transcript
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Episode #540 - I’m Afraid To Buy Stocks In Retirement! What Should I Do?
Roger: The show is a proud member of the Retirement Podcast Network. Today's show is dedicated to you having the confidence to not just survive retirement, but really lean in and rock it.
Hey there, Roger Whitney here. By day, I am a practicing retirement planner with over 30 years’ experience, founder of Agile Retirement Management. And for the last 10 years or so on this show, we've hung out weekly to focus on not how just to be amazing retirement planners, how to have a process in place so you don't have to make this your second job and you can actually go create that great retirement with confidence.
Today on the show, we're going to do a mini case study based off of a question of how I get back in stocks when I'm worried about the markets after retirement, a question from James. In addition to that, we're going to answer some of your questions. Plus, we're going to have it in the news segment related to AT&T's data breach.
I got one of those letters, so we're going to talk a little bit about identity protection.
Now next month, because this is the last week of the month, right? In June, we have our next Retirement Plan Live case study with Mike and Judy. Mike doesn't have social security and what they want to know if they can afford the lifestyle that they would like in retirement.
That's going to be really exciting. I've had a lot of conversations with Mike and Judy. They're a fantastic couple. I think this is going to be a good one. If you want to receive weekly updates with recaps of the show, resources that we mention on the show, as well as some exclusive content, in this case, related to Mike and Judy, sign up for our 6-Shot Saturday email, and you can do that at rogerwhitney.com. That way, once a week, you'll get an email with a recap of everything and links to some of the stuff that we talk about.
With that out of the way, let's get to James’ question about getting back into stocks.
PRACTICAL PLANNING SEGMENT
I got an email not that long ago from James about questions around reallocation and equities.
How much, basically, how much risk do I need to take? I can't get myself to take what I think I'm supposed to. Let me read some of James question here.
"Hey Roger, I'd like to get your input on how to get a better long term asset allocation and withdrawal strategy in place."
So, James gives me a little bit of a short background.
"I am retired about a year. I'm 65, planning to take Social Security at age 66. My wife retired. She's 62. We both have pensions. Currently our income is 54, 000. Combined income, once all of our income sources get turned on, I'm assuming pensions and Social Security, will be approximately 120, 000."
They get 120, 000 in income from basically social capital, and then James goes on and says,
"Our core living expenses are about 97, 000 a year."
Then he says he's doing some Roth conversion to keep under IRMAA, et cetera.
James says,
"Here's my dilemma. When I retired, I wanted to remove some volatility from my portfolio and ensure I have enough money to cover expenses for at least three years. I shifted my portfolio to all fixed income, terrible idea in hindsight. We have about 2. 4 million split evenly between taxable and tax deferred, all earning about 5%. This more than covers my income needs. So, I'm looking to restructure, but I can't pull the trigger on going back into stocks.
Classic problem, I guess. I recognize that I need equity exposure to combat inflation over the long term. I have a preferred asset allocation of roughly 40 percent stocks and 60 percent bonds, but I'm nervous about the recent soaring stock market and taking a huge sudden decline in my portfolio if I get to that allocation.
What would you recommend related to this approach?"
James, there's a lot to unpack here. So, let's start off with my first observation is that I want you to question a premise that you have in your statement. That is, you say, I recognize I'll need some equity exposure to combat inflation over the long term.
Will you? Do you need equity exposure? Is inflation an issue for you? A serious question. It's a premise, because it's normal that we know that inflation will eat away at the purchasing power of interest rates, and equities can be a very good hedge against inflation for longer periods of time. But do you need that hedge?
That's an important question to examine. The way that you can go about that is to build a process to see if you're so overfunded that you could afford not to take equity risk. Yes, the purchasing power of your pensions and your assets may degrade over time, but you have so much in excess assets relative to your spending and income that it doesn't really matter.
All that really means is you're going to have less money when you die, or less money for your heirs, or for gifting. Maybe some less money for spending shocks, but you still may have enough money to cover that.
I think I would question that premise and see if you really need to take equity risk to have a plan that you can have confidence in. If it costs you 97, 000 a year to live and your asset allocation, you have a preferred mix of 40 percent stock, 60 percent bonds. I'm not sure how you got to that, but I want to talk about a little background, James, to give you some concept of when we think about asset allocation. It's good to revisit this.
Okay. So where does this concept even come from? Why are we using asset allocation and talking about 60 stocks to bonds, etc.? We take this as what we're supposed to do and, in our saving, and accumulation years, we probably filled out a risk tolerance questionnaire to suggest an allocation and then we implemented it in our 401k.
But where does that always come from? Where does that come from? So, a little bit of background. All that comes from a theory called modern portfolio theory. Harry Markowitz won a Nobel prize for that. It became institutionalized in investment portfolio construction, usually in the 70s, when 401ks became much more popular when ERISA, which is the regulatory structure around managing 401ks, came into place.
Asset allocation became codified, if that's a word, as a best practice in putting together a portfolio for retail investors. How does asset allocation even work? It's important to understand a little bit of background of it as it relates to you, James, and think about what your allocation should be.
Asset allocation is attempting to optimize a portfolio. Okay, great. Well, what are we optimizing the portfolio for? We're optimizing the portfolio based off of, for a given level of risk, a rational person would implement the most efficient portfolio to get the most potential return for that given level of risk.
Conversely, if we have a given level of return that we would like to try to hit, a rational person will optimize a portfolio to minimize the risk for that given level of return. That is what a rational person would do. So how do you go about doing this? This is the work of Harry Markowitz and many others asset allocation.
To come up with the proper allocation between stocks and bonds, let's just use that as an example. What are your possibilities with stocks and bonds? If those are the two assets you have, well, you have 0 percent bonds and 100 percent stocks on one extreme, and then 100 percent bonds and 0 percent stocks on the other extreme, 50 and 100 of one or 100 of the other.
If those are two extremes, what are the optimal portfolios along that spectrum of those two extremes? The way asset allocation is practiced is they have you take a risk questionnaire. You probably have filled one of these out, usually five to 10 questions, sometimes in just not numbers, but how would you feel if your portfolio went down by 12 percent or whatever, and then you would rate your feeling on that. What's happening in the background with that is they're scoring each one of your answers and putting a number value to it to come up with your risk score. Then they're going to what's called an optimizer, which says, okay, if James here is investing in stocks and bonds and he's going to implement the most efficient portfolio, what would be the mix of stocks and bonds based on his risk score to try to optimize returns? What goes into that optimizer, this is a little bit of a geeky hat, but hopefully this makes sense for you. There are three inputs that are going to be needed to figure out the most efficient portfolio in this example, we're going to need to know, well, what is the average return that stocks and bonds would give us over time?
All right, we can look at history and say, on average, stocks give us 10%. On average, bonds give us 5%, right? Well, that's not enough. We're talking about risk here, and we need to measure risk to know how much risk they give us. Stocks give us more return, but do they have more risk? In investment management parlance, we equate risk to what we call volatility.
In statistical terms, that would be standard deviation. All that really means is how much it bounces up and down around the average. So, a simple example that has always made sense to me anyway, is in Fort Worth, our average temperature is roughly 72. But if you look at a year's time frame, we can have multiple days in the hundreds, and we can have multiple days in the 20s or 30s. There's a lot of volatility or standard deviation around our average temperature of 72.
Whereas, if you look at San Diego, their average temperature is about 72. But if you look at 12-month period, they may have multiple days in the 80s, maybe 90, and multiple days in the 40s, maybe 50s. So, their standard deviation is a lot smaller around the average than it is for Fort Worth. That's essentially how we measure risk in investment management.
We need to know the average return for stocks and the average returns for bonds. We need to know their variability. how much they go up and down. And then one last thing we need to know is how do they act together? When stocks go up, do bonds go up in an equivocal amount?
Do they go up when bonds go up or do they go down? Do they move together or do they move opposite or is it somewhere in between? With those three inputs into this optimizer, what you can create is what's called an efficient frontier, which is the mix between stocks and bonds. all along the spectrum of expected return or expected risk level.
If James says, “I don’t want more risk than this, based on volatility”, you could go along that efficient frontier, and it would tell you the mix that the optimizer would recommend in terms of asset allocation. Okay, you should be 40 percent bonds, 60 percent stocks. Or if I want this expected return, then it will tell you the portfolio mix that would give you that expected return, statistically, we're talking, and minimize the risk in terms of volatility. That's essentially how asset allocation works.
But does that make any sense in retirement? Because nowhere in there did, I talk about, well, I need to take money out every year, and I can't afford to have bad risk early. This works really well for optimizing portfolios when there are very long-term time frames in accumulation.
In fact, a lot of the studies back then related to this weren't with retail investors, they were pensions and foundations, etc. So that's where this asset allocation structure comes from, James. I think it's important to understand that because here's how I would suggest that you look at this.
I would suggest you look at your investment portfolio from the perspective, what's the minimum effective dose of risk, we'll call that volatility, that you need to support the lifestyle that you've defined in your plan.
In this case, you defined it as 97, 000 a year, inflation adjusted. What's the minimum effective dose. that I need to reasonably expect that I can achieve that even with bad markets, even with inflation, etc. Doesn't mean that you're going to implement that portfolio, but I think that's a better starting point than some risk tolerance questionnaire or preconceived notion that doesn't have any basis to what the problem is.
You know, most likely you're not going to implement that. I did a very rough feasibility study, James, given the numbers that you gave me. Obviously, I made a lot of simplifying examples because what you gave me is what I read, and my initial feasibility study says you don't have to own any stocks if you don't want to, and your plan is feasible, meaning that inflation would eat away at maybe your pension and your investment assets because you were all cash. It was like a 99 percent probability that even with bad outcomes, you would still be okay. So, you're massively overfunded, meaning that you could probably not take any equity risk at all and never have to worry about it.
I actually had a client years ago. I was very young in my career. David went to Iowa. We always got into football talk because of big 10. For a while I was implementing and suggesting and recommending asset allocation and having equities, et cetera. He just couldn't handle it. He hated it. And it got to the point where I had to figure this out.
Well, but this is what the best practice is. It took a journey to realize David and his wife, the way they live, what they want out of life and the assets and the income sources they have, they don't have to buy stocks ever, so they started to buy CDs and more CDs. Finally, it was like, David, just go do that.
You don't need me. You don't need all this equity risk. You don't want it. You're okay giving up any upside because you know, you've done the work to say that you don't need it. He wanted the minimum effective dose of risk.
Now most of us don't for other reasons, because maybe bigger spending shocks or perhaps we want to build our resources for inheritance or build our resources so we have more options for goals that we might want that we don't even know what that we might want five or ten years from now, maybe we're younger. You know, just like the minimum effective dose of risk for driving, even if you're going to drive is to go like 10 miles an hour, if everybody drove 10 miles an hour, the risk of driving and the casualties and the injuries that would happen from driving would go almost to zero. But we choose to drive 65 on the highway, even though we know we could decrease the risk dramatically if we didn't, because we want to get places faster, and it would go too slow, and we want to be good stewards of our time.
Well, you're likely not going to implement the minimum effective dose of risk, In this case, James, because you want to be a good steward of the money. You don't just want to bury it. So, I just want to challenge you to go through a process so you can see what risk you need to take and stress test that against higher inflation, etc. Because you may be well overfunded, and then you can proactively choose to take investment risk because you want something more. I think that's a healthier way to approach this subject.
All right. So, you didn't ask that question, but I think it's really important because that premise is forcing you into a decision set that seems to be very uncomfortable for you. If we go with my premise that, Hey, it sounds like you're well overfunded. Don't be in such a rush to feel like you have to get your asset allocation. If you don't feel comfortable, You got time, but do your work to make sure that that's the case for you.
Now, once you get to trying to build out your income floor, because then you're the second part of your question is, what if I build out a five-year secure income floor? What do I do after that? I would say in your case, You might want to explore what style you have in term personally and how you want to generate income. This is some of the work that Wade Pfau and retirement researchers put together called the RISA, which is an income style assessment. It's basically a personality test that tries to help identify what is not just simply going to mathematically work for you, but what works for you personally, because it doesn't matter what the math says.
If you can't stick with it because you're just not comfortable with it, it's a mismatch. If you suck it up and go with the math, you're going to have a horrible experience and maybe bail. Good example. I don't like roller coasters anymore. Mathematically, physiologically, I can totally handle them, but I don't like them, so I don't go on them, even though physiologically I can totally handle it. I would suggest, James, that you take the RISA profile. We'll have a link to this in our 6-Shot Saturday email. It's not perfect, but it's a great basis for conversation so you don't feel pigeonholed into taking more risk getting on that coaster if you don't actually want to.
Then if you can couple that with the fact that you don't even need to, you can get something that's right for you. For those of you that are in the Rock Retirement Club, we've licensed RISA and incorporated it into the process because we think it is important that you match that style.
Let's assume, I'll back off a little bit on my soapbox there, James, and let's assume that 40 percent stocks and 60 percent bonds is your right allocation.
Accept that as facts and evidence. How do you get to that if you're 100 percent bond, given that you're nervous? Yes, you can dollar cost average. You can do it monthly. You can do it annually. Statistically, the numbers don't make much of a difference if the time frames are the same. My suggestion to you is to explore the things that we talked about. But if that's what you want to get to build out your five-year income floor, do that first and consider building it out to eight years. It doesn't sound like you really need much income from your assets, and then once you have that built out, start to implement it in a systematic way where you pre decide, and I don't really care if it's monthly, if it's quarterly, but take away this decision, because you're going to drive yourself badly.
When the markets go up, you're going to feel like you're missing out, so you can't do it now, and you're even more scared when the markets go down. Psychologically, you're going to, you're not wanting to do it because markets are going down and they might continue to go down, you're going to drive yourself batty. So, I would pre-decide one, how much do I want to have in equities? Then I know this is money that I'm not going to need for at least 10 years, and then just decide, and make it a systematic, and don't think about it anymore.
This gets a lot easier if you build a plan of record, because you've done the work in a systematic way, which is how I would suggest you do it.
IN THE NEWS
All right, in our In the News segment, I got a letter from AT&T.
"Notice of data breach dated April 25th, 2024."
This went out, I think, to over 70 million people. I could be wrong on that, but that's what I heard. Whether you got one or not, and I really hope you didn't get one, but whether you got one or not, I think this is important for all of us to think about.
I'm going to read excerpts of the letter related to the data breach. What I’m going to do about it and some other ideas for you and why I think this is important to you, whether you got this or not.
So, "Dear Roger, at AT&T, we take the security of our data very seriously. Some of your personal information was compromised."
This is like a four-page letter, so I'm just taking pieces of this out.
"We're offering you one year of complimentary credit monitoring, identity theft detection, resolution services provided by an outside service. This service is free for one year. But you got to follow the instructions."
Then it's in a Q&A format.
First question, what happened?
"Well, on March 26, 2024, we determined that AT&T customer information was included in a data set released on the dark web on March 17, 2024."
Ooh, dark web. That sounds scary, and it should be.
Next question. What information was involved?
The information varied by individual and account, so we don't know if my information was released, but may have included, so we don't know exactly what was included, first name, or full name, excuse me, email address, mailing address, phone number, date of birth, And social security number.
Oh, that's a big one. Oh yeah, and AT&T account number and password, so they reset our password.
"Based on our investigation to date, the data appears to be from June 2019 or earlier."
So, people that have been customers prior to June 2019, as far as they know. And then they're offering us complimentary credit monitoring, etc.
"Additionally, we launched a robust investigation supported by internal and external cybersecurity experts."
Holy cow! Full name, address, phone number, date of birth, social security number, all on the dark web. Which is, dark web is like this Internet web that is like behind the scenes that all the bad guys play on. Usually, you hear about with a child pornography and thieves of, well, data. So, this is out there. So, what that means for me as a recipient of this letter is that this is going to stick with me for the rest of my life. It's not like my social security number, if it was. Something that was released and we don't know if it was, probably never will know, will be on the dark web forever.
My understanding sucks. That's going to be, I have to worry about identity theft. Now, am I mad at AT&T? Not really, to be honest with you. I'm not. My guess is, as a public company, my premise is that they have a cyber security department and they focus on, they take security important, I believe they do, and they have external and internal people that work on this nonstop.
I've met with FBI agents that focused on this. I know somebody that was head of data security at a major credit card company. I've been friends with him for a year. They, these people take this stuff really seriously, but so do the criminals and it's like an arms race of back and forth. It's going to happen. If it hasn't happened to you, it's going to. And so that's why I think this is important for all of us of what do we do?
Well, we can't stop it, right? They can't stop it. It's just going to continue to be something that we have to manage as a risk, because we can't eliminate the risk.
What am I going to do? I'll tell you what I’m going to do and then we'll talk about some other things that I’m already doing so I don't need to add those in.
So, number one what I’m going to do is monitor my credit reports I've done that in the past but to be honest with you I got lazy with it. You get a free credit report from each of the three bureaus Equifax, Experian, TransUnion and I’ve gotten those before but I don't do it regularly. I should, because that's going to show you the entire credit history so you can look for things that are unusual and dispute them.
The second thing that I'm going to do is initiate fraud alerts with each one of those bureaus. It doesn't cost you any money. Usually, they last for about a year, and this will add an extra layer of security, protection where businesses are required to take steps to verify your identity and then you get some alerts.
I'm going to do that and I've never done that before just because I'm lazy and I don't think about this until I get a letter from AT&T, I guess. I'm going to do that.
The third thing that I'm going to do is I'm going to do an audit of all of my usernames and passwords. So, I use a password manager and we'll get into those here in a minute.
I have generally had very complex passwords because I keep them in a password manager. So, they're not like Roger 2000 or 1997. I don't reuse passwords very often, but I'm going to use my password manager to give me a report, which it can do of here are all the passwords that you haven't changed in a long time. Here are websites that we see as compromised. Here are passwords where you're using the same password on different sites. I'm going to prioritize all the different logins I have, because it's substantial when you start to add it up. I'm going to prioritize email, financial accounts, and then go down the list from there and update all of the passwords.
Next thing I'm going to do is make sure I have two factor authentication turned on the really important accounts. I generally do, but I want to go check that. So, two factor authentication, if you have not done it, generally every financial account asks you if you want to do it, which is essentially if you go and log in, say, on the website with your email and your password, Amazon's a good example.
Log in to Amazon. Put in your email, put in your password, and then it will send you a text with a code, and then you have to enter that code in order to actually log in. So, it sends you a verifying code to a separate device in order to log in, and that code changes every time. That's essentially what two factor authentication is, and there are different variants of that.
It helps when they get access to your email, but you're getting text and they don't have access to that, so I'm going to make sure that I have all those set out and I would encourage you to look at two factor authentication. So, what other things should you consider? I think using a password manager is good practice.
Now, I'm not a cybersecurity expert, and this actually, we have a question related to this from Andrea that just happened to come in. Maybe she got the letter too. I'm sorry, Andrea.
Andrea says,
"The passwords that I have for all my financial and other accounts are getting out of control. They are decent passwords in terms of complexity."
What we mean by complexity is you know, numerals, there's symbols, there's random letters. It's not just Roger 1997.
"But they are saved on my phone, which I know is not great, because my phone could get stolen. I have them backed up on a paper file, which doesn't seem safe either. I have heard you and others talk about password managers like 1Password, but how is this a safer option? Then all of my passwords would be in one place, which makes me nervous.
If I use something like this, aren't I exposed to the possibility of an unscrupulous employee, say at 1Password or LastPass or whomever, gaining access to all my financial passwords? Would love to hear your logic behind these sorts of password managers."
It's a great point, Andrea, in terms of password managers.
I use 1Password. No affiliation with them. We had them on long ago. Maybe I need to ping them and try to get somebody to come talk about this. My understanding with 1Password is that only I have access to the vault. So when I use my one password, which gives me the keys to the kingdom that gives me access to all of my passwords within the vault. Even 1Password employees can’t get in the vault and if I lose my one password, I can't remember what it was and I’ve had that happen before I went on vacation for a long time and I don't know what happened came back. You have to make sure something you can remember because if you forget your one password, you are locked out of that vault forever. You can't get back into it, is my understanding. But, Andrea, bad guys will be bad guys. So, yes.
The reason I still think it's good practice is, one, sort of like the driving a car thing. Yes, you can go slower and be more safe, not be online, but we all have to take 1Password is, one, it's very low friction in order to be able to log into accounts quickly, because I don't like friction, if you have complex passwords, symbols and numbers and letters, capital and lowercase, and they're 15 characters long, and there's a different one for each account or login, nobody's going to remember that, and it's a pain in the butt to type in if I kept it on a piece of paper, which you're right, isn't any safer. 1Password allows me to very easily generate these random passwords that I never actually know and keep them so I can log in very quickly using the widgets that they have. That makes it more complex in general.
Then if I forget a password, I can go through the forgot password protocol at whatever website and reset the password to whatever I want. So, it's not like if I forget the password, I don't have access to the account. The other thing that I like about them is this audit feature within 1Password, and I'm sure the other ones have something similar.
In fact, let me go to my 1Password. Let me open it up here. I'll just run my own little audit. All right, so I pulled up my 1Password application, used my 1Password and logged in, and I'm logged into what's called Watchtower, and it shows that there are two compromised websites. Data stored by these websites may have been compromised, so it's letting me know that and it's showing me what they are. There are 13 websites that are a little bit more unsecure, because there's just, we don't need to get into the technicals about that. Ooh, this is bad. I have 44 reused passwords. So obviously, I'm not always using complex passwords. There are 15 websites that have passkeys available that I have not activated. I don't even know what a passkey is, so I'm going to research that, because it will show you the items. There are 28 websites where they offer two factor authentication that I have not set up. So, here is an example. Then I have 44 weak passwords.
Ooh, not good. But it actually says my overall score is 872. I don't know what that means, but it says it's actually pretty good because I have a lot of different things that log into. So that's, I think, Andrea, the benefit of that, that you're not going to get with writing it on paper or keeping it on your phone. Which is arguably no less safe than using one of these password managers.
We'll continue to have more on this topic and maybe we'll get an expert in to have a chat about cyber security because I think it's an important topic, but that's what I'm going to do with my letter from AT&T.
With that, let's get on to answering some of your questions.
LISTENER QUESTIONS
Now it's time to answer your questions. If you have a question for the show, you can go to askroger.me and type in a written question or leave an audio question or just say hi and we'll try to help you take a baby step towards rocking retirement.
HOW DOES MOVING A 529 INTO A ROTH IRA WORK?
Our first question I didn't put in the answer, but I didn't add the question. I'm sorry I can't mention your name, but it was around how does it work in moving a 529 college savings plan to a Roth IRA. It was related to that, so let's talk a little bit about that. We'll have a link in our 6-Shot Saturday email to a Schwab article that walks through this.
Back when they initiated Secure 2.0 Act, they had a provision in there that allowed unused 529 plans to be converted to Roth IRAs for the beneficiary. Pretty cool, right? To help kids get a step up on their Roth IRA retirement savings.
So how does this work? So first off, the 529 needs to have been owned for at least 15 years before you execute the rollover. If you have a 20-year-old that would have had to been started when they were four or five, even to be eligible to be able to take money from a 529 savings plan and move it to a Roth IRA. Second, assuming you have a 529 that's been around for at least 15 years for the beneficiary and it's not going to be used for college, the annual limits of the movement of 529 plan to the Roth IRA for the beneficiary is the annual contribution limit that's normally in effect.
For 2014, that would be 7, 000. So, let's say you have 40, 000 in a 529 plan. The account's been open for 15 years. You can only move 7, 000 in 2024 from the 529 plan to the beneficiaries Roth IRA. Over the lifetime well, there's a lifetime 35, 000 limit in what you can convert. So, you'd have to do that on an annual basis until you hit that 35, 000 limit.
Then lastly, the beneficiary of the 529, must also be the owner of the Roth IRA, and they must have earned income at least equal to the rollover. If you open up a Roth IRA for Johnny at age one and at age 17, 16 years later, there's a bunch of money in there. So, we meet the 15-year requirement. They can do 7, 000 into a Roth IRA at age 17. If they don't have the earned income, you still can't do it, and it has to be for Johnny. It can't be for some other non-beneficiary of the account.
We'll have a link to this article that gets into the details. It sounds really cool and it definitely can be helpful. It's not going to be game changing, but it's definitely one of those tactical things that you might be able to pick up.
HOW TO KNOW IF JOHNNY SHOULD BE LOOKING FOR ANOTHER FINANCIAL PLANNER?
Our next question comes from Michael related to a large firm financial planner.
Michael says,
"Hey Roger, just started listening three months ago and I'm hooked."
Awesome.
"I've been burning through your episodes on my hour commute each day."
Ooh, not so awesome, but at least you're being productive, Michael.
"I'm 57, plan to retire in five years. My wife and I have about 2 million in 401k, 403b IRA assets. We have some pensions. I've been using Fidelity as my financial retirement planner for over 20 years. I've recently received a more dedicated planner at Fidelity, and we talk every six months. I feel comfortable with them, even though I know they are commission based, which you don't recommend.
Just wondered if I'm missing out on exploring other options with my planner, even though I'm comfortable at this time."
First off, the commission thing. It's more about following incentives. There are fantastic planners that earn commissions, so it's just an incentive thing. If you are a fiduciary advisor and you charge an asset under management fee, or you recharge a retainer fee, There's still going to be some conflicts there, so it's more about managing the conflicts and disclosing them. Then what's better.
Where might you be missing something? Well, the most important thing that I heard is you're really comfortable with the setup. It sounds like it's working for you. You're five years out from retirement and they definitely work much better in accumulation in my opinion, then when you get to retirement, it sounds like it's working with you and you're very comfortable with them. That goes a long way in my book, Michael. Doesn't matter what size firm they're at.
What might you be missing? They're probably doing relatively well in vision and what are my goals? Probably doing really well in is this feasible? Using software tools to say you're on the right track, the fidelity line that they talk about. They're probably weaker in resilience in building out specifically the cash flows and how you're going to pay for it from the bottom up. Usually that's a lot lower resolution, and they're probably decent in the tactical end of it. If you have a proactive planner and talk about, you know, Roth conversions, how these rules work, etc. In the tactical realm where they're probably weaker is on tax consulting or forecasting.
To be honest with you, I'm not an expert in it either and the smaller firms are working to be more cognizant of the tax rules. That's one of the bigger levers in retirement is multiyear tax planning, not really doing tax returns. That's generally where large firms are weakest mainly because of compliance concerns where they're just not allowed to do it. They're not allowed to talk about alternative assets which it doesn’t sound like you have any real estate and businesses and things like that. But they're probably pretty good in the vision, and in the feasible stage, and on the investment end of it.
The other part that maybe you're missing is more of the holistic stuff, but that's even a bigger subset, life coaching and decision analysis.
Is that enough to make you go look further? I don't know if it is, and at risk of talking my own book, meaning talking about something that I offer? I think the Rock Retirement Club is a great supplement for somebody that's working with an advisor, because you're going to be surrounded by hundreds of people very much like you, some of them working with advisors, some of them not, and you're going to have a safe place to see how other people are doing it and see our process and you can actually build your own concurrent plan that walks through a lot of the details that you can end up having more robust future discussions with your advisor and at a hundred bucks a year, I think that's a reasonable cost to get more value out of your advisor. Again, that's sort of talking about my book.
I don't think that there's a big issue there, especially since you're becoming more educated so hopefully, you're bringing up some of these topics around making it resilient and pie cakes and tax management with them, which is going to make them better too.
With that, let's go set a smart sprint.
TODAY'S SMART SPRINT SEGMENT
On your marks, get set,
and we're off to take a baby step that you can take in the next seven days to not just rock retirement, but rock life.
All right. In the next seven days, take 30 minutes and think about your passwords, how you're going to protect yourself. We'll have a resource in 6-Shot Saturday. I'll share something with Nichole to make sure we put it in there that will at least give you some framework of things to think about.
But just take 30 minutes and come up with a couple actions that you can do. We all have 30 minutes during the week.
Now if you want extra credit, and I know you all love extra credit, is if you have elderly parents, start to think about how you can help them because they're going to be most vulnerable to a lot of this stuff and AI and deep fakes and voices and things like that, which we didn't even get into today, it's going to be even harder for them.
CONCLUSION
Sorry, I didn't answer a ton of questions today. My voice is really gone. It's been a really stressful day, to be honest with you. Had, you know, a slight medical mishap with some crazy vertigo that hit somebody close to me and that's scary. I didn't know that was a thing and literally went to the hospital and they did a couple movements. There's a name for some way you move the crystals in your ear back in place and they were just fine, but still pretty scary. Never had someone I love in an ambulance like that before. So, voice is gone, a little stressed out.
Hopefully you found this of value. Everybody's fine. I hope you have a wonderful day and never experience that.
The opinions voiced in this podcast are for general information only, and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal tax or financial advisor before making any decisions.