Retirement Pro: Think Cash Flow, Not Rate of Return

This is an excerpt from the video titled Think Cash Flow, NOT Rate of Return with Lynn Dolan at ETFguide and Mark Mappa, CFP and Author of Cash Flow is King.

Lynn: Cash flow is important for everyone. But it’s especially important for retirees as income from working turns off and income from retirement savings turns on. Here to discuss that is Mark Mappa, author of Cash Flow Is King: Think Cash Flow, not Rate of Return— You can’t spend Rate of Return! Mark holds 8 professional designations, including the CFP. He’s a fiduciary and the president of Mappa Wealth Management. Nice to have you with us Mark, welcome to the program. One of the most important retirement planning concepts you stress in the book is that people should think about cash flow, rather than their portfolio’s rate of return. What do you mean by that?

Mark: Thank you for having me, I’m excited to be talking with you today.

Lynn: Awesome! Among the worst retirement planning blunders a person can make is outliving their financial resources. It’s hard to go back to work when you’re 80 and you’ve run out of money. How can people avoid this fundamental mistake?

Mark: Correct. So everything we do revolves around cash flow and cash flow matters a lot. I call cash flow our financial lifeblood. Cash flow allows us to pay our bills, pay our mortgage, save for our kids college, our retirement savings. We also use cash flow to invest and save for retirement. And if you’re a retiree, you’ve accumulated assets and the objective is to spend that money during retirement because you’re no longer working. So you want to maximize that cash flow and minimize your risk. The mindset should be cash flow and there’s a number of ways to make that happen.

The other thing to think about is when you’re saving and investing for retirement you also need to be thinking about cash flow. Many people are thinking about the rate of return they can get on their investment and how much growth they can get. But what people don’t realize is that dividends are a great source of cash flow. For example, if you own a stock or mutual fund that paid a 4% dividend and it had a 5% growth rate, that’s a 9% total rate of return. If the investment didn’t have any dividend, the entire investment would have to grow at 9% just to equal the investment that gave you some dividend cash flow.

Interest earnings is also a part of cash flow. Everyone’s heard about the benefit of compounding interest. The other thing I want to add is the S&P 500 during the past 80 years, 44% of the indexes’ total return was a result of reinvesting dividends.  So it’s a cash flow mindset that everyone should have regardless of what stage of their investment plan they are.

Lynn: According to, the US government has over $127 trillion in unfunded liabilities and it’s just a matter of time before there’s a major reckoning day and it will likely come in the form of higher taxes…and from a retirement planning standpoint, people that incorrectly assume today’s historically low tax rates will remain the same during their retirement could e in for a rude awakening when they realize their cash flow needs aren’t being met because taxes are devouring a larger portion of their retirement income. Am I being an alarmist or do you think this is a real risk facing retirees?

To watch the full interview of Think Cash Flow, NOT Rate of Return, visit ETFguide’s YouTube channel for more. 

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