Glen Nakamoto: Building a Retirement Paycheck

Foreign. Welcome to the new Retirement podcast. Today we're going to be talking with Glenn Nakamoto, a former cybersecurity analyst and self professed non financial advisor with no background in financial planning, who likes to quote, dig deep into topics of interest, including retirement planning, and has on his own created a super robust retirement income plan. So I met Glenn through our Facebook group after noticing him making some really insightful comments about other people's questions. So I invited him to write a summary of his own plan for us. And 6,000 words later, which is currently on our blog and you can link to from here, he laid it all out for us. So we're going to dive into how to build lifetime income with a retirement income floor from a layperson. And Glenn is joining us from Merrimack, New Hampshire. Glenn, welcome to our show. It's great to have you join us.

Thank you. Thanks for this opportunity.

Yeah, I appreciate your time and it's great to hear it kind of from a quote unquote lay person. But you've obviously done some very deep thinking about this which we're going to go through and it's going to be great for people to hear it in your own words. But before we get started, I just want to frame this up a little bit. So Glenn built this kind of super robust, super safe plan around lifetime income. He's leveraged Social Security, kind of optimized that used annuities, thought through how to optimally use RMDs or required minimum distributions, and how to manage his assets. I'm on the email group called Retirement Risk that's part of the Society of Actuaries. And that list has many of the top thinkers around lifetime income and life cycle investing, like Zvi Bodhi, Steve Vernon and A. Rappaport. And they go deep on these topics. So I kind of threw out this case study to them and they thought it was great, had lots of good questions and want to dive into some of their questions as well. But to some degree, it feels like Glenn has done something like inventing fusion in his backyard because they all talk about this theoretically and he's actually implemented it. That's why we're going to take a deep dive. So with that, Glenn would love to kind of get, you know, just a little bit about your background and kind of, you know, your career, you know, and how you kind of decided to take this on. You know, you can give us a little bit on that.

Yeah, sure. Well, I, my, I've actually only worked for two organizations. The first, right out of college, I Worked for the federal government for roughly about 13 years. And you know, while I was there I thought, you know, I was going to live out my entire career. But things happened and eventually I wound up going to work for a private company. But when I did, it turned out that the concept of government pension just kind of went out the window. At that point it actually turned into a 911 Porsche. For me, it's probably not the best thing to do for retirement planning. But once I entered the so called private sector, I was introduced into what a 401k was, which I had no clue what it was. I had to start paying Social Security. To be honest, prior to then, I never paid attention to any of that. But since then, when I showed up at work, this was 1982, HR sat me down and said, oh, you want to pick a mutual fund or something because you're going to be fully vested in retirement. I didn't know what vested mean at that time, so I said, well just, just pick a mutual fund and the company I work for is going to match those funds. And I knew nothing about matching funds, 401k. So they gave me this nice book, three ring binder, and they told me to pick one. So I opened this book, the one page that was dog eared, I scanned it and I said, okay, this one here looked like it had the best year to date, one year, five year tenure. And it turned out to be a Fidelity Magellan. So I said, put everything in there. And I didn't look at that thing for almost 18 years, believe it or not. So I had a lucky beginning in that regard and I stayed with that company until I retired, you know, seven years ago. So it's been an interesting ride.

Wow. So when you left the federal government, did you like lump sum your pension out? Essentially. And you know, one of the things.

I probably shouldn't have done, but I did. Yeah, because I didn't know, you know, whether I was going to go back to them or what. So I said, well, you know, you're, you're younger at the time, you got a young family, said needed a car. So it was probably one of the things I shouldn't have done.

But yeah, hey, it worked out right. You bought this fancy car, enjoyed it, but it was a depreciating asset. But you then bought a great fund and wrote it for a long time, which is essentially the strategy that most people are supposed to do. You went and kind of said, okay, I'm going to do this. Did you not kind of think about when did you start thinking about, okay, how I'm going to generate income from these assets?

Well, what happened was as my wife, my wife is three years older than me and she'd been talking about retiring for a while. And basically as we were looking at our portfolio, I was thinking she's at the point where it might make sense for to her to retire because we both worked at the same organization, but her work environment was a little bit, I think, stressful in some regards. So I told her we don't really need that income. And so what we could do is, in fact, go ahead and have her retire. So that's when I probably start to think about what's going to make me comfortable retiring. Because up to that point I still had a paycheck. And so, you know, so that's probably was about three years before I wound up retiring that I started really thinking hard about it.

Okay, so up until that point, you kind of been saving past, you know, you'd been saving and investing and accumulating assets, but not really thinking about how am I going to turn this into, you know, income.

Right.

And how did you, you know, what were your goals? Like, how did you, what were you trying to accomplish as you, you know, thought this through?

Well, to be honest, up to that point, since I really didn't have a target date retiring, to be honest, I was like 95% in equities, I figured that the idea of working your way down to something more, I could see that if I knew exactly what that target date was, I would start to shift. And I honestly thought maybe at first I might work till I'm 66 or something. So when she retired, I was still only 60, so I figured I might as well continue to keep heavy weighted on equities. And that was a great time in that part of the century to stay in equities. But once she retired, I knew that clock was going to start ticking. And that's when I started thinking about what kind of income do I want? Having assets is one thing, but the idea of just taking money out of savings just wasn't appealing to me. I was always comfortable with getting a paycheck. What I think drove me was how do I create that paycheck? And first of all, how much of a paycheck do I need? So that's what kind of got me thinking about trying to come up with some kind of strategy.

Got it. I know in reading your, your post, you know, you talk a lot about, yeah, wanting the paycheck and wanting it to be reliable you know, making sure that your kind of minimum income was guaranteed, you know, and then also having kind of discretionary income, and then also how to think about hedging inflation. So can you kind of, you know, lay out how you. At a high level, kind of how you constructed it?

Yeah, I guess the first part of it was I was really trying to get a sense of how much money do we really need. What were those essential expenses? Because, to be honest, when my wife retired, I don't think I really had a good handle on it at the time. I remember thinking all these rules of thumb where Fidelis said you need 10 times your last salary. Well, that tells you your salary, but doesn't really tell you what you need or what you're spending. So the first part of it was to get a good handle on our expenses, because until then, we were fortunate enough that we didn't have to budget. So we kind of spent whenever we needed to spend. So the idea of actually trying to analyze what we're spending turned out to be a lot harder than I thought, because you had to collect all these statements and all that. And the first time I did it, it was so painful, I swore I'd never do it again. But what you spend prior to retirement is a little different than what you spend after, because you no longer have to make retirement contribution. You don't have to make mortgage payment, assuming you pay off your mortgage. I had to figure out a way to get a handle on expenses. Over the course of the next two years, I developed my own system of how to gather the information and then basically convert it over to a spreadsheet and then categorize it and then start to get a handle on it. And then as I've been doing that for, like, almost two or three years by the time I retired, at that point, I had a really good handle on what my quote, my essential expenses were. And by definition, everything else was discretionary. That then told me, in combination with my projected Social Security, that if I wanted to have that Social Security and this essential, you know, all these essential expenses covered by steady income, it told me what my difference was. My gap, you might call it that. And that was the amount that I then sought. How do I get reliable income from that? And that's where, you know, I started looking at annuities. But at first it seemed like the only people that would talk to me about annuities were trying to sell me hybrid annuities, variable index annuities. And I only really learned about immediate annuities, like, literally about six months before I retired. But when I saw that, I said, wow, this is not a bad deal. It's a way to generate a paycheck. And I said, but then I needed to know, how much did I need? So that's where looking at Social Security, looking at the essential expenses, calculating the difference, that then gave me an actual target income that I felt I would be comfortable with. And then that in turn told me how much assets would I need to use? And the question was, is the percentage of my assets that I would use at that time to buy these annuities, was I comfortable with that?

Right. And that turned out to be a pretty significant chunk of your Right.

And I had no idea whether this was too much. Was it? So that's when I started talking to advisors, financial advisors, and not a single person advocated an immediate. They always had, we could do this with bonds, we can do this other ways. But to me, those things still had market volatility at times. So I was still looking for other options. But that's kind of how I decided that these types of annuities, I actually did go down the path of almost buying some hybrid annuities. I know that I would have to wait like 5 years, 7 years before QUOTE income would start rolling in. What turned me against them, though, was I said, okay, I like the upside. I didn't mind the cap. I like not having a downside. But when they sent me the paperwork to sign on the dotted line with all the gazillion writers that this thing came in, I counted. It was in the three ring binder, first of all. And there were 23 different tags where I had to sign or initial. And much as I tried to do read this document, I could never. I never felt comfortable signing any of it because I couldn't understand it. So I finally gave up.

Right. Well, I think that you raise a great point. Right. It's like things need to be simple and understandable. And if they're not, you know, why are they so complicated? I mean, that sounds amazing to say, hey, because I know you're looking at taking 30% of your savings for retirement or potentially net worth. I mean, whatever. It's a big chunk of money and locking it up. Right. It's like if you buy a house, I don't know if you're doing anything huge you want it to be, at least you kind of understand the math behind it. Right. Or you understand what you're getting into. And it's kind of interesting to hear that. Yeah. And a little bit more on, you know, the. As you sought advice. So you're doing this yourself and then you're kind of going this transition. You're like, okay, I'm going to look for help. You talk to financial advisors, you talk to insurance folks, insurance brokers, who are typically salespeople, and they're not fiduciary. Right. But with the advisors, did you feel like you were getting completely unbiased advice funded, the financial advisors that were calling themselves out as fiduciaries?

Well, I mean, they, I honestly thought that they were giving me what they believed to be good advice. However, I guess in the back of my mind, given that, you know, when they talked about fact that they get paid by a percentage of assets under management, and I was basically advocating taking away a third of that, I always wondered whether that influenced their, what do you call it, the fact that they didn't seem to want to advocate immediate annuities. They didn't have problems talking about variable annuities or some of these other instruments.

But when I talked about just plain.

Simple immediate annuities, where there's no cash.

Value, there's no investment, period, I pay.

It out, I get right away. To be honest, I didn't have a.

Single person during that initial period ever tell me that it was a reasonable thing to do.

In fact, there was one company that.

Thought it was the most stupidest thing that I should ever consider.

Yeah.

So we weren't met, you know, we weren't basically going to see eye to eye on that.

Did you ask them how they're getting paid? I mean, were these hourly or a. Under management?

Yeah, I mean, the initial ones were.

All asset under management.

I did not find a single advisor.

At the time that was charging hourly. I was having a very difficult time trying to find somebody like that.

Yep. Yeah, because it's, it's such a better. I mean, it's. If you're a financial advisor and you can cobble together $100 million of assets and you charge 1%, you can make a million dollars a year babysitting other people's money. I mean, I get the business model. It's unbelievable. Right? It's a great lifestyle business, you know, and I think the question is, is, you know, and look, some advisors earn their money, they do great things and there's a huge amount of value. I mean there's definitely. There's clearly a segment of society that like is delegated. I just want someone to take care of this for me and they hopefully will have better outcomes with that. But the fee structure Is high. You know, I think we talked to Rick Ferri about this is like why do you pay financial advisors that way versus you pay a lawyer or your accountant per hour? Right. You're kind of seeking expert advice on money or whatever legal matters. It's like you pay them, you pay, you get the expert advice and then that's it, that's the end of the transaction. And then what was your sense about, you know, back to the insurance folks? I mean, did you feel like you were getting clear guidance or did you feel like you're just being sold too?

Well.

My initial sense was that they were interested in managing the investment more like I was in the accumulation phase, that they were trying to maximize things.

While I was trying to bring the.

Focus of the discussion to how do.

I generate income, reliable income. And all I got at that time.

Was things like the 4% rule, use bonds, use a asset allocation, draw from this or that.

But when I talked about my concerns.

About reliving the 2008, 2009 kind of.

Downturn or the dot com downturn, how.

Do these things impact that type of asset allocation.

Or the income?

And they say, well statistically, if you.

Continue to draw out this, things will work out.

So I saw the charts and the graphs about, yeah, you know, if you were to look at Monte Carlo simulation over 30 year periods, statistically these things would look good. But I had also been reading more recent that because interest rates were starting to drop a little bit and all that. Were those statistics still good? Started hearing reading articles or rumblings about the 4% rule is probably no longer 4%, something less.

But it was really more about the day to day, not day to day, but the market volatility that uneased me.

As far as the essential banks were concerned.

Well, I think also a lot of the variable annuities and guaranteed withdrawal products are nominal dollars. And so there's this giant inflation risk. In fact, in this I'll point to an article from Joe Tomlinson. He kind of compares spias like immediate annuities with ideally if they can get some kind of cost of living adjustment versus variable products. And if you look over 20 or 30 years and you're not getting, you don't have some kind of inflation hedge, your purchasing power is going to get cut in half. So it's a huge risk for folks. As you map this out, can you just take us through how you divided this in the article into three buckets? And you did talk about, okay, you thought about how to define your essential income and then you had Three buckets, the income floor, discussionary and investment. Can you talk a little bit about why you did. And you're thinking about buckets is a little bit different than the traditional bucket strategy, which is really different risk assets. Yeah, time segmentation and different risk assets in each bucket. So super low risk in the first bucket for the immediate future and then intermediate risk in the interim bucket for 5 to 10 years or whatever the period is, and then high risk in the long term bucket. But you did it a little bit differently, so I'd love to hear that.

Yeah, I mean, to be honest, as I was approaching retirement, that's sort of.

The direction I was headed. I was looking more at the bucket strategy as being the best option if.

I was going to continue to just.

Stay in bonds and equity.

I mean, yeah, equities and bonds, but the more I thought about the notion.

Of how do I get steady income.

Reliable income, the more I leaned away.

From just having that one or two years of bucket one. So as I transitioned that into the notion of a lifetime reliable income, realizing.

That there's an inflation element to it.

That at least helped define what I wanted to do as far as the so called bucket one part. Now bucket two became then at that point discretionary.

And at least in the initial part.

Shortly after I retired it was sort of discretionary fund. But as I was approaching, I think when I hit about 64, 65, I was thinking about RMD payouts. And at the time I wasn't aware or hadn't planned on doing in kind transfers from the IRA to a tax efficient account on the outside. I thought I might have to sell, for example. So I said, well, rather than force myself to sell, why don't I have at least some assets set aside that if I have to take money out and, and either transfer to another account or to spend, I've got something that I that's not tied to market volatility. So if the market goes down, I've got that. Also at the time I hadn't done any Roth conversions. So I was basing it on what my projection stated our balances would be. And I estimated, you know, based on those projections what our approximate RMDs would be. So that's when I built bucket two to be a five year ladder, rolling ladder.

And as we were approaching age 70.

I started to tune each rung of that ladder to match the R and D. Now in the meantime I started doing a lot of Roth conversion. So now this ladder actually has quite a bit more in it than the rmd since I've been able to move a fair amount of assets into a Roth account. But that at least kind of my.

Goal behind why I wanted the bucket.

To in the first place was that the first 10 years, in our case, maybe up to 15 years, I felt were very important in terms of wanting to enjoy retirement.

And I didn't want to have to.

Rely on a really good market outcome in order to be able to travel and do those things. I thought by setting up this bucket too, to lock in 10 years worth of discretionary funds, that would be great.

Then I wouldn't have to worry about.

It and then I could deal with things happening after that later.

So by defining what bucket one and.

Bucket two and then by definition everything else fell into bucket three. And I could now focus bucket three on addressing inflation for the most part.

Nice. So on one way to think about it is like you funded a 10 year paid vacation. You know, it's like, like if you're working, you'd be like, hey, listen, I got paid vacation, I'm going to take it, right? My paycheck's coming, I don't have to worry about it at all.

Yeah, that was sort of my mental attitude when I was thinking about, you know, what bucket one did was cover all my expenses. Bucket two was like you said, all the fun stuff and question was, could I do that and still have a sizable amount in bucket three to address inflation?

That's probably the easiest way to look at it.

Yeah, that sounds awesome. And just real quick, I have a question. When you thought about your minimum versus desired spending, what did the percentage look like? So, for example, if it was 100,000, was your target income when you did this analysis post retirement, what percentage was minimal, like the essential expenses as part of your overall spending?

Oh, as part of my overall spending, my over. Okay, let's see. I'm trying to look at things. My essential expenses probably covered about, I would say maybe between 70 to 75% of all the expenses. And then so the remaining. 25 to 30% would be what I would consider discretionary. Now the essential expenses, at least when I decided to buy the annuities, I had roughly about two years of data collected, but it was two years of data while I was still working. So one of the things I had to do was I had to eliminate the retirement contributions, Social Security payments, all those things. So I was fudging a lot of things in that to try to figure out what was I really spending. And then on top of that I said, well, I Want to have more time for travel. So it was a lot of guessing to some extent, but at least I had a good feel for what I considered essential. You know, how much do we spend for gas, utilities, food, those kinds of things?

Yep. Awesome. So you've constructed this. You've been also doing the Roth conversions to kind of be more tax efficient. So how do you manage it now? Like, how often do you have to look at this? You know, do you continue to build out your ladder every year? Like, what does it look like when you're kind of in retirement managing this income plan?

Well, I was building. I. Yeah, I, I had sort of a. The first one thing that helped was that when I retired, I hadn't planned on working part time, but I had an opportunity to work part time from home, you know, only like one day a week or a couple of days a month. And, and it was too good opportunity to turn down. So one of the things that part time employment did was it gave me this additional income where I didn't have to worry as much about the discretionary fund. I actually used this money to cover our discretionary. So my need for that bucket two really didn't start until about five years later. So five years later what I did was, okay, I'm like 66 or something like that. I was coming up to my fr. Full retirement age for Social Security. My original plan was to start drawing Social Security at that point, but since I was still working part time, I now could get spousal benefit. Between the part time work, the spousal benefit, The annuity income, I discovered that I don't need the Social Security. So my bucket strategy at that point just transitioned to starting a payout at age 70. I did have a plan for all that, but like I said, this additional income covered all our discretionary needs for the first five years. And then at that point I started into this bucket strategy. Now the current bucket is a five year CD ladder. And as I said, those, the income from those five, you know, rmd, so to speak, will actually give us enough discretionary funds for almost 10 years. So my plan right now so far is not to continue to add to the rungs of that ladder, but I'm making kind of a year by year assessment as to is there something better? One of the things I've been looking at is a deferred annuity to buy into something now, hold onto it for five years and then cash it out on that sixth year. And that's one way I could continue the ladder on the other Hand, I've also been looking at the fact that because I waited to age 70 to start Social Security, I've gotten a nice 32% boost in that income. So that monies can also covers more than our discretionary needs, too. So right now my plan hasn't been to continue the ladder, but I have other income sources that are not available for discretionary spending.

Yep. Yeah. Well, it's interesting. Are you saying that do you think your income is going to continue rising in retirement? Or I mean, how, how do you, for when you look at it going forward, how do you see your income unfolding? And I asked this because, like my, someone in our, in our extended family who is similar age, kind of like, you know, late 60s, 70s, like going to retirement was like, hey, it looks like I'm going to have more income in retirement than I ever had working. And which was like confounding to her. And she's never made a lot of money but. Or not huge money, but had been regularly saving and investing and looking at different ways to kind of boost income.

Yeah. I mean. Yeah. Well, certainly the dollar amount I think is going to grow at least based on all these projections, like your tool, for example, the new retirement tool. I also do Monte Carlo simulations with the Fidelity Retirement Analysis tool, and they said even if I use the pessimistic percentages, it will grow. But the question is, does that growth just compensate for inflation? That part, it's hard to say. But bottom line is that because I was able to wait to age 70 for Social Security, gotten that income boost, the amount of money that we're getting in terms of a lifetime income is actually quite a bit more than what I need as what I originally planned for that income floor. And because if that money is in fact there, that means I don't really have to draw out of my bucket too, at least for those possibly, maybe those 10 years. I don't know. I mean, I'm going to try.

Yeah. Right. And then for bucket three, where you're I think pretty, you're like 80, 20. Right. In terms of like equities to bonds, have, have you been. But you've been rolling some of that into Roths, but I guess to the Roths still, you still count them as bucket three, correct? Yeah.

Yeah. The Roth IRA is still part of my bucket three, and it's pretty much 100%. The Roth portion of it is 100% equities.

Right. And the advantage there is, I know in your thing in your post you called out it's a Good hedge for, you know, future tax increases, obviously, but you know, emergency funds, college funds for grandchildren and estate planning. Because it can be passed on, you know, tax free. Yep, yep. Yeah, that's awesome.

Yeah. Especially with the, you know, with the elimination of the stretch Iraq, if you can. And since you don't have to have any RMDs in the inherited IRA, at least for the first nine years, if you can hold on to that roth the full 10 years and just use your tax deferred type, you know, traditional IRA for inherited, then it really does boost the amount that after taxes that your beneficiaries can get.

Yep, that's good. All right, so we had some questions from the folks in the SOA group. Well, one of the questions was, did you ever consider a deferred annuity? But now it sounds like you are thinking about it. So that's for longevity. I mean, one thing you could have done would be draw your assets earlier. Just instead of buying the spia, the immediate annuity, just buy a deferred annuity and fund the gap. Just like you funded the gap for Social Security. Right. You're just essentially pushing it back. Did you think about that strategy at all?

You mean as far as using deferred annuities to fund the GAAP to age 70?

No, just instead of buying the Spia, what age did you buy the immediate annuity?

I was 63. That's when I retired.

Right. So at retirement, say Fund 63 to 70 or some future time frame with your assets, with your savings, and then buy a deferred annuity starting at 70. Do you think that, did you consider doing that?

I don't know that I seriously considered that option. At least I don't remember doing a trade off with that, with that particular analysis. I think at the time I was probably more interested in guaranteeing some income rather than just using assets like that. But that's, you know, that's probably, I mean, you know, if I were to do it over again, I probably would certainly consider that. I think there was more from my viewpoint, I was looking more at the standpoint that, you know, if I'm really going to retire, I just wanted to have that steady income. That was kind of a driving factor. It may not have been, like you say, optimal, but it's one of those things where I just felt comfortable.

Yep, totally. Did you think about getting, using a qlac, a qualified longevity annuity contract, so basically buying the annuity with DC assets to find 401 assets?

Yeah, I did, but it seems like the only way you sort of benefit out of that, if you, if you live much beyond age 84 or, you know, somewhere in the mid to late 80s. And as I was looking at my, you know, the growth of Bucket three, I didn't feel that I needed that at, at the moment. But yeah, it was a consideration. The thing is, and I think if I did the QLAC, it's only like up to like 130,000. Was it?

Yeah, I don't know the exact limits.

The dollar amount was relatively small. Like I say, it's only about 130, 140,000. So I didn't think that it would add that much value from my viewpoint at least.

So having gone through this whole process, can you think of ways that you would like to see this be better or simpler? It feels like what you did is great, but requires a huge amount of financial education and focus to think through the. I mean, you have to accumulate well, which you did, but then you have to think through Social Security claiming inflation, whether you should annuitize the risk in your portfolio. Looking back, are you like, wow, this could be made a lot better doing certain things?

Well, I mean, yeah, I'm not sure how it could have been made better possibly if when I was talking with some of the financial advisors in the early phases of this and they were to lay down a plan like this that says, here's a way that you could generate income, here's how this is the kind of asset you need to save. If they were to lay out kind of a storyline pretty much the way I developed mine, let's say I probably would have jumped on that bandwagon pretty quick. Now, I can say that now, but to be honest, you know, back seven, eight, nine years ago, when I started down this path, to be honest, I didn't know what I wanted to be. All I wanted, to be honest, the thing that drove me was I wanted to recreate that paycheck. You know, all the other things kind of evolved over time, but so for me, no one seemed to, I don't know, give me that comfort level that says, here's how you generate that paycheck. The immediate annuities with the Social Security seem to be the best option for somebody that didn't have a pension. And I never saw people talk about combining those two in the way that I did. I guess if there were a financial advisor that saw that and tried to put those two pieces together, I probably would have aligned myself closer to that kind of an advisor early on.

Yeah, well, that's part of what we're doing as well is we're, we're trying to take an income view for retirement. I mean, there's still work to be done, but you know, we talk. I don't know if you've listened to the Bob Merton podcast. You know, his whole, you know, stake in the ground is that the whole problem with retirement planning and advice is that it's totally focused on assets versus income. You know, everyone's like, save more assets and the whole potential financial services industry has paid on those assets. So they're incented to encourage individuals to keep saving up more and more because they make more and more money versus what people want is what you've built, which is pensions. They want income, lifetime income that is ideally inflation hedged and guarantees their quality of life and helps them create a consistent quality of life for their whole entire life. Which sounds like an easy idea, but it's obviously not dead simple to create. So we're trying to make it easier for people to kind of get an understanding what they have and then see ways to accomplish it, but have some degree of control themselves. Okay, awesome. So in terms of like tools that you've used, I know you're user of our platform and you mentioned Fidelity. I think you also mentioned you tried Personal Capital. Any other tools or resources that you found useful?

I mean those are probably the ones that I've sort of experimented with most. I have the longest history with the Fidelity Retirement Analysis tool, but it's strictly linked to Fidelity funds. I think one of the reasons I was seeking other tools like the one at New Retirement was the fact that I could merge other accounts together outside of Fidelity Personal Capital, if I remember correctly. While I like the tool, one of the nice features maybe you might want to consider it is the fact that when you enter in the. What is it called? The Cusp. The Cusp ip. The Cusp of the. It tracks the changes day to day. So if you do an update, you don't have to manually enter in all the values. But I don't see myself ever going to them as a financial advisor because of the way they want to control everything. They would require me to move all my money over to their broker dealer and they told me that I won't even have access to it, which I thought was strange. If I wanted, I have to go through them to get things that would not go well with me.

Yeah, we think the future is, I mean they built some pretty cool technology, but we like our users are like you. They have money in Many places, they want to control it. They want to keep the fees low. And, you know, there's, you know, some people are like, hey, Great, I'll pay 90 basis points or 100 basis points. But, you know, I had a user of the day, he's like, Well, I have $5 million and I have an advisor. If they're charging 1%, then he's paying 80 basis points. He's paying 40, $50,000 a year in fees. He's like, maybe I can do this myself. And yeah, maybe you can. So for six bucks a month or whatever, that plus flat fees, I mean, definitely, we think the future is going to be much lower cost and much more transparent, Much more control for the end user if they want it. Okay, great. So, you know, looking forward, you know, do. I mean, are you. Feels like you're. You've taken the financial worries off, you know, what do you spend your time on?

Well, I mean, you know, until this pandemic hit, my wife and I, you know, love to travel. So we've been, you know, hitting the road a lot. We slowed down a little bit since, of course, but my hobbies keep me busy. We have a pretty sizable garden here, and I also love to take photographs and stuff like that. So, yeah, the hobbies are keeping me busy and I almost consider. I also like to read a lot. So I continue to read about. More about financial planning, stuff like that. I don't know. At some point you like to say, yeah, I'm comfortable, but I'm also trying to see, as I'm looking at my son and daughter, for example, what can I do to help them plan for their retirement too? Because I know when the stock market recently dropped like 30%, got phone calls from both of them saying they want to get out. I said, no, no, no, that's. Don't sell. Ride it out. But yeah, so it's. I'm keeping pretty busy.

That's good. How do you, when you travel, are you. Do you have an RV or something like that or.

No, I mean, when we traveled in the past, you know, we. We have some timeshares out in Hawaii that we use very, very regularly. So we go out there on even years and we go to Florida on odd years.

Nice the way it turns out.

So you're snowbirds.

Yeah, but yeah, we love to do river cruises in Europe. If another pandemic ever happens, at least we won't get stuck out in the ocean, right?

Yeah, the cruise industry has gotten. Gotten hit. But I did see that reservations came storming back so we'll see.

Yeah, I saw that.

I would say be thoughtful. I don't think this virus has gone anywhere. Yeah, you know, and there's, it's definitely, there's a risk, you know, you know.

We, I, this past fall we went, we spent almost two weeks on the road during fall foliage because I can never pick the peak days. So we said, all right, let's just kind of shotgun it. Yeah. And we just went riding around the New York Finger Lakes area until the peak.

Yeah, I grew up in Rochester, New York, so near Lake Canandaigua, and. Yeah, it's very nice out there. All right, well, this was good. Anything else you'd like to share about your process and experience doing this?

Well, you know, one thing that you got me thinking about when you sent some comments out, some of the people that sort of looked at this article commented about inflation. Even in the write up that I had, I did say that I thought trying to manage inflation was going to be a significant issue, a big challenge. But I went back and I looked at what I wrote. One other thing I thought about was if people want to do something like this, for me at least I tend to be a bit of a nerd when it comes to spreadsheets. I live and die by them. And I probably have, you know, on any given, for any given year, I have a spreadsheet for my expenses, I have a spreadsheet for my income. I'm constantly monitoring if I take a withdrawal from the ira. I'm always worried about things like hitting the Medicare, the IRMAA penalties kind of thing, because I came very close. One year I actually exceeded it because I didn't take into account a state credit that I got, which turned out to increase my adjusted gross income, which then kicked me up into the next penalty level, which resulted in almost, if I remember correctly, about 2,400, almost $2,500 penalties, $1 increase. But I was able to effectively negate it by doing. It was one of the years I was still working part time. So I was able to actually make a traditional IRA contribution before April, reduce my AGI, kick it back down. But that's the kind of stuff that it shouldn't have. That's what makes doing this stuff hard, stuff like that. But as I said, I went back and I took a hard look at the inflation. And as you pointed out, if you have a fixed amount of money coming in and 20 years later to get the same purchasing power, it's almost double, you know, So I actually did actually spend Quite a lot of time analyzing that. And I created all these spreadsheets that say, hey, if I had this, you know, 20 years from now, it's going to need to grow to this. And so looking at a variety of mechanisms, from dividend income to, you know, deferred annuities, all those kind of things, those are all kind of built into that bucket. Three part to some extent. But you're right in the sense that it'll be hard. I think I spent a lot of time studying all these things and I wish it could be easier and maybe if some financial planners think along those lines where they're looking at retirement income planning, because I think that's now getting to be a more common term.

That.

Could go a long way in helping people like myself. And that's also, I think, one of the big value adds of having a financial plan. It's not just investing the money, but helping you solve these kinds of issues. And inflation is definitely one of them.

Yep, for sure. Yeah. No, I mean, I think there's opportunities in using software and methods and education, but also products. Is there a way to package up? Maybe this is a project for you. Could you package up and scale what you're doing? Could you turn it into. People have created target date funds. And the last podcast we just uploaded was there's a guy, Kevin Hanney, who works at Raytheon Technologies, and they've built kind of a lifetime income platform for their employees that is accumulation using target date funds. And then it does a kind of dollar cost average into variable annuities. They use variable to buy layers of income going out to try and deliver that synthetic pension. So they're trying to package it up as a benefit for the employees. But is there a way to kind of like put this together? Low fees, transparent, simple hedge for inflation. Get you to income, you know, make it reliable. I think, you know, I mean, one easy way to do it is to delay Social Security like you did, because you basically get 75% more of a COLA indexed or inflation indexed income. So just figure out a way to bridge yourself to delaying that and that's a way to start doing it. And just one last comment on this. One of the SEOA folks said, I think it's only like 1%. It's a super small percent of people that actually wait until 70. Most people are, they were at 62. Now they're older. Now more people are waiting to their full retirement age, but not their maximum retirement age.

Yeah, I agree. I mean, I remember when I retired at 63, there was a certain amount of temptation to start Social Security then as well, because that's part of that desire to get that paycheck going. But the more I looked at it in terms of that this is inflation protected and you get that 8% per year growth, at least from the FRA point, that makes it so much more attractive because if you actually calculate how much you have spent, if you will, by not collecting it, the amount of money that you delayed, that you quote, spent, wouldn't buy that much inflation protected annuities.

Right? In the retail environment, yeah, it's much cheaper to get it.

But the big question is, you know, can you, can you afford to wait to then. So, you know, so the question is what, what can you do to get to that point? But at the same time, at least in our case, I didn't want to do too much belt tightening because that's also the time period where you want to, you know, enjoy, enjoy your retirement. So there's that tug of war.

Sure, totally. And it's a balance, right? I mean, and the reality is people also spend less money as time goes by. So for every year in retirement, typically your rate of expenses drops 1%. So over a decade, it's a 10% drop. So if you were spending 100,000, 10 years later you're spending 90,000. You know, 10 years later you're spending $81,000 of real money. So that's another hedge to people, definitely. They slow down, they don't do as much.

You know, it's funny you mentioned that because I've got nine years of expense that it collected and I've definitely noticed that trend as well. It was up here and then it is definitely dropping. But at the same time, my discretionary spending is bouncing all over the place. It sort of depends on what trip you take that year. But overall it's money that we know we can spend, so I'm comfortable spending it. That's the other part of this whole plan was that, you know, if you're, if you don't really know how much you need or how much you, you get a little bit conservative with, you know, spending. And there's, I read an article where there's as much danger underspending for some people than overspending too.

So people that have money as they head into retirement have more money when they pass away. People that don't have quite enough money, they tend to fly into the ground and then they run out of money and then it's like Social Security only or whatever it is. So you know, and.

And I noticed that, you know, when. When you. When you run these Monte Carlo simulations, I could see that, you know, if I added one more expense, like, I think that a thing that I did that I thought was fun was I said, all right, what if I put that 1% AUM fee in AS. As an essential expense? You know, would the curve go up like you said, or does it start to flatten? And I was surprised what 1% did.

Wow. Makes a huge. Yeah. Well, this is. There's a lot of writing on this, and, you know, talk to Rick Fair about this, but if your real rate of return on your investments is like 4 or 5%, you know, you know, not nominal, but if. And you're giving 1% of that up, you're getting 20 to 25% of your returns up every year, right? So people are like, oh, it's 1%. Well, it's not a lot of money. Well, if it's. If it's a quarter of your returns, it is a lot. And then you lose the compound growth. So if you project that over a lifetime, you're giving up 30 to 40% of your potential gains to your advisor. Well, to fees, whatever it is. And that's why mutual funds were. Hey, mutual funds loved it when they could charge 1%. Vanguard change that. Now it's like, you know, whatever, 10 to 15 or 20 basis points, right? But the advisor. Yeah, of course they love it. But, you know, when people really take a look at this and they're looking at longevity, they'll be like, yeah, that's. You know, if I could be giving another half a million dollars to, you know, my kids, is that worth it? I don't know. It's. It. We just want to shine a light on that so people can see what's up. All right, well, Glenn, I know you've got other things going on, so I really appreciate you being on our show and kind of explaining what you did here. Thanks, Dotto Robison for being our sound engineer. Anyone listening? Thanks for listening. Hopefully you found this useful. Our goal at New Retirement is to help anyone plan and manage their retirement so they can make the most of their money and time. And if you made it this far, I encourage you to one, join our private Facebook group and or follow us on Twitter. And also check out our site and planning toolretirement.com where you can build your own plan for free or take advantage of our premium advanced tools and partners personal support for a low cost. And then finally, we are trying to build the audience for this podcast, so if you could leave us a review on itunes or Stitch or anywhere, we'd appreciate it. We'll read. We read the comments and try to incorporate the feedback into our show. So that's it. Thanks again and have a great day.