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Are You Preparing to Smile in Railroad Retirement? Thumbnail

Are You Preparing to Smile in Railroad Retirement?

Video Retirement Financial Planning


What's your plan for spending in Railroad Retirement?

Welcome, everyone to another edition of the Highball Advisors, Railroad Retirement Whiteboard. My name's John McNamara of Highball Advisors. And today we're going to talk about spending Railroad Retirement. You've created all this money, and now you're ready to spend it and enjoy the fruits of your labor, so to speak. So how does that work? Is it a static event? That means I need $70,000 a year for the rest of my life every year on the year. And you can do that through a combination of Railroad Retirement and drawing your portfolio. However, a lot of research has been done on this and David Blanchett did one lately and I'll put down the links on the YouTube channel, did a study on this. And it's all about the retirement smile. And I'll get into that a little bit later, but there's three stages to retirement. It's your early years where you're travel, you're doing hobbies, a lot of things going on, all that stuff. So your spending is increasing there.

And then in the middle is you're starting to slow down a little bit. You're getting a little sedentary, not going out as much, not doing as much stuff, so you're spending is decreasing. All right. And then finally, towards the end of the play, so to speak, the medical expenses are increasing and the spending is going up. So what that does is that, represented here by the yellow line, it increases, it creates that retirement smile. So maybe early in this example, somebody might be spending a hundred thousand dollars a year. And like I said, it's a combination of drawing down the portfolio, and guaranteed retirement income. But however, as they approach 80, they're just slowing down to about only spending $60,000 a year. However, as we get towards the end here, it starts ramping back up to start covering the medical expenses. So that's your retirement smile.

So that's different than, like I was saying before, is when some people say I need in this case, $90,000 a year. That's that purple line. Well, who lives like that? Nobody lives like that. Things go up and down. Life comes along. So this is the way you want to be thinking about it. I mean, this just has life goes on. So what you want to be thinking about as you're planning your retirement, and de accumulating your assets and all those things, is understand your sustainable spending rate. I'm going to spend a little bit more, understand what that number is. Plan for this smile. And then as you plan for this, you can adjust your distributions every month or every year. How much should I be taking out? You can plan for it that way, and then always do your adjustments for inflation. Put that inflation factor in there, because you want to look at that.

So these are the type of things that I look at when I'm working with my clients is working on that dynamic retirement spending. Very, very important. If you're interested in something like that, reach out to me. I have a boarding for railroad retirement process. We go through a lot of this stuff. It's a free process. And if you're nearing retirement, it's very interesting. Gives you a good snapshot of what retirement looks like. Please subscribe my YouTube channel. That's going great. Click on the notifications, get the latest videos. And until next time, everyone, please stay safe. Stay on track and take care. So long everybody. Bye.


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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. Highball Advisors encourages you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Highball Advisors, and all rights are reserved from Highball Advisors, and all rights are reserved.