How Should You Invest Once You Have More Than “Enough” to Retire?

Our topic on this episode of the Ready for Retirement podcast is about how you should invest once you have more than enough to retire.

Questions answered: How should I invest throughout retirement? What investment strategies can I implement to improve my financial future? What should I do with additional funds in retirement that I want to invest? What is the best approach for my individual situation? 

Are you ready to start focusing on the things that truly matter when it comes to your financial future?

Episodes Mentioned

Episode 27: How Much Can I Safely Spend In Retirement?

Key Points

• Why don’t we feel “wealthy” even if we’ve been told we have “enough”?
  • There will almost always be someone with more “wealth” than you. 
  • As your wealth grows, there’s more opportunities with tax planning, estate planning, etc.
• What doesn’t change as your wealth grows?
  • The stock market doesn’t care how much you have in your portfolio.
    • You may adjust your allocation, but the principles that work when you have $9,000 in your portfolio work when you have $90 million in your portfolio.
• Example
  • Expenses
    • If a couple has expenses of $150,000/year and a $9,000,000 portfolio, there is a withdrawal rate of 1.7% ($150,000 / $9,000,000).
      • The listener informed us they want $280,000/year, which is a withdrawal rate of 3.1% ($280,000 / $9,000,000).
    • For more information, listen to Episode 27: How Much Can I Safely Spend In Retirement?
      • The simple answer for this couple is that they are able to comfortably reach their goals.
• Should I be invested in real estate, business interest, or alternative investments?
  • Many individuals feel as if they need to be doing something different when their wealth grows.
    • They think the portfolio that got them started is “elementary” and as your wealth grows, you must do something different.
  • The reality is that the percentage in each asset class may change, but the principles and the fundamental truth is that the portfolio values don’t change.
    • The reason you started investing was because you likely invested in real companies in a well-diversified portfolio.
• How would I invest $9,000,000?
  • I would invest it in a similar allocation strategy (adjusted to one’s individuals goals based on what they want to accomplish), but alternative asset classes aren’t needed to reach those goals.
• History
  • Maslow’s Hierarchy of Needs
    • Until physiological needs are met, you don’t think about anything else.
      • If you’re underwater, the only thing you’re thinking about is getting air. 
        • You’re not thinking about dinner or laundry or anything else, just air.
  • Finances are Psychological
    • Until we have our safety needs met, we can’t think about our financial needs.
• What’s the difference between someone with $9,000 vs. $9,000,000?
  • The financial motivations are likely similar – they don’t want to live paycheck-to -paycheck, they want an emergency fund, food on the table, etc.
    • These are safety needs.
  • After safety needs are met, there is love & belonging.
    • Once they are no longer living paycheck-to-paycheck, they are experiencing trips with their families and going on adventures and experiences.
  • After love & belonging is met, there is self-actualization.
    • This is where someone with several million dollars in their portfolio may be.
    • The investing allocation doesn’t change, but it has to do with what you’re pursuing outside of your finances that your finances are supporting.
  • It’s not about your money, but what you want your money to do for you. 
    • There is a diminishing level of motivation once you’ve met your various levels of needs.
• How should I think about self-actualization?
  • Tony Robbins once said that regardless of where you are, there are six fundamental needs that everyone has.
    • They are an expression of self-actualization. What is it you actually want?
      • Certainty (to avoid pain and feel safe)
      • Uncertainty (variety, need for change & the unknown)
      • Significance (feeling unique/special)
      • Connection & Love (family/friends)
      • Growth (always growing/adapting)
      • Contribution (why are we here?)
    • Not everyone has all of these needs to the same extent, but we all have a makeup of all of them.
  • How should we think about these needs?
    • Does the stock market give you stress?
      • You may not need to be invested in the same way as you did when you were growing your wealth and you now want a portfolio allocation that allows you to sleep more comfortably at night.
    • You may find that you enjoy the uncertainty of investments and want to participate in IPOs and other investments that have significance to you. 
    • You may find a certain feeling towards someone/something and you want to use your money to bring connection (family trips, charitable giving, etc.).
    • Do you want to leave funds to those you care about most?
      • If so, you may not need to take on financial risk, but you may want to ensure you’re growing your portfolio as much as possible to maximize the hard work you’ve done over your lifetime.
        • One individual may want to preserve the money they’ve grown and are okay with giving up a certain amount of upside in exchange for the volatility that comes along with it.
        • One individual may want to invest the same way as when they were in their early twenties because they’ve seen how that has worked for them and the power of growth.
    • Everyone has different goals and it’s about understanding what you want your money to do for you. 
• Your investments don’t need to change to have a tremendous amount of wealth and reach your goals.
  • Tax planning strategies can have a significant impact with what you hope to accomplish (Charitable Remainder Trust, Donor-Advised Fund, etc.). 
• Your money is simply a tool that allows you to create the life you want to live focused around what you care about most.

Timestamps

1:44 – Introduction

2:30 – Why Don’t I Feel Wealthy?

4:22 – How Much Can I Spend In Retirement?

7:20 – Why Warren Buffett’s Returns Don’t Tell The Whole Story

9:34 – How Physiological Needs Impact Your Finances

11:56 – Self-Actualization

14:16 – Six Fundamental Needs

17:04 – How You’re Invested – It’s A Tool

20:04 – Tax Strategies

23:03 – Inflation Concerns

26:15 – Aligning Your Investments With Your Financial Goals

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