How To Confidently Spend AND Invest

Over the last few weeks, we’ve dissected The Relaxing Retirement Formula™, and most recently begun to answer the final question which is where do you position your investments to produce the long term rate of return that you need to earn while experiencing less volatility and paying less taxes to the government?

Principle and Guideline #1 was knowing what NOT to invest, i.e. the amount you will be spending in the short run, and getting comfortable with the idea that not all of your money will be invested to earn top returns.

Principle and Guideline #2 was the understanding that all investments have merit for somebody, but not necessarily for you. Given the rate of return you need to earn due to your unique circumstances and priorities, what percentage of your investment holdings do you need to subject to different asset classes and investment styles (“trains”)?

Now that we’re comfortable with the first two, let’s jump into Principle and Guideline #3 which pulls #1 and #2 together:

Withdraw Your Spending Needs Directly From the Fixed Income Side of Your Investments, Not By Selling Your Equity Investments Each Month

The first thing I’d like to convey is that this will not work for you unless you’ve carefully followed each step in The Relaxing Retirement Formula™ so far.

It will seem foreign and counterintuitive to you.

However, if you have, then you already know the amount of money you need to withdraw from your Retirement Bucket (your investments) each year, and you’ve plotted out the amount you’ll need to withdraw over the next 5 years at least.

If you’ve done this, and you’ve applied Principles #1 and #2, then you can now confidently invest.

What makes us fear a down market is being forced to sell at the wrong time, i.e. when the price of your investment is down.

If you follow this principle, and you carefully allocate enough money in short term instruments to support your withdrawal needs, you can confidently invest like a pro knowing that you won’t be forced to sell equity investments to support your income needs when market prices are lower than you’d like. You will already have the amount of money you need set aside.

It’s only when you “have” to sell that you run into trouble.

What this allows you to do is confidently spend while you allow your inflation fighting investments to do their job in the long run which is the key to successful investing.

Don’t underestimate just how important this is. It works especially well during market corrections when the overwhelming majority of retirees panic and feel as though the “have” to sell.

Committed To Your Relaxing Retirement,

Jack Phelps

The Retirement Coach

P.S.: HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement Coach “Strategy of the Week”, please pass it on. Simply provide their name and email address to Or they can subscribe at our website!

Thank you!