15 Years of Advising $3M+ Retirees (What Changed) | The Limitless Retirement Podcast

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In this conversation, Danny Gudorf, a financial planner, discusses the evolving beliefs about retirement planning. He reflects on misconceptions he held early in his career, such as the idea that reaching a certain financial milestone guarantees readiness for retirement. He emphasizes the importance of understanding spending habits, tax implications, and the emotional aspects of retirement. Danny also highlights the need for intentional planning regarding wealth distribution and the significance of finding purpose in retirement beyond financial security.

Having More Money Doesn’t Automatically
Make Retirement Easier

Fifteen years ago, I thought someone with $3 million had essentially finished the hard part of retirement planning.

They had saved enough. They could retire. Our job was to manage the investments, create income, and help them enjoy what they had built.

Then I started watching what actually happened.

People with $3 million, $4 million, and even $5 million were still afraid to spend. Some continued working even when their financial plan suggested they could retire. Others spent so little that their retirement accounts continued growing—along with their potential future tax bills.

They had successfully accumulated wealth, but a larger account balance wasn't answering some of retirement's most important questions.

After 15 years of helping retirees work through these decisions, there are five things I believed early in my career that I look at very differently today.

And the first starts with the number everyone seems to focus on.

Belief #1: Reaching Your Number Means You're Ready to Retire

For years, I thought $3 million represented a clear retirement milestone.

There's no question that accumulating that much means you've done a lot right. But today, an account balance alone tells me surprisingly little about whether someone is ready to retire.

Before we can answer that question, we need to know two things:

  • How much do you want to spend?

  • Where is your money located?

Consider two couples who each have $3 million.

One wants to spend $7,000 per month. The other wants to spend $20,000 per month.

Their account balances might look identical, but their retirement plans could look completely different.

Where that $3 million is held matters too.

Many people spend decades accumulating money inside 401(k)s and traditional IRAs. Those accounts generally contain tax-deferred dollars, meaning withdrawals are typically subject to ordinary income taxes.

That's why we look at three broad tax buckets: taxable, tax-deferred, and tax-free.

Only after understanding spending needs and how assets are distributed among those buckets can we start evaluating what the money may realistically support.

But there's another problem.

Many successful savers don't suddenly become comfortable spenders when they retire.

They've spent decades living below their means. That habit can be difficult to switch off.

Eventually, that may contribute to larger account balances, potentially larger required minimum distributions, and more wealth passing to the next generation than originally intended.

That isn't necessarily bad.

But it should be intentional.

How much of your money is for you? How much do you want to leave behind? And what happens financially if one spouse dies before the other?

Your account balance can't answer those questions.

Belief #2: Being Conservative Always Means Being Safe

Being financially conservative helps many families build substantial wealth.

But being conservative during retirement can mean something very different from being conservative while accumulating money.

I've worked with people spending $7,000 to $10,000 per month even when their financial projections indicated they may have had the capacity to spend considerably more.

Yet they were still asking:

Can we afford this trip?

Can we help our children?

Can we remodel the house?

After 30 or 40 years of saving every extra dollar, spending from your portfolio can feel uncomfortable—even when the numbers suggest you're on track.

That's one reason we use retirement income guardrails.

Imagine driving on a winding mountain road. A guardrail doesn't guarantee that nothing will ever go wrong, but it gives you boundaries.

Retirement income guardrails work on a similar principle.

We establish upper and lower boundaries around a portfolio and create rules for what we'll consider doing if those boundaries are crossed.

For example, under our process, if a portfolio falls below its lower boundary and remains there for more than 90 days, planned spending may be reduced by 10% the following year. If the portfolio grows above its upper boundary, there may be an opportunity to increase spending if appropriate.

These are planning guidelines, not guarantees. Markets, tax laws, personal circumstances, and assumptions can all change.

The value is knowing in advance how you may respond.

For households that appear to have accumulated more than they're likely to need, the conversation may then expand to three possibilities: spending more on themselves, potentially using funds to cover taxes associated with Roth conversions when appropriate, or giving money to family during their lifetime.

There is no universal right answer.

The important part is making the decision intentionally instead of allowing fear to make it for you.

Belief #3: Get the Investments Right and Everything Else Will Follow

I still believe in diversified, low-cost investing.

What changed is my understanding of how differently two people can react to the exact same market decline.

One person sees their portfolio fall and understands where the next several years of retirement income may come from.

Another immediately wonders:

"Am I going to run out of money?"

"Will I have to go back to work?"

"Should I sell before this gets worse?"

That's why retirement planning can't begin and end with portfolio construction.

We spend time rehearsing difficult situations before they happen. We call these conversations "lifeboat drills."

What happens if markets fall?

Where does your retirement paycheck come from?

Would spending need to change?

If so, what might that adjustment look like in actual dollars?

We also discuss what we call a "war chest"—safe assets such as cash and bonds intended to help fund portfolio withdrawals during market declines.

Within our bucket approach, we generally plan for around five years of spending needs that must come from the portfolio to be covered by this portion of the strategy.

Again, that's our planning approach, not a rule that applies to everyone.

There's also an important distinction between risk capacity and risk tolerance.

Risk capacity is what your financial plan can withstand.

Risk tolerance is what you can emotionally withstand when markets become volatile.

Those aren't always the same.

Someone may have enough assets to accept more investment risk financially, but if a significant market decline causes them to abandon the strategy at the worst possible time, that matters too.

More wealth can give you more choices.

It doesn't automatically mean you need to take more risk.

Belief #4: Taxes Are Something You Deal With in April

Earlier in my career, taxes were largely viewed through the annual tax-return cycle.

Gather your documents. File the return. Find out what you owe.

Today, I think that's far too narrow for retirement planning.

For some households, projected federal and state taxes and Medicare-related surcharges over a multi-decade retirement can represent a substantial expense.

That's why we focus on lifetime tax projections.

We first estimate what could happen if someone continues on their current path. Then we compare that with alternative planning strategies.

Of course, these projections depend on assumptions.

Nobody knows exactly what tax rates will be five, 10, or 20 years from now. Tax laws can change, investment returns can differ from projections, and personal circumstances evolve.

But comparing reasonable scenarios can still reveal important planning opportunities.

One period that deserves particular attention is the window between retirement and required minimum distributions.

Depending on someone's income and tax situation, these "gap years" may create an opportunity to evaluate Roth conversions.

But more isn't automatically better.

You can potentially convert too much just as you can potentially convert too little.

The question is whether paying taxes today may produce a better projected result than paying taxes on future withdrawals.

And there's another issue married couples frequently overlook: the potential tax consequences after the first spouse dies.

A surviving spouse may eventually file as a single taxpayer while still receiving substantial income from Social Security, pensions, and retirement accounts.

Those years need to be included in the analysis.

So do the beneficiaries.

If your children are expected to inherit a large traditional IRA, their potential tax situation may also be relevant to your legacy strategy.

Retirement tax planning isn't just about what you owe this April.

It's about understanding how today's decisions could affect decades of future taxes.

Belief #5: Retirement Is Mainly a Financial Decision

One of the earliest clients I helped retire sent me an email about 18 months later.

He had taken the trips.

He had gone fishing.

He had finished the honey-do list.

Then he asked:

"Now what?"

Money wasn't his problem.

He needed something meaningful to do with his time.

Work had provided structure, relationships, responsibility, and people who depended on him. Retirement removed much of that almost overnight.

That's why today, alongside financial questions, we ask something else:

What do you actually want your days to look like?

What does your ideal week look like?

Who do you want to spend time with?

What do you want to learn?

What activities or organizations do you want to become involved with?

For married couples, both spouses should think through those questions.

One person may imagine traveling every month while the other wants to spend more time at home with family.

That's an important conversation to have before retirement begins.

You don't need to map out every year of the rest of your life.

But retirement needs something beyond the first few vacations.

Your Retirement Number Is Only the Beginning

If you've accumulated $1 million, $2 million, $3 million, or more, you've already accomplished something significant.

But reaching a financial milestone doesn't automatically answer the questions that determine what retirement may actually feel like.

How much can you reasonably spend?

What will you do during the next major market decline?

How could taxes affect your retirement over several decades?

What happens financially if one spouse dies first?

And perhaps most importantly:

What do you actually want to do with the time you've worked so hard to create?

Those are the conversations I've learned matter most.

Your retirement plan shouldn't simply be designed to help you accumulate the largest account possible. It should help you make informed decisions about your income, taxes, investments, family, and the life you want those resources to support.

One Number You May Still Be Missing

If much of your retirement savings is held in a traditional IRA or other tax-deferred accounts, there's another number worth understanding:

Your potential future tax bill.

Required minimum distributions, Social Security income, pensions, Roth conversion decisions, and the death of a spouse can all affect the taxes you may pay throughout retirement.

Watch the full video to see how these pieces fit together—and why retirement planning doesn't stop once you've reached your number.

Conclusion

Fifteen years of working with retirees changed how I think about retirement.

A large portfolio doesn't automatically create confidence. Conservative spending isn't always the same as financial safety. A good investment portfolio can't solve every retirement problem. Tax planning shouldn't be limited to April.

And retirement itself is about much more than money.

The goal isn't simply to reach a number.

It's to understand what that number can help you do—and make deliberate decisions about the life, family, and legacy you've spent decades building.

Transcript: Prefer to Read — Click to Open

Danny (00:00.258)

Fifteen years ago, I thought a client with three million dollars had pretty much finished their journey. The hard part was over. They had saved enough, they could retire, and we’d manage the investments, help them take money out, and that was pretty much it. But then I started watching what actually happened. People with three, four, or even five million dollars were still afraid to spend.

Some kept working, even though the numbers said they could retire. Others spent so little their accounts just kept growing and growing. And along with those accounts, their future tax bills kept growing as well. These were disciplined people. They’d done well, but they still had questions that a bigger account balance wasn’t answering. So today I want to walk you through the five things I believed when I started my career that I no longer believe.

And I look at very differently now. And more importantly, I want to show you how we approach those decisions today. Hey there everyone. My name is Danny Gudorf, a financial planner and owner at Gudorf Financial Group. We are a total wealth management firm that has certified financial planners, estate planning attorneys, and tax repairers all under one roof, working with retirees just like you every day. The first belief was that reaching a certain number meant you were ready to retire.

For me, that number was $3 million. Now, if you’ve saved that much, you’re obviously done a lot right. But before I can tell you what retirement actually looks like, I need to know two things from you. How much are you spending and where is your money located? A lot of our clients here in Dayton, Ohio have spent 30 or 40 years putting money into their 401ks and IRAs. They retire, then they roll it into an IRA.

And now most of their savings is sitting in that one tax bucket. They see $3 million on their account statements, but that doesn’t mean they have $3 million available to them to spend. They still owe income taxes as that money comes out of those IRA accounts. So we start with three questions. What are you spending today? And what do you actually want to spend in retirement? And how much money do you have?

Danny (02:20.512)

In each of those three different tax buckets. Those are taxable, tax deferred, and tax-free. Now we have something we can actually work with. Because a couple spending $7,000 a month has a completely different set of decisions than a couple who’s spending $20,000 a month, even if both couples have the same exact account balances. And many of our clients are financially conservative.

They’re teachers, they’re engineers, they’re business owners. They’ve spent their entire lives living carefully below their means. Getting to three million dollars doesn’t suddenly make them comfortable spending it. I’ve watched clients continue accumulating money well into retirement simply because they never needed to take much out. Eventually, we’re looking at larger required minimum distributions, higher taxes, and potentially.

A lot more money going to the next generation than was originally attended. Now, that may be your goal, and that may be exactly what you want, but we need to make that decision intentionally. How much of this money is for you? How much do you want to leave to your kids? And what happens to the plan if one spouse passes away? Reaching your number doesn’t answer those questions. The second belief was that being conservative.

Always meant being safe. Being careful is what helped many of these families accumulate the money they have. I’m certainly not going to tell them that was a mistake. But I’ve sat across from clients spending seven to ten thousand dollars a month when their retirement plan could support something closer to twenty thousand a month. And even in that situation, they’re still asking me if they can afford to take this trip or give this money to their kids. Think about that.

You can spend 40 years training yourself to save every single dollar that comes in. That habit doesn’t disappear the day you retire. So part of our job is showing people what they can reasonably spend and just as importantly, what would cause us to change that amount. We do that with something we call our retirement income guardrails. Think about driving up a windy mountain road.

Danny (04:42.902)

Some roads have guardrails on them and some don’t. I know personally I feel a lot better when there’s a guardrail there. We use the same idea with your retirement income. We establish an upper and lower guardrail around your portfolio. And as long as the portfolio stays between those boundaries, you continue taking your target retirement paycheck. That’s the monthly income coming from the portfolio.

Under our guardrail rules, if the portfolio falls below that lower boundary and stays there for more than 90 days, we decrease the plan spending by 10% the following year. If the portfolio continues to grow above the upper boundary, we may be able to increase the spending if that’s something you want. Of course, we’re making assumptions about the future. We still review the plan, but now we have an actual process to follow. You know ahead of time.

What we’re going to do if things change. And I found that when clients can see those rules ahead of time, they become much more comfortable actually spending their money. For households that have more than they’re likely going to need, we usually talk about three different options. The first option is just to spend more money. Take the trip you’ve been putting off, fix up the kitchen, do something you wanted to do. Second, we could use some of that money.

To help pay the taxes on Roth conversions, if the math supports doing it. And third, start giving some of your money to kids or grandkids now while you’re alive and you can actually see them use the money. You don’t have to do all three, and you may be perfectly happy with what you’re currently spending and decide that you want to leave more to your family. That’s completely fine. Everyone has to make their own decision for themselves. But dying is

With a mattress stuff full of money, isn’t winning the retirement game either. If you spent this entire time afraid to use it. The third belief was that if we got the investment portfolio right, that would take care of most of the problems. I still believe in low-cost diversified investments, that part hasn’t changed. What changed was watching clients go through market declines. The same market could fall for every one of our clients, but their reactions

Danny (07:03.896)

Could be completely different. Some understood exactly where their income would come from, others immediately started worrying that they were going to have to go back to work or they’d run out of money. So we started spending more time rehearsing those situations before they happened. We call them lifeboat drills. We walk people through questions like: what happens if the market drops? Where does your retirement paycheck come from? Would we need to adjust your spending? And if we did,

What would that adjustment actually look like in dollar terms? Part of that conversation is what we call your war chest. That’s the money we’ve set aside in safe assets like cash and bonds to help you take your withdrawals from during a market decline. In our bucket approach, we plan on having around at least five years of spending needs that needs to come from the portfolio covered by this part of the strategy. We also look at two different types of risk.

Risk capacity and risk tolerance. Risk capacity is what your finances can handle, your actual retirement plan. Risk tolerance is what you can emotionally handle when you see your account dropping in those times of turmoil. Those are not always the same thing. You may have enough money to own more stocks, but if you can’t sleep at night when the market falls, then we have to account for that as well. Having three or four million dollars can actually give you.

More room to choose. You don’t automatically need to take on more risk just because you can afford to. The lifeboat drills take us through and talk us through those decisions while everyone is calm. That conversation is much easier before you’re watching the market fall. The fourth belief was that taxes were something you dealt with in April. You gathered your documents, you filed your return, and then you found out how much you owed.

But then I started adding up what a family might pay in taxes across the 30 or 40 year retirement. For some households, that projected tax bill rivaled just about everything else they would spend in retirement. So today we run lifetime tax projections for our clients. We start by looking at the current path, and if you keep doing exactly what you’re doing today, what

Danny (09:26.968)

Do we project that you would pay in federal, state, and Medicare surcharges over the course of your retirement? Then we compare that with different planning strategies. Now we’re making assumptions. Nobody knows exactly what tax rates will be five, ten, or even twenty years from now, but we can use some assumptions on both sides and compare the different approaches. One period we pay very close to attention what’s called your gap years.

That’s the window between when you retire and the age when you’re required to start with your RMDs. Depending on your other income, those years may give you an opportunity to do Roth conversions. And there is such a thing as converting too much. There’s also such a thing as converting too little. Our job is to try to find that sweet spot. What will you pay in taxes to convert the money today? What could future withdrawals cost you? And who will

Will eventually inherit this money. A Roth conversion doesn’t make sense for every household if the math doesn’t support doing it. But we should be comfortable saying that. We also need to spend a lot of time looking at what we call the widow’s tax trap. After one spouse passes away, the surviving spouse may eventually be filing taxes as a single taxpayer. The tax brackets get smaller, but that surviving spouse may still have.

Substantial income coming in from Social Security, pension, and your retirement accounts. If that person lives another five, seven, or even ten years longer, those years matter. And we need to account for that in your tax projection. And there’s a practical side to this too. Does each spouse know where all the accounts are? Have we checked the account titling and the beneficiaries against your estate plan? Do we actually have a relationship?

With both spouses. The last thing we want is a surviving spouse trying to figure all this out during that time of grieving. That can make major mistakes. Then we look at the kids. If you’re planning to leave your children a large traditional IRA, their tax situation belongs in the conversation too. You simply can’t answer all of these questions by looking at what you owe in taxes in April. And that brings me to my fifth belief.

Danny (11:51.286)

I used to think retirement was mainly a financial decision. I remember one of the first clients we helped retire. About 18 months later, he sent me an email. He said, Danny, I’ve done the trips, I’ve done the fishing, I finished the honeydew list. Now what? That struck with me. He had more than enough money, money wasn’t the problem. He needed something meaningful to do with his week. Work had given him a schedule.

People had depended on him, he had relationships, responsibilities, and things that filled up his day. Retirement took a lot of that away almost overnight. So today, alongside the financial questions, we also asked something else. What do you actually want your days to look like? What does an ideal week look like for you in retirement? Who are you spending time with? What do you want to learn? What do you want to get involved in? And if you’re married,

Both spouses need to answer those questions because one person may picture traveling every month, the other may picture staying home and spending more time with the grandchildren. You want to have that conversation before you retire. You don’t need to map out the next 20 years of your life, but you do need to think about beyond those first few trips. So if you’ve accumulated one, two, three, or even four million dollars for retirement, give yourself some credit.

You’ve done a lot right. But reaching this milestone doesn’t mean you’ve answered every retirement question. What can you actually spend? What will you do when markets fall? And what could you pay in taxes over your lifetime? What happens if one spouse dies first? And maybe most importantly, what do you actually want to do with the time you’ve worked so hard to create? Those are the conversations we spend our time on now.

And if most of your savings is sitting in a traditional IRA, there’s one more number I think you should understand. Your future tax bill. In my video here, how a $1.3 million IRA turned into a $2.3 million tax bill. I walked you through exactly how those taxes can build up in retirement. Click the video next. I’ll show you how required minimum distributions contribute to the total and where tax planning.

Danny (14:14.392)

can make a major difference.

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