Beware of Retirement Half-Truths - Cravitz Financial & Insurance Solutions

Beware of Retirement Half-Truths

We hear a lot of half-truths in the financial world, not necessarily because people try to make misleading statements, but because sometimes a simple statement just doesn’t quite tell the whole story. On this episode, we’ll discuss a few examples that seem straightforward but have nuances that can significantly impact your retirement strategy.

From the 4% rule to diversification myths, Ryan breaks down why these statements aren't always black and white and how to navigate them for a successful retirement.

Here are the half-truths we’ll explain in this episode:

  • Don’t worry about those losses because the market always goes up in the long run.
  • Diversification is the key in retirement planning.
  • You should withdraw 4% annually from your retirement savings.
  • Saving just enough to match your employer’s 401(k) contribution is sufficient.
  • You don’t need a retirement plan if you plan to work throughout retirement.

Full Transcript:

Ben (00:01):

We hear a lot of half-truths in the financial world. Not necessarily because people try to make misleading statements, but because sometimes a simple statement just doesn't quite tell the whole story. And on this episode, we're going to share a few examples of that and discuss why that might be. It's coming up.

Announcer (00:18):

When it comes to financial planning, you need to cut through the jargon so that you can understand how to achieve your own retirement success. This is Candid Conversations Retirement Talk with Ryan Cravitz of Cravitz Financial & Insurance Solutions.

Ben (00:33):

Well, hello, glad to have you on Candid Conversations. This is Retirement Talk with Ryan Cravitz of Cravitz Financial in Orange, California. Glad to have you on the show. Ryan. Good to talk to you again. How are you?

Ryan (00:42):

I'm doing pretty good today. How about you, Ben? I'm

Ben (00:44):

I'm doing pretty well. Getting into the middle of the summer, the heat ratcheting up a little bit for us, but looking forward to a couple trips. You guys have anything planned this summer?

Ryan (00:54):

Nothing, nothing big. Just a lot of small things. So we're doing plenty of trips down to Wild Rivers. Our son, Cody, is just a huge fan of the place. It's a, what do you call it, a waterpark, and so you can't take this kid out of the water. So we're going down there. We've got a season pass now and it's pretty close to our house, so it's a lot of fun going down there.

Ben (01:19):

That is pretty cool. I'm sure you have nice weather year round, so you probably don't have to take advantage of it as much as other people do in the summer months, but I'm glad you got some stuff planned and we have a good show today. I'm glad anybody that's tuning in for the first time, we appreciate you being here. You can find everything on line at If you have any questions, want to get in touch with Ryan no matter where you're listening from, you can get in touch with him there at Or you can always call 714-462-9155. So today, half truths, Ryan. I know it's, I think this is kind of the world we live in today, right? Where not everything tells the whole story. There's a little bit of nuance that often it gets overlooked. Yeah,

Ryan (01:58):

I mean definitely for sure. And a lot of these things are, like you said, I mean they're half trues for some people in some situations it makes a lot of sense, but it's not the case for all people in all situations. So we'll kind of break this down today. I think this is going to be good.

Ben (02:17):

Yeah, I think this will be maybe a little eye opening, some of the statements we're going to read off and some of the half truths that we're going to highlight today. Because on the surface they seem like pretty standard, straightforward financial guidance. So we'll explain why they're not always black and white. So let's start with this one, Ryan. I know the market has been doing well here recently. It'll be heading back down at some point. It goes up and down. So the market does. But when those sharp downturns happen, you often hear someone say, look, don't worry about those losses because the market always goes up in the long run. So break that down for us.

Ryan (02:52):

So this is exactly one of those things where it's a half truth because in the long run, the stock market always has gone up. And if you're talking to a 30-year-old or 40-year-old that has money in a retirement account and you're not planning to touch that for many, many years because your income's coming from your job there, there's some truth to that. If we follow market history, if that continues, the stock market will likely continue to go up. Now of course there's going to be bumps along the way. We're going to have some highs, have some lows and all of that. But where it becomes the issue is in retirement. And even as you approach retirement, especially in those years, about five to 10 years before you retire, up until five to 10 years afterwards, once you start having to turn your savings, your investments into a retirement income stream, well, I mean now those investments may not come back because now you're withdrawing money from that.


And if you're withdrawing too much and you lose too much, I mean now at this point it may not come back in that situation. So on the one hand, it's good, it's meant to be helpful because we don't want to panic when we have short-term downturns because inevitably it's going to happen. We're going to have these 5% pullbacks, 10% pullbacks. I mean all these things are very normal and common when we look at the markets, when we have situations we've had recently where the market's been doing quite well for quite some time now, sometimes we forget that. It's important to take these things that are said kind of into perspective and understand where it makes sense, where it's just trying to be helpful and maybe you got to watch out because like I said, if you're relying on this money right now for income and you just lost a significant sum, maybe it won't come back.

Ben (04:59):

And this is a good thing to remember too when you're early investing, right? Because you're not supposed to worry about losses as much because you have a really long time horizon to make all that back up. But yeah, as you said, if you're getting into retirement or into retirement and you're relying on that money, those big drops can be costly potentially. So having a plan for that is important.

Ryan (05:17):

And sorry, Ben, the other thing is too is for that younger person, when their investments go down, the market's going down. If they're continuing to invest on a regular basis, they're dollar cost averaging into there. And when the markets are down, they're buying more shares on a regular basis and over the long term, things could work out real well. But in retirement or when you're going to need that money now for income, you're withdrawing from that, let's say on a monthly basis. Now we're talking about reverse dollar cost averaging. That's the exact opposite situation. So that's what we got to watch out for.

Ben (05:53):

That's a good point. We're talking about retirement half truths that you need to be aware. Let's so about this one, Ryan, because on the surface I'll look at this and I'll say, well, why is this not completely true? But diversification is the key and I think, I guess the key is what's most important here.

Ryan (06:08):

Yeah, I think the word "the" is exactly it. But to kind of break this down, there's a lot of things to this because you hear this a lot that people feel sometimes that they are diversified and sometimes they are, but sometimes it's a situation where people aren't as diversified as they actually think they are. In other words, just because you own 20 different mutual funds doesn't necessarily mean you're diversified. If all of those funds invest in the same types of stocks, for instance, they're all large cap growth or large cap value or small cap growth or whatever it is, then you're not diversified. What you have instead is a lot of overlap within your portfolio where all these different funds are all investing in the same types of securities. So that's kind of the first thing there. And that's so important. I mean just you have funds from different fund families or things like that that doesn't mean you're diversified. So there's so much to that.


But having said that, let's say that you are well diversified. I mean is that really the key to a successful retirement? Well, it's one component. Like I always say, investment planning is just one component of a sound financial plan in retirement, because you have the investments, you have any insurance that's needed, the tax planning you need to be planning for the estate and legacy planning, right? All of these things need to be considered within the context of an overall sound retirement plan. So yes, being diversified and how you're going to be diversified is important. Are you more aggressive? Are you more conservative? What are your income needs? What is your risk tolerance? But also what is your risk capacity? So there's a lot of factors that need to be considered here. I think you're right, diversification is a component, but it's not necessarily the key to that successful retirement.

Ben (08:19):

Very true. Can't just buy a bunch of different products and consider yourself diversified and feel like you're in good shape. There's a lot more to it as we always point out on the show. There's a lot that goes into retirement planning. It's not just one or two things. It's a complete picture and that's just a good explanation of that. Alright, Ryan, how about this retirement half truth when it comes to figuring out how you're going to distribute those assets, as we've kind of touched on a little bit already in the show, but you should withdraw 4% annually from your retirement savings. I hear that a lot in terms of a good strategy for making your money last.

Ryan (08:50):

This is a common thing out there. They call it the 4% rule and if you're not familiar with what the 4% rule is, just kind of a brief recap on that. So the 4% rule came about in the 1990s by a guy that did some research and based upon the research, the idea was is that if you were to retire, you could withdraw 4% of your portfolio. So let's say you have a million dollars, you could withdraw $40,000 the first year and then increase that by the rate of inflation each year. And then if you had a 50/50 portfolio stocks to bonds that you would have a very high likelihood of not running out of money over the course of 30 years. Having said all that, I am not a fan of the 4% rule at all. I think it is far too conservative.


I think it's far too generic as well. First of all, not everybody retires at 65 and needs to make sure they have money until they're 95 today. Some people retire at 70, others retire at 75, some retire earlier, but based upon your health situation or other factors, you may not likely live for 30 years. And so even if you did live for 30 years and follow that 4% rule, what I have seen in running different simulations with my software and other things is that the chances are you're going to have far more money in your later years than you want to. In other words, if you follow that rule, chances are if you retired 65, now you get into your seventies and eighties and now you haven't spent as much as you actually probably could. And now you get into your eighties and you start thinking, well geez, how am I going to spend all this?


Maybe I should have been spending more money sooner. So again, I'm not a fan of the 4% rule. I think it limits people spending in retirement. You work so hard to save and invest for all those years and it is important that if you want to be able to spend your money, that you're able to spend as much of it hopefully as safely as you can in order to make sure that you're not running out. That is so important so that you enjoy your retirement. Now of course, if you have other legacy planning goals and things like that, that needs to be considered too, but it's a rule of thumb, but it's the 4% rule and that's all it is. It's not really a rule, it's more of a theory and it's just a rule of thumb.

Ben (11:33):

Right? Again, a reminder, if you're hearing anything that maybe you catch you a little off guard makes you want to sit down with someone to look over what you're doing in terms of retirement and your financial planning, you can always call Ryan at Cravitz Financial. It's 714-462-9155. Alright, so another thing that we're kind of told always is you want to save and match your 401(k) contributions by your employer. You want to save enough to match that. Well, of course that is still a true strategy, but the half truth here, Ryan, is that saving just enough to match that just to get that match is sufficient. Why is it not sufficient?

Ryan (12:08):

So here's the thing on that. So I mean certainly you want save enough in order to get that match. We all want to make sure we're taking advantage of the free money that's for certain, but not contributing more on top of that doesn't necessarily make sense. I mean, if you have specific goals in retirement in order to meet those spending goals, if you need to save a certain amount of money, then you just need to go ahead and save a certain amount of money to go ahead and do that. You need to do that. And let's say your employer only allows you to or only matches you on let's say 3%, they'll match a hundred percent of 3% of your savings. Well, that doesn't mean you shouldn't be contributing 5%, 10% or 15% in order to actually make that work. I mean, think of that as just an extra bonus that you're given.


A lot of people don't have that available. Imagine for anyone that' s self employed. I mean, you don't have anyone that's contributing to your retirement account. You just have to contribute. So take advantage of it if you have, whether it's pre-tax, you're getting that deduction now and that's nice, or maybe you have a Roth option so you can get that money out tax free in the future. So thinking through what makes the most sense there can make a lot of sense. Now, interestingly enough, sometimes on the flip side of this, I've had situations where in working with clients where they were not getting a match, they were approaching retirement and after running the analysis, they had enough saved. They didn't even need to save anymore in their 401(k) and I actually recommended that they stop all contributions to the 401(k) and just use that money and enjoy themselves, enjoy their life now with that extra money before retirement because they had plenty saved in that case. So kind of the opposite situation, but that's why these are half truths and sometimes they can make sense, but in a lot of situations they don't.

Ben (14:17):

Alright, very good. Got one more to throw out there in terms of half truths and it is, you don't need a retirement plan if you plan to work through retirement. I know a lot of people, Ryan, are planning to work into retirement. People are working longer and longer now, but that doesn't mean you can escape planning, right? You still need to get things in order.

Ryan (14:35):

Yeah, for sure. A couple of generations ago, the idea of retirement was you retired. A lot of people weren't healthy and active enough to get out and do a lot of things and retirement itself just didn't last as long. Today it's so much different. I mean, today people are continuing to work in retirement whether they're working in a different field or whether they're cutting back their hours or whatever it is because I think in part because people are living so much longer, it gives us all something to do. Another thing to kind of bring us fulfillment there in retirement, because again, some people do or will spend 30 or more years in retirement, so it's good for that, but it's so important to have a plan because at any time some health situation or something like that could strike and now as a result, you may not need to work or you may not be able to work mean, and so that could put you in a bad spot.


But even if you can continue to work and you're healthy, that doesn't mean you don't need a plan because there's all different things that need to be considered. What distribution strategy should you follow with your assets over time? Should you be incorporating any Roth conversions, for instance, into the mix as just one scenario here? So there's all different things that you need to still consider financially as to what's best to do with your money in order to make sure that it's working the best for you. Then if beyond that, if your goals are to leave money behind to your kids or grandkids or charities and figuring out the most efficient ways to do that from a tax perspective and everything else, there's always things that need to be considered.

Ben (16:30):

Alright, great stuff as usual. Good explanations, Ryan. And again, a lot of these things seem to be true on the surface and they are for the most part, but there are some nuances that you need to be aware of and again, why you sit down with the financial professional that can help you work through these things and make sure that you're on the right path, that you're doing the right things to get to your retirement goals, to reach those financial goals in that financial future that you envision. Again, you can go to to learn more no matter where you're listening to the podcast from or you can call 714-462-9155. Ryan, any final thoughts on those half truths before we get to the mailbag and a question here that came up recently,

Ryan (17:06):

Nothing I can think of in particular. I guess other than just remember that everything as it relates to your financial life and your plans for retirement and everything else is so individual to you based on your situation. So you'll read things, hear things on the news or other things, and whether those things apply to you, it could or it may not. So that's about it though, Ben. Okay.

Ben (17:34):

Alright. Well, let's jump to a question. Again, this is a question that came up recently we thought would be good to address on the show a scenario that maybe you might come across here soon and let's hear Ryan kind of work through it for us. But here's the situation, Ryan. I have enough cash in the bank that I could get by without taking any IRA withdrawals this year. I could live off my Social Security and just spend down my bank account. Would that be a good idea? It seems like I wouldn't pay any taxes if I did it this way.

Ryan (17:59):

Yeah. So here I am going to give my standard answer, of course is that it depends, right? So maybe, maybe not. And so let's kind of think through some of the important things to consider here in retirement versus when you are working, right? When you're working for a lot of people, your income comes from your paycheck. If you're W2, I mean that is your income. You might have other income, maybe rental property or something else, but for the most part, for most people, your income is coming from your job. But now in retirement, it's an entirely different ballgame, right? You retire, you're no longer working, let's say, and now you have money coming from Social Security or maybe you're delaying that whatever the situation is there. You might have money from an IRA or 401(k) that's subject to when you would take withdrawals from that, it's subject to ordinary income tax.


You may have a taxable account and that's taxed differently, and you might have a Roth account, which that's going to be when you withdraw money from that, as long as it's a qualified distribution, you're getting money out tax free. So you have all these different sources of income that are taxed differently. Part of creating that sound retirement income strategy is thoughtfully thinking through how much you're going to withdraw from different income sources and when. So for instance here, presumably he's paying nothing in taxes or he is getting Social Security, he's getting money from a bank account. He could pay nothing on taxes and on the surface, certainly that looks good. None of us want to have to pay any more in taxes than then we have to. But the thing that we want to consider here is let's say that you have money that's in an IRA or a 401 (k )or some other type of account that when you withdraw money from it, it's going to be subject to ordinary income tax.


Well, just because of the standard deduction alone, you can withdraw some money from this account and not have to pay any income taxes. So that's a huge win because think back in your working years, you contributed, you got that tax deduction, saved you a good amount in taxes then and now potentially you may be able to take some money out and not have to pay any taxes at all just by utilizing that standard deduction. Now, if the amount you need for income is above these limits, you may still be able to play it so that you're only paying taxes at a 10% rate or a 12% rate, right? Just all depending upon where you fall within these brackets. So remember all that money that's in those pre-tax accounts, you're going to pay taxes on it eventually when you withdraw it. It's just about being strategic about when you take those withdrawals to make your income last longer and provide you with more income there in retirement. So hopefully that helps and to give some different things to think about. It's so important to have that sound retirement income strategy, distribution strategy to maximize your income.

Ben (21:07):

Awesome, great situation and something that I know a lot of people probably will think about when the time comes, and hopefully that answers some of your questions if you thought about that scenario as well. But if you want to get more information, you can always get in touch with Ryan at Or over the phone, 714-462-9155. Great stuff, Ryan, as always, appreciate your time and thank you for listening to the podcast. Please subscribe wherever you do so. Also, make sure you check out Ryan on YouTube as well. Always putting out some consistent content there if you want to learn more about financial and retirement planning as well. Ryan, thanks again for your time.

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