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Episode #613 - Building Agile Retirement Goals

Roger: I think we spend too much time thinking about what we want in retirement instead of creating the conditions to discover it. Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence to lean in and rock it. My name is Roger Whitney. Gonna hang out with you today on week two of a four week series on better retirement goal setting. Last week we talked about the paradox of knowing what you want. This week we're going to talk about building agile retirement goals. Next week we're going to talk about how to navigate those goals once you start the journey a little inside baseball, in case you care, I think it's helpful to know how we come up with these series. Sometimes they're suggested by you or someone like you. Last week we had someone suggest, hey, can you redo another series on health care before Medicare? Which is a great idea by the way because we haven't done one in a number of years and lots have changed. So we have that on the docket. Oftentimes it's because I am curious about a portion of the process of retirement planning because we do this every day for a living and we teach it in the club and I want to go to the balcony, as they say, and get some perspective on a particular part of the process, in this case retirement goals. And normally when I do that, what I'll do is I will start reading a little bit on the topic and I will journal on the topic, incorporating what I read, incorporating my perspective on the countless conversations, one on one or in the club or with clients on setting retirement goals to come up with what's going on here. Can we do this better? Where are the nuances? And you know what I said at the beginning of the show, I think sometimes we spend too much time focusing on “I have to determine what I want rather than setting the conditions to discover it.” That's what we're going to talk about. That's how I do this process. Now, if you want to hang out live and noodle on this topic, on November 6th we're going to have an online hangout meetup, webinar, whatever you want to call it, where we're going to talk about the Go Go years and the importance of those. We're going to talk about goal setting to hopefully help you on your journey. So you can register for that live meetup at livewithroger.com it's going to be on November 6th. If you register, we will send a replay. In addition, we'll tell you a little bit about the Rock Retirement Club because we're opening up enrollment for the fall cohort to join. Usually this is one of our larger ones, which is great. This is the last chance to join this year, and we'll tell you how it can help you get the tools and build your retirement plan of record and have that safe place to ask questions to. Well, hopefully do retirement better so you can learn more about that. Live with Roger.com. Let's get to how to build agile retirement goals.

THE INTENT IS TO BUILD GOALS THAT ARE MORE MEANINGFUL TO YOU SO YOU CAN ROCK RETIREMENT

Roger: So our intent today in building agile retirement goals is to build goals that are more meaningful to you. You, the one person who is hearing my voice right now, so that you can rock retirement. Now, let's talk about this phrase. Rock retirement could sound a little aggressive, right? Rock and roll, you know, do. It can sound aggressive. It doesn't have to be. It can be smooth rock. It can be romantic rock. It can be quiet rock. It doesn't really matter what it means. All I'm trying to express here is you leaning into the life that is meaningful to you. It doesn't have to be taking on the world. That's what I mean is you leaning into your own life. I just happened to use Rock Retirement became the name of the book, and so I sort of own it now. But it just needs to be meaningful to you, and so do your retirement goals. When you look at writing on happiness, the how of happiness, Flourish, all these books on fulfillment and all these things, one theme comes out of them, and that is happiness is not something you can pursue and get. It is something that ensues from how you live. It's a byproduct of how you live day to day. You sort of fall into happiness because of the conditions that you have set up in your life or you don't. And I think that's really important when we think about retirement goal setting, because often the conversation is, tell me what you want. How much do you want to spend in retirement? How much do you want to spend on that car 10 years from now? We have these Go Go years. You need to tell me how much do you want to spend so you don't miss those years. Even I frame it this way. Sometimes. I have poker chips on Go Go years, for goodness sake. And it makes us have to define it and feel like, I better come up with a number. So we come up with $50,000 for Go Go Trav or whatever the number is, because they told me to think big and I might miss my Go Go years when I'm still healthy and young and energetic. So we set it up this way. So we come up with these numbers. 50,000 on go go travels for 50 years. And more recently, I've been asking questions when those goals are set up.

HOW DO YOU SET GOALS THAT ARE MEANINGFUL TO YOU IN AN AGILE WAY?

Roger: Well, tell me about this 50,000 on go go travel. You set it up, you're going to retire next year. What is next year going to look like? Or have you ever spent $50,000 in one year on travel? Some people have, awesome. Some people are like, no, no, I haven't even come close. I'm like, well, how is your travel now? Do you really enjoy the rhythm of your travel right now? Oh, yeah, we love it. We're comfortable. It's smooth. Okay. You love your travel right now. You've never spent close to whatever goal you set for Go travel. How are you even going to spend that amount in that year, next year? And they're like, I don't know. I don't know. And they become these sort of totems that we hold up that are really meaningless because people like Roger or others say, hey, you got these Go Go years. It might be feasible. Why not dream big? You don't even know if you want to travel. Let's say in this example, $50,000. That could be a lot of travel. That sounds tiring. Or maybe you just don't feel comfortable sitting in business class. That's just not your jam. Right? Like, I always, I, get attracted to cars, like, you know, Land Rovers and things like that. But I don't see myself. I don't think I'd ever buy a Land Rover. I don't see that as my self image. I don't know. So we got to be careful about these goals. And oftentimes people like me can frame it incorrectly. All that matters is they're meaningful to you. And it's almost impossible to set them ahead of time for many of us. So how do we approach this? So we're going to talk about how to approach goal setting in a more agile way. And we're also going to talk about the anatomy of a goal, because not all goals are the same. And hopefully this will help you, in your process to creating a more meaningful life. Right?

YOU WANT TO START WITH SELF-DISCOVERY AND ESTABLISHING OR REVISITING YOUR VALUES

Roger: All right. As always, we got to start with that self discovery, that foo foo stuff. I love the foo foo stuff. It's important. I love the numbers, too. But we got to start with self discovery and self reflection, just like I do when I'm thinking about this series. You want to start with establishing or revisiting your values. Now, there's a difference between a virtue and A value. And we can argue. I don't know how hard these are, but a virtue is something that's more character related. Stoicism. There's just a thread of great character. Values are something that you choose for yourself. Everybody has a different value or set of values. I'm going to grab my values plaque because I have one. Because I'm geeky that way. I'll read a couple of my values. One of my values is adventure. That is something I choose to live up to as a standard. I want to be adventurous. I want to go into nature. I want to try new things. I want to stretch myself. That may mean nothing to you. Continuous improvement. That's why I do these series and even that's why I do this podcast. Because this is my way of thinking through what I do. Because I want to be better. I always want to be better. It never ends. My relationship with God is something that is important to me. Bravery, laughter, service, positive attitude. Those are my chosen values. And in my mind I am closer to rocking retirement. Rocking retirement. Even though I'm not retired when I am living in congruence with those values. That's why we got to start there. And then from that exercise you want to journal, when was I at my best? When would I. When did I have that flow state in life, in my childhood and career? What were the conditions when I was like in my zone? And then conversely, what were the things that weren't when I was in these conditions, I just didn't feel right. That is how you discover your values or can rediscover them.

FOCUS ON CREATING CONDITIONS TO EXPLORE YOUR VALUES AND BUILD A LIFE WHERE FULFILLMENT NATURALLY FOLLOWS

Roger: This is where we got to start because your goals, the conditions you set up for your life, which is really the ultimate goal we want here, are going to help set the table for you to discover this new version of you in this new season of life. So let's talk about focusing on creating the conditions to allow you to explore how to live out your values so you can live an authentic life and have the byproduct of fulfillment and happiness. Are you following the thread there? So we call this, you know, this soft stuff, foo foo stuff and it's not, it gets to hard dollars. But they have to start with you and you are not a spreadsheet and nor is your life. And so we want to start there to better inform the goals that you're going to set. I'm trying to build a thread here. This is actually very engineering-like if we think about it. Okay, so we want to focus on creating the conditions so that you can Explore and live out these values. So step one is establishing a firm foundation. So in my vernacular, that is understanding how much it costs to live what I call a base great life. Base great life, not rice and beans. How much does it cost for housing, transportation? So I can just not starve and be, you know, be out of the rain. A base great life has those elements. So what is in a base great life? How much does it cost for housing? Got to have a roof over our head. How much does it cost for health care, for food and utilities, for transportation? For a base level of engagement, which means some travel, some hobbies, etc. What is the base number for that amount? You know, at least as best as you can determine right now. So version one is all we're shooting for, because we have to have that solid foundation where we move up the Maslow hierarchy of needs, which sets the conditions for us to lean into other things. So we need to know what a base great life is. And it can't just be rice and beans. So we want to have some of that general travel in there. That could be $100,000. It could be $500,000. It could be $70,000. Hey, Sherlock, it doesn't matter what the number is. Everybody's going to have something different. So you want to come up with that number, and it works. To use the number that it is now, but have some thoughtfulness to it. Now, you may have spreadsheets going back 20 years, which is awesome. You may have never done a budget in your life. You can do some basic work, and we have education on how to do that, but we just need to know that base great life number, that clarity and that level has to be feasible, and it has to be resilient. This is the important number. This is the baseline. From a Maslow perspective, we gotta have this. Now, once we have that, we move up to conditional wants. Now these are where we talk about the Go Go budget. You know, for those early years, the travel budget, the hobby budget, the energy or extra health budget. An example might be a concierge doctor. That could be a discretionary want for some of us that might actually be in our base great life. We get to make those choices. Nobody can tell us where it should be. You do you. We want to know those as best we can. This is where we come up with the Go Go travel budget as an example. And it's okay to swag a number that might feel like a stretch. You just don't want to tie yourself to that number. And create stress unnecessarily. And this is the area where we want to think about how we build goals. Dr. Bobby next week and I are having a chat on the show about organic foods. And one thing I love about Bobby's process is he focuses on N of 1 studies, meaning you're the N in this instance. And you have to experiment to determine what's most meaningful for you. You're not going to be able to know if 50,000 go go travel is right for you. You're just a theoretical exercise. You can hold it up there. You're really going to know as you start to do it in some form and discover by experimenting what is the right number and what is the right sequence and what things should be in those Go go travels. Because your goat, you may find that it's too little or it's too much or there's a seasonality to it. You're only going to know this by doing is essentially what I'm saying. So how do we do this? By doing this is where these n of 1 experiments can be very handy. And the way you want to set your conditional goals is with an open hand and do very low stakes experiments. So we want to lower the stakes of your goals, meaning that it's okay if we don't hit them. If you have a 50,000 go go budget for travel, it's just a number. It's your budget that you know you could spend, not that you have to spend. You just want to start making decisions knowing that it's feasible and see what happens. And when it doesn't work, fix it or change it or delete it.

YOU HAVE TO EXPERIMENT TO DETERMINE WHAT IS RIGHT FOR YOU

Roger: You want to experiment with activities. Don't commit and don't commit for too long. We were having a discussion around, a classic discussion the other day with someone about a beach house. And this is a good example because we, they originally threw up a beach house for, you know, an amount of money that one person wanted and the other one wasn't sure. And I've had this kind of conversation, this is really a conglomerate of countless conversations about this exact topic. And we put the beach house as the totem for what someone wanted. Now that's a big goal, right? And in order to experiment with that goal, you want to determine what it is you really want by setting that goal. In this case it was the same things I wanted in Colorado, which was I want to decrease the resistance in doing the things that I want. Adventure is a value. I want to be able to mountain bike from my house. I want to be able to get to a river, I want to be able to hike, etc. I want to be able to have a walkable city where I'm fit. Since I got back from Colorado, by the way, I've gained, like, five, six pounds. It's just hot here in Texas. I'm grumpy. So in order to live up my value of adventure and fitness and freedom and being closer to God, it was by having a place in Colorado. Now, many of you know that journey, and initially I had to buy a house there, and I went through my lots and all that other stuff. But in this case, we go to how do we make this low stakes? What I really wanted was the adventure, the fitness, the outdoors, walkable city, etc. And I just put a totem of I had to have a house where really what I wanted were the things that I pictured the house giving me. And so the way you would lower the stakes on a goal like that would be what Shawna and I did. We started renting a place, in this case Salida, for a month every summer, and then for two months every summer. And we could have, though we didn't, we could have rented places in other areas of Colorado or the country to get the access to adventure, the ability to have a walkable town for fitness, the outdoors, for being closer to God and for freedom. So it set the conditions, but without having to buy a house. And that's what I mean by lowering the stakes so you can try before you buy. And very easily it could have been, we rented a place or two in Salida for, say, for two years and realized, no, this isn't us. we don't like this, or, I don't want to be tied here. I actually want to go to other places. And that way it was. I, would much more easily have pivoted had that been the pathway. So that's what we mean by lowering the stakes. Run it before you buy it. Quit as easily as you start. And this is something Michael Easter explores in the scarcity brain. It's very easy to start. Things is exciting, it's new, it's fresh. We're hardwired to like new and more. It's harder to quit. And we get. You need to get comfortable with quitting. Another client I can think of Brian with golf is, I'm going to be in the golf. Brian's really good at experimenting. I'm going to be in the golf, and then I talk to him in, you know, three, four months later. Oh, yeah, I decided I'm going to do something else, we got to quit as easily as we start.

ROGER TALKS ABOUT THE ANATOMY OF A GOAL, SPECIFICALLY LOW STAKES GOALS THAT MAXIMIZE OPTIONALITY IN RETIREMENT PLANNING.

Roger: That means you’ve got to set your goals differently. So let's talk about the anatomy of a goal. So let's first talk about what we call a low stakes goal. These are goals that are year by year decisions and they maximize optionality. And optionality is something we never really talk about in retirement planning. It's probably one of the most valuable things you can have. So go-go Travel would be this example. It's an annual goal. It's scheduled for 15 years. And each year we're going to spend that proverbial $50,000 that I used as an example. And it's inflation adjusted. So when we set that goal in software or spreadsheet or whatever, it's going to be set 15 years, $50,000 a year annually, adjusted for inflation. So it gets hardwired into the plan. But think about that goal for a second. There's a maximum optionality there. You can't, you're not obligated to that $50,000 a year. It's just a number, really. It's a year by year goal, right? It's 50,000, and then that's your budget. So if we're going into 20, 26, say in a quarter or so, and you have this type of goal set, I have a budget for $50,000 for, for Gogo Travel. I mean, you want to sort of own that number, and any travel you do goes against that budget amount. And then at the end of the year you're going to realize, and throughout the year you're going to say, oh, I'm under budget, I'm over budget, et cetera. And at the end of the year, you're going to reflect on that $50,000 goal and say, wow, we totally missed the mark. We did all the travel we wanted and we're tired and we only spent 25. Let me revise this goal, which means for the next 14 years, you revise it to a more relevant number, or conversely, you overshoot it and then you reevaluate whether you need to revise upwards. You have a lot of optionality here. You have a lot of optionality to repurpose the $50,000 in Go Go Travel next year to health or to gifting to the kids, because it's just a fictional bucket on a budget line item or a goal line item. But in your software it doesn't realize that. So that's a really good example of the anatomy of a low stakes goal where you experiment, like Bobby says, you experiment For a year, you learn what's working and you fix it, adjust it or delete it.

ROGER TALKS ABOUT HIGH STAKES GOALS.

Now let's counter that to the anatomy of a high stakes goal. This is going to be a large expenditure. Let's say it's buying that million dollar house or gifting that half a million dollars to charity. That's a high stakes goal. A lot of money coming out. And if it happens early in retirement, you're never going to get that money back. In the gift case or in the purchase of a house case, it's going to be more difficult. There's going to be a lot of friction in cost, in getting, in doing the goal. In case of buying a house, you have closing costs, you have utilities, all these things, second or third order consequences, they're difficult or impossible to unwind. Like the gift, you can't unwind that. Once it's done and you've given the money to charity, you're not getting that money back. In the case of a house or an rv, you have the friction of trying to sell it, the costs associated with selling it, the time and whether you're going to make money or lose money, et cetera. It's hard to unwind. These are, you know, example might be $150,000 two years into retirement for in a depreciating asset like an RV or as a gift. The anatomy of that kind of goal is different than the low stakes goal that we talked about beforehand. Another example here would be a mortgage. Let's assume rather than $50,000 in Go Go Travel, you buy a second home and you put a mortgage on it and it's $50,000 in mortgage payments, right? That's a high stakes goal, right? Unlike the Go Go travel goal, you can't repurpose it to gifting or to health or other things because the mortgage company wants their payment every month and on time. You have no optionality there unless you sell the property. Whereas if you're wired in for a 15 year mortgage in an example that is hardwired into the plan. Now, unless you go through the friction of selling the asset, that is a very different goal than a low stakes goal. So it's important to realize that not just in your goal setting, but also in the results that your plan gives you. Because if you hardwire in a low stakes goal of 50,000 go go travel for 15 years, it's going to assume you do all of it when exact. In actuality, it's a year by year decision. So you want to think of your goals as what is the firm foundation that is critical. We got to get math on that and know that that is feasible and making sure that's resilient because that's our base Great life. Then when we get to conditional wants, we want to do n of 1 experiments and focus more on low stakes goals. This sets the conditions for discovering how you're going to live out your values rather than forcing you to on a path that you have to maintain because goal setting is theoretical and you want to have a much more.

You want, you want a loose hand with these so you can discover, oh, I do like golf. And maybe that leads you ultimately to join, ah, an expensive country club. Awesome. You're discovering it, not determining it in some high stakes way. And so that's what I mean about the conditions. And this should take a lot of pressure off of what do I want? Gotta get the base Great life. Now it's just experimenting N of 1 studies. Yeah, we're gonna put this travel budget here. It's just a totem that we're gonna use and it's gonna be a number and we're gonna compare how we did against that number, but with no obligation to hit that number and then we'll revisit it. Those are the kinds of things we want for almost all of our conditional wants, those discretionary spending things. M Rather than thinking you got to know what it is, I think that's a healthier way to build out retirement goals. And then because you're using an agile process, you can iterate on those and decide what you need to fix, etc.

LOW-STAKES GOALS HELP YOU EXPERIMENT, MAKE CONFIDENT DECISIONS, AND DISCOVER WHAT TRULY SUPPORTS A FULFILLING RETIREMENT.

Roger: One last thing I want to say related to goals is one positive thing about setting this low stakes goal and I'm going to use 50,000 in Go Go budget is even if you never spent close to that, it's good to hold that out there knowing that it's feasible and resilient because. And you want to almost key on that number throughout the year. I have an example here recently where we have someone that has a hard time with spending money. Not because they wouldn't enjoy the benefit of hiring a landscaper rather than it doing themselves, et cetera. They see the benefit of it, but they have a script that they've learned through, you know, their life that just makes it hard because it doesn't feel safe. So by setting say a 50,000 go go travel number and knowing that it's feasible and knowing that it's resilient, the exercise we went through is you just got to hold on to $50,000 every dollar you spend next year, reference it off of $50,000. So if you spend $500 to have some labor help you with the backyard process, hardwire it, say, compare it to the $50,000. Yes, you're spending 500,000 and it feels extravagant and maybe incongruent with who you are, but it's a drop in the bucket compared to the money that you know you can spend regret free, which is 50,000. These mental models can help us get over ourselves. And the whole goal here is not to spend money. It's to discover who you are and how you can best rock retirement. And you're only going to do that by making decisions and experimenting and reflecting. So hopefully that helped you evolve your retirement goal setting. Next week, we're going to talk about how to navigate goals. But for now, let's go answer some of your questions. all right now time to focus on you and your questions. If you have a question for the show, you can go to askroger me M. Type in your question. Leave it. Audio question. We'll do our best to help you take a baby step towards rocking retirement. Quick tip there is we elevate audio questions because we love to hear your voice.

ROGER ANSWERS MELISSA’S QUESTIONS ABOUT ROLLING OVER AN IRA WITHOUT PENALTY AND WHETHER TO TRUST A FLAT-FEE FIDUCIARY FIRM THAT OFFERS TO MANAGE HER ACCOUNTS.

Roger: All right, our first question comes from Melissa. She says, hey, Roger, I apologize if I've already asked, but I have emailed several podcasts and no one has replied yet. I got two questions. Number one, can I, without penalty, roll an IRA? It's at this firm where they're charging me like 1.3% to manage the assets into an account. So let's say at Vanguard and just manage on my own. So Melissa, yes, you can. Now when we say without penalty, we're talking about without tax penalty depends on what you're invested in in that particular ira. There may be some fees involved in that. I don't know enough information to answer that, but generally not. But you want to pay attention to that. But you are allowed to move an IRA from one company to an IRA at another company. So one from, say Merrill lynch to Fidelity or Morgan stanley to Vanguard, etc. Your IRA is structured as a tax advantaged account and the custodian is the name that we use in the biz is the financial institution that holds the IRA. So what you can do is establish another ira, let's say at Vanguard, just as an example. And then Vanguard has paperwork, it's called a transfer form, where you give them a statement, your last statement from your other ira and you give them authorization to go to that current ira and said, please transfer these monies into, in this case Melissa's new ira. So it's a pulled transaction from the new IRA firm. So the procedure would be: determine what firm you want to have your assets at, give them your most recent account statement and establish an ira and then they will request the money from your old IRA and your old financial firm in assuming that there's nothing proprietary that can't be moved. Because sometimes the firms will have investments that are specific to the firm and that's something you'll need to, you know, Vanguard or whomever you choose can tell you. Assuming that they're normal assets, they will pull the assets from the old IRA to the new ira. And there is no tax consequence for that. There's no tax reporting or anything. It just goes from custodian, the holder of your IRA, to the new custodian. But you definitely want to check with your current firm first to see if there's any, like, private investments or proprietary products that you're in that can't be transferred. I'm dealing with that issue right now with a client on private investments, a new client coming in. They have some things that are a little bit more complicated, but most of the time that's not the case. But you can definitely do that. So there's an answer to your number one.

Your second question was: I met with an advisor at a firm. They're supposed to be a flat fee fiduciary company. She did say that they could roll over older IRAs into their IRA accounts. Just curious if you know of them and if they are any good reviews seem positive?

I am familiar with the firm, Melissa, but I have no direct experience with the firm. So based on my knowledge of the firm and I'm not naming them because I don't know who they are and I'm not going to advertise for them if I really haven't vetted them based on my knowledge of the firm that it's a legit firm. Now you're going to be working with an individual and a lot of it has to do with who the individual is and what skills they have to solve the problems that you are trying to address. And we will put in our noodle email a link to how to interview an advisor, which at least helps you vet and hopefully get you to a better match in terms of who you're going to work with. But it's really helpful, Melissa, when you, when you're talking to a potential advisor, is to know exactly what you're trying to solve for if you're just trying to solve for very basic retirement planning and basic investment management, then I think the firm that you mentioned is probably pretty good at that. If you're looking for detailed tax planning or really more hand in hand figuring things out and you're dealing with things, then you want to know what it is you're trying to solve for so that you can understand how much they're able to solve for you. Hopefully this helps you a little bit, Melissa, but you definitely have portability in that ira and the better you can determine what you want to solve for in talking to an advisor will help you find a better match. Realizing that as long as you don't go into, you know, private investments or proprietary products, if you get three or four months into it and realize it's not right for you, you can move it again. So a lot of optionality there. So in that way you could at least get it out of this higher price firm that you're at. Move it to something like the firm you mentioned and then if you don't like what they're doing, you can always move it to manage it yourself.

GREG ASKS ROGER TO REVISIT HEALTHCARE BEFORE MEDICARE.

Roger: Our next question comes from Greg, and it's actually a request. Roger, I've been listening to your podcast and recently subscribed to the Noodle. Hopefully you're liking the Noodle. Very informative. I just saw this month's Noodle. Regarding health care before Medicare, I'm listening to the podcast that you did back in 2018. I wondered if this is a topic you can revisit now that we're in 2025 and the landscape has changed. Boy, Greg, has it changed. Yes, this is a topic that is worth revisiting now. We are going to revisit this in early 2026 and here's the reason for that, is that there are still some things that need to be cleaned up. I was having lunch with Wade File last week, or a week or two ago, and we're talking about an update to his retirement guidebook, which is an excellent resource and he's coming out with another addition and even he's going to wait a lot of that set. But he has to wait to get clarity on what's happening specifically with healthcare, before he goes to publish because there are some open loops. So, Greg, we have this on the docket for the first quarter of 2026.

ROB ASKS ABOUT DEFERRING SOCIAL SECURITY TO AGE 70 AND WHETHER HE STILL RECEIVES COLA INCREASES IN ADDITION TO THE 8% DELAYED RETIREMENT CREDIT.

Roger: Our next question comes from Rob related to deferring Social Security. First thing he says is I shared a walking through Social Security video where I shared my Social Security statement redacted and walked through it and he doesn't have the same page as I do. And evidently I have the pages 49 for people age 49 through 60. And Rob says he is 64 and he doesn't have the paragraph that says will Social Security be there for you? With that estimate that I shared on that video, we could put a link to that in the noodle. He also has three or four additional pages so they're different based on the age and honestly I didn't know that and that makes sense. And since he is writing, he says he wanted to confirm his assumption. So he's 64 and he's trying to determine what his benefit will be at age 70. When he decides to claim he wants to know does he get the benefit of the COLA in addition to that 8% bump for waiting after full retirement age? Rob, you are correct that you don't lose ground each year. You delay claiming your payout courtesy of the COLA or the inflation adjustment. On top of that you get an 8% annual delayed retirement credit non compounded from your full retirement age until you start your benefit at age 70. As far as what that inflation rate is, that's undergone a lot of changes in recent history. In 2024 it’s 2.5%. The average over the last 10 years was 2.8%. The average since 1975, which I think is when it was implemented, was 3.7%. So you do get both benefits.

CHRIS ASKS ABOUT USING ONLY A TOTAL WORLD STOCK AND BOND INDEX FOR HIS PORTFOLIO.

Roger: Our next question is an allocation question from Chris. Hey Roger, love the show. Nice mix of financial and life topics. I am retired and my plan is feasible, agile and resilient. A total world stock index says The S&P 500 companies make up about 60% of the total holdings. For the stock portion of my portfolio, what is the downside of only holding the total World stock index? So that's question number one. It's related to question number two. So let's get to that one too Chris. And for the bond portion, your question is for the bond portion of my portfolio, what is the downside of holding only the total World bond index and are some ETF or mutual fund that mimics those indexes. So Chris, first off, they are not appropriate for your contingency fund or your income floor that layer two. so they are not appropriate for the money that you're going to use to fund your life, at least for, for the first five years. Those monies need to be in specific instruments where, you know, there's maturity and the most important feature is that you're getting your money back, then you're trying to earn yield on those and that's the money that you're going to use to fund your life for the next five years. Now outside of that, we have the rest of your money that is trying to battle inflation. And so we'll call this the upside portfolio in our pie cake.

So let's just talk about the upside portfolio. Is there significant downsize to just simply owning total world stock index via, some type of fund and a total world bond? From a simplicity sake, it can be very elegant, right, because you just have two funds and you know you're broadly diversified over a large number of stocks and bonds on a global basis. I like that. What could be downsides to doing this? Maybe we do want to get a little bit more nuanced in this. The downside, Chris, would be that when you are reallocating because you'll have to fill up your income floor at some level year after year. If you only hold two funds, it makes rebalancing pretty simple, okay? Because you sell one, buy the other and you get to whatever mix you're looking for. And you can, you know, pull off some assets to rebuild clarity on how you're going to fund your life. But if you only have two funds, you have less levers when especially the world is going sideways in some ways in terms of where you pull money from. So especially in an after tax account, sometimes it can be beneficial to have it broken down more than just simply these two funds or these two broad asset classes. So you can do tax loss harvesting and you can be more tactical in pulling from winners and losers in your rebalancing. Sometimes there's some benefit to that. And in addition, even if it's in a pre tax account, there can be some benefit to doing exactly the same thing, although it's not for tax purposes. It helps you source funds to refill the buckets that are going to fill your life more tactically, but it shouldn't be required. This is an optimization question. So if you really wanted to be simple, yeah, you could use those two index based investments, total world bond, total world stock for your upside portfolio and whatever mix you think is appropriate. After you funded your life over the near midterm, will you lose out on some optimization opportunities, whether it be tax loss harvesting or rebalancing a little bit more tactically perhaps. Is that enough to make it more complicated for yourself? I don't know. Each of us is a little bit different there. But from an allocation standpoint, you're getting 80, 90% of the way there in the, in what you're proposing. It's just more in the optimization areas that you might miss out a little bit.

ROGER ADVISES KEEPING A LOCAL CONTINGENCY FUND SO YOU ALWAYS HAVE ACCESSIBLE CASH AND DON’T FEEL “CASH POOR.”

Roger: Now, before we get to our smart sprint, I want to talk about an observation I've had just in working with clients and setting up paychecks after they're used to getting that normal monthly paycheck. It's important, I think, at least initially, as a default, to set up a rhythm of paychecks that closely mimic what you were used to operating in when you were working. And that could be a monthly paycheck, it could be a bi monthly paycheck, whatever that is, to pull from your assets. So you're getting an automatic deposit from your assets to your spending account on a regular basis. We're used to operating that way. The money shows up, we spend it. One thing I've observed over the last few years, though, that I hadn't really thought of is that when you set it up that way and all of the assets are in your investment accounts outside of your normal operating accounts, like bank accounts that you operate out of, it's easy to feel cash poor. You don't have a lot of cash to write the check for that car, et cetera. Even if, you know, mentally it's over in that investment account and maybe it's in a money market or a CD, it's a different kind of accounting. Mentally, let's say it's a car and you know what, you want to buy a car and it's $40,000 to go talk to that account and get it transferred over, or to have the conversation with the advisor to send it over. Sometimes that can feel like asking permission to get money that's yours, even if you're not working with an advisor. So I think it's important that you have a reasonable contingency fund locally at your bank. And it may. It's likely not going to earn the same kind of interest you might earn in a. A money market at an online bank or at a Fidelity or at a Schwab or where have you. But you don't want to get yourself in a position where you feel cash poor when life is happening and you're. You're thinking you're going to buy a car a year from now. But things accelerate. You can move quickly or you get an opportunity to go on a trip. You don't want to set it up so you feel like you're cash poor and you have to go ask for cash that actually is there, but in, from how we do it, mental accounting. So all of that to say, so you don't feel cash poor, make sure you have a reasonable contingency fund that's local and forego the interest on that 40, 50, even $100,000 so you feel like you have control and you don't have to go ask for money. That's the point. With that said, let's go set a smart sprint. On your marks, get set. And we're off to take a little baby step we can take in the next seven days to not just rock retirement, but rock life.

SMART SPRINT

Roger: All right, in the next seven days, I want you to go back to your retirement goals and whatever kind of retirement plan you have put together and think of them through the lens of our discussion. Are you assuming that if you're go going for 15 years that it has to happen every year and that's influencing, overly influencing the result when in fact it's a year by year decision? I want you to look at them through the lens of the topics that we brought up earlier to see if you can be more nuanced because that might help you have more confidence. It might help you realize, wow, I really could retire a year earlier if I wanted to, or I could do other things that I didn't think I could do because of the way I had my goals structured. It's a good, I think it's that we want to extract as much life as we can out of a retirement and this is one way to do it.

OUTRO

Roger: All right, let's review what we talked about today. When you're setting agile retirement goals, it's important to establish a firm foundation on your base. Great life. That one we want to have wired in. Second, we want to then think about conditional wants, a, go go budget travel budget, etc. Third is we want to be careful about different types of goals. There are low stakes goals and there are high stakes goals and we need to understand the difference of those in planning and when you're setting goals. I think it's helpful to focus on setting up the conditions of discovering your life more than what the specific goals are. All right, with that said, I hope you have a wonderful day. Next week we're going to talk about how to navigate goals as life unfolds.

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All, performance reference is historical and does not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax or financial advisor before making any decisions.