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Episode #515 - How Do I Refill My Retirement Income Floor?

Roger: I was reminded of something this week that I want to remind you and I of, and as my friend Nick Kennedy says, "It's good to remember that there is a God, and you are not him."

Well, hey there.

Welcome to the Retirement Answer Man show. My name is Roger Whitney, and this is the show dedicated to helping you not just survive retirement. But to have the confidence because you're doing the work to lean in and rock retirement. 

Last week on the Bring It On segment, we talked about a couple of keys to happiness.

The two being agency, having the ability to take action to improve your life, and gratitude, one that almost all studies show leads to more contentment and more happiness. I was reminded of another one as I was reading a chapter in The Road to Character by David Brooks, great author by the way, he also wrote The Second Mountain, another great, great book.

He was profiling St. Augustine and his journey to accepting Christ. Now, put the religion stuff aside if that's not your faith or belief. The concepts and the point are very valid either way. What I was reminded of in reading that, which reminded me of Nick Kennedy, my coach and friend, who always says in his life, remembering that, hey, there is a God, and I am not him, is a reminder that we are not in control, we are not in control. In the book chapter of Road to Character, talking about St. Augustus, they talked about his journey of surrendering, acknowledging that in this case, St. Augustus was not in control and rejecting or balancing the ethos of project management, finding your agency and taking action and being the captain of your own ship, which is definitely nowadays an ethos that we all embrace.

I embrace it a lot in terms of managing a process and looking for what I can do and applying my agency and encouraging you to take baby steps. Those are all very important things. It's also very important to surrender and realize we're not in control. For me, God is in control. I surrender to him because he is my father and the director of my life.

Now, for you, it might be something else. I'm not here to have that discussion. I'm here to talk about surrendering to the fact that so much happens outside of our control. We can drive ourselves mad and not rock retirement thinking that we can control everything. It was important to acknowledge that, so we had a little bit more complete story.

So much is happening outside of our control. We definitely need to have gratitude and surrender to that, and also find agency and take little baby steps. So, I felt moved to say that, so I wanted to say that today. Today we're going to answer your questions on refilling your bucket or your pie cake, Roth conversions, non-deductible IRAs.

As well as talk about another second passion segment in the bringing on segment with Kevin Lyle's coach in the rock retirement club about Staged retirements. So, with that, let's go get started. 

LISTENER QUESTIONS

We're going to get to your questions, and this is what we're going to do in December as well is focus on answering your questions. In addition to that, we are going to start launching videos on our YouTube channel at youtube.com/retirementanswerman, where I'm going to choose one question and get into the rhythm of answering one on video once a week. So, you can check that out over on YouTube.

I am saying this publicly partly to get myself to build this habit because I've lost that habit and I want to start it and I'm a little delinquent in getting it moving. So hopefully by telling you, I can honor you and keep my promise there. We'll have a link to that in our 6-Shot Saturday email.

If you have a question for the show, go to askroger.me and you can type in your question, leave an audio question, just type in and say hi. Tell us anything you want to tell us.

HOW TO REINVEST MY RETIREMENT INCOME FLOOR

All right. With that said, let's get to our first question. 

"How do I refill my retirement income floor?"

That's rebuilding your pie cake. This comes from Mike. This is a different Mike. I answered a question on episode 473, and this is a follow up question from a different Mike. 

Mike says, 

"Let's say I spend 100, 000 annually, so I set aside liquid accounts for 500, 000 for five years. In my process, I replenish each year by selling 100, 000 in investments to get back to 500, 000. Or should I run through the 500, 000 and replenish when times are good, meaning returns on investments, and skip replenishing when times are bad?

If I replenish each year annually, I don't really avoid selling investments in downed markets. What am I missing here?"

That is an excellent question here, Mike. So, let's set the table and explain what we're talking about here. For those of you that may not be familiar with the concept.

In our Agile process, our baseline stance on building a resilient plan outside of just simply testing against various retirement risks is to position your financial assets from purely an accumulation grow, grow, grow, grow to a decumulation phase meaning we want to build out as a baseline, anyway, a five-year income floor. This is part of what we call the pie cake. We have our contingency fund, which is our emergency fund. Then we build out financial assets that cover the next five years of anticipated spending from investment or financial assets.

In that process, what you would do is build a five-year cash flow estimate outlining your income year by year. Then below that, you would outline your spending for your base great life, that non-discretionary base great life, plus any discretionary spending that you wanted to do. That could be travel, that could be purchasing a new car, etc. You would map that out for five years and do some basic tax estimates, and then what you get to be, how much of my spending is my income not covering? 

So, in Mike's example, we'll stick with that example, Mike. Let's assume that you have 50, 000 a year in income. We're going to keep this simple. Over the next five years, and you need to spend 150, 000 over the next five years, including taxes and some discretionary things.

So net, you have a negative 100, 000 a year cash flow, each year for five years. You add that up, that's 500, 000 that you don't have the income for. So, what we argue to build a resilient plan initially is to reposition your assets and identify exactly where you're going to get that deficit to create your paycheck because you're essentially going to have to create a paycheck from your financial assets.

 That is part of the process of repositioning from accumulation mindset, grow, grow, grow, grow, grow, for the long term to mapping out, hey, I'm going to have some short-term needs that I can't risk losing that money. So that's the conceptual setting of the table. 

Now, to this Mike's question is, okay, great, but what happens a year from now when now I have 400, 000, not 500, 000? Do I just simply sell what I need to sell to rebuild that floor? If I do that, regardless of markets, doesn't prevent me selling in down markets. So, what's the point? Isn't that just as bad? 

That's a great question, Mike. The simplistic answer is yes, you would.

Now annually with your upside assets the investments that are at risk You're going to be doing rebalancing anyway, meaning that if you have 70 percent of it in stocks and 30 percent in bonds to keep it simplistic, a year from now, that percentage isn't going to be the same from an allocation standpoint. So, you're going to have to sell one and buy the other to rebalance that. Rebuilding the floor in a very simplistic model structure, rather than sell one and buy the other, you could just sell one and carve that money out to help rebuild your income floor. 

But then if you have a bad year, and you still need more money, yes, in a one-dimensional model, you would just simply sell enough to rebuild the floor, assuming you had another 100, 000 at the end.

In reality, Mike, it's much more nuanced, just like life is. A big reason you want to build, at least as a baseline, is that five-year income floor is not just simply so you can cover your paycheck for the next five years, although that's the initial intended purpose. Other reasons include that your spending is going to change as much or more than the markets or inflation. 

So, every year as you're going through the process, let's say you hit the mark and you spent that 100, 000 and now you're at 400, 000. Step one is going to be recasting what your income's going to be for the next five years. Because your estimates initially will be wrong. Maybe part time work wasn't as much as you thought it would be, or maybe it's more than you thought it would be. Your social security is going to go up more than you thought it would, or less than you thought it would. 

Other things will come in and out of the income stream, so you have to refresh your five-year estimate based off of that. And then your base great life, which are going to be those basic needs plus normal simple pleasures. Those numbers are going to change as well. Your estimates may have been wrong. Maybe you estimated too much. Maybe you estimated too little. Maybe you had things that were a need last year that are not a need this year. You thought you needed the country club, but you realized you don't. You thought you needed the gym membership, but now you exercise outside.

Those numbers are going to change a lot, Mike, so you need to refresh those. In addition, you're refreshing those numbers, looking forward again five years, also based on inflation. Now you, Mike, and whoever else is listening, you're going to have your own personal inflation. It's been very interesting to walk this journey with people going through high inflation periods and low inflation periods, if we all deal with that differently.

Some people never really see their spending go up year by year, even if inflation does, because they make adjustments to their spending. They don't eat out as much. A good example, I took Spencer to go see Napoleon last week and we went to a normal sub shop. Not Subway, but not super high end. And it was like 30 or 40 for us to get two subs, some chips, and a drink.

I don't do that as much now because I'm seeing inflation. My wife doesn't buy filet anymore, she buys less expensive steak. So, a lot of us naturally do that, so inflation will show up differently for each one of us. This is one reason why we want to recast those estimates. Then in addition, the wants or discretionary spending we have are going to change.

Travel let's use as an example of we need 10, 000 a year to travel, well we don't necessarily spend that. Sometimes we're spending more, sometimes we're spending less. The car or the wedding that we thought was going to happen in one year doesn't happen or it moves out. 

So, Mike, part of the process is re forecasting everything with the information you have and that means that all of our assumptions are wrong, so that's why this process is so important. So, it may not be as simple as you need an extra 100, 000 now. It may be that you need more of that. It may be that you need less of that because your estimates are a little bit better, and you've made changes.

It still gets to the question though; how much do I just go ahead and rebuild five years out? 

Other things might change too, by the way. Let me go back to that. The interest you're earning on that five-year cushion went from basically zero to five percent a year. That's a significant change that you want to factor into all of this, right? Because that money is now earning money, which is great. 

In our process, Mike, usually we do this in the third quarter, is that we do rebuild it every single year, and we make an adjustment call on the timing of when we actually replenish that five-year income floor. We don't necessarily do it in one big swoop, although that's simple from a model standpoint.

Perhaps we do wait a little bit to replenish it, knowing that we have a lot of time to let markets do their work and let interest come in, etc. Perhaps we do adjust some spending to slow the amount that we need because we're in the middle of a storm, so we don't do as much discretionary spending.

We make minor or major adjustments there, so now that Four-year floor after year one maybe becomes a five-year floor because we extend out some things. This is a constant negotiation with yourself, and you're negotiating that within the plan of record that you've created, where you're still testing the feasibility after the first year.

You're doing your feasibility, you're doing long term forecasting to see, okay, I just spent 100, 000 and I'm in a bad market. Is my plan still feasible? Even given those two things, you're doing that assessment prior to figuring out whether you're going to rebuild it or not. All of this has to work together, Mike.

So essentially, every day that you're planning is day one. If you make a plan today, let's say you don't look at it for a year and you just execute. When you go back the next year, you're basically starting fresh again because you're not the exact same version of Mike. You don't have the same assets, you're not spending exactly the same, you have different priorities.

But if you do this religiously, or consistently, you're continually refreshing the plan as if you were doing the planning at the first time. It gets easier because you get more reps in, you have the structure available to you. But I've had instances, Mike, where we did not replenish the plan. We let it burn down a little bit to go through some major storms.

In the same year with some other clients, we did replenish it. So, this is going to be individual.

I wish there was a simple system to do this. And this is one reason why, although guaranteed income sources are really valuable in planning, be that social security, pensions, or annuity income, we have to maintain a good dose of flexibility because your life is going to change so much and we just, totally underappreciate that and why we need to keep refreshing all this stuff annually rather than think we can figure it all out. 

So hopefully that gave some more context to the previous Mike's question and answer. 

CONTRIBUTE TO A GRANDCHILD'S ROTH TO TEACH COMPOUNDING?

MC emailed in with some suggestions for year-end planning for grandparents.

He said, 

"I wanted to offer another option that combines Roth and legacy planning, and that is contribute to grandchildren's Roth accounts. If a boomer already has reached the age of required minimum distributions, or he and she has withdrawals from funds anyway, why not use those funds if you don't need them, to gift to your grandchildren. Assuming the grandchildren have some earned income to support the amount that they can contribute to a Roth, it limits the annual gift up to 6, 500 a year. And as long as a grandchild has that earned income, you can use that money to contribute to their Roth. 

Functionally, it's a gift to them and they contribute to the Roth, and that can offer them a preview of how matching funds work in Retire in 401ks in the real world and stories about how grandma or grandpa matched your summer job, and your employer is going to match contributions. It demonstrates the time value of money, and you start a Roth fund for someone that's 15 years old It can translate into impressive returns when he or she turns 25, etc. So it can give them a jumpstart on learning about compounding and about matching and about saving."

So, I think it's a great idea, MC, and that's something we can do. You still pay taxes on the RMD, but it's a way of creating money from a required minimum distribution realm that you receive into a learning lesson for the next generation. I'm a parent. I don't have grandchildren, and I do this with my children now, so that's a great idea.

Thanks for sharing.

HOW IS A NON-DEDUCTIBLE IRA CONTRIBUTION WITHDRAWAL HANDLED?

Our next question is related to non-deductible IRA contributions. 

"First off, I want to say, I love your podcast and have listened over the past two years to all of them from the beginning."

Wow. Honored for the investment of your time.

"I have a net worth over 7 million, divided among brokerage, traditional IRAs, and 401k, Roth IRAs, 401ks, and non-deductible IRAs.

When I want to withdraw from my non-deductible IRAs, do I need to pay taxes on the monies? How do I let the IRS know that I've already paid taxes on these withdrawals, thus I don't have to pay taxes again?"

So, the central question is how is a non-deductible IRA contribution taxation handled when it comes out?

Step one, which is often an overlooked step, is when you make a non-deductible IRA contribution. You file form 8606 in the year that you did it, and every year thereafter, so that you're letting the IRS know and keeping track of all of your non-deductible contributions, and that's an overlooked step.

Now, when you make withdrawals from your IRAs, and let's be clear here, you could have an IRA, you know, say at Fidelity, you call it a non-deductible IRA, and then you can have another IRA at Schwab or some Vanguard or some other place. The IRS isn't looking at that as separate. They just see IRA monies, individual retirement accounts monies. So just because you do accounting, maybe even with separate accounts, the IRS isn't going to look at that. 

When you go to make withdrawals from IRAs and you have non-deductible contributions, the basis you contributed does not need to be taxed again, as you pointed out. But the tax will be gross, and you can't choose whether you are taking your IRA withdrawals from the pre-tax dollars or the non-deductible basis or non-deductible growth portions of your IRAs.

So, a large portion of your withdrawals, assuming they've grown over a long period of time, will be taxed. What you would need to do is file, again, that IRS Form 8606, where the taxable amount will be calculated as a portion of any withdrawals that you make. The downside of some of these non-deductible IRAs that stay in that form, is now you have to do some basis accounting for to, one, keep track of it when you make the contributions, which a lot of us didn't do, at least in my experience.

And then when you make a withdrawal, do the calculation. In order to figure out what percentage of any IRA withdrawal is taxed or non-taxed because it's part of that basis from those non-deductible contributions. But the form walks you through it as best as an IRS form can.

THE PROS AND CONS OF EVERPLANS 

Our next question comes from Rashmi related to digital archiving for the family. 

"Hey Roger, you're doing a great service to all your listeners. Thank you for the wisdom. My question is around Everplans. At one time, you mentioned Everplans for digital archiving the financial and non-financial details for family for the future. I cannot find it in your resources.

Can you explain what the pros and cons are, and if there are any competitor plans that do the same thing?"

So, Rashmi, great question. Everplans is a digital platform, and it's actually everplans.com, you can find it, that digitally helps you organize your financial and your non-financial documents and organize your life so that you can get to these important things easily and you can actually assign deputies whether that's your executor or future executor, trustees, your CPA, your advisor. You can grant them access to all or part of your digital organization structure. In the event they need to have access to it and there's some protocols if you pass away that they get access to more and more so they can go through managing the closing of your financial life in an organized way.

So everplans.com is just a service that is out there that does this. What does Everplans cost right now? I'm actually on their website right now, and it's like a hundred dollars a year to do that, and the nice thing about Everplans is that it walks you through the organization process, which is a big pain in the butt, doing it on your own in any way, where you can upload all the documents and it will ask you questions very much like TurboTax does. It interviews you to know what questions to ask you in order to organize everything. 

I don't have any affiliation with Everplans other than I licensed it as a benefit for Rock Retirement Club members. So, if you're a member of the Rock Retirement Club, you have access to this as part of your membership, but you can go ahead and purchase this on your own at 100 a year, I think is what they charge, and it's HIPAA compliant and they take their security seriously with all the caveats around having things in the digital world and identity theft, etc. But they do take their protocols seriously and inherent in doing that. 

So, the pros are that it's all in one place, neatly organized and easily accessible. Assuming that you've created these deputies where they have logins when they need them. 

The downside is that it's on the internet. In the club, for those that are a little less comfortable with putting things on the internet, just going through the interview process, even if you're not uploading anything, can help you create your own structure because the question is, if I don't use something digitally, where am I going to put this stuff? Am I going to put it in an Excel spreadsheet? Is it going to be a file on my computer? What if my computer gets stolen? Am I going to put it into Dropbox or Google Drive? Everything's going to have those security issues related to it.

I feel confident in Everplans enough to spend money to have it as a benefit in the Rock Retirement Club. 

Are there competitors to that? I'm sure there are. Outside of the organizational structure and scaffolding that it provides, well, let's just focus related on that for a second. There are plenty of books that talk about what you should have organized, checklists, and PDFs that you can complete.

I think AARP has a book to walk you through the things that you should keep. It's just a matter of whether you want to use a digital tool or not. If you do, I like dedicated use tools because they focus on one thing, and generally they are more adept and iterate quicker on making it better and better and better.

ON ORGANIZING BOOKS

Our next question is a little bit of a suggestion and a celebration from Penny. 

Penny says, 

"Hey, Roger, we are looking forward to 2024. Well, for us, it's actually looking forward to retiring February 2nd. We are so excited about this new phase of life. A little scared too. Thanks for such a good podcast. I enjoy it a lot. As for your books waiting to be read."

I got about two more the other day. I did this on a Black Friday special at Barnes Noble. I bought War and Peace and Don Quixote. Have you seen how big these books are? It's going to be interesting how long it takes me. I'm trying to sprinkle in classics. Oh, those are heavy books. Anyway.

"Here's what I do, I have set aside a shelf for those books. Nothing else goes on that shelf. As for storing them, I shelve them by subject. Books I am not keeping go into the little free libraries in our neighborhood or to the library for their book sales. 

Hope this helps."

penny, that's a great idea.

I'm actually purging a lot of books, we have Half Price Books down here, and I just donate them to them. I mean, they give you maybe a dollar for 50 books. I don't know. I try to purge the books that I don't want to keep. Having a shelf just for the books that you haven't read yet or need to read.

It might be a little damning for me to see how many there are, but that might help me not purchase so many more. But I appreciate the idea. It's a good idea. I want to celebrate with you on February 2nd. So, as you get close, ping me privately or send me an email. Maybe we can get you on to say a quick huzzah as you retire.

BRING IT ON

With that for today, let's move on to the Bring It On segment.

Now it's time to Bring It On and tackle the non-financial area of retirement and today we're going to talk about passion and work with retirement coach Kevin Lyles. How are you doing, Kevin? 

Kevin: Good, Roger. How are you? 

Roger: Good. What is on deck today when it comes to having passion about things in retirement? 

Kevin: Well, this is one that not everyone can do, but I think if you can, it's maybe a great way to ease into that retirement transition, and I'm talking about phased retirements. That can mean several things. 

So, obviously, the one you think of is just cutting back on your hours, maybe the number of days of week you're working for a year or two before you leave your job. So that's the one way to do it, but there are some other ways.

I've heard you, Roger, talk about people who are institutionalized, and I think that's from Shawshank Redemption. 

Roger: It is. It is. 

Kevin: All right, and so one way to do it is just mentally a phased retirement and that is, focusing less on your job instead of giving your job 110 percent of your mind and your effort. Maybe you cut it back to a hundred and you focus a little more on your future.

That's a type of phased retirement. It's a mental approach. 

Roger: Let's talk about that one for a moment because I don't think that's been highlighted enough. Right, because we've been on the treadmill of career advancement and pleasing for so long that work, especially our generation is so integrated with our life of just simply mentally saying, I stop at this time, you don't even have to tell anybody, right?

You just compartmentalize it more than you maybe have in the past. 

Kevin: Exactly, and it might not even mean quitting at a certain time. It might just mean when you get home, not thinking about the next day's work. I used to do that after dinner, you know, I'd grab a notebook and start planning the next day.

As you are getting ready to retire, going into that phase of life, maybe you need to spend that time planning what that next phase of life is going to look like and not thinking about your job. You don't need to get a new promotion at your job. You don't need to be the best employee. You just need to be really good.

Roger: It might not just be not thinking about it, but nowadays it would be, and this I think is a really difficult thing for people, putting your phone away. 

Kevin: Yes, absolutely. Email, right?

Roger: Oh, geez. 

Kevin: Getting emails at all hours of the day. We joke about when we do that on vacation, but most people just think it's a normal thing to do emails all evening long on your job, and it's really not. A lot of societies don't do that at all, but we've sort of adopted that work ethic where we're always available for our job.

It's just a matter of saying, you know what, I'm going to turn that switch off and I'm going to start thinking more and planning for my future. 

Roger: Two tactics around that, Kevin, a friend of mine does this, is he actually got a separate phone for personal. A lot of times we don't put our phone down because it's still our personal phone with kids texting and friends texting. He had his phone that had his work email and everything and then he bought a second phone. So, when he comes home, he puts that phone away and only keeps his personal phone. Which I thought was, may cost a little bit of money, but it compartmentalizes it, so you don't have the emails dinging you on your personal phone.

Kevin: Yeah, so another way you can do a phased retirement, this is one that I really like people to think about and it won't work for every role out there every job, but it will for a lot and that is move into perhaps a different position that's less stressful. Maybe it's consulting. Maybe it's mentoring younger folks at your company but figure out if there's a particular Aspect of your job that is very stressful and you realize that then maybe you figure out a way to get rid of those duties and shift to something else as you go into retirement.

Roger: Yeah, that can be hard. Usually what I hear is it's the obligation of managing a team and the stress related to managing people or being the one that's responsible for the project. And not just participating in the project, right? 

Kevin: You're right and that's true, but I will tell you one thing I’ve found out through coaching some people through these kinds of things a lot of us overestimate how important we are.

Roger: What are you talking about? Wait a second, I know I’m extremely important Kevin. I don't know what you're talking about. You are important.

Kevin: So maybe you can back off a little bit and it'll be just fine, so that's it.

Then finally the fourth type of phased retirement you can think about is actually leaving one job but moving into something completely new that you find really fun or interesting and doing that but on a lesser basis. So that's a phased retirement if you will you're going from one job to another.

Roger: Two questions about that Kevin. Maybe one, maybe more.

One is, why would I do this if I'm going to end up doing roughly the same amount of work for likely substantially less money? 

Kevin: Yeah, and that's the key, isn't it? You need to make sure you're doing a type of work that is more meaningful to you, that maybe gives you energy rather than saps energy out of you.

You know, there are several benefits to these phased retirements, all these types that we've talked about. 

One, it keeps the money coming in, and a lot of people have under saved for retirement, so that's a good thing. 

But the two that are most important from the non-financial side, which is what we're talking about today, is stress reduction.

A lot of people have a lot of stress around their jobs, and frankly, the more important your job is, the more demanding it is, the more stress you feel. That can really create a lot of problems for you as you age.

Then the next is physical demand. Depending on your job, if your job has a lot of physical demands, as you enter your seventh decade into your 60s, that can become more and more important that you back off of that some so that you're able to enjoy the rest of your life and you're not destroying your body. 

So those are two benefits. You say, why would you do it? Even if it means less money, that's why you might do it.

The other thing, though, as a retirement coach, I love is it can keep you engaged. And active, keeps your mind active as you explore options for the rest of your life. So, I think a dimmer switch is just a lot less abrupt than an on off switch.

Roger: It gets back to helping you compartmentalize more so you have more time freedom for the next season, right?

Kevin: It does. It does. 

Now, there are a couple of downsides that I want people to be sure they're thinking of. One, is don't use phased retirement as an excuse for never retiring. You know, it's that one more year syndrome. Don't postpone things that you want to do in your retirement that maybe you need to do in this phase of life. Don't put them off so long that your go-go years are gone, and you never do them. So, make sure you're not doing that. 

The second thing is, make sure a phased retirement meets your spouse's idea for what retirement in that phase of life needs to look like. If your spouse is ready to start traveling and you're not, then that can create an issue. So just make sure you talk about it together. 

Roger: Yeah, it's definitely a good training wheel to have a vision of, because some people just don't know what they want, right? They know they're tired of the stress. But they can't imagine not working because they're institutionalized. It creates compartmentalization.

The purpose of that part is to have some time to create a different life. 

Kevin: Exactly. It helps you through that period of fear. You're afraid of letting go and shutting off that income spigot, and you don't know what you want to do. So, it gives you some time to sort of start planning. 

Roger: Key message here is many of us don't think that these are even options, and they are.

Kevin: Exactly. So, let's give people a smart sprint here. 

Go inquire at your work as to whether this is possible, whether others have done it. Maybe you don't want to ask your boss. Maybe you want to talk to coworkers who are a little bit older than you and may have done some things, just find out what's been done in your company and give it some thought.

You may not want to do that, but it's a good option for a lot of people.

TODAY’S SMART SPRINT SEGMENT

On your marks, get set,

Roger: and we're off to take a little baby step that you could take in the next seven days not just to rock retirement, but rock life. 

So, in the next seven days, and this is related to the title question for today. I want you to check your liquidity. I want you to look at your pie cake, look at your buckets, and calculate how much liquidity you have relative to the spending that you need to do over the next five years.

I think we should have done this already, and in our standard of care, we do this usually in the quarter like I tell you. But if you haven't done this yet, it's a good thing to do before the end of the year. So, you can look at possibly some reallocation, perhaps taking advantage of some tax loss harvesting, and here's why.

This is a note from Dano, who is an RRC member, and he says, 

"As a former Navy pilot, I enjoyed your aircraft carrier analogy from last week's podcast. In addition to compensating for the changing weather and sea state, we also keep a certain amount of fuel in reserve lest a black swan event interrupted our best laid plans when returning to the ship.

In naval aviation, the black swan event could be a flight deck accident or an equipment breakdown, unexpectedly blocking the flight deck on a clear and calm day. In my retirement planning, the Black Swan event could be an unexpected major illness, severe car accident, etc., big market downturn, all sorts of things.

For this reason, I always keep a strategic reserve when planning for retirement. 

Thank you so much for all you do, 

Dano, RRC member."

Great reminder, Dano, of why we need to have a strategic reserve for what we don't know, and the five-year pie cake or income floor can play that role in why we need to continually iterate to build what it should be year by year.

So, if you haven't done that in a while, Let's do that before the end of the year.

CONCLUSION

As always, thank you for hanging out with me today. I hope that some of the discussions today helped you take a little baby step in your journey to rocking retirement. That's a key thing. This is great stuff to listen to. We expand our perspective, but it always comes down to what is one thing, one little baby step you can take.

We're always going to try to explore that honestly with as much integrity as we can, and always make sure this podcast is about you and the baby step that you can take. It's easy to forget that sometimes, because I'm talking into this tin can, and there's all these ideas and all these reasons to do these things outside of just you and I having a conversation to think proactively about how to do this stuff.

I'm going to try to stay true to what this podcast has always been, which is me sharpening my saw and me helping you sharpen yours. 

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 do 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.