transcript

Speaker 1:
[00:00] The Retirement and IRA Show represents the words and views of the show hosts exclusively and should not be construed as investment, legal or tax advice. All information is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy. All economic and performance information is historical in nature and is not indicative of any future results. Any indices mentioned on the show are unmanaged and cannot be invested indirectly. Diversification and asset allocation strategies do not assure profit or protect against loss. Never make any investment or financial decisions based on information offered on this show without first consulting your financial, legal or tax advisor. Financial planning services offered through Jim Saulnier and Associates, LLC, a registered investment advisor.

Speaker 2:
[00:42] This is The Retirement and IRA Show coming to you from beautiful Northern Colorado. Join us as certified financial planner, Jim Saulnier, as well as Colorado State University finance instructor and certified financial planner, Chris Stein, teach you about IRAs, 401Ks, annuities, Social Security, pension plans, and estate planning in a fun and enjoyable show. Whether you are listening live in Colorado or streaming from their website or iTunes podcast, Jim and Chris want you to know that they are available to help you plan for your retirement. Just visit their website at jimhelps.com. That's Jim, helps.com. Click the Meet the Team button on the homepage. Now, here's Jim and Chris with today's show.

Speaker 3:
[01:32] Well, hello, everybody, and welcome to The Retirement and IRA Show EDU edition for this week. On today's episode, we're going to review an article, I guess, is the type of show. There's an article that technically came out last year in 2025. Jim's been holding on to it for an opportunity to discuss it. Today is that opportunity. The article comes from the New York Times, and it was originally released, it was back in July, so it was a little ways ago. But it's entitled, You Saved and Saved for Retirement. Now You Need a Plan to Cash Out, and that title, as you might expect, means it's going to talk about what we generally talk about here is, how do you actually use the money that you've actually, that you've spent all that time amassing, the various income sources you might have, how do you put it all together to come up with a spending plan for retirement? That can be quite daunting at times. Saving for retirement, oftentimes people, when they compare the two, find the saving part to be technically easier. It's really just dedication, habit, commitment to doing it. But the distribution and use of those assets can be complicated. There's tax issues, there's the pace at which you can distribute them. It's how do you coordinate it all together? How do you treat the income sources you might have in retirement? All are, all are, all expenses treated equally in our view. No. So we'll get a little more into that as we dive through this article that Jim is bringing up to us today on the show. So Jim, thank you for joining. Thought that you have anything else better to do on a Tuesday afternoon when we record, but here we are. Did I summarize where we're headed here well enough?

Speaker 4:
[03:46] I think you did. Just a couple of things. It isn't technically from last year. It is from last year, July of 25.

Speaker 3:
[03:56] Well, some of those they re-rack, so it might have come out again. So I wanted to make sure.

Speaker 4:
[04:00] This is definitely, because I got it directly from, I do not have a subscription to the New York Times folks, and those of you who do, I'm sure you can look up this article. As Chris said, it's You Saved and Saved for Retirement, Now You Need a Plan to Cash Out. That's a long title. It's from Blair Kelly. I have no idea if that's a male or female reporter, but Blair Kelly. So for those of you who have a subscription, you can access it. Other than that, you can't generally get New York Times articles. The way I got it is Joe, our office manager, has a subscription to the New York Times. So when there's an article that I find interesting, she gifts it to me. So you as a subscriber can gift articles. I don't know how many she can gift, but over the time, she has gifted me many articles if they appear in the New York Times. So that's how I got it and I liked it. It has some good things in it, it has some things I agree with, some things I don't agree with, and some things that I have no opinion on. But it's nine pages long, so this is not going to be one EDU show. And what we intend to do is go through the article, I'll probably jump in spots instead of just reading the whole thing, it'll go a little long then probably. And where Chris and I feel there's no script, Chris can opine wherever he wants and I will opine wherever I want. When I read the article, I read it back in July of last year and I read it just recently again. There's definitely some things that I have some opinions on, and there's some things that I think the article references that I support and other things that I kind of question. But I think you'll learn from it and that's the key. Because the general takeaway that they have in the article is that it's not easy. And I think anybody who is planning retirement understands it's not easy. And it's so much more than just investing. There's nothing that, what's that saying, grabs my goat or something like that, grinds my goat, something, something.

Speaker 3:
[06:08] Gets my goat.

Speaker 4:
[06:10] Gets my goat? That's not very smart, gets my goat? You sure it's not grinds my goat?

Speaker 3:
[06:17] Well, that sounds violent towards the goat. It's when somebody, you know, got my goat. Pretty sure that's what it is.

Speaker 4:
[06:25] Well, I guess, all right, back in the days when people had goats, I guess. The reason I said that is I'm looking out the window at my neighbor's goats. So I saw the goats. I remember, wait a minute, that goats grinds my goats, so it gets my goat. But there's nothing more that gets me going when people hear I'm a retirement planner. You meet people say, what do you do, Jim? Nowadays, I just say, I own and manage retirement planning practice. And then they'll say, oh, so you do retirement? I says, yes, we're retirement planning practice. So investments, and that's the first thing they want to jump. Where should I put my money as a retiree? And trying to get people to understand, especially you VGers out there who spent your whole life amassing your assets. You geek out on investing. You write your own spreadsheets for it. You enjoy it till the cows come home. Trying to get you to understand that when I say it's one of the least important things, I mean investing alone does not comprise more than 50, 60, 70, 80% of the importance of your retirement. It's not just investing. It's putting in place a plan for spending. It's addressing longevity. It's addressing taxes. It's addressing your go-go, slow-go, no-go years. It's addressing the estate and the legacy. There are so many moving parts, aging, long-term care, all of these things that investing, in my opinion, is one of the least important aspects of retirement planning. It gets all the attention though. I think a lot of that attention is, I don't want to say unnecessarily, but perhaps there is a alternate, ulterior motive is a better way of putting it, of the financial services industry to bring investing to the forefront, because that's how they get paid. If they can get you to feel you have to have your money professionally managed all the way through retirement, and you have to give 1 percent of your wealth, which could be, in some measures, 20 percent or 25 percent of your safe spending every year, you're just going to give to someone to manage your portfolio. If they can make investing seem the most important thing, you'll be still willing to give them that money. Well, I'm here to share with you, and so is Chris, and to a degree, this article that does a lot more to retirement and investing, and in my opinion, it is not the lead issue you should be worried about. It's important, yes, you have to have your money earmarked to earn more than the anticipated inflation of the targeted spending those dollars are going towards. It's not about trying to match or beat headline inflation. That's silly. If you have a minimum dignity floor growing at 6% and you're buying just tips that are tied to general headline CPI that might only be going up at 3% or 3.3%, but your MDF is going up at 6% or 6.5%, Chris can share some of the MDF increases that he's seen, probably even greater than that. But if your inflation plan is just to buy tips to grow at 3% or headline inflation to cover your MDF, you're already entering or planning incorrectly. I'm not saying there's no place for tips. I'm saying that part of what you have to understand is distributing a portfolio is so much more involved than just giving somebody 1% of your wealth and telling them to manage this and meet a moderate growth target. There is so many more elements to retirement. At least they try to address that in the article. That's what I liked about it and that's what we want to opine on. Just give you guys some food for thoughts. Long time listeners, you'll probably be hearing a lot of things that you've heard before. But if you're a relatively new listener over the past few months, or maybe over the past 12 to 15 months, a lot of what we might say in this series will be new to you. Chris, did you have time? I know I literally sent it to you about 30, 40 minutes before we started. But did you have time to peruse it a little, if not read it all?

Speaker 3:
[11:19] I skimmed it. I didn't read it every single word, but I skimmed through it. It looks like there's some good stuff to talk about in there.

Speaker 4:
[11:26] Perfect. Again, if you have a subscription to the New York Times, try to download this article and read it. I cannot repost this article. I'm sorry. It's trademarked. So we will not link to it or at least make it available for download. But find somebody who has a New York Times subscription if you don't have one and ask them to gift it to you. Okay. So it begins. Nearly two-thirds of Americans say they are more worried about running out of money in retirement than dying. I think you've heard that before, Chris. I've heard that statistic before as well.

Speaker 3:
[12:00] Every survey that's ever been done of retirees is, what's your biggest fear? And not that every single person answers this, but the vast, vast majority do running out of money too early. That's the biggest fear in retirement. It isn't that I'm going to die. They have some realizing that's an inevitability that's going to happen. And the scariest thing though is they've beat the father time and they're living on, but their balance in their account hit zero. That's very, very concerning as they look forward into their own future. So that's not surprising to hear that.

Speaker 4:
[12:40] Right. And the reporter continues and says, many retirees could be on track to turn that fear into a stock reality. I kind of like how she worded that because most people listening to this podcast, you're not going to run out of money. I think the fear of outliving your money, yes, many. She didn't say all. She said many retirees. And I think it is people who entered retirement ill prepared. People who did not pay attention during their younger years. I spoke recently, well, recently several months ago. You may remember Chris, a friend of mine who shall remain nameless. And the state he lives in shall remain nameless. He's the IRS is listening. He went his whole working career. Do you remember this Chris, without paying taxes?

Speaker 3:
[13:35] Oh yes, I recall that story.

Speaker 4:
[13:37] Well, not only did he not pay taxes folks, he didn't pay into Social Security, he didn't pay into Medicare. And guess what other type of accounts Chris didn't pay into?

Speaker 3:
[13:49] Retirement accounts.

Speaker 4:
[13:51] Retirement accounts. I like this guy. He's a great guy. He is ill-prepared for retirement and it's his own fault. So there are many people who fall into that category, sadly. I'm hoping he's in his early 50s, he's not going to be able to pull this out, but I'm hoping he can put some things in place to assist him as he ages, least of which staying with the lovely woman that he's dating, who has paid her taxes and did pay in Social Security. But most people listening to this podcast, the part of this article that references outliving your assets, I get it, that's probably not you. But it doesn't take away from the fact that your retirement isn't in and of itself also going to be difficult. It can be difficult to manage, difficult to control, difficult to understand. And depending on how your life transpires throughout your remaining years, it could be a very wonderful retirement or it could be a difficult health-wise retirement. None of us know. But where we reference, and I'm just reading from the article about outliving your assets, I do feel, to go back to Wall Street again, that they try to impart a lot of fear that you are going to outlive your assets. And that's why you need them, which always made me scratch my head, Chris. If you have that little money that you might outlive your assets, and they're going to limit you to a three or a four or 4.7, according to Bill Benjamin, the father of the 4% rule, the new safe withdrawal rate. But if they're going to be taking one, one and a quarter, one and a half of your daily, excuse me, of your yearly spending, but limiting you to a 4% or four and a half or 4.7 or three, they're taking one third, one quarter, 20% of your spending. Why don't they begin by firing themselves? Anyways, don't get me going down that rabbit hole. So I just want people to understand, we recognize if you're listening to this podcast, some of what the reporter Blair Kelly is referencing doesn't apply to you, especially the outliving of your assets. But that said, even with the clients that we work with, on quite a regular basis, I wouldn't even put this in the category of a unicorn, I would put this in the category of something else that you see quite regularly. What do we see regularly, but not all the time? Every once in a while at night, I'll actually see a real owl flying. That's not impossible, but I see the big white ones out here, they scare the hell out of me at night when I'm going. And I found a head of a rabbit in my barn, on top of my potting bench. And I thought that, I don't know what the hell put it there, had to be an owl, flew in, maybe a barn owl, I don't know, ate the rabbit and left its head. Or it was someone taking a scene out of Godfather, trying to do it with rabbits with me instead of a horse's head, I don't know. But anyways, I don't want to say you're an owl, but I'm just trying to say, every now and then, we do see people who do have one, two, three million of assets and they're on track to outlive them. And Chris, why don't you give a little bit of thought on that? But how often do you see that? And what spending is generally driving that? Minimum dignity floor or fun?

Speaker 3:
[17:38] Well, I'd say, for the most part, people with even a modest amount of savings. So there's a whole crowd of people in the United States that have no effective savings. So unlike your friend that you mentioned, they at least have Social Security, but not much else. I don't know what the latest statistic is, but I'm always shocked when they come out each year with the number of people close to retirement that have only saved like $50,000. So there's a whole boatload of those people that even basic needs like minimum dignity floor expenses are going to be a challenge to cover simply with their Social Security. It's with reasonable savings. And obviously this will vary a little bit, depending on where you are, your lifestyle as well. Not everyone's minimum dignity floor is the same, because even though it's what a lot of people consider required expenses, different people have different requirements, live in different areas of the country with different costs of living. So there's variations there. But for even with very modest savings, we actually run a projection and, you know, in our process, the first thing we focus on, we've got to establish coverage of the minimum dignity floor. So those expenses of food, utilities, transportation, housing and healthcare is what we put in this group that Jim coined the term years ago, minimum dignity floor. And so the first focus for us whenever we have a new client that we're working with is to establish that and make sure, because above all else, that's got to be dealt with. And so we look at that. And even those with modest savings, it looks like if that's all they were covering, they likely have no real risk of running out of money. There's no be a very, very difficult, actually, for them to run out of money. It's when they add the reasons to be retired. People aren't retired just to live at their minimum and dignity floor level, but they throw in the fun, what we call fun expenses. Others call discretionary or wants and wishes, or there's lots of different names out there. We just try to keep it simple and straightforward. The fun part, all the embellishments to retirement of your minimum dignity floor that make it enjoyable throughout the rest of your lives. And it's those expenses that if they're too large compared to your resources, might drive you to the there's a real chance you're gonna run out of money later in life. And for certain people whose vision for retirement, vision for fun, what we've actually literally called fun vision, which represents how much of their current portfolio is needed to satisfy the fun part, the fun vision is oversized compared to their resources available and might even drive them to be, while they might be fine covering just the minimum dignity floor, might see them with a projection that shows them running out sometime in their late 70s or early 80s, even if they had a decent amount of money. You can, no matter how much money you have, if your spending levels are high enough, you're gonna run out of money. So it's all relative. But for the most part, to get back to your question, the reason why people run out of money, at least those with some modest savings, isn't due to minimum dignity floor. It's about the whole reason you're retiring, to have time on your hands and go do some fun stuff before you can't do it anymore.

Speaker 4:
[21:15] Right. More often than not, back in the day when I was meeting with clients and doing plans, and I have it for several years, as you all know, but back in the day invariably, when staff who was bringing the completed plan to me to review and prep for delivery would say, oh, this is going to be a difficult delivery, it was telling me that they were going to run out of assets. When I looked at it, it was always, always, always driven by fun. It was never driven by minimum dignity floor. That's key. That's not a bad thing. That's what I'm trying to get at here, folks. Most people, and I think even people who don't come into retirement well prepared. Now, my friend, and he truly is a friend, is an extreme example. Never paying taxes, never paying into anything, never paying into Medicare, never saving anything. That's extreme. People who are ill prepared, generally will still go into it with some type of savings and social security. And when you look at their minimum dignity floor expenses, not reserves, not aging, not long-term care, not guaranteed inheritance, not fun, but just isolate their food, utilities, transportation, housing, and health care expenses, many people will be able to satisfy them. It's the other things that they want to do. My dad passed away, as you all know, two years ago, just a week ago, May two years. He didn't have savings. He had a little, but it really came from his wife, not from him, and hers came from an inheritance, is but the most that I'll say. He personally didn't have much. I believe when he passed, he was no savings, but he lived on his Social Security, and he had a wife, and there combined Social Security and some savings that she had. He was not a wealthy man. By definition, he died, he ran out of money, but he was still living. He was still in his community, still alive. He was on Medicaid the last few months of his life, yes, and that's because he qualified for it with no assets. So dad theoretically fell into the category of someone who outlived his assets, but he wasn't on a street living in a cardboard box. Social Security gets a lot of negative press, especially sometimes by the asset managers who think it's a waste and should be privatized and invest all the money. But if you look at Social Security for what it was designed for to keep people out of poverty, I think Social Security does wonders when looked at from the realm of food, utilities, transportation, housing and health care. And for the last few years of dad's life, he gave up his license. He had no car. His wife had a car, but he personally did not. I would say probably about seven years before he passed, he stopped driving and they didn't need two cars. So for dad, it was food, utilities, not necessarily transportation, housing and health care. But his Social Security supported it. For many of you, your Social Security, your combined Social Security if you're married, pensions for those of you, many listeners have pensions, not all. And for those who purchased an income annuity, those three sources of income go a long way to covering your minimum dignity floor. But I have never seen someone ever fail. Chris, have you and it would never make it through the planning process because we would refund the people's deposit and tell them that it's showing failure. But have you ever seen a plan fail at the MDF level?

Speaker 3:
[25:31] I don't think so. It's possible that there's been one, but I don't think so.

Speaker 4:
[25:39] Yeah. To my knowledge, folks, at least when I was actively reviewing the plans, never saw it. Doesn't mean staff hasn't seen it since. They don't bring every single plan to my attention. But that is good. That is saying that most people, and you don't see this level of clarity with the safe withdrawal rate. You don't see it with a Monte Carlo probability statistic. Dad would have failed the Monte Carlo probability statistic. But was he destitute? No. So the only way to truly get an idea of if you can cover your minimum dignity floor of food, utilities, transportation, housing and health care, is to isolate those expenses, project those expenses, not with headline inflation, but with actual inflation numbers geared towards those expenses. It's the same concept in theory we carry with what we call the see-through portfolio. I gave it the analogy of a toy box. Your portfolio is just this big brown toy box you can't see into. You got to lift the lid, look in and find the toy you're looking for. For all of you listening to this podcast, your toy is your fun number. And that toy is always at the bottom of your toy box or at the bottom of your portfolio. And you have to pull out of that toy box, all the items or the toys if you want that you don't need. And the same thing from your portfolio. Now you do need these toys. The metaphor doesn't fully carry over, but you're going to pull out your minimum dignity for delay period and post delay period. You're going to pull out your guaranteed inheritance. If that's important to you, your aging, your reserve buffer, your long-term care needs. When all of those spendings are done, what's left is your fund number. Well, when you pull those out of your portfolio, to me, your goal in management now should be to look at the spending each position is tasked with, look at the inflation rate of that spending, monitor it on an on-going basis, but your investment goal should be to meet or exceed the targeted spending inflationary rate, what we call T-SER in the office. Well, that's the same with your spending. When you're looking at your minimum dignity for spending, it's the same as the spending in your see-through portfolio, your investment positioning. You should be ear-mocking those expenses to their targeted inflationary rates. And growing them in your projections by that, don't use, a lot of people do, we just feel it's not as accurate to use a general inflationary rate across your entire projection. And you see that a lot of the software programs in our industry do that. They give the advisor the ability to use a general one or individual ones. Individual ones are a lot more work for the advisor. They have to program a cash flow in. Each expense gets its own inflationary rate. That's far more programming time. So the makers of the software give them the ability to just say, hey, we'll inflate all expenses at a certain rate and you can put that in. I don't know if you're working with an advisor, which option they're using. They may be able to defend their approach and that's fine. But for us, we believe and I'm encouraging you, when you start doing this spending, make sure you inflate it at inflation rates that reflect the spending in the minimum daily flow. Not as a whole, but each individual, food, utilities, chairs, station, housing, and healthcare. Anything you want to add to that Chris, because I might not have explained that well. You do this more than I do now. Yeah.

Speaker 3:
[29:51] I think it's totally appropriate, and especially focusing on the minimum dignity floor, because there's several things in there that have been receiving upward price pressure, we might call it, and have been for years and years. I mean, this is not something new that we've done just because of recent inflation. This is something we've done for years and years in our process, where we recognized, 20 years ago, 15 years ago, 10 years ago, 5 years ago, now, that medical expenses grow faster than average inflation. That more recently, that commodities which drive grocery prices put upward pressure on food prices that tend to now grow faster than average inflation. Things like that. Utilities, I'd say more recently. There was, for a while, utilities were relatively stable in that they didn't really inflate faster than inflation. But over time, we've noticed that's starting to pick up a little bit. And utility inflation probably shouldn't be done at what most people consider to be average inflation over their projections. When you get to fund spending, that's a little bit different in that I think you have some control over it. I mean, someone could certainly argue, anybody who's traveled and done fun things, could probably point to all kinds of anecdotal examples where inflation has been above average for fill in the blank, right? Air travel, food when you're traveling, you know, all these things that are a cost of going out and having fun. However, unlike your utility bill, where you could pretty easily, you know, unlike your utility bill where you can't easily change some behaviors a little bit and mitigate the price pressure, most people with their discretionary or fund spending do exactly that. So you can kind of even if fun inflation, if we want to call it that, you could maybe argue should be four and a half percent instead of three or four, you know, instead of three or something like that. Three, I'm just throwing that out because that's a very common average inflation rate that is used by financial advisors and financial planners when doing projections. So certainly using four means it's an expense you're expecting to go up faster than average.

Speaker 4:
[32:27] I believe right now, Chris, we're using 3.4. The last time we did a sub, yeah, because Jacob and I will isolate fun. And the last time, rather than doing it manually, I used ChatGPT to help me. And I'm still trying to refine that prompt and that command. But we arrived at 3.4. And I like some of the rationale that Chat was sharing with me. And I think we may even end up doing a podcast on that in the future. But right now, we're using 3.4. But I don't believe I've updated that for six months. So I tried to update the T-SERs, the target inflation spending rates, for the portfolios that we manage for people in investment positioning. And right now, we're using on fund 3.4. For some reason, 3.7 fits in my head, but I do not believe we raised it to that. I believe it's still at 3.4. But it's funny how you did say that, and you can, I do not believe, and I'm glad Chris didn't say you can cut, I don't feel you should cut fund at all, fund at all.

Speaker 3:
[33:36] No, I'm not saying like an obvious cut, like let's not do this or that. Yeah, it's just kind of a...

Speaker 4:
[33:41] But it's what you did say. You said something to the effect of massage or you didn't use that word, but that was what you were implying. And I smiled because I am flying out in two days, as you know, back to my apartment in Ohio. And I got so fed up with it, I made a change and I'm flying frontier. I'm not happy because I'm going to be delayed. I'm going to be on a plastic seat. But the price difference was over $200 cheaper than any of the big four now, whether it's United, Southwest, Delta or American. And I couldn't pass that up. It was just too big of a Delta to say no. And I made that change because flying is getting expensive. Could I afford the Delta in the United? Sure. But why? Now, ask me that once I get to Ohio, because if my flight pulls a typical frontier, I may be complaining that I didn't spend the extra couple hundred bucks.

Speaker 3:
[34:43] That's probably more of a drastic change than I was describing. I was saying something like, oh, instead of a five-star hotel, let's do four-star because prices have just gotten crazy in fill-in-the-blank country, that type of stuff. You're still out there doing it. You can't do that with medical expenses or your utilities or something. You have to stick to those. What I'm describing is essentially substitution, that when there's inflation, consumers, when they can, oftentimes substitute, right? They still consume something. It's not that they go from consumption to not consumption at all. They consume a substitute that is more reasonably priced. So in that way, I think it is more reasonable to be using what Jim and Jacob had done with some of their research on this, the three, three to three, seven or something like that. Even though I bet a bunch of people could point to, you know what, over the past five to seven years, we based on that, we should probably be using more like four and a half or five for fun expenses.

Speaker 4:
[35:47] You do a lot of flying, absolutely.

Speaker 3:
[35:49] Which if you're not willing to do any substitution, maybe that is justified. You'll have to decide what your behavior is. But one thing I can tell you, you don't want to assume you're going to substitute with MDF expenses. MDF expenses are pretty much, you're just going to have to bite the bullet and absorb and pay the inflation. So in your projections, you should be using reasonable projections for that based on the best information you can get your hands on. Nobody has a perfect crystal ball. But I think we have the suggestion of exactly what I've been talking about.

Speaker 4:
[36:22] You did. What I did is exactly what you said, substitution. I'm still going to Ohio. I just substituted a nice first-class seat in the United for a plastic seat on Frontier.

Speaker 3:
[36:35] We'll see how that goes.

Speaker 4:
[36:37] Yeah. I'll let you know. All right. So the article continues and I like this quote. You can't just arrive at 65 and say, okay, now what am I going to do? It is a process, not an event. That is attributed to a gentleman named Peter De Silva, Chief Executive of IRA Logics. Never heard about IRA Logics, but the article said that they are a technology, retirement technology company. The article then continues and I do like that quote. If you're listening to this podcast, you are trying to put a plan in place. Now, we've said regularly, our approach is not ideal for somebody more than five years from retirement. And even though we don't care to enter retirement, or at least with our clients, you might do it differently, enter retirement with a Monte Carlo probability based type plan, we do feel those plans are ideal until they create a crystal ball, which they haven't yet. Those plans, though, are ideal for people well into the accumulation phase, your 20s, 30s, 40s, 50s, and it's most likely going to be people in their 40s and 50s using it. You're still far enough away from retirement, that it's not a concern to you, but you're close enough where you're starting to think, am I on track though? Am I savings enough? Should I save a little bit more? I think a Monte Carlo based plan, they're quick, they're easy, you can find them anywhere online, and it might help you produce a guide, a general guide. Our approach to retirement planning is best served to start doing that calculation when you're about five years or less from retirement. But I do agree that the gentleman who said, the Peter de Silva gentleman, it's coming, it being retirement, retirement's coming. You've got to plan for this. Don't be like my friend who gets a hold of me and tells me all of this, and okay, what can you do for me? And the answer is nothing. Absolutely nothing. At this point, you should have been planning for it. So the article continues, and this time with someone from Alliance. It says, even those that have a plan, don't adhere to it. So it's a plan in name only. And this is attributable to Kelly Lavigny, a vice president of Consumer Insights at Alliance.

Speaker 3:
[39:23] That'd be Lavine.

Speaker 4:
[39:26] That's Lavine?

Speaker 3:
[39:27] Yes.

Speaker 4:
[39:28] Well, it's spelled Lavigny.

Speaker 3:
[39:30] True, but we don't pronounce things phonetically.

Speaker 4:
[39:35] In my language, this is not my native language, English, we would pronounce that Lavigny. But OK, for you English speakers, Lavine. Are you serious? That's Lavine?

Speaker 3:
[39:45] That's one version of Lavine, yeah.

Speaker 4:
[39:48] Sorry, Kelly. If she gets a hold of it, I mean, she can pronounce it however she wants.

Speaker 3:
[39:52] Maybe she does pronounce it.

Speaker 4:
[39:53] That's what I'm hoping. Kelly, if you are a fan of The Retirement and IRA Show, if you pronounce your last name Lavigny, can you just let me know so I could rub it in Chris's face live on the air? All right. She continues. You're going into 30 or 35 years of giving yourself a paycheck, and you don't have any idea whether you're going to make it.

Speaker 3:
[40:16] Again, this sounds stressful.

Speaker 4:
[40:18] That sounds stressful. Now, in due respect, miss or missus, I don't know, Lavigny is working for a company that offers annuities, and we don't say that with a negative tint on this show at all, but it doesn't surprise me that she's picking up the paycheck and the cash flow, because that's what she and her firm do. They help people replicate the safety and security and the comfort of their paycheck, rather than replacing it with this big unknown. And I think that's what she's trying to say. You're hopefully going to live 30, 35 more years, and are you going to make it or not? If the first quote that opened up this article that nearly two-thirds of Americans say they're worried about outliving their money rather than dying. And I don't believe that's not true. So that main quote is because people don't know how long they're going to live. They don't know what the future is going to bring. They are a zebra alone on the Serengeti. But Ms. Levine works for a company that's trying to get all those zebras to herd up. As if nature never thought of the brilliance of the safety in numbers, the brilliance of herding. Now, you know I'm being facetious here because I point this out constantly. For some reason, our, the human approach in America at least, to retirement is to turn retirees into a lone zebra on the Serengeti. Chris, if you're a lone zebra on the Serengeti, what's the big risk you run into?

Speaker 3:
[42:10] That you run across a predator, and guess what, you're the only target.

Speaker 4:
[42:15] You're the only one there. So you might be happy with all the space around you, with all the green grass, well, during the rainy season, the green grass anyways, and all the food and the water, and just life is great until a pride of hungry lions come around. And a zebra is going to go down. And if you're the only zebra there, guess what, you're going down. So nature figured that out tens of thousands, if not millions of years ago, I wasn't around during the dinosaurs, but I'd say millions of years ago, there was some predatory little baby dinosaur things that were herding together to protect themselves from the T-Rex. Does that mean the T-Rex isn't going to eat? No. It means the T-Rex would have found and got something, just like the lions will still take down a zebra. But when you're the only zebra, you're the one going down, that's it. If you're hiding in a herd of 10,000 zebras, at least you got a snowball's chance and you know where to not be that zebra. But if you're alone, you are that zebra. But for some reason, the whole industry that has created what is known as the US retirement industry, the wealth managers, the AUMers, as I like to call them, believe your approach to retirement is to be that damn zebra. Instead of saying, hey, let's herd up. Let's pool our risk. Anybody who ever took any course on insurance knows that's called risk pooling. It's where all people get together and pay into one big pool in case you are that zebra. There'll be something there to help you. In the case of an annuity, it is if you did run out of money or even lived long enough where the annuity company paid you all your money back and all your interest, they have to keep paying you. Why? Because other people in your risk pool were the zebra. Because again, even in a risk pool, a zebra is going down and a herd, a zebra is still two or three if the pride is big enough, they're still going down and they're going to be dinner for a week for those lions. All the grass that those dead zebras would have eaten, now get to go to everyone else. So it's the same thing in an annuity. Some people will pre-decease you and all the money that would have went to them go to someone else. Who? Everybody else in the risk pool. So it doesn't surprise me that Miss Levine referenced that because she works for an annuity company. And she's just trying to say, hey, the risk of going through life without a paycheck that could last for 30 to 35 years is crazy. And I agree with that because you can replicate it yourself very easily. Okay. So the article then jumps into the classic approach though. It's not the classic approach is not risk pooling, is it, Chris?

Speaker 3:
[45:30] No, it's being a zebra alone for the most part to continue that metaphor. And then just restricting your eating of the grass to tight enough amount that you shouldn't be expected to run out of grass before you die. Grass being your money.

Speaker 4:
[45:52] That's very good. Okay.

Speaker 3:
[45:54] I'm doing my best to stay inside this this Serengeti thing, yeah. I think we can do it. I think we can keep doing it.

Speaker 4:
[46:00] I've been using that metaphor for years, you know that. And I think it plays wonderful. People get it. I mean, it's not only zebras. You see it with fish. You see it with birds. Birds heard. No, they don't heard. They flock. Fish swarm. Swarm, right? No, school. They school. They don't swarm. They school. And animals with hooves heard. But the whole idea, nature identified long ago, risk pool. Why don't retirees do that? Well, I think a great deal is the wealth management industry makes a boatload of money managing your assets. They don't want you risk pooling.

Speaker 3:
[46:41] Well, most of us do. Most of us do with an element of our retirement, because Social Security is Social Security, but it's because they're forced into it. Yes, but you're forced into the pool. Yes.

Speaker 4:
[46:53] Okay. The article continues, if investors know anything about structuring retirement withdrawals, what financial planners call decumulation, which is true. We call it the decumulation phase. It's the 4% rule. This was pos-

Speaker 3:
[47:10] Posited.

Speaker 4:
[47:12] That's a stupid word.

Speaker 3:
[47:13] It's like proposed.

Speaker 4:
[47:15] This was first discovered or proposed. I like that better. In 1994, posited?

Speaker 3:
[47:22] Posited. Not posited. Posited.

Speaker 4:
[47:25] Posited. English is a crazy language, all you native speakers. This was posited in 1994 by financial planner Bill Benjen. I want to give Mr. Benjen his due respect. He is due that. His new book is out. I have it. I have not read it yet. I highly don't listen to my podcast, Mr. Benjen, but if you want, I will be reading your book. But I passionately disagree with a safe withdrawal rate for retirement. The thing that strikes me, 1994. It's a good year. Most retirees are basing their decisions on something that was created with rudimentary spreadsheets back then in 1994, and 30 years later, it hasn't changed. Let me ask you, are you driving cars that are similar to the way they were 30 years ago? Are you talking on phones similar to the way they were 30 years ago? Are you watching TV's that looked like the ones you had 30 years ago? Are the sitcoms and documentaries that you're watching on said TV's similar to where they were 30 years ago? How about your jeans, your shoes, your socks, the house you live in, the neighborhood you live in? Anything looked like it did 30 years ago? Why the hell are we still doing retirement planning based on the way it was first proposed 30 years ago? Only change? It's now 4.7 instead of 4 as a safe withdrawal rate, according to Mr. Benjen, who is smarter than I ever will be with math and science. I freely admit that. I just don't feel this is a reasonable way to approach retirement. It's part of what I thought of 27 years ago when I was just entering this industry. This makes no sense. And it's why we came up with a different way of trying to improve it. And I've told staff, I'm on my way out. I always preface that with, I'm not dying, but I'm not going to be doing this forever. And this firm will continue after I slow down. And I told them, if I come back 30 years later from Ohio, and you all are still doing retirement planning the way I left this, I'm going to whip you upside the head with a wet noodle. I don't know if I'll be able to, because I'm going to be into my 80s by then, or 90s. But my point is in a very joking manner. Why has everything changed, but we're still going to satisfy retirement the same way? Oh, there's a little difference in here. We threw Monte Carlo in there. Ooh, look at that. Wonderful. That's meaningless and useless. We're still going to limit people to spending a certain amount of their money, even though many of them are going to become the quote unquote other guy and not be able to enjoy their retirement because they unnecessarily curtailed spending on fun. That's the biggest thing that gets my goat. And we're going to make them zebras on the Serengeti. And every single zebra as it gets old is going to need help because their brain is diminishing. And isn't that a wonderful way to stay in business, isn't it? Gee, sooner or later they're going to have to hire me to manage their money because they can't do it themselves. And it just keeps feeding the beast. When you could take them from being a zebra and make them herd up and simplify their investing to the point where, God forbid, you probably don't need to pay an AUM fee for the rest of your life. You could just pay a fixed fee to an advisor who is going to be helping you, not just with your assets, because that's only one thing of many, and they're going to work with you on a continual basis for a fixed known fee, not some AUM fee based on how much wealth you may or may not have. But anyways, I'm going down a little rabbit hole there. It's when I read this, when Chris was talking, I read the next paragraph. When I saw 1994, it just hit me. It's like 1994. I didn't even have a cell phone back then. I had a beeper. I was only a cop for two years. And we're still doing retirement the same way I used to communicate with a beeper. My beeper has evolved into a smartphone with more computing power than the Apollo mission that landed on the moon. And we're still essentially planning retirement with a beeper. Makes no sense. Okay, let's say you, because you probably don't agree with me, but you can go. I agree.

Speaker 3:
[52:24] I'll give the 4% rule style approach, because I say that because people are using other numbers other than four. Even Bill Benjamin has revised this number. And he's revised it a couple of times. He's got to come out with opinions, and others have looked at it a little differently, come out with their own opinion. That, it is simple to understand. So, if we want to give it a, you know, a pat on the back for something, it is pretty simple to understand. When you start getting into the weeds and, you know, breaking things up to get more clarity, right? And the clarity, I think, is key. I talk to people all the time that until they see all the component parts of their plan, they don't have the clarity that they feel that then they can be comfortable spending on fun the way you and I encourage them to, which is early in life during those go-go years, spend a fair amount of what would be allocated as your lifetime fun, because that's when you've got the opportunity to do the more expensive things, which generally means an expensive hobby or travel. Travel is the thing that is usually the biggest ticket item on most fun menus, if you will. And to get that kind of clarity, you can't look at it in this 50,000-foot view 4%, 3.5%, 4.7% rule. That is simple, but it's so high level that I think people don't get the comfort that they need to spend confidently, because they lack the clarity when you're at that 50,000-foot level. You do kind of got to dig into it. This is part of what leads to the distributing and using your nest egg is complicated. If you really want to dig into it and squeeze as much juice out of it as possible, which I think is a great goal to have. You've got this nest egg and you just want to get the most enjoyment possible out of that safely, protecting the things that you need to protect. But the juice that can be had, let's juice the heck out of it. You can't do that with a 50,000-foot view. You do got to dig into it a little bit.

Speaker 4:
[54:44] I agree. Well, I won't make a big deal of it. The article talks about Morningstar, who in 2021 started coming out with their own safe withdrawal rate. And the recommended rate in those studies was 3.3 percent, this Morningstar now, 3.3 percent in 2021, 4 percent in 2023, and 3.7 percent in 2024. Significantly lower than Mr. Benjen's recommended safe withdrawal rates. And I've seen others when Morningstar was at 3.3. There was a, I think, Harvard came out with the 2.8 and Harvard, if it wasn't you, sorry, but someone came out kind of at the, shortly after the COVID panic and things, it was down to 2.8. My point is it's all over the place, folks. So what is the safe withdrawal rate? Who knows? It's that unknown. Why are you going to enter retirement based on a huge question mark? I don't get that. If food, utilities, transportation, housing and health care expenses, are five broad categories of expenses that you will never outlive, no matter how long that may be, and you must always cover whether you have money or not, why are you going to base it on something that was created in 1994, a concept, a theory that was created in 1994? Yes, it's been updated, so maybe it's not a beeper anymore. We're up to a flip phone perhaps, and not the fancy flip phone that Chris has with the split screen touchpad thing he has. That's a Samsung, isn't it Chris, yours?

Speaker 3:
[56:36] Yeah, my current phone is, yes.

Speaker 4:
[56:37] Yeah, I think Apple's coming out with that split screen flip phone type thing. But my point is folks, Chris is right, they being the industry, has kind of massaged and tried to improve the safe withdrawal rate by building what are known as God Reels, or ceiling and floor, or God Reel approach, where you can raise it a little or drop it a little based on what the market's doing. But it's incredibly complex, and you need software for it. Now, fortunately, there are software manufacturers out there who make it available to advisors, and they're the ones who tend to be pushing this approach to retirement planning. But it then marries you for the rest of your life, to having to consistently or have an advisor consistently monitor and change your spending and your allocation and tell you this year you can go higher or this year you can go lower. Who the hell wants to live like that? Just tell me how much I can spend on fun, and let me go have fun, and just keep looking at everything else. All the other dollars I put towards all the other expenses that weren't fun. Let's just make sure they keep in track of their t-sir. But show me my fun so I can go out and spend whether it's 3.3, 3.8, 4, 4.7 or 52% of it in one year. I don't care. I'm going to go spend my fun money because that is my goal. My goal is to spend whatever I have amassed and can dedicate to fun over the initial years of retirement when I can finally spend them. We're going to be wrapping this up. Just two more paragraphs and then we're going to pause, and we'll continue next year. Excuse me. Next week.

Speaker 3:
[58:27] That's quite a cliffhanger.

Speaker 4:
[58:30] Next year, we'll be back. Same time, just one year later. Sorry folks, next week. This was on by design and I told Chris this. This will probably go two shows, it may even go three shows. And I told him, let's just run with it and share our thoughts on our process, on the industry's process, on what we like in the article, what we don't like and what we're agnostic on. And we're not bashing the article. I just again, I'm trying to point out in my opinion, do we have that sound effect, things that make you go, hmmm? Because if you do, now would be a good time to play it. Things that make you go, hmmm. How come I could hear it this time? I usually don't hear it when you play a sound effect.

Speaker 3:
[59:16] Because it wasn't music.

Speaker 4:
[59:18] Oh.

Speaker 3:
[59:19] We record this over, we meet over Zoom to record this, folks. And those of you who use Zoom all the time know that it filters out background noise, which it considers music to be one of those. So when I play musical sound effects, Jim can't hear it on his end because he's on Zoom. You all hear it because I'm recording it before it hits Zoom to get, kind of reveal some of the sausage making for the podcast. But yeah, that one works for you because it was just verbal.

Speaker 4:
[59:51] Okay. Now I forgot what made me go, hmm.

Speaker 3:
[59:54] I can play it again if you.

Speaker 4:
[59:56] No, I'm trying to think in my head because there was something I was going to say that makes me go, hmm. I cannot remember what that is that made me go, hmm. So anyway, sorry folks, but at least you got to hear things that make you go, hmm. That used to be a whole series on the radio show. This is going back years ago. We would play things that make you go, hmm. Chris would share for the week something that he saw in the headlines that made him go, hmm. And then I would share. That's how we came up with that. All right. So the article wraps up at least for where we're going to go. Other finance experts say withdrawal rates of 4 percent or less present a danger apart from running out of money. The risk that fearful retirees will scrimp spending less when they could afford during what should be their leisure years. Thank you. That's exactly what I have been saying for a decade or more, probably two decades by now. For most people outliving their assets, for many, I don't want to say most, most people listening to this podcast, many people throughout society, but certainly not all. Your biggest risk is not outliving your assets. It's not spending enough on fun. And that was one of the things my dad asked me to always share with you people. Don't be what they called in his retirement community a Debbie Downer. And they were described by my dad as, remember, my dad died with no money. He theoretically outlived his assets, but he was still surviving because he was covering his minimum dignity floor with what secure income he had, which for most people, Social Security, especially married couples, Social Security can usually easily cover your minimum dignity floor. Anyways, a Debbie Downer with a people in the retirement community with money. It's not that they didn't have any, they had it. But they couldn't spend it or at least spend it on fun. And they had regrets not spending it when they could. And he said they were the most son, he would say, they're the most depressing people to be around. And he said, they don't shut up about it. And he said, we'd call them Debbie Downers. Don't be a Debbie Downer. And that's what that paragraph is saying. Would you agree, Chris?

Speaker 3:
[62:27] Yes, totally.

Speaker 4:
[62:31] Okay.

Speaker 3:
[62:33] I mean, talk about how depressing that is, right? You have the lost opportunity that there's no going back, that you're only heading one direction and it isn't back to health and better mental acuity, where you could do some of the things now in hindsight you wish you had done.

Speaker 4:
[62:55] Okay. Well, we're going to wrap up there and we made it through page four of nine. And we actually made it halfway through. Because Chris, if you look at page nine, I'll read page nine now so we can just wipe it right out. Share it to you by a New York Times subscriber. So page nine is gone. So we made it halfway through. So we may wrap this up in two shows. So we're halfway through the article and hopefully, yeah, we didn't share any wild and deep dives on this EDU show. But I hope it got you thinking, especially if you're relatively new to our show, our philosophy, our approach. It's hopefully going to get you to say, yeah, why are we doing things this way? Why do I have to do it based on what someone created in 1994? Why don't we just try to look at it a little bit differently? It's all we're trying to get you to think of. And also, when next time, and again, annuity is a four-letter word. We hate annuities on this show, and I don't want to say love, but we accept annuities on this show. We're on both sides of that argument. And in June for National Annuity Awareness Month, you're going to hear me rip the annuity industry new ones, because I despise it at the same time that I appreciate it. And it's all about knowing the right annuity, how it works, and where it fits in. But for today's show purpose, it's about getting you to understand. And many people don't need an annuity. Our approach is designed to actually keep people out of useless, needless annuities that people are trying to sell you to make a commission. And instead, isolate your minimum dignity floor, increase those expenses for their own unique and individual inflation rates, optimize your social security, strongly consider your pension before the knee-jerk reaction of taking a lump sum, take it if the facts make sense that you should, but keep it if the analysis shows you need additional lifetime secure income and the pension is well-funded. And then yes, top off if need be with a lifetime guaranteed annuity, so you can keep from being the zebra by yourself on the Serengeti rather than herding up, not for all of your life's expenses, but for those five categories of spending that you have to cover for the rest of your life. Why do you want to be a lone zebra on the Serengeti or a lone duck during hunting season flying into a pond rather than being in a big flock of ducks or a lone fish with a hungry school of those big tuna things, those blue tunas? I used to watch Wicked Tuna. You'd be that lone mackerel. Why are you going to be that one lone mackerel when there's all these hungry blue tuna swimming around? School up with all the other mackerel and hope you do all right. I don't get why American's Retirement doesn't embrace that simple evolutionary brilliance that nature came up with. Gee, we're going to be eaten if we're all by ourselves. Let's get together. I don't know which zebra thought of that first. Genius. But give that zebra exactly a stop for his forehead. Or the first mackerel who decided, screw this, swimming around alone. I'm going to hang with this dude over here and invite some more people with me, because maybe they'll be eaten and not me. That's the whole theory. If nature does it, why don't we? I don't get it.

Speaker 3:
[67:03] That's a complex question. We won't dig into the whys of that right at this moment. I have some thoughts, but I'm sure they'll come out moving forward. I want to thank everybody for listening. Once again, this article, if you're looking for it, the title is You Saved and Saved for Retirement. You Need a Plan to Cash Out. That is the New York Times. I glanced while we were doing the show, see if it was available elsewhere and it's no, it's just natively right on the New York Times web page. It's still up there, but it is behind their paywall. If you don't have a subscription, I'm not sure what options to suggest to you.

Speaker 4:
[67:42] Find a friend who has a subscription.

Speaker 3:
[67:44] Ask them for a gift. There you go. So Jim, you take care and everybody else, stay safe out there and we'll circle back to this article next week in a couple of days look for our Q&A show to come out. Sounds to me like it will be Jake and I doing that Q&A show because Jim will be traveling.

Speaker 4:
[68:03] By a very uncomfortable frontier seat, I might add.

Speaker 3:
[68:07] Yeah. But you saved a couple of hundred bucks.

Speaker 4:
[68:10] So I did. Two hundred, a little bit more than two hundred. I just couldn't pass up that. The utility of sitting in a comfortable seat for a little over two hours was not worth 200 bucks. Now being delayed in an airport for 15 hours would be worth $200. So I'm hoping Frontier doesn't live up to its horrendous reputation here in Colorado.

Speaker 3:
[68:33] We can't wait to hear from you next week. We'll get the lowdown. So everybody, thanks a lot and we'll be back with you next week with a brand new show.

Speaker 2:
[68:43] You have listened to Jim on the radio, read his quotes in the media and enjoyed his banter on iTunes. But even now you may wonder what sets Jim Saulnier and Associates apart from other financial planning companies. The answer is quite simple. Jim's diverse team of professionals specializes in retirement planning. They form a lifelong relationship with you and measure success not through product sales but through the security and prosperity you may achieve in your retirement. Jim's entire team shares his unwavering commitment to placing their clients' best interests first, while offering their services at fair prices with full disclosures. The professionals at Jim Saulnier and Associates are available to assist you with your retirement planning needs. Visit jimhelps.com, that's Jim, helps.com, or call 970-530-0556.

Speaker 1:
[69:38] The Retirement and IRA Show represents the words and views of the show hosts exclusively and should not be construed as investment, legal or tax advice. All information is believed to be from reliable sources. However, we make no representation as to its completeness or accuracy. All economic and performance information is historical in nature and is not indicative of any future results. Any indices mentioned on the show are unmanaged and cannot be invested indirectly. Diversification and asset allocation strategies do not assure profit or protect against loss. Never make any investment or financial decisions based on information offered on this show without first consulting your financial, legal or tax advisor. Financial planning services offered through Jim Saulnier and Associates, LLC, a registered investment advisor.