Transcript:

[00:00:00] Voiceover: Welcome to the Life Unlimited Podcast with Larry Heller. You deserve complete financial advice so you can confidently live your life your way for life. Now let’s get into this week’s podcast episode.

[00:00:18] Matt Halloran: Hello and welcome to another Life Unlimited podcast with your host Larry Heller. Today we are gonna talk about the six retirement killers in Larry.

[00:00:26] Matt Halloran: Let’s start off right out of the gate here with a giving credit where credit’s due.

[00:00:30] Larry Heller: So this is an article I saw in Kiplinger Magazine, so I thought this is great ’cause they hit it right on the head with a lot. But I thought I would expand a little bit more and put a little bit some stories into this mix as well.

[00:00:44] Larry Heller: But, if you’re about to retire or in retirement, be aware of these six potential killers.

[00:00:51] Matt Halloran: I love the first one, uh, because this is where a lot of people, a lot of people don’t put enough value in this one. So let, let’s, let’s start with the plan.

[00:00:59] Larry Heller: this one is huge because if you don’t have a plan when you retire, you have no idea how much you can spend, how much you’re, you’re spending, how much you should, a lot of people come to us, they, they’re about to retire and they have no. No guidelines? No. uh, what is that? Gutters on the, on the, on the bowling alley side. So they’ve been getting an income. A lot of people have been working and they get the salary every week, every two weeks. And all of a sudden that’s gonna stop.

[00:01:27] Larry Heller: And now they gotta. Take [00:01:30] out money out of their retirement accounts. I mean, yes, they may have some social security that comes in on a, uh, reoccurring basis, but if you just haphazardly pull from this, and if you didn’t create a plan to see how much money that you can spend. A lot of times you don’t know if you’re gonna have a successful retirement, and it works both ways, whether you, you’re gonna have enough money and not run outta money.

[00:01:54] Larry Heller: One, but also maybe you don’t spend enough money in retirement, so the first thing is really worrying about. Not, having enough money, but it’s also spending enough money. When we put clients onto a written plan and they can see it, and they can see, okay, this is gonna work. Now they can relax a little bit more and they can feel confident that what they’re doing and what they’re spending and they’re not worrying about it, because I don’t care how much money you have the first year that you retire, and you’re definitely nervous about kind of, what am I doing?

[00:02:27] Larry Heller: How do I do it? Go through it. So having a written plan and it’s, I proven it’ll make, make you more successful, whether you’re retiring or not, having a financial plan will make you more successful.

[00:02:37] Matt Halloran: Just such a nice, you know, the gutters on a bowling alley, guardrails, you know, going down a highway.

[00:02:43] Matt Halloran: It’s just nice to know what your parameters are, so that you, as the financial services professional, can also make adjustments accordingly, in case there’s too much or too little, which really leads us into the next one, uh, which is. Man, Larry, people just don’t really understand how [00:03:00] the markets work.

[00:03:01] Larry Heller: Well, yeah, I mean, there, there’s a couple, you know, you know, overly optimistic investment assumptions is really you, you may be looking at your returns from the last year and saying, oh wow, this is a great year. I’m gonna get 15% every year on my, I’ll just keep the money in equities. Mm-hmm. And then, boom.

[00:03:20] Larry Heller: Then they go through a year where it’s down. Then they. Sell at the worst time to put it all in cash and then they miss the upswing on that. So really rather kind of be conservative when we create our retirement plan, a cash flow analysis, we use very conservative numbers in there because. Better having a surprise on the positive size.

[00:03:41] Larry Heller: Yeah. Than having a surprise on the negative side. So you don’t wanna, you don’t wanna just look at totally historical numbers. A lot of people, well, my bonds earned 7%. Well, Matt, what was interest rates a few years ago? I sure wasn’t 7% brother. It was close to zero, so you can’t just assume that you’re gonna be getting these year in, year out.

[00:04:06] Larry Heller: You’ve gotta kind of go through that and use an over a realistic ongoing amount. Also, what we do, which they didn’t mention in here, which is also could be one of those killers, maybe a seventh killer is the I word. Okay. What’s the I word? You’re on the spot. I’m gonna, I’ll, I’ll be out. Inflation.

[00:04:26] Matt Halloran: Oh, oh God, yes.

[00:04:27] Matt Halloran: Oh

[00:04:28] Matt Halloran: yeah. Holy Moses.

[00:04:29] Larry Heller: So, [00:04:30] non accounting for inflation when you’re doing both your written plan, but putting in your, numbers here as far as being overly optimistic or pessimistic, putting in a. Realistic inflation number. So making sure that you have the, the, the right numbers in there. And of course what we wanna do is we wanna kind of put a certain amount of money sitting in cash or CDs or treasuries.

[00:04:53] Larry Heller: and we’ve talked about our reservoir strategy numerous times, but if you have enough money to go, hmm, maybe 18. 24, 36 months, somewhere around there, depending upon what’s going on, that money should be sitting in a cash account. Now we’re getting a little bit higher rates of return as we’re speaking today in August, 2024, we’re getting 5%, but that may go down.

[00:05:17] Larry Heller: Mm-Hmm. So you gotta take that kind of out of the, out of the assumptions too. So when you’re putting together an asset allocation based upon a diversified portfolio, if you are missed by one or 2%. Over 20 or 30 year difference, that’s huge. That could mean the difference being whether you have a retirement plan that works or it’s not.

[00:05:38] Larry Heller: So make sure that you have realistic investment, projections in your plan.

[00:05:44] Matt Halloran: You know, I know that we’ve, we’ve talked about the moat in the reserve a number of times, but I, I just, I, I want to reposition that back to the overly optimistic investment inceptions, because again, the markets go up and down, and what a lot of retirees do is they’re plastered to the markets to [00:06:00] see what’s going on today when they know that they don’t have to sell.

[00:06:05] Matt Halloran: For 18 to 24 months, we know that that lowers their stress level and allows ’em to focus on what they should be focusing on, which is really living the retirement that they’ve dreamed. Now, you hinted toward this next one, which I think is number three, a little earlier, which is that they’re either, they’re, a lot of people are concerned that they’re spending too much, but you and I’ve had many conversations about this.

[00:06:26] Matt Halloran: Sometimes they’re just being far and away too frugal.

[00:06:29] Larry Heller: I would say that most people come in here and they, they’re planning on spending less than they actually can. They’re so nervous about it, and they haven’t run in numbers that they, they spend less, and when they hear, when they, we go through the plan and we show ’em the analysis and we show ’em the reservoir strategy, it gets them really comfortable.

[00:06:51] Larry Heller: So now they can spend more. So when they’re hearing me saying, you know, go ahead and spend more, sometimes we’re telling people they’re in a. Higher estate tax level. I said, if you don’t spend it, the government’s gonna come in and take another tax out of it. But yes, spending more so talking about that.

[00:07:09] Larry Heller: And a lot of it is kind of on the, the upbringing. We had a client in a few weeks ago, extremely successful, one of our biggest clients, and we were talking about her childhood and where she. Came from and struggled and poor. And so even though now that she’s got significant wealth, getting to do that, to get [00:07:30] out of that, background and what she’s used to, and we’re talking about years and years later, is a mindset.

[00:07:36] Larry Heller: But so you wanna balance both. On the other hand, there are some people that come in and say, well, I wanna do this and I wanna buy this house and this house. And I’m like, Hmm, you know what? Well look at the numbers and we’re showing that’s not gonna work. You now need to kind of look at pairing it, pairing it back, so not being too frugal, not being, you don’t wanna spend too much.

[00:07:55] Larry Heller: And then looking at this on an ongoing basis because life changes what you wanna do, what you wanna spend changes. Of course, health comes into play here. Health expenses come into play, So we have a couple of podcasts that we’ve done, Matt. So, uh, so there’s one we did on spending enough it called, um, are You Spending Enough Episode, episode 1 36.

[00:08:17] Larry Heller: so go back and do that. And when we were talking about the reservoir strategy, you can also look at our reservoir strategy, which was episode one 19. So two other episodes talking about retirement and kind of how to go about, doing it.

[00:08:29] Matt Halloran: You know, uh, tho those sorts of, uh, baggage that happens with a, a lot of people, especially when it comes to retirement money, how they’re feeling about money are, are things that financial advisors really have to be specifically trained to help manage.

[00:08:43] Matt Halloran: And, and I. I love that you have spent lots of time in your personal growth and education, learning how to manage some of the behavioral components of what it means to manage money. Because if not, what happens is, uh, if, if you don’t have an advisor who has the level of training and [00:09:00] experience that you do, sometimes they will just blindly trust them, which can be a huge, and it’s actually, you know, the next retirement killer.

[00:09:08] Larry Heller: So, uh, I remember early on I was working with a, um, divorce client. And, um, her ex-husband, did a, had his financial advisor do a retirement plan projection. And I remember the exact numbers that they were percentage, I think maybe he was using a 10% rate, could have been greater than that.

[00:09:28] Larry Heller: So in 25 years, they was showing that she was gonna have like. Millions and millions of tens of millions of dollars. And he was telling her, you’re gonna be fine Fon. Don’t worry about it. Look at this, look at this report. And I looked at it, I’m like, yeah, because those numbers are not realistic to get year in, year out.

[00:09:48] Larry Heller: I said, if we change it, we bring it back down a few percentage points and now we run it. Look at the difference. so you’re really the, the going about, we talk about the overly optimistic, um, investment options before, but really making sure that you’re not solely kind of. Relying on somebody out there who’s not an expert.

[00:10:08] Larry Heller: a lot of these programs are done by big brokerage firms, and they’re, they’re, they’re spit out and they’re not overseen by a qualified, certified financial planner. With experience and, and looking at this and looking at the financial planning side to really make sure the plan that you’re putting in place is reasonable,

[00:10:27] Matt Halloran: you know.

[00:10:28] Matt Halloran: They’re, [00:10:30] they’re, you know, a lot of people out there that say that they’re planners, uh, right. But they’re either wicked product specific focused or they’re these one page financial plans, which is not a real financial plan. And working with somebody who’s a certified financial planner. Who’s gone through that time and continuously doing all of the education can make a big difference.

[00:10:52] Matt Halloran: And you dove into this more deeply, um, in, in episode 1 54. Do you remember what that puppy was about?

[00:10:58] Larry Heller: Yeah. That was a kind of a deep dive into our services. and just expanding on what you just said there, a lot of times, there’s a big brokerage. Firm and there’s an your investment advisor, and they’re not even doing the financial plan.

[00:11:11] Larry Heller: They’re taking the numbers and then giving it to somebody with a year or two experience behind running some numbers and then gives it back to them. They’re not really getting to know to understand the client. I mean the first thing somebody comes in, we talk about what some. Important to you and really what learning about you, learning about what you wanna do, because knowing those things helps to devise a plan and helps devise a, plan that’s gonna work.

[00:11:37] Larry Heller: And there are so many factors. And then if you don’t ask for so many factors in there and, and one of the things that sometimes we ask for is, do you have long-term care insurance? And then you’ve gonna say, well, why do you need to know if I have long-term care insurance, if my retirement plan is gonna work?

[00:11:53] Larry Heller: Well, if you have a good long-term care insurance, and a lot of times you can’t get your hands on that anymore, that maybe [00:12:00] you don’t have to allocate as much for a potential illness. But if you don’t and your. Husband and wife, and you’re in your sixties, there’s a good chance one of you may need some additional expenses along those lines.

[00:12:13] Larry Heller: So you may wanna account for that a little bit. or finding out a little bit about their health condition. Do they have any type of. Illness that may cause them to have longer term talking about their parents and their parents’ history. So there’s so many kind of abstract variables that you need to kind of discuss and know when you’re talking to, to your advisor.

[00:12:36] Larry Heller: I tell people besides their, doctor, I’m gonna know more about them. I should than anyone, any other advisor out there, in order for us to put a great financial plan and a great retirement plan together for you.

[00:12:48] Matt Halloran: Well, and, and in that episode, talking, talking about financial planning, one of the things that I remember you talking about was the idea of that the, the plan does need to be reviewed on a regular basis and it is gonna change over time.

[00:12:58] Matt Halloran: And you, what, what a nice example. So you re, you retire, uh, and then your retirements need change because. Let’s say somebody does get sick, or maybe they don’t, and they’re wicked healthy at 80, right? Mm-Hmm. Your financial plan should be adjusting and reviewed on a regular basis to make sure that those adjustments are made and the big brokerages or wirehouses or whatever you want to call ’em, they’re gonna deliver you something to close the business.

[00:13:24] Matt Halloran: You are a number to them. It’s not a real relationship.

[00:13:28] Larry Heller: Yes. I mean, there’s so many things that [00:13:30] popped into my mind when a client come in, we’re doing some planning, and they were talking about spending a lot of money on travel, but they’re only doing it for 10 years. And I said, well, what happens after 10 years?

[00:13:38] Larry Heller: Well, we’ll be in our mid seventies. We won’t be. I said, I got clients in their eighties that are still getting on planes and going to us. How do you know that you’re not gonna be able to do, not gonna be able to, you don’t know that you’re not gonna be able to do that. So, planning for those or, people say to me, why I’m gonna stay in my house forever.

[00:13:56] Larry Heller: Yeah. And I’m like, where’s your, main bedroom? Oh, it’s on the second floor. Do you have any bedrooms on the, no, no place in the, well, maybe you’ll be able to. Stay there. Hopefully you, you do, uh, maybe there’s options of putting in a, some type of, um, el elevator or, something up the stairs, but maybe you won’t.

[00:14:15] Larry Heller: so what is that gonna look like if we, if that has to change some? So all these kind of conversations will change over their lifetime. Where, where are we doing this? And looking at this analysis every year to see what happens, to see what’s going on. Yeah.

[00:14:28] Matt Halloran: I love that you talked about the, chairlift going up.

[00:14:31] Matt Halloran: That’s what I meant. The chairlift going up. I, I just, I remember that commercial as a kid, you know, watching the person sit down and going up. but the interesting thing, and one of the other considerations that is a huge retirement killer, is your generosity, right? Even in the house situation, you know, a lot of people are, are starting to move in with their children. but let’s talk about the kids ’cause this can be a huge retirement killer. But I would like for you to keep in mind and maybe elaborate on the fact that some of the people now who are getting up in age 70, 80 years old [00:15:00] are, are actually opting to move in with their kids’ families to be closer because long-term care facilities are so expensive.

[00:15:08] Larry Heller: So you kind of got this, you know, sandwich generation that I’ll call it. So you’ve got both sides. You’ve got your younger, kids who listen. Buying a house today, I don’t care where you are in the country, is a lot more expensive than it was years ago. And I’ve talked to a lot of people, they’re, one of the things they’re looking to do is help their kids either with.

[00:15:30] Larry Heller: Childcare, um, either doing it themselves or paying for it or helping them with a down payment of their, their house or helping with, uh, rent. and that’s all great if you can well and afford it, but can you, so, and a lot of times a lot of people, they think they can because they’re not doing. All the other items, they’re not creating a plan.

[00:15:51] Larry Heller: So they have a big chunk of money now, but they’re not realizing that chunk of money has gotta last them a long time. And there’s gotta be a bigger chunk enough in there to, in case they need some other type of expenses. So be careful not to over extend yourself for your kids. And I know it’s sometimes it’s really hard to say no, especially if they have a.

[00:16:13] Larry Heller: Cute grandchild or two that you’ll want to do that. So, uh, again, not to say that you shouldn’t do this, but don’t overextend yourselves. it’s like the story that, uh, Kipling just talks about is when you’re in the airplane, make sure you put your mask on first before you help your [00:16:30] child’s mask on.

[00:16:31] Larry Heller: if you can do both, great, but just make sure that you know what exactly what you can afford to do.

[00:16:36] Matt Halloran: You know, Larry, uh, as, as a person who loves analogies like that, uh, you know, I, I have to say that, that putting your mask on first, the only time I ever really hear that ever talked about is when I fly.

[00:16:51] Larry Heller: Yeah.

[00:16:51] Matt Halloran: What an imp uh, an important thing for you to understand that if you are not taking care of yourself first, then your ability to help your children and your family later down the road is actually gonna be diminished over time Now. Which can be really, really, really risky, right? Uh, you know, you know, helping out, uh, you know, a grandchild, start a business, you know, helping them pay for blankety blank as the list that you just said.

[00:17:16] Matt Halloran: But risk is the sixth retirement killer. So let’s dive in.

[00:17:19] Larry Heller: Yeah. so again, how risky are your, investments in your retirement, and do they know what risk is? So, and sometimes they’ve done very well on this risk, but they don’t really know what their risk is. And literally we’ve just had a client, potential client come in the door and six stocks made up.

[00:17:42] Larry Heller: 45% of their portfolio. So, but those six stocks were great stocks for the last 10 years. So they’ve seen their portfolio dramatically increase the saying, well, no, why do I have to worry? These aren’t gonna go down. But really trying to explain the risk that [00:18:00] they have and point out. That there are plenty times in history where we’ve seen some tremendous corrections and how, how, what will happen to your portfolio, what would happen to your retirement if we go through one of those times.

[00:18:17] Larry Heller: So making sure that you have the correct asset allocation, making sure that you have a diversified portfolio. Now look at this person who came in recognizing. The risk and is willing now to say, ah, it’s time. I should kind of take some of this off the table, diversify and make sure that it’s done, properly.

[00:18:37] Larry Heller: But, and then even knowing the risks, I mean, we try to educate people that come in the door, at least on a high level, to understand that. We talk about money being in stocks and the investment, it’s not gonna go to zero. If you’re in a diversified broad index fund, it’s gonna go up and down, but it’s not gonna go to zero.

[00:18:56] Larry Heller: You know, if you’re in a stock and that stock happens to have go, bad, you could lose all your money in that once. There’s a lot of different risk in an individual stock than there is in a diversified equity portfolio. And there’s different risks, but. Within equities, large cap, small cap, and there’s different risks between cash, bonds So knowing your, knowing your risks. So we start with every client fills out a risk tolerance questionnaire because. What we wanna do is we wanna know, [00:19:30] okay, what is that kind of pain point? So when we have a correction, you’re not gonna sell because we know when we do have a correction, things are gonna go back up and we don’t want things to, uh, we don’t want you to sell there.

[00:19:41] Larry Heller: So we start talking and educating right from there. And we talk about the 18 to 24 months, sometimes even 36 months that we want in cash reserves. So when we go through these corrections. That you’ll be fine. You won’t panic when you turn on the news, you’ll, you’ll remember us. And so knowing your risks, helps your retirement.

[00:20:04] Larry Heller: We’re doing this in August. A couple weeks ago. We had a thousand point drop in the market. we had no clients calling us. we sent out an email that day. We got one response on the email. sometimes, usually when legal happen, we send this out. Some of the clients are like, oh, is it time to rebalance and buy now?

[00:20:21] Larry Heller: And that’s kind of the mindset you wanna kind of think about. So you, you wanna have a balance portfolio. You don’t wanna have, too much risks. speaking of risks, you can. Tune into episode 1 29 when we talk about a little bit more of those, pitfalls. So you wanna construct a portfolio, our reservoir strategy that makes sure you have your cash needs, your intermediate needs, and even your equities.

[00:20:45] Larry Heller: Long time when people come in, it’s 65 years old and they’re retiring and I’m, we’re talking about long term, and they kind of look at me and I say, long term, what’s 10 years? You know? 75 is not that old anymore. So, you know, so you still wanna make [00:21:00] sure that you construct your PO portfolio for a short period of time because you don’t wanna under risk that you don’t wanna take all your money and put it in just the bank, and then inflation eats it away and you don’t have enough at the end of the time.

[00:21:13] Larry Heller: So you wanna make sure that you have a, you, you don’t take on too much risk, but you wanna have a diversified, balanced portfolio that’s gonna outperform inflation and get you to the. Income that you need so you can enjoy your retirement and don’t fall as one of these killers.

[00:21:30] Matt Halloran: Yeah. Well, Larry, I’m sure that there’s gonna be people who wanna know more about how you can provide them with the guidance so they don’t fall prey to these retirement killers.

[00:21:37] Matt Halloran: Where should they go?

[00:21:38] Larry Heller: best to Reach out to us on our, website hellerwealthmanagement.com, and you can click right on there and schedule a 20 minute call with me or one of the other advisors and we can talk to you about creating a re non-retirement killing plan for you. Or you can reach us at 6 3 1 2 4 8 3600.

[00:21:57] Matt Halloran: Listen. And the other nice thing is, is Larry, uh, did a great job of, of referencing previous episodes. If you have not subscribed to the show or if you haven’t listened to those episodes, we’ll make sure that those are in the show notes. But please go back and listen to the whole library, uh, that Larry has created over the last number of years to help you make better financial decisions so that you really can have your life unlimited for Larry.

[00:22:20] Larry Heller: And one more, one, one more thing. You also now. Don’t. You can also go to our YouTube channel where you can watch all these, all these videos. So it’s, uh, [00:22:30] life Unlimited, Larry Heller Life Unlimited and watch all these podcast as, as well.

[00:22:35] Matt Halloran: Fantastic. Well go to the YouTube channel, we’ll make sure we have a link in the show notes too.

[00:22:38] Matt Halloran: But, uh, thank you very much, Larry, for all of your wisdom and passing it on, and we’ll see everybody on the other side of the mic very soon.