The information contained herein is intended to be used for educational purposes only and is not exhaustive. Diversification and/or any strategy that may be discussed does not guarantee against investment losses but are intended to help manage risk and return. If applicable, historical discussions and/or opinions are not predictive of future events. The content is presented in good faith and has been drawn from sources believed to be reliable. The content is not intended to be legal, tax or financial advice. Please consult a legal, tax or financial professional for information specific to your individual situation. This work is powered by Concenture Wealth Management.
Registered Representative of Sanctuary Securities Inc. and Investment Advisor Representative of Sanctuary Advisors, LLC.- Securities offered through Sanctuary Securities, Inc., Member FINRA, SIPC. – Advisory services offered through Sanctuary Advisors, LLC., an SEC Registered Investment Advisor. – Concenture Wealth Management is a DBA of Sanctuary Securities, Inc. and Sanctuary Advisors, LLC.
Transcript
In the interest of everyone’s time, let me first say thank you. Thank you for taking this time to uh come and join us and uh talk about income planning and retirement planning. My name is Robert Gilland and I am founder and managing director of Consensual Wealth Management and with me is Aaron Haidider. I’m senior wealth adviser here at Conenture and want to say thank you to everyone.
Really this conversation today is really with with for people who are within five years plus or minus of of retiring or have recently retired to go through to think about how do you go through to create an income stream? All too often people say to us, “Hey, look, I I think I’ve saved enough, but how do I create an income stream?” And so today, what we’re going to talk about is how do you go through and create a retirement income blueprint? how to turn your savings into a reliable income. So, this is going to last, this conversation is going to last about 20 25 minutes. After that, we will have an opportunity for questions and answer. And if you have a question as we’re kind of going through it, please use the Q&A box to go and and type your question in. I promise we’ll get to it before we end uh today. So, kind of with that, let’s go ahead and uh kind of kind of kick in, get get started.
And so um you know the thing that we’ve realized is that you know you go and you start working you start saving and you have about a 25 to 30 year period where you’re in this accumulation phase that’s where you’re saving as much as you possibly can and you’re going and building it. But when you move from that accumulation phase, have I saved enough money over to how do I turn this into a reliable income? That requires a paradigm shift. That requires you changing the way that you view the assets. And in fact, it requires it requires that you coordinate between the different types of accounts and how you access it. There’s tax reasons, growth reasons, all different all different things you have to be focused on. And so today, what we’re going to walk through and talk about is that that mindset change and what are the things that you need to be thinking about?
And so the way that that I like to think about this as you’re going through and wondering, have do I have enough money saved? You can kind of think of it like this. As you’re approaching retirement, you can think of it a lot like a pantry. You walk into that pantry and it’s full. It tells you how much you have. It shows you what’s available. But that meal plan tells you what’s for dinner. That’s what we’re talking about. Another way to say that is a spreadsheet gives you an idea, shows you a net worth, and it doesn’t lie. It shows you exactly where it is. It behaves a certain way, right? plus and minuses and multiplication and division. It tells you exactly what the numbers are. Life does not operate that. But a dependable retirement income plan will allow for you to walk through and grow those assets the way you want. This is something that’s that’s really important to understand. I’ve emphasized dependable and reliable income plan. That does not mean guaranteed. Life changes. Markets move. Things happen. But what it does mean is that if you’ve planned those changes, those headlines, those different things that go and happen don’t necessarily have to change your behavior. And really, we we organize this process really around three different decisions.
These these three decisions as we’re going through and looking at this, it’s first and foremost, number one, know the gap. What’s the gap? The gap is you know what your guaranteed sources of income are. That could be social security, that could be uh pensions, it could be different things kind of like that. And you know what your income need is. The difference between those two, that’s your gap. Okay. The next thing you have to do is you have to bridge that gap. it we and Karen will walk through some numbers here in just a second, but you need to bridge that gap so you know exactly where that income stream is going to come from in order for you to live live your life in retirement. But here’s the key and this may be the most important part. You’re walking into retirement. You’re thinking about what that gap is. You know what the bridge is. That doesn’t mean that it stays static. You have to be able to make these decisions and make adjustments as you go through so that you know exactly how this money will work and you have you have options. So Karen, let’s start by by kind of walking through the cere you can walk through the gap for us here real quick. Put some numbers behind it.
Absolutely. So again, that gap that Robert just talked about, that’s determining what your savings has to provide to you on a monthly basis to sustain your standard of living in addition to that guaranteed income that you have coming in. So the first thing we start with is determining what does it cost you to live on a monthly basis. And when we think through that number, that is not just your debts, things like your mortgage, your car payment, that’s everything else in addition to it. So that’s your car payment. that just said that one. That is your cable, electricity, going out to eat, doing your annual travel that you’ve built in. It’s all of the essentials, but I would also add it’s the discretionary in there as well. Then you look at your reliable income sources or your guaranteed sources of income. That is things like social security, that is employer or government pensions. And then that can also be annuities. If you are taking systematic withdrawals or you’ve annuitized your annuity, all of those sources of income are guaranteed and coming in on a monthly basis. When we take what you need to live on or what you live on a monthly basis minus your guaranteed sources of income, that is your gap number that your savings has to make up to determine on a monthly or to sustain on a monthly basis your standard of living. Now, a couple things to point out here. When we meet with people and talk to them about what they spend on a monthly basis, a lot of times people will say, you know what, I’m working right now. I’m probably going to spend 80 to 85% of what I’m currently spending when I go and retire. That doesn’t necessarily always work. The best way to build a plan is to have a real firm number around what it actually costs you to live on a monthly basis. This is not putting you on a budget, but what this is doing is getting real clear about what it actually costs you to live. Because when we talk about what it costs to live and we build out this plan, if in your mind you think you’re spending $12,000 a month, but in reality you’re spending 15 or $16,000 a month, those are going to be very different impacts to this plan that we put together. So being real clear about the numbers and putting those numbers into dollars is very important. Other things to think about too when you’re looking at your guaranteed sources of income, the timing of when those start is important. You may be retiring and your income will start right away. Or if it’s something like social security, maybe you’re looking to retire in your early 60s and we’ve got a gap couple of years where we don’t have social security yet coming in. So being real firm on understanding when your income sources will actually start is important in building this plan. So let’s put some real firm numbers into this and talk this through.
So this is an illustrative example. This is not any of our current clients, but I wanted to give you some numbers to understand how all this works. So, in this example of this couple here, they’ve determined that it costs them $8,000 to live on a monthly basis. This does not include taxes. This is just everything to go and do and live on a monthly basis. Between the two of them, their social security is $5,000 a month. They don’t have any pensions. They don’t have any annuities turned on. So, it’s $5,000 a month coming in. Well, the $8,000 spending minus $5,000 of social security means that there’s $3,000 a month that we have to to supplement their social security in order to maintain their standard of living. By having and defining this number, what that does is it allows us to then account for taxes, to account for inflation, and most importantly to account for the unexpected uncertainty of life. So instead of just viewing this pool of assets as having to sustain an entire retirement, now we have a number and a real firm idea of what we have to sustain yearbyear and we can build out a plan based on that.
Now I want you to take for a second a moment to think through your current situation. So you may or may not know right now, but try to think in a general sense what it costs you to live on a monthly basis. And what I will say is if you’re still working and you don’t have this number clearly defined, one thing to look at is what your take-home pay currently is and determine after the end of each month when all bills are paid, are you spending all of that amount or is there an amount left over? And that will kind of give you a starting place for what your essential spending is on a monthly basis. Then I want you to think through what your guaranteed sources of income will be in retirement. So, your social security, if you’re married, your spouse’s social security, any pensions that you may have or any annuities that you plan to annuitize in retirement. From there, when you subtract those two, you will come up with your gap number. Now, if you’re looking at this equation right now thinking, you know what, I don’t know these numbers. That is okay. Circle the number that you don’t yet know. That’s where the planning needs to start where we need to get some firm ideas and some clarity around what your actual numbers are. For the sake of time today, we’re going to assume that we’ve come to a monthly gap number for you and you have a general idea of what yours will be.
So once we have that, the next question becomes where do we go to provide that monthly gap income? We’re going to jump forward here.
So again, we’ve talked about the regular income coming in, the social security, the pension. We’ve just determined what our monthly gap number is. So again, that example that I just showed you, that $5,000 a month couple with social security. Their gap was $3,000 a month. Now, the next portion is to determine where does the bridge come from? And like Robert said a moment ago, the bridge is the first couple years of income that’s going to fill that gap. The single, actually I should say one of the two scariest things that we hear from people that are eyeing retirement, one of them is not having a paycheck coming in anymore. They’re used to having that every two weeks or every one time a month paycheck coming in. And the idea of not having that anymore is a very scary idea to them. So, by viewing this bridge here that will provide for the gap, that’s how we recreate that paycheck in retirement and provide you that comfort of knowing you have income coming in. What that does is it takes away the scramble at the end of every month instead of having to look at your portfolio and determine, oh my goodness, what do I sell right now because I need this $3,000 next month. Now we have a clearly defined place where we have funded 1 to two years of that income need in order to create that paycheck for you. So again in that illustrative couple it was $3,000 a month was the gap. When we annualize that that’s $36,000 a year. And for this example here if we take two years of that that is $72,000. That’s the bridge that we would have that would provide that gap on a monthly basis that becomes the paycheck that you receive in those first couple years of retirement.
Now, the other great thing about this bridge, too, is this allows for flexibility. What I mean by that is when the markets are really good, we can look at where our bridge funding is and say, you know what, let’s go ahead and refill the bridge and start building the next couple years beyond that. When markets aren’t so good and we’re in a down market, we’re not forced to go and sell something to create an income stream. Instead, we have time for the assets to then recover and to grow before we go and refill that bridge. Like Robert just said at the beginning, and like we all know, markets don’t go up every single year. So, planning for that uncertainty in those down markets is extremely crucial. So, let’s look at what we do in periods of down markets, Robert.
So I think that that’s really really a good point. We’ve gone through a period here for the last three looks like going on four years where we’ve had really good good markets. But it wasn’t too long ago in 2022 where the market was down almost 20%. And it really most of us remember the great financial crisis or the great financial recession. What ended up happening during those times? Now, just envision that you were, it’s 2007, and you were looking to retire, but what your plan was is that you were just going to go to take money out of the accounts. Well, just kind of take a little bit, $3,000 every month without having a plan in place. In those periods of market volatility, when the markets are down, what ends up happening is that those withdrawals can end up making a significant impact. If you’re selling shares, they’re no longer available to be able to grow. And what happens is is that is that you end up possibly doing irreparable harm to the portfolio by not building that bridge to go through to get started. So in order to kind of understand how this bridge the bridge is to get us across a little bit of time 2 3 4 5 years that we don’t want to forsake what long-term growth actually looks like. So I think in the next slide it goes through and it walks through the paths to go to show us exactly what that looks like.
So stop and think about this. In path A, what you’re going to do is you’re just going to take a portion out from wherever you think that it might be whenever cash is needed. So that $3,000 a month, we’re just going to go through and withdraw that. You’re going to sell it whenever it’s convenient and you know the markets, you’re going to just kind of hope that the markets kind of stay relatively steady. That’s path number one. Path number two is that you’ve defined what you need in the near term. you coordinate that around which types of accounts and the tax decisions to go to take it out and then you refill those according to plan or as you go to see the growth that’s inside of there. I think if you stop and think about 2007, both of these or even if you retired in 2021 with knowing that 2022 the market was going to be down 20 plus 20% or so, what you end up finding or realizing is that the outcomes are completely different. The reality is is that you when you were following path A just kind of pulling out some percentage on a monthly basis, you’re subject to headlines. you’re subject to that market volatility. It gives you a much cleaner path by building this bridge, understanding what your gap is. And I think that that if you go through to think about that $3,000, right? Both people in path A and path B have the same amount of money, the same requirement, but their outcomes are completely different. And so the bridge answers where’s my next question going to come from? and and that large it allows for that larger plan to evolve over over time.
And so the way that we call this bridge and the way that we put it to work is that we call it the dynamic age approach. And the reason for that is is like I said earlier, spreadsheets behave, life doesn’t markets include mark retirement includes market changes, headline risk, all of those other things. The goal here is not to predict when every single event is going to happen, but rather to have a plan in place about what to do if those do happen. And so, as we go through and look at it, the dynamic age approach is what we call it. It needs to do three things all at the same time. And age is an acronym. A stands for it has to be adaptable. You’re looking to retire. You need we’ve got a bridge that we need to build of $3,000 a month. We need to pull that forward several years so we know exactly where that income’s coming from. But lo and behold, your daughter decides to get married. So now you have to you have a larger expense that ends up happening right there. We have to be flexible. We have to grow. We have to allow these assets to stay ahead of inflation. And the great thing about this is we’re not forsaking being adaptable and having the opportunity for growth because that E that’s inside there E stands for insure. Ensure that the funds are available, the outcomes that you need are available when you need them. And as we go through and we develop this, you can go through and see that in your situation, you know exactly where the money is and you’re no longer as concerned about the necessarily the day-to-day movement of the market. So what what we find is that almost all of our retirees when we go through and as they’re looking at this and they go and see how this plan is, you can almost see the weight just come completely off of their shoulders. They’ve got clarity and they’ve got confidence, knowing exactly where that money’s coming from. Here’s the key. We spent a lot of time talking about cash, having that bridge, having those funds so that they’re safe, flexible, and and right there to go to get it. You do not have to forsake growth because you have assets sitting in cash to go inside there. By having a plan put into place, growth still is part of that income plan. Because what it does by having these assets aside is it gives these growth assets times time to work, time to grow, time to refill and replenish those those buckets. So as you as you go through and look and see where this is and you have that bridge in place, you have the peace of mind that knowing that the day-to-day movement of the market and really protect the point that I want want to make here is that protecting the paycheck does not mean you’re giving up future growth. So go ahead Karen.
Yeah. So as you just mentioned when we build this approach the name says it all. Dynamic age approach. It has to be dynamic and move and evolve with you. This is not a static build it one time set it and forget it type plan. It’s also not a plan that you create right before retirement and then that’s it. It just stays there. It has to evolve with you. And with that, having this plan in place makes it to where the changes and the adjustments in the plan become intentional and intelligent instead of emotionally reactive. That’s where a lot of investors in retirement get it wrong is they make emotional decisions instead of intentional decisions and can quickly derail their plan based on that. So, it’s really important when building this plan that you think through what types of triggers would warrant a review of your plan. Now, the first one I think most people think of is the markets. a huge down period in the markets or even a huge up period in the market, FOMO kicks in, you think, I’ve got to chase that hot stock that’s doing so well. Those are the types of things that we quickly hear from people. They want to do a review because of those. But there’s other things you should think through that should warrant a review of your plan, your spending habits. When you go and retire, we hear a lot of times people decide that they are certain they’re going to live in one spot when they retire. grandkids come along, adult children move to different parts of the country, clients decide to move with them and be more present and close. Well, with that comes changes in spending. Now, there’s a mortgage payment potentially or just an increased cost of lifestyle to live somewhere different. Spending changes warrant a review. Taxes. When there are changes in tax law or to your strategy, that’s absolutely a reason to review the plan. Health care cost. The second scariest thing that we hear from people about retirement. Remember I mentioned the first one was not having a paycheck in retirement. The second one is health care cost. So if there are new costs for health care, let’s say something happens in your life, a major health event and your spending needs go up. That’s a reason to review your plan. Or it may be now you’re 65 and it’s time to start Medicare. That might be a reason to review your plan and see where your spending needs are based on that. And then the last one involves around family. When you’re thinking through your legacy and what you want your assets to ultimately do and what you want to leave behind, as those decisions change, that can warrant a review. A lot of times when we first meet with someone, people usually tend to be in one of two camps. They tell us that either, you know what, I want to spend and go in retirement and have all the fun, and if the last check bounces, we did our job right. That’s one camp. Then we meet other people that say, you know what, I have a clearly defined idea of what I want to spend and do in retirement, but ultimately I want a set number of dollars to go to my adult children at my passing. That’s their legacy. Depending on which camp you may be in that you may start in one of those in retirement, but 5, 10, 15 years down the road, you may change your mind and decide if you’re in the camp that wanted to leave money to adult beneficiaries and children. Now you decide, you know what? I’m having too much fun traveling and going. I want to spend all my money that I work so hard for. As those decisions change and evolve in your life, those things trigger a review and warrant a review of your plan. Now, the key thing here is having a review does not necessarily mean making a change. What it means is evaluating where are we in the plan? Where are the assets that are dedicated to all these things and do we need to make adjustments? Just because one of these five things has happened doesn’t mean we go and make lots of changes in the plan or big trades or anything like that. It just means a conversation is had to see what updates need to be made to match that.
And once you have this plan in place for what triggers a review, it makes a lot easier to decide what is the goal of all these dollars and how do we put it all together. So on the next slide, this is how we kind of build out the income plan or the income system. Every dollar has to have a job and it’s based on the time horizon or the need of those dollars. We really view things into four buckets. That first bucket is the guaranteed sources of income. So like we talked about the social security, the pension, the guaranteed income coming in. That is your monthly income foundation. The next box is where the bridge is built. We call that our short-term income box. This is where we have a couple years in retirement of income set aside in things that are liquid, that are stable, and that have guarantees on them. Because like we said, when we’re providing that gap as a paycheck, the last thing we want to do is have to go sell something in a down market to create that paycheck. So the bridge or your short-term income is where those assets live to provide the paycheck. Then we have our refill reserve. These are intermediate term assets. We like to call these our income replacement assets. So these are assets that a couple years from now will be used to keep that paycheck going to you. But because we don’t need them for a couple years, this is where we can afford to take some risk on our assets. So we make a very smart allocation designed to reach the goals that we’re after here with the appropriate amount of risk. That leaves everything else to be long-term growth. These are the assets that are the most allocated towards risk because we have the most amount of time until we need them. These are things that will allow us to outpace inflation to ensure that we have a high degree of confidence that can reach all the goals that we’ve planned for. And this also allows most importantly for flexibility in the plan when the unexpected happens or those life moments happen and we really want to do something special. These assets and the growth of these assets allow for that type of flexibility for you to be able to go and do the things that pop up.
Now, time horizon isn’t the only thing that’s important in creating this income plan, though. What I would argue is one of the most important things is remembering that everything has to be planned in whole coordinated together. Kind of like a puzzle. You look at a puzzle with all the pieces out on the floor. They’re all separate, all different colors, not really sure where to go. When you start putting those puzzle pieces together and fitting them in the right spots, that brings the entire income plan together and ensures that we’ve got everything laid out and we’re going to be able to have a high degree of confidence we can reach these goals. So, the taxes are extremely important to make sure we’re accounting for how taxes fit into the plan. Those will affect the the dollars that hit your bank account in your paycheck in retirement. Health care. Again, second scariest thing for people in retirement is those health care costs. We have to have a plan in place for managing those health care costs. Family priorities, whether it be we want to gift assets to adult children now and we want to see them use those assets during our lifetime or we want to have a plan for a legacy after we pass. Those need to be planned for. And then, as we’ve said all along, the most important that I would argue is the unexpected. We have to have a plan for the unexpected because I think y’all might have heard this quote before. The only constant in life is change. We’ve got to know that change is going to happen. We have to have a plan for where do we go when that change happens and those unexpected things happen to recreate that paycheck for you.
So, jumping into the taxes portion of it. Taxes I think scares a lot of people in retirement because they’re not quite sure how do I fit everything together to create that paycheck. So, when we look at how we’re creating that gap income on a monthly basis, there’s really three types of accounts that we’re looking at pulling from to create the paycheck. We’ve got our taxable accounts. This is your bank accounts, your checking, your savings, your CDs, your brokerage accounts. These are the accounts that are not retirement accounts. You’re probably paying taxes on the interest and the dividends. And if you’re selling something in your invested brokerage account, you’re potentially paying capital gains to create that paycheck. Then we have our traditional retirement accounts. These are the tax deferred accounts that we have. Things like your IAS, your 401ks through your employer, 403b, 457, those types of accounts where we’ve deferred the taxes all along. So, at some point, we’re going to be required to take uh take funds out of these accounts and pay the taxes on them. The last part is the Roth accounts where you’ve put your after tax monies, they’ve grown completely tax-free and you can ultimately go and tap them in retirement for tax-free withdrawals. Now, a common misconception that we hear is a lot of people think, you know what, when you go and retire, you live on your taxable assets. You now drop into the lowest tax bracket potentially and you’re doing great. And eventually, you just work your way through this list, taxable, traditional, Roth. However, like I mention mentioned a second ago, that puzzle piece, if we only think about the right now taxes and forget to plan for future taxes, we could ultimately be putting ourselves in a detrimental situation later on where we have no flexibility or control over our tax situation. If we spend down all our taxable assets first, we could potentially owe a lot more in taxes down the road than we may have to. So understanding that when building this plan, it’s not necessarily a set formula of which accounts to use. It needs to be coordinated in addition to a lot of other things which accounts we pull from yearbyear focusing on what taxes are both now and in the future.
Another really important part is the health care. So again, healthcare is scary because it’s the unknown piece of all this. We don’t know how long the assets have to stretch. we don’t know if something’s going to happen, we’re going to have a major health care event that we have to care for. So having a plan in place around health care helps alleviate a lot of that. So when we think through health care, this is not just health care premiums. If we retire before Medicare age, we have to have a plan in place for how do we provide health care until you reach Medicare age, but it’s also looking at the out-ofpocket cost, potential long-term care needs, and also looking at longevity in your family. If you or your spouse have um parents, grandparents in your family that have lived into their late 80s, 90s and beyond, you have longevity in your family. We need to plan for that longevity to ensure that the assets have a high chance of being able to sustain your lifetime well into your 90s. If that’s the case, some people think about long-term care and think that we need to have a policy in place. Well, that’s a conversation that needs to be had of does it make sense to have a long-term care policy or does it make sense to plan for a self-funding type event because we have the assets to sustain it. These are the types of conversations that are very important in building out this income plan. And then the legacy piece of it. You’ve worked years and years to build up this wealth. Now you’re envisioning what kind of legacy can you leave to your children, to your beneficiaries, and to others. Understanding the impacts of the types of accounts that you’re leaving to these beneficiaries and the impact to them will help make sure that the legacy that you’re leaving matches what you actually want to have happen. And understanding that all of these priorities are competing for your dollar. So, we have to have a smart, thoughtful plan that accounts for the taxes, the health care, and your future legacy, not just one of these by itself.
And here’s what I would tell you is probably one of the most important parts of this income plan that often gets forgotten, especially by investors that are trying to do this plan all by themselves. We have to stress test the plan. Like Robert said, we can build these numbers on a spreadsheet, but spreadsheets don’t match real life and they don’t change as life happens. We have to have a plan in place that goes through and stress test the portfolio in different situations. This is not scoring the portfolio. This is not an ABCD type test. This is running the portfolio through different types of scenarios to see do we run out of money? What type of probability of success do we have in these different instances? So, for example, an early market decline. Robert mentioned somebody earlier retiring in 2007. Well, 2008, 2009 were a major drop in the market. Someone that retired then versus someone with the exact same amount of wealth retiring in two 2023 where we’ve had three straight years of double-digit returns in the market. Those are very different first couple years of retirement for those same portfolios. So testing the portfolio in different types of market movement will help you understand and give you clarity around what your portfolio might do in different types of markets. Longevity. People’s retirements are lasting longer and longer than they ever have before. Um the average age of people is growing. Medical advancements are making it to where people live longer. We have to ensure that we have a high degree of confidence. the portfolio can live 30, 40 years if it needs to and sustain your lifestyle. And then again, you’re probably getting the point by now that we’ve both said quite a bit here, the unexpected. Having a plan for if we need to have a large withdrawal or something is going to potentially happen in the future, can the plan sustain it and how does it react? Where do we take from to ensure that those unexpected things can happen and they don’t derail the plan that you have in place?
So, in building this plan, and Robert and I have a many, many years of helping retirees do this, there’s some common themes that we see happen that we don’t want to have happen to you that we want to point out here. In a lot of situations, the things that I’m talking about here, people think they’re making really good decisions. The problem is if you make decisions in isolation and you don’t think through one decision over here and how it impacts this one over here, that’s where issues start to come into play and we start to have plans fail, for example. So, not being clear on your numbers is one theme that I really want to point out here and hopefully you’ve heard me say that throughout these last couple slides. Understanding where your actual lifestyle costs are versus just guessing. That makes a very big difference. Not taking into account how the taxes fit into things. Just having a general idea, but not really having a firm plan. You’ve got to be clear on your numbers. Another key theme here is not being certain and having a defined strategy around your withdrawals. What I mean by that is not knowing where the source of your funds are going to come from. claiming benefits, things like social security or starting a pension, but not looking at everything else. So, for example, a lot of people that we talk to say they’re eligible for social security at 62. So, maybe they go and retire at 60. They think they’re going to turn on social security at at 62 because it’s income quickly to them. Making a decision like that without thinking through the long-term effects can cause irreparable harm in the plan. You’ve got to understand how income sources and the timing affect everything else in your overall plan. Having too much cash is another thing I would say. A lot of times what we hear from retirees or people getting ready to retire is, I’m just going to hold a lot of cash. That way when markets aren’t great, I’ll just pull from my cash. What that ends up doing is they end up having a very large percentage of their portfolio in cash and they’re losing out on opportunities because they don’t have a focus of what their cash is doing and where it should be. And then the last thing I’ll say here is not having rules for when and how to adjust. If we don’t have a plan for when the unexpected comes and what we’re going to do, then we’re flying blind and making emotionally reactive decisions and that never ends well.
So, to wrap it all up here, someone getting ready to retire, and maybe that’s you. Maybe you’re a couple years away from retirement, there’s five things that we tell our retirees and people getting ready to retire to get real clear on before you go and click the button. And actually, I’m going to add audible here and say one more before I redo these five things. A lot of times when people look at retirement, they’re looking at retirement as a number on the count or a date on the calendar. They know that they want to retire at 60. We tell our clients, think through what you want to do when you retire. When every day is a Saturday, what are you going to do to fill your time? Build that retirement bucket list of what are all the dreams and goals that you and possibly your spouse if you’re married want to go and do to fulfill your life rather than just retiring to click of bots. So assuming you’ve done that and you know that you’re getting ready to retire, getting clear on what is your lifestyle right now? What’s life going to cost each month? When is your income going to get turned on and what are your sources and how much? What is your gap number that the portfolio needs to provide to supplement those income sources? Where are the first one to two years of that gap income, that paycheck going to come from? And then most importantly, what is going to trigger a review or an adjustment in the portfolio? what types of situations are we going to make adjustments in? So, Robert, bring it all together for us now that we’ve kind of heard all that.
So, we started off talking about there are really two kinds of mind shifts or my thought process, right? One of those is how have I saved enough? Hopefully, as we’ve walked through this this transition over to how do I create that income? Starting off with know the gap. Then you got to go to build that bridge and understand that life changes and any be able to be make those adjustments. Any sort of solid income plan and what we’ve seen with clients is employing the dynamic age approach to their portfolio to set the assets up so it accomplishes that gives them clarity and peace of mind. And so once you see that shift, you know exactly where that paycheck’s coming from. Now you can really focus on what’s important and that is living the life that you want to go through and live. And so with that I would like to open this up to questions. Um you can do one of two things. Either put it in the Q&A box or simply raise your hand and we will unmute you and let you uh let you ask your question.
As we’re as we’re kind of waiting to see if anything uh any of those kind of queue up, one of the things that I think that I would like that that we’ll kind of un talk about one of these is should I pay a more mortgage off before I actually retire? The answer to that is it depends. A lot of times we have questions. There is, if I put my financial advisor hat, and I’m a huge proponent of being completely debt-free, but there is certain kinds of debt that are that are what you would call good debt, right? You get the tax deduction on them. The cost on it is really low. And if your mortgage has a 2 and a half or 3% interest rate, um, we would probably recommend against paying that off because we can virtually take no risk and get a higher return than what that’s costing you. I think what the real key is around as you’re going through and thinking thinking about this, what I think that everyone needs to to be thinking about is that there are a lot of different pieces and a lot of different things that you have to take into account as you move over into this income phase. The income phase is absolutely fantastic if you’ve gone through and and and done the planning and put it to work. And so when you go through and you look and Ryan, if you want to flip over to the next page, I think that the next I I think that the key is is understanding what you need that those assets to produce and developing a strategy to get there. A lot of times when we walk through with people, they have a lot of questions. They have a lot of general ideas. And kind of the next step that I would throw to you is is if it would be helpful to you, all you have to do is just simply book. and Ryan just put inside of the uh chat uh a link to our calendar. Just simply book a 30 minute no obligation conversation around around yours to help you determine what your bridge needs to be and what your gap needs to be. We can start that process to walk through with you and I’ll promise when it’s all said and done, you’re going to feel significantly better and have a lot more comfort and confidence as you walk into retirement.
And and if I’ll jump in right there, if you’re wondering what that conversation looks like or what you need to bring to that or what that would be, having a general idea of when you want to retire, understanding what it costs you to live on a monthly basis and what it will be in retirement, and then the questions that you most want to have answered. Those three things would be key to have and would guide the conversation and it’ be a really good use of your time. So, the link that’s in the chat with our calendar, feel free to copy and say that if you don’t quite know what your schedule is right now and you want to take it to look at later, write that link down. We’d love to have a conversation with you and help give you some clarity.
And so, kind of with that, I realize that we went a little bit over. I said we were going to be 30 minutes and we went a little bit over, but I want to thank you very much. If you have questions or things that we can help you out with or just want to kind of get a second opinion, book one of those complimentary retirement clarity sessions with us and we’d love to have that chat. Hope everyone has a great rest of the day and we will talk to you all soon. Thank you. Thanks.
