Episode: The Tom Dupree Show | Host: Tom Dupree | Co-host: Mike Johnson

Episode Summary

Tom Dupree and Mike Johnson tackle one of the most common misconceptions in retirement planning: that a 401(k) balance is a retirement plan. It isn’t. It’s a savings vehicle — and a very good one — but it was designed to collect money, not distribute it. This episode explains what that distinction means in practical terms, and what steps to take before retirement to make sure your savings can actually do the job you’re counting on them to do.

Topics Covered in This Episode

Why a 401(k) is an accumulation vehicle, not a retirement plan
The problem with applying a growth portfolio to a withdrawal strategy
How rolling a 401(k) into an IRA opens up income-oriented investment options
The three-legged stool: income, growth of income, and price appreciation
Why selling shares to fund expenses works in a rising market — and fails in a flat or declining one
The case for consolidating multiple old 401(k) accounts before retirement
How dividend income shifts the focus from watching the balance to watching the cash flow
Why pure asset allocation models limit flexibility in retirement
The psychological value of knowing what you own and why you own it

Key Takeaways

The 401(k) did its job — now it needs a different tool. A 401(k) is structured for dollar-cost averaging and tax-deferred growth. That design is a poor match for generating predictable monthly income in retirement.
A bigger balance is not a plan. Knowing your account value is not the same as knowing what that value will produce for you each month, for how long, and under what market conditions.
Income-first investing changes the math. When a portfolio generates enough dividend income to cover living expenses, you are not forced to sell shares during market downturns — and that distinction is what protects long-term wealth.
Rolling to an IRA opens up your options. The investment menu inside a 401(k) is limited by plan design. An IRA allows access to individual dividend-paying stocks and income-generating vehicles that most 401(k) plans don’t offer.
Scattered accounts are a retirement hazard. The average person approaching retirement holds three to five old 401(k) accounts. Consolidating simplifies beneficiary designations, RMD calculations, and day-to-day management.
Watch cash flow, not just the balance. In retirement, the number that matters most is what the portfolio produces each month — not what it’s worth on any given day.
Know what you own and why you own it. Clients who understand their holdings don’t panic when markets get choppy, because they know the income side of the equation hasn’t changed even if the price has.

Three Questions Worth Answering Before You Retire

Tom closed the episode with three questions every listener should be able to answer:

Do you know what fees you’re paying?
Do you know what income your portfolio is currently producing?
Do you know what you own and why you own it?

If you can’t answer even one of those with confidence, that’s worth addressing before retirement — not after.

Frequently Asked Questions What is the difference between a 401(k) and a retirement plan?

A 401(k) is a tax-deferred savings vehicle offered through your employer. It is designed to accumulate money during your working years. A retirement plan is a personalized strategy that determines how you will generate income from your savings throughout retirement — including what you own, how much you withdraw, how taxes are managed, and how long your money needs to last. The 401(k) is one piece of that plan, not the plan itself.

Should I roll my 401(k) into an IRA when I retire?

For most retirees, rolling a 401(k) into an IRA makes sense because an IRA offers a much wider range of investment options — including individual dividend-paying stocks and income-focused strategies that most 401(k) plan menus don’t include. Pre-tax contributions roll into a Traditional IRA; Roth contributions roll into a Roth IRA. The rollover should always be done institution-to-institution to avoid taxes and penalties. Every situation is different, so it’s worth reviewing your specific plan before making the move.

What is wrong with leaving my 401(k) invested in an S&P 500 index fund in retirement?

The S&P 500 yields just over 1% in dividends — not enough to cover most retirees’ living expenses. That means you’d need to sell shares regularly to generate cash. When the market is rising, that works. When the market is flat or declining, you’re forced to sell more shares to get the same dollar amount, which depletes your principal at the worst possible time. Over a 20- or 30-year retirement, that pattern can quietly cause serious damage to a portfolio.

What is an income-focused retirement portfolio?

An income-focused portfolio is built around investments that generate regular cash flow — primarily dividend-paying stocks in companies with long track records of consistent and growing dividends. The goal is for the income produced by the portfolio to cover living expenses, so you are not dependent on selling shares to fund retirement. Price appreciation is still part of the picture, but it’s the third priority, not the first.

How many 401(k) accounts should I have going into retirement?

Ideally, as few as possible. The average person approaching retirement holds three to five old 401(k) accounts from previous employers. Consolidating them into one or two IRAs — one Traditional, one Roth if applicable — simplifies beneficiary designations, required minimum distribution calculations, and overall portfolio management. It also makes it much harder to lose track of money you’ve worked decades to save.

What is a safe withdrawal rate in retirement?

A commonly referenced figure is 4% per year, which comes from historical research suggesting that withdrawal rate has a high probability of lasting 30 years across most market environments. However, the right withdrawal rate depends on your specific expenses, other income sources like Social Security or a pension, your tax situation, and how your portfolio is structured. An income-focused portfolio where dividends cover most expenses may allow for more flexibility than a pure growth portfolio using a fixed percentage rule.

What does Dupree Financial Group do differently from a typical 401(k) plan?

Dupree Financial Group is a fee-only, fiduciary RIA that manages separately managed accounts — meaning your investments are held in your name, not pooled into a fund. The firm builds income-focused portfolios around dividend-paying companies selected for their financial strength, cash flow, and dividend history. There are no products sold, no commissions, and no conflicts of interest. The focus is entirely on building a portfolio that generates reliable income and protects principal over a long retirement.

About The Tom Dupree Show

The Tom Dupree Show is hosted by Tom Dupree, founder of Dupree Financial Group and a 47-year veteran of the investment business. Each episode covers the financial topics that matter most to retirees and those approaching retirement — in plain English, without the Wall Street spin.

Dupree Financial Group is a fee-only, fiduciary Registered Investment Advisory firm based in Lexington, Kentucky. The firm manages separately managed accounts focused on income-generating, dividend-paying portfolios — no products sold, no commissions, no conflicts of interest.

Past episodes are available at dupreefinancial.com under the Radio tab.

Schedule a Complimentary Portfolio Review

If you’re not sure whether your 401(k) can actually support the retirement you’ve planned, we’ll take a look. No charge. No pressure. Just an honest conversation about what you own and whether it’s working for you.

Call: 859-233-0400 | Visit: dupreefinancial.com

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