Retirement Cash Flow Planning: How to Approach It Strategically

James Bogart

Welcome to the Bogart Effect, a Wealthy Wisdom podcast. The following Bogart Effect podcast is intended for general information purposes only. The information discussed is no substitute for personalized investment advice from Bogart or another investment professional. Please see important disclosure information at the end of the presentation.

James Bogart

All right. Good morning. Thank you for joining us for the Bogart Effect. With me is Brian Windsor. And we’re going to talk about retirement cash flow planning.

Brian Windsor

Absolutely. Welcome.

James Bogart

You know, we joked when we were preparing for this, it’s like, you know, this is an easy one. Well, the reality of it is, is it’s not easy. You know, and it’s something I think it’s undervalued in the planning process, especially when someone is getting ready for retirement. And this isn’t something, in our opinion, that you wait to do till you retire. You really should be looking at it, thinking about it well, in advance of when you actually retire. So, we’re going to have an overarching framework of why, when and where and kind of dive into each one of these, you know. But what I would tell you for me, with retirement cash flow planning, you really have to start with the plan itself, right? And every one of us has a different vision of retirement, you know, and different variables, you know, some are retiring with younger children still that might be getting ready to go to college. Some have their kids that are completely out of out of the house. But they might have their parents are big variables for them. And some are just saying, look, I got things that are more important to me than what I’m currently doing, and I want to start enjoying my retirement. So, everyone’s vision is a little bit different. And the reality of it is, is it’s going to change through the retirement process a little bit. So, let’s talk a little bit about the why first.

Brian Windsor

Yeah. Well, why cash flow. Why cash flow planning is such a big deal in what we do on a day-by-day basis is any time retirees or soon to be retirees are given studies of asking them what are their greatest fears of retirement? And it’s running out of money.

James Bogart

Always, yep.

Brian Windsor

And I can’t think of something that is most impactful to have continuous conversations on for with our clients as to assessing their current cash flow needs, but also looking down the pipeline to determine what else is happening and how do we make decisions today with what we know to be in the future? It’s extremely important to have a plan in place. And we say that. But, what does a plan do? A plan lets us know number one, yeah, we have enough money to pay the bills. But ultimately, underneath the hood of all of that, it helps us minimize those fears and reduce risks that an externality that is unforeseen in 1 to 5 years that happens whether it’s a personal situation, whether it’s a market situation. Having a plan in place allows us to reduce the risk that we’re going to fail, let’s just say it. Or have anything that could come our way, that we’re not nimble enough. Having that plan allows us to check back in, have a point of reference of this is how we this is where we’re going. And let’s assess this on an annual basis at least.

James Bogart

So, you said two things there that I kind of want to pull on the threads and really emphasize the point. The first is fear, right? Like having a plan. The intent is to remove emotion as much as we possibly can. For most of us, I’m going to put myself in this category. Emotion is a very big impediment to longer term success. And by the way, that’s not always a bad thing, right? Some emotions good, some bad. But fear is what we’re really talking about here. And the reason that we need to have a plan in place pertaining specifically to cash flows is to remove fear from this process as much as possible. Right. And you mentioned some of them right. It’s market drivers. It’s changes in your life, changes with your kids, you know. But having visibility to cash flow really is a very important part of this. The other thread that you mentioned is the frequency that we’re talking about these things, you know, and I would tell you, the number one conversation that I have with clients still is around their cash flows. Markets are important and investments are important, I don’t want to minimize any of that, but it’s directly correlated over into the investment thesis. Right. So, then we start talking about kind of the formulation of this plan. And again, we’re trying to reduce fear. But the reality of it is that we need to constantly be assessing this. And then we kind of need to get into some of the nuances of, of the layers around cash flow planning, like what age are you retiring at and how is that having an impact on where we’re sourcing cash flow from? What are the tax implications of how we’re sourcing cash flow? You know, and a lot of it is predicated on how someone has accumulated their wealth. You know, we have a lot of our clients. They have big IRA accounts pretax assets. And when you take it out, you get to pay ordinary income. So, you know in the conversation around this planning well let’s say you know one of the goals and aspirations is buying the second home. And we know we need a decent amount of money. I’ll make it up, say half $1 million to go buy this beach house or lake house or mountain-

Brian Windsor

I don’t know what beach house you’re getting for half $1 million. But let me know.

James Bogart

Down payment.

Brian Windsor

Okay down payment.

James Bogart

Whatever it is. Yeah, might be bigger number. But the point is, is if you got to pull a half $1 million out in a year and it’s all coming from an IRA account, boom. Like, and then you got to live. Right. So now that’s an extremely expensive tax year. And so, this is exactly why the planning is so important. Because instead of maybe, for example, doing things like a Roth conversion or something like that, maybe what we decide to do is a more incremental draw to build up that cash position when it’s not all in a big tax bracket. So, then we have the liquidity to be available to do it. Same goes with the logic on maybe why we’d want to have a mortgage for that that expensive beach house. But the reality of it is, is that if we were to do that, we might have that in there simply because it allows us to spread out the distributions off of the assets. Right. So, it’s a composition of the asset base is really what my point that I was making.

Brian Windsor

One of the interesting things that I’m thinking about as you’re discussing this, this beach house, this other things of how we want to view our defined way of retirement. The view that I have, the way you have our clients have, everyone’s different. Everyone’s going to have a different vision of what is important to them. And I want to get into some of those things about, you know, the cash flow conversation is one of the what I think is the best part of the job. And I’ll explain in a little bit as to why that is, but just coming it from an angle that as you’re listening to this or watching this, is that you’re different from everybody else, and there is no set way to say, hey, here is the defined formula, like this is cash flow. Call it a day. Everyone’s going to be different. Everyone is unique. Your cash flow strategy should also be representative of those

James Bogart

Uniqueness. Yeah. Absolutely.

Brian Windsor

Exactly.

James Bogart

So, we talked about the why. And I think we kind of belabor the why a little bit. But let’s get into the when a little bit. And for me this is probably the most transformative part of the conversation that we’re having with most households, especially as they’re making such a critical life event. As in transitioning to retirement. And the reason I say that way is because prior to retirement, you’re in what we call the accumulation phase. You have an income; you have cash flow you’re saving. And your investment thesis is very different because frankly, you still have a job and you don’t need your portfolio to be generating income and cash flow for you. As you make this life event into retirement. Now you’re in what we call the deaccumulation phase. So, your nest egg, what you’ve accumulated and saved now needs to be what we use to deliver your income in cash flow strategies. So, it’s not only a different investment thesis, but it’s also a different emotional thesis as well. So and so when we make that coming back to the plan and why the plan is so important when we build that out, it’s done with the specific and direct intent of facilitating as a as emotion free as possible that transition. Like I’m adamant, as soon as someone retires, I want to get that paycheck replicated into the account. You just helped my mom on this, right? And it’s like the cobbler without shoes, right? I love my mom. But, but it’s like,

Brian Windsor

Shout out mom.

James Bogart

Yeah. Thanks, mom. It’s like, hey, mom, you retired. Congratulations. We need to get this paycheck going. And, you know, it’s one thing where I find the emotion driven off the life event can be it for some people, an absolute catalyst for destruction. And in the sense of they get so fearful that it makes it makes them do things that are not necessarily in their financial best interest.

Brian Windsor

I’ve seen people be retired and go back to work because they are so fearful of making that switch from accumulator to deaccumulator, and it’s fascinating to watch because and I think that that’s where a part of our job becomes so unique is that we’re sort of like the gatekeepers to this door of retirement and showing them the way. And one of the, you know, the interesting parts is being able to allow someone to feel self-empowered enough to know that this is the right decision and I can make this happen because, you know, I got Bogart Wealth and my team making sure that this is all happening. So, it’s our job and working with clients as advisors to allow them to see through that, allow them to feel that so that when that time comes, that anxiousness, that fear is eradicated and it’s the opening to a new life, because that’s exactly what we’re talking about here, is you’ve worked for 20, 30, 40 years to get to a point that you now not have to get up to go work in that way. If you still want to work, you have vocational freedom. Great. Go ahead and do that. But it’s our job through this process to allow people to see that. And that is that’s the best part of the job.

James Bogart

I completely agree. Now, one of the things you said, I’m going to I want to dive into a little. This is such a pivotal life event that we so commonly focus on the employee as they’re making the change, but it’s a household change. And I think that in a lot of familial structures, you typically have one person who is the earner and you have one person who is the, let’s just say caretaker, safeguarding, pays the bills, etc. Right.

Brian Windsor

Office manager, as we call it in my house.

James Bogart

Well, a COO. So, I’m CEO.

Brian Windsor

My wife needs to be promoted.

James Bogart

Not trying to create marital strife here. But the point is, is it’s very common that you have one person who really focuses on the checking account, and you have one person who focuses on the bigger picture. And by the way, doesn’t mean that both aren’t bringing in income, right? It could simply just be you have your core focus is related to the household. And sometimes the household, it’s one person who does it all. The reality of it is, is that it’s a lot of times as emotional as it is for the employee that’s retiring, it’s equally, if not more emotional for the person who is responsible for paying the bills. And that’s why, you know, getting these mechanisms in place and having this plan built out of how are we going to repay or now pay our bills and we don’t have a paycheck coming in. It’s really, really important with that planning process. So, let’s talk a little bit about the where. And some of it’s the how as well. Right. I think in order to frame this out, we, we should do a quick recap of the different types of accounts. You know, so there’s non-qualified accounts. This is checking accounts, brokerage accounts etc. You know those are after tax monies. You pay dividend income, you pay interest income, you pay capital gains income. No required minimum distributions there. Then you have the pretax bucket. This is IRAs 401K’s a lot of people call qualified accounts. This is tax deferred money. So, you didn’t pay tax to get them in there. Usually, you get a deduction on the way in right. The money grows completely tax deferred. When you take it out you pay ordinary income and there’s required minimum distributions. And then the third buckets Roth money. Roth is tax free money to get- excuse me. After tax money to get in. It grows tax free as long as you’re over the age of 59.5, and that Roth’s been in existence for over five years. There are no required minimum distributions on Roth. So, I frame it that way simply because a lot of people think, oh, I need everything in Roth. No, actually, because you had to pay tax to get it in there. It’s actually not always the most advantageous place to accumulate money. The most successful financial plan, in my opinion, is you have money in each of them, the non-qualified pretax and the Roth. Right. So, and there’s going to be different stages of life that flow where it makes sense to, to have wealth accumulating in different buckets. When we talk about the where a lot of times, you know, the first place and most tax efficient place of getting money is the non-qualified. And it’s simply because of the taxability of the event along the way. Let the IRAs continue to grow tax deferred, gives us some optionality. And then lastly, we’re letting the Roth’s, that’s the long-term stuff, grows completely tax free. Really. I think of it in the sense of the reason we like non-qualified accounts first is because it gives us options, gives us control. We’re not creating tax. If we decide at the end of the year that we want to just do a distribution from an IRA to replenish our cash flow bucket, we can do that. If we want to do a Roth conversion, we can do that. If as we’re talking about that beach house, like if we need to be moving some money to different account types, we can do that, right? It gives us the ability to have that flexibility on a cash flow strategy in retirement. One thing I think a lot of people forget is when your retirement retired, you might have a monthly distribution of, let’s just say, 12,000 or $15,000 a month. That’s going into the checking account. That doesn’t necessarily mean it’s creating ordinary income like you’re working. When you’re working, you get a W-2, right? You have earned income, and that’s taxable income. But if you’ve got money sitting in a money market account or a brokerage account and you’re just giving yourself a paycheck, that’s not creating a taxable income event. So, it gives us the flexibility to really start to dive into some of the tax optimization work as well, which is a direct correlation to some of this retirement cash flow conversation.

Brian Windsor

As you’re talking about this, I always hear, well then how do we do this, Brian? How do we actually make all of this happen? Specifically, if you’re working with a household and you’re working with the individual, that is the bigger picture. Hey, let’s make sure we’re okay. The savings are great. But then there is that COO of the household or the office manager in my case.

Brian Windsor

James Bogart

She’s not going to be happy after she listens to this.

Brian Windsor

Okay, I’ll have some honey to dos later. But how do we then take our assets and alleviate the fears and the risks that this is not going to work out right? How do we have the investment structure in place so that when the cash flow is needed, it’s available? Because going back to what we just talked about a few minutes ago is there is that shift from the accumulation to distributing assets to provide cash flow, the investments that are going to lead, that need to be tailored for that specific cash flow approach. So, you’re talking about, well, there’s that second home that we want to be able to look to purchase. Okay. When do we go ahead and do that? But also, what do we do today in order to make sure that that can be the reality? Markets are up and down and who knows from a short period of time. If I have just a couple of years till that’s happening, the way that I’m investing that has got to be different than the way that I’m investing for money is that probably may not be tapped for cash flow at any part of my life.

James Bogart

So, what I’m hearing from you is the first thing we have to do is have a very honest assessment of what are the upcoming expenses going to be? Not only what you need to live on, but potentially other things that might be coming up, cars, medical things, grandkids, college, another home, to give us the visibility of the amount. The amount, but also the timeline of when we’re going to need it. Because to me, the number one success for investing is time, right? If you look at the just duration, any six-month period of time, you’re going to find a period of time you lose money. That’s almost guaranteed. If you look at the probability that the S&P, for example, is going to be up in a year to about 73% in one year, 73% chance it’s up. So, by the way, that’s still pretty good odds, right? It’s better than 50/50. But then if you look at it over a five-year period of time, the probability of the S&P being up is like 97.4. Right. Like so the longer the duration of time, the higher the probability success goes up. So that then comes directly back to this conversation of if we have visibility of when we need the money, we go ahead and have a different investment thesis for the short-term stuff. So that ultimately, we can let the longer-term oriented stuff bear more risk. Right. And that’s why this retirement cash flow conversation and building the planning for it is so critical. Absolutely imperative. So, let’s talk a little bit about the implementation of this. Right. So, we’ve done the why the when the where. Let’s talk. Well, this is really the where. But let’s get into some more implementation of it.

Brian Windsor

Yeah. So, to find where your other sources of income are coming from, it’s not just our investments. Social Security. Some of our clients may have access to pensions. Some clients might think about still working in retirement. Whether it’s I’m switching roles, I’m going to switch companies and work there for a few years, or I’m just working part time. All of that’s important and critical for how we’re going to define where your cash flow comes from, your tax rate is going to be. So having an assessment of, okay, here’s my expenses. Right. This is, this is what I need for my, my, my, my daily living expenses and then my travel. However, you’re budgeting. And then here are the levels of cash flow that’s already coming in. And it’s not just okay. Yes, it’s looking at the investments but also understanding. Talk about qualified assets required minimum distributions. There’s already a cash flow plan for you that the IRS mandates starting for 73, 75 years old, depending on your age. We also have to assess when the government is telling us that there’s a certain amount and when and how we have to take it out. That’s got to be factored into what we’re doing today. Exactly.

James Bogart

Can I add one thing to yours? Which is I think it’s also the age of retirement, because when we talk about the mistakes that people make, if if you’re retiring under the age of 59.5, which a lot of individuals are striving to do at this point, not properly planning for that can be catastrophic is one. The reason for this is IRAs, 401Ks, in most instances, you can’t pull out before the age of 59.5 without a 10% penalty. Now there are some, some, some strategies to manage that. But for anyone who wants to retire, let’s just say 55, you know, now you’ve got a four-and-a-half-year gap that needs to be bridged, some form or fashion. Now, typically the best place to do that is the non-qualified, which is our default, cash flow strategy as well. But not planning appropriately for that and just making the decision to retire. Well, that could be bad, right? So just to add into having that plan, that visibility, but also assess the timeline.

Brian Windsor

So, there’s yes, we talked to a lot of clients about, you know, no later than one year. How do we have to really get this late in. Preferably five years away to sort of get our ducks in a line? But what I’m hearing you say right now, ringing true, that there’s no wrong time to be on cash flow plan.

James Bogart

Well, so I think the reality of it is, is the earlier that we can engage with the household to start building out these plans, because success is, is driven based upon, as I mentioned earlier, time. But it’s the behaviors that we have. You know, for example, saving maxing at your 401K, but then it becomes a conversation of if we have some extra money, where are we saving? A lot of people, as I mentioned earlier, I think we should get into the Roth. Well, that might not be that the case right.

Brian Windsor

Yeah, especially in that example of somebody retiring.

James Bogart

Exactly. Yeah. Bingo. So that’s why engaging, you know, mid 30s, late 30s is great because we could at least have some directional conversations. 40s. It’s starting to get to the 50-yard line. And as we get into the 50s, your 50s were absolutely hitting the red zone. You know what I’ve noticed with the pandemic, one of the biggest changes is households by and large wanted to work until their late 50s, early 60s. And that was the plan. Now, I think a lot of individuals have changed their timelines where it’s let’s go as soon as we possibly can. And what’s the decisions that need to go into that as well. Right. So, building out this plan, I mean, we’re going to belabor this whole conversation around having a plan. But the earlier the better we can engage. And it’s not just the investment conversation. Right? I was actually having a conversation with one of our employees’ children, about how they should be saving. And it’s what should I and this is someone in their mid-20s, right. So, should they be saving for the down payment of the house, or they be maxing out their 401K plan? Should they be saving for a car? Should they rent? Should they buy? Right. Like these are all the conversations that in their in your 20s. Like it’s so hard because everything’s chipping away at the same cash flows. But it has a direct impact on this retirement conversation. Right. So, it’s why it’s so important to actually be direct about it early on, and especially even if this is just a little tangent about your kids as they go into the workforce, like helping them with this financial literacy conversation, because that’s really what this is, right? And emphasizing the need to be very deliberate in how you’re saving. You know, wealth accumulation is very simple. Spend less than you make, right? Like, and give it some time and you’re going to be able to be okay. Right. Like what I’m finding now and this is a societal comment, is that less and less of that emphasis is being placed. If you think about it, we have 336 million Americans. Only 4.8 million have a million of investable assets. 1.8 million have 5 million of investable assets. So, like when you talk about statistics and it’s like this conversation is so important and it’s important to have it as early as possible. And related to your comment about understanding the income sources. Well, 30 years ago, 48% of the S&P 500 companies had pensions. Now there are 13 of them, not percent, 13 of them. Right. So, pension models going away, it’s placing more emphasis on the need to save cash. Comp has gone up right to offset some of that. But the reality of it is, is the savings hasn’t gone up at a proportional level. Right. So, this need is becoming so, so important. And that’s why engagement as early as possible. Right. Like in a perfect world we’re talking to them in their 20s. We use it with them in their 30s. And we’re getting ready in their 40s. And implementation in their 50s. Right. Like that’s the high level. So, let’s bring it back. Right. Let’s talk a little bit about what are the strategies available to a household now that they’ve made the decision. Retirement. We’re going to build it out. Yeah. So, talk to me.

Brian Windsor

So, you got to think generally speaking you know our grandparents they think about retirement and then their investments. And it’s well I’m going to live off the income from my investments. I’m going to live off of the dividends that are being paid to me. That’s one way. That’s one way.

James Bogart

And we call that income only.

Brian Windsor

You need a pretty sizable asset, level, in order to be able to provide that. Because when you’re looking at any income streams that, you know, depending on where rates are, right, they might be anywhere from 2 to 5%, depending on where you’re looking at, what risk you’re looking to take. That’s a cash flow source that’s coming in. Now. The real big downside to doing that, number one, is that without, you know, taking the last year or two into consideration, we’ve been in a relatively low interest rate environment. So, it’s been darn near impossible for a lot of our clients to say that that’s the approach that I’m taking the other.

James Bogart

Or it’s forced certain types of investments. If that’s the strategy that they want to have. Which isn’t necessarily the best investment thesis either.

Brian Windsor

That’s the that’s the that’s the process. That’s the point. You’re leaning to one part of the market, one part of the market to provide interest or dividends. Right. So, I’m thinking about individual bonds or bond funds or dividend paying stock funds. Those over recently or over the last ten, 20 years haven’t appreciated as much. So yeah, if I’m thinking about long term forecasting, oh, I can get my 4% or my 3%. That’s great. But what’s your opportunity cost? And who else is that impacting that opportunity cost. Because you could just say I’m comfortable with that. But what’s your spouse think about that. What is what are your children or the next generation think about that with what this wealth can actually provide to you. So, you have to tread lightly on the income only approach. It’s for some, maybe not for all, but it’s certainly one that’s there to provide a little bit more stability.

James Bogart

Well, and I think recently especially and there is recency bias as it’s happening. Money markets are paying 5%, 5.2% right. So, it’s very easy. And by the way if you look at global wealth accumulation right. Like there’s also been a little bit of an additional stimulus for the affluent simply because those that have money can throw it in money markets with no risk getting 5%, 5.2% right. And if you look at the level of money that’s sitting in in money markets and, CDs and high yield programs. Normal environments, about 3.3 trillion of cash, cash equivalents currently at 6.3. Still, by the way, we’ve been that way for about 18 months. I have not seen that number coming down. And again, it’s this this socioeconomic divide that’s happening. But it’s a risk-free way of just being income only. Right. That’s not a long-term thesis is what I’m hearing. And so, what it tends to happen is people are biased to a dividend paying stock. It might be paying three and a half to 4.5%. It might be paying or might be going into CDs or bonds. Right. But now you’re missing growth stocks. You’re missing blend stocks. You’re missing the things especially this last year and a half that have two years now. They’re really done. Well, specifically with tech companies. Most tech companies don’t pay dividends with the exception of like Apple. But even that’s a pretty small dividend.

Brian Windsor

So then think about the other way. Then you’re thinking income, only then the other way that a lot of clients may look at that is like, well, I’m going to do a more diversified approach and take a systematic withdrawal from my portfolio. That’s the generally, hey, three, 3%, 4% for my portfolio on an annual basis, and I am blanketing my entire portfolio with a certain asset allocation strategy, whether it’s your general 60% stock, 40% fixed income, and I’m just going to take 4% from all of those sources and just drive my cash flow from that. Well, that’s a certain way that you can help provide income. And studies will show. Again, it’s just a theory. It’s never been proven. And you can’t prove what the markets are going to do in the next 10 to 20 years. So, you never know if that 4% is going to be okay.

James Bogart

Well, in really quickly, I just want to articulate, like a lot of people ask about these withdrawal rates, and I want to give a little bit of substance to why that matters. General guidance if you use a 5.5% rate of return, 2.5% for inflation, or the difference between the two is 3%. So, a 3% real rate. If someone withdraws 4% of their portfolio, that portfolio will last on average 41 years. If you withdraw 5%, it’ll last for 28 years, 6%, 21 years, 7%, 17 years. So obviously, the higher your withdrawal rate, it becomes a crash and burn pretty fast. Like and it shortens duration. But if somebody is 60 years old at a 4% withdraw 101 years. Yeah, that’s probably pretty good. Right. Or close to. Just really quick the other way. A 3% withdrawal rate lasts for 99 years. So that chart looks like it’s going forever. It’s actually not. It starts to inflect a 2% is 167 years. Right. So, depending upon what a household’s goals and aspirations are, that withdrawal rate becomes a direct barometer of this. And by the way, the lower someone’s withdrawal rate, higher probability of success, it creates new issues. Some of these tax conversations and things of the sort. But that’s where this pro-rata approach why people talk about this, this withdrawal rate and what’s ultimately, you know, driving it. I would argue a lot of it is because of probability of success. Right. So, then the third approach is a bucket approach. Right. And to me the bucket approach just seems so logical. Right. Like we know what your needs are going to be for the next 12 months, 18 months, 36 months. Right. Depending upon someone’s risk profile, why shouldn’t we have that bucket of money sitting in a lower risk environment? Yeah. And you could tell the way that Bogart Wealth is biased, like we’re very much a bucket approach type of firm. But what it means is you have a short-term bucket. You have an intermediate term bucket, and you have a long-term bucket. And for every household, it’s that composition is going to be very, very different depending upon their income needs, the cash flow needs, their risk profile, their comfort level with risk. And by the way, in some instances you are going to integrate the income approach and the pro-rata approach. But it’s after we’ve been very deliberate about where is your incoming cash flow going to come from. Right.

Brian Windsor

Yeah, I think about a lot of times with clients that have had a tremendous amount of success being able to save in their Roth’s and with tax free growth, tax free withdrawals, how that money passes through to an estate is that your heirs get ten years or ten years of complete tax-free withdrawals or ten years of tax-free growth. So typically, when we’re looking at plans and we’re assessing where Roth’s fit into these monies, they have a different risk characteristic entirely because generally it’s thinking about the estate.

James Bogart

Well so can we take a step back.

Brian Windsor

Yeah, go ahead.

James Bogart

The tax implications are a big part of these conversations. Right. And a lot of times I think a lot of households underestimate the value of an after-tax return versus they just look at the gross like all right. You know my accounts are up. Whatever the number is 6%, 10% 14%. But what really matters is the composition of that growth, which is exactly what you’re saying here. And so, a lot of the reasons why, when we’re building out these retirement cash flow plans, it’s done with these tax implications in mind where we’re going to look at the non-qualified bucket first. As we mentioned earlier, it gives us a lot more flexibility of where the cash flow is coming from, why it’s coming from, you know, each of these respective places. And then it gives us the flexibility to come in and say, all right, now we have all this tax optimization work that we need to do. And dependent upon again someone’s withdrawal rate. You see how these things intertwine. We can then get a direct implication of what are the future required minimum distributions going to be at someone’s age 73 or 75 depending upon their age. And then it becomes a conversation or the RMDs driving their tax rates up. Yeah. We need to be doing something now as quickly as possible to mitigate that. And then last but not least, is there a legacy conversation? And I think of one of our favorite households to work with. Like he’s very clear. This is about maximizing legacy for him. And that’s a great conversation because it obviously can buy us right off the bat. We need to have some growth in the portfolio. Right. And we need to really be focusing on the composition of how the wealth is transferring. It’s not just let’s leave the kids a big IRA accounts. We really, really in in that particular individual’s case, there’s an R&D implication. Right. But we also need to be very deliberate on moving the money over into a Roth to be focusing also on this legacy discussion.

Brian Windsor

Couldn’t agree more. And one, one quick point that I want to make, as we’re getting closer to wrapping up here, is. I got an email this morning from a client and ‘Brian, plans are good. We feel very comfortable. No. Kids recently retire within the last few years. And the conversation is, how can we think about driving our lifestyle more?’ That is another part of the cash flow side of things that I love having conversations about allowing clients to live a richer, more fulfilled life, right? If they want to think about increasing lifestyle. And that’s not just spending more money and trips and travel. It can be gifting to your favorite organizations and allowing that to happen in front of your own eyes, as opposed to after your passing. Our job is to help create what the thresholds are, in realistic terms, right? That’s where also our jobs come in as gatekeepers to say this is what we can consider doing at this cost. Meaning what does it do to you in the long run at the what is the size of the estate look like? So, it’s allowing clients to see a vision of a life that they may not have known about a couple of years ago, and a lot of times we’re running financial plans, which we here at the firm look at a slower than normal long term growth rate, which you have to you have to look at that to assess that yeah, you have enough money to pay the bills. I’m going, I’m coming up on my 20th year in the industry soon, and I’ve been working with clients on financial plans for many, many years. And as we’re always assessing sort of, I don’t call it the worst-case scenario, but not so good scenarios you and you see the markets have average returns. And what happens is, is you are able to go back to the plans from like five years ago or ten years ago. And you can see how that time and how your disciplined approach with your investing is opening the doors up to doing things differently than you first envisioned. And that’s where I think our job comes critical is because we’re not just here to help. Yes, we are with their investments and making sure that they feel comfortable, but it’s also allowing clients to see a different life that they may not have thought of.

James Bogart

Yep, absolutely.

Brian Windsor

That is the best part of this job.

James Bogart

So, in wrapping up, let’s just hit some of the bigger mistakes. Because I don’t want to shortchange that. Right. And I think from my perspective, it it’s being honest and candid about what your expenses actually are. But for me, that’s probably the number one mistake I see with retirement cash flow planning. I think it’s not planning early enough. Right. I think that age conversation, that’s, that’s another one that I’ve noticed is a big, big, big shortcoming with a lot of people’s plans. Any others that you can think of?

Brian Windsor

I’m a different investor now that I’m retired. How I reacted in March of 2020, how I reacted in November of 2008 as I’m accumulating, a lot of times clients did nothing and that’s a good. Could have been different things like rebalancing that we can talk about like we did on our end. But it’s different. It’s different when you know that these moneys represent you’re paying your mortgage next month. It’s different when it’s this, your daughter’s wedding that you want to help pay for. It’s a different mindset of what these moneys mean to you. So, I do find that clients are more, sometimes more emotionally charged earlier on in retirement during downturns of the market to have concerns. So that’s why, again, it’s critical for us to have a plan in place for all of their expenses and making sure that they have that peace of mind that even when these things occur, they feel comfortable that they have the plan.

James Bogart

Yep, yep. Absolutely. And I think related to that, though, is not a comment you just made a minute ago around not understanding the value of your wealth. Yeah. And fully appreciating what your wealth represents. Because it’s not just the paycheck, but it’s also the, the impact that it can have on your lives, your family’s lives, philanthropies lives, etc. You know, in that one, for me, usually comes a couple of years in. It’s not like the immediate because you’re making such dramatic changes, but now all of a sudden, it’s like, hey, my, my kids really could use this help now, not 30 years from now. Like, what are ways that I could be having an impact as well. Right. And related to that, they’re sometimes putting too much structure around those types of things, whether it’s philanthropy, kids, you know, nieces, nephews, whatever. Like we don’t need to necessarily model like every single year we’re doing this giving. But you use a year like 2024, right? Like this is 2023. These were great years. They rectified what happened in 22. But yeah, we probably got a little cushion if we want to do a little bit of extra stuff like this is the stuff. And usually going into Q4, these are the types of conversations we’re having.

Brian Windsor

Absolutely.

James Bogart

So really productive conversation today. Thank you so much, Brian. Appreciate the time. Thank you all for taking the time to listen. Appreciate it.