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Most retirement advice sounds like this. Save more, spend less, don't run out of money. And that's not wrong, but it is incomplete. In following incomplete advice for 30 years is how people end up financially ready for retirement but completely unprepared to actually live it. I've spent a decade and a half helping people to manage this transition. Today, I'm the CEO of a company that serves over a thousand clients nationwide and manages over two and a half billion dollars for those same clients. And what I found in my experience doing this is retirement doesn't just follow hot tips. It follows law specific, predictable patterns that determines whether someone thrives in retirement or spends it anxious and underspending, worrying they made the wrong decision. Today I want to walk you through seven of those laws. This is the video I wish I could send to Everybody in their 50s before they make the decisions that are going to ultimately impact the next 30 years of their life. There are three problems the retirement planning has to solve simultaneously. The first is a math problem. Do you have enough and will it last? The second is a time problem. Are you actually using your money when it can do something for your life? And the third's a psychological problem. Can you actually give yourself permission to spend what you've built? Most people only solve that first problem. These seven laws address all three. Law number one, the number isn't the goal. The life is. Everyone comes into retirement planning with a number. One million, three million, five million. Whatever the number is, they treat it like it's some finish line to be reached. But here's what I've witnessed time and time again. People hit that number but don't feel any different. Nothing changes. So they keep saving, they keep deferring. They keep saying, one more year. That number was always supposed to be the means to something, but instead it's become the thing. I worked with a client. I'll call him David. David had $4 million saved by the age of 61. He was meticulous. He was disciplined. He never wasted a dollar. He could be confident that he could retire and have that money last for the rest of his life. But he told himself it wasn't enough. He didn't feel any different at 4 million. So he told himself that 5 million was that nice round number when he'd finally retire. So he KE working. I asked him, I said, david, what would be different at 5 million that you can't do with 4 million? He couldn't answer because he never actually thought about what that money was for. He'd optimized the plan for saving so well that he forgot what was on the other side when it actually came time to spend. So instead of waiting until 5 million, he retired with 4. He retired because we finally built that plan that showed David not what that money was worth, but what it could translate to in terms of a lifestyle that it could support. And once he saw that, he'd wished he'd retired years ago. So what's the law? The law is this. Your number is a tool, not a destination. Money should always be the supporting thing, not the main thing. So start with a life, then go figure out what it costs. Law number two, you have three retirements, not just one. When people think about retirement, they think about a long open phase. Golden years sitting on the beach, enjoying a cocktail, doing what they think they've always dreamed of doing. But here's the reality. Not all years are created equal. You're going to have your go go years. Those are typically thought of as the years between your 60s and early 70s. Then you're going to have your slow go years. Those are your early 70s to your early 80s. And finally you're going to have your no go years. That's your early 80s and beyond. The go go years is where everything you dream about actually happens. The trips you want to take, the time you want to spend with loved ones, the energy, the vitality, the things that you can do in retirement. Those are the years where they're getting done. This phase is expensive, and that's because it should be. This is when you're taking all that you've dreamed of and actually living it. Then phase two happens. Phase two is a slow go years. Let's call that ages 72 to 82. The pace changes, travel becomes less frequent. You're not as active as you used to be. Maybe the people you spend time with aren't as active as they used to be. Or in some cases they may no longer even be here. Spending starts to drop, not because you're running out of money, but because you no longer have the energy or the health or the desire to do all the things that you dreamed about in retirement. Phase three is the no go years. This is the stretch where home and health become your entire focus. Spending, ironically, may actually tick back up because of health care costs or long term care costs. But the discretionary spending, that's largely done at this point. So here's why this matters so much. People think of retirement like one phase of life, as if all the spending, all the enjoyment is going to be spread evenly over those 30 years it won't. Most of that is going to be front loaded in the first five to ten years of retirement. So here's a takeaway. Front load those good years and also this. Do not delude yourself into thinking that two or three more years of work is going to be worth it. When those extra two to three years of work are taken away, a big percentage of of your remaining healthy years. Law number three is tax diversification can be just as important as investment diversification. Now we know why we diversify. On the investment side. You're not going to go into retirement with all of your money in one single stock the same way you shouldn't go into retirement. All of your money in one single account type. Ideally, you are preparing ahead of time. Do you have your pre tax 401k and IRA assets? Do you have your Roth assets? Or at a minimum, do you have a plan to convert to your IRA assets? Do you have a health savings account? Do you have a brokerage account? Understand that having different types of accounts gives you flexibility. Because in retirement, here's the thing, you get to control to a large extent what your tax bracket actually is. Now this is confusing for people, especially people who've worked their whole lives saying, I just paid taxes on whatever I earned. You're telling me that changes in retirement? Yes, that changes in retirement if you've done a good job of preparing ahead of time. If you have the flexibility of having money in brokerage accounts and pre tax accounts and Roth accounts and other types of accounts, you get to decide the order in which you pull money from your accounts. By deciding that, what you're ultimately basing that decision on is your tax strategy. What's the right way to pull money out to keep your lifetime tax liability as low as it can possibly be? So where you have your money can be almost as important as how much money you have. For those of you still planning for your retirement, make sure you're starting to diversify now. It will give you flexibility on the back end. Law number four, your sequence of returns matters more than than your average return. Now this is someone that surprises retirees the first time they see it. Two different retirees can enter retirement at the same age with the same portfolio, balance with the same spending needs, and have wildly different outcomes. The difference is the returns that each received. And I'm not talking about the average return. The average return could be the exact same, but the order in which those returns showed up is actually what's most important in retirement. I don't care if Both of them got 6%, 7%, 8% average returns. It's the sequence in which those returns are received. So let me paint a picture for you. If you retire and you retire at 60 and Social Security is going to start at 70 and beyond, and you have a horrible downturn in the first few years of retirement, there's a lot of pressure on your portfolio. Social Security hasn't kicked in. All of your withdrawals are coming from your portfolio. And by the way, the market's down 30, 40%. What does that mean? Well, it means you spent your whole career putting money into your portfolio and downturns actually helped you. Now the opposite is true. When you're pulling your money out of your portfolio, you're being forced to sell great investments when they're at their lowest price. That's not a recipe for long term success. The damage has already been done and in many cases you can't recover from it. Now on the flip side, this individual over here has the same average returns, but they had strong returns the first several years of retirement. Then in the latter years the markets fell quite a bit to lower the average. But it didn't matter. They actually had a much stronger outcome. Because of those early years. Their portfolio was able to generate all the income they needed. And it wasn't until the latter end that they started having poor returns. Same situation, same average return, different sequence of returns, and it made all the difference. So here's the takeaway. How you structure your withdrawals and how you construct your portfolio may matter even more over the course of your retirement than the average return that you receive. A good withdrawal strategy understands exactly how much you need to have in growth assets in your portfolio and exactly how much you need to have in stable assets in your portfolio. As step one, then step two is that withdrawal strategy and needs to have a structure and a framework for helping you understand when do you pull from each. If you can nail those two things, you're largely going to insulate yourself from the sequence of return. Risk law number five, the break even math on Social Security is probably wrong. Almost every single Social Security calculator on the Internet, every single Social Security projection you get from a financial advisor to seminar, they're all incomplete. They're all showing you something like this. If you wait until age 70 to collect Social Security and if you live past the age of 81, you're going to be better off in the end. The math is accurate, but it's incomplete. And when you make decisions based on incomplete data, it can have devastating results. Here's what those calculators miss. If you're delaying Social Security and you're retired today, your income has to come from somewhere. So, sure, this Social Security benefit is rising because you're delaying the collection of it, but what are you living on in the meantime? Well, your portfolio. So you're pulling money from your portfolio, which is, of course, what it's designed to do. But that portfolio is now being drawn down, which means that once Social Security is maximized, that number is higher, but the remaining income that can be generated by your portfolio is lower. So if you're not taking both of those things into consideration, you're missing the entire picture. This is especially true if you retire and there's a downturn in the market. There's a downturn in the market and you're delaying your Social Security. Not only are you drawing from your portfolio, but that portfolio is declining, putting a lot of pressure on your portfolio, which in some cases it could actually be better to collect Social Security early to protect the income that can be generated from your portfolio long term. But the law is this. Your Social Security decision is an investment decision, not just a benefit election. The right age to collect depends upon your health, your retirement year, your portfolio value, and your overall strategy. Do not make that decision in a vacuum because a decision made on incomplete data could be a disaster for your overall plan. Law number six. Your biggest retirement risk is not running out of money. Now, what's the number one fear? It's probably you're going to run out of money in retirement. That's what most people obsess about. But the data tells a different story. The data shows that if you're an average retiree and you spend 4% of your portfolio value, which we're all anchored to because of this 4% rule, you are far more likely to have a lot more money at the end of your retirement than you did at the beginning of retirement. Now, that's if you're spending 4%. I see a lot of people who retire, but they're afraid to even spend that much on their portfolio. So they're only spending 3%, two and a half percent, 2%. Those people are doing that because they're so fearful of running out of money. You can resonate with this as you're thinking about your retirement. What's the top concern you have right now? Are you going to run out of money? Are you going to be living under a bridge one day? Are you going to be in a position where your spouse isn't cared for after you Pass because there's no more money left. Or all perfectly valid concerns, but all are concerns that can be addressed through good planning. The biggest risk I see too many people face is they leave too much on the table in terms of what they could have done in their retirement. They underspend, which translates directly to they under live. They don't take the trips they could have taken. They don't do the things they could have done. They don't spend the money like the money was intended to be spent. So one day they wake up with more money than they'll ever be able to spend. And they also wake up with a tremendous amount of regret saying, what could have been? What could we have done with this money? When we had our energy, we had our friends, we had our health, we could have created something wonderful for ourselves, but we let fear drive our decisions. And sure, we won't run out of money, but now we're dealing with the pain of regret. So, yes, have a plan to make sure that you're going to be in a position that you don't run out of money. But what I see far more often than running out of money is people who run out of life never having actually lived. And they never actually lived because they lived in fear and didn't spend what they had worked for. So the law is this. The goal of a retirement plan is not only to make sure you don't run out of money, it's also to give you permission to spend it. A plan that leaves you anxious and underspending is not a successful plan. Doesn't matter how much money you end up with. That's not the point of planning. Then law number seven is this. The final decision to retire is emotional, not financial. This last one is one that most financial planning conversations never get to. By the time most of my clients start seriously asking if they can retire, the math already works. The questions have already been answered. What they're asking is something different. And it's this. Am I allowed to stop? And I know this because I watched so many people delay their retirement by two years, three years, five years. Not because they needed more money, they were fine, but because they didn't know who they were going to be when they no longer had the identity of being an attorney or a teacher or a business person, the engineer, or whatever their career was. So before you retire, you have to separate yourself from your employer. You have to replace what your employer offers, both in terms of income and benefits, but also in terms of purpose and structure and contribution. If you can do those things, you're going to be ready to retire. But the decision here isn't a financial one. It's largely an emotional one. So before you make any major retirement transition, ask yourself these five questions. First one, what life does this make possible? Not just what does the math say, but what does this mean for how I'm actually going to live both today and in the future? Number two, what's the real cost of waiting, not just financially, but in time, health and energy? You need to be looking at both sides of the ledger. Decision number three, what's the tax impact, not just this year, but over the next decade? A decision that looks smart in one year can be very expensive across the entirety of your retirement. Four, am I protected in the early years? The early years when I want to do my spending? Am I protected against sequence of return risk? The way you construct your portfolio and the way you withdraw your portfolio will be the thing that determines this. And then number five, can I actually live on this plan and not just survive it, but live it? A plan you won't follow is not a plan at all. So these seven laws won't give you a specific number or a specific date or any specific recommendation for your retirement, but what they'll give you is a framework for how to make the decisions that matter. If this was useful, please subscribe. And if you need help with this, reach out to us at Root Financial. This is exactly what we help clients to do. Help them understand what they're retiring to so we can structure a retirement plan, an investment strategy, a tax strategy, an insurance coverage plan to make sure that everything you're doing is supporting the life you want to live.