Lump Sum or Cash Flow for Retirement? – Episode 405

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[00:00] Hello, partners. We’re going to be talking about getting a lump sum of money for your retirement or cash flow. And yes, I use the R word. I apologize, Kim, but we have to set the table so that people understand. Absolutely. So this is a big decision that people have around that shift in life that is still called the R word. And it is often a human resource decision, like the people especially that come from larger companies have a pension, the old style pension where they could get a lump sum or create some type of cash flow. Usually the pension type cash flow is a guaranteed cash flow. Those environments are shifted off to an insurance company with what’s called a single premium immediate annuity being purchased. This may be all behind the scenes. You may not even

[01:03] be aware of it as a person that has recently retired. And yet it is usually what happens to guarantee that cash flow. Am I in the right space in terms of what your question is? You’re setting the table. And to give a quick context, this came from a conversation I was having with a friend. He happens to be quite a few years older than me. And he’s selling a couple of his apartment complexes. And he goes, Oh, this will be the cash that I need for the rest of my life. And I said, he goes, what’s your number? I said, I don’t have a number like that. I’m focused on cash flow. And there was another 30 minute debate, but now you have the context of it. Well, that’s such an apropos discussion, because that is the question, whether it’s

[01:55] selling a business, selling an apartment building, getting the quote, retirement pension decision put in your lap or what have you. People become completely unaware of what inflation does to money. And so whether it’s the cash flow that you have in your mind and or the lump sum that this guy had in his mind, we absolutely positively must be conscious of what inflation does to it. So somebody gets told, oh, you’re going to get 10 grand a month. Pick your number. Oh, that sounds fabulous right now. That’ll be enough for my life. Just like your friend was saying, because he got X million as a lump sum from selling whatever apartment building. Well, in today’s dollars, yes, that’s an awesome number. Yes, that appears like it will provide

[02:42] for all your needs. And I suppose somewhere, you know, maybe there is a number per month or per year that would actually do that. But it’s pretty far and few between the person that actually can get that. And even if that is what’s happening, we just don’t know what’s going to happen with our lifestyles. We don’t know what’s going to happen with technology. This is why I don’t like financial plans and retirement plans, because they pretend that nothing is going to change of any substance. What if you did a financial plan 20 years ago and didn’t even know that the thing called a cell phone exists? I mean, we spend ridiculous amounts of money right now on cell phones and other things like that. You know, the

[03:23] new VR headsets that are out. Well, two years ago, nobody put a line item for budgets of a VR headset. And now that virtual reality headset is going to be a very necessary part of doing business maybe in the next two or three years. So this goal of get my number, you know, I want whether it’s cash flow or lump sum, I want my number is, I think, a limiting way to look at things. And first of all, there’s more limiting and less limiting. So like in his example, in my mind, Spencer, the lump sum is more limiting, the cash flow goal is less limiting. But part of the reason cash flow is so valuable is not only is it less limiting, because it’s more of how our lives work, we pay things on a monthly

[04:11] basis. It’s nice if we have monthly cash flow coming in. It also typically means that you’re still providing value, you’re still out there in the marketplace doing something. Now, maybe it was intellectual property that you developed a while ago. And so you’re not actually still actively doing something for it. But us human beings, we’re not designed to sit around and do nothing. That is not what we’re here on earth for. And if we fall into this, oh, I’m going to get this lump sum, or oh, I’m going to get this cash flow deal and be set for life. If you’re 100 years old, I can go for that. If you’re anything less, I’m going to say, what about your skills? What about your talents? What are you not bringing

[04:52] to the table that is a part of who you are that the world wants to see? Don’t hide that, bring that forth. And with that, create cash flow with that, provide value with that, you can beat inflation. You know, it’s funny, every person, and as you were talking, I was thinking through this, every person that I personally know, that focused on a lump sum number, and that was their goal. Their whole focus isn’t happy. They kind of stopped. And it takes me back to a conversation we had last week with our kids as we were walking down the road. And they were asking about and how how nerdy are we as a family, but I was explaining 401ks and Roth IRAs and all that to the kids. And I said, Well, start with this. I said, when

[05:44] you guys get old, do you want to be making more or less? And they go making more. I said, Now, wouldn’t it be awful if your whole goal was that you’ll be making less money? And that life won’t have any surprises? And they go, Well, that’s not fun. I said, Okay. And, and so I start to tee it up to let them know that one, like, we can’t predict as the future is. And two, as we’re looking at this cash flow, we can make a game out of this versus speculating what the government’s going to do or speculating other pieces like I love the cash flow world because I’m involved. It’s fun. Like this is like a game of chess. I know people that set a cash flow number obtained it. And now 20 years later, because of inflation, they’re scrambling

[06:38] for expenses. And now their skills are rusty. Their abilities, their contacts are reduced. And so that is not a fun position to be in. And it’s why the our word the retirement word is so not a part of our lexicon is because we see what it does to people. And so yes, we should create businesses that create cash flow. Yes, we should buy real estate that creates cash flow. Yes, we should look at guaranteeing some of that cash flow with a single premium immediate annuity or a pension payout or what have you. And we want to keep working. And we want to keep giving of our skills and our talents and put value out in the marketplace. So that that cash flow that we’ve created is just the baseline. And we keep growing from

[07:32] there, not only growing ourselves, but growing the income and the capabilities because having cash flow, even if it’s extra more than you might need right now, is a much better way to help the world than not having the cash flow and not being able to hire other people not being able to have experiences and invest in things and learn new things, etc. It’s just a shift that I am so excited about having our world adopt, and we will keep doing our work while that happens. You know, to put a ribbon around this episode and wrap it up. It comes from other videos that I’ve seen you do and podcasts and I would summarize it by saying the general audience and financial industry don’t talk about cash flow, as you’ve stated, because it’s one of the

[08:29] hardest things to create. Is that isn’t that accurate of your statement? It is that is the toughest thing in personal finance to create consistent, incoming monthly cash flow. So depending on your situation, if you happen to be an accredited investor, it may be easier for you to do that. If you’re not an accredited investor, there are still solutions out there. One thing that works and has helped me as I’ve learned, is to just go to the source and ask for those solutions. So for listeners, if you’re looking to create more cash flow, and you happen to be a accredited investor, make sure you send an email to hello at partners for prosperity.com. And if you’re not accredited, there are solutions out there as well. But as you mentioned,

[09:16] Kim, this is a game that we can continue to play ongoing. There’s no end to this. This is so fun. Well, thank you for your help, Spencer. Love the conversation. Thank you listeners for listening to this episode. Thank you for listening to the prosperity podcast to take control of your money and have it work for you. Visit us at partners for prosperity.com. If you liked this episode, make sure you subscribe and leave a review.