Roger Whitney: ‘Retirement Planning Is Not Financial Planning’
Christine Benz

Roger Whitney: ‘Retirement Planning Is Not Financial Planning’

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Our guest on the podcast today is Roger Whitney. Roger hosts the popular Retirement Answer Man podcast, and he’s also the author of a book called Rock Retirement: A Simple Guide to Help You Take Control and Be More Optimistic About the Future. He’s also senior financial planner at Agile Retirement Management and the creator of the Agile Retirement Management Process. Roger has a CFP certificate and has earned numerous other designations, including the accredited Investment Fiduciary, Certified Investment Management Analyst, and Retirement Management Advisor designations. Investopedia has named him to its list of 100 Top Financial Advisors in the U.S. on five occasions.



The Retirement Answer Man podcast

Rock Retirement: A Simple Guide to Help You Take Control and Be More Optimistic About the Future, by Roger Whitney

Rock Retirement Club

Current Environment, Tax Matters, and In-Retirement Spending

″#309: Crashes, Retirement, and Bears, Oh My! How to Protect Your Retirement Lifestyle,” The Retirement Answer Man podcast,, Jan. 22, 2020.

″#421: How Will Inflation Impact My Retirement?” The Retirement Answer Man podcast,, Feb. 9. 2022.

“#411—Overcoming Frugality,” The Retirement Answer Man podcast,, Dec. 1, 2021.

“#386: Retirement Withdrawal Strategies: The Safety-First Approach,” The Retirement Answer Man podcast,, July 14, 2021.

“#282: Is an Annuity Right for Retirement? The Pros and Cons of Fixed Annuities,” The Retirement Answer Man podcast,, July 17, 2019.

“The RISA Framework: A Systemized Approach to Personalizing Retirement Income Strategies for Clients,” by Alex Murguia and Wade Pfau,, April 20, 2022.

“#456: Should I Switch My Bond Portfolio to CDs?” The Retirement Answer Man podcast,, Oct. 12, 2022.

“#310: Crashes, Retirement, and Bears, Oh My! Investing in Retirement: The Pie Cake,” The Retirement Answer Man podcast,, Jan. 29, 2020.

“How to Simplify Your Decision Making Process for Retirement Planning,” by Roger Whitney,, Oct. 13, 2020.

“#455: Which Account Should I Begin Drawing From First In Retirement?” The Retirement Answer Man podcast,, Oct. 5, 2022.

Real Estate

“#383—Listener Questions: Should I Pay Off the Mortgage or Keep the Cash if I’m About to Retire?” The Retirement Answer Man podcast,, June 23, 2021.

“#452—Should We Consider a Mortgage for Building Our Retirement House?” The Retirement Answer Man podcast,, Sept. 14, 2022.


“Dana Anspach: How to Build an All-Weather Retirement Plan,” The Long View podcast,, Oct. 18, 2022.

“#311: Will I Need Long-Term Care? Reviewing the Statistics With Christine Benz From Morningstar,” The Retirement Answer Man podcast,, Feb. 5, 2020.


Christine Benz: Hi, and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.

Jeff Ptak: And I’m Jeff Ptak, chief ratings officer for Morningstar Research Services.

Benz: Our guest on the podcast today is Roger Whitney. Roger hosts the popular Retirement Answer Man podcast, and he’s also the author of a book called Rock Retirement: A Simple Guide to Help You Take Control and be More Optimistic About the Future. He’s also senior financial planner at Agile Retirement Management and the creator of the Agile Retirement Management Process. Roger has a CFP certificate and has earned numerous other designations, including the accredited Investment Fiduciary, Certified Investment Management Analyst, and Retirement Management Advisor designations. Investopedia has named him to its list of 100 Top Financial Advisors in the U.S. on five occasions.

Roger, welcome to The Long View.

Roger Whitney: I am excited to be here, Christine.

Benz: We’re excited to have you here. I wanted to talk about your podcast Retirement Answer Man. Can you talk about how you figure out which questions that you’re going to tackle?

Whitney: Really two ways. Initially, it has been what I’m thinking about. So, I’ve used the podcast—and it’s been a personal journey for the eight years that it’s been on—and we generally do monthly themes. So, we’ll spend an entire month on, say, long-term care or functional health. And I choose those themes by what I want to refresh my thinking on. So, long-term care is a great example. I know that’s a passion of yours. I have my opinions on long-term care, but let me use the podcast to have, say, four episodes where I think through it from beginning to end to see and basically challenge my own beliefs so I can come to how do I want to manage this. So, that’s the general way I’ll come up with the themes, and obviously, I get lots of suggestions. And then, on the question-and-answer show, it really is listener-driven. The whole show is meant to be about the listener. Those are the two ways I come up with it. But I like that process of revisiting a topic, whether it’s long-term care, or Social Security, or Medicare, and starting at the beginning again, because it’s so easy to get trapped in our own thinking and how we plan, and that can create less avenues to try to find great solutions.

Ptak: You’re closing in on 500 episodes of your podcast. Which episodes stand out in your mind is some of your favorites?

Whitney: That’s a really hard question to answer because I’m a little bit like a shark. I produce them and I don’t go back and recap and relisten to them very often. But I would have to say, Jeff, we do these retirement plan lives, which are a case study with an actual listener. In fact, we’re getting ready to do another one in January. And so, we ask listeners to raise their hand and tell us a little bit about themselves, and then I interview them. And then, what I do is I agree to do a retirement framework with them. And we’ll change their name, and we’ll change some of the dynamics, the details to protect the innocent. And then, we’ll release my conversation with this person on the podcast over a monthlong period of—tell me about yourself, tell me about what your vision is for your life, let’s talk about what resources you have, let’s talk about some aspirations and concerns, and then we end with a live meetup where I actually analyze and come up with is their vision feasible and if not, help them get to a feasible solution. So, it’s like being able to sit in on a financial or retirement planning meeting. Those are probably my favorites because they’re the favorites of the audience.

And we’ve done, seven or eight case studies now and a lot of times, what we’ll do is, we’ll choose a theme. The last one, I think, we did was unexpected retirement. I guess that was in ‘21. Because of COVID, we had a lot of people that were getting laid off. So, we wanted to talk to somebody who got their retirement accelerated. We’ve talked to people with pensions. We’ve asked for people without pensions, people that are married, people that are single, so we can try to create these little case studies so the listener can listen into somebody that is a lot like them. And those are my favorites because that’s what people like the most.

Benz: We’re in the midst of this really tricky environment, especially for people doing their retirement plans where we have higher interest rates, which are whacking stock and bond prices, high inflation. You interact a lot with people in retirement, getting ready to retire. Can you talk about some of the key things that you’re hearing from actual people at that life stage?

Whitney: And in the club, I probably had thousands of one-on-one conversations with people in or near retirement and obviously, my advisory practice. What I have found is, obviously, the present concerns of bear market, interest rates, inflation—there’s a big list right now, isn’t there? And they are concerned about…

Benz: Recession.

Whitney: Recession—throw that one in there—recession. And there’s a big concern there. But I think the concern isn’t so much about the bear market or any of these things. It’s more about what might be right around the corner. It’s what they can’t see. It’s like driving in fog right now. And so, there’s that concern, and that’s usually what people come in and present within a conversation. And those tactical things are really important, but you have to really pull back. If you think of this like a diagnostic exercise, people will come with the tactical thing, because this hurts, and you can’t just simply focus on fixing the hurt, you have to pull back and well, how do we actually address this in a longer-term nature? I think that would be the number one thing is helping people think through this in a more logical way rather than a reactionary way because there’s a lot of stressors out there right now.

The other thing that I think is really surprising, Christine—and we have two big retirement crises. One is the people that haven’t done or weren’t able to do, for whatever reasons, prepare for retirement, and they’re behind the eight ball. So, that’s the crisis that we talk about and that we know about, and that’s real. There is also a crisis for people that have done everything right or had the fortune to have things go more their way to be in a position where they have lots of choices. And they have a crisis, too, and that’s generally the kind of people that would listen to, say, my podcast or your podcast, because they’re actively engaged in thinking about this stuff. And their crisis doesn’t sound really that important relative to the first crisis. So, I don’t think we talk about it a lot, but I know in the countless one-on-one conversations I have is that they are in a position where they have lots of choices to create a life that is meaningful and to have an impact on the world. They know it intellectually when they run the numbers. But they can’t do it because they’re worried about recession, interest rate, long-term care, the future. So, there’s this second crisis of confidence with people that actually have the most options, not simply to a great life for themselves, but also to have an impact on the world in the way they use their assets. But they don’t feel like they can because they’re just as worried as everybody else, and I find that very interesting. That was very surprising to me as I have walked this journey and talking to so many people.

Ptak: And so, how do you help them get past that, that second group that you’re referring to that maybe is paralyzed by choice or uncertainty?

Whitney: That’s a great question. That is really what my job is, is to help. There’s two ways I think you go about that. One is, you help them create this framework so they can actually see more clearly that they have excess assets they could do something with. And then, two, you help them think a little bit more broadly about what their life actually could be, which is actually a really, really difficult thing. I heard this metaphor the other day of if you have a bonsai tree and it’s in a pot, it will only grow so big. And let’s assume that pot is our beliefs of what’s possible and what we could do. If you take that bonsai tree and you put it into a field, it can grow 10, 20, 100 times bigger than what it could in a pot. And so, I think a lot of this is helping them expand—I think there’s a crisis of having a vision of what I could do and what I want my life to be because everybody is so focused on just getting to retirement.

And so, some of it is the intellectual—let’s have a framework to help give ourselves permission, and the other is, how do we overcome the frugality that has served us so well in incremental steps? You’re not going to go from an amazing saver to an amazing spender just because you’re retired. Intellectually, it makes sense, but psychologically, it’s too big of a leap. And so, some ways are to start to how do I spend a little bit of money to decrease friction in my life or to have impact in some way? So, it’s a journey just like anything.

Benz: I wonder if you can give an example, maybe protecting the identity of your client, if it’s a client, but maybe talk us through how this worked in someone’s concrete situation where you helped them get past their fear of spending, get past their fear of the current market environment, or whatever, to really proceed and live their best lives.

Whitney: Oh, I’ve got a perfect example. I didn’t have to think about it. It was with the club member—and we’ve shared this, so it’s not divulging anything that hasn’t been shared. About a year-and-a-half ago, I had a conversation with a club member. And we ticked those boxes. The conversation went like this. 1) It’s clear that they have enough money for whatever they desire. They’ve won the financial game. They didn’t have that need. 2) This individual started talking about she always wanted to travel because she never traveled and she wanted to go to Europe, and it was so important to her to go, and she’d probably do it the next five to 10 years. So, this is the way the conversation is going. And then 3) She starts telling me a little bit about her family. And her mom is blind. And she actually has a genetic disease that caused her blindness. And her sister who’s younger than her has started to show some deterioration in her eyesight. And so, she was telling me about that. And then, she just sort of throws in, yeah, and this is something that I might have too, and we just don’t know when it’s going to hit. And I’m sitting there and maybe you are too, if I described it correctly, going, OK, wait a second here. You’ve won the financial game. You’re fine there. You were very passionate about traveling and going to Europe specifically, and your family has this genetic disease where you could lose your eyesight. Why the heck are you not going to Europe? And I said that to her. And she didn’t have an answer other than she couldn’t identify the pathway for how to actually do it, because she had never really traveled before.

So, what we did in the club is I got her permission. I initially did it anonymously and held a meetup in the club. We had about 100 people on Zoom, and I told this story, and I said, I know a lot of you have traveled. Let’s brainstorm, and I just created a mind map as we talked of tips on how to go to Europe, where to go, services that might be helpful, packing tips, and so on. And we just created this huge mind map during this meetup, and then the team put it together in a PDF and we gave it to her with all these lists of words of encouragement to her. And then four months later, I get a picture of her in Munich. That’s a good example, I think.

Benz: Love it. That’s a great example.

Ptak: It sounds like you’re talking about sort of in a sense stepping away from the spreadsheet and some of the particular schematics of retirement such as the sustainability of one’s spending, whether they’ll outlive their income, to focus on maybe some of the squishier aspects, spending retirement in a meaningful way, which sometimes goes overlooked. What are some of the other big questions related to retirement and retirement planning that you think are maybe underdiscussed by others within the retirement planning community?

Whitney: I do. I want to touch on that, but I want to challenge a couple of the words that you used.

Ptak: Sure.

Whitney: The squishier stuff are actually people’s lives. And that’s the purpose of the money. People that have these options, they’ve sowed and reaped and accumulated assets and now is their time to actually reap these assets for a purpose. And I think retirement planning is not financial planning. Financial is critical to retirement planning. But I think one of the most underlooked areas in retirement planning is that it’s about this reaping phase of life and using those resources for something more important than money. And when we think of it as financial planning, we put financial as the hub of everything, and I think that is the biggest problem with retirement planning. It is extremely important to get the financials right. But that is a means to an end. So, that’s I think one of the areas that is woefully underlooked. And when it is talked about, it’s an afterthought or it’s an advertisement because it’s playing on heartstrings.

But in my experience, in my 30 years and knowing lots of planners, it is an afterthought. It is not the main thought. So, I think that’s one area. And I think the next area is going to be in how we actually make decisions. I think that’s an area where it’s woefully not undertalked about in terms of retirement planning. There’s a great quote from a gentleman named Phil Stutz. And he says you will never be exonerated from three things: you’ll never be exonerated from uncertainty, from pain, and from the need to have to do hard work. And when we’re talking about retirement planning that you’ll never be exonerated from uncertainty is an extremely important one that we don’t acknowledge enough. I think as an industry, we should come to any kind of planning with a little bit more humility in terms of what we can actually figure out.

Meaning that, let’s take long-term care as an example. We created a long-term-care decision pod, which is an organized way to think through should I fund long-term care, or how should I deal with this risk? What are the pathways to deal with this risk? And at the end of the day, when you go through this organized way of thinking about it, it’s as clear as mud. You still have to make a judgment. You’re never going to get to the last mile of clarity, or rarely will you. And so, I think that humility of, hey, I’m not here to figure this all out for you. You and I, client, or you and I are going to think through this in an organized way so we can make a better judgment call and then have some agility so we can make changes along the way. I think that type of thinking I don’t think it is addressed enough, because I’ve been doing this forever. I have a lot of certifications behind my name because I always wanted to be the smartest person in the room. I wanted to give the client the answer. But as I’ve matured as an advisor, I realized I can’t give the client an answer because I don’t know what’s going to happen in their life and I don’t want to stake my value to them as trying to act like I know. That’s not fair to them, and it puts way too much pressure on me. So, I think those are the two things I would think of.

Benz: Roger, you’ve mentioned long-term care a couple of times. You mentioned that I’m super-interested in this complicated, hard, not-good problem. Can you talk about how you work with people to come to a decent solution in that area?

Whitney: So, if you think of an organized process, so even tactical decisions whether it’s long-term care or inflation or should I buy a lake house, whatever the issue is, you always want to start at the top of the funnel from a decision-making standpoint. So, the funnel goes—vision, that always is first and then, what is a feasible plan to fund my goals? You want to take that vision and create some actionable goals that you can work on matching the resources with. So, you want to create a feasible plan that is, using whatever tools we have available to say, yes, this is a safe direction for us to go. It’s feasible.

And then, the third stage—and this, Christine, is where we would address long-term care is—how resilient is this pathway that we’ve identified? Great, it’s feasible that I could go on this journey, but how do I make it resilient, so I don’t get knocked on my butt too easily? And long-term care is something that could knock you on your butt retirement-wise. So, you would want to go through in the decision pot—I don’t have it here in front of me—but the decision tree would go, let’s talk about our opinions on how we want to deal with long-term care. Do we have extended family that can help? Do we want them to help? Could they help? Do they want to help? Let’s estimate what a bad-case scenario might be monetarily. I’m 85, I have three to five years of expenses, then it’s $80,000 a year. Let’s estimate that, and let’s take our feasible plan of record and put that event into the feasible plan of record and see how it impacts the feasibility of that plan and do some assessment there as to, I could easily self-fund this if I had to. And then let’s bring in, well, do I want to? Would it be easier if I just had insurance? Do I feel better psychologically by having this transferred to some extent? And then, once we have that impact to the resilience, then we actually go get quotes for traditional long-term care and hybrid long-term care. Even if we’re not going to do it and our preference is likely not to do it, we still go get the quotes and we look at them and we look at the trade-offs to see more of the picture and then ultimately get to a judgment. So, that’s how we do it with anyone that we’re going to go through. We always start from those frameworks and try to not prejudge as much as we can so we can get to what seems to make sense at this point in time. And there’s a lot of other things obviously that have to go in there.

Benz: You referenced the role of peace of mind in that decision that someone may be a perfect candidate for self-funding their long-term-care expenses. It looks like, on paper, they’re perfectly well equipped to cover even a bad long-term-care outlay. How does peace of mind factor in if having some sort of an insurance product would give someone more comfort with their total plan?

Whitney: It could be the decision that could be the dealbreaker of buying it simply because there are navigational services that come along with it or that money will flow in so my spouse, or my second, financially doesn’t have to figure out where they’re going to pull money from to pay for things. That could be the sole reason to do it, even if it doesn’t make sense financially. And that’s much more art than science.

Ptak: In a related vein, since we’re talking about peace of mind, the notion of guaranteeing something. Annuity payouts are picking up, thanks to higher yields, and for some, that might be the right choice if you’ve concluded that you don’t want to make perfect the enemy of good and there’s an opportunity to guarantee an income stream. Do you think more retirees should consider them given the fact that yields have perked up the way they have? And if so, what kinds of annuities do you think that they should be keeping in mind?

Whitney: That’s a great question, and this is one where I have evolved as I’ve revisited this stuff. So, my history in this industry—I started out in 1990-91—I don’t remember. And I was an equity person in the ‘90s, good time to do that. And then, became a planner. So, I did not come from an insurance background. I have some biases against insurance. And through revisiting this topic on the show in a monthlong theme—I can’t recall the month that we did that—it actually refreshed my thinking a little. So, the way that I think about this is, yes, you should consider it. If you think of, I have this feasible plan and I’m trying to make resilient, you have to figure out how you’re actually going to fund it in detail. And so, that’s a fork in the road.

If you think of a gas gauge—we’re not on video, so I can’t do the visual—but if you think of a gas gauge, all the way on the righthand side, let’s call that systematic withdrawal. That’s just sell money when you need it, from investments when you need it. That’s one extreme of that gas gauge. And then, if you go all the way to the other end, we’ll call that the safety-first end—that is, buying guaranteed payments to cover the majority, if not all, of your needs. So, you have a safety-first approach. Each of us are going to fall somewhere in between there. And the way that you determine how much, if any, do you put to, say, the safety-first approach is going to be dependent on two things in my mind.

Number one is going to be financially. And that is, how funded is your retirement? The less funded you are in retirement, the more constrained you are, meaning that this should work, but we might have issues depending on how the world unfolds—the more you may lean toward a safety-first approach, meaning buying guaranteed payments. Initially, people would say, “Wait a second, I got to make more returns to catch up.” That seems to make sense, right? “I need to get more returns because I’m constrained.” Yes, but as we know, the downside risk is asymmetric to the upside. If you have a bad term in events, like a bear market with bonds going down and recession and so forth, you can take an OK situation and make it a lot worse really quickly. So, it’s actually the other way. You want to guarantee payments. And then as you have more fundedness and you’re perhaps overfunded, you could probably move more toward the right, the systematic withdrawal. So, that’s one way that you want to determine how much of buying guaranteed income payments that you’d want to go through.

The second part of that, which I think is an emerging part, is the psychological part. And I know Wade Pfau and his team at Retirement Research come up with RISA. I’m somewhat familiar with that. I’ve used other personality types. I have a client who’s clearly overfunded for retirement. They have more than enough money but were buying fixed payments because psychologically they need that. They don’t need it mathematically, but psychologically they need that to give themselves permission to live a life and not live with stress of bear markets. Because even if you’re overfunded by a lot, a bear market hurts you just as much psychologically as it does anybody else. And so, psychologically, you want to make sure you match how much of these guaranteed payments. Now, Jeff, you talked about what type do you buy? I like to buy food as much as possible, not food product. So, that would be an immediate annuity, a deferred income annuity. I try to keep those things as simple as possible. I try not to add too many ingredients that I can’t understand. And definitely, with interest rates, that’s helped.

Benz: Some advisors think that automatically annuities, especially fixed annuities, should be off the table because of inflation because the purchasing power from them will be eroded, especially with high inflation like we have today. How do you think about that issue?

Whitney: I have been one of those advisors for a long time. So, I’m intimate with that viewpoint. What is missed in that viewpoint is the fact that because you have these guaranteed payments coming in that are covering the base great life, it allows you to do other things with the rest of the money. It allows you to perhaps be more aggressive investment-wise because you have longer time frames for those investments because you’re not having to sell them or keep more liquidity. So, I think it all balances out. Anybody that’s done a lot of retirement planning has seen that when somebody has a pension, even if it’s not inflation adjusted, it makes a huge difference in the resilience of the plan. So, I’ve evolved on that. I think what they’re missing is the fact that, because we have these guaranteed payments, we can invest differently with the rest of the money.

Ptak: You recently explored the topic of bonds on your podcast. I think the specific question you discussed was whether someone should switch their bond portfolio into CDs. Can you talk about how people should approach that question?

Whitney: That was interesting and it’s interesting too that, wow, these yields are one of the big benefactors of rising interest rates, definitely haven’t been bond prices and bond funds. That’s been horrible. I don’t know about you guys. Is that the worst in our lifetime easily? Got to be.

Benz: I think so.

Whitney: The way I approach bonds—and I’m not saying it’s right—is if it’s part of a very long-term portfolio, I use funds. Because it will work through those cycles, and you’ll feel it, this is a once-in-a-lifetime event right now. Bond-wise, it’s definitely been painful, but over time as interest rates level, those bond funds will pay out higher and it will regenerate itself. I believe in a long-term asset-allocation strategy, assuming you have a long enough time frame, let’s call that 10 years-plus. If it’s shorter, I am much more attracted to individual bonds or anything that can give me yield and security. And I know you had Dana on. Dana and I are friends and work on the RMA curriculum together. And I agree with her. I like her phrasing of—you have two different pots of money. One, I need the return of my money, and then, the other pot is, I need the return on my money. If it’s long enough, bond funds are fine. If it’s return of my money, I like individual bonds, CDs, T bills are very attractive right now in my opinion. I like to have the individual bonds if I’m doing… But I practice a certain way, Jeff. Maybe I need to describe that to answer this question.

When we have someone that goes into retirement, our baseline is that they have a minimum of five years of their consumption that they need to fund with their financial assets de-risked and in individual things—CDs, individual bonds, and so on—so we can prefund their consumption. I’m much more concerned of the return of the money. And then the longer-term money, I would rather just stay in bond funds and trust asset allocation because the time frame is appropriate for that.

Benz: That sounds kind of like a bucket-type approach. I’m curious, do you agree that your thinking jibes with a bucket strategy and what do you think are the major pros and cons of bucketing?

Whitney: I call it a pie cake because that just sounds better to me.

Benz: A what?

Whitney: I call it the retirement pie cake. So, it’s essentially the same thing. When you’re looking at your retirement assets—and again, those go from feasible to resilient to optimized. Resilience is the stage where you’re figuring out how exactly am I going to pay for my life? Bucketing and the pie cake are very much the same. You want to take all of your assets and put them into a couple of different layers of asset allocations—an asset allocation pie, you put them on top of each other, you got pie cake. You want to have a contingency fund. And then, you want to have an income floor, which is going to prefund your life between three to eight years, depending on the individual. So, that means, if I need $100,000 from my assets to fund my life, that’s not going to be paid for by work or pension. I’m going to have that money prefunded, invested in something that will give me a yield and be there when I need it because I’m going to spend it.

The second layer of that pie cake is this income floor. And then, the third layer is going to be upside portfolio. And then the fourth layer potentially could be longevity portfolio of potentially buying some guaranteed income today or maybe sometime in the future. Every asset should fall into one of those categories. And you want to call that a bucket? Awesome. You want to call that a pie cake? Yummy. Doesn’t really matter. And ultimately, it creates a barbell. When you think of an asset allocation, you have super, super conservative on the front end to fight against sequence of return, which is one of the biggest risks financially in retirement, especially early. And on the other end, you have risk assets—stocks and long-term investment assets—which is fighting against the other big risk financially, which is inflation. So, rather than play the middle, you create more of a barbell approach. And there’s lots of reasons I think that’s a really good way to do that.

Ptak: There’s probably a strong temptation right now to make adjustments to a retirement plan of the sort that you just described in order to hedge against inflation to protect the assets better against it. I think you just indicated that some of the assets in some of those buckets or slices of your pie are really there in order to protect against inflation. What do you say to those that want to go in and maybe add some commodities, sprinkle in some other supposed inflation hedges to basically keep them sticking to the plan?

Whitney: That’s the tactical temptation that is always there because all we hear about, for the most part, is the financial bling of planning—all the shiny things that seem cool but lose their luster very quickly and they end up in the bottom of the closet. Having a process, and this goes back to, rather than talking about the financial bling, you want to keep the main thing, the main thing. The main thing is retirement outcomes, the life that you want to live. And if you use a process that gets that vision, makes it feasible, thoughtfully think through how to make it resilient, and then optimize it, we predecided a lot of things for a purpose. So, we didn’t have to make these decisions when inflation spiked or the markets went down. We didn’t have to make short-term decisions that are reactionary. And that’s really hard because the temptation is always there because the bling is what’s on 24/7 depending on what you put on the TV or whatever.

Decision-making processes are the key to all of this, so you can be agile. In terms of dealing with clients and their wanting of this, most of them don’t. And if they do, my tactical way of dealing with that is to continually walk through why this works, how we thought through this to bring them back to center, and then if they’re really motivated to do something, to carve out a piece where they can express a very firm opinion with monies that aren’t going to put the feasibility and the resilience of the plan at jeopardy. I think that’s a really important aspect of this. I’m like, fine, you want to be in commodities, we’ve walked through it. Here’s X amount, go open up an account over there. Knock yourself out. If you lose all that money it won’t matter to your life, but you’ve been able to express your opinion. And I think that’s the fallback position. But to be honest with you, because of the clients that we work with anyway, they all are of the same mind and have the same worldview, so they’re generally not interested in those things to begin with.

Benz: How do you figure out what that percentage of portfolio could be mad money? Or does it depend on the clients’ financial wherewithal?

Whitney: When you’re thinking about that percentage, Christine, are you referring to like on an annual basis or overall?

Benz: The total portfolio. If you just were to say, “I think you can take X dollars and go nuts with it. I’m not worried about you losing it all.” How do you figure out what that could be in terms of the percentage of the portfolio?

Whitney: How would we think about that? “Roger, I want to buy some commodities. I’m worried about inflation. I think commodities are cool. How much can I do?” That could be the same thing as, “Roger, I want to buy a sports car. How much of a sports car could I buy?” It doesn’t really matter what it is. So, what I would do is take the plan of record, which we would have established, and then create a what-if scenario and say, what if we took $100,000 out to buy the sports car, commodities, doesn’t really matter what it is. What if we did that, then what impact does that have to the resilience of the plan? And we’ll be able to see that whether it’s using a household balance sheet or using Monte Carlo simulation, we’ll be able to make that judgment at least in an organized way. And then, if it looks like this is fine, then we have to go down more tactically and okay, where do we get that money because there might be some tax consequence. So, we’re constantly creating what-if scenarios.

And then, the kind of scenario that we’re describing here, Christine, is very different than, say, “I want to buy a lake house,” because when you want to buy a lake house, that’s a decision with some obligation to it. It’s not just a one and done. You buy your sports car; you lose money in commodities. There’s no journey after that. It’s done. But if you buy something that’s much more permanent, now you got taxes, you got upkeep, you got all the journey along with it. So, those ones you will really want to slow down a lot more.

Ptak: Many retirees have heard that one of their best responses in the face of a tough market environment is to cut spending. Inflation, of course, makes that difficult. How should people manage their withdrawal rates in an environment like this one?

Whitney: It’s a good question. I don’t think of life in terms of withdrawal rates. I don’t like withdrawal rates as a framework for thinking about retirement. I think it’s a horrible way to have to live a life. But there are times when you have to make adjustments. The way that I would approach it is, you really want to get dialed in: What do I need to live my base great life? I define a base great life as the non-negotiable. That’s obviously the housing, the medical, the food, the shelter, all the things that are base, but it’s not a rice-and-beans kind of life. You want to have some very basic travel, some basic entertainment. But that’s the marginal line that we don’t want to have to cross. That should never have to be compromised in the plan that you build—God willing, never compromised.

And then, you have all the discretionary things that you add on top of that. If you think of like a plate of spaghetti, the base great life is the noodles. You have to have the needles to have spaghetti. And then, you put on these more discretionary things: I want to have some go-go extra of $5,000 a year for the next 10 years. That’s some sauce that you put on there, and then maybe you add some buying a mountain bike, that would be on my sauce, and then you can add on these wishes or the more aspirational things. I think where you can look to make adjustments are going to be in the sauce and then in the spices. Because one is, I think it’s a really good idea to make adjustments there when times are rough for a couple of reasons. One is, it definitely helps the plan. You spend less money. It makes your income floor longer. It helps keep investments longer. So, it definitely helps the cause. But the other part, going back to psychological is, people want to do something. People get it; the world is rough. And when I have bear market calls—and we did this in the quick bear market of COVID when the floor was dropping out of everything, I had, I think, 80 10-, 15-minute calls with everyone that we work with. And the structure was the same—this is horrible. Listening to them talk about how it’s horrible and agreeing and affirming that, giving them perspective as that they’re going to be OK, and we’ll get through this and then helping them see that, assuming that’s the case. And then, brainstorming what does this make possible, and then, leaving with an action item.

So, I never left a meeting without an action item. I think with one person they were cutting their Netflix, because at that time, we thought the world was ending COVID-wise. But I knew that person cutting their Netflix account wasn’t going to make a material difference to their life. But the last thing you ever want to think about when things are tough is, oh, just hold on, in the long run, it’s going to be OK. That’s a trope for advisors that any client could tell you. That’s not enough because that robs people of their agencies.

The way I would answer that, Jeff, is, you want to know what your base great life is. That’s the one you don’t want to ever have to cut, and you want to plan thoughtfully so you don’t have to cut it. And then, I think being agile in those nondiscretionary things, I think that’s perfectly appropriate. I think we bought some generic paper towels that disintegrate in your hands. My wife naturally made a decision: “I can’t pay that for bounty. It’s inflation—look at what they just raised it to. I’m going to buy this one.” We naturally want to do those things and do them whether we’re asked or not, and I think that’s actually a healthy thing to do.

Benz: Sticking with the topic of retirement spending, I wanted to pick up on something you recently covered in your podcast, which is, assuming that someone is coming into retirement with multiple pools of assets—so taxable, traditional tax deferred, Roth—your podcast episode explored how to figure out where to go for funds. Can you walk us through some of the ways that you would encourage people to think about that problem?

Whitney: It’s a great question. In my world, that would be in the optimization stage. Once we have a feasible plan that’s resilient, and we’ve mapped out how we’re going to pay, say, for the next five years from our assets, we also build a five-year cash flow estimate on what their income sources are going to be, whether it’s from withdrawals or from pensions or work or what have you. And once we’ve mapped that out and figured out the baseline of how we’re going to pay for it, usually we start with the traditional hierarchy. We spend all of our aftertax assets first and then we move down the pecking order. But then before we implement anything, we go to the optimization stage, which is, wait a second here, can we be a little bit more thoughtful about how we withdraw money from a tax perspective? Because generally, when someone retires, there’s a gap between when they retire and Social Security where they have a lot less income and we have to figure out, well, maybe we can take some money out of our pretax assets to help fund life and pay taxes, say, at a 12% tax bracket rather than a 22% tax bracket. And so, we start to think about that.

And there are a couple of levers that come into play here. We have to think about IRMAA, which is the Medicare surcharges. We have to think of, do we need to solve for IRMAA and make sure we’re OK there, because it’s a two-year lag window. Do we have to think about ACA credits, which has been a huge one recently, when we’re thinking about where we’re going to pull money to fund life to create this income floor. Do we try to solve for IRMAA, or do we try to solve for tax bracket filling up the tax buckets? And that’s not easy to figure out. And a couple of approaches that you have to think through on that is, you may solve for IRMAA today, but you have so much in your tax-deferred bucket that you’re building this larger liability in terms of required minimum distributions later on. So, we have to see how that interacts with the potential required minimum distributions. We want to think through all of those things so we can pull money from specific accounts at specific times.

And that might be a combination. With the ACA, The Affordable Care Act, and the way they’ve handled subsidies, it’s made it a lot easier because it’s not a cliff anymore. But I’ll give you a good example, actually that I just discussed today. I spent an hour with a client. They had sold some properties and we were doing a tax estimate for this year. And they draw money from their IRAs. And we realized we’ve been drawing money from their IRAs to fill up the 12% tax bracket. But because they’ve had all these extraordinary income sources, we’re like, wait a second, maybe we should stop between now and the end of the year, because we’re already at the first IRMAA bracket of healthcare subsidies for Medicare. If we don’t stop withdrawing from the IRA, we’re going to get bumped up to the second category, which is $3,000, $4000 difference to this couple. So, we walked through, does it make sense to stop distribution from the IRA and then use aftertax assets so we can stay under that next bracket of IRMAA? And then, after Jan. 1 when they get normalized because they won’t have all these property sales, we could potentially just refill the bucket then if we had to. So, that was our conversation where potentially we saved $3,000 to $4,000 just by being thoughtful of how we’re withdrawing money and how taxes interact with that.

Ptak: We also wanted to pick your brain on real estate, which is another topic you tackle often. I’d imagine a perennial question is whether people should come into retirement mortgage-free. In your opinion, should pre-retirees and in-retirees prioritize mortgage paid out if they have an interest rate of 3% or so? Or is mortgage paydown harder to argue for now that safe real yields are going up the way they are?

Whitney: I think I’m going to buy a T-shirt that says “I have a fixed 30-year mortgage at 2 and 5/8ths.” I think I almost pegged the bottom, and I had considered paying off my mortgage at the time. This is a horrible answer. But we all know this is the answer is: it depends. The key is to think through it logically. If you focus on paying off your mortgage, that can definitely help you from a cash flow perspective. Because you’re not going to have the mortgage payment. If you look at my mortgage payment, when I was looking at paying it off, my principal and interest is less than my taxes and insurance. So, if I were to spend a couple of hundred thousand dollars to pay off this mortgage, I would save $900 a month in cash flow. It didn’t make sense to give up that much aftertax liquidity to save $900 a month in cash flow. And when you’re going into retirement, it’s about cash flow planning as much as it is about the efficiency of interest rates and paying off mortgage. And I think that’s an important consideration here.

I don’t know what the answer is for every individual obviously, but I think you want to think through that, because if you’re not building up aftertax assets, which is usually the area where baby boomers especially have the least amount of money. They have a lot of tax-deferred assets. They may have some Roth, but they generally don’t have a lot of taxable assets. And if they use all of their aftertax income or a lot of their aftertax assets to pay off this mortgage, which feels great—I would love to have a paid-off mortgage. What that could do in retirement is force them to have to take distributions from IRAs and pay taxes on those distributions and how that interacts with IRMAA and ACA subsidies, and so on. So, it’s not always a clear-cut decision.

We had the RRC roundup, which is the conference for the Rock Retirement Club, and we had over 200 people there. And a gentleman came up to me who I had had a conversation with a few years ago—and this is just an anecdote—but he had a number of properties. And somehow, we had a discussion—maybe it was on a meetup of does he pay them off or not. And he said, “I remember that conversation that we had in the clubhouse, and it leaned toward why would you pay them all off if your liquidity is going to get drained on an aftertax basis?” And this was a couple of years ago that he was recalling this conversation. We were just standing in the hall. And this is his hindsight, not mine, he said, “Had I paid all those off and not had all the liquidity that I had right now, I don’t know if I would have had the confidence to retire.”

The key to all these questions is, think through them thoughtfully in a well-thought-out process. And what we tend to do with these questions, Jeff, is to go from the bottom up, go from the tactical and fill in the bigger. We go the wrong direction in the thinking process. And I think if we can go through the same thinking process in an organized way, we’re going to get to a lot better judgments. And the whole key to this—because we’re going to have to be agile, because uncertainty we’ll never be exonerated from is—how do we make decisions a little bit better consistently is really the name of the game of being able to have a great retirement.

Benz: Another basic question that people often think about in the context of retirement planning is when to retire. Can you offer some guidance on the considerations that people should bear in mind, financial, nonfinancial, the whole suite of considerations in that vein?

Whitney: Small question. So, when to retire? The first thing, when you’re starting to feel this urge to retire, the first question you want to ask yourself is, why? Am I running away from this life that is just wearing me out and just trying to make the pain go away? Or am I so interested in these other things that I’m excited about in life that I’m being pulled to something? That’s a really important distinction that you want to ask yourself. Because if you’re running away just to get away from the pain, you might be setting yourself up for a hard transition. Because once you get the pain away, then you’re a little adrift and not really making forward progress in this next season of life. I think that’s an important consideration. Whereas if you’re being drawn to things, like, “I don’t have time. This work is getting in the way of this life that I’m excited about.” That’s a much healthier way to make a transition like that. And if you don’t have that, the first thing you need to do is to build some boundaries around work so you can free up a little bit of time to noodle on that and actually create some outside interests, which is hard to do, because we get into this treadmill and the 24/7 work environment just wears us out and doesn’t give us a lot of time margin. So, that’s one thing I think we need to think about.

And then, you also want to think about—and this is a harder thing for baby boomers to think about because we didn’t have this. I’m not a baby boomer, but they didn’t have this growing up is, what is retirement? Are you thinking about this like a light switch, which is generally how we think about it? I’m working full-time and then turn it off and I’m done? It’s a binary thing? Or is there a way of thinking about it like a dimmer switch? And now is the best time. I think baby boomers and people heading toward retirement, they are in a driver’s seat in terms of thinking of it like a dimmer switch, in terms of how do I slow down my full-time work? Whether it’s with the same company or retiring and doing contract work or doing something totally different but still earn income and still have some structure to my life to manage that transition a little bit more smoothly. So, take some baby steps before you turn the lights totally off. I think that’s actually a huge opportunity for a lot of people right now.

And then, financially, I think it’s going to be start to look at what your base great life really costs. Because when you’re in your 50s, when you start really thinking about this—I call it the not-so-thrifty 50s—because you’re making probably more money than you ever made, your kids are pretty much launched or close to launch if you have kids, and it’s easy just to be a little lucy with how you spend money. So, what does it really cost to live my life? And then, next, look at the tax bracket diversification to see if you need to shore up some money in different tax brackets.

I’ll use myself as an example there. I’m 55. Two years ago. I stopped saving in pretax assets and started funding our Roth 401(k)s for myself and for my wife, and I’m in the top tax bracket. That seemed silly. But I realized, I have so much in pretax assets relative to the other buckets that I’m just building a bigger liability later on, and I can afford to pay the taxes today. I’m annoyed by it, but I have the cash flow where it doesn’t impact my life and I’m trying to give a gift to my future self of building tax-free assets. So, those are some of the things I think you should think about if you’re five to 10 years from retirement, is how can you tactically think about your future self and give them some gifts because you have the advantage of earning income today.

Benz: Well, Roger, this has been a terrific conversation. We so appreciate you sharing your thoughts with us today. Thanks for being here.

Whitney: It was awesome. Thanks for having me.

Ptak: Thanks so much.

Benz: Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.

You can follow us on Twitter @Christine_Benz.

Ptak: And @Syouth1, which is, S-Y-O-U-T-H and the number 1.

Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.

Finally, we’d love to get your feedback. If you have a comment or a guest idea, please email us at Until next time, thanks for joining us.

(Disclaimer: This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording. Such opinions are subject to change. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. and its affiliates. Morningstar and its affiliates are not affiliated with this guest or his or her business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy, or the completeness of the data presented herein. Jeff Ptak is an employee of Morningstar Research Services LLC. Morningstar Research Services is a subsidiary of Morningstar, Inc. and is registered with and governed by the U.S. Securities and Exchange Commission. Morningstar Research Services shall not be responsible for any trading decisions, damages or other losses resulting from or related to the information, data analysis, or opinions, or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile before making any investment decision.)

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