Transcript:
Easan Arulanantham:
Why is fixed income, you know, like a pension or Social Security, so powerful in retirement?
Tom Vaughan:
Yeah, reminds me of situations that I’ve been in where, you know, I will be meeting with clients, for example, a couple, both were teachers both put in their 30 years, or what have you, they’ve got this kind of 80 to 85% of their income that they used to have teaching now coming in from their, from their State Teachers Retirement System stirs a member in 2008, you know, the markets falling apart, a lot of clients are coming in pretty concerned, you know, because it’s a big, it was a big downturn, and got this teacher client couple sitting there, they’re just totally relaxed, really, you know, not worried about it, they haven’t taken anything from their investments for ever, because they’re basically able to live off of this pension that’s coming in, and, you know, really drove home to me, that’s, you want to, if possible, have some component of that.
Now, Social Security is like that, it’s a pension. And all these pensions are going to have some difficulties keeping up with the possibly keeping up with what you have for inflation for your the things that you’re buying. But it’s still a really powerful component, it’s just, you’ve got money coming in from an outside source, that is guaranteed, alright, as long as it doesn’t fail, for some reason, which it hasn’t. And you don’t have to rely upon the stock and bond market as much. So if I need $100,000, and I’ve got, you know, 100,000 coming from pension, Social Security, you know, whatever happens to the market, I’m not that concerned with because I’m not using it, if I need, you know, 100,000, and I only have $10,000 coming in from Social Security, for example, you know, then I’m in a different situation. Now, I’m withdrawing an awful lot of money out of the market, and I’m hoping for good returns. And when bad returns come it increases my stress level. Right? So that’s where you see this pension. So security component, really kind of add to the stress free lifestyle as far as that goes. So you know, not everybody has that not everybody can do that. Not everybody wants to be a teacher or a civil servant, or firemen or whatever it is that creates these big pensions nowadays, but that’s why it’s such a critical component, though.
Easan Arulanantham:
Yeah. The one caveat with pensions is, a lot of times they don’t keep up with inflation. And so that’s why you kind of want a bit of both. You don’t want the purely pension or purely investments, you want to have kind of that diversity of income. Yep. And so your your investments would outpace inflation, but then if the markets down, you want that rely on that pension, that’s kind of there. That’s kind of always coming in.
Tom Vaughan:
Yeah. Yeah. No, it’s, it’s a great situation to be in for retirement, that’s for sure. Like saying there used to be a lot more pensions, in private business. Also, those have all disappeared for all intents purposes. And so pensions are a little bit harder to get now you have to take on certain types of jobs to get them. So security still there and maximizing Social Security, which is a big thing we work on all the time is a really good idea. There’s some great stuff that you can do to try to really bring that up as much as possible. And that does help right so almost everybody has so security if you don’t have a pension so that’s that’s an important component.