Episode 91A: Why You're Not Spending Enough in Retirement! PART 1

You know what your problem is in retirement? You're not spending enough.

In this episode of Straight Talk Wealth Radio I’m going to be talking about why you need to spend more in retirement. You're not spending enough money, and I know why. So today I'm going to tell you not only why you should be spending more, but how to do it and how to do it with peace of mind.

In this episode you'll learn:
1. The challenges baby boomers face in retirement, including longevity risk, market behavior impact, and withdrawal rate risk.
2. The concept of sequence of returns risk and how it can significantly impact retirement income, especially when taking distributions in a down market.
3. The importance of spending more money in retirement to avoid financial problems, and how to do so with peace of mind.
4. The retirement planning challenges faced by individuals of all financial statuses, including calculating life expectancy, portfolio performance, inflation, and withdrawal rates.
5. The financial situation of the "Bob Hope generation" and how their pensions and Social Security benefits provided a more stable retirement.
6. How different withdrawal patterns in up and down markets can affect the longevity of retirement portfolios.
7. The longevity risk multiplier, which includes market risk, withdrawal rate risk, and sequence of returns risk, and how to manage longevity risk by shifting risk to others.
8. The role of guaranteed streams of income in providing confidence for retirees, as supported by a study from the Metlife Mature Markets Institute.
9. The difficulty in confidently planning retirement spending when relying on fluctuating portfolios.
10. Upcoming solutions to increase retirement income, including determining income needs, withdrawal rates, and insights from government reports, which will be covered in future episodes.

Today we'll discuss:
"Financial Security: We're going to talk about how to stretch a dollar and how to protect the dollars coming into you to make sure they don't run out and that you can spend more of your money with a free heart."
— [00:04:07 → 00:04:20]
"Retirement Planning vs Investment Planning: Retirement planning is not investment planning. They're different. "
— [00:06:22 → 00:06:40]
"Retirement Lifestyle Choices: So the point is that not everybody is choosing to work later. They are living longer, but they're not necessarily choosing to work later."
— [00:11:50 → 00:12:08]
"Understanding Retirement Withdrawals: Now, there's this rule, we're going to look at it called the 4% rule, which says you should start with 4% a year of your portfolio as an acceptable amount to begin withdrawing with some increases for inflation. Good idea, bad idea."
— [00:14:22 → 00:14:37]
"Understanding Sequence of Returns Risk: The theme of this risk is the difference a few bad years can make. And this is really, really important in terms of market performance and what you're going to get out of your portfolio to spend."
— [00:15:42 → 00:15:55]
"Investment Strategies: Our annual withdrawals might start at 5% withdrawals, but we're going to adjust them upward 3.5% each year for inflation."
— [00:18:56 → 00:19:16]
"Financial Planning and Retirement: Now, once you're retired, if you discover you are running out of money 13 years earlier than you planned, that's a big deal."
— [00:20:48 → 00:20:57]
"Understanding Sequence of Return Risk: It only takes one or two years difference to kill 13 years off your retirement. When you look at the potentiality of how fast markets can fall, and you can be in an up market and think you're in an up market, but if it turns on you early on, you're a goner. So this matters. Sequence of return risk... The order or the sequence of investment returns is a primary concern for retirees who are living off their income and capital of their investments."
—[00:21:30 → 00:21:49]
"Increasing Income Withdrawal Rates: We could get people from a hopeful 4% withdrawal per year to a for sure 7% withdrawal per year, maybe even up to 10%, and do it with peace of mind and confidence."
— [00:32:11 → 00:32:27]

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**Key Links:**

[polish-american]

My Silent Gen mother saved her entire life. Changing a mindset from saving to spending, as I have seen, is nearly impossible for some older folks who fear "running out" even if that is unlikely. Thank you for your commentary.

[manuelr]

i put 1/3 in stable funds 1/3 in MMF 1/3 in stocks. i'll draw from the 1st 2 buckets for 15 yrs with my SS 3600. don't have a mortgage if i make it past 15 hopefully the stock portfolio will be fine i should not be travelling much by then hence less money needed. mom made it to 90 and dad to 91. Spend a little more while you can still enjoy it.

[Ozymandias-rv]

Never spend money that you don't need to spend no matter how wealthy you are. Impossible to establish a dynasty if you waste money in retirement.

[jimyan]

Ghastly introductory "music."

[williammcintyre-vd]

Whit a blether. Much ado about nothing