Episode•June 16, 2022•23 min

Retirement Daily with Robert Powell | Ep. 113

Robert Powell joins Tiffany in this episode to talk through all things retirement planning! Robert drops gems on how to start planning for retirement, where you should be investing your money, and he answers frequently asked questions about retirement. About Our Guest Robert Powell, CFP®, is an award-winning financial journalist whose work appears regularly in MarketWatch.com, USA Today, TheStreet.com, The Wall Street Journal, and AARP. He is the editor and publisher of TheStreet’s Retirement Daily (www.retirementdaily.net), editor-in-chief of the Investments and Wealth Institute’s (IWI) Retirement Management Journal, host of IWI’s Exceptional Advisor podcast; co-founder of finStream.tv; and co-founder of Salem State University's Online Elder Planning Specialist program. Connect with Robert Instagram: https://www.instagram.com/retirementdaily/ Twitter: @rjpiii Facebook: https://www.facebook.com/RetirementAdviceandWisdom Connect with Tiffany on Social Media Facebook: Money Talk With Tiff Twitter: @moneytalkwitht Instagram: @moneytalkwitht LinkedIn: Tiffany Grant This podcast uses the following third-party services for analysis: Podcorn - https://podcorn.com/privacy OP3 - https://op3.dev/privacy

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Key Takeaways

1
Build a retirement plan with built-in cushions for market volatility, inflation, and rising interest rates
Having a financial plan with risk capacity allows retirees to maintain lifestyle during downturns
Plan should include strategies for sequence of return risk, inflation protection, and rebalancing
2
I-bonds offer an inflation-linked savings option for emergency funds with current rates around 8.5%
Interest rate adjusts every six months based on CPI
Annual purchase limit is $10,000 per person ($20,000 for couples, plus $10,000 via trust)
Five-year holding period with early withdrawal penalty
3
Young investors should prioritize savings rate (9-13% of salary) and use salary-based benchmarks
Aim for 1x salary saved by age 30, increasing over time
Target date funds simplify investing for beginners
Employer 401k match represents free money—contribute at minimum to capture it
4
Roth 401k and Roth conversions can create tax diversification for retirement withdrawals
Roth 401k contributions are after-tax but grow and withdraw tax-free
Consider Roth conversions between ages 60-72 to build tax-free income sources
Traditional vs Roth decision depends on current vs expected future tax brackets
5
Having a written retirement plan significantly increases confidence in funding retirement
Employee Benefit Research Institute data shows planners are more confident than non-planners
Plans should be revisited and adjusted for life events like marriage, children, or home purchases

Intro

Tiffany hosts Robert Powell, CFP®, award-winning financial journalist and editor of TheStreet's Retirement Daily, to discuss retirement planning strategies amid current market volatility and inflation concerns.
Robert Powell, CFP®, is an award-winning financial journalist whose work appears in MarketWatch, USA Today, TheStreet.com, The Wall Street Journal, and AARP. He is editor and publisher of TheStreet's Retirement Daily, editor-in-chief of the Investments and Wealth Institute's Retirement Management Journal, and co-founder of finStream.tv.

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– Current Market Impact on Retirees

Robert emphasizes having a financial plan with built-in cushions for inflation, rising rates, and falling markets. Retirees with plans in place haven't needed to lower their standard of living.

If you went into this sort of current period without a plan in place, well, I would go back and create a plan.

Key considerations include: housing costs may be stable or beneficial due to home equity; shorten bond duration or add TIPS; consider I-bonds for emergency funds; use reverse mortgages strategically for sequence of return risk management.

– Understanding I-Bonds

I-bonds are inflation-linked savings bonds with rates adjusted every six months based on CPI. Current rate (May-September) is approximately 8.5%.

For many people who are looking to park some cash and create an emergency fund... it's a good way. It's an easy way to earn a decent return.

$10,000 annual purchase limit per person
Five-year holding period with early withdrawal penalty
Not designed to fund entire retirement

– Advice for Millennials and Gen Z

Focus on savings rate first: 9-13% of salary in 401k. Use salary-based benchmarks (1x salary by age 30) to track progress. Create a written plan even if retirement is decades away.

You would never get on an airplane if the pilot didn't have a flight plan, right? Why should you depend on your money getting somewhere without a plan?

Target date funds work well for simple portfolios; more complex situations may benefit from working with a planner. Consider human capital and Social Security (perhaps at 80% of projected benefit) in planning.

– Roth vs Traditional and Tax Strategy

Traditional rule: lower tax bracket now → Roth; higher bracket now → traditional. Michael Kitces' concept of 'tax equilibrium' suggests planning for tax rates across entire retirement, not just first year.

Years from now, when you're about to retire, say, between the ages of 60 and 72, maybe you start thinking about doing Roth conversions so that at least you create an account from which you can pull money tax-free years from now.

Roth conversions require paying taxes upfront but create tax-free withdrawal options and avoid RMDs.

Resources

Topics

retirement planningI-bonds 401k contributionsRoth vs traditional IRAmarket volatilityinflation protectionsequence of return riskreverse mortgagetax strategyfinancial literacy