Steadfast Wealth Planning Podcast

Mastering the Three-Legged Stool: Building Retirement Income That Lasts

• Cody Stansell • Episode 5

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How Do I Create A Retirement Income Plan That Lasts?

Retirement planning goes far beyond simply saving money—it requires a strategic approach to creating sustainable income that lasts throughout your golden years. In this enlightening episode, Senior Wealth Advisor Cody Stansell breaks down the essential components of building retirement income that withstands the test of time.

At the heart of effective retirement planning is understanding your own investment personality. Are you the conservative type who values predictable income and minimal market fluctuations? Or do you have a more aggressive mindset, comfortable with market volatility in exchange for potentially higher returns? Cody emphasizes that neither approach is inherently right or wrong—what matters is creating a strategy aligned with your personal comfort level and needs.

The conversation explores the classic "three-legged stool" approach to retirement income. First, Cody offers powerful insights on Social Security timing, revealing how delaying benefits can increase your monthly payments by approximately 8% for each year you wait. Second, he discusses the pros and cons of annuities and pensions as guaranteed income sources, highlighting when they might (or might not) be appropriate for your situation. Finally, he examines how to strategically withdraw from investment portfolios to complement your other income streams.

Perhaps most compelling is Cody's breakdown of "bucket planning"—a methodology that divides retirement savings into three distinct timeframes: a conservative bucket for immediate needs (24-36 months of expenses), an intermediate bucket for the medium term, and a growth-focused bucket for long-term needs. This approach allows retirees to sleep peacefully during market downturns while still positioning a portion of their assets for the growth needed to combat inflation over decades of retirement.

Want to create a retirement income plan tailored to your unique situation? Visit Steadfastwealthplanning.com for a complimentary consultation or call 469-606-2040. Smart planning, Christian values, a life well lived.

To learn more about Steadfast Wealth Planning visit:
https://www.SteadfastWealthPlanning.com
Steadfast Wealth Planning
5550 Granite Pkwy, STE 270
Plano, TX 75024
469-606-2040

Speaker 1:

Welcome to the Steadfast Wealth Planning Podcast, where faith and financial wisdom come together. Hosted by Cody Stansel, owner and senior wealth advisor, we provide comprehensive Christian-based financial planning to help families, individuals and business owners build a life they're proud to live. From investment management and tax planning to preparing for retirement, we're here to guide you with clarity, integrity and purpose. Let's get started.

Speaker 2:

Saving for retirement is only half the journey. Building a plan to make money that lasts is where the real strategy begins. Here's how we help clients create lasting income. Welcome back everyone. I'm Sophia Yvette, co-host slash producer. Back in the studio with Cody Stansel, senior Wealth Advisor for Steadfast Wealth Planning. Cody, how's it going?

Speaker 3:

today. Hey, sophia, I'm doing well. It's springtime, sun's out. I'm actually going to a Texas Rangers game this evening, so life is good right now.

Speaker 2:

I appreciate you asking oh, lots of fun, yes absolutely so for our listeners who may not know, how do I create a retirement income plan that lasts?

Speaker 3:

great question. It's all about knowing yourself and your personality type around investments and income, and what I mean is there are some folks that are more conservative and want a fixed income stream and don't want as much market fluctuations with their investments and with their retirement nest egg and rightfully so, there's nothing wrong with that Whereas other folks are slightly more aggressive. They understand the market, they're okay with their balance going up and down and they don't want to lock themselves into just a fixed income stream in retirement, and so there's no right or wrong answer. It's just knowing what personality type you are, and what makes sense for some clients may not make sense for other clients. So we run through an exercise where we have this conversation with clients and kind of gauge where their personality type is, but we want to create an income plan. We have software aggregating all of your income sources. So in general there's about three different sources of income.

Speaker 3:

You'll hear a lot of folks call this the three-legged stool in our industry. One is Social Security. So having a plan around when to take social security is really crucial. You can take it as early as 62, or you can delay it as late as 70. But for every year you delay. It's about an 8% increase in your monthly income, right? So if you're entitled to $1,000 a month at age 65, but if you wait to take it at 66, one year later you'll receive about a thousand eighty dollars a month approximately. Right, the mass on exact, but it's around there. I know this doesn't sound like much 80 bucks more a month, but that's every month for the rest of your life, right? And that's just delaying it one year. So you can imagine if your benefits even higher if you delay it two or three years and you live another 30 years. That does add up significantly over time. Our opinion on Social Security is don't take it until you really need the cash. Don't just turn 62, you're still working or maybe you just retired but you don't really need the income, and then you just turn on Social Security and that money just goes into your savings account. It's taxed, it's taxable income to you, right? So don't just turn it on just for the sake of turning it on. It's when you need that income. Then let's obviously consider turning it on. So it's having a plan and having a strategy before social security.

Speaker 3:

The second leg of that three-legged stool is an annuity or a pension, kind of like what I was talking to earlier. Three-legged stool is an annuity or a pension, kind of like what I was talking to earlier. Some folks don't like market volatility, so purchasing an annuity may make sense for them, doesn't make sense for everyone and you definitely have to know what you're purchasing before pulling that trigger, because there's generally no going back once you purchase an annuity after a certain period of time. But basically an annuity is purchasing with a lump sum of your balance, purchasing a monthly income stream to pay you every month for the rest of your life. So generally there's no market fluctuations, but there is a. You know, with $300,000 of my money, I can purchase $2,000 a month for the rest of my life. For some folks that sounds great, for some folks, oh, you know, I kind of feel handcuffed. I can't take more than two grand, but I can't take less than two grand, you know. So it's really.

Speaker 3:

Once again, this depends on somebody's personality whether that makes sense for them or not. And then the last stool, the third stool, is your investment portfolio, your 401k. This is where lining up all of your income streams, adding them together, seeing how much you want to spend in retirement versus how much withdrawals you need from your bucket of money, we'll have a fulfillment retirement and that's really what we gauge with our software right, lining up your income expenses and how much of your retirement bucket do we need withdrawal from. So having an income plan that lasts is all about knowing your options, knowing how much of your retirement bucket do we need withdrawal from. So having an income plan that lasts is all about knowing your options, knowing how much you want to spend all of your other sources of income and deciding if you want to fill that income gap with normal withdrawals from your retirement portfolio or purchasing an annuity with an income stream makes sense for you.

Speaker 2:

So, cody, what is bucket planning and how does it protect your retirement income?

Speaker 3:

Yeah, absolutely so. Bucket planning is most folks just think of their money as one bucket of money. Right, I have a 401k. It's a million bucks. Okay, that's one big bucket and some of it's aggressive, some of it's conservative, but you don't really know and it doesn't really all make sense. And so when the market goes up, market goes down, your emotions are really tied to that one buck in money.

Speaker 3:

What we want to do is divide that bigger bucket into three different buckets. The first bucket we want you to have is about 24 to 36 months of income in a very conservative portfolio. Doesn't really go up with the market, doesn't really go down for the market. That is what we're sending you every month and we know exactly what it's going to be. That way you're not lying awake in bed at night when the market goes down wondering if you'll be able to afford the next monthly payment that we send you. So that's the first bucket, a very conservative bucket. And then we have an intermediate bucket. That's another about 24 to 36 months of income. Which real math if you need $5,000 a month from your portfolio, 24 months is 120 grand, 36 months is about 180 grand. So we want you to have about 120 to $180,000 in that intermediate bucket. It's invested a little bit more aggressively than the conservative bucket, but not all stock market exposure. It's not fluctuating that much and that way we can touch it if we need to, but it's really going to keep up with inflation a lot more.

Speaker 3:

And then that last bucket is your growth bucket, and it's not for today. It's for 5, 10, 20 years from now. Where we need to make money, we need to keep up with inflation. It's going to go up, it's going to go down, it's going to go up, it's going to do that thing. But once again, it's not for you today. It's for 2035, ms Smith. It's not for 2025, ms Smith, miss Smith, it's not for 2025, miss Smith. So I made this analogy earlier. But it's kind of like you have a house and you don't plan to sell that house within the next decade. You care much less what your house is worth. Month to month you don't really care. So it's kind of that mentality. It lets you sleep at night, while also keeping up with inflation and making sure that 20 years from now you'll still have these buckets of money for you.

Speaker 2:

Amazing. And so one final question for you today, cody how do you protect your retirement income against inflation?

Speaker 3:

Yeah, great question. Inflation, as we all know, is just the cost of goods going up, and we've seen that drastically in the last four or five years, right since COVID. The biggest thing a lot of folks. It's counterintuitive if inflation on average is about two and a half percent per year. That's what history tells us. The last 80 years or so. Once again, the last four years, it's been much more than that. Recent studies come out. Just cost of living is 22 percent more than what it was in 2021.

Speaker 3:

Just bread, eggs, gasoline, housing, whatever. It may be Right, so I know it's been a lot more here recently, but that's where, if you just had your money too conservatively invested let's say you have it in your bank account at 3% in a high yield savings account Well, once again, inflation on average is about 2.5% per year. So after you even pay taxes on that 3% from your bank, you're not really getting anywhere, right? You're not making money. You're just barely keeping up with next year's cost of bread and eggs.

Speaker 3:

And so the best way to combat inflation is actually stock market exposure, because what is inflation? Inflation is actually stock market exposure Because what is inflation? It's Apple coming up with their new iPhone and they charge $200 more than last iPhone. Right, that's cost of living going up, and so it's. But when you own stocks and your actual shareholder of Apple, you know they charge more, which causes inflation, but once again you as a shareholder, the stock price goes up. So actually owning stock market exposure is the best way to combat inflation. If companies raise their prices, they're making more and therefore if you own that company's stock, you're making more as well, so that's the best way to combat inflation.

Speaker 2:

Love it, Cody. We'll catch you on the next episode. Have a fantastic rest of your day.

Speaker 3:

You too.

Speaker 1:

Thanks for joining us on the Steadfast Wealth Planning Podcast. Ready to take the next step in your financial journey, visit steadfastwealthplanningcom for a complimentary consultation or call 469-606-2040. Smart planning, christian values, a life well lived. We'll see you next time.