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Welcome to How to Retire on Time, a show that answers your retirement questions. Say goodbye to the oversimplified advice you've heard hundreds of times. This show is about getting into the nitty-gritty so you can make better decisions as you prepare for retirement. Text your questions to 913-363-1234 and we'll feature them on the show. Don't forget to grab a copy of the book, How to Retire on Time, or check out our resources by going to www.retireontime.com.
Welcome to How to Retire On Time, a show that answers your retirement questions. We're here to move past that oversimplified advice that you've heard hundreds of times. Instead, we're gonna get into the nitty gritty. As always, text your questions to (913) 363-1234. And remember, this is just a show, not investment advice.
Mike:Do your research. David, what do we got today?
David:Hey, Mike. How hard is it to learn how to manage your retirement plan on your own if you don't have a financial background?
Mike:This is a tough one. It's a tough one because I believe people should learn how to do certain things, but it doesn't mean you should do them. Mhmm. Let me use an example. I know how to repair the engine of a car.
Mike:I have taken apart this beautiful Chevy engine.
David:Okay.
Mike:I put it back together. Yeah. Right? I learned how to take out I mean, we took out everything, and it's embarrassing for you to even regurgitate this, because I don't remember the names of all of the different components. I just remember what they looked like.
David:Uh-huh.
Mike:Right? So I can do that. It doesn't mean I should do that continually.
David:Yeah. That makes sense? I was just talking to somebody just the other day. They were asking me if I wanted all this oil change stuff.
Mike:Mhmm.
David:And I said, you know, I used to do that. I changed all my cars all the time, but I gave it up. It just was like, wasn't worth the hassle anymore.
Mike:Yeah. So here's what people typically want me to say. Can you just give me a portfolio that I can buy and hold and just watch over time? Unless there's a history of you getting up and tracking the markets and knowing what to do, you already have experience in managing a portfolio to some extent. Whether you're an amateur, maybe you're middle ground, or maybe you were a professional that just left the industry, and you're looking for a plan that's more on the tax side of things, that's more on the legacy planning.
Mike:Mhmm. That probably makes more sense. Because if I'm gonna sit here and say, yeah, just buy and hold this portfolio, and you should be fine. Technically, that could be true. If the portfolio is built correctly, it could be true.
Mike:But is it in your best interest? Are you looking to try to just pay less money in fees? Is that the goal? Because the true sense of a fee is that you get more out of what you paid for.
David:Right.
Mike:So let me just set this situation up. If you came in and we gave you a plan, we put together a plan. It's beautiful. Based on today's information, you should absolutely do this. And maybe you implemented it mostly, but you just misaligned a few things.
Mike:Maybe you took some creative liberties, whatever it is, and the markets are down now 30% or 40%. And you're going, well, this sucks. It does. Mhmm. And $2.50 an hour isn't able to fix it.
Mike:There are things that when they're unfolding, you need to be adjusting along the way, and we can say it. But do you have the emotional grit to do it when it needs to get done? We had someone that did a onetime plan recently, and there was one stock in particular we had recommended. It was basically a soft monopoly stock. Great stock.
Mike:Has over a decade, if not multiple decades of just incredible performance, stability, which is nice and easy. Right? Yeah. Well, then the environment changed. Stock fell off a cliff, has never recovered.
Mike:Yeah. They panicked and said, yeah, I don't wanna do this anymore. They thought they could handle what it takes to really so you just you need to understand what you're signing up for. We want to believe that you can just buy and hold the S and P 500, and you're fine. It's more risky than you may realize.
Mike:And just because the last 15 have been great, doesn't mean the next fifteen years will be great. We wanna believe that a sixty forty split's all you really need. Maybe that's enough to survive. Mhmm. But are you trying to avoid fees just to survive, or are you trying to get more out of it?
Mike:Remember, if you buy a plan, you're buying a product. There are strategies you can implement, but knowing how to implement and when to implement those strategies, that's gonna be up to you. Are you sure you wanna take on that risk? And this goes back to the Dunning Kruger effect, which is a psychological phenomenon where those who lack experience don't understand the right questions to ask or what they're really signing up for. And so I've actually told people, no, I will not create you a plan.
Mike:I lost the business because what they were asking for did not support their expectations, and their alleged experience was not congruent with what they said they would be willing to do in the future. Retirement is not the time that you learn how to manage money in the market. It's the time you learn how to manage money with a professional guiding you along the way.
David:Because the stakes are kinda high. Right?
Mike:Yeah. If you mess this up, you're done. So I believe in self reliance. The church that I attend has a whole program about self reliance. Yeah.
Mike:But you need to differentiate ignorance versus self reliance. So let me just dive into that real quick.
David:Okay.
Mike:It is good to become self reliant in understanding how to manage your personal finances, how to manage your cash flow, how investments work. It is ignorant to think that your half an hour a week or maybe your hour every morning a week is going to compete better than an entire team with over a decade of experience that understands how to do this. Yeah. There is something about time in the saddle that's going to benefit than those who happen. Now notice the difference here.
Mike:If you're just starting it, you need to work with someone who's going to teach you how to fish. That doesn't mean that eventually you go out and fish. It means that you know how to fish so that you can have an intelligent conversation with the person that's managing your money Yeah. To be with them as a team member.
David:Okay.
Mike:You don't wanna operate off of blind trust. Okay? In my opinion, I've never had a surgery, but if I were about to have a procedure or surgery, you better believe I'm gonna be very informed and ask the doctor a lot of questions. Not stupid questions like, well, chat GPT told me this. Uh-huh.
Mike:I'm gonna say, help me understand the risks. Yeah. Help me understand. Okay. If this were to happen, what should I expect?
Mike:If that were to happen, this medication is great. Is there another medication we should be considering? And if the doctor's frustrated with you asking those questions, get a new doctor. I'm willing to believe that a doctor would prefer to have a more informed patient, because if they're a more informed patient and they consent, they're less likely to get sued.
David:Oh, yeah.
Mike:I don't know. That sounds like a good deal to me if I were a doctor. Yeah. But they fully understood, okay, so these are the risks. Here here's something happened recently.
Mike:My daughter, she's young, less than a year old, got an ear infection. We took one antibiotic. She almost got better, but didn't quite get there. So then the doctor said, well, you know, here's the next antibiotic you should give her. That was the conversation.
Mike:There was nothing else. And we just thought, well, it's antibiotic. They're all kind of the same. Right? I've now learned, no.
Mike:This secondary antibiotic, though it's kind of the textbook way to do it, has a high risk of throwing up. Oh. So when our daughter started throwing up all the time, couldn't hold food down, we thought, oh, she's getting worse. No one told us about that risk, And the doctor never said, well, they're close enough to healing. You could just keep her well fed, help her take her naps, make sure you do not miss nap.
Mike:She will probably heal in the next two weeks. If you wanna speed it up, we could use this antibiotic. There's a high chance that she'll throw up. You don't need to do one or the other, but here are your options. Yeah.
Mike:I would have much appreciated that conversation, and then we would have done the natural path. Look, I love Western medicine. Mhmm. But she wasn't that bad. We just noticed she was scratching her ear.
Mike:I would have much rather said, yeah. We can probably, as long as it doesn't get worse, chosen this other path. Yeah. Self reliance has been an informed buyer. It is not prudent for you to do everything yourself.
Mike:I mean, are you gonna go out and farm for yourself and avoid the grocery store? Are you gonna go out to the lake and fish for yourself instead of buy fish from the store? Are you gonna change your oil for the sake of saving some no. That's not what self reliance really means.
David:Mhmm.
Mike:It's being an informed buyer. But do you see my point? Sure. If your money serves you, then you hire professionals to get you a better result than you would on your own, but you're still incredibly involved every step of the way. Yeah.
Mike:You should be learning. You should be learning about taxes. You should be learning about investments. You should be understanding why. I get the question all the time when we do a portfolio rebalance.
Mike:Why'd you buy that stock? That's not annoying. That's not a criticism. That's a wonderful conversation.
David:Yeah. Like, I just wanna understand why, and then I'm on this journey with you instead of just being a, I guess, a passive just.
Mike:Blind trust is a great way to get abused. Yeah. So when someone has history of managing their money, they have their system of how they manage their money in the market. And I say, what would you do if this would happen or that would happen? And they have an answer.
Mike:I love building those people one time plans. Love it. Because I'm just bridging the gap of their tax planning, lining up their social security optimization, and so on, and they're good to go. Our one time plans were really intended for those people. They were not intended for, I don't know, four to six visits, and now you're some financial expert.
Mike:That is an inappropriate expectation, and I would rather lose the business than tell you what you wanna hear and say, yeah. Just just do this, and you're you're good.
David:Yeah. Maybe their motivation was just, I'm gonna save a few bucks, give me my one time plan because I don't wanna pay the fees.
Mike:Yeah. If you've got a million dollar portfolio and you made a 2% error, it's a $20,000 error. Yeah. To what? Save $250?
David:Right.
Mike:Or maybe $5,000 for a year? And then think about the tax planning. So the active avoidance of fees is well intended. Heck, I wrote the article that said how a comprehensive plan could replace your adviser and save you money and fees. I love that conversation, but I don't want anyone to ever have the impression that after a couple of visits that you're emotionally and intellectually equipped for what could happen in the next couple of years.
Mike:Just understand the difference. If you have a background, you've been doing it yourself, great. Maybe that's suitable for you. But once you retire, now is not the time to inherit all of that risk. It's just not appropriate.
Mike:That's all the time we've got for the show today. If you enjoyed the show, consider subscribing to it wherever you get your podcast. Just search for how to retire on time. Discover if your portfolio is built to weather flat market cycles or if you're missing tax minimization opportunities that you may not even know exist. Explore strategies that may be able to help you lower your overall risk while potentially increasing your overall growth and lifestyle flexibility.
Mike:Is not your ordinary financial analysis. Learn more about Your Wealth Analysis and what it could do for you regardless of your age, asset, or target retirement date, go to www.yourwealthanalysis.com today to learn more and get started.