker 3: conversation with your employer, and I realize it's kind of
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  Speaker 3: a rarefied position to be in where you are able
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  Speaker 3: to have an open dialogue. But older workers are good,
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  Speaker 3: good workers, and I think people should realize the power
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  Speaker 3: that they probably have if they've been in their positions
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  Speaker 3: for a while.
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  Speaker 1: The idea of retiring at sixty five or seventy is
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  Speaker 1: an anathma to me. At the same time, what was
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  Speaker 1: Warren Buffett when he announced he retired earlier this year
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  Speaker 1: ninety four? That's like incredible. I don't know if I
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  Speaker 1: got another thirty plus years in me, but he clearly
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  Speaker 1: loves his job. If you're in a situation where you
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  Speaker 1: can keep working, find it not only remunative but fulfilling
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  Speaker 1: and bringing you some degree of purpose. Is there a
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  Speaker 1: reason not to retire?
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  Speaker 3: Absolutely not. I mean, you do want to check that
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  Speaker 3: you are able to continue to do the job. I
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  Speaker 3: was recently on a panel with Carollen McLanahan, who's an
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  Speaker 3: MD and a financial planner. She made the point that
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  Speaker 3: financial advisors should actually consent to take cognitive tests periodically
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  Speaker 3: just to make sure that their acuity is where it
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  Speaker 3: needs to be in order to do the job. And
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  Speaker 3: you'd want to have a feedback mechanism in place so
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  Speaker 3: that people could tell you if you're not really delivering
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  Speaker 3: on the on the responsibilities of that job, there needs
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  Speaker 3: to be something in place to help you step away
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  Speaker 3: from that. So that's one kind of thing that I
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  Speaker 3: think people should troubleshoot in advance. But it is a
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  Speaker 3: beautiful model, you know, especially if people might say, well,
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  Speaker 3: I like my job, I just don't like at forty
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  Speaker 3: hours a week, and so maybe you can transition where
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  Speaker 3: you're you know, taking Wednesday off at first, or you know,
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  Speaker 3: maybe just just working three days a week, whatever days
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  Speaker 3: it might be. It Yeah, yeah, exactly.
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  Speaker 1: Three day weekends.
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  Speaker 3: Move into it very gradually.
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  Speaker 1: So to wrap up, like so much else involving our
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  Speaker 1: financial life, Planning goes a long way. The sooner you
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  Speaker 1: start planning, the better you have to think through where
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  Speaker 1: your revenue is going to come from, what your spending
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  Speaker 1: looks like. I like the idea of having a dynamic
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  Speaker 1: portfolio that gives you flexibility and adaptability no matter what
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  Speaker 1: the markets do or what inflation looks like. And then,
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  Speaker 1: most importantly, organize your financial affairs and communicate it with
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  Speaker 1: your immediate family. I'm Barry Ridults. You're listening to Bloomberg's
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  Speaker 1: at the.
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  Speaker 2: Money, The best is yet to come. Come the day
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  Speaker 2: you mind, Come the day