From Saving to Spending: How to Master the Decumulation Phase

5.23.25: Audio automatically transcribed by Sonix

5.23.25: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Speaker1:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Speaker2:
Welcome to Money Matters with Mike, with your host, Mike Zeno. Mike works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you too. So now let's start the show. Here's Mike Zeno.

Speaker3:
What's up people? Welcome to the show where we dive into the strategies, the insights, and the tools you need in order to secure a confident and stress free financial future. I'm Mike Zeno, and my mission is to help you protect your nest egg, outsmart retirement risks, and live the life that you've worked so hard to achieve, whether you're nearing retirement or already enjoying it, we are here to guide you along every step of the way. And boy, do we have a lot of great information today to discuss on today's show. We're going to answer some common retirement questions and help you determine whether or not your investment strategy is age appropriate. As always, I have the distinct honor and privilege of being joined by the one and only my co-host and producer extraordinaire, Mr. Matt McClure. Matthew, how are you today, sir?

Speaker1:
I am doing great, Mike. You know, it just reminded me, as you were talking there about what's coming up on the show today, um, about being a kid and my mom telling me to act my age. So act your.

Speaker3:
Age. Right.

Speaker1:
Right. Exactly. Although there was one point in time, um, because I. My feet grew very fast when I was a kid. So there was one time where my shoe size was greater than my age. So I do think she told me to act my shoe size at some point in my life. But now it would be act your age, not your shoe size. But yeah, you know, it got to be age appropriate when it's talking about your investments or talking about how you how you behave in public so you don't get your mom yelling at you.

Speaker3:
You know that that is those are facts, right? Are you telling me, Matt, that you know, somebody who's 25 should not be investing the same way as somebody who is 75?

Speaker1:
I would I would imagine that that is going to be the case. Yes. Uh, generally speaking, unless, you know, you, um, know for a fact that you're going to live to be about 150 years old. Yeah. Uh, that's that's definitely the case. Um, but, yeah, we're going to talk about a lot of those things today, Mike, because, you know, just the differences in, uh, you know, when you are, you are younger, uh, the way that you can tolerate risk versus the way that you can tolerate it when you are older and nearing retirement? Boy, it's a huge difference there. And, um, you know, we'll go through a bunch of that here on the, on the show today. But yeah, folks, thank you for joining us here on Money Matters with Mike. Really do appreciate it whether you're listening to us on the radio throughout the Carolinas, or if you are listening to us via the podcast, wherever you may be, you could be in Guam listening to us on the podcast. Who knows? Um, but we thank you wherever you might be doing that. And you can get the show as a podcast wherever you get your podcasts. Yes, we are available. All the places you can also go to Money Matters with Mic.com. That's Money matters with Mic.com. That's the website for the show, and you can also get all of the previous episodes we got like, you know, over three years worth of episodes for you now, uh, to to go back and listen to.

Speaker1:
And, um, there's really so much great information. Chances are, if you have a question about retirement planning or financial planning in general, we've talked about it on the show. Do a quick search there. And, um, I'm sure you will find some answers to what you're looking for. If you don't find any of the answers that you're looking for, then I would be surprised. But you can also give Mike Zeno a call at (700) 456-0157 1573. You'll be glad to answer those questions. And or if something that you see or read or hear sparks your interest in retirement planning and saying, you know what? I really need to get my ducks in a row. I need to make sure that I am going to be ready for retirement. Call him as well and he'll be glad to get you a plan. Started 704 5601573. Once again is the number. You can also go to YouTube search for Money Matters with Mike. Same thing on Facebook. Uh, we're always, uh, interacting with folks there. I know, Mike, you love talking to people on the socials and just, you know, really interacting and answering questions and all the things there, because that really is what it's all about when it boils right down to it. It's it's education and it's making sure that people are confident when they get to their retirement years.

Speaker3:
No doubt. I mean, folks, our education system in the United States of America has been broken for quite some time. So that's why we do this show, just to try to throw little nuggets that people can use and staple to their the everyday financial planning practices. So if there is anything that you have learned. Share it with your friends. Share it across your socials, right? The more people we're able to reach and help, the better off everybody is going to be. Especially when preparing for retirement.

Speaker1:
Yeah. Absolutely right. Money matters with Mike once again is the website to reach out. That's Money Matters with Mike comm. And you can also give them a call once again. (704) 560-1573. Well a lot to come up here on the show over this next half hour. We've got some talk about how to prepare your portfolio for the decumulation phase, how to manage taking what you've earned, taking what you've saved and invested over the years, and actually turning that into income that you can live on. That really is what it's all about in retirement. We'll talk about that. It's also never too late to really start preparing for retirement. You can catch up. There are ways that you can catch up. If you are a pre-retiree and still have a successful retirement. So don't think that if you feel like you're behind, that's the way it's got to be and you're just going to have to, you know, live on rice and beans in your retirement years or whatever the case may be. No, there are ways you can catch up. We'll talk about that as well. And, um, you know, talk about age appropriate investing. That is is a big topic on today's show also. Yes, but let's get some inspiration for this conversation as we begin, shall we? And we'll do that with our quote of the week.

Speaker4:
And now for some financial wisdom. It's time for the quote of the week.

Speaker1:
And this week's quote comes from the late, great Jim Rohn, who was an author, motivational speaker, entrepreneur, and he said this your income is directly related to your philosophy, not the economy directly related to your philosophy, not the economy. I love that because it's, you know, it really takes the control over your income stream in retirement, puts it in your hands. And I you there's, you know, things that you cannot control, obviously. And the larger economy is one of those things. But I think what Jim is saying here, Mike, is that there's so much you can control. So so do that.

Speaker3:
Yeah. I mean, just sitting with that for a second, right. Because it runs counter to what we hear every single day. If you turn on the news, uh, what are you going to hear? It's all about the stock market swings. It's all about debt ceilings, about interest rates, about inflation. Right. It's enough to make any person in the United States of America feel a little trepidatious and nervous about their future. But Jim Rone's point is this your long term financial security isn't dictated by headlines. It's shaped by your mindset, your beliefs, your values, and more importantly, the decisions that you consistently make.

Speaker2:
Hungry for something to chew on? Here's some meat on the bone.

Speaker3:
So think about this in terms of a pre-retiree. You are what I call, uh. You're in the final lap. Okay. You've been running that race, and you're in the final lap before retirement. And the most important thing that you can do right now is not panic over the market or try to time your investments perfectly. Okay. It's to embrace the retirement philosophy that is proactive, that is intentional, and that is grounded in principles, not reactions. Okay. Are you consistently saving and investing regardless of what the economy is doing? Are you focused on controlling what you can control, right? Control the controllables like your spending. Like how much you pay in taxes. Like fees, like risk exposure. Have you shifted? And this is a big one from a growth mindset to one that now values income and preservation as well. We've talked on the show about most people prepare to climb Mount Everest or Mount Kilimanjaro for years, but very few actually prepare for the descent. And folks, where do most deaths occur? It's not climbing them, it's on the way down. So we don't want to have you die a financial death. Because look, the markets will always rise and fall. Politicians will come and go. But your success in retirement won't come from guessing what the fed will do next. Right? It's going to come from having a clear and disciplined philosophy and then sticking to it. And if you're maybe a new retiree, Maybe you've just crossed the finish line.

Speaker3:
You have officially retired. Hey, congratulations. But here's the truth. This is now where the real work is going to begin. And this is where your financial philosophy has to be stronger than your fear. When markets get bumpy. Are you the person that panics and pulls out, or do you rely on the income plan that you've already put in place? When the news says recession, do you retreat? Or do you remember that your portfolio was built to weather the storms? Are you focused on chasing Alpha chasing returns, or are you focused on creating reliable income that gives you freedom month after month? If you have built your retirement on a solid philosophy, one that values preparation, flexibility, long term thinking than the economy does not control your outcome, you do. The bottom line here is that Jim Rohn was absolutely correct. The difference maker isn't the S&P. It's not the Dow Jones. It's not the Nasdaq. It's your discipline, your consistency, your financial philosophy. So as you plan or begin living your retirement, like I would challenge you to ask yourself, is my plan based on fear and reaction or is it based on clarity and conviction? Because peace of mind does not come from predicting the future, okay, it comes from preparing for it with a mindset and philosophy that is much stronger than the market.

Speaker1:
Yeah, if we could all predict the future, I mean, things would be a lot different in life. But you know, we can't do that. What we can do, as you say, is prepare for it. And I feel like, yeah, that is, um, worth so much. I think it's actually it gives you that thing that is priceless. And that's peace of mind in your retirement years. And when you're approaching retirement because, you know, you don't worry nearly as much as people as other people might. About all of those day to day things that you really can't control. You just worry about the things that you can control and know that you have prepared properly for your retirement years. I think that's great. And yeah, you're right. You know, Jim Rohn was absolutely correct in what he was saying there about, you know, really taking the reins and and controlling things yourself, the things that you can control. And um, okay, so one of the things that you can control is a big focus of the show today, and that is the decumulation phase of life. Um, you know, when we say, you know, of course, a lot of people are going to be much more familiar with the term accumulation, right? Because that's what we've all been doing. If we're not retired just yet. We've all been accumulating, uh, you know, saving or investing, uh, putting money aside in 401 S and IRAs and TSP and all the things. Um, but, you know, you've you've been building up this big nest egg, um, which is great, you know. Nothing wrong with that, of course. But then you get to that retirement date and that switch changes from accumulation to decumulation. So talk about kind of that difference, Mike, when we when we talk about sort of that transition from one phase to the other.

Speaker3:
Yeah. So I mean, Decumulation is that process that you go through during retirement where your focus has to shift? Okay. And now you're using those assets to generate the necessary income. So while you're saving for retirement, you are looking at your net cash contributions. You're focused on asset growth. You are looking at long term investment horizons. And in the decumulation phase now you're looking at, all right, how do I spend down some of that money. It's the net cash drawdown. It's focus on return certainty. It's shorter investment horizons okay. And so the soaring number of baby boomers that are entering and approaching retirement is leading to a major shift in focus from the ascent. All right. And climbing Mount Everest and Mount Kilimanjaro to, you know, the decumulation, the descent, the retirement income focus. And so the problem as we see it and most of the folks that we're talking to on a day to day basis, they are uncertain on how they're going to manage their retirement assets and generate consistent income without, you know, outliving their money. Okay. And that is the number one fear for retirees is outliving the money that they have actually saved. Okay. And a Blackrock survey found that only 36% of Americans are actually confident that they're going to have the income they're going to need in retirement, while 55% are concerned about outliving their savings. You know, as far as the for the rest of their life, will they have enough? And so, without thoughtful, trusted guidance and planning, this could have dire consequences not only for you, but for the next generation seeking income to sustain a consistent standard of living. Matt.

Speaker1:
Yeah, you're absolutely right. You know, retirees have got to have retirement income solutions that that really can provide confidence that they're going to be able to actually spend their money, that they have saved, that they have invested over the years. You know, for not only those essential needs keeping the roof over your head, paying the bills, you know, making sure you got a car to drive, making sure you've got, you know, proper insurance coverage and all of those things. But for those wants that they have in retirement so that they can enjoy that lifestyle, that they have been working so hard to achieve all of these years. Right. So it's it really is essential that you have a plan not only for accumulation but also for decumulation. So then the question becomes like, what is the solution to that? Like what do you what do people need to be looking at and thinking about during that decumulation phase so that, um, you know, they don't have all of those concerns anymore about running out of money?

Speaker3:
Yeah. I mean, the solution is one that people have been searching for for a long time. And I started cracking up. When you're talking about, you know, the the wants versus the needs. And I'm like, are you do you mean that people actually want to be able to enjoy their golden years? They want to be able to go out to eat whenever they want. They want to be able to take in a show whenever they want. They want to be able to travel and see the things and do the things, like all the things. And it just made me chuckle because, you know, when we're talking about the solution for the decumulation phase, some research, we actually base things on facts, folks. Um, from Stanford Center on Longevity. It looked on it several different ways that investors can potentially assess and then combine a mixture of investments and insurance products against different retirement goals. And they evaluated these systematic withdrawal plans for investment portfolios and annuities against, uh, the amount of income that they actually had about any access to their savings, both pre and post retirement protections that they had in place, uh, inflation protection as well as lifetime guarantees.

Speaker3:
And one of the key findings from their research folks, this is again, fact was that from a purely financial perspective, believe it or not, annuities often provide higher yearly income as compared to systematically withdrawing from investment assets. So, you know, I thought that was shocking. It's something that I have known for many, many years. And we've been screaming from the rooftops, you know, there's other, uh, people out there that they scream that annuities are bad. And you know, we do better when you do better and all that kind of stuff. Well, guess what, folks? Yeah, when they're charging you a percentage fee, they're exactly right. And they're going to do better when you do better, right? But those fees are ridiculous. And I wanted to just kind of, you know, shout out to all those folks who are in that retirement red zone. And so if you're in the 5 to 10 years before or the immediately 5 to 10 years in retirement, please give us a call so that we can test the strength of your plan.

Speaker1:
And that number is 704 5601573704560 1573. You can also go online. Money matters with Mike. Com is the website for the show. And reach out to Mike Zeno via the contact page. That's just right there on the home page. All right. Well, um, all right, so we're going to talk a little bit of, um, risk versus reward here and whether or not people, if they feel like they are behind in their retirement investing. If they feel like those goals that they have are still way too far away here. Um. Is it too late to start investing? Is it too late to get caught up? Um, because, you know, I mean, as you get closer and closer to retirement, we talk about this a lot. The runway gets shorter, right? So you want to be taking less risk and all those things. But, Micah, I mean, the question remains, is it possible for people to actually get caught up and still have a secure retirement, even though they may have gotten started later than they would have liked?

Speaker3:
Right. So a lot of pre-retirees fear that their opportunity to invest and build wealth is behind them. Okay, and while it's true that investing later in life does come with its own set of roadblocks and its own set of challenges, implementing the right strategies, did I just say implementing implementing the right strategies? I just made up a word. Um, and if you do that now, that can help you build a much more robust and secure retirement fund. Even if you're already past your prime investing years, folks. So you know, some roadblocks that you may have, um, is decreased risk tolerance because as you age, your risk tolerance typically and should decrease, which necessitates a shift to more conservative investments like bonds and money markets to, you know, protect your savings. You have a much shorter investment horizon or time window. You have less time to recover from market downturns, and that can make it much more challenging to achieve the same level of growth as younger investors who can take more risks. And then there's that intimidation factor. Navigating those challenges can be complex, especially if you don't have a history in investing. And so consulting with a financial professional can provide valuable guidance and optimize your strategies for your financial future. But despite those obstacles, right, it is never too late to start making the most of the time that you have left, right? Investing later in life can still provide numerous benefits for those who are nearing retirement, including. Number one, I think financial awareness. By the time you reach your 40s, your 50s or 60s, you'll likely have a better understanding of your financial situation as well as your goals. And that awareness can help you make much more informed decisions. As well as strategic investment decisions. You also have the ability to increase your contribution limits, because near retirees can take advantage of higher contribution limits to both 401 400 and Roth IRAs, regular IRAs. And because of the catch up contribution that allows you to catch up on your retirement savings with the possibility of having even more tax benefit.

Speaker1:
Yeah. So even if you are behind or you feel like you're behind in your retirement plan, your retirement savings and investments, there are those different ways to get caught up. And, you know, if you want a plan that accounts for that, for your time horizon, however long or short it may be. I know a guy, uh, he can help you out. His name is Mike Zeno. Money matters with Mike. Com is the website once again in the number (700) 456-0157 three. And you know, Mike, you just talked about different ages and different kind of age groups and sort of how you by the time you're in your 40s or 50s or 60s, you've got a much better idea of what your goals are or should be. And you know, a better idea of how to achieve those, hopefully. And you know, that also means though, that well, I guess I should say, it doesn't mean that in your 40s or 50s and your and 60s all of your retirement goals or strategies or all of that should be the same and and and not change. There are actually different strategies that you should use. And of course this is it's all based on your individual situation as well as your age. Right? The age is one factor. But in general, there are some different strategies that you can employ to maximize your retirement savings and make sure that you have a secure financial future. So let's kind of go through those decades here, Mike, let's start out with investing in your 40s. What is that all about?

Speaker3:
I think that's about building a strong foundation, right? I mean, you've heard that a house built on sand is going to sink, right? But a house built on rock will stand the test of time. Your 40s are a critical period for building that robust retirement portfolio, because by this stage, you are likely experiencing significant career growth. You're earning more than you did in your 20s and your 30s, and that increased income actually provides a prime opportunity to boost your retirement contributions. So if you haven't already, now is the time to start seriously contributing to your 401 S, your 403, your IRAs. And if your employer offers a match, make sure you are taking full advantage of it, because that free money can significantly enhance your retirement savings. When you're in your 40s, you should aim for a balanced portfolio that offers a mix of growth and stability. And if you haven't started contributing in your 30s, don't hesitate to seek the advice of a financial professional because they can help you structure a much more aggressive portfolio to make up for that lost time and while still managing risk. Right. And then obviously, the regular reviews of your investment strategies will ensure that it remains aligned with your financial goals and allows you to adjust as you continue aging.

Speaker1:
If my math is correct, Mike, then that means after your 40s come your 50s. Um, yes. I'm I'm I'm a very smart guy. Uh, we mentioned, uh, um, Einstein on the last episode. I am right up there with him. Uh, just based on my math skills. Uh, purely. But after your 40s, that does come. Your 50s. So then what? How did things change when you go from your 40s? You're building that, been building that strong foundation. Then how do things change going into that next decade?

Speaker3:
Yeah, I think this is the time where you really, uh, have the opportunity to secure your future, right? When you enter your 50s, your risk tolerance begins to decrease just a little bit because now retirement becomes real to you, right? You can see it right over the next horizon. And this is the time to start shifting your investments to, you know, more balanced options. And while you still have a decade or more to grow your savings. Don't lose sight on preserving what you have accumulated. And one key advantage during your 50s is the ability to make increased catch up contributions to your IRA, your Roths, or any other retirement accounts that you have. And consulting with a financial professional is highly recommended at this stage in life, because they can help you navigate the complexities of retirement planning, such as determining the right mix of investments, understanding the tax implications of different retirement accounts. And they can also help project what your retirement income will be based on various scenarios, including early retirement, retiring at 67, or even working into your 70s.

Speaker1:
Yeah, that's absolutely right. And of course, the goal being working into your 70s if you want to. Not because you have to. That should definitely be the goal there. And in our last couple of minutes here, Mike, let's talk about investing in your 60s. So you've gone through building that foundation. Then you've secured your future in your 50s. What do you do in your 60s before you get into those retirement years?

Speaker3:
Yeah, I think this is really about fine tuning, uh, your investment strategies so that you have an optimized retirement. Your 60s are the final stretch before you actually pull the trigger, cross the threshold into retirement, and your investment strategy should reflect this. Okay. The primary goal now is to preserve your capital and to ensure a steady income stream during those retirement years. And if you have not already engaged with a financial professional, now is the time to do so. It is crucial to have a clear understanding of your retirement And expenses, as well as your income sources, including social security, pensions and any part time work that you plan to do. Professional guidance can help you fine tune your portfolio so that it aligns with your specific retirement timeline as well as those financial needs. And so that is one thing that we offer for all of our listeners is a full retirement plan and consultation. And we provide these at no cost, no obligation. You'll only work with us if it's best for you. We can help you with the Social Security planning, the Medicare maximization. We can compare your current situation to what's possible if you work with us. And, you know, bottom line is, is it's your money. And if it's important to you, it's important to us.

Speaker1:
And so to reach out, just do that by going online to Money Matters with Mike comm. That's money Matters with mike.com. Or give them a call (700) 456-0157 three. The number one more time 704 560 1573. Well, Mike, that's going to do it for our time together this week, sir. But I appreciate it as always, and we'll talk to you next time.

Speaker3:
Matt, thank you for everything you bring to the show as well. But most importantly I say this each and every week. Thank you to our listeners. Whether you're listening to us live in the Carolinas on a Saturday morning or you are listening to us anywhere across the globe. Without you, we don't have a show. If you picked up anything today, please share it across your socials, because chances are you'll help a lot of other folks out there. So whatever you're doing this weekend, we hope you enjoy it to its fullest extent. And as always, make it a great day.

Speaker2:
Thanks for listening to Money Matters with Mike. You deserve to work with a licensed financial and insurance professional who can offer strategies for protecting and growing your hard earned money. To schedule your free, no obligation consultation, visit Money Matters with Mike comm or pick up the phone and call 704560 1573. That's 704 5601573. Not affiliated with the United States government. Mike Zeno does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or a specific result. All copyrights and trademarks are the property of their respective owners. Amara Life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness, or the results obtained from the use of this information.

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