transcript
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Episode #493 - Listener Questions: How Can I Reverse Taking Social Security?
What is your intent? My good fellow or lady? What is your intent? It's an important question in almost every decision.
INTRODUCTION
Hey there.
Welcome to the Retirement Answer Man Show. My name is Roger Whitney. I'm your host and this is the show dedicated to helping you not just survive retirement, but to do the work so he can have the confidence to lean in and rock retirement.
What is your intent? So next week is the beginning of the month, and I'm going to share the books that I read.
One book that I read that was excellent was called Call Sign Chaos, written by Jim Mattis and Bing West. Jim Mattis was instrumental in the military and all the interventions we've had in the Middle East. He is known as the philosopher general, he's a ferocious reader. Really good book outside of his military and storied career as a general and that journey. I took a lot from it and one of the things I took from it that you'll hear me talk about today, and you're probably hearing me talk about, because I'm being intentional about leaning into this, is he talked about, when there is an order given, it's important to have what's called the commander's intent. I wasn't military, so I didn't get exposed to these things and I thought of how I can incorporate them. The example he gave in the book was, let's say the general says, I want you to take that bridge in order to stop their retreat. Taking the bridge is the tactic, the commander's intent is to stop the retreat and it's important that there's always a clear intent expressed.
So when you're out there in the wild doing whatever you're doing, trying to take the bridge, well, what if you can't take the bridge? You run out of gas, you have an issue. They get there first or whatever. You have to improvise in order to execute the intent of the order. If you take the bridge, but you don't stop the retreat. It doesn't matter that you took the bridge. The important thing is stopping the retreat.
When we think about the decisions that you are making as you walk this retirement journey of what kind of paycheck you create, do I do Roth conversions? Do I add investments to optimize my portfolio? It's easy to get caught up in the tactical parts of it and forget what the intent is, and you want to be clear on what the intent is, and it forces more disciplined thinking before you start adding layers of complications or complexity to your plan.
I think that's a really important concept. That's one reason why we want to have these pillars and go through an organized process, always reminding ourselves that before I add that cool investment or that strategy, that I go through the process and I rem What's my intent of doing this is and is that intent worth the complication because these things will end up being things that move with us and that we'll have to manage throughout our retirement. So, it's a good book. We'll talk a little bit more about it next week. But for now, let's go focus on your questions.
LISTENER QUESTIONS
Now it's time to answer your questions. If you have a question for the show, you can go to rogerwhitney.com/askroger and leave an audio question or a typewritten question. You can also just simply reply to our weekly 6-Shot Saturday email where it will come to me, and I can put that into the queue and try to answer it on the show. So that's a simple way.
If you don't receive our weekly summary where we share links of things we talk about, you can sign up for that at rogerwhitney.com or sixshotsaturday.com as well.
HOW TO USE YOUR 5 YEAR CUSHION
All right. Our first question comes from Mike on what he calls the cash cushion.
Mike says,
"Hey, Roger.
Like Rosie, I retired in 2021 and got whacked side the head by 2022 bear market. I'm still treading water but expect sunnier days at some point. Once that happens, I'll be taking your advice to get some funds set aside to weather these storms.
But I have a quick question about the five-year cushion. If I put aside and spend from that balance, am I supposed to replenish my five-year cushion each year? Doesn't that mean I'm moving money from the general market and still dealing with the ups and downs? I bet only one fifth of the cushion. Am I missing something here?"
it's a good question, Mike. I think of this, you call it cushion, I call it a income ladder as a payroll reserve. When you retire, you no longer have a paycheck, or your paycheck is severely reduced because you're not earning money from income, perhaps you're getting a pension or social security. You have a lot less options to generate income to cover your life. So, you have to cover the deficit from your financial assets.
As a business owner, I'm used to that, right? I have to build a payroll reserve to not just fund my paycheck, you know, Roger gotta get paid, but to fund the employee's paycheck because they have to get paid. I have a payroll reserve account, which you could call a cash cushion to prefund the payments for myself and employees so I can have some resiliency because they need that money, I need that money to live life. It's no different than that.
In your case, unlike a business where you have revenue, recurring revenue, you need a longer payroll reserve because you don't have that revenue naturally coming in to build that bucket. You need to take it from your assets. Perhaps you have some dividends, and some interest, but typically, unless you have massive assets, it's not going to be enough to offset the spending.
So we get this conceptually. Now I want to take your question and actually break it into two parts. The first one, Mike, is I'm a little concerned about one phrase that you said and said, once we see sunnier days, once that happens, I'll be taking your advice to get some funds set aside to weather storms. That makes sense. I definitely think the fact that we're in a post bear market needs to be taken into account into how you create a structure that you can have more confidence in or that can be more resilient.
The worry there, Mike, and this is the pickle that you're dealing with, is the storm could be the precursor to the real storm or to a continuation of the storm.
Waiting for sunnier days to batten down the hatches could expose you to exacerbating the situation if the storm continues or picks up steam. That's difficult to navigate. You are where you are. How do you move forward? As much as you can put the past behind you, I don't want you to not think proactively because the storm could come back, it could get bigger. We don't know, and that could make your situation even more tenable than it might be. So be careful with that, and I know there's no real easy way to navigate that.
Now your question is, doesn't that just mean moving money from the market? So we're still dealing with the ups and downs. On a high level it does, right? If markets are really bad, what it gives you is a longer timeframe of liquidity. Well, actually, just to take it from that perspective, by building up this payroll reserve, it gives you more optionality to manage life and to manage your retirement. I would argue that optionality is severely undervalued in retirement planning, the ability to adjust what this big payroll reserve will do for you is it will allow you to have liquidity. So, in year two, when you change your mind about what your actual spending is and what your income sources are, because your preferences have changed, you decide to go back to work, maybe you take Social Security early. You have liquidity to adjust your life unfolding so you don't have to go to at-risk assets to make those adjustments.
As an example, let's say your health situation changes and you're going to have higher healthcare costs going forward. Well, now at least you have some liquidity to adjust your entire model without having to pull from the market, so it gives you that optionality. In addition to that, that cash cushion, Mike, will give you optionality so if we do have a bear market, and you heard Rosie and I talk about this in the case study, you can choose to manage your spending maybe by decreasing some of the wants and the wishes. Or in her case, I think they had a lot that they had purchased that they can get out of, which would one, give them some money back and two, lower their fixed expenses in order to extend the life of that cushion by moderating, spending during storms, right? Just as visually, I think you're on a sailboat. You're rocking and rolling. You're having a margarita as you fly across the ocean, whoa, storm comes in. Maybe you stop the margarita so you can have your wits about you, and you batten down the hatches and you slow down to ride out the storm.
In a similar way, you can slow down your wants and your wishes and even some of your base great life to make that, in theory, five-year cushion, maybe even a little bit longer. Maybe it's six or seven years because of this moderated spending while the storm is going on to maintain it as being resilient. In addition, you could explore other levers in Rosie's situation where her husband doing his online business of maybe leaning in to trying to earn a little more income in addition to doing this moderation in order to work your way through the storm.
If you don't have that cash cushion, you're going to have a lot less options to navigate storms in this case. You could literally after year one, let's assume none of those things are on the table, you spend year one of your cash cushion and you're going through a major storm. You could literally just say, well, I'm not going to replenish it this year.
Now I have a four-year cushion, and then maybe you do it for another year. Now I have a three-year cushion. All the while you're giving your at-risk assets, at least statistically, Time to revert to the mean because storms come and go, but you have these options. If you are optimized for long-term investment returns and you don't have this payroll reserve, you got a pretty tart pickle. Is it tart? Are they tart? What are they sour? I don't know. You have a tart sour pickle you have to deal with without a lot of options to move.
So, you have flexibility in how you actually rebuild that floor and to what extent you rebuild that floor. That's the logic behind it. And it has nothing to do with the optimization of an investment portfolio. It's putting a high value on flexibility and optionality that I think a lot of people don't think about too much or enough.
DOES HAVING A CIVIL JUDGEMENT AGAINST ME APPLY TO MY ACCOUNTS IN OTHER STATES?
So, our second question comes from Jake having to do with insurance.
Jake says,
"I have not heard the following question ever asked, and your education on this topic would be helpful.
My question is this, I have a million dollar plus rollover IRA with a custodian in Pennsylvania, and I have a $200,000 Roth IRA with a custodian based in Maryland. I have additional cash at a Michigan bank and a larger share at an internet bank. I am single and presently live in Michigan.
If I were ever to have a civil judgment against me in Michigan, would those assets held in other states be exposed to the risk of loss?
I currently have an umbrella liability policy covering 2 million above and beyond my homeowners and auto insurance policies. However, I'm wondering if I might be over-insured in carrying more insurance than I need."
That's a great question, Jake and I have never had this question before.
So, we have two parts to this.
One is, am I over-insured, and two is how do judgments work when I have assets potentially held at firms that have offices or headquarters in different states?
Definitely a good question. You definitely don't want to be over-insured. However, my experience has been that if someone needs the insurance they bought, their answer is consistently, I wish I would've bought more. So if you ever need it, Usually you're thankful you have what you have, but it's the most expensive thing you can pay for if you never have to use it, and that's just one of those weird things, right?
The good news with liability insurance policies, which help protect against judgments safe or slip and fall or an auto accident, they fill the gaps of auto insurance and home insurance. That type of insurance is relatively inexpensive to purchase. Cost levels of umbrella insurance from 1 million to 2 million verse 5 million, might find that the coverage difference isn't really worth the stress of optimizing the numbers too much, because they're not very expensive policies to have because they sit behind your normal policies.
Generally, the idea is to have at least as much umbrella insurance as your total assets. So, as you mentioned, you could add up your assets and look at it. Relative to the cost of the coverage. So, look at the cost of going from 2 million to 1 million or so forth, and you might see that it's not worth the hassle and it might just make you sleep better at night.
Now the second question, what happens if you have a judgment against you in Michigan where you live, but you have these IRAs and you say at a firm in Pennsylvania and a firm in Maryland? All individual retirement accounts have some level of creditor protection. Not quite as much as a 401k, which has federal protection against creditors, but they still have some, and that's going to vary state by state.
That's what you're getting at here, Jake, and I'm not an attorney, so I, I researched this just a little bit and I didn't get a very clear answer, but here is my, thinking on it is that it's going to be driven by where you are a resident of and or where the judgment took place. The fact that you have an IRA custodian in Pennsylvania, I doubt would mean that the Pennsylvania law would prevail because every state has different rules on how much liability you have against these types of judgements.
I do think this is definitely a question for an attorney, but when you think of, say you have an IRA custodian based in Pennsylvania, well, most IRA custodians, and by the way, a custodian is just a firm that holds your assets like a Charles Schwab, or Merrill Lynch, or Fidelity. They're going to have their home base. Most custodians are going to have offices and presence all over the country, if not the world. So, where they're based at, I don't think is necessarily going to come into play. But if you're really concerned about that, I would talk to an attorney or someone that is a specialist in liability protection to answer that question.
I would also check out what level of protection Michigan has because a level of protection is going to be state dependent in terms of liability coverage.
BRET WANTS TO KNOW MORE ABOUT HOW TO MAXIMIZE HIS ACCUMULATION PHASE
So, we're going to take a hard right turn to Albuquerque and answer a question from Bret wondering about a financial advisor. Bret is one of the younger listeners I imagine of the show.
He is 38. He has about 200 in retirement funds, and he wants to know when I should consider a financial advisor.
"Right now, I'm following the Bogleheads three fund approach. I am single. I have no kids, and I'm not expecting any either. Currently, I make about 80,000 a year and I have a 40 K emergency fund currently putting about 27% in my 403b and a target date fund with Vanguard.
Any advice would be great."
So, when do you need a financial advisor, Bret, in your situation, just given your age, it sounds like you're doing pretty much everything, right? Anything I would suggest is going to be stylistic, but it sounds like you're in the accumulation phase of planning. You're building your wealth and working, and you may not have a name for these assets, so that's good just to accumulate wealth.
An advisor could help you in that. If they're more of a planner, a full-service financial planner will help you with the insurance part of it and help you with the estate part of it, which you probably have minimal needs, and help you think through not just your investments, but your cashflow management.
How much value is there relative to the cost? It's very difficult to say, but I think if you followed a hierarchy very similar to what we talk about on the show, for people that are navigating retirement or their pathway into retirement, I think that would help a lot even without an advisor with a couple wrinkles.
So, when I think of a 38-year-old, I think of, okay, you got your cash reserve taken care of, so you have your emergency fund. Next will be, should you be paying off debt? You didn't mention any debt, so we'll assume you don't have any, but that could be something you could use with every incremental dollar.
And then do you have a reserve for upcoming expenses? That car that you're going to buy next year, or that house that you're going to buy in three years. Whatever you're forecasting, you want to build reserve funds for bigger expenses if you're going to pay cash for them, so you can have more financial liquidity to approach those just like we would talk about a pie cake or building an income floor for somebody in retirement.
At your stage in life, I think your best investment is still your career capital. This is a concept that comes from Cal Newport’s book, So Good They Can't Ignore You. I would recommend to anybody in the wealth accumulation phase, and still building a career or building income, whether they're going to pivot careers and go FIRE or whatever they're going to do. Your career capital is investing in your value as an employee or potential entrepreneur, your reputation in the marketplace for businesses or for employees, and so I think you could invest in that could be certifications, that could be career coaching, that could be personal development, that could be networking.
Those are probably good places to look at investing in outside of normal financial capital because those are going to build your most valuable asset when you're younger in life, which is your ability to earn income. It's going to one, potentially increase that the trajectory of the increases of income that you're going to have, and or it's going to increase the options you have because you're so valuable in the marketplace.
So, I don't know if you, in your situation, really need a financial advisor. The fact that you're listening to a podcast, I think you have a lot of free information, and it sounds like you're doing most things right. That's usually the piece I do see missing, Bret, is this concept of career capital and thinking strategically, what can I do today outside of financial assets to improve my marketability in the marketplace, whether you're an employee or a business owner or my network, so you can have more options earn, earn more income, or perhaps both later on.
HOW TO REVERSE A DECISION TO CLAIM SOCIAL SECURITY
All right, our next question comes from Jesse, related to social security.
" Hey, Roger, love the show, and I have a question about social security.
I started receiving payments at my full retirement age in December of 2022. My financial projections have changed, and I want to reverse my decision. It's my understanding that I have a 12-month window until December 23 to do so. I know I will have to pay back the gross amount received to date, but are there any other consequences for my reversing this decision?"
All right. Interesting. Jesse, so how do you reverse your decision on claiming social security. You don't see this happen very often, but changes in your situation can change, you got a very high paying job, perhaps you got a big inheritance.
We don't have a lot of information here, so let's just talk about the actual question, Jesse, so you can indeed reverse your social security benefit claim within the first 12 months from benefit approval, so that's the date that you're going to work off of and that date's going to be at some point prior to you receiving your first paycheck. In order to start the process, you have to fill out a Form 521 and we'll put a link to it in our show notes, and then you'll have to mail or fax that in, is fax a thing nowadays, to Social Security. That form will require you to provide your name, which benefit you wish to withdraw, the date of your application, and it'll just walk you through the process.
You're correct, you're going to have to reimburse any income that you received from Social Security from the time that you got your first check to when you're stopping it. This is also going to include, just remember, any Medicare premiums or taxes that were withdrawn from the paycheck prior to getting to you. So, if you got $2,000 a month, but you had a $500 a month Medicare deduction prior to 2000, getting to you, that 500 is going to be part of the reimbursement that you have to do.
As with anything, not just Social Security, whatever you submit, I would take the ownership of following up and helping remind people to do their job, because they're busy and they're dealing with lots of things coming at them. That's a practice we have in our practice. When we submit a service request, even to a custodian like Charles Schwab, we follow up to make sure they do that because things happen and it's important to us, it's more important to us than it is to them. So, we take ownership of that.
Same thing here is you take ownership of the follow up and make sure that this is moving along with the process. So that's how you would do it, Jesse.
EXAMPLES OF SIMPLIFYING A PORTFOLIO BY USING ETFs OR OTHER ALL-IN-ONE FUNDS
Our next question comes from Chris related to asset allocations to automatically rebalance.
"So, Roger, you were discussing simplifying a portfolio with four ETFs or four investments, a core US fund, a core bond fund, an international and emerging markets, et cetera.
If I understand you correctly, the US core fund could be a 70/30 allocation that would have many sleeves within it, that automatically rebalance. I would like to learn more about a fund like that. Can you give me an example of one. Your podcast is amazing, a perfect blend of finance topics and life topics."
Then he gives me a P.S.
"Roger.
When I declutter clothes for my wardrobe, I play a game where once a week I vote an article of clothing off the island. I have three minutes to decide which piece of clothing goes. It's actually fun. Sometimes I let my girlfriend cast a vote. Thanks, Chris."
This is another one of those instances, Chris, where we have the desire to do YouTube version of parts of the show, not the entire show, where some visuals would be very helpful.
So, I do believe that simplifying a portfolio is important, and we talked about that a little bit last week as well. So, you can buy what's called an asset allocation fund, mutual fund, or ETF that has the sleeves of, let's say, like you said, 70% stocks, 30% bonds, and are highly diversified because they have lots of different funds underneath that, but you're just buying one ETF or one mutual fund, and so what are some examples of those?
Well, the two that come to mind that you could look at as an example, and these are by no way endorsements, they're just used for example purposes. If you look at an ETF, there is an iShare core growth ETF, so this is an exchange traded fund, what ETF stands for, and it actually has a fully developed portfolio in it of various asset classes.
So, if you looked at this holding, and the symbol for this one, by the way, is A as in Alpha, O as in Oscar, and R as in Rodeo. If you looked at the allocation within this one ETF, it actually owns a number of ETFs. It owns the S&P 500 index, it owns the total US Bond market index, and there's probably six or seven different ETFs at various percentages, which is one allocation in this case, roughly, I believe, 70% stocks and 30% bonds. So, by one ETF, in this case, AOR as an example, you're getting an instant asset allocation and it will dynamically, I believe, daily, if not inter day. Maintain that balance using inflows and outflows to continually rebalance. The total management fee on this is 15 basis points or 0.15%.
So that is an example of what we're talking about here, and Vanguard life strategy allocations would be another example of that. Chris.
So, what are some of the advantages and disadvantages of these all-in-one funds?
Well, the advantage is it's all in one. It's simple, it's low cost, relatively tax efficient, so you don't have to do your own rebalancing year in and year out, that can be very efficient. It might be very attractive, especially within tax deferred accounts like IRAs or Roth tax free accounts because you're not worried about any tax consequences.
Some of the disadvantages of them are the fact that you don't have any options of how you trade and rebalance, and this especially comes to light within an after-tax account because you only own one fund, it's more difficult to do rebalancing. Maybe you’re rebalancing and trying to refill your cash cushion or your income floor by doing rebalancing, or perhaps you're going to have less opportunity to do tax loss harvesting. Like last year, bonds were down significantly. You could do swaps in order to realize losses on a particular asset class that didn't do that well. So, there's a lot less advantages to these in after tax accounts.
That would be an example, or those would be two examples I would suggest. And the goal here is to target an allocation that isn't tied to any particular life outcome, and that's why it would be on the longer end, the upside portion of your pie cake. So, this would be a good resilient or optimized question.
HOW TO DIVERSIFY AN OVERFUNDED PORTFOLIO
Our next question comes from Todd, and it's another one related to asset allocation, but in a little bit different way.
He says,
"I plan to retire at age 58 in two years. My wife and I are probably overfunded. I'm mostly tuning out the noise about the 60/40 portfolio obituary, 60% stocks 40% bonds obituary largely standing by in my pre-retirement years.
But I'm wondering if my plan would be more resilient to runaway inflation and a flat or down stock market by putting 10% into commodities and or real estate mutual funds. I hesitate to make this change since those investments are on the upswing, but I don't know when or if they will ever come back down.
I was thinking I could maybe do 60% stocks, 30% bonds, 10% in these alternatives, or 55, 35, 10 or some other combination since I think it's likely that those in investments will behave differently than the stock market. What do you think?"
So that's an interesting question, Todd. So here you are in what you believe to be an overfunded position, so you have more assets than you need for the liabilities of your spending over time.
So that's a great position to be in before you explore adding commodities and our real estate to your portfolio. I would first build the resilience of your portfolio by building out your payroll reserve, ala the pie cake. I would do that first because you're dealing with two investment risks when it comes to your monies in retirement.
Number one is, on the short-term sequence of return, the fact that you could get really bad hand of returns early in retirement, the way you protect against that is by building out a payroll reserve that gives you options.
The other main risk that you are dealing with, especially in any environment, but especially if you're refunded, is inflation risk. Meaning that the dollar value will deteriorate in terms of its purchasing power over your lifetime.
So those are the two risks. The way you deal with inflation risk is by investing in things that have embedded in them barriers against inflation by having the ability to grow and maintain their purchasing power.
That's essentially the two risks that anybody is facing in retirement when it comes to allocating their assets, sequence of return risk, or long-term inflation risk.
Now I just recently saw Jeremy Siegel speak at an investment and wealth institute conference, who's a brilliant man wrote, stocks for the long run.
He definitely has his opinions, but he is well regarded and spent his life researching this stuff, and he argued in his presentation that the perfect inflation hedge is equities, assuming they're long-term or part of the reason is that if you have a rise in the cost of goods, whether it's commodities or labor or whatever, equities, companies over time will always pass that along to the consumer.
Now, short term equities are extremely risky. They can bounce all over the place, but long term they are, he would argue the perfect inflation hedge. He looked at real estate and he looked at his data from real estate, and I'm just paraphrasing from the presentation, and real estate had returns on par with equities, if you look at it in a long-term timeframe, and had about the same volatility, if not, maybe a little bit more volatility than equities, and he didn't believe commodities added that much to it.
So, prior to thinking through this, Todd, I would suggest that you build out, even if you're overfunded, build out your cushion in order to secure the outcome of your life, and now we're dealing with investment assets that are truly long term.
So, get that resilient part done. I don't think adding commodities or real estate is part of the resilient equation. Now, if you choose to optimize your portfolio, then you could add these two things, and the reason I think this is something that you could consider, Todd, is one. You state that you're overfunded. I'm assuming you make your plan resilient in the way that we think about it anyway, I would take care of the basics first, and if you have the opinion that commodities and or real estate are going to help you with runaway inflation, go ahead and add them to your equity portfolio.
So, when you talk about a 60 40 or a 60 30 10 or 55, 35, 10, we're not talking about the part that is the income floor, that tier layer two, we're only talking about your long-term money. So, I would probably lean towards taking money from your equities to put into commodities and to real estate, not from the fixed income portion, because you're already going to be fairly fixed income light in the long-term portfolio, and you're going to have your cash cushion because you've made your plan resilient.
This is going to be an optimization question, and it goes back to what your intent is. I am going to add commodities and real estate in order to what? That what should be the driver of whether you're looking at doing it.
Now, commodities can be extremely volatile and real estate can as well during times, and then you have to make sure you factor those in because they're not negatively correlated. They're still positively correlated. They're just not a hundred percent correlated. Is adding to this layer of complexity materially impacting your long-term wealth and your retirement? I would argue probably not, but stylistically, if it's something that you want to do, assuming you've taken care of the basics of having a resilient plan, a feasible plan that's resilient, and you have excess cash that you want to hedge your bets. I don't have any issue with that, but make sure you address it in the proper place.
Only do it with your upside or long-term money, and I would pull from the equities to go to those more than I would pull from any fixed income.
SHOULD I STOP THE AUTOMATIC REINVESTMENT OF DIVIDENDS?
So, our next question comes from Pat. This is another investment related question related to reinvestment of dividends during the Decumulation phase, and Pat gives a bunch of background, but I'll try to get to the essence of it.
Pat says,
"We have dividends and interests. We have been reinvesting in both taxable and non-taxable accounts since the get go. Our living expenses will be more than our pensions, dividends, and interest. So, we will need to sell some of our assets, ETFs, and stocks to cover our living expenses.
I understand the advantage of compound dividend reinvestment, but in thinking since we need to sell assets to cover expenses, we might want to stop those reinvestments in order to have more cashflow coming to our accounts.
So, the core question is, what do you think about stopping automatic reinvestments and dividends?"
Well, I actually agree with you, Pat, on the accounts that you are going to use to help build your pie cake, I think it's perfectly reasonable to stop dividends and reinvestments in the assets in those accounts.
Let's take the after-tax account as an example. So, if you own a mutual fund or an individual stock, you will get dividend distributions, and in the case of a mutual fund, you'll get long-term or short-term distributions, typically annually from those investments. In the accumulation phase, we reinvest those, just usually as a default, to buy more shares of the investment. Functionally what happens is it's a distribution to you, let's say dividends, and they're included in your taxes, and it's actually a purchase of additional shares in the investment. So, it's like a systematic investing program, except you're using the dividends to buy more shares.
I do agree, and especially in after tax accounts, Pat, to turn those off in Decumulation for a couple reasons.
One is they're taxable events and it's going to create a flow of income that can help you not have to sell shares or maybe minimize the amount that you need to sell in order to build your pie cake.
So, I think it's perfectly reasonable to do that.
I think it's also perfectly reasonable to do that in pre-tax accounts that are meant to help fund your life, because that will just create this natural tailwind effect and then the assets that are upside portfolio that you're not going to touch for a long period of time, I think it's reasonable to continue to reinvest those because that will help them in juicing their returns by that just inherent dollar cost averaging.
With that said, it's time to get to our next segment, which is Bring It On.
BRING IT ON
Today in the Bring It On Segment, I just want to teach you a quick tool or talk about a quick tool I learned actually from a performance coach, I believe it was Brian Kane, who works with baseball players. Very energetic guy and I think this is a good one. We interact with a lot of people, obviously our family, our spouse, our friends, coworkers, people on the street.
It's easy to get overwhelmed and sometimes get ourselves worked up a little bit to where we're not as rational or centered in how we want to perhaps respond to something or to someone. And when we get into that state, we act out in a certain way, sometimes very unintentionally, because we we're off kilter, we're not centered.
So, one thing we can do, and this is a quick thing that we can do, and I don't know if I taught this the other day on the show because I've been telling a lot of people about this because I've been practicing it. So, if I've said this before, hey, it's worth repeating. When you find yourself in a moment where you're a little bit off kilter in a conversation, whether it's on the phone or you're dealing with the IRS or with the cashier at Walmart, whatever it is, there's something you can do to really center yourself really quickly.
Number one is to do something physical. Clap your hands, slap your side. Number two is taking a deep breath, and number three is doing something audible. You can choose what it is. I got this, I'm good, and maybe even swipe your chest like you're wiping away the discombobulated state and recenter yourself, and then re-engage with whoever you're talking with or whatever you're doing.
It's called red light, yellow light, green light, and you'll see baseball players do it. Brian Kane shares a lot on his Twitter of baseball players that are centering themselves. They have a routine.
I think in our relationships, especially when we're dealing with uncomfortable conversations or stressful situations, it's easy to escalate, and this is a good quick way to clear your head. So, something physical, deep breath, and a little mantra, whatever one you want. I got this. I'm centered. I think that will help us stay on keel as we navigate all the relationships in our life.
With that said, Let's go set a smart sprint.
TODAY’S SMART SPRINT SEGMENT
On your marks, get set,
and we're off to set a little baby step we could take in the next seven days to not just rock retirement, but rock life.
All right, in the next seven days as you're thinking about your portfolio, which we talked a lot today, if you're thinking about adding something or you're reviewing your portfolio and looking at something that maybe you added in the past, ask yourself, I want to add this, or I put that in there with this intent.
Reexamine whether that intent is worth the extra complication. We want to have elegant simplicity, and it's okay to add real estate or commodities. Once you've done the basics, you have a feasible plan that's resilient. If you have room to optimize, it's okay to optimize as long as you have a clear intent of why you're doing it.
CONCLUSION
All right. Next month on the show, we are going to focus on Roth IRAs and 401ks, what the opportunity is from an optimization perspective to add them, sprinkle them into our planning, how they work and all the rules around them.
Now, there's a couple reasons I'm doing this. One is, remember the mistake I made a few weeks ago on the answer to that Roth question? I'm proud of myself for alchemizing that in collecting a turnaround by fixing the record and reexamining it. So, I'm proud of myself. I'm going to give myself an attaboy for that. But when I originally started this show, I started it as a personal journey to sharpen my saw as an advisor and that question, and just the fact that I didn't have my thinking cap on reminds me, okay, this is something I need to refresh my thinking on in an organized way. That's why I started the show in the first place, was to refresh my thinking and do it publicly.
So, we're going to explore Roth IRAs next month on the show. I appreciate you being part of the show. This show is all about refreshing your thinking and sharpening your sauce so you can take action.
We're all committed to empowering you to rock retirement with authenticity, with humility, and with a focus on you taking action, always.
Stay cool out there. It's a hot summer.
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 references are 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.