How are you preparing for retirement? Have you looked at all of the dimensions to ensure you have a successful, long runway of money always available? On today’s special roundtable episode, we dive into a piece that claims there are seven things you need to do in order to be prepared for retirement. Joining us are: Don McDonald from the Talking Real Money podcast, Paula Pant from Afford Anything, and OG.
In the second half of the show, sponsored by DepositAccounts.com, we dive into risk mitigation, the importance of maintaining adequate cash reserves while in retirement, and keeping a historical context of current events.
Be sure to stick around for the yearlong trivia competition with Doug’s baseball-themed trivia.
Deeper dives with curated links, topics, and discussions are in our newsletter, The 201, available at https://www.StackingBenjamins.com/201
Enjoy!
Watch On Our YouTube Channel:
Our Topic
Playing Their Part (HumbleDollar)
During our conversation you’ll hear us mention:
- How to meet the dual goals of financial security today and confidence about the future
- Defining the absolute minimum you need to make ends meet
- The importance of understanding your personal risk tolerance
- The anti-budget
- Cash flow predictability in retirement
- The risk of withdrawing from your portfolio when asset prices decline
- The role of holding a substantial cash reserve
- Accounting for the variable expenses throughout the year
- Aligning your income with your out go as you approach retirement
- Flexibility in retirement
- Planning expense categories as you age
- Implementing the right portfolio withdrawal strategy
- Basing your lifestyle expenses on the returns of your portfolio
- The three stages of retirement
- The myth that expenses go down in retirement
- How to fund retirement spending money
- Can annuities fit into your retirement spending plan?
- Social Security planning
- Smart tax planning
- The benefits and downside of income predictability
- Protecting your portfolio against downside risk
- Avoiding panicking during market declines
- Longevity risk
- How to create a drawdown strategy
- How many years’ worth of expenses to keep in cash
- Reversion to the mean
- “This time is different”
- Inflation
- Flexible withdrawal strategy
- Importance of staying invested while in retirement
Our Contributors
A big thanks to our contributors! You can check out more links for our guests below.
Don McDonald
Another thanks to Don McDonald for joining our contributors this week! Hear more from Don on his show, Talking Real Money at Talking Real Money – Investing Talk on Apple Podcasts.
Paula Pant
Check Out Paula’s site and amazing podcast: AffordAnything.com
Follow Paula on Twitter: @AffordAnything
OG
For more on OG and his firm’s page, click here.
Doug’s Game Show Trivia
- In the year of the longest uninterrupted game, 1966, what was the average price of a ticket to a major league baseball game?
DepositAccounts
Thanks to DepositAccounts.com for sponsoring Stacking Benjamins. DepositsAccounts.com is the #1 place to go when you’re looking to see if your rate is the BEST rate on savings, CDs, money markets, and even checking accounts! Check out ALL of the rates ranked from best to worst (and see the national averages) at DepositAccounts.com.
Join Us on Monday!
Tune in on Monday when we’ll learn how to plan ahead for paying taxes with the artist and host of the Sunshine podcast, Hannah Cole.
Miss our last show? Check it out here: All About Vesting Schedules and Stock Market Predictions! (SB1530).
Written by: Kevin Bailey
Episode transcript
[00:00:00] Speaker: Good morning, Christopher Robin. [00:00:02] Speaker 2: Oh, good morning. Winnie the Pooh [00:00:08] Speaker 3: live from Joe’s mom’s basement. It’s the Stacking Benjamin Show. [00:00:23] Speaker 3: I am Joe’s mom’s neighbor, Doug. And on today’s round table, we are asking how are you preparing for retirement? One Popular Money Blogger claims. There are seven things you should consider, not five, not eight. Seven things you should consider here to take a swing at them is money. Major Leaguer pull a pant. [00:00:42] Speaker 3: Also, joining the conversation is a resident Grumpy og, and finally, a guy who keeps us all laughing even when things run a little long. It’s the one half of the Talking Real Money Podcast, Don McDonald. But that’s not all. Halfway through the show, I’ll share my stubby trivia question. And now a guy who hits it out of the park every episode, it’s Joe. [00:01:10] Speaker 3: Oh, Saul. See, hi [00:01:14] Speaker: Doug. At least a ground rule double. That’s what we go for. We don’t try to do that. Big swing. Hey everybody, welcome to Friday. Happy, uh, father’s Day weekend. It’s, uh, Friday before the big holiday. Is this, would you call this OG a Hallmark holiday or real holiday Father’s Day? [00:01:30] Speaker 2: Well, I, I’m not celebrating that. [00:01:31] Speaker 2: It’s my anniversary weekend this weekend, regardless of when Father’s Day happens to be this year, despite the fact that it’s always the next weekend, but whatever, it’s [00:01:39] Speaker: If wanna celebrate your relationship with your father, do that every weekend, I think. Yeah. [00:01:43] Speaker 4: Oh, [00:01:43] Speaker: I’m touched also. Hear that voice Is Don McDonald’s here with us from Talking Real Money? [00:01:48] Speaker: How are you my friend? [00:01:49] Speaker 4: I couldn’t be better now because I’m on Stacking. Benjamins again, and [00:01:52] Speaker: it’s been so long. It has been a while, man. But you guys are always getting it done over talking real money. And for people that don’t know what you guys do, talk about what you and Tom are up to. [00:02:03] Speaker 4: Well, here’s what we do. [00:02:05] Speaker 4: Almost every day we talk about real money. Who knew Cryptic? We do. I don’t, yeah, we just talked. We always find something to talk about, like kinda like the seven things that you should do to retire. We do that kind of stuff all the time. And uh, we’re, we’re there all the time. And then this summer I’m gonna be on the road doing it, traveling across America, talking real money on the road with real people, real money, with real people, with people visiting us at campgrounds across America for a cookout. [00:02:34] Speaker 4: We’re doing cookouts. We’re doing a big cookout in Madison, Wisconsin. [00:02:37] Speaker: Oh, I love Madison, Wisconsin. Yeah. [00:02:39] Speaker 4: Nice place. And how do people get to schedule for that? John? Is the schedule public yet? It’s at talking real money.com. [00:02:44] Speaker: Yeah, [00:02:45] Speaker 4: you’ll see the Big Silver Airstream and just click on that Learn more button. [00:02:48] Speaker: Awesome. That’s great. Uh, I did a 40 city book tour down. I think that’s a huge mistake. By the way, what’s your embarking on? You could have talked to me first. Don’t get me wrong, everybody, but I met, it was super fun. It was just going from point A to point B. Uh, I’m driving [00:03:01] Speaker 4: a trailer though, so I just, it’s like, I’m like a turtle that makes it so much better. [00:03:05] Speaker 4: I’m carrying my house with me. [00:03:07] Speaker: You just buried it even further. Don, [00:03:09] Speaker 2: you’ve never seen Joe Pack. He pretty much carries his whole house with him anyway. [00:03:12] Speaker: I know. Hey, I’m, I’m, I am right here. Speaking of right here, we also have Paul Pat from Afford Anything right here. I, I am right here. [00:03:21] Speaker 5: Sorry, Chile in my throat. [00:03:23] Speaker 5: That yes, uh, my fault. [00:03:26] Speaker: Big weekend for you. Big holiday weekend. Is this a big holiday in your family, you know, in your family? Honestly, [00:03:29] Speaker 5: I’ve, I’ve been working every weekend, so, uh, like Oh, [00:03:32] Speaker: father’s Day. [00:03:32] Speaker 5: Yeah. Well, my dad is in Atlanta. I’m in New York, so, you know, we, we talk on the phone, but, uh. Yeah, I haven’t actually, I don’t think I’ve seen my dad on a Father’s Day in probably a decade. [00:03:45] Speaker: But you talk to him all the time. Yeah. Yeah. We talk on the phone all the time. It’s kinda like what we were talking about every day’s Father’s Day, right? [00:03:50] Speaker 5: Yeah, yeah, exactly. Oh, and uh, my parents are coming to FinCon this year. Again, they’re making a return trip. They are, because they live in Atlanta. [00:03:58] Speaker 5: Fincons gonna be in Atlanta, and they are so excited, so, so, so excited. They said that the last time that they went to FinCon, which was in 2018, everyone kept coming up to them and saying, oh, you’re Paula’s parents. You’re Paula’s parents. No, let’s be real Paula. The big thing was they got to meet me. They did. [00:04:15] Speaker 5: When my dad met you, you know, you, you introduced yourselves and then Joe, you walked away and my dad looks at me and goes, is that Mr. Benjamin? [00:04:26] Speaker: That’s what they call him. I’m like, no, he’s only half Mr. Benjamin. Only half of Mr. Benjamin. Yes. Well, you know what? Not only is it Father’s Day weekend, but it also, it’s this special for another reason. [00:04:36] Speaker: You know why, Paula? [00:04:37] Speaker 5: Why is that? [00:04:38] Speaker: It’s because this episode’s brought to you by State Farm. That’s why if you’re a small business owner, it isn’t just your business, it’s your life. Whatever your business might be, you want someone who understands. That’s where State Farm small business insureds comes in. [00:04:50] Speaker: State Farm agents or small business owners too, and know what it takes to help you prioritize your policies for your small business leads like a good neighbor, state Farm is there. Talk to your local agent today. And by the way, this episode not only brought to you by State Farm, we make sure that the second half of the show is always ad free. [00:05:07] Speaker: And that’s ’cause we got some other cool sponsors. Here’s to right now. We got Don McDonald from Talking Real Money with Us. Oh gee, Paula Neighbor Doug. So let’s get moving. [00:05:22] Speaker: Today’s piece comes to us from, uh, Jonathan Clements. And, uh, Don, you were talking about this earlier. You’re a big fan of Jonathan. [00:05:29] Speaker 4: Absolutely. As a matter of fact, his first book, I wrote some of the liner notes for it, some of the, uh, the review things. Uh, I reviewed the book and I love Jonathan’s work. [00:05:37] Speaker 4: Always have for many. He used to be on my old show back when I was on Business Radio Network a lot, and he’s a great guest. He writes great stuff. He has a nice, sensible approach to money. [00:05:47] Speaker: Totally sensible. Absolutely. What’s great for people that don’t know who Jonathan is for a long time he had the personal finance column at the Wall Street Journal, and now he has a wonderful site called Humble Dollar. [00:05:58] Speaker: And uh, if you’ve never been to humble dollar.com, we’ll have a link in the show notes. On this, he talks about seven different dimensions to planning your retirement. And I wanna walk through these because Jonathan introduces it this way. By the way, if you’re listening to us and you haven’t, uh, seen this piece, no need to have it in front of you. [00:06:15] Speaker: In fact, what’s funny is, uh, we accidentally got our contributors for this live taping the wrong piece. So they haven’t even seen the piece. And I told them they’re all such pros. And this is so straightforward being Jonathan, I think we’re gonna do a great job here. I’m gonna get a Father’s Day surprise. [00:06:31] Speaker: This is your Father’s Day surprise. We’re gonna send you the wrong stuff, Don. Happy Father’s Day. And a tie, [00:06:37] Speaker 5: this will be just like college, like having to talk about something that you haven’t read in class. That’s right. [00:06:42] Speaker: Exactly. I get da, da da. Time to dance. Our, uh, retirement income, Jonathan Wrights is built on a slew of financial products and strategies, but we should think less about the gory details of each, and more about the role they play in our overall retirement finances. [00:06:57] Speaker: The fact is that each of us comes to retirement with different levels of wealth. And different desires. We all want both a sense of financial security today and confidence about our financial future. So how can we best meet those twin goals? We might think about our retirement finances in terms of seven dimensions. [00:07:15] Speaker: So I wanna walk through these. The, the first one he says is setting a floor. First thing, setting a floor. Arguably, our fixed living costs should be the starting point for our retirement income plan, because if we’re struggling to cover property taxes, insurance premiums, utilities, grocery bills, and other recurring costs, our final years will likely be a wash with financial stress. [00:07:36] Speaker: So he goes, right. Two, we’ll start with you, Don. He goes right to this idea of financial stress and the first math problem to figure out is this floor. So how much we need to keep the lights on. To me, that kind of sounds like retirement’s like running a startup, right? Yep. I have this burn rate now, Don in retirement, and I gotta make sure I cover the burn rate. [00:07:54] Speaker 4: Absolutely. And this is the basis I believe, for every good financial plan. I think before anybody thinks about investing for retirement or any of these other processes, you need to first establish what your need will be when you get there. Now, this is not an exact science, it’s an art. But you take what you have today and you try to extrapolate that into the future, knowing that you’re gonna have higher medical costs, but maybe you’ll have a lower, you won’t have mortgage payments or something is gonna shift. [00:08:22] Speaker 4: So you need to actually sit down with a piece of paper and your significant other and calculate what you’re gonna need, add some inflation in because what that number shows you is, uh, what I like to call your risk need. If you don’t know what you need, you don’t know how much risk you need to take. And then you combine that with your risk tolerance, which I’m sure shows up somewhere. [00:08:45] Speaker 4: Yeah. And, and then you have a really good idea how you need to go about building that portfolio. [00:08:50] Speaker: I like that you put risk need after risk tolerance. ’cause what drives me crazy, Don, is everybody starts with how much risk I like to take. And it isn’t about how much risk I like to take, it’s how much risk do you need to take first? [00:09:00] Speaker: And then can I stomach that? Why take more than you need? Yeah. But also, can I stomach that risk? Yeah. [00:09:05] Speaker 4: That’s what I think is so important about taking a risk tolerance survey of some sort at every point along your retirement path. [00:09:13] Speaker: Yeah, I definitely like it after I know the need. ’cause I’m like, okay, can I handle this? [00:09:17] Speaker: Can I not? Paula, I’m coming to you next because you are famously Ms. Anti Budgett, right? No budget for Paula. I save what I need to and I spend the rest, but it seems like if our goal is this burn rate thing, we kind of need a budget, at least for in this planning stage, so that we know what that floor is. [00:09:36] Speaker: True or false? [00:09:37] Speaker 5: Well, so it depends on. If you decide how much money you want to save, assuming that you have some type of a stable income, right? Assuming income, predictability, then figuring out how much you wanna save necessarily means that you also know how much you’re going to spend and therefore how much you’re going to burn. [00:09:55] Speaker 5: So it really only becomes different if you have volatile income. And in the case where you have volatile income, then you pick your minimum savings amount, and then the spending portion of it is volatile based on your income. So in that instance, that burn rate would be volatile. [00:10:11] Speaker: I still need to know just that basic number. [00:10:13] Speaker: You’re saying once I know the number, I’m free to spend. That’s, that’s my number. [00:10:18] Speaker 5: Well, so assuming a stable income Yeah. You know the amount that you want to save, and that is your non-negotiable. Sure. And so you prioritize those savings. First and foremost, whatever’s left over is what you can spend. [00:10:31] Speaker: But in retirement, I’m not saving. [00:10:33] Speaker: I mean, let’s say I’m done saving. Right? I’ve thrown that away. I’m done, baby. It’s time for me to party. Yeah. [00:10:38] Speaker 5: Yeah, [00:10:38] Speaker: at that point then I just minus what I was saving. And there’s your numbers, what you’re saying. [00:10:42] Speaker 5: Yeah, pretty much. Exactly. Plus in retirement, you’re like, you are going to be taking out a, a fixed amount anyway. [00:10:48] Speaker 5: I mean, it might adjust annually, but typically for most retirees, you’re, you’re on a very stable income. [00:10:55] Speaker: Well, and how does this then og inform your, uh, your retirement savings bucket strategy? And, you know, Don alluded to, you know, risk, tolerance risk that we need to take, but how does this help you set up your investments in a way that makes sense? [00:11:11] Speaker 2: Well, I think, you know, we’re gonna talk about this in a little bit when he talks about inflation, so I don’t wanna steal too much thunder from that. But when it comes to kind of thinking about your cash flows, the biggest risk in retirement income is taking money out when things are going down and not giving yourself the time to recover. [00:11:29] Speaker 2: So as you’re investing your portfolio, think about the person who retired January 1st, 2008. The market was pretty much at an all time high. Life was okay, things were going fine, jumped in his airstream, went on vacation for an entire year, and then, and then comes back a year later and goes, Hey, how’s my money doing? [00:11:50] Speaker 2: And not having a reserve or a buffer to account for the fluctuations of the market, which again he talks about in a little bit, could cause a lot of consternation because, you know, you’re drawing down from a portfolio that’s already down. And so back to, you know, from a cashflow standpoint or a budgeting standpoint, for all the people who don’t do budgets, I’m not, I’m a, I’m a Paula anti Budgett person too, but a lot of stuff gets automated, right? [00:12:14] Speaker 2: You just go, oh, I, you know, have car insurance. I just sign up on, you know, they fill out the form and my life insurance is paid. This way, my property taxes are paid outta my mortgage. Or if they’re not there, then every so often I get a bill and I just send it. You know, you don’t really. Think about it, if you’re getting close to your financial independence time, if you’re getting close to retirement and you haven’t sat down and gone, here’s how much I actually spend every single month. [00:12:37] Speaker 2: It’s a fun exercise to do, and it doesn’t have to be to the exact penny, but a lot of times stuff gets lost in there and you can’t do it one time in, in a month and go, oh, like here’s my MX statement. This is my spending. Because there’s a lot of stuff that’s quarterly or semi-annually or even annually. A lot of times we look at our income and go, where’s what the heck’s going on? [00:12:55] Speaker 2: Well, we don’t account for those $10,000 property tax bills or the $5,000 insurance bill that comes up once a year or the, you know, you go on vacation once a year and it’s, you know, a decent amount of money. And so the only time you can kind of capture that is what, like what Paul has said, start with the big number. [00:13:12] Speaker 2: Here’s how much money I made last year. Take out all the savings, take out all the known things. I know how much my tax bill was last year. You can find that on your tax return. I know how much I saved in my 401k and my. Investment accounts. Like that’s very trackable and easy to, easy to figure out. I know how much my debt payments were. [00:13:27] Speaker 2: Hopefully those are gonna go away as you get closer to retirement. And if they’re not, you know, you can account for that. But then what’s left over? That’s your number. That’s how much you’re spending. Now he talks about in this, how much is discretionary versus, you know, fixed. Yeah. I’m of the belief that people don’t retire unless they can maintain a similar lifestyle. [00:13:45] Speaker 2: Or you just get too old. You know, you’re not gonna early retire at 52 and go like, I can’t wait to cut my lifestyle by half. You know, like that’s not how real world works. So [00:13:54] Speaker 4: I was having so much fun until I got to 52. Darn it. [00:13:57] Speaker 2: Yeah. And then I got to cut my lifestyle in half. It’s like, no, I just work a little bit longer. [00:14:01] Speaker 2: So if you haven’t done this, if you haven’t sat down and gone through with a paper and pencil, you know, and like written down your, written down your budget, and it’s too hard to do, I honestly love the way that Paula talks about it. Take all the knowns out of it, because that’s gonna end up with what that number is. [00:14:16] Speaker 2: Then you can decide from there how much of that is fungible in terms of. Fixed versus discretionary. [00:14:23] Speaker: Well stick with Paula. We’re gonna have Paula Fest, I guess, here for the next might for, for the next couple minutes because the next thing Jonathan talks about is building in flexibility. You know, you’re talking about that, Paula, about how one month, another month. [00:14:35] Speaker: And so once you’ve saved, you know, I can be as flexible as I need to be in a given month and other months. I don’t need to be that flexible. But when it comes to retirement, let’s help our stackers out a little bit. What comes to mind when you think flexibility in retirement? [00:14:48] Speaker 5: It depends on the age and the health of the person. [00:14:52] Speaker 5: Oftentimes people, if they’re in their sixties or seventies, they’re still young enough that they can often travel, they can engage in hobbies. So you might, you might see a lot of those, uh, those fun things like the pent up demand of things that they couldn’t do while they were working full-time. Big fun spending. [00:15:09] Speaker 5: Exactly. Exactly. Yeah. And then as you get into your eighties and nineties, typically, um, many retirees tend to not travel as much. Often there are some health concerns or mobility issues that come up in, in your eighties or nineties. And so you tend to see, generally speaking, more spending on, on health and, uh, domestic labor, like somebody to help you clean the gut or somebody to, or even more. [00:15:35] Speaker 5: Activities of daily living type of tasks, cooking, meals, cleaning, not just a housekeeper coming in once a week, but maybe somebody coming in every other day to sort of tidy up those types of things. So more of the budget can go towards that. Donna Ji, anything to [00:15:51] Speaker: add to that list? Apolis, [00:15:52] Speaker 4: I want to add something about flexibility because I am a big fan of a, of using flexibility as a withdrawal strategy. [00:15:59] Speaker 4: Oh. So, because most of us have proven over our lives that we’re capable of living our financial lives flexibly. When we lose a job or we get a cut in pay or whatever it might be, we can reduce or expand our spending to fit the income. That’s why I think considering something like a flexible strategy is kind of a way to get that when you say, I’m gonna take 5% or whatever the number is out of my portfolio every year, and that’s my budget for the year. [00:16:23] Speaker 4: So if the market or my portfolio had a great year, then I am gonna be able to do anything I want. Maybe even keep some of it, not have to use as much in the future. So you can make kind of add that flexibility I think, to your portfolio and your withdrawal strategy. [00:16:37] Speaker: Don, I had this conversation with our mutual friend, Paul Meerman, um, and he uses this for his travel. [00:16:41] Speaker: You talk about 5% of your portfolio for lifestyle, he says for life and [00:16:46] Speaker 4: everything else. [00:16:47] Speaker: Yeah. He said that he will travel the world when the market has an up year. Um, and when as a down year they will do the, you know, more of the staycation. He’s in the Pacific Northwest, so he will just explore the Pacific, which there’s plenty of stuff to to Mm-Hmm. [00:17:00] Speaker: Wherever you live. There’s all kinds of stuff regionally. And he said I like both of them, but I also kinda like the surprise, you know, given what the market does. Having a good [00:17:09] Speaker 4: year. [00:17:09] Speaker: Yeah. Whether I’m going to Europe or whether I’m headed to Tacoma. You know, [00:17:14] Speaker 4: I’d just be driving in the Airstream anyway, so. [00:17:17] Speaker: Exactly. Uh, and by the way, if the market doesn’t continue picking up, it might be just a trip done around your neighborhood with Airstream, it sounds like. [00:17:25] Speaker 4: Yeah, as long as I can stay in national parks on the senior rate of like 12 bucks a night, I’m good. It’s [00:17:29] Speaker: living the dream, man. I’m [00:17:30] Speaker 4: moving outta the house and just doing that. [00:17:33] Speaker: og Any other expenses you see with clients when it comes to these big, uh, flexible things that come to mind? I [00:17:38] Speaker 2: think there’s a couple, we, we hit on it just, uh, one of them, which is the healthcare costs. I think there’s two layers to it. Healthcare costs before Medicare. So if you’re an early retiree, a lot of times, and this is changed a little bit over the last couple of years because, uh, rising costs, but it used to be you didn’t really capture the full cost of healthcare when you were, when, when you were working because it was largely born by your employer. [00:18:03] Speaker 2: And now some of that’s getting passed on because the costs are rising so much. Sort of seeing a little bit more of it. But recognizing that there’s a pretty big increase in the healthcare costs from retirement to Medicare. And then there’s still some costs from Medicare and beyond to include large healthcare expenses infrequently, you know, during that kind of 30 year period where you have some major medical kind of stuff, potentially major health issue. [00:18:27] Speaker 2: I don’t know who coined this, but I loved it. So I steal it all the time, which is to say there’s kind of three stages. There’s the go-go years in retirement, where all that pent up demand that we were talking about of like, I gotta go get all these things done. The bucket list, uh, slow go years, which, you know, hey, we’re just gonna take it a little bit easier. [00:18:44] Speaker 2: Maybe trips are more domestic, not as international, maybe once a year instead of five or something like that. And then, like Paula was talking about, when you kind of settle in to the no-go years, so go, go slow go and no-go, which I thought was, uh, pretty witty to say. But each one of those, you know, we have this, I think we have this myth that, oh, my spending will go down in retirement. [00:19:03] Speaker 2: I don’t, I don’t think that’s true. I think it goes up and rises just like everything else. And to Don’s point. It’s gonna ebb and flow based on what’s really going on in your life. If there’s a big medical expense, well guess what? You’re probably gonna dial back from gift giving that year or the big trip. [00:19:18] Speaker 2: Or if the market does really bad or really great, you’re gonna make some changes. That’s kind of the normal, normal pace of life that you’ve experienced from, you know, from when you started working at 13 years old or whatever. [00:19:31] Speaker: og. Do you like, you know we talked about that money for your floor, right? And that’s kind of your core portfolio, core strategy. [00:19:37] Speaker: This flexibility Jonathan’s talking about and that we’re talking about. Is that a separate bucket? Do you have a separate bucket of money or is this added on and, and it and it is what it is? You count it as more of the same or different? [00:19:49] Speaker 2: Well, I suppose it all depends on how your retirement income is structured. [00:19:53] Speaker 2: You know, some people it’s becoming fewer and fewer, but some people have pensions in addition to social security and some personal retirement savings and things like that. It’s a lot easier to compartmentalize. Those different income streams and your, the expenses that are tied to that, when you can do that, I know a lot of people that think, okay, I know my RMD, my required minimum distribution every year is about X. [00:20:14] Speaker 2: That is my y. You know, it’s like I get this check in July, I know that I always use it to pay my taxes and go see the grandkids. Like that’s that money. And so it’s easy to kind of compartmentalize it when it’s, you know, in different buckets. If you only have social security or you only have personal savings, it’s kind of suit your demeanor, I suppose. [00:20:35] Speaker 2: There’s some people who like to have 32 savings accounts, like, you know, I got one for the car, one for the car repairs, one for the tires, one for the tire repairs. You know, like all the different, yeah, wine nabbing of every dollar type thing. I think it’s fine just to have one bucket, but if you’d like to split it up, there’s no, no reason not to, I guess complexity maybe. [00:20:54] Speaker: Let’s say Paula, that you’re, you’re coming in hot to retirement. Somebody’s hanging out with us, and they’re very close to the vest. They, they have enough money for the floor, but they really need growth to be sustained in their portfolio. You know, this concept of flexibility also means skid marks on the growth. [00:21:15] Speaker: Do you have a strategy where you maybe go into debt or take out a line of credit in retirement in case some of these big things happen? I would [00:21:21] Speaker 5: hope that if you are coming in hot, meaning that if you are just barely, you could retire, but only if, uh, if the stars align and everything works out and you have a couple and you don’t get hit with sequence of returns risk and um, have a couple of good years right up front, I would hope that if that is the case. [00:21:44] Speaker 5: I’d hope you’re in good enough health that if you needed to, your flexibility would be that you could take on some type of income producing activity. Ah, yeah. The challenge is that a lot of retirements are involuntary and there are some people who don’t have the health to be able to do so. But assuming that your health is there, the real flexibility is willingness to earn an income, even if it’s a part-time income or some type of remote work. [00:22:13] Speaker 5: So it’s your human capital. Yeah, yeah, exactly. Your human capital is your most, uh, the, the flexibility with the biggest payoff. Interesting. [00:22:21] Speaker 2: I mean, you think about it. Hold, hold on just a second. I would just add to that just a second. Sure. It’s like if you think about that extra income, and a lot of times, especially when we’re moving into retirement, it’s like, well, I mean seriously, what’s, if I go work part-time, you know, what’s an extra I. [00:22:36] Speaker 2: What’s an extra 10 grand? Like, who cares? It’s just 10 grand, you know, is that really gonna move the needle? That’s not having to have a quarter million dollars saved, you know, or, or the mortgage payment paid off, you know, and your mortgage payment’s $2,000 a month, that’s a half a million dollars. You don’t have to have saved to help with that payment. [00:22:56] Speaker 2: It’s a pretty profound amount. How little bits of extra income, even if it’s small amounts of like, you know, I, my father-in-law, umpires, softball, and baseball during the spring, like, that’s his, he’s in his seventies and he does that. And I don’t know how to think he makes a couple thousand bucks doing it, maybe, but that’s, you know, that’s a bunch of money that he doesn’t have to have saved in his investment account to pay that $2,000 or $3,000 a lot enough to put gas in the car for the year. [00:23:23] Speaker 2: So don’t underestimate that. [00:23:25] Speaker: My father-in-Law found out, uh, if he was a bus driver for the local school district, he would get health benefits. And he had just a year and a half to go. And not only did he get paid, and not only did he get to yell at kids, but he also, oh, bonus, it’s just amazing. He, he also pitched himself every day. [00:23:44] Speaker: I’m sure. Yeah. Health insurance covered, got paid, and got to yell at kids. Don, I wanna come to you for number three here before we go to the break, because this has Don McDonald written all over it. Number three is buying predictability. And Jonathan writes, where will we get our retirement spending money could either come from selling assets or home stocks, bonds cashing out part of a savings account or via regular income. [00:24:08] Speaker: It sounds like Donny’s talking about your favorite product. Do do, do you hear me baiting Don McDonald? Yeah, it sounds like he’s talking an are annuity. Are you me With annuity? He’s talking annuity. Don [00:24:17] Speaker 4: annuity. [00:24:18] Speaker: It’s like red meat to Don McDonald. [00:24:20] Speaker 4: You know, it depends on the kind of annuity. If you were to say index annuity indexed annuities will just. [00:24:27] Speaker 4: Throw me into a tizzy, but an and I wanted immediate annuity. See, I just wanted to see it, Don. Oh, I hated indexed annuities with a white hot passion. The commission kind of annuity though. The commission is so great, Don, what’s not to like? Oh, I know. Tom and I sat down and did the numbers on our firm, and if we were just selling index annuities, we’d all be rich. [00:24:44] Speaker 4: We’d both be worth like eight figures, nine figures. Yeah. You wouldn’t have to work again [00:24:48] Speaker 2: just one time. [00:24:49] Speaker 4: Just sell ’em all. Yeah, just that one commission client. [00:24:52] Speaker 2: Be damned [00:24:52] Speaker: Don. Client be damned. [00:24:53] Speaker 4: That’s right. Oh yeah. That’s the attitude of most of the industry, dude. It is. But okay, let’s talk about immediate annuities for a minute because, and I think they’re rare cases where somebody must have absolute certain income for the rest of their life. [00:25:08] Speaker 4: They serve a useful purpose as long as people understand what they’re getting into. When you get an immediate income annuity, you are totally, absolutely irrevocably giving up a huge chunk of change. If you do the math, if you live into, you do it when you’re 65. It’s not until your early to mid eighties that they actually start paying you anything on your investment. [00:25:35] Speaker 4: They can pay you for that first 16, 17 years depending on what the rates are, 15 years, totally out of your principle, and never touch a penny out of their pockets or out of their investments. So you’ve gotta remember that, that they’re not giving you anything. And these seven or 6% returns they’re quoting, those aren’t returns on your money. [00:25:54] Speaker 4: That is partially return of your money. As long as you understand those things, I’m good with it. You wanna see the dogs [00:26:00] Speaker: again or the ponies, right? Smoke or the mirrors? Which one do you want? The smoke [00:26:04] Speaker 4: or the mirrors? I prefer the ponies ’cause I got dogs. So show me the ponies. [00:26:08] Speaker: og. I think it’s predictability though. [00:26:10] Speaker: Also says maybe doing some homework ahead of time for our stackers that aren’t retired yet on your social security options. And Medicare I think is probably your. A one homework assignment. [00:26:19] Speaker 2: I mean, there’s some influence that you can do with that, right? Like if you are a business owner, you can, uh, somewhat control your income perhaps, and you can decide how you want that taxed, and that kind of downstream affects your social security. [00:26:34] Speaker 2: I don’t think that there’s a lot of people who are going around, you know, asking their boss for a raise so that their social security benefits are a little bit higher in the future. That’s kind of, uh, item number 600 probably on the list. But recognizing that there are different timeframes and there’s an endless debate of do I take it at 62? [00:26:52] Speaker 2: Do I take it at 67? Do I take it at seven? Which one does my spouse or partner take his or hers? And, you know, we’ve got all these different situations with previous marriages and stuff like that. There’s, there’s a lot of options. I hate the fact that people come out here and just say, well, the only best way to do it is to wait until 70, or the only best way to do it is. [00:27:13] Speaker 2: Take it at 62. Look, at the end of the day, it’s what’s best for you. Like you have your health needs, you have your life expectancy, and you know what’s going on in your family and that sort of thing, and that’s gonna drive a lot of your decision. You have your money, right? If you’ve got assets piled up elsewhere, well then the risk of waiting on social security goes down a little bit. [00:27:33] Speaker 2: If you’re, like Paula said, if you’re kind of forced into retirement and you are like, ah, crap, I needed a few extra years. Maybe the fact that you have access to social security at 63 and a half will be the difference that makes it so everybody’s gonna be unique about this. But I think knowing that you have different outcomes and working through what that looks like, I think is really, really important. [00:27:53] Speaker 2: And knowing how taxes work, golly, you get to it, just has such a big impact. And so many, we talked a couple weeks ago about. The taxation of your Medicare, you know, if you have a good year of income in retirement, right? How that, you know, how that affects it. Irma. Irma, good little Irma. Good little Irma. And, um, you know, so many people are surprised by that. [00:28:13] Speaker 2: So there’s a gimme a gotcha. Everything. So, or just buy a bunch of annuities like Don wants you to do and, and you’d be fine. So [00:28:20] Speaker 4: Josh’s point about these absolute answers, like it is absolutely best to have an annuity. It is absolutely best to take Social Security at 70. The correct answer is, and this is one of the problems with our industry, the correct answer for everybody is it depends. [00:28:35] Speaker 4: Hmm, yeah. It always depends. My [00:28:37] Speaker 2: favorite thing, Don, is when people say, should I do a Roth 401k or a traditional 401k? And I’ll go, uh, it depends. I don’t know what are tax rates in 40 years? I mean, if you can gimme that bogey, I will a hundred percent be able to get you. If you know the future, we can tell you exactly. [00:28:55] Speaker: Well, I’ve got kind of a philosophical, uh, two-parter for you. How important is predict? Predict how important is protecting your predictability? Say that three times for your sanity. Just the sanity of protecting that predictability of money coming in. Is it better to have something where it’s an automatic check every month? [00:29:14] Speaker 5: You remember earlier when you were talking about not taking on more risk than necessary? Are you assuming that, I can’t think back 20 minutes that I’m that old Paula. You think my age has advanced that far? He [00:29:25] Speaker 2: took his prevagen today. Paula, don’t worry. We watched him. [00:29:29] Speaker 5: So I was thinking during that conversation that what you were talking about was. [00:29:36] Speaker 5: There’s risk requirement. And then in addition to risk requirement, there’s also risk tolerance, which is psychological and risk capacity, which is logistical. Right? Right, right. Yeah. And so to your question about the predictability, the importance of predictability in a person’s own life is probably going to be a reflection of a combination of that tolerance, you know, volatility tolerance, which is psychological and volatility capacity, which [00:30:06] Speaker: is logistical. [00:30:08] Speaker: I think some of this people achieve right? By, by paying off mortgages, I mean, it’s paying off your mortgage a piece of this, uh, protecting your predictability. [00:30:18] Speaker 5: Absolutely. I think lowering those fixed monthly bills, again, going back to what we were talking about at the beginning, lowering that floor, the smaller your required spend per month, the, just the more flexibility that you have. [00:30:33] Speaker 5: And so if you. In particular, if you are in an unpredictable situation, again, maybe because of your health, maybe because of your wants, but if you are in what is otherwise an unpredictable situation, some people will choose to counterbalance the unpredictability of other aspects of their life by lowering that floor. [00:30:53] Speaker 5: But again, it totally is, A lot of it is so psychological. Some people thrive on the not knowing and the excitement that comes from that and the creativity that, that forces. [00:31:06] Speaker: I love how know yourself enters into the financial plan as, as much as anything else. So, so great. We have coming up in the second half of this discussion, we’re gonna talk about fending off inflation, cushioning, crashes, and, uh, protecting the long game, right? [00:31:21] Speaker: Uh, the long end to our game. But before we do that, at that waypoint of every Friday episode, we have this amazing trivia contest between our three frequent contributors, OG Paula, and my mom, who contributes by letting us use her basement. And so Don mom is never coming down to the basement. She doesn’t like the stairs, so you’re playing on behalf of mom, which means good news and bad news, my friend. [00:31:44] Speaker: Which would you like? Oh, no. You want the good news or the bad news? [00:31:47] Speaker 4: Oh, uh, no. I, I, I love starting with the bad news because then I can feel better later. [00:31:51] Speaker: Well, the bad news is you’re in last place. Uh, mom’s got, I know mom’s [00:31:54] Speaker 4: got five. I’m always [00:31:56] Speaker: there. Somehow Paula has six. I have no idea how then OG has six and because OG was ahead of Paula last year, OG will guess first. [00:32:06] Speaker: Paula will guess second. And Don, the good news though is because you have five and they have six, not only with a wind today, can you enter mom into a tie, which she’ll be forever grateful. Number two though, is you also get to guess last, which is great [00:32:21] Speaker 4: cookies. But do I get cookies? I’ll leave [00:32:23] Speaker: that up to [00:32:23] Speaker 4: her. [00:32:23] Speaker 4: Is she gonna bake cookies if I get her to six? [00:32:25] Speaker: Well, last time it was brownies and I’m not sure that really helped with the scoring or your [00:32:29] Speaker 4: Oh yeah, that was, well those brownies, it’s a [00:32:31] Speaker: whole different deal there, dude, but, [00:32:33] Speaker 5: but those brownies are the reason, I assume you can’t remember what we said funny minutes ago that that might be why Paula [00:32:39] Speaker 4: mom stop baking up there, [00:32:40] Speaker: that that might be why Paula loses every week. [00:32:44] Speaker: We, we’ve got, we’ve, but not this year. Something’s going on. Doug, you’ve got the question so we can get a winner. Thought [00:32:51] Speaker 3: you’d never get to me, Joe. Hey there, stackers. I’m Joe’s mom’s neighbor, Doug. On this day in 1966, the Miami Marlins beat the St. Petersburg Cardinals in the longest. Uninterrupted professional baseball game in American history, lasting an incredible 29 innings. [00:33:12] Speaker 3: The game went on for a whopping seven hours, ending around two 30 in the morning with a final score of four to three for about one run per hour. I score more than that in the average hour, if you know what I mean. What I’m saying is I’m really good at Fortnite. Many restless fans left mid-game to get drinks at a local bar and ended up picking up a shift at the bar. [00:33:38] Speaker 3: The people that left didn’t miss a thing either. The 12th inning began an astounding 17 inning streak of neither team scoring. That’s gotta be where the word pointless comes from. Today’s trivia question is, in the year of the longest, uninterrupted game, 1966, what was the average price of a ticket to a major league baseball game? [00:34:02] Speaker 3: I’ll be back right after I ask the kids across the street how much they typically score. Gotta make sure they’re not gaining ’em. [00:34:10] Speaker: That might not go well. But, uh, we will let you do that while we collect answers for you. Doug. We get to start with OG 1966, the average price of a ticket to a Major League baseball game. [00:34:24] Speaker 2: Well, the only frame of reference that I have was a trip to Disney in 1983 for, for a family of four, and it was a, uh, blistering $50 and my dad was not impressed. He thought that was ridiculous and, uh, felt we should probably go home. So I’m gonna go backwards from there. Average baseball game, I mean, probably let’s go. [00:34:51] Speaker 2: Uh, five and a quarter. $5 25 cents [00:34:55] Speaker: for an average ticket. $5 and 25 cents. Paul, does that sound good to you? [00:35:00] Speaker 5: Man, if I knew what a baseball ticket today cost, I could try to reverse engineer that with inflation. But obviously I have no idea what a baseball game today costs. [00:35:11] Speaker: Uh, what do you mean? Obviously people don’t know that. [00:35:13] Speaker: Maybe you go all the time. I think, I think this entire audience knows that. [00:35:20] Speaker 5: I think anyone who has listened to any number of Stacking Benjamins episodes could probably guess that about me. [00:35:26] Speaker: Maybe, maybe not up on the Yankees this year. [00:35:28] Speaker 5: I know sports about as well as I know movies, which is to say not at all, [00:35:33] Speaker 4: thank goodness she knows money. [00:35:34] Speaker 5: Yes, exactly. So, one thing I got, uh, except in this case, because I don’t know the amount, but I’m going to, you know, I’m gonna leave some space, uh, I’m gonna guess a dollar and 75 cents. [00:35:51] Speaker: A dollar and 75 cents. So Don, there is a wide, uh, field goal in between those. Yeah, there’s a [00:35:58] Speaker 4: window in, in the middle. Yeah. [00:36:00] Speaker 4: Um, it’s funny ’cause I’m, I looking around, um, I think I’m probably the only one old enough to remember this time as ma fact. Matter of fact, in 1968 I bought, my grandmother took her to a Denver Broncos, Houston Oilers game. And I don’t remember what the ticket was, but it would be obviously more expensive. [00:36:20] Speaker 4: I was going to go with, this was my original thought, so I’m gonna stick with it. Average cost, major league baseball game, $2. $2. We got five 20 and that’s based on. Based on what I remember, I was making as a paper boy in 1968 to buy a ticket for my grandmother to go football, to go to a football, football game. [00:36:44] Speaker 4: It couldn’t have been the football game, couldn’t have been more than 10 bucks based on the, you know, 50 cents an hour I was making or whatever it was. [00:36:50] Speaker: We got 5 25 from OG dollar 75 from Paula, $2 from Don, who’s right. We’ll let you know in just a minute. OG opened this, uh, shindig up at $5 and 25 cents. [00:37:03] Speaker: Paula and Don both said, nay. Nay. You might be way too high. You think you’re too high? [00:37:09] Speaker 2: You know, I, I, I do. I I don’t really have a frame of reference from 19. I should have asked you. Oh, like what? [00:37:20] Speaker: Yes, I was, uh, in 1966, I had, well, I, I would say, uh, Don that I was born probably, I. 10 months before you took your mom to that football game. [00:37:33] Speaker 4: You were a little guy. I [00:37:34] Speaker: was, I was, I was a little guy. I was a gleam in my parents’ eye in 1966. Paul, a dollar 75. Don liked it and he’s got some, he’s mm-Hmm. He’s got a real anchor. Not the one OG tried to plant. So you gotta be feeling pretty good. [00:37:48] Speaker 5: Good. I’m, I am, I’m feeling good. I have a, a wide range of answers that would all fall into a, around what I guessed. [00:37:56] Speaker 5: So Yeah. I’m feeling good about my guess. I think I could possibly pull into first year. [00:38:00] Speaker: I gotta say, Paula, I’m pulling for you. ’cause this miracle continues throughout the year. This would be amazing. This would be great. And Don, two bucks. [00:38:08] Speaker 4: Two bucks. Two buck Chuck. Feeling good? Uh, yeah. I am. I, I actually am. [00:38:12] Speaker 4: ’cause I’ve got that nice range above two bucks. [00:38:14] Speaker: You do. You got some of the upside. Well. Let’s see. It’s no longer gonna be about feeling in a second. It’s gonna be about somebody’s high fiving themselves, Doug, who’s winning this thing? [00:38:26] Speaker 3: Hey there, stackers. I’m self-appointed neighborhood scorekeeper and the Rain Man of baseball, Joe’s mom’s neighbor, Doug. While the longest uninterrupted professional game of baseball went on for 29 innings, the longest professional game ever went on for a remarkable 33 innings, but was played over three days in April and June of 1981. [00:38:50] Speaker 3: Sounds like a date I had once, one minute year feasting on endless shrimp at Red Lobster. And the next thing you know, you’re waking up in the bed of your own El Camino in a target parking lot covered in Cheddar Bay biscuit crumbs. It was frightening. Today’s trivia question is, in the year of the longest, uninterrupted game, 1966, what was the average price of a ticket to a major league baseball game? [00:39:13] Speaker 3: The answer with entry to a professional baseball game, hovering around $53 today, watching your favorite team play live can add up to a pretty pricey day hot tip. If you’re looking for a day at the ballpark without breaking the bank, you can watch me play every Sunday here in Texarkana. I may not be the best player, but I look great in a uniform. [00:39:35] Speaker 3: Nope, nobody’s agreeing with me. And you can see, you can, you can see me for about the same price as you’d have paid to go see a pro game in 66. But where does that leave our contestants? Well, here’s what I can tell you. I can tell you that OG was off by $2 and 39 cents. Paula was off by a dollar 11. And Mom, Don, Don. [00:39:59] Speaker 3: Mom, mom, mom Don. I like Mom, Don. He was off by 86 cents because the correct answer is $2 and 86 cents. Congratulations, mom, Don [00:40:10] Speaker: Don McDonald brings home the win and we have a, I got something right? We have a three-Way tie now three-Way tie, it’s a threeway and we’re almost halfway through the year. Love you mom. [00:40:20] Speaker: It’s fantastic. Maybe she will give you some of those brownies. Now, Don, [00:40:24] Speaker 4: it’s been a long time since I’ve had those brownies [00:40:26] Speaker 3: by, by the way, even though it sounds awesome. $2 and 86 cents in 1966. That’s equivalent to about $27 today. So yeah, prices have gone up, but it’s not like it was pocket change in 66. [00:40:39] Speaker 3: I mean, it was still 27 bucks on average to get in. So it still something that’s still a lot of money [00:40:44] Speaker: for a paperboy, Don. [00:40:45] Speaker 4: Yeah, it was. I had to throw the Houston Chronicle for a full year to take her to that. That Houston Oilers game. Did [00:40:53] Speaker: they win? [00:40:54] Speaker 4: No, Broncos did not win. Oh, no. I was a Denver Broncos fan. [00:40:57] Speaker 4: So was she. We, we used to watch it together when I was a baby, practically, and she wanted to see the Broncos. I took her and they lost. [00:41:03] Speaker: Well, luckily you weren’t a Detroit Lions fan like I was. ’cause that’s been a long, painful process. Brutal. Until last year. But we’re on our way, Don. [00:41:10] Speaker 2: Yeah. It’s way better to be up Houston Oilers fan. [00:41:12] Speaker 2: Yeah. [00:41:15] Speaker 4: Who are they now? Oh yeah. They’re the Titans, right? They’re the Titans, yes. [00:41:18] Speaker: Yeah, yeah. All right, time for our second half of this discussion about the seven dimensions we should think about when thinking about retirement. And this is brought to you by deposit accounts.com. You know what happens, Paul, when you go to deposit accounts.com. [00:41:31] Speaker 5: You find out that the deposits that are currently uh, in your portfolio are nowhere near the best in class, [00:41:36] Speaker: nowhere near most probably. Nice job@depositaccounts.com from LendingTree, you could compare more than 275,000 deposit rates from over 11,000 banks at credit unions. And guess what, Paul? You can pitch yourself ’cause it’s for free savings. [00:41:49] Speaker: Account rates. As we record this a little before, you can check out the current rate just by going to deposit accounts. ’cause all I did was just went deposit accounts.com and here it is. National average on a savings account right now, 0.52. That’s bumped up a little bit from last week. Top 1% though down a little bit from last week, 4.97%. [00:42:07] Speaker: But huge difference if you’re in the top 1% on savings accounts than the national average. How do you find out about that? See these checking money markets? Just go to deposit accounts from LendingTree deposit accounts. Compare. Ditch switch and save. Alright, let’s jump back into this wonderful piece by Jonathan Clemens, who’s, I think, uh, knocking it outta the park again, as are our contributors discussing it. [00:42:30] Speaker: But next on this list from Jonathan Don is, uh, let me scroll down. [00:42:37] Speaker 4: You mean you don’t have a newspaper in front of you? I don’t. What’s up with that? Hard to believe. [00:42:40] Speaker: What’s up with that? Uh, cushioning crashes when people get into retirement. Retirement’s a long time, Don, but I think everybody worries when they get there. [00:42:50] Speaker: They’re like, what if I put my money in? It crashes right away. How do you, how do you think mentally through the fact that I might be living through a few crashes during my retirement years? [00:42:59] Speaker 4: Well, that’s the reason why we see the popularity of these target date funds, these target retirement funds because they build a portfolio that grows increasingly more conservative as we age. [00:43:12] Speaker 4: So you’re gonna, you’re going to generally want to have a less volatile portfolio, and that’s really, as Paula mentioned earlier, volatility is what risk is all about. If you build the right portfolio, you no longer have to worry about risk. Risk, the kind of risk where you like, like Crazy Kitty, or Hello Kitty, or Mad Kitty or Roaring Kitty something Kitty. [00:43:33] Speaker 4: You know, all the kitties something. The kitties. You don’t have to worry about losing everything if you build a really diverse portfolio. So as you get older. You will generally want to increase the, the portion of your portfolio in very stable bonds. Not volatile bonds like junk bonds or high uh, long maturity bonds. [00:43:53] Speaker 4: But again, it comes back to the risk profile of a person. If you are in retirement and you don’t need to have a lot of risk to keep going through life, then you don’t wanna have a lot in the stock market. And if you have 20 or 30% of your portfolio in the stock market, historically, worst case scenario is not a crash. [00:44:15] Speaker 4: It’s a, it’s a stumble in the market. It’s a, you know, 10, 15, maybe 20% decline, not a 50 or 55. [00:44:24] Speaker: Oh gee, I know you’ve got a different way that you like to mitigate that risk. We, we call it, [00:44:28] Speaker 4: I knew you were gonna pick on me for this. [00:44:29] Speaker: We, we call it an indexed annuity. Tell me about that. No, I’m kidding. [00:44:34] Speaker 4: I gotta go, [00:44:35] Speaker 2: gotta go [00:44:37] Speaker: did. [00:44:37] Speaker: No, that is not it. You get [00:44:38] Speaker 2: all the upside and none of the downside and we made [00:44:41] Speaker: up our own index. [00:44:42] Speaker 2: Kidding. [00:44:43] Speaker: Jonathan Clemons says, you know, if we get a year like 2022, you can have what Don’s saying, stocks and bonds, and they both got humbled. [00:44:50] Speaker 2: Yeah. So I think that the biggest risk in retirement is running outta money. [00:44:55] Speaker 2: And I think the easiest way to run outta money is to have as much stuff guaranteed as possible. You know, you look at the thing that got you here was owning companies and the compounding value of it over, you know, your entire life of growing your portfolio. And right at the peak when it’s as big as it’s gonna get, I think it’s foolish to then just say, nah, I don’t need any more of that. [00:45:18] Speaker 2: There’s a balancing act there because for a lot of people like getting just their lips above the waterline in terms of retirement, it’s kind of this real treacherous spot because any amount of decline, whether it’s 2022 or something really catastrophic, like 2008 was 2000, you know, eight, nine, you know, that can cause a, a, a really big swing in terms of your livelihood. [00:45:40] Speaker 2: You know, like I gave that example before you go on vacation on January 1st, 2008, you come home on December 31st, 2008 and go, Hey, how did my money do? It’s like, well, it’s than half. You got half of it. But what we’re trying to avoid, if you kind of peel the away, the layer of the onion here, I think is we’re trying to avoid taking money out of the market when it goes down. [00:46:00] Speaker 2: And the way that you can avoid that is by having an adequate amount of reserves to withstand those declines. In my mind, you’ve put money in every single month for your entire life. You should just continue to take that money out in the same form that you put it in. So you know, you need 5,000 a month to live on and you just sell 5,000 a month outta your portfolio with the stipulation that you have a big giant cash reserve. [00:46:24] Speaker 2: And you know, when we’re, when we’re growing up, we talk about cash reserves of being three months or six months, we’re like, wow, I’ve got a six month cash reserve. I’m talking three years of cash reserve. And I think Don and I are saying the same thing, just a different way. His way of having, you know, being more conservative is kind of changing the asset allocation. [00:46:42] Speaker 2: Mine is saying, well just have a bunch of cash and the rest be invested as per your normal, you know, asset allocation. And that’s another way to kind of even out the volatility because what you do then is you just live on the cash and allow the market to recover. We’ve, we’ve seen every time, no matter what’s happened in the history of mankind, the stock market has come back. [00:47:03] Speaker 2: The thing we need is time. And if you can give yourself enough runway to just go, all right, the market’s down 20%, I can still live my life for three years, four years. If you wanna be ultra, ultra, ultra conservative, five years and say, I’ve got five years of runway where I can just let this portfolio just do what it does. [00:47:21] Speaker 2: Just look at every time period that the market’s gone down, there’s been a big recession or a big market decline, and then go, what did it do five years later? You’re always okay. The problem is, is that if you don’t take that extra cash, if you don’t have that extra runway, then the market goes down by 20 or 30% or 40 or 50 or 57, and now you’re taking money out ’cause you still have to live on it. [00:47:45] Speaker 2: You know, you had a million bucks, now you have 600,000 and you’re taking another 40,000 out now to live for this year. Yeah, and I think I misspoke [00:47:51] Speaker 4: a little bit when I said Bo, I meant really fixed income that a big chunk of your portfolio is fixed. Fixed income. Yeah, sure. Fixed income bonds, which could be CDs, which can be all kinds of things. [00:47:58] Speaker 4: Absolutely. Yeah. Basically the same thing. You need to have a place where you feel like, I’ve got money if the stock market goes down to l and a in basket. [00:48:05] Speaker 2: Yeah. And the more conservative you wanna be up to a point, right? You could have all of your money there. Yeah. You don’t want that. But then I think you’re giving up, you know, opportunity long term. [00:48:13] Speaker 2: But I think that the, the idea that we want to get more conservative as we get older. It really rubs me the wrong way because we have such a great opportunity to continue to grow your portfolio, to keep up with the rising costs and also benefit the people around you with a little asterisk of like, if you’re just like, just barely there, it’s really treacherous because one little, you know, not even a big wave. [00:48:37] Speaker 2: Yeah, just a little bit of extra water in the boat and you sit good wreck it. And that’s why I hate, like, I hate those, you know, like, oh, as soon as I get 25 x my savings, I’m good. It’s like, or my income, you know, whatever the, the fire like back of the envelope calculation. This all started at the very beginning, right? [00:48:52] Speaker 2: We’re like, retirement is personal. You have to figure it out for yourself, figure based on your needs and goals and timeframes and so on and so forth. Not just like a, you know, back of the envelope calculation. [00:49:01] Speaker: Paula, the place I wanna uh, hear from you on this is, you know, afford anything is always about thinking about your thinking, right? [00:49:08] Speaker: How do you think about your thinking? And certainly the thing that you and I and Don and OG see all the time. Is not the strategy blowing you up, you blow yourself up because of this worry, right? This worry around crashes. What do we do on the mental side to put the girders up, to put that wall up so that, you know, 2007, 2008, 2019 87, uh, 1923, whatever. [00:49:35] Speaker: I mean, pick your, pick your downturn. 1970s sucking sound. How do you protect mentally against you blowing up your own plan, even if your money’s in the right place. [00:49:46] Speaker 5: I think you alluded to the answer within the question, which is you be a student of history because as a good student of history, when the next thing comes, you recognize it as simply part of a, a long historical pattern of the stock market generally going up over time, but occasionally punctuated by these brief moments of suckiness. [00:50:12] Speaker 5: Right? And so the next time a brief moment of suckiness happens because you’ve studied history, you see it for what it is in, in the big picture. I think also the, the other portion of that that is sort of the premise of my answer is zooming out and taking a look at the big picture. Because it’s very easy to catastrophize when you are taking a short term view. [00:50:34] Speaker 5: But the more you take that 30,000 foot view, the more that you think long term, the easier it is to, uh. Again, to have context around what you’re seeing. And you can do that at any age. So even if you are, you know, if you are 65, you can still take a 30 year view because you hope that you’re gonna live until you’re 95 at least, or a hundred. [00:50:58] Speaker 5: And so you’re hoping to be able to blow out some birthday candles 30 years in the future. [00:51:04] Speaker: I think the, the hardest thing to stop yourself from saying, and I heard this all the time back when I was a financial planner. Is this time’s different. Paula, this time’s different. I mean, those were all, those times history’s cute and all, but this time is different. [00:51:15] Speaker: But you don’t understand this is the real thing. It’s going down Paula. Right. [00:51:18] Speaker 5: You know, I, I’ve heard that many times. I, I remember hearing that a lot. Um, at the start of the pandemic in particular. This time it’s different. We’ve never had something like this before, despite the fact that there was a pandemic in 1917 as well, you know? [00:51:31] Speaker 5: But this one is different. [00:51:32] Speaker 2: Black Plague, everybody. Come on. Oh, I’d forgotten about that one. [00:51:36] Speaker 5: Yeah. 1917. Not really [00:51:38] Speaker 2: sneaky. All [00:51:39] Speaker 5: right. But if you are tempted to believe that this time it’s different because this time we have the internet. This time we have ai this time, this time. Then the other thing that can be helpful is looking at underlying fundamentals, because even when there is a moment of volatility in the US, we have some very, very strong underlying fundamentals, long-term underlying fundamentals, and that. [00:52:04] Speaker 5: Paints a very bullish case for the future of the stock market in the us. [00:52:10] Speaker: I like that because as you know the fundamentals and you know that this isn’t voodoo, I mean, the big phrase that always made me roll my eyes as you’re talking about what makes you roll your eyes was when people are like, well, I don’t really play the stock market. [00:52:20] Speaker: I’m like, and we’re not going to a casino. It’s not playing. We’re not playing anything. Fending off inflation is his fifth dimension here. When you think about retirement, Don, when we say the word inflation, now obviously people are thinking about, you know, if, if I were to ask you this question five years ago, people were like, what? [00:52:36] Speaker: Inflation? Who cares? Now everybody’s like, yeah, totally get it, but what do we need to know? We’re putting our portfolio together about inflation. [00:52:43] Speaker 4: Well, you can’t just manage your portfolio thinking about inflation. And the other thing is, is when we have it, we think about it, it becomes front of mind, and we start looking for strategies to compensate. [00:52:55] Speaker 4: And some of the strategies are just stupid. Like gold, just stupid. A terrible, awful, horrid investment that has never done anything for anybody. Any time done. But hold [00:53:05] Speaker 3: on, hold on. Tell me how you really feel. Yeah. We gotta find guests who are a little bit more on point. [00:53:09] Speaker 4: This, I know I hate gold, but here’s the thing. [00:53:12] Speaker 4: What we forget when we have a portfolio that is balanced between stocks and fixed income or stocks in our emergency pool, or however, whatever we call it, when you have a massively diversified portfolio of stocks, what are you investing in the economy of the world when prices rise, what do those companies that make up the economy of the world do with their prices? [00:53:36] Speaker 4: They raise them. Stocks have historically been a wonderful inflation hedge in and of themselves given time day-to-day stocks are crazy making. Again, look at GameStop, but over a long period of time, you’ve already got an inflation hedge in your portfolio. All you need to do when you’re making your plan is factor it into your income needs possibly, but trying to invest for it. [00:54:04] Speaker 4: If you’re investing properly, you probably already are. I. [00:54:08] Speaker: I gotta pause for a second. ’cause I think OG wants to come over and give you a hug. Done. I think he, [00:54:14] Speaker 6: I [00:54:14] Speaker: think, I think there’s, thank you. I think there’s an I love you man, coming, uh, from OG Paul [00:54:18] Speaker 2: stocks all the time. [00:54:19] Speaker: Yeah. [00:54:19] Speaker 2: It’s like a built-in self-correcting system. [00:54:22] Speaker 2: It’s like, everybody worries, and, and you said it perfectly, Don, it’s like, oh my gosh. What happens if the prices go up? Well, you’re the owner of that company. You want that to happen. You [00:54:30] Speaker 4: make more money, you dump it. What [00:54:32] Speaker 2: if, what if Apple raises the price of their iPhone? Well, you own a, you’re a part owner in that. [00:54:36] Speaker 2: You’re gonna profit from it, you know? ’cause guess what? All the smart people in the world, they all work at these companies and they’re all, their pay is tied to the performance of the companies. And they wanna make money too. So guess what they do? They go, ah, you know, cost us more to make this. You know what we should do? [00:54:47] Speaker 2: Charge a little bit more. Why is that? Oh, so we have the same profit, so I can make my bonus this year. Alright, cool. Are you good with that? I’m good with that. Alright. We gotta split it with all the other owners. Yeah, that’s cool. I don’t think they’ll mind, it’s like, it’s like self-fulfilling prophecy. It works out. [00:54:59] Speaker 2: It works out. Like, [00:55:00] Speaker 4: I mean that’s the problem with this whole thing that we talk about OG, is that this, my favorite thing is if you’re investing, right, everything you do is sort of duh. Be interesting is a duh thing. Should [00:55:14] Speaker: be, oh my god, Paul, the bromance going on right now. I gotta come to you. So I get them to stop hugging each other. [00:55:18] Speaker 5: Oh, it’s beautiful. It’s beautiful. I love, love [00:55:23] Speaker: it. It’s totally beautiful. I love, love. That’s great. Number six on Jonathan’s list, protecting the long end. And that is what if we outlive our savings? Now this is a big fear, especially those people coming in and hopping. I, I don’t think there’s a person alive who doesn’t think about this possibility. [00:55:41] Speaker 5: Mm-Hmm. Yeah, it’s, I’ve mentioned this before, but financial planning is the only arena in which fear of having a long life is a thing. Right. Bad. Right. There’s even, what if I live forever? There’s even a jargon term for it. It’s called longevity risk, which is just the fear that you’re gonna live until a long and healthy and happy life. [00:56:02] Speaker 5: Right. That would suck. Yeah. Naturally. Well, okay. Again, medical bills are an exception, but generally speaking, when it comes to other discretionary expenses, naturally, as you see your. Portfolios start to dwindle. As you see your assets start to dwindle, your lifestyle begins to adjust. And so you might, maybe at the age of 70, you’re not willing to downsize to a smaller home, but maybe at the age of 85 you change your mind and you realize that this home is a a little bit too big. [00:56:37] Speaker 5: Or you know, even though you love the home, it just doesn’t really make sense for you anymore. Right? So there are other elements of your life that you adjust as the size of your portfolio changes. A lot of people have a fear of outliving their money, but how many people actually do what we see from the data is that more times than not, people have the opposite. [00:57:02] Speaker 5: You know, people end up having. Money. Uh, they people don’t die with zero. They die with some number that is greater than zero, which they then pass on to heirs and beneficiaries or, or we [00:57:13] Speaker 4: have kids and then they take care of us. [00:57:15] Speaker 2: I’ve asked my daughter if she’s gonna take care of me. She just looks at me. [00:57:18] Speaker 2: She goes, no, no. I took care of you child. She’s eight though. Like, when, when do I get to have my diaper changed [00:57:25] Speaker: to gotta play that card harder. Archie. Yeah. Don, let’s just get R right at it. Part of what Paul is saying, and she said a lot more than this, but just very succinct, does this ever actually happens? [00:57:36] Speaker: Does this ever actually happen that somebody dies with zero? Well, [00:57:39] Speaker 4: I’m sure we get sure. When they die with debt, it happens. However, this is why I am such a proponent of, I’m gonna give credit. Paul Merriman was the guy with whom I originally worked these numbers. We look back at a flexible withdrawal strategy. [00:57:56] Speaker 4: Monte Carlo going back, I. Decades back to the seventies, and almost any portfolio works except for a hundred percent fixed income. Almost any portfolio works. If you set up a 5% flexible withdrawal strategy, as Paul has said, we adjust our lives to what our income is. If you were to do that over the co over any period of time in the past, what that would’ve done, you would’ve never, you couldn’t have run outta money because you always had, if you waited long enough, the market coming back and refilling your portfolio to some extent. [00:58:31] Speaker 4: So it’s, it’s, it’s close to impossible to run outta money. It, unless the stock market falls continuously over your life, in which case the world is ending and you’re in bigger trouble than dying without money, much bigger [00:58:45] Speaker: problems. That’s the one strategy where gold might help you for a little while. Don, [00:58:49] Speaker 4: no, no, no. [00:58:50] Speaker 4: Costco, the big, uh, gear worth of food. Two or three years of that and guns, because my, I’m coming after your food if you don’t have a gun, and I do. So [00:58:58] Speaker: go take over a Costco and, uh, food, [00:59:01] Speaker 4: food and guns. That’s what you want. Grab, [00:59:02] Speaker: grab the guns. [00:59:03] Speaker 4: That’s my incredibly scary right wing strategy on that one. [00:59:06] Speaker: Paula. [00:59:07] Speaker: Paula, you already, you already referenced number seven, which is when all else fails, we might have to spend our home equity, might have to use a reverse mortgage. You kind of, uh, talked about that. You just start, uh, jettisoning other stuff. Wonderful piece. I’ll link to it in our show notes page at stacky Benjamins dot com. [00:59:23] Speaker: Thank you, Paula, Don and OG for, for just a wonderful conversation on this. Let’s find out what each of you are doing. This. Fine. I don’t know, hallmark Holiday weekend. og. Uh, your kids, your kid’s not doing anything right. She’s not gonna take care of a year later. She’s not gonna celebrate Father’s Day with you. [00:59:40] Speaker 2: No. So it’s not a Hallmark holiday. It’s a real holiday. Our anniversary, I told you. Oh, it is. Your anniversary was listening at the beginning. Yes. And two. Plus another five. So 22 years of wedded bliss, 27 years of hanging out together. [00:59:58] Speaker: I thought I was gonna say 27 years total. [01:00:01] Speaker 2: Yeah. Well, no, that’s true. [01:00:02] Speaker 2: That’s what I was thinking was, I’m going, [01:00:04] Speaker 4: it was 27 years, but 22 we blis 22 were great. Which is good. That’s a good average. Yeah, [01:00:09] Speaker 2: exactly. It’s a every other year thing now. It’s, you know, but, uh, no, we’re traveling this weekend. We got, uh, we’re in high school graduation season, so we’re, we’re right at the age Oh yeah. [01:00:18] Speaker 2: Where all the nieces and nephews are graduating from the things. So we’re, we’re back and forth to Michigan. Uh, so this weekend we’re gonna Michigan to, to see my niece and her graduation party, and then, uh, awesome. Back to Texas and back up to Michigan again next weekend. [01:00:31] Speaker: We did a couple of those this year as well. [01:00:33] Speaker: Went to wedding first wedding I’ve gone to in a long time as well. It’s a lot of happy stuff. Uh, Paul, we’ll get to our guest of honor last Paul app pant. What’s happening at the Afford Anything podcast? [01:00:44] Speaker 5: So on the Afford Anything podcast, we’ve got a, a summer calendar full of great interviews. Michael Kitsis, who was on the show originally back in, never heard of him. [01:00:53] Speaker 5: I know, right? He was [01:00:54] Speaker 4: great in Batman. He’s not just everywhere. No. [01:00:58] Speaker 5: He was originally on the show in 2017 or 2018. We have a two hour interview with him. It’s not gonna air until the end. Uh, it’s, it’s gonna be a while, so it’s not gonna air until the end of summer. But that is going to be one of our most epic, it’s gonna be the epic end. [01:01:12] Speaker 5: He, he’s still talking episode. [01:01:14] Speaker: That’s right. Paula says five words during that interview. [01:01:18] Speaker 2: She just hit record and said, uh, Michael, uh, why don’t you tell us about something that you’re interested in? Record. I’ll be back, back in 45 minutes on Tuesday [01:01:26] Speaker: and don’t get me, don’t get me wrong. It’s all great stuff. [01:01:28] Speaker: But that dude Oh, it’s fantastic. Can bring it. Yes. He can bring it. [01:01:31] Speaker 2: He has some energy around his topics. Well, [01:01:33] Speaker 5: and he’s just, he’s so well-versed in, in, in the world of financial advising and financial planning. So. Lots of wisdom, lots of knowledge. [01:01:41] Speaker: Epic Michael Kites on the Afford anything. Yeah. [01:01:44] Speaker 5: Yeah. But that’s, that’s not gonna happen until the end of summer. [01:01:47] Speaker 5: I’m just putting it out here because, uh, it’s a big one. Putting the carrot out. Yeah. Dangling the carrot. I’m also, uh, also coming up, this is also end of summer, uh, the CEO of Yum Brands, which is the parent company of KFC. Taco Bell. [01:02:02] Speaker 2: Mm, taco Bell, pizza Hut [01:02:03] Speaker 5: and Habit, uh, burger Grill, co-founder and former CEO of Yum. [01:02:07] Speaker 5: Brands. You’re talking about the importance of fourth meal and a healthy diet. You don’t care Taco. So he’s the guy who, he created Crystal Pepsi back when he was at PepsiCo. So I opened the interview by talking about, by asking him all about Crystal Pepsi, and I closed the interview by telling him about how much I love the Mexican pizza at Taco Bell. [01:02:26] Speaker 5: So, uh, yeah, yeah. I ask him why Taco Bell didn’t perform as well as McDonald’s did, you know? Wow. Um, [01:02:32] Speaker: you ask him how many of those names on the Taco Bell menu are made up? Like, is there really? Was there a gordita before Taco Bell? I don’t know. I’m seriously asking. I don’t, [01:02:40] Speaker 5: I I don’t know. I don’t know. I I did not, I just, uh, clue the interview. [01:02:43] Speaker 5: I did not ask him that question. Well, it’s [01:02:45] Speaker 2: a Spanish word, long before it became a Taco Bell. That’s the female of, of Gole. Gord [01:02:49] Speaker: Gord and Gordita. Yes. [01:02:51] Speaker 4: Gordita. Gordita, you see? Yes. See, [01:02:53] Speaker: and that is, that is a summer of fun on the Afford Anything podcast. [01:02:58] Speaker 5: Yes. Yes. Those are both gonna be end of summer releases. [01:03:00] Speaker: Fantastic. Mr. McDonald, thank you so much for coming back. This is so fun as usual. Oh, [01:03:07] Speaker 4: my pleasure. Hey, you know, we don’t plan the head like Paula with our shots. It’s like, [01:03:11] Speaker: we don’t know. We’re just, we’re just taking the Airstream around. I can tell you. [01:03:15] Speaker 4: I’m gonna take the Airstream around in July, going from Florida to Seattle. [01:03:21] Speaker 4: Gonna have a little, uh, lots of, I’m gonna meet with people along the way. Just, you know, just one-on-one, not anything fancy. Come to the campsite, we’ll say hi. But I just thought of something when these guys were talking. Tom, my co-host is deserting me in my hour of greatest need going on a safari in Africa. [01:03:40] Speaker 4: Oh, and he’ll be gone. Three of our live Saturday shows that we do. So I have to do them by myself. So I thought to myself, I thought self, this is a great opportunity to get people to call the radio show on Saturdays. Oh, the 22nd, the 29th, the, the last two weeks of June and the first week of July weekend. [01:04:01] Speaker 4: Every Saturday we do a live show on the radio in Seattle. And you can call it at eight five five nine three five talk 8 5 5 9 3 5 8 2 5 5. So any Saturday, three to five Eastern, call me. Fantastic. ’cause Don’s lonely [01:04:14] Speaker: without you. [01:04:14] Speaker 4: Exactly. I’m gonna, Tom’s gonna be out there visiting lions and I’m gonna be fighting the financial battles here at home. [01:04:22] Speaker 4: That’s [01:04:22] Speaker: fabulous. I, uh, and talking real money wherever Finer podcast. Are found. [01:04:28] Speaker 4: Same place. Your podcast is all of the same places and the [01:04:30] Speaker: afford Anything show [01:04:31] Speaker 4: and the afford anything. Which my gosh, I was looking at the rankings. Paula, you are killing it. Oh, well thank you. Thank you. You are killing it. I, Stacking. [01:04:42] Speaker 4: Benjamins has slipped you though. [01:04:46] Speaker 5: Wow. Wow. Thank you. Thank you so much, Don. I’m [01:04:49] Speaker: so glad you had a really good last appearance here. Super. [01:04:52] Speaker 5: Well, you know, it’s fantastic. Well, you, if the Ford anything is killing it, it’s because every other episode we have this guy by the name of Joe Saul-Sehy, who joins us to antibodies. [01:05:03] Speaker 4: By the way, Joe, you’re still higher than we, are [01:05:07] Speaker: we going back to the Brownies reference? Is that what we’re doing? [01:05:09] Speaker 4: You know, I’m, no, yeah, you’re always higher than I am. [01:05:14] Speaker: All right, thanks everybody on YouTube for joining us. If you wanna hang out with us live, just, uh, you’ll find it, uh, the time we’re going live in the Facebook group or on our Facebook page at Stacky Benjamins or the Stacky Benjamins basement. [01:05:25] Speaker: So thanks to to all of you hanging out with us, everybody listening. Thank you so much. If you know somebody who’s not thinking about retirement enough, it’s great to forward this, uh, episode to them. But you know what the best part of this episode is, is when we do this, we ask Doug to summarize this. What do you think our biggest, uh, to-dos are now Doug? [01:05:43] Speaker: Well, Joe, I’ve [01:05:44] Speaker 3: got three of ’em. First, take some advice from this flash in the pan guy Don McDonald. Before you think about an investment strategy for retirement, make sure you determine your bare minimum risk need. Second, remember what Paula has said, unless you have your own neighbor, Doug, that you can extort into taking care of your home for you. [01:06:03] Speaker 3: You may have some domestic assistant expenses that you don’t have when you’re younger, but what’s the biggest to do? I gotta make it crystal clear to the guys in the league that I have no interest in going pro. I can’t be playing ball at 2:00 AM on a Saturday night. That’s the only time I can squeeze in my weekly mani-pedi, and full body wax session. [01:06:24] Speaker 3: Oh God. Thanks to Don McDonald for joining us today. You can find more from Don and his podcast at Talking Real Money wherever you’re listening right now. We’ll also include links in our show notes, you know where thanks to Paula Pan for hanging out with us today. You’ll find her fabulous podcast, afford anything wherever you listen to finer podcasts. [01:06:47] Speaker 3: And thanks also to OG looking for good financial planning. Help head to Stacking Benjamins dot com slash OG for his calendar. This show is the property of SB podcasts LC copyright 2024 and is created by Saul Sea. Hi, Joe gets some help from a few of our neighborhood friends. You’ll find out about our awesome team at Stacking Benjamins dot com along with the show notes and how you can find us on YouTube and all the usual social media spots. [01:07:17] Speaker 3: Come say hello. Oh yeah. And before I go, not only should you not take advice from these nerds, don’t take advice from people you don’t know. This show is for entertainment purposes only. Before making any financial decisions, speak with a real financial advisor. I’m Joe’s Mom’s Neighbor, Duggan. We’ll see you next time back here at the Stacking Benjamin Show.
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