- The norm: as you get closer to retirement, you should take less risk.
- De-risking your portfolio
- Leaving the gathering phase, entering the distribution phase
- Taking money OUT of these accounts is a totally different strategy.
- Some of that money won’t be needed for 10 years, 15 years, 20 years
- No need to re-risk 100%
- What you’ll do in the first 10 years of retirement may be very different from what you’ll do in the next 10 years of retirement.
- What’s your inflation number?
- Stress Testing your retirement plan, to ensure self-sustainability
- Building partnerships and proper, long term, lasting relationships with clients
Host Jordan Rich
Hello dear friends, welcome. It’s a beautiful summer month and we continue to come to you with great advice about retirement and great health. For those of you thinking about planning for retirement. I’m Jordan Rich along with Mark Rowlette, founder and president of South Shore Retirement Services in Hingham. Sir, your tan is improving every single week I see you.
Which is about me not remembering where to put the sunscreen on in the morning. But sometimes I don’t when get on the boat with my friends. So yes, the summer’s here. And I’m very much enjoying it trying to balance work and get net and catch and dinner.
Host Jordan Rich
Well, balanced work is something that we all need to do, even those of us who are approaching retirement because there’s a little bit of work involved. And we’ve got to get our head straight so that we can make the right decisions. And that’s what we’re going to be talking about today. And there’s a four-letter word that people haven’t heard much, except for the last six or eight months or maybe a year. And that’s “RISK”. They are concerned, so we’re going to allay some of those concerns, hopefully, please begin with what you want to talk about when it comes to risk.
When I was doing that a bit of research for the show today, the norm is as you get closer to retirement, you should obviously take less risk. And still kind of makes sense. But looking at it from the perspective of all of your money and not taking any risk? Maybe it doesn’t make sense for you. It really depends on the individual or couple situation. So you know, de-risking your portfolio doesn’t necessarily mean that you have to pull it to the sideline, where you don’t have any possible opportunity to make money.
The market’s been really hot for quite a while now. But as we all know, things are cyclical, so it’s probably due for a correction. I know the Fed has been reducing the money supply by increasing interest rates, and it seems to be starting to help cool down the economy a little bit. Inflation seems to be getting a little bit better. I noticed the gas prices starting to go down. And that seems to be the first thing that we all notice. But it doesn’t mean necessarily that we’re out of the woods from a market standpoint, nobody has a crystal ball. Not even me.
But I think you know, as people get closer to retirement, especially the people that I see, on a daily basis, anxiety is something that kind of creeps into the back of their minds where, you know, they’ve built up a nest egg, and they’re looking at now just starting to use it, and they’re anxious about “Am I going to have enough to survive? Am I going to have enough to do the things that I want to do?” What are the things that could potentially impact that? Obviously, a downturn in the market is one of them.
Host Jordan Rich
You and I have talked about this quite a bit, the idea that you’re in a different place. When you’re in retirement or approaching it, you’re no longer in the gathering phase, you’re in the distribution phase. So the even the term “de-risk” doesn’t sound as ominous as let’s say, you’re in the middle of your work world, and you’re 40 years old, and you’re looking at the future in college expenses. I mean, it’s just a just a different paradigm for those of us who are approaching this age range. So we have to think about ourselves differently.
Mark Rowlette Absolutely. I think you’ve made a really good point. It’s a completely different paradigm, as people start to think about retirement, all of a sudden their mind shifts to distribution. “All right, I’ve been accumulating for the last 30 to 40 years. And now I got to start pulling money out of it. And really, I hadn’t thought about it until just now.”
So taking money out of the accounts is a totally different mindset for people when you start talking about how to do it. And this is my opinion. I think that the financial industry has done a bad job of educating people on how to spend the money. Right? Because there’s such a huge flow of people that are going into retirement for a number of different reasons. And all their working lives. The financial industry has promoted saving, saving, saving. And obviously that’s critically important too, because you don’t have anything to distribute from if you didn’t save in the first place. But there wasn’t really much education about distribution. Now it’s starting to tweak and starting to change.
But for many years people would retire have social security and a pension plan, right and maybe they save some money but pensions were very prevalent with most companies. And that’s not the case anymore. So the idea of as you get closer to the end game, pulling back all of your money and saying alright, now we have to de-risk 100% of our portfolio. Personally, I disagree with that. I think you have to look at it from the perspective of when you need the money.
How much money you need and how long you’re going to live for. A lot of those things are very difficult to quantify, because nobody knows how long they’re going to live for, for the most part. But you do know how much money you need, potentially, right? We’ve got social, you’ve got whatever else you got going on, and you need to supplement. So if you’ve worked for 30 years and amassed a nice nest egg, it doesn’t mean that the day that you see need, to start taking money from it, or that 100% of that money needs to be available.
And I’m not talking about tying it up or locking it in. I’m talking about making your money work more logically. If you need your money over a 30-year retirement lifespan, well, some of that money, you don’t need for 10 years, 15 years, 20 years, and so on and so forth. So the money that can go out, and the longer range potentially could be working harder for you. That’s a lot of what our education is about when we talk to potential clients.
Host Jordan Rich
The education that occurs in the office when you make an appointment for a consultation, or certainly at any of the seminars or webinars and certainly here on the show. But you also have an option for friends to make a phone call to set up a 15 Minute No Obligation Strategy Call, we call it. And it’s basically a chance to get that nagging question answered. Or to pick up on something you’re hearing on the show, it’s really gnawing at you. It’s an opportunity to do that. No obligation, totally free. 781-836-4214. You can schedule the call at your convenience. You can do it via RetireSouthShore.com. There’s a very easy calendar grid. Simply set it up and answer some of those quick questions that you have. But for longer questions, there’s always the in-office consultation and more.
So let’s talk a little bit about some of these actual, practical “de-risking” options that people can think about anyway, at this point.
Yeah, here’s a lot of chatter as people get closer to retirement, or their friends start talking about “How do we adjust our retirement plan in these unpredictable times that we’re in?” because we are in unpredictable times.
What about inflation? Everyone’s talking about inflation. And while it looks like they’re starting to curb it, things are still getting more expensive and have always gotten more expensive as time goes on. From an inflation perspective, we try to look at it for the standpoint for a client of “what’s your inflation number?” – meaning “what are you spending money on now? What are you going to be spending money on later in life?”
I say this to almost every client, when I sit with them, what you’re going to do in the first 10 years of retirement are very different to what you’re going to do in the next 10 years of retirement. So please be aware of that and build that into your overall strategy.
People don’t like the roller coaster. So when you talk about de-risking, you want to focus on the risk. Maybe you’re sitting there listening, and you’re saying, “I know the market goes down, and I know the market comes back, and I can tolerate that. And I’m good with that.” To people who say that to me in meetings, I say, “Well, maybe you can take the risk. But maybe your money can’t take the risk, or maybe your money can afford to take that risk, but you don’t need to. So what’s the point?” Why? Why are you taking so much risk with your money? And if the answer is, that they want to leave more money to the next generation, there’s probably a better way to do that. For most of the people that we meet with, the largest assets that they have (with the exception possibly of their home), are something that they have not paid taxes on yet. So building a further tax time bomb might not make sense for them.
So really, it’s as simple as, “what are you trying to protect?” Are you trying to protect your money? Are you trying to protect your income, and I totally understand trying to protect your income, because you want to make sure that if you need $6,250 a month (or whatever your number is) that that’s what you’re drawing from your account, not $6,250, that was worth $7,000 a week ago. You don’t want to do that. You don’t want to be taking money out at a loss. Once you’ve realized that loss, you’ll never get it back if you’re spending that money.
Host Jordan Rich
A wise sage once said “Patience is a Virtue”. The same gentleman or lady also said “don’t press Send so quickly.” The point that I wanted to make is what Mark is talking about – the opportunity to discuss these things, to have them laid out, to see it in your in your purview right there in the office, or on a screen or on a piece of paper, so that you know exactly where you are and where you could be going. There’s no rush to judgment here. You don’t have to make a rash decision. This actually puts a lot of people back at ease.
Yeah, let me give you a quick story, and an example of the process here in the office. If it ain’t broke, we’re not going to try and fix it. And the example I want to give you is I met with a couple a couple of weeks ago. I went through our process of gathering information from them, putting together an income analysis. The husband was very much on top of his investments, and he liked it, and he did it really at a very high level and did a really good job on it. And that’s exactly what I told them when we sat down in a meeting. I think maybe they were under the impression that I was going to poke faults in it because that’s what people possibly think financial planners do.
And I said, “Listen, you’re doing a great job, I don’t think that you need financial guidance, the only thing that I would point out is, you do a really good job, but your wife is not involved in that side of it. And if something happens to you, who’s going to pick up and take over from that standpoint?”
The process of going through this is making sure that what you’re doing now, if it can be improved upon that you’re aware of, there’s no rush to make these decisions. I think the sooner you start planning for these things, the more control and power and comfortable feeling people will have. But there’s no “you gotta get this done and you’ve got to change everything”, because maybe you don’t.
And when you’re talking about de-risking, one of the things that we look at is stress testing your retirement plan, making sure that your retirement plan is able to sustain itself, and seeing where you might have money currently in a bad situation. People have become a little bit complacent, and are forgetting that when markets go down, they can go down for a number of years, remembering 2001, remembering 2008. I’m hopeful that that doesn’t happen again. But it’s not a situation necessarily where the market drops for about a month, and then everything is good. Again, it could be a long period of time.
If that long period of time happens at the same time that you’re pulling money out, well, that could be a recipe for disaster. So stress testing your existing retirement strategy, retirement plan is critically important.
Host Jordan Rich
I want to pick up on something you said and we’ll go to a break in a moment. But you said sometimes it’s the partner, the spouse, the colleague, son, daughter, sometimes it’s someone who’s not as aware, and it’s your role to bring them up to speed. It just makes everyone feel better when everyone knows where to go, what to do when the time comes.
Yeah, listen, I’ve been in business for 25 years, and I intend to be in business, hopefully for another 25 years or so.
And, you know, timing is everything. And I always want people to feel you know that they’re not going to come into the office and get beaten over the head until they become a client or they never want to hear from us again. And that example is a perfect example of maybe at some point in the future, those people will say, You know what, now we do, we do want to have professional help.
I just want to make sure that all cards on the table be very direct and very upfront with them that I don’t think that they necessarily need to use our services now, from the financial side of things. They use some of the other All Hands Analysis Services. And when the timing is right, the timing is right. We don’t want people to feel pressured. We don’t want people to feel that it’s all about one side of the table. We want to truly build partnerships and proper, long term, lasting relationships with clients. And if they’re not going to become a client today, maybe they become a client tomorrow, or maybe they don’t become a client at all. But these people in particular were reaffirmed that what they were doing worked, and the way they were doing it is what we would have done, so there’s no reason to make a change.
Host Jordan Rich
You can connect easily. Just go to RetireSouthShore.com. All kinds of information there and all kinds of information coming up in part two of our program. Stay tuned.
Host Jordan Rich
Welcome. This is Retire South Shore Radio. I’m Jordan Rich and here of course with me is Mark Rowlette, founder and president of South Shore Retirement Services and we’re focusing today on sort of a new term of art.
I like the term “De-risking”. It takes the threat and the sort of the hardness out of the word “risk”. But it’s important to adjust. I think that’s a key element when you’re moving through retirement or planning for it. And Mark, we talked in the first half about people that are looking at their overall situation, moving from gathering and saving to distribution, and now is the time to at least assess where we are. So what other tips do we have for people in the de-risking phase?
De-risking might sound to people who are listening as “just take all your money and have no risk with your money.” But that’s not what I mean. And it’s not necessarily de-risking your portfolio, because almost all of our clients have some of their money that has that up-and-down roller coaster.
It’s more de-risking your income. Right? We want to make sure that we’re able to derive the income that a client needs on a consistent basis without taking money out, that is “lost money”, right? Probably the most important way to structure anyone’s retirement assets, is make sure that you have money for now, money for later, money for later, money for later, and so on and so forth.
And the further out you go, honestly, the more risks that maybe that money could potentially take. When you start looking at these retirement strategies, or you’re looking at your own retirement plan, you want to look at (like we said before the break), how much risk you actually need to take. Maybe you think you can tolerate more risk, but maybe your money can’t. So the stress testing of it and showing the “what if” scenarios if the market takes a downturn for three years – if you don’t change how you’re invested, and you pull out the money that you need, what’s going to happen. And if it’s still good, and you’re happy with it, your money you can do whatever you want with it. One of the things we don’t want to see people is making knee-jerk reactions, right? Becoming emotional, and becoming emotionally attached to either their holdings, or emotional because something’s going on in the world. And they think, “Oh, my gosh, I gotta get out.” Because maybe you don’t.
If you have your money, and it’s gone down in the wrong direction, as a function of how the market has been, is there any opportunity there? Is there anything that you can do in light of a bad situation from the outside in, that makes it a good situation? And a lot of time there is. I mean, if your account has gone down, and you’re in a situation where it makes sense for you to do some of these Roth conversions that we talk about, maybe you’re able to do it at a discount. Maybe the holdings that you have aren’t bad holdings, and you don’t want to get rid of them, you don’t want to sell them, but to pay the taxes at a discount might actually be an advantage to you. So well, I can’t give you tax advice. That’s part of the All Hands Analysis. We build tax strategies. Our team of CPAs can give you tax advice, if that’s what you want. So always looking for an opportunity, no matter what’s going on, is something that can help people put more money in their pocket, quite honestly, which is really what we’re all trying to do.
Host Jordan Rich
Hindsight is 2020, another cliche that is overused, probably, but it really matters and is most illustrative when you’re looking at the financial picture. You just said it in the last segment: 2001 and 2008. And here we are in 2022. If you go back into the 20th century, those cyclical periods are almost predictable from one to the next. So it’s really important to have a clearer picture, a perspective, if you will, of all this. And one way to get help immediately to a nagging question that’s been bugging you is something your listening to on the air, and you’d like to get a follow up free, No Obligation 15 Minute consultation is available. It’s a terrific service that’s been in operation since before the pandemic. And it’s really turned out to be a godsend for many people just to get advice and, and help at the time. So to do this, to get the No Obligation Strategy Calls set up, you can always just go to RetireSouthShore.com. Sign up on the grid or call the office anytime leave a message on the weekend 781-836-4214. The bucket list, we all remember the movie and everyone uses that term. But this is where the other use of the term bucket list comes into play. Because I it’s the best way for me to think about my own situation is to look at those buckets where money is and where it’s coming from and going to.
Yeah, reminds me to remember that show we did a couple of years ago about the bucket list of stuff that clients should be doing or want to be doing in retirement. I think that’s really important as well. But yeah, the bucketing of your money or laddering of your money we think is really the key to making sure that you have less less anxiety, and a comfortable, enjoyable retirement. You have some money that is extremely safe, some money that is a little less, some money that is a little less and you keep going on and so forth. And that allows people to make the returns that they want to achieve without having to sell off something that they’re losing value in. and to take the stress and anxiety out of retirement.
I think a lot of what we look at is, “what’s the person’s current allocation of the money?” How do we best help clients position their assets in order to achieve the returns that they need, achieve the returns that they want, and then achieve the returns that their money can tolerate. Part of that is looking at the specific holdings the clients have. We spent a lot of time doing analysis on the individual holdings that they have, looking at inefficiencies in them, if there are inefficiencies. And I mean, the inefficiencies from the perspective of how that particular asset is matching up to its peers? Is it doing better than its peers? Is it doing worse than its peers? How expensive is it? Is there any cost associated with it?
Everyone knows, no matter where you put your money, there’s some cost to it, even if you put it under the mattress, you know, you have an inflation cost to it. So what is that cost? Can that cost be reduced and still achieve the same goal? Well, that’s returning itself, looking at what sort of guidance that people are getting, because in our opinion, it’s not enough to just say, “Here’s a better way to allocate your money, good luck to you. And I hope it works out.”
It’s partnering with them and working with them on a continuous basis, I see on the calendar, because we have the quarters, quarter meetings coming up, you know, dozens of quarterly review meetings with clients, and they’re not all about, well, “here’s how your money’s doing and everything’s still good.” It’s more about what’s going on in your world is anything changed that we can seek an opportunity here? Did you buy anything? Did you sell anything? Did you have a grandchild? Did you get a new job? What’s going on in the general landscape to see if there are any opportunities there. So you talk about seeking professional help, that’s what we do. Helping people basically quarterback through their retirement and making sure that there’s no stone left unturned, because the worst thing to know is the thing that you didn’t know, right? The thing that you weren’t aware that you could have taken advantage of that put you and your family in a more comfortable position.
Host Jordan Rich You’re listening to Retire South Shore Radio. That is also the website, RetireSouthShore.com. For follow up information, you can zero in on what Mark and I are talking about. And I’ve got to share this story, I often get, Hey, I hear you on the radio with that fella with a great accent. And talking about retirement planning, and so forth. And I was with one colleague friend about my age, so Men of a Certain Age, if you will. And he put it this way. He said, when I’m dealing with the people who are helping me plan my future, I suddenly feel like the CEO, the chief executive officer, working with a brand new CFO, Chief Financial Officer, and that person or persons in I’ll use that, in your case, it’s the All Hands Analysis team that is our financial department. My wife and I know we can sort of lean on them for help, advice, information and communication. I thought that was an apt way to describe it. You know, this is a guy who worked for somebody else his entire life, and now he feels he’s in control?
Absolutely. I think it’s a great analogy. I think, you know, in any situation, you know, the CEO is the one that’s in charge. So we know that the clients are the ones in charge. And I think too many people in my industry, keep telling clients what to do. I really want to sit with a client and say, “Well, what do you want? What are you trying to achieve here?” And the obvious answer is, “I don’t want to run out of money, I don’t want to lose money, and I want to make money.”
But it’s the non-obvious “what’s important to you.” What if you can put yourself in a position that you’re not going to have to worry about money for the rest of your life. What’s important beyond that? What are the things you want to do? We’ll give you, guidance and give you concepts and give you ideas and work and partner with you going through it. But ultimately, I don’t lose sight of the fact that it’s a client’s money, it’s a client’s life savings.
So you have to be aware of what they want to do as opposed to what you think they want to do.
Host Jordan Rich
It all starts with conversation and communication. And that communication stays ongoing, because it has to. We’re talking about the world changing rather quickly. If you keep up with those changes, and it doesn’t mean like every two days, but if you keep up with those changes with regular connections, you should be in pretty good shape to handle what comes your way.
Yeah, I think it’s so important to stay in touch with clients with all cards and full disclosure. It’s really good for business. Clients don’t leave because they don’t feel like they’ve been forgotten. The too many people who’ve come into our office, they really don’t talk to my person. They’re always available if I call them but to us, we want to make sure that we’re staying in touch with them by you know, having review calls, having review Zooms, the advances of technology when we were kind of forced upon it. I mean, you and I had never done a Zoom before and then all of a sudden we did almost two years of Zooms..
I think it makes it a lot easier. I have clients all over obviously the South Shore – all over New England, all over the country quite honestly, and technology has made it easier to stay in touch and communicate with people. But I think it’s so important to do that. We do a lot of client events, just to appreciate the fact that they entrust us with their life savings. And we take that really seriously. We want to say thank you for doing that. But it’s also a good way to stay connected with the people who we serve, not just them knowing that we’re still here. I think you know how I’ve set up the business. And I know it sounds cheesy, but it’s not financial at all. It’s just that we want to work with people who are good people who I’d want to sit down and have a glass of wine or a beer with. I’d want to be able to bump into them on the weekends and go and shoot the breeze for a little bit and not want to try and avoid them because I hadn’t contacted them in so long.
Host Jordan Rich
Well, we should add that you actually live in the community you serve. So you will bump into people at the at the compost heap and at the supermarket. And that’s what small business people do. And those who are successful, do it. Well, listen, I appreciate the whole concept of de-risk. I’m not a big risk taker. In fact, I used to joke that I don’t ski because I have a back problem. It’s called the yellow streak that runs all the way down my back. But I appreciate that sense of, of understanding and I think our listeners do too. People who want to know more RetireSouthShore.com, of course.
I would like to know how the fishing is going about midsummer at this point.
I’ve got to tell you a quick story because I know we’re running out of time. I was out fishing a couple of weeks ago, and I’ve told a handful of clients this because they all are into the same sort of thing. And we were out for about three or four hours fishing and came back in. Our plan was to leave the following morning at like 3am to go much further out to try and catch some tuna fish. I wanted to make sure that all we had to do is get on the boat and go. So we went to the fuel dock, and right as I was pulling into the fuel dock, all the electronics just went out on the boat, the steering went. Whoa! Everything just went dark. The boat was still working, but not well. And to make a long story short, it was just a $17 fuse. So we got it fixed. But I was so panicked that it didn’t happen. But if it had happened the next day when we were 55 miles off shore, that probably would have been me coming back and saying we’re no longer talking about fishing anymore because I don’t do that. Well I would have gone well but that was a little anxiety.
Host Jordan Rich
I would have called my friends with the Coast Guard and reel you back in because, you know, you have a radio show to do! Glad you’re doing well. Thank you Mark for everything. We’ll see you guys next week.
[end of podcast]