What if the number you’ve been quietly counting on your whole working life, the one that’s supposed to carry you all the way through retirement, what if it turns out to be nowhere near enough, and you don’t find out until it’s already too late to do anything about it? That is gonna be just one of our topics for discussion today.

I’m Anthony Saccaro. Thank you for joining us here. 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. Really glad that you’re here, wherever life might have you, and we’ve got a great show ahead because we’ve got four listener questions that we’re gonna spend our time answering.

And if you have a question that you might want me to answer in a future episode, all you need to do is go to providencefinancialradio.com and you can ask your question there. And just so you have an idea as to where we’re going in the show, here are the four questions that we’re gonna be answering. How do you know if you have enough to retire?

Number two is what is the best way to withdraw income from your portfolio to make sure you don’t have to worry about running out? The third question is how to protect against inflation. And the fourth question is what percentage of stocks and bonds should a retiree have? That’s gonna be our outline for the rest of the show.

Let’s jump into our first listener question then, and it comes from Linda in Rancho Cucamonga, and she wrote in this: “My husband and I are both sixty-one, and we’re hoping to retire in the next couple of years. We’ve managed to put away right around nine hundred thousand dollars between our 401Ks and some savings, and for a long time, we figured that this was our finish line once we hit it.

But lately, I keep reading that a million dollars isn’t what it used to be, and now I’m second-guessing everything. How do we actually know if we have enough to retire or whether we’re just fooling ourselves?” Well, Linda, thank you for taking the time to write in the question, and I know that there are many listeners who also have the same question as well.

What I wanna mention is that the first notable point is that you said you need $900,000, and that was kinda your goal. My question is why was that your goal? Most people kinda set an arbitrary number that really doesn’t mean anything. $900,000 is kind of an odd number. Most people would round up to a million, and they think that if they have a million dollars, then they’re gonna be fine, and that’s a very common myth that you need a certain number to be able to retire.

But I’d be really curious to know where you came up with $900,000. When I’ve asked other people this question, where they came up with their number, most of the times I hear something like this: “It just sounded like a good number,” or, “It was something that someone told me I needed,” or, “I read in a book.” And most of the times, that number is just a guess.

It doesn’t mean anything. The next part of your question, Linda, is do you have enough? And my follow-up question to you, again, would be what does that mean? What is enough? Enough for what? Enough to get you income? Enough to leave a legacy for your kids? Enough to offset inflation? Or, if you’re like most people, all of the above. Most people have set an arbitrary number as a goal, but they don’t really know what enough is.

They don’t really have a purpose for their money. Unless you know what the purpose of that money is, then it’s hard to answer, do you have enough? Usually, when someone asks me, do I have enough, it usually means, do I have enough of a portfolio to solve the income gap that I’m gonna have in retirement?

You’ve heard me say many times before on the Providence Financial Retirement Show that my definition of a successful retirement is as much income as you need until the day you die. And when you look at your income and your expenses, and then you consider the amount of income you’ll be getting from Social Security and a pension and maybe other sources, I find that most people actually need their portfolio to give them some additional income because the income from Social Security and pension isn’t going to cover all of their goals.

There usually is gonna be a gap, and the income needs to be filled from their portfolio, and that’s probably what you mean as well when you ask, “Do you have enough?” Before we continue answering your question, though, Linda, I want to offer the rest of you a complimentary resource that we’re gonna make available to you absolutely free of charge just because you’re a listener of the Providence Financial Retirement Show, and this is a commissioned report that is going to answer the question, how much do I need to retire?

It’s a very common question, and we have a report that will help you answer that question once you get it. If you’d like to receive it, very easy. All you need to do is go to providencefinancialradio.com/report. Again, it’s providencefinancialradio.com/report. Give us your information, and we will email this report right on over to you.

But it will help you answer the question and give you some things to think about with regards to how much do you actually need to retire. Once again, if you want that report, just go to providencefinancialradio.com/report, and you’ll have it in your inbox shortly. I’m Anthony Saccaro. Thank you for joining us today here on the Providence Financial Retirement Show.

We’re just getting started, and we have four listener questions that we’re answering today. Linda had written in a question letting us know that she and her husband are both sixty-one years old and want to retire in a few years, and they have a nine hundred thousand dollar estate, and they just wanna know if that’s enough.

As we’ve already touched on, we need to know what enough is. But if Linda is like most of the retirees that we talk about, enough means that it has to give her the amount of income she needs from her portfolio to cover the gap that she’s probably gonna have if Social Security doesn’t pay her bills. And if the purpose of your money is to produce income in retirement, then that gives us something to talk about because there’s a right way and a wrong way to do it.

The starting point, though, is to know what your gap is. You have to list out what your income sources are. Then you have to list out what your expenses are. You have to make sure that you keep taxes in mind as well. And then you have to know what the difference is, the amount that you’re gonna need to actually pull out of your portfolio each month so that you can fill that gap and live the retirement that you have in mind.

That’s where the real planning begins. You have to know how much income your portfolio can comfortably give you so that you then don’t have to worry about running out of money before you run out of life. Of course, the wild card here is we don’t know how long you or your husband are gonna live. But I find that most people often underestimate the amount of time that they could live.

I was just talking with someone recently who asked me to build a plan up to eighty-five years old because according to them, that’s the average life expectancy. And if I were to build a plan for them to essentially be out of money by the time they were eighty-five, then to them, that would be successful.

But we have to remember that averages are just averages. It means that some people are gonna die sooner and some people are gonna live longer. Well, what if you’re on the side of the average that lives longer? What if you live to ninety or ninety-five or a hundred, but your plan caused you to run out of money when you were eighty-five?

That wouldn’t be a great scenario to be in. Linda, I really hope that gives you something to think about and that I’ve answered your question. Thank you for taking the time to write in. The question then becomes how much can you comfortably withdraw from your portfolio so that you’re never in a position to have to worry about running out of money?

And we have another listener question that’s really on point to this a little later, so I’m gonna address this in more detail in a few minutes. But I wanna talk about the rule of 4% because it’s an age-old rule that really gained popular back in ’94 when it was developed by William Bengham. And the rule is that if you’re invested for growth, mostly in mutual funds, that you could take about 4% a year from your portfolio and never have to worry about running out of money.

And that’s a rule that I hear a lot of retirees quote today. They just think that if they take 4%, they’re going to be just fine. The problem, though, is it is just a rule of thumb, and it’s even been questioned. Back in the ’90s, interest rates were very, very high. And even though today interest rates are much higher than they were just three or four years ago, the fact is that they’re still much lower today than they were back in the early ’90s when this rule was thought up.

And there have been studies that have showed that the rule of four percent might actually be too much. As a matter of fact, William himself even said that this rule of four percent is outdated. As a matter of fact, I had the privilege of being quoted in a US news report where they interviewed William, and then they asked several advisors about the rule of four percent, and I had a chance to add some commentary, and my commentary is that it’s outdated.

As far as I know, the current rule is three point one percent. At one point it was two point eight percent. And what that really means is, because it’s been adjusted so much, no one really actually knows what the rule is. If you’re invested for growth and you’re making withdrawals from your portfolio, we don’t really know how much you can safely withdraw because it depends on what the market does.

Ultimately, what this means is that if you’re relying on this rule, you have to hope that the market acts in your favor in order for the rule to work. Your retirement and the success of it is tied to what the market does, and I don’t think that’s a successful retirement. I don’t want you to be able to retire only if the market does well.

I want you to be able to retire on your schedule, not only if the market acts favorably. And that’s why I often talk about living off of your interest and dividends, because if you do that, you’re not touching your portfolio at all, and you don’t have to wonder whether or not you’re ever gonna run out of money, because you can’t if you’re not spending your principal.

And if that sounds attractive, but you would like to learn more, I wanna offer you my book, More Life Than Money, absolutely free of charge, just because you’re a loyal listener of the Providence Financial Retirement Show. If you’d like to receive a copy of More Life Than Money, we’ll send it to you. You just have to go to providencefinancialradio.com/book.

Again, it’s providencefinancialradio.com/book and give us your information, and we’ll ship it right out, and you’ll have it within a few days. But in More Life Than Money, I wrote an entire chapter about how to live off your interest and dividends and leave your principal alone. To claim your free copy of More Life Than Money, one more time, just go to providencefinancialradio.com/book and we will get it right out.

You’ll have it shortly.

Thank you for staying with us. My name is Anthony Saccaro. You’re listening to the Providence Financial Retirement Show. Really glad that you’ve taken some time out of your day to join us, and I trust that you’re enjoying today’s show. The purpose of the Providence Financial Retirement Show is simply to help you get the information you need so that you can have the peace of mind that you deserve in retirement.

Today, we’re answering four listener questions that I know are relevant to many of you. The first question that we just answered is: how do you know if you have enough to retire? The question that we’re gonna answer here in just a minute is: what’s the best way to withdraw money from your portfolio? The third question that we’ll cover shortly is how to protect against inflation, and then we also have a question about stocks and bonds and what percentage of each a retiree should have in their portfolio.

Let’s jump into our next question, though, and this one comes to us from Robert in Temecula, and he wrote in this: “I spent my whole career saving and being disciplined about putting money away, and now that I’m actually about to retire, I’m realizing I have no idea how to do the opposite. After thirty-five years of building this nest egg up, how do I start pulling money out of it without panicking that I’m gonna drain it too fast?”

And that’s a question that I know is not unique to Robert, but many of you have that same question as well. So thank you, Robert, for being the one to take time to write in that question so we can answer it here on the Providence Financial Retirement Show. What you’re really referring to, Robert, is the mindset shift that needs to occur when you retire.

If you’ve listened to the show for any length of time at all, you know that I often talk about the psychology of retirement. Retirement is not just about the math. It’s not just about the money and the size of your portfolio and how much you can take out of it. That’s certainly a part of it, but it’s not the only part.

As a matter of fact, I would even suggest that the bigger component of retirement is what you’re referring to, Robert, and that is the psychological component. When you do something for thirty-five years, regardless of what it is, it becomes a habit. And are habits generally easy to break or are they generally hard to break?

Yeah, they’re usually pretty hard to break. For thirty-five years, you’ve been saving, you’ve been responsible, you’ve been making good decisions, you’ve lived within your means, and you’ve consistently been putting money into your retirement accounts. That’s a habit. And now that you’re about to retire, you’re experiencing the same withdrawals that a lot of others have experienced, and that is now you have to change your habit.

But it’s not easy to do. It’s also not just psychological. It’s not just something that you can say, “Well, I’m just gonna change.” It’s neurological as well. It’s physiological. Scientists and medical researchers have proved that when you do something over and over again, it actually creates neural pathways in your brain.

Think about these pathways as kind of like water running through a trench. The more water that runs through, the faster it runs through, the more consistent it runs through, the bigger the trench gets. And if you wanna fill in that trench, it’s gonna take a long time the longer that water has been running.

And these neural pathways work exactly the same way. Every time you put money into your bank account and you save it, every time money comes out of your paycheck and goes into your 401, that deepens the trench, and the neural pathway becomes that much deeper, and you can’t just go and break it. The good news, though, is that now that you understand it, it does become much easier to overcome depending on how you’re invested.

When we were answering Linda’s question in the last segment, we talked a little bit about the rule of 4%, and the entire gist of the rule is that you have to sell principal in order to get the income from your portfolio that you need to live the retirement that you want. The inherent problem with cannibalizing your portfolio to get that income you need every month, that has a huge psychological impact because you know intuitively that the more you have to cannibalize your principal, the faster your money’s eventually gonna run out.

And if you’re doing this, then you know that it’s not a good feeling. And now here you are in retirement just having not a great feeling about retirement, always wondering whether or not you have enough, and not necessarily living the stress-free, peaceful retirement that you deserve. Why? Because you’re cannibalizing your principal. When you’re living off of your interest and dividends, however, the cannibalization, that goes away.

You can spend your interest and dividends with no impact on your principal whatsoever. And when you know that you can get true income from your portfolio, what it does is it really helps you overcome the fear of spending money because you know that you’re not touching your principal at all, but you’re still getting your income.

And because you’re listening to the Providence Financial Retirement Show, if you wanna learn more, I’ve got a resource that I’m willing to email you free of charge. It’s an animated video that’s only seven or eight minutes long, so it’s really short to watch, but because it’s animated, it’s also fun. It’s called The Case for Fixed Income.

So if you like the idea of being able to live off interest and dividends and protect your principal at the same time, you’re gonna learn a lot from this video. If you wanna get it, just go to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your information and we’ll email it to you shortly.

One more time, to get your free animated video called The Case for Fixed Income, go to providencefinancialradio.com/video and you’ll have it shortly. And you’ll learn what you need to know to be able to get income from your portfolio, all while leaving your principal untouched. I’m Anthony Saccaro. Thank you for joining us today, wherever life might have you.

You’re listening to the Providence Financial Retirement Show. My goal is to help you have that education and information you need so that you can have the peace of mind in retirement that you deserve. We’re answering four different listener questions today about four different topics, and right now, we’re in the middle of answering Robert’s question.

And if you just happened to stumble across our show, let me repeat the question for you so you can be filled in. Robert wrote in that he spent his entire career saving and being disciplined and putting money away, and now that he’s about to retire, he realizes that he has no idea how to start taking money out of his accounts, and he just wants to make sure that he doesn’t drain it too fast. And as I already mentioned, if you’re having to sell principal, you’re cannibalizing your portfolio, and you’re always gonna worry about draining it too fast because you’re gonna be dependent on what the stock market does or what your investments do.

If your investments continue to grow every year more than you’re taking out, then that’s great. But if your investments go backwards and you are withdrawing at the same time, that’s what I often refer to as a double drain. Your portfolio is going down, and you’re selling principal at the same time to make ends meet and live the retirement you want.

That’s no good. And that’s exactly where that uneasy feeling that Robert has comes from. And if you’re retired and making withdrawals from your portfolio, you probably know exactly how Robert feels. As I just mentioned a minute ago, though, one of the easiest ways to break the habit of putting money in and to feel much more comfortable withdrawing money is to withdraw only your interest in dividends.

This way, you leave your principal alone, and you still get your income. And I have retirees tell us all the time that once they’ve made this shift, their peace of mind just goes through the roof because they know they’re no longer in a race against time. Their retirement’s not dependent on what their portfolio does.

It’s not dependent on the stock market or some of the geopolitical concerns. They know that they’re getting income without cannibalizing their portfolio, and that just helps you live retirement with more peace than you can possibly have if you’re selling principal. Making this shift then from being invested in investments that require you to cannibalize your portfolio to investments that pay you interest and dividends, that’s certainly a good first step, but it’s also not the whole story and not where the story ends.

You also wanna make sure that you’re withdrawing from the proper account. Many of you have some taxable accounts. You’ve got some money in the bank. You’ve got money in IRAs, maybe some Roth IRAs. And you have to coordinate where your withdrawals are gonna come from so that you can be as tax efficient as possible too.

The mistake that I often see people make is because they’re trying to avoid taxes this year, is they take whatever excess withdrawals they need from the accounts that have already been taxed, and they try not to withdraw from their 401s or IRAs, which have never been taxed. By doing this though, you create a couple of ramifications.

The first potential problem is that once that taxable account is gone, well, now you’re gonna be forced to start taking from your IRAs, and that could push you into different tax brackets and cause your Medicare Part B premiums to go up. There’s a lot of potential negatives for withdrawing and depleting your taxable account first and then now having to rely on your pre-tax retirement accounts.

A second negative is that you might actually be missing out on some tax opportunities. I find that many retirees could be taking out money from their pre-tax retirement accounts and only paying maybe twelve or fifteen percent tax. And because they’re not aware of how the tax code works, they’re not doing that.

They’re withdrawing from their taxable accounts, and once the taxable accounts have been depleted, now they’re gonna be forced to start taking all the withdrawals from their IRAs. And again, it might be a much higher tax bracket, which could have been avoided had they have just structured their income properly.

If you wanna quit worrying about running out of money before you run out of life, then I think it boils back to what we just talked about. You should probably be focused more on getting income from interest and dividends and have a strategy as to which accounts you’re gonna withdraw from. Those two things are really gonna dramatically improve your peace of mind because now you know that you’re being as tax efficient as possible, and you don’t have to worry about running out.

And thank you, Robert, for taking the time to write in that question. If you wanna learn more about how to do this, in my book, More Life Than Money, I spend a significant amount of time talking exactly about this topic, and certainly in much more detail than I could cover here on the show. Because you’re a listener of Providence Financial, I’ll send you a copy of More Life Than Money absolutely free of charge.

I won’t even charge you shipping like some people do. But you do have to request it, and you can do that by going to providencefinancialradio.com/book. Again, it’s providencefinancialradio.com/book. Just leave us your information and a FedEx truck will show up in front of your house in just a few days and give you a copy of More Life Than Money, and you’ll be able to learn more about how to create income from your portfolio and be as tax efficient as possible.

Simply go to providencefinancialradio.com/book and you’ll have your copy soon.

It’s good to have you with us today. You’re listening to the Providence Financial Retirement Show. My name is Anthony Saccaro. We are your retirement income source, and this is the place where retirees come for income. We’re taking today and we’re answering four listener questions that I know many of you have, and the next question that we’re gonna answer has to do with inflation.

Before we go there, though, I wanna remind you, if you have a question for the show, all you need to do is go 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 go into our next question, though, and it comes from Sandra in Thousand Oaks.

“I’m 68 and retired three years ago. When I built my plan, everything felt comfortable. But with how much prices have gone up just at the grocery store and the gas pump, I’m honestly scared. How do I keep inflation from slowly wrecking the retirement that I’ve worked so hard for?” Sandra, thank you for taking the time to just be so open and ask that question ’cause You’re not alone.

I get this question almost every day from retirees that are worried about the price of energy and groceries and everything else. The bad news is it doesn’t look like inflation’s going away anytime soon. The good news is, if you’re invested right, you’ll easily outperform inflation by two or three percent and have no problem keeping up.

Let’s touch on inflation, though, really quick. All the indicators seem to be telling us that inflation is continuing to rise. When COVID first happened, inflation went through the roof, and you remember that, and then the Federal Reserve raised interest rates very quickly to combat it, and inflation has come way, way down.

The Federal Reserve’s target is two percent, and over the past few years, inflation has gotten down into the high twos, low threes, just depending on the measure you use to look at it. Now, though, it’s starting to rise again. And whereas at the beginning of the year it had been forecast that the Federal Reserve would lower interest rates maybe two or three times, now it’s kind of looking like they’re gonna have to raise interest rates.

And if you are a saver, that’s actually good news for you. Because whenever the Federal Reserve raises interest rates, then bond rates rise and other investments that work like bonds that pay dividends or interest, those generally go up as well, which means you can actually get more income in a higher interest rate environment.

It’s really not all bad news. Retirees, though, tend to feel inflation differently than everybody else. Why? Because you’re on a fixed income. You know that you’re not gonna get another raise because you’re not working anymore. You know that you can’t go get another job that pays more. It just becomes much more difficult to fight inflation if you’re retired.

And because you’re on a fixed income, it tends to affect retirees differently. On top of that, inflation for retirees tends to be about one or two percent greater than for the average population. The reason is because retirees are wanting to do the things in retirement that they were waiting for. While you’re working and looking forward to retirement, most retirees are building a bucket list.

And when you get into retirement, you’re gonna do those things. And a lot of those things involve travel. That’s the number one bucket list item. And the travel companies know that you’re gonna travel regardless of how much the rates go up, so they tend to increase faster than everything else. And if that’s not bad enough, then you throw in healthcare issues.

And healthcare tends to rise faster than everything else as well too. And those are two main reasons why inflation for retirees tends to be a little bit more than inflation for people that are still working. Inflation certainly is a big risk to your retirement though, and healthcare is as well too, which we just mentioned a minute ago.

What a lot of you have may never thought about is that retirement’s actually a risky business. You only get one shot, and it’s the most expensive purchase that you’re ever going to make. So you need to know what these risks are. And because our focus is on working with retirees, we’ve put together a short animated video that identifies the seven most common risks that retirees take and, of course, what you need to do to avoid them.

If you’d like to receive this video, I’ll send it to you absolutely free of charge, but you do have to ask for it. You can do that by going to providencefinancialradio.com/video. Again, it’s providencefinancialradio.com/video. Leave us your email and your information, and you’ll have that video emailed to you very shortly.

To claim your free video about the seven most common retirement risks and how to avoid them, just go to providencefinancialradio.com/video and we’ll get it right out. I’m Anthony Saccaro. Thank you for spending some time with us today. 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.

Really appreciate that you’ve joined us today, and we’re in the middle of answering a question about how to protect from inflation. Up to this point, we’ve just talked about the fact that inflation seems to be on the rise, and that inflation for retirees tends to go up one or 2% more than it does for the general populace.

I wanna take a minute though and talk about a dangerous thought that I know for sure many of you are having. I was just talking with someone the other day who basically said, “I’m gonna be invested all in the stock market through my retirement because it’s a great inflation hedge.” And that’s partially true, but it’s also partially false, and it’s that partially false part that if you’re not prepared for, could really kill your retirement.

Let’s tackle the partial truth and see what that’s all about. If you look at the stock market over the long run, generally speaking, it averages eight or 10%, depending on the metrics that you use to review it, and that certainly outpaces inflation. So there’s truth to that. The problem, though, is that it relies on averages, and averages can be very misleading.

If I tell you that I have two buckets in front of me and I’m sitting on a stool, and the bucket that my right foot is in is full of ice water, and the bucket that my left foot is in is full of boiling hot water, and as you can probably imagine, I’m not feeling great at all because my left foot is burning and my right foot is freezing.

And that’s also true when it comes to average return of the stock market. A lot of the statistics that you read about, the financial advisors you talk to, they tend to hide behind the averages because the averages smooth things out. And if you have 30 years in front of you, you can rely on the average.

But if you have one or two years until you’re gonna retire, the average means absolutely nothing. I was having a conversation with a lady just recently, and she mentioned that she would expect her $2 million portfolio to grow by 15 or 20% over the course of the next two years before she retires. And when I asked her where she came to that number, she said, “Because the average of the stock market is generally 8 to 10% a year, and if it grows by 8 to 10% a year, that means that in two years I’ll have 15 to 20% more.”

And that was her general thought process, and I know that many of you are thinking the same way. Here’s the question that I asked her, though, and I’m gonna ask you: Is it possible that over the next one or two years, the market actually goes down? Of course it’s possible. As a matter of fact, I think it’s more probable that in the next one or two years the market is lower than it is right now just based on everything that’s going on, and that’s where relying on averages could actually be really dangerous.

If you’re gonna retire in the next couple of years and you’re planning, like this lady was, on having another 15% or 20% more in your portfolio, well, how’s your retirement gonna be affected if your portfolio is actually down by 15% or 20%? The partial truth of this answer then is that, yes, over time the market averages 8% to 10% a year, but where this becomes misleading is that doesn’t mean that’s what the market’s gonna do over the next one or two years or however long you are counting on.

Just because the market averages 8% to 10% per year over the last 30 years doesn’t mean that’s what you’re gonna get in the next few years. Could be quite the opposite. That takes us to something else that I often hear though, and that is, how am I gonna keep pace with inflation if I am in bonds or if I’m in fixed income?

And it’s almost as if many of you believe that if you’re in fixed income, then you’re gonna fall back to inflation. That’s just really not true. On the contrary, I would actually suggest to you that if you’re invested in fixed income, it’s actually a more secure way of staying pace with inflation and really even outperforming it if you work with an income specialist like we are here at Providence Financial.

When you have a fixed income portfolio, that means that you’re gonna be getting interest and dividends, and right now, if you’re invested properly for interest and dividends, you can easily get five, six, or seven percent a year. And if inflation’s only three or three and a half percent, which is kind of where it is right now, you’ve essentially doubled inflation just because you were invested in fixed income.

So it’s really quite a myth that if you’re invested for a fixed income that you don’t keep pace with inflation. And I think the reason that a lot of people believe that is because most brokers focus on stocks and mutual funds, and they tend to plant the idea that fixed income won’t stay pace with inflation.

And that might be true because they’re not income specialists, and they wouldn’t know how to keep pace with inflation using their strategies. But as I mentioned, because we are income specialists, you’ll probably get close to double what inflation is, and it’s a much safer way to keep pace and even outpace inflation.

If you’re sitting there starting to wonder whether or not what you’ve been told and believed is not quite as true as you thought, and you’re interested in learning more, well, I’m interested in sending you my book, More Life Than Money, because I talk about the ten most common mistakes that I see retirees make and how to avoid them, and I certainly spend a lot of time talking about how income can help you outpace inflation if you do it right.

If you’d like to get a copy of More Life Than Money, very easy to do. You just need to go to our website, which is providencefinancialradio.com/book. Again, that website to go to is providencefinancialradio.com/book, and within a few days, a hardcover copy of More Life Than Money will show up right on your doorstep.

And you’ll be able to learn what you need to know about how to keep pace and even outpace inflation safer than if you were invested in the stock market. To claim your free copy of More Life Than Money, just go to providencefinancialradio.com/book and we’ll get it right out.

I’m Anthony Saccaro. You’re listening to the Providence Financial Retirement Show. I’m really glad that you decided to continue joining us here, so certainly hope you’re enjoying the show. We’re in the process of answering your listener questions. We’ve already answered a question about how do you know if you have enough to retire.

We answered another question about the best way to withdraw income from your portfolio. And the question that we just contemplated is how to protect against inflation. Our last question of the show, though, comes from Michael in Santa Clarita, and he wrote in this: “I’m sixty-four and just about to pull the trigger on my retirement.

My whole life I’ve been pretty aggressive with my investment, and it’s worked out well for me, but now I’m hearing that I’m supposed to dial way back and get more conservative. Part of me worries that I’ll be too cautious and run out of growth, and the other part worries that one bad year might wipe me out and I’ll lose everything that I’ve saved.

How do I figure out the right mix?” That’s a question that we get all the time, and I appreciate you taking the time, Michael, to write in. I think you’re right to be asking the question, though, and a lot of people are asking that question today because there really is a lot of uncertainty in the world around us when you consider inflation rising and the war and all the other geopolitical concerns that are happening as well.

And there’s also a couple of myths that are surrounding this question. One of the myths that we already discussed, and I don’t need to go over it again, is that stocks will be a good inflation hedge. And over the long run, that’s true, but over the next year or two, it doesn’t mean anything. Especially if the stock market goes down.

It’s not a good inflation hedge if inflation goes up and the stock market goes down. That’s a negative inflation hedge, as a matter of fact. There’s another myth out there as well that basically is a formula. It says that if you take 100 and you minus your age, the answer is the amount of stocks that you should have in your portfolio.

So if you take 100 and you minus your age 60, the answer is 40, and according to this myth formula, you shouldn’t have any more than 40% of stocks in your portfolio. And there’s been some commentary and some discussion about whether the right starting point is 100 or whether it should be 125, but either way, it’s a formula.

And the problem that I have with that is that your life is not a formula. Your life is one of a kind. Your retirement, that’s gonna be very specific to you. And to take a formula and apply it to everybody all the time just doesn’t make sense to me. It’s kind of like the rule of 4% that we’ve already talked about.

It’s just a rule of thumb. It’s not something that you should base your entire retirement future on without taking into consideration your individual situation. The answer to your question, Michael, is really gonna be very situational. So let’s talk about a few situations that retirees are in. And actually, now that I think about it, before we get into that, I want to offer you something that I think is gonna be very helpful.

When the conversation comes up about being more conservative in retirement, it usually comes down to stocks and bonds. What percentage of stock should I have? What percentage of bond should I have? And it’s not just bonds. Bonds really represent fixed income. And as we’ve already previously noted, fixed income’s a good way to outpace inflation.

It’s a good way to be able to make withdrawals from your portfolio without having to sell principal. And something that I don’t think we noted yet is that most of the times fixed income is more conservative than stocks, and that’s one of the reasons that as you get older, most people believe they should have some fixed income in their portfolio because it’s more conservative.

If you’d like to learn more about fixed income, I’ve got something that you’re gonna wanna watch. It’s an animated video that we’ve created, and it talks about the case for fixed income. If you wanna get it, we’ll email it to you. You just need to go to our website, give us your information, and you can do that by going to providencefinancialradio.com/video.

Again, it’s providencefinancialradio.com/video. Leave us your information, and shortly you’ll have an email in your inbox. All you gotta do is press play, and you’ll be able to watch this animated video. It’s only seven or eight minutes long, but you’ll learn a lot about fixed income and how it can help you get the income you want without touching your principal and make your portfolio more conservative at the same time.

Just go to providencefinancialradio.com/video and you’ll have it shortly. My name is Anthony Saccaro. Thank you for staying locked into the Providence Financial Retirement Show, where it truly is all about the income. We’ve been spending our entire show answering your questions. The question that we’re in the middle of answering right now came from Michael in Santa Clarita, and he really wants to know what his portfolio should look like in retirement, what percentage of stocks and even what percentage of fixed income.

And I wanna give you the general thought process, and then what we’ll do is we’ll talk about some specific scenarios that you may find yourself in. The general thought process is that whatever income you need from your portfolio should come from interest and dividends. And if you’re a regular listener of the Providence Financial Retirement Show, then you know that we talk about this all the time.

If you’re making withdrawals from your portfolio, chances are you’re cannibalizing your principal, but if you’re living off interest and dividends, you’re leaving your principal untouched. And that’s the general thought. If you need income from your portfolio, get it from interest and dividends without having to sell principal.

That then takes us to the more specific situations when it comes to when you retire, how much should you have in stocks and fixed income? There are three situations that I can think of that most retirees fall in. One, they don’t need any income from their portfolio at all. Number two, they need some income from their portfolio, but not a lot.

And number three, they need a lot of income from their portfolio. And the answer to the question of what that mix should be is gonna depend on what situation you fall in. If you happen to not need any income from your portfolio at all, and you don’t foresee needing income for at least the next ten years, I think you can stay fully aggressive.

You don’t necessarily need to make that change. You may wanna make that change because investing for income is more conservative, but if you don’t need income from your portfolio, then you can ride out market swings. And quite frankly, that’s not a bad position to be in. What about the second scenario?

What about a scenario where you need some income from your portfolio, but maybe not a huge amount? In that scenario, it may very well make sense to take a portion of your portfolio, position it for income so that you can live off the interest and dividends that you need, and then the rest of your portfolio that’s not there designed to give you income, you can invest that aggressively.

Because that part of your money, your portfolio, is gonna be able to ride out the ups and downs of the stock market, and you’ve already got your income covered. We had a good example of this just recently where a lady had two point four million dollars in her portfolio, and she needed eighty thousand dollars a year of income.

So we took one point six million dollars, and we invested it really conservatively at five percent, and in the end, she’ll get somewhere between five and six percent a year of income from her portfolio. But five percent a year on one point six million dollars is eighty thousand dollars a year. That takes care of her income needs.

That then left her another eight hundred thousand dollars that she could afford to be more aggressive with because she didn’t need it for income. And I think that’s really a prudent way to handle that second scenario. Invest the part that you need for income to get the income you need, and then you can invest the rest for growth.

The first scenario then is you don’t need any income at all from your portfolio. The second scenario is you need some income from your portfolio, but not a huge amount. And that takes us to the third scenario, which is you need as much income from your portfolio as you can get. And that’s a different scenario.

I have to say, it’s probably the toughest scenario as well too, because you don’t have a lot of room for flexibility. If you stay on the stock market and the market crashes, it’s gonna absolutely affect how much income you can get from your portfolio. And because you already need a lot of income, it could dramatically affect your retirement.

And in this scenario, it may make sense to switch a majority of your portfolio from growth to income because you need a lot of income. And those are certainly the three scenarios that most of you fall in. You either don’t need any income from your portfolio at all, you need some income, or you need a lot of income.

And Michael, I certainly hope that that helps answer your question. Thank you for taking the time to write it in. Here on the Providence Financial Retirement Show, you know we spend a lot of time talking about income because in retirement, you’re going to need income. And in my book, More Life Than Money, I wrote about how you can get income from your portfolio and still leave your principal untouched.

If you wanna receive a copy of More Life Than Money, I’ll send it to you, no obligation, just free of charge because I wanna make sure that you don’t have to worry about your retirement. You deserve to have the peace of mind that everybody else who is a client of ours has. But you do have to ask for the book, and you can do that by going to providencefinancialradio.com/book.

Again, it’s providencefinancialradio.com/book. Leave us your information, and More Life Than Money will show up on your doorstep in just a few days. Just go to providencefinancialradio.com/book and you’ll have it soon. I’m Anthony Saccaro. Thank you for joining us for today’s Providence Financial Retirement Show, where we’ve spent our time answering four listener questions.

I certainly hope you’ve learned something that you didn’t know before, something that’s gonna allow you to have a greater peace of mind, more confidence, and more clarity in your retirement than you had before you listened to the show. I really appreciate you being here. We’ll see you next week, same time, same place.

Have a great week, everyone. God bless.

Disclaimer: This transcript is provided for educational and informational purposes only and reflects a general discussion from a live radio broadcast. It is not intended as personalized financial, tax, or legal advice. Individual circumstances vary, and listeners should consult a qualified professional before making decisions.