Transcript Episode 129: Misconceptions

Key Topics

• “Lies” that people tell themselves about their money
• Is there a “magical number” you need to get to? Why there’s no real reasoning around it.
• “I have plenty of time” Maybe you do. Use it to plan wisely.
• Retirement: It’s not going to not happen.
• Avoid the trap of impulse buying
• The average American spends 10% more using a credit card than when using cash.
• What’s the impact of a major purchase on retirement? Know about it ahead of time.
• Retirement accounts are not just about returns.
• Distribution Strategy: how and when to take money out, and where to take it from to
  Minimize your Lifetime Tax bill.

Narrator

This is Retire South Shore Radio, a weekly program designed to educate you on all your retirement options and introduce you to Mark Rowlette, founder of South Shore Retirement Services for the latest on free seminars. To obtain a report or to set up a consultation, please visit RetireSouthShore.com Retirement Services and real-world retirement solutions. Looking at the whole picture to design a complete strategy, including retirement planning, Medicare decisions, and legal documents. Now, here’s Mark Rowlette. And your host, Jordan Rich.

Host Jordan Rich

Hello, once again, welcome to another edition of Retire South Shore Radio. Great to be with you. I’m Jordan Rich summer continues to keep up its hectic pace, but we’re here to give you information and help when it comes to planning your retirement. And I hope you’re enjoying your summer. I know one guy who is enjoying his summer, Mark Rowlette. And the reason I know that is because I never saw a bigger smile that when you caught that monster fish a few weeks ago, that was amazing.

Mark Rowlette

That was a pretty cool, cool thing to have happen. I have to admit it. I didn’t catch it alone. There was four, four of us bringing that fishing out on the boat. So am almost 200-pound tuna was the biggest fish I’ve ever caught. I know I sent you a picture of it.

Host Jordan Rich

I loved it. I saved it. That’s called a bigeye tuna, correct? Okay. Right. Those are monsters. Wow. Well, congratulations. And it took a team effort, which is what retirement planning is all about, a team effort. So we’ll get into it and sort of cross paths with the same metaphor. Today, a very interesting topic. And I think it’s connecting with a lot of people already, as I thought about this, and shared it with a few friends. The lies we tell ourselves about money. My goodness, where do we begin?

Mark Rowlette

I suppose it’s not really what you might think when I say, “the lies that people tell themselves about their money”. You know, a lot of people don’t even know what they have, how much they have, how they’re going to be able to use them. A lot of people that we meet with have kind of convinced themselves that they have some magical number that they need to get to. There’s no real reasoning around it. It’s just something psychological inside of them that that makes them feel like that’s the goal that they should have. So what I wanted to talk about today was just some of the things that we tell ourselves, and we’re all guilty of this. And some of the things that we do are convinced ourselves that we can do and will kind of be okay. I thought it would bring them up because why not?

Host Jordan Rich

I think it makes perfect sense. And having a dad who’s now in his 90s I contend that he’s a very smart guy and has his wits about him. I can tell you that when it comes to certain things, not just money, but taking pills, listening to doctors, I mean, we are all creatures of habit and set in our ways. So where do you begin? And this is directly aimed at people who are in our age bracket, thinking about retirement my age bracket, but where do you begin with this?

Mark Rowlette

But like I said a minute ago, one of the first things that people convince themselves of is that “I’ll be happier, if I have X amount of dollars, I’ll be happier, or I’ll feel safer. If I have a certain amount of money in the bank, then I’ll be good.” And I’m sure to a lot of people listening, that sounds familiar. And I think it’s important, obviously to have money saved and have a cushion in the bank, you know, the usual three to six months expenses that they suggest that we have in cash and cash equivalents.

But when you’re talking about retirement planning, there have been a lot of studies done on this. And the idea of trying to get to a “lump sum number”. While it’s important to put that money aside and have that money available, the actual number itself doesn’t really do anything for you.

The reason I say that is, if you have in your head some goal to get to X. And firstly, you don’t get to X, you’ll be devastated. Right? You think “I can’t do this, I don’t have the resources to do this.” But the funny part about it (or not funny part about it) is they’ve done studies.

And if you get to that number, or even surpass that number, there’s no “happiness light switch” that goes off. Nothing changes in the person’s world, because they’re still sitting there with a lump sum of money, saying, “Well, what do I do next? How do I actually use this money?”

That’s the kind of the challenge around it. So trying to get to some plateau or some dollar figure might not make any sense, because you’re looking at this from the perspective of “I need this to supplement my lifestyle and I don’t want to work anymore.” So it’s more about supplements than where the supplements coming from. If that makes sense.

Host Jordan Rich

It makes all the sense in the world and I’m looking at this generationally. Most people would agree that those who grew up in the Depression who were children during those years, that incredibly difficult period, from the late 20s, through the early 40s, the World War Two Greatest Generation, you can understand, because of the conditioning that was part of everyone’s life.

But even today, I mean, people in their 40s 50s and 60s have similar pangs and feelings and concerns. A lot of it is probably fostered by media and scare tactics and things like that. So we have to be aware of that.

Mark Rowlette

I would agree with you completely. Yeah, again, what we do in our office is try to methodically put together strategies for clients to show them how they can maintain their lifestyle. And it’s really important that you have resources available to create the income needed for that lifestyle. But it’s more about the lifestyle, it’s more about the income that the person needs. And it doesn’t mean that’s one particular product over another.

It’s just, “If I need $2,732 a month for my money, how do I get that? And how do I make sure that I have that on a consistent basis for the remainder of my life for me, and my spouse’s, life?”

Host Jordan Rich

Mark just mentioned a very key word. That is strategy, and we have a very good opportunity for you. It’s called a 15 Minute No Obligation Strategy Call, a phone call. It’s a chance to get a question answered something specific to your situation that can at least help you can get the ball rolling. Or a general question about retirement planning. To set it up, go to RetireSouthShore.com. You can actually make an appointment, or book an appointment for a phone call. How cool is that?

781-836-4214. It’s all no obligation, or you can call the main office. And if you call on the weekend, when this show airs, I’m going to give you my firm Jordan Rich stamp guarantee that you will get a call back pronto on Monday or Tuesday. 781-836-4214 or RetireSouthShore.com to set up that 15 Minute No Obligation Strategy Call. So Mark, we’re focusing on, I think, a fascinating topic, and that is the “lies” or (not going to suggest their negative intentions. They’re not negative. They’re not deceits), but the things we tell ourselves that may not necessarily be true. Gotta listen to them. And why don’t you take the next one?

Mark Rowlette

Well, I think a lot of these will sound familiar to people when I say them. As in “I deserve it, regardless of whether I can afford it.” Right? Yeah, what I mean is “I’ll treat myself it’s a great deal, I can’t pass it up”, or “you only live once. You don’t know how long you’re going to live”. Or “I’m going to get this because who knows how long I’m going to be around”.

You don’t want to fall into that trap of impulse buying. And we’re all guilty of it, me included. I’ve tried to do a better job of impulse buying now and trying to educate my kids to sleep on something before you really decide whether you want to have it or not – if it’s really important to you. But I think the way the world has changed over the course of the last couple of years, retail therapy and stress purchasing and impulse buying has gone up. Those stats on it, that spending – increased by about 18% to 20% in 2020.

We all know why, right? Everyone was at home, nobody was going out, we weren’t meeting people face to face. And as a result, people were spending more money. You don’t want to fall into that trap of putting yourself in a situation of something that you thought you could afford, you can’t afford and you pushed yourself. And now as a result of that knock-on effect, it’s going to impact you at a time in life when you cannot maybe put more resources in meaning that you’re no longer working anymore. So there’s no income, or excess income that you can put into accounts to make up that number.

Host Jordan Rich

That is a terrific point. And I’d like to add a personal story, here. I am in the process of purchasing a new car. My car is seven or eight years old. And when I planned in my earlier days ahead, one of the helpful hints was “let’s plan ahead and put aside and make sure there is money for the car purchase I didn’t want to lease, I wanted to buy.” So I am perfectly happy with the arrangement.

And I know that’s something that you and your team, the All Hands Analysis team would do, would look ahead and say, “Listen, in five or six years, you might very likely need to replace your car”. You’re going to need, well, by that time maybe $50,000 or $60,000 depending on what you’re buying. But certainly that kind of planning just takes a load of worry off the table.

Mark Rowlette

Yeah, I hear it all the time in the office when people are, “Well, I’m getting ready to retire, my car’s almost paid off.” So I said “You’re not going to buy another car? What do you mean? The car’s not going to last you for 30 years.” So you have to, like you did, tee up future expenses. And that’s part of what we’re doing with our clients, looking down the pike and saying not only are we going to try and grow your money and try to help you save money on taxes.

We have to be anticipating expenses that are going to come up down the road, not the big scary expenses, obviously, that’s important too, if somebody gets sick and whatnot. But expenses like buying a car, replacing a water heater, things that will cost money. So preparing for that down the road, puts you in the position that you’re in Jordan. You’ve set aside the money and you’re going to go buy the car, and it’s not going to be a stressful purchase.

But it’s also not an impulse purchase, because you’ve really been thinking about doing it. Impulse purchases, can start to creep up and start to amount to an awful lot of money. This kind of brings in the side of things where people start using credit cards and app purchasing. And it’s so easy to spend money. The average American spends 10% More money using a credit card than they would if they were using cash because it doesn’t seem like it’s real. “Some other time, I’ll just take care of it later.”

You’re going on your phone, you’re on Instagram, or you’re going on these different apps, and they’re selling you stuff the whole time. It’s just one push of a button and it’s going to be at your house the next day. It’s just too simple, sometimes, to fall into that trap of impulse purchasing.

Host Jordan Rich

This is advice for anyone, including teenagers, but certainly for people in their middle years thinking of retirement. We are very close to a cashless society. More and more. I’m finding fewer people take cash or are interested in cash. People are whipping out credit cards to buy Chiclets and bags of potato chips. So you’ve got to be aware that this is the way of the future. It’s here now and you’ve got to be aware that cash is not king anymore.

Mark Rowlette

Oh, absolutely. I’ll tell you a quick funny story. My youngest daughter, Reese, jumped on my phone a couple of weeks ago and put a few things in a cart for a particular store that she likes the clothes in. She was trying to pull a fast one on me and she came over to me she goes, “Dad, I just need you to stare at your phone” because she had double-clicked the side of the phone. And all it needed for Apple Pay was to see my eyes looking at the phone and the purchase would have gone through. I was like, “Hold on a minute. What are you doing?”

Host Jordan Rich

You’re raising a genius is what. She’s going to work the business world to her advantage and be a superstar. No question about that. We’ve talked about Reese before. We’re going to continue this because it’s important. These are the kinds of issues that many finance programs don’t ever talk about. They talk about the numbers, they talk about rates and things like that. But I think you’re hitting a home run with a topic like this. I am thinking. I’m taking notes. And I’m thinking “Oh my God, that’s partly me.”

So when we return from the break more of these, shall we say, misconceptions or stories I’ll call it stories we tell ourselves – it doesn’t sound as harsh. We’re talking with Mark Rowlette of course. And if you would like to find out more about what I mentioned a few minutes ago, the 15 Minute No Obligation Strategy Call. That and much more, including seminars and webinars and opportunities to connect are all at the website, RetireSouthShore.com. We will come back and continue right after these words.

[Begin pre-recorded segment]

Narrator

One of the biggest stressors when it comes to retirement is the obvious one will you ever have to worry about running out of money in retirement?

Host Jordan Rich

That is the key question and proper retirement planning. Working with the All Hands Analysis team can truly help. Here’s Mark Rowlette, founder and president of South Shore Retirement Services.

Mark Rowlette

Most of our clients have a person, when we meet with them, somebody who has helped them accumulate their wealth during their working lives. But distribution going into retirement, starting to take money out of these accounts is a totally different animal. It’s not just about returns. Returns are important, but strategizing on what’s the best way to take this money out, how you should take it out when you should take it out and where you should take it from is critically important when you’re transitioning into retirement

Host Jordan Rich

Schedule your FREE 15-Minute Strategy Call today just visit RetireSouthShore.com That’s RetireSouthShore.com investment advisory services made available through AE Wealth Management LLC, AEWM. AEWM and South Shore Retirement Services are not affiliated companies.

This is Jordan Rich reminding you that South Shore Retirement Services offers a number of ways to learn about a happy and safe retirement with frequent evening seminars at local fine dining establishments. You can find the complete schedule and register for the seminars at RetireSouthShore.com There are also regularly scheduled webinars. There’s the Retire South Shore podcast series and the South Shore Retirement Services newsletter.

Information is power and the All Hands Analysis team at South Shore Retirement Services is ready to inform, educate and reassure you in retirement. Again, visit RetireSouthShore.com.

[End pre-recorded segment]

Host Jordan Rich

Hello and welcome. This is Retire South Shore Radio. It’s a program that is so important to those of you thinking about retirement and that’s just about everybody in a certain age bracket. What we do here with Mark Rowlette, the founder and president of South Shore Retirement Services, is more than just talk about interest rates. The All Hands Analysis team is working around the clock for your clients, Mark. But we also talk about the human elements, what makes us tick and why we think the way we do. And today’s show is ringing home very closely with me and people in my world. And that is the misconceptions, the things we tell ourselves about money, that may not actually be the case.

Mark Rowlette

It’s the things that we convince ourselves to justify something that we’re doing, right? Everyone that in every walk of life – you wake up at, I don’t know, six o’clock in the morning, and you’re going to go for a run, or you’re going to go to the gym, you’re like, you know what, I’m just going to go twice as long as tomorrow, and then you go back to sleep.

Money is no different. The other thing that we convince ourselves of is “I’ll save more later, I’ll play catch up. I’ll do it again later on.” And we see that more often with people who are self employed (me being one of them), who are putting money into retirement plans, and they’re doing it manually.

Meaning that they’re doing consciously. They’re writing a check on a quarterly basis, or on an annual basis, around when they do their taxes. It’s a lot easier to maybe not put as much money away, by convincing yourself you’ll play catch up later. For folks that work with jobs, with 401Ks, it’s just being payroll deducted. It just comes out. It’s just gone out of their paycheck. So sometimes, the idea of “I’ll play catch up later,

(A) you might not do it, and
(B) you might really miss a great opportunity to have made some money and in a period of time that you didn’t put that money in there in the first place

Host Jordan Rich

That is so critical. It’s hitting home with me, I’m also self employed, when I’m not on the air working at the radio thing. And it is absolutely true. If it’s left up to you, you’ll get diverted for some reason, it might be a very good reason in your mind. But it’s very important to remember that, which is why and I’ll bring it back to what you and your team do. Which is why having the All Hands Analysis approach at RetireSouthShore.com, or South Shore Retirement Services is so helpful, because you’ve got people to remind us and people to guide us through various levels, things that we may not even have time to think about.

Mark Rowlette

Yeah, our business is obviously the money side of things, managing clients’ assets, and making sure that we’re managing their expectations and managing their ability to continue in retirement and taking care of their tax filings if they want through our CPA team. Obviously, I can’t give tax advice. We just build the tax strategies. But they can give the advice and do the filings if clients want, making sure that we’re able to help them manage their health insurance through Medicare, Medicare supplements, and then manage their estate through legal planning.

It’s kind of like, not only are people using our services because they want a professional to take care of those things for them, but they also have accountability, right? Meeting, speaking, zooming with clients on a continuous basis, to us, is really important from many perspectives. We want to make sure that they’re aware that we’re here. We want to make sure that we’re not missing any opportunity or any life-changing event that they might have. But we also want them to understand that if we say and we’re going to do something, and they’re saying that we’re going to they’re going to do something on the other side of it, meaning I’m going to buy something or I’m going to save more money or this CD is coming due in three months. We’re going to do X with that, because we’re going to have these “check-ins, checkups” as it were. They have accountability to themselves and to us as well. So it’s not a case of “Oh, yeah, it renewed and then I went and I bought a timeshare” or something like that, because the money was just sitting there.

Host Jordan Rich

And by the way, just a side note, I visited the office recently, very recently, and there are more members of the team in place to help people because times are busy. And it’s good to see you get brought on some really dynamic, wonderful people to assist in that area.

Our money, clients’ money sits on the Fidelity platform. So they’re enormous, multi, multi-billion dollar institutions that we use, but we’re not “one size fits all”. And I think that’s really important. So it’s been great to have Erika come on board. She’s been a great addition to the team and we’re delighted to have her.

Host Jordan Rich

It’s a pick up. It’s time for me to remind people that there’s an opportunity to connect directly with no obligation of free opportunity to get information. It’s called a 15 Minute No Obligation Strategy call that you can arrange. You can set it up in advance. It’s certainly an opportunity to talk with someone like Mark or Erica or anyone on the staff that is warranted. The telephone number to call to set up an appointment is the main office number, 781-836-4214. I’ll say it again, slower 781-836-4214. I liked the opportunity to do it online. There’s an easy grid to set up the appointment at RetireSouthShore.com. And while we’re thinking about it, let’s have you share what happens again, on those calls, because we talk about them all the time. In general, what’s the process? Mark?

Mark Rowlette

Listen, before COVID-19 came around, we didn’t really do “strategy calls”. We would have face-to-face meetings with people who would come into the office, and we would talk to them about it. Obviously, as life changed, and the way people had to do business changed, we had to evolve as well.

I’d never done a webinar before and I’d never heard of Zoom before, so the way to connect with people was to do a telephone call. It was so well received for a number of reasons. It was really efficient. From our perspective, we were able to answer questions that clients have, that maybe it’s just as simple as “you should do this”, and the people go on their merry way.

But it was also a really hands-off, low-stress, not-feeling-pressured opportunity for somebody to talk to me or one of the other people on our team to have these things addressed. Because I realized that when you’re talking about money, you’re obviously wanting to get advice and know if you’re doing all the right things.

There’s a huge trust factor involved in our industry in our business. That’s all about what it is. It’s trusting the people that are taking care of your money with you. So it’s just a very easy way to start that process. It’s not that people can’t come up to our office or jump on a Zoom. Our office is right in Hingham. It’s really easy to start that dialogue by sitting at home having a cup of tea picking up the phone, and making that call. (You know me, I run long in everything that I do.) Some “15 minutes”  evolve into 25 minutes or so. But it’s an opportunity to answer the questions. I’m well aware that it’s an opportunity for people to see if we’re the type of people they would like to go forward with at all. So it’s kind of a vetting app system.

Host Jordan Rich

Absolutely. It works very, very well for both you and of course, for the folks who have questions. So we have a few minutes left. And I’d like to sort of wrap up this very important human topic, which is the things we tell ourselves about money, that may not actually be the case and misconceptions, our own personal imagination that might take over. What else was on your list?

Mark Rowlette

Well, when I was doing research on this, I always like to try and find somebody far smarter and intelligent than me to find something good to give a quote.

Ben Franklin said, “by failing to prepare, you’re preparing to fail.” That brings us to the point of people saying, “I have plenty of time, I don’t need to think about this right now. I don’t need to think about transitioning into retirement time 7, 8, 10 years away. It’s too soon. For me, I’ll think about that later”.

Well, “later” could be a really expensive undertaking. I’ll give you a quick example. I met with a gentleman a couple of weeks ago who’s getting ready to retire, but wanted to wait until he hit a certain age. I’d met him six months ago, and he was not a client. But as a result of waiting an extra six months,  his accounts, where they’re currently held, have lost substantial amounts of money.

So his waiting on a particular type of bonus from the employer has actually been more than offset by the loss that he’d encountered in his account.

So having plenty of time, as in “I don’t need to think about this” – everyone should be thinking about what the end goal is. That money that you’re putting away is earmarked for retirement, make sure that it’s structured correctly. So if something happens, meaning the stock market goes down, or the Fed continues to increase interest rates, it’s going to have an impact on everything. There’s going to be knock-on effects on everything.

You don’t necessarily want your timeline (of when you want to stop working or go part time or whatever it is you want to do) to be completely dictated because the market went in the wrong direction. I think you know, and I know, every one of our clients has some money in the market and there’s nothing wrong with that. That’s a really important part of it, but you want to make sure that you have a safe position with some of your assets. So you can go and retire in three years or in 26 months or whatever your number is. Don’t let the market dictate your timeline and when you want to do something. So the idea of “I have plenty of time?” Yeah, maybe you do have plenty of time. But there’s no time like the present to start putting these things together and putting these wheels in motion.

Host Jordan Rich

I’ll return to my story that we talked about in the earlier segment about me making plans six or seven years ago, to put money aside in my “retirement package”, that I could buy a new car right now. (I still have to wait four months for the car to come.) But the point is, even though I don’t consider myself in retirement mode, I started planning as though I was retiring years ago, and that’s what people do. And those are the people who wind up skipping a bit more lightly to and fro, because they’re not quite as worried and not quite as concerned, and they’ve got more security.

Mark Rowlette

When I was writing out what I was going to talk about today, something came into my head from years ago, when I was in Ireland. It’s called primary school over there. It’d be like elementary school or middle school, maybe.  I remember something you might do in an exam, or you would do something from home, or you would do something where you had the ability to look at the book, right?

If you wanted to, you weren’t meant to, or you would maybe write down an answer to a math question, because you saw somebody else’s answer. And the teacher used to say, “You’re only fooling yourself.” And I used to think when they would say that to the students, and sometimes to me, “What do you mean, I’m only fooling myself? I’m fooling you and fooling all these people.” But I started thinking about it, and you are only fooling yourself.

The same thing kind of goes into retirement planning. It’s not that you’re fooling yourself, but it’s your retirement. It’s not going to not happen. You can’t bury your head in the sand and assume that everything’s going to get taken care of and be okay, going forward. If somebody hits the lottery, maybe they will.

You have to plan for, I guess, the possibility that you don’t win the lottery and make sure that you’re putting yourself in the strongest possible position, both from how your money’s invested, and how your distributions are going to be structured. Meaning “I’m going to take money from this account, this account and this account different tax qualifications in order to minimize my lifetime tax bill”.

And maybe you do deserve that luxury or that thing that you wanted to buy. But you may as well look before you buy it to make sure that it’s not going to have some big negative impact on you going forward for the rest of your retired life. Working with firms like ours, it’s not that we put people on budgets. It’s not that we tell people not to spend the money.

But if there was a situation I was in, and somebody could tell me, “All right, if you do this, this is what the effect going to be.” I would want to know about it ahead of time. I think most of our clients want to know ahead of time. “Hey, if we take that trip to Italy next year, and we spend X amount of money, what’s that going to do to our retirement plans?”

Host Jordan Rich

It the key word is people it’s a people business. It’s not just business. And that’s why we’re talking about things like this, that affect us all. We’re all people, we all breathe same air. And we all have these issues that we have to contend with. Mark, you did it again. Not only did you catch the biggest fish I’ve ever seen on planet Earth, but we’ve got it on the website.

I don’t think we’ve teased it enough people are dying to see it. But pardon the pun, you’ve “reeled in” a very important aspect here of human nature. And I love it when we do these kinds of shows. Mark, thank you. We’ll see you next week.

Mark Rowlette

All right, take care have a great one.

Narrator

You’ve been listening to Retire South Shore Radio, a presentation of South Shore Retirement Services for the latest on free seminars to obtain a report or to set up a consultation. Please visit RetireSouthShore.com Stay tuned for more real-world retirement solutions at RetireSouthShore.com.