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ANNOUNCER: You found it. It’s your safer place for retirement planning. Prepare to be coddled in pure fiduciary goodness with your host and President of Decker Retirement Planning, Mike Decker. This is Safer Retirement Radio. If you’re in or near retirement, listen up and learn about a math-based, principle-based approach to retirement that is designed to help you enjoy a safer retirement. These strategies are to help protect and grow what you’ve saved and live the life you want today. So, grab a pen, because your safer path to retirement planning starts now.
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MIKE: Good day, everyone. This is Safer Retirement Radio, you’ve got Mike, Josh, Cameron here for the next 58 minutes whether you’re listening to us via podcast or on the radio. We’ve got quite the show lined up today. Josh, Cameron, thanks for joining me today.
JOSH: Thanks Mike, appreciate it.
CAMERON: It’s great to be back.
MIKE: So we’ve got a long agenda here of a lot of different topics, but before we dive into it, all you listening, I hope you have a sense of joy right now. We’re coming into the holiday season, a time for travel, a time for enjoyment, family, friends, festivities. How many more positive F-words can we say in that sentence there? Fun, that’s another one.
JOSH: Positive being the keyword, right?
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MIKE: Yeah. [LAUGH] But when it comes down to this holiday season, it really… whether you celebrate Thanksgiving, Christmas, Kwanza, Hanukkah, all the different celebrations, New Years, or not, there seems to be a general sense of just coming together and connecting with those who are most important with you. And that’s a beautiful thing. For all you retirees or near retirees, I hope you feel young. Because I believe you are. Here’s my case. If you’re 55 or 60 years old, right now the odds are you’ve got another 30 years left in you, at least.
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MIKE: Think of all that you accomplish from your twenties to your fifties. Let’s do it again, but this time you’ve got financial stability, you’re not bound by work, and if you’ve got a good retirement plan, by all means it can be the most fulfilling part of your life. Oh my goodness. I mean, think about it. Cameron, Josh, with your grandparents and your relationships, I mean, with me, I remember going to a dude ranch with one of my grandparents for a whole week. It was an incredible memory. I remember having Christmas, oh this is a fun one.
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MIKE: My grandfather, years and years ago, dressed up as Santa. We had no idea it was him. We were all kids, this is years ago. But I mean, those are cherished memories that we have, and that’s a beautiful part about retirement, is you can do whatever you want. Time is yours. Time is our most precious commodity and when you own it, you’ve got a lot of power in your time.
CAMERON: And I think toward the end of the year, you know, a lot of people start thinking, “Okay, New Year’s resolutions, what are we gonna do next year? How is this year looking?”
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CAMERON: And it really is a great time to reassess, not only, you know, “Let’s make sure we spend the time with the family, but maybe let’s get together and see where we are, you know, with our finances for the next year.”
JOSH: Yeah, I agree, I think it’s… I’m really excited for the holidays this year, getting to spend time with everybody. Especially my parents are kind of in that boat where they’re being able to spend a little bit more time with their grandkids and be able to do some of those fun activities. It’s a great time to do both, just family and taking a look at where we’re at with everything.
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CAMERON: You know, and everyone’s retirement dream looks a little different. For some, it’s family, it’s grandkids. For others, you know, some of our single listeners, it may be different vacations or different trips or different activities. Maybe, you know, going on that drive up the coast that they always wanted. I mean, there’s so many fun things around the holidays that you guys can do and you know, having like Mike said, your finances in order can really set the stage to do, you know, to have this end of year time be one of peace and happiness for you.
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MIKE: We got a fun client, I just love this woman to death. She doesn’t just sit around in retirement, I mean, she’s going places and doing things. I mean, for a year she decided to be a ranger or some helper at Yellowstone. And just loved it. I mean, she didn’t need the income, she just wanted to do something, wanted to live in Yellowstone. Took up a part-time gig there and had a riot. And then in the holiday season, when it slows down there, [LAUGH] gets a little cold in Yellowstone, she went back and her life was just so fun because it was party after party, a friend visiting, really high quality time.
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MIKE: It’s just such a beautiful thing. Now, Thanksgiving is coming up, obviously. You know, ‘tis the time. Got the football season going on, got all the cooking, practicing, had Friendsgiving just the other day. So, everyone’s practicing their turkeys and how to do it right for when the family comes over. Want to throw out a fun little tradition that my family has done, because when you have your health and you have your finances in order, having gratitude is the glue that keeps life’s fulfillment in line. What we would do is we’d have a couple of little corn kernels in front of our plates.
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MIKE: And we’d go around the room and say something we’re thankful for and put it into the kernel and it’s such a wonderful experience to share aspects that you’re grateful for.
CAMERON: You know where that tradition came from, right Mike? With the kernels?
MIKE: No. We just did it. [LAUGH]
CAMERON: No, no. So, when the pilgrims came over the first year they were here, they actually almost starved. You know, they came in December, they showed up thinking they were in Virginia, and they were actually up near Boston. It’s very, very cold.
MIKE: Very cold in Boston.
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CAMERON: Yeah, they struggled and they were rationed, you know, with the help of the local Indians, they were rationed to five…
MIKE: Native Americans.
CAMERON: Yeah, there we go. Native Americans. They were rationed to five kernels of corn per day and about half of ‘em starved. And so then the next year when they were able to have that first Thanksgiving that the governor declared, “All right, we’re having a Thanksgiving,” you know, and then it feels a lot more like what we think of Thanksgiving, they wanted to put those five kernels of corn out and remember, “This is where we came from.”
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CAMERON: So, that’s actually where that tradition came from and there’s a lot of families that follow that. So, you guys kind of unwittingly were doing that tradition, weren’t you?
MIKE: Yeah. I never asked the history of it, but that’s quite insightful. I mean, Thanksgiving, it’s a time to celebrate of plenty. If you’ve worked your whole dang life, you’ve saved up, you’ve scrimped, you’ve saved, you’ve made sacrifices. You’ve had the ups and downs, you’ve had a great career, then all of a sudden you’ve lost your job. And then you’ve reinvented yourself and now you’re in a new career. I mean, life throws the kitchen sink at you and everything in it.
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MIKE: And yet it seems like the American mentality is to come out on top. And client after client coming through our door is saying, “Hey, here’s how much I have. Here’s how much I need. Can I retire?” And it’s just the most beautiful conversation. So, for all of you listening right now, I hope that this week especially, that you can focus on family and friends and what means most to you. If you want to continue your research on retirement, if something feels off, the bottom line is that you can continue to do what’s most fulfilling for you and enjoy your time with friends, with family, and really cherish those moments.
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MIKE: My grandparents have been some of the most influential people in my life growing up. And so, I hope for all of you that are retired, whether you have grandkids or not, you’ve got friends that you can cherish those moments, and really just bring things together in this holiday season. There’s a lot of talk about, “Oh, the markets may crash,” and market turbulence and frankly, it kind of bugs me. And here’s why. Sure, it’s true what they’re saying. But is it necessary, and hear me out, is it necessary to keep just plugging the newsreel of fear that in the markets, that this is gonna happen, this could happen, this could happen.
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MIKE: Almost creating a self-fulfilling prophecy. If you have a correct retirement plan, a math-based, principle-based retirement plan, which we call a safer retirement, none of this needs to concern you at all. The markets crash 40 percent in December, let’s say it crashes in one month, 40 percent in December, and doesn’t recover for six years. It’s fine. Because if you’re math-based, principle-based, you’ve got a plan that you can rely on for the next 30 years.
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MIKE: Retirees have to be able to handle about three to four significant market crashes, that’s what the history suggests they will experience in their retirement. Retirees need to be able to handle the next 10 to 18 years of low upside potential. MIT is suggesting that we’re gonna have an average of two, three, four percent on average for the next 10 years at least. Can you handle that? We’re gonna talk more about that today, what market fears cause crazy people or market fears cause us to do crazy things, I’m not calling anyone a crazy person here, I’m just saying that market fears can cause us to do emotional things.
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MIKE: That had we had a sound mind, maybe we would’ve thought it through a little bit differently. We’re also gonna be talking about some myths here, all on the show today. And then wrapping up with an overarching solution to a lot of these myths in your retirement plan. So, stay tuned for the whole show here. As always, if you want to catch this show again, iTunes, Google Play, wherever you get your podcasts, it’s readily available on our website at DeckerRetirementPlanning.com. You can read the transcripts, you can catch our research. We have one of the most detailed, in-depth market commentaries that come out weekly on our site. You can get that on our newsletter, it’s a free subscription.
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MIKE: And we also include other lifestyle aspects as if you don’t have your health, you don’t have retirement. So, we want to incorporate health in retirement. And so, we typically have nutrition-based articles and things of that matter, but the bottom line is, you are young. You may not feel like you’re in your twenties, but you are still young and have years ahead of you. Let’s make every bit of it. Now, for our new listeners here, I do want to recap real quick the principles of retirement planning. If you follow these principles, the research suggests that you have the highest probability of having a successful retirement.
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MIKE: The first principle is to only draw income from principle guaranteed accounts or sources. The reason why is if markets are volatile or they go flat or they go down, you can sail through it unaffected. We want to avoid sequence of return risk, that’s a fancy word for basically it’s the opposite of dollar cost averaging into a portfolio. It’s negative, or let’s see, dollar cost averaging in a negative way as you pulling out of the portfolio. They call it sequence of return risk.
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MIKE: You can Google it, but essentially drawing income from a fluctuating account can destroy your retirement. We saw that in 2008, and those who followed these principles were unaffected in 2008.
CAMERON: And specifically that can, with the sequence of return risk to break that down a little bit more, you mitigate your returns in the up year because you’re pulling assets out every month that the indexes or whatever you’re invested in is trying to make money, and then in the down years you’re accentuating those losses by pulling even more in.
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CAMERON: So, it’s just not a situation that you want to find yourself in in retirement.
MIKE: It’s a one-way street.
JOSH: Yeah, I think the bottom line there is to remember that your expenses don’t change month-to-month, so when you have a good month or a bad month in your investment portfolio, you still need the same amount of money to get by each month. So, pulling out your normal amount essentially costs more on the down months.
MIKE: A lot more. Mm-hmm. So, simply put, principle guaranteed sources, whatever they are, frankly we don’t care if they’re insured by a bank, insurance company, or the federal government or municipal government.
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MIKE: It needs to be insured and guaranteed to some extent so if markets go sideways, things happen, your income is not affected. Now, let’s be very clear about this. Mathematically speaking, an income annuity would qualify as a principle guaranteed account. An income annuity, when you turn on that income or the rider’s source is not flexible. Be weary as market fears cause us to do crazy things. Income annuities, I believe, are one of those crazy things that we may do.
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MIKE: Because the average return based on our research is around two percent annual return, year after year. And the insurance company’s hoping you die before you make their money back.
CAMERON: Not only that, you’re leaving out the inflation that you are now not gonna be able to participate in because you’re locked in at whatever monthly payout that you had when you started that income annuity.
MIKE: Mm-hmm. And there’s different metrics there, and some people say, “Well, my income annuity’s guaranteed a growth of seven percent.” Just keep in mind that’s a ghost account, it doesn’t actually have a dollar value. Call your insurance company, have the conversation.
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MIKE: Ask them, “What’s my cash value and the cash value performance?” And if you want some help with this, we’d be happy to help you at (833) 707-3030, you can call us or go to DeckerRetirementPlanning.com, click ‘Get Started’ and we can walk you through that at no cost to you, but the bottom line is, understand what you’re working with. The principle is true, if you do have an income annuity and you’ve turned on the rider, markets will not affect your income because you’ve turned on the rider, it’s a self-made pension. Is it best for your performance?
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MIKE: Is it best for your retirement? I would argue that mathematically it is not. Our retirees guarantee their income, or they have principle guaranteed sources mapped out for the 10 to 15, sometimes 20 years. We’re not doing any riders, it’s just management of accumulation with principle guaranteed sources. It’s a beautiful thing.
JOSH: So, yeah, I mean, we’ve seen a lot of those. We’ve seen a lot of hurdles that people have to jump over trying to get their distribution plans in place or their safer retirement plans in place.
MIKE: Mm-hmm, and I want to talk about the second principle real quick and then Josh, I know you have a story about this.
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MIKE: The second principle is not only under, or it’s diversified by a purpose, not just by a risk. You must understand not only what you have to work with, but how to work with what you have.
JOSH: Right, and that’s one of the biggest hurdles that I come across, being on the… just kind of a reminder, my role here, I help people kind of get their safer retirement plan in place. And a lot of times people coming into that situation, they might not know exactly where their funds are or what the next steps are, and that’s where we come in to kind of walk ‘em through that process. We’ve kind of seen it all, from liquidity issues of not being able to pull their funds out right away, to a myriad of different things.
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JOSH: We’re usually able to overcome those. Remember one client we had, we called in to her, I think it was a 403(b) that she was rolling over. And just for most of those 401(k), 403(b), you just call in and say, “Here’s what I want to do,” and then they give you the next steps. Well, in this case they told her, “Okay, that’s great, we can get this started for you. But there’s a 120 day waiting period.” And that is so far the longest standard waiting period I’ve come across, 120 days is outrageous. But in this case everything was fine, it just took longer to get everything in place.
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JOSH: Luckily, we had the plan in place, we knew what was gonna happen, we knew the dollar amounts, we took a few precautions while we were waiting for that money to come over. And everything worked out just fine. But it just kind of circles back to knowing what you have in retirement or knowing where you stand with all of your different accounts. Sometimes it’s gonna be next day that you get to bring everything over, sometimes it’s gonna take longer and just understanding the liquidity of what you currently have and what you’re trying to get to in retirement.
MIKE: Here’s a simple graph if you can picture it in your mind.
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MIKE: Now, if you’re driving, half picture it in your mind, let’s still drive safe, but hopefully you can understand this idea, diversify by purpose, not just by a risk with the investment triangle. The investment triangle suggests that you’ve got, so a triangle with three different traits. The first one at the very top I always put is growth. We like investments to grow, okay. On the bottom left you’ve got liquidity. Liquidity is nice, right? Like to be able to pull our assets out, unlike that 403(b) that you were talking about.
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MIKE: And then on the bottom right you’ve got principle protection, okay. The problem is, pick two. Any given investment only offers you two of the three. You can’t have your cake and eat it too. And the trouble that I have seen throughout the years of doing this is most practices that I’ve noticed and observed pick two and then rally around those two for their entire practice. For example, growth and liquidity typically are practices that want to keep you all at risk with an AUM play.
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MIKE: It’s diversify your assets, you can pull your assets out with the four percent rule, everything is fine. And we’ll just keep managing your assets, value investing or whatever it may be. Well, that goes against the first principle of retirement planning, draw income from principle guaranteed sources. Can’t do that. You can’t do that, but they’ve built their practice around that.
CAMERON: And many times clients may not understand that they’ve been setup that way and they don’t realize that they’re fully exposed in that growth and liquidity. They don’t know that they don’t have any sort of protection.
MIKE: And these are the securities guys, good people, very smart people, but they’re security guys and they believe that they’re the best thing since sliced bread.
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MIKE: And that’s okay. They’re very smart, they’re very good at what they do, but you don’t put all your eggs in one basket and this would be defined as all your eggs in growth or liquidity basket. We’ve got some fun statistics on that that we’ll be talking about that come from Bloomberg later on in the show today. But to continue on the conversation, let’s talk about the insurance guys. The other half, dare I say, of the financial world. Growth and principle protection, we already talked about an income annuity. But how ‘bout that? We’re gonna guarantee your income for life and it’s gonna grow out seven percent. Hallelujah. No, that’s not what we really, let me say what actually is happening.
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MIKE: Your account’s gonna grow around what I’ve noticed to three percent of accumulation value, sometimes four percent on a good year. But they’ve sold you on the ghost account that is gonna grow at a guaranteed seven percent or greater. And it grows to this beautiful number and you think you are on the gravy train. And then the actuaries who know your life expectancy divide it by the number that they decide. It’s an arbitrary number that divides it and then lets you know how much you’re actually gonna do. If they have control of an arbitrary number that defines your income, they could guarantee essentially whatever they want, it doesn’t matter. Because they have control of the end figure.
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MIKE: Which is that arbitrary number, it’s a step most people don’t connect and they just glance over that. Which is why when we have these calls with our clients, and we break down their actual performance, they are typically livid. Growth, principle protection. Beautiful thing, every plan needs it. But maybe not the income annuity play. That’s all I’m suggesting. Liquidity and principle protection, I don’t know a practice that surrounds that one, other than when you go to your bank, your bank is gonna say, “Hey, it’s good to have a savings account.” I think we can all get behind that though, so.
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CAMERON: Yeah, yeah. Oh, sorry Josh.
JOSH: Go ahead, yeah, yeah. [LAUGH]
CAMERON: Wait, I was just gonna say, yeah, you know, we encourage our clients to have an emergency fund set aside and that might be in that category. You know your retirement’s not gonna be won or lost based on the savings rate of your emergency fund, but it’s important to have there, and so that’s kind of the plug for that one.
JOSH: And so, just with that triangle that you got there, Mike, that just kind of circles back to the diversify by purpose, not by risk. With our plans…
MIKE: I mean, you gotta diversify by risk, just not have that the only factor.
JOSH: Right, right. And that’s exactly what you were just saying.
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JOSH: Each of these different companies you outline is gonna have, they’re gonna focus on one side of the triangle, where they have two of those principles, not all three of ‘em. It’s important to incorporate some investments that have all three. Not necessarily one investment that has all three points, but multiple investments that have two, so you overall can encompass the whole triangle.
MIKE: Correct. Think of a football team, and Thanksgiving, football, okay? Go Seahawks. I don’t care where you are in the nation, listening to this show right now, Go Seahawks. But [LAUGH] let me say this way, can we have all quarterbacks on your team?
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MIKE: It would never work. I feel bad for some teams, I won’t say which ones, that seem to have no offensive line and the quarterback scrambles every single play. That quarterback is essentially like most people’s retirement plan, where it’s a one trick pony, and they hope they can make it.
CAMERON: Throwing a hail Mary.
MIKE: Throwing the hail Mary, my goodness. Let’s see who catches this. But when you have an offensive team where you’ve got your, I’m doing this analogy on the fly, by the way, but I think it’s gonna work. Walk with me through this. You’ve got your offensive line, your principle protection. Oh, what a beautiful thing. And they can push the people down, they can work with that, but you’re protecting the quarterback.
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MIKE: The quarterback, and then you got your running back, and basically the people that gets the yardage. That’s your growth. So, you’ve got your principle protection, you’ve got your growth, but the quarterback and his audibles that tend to happen, maybe is that your liquidity? Kind of a weak analogy here, but what I’m saying is, when you bring ‘em all together, when you bring them all together you got a complete team. When you have growth and liquidity as your long-term risk play that you don’t need to touch for 20 years, you can handle the risk that it brings.
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MIKE: When you have growth and principle protection and you’ve outlined for 10, 15 years or so, 20 years, whatever you want. No income riders, I’m suggesting to you, mathematically speaking, but whatever you want, that’s fine. Then you’ve got income from a reliable source, a principle guaranteed source. And then you’ve got your liquidity and principle protection for when life happens, when there’s a new roof that’s needed, when the water heater breaks, when you need a new car, whenever life happens, you have it all set up so you’ve got your team organized to just keep going.
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MIKE: Vince Lombardi, didn’t he say, “Just get four yards on every play and you’ll never lose.”
JOSH: I think we need to come up with a new segment where we give you obscure sports references and you create some kind of financial analogy out of it.
MIKE: Oh, that’d be the end of me. And let’s just revisit, we haven’t even finished the third principle here, but it goes to show how important this is. The third principle is to use a distribution plan, not an accumulation plan like the pie chart. A distribution plan maps out down to the month net of tax how much you can spend for the rest of your life.
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MIKE: Most people refer to this as a bucket strategy, though the most popular book on the bucket strategy I don’t believe in. Changing three different buckets around like a juggling act, I think is not a sound financial plan. And I think it flies in the face of stability.
JOSH: It makes things complicated too, right, when you’re trying to make things a little more simple.
MIKE: Yeah. [LAUGH] I think I would call that collusion, not in the term that it’s been politically used, but collusion with the definition of when you try to accomplish something and get the opposite effect of what you were trying to accomplish.
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MIKE: That three-part bucket strategy, I believe accomplishes the opposite of what it’s trying to accomplish. The pie chart play, maximum growth but taking income, this is sequence of return risk. It accomplishes the opposite of what you want to accomplish. Which is you’re devastating your plan by taking the income and compromising the gains on the up years while you accentuate the losses in the down years. Collusion plagues the financial industry, especially in financial planning. We do it to ourselves unbeknownst to us.
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MIKE: Yet, when you follow the principles that govern proper retirement planning, you avoid it. It’s a beautiful principle-based approach and we use math to calculate those plans. When we wrote our own algorithms to be able to do so, we called it a safer distribution plan, but here’s a quick summary. Again, the principles of retirement planning. One, draw income from principle guaranteed sources. Two, diversify by purpose, not just by risk. And three, use a distribution plan, not the pie chart guesser. If you do that, you are set up with statistically, according to our research, and we do a lot of it.
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MIKE: Statistically speaking, you have the highest probability for successful retirement. These principles got our clients through 2008 without an issue. These principles took 2000, ’01, and ’02, those retirees sailed through unaffected. This is how retirees need to be doing it. We had an interesting meeting, this was years ago. Actually, I say we, Brian Decker had the meeting, I was not there. But I do want to recount what had happened. We were, and I can’t say names here, want to have some privacy, but we did have a wonderful meeting with a president, I’m just gonna say this.
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MIKE: A president of one of the largest banks in the world. He was retired, he was a friend of one of our clients who kept saying, “You gotta see this, you gotta see this.” Invited him to one of our dinner events, invited him to a classroom event. He didn’t want to be bothered by all that. He came into our office, he actually just walked in, frankly. He just said, “Hey, want to talk to Brian, so-and-so said I need to talk to you guys. I’ve heard about there’s some great plans, something you guys are doing. You got 15 minutes.” Brian happened to have some time there, and so they sat down.
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MIKE: And 90 minutes later he stood up and said, “I knew the four percent rule didn’t work; I knew the pie chart was not a distribution plan. This is what all retirees need to be doing.” It was such a fun visit. Now, we later on ended up working with him, which was a fun situation. And here’s-obviously when you have over five million dollars and he had millions of dollars, a little bit different plan than the basic plans that we put together. But regardless of your wealth, whether you have 500,000, five million, or 50 million, or 500 million, the principles stand true.
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MIKE: Draw income from principle guaranteed sources. Diversify by purpose, not just by risk. And use a distribution plan, not the pie chart guesser. If you want to learn more about this or talk to one of our purebred fiduciaries, we are welcoming visits. We’re not open on Thanksgiving or the day after Thanksgiving, but we can schedule around the holiday festivities. But call us, (833) 707-3030. There’s a reason why we’re in multiple states and growing.
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MIKE: People are resonating with this and they didn’t even know it was an option to them. (833) 707-3030 or go to DeckerRetirementPlanning.com and you can click the button, ‘Get Started’ on there so we can reach out to you and then schedule the time to visit with one of our purebred fiduciaries. People that are legally bound to do what’s in your best interest.
CAMERON: And you don’t even have to live in the states that we currently have offices, we can do virtual meetings as well, and we have several clients that have really appreciated it. It’s the same, you know, distribution plan set up, it’s the same level of relationship building.
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CAMERON: And we have many clients in other states who sometimes clients plan with us within the state move away and continue to work with us for the love of the relationship and the safer distribution plan that they have.
JOSH: The nice thing is, the math stays the same no matter which state you’re in. Sometimes it gets a little bit weird in some of the states, but for the most part the math is the same no matter where you live.
CAMERON: That’s right, Josh.
MIKE: Sure. So, let’s, I want to cross-reference this, if that’s okay with everyone listening right now. I guess you don’t have much of a say, ‘cause I’m a voice on your radio, [LAUGH] but we’re gonna cross-reference this with a fun article that The Motley Fool put out. Three pieces of dated retirement advice that you should ignore.
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MIKE: Let’s talk through this one. The first one is, you need a million dollars for retirement. At least that’s the claim. And the background of the claim is for decades a million dollars was the benchmark for retirement savings. And then you just pull four percent from that and you should be fine. Now, we’re gonna get into the four percent rule later on, though what’s interesting is person after person, family after family, are coming into our office with less than a million dollars, whether it’s 500,000, 700,000, 350,000, with a pension.
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MIKE: Whatever the situation is, and they’re doing two things. Retiring before they thought they could and getting more money than they thought they could.
JOSH: I just want to add to that, I see, I can’t even count how many distribution plans and retirement plans we’ve put together below a million dollars. And even a lot of those have funds or income that they can set aside to give to their kids. It’s not just that they’re being able to retire sooner with more money, but they’re also able to set up some kind of a legacy for their families.
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CAMERON: You know, they’ve been frugal throughout their lives and they realize, you know, once they actually see the numbers, “I don’t need all of that income to live on, why don’t we go ahead and earmark some of that as legacy funds.” Which is what you’re talking about. And it’s such a cool thing to see.
JOSH: Right. And every situation’s gonna be different, everybody’s gonna have a different set of requirements that they want to meet and different priorities. But for the most part, I mean, it’s crazy to me to see that, that a million dollars needs to be the benchmark, I don’t think that’s true for a lot of people.
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MIKE: It depends on how much you have and how much you need. And your needs are different than someone else’s needs. If you want to learn more about this you can go to DeckerRetirementPlanning.com and there’s a section specifically called, ‘A Safer Distribution Plan.’ We break it down for you. The bottom line though is, don’t live off of other people’s standards. You’ve got your own standards, you’ve got your own lifestyle, only you can know if it’s gonna work or not, and when we can run the numbers you can make an educated decision that’s mathematically backed on what your retirement looks like.
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MIKE: That’s probably one of the coolest holiday gifts you could give to yourself, is understanding, “Okay, I think I’m five years away from retirement, what does it look like? I think I’m three years away from retirement, I want to see what things are looking like right now. Want to see what I need to adjust with my portfolio, so if we have a destructive December, my retirement isn’t pushed back for years.”
CAMERON: Or, “I’m already in my retirement, you know, I’m in this pie chart phase. Can I see what this would look like? I’ve been, you know, afraid to take too much or not knowing how much I can take.”
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CAMERON: We have a lot of clients who come in who are well into their retirement years, and they love that peace of mind they get with knowing, “Okay, yes, now, you know, we can kind of relax a little, we have the distribution plan set up.”
MIKE: You remember that Klondike bar commercial years ago? What would you do with a Klondike bar? What would you do with a thousand extra dollars a month? What would you do without any fear of retirement? We could play this game for a while. What would you do with fill-in-the-blank? When your math-based, principle-based, you get clarity. It’s a kind of clarity that I believe most other financial practices cannot offer. That’s what’s so fun about that introductory visit, it’s a 2,000 dollar value, I should say.
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MIKE: We don’t charge people for it, but it offers so much value, so much clarity. It’s a really special visit. When people come and we talk about the principles of retirement planning, we talk about the market headwinds that retirees face, and then we talk about the solutions that are there. Should you want to proceed at that moment, and it seems like it’s a good fit, then we decide together we want to proceed. But if you don’t want to, there’s no hard feelings. At least everyone in the room that attends knows mathematically what their retirement looks like. It’s a beautiful thing.
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MIKE: Call us if you want to talk more about that. (833) 707-3030, or go to DeckerRetirementPlanning.com and you can click on the button, ‘Get Started,’ and decide what you want to talk about. We’ll reach out to you within one business day. Let’s talk about the second rule, that [LAUGH] according to Motley Fool, and I wholeheartedly agree with this, you should ignore. The four percent retirement withdrawal rule, which by the way, was debunked by William Bengen in 2009 after it destroyed most or a lot of people’s retirements after the ’08 crash.
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CAMERON: That’s the guy who invented it, right Mike?
MIKE: That’s the guy who invented it, who has discredited it and said it doesn’t work in flat market cycles and it’s dangerous and he stopped using it and you should not use it either. That’s pretty profound. I mean, that’s a big deal. But yet, that’s well, yeah, I was gonna go there with an automotive company and some of the idea, but I don’t want to get political in anything that matter.
JOSH: Can I just ask, Mike?
JOSH: In your opinion, if the guy that built it, the guy that created it has debunked it and said, “No, don’t use it.” Why do you think people are still using the four percent rule today?
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MIKE: This is more of an emotional intelligence answer, but I think it’s the most legitimate answer that I could give. When people are familiar with a certain environment, they are going to want to stay in that environment. It’s how it is. Change, I’m gonna see if I can pull up this quote here, but essentially change is a terrible thing that we avoid wholeheartedly, we do not want to have change. Do not want it. This is a quote from Dr. Himmer, he’s an emotional intelligence coach, corporate coach, out of Washington state.
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MIKE: But I thought he, in one of his models, he did some very insightful. He says, “As a general rule, humans would rather be ruined, crushed, belittled, or abused than change or even be asked to change. In fact, most of us,” and keep in mind, I’m not talking about the extreme situations here, I’m just saying change within yourself, okay. “In fact, most of us are only willing to question five percent of our present knowledge at any given point.” And that’s according to a Ken Wilber study.
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MIKE: This term, I know, is ubiquitous in conversation and usually expressed by those who prefer the status quo to the energy and effort required to discover something they don’t know. When people enter into their twenties, and they start investing. The ideal situation for them is a pie chart, because it’s a good accumulation tool. It’s easy to understand, you diversify and you grow. How in the world can someone feel comfortable to leave the investment strategy that they’ve used for 30-plus years?
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MIKE: And be okay to move to something that, even though it’s better for them, it’s still asking them to change their investment mentality.
CAMERON: Well, it’s hard to and so many people are saying the same thing, you know, you hear others quote the four percent rule and you’re like, “Well, if that person over there is saying it, you know, and this person over here, why shouldn’t I say it too?” And you know, it just takes a different mindset to break that mold. And like you said, to say there has to be a better way.
MIKE: So, let me continue on with this. Richard Row [PH] said, “Life is divided into two parts, first half and second half.”
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MIKE: “Change means you cannot travel the second half of life using the tools of the first half.” Without a new toolkit, we labor with the same survival habits that were designed or were developed from early childhood or in this situation, your accumulation phase, and taught by us a family of origin, your accumulation financial professional. Too many couples, teams, organizations are stuck functioning in their relationship at an adolescent maturity level, stumped in their growth because they fear change. Too many retirees are stuck in the accumulation mode because they fear change.
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MIKE: Retirement is one of the most stressful transitions that any human can take. So, it makes sense that the most popular retirement plan strategy is the one that asks people to change the least.
JOSH: One of my favorite books that I read it a couple times a year I think, it’s called Who Moved my Cheese?
JOSH: And one of my favorite quotes in that book is, “What would you do if you weren’t afraid?” And I think that kind of goes right in line with that, with like you said, it’s the fear of change.
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JOSH: And that’s the reason why that rule persists. And I think it’s something people just need to ask themselves if they find themselves stuck in the situation where they’re listening to the principles and they say, “You know what? Maybe I should adjust something.” Think about what you would do if you weren’t afraid.
MIKE: What if, I’m gonna throw out a big what if. What if you could lower your fees, lower your risk, and increase your income in retirement? What if that were possible?
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MIKE: I’m not saying there’s a magic pill out there. There’s not. It’s just math. It’s putting in a little bit of extra work and doing a holistic and complete approach to retirement planning. Sure, we challenge the industry at this. Sure, we’ve disrupted a lot of other financial practices in doing this. Mathematically speaking, what we are offering is better than the four percent rule or the other strategies.
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MIKE: Unless you’ve just accidentally, and I say accidentally because if you think you’re a genius at stock picking in a 10 year bull market, I just, let’s see how the cards fall over the next 10 years.
JOSH: You’re in a crowd of geniuses, right?
MIKE: Yeah, you’re in a crowd of geniuses. We’ve had a great 10 year bull market and I honestly hope that you all were able to participate to the fullest of this bull market, it’s been a wonderful ride. My hesitancy is for what may come next. What may come next may be detrimental and are you prepared for that? Our clients are, are you?
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MIKE: What if, and this comes from the Moody’s rating system of market triggers that could trigger the next downturn, it’s just one pinprick that can start the contagion. And I’m gonna go to the severity of shock that would happen, escalation in global trade war. If that falls apart, it could have significant ramifications within us. Within our economy, within our markets, within your retirement investments.
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MIKE: A central bank policy error, if they do it wrong, that could have some significant ramifications. No Brexit deal could have a rippling effect across global economies. A European debt crisis, Brian and I, when Brian was on the show years ago, and I would talk about this all the time with PIG. Portugal, Italy, Greece, Spain, these countries could bring down the global economy by their debt. Is that a risk you’re willing to take? And if you’re, according to Bloomberg here, let me pull this up real quick, and we’ll talk about this in just a moment, but I want to throw this out there.
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MIKE: In regards to the third quarter, what we just left here, almost one-tenth of boomers were entirely in equities during that quarter. That’s high risk. Is it worth it? If the Fed chairman, Powell, was removed, that would have an economic, or should have an economic shock within what’s going on. Oil prices could shock our retirement. Could shock the economy. Now, the likeliness, the Fed chairman has a very low likelihood of being removed, statistically speaking or probability speaking, I should say.
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MIKE: But escalation in global trade war, central bank policy, or oil price shock are higher likelihood of happening. When it comes to understanding retirement planning, what if there was a better way? What if a small change that still you could understand and comprehend provided much more features and stability in your retirement? That’s what we offer every week on this show.
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MIKE: That’s what we do at Decker Retirement Planning. If you want to talk more about this in person, we would love to visit with you. (833) 707-3030, you can visit us in one of our offices. We’ve got two in Utah, Salt Lake and Lehi. We’ve got three in Washington, Seattle, Kirkland, and Renton. We’ve got one in San Francisco, right downtown. We’ve got offices available and we also do digital virtual visits over the phone, Skype, FaceTime, whatever it may be.
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MIKE: But when it comes down to your retirement, the principles are here to help you transition from the accumulation strategy to a distribution strategy. We use a math-based approach with these principles to give you the stability that you want. To increase transparency, to increase retirement income, to lower risk, to lower your fees in most situations, most all, I can’t think of one client that had to pay more fees.
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MIKE: It’s built for retirement. It’s built for what we call a safer retirement. Call us. (833) 707-3030, when you call in they’ll gather your information, our call center. And so, when on Monday we can call you and schedule the time for you to visit with us. You can also go to DeckerRetirementPlanning.com and read a little bit more about this. Education’s critical. We have different books that are available online for free at our website, to where you can read more about what we’re proposing here, that’s research-backed, suggesting this is the optimal retirement plan for most all Americans.
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MIKE: And then from there if you want to click ‘Get Started’ on the bottom of the page, we’d love to visit with you at no cost to you. We ask that you’re 55 years or older, and have at least 300,000 of assets saved up for retirement because we are here to quantify something for you. (833) 707-3030 or go to DeckerRetirementPlanning.com. Let’s continue on the path though. Josh, did I answer your question?
JOSH: Yeah, definitely.
MIKE: A little longwinded.
JOSH: That’s, yeah. [LAUGH]
MIKE: You can hear my passion about it. It just, growth mindset or fixed mindset. Fixed mindset won’t let you or it’s gonna force you to use the tools you used in the first half of your life, to the second half.
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MIKE: And it’s just, the toolbelt is not equipped for what you need.
JOSH: Right. Yeah, I think that was perfect.
MIKE: So, let’s finish this segment up. The Motley Fool’s third point here is, the myth that you should ignore is you’ll spend 70 to 80 percent of your pre-retirement income in retirement, that may happen. That may be true. But in most situations it is not, and you can’t bank on that. You just can’t bank on it. I mean, Cameron, you deal with this all the time.
CAMERON: Yeah, you know, we’ve talked about this in past shows. A lot of clients have accumulated primarily in pre-tax accounts.
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CAMERON: And I think that was with the understanding that taxes, you may draw less income in retirement, your taxes may be lower. Taxes and interest rates seem at an all time low, where are they going from here? It only seems up. We just can’t bank on that you’ll spend 70 to 80 percent of your pre-retirement income in retirement. Sometimes it’s less, but many times it’s more. A lot of clients, like we’ve said previously, will see that gross dollar amount say, “Oh look, I have 500,000. Look, I have 600,000.”
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CAMERON: And on a year-to-year basis, factoring in growth, factoring in a changing tax environment, often underestimate the long-term tax ramifications of your 30-year retirement.
MIKE: Mm-hmm. Safer Retirement Radio listener, let me ask you a question here. If time is money, and that’s a situation of where you’re accumulating assets, you’re making money, time is money. When you’re retired, wouldn’t the opposite be true? If you have more time you may want to spend more money. You may want to do more things. Is that true to you?
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MIKE: Are you gonna want to spend your retirement doing chores around the house or are you gonna want to spend your retirement traveling, going out to eat, picking up new hobbies, enjoying your life with these different adventures? Which camp are you in? If you’re in the latter, I would suggest that this idea of 70 to 80 percent is not something to bank on and that you want to plan on the same or more of what your pre-retirement income is.
JOSH: I think part of that, I mean we talked about it, I think it was last week, where a lot of people go into retirement expecting to reduce their expenses.
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JOSH: And then it turns out that they need to help an adult child with something or they want to make a gift to somebody. Something like that. There’s always gonna be something that comes up, but it’s just anticipating that and not banking on the fact that expenses are gonna go down.
CAMERON: You know, and often clients will come into retirement, you know, you’re young, like we started with the show, you’re young, you’re full of energy, and often want to spend more at the beginning of your retirement when you have the energy to do a lot more traveling, trips, bigger purchases that, you know, are more physical in the early years.
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CAMERON: And how do you account for that if you don’t have a safer distribution plan? It’s pretty tough.
MIKE: So, here’s something to point out as well that I’ve noticed throughout the years. Those who plan to have 70 to 80 percent of their assets in retirement, whether they work with us or not. When they have the realization and it’s mostly not, we don’t like to work with clients that are gonna try and strap on the belt real tight, buckle down, and just get through retirement. It doesn’t seem like a… it’s hard for us to endorse that. Unless there’s a good reason and we talk through that.
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MIKE: But for most people who just think they can buckle it down, what typically happens is when they realize it’s not working, they need more money. They typically start taking more and more risk. More and more risk is appropriate in your twenties or thirties, and then as you get older you take less risk. When you’re in your retirement age, whether you are retired or near retirement, it seems wrong, is all I’m gonna say. It seems wrong to take more risk, because if you’re wrong, it’s more devastating.
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MIKE: Keep that in mind. That’s the full part of the article. I think Motley Fool did a great job with that. They’ve got some great resources, it’s a fun website to get some financial data, fun guys over there. It’d be fun to have ‘em on the show one time. Maybe we’ll see if they can coordinate with that. And really when it comes down to these risks that retirees are taking, what we want to accomplish is a safer retirement. Retirement stability. Not everyone has the luxury of a pension. My grandfather, a Boeing engineer, great man, had a Boeing pension.
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MIKE: And it gave him everything that he needed. So, their other assets were simply play money. And they invested accordingly. Their pension, principle guaranteed source. I know Boeing’s been in the news for a while, but I don’t think they’re gonna be going out of business any time soon. I think they’re a stable company, they’re a great company. Love Boeing, from a family standpoint as well. They took care of my grandparents with that pension. But they drew income from principle guaranteed source, they diversified by purpose, which was their assets were meant to be for legacy and for play.
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MIKE: Great. If that’s your situation, by all means do that. It follows the principles of retirement planning. What was I getting at? I got a little sidetracked here on this, but when it comes down to the risk that people are taking, are we aware of the risk? The 10 year bull market we’ve just experienced in retirement has set, I believe, unrealistic expectations for the next 10 years. Now, we were saying, you know, cycles go up or they go flat. It’s just history.
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MIKE: It’s a great situation, but let’s be prepared for what may come in the near future.
CAMERON: You know, just to wrap up that one. One thing I did like from that report, it mentioned that more than a million workers contributed to a Roth account, almost a tenfold increase from a decade ago. And if you remember from other shows, Roth is the after-tax qualified contribution that you can’t pull until 59 and a half, but grows and distributes tax free.
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CAMERON: So, if you are, you know, early on in your retirement or you plan to keep contributing, consider the Roth as it’ll have downstream positive effects for you.
MIKE: Oh, it’s a beautiful thing. And this seems basic, but some people are pleasantly surprised with this. A Roth IRA is not bound to RMD regulation. At least right now it’s not.
CAMERON: Or Roth 401(k).
MIKE: Or Roth 401(k). You are not required to distribute assets after 70 and a half years old. Huge benefit. There’s a lot of clients who had they not come into visit with us, were set up to be forced into the highest tax bracket in their retirement because of their RMD.
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MIKE: Why pay more in taxes if you don’t have to? I’m not saying avoid the IRS, I’m saying deliberately use tax minimization strategies so you’re not painting yourself into a corner. That’s all I’m suggesting. When it comes down to it, folks, though and it’s been a fun time so far on this show here. Just always remember the principles of retirement planning. Math is one plus one is two. Never will be disputed. Two plus two is always four. That’s it. But when you incorporate the principles, then you have a structure, you have guidelines to check the quality of your plan.
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MIKE: The first principle, just as a fun reminder, draw income from principle guaranteed sources. We’re not suggesting that you have to lock up assets for the rest of your life into an income annuity. What I’m suggesting is if you for five, 10, 15, or 20 years, we typically recommend 15 to 20 years, that you’re drawing income from principle guaranteed sources, whatever that means. Just has to be principle guaranteed to avoid sequence of return risk. The second principle is diversify by purpose not just by risk.
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MIKE: It’s important to know what you have to work with as well as how to work with what you have. And that reflects with the investment triangle. You’ve got growth and liquidity, those are long-term risk investments. You’ve got growth and principle protection. A great situation to draw income from. Liquidity principle protection. Great place to put assets that are meant to help you for emergency situations. Emergency cash, discretionary cash, rainy day funds, whatever you want to call it.
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MIKE: And then the third principle is use a distribution plan, not the pie char guesser. That simple. The pie chart, and we talked about this a little bit before, is an accumulation strategy, great for you twenties, thirties, and forties. But when you’re getting closer to retirement, here’s a fun fact, a 40 percent correction in the market, according to Morningstar’s average mutual fund performance suggests that it takes six years to recover.
CAMERON: That’s just to get back to where it was, right?
MIKE: Just to get back to where you were.
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MIKE: If you are wrong, if you elect for the pie chart and you are wrong, Morningstar is suggesting you’re delaying your retirement for six years. Is that risk worth it to you? Cameron, you leaned forward to the microphone.
CAMERON: [LAUGH] I was just gonna say, you know, it goes with the theme in the show, you know, if you’re already in retirement or are soon going to be in retirement, could you wait six years? Could you say, “Well, I’ve been drawing four percent. Oh, it went down 40 percent, I’d better hold off for six years and not draw a dime.” That’s just not gonna happen.
MIKE: It’s not worth the risk. Math-based, principle-based approach make up a safer retirement.
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MIKE: And if you want to take us up on that offer it’s at no cost to you. You can call us at (833) 707-3030 and you’ll get a safer distribution plan. We’ll have an open conversation about a safer tax plan. We’ll talk about social security. We’ll talk about your portfolio as it is and give you a portfolio review from a purebred fiduciary standpoint. We’re legally bound to do what’s in your best interest, and we built the infrastructure to be able to honestly do so. A fiduciary without a tool, it’s like a Boy Scout without a map and compass. I mean, they might know the terrain, but they can’t guide you effectively through it. We built our map and compass to navigate retirees through their retirement successfully, it’s a beautiful thing.
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MIKE: Call us. (833) 707-3030, we’re wrapping up the show right now, but at no cost to you. Or you can go to DeckerRetirementPlanning.com and there you can click the button ‘Get Started’ and let us know what you want talk about. We’d love to have that conversation with you. We’d love to have from a purebred fiduciary standpoint, we’d love to have that open discussion to enable you to have or to get the transparency that you deserve as well as have a safer retirement to enjoy yourselves. Josh, Cameron, it’s been a pleasure. Thanks for being on the show today.
JOSH: Thanks, Mike.
CAMERON: Oh, great show. Thanks, Mike.
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MIKE: Just a quick wrap-up, we’ll be on the air same time, same place next year. Podcast listeners, you’ve got the advantage as we do post the show Fridays at 10:00 AM Mountain Standard Time, so you can catch it there on whatever podcast that you prefer, on whatever device that you like to use. I do have a fun little announcement as well, that this week we’ll be launching on our website, under the book tab, so Safer Retirement Education under the books, a safer retirement series. A safer retirement for the engineer, which was written for engineers.
RR S3 E22 THREE MYTHS RETIREES SHOULD AVOID [00:57:30]
MIKE: A safer retirement for the hardworking American. And a safer retirement for the business professional. We wrote these books for you, addressing your specific retirement needs. And they’ll be for free download on our website this week. You can go to DeckerRetirementPlanning.com to catch that. You can buy it on Amazon for 20 dollars or get it for free on our website. We’re fine either way. Thanks for tuning in to the show today, it’s been a pleasure. And if nothing else, just make sure you get the transparency that you deserve.
MALE: I should say same time, same place-
Decker Retirement Planning Inc. is a registered investment advisor in the state of Washington. Our investment advisors may not transact business in states unless appropriately registered or excluded or exempted from such registration. We are registered as an investment advisor in WA, ID, UT, CA, NV and TX. We can provide investment advisory services in these states and other states where we are exempted from registration.