Strategies to Facilitate Intergenerational Wealth Transfers #2 – Transcript

Vince Scully
Hello and welcome back to this special XY advisor podcast mini series focused on retirement income covenant and its implications for advisors. I’m Vince Scully, veteran advisor and founder of Life Sherpa, Australia’s most affordable financial advice service. In this episode, we made a couple of friends from the fin CON network of personal finance content creators. My first guest is Emily Guy Birken. Emily is the daughter of a financial advisor and self confessed money nerd. She’s the author of The Best Seller book, The Five Years Before You Retire, and three other books, choose your retirement, making social security work for you, and in financial stress. Now, more recently, she co wrote stacked your super serious guide to modern money management. With my good friend Joe Saul-Sehy , host of the Stacking Benjamins podcast. My second guest is Eric Brotman. Eric is the host of the don’t retire graduate podcast, and author of the award winning book by the same name. He’s also a practicing advisor at BFG financial advisors, I caught up with Emily and Eric at fin con 22 in Orlando, Florida earlier this year, and chatted all things retirement. Emily, you’re an author of many books, but talk to me about your retirement book.

Emily Guy Birken
So my book is called the five years before you retire. And it is specifically geared towards the people who basically realized the night before the exam that they forgot to study.

Vince Scully
In that you can’t get the Smart kid in the class to do your exam

Emily Guy Birken
now not not when it comes to retirement, unfortunately. So for many of us, we just don’t really think of retirement as something that’s actually going to happen until it’s staring us in the face. You know, there’s always life’s always going on, you know, you’re raising your kids, you’re sending them to college, you’re you know, you’re dealing with your parents, whatever. And then it’s in that five years before you retire, that all of a sudden you realize, oh my goodness, I have to figure this out. And so I wanted to help the people who feel like all the books are either, you know, for 20 Somethings or like, here’s how you set things up, or for people who are already retired or for people who feel like they’ve done things right and just want to maximize. So this is for the folks who are like, I don’t even know where to start. Because there’s a lot of them a lot of people who are just overwhelmed by it. And so I wanted to kind of break things down step by step to say like, Okay, here’s what you can do right now, here’s what you can want to be planning on doing next year. And here are all the things you need to be thinking about. And so to make it easy and actionable. Well, let’s say simple revenue easy. Anything worth doing is never easy, but it can be simple. And it can be something that you can follow step by step and not feel like you’re overwhelmed, or there’s no point because there’s no way you’re gonna be able to retire because a lot of people will be like, there’s no possible way. So I might as well not try. I want people to know No, absolutely, you can have a satisfactory enjoyable retirement, even if you wake up five years before you retire and realize you haven’t planned ahead.

Vince Scully
So the message is that it’s never too late to stop.

Emily Guy Birken
Never, it’s never too late to start. I mean, maybe deathbed is not the right time to start planning your retirement. But even then it’s never too late to start estate planning.

Eric Brotman
Well, and you don’t have to save a whole lot if that’s when you really don’t your run rate is reasonable.

Emily Guy Birken
It’s very, very reasonable that point,

Vince Scully
I’m also joined by Eric Brockman, who’s a financial advisor, founder of BFG, which doesn’t stand for big, big, Friendly Giant financial advice, and the author of graduate don’t retire, which I think is a great message. So welcome, Eric.

Eric Brotman
Thank you, Vance. My, the book is called don’t retire graduate. And it’s really about retirement in its traditional sense being awful for us. And my complete lack of interest in doing it. And what I mean by that is that retirement typically is a it’s a retreat, it’s a surrender. It’s giving up and you go from the 40 5060 hours a week for the for 40 or 50 years. And you build a vitae and a career and a network and all of these things that are incredibly powerful and valuable. And then you just quit and disappear and put your feet up and play shuffleboard and I don’t get it because that is a dreadful way to spend what could be the last third of your life and the last half of your adult life

Vince Scully
I get that you don’t play golf?

Eric Brotman
I don’t golf, I gave it up for the good of the game. No, I did. I had two or three golf shots that were among the worst golf shots ever seen. Fortunately, none are recorded. And I finally gave my clubs to charity, the ones that weren’t broken, which by the way, were never broken out of anger just out of bad form. It’s true story.

Vince Scully
So if you don’t play golf, what do you graduate to?

Eric Brotman
Well, my plan is to graduate to obviously you’re a long way from retirement. Well, I never want to retire not not in the sense that that people think of it i i think retirement is the absence of needing to work I think being financially independent is a fabulous goal. And whether you’re 25, or 85, when you get there to me is immaterial if you can reach financial independence so that you can do whatever you want to do, whether it’s for income, or whether it’s purely for fun or for enrichment. I think that’s terrific. To me, that’s retirement, I never want to not be working. But I sure as heck don’t want to be working because I have to, I want to be doing something I love, because that’s what gets me excited about getting up in the morning.

Vince Scully
So a question for both of you, then, how do you know when the right time to retire is?

Eric Brotman
You want to field that first?

Emily Guy Birken
Sure. So I think that the right time to retire, I mean, obviously depends on from person to person. And it’s going to be when you feel like you are ready to move from one section of your life to the next. So now in some cases, that’s going to be a financial decision. So you know, for people who, for whatever reason are unhappy in their career or, or anything like that, they might decide, okay, I’m gonna retire when I have the assets necessary to that I feel confident that they’re going to last until the rest lasts for the rest of my life. For some folks, retirement is going to be more of an emotional decision. You know, for people who love what they do, like Eric does, or who own a business or something like that they might decide like retirement is when I have the the right successor plan in place. Or when I feel like you know, what, I’m being drawn more towards things that are outside of work than they are inside of work. So there’s a sense of readiness to it. And that’s what I’m what I think is gonna be ideal for a lot of people retirement is not necessarily a choice, you know, sometimes people will have a health problem or there’ll be downsized or, or something like that. And so they don’t necessarily have a choice in when they retire. And so for that reason, I think it’s really important to plan ahead for the financial aspect of it as much as you can, so that if your retirement is involuntary, you can still have the choices available to you after that moment. So like plan, you know, hope for the ideal do what you can for the ideal plan for the unexpected. And somewhere in between is going to be your real retirements.

Eric Brotman
I wouldn’t I would say that that answer is dangerously close to perfect.

Vince Scully
I agree we can’t possibly have that. Well, I

Eric Brotman
mean, I agree with everything she just said, which I didn’t expect. Actually, I do think that the act of retirement is such an emotional social change. It’s a life change that goes beyond the financial. So I would completely agree with Emily that having enough resources, having enough wealth, or enough income that’s predictable, so that you can sort of quit your day job, if that’s what you’d like to do is is a very important step. But you really do have to be ready emotionally, because we tie especially on I know this is a an international audience, but in the in the US we tie who we are inextricably to what we do. And I think that’s I think that’s a global Well, I don’t I hadn’t seen a whole lot of that in Europe. But But if that may be true in Australia, what I will say is that, that when people ask, you know, tell me about yourself, the first thing a lot of people come up with is I’m an architect, I’m an accountant, when really they’re also potentially a husband and a father and a volunteer and a hockey fan. Like there’s so much more to us than just what we do. And if you tie your personal sense of value, and your personal identity to what you do, the moment you don’t do it anymore. You’re almost in a state of of purgatory, you’re, you’re no longer in your own your own value. So, you know, I look at LinkedIn or other social sites, and if somebody’s site has their name, and it just says, you know, Mary Smith retired, well, I’m not going to be like, oh, there’s somebody I gotta get to know we’re going to do some stuff together. I’m thinking it might as well say deceased, honestly, because that that is equivalent to, I’m no longer in the game. And I’m not sure why I’m here, as opposed to instead of retired saying consummate volunteer or, or lifelong learner or something interesting about yourself. If it just says retired on there, we have nothing to talk about. So I

Emily Guy Birken
actually am a big movie buff. I love films. And there’s one that really stuck with me. There’s a movie called about Schmidt. It’s Jack Nicholson. And it’s about a man who retires from the insurance industry. And he his wife dies unexpectedly, and he is lost. And he’s not lost after specifically after his wife dies. He’s lost the day after his retirements. And that film stuck with me so much because it reminded me of how we so often define ourselves by what we do for a living and we Uh, no matter how you kind of tried to paint a pretty picture on what retirements gonna look like, because he gets, you know, this luncheon and the gold watch and the next morning, his wife prepares breakfast for him in the RV that they’re going to travel in. But he doesn’t have any thing to do every day. He doesn’t have a purpose or a place. And it’s a it’s a kind of a bleak movie. But it’s an important one, because I don’t feel like we often talk about it, because for so many people retirement seems like a goal in itself. But if you make retirement your goal, and you say like, I’m going to be happy on the other side of retirement, you’re not really valuing your own life, and you’re not.

Vince Scully
So there’s the difference, I guess, between retiring from something and retiring to something absolutely. But picking up on the theme of that movie. What do you say it was called?

About Schmit

Eric Brotman
I have seen it and it is bleak. Yeah, I mean, it is a dreary film, it’s not something you’re gonna watch to then get really excited about your day. But it’s a downer.

Vince Scully
So most retirees that are made are way too busy to do anything, you got to book him in weeks in advance to get a lunch appointment between grandkids and travel. And obviously travel has been a bit of a problem for last couple of years. But most retirees I know are extremely busy, that that doesn’t necessarily equate to happy or fulfilled, but busy is that your experience,

Eric Brotman
my experience is that those retirees who are in fact busy, hopefully are also enriched by the things that they’re doing. It’s not just something to fill their day. And that, to me is one of the keys of a successful retirement. I think there’s a lot of people though, that that sit in their chair and watch daytime TV and literally wither away. And it’s incredibly sad, and of what could have been a life well lived, but is now almost an erosion of your of your humanity. So there’s there’s obviously a spectrum here, but the people who really have a purpose and a any reason to get out of bed, whether it’s grandkids or volunteering or consulting, or gardening, whatever whatever their passion is, if you have that it’s a great way to thrive in the next chapter of your life.

Vince Scully
And as an advisor, Eric, how do you deal with the just one more year syndrome where people have a retirement dollar amount in mind, or worked with their advisor and got $1 amount in their mind? And getting close? We’re getting there and go, Oh, maybe just one more year, which often becomes 235? How do you deal with as an advisor,

Eric Brotman
I It’s funny, you call that a syndrome, I think if if it’s because you’re enjoying it, and you don’t want to give it up and you’re not ready emotionally to give it up yet. I think it’s great if you’re working for fun. And you’ve acknowledged that you’ve hit that target where I now as an advisor can say, you no longer have to work, you’re in a position to have sustainable income for the rest of your life, in all the ways that we’ve talked about and plan for and so forth. But if they say we want to keep working. To me, that’s, that’s great. That means they’re enjoying it. It’s the opposite effect. That’s really problematic. It’s the folks who could be on track to do this at 63 or 65, or 67. Who Sam done at 58. I don’t care where I am. And what could be a very rich, and I use the word rich in quotes, not financially, but what could be a very rich 20 or 30 year retirement for them becomes more of a struggle because they quit too soon. I think quitting too soon, both socially and financially can be more dangerous than than staying too long.

Vince Scully
Missing. Interesting. Take me, what do you see people who do jump too early when all their buddies are still in the

Emily Guy Birken
works? Oh, so I I was actually the one more year syndrome I was thinking of I’m married to someone who’s probably going to be like that. He tends to be a bit of a white knuckle or when it comes to to money in that, you know, there’s there’s a like, even if we have $1 amount where this will be enough. He’ll be like, Okay, what’s the worst case scenario? So what do we do then? And so trying to help people who have trouble recognizing that, yes, you do have enough? Yes, it’s going to be okay. No, you don’t have to be fearful and work until you’re 75. Just because you’re afraid you’re going to run out. That can be a very difficult situation. And that’s why I mean, I’m very glad to see there’s a rise in financial therapists out there because there are so many people who and that’s like two sides of the same coin of the people who are like I’m quitting it at 58. They are white knuckling time. And, you know, then there are people who are white knuckling money because the people who are like I want to quit at 58 because who knows, maybe you know my father died at 64 And like, I don’t want to, you know, get to 63 and have one year Your left. So you know, I’m quitting now, because I want as much life as possible. And then there on the other side of that coin, you have the people who are like, you know, I could retire at 65 and have enough money, but what if I live to be 108? Oh, my goodness, I’m gonna, I’m gonna keep working till I’m 75, just in case so and that both of those come from a sense of fear that you’re not gonna be able to handle whatever comes.

Eric Brotman
It’s a scarcity mindset rather than an abundance mindset for sure. And I think there’s a third group because I agree with you, those two groups are distinct and problematic. The third group is those who do retire, and by any financial measure, retire successfully, and then are horrified to spend their own money and enjoy their their lives. I know too many people who never take the trip or who never who don’t help with their grandkids education, or who don’t do the things that they can do. And it’s like, they’re coming to me as their adviser saying, can I spend some of this money? And the answer is absolutely, yes, please take the trip, please do it and send me a postcard. And they never do it. And then they age. And they can’t for one reason or another one of the spouses or somebody’s got a health issue or, or doesn’t live long enough, and they never take the trip. That to me is devastatingly sad. You know, and most of our clients are coming from a position where they’re their parents, a lot of them are aging, we work with mostly the sandwich generation and multi generational family. So you’ve got a kids to educate and parents to worry about simultaneously, which is a common thing and kind of a fearful thing in some cases. But most of our clients would say to their parents, you don’t have to leave me a nickel, use, this is yours, spend it, have fun with it, please don’t leave me in a position where I have to pay your bills. You know, don’t don’t saddle us with with with a problem. But don’t worry about what you’re leaving behind. We’re good, we’ve got this. I mean, people are living long enough that when you die, you could have kids who are 70, they shouldn’t need money at that moment, if they’ve done their own thing. You know, these kids aren’t 23. And in trouble, they’re, they’re 70 years old.

Vince Scully
I’d like to come back in a couple of moments and come back to that sandwich generation thing, because that is becoming a big deal. But I just want to unpick the spending bit first. When I first started as an advisor, my my first boss said to me that the undertakers check should bounce. Now, we don’t have checks anymore. And I’m sure the credit card company will just pay the swipe, but as a philosophy, their concept of spending your last nickel on the last day, if we could actually engineer there would seem to be a great outcome, obviously, predicting that day is next to impossible. But in my practice, over the years, I’ve certainly seen a lot of retirees reluctant to spend the money and a significant chunk, if not the majority, died with more than they retired with. How do you deal with that as an advisor? Well,

Eric Brotman
I think it comes down to that abundance mentality, if if you’re enjoying your life, and you are in fact taking the trips, and you happen to have terrific investment returns, and you happen to grow your wealth, I don’t see that as a downside. I think if you don’t take the trips, because you’re petrified that you’re going to outlive your money. That’s not a good thing. So I think you really have to look at it case by case, I don’t think it’s a math problem. I think it’s psychology, more than anything. It’s been said that to be young and broke is an inconvenience, and to be old and broke is a tragedy. And in that particular case, you don’t want to be at three years old and still alive and and have that last check, bounce, because it’s not your last check where it is and you have a new problem. So people are legitimately afraid to outlive their money. That is a very big fear because especially for retirees who aren’t still working in some capacity. If you don’t know that you can wake up tomorrow and make more. It is different than if you believe you can. You know, in other words, if if one of us here, were suddenly saddled with a bill, we didn’t expect her surprise, we didn’t expect and had to spend every nickel we had, we would still wake up tomorrow and go make money. That’s not true, necessarily when you’re fully retired. And that’s a scary proposition. I think.

Vince Scully
I mean, one of the things you’re describing there is what actually is called longevity risk. And I must admit, as I approach 60, I think much more of longetivity opportunity. But managing that is obviously a tricky situation and your point about people being petrified about outliving their money. What are the things that you do as an advisor to help deal with those thoughts?

Eric Brotman
I think in in the advisor community and when we work with clients, the important thing to understand is that clients have spent people all of us have spent 20 or 30 or 50 years With an accumulation goal with a plan to build it, and that’s actually very easy math, you put x dollars away every month for y years, you get z percent and voila, here’s your here’s your balance. That’s easy. The hard one is, how do I use it, because not every dollar is the same, you know, $1, in your retirement plan is still going to be taxable in a different way than $1 in a Roth or $1, in a brokerage account. And so not every dollar is, is equal at that moment. And so putting together a strategy for income is something none of these people have ever done before, they’ve never had to do it. And so our experience in doing that hundreds of times with different families, allows us to build to build our advice around each particular case. So I consider income planning to have three different options. And I’m sure they’re more than three, but they’re three in my mind. And it’s all based on your withdrawal rate, how much of what percentage of your working assets, and by working assets, I’m not including your house, necessarily, or other other intangibles, I’m talking about the assets that you can convert into income, what percentage needs to be utilized on an annual basis, in order for you to live with dignity and hopefully with joy. And if that number is under 3%, you can almost do anything you want. I mean, you’ve got a total return mentality, things can be in one big bucket, and you can just sort of pull out of it. And barring the Black Swan, and you prepare for that in various ways, but barring the Black Swan, you’re okay. The 4% rule is not this is a common fallacy, I think 4% is too high a draw, unless you are doing what I like to refer to as asset segregation. And asset segregation is having specific assets in your portfolio set up for specific timeframes ahead. And so it’s called the bucket theory or these other, there’s different strategies around it. But the idea is, if you have five to 10 years of money that is not at particular investment risk, then the rest of your portfolio can have some risk in it, because the 10 year period is generally long enough that you’re not going to have a 10 year bear market. If we do we have a new problem. But all by all conventional wisdom, every eight to 12 years or so we’re going to have a bear market of some kind in various ways and assets will get will get decimated in some way. And as someone who didn’t live through the 70s. Well, I mean, it does happen I you know, I have I lived through the 80s, I was alive in the 70s, but did not care about money, per se at the time, apart from pocket money. Well, I needed to for the arcade. But so that’s the second strategy. And then the third one, and it’s one that gets a lot of press and a lot of that press is negative is annuitization. And one way to deal with longevity risk is to turn some of your assets into a predictable insured income stream. And that means using annuity vehicles or annuitize, in one of your various accounts. And unfortunately, annuities have been so vilified and so bastardized by so many people, especially salespeople who don’t really know what they’re doing and hurt people, that there’s a great deal of fear and uncertainty around what is frankly, a very decent longevity plan if you use it properly. And

Vince Scully
much of it view I think is based on history, that you know what the market looked like 10 or 20 years ago, that when you obviously products differ from market to market. But as a general rule, I was thought that the more modern products are a much better vehicle than the ones we had 10 or 20 years ago,

Eric Brotman
I wouldn’t necessarily say they’re better or worse, they’re certainly different. Annuities aren’t good or bad. Generally, there’s some exceptions, but generally, they’re not good or bad. They’re just right for you or not right for you. And they can be used properly or not. That’s like saying you’ve got a toolbox in the garage with all these different tools. And if you’re trying to build a ship in a bottle and the tool you pull out as a hammer, it’s not going to go well. That doesn’t mean it’s a bad tool, it just means it’s the wrong tool for this job. And so in that particular case, it’s important to look at it one on one, one size never ever fits all, especially when it comes to income planning. There are so many variables, many of which we can’t control. I mean, you have inflation, you have you have health and welfare, you have longevity, you have things we can’t possibly reasonably predict. And so many financial advisors rely on Monte Carlo simulations, which is this idea of having a percentage chance of success, you have an 87% chance that this is going to work. Well. That to me is a 13% chance that you’re out of money. So I don’t like that. You know, and there is no 100% chance, let’s face it, so it’s never going to be perfect. I think you have to look at it case by case and I don’t think an annuity is a dirty word. I just think they have been used improperly in so many scenarios that it makes big news and that’s problematic. They’re certainly not for everyone. But if you have to withdrawal more than four and a half, five, five and a half percent Don’t have your nest egg, and you’re 70 you only have a 20 year runway there. And if you outlive that you have a problem, so it does solve some, some issues.

Emily Guy Birken
So just to jump on that, one of the problems in the financial sphere is that we need to reach people at lots of different levels. And so like what you’re talking about is there is so much nuance, but there are so many sound bites that are like, you know, you got to make sure you’re saving more for retirement, and people need to hear that, absolutely. But that is the message that gets stuck in people’s heads. And so we end up having this kind of binary system where like saving money good spending money bad. And it’s because we need to have these rules of thumb, these really quick sound bites these headlines that you consume on Twitter, because that’s the only way to reach the majority of people who aren’t spending time thinking about it. And for a lot of people, they are not able or I you know, just have not had a chance to get into the the deeper nuance of it and the fact that you know, or like annuities bad, you know that like that, that’s all that they hear. And like you said, it’s it’s like saying a hammer is bad? Well, no, it’s used for a specific tool or specific purpose. And if that’s not what you need it for, then it’s not going to go well. And so you end up having the kind of situation where people react to binaries in, in various ways. I’m thinking of, you know, if you grew up under very strict parents who are like you never drink, you never drink, never drink. And so you know, when you turn 21, you could either continue to internalize what they told you, and you don’t drink, or you completely reject it and say, Well, who to kill is on me. And so I feel like that happens with retirements and retirement spending, because you have the like, very basic message of like, you need to accumulate, you need to accumulate, you need to accumulate. And so you have some people who are like, Oh, my God, I can’t touch anything, because I need to accumulate that was important. Or on the other hand, you have people who are like, Woohoo, I can spend it all now, you know, Cruise is on me. So and that’s, that’s part of the problem. And part of you know, why I do what I do is bringing nuance to people who don’t spend their days thinking about money, who don’t spend their days thinking about, you know, withdrawal strategies, and, you know, assets under management and all that. So those are, those are the things that it can get very, very difficult because it is so complex and so nuanced, and so idiosyncratic to each individual retiree. And yet, the only way to get a message to everyone is to paint with a very broad brush.

Vince Scully
And like I say this, you talked about the 4% rule, Eric, which should probably be better characterized as the 4% observation. And because it really is just based on history, and as we all know, past performance is no guarantee of future performance. So don’t we have to get back to a sort of a probabilistic measure at some point, I know you’re sort of very dismissive about the 87% success rate. I must admit, I’m in the 30% failure rate school, but because that’s the bit that matters. The 87 is, well, that’s what you’re supposed to do. For me as an advisor. The 30% is the bit that doesn’t, but to think of it as a human blindly spending 4%. Regardless of having, what markets have done, what the world’s done, does seem a bit naive to me that humans don’t behave that way.

Eric Brotman
Well, humans don’t behave that way. And life doesn’t work that way. You know, life works that way until you need a roof, or a driveway or a car or something happens that year, or there’s a medical issue. So contingency planning matters, risk management matters. There are so many financial professionals out there who spend so much time talking about your portfolio and your asset allocation that they completely forget that there is cash management and debt management and risk management and other components to a solid financial plan. A financial plan is only ideal if it works no matter what. Well, let’s think about the things that can go wrong. And let’s let’s decide which ones we need to defend against and which ones we can bear. And when you start talking defense and risk management, sometimes that means insurance, but this is not euphemistic. It doesn’t have to be insurance. There are other ways to do things. There’s asset titling, there’s legal documents. There’s other types of strategies that can work. So when I say risk management, that doesn’t mean go buy insurance. But there are some risks that we cannot bear. And if you cannot bear that risk, you have to assess the likelihood of that risk happening. I mean, I can’t bear the risk of a piano falling on my head while I’m sitting here. I don’t think that’s a pretty low risk. Well, I think it is I don’t think it’s something I should run out. And by falling piano insurance? All right, some people would think that’s actually really policy for Yeah, yeah, no, I sign right here. What does that cause because I’m at a concert hall

Vince Scully
called umbrella policies, pretty strong,

Eric Brotman
they should. So Solid. My point is that there, there are risks that we insure against on a day to day basis that are very expensive to insure against that are also unnecessary. You know, most people spend more time worrying about the ding and scratch in their car door than they do about the big stuff. And so the only reason to use insurance is because there’s a risk you cannot bear that has a likelihood that is reasonable enough that you should plan for it in that way, like living to 103 legs, and that’s one of them longevity risk. So so how do you plan as if you could not wake up tomorrow? And at the same time plan that you could be 106? And that’s a very interesting and difficult proposition. And that’s partly why financial advisors aren’t going anywhere. And

Vince Scully
for most 65 Euro euros, that risk is a much bigger risk than what the market is going to do tomorrow.

Eric Brotman
Absolutely. what the market does tomorrow should be irrelevant to almost all of us. It should not matter what happens tomorrow, next week, not even next year, if we’ve done it right. As long as we don’t go into a depression or a tenure tailspin of some kind, as long as we’ve done it, right. That’s noise. It’s financial pornography, what the Dow did today matters to almost none of us, unless you happen to own as your net worth 30 stocks, and those are the 30 stocks you on? If that’s not you, that’s merely a trivia question answer.

Emily Guy Birken
And that one of the things that I think people forget, is that you have flexibility even in retirement. So one of the reasons why people are less worried while they’re working is because like, like Eric was saying, I can get up tomorrow and earn more money. And while in retirement, you’re not earning money through a job anymore, you are still can be invested for the long term, even when you’re 60. When you’re at when you’re 100 By having thing having assets that you don’t need to touch for at least 10 years. And so I recently got got into a conversation with my husband, so you know how it is with married couples, where someone will be an expert, and the spouse will not believe them. And so, uh, he came across just normal life. Oh, my goodness, he came home talking about Yeah, someone was talking about like, the the bucket method, I was just like, Oh, my goodness, if you don’t read my books, and, and so he was saying like, okay, and he’s, he’s an engineer, he’s a math guy. He’s like, Okay, can you show me the math of what the bucket method would look like, compared to like, the 4% rule. And I was like, well, we’re not doing the 4% rule. And it was like, you know, alright, let’s try to figure this out. And he’s trying to do an Excel spreadsheet with the last 20 years. And like, what we finally got down to it was, these are doing all of this is immaterial, you know, figuring out what this would have looked like, you know, starting in 2000 to 2020. Doesn’t matter, because what it’s really about is our flexibility, and our ability to make decisions and changes as circumstances change. So if you’ve got, if you’ve got assets that are invested for the long term, and you know, you’ve got, like a banner year, you can decide, okay, how am I going to rebalance? If you’ve got a terrible year, you can decide, you know, do I need to rebalance? Is there anything I need to do. And so that’s something that I feel like people want a set it and forget it decision, they want to say they want their money to be a crock pot, you know, you put it all in, and then you turn it on. And then when you need it, you go get it. But that’s just not how it’s gonna work. The you, you are not cooking in a crock pot, you are making a like a long term kitchen masterpiece, where you consistently need to add a little more salt, or take out the bayleaf or whatever you need to do. And so that’s something that I think people because they’re looking for a quick answer, or they’re looking for a okay, this is it, I’ve done it, I found the Holy Grail and I’m done. They forget that they have so much power by claiming that flexibility and recognizing that they can make changes to their decisions all the way through till the end.

Vince Scully
Can we come back to the elephant in the room for those of us who are, you know, a few years away from from retirement is this this concept of the sandwich generation, you know, people retiring today and in the next 20 or 30 years are probably the first generation where, you know, they’re still actively juggling kids and career and elderly parents. What do you think that means for retirement planning? Eric?

Eric Brotman
I can answer that in two ways. The first is that I believe that means that don’t stop at two. Well, I’m only giving you two events.

Emily Guy Birken
More It’s gonna cost you 21st.

Eric Brotman
I’m still on the crock pot thing. I’m hungry now. So and there’s tequila. So the crock pot now, and now that’s bad. So the first answer, I believe, to, to how to handle this is that planning should be done on a multigenerational basis. Communication, open communication between generations is in, it’s incredibly important and also really difficult, you know, to get your parents to share with you, there’s so much so much baggage around money. People with an enormous amount of money are sometimes embarrassed because they have so much other people with what you might consider to be awful lot of money, are embarrassed because they think they could have made more. You know, it’s like George Carlin used to talk about drivers. And there’s always somebody driving slower than you and somebody driving faster than you. And he gave them names, I won’t mention on your show. But the important thing is to no one’s ever driving just your speed. And that’s true with this, this generational stuff you’re talking to your parents about their resources can be really challenging. And talking to your kids about your resources can be challenging, and I think finding an advisor or a or someone to walk you through that, and spend some time in a safe environment. And it can be a qualitative rather than quantitative environment. This is as much about visions and values as it is about dollars, dollars and cents. So that’s my first answer is, if you have that spectrum, if you are that sandwich, make sure everybody’s communicating on some level and do it with a referee if that’s going to be necessary in your family. So that’s the first one. And the second one is if you are in fact, the center of that generation. And sometimes you do, and sometimes you don’t get that communication. You know, to Emily’s point earlier, stay flexible, because there will be years where you need to support your kids in a different way. And there will be years where you need to support your parents in a different way. But it all comes back to the airplane safety lecture, which is in the event of cabin pressure masks will fall, please secure your own mask before securing the masks of others. The same thing is true with money. People have nearly bankrupted themselves educating their children. And for people who do that I will say I understand education is important. And I understand what you’re trying to do, which of your highly educated children do you plan to live with? Because you’re going to be out of money when you do this. So So and I say that a little bit tongue in cheek, but the truth of the matter is you must take care of yourself and your spouse and your immediate family first, if you can do that. There are other ways to handle some of these other expenses. For for elderly people, there is Medicaid. That’s no one’s first choice. But there is a safety net. For young people, there is financial aid, there are other ways to deal with education. And those kind of those are the big ones health care and education. But you can’t borrow for retirement. It’s the only thing we can’t find a way to finance.

Vince Scully
There’s reverse mortgages, perhaps.

Eric Brotman
I’m not sure that’s financing. I mean, it is but but that to me is just turning an asset into income. So whether it’s your house, that you’re you’re using the equity or whether it’s your portfolio, and you’re using dividends or interest or whatever, I consider that the same animal for that purpose. Yeah.

Emily Guy Birken
So just to jump on that. One of the things similarly, I I recommend that people ask themselves, will your children or will your parents, thank you for what you’re doing? If you’re living in their basements, or if that means you’re unable to do things, you know, for your parents, you’re unlikely to be living in their basement, but that that means you’re unable to do things that they find important. Because we have these like cultural and family and moral obligations that we feel like we have to follow. But remembering what that’s going to cost. So like, like Eric said, you know, if you’re paying for your child’s education, and that means that you’re you’re going to have to live in their basement. They’re not going to be thanking you for that same thing if you’re paying for a lavish wedding, but that means that you can’t retire. Or is that really serving your kids and serving what you find most important? And I actually like to recommend, and I’m not a sponsor, or anything like that, but there’s a book called, can’t we talk about something more pleasant by Roz chast, who is a New Yorker cartoonist, and it’s like a graphic novel about her, her parents last few years of life. She was an only child, her parents had her when they were in their early 40s. And so they were older, older parents, and they lived 50 years in the same apartments in New York. And anytime she would try to talk to them about estate planning about finances, they would say, can we talk about something more pleasant? And so she because she was an only child was stuck in this very difficult sandwich situation because she had her own children and her parents were, you know, kind of stubborn about not wanting to leave their home. They’d been in for 50 years, which is completely understandable, but they didn’t have finances for it was just kind of a mess. And it helped To me better understand how I could draw boundaries around what was necessary for me and my, my personal family, my kids, myself, my husband’s what was necessary for me to feel like I’m taking good care of my parents, if they get into a situation where they need help from me, and what’s going to take care of me, you know, I want to think of my future self, as you know, like, 80 year old Emily, I want to take care of her too. And, you know, giving thought to that as, as an actual person, instead of like, oh, yeah, I’ll figure it out, is you’re more likely to want to be protective of your future self. And so I think that that’s so difficult and so hard to parse out. But taking the time to think through, like, what is this going to cost? If I, you know, bankroll my parents assisted living, when I can’t afford to do that, what’s it going to cost if I pay for my kids college, and you know, set them up in an apartment that, you know, when they could live at the dorm or whatever? And those are the things that if you think about it, and think about what is this really going to cost? And what is this really going to giving them over a lifetime? Is very clarifying.

Vince Scully
Eric, just the final point on the vise proposition, do you think the moving from accumulation, which as you suggested might be a little more predictable to D accumulation or retirement, he’s a good time to consider changing advisor looking for an advisor with different skill set,

Eric Brotman
it certainly can be I mean, there are advisory firms and advisors who have a broad enough set of skills and potentially even specialists in different areas where you don’t have to make a change. But it is a spot where you need to make sure you’re communicating with someone who who, who can, who can take a difficult concept and make it make it accessible to you. Because it is a different conversation. It is a different language it is if you’ve been. And I always say we don’t represent cowboys, but if you’ve been like a speculative investment, cowboy your whole life here. And now it’s time to figure out this other thing, the advisor who has shepherded you through that process, and I use that word loosely. It may not be the right person for you. But if you’re working with a certified financial planner practitioner, and you’re working with a firm that has a depth and expertise, I don’t think it’s necessarily a time for a change. I think for people who’ve been doing it themselves, it’s a really good time to start thinking about getting advice, because doing it yourself as an accumulator is something very natural to us. We’ve been thinking about it since we earned our first paycheck, the shift to income planning, something we haven’t thought about at all, and most people are not prepared for the not only the nuances, but the tax ramifications and the other decision points. So if you if you’ve been doing it yourself that five years, a window that Emily writes about is a perfect time to either make sure that your current advisor is is ready. Or if you’ve been doing yourself, it’s a good time to find someone to walk you through what is going to be a usually a very binary moment. Now there are some people who retire and then go back to work. And so it’s not quite as stark a contrast but most of the time you go from from cashing paychecks to having to write your own and it’s different.

Vince Scully
And as an advisor, what should I be doing to protect my client existing clients who I’ve worked with in accumulation as they go through this change that you’ve just talked about?

Eric Brotman
I think having this conversation with them regularly along the way, and preparing them for the the fact that that it’s coming will be very helpful to know that even if they’re not quite ready for it, the fact that this is a skill set that not only do we have in the language that we speak, but it’s also something we’ve done countless times will create more ease I think.

Vince Scully
Okay, well, we should probably think about wrapping it up there. But if you could, maybe Emily, start with you share with our audience where they can find more of

Emily Guy Birken
your work. Absolutely. So you can find me at my website Emily guy birkin.com And that’s Emi lygybirken.com. I’m also on Twitter at Emily guy Birkin and on LinkedIn. And then if you are interested in seeing something that is not financially related, I have a website called your one good thing.com where I share one good thing every single day trying to just remind people to stop and recognize the the little joys the sweetnesses in every single day.

Eric Brotman
Eric all of the resources the books and courses and and podcasts can be found at Brotman media.com. And if

Vince Scully
you’re interested in RMS spelled it for that reading audience

Eric Brotman
br OTMANMEDI a.com Brotman media dot Tom and for those folks who are interested in learning more about our financial planning and wealth management services, we’re at BFGF a.com.

Vince Scully
Thanks to Emily and Eric for sharing their thoughts on a busy day at fin con 22. That was Emily guy Birkin, author of the five years before you retire, and Eric Brockman, financial advisor and host of don’t retire graduate podcast. The key take out for advisors here is that retirement advice is more about the person than about the money. Understanding this is the key to building a successful retirement advice practice. In the next episode, we’ll catch up with some Australian advisors who are doing just that, and building great advice businesses. So till next time, I’m Vince Scully in you’re listening to the X Y advisor podcast. Bye for now.