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Transcript

Mike:

The concept is a hundred percent incorrect. It’s wrong, wrong, wrong. Because the question, if you want to make work optional, or if you even want to retire, the question is not how much money do you need to have? The correct question is how much income does your portfolio need to produce to make, to make work optional so that you could retire people, whatever you want.

Zach:

Welcome back to your retirement today. I’m your cohost filming alongside me. We have Michael Reese certified financial planner and founder and president of Centennial advisors headquartered right here in beautiful Austin, Texas. Tonight’s show. This is an exciting one. Mike, we’re talking about the three questions that you have to answer to make work optional. Now, at the end of our last segment, you kind of tease what’s coming up here. We’re going to be talking about the amount of income you need to make work on.

Mike:

Yeah, that’s exactly the deal. So I’m going to give you an example of what I’m talking about because we were talking about this in the last segment. We said, you know, there’s this ING commercial several years ago now ING is now called Voya financial. And I think they made this change. Boy, it might’ve been 10 years ago now. I don’t know. It’s been a while, but the point is there was a commercial and people would walk around. You might remember it, right? I remember it. People are walking around the street and they’d have like these orange bubbles above their head because the company colors and the question was, what’s your number? What’s your number? And the, and the number represented how much money you would need to retire or put another way, how much money would you need in your retirement accounts in order to make work optional? Right? And the funny thing is, it’s a dumb, it’s a whole, the concept is a hundred percent incorrect. It’s wrong, wrong, wrong. Because the question, if you want to make work optional, or if you even want to retire, the question is not how much money do you need to have? The correct question is how much income does your portfolio need to produce to make it, to make work optional so that you could retire or keep working whatever you want to do.

Zach:

Right, because if I step away from my job, I have to replace those paychecks somehow.

Mike:

That’s exactly it. You got to replace the paycheck and, or at least a chunk of it. Right? So here’s, let me give you a good example, right? So imagine, let’s talk about Joe and Fred, right? Two hypothetical fictional people. Okay, Joe he has he sitting here and he has a million dollars in his 401k and Fred has 700,000. All right. So Joe has a million. Fred has 700,000. Who do you think is more ready to retire?

Zach:

Well, you would think Joe, just based off the number,

Mike:

He’s got more money. Sure. Right? Oh, but wait a minute, wait a minute here. Let’s say let’s keep this even simpler. They need let’s imagine that they need the same amount of income from their portfolio. Okay. Okay. So just for the sake of discussion, let’s assume they need $3,000 a month, right? Joe has a million dollars. He needs 3000 a month in order to make work optional. Fred has 700,000. He also needs 3000 a month to make work optional, who is more who’s in the better position to make work optional. It seems like Joe, you would imagine Joe, because he’s got a million Fred at 700,000 and they need the same amount of income. Right? But then we start diving into how they have their money invested. And we learned that, Hey Joe, you’ve got your million dollars. When we run the analysis, we learn that your portfolio, the way it’s structured, it’s only generating one and a half percent income, which is very common today.

Mike:

It’s only generating 15,000 a year of income. Now he wanted 3000 a month, which was 36,000 a year. His portfolio is generating 15,000. Is he ready for work to be optional? He’s not, no, not even halfway there, unless, unless he makes some serious changes right now, by the way, he might be there. If he’s open to making the changes, but he’s not there yet. Yep. Let’s look at Fred. He’s got 700,000. When you look at his portfolio, maybe it’s generating income of 40,000 a year. He needs 36. Is, is he in a position where work could be optional for him?

Zach:

He’s getting there very close.

Mike:

Well, he needs 36 and he’s getting 40 he’s there. He’s there. Right? What if he was at 32? He’s close, right. Or 30 he’s close. He’s a lot closer than Joe is. Right? So here’s the thing. It’s not about the amount of money you have.

Mike:

If you want work to be optional, it’s about the income that your portfolio is generating. And it’s not just about the income. It’s also about how sustainable the income is. So I’ve got this great little, a fundal exercise. So if you’re out there, if you ever come watch one of my live events, you know, so sometimes I’ll do, like, I might be at a hotel speaking. I might be at a restaurant. And one of the things that sometimes I like to do just for fun is I’ll, I’ll go to a couple like a husband and wife. Right? I know this one. Yes. And I go, I always start with a husband and I just simply ask him, let’s say his name is Bob. We got Bob and Mary here. Right? Like, Hey Bob, can you mind if I asked you a couple questions? He’s like, sure, go ahead.

Mike:

I say, so Bob, are you still working? And I tried to pick someone young enough. They’re probably still working. Like he goes, yeah, I’m still working. Great. So since you’re working, what happens every couple of weeks? Well, my company deposits, you know, my paycheck and then I like to ask. Okay, great. So now, as long as you’ve worked at this company, have they consistently deposited those paychecks? Have you gotten a paycheck? Every two weeks? Pretty consistently. Well, yeah. And over time, like due to maybe inflation or maybe because he got promotions, have you seen increases in your pay over time? He’s like, yeah. All right. So Bob, every couple of weeks you get a pay check, like clockwork, you been getting raises over time, right? It’s all been pretty consistent. Now what about this? You know, in 2013, the stock market was up like 30%.

Mike:

Did your company come to you in 2013 and say, oh Bob great news. The market’s up like 30%. We’re going to give you a 30% raise. Did they do that?

Zach:

They did not do that.

Mike:

No. Okay. Well what about in 20 2008, 2008, the market was down 37%. 37%. Did they come to you, Bob? Oh my gosh. It’s horrible. The market’s down. We got, we all got to tighten our belt. We need to cut your paycheck by 37%. Did they do that?

Zach:

No,

Mike:

Of course not. So what you’re saying, Bob, is that while you’ve been working your income, it’s been stable. It’s been consistent. It’s been growing and the stock market doesn’t impact your income. It’s it? It is what it is. Is that fair to say? Yeah. And he’s like, yeah. Okay, great. Then when you retire don’t you kind of want the same thing don’t you kind of say, Hey, when I’m working my income, it’s stable.

Mike:

It’s predictable. It’s grows over time. Don’t you kind of want the same thing when you’re retired. It’s like, oh yeah, definitely. Well, Bob, how long do you want that to be the case? Like how long do you want that income to continue in retirement? And this is where I have a little fun. Cause he always says the same thing. Once he say Zach, as long as I live and this is where I say, why are you sure about that? He’s like, yeah. I said, very sure I was okay, well now, but Bob, I’m confused. Didn’t you tell me that this lovely lady sitting beside you, Mary, is your wife. If your income only lasts, as long as you live, who’s probably gonna live longer. You or Mary? And that’s when he starts laughing. He’s like, oh, I answered this wrong. He was like, so I said, so, so Bob, do you want to maybe amend that statement?

Mike:

How long do you want that to last again? You want it to be stable, predictable growing. How long do you want that income to last again? It goes. And what does he say? Oh, as long as we both live. Oh, that’s a better answer. Okay. Fair enough. But here’s the deal. Do you want work to be optional? Well, question number one or decision number one, strategy. Number one. How are you structuring your retirement savings so that they are generating enough income, enough income to replace that paycheck income that is stable, predictable and growing over time. No matter what the market does in both good markets and bad. How are you doing that? Yep. That’s a question you have to answer. And by the way, that’s one of the things that we’re going to be talking about at retiring while university. So here’s the thing coming up starting tomorrow night, you still have time.

Mike:

This is your last chance, but you still have time starting tomorrow night. I’m personally going to be hosting a two week class of financial, like a college level financial class on how to make work optional. It’s called retiring while university. And we’re going to cover these three questions you need to answer so that you can make work optional so that you can enjoy the easiest path to financial security, no matter what the markets do. Right? So it starts tomorrow night, six 30 to eight 30 is part one. Then the following Tuesday, the 27th, same time, six 30 to eight 30 is part two. This is a zoom meeting. So it’s like a live virtual class. So you get to hang out in your own home. If you want to be in your pajamas at early, that’s fine. You don’t even have to turn the camera on.

Mike:

I hope you do. Cause I like you see me. I like to see the people in the class. Right? there’s already like a hundred people registered. So there’s going to be a ton of people in the room. So it’s not like it’s just you and me. You can be very what’s the word anonymous. Yes, but you just it’s great information. We’re gonna have a lot of fun. And the way it works is I’m going to cover, you know, a number of financial topics, but I’m going to cover the first topic. And then what I’ll do is I’ll open it up for Q and a. I want to make sure your questions are answered and it’s going to be a blast. It’s super easy to sign up. So what do we need to do? Like, so here we are. We’ve got listeners out there say, man, maybe I should sign up for that. It’s free. It’s easy. It’s fun. What are the

Zach:

You’re right, Mike? It is easy. All you have to do. If you’re listening to the show, you want to sign up, you go to five 90 that’s 5, 9, 0 class.com. Again, that’s five 90 class.com. Enter your name, your email, boom. You’re registered and we’ll send you all the information immediately.

Mike:

I think it’s important that when they put in their name and email sack, that they hear the boom sound.

Zach:

You hear the boom sound effect. When you click sign me up,

Mike:

Then you know, you’re registered. Very good. Boom. All right. So I know you love saying that. All right, we’ve got it. We’re hitting up against the break here. When we come back, we’re going to talk about the second question. You’d answer. What are you gonna do about all those taxes in retirement? Don’t go anywhere. We’ll be right back.

Zach:

Hi. And thanks for checking out retirement today. If you like the content we share on our channel, make sure to like comment and subscribe. So you can say notified about all of our latest content and videos. Be sure to share all of our information with your friends and family as well. Thanks for joining us. We’ll see you next time.