The Short Game: The Make-or-Break Years Before You Retire

Episode 6 transcripts You're listening to the Retirement Life Podcast, a place where we help you cast a vision for your retirement and take the next steps to live it. I'm Tony Hall here with my co-host Rc Arseneau. And each episode, we'll bring you real stories, honest conversations, and practical ideas to help you build a retirement that's meaningful and life-giving. Let's jump in. Well, welcome back to the Retirement Life podcast. I'm your host, Tony Hall, here with my co-host, Rc Arseneau. RC, last episode we kicked off a three-part series on one of the most important and honestly sometimes intimidating parts of retirement, and that's finances. Uh, if you haven't listened to the last episode yet, I want to encourage you to go back and check that out because we're really building on that this episode. Uh, RC, in that last episode, you you helped us understand our finances better, uh, by comparing it to the game of golf, and honestly, it's super helpful. Um, but we looked at finances thinking about the long game in golf and you kind of left us on a cliffhanger, uh, talking about the importance of the short game and what that is. Yeah. So, that's right. So, the main takeaways from the long game are that first you just need to get in the game, right? take that first swing and then keep that positive momentum going by directing yourself back to the fairway. If you find yourself kind of off track and and when life leaves you in the rough, so to speak, knock it back on the fairway. And while the long game does represent more than half of your financial life, I think a lot of people would be surprised to learn that it's actually right here in the short game that your best retirement outcomes can be won or lost right here. Or even worse, one that would start out positive and then turns into a negative outcome. And and many people completely ignore this short game. M I would guess that some if not several of our listeners haven't reached the short game yet. Um and even if even if they have if they've gotten to that point in their planning uh they may have a lot of thoughts about you know you saying that how important this aspect of financial planning is um I mean we spend a lot of time in the long game. Yeah. So how can you unpack for us this part of the game? Yeah. Well, if you were to ask a seasoned golfer, hey, what's the best way I can improve my golf score? You might think the same thing. You would think, well, maybe they need to work on on their driving the ball long. That's what you spend most your time doing. But no, that's that's not what you're going to hear. They're going to tell you, focus on your short game. Work on their short game. And it's because they realize that it's it's right here in this part when we're getting up on retirement that we have to move from shooting long but being volatile to becoming more precise. And these shots really matter. The the stakes are much higher. And I think many retirees actually understand this just a little too late. And in in fact, in a recent Schroeders retirement survey, 86% of those surveyed said they wish they had started planning earlier. And I think that it's this short game that they were missing. This is the part that they were feeling like they skipped. And this is where a lot of the questions and concerns and and the fears that you mentioned on the last episode actually come up. And the reason is is that this period of the short game is the most fragile. It's the most dangerous years if you will for your entire retirement plan. W can you just take a moment and help us understand um when you know when when is this important in financial planning and then why is it so important? Yeah. So the short game it's this part of the planning process where you're really coming up on retirement. You know, up to this point, maybe you just dreamed a retirement as kind of this general goal, right? But now you're getting much closer and you're going to start daydreaming about specific things you want to do. Do I want to go travel? I I want to start taking on these hobbies, you know? And that'll be one way that you know you're coming up on the short game. This is usually like 3 to five years before your planned retirement date. Ideally, for most people, this is probably around ages 59 to to 60. And why this is so important financially is you're making this major transition from the long game where you're pouring money into your accounts. Next, you're get trying to get to being on the green, but now you're no longer not only not adding to your accounts, but you're going to start taking from your accounts um when you're on the green. And years of study continue to show that timing actually matters in retirement. And specifically what I mean by that is is that retiring right before a serious market downturn can have this incredibly negative impact on your overall plan and your outcome. And so these two years, two to three years before you retire and two to three years after you retire, this is what's most at risk. And here's the challenge is we don't have a crystal ball. I mean, if you retire today, you have no way of knowing if there's going to be a market downturn in three years. So, you need to begin making these adjustments before you enter this dangerous time period. Wow. Well, RC, um here are some comments that we we've gotten from retirement boards that express fear um that people have about this. Okay. So, if the market is not doing well, uh these are some of the things that that that people are are commenting or expressing. Uh first, are people still retiring that uh now that the market is going down? Um or I will never be able to retire now. Uh we we saw you know how will I know if I have enough money? Um and then should I take the risk of outliving my money and retire early? I want to enjoy life while I can. And then uh the last one, I just retired and living expenses are more than I thought. I'm very concerned. So these are real people. They have real emotions and fears surrounding all of this. Can you speak to some of those fears to those types of people? Yeah, Tony, those are great examples. And when I hear people have these fears and and they're expressing them, I can tell that these are folks that are still playing the rules of the long game. Um, and they've not made this transition into the short game. And and really, this is a great time for some of those folks. I would say if you don't have a professional adviser that you're working with at the planning table or on your team at this point, let those be kind of a flag that this is time for you to add someone to that table. But but remember this, the long game, what we talked about is you have plenty of time for risk. You know, you hit your driver off the tea, if you go off into the woods, that's okay. You've got time to get back onto the fairway. But now you're on the verge of retirement. you're getting much closer, right, to the goal, to the flag, and so you don't have as much time to to knock it back onto the fairway. The stakes are much higher, and this is not when you want to be sloppy or unintentional, and and this causes a lot of panic for people, and and they don't really know what to do about it. Yeah, that's that's a good uh analogy. I I'm not this is not an admission of guilt, but I it would be kind of like being close to the green and and launching the ball over the green or something like that, but I've heard I've heard people do that. So, what do you do differently? Yeah. So, here's here's something I want to share um just to give people some ideas on on what they could do. And and I want to say upfront, this isn't meant to be specific financial advice to anyone, but really just to give you some concepts to think about that you can discuss with an adviser. So, think about your retirement like up to this point. And for those of you that are just listening, I've got a picture of water. Um, it's just full of water. And and think in the long game, you've got your portfolio as just one big p picture of water. Um, and what a lot of people do is they'll just take this picture and then they're trying to figure out how much can they just pour out every year once they hit retirement. This is what we're talking about that creates fear. One strategy that you might consider is is what I would call kind of a bucket strategy. Think of instead of one big portfolio, you line your portfolio up into three different accounts. We'll call them buckets, right? Bucket number one, you're just wanting to pour enough into that that's going to last you like your next five years. This is this is what's designed to get you through this high-risk period and we're going to invest that in a very conservative way. And remember, we're doing this before anything bad happens. So, we're protecting some of your income along the way, right? And so, that's what we want to do with this with this bucket number one. Well, from what I know, um, safe investments, you know, they make less money. Um, yeah. And so, is that something that someone should be worried about? Should I worry about it being a safe investment? Would I be missing out by doing that? Yeah. No, that's that's a that's a great point. And the answer is, well, this is why we have other buckets, right? So, yeah, it's true. You don't want to overallocate. This is enough to bridge you through that risk, but that's just enough to get you through years, let's call it one through five, right? But then you do have a bucket number two. Pour some of your portfolio into this. Maybe you you're able to invest this in a little bit more of a balanced portfolio, a little bit more risk, right? And it's designed to get you through maybe those next 10 years. So now you got 15 years of income that are relatively stable, right? And then you've got a bucket number three. This is like 15 years down the road kind of money. This is still kind of long-term mindset. And so imagine what would happen then if the market did do some wiggling and it went down. Well, yeah, your long-term bucket is going to move a lot. Your midterm bucket is going to move a lot less. But that first bucket that was designed for safety, that's what you're taking out of and it's been stable. So, we're not locking in any of these harmful losses that creates this awful ripple effect. Does that make sense? Absolutely. Absolutely. So, we we've covered the long game, we covered the short game. Give us a teaser of what we're going to talk about in the next episode uh about being on the green. Yeah. So, imagine you've done all of this good work on the long game. And I mean, let's be honest, for many of us, this that's the grind. It's more than 50% of your financial life. You're you're scraping to save this whole time. Now you've done the good work of trying to bridge this transition over to the green. Now imagine you've gotten the ball on the green. It's time to retire. You pull your putter out of the bag. You walk up onto the green and you step up to your ball and you get ready to take a swing and look up and realize there's no flag. Like there's no pock there's I don't know what I'm even aiming at. like why am I even standing on this piece of grass? We don't know. So, this happens to a lot of people. They've done all the work. They thought the goal was just to get there and then once they get there, they're wondering, well, what what am I doing here? That's what we're going to talk about. Uh what retirement means, what kind of a legacy you want to leave behind, what does this look like? That's going to be our on the green discussion. That's awesome. That sounds great. Uh we talked a lot in our prior episodes about finding your purpose and and so I'm really looking forward to digging into the conversation of of how your money ties to purpose. Yeah, that it is going to be a great one and it's probably the most important. Wow. Well, thanks for joining us for part two of our three-part series on finances and retirement. If you haven't listened to uh the first episode yet, please go back and do that. We encourage you to to to hear where we're um going with this. It really does lay the groundwork for everything we've talked about in this episode today. So, don't forget on the next episode we'll wrap up this series with a conversation you won't want to miss. Uh if you've found these episodes helpful, share them with a friend thinking through retirement. Also, uh if you're on Facebook, come find us at the retirement life. Until next time, keep dreaming, keep planning, keep living this season with hope. This podcast is intended for general information, educational, and entertainment purposes, and is not intended to provide financial, legal, medical, health, or lifestyle advice. Individuals should seek their own advice from a qualified professional. It is not an endorsement of any particular product, service, or organization. The opinions and views expressed on this podcast are those of the participants and do not necessarily reflect the opinions of the Retirement Life. The Retirement Life and Arseneau Financial are separate entities. This podcast is not to be considered a solicitation for investment or financial planning services through Arseneau Financial LLC.