Jean Chatzky: How to Create a Forever Paycheck for Retirement

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Christine Benz (0:34)

Hi, and welcome to The Long View. I'm Christine Benz, Director of Personal Finance and Retirement Planning for Morningstar.

Amy Arnott (0:40)

I'm Amy Arnott, Portfolio Strategist for Morningstar.

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Today on the podcast, we welcome back Jean Chatzky. Jean is the author of a new book about retirement planning called The Forever Paycheck, The New Retirement Strategy to Spend More, Worry Less, and Never Run Out of Money. In addition, she has written several other New York Times bestselling books about money and investing. She's also CEO of hermoney.com and host of the podcast, Her Money with Jean Chatzky. She served as the Financial Editor of NBC Today for 25 years and is the Financial Ambassador for AARP. She appears frequently on CNN, Msnbc, and was a recurring guest on the Oprah Winfrey Show.

Jean, welcome back to The Long View.

Jean Chatzky (1:25)

Thanks. Thank you so much for having me.

Christine Benz (1:27)

Well, thanks for being here and congratulations on your new book, The Forever Paycheck. We want to delve into the book today. But before we get started with some substantive questions about retirement planning, just wanted to ask what made you want to go deep on this topic of retirement planning?

Jean Chatzky (1:45)

I think it was a couple of things.

I'm 61 years old and so in the guise of doing a little me search, this is where I've been living lately and where the people that I've thrown up with have been living. But I also have watched people, including my mother, live in retirement over the past couple of decades. And noticed the real difficulty that she and others have had spending their money, which to me seems incredibly sad. We hear, of course, a lot about people who haven't saved enough. But for those who really have done the work and who have set themselves up so beautifully to then find that they just can't open the spigot and live the lives that they had wanted to or planned on living is a real problem. And as somebody who spent so many years writing about accumulating money, investing money, building wealth, it just seemed time to turn to this idea of, okay, what's next?

Amy Arnott (3:11)

So to expand on that a little bit, why do you think that is that so many people, even retirees who have more than sufficient assets to support their spending are still reluctant to spend? What do you think are some of the main factors that are contributing to that?

Jean Chatzky (3:31)

I think it's twofold. First, it's really complicated. When you look at the maze of accounts in which we hold our money, taxable, tax-deferred, Roth accounts, and the penalties that we could hit if we do it wrong in terms of things like Irma for Medicare or getting kicked into a higher tax bracket, it becomes this very, very difficult math puzzle to figure out how much and what to pull from which accounts at what time. There's also a huge amount of fear that if you do it wrong, you'll run out of money, you'll blow through your resources too fast. But the other factor is this emotional gate that seems to go up for people when they're asked to flip the switch from accumulation to decumulation.

It just turns out to be highly uncomfortable. Part of that, I think, is again the fear factor. But part of it is that we've gotten so used to saving money for 30, if not 40 years.

We've bought into this language of paying ourselves first and maxing out our retirement contributions and grabbing all the matching dollars. That to ask ourselves to one day just wake up and do the opposite is really, really difficult. And while we have these behavioral finance helpers that have been built into the accumulation process, things like auto enrollment and auto escalation of contributions and target date funds to make sure that we're investing appropriately, none of that stuff exists for spending.

Christine Benz (5:44)

You had a great section in the book, Jean, where you talk about just the mental accounting aspect of spending income, that we're all used to spending income from our paychecks. We're not used to spending from our assets. And I thought that was such an astute point. Wondering if you can kind of unpack that for us, because Amy and I have talked between ourselves about how just logistically extracting cash flow from a portfolio with like a total return approach, it's harder than just spending dividends. So maybe these people who are really focused on dividends aren't so irrational. It's just easier to use dividends for your spending money. Can you talk about that issue of income versus assets?