488: From Accumulating to Spending: 20 Lessons for a Happy & Successful Retirement with Christine Benz

Casey Weade: If you want to know the most important lessons for a happy, successful, and wealthy retirement, which of course you do, well, this is the episode for you. We're going to be talking about everything retirement. We'll talk about Social Security, taxes, lifestyle in retirement, how to make that spending transition or start spending a little bit more in retirement with confidence. And of course, we will also be hitting on investing. This is Casey Weade. Welcome to the Retire With Purpose podcast, where it is my mission to deliver clarity and purpose and elevate meaning in your life. We do that both through the financial and non-financial conversations that we have here on the show.

I encourage you to lean into those non-financial conversations that we have. You can look for those moving forward under the Freedom After 50 tags. So, look for that series. And then we also share with you articles week in and week out every Friday. We like to highlight those with you in short form. Today, we're doing more of a long-form interview-based podcast with a guest that's actually been on the podcast in the past. I'm very excited to bring back Christine Benz. Christine is the Director of Personal Finance and Retirement Planning for Morningstar, Senior Columnist for Morningstar.com. You'll see many of her articles that she writes show up in our weekly email that hits your inbox every single Friday.

She does put out some glorious content and we're going to be diving into some of that today. She's the co-host of The Long View and How to Retire podcast. She has been named by Barron's Top 100 Most Influential Women in Finance and the Ten Most Influential Women in Wealth Management. We had her back in Episode #264, focusing on common sense strategies for your retirement plan. Today, we're going to focus on her latest book, How to Retire: 20 Lessons for a Happy, Successful, and Wealthy Retirement. We partnered up with Christine because we want to get this book in the hands of as many of you as possible.

If you would like to get a free copy of this book, all you have to do is go over to iTunes, write us an honest rating and review on iTunes, and then shoot us a text. You can text us the word 'BOOK' to 888-599-4491. We will verify your iTunes user name from there, verify that review, and get you the book for free. It's really that easy. So, let's get into it today. We have a lot to cover.

[INTERVIEW]

Casey Weade: Christine, welcome back to the show.

Christine Benz: Casey, it's so great to see you. Thank you so much for having me back on.

Casey Weade: I'm excited to have you back on. And everybody, really, we had great reviews from the last interview that we did. And I love the content and how you write and how you communicate. And this book didn't let anyone down in that realm. And I think that might be because this wasn't a research project of yours. You called this a Me Search project. What did that mean?

Christine Benz: Well, it meant that I was starting to ask some of the questions that come up in the book for my own life, for my peers. We're all getting to an age where we're starting to think seriously about the logistics of retirement. I really felt like I had the financial piece settled. I had thought through a lot of the key considerations financially, but what I had underrated probably were some of the non-financial considerations, some of the things that when we look at what makes people feel content about their lives in retirement, what are the things that contribute to that? And so, those are some of the things that I wanted to explore in the book for myself.

Casey Weade: You know what I don't want anybody to overlook, and I could see it just being easy to overlook, that's not really highlighted, the ordering or the methodology that you leverage. Maybe you didn't really have a methodology to how you ordered these things. But as I view it, I think it's something that's really challenging for retirees is prioritizing those planning considerations. And I see what you laid out here is very similar to our retirement planning process that we use. It starts with purpose, getting clear on those non-financial aspects. And then liquidity for emergencies, income planning, then investment planning, then estate planning and tax planning, health care planning, and then that, of course, as part of that end-of-life planning or legacy. And it feels like it very much follows that. Was that intentional?

Christine Benz: Well, it was. I put a lot of thought into how to sequence those lessons because I did want to start with kind of the visioning exercise, which Michael Finke went through in the first chapter of the book, but then get into more granular financial discussions, and with some of the estate planning, succession planning considerations. So, I did want it to follow an arc, but I also wanted to enable people to kind of dip in and out, because that's one thing I've been gratified to hear about the book is people have said, "Oh, you know, I just picked off a couple of chapters that I was interested in. I'm going to come back later on," and that's totally fine. It doesn't necessarily require you to read the whole thing through in sequence. You can use any sequence that you want.

Casey Weade: Yeah, I love that. And we are going to be kind of looking at each one of these segments pretty quickly. I don't know that we'll get to every single one of these lessons, but the way I looked at this because I think one of the coolest things about the book, I look back at our podcast guests, almost every single one of these lessons that you've cited from individuals, they've been on the show at some point, and everybody takes a little something different away from each one of these guests just like they will your book. And I want to focus in on maybe one or two things that stood out from each one of these that you wrote about in the book. And we're going to kick it off with Michael Finke, who was on Episode 371 and 468 of the podcast.

He talks in here about routine and the importance of having structure in retirement, striking some level of balance between having a routine and something that's so rigid that you can't really enjoy yourself in retirement. And so, many times I'd say the majority of the time when I ask people, "What are you going to do in retirement?" they say, "Well, I'm just going to wake up when I want to wake up and I'm going to go to sleep when I want to go to sleep and I'm going do what I want to do every single day." And there must be some type of balance between these two different things. But it's going to be unique for everyone. So, how do you recommend individuals go through the process of finding the right level of rigidity or the right routine for themselves because it's just so important to figure that out prior to stepping into retirement?

Christine Benz: Well, absolutely, Casey. It's such an important question. And unfortunately, I think that the way we work in this country is that many people show up in retirement quite burned out. And as you say, they haven't really been able to visualize retirement beyond, "Oh, I just want to get enough sleep. I want to have time to relax with my family." And all of that stuff is great. You need to do that in retirement. But as Michael points out in the book, you need something to relax from. Like, the best days inevitably are the days where you get something done, whether it's just giving your garage a good clean out or doing volunteering somewhere or whatever it is. You're getting something done, something that confers some sense of accomplishment or purpose, and then you're also relaxing.

And finding the right balance I think is a little bit a matter of trial and error. I think a really good practice to consider in the years leading up to retirement is to take some vacations at home where you're experimenting with this a little bit, and I've done that a little bit with some vacations that I've had. At Morningstar, we have a sabbatical program where we get six weeks away from work, and I've usually used about half of my sabbatical to travel and the other half to experiment with home life just to see what this is going to feel like, what combination of exercise, purpose, activities, relaxation activities, how the pieces fit together for me, and it is very personal, but you need to spend some time experimenting prior to retirement. You don't want to show up in retirement on day one and figure this stuff out.

Casey Weade: Well, I think that's the thing we see most often, though, is individuals stepping into retirement. They've never taken more than two weeks off work. And then it's kind of like throwing a fish in cold water. You've never felt that before. And it can be quite a shock. And I love the sabbatical program. I think there's a lot more employers that are leaning into that and giving more people off in larger chunks, especially as they approach retirement. And I think that's one of the things we've heard time and time again from our guests is make sure you practice retirement before you step into retirement.

And there's another piece of this that stood out from Michael Finke and then a few more so from an X or a Twitter post that you had not long ago because in it Michael Finke talks about the concept and the value in having a bucket list and how exciting that can be and how that can drive purpose in retirement. And then on X, you commented not long ago, just a few months ago, you said, "Contrarian point of view. The whole spend on experiences mantra is overstated. The most worthwhile experiences involve connecting with other human beings and that can be done very cheaply and often walking with friend, inviting." You said, "No bucket list!"

And Jet Vertz, I don't know if you know Jet, but Jet was on the podcast not long ago and he wrote the book, Purpose Driven Bucket List. I just loved that concept. And I'm wondering after this interview, you've written the book and you wrote about having a bucket list, you talked with Michael Finke about it, are you still really standing on business here no bucket list?

Christine Benz: Well, I think you probably need some balance, that you do need a list of things that can confer some sense of purpose, things that you want to get done, big picture things. But I've been super influenced by Jordan Grumet, and I know we're going to talk about Jordan, whose new book is called The Purpose Code. And his point is that people sometimes really get stymied by this sense of, "Oh, I need what Jordan calls big P purpose. I need to have to start a foundation or run a marathon or whatever, you know, do something really big picture." And those things are fine. They're good to have those aspirations but we need things that confer daily joy, whether it is those walks with a friend or your partner or cooking weekly healthy meals or whatever it is.

You need things that light you up every single day in addition to perhaps some of those big aspirational things that you might choose to pursue. So, I have just found, you know, as I have had more of those bucket list things that I've been able to do and travel a lot of places and all that stuff, at the end of the day, what I really do love is some of the smaller, more joys, some of the things that I can experience daily. So, that's the beauty of it. It's equal opportunity. It doesn't depend on how much you've saved, that anyone can pursue those smaller joys. You just have to figure out what they are.

Casey Weade: Yeah. We've had Jordan on the podcast a couple of times and I know he's mentioned in both of those interviews how sometimes individuals on their deathbed can really beat themselves up over not checking enough of the boxes on their bucket list. So, I think that's a really important area of emphasis. We do dream storming with our team and our families once a year where we get them to dream about the future. And sometimes when we're doing that dream storming, they can get in this mindset of thinking about really big things. And it's hard to think about these really big things or what if I don't accomplish them, I think that's a great point of emphasis that dreams can be the little things that you get done every day. It can just be a way that you live your life and that can create a lot of self-worth.

Christine Benz: Absolutely. I love that, dream storming. I'm going to use that. That's a great idea.

Casey Weade: Well, let's get into Laura Carstensen's takeaways here, nurturing your relationships. When we think about relationships, do you find that the planning for relationships or the impact and thinking about the impact relationships will have on a retirement is often an afterthought? I don't feel that this is often an area that is planned around prior to retirement.

Christine Benz: One recurrent theme I've heard in talking to actual retirees is that they underrated the extent to which their work relationships would kind of ebb away, that maybe they stay in touch with a few very close work friends. But for the most part, your colleagues, if they're still in the office or wherever you work, they are going to kind of get on with their lives and they may not think about you as much if you're not there on a daily basis. So, if you are someone who gets a lot of social interaction from work, think about how you'll replace that in retirement, Laura points out in the book that men, in particular, can sometimes struggle with this, that their social networks are a little less diversified than women's coming into retirement.

So, if men are receiving a lot of their social interaction from work, they need to think about where they will pick that up in their community, in their gym, whatever it might be. You just need to make sure that you are finding opportunities to connect with other people. Because as Laura references in her chapter, a lot of research has been done about human happiness, and much of it comes back to who we love, who loves us. And so, you need to make sure that you are replenishing those connections that perhaps you had from work.

Casey Weade: You mentioned prior to getting started the interview that you're now 100% remote from work. And this isn't unusual in society today, in the workforce today. So many individuals are working remotely. Now, this transition from being in office to being remote for you, what can the impact of that have on relationships for you? And did you do any intentional planning to ensure that you didn't have this gap?

Christine Benz: Yeah. It's a great question, Casey. And so, for me, it was quite gradual. I had initially moved to be like three days a week at home mainly to help oversee the care for my parents, who lived just a few blocks away from me here in the Chicago suburbs. And then my parents passed away and COVID happened and I eventually moved to full-time remote work in recognition of the fact that my work is largely solitary, where I do a lot of writing. I worked on the book project. I do research. But I do have to be really intentional about making sure that I have connections with people throughout the day. So, I have a walking buddy who's right in my neighborhood.

We live in the Chicago area where sometimes the weather is inclement, so we walk inside on a track when the weather is bad, but that connection is really kind of a nurturing connection. And then I have a couple of close friends who I stay in regular touch with. So, yeah, you do have to make plans to keep those connections alive. Even colleagues who I don't see on a daily basis, we still will get together for lunch. I'll come into the office because it is an important part of feeling like you are connected to something larger than your own little work experience to have those regular connections with colleagues.

Casey Weade: Well, I think that's the thing that I fear most, not just for retirees, but society as a whole, is we just continue to get more and more disconnected, forgetting that we're very social creatures and we are designed to be around other humans, not only being around other humans, but I believe we share the same purpose in helping other people. And we can't do that if we don't have those regular connections. Blue zones highlighted that perfectly, those with the most daily social interactions where they knew the first name of other individuals seem to be the one predictor of longevity.

And in order to do some of those things, here's my hard transition for this and that is in order to do a lot of those things and have those social connections, we have to get out of the house. And often that involves spending at least a little bit of money on that gym membership in order to walk that track or whatever that might be. And that can be a big transition for retirees going from accumulation and saving to deaccumulation and spending. And I found it interesting, as I look throughout your book, the majority, about a quarter of all of the lessons in the book have to do with retirement spending. You overweighted this topic. Was that intentional and why?

Christine Benz: Well, probably so. And it may have just been that a lot of my research at Morningstar has focused on retirement spending, safe spending rates, portfolio construction for retirement. So, that's probably why I put a little bit more emphasis there. But, Casey, I think you're absolutely right that this is an under-discussed topic of retirement planning where people have saved their lives, saved their entire lives while they are working, and they come to kind of view themselves as savers. And so, flipping that switch into spending mode is a really difficult transition for a lot of people.

So, we wanted to explore that, how to give yourself permission to spend, how to move from saving and investing into spending where your portfolio won't necessarily hang out at that high watermark that you might be anchoring on and how to do that, how to think about that. So, I do think it's a super important dimension of retirement planning.

Casey Weade: Well, Fritz Gilbert offered you a piece of advice, if you will, or a little guidance, and it's the unique strategy that I want to point out because I'm not sure this came up in my conversation with Fritz and I don't even know how I feel about it right now. It's an interesting one, and I'm looking forward to hearing how you think about this. So, Fritz talks about steering new investment contributions and the cash, the 2 to 3 years leading up to retirement. And this, I mean, for most they go, "Well, this is like the most pivotal point. I'm supposed to be saving right now. I need to save as much as I possibly can. And now you want me to stop saving and set it aside in cash? At the same time, while I'm still saving, I'm just not putting in my 401(k)." How does this help psychologically with the spend-down factor as we make this transition into retirement, at least in those first few years?

Christine Benz: Yeah. Fritz and I are mutual enthusiasts for the bucket approach to retirement portfolio allocation. And the basic idea is that you are structuring the portfolio to supply your spending on an ongoing basis. And most investors, as they move into retirement probably have not allocated a couple of years' worth of portfolio withdrawals to cash investments. That's probably a missing link in their portfolios, in my opinion. And so, the idea of having those cash reserves is that you have a little bit of a buffer set aside. If stock returns are down or bond returns are down or maybe both, maybe it's a repeat of 2022, you have a safe store of assets that you could withdraw from during a period like that. So, that's the basic idea that Fritz was talking about there as you're beginning to amass those liquid reserves to protect yourself against a bad sequence of returns.

Casey Weade: Yeah. I don't know that many think about the bucket strategy or a specific type of income strategy. You know, of course, they go, "Well, yeah, that's going to allow me to spend more because I invested properly. I'm going to get better returns or something along those lines." But, to me, the reason I love the bucket strategy and I know you did a whole lesson in the book on the bucket strategy, I think it's more psychological more than anything else, which is the same way that we think about our different allocations or buckets. Beyond just having this income bucket, you have your emergency bucket, you have your investment manager, your long-term bucket, your inflation bucket, your legacy bucket. You kind of break these into different areas so that psychologically you're just freeing up your confidence, I guess, to spend.

And I think that's probably what having that extra 2 to 3 years of cash does is you go, "That's right. The market's down 10% or 20%. I'm okay for a couple of years. I could wait. I bought myself some time for the market to rebound." And this is in sharp contrast to just leveraging the good old 4% rule and drawing 4% out of our portfolio, adjusting it for inflation every year. And you talk about that next in the book with David Blanchett, who is on Episode 55 of the podcast. We have him coming back here in a couple of weeks to discuss some of his more recent research. He and you both discussed how the 4% rule might be too conservative today.

Now, not that long ago, three or four years ago, 4% was too aggressive. And so, when you think about the 4% rule being too conservative, do you feel that that's too conservative due to economic reasons today that we find ourselves in a different economic environment? Or because David talks so much about our retirement spending patterns, is that more due to how retirees actually spend in retirement?

Christine Benz: Yeah. I'm more interested in David's research that looks at the trajectory of retiree spending, and it does indicate that those early years of retirement are the high-spending years. There's pent-up demand. People's health is often good in those early years. Maybe they're helping launch adult children. There are a lot of reasons that factor into that. But when David has examined the data and other entities have as well, like the Employee Benefits Research Institute has also looked at this, what they see is a pretty steady downward trend in retiree households spending through retirement.

So, pretty much straight down from early retirement through, say, the early 80s and then you see it trail up later in life. And that's because some, not all, some retiree households have higher spending later in life to account for long-term care expenses. So, if you factor that in, if you factor in that downward trend in spending, what it can allow for is higher spending early on. So, if you're okay with that bargain that if you can assume that your spending will level off or head down later in life, then you should give yourself permission to spend a bit more than 4% early on. In fact, I think David's research points to 5% being a perfectly safe starting spending rate for people who are okay with that idea that their spending will trend down.

And I think this is a particularly important finding for households where the budget is a little bit tight, where the difference between 4% and 5% is really going to make a difference in their quality of life. I think they should explore that higher spending early on.

Casey Weade: Yeah. Well, and most of this research and even most of our listeners today, they're listening to this and they're going to live a 25, 30-year retirement. Yeah, the 4% rule, largely based on a 30-year retirement annual adjustments for inflation. But I think the riskiness is people are thinking about retirement at a younger and younger age today, even as young as 35 or 40 years old, those that find themselves in the FIRE movement going, "Hey, I've got $1 million. 4% rule, I'm going to take $40,000 a year in my portfolio. I'm only spending $40,000 a year. This should work out just fine." We had a question from one of our Weekend Reading subscribers.

And if you're a Weekend Reading subscriber, we reach out to you prior to these interviews, ask you to submit these questions so that you can kind of help co-architect these interviews, make sure you get signed up for that and check out a link at RetireWithPurpose.com and you can submit your questions like John here. John is a FIRE advocate here. John says, "What would you recommend to FIRE adherents on the applicability or the modification of the 4% safe withdrawal rate rule of thumb for the longer durations needed for early retirees?" He says, "Do you recommend reducing it by 0.5%, 1%? Is it 3%? What do you recommend and how do you think about the 4% rule for those that find themselves in that space of the FIRE movement?"

Christine Benz: Yeah. It's such an important question, Casey, and I would refer people to Karsten Jeske's work. I think his website's called Early Retirement Now. I would say he's been one of the most serious researchers on the topic of safe withdrawal rates and FIRE. But I think a couple of things come to mind with respect to young retirees. And one is that, and this is true for older retirees too, the flexibility in terms of adjusting your withdrawals up and down based on how your portfolio is performed, that's really such a valuable asset that you have as someone who's in retirement.

So, if you're willing to take less when the portfolio is down, perhaps take more when it's up like it has been over the past couple of years, that's a best practice with respect to retirement withdrawal rates regardless of your age, but particularly so for young retirees. In fact, I think in a lot of ways, this idea that someone will just take out the same amount and inflation-adjusted on kind of a ROTE basis year-by-year, it's kind of a straw man because it's not how people spend. And ideally, you would plug in a little bit to what's going on in your portfolio. And the basic intuition there is that if you can take less when your portfolio's down, that leaves more of it in place to repair itself and recover when the market recovers. So, flexibility is really important and arguably even more important for the cohort of young retirees.

Casey Weade: Yeah. I think, I mean, you're kind of touching on Jonathan Guyton's guardrail method of retirement spending being more affable for those younger retirees. And I don't want it to get overlooked. You talk about the 4% rule being kind of a straw man. And I think that's true and it's just kind of crazy to me that people think, "Well, yeah, I'm going to spend $75,000 of my portfolio next year. I'm going to spend $77,000. I'm going to spend $80,000." Have you done that during your lifetime? That's never happened, right, for the majority of us. I know we're going to spend a lot this year.

We're probably going to spend twice as much this year as we spent last year. Then the year after that, I think we're probably going to spend even less than we spent this past year. That's just the reality of how we live our lives. When you were speaking with Jonathan Guyton and for this interview for the book, you said you experienced an aha moment. What was that aha moment?

Christine Benz: Well, Jonathan was talking about this system that he has, the guardrail system. And he made the point that adjusting your withdrawals up and down based on how your portfolio has behaved is a rare action that actually aligns with what you want to do. So, it's a rare action that makes sense from an investment and portfolio standpoint, but it also aligns with what you feel in your gut. So, when the market is down like 2022 repeat, you probably did feel like, "Oh, I want to take my foot off the gas a little bit with my spending." Whether you're retired or not retired, that probably was your gut reaction to that bad market environment.

On the other hand, when the market's up, as it has been last year and the year before, you're probably feeling a little bit more flush, right? You're feeling a little bit more like spending. And so, Jonathan's point was a lot of the things that we feel like doing behaviorally don't align with what's good for our portfolio. So, like when the market's down, we think, "Oh, I want to pull out of stocks," or the very simple thing, spending more feels better than saving more, right? But in this case, what you feel like doing actually is the right thing to do for your portfolio.

Casey Weade: Yeah. Well, I feel like business owners understand that pretty well. If you've lived on a fixed salary, regardless of what's happening in the economy, you've never really had that feeling. But I know when our business is doing better, we go, "Hey, we can spend a bit more." Business isn't doing so well. "All right. Well, we're going to cut back a little bit." And you just are kind of used to this ebb and flow in your spending. And as you write, you can feel it in your gut. I think that's easier for some. It's going to be, I think, more challenging for the majority of individuals to have adjustments in their income every year, especially if it's, well, I'm going to drop my spending by 10% this year.

I think so often we go, "Well, identify the discretionary money," and those are the dollars that you're going to be willing to give up in retirement. And in my experience for retirees, they're 65, 70 years old, they've worked their whole lives, saved their whole lives, they go, "Hey, nothing's really discretionary, right? The country club membership at the onset of retirement, yeah, I don't need that." But then when push comes to shove, they go, "Well, I've earned this. This is mine. I'm going to go ahead and spend on this." Do you think that retirees really have this, when push comes to shove, they'll be able to implement and execute on having the flexibility in spending they think they're going to be able to really embrace?

Christine Benz: The key first step in all of this is looking at your non-portfolio sources of cash flow. So, we’ve been talking about how much you can spend from your investment portfolio, but most of us are bringing some other sources of non-portfolio income into retirement. So, for a lot of us, the main one, maybe the only one will be Social Security. For some of us, perhaps, they will be receiving a pension. People might have sort of idiosyncratic sources of income like rental properties, for example, or maybe they’re working part time.

So, the more of those non-portfolio sources of income you can line up, the better. And they all differ a little bit in their characteristics. But if you can do that, if you can get more of your household cash flow needs coming from those non-portfolio sources of income and by the way, that might include some sort of an annuity product as well. But if you can align your household spending with those sources of income, it just takes the pressure off with respect to the investment portfolio. And I think you will have a little bit more flexibility. You may be able to absorb cutbacks a little better than would be the case if you’re more reliant on the portfolio for more of your household cash flows.

Casey Weade: And I think that’s what David Blanchett really emphasizes some of his most recent research, right? The higher that guaranteed income or the higher those more reliable sources of income, yeah, it can be a little bit more flexible on these other dollars because you’re taking some of that pressure off. Now, you also brought in Ramit Sethi into the book and he discussed primordial financial decisions and he brought him in for that. But he talks a lot about mindful spending.

And my question was, do you feel that we get more mindful or less mindful about our spending as we age and as we approach retirement or even in retirement? I think, for myself, I look at the last 20 years of spending, I think I’ve become less mindful about my spending and not more mindful about my spending. And I think that’s just going to make it so much harder to make that transition to a fixed income someday.

Christine Benz: Yeah, I think we do get in grooves with respect to our spending and we don’t think a lot about some of the outlays, some of the decisions we’re making in terms of spending. In fact, I’ve come to view spending as like the next frontier in the whole behavioral finance discussion. I feel like it’s been way under discussed. You’ve had a lot of researchers who’ve been very focused on how we approach our portfolios and some of the kooky decisions we make in terms of how we allocate our investment assets.

But I feel like we are under discussing the spending piece of the equation. So, Ramit has been a huge believer in this idea of really picking your priorities in terms of your spending and not just doing what everybody around you is doing. I think we’re social creatures. We naturally tend to want to conform to what people in our communities are doing with spending. And that’s where those groups can form, I think, where you’re just sort of like, oh, everyone in my neighborhood drives this kind of car or takes this kind of trip or whatever.

And as we proceed down our life’s path, we just tend to conform more and more. And his point is, take a step back, make sure that the allocations you’re making with your expenditures really align with your vision for your life. And it’s not too late to try to explore how you might be spending differently from the people in your peer group or your community.

Casey Weade: And we have a retirement coach here on staff last, who was on the show quite often. And I think this is some of the more important work he does from a financial standpoint with the families they work with is having them put together a budget and really trying to figure out if the spending aligns with their values or their vision for their life. And that’s just work that we so often don’t do.

So, we talked a lot about spending here. Now, we have talked about income planning. So, perfect transition, spending going into planning for that income. Of course, you had to have Dr. Wade Pfau, a professor of retirement income in the book and also, on Episode 11 and 121 of the podcast, he talked a lot about RISA and his work around RISA and in the book, in Retirement Income Style Awareness. We’ve used these assessments quite a bit with the families that we work with. And so, rather than just rehashing everything RISA is, I encourage you to go back and listen to that interview if you want to learn more about it.

What I want to know is a little bit about your style, a little bit more about the way that you think about your retirement income style, your implementation style. The retirement income style, I can pretty much tell you exactly what you’re going to be. I know where you land here. I look at these four, time segmentation, total return, protected income, risk wrap. I am assuming you and I both land on time segmentation.

Christine Benz: Yeah, the time segmentation is a fancy way of saying bucketing, but the basic idea is that you’re structuring your portfolio based on your expected demands on that portfolio. And this is what Wade has identified as kind of a hybrid retirement income style. And not to get too deep into the weeds, but sort of a really extreme non-hybrid retirement income style would be like, I want extreme certainty in my cash flows in retirement. So, I’m going to put everything into an annuity and lock it up and have that cash flow situated for the rest of my retirement. The time segmentation approach is a little bit of a blend where you do want some certainty, but you also want access to your funds. You want to benefit from the market’s long-term growth.

Casey Weade: Yeah, and there’s nothing wrong with any of this, right?

Christine Benz: No.

Casey Weade: That’s what I appreciate most about Wade’s research is he doesn’t say one’s better than the other. You’re wrong. I’m right. But I think that’s what you get from most of, especially the not so much the researchers, maybe the advisors.

Christine Benz: Well, the one-size-fits-all-type approach to retirement income planning is, I think, very common among some advisors. And Casey, I’m happy to hear that you explore this with your clients because Wade’s basic point on all of this is that we’re all geared a little bit differently in terms of what we want, what we’re looking for from our retirement income. And actually, I’m someone who has always worked in the context of an employer-provided paycheck. I have never been a business owner. I’ve never had that lumpiness in my cash flows, in my household cash flows. My husband has always worked in the context of an employer-provided paycheck, too.

And so, we actually do like certainty quite a bit. As much as we’re comfortable with equity risk in our portfolio, in terms of our household cash flows, we like certainty. So, I could see us actually augmenting whatever we receive from Social Security and we probably will delay Social Security filing, but we might augment that with some sort of an income annuity just to provide a guaranteed source of funds that will meet our household living expenses. And then the rest of our portfolio will go into kind of a bucketed portfolio.

Casey Weade: Yeah, I definitely see myself leaning in the same direction and I want to touch on that a little bit more in here just a minute. But before we get that, the other piece that I really enjoy about Wade’s research and what he’s doing with this assessment is he is also assessing your implementation style. Are you a delegator, a collaborator, a validator, self-directed? And where I’m curious in you is I feel like I am some kind of blend of a delegator, a collaborator, and self-directed. I like to kind of be the quarterback and make a lot of the decisions, but then I’m going to collaborate with my advisor and others to say, “Hey, do you see anything else? Is there anything I’m missing?” And then I’m a delegator in a lot of ways. I’m not going to manage my own investment portfolio. I’m not going to file my own taxes. Where do you land in this? And I just don’t see how we fall. There’s not too many people that fall in just one bucket.

Christine Benz: No, that’s absolutely true. So, people are often surprised to hear that we, my husband and I work with a financial planner, even though I went through the CFP program. I have blind spots, right? I just have areas that aren’t as strong for me, where it’s not my day job to focus on tax management, for example. So, the planner we use is very, very strong in terms of tax considerations. I think we do all have blind spots where we need to either collaborate or delegate the decision making to other people. So, I think you’re 100% right that these DIY types who assume that they will be 100% in charge of every aspect of their retirement plan, they ought to investigate maybe getting some help.

And another thing that’s top of mind for me is that we know that cognitive decline is an issue for older adults. And so, you want to make sure that you are protecting yourself against the potential for cognitive decline. You don’t want to be the sole overseer of your retirement plan. You want someone else to have a sense of where you hold your assets, what sort of system you’re using to extract cash flow from your portfolio. And that’s the beauty of bringing someone on board to help oversee your plan on an ongoing basis, or at least to provide a second set of eyes on that plan.

Casey Weade: I thought it was interesting the way you ordered these two lessons. Lesson 8, you’re inviting Dr. Wade Pfau on, who’s obviously a big proponent of annuities, and then you’re bringing in William Bernstein, Lesson 9, who argues against annuities. Why do you feel that it’s important to provide these two different perspectives? And I think we know where you land.

Christine Benz: Yeah, I definitely wanted to showcase that there’s not a single way to do all of this, that it is very individual specific. The most valuable retirement plan is one that you can stick with and live with and that won’t keep you up at night. And so, William Bernstein, Bill Bernstein, he’s a genius, in my view. He’s an author and someone who has written very deep works on how to invest assets for retirement and for other goals. And he’s positively allergic to the idea of annuities.

And for some good reasons, one of the biggies is that you can’t buy an annuity that is linked to the consumer price index. So, you can’t have that insulation for your purchasing power and that inflation may slowly erode the value of any cash flows that you’re getting from the annuity. But it does get back to Wade’s matrix, where his view is that we’re all geared a little bit differently. And I think that’s absolutely true, that there’s no single one right answer, no single prescription for how to do retirement planning.

Casey Weade: Yeah. There’s just so much misinformation and then misconceptions and then, just outright wrong things that you’ll read on the Internet. We can’t get CPI-indexed annuities. We know we can get CPI inflation-indexed annuities. And it’s hard when you’re a consumer out there listening to podcasts or reading information because everybody has something different to say.

And I think it’s hard for people to figure out who to listen to. I mean, how do you wade through this? Now, well, we talk about Wade Pfau. How do we wade through this and figure out, well, who do I listen to? I think that was one of the good questions on Social Security here, even, not just how do I invest? How do I think about annuities? How do I think about tax planning? So, it just shows up in so many different areas of planning. How do you figure out the appropriate source of information if you’re really getting the truth or the facts?

Christine Benz: Well, it’s a great question. I think you do want to look to experts who have published a deep body of work who are leaning on the data when giving information that you don’t want pundits who are just sort of producing soundbites without hard data to back up the points that they’re making. So, that’s why I wanted the book to feature people like David Blanchett, Bill Bernstein, Wade Pfau, people who have a deep body of research to back up whatever convictions they espouse.

Casey Weade: I think that’s why I focus on bringing individuals that are doing research such as yourself. I mean, you’re not invested or you don’t have a bias whether someone plans one way or another or buys something from you. You’re not selling anything. I want to invite researchers on the show that aren’t getting paid for pushing people in one direction or another.

And you’re not one of those people. So, let’s hit on your chapter, Christine Benz, so Lesson 11, you talk about cash flows. We’ve already talked about the bucket strategy and why you’re a big proponent of this method. I think what’s going to stand out for some in this lesson is discussing a fourth bucket. Quite often, that bucket strategy is broken into three different buckets, your short-term, mid-term, long-term spending. You talk about a fourth bucket and that one being for long-term care expenses. When you think about allocating dollars for this fourth bucket, for long-term care expenses in the future, how do you decide how much to allocate? And do you also incorporate some type of insurance in that fourth bucket? Or is it just a savings bucket?

Christine Benz: The long-term care question is the elephant in the room in retirement planning? In my experience, when I’m speaking to groups of older adults, this is the issue that keeps even financially well retirees up at night. This idea that maybe I’ll be one of those people who stuck with a big balloon payment at the end of retirement, which is what long-term care expenses effectively are for retiree households. I think about my own parents both had a long term care need. And I think, ultimately, it probably totaled $300,000 or $400,000 at the end of their lives.

Insurance might be part of the equation for some older adults. Unfortunately, the long-term care insurance market is a troubled market where we’ve seen more insurance companies getting out of the business of offering long-term care insurance. So, a shrinking share of insurers in the mix is rarely a good formula for consumers. So, we’ve seen premiums go up on long-term care policies.

So, for people who do not have long-term care insurance, they’d want to think about, well, what do the data say about the cost of long-term care? Geography is a big determinant about, in terms of what care will cost. So, if you live in a large urban center, you need to be prepared to pay more for long-term care. If you’re in a rural area, you probably will pay a little bit less or a lot less. The typical long-term care expense in the US, according to Genworth is just over $100,000 as of their most recent data run.

And then you can use kind of the typical duration of long-term care, which is one and a half to two years to guide how much to drop into that fourth long-term care bucket. So, if you’re part of a married couple, you’ve got two people and you’ve got maybe two years’ worth of long-term care expense per person. So, that’s roughly $400,000, less any non-portfolio sources of income that you might have coming. So, if you have Social Security, you might be able to back that out and assume that you’ll still be getting that benefit even if you have a long-term care need. So, that can reduce to some extent the long-term care fund accordingly. But you can back into what would be an appropriate least sized long-term care fund using that sort of basic framework.

Casey Weade: I think people, when they think about the retirement income side of things or the investment management side of retirement, they think, yeah, I want to know all the tools. I want to know all the different ways that I can possibly be investing or creating some type of retirement income, the different types of approaches. But when it comes to long-term care, quite often what we hear, I just want a long-term care quote, or what’s it going to cost me to buy long-term care insurance? And I love that you’ve highlighted a few different ways and you need to be looking at this decision, much like you do the income planning decision. What are all the different tools? And what are the pros and cons? Should I be saving? What’s the pros and cons? Should I buy a hybrid life insurance policy, a hybrid annuity? Should I buy a traditional long-term care insurance policy? There’s so many different ways for us to plan that we can easily overlook.

And one of those areas of planning is also housing and retirement. And you brought in Mark Miller to discuss making smart choices about housing and retirement. He discusses this livability index. I thought that was really interesting. I’m going to have to reach out to Mark to have him on the show now, the livability index, and I’m sure you can’t recall every element of that. So, that was affordability, health care, transportation, social, environment, work, community, kind of the general categories there. When you think about housing and you maybe someday make a full-time transition to retirement and maybe you think about moving somewhere else, would you overweigh one of those individual factors? Or do you think we should look at them equally?

Christine Benz: Well, it’s very individual specific. I loved that Mark covered the topic of housing in a really holistic way. His point was sometimes retirees do focus disproportionately on the financial piece, that they think about moving to a part of the country or to a state that has lower taxes than the one where they live, for example. And that’s certainly part of it, but you also need to think about your proximity to your loved ones, to cultural activities that you value. Health care becomes increasingly important as we age. That might be, as I think about my own situation today, it’s not something that’s top of mind for me, but maybe at some point in the future, my proximity to a really great health care center. So, I do think it’s a balance for retirees. But Mark’s point is, don’t put too much weight on the financial piece. It’s an element for sure, but you want to think about the other dimensions as well.

Casey Weade: Yeah. And for you, it sounds like health care might be one that you focus on the most as you get closer to that point, which I don’t, for our family, having some health challenges historically and for my wife, she goes, “I want to move to Cincinnati.” Yeah, she just loves her health care system. And that’s just something that is so often overlooked.

Let’s move on to Lesson 13 with Maria Bruno. Maria touched on three halves questions for determining whether it’s time to retire. Have you had enough? Do you have enough? And will you have enough? How do these three questions show up for you?

Christine Benz: Yeah, I thought this was such a brilliant way of framing it, and it’s one of the pieces of advice that has been parroted back to me the most when I’ve talked about this book, that those three halves have really resonated with people. So, the “have you had enough” was basically like, are you up to here with work? Are you done? Or do you still have things that you want to explore? When I think about my own career, I still have things that I want to work on. Maybe another book, actually. So, I have not had enough and my work-life balance is pretty agreeable. Other people might say, “I am done. I have done everything I need and want to do.” The “will you have enough” or what’s the second one? Is it...

Casey Weade: Do you have enough? And will you have enough?

Christine Benz: “Do you have enough” is mainly a financial question. Do your financial assets line up to support the income that you will need when you walk away from work. And so, that one’s a little easier to quantify than the first one. And then the “will you have enough” is some of the things that we are talking about at the beginning of this conversation, Casey, this idea of will you have purpose? Will you have that sense of identity that your work may have conferred? Will you have enough social contact later in life? And that’s all sort of the softer aspect of retirement planning that I think is super important to explore prior to retirement.

Casey Weade: Yeah. Don’t you feel that the first and third questions are the hardest ones?

Christine Benz: Well, they are. The middle one is easy because it is at least somewhat quanti... yeah, exactly. But the other two do require a little bit more soul-searching.

Casey Weade: Yeah. And how do you recommend that people go through that soul-searching? Do they seek out guidance? How do you plan to go through that process if you do? Or what are the different ways that individuals can go through that process, especially if they find that to be more challenging?

Christine Benz: One thing I’ve really come to recommend after having gone through this research project is phasing into retirement, very gradually, if you can, that I think the idea of retirement as a hard stop is feeling increasingly antiquated to me. And of course, we don’t have 100% control over when and how we retire. But ideally, as you sort of enter your 50s, if you can start being thoughtful about, okay, which aspects of my work do I really like, do I want to continue doing, those are potentially things to continue caring past retirement that, maybe you want to continue to pursue those activities later in life, and then you may have things that you want to take off your list entirely.

And so, to try to begin that tinkering process earlier than we normally talk about it. So, don’t wait until you’re in your early 60s to think about these things. Start far earlier, and maybe you kind of do it in stealth mode where you’re not really communicating with your employer about these things. Maybe you are. Maybe you have a really good relationship with your employer and you want to start talking about things that you want to bring forward and things that you want to pull back from.

But I think that exploration process should way proceed when people typically embark on it. It shouldn’t be in just the couple of years prior to retirement. You should start down that path, maybe 10, even 15 years prior to your anticipated retirement date.

Casey Weade: A recurring theme with Christine Benz, practice your retirement. That’s what I hear you saying once again. So, we know how important that is. Let’s hit on Jean Chatzky’s Lesson 17, what women need to do differently. You didn’t have a chapter in here on what men need to do differently. You had one that really just focused exclusively on women and that took... I mean, one of 20 lessons is saying a lot when we’re talking about 20 lessons about retirement. So, this must be something that you think is really necessary to emphasize. Why do you feel that you needed a whole lesson devoted entirely to women’s retirement planning issues? What kind of unique risks need to be considered there?

Christine Benz: I’m passionate about this topic as does Jean, and the key reason is that women are much more likely to be poor in retirement. Women have much less financial wherewithal heading into retirement. When you look at the data, women are much more likely than men to be exclusively relying on Social Security to provide their cash flows. And their Social Security payments are also lower than men’s because of lower lifetime earnings.

So, women need to take steps to ensure their financial wherewithal. Single and divorced women are particularly likely to be at risk financially in retirement. So, a couple of things jump out at me. And I should also say women also live longer than men on average. And so, not only are you bringing fewer retirement assets into the equation, but you’re also extending the duration that that portfolio needs to last.

So, women need to look at their income trajectories. When we look at the data, we see that women are achieving early on that their incomes match their male counterparts, in some cases, exceed them coming out of college. But then due to caregiving, mainly, due to the fact that we’re more likely to care for children, we’re also more likely to help care for our adult parents, that those things weigh on our ability to earn. So, if we emerge from college and have good jobs, we need to hit it really hard in terms of retirement savings, harness those early savings opportunities.

We also need to pay attention to long-term care because when we look at the data, because we do tend to outlive our male partners by a couple of years, it means that there’s no one there to care for us. So, if a couple is purchasing long-term care insurance, Jean argues that it’s more important to lay that foundation for the female partner because she’s more likely to need paid long-term care in her lifetime than is the male partner.

Casey Weade: What do you hope, as men are reading this book, I want to make sure men don’t skip over this chapter. And so, what do you hope that men take away from this lesson? What’s the number one thing that you want them to get?

Christine Benz: One of the key things is smart Social Security claiming decisions. Oftentimes, I think people pursue or decide about when they’ll claim Social Security in a vacuum that they’re not thinking about the household’s total cash flows. So, if the male has been the higher earning partner in his lifetime, that he’d want to consider delaying in an effort to enlarge the household cash flow. So, if the male partner pre-deceases the female, that will enlarge the household’s cash flows. I think that’s an important dimension of this.

Casey Weade: I know every time I’ve written a book, I always look back and go, oh, I wish I would have done that. I wish I hadn’t done this. I wish I would have done that differently. I want to rewrite that piece and I’ll do it. A year or two years down the road, when you look back at the side of 20 is a nice round number. So, I feel like we landed at 20 here and there might have been more. If you look back at these 20s and you could add one, and you could add 21, what would be one more lesson that you would incorporate into the book?

Christine Benz: One would be on long-term care planning. So, Carolyn McClanahan did discuss long-term care planning in the context of health care planning. And I do think she provided a good, well-rounded view on the topic. But it’s such a deep and important one that I think if we had one other chapter, we probably would have discussed that and also, frankly, discussed the limitations of government resources with respect to long-term care.

I think people, unfortunately, have the misconception that the government will provide long-term care and that will be part of Medicare. And it’s not. It’s fully outside of the Medicare system for people who have exhausted their resources. Medicaid is a backstop for long-term care. And in fact, Medicaid is the largest provider of long-term care in the US. But there’s a lot of confusion around what government resources pay and won’t pay. And so, that is probably an area where I would have put an additional exclamation point on with an additional chapter.

Casey Weade: Yeah. We just kind of touched on each one of these topics and we’ve got to bring things to a close. We don’t have time to read the whole book to everybody today. Yeah, we missed taxes, we missed Social Security, we missed estate planning. And so, these things are important to you, as I know that, at least one of these lessons is going to be important to you. We want to make sure that you can dive deeper.

And so, we’re giving away copies of Christine Benz’ book. Again, all you have to do, write an honest rating and review of the podcast on iTunes and then shoot us a text. We will send you a link to verify your iTunes username. We’ll get you the book for free. All you have to do is text us the word “Book” to 888-599-4491, or just check out a link in the show notes. Visit us at RetireWithPurpose.com. Christine, thank you so much. Again, it’s been a pleasure, and I look forward to the next book.

Christine Benz: Casey, thank you so much. I always love talking with you. Thanks for having me on.

Casey Weade: Thanks, Christine.