Your Realistic Retirement Plan with Brie Williams

[INTRODUCTION]

[00:00:11] Dean: As always, thank you for listening to The Guided Retirement Show. I’m your host, Dean Barber, Managing Director at Modern Wealth Management and we’re going to continue on a conversation with Brie Williams here today and we’re going to be talking about how to build your retirement plan and how not to build it in what we will call fantasyland. We don’t like to think about some of the things out there that may be uncomfortable. Some of the things that might derail an ideal type of retirement and Brie’s going to go through some of the psychology of building a plan, why it’s important to make sure that you’re thinking of not just all the good things that you want to have happened in your retirement as you’re building that plan but also thinking about some things that might not be so pleasant that could come along. I hope you enjoy today’s episode.

[INTERVIEW]

[00:01:02] Dean: So, when people build their retirement plan, I think they do it in this fairytale world. They assume that both are going to live long, happy, healthy lives, “We’re going to be able to do all the traveling and everything they want to do. Nothing is ever going to get in our way.” And I think it’s human nature to want to imagine that our future is going to be the way that we wanted to be.

[00:01:32] Brie: I would agree with that because when you think about events that are not so happy where things are not all sunshine and flowers, it’s not motivating, so it causes us to procrastinate. So, death, that’s not a motivating thought in any way shape or form and so the psychology comes into play here and it’s proving out through researches, we’ll move into either a mode of procrastination or we just completely put it aside forever because we would prefer anything about hope as a strategy as opposed to a what-if, a contingency factor that could be a reality.

[00:07:09] Dean: So, as people head into retirement, Brie, and they build out this retirement plan, I like to say, “Look, let’s build that plan based on you both living a long time, based on you being able to do all the stuff you want to do,” but then let’s throw in every what-if scenario that we can think of. Let’s say that somebody has a stroke or a heart attack at two or three years into retirement. When somebody passes away, what happens to the Social Security? What happens to the lifestyle? Are you going to be forced to downsize? How is it going to impact your life? What’s the impact on the tax return? What happens if our government officials don’t get their act together and people wind up with 70% of what they’d been receiving in Social Security? How’s that going to impact? What happens if we have a higher tax rate or higher inflation?

I mean, there’s all of these what I’ll call the what-if scenarios that I think need to be stress-tested into a person’s retirement plan, not just once but on a very regular and ongoing basis. And I think two of the stress tests that people don’t like to think about and they don’t like to talk about is that premature death and it is also the possibility of a long-term healthcare stay or needing some in-home healthcare. And those things can be destroyers of a retirement.

[00:03:42] Brie: Absolutely. And let’s just say right now there are not happy things to think about.

[00:03:47] Dean: Well, but they happen.

[00:03:50] Brie: They do happen and more often than we realize when we really think about life. Life is messy.

[00:03:55] Dean: Have you witnessed long-term care with a family member?

[00:3:57] Brie: Yes. I have. So, I lost my dad about seven years ago and he passed away at age 72 due to brain cancer. It’s a glioblastoma stage 4 and when that happened and he was diagnosed he was a healthy man living life to the fullest and extremely active, happened on a business trip where he drove off the side of the road because he had a seizure and the cause of the seizure after much discovery ended up being the brain tumor, the cancer, and we were given a diagnosis of 18 months to two years tops and in about the 18-month mark we lost him. So, that left our family which is small, it’s just my sister and I and my mom, really kind of scrambling to put together some very necessary puzzle pieces quickly because it had tax implications, it had insurance implications, it had income implications but also care for him.

So, you have a very high emotional quotient of factors at that point because your energy should be spent with dad, should be spent with what type of care does he need right now, and everything in that manner was so he could live life with grace and dignity. Not working on the intellectual component of, okay, these are adjustments we need to be making in the financial plan now because that’s when it feels really overwhelming and complicated.

[00:05:24] Dean: Well, and that is the point at which many people can really be taken advantage of. If they haven’t thought through that, if they don’t have that – if they haven’t built that in, okay, think of it like this. You board a big airliner with the airline crashes that have been out there in the news recently.

[00:05:45] Brie: Mind you, I’m on a plane later.

[00:05:49] Dean: Yeah. But what is that pilot doing? That pilot is going through a very thorough checklist and no matter what happens, they have their checklist that they go to that says, “If this happens, then these are the things that I’m supposed to do.” I believe that when somebody’s doing retirement planning that they should already have those contingency plans built-in, which requires us to think about the uncomfortable situations that we might find ourselves in and face those situations and come up with solutions of an action plan before those situations arrive. Can you imagine if the pilot didn’t have the checklist and they go like, “Oh my gosh, what are we going to do now?”

[00:06:39] Brie: Yeah. Shooting from the hips, not a great strategy.

[00:06:41] Dean: No, but that’s what the vast majority of people do when it comes to their retirement plan. It’s your plan of hope but let’s talk about this. So, you have any statistics on the number of people that will spend some time in a long-term care facility or the cost and what does that do?

[00:07:04] Brie: So, if you haven’t set aside finances to cover your assisted healthcare needs beyond just regular insurance, that can easily be $250,000 a year depending on where you are in the country. That’s just one year. So, you could be looking at needing $0.5 million if you’ve got some longevity but need the care that you can’t get at home or even just bringing assistance in-home. That may also require you to think about some structural changes to your home, which was probably not something you are considering. Because if climbing up and down stairs as an example is out of the question now, then you need to make sure you can live on your first floor and if there isn’t a bedroom and/or a bathroom facility on level 1, you need to build it. So, there can be unforeseen expenses, not just the traditional expenses when it comes to healthcare that is outside the realm of what you would normally think about doing.

So, those are all factors to consider and it’s not just funding. It’s structures too that matter as well as communication with your family. So, you need to share what your wishes are and what you have planned for so those that need to step in to help you, your trust and contacts, family or otherwise, are prepared to take up their responsibility and follow through. If you don’t tell me as your daughter what you anticipate or would like, what your version of living with grace and dignity and you need assisted care that I cannot provide, I’d like to know what that is and what we’re talking about in terms of funding and structures so I can help you achieve that if you are putting that responsibility on me to help.

[00:08:58] Dean: And if you had a stroke or you’re incapable of making those decisions and you haven’t laid that out in a trust document, then it’s all left up to guesswork.

[00:09:10] Brie: Correct and that’s when people can get taken advantage of or the outcome isn’t what they intended. So, family dynamics are complicated and individuals of there’s multiple children will all have different possibilities in mind for what they think the right thing to do is for mom or for dad. So, without that communication and with the documentation in place and that’s something you need to revisit on a regular basis. Some of the basics, do you have a healthcare proxy? Do you have a will? Are your beneficiaries updated?

[00:09:43] Dean: Durable financial powers of attorney.

[00:09:44] Brie: Exactly.

[00:09:45] Dean: All these things that have to be in place.

[00:09:46] Brie: All those things, yeah. So, you should be looking at that annually when you go in for your financial review. I mean, consider that a financial health check. It’s critical because people change in your life. You have different people coming in and out and your trust also changes too. So, you want to make sure that that is current because a lot of people said it and forget it so they don’t realize that they did get divorced and they never change documentation so spouse number one is still on documents and it actually should be spouse number two.

[00:10:20] Dean: I’ve read stories about that.

[00:10:23] Brie: It seems like you wouldn’t miss that, but people do.

[00:10:27] Dean: Yeah. So, we started talking about how people want to develop their plan in this fairytale type of world, and then that really quickly turned into, oh my gosh, Dean and Brie were talking about these horrible things, but I want to go back to your dad.

[00:10:48] Brie: Sure.

[00:10:48] Dean: Okay. So, your dad was 72 when he passed away. He had brain cancer. They found it obviously about age 70 and lasted 18 months. I would imagine that your dad probably has done some planning. Was he retired at that point?

[00:11:05] Brie: Nope. Still working.

[00:11:05] Dean: He was still working. Okay. Did he have plans to retire?

[00:11:08] Brie: The man was not going to retire.

[00:11:10] Dean: He was not?

[00:11:11] Brie: No. Very much driven by his job. He loved it.

[00:11:13] Dean: Interesting. Okay. So, I was going to say was his plans interrupted? Were your mom’s plans interrupted? Was this something that was just like, “Oh my gosh, now everything has changed?”

[00:11:27] Brie: Well, I think more so than plans financially being interrupted, her vision of what the back third of her life was going to be about was interrupted and that is obviously intrinsically connected to finance. So, her retirement years are now a different reality both in a monetary sense, but I think more importantly, in which he envisioned doing at that stage in her life is completely turned upside down.

[00:11:55] Dean: Which in turn is going to then affect you and your siblings, right?

[00:12:00] Brie: Of course. And we were lucky because we did have a really good financial advisor helping us and was able to work through. It was a very stressful period of time and keep us focused on the decisions we needed to be making, what, when, and the proper order within the limited time framework that we had to work on because we suddenly need to focus on things that were a little further out, if you will, and some of the planning conversations. So, we could maximize opportunities that would make decisions more effective whether it was a tax consideration or the way money would be changing hands from one individual to another, and that makes a big difference in what you had to work with once that person is no longer here. Then I think the other factor that many people don’t consider is my father took great care of all of us. He was the primary breadwinner, and he did instill a great work ethic in his children and so it’s now our chance to step up and how could we help him not feel that we were setting him aside because he still was with us with sound mind for quite a while. So, what we would do is he would have a meeting with the financial advisor as like he always had and then we would all group together immediately following as a family.

[00:13:15] Dean: Family meetings.

[00:13:15] Brie: And that was important because…

[00:13:17] Dean: That’s critical.

[00:13:17] Brie: It gave him a role, a purpose, and it didn’t diminish everything that he had worked so hard for.

[00:13:23] Dean: Yeah. That really is critical, and I think that’s one of the important things is, is when you’re putting together your financial plan, okay, let’s ask these questions, what happens if? Now, there’s no possible way that your dad’s going, “Well, what happens if I get brain cancer?”

[00:13:39] Brie: Right. That was never in the realm of possibility.

[00:13:40] Dean: Right, but it doesn’t have to be specific. What happens if I get sick? What happens if I pass away? What happens if I need long-term healthcare? How does that affect my surviving spouse? How does that affect my children? How does that affect them not from just an emotional standpoint but from a financial standpoint? I’ve had many people tell me, “Dean, I don’t want to be a burden on my family,” and I look at him and I said, “Well, you’ve got plenty of money. You’re never going to be a financial burden.” “Now, Dean, that’s not what I’m talking about. I’m talking about I don’t want to be a physical, mental burden. So, what I want to know is that in the event that I can’t take care of myself, I’m not going to put that burden on my children. I’m not going to put that burden on my spouse. I want to make sure that I’ve got enough money that I can be in a skilled nursing facility or whatever is going to be required with proper care, with dignity, etcetera, without being a mental and physical burden on my family.”

For some people that’s critical and some people would say, “Well, I would expect for my children to step in and take care of me or that I could move in with them and they could do this for a period of time.” And so, what you’re saying earlier about is this document has had you put these things in writing and have you had communication with your family about these things? That’s all part of financial planning has zero to do with investments, but it’s critical when it comes to the financial planning. Now, it will come back to the investments at some point because there are going to be financial things that are going to happen and that’s where the stress testing of the financial plan comes in.

[00:15:19] Brie: Right and it really comes down to can you as a family get comfortable talking about money matters?

[00:15:26] Dean: Well, you’re going to have to.

[00:15:27] Brie: You have to.

[00:15:28] Dean: Okay. Whether it’s by force or by choice at some point it has to happen.

[00:15:33] Brie: Right. And to your point even just starting those conversations, it’s not about sharing what your bottom line is, your balance sheet, because the things we were just discussing aren’t about the money. That’s the end of some of the choices that are made. It’s the ability to help someone live their life on their terms with their definition of financial security.

[00:15:57] Dean: Okay. Let’s take a quick break. This is the Guided Retirement Show. I’m Dean Barber. We’ll be right back.

[ANNOUNCEMENT]

[00:16:02] Female: Is thinking about your retirement intimidating? Okay. Let’s get real. The thought of not having to go to work five days a week traveling, spending time with your grandchildren, basically, doing what you want to do on a daily basis. Well, that’s not scary. However, paying for that retirement lifestyle, well, that can be a little more daunting. The reality is retirement doesn’t have to be scary and a good place to start is by listening to America’s Wealth Management Show hosted by Dean Barber, that’s the guy you’re listening to on this podcast, and Bud Casper. With over 65 years in the financial industry, Dean and Bud discuss how to live your one best financial life. And unlike some other radio shows, they don’t talk about investments or the latest get rich financial products. It’s strictly retirement education.

Now there’s a couple of ways to listen. You can download America’s Wealth Management Show on your favorite podcast app or if you like to listen or stream your radio shows in real-time, simply go to AmericasWealthManagementShow.com and find out where and when you can listen to this week’s show. That’s AmericasWealthManagementShow.com.

[00:17:18] Dean: Have you witnessed long-term care with a family member?

[00:17:20] Brie: Yes. I have. So, I lost my dad about seven years ago and he passed away at age 72 due to brain cancer and when that happened, and he was diagnosed he was a healthy man living life to the fullest, happened on a business trip where he drove off the side of the road because he had a seizure and the cause of the seizure after much discovery ended up being the brain tumor.

[INTERVIEW]

[00:18:09] Dean: Welcome back. I’m Dean Barber, Managing Director at Modern Wealth Management and this is The Guided Retirement Show. So, in our prior podcast, we were just talking about this idea of planning and you talked about this idea of living on your own terms, living with dignity, etcetera, and now we’ve kind of morphed into talking about this idea of, gosh, what happens if something bad happens? And being able to have an open and honest dialogue about those types of things that all have to be built into the plan from day one. It can’t be something that comes in as an afterthought later on. That’s got to be part of the discussion because at some point it could have a financial impact.

[00:18:54] Brie: Absolutely. So, think of it as a contingency plan. You may never need it, but you have it if you do. And I’d rather have it than find myself in a situation where I don’t have time on my side. I’m rushing as opposed to being thoughtful about the choices before me.

[00:19:12] Dean: Right. Or you prevent yourself from being taken advantage of by a salesperson.

[00:19:16] Brie: Yes.

[00:19:17] Dean: All right. So, what I mean by that is if you had this conversation, you’ve built this into your financial plan then you can use insurance as insurance was originally intended to be used, which is to transfer risk to an insurance company as opposed to you taking on the risk financially on your own. It’s purest form. That’s all insurance is and all it ever should be, and it should never be sold on a fear, but I know a lot of people that have made a great living selling long-term care or life insurance policies based on fear, right?

[00:19:56] Brie: Sure. Well, fear is a motivator.

[00:19:57] Dean: Yeah but it’s not fair.

[00:19:59] Brie: I didn’t say it was.

[00:20:01] Dean: And I think that how you protect yourself from being taken advantage of and being sold is by planning and having the knowledge and understanding what is the likely outcome in the event that these things happen. And then you can look at it and say, “Okay. From a financial perspective, if this happens, you know what, we could self-insure this. So, let’s run our plan as if we’re self-insured and then let’s put that in there and let’s say, “Okay. If we chose to insure, what’s that insurance going to cost?” And now let’s run the plan saying that that’s an extra budget item. Okay. Well, which one of these two things give me and my family the best outcome? And then you’re not buying insurance. Nobody’s selling you insurance. You’re actually saying which one of these two options gives me the results that I want.

[00:20:57] Brie: Right. It’s a strategic lever then and you’re taking a risk-managed approach and you’re also hopefully starting early enough that you can use longevity as an asset in your financial plan because it is an asset. Use the time you have to your advantage because when we procrastinate and put things off, that time gets away from us and it can take away choices which could minimize the outcomes we actually are hoping to achieve.

[00:21:25] Dean: Well, I’m such a big proponent of financial planning, but I honestly believe that no one should ever purchase a life insurance policy without going through a financial planning process. First, no one should ever purchase a long-term care insurance policy unless they go through a financial planning process first and have really sat with that financial planner. Let that financial planner be the architect of the rest of their life and draw that out in blueprint and then let’s put these what-if scenarios in there and see what the outcome is because if you do that, then you can actually discover what’s the real need and then you’re just fixing a problem as opposed to being sold a product and I think that most people would then say, “Ah, I get it. Okay. That’s why I have this,” but I run into people all the time that have been sold a product years and years and years ago. They still have it. They’ve taken out the plastic binder and the ink is sticking to the plastic binder. It has never been out of there. “What in the world is this thing?” “Well, I don’t know. We bought a long time ago.” “Who did you buy it from?” “I don’t know.” And lo and behold, it’s just money that’s been flushed down the toilet.

[00:22:44] Brie: Right. Yeah. I mean, anything you buy, a product or an investment vehicle has to be connected to the strategy because you may not need it and if you do, it should be purposeful in why it was implemented so why you own it, what it’s for, and when it’s on track to do. If you don’t have the answers to those three questions, then don’t buy it.

[00:22:58] Dean: Right. And you’ll never have the answers to those three questions unless you’ve gone through the comprehensive financial planning process.

[00:23:04] Brie: Exactly. Do things in the right order if you can, because it’ll help you, in the end, do more with your capital.

[CLOSING]

[00:23:11] Dean: So, in our next discussion, I want to talk to you about some of the, I guess, we’ll call it fraud and abuse that is perpetrated on our seniors. I’m going to say seniors, anybody that’s 55 or older. There a lot of different scams and things going out there and unfortunately there are scams in the financial industry, there are scams in – it’s all across the board. So, in our next episode, we’re going to talk a little bit about what are the biggest scams that are out there, how do you recognize those things, and more importantly, how do you protect yourself from that. Thanks so much for joining us on this episode of the Guided Retirement Show. You can find links to this episode show notes and giveaways all in the show description or you can always visit us at GuidedRetirementShow.com/4. And don’t forget, subscribe to The Guided Retirement Show so that you are notified when we release our next episode.

[END]

Investment advisory service is offered through Modern Wealth Management, an SEC-registered investment advisor.