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What is the Financial Order or Operations DURING Retirement?

June 11, 2023

In this highlight, we discuss if the Financial Order of Operations changes during retirement and how you should approach it.

Want to know what to do with your next dollar? You need this free download: the Financial Order of Operations. It’s our nine tried-and-true steps that will help you secure your financial future.

Transcript

So, we’re going to kick it off with Drew’s question. I think that this is Drew who sent us some hot sauce. Dog, hot sauce is amazing! Half hot sauce, I’m excited. I think it is. I just kind of wanted to be like, “Yo, we just got some. We love getting presents.” So if that was you, maybe it’s another Drew. If it’s another Drew, thanks to that Drew. But his question is, “Is there a financial order of operations 2.0 once you’re retired? How do you best utilize your savings to rebalance your target date retirement, HSA, etc.?” And then, I mean, the crux of this question is, “How do you continue mutant strategies into retirement?”

Yeah, it’s so funny. Um, and if you’ve been hanging around us for any amount of time, you’ve spent a lot of time in our chat, you’ll notice there are some staples in our chat, some folks that are always there. And one of the guys was like, “Hey, I’m retired. I’m not de-accumulating. I’m still saving. I’m still adding to my portfolio. I’m still following the financial order of operations.” I think if you’re a true Financial Mutant, you can do that, right? Your portfolio gets so big that even though you’re beginning to live off the dollars, even though you’re beginning to pull down on your assets, you find that your account’s still growing. We call that true Financial Independence. But I think Drew’s question is, “Okay, let’s say, you know, I’ve been building my whole life. I’ve been following the financial order of operations. If you do not know what this is, go check it out at moneyguy.com/resources. It’s a tried and true nine-step process of how to build towards Financial Independence. I’ve been following that. I’ve been doing what I’m supposed to be doing. But now it flips. Is there a tried and true process for de-accumulation?”

Well, here is the truth of the matter. De-accumulation is so unique for every person. I mean, accumulation is also unique, but there are some guardrails. Like the path is generally similar, right? Like I follow step one. I cover my deductibles and I get my employer match, and I do my tax-free, and I do my employer… like that’s fairly commonplace across all investors, across all accumulators. When it comes to de-accumulation, it’s a lot more special. Yeah, like, what’s your situation? What’s your life going to look like? So many variables. When are you going to retire? What kind of accounts do you have access to? Are you going to work in retirement? When are you going to draw Social Security? Do you have a pension?.There are all kinds of things that get so granular and so nuanced. And accumulation, from simple things like, “Okay, what’s a sustainable withdrawal rate? How much money can I live off of?” to more complicated things like, “Should I be perpetrating a Roth conversion strategy between my retirement date and the time that I get to my required minimum distributions, in an attempt to pay less taxes over the lifetime of my portfolio and potentially even leave tax-free assets to my beneficiaries?” Like, it gets so unique and so nuanced. There’s not really a Foo 2.0 for retirees. For the accumulators, for a lot of folks, we actually think that’s the time where it makes sense to take your relationship to the next level.

You know, we talk about the abundance cycle all the time here. You can learn, you drink up all the stuff that we provide. You apply it to your financial life, and hopefully, it allows your financial life to grow, and you reach financial independence. And then it gets to the point where you say, “Man, things have gotten so complicated. I’ve heard about Irma, and I don’t know what that is. I don’t know what to do with Social Security. I’ve heard about RMDs, what is that? How do I navigate that?” And you say, you know what, I really wish I had a second set of eyes. I wish I had someone else to help me walk through this. Because for most folks, you get one retirement. For us, or for financial advisors like us, we’ve counseled tens, hundreds, some firms even thousands of clients through retirement. So we’ve seen the situation before. We can provide you counsel.

So, a lot of times, when it comes to de-accumulation, when it comes to Foo 2.0, it’s not really Foo 2.0, it’s you 2.0. It’s what do you need to make sure that your financial life looks the way that you want it to look for this next stage. Now, the same sort of things that got you here are the… if you’re looking for tips and tricks to stay a financial mutant, great. Live on less than you make, meaning live on less than your sustainable draw rate. If you know that you can pull four percent off your portfolio, don’t start pulling off eight, nine, ten percent. You’ll get yourself into trouble. Uh, don’t lose sight of value just because you’ve got a million-dollar portfolio. It doesn’t mean you need to go buy million-dollar things. I mean, maybe you can, but maybe that’s not what you need to do. Am I spreading out my risk appropriately? Do I have emergency reserves in place? Am I checking all the boxes that I know I ought to be checking? And specifically, as it relates to retirement, am I taking care of the soft stuff? Am I doing the things that maybe I would not have thought about?

We have a great resource. You can go to moneyguy.com/resources, and the name of the resource is the Money Guy Retirement Guide, it’s just some questions to ask to prepare you for that. Some of it’s you 2.0 stuff, but some of it is the soft stuff to make sure that this next phase of life that you’re moving into is a satisfying one, is a fulfilling one, is one hopefully filled with abundance, because that’s what we ultimately want you to move towards. So, that’s a long way to say there’s not really a Foo 2.0, but you can still be a financial mutant even well into the accumulation phase.

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