Retirement For Life

The First 5 Years of Retirement: Avoiding These Common Pitfalls - Ep 32

• Christian Cyr, CPA, CFP® • Season 2 • Episode 32

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To get the full RFL experience, watch the episode here at https://youtu.be/jmfF9z4g65k

The first five years of retirement represent a critical "danger zone" where key decisions can make or break your financial future. In this eye-opening episode, Christian Cyr, CPA CFP® and his team unpack the most common pitfalls that derail even carefully planned retirements.

We explore why both retiring too early and waiting too long can be problematic, revealing surprising research from the Journal of Happiness about the health and mental wellbeing benefits of timely retirement. You'll discover why the happiest retirees engage in at least 3.5 "core pursuits"—activities that inspire and fulfill them beyond Netflix binges.

The conversation takes a serious turn as we examine why maintaining an overly aggressive investment portfolio during retirement's early years could spell disaster. Christian shares stories of clients who narrowly avoided significant losses by adjusting their risk exposure just before market downturns.

Perhaps most shocking is our deep dive into Social Security timing. Most Americans claim benefits too early, missing out on a potential 77% increase in monthly payments by waiting until age 70. This decision affects not just your income but potentially your spouse's survivor benefits for decades.

Finally, we reveal why traditional withdrawal strategies like the "4% rule" often fall short, and why Christian's concept of the "perfect retirement" focuses on creating stable income streams while minimizing lifetime tax burden. This episode delivers actionable insights that could transform your retirement outlook—whether you're already retired or planning for that transition.

Ready to create your own perfect retirement? Schedule a consultation about our AIM retirement system and avoid these costly mistakes before they impact your financial freedom.

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Christian Cyr, CPA, CFP®:

All right, you guys ready.

Andrea Brannon, CFA®-IF:

Ready.

Christian Cyr, CPA, CFP®:

Today's episode is the first five years of retirement pitfall. No, the first five years. Okay, are you guys ready? Yep? Today's episode on Retirement for Life podcast is all about the top five most common pitfalls we have seen over the years of people who are retiring right off the bat. No, it's not the top five, it's the first five years of retirement.

Emma Bean, CFA®:

Right.

Christian Cyr, CPA, CFP®:

Right, okay, I got it In three, two, one.

Intro:

Retirement for life, your passport to a comfortable and confident retirement. The podcast that's equal parts education and entertainment, where we break down the retirement maze with a dash of fun and a heap of wisdom from your host, christian Sear, cpa, the passionate retirement specialist and president of Sear Financial Wealth Advisors. The independent registered investment advisor specializing in the AIM retirement system.

Christian Cyr, CPA, CFP®:

Okay, you guys ready today for this topic? Retirement for Life. Emma came up with this topic. It is the top things that retirees do wrong in their first five years after that big day of retirement. And this is a great show because, as I read through the top five things we're going to talk about, every single one of these things is something that generally people make mistakes on. I thought about it. I know I was assigned two of the five and I'll warn you, so I have topic number one and topic number five. I have two cue cards for topic number one and I had to shorten topic number five from four cue cards down to three. But we'll try and keep it short today, all right.

Christian Cyr, CPA, CFP®:

So the first topic that I want to address right off the bat is about the timing of the retirement decision. This goes both ways. A lot of people retire too soon and a lot of people don't retire soon enough. I'm going to start with the latter. A lot of our clients come in. They've done a great job saving money, we've put them through the AIM retirement system. And what do we say? You can retire right now. And what do a lot of those guys say, andrea?

Andrea Brannon, CFA®-IF:

I mean, I think most people are happy to know they can retire, but they don't want to pull the trigger right away. It's an emotional thing and it's hard for them to wrap their minds around not having a regular check coming in and living on their savings.

Christian Cyr, CPA, CFP®:

They're nervous. Yeah, they're just nervous. So the thing about having saved up a ton of money, the thing about hiring a team of professionals like us, is that you're putting your trust in other people, and that's a hard thing to do. It's a hard thing to do if you've been working for 40 years, but I hate to see people who have done a great job saving and feeling like it's almost committing a sin to retire early. So I put these notes down. I'm talking about waiting too long. I'm thinking about a client who recently came in who waited too long, and what happens is life happens and these other things catch up with you and pretty soon you look back and you say did I really need to work 42 years instead of 40 years? So the things that I talk about with people are about the health that's involved with retiring early. There is strong evidence that retirement improves health, mental health and life satisfaction. Now would you believe that?

Emma Bean, CFA®:

I mean, yeah, how many clients do we have come in that say they're so stressed out at work, they would love to retire, but they just don't know if they can? Even just getting that off your plate reduces stress and anxiety so much.

Christian Cyr, CPA, CFP®:

Yeah. So don't work too long. Trust somebody, find somebody you trust. And if they tell you you can retire, I would encourage people in that position. When your advisor team is looking you in the eye and saying you have a 99% chance of retirement success, don't go to work one more year. How many people could walk in and they say, gosh, I'm so glad I retired.

Andrea Brannon, CFA®-IF:

Yeah, all of them.

Christian Cyr, CPA, CFP®:

So the study I always tell people in this situation is ironically, there's the Journal of Happiness. Have you ever heard of the Journal of Happiness? No, but the Journal of Happiness did a study two years ago, which I show people all the time now, and surprisingly it found that people who retired had more years of feeling good than their counterparts who were still at work. Okay, so what's life about? It's about happiness, yeah, but it can go the other way too. We have people who are going too soon. What's my do you know my pet peeve?

Andrea Brannon, CFA®-IF:

when people just decide to retire or they come in and they say yeah Well, they don't know what they're going to do with their spare time.

Christian Cyr, CPA, CFP®:

And they say I'm retiring, and I say why? And they say because I'm going to be 65 next year.

Andrea Brannon, CFA®-IF:

It's a bunch of bullshit.

Christian Cyr, CPA, CFP®:

You don't retire because of an age. You don't retire because you've met 30 years on the job. You retire for two reasons and I want this is important. I wrote this down. The only way you should retire is if you can say these two things Ready. Number one I've met with a retirement specialist and they said I'm able to retire Right. How many people just retire and don't even go visit somebody and just say I'm going to retire?

Andrea Brannon, CFA®-IF:

And start social security.

Christian Cyr, CPA, CFP®:

And the second thing is they should have plenty of truthfully purposeful things that they can't wait to do in retirement.

Andrea Brannon, CFA®-IF:

Yeah, not just sitting and watching Netflix. That's what I say.

Christian Cyr, CPA, CFP®:

Sitting on the couch and watching Netflix and maybe drinking whiskey is not a retirement. A retirement does not make yeah. So I want to talk about the things that I've told my children growing up, the things that I tell my retirees growing up Do not retire until you have purpose in your retirement. And those could be so many things. And I brought a guest in the number game and I feel like, Andrea, I feel like you're an advantage here because I've cited this Now I hope I don't shame you and you get it wrong. But, Brooke, why don't you go ahead and read this question of the day?

Brooke Fay:

Survey of nearly 2000 American retirees, conducted for what the happiest retirees know, revealed insights into their habits and behaviors. Specifically, the study defined core pursuits, which include things that inspire, elate and electrify your days, things that you look forward to, such as creative arts, painting, playing, dance, music, gardening, travel, babysitting your grandchildren, sports as an exercise, golf, pickleball, hobbies and volunteering. According to the study, the happiest retirees tend to have at least how many core pursuits.

Christian Cyr, CPA, CFP®:

Core pursuits are not watching Netflix, right, we were just talking about White Lotus, the third season. That's not a core pursuit. These are things that are meaningful. They make you wake up in the morning and say I can't wait to do this. I've filled my day with things that are full of fun. So happy retirees. How many core pursuits do they have? Now I'll tell you. The answer is a decimal, so it's got a point something after it, so your answer should be like 99.8, not 99. Does that make sense? Yeah, so add a decimal to it. Okay, okay, reveal your answers 4.2.

Christian Cyr, CPA, CFP®:

3.5. Brooke, who got it right.

Emma Bean, CFA®:

Oh my gosh, Andrea. Andrea nailed it.

Christian Cyr, CPA, CFP®:

Guys, this is important you have to have purpose in your retirement. You're not just going to walk up and say I'm 65. Today, I'm retiring. You're not going to walk up and say I'm 65, today I'm retiring. You're not going to walk up and say social security starts at age whatever and I'm going to retire because social security starts. You're going to retire because, as I said, your advisor said that you are able to and you know exactly what you're going to do. Now, andrea, we can tell right off the bat. When we're going through the AM Retirement System, one of the key questions we ask is a non-financial question what are you going to do in retirement? You can always tell right. Some people, like your dad, would be like no problem, I've got 25 million things I can do in retirement.

Andrea Brannon, CFA®-IF:

And what did you give me crap about? I say my husband doesn't need to retire because he's just going to sit on the couch and watch TV.

Christian Cyr, CPA, CFP®:

That's right. No, he doesn't need to retire. He's not going to cut the grass.

Andrea Brannon, CFA®-IF:

No, not unless I make him.

Christian Cyr, CPA, CFP®:

Right, you could just tell like there's people that sit across from us and they're about to retire and you ask them a question what are you going to do in retirement? And they kind of just blow it off.

Emma Bean, CFA®:

It's funny it retirement and they kind of just blow it off. It's funny, it almost catches them off guard. They're coming to a financial advisor and they expect us to be talking about numbers a hundred percent of the time and a lot of the times like. Our first question is like how much do you like your job and what are you going to do in retirement?

Andrea Brannon, CFA®-IF:

Yeah.

Christian Cyr, CPA, CFP®:

They're like I don't, oh, I'm going to have fun. No, no, no, no, no, no, no, no. Like specifically Give it to me. What are you going to do? Are you a kayaking queen? Are you a quilting queen? Whatever you know, you need to tell me what you're going to do. So, number one don't be that guy who's got a ton of money saved up and just wants to work for two more years just because he feels like he should. Emma and I talked to a guy the other day. He wants to work for two more years. Do you remember why he said that? He said his daughter has another year of college left, or something like that.

Christian Cyr, CPA, CFP®:

He's like no, you have X million of dollars. You have a wife sitting on the couch who's about to retire and you're going to work for two more years. How's that going to work out? That's like spousal envy, when one of them retires and one of them doesn't. But the other side of it is don't just retire, just to retire. Yeah, make sure you are financially able to retire and you're going to have purpose. That's my first topic. What's the second topic?

Andrea Brannon, CFA®-IF:

It is investment risk.

Christian Cyr, CPA, CFP®:

Ooh.

Andrea Brannon, CFA®-IF:

Yeah, and income planning kind of a twofold thing.

Christian Cyr, CPA, CFP®:

All right.

Andrea Brannon, CFA®-IF:

So a lot of times over the years we've had people come in and we look at what they're invested in. Even in their 401ks they are investing like they're 25 years old in a lot of cases. So that is one of the number one things we want to look at Five years before and five years after retirement. This is what we call our danger zone. So we don't want you to be investing like you're 25 at that point. We need to put some safeguards.

Christian Cyr, CPA, CFP®:

We've had two people like that just recently and, of course, recently. This is what April 8th 2025. Market's way up today, but we've seen this tariff thing just drive down markets almost 20% from their high. Two people in particular one is 71 years old and one is like 64 years old. One of them has 90% of their money in the stock market. That's not a good recipe for most retirees.

Andrea Brannon, CFA®-IF:

No.

Christian Cyr, CPA, CFP®:

It's not. And then they call you and they say, oh my gosh, I want to transfer my assets over to your firm because I want to go into the AIM retirement system, but now the market's down 20%. What do I do? You should never have been in that position.

Andrea Brannon, CFA®-IF:

Exactly.

Christian Cyr, CPA, CFP®:

That's a great one Investment risk.

Andrea Brannon, CFA®-IF:

Yeah, and even if they're in a target date, sometimes they don't even pick the right one, because even target dates can be too aggressive.

Christian Cyr, CPA, CFP®:

Yeah, I agree.

Andrea Brannon, CFA®-IF:

So that is one of the number one things. And then income planning. You know everyone thinks I'm going to retire at 65 and start my Social Security, but that isn't always the way to go, and so we need to look at how we're going to replace that income. And Social Security isn't even going to replace all your income, even if it was what your plan was. So you need to have another way to make up that income and have a plan in place.

Christian Cyr, CPA, CFP®:

A hundred percent. How many people walk in and say I'm going to retire and start my social security, yeah. Or even worse, how many people walk in for the first time and say I'm going to retire and I already started?

Andrea Brannon, CFA®-IF:

my social security, yeah, and a lot of times they don't realize that there's a limit on what they can earn at that point too. So we've also had that issue, so investment.

Christian Cyr, CPA, CFP®:

Yeah. So investment, risk and income planning two big things.

Andrea Brannon, CFA®-IF:

Yeah.

Christian Cyr, CPA, CFP®:

When people come in and say I've already started my social security, I just bite my tongue.

Andrea Brannon, CFA®-IF:

I know, Because I'm like what were you doing?

Christian Cyr, CPA, CFP®:

Like that's one of the biggest things we help people with.

Andrea Brannon, CFA®-IF:

Well, and when we're doing a plan, if we can't, you know, optimize social security, that puts a lot of limits on what you can do in their plan. A lot of times that can make the biggest impact.

Emma Bean, CFA®:

And if they're already collecting income. It limits our ability to do things like Roth conversions in those golden years. Five years after retirement is when your income's super low. You're in the lowest tax bracket you've been in for a while and we can start to do the heavy lifting in those five years to set you up for success and have that income turned on and the rest of it is a lot easier.

Christian Cyr, CPA, CFP®:

It flies in the face of. I told Brooke the other day I'm going to write a book. Right now all I'm doing is just writing down the table of contents. And the table of contents keeps getting bigger and bigger and bigger and bigger. But one chapter is dedicated to what I call the perfect retirement, and I've, unfortunately, been investing for 30 years and helping people with retirement for over 20. And I finally have found what I think is the perfect retirement, and we see it on a daily basis and we'll talk about it later. But essentially it means you don't have to worry about things, and that's a great point, Emma, because when you start putting 90% of your portfolio in stocks the year before you're about to retire or you do damage to your potential social security plan, you ruin the perfect retirement.

Andrea Brannon, CFA®-IF:

It's not an option anymore, and one of the number one things that you used to talk about at seminars was what happened to your dad right before retirement. And what happened he couldn't retire right away, like he had planned on it, because he had to wait for it to come back.

Christian Cyr, CPA, CFP®:

It's a retirement ruiner potentially, and especially when you look back, because the last 14 out of the last 16 years the stock market's been up and so we've been on a really good run and people just assume well, it's just going to keep on going like that. And how many people do we catch just in the nick of time?

Emma Bean, CFA®:

yes, there's been multiple just in the last couple months that come in with 100 stocks and we're like whoa, you need a dial back, you're retiring next year and they've thanked us because in the last month they would have lost a lot of money.

Christian Cyr, CPA, CFP®:

It's like they come in they say I'm riding on a motorcycle, I've got no shirt on, there's no seat belts on a motorcycle and it's been working for the last 20 years.

Emma Bean, CFA®:

We're like no, it's been good for 20 years. But.

Christian Cyr, CPA, CFP®:

Get a sedan, put a seatbelt on and do it before you crash. And then the market crashes and they're like thank God, I had airbags Exactly.

Andrea Brannon, CFA®-IF:

Yeah Well, and that goes perfectly with what the article I had found in the Wall Street Journal. It was called America's retirees are investing more like 30-year-olds, and part of that is because of what you said. There's been this great run where they haven't seen a lot of negative market activity since like 2008. So people are just feeling real confident and keeping everything in there Too confident. Too confident. Nearly half of Vanguard 401k investors that are actively managing their own 401ks. They are over the age of 55. How much do they have in their stocks?

Christian Cyr, CPA, CFP®:

in their portfolio. Okay, I think that the so that's 10 years from retirement, basically give or take, Well depending, yeah. All right, I would say that based on a target date fund. I would say that a target date fund for a person 10 years from retirement, would have about 65% in the stock market.

Andrea Brannon, CFA®-IF:

So I would have guessed over 65% and I looked up a 2030 target date right now?

Christian Cyr, CPA, CFP®:

Okay, yeah.

Andrea Brannon, CFA®-IF:

Has 60% stocks and 40% bonds.

Christian Cyr, CPA, CFP®:

And that's technically five years from retirement. So I think, like I said, I think if the person was 10 years away from retirement, the typical target date fund would have about 65 equities, and so it would have been north of 65%.

Andrea Brannon, CFA®-IF:

But they say in this article that you should do 100 minus your age and that should be about your percentage in equities.

Christian Cyr, CPA, CFP®:

Okay.

Andrea Brannon, CFA®-IF:

So that's like the formula that most people use, yeah.

Christian Cyr, CPA, CFP®:

I just feel really comfortable with the portfolio that we set up clients with. It's generally conservative compared to most. A lot of advisors out there are putting their clients in a 60-40 portfolio and that's okay. It depends on how much money you have and everything. And then there's this diabolical conflict where people who haven't saved up enough money what do they need to do?

Emma Bean, CFA®:

They need to be in market.

Christian Cyr, CPA, CFP®:

They need to be risky right and have growth in their portfolio. Those are the exact people who can't afford to have that major downfall. So it's always a one-on-one situation. But for me, as I sit here and think about hundreds of families that we're trying to take care of in retirement, a 50% allocation, maybe just north, 55% feels, really good.

Christian Cyr, CPA, CFP®:

It just feels like the right combination where you're still making money. You know bonds make money too Right. But I always feel like the target date funds and I've talked about this. I think the target date funds, in my personal opinion, towards the end, like that 2030 fund, to me it feels just a little bit too aggressive. That's just my personal opinion.

Andrea Brannon, CFA®-IF:

Especially if you don't have the income planning along with it, where you have a certain amount set aside for your income.

Christian Cyr, CPA, CFP®:

All right. So we've talked about the timing of the retirement. Decision is a big mistake that a lot of people make. We've talked about the investment risk. Too much is sometimes often something we see a lot. And then we've talked about income planning, maybe putting the cart before the horse and not getting income planning right.

Emma Bean, CFA®:

I think income planning is what you should leave to the advisor which brings up social security Right along with income planning.

Emma Bean, CFA®:

You know social security is typically what we see as the largest income throughout a retiree's remaining life. So this is a huge decision I would argue maybe the biggest decision that a retiree has to make in those first five years after retirement. We do see a lot of people come in and say I'm retiring at 62 and I'm going to collect social security right away. And there's even people that don't understand that you can actually wait after you retire and wait to collect. Some people think those two go hand in hand and they don't.

Christian Cyr, CPA, CFP®:

Yeah, they don't even think it's an option.

Emma Bean, CFA®:

Right, and this is something that has to be planned out for you and your spouse, in conjunction with all of the other things that we have planned for you. Maybe you think, oh, at 62, I'm going to collect, I'm going to get what I'm owed from the government and I'm going to start collecting as quickly as possible. Which?

Emma Bean, CFA®:

we see a lot but, like I was mentioning earlier, that eliminates some opportunities that we have when it comes to a Roth conversion or things that in, you know, in those first five years of retirement, like I said, your income is so low that we have opportunity to convert at the lowest tax rates right now and not have to worry about it later in life.

Christian Cyr, CPA, CFP®:

By the way, my book that's another chapter, social Security.

Andrea Brannon, CFA®-IF:

Your future book. It's going to be war and peace.

Christian Cyr, CPA, CFP®:

Well, I just can't wait to write it. I'm going to have to retire for a year to write it. But yeah, again it goes back to you're doing a lot of things to harm your retirement when you make the wrong social security decision. We've done a lot of topics on social security here and they get a lot of views, but the one thing, the one statistic and I hope this doesn't, I don't think this steals your question today the one article that we brought out is that 90% of people get the social security decision wrong and you get into a lot of well, is social security going to be around and things like that, but generally speaking, 90% of retirees get it wrong.

Christian Cyr, CPA, CFP®:

And so that is clearly one of the top five mistakes that retirees make early on in their retirement.

Andrea Brannon, CFA®-IF:

Well, because people don't take into consideration their longevity, they all assume they're not going to make it to age 90, but just statistically that's not true.

Emma Bean, CFA®:

So. So, before I get into any of the specifics, let's do the guess, the number game, so I don't give it away. So my question for both of you is how much higher is your social security benefit if you collect at age 70 versus if you start collecting at age 62?

Andrea Brannon, CFA®-IF:

Is this a percent higher this?

Emma Bean, CFA®:

is a percent higher. So if you're looking at the amount you'll collect at 62 versus age 70. This to me, was a shocking number and, I think, something that most retirees probably don't realize, because we do see a lot of people collecting at age 62.

Christian Cyr, CPA, CFP®:

Showing your math this answer is why people hate me. Okay, I would say 54%.

Emma Bean, CFA®:

Okay, the correct answer is 77%.

Christian Cyr, CPA, CFP®:

Wow.

Emma Bean, CFA®:

So I actually went through some of our clients' actual Social Security amount. So this is one of our clients here.

Andrea Brannon, CFA®-IF:

I was just thinking double.

Emma Bean, CFA®:

Starting at age 62. So double would be. You know that would be.

Christian Cyr, CPA, CFP®:

Yeah, yeah, wow, 88% increase.

Emma Bean, CFA®:

So, starting at 62, you'd be collecting $1,200. We're talking a thousand dollars a month difference in income just for one person. The important thing, too, to keep in mind with this is not only is this your benefit, but this can also significantly affect your survivor benefit for yourself.

Christian Cyr, CPA, CFP®:

That's like my number one thing we always say your wife, the guy's going to die first and they're thinking I got to get my social security back. I got to get my social security back, and they're not thinking about the true impact. That's what I always say about it.

Andrea Brannon, CFA®-IF:

I was picturing these numbers and trying to decide if it was 67 or at 62 that I could remember these numbers, Because I know I've seen this but I can't remember where in the stage it was. I know it increases a lot more towards the end, but still.

Emma Bean, CFA®:

So on average it's 77, but it can be up to 90% a jump, so almost double for you know, depending on how you paid in. And you know something too to think about. What's the? I would say the biggest excuse we hear for collecting at age 62 is oh, my family doesn't have longevity, I'm going to pass away soon, so I need to start collecting early. But this directly translates to your survivor benefits. If you're giving your spouse an extra thousand dollars a month, that's a huge difference when it comes to income.

Christian Cyr, CPA, CFP®:

I've said I will go to my grave saying this America has been force-fed the wrong perspective on social security. Everyone, even the calculators, you'll collect more if this, you'll get more of this. I'll get my money back sooner if this the perspective on Social Security. On my tombstone it's going to say Social Security should be about this maximizing your chances of not running out of money.

Andrea Brannon, CFA®-IF:

Yeah, well, just the words they use. They say early versus delayed.

Emma Bean, CFA®:

Yeah, so that just sounds negative yeah. The early retirement sounds great, it's just guys, especially these alpha males.

Christian Cyr, CPA, CFP®:

They're like I've got to get my money back from Uncle Sam. They've screwed me out of it for 40 years and I got to get it back as soon as possible. It's like no, no, no, no, no. You're sitting in a retirement specialist's office not to maximize your social security. You're sitting in a retiree specialist's office to make sure you have 100% chance of retirement success. Reverse the perspective. Reverse it. Great topic. I love that. I feel bad that we both got it wrong so bad.

Andrea Brannon, CFA®-IF:

I know my problem was not remembering 62 or 67 was the number, because I knew either way you want to wait, all right.

Christian Cyr, CPA, CFP®:

So the last topic we're going to talk about today is withdrawal strategies, and I just made a video. Brooke and I made a video about the difference between a financial generalist and a retirement specialist, and I think the big thing it comes down to is withdrawal strategy and, as I said, I have a lot of information on this. But this is the reason we made that video and this is what I wrote down. This is the area of retirement, I believe, that adds the most value to a person's retirement. It's the area of retirement that makes you say I need a retirement specialist, not an investment journalist, which is exactly what that video was about. It is the area of retirement where, I believe, real retirement advisors show their face and show their value. It is the area of retirement where you really add significant improvements to your retirement plan. Withdrawal strategies really focus on these two things minimizing taxes and minimizing sequence of risk sequence of return risk and a lot of times people don't know what that means. It's essentially saying you don't know what the stock market is going to do for the next 30 years. To do for the next 30 years.

Christian Cyr, CPA, CFP®:

If you would have retired in 1929, you were about to face the worst 30 years of the stock market, unbeknownst to you. You had the Great Depression, and the 40s and leading up to World War II were just not very good times for the stock market. And then World War II happened and we bombed half the world and we revolutionized America for the stock market. And then World War II happened and we bombed half the world and we revolutionized America and the stock market took off. Right, it turns out. Now this is not question of the day, guess the number game, but this is the best 30 years would have been if you would have retired in 1970. You would have seen the best 30 years. Okay, 1970, you would have seen the best 30 years. That is sequence of risk return. So average age of a person who retires at our firm is 63.8. That means you have 30 years where you have to make this stuff last. 30 years of risk. What's going to happen in 30 years?

Christian Cyr, CPA, CFP®:

A bunch of new presidents. Yeah, you're going to see probably four major stock market crashes. That is a lot of time, and so an effective withdrawal strategy is shrinking that time of risk, and that goes back to that perfect retirement. One concept is, like I pointed out here is mailbox money. We talked about income planning. Imagine if you could just have risk in your retirement, not for 30 years but for, let's say, yeah five to 10 years.

Christian Cyr, CPA, CFP®:

If I have a million dollars in my portfolio and I say make it last for a million years, you know? Think about a car. All right, let's say one of the rules, the laws of the land, was that the day you retired you had to buy one car and it had to last for 30 years.

Andrea Brannon, CFA®-IF:

Yeah, good luck.

Christian Cyr, CPA, CFP®:

Will that happen or will it not happen?

Andrea Brannon, CFA®-IF:

No way.

Christian Cyr, CPA, CFP®:

The perfect retirement is about saying look, you only get one car for the rest of your life, but it only has to last for 10 more years.

Andrea Brannon, CFA®-IF:

Right. You always say that you give me this amount of money. I can get this 10-year gap covered with. You know you can wait for Social Security. You can wait to start mailbox money. I can make this money last for that time frame.

Christian Cyr, CPA, CFP®:

We're not allowed to say guarantee in this industry, right, right. So I can't say I guarantee that I can make a million dollars last for 10 years.

Andrea Brannon, CFA®-IF:

Right.

Christian Cyr, CPA, CFP®:

But I'm thinking that in my head. Okay, and so that's the idea of a proper withdrawal strategy. Yeah, it involves things like having a bucket of bonds, so this picture here is red Bonds.

Christian Cyr, CPA, CFP®:

Hey, I need a distribution. Well, if you look, you've got social security and mailbox money that starts generally at age 70. That means at age 70, if you have the perfect retirement, you're not taking money out of your investments. We've set up a withdrawal strategy that is basically saying all the withdrawals you need are guaranteed, and oh, if you want to take your wife on an anniversary trip, you need an extra $15,000, we'll take some out of those bonds Yep exactly.

Christian Cyr, CPA, CFP®:

Another thing about withdrawal strategies is that taxes we are going to in that five to 10 year period, pay all of your taxes right now. We're going to pay them up front. So not only are you 70 and getting guaranteed income, but your taxes are next to nothing. We had a client in the office this week last week, and we showed him His tax bill is about $12,000 to $13,000 a year for the rest of life. This guy's a multimillionaire. He's paying less than $15,000 a year in taxes. Right, the only thing that's getting taxed is his social security, for the most part.

Christian Cyr, CPA, CFP®:

Yeah, so you're. You're basically with the withdrawal strategy. You're thinking about taxes. Which bucket do I take stuff from? Do I have extra money on the sidelines in case I need it for bonds? Do I have my guarantees in place? This is what withdrawal strategy is. This is where that's going to be the biggest chapter in the book the perfect retirement, and it all is based around withdrawal strategies. Now let me ask you guys, if you did have to buy a car that was going to last 30 years, what would you buy?

Emma Bean, CFA®:

Hmm, a Toyota.

Andrea Brannon, CFA®-IF:

Hyundai right Because they got a 100,000 mile warranty.

Emma Bean, CFA®:

Don't Toyotas have a 200,000-mile warranty?

Christian Cyr, CPA, CFP®:

I don't think so. Maybe I was looking at it because I chat GPT'd. What are some common withdrawal strategies in retirement? And again, these are the things that most people don't think about. These are the things that a common advisor doesn't tackle like we do. But I don't like a lot of them. A lot of the solutions are not good, like here's one that I despise. A common withdrawal strategy is that in times when markets go down so say the market goes down 40% in a given year, so say the market goes down 40% in a given year it's called a dynamic spending strategy. Don't take money out or reduce the amount of money you take out of your investments in years when the market goes down.

Andrea Brannon, CFA®-IF:

That's what I was reading too.

Christian Cyr, CPA, CFP®:

How realistic is that it?

Andrea Brannon, CFA®-IF:

sounds good in theory. Like if you're doing the 4% theory of taking out. You can take out 4%. They say to reduce it to 3%. So you're living on less, which how realistic is that? How many people do we know that? Come in that they could.

Emma Bean, CFA®:

Realistically spend that much less. The market's been down the last week or month. You still have the same expenses that you have to cover during that time period.

Christian Cyr, CPA, CFP®:

I mean, there was a guy who was a lot smarter than I did. I think it was 39 years ago. He came up with the 4% rule. It's a great rule. He's like if you have a million dollars, you can take out 4% a year and you'll be okay. Yeah, not only is that perhaps not realistic, I mean it forces people to calculate that they need $3 million to retire.

Emma Bean, CFA®:

Right right.

Christian Cyr, CPA, CFP®:

It's also assuming that people want to leave $3 million to their kids, which most people don't. No, and it's just not a good way to plan because you can't always take out 4%. And so I think the perfect retirement, as I just explained earlier, is a better way to approach retirement. When we're looking at a retirement plan, we almost never look at withdrawal rates. We're looking at income stability. If you say to a common person, you know your withdrawal rate is 6%, and kind of frown at it, what does that mean to them? Right, but if I say that your income is 90% guaranteed for the rest of your life, yeah, that means a lot more to them.

Christian Cyr, CPA, CFP®:

They get that. It makes sense and that's a common sense approach and just makes so much more sense. Another one I don't like, because we talked about it earlier, is working longer. That is certainly a good way to shrink the 30 years to 28 years or 25. But one of the first things we said today was working is generally not healthy. The whole idea is to retire. So sure, I've got a great way that I can maximize your retirement success. Never retire, but who wants that? No? So I think that the ways that we do withdrawal strategies are better reducing taxes and minimizing the risk that you have, not in your portfolio per se, but with the time. And what's the coolest thing about the perfect retirement? Because you got half your money in the stock market and you never touch it. And where do we put it? Where do we put the stocks? In a Roth?

Andrea Brannon, CFA®-IF:

Yeah, they're going Roth, ideally.

Christian Cyr, CPA, CFP®:

So your stocks? Yeah sure they're going to have bad years, but they're going to grow.

Emma Bean, CFA®:

I mean that 30-year period, 1970, 1999, annual return of the stock market was almost 15% per year. Yeah, and the best part is, once it's in your Roth you have no capital gains tax and no tax when you take it out.

Christian Cyr, CPA, CFP®:

Yep, yeah, I like that. So that's withdrawal strategy. So would you add anything else about withdrawal strategies before we? No, I think we covered it All right. So let's summarize. I said, number one retirement problem in the first five years is the decision on when to retire too soon or too late.

Andrea Brannon, CFA®-IF:

Yeah, you said your investment risk and having a good income plan.

Christian Cyr, CPA, CFP®:

And you said Social security timing.

Christian Cyr, CPA, CFP®:

And I said I tied it all together with withdrawal strategies. These are the top five things that people get wrong. Don't be a 62 year old with $3 million in your 401k and say I've just got to work one more year so I can pay my daughter's college off. Say to yourself I want to be with my wife an extra year because she's a teacher and she's retiring. Don't be a guy that says I'm going to take my social security the day I retire because that's what I'm supposed to do. Don't be a guy that says I need to make my money last for a long time and how am I going to do that without using somebody who specializes in figuring out that? Answer. Top five things that retirees the pitfalls of retirees do in the first five years. Brooke, is this episode 33?

Brooke Fay:

32 32.

Christian Cyr, CPA, CFP®:

32 podcasts and you've been on most of them Most of them. Yeah, brooke's been here for every single one of them. Brooke, what was your favorite podcast ever?

Brooke Fay:

I love them all.

Andrea Brannon, CFA®-IF:

They're all her children. She's the one that's doing all the hard work.

Christian Cyr, CPA, CFP®:

All right, we'll see you guys on the next podcast. Thanks for listening today to the Retirement for Life Show. See you in two weeks.

Outro:

Investment advisory services provided by Sear Financial Inc. Sec registered investment advisor. All content on this podcast is for information purposes only and should not be considered investment, legal or tax advice. Material presented is believed to be from reliable sources and no representations are made by our firm as to another party's informational accuracy or completeness.

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Christian J. Cyr, CPA, CFP®

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Andrea Brannon

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Emma Bean, CFA

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