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Episode #537 - My Experience Moving To A Retirement Community

Roger: The show is a proud member of the Retirement Podcast Network. 

Welcome to 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 really rock it.

Hey there, Roger Whitney here. 

By day, I'm a practicing retirement planner with over 30 years’ experience, founder of Agile Retirement Management, and by night, I have hung out with you on this show over the last 10 years, noodling on how to really do retirement planning right, so we don't make it a job, we make it a vehicle to go out and live a great life.

Today on the show, we are going to do a mini case study on someone that moved to a retirement community, in this case, The Villages in Florida. Brad and his spouse moved from Iowa down to The Villages, and he gave me a four-hour tour when I was down there and was willing to chat about the logic behind their decision, and the experience that they've had. We're going to do that mini case study. 

In addition to that, we're going to answer your questions on new catch-up rules for retirement plans in 26, where to put taxes in a plan, should you still buy I-bonds? That question came in, so we'll do that as well. 

Last week on the show, we answered a question related to the 10-year rule and inherited IRAs. There was some relief given to people that weren't taking the distributions they were supposed to by the IRS. There were some gaps when it comes to the 10 year rule because it was answering a specific question that is probably important to some of you So what I decided to do with along with my team, Troy, Kim and Scott is build a mind map outlining the current state of rules ever changing of inherited IRAs, including the 10 year rule and create a video explanation on our YouTube channel youtube.com/retirementanswerman. 

For those of you that really want to know this stuff or have a question that you're trying to get answered maybe you can find your way on that mind map. We'll also have a link to that video in our 6-Shot Saturday email. If you love the show, you're really going to love this email where we share links to resources that we mentioned. So, you can sign up for 6-Shot Saturday at 6-shotsaturday.com or rogerwhitney.com.

With that, let's get to our conversation with Brad about the decision to move to a retirement community.

A MINI CASE STUDY

So here we are with Brad, how are you doing Brad? 

Brad: I'm doing great, Roger. 

Roger: Good. You gave us a four-hour tour of The Villages a few months ago, and I wanted to chat with you about your journey to deciding to move to The Villages. So, is that cool? 

Brad: Yeah, sure. Absolutely. 

Roger: Well, let's start off with the facts. So how old are you now?

Brad: My wife and I are both 55. 

Roger: You're 55 and you are retired now, correct? 

Brad: Correct. 

Roger: Okay. So, we'll get to when you moved to The Villages, but when did you first got introduced to The Villages, how long ago was that? 

Brad: Made our first visit here in April of 2022. We came down and spent the whole month of April for the very first time I had done a bunch of research and we had some good friends that had retired in Iowa and moved here. We made the trek down here to see them and check out The Villages.

Roger: Had you visited them in The Villages before deciding to go for a month?

Brad: No, back in the fall of 2021, when I first joined the club and I started the master class and we were going through the goals and the vision and all that tough stuff, what do you want your retirement to look like? It was pretty clear to us that we really wanted to get out of Iowa during the winter months. We checked out Phoenix for a week I'm not I can't remember exactly when that was in between there sometime. That really wasn't for us and then you know, this good friend of Tammy's that moved here and we're like, wow. We were a little surprised that they made the move and we're like, well, let's go down and check it out and from what we had heard three or four or five days just isn't long enough. We made the decision to go ahead and come for a month.

Roger: Was it during the summer months winter months? I guess winter months, right? 

Brad: No, it was the month of April. 

Roger: Okay. Okay.

Brad: We picked April. It's kind of interesting. I mean to rent in The Villages Is the most challenging time of course is January, February, or March. That's the most expensive time and the most challenging time to find a place.

So, we're like, well, you know what, Iowa in April can be, we can get snow and wind and cold and can be just anyway. So, we just chose April and that's kind of the reason that we did it. 

Roger: Okay, and to visit friends. But also, what were you thinking in terms of searching like when you went to Phoenix, etc. You were just trying to find a place to buy or what was the intent?

Brad: Actually, no when we decided that we needed to get out of Iowa or wanted to get out of Iowa during those months. Our initial thought is to you know, go south Florida someplace like that for three months what we were thinking. Ultimately, we wanted to get to where it was at least three months. So, part of coming down to visit Tammy's friend was to check it out to see if this is a place that we would want to do that with the intention that we would check others out as well.

Roger: Early in your journey you found one that you liked obviously because you live there now.

Brad: Yeah, so when we come down that first year for a month, we're like, oh, you know, we could tell we really liked it.

It was really what we wanted but we thought we had better do our due diligence a little bit. So, we went to another community, 55 community in Florida and checked that out now. We didn't stay because it was close enough to The Villages. We went up and spent a day and it wasn't even in comparison.

So, we made the decision after that, that neither one of us, Tammy or I really like water, isn't that important to us so being on the coast, anything like that would have been important to us, but being active and having a lot of things to do outdoor things to do in a community that like The Villages, it has all those opportunities with clubs and different things.

Roger: So how long after that month long visit, did you buy a place? 

Brad: That was April of 2022, and then of course we went back to Iowa and then we came down for another month and rented. That was April of 2023. We did basically the same thing we did in the same month. We rented a home that was a little further south of The Villages and ended up being kind of like where we ended up buying.

But we spent that second month or that second year for the month just to, you know, once again, just to make sure that this is what we wanted to do. After that month or during that month, we decided that, yeah, we're going to go back to Iowa. I had a couple biking tours that I was doing, bicycle touring, and then once I got home we were going to put the house on the market and then come down and rent, because you can rent in the August, September, October time frame, you know, nobody really, in those months it's not busy, so it's easy to rent, and we would sell the house in Iowa, have the money in the bank, come down here, rent, and then find something to purchase.

That's actually what we did. So, we actually came down two years in a row for a month and then at that point we decided to purchase and go back a little bit to the story. Original plan was to just rent a place for three or four months, and then keep our home in Iowa. After being here, we decided that we wanted to spend more time in Florida than we did in Iowa, and then, at the same time, too, our children were moving and doing different things in different locations. So, being back where we had our home in Iowa didn't make that much sense anyway. 

Roger: So, you weren't leaving your kids because they were going off doing their thing anyway. 

Brad: Right. Yeah. Yeah. They're both adults and we have their careers and their lives and we'll get to this in your conversation.

But we do plan to go back to Iowa. In fact, we're looking right now for two, six weeks in the summer to get to go back and see the kids and family and different things for a longer period of time. So, it's kind of the reverse of living In Florida and going back to Iowa for three or four months, but for at least a month or two we'll try to do that every year.

Roger: So rather than being a snowbird which you live up north and you come down, you're a sunbird. 

Brad: I guess we'll call it Exactly. We kind of reversed of what we thought we would do and you know, there's some benefits to that obviously being able to be in Iowa three months is not nice, but really that starts in November So to me, it's more like five months of you know, gloomy overcast, cloudy weather, cold and snow type of thing.

So, weather wise, I think we, obviously we haven't experienced the summer in Florida and I know that that's going to be a little different, but hopefully we'll be able to spend some of that in Iowa.

Roger: You moved down full time six months ago, correct? 

Brad: Yeah, six months. 

Roger: Okay, so you haven't experienced the full dead of summer yet. How was your experience being there full-time for the six months. 

Brad: It's been so far so good. I think it certainly helped to spend two full months down here before we actually made the move. We were already involved with bicycle club and different pickleball groups that month that we were here just this last year. So, we kind of got right moved into a new neighborhood. You know, everybody's kind of the way The Villages kind of operates, you know, all the new homes get built in new villages, and so everybody kind of moves into them, everybody's kind of new, and that's kind of a nice way to meet new people, but we've been very pleased with the decision, you know, it's like anything, it's nothing's perfect, but overall, what we wanted to get out of it, we're getting out of it, and that's to be very active, live an active lifestyle with plenty of things to do. So yeah, it's been six months. It went really well. 

Roger: So, your intent going into this Brad for you and Tammy was to, it sounds like you looked for 55 and over communities What was behind that decision? 

Brad: You know, I think I think A part of it is, you know, we kind of wanted to be and there's pros and cons But one of the things being retired at 55 In the community who are living in Iowa There wasn't that much to do with people that there wasn't that many people that were retired, especially in our age group and so coming to Florida and being in a retirement community, now, obviously there's people that still live, that live here that are 55 and older that still work, but majority are retired or working even part time. 

There are 3000 clubs and so there's plenty of activity and people doing things. I mean for Tammy and I, right now anyway, and that could change that's the nice thing I like about The Villages is there's you if you get tired of playing pickleball or Water volleyball or what I have it, you know, there's so many different things to do and because we want to be around people that were in a similar situation, I guess.

Roger: Yeah, definitely felt on our four-hour tour that Everybody was there To make friends and be active.

Brad: Yes, and I think it's kind of interesting because people move here because they want to. You know, they're not working, they're not moving here, they need to transfer here to a job, you know, and they move here because they want to. So, most people are here for the same reason that we are, and that's for the most part, like anything is 150, 000 people in The Villages, you have a few people that this isn't right for them. That's pretty normal too, but overall people have been super friendly, just happy to be retired, happy to be active, happy to be in the sunshine, just been a good fit for us.

Roger: So, I've had clients that have gone to Margaritaville and the Carolinas for similar reasons around being active and socialization.

Brad: Yeah.

Roger: You're 55. So, like your cohorts are probably still working for the most part in Iowa. 

Brad: Right. Yes. Yes. Okay. 

Roger: So, tell me about The Villages because I was a little blown away because I knew it was a big retirement community, but I didn't understand how it was organized. So just give me a brief rundown of how The Villages works.

Brad: Yeah, so The Villages started 30 years ago, and so it's basically grown from in 30 years to, to, well, there's close to over 100 villages within The Villages, I guess, if that makes sense, because, like, we live in Lake Denham Village, and so there's all kinds of villages within The Villages, and basically, every village area has all the things that people want to come here for golf and recreation and town squares where there's live music and retail stores and restaurants and different things like that.

Like when you were here, just because The Villages is so it's, it's big, but you don't have to travel to one end of the other to experience. I mean, we're within a really a five-mile radius, 10 miles max of where we need to go to get the amenities of the village. So, we pay an amenity fee, monthly amenity fee, for the pools and the tennis and pickleball and all the different types of rec centers and different things like that, we pay an amenity fee.

Does that make sense? 

Roger: I think that hits it where I think of it like Disney Villages. Yeah, that was what I kept coming back to is that it's organized where there's these multiple town squares that everything is curated, I guess, is what I came up with and clean and safe and kept up well, and we went into, I think you took me to a couple community centers.

They all had a theme. We saw pickleball. We saw people playing water volleyball. We saw people doing croquet or I don't know what we saw. There were crafts. It was really a bunch of everything. 

Brad: One of the things that I don't know if you took away from this. I mean, I don't think unless you come here you don't realize.

I mean, it is just really well done and it's consistent from start way up, what I call up north, where they started all the way down to where we're at. I mean, they've managed it very well. You have no idea what village you would be in because it's just, you can't tell a difference of how it's kept or how it's very clean.

You know, when you go into those rec centers, they're not just your typical rec center. They're very well done. 

Roger: Yes, they're extremely well run, and the employees are also villagers. Is that what you guys call yourself? 

Brad: Yeah, there are a lot of part time jobs. My wife and I both have decided in the last six weeks, eight weeks, we both got part time positions. We work for the village's rec center 15 to 20 hours a week. And it's been a nice part of it's a little structure that we put into our day, which is nice social piece of it. Obviously, it's a little extra income for spending and doing fun things in The Villages. So that's been nice. 

One of the things that we had intentions to kind of do that. We didn't know if we would do it right away or how long it would take to do that. But one of the things that I wanted to make sure of when we did that. Is I wanted no commute or very little commute very much. So, well, you drive a golf cart, right? Yeah. Yeah. So, I can ride my bike or walk or take the golf cart to work and Tammy's rec centers within a mile. So same thing there. So, I don't know if fun's the right word, but we wanted to enjoy the work and not make it you know, no stress, but just have some structure in our day. So that's been a good decision so far.

Roger: It's very clear that this kind of structure and curation of community and villages in these little town squares is right for you. Have you talked to anybody or experienced anybody that where either they get there or they visit and it's like yeah, this isn't for me. 

Brad: Yeah. Yeah, actually I would say it's a small percentage but there's definitely in fact, there's a couple people that we've met that were actually working at the rec center and they were going to move back to a home as they called it because it just wasn't for them.

Yeah, I think when you kind of get down it It's not for everybody I mean If you don't enjoy activity and being around people and doesn't mean that you have to socialize all the time, I mean, but it's, it's very much an active community and if that's not for you, wouldn't be the place to come. 

Roger: Yeah, I'll tell you about my takeaway from it, Brad, when I've been describing it to others is I imagined if I live there, it would be a blast.

But then I say, I don't think it's for me. Like we want a small town that is activity based, but the curation of it just felt odd to me. So, I think you guys approached it really well in that you tested a couple of different ones to get different flavors, and you seem to have settled on this one really quickly.

Our plan, like with Salida, which is the town that we have a place in now in Colorado, our plan was to do a hub and test different cities. We landed on Salida early and we cut a lot of that testing short because we liked it so much, and it sounds like you had the same experience. 

Brad: Thanks. Yeah, and I think we know when we're looking at what do we want this retirement to look like in the vision? Then a lot of people talk about travel and Tammy and I are just, that's not important to us. That's not something that we really care so much about doing, and so we really wanted to be in a community where there were plenty of things to do.

If we got tired, tired of this, we could do, there's many different things, and then that may even change within the seasons and go in the summertime and we're here. We may, maybe we won't be out so much. Maybe we'll be inside doing, enjoying different clubs that are inside doing different things, but it's an adjustment. I think that's one of the one reason why I wanted to come down for a month is after researching it, I knew that it was going to be pretty overwhelming to come down for just three or four days. So, I think people that move here, and I speak with them frequently because in my position, a lot of people coming in on lifestyle visits and checking The Villages out, and even people that have only been here a month or two, it takes some getting adjusted, to just the golf carts. I mean, it's people don't realize.

Roger: I thought I was going to get run over a couple times.

Brad: I mean there's 70 000 golf carts and roundabouts and but you don't have to go from one end to the other. Does that make sense?

Roger: You have communities, and they've done an amazing job with that, by the way, I really came away impressed. Everybody felt like they had their own community and own downtown area via the village. 

Brad: You know, if there's a certain band that's playing that you like, it's in another one of the town squares, you can certainly go, but it doesn't feel like you have to only place you go to listen to music is one place and it's a 30-minute drive.

That's not how it works. 

Roger: Yeah, sort of like I remember going to Michigan State, Brad, and every now and then there would be an, you know, it's a 40, 000, 45, 000 back when I went there, Lord knows what it is now, but every now and then you would have a class that was across campus and it was like a whole different world because you never went to those areas because you just stayed in your bubble of wherever your college was.

What advice would you have on somebody that either hasn’t retired yet, and they're trying to think of where they want to move. How should they approach that? 

Brad: I think first where they want to go based on what they want to do, what do they want to do when they get to wherever they want to go?

I mean, what are the types of things that they enjoy? I mean, do they enjoy walking on the beach or where you guys are in Colorado? I think that'll get kind of dictate kind of where you want to go. I say this and we didn't do this very well, but explore different areas is probably a good idea, but then depending on your time frame, I mean, if you're working to go to one or two a year, maybe I think it's if you can, I go back to this, at least here for us in The Villages coming for a long enough time to really go. The first week is kind of like the honeymoon thing. Okay, but is it really what you want after two weeks three weeks? I think we really could settle in and go. Yeah, we can see ourselves living here, we feel good about this and I don't know if you can get that same feeling and a short stay that makes sense?

Roger: Yeah, that makes total sense.

That's what we did in Colorado as well. My aunt Patty and I had dinner with her when I came and visited you. Aunt Patty and her husband. She's a hippie. That's what I remember she grew up, transcendental meditation, they have a place in Iowa because I used to live right at Maharishi University, and I remember she lived in Florida, I think in the Jacksonville area, and she told me that they moved to The Villages. This was a number of years ago, and I'm like, what? You're the last person I think would go to The Villages, and when we were having dinner, which is the first time I'd seen her at The Villages, what she said Because they had migrated to Florida and went to a normal neighborhood was the problem of going to a normal neighborhood in Florida, meaning not a 55 and older, was that you had working people, you had people with kids, and it's wonderful to have that diversity, but they weren't near as interested or available to be able to make friends, so they found themselves isolated. In a neighborhood because everybody's off doing their own things. 

Whereas in The Villages Everybody it's like going to college as a freshman. Everybody wants to make friends and is open to it.

Brad: Yeah, that's a great way to look at it. That's kind of how it is in The Villages and I’m sure it's in other communities as well as 55 and over communities, but it's kind of like we talked earlier about in Iowa I mean; we're retired and everybody's going to work and you know so it's just there wasn't as many things to do with people and socializing different things.

So just a good setup.

Roger: Thanks so much for sharing your wisdom, Brad. 

Brad: I really appreciate you guys making the trip down here and having a meet up. It was a good meet up and I'm hoping to continue to meet with some of the Floridians around the area. 

Roger: Awesome.

LISTENER QUESTIONS

So now it's time to get to some of your questions to help you take a baby step on your journey. If you have a question for the show, you can go to askroger.me and we'll try to help you on your journey. Thanks. 

SHOULD WE CONSIDER GETTING I-BONDS IN 2024?

Our first question comes from Howard.

Howard says, 

"Good morning, Nichole."

By the way, Nichole's going to be on the show in a week or two. Thank goodness. She's awesome.

"Has Roger talked about whether we should consider getting I-bonds in 2024 as he did in past Januarys?"

Good question. 

Howard also throws in,

"Also, Dr. Bobby and Mark are great to listen to. Absolutely enjoy their comments. 

Thank you so much, Howard."

So, Howard is wondering why in January we didn't talk about I-bonds as we may have done in past Januarys.

There's no real reason that we didn't, Howard, other than we had other things going on, and so let's talk about I-bonds and whether they make sense to include in your contingency fund or as part of your allocation.

Before we get to whether they make sense in 2024 or not, Howard, let's talk about the basics of I-bonds, and we're going to include a link to a really good page on Treasury Direct related to I-bonds in our 6-Shot Saturday email so you can get all of this information and understand these better. But let's cover the basics. 

So an I-bond is issued by the Treasury Department via Treasury Direct. The current yield on I-bonds issued between November 1st, 2023, and April 30th of 2024, they reset it, I guess at the beginning of May now, so it probably just happened, was 5. 27%. So that's the current interest rate that you receive on an I-bond. 

But how is that interest rate calculated? Well, it has two components. It has a fixed rate, which was currently before April 30th, 1. 3%, and the difference, the 4 percent or so is a inflation adjustment to the interest rate. So, you're guaranteed that 1. 3 percent fixed rate, and then the rest of it is going to vary based on published inflation rates, published by the Treasury Department. 

These were very attractive relative to other investments a year or two ago when interest rates were near zero and inflation was starting to rise. As the internet always does, all of a sudden you saw a lot of articles and headlines about how awesome I-bonds are, and now that interest rates have come up and treasury bills and other types of instruments yield equivalent, nobody's talking about I-bonds anymore. That's the way the internet works. That's why we don't use it to plan our retirement. So now they're not really talked about anymore.

Current yield is 5. 27%, as of the date I'm recording this, and that will vary based on inflation, because the intent of an I -bond is if you put in a dollar, you're going to get a fixed rate of return, and that dollar should be able to maintain its purchasing power because the Treasury will adjust the interest that you receive based on published inflation rates so that dollar preserves its purchasing power and earns a little above with the fixed rate. That's the intent of this instrument, is the preservation of purchasing power for the money that goes into it. You can hold an I -bond for 30 years, but you're not required to. You can sell it after one year, but if you sell it after one year and it's before five years, The penalty is losing three months of interest.

That's the penalty. So, they're liquid after a year, but if you sell it before five years, the only penalty is you're going to lose three months of interest. Other than that, it's dollar for a dollar. So, it's not going to go up and down in value. 

One kicker with I-bonds, which really limits their function, you can only buy up to 10, 000 of an I-bond per social security or tax ID number in any given year.

So, if it's you and your spouse, you each could purchase 10, 000. In any given year. So that's the basics of I-bonds. So, Howard, your question is, should I continue to buy I-bonds?

I would say, I think they're a perfectly reasonable instrument if you have the right intent for the money. So, the way that I use I-bonds personally, is it is my long-term contingency or emergency fund.

I've been buying I-bonds personally for a number of years to build up my contingency fund for just life happening to me. For in January at least so far this year. I have not bought them, not because I don’t like them but because I have an adequate amount in there for the purpose which I’m using it for.

But let's assume you need 20, 000 three years from now to supplement your pension or social security as you build out an income floor.

Well, I think it's perfectly reasonable to buy an I-bond today for twenty thousand dollars if you're married each spouse buying ten and then knowing three years from now, that yes, you might lose a little bit of interest but that money will maintain its purchasing power within the context. Maybe that's not the best use, maybe it's five years out. But understand the intent of what you're trying to do with the money and use this as part of the menu along with individual treasury bonds, certificates of deposits, other types of individual bonds, and just make a judgment call.

Howard, it's not that I dislike them, I just didn't talk about them, and for me I haven't bought them this year mainly because for my intent, long term contingency fund, I've already funded that so I’m doing other things with my funds.

CLARIFYING NEW CATCH-UP RULES IN 2026

Our next question comes from Paul relative to new catch-up rules starting in 2026.

"Hey Roger, with the new catch up rules for 401k plans starting in effect in 2026, how will that affect the ability to contribute after tax dollars for high earners to a traditional IRA who intend to convert the contributions into a Roth IRA?

So what he's referring to is current guidance is that in 2026, related to the SECURE Act, that if you make over, I believe it's a hundred and forty five thousand dollars annually, the catch up provision within a 401k not your normal employee contributions, but the amount that you can contribute in addition to If you're over age 50 will no longer be able to be deposited in a traditional 401k plan.

What the SECURE act 2. 0 is saying at the moment is that yeah, you can contribute your normal employee contributions to the pretax account, but if you have catch up provisions, those must go into a Roth option within the 401k. 

We'll see how that plays out and whether that stays in effect through the implementation of that in 2026, I believe it is.

So, Paul asked, well, how will that affect the ability to contribute after tax dollars for high earners to a traditional IRA who intends to convert it? Essentially doing a backdoor Roth contribution. Off the top of my head, Paul, I don't know if it has any impact to that backdoor Roth function. I don't recall seeing anything there.

I also would say that this is what I would call a green banana. Here we are in mid-2024. That's a year and a half away. We have an election in between that for the presidency and the Senate. I'm not even thinking about this stuff to be honest with you. I will think about this stuff probably mid next year when I'm starting to close out 25 planning and think about 26 because I tend to not think about things. Well, tend not to think, I work to not think about things before there's something that I can actually do anything with. 

The reason for that is that we only have so much time, me as a practicing retirement planner, but you in your life planning for your retirement. It's important to use your time wisely and I make the decision I don't want to use my time on things that I really don't have any agency or control over and that are far enough out that I don't have to worry about them right now.

That frees up my time to focus on more important tasks.

CHARLIE'S COMMENT ON SYSTEMS THINKING

Our next question is really a comment from Charlie. 

He says, 

"Hey Roger, just wanted to tell you how much I enjoyed this week's episode on systems thinking and complexity. I had the luck of taking great system thinking courses nearly 40 years ago as part of my MBA, and the idea around complex systems has stuck with me throughout my career.

I retired about a year and a half ago and have been enjoying life. At the same time, it seems that something is missing at times. This episode really helped me understand that my days are now primarily filled with simple, complicated things, and I am missing working on complex issues. 

I've been debating taking the plunge back into doing some independent consulting and think I will go ahead and try a few more complex assignments to see if that helps fill out my retirement."

I love that approach, Charlie, and the fact that you are able to identify or make that connection between what might be missing.

Almost all knowledge work, which is the majority of us, is around complex tasks that never really have a result. And you can't just simply create the widget and build the widget and have it all figured out, the value of that is you see completion. It's like mowing the yard. 

A lot of us are in more knowledge-based careers where we're dealing with these complex things that never end and never can actually be figured out. We can miss that quest in retirement when we're dealing with just complicated things. I thought that was interesting. 

We just had literally today when I'm recording this, an internal meetup in the Rock Retirement Club on improving our skills and using the retirement software that we provide to club members. We had about a hundred club members on there and learning how to use the tool to model the scenarios that they're trying to model for their journeys for retirement, and it's a wonderful exercise but it can be very frustrating for me, but also frustrating for the people using the tool, because these software tools, retirement planning software, even if they're very robust, have so many holes in them. Because they're trying to model 30-year time frames of various spending and cash flows and taxes and so forth. There's a lot of holes in them, because they're trying to bring precision to a very complex problem.

Initially, that can be really frustrating when you're doing retirement planning, doesn't matter how great your spreadsheet is.

If you really think about it, it comes down to accepting that you can't figure it out and that the software or your spreadsheet or whatever tool you're using, it's just going to be wrong, and it's going to have a lot of holes in it. Rather than be frustrated about it and think that if I just improved my spreadsheet, or if they just improved the software, it would all be okay.

Once you realize that, no, it won't be because it's complex and you can't, it can actually be very liberating so you stop chasing those rabbits that you'll never catch, so you can work on the frameworks for being agile and managing over time. It can actually be very liberating once you get past thinking that you can get this all figured out.

So, thanks for the feedback, Charlie. Good luck to you with testing.

My only counsel there is going into those assignments, if you do it, build some boundaries so you don't get overly obsessed with the complex problem so you can maintain a line between when you do that and when you go live with all this time freedom you have.

WHERE TO PUT TAXES IN YOUR PLANNING SOFTWARE?

Our next question comes from Robert related to where do you put taxes in the plan when you're building this cash flow model? 

It's a great question. I don't put it under goals. If you're using software, your software is going to have a hierarchy of simplifying assumptions of where it's going to draw money and how that money is going to be taxed. Those estimates that the software creates, that maybe you export or you see on the table that it creates for you, Robert, are going to be all over the place and probably pretty wrong. It's a very blunt tool that software uses for these things. Then that's why, even if you're using software, Robert, when you're thinking about taxes, that software is good enough for just long-term proof of concept or feasibility.

My suggestion, Robert, would be, when you're dialing in the near midterm, let's call it the five years, if you're going to build a five-year income floor, you're going to build your own Excel template of a five-year cash flow statement, which is going to have all your income sources, all your goal spending, and it's going to have a tax estimate line below those.

So, if you have 100, 000 in income, 200, 000 in spending, you have a negative 100, 000 cash flow for that year. Then you add a line, which is your estimated taxes for that year, and that estimated tax number is going to be based off of your decision of where you're actually going to pull money from in order to pay for your life, because you may pull it from after tax dollars. You may pull it from IRA dollars. You may pull it off Roth dollars. So, you're going to want to create those numbers to make sure they're a little bit more accurate than the software is going to do for your specific plan for that year.

We like to do that no more than five years from a tax perspective, have a better estimate on that cash flow spreadsheet for the first five years and really, it's a year by year that you're informing those numbers, so you can get to the true deficit that needs to be funded.

That's where you would have that line Robert and I think I don't know if it was the last Retirement Plan Live, but the software is going to do it bluntly. I would do it based on exactly where you're going to pull the money because that way you can dial in what your tax estimate's going to be.

A SUGGESTION FOR THE PODCAST

We'll close out the Q/A session with a comment from Glenn.

Glenn says,

"I'm sorry, I missed the survey because I had a suggestion for you, but I've been busy with life changes after being widowed for seven years. I just remarried and moved 70 miles to my wife's new home.

I have also been renting my house for sale, now waiting to close." 

Whoopee! Congratulations, Glenn. That's awesome. 

"Anyway, I have a suggestion for your podcast. I enjoy the financial side of your show, and I know others gain a lot from the non-financial. My suggestion is possibly to create two podcasts. One dealing with the excellent retirement plan on financials and one dealing with the non-financial or mindset side."

That is actually something Glenn, that I have been toying with on and off for about a year and a half. Incrementally, it's not double the work, but it definitely adds much more from a project standpoint and workflow standpoint, and I've considered that. We haven't really polled on whether we should do that.

I vacillate between liking the idea and not doing that, and all of you are welcome to shoot me an email and reply in 6-Shot Saturday on your thoughts on Glenn's suggestion. It's definitely something that I've entertained. So, thanks for the thought.

With that, let's go make sure this is actionable and set a smart sprint on your marks, get set.

TODAY’S SMART SPRINT SEGMENT

We're off to take a baby step that you can take in the next seven days to not just rock retirement, but rock life. 

All right. In the next seven days, I want you to maybe journal on or have a conversation if you have a spouse or a partner about where you're going to live in retirement if you're not retired yet.

Where are we going to live? Why? Why are we not considering something else?

If you are retired, have this conversation with fresh eyes of is this really where we want to be for the rest of our life? Does it give us the environment that we want, the community that we want, the activities that we want?

Maybe ask the question, well, hypothetically, just playing around here, if we were to move or have our ideal location, what would that look like? Make it hypothetical. Make it a very low stakes discussion. Doesn't mean you've got to make any changes, but it's good to revisit this stuff.

CONCLUSION

So next week on the show, we are going to talk about the things that you should stop doing in your retirement planning. It's human nature. It's hardwired for us to add things. Michael Easter pointed out a lot of research in his book, The Scarcity Brain, that we talked about a month ago. We tend to want to add things in order to improve things.

In reality, much of the time, the biggest impact can be had by stopping things. How nice it would be to do less things and have a big impact. So, we're going to talk about that. In addition to that, we're going to have Dr. Bobby with a Rock Life segment on health and answer your listener questions. 

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 and reference 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.