176 | Flexible Spending Rules for Early Retirees | Michael Kitces

ChooseFI | Financial Independence Podcast

Jonathan Mendonsa & Brad Barrett | Choose FI Media, Inc

Investing, Business, Careers

4.8 • 5.2K Ratings

🗓️ 23 March 2020

⏱️ 85 minutes

🔗️ Recording | iTunes | RSS

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Summary

Most early retirees panic when markets drop, slashing spending to protect their nest egg. But what if that instinct is exactly backward? Michael Kitsis challenges conventional retirement wisdom by introducing flexible spending rules that adapt to market conditions rather than rigidly sticking to the 4% rule. The conversation explores how early retirees can navigate financial independence with more confidence by understanding when to adjust spending, when to seek additional income, and when to simply stay the course. Key Topics & Timestamps [00:02:11] Introduction of Michael Kitsis and episode overview [00:10:54] Understanding financial independence: the importance of disconnecting time from income [00:15:01] Safe withdrawal rates: Exploring the 4% rule and its implications for early retirees [00:20:00] Market conditions and their effects on retirement spending [00:30:36] Importance of adaptability: Adjusting plans under financial pressure [00:35:16] Embracing flexibility in lifestyle choices amidst changing economic conditions [00:40:00] Case study analysis of a 28-year-old early retiree and her potential strategies Key Insights Achieving financial independence means having flexibility with how you spend your time, unhindered by income concerns. Having alternative income sources during retirement allows early retirees to adjust their spending plans based on market performance. Flexibility in spending and lifestyle is crucial as market conditions fluctuate. Understanding safe withdrawal rates can significantly influence how much money you can comfortably withdraw without jeopardizing your financial future. The narrative around retirement should shift from a rigid notion of failure to one of adjustment and flexibility. Important Quotes "Achieving financial independence means your time is free from any income constraint." [00:10:54] "If you can have a fat-fire retirement and do cool things, that's great. But if horrible stuff happens, I will dial my lifestyle back a little." [00:35:16] "Being adaptable means being able to adjust your plans under pressure." [00:30:36] Related Resources Nerd's Eye View - Michael's website for further insights and educational materials ▶ Listen Next: Ep. 187 — Distance Learning and Education Costs | Essential Listening

Transcript

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0:00.0	Hey everyone, very excited to share this episode with you today, but I wanted to add just a quick
0:04.2	note onto this just because of everything that's going on in current times right now.
0:10.2	The reason that we decided to release this one instead of pushing it back like we're doing with
0:14.4	some of the others is that it is so timely. In this particular episode, we're going to be talking
0:19.6	to Michael Kitsis about his backstory and the work that he's done, which a lot of us have drawn on
0:26.1	as we've started to do modern day portfolio planning, retirement, drawdown strategy.
0:31.2	But one of the goals that we had for this episode was to talk to Michael about adjusting your drawdown,
0:37.9	adjusting your spending in the context of great markets and maybe in this case, bad markets,
0:44.3	right? Flexible spending rules for the early retiree. We're tying this to an episode that we did
0:49.1	several weeks ago with purple from a purple life, really trying to get a sense for in what
0:54.6	environment would an individual in retirement and what circumstances would they consider
1:00.0	ratcheting up or ratcheting down their spending? What does the data tell us about when would be
1:05.2	appropriate to do that? Make these decisions not from a place of fear, but really recognizing
1:11.2	the nuance of our situation. This conversation is going to hold a lot of value and let's go and hop
1:16.5	right into it. Welcome back to Choose FI.
1:24.6	You're listening to Choose FI Radio. The blueprint for financial independence lives here.
1:40.0	If you're looking to unlock the secrets to financial independence and early retirement,
1:45.0	you're in the right place. Stay tuned and join a community of like-minded people who are getting
1:50.4	off-amps to the world and taking control of their lives in the pursuit of financial independence.
1:56.0	Choose FI, your home for financial independence online.
2:00.9	All right, everyone, super excited about this episode. We're getting the chance to talk with Michael
2:14.5	Kitsis from Nerdsiveview and Kitsis.com. And there's a couple of reasons that I think this episode
	...

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