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Episode #473 - How Is Deferred Compensation Taxed When I Receive It?

[00:00:00] "It's the little details that are vital. Little things make big things happen."

-John Wooden

INTRODUCTION

Hi there. Welcome to the Retirement Answer Man Show.

My name is Roger Whitney. I am your host.

This is the show dedicated to helping you not just survive retirement, but actually have the confidence because you've done the work to lean in, and rock retirement hopefully even in a bear market. Now, today we're gonna answer some of your questions and we're gonna have our new Bring It On segment where we talk about the non-financial aspect of retirement.

PRACTICAL PLANNING SEGMENT

Before we do that though, I want to share some of my observations from the recently aired Retirement Plan Live series with Rosie and Dwayne. We just had the results webinar with Rosie, where we actually looked at the results of where they're at right now. It wasn't feasible and so we had to navigate that.

 I want to thank Rosie so much for stepping up [00:01:00] and sharing a somewhat difficult situation so publicly and we're gonna work to help her out, but for us to learn as we walk this journey with her. So thank you so much, Rosie. So my observations from that journey with Rosie, and if you didn't watch the results webinar, it is at rogerwhitney.com under free resources, you can find it there.

Essentially, when we did the analysis with this bear market, it was clear that the plan that they had, which is relatively close to the plan that they have been working is nowhere near feasible. If they continued on that trajectory, it looked like they were gonna run out of money within the next 10 years. So it was a difficult one to navigate, especially live with Rosie and a thousand plus people, and I think we framed a way to get back on track. So that's the short of it, but you can see the replay at our website. Here are my observations from [00:02:00] my interactions with Rosie and what I've heard, and I'm thinking about it a lot.

I haven't had a lot of extended interactions beyond what you heard on the show. We, Rosie and I, had a few conversations outside of the show, but not a lot. And I'm coming into this with fresh eyes, so I want to acknowledge that perspective. Here are some observations I have that I think we need to all be aware of in our own journey.

Number one, when Rosie retired in mid 2021, it was a bull market. Interest rates were zero, and their plan, I assume, was somewhat feasible when they retired because they're working with an advisor and they said that they saw projections. When I step back and look at it, I don't know how it was feasible even before the bear market with the kind of withdrawal rate they were taking, but we'll leave that. Even if it was feasible though, it's clear that nothing was done to make it resilient, which is that third [00:03:00] stage of a good retirement plan.

You have a vision, you have making a feasible plan. Then you gotta make it resilient so it can handle shocks. Whether that's life event shocks, or a bear market shocks. So it's clear that the plan never became a resilient plan. So when life happened in the term, in this case, a bear market, the plan broke pretty quickly.

 Now they're dealing with a plan that isn't close to feasible and having to really make some tough decisions as a result of that. Now, would the plan have broken anyway, given that we had this bear market? Possibly, but I don't think it would've been near as big of a renegotiation as they're likely facing.

So that's my first observation is that they had a feasible plan statistically looking at models. I don't get how that worked actually, but I'm assume that's what happened. They said they had numbers with their advisor that said it was feasible. Well, it wasn't resilient, so that feasibility was very weak [00:04:00] and it didn't take much to blow it over.

One analogy to think about this, the difference between feasible and resilient. A feasible plan is like a lit candle. The candle can burn, but if you have a good breeze come by. It's gonna blow that candle out. When you make a plan resilient, it's like a fire. It has some substance to it. So when a breeze comes by, it's definitely not gonna blow it out, and it may actually fuel it and make the overall plan stronger.

Now, that's not a perfect metaphor, but hopefully gets the point home. So that's observation number one.

Observation number two. Going into their plan or into retirement as well as currently, they're about 75% equities. In their overall allocation, and given the constraints of their plan, meaning that they weren't vastly overfunded, they were barely feasible, if that. They continued with an accumulation investment [00:05:00] stance, even though they had started doing systematic withdrawals on a monthly basis, reverse dollar cost averaging. In mid 2021, it was probably hard to get much more conservative in terms of having an investment plan that matched the withdrawals they were gonna do because interest rates were zero and the markets were doing relatively good. So it would've been having to pivot when the party was still going on. But this accumulation, meaning fairly equity-heavy investment allocation, didn't serve them when they were drawing money out when sequence of return risk was the highest.

And that is really unfortunate, especially given that they're not overfunded, they were barely funded and now they're underfunded for what their plan has been. And that's a an example of going from retiring and going from an accumulation to a decumulation investment stance. You gotta make that transition to secure the [00:06:00] outcomes you want in this harvest season of life. So that's unfortunate.

My third observation is related to that is that they been using a financial planner, a CFP, this entire time, and I don't know the conversations they had with this planner over this entire time. I don't know the process that was used. But it becomes much more clear to me, seeing how things were done, that there is a big difference between a financial advisor, and even a financial planner and a retirement planner. Somebody who goes deep on how do you actually build and manage a decumulation plan that has some resilience to it. I think financial planning is a whole different category.

If you think of financial planner, that's like your general practitioner in the medical field, you're not gonna have them do surgery. You're not gonna have them do the specialties because they're a general practitioner. I'm convinced more and more that a specialist that focuses on [00:07:00] true retirement planning, that is product and investment neutral, is very different than a general financial planner. I think we see that in this case.

From my understanding is, they had this accumulation mindset in terms of the investment allocation and they were literally selling assets every single month from the asset allocation to meet the withdrawals. That simply does not work for somebody who is very constrained or on the edge of a feasible plan. Doesn't work.

Fourth observation, it was obvious that there were communication issues between the advisor and Rosie and her husband. Rosie articulated that she assumed that there was safe money there for the distributions, and in her mind she said, safe money meant money markets, CDs, et cetera. In a recent meeting with the advisor, she shared that in fact, the advisor heard safe investments [00:08:00] and had that simply in the bond portion of the allocation. So it was in bond funds or ETFs rather than in liquid assets like cash, CDs, et cetera. That was not Rosie's understanding and this incongruence between what she thought and what the advisor thought.

This situation went on for over a year and was just recently discovered. So, there was obviously some miscommunication here on the advisor part for not showing in detail exactly how this was going to happen potentially. I'm wary of knowing what the advisor did and criticizing the advisor because I don't know what the conversations were. But it's clear that Rosie had a different understanding and she didn't dig deep enough, most likely in looking at the statements and in their conversations to tease out the fact that there was some miscommunication going on. Both parties can be at fault there.

 In what Rosie shared on the show and on the results show is, she would ask questions [00:09:00] and then the advisor would answer them, but on a surface level. Then Rosie either didn't know the question or didn't have a follow up question to pin it down deeper. The little details are vital, especially on the important topics because that's how big things happen. This little detail of exactly how the decumulation plan was going from the investment fund to create their paycheck. That detail was missing. It was low resolution for Rosie as to how it was gonna go, and that's a problem.

My last observation I'll share for now is that Rosie took her Social Security early. Duane just started his Social Security. So there might actually be an option there to undo that.

She articulated, I think it was in the third episode of that series, that she and Duane were determined to take their Social Security early to preserve their assets for as long as they could, and that the advisor and Rosie and Duane had surface level discussions, but never actually [00:10:00] looked at it in an organized way in depth, because they had already made that decision.

In their situation, this is a decision that is material to the long-term feasibility of this plan. Given that they were so constrained at the beginning of retirement, maximizing that social capital of maximizing Social Security, even if they went through their assets, could have made a significant difference in the trajectory of their plan, even if they had to tap their assets early.

At a minimum, it should have been analyzed more in detail. So even if they chose to take it early, it was done with eyes wide open. That was a rough one to go through. I appreciate Rosie. And they're working on the decisions to get back on track.

But with that, let's move on and answer some of your questions.[00:11:00]

LISTENER QUESTIONS

I like answering your questions. We're gonna do that today. So if you have a question for the show, go to rogerwhitney.com/askroger or click on the link in our 6-Shot Saturday email that will take you right to the site where you can type in a question or you can leave an audio question so we can hear your awesome voice.

QUESTION ONE:

"Is deferred compensation considered earned income during the distribution period?"

All right. Our first question today comes from Scott related to deferred compensation. He has a deferred compensation plan. Before we get to his question, let's define what that is. This is a compensation scheme developed by companies where it allows an employee to defer their income in this deferred compensation plan, and then it would be invested in some way, and then it would be paid out on some schedule at some later date, typically retirement.

Each plan is structured differently. Some plans you have to [00:12:00] choose when you're deferring your income in the year that you make that deferral, sometimes there's some flexibility there. So as an example, let's say you're 40 years old and you make $200,000. You can say, defer a hundred thousand dollars of my income and pay it out to me when I'm 65.

Then that money would grow and then be paid out at 65. And each plan is a little bit different. So there isn't just some standard plan everybody has.

So Scott's question is,

" Is deferred compensation considered earned income during the distribution period? I'm asking for the intent of Roth conversion after retirement or for Roth contributions of excess money."

So what Scott's trying to figure out is how is this deferred income treated when it's actually paid out because he wants to consider doing some Roth conversions or perhaps contributing to Roth because he's gonna get this income. What's the treatment of that income from a deferred compensation?

So Scott, unfortunately, deferred [00:13:00] compensation payouts is not an eligible type of income to allow you to make Roth conversions. Other types of incomes are non IRA contribution eligible as well. Pension income, annuity income, property earnings and profits. And certain types of profit income as well, don't count as income in order to actually make a Roth contribution in this case, and I would refer you to the IRS publication 590a , where it talks about this.

Now, if you're gonna have deferred income payouts or deferred comp payouts in retirement, you could use those payouts that you're gonna pay taxes on, because it is earned income from a federal tax bracket standpoint, to fray the cost of perhaps doing Roth conversions of other IRA assets instead. But unfortunately, It's not gonna count as income to allow you to make a contribution to a Roth IRA.

QUESTION TWO:

"When can someone collect Social [00:14:00] Security survivor benefits?"

Our next question comes from Scott related to Social Security.

Scott says,

"I have a 58 year old friend whose husband died last year at age 63. He was the primary earner. I don't know all the details about her finances, but based on my conversation with her, I assume she could really use the monthly income. When can she start collecting Social Security? Am I right that I'm assuming that it's based on his contributions? "

Okay, Scott, thanks for helping her out on this by the way. The earliest your friend can receive Social Security based on her survivor benefit isn't until age 60. Now if she had enough earnings on her own record, that would be 62.

Given her birth year, if she does turn on her survivor's benefit, at the minimum age of 60, she would get about 70% of what the potential survivor benefit would be based off of her husband's record. Delaying until age 62 would get her about [00:15:00] 80% of the full survivor benefit, and then waiting until age 67, her full retirement age, would be the highest benefit she could get.

Unfortunately, there is no benefit for her delaying out to age 70 if she's claiming as a surviving spouse on that benefit. Given her age, that's about nine years until she could get the maximum survivor benefit. Unfortunately when you have a spouse pass, your expenses don't go down by half.

They may go down a bit, but sometimes it could actually increase because you have new expenses for other things. By the way, we're gonna be exploring going from two to one next month. That's gonna be the theme for the entire month. And we're gonna have some organized thinking around navigating these types of decisions, including the survivor benefit for Social Security.

What she needs to have to help make that decision is a feasible plan of how this is going to work. Because right now she's focused on the way [00:16:00] you stated anyway here and now of "Hey, getting this benefit at age 60 could really help right now" and what she needs to understand better, between now and when she makes that decision is, does taking that burden to hand right now potentially hurt me later in life in terms of having guaranteed income that will increase by inflation.

The only way she's gonna find that out is by putting together a framework for not just how she's gonna pay her bills this year, next year, and the year after, but how she's going to cover her expenses into older age.

Everything should be on the table, whether it's part-time work, relocation, adjusting expenses. Everything should be on the table so she can start to look at her new situation, her unexpected situation with fresh eyes, and we're gonna talk a lot about that in an organized way. So maybe suggest that she tune into that for March's series on going from two to one.

QUESTION THREE:

"On setting [00:17:00] aside a 5-year fund as the basis to building the pie cake."

Our next question comes from Michael, relative to creating the pie cake in this pathway for how to pay for life. So let's check out Michael's question.

Hey Roger, this is Michael. My question's about the pie cake and the five year short term fund. You may have already addressed my question, but I haven't heard it yet as a relatively new listener, although I've gone back to a lot of older podcasts to try to find it, but here it goes. So my retirement pie cake consists of a tax diverse collection of stocks and bonds in a 60/40.

Having a five year cash fund permanently lowers returns over the course of a long retirement, since the stock market is much more often up than down any one year, and since I have to replenish the five year fund each year by selling assets anyway, doesn't this just create a stagnant pool of sidelined wealth that would more likely be earning a better return elsewhere.

If I run my numbers for retirement and include five years of living expenses as not invested, that means I either need a larger pie cake at retirement to make it work, or [00:18:00] I will need a little bit more modest life than if, say, I only need to have one to two years set aside for cash. Or do I let the five-year fund dwindle down in a bad market and wait to replenish it when the market gets better? If so, isn't that just another way of trying to time the market?

Ultimately, is the five-year fund really a behavioral buffer because we humans are very loss averse and prone to making bad decisions?

If I'm confident in my ability to act rationally in a declining market or even have the option of going back to work part-time, if things really go south, will I be okay with a much smaller short-term fund than five years?

Thanks for all you do, Roger, and for addressing my many questions within a question.

Hey, Michael. Yes. Many questions in the question, but great questions all of them.

So let's try to unpack this a little bit. So first off, the exercise of creating the pie cake and mapping out how you're gonna pay for the first five years of life is after you know you have a feasible [00:19:00] plan. So when you have a feasible plan of record, which is stage two, you go from vision stage one, feasible plan of record stage two.

So you know that, hey, mathematically, this should work whether you're using Monte Carlo scenarios or what your spreadsheets or what have you.

The third stage is making the plan resilient, meaning that, okay, it's feasible mathematically, but we know that a lot can happen. Life can smack us in the face, as we just heard with the last question. Markets can smack us in the face as we just are going through a bear market. Inflation can smack us in the face and rise much higher than what historical norms are, and all of those can work together in some instances and just give us this really toxic mix.

As a result of all of this uncertainty, it's important to have slack in the system, meaning liquidity. So we have pieces that we can move around and make [00:20:00] adjustments to so we can navigate that. If we have almost no cash reserves or maybe only a year or two, and then the rest of it is invested with risk assets, volatile assets, it lessens our optionality and the ability to make adjustments because we're running a more optimized from a return standpoint system.

One of the problems with trying to optimize the return flow, the potential returns, is that you make it more rigid. You make it more brittle to breaking when this toxic mix enters the system of a bad markets inflation, et cetera.

So five years I use as the baseline, we have to have a baseline to start from. So the way you're gonna determine how much of a buffer you need, or income floor you need is gonna be based on your "fundedness" ratio in terms of how feasible [00:21:00] the plan is. If it's very clear that you are overfunded, meaning you have excess wealth, more wealth than you really need to fund your lifestyle, then you could move between two extremes of super safety. First, just buying guaranteed income via pensions and annuities, as well as having an income floor or you could just do a straight systematic withdrawal because you have so much slack in the system because of this excess wealth that you can handle that toxic mix and still have volatile assets.

How feasible the plan is and where you fall on that spectrum of I have a lot of excess assets or I'm underfunded, is going to determine how big this income floor might be, so it doesn't necessarily have to be five years, it could be two years if you're really overfunded and you're comfortable with volatility.

Now, let's assume it is five years and go a little bit more directly to your question.

Does that hamper returns? Potentially, [00:22:00] because the assumption is if you have, and this is in my practice anyway, if you have five years of expected spending pre-funded in cash, you're still going to earn an interest rate on that. T- bills are paying close to 5% now. So you can still earn interest on all that money. It's not literally going to sit in a money market. It can be in CDs. It could be in T-bills, it could be in individual bonds.

The key attribute of that cash buffer is you just want to make sure you have some guarantees that the money will be returned to you at least at the same value, but hopefully with some return from interest.

Once you build that buffer, then when you're investing the rest of the money, Michael that allows you to be more aggressive than you would've otherwise been in terms of equity and other risky assets. So we're going from the income floor, which is the return of my money is important, to on the upside it's really the return on our money that we care about.[00:23:00]

So the upside portfolio, Michael, would be likely invested much more aggressively than you would've otherwise. It's very interesting as I've gone through this over the years with clients, is if you look at the entire pie cake, it ends up being like a 60/40 allocation. At the end of the day, the difference is in the accounting.

You have very, very, very safe assets on one end, and you have much more aggressive assets on the other end, but together it looks more like a traditional portfolio. That would be called barbell approach, if from a portfolio construction standpoint.

The reason you go through this exercise though is that it's not about maximizing potential returns, and this is the behavioral part.

We've been focused on maximizing returns in the accumulation phase because we've had so much time and we're saving for the future. Well in retirement, the future is now, and the standard [00:24:00] comes from not maximizing the return on the assets as the main focus. It's still important, but it's not the main focus. The main focus is life outcomes.

This is the harvesting season of life where you using your deferred wealth to fund your life. That is critical, and you don't want to fall short. It's so important that we're willing to sacrifice some excess return for having confidence that we can actually live the life that we want.

That's the big mental mind shift, Michael, that we have to go through. It's really different than how we have thought of investing over the years. It's about your life, you're not taking this money with you, and it's about are you able to spend, like you want to spend? We can intellectually get that, but we definitely need to have the confidence that we can do that.

It's worth having less of a return, statistically or less of a return potential [00:25:00] statistically in order to have confidence that yes, we can go on that trip and spend money even though there's a bear market and inflation is high. With a systematic withdrawal type structure where it's more optimized towards return on the investments, it's much more difficult to do that, which will cause people to deny themselves.

So hopefully that unpacked it a little bit for you, and leave another message and I'll answer any follow ups you have.

QUESTION FOUR:

"On spending psychology during the go-go years."

So our next question comes from Mike and it's related to spending psychology.

Mike says,

"Hey, love the podcast, loyal listener. I retired 18 months ago and like many retirees, I'm having a problem switching from saver to spender. I don't wanna miss out on experiences in the go-go and slow-go years only to have lots of cash and lots of regrets in my no-go years. I was wondering what your thoughts were on this line of thinking.

[00:26:00] So the conventional wisdom would be is that if you have retirement savings of say, $1.25 million, a safe withdrawal rate would be about $50,000 a year indexed each year for inflation.

Well, what about changing this to say $75,000 a year, but not index for inflation, the real amount you have to spend will decrease by inflation each year, but encourage you to spend early in retirement while you're healthy enough to enjoy it. I've run these numbers through an online calculator and I'm still left with a sizable amount in doing this over 30 years, and the sum could be used to make up the difference to living expenses in the shortfall. What are your thoughts on this?"

It's an interesting question, Michael. I am not a fan of the paradigm of withdrawal rates in thinking and planning based on average withdrawal rates. I think that's the wrong way to approach it in most cases. It's a good rule of thumb, but from a how do I actually do this standpoint, I wouldn't use [00:27:00] it.

My suggestion would be that you actually plan out the sequencing of what you're trying to say. So let's assume you want to spend 75,000 early in retirement, during your go-go years. My suggestion would be is start with your needs. What are the base needs for Michael and his family to live now and put an inflation rate on that base great life, and that's gonna be obviously the needs category with just some casual travel and eating out, et cetera. Then put a go-go extra amount. So let's assume that base amount is $75,000. Then put a go-go extra amount on top of that, say for 10 years. Let's say it's an extra 10,000 for 10 years, and then it tiers down to an extra of 5,000 for the 10 years after that and so forth.

I would actually break out your spending in a couple categories. Hey, what is it gonna [00:28:00] cost for a base great life? Then the discretionary, what can I add as go-go extra for a period of time and then slow-go extra and start to break these goals out. Some people go even as far as I'm gonna travel at this amount every other year.

I'd like that approach better in doing the analysis because it's more accurate to how people actually live, than a simple withdrawal rate because there can be periods of time where your withdrawal rates are not reasonable because you have some extraordinary spending that you're doing in a few years. Then you have other income flows, say downsizing your house or an inflow from an inheritance that might come later on.

Although you're higher than reasonable withdrawal in year three doesn't look good, it's counterbalanced by another inflow later on. It's much more bespoke than we think. So I'm not a fan of using these average [00:29:00] rates. I would rather you build a cash flow estimate based off of the sequences between base great life, discretionary wants, and wishes. That will give you a dashboard as well that as life gets better market wise, and say you're spending below average, you can start to add in things that maybe you couldn't get initially, but if life starts to go the other direction, you have more levers you can pull to figure out how do I keep this thing feasible even though the slope of my wealth is going the wrong direction.

That would be the way I would approach it, Michael. Mathematically, you can make these spreadsheets work like you want, but in reality you're not gonna live this way most likely. So I'd be careful in this approach. With that, let's move on to our Bring It On segment and talk about the non-financial part of life.

BRING IT ON

Roger: Bring it on! Now you are the hero you've been [00:30:00] waiting for. So let's go.

So today we're gonna talk about building energy so you can show up more as your best self. And when I think of energy, I think of Dr. Bobby Dubois who helped us with functional health last year. You're gonna be hanging out with us about once a month now. Bobby, how do you feel about that?

Dr. Bobby Dubois: Sounds like fun.

Roger: It is fun. So when we're thinking of what can we do proactively to show up, have the ability to show up as our best selves, you've referred to the three-legged stool, so help set the table of what we're gonna talk about today.

Dr. Bobby Dubois: So, to rock retirement, to feel like retirement is a success, you need to have your finances in order, you need to have a reason to wake up in the morning a purpose, and you have to have health. You have to have energy, or the engine just stops. So [00:31:00] my hope is that we can now take a step beyond what we've already talked about, which are things like nutrition and exercise, and dealing with the healthcare system and talk about a little softer, but equally as critical topic, which is our emotional, our cognitive, and our social wellbeing. I'm very passionate about beginning this dialogue and today's just a beginning. And hopefully we'll delve into each of the topics we'll mention today in much greater detail.

Roger: Oh, totally. I think the goal in this isn't necessarily to create some massive change tomorrow, either with ourselves or with someone else. I guess a lot of it is just, number one awareness, and then that helps change our paradigm about things so we can take little baby steps to be able to show up better.

Dr. Bobby Dubois: Absolutely.

Roger: Okay, so what's the first subject that you want to talk about around this goal of being [00:32:00] able to have that energy?

Dr. Bobby Dubois: So if our goal in this sort of beginning to look at this is to be in a good place emotionally, being happy, not depressed, not anxious. Mentally, we want to stay sharp. We don't wanna lose our faculties over time, and we wanna have the type of relationships which are very, very satisfying. There are four areas that I would like to explore and just get our toes wet for today.

Okay. The first is, sleep is critical. How much you get, how well you sleep is a critical component of achieving emotional, cognitive, and social wellbeing.

Second, social interactions. Not only is it fun to play with your grandchild or have dinner with another couple or play pickleball with a guy friend. Having somebody that you can share difficult things with as they arise is [00:33:00] a critical part of achieving that type of health.

The next is mind body activities. You know, it could be meditation, could be yoga, could be qi gong. This is a critical thing that one can do to improve that wellbeing.

The last is exposing ourselves to something uncomfortable, heat and cold.

And what is remarkable is it's not just that meditation calms us or having dinner with a friend makes us feel good about life. These four areas have been shown to help people live longer and actually be healthier, with less cognitive decline, fewer heart attacks, fewer strokes, lower blood pressure.

It's remarkable. And these are even more powerful oftentimes than the drugs we take. So I'm very excited and I think there's opportunities for everyone.

Roger: I wanted to pause there for a second because that's a big claim, [00:34:00] right? That these things are just as powerful or more powerful than all the medications for high blood pressure or other things. Obviously there are times when those are appropriate, but we seem to go to those first before we talk about these things, typically. I wonder why that is.

Dr. Bobby Dubois: Well there's a long set of things we could talk about from the doctor only having eight minutes with you in a typical exam time to we all look for something that's a simple fix.

Yes. These seem like bold claims and the exciting things is that there's actually clinical evidence on all of these. Now, in some cases it's quite rigorous, randomized controlled trials. In other cases, it's not as rigorous, but it's highly suggestive. And so as we go through each of these, both today and in the future, I'll actually share evidence.

This isn't just some woowoo opinion, there's real evidence. I want people to feel that this is [00:35:00] something they can act upon.

Roger: That’s one thing I love about you is because you have a high standard for what information you feel is valid. And I appreciate that.

Dr. Bobby Dubois: Thank you.

Roger: So let's talk about each one briefly.

Let's talk about sleep. Now, this actually is a target for me this year is my sleep. I use one of those trackers. I use the Whoop, it doesn't really matter what, what you use. I know they're not a hundred percent accurate, but I'm trying to get to a 90% sleep efficiency. Why is sleep so important?

Dr. Bobby Dubois: Well, first let me point out that we don't get enough of it, and then I'll sort of explain why it's so critical.

One third of Americans don't get enough sleep, and it's traditionally defined as seven hours or more, so a third of Americans get less than seven hours. And the 1940s, the average was 7.9 hours. We got a lot more sleep. Today it's about 6.8, so it's underneath that threshold that is worrisome.

Okay, so it isn't just that you wake up and you feel [00:36:00] like, ah, I'm not refreshed, and yeah, maybe my mind's a little foggy for a couple of hours and maybe I'm dragging in the afternoon.

It's been shown, and again, published studies in good journals numerous times that if you get less than seven hours of sleep, you have a 20% higher risk of heart attack and a 30% greater risk of obesity. We all know that if you don't sleep well, you often sort of satisfy yourself by eating. So this latter one isn't surprising.

Since you know, one of the three is emotional, social, and cognitive, a huge British study look at people in their fifties and sixties and found that those people who were getting less than seven hours of sleep had a 30% greater risk of dementia.

So not only is it a feel good phenomenon, it truly affects our health and it truly affects how long we might live and as we'll [00:37:00] get to in future months, there are real ways that we can try to improve that.

Roger: So what is, you mentioned seven hours, but what is enough sleep? Is there a standard around that or a guideline?

Dr. Bobby Dubois: No, everybody's different. You know, if you get 12 hours of sleep, you begin to say, huh, maybe you're kind of depressed and you don't want to get out of bed in the morning. Clearly below seven is problematic, but whether you get seven, you get eight, you get eight and a half.

You know, I don't think there's any data that, you know between those ranges. It makes a difference. I typically aim for eight, eight plus every, every night. I try to get it most nights and most of the time I'm pretty successful about it.

Roger: As I became more aware of this Bobby, because I'm working on it because I want to get eight, you know, seven to eight hours of sleep.

What I have found is I actually have to be in bed for at least nine hours to get that sleep. It's not like I get in bed, is when I'm going to sleep. It's usually there's wait time [00:38:00] and it takes time to get to bed and you're in a waking up period. Then if it takes nine hours, and I wanna wake up at 6:00 AM… You do the math, that means I'm supposed to go to bed at nine and that's hard.

Dr. Bobby Dubois: I go to bed at 9:00 or 9:30. So yeah, for me it's easy. But for a lot of people who are night owls, they have to think about it differently.

Roger: Well, it's more of a habitual thing, right? Because we're traditionally, we haven't done that. My wife will see me get up and start to walk to the room and she's looking at her watch, looking at me like you know, what are you doing there?

Okay, so sleep, and I've read a lot of things on that as well. So that's why sleep is important. Let's go to social interaction. How does that help us from a health and energy perspective?

Dr. Bobby Dubois: This is really one of the astounding things. You know, everybody says to have meaning in your life. You wanna be with other people, you wanna do things for other people.

But it wasn't clear that it actually connected the dots to your health and how long you lived. It turns out that satisfying social relationships, and there's a lot of [00:39:00] definitions for that. My personal definition is if something's truly troubling you and, and perhaps in kind of a vulnerable way, do you have somebody that you can talk to.

You know, it could be a spouse, it could be a male friend. It could be a sibling, but is there somebody you can go to now if you think about a little bit more deeply, why might that help our health? Well, because getting things off our chest, reduces stress. Getting empathy, giving empathy, reduces stress, and it turns out that equally and maybe even more powerful than not smoking, getting exercise, having your cholesterol and blood pressure under control to predict your health as you get older and how long you're gonna live. Social relationships are the one.

So there's a huge study of about 300,000 people and they found that people who did not have a satisfying relationship or series of relationships, [00:40:00] had a 22% higher risk of death.

Folks who have been watching the news and reading the papers may have run across a Harvard study that has become quite talked about of late where they looked at 75 years of folks and tried to understand why were they happy? Why did they live long? Why didn't they?

It turns out the most important predictor of whether you will be healthy in your seventies or eighties or even lived to your seventies or eighties was how satisfied you were with social relationships in your 50s.

Roger: Interesting, and I like that. How satisfied, not just the relationships, but how satisfied you are with them.

Dr. Bobby Dubois: Yeah. And that these, this predicted less cognitive decline. And this is an interesting one. We all get pain sometimes. It bothers us a lot. Sometimes it doesn't bother us so much. Those that have satisfying relationships still had pain, but [00:41:00] it didn't bother them as much.

And again, it's not a surprise because sharing these types of struggles with other people does help you feel better. So it's wonderful. And I'm an introvert, so for me, this means work, and of late I've been working hard to try to improve mine.

Roger: Me too. Me too. I'm an introvert as well, and struggles sometimes there.

All right. Number three is mind body activities. What do you mean by that?

Dr. Bobby Dubois: Well, we know that the mind and the body are connected, and sometimes the body tells the mind things. Sometimes the mind tells the body things. But sort of tactically, meditation, yoga, qi gong. You know, there's a long history of this in Asia. It's becoming unbelievably more common here in the States and just like sleep and satisfying relationships. Yes, it helps us feel better. It helps us feel calmer, feel more at one with the world. But darn, it's been shown in [00:42:00] diabetics that meditation and these types of things, lower diabetic's blood sugar.

When you measure cortisol or stress hormones, they're actually down and your blood pressure is down, and at times the effect of these mind body activities is even more powerful than medications. So it isn't just, I want to be a Buddhist and I wanna be at one with the world and join, you know, spiritual things when I pass on to the next world, it actually will help our health and will help us live longer. There's more and more data to say, this isn't conjecture, this is real.

Roger: So let's go to the fourth one real quick and then I want to tie that in with the one you just talked about altogether with these. That's basically exposure we're gonna call it, to heat and cold and uncomfortableness, I guess it would be. Isn't there a reason we have all these modern amenities and we keep our [00:43:00] house around 73 degrees or whatever the temperature is?

Dr. Bobby Dubois: Hmm. Yeah. It makes us feel comfortable. Yes, absolutely, and a warm sweater on a cold day is great and ice cream on a hot day is wonderful too.

But the Scandinavians have been doing this thing called sauna for a very, very long time, and they roll around in the snow sometimes and the Russians jump into ice cold water. You know, there over the last decade or two are a huge number of studies that's saying not only do you feel better. After I jump in an ice bath, darn it wakes me up. Well, yeah, that's not a huge surprise. But now there's increasing amounts of data that sauna, as an example, lowers your risk of heart disease, your likelihood of stroke, your overall mortality rate, and once again, cognitive decline falls by 20% in people who are regular sauna goers.[00:44:00]

Now the cold plunge, which are these tanks you can have and we have one in our house. Or you can just take a bag of ice, toss it in a bathtub and climb on in. These are becoming very popular now as well, and it isn't just to soak your elbow because you play too much tennis. It does something to your hormone levels.

It does something to your cardiovascular system. Not as much data on cold plunge, although it's starting to look more and more promising, but very powerful. Who knows? Maybe some of it's mediated through the fact that when you do these things, you sleep better and maybe sleep's the common factor. But all of these things are helpful, and I love when one plus one equals three. Here we got four things, one plus one, plus one plus one, and gosh knows, what that will add up to. But being able to focus on all four of these, you have a very powerful way to help you live longer. and health state that will really be good for you in your [00:45:00] retirement.

Roger: When I think of all four of these, and we're gonna dive into each one of 'em and a lot of other things, month to month, as you and I chat together, it, this is a multi-factor thing. If you're doing one, you're likely doing the other. You're sort of like, if you're exercising, you're likely eating a little bit better. So they start to compound and compounding. It's very powerful. When we hear these, these require changing our habits in some way, which is the hardest thing to do because we have these grooves of habits that define our life.

We are our habits, right? And so what I think about is when you mention cold plunge, like my test on a cold plunge, Bobby is, and I don't do it every day because it's uncomfortable, is the last 10 seconds of the shower. I just turn it to cold and it shocks me. Especially cause I take hot showers, so I sort of get one degree to the other.

So it can be just these little baby steps of going to bed [00:46:00] 10 minutes earlier, just not having the TV in the bedroom. Just little baby steps.

Bobby, I'm excited to go on this journey with you. This is how we build a great life and stack the odds in our favor, just these little incremental things.

Dr. Bobby Dubois: Well, this is great. I look forward to further dialogues and interacting with folks on what are terribly important issues about emotional wellbeing, our social interactions, and the wellbeing related to that, and our cognitive function, all of which will help us live long and well.

TODAY'S SMART SPRINT SEGMENT

Now we're off to set a smart sprint where you can set a little baby step you can take over the next seven days to not just rock retirement, but rock life.

In the next seven days, choose something in the energy category. Maybe it's something Bobby and I chatted about and try something new.

It could be doing the cold shower for the last five seconds.

It could, could be going to bed maybe a half hour earlier.

Find one thing you can start [00:47:00] doing to improve the sleep that you're getting and the energy you can have so you can show up as your best self every day.

CONCLUSION

All right. The end of the show, I think this is the second time I'm doing this. I want to make a pledge to you as the Retirement Answer Man listener. We had a lot of decisions recently about the direction of the show, whether we're gonna have advertising, whether we're gonna join a big podcast network, et cetera, and we made a decision to keep the show focused on the core purpose of our entire organization, which is to empower people to rock retirement.

So our pledges, number one, our focus is going to be on you and your journey in this stage of life. Whether you're coming up to retirement, you're in the transition or you're retiring, we're gonna focus on you and how you can actually rock it. We're gonna focus on how you can have hope, so you can create that inspiring goal. Have that agency, and identify [00:48:00] pathways. That's what we want to empower you to do.

We're gonna do this with authenticity.

No pretense. We're gonna be humble in our approach. We're gonna be respectful to everyone that is on the same journey knowing that everybody has their own idiosyncratic way of doing this.

We're gonna be curious.

We're gonna try to approach everything with fresh eyes and hold our own beliefs up for an examination to either confirm them, adjust them, or realize that maybe we were wrong.

We're gonna continue to work on having freedom from big finance, from products. We're not gonna about talk about products from money, we're not gonna get paid for the anything we talk about or gimmicks.

We're just gonna be real.

We wanna focus on action.

We want you to take incremental action.

We want you to expand your perspective.

I'm not worried about you knowing everything about Social Security or anything in detail beyond what you need to know to actually take action because that's where life happens.

I am all in on this. So let's do this.

The opinions voice in this podcast are for general information only and [00:49:00] not intended to provide specific advice or recommendations for any individual. All performance references, 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.