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Retirement Answer Man

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Jun 9, 2021 • 36min

Listener Questions: How Do Rental Properties Fit into My Retirement Plan?

This month on the Retirement Answer Man show, we are tackling your listener questions. Although we don't have a monthly theme like we usually do, I am also sharing my random thoughts from the retirement scene. If you miss the monthly theme, you can look forward to July and August.  In July we’ll be discussing your withdrawal strategy for retirement and August will be a month dedicated to women in retirement. Since I can’t speak to being a woman, Tanya Nichols will join me then to share her wisdom. Make sure to join us for those month-long topics.  If you have been enjoying the show, please head over to your favorite podcast app and leave a review! Random thoughts on retirement Real financial planning takes time and isn’t scalable. Should is a dangerous word. Be careful how you use it.  Generating income to live off of is not a good retirement strategy. Rather than thinking about generating income in retirement, think about total return instead.  In retirement, taxes are all about timing. Limit your taxes by choosing whether to pay them sooner or later. You can't actually control your emotions, desires, fears. However, you have the choice of whether to nurture them or let them drift by.  What about rental properties in retirement?  Where do rental properties fit into a retirement plan? Rental properties can be fantastic for generating income, but they can also be a lot of work. Of the many people that have rental properties, some choose to continue renting their properties well into retirement. Whether or not you choose to continue as a landlord in retirement should be based on whether you enjoy the work. If you opt to continue having rentals in retirement, they will have their place in your retirement plan just like any other business.  Keep the books in order Just like any business, rentals have revenues and expenses. Make sure to keep a separate set of books on your rentals to understand their cash flow. Keeping the books in order will help you understand the income they generate and how the rental properties fit into your net worth statement. This practice will help you explore how lucrative the properties are and whether you would like to keep them as a way to generate income in retirement. When you understand where you stand with your rental properties you can be more strategic in building your retirement plan.  Incorporating rental properties into your retirement plan With the books and net worth statement in order, you can start building your retirement plan. Consider how your retirement plan would look with the rental properties in place and also what it would look like if you sold them. When creating your retirement plan, you’ll want to consider your social capital, human capital, and financial capital. Since the retirement properties are a business that generates income they are considered human capital. This type of planning will give you a framework to consider whether to sell the properties or keep them. You should also consider your experience. Do you enjoy keeping rentals or is it work that you dread? What kind of experience have you had with rental properties? Do you plan on keeping your rental properties in retirement? OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN RANDOM THOUGHTS [2:20] Real financial planning isn’t scalable LISTENER QUESTIONS [6:52] What about rental properties in retirement? [12:39] Is it better to buy slower growth dividend stocks now or in retirement? [16:05] What to do with RMDs that are more than you need? [21:05] If you have twice the assets, why pay an advisor twice as much? TODAY’S SMART SPRINT SEGMENT [33:30] Estimate what your RMDs will be with our RMD calculator included in the 6-Shot Saturday newsletter Resources Mentioned In This Episode Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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Jun 2, 2021 • 34min

Listener Questions

Over the next several episodes I’ll be answering your questions. Rather than having a central topic for the month, I am dedicating each episode to tackling your burning retirement queries. You can head on over to RogerWhitney.com/AskRoger to leave a voicemail or you can send an email. Enjoy hearing my response to questions like where do I start and how do I max out an HSA in the same year that I retire? Press play to discover the answers.  5 tips from the retirement scene  Consistency is key. Do you feel like you jump around from one process to another in your retirement planning? Whether you are changing your financial planning or investment management process, if there is no consistency in your decision making it’s like you have no process at all. It’s one thing to tweak your process a bit to adapt and stay agile, but don’t change the process completely.  Trying to estimate future market returns is a fool’s game. It’s impossible to tell what future returns will bring. There is no reason to try and guess what they might be. Instead of trying to predict the market, focus your time and energy on the things you can control.  Retirement planning shouldn’t revolve around your investments. Instead, your life should be at the center of your retirement planning.  Learn to say no. It’s okay to say that doesn’t work for me. Don’t allow many different things to put demands on your time.  Don’t depend on the 4% rule. People tend to focus on the 4% rule since it estimates a sustainable withdrawal rate, but if you base your retirement planning on this rule you’ll likely end up with way more money than you had expected. Not only that, but you’ll miss out on life experiences in the process.  Where to start? One listener recently started listening to the show and was wondering where she should start first. It’s hard to say since that all depends on what you’re looking for. One way to begin is to listen to the Retirement Plan Live series. These case studies can help get you thinking about what you should do first in your retirement planning. Do you have any suggestions on where she should begin? Send me an email so I can let everyone know where they should begin listening.  Learn from my cautionary tale I have shared the tale of the RV that I purchased with my brother-in-law several years ago on past episodes and now I can finally bring that anecdote to a conclusion. I share my experience with you as a cautionary tale of keeping something around simply because I wasn’t in urgent need to sell it. For 7 years I have been paying to store this RV and not once has it been used. Listen to my story to learn how to recognize the changing seasons of life so that you don’t end up spending $6300 to store something you’ll never use again. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN RANDOM THOUGHTS [3:20] Random thoughts on the retirement scene [9:04] Learn to say no LISTENER QUESTIONS  [12:34] What do I do first? [16:10] Steve is excited and scared at the same time [17:17] HSA plans in the year of retirement LESSONS LEARNED [22:20] I just got rid of the RV that I bought 7 years ago [28:25] Lessons learned from my cautionary tale TODAY’S SMART SPRINT SEGMENT [32:37] Identify one thing to clean out this week Resources Mentioned In This Episode Episode 259 - How to Live Without a Paycheck  January’s Retirement Plan Live episodes start here  BOOK - Basic Economics by Thomas Sowell  Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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May 26, 2021 • 34min

Your Non-Financial Retirement Plan: Creating Your New Rhythm of Life

Life is like a river that flows and changes over time. There are gradual twists and turns that we make in life and retirement is one of those. To ensure that your retirement flows in the right direction it is important to plan ahead.  In this episode, we explore how to create the direction of the new flow of your life in retirement. You won’t want to miss hearing BW from the Rock Retirement Club as he defines the 6 arenas of life that require our time and energy. Listen in to check it out. What does it mean to rock retirement? I am always talking about rocking retirement here and in the Rock Retirement Club, but I haven’t ever defined what that actually means.  On a recent live meet-up with 600 of you, we were able to piece it together and create a working definition of what rocking retirement means. Rocking retirement is a verb--an action word that describes a way of being.  Rocking retirement is a state in which you work towards aligning your resources to create your best-imagined life. Money is important to rocking retirement, but decisions about money and life are always intertwined, so It’s important to create a retirement plan that helps you create a rocking retirement! What you need to ask yourself to get into the right groove Your life has created a well-defined groove that you have followed for decades and work has been essential to helping create that groove. Now that your working years are slowing down or coming to an end, it’s time to create a new groove that is different from the old one. Think about the direction you want your new life to take. What will your lifestyle look like? What can you afford? When can you start this new journey? What can you afford to do? Defining the answers to these questions is integral to creating the rhythm of your new life in retirement.  The phases of retirement There are several stages to retirement and right now you are probably in the planning stage. This is the time when you are trying to get it all figured out. You are trying to envision your retirement journey.  The second step of retirement is the honeymoon phase. This stage is a celebration of your new life. Everything you do in this stage is exciting and you will probably be actively enjoying your life. After the honeymoon phase, many retirees reach stage 3 which is a point of inflection. They start to question their choices. They may atrophy a bit and wonder if life will be like this forever. However, this is when it is time to rock retirement! Listen in to learn how you can really rock this sometimes challenging stage of retirement Design your life energy To get intentional about retirement planning you need to consider the 6 life arenas. The first one is labeled career, but this doesn’t have to be a traditional career. It can be whatever gives your life purpose or meaning. Think about what you are trying to accomplish. The next stages are family, relationships, self, spiritual, and leisure. Think about where you are spending your life energy. Is it in line with your priorities? Sit down and think about the direction of your life. Listen to this chat with the RRC head retirement coach, BW to learn how you can get your retirement moving in the right direction.  OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN WHAT DOES THAT MEAN? [5:03] What is rocking retirement? PRACTICAL PLANNING SEGMENT [6:55] The steps to creating your new journey in life COACHES CORNER WITH BW [11:35] The 6 life arenas [18:35] Think about how you are spending your life energy Q&A SEGMENT [21:22] A question on the Rule of 55 [24:25] How dividend aristocrats can be integrated into your retirement plan [30:10] Share your retirement wisdom TODAY’S SMART SPRINT  [31:31] Pick one area of your non-financial life to improve Resources Mentioned In This Episode Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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May 19, 2021 • 46min

Your Non-Financial Retirement Plan: People and Play

Our theme this month is your non-financial retirement plan and in this episode, we’ll explore how relationships and play fit into that plan. These are two key components to a happy, fulfilled life. You guys know how important this subject is which is why we had more than 500 people join the webinar last week. If you missed out on that webinar you can watch the recording at RogerWhitney.com/resources. Press play to hear how important people and play are to your non-financial retirement plan.  Have your relationships suffered over the last year? Covid has tested many of our relationships over the past year. If you are like me, your family relationships have thrived, yet your friendships have suffered from the lack of in-person connection. With grey divorce at all-time highs, the spousal relationship is essential to remain happy, but friendships matter too. Hopefully, the change in lifestyle that we have all experienced this past year has given you time to reflect on the relationships that matter the most to you. Loneliness disproportionately affects the elderly Loneliness is a major contributor to depression and it disproportionately affects the elderly. As people age, they tend to spend more and more time alone. A recent study showed that time spent alone increases as people get older. People in their 20s and 30s generally spend 4 hours a day alone whereas those in their 60s spend 6 hours a day alone. People in their 80s tend to spend 8 hours a day by themselves and may only spend 1 hour with friends.  Cultivate relationships with a younger crowd One way to pursue new friendships is by forging relationships with those that are younger. Not only do younger people tend to be more active, but a younger crowd will likely not leave you as the last man standing as you age.  If you don’t have younger friends it is easier to do less and less each day. It can become harder to leave the house and stay active without the motivation of others to help you stay engaged. This can lead to atrophy--mentally, physically, and emotionally. Retirement isn’t a time to just sit around waiting for what is to come. You’ll likely have 30+ years ahead of you. The more you get out and play now the better quality of life you’ll have in the years ahead.  Retirement isn’t an event, it’s a transition Our relationships evolve over time, and retirement can change the friendships that you have. Some friendships may fall away as the season of your life changes. However, it’s important to recognize the relationships that are worth preserving. Some friendships should be fostered through the changes in life. Retirement isn’t a single event, it’s a transition. This is a time in life when you can cultivate new relationships. Think about who you choose to associate with foster friendships that will challenge you to be your best self.  OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [2:30] As we age our network of people decreases over time [9:40] It’s harder to get out of the house as you age COACHES CORNER WITH BW [12:35] 6 essential characteristics of a healthy relationship [26:02] Grey divorce is more and more common Q&A SEGMENT [30:15] Should Richard take Social Security [31:56] Navigating Medicare after moving to a different state [34:03] Security surrounding online money management platforms [39:07] A word of wisdom from Cynthia TODAY’S SMART SPRINT SEGMENT [42:40] Let what you learned about relationships and play marinate this week Resources Mentioned In This Episode Ted Lasso Boomer Benefits Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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May 12, 2021 • 36min

Your Non-Financial Retirement Plan: Identity, Purpose, and Growth

How do you introduce yourself at parties? Do you use your job title or do you define yourself in other ways? Oftentimes, our work becomes part of our identity and we begin to think that our job is who we are. This can lead to an identity crisis in retirement which is why it is important for you to define your identity and purpose outside of your career.  In this episode of Retirement Answer Man, we continue to focus on the non-financial retirement plan while homing in on your identity and purpose. Are you ready for some self-exploration? Hit the play button to learn how to define your identity and purpose outside of your career. Does your business card reveal your identity? Do you remember when you got your first business card? That card with your job title let the world know your role in the company and in society. Your business card along with the degrees and certifications that you may have hanging on your office wall can say a lot about what you do for a living, but do those items really reflect your identity?  In the work world, titles are important to understanding people's roles that we often never think beyond the traditional symbols of identity. However, when you retire, you’ll leave that work world behind and need to find other ways to express who you really are.  How do you define yourself? When you retire you no longer have your career tied to your identity. Your career is no longer the focal point of who you are. If you define your worth by your job title, that can leave you feeling lost when your position changes or disappears.  Have you ever thought about who you really are? Think about how you can separate your identity from your job title. Dig deeper to really discover who you are. How do you define yourself? You don’t want to lose yourself when you lose your business card.  What is your purpose? One way to begin to identify yourself outside of your career is to define your purpose. Think about what is your purpose now. How will your purpose change once you leave your career behind?  To define your purpose, think about what is important to you. Your purpose doesn’t have to be momentous or world, rather, it should be something that is significant to you. Do you want to be an amazing grandparent, an explorer, a creator? Identifying your purpose is a fantastic way to ensure that you don’t get distracted by all the things that can pull you away from your goals.  Express your identity to have lifetime growth  Retirement can be whatever you want to make of it. If you want this transitional time to be one of growth then think about your identity and purpose. Who do you want to be in this new stage in life? What role will you now play in the world? As humans, we continue to grow and change over time, but to ensure that you are changing in the direction that you want you’ll need to understand your true identity and define your purpose. Once you do, you will be ready to rock retirement.  OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [2:00] Separate your identity from your title [9:32] How do you define your purpose?  Q&A WITH NICHOLE  [17:25] An after-tax catch-up contribution question [24:22] How to save for a child’s upcoming education [29:34] Tips on TIPS TODAY’S SMART SPRINT SEGMENT [32:44] How do you identify yourself? Resources Mentioned In This Episode BOOK - Effortless by Greg McKeown BOOK - Essentialism by Greg McKeown Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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May 5, 2021 • 26min

Your Non-Financial Plan: A Great Life Is About More than Money

Retirement is about much more than finances. Money is important to mastering retirement, however, it isn’t everything. To have a successful retirement you must start with a strong financial plan and then begin to consider everything else. Over the next 4 episodes, we will discuss your non-financial plan. You must have a strong understanding of what is important to you before you begin retirement because someone or something is sure to fill your time when you retire.  Make your retirement count by identifying your purpose to help you determine your new rhythm of life. This 4 part series will help you realize the importance of your non-financial plan in retirement.  Start by getting your money right The key to beginning any non-financial plan is by first ensuring that your finances are in order. You can’t begin to focus on the rest of your retirement without having your financial plan in place.  The first step to any financial plan is by separating your desires into needs, wants, and wishes. Think about what a fulfilling life would look like to you and then consider how you will pay for it.  There are 3 ways to pay for life in retirement: social capital, human capital, and financial capital. After identifying how much money you will have from those first 2 areas you can then understand how much of your savings--your financial capital--you’ll need each month. The key to creating a financial plan in retirement is by staying agile.  What do you lose when you leave full-time work? When you leave your full-time job to retire you lose more than just a paycheck. Many people don’t consider this, but a lot of the anxiety over planning for retirement is about the void that is created by stepping away from the professional world.  You will need to learn how to create a paycheck in retirement but you’ll also need to learn how to create structure, social connections, and how to establish an intentional rhythm to your life. Have you considered how you will fill the void that your work life will leave behind?  What are the elements of life that will help you rock retirement? What do you need to live a good life? I’m not referring to the material things that surround you, I mean the non-tangible elements in life. Relationships, congruency, self-growth, gratitude, and agency are all examples of these intangible elements that are so important to living a fulfilling life. You’ll need to consider these intangibles if you want to create an amazing life in retirement. Listen in to discover why the intangibles are so important to your non-financial plan.  Join me for the live webinar! If you found this episode helpful, be sure to check out next week’s webinar. On May 13 at 7 pm CDT I’ll be hosting a live webinar where you will learn what it takes to build your own non-financial retirement plan. Not only will you learn all about how to use the pie cake retirement investment plan, but you’ll also learn the elements to consider on the non-financial side of retirement. Additionally, you’ll get a sneak peek into the RRC. Click here to register now! OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [6:02] What are the elements of life that will help you rock retirement? [8:45] What do you lose when you leave full-time work? [13:20] Start by getting your money right Q&A SEGMENT [16:58] A question about a 457 plan [18:31] What are the pros and cons of listing your estate as a beneficiary? [21:30] The pro-rata rule TODAY’S SMART SPRINT SEGMENT [23:43] What non-financial elements of your life will change in retirement? Resources Mentioned In This Episode LiveWithRoger.com Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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Apr 28, 2021 • 40min

Asset Allocation Ingredients: What Are UITs and Structured Notes?

As you start retirement planning you’ll want to think about using various types of retirement vehicles. This is why we are exploring different asset allocation ingredients in this series. I want you to understand the basics of these investment vehicles so that you can make an educated decision on what to include in your retirement portfolio.  Today you’ll learn about closed-end mutual funds, UITs, and structured notes. Listen in and learn why it’s important to keep your investments simple. Don’t need to overcomplicate your investments.  What is a closed-end mutual fund? The biggest difference between a closed-end mutual fund and an ETF or open-ended fund is they issue a fixed number of shares. Because of this, closed-end mutual funds act more like individual stocks. They even have an initial public offering just like a stock does. Sometimes they will even roll out a secondary offering. Since there are a limited number of shares, that means there is no more money coming in or out of the fund. Closed-end funds also use leverage as a way to improve returns.  What are the advantages of closed-end mutual funds? Open-ended funds and ETFs always trade at net asset value, however, closed-ended funds can trade at a premium or at a discount. They aren’t typically purchased at the net asset value.  Closed-ended funds don’t experience cashflow issues since they have a fixed amount they are investing. They don’t have to sell securities just because someone needs the money. People usually buy closed-end funds because of the distribution yields they payout. But it is important to remember that the high yield is usually due to the leverage they use. Discover the disadvantages of closed-end funds by pressing play.  What is a unit investment trust (UIT)? A unit investment trust (UIT) is a fixed portfolio. You’ll get a basket of securities in certain percentages that stays consistent over time. At a predetermined date, this trust matures like a bond and you’ll receive the cash value. The benefits of UITs are the costs and the lack of yearly capital gains. Since the trust matures at a certain time you will only need to worry about capital gains taxes at that time. They are also low in cost due to less management. Discover why I haven’t used UITs and why I really don’t like structured funds by listening. Check out the Rock Retirement Club The Rock Retirement Club is our online university that will empower you to rock retirement. The online courses will teach you how to build your retirement plan step by step. You’ll learn how much is enough and when you can retire. In addition to being part of the amazing community of like-minded people walking the same journey, you’ll also gain access to retirement calculators, spreadsheets, and other tools to help you rock retirement. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [4:38] What is a closed-end mutual fund? [8:31] What are the advantages and disadvantages of closed-end mutual funds? [12:57] What is a unit investment trust (UIT)? Q&A SEGMENT [19:17] How much is too much for a 5-year plan? [25:03] A healthcare before Medicare question [30:34] Self-funding long term care insurance using your home TODAY’S SMART SPRINT SEGMENT [37:13] Think about what you can accomplish between now and the end of the year Resources Mentioned In This Episode Check out the long term care insurance series by starting here Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger
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Apr 22, 2021 • 37min

Asset Allocation Ingredients: What Is a Separately Managed Account (SMA)?

Retirement planning takes many different forms, but to effectively manage your money in retirement it is important to know the types of investment accounts that are available. This is why I am hosting the Asset Allocation Ingredients series.  Over the course of this series, we explore what goes into your investment mix. This episode focuses on separately managed accounts. You’ll learn what they are and their advantages and disadvantages.  Make sure to stick around for the listener questions segment to hear answers to questions from listeners like you.  What is transformation? Transformation means a dramatic change in form or appearance. However, there are many transformations we can make in life that aren’t physical. Common life transformations occur when we leave school and enter the professional world, go from single to married life, and of course, from working to retired.  A transformation can be triggered by a few different things. It could be triggered by a life event, or it could be a gradual change over time, or simply by you looking for a change in your life. Are you working towards any transformations in your life?  What is a separately managed account? A separately managed account is a portfolio managed by a third party. Essentially, you are assigning the management of funds to a money manager who is implementing the portfolio that you have hired them for.  A separately managed account is different from an ETF or mutual fund in that you open an investment account at a firm and the account manager will build the portfolio based on the strategy you choose. It’s like a mutual fund that is completely unwrapped. You own each individual position in that account rather than in a bundle.  What are the advantages and disadvantages of separately managed accounts? Some advantages to SMAs are:  You have access to institutional managers that don’t manage mutual funds. You can customize your account by setting restrictions on what is allowed.  You maintain better control of the realization of gains and losses. There are a few disadvantages: There are fewer options to choose from. The baseline to open an account is higher. Fees are generally higher than other types of accounts. They add more complexity to your portfolio. Are separately managed accounts a part of your portfolio? What do you like about them? What’s coming up next on Retirement Answer Man Make sure to check out the next episode where we will explore UITs and structured notes. After this deep dive into the financial aspect of retirement, next month our focus will shift to the non-financial side of things. You won’t want to miss out on building your non-financial retirement plan. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN WHAT DOES THAT MEAN? [2:10] What is transformation? PRACTICAL PLANNING SEGMENT [5:49] The basics of a separately managed account [10:08] Disadvantages to this kind of structure for investments Q&A SEGMENT [14:24] A thank you from Dennis [18:21] How to choose mutual funds [21:38] The tax deductibility of long-term care  [23:52] How did I calculate the discount rate in the Retirement Plan Live webinar [31:11] What do you do with tax liability on a net worth statement? TODAY’S SMART SPRINT SEGMENT [34:05] Think about a transformation that you are working toward Resources Mentioned In This Episode Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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Apr 14, 2021 • 37min

Asset Allocation Ingredients - What is a Mutual Fund?

This month we are discussing the ingredients that make up your retirement portfolio--your pie cake. In the previous episode, we took a deeper look at ETFs, and in this episode, we explore mutual funds.  You probably have mutual funds somewhere in your portfolio, but you may not know exactly what they are. On this episode of Retirement Answer Man, we will take a look at what a mutual fund is so that you can determine if you should have one in your retirement toolbox.  Is the Rock Retirement Club right for you? To truly rock retirement you need to do 3 things.  Build a solid retirement plan that will act as your decision-making framework to help you implement an agile process throughout your retirement.  Find a safe place where you can get unstuck whenever you get stuck building your retirement plan. You need a place where you can keep your momentum going and you can get answers to the questions you have. Surround yourself with people who are intentional about living this part of their life. Get inspired by others and inspire others so that you can all rock retirement together.  You can find all 3 of these things in the Rock Retirement Club. If this sounds like it could help you plan the next chapter of your life check out RockRetirementClub.com. Have you collected investments and accounts? As you approach retirement, you may notice that you have a lot of financial clutter. You have probably worked a few different jobs and over time, you may have collected retirement investment accounts in various places. You may also have several types of investments in different accounts.  When you are approaching retirement this can be a problem. These investments can be a financial mess. The complexity can be confusing and overwhelming. When building a retirement investment portfolio take the time to make it simple. Determine what kind of portfolio you want to build to support your retirement. What are open-ended mutual funds?  Mutual funds are similar to ETFs which we discussed in the previous episode. However, in a mutual fund investors pool their money together into an existing portfolio. Mutual funds are priced only once per day based on the net asset value and they are traded only once per day based on that price. What are the advantages and disadvantages of open-ended mutual funds? Just like any other investment, mutual funds are neither good nor bad. They are simply a tool to add to your investment toolkit. One advantage of mutual funds is that there is no tracking error since it is priced on the net asset value. They are easy to invest and there is a huge menu of investment options. Open-ended mutual funds are extremely liquid so you can get in and out of them easily. Listen in to hear what the disadvantages of mutual funds are. You’ll also hear me answer several listener questions with Nichole. Press play now. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [4:38] Have you collected investments and accounts? [7:25] What are open-ended mutual funds? [9:51] What are the advantages and disadvantages of open-ended mutual funds? [19:07] Open-ended funds are neither good nor bad  Q&A WITH NICHOLE [21:52] How to use a set portfolio to build your pie cake? [26:41] Should your withdrawal strategy change if you don’t have kids? [30:37] What to do with a 457B plan? TODAY’S SMART SPRINT SEGMENT [34:36] Question what you are doing--what else could you be doing? Resources Mentioned In This Episode Episode 370 - The recent episode with Fritz Gilbert Episode 372 - Start here if you want to learn more about building your pie cake Episode 363 - The beginning of the Let’s Get Physical health series BOOK - Atomic Habits by James Clear Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center
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Apr 7, 2021 • 46min

Asset Allocation Ingredients: What is an Exchange Traded Fund (ETF)?

If you have listened to this show for a while you know that I like to create a retirement withdrawal strategy based on the pie cake. However, we haven’t discussed what goes into the mix.  Over the next several episodes, we’ll dive into the details of asset allocation. You’ll learn a bit about ETFs, mutual funds, separately managed accounts, and UITs. On this episode, in addition to answering listener questions with Andy Panko from Retirement Planning Demystified, you’ll learn about ETFs and their pros and cons.  Building your pie cake In retirement, your portfolios need to reflect when you plan on spending those funds. I separate these portfolios into what I call the pie cake. The basis of the pie cake, is of course, the plate. Your plate will contain your contingency fund and emergency fund. The first layer of your pie cake contains the money that you will use to fund your life over the next 4-5 years. The next layer will contain funds that have a different asset allocation. It may contain funds that are more of a mix of stocks and bonds. In your last layer, you have your long-term assets which will consist mainly of stocks.  What are the ingredients of the pie? Now that you have the cake set up you’ll need to consider what you’re going to put into each pie. Each layer of the pie cake is different and must be made separately. You’ll want to consider what ingredients you want to add. How many ingredients do you want to have in your mix? I like to have as few ingredients as possible. Try adding complexity to your ingredients by diversification rather than simply adding more ingredients. What would you prefer in your pie--simple ingredients or complex ones with names you can’t pronounce? What is an exchange-traded fund? An exchange-traded fund (ETF) is an instant portfolio. It is different from traditional mutual funds in that an ETF trades like a stock--you can buy call options or put options. They can be highly managed or not depending on what you buy, so pay careful attention to the fees attached.  One unique mechanism ETFs have is that the managers buy stocks that represent the portfolio you are trying to match. They track very closely to the net asset value. Learn more about ETFs by listening to this episode of Retirement Answer Man--make sure to stick around for the listener questions with Andy Panko. What are some advantages and disadvantages to ETFs? ETFs aren’t all good or all bad. They have their pros and cons. One advantage to an ETF is that you have an instant portfolio. Another advantage is the clarity. You know what is inside the fund at all times. They are also transferable between different brokerage houses and are quite tax efficient.  On the flip side, if you buy an ETF that is focused on an index you may get less diversification than you think. So make sure to dig under the hood a bit to understand what it is that you are buying. ETFs can also be more expensive if it is more actively managed. Press play to hear the difference between an organic and manufactured ETF. OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN PRACTICAL PLANNING SEGMENT [1:50] How to build your pie cake [3:23] What ingredients do you need to create your pie? [7:48] What is an exchange-traded fund? [11:28] What are some advantages and disadvantages to ETFs? [15:31] There are organic and manufactured ETFs Q&A SEGMENT WITH ANDY PANKO [19:23] Tax planning in retirement [23:40] Can you use one spouse's HSA to pay for the other spouse’s medical expenses? [26:55] How to balance retiring with college expenses ahead of you [31:30] Roth conversions and the pro-rata rule [38:32] Andy gives me some tax advice [42:28] Can I recommend a First Pen? TODAY’S SMART SPRINT SEGMENT [43:45] Take a look at your portfolios and ask yourself if they are too complex Resources Mentioned In This Episode Taxes in Retirement Facebook group Retirement Planning Demystified on YouTube BOOK - Thinking in Bets by Annie Duke Rock Retirement Club Roger’s YouTube Channel - Roger That BOOK - Rock Retirement  by Roger Whitney Work with Roger Roger’s Retirement Learning Center

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