How Retirement Planning is Like a Game of Chess

Welcome into another episode of Mr. Stillman's opus. I have been George alongside John Stillman John baccalaureate returned our 51st episode. Your second, my congratulations.

Thank you sir.

You don't know John.

John is the present founder of Rosewood wealth management's and author of the financial buffet which I did spend a weekend reading.200 deftly should not of taken you a whole we could well make you feel good about a night but still a couple of bowel movement took a weekend to dive into my joy. I will say I did enjoy it with you. Also, think about it. Rosewood wealth management.com so often you play chess you play chess at all. I used to play more than I do now which is never to hell. I played a lot in college, I actually made a chessboard.

So this here we got so here we go, I will. I don't know why I was so incredibly bored at some point thing was over Christmas break during when your college and for whatever reason I had nothing to do that day and I just been in some store that have these really cool handcarved chess piece death seen him so I said I can do this I can make my own chessboard. So I got all these random spare parts around the basement and put together these let's call it intricately formed chess pieces handcarved might be a bit of a stretch, but you could recognize for the most part what each piece was just put together different spare parts that you actually designed like a chess piece or did you go creative like Carolina basketball players wealth.

What if money was missing that I don't know how you did ask that question because what we had. So I took the chessboard and I have blue-and-white squares corset and I had you know the outline of the state of North Carolina in the middle like it was the Dean Dome for okay and so I made the chess pieces look like a piece they were supposed to be, but but then I cut out a picture of different Carolina basketball flag and put them on each of the pieces that's awesome.

So you had Raymond Felton is the King and Sean May was a rook you can you can tell what error I will write school based on this, but yet so I have this chessboard when we play it in the dorm quite a bit until I think some of my less than perfectly constructed pieces started to fall apart but so will be a family heirloom legacy will have to make a new one. But all that to say that was the last time I played any kind of chess on a regular basis okay will ask you that because that's today's topic it's how financial retirement is like playing a game of chess installing checkers is little more intricacy to it in your planning. And I want to go through each of those pieces you're very familiar with pieces.

Obviously you've been designed to cover here.

So let's start at the very bottom and work our way up and what you can't explain which each piece is in terms of her retirement strategy so will start the bottom and pawn.

How does that play in your strength. Also think about the poem in a game of chess. A lot of people so to see these as expendable the kind of in the way you have to start moving them sitting at your other pieces out the can actually do something other than move one square the time, but once you sorta have this war of attrition happening on the chessboard.

If you have some pawns left that can make it to the other end of the board. What happens they become acquainted right right so completely different piece that we now have on our hands so you don't want to just let all of your poems gets laid early on because you lose the opportunity for that upgrade later and quite frankly they are good for blocking in, keeping the other player from being able to make some moves.

If you have pawns in certain places that are holding them at bay so you don't want to overlook your ponds even though they seem very expendable. You have so many of them they can't do much will it doesn't mean they're worthless right so what is the pawn of the financial world, the pawn of the financial world is the monthly contributions that you're making to your retirement and in any given year. They may not seem like much.

If you look at how much you put in your 401(k) this year.

This calendar year. You might say well it's going to last me very long in retirement.

That's a couple months worth of income. But if you're in your 50s or 60s, and you look back and everything that you've put in so far and you look at all that compounding growth on that over the years.

Well you have a lot more those accounts and what you actually contributed unless you just invested all in the money market account with hopefully you have it done for the last 40 years. But if you've been putting money in religiously for 30 or 40 years. You probably have 20, maybe 30 times what you actually contributed in those accounts because of the way that the market behaves over time. Now the other thing to consider is if you're on the front in that equation.

If you're in your 20s or 30s and you're putting money in it just doesn't feel like you're doing a lot and maybe you put in $2500 this year and let's say we have a downturn in the market meant 2500 becomes 1800 now you're almost demoralized because you think the little bit I was putting in is not worth even less than it was but you just you have to look at it over the long haul. Just like that pawn that survives to the end of the chess game and become the queen of the in that's eventually what happens with your monthly contributions. If you'll stay with a lot of love and miss good advice and had same way for me I keep trotting you try to get to that finish line much quicker. You don't enjoy that process, such as part of the process. Just this morning. That's what I mean. It's like anything else in life. It's like losing weight or like changing a bad habit like it just doesn't happen overnight, and it's no different with your investing. I about the next one the night.

This is this is when this got a very specific movements doesn't move in big chunks at a time, but it's a big piece in your chess strategy has a plan to finance also. The night is interesting on the chessboard because if you think about the night is the only piece that can actually jump over other pieces, so any other piece of your moving. There has to be a clear path from the point that they are to the point you want them to be that if there is a piece in their way.

They can't move that spot you want to be when the night is different, but night moves up to and over one and so if there pieces in his way. It's okay. Can moves in this L-shaped direction and that includes being able to jump over pieces. That's a very specialized kind of thing that that the night can do. Now the night is limited in how far you can go because that L-shaped up to with over one pattern is all you knew. It's a very specialized movie can make but it is helpful because it's so different from what something else can do so. He's not the most exciting piece of boiling you need him is really helpful when the board is really crowded. Sometimes the night is about the only thing you can work with a lot of professional chess players love your grandmasters will tell you exactly really hard to win a game without at least one of your nights on the board so what's what then is the night of the financial world left. That's the conservative investments in your portfolio. Not very exciting when the market is doing great. You can look at these conservative pieces same. I wish I was invested more aggressively here because they're just not growing like the rest of my portfolio.

Maybe I should make some changes will but sure enough assumed the market turns down and you have no losses in those particular investments and or maybe slight losses or maybe even slight gains depending on how those conservative investments are invested. Then you realize why you have those in the first place, and so just like the pawn that you don't want to assume as expendable.

You will look past the night just because he can't move all the way across the board in one move, he has a very specialized purpose, just like those conservative investments in your portfolio and yet are not the most exciting thing, but they do have a specialized purpose that you don't look past, very good, very good job like that one that is one we'll talk about right this the one you have to have if you lose it you pretty much just wanted to cooking over and move on because you think you lost the game, but it's the Queen the Queen can do anything, can move everywhere she seems like the best piece is that the same case for your financial plan.

Also, a lot of people get really fixated on the Queen and the fact I read about a guy I can't remember what his name was probably Russian, but he was a great chess player the past and his whole strategy when he was playing maybe a less experienced player than himself. He would always uses Queen's bait so he put the Queen out there in a vulnerable position in the other player would take his queen and then at that point he would offer them a draw on the match and of course they would inevitably decline right because now I just took this grandmasters are telling yeah I know you can take a draw well you know what happens next. He would then run the table on them and win the game and they were wishing they taken the draw when they have the opportunity and so what he was doing.

It was sort of a misdirection thing. He was getting them so fixated on his queen that they left themselves vulnerable in other places because they were trying so hard to take his queen. So you could get fixated on other people's Queen or you could be to fixated on your own queen like you might be too worried about protecting her or trying to get her out there making moves because she seems like the most powerful piece of the board you get too focused on that and you lose sight of other things on the board. You should be paying attention to. So just like the night is our conservative investments.

The Queen is our higher risk investment. The Queen is our Facebook stock or Google stock for our Netflix stock which you seem big growth in over the last five, six, seven years and it's exciting. It's cool to watch you feel like you're making a lot of money. When this happens and just like the Queen can move all the way across the board in any direction jingo side to side, front, back, diagonal very powerful piece, but we can't get too focused on that one piece united with a game of chess just with your Queen in the same way, you're not going to win the retirement game just by picking a few stocks. The do really well. Over time you need to have a lot of other asset classes that do well for you, so don't get to fixated on these few stocks that you've picked out because you take your eye off the ball and you miss some other pieces in your financial plan that you should be focusing on because you're too worried about you know the P/E ratio of a particular stock that you want to pick her in a really reading about a certain investment and find out about the new CEO somewhere determining if it's stock you will buy or not. All those things are fine to do but you can't make that the only thing you focus on okay one one that you have to focus on because soon as you lose it. The game is over.

Indeed, Nestor King.

So what is your King thing and what is that one thing that you have to always protect no matter what will the king is your income okay and this is true whether you're working or whether you're retired. It's especially true once you retire. But while you're still working that income is so important because that's your most powerful wealth building two for one. And obviously it's also how you pay all the bills so if you don't have an income well were not making any progress toward future wealth.

You're just surviving, but think about once you're in retirement. If you don't have income checkmate game over. You have to have those income streams coming in, which seems obvious, but a lot of people just say well ill have my Social Security and $900,000 and I'll just take from this pile of $900,000 as I need it and hope I don't run out, but psychologically you can't really spend money with confidence you can have the lifestyle you want in retirement. If you don't have some systematic way of knowing that the checks are coming in the next month so the only check you have coming in the next month is Social Security but so you're getting $2000 a month, but you spend $7000 a month selection which means you have to take 5000 a month out of your pile of 900,000. Psychologically, that becomes really difficult because you see that you're taking money out that piles getting smaller and smaller.

Assuming the market isn't just go through the roof and you start second-guessing everything you do should I be spending less. Should we not of done that trip.

Should I really ratchet down my withdrawal rate because of taking too much out of my get a run out of money.

You start having those concerns and then you can't have the lifestyle you want.

You can't enjoy retirement because you're always second-guessing how much money you taken out your pile, so let's suppose that you set up your plan in such a way that you have regular income streams that are coming in every single month Social Security is basically going to be the base for everybody but then you might also have a pension you might have some rental income you might have an annuity that's paying you out every month you might have gotten you might have owned a business and you sold the business and you're getting regular payments from the business from the person that bought you out there a lot of ways to create regular monthly income but you want to have that structured in such a way so that you always see those paychecks being replenished every month in the same situation may be spend $7000 a month. But if 6000 of it is coming in in a predictable way month after month and those income streams are going to last the rest your life. Let thousand extra that you have to take out kinda for your fund money now that thousand a month doesn't stress you out because you don't feel like you're taking so much out of this pile and so that's a really important thing to have. That's the king in retirement planning is your income and you would be sure that you don't ever lose the income and DHS is just like financial planning may really makes a lot of sense. He laid it out pretty well today. Jeff always said that, that's one thing that I have set command from day one episode 51 now that said that exact same here, but John can help you with this is team up with this kind of thing I retirement income Nestor big piece of and John can help you figure out what you need and how you're going to earn that after you sign retire. You can find him@rosewoodwealthmanagement.com. He also called 800-545-2991. That's also available via text. John not upset the book now make sure people got a subscribe and review this by casting right yeah Horton I don't know that we've ever committed people to do that but what I like to present much like your basketball recruit Joni five-star sister has it only has Mr. Stillman's opus. Until next time, John Stillman, I been George talk to you later Carolyn once towards doing business as Rosewood will is a registered investment advisor in the state of North Carolina.

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