Are you the person in your family that stays away from financial planning? Do numbers and financial jargon put you to sleep? If so, this is the right retirement planning series for you. This episode is the third in the Retirement Planning for Non-Planners series. In this series, I explain what you need to know without all the financial lingo so that you can understand the most important aspects of retirement planning. 

In this episode, Fritz Gilbert from The Retirement Manifesto blog joins me to discuss the basics of retirement planning risks. Listen in so that you can understand what to look out for in retirement planning.

This is a financial jargon-free series

If you aren’t interested in finance it can be difficult to discuss retirement planning with someone who is. They start throwing terms like RMD, sequence of returns risk, and the 4% rule. When people start using these terms it can be easy to become overwhelmed. The purpose of this series is to empower you so that you can have an understanding of what is happening with your money to help make better choices. My goal is to explain retirement planning in a non-geeky way that anyone can understand.

What are the financial risks in retirement?

Retirement brings different types of risks for your money. Essentially there are two types of risks to be aware of: short-term and long-term risks.

Think about a teeter-totter. On either side of the teeter-totter, you have your short-term risk and your long-term risk. The short-term risk is losing money today and the long-term risk is losing money in the future. You need to come up with a solution that balances both of these risks without tilting too much to one side. 

We lose money in the short term through market risk. If the market takes a tumble, you could lose a significant portion of your savings. The solution to that is to take all of your money out of investments and have it sit in cash. Unfortunately, this solution to the short-term risk doesn’t work in the long term. 

The long-term financial risk is inflation. You may have noticed gas prices or food prices increasing over time. This means that your dollar today won’t be worth the same as your future dollar. As prices increase the value of your money decreases. We combat long-term inflation risk with investing, however, this solution puts us at risk in the short term. 

How to balance retirement risk

To balance both sides of the risk spectrum it is important to think about how much money you will need to support your lifestyle in the near future. You’ll want to consider how much cash you should have on hand if the market drops. This will help you mitigate the short-term risk while at the same time leaving the rest of your savings to grow in the long term. The goal of balancing these risks is to have the confidence to have money to spend next year and also to spend when you are 80.

OUTLINE OF THIS EPISODE OF THE RETIREMENT ANSWER MAN

PRACTICAL PLANNING SEGMENT WITH FRITZ GILBERT

• [2:30] Financial lingo can be intimidating
• [6:37] Short term risks
• [10:47] Inflation is a long term risk
• [18:37] How to deal with spending shocks
• [25:55] Understand what types of questions to ask
• [28:39] Catching up with Fritz in retirement

LISTENER QUESTIONS WITH NICHOLE

• [38:24] 6-Shot Saturday drama
• [42:15] Should Shari take the lump sum or an annuity?
• [48:20] How do I feel about LIRPs?
• [54:36] What are the non-financial boundaries of a fiduciary?
• [1:00:24] A question about my pronunciation of words
• [1:02:47] A proposal for changing the GAA acronym

TODAY’S SMART SPRINT SEGMENT

• [1:04:34] Organize the strategy that best works for you

Resources Mentioned In This Episode

Retirement Manifesto

Retirement Planning for Non-Planners - start with this first episode

Rock Retirement Club

Roger’s YouTube Channel - Roger That

BOOK - Rock Retirement  by Roger Whitney

Work with Roger

Roger’s Retirement Learning Center