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How might you achieve a happy, successful, and wealthy retirement? Well, here to talk with me about that is Christine Ben. She's the director of personal finance and retirement at Morningstar. Welcome, Christine to Decoding Retirement.

Bob,so great to be with youalways. Oh,

it's a pleasure to have you on the show, and it will be a pleasure to have you sort of walk us through the 20 lessons to have a happy, successful, and wealthy retirement.Uh, I should note that here's the book just out, How to Retire, and it features interviews with some of our favorite people that you and I both have spoken to like Michael Finka and David Blanchett and Wade Fow and on and on Laura Carstensen, the list goes on.But I want to start with what uh it might be considered a bit of breaking news. The Social Security Administration recently announced that they benefit increase because of the Social Security Fairness Act will go into effect on February 24th and that folks will be entitled to a retroactive, uh, check. I know that you have a chapter in the book where you talk with Mary Beth Franklin about Social Security. I'm just curious if you have any thoughts about.Uh, the, the Social Security Fairness Act and what this retroactive benefit will mean to for folks, the roughly 4 million people who will get this increase in their benefit.

Well, it'll be meaningful, Bob, and um, as we both know, Social Security is the bedrock for retirement for many Americans or for most Americans, I should say. So the fact that people who had previously had their Social Security benefits curtailed somewhat due to their coverage by a pension can now getUh, a fuller reflection of their work in the private sector, I think it's a positive, and it's all too rare to have anything that has bipartisan support, uh, these days, so it's pretty amazing that this, uh, that this act passed through what is a deep divide in Washington. It's impressive.

You know, it's interesting we had Olivia Mitchell on our show a little bit ago where she did talk about the Social Security Fairness Act and and its impact on the trust fund and how it may, uh, deplete it about, uh, I think she said somewhere on the order of 6 months sooner than uh than it might ordinarily be. So there's good in the fact that that beneficiaries will get a higher benefit, but maybe there's a little bit of, um, warning that the trust fund gets depleted sooner than expected because of this, uh, this act going into law.

Well, 100%,and I'm glad you said it, so I didn't have to, to receive the hate mail from the teachers and, and policemen and so forth. Um, but that has been, um, in the back of my back of my mind as I've been seeing this news, you know, I was like, well, wait a minute, we're kind of going in the wrong direction here. We need to shore up this trust fund. Um, and so I thinkDown the line, there will be some hard work to figure out, well, what steps can we take to help improve Social Security solvency because of its essential role in retirement security for so many of us.

Yeah, well, I'm afraid we won't solve that problem in retirement, but we can solve a couple other things given the lessons that you wrote about. You interviewed Michael Finka in the book, and he talked about how people should visualize their in retirement lifestyle and then how to put it into.Uh, how to make, put in place habits to make it happen. I'm curious if you could share with us what you learned from that discussion.

Yeah, Michael makes the astute point that, um, work can't be all about relaxation, that even though people come into retirement with this pent up list of things that they want to do and just leisure activities, they want to really enjoy their free time. His point is that you need something to relax from that, um, the best.Relaxation comes after you've actually accomplished something. So even when you step away from work, you need to figure out a way to have a sense that you are accomplishing something, have some animating force that's providing you with a sense of purpose. So for some people that might be some volunteer.Activity for some people it may be continuing to work longer in some capacity or perhaps it's just re-engaging with, um, your children and grandchildren after you have finished your career. So it's up to each of us to interpret this individually, but I think the main point is thatEven when you step away from work, you need to look at where you will go for some of the balance and structure and purpose and identity that your work provided you with.

Yeah, sometimes when I think about visualizing my retirement, I'm thinking about the, um, the aging apps that people are told to use so that they can see what their future self looks like and how to plan for that future self. And I must admit those, those aging apps are scary to me because I don't like the way I look when I'm 80 or 90 years old.

Right. The idea is you empathize with your future self though, and, and, and Michael makes a related point in the book, which is thatWe probably should try to envision retirement as a series of phases. I think it's sort of the human condition that we tend to think that the body that we're in today, the mind we're in today, it will ever be thus. And unfortunately, it will not be as we age. So if we can try to get our arms around, well, what do we want as we age and need to make um, some of these changes in our lifestyle. If we can get ahead of some of that decision making.That helps ensure that um any decisions that say, children would ultimately need to make on our behalf, that we're doing it ourselves, that we're in the driver's seat, and I think that's terrific advice as well.

Yeah. You also spoke to one of my favorite people. He's been on decoding retirement, Fritz Gilbert, and he's one of the few people I think who'sactually retired that you interviewed and, and he does talk about the, the steps that you need to take before retiring. And I think what was so interesting, at least in my discussion in, in your book is how thoughtful he was about the steps you need to take before you retire. It wasn't like he got to age 60 and said, that's it, I'm calling it a day and hand in his, uh, his key card.

Exactly. He phased into it in the years leading up to retirement, and I very much believe that that's a best practice that really kind of starting at age 50 probably, if you can start toNot necessarily take concrete steps, but if you can just start to think about, well, which parts of my work do I like, which do I like less, you can start making some decisions around that and maybe you're doing this kind of in stealth mode where you're not having that discussion with your employer, or maybe it's a candid discussion with your employer. But starting early, I think is such a valuable piece of advice from Fritz. And he said that, um, on his retirement manifesto blog, that thisThis is his most popular series of posts ever that he really gets quite specific about the steps to take in the 5 years leading up to retirement, the 3 years, the 1 year mark. And then, you know, at the end, it gets quite granular. Like he talks about things like, you probably have some contacts on your work email system, who you would like, you know, people you'd like to stay in contact with, start getting those off. Maybe you've got photos of your colleagues or whatever.Your work computer starts saving those to another device. So some very practical specific steps, um, both financial and non-financial. And he also talks about, um, kind of dabbling in retirement well, well prior to his own retirement.

Yeah, he's got some great advice. It's a great blog. People, if, if, if, if our listeners aren't reading his blog, they ought to because it's just filled with such great wisdom ongoing. I think it's been 400 plus columns that he's written over the course of his time, and they're all great.Um, you mentioned something that leads into our next, uh, uh, subject that you interviewed, Laura Carstensen, um, and she talks about this notion of relationships and the role that they play, as you, as you age and how they change. Uh, curious what you learned from Laura.

Well, I always learn from Laura. She's one of my favorite thinkers on the topic of aging. And, um, she makes a few points. One is, um, that work is good for us, actually, from the standpoint of helping us maintain these social connections, um, that, that social connections mean a lot to our life satisfaction.And so she talks about the importance of getting ahead of some of those changes that will inevitably accompany retirement and make sure that you are replacing work friendships with friendships outside of work, because those work friendships may not stand the test of time. So again, preemptively, just kind of thinking about, OK, when I step away from work, where will I go for thethose day to day interactions with people that I probably have with my colleagues. So I loved that piece of advice. And then I also loved her discussion of how our social networks tend to change a bit as we age, that they do tend to become smaller and some of that is for sad reasons, like people dying or moving away. But, um, some of it is actually self selection.That we may have had these more diffuse uh networks of friends, maybe like your kids' parents, or your kids' friends' parents, who you would hang out with after the soccer game, as she puts it, you know, perfectly good friends, perfectly good people, but they're not.That inner circle. And as we age, we tend to want to spend more time with the inner circle, uh, that very tight network of people who totally get us where when we walk away from being with them, we're like walking on air because we feel so completely understood.And so her point is it's OK to have your network shrink a little bit as you age, but always kind of be looking for that, that next line of people that you don't want that social network to get too small. You don't want to be down to just say 2 or 3people. Yeah,

I'm curious.Um, whether she mentioned the difficulty that men have in keeping their social circles, uh, as they age, in part because I, I, I'm, I'm certain that if I recall correctly, the research suggests that women might do a far better job of keeping their social circles going than men do as they age.

She diddiscuss that, Bob. In fact, uh, several people in the book discussed that very same phenomenon. So it's important for um men to, to be preemptive on this front, um.That when we look at, uh, men in aggregate, when she and her team have looked at, um, men's behaviors in aggregate, what, what they do tend to see is that their social networks are more concentrated with, with work colleagues. And so to the extent that men can start thinking about, well, you know, can I ask, uh, people at the gym to go to lunch with me or whatever the case.Might be whatever whatever they can do to put themselves in contact with other potential friends that's, uh, will be down to the benefit of I think greater life satisfaction and happiness.

Yeah. You also interviewed David Blanchett uh about his uh retirement spending smile and what people can do to create a reasonable spending pattern in retirement. Uh, what thoughts, uh, did he have to share with you?

Well, David is a seminal researcher on many different aspects of retirement planning, but some of his, um, most important research, I think, examines the trajectory of retiree spending. So looking at the same households over time, what he identified is that spending does tend to trend down throughout much of, uh, people's lives, and then in some cases, mainly due to uninsured long-term care costs, it flares up later in life. So, David.Has always been a believer in people giving themselves a little bit of permission to spend more earlier on because of that phenomenon that he, he's observed that people do tend to naturally spend less. Even higher income households where the, the decline in spending clearly is not due to worries about running out of money, he has observed that same pattern there as well. And, uh, Ebre has also done some research along the same lines. So toMe, for people who have tight financial plans, it's a reassuring message that if you have a lot of pent up demand for activities like travel or maybe helping launch adult children or whatever the case may be, give yourself a little bit of permission to spend more in those early years if you're OK with that trade-off of spending perhaps trending downlater on. Yeah,

Christine, we have to take a short break and when we come back, I want to talk more about the permission to spend topic, so don't go away.Welcome back to Decoding Retirement. I'm speaking with Christine Ben. She's the author of a newly published book, How to Retire. Um, Christine, when we left off we were talking about the permission to spend, and I think it's an interesting topic and oftentimes what I hear from financial advisors is that they have to give their clients permission to spend.Because sometimes they worry about running out of money, so they're reluctant to spend, especially in the go go years, uh, or even the slowgo years of retirement because they don't want to run out of money. Uh, and you also spoke to another expert, uh Remit Sey about this very topic about, uh, getting people to, uh, have, get permission to spend.Talk more about that.

Uh, the, the problem is, uh, a real one, I think, Bob. It's something we don't discuss that much because it's, it feels almost a little bit perverse because we know that there are a lot of people in our society who are really under saved relative to what they might need. But I certainly encounter a lot of people who have articulated.This very issue that they have identified as savers throughout their retirement accumulation career. It really became a comfortable identity for them. And so then this idea of seeing their portfolio, which is probably these days hit kind of a high water mark because the market's been good, seeing it.Decline is not comfortable, and people really struggle with um spending, I think appropriately in many cases, and part of it, I do think has to do with the term spending.That there is this association of spending with profligacy that, uh, you know, we're saying, well, you know, you could spend more, and that means that you need to buy a new car every year or need to go out to dinner every night or do things that are just not you, which isn't really the case. I think sometimes people under explore the idea of lifetime giving.Which is technically spending too. But the idea is that, um, when we look at the data and when people inherit assets from their parents, they're often in their 50s, even early 60s. Their financial fortunes are pretty well set by that life stage. Whereas if you've got older adults who are retiring today and they've gotAdult children, young adult children, that is such a fabulous opportunity to help them get off on the right foot by helping pay down college loans or making home down payments. It doesn't take a lot to make a big difference. And so I really like the discussion that I'm hearing about lifetime giving, um, as, as part of this spendingequation.

Yeah, and when I think about the permission to spend, I also think about what advisors tell me where they say, a lot of times their clients come to them and say, am I OK? as if to say, will my money last and is this spending pattern OK? And once they learn that they're OK, then they feel free to spend the money that, uh, that they need to support their lifestyle or to gift money to their children and loved ones along the way.Um, Christine, you also spoke to Wade Fow about, uh, something that he developed the retirement income style analysis where people have preferences for either a total return or probability first or safety first or other types of, uh, income generating, um, uh, vehicles. Uh, talk more about that.

Right, I, when I read uh Wade's uh retire retirement income style.Analysis and, and took the questionnaire. It really just, um, lit up my brain because it's a, in a lot of ways, it's like the Morningstar style box for investors or for retired people. And the point there is that we're all wired a little bit differently in terms of what we want from our retirement cash flows. You might have people who say they are seeking a high degree of certainty. They don't care if it's short.Shifts the growth of their portfolio. Other people might say, no, I really want to, uh, have an opportunity for my portfolio to grow further. I want to be able to take out more in some years, take less in other years. I want that optionality with my portfolio. So I loved, uh, Wade's discussion of the various shades of retirement income. And, uh, my goal and includingIn the book was to help people home in on their own, um, retirement style. And I would say a broader message of the book is that there's more than one way to do this. Uh, I think sometimes advisors might be quite formulaic, like, here's how I deliver retirement cash flows. And the point of Wade's chapter, and I hope the book as a whole is, no, there's definitely more than one way to get this done.And you should give a little thought to what you specifically are lookingfor.

Yeah, you know, in part because advisers are maybe wired to deliver one way of income planning for their clients, right? Maybe someone is doing a 4% rule or someone's doing a floor and upside and someone might be doing the bucket approach or whatever the case may be.It seems important that the client have an understanding of who they are, what their preferences are, and maybe find the advisor that can deliver against that versus going to someone where, um, you know, you're, you're, uh, they're a hammer and you're a nail.

Well, exactly.And, and Wade's message to advisors too in the book was, you know, if you're an advisor who is just doing that one size fits all solution, stop doing that. That there is more than one way to get this done and you should stay open to delivering different solutions for your clients.

Yeah. You talked to another, uh, favorite of mine, uh, William Bernstein.About asset allocation and how people should think about their, how they allocate their assets, uh, in retirement. Uh, it's a, it's a great topic. Uh, I, I, we just spoke to Bill Bengan, who was in the camp that you should stay at 55% stocks, uh, uh, 35%, uh, bonds and 5%, uh, cash throughout retirement.

Well, Bill Bernstein has a slightly different message and um I also did include different um kind of shades of how to how to construct a retirement portfolio. But Bill Bernstein is kind of a safety first guy, I would say that umAddressing inflation risk, making sure that your cash flow needs are basically locked down in something that delivers inflation protection is the way to go in in Bill's view. So he likes the idea of constructing a laddered portfolio of treasury inflation.Protected securities as it happens today, um, is not a bad time to construct such a, such a tips ladder. Tips, uh, real yields are, are pretty decent relative to history. There have been other points in time like 5 years ago when this was a less attractive solution.Um, but Bill's point is that safety first should be your watchword when constructing a portfolio. And certainly if you have additional funds beyond those, uh, funds that you might put in that tips ladder to supply you with your, um, kind of basic living expenses, you can and should do that, but, uh, addressing thePortfolio cash flows and making sure that your inflation, um, protecting them, he thinks his job, jobs 1 and 2.

Yeah. So I know you're a fan of the bucket strategy, and it seems like if you're laddering tips for maybe the first bucket, uh, that's one way to go about it and then creating additional portfolios that might accommodate years 5 through 10 or 10 through 30 or whatever the case may be. Is that fair to say?

Yeah, those two things could work together for sure. Um, and I do like the idea of it, in addition to the funds that might go into the, into the tips ladder. I do like the kind of basic bucket premise of holding some cash reserves aside, just because, you know, you don't know how things will play out in retirement and whether you'll have unanticipated.Expenses crop up, in which case the cash will be really, really valuable. You would not have to want to have to to touch that tips ladder if you happen to need more from your portfolio.

Yeah, so we only have a little bit of time left, Christine. You talked to JL Collins about keeping things simple in retirement. How to do that?

Right. uh,JL was, I think, a good counterpoint to, to Bill Bernstein's chapter because, um, Bill tends to be a little bit more rooted in history and the academic research. Um, JL is very much on the side of trying to be as minimalist as you possibly can be when thinking about your retirement portfolio. And there's a lot to like about that idea because we know that cognitive decline is, uh, grows in prevalence among older adults.It's really helpful to think about trying to reduce the moving parts in that portfolio. So he talks about just using a simple index fund based portfolio, maybe a little bit of cash, but if you're using a kind of a core stock market index, core bond market index, that gives you some of the key ingredients that you'd need, and you probably don't need to monkey around with a lot more, um, complicated building blocks for thatportfolio.

So, Christine, and sadly, we've run out of time. We've covered about half of the lessons in this, your book, and, uh, we'll invite you to come back on and, uh, talk about the other 10 lessons that we didn't get to for a future episode if you're up for that.

Of course, thank you so much, Bob. It's been great.

Pleasure. So that wraps up this episode of Decoding Retirement. We hope we provided you with some actionable advice to better plan for or live in retirement. And don't forget, if you've got questions about retirement or money, email me at askbob@yahoo Inc.com and we'll do our best to answer your questions in a future episode.