Funding Discretionary Spending: EDU #2533

14 snips

Aug 13, 2025

The conversation dives into Robert Merton's retirement income framework, comparing discretionary spending strategies. The hosts emphasize the importance of liquidity and principal protection for funding those treasured 'Go-Go' years. They critique the notion of sacrificing passions during market fluctuations and explore the potential pitfalls of high-risk investments for non-essential expenses. Listeners gain insights on how to balance guaranteed income with aspirational spending, making retirement enjoyable while safeguarding their financial future.

Ask episode

AI Snips

Chapters

Transcript

Episode notes

INSIGHT

Annuities Are Insurance, Not Investments

Annuities are insurance products, not investments, and converting assets to annuities replaces principal with a lifetime income stream.
Treat annuities as apples vs. fruit: they solve longevity risk but change liquidity and control.

ADVICE

Protect Go-Go Years, Don’t Treat Them As Cuttable

Do not label go-go retirement spending as easily reducible; protect years when health and mobility allow big experiences.
Prioritize funding go-go years so you can actually enjoy them while physically able.

ADVICE

Keep A Liquid Go-Go Fund

Keep a dedicated liquid, principal-protected 'go-go' fund you can spend freely without timing constraints.
Decide your go-go dollar amount and keep it accessible so you can spend when opportunities arise.

Get the Snipd Podcast app to discover more snips from this episode

Get the app

Chris’s Summary
Jim and I continue discussing funding discretionary spending in Robert Merton’s three bucket retirement income framework from last week’s article, focusing on how his flexible and aspirational spending categories compare with our philosophy. We explore why annuities are insurance products, where TIPS fit into income planning, and why funding Go-Go years demands liquidity and principal protection. The conversation also examines how Minimum Dignity Floor expenses differ from discretionary goals and why tying those goals to high-risk investments can be problematic.

Jim’s “Pithy” Summary
Chris and I pick up where we left off last week, taking a closer look at Robert Merton’s second and third retirement income “buckets” and how they’re presented in the article we’ve been dissecting. While I can see value in some of the thinking, I have a hard time with the notion that your passions and big adventures should be considered optional spending that you cut when markets turn. These Go-Go years don’t last forever, and I’m not about to tell someone to shelve an elk hunt, delay a trip to see family, or skip the project that brings them joy because of a short-term dip. That’s not my idea of funding discretionary spending.

We also look at the tools Merton and the article highlight for flexible spending—TIPS, for example—and how those compare with keeping your discretionary funds liquid and principal-protected. On paper, some of these options sound flexible, but real life rarely plays out as neatly as a model suggests. If the market timing works against you, that “flexibility” can disappear fast.

Then we’ll get into the aspirational spending—the so-called extras—and the suggestion to tie them to higher-risk assets. We share our thoughts on matching the right investments to the right spending, why emotional comfort matters in retirement planning, and how your Go-Go years deserve a funding approach that lets you enjoy them while you can.

The post Funding Discretionary Spending: EDU #2533 appeared first on The Retirement and IRA Show.