How to Glide into Railroad Retirement

Transcript:

When it comes to investing for retirement, learn why the glide path isn't always the best way forward for Railroaders.

Welcome everyone to another edition of the Highball Advisors, railroad retirement whiteboard. My name is John McNamara, Highball Advisors. And what we're going to talk about today is you know, planning for retirement, but the investing for retirement, how should we do that? What, what's the right way. What's going to be the most beneficial way for me as a railroader to invest in, grow my money, right through mostly through 401ks. How are we going to do that? So at the end, I will have, you know, enough wealth to retire. So let's just go through what I talk about the term is the glide path, right? The glide path, right? So the way the industry thinks about it is this is just, you know, glide path. Nice, easy way to just kind of ease your way into retirement. We'll just kind of slowly go down and just, you know, reduce our risk as we go into retirement.

Right? So it's kind of, we'll be aggressive and then we'll work our way down as we get closer to retirement. So it's a formula here, right? Basic asset allocation, like I said, based on the number of years you have retirement. So let's say if you have 30 years before retirement, you know they want you to be more aggressive in your investments. You know, could you, you can take the ups and downs in the markets a little bit more cause you have a lot of time, but as you get nearer to retirement, they wanted to keep moving you closer into a bonds, safer investments that aren't going to be risky, right? Because they're saying, well, this is your nest egg and you need it for retirement. So therefore we want to protect it because we don't know if the market's going to come back again.

If it goes down two years before retirement or one year before retirement, right. So that's the thought behind the glide path, right? So now, now why use a glide path? Right? So it's, it's about risk, right? It helps reduce the risk as you get near to retirement, right? So you put it in this glide path and you know, you're growing wealth really in the early years and you're building up that nest egg and you're just taking, you're taking chips off the table, so to speak as you getting closer to retirement. So you're taking that risk away. Right. And what the 401k providers use is these target target date funds. You probably seem like target date 2025 or 2030 or 2035. And what they are is those asset allocations. And the, every year they get adjusted a certain percentage in, you know, large cap growth, large cap value and versus bonds.

And they just keep changing that percentage every year. So it's really this right? It's like just set it and forget it. It's like, well, I plan on retiring in 2035, I'll use the 2035 target date fund. Right. So, I mean, it's simple as that. Right. And you never have to worry about life again, it's that easy. Right. But let me propose something little bit different here for, for a railroaders glide path. Okay. Because what if, what if these are all trying to achieve here and, you know, rightly so, but these really, to me, aren't for railroaders in that this is for people who are going to need additional retire, guaranteed retirement income when they retire, right? So normally they'll retire and say, I have social security, but Jesus, you know, I can't live on the, you know, $3,000 a month, let's say social security is going to pay me or something like that.

You know, they can go out and buy an annuity or something like that. Or you have to come up with some withdrawal strategy of your money which is, you know, that's, that's a challenge. That's not guaranteed by any stretch of the imagination. So that's why they put it this way. So maybe you can go out and purchase some more guarantee, retirement income, but however railroad is different. Like I was saying, so what would be a railroaders? This is the important part to understand for the railroaders Glidepath is what would be their retirement income stream. Well, that's tier one. Okay. Which is similar to social security. So that's kind of checking on that, but then you have that tier two , which is another source of retirement income and perhaps some of you might even have a pension. So that might be three sources of guaranteed retirement income.

Right. So now if I understand how much guaranteed income I have, right. And how much I'm going to need in retirement, all right. I don't need to be withdrawing my risk. Right. Because that's what I would throw my risk. It all you have to also remember. Yeah. It's safer, but you're also reducing your chance growing, growing your wealth. Right. So that's the trade off reduce risk versus growing the wealth. So what I'm saying here is by having these three sources and knowing what your retirement looks like, you can grow, gives you the opportunity to grow your wealth a little bit more. So the strategies that I would look to for railroaders is, you know, especially railroads 30 or more years, you don't need a glide path. All right. You shouldn't be in there. These funds really I've yet to meet a railroader with 30 or more years who can't really cover their expenses in retirement.

You know, obviously, you know, outside of vacation and Monaco every year or something, I don't know, but very 30 or more years probably need no glide path. And then less than 30 it's case by case example, right. Maybe somebody has just done five or 10 years. Well, you know, five or 10, five years or 10 years, tier two is really not going to be enough to significantly adjust your retirement income. So maybe, maybe this glide path might be better. So like I say, everything's case by case, but I just wanted to present this to you start thinking as railroaders on this glide path and taking this opportunity now, right. These years when you're growing your retirement income to make sure that it's positioned properly. So it found this interesting. Let me know feel free to reach out to me if you want discuss a little bit further those getting close to retirement, you know, feel free to do my boarding for railroad retirement. See how you're doing on your on your goals for retirement. And please subscribe to my YouTube channel. I really do appreciate that. And as always, everyone, please stay safe, stay on track and take care so long, everybody.  Bye.

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