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Out of the tree of Life, I just pick me plumb.

You came along and everything started into hum.

Still it's a real good bet.

The best is yet to come.

Have you thought about retiring?

Do you know what you'll do, how you'll spend your time and income?

I'm Barry Ridhelts and on today's edition of At the Money, we're going to discuss your retirement.

To help unpack all of this and what it means to you, let's bring in Christine Bens.

She is the director of Personal Finance and retirement Planning at morning Star.

She's published numerous books on the subjet, most recently How to Retire Twenty Lessons for a Happy, successful, and Wealthy Retirement.

So let's start with the basics, Christine.

In your book you talk about you need to define your purpose in retirement.

Explain purpose is super important to us throughout our lives, very and that's true as we age.

The problem is is that a lot of people do receive some sense of purpose from their jobs, and so when they step away from work, they're stepping away from part of themselves.

So the idea is, as you approach retirement, make sure that you're being super thoughtful about how you will replace that sense of purpose that you derived from your work, that you should kind of pre populate your activities to find some that do provide you a sense of purpose.

Jordan Grummitt, who is the last chapter of the book, has a whole book about purpose called The Purpose Code, and his point is that there's a lot of purpose anxiety out there that you say you find a purpose and people think really big.

They think, oh, I need to write a book or start a foundation, or climb everest or something like that.

And maybe you do things like that.

But his point, I think is really comforting, which is that small pee purpose.

He calls it like bird watching or gardening, or you know, cooking meals for your family, smaller things that bring you joy.

Those are just fine too well.

So while you're trying to cook up what your big pee purpose might be, just find those things that bring you joy, that give you that animating force for your days.

So daily goals and activities up film and not just kill them.

Onjaro.

So let's talk a little bit about planning.

How important is it when should people start playing?

Is this something you do five months before you retire or is this something you do fifteen years before you retire.

I've really concluded that this idea of retirement has a hard stop where we're not really thinking about it except for like the months leading up to retirement.

It's a terrible model.

And I know why it happens that, you know, the way we work in this society is so intense that people show up in retirement totally depleted and they haven't really been able to envision anything besides like Netflix or traveling or whatever.

And those things are all great, but you should ideally start I think age fifty is kind of a good marker, start thinking about this vision for your later years.

Perhaps you will continue working a little bit longer.

And I love the idea of people at that life stage being super thoughtful and trying to direct the work that they do, taking an inventory of the things that you still enjoy, taking inventory of the things you don't enjoy as much.

I have a stop doing list on my desk of things that I don't enjoy as much that I have to remind myself to stop saying yes to.

But I think that that is a great way to segue very gradually into retirement.

So that the complexion of your work is that you're doing more things that you enjoy and you're shedding some of those things you don't like as much.

So let's talk about income while you're in retirement.

What are some of the more common forms of retirement income.

We automatically think of stock diven ends or bond yields.

How do most people generate the sort of income they need to enjoy a retirement.

I think it starts with non portfolio sources of income.

So being thoughtful about how you are maximizing social security potentially, you know, I've warmed up to the idea of using simple income annuities to augment what someone might get from Social Security.

So the idea is that you you're trying to address your basic living expenses with those non portfolio sources of income, then it just gives you a ton more flexibility with your investment portfolio, and it puts you in a better position to put up with what will be the inevitable ups and downs in the market.

You mentioned bond income and dividend income ary and certainly retirees love the idea of subsisting on organically generated income.

I think that that can be actually a huge trap.

From a portfolio construction standpoint.

I can't tell you how many weird looking portfolios I've seen that have been assembled in the name of kicking off whatever amount of income someone wants.

I'm a big believer in assembling a total return portfolio and then maybe annually taking a step back and saying, what is the best source of funds for me in this year.

For the past few years, it has been trimming large growth stocks, I think for a lot of retirees.

But the idea is that it's a dynamic approach.

It's not a one and done I'm going to source my income through the portfolio and never think about it again.

I like the idea of the dynamic approach.

We're going to come back to portfolio organization in a moment.

But since you brought up social Security, I always get asked, Hey, what's better.

Do I start taking Social Security as soon as I'm eligible, or if I could get by, do I wait until I have to take it and generate the maximum monthly income?

How do you answer that question?

We had seen this steady trend toward people delaying over the past several years, but that seems to have reversed itself a little bit recently as some of the scary headlines about potential adjustments to Social Security have been predominant, And so delaying is a really good strategy for people who can of for to do that, who can afford to subsist on their portfolio income prior to social Security starting.

And everyone's heard the reasons, but you know, you get a guaranteed pickup and benefits for every year that you're able to delay past your full retirement age, and that benefit is also inflation adjusted, so even if you haven't yet claimed, the benefit that you eventually receive will be inflation adjusted to reflect whatever inflation increases have come along.

So it's a terrific strategy, especially for the high earners in a household.

If you've been the main earning partner or the high earning partner, it's often a great strategy for you to delay in order to enlarge for the whole household that social Security income.

For a lot of couples, that's maybe, you know, kind of divide and conquer, where one claims it full retirement age and the other weights until age seventy.

I often recommend the open Social Security tool is kind of a good basic and free tool for people.

And since you brought up portfolios earlier, let's talk about I do like the idea of being dynamic and flexible, where you can look at, hey, we're up twenty percent inequities.

I could peel that off rather than draw something else down.

But how do you advise people organizing structure their investment portfolios from maximum cash flow during retirement.

I've become a huge evangelist for the bucket approach to retirement portfolio planning.

I remember talking to Harold Dvinski, the financial planner, probably twenty years ago, and I was asking him how he sources cash flows for his clients, and basically he said, I run a total return portfolio, and I bolt on this cash bucket.

And he noted that having that cash ear marked for down markets really gave his clients a ton of peace of mind with the long term portfolio.

They weren't bugging him about losses in that portion of the portfolio because, as they knew, in a down market, they could pull from the cash.

So I love that idea of having very liquid reserves, maybe amounting to a couple of years worth of portfolio withdrawals, then maybe fixed income assets accounting for another five to eight years worth of portfolio withdrawals, and then the rest of the portfolio in a globally diversified equity portfolio.

I think it's kind of a simple way to think about it, and I always say, even for financial advisors who aren't using buckets, it's a wonderful client illustration tool.

My senses that people really get it and they're on board with the acid allocation.

It doesn't seem so black boxy to them.

And just to clarify, when you say cash, in my mind's eye, I immediately think money markets with just last summer were paying over five percent some form of investment grade corporates or treasuries.

And then depending on the tax bracket and the state people live in, munis, how do you think about quote unquote cash.

So I would think of cash as being more or less pure cash, money market fund, some sort of high yield savings account.

The idea is that you aren't monkeying around with any potential losses.

These are your cash flow needs and so you don't want any volatility whatsoever.

I would put fixed income assets in that second bucket, and I would kind of stair step at my risk level where maybe I have very short term bonds, just kind of a step beyond cash and then moving into intermediate term bonds.

MUNI.

Certainly, if pulling from the taxable portfolio is part of the equation, you would want to think about them, especially for people in higher tax brackets.

But I'm kind of a purist about that cash bucket, and I think of it as kind of a ero risk portion of the portfolio, probably a federal money market fund or maybe AMMUNI money market fund for higher income folks.

So we started out talking about what actually retirement is and how people should define their purpose.

What about those who want to keep working part time?

How does that transition go from full time to part time or even from full time to fully retired.

It seems like that's a challenging time period.

It's a beautiful model.

What we see when we look at the data is that working is really good for people.

That people who are able to work later in life do tend to be healthier and wealthier, And of course it's a little bit of a cause and effect puzzle there that the healthier and wealthier people are probably able to continue working longer.

And it's important to note that the spoils of being able to work longer are not following equally in our population.

That that wealthier people are able to continue working longer and they need to less.

But it is a really great model for people who like some aspects of their jobs.

So, Barry, I think you're probably a perfect example.

I'm a good example of this where I really like a lot of what I do and want to continue doing it longer.

Have that conversation with your employer, and I realize it's kind of a rarefied position to be in where you are able to have an open dialogue.

But older workers are good, good workers, and I think people should realize the power that they probably have if they've been in their positions for a while.

The idea of retiring at sixty five or seventy is an anathma to me.

At the same time, what was Warren Buffett when he announced he retired earlier this year, ninety four.

That's that's like incredible.

I don't know if I got another thirty plus years in me, but he clearly loves his job.

If you're in a situation where you can keep working, find it not only remunative but fulfilling and bringing you some degree of purpose.

Is there a reason not to retire.

Absolutely not.

I mean you do want to check that you are able to continue to do the job.

I was recently on a panel with Carollen McLanahan, who's an MD and a financial planner.

She made the point that financial advisors should actually consent to take cognitive tests periodically just to make sure that their acuity is where it needs to be in order to do the job.

And you'd want to have a feedback mechanism in place so that people could tell you if you're not really delivering on the on the responsibilities of that job, there needs to be something in place to help you step away from that.

So that's one kind of thing that I think people should troubleshoot in advance.

But it is a beautiful model, you know, especially if people might say, well, I like my job, I just don't like at forty hours a week, and so maybe you can transition where you're you know, taking Wednesday off at first, or you know, maybe just just working three days a week, whatever days it might be.

It Yeah, yeah, exactly.

Three day weekends.

Move into it very gradually.

So to wrap up, like so much else involving our financial life planning goes a long way.

The sooner you start planning, the better you have to think through where your revenue is going to come from, what your spending looks like.

I like the idea of having a dynamic portfolio that gives you flexibility and adaptability no matter what the markets do or what inflation looks like.

And then, most importantly, organize your financial affairs and communicate it with your immediate family.

I'm Barry Ridults.

You're listening to Bloomberg's at the Money.

The best is yet to come.

Come the day you might.

Come.

The day