Active Planning vs. Passive Investing: Necessary Strategies for the Withdrawal Phase

Be one of a kind with Mike's Plan.

Welcome to the One of a Kind Financial Show Daily with your host, Mike Milligan. It is Friday, November 7th, as we prep for the first end of the first full week of November. We are quickly approaching Thanksgiving and that timeless holiday tradition called with stuffing and cranberry sauce and turkey. But you know, people can make mistakes come Thanksgiving, right?

They can allow their stuffing to stay in too long and it can dry out.

Right.

Turkey can, you know, maybe have to go back in the oven, uh, uh, for a little bit more time. But, you know, people make common mistakes often when it comes to financial planning. Recently on the One of a Kind Financial Show, Gary and I talked about some of those common mistakes people make.

And, you know, we wanted to share those with you. So as we wrap up this first full week in November, I just want to remind you, be one of a kind.

Most retirees and even some advisors focus on how much money you have in retirement. But what matters just as much is how you use it. And it means understanding decumulation, the careful drawdown of your assets. This first segment, we're going to lay the foundation and look at the common mistakes that people make when starting to spend their portfolio. Here's the first one, Mike. Retirees are underplanning the most important phase. Why and how are they doing that?

Well, uh, you know, a recent study that came out found that only about 1 in 5 retirees use a structured withdrawal strategy. Um, there's a lot of people out there just winging it, Gary, and, uh, they, they, they spend reactively based on what feels safe rather than proactively with an actual plan. And for high earners, that, that lack of structure can mean missed opportunities Like for doing things like Roth conversions, or it could mean overtaxation, or it could also mean running out of money later. And so, uh, I, I, you know, I got the— I've got this suspicion, this hunch that, uh, why retirees, uh, they, they, they, they kind of do this willy-nilly approach.

Mm-hmm.

It's because, it's because they have either been burned by a financial advisor in the past. They're working with somebody where they've asked a question before, where they've been given kind of a, an answer that they don't like or that has been vague. And this whole idea of underplanning in the most critical time of your retirement, which is the first couple of years, is, is imperative. So that's why I built One Oak Financial. That's why Ideas by Mike has been operating and providing education services for so long, is to help people instead of reactively live life, plan for the life that is theirs, their one-of-a-kind life.

Absolutely. And oversaving leads to underspending and regret. If you have the money, spend it, go right ahead. It's okay.

Yeah. Research by Blanchett and Finch finds that although retirees spend 80% of their guaranteed lifetime income sources, they only spend about half of what they could safely spend from their own wealth. So, so people are, are, are okay spending their federal pension or their Virginia retirement pension or their Social Security, but they're scared to death to spend their money. Why is that? Well, because they're scared of running out of money. Many well-positioned retirees are underspending. They're still operating in saver mode. driven by the fear of scarcity, even when abundance is already achieved. This often leads to missed travel, delayed generosity, or fully enjoying the early years of their retirement. Gary, nobody ever gets on their deathbed and says, I wish I'd have saved more.

Right, exactly.

You know, I wish I would have left more of a legacy and not dollars. They always say, I'm sorry I missed that high school graduation of my grandkid, or I didn't go on that trip, or, or I missed the birthday. of my, uh, of my 13-year-old grandson, or I miss, I miss being present and having experiences in my life.

Sure.

And so we actually help people, uh, create confidence enough to really enjoy their money. Then that's either by creating money they cannot outlive, it's creating an investment plan that they know it benefits their lifestyle, not the lifestyle of the advisor charging the fee. My, my lifestyle I will tell every listener right there, my lifestyle is secure. What I'm doing in my life, I've been doing this, uh, for 26 years at Hampton Roads. I will do it for the next 26 years or more, but I've built a company that's going to go for generations. My lifestyle is secure. I, I, uh, I would just want— so I don't need clients to actually secure my life. I want to make my clients have a secure life, and I want them to do the things that I'm doing in my life— travel, enjoy my grandson, be with my kids when I can, you know, go to Puerto Rico, right, and have some mofongo this weekend, right? Uh, be here at Thanksgiving, enjoy Christmas. I want my clients to have the same experiences.

Right. And they can do that by calling 800-748-1838 Or text the word ideas to 600-700-800-748-1838. The show is the One of a Kind Financial Show with Mike Milligan. I'm Gary Nolan, your consumer advocate. Want to thank you for joining us, spending time with us this weekend. A couple of minutes left. Decumulation involves more risk factors than accumulation, Mike.

Yeah, accumulation is relatively simple. Save, uh, every couple of weeks out of your paycheck, invest, and invest wisely over time. Decumulation, on the other hand, involves market risk, longevity risk, sequence of return risk, inflation, and tax drag all at once. All of those risks are hitting your portfolios one time. It's a multidimensional challenge that requires active planning, not just passive investing. Our clients, our clients don't see these blind spots because, uh, while they're retired, while they're working, even if the market is down, they're putting some more money into it. Because they're still saving. Uh, it's just not what they see. And then in retirement, they get there, all of a sudden anxiety and fear goes up because, uh, because, uh, if the market goes down, they can't, they can't sleep well at night.

All right, Mike, up against the clock. Final thoughts. What do you do for listeners when you meet with them with that one-of-a-kind financial plan?

Well, you know, you can't flip the switch from growth to income without a plan.

That—

and we create the one-of-a-kind financial plan, one-of-a-kind Is also the name of our company, One Oak Financial, because just like our company is one of a kind, so are you. And so the plans that we create help solve the problems of the largest expense you'll ever pay, which are taxes. Solves for the problem of decumulation versus accumulation through a retirement income process that we have trademarked. And the investment piece is where most advisors want to spend 90+% of their time with clients. It's— we do investments, but we do it for your benefit, not ours. And then we create a long-term care plan so the end of your life is well taken care of. And then a legacy plan that tells your family, I love you. We, we created the One of a Kind Financial Plan, Gary, because our clients are unique and we want them to live a one of a kind life.

800-748-1838, 800-748-1838, or text the word IDEAS to 600-700.

One last message from our compliance team as a reminder, Mike, Milligan, Certified Financial Planner, is an investment advisor representative of Advisory Alpha LLC, an SEC-registered investment advisor. All opinions expressed by me, Mike, or any podcast guests are solely our opinions and do not reflect the opinions of Advisory Alpha. This recording is for informational purposes only, should not be relied on solely for investment, tax, or legal decisions, and it's in no way intended to communicate or guarantee specific performance or suitability of any security instrument or product as we may have discussed. Investment advisory and financial planning services offered through Advisory Alpha LLC are registered investment advisor. Insurance products are provided by Ideas by Mike, a licensed agency located in Norfolk, Virginia, and licensed to do business in all 50 states. While tax and legal issues may be discussed in the general course of financial and investment planning, Advisory Alpha does not provide tax or legal services. Please consult with your tax or legal professional prior to making decisions related to these issues. If you want us— an appointment with Ideas by Mike or One Oak Financial, please reach out via our website. This podcast is produced in conjunction with Mike Milligan, LLC.

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