And we don't know what the end is. No one knows when that time will be. We have estimates and life expectancy, some family history and those things. But it's a balancing act between enjoying the day, enjoying the moment, enjoying your time now, and making sure that if you do happen to live out into your late 80s and 90s, maybe even beyond, that you have resources.
Welcome to Keen on Retirement, a show dedicated to helping you thrive before and during your retirement years. If you are looking to grow and protect your wealth and want to make the second half of your life the best half, then listen in as well as advisor Bill Keen and his host sort through the key issues that you need to know in a lively and candid way. Just like there are different ways to succeed in life, there are many different ways to fail in retirement. Hello everybody, Steve Sandusky again, and you are listening to Keen on Retirement and sitting right on my right shoulder here is Bill Keen.
Hey Bill, it's always good to be in person with you. Hey Steve, great to be back in your studio again. It's a pleasure to be here. Yeah, well it's fun to host you guys here in our little town just outside of Milwaukee, Wisconsin.
It may be freezing outside, but we are warm and toasty in here for sure. Yes we are. Well, Chris and I are truly enjoying our time with you. Linda, so thank you so much.
Yeah, well it's our pleasure to have you here and we look forward to getting you back here again. Of course, we're gonna have to get down to Kansas City too. You bet, and you'll bring you into town. Yeah, and you got your studio down there as well.
We have a nice studio set up there. We're able to do our episodes, and we'll bring you an R's. You'll be on my territory then. There you go.
I can do one of our quizzes there and I'll have a lot of material to support to try to throw you all. That's right, yeah, I think in our last episode, I don't think we did any quizzes. So maybe we'll have to throw one or two of these in here. And well, we just might, and they're all impromptu, we might say, so we, Steve and I have a little contest going here to try to throw each other off.
So we'll see how that goes. All right. So Bill, today we wanna talk about some ways for retirement that they are going to fail at retirement. And so as part of our program here, we wanna make sure that people are getting educated and their proactive in the retirement planning process.
And we can foresee a lot of these things. We can't. You've got so much experience that you can tell what some of the issues are that people may have and stop them early on so that they don't make these mistakes. So why don't we start with?
What are some of the things that you see people do that causes them to fail at retirement? It's one of the issues that's so powerful about having a community of folks that we work with at Kean Wealth is that we see our clients sharing stories with each other and sharing their experiences with each other. It's another reason we did this podcast series is because we're able to just share what's happening, things that are working, and things that aren't working, exactly like you said. And if we can help our clients not to, and our listeners not to have to reinvent the wheel, we've been successful.
First off, I'd just like to say, failing at retirement isn't all about money. Certainly a good portion of it is financial, but there's a big portion of it, maybe more than half, that is not financial, it's other issues. And to start with our program today, the first thing that comes to mind to me is folks that over commit in retirement, they work themselves to a position where they're able to retire, they've got their schedules in front of them, their time is free, and they have not learned to say no yet. So it's interesting, we sit down with clients that are getting ready to really make that lunge to retirement, and we say, one thing you have to do is learn to say no.
And it's confusing at first, they don't know what we're talking about, but being asked to serve on boards, being asked to come back and consult at a firm, being asked to babysit. Oh yeah, I've got those kids out there, right? Oh, mom and dad, you've got a lot of time now. You want the kids while we take our vacation?
Yeah, absolutely, all of a sudden, we know that's available. Or we're watching the dogs, right? Watching the dogs as well, or some combination of those things. It's funny, we laugh about it, but I have seen people pretty quickly in retirement, get over committed, and almost as stressed out as they were when they were having to go to work every day.
So I just wanna lay that out there, something to start out with, and just be aware of it. And just really know, protect your time, especially at first, until you get into the rhythm of what this retirement looks like. And do you have any advice for people on, how do you determine what you say no to? Do you just get back to your values, what's important to you, or do you have any ideas or thoughts on how you counsel people in that area?
Well, the first thing I always say is, operate by the 24-hour rule. The 24-hour rule is this, you never have to say yes immediately. You can always get a good night's rest. Let me think about that.
That's right. I'll get back to you. Absolutely, and a lot of the people that we work with, probably including myself, I wanna make folks happy. I wanna do things if someone asks me to do something, I wanna be able to come through.
But yeah, you're right. When you start talking about first place, it comes as the values. Looking at what's important to you, and you sit down with your financial plan, and if you've done your retirement planning, and you know the things that are important to you, I'll tell you what, every decision can be vetted against your long-term plan. And it's so important to have a plan, whether it's financial planning we're talking about today, and retirement planning, or an overall business plan, or whatever, endeavor.
Every decision can be vetted against your prethought-through plan. And the answers, in most cases, are obvious. They really are, if you've done that work, and you've taken the time to think things through. But I really do think it's important that folks just protect their time, and not have to unwind a bunch of things that they over-committed to right up front.
I see it a lot, and I know it's something that probably we haven't talked about at all over time. And it kinda rolls, actually, right into that whole concept of planning on what your days will actually look like in retirement. We did an episode on that, Steve, an entire episode. The One Happiness in Retirement.
Absolutely. Just getting a sense for really thinking about what the days will look like, once you don't have to go to work anymore. You've mentioned several podcast episodes that you've heard of folks retiring, and actually dying in pretty short order. And that's shocking to people.
When you hear about that, but people that their entire identity was wrapped up in work, and really weren't ever able to get their arms around what it would be like, not having to go in. I think both those things go hand in hand, and I would recommend folks go back to that Happiness in Retirement episode if you haven't listened to that one. Just take a listen to it, see if you can relate to some of the things in there, and maybe it'll stimulate some thinking about how you'd like things to look when you do finally retire, or even now if you are retired. And do you find that when it relates to this particular issue, do you find it's a bigger issue that people over-commit, or it's a bigger issue that they don't have enough to do in their board?
Gosh, it's a great question. It's a real balancing act, and it's different for every person, and it actually rolls right into a couple of the other topics that we're going to talk about today that people are on both ends of the spectrum too. Some are in the middle and balanced, but it has to do with spending in retirement. But when it comes to over-committing or under-committing, I would say more people that we see are over-committing than under-committing.
Okay, now we do have some that are, I say under-committed or don't have a plan for their days. We really have to talk to them about getting involved in the community, getting involved in a gym, and of course certainly involved in their church community, they're involved there. But the majority of the people that we're dealing with are over-committed as opposed to under-committing. Okay, very good.
So you started touching on over-spending. Tell me more about that. We've talked about this in the past with knowing where you stand, having realistic expectations of what the future will look like, what inflation will look like, what the market returns will look like, what spending needs will be, and then coming up with something that we're comfortable with being able to spend, and really understanding it, and working within a budget. And I always said I didn't like to talk about things in terms of budget, because it sounds restrictive, so we call it a spending plan as opposed to a budget.
I do see, in some cases, both sides of the spectrum, some folks wanting to spend more than their plan will allow, and I also see the other side of it where folks are afraid to spend anything. So there's a generation, probably your parents, I would say my parents, just the generation who are afraid to spend money or actually feel guilty about spending the money that they've actually planned. Right, I think a lot of it goes back to when you grew up. Like I know my parents and my in-laws, they grew up back in the 1930s, and of course we know what was happening in the 1930s with the Great Depression, and those types of experiences stay with you for life.
And oftentimes they shape your spending patterns. We've talked about behavioral biases in a previous podcast, and those are things that stay with you. And we all have our hang ups about money, and a lot of it goes back to the way we were raised, the times during which we were raised, and they stick with us. And so, you and I know people that have millions of dollars.
That's right. And they live as if they're making $30,000 a year. They're just afraid to spend. That's right.
I think it's so important to be able to have money set aside, have a plan in place, and know what you're able to go out and enjoy, and just not be guilty about it. In your experience, do you have clients where you do a plan with them, and it's clear that they've got plenty of money. They can spend a lot more. Do you essentially, quote, give them permission to say, it's okay to go spend.
Go enjoy yourself. Have some fun. Is that part of what you do, or is that stepping outside of the boundaries of what you do? No, it's absolutely part of what we do.
If someone is capable of more, and we get to see that in the meetings, the process that we put folks through, we get to know people well. And we take a fiduciary position for the families that we work with, so by definition, we need to make sure that everything's in their best interest, and still in order for them consistently. So we do get to see people, we get to see the evolution of their lives, and what's happening. And when we spot that, we let people know, please, you know, there's a lot more that you could be spending money on if you want to, and it's ultimately their resources, and they can do with them what they want.
But just the concept of not feeling bad about spending money or enjoying their lives, or taking a trip, or something of that nature, is important for us to get out there to folks. Not as fun to talk about is the overspending side of things. And- Do we have to talk about that? Oh my goodness gracious.
I think we better. Okay, all right. I think we better talk about it. It's not fun.
I think in a prior episode you said, but spending is fun. Right. Yes, of course. Well, we want to stimulate the economy, we're a consumer-driven economy, right?
And when said old joke, they say money can't buy happiness, whoever said money can't buy happiness, just isn't spending it, right? That's right. That's right. He's evolved his program.
That's right. This whole concept of family having a pool of resources, and making sure that that money lasts the rest of their life, making sure that they have a dignified life out to the end, and we don't know what the end is. No one knows when that time will be. We have estimates and life expectancy, some family history and those things.
But it's a balancing act between enjoying the day, enjoying the moment, enjoying your time now, and making sure that if you do happen to live out into your late 80s and 90s, maybe even beyond, that you have resources. And so it is a balancing act. A lot of folks want to spend more money up front and they're younger. When they can move around, travel more, do things.
Naturally, I can understand that. The issue that we come across though is that when you define, let's spend more when we're younger, well when you define what winter you quote older. When does younger end? Right.
What we can do as advisors is advice people on what the averages have been and what the probabilities are of certain spending levels. And you've heard the 4% rule banter it around. And if a client or listener wants to go to Google at right now and type in what's safe withdrawal levels from investments, maybe that would be something to Google, you would see probably the 4% rule, meaning that if you have a pool of capital and you have an invested in a balanced portfolio of stocks and bonds, that a 4% withdrawal rate has worked most of the time. Right.
So if you had a million dollar portfolio broadly diversified, you could take out 4% per year or $40,000 and have a reasonable probability that you're not gonna deplete that million dollars by the time you die. Not to go over on just this topic, but it's such an important topic. And I said right up front, this isn't all about money, but a lot of it is about money. As folks get older and they're out into their 70s, let's say, who would I be to say, you have to stick with the 4% rule?
Let's say somebody's in their 80s. And they're only spending 4% because that's what the numbers are, say 4%. Well, their life expectancy really, by the current numbers that are out there would be 5 years. So only gonna spend 4% a year, but you're only gonna live 5 or years.
It's all, you know the word I'm gonna use now, I know you cause you made fun of me offline on this. Many times, you've got to be nimble. There you go, nimble. And you're planning.
And all that means is you just have to have some common sense around these things. But again, just not spending too much up front and then not being in denial about it. And when it comes to overspending, when people do overspending in your experience, are they overspending on themselves? Or are they overspending on other people?
That's a great point in question. In some cases, folks have taken mortgages and they've done things that have gotten themselves or have some credit card debt or some things that are out there that they're having to deal with. And so there's some real core issues that have to be addressed. In many of the cases though, surprisingly enough, they're doing things like supporting adult children.
And that can be a real drain on a retirees portfolio. We'll talk about all these probabilities and things that have to be overcome inflation, long life expectancies. And if a client is supporting one or two or more adult children, I'll tell you when you're having a budget two or three or four thousand a month in addition to a retiree's spending needs, that can be pretty devastating to a portfolio that goes on. Well, and I've seen situations, I'm sure you have two, where not only are you supporting one of your adult children, let's say it's one, if you have two other children that you're not supporting, then it creates some issues with you and your other two children that you're not supporting.
Well, why are you supporting my other sibling here? That's right. And you're not supporting me. I mean, that's not fair.
I've seen that situation happen. I would imagine you've seen that too. Oh yeah, it's the story of the prodigal son, right? I see that a lot.
I actually see clients making estate planning decisions based on that. One child's gotten the inheritance already and so the estate plan is adjusted to offset those advances on inheritance, I guess. You call it. Yeah, that's very interesting.
Now how do those go over? Do the heirs know that ahead of time that you already got your inheritance because we supported you and the other two kids are going to get the bulk of it because they didn't get it already? They've pretty much been straightforward with it. Steve, I see parents that get, we all want our kids to do well and we want to take care of, our kids, we want to take care of our parents as well, which actually is something too that I see.
I see the sandwich generation occurring in these retirees today where they have kids and grandkids and then maybe even parents that they're supporting, they can create a strain. But having a child, it's having a hard time getting off go with the payroll is tough from a lot of standpoint. And just having those healthy boundaries, it's kind of beyond our scope of engagement with a client, but they say people have to hit bottom before they make a change. A parent having to cut off a child, stuff for them.
It's tough for them, but it actually helps the child ultimately. Now, in your role as an advisor, is your role to bring these issues up and say, hey, you're supporting one of your children, here's what it's doing to your financial plan, here's what it's doing to your retirement plan, here's some things you need to be thinking about. How far do you go with that versus maybe referring them out to some other specialist that's outside of what a financial advisor does? Where's the boundary there?
You use the word boundary, where do we find a boundary here? We take everybody's situation very respectfully. And first and foremost, in the context of someone's financial plan, I can be respectfully frank about what they're doing and what the effect is on their retirement. If this situation continues, it's very possible that you personally might run out of money at some point in the next, maybe 10 or 15 years or 20 depending on the situation.
And being forward about that to the point, I think it will get people's attention. It is the truth though. So we have to let people know those things. Just having that open, honest conversation, absolutely, and raising the issues and being able to work through those eventually.
And I will tell you, there's been a couple times, Steve, where clients have actually brought their kids in and have had to hear me a third party. Say that to them. It's been pretty intense. You could imagine, again, when I got into business, 20-some years ago, I didn't really think about it, I didn't know that would be some of our activities.
Well, that's a good point. Sometimes people think financial advisors just manage people's money. Print numbers or whatever. I mean, that's obviously an important part of what you do.
But there's so many other things that you and other financial advisors do that goes beyond the money management piece. That is every bit, if not more important, than the money management piece. That's right. I'm honored to be in those positions with folks, but at some point, it keeps us on our toes for sure.
It does. Probably one of the things too, as we think through ways to fail, it would be risk on either side. Are people taking too much risk in their portfolios? Or are they taking too little risk?
And I really don't like the word risk, but that's OK. People can understand that. But when I think about, are we taking too much risk? In the context of, do I have all my money in one security?
Now, to me, that's risk. That's for sure risk, because one security can actually go to zero. So that's risk cannot be diversified away. If you just got one company, there could be a company specific problem like Enron.
That causes it to blow up and you lose everything, versus if you had 30 or 40 or 100 different companies that you own, it's a lot less likely that they're all going to go down at the same time. That's exactly right. And if they all go down, maybe temporarily in price, but they're all not probably going to go bankrupt. I know the example I like to see is you take a pencil.
And this pencil is a company. Now, try and break that pencil in two. Pretty easy. You can easily do that.
Now, if I give you 20 pencils and you hold those 20 pencils, and I say, now, try and break those 20 pencils over your knee. That's right. You can do that. That's right.
You can do it. That's exactly right. I saw that same thing with a piece of paper compared to a phone book. There you go.
The paper ripped the phone book. Right. It's the same concept. When we say too little risk, what we mean by too little risk, if you ask me where do you fall from a risk profile?
And I know that's something that we all need to ask folks and understand. But it's way deeper than just asking a couple questions. Because Steve, if you ask me what kind of return would I like to make in my investments? I would say, hi.
And then if you ask me, well, how much risk would you like to take? I would say, none. OK. That's my best tolerance.
Yeah. And if you can find an investment that does that, let me know. Right. OK.
Right. Exactly. So now you have to back it up and say, we start. We ask people, how much would you like to see your portfolio go down to make a certain amount on the upside?
And all those things are fine and they're a part of the process. But it's really hard for people to really relate and own what that means in a vacuum. Right. And so you're in the heat of the moment.
It's easy to say, well, this is what I'd like. But then when money is on the line, now it's an emotion. Because gosh, that's happening here. Absolutely.
So guess what? Risk tolerances change, depending on what the market is doing. So when the market has been going up for three or four years without much of a correction, everyone's risk tolerances, if you ask them, it's very high. It's high.
It's fine. It's all good. The market just goes up. Yes.
Yes. And we talked about that too and recently about recency bias and all that. But when the market's been going through, even a short period of volatility on the downside, people's risk tolerance has completely changed. And now everybody's not as risk tolerant.
So as an advisor, we have to help people find that middle ground, help people find that balance. And we have to make sure that someone is invested so that they can actually make it to their destination. And there's two little risk concepts. It's simply this.
Would you rather have security long term with some short term insecurity, meaning that you have to deal with some volatility day to day? Or would you rather have total security up front now today? So you have money in CDs and bonds and government bonds. You have no uncertainty whatsoever.
But with inflation and long life, you look up your 20, 25 years out and you're out of money because you didn't make enough to keep up. So in that example, you have short term security and long term insecurity. When given the choice, the short term security sounds pretty good to most people. It's finding a balance between not too much risk, not too little risk, but finding the place that's going to get people to their destinations and keep them sleeping at night as well.
Wasn't that Goldilocks? Not too cold? Yes. Yes.
I think I've heard that referred to our economy at certain times over the years. Right. That's right. I hope that makes sense the concept of we talk about risk and risk giving a lot of different things to different people.
So I think it's good to spend some time talking about what it actually means. Yes, definitely. So Bell as we wrap up here, any other things that you want to share on this idea of failing at retirement and what we can do to not fail at retirement. Being aware of these issues that we're talking about, keeping the retirement plan up to date, when I started in the business nearly 25 years ago, no one was looking at their account balances every day online, Steve.
It was once a quarter, paper statements would go out. And if there was activity in the account, a monthly one would go out. But nobody, if I recall, really looked at their monthly statements, really the clients would look at their quarterly statements, look at their values. And if we were going through the client in the market, you might get a few calls about it, not really much.
If someone called and wanted to know their account balance between quarters, it was kind of anomalous. Today, you turn on your computer. People are refreshing their balances by the hour. And I'm telling you, that is not productive for people's long-term plan.
If you're a commodities trader or you're working in an industry where you're trying to secure options or futures or do something that has to do with the daily or hourly markets, it's one thing. But if you're a long-term investor, refreshing your account balances every hour, it's going to be harmful. Right. And I know there are studies out there that have looked at the returns of investors compared to the frequency of how often they looked at their statements or how frequently they traded.
And they concluded that the more often you look at your accounts, the more frequently you trade, the lower your return. That's what the data has said consistently coming in. So the point to that is, look at your financial plan, get conscious of it, get truthful with yourself, look at it once or twice a year. And I believe in coaching, I believe that we all need to have somebody that can help us see the blind spots we can't see, as we've said before, and get clarity and get aware a couple times a year in the middle.
Don't plant seeds and then two days later dig them all up and see if they're growing. Exactly. That's what you do. They do that heavy lifting, they do that worrying, they monitor things so that the client doesn't have to.
That's right. And keep things updated, check in on things, good financial advisors will do that for you and make sure that you're having those conversations on a periodic basis. But if you put a solid plan together at the beginning, do some rebalancing, monitor things, make adjustments along the way as needed, it should be okay. That's right.
Very much so. Great. Bill, thank you. As always, lots of fun to do these shows.
Always fun to do them in person too. Yes, sir. We'll have to make a habit of this. All right.
Well, I sure enjoy it, Steve, and I sure appreciate everything you're doing in our industry and for us and our clients and listeners as well. Thank you. Thanks, Bill. The opinions expressed in this podcast are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security.
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