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3 Answers You Need
to Confidently
“Flip the Switch”

Every disciplined accumulator we’ve worked with reached a unique inflection point which we call The Employment Dependency Threshold™.

After decades of working, raising a family, and putting their kids through school, they all sort of paused, reflected, and asked themselves some very important questions:

  1. “Do we have enough built up to support us without having to work if we choose not to?”
  2. “How much can we afford to spend (or gift) without running out?”
  3. “How should we position our Retirement Bucket to make it last?”

What the overwhelming majority of folks who are asking these questions are looking for are quick, simple answers.  What they really want is a magic pill!

Unfortunately, in order to develop the unflappable confidence you need to “flip the switch” and spend what you’ve saved so you can live your Best Life, there are no quick and simple answers.

Here’s why….

Why Are There No Simple Answers

Let’s take a look at two couples, Mike and Mary, and Ron and Rose, both age 62. To keep it simple using round numbers, assume each couple has:

  • $2,000,000 built up in their Retirement Bucket™,
  • the same monthly pensions, and
  • the same social security retirement income

Beyond that, here’s what else we know about them:

Mike and Mary have no mortgage or home equity line of credit, and they have recently completed many major upgrades to their home, i.e. a new roof, indoor and outdoor paint, a new furnace, new kitchen countertops and cabinets, and new bathrooms. They purchased new cars with cash in the last two years which they plan to drive for ten years since they put very little mileage on their cars.

Ron and Rose still have $370,000 outstanding on a second mortgage they took out to pay for their kids’ college tuitions, weddings, cars, and a condo down in Florida they bought a few years back. They both drive high end cars which they replace every three years. And, while their home is very nice, after 26 years, it is starting to look “tired” and will need significant upgrades in the next two years.

Even though both couples have the exact same level of Retirement Bucket™ investments, and the same amount of income coming in from social security and pensions, their situations are drastically different because it will cost much more to support Ron and Rose’s desired lifestyle.

Do They Have Enough?

Ron and Rose are less “likely” to have enough built up because they spend more and thus they are much more dependent on their Retirement Bucket™ than Mike and Mary.

However, that alone doesn’t answer if Ron and Rose or Mike and Mary have enough built up to support their desired lifestyle.

That’s a very important point!  Many individuals make their financial decisions based on their perception of how they “measure up” to others, based on some insignificant statistic they read on the internet, or based on the opinion of a friend or colleague.

None of those criteria will provide them with a confident answer to the question they asked.

The way for Ron and Rose, Mike and Mary, and you to determine if you have enough built up is to thoroughly quantify your level of Retirement Bucket Dependence: i.e. over and above income you may receive from social security, pensions, and rental property, how dependent are you each year on your Retirement Bucket?

If you don’t know the answer to this question, you will have unnecessary anxiety and you will “pull your punches” by restricting your spending for the rest of your life because you don’t know if you have enough built up in your Retirement Bucket™. Or, you will continue to work because you think you “have” to, when in fact you may not “have” to.

Beware of the”One Size Fits All” Rules of Thumb

Even though they receive the same amount of income each month from pensions and social security, Ron and Rose will have to withdraw more each year from their Retirement Bucket™ than Mike and Mary because they spend more. Everything else being equal, in order for their Retirement Bucket™ to remain full over their lifetime, Ron and Rose have to earn a greater investment rate of return than Mike and Mary.

Given this, the Retirement Bucket Strategy™ for Ron and Rose has to be very different than for Mike and Mary. This is precisely why the answer to the question, “are we positioned correctly to make it work?” has no quick and simple answer. And, it is why relying on generic “rule of thumb investing guidelines for everyone” you find on financial websites, and “one-size-fits-all annuity sales pitches” are so dangerous at this stage in your life.

The question Ron and Rose, Mike and Mary, and you want and need an answer to is: What real long-term investment rate of return do you need to earn on your Retirement Bucketin order to remain full for the remainder of your life while generating the increased lifestyle sustaining income you need each year?

The real investment rate of return you need to earn is dependent on three factors:

  1. Your Level of Retirement Bucket Dependence™
  2. The Size of your Retirement Bucket™
  3. Inflation

Without complete clarity on these and several other questions regarding needed cash flow and income tax strategy, you can’t begin to make rational, long term investment decisions because you have no clearly defined investment goal.

The Relaxing Retirement Formula

As we kick off a brand new year together, my strongest recommendation is to get right back to the fundamentals of The Relaxing Retirement Formula™.  And, the first step is to get a really good grasp on just how dependent you are on your Retirement Bucket™.

This is the most definable difference I have witnessed among our most successful Relaxing Retirement members.  They take the necessary time to adhere to the fundamentals so they can make calm, rational decisions and remain confident during all market conditions.