Retirement Planning Done Right

Finance U Public Finance U
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Originally published at: Retirement Planning Done Right – Peak Prosperity

In this week’s Finance U, Paul Kiker walks us all through the retirement planning process that he runs with every new or prospective client.

Whether you plan to retire someday or already are retired, you really need to hear this podcast because Paul’s approach is comprehensive and probably unlike any you’ve already been through.

The key is running various scenarios based on all financial history starting from 1926 onward. By placing your current situation and portfolio approach on every possible starting year, a “spaghetti diagram” shows you how many of those would have been successful and how many years you would have failed.

If your probability of success is only 50%, but it could be brought up to 95%+ by making some portfolio adaptations, would you do them? I sure would.

This is the essence of how Paul approaches investing; he actively manages risk and keeps his clients looped in every step of the way.

Once the plan is in place and running, does it stop there? No. With changing life circumstances or changing market conditions, the plans are revisited. If nothing changes, they are still re-run every 3 years as a matter of practice.

A retirement plan should be dynamic rather than a one-time forecast, adapting to inflation, market conditions, spending, taxes, family needs, and other changes throughout retirement.

Perhaps the most eye-popping thing for most investors is the impact on future cash needs of changing one’s inflation expectations by even a single percent. Hey, inflation is a persistent compounding function, and it’s going to be headed higher based on rising diesel prices and the recent hot PPI readings.

Those who are going to have the best chances at successfully navigating the next 20-30 years are going to be those who have prudent plans in place, an ear to the ground, and eyes on the changing market conditions.

Timestamps

00:27 – Episode introduction: planning retirement amid expensive stocks, Social Security concerns, and higher-than-official inflation
01:29 – Welcome to Paul Kiker and overview of the retirement/financial planning process
02:33 – Hypothetical scenario (JJ & Jane Doe) and why a full retirement plan analysis is essential
05:51 – Gathering complete client data (beyond just assets) and the planning meeting approach
07:54 – Plan assumptions: ages, retirement goals, 3.5% inflation, income needs, and historical simulation method
09:44 – The long-term impact of inflation on required income and lifestyle
17:46 – Conservative portfolio results: ~51% success probability and historical depletion scenarios
24:08 – Current market valuations vs. history (most expensive on many measures) and risks of passive approaches
29:15 – Switching to moderate growth allocation (~96% success) and the trade-offs of adding equity risk / tactical management

FINANCIAL DISCLAIMER:

The information contained in this video and the resources available for download through our affiliated website are not intended as and shall not be understood or construed as financial advice, nor should be interpreted as a solicitation to sell or offer to sell investment advisory services. No person who currently works for or contracts with Peak Prosperity or Peak Financial Investing is an attorney or accountant, nor are we holding ourselves out to be, and the information contained in the video and on the website is not a substitute for legal or tax advice from a professional who is aware of the facts and circumstances of your individual situation. While Peak Financial Investing is a registered investment advisor, please note that this podcast is not intended to be investment advice.

All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such. We have done our best to ensure that the information provided is accurate and provides what we feel is valuable information. The views expressed are subject to change based on market and other conditions.<

No guests or clients appearing on the podcast receive any form of compensation for their appearance and obtained no other benefit from either Peak Prosperity or Peak Financial Investing.

All investing involves risks including the possible loss of capital. Asset allocation and diversification does not ensure a profit or protect against loss. Please note that out- performance does not necessarily represent positive total returns for a period. There is no assurance that any investment strategy will be successful. All investments carry a certain degree of risk. Dividends are not guaranteed, and a company’s future ability to pay dividends may be limited.

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Retirement Planning amidst a torrent of Inflation? Really? WTF?!

It’s Day 10 of his 40 Day Fast, and Michael Yon is adopting his Japanese Buddhist personality.

It’s a Noble Endeavour, but I suspect that Yon-a-Son is facing a very Long and Winding Buddhist Path to overcome his noxious accumulated very, very Bad Karma from having killed hundreds of people…animals too? He’ll likely be reborn as a ravenous, mindless alligator or crocodile? It’s Just the Way that it is…. As McMurphy said to the Psychiatrist in the movie “One Flew Over the Cookoo’s Nest”: “It ain’t up to me, Doc.”

Speaking of the Buddhist Noble Path towards Enlightenment, Should I attempt do do the “Bodisatva Thang” to Brainwash the rich people on the edifying Benefits of Overcoming the Limitations of Money and Accumulating Lots of “Stuff”?

Or, would this Effort likely be Fruitless and Wasted?
(It may work on the Males; forget the vain, emotional Females?)

Or, maybe, assist the AI’s in trying to persuade the confused Rich People to merge with the AI’s to facilitate the Alien Invasion of our particular Space/ Time Dimension?

The Rich People may be a Hard-Nut-2-Crack? As Trump knows, the benighted plebes need only be induced with an Offer of $5,000 Bucks? Where did the $5,000 Number come from? It wasn’t Negotiated…. WTF?

I say: “F…k. Guilt!”

As the ineffable Canadian Relationship Guru says vehemently: “Stop Being Weak!”

Damn Straight!!!

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Maybe, I should just have 1,000 T Shirts in various lurid colors made in some sweatshop factory in China that read?:

“Fuck Guilt!”

And, then hand them out to the Jurors, and to the Seniors in the Nursing Homes? And, to all of the angry Divorced Men alienated from their kids?

Or, hand them out to the Cops to wear underneath their uniforms?

Or, make the Politicians wear the T-shirts at gunpoint (no bullets in the gun, of course, on the advice of Saul Goodman, of course).

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Paul mentions that passive investing is NO downside risk management. Interesting and true - I’d never thought of it that way.

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What is the role of “Greed” in Retirement Planning?

How come Chris and Paul never talk about the Importance of Greed?

Southern Stoicism

W.W.’s Philosophy is:

“My Daddy always said that there’s 2 things that make this world go ‘round: One is Need, and the other’s Greed. Now, you and me are The Need. The S.O.S. Corporation…well…they’s the Greed.”

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What exactly are the definitions of “risk” and “success” used in the podcast? For me, the whole concept of risk is squishy. Recalling the farce of Credit Default Swaps and mortgages to arrive at a AAA rating vs a CCC rating some subsequently found out the “risk” meant zero return of investment and zero return on investments.

One definition is: In finance, risk is the possibility that actual outcomes will differ from expected outcomes, including the potential for financial loss.

OK, that definition applies to a population of entities such as an index. If one were to invest in Zimbabwe bonds, failure is not just a probability of differing outcomes such as a variation in percentage points on income, it is the loss the entire investment.

If the term risk is only applicable to a population of investments, each of the items in that population has a risk. Is it the “risk” a probability of not achieving the income goal or is it the probability of total loss. Even in a large population of investments, some might be Zimbabwe bonds, others may be mining shares, etc. So, how is the risk of the entire population arrived at?

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The Stoics believe that the most important ethical Principle is Virtue rather than Guilt? So, even if one commits the purported “Crime” it doesn’t matter where the commission of the “Crime” was done to preserve his individual Virtue? Contrariwise, non-commission of the ostensible “Crime” can be equally reprehensible where non-Commission of the purported “Crime” undermines his Virtue?

Is this correct?

So, W.W.’s ostensible “Crimes” of robbing the SOS petrol stations were justified in the name of upholding W.W.’s higher Stoic “Virtue”?

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I’ve not listened to all of this episode yet, but I’ll link to a previous comment in which I respectfully disagree with some of the way that Paul frames these ideas and seems to define “passive” and “active”.

Passive investors still have to choose how to allocate their money and they can (usually in an automatic way) rebalance and reallocate as values change and as they age. I don’t believe that “passive” necessarily means you invest then leave it. That’s perhaps an extreme definition, but maybe not widespread in practice - but still a long way from “active” decision making/investing/trying to buy what is cheap and selling what looks pricey.

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Re risk. It’s a tricky thing to get across to people sometimes.

I’ve spent 20 years trying to explain to my parents that holding money in the bank for 20 years isn’t a good thing. It’s risk free in the sense that you know what is going to happen - your capital will stay intact (in nominal terms) and interest will be added.

Risk free. Certainty. That’s good, right?

Well, not really as the certainty is that you WILL lose in the long run. The real value of your money WILL go down.

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This is something I could never get my husband to understand. That real inflation is almost double the interest rate especially once taxes come out of interest earnings.

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I can kindof get them to understand individual pieces. Or at least I think I do. eg we’re agreeing that £1000 bought you more in the year 2000 than now. But then when I try to tie the strands together, it’s like we didn’t just have the conversation that we did.

Mind, I find that with a lot of people. Especially since 2020.

A couple of years ago, I decided I was done arguing with people. Now I wonder if I should add trying to explain things to people. But I want to help. So when people seem to ask for help, I can’t help but try. Then I regret it. Sigh.

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I have been prepping for 30 years. Threats have come and gone and the non Preppers made it through also.

I hello when asked. I don’t evangelize beyond casual conversation unless asked.

Alot of food I know love paycheck to paycheck and enjoy their TV and Facebook lives who am I to harsh their mello. When I have 30 year old prep items still waiting for their day.

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Eventually, a threat will get the civilization and you (or someone else) will be better off for your efforts. There’s no guarantee, even in a lifetime.

But I can’t imagine discussing retirement planning with someone expecting to retire 2040+. As nasty as the wars and institutional failure and civil strife are, there’s precedent. But with AI coming through now, the future doesn’t look like the present. My goal is being in a strong position in 2030 with the hope of being able to set a new goal. The thought of working toward my retirement around 2050 is pretty funny!

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I get it, I am confident the future will be harder to retire in, not easier.

I am glad to have come from humble beginnings. I can be happy with a whole lot less than I have now. I just hope those around me will remain content and happy also.

Access to food and hygiene and a dry bed and some heat in winter are a good start. Adding a little AC in summer makes for a good life, even if it’s just the bedroom. Just starting out, I lived for two years with only a 6k btu window unit in Florida and I felt like I was so responsible and blessed that I had enough in my wallet to buy it when the big AC unit went out.

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I’ve said for a while that I think history will remember the last 80 years as a one off that happened due to energy abundance (oil), demographics, a tech surge and naive promises being made (massive pensions to state employees).

Soon we will go back to how it has always been - that people work (at least a bit) pretty much until they die and/or manage not to do as much by living with their children. Which used to work - they could sleep in their rocking chair with a baby on their knee while mum went out to work, tend to the chickens and other light domestic duties etc.

Now, unless gran invested well or worked for the state, she is struggling to keep up her bungalow and struggling with many jobs. Then her kids are across town struggling to pay their big mortgage and childcare. I mean, it works for the bankers and the taxman - but could it work better for people? I think for many it could. Some pride will have to be swallowed and there will be some issues, but after that, maybe it’s ok?

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Correct, using gold and silver as a comparison, the real inflation rate in Australia has been 8% compound over the last 50 years. This is why life just keeps getting harder - in the 70s, one ordinary wage paid for a house, car, stay home wife and 2 kids. Now you need both parents working and they still have to put everything on the credit card.

Governments lie, all the time, about everything, and the CPI is the biggest lie of all.

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Sadly the 1970’s starter homes are not available. Small 750-1000 square foot homes are not permitted to be built. Where I grew up there were oodles of rock solid strong cement homes with thick slabs, hefty footers and reinforced poured lentils. They had ceramic/ terracotta roofs and lasted seemingly forever. Today these homes with their 1950/1960’s covered carports that connected to patios are bought at tremendous prices, have the roofs torn off are gotten then turned into much larger homes using both the original home and it’s carport and patio as the first floor and adding a second floor because they are still rock solid and doing so avoids much more expensive measures to start a new construction.

Cars are more complicated then they were back then. My 1971 Super beetle was easy to work on and proportionately cheaper to own in its day.

We also have way more in terms of taxes and insurance in our lives. There are far far more basics and essentials, many of which we never asked for.

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Do the poured lentils not attract mice?

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You’re bean funny, right?

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