How to Create a Retirement Paycheck That Lasts for Life

Good morning. This is Mike Milligan, Certified Financial Planner. This is the One of a Kind Financial Show Daily. A note before you listen to the daily podcast today. I recorded this on Sunday, August 2nd, as I'll be traveling this week. But if you're— so when you're hearing this, I'm in Boston, Massachusetts, tea in hand, heading into a session with people who write the annuity contracts and retirement income products you and I use to keep clients whole in retirement. Today's pillar of the One of a Kind Financial Plan that I'll cover is retirement income, because that is the heart of what I do for a living. Educate, coach, plan. Never miss a moment. Let's go.

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Today is a heavy earnings day of the week. Before the bell, 3 of the largest global businesses report: McDonald's, Pfizer, Merck. Wall Street expects roughly $3.39 in earnings per share and about $7.14 billion from Ronald McDonald and the team over at McDonald's. This will be your read on the American consumer willingness to eat out. We're going to see if people are consuming 2 all-beef patties, special sauce, lettuce, cheese, pickles, onions on a sesame seed bun. Then Pfizer, earnings per share estimate around 68 cents on $14.4 billion of revenue. The Reno form of pricing power will come out during that report. And then, Mark, the estimate is a loss of 27 cents per share, $16.4 billion of revenue distorted by a specific charge, but the underlying oncology business is what analysts will read. Caterpillar, also one of the staples of the American economy, reports also. And this is going to be your global industrial signal. Then we get a read, JOLTS, jobs openings for June from the Bureau of Labor Statistics. Watch the rate here. It's one of the cleanest reads on labor market confidence. Quits go up when workers believe they can find something better. Quits go down for 4 straight months tells you the labor market is soft even before payrolls hit. So this JOLTS report, And the quits rate is going to give some indication of how the American worker is feeling. After the closing bell on Tuesday, the one everybody's waiting for is AMD, Advanced Micro Devices. They're going to report their 2nd quarter earnings. Wall Street expects $1.60 of earnings per share versus $0.48 a year ago and $11.25 billion in revenue. This is the chip test after Microsoft's blowout last week. and after Amazon's $25 billion chips run rate disclosure. The market wants to know whether AMD's data center business is capturing the AI CapEx like Nvidia has. Then Uber and Starbucks, Uber and Starbucks also report on Tuesday. Expected narrative here, let's go that McDonald's holds guidance. McDonald's is one of the boring stories the markets needs to see. Maybe AMD beats, AMD guides data centers, strong. Chip stocks that ran 10 to 15% last Thursday hold their gains. JOLTS comes in near consensus. Nothing changes about the Fed odds if that happens. That, that would be a good day. But what if the unexpected happens? Say that McDonald's sees a shift in the, in the consumer and they cut guidance. That would confirm consumer weakness at the low end. AMD misses on data centers or the guide is soft. That would put the recovery rally In doubt. Let's say JOLTS prints under 7 million openings. That would be a fresh downshift. Also, this is the day before Chair Wash may or may not speak publicly. Anything for the Fed voice this week fills Friday's payroll setup.

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Today's pillar is the one people call me for the most. Retirement income planning. This is a moment that every retiree meets and almost none of them describe out loud. The direct deposit stops. The paycheck that has landed in the account every 2 weeks for 30 or 40 years is gone. And a different question replaces it. The question is not, am I saving enough? The question becomes, where does the check come from now? Retirement income planning is the practice of answering that question In writing before it becomes emotional. See, here's the thing that most people don't get about having a written retirement income plan. You would never accept a job when you're working, when you're going to trade time for a paycheck without knowing exactly what's coming on that paycheck. You don't take— But most people who have an hourly rate, have a salary job, Expect the expected. Now, commission sales folks are different. They earn based off of what they get on the other side, but that's not the majority of people. See, the majority of people want a written income plan, knowing what they're going to get for the future. Retirement income planning is the practice of answering that question in writing for those who no longer work. And before it becomes emotional. These are the 4 sources of retirement income for most Americans. First is Social Security. Second, pension income, if you have one, and increasingly fewer people do. Third is withdrawals from your accumulated retirement accounts, including IRAs, 401s, brokerage accounts, and Roth IRAs. And then fourth is going to be some type of guaranteed income, whether that's from insurance-based income vehicles like annuities, If it's from rental income, from owning real estate, or some kind of payback from a loan or a payout from a previous job. When you blend those 4, and blending them is what separates a real plan from a rule of thumb, you get that comfort versus the anxiety and fear that most retirees have. See, the number one fear retirees have is running out of money. Retirement income solves that fear. So here's what a general rule of thumb looks like. Withdraw 4% of your portfolio and let it increase with inflation. That rule was established and published in 1994 by Bill Bengen, who has appeared on the Ideas by Mike podcast, based on US capital markets from 1926 going forward. It's not evil. It's a starting point. It's also a lousy substitute for a written plan that accounts for your Social Security claim age, your health history, your spouse's health history, Whether you have a pinch in the ordinary income tax bracket you set each year, the sequence of return risk in the first 5 years of retirement, and whether you want a guaranteed floor of income or you would rather take your chances with the market for higher upside. See that last part? Those are all the uncertainties. That's what causes the fear and anxiety. That's what causes the cortisol to spike. Let me give you the framework the way I teach it. Retirement income planning has 3 layers. Layer 1 is what I call the floor. The floor is the amount of income that must show up in your account every month, whether the market is at an all-time high or in the middle of a 2008-style drawdown. Groceries, utilities, insurance, property tax, medications— bills that do not care about the S&P 500. The floor is best funded by Social Security, pension income, and where appropriate, guaranteed lifetime income annuities, because those sources do not go down when the market goes down. Layer 2 is what I called flex, or the things you want. Flex is the discretionary spending, travel, gifts, hobbies, restaurants that can move up in a good year and down in a bad one. Flex is best funded by systematic withdrawals from investment accounts because if the market has a rough year, you could dial it back a little bit. And then layer 3 is legacy. It's what is left after the plan works for the surviving spouse, for the kids, for charity, for the community. See, a retirement income plan tells you on paper exactly what the floor is, exactly where the flex or the things you want come from and exactly what the legacy target is. Everybody I meet who has the plan sleeps better. Everybody I meet without the plan feels anxiety every time the market moves or has a bad Wednesday. Retirement is the moment. It cannot be undone. Nobody retires and says, I want to go back to work. Retirement income is the glue to this because retirement should not be a rehearsal. The plan you write is what protects the moment from being consumed by anxiety of running out of money. We're not chasing returns as much as building a one-of-a-kind financial plan. Retirement income is the pillar that turns that plan from a spreadsheet into a paycheck.

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So on Tuesday, consumer signal in the morning from McDonald's and Pfizer and labor signal at 10 from the JOLTS report. AI chip signal after the close from AMD. And under all of it, the question every retiree eventually asks, where does the check come from when I retire? If your plan does not answer that in one page that you could hand to your spouse and give her or him comfort, we should talk. Text the word ideas, I-D-E-A-S, to the number 600-700, or call me. Call our office, 757-909-7151. My team is there. We're here to build a retirement income plan that works for you, so you can have less, less fear and less anxiety. This has been Tuesday, August 4th edition of the One of a Kind Financial Show Daily. Tomorrow, we're talking about estate planning. Estoy aprendiendo. Estoy aprendiendo. I am learning. So are you. Educate, coach, plan. It's my mission and never miss a moment. It's my motto. I'll see you tomorrow. This has been the One of a Kind Financial Show Daily with your host. Mike Milligan. I am an invest— investment advisory representative with Advisory Alpha LLC. Ideas by Mike, doing business as Wood Oak Financial, is an unaffiliated entity of Advisory Alpha LLC. This has been for educational purposes only. Do not make investment decisions based off any content from this podcast without first consulting a licensed financial professional.

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