I Retired at 61 With $3.4M. Now Where Does the Money Come From?

If you want your own custom portfolio-to-paycheck system, book a call here: https://www.demarsfinancial.com/start-here?utm_source=Youtube&utm_medium=Videolink&utm_campaign=46195

👉 Get free access to the same professional retirement planning software we use with our clients:
https://www.demarsfinancial.com/right-express

Retirement income sounds simple until the paychecks stop. This couple retired with $3.4 million and a paid-off house, and three weeks in it felt like going broke, because no one had ever built the system that turns a portfolio into a monthly paycheck.

This is the part of retirement almost no one prepares you for. For thirty years, the whole job is saving. Then the deposits stop, and overnight you're supposed to know how to pay yourself from a stack of accounts you spent a career filling. Most people have plenty saved. What they don't have is a plan for where each month's income actually comes from.

In this episode, Taylor walks through the exact system he builds for couples in that spot, using one real example with names and details changed. You'll see:

* The three-bucket approach, and why your cash "pantry" is a reserve, not your monthly income
* The simple, almost boring change that makes your savings feel like a paycheck again
* How to keep that paycheck coming during a market downturn without being forced to sell stocks while they're down, which is the heart of managing sequence of returns risk
* Which accounts to spend from first, and how a smart withdrawal order can keep more of a six-figure lifestyle in the 12% federal tax bracket or below
* The low-tax "gap years" before Social Security and required minimum distributions (RMDs) begin, and why it's one of the best tax-planning windows in retirement
* Three questions to ask your spouse tonight to find out whether you have a real retirement income plan, or just a pile of accounts

If you're a few years from retirement with a solid nest egg and no clear picture of how it becomes income, this one is for you.

0:00 Retired with $3.4M, and it felt like going broke
1:02 Plenty saved, but something felt off
2:08 The question that stopped them cold
2:51 When "we don't know" spreads to everything
3:31 It's not a money problem. It's a paycheck problem.
4:11 Why no one taught you how to spend it
4:44 The three buckets: pantry, bond bunker, growth
5:51 Piece 1: The pantry (how much cash to hold)
7:02 Piece 2: The 15-minute paycheck setup
8:28 "Isn't that cash just sitting there?"
9:15 Piece 3: What to sell, and when
10:54 Which account to spend from first (your tax bill)
11:53 How a six-figure retirement can pay almost no tax
13:05 The part you can't do yourself
13:52 3 questions to ask your spouse tonight
14:57 How Paul & Susan's story ended

Resources:

Website:  https://www.demarsfinancial.com/

Phone: (509) 536-9556

Schedule an introduction call with Taylor: https://bit.ly/demarspodcast

Check out Taylor's YouTube Channel: https://www.youtube.com/@TaylorMadeRetirement

Taylor's Newsletter: https://demars-financial-group.kit.com/827c64fe0e

Disclaimer: Since we don't know your specific situation, none of this information should be construed as tax, legal, financial, insurance, financial advice, or other advice and may be outdated or inaccurate. It is your responsibility to verify all information yourself. This content is prepared for entertainment purposes only. If you need advice, please contact a qualified CPA, attorney, insurance agent, financial advisor, or the appropriate professional for the subject you would like help with. Demars Financial Group, LLC or its members cannot be held liable for any use or misuse of this content. Advisory services offered through Demars Financial Group LLC, a Registered Investment Advisor. Demars Financial Group is not affiliated with LPL Financial.

Transcript

SPEAKER_01 0:00

Today's content is pulled from Taylor's YouTube channel. If you want to watch the video version or catch more great content, subscribe by clicking the link in today's show description. Welcome to Taylor Made Retirement, where we explore what it takes to build a retirement that works for your money and your life. With third generation certified financial planner Taylor DeMars.

SPEAKER_00 0:28

Three weeks after Paul's last paycheck, he and Susan sat across from me with $3.4 million saved, yet they said that retirement felt like they were going broke. Paul was 61, and after years of saving, he had filled every account the way you're told to. His wife Susan was 59, and by any measure, they had been successful and should be relieved. But the deposits had stopped. The bills kept coming. And one morning, Susan looked up from the checkbook and asked a question that stopped them in their tracks. Something to the effect of, uh, where's the money actually going to come from every month? Neither of them had a great answer. So if you're on the home stretch to your last paycheck, with plenty of money saved, but no clear picture of how it turns into income, this video is for you. Because what Paul and Susan were missing took, frankly, one meeting to build. And it's changed how every month in retirement has felt since. Quick note before I start Paul and Susan are a pattern I see all the time, with their names and details changed. Now, this is for education, not advice for your specific situation. For their retirement, the first few weeks, the alarm still went off at six, old habits died hard. Paul would still get up, pour his coffee, and check his account balances, sometimes multiple times before lunch. But not because anything was necessarily wrong. The balances were fine, but in his gut, he just had this aching feeling like something wasn't right. But on paper, it looked good. They had been working for decades for the same firm. They paid off for house. And in fact, they had built a little cottage in their own time with their own hands. And that's where they were going to center their retirement around. Their $3.4 million were saved across their 401ks, IRAs, their brokerage account, and some Roth money. On paper, they had won the game. And so when I asked Paul how they had built it, he said something I hear all the time: something to the effect of, we've just been saving forever. That's what we do. And that's the thing. For 30 years, saving has been automatic. Money comes in every two weeks, a chunk of it goes to your retirement accounts to pay the bills, and you never really think about how it travels through the pipes to get there. Suddenly, one day in retirement, it's going to stop. And three weeks in for them, the bills were due. And Susan had their checkbook open and she asked Paul, the guy who she could count on to know where every dollar is and where it's going. She wanted to know where is the money actually going to keep coming from. And he went quiet because he didn't have a great answer. I mean, he could figure out what to do for the next few months. They had some CDs, had some cash on the side, but that doesn't solve a multi-decade problem. Here's what they realized is that although they knew how much they had in the savings, they didn't know how to route it to fund their actual lifestyle or let the finances fund the fun, as I like to say. They needed to find out how those dollars were going to land in their checking account on a Tuesday. Now, you'd think that the hard part was that one question, but it wasn't. What surprised me was how fast this not knowing for them spread to the rest of their retirement goals, such as the trip to Italy they talked about to do for a decade. They kept saying, well, let's just wait until we figure this part out. Hey, weren't we going to replace the car? Let's hold off another year. And this pattern repeated little by little, and each of their plans turned back into questions. Their savings for retirement were great, but at the same time, they felt like they were tightening their belts more and more in retirement because no one had given them the green light to spend and they couldn't give it to themselves. And that's when it dawned on me that most of our clients, like Paul and Susan, they don't have a money problem. They have a paycheck problem. For 30 years, that their paycheck did two jobs that they never noticed. The first was paying the bills, sure. But at the same time, every two weeks it deposits into your account and tells you, you're okay. Here's your permission to spend and live this month. When those paychecks stop, you don't just lose income, you lose the signal. And in Paul's words, he says it better than I could, where I used to fund my portfolio with my paycheck, but now it's time for my portfolio portfolio to become the paycheck. That's frankly the whole transition in a nutshell. And my industry, the financial services industry, doesn't really prepare you for it. So you might ask, why does this happen to people who are smart, competent, and have done everything right up until this point? Because until now, every tool you were handed was meant for one side of the table: filling the buckets, contributing to the 401k, what's your contribution rate, all the apps that will cheer as your balance goes up over time. It encourages you to continue pouring the money in, but almost none of it tells you how to unwind it and get the money back out. And this feels good when you're filling the buckets, but what's most important is figuring out how to run the plumbing to get the money back out. So let me show you how we will look at it. We want to build three purpose-built buckets. You've got your first layer of the pantry. This is your cash, what you need in a pinch. The next layer is your bond bunker. We call it boring, but it's there so that not if but when the market drops, you're not forced to sell stocks at the worst time. And the remaining portion of a client's portfolio goes into growth. That's the engine, that's the part that is meant to beating rising prices over the long run. Most people already have some version of these three buckets. And this is the part that actually matters. Because in this graphic, you'll notice these arrows all feeding into the checking account. Because the checking account doesn't care how or where it gets filled, it just needs to pay the bills and those that are expected and unexpected. How the money comes out or when the money comes out from each of the buckets, that's the plumbing. That's the magic. And that's the part that nobody hands you a blueprint to do. So most people think that the hard part is being able to pick the buckets, but the real work is in these arrows. So for the rest of us, let me show you how we actually build the plumbing for Paul and Susan's situation of these three pieces from the paycheck that gets funded either by the pantry, bond bunker, or the growth bucket. This first layer, like I said, is the pantry. We call it that because we want clients to feel like they have funds at the tip of their fingers. In our opinion, this is not a great place for things like uh fixed-term bonds, CDs. You need to know that you have the access, not if but when you need it. Kind of like having access to the fire extinguisher and being able to pull out the pin and put out the fire. This is meant to be relatively boring and hopefully in a high yield savings account. And you may ask, what's the right amount for me? My rule of thumb is around six months of your actual spending needs, and for a lot of couples, closer to a year. Especially if you know that a big expense is coming down the line, like replacing a car or a roof project that's coming up, or maybe you want to fund a goal like a family trip or funding a wedding. That way you know that it's there when not if, but when you need it, and you're not trying to unwind that money out of the accounts. For Paul and Susan, we size that right amount in their first meeting. Now, one thing that most people get wrong, so let me get clear, the pantry is not where we want your monthly paycheck to come from. It's that reserve sleep-at-night money, the cushion that's there so you're not worried about what's going on with the market when you wake up and hear that everything is in the red. Which brings us to piece two, the paycheck. This is the part that I promised from the start. This is the boring 15-minute change that flips how their whole month felt from month to month in retirement. We set up for our clients one automatic transfer. It's usually a single predetermined amount based on the rest of their plan we've already built that will then land in their checking account on the first of every month, coming out of their investment accounts automatically. The same rhythm that clients have been used to from a salary for 30 years. And that's it. That's the whole trick. And I know how small that sounds, but watch what it does to your head. When you know that money is gonna show up regularly without you having to lift a finger, it feels like income, like a paycheck, because it acts like one. Money that you have to log in and pull out and discern what you're gonna withdraw feels like taboo, like you're rating the piggy bank. And rating the savings is the one thing 30 years of discipline that got you to this point won't let you do. So many people don't give themselves permission to do it. They'll underspend, they'll play anxious, and in Paul and Susan's scenario, the cottage gets used half the time. Now, this automatic transfer solves that with zero willpower. It hands a lifelong saver like yourself the thing that they can trust, a deposit on a regular schedule. For Susan, the first time that transfer landed, the conversation in that kitchen environment changed. It went from can we do this thing to, well, it's already in checking. It's the same money, it's just a whole different feeling. Now, if you're the spreadsheet and the nerdy numbers type like me, you're already pushing back, probably. You're thinking, hey, six months of cash, even a year, isn't that sitting there doing nothing while the market is going up over time? That's a drag to the whole plan. And I hear you, the the pantry is not there to win any races. It's not trying to win. Its number doesn't show up as a return you're gonna get back on a statement. I like to think of it more as a mini insurance policy, so you know that you have the funds at your fingertips. The bond bunker is there to weather the storm so you don't have to sell in the worst month of a bad year. So that's the payoff. We're not here to predict what the market's gonna do, just plan for it. The third piece here is the refill. And that's the engine of this whole paycheck system. Because the pantry is the easy part. The real question is where your monthly paycheck actually comes from. Because every month, to send that deposit, something has to be sold. Now, Susan, in her case, didn't care what account it came from or what it got sold to make the money show up. Her question was much more simple than that. She just wanted to know is the next month handled and can we do our trips, yes or no? And keeping her answer at yes, month after month for the next 30 years is what keeps her stress free from nagging her husband and where this gets a little more involved. Because in order to provide that paycheck, there are two decisions that you need to make at the same time. Your initial logic is to say, well, if I have stocks and bonds inside of the portfolio, you know, stocks are going to grow higher than bonds over the long term. So in the good years, I'll just take off some of the cream or the gravy from the top and live off of that. And then when the stock market is inevitably down for a period, I'll live off of the bonds, right? So you're not pulling off of the stocks just to cover your month-to-month paycheck and bills. That's pretty straightforward because we believe that eventually the market will recover from every market downturn. And that at that point, it can refill your bonds that you've been depleting to live off of, to buy yourself time while the growth bucket comes back. Of course, you need to make sure that you're continually finding that balance of stocks to bonds to be regularly calibrated according to your withdrawal needs, your risk tolerance, and how it fits in the rest of your plan. That's a topic for another video. The objective is that a down market is going to change your statement, but you're not the month of your lifestyle. The deposit will still land inside of your bank account. However, the second decision that works in congruence with the first one can't be ignored, which is which account are you going to sell from? Most retirees have three different tax buckets, where their accounts are either taxable, like a regular brokerage account, tax deferred, think of your IRA or 401k, and tax-free, like a Roth IRA. And each of these buckets has a wildly different impact on your tax bill. If we look at where Paul and Susan are, they're both retired, but neither of them have started Social Security yet. So for the first time in their adult lives, their taxable income is before they start making any withdrawals, is next to nil. In those years, the tax code is kinder than you'd think. A married couple, for example, gets a standard deduction of $32,000 in 2026. Money that the IRS doesn't tax at all. The next chunk of income after that, up to $100,000 of taxable income, gets taxed at 12% or less. And that's just how the most expensive tax bucket gets taxed, the tax-deferred one, the 401k, the IRA. Your brokerage account, that's where things get more creative, and only the gains are taxed on side of that account. And up to that similar level that I referenced earlier for taxable income, gains are taxed at 0%. So for this couple, it means that designed right, a six-figure lifestyle can be mean that you're paying next to nothing in taxes. And when you are paying taxes, you're paying in that lowest income threshold up to 12%. In the end of the day, this means that you're keeping more of your own money rather than giving the IRS a tip. On top of this, designing your income withdrawal strategy can mean the difference between paying tens of thousands of dollars for ACA health insurance premiums or being able to stay under the limits and qualify for subsidies until you reach eligibility for Medicare. Those same low-income windows are a great opportunity where we start chipping away at the ticking tax time bomb of the 401k, which for most of our clients is the vast majority of the retirement savings. And so being and getting ahead of that allows us to lessen the problem of requirement distributions, which start at age 75 for anyone who is born after 1960. How to use that tax window is a whole video on its own, which is the one I'd suggest you watch next. So here's the honest part. The pantry we talked about earlier, you can set up in a weekend. The transfer is 15 minutes between your accounts when you log in online. But the ongoing paychecks, whether to sell from the stocks or bonds at certain times of the market and which of your accounts to sell it from to design your personalized tax bill every month, this is something that gets a little more involved. This is what you need to get right. As I hear my dad say, a small mistake on a small account is a small problem. The same mistake on a seven-figure balance, repeated for decades, is how a couple loses six figures but never even notices it was gone. For our clients, managing all this is my job. If you're running this yourself, it's on your plate. So here's what you need to do tonight. Sit down and ask yourself and your spouse as well if you have one, these three questions. One, where's the next month's deposit coming from in our retirement income? Two, how many months will our pantry or emergency fund cover? And is it at least six or at least a number that can help us sleep well at night? And three, not if, but when the market drops 20%, what's our written rule for where the paycheck will still come from? If you can answer each of these in a sentence, you've got a system. If you got two different answers or a long pause, that you know that you have a problem. And the good news is you know exactly what you need to go build. And if right now you just realized you could rattle off your account balances, but you couldn't answer Susan's question about where the paycheck comes from either, you're the person that we build the system for. That's the whole reason an introduction call exists. Let's see if we're fit for you and see if you're fit for us to draft a version of your own paycheck system, your pantry, your bond bunker, your growth bucket, and the whole refill plan that makes it happen. You can click the link in the description or scan the QR code on screen now to book your session. Now, let me tell you how Paul and Susan's story ends. You might recall last April of 2025, where in the whole tariff tantrum was going on in the market, it dropped by 20% in short order. Their statement came in the red, and the market had a rough n a rough month to say the least. So when Paul opened it, he looked at his statements, and for the first time in his adult life, a down month didn't give him anxiety about the next 30 days. The transfer landed in his checking account on the first, like it continues to do to this day. So they were able to book the bucket list to Italy anyway. He still checks his bank balances in the morning, but now it's a habit and not a search party. Remember, you didn't save this money to be afraid of it. The plumbing of the buckets is the part that finally gets lets you get to use it. And the retirees who build it stop waking up every morning asking the market for permission to live their best retirement. If you want to see what those wide open, low tax years can do for you before the tax clock starts ticking, the next video is on screen now.