What Percent Can You Take from Your Retirement Funds to Live Your Lifestyle?

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Episode Transcript

(00:00):
All topics and securities mentioned on straightTalk from the House or for informational purposes
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(00:22):
financial planner Tracy Anton right here thirteenten wi BA. Don't get to know
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(00:45):
a date that's convenient to you.Again that website, t Anton Investment House
dot com. Let's tell pH numberof the office in Middleton six O eight
five zero one fifteen forty nine.That's six O eight five zero one fifteen
forty nine and joining us This morningis certified financial planner Tracy Anton. Tracy,
how you doing this week? I'mdoing fabulous, Sean, how about
you. I can't complain at all. It's been a little hot these fast
few weeks, but it's true.This is true. Yeah, I like

(01:07):
it hot. How people do?I don't mind it. I you know
what, I will take it.I will. I will take ninety degree
temperatures over zero or worse anything.So remember there's always a win show when
it comes to zero, there's alwaysa window. Yes, it's a very
good point. So you know,Tracy, We're gonna talk this week about
what percent can you take from yourretirement funds to live your lifestyle? And

(01:30):
I've got to ask what kind ofbrings this up? Well, I know
it's a big question for retirees.They want to know what they can take
out and they don't want to runout of money, right, but they
also don't want to leave too muchon the table and they want to live
their lifestyles. So it really makesa difference what withdrawal rate you decide you
want to take, and it makesa difference on whether you can retire early

(01:52):
or later, or how much incomeyou're going to have and what your lifestyle
is going to look like. Sothis week I saw a pretty fun article.
It was debating how much money retiresshould draw from their accounts, and
of course who weighed in but SusieOrman. So yeah, so she's a
financial planning guru, and you know, she weighed in on this four percent

(02:15):
rule of thumb that they have andit's just kind of an industry benchmark,
the four percent rule, and shesays it's dangerous and then she said and
it doesn't work anymore. You couldjust see her say it, right,
And what I found pretty interesting,of course, was the creator of this
four percent rule, Bill Bengan.You know, he weighed in, and

(02:38):
of course he says the opposite.So there was this, you know,
at least the way the article waswritten, it was this a little bit
of tussle here on whether is ityou know, it is a four percent
rule accurate? Is it all?You know? No longer appropriate because everything
that's going on in the world.But I just was like, oh,
this will be fun on topics.It sounds exciting a little bit of duel

(03:01):
for a dueling from a couple ofbig time names, that's for sure.
As we talked this Morning with certifiedfinancial planner Tracy Anton here on thirteen to
n WIBA. Don't forgive mention thewebsite. If you're looking for money management
to portfolio management t Anton investment Housedot com. You can schedule appointment right
there online. It's t Anton InvestmentHouse dot com. So we hear about

(03:21):
the back and forth there, Whatexactly is the basis of this? What
will we hear about the four percentrule? What Tracy are we talking about
there? Yeah? So again,I think the four percent rule is just
a benchmark. It's a place tostart with, and most people recognize that.
But Bill Bengan is the creator ofthis, and he based it on
decades worth of statistics that he lookedat retirement spending and also the stock and

(03:46):
bond returns, and it showed thatretires could reasonably expect their funds to last
thirty years or longer if you takea four percent withdrawal of your nest egg,
and in some cases actually it wascloser to fifty years. So it's
pretty interesting. But the four percent, it also had an inflation writer that

(04:08):
it could go up as well,and in the four percent, it's pretty
it's a pretty straightforward thing to followso I think that's also helpful for people.
It's like, Okay, I'm justgoing to take four percent of my
four one K or whatever retirement assetsyou have, including you know, brokerage
accounts and things like that too.So I call that, you know,
working capital type thing. But itwas really a straightforward rule, easy to

(04:30):
understand. If you have a milliondollars, for example, your first year,
you would spend forty thousand, youknow. And then again he had
an inflation writer to it too,So if inflation would say two percent,
the math would be, you knowa little bit more so it would be
probably one point or two forty thousandto forty thousand, eight hundred is what
you could withdraw that year, andso on and so forth. Let's put

(04:51):
this kind of kind of out thereand kind of work through some a little
bit more through those numbers, tracingkind of how exactly that four percent then
works exactly, kind of putting kindof applying it that way. Again,
that's pretty simple, Sean. Youjust basically add up all your investable assets
and withdraw four percent of that totalduring the first year of retirement. Then
in subsequent years you adjust that amountyou're withdrawing to account for that inflation.

(05:15):
And again, by following this rule, he says that there's a high probability
of not outliving your money during anassumed thirty years in retirement. So there's
a lot of holes in this though, because you know, there's the question
of well, do you actually needthe same amount when you're age eighty verses
sixty two? Right, it's likethe answers know, you know, you

(05:38):
probably need a lot less. Infact, Schwab came out and said,
you know, people are spending alot less in retirement in their eighties than
they would in their sixties and seventies. Right. They call that the go
go years. So you know that'ssomething to consider here. And again he
has an inflation writer, but whenhe looks at these numbers, he was

(06:00):
looking at extremely high confidence numbers.So it is being ultra conservative as well.
And the question is are you goingto live thirty years? Right?
I mean I do think the longevityis much higher, but thirty years from
retirement, I mean that's ninety fiveyears old and maybe you won't care by
then, right, So there's someof this that's interesting, but that's the

(06:23):
rule. And again it's just aplace to start from. In my opinion,
it's a place to start. Okay, that's the rule of thumb.
That's in the industry average. Youknow, let's look at your situation and
say, should it be even morethan that? That's my thought, like
the way you think, Tracy.We're gonna talk a little bit more with
Tracy about the four percent rule,get a little bit more insight on her

(06:44):
thinking on the four percent rule,if she thinks it's the right thing or
kind of where she views that.We'll get the details from Tracy on that
in just a moment. In themeantime, I mentioned the website Tanton Investment
House dot com. If you haven'tbeen there yet, I urge you to
head on over check it out again. It's a great resource to learn more
about Tracy, the entire team att Anton Investment House. Also learn about
them, a little bit about whatmakes some special. Also great opportunity there

(07:05):
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Anton Investmenthouse dot com. That's tA N t O N Investmenthouse dot com.
Now the telephone number six O eightfive zero one fifteen forty nine.
That's six O eight five zero one, fifteen four and nine. We'll continue
our conversation with Tracy about that fourpercent rule. We will do that next.

(07:28):
Straight Talk from the House continues righthere on thirteen ten WIBA. This
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(08:11):
Adel the number six eight five zeroone fifteen forty nine. That's six O
eight five zero one, fifteen fortynine. Heard about the little friendly disagreement
about what it means if the fourpercent rule is applicable in these modern times
or not. What about you,Tracy, when when we hear about the
four percent rule, do you agreewith that? Well? You know,
again, I think it's a startingpoint, a good place to start with,

(08:31):
but I really disagree with Susie.Okay, So basically I think Susie
is pretty conservative, but also shelikes to create storm, right, she
likes to think about like the controversiesout there. And you know, on
one hand, I give her alittle credit that she's talking to the masses.

(08:52):
She's talking to a lot of peoplewho haven't saved at all for retirement.
Some of the advice that she hasgiven over the decades here has been
like a recently was like, youknow, wait to take yourself security until
age seventy. Now, that's greatif you want more dollars, and and
yes, it goes up by aboutthirty percent from sixty two to seventy.
But at the same time, youknow, we don't live forever. So

(09:15):
I think, you know, blanketadvice is never really the best advice,
first of all, and again that'snot her fault. She's just giving you
know, generalizations. But at thesame time, I really think that when
we'll talk later about really what shesays, I think it's like, you
know, take us least as amountas possible was her idea. So my

(09:37):
thought here would be, you know, look at your numbers and say,
what is really what's best for you. I mean, there are people who
are taking much higher percentages and doingjust fine. Right. And I would
say another another really interesting thing aboutwhen I've studied this, Sean and others
have two like Michael Kitts's is abig name in the Final in planning world

(10:01):
and he's a national speaker, anda few years ago, in twenty fifteen,
he looked at the four percent rulein this article called wretchetting safe withdrawal
rates. I've mentioned it previously onthe show and it's just it's just so
striking to me that I'll mention itagain. It says, you know,
a more dominant version of the fourpercent rule he talks about, and he

(10:22):
says he reviewed the thirty year rollingperiods beginning in eighteen seventy one through nineteen
eighty five and found that over twothirds of the time, the retirees finished
with more than double their initial principleleft over, and the median wealth at
the end of the thirty years wasalmost two point eight times the principle.
So I don't think most retirees wantdouble the money in the end, right,

(10:46):
But there's a factor here that wecan't put our fingers on, which
is what will the market do right, because you know, you can't ever
say it's guaranteed. Historically it's neverthe same as going forward. But at
the same time, I think whatSusie is to instill is a little bit
of fear, and maybe a littleis okay, But at the same time,
I really think that she's going alittle far by saying, you know,

(11:07):
this time's definitely did different and youcan't count on that four percent rule.
I just disagree with that. That'sinteresting when you when you mentioned some
of those statistics and some of that, you know, some of that that
ratcheting safe withdrawal rate and against almostthree three times the original prince, where
you're like, oh my goodness,that's almost that's not what people want,

(11:30):
right. I mean, I havenot heard one person to say, no,
I really want extra money in theend. Usually they're like, well,
I'm happy if you know what Ihave ghost to my kids, but
I really want to live my bestlifestyle, and that's usually what I hear.
But I mean that seems a bita bit too much because you're trying
to balance that. You're trying tobalance the fear of running out of money,

(11:50):
but you're trying to also balance likeleaving too much behind in a way.
Yeah, and they what do theyalways say? Can't take it with
you. So we've got important pointconversation here this morning with certified financial planner
Tracy Anton and Tracy as we kindof break down a little bit more of
insight that as far as what Susiewas pointing out is what is she kind
of overall, what's her point abouttoday's economy and the markets and why is

(12:13):
she kind of taking this this thisattitude towards this Well, she points out
that, you know, Americans arebattling high inflation. She says, interest
rate hikes, market volatility, andI think she said extreme market volatility,
which again I disagree with that strongly. And she says other challenges. She
said, the less you withdraw eachyear, the better off you are.
Okay, So my point here wouldbe, but are you like, what

(12:37):
is your goal. And for again, for many folks, it's to live
their best lives using the money they'vesaved their whole life for. So you
know, they don't want to runout of money, but they also don't
want to be fearful and not useit. And I think that's what she's
honing in on, is is thatfear. Now for those people who haven't
saved, you know, that mightbe a different conversation. But for the

(13:00):
majority of people that I see thatare using their moneys and have saved well,
and they and they've invested well too, they've been doing it for decades.
Here it's time to turn the switchand start using the money. Talking
about certified financial planner Tracy Anton,I like those where SORTI fied financial planner
Tracy Anton. The website t Antoninvestment House dot com. That's t A

(13:22):
N T O N investment House dotcom. Dolphin number for the office right
in Middleton six eight five zero one, fifteen forty nine. That's six eight
five zero one, fifteen forty nine. So one of the things that I
know is you can't criticize something withoutoffering an alternative. What do we know
for Susie, what does she saythe alternative to the four percent rule maybe
Well, apparently in this article shetold article money Wise that it doesn't work

(13:48):
anymore, that the four percent doesn'twork anymore, and she says very dangerous.
She advises not to use a fourpercent rule because there is no way
to predict what's going to happen.She says, once you actually you're living
the retire life. And then againshe goes on my economic volatility and all
these things, stock market swings andchitch rate swings. Again, that's a
lot of fear, and it's alot of noise to me, and it's

(14:11):
like, okay, well, let'swe have to assume certain things like what
the rate of returns going to be. That's probably your biggest assumption, and
you have to use that using youknow what numbers, how your assets have
been allocated between stocks and bonds.You know. She says that you should
do three percent as a safe withdrawalrate if you need a number. And

(14:35):
again, the man who analyzed allthis data came up with four. But
ironically, this is the funniest partof this whole thing, in my opinion,
is that in another interview he personallysaid that he uses for himself.
He's retired. He uses a fourpoint seven percent rate. I was like,
okay, wait about he's not evengoing a bond in this role,

(14:58):
and so what does that tell you? I think four percent is probably too
low. Yeah, very well,that is very fascinating talking this running with
a certified financial planner, Tracy Anton. I love this stuff. Yes,
the website t Anton Investmenthouse dot com. That's t A N t O N
investment House dot com. Great websiteto learn more about Tracy and the team

(15:20):
also have great opportunities. Schedule appointmentat a time and a date that's convenient
to you. Again, just headon over to t Anton Investmenthouse dot com.
That's t A N t O Ninvestment House dot com. Or of
course you can always call six Oeight to five zero one, fifteen forty
nine at six eight five zero onefifteen forty nine. Should you take her
advice? We'll get the details fromTracy next. Yes, straight talk from

(15:41):
the House with certified financial planner.Tracy Anton continues right here in thirteen ten
WIBA. This is straight talk fromthe House with certified financial planner Tracy Anton
right here thirteen ten WIBA, talkingthis week about the four percent rules,
some questions, and of course alwayslove getting different perspective us and hearing some
different perspectives on it. Don't forgetif you miss any part of the program,

(16:03):
you can always listen back at tAnton Investment House dot com. While
you're there, learn more about Tracy, learn more about the team at t
Anton Investment House. Also, ifyou're looking for money management or portfolio management,
a great opportunity there to schededule anappointment at a time and a date
that's convenient to you. Again thewebsite t Anton Investment House dot com.
Telephone number six to eight five zeroone, fifteen forty nine. That's six
to eight five zero one, fifteenforty nine. So we're talking about Susie

(16:26):
Orman and her saying it maybe aimfor three percent? Should we follow her
advice? Tracy, Well, okay, no, all right, I'm not
direct, right, but Sean,I have clients taking out a wide range
of withdrawal rates. Some folks arecomfortable taking out a couple percentage points maybe

(16:47):
one, two three, because theydon't need it and not sure what they
would spend it on. Many peoplesay, well, I've got everything I
want or I'm doing everything I want, and they kind of know, well,
it will likely grow better invest didinto a high quality stock and bond
account or money market versus a moneymarket or something like that. But I

(17:07):
have other folks that are taking outfour to six percent as a withdrawal rate,
and they have been for several decadesnow we've had a really great market,
so you know, you have totake that into consideration. But I
would again just say it's it's reallyimportant to look at your personal situation and
really important to be flexible. Soyou know, if I was retired,

(17:30):
for example, I would say,okay, well you know what kind of
withdrawal rate do I need? Whatdoes my lifestyle indicate that? How many
dollars do I need as a distribution? You know, if I really want
to be done working, like somepeople are just done, they're really done,
and they're really done, and they'relike, okay, I'll make that
number work, So you have to. I think I would back myself into

(17:52):
it in that fashion. And that'swhat we do with clients. We'd look
at their cash flow analysis and wesay, well, what number, what's
your budget? What do you thinkyou would need in retirement? We start
there, but then I also lookat it vice versa and say, well,
what if we took a five tosix percent distribution rate, what do
those numbers look like? And it'slike, yeah, that looks pretty good.
And so it all depends on yourtaxes that you're spending too. There's

(18:18):
so many factors. So I alsothink it's nice to be flexible. So
again, if it was my dollars, I would say, when markets are
bad, if I could spend alittle less, I probably would do that.
When markets a little bit better,I probably would I would probably increase
my withdrawal rate. Really good stuff. As we talked about this four percent
rule Tracy and a little bit ofthe debate that goes on, are there
other experts weighing in on this?Well, you know that Bangan who created

(18:45):
the four percent rule. You knowhe had recently and updated his own rule.
And I guess his original decades ofresearch only included two asset classes,
treasury bonds and large cat stocks.So again he changed his rule because he
said, well, if you addsmall caps, you know, it's more
like four point seven percent that youcan do as like a quote unquote safe

(19:08):
withdrawal. Wow, So what's theyou know, the question that folks need
to keep in mind when we whenwe discuss kind of like an overarching thought
here. As far as discussion ofthe four percent rule, well, I
would just say people need to thinkabout you know, can can you can
you make changes if conditions change.So the four percent rule, as we
mentioned is it's pretty a rigid guideline. It does take in consideration inflation,

(19:30):
which people usually forget about, butit does um and you know, it
assumes that nothing changes in your world, and in things do. Life does
change quite a bit, so youwant to make sure that you can make
adjustments as life changes. But Ithink the reality is this, if you
remain flexible and you can make simplechanges even during down markets like lauring you're

(19:52):
spending on maybe that extra vacation,or maybe you don't gift as much to
your kids that year something. Youknow, people just naturally do it.
I have seen it over the decades. People just do it. It's like,
oh, I don't think things aregood right now, I'm going to
spend less on that. And it'sjust it seems to work out pretty well.
And I think it all depends too, and how you're invested, how

(20:14):
aggressive or conservative you're invested that's goingto make a huge difference on your withdrawal
rate. And again, you know, when we look at like this the
four percent rule, he when hedid this, he really was basing it
on like really being super conservative,you know, as far as his confidence
level. Interesting, what about asfar as speaking of confidence, how much

(20:37):
does confidence and what kind of roledoes confidence play in the decision on that
withdrawal rate number. Well, whenBengan did this, he said that he
was trying to look for a veryhigh confidence level that you would not run
out of money in thirty years.So he again used his historical numbers for
decades and use past market numbers,and he was close to like one hundred

(20:57):
percent. And there was a reallygood article by Schwab that said, you
know, they pointed out that seventyfive to ninety percent confidence level is typically
appropriate for most people. And that'spretty comfortable, you know, for people
and the spending limit. You know, depending on what you spend, you
know, you might want to remainflexible but inadjusted if you need it,

(21:21):
But usually you don't need one hundredpercent confidence. So again, the goal,
I don't think is to be like, well, we'll never run out
of money, and again I havenever seen it. Of course I've had,
you know, the benefit of havingsome beautiful markets in the thirty years
I've been invested. But still,I mean, when people get overly fearful,
that's probably not good because that meanstoo many dollars. They're not taking

(21:42):
an advantage of all the work theydid. You know, even gifting to
your kids is fun to do,you know, per year, you know,
use the gifting limit of fifteen thousandper year. It's wonderful to do
if you have the dollars to doit. Or taking that trip with the
kids is wonderful to do, sothings like that. But I think there's
the things you have to adjust for. But you don't need one hundred percent

(22:06):
confidence level. Typically most people don't. And therefore I think the four percent
rule you could be a bit higherfor most people. It works hard to
earn it. You better enjoy it, that's for sure. And that's one
of the great things about working withTracy, as we talked about having that
plan and starting that conversation, thatfour percent rule. It's a great starting
point, but there's definitely a lotof conversation that goes into it. Today

(22:29):
is a great day to start thatconversation with Tracy. I've been looking for
money management or portfolio management. Tracyand the team would love to get to
know you all get to do hisHead on over to t Anton investment House
dot com. That's t A Nt O N investment House dot com.
From there you can schedule appointment ata time and a date that's convenient to
you. Again, the website tAnton investment House dot com. The telephon
number for the office right in Middletonsix O eight five zero one, fifteen

(22:52):
forty nine. That's six O eightfive zero one, fifteen forty nine.
Tracy. Time just flies by chattingwith you. It's been a great day,
you enjoy it. Thanks so much, you too, Sean