Steps to a Scandal-Free Retirement

Thanks for joining us on another episode of Mr. Stillman's Opus. I am Ben George alongside the president and founder of Rosewood Wealth Management.

It is John Stillman. You look well rested. Do I look fresh?

Do I have a glow? Is Miss Olivia Rose keeping you up at night? She is. She's actually keeping my wife up a little bit more than me.

Um, when this was recorded at least, I might, I might be stepping in at some point pretty soon. But yeah, you know, three, almost a three week old in the house now. Um, it is the life change we expected it to be. But the wife has handled it well.

It's been, it's been a lot of fun. There's a lot of times you don't know what you're doing. You don't know what the baby's doing. Yeah, that doesn't change. And you're trying to figure it out.

It can be 13. You still don't know what you're doing. But I feel like we can kind of, together we can get it done. I have a lot more respect for single parents though. That's a tough process.

I've never understood how that works. I don't know how you could, but more power to them. Today's show, we're moving away from children a little bit and talking about a scandal free retirement. So what exactly is a scandal free retirement? Well, if you look close enough at most folks' financial situations, you're going to find out that it's almost scandalous how badly their financial matters have been handled. So we're going to talk about the steps people should take to create a scandal free retirement.

So these are going to be right up your alley. So we got five on the list and we're going to start off with the strong one. And that is you got to impeach consumer debt. Yep, that's right. Now, we'll think of this differently than impeaching in the political sense, because a lot of people think that impeach means removed from office. Well, that's not exactly like Clinton was impeached, but he wasn't removed from office, right? So just because you're impeached doesn't mean you get kicked out. But in this context, we do want to impeach consumer debt, meaning we want to kick it out.

We want to kick it out of the house. So when I say consumer debt, you know, take the mortgage off the table. That's not really consumer debt. That would be to the extent that there's good debt, that would be good debt. But all this stuff that you've kind of been keeping around like a pet, like your student loans, or your credit card debt that you'll eventually get around to paying off or you just you always have a car payment like as soon as you pay off a car, you go out the next week and trade it in so that you can get a new car and you just constantly have a carpet like that kind of stuff as we're entering into retirement. We want to get that debt off your plate because, sure, you might have enough money saved for retirement that you can create the income that you need to service all those debts.

But in creating that income, it's going to put you in a higher tax bracket. So if you just get rid of the debt, well, you can have the same lifestyle that you would otherwise have, but it's going to require less income to create that lifestyle and you can be in a lower tax bracket. How many clients are free and clear of their mortgage by the time they get to retirement?

Is that common? Probably two-thirds, I would say. I mean, for a lot of people, they're paying it off in the last five or so years of working and they might have a couple years of working with no mortgage and then they're really pouring gas on the fire in terms of adding to their savings because they don't have the mortgage anymore. And then, yeah, they're entering into retirement without it. Now, that's not to say that you're screwed just because you have a mortgage in retirement.

We just we have to make sure that the income plan is set up in such a way to make sure that you can pay it. Gotcha. The next step to a scandal-free retirement, you got to stop the leaks in your budget.

Yep. So there's something called lifestyle creep that you have to pay attention to. And that just means that as your income increases, so do your lifestyle needs. So let's say when you first start working, you get your first job out of college and you're making $29,000 a year and you have a certain lifestyle and you're able to pay your bills on that $29,000. And let's say that you're able to save $500 a month at that stage of your life.

Okay, just to pick a number. Fast forward a few decades, you're still saving $500 a month, except now your income is $69,000 a year instead of $29,000 a year. What happened? Well, your lifestyle, your spending needs increased along with your income. You're not saving anymore even though you're making more. And so that happens to a lot of people if you're not paying attention, if you're not really watching your household expenses, all those lifestyle expenses are just going to increase as your income increases.

So you want to stop those leaks, periodically take a look through all the things that you're spending money on that are, you know, recurring monthly expenses. I mean, at some point, we're all going to have like 10 streaming services that were subscribed to. And do you really need Disney Plus and HBO Go and DirecTV Now and Hulu and Netflix? I mean, do you really need all those?

Amazon Prime TV? Like at some point, you want to say, you know what, I probably need like two of these and I could spend $20 a month on these services instead of 100. So it's little things like that you just want to review periodically. Are you still paying for magazine subscriptions that you don't ever read? That kind of stuff is easy to not pay attention to.

It doesn't feel like it's a big number at $8 a month or whatever it is, but you have enough of those expenses, they add up pretty quick. So stop the leaks. When you said lifestyle creep, I thought that was like a bad advisor, like some kind of person that you don't want in your life who looks in your window at night. Yeah, lifestyle creep.

That's definitely different than what you were describing. The next step is you have to obstruct your catastrophic market losses. Absolutely. You want to obstruct those losses. And, you know, it depends on your age, too. If you're in your 30s, we don't have to worry as much about market losses in your portfolio because you have time on your side to recover. It's just not a big deal if you have some catastrophic, what we would call catastrophic, like think 2008 where the S&P loses half of its value in a relatively short period of time.

If you're 37, this is not a life changing issue. In fact, it's probably good for you because you're putting money into those accounts, you're buying stuff on sale, this is working out in your favor. If you're 59 and you're retiring in five or six years, well, now suddenly we can't afford to have that kind of downturn because we don't have the recovery time. You need that money for income before it's going to recover back to where it was before the loss. So you want to be sure that you have some stops in place to make sure that you can't experience a 50% loss of your money. Yeah, we want to have some money that's exposed to that kind of risk because you don't need all of your money the day that you retire.

Some of it you're not going to need until you're in your 70s or 80s. That money can be exposed to that kind of downturn. But if it's money you need in a shorter period of time, yes, we need to obstruct those market losses. Next up, if you see something, you got to say something, right? So blowing the whistle on unnecessary or excessive fees is the next step.

Got to be careful of those whistleblowers. Yeah, and a lot of this just boils down to knowing what your fees are in your portfolio. So often people just don't really know what the costs are associated with their investments. And it's not that fees are inherently bad. I mean, people in the financial realm, we have to make money somehow, right? But it's important that you understand what the fees are, how they're being deducted. Is it a situation where you have an advisory fee and then you're also paying trading costs every time the portfolio gets rebalanced? Do you also pay commissions every time stuff is bought and sold?

How is your advisor making money? And if you understand that and you're fine with it, then there's not necessarily a fee that's right or wrong as long as you know what it is and you're comfortable with it. What we don't want is fees that you don't know are there that could easily be eliminated.

But you don't know to eliminate them because you don't know they exist. Makes sense. And the final step to a scandal free retirement. Collude with a good adviser. So usually the word collusion isn't a good thing. Well, in this case, we want collusion.

Absolutely. Collude with a good adviser. So let's define what a good adviser looks like. And it might not be the same person for everybody, but you need an adviser who is able to talk you through the big picture of your financial plan. So often I see people who they say they're satisfied with their adviser. And then I say, all right, well, what has this person said about when you should start your Social Security? What do they say about your tax plan for next year? I mean, how much can you take out of your IRA before you're paying more taxes on your Social Security?

How much do you start going through all these questions? Oh, well, we don't really talk about that. We just talk about the account that he's managing.

And, you know, he usually asks how my mom is. OK, well, if all you want is somebody to manage the investments, that's fine. But understand that that's all you're getting. I always use the analogy of the guy who you hire a landscaper to take care of your yard and you say, all right, well, I could have this landscaper A over here or landscaper B. They pretty much charge the same thing.

So I don't know that there's really a difference in the two. But landscaper A is going to come cut your grass during the mowing season. So from April to October, he's going to come cut your grass every week. That's pretty much it. Landscaper B is going to come cut your grass, but he's also going to prune your hedges twice a year, spring and fall.

Make sure those are looking good. He's going to blow off the driveway and the sidewalk really well after he mows to be sure you don't have clippings all over the place. He's going to come clear your driveway in the winter when it snows and ices. So come get that out of the way for you.

And, you know, maybe he's going to spray weeds in your beds. Now, suddenly these are not apples to apples comparisons. Right. But because you didn't explore deeply enough what you were getting, you didn't know exactly what was being provided to you. So that's one thing on this discussion of colluding with a good adviser.

Understand what the service is that you're paying for and what are you actually getting for the fee that you're paying. The second thing is just having somebody that can communicate with you in a way that works for you. So one, that means responding to calls or emails in a timely fashion.

But two, it also just means the way they communicate. I think so often people go in to meet with their adviser and just nod along while the adviser talks about inverted yield curves and what we should expect next year in the market. If this happens and this and well, we're overweighted in global markets right now, we're overweighted in the emerging market. So we need to dial back on that some because we don't feel great about the emerging market. Yeah, like people feel like they're supposed to just nod along and say, oh, sounds good. This guy's a lot smarter than me, so I should just listen to what he says.

No, you need to have somebody who can explain why they're doing what you're doing in a way that you can digest and that you can then take action steps to apply to your life. Look, each of these steps will help you have a scandal free retirement. And after hearing them, I hope you're Russian to make changes to your portfolio because Ukraine make a difference today if you make these changes. How long you've been playing in that?

I don't know. Definitely during the course of this episode, I've been cooking some things up. You know, it works around here.

But seriously, though, you can always get in touch with John Rosewood Wealth Management Dotcom is the Web site and get your retirement in order. Stop the leaks, impeach, obstruct, blow the whistle and collude. Those are all the steps today. It's a busy day right there.

If you do all those things in one day. Thank you, John. That is a wrap for this episode of Mr. Stillman's Opus. Subscribe on Apple podcast or wherever you get your podcasts and we'll talk to you next time.