Retirement Answer Man

Making retirement decisions brings plenty of questions and over the next month, I’ll be tackling your retirement questions. While I love answering your questions, I also enjoy hearing your thoughts. In today’s episode, there are a couple of questions that I’d love to hear your feedback on. If you have any thoughts to share with other listeners please respond to the 6-Shot Saturday newsletter. If you’re not signed up, head on over to RogerWhitney.com and scroll down to the bottom of the page to get weekly tips, news, and resources in your inbox every Saturday morning. Deciding to spend large sums of money in retirement can be unnerving Early on in retirement is when people want to have the most fun, but it can also be the most daunting time to spend money. Even if the numbers say that you’ll be ok financially, you can never be certain if you may need that cash when you’re 90. Making the decision to spend large amounts of money in retirement can be daunting.I got to thinking about decision-making recently when I wrote the biggest check I have ever written. This check will (hopefully) be an investment in my business, but it was still a difficult decision to make that took a lot of thought and counsel from others. How I employ my own decision-making tactics I actually practiced what I preached and used the same decision-making process that I teach on the show. I started with my vision by projecting where I want to be in the future. I thought about how this decision fits into my long-term goals for myself and my company. Then, I got to thinking about the result that I hoped for as well as the worst-case scenario. I seek the counsel of others Since I know I have blind spots in my own decision-making when it comes to myself and my business, I enlisted the help of others to bounce my ideas off of. I started with my wife, Shawna, then sought counsel from Nichole, and others that understand my situation. I encouraged them to challenge my assumptions and poke at my blind spots. We walked through alternatives and discussed opportunity costs. Ultimately, it was up to me to make the judgment call. I won’t know for quite some time whether I made the right decision, however, I know that the process that I used to make this decision was sound. With the right process, you can be secure in your decision making I share this with you, because you may be wondering if you should spend $30,000 to take an epic family trip next year, buy that vacation home, or RV across the country. The memories you create may be well worth the money, but you won’t know if you made the right choice until you reach the end of the road. Nobody can tell you what the correct decision will be for you, but if you work through your decision in an organized way starting with your vision then you’ll know that you made the best decision that you could. Speaking of big decisions, Wendy is trying to decide whether to increase her savings now that she and her husband will be empty nesters. Or should they continue to save for retirement at the same rate while taking time to travel and enjoy more of life now while they are both still healthy? Listen in to hear the details of her situation and then let her know what you think by responding in our 6-Shot Saturday newsletter. What would you do if you were in her shoes? OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [1:32] My process as I work through a big decisionLISTENER QUESTIONS [11:05] Daniel’s comment on needs, wants, and wishes and my response[14:22] A consideration on relocating in retirement[17:10] Travel now or increase savings and retire early?[20:50] Bond accrual structural strategy[22:24] A Roth conversion question[26:06] On retirement regretTODAY’S SMART SPRINT SEGMENT [31:46] Check out our decision-making worksheet in 6-Shot SaturdayResources Mentioned In This Episode Boomer BenefitsPODCAST - Deep Questions with Cal Newport Episode 402 - The Tax Toolbox with Andy PankoEpisode 416 - Retirement Plan Live: Why We MovedEpisode 426 - How to Plan Your Agile Retirement: A Feasible Retirement StrategyBOOK - Wooden: A Lifetime of Observations and Reflections by John Wooden BOOK - Born Standing Up by Steve Martin BOOK - So Good They Can’t Ignore You by Cal NewportBOOK - Unstoppable Teams by Alden MillsBOOK - Antifragile by Nassim Nicholas TalebBOOK - The Way I Heard It by Mike RoweBOOK - How to Decide by Annie DukeBOOK - Grit by Angela DuckworthRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

“In preparing for battle I have always found that plans are useless but planning is indispensable.” Dwight D. EisenhowerIke is reminding us that the plan is not as important as the process. It is the practice of planning that is critical to success. You’ll never have everything figured out since the perfect retirement plan doesn’t exist, but by planning and staying agile you will be able to correct your course along the way. This month we have gone from theory to practice to mastery. On this episode of the Retirement Answer Man show, you’ll learn how to optimize your feasible, resilient plan so that you can rock retirement. Have a feasible, resilient plan in place before trying to optimize Most retirement planning blogs and articles focus on optimization since optimizing retirement plans is the bling of financial planning. However, without first having an inspiring goal for your retirement, you wouldn’t have the hope of rocking retirement. It is important to start with a goal at the beginning to ensure that you build a feasible, resilient plan before trying to optimize your retirement plan. Remember that you create a retirement plan to help you focus on achieving the life outcomes that you have envisioned for yourself in retirement not to find the best Roth conversion strategy or qualify for ACA credits. Retirement tax planning is the best way to optimize your retirement plan There are so many ways that you can optimize your retirement plan that it can end up being an infinite pool of possibilities. So you may be wondering what the best way to enhance your retirement journey is. The biggest way you can optimize your retirement journey is through tax management. In retirement, you have more control over your taxes than at any other time in your life. This means that instead of planning your taxes from year to year, you now have the capability to plan for lifetime tax savings. Retirement tax management is not about avoiding taxes, instead, it's about timing your taxesYou can plan your withdrawal strategy to optimize for taxes not just for this year but in the future as well. By forecasting your tax rate over the next 5-8 years using a traditional withdrawal approach you can gain an idea of what your RMDs will be once you turn 72. From there you can work backward to see if it would make more sense to do Roth conversions and pay more in taxes now so that you don’t have to withdraw so much later on in life. Listen in to hear how working backward can ensure that you focus on where you are going rather than where you are now. Timing your Social Security benefit is another way to optimize your retirement plan Social Security timing is another area that is important to think through in an organized way. Once you understand your withdrawal strategy then you can analyze where your Social Security benefits fall into your pie cake structure. Establish a retirement plan of record Once again it is important to start with the end in mind. As you revise your retirement plan it is important to create an abstract with a summary of all the decisions you have made so that you can have a log of how everything plays out within the context of your thinking. This method will give you the framework to see how your decisions fit together over time. Every 6 months you’ll want to revisit your plan and ask yourself what has changed. Are your goals still the same? If not, then you can realign as needed. By revisiting your plan you can focus on the risks and opportunities that lie ahead. Try to set action items that focus on 1 or 2 of these risks and opportunities. This will give you an inspiring goal to work toward, the agency to achieve it, as well as the confidence to rock retirement. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [5:53] What can you do to enhance this journey?[6:12] Tax management is the biggest thing you can optimize[14:42] Should you try to get ACA healthcare subsidies?[16:21] Take a look at Social Security[20:55] The little conversationsLISTENER QUESTIONS [23:37] Why should you use your house on your net worth statement?[25:46] On using the strategic assumption of no inflation[28:17] A Social Security timing question[30:08] An observation on inflation[33:23] Using caveats on Roth conversions[36:34] How to report decreased income to MedicareTODAY’S SMART SPRINT SEGMENT [41:04] Map out the process that you want to take to walk through your strategy in a fresh wayResources Mentioned In This Episode Form SSA-44Episode 402 with Andy Panko - The Retirement Tax ToolboxLTCI PartnersRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

Now that you have come up with a retirement vision and learned to create a retirement plan that reflects your vision it’s time to make your plan agile. On this episode, you’ll learn why you need to have an agile retirement plan and how to make your plan resilient to the unexpected forces that could derail your retirement plans. Make sure to stick around until the end of the episode to hear BW talk about why it’s so important to master the fundamentals of retirement planning. Don’t get overwhelmed by retirement planning Over fast few months I’ve been working with a project manager to create an SOP (standard operating procedure) for Agile Retirement Management. This is such a huge project and it can be easy to get overwhelmed. But just like planning your own retirement can be complicated and overwhelming when you break the giant project into smaller actionable steps, it becomes more manageable. Walking through baby steps one by one takes away a bit of the overwhelm that can come with such a grand project. Creating a resilient plan will help you prepare for the unexpected  In the last episode, you learned how to turn your retirement vision into a feasible plan. But just like with any plan, it can be easy to knock your retirement plan off course. This is why it is important to create a resilient plan. Incorporating resiliency into your plan will help you to prepare for the unexpected. What could knock you off course on your retirement journey? There are many things that could derail your retirement. Sequence of return risk is one. The markets don’t provide the same returns each year and these ups and downs can greatly affect your retirement–especially if there are a few bad years at the beginning of retirement. Those bad years could easily knock your retirement plans off course. Inflation is another issue. As we discussed all last month, inflation over time can put a dent in your purchasing power. Unplanned life events have a way of sneaking up and catching us off guard. Illness, death, long-term care events, or children in need are further events that could impact your retirement plan. The most common disruption of retirement plans is you. You may simply change your mind. Since you are always changing your needs, wants, and wishes change over time. Listen in to hear how you can make your retirement resilient against all of these bumps in your retirement road. How to develop slack in your retirement plan It is important to have slack built into your system. Similar to the way that a very taut rope may break if you try to adjust it, we need to ensure that there is a bit of slack in the line of your retirement plan so that you can ensure that your desired life outcomes are feasible. When you press play you’ll hear how building a pie-cake can help you create slack in your retirement plan. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [3:08] You don’t need to get overwhelmed by retirement planning[5:05] You need to create a resilient plan to prepare for the unexpected[7:10] Why you need slack in your retirement plan[12:12] The difference between the return on your money and return of your money[14:32] How to build resilience into your retirement plan[25:27] How the pie cake can help you build resiliency in your planCOACHES CORNER WITH BW [32:45] Kevin’s experience with pivoting in retirementTODAY’S SMART SPRINT SEGMENT [40:39] Understand how much liquidity you have on your balance sheetResources Mentioned In This Episode Boomer Benefits DISC assessmentEnneagramRISA retirement profileRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

“Our mind is dyed with the color of our thoughts”--unknown. If this is true, then how are you thinking about retirement in the right way? To have confidence in your retirement plan you need to be thinking about the things that you can control and focusing on what has the biggest impact on your life. On this episode of Retirement Answer Man, you’ll learn how to create a feasible retirement strategy by analyzing your goals against where you are now. You’ll then learn about the three types of capital and how to build a net worth statement so that you can create a retirement plan of record. You won’t want to miss this important stage in developing your retirement plan, so press play now. Contrast your goal with where you are now  According to the latest goal-setting research, merely setting goals alone isn’t that empowering. It is important to cast your vision; however, you also need to contrast your goal with your current state of affairs. This way you can see where the gaps lie. These gaps may make you uncomfortable, but acknowledging the incongruency will help you understand how far you need to go to reach your goals. This way you can also start collecting the little wins that inch you closer to your goals. The 3 types of capital to fund your retirement  To create a feasible plan of record, you have to examine the resources that you have to fund your spending. To do this, you need to understand the different types of capital available to you in retirement. The first resource to consider is your social capital. Social capital is the payments you receive from a collective program like Social Security or a pension. These are guaranteed payments for the rest of your life. You’ll need to have a good estimate of what those payments are and when they start.Human capital is next. You may not realize it, but you have used human capital as your primary resource for your entire working life. Human capital is the work you use to create income. Traditionally in retirement, this resource is absent, but many people now choose to work differently during, what I call, pretirement. You may choose to do a bit of consulting, open a small business, or do some part-time work for a few years. No matter how small the income may be, include it in your plan of record. Project when will it start, when will it end, how much you plan to make. Whatever human capital and social capital don’t pay for has to come from your financial capital. Your financial capital is simply your money. You will need financial capital to fill the gap between your retirement goals and your projected income. You can gain a better understanding of your financial capital by creating a net worth statement. Make sure you’re signed up for this week’s 6 Shot Saturday newsletter to receive a net worth statement template that you can use to create your own. How to know whether your plan is feasible To understand whether your plan is feasible you’ll need to create your net worth statement by listing your assets and your liabilities. Even if you have no debt, you’ll want to list your future consumption as a liability to understand how your assets and liabilities balance out. By comparing both sides of the net worth statement you’ll understand your fundedness level. Listen in to hear how I use two ways to calculate fundedness to see whether a financial plan is feasible. On next week’s episode, you'll learn how to make your plan resilient, so make sure to check it out. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [3:38] Contrast your ideal retirement with your current situation6:35] How to create a feasible plan of record[14:28] Your assumptions will be incorrect[18:03] How to know whether your plan is feasible[28:20] What does feasible mean?LISTENER QUESTIONS [30:10] Jim’s question on Social Security[34:05] Moving from a balanced fund to a stable value fund[38:30] Mark’s question about using I bonds in bond laddersTODAY’S SMART SPRINT SEGMENT [41:52] Take baby steps to create micro winsResources Mentioned In This Episode Social Security detailed calculatorLTCI PartnersRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

Retirement is a journey into the unknown that can be intimidating. This is why you need to build up confidence in your plan so that you can rock retirement. To build your confidence it is important to master the fundamentals which simply means that you must practice them over and over again.  Last week you learned to let go of the things that are out of your control and how to concentrate on working with the controllables by using an agile approach. This will give you the agency you need to prosper in retirement. Today we’ll focus on developing an inspiring goal for your future. Over the rest of the month, we'll explore the pathways to get you to your goal. If you are ready to learn how to rock retirement press play now. 4 roadblocks that could hinder fulfilling your vision With retirement on the horizon, you are ready to jump right in, but there can be some things that could hinder your progress. The paradox of choice Who do you want to be when you grow up? This is a challenging question when you are already in your 50s or 60s. You have competency and interest in many domains at this stage of life, so it can be hard to choose what you want for your future. Or you may feel that when you set your goals they are set in stone since there's not a long time to change course. Don’t worry about this because you will change your mind. Life unfolds in twists and turns and plans will change. Don’t let the paradox of choice paralyze you. Start retirement with a clean slate If you are like most of us, your life has been organized around your work or children. When you retire, your commute disappears and your kids are will have been sprung. You can now design your life any way you want. Think about how you can start your new life fresh from a clean slate. The accumulation mindset  You have been a good saver your whole life and at this point, you have built up your net worth. Having these assets is comforting, so it can be challenging to begin to use your savings. However, you chose to defer that income to provide for your life in retirement. Eventually, the balance in your retirement accounts will level off or go down. You’ll have to overcome the fact that your savings are no longer growing. It is important to get over your frugality mindset to enjoy all that you have accumulated. Tomorrow is the day We often plan retirement thinking about tomorrow. We think that tomorrow is the day that we will start x, y, or z. But it is important to remember that we are not guaranteed any tomorrows. To truly rock retirement you have to live for today. Today is the day to show up and pay attention to your life. Life is happening now, so rock your life today. How to create a vision for your future Before you begin to financially plan for retirement you need to create a vision for your future. One way to do that is to use the wisdom from those at the end of their lives to make the most of your own. Listen in to hear the top 5 regrets of the dying to help you make the most of your own life.Have you given much thought to your values? Spend some time establishing your values so that you can envision building a life that is true to yourself. Once you have created a vision for your future you can create a plan to make it feasible. Don’t miss next week’s episode to learn how to create the pathways to reach your retirement vision. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [3:57] Who do you want to be when you grow up?[6:05] Your life is organized around your work[9:07] Tomorrow is the day[12:02] A 3 step process to create a vision for your future[19:10] How to bring these goals into a financial perspectiveLISTENER QUESTIONS [25:57] A question on the 4% expected return used in the Retirement Plan Live webinar[29:43] Why use a 5% expected return rate?[33:35] A question on delaying taking RMDs[35:50] How I pick case studies for Retirement Plan Live[40:03] What to do with an inherited IRATODAY’S SMART SPRINT SEGMENT [44:08] Create a compelling vision for your retirementResources Mentioned In This Episode Check out Boomer Benefits for all your Medicare questions!BOOK - Wooden by John WoodenBOOK - The Top 5 Regrets of the Dying by Bronnie WareRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

 We can be easily distracted by the bright shiny objects of retirement planning which is why it is important to master the fundamentals first. Understanding the fundamentals of retirement planning will help you to create a solid foundation so that you can cope with all of the uncertainty that retirement brings. Here on the Retirement Answer Man show, I typically dive into the foundational concepts of retirement planning in bits and pieces by answering questions. However, I haven’t taken a deep dive into teaching the fundamentals here on the show.Over the course of this 5 week segment, we will start at the beginning and explore the fundamentals of retirement planning in greater detail so that you gain a working knowledge that will give you the confidence to execute your plan. If you have been wondering what Agile Retirement Management is this is the perfect time to press play. Areas where traditional retirement planning is lacking There are so many uncertainties surrounding retirement, but most people are worried about just one thing: running out of money.Traditional retirement planning methods help people build a financial plan to ensure that they don’t run out of money. In conventional planning, retirement becomes a one-dimensional math problem to be solved with investment products. Retirees are asked to place all their trust in the numbers of long-term returns and hope that all will be well.These planning methods focus solely on the financial future and without considering the person’s life goals. While it is important to plan for the future, life exists now. Retirement should be about living life to the fullest extent that you can. An agile approach to retirement helps you balance the future while living a great life today. What is an agile approach to retirement? I designed the agile approach to retirement planning by using a project management methodology. Agile retirement management focuses on achieving an objective by focusing on one thing at a time without trying to figure everything out all at once. With this approach, people are able to quickly iterate as needed as their situation changes. The key to an agile methodology lies in understanding the fundamentals of retirement planning so that you can increase your agency and control the controllables. This ensures that you can refine your goals and dreams based on what you can control. The principles of an agile approach to retirement planning An agile approach accepts that you can’t figure out everything. There is no way to predict what will happen with inflation, markets, or even your life in the future. This is why it is important to try not to dial in exactly what will happen 20 years from now. By staying agile, you’ll be able to quickly respond to any shifts in life or the markets and consider how to improve your reactions.These are the principles to developing an agile approach to retirement: Collaboration - It’s important to collaborate rather than delegating someone to plan your retirement. Use your strengths to inform your decision-making. Being creative together allows you to discover joint solutionsFlexibility - You can't figure out everything at once, so value optionality and flexibility.Prioritize - Try as you might, you can’t do everything at once. With so many levers to pull, it can be easy to focus on the wrong thing. Prioritize to improve focus and find the areas that will make the biggest impact on your life. Communication - Even if you do it on your own, you still need to have the right communication. Use a series of little conversations to check in with your plan to make sure that you are on the right track. Take action then review the action once it is complete. Periodically evaluate risks and opportunities in your plan.Traditional retirement planning doesn't allow you to explore the things that matter in life. You don’t want to miss out on the ride of life, so master the fundamentals of retirement planning. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [2:55] Why it is so important to master the fundamentals of retirement planning[9:40] What is an agile approach?[11:50] Principles of an agile approachLISTENER QUESTIONS [19:34] Worries about the long term stability of Anne’s annuity[23:29] Chen was relieved to hear Dom’s story[24:45] A life insurance question[26:41] How to determine payout options when the female has the pensionTODAY’S SMART SPRINT SEGMENT [30:28] Review the controllables that were discussed in your last retirement plan meeting Resources Mentioned In This Episode  Episode 422 - with Don’s interviewLTCI PartnersRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

Welcome to the last episode in the 4 part series on inflation in retirement. If you are just now joining in, consider heading over to the first episode in this series which covers what inflation is and how to measure it. The second installment discusses the ways that inflation impacts retirement and the previous episode helped you build a framework for combating inflation in your retirement plan. I create these deep-dive series as a way to sharpen my own skills as a financial advisor and to refresh my thinking on a topic. The order of the episodes allows me to think through a subject in an organized way. This is why I encourage you to listen to the series in order so that you can understand the progression of the subject at hand. Press play now if you have already listened to the preceding episodes so that you can learn the tactical ways to fight inflation in your retirement plan. Strategy vs. tactics Before we dive into the tactical ways to fight inflation, it is important to understand the difference between strategy and tactics. A strategy is a framework for how you achieve a long-term goal. Tactics are the smaller steps that have a shorter time frame. Unlike strategy, tactics are easily started and discarded. They are a means to an end that complement and enhance the strategy. Your overall long-term goal is rocking retirement, and hopefully, after the last episode, you have begun to create your strategy to combat inflation so that you can rock retirement. Listen in to learn tactical measures that will enhance that strategy. The current tactical situation regarding inflation We are all wondering where this inflation is taking us. Are we experiencing a monumental shift away from the low inflation and low-interest rates of the past 20 years? At this point, we can’t say for certain that inflation is here to stay, but we can analyze the current situation. In January, we experienced 7.5% inflation. If this trend continues, we will see rising interest rates as a result. Rising interest rates can lead to changes in the financial dynamics across the board. Bond and money market rates will rise, but on the flip side, the cost of borrowing money will rise as well. Rising inflation has a financial impact on every part of the economy and we will see a shift of capital across the world. It is important to understand that we don’t know for certain what will happen in the future. All we can do is educate ourselves and have a sound strategy in place. Tactics to use if rising inflation becomes the new trend If inflation continues to rise there are many ways that you can adjust your tactics in line with your overall retirement strategy. Buy I bonds - These bonds adjust the amount of interest-based on inflation to preserve the purchasing power of the dollar over timeCheck out Treasury inflation-protected securities (TIPS)- TIPS are more like a traditional treasury bond. They adjust the principal balance of the bond based on an inflation factor to achieve the same goal. The price fluctuates based on interest rates and other factors.Hold money market funds - Hold more money market and cash assets. As interest rates rise you can lock in at higher interest rates. Use more debt to buy things - take advantage of the current low-interest rates to purchase things that are likely to rise in price in the futureBuy in bulk - Buy at today’s prices rather than tomorrow’s. Change jobs - The labor market is tight right now and wages have not kept up. This means that companies are starting to bid up.Invest - Investing in real estate, companies with pricing power, and commodities have historically been a good idea during times of inflation.Although there are many tactics you can use to fight inflation risk, it is important to do so with a sound strategy in place. Listen in to hear why you shouldn’t take extreme measures to tackle inflation. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [4:20] Coming next month…[6:30] Where to go if you can’t afford a full-time financial advisor[8:42] Strategy vs. tactics[12:38] What is the current tactical situation regarding inflation?[20:20] Tactics to use if rising inflation is the new trend[26:55] What I am doing tactically to fight inflationCOACH’S CORNER WITH KEVIN LYLES [35:05] How retirement calculators treat inflation[39:34] What else inflates in retirement?TODAY’S SMART SPRINT SEGMENT [43:05] Define the guardrails for your tacticsResources Mentioned In This Episode Check out the Stacking Benjamins book tour–I’ll be at the Dallas event with Joe Saul-Sehy on March 1 Episode 417 with Joe Saul-SehyRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

Inflation will affect your retirement one way or another. It’s up to you to create a strategy to manage that risk. On this episode of Retirement Answer Man, you’ll learn how you can build your own strategy to deal with the creeping risk of inflation.In the past two episodes, you learned what inflation is and how it can affect your retirement. Next week you’ll learn how to use tactics to tweak your strategy to optimize it for specific situations, but first, let’s go learn how to come up with your own plan to combat inflation. Data vs noise It is important to understand the difference between noise and signals when coming up with a strategy. It’s easy to be distracted by the everyday noise that surrounds us and fail to heed the signals that we should actually be watching for. In today’s overly connected world, we have access to information that is being transmitted instantly. Rather than learning from the signals that can help us create a course of action, we get distracted by the constant noise. As data flow increases, we tend to get overloaded with information. According to Nassim Taleb in his book, Antifragile, data is toxic in large and even moderate quantities because it increases our tendency to overreact to the noise. This is an important factor to recognize when coming up with a risk management strategy which is what a retirement plan really is. Strategies start with vision Coming up with a strategy for retirement planning is like checking a recipe before you go to the grocery store. You want to make sure that you have all the ingredients so that you can put them together in the correct portions to create a meal. If you don’t plan before your trip to the supermarket you could come home with plenty of food but nothing that will help you prepare a healthy meal. To ensure a healthy retirement, make sure that your retirement starts with your vision for life. How to create a strategy to manage inflation Now you understand that you need to have a goal in mind before you create a retirement strategy. The two risks that you must balance in retirement are sequence of return risk and inflation risk. Sequence of return risk is a near-term risk that occurs when your stocks go down in value shortly after you begin withdrawing from your accounts. The risk of inflation means that the value of your dollar decreases over a longer period of time. Your retirement strategy needs to balance these near-term and long-term risks. Listen in to hear how you can manage inflation risk while at the same time considering sequence of return risk.If some of the terminology I use confuses you, make sure to listen in the month of March. I plan to explain the fundamentals of retirement planning in greater detail. You’ll learn about the pie cake, agile retirement planning, and the retirement plan of record. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [3:29] Noise vs. signals[5:35] What is a strategy?[12:57] How to create a strategy to manage inflationLEARNING FROM DONALD’S SITUATION [20:40] Learning from Donald’s retirement plans[25:46] What happened to Donald’s wife[29:15] How Donald’s perspective has changed[33:08] How Donald’s financial plans have changed[35:20] Use the technology you have to record your loved onesTODAY’S SMART SPRINT SEGMENT [36:47] Evaluate your reaction to inflationResources Mentioned In This Episode LTCI PartnersWSJ article - The Trouble with a Stock Market Bubble by Jason ZweigFILM - The Social DilemmaBOOK - Antifragile by Nassim TalebRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

Inflation is on everyone’s mind these days. If you have been wondering how inflation will affect your retirement, you’ve come to the right place.This is the 2nd episode in a 4 part series on inflation. Last week we defined inflation, today, we’re discussing the impact of inflation on retirement, next week we get strategic, and in the final episode, we’ll get tactical and answer your questions on inflation.Press play to learn what you need to know about the effects of inflation on your retirement. Just choose a number Inflation is nothing new. It has been affecting us over the course of our entire lives. This is important to remember when planning retirement so that you don’t overthink how you plan for inflation as you build your retirement plan of record.When building your retirement planning model, you’ll need to assume some number to plan for inflation. This number can be chosen based on history or another method. You don’t need to worry too much about where the number comes from as long as you’ve done a bit of research to get it. The most important thing to remember when choosing a number to assume for inflation is to leave it alone. It’s important to stay agile You’ll be consistently iterating and tweaking your retirement plan of record as your lifestyle changes from year to year. Even though inflation rates will fluctuate over the course of your retirement, leave your assumed inflation estimate alone.You won’t get any more accuracy from your model by tinkering with this number. Instead, you’ll end up tilting the numbers one way or another based on your proximity bias. Iterate based on the reality of your lifestyle rather than some projected assumption. Let your spending habits change based on your life choices. How does inflation impact your retirement? The best way to understand how inflation can impact someone over time is to crunch the numbers. If you spend $9,000 per month today and assume a 3% inflation rate, in 15 years your standard of living will decrease by 36%. If you change the inflation rate to 7%, the standard of living will worsen by 64%.Although these numbers can seem scary, you will have a bit of optionality in the way you spend your money. If inflation is high, you may choose to scale back your spending in many areas. Areas where you can’t scale back There are a couple of areas in life where you won’t be able to scale back spending. A healthcare event is not a choice and will need to be cared for whether you are ready or not.Unfortunately, due to the healthcare renaissance in medical technology, inflation in the medical field has risen by 3 times the average of other goods and services. Healthcare and long-term care are two areas that have higher than average inflation and you have little control over your need for them.Even though inflation will cause prices to rise, you will have a safety feature built into your retirement by way of social capital. Social Security has a cost of living adjustment built into the system based on CPI-W. Listen in to hear how these adjustments in addition to your human capital can help you combat inflation in your retirement. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [3:30] Be careful with your assumptions[10:01] How does inflation impact your retirement?[21:48] How stocks and bonds react to inflationLISTENER QUESTIONS WITH TANYA NICHOLS  [28:40] How Frank can decide if he can continue with his early retirement[35:20] Where can someone with modest means go for retirement advice?[40:02] What is the role of bond funds in a retirement portfolio with a low-interest rate environment?[47:28] Clarification on signature requirements for IRAsTODAY’S SMART SPRINT SEGMENT [51:17] Review your inflation assumptionsResources Mentioned In This Episode Episode 405 - Don’t Let Perfect Be the Enemy of GoodLutheran Social Services Financial ServicesXYPNAlign FinancialBOOK - So Good They Can’t Ignore You by Cal NewportBOOK - The Good Entrepreneur by Nick KennedyRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center

Inflation is quite the buzzword lately. Every news network reports that inflation is on the rise which is apparent at the grocery store, the car dealerships, and even in the housing market. If you are planning on retiring soon, worries about inflation could keep you up at night. This is why over the next 4 weeks, we are going to study how to manage inflation in retirement. Today you’ll learn what inflation is and how it is measured. In week two of this series, we’ll discuss how inflation affects retirement, the following episode will study how to manage inflation from a strategic level, and our last episode on this topic will explore the investment vehicles that are available to help protect our portfolios against inflation. What is inflation? Everywhere you look you can see that inflation is on the rise which is why we are studying this topic in depth. Before we can learn how to battle it, we must first understand what it is.Inflation is the decline of purchasing power of a particular currency over time. This means that over time, your dollar will buy less of a particular good or service. We often reflect on the good ole days when a gallon of gas was less than a dollar, but we can see how inflation occurs across the board. Today a gallon of milk costs $3.59, but in 1995 it cost $2.50. A dozen eggs are $2.80 today, whereas, in 1990, that same dozen was only $1. This is inflation.The way we see inflation from a retirement perspective is that the purchasing power of your dollar buys less over time. A look at average historical inflation rates Since the 1920s, the average rate of inflation has been 2.88%. However, this does not mean that each year the inflation rate has been the same inflation fluctuates from year to year. The highest inflation rate was in the 80s and was 15.61%. In the past 20 years, the inflation rate has been lower than that 100-year average at 2.06%. Over the past 10 years, we really haven’t worried about inflation and we have had the added benefit of enjoying excellent return rates from the market, so if you retired in 2011, there hasn’t been much to worry about. But this isn’t always the case. In the 1970s, inflation was at 7% per year which was coupled with a rough decade in investment returns, this perfect storm could cripple retirements. Inflation risk can be compared to sequence of return risk as you enter into retirement. How inflation affects retirement planning When you are planning your retirement you want to understand how much things cost so that you can predict how much money you will need each year. If you spend $9000 per month now, in 20 years you’ll need much more to have that same purchasing power. No one can predict what will happen in the future, but if you study the past and take measures to protect your portfolio, you can hedge against this ever-present risk. Learn how inflation is measured why that is important to plan your retirement on this episode of Retirement Answer Man. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [5:00] What is inflation?[12:10] How inflation affects retirement planning[13:46] What causes inflation?[19:00] How do we measure inflation?LISTENER QUESTIONS WITH ANDY PANKO [26:30] Is it better to do a Roth conversion or take advantage of a 0% capital gains tax rate?[34:55] The difference between Roth conversions and Roth contributions[39:59] How to adjust the Social Security calculator for early retirement[46:45] Is inflation risk higher when one retires early?TODAY’S SMART SPRINT SEGMENT [56:55] Think about your optimization to see if you have enough slack in your systemResources Mentioned In This Episode Taxes in Retirement Facebook group with Andy PankoTenon Financial GroupLTCI PartnersWatch the Retirement Plan Live replay here!BOOK - Antifragile by Nassim Nicholas TalebRock Retirement ClubRoger’s YouTube Channel - Roger ThatBOOK - Rock Retirement by Roger WhitneyWork with RogerRoger’s Retirement Learning Center