3 Strategies to Retire with Confidence

Peter, good to see you. Welcome back, everyone.

I love it when we get to kind of break out the basics. So today, Peter, we were talking through three strategies to retire with confidence. A recent survey by the AARP found that many Americans over 50 do not feel confident about their finances.

Used to be we were able to rely on a pension, right? But now it is our job to save, invest, and then determine how to pay ourselves in retirement without running out of money. So tip number one, break out the buckets. Utilize the bucket strategy.

What do we need to know? Yeah, well, buckets is basically segmenting the assets that you have saved and accumulated in an appropriate way and method for different purposes. It can be time optimized. So bucket number one is for your near term expenses. This is money that you're not taking a whole lot of risk with because you're going to spend it pretty soon.

And soon would be in the next one to three years, perhaps, or maybe one to five. And then you've got a little further term bucket that you could potentially feel a little bit more comfortable taking some risk with. That is money that you don't envision needing or using in the next five to 10 years, maybe a little bit more there. And remember, on the day that you retire, you basically have all of the dollars that you're going to have. This is a finite amount of money.

You've got to make it last an unknown amount of time, which is why there is so much doubt and worry about retirement. So segmenting these buckets for different periods is a requirement that you've got some of those dollars that you do not envision needing for 10 or more years. Those should be in the last bucket and generally positioned for a little bit more aggressive growth because over 10 years, yes, there may be a down year or two, which you wouldn't want to have impact your now money bucket.

But we've got time on our side to allow us to recover in that distant bucket. The other way for the time segmentation or the different buckets, Aaron, might be tax status. And I think that that actually certainly plays into this picture is that you've got to look at the tax efficiency of your dollars, what dollars mean the most if they grow the most. And so that is like those Roth dollars. If you've got Roth dollars, generally, that should be an account and a tax status that is placed in that distant bucket for more growth into the future, because growth within that bucket means the most to you. And there may be some exceptions there where in the short term we're trying to cover a doughnut hole and we don't want to pay unnecessary taxes or encounter some of the unintended secondary consequences of having our Social Security become taxable or paying more in Medicare premiums. So there are some exceptions where that Roth money jumps to the front.

But more often than not, the majority of the Roth money should be in the last bucket where the taxable and the tax deferred money is within the first and or second bucket. And by the way, that first bucket, it should not be money that I envision only needing if the market goes down and I'm keeping this three years worth of expenses dry docked just in case that happens. That is not a terrible strategy to overcome market downturns. But at the same time, the market goes up in more than 75 percent of the years throughout history. So basically what you're saying is that you've got three years worth of idle cash that is sitting around 75 percent of the time or a 75 percent chance that you're not earning as much as you could on that money. So we really dig into this time optimization and try to figure out how best to achieve both growth and cover the what ifs in case the market goes down.

Because as you pointed out, Aaron, there's more uncertainty than ever before. Lack of pensions being a large part of this. We did not have to time segment out and be as careful with the pension that was going to come in rain, hail, sleet, snow, shine, markets up, down or sideways and go you die until you passed away. And so it wasn't that finite amount of money that you really had to be careful to bucket out and time optimize. But I would say a majority of the American public, unfortunately, has not made the transition as successfully from having those pensions to now being responsible to have to save for ourselves.

And even those that have done more than reasonable in accumulating and saving and investing still have the uncertainty, because the 401K and the lump sum, no matter what the amount, does not equate to the kind of financial certainty and security that pensions once offered. And so that's why this conversation, even though it's back to the basics, is so vitally important and often overlooked. Yes.

All right. Tip number two here. Consider semi retirement. According to data from the Bureau of Labor Statistics, the number of people 75 and older who are still working is expected to grow by 96 percent by 2030. So please talk to the financial and even emotional benefits of a hybrid retirement. What are you going to do in retirement?

I'm going to keep working. Right. It's not the traditional definition of retirement per se. And unfortunately, for some, it is a financial necessity. But more often than not, actually, what I'm seeing is that people are driven by activity and want to stay busy and motivated. And so even if they are retiring from the main job that they've had for a career that was high stress and high demand, they still want to stay active in doing something and realize that they can't just vacation all the time. And so they're looking to change and shift. I call it the rewirement retirement.

They're rewiring. They're they're distressing, but they're staying involved in something that gives them more personal fulfillment and uses up some of their time because we are either at work or we're out in the world spending money. And so if we can stay involved in something where we get personal fulfillment, emotional fulfillment and are not spending as much money, that is going to be helpful in making the money that we do have last that much longer.

And the emotional aspect of this really cannot be understated. I see a lot of people who are financially prepared for retirement, but haven't really thought through what they're going to do to fill their time. And I've even dealt with situations where those same people come back to me after a year or two years and say, you know, I'm I'm not loving retirement as much as I thought I would.

I'm looking for something to do. And so that that emotional sense, it's it's it's not talked about nearly as often as it should be. But there is a psychological component to a lack of activity that unfortunately people don't realize until they don't have that activity. They don't have that motivation and social interaction.

And then all of a sudden it hits them that I'm not as happy as I thought I would be. No matter how much money they've got, they don't have the fulfillment. And so really think about what you're going to do to fill your time, to stay active, to stay motivated, because mental health is physical health is emotional health and financial health.

They all play into this picture of a fulfilling retirement. And then the last tip is pretty simple. Do the math. In other words, have a plan.

But of course, Peter, this can get very overwhelming. Where do we even start? Yeah, well, start with the basics. I actually like to start at the bottom and look at budget.

Nobody's favorite word. But when we plan on leaving the paycheck behind, how much we're spending is actually probably the most essential number. And look, the vast majority of my clients have been lucky or hardworking or blessed enough, whatever you want to classify it as, to be comfortable in their earning potential during their careers. They have earned enough income where they have not had to stretch every penny. They have not had to pinch and stretch every dollar and weren't necessarily forced to clip coupons just to make ends meet.

It's a comfortable, confident kind of position to be in. But for those same individuals, for that same description, which I'm certain most of the people watching or listening fall into, the lifestyle that we are accustomed to generally is that much more expensive. And the shift in income when we walk away from the paycheck is that much more significant. And so understanding lasting financial confidence when we still have bills but don't have that paycheck any longer really does involve doing the math, having the plan, getting back to the basics and understanding your budget and your spending habits. Now, here, budget should not be a terminology of I can't do this.

I can't do that. We don't have the money to do any of those things. But you should understand how much life, including lifestyle, not just your line item budget and month to month financial obligations, not just subsistence, but how much life actually costs you. And then you can sort of backtrack and reverse engineer and do the math. And we've got some pretty cool calculators and softwares that help with this. And basically every variable we can tinker with and say, well, what if this happens?

What if that happens? And give somebody a really good picture and projection of what that financial outlook looks like so that we are getting back to the basics and understanding what that financial future looks like and feeling pretty confident about it. So much that goes into it.

But again, those are good high level basics. So Peter, somebody would like to talk these things through with you and find, you know, create their own unique financial plan. How can they get ahold of you? Yeah, give us a call. We do offer to put together what we call the optimized retirement plan. There's no cost, no obligation.

You can leave your checkbook at home. This is a part of our planning process. It generally takes a couple of conversations to get that put together. You're welcome to share as much or as little information as you feel comfortable. But in putting that plan together, you know, details do matter. So the better information we have, the better the plan and the forecast, the more accurate it will be. But give us a call to get started in that conversation and get your optimized retirement plan put together.

Nine one nine three zero zero five eight eight six nine one nine three zero zero five eight eight six. You can also check us out online at Rashaan planning dot com. It looks like rich on planning dot com because you don't get rich or stay rich on accident. You do it on planning. So rich on planning dot com. Little play on the last name there.

You can email me, Peter, at Rashaan planning dot com. Great. Peter, thank you. A pleasure. And thank you.

Hey, folks, Peter Rashaan here with Rashaan planning. So glad that you are enjoying the podcast Planning Matters Radio. You know, one of the tools that we've put out there that people really seem to appreciate and really are our finding of value is at nine one nine retired dot com. It is your retirement tax bill calculator. If you've got any kind of retirement account, your tax deferred 401K or IRA, this is the Web site.

This is the resource where you can go. You can plug in your own numbers, your information. You can slide the tool calculator up and down for your tax rate or your amount of savings and see what your tax bill is likely to be if you default and defer to the IRS's plan versus what you could potentially bring that tax bill down to. A lot of times it is a very significant savings.

So if you have not yet, go to the Web site nine one nine retired dot com. Run your numbers on the retirement tax bill calculator. This has been Planning Matters Radio. The content of this radio show is provided for informational purposes only and is not a solicitation or recommendation of any investment strategy. You are encouraged to seek investment tax or legal advice from an independent professional adviser. Any investments and or investment strategies mentioned involve risk, including the possible loss of principal advisory services offered through Brooke's own capital management, a registered investment adviser's fiduciary duty extends solely to investment advisory advice and does not extend to other activities such as insurance or broker dealer services. Advisory clients are charged a quarterly fee for assets under management while insurance products pay a commission, which may result in a conflict of interest regarding compensation.