00:00:00:08 – 00:00:26:29
What if we have a 20% loss at any point within the first ten years of your retirement The odds of the market going south 20% during the first ten years of retirement. They’re not it’s not 100% but it’s a really big number. It’s a really big likelihood like that’s really probably going to happen. You should fully expect that’s going to happen.
00:00:27:00 – 00:01:08:13
You live a 30 year retirement. You take out 4% the odds that you’re going to run out of money are now 43%. 43% What if you’re taking out 5%? 70.7% that you’re going to. Now, these are the probability that you’re going to run out of money. And that’s a problem. If you’re retired and you decide for your retirement, I’m just going to build this balanced portfolio for retirement, which, by the way, that’s what all the big firms recommend you do.
00:01:08:26 – 00:01:44:06
So if you follow the advice of all these big firms out there and you say, yeah, I’m just going to have a diversified portfolio and I’m going to take either 4% income or 5% income in retirement. You need to understand if that’s your plan. If you have a 20% market loss at any point during the first ten years of your retirement, if any one year, the market’s down 20%, odds are really good you’re going to run out of money My perspective, I don’t think that’s a retirement plan in my view.
00:01:44:18 – 00:02:14:00
You’re just helping your plan. Let me share with you a way that we manage money in retirement that works a whole lot better, has been proven to work in both good markets and bad. What we encourage you to do. Let’s say that you want 4%. You know you want 4% income, right? So we’ll say income and growth we recommend you split things up instead of just having the portfolio and left or you just kind of taking distributions.
00:02:14:01 – 00:02:38:29
This is what we would tell you to do. If you want 4% income. Take 40% of your money and put it in an income bucket. We personally like to use certain types of indexed annuities work really well here. But, you know, maybe a bond portfolio would work as well. But here’s the key. All you got to do is earn 3% per year or better.
00:02:39:17 – 00:03:07:29
You would take 100% of your income, take all income from that bucket until it gets down to $0. And if you earn 3%, that’ll last 12 years. If you’re in 4% and last longer, you’re in 5% less longer. But that’s the magic part Get at least 12 years in. The other 60% would be on the growth side. As long as you’re taking all of your income from the income bucket.
00:03:08:14 – 00:03:34:00
The growth side that can just grow and it’ll have good years and bad years. And here’s the thing. If you can earn 6% here per year, this growth bucket will double over that 12 year period. So in our example, let’s say you’re starting with 500,000, well, 4% of 500,000 is 20,000. So what do we do? We’re going to put 200 K here.
00:03:34:06 – 00:03:51:28
We’re going to take our 20 K per year right? We’re going to grow with inflation. All that good stuff over here. We’re going to have 300 K. Right. And as long as you earn 6% at the end of your 12 years, you would have gotten your income. On that side, this side you would have finished with 600 k.
00:03:52:23 – 00:04:17:03
Hey, I started with 500. I ended with 600 What are we going to do then? Hey, let’s play the game again. That’s how you create income in retirement at four or 5%. You can adjust the numbers. That’s how you create income in retirement so that you are protected and so that your money lasts. This guy over here, loser we all want to do that.
00:04:17:15 – 00:04:32:02
We want to do something more like this. This is how you fix it. Now, we’ve talked about what if the market doesn’t cooperate? So we here’s how you fix all that. Now, there’s still one more risk out there that we need to think about. We’re going to cover that one in part three