MtoM #236: Physician Takes a Youth Sports Team to the State Championship and Finance 101: Sequence of Returns Risk

Summary

White Coat Investor Podcast – MtoM #236

Physician Takes a Youth Sports Team to the State Championship and Finance 101: Sequence of Returns Risk

Date: August 18, 2025
Host: Dr. Jim Dahle (White Coat Investor)
Guest: Adam, Non-Operative Sports Medicine Physician

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Episode Overview

This episode of the Milestones to Millionaire (MtoM) podcast spotlights Dr. Adam, a sports medicine physician from Eau Claire, Wisconsin, who coached his son’s youth hockey team to a state championship. The discussion explores how sound financial practices enabled Adam to find time for family, coaching, and personal priorities, ultimately reaching financial milestones like “Coast FIRE.” Dr. Dahle and Adam discuss the costs of youth sports, achieving work-life balance as a physician, and actionable financial strategies. After the interview, Dr. Dahle presents an educational segment focused on Sequence of Returns Risk—an essential retirement planning concept for high-income professionals.

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Key Discussion Points and Insights

1. Introduction to Adam’s Milestone: Coaching a State Championship Hockey Team

• Location & Profession: Adam lives in Eau Claire, Wisconsin, 12 years out of training, working as a non-operative sports medicine physician.
• Milestone Achieved: Coached his son’s squirt (9–10-year-olds) hockey team to win the Wisconsin state championship.
• Personal Connection: His son, Sam (11 years old), plays center on the team. Adam manages coaching alongside a busy medical practice.

2. Financial Independence and Work-Life Flexibility

• Achieving Coast FIRE: Adam has reached the “Coast FIRE” milestone—if he stopped contributing to retirement accounts today, he’d still have enough for retirement.
  • Quote [08:49]:
    “I would say I’m at Coast FIRE at this point. If I don’t put anything else into retirement from now until I retire, I’ll be good.” — Adam
• Time Management:
  • Adam adjusted his work schedule, seeing the same number of patients in four days instead of five, freeing up time for coaching and family.
  • Quote [13:02]:
    “Because of being paid on production, I can work four days a week and see the same number of people. And I never took a pay cut when I dropped my FTE.” — Adam
• System Support: Adam’s financial security lets him take time off for tournaments with sufficient notice; his practice allows schedule flexibility.

3. The Realities and Expense of Youth Travel Sports

• Annual Costs:
  • Association fee: ~$1,500
  • Jerseys: ~$200
  • Four hotel weekends (travel): ~$500 each
    Total ~ $3,700 per season, not counting gear and off-season programs.
• Geographic Arbitrage: Lower costs in Wisconsin/Minnesota compared to higher cost-of-living areas (e.g., NYC).
  • Quote [14:10]:
    “I guess you call it geographic arbitrage. Right.” — Adam
• Growth in Youth Sports: Youth hockey is nearly year-round, with growing demands on both time and finances.

4. Financial Habits That Built Freedom

• Early Financial Literacy:
  • Read finance books (including Dr. Dahle’s) right out of residency.
  • Paid off debts aggressively (before PSLF guidance was common).
  • Maximized all available retirement contributions: 401(k), 457, backdoor Roth IRAs, and later advocated for a mega backdoor Roth option at his workplace.
  • Quote [16:26]:
    “…after about a year that was available. And so then I started maxing that out too. And so really just have done everything that has been offered. We kind of look at things where we pay ourselves first and then we live on what’s leftover. And right now that’s turned into about $2 million in investable assets.” — Adam
• Automated Finance: Most investments/giving are pre-paycheck or immediately post-paycheck, ensuring retirement and charitable goals are met first.
• Principle: “Live within your means… Once the paycheck does come home, we set aside money for our giving every month, and then after that, we live on what’s left.” [17:50] — Adam

5. Advice to Physicians Seeking Better Family-Life Balance

• Live Below Your Means: The cornerstone of gaining freedom and flexibility.
• Automate What Matters: Max out retirement accounts, automate giving, and let lifestyle follow after those commitments.
• No Regrets Approach: Focus on “what life’s really made out of”—family, faith, health, and coaching/community impact.

6. Notable, Memorable Moments

• Famous Opponents: Adam’s team played against a Minnesota team coached by NHL stars Zach Parise and David Dubnik. Adam missed that game due to work, noting the quirks in youth league age regulations.
  • Quote [11:06]:
    “…the opposing team coaches were Zach Parise and David Dubnik from the Wild.” — Adam
• Wisconsin Pond Hockey Tournament Invitation: Adam pitches the storied national pond hockey event in Eagle River, WI, likening it to “Disneyland for hockey players.”
  • Quote [18:52]:
    “It’s like Disneyland for hockey players… It would be great to have you out sometime to do that.” — Adam

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Segment: Financial 101 – Sequence of Returns Risk

[Starts at 19:51]

Definition and Importance

• Sequence of Returns Risk (SORR):
  The risk of running out of money in retirement because poor investment returns occur early in your withdrawal period, despite “adequate” average returns over time.
  • Quote [19:51]:
    “Despite having adequate average returns from your portfolio to support your retirement spending, you run out of money because the poor returns came first.” — Dr. Dahle

Who Should Worry Most?

• Early retirees (retiring in their 40s or 50s) face the greatest risk over a 30+ year withdrawal period.
• Those spending 4% or more of their portfolio are more exposed than those with greater wealth or lower withdrawal needs.

Strategies to Manage SORR

• Be Wealthy (Low Withdrawal Rate)
  • “If you’re only spending 1% or 2% or 3%... you’re basically bulletproof from sequence of returns risk.” [20:26] — Dr. Dahle
• Work Longer or Part-time
  • Extending work life shortens the withdrawal period and reduces risk.
• Increase Guaranteed Income
  • Delay Social Security to age 70.
  • Consider pensions and immediate annuities to cover essential expenses.
• Inflation-Protected Investments
  • Use I bonds, TIPS, and diversified assets (stocks, real estate) to defend against inflation, which can worsen SORR.
• Reduce Portfolio Volatility
  • Implement a “bond tent” (greater bond allocation just before and after retirement) and adjust as retirement progresses.
  • Quote [24:01]:
    “The main thing people do when they’re worried about sequence of returns risk is they just reduce the volatility of the portfolio.”
• Laddered Bonds and Buckets
  • Build a TIPS ladder for first 5–10 retirement years for predictable income.
  • “Bucket” strategies: Hold 1–3 years’ expenses in cash, another several years in bonds, rest in equities—refill after good years.
• Flexible Withdrawal Rates/Guardrails
  • Reduce spending substantially (sometimes by 40–50%) when withdrawals intersect with market downturns.
  • “If your only method of sequence of return risk mitigation is reducing spending, you better be prepared to reduce spending a lot…” [27:26] — Dr. Dahle

Key Takeaway

• Have a Plan: Every retirement plan should specifically address SORR, especially if retiring early. Use a combination of guaranteed income, portfolio diversification, spending flexibility, and strategic asset allocation.

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Notable Quotes with Timestamps

• Adam on financial security and family:
  “I don’t have to worry about money anymore. And I’m at a stage in life where I can really just focus on the things that matter now, like my faith and my family and my health.” [08:20]
• Adam on advice for other physicians:
  “You have to live within your means. You can’t spend money that you don’t have.” [17:50]
• Dr. Dahle on priorities:
  “Those other things, of course, are what life’s really made out of. Right. All these other things that really are the priorities….” [13:15]
• Dr. Dahle on SORR:
  “You run out of money because the poor returns came first.” [19:54]
• Dr. Dahle, closing:
  “It’s fun what we can accomplish when we have our finances on track. You can have evenings to spend coaching your kids or whatever else is important to you in life if you just get your financial ducks in a row. It’s part of the why, right?” [19:51]

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Highlights & Takeaways

• Financial independence unlocks the time to pursue what’s most important: Adam’s story exemplifies how intentional financial strategies create long-term flexibility to prioritize family, health, and fulfilling community roles.
• Practical tips for medical professionals: Maximize available retirement accounts, automate both investing and giving, and set limits on lifestyle inflation.
• Sequence of Returns Risk is essential retirement literacy: Understanding and planning for SORR can mean the difference between a stress-free retirement and running out of funds, especially for high-income professionals aiming for early or flexible retirement.

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Suggested Listening Timestamps

• [07:02] – Adam introduces himself and his milestone victory
• [08:49] – Adam discusses reaching Coast FIRE and financial independence
• [09:11] – Logistics and sacrifices behind coaching a travel hockey team
• [13:02] – Work-life balance: shifting to a four-day work week
• [13:43] – The true cost of youth hockey travel sports, with financial details
• [15:18] – Deep dive into why Adam prioritized early financial independence
• [17:50] – Adam's advice for achieving financial flexibility and balance
• [19:51] – Dr. Dahle's in-depth explanation of Sequence of Returns Risk and retirement withdrawal strategies

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Tone and Presentation

The episode maintains Dr. Dahle’s signature blend of approachable expertise and motivation. Adam’s authenticity and practical advice encourage listeners to see financial planning as a way to enrich life—enabling rather than restricting. The tone is conversational, honest, sometimes lighthearted (hockey banter), but always practical and actionable.

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For more stories of physician financial freedom and practical advice, visit White Coat Investor.

Transcript

[A]

This is the White Coat Investor Podcast, Milestones to Millionaire celebrating stories of success along the journey to financial freedom. This is Milestones to Millionaire podcast number 236. Physician takes a youth sports team to the state championship. This podcast is sponsored by Bob Bayani at Protuity. He's an independent provider of disability insurance planning solutions to the medical community in every state and a longtime White Coat Investor sponsor. He specializes in working with residents and fellows early in their careers to set up sound financial and insurance strategies. If you need to review your disability insurance coverage or to get this critical insurance in place, contact [e-mail] today. You can also email infoetuity.com or you can just pick up your phone and call 973-771-9100. We got a cool thing coming up on August 19th. We have something pretty special. We're calling it Financial Crash Course. Now I'm going to spend an evening with you and we're going to help you to get stuff figured out that you're still working hard on. While you didn't become a doctor to get rich, you've worked far too hard not to be financially successful. And too many physicians are still living paycheck to paycheck, stressed about money and unsure how to turn a high income into real wealth. So Next Tuesday at 6:00pm Mountain, I'm hosting a free Financial Crash course to help change that. This is a live experience. Okay, we'll walk through how to become debt free within five years of residency and set yourself firmly on the path to multimillionaire status. We're going to cover what actually matters, what to do next with your money, how to invest with confidence, how to reduce your tax bill legally, how to protect your wealth through insurance, estate planning, and asset protection. Most importantly, how to actually use your income to build a life you love. Okay, register now. Whitecoatinvestor.com crashcourse if you can't make it live, we'll send you the replay to everyone who registers. But it's going to be a presentation and it's going to be a lengthy Q and A session afterward. If you attend live, you'll get a free bonus. Download a financial plan template that will serve as your personal roadmap to building wealth. And to top it off, we're giving away five free enrollments in the Fire your financial advisor attending course. That's a $799 value. You've done the hard work to earn this income. Now let's make sure it's working for you so join us live, Tuesday, August 19th. [e-mail] CrashCourse all right, we have a podcast sale. That means it's a sale on our stuff that's only available to those of you who listen to the podcast. Cause you gotta listen to the podcast to get this code. If you will use code PODCAST20before Friday, August 29, you'll get 20% off all our white coat investor courses. And that makes the new fire your financial advisor student course just 79 bucks. All of our courses, though, are 20% off. Whether it's the real estate course, whatever version of fire your financial advisor that's appropriate for you, whether it's our annual continuing financial education course, all of these 20% off through August 29th. All you got to do is put in the Code podcast 20. Be aware that some of these courses are also eligible for cme. There's a version of Fire Financial advisor that qualifies for cme. And of course, the continuing financial education courses always qualify for CME because they come from the conference that qualifies for cme. Speaking of the conference, it's coming up soon. You can't sign up yet, but you will be able to in a few more days. The Physician, Wellness and Financial literacy conference of 2026. The speakers have now been announced. You can go to whitecoatinvestor.com WCICON just so you the full lineup and session topics. Start lining up your friends, right, to come with you. You can come alone. We make it so it's very easy. It's a very welcoming community to come alone. But lots of people like to bring their friends, and we certainly encourage that sort of behavior. The more the merrier. Be aware that the last time we held this conference in Las Vegas, it sold out in 23 hours. Now, I don't know that it's gonna sell out this time at all. I don't know that it's gonna sell out in 23 hours. But I wouldn't necessarily wait. It's gonna be a great conference. It's in Las Vegas. It's not on the Strip. If you don't wanna go to the Strip, you don't even have to go to the Strip the entire time you're there. But if you're there, if you want to go there, it's not very far away, so you can go check out shows or whatever you like to do on the Strip that's available. And of course, it's close to Southern Utah and the Grand Canyon, all that kind of stuff. If you want to make a family trip out of it. That's also a great option. So mark your calendar to join us March 25th through 28th at the JW Marriott Las Vegas Resort and Spa in beautiful Summerlin, just west of the Strip. Okay. Whether your career is just getting started or you're planning your exit strategy, this group of finance and wellness experts is going to help you get closer, closer to the life you actually want. Okay. This is a peaceful desert retreat. It's near Red Rocks, one of my favorite places, but it's still close enough to check out everything else that Vegas has to offer. If you've never really been in Vegas or experienced Vegas, it's quite an experience that everybody ought to experience once. It may not be your thing, but if it's not, you know what? Red Rock probably is. And we're even closer to Red Rock than we are in the Strip. Early bird registration is going to start at the 1st of September, so put a reminder on your calendar. Register with the lowest prices we're going to offer from here till the [e-mail] WCICON and I hope it doesn't sell out immediately, but if it does, you'll be glad you got on right on September 1st and signed up. Okay, we've got a unique milestone today, as you heard with the title of this podcast, we. But yes, we're still going to be talking about finances. This is a finance podcast. You can't come on here with milestones that aren't financial. Just FYI. We've got to twist whatever milestone you've accomplished and still talk about finances to inspire others to really take the wheel and take advantage of all the wonderful things that are available to them in this world. If you can manage your finances, well, stick around. After this interview, I want to talk for a few minutes about sequence of returns, risk, and some of the methods to deal with it. If that term is totally new to you, you definitely want to stick around after this podcast. Our guest today on the Milestones to Millionaire podcast is Adam. Adam, welcome to the podcast.

[B]

Thanks, Jim. Really love your podcast. I'm so glad I can be a part of it today.

[A]

Well, we're excited to have you on this. This is actually the last of five podcasts I'm recording today, which is always fun to have a really great one at the end, and this one's going to be a little bit unique. Let's give people a sense of where you're at in life. What part of the country do you live in? What do you do For a living. How far are you out of your training?

[B]

All right, so I live in Eau Claire, Wisconsin. I'm a non operative sports medicine physician, and I am coming up on 12 years out of training.

[A]

Okay, very cool. All right, tell us what milestone we're celebrating today.

[B]

Well, this year, my squirt hockey team that my son plays on won the Wisconsin state championship.

[A]

That's pretty awesome. Okay, for those who aren't aware, squirts are like 9 and 10 years old are basically what squirts are.

[B]

Exactly. Yep.

[A]

Okay, so you won the state championship, and that's no small feat in Wisconsin. You're not in. You're not in Utah. Here. I mean, we have hockey here. We're really proud. We've got an NHL team now. But let's be honest, we. We are not a huge hockey state like Minnesota and Michigan, Alaska, et cetera. So this. This is no small accomplishment in Wisconsin. But as I told you before we started recording, we can't just celebrate state championships. So we gotta delve a little bit into the financial aspects of this. What is it in your life that has allowed you to spend enough time coaching that you can have a state championship team?

[B]

Well, I would say my. My story starts coming out of residency and reading books like yours kind of right away. That was right about the time I graduated, was when your book came out. And following a solid financial plan over the last decade has really allowed me to set things up to where I don't have to worry about money anymore. And I'm at a stage in life where I can really just focus on the things that matter now, like my faith and my family and my health.

[A]

Very cool. Would you describe yourself as financially independent already or you just feel like you're on the fast track to get there?

[B]

I would say I'm at Coast Fire at this point. Very cool. If I don't put anything else into retirement from now until I retire, I'll be good.

[A]

Very cool. I'm not sure we've done Coast Fire as a milestone. We should have done Coast Fire. That's even better. Okay, we got to hear about the hockey team, though. I mean, is this a travel team? I assume it's a travel team if there's a state championship.

[B]

Yep. This is a travel team. We travel all over the place In Wisconsin, we live about an hour away from the Twin Cities, and so we. We probably play a third of our games against teams in Minnesota, which really has helped to grow our program in advance. Just blessed to have a group of kids that really Works hard and they all push themselves. And as a result, we've had really a lot of success this year. And it culminated with a state championship, which was really cool.

[A]

Yeah, that's very fun. You got a kid on the team, I assume?

[B]

Yep. I've got my third of or my second of four. Sam is a. He's. He's just turned 11, but yeah, he was on the team. He had a great year.

[A]

Okay, what position does Sam play?

[B]

Sam is a center.

[A]

Okay, what line Sam on? Is Sam the first line? Center.

[B]

We rotated two centers on three lines this year, and Sam, they were. I would say they're pretty equal. It really didn't matter who started.

[A]

Very cool, very fun. So at some point along the way this year, especially with you going all the way to the state championship, there were some times when that really didn't work well with work. So tell us what you did with work when there were conflicts.

[B]

If I had over a month notice, I could take the time off. What a lot of people don't know is that youth sports, and as a sports medicine physician, this is the world I live in. Youth sports has kind of taken over. And so a lot of tournaments now start on Friday, and they might even start on Friday morning.

[A]

So you have to travel Thursday night?

[B]

Sometimes, yes, but most of the time it's just leave early Friday morning. I probably missed the coolest game of the year. This year. We played in a tournament in Minnesota, and the opposing team coaches were Zach Parise and David Dubnik from the Wild.

[A]

Wow.

[B]

And so their kids were on the. On the other bench. And that was the game I missed.

[A]

Did your team win the game? That's the question.

[B]

No, actually, I'll make an excuse. The Minnesota kids, they had to use a different birth year. So they go, it's June to June or July to July. And in Wisconsin, we're January to January. So our kids are ballpark six months younger than their kids, which makes a little bit of a difference in youth sports, especially at this age.

[A]

Yeah. Well, you know what's interesting is a lot of people don't know this, but some huge percentage. I don't know what it is. 63 or 70% of NHL players are born in January to March.

[B]

Yep.

[A]

And the reason why is. Cause they're just a little bit older. And so at every level, they're a little bit older and a little bit better than their peers. And so those are the ones that end. End up in the NHL eventually. It's a really curious statistic, but. Okay. So sometimes you've got to be there on Friday. And what, you rely on your partners, you cancel clinic. What do you do when that happens?

[B]

I usually am booked out about a week, and so If I got 30 days notice, I can just shift. I'm not having to really cancel patients. One of the things that I noticed after probably about six years in the area that I'm in, is that no matter how hard I work, my system is going to give me about 80 patients a week. And if I can do that in five days a week, great. There was a point a few years ago that I realized I could really do that in four days a week. And so I take one day a week off, and I just get all the patients in the rest of the time. And it's allowed me to see everybody that I need to see through my system, but also has given me a little bit more family time, a little more time to get things ready, to get practices planned, to get connect with my wife a little more. So all those things are. Have happened.

[A]

Just.

[B]

Just, I. I guess happenstance. But that's really worked out because. Because of being paid on production, I can work four days a week and see the same number of people. And I never took a pay cut when I dropped my fte.

[A]

Yeah, very cool. And those other things, of course, are what life's really made out of. Right. All these other things that really are the priorities. Sometimes we don't always remember that or always treat them that way, but they are the priorities. Okay, so give us a sense. You got more than one kid in travel sports, I'm guessing.

[B]

Yeah, we have four right now.

[A]

Yeah. Okay, so let's talk about the expense of travel sports. What's it cost to be a player on your state championship team? What did parents spend this year to have a kid on that team?

[B]

So $1,500 was the association fee to join the team. About an extra 200 for jerseys, and then four weekends in hotels. Each weekend. Ballpark, $500.

[A]

Well, you clear. You clearly are in Wisconsin and Minnesota if you can get.

[B]

Yeah, I guess you call it geographic arbitrage. Right.

[A]

That's it. That's pretty good. Plus gear, of course. Hockey gear is not trivial gear.

[B]

And then now hockey is. You roll right from the winter season into a spring season, and then you've got a camp all summer. And they're trying to get my kid to play on team now. And I'm going, we need to do some other things. We need to get them. Give them a little bit of a break.

[A]

Yeah. Find A little bit of balance there, but your team fee is actually significantly cheaper than my kid. My kid's in high school now, but, you know, he pays that much just for the high school team.

[B]

So I played a little bit in med school. I was in New York City, and I played on Chelsea Pier, which is a really cool rink because it's elevated, it's off a ground level, and the fees there were like. It was like $1,000 every three months. Wow.

[A]

Just a different world. Just for beer league hockey.

[B]

Just for beer league hockey.

[A]

Yeah. That's pretty wild. I guess that's what you get in a high cost of living area. There's a message about geographic arbitrage there somewhere. If you want to play hockey, you know, go to the northern Midwest rather than, you know, Manhattan, I guess. Okay, very cool. Well, this idea of coast fire is something not a lot of people have heard of.

[B]

Okay.

[A]

And that, you know, is a reasonable goal in and of itself. Clearly, early in your career, becoming financially comfortable, whatever was important to you and your spouse, why. Why did you end up saving enough money that you now no longer have to save for retirement?

[B]

The answer to that question is probably pretty complex. I was really interested in finance during residency and started reading books about it and started initially listening to Dave Ramsey's podcast about getting out of debt. And then when I started to read that and really tackle the debt, and that was before student loan advice was available, or else I probably would have done the PSLF route. But then I started reading other books. That was kind of a snowball into books like yours, where I started learning about all the different retirement accounts that I could. Could invest in and set up. And really, throughout the last decade, I've just maximized everything that was available. So every year we max out a 401k, we max out a 457 plan, backdoor Roth IRAs. And then I, lucky enough to work for a company that also would put about 30 grand every year in addition into retirement. After I had kind of gotten financially literate about four years into training, I approached my system because they weren't offering a mega backdoor Roth. And none of our financial people had heard of it and so kind of talked them into, hey, this is the thing that's available. And after about a year that was available. And so then I started maxing that out too. And so really just have done everything that has been offered. And we kind of look at things where we pay ourselves first and then we live on what's left over. And right now that's turned into about $2 million in investable assets.

[A]

Cool. And given that you're only 12 years out of training, there's plenty of time for that double to double once or twice while you're still working, which is pretty cool. Okay. There's somebody out there sitting around going, is this all there is to life? I sure would like to spend more time with my family. I'd like to coach a team. I'd like to do some of these things that you're doing in your life now. What advice do you have for that, Doc?

[B]

The biggest thing is you have to live within your means. You can't spend money that you don't have. That's probably the biggest thing. The way we have our life set up is that most things come out before the paycheck ever comes home. Once the paycheck does come home, we set aside money for our giving every month, and then after that, we live on what's left. And that's been more than enough to cover all of our expenses and everything that we want to do. And so if there's someone else out there that wants to live life to the fullest, I would say that's kind of the process and the steps.

[A]

Very cool. Adam, congratulations on what you've accomplished. Congratulations to you and your team.

[B]

Thank you.

[A]

And, you know, not only your team, including your spouse and kids that have worked on your finances, but your hockey team. It's got to feel pretty good to take them all the way and put that trophy up in the air and have them enjoy that feeling, that accomplishment, even at the young, tender age of 9 or 10 years old. So congratulations to all of you.

[B]

It's been really, really cool. I also want to put a plug. I know you're a hockey guy if you're ever interested. Wisconsin hosts the USA National Pond hockey champions every year. The way one of my buddies put it, it's like Disneyland for hockey players. And so it's in Eagle River, Wisconsin, first, second weekend in February. Every year they get, like, several hundred teams, 24 rinks, and it is a blast. So if I know you're an experienced guy, that's an experience. It would be great to have you out sometime to do that.

[A]

You know, one of my fellow coaches on the high school hockey team went out and played this year, and so I was coaching while he was playing. But it does sound like a great experience. I would like to come out and maybe we can put together a white coat investor pond hockey team and go out there and clean up.

[B]

I would imagine there Are enough white coat investors out there that we could probably field a solid squad.

[A]

Nice. We'll let you go. Thank you so much for your time.

[B]

All right, thanks, Jim.

[A]

All right. That was fun. It's always fun to talk to a hockey player and a hockey coach and it's fun what we can accomplish when we have our finances on track. You can have evenings to spend coaching your kids or whatever else is important to you in life if you just get your financial ducks in a row. It's part of the why, right? You got to have a why to do all this stuff. So let's make sure we do that. I told you at the top of the hour we were going to talk a little bit about sequence of returns risk. Sor. If you're not familiar with this term, you need to be, particularly if you're getting anywhere near retiree. Sequence of returns risk is the risk that despite having adequate average returns from your portfolio to support your retirement spending, you run out of money because the poor returns came first. That's what sequence of returns risk is. You had a bad sequence, you had the bad returns first before the good returns came. Because when you're portfolio is falling in value and you're withdrawing substantial sums from makes it more likely that you run out of money. Now obviously there are other ways to return on money. You know, if you don't manage your money, you're going to run out of money. If you don't save much for retirement, you're probably running out of money in retirement. And you know, if you have some massive, huge unexpected expenses like you decided you're not going to buy health insurance and you had a cancer or some terrible trauma, you landed in the ICU for, maybe you run out of money or some long term care situation you weren't prepared for, maybe you run out of money. But for the most part, if you've done a good job saving for retirement, you do a good job managing your money. The risk to worry about is the sequence of returns. Risk to have crummy returns in the first 1, 2, 3, 5 years of retirement. The worry is that you're retiring into the next great depression, that you're retiring into the stagflation of the 1970s. And so that is something that you probably ought to have a plan for as part of your written financial plan. So let's talk about what those plans might look like. First of all, one plan that works for lots and lots and lots of white coat investors. It's almost a default plan, an error plan is to just Be rich, okay? If you're very wealthy, if you retire very wealthy, sequence of returns risk just doesn't exist for you. Okay, let me give you an example. Let's say we got a retired couple, they spent $200,000 a year, and because they did such a great job earning and saving and investing throughout their career, they retired with $10 million. Okay? So $200,000 a year of $10 million is 2%. If you're only spending 1 or 2 or 3% of your portfolio a year, you're basically bulletproof from sequence of returns risk. The entire world has to melt down for you to run out of money. This is not the people who really have a serious sequence of returns risk. If you're perfectly comfortable spending 1% of your portfolio, you're going to be fine. I mean, the truth is, on average, if you look at the data used when they're putting together things like the 4% guideline, they note that on average, when people spend 4% of their portfolio adjusted upward with inflation each year as they go along, after 30 years, on average, they have 2.7 times what they retired with. Right? The sequence of returns issue. The reason why that's only 4.4percent rule instead of the 6% rule or the 8% rule is because occasionally you get those bad returns first. So that is where it comes from. All right. Another solution besides just being really wealthy, right? If you're not spending anywhere near 4% of your money, that works fine. Another method is to work late. Work a long time. Let's say you're one of those docs that just loves it and you keep working until you're 70, 72, 75. Well, guess what? If you're still working until you're 75, your life expectancy is probably something like 8, 10, 12 years, something like that. All these studies that look at sequence of returns risk, they're really looking at 30 year time periods. If you are only going to be retired for a decade before you die, even if you live a little longer than you expect and you make it 15 years, guess what? You're not going to run out of money. The people who really need to worry about sequence of returns risk are the early retirees, right? If you're retiring 45, 50, 55, you might have a longer than 30 year time period and maybe that'll result in you spending less than 4% or doing some more of these strategies that I'm going to talk about to deal with that sequence of returns risk. But working late or at least having the ability to go back to work and work some of those years in retirement has a dramatic effect on how all of this works. So all of a sudden, instead of having to withdraw a whole bunch of your portfolio in a year, the market is down, or a couple year period, when the market is down, you can live off some of the money you earn and it works dramatically better. You don't run out of money, sequence of returns, risk basically goes away. Okay, here's another method. Another method is to guarantee a whole bunch of your income. Now, Social Security is a guaranteed income. Obviously you got to pay attention to who stands behind the guarantee. In the case of Social Security, it's the US government. But delaying your Social Security to age 70 gives you the best deal out there on an inflation adjusted immediate annuity. Basically, you can put the highest floor possible under your guaranteed income, your guaranteed spending. And that can really help a lot. In a year when markets are down, there are other sources of guaranteed income, right? You might have a pension from a job you took. You can also buy an immediate annuity. You can go to insurance company, you can give them $100,000 and they might give you something as high as $600 a month for that $100,000. So obviously you can buy more of those. If you want more than $600 of guaranteed spending a month, maybe you can buy a quarter million dollar one on yourself, another quarter million dollar one on your spouse. Right now we're talking about $3,000 a month of guaranteed income. So you combine that with your Social Security and all of a sudden, well, that's not too bad. Even if markets are down and we got to cut back our spending a little bit, we've got all of our essential fixed expenses covered by guaranteed income. So that's a method that works very well. Here's another method that works. A big risk in sequence, risk in the sequence of returns. Risk is not just that you have poor returns, it's that you have poor inflation adjusted returns or real returns. The worst time period, actually historically, if you look at the data for US stock and bond returns, is actually the 70s. And it's not because returns were so terrible. The returns were not good by any means. The problem was inflation went way up. And so the real returns were really particularly bad. And so you can reduce that risk by having more assets in your portfolio that tend to do well in inflationary kind of period. Now you can buy some bonds that are indexed to inflation, like I bonds like treasury inflation protected securities or tips. Those help protect you from inflation rather than Having all your bonds in nominal bonds, especially long term nominal bonds, but just having things in there like real estate and stocks also helps protect you from inflation. Sometimes people add some other stuff, commodities or some crypto assets or some precious metals or things like that to help protect from inflation. That's reasonable to do with a small percentage of your portfolio. But if you think about inflation being the biggest risk you're facing, you'll design your portfolio a little bit differently to try to protect you against inflation. Rather than having 60% of your retirement portfolio in long term nominal Treasuries, which may not be the best move if inflation really rears its ugly head. The main thing people do when they're worried about sequence of returns risk is they just reduce the volatility of the portfolio. They take less risk. And that's typically during the last few years before you retire and the first few five years or so after you retire, more bonds in your portfolio, more CDs, whatever, these fixed income investments that aren't nearly as volatile as your stocks, not nearly as volatile as your real estate. And so you can just put a little bit more money in bonds. In fact, that's often called a bond tent, right? You have a few years where you have more of your portfolio in bonds a few years before and after your retirement date. And then you actually can get more aggressive a little bit later with your portfolio once you've gotten through that really bad sequence of returns risk time period. Another thing people will do with bonds is they will actually create a ladder of individual bonds. Typically these are treasury bonds and typically they're inflation protected bonds. So you're making a TIPS ladder. So you actually put whatever you want to spend for those first five years of retirement into tips, right? Let's say you're going to retire in five years and you want a five year TIPS ladder to get you through that worst of the sequence of returns risk period. So you're buying a five year tips, you're buying a six year tips, a seven year tips, eight year tips, nine year tips, right? You're buying these TIPS bonds so that you will have that money to spend for that year. And maybe you put your entire expected spending amount for that year in tips. Maybe it's $100,000 or $200,000 for each of those years and you make your TIPS ladder for it. Well now even if the market tanks the day you and it stays down for three, four, five years, you're fine because you're not have to touch that money, you're going to be Spending the money coming out of that TIPS ladder every year. Now, obviously, if you only have a five year TIPS ladder and you have a nine year period of terrible returns, you could still have some sequence of returns risk. But a five year TIPS ladder is going to get you through an awful lot of that. That's kind of the mindset behind some other strategies. You've heard of the bucket strategies, and the idea behind that is you put one or two or three years worth of spending in cash and you put years four through six or eight or ten in the bonds. And after that, you invest the rest of the portfolio aggressively. And in a typical year, you replenish each of the buckets. You sell some of the bonds and move it into cash, you sell some of the stocks or real estate and move it into bonds and you replenish the buckets. But in a bad year, you don't replenish the buckets. You allow your more risky assets to continue to grow. And you just realize, hey, that's what this bucket is for. This bucket was for sequence of returns risk. We're just going to spend from it. We won't replenish it until the good returns come back in two years or three years or four years or five years or whatever. So that's one strategy people use. People use all kinds of different withdrawal strategies, and most of them the goal is to manage sequence of returns risk. A popular one right now is called the guardrails strategy. And there's these rules involved in the strategy. When returns are this and you do this. When returns are this, you do that. And that helps you decide how much to take out of your portfolio, where to take it from, and kind of manage that spending to try to minimize the sequence of returns risk. But the main idea behind it is just to spend less. When the risk shows up, you go, okay, well, I got to cut back now. Some people are surprised just how much they have to cut back their spending in those years. It's not cutting back your spending just 10%. I mean, that'll help. But you might have to reduce spending. If this is your only method of dealing with sequence of returns risk, you might have to reduce spending by 40 or 50% and for more than a year, 1, 2, 3, 5 years, that's possible. So if your only method of sequence of return risk mitigation is reducing spending, you better be prepared to reduce spending a lot in order to make sure you don't run out of money before the end. That's the concept of sequence of returns risk. Those are the basic ways of dealing with it. You ought to know about what that is. You ought to have a plan for it. If you're getting close to retirement, you ought to put that plan into your written financial plan. Hope that's helpful to you. This podcast was sponsored by Bob Baiani at Protuity. One listener sent us this review. Bob has been absolutely terrific to work with. Bob has always quickly and clearly communicated with me by both email and or telephone with with responses to my inquiries usually coming the same day. I have somewhat of a unique situation and Bob has been able to help explain the implications and underwriting process in a clear and professional manner. Contact [e-mail] Protuity today. You can also email infoortuity.com or you can just call them at 973-771-9100. If you need disability insurance and you don't have disability insurance or you're worried your disability insurance is not very good, get it taken care of now. Don't wait until you develop another medical problem or, heaven forbid, become disabled. 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