Managing Cash Flow in Retirement

On today’s episode of the Wiser Roundtable Podcast, the team goes over managing cash flows – a major part of retirement planning. Many people aren’t fond of the word ‘budgeting’ because of its inherent connotations, but managing cash flows during retirement is essentially just that.

Listen on Apple Podcasts or watch on YouTube:

SUMMARY:

More Than Just a Nest Egg

Accounting for daily living expenses like food, shelter, healthcare expenses, and transportation, coupled with discretionary expenses such as travel, hobbies, or other luxury items, is a pivotal step in preparing for financial success. Retirement isn’t just about a nest egg – it’s more than that. What amount you want to live on annually, along with inflation and rising healthcare costs, is what you should try to focus on. Optimization of your cash flow and tax-smart withdrawal strategies will help you continue to succeed.

Inflation and Economic Environment

One variable that is often unaccounted for is inflation. Because of inflation, a dollar today ‘is not the same’ as a dollar 10 years from now. Rising inflation will eat into your nest egg over time, so using around 2.25%, our firm aims to account for this increase when conducting retirement planning. Healthcare costs are often underestimated when calculating a ‘nest egg’ number as well. The cost of healthcare increases around 5% annually, so over the course of a 30-year retirement span, you could end up paying over a quarter of a million dollars out of pocket for healthcare alone. Cash flows must be able to withstand these kinds of fluctuations. A variety of software and services are available to help guide you through this planning process.

Secure vs. Insecure Sources

Social security, IRAs, Roth IRAs, brokerage accounts, annuities, savings accounts, rental income/real estate, and some pensions are all types of cash flow that help shape your financial path throughout retirement. Social security is considered a secure income source because it’s fixed, but social security alone often does not support the lifestyle and personal needs of retirees today. So how do we close the cashflow gap between anticipated expenses and secure income? That’s where portfolio income comes in. Portfolio/investment income, while not 100% secure, will act as a supplement. By carefully planning for a required rate of return through managing risk and volatility, you can achieve financial freedom that lasts all the way through retirement.

Our Approach

Index funds are a great way to get exposure to the asset class for various sectors in the economy at a low cost. Withdrawal strategies such as the “4% rule” are a great place to start. Our firm also runs a Monte-Carlo simulation – a trial of 1,000 outcomes designed to zero in on the highest probability of success. Having a steady cash bucket and maintaining these funds through self-control and discipline can provide you with greater peace of mind as you prepare for the future.

TIMESTAMPS:

1:03 More Than Just a Nest Egg

5:10 Inflation and Economic Environment

8:38 Secure vs Insecure Sources

15:07 Our Approach

LINKS:

Learn more about Casey Smith and connect with him on Twitter.

Learn more about Brad Lyons.

Learn more about Matthews Barnett.

CONNECT:

Twitter, Instagram, Facebook, LinkedIn, and YouTube.

Learn more about the Wiser Wealth Management Roundtable podcast and access previous episodes.

Recent posts

  • How will a potential government shutdown affect your portfolio?
  • How to Differentiate between Marital and Non-Marital Assets
  • What is a charitable remainder trust?
By Published On: August 18, 2021

Share This Story, Choose Your Platform!

Wiser Wealth Management, Inc (“Wiser Wealth”) is a registered investment advisor with the U.S. Securities and Exchange Commission (SEC). As a registered investment advisor, Wiser Wealth and its employees are subject to various rules, filings, and requirements. You can visit the SEC’s website here to obtain further information on our firm or investment advisor’s registration.

Wiser Wealth’s website provides general information regarding our business along with access to additional investment related information, various financial calculators, and external / third party links. Material presented on this website is believed to be from reliable sources and is meant for informational purposes only. Wiser Wealth does not endorse or accept responsibility for the content of any third-party website and is not affiliated with any third-party website or social media page. Wiser Wealth does not expressly or implicitly adopt or endorse any of the expressions, opinions or content posted by third party websites or on social media pages. While Wiser Wealth uses reasonable efforts to obtain information from sources it believes to be reliable, we make no representation that the information or opinions contained in our publications are accurate, reliable, or complete.

To the extent that you utilize any financial calculators or links in our website, you acknowledge and understand that the information provided to you should not be construed as personal investment advice from Wiser Wealth or any of its investment professionals. Advice provided by Wiser Wealth is given only within the context of our contractual agreement with the client. Wiser Wealth does not offer legal, accounting or tax advice. Consult your own attorney, accountant, and other professionals for these services.

Sign up for our newsletter!

Our latest blogs, podcasts, and educational videos delivered to your inbox weekly.