Fritz Gilbert (2:24)

The Retirement Manifesto? It was really just a experiment on my part. I started it three years before I retired, so I started it in 2015, 10 years ago. Just a blog to kind of capture my thoughts as I was preparing for and transitioning into retirement. And it's turned into a kind of a passion project. I've been writing for 10 years now it's turned into kind of a thing and I'm just really enjoying the interaction with the readers and having a forum where I can just share my thoughts as I live this life in retirement. It's been a fun project for me.

Christine Benz (2:53)

Yeah, it's a fabulous blog and I do like the give and take that you have with your readers where they're sharing their own experiences. Dana, let's talk about your day job, your main job as a certified financial planner and founder of your own planning firm, Sensible Money. Can you talk about the firm and who your target client is?

Dana Anspach (3:13)

Yeah. We are a fee only financial planning firm and investment management firm. We focus primarily on people entering that decumulation phase. I know not everyone relates to that word, but it's, you know, we work our whole lives, we accumulate assets, often a collection of things, and then one day all of those items have to work together to create reliable, consistent income. And we help people plan out that transition and see how it's all going to work, how long their money's going to last. That is really all we do is work with people typically age 55 plus with over a million in assets who are planning their retirement journey.

Amy Arnott (3:52)

So, Fritz, back in April, you had a post announcing that you were retiring from full time blogging. What prompted you to make a change there?

Fritz Gilbert (4:03)

Yeah, retirement 2.0. Really what it was, it was, I've been writing for 10 years and for the first six years I wrote every single week and I enjoyed it. It was great. As I got into retirement, I started having a lot of other things that were filling my time and that were of interest and I was writing less frequently. But even with that, it was still feeling a bit like an obligation. And I've written a post about how retirement's like a game of poker and you have these cards in your hand and at any given point in time you can pick cards up, you can put cards down, and if the car you're holding aren't the best cards for you at that stage, put one down and pick up another one. So I was just kind of living through that, you know, that analogy or metaphor. And I just said, you know, I want to spend more time outside while I'm still healthy and fit and love doing all the stuff outside. And spending the amount of time it took to be on my computer writing the blog on a semi regular basis just was starting to feel a little bit more like a burden. So I said, I'm just going to take a step back. I'm still going to write when the urge hits. But I don't want my readers to just expect a post on any kind of regular basis. And I'll just write when I feel like writing, and it may not be for a while. So that was really what the announcement was, was just stepping back from even the reduced frequency and saying, I might not write for months at a time and don't be surprised if you don't hear from me. That was kind of the announcement.

Christine Benz (5:22)

So the reason we wanted to have you two together today is that Dana is now going to be contributing her commentary, her thoughts on her pre retirement period to the retirement manifesto. Dana, maybe you talk about the impetus for your decision to raise your hand and tell Fritz that you wanted to embark on this project with him.

Dana Anspach (5:43)

Yeah, it was one of those spontaneous, but as many spontaneous things, there was probably a lot of thought going on behind the scenes that led to it seeming so spontaneous. You know, I, in my profession get to see hundreds of retirement journeys. I think most of us in our lives see, you know, our grandparents or parents, if we're lucky, maybe some aunts and uncles. But we see hundreds of examples and we see this bell curve of how it usually plays out. And so I think about my own retirement probably far more than the average person would. And as I was thinking about it, I, you know, I thought back to the joy I had when I initially wrote for About.com and I had a site called MoneyOver55 and they allowed us to have a blog where we were supposed to share our personality and our voice. And as I was thinking about my own retirement journey and how was this going to work for me, I've been thinking, like, I really miss that expression. And so that had been on my mind for about a year. I saw Fritz's post that he was retiring, and it was like without even thinking, in 30 seconds, I had a text fired off to him. You know, we had obviously met and had each other's cell numbers. And I was like, I have an idea, maybe an experiment. And so that's really what we decided was we're just going to experiment for a year. You know, like Fritz, I'll. I'll post when I have stuff that I feel passionate about writing about, and we'll see what happens.

Amy Arnott (7:11)

We also wanted to talk about the whole idea of a phased retirement. And Dana, this is something that you have written about quite a bit. You've said that you've helped a lot of your clients visualize their retirements, but when you started thinking about your own, you kind of saw A blank. Why do you think that was? And there was a vacation that you took recently. I understand that sort of changed your thinking about that issue.

Dana Anspach (7:40)

Yeah. And that was my first post on the Retirement Manifesto where I share this story. You know, I may be accused of being a workaholic at times, and I've had this argument with people and with myself of when you really love what you do, it doesn't feel like work. And so I am lucky enough to have found a profession where I really do find joy and satisfaction in work at the same time. I read about and watch retirees. I don't have children, and so thus I won't have grandchildren. And I see so many of our clients who have very satisfying retirements where family and, you know, visiting family and taking care of the grandkids is such an important part of that. It provides, you know, such a sense of purpose for them. And I know I won't have that. So it's really been a journey of thinking about, well, you know, what are the activities that I will find that will bring me joy? Because without that, I will just keep working. And I think there is more out there I want to explore, but I need time to go figure that out. And so for me, what happened on that vacation is normally, you give me three days off, and literally, I'm chopping at the bit. I'm bored. I'm ready to go back to work. But on that particular vacation, it was 14 days, much like Fritz, we were in the mountains, outdoors, hiking every day, just, you know, being in nature. And I actually enjoyed it. I never got bored. By the time it was over, I was like, wow, this is what a joyful retirement could feel like. And it was the first time I ever really felt that. And so I, you know, was 54. I turned 54 this year. I was 53 at the time of that vacation. And we often see clients get serious about retirement around the age of 55. And I think it's just for me, having that experience and starting to realize I need to explore more experiences like that so that I have something I'm planning for. I'm great about planning the numbers. I update my financial plan, and, you know, I do all of that religiously, but having the inspiration behind it of what is it I'm really planning for, that's the piece that has been missing for me.

Christine Benz (9:55)

So, Dana, you've said that you've decided to take a very gradual approach to retirement. One of your posts on the Retirement Manifesto was about that first phase, which you call the Pre go phase. Can you kind of talk about what that means and what changes, if any, you're making to your work or your lifestyle to accommodate that phase? That pre go phase?

Dana Anspach (10:21)

Yeah. For me, the prego phase starts when you really start contemplating retirement. Not just the number side, or for some people, it is the number side. But what's that going to look like? When, realistically, will that happen? How's this gonna work for me? And so part of that for me is that exploration I alluded to is saying, okay, how do I take some more time off? You know, my husband and I did a two week hiking trip in the Alps. It was 10 days of hiking the Mont Blanc circuit. I was able to hike seven of those 10 days, so about 70 miles, which we trained for six months to do this. And it was incredible. I didn't take my laptop with me. The first in almost my entire career I've ever taken a trip without taking my laptop. And so there was preparations we made in the firm to make sure all the responsibilities could be handled, and everyone did an absolutely seamless job. So for me, it's exploring more things like that. It's gradually peeling off more duties and responsibilities, figuring out what are the things where I can add the most value to the firm, things that still give me energy that I'm excited and enthusiastic about. And then how do I begin to find those things outside of work that bring me joy so that I have a retirement that I'm excited about planning for?

Amy Arnott (11:46)

Yeah, a lot of people talk about the idea that you need to have something that you're retiring to, not just retiring from.

Dana Anspach (11:55)

Exactly. And for some people, I think that's easier than others. There's not really a right or wrong way. You know, we're all different and unique. And some people have a very clear, you know, idea, and they're very happy in retirement with their hobbies and family and trips and other people. It's going to take a little bit more work to figure that out. And I'm one of those other people where I realize it's going to take a little bit more work.

Amy Arnott (12:21)

You've also been working on a new book about the four phases of retirement spending scheduled to come out later this year. Do you have a specific launch date planned? And maybe you could give us one or two highlights from the book so far?

Dana Anspach (12:36)

Yeah, we don't have a specific launch date. I'm thinking it's gonna be about November. The book is called Living off youf Acorns. Your guide to the four phases of retirement. And I describe those as the pre go phase, the go go phase, the slow go phase and the no go phase. And I think there's so much we have to learn about the decisions we can make in our earlier ph, studying what it might look like in our later phases. And you know, as I mentioned, I've seen hundreds of those examples. And there's certainly this bell curve where we see the majority of people are spending more in that go go phase and we're able to plan their spending and their financial plan around that to accommodate that and then things naturally slow down. But of course there's exceptions. You know, for most people that slowdown occurs in their mid-70s. But I have seen people who needed assisted living as early as 73. They would be on one end of that bell curve. I have other clients who are 89 and still fully independent and self sufficient. They're on the other end of that bell curve. But by studying what our later phases will look like, I think that can give us more permission to spend in the go go phase. So if we really do our planning in a solid way in the pre go phase, we can structure that go go phase to go out and do things that are meaningful, whether that be time with family or contributing to charitable causes, or volunteering or contributing back to your profession. There's going to be time and resources to do those things. And I see a lot of people who financially could do more and they don't because they're preserving so much for later. And I think there's just a better way we can go about and that comes from really understanding the full cycle of retirement and what that's going to look like.

Christine Benz (14:36)

So we definitely want to drill into that issue that retirees have about giving themselves permission to spend kind of appropriately given what they've managed to save. But Fritz, I wanted to switch over to you to discuss your own retirement trajectory. Did you have a pre go phase like what Dana has been talking about, either sort of overtly or maybe less overtly? Can you talk about kind of that pre retirement period for you?

Fritz Gilbert (15:04)

Yeah, absolutely. And I applaud Dana. I think everybody listening, taking the time to really think about the non financial aspects of your retirement while you're still working is hugely beneficial. And I've written about this extensively. You know, a lot of people go through a difficult transition. Like 60% of people struggle with the transition. And the way to avoid that is to do exactly what Dane is talking about. Now she's fortunate she's got a firm. She can delegate some stuff over time she can change the ownership, the equity structure. She's got a lot of flexibility to really tweak that. I was in a corporate role, so I didn't have that type of flexibility. But it doesn't mean you can't mentally work through thinking what you want your life to be in retirement. And I took a mini retirement, which that's something I encourage people to do, where I basically took a 10 day break over the holidays. We came up to our cabin in the mountains, which is where we were going to downsize for retirement. We already owned the cabin, so we came up here for 10 days and we said, look, let's just think about retirement. Not like, oh, it's Tuesday, let's go kayaking type stuff. It was more what do we want our life to be? Exactly what Dana is, it's that opening your mind and being willing to experiment and be curious and think about what you want your life to be and finding a way to do that either in a very gradual long term transition like Dana's doing, or in mine. I had a target date set and I knew it was coming and I made it and it was a great transition. But after I kind of knew the numbers, I still had about a year or so to wait for the numbers to come to fruition. Right. So there's not a lot of benefit in continuing to churn the numbers, but there's tremendous benefit in taking that extra year to really think about what do you want to be. And I wrote a post that makes me think about it. It's called the ten Commandments of Retirement, which was all about kind of the mindset, have an attitude of gratitude, find a way to give back, pursue your curiosity. I still have it hanging on my wall in my office and it's years after I've retired. It's refreshing to look at that and say, you know, those are all still pretty North Star type guiding principles. And I wrote that maybe three months before I retired. So yeah, finding a way to do, whether you call it pre go or whether you call it recognizing all those things you're going to lose from work, the structure, the relationships, the sense of identity, all those things we've talked about recognizing that and thinking about how you're going to get fulfillment in your retirement years, there's really critical piece of retirement planning that everybody needs to do.

Amy Arnott (17:27)

So Fritz, I think you actually retired when you were 55, which is earlier than the traditional retirement age. And after you had that mini retirement and kind of the one year period where you getting things Lined up. You did make a hard break with work rather than shifting to part time or taking more of a gradual approach. And it seems like that has really worked for you. Having full time employment and then full time retirement. Do you think that's the right answer for some people?

Fritz Gilbert (18:02)

I mean, yeah, I think some people don't have a choice, right? If you lose your job or something, maybe you struggle around and you're trying to find something, but it can absolutely work. And I don't have a problem with people saying, hey, I want to work part time or I want to do some consulting on the side. The thing I would caution people, even if you think that's going to be the path you want to take, run your numbers as if you don't take that path and give yourself the freedom that you don't have to earn money in retirement. Because the benefit of being able to decide what you want to do without having to worry about the financial elements that come with that really opens you up to pursue things. I'm doing a lot of charity work now. Obviously we've talked about my wife's charity on previous episodes, Freedom for Fido. And that doesn't generate any income and that's fine. So I think, I think even if you think you're going to transition and work some, run your numbers and make sure that, well, maybe I want to have the flexibility that I don't have to work. And I think that is probably the sound way. And then if you decide you do want to continue to work a little bit, I would encourage people don't do it as a default. A lot of people fall back into that because after about a year they go through the honeymoon phase and they're kind of off. Riley Moyns has a great piece, the four Phases of Retirement. He talks about phase two, which is kind of this depression disorientation phase. And that's when people start recognizing that they have lost all these other non financial things when they retired. The structure of their day, the relationships, the sense of identity. And a very easy way to get those back is to go back to work, right? And if you look at the numbers, the number of people that go back to work for non financial reasons is surprisingly high. It's actually more depends which studies you look at. But it can be more people are doing it for the non financial elements than for the financial. So recognizing your need to find a way to nurture those other needs that you have that you used to get from work. If you do that successfully in the pre go phase, it can make this transition to a full stop retirement a lot smoother. And then if you decide to go back to work, you're doing it just because it's something you choose you want to do. And you might choose not to do that. You might choose to do charity stuff. You might choose to find ways to give back to your community and find your fulfillment that way. And I think each individual just has to work through that process for themselves. But taking the time to think about it before your retirement date is really, really helpful.

Christine Benz (20:29)

Dana, I wanted to hear about your experience working with clients as you help them figure out how much they can reasonably spend in their retirement. Anecdotally, and speaking to a lot of retirees, this is something that retirees struggle. Numbers suggest that they should be able to spend X, but they just can't give themselves permission to spend that amount. Can you talk about that experience with your clients and also whether you have any hacks to sort of help them? I know you've said you just mail them the check, but let's just talk about that issue with your clients.

Dana Anspach (21:04)

Yeah, I've tried so many hacks, but, you know, when I talk about a bell curve, I would say, you know, I see the majority of the type of client we work with do fall in that category where they have have sufficient assets but really struggle with spending. And we have tried numerous things. One of those is mailing the book Die with zero and using that as an introduction to have conversations around meaningful spending to emphasize that we're not just encouraging frivolous spending, but meaningful spending. One of the coolest stories we had was a client who read that book and really they felt completely comfortable as they shared. They said, you know, we're the kind of people who still share a single Coke at dinner. And so they were comfortable with their own spending, but they had a family member who, you know, had always been scraping by and they, you know, said they were giving him $10,000 and he was shocked and, you know, why are you doing this? And they explained they had read the book and, and he shared the whole thought process and what he was gonna do. And the number one thing that he wanted to spend the money on was prescription glasses. He'd never had the money for prescription glasses. And I think about that story and the difference that you can make in people's lives. And you know, so many of us would take prescription glasses for granted. And to this person, that money was so meaningful and could make such a difference in some daily things that they were struggling with, with. And so Those are things my husband and I have talked a lot about as we don't have children. You know, how do we find people who are really working at it and trying hard and, you know, are there ways we can contribute to their lives now that can really make a difference for them? You know, maybe they simply need a laptop to be able to get to work or transportation or, you know, there's so many people struggling that this. The tiniest little boost can make a difference for them. Them. And so we try to talk about those kinds of things with our clients. It's not just spending to spend, but on things that can make a difference. And yes, as you alluded to, we've tried just setting up a direct deposit to them. You know, we had that once, and a client, you know, turned around and three months later said, no, stop that. I don't need that. So we've tried all kinds of things. And, you know, Fritz mentioned running the numbers numerous times doesn't really add a lot of value. And I agree. And yet we've had clients that needed to run the numbers 8, 10, 12 times just to feel comfortable. And so we're all just wired so differently. You know, hearing all these perspectives, I think is what can really help.

Amy Arnott (23:51)

And, Fritz, you've also written about this issue of giving yourself permission to spend. And it sounds like maybe that was a little difficult for you at the beginning, but that it has been getting easier. Have there been any strategies or ways of thinking about things that have made spending more comfortable for you?

Fritz Gilbert (24:12)

Yeah, and I applaud you guys for bringing this up, because I think underspending is a. It's kind of a. It's a big problem, and people don't really talk about it because it's so counterintuitive. But, yeah, I struggled with it. And, you know, I think the reality of it, as I said, I retired at 55, so by definition, I was a pretty aggressive saver. You know, we always saved. Every time I got a raise, we take a little bit more of it into savings and just spend, you know, half the raise or whatever, so that, you know, we were avoiding lifestyle inflation. We were always very careful about it. So that was an ingrained habit of being careful with the money. And in retirement, you're finally at the stage where you're free to do these things with your life, and you don't want to be constrained by that old frugalistic mentality. So it's a big transition. I would say it probably took me about five years. And the hack that I use Kind of like we were talking about with Dana, where she'd mail a check to the clients. I set up automatic paychecks. Basically it comes out of a money market fund that I. I set it up every year end. I go through the numbers again, I restock this cash bucket, and I just set up a paycheck based on my safe withdrawal rate. I know I'm good to spend it. Look at my year end portfolio. So I adjust it every year based on what the market's doing. Market's been very good since we've retired, fortunately. So our ability to spend has gone up, but we haven't really had the need to spend that additional money. Right. We're very happy with our lifestyle, but what we're doing is we're forcing the that safe withdrawal rate into our checking account. And at the end of the year, if there's $10,000 in there that we haven't spent, okay, let's give it to charity, right? We're forcing ourselves to spend what's coming in. And that has seemed to work for us. And as you, you know, my first real struggle was this mountain bike. I wrote a story about it. I live in the mountains. I love to ride mountain bikes. And there was a nice E bike and I was like, oh, man, it's like $5,000. I'll just buy the old traditional bike for 1500. I don't need. And I'm like, what are you doing? It's $3,500, well within our safe withdrawal rate. And I bought and I've never been happier. I love this thing, right? I'm getting older. It's harder to get up the hills. And this thing has brought me true joy. So that was kind of my first. It worked. And we've continued to grow on that. We just got back from a trip. We went up to the Arctic Circle, up the coast of Greenland. It was Viking Cruise. It was expensive. But my wife and I talked about it. We said, you know, we're 62, we're healthy. There's some places we really want to go that when we get older, die with zero mentality. We're not going to be able to do. We've got the money, let's do it. So we took this trip. It was one of the best trips in our life. We saw polar bears. You know, it's one of those things for the rest of our lives. I'll always remember seeing those polar bears out on the sea ice, right. It was magical. And it was just a special time for my wife and I so spending money, like Dana says, on things that matter. The other example I'll use right now, we're doing an expansion on our cabin. And you know, our thought process there is. We love where we live. If it's within our control, we plan to live here the rest of our lives. But there's some things about the cabin that kind of irritate us.

Dana Anspach (27:09)

Right.

Fritz Gilbert (27:09)

The laundry's in the hall. There's not a good place to put it. Our bedrooms, you know, it's a three story, you know, 2,200 square foot cabin. So we're always going up downstairs. And we say, man, when we get older, we're not going to be able to do this. So we are extending the main level and we're putting in a master bedroom on the main. We're putting in a laundry room on the main. Everything's going to be right there on one level. Why? Because right now we can afford it and then we can enjoy it for the next 20 years rather than wait 20 years and then do it and it's going to cost roughly the same adjusted for inflation. Let's do it now and enjoy it for 20 years and really love where we're living. So we are getting better at it. But I think the trick is you really need to look at your safe withdrawal rate, determine how much you can safely spend and force yourself to spend it. Because everybody worries, what if I need a nursing home? What if I need this? What if I need that? Valid concerns. But once you've built safety stocks into your numbers. An example, let's say you're going to be in a nursing home for, okay, maybe two years. Let's say $200,000. Well, fine, take $200,000 out of your net worth cal at the end of the year and say, I'm going to reserve that for nursing home. And then calculate your number. Right. There's ways to get around these fears of late in life, financial needs. And the thing you don't want to do is have safety over, safety over safety over safety and not live this life that you can enjoy now in your go go years. And then you get to your 80s and you can't do anything anymore and you've got more money than you can spend and you're going to have regrets. The that's a pretty common path. I'd love to hear Dana talk about how many of her clients that are 80 plus have more money than they know what to do with. I bet it's the majority. So that's kind of the choice do you want to be that person, or do you want to find a way to give yourself freedom to spend within reasonable limits and then be very conscious on how you spend that money to bring the greatest value and joy to your life? That's the approach we've taken.

Christine Benz (29:06)

Yeah, that's helpful. Fritz, Dana, I would like to hear from you, and specifically, I wonder if you could reflect on market conditions, which have been pretty strong during Fritz's retirement so far. You were helping clients, I'm sure, during the global financial Crisis back in 2008. Can you talk about how retirees responded when they're really seeing their nest eggs go down quite a bit? What strategies would you encourage them to embrace in bad market environments?

Dana Anspach (29:38)

Yeah, you know, it's a great question, because we are all suffer from recency bias, even those of us in the profession. And when things have been good for multiple years, which they have been, we tend to think they will always be that way. And I will say, going through the great financial crisis with retired clients was terrifying, not only for them, but even for us as financial advisors, because we knew so adamantly that they needed to stick with their plan. And yet their emotions were just raging in terms of fear, having just retired, watching those portfolio values go down, in some cases 30 to almost 40%, and feeling like, oh, my gosh, this is never gonna recover. What's gonna happen? So it was challenging, very challenging time, and it lasted about two years. We were able to keep almost all of our clients, you know, within their plan without making any major changes. And truly, in hindsight, it didn't impact any of their lifestyle, their retirement paychecks that we'd set up stayed the same. We did forego inflation raises for many years, in some cases, you know, up to five or six years. But inflation also stayed almost at zero during that time. So. And that's often the case when we go through really, really struggling economic times that inflation and interest rates were low simultaneously. And so once things recovered, we were able to resume those inflation raises. It's allowed us to increase retirement paychecks quite a bit in the last few years as inflation has reared its head. I think, to answer your question, you have to have a plan in advance. And so. So we all want to know, okay, not, oh, I'm just going to stick my head in the sand and assume a bear market will never occur during my retirement. It will, and it will likely occur multiple times. So what is your action plan? Had a friend that used to fly helicopters, and he described it as your crash plan. You had to have and prepare so that you would react in the right way in real time when these things happen. That, to me is the key to weathering market volatility, which we haven't had recently recently, but I'm sure we will.

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Amy Arnott (32:53)

Another solution that we sometimes hear about is annuities. Not variable annuities or complex products with high fees, but things that are more straightforward. Single premium, immediate annuity or a deferred annuity. Is that something that you use with your clients at all?

Dana Anspach (33:17)

We do. We are fee only, so we don't participate in commissions, nor do we charge asset based fees on annuities. But it's part of our planning process. And then we have partners that we work with to get annuity quotes or research current products. And we use a set of metrics in almost all aspects of our practice. And one of those metrics is called a coverage ratio that looks out at where your cash flow will be in your typically early 70s, about the onset of the slow go years. And we look at how much guaranteed income is available relative to your total expenses. And we have discussions around that coverage ratio and how an annuity could impact that. I think there's benefits not only in the license to spend research that many of us have read by David Blanchett and Michael Finke, but also in terms of safety later on so cognitive decline can begin. And we have seen people make just, you know, illogical decisions and are unaware that they're doing so. And the more guaranteed income you have later in life, the more you're protecting a certain minimum lifestyle. And so we do have those conversations. Despite that, we have many, many clients who are, you know, just maybe have a bad opinion about annuities. You know, they can be sold in some cases and get a bad rap when in fact they can be a very useful financial tool when they're used intentionally as an important piece of the puzzle in structuring retirement income.

Christine Benz (34:58)

While we're on the topic of guaranteed income, I'd like to talk a little bit about Social Security. And Fritz, maybe let's go over to you and talk about how you and your wife are approaching Social Security filing.

Fritz Gilbert (35:10)

Yeah, good question. You know, all the research you read is you should defer now. You need to think about the spousal benefit because the spousal side adds some complexity. Danny just wrote an article about this on the retirement manifesto a couple weeks ago ago. And so you really need to factor in. So what we've done is my wife, she was a lower earner, she was a stay at home mom. So she only worked for maybe 10 years. So we actually filed for her Social Security at age 62 and she started it. And then we're going to wait for me to be 70 and then I'll claim, at which point she'll claim the spousal. And the logic for that was it's a higher inflation protection. You get the 8% return between now and then, et cetera, et cetera. Everybody knows the reasons to defer and it is absolutely the recommendation. Then you have others who say, yeah, but it's going to be gone. I'm going to get a big haircut. I'm just going to take it now and invest it. It's a very personal and difficult decision. We've elected to defer because that's what the math says. That's your best financial return over your lifetime, assuming you're going to live a long time. And I'm planning hopefully to live a long time. I'm healthy, I've got longevity in the family, except et cetera, focus on fitness obsessively. I'm a big fitness guy, so hopefully I'll live a long time. That said, what I did in our retirement planning, I wasn't totally just naive and blind to the risk that Social Security takes a haircut. So when we were doing our pre go years and really doing the deep dive on the numbers, we ran a cash flow out to age 95 and I looked at scenarios where I took a 25% cut on Social Security and said, okay, let's kind of use that as our base case and let's say if Social Security gets cut and that's what we've got, are we good? Because we don't want to be dependent on 100% of Social Security delay till 70 and then have it cut. And now we're in trouble because we didn't look at that as a possible scenario. So our base case scenario assumes a 25% cut. So if we get more than that, great, it's a bonus. We'll give more to charity, whatever. So again, we've taken conservative approaches in our planning, but we're still trying to make the decisions that all the experts say are the best, best decisions given our situation of longevity and wanting the inflation hedge. And my feeling is between my wife and I, one of us very well may live into our 90s and getting that survival benefit up for my wife and doing what we can to optimize that for longevity, considering that there's two of us in this relationship, just seemed like the most logical thing for us to do.

Amy Arnott (37:35)

We also wanted to talk about the whole topic of figuring out what your safe withdrawal rate. And there's always a lot of debate about this topic. Bill Bangin has a new book out where he now advocates a 4.7% withdrawal rate instead of 4%. And Fritz, I wanted to ask you first, how did you approach this question of calibrating what the withdrawal rate should be?

Fritz Gilbert (38:04)

Yeah, you can have a whole episode on that. Let's get big earn on here. And we could talk for hours, right? But you know, when I was retiring, if you look, even Christine, I think you wrote some articles about this and I think at the time you guys were at the three and a quarter, 3.2, 3.3 was bouncing up and down, but you know, mid to lower three percents. So again, because we're conservative, you know, we're very conservative with everything in this retirement planning space because we don't want to make a mistake and run out of money. We chose a more conservative approach and we said, okay, let's look at three and a quarter percent. And that was kind of our baseline. But we also know, hey, there can be years. So every year end I update our net worth. We subtract the non spendable assets, things like the house, the cars, so you end up with your kind of retirement funding pool. And I multiply that times three and a quarter. Three and a half.

Dana Anspach (38:53)

Four.

Fritz Gilbert (38:54)

Four and a half. And I create this guardrail approach where I say, okay, if we have a need, inflation's catching up to us or whatever, I'm comfortable going up to maybe four and a quarter if we need to, but I'm only going to do it on an annual basis. I' review it every year. We'll take a look at if the market maybe look at it this way, the portfolio comes down. Well, okay, our portfolio's come down by quite a bit, but our spending hasn't. Okay, we're at three and a quarter. We can go up to four and a quarter lower portfolio, a little bit higher withdrawal rate. I'm comfortable with that. So we kind of look at this three and a quarter to four and a quarter, maybe even four and a half. Never had to do that yet. But knowing that we can go a little bit higher, especially knowing that Social Security is going to be coming in at age 70. Right. So eventually, essentially that withdrawal rate will drop as Social Security comes in unless our spending goes up. So we're comfortable with this variable approach and kind of adjusting year by year, looking at a combination of what the portfolio's done and what our lifestyle and inflation and spending needs are for the following year.

Christine Benz (39:57)

Dana, how do you do it for your clients? Calculate how much they can reasonably withdraw?

Dana Anspach (40:03)

Yeah, it's interesting because we do it very differently. You know, we don't look at any kind of annual safe withdrawal rate. We look at what I would call a lifetime safe withdrawal rate. So we use a concept called fundedness. It's very much like how pension plans calculate the status of the pension where they have a set of retirement paychecks they have to deliver, and each year they have to run an analysis to say how well funded is the plan to deliver those future cash flows. So we're doing the same thing on a household basis basis, and we want a particular fundedness ratio that in essence would probably equate to about a 4% lifetime withdrawal rate. But there could be times where someone is delaying Social Security where their withdrawal rate may be much higher. We've had clients, you know, take out 8% or even 10% in a year because there were go items they wanted to pursue. And when we ran that out over the lifetime of their place plan, it worked perfectly. And they were still projected to retire with more assets at the end of retirement than they had at the beginning. So when we run that out, we think there can be times where that safe withdrawal rate, when you look at it year by year, can prevent people from spending as much as perhaps they safely could. Now, the other aspect of that is, in many cases, those safe withdrawal rates were based on Great Depression like conditions, day one of retirement. And my thought process is, well, why would I plan my retirement as if it was the Great Depression from day one? You know, I would rather plan on still a very conservative set of conditions. I never want to use above average conditions or above average assumptions in the modeling, but it's probably not going to be the Great Depression from day one. So let's look at it a little differently. And if the Great Depression conditions should come along naturally, there's adjustments that can be made and we can still ensure that that person would never run out of money as long as those adjustments were made prudently.

Amy Arnott (42:13)

I wanted to ask both of you how you're thinking about market valuations. And you know, if you look at almost any metric, the CAPE ratio or other valuation measures we still have, have valuations on US Stocks trading at pretty elevated levels. And I'm curious about how you're thinking about that potential impact on portfolio withdrawals. And do you think that retirees should be prepared to perhaps tap on the brakes with their spending?

Fritz Gilbert (42:48)

I'll jump on it first. I guess the way I look at it, I'm a big fan of pretty very deliberate diversification. So I've got small international, small value, small growth. I've got international bonds. And the other thing I should mention is I like to hold them in separate mutual funds or ETFs. If you do something like the target date, which works fine in the accumulation years if you get into retirement and let's say you've got a blended. Let's just say it's S and P and a bond fund and the S and P's are doing great, but the bonds aren't. Or vice versa. Versa. It's hard to pull out that particular segment asset allocation that's done well. So I had some target date funds in my working years. Once I got into retirement, I broke those into their separate categories. And the reason being now at any given years, I'm looking to restock this cash bucket. I do it throughout the year, but I do it very intentionally at year end. I can look at whatever asset class has outperformed in the prior year and sell a little bit of those holdings to restock the cash bucket. So I don't get too obsessed about about any particular asset class that's overvalued under the assumption that, okay, that one will probably have a reversion to the mean. It happens. But then the ones that have been underperforming hopefully will be outperforming at that point in time. And with a properly diversified portfolio and some bonds that I'm holding to maturity so they're essentially risk free other than default, you've got options that you don't have to be dependent on the Stocks being overly dependent in a microcosm of the stock market is a really high risk. So I wouldn't be comfortable with that. But knowing that I've got options and I've got some asset allocation choices that are easy to access gives me the comfort that, yeah, even if S and P Tech stock's overrated, overvalued, probably is, that's okay. I'm using that right now to fill my cash bucket because it's been doing well, right. So I'm selling some of that as it wins and I'm giving the other asset classes time to recover. Look at the international, right? It's lights out this year. I haven't sold any international in the last five years because it's been underperforming. So now it's got time to recover. So I think the key to that to me is asset allocation. I'll turn it over to Dana and see how she does it on a broader basis.

Dana Anspach (45:07)

Thanks, Fritz. Christine, I don't know if this came up in our last podcast, but we use a different kind of equity model through our investment partner Asset dedication that is based on what's called a Mini Max principle. It's basically looking at what equity asset class mixes held up the best under the worst case scenario. So what you're doing is maximizing the outcome of a minimum return scenario. And that sounds really confusing, but when you think about retirement, if we get good markets, we're all going to be fine. That is really not what we're concerned about. We're always concerned about the worst case scenario. And so as a dedication, approached this and said, well, if I designed an equity allocation that even in a worst case scenario earned more than other allocations, then that would help provide more downside protection. And it just so happens that type of allocation is quite diversified. It's not as heavy on US large cap equities. And so, you know, like Fritz said, international has underperformed for five years. And so our portfolios do have a significant international allocation as well as a value allocation. And we are seeing that do quite well this year, but it won't do well every year, nor will any allocation. So I, in a roundabout way come to the same conclusion as Fritz is diversification matters. But more importantly, what matters is knowing what are the principles your portfolio is constructed on. A lot of people end up with an accidental allocation and there's, you know, a little bit of this and a little bit of that. Maybe they read this newsletter or read this article or, you know, saw a writer up on a particular strategy. It's really saying, okay, I need a disciplined process that I'm going to follow. And whatever that is, you need to know what it is and you need to follow it consistently throughout retirement. And given that, I think there's a lot of different discipline processes that can all work well. Where people get in trouble is when they're not following some type of discipline process and they're kind of, you know, getting pinballed around by what the headlines are. That's what I worry most about for retirees are those behavioral reactions if they are not prepared with a set process that they're aware of.

Christine Benz (47:31)

I think we could talk a whole other hour. But I wanted to ask you, Fritz, about one of your recent posts that related to some tax planning that you've been doing and your time being retired, where you had been doing a series of conversions of your traditional tax deferred assets to Roth. And you said that one of your surprises was that it just hadn't paid off to the extent that you might have hoped. So can you talk about that? Because I know a lot of people in the period that you're in kind of post retirement, pre required minimum distribution, pre Social Security, people do these conversions. Talk about how that's worked for you.

Fritz Gilbert (48:08)

Yeah, and the response to that post has been really interesting to read. If you haven't read the comments, everybody say, yeah, same thing. Same thing with me. Same thing with me. And I wouldn't say it hasn't paid off. I think the point I was making is in spite of doing what I feel are pretty aggressive broth conversions, the pre tax traditional IRA balance is stubborn. It's really hard to get it to come down. And let's use an example. I use these in my post. I'm gonna do them from memory. One was, let's say you had a million dollar portfolio in traditional IRA, you could use 500,000. I did both scenarios, but a million's easier to do the math on. If you've got a million in a traditional IRA and the markets return 20%, which they've done right in the years since I've retired. Retired, your IRA is going to generate $200,000 of growth. So even if you're doing a $200,000 Roth conversion, guess what? Your IRA balance at the end of the year is still a million dollars. And it's a first world problem. It's because the markets have been doing very well. And most baby boomers, a lot of baby boomers that had 401s and they were kind of Instructed save to the pre tax, save to the 401k Iraq. Most baby boomers that have been responsible tend to have a fairly large pre tax ira. So combine a good market since I've retired with a pretty healthy IRA balance and it's surprising how large those Roth conversions have to be to materially bring down the IRA balance. That was the whole premise of the article and I was really pleased with the response because I think it's a reality that a lot of people are seeing, seeing. But it hasn't really been talked about a lot in the retirement planning space, even though many, many people are experiencing it. So that's really what the premise is.

Amy Arnott (49:55)

What about on the non financial side? Fritz, what would you say has been your biggest surprise there during retirement?

Fritz Gilbert (50:03)

Ooh boy, I could talk for days. Yeah, I think what I've been very pleased with is how thoughtful I was going through this preparation, the free go as we talked about earlier earlier and really taking time to consciously think about all of those non financial aspects I was getting from work and experimenting. Look at my blog as an example. I started it three years before I was retired and it's since turned into a major source of identity. Here I am talking to you guys. I'm this retirement guy, right? It's a new me. It's a new identity that's been created just because I experimented and I was curious and I played around with some, some things. Same with my wife's charity. I think the biggest thing for me is how well the transition has gone. And the biggest takeaway that I have learned from that is how important it is to really foster your curiosity. Almost back to a childlike mentality. When you were a kid, you just go out and do stuff and play, right? And we've been forced through the system for 40 years to fit the structure and do these tasks and it's so structured and finding a way to build up that muscle again to exercise that artistic, creative, fun side of life, it's worked really, really well. So I would say that's been my biggest surprise is how well that's gone. I never went through that phase two depression, disorientation phase. Only 15% of people avoid, avoid that. So I think the thing I try to preach, and one of my big messages is you don't have to go through that disorientation and depression phase. A lot of people, 85% of people do and your chance of depression goes up. I think it's 40% when you retire. So it's a real, it's Kind of a health crisis, right, that people are totally oblivious to. And when you ask me about non financial, that's where my mind goes, is it doesn't have to be that way way, but you've got to be aware of the importance of thinking about it. And more importantly, start listening to that curiosity and taking that first step and doing it over and over and over again. I talked about reducing the amount of time I'm writing on my blog. That's the same thing. That's, hey, I'm more curious to start pursuing these other things. I'm not married to anything. I'm willing to move these cards in and out of my hand and experiment with different things and keep life exciting and fresh. That, to me, is the best story of the non financial side that I've experienced so far.

Christine Benz (52:30)

Dana, in your years of working with retired clients, what have been the main takeaways in terms of how you'll approach your own retirement?

Dana Anspach (52:40)

Ooh, that's a big question. You know, it's, it's funny because I think my nature is such that if I didn't do this for a living, I don't think I would be so great at planning my own retirement. So I'm very, very grateful that I landed on this profession because. Because it makes me run my numbers and save each year from watching my own clients. I'd like to think I'll be better at spending, but yet I find I'm subject to the same biases as any of us. And so there can be that reluctance to say, oh, that's too much money, when in reality it would probably be just fine. I think I'm going to struggle with the same things my clients are going to struggle with. I think that's the biggest eye opener. As much as I, I know when it comes down to yourself and your own planning, you know, I'm not going to be exempt from these things and taking the time to think about it now, every time I hear Fritz talk, just, you know what he was just sharing, I feel inspired and enlightened and hopeful about pursuing that childlike playfulness. I have watched clients and interviewed many for my upcoming book where I didn't know they went through that depression phase that Fritz talked about. Talked about, yet they did. So it was an eye opener for me to hear that, wow, they did experience this and yet had never talked about it with me. And so, you know, seeing all of that just brings a new level of awareness to it. I'll probably be kinder and have more grace for myself as I navigate these phases, I think we can be hard on ourselves. I think it can be okay if we go through some of the depression or downside and there's probably proactive steps we can take. But if there's anything I take away, it's looking at it as this big circle of life, seeing how the phases will unfold, being intentional about how I will want that to go, doing everything I can to be intentional, and yet at the same time, letting go and letting that journey unfold as it will.

Christine Benz (54:54)

Well, Fritz and Dana, this has been such a fun conversation. Thank you both for taking time out of your schedules to be with us today.

Fritz Gilbert (55:02)

Thank you so much, Christine. And I think you can see why I'm excited to have Dana writing. You know, let me finish with this. So she talked about sending that text when we opened up with that. So it's an appropriate thing to close with, if you don't mind. I had sent my retirement. I'm retiring from blogging article. And I was like, you know what? I'm going to go celebrate. I'm going to go ride my mountain bike in the mountains. It's a beautiful day. And I went up to North Carolina and rode the mountains. I was coming off the trail, pulled my phone out, turned it on there as a texture from Dana. So it was right when I was coming off mountain biking, which was just cool. So she and I talked. And what I love about this is I'm 10 years. You know, I've been writing 10 years. I'm retired seven years. But look where Dana is. She's 54. She's in exactly the same mind space where I was when I was starting to think about, you know, all these things for my personal retirement. And it's been a great journey to write about it. So to kind of have Dana coming in as an outstanding writer and a certified financial planner, obviously very, very knowledge knowledgeable and have somebody else stepping in now to kind of go through that same journey in the footprints of what I've been laying out for years. What an exciting time to have her kind of sharing her steps, going through the same process. So I think having both of us on. Thank you so much. I'll turn it over to Dana to say the final farewell. But I'm really excited about where things are, and it was great talking with both of you.

Dana Anspach (56:17)

Yeah, I second all of that. And I would say, even to your last question, when you were just talking about Fritz, one of the things that went through my mind was just the realization that, you know, wow, I am starting to experience all of these things I've watched my clients experience over the years and how different it feels when you're in it versus when you're helping someone plan for it. And that's part of my inspiration in writing and sharing that journey is really saying, look, here's what this is like, you know, let's all get better at it to together.

Amy Arnott (56:50)

Well, thank you so much to both of you. It's been great talking with you and I also really enjoy reading the Retirement Manifesto blog and one of your recent posts, Fritz, on traveling in the Arctic about the two weeks that you spent above the Arctic Circle I thought was amazing. So I recommend that post in particular if people aren't already familiar with your blog.

Fritz Gilbert (57:16)

Well, thank you very much. That was a trip of a lifetime and we actually signed up for one to Antarctica. So thank you for the kind words on the article. It was a great trip and I encourage anyone that's one thing I'll say. Greenland and the Arctic are just now opening up with global warming and the sea ice. You know, going further back, there are a lot more people that are starting to discover Greenland. It is an absolutely amazing place to take a cruise. So if you're thinking about it, I really do encourage people to look into that area. It's not an area that that many people have gone to and it's absolutely magical.

Christine Benz (57:44)

Fantastic. Thanks both.

Fritz Gilbert (57:46)

Thank you.

Dana Anspach (57:47)

Thanks everybody.

Christine Benz (57:50)

Thank you for joining us on the long view. If you could please take a moment to subscribe to and rate the podcast on Apple, Spotify or wherever you get your podcasts, you can follow me on social media, hristinebenz on X or christinebenz.

Amy Arnott (58:08)

On LinkedIn and amyarnot on LinkedIn.

Christine Benz (58:12)

George Cassidy is our engineer for the podcast and Cary Gretchik produces the show Notes each week. Finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.

Podcast Disclaimer Narrator (58:32)

This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording and are subject to change without notice. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. And its affiliates, which together we refer to as Morningstar. Morningstar is not affiliated with guests or their business affiliates. Unless otherwise stated. Morningstar does not guarantee the accuracy or the completeness of the data presented herein. This recording is for informational purposes only and the information, data analysis or opinion it includes or their use should not be considered investment or tax advice and therefore is not an offer to buy or sell a security. Morningstar shall not be responsible for any trading decisions, damages, or other losses resulting from or related to the information, data analyses or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives, and risk profile. Before making any investment decision, please consult a tax and or financial professional for advice specific to your individual circumstances.

Fritz Gilbert (60:14)

Sam.