Mike and Jim on Retirement Income Planning (Ep. 12)

Welcome to Ideas by Mike, the podcast with Mike Milligan, where you will find one-of-a-kind financial planning advice for your one-of-a-kind life. With over 22 years of experience as a certified financial planner, Mike shares experiences and advice on crafting simple, easy-to-understand financial plans based on your values and priorities. He believes that taking a personalized approach is the best way to prepare for the future and give meaning to your finances. So follow along as Mike, and from time to time his guests, explore different strategies and tools that could help you secure your financial future in retirement. Now on to the show.

Hello and welcome to the Ideas by Mike podcast with your host, Mike Milligan. I'm Wendy McConnell. Hey, Mike, how you doing today?

Good, Wendy. How are you?

Oh, I am good. I am good. The weather's starting to get a little cool. Loving it.

Yeah, it's still 85 degrees where I am. So this is not a— it's not a big— that's not a— that's not— fall has not arrived.

Sorry.

Virginia yet. But thanks for bringing that up.

Oh, sorry. Well, you have air conditioning, so there's always that, right?

That's right. I'm excited for today's episode. We've been going over the one-of-a-kind financial plan. And that one-of-a-kind financial plan has 5 different aspects to it. It has the tax planning, retirement income planning, investment management, long-term care, and estate planning. And I'm really excited about today's, the retirement income segment of the one-of-a-kind financial plan, because Jim Fisher, who's with us, and I have had a relationship for multiple years now. And not only is he innovative, For virtual advisors around the country, he's a good friend. And we've been able to kind of go through this process together. So I'm excited, Wendy, about having him on to talk about the Forecaster.

All right. Well, welcome, Jim. Thank you for being here today.

Oh, I'm glad to be here. Appreciate you having me.

Mike says that you're not soft-spoken, but that sounded soft-spoken to me. You're gonna get loud later, right?

Yeah, I can. You, you want me to turn up the volume?

No, I just want you to, I just want you to have a good time there, Jim.

Oh yeah.

So, Jim, we kind of went on a journey together about 4 years ago when we— you and Brian and JuiceBox, who's the flagship company that you founded and you've built to help insurance professionals. We kind of went on a journey together on this whole idea of retirement rescue. Do you remember that? Remember that whole conversation?

Oh, for sure. I mean, that was definitely— those words specifically were the trigger point. I think it's apt. To, to call it that with the context of you being in the Virginia Beach area.

That's right. Right. Because like how that all came about is like living close to SEAL Team 6. You know, Marines are called in, right, to jump into a spot, rescue somebody out of a situation, and then they go back into their bunkers in Virginia Beach until it's time to do that again. And like we were, we were trying to change the industry, right? I think you'd agree with this, trying to change the industry, right? because we had just come out of COVID and people needed professionals who could jump into their retirement, help save them from market downturn, inflation, volatility, risk, all of that, right? And what came out of that was like this beautiful friendship and a great business. But that tool that you created called the Forecaster, can you— I mean, just in your mind, what has that done, that one tool? What has it done to change? JuiceBox, JB Growth, JBP.

What has it done for you personally in business or for the people we use it for?

We'll start, start with you personally because that's what, that's what we talk about here. You know, we all live a one-of-a-kind life. So like, how has the Forecaster changed like you, like your trajectory in this business?

It made it possible for us to help more people tell a better story. that was objective, right? The facts, the math is irrefutable. And one of the things that the Forecaster itself is, I call it a mathematical mirror. Why that? Well, when you stand in front of a mirror, there's only one thing that's reflecting back and that's reality, the truth, it's objective. And so, the Forecaster created the opportunity for us to do that for other people and give advisors, especially virtual advisors, a tool to show the financial reality and the forecast of where people are heading in retirement with their numbers. And in so doing, what did it do for us? It allowed us to unlock the potential in so many more people and allow them to serve at a higher level. And the result has been quite fulfilling for me personally because I was able to help people that are earlier in their career and don't have the experience.

Yeah.

experience that you do, Mike, to serve people at a high level, to tell a clear story with their numbers without having to understand and be able to do all the math themselves when it comes to income forecasting and tax relationships and risk analysis and all those types of things. But the personal benefit is to understand the value that I get to create for others and the ripple effect of positive impact that that delivers in how advisors are able to create better for themselves by creating more value for their clients. And to be the person who creates that ripple effect of positive impact is very rewarding. So, yeah.

Yeah. And I sense that too in my personal practice, right? Because what the Forecaster is allowed, it does allow to tell story, right? I mean, Jim, as you know, I can walk people through a Forecaster just by talking about it without verbally, right? But like what I've seen it help people like Marcus Washington and Kevin Neidermeyer and Scott and Seth. And I mean, just the names go on and on, right? It's been so fun to be on that journey. Retirement income planning, though, that's kind of the focus of The Forecaster, right? What is it? What does like retirement income planning mean to you? Like, what do you— When you see the numbers that people are reflecting, what does retirement income mean?

Well, I think to understand what it means and why it's important, I think it's helpful to realize that I think most people don't think about income planning when they just think about retirement saving. You know, they think about climbing that mountain. They think about, I need to accumulate enough so that I could live off of it. And the idea of living off of it, that coming off off the mountain, you know, have the same lifestyle but no longer have to work. You know, a more clear way to say be retired is reliant on how do I turn assets, the retirement savings, no matter where we save them to, into income. Hopefully, you've been able to save enough because it's key to having enough income in retirement. So, or retirement income for most people, they, you know, the, The sage advice or wisdom is the 3-legged stool, right? You have the Social Security, the pension, and then the personal savings. And I think where we really help people from a forecaster standpoint and forecasting, projecting, seeing where you're heading using retirement math, these very common principles and metrics of planning for retirement, we get to look at all 3 of those income sources. And from a planning standpoint, what the Forecaster often allows us to do is expose or uncover an income gap. A lot of the people that we meet with when we take them through a retirement income forecast using these tools, what we find is that they generally know that there's these accounts and these places that income come from, but they don't know what they're going to be. They don't know how they're computed or ultimately, what does it actually mean for them? Do they have enough? Will they be able to retire when they want, how they want, and will they be able to stay retired? One of the things I loved when I first got to work with you, Mike, is this idea that there are no retirement do-overs. But unfortunately, without proper planning, many people are effectively including the potential for a do-over, which is a nice way to say have to go back to work because you didn't have the income planning in place to do that. And so, the Forecaster allows us to uncover the income gap. You know, do we have enough income to sustain the lifestyle that we expect in retirement from Social Security, pensions, and income from retirement savings? And often what we're doing inside of that is we're managing risks. You know, you can't keep all your eggs in one basket. The question is, what baskets do we have available to us to protect and secure our income in retirement? And the Forecaster, you know, shows us those numbers. It shows us the math behind don't keep all your eggs in one basket. Don't, you know, you have some eggs in that market basket even in retirement, but some Some of them need to be in the safe basket that's going to be sustainable. It often allows us to look at taking money from qualified accounts like your 401 and your IRA, where a bulk of many people's retirement savings go, that third leg of the stool, and maybe shifting more of it into the pension bucket, that lifetime income. And so, I don't know if we want to get into what strategies and/or products make that possible, but what we find is a lot of people don't know Social Security, but once they find out what it is, they realize they have gaps in those other 2 buckets. And they don't know how assets become income, especially for life. And the best way to do that is often to manage risk properly and convert some assets into a pension, a personal pension strategy is often. And that idea of the rescue is we're rescuing people from risk and uncertainty so that they can have more and worry less in retirement. And that's some of the things that I really think about when it comes to retirement income planning. We could go deeper on strategies, products, if that's helpful.

So Jim, can you tell us about more of the strategies that you recommend for diversifying retirement income sources?

Yeah, of course. Like to go a bit deeper, when we talk about those, those 3 buckets, most of the time when we run an income forecast for people, they often are deficient in like that pension bucket, right? They have, they had, they didn't get a pension from their employer, but they were able to save and maybe get matching contributions and they just weren't aware that they can convert those assets into a pension-like income stream. And so, the strategies that we use for that is we partner with A-rated pension companies, which most people don't realize is an insurance company. And we use what's called an income annuity. And where you can kind of get what we often call is your father's pension, right? You can get a pension like your father had with that same durable lifelong income that could make sure that all of your baseline expenses that make your life happen, could be secured with guaranteed income. And that's kind of your safe bucket. So you got your Social Security and your pension income, and then we can leave the rest to grow and cover the rest of the increase in expenses in life inside of, you know, a traditional market portfolio. But it's about diversifying and managing risk properly. And often that means shifting from risk assets, we call that risk-on, inside of a traditional retirement portfolio and blending some of that over into a pension bucket. And we're often using A-rated insurance companies and deferred income annuities.

Our industry is littered with fiduciaries, like just fiduciaries who will only do one thing, right? And they call themselves fiduciaries and they'll hang themselves on something called the safe withdrawal rate, right? The 4% that you can take off, like, keep money invested with me. I'm going to charge you 1%, but then take 4% off forever. And we've done a lot of research on that, right? We know that that's not really the fiduciary model that's out there is because it's not doing what's best for the client. But when you've run forecasts on just doing the safe withdrawal rate, what are some of the things you've noticed in the forecaster? Because the forecaster is the mirror, but what will the forecaster do if you only use the safe withdrawal rate?

It will reduce. your income capacity and certainty from an account that remains in the market. And if you unpack what safe withdrawal rate is, well, when safety is up against risk, the rate at which you can withdraw in a risk environment inside of where the fiduciaries typically operate, not all fiduciaries, not like holistic planners like you, You are, Mike. But when they operate in that environment, they can maybe get 4%. And if you look at the volatility, aka the ups and downs of the market, is more frequent. A lot of people say that 4% may be aggressive, maybe not as safe, maybe it's 3.8%, 3.5%, 3.3%. When you look at those numbers, it's just reducing the sustainable, the safe, safe meaning it will You know, be there for life, it reduces the income you can get. But when you compare that to the fact that when safety and the sustainable rate of income from a principally protected account, which is what's available inside of a, like a fixed indexed annuity that has an income benefit tied to it, when you look at those types of opportunities, we see income increasing just from those assets anywhere from 30% to 70%.

Wow.

from the withdrawal rate alone. That doesn't even consider that a lot of these pension companies, these insurance products offer, you know, other benefits like bonuses and guaranteed growth rates for the income benefit. And when you add those things to it, well, that's when you're on the upper end of that, that, you know, income could, everybody's an individual, so we could run a personal forecaster for you, but your income from that asset could increase by 70% when compared to a safe withdrawal rate of a market-invested account.

At the time of this recording, this coming Saturday is my birthday. I'll be 48 years old. And so, I have— and that's like my shout-out to myself. Happy birthday, Mike, when I listen to this. Hope you had a good day. But one of the most interesting things is like, what age should people really start being concerned about retirement income? Just based off what you've perceived out there.

The math and the data says that it's really important for you to shift your strategy from purely focused on growth and accumulation when you're within 10 years of your retirement target, right? So, if the full retirement age according to the Social Security Administration is 67, then by 57, you need to be shifting your approach to income planning. And how do we shift some of those eggs from the risky basket to the safe basket? Not all of them, but there's balance and harmony in this asset allocation strategy. But But within 10 years of retirement, the data shows, we look at research from like JPMorgan Chase that we call that the retirement dead zone. It's the opportunity where if you don't have enough time for a major market downturn to recover, which means either you don't retire or when you do retire, you retire with less. And if it happens during retirement, you might have a do-over. And none of those are outcomes that anybody was planning for. But to not have a plan and start within that 10-year window means you are.

Yeah.

planning for the potential for one of those dramatic, you know, retirement deficits to occur for you.

So, Jim, do you have advice for those who have already retired? But I think a lot of us are concerned about outliving our savings.

Yeah, I mean, the same thing is still true for you. I mean, certainly if you've got to be within 10 years, if you're beyond retirement, then it's still just as important. And, you know, one of the things I like to say, there are only 3 factors that control the quality of your retirement. How much have you saved? Where have you saved it to? And when are you going to retire? Well, when you retire, we're no longer trying to change the timeline of when we're going to live off the assets. So, that's not something we can control. And we're no longer trying to save more because we're now living off of it. So, the question becomes, and the opportunity that you still have when you retire is, is there better soil for your assets To live for a better outcome or more sustainability, not to outlive your income. And so, you should work with a professional who can assess where are your savings now and is there a better vehicle that's going to produce more? Just like if you plant trees in better soil, you'll bear more fruit. You can move that tree from Alaska to Florida and the oranges will grow more abundantly. And the same thing is true for your retirement is if it's in one account, you can move it to another account. One account subject to risk. and a lower withdrawal rate to another account that has no risk and higher rates of sustainable withdrawal would immediately increase your income if that's what you're solving for. But there are other benefits too. Maybe there's a tax planning strategy by being in a better vehicle or having a better plan. Maybe there's a more abundant legacy and a benefit you can leave to your family or your heirs by having the right plan. So, it's not just about income, but often, that's probably the biggest concern for most people. And absolutely, in retirement, still an opportunity to maybe reallocate, shift where's your retirement planted. And if so, you could move it to maybe bear more fruit.

Jim, when's the last time you got a raise?

A couple months ago.

That's awesome, right? So, retirees don't often get raises, right? What's a way that a retiree can get a pay raise?

It's very similar to what we were just talking about, which is a better strategy, right? If you shift your assets into a better strategy, you aren't suffering the status quo, which the status quo is the commonly accepted options without education or strategic insight. You often get a status quo result, mediocre. And so, it's pretty simple. If you have assets in a retirement account, you shift them to a pension account that offers a new client bonus and an income benefit that increases with inflation or market performance. There, right there, strategically is a way to get more raises in the future. So it's about how do you manage your assets and where do they live that can drive More income for you.

Jim, what version are you on of the Forecaster now?

3.7.1.

Talk about the iterations of that, right? For those people who are not technically savvy, right? What does 3.7.1 mean?

I mean, we've been working on it for probably close to 4 years now. It gets updated probably almost weekly for 2 reasons. Reason number one, we make updates to it is to bring more clarity and value to the consumer that we serve with it through the advisors that use it. And then reason number two is to make it increase the utility and experience for the advisor itself. And so, I mean, I update it almost weekly and obviously, we're updating it every year in a big way to manage current tax rates and current market I mean, it automatically pulls in market data every day. So technically it's updating daily. But I mean, I would say actual versions, hundreds. We've gone through hundreds of versions. You know, we're on the iPhone 16 right now. I'm on the Forecaster version 114, you know, something like that. So it's just constantly refining it to what we need to deliver as far as clarity to the market. Jim, what new trends or tools do you see emerging in the retirement planning space that could benefit I think the biggest thing that people should be looking for is personalization, is the ability to, you know, Mike, you talk about, you know, have a one-of-a-kind financial plan for your one-of-a-kind life. And so, if you're trying to filter for tools and strategies, the thing, the signal of a greater benefit and more ideal outcome is that you're treated like you are one of a kind. That means they start with a discovery process that isn't like superficial, like tell me your accounts, but it's like, well, what's important to you? Why do we need to solve for that? Right? How does that look like? And, and there's, there's a, um, you know, that, that just creates more optionality and therefore greater outcomes for you. And so, um, from a toolkit standpoint, I mean, there's a lot of tools that do that. We've been talking about one that we developed. But you'll find that the right person that you're working with has an ability to personalize your plan at the deepest level possible. Because, you know, you're an individual and what you care about is different from the next person, how old you are, what you've saved. There's so many factors to consider. And you want to make sure that there's a deeply detailed process at the beginning.

Yeah.

That allows you to get that one-of-a-kind plan for you and your one-of-a-kind life.

Jim, that was an amazing answer. That is exactly why we exist and do this podcast. So, Mike, how can people get in touch with you if they have some more questions about their own one-of-a-kind life and plan?

So, it's, it's all @ideasbymike, Instagram, Facebook, and then the website, www.ideasbymike.com. You can also go to YouTube @ideasbymike where you'll find the recording of this podcast, the video recording. And for those of you, and I know we have these, right? I know we have financial advisors and financial planners and insurance-only agents who listen to this. And one of the things I realize is that I don't have the capacity to help everybody in the retirement income planning space. But if you consider yourself to be a retirement income professional, I would tell you to take a look at JB Growth Partners. It's jbgrowthpartners.com, and there's a Contact Me section in there that you can reach into Jim and the team over at JuiceBox to find out what you can do to provide the mirror moment for people by using the Forecaster. Jim, does that make sense?

Yeah, that's perfect.

All right, Jim, thanks so much for being here. Thank you, Mike, and thank you for listening today. Please like, follow, and share this podcast with your friends. Until next time, I'm Wendy McConnell.

Thank you for tuning into Ideas by Mike, the podcast, the show where ideas turn into money. If you enjoyed today's episode, make sure to click the follow button to stay up to date on future releases. For additional information on becoming a part of the Ideas by Mike community, check out our website at ideasbymike.com. Don't forget to take a look at the show notes. And for more financial insights, subscribe to the Ideas by Mike YouTube channel or visit the website to find one of the upcoming webinars. Also, connect on Instagram or Facebook @IdeasByMike. Ideas by Mike is an LLC headquartered in Virginia with offices in 42 cities. The company owns an insurance agency registered in all states directly or through affiliate companies. Mike is an investment advisor representative with JB Wealth Advisors. Any financial planning information shared on the show should not be construed as financial advice for you personally. For your one-page financial plan, please reach out to Ideas by Mike through the website. The information covered and posted represents the views and opinions of the guest and does not necessarily represent the views or opinions of Ideas by Mike. The content has been made available for informational and educational purposes only. The content is not intended to be a substitute for professional investment advice. Any financial planning information shared on the show should not be construed as financial advice for you personally. For your one-page financial plan, please reach out to Ideas by Mike through the website.