What Everyone Wants to Know

Good Morning Relaxing Retirement Member,

When we meet with an individual or couple for the first time, there are two things they want to know very early in our conversation:

  • “Do we have enough built up to support us without having to work if we choose not to?”
  • “Are our investments positioned correctly to make it work?”

Our answer is always the same; “We don’t know yet because everyone’s numbers and priorities are so different. But we will show you how to find out!”

Why There Are No Simple Answers

Let’s take a look at two couples, Mike and Mary, and Ron and Rose, both age 65. To keep it simple using round numbers, assume each couple has:

  • $2,500,000 in total investment holdings,
  • the same 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 $300,000 outstanding on a second mortgage they took out to pay for their kids’ college tuitions and weddings, 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.

Are They Positioned Correctly?

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™.

You want to be infatuated with knowing your numbers cold!

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.

In the next edition of The Retirement Coach Strategy of the Week, we’re going to begin with the fastest and most accurate way to do that.

Stay tuned!

Committed To Your Relaxing Retirement,

Jack Phelps
The Retirement Coach

P.S. Arm yourself with the questions you must ask to determine if your financial advisor has a legal obligation to work in your best interest at all times vs. the best interest of the company they represent. To receive a free copy of the Consumer Guide titled: “The 13 Questions You Must Ask Your Retirement Advisor (or Any Financial Advisor You’re Thinking of Working With) Before You Hire Them”, simply click this link: https://www.theretirementcoach.com/free-consumer-guide-how-to-protect-yourself

Your FREE copy will be sent to you immediately.

P.S.S. HELP spread the news! If you have a friend, family member, or co-worker who would enjoy receiving my Retirement CoachStrategy of the Week”, please pass it on. Please simply provide their name and email address to us at info@TheRetirementCoach.com. Or they can subscribe at: www.TheRetirementCoach.com

I appreciate the trust you place in us. Thank you!

(The content of this letter does not constitute a tax opinion. Always consult with a competent tax professional service provider for advice on tax matters specific to your situation.)