A financial advisor and retirement blogger discuss the key phases of retirement, structuring portfolios for drawdown, and how retirees can give themselves ‘permission to spend.’
Today on the podcast, we welcome back two previous guests. Dana Anspach is the founder and CEO of the financial planning firm, Sensible Money, based in Scottsdale, Arizona, and she has been practicing as a financial planner since 1995. Dana is also the author of the lecture series “How to Plan for the Perfect Retirement,” available on The Great Courses, and the author of the books Control Your Retirement Destiny and Social Security Sense. She has begun blogging about her own retirement journey on The Retirement Manifesto website.
Fritz Gilbert retired in his mid-50s and has been blogging about his retirement experience ever since. He is the creator of The Retirement Manifesto, and he also wrote a book about retirement called, Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years.
How to Plan for the Perfect Retirement on The Great Courses
Control Your Retirement Destiny: Achieving Financial Security Before the Big Transition, by Dana Anspach
Social Security Sense: A Guide to Claiming Benefits for Those Age 60-70, by Dana Anspach
“Dana Anspach: How to Build an All-Weather Retirement Plan,” The Long View podcast, Morningstar.com, Oct. 18, 2022.
Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years, by Fritz Gilbert
“Fritz Gilbert: Early Retirement Made Simple,” The Long View podcast, Morningstar.com, Oct. 27, 2021.
“A New Chapter for The Retirement Manifesto,” by Dana Anspach, theretirementmanifesto.com, May 22, 2025.
“When to Start Planning for Retirement: Understanding the ‘Pre-Go’ Years,” Video with Dana Anspach, sensiblemoney.com, July 2, 2025.
“Retirement—My Journey From ‘No, Never’ to ‘Maybe One Day,’” by Dana Anspach, theretirementmanifesto.com, June 5, 2025.
“The Ten Commandments of Retirement,” by Fritz Gilbert, theretirementmanifesto.com, March 6, 2018.
“The 4 Phases of Retirement,” by Fritz Gilbert, theretirementmanifesto.com, Feb. 1, 2024.
“Why 28% of Retirees Are Depressed,” by Fritz Gilbert, theretirementmanifesto.com, June 22, 2023.
“Scared to Spend? (You’re Not Alone),” by Fritz Gilbert, theretirementmanifesto.com, Nov. 21, 2024.
“The Role of Annuities in Retirement Planning 2024,” Webinar with Dana Anspach, sensiblemoney.com, May 24, 2024.
“5 Top Regrets of Retirees (and How to Avoid Them),” by Fritz Gilbert, theretirementmanifesto.com, Jan. 30, 2025.
“How Social Security Spousal Benefits May Change My Claim Date,” by Dana Anspach, theretirementmanifesto.com, June 26, 2025.
“Rethinking the 4% Safe Withdrawal Rule,” by Fritz Gilbert, theretirementmanifesto.com, Nov. 18, 2021.
“Don’t Cheat Yourself With the 4% Rule! 2021,” Webinar with Dana Anspach, sensiblemoney.com, May 18, 2021.
The Safe Withdrawal Rate Series (Early Retirement Now with Karsten Jeske, also known as “Big Ern”)
“The Golden Age of Roth Conversions,” by Fritz Gilbert, theretirementmanifesto.com, Oct. 12, 2023.
“My Biggest Surprise in Retirement,” by Fritz Gilbert, theretirementmanifesto.com, June 12, 2025.
The Four Phases of Retirement: What to Expect When You’re Retiring, by Riley Moynes
Die With Zero: Getting All You Can From Your Money and Your Life, by Bill Perkins
“Guaranteed Income: A License to Spend,” by David Blanchett and Michael Finke, Retirement Income Institute, June 2024.
A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More, by Bill Bengen
(Please stay tuned for important disclosure information at the conclusion of this episode.)
Christine Benz: Hi and welcome to The Long View. I’m Christine Benz, director of personal finance and retirement planning for Morningstar.
Amy Arnott: And I’m Amy Arnott, portfolio strategist with Morningstar.
Benz: Today on the podcast, we welcome back two previous guests. Dana Anspach is the founder and CEO of the financial planning firm, Sensible Money, based in Scottsdale, Arizona, and she has been practicing as a financial planner since 1995. Dana is also the author of the lecture series “How to Plan for the Perfect Retirement,” available on The Great Courses, and the author of the books Control Your Retirement Destiny and Social Security Sense. She has begun blogging about her own retirement journey on The Retirement Manifesto website.
Fritz Gilbert retired in his mid-50s and has been blogging about his retirement experience ever since. He is the creator of The Retirement Manifesto, and he also wrote a book about retirement called, Keys to a Successful Retirement: Staying Happy, Active, and Productive in Your Retired Years.
Dana and Fritz, welcome to The Long View.
Dana Anspach: Thanks, Christine. Happy to be here.
Fritz Gilbert: Yeah, Christine. Thanks. Nice to be back with you again with my new partner, Dana. This will be fun.
Benz: Yes. We’re excited to talk to you. We’ve had you both separately on the podcast, so this will be fun to chat today. Let’s start with some introductions for people who might not be familiar with you. Fritz, what’s The Retirement Manifesto and why did you create it?
Gilbert: The Retirement Manifesto, it was really just an experiment on my part. I started it three years before I retired, so I started it in 2015, 10 years ago, just a blog to capture my thoughts as I was preparing for and transitioning into retirement, and it’s turned into a passion project. I’ve been writing for 10 years now. It’s turned into kind of a thing, and I’m just really enjoying the interaction with the readers and having a forum where I can just share my thoughts as I live this life in retirement. It’s been a fun project for me.
Benz: Yeah, it’s a fabulous blog, and I do like the give and take that you have with your readers where they’re sharing their own experiences. Dana, let’s talk about your day job. Your main job is a certified financial planner and founder of your own planning firm, Sensible Money. Can you talk about the firm and who your target client is?
Anspach: We are a fee-only financial planning firm and investment management firm. We focus primarily on people entering that decumulation phase. I know not everyone relates to that word. We work our whole lives. We accumulate assets, often a collection of things, and then one day all of those items have to work together to create reliable, consistent income, and we help people plan out that transition and see how it’s all going to work, how long their money is going to last. That is really all we do is work with people typically age 55 plus with over a million in assets who are planning their retirement journey.
Arnott: So, Fritz, back in April, you had a post announcing that you were retiring from full-time blogging. What prompted you to make a change there?
Gilbert: Yeah, retirement 2.0. Really what it was, I’ve been writing for 10 years, and for the first six years I wrote every single week, and I enjoyed it. It was great. As I got into retirement, I started having a lot of other things that were filling my time and there were of interest, and I was writing less frequently. But even with that, it was still feeling a bit like an obligation. I’ve written a post about how retirement is like a game of poker, and you have these cards in your hand. At any given point in time, you can pick cards up, you can put cards down, and if the cards you’re holding aren’t the best cards for you at that stage, put one down and pick up another one.
So, I was just kind of living through that analogy or metaphor. And I just said, I want to spend more time outside while I’m still healthy and fit and love doing all the stuff outside. And spending the amount of time it took to be on my computer, writing the blog on a semiregular basis just was starting to feel a little bit more like a burden. So, I said, I’m just going to take a step back. I’m still going to write when the urge hits, but I don’t want my readers to just expect a post on any kind of regular basis. And I’ll just write when I feel like writing, and it may not be for a while. So, that was really what the announcement was, was just stepping back from even the reduced frequency and saying, I might not write for months at a time, and don’t be surprised if you don’t hear from me. That was kind of the announcement.
Benz: So, the reason we wanted to have you two together today is that Dana is now going to be contributing her commentary, her thoughts on her preretirement period to The Retirement Manifesto. Dana, maybe you can talk about the impetus for your decision to raise your hand and tell Fritz that you want to do embark on this project with him.
Anspach: Yeah, it was one of those spontaneous, but as many spontaneous things, there was probably a lot of thought going on behind the scenes that led to it seeming so spontaneous. I, in my profession, get to see hundreds of retirement journeys. I think most of us in our lives see our grandparents, parents, if we’re lucky, maybe some aunts and uncles, but we see hundreds of examples and we see this bell curve of how it usually plays out. And so, I think about my own retirement probably far more than the average person would. And as I was thinking about it, I thought back to the joy I had when I initially wrote for About.com, and I had a site called MoneyOver55, and they allowed us to have a blog where we were supposed to share our personality and our voice.
And as I was thinking about my own retirement journey and how was this going to work for me, I’ve been thinking like I really miss that expression. And so that had been on my mind for about a year. I saw Fritz’s post that he was retiring, and it was like without even thinking in 30 seconds, I had a text fired off to him. We had obviously met and had each other’s cell numbers, and I was like, “I have an idea, maybe an experiment.” And so that’s really what we decided, was we’re just going to experiment for a year. Like Fritz, I’ll post when I have stuff that I feel passionate about writing about, and we’ll see what happens.
Arnott: We also wanted to talk about the whole idea of a phased retirement and, Dana, this is something that you have written about quite a bit. You’ve said that you’ve helped a lot of your clients visualize their retirements. But when you started thinking about your own, you kind of saw a blank. Why do you think that was? And there was a vacation that you took recently—I understand that sort of changed your thinking about that issue.
Anspach: Yeah, and that was my first post on The Retirement Manifesto where I share the story. I may be accused of being a workaholic at times. And I’ve had this argument with people and with myself of when you really love what you do, it doesn’t feel like work. And so, I am lucky enough to have found a profession where I really do find joy and satisfaction in work. At the same time, I read about and watch retirees. I don’t have children. And so thus I won’t have grandchildren. And I see so many of our clients who have very satisfying retirements where family and visiting family and taking care of the grandkids is such an important part of that; it provides such a sense of purpose for them. And I know I won’t have that. So, it’s really been a journey of thinking about, well, what are the activities that I will find that will bring me joy? Because without that, I will just keep working. And I think there is more out there I want to explore, but I need time to go figure that out.
And so, for me, what happened on that vacation is normally you give me three days off and literally I’m chomping at the bit. I’m bored. I’m ready to go back to work. But on that particular vacation, it was 14 days, much like Fritz, we were in the mountains outdoors, hiking every day, just being in nature. And I actually enjoyed it. I never got bored. By the time it was over, I was like, wow, this is what a joyful retirement could feel like. And it was the first time I ever really felt that. And so, I turned 54 this year. I was 53 at the time of that vacation. And we often see clients get serious about retirement around the age of 55. And I think it’s just for me having that experience and starting to realize I need to explore more experiences like that so that I have something I’m planning for.
I’m great about planning the numbers. I update my financial plan, and I do all of that religiously. But having the inspiration behind it of what is it I’m really planning for, that’s the piece that has been missing for me.
Benz: So, Dana, you’ve said that you’ve decided to take a very gradual approach to retirement and one of your posts on The Retirement Manifesto was about that first phase, which you call the pre-go phase. Can you talk about what that means and what changes, if any, you’re making to your work or your lifestyle to accommodate that phase, that pre-go phase?
Anspach: Yeah, for me, the pre-go phase starts when you really start contemplating retirement, not just the number side. Or for some people, it is the number side. But what’s that going to look like? When, realistically, will that happen? How is this going to work for me? And so, part of that for me is that exploration I alluded to is saying, OK, how do I take some more time off? My husband and I did a two-week hiking trip in the Alps. It was 10 days of hiking the Mont Blanc circuit. I was able to hike seven of those 10 days, so about 70 miles, which we trained for six months to do this. And it was incredible. I didn’t take my laptop with me—the first time in almost my entire career I’ve ever taken a trip without taking my laptop. And so, there was preparations we made in the firm to make sure all the responsibilities could be handled, and everyone did an absolutely seamless job.
So, for me, it’s exploring more things like that. It’s gradually peeling off more duties and responsibilities, figuring out what are the things where I can add the most value to the firm, things that still give me energy that I’m excited and enthusiastic about. And then how do I begin to find those things outside of work that bring me joy so that I have a retirement that I’m excited about planning for.
Arnott: A lot of people talk about the idea that you need to have something that you’re retiring to, not just retiring from.
Anspach: Exactly. And for some people, I think that’s easier than others. There’s not really a right or wrong way. We’re all different and unique. And some people have a very clear idea and they’re very happy in retirement with their hobbies and family and trips. And other people, it’s going to take a little bit more work to figure that out. And I’m one of those other people where I realize it’s going to take a little bit more work.
Arnott: You’ve also been working on a new book about the four phases of retirement spending scheduled to come out later this year. Do you have a specific launch date planned? And maybe you could give us one or two highlights from the book so far.
Anspach: We don’t have a specific launch date. I’m thinking it’s going to be about November. The book is called Living Off Your Acorns: Your Guide to the Four Phases of Retirement. And I describe those as the pre-go phase, the go-go phase, the slow-go phase, and the no-go phase. And I think there’s so much we have to learn about the decisions we can make in our earlier phases by studying what it might look like in our later phases. And as I mentioned, I’ve seen hundreds of those examples. And there’s certainly this bell curve where we see the majority of people are spending more in that go-go phase and were able to plan their spending and their financial plan around that to accommodate that. And then things naturally slow down.
But of course, there’s exceptions. For most people, that slowdown occurs in their mid-70s. But I have seen people who needed assisted living as early as 73. They would be on one end of that bell curve. I have other clients who are 89 and still fully independent and self-sufficient. They’re on the other end of that bell curve.
But by studying what our later phases will look like, I think that can give us more permission to spend in the go-go phase. So, if we really do our planning in a solid way in the pre-go phase, we can structure that go-go phase to go out and do things that are meaningful, whether that be time with family or contributing to charitable causes or volunteering or contributing back to your profession, there’s going to be time and resources to do those things. And I see a lot of people who financially could do more, and they don’t because they’re preserving so much for later. And I think there’s just a better way we can go about that. And that comes from really understanding the full cycle of retirement and what that’s going to look like.
Benz: So, we definitely want to drill into that issue that retirees have about giving themselves permission to spend appropriately given what they’ve managed to save. But Fritz, I wanted to switch over to you to discuss your own retirement trajectory. Did you have a pre-go phase like what Dana has been talking about, either overtly or maybe less overtly? Can you talk about that preretirement period for you?
Gilbert: Yeah, absolutely. And I applaud Dana. I think everybody listening, taking the time to really think about the nonfinancial aspects of your retirement while you’re still working is hugely beneficial. And I’ve written about this extensively. A lot of people go through a difficult transition, like 60% of people struggle with the transition. And the way to avoid that is to do exactly what Dana is talking about.
Now, she is fortunate. She has got a firm. She can delegate some stuff. Over time, she can change the ownership, the equity structure. She has got a lot of flexibility to really tweak that. I was in a corporate role, so I didn’t have that type of flexibility. But it doesn’t mean you can’t mentally work through thinking what you want your life to be in retirement. And I took a mini retirement, which, that’s something I encourage people to do, where I basically took like a 10-day break over the holidays. We came up to our cabin in the mountains, which is where we were going to downsize for retirement. We already own the cabin. So, we came up here for 10 days and we said, look, let’s just think about retirement. Not like, oh, it’s Tuesday, let’s go kayaking type stuff. It was more, what do we want our life to be? Exactly what Dana is saying, that opening your mind and being willing to experiment and be curious and think about what you want your life to be and finding a way to do that either in a very gradual, long-term transition like Dana is doing, or in mine, I had a target date set, and I knew it was coming, and I made it, and it was a great transition. But after I knew the numbers, I still had about a year or so to wait for the numbers to come to fruition. So, there is not a lot of benefit in continuing to churn the numbers, but there’s tremendous benefit in taking that extra year to really think about what do you want to be?
And I wrote a post that makes me think about, it’s called “The 10 Commandments of Retirement,” which was all about the mindset—have an attitude of gratitude. Find a way to give back. Pursue your curiosity. I still have it hanging on my wall in my office. And seven years after I’ve retired, it’s refreshing to look at that and say, you know, those are all still pretty North Star-type guiding principles. And I wrote that maybe three months before I retired.
So yeah, finding a way to do, whether you call it pre-go or whether you call it recognizing all those things you’re going to lose from work—the structure, the relationships, the sense of identity—all those things we’ve talked about, recognizing that and thinking about how you’re going to get fulfillment in your retirement years, really critical piece of retirement planning that everybody needs to do.
Arnott: So, Fritz, I think you actually retired when you were 55, which is earlier than the traditional retirement age. And after you had that mini retirement and the one-year period where you’re getting things lined up, you did make a hard break with work rather than shifting to part time or taking more of a gradual approach. And it seems like that has really worked for you having full-time employment and then full-time retirement. Do you think that’s the right answer for some people?
Gilbert: I think some people don’t have a choice, right? If you lose your job or something, maybe you struggle around and you’re trying to find something, but it can absolutely work. And I don’t have a problem with people saying, hey, I want to work part time or I want to do some consulting on the side. The thing I would caution people, even if you think that’s going to be the path you want to take, run your numbers as if you don’t take that path and give yourself the freedom that you don’t have to earn money in retirement, because the benefit of being able to decide what you want to do without having to worry about the financial elements that come with that, really opens you up to pursue things.
I’m doing a lot of charity work now. Obviously, we’ve talked about my wife’s charity on previous episodes—Freedom for Fido—and that doesn’t generate any income, and that’s fine. So, I think even if you think you’re going to transition and work some, run your numbers and make sure that, well, maybe I want to have the flexibility that I don’t have to work. And I think that is probably the sound way. And then if you decide you do want to continue to work a little bit, I would encourage people don’t do it as a default. A lot of people fall back into that because after about a year, they go through the honeymoon phase, and they’re kind of off.
Riley Moynes has a great piece, “The Four Phases of Retirement.” He talks about phase two, which is kind of this depression, disorientation phase. And that’s when people start recognizing that they have lost all these other nonfinancial things when they retired—the structure of their day, the relationships, the sense of identity—and a very easy way to get those back is to go back to work, right? And if you look at the numbers, the number of people that go back to work for nonfinancial reasons is surprisingly high. It’s actually more—depends on which studies you look at—but it can be more people are doing it for the nonfinancial elements than for the financial.
So, recognizing your need to find a way to nurture those other needs that you have that you used to get from work, if you do that successfully in the pre-go phase, it can make this transition to a full-stop retirement a lot smoother. And then if you decide to go back to work, you’re doing it just because it’s something you choose you want to do, and you might choose not to do that. You might choose to do charity stuff. You might choose to find ways to give back to your community and find your fulfillment that way. And I think each individual just has to work through that process for themselves, but taking the time to think about it before your retirement date is really, really helpful.
Benz: Dana, I wanted to hear about your experience working with clients as you help them figure out how much they can reasonably spend in their retirement. Anecdotally, and speaking to a lot of retirees, this is something that retirees struggle with, that the numbers suggest that they should be able to spend X, but they just can’t give themselves permission to spend that amount. Can you talk about that experience with your clients, and also whether you have any hacks to help them? I know you’ve said you just mail them the check, but let’s just talk about that issue with your clients.
Anspach: Yeah, I have tried so many hacks, but when I talk about a bell curve, I would say, I see the majority of the type of client we work with do fall in that category where they have sufficient assets but really struggle with spending. And we have tried numerous things. One of those is mailing the book, Die with Zero, and using that as an introduction to have conversations around meaningful spending to emphasize that we’re not just encouraging frivolous spending, but meaningful spending.
One of the coolest stories we had was a client who read that book and really they felt completely comfortable as they shared, “We’re the kind of people who still share a single Coke at dinner.” And so, they were comfortable with their own spending, but they had a family member who had always been scraping by, and they said they were giving him $10,000 and he was shocked and why are you doing this? And they explained, they had read the book, and he shared the whole thought process and what he was going to do. And the number one thing that he wanted to spend the money on was prescription glasses. He’d never had the money for prescription glasses. And I think about that story and the difference that you can make in people’s lives. So many of us would take prescription glasses for granted. And to this person, that money was so meaningful and could make such a difference in some daily things that they were struggling with.
And so, those are things my husband and I have talked a lot about. As we don’t have children, how do we find people who are really working at it and trying hard and are there ways we can contribute to their lives now that can really make a difference for them? Maybe they simply need a laptop to be able to get to work or transportation or there’s so many people struggling that the tiniest little boost can make a difference for them. And so, we try to talk about those kinds of things with our clients. It’s not just spending to spend but on things that can make a difference.
And yes, as you alluded to, we’ve tried just setting up a direct deposit to them. We had that once and a client turned around three months later said, “No, stop that. I don’t need that.” So, we’ve tried all kinds of things. And Fritz mentioned running the numbers numerous times doesn’t really add a lot of value. And I agree. And yeah, we’ve had clients that needed to run the numbers eight, 10, 12 times just to feel comfortable. And so, we’re all just wired so differently. Hearing all these perspectives I think is what can really help.
Arnott: And Fritz, you’ve also written about this issue of giving yourself permission to spend. And it sounds like maybe that was a little difficult for you at the beginning, but that it has been getting easier. Have there been any strategies or ways of thinking about things that have made spending more comfortable for you?
Gilbert: I applaud you guys for bringing this up because I think underspending, it’s a big problem and people don’t really talk about it because it’s so counterintuitive. But yeah, I struggled with it. And I think the reality of it, as I said, I retired at 55. So, by definition, I was a pretty aggressive saver. We always saved every time I got a raise, we’d take a little bit more of it into savings and just spend half the raise or whatever, so that we were avoiding lifestyle inflation. We were always very careful about it. So that was an ingrained habit of being careful with the money. And in retirement, you’re finally at the stage where you’re free to do these things with your life, and you don’t want to be constrained by that old frugalistic mentality. So, it’s a big transition. I would say it probably took me about five years.
And the hack that I use—kind of like we were talking about with Dana where she’d mail a check to the clients—I set up automatic paychecks basically, it comes out of a money market fund that I set it up every year-end, and I go through the numbers again, I restock this cash bucket, and I just set up a paycheck based on my safe withdrawal rate. I know I’m good to spend it. Look at my year-end portfolio. So, I adjust it every year based on what the market is doing. The market has been very good since we’ve retired, fortunately. So, our ability to spend has gone up, but we haven’t really had the need to spend that additional money. We’re very happy with our lifestyle. But what we’re doing is we’re forcing that safe withdrawal rate into our checking account. And at the end of the year, if there’s $10,000 in there that we haven’t spent, OK, let’s give it to charity. We’re forcing ourselves to spend what’s coming in. And that has seemed to work for us.
My first real struggle was this mountain bike. I wrote a story about it. I live in the mountains. I love to ride mountain bikes. And there was a nice e-bike, and I was like, oh man, it’s like $5,000. I’ll just buy the old traditional bike for $1,500. I don’t need it. And I’m like, what are you doing? It’s $3,500. Well within our safe withdrawal rate. And I bought the e-bike and I’ve never been happier. I love this thing. I’m getting older. It’s harder to get up the hills. And this thing has brought me true joy. So that was kind of my first, like, it worked. And we’ve, we’ve continued to grow on that. We just got back from a trip. We went up to the Arctic Circle, up the coast of Greenland. It was Viking cruise. It was expensive. But my wife and I talked about it. We said, you know, we’re 62, we’re healthy. There are some places we really want to go that when we get older—die with zero mentality—we’re not going to be able to do. We’ve got the money. Let’s do it. So, we took this trip. It was one of the best trips in our life. We saw polar bears. It’s one of those things for the rest of our lives. I’ll always remember seeing those polar bears out on the sea ice. It was magical. And it was just a special time for my wife and me. So, spending money, like Dana says, on things that matter.
The other example I use, right now, we’re doing an expansion on our cabin. And our thought process there is we love where we live. If it’s within our control, we plan to live here the rest of our lives. But there’s some things about the cabin that kind of irritate us. The laundry is in the hallway. There is not a good place to put it. It’s a three-story, 2,200-square-foot cabin. So, we’re always going up and down stairs. And we say, man, when we get older, we’re not going to be able to do this. So, we are extending the main level and we’re putting in a master bedroom on the main. We’re putting in a laundry room on the main. Everything is going to be right there on one level. Why? Because right now we can afford it. And then we can enjoy it for the next 20 years rather than wait 20 years and then do it. And it’s going to cost roughly the same adjusted for inflation. Let’s do it now and enjoy it for 20 years and really love where we’re living.
So, we are getting better at it. But I think the trick is you really need to look at your safe withdrawal rate, determine how much you can safely spend and force yourself to spend it. Because everybody worries, what if I need a nursing home? What if I need this? What if I need that? Valid concerns. But once you’ve built safety stocks into your numbers—an example, let’s say you’re going to be in a nursing home for, maybe two years, let’s say $200,000, well, fine. Take $200,000 out of your net-worth calculation at the end of the year and say, I’m going to reserve that for a nursing home and then calculate your number. There are ways to get around these fears of late-in-life financial needs. And the thing you don’t want to do is have safety over safety over safety over safety and not live this life that you can enjoy now in your go-go years. And then you get to your 80s and you can’t do anything anymore, and you’ve got more money than you can spend and you’re going to have regrets. That’s a pretty common path.
I’d love to hear Dana talk about how many of her clients that are 80-plus have more money than they know what to do with? I bet it’s the majority. So that’s kind of the choice. Do you want to be that person? Or do you want to find a way to give yourself freedom to spend, within reasonable limits, and then be very conscious on how you spend that money to bring the greatest value and joy to your life? That’s the approach we’ve taken.
Benz: Yeah, that’s helpful, Fritz. Dana, I would like to hear from you and specifically, I wonder if you could reflect on market conditions, which have been pretty strong during Fritz’s retirement so far. You were helping clients, I’m sure, during the global financial crisis back in 2008. Can you talk about how retirees responded when they were really seeing their nest eggs go down quite a bit? What strategies would you encourage them to embrace in bad market environments?
Anspach: It’s a great question because we all suffer from recency bias, even those of us in the profession. And when things have been good for multiple years, which they have been, we tend to think they will always be that way. And I will say going through the global financial crisis with retired clients was terrifying, not only for them, but even for us as financial advisors, because we knew so adamantly that they needed to stick with their plan. And yet their emotions were just raging in terms of fear, having just retired, watching those portfolio values go down—in some cases, 30% to almost 40%—and feeling like, oh my gosh, this is never going to recover, what’s going to happen?
So, it was challenging, very challenging time, and it lasted about two years. We were able to keep almost all of our clients within their plan without making any major changes. And truly, in hindsight, it didn’t impact any of their lifestyle. Their retirement paychecks that we’d set up stayed the same. We did forego inflation raises for many years, in some cases, up to five or six years. But inflation also stayed almost at zero during that time. And that’s often the case when we go through really struggling economic times that inflation and interest rates were low simultaneously. And so, once things recovered, we were able to resume those inflation raises. It’s allowed us to increase retirement paychecks quite a bit in the last few years as inflation has reared its head.
I think to answer your question, you have to have a plan in advance. And so, we all want to know, OK, not—“Oh, I’m just going to stick my head in the sand and assume a bear market will never occur during my retirement.” It will. And it will likely occur multiple times. So, what is your action plan? I had a friend that used to fly helicopters, and he described it as your crash plan you had to have and prepare so that you would react in the right way in real time when these things happen. That to me is the key to weathering market volatility, which we haven’t had recently, but I’m sure we will have it again.
Arnott: Another solution that we sometimes hear about is annuities, not variable annuities or complex products with high fees, but things that are more straightforward, single premium immediate annuity or a deferred annuity. Is that something that you use with your clients at all?
Anspach: We do. We are fee-only. So, we don’t participate in commissions, nor do we charge asset-based fees on annuities. But it’s part of our planning process. And then we have partners that we work with to get annuity quotes or research current products. And we use a set of metrics in almost all aspects of our practice. And one of those metrics is called a coverage ratio that looks out at where your cash flow will be in your typically early 70s, about the onset of the slow-go years. And we look at how much guaranteed income is available relative to your total expenses. And we have discussions around that coverage ratio and how an annuity could impact that.
I think there’s benefits not only in the “License to Spend” research that many of us have read by David Blanchett and Michael Finke, but also in terms of safety later on. So cognitive decline can begin, and we have seen people make just illogical decisions and are unaware that they’re doing so. And the more guaranteed income you have later in life, the more you’re protecting a certain minimum lifestyle. And so, we do have those conversations. Despite that, we have many, many clients who are just maybe have a bad opinion about annuities. They can be sold in some cases and get a bad rap when in fact they can be a very useful financial tool when they’re used intentionally as an important piece of the puzzle in structuring retirement income.
Benz: While we’re on the topic of guaranteed income, I’d like to talk a little bit about Social Security. And Fritz, maybe let’s go over to you and talk about how you and your wife are approaching Social Security filing?
Gilbert: Good question. All the research you read is, you should defer. Now, you need to think about the spousal benefit because the spousal side adds some complexity. Dana just wrote an article about this on The Retirement Manifesto a couple of weeks ago. And so, you really need to factor in. So, what we’ve done is my wife, she was the lower earner, she was stay-at-home mom. So, she only worked for maybe 10 years. So, we actually filed for her Social Security at age 62 and she started it. And then we’re going to wait for me to be 70 and then I’ll claim at which point she’ll claim the spousal. And the logic for that was, it’s a higher inflation protection, you get the 8% return between now and then, and so on, everybody knows the reasons to defer. And it is absolutely the recommendation.
Then you have others that say, yeah, but it’s going to be gone. I’m going to get a big haircut. I’m just going to take it now and invest it. It’s a very personal and difficult decision. We’ve elected to defer. Now, because that’s what the math says—that’s your best financial return over your lifetime, assuming you’re going to live a long time, and I’m planning hopefully to live a long time. I’m healthy. I’ve got longevity in the family, and so on, focus on fitness, obsessively. I’m a big fitness guy. So hopefully, I’ll live a long time.
That said, what I did in our retirement planning, I wasn’t totally just naive and blind to the risk that Social Security takes a haircut. So, when we were doing our pre-go years and really doing the deep dive on the numbers, we ran a cash flow out to age 95. And I looked at scenarios where I took a 25% cut on Social Security and said, OK, let’s use that as our base case. And let’s say if Social Security gets cut, and that’s what we’ve got, are we good? Because we don’t want to be dependent 100% on Social Security, delay till 70, and then have it cut, and now we’re in trouble because we didn’t look at that as a possible scenario. So, our base case scenario assumes a 25% cut. So, if we get more than that, great, it’s a bonus, we’ll give more to charity, whatever. So, again, we’ve taken conservative approaches in our planning, but we’re still trying to make the decisions that all the “experts” say are the best decisions given our situation of longevity and wanting the inflation hedge. And my feeling is between my wife and I, one of us, very well may live into our 90s. And getting that survival benefit up for my wife and doing what we can to optimize that for longevity, considering that there’s two of us in this relationship, just seemed like the most logical thing for us to do.
Arnott: We also wanted to talk about the whole topic of figuring out what your safe withdrawal rate could be. And there’s always a lot of debate about this topic and Bill Bengen has a new book out where he now advocates a 4.7% withdrawal rate instead of 4%. And Fritz, I wanted to ask you first, how did you approach this question of calibrating what the withdrawal rate should be?
Gilbert: Yeah, you can have a whole episode on that. Let’s get “Big Ern” here. We can talk for hours, right? But when I was retiring, if you look—even Christine, I think you wrote some articles about this. And I think at the time, you guys were at the 3.25%, 3.2%, 3.3%, bouncing up and down. But mid- to lower-3%. So again, because we’re conservative, we’re very conservative with everything in this retirement planning space, because we don’t want to make a mistake and run out of money, we chose a more conservative approach. And we said, OK, let’s look at 3.25%. And that was kind of our baseline.
But we also know, hey, there can be years—so every year-end, I update our net worth. We subtract the nonspendable assets, things like the house, the cars, they end up with your retirement funding pool. And I multiply that times 3.25, 3.5, 4, 4.5. And I create this guardrail approach where I say, OK, if we have a need, inflation is catching up to us or whatever, I’m comfortable going up to maybe 4.25, if we need to. But I’m only going to do it on an annual basis. I’ll review it every year. We’ll take a look at it. Maybe look at it this way, the portfolio comes down. Well, our portfolio has come down by quite a bit, but our spending hasn’t. OK, we’re at 3.25. We can go up to 4.25, a lower portfolio, a little bit higher withdrawal rate, I’m comfortable with that.
So, we look at this 3.25 to 4.25, maybe even 4.5—never had to do that yet. But knowing that we can go a little bit higher, especially knowing that Social Security is going to be coming in at age 70. So eventually that withdrawal rate will drop as Social Security comes in unless our spending goes up. So, we’re comfortable with this variable approach and kind of adjusting year by year, looking at a combination of what the portfolio has done and what our lifestyle and inflation and spending needs are for the following year.
Benz: Dana, how do you do it for your clients, calculate how much they can reasonably withdraw?
Anspach: It’s interesting because we do it very differently. We don’t look at any kind of annual safe withdrawal rate. We look at what I would call a lifetime safe withdrawal rate. So, we use a concept called fundedness. It’s very much like how pension plans calculate the status of the pension, where they have a set of retirement paychecks they have to deliver and each year they have to run an analysis to say how well funded is the plan to deliver those future cash flows. So, we’re doing the same thing on a household basis. And we want a particular fundedness ratio that in essence would probably equate to about a 4% lifetime withdrawal rate.
But there could be times where someone is delaying Social Security, where their withdrawal rate may be much higher. We’ve had clients take out 8% or even 10% in a year because there were go-go items they wanted to pursue. And when we ran that out over the lifetime of their plan, it worked perfectly. And they were still projected to retire with more assets at the end of retirement than they had at the beginning. So, when we run that out, we think there can be times where that safe withdrawal rate when you look at it year-by-year can prevent people from spending as much as perhaps they safely could.
Now the other aspect of that is, in many cases, those safe withdrawal rates were based on Great Depression-like conditions, day one of retirement. And my thought process is, well, why would I plan my retirement as if it was the Great Depression from day one? I would rather plan on still a very conservative set of conditions. I never want to use above-average conditions or above-average assumptions in the modeling. But it’s probably not going to be the Great Depression from day one. So, let’s look at it a little differently. And if the Great Depression conditions should come along, naturally there’s adjustments that can be made. And we can still ensure that that person would never run out of money as long as those adjustments were made prudently.
Arnott: I wanted to ask both of you how you’re thinking about market valuations. And if you look at almost any metric, the CAPE ratio or other valuation measures, we still have valuations on US stocks trading at pretty elevated levels. And I’m curious about how you’re thinking about that potential impact on portfolio withdrawals, and do you think that retirees should be prepared to perhaps tap on the breaks with their spending?
Gilbert: I’ll jump on it first. I guess the way I look at it, I’m a big fan of pretty deliberate diversification. So, I’ve got small international, small value, small growth. I’ve got international bonds. And the other thing I should mention is I like to hold them in separate mutual funds or ETFs. If you do something like the target date, which works fine in the accumulation years, if you get into retirement, and let’s say, you’ve got a blended—let’s just say it’s S&P and a bond fund. And the S&Ps are doing great, but the bonds aren’t or vice versa, it’s hard to pull out that particular segment asset allocation that’s done well.
So, I had some target-date funds when I was in my working years. Once I got into retirement, I broke those into their separate categories. And the reason being now, in any given years, I’m looking to restock this cash bucket, which I do it throughout the year, but I do it very intentionally at year-end. I can look at whatever asset class has outperformed in the prior year and sell a little bit of those holdings to restock the cash bucket. So, I don’t get too obsessed about any particular asset class that’s overvalued under the assumption that, OK, that one will probably have a reversion to the mean. It happens. But then, the ones that have been underperforming, hopefully will be outperforming at that point in time. And with a properly diversified portfolio and some bonds that I’m holding to maturity, so they’re essentially risk-free other than default, you’ve got options that you don’t have to be dependent on the stocks.
Being overly dependent in a microcosm of the stock market is a really high risk. So, I wouldn’t be comfortable with that. But knowing that I’ve got options and I’ve got some asset-allocation choices that are easy to access gives me the comfort that, yeah, even if S&P tech stuff is overrated, overvalued—probably is—that’s OK. I’m using that right now to fill my cash bucket because it’s been doing well. So, I’m selling some of that as it wins. And I’m giving the other asset classes time to recover. Look at the international. It’s lights out this year. I haven’t sold any international in the last five years because it’s been underperforming. So now it’s got time to recover. So, I think the key to that to me is asset allocation. I’ll turn it over to Dana and see how she does it on a broader basis.
Anspach: Thanks, Fritz. Christine, I don’t know if this came up in our last podcast, but we use a different kind of equity model through our investment partner Asset Dedication that is based on what’s called a mini-max principle. It’s basically looking at what equity asset-class mixes held up the best under the worst-case scenario. So, what you’re doing is maximizing the outcome of a minimum-return scenario. And that sounds really confusing, but when you think about retirement, if we get good markets, we’re all going to be fine. That is really not what we’re concerned about. We’re always concerned about the worst-case scenario.
And so, Asset Dedication approached this and said, well, if I designed an equity allocation that even in a worst-case scenario earned more than other allocations, then that would help provide more downside protection. And it just so happens that type of allocation is quite diversified. It’s not as heavy on US large-cap equities. And so, like Fritz said, international has underperformed for five years. And so, our portfolios do have a significant international allocation, as well as a value allocation, and we are seeing that do quite well this year, but it won’t do well every year, nor will any allocation.
So, I, in a roundabout way, come to the same conclusion as Fritz is, diversification matters. But more importantly, what matters is knowing what are the principles your portfolio is constructed on. A lot of people end up with an accidental allocation. And there’s a little bit of this and a little bit of that. Maybe they read this newsletter or read this article or saw a write-up on a particular strategy. It’s really saying, OK, I need a disciplined process that I’m going to follow. And whatever that is, you need to know what it is, and you need to follow it consistently throughout retirement.
And given that, I think there’s a lot of different disciplined processes that can all work well. Where people get in trouble is when they’re not following some type of disciplined process, and they’re getting pinballed around by what the headlines are. That’s what I worry most about for retirees is, are those behavioral reactions if they are not prepared with a set process that they’re aware of.
Benz: I think we could talk a whole other hour, but I wanted to ask you, Fritz, about one of your recent posts that related to some tax planning that you’ve been doing in your time being retired, where you had been doing a series of conversions of your traditional tax-deferred assets to Roth. And you said that one of your surprises was that it just hadn’t paid off to the extent that you might have hoped. So, can you talk about that? Because I know a lot of people in the period that you’re in—postretirement, prerequired minimum distribution, pre-Social Security—people do these conversions. Talk about how that’s worked for you.
Gilbert: Yeah, and the response to that post has been really interesting to read. If you haven’t read the comments, everybody is saying, yeah, same thing with me, same thing with me. And I wouldn’t say it hasn’t paid off. I think the point I was making is in spite of doing what I feel are pretty aggressive Roth conversions, the pretax traditional IRA balance is stubborn. It’s really hard to get it to come down.
And let’s use an example. I use these in my post. I’m going to do them from memory. One was, let’s say, you had a $1 million portfolio in traditional IRA, you could use $500,000. I did both scenarios, but a million is easier to do the math on. If you’ve got $1 million in a traditional IRA and the market has returned 20%, which they’ve done in the years since I’ve retired, your IRA is going to generate $200,000 of growth. So even if you’re doing a $200,000 Roth conversion, guess what? Your IRA balance at the end of the year is still $1 million.
And it’s a first-world problem. It’s because the markets have been doing very well. And most baby boomers, a lot of baby boomers that had 401(k)s, and they were kind of instructed: save to the pretax, save to the 401(k), IRA. Most baby boomers that have been responsible tend to have a fairly large pretax IRA. So, combine a good market since I’ve retired with a pretty healthy IRA balance, and it’s surprising how large those Roth conversions have to be to materially bring down the IRA balance. That was the whole premise of the article. And I was really pleased with the response because I think it’s a reality that a lot of people are seeing, but it hasn’t really been talked about a lot in the retirement planning space, even though many, many people are experiencing it. So that’s really what the premise is.
Arnott: What about on the nonfinancial side, Fritz? What would you say has been your biggest surprise there during retirement?
Gilbert: Oh boy, I can talk for days. Yeah, I think what I’ve been very pleased with is how thoughtful I was going through this preparation, the pre-go, as we talked about earlier, and really taking time to consciously think about all of those nonfinancial aspects I was getting from work and experimenting. Look at my blog as an example. I started it three years before I was retired, and it’s since turned into a major source of identity. Here I am talking to you guys. I’m this retirement guy, right? It’s a new me. It’s a new identity that’s been created just because I experimented and I was curious and I played around with some things, same with my wife’s charity.
I think the biggest thing for me is how well the transition has gone, and the biggest takeaway that I have learned from that is how important it is to really foster your curiosity almost back to a childlike mentality. When you were a kid, you just got to do stuff and play, right? And we’ve been forced through the system for 40 years to fit the structure and do these tasks, and it’s so structured. And finding a way to build up that muscle again, to exercise that artistic, creative, fun side of life, it’s worked really, really well. I would say that’s been my biggest surprise is how well that’s gone. I never went through that phase two, depression, disorientation phase. Only 15% of people avoid that.
So, I think the thing I try to preach in one of my big messages is, you don’t have to go through that disorientation and depression phase. Eighty-five percent of people do, and your chance of depression goes up I think it’s 40% when you retire. It’s a health crisis, that people are totally oblivious to. When you ask me about nonfinancial, that’s where my mind goes is it doesn’t have to be that way. But you’ve got to be aware of the importance of thinking about it, and more importantly, start listening to that curiosity and taking that first step and doing it over and over and over again. I talked about reducing the amount of time I’m writing on my blog. That’s the same thing. Hey, I’m more curious to start pursuing these other things. I’m not married to anything. I’m willing to move these cards in and out of my hand and experiment with different things and keep life exciting and fresh. That, to me, is the best story of the nonfinancial side that I’ve experienced so far.
Benz: Dana, in your years of working with retired clients, what have been the main takeaways in terms of how you’ll approach your own retirement?
Anspach: That’s a big question. It’s funny because I think my nature is such that if I didn’t do this for a living, I don’t think I would be so great at planning my own retirement. So, I’m very, very grateful that I landed on this profession because it makes me run my numbers and save each year. From watching my own clients, I think I’d like to think I’ll be better at spending, but yet I find I’m subject to the same biases as any of us. And so, there can be that reluctance to say, oh, that’s too much money, when in reality, it would probably be just fine.
I think I’m going to struggle with the same things my clients are going to struggle with. I think that’s the biggest eye-opener. As much as I know, when it comes down to yourself and your own planning, I’m not going to be exempt from these things. Taking the time to think about it now—every time I hear Fritz talk, what he was just sharing, I feel inspired and enlightened and hopeful about pursuing that childlike playfulness. I have watched clients and interviewed many for my upcoming book where I didn’t know they went through that depression phase that Fritz talked about, yet they did. So, it was an eye-opener for me to hear that, wow, they did experience this and yet had never talked about it with me.
So, seeing all of that just brings a new level of awareness to it. I’ll probably be kinder and have more grace for myself as I navigate these phases. I think we can be hard on ourselves. I think it can be OK if we go through some of the depression or downside and there’s proactive steps we can take. But if there’s anything I take away, it’s looking at it as this big circle of life, seeing how the phases will unfold, being intentional about how I will want that to go, doing everything I can to be intentional, and yet at the same time letting go and letting that journey unfold as it will.
Benz: Well, Fritz and Dana, this has been such a fun conversation. Thank you both for taking time out of your schedules to be with us today.
Gilbert: Thank you so much, Christine. I think you can see why I’m excited to have Dana writing. Let me finish with this. It’s really interesting. So, she talked about sending that text when we opened up with that, so it’s an appropriate thing to close with if you don’t mind. I had sent my retirement, “I’m retiring from blogging” article, and I was like, you know what, I’m going to go celebrate. I’m going to go ride my mountain bike in the mountains. It’s a beautiful day. I went up to North Carolina and rode the mountains. I was coming off the trail, pulled my phone out, turned on, there’s a text from Dana. It was right when I was coming off mountain biking, which was just cool. So, she and I talked.
What I love about this is I’ve been writing 10 years, I’m retired seven years but look where Dana is. She’s 54. She is in exactly the same mind space where I was when I was starting to think about all these things for my personal retirement. It’s been a great journey to write about it. So, to have Dana coming in as an outstanding writer or a certified financial planner, obviously very, very knowledgeable, and have somebody else stepping in now to go through that same journey in the footprints of what I’ve been laying out for years—what an exciting time to have her sharing her steps, going through the same process. So, I think having both of us on, thank you so much. I’ll turn it over to Dana to say the final farewell, but I’m really excited about where things are, and it was great talking with both of you.
Anspach: Yeah, I second all of that. I would say, even to your last question when you were just talking, Fritz, one of the things that went through my mind was just the realization that, wow, I am starting to experience all of these things I’ve watched my clients experience over the years and how different it feels when you’re in it versus when you’re helping someone plan for it. And that’s part of my inspiration in writing and sharing that journey is really saying, look, here’s what this is like. And let’s all get better at it together.
Arnott: Well, thank you so much to both of you. It’s been great talking with you. And I also really enjoy reading The Retirement Manifesto blog. One of your recent posts, Fritz, on traveling in the Arctic about the two weeks that you spent above the Arctic Circle, I thought was amazing. So, I recommend that post in particular, if people aren’t already familiar with your blog.
Gilbert: Well, thank you very much. That was a trip of a lifetime. And we actually signed up for one to Antarctica. So, thank you for the kind words on the article. It was a great trip. And I encourage anyone—that’s one thing I’ll say. Greenland and the Arctic are just now opening up with global warming and the sea ice going further back. There are a lot more people that are starting to discover Greenland. It is an absolutely amazing place to take a cruise. So, if you’re thinking about it, I really do encourage people to look into that area. It’s not an area that many people have gone to, and it’s absolutely magical.
Benz: Fantastic. Thanks, both.
Thank you for joining us on The Long View. If you could, please take a moment to subscribe to and rate the podcast on Apple, Spotify, or wherever you get your podcasts.
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Arnott: And at Amy Arnott on LinkedIn.
Benz: George Castady is our engineer for the podcast and Kari Greczek produces the show notes each week.
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