Should you delay social security or take it as soon as possible? Are Roth conversion something that really makes sense or should you just ignore them? What happens if the market drops right after you retire? Could it have a major impact on your retirement? If you’re curious about the answers to any of these questions, then you are gonna be glad that you joined us for today’s show.

I am Anthony Saccaro. Thank you for tuning into the Providence Financial Retirement Show, where it truly is all about the income. We are your retirement income source, and this is the place where retirees come for income. Every week on the Providence Financial Retirement Show, we generally take a topic and explore that topic and answer some of your listener questions along the way.

But you guys have been busy. You’ve been writing in a lot of random questions about a lot of different things. So we’re gonna take our entire show today and we’re gonna answer your questions. It’s probably a good time to remind you that if you have a question for the show, all you need to do is make your way over to providencefinancialradio.com and you can ask us your question there and maybe we’ll get a chance to answer it in a future episode.

Let’s start though by diving right into our first question, and this one comes from Daniel in Newport Beach and he wrote in this, I’m 64 and planning to retire sometime in the next year or so. I’ve got about $1.3 million saved mostly in stock funds. And while I’ve done well over time, I’m starting to get nervous about what happens if the market drops right after I retire.

Everyone keeps telling me to just stay the course, but that feels a lot easier when you’re still working. How should I really be thinking about risk at this stage, Daniel, this is one of the most important questions that you can ask right before retiring. Lemme assure you that you are not alone. This is exactly the type of question that keeps a lot of people up at night, especially when there are a lot of moving parts that are going on in the world when you think about inflation and wars and everything else that you can point to today that has an effect on the economy and ultimately might have an effect on your retirement.

So, great question, and I want to give you some things to think about. The first thing that I wanna note is that your question asked if you should stay the course because that’s what you are hearing. Well stay The course is another nice way of saying buy and hold, and that’s what Wall Street’s mantra is.

Buy and hold. That’s what your brokers are gonna tell you. That’s what your friends are gonna tell you, and that’s what Wall Street wants you to do. The question though is buy and hold really the best strategy, especially before you’re about to retire. And before I answer that question though, I wanna point out a couple of things.

First of all, most advisors, most brokers tell you to buy and hold pretty much no matter what. If you have a broker that’s told you to sell and get out and move back in, then you’re probably in an anomaly because most brokers, the standard saying in the standard piece of advice is buy and hold. That’s what they want you to do.

But can you think of a situation. Any situation where the same advice applies to everybody all the time, well, that would be silly, right? Imagine going to a doctor and no matter what your condition was, whether you had a headache or you had a common cold, or the flu or broken arm, imagine that the doctor gave everyone the same prescription all the time.

That just wouldn’t make sense. In the world of Wall Street, though buy and hold is advice given all the time and it doesn’t make sense for everybody all the time like they would have you believe. That also doesn’t mean it doesn’t make sense at all for anybody because there are certainly times that it does make sense.

If you have more than 10 years to retirement and you are dollar cost averaging and buying the same investments over and over again, you should buy them and you should plan to hold them, but hold them till when. Hold them forever and never sell them at all. Never make any changes. No, that’d be ridiculous.

And most of the times when someone tells me that they’re just gonna continue buying and holding, it’s because that’s what they’ve always heard. And people don’t necessarily tend to believe what’s true. They tend to believe what gets repeated often, and by and hold, it’s repeated so often that everybody thinks it’s the right approach.

But I really love your sincerity and your question because you don’t feel like it’s the right approach. You feel like you’re gonna retire and you feel like you’re taking too much risk, Daniel, and you’re questioning whether that really is the correct move to continue staying the course or to actually make some changes.

I think it’s a really smart question. I’m glad you’ve taken time to. Before I move on and dive deep into answering your question, though, I want to acknowledge that if you were to continue buying and holding at this stage of life, it might be a mistake. And there are a lot of mistakes that I’ve seen retirees make over my career that they don’t even know they’re making.

Why? Because these same mistakes get repeated over and over, and we tend to believe them just because they get repeated so often. And if you’re on the brink of retirement or you are already retired, you need to know what these mistakes are. We’ve put together a short but powerful animated video that talks about the most common mistakes that I’ve seen retirees make and how to avoid them.

And if you’d like to learn what these mistakes are, just to make sure that you’re not making them accidentally, just because you’ve heard these mistakes over and over again and you believe that they’re really true, you’re gonna wanna watch this video, we’ll send it to you. Absolutely. If free of charge, you just have to go to our website to get it.

And the website, it’s providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your information. We’ll get it right out, but it’ll show up in your inbox shortly and you’ll learn what these common mistakes are. Mistakes that many of you think are not mistakes, but actually are.

To get your free animated video, just go to providencefinancialradio.com/video and give us your information. You will have that video in your email inbox soon. I’m Anthony Saccaro. Thank you for staying with us. You are listening to the Providence Financial Retirement Show. We’re taking our entire show today and we’re answering your question.

So the show is always about you, but today the show is really about you, and we’re answering a question right now from Daniel who’s 64 years old and about to retire in the next year, and just kind of feels like maybe he’s taking a little too much risk, but everyone is telling him to stay the course, and he just wants to know if that’s really good advice or not.

And we’ve already just covered the fact that staying the course is the same thing as buy and hold. And that’s the same advice that Wall Street gives to everybody all the time. If you’re 20 years old, it’s stay the course, buy and hold, don’t make any changes. And if you’re 70 years old, it’s stay the course and buy and hold and don’t make any changes.

And to give everybody the same advice all the time is just really ridiculous. When is it then a good time to buy and hold. And when is it a good time to start thinking about making changes? Well, if you’ve got 10 or more years to retirement, meaning you’ve got at least 10 years until you’re retired, I think buy and holds a good strategy.

Keep dollar cost averaging, keep buying the same investments over and over again. Don’t make changes. It’s good advice until you get to about the point where you’re 10 years away from retirement. Once you get to about 10 years away from retirement or so, what you need to start doing is you need to start shifting your portfolio away from growth and more towards focus on interest and dividends.

Why? Because growth is unknown. You don’t know what the growth of your portfolio or what the growth of the stock market’s gonna be over the course of the next 10 years. And because of this unknown, you can’t count on it, but interest in dividends if you invest, right? Especially like we teach here on the Providence Financial Retirement Show, you’re gonna be able to count on them when you are invested for growth, it’s a guessing game.

What is your mutual fund portfolio gonna be worth in 10 years? You have no idea. Now I know what some of you are thinking. You’re probably thinking, wait, Anthony, the market goes up all the time. Well, if I were to sit down with you and show you some charts going back 200 years, I can show you many 10 year time periods where the market has been just flat, no growth, drops, recoveries, volatility, but over a period of 10 years, no growth at all.

That’s another thing that gets repeated so often that we tend to believe it. The market goes up all the time. You tend to believe that. What they don’t tell you though is that although the market does go up all the time, many times it’s recovering from a downfall. So if the market dropped by 20% and then it increases back to its normal level, yes, it’s going up, but you are going nowhere.

The market has just been flat. Now, to be fair, there are many decade long time periods as well where the market does go straight up. And these long periods of time where the market goes straight up are usually followed by long periods of time where the market is just flat. And if you were to go back to the turn of the century to the year 2000, and you were to chart out from 2000 to 2026, what you would realize is that the first 13 years of this century, the market looked like a big W zero growth for the first 13 years, two crashes, two recoveries, no growth whatsoever.

In the last 13 years, the market has done extremely well. And if these flat periods are followed by good periods, then history tells us that we might have another flat period coming. And if you’re planning on another decade of eight or 10% per year of growth and the market is flat, you might be sorely disappointed because your retirement plans might not work out the way that you anticipated.

And that’s why I suggest that starting about 10 years out, you wanna start shifting your portfolio from growth to income because you can count on income, you can’t count on growth. And note the market doesn’t always go up. Back to your question then, Daniel, you’re only a year away from retirement, and if you are still invested like you were 10 and 15 and 20 years ago, then yes, it’s probably time to make a shift.

And I think your gut feeling is exactly correct. I certainly hope I’ve helped given you something to think about, but thank you for taking the time to write in that question. If you’re the kind of person that would like to dig in a little more to market history and look at what the trends of the market have been over the last couple hundred years, realizing that this could actually help you kind of determine over the long run where the market might be headed.

Well, you’re gonna wanna read chapter five of my new book, more Life Than Money, because I wrote extensively about those market trends, and it does give us a clue as to where the market might be going over the next 10 years. I’ll send you more life than money. Absolutely. If free of charge and it’s really easy to get, you just have to go to our website and ask for it.

The website is providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information and we’ll get a brand new hardcover copy of More Life Than Money right out to you. To claim your free copy of More Life than Money, go to providencefinancialradio.com/book and we will get it right out.

Thank you for hanging with us today. My name is Anthony Saccaro and you’re listening to the Providence Financial Retirement Show. We are your retirement income source and this is the place where retirees come for income. We’re taking our entire show today and we’re answering your questions. We’ve already answered a question about whether or not the buy and hold strategy works all the time for everybody or whether you should actually think about making some changes.

We also have a question coming up about social security, but the next question that we’re gonna answer now has to do with Roth conversions, and it comes from Susan in Pasadena and she wrote in this, my husband and I are both 67 years old. Recently retired, and we haven’t started Social Security yet. We have about $900,000 in IES and a smaller brokerage account.

Our CPA mentioned possibly doing Roth conversions, but we’re worried about paying a big tax bill. Now, how do we know if that’s actually the right move? Well, Susan, thank you for taking time to write in your question. And the first thing that I wanna say is, I’m really proud of your CPA, because most CPAs that I’ve run into, they don’t often recommend Roth conversions.

And when you think about why that is, it’s because of what you’re suggesting and that is that you have to pay a big tax bill now, and why do you hire your CPA to help you pay more taxes or to help you save money in taxes? And because they’ve been trained to help you save money in taxes, a lot of them really don’t focus on Roth conversions because Roth conversions are gonna cause you to pay more taxes.

Now, although there could be some long-term benefit down the road, just based on the fact that your CPA even brought it up to me, tells me You probably have a really good CPA. So I really appreciate that. Let’s define the core issue though. Based on your email, most of your money is in pre-tax accounts.

You have about $900,000 in IRAs. This means that every dollar you take out is going to be taxable, and that means that retirement’s gonna be very expensive. How expensive? Well, if you’re in the 25% tax bracket, that means that you’re gonna need to take out 25% more than you need, so that by the time you pay the tax, you actually have the amount that you need to be able to cover your monthly bills.

And I’m really glad that you included that. You haven’t started taking Social Security yet, because that’s gonna be a really important consideration in deciding whether or not to even do Roth conversions. And if you’re not familiar with whether Roth conversion is, lemme take a minute and just explain it so you know exactly what we’re talking about.

If you have money in a pre-tax retirement account. The government allows you to take some of that money and transfer it to a Roth IRA, which is called a conversion. When you make the conversion, you’re taking money out of your traditional IRA that you’ve never paid tax on and you’re transferring it to a Roth IRA that’s gonna grow tax free here on out forever.

And when you do the conversion, you have to pay the tax, and that’s the number one reason why many of you have probably decided not to do conversions. You have to pay the tax. Why would you do that? And that’s exactly the question that Susan wants to know the answer to. And let me give you the short answer and then we’ll expand on it.

When you do a Roth conversion or you set up a Roth conversion strategy over time, what you’re really doing is you’re paying off the taxes that you owe the IRS, and you’re converting those dollars into tax free income. Tax free income. And I’ve also add tax free growth. When you put that money or you convert those dollars into a Roth IRA, you never have to pay tax on the growth and you never have to pay tax on any income that you get from that Roth IRA.

And that’s very powerful because if you are in a situation where you have all your money tax free, well now you’re not subject to required minimum distributions. And now you don’t have to take out 25% more than you need because there are no taxes to pay. In Susan’s situation, all of her money is in these pre-tax retirement accounts, and that means that she’s gonna have to pay whatever her ordinary income tax rate is on all of her income that she takes out of those pre-tax retirement accounts because it’s all gonna be taxable income.

And as much as I hate to say it, Susan, and you probably don’t want to hear this, this is usually the worst way to go into retirement. Retirement’s very expensive when every dollar you would draw is taxed. The most optimal situation that I see and what we often help our clients with here at Providence Financial is to have a tax diversification as well.

And that means that you have some money in your pre-tax retirement accounts. You also have some Roth IRA, and you also have some taxable brokerage accounts as well. And when you have those three tax buckets of money, you have a lot of flexibility and a lot of control later in retirement. I am gonna guess that many of you are familiar with being diversified among your investments, but you also wanna be diversified among the taxability of the different investments as well too.

Some in pre-tax, some in tax-free, and some in taxable. That’s optimal. And Susan, I’m gonna finish answering your question, but before we move on, I know that a lot of you are wondering the same thing. You probably have a lot of money in pre-tax retirement accounts, and should you do Roth conversions?

That’s probably a question that a lot of you have. We’ve got a resource that I want to get in your hands. It’s an animated video that talks all about IRAs and Roth conversions and whether or not they make sense for you based on your situation. You’ll learn more specifically what they are, how they work, the pros and cons, and certainly this video’s going to give you some things to think about.

I wanna send you this video absolutely free of charge. All you need to do to get it if you think it would help, is just go to our website and ask for it. It’s providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your information and we’ll email that video right on over to you and you’ll just have to press play and you’ll be able to watch it.

It’s really fun because it is animated and it’s pretty short. I think it’s only seven or eight minutes long, but it’s also very powerful. You’ll learn for yourself whether Roth conversions are something you should consider. Just go to providencefinancialradio.com/video and we will get it right out.

I’m Anthony Saccaro. You’re listening to the Providence Financial Retirement Show, and we’re taking our entire show and we’re answering your questions. Presently, we’re answering a question from Susan who is asking about Roth conversions and whether it’s something that makes sense to do or not. We’ve already discussed the fact that tax diversification is also very important.

Going into retirement with all of your money in pre-tax retirement accounts, that’s usually the worst way to go into retirement. It’s gonna make retirement very expensive. The better option would be to have some in pre-tax retirement accounts, some in Roth IRAs, and some in taxable accounts. That just gives you a lot of flexibility.

Let me move on though, and give you some other things to think about when it comes to Roth IRA conversions. Things that you might want to consider in trying to decide whether or not it makes sense for you, because they certainly don’t make sense for everybody all the time. Remember earlier when I said that people tend to believe what is repeated, not necessarily what’s true.

Well, it’s often been repeated about Roth conversions that you don’t want to do them because you’ve gotta pay the tax. Now, it doesn’t mean it’s necessarily true. It doesn’t mean it’s necessarily good advice, but we tend to wanna delay the pain as much as possible. And when you do Roth conversion, you are going to have to pay the tax now, and for many of you, that might be why you haven’t ever really taken it seriously, but what’s the alternative?

Well, the alternative is to keep your money in pre-tax retirement accounts and then be forced by the government to start making withdrawals on the government’s timetable through required minimum distributions. And I know that many of you are actually underestimating what the ramifications could be of required minimum distributions.

When you’re forced to take money out of your retirement account, you have to claim it as income, and of course that means you have to pay tax on it, but it may also push you into a higher tax bracket. It may cause more of your Medicare Part B premiums to be taxed. It may also cause you to have to pay tax on your social security income.

So there’s a lot of negatives around required minimum distributions. And if you don’t do Roth conversions and you’re not proactive, then required minimum distributions are something that you’re gonna have to comply with. Otherwise, if you don’t, then you’re gonna have to pay a large penalty, 25%. That’s the penalty that the IRS will charge you if you miss a required minimum distribution.

Required. Minimum distributions though, are only applicable to your pre-tax retirement accounts. They don’t apply to Roth ira. The reason is simple. With the pre-tax retirement accounts, you’ve never paid taxes, and the government doesn’t want you to just let it sit there forever. They want their tax dollars at some point, and that’s why they impose a required minimum distribution.

But with the Roth, you’ve already paid the taxes. There’s no benefit for them to force you to start taking money out of your Roth IRA. So required minimum distributions go away, and that’s a big benefit of Roth IRAs that a lot of you’re underestimating. A common mistake that I see a lot of retirees make is that they try to do everything they can to save taxes this year without realizing what the tax consequences are gonna be over the rest of their life.

And it’s always better to be proactive than reactive. And doing Roth conversions is a very proactive tax strategy. It’s a strategy that you’ll have to pay more taxes now, but you’ll get a lot of tax savings later. Oftentimes the best time to do Roth conversions is between the time you retire and the time that you start taking Social Security.

Your income is a lot less. You don’t have your wage income anymore, and you’re not taking Social Security, which means your taxes are gonna be lower to begin with. And Susan, that’s exactly where you are right now. You haven’t started taking Social Security yet, but you’re already retired. The answer to your question then is yes, absolutely.

I think your CPA is right, and you probably should start thinking about doing some Roth conversions with at least some part of your pre-tax retirement accounts. Hopefully that gives you something to think about, and maybe I’ve just shifted your perspective a little bit. Realize that your CPAI think is actually great in the advice that he’s given you, and talk to him further about what dollars and how much and when to do it.

He can help you with all that. Thank you for taking the time, Susan, to write in that question. If you’re in the same situation as Susan and as many of you are with all of your money or a ton of your money in pre-tax retirement accounts, and maybe I’ve given you something to think about as well too, but you wanna learn more on my book, more Life than Money.

I’ve written a lot about that. I’m willing to send you more life than money. Absolutely. If free of charge, and you can get it by going to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information and we will get it right out. To get your free copy of more Life than Money, go to providencefinancialradio.com/book and you’ll have it show up on your doorstep in just a few days.

I’m Anthony Saccaro. Thank you for joining us here on KNX AM 10 70. We’re taking this entire show and we’re answering your questions. The next question we have has to do with social security and whether or not you should take it early as possible or whether you should delay taking it. That’s where we’re gonna pick up right here on the Providence Financial Retirement Show.

Thank you for staying locked into the Providence Financial Retirement Show where it truly is all about the income. I’m Anthony Saccaro. We are your retirement income source and this is the place where retirees come for income. Thank you for joining us today, wherever you might be. Really glad that you’re here and we’re answering your questions.

The next question that we have has to do with Social Security, and it comes from Kevin and Thousand Oaks, and he wrote in I’m 66 and still working part-time, but I’m eligible for social security. I don’t necessarily need the income yet, but I also don’t wanna leave money on the table. Is there a clear reason to delay or should I just go ahead and start taking it?

Well, Kevin, you’re not the only one with that question. I find that many listeners have the same exact question, so we’re gonna take some time to give you some things to think about, about whether you should take it now or whether you should wait. Kevin, you use the phrase leave money on the table, and that phrase is what drives a lot of conversation and a lot of decisions because social security isn’t about winning or losing.

It’s not just as simple as getting your money back as fast as possible. Social security is just one piece of your retirement puzzle. And I find that a mistake that a lot of you’re making when it comes to social security is looking at it in isolation. But social security has to be looked at among the bigger picture, and there are questions and considerations that you need to think about before deciding to take social Security or not.

The general idea though, is that the earlier you take it, the less you get, the smaller your benefit’s gonna be, right? And the longer you delay, the higher your guaranteed monthly income’s gonna be. Essentially there’s a trade off and you’re choosing. Do you take more money now for longer term, or do you lock in a higher amount of income later, but for shorter term?

I will also add that the longer you live, the more valuable waiting usually is, regardless of whether you take it at 62 or whether you take it at 70. At about 80, you’re getting the same dollar amount, but if you live beyond 80 years old, you’re gonna get a much greater benefit if you were to wait until 70 years old.

But there’s a lot more to it than that. It needs to align with your plan. If you need the income now, it makes your decision easy. You can’t wait even if you wanted to because you’ve gotta rely on that social security to pay the bills. But Kevin, in your situation, you said that you don’t need it now. So for you, it becomes more of a strategic decision.

You didn’t mention what your marital status is, but if you’re single, then that’s gonna have a different impact than if you’re married. If you’re single and you’re not in great health and you doubt that you’ll make it to 80, then you probably wanna start taking it as soon as possible. But if you’re in great health and there’s no reason you couldn’t live to 90 or a hundred years old, then delaying it probably makes more sense.

Mathematically, you’ll get more lifetime income if you were to wait for a few more years until you reach 70 years old. If you are married though, there’s a completely different dynamic that is oftentimes ignored when it comes to taking social security, and that is the survivor benefit. Simply stated, the survivor benefit says that when one spouse passes away, the survivor is going to keep the larger of the two social securities.

If you happen to be the breadwinner, Kevin and your spouse is gonna step into your social security when you pass away, then waiting till 70 might make sense because your spouse will get a much larger benefit because you waited for three years. That’s a massive consideration, but I find that most people ignore it completely when deciding to file for Social Security.

Ultimately, though I don’t want you to look at Social Security in isolation, it has to fit in with your income plan. It has to fit in with your tax strategy and your Mari status. And when you begin to look at social security as part of the bigger picture, oftentimes it changes the decision that you might have made if you’re just looking at it in isolation.

Kevin, I certainly hope that helps. If you are in a situation though, where you’re not taking Social Security yet and you’re wondering the same thing as Kevin, should you take it now or should you wait? Well, we’ve created an animated video that talks just about social security. I won’t charge you for it.

There’s no obligation. I just want you to have the information. If you’d like to get this animated video, just go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video, and we’ll get it right out and you’ll be able to learn what you need to about Social Security so you can make the best decision for you and your family.

Simply go to providencefinancialradio.com/video and you will have it show up in your inbox shortly. Thank you for taking time outta your day to join us. I’m your host, Anthony Saccaro and you’re listening to the Providence Financial Retirement Show, where it truly is all about the income. Our goal here on the Providence Financial Retirement Show is to give you the education and information you need so you can go into retirement or stay retired with the confidence and clarity that you deserve.

It’s all about peace of mind, and peace of mind comes from having an understanding of. What the risks are and what you need to know to be able to stay retired successfully. Our entire show today is based on answering your questions. Our next question comes from Lisa and Carlsbad. She wrote in, my husband and I are both retired and we’ve been living off our dividends and occasionally selling shares when needed.

Our advisor keeps telling us we’re fine because the portfolio’s average good returns, but I feel uneasy having to sell investments when the market is down. Is that just part of the process or is there a better way to structure this? Lisa, thank you for taking the time to write in that question, and I know that many of our listeners are wondering the same thing, especially because we’ve had such a volatile market.

To start off the year, just recently, the stock market went into correction territory, which means that it was down by 10%. And if you are selling assets to get your income, then you probably have that same uneasy feeling that Lisa has, and rightfully so, because you have a double drain going on in your account.

The market is down, your portfolio is down, that’s drain number one, and you’re withdrawing income at the same time. That’s drain number two. Something I’ve often referred to as a double drain. You mentioned in your question, Lisa, that you’re living off of dividends and selling shares when needed. And that’s a very common total return approach.

The challenge though is that when you sell shares in a down market like we’ve had over the first few months of this year, you’re going to lock in those losses. You’re not just writing volatility, you’re actually realizing it, and every time you sell shares to do whatever it is you want to do, and the market is down, those shares are gone.

They never have the chance to recover when the market actually recovers. You also mentioned, Lisa, that your advisor is focusing on average returns, and that’s a mistake that’s often very, very confusing. You would think that if the average return of the stock market is 10% over time, that as long as you’re taking out less than 10% a year, you’re gonna be okay.

That’s not the way the math works though. Averages have a way of smoothing things out, and I can look you in the eye and I can say that over the history of the stock market, it’s average generally eight or 9%. And when you throw in dividends, it’s gonna be closer to 10% return, somewhere between nine and 10% a year.

Depending on how you measure it, is what the stock market averages over time. But there are many years where the market has gone down by 10 or 15 or 20, or even 30 or 40%. And Lisa, if you’re making withdrawals from your portfolio and the market goes down by 30 or 40% this next year, what good does the average do for you?

That doesn’t do any good at all. You’re gonna have to cannibalize a lot more of your principle because the market’s a lot lower than if the market was actually up or just even with where it is when you started making those withdrawals. If you have 20 or 30 years to go into retirement, you can rely on averages because you’re putting money in.

But when you are making withdrawals from your portfolio, throw the averages out the window. They don’t mean anything. And I think this is what your gut is telling you, which is why you wrote in with the question, the fact that the market averages 10% a year or more over the long run means nothing to you.

You took a loss of 20% in the shares that you had to sell. Here’s something else I want you to think about too. And that is, what if the market goes down two or three years in a row? It’s not like that hasn’t happened many times in the future. If you’re making withdrawals from your portfolio and the market’s going down one or two or three years in a row, it could have a significant impact on the rest of your retirement.

Once again, because the shares that you are selling to live your retirement lifestyle, they never have a chance to recover. They’re gone. I find, however, that a lot of advisors hide behind averages because they sound good, but when you’re in retirement, they don’t mean a thing. And I think it’s a mistake to rely on averages when you are actually making withdrawals.

So yeah, I think your advisor is making a mistake, and I think you’re wise to listen to your gut. And it’s not uncommon for advisors to say that because most advisors specialize in accumulation, they specialize in growth, they specialize in averages. They don’t specialize in retirement like we do here at Providence Financial.

What’s the better way? We’ll answer that question in just a minute, but before we move on and answer that question, I wanna offer you a copy of my book, more Life Than Money, absolutely Free of charge, especially if this is starting to make sense. If you’re starting to understand why you can’t rely on averages when you are retired and there’s no cost, no obligation, we’ll just send it out to you free of charge so that you can get the education that you need.

If you’d like to give more life than money. Simply go to our website, providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information, we’ll get it right out. It’ll show up on your doorstep soon. One more time. Go to providencefinancialradio.com/book to claim your free copy of more Life than Money, and you’ll have it shortly.

My name is Anthony Saccaro. You’re listening to the Providence Financial Retirement Show, where it truly is all about the income. We are your retirement income source, and this is the place where retirees come for income. We’re taking the entire show, we’re answering your questions. We’ve already answered a question about Roth conversions, whether they make sense.

We answered a question about social security and should you take it right away or should you wait until 70 to take it? And we also answered a question as well about whether you should think about shifting some of your portfolio and making some changes as you are getting closer to retirement. Right now though, we’re in the middle of answering a question from Lisa and lemme read the question again ’cause we started answering it, but let me just bring you up to speed just in case you did join us.

The question she wrote in was this. My husband and I are both retired and we’ve been living off dividends and occasionally selling shares when needed. Our advisor keeps telling us we’re fine because the portfolio has average good returns, but I feel uneasy having to sell investments when the market is down.

Is this just part of the process or is there a better way to structure this? We’ve already discussed some of the problems with the advice that Lisa received, so I want to talk about what the solution is. I believe in my heart of hearts that the solution is to focus on interest and dividends. The reason is because when you are living off of interest and dividends, volatility doesn’t matter.

I didn’t say volatility goes away. I just said it doesn’t matter. Volatility becomes a really big deal. When you have to sell principle in order to get your income, if the market goes down 10 or 20 or 30%, you have to sell more principle. In order to get the income you need to maintain your retirement lifestyle.

And if you keep selling income over and over year after year, eventually you could be in a position to have to worry about running outta money. And that’s the number one concern that retirees have today. And the only reason they have that concern is because they’re in a position of cannibalizing their principle, hoping that their principle continues to grow at a pace faster than the rate at which they’re cannibalizing it.

And of course, when the market goes down, your principle’s not growing at all. As a matter of fact, it’s shrinking. You’re making withdrawals at the same time. That takes us back to that double drain that I talked about. Drain number one is the portfolios dropping in value. Drain number two is you’re having to cannibalize your principle at a lower price in order to maintain your lifestyle.

It’s a double drain, and it’s the number one reason why many of you are actually afraid of running outta money before you run out of life. But if you live off of interest and dividends, if you focus on income the way we teach here on the Providence Financial Retirement Show, that goes away. What you need to understand is that interest and dividends are renewable resource.

You can spend them and they will come back again next year. You can spend ’em again next year, and they will come back again the following year. And it doesn’t matter what the value of your portfolio is at any point in time. It could be up, it could be down. But if you’re not cannibalizing your principle.

If you’re leaving your principal intact and living off your interest and dividends, then the volatility no longer matters. And that’s gonna give you the confidence to know that you have income that will last your lifetime, and you never have to worry about running outta money. That’s gonna give you peace of mind.

And that’s what we teach here on the Providence Financial Retirement Show. And Lisa, to round out the answer to your question, you said that you’re living on some interest in dividends and you’re selling some principle whenever you need the extra cash. I’m gonna suggest that you restructure your portfolio so that all of your income is coming from interest in dividends.

That’s going to solve your worry. Thank you for taking the time to write in that question. If you’re starting to realize that interest in dividends is probably the way to go when it gets to retirement, but you wanna learn more. Well, we’ve got a resource that you’re gonna want to get. It’s an animated video that talks about the case for fixed income.

You’ll learn what you need to know about interests and dividends and how you can structure your life and your retirement and your portfolio to be able to live off of interests and dividends so you don’t ever have to worry about running outta money before you run out of life. I’ll send you this video free of charge.

We’ll just email it to you, but you have to let us know you want it, and you can do that by going to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your email, address your information. We’ll get it right out. You’ll learn what you need to know about how to live off your interest and dividends and leave your principal alone.

And I’ll also say it’s fun to watch because it is an animated video. To get your free video, just go to providencefinancialradio.com/video and you will have it in your inbox shortly. Thank you for being with us today, wherever you might be listening from. You’re listening to the Providence Financial Retirement Show, where it truly is all about the income.

My name is Anthony Saccaro and we’re taking our entire show today and we’re answering your questions. And the next question that we have comes from Brian and Glendale, and he wrote in this, my wife and I have been meaning to get our estate plan done, but honestly we’ve been putting it off because it just feels really complicated.

We don’t have a massive estate, maybe around $800,000, including our home. Do we really need a trust or is a will enough? Well, Brian, thank you for taking the time to write in the question, and you’re probably writing in because you know that in addition to owning Providence Financial, which is a retirement planning firm, I’m also an estate planning attorney.

So we’re gonna shift our conversation from some of the financial questions that we’ve had to an estate planning question. And the gist of the question is, do we need a trust or do we need a will? And I might even throw in that Brian believes it’s also complicated. Let me address the complicated issue first, because a lot of attorneys want you to think it’s complicated because the more complicated something is, the more they can charge you.

The truth is though that estate planning’s not complicated at all. I know you mentioned that in your question, Brian, and it’s much more inexpensive than a lot of you might be thinking. Let’s turn though and answer the question, and we need to talk about the difference between a trust and a will. I think that’s a good place to start, and if we start by talking about a will, what you need to know is that it doesn’t avoid probate, in my opinion, a proper estate plan, especially here in California, where my practice is located, really should be to avoid probate.

Probate’s very expensive. It’s public. You’re gonna have to involve attorneys. It’s gonna take a lot of time. And there’s really no reason to have to go through probate at all. But probate is the default if you don’t do anything, and it’s also required if you have a will. A lot of people inaccurately think that if you have a will, you avoid probate.

That’s not the case. A will just helps the court determine what to do after probate is done. On the other hand, when you set up a living trust, it avoids probate completely. If you have an $800,000 estate, it could very well cost you 25 or $50,000 to go through the probate process, but to set up a living trust might only cost you three or four or $5,000, just depending on how you want the trust to work.

That’s why I say a trust is relatively inexpensive compared to what the cost of probate is gonna be. A common mistake that I often see people make though is they think that estate planning is only for your beneficiaries. And that’s actually not true at all. It is true that your beneficiaries are gonna benefit from your taking the time to do estate planning, but it’s not only when you’re gone, there are components of an estate plan that you need to have even while you’re alive.

If you’re ever in a situation where you can’t make your own decisions because you are either in an accident or because maybe you got dementia or Alzheimer’s or something like that. Well, a good estate plan is gonna allow someone to come in and make those decisions for you. A will doesn’t do any of that.

A will is only for when you’re gone. But a trust is a living document, and that’s often why they call it living trust. If it was only designed for when you’re gone, maybe they would call it a dying trust, but it’s not called a dying trust. It’s called a living trust. And that’s because there are a lot of benefits that you’re gonna get.

When you are alive, it’s not just about when you’re gone, but the primary reason to do a living trust is to avoid the excess cost and hassle of probate. And Brian, I certainly hope that gives you the answer that you were looking for. Now, if you’re in a situation like Brian, and maybe you’ve never done any estate planning, maybe you’ve thought it’s complicated, maybe you’ve thought it’s too expensive or you just don’t need it because you don’t have a terribly sizable estate, and you’re starting to realize that you should actually learn more about it.

I wanna offer you a complimentary copy of my book, more Life Than Money, because I designate an entire chapter just talking about estate planning, and I’ve done entire shows on it. I’ve done entire podcasts on it, and much more than just answering Brian’s question. There’s a lot that you need to know, and a good starting point would be to get a free copy of More Life than Money and read that chapter.

I’ll send it to you absolutely free of charge. All you need to do is go to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Leave us your information. We’ll get a copy of More Life than Money right out to you. You’ll have it in a couple of days. Simply go to providencefinancialradio.com/book and we’ll get it right out.

And I know one of the benefits you’re gonna get is learning how estate planning is actually gonna help you while you’re alive, not just when you’re gone. I know that’s what a lot of you’re thinking. providencefinancialradio.com/book. That’s where you need to go to get a free copy of more life than money.

We’ve been answering your questions all show. We’ve answered a question about social security. We answered another question about should you start making changes to your portfolio as you approach retirement. We also answered a question about Roth conversions and now we just answered a question about a living trust versus a will.

Thank you for joining us today, wherever you might have been. I’m Anthony Saccaro. You’ve been listening to the Providence Financial Retirement Show. Have a great week everyone. God bless.