John, very good to see you. We get to talk through the headlines today, a popular financial guru proposes an 8% withdrawal rule, we’re going to talk through whether that is realistic. So recently this well known financial expert dismissed the common advice to withdraw only 4% of your retirement savings annually as “moronic”, instead advocating for an 8% withdrawal rate, he argues that rate can be sustained without eroding your principal balance. So of course, the financial world exploded upon hearing this advice. What do you think?

I think that's one heck of a gamble with your life savings. Today’s retiree, their biggest fear is running out of money. You go with 8%, now he mentioned the 4% withdrawal rate, over the last decade there have been a lot of studies that show that even in tough economic times, that's a 50/50 chance that your money is going to last. So 8%, to me, is reckless. And I'll take take it one step further, as the retirement management advisor, we spend a ton of time in that curriculum on income withdrawal percentages, and they said listen, anything from 3 to 3 1/2 percent, underneath that, you’re overfunded. From 3 to 3 1/2 to 7% you're constrained, which means that it may be doable, but you're gonna have to be willing to make adjustments, especially the higher that rate gets. Anything above that, you're underfunded and you shouldn’t be retired. So to suggest 8% I think, is really you're not gonna have a peace of mind retirement. Let's put it that way.

So this expert also recommended that retirees invest all their assets in equities. Wouldn't that expose a lot of retirees to a lot of risk and market volatility.

Yeah, absolutely. I mean, that's the people who did that in, you know, 2007 to 2009 and they had 51% less money. Retirement investing is completely different than accumulation investing. You cannot afford big market losses. And, you know, unless you're a Harry Potter and Warren Buffet wrapped up into one, or extremely lucky. And I mean, extremely lucky, you're going to be along for the ride of the market. So if you want those big equity like returns, you're also going to take those big equity losses. And it's in my over-decade of experience that no one, no one likes the equity type losses, especially when their income and their livelihood depends on that money.

Right, right. So, when could an 8% withdrawal rule be sustainable? Well, an 8% withdrawal rate could be sustainable, maybe for, you know, a couple years. I'm not gonna go over a 34 year time horizon. The other problem with generalized withdrawal rate, right? Are we talking about a person who just retired in their 70s or a person who's retiring at 55/56 that's two completely different things, this gets back to the act Erin that retirement planning is based on your own individual DNA you know when it comes to the financials. So you know an 8% withdrawal rate, we have talked, in past videos Erin, about spending your money. We don't want you to be savers anymore. We want you to enjoy those go-go years. So yes, you can spend a little bit more early in retirement. We call it the retirement smile, but you have to understand your limits. You know we we don't talk withdraw rates in our office, we talk dollars and cents, because that's what helps our clients understand how much money they can take. And you know, if we have a positive and negative effect, what will happen to that money in terms of their income stream.

Right. And I know that you run very specific software, which, of course, is personalized to all of your clients. So John, how do you help clients get to this number that's so much better than a percentage, and how often are you revisiting that number?

Yeah, so we're not going 8% 4% 5% because if you're watching this video, you're probably going, well, how do I even calculate that? What does that mean? We talk dollars and cents to our clients. So here we use extremely advanced software that is specific to income distribution planning. And so here we see a client has $2.3 million and we're saying, “Hey, listen, you have a spending capacity of $20,400” so this is how much money that they can reasonably spend every month, and let their money last them 30 plus years. We're going to give them a gross of tax and a net of tax, depending on which state they live in, that could have an effect on it. So now our clients have an understanding, okay, I can take out this much money during, you know, this year or this month. So we're going to take one step further, and we're going to say, “Listen, John and Susie, if the markets are good, and your account balance goes up to, you know, in this example, two point almost $5 million, you can actually give yourself a $1,300 raise here”. And and maybe enjoy retirement doing an extra, you know, little vacation or whatnot. However, if you spend a lot of money, or if you're one of those equity only people, and you experience a major market downturn, which in this case, you go from 2.3 down to 1.8 million dollars, then we're going to say, “Listen, you need to reduce your spending down a $19,400 to make this sustainable, we're going to guide you.” And Erin you ask, how often we look at this? This is monitored by the software daily. And then we look at it periodically throughout the year, and we get notifications if there's any issues that we pass on to the client, so we're on top of this. We don't want to sit there and go, Oh, you know, last year, you lost 30% you took out 8% and you know, the Monte Carlo says now you have a 60% success rate.

That is incredibly helpful. That must bring so much peace of mind. John, if somebody would like to speak with you and crunch the numbers so that they can figure out how much they can comfortably withdraw in retirement, how can they reach you?

Well, always visit our YouTube channel here, subscribe, and we have a ton of videos in the past on spending in retirement. But you can also visit our website, www.gosecurus.com, and from there, we have a ton of resources, podcasts, videos, vlogs, and while you're on the website, if you want to talk us, you can go over the Contact Us Tab and you can schedule a 20 minute phone call where I will answer any general questions, or you can schedule an complimentary vision and clarity consultation. And if you like doing things the old fashioned way, you can go ahead and give a call at the office. 858-935-6210 and Emily will get you on our calendar.

John, thank you so much for your time today.

Thank you, Erin.