7 Deadly Sins & Retirement Planning

Welcome to Mr. Stillman's Opus. I'm Ron Stutz, and John Stillman, of course, is here as always. And today we are talking about the seven deadly sins.

And John, I can't wait to get into this conversation. Number one on the list, seven deadly sins, pride, envy, wrath, greed, sloth, gluttony, and lust. And let's start with pride.

Here's how they relate to your retirement plan. Exactly. Yeah. I'm anxious to know. So pride, we often see when people essentially are too proud to get help. Or maybe they come to get help, but they're too proud to ask questions that they know they need to ask. They feel like it's questions that they should know the answer to, so they just don't ask. Or maybe if an advisor is explaining something to them, and they don't understand it, they don't ask for clarification. They don't ask for clarification because they're too embarrassed. There are different types of personalities that are more likely to be this way than others.

I have some clients who will interrupt me mid-sentence if they need me to repeat something. But then I have other people who are so, they're such people-pleasers and peacemakers that they feel like it's creating conflict to say, wait a minute, can you explain that again? And I think that's a form of pride. It gets in the way of you really understanding what's going on. As I said, for some people, it's the pride of saying, well, I can do this myself.

And the fact of the matter is, you may be able to. But I do have one client, and I think this was really wise on his part. He was in his mid-60s, and he said, look, I can do this myself. I like doing it myself. I've done a good job over the years of doing it myself. However, I'm 67. I recognize that 10 years from now, I'm probably not going to have the mental acuity to be able to continue to manage all these investments myself and make the best decisions that I can. And so I would like to go ahead and establish a relationship with somebody that I can trust when I get to that phase of life.

And then, yeah, it's a little too late at that point. Maybe everybody should take a page out of David Ruffin's book, David Ruffin and the Temptations. Ain't too proud to beg. There you go. Ain't too proud to ask questions.

That's right. How about envy? That's one of the seven deadly sins. Envy, what do you do with that? So a lot of times, people are comparing their investments or the size of their 401k to maybe their neighbor or other people at work. And they're trying to see who's got the bigger balance in their accounts. And the fact of the matter is, it doesn't matter what your neighbor has because they might have a completely different lifestyle. They may have completely different income streams. Like I have a client who's just stressed out to no end that she only has $750,000 and her neighbor next door has $1.5 million. They have twice as much money and it freaks her out. But she has two rental properties. She's going to have a big state pension when she retires.

Her neighbors have none of that. So they need more assets. And so people get caught up in comparing account balances or maybe even comparing performance. You know, my account hasn't been doing much the last couple of years. My neighbor, my friend at the gym has been making a lot on his money. My buddy at work has really been making a lot of money the last couple of years. Well, maybe that person's at a different phase of life. Maybe if somebody's 45, they're taking more risk in the market and they are experiencing more of the run-up that we've had for the last couple of years. If you're 65, you can't really afford to be taking that risk.

You need your investments, not every single dollar, but you need a decent percentage of your investments probably to be a little more conservative. So you just have to be careful comparing yourself to other folks. We're talking about the seven deadly sins when it comes to retirement planning. We've been through two of them so far, pride and envy.

Next on the list at number three is wrath. Yeah, and I'll see people make decisions out of anger that are, it's kind of the cutting off your nose to spite your face kind of situation. They will actually hurt themselves just to get back at somebody from a financial standpoint. So as an example, somebody came in here just a couple of months ago and he was in a situation where he'd gotten into this variable annuity that somebody had sold him. And I think within three or four months of getting it, he realized that it was a bad deal.

Well, we called up the variable annuity company, figured out exactly what his fees are and exactly what it did and didn't do, and then he was even more unhappy with it. But it was a situation where his surrender fees were pretty high to get out of it. He was going to be penalized if he didn't leave the money in for a certain period of time.

That's how those work. And so he was actually willing to lose a ton of money to take the investment out, to cash it out instead of just sucking it up and leaving it in until the end of the term. And so I was begging him to not take the money out because he was going to lose so much in penalties. But he was so ticked off at the other advisor who had sold it to him, out of spite, he was willing to hurt himself thinking that he's hurting the other guy in the process. And so I don't see wrath necessarily a lot when it comes to financial planning, but situations like that can manifest themselves and you just have to be really careful.

It certainly does make a lot of sense to think like that. Pride, envy, wrath, and next on the list, this is greed. People get crazy when it comes to their money.

That's an easy one. And we see it all the time when the market is running up like this. I have so many clients who three or four years ago, we put together a portfolio for them that was relatively conservative because they were going to be retiring in the next few years.

And it takes constant re-education to say, look, remember, why did we do this? It's because we can't afford the risk. Well, a lot of people, maybe their 401k is more aggressively invested and they're seeing their 401k really doing well in the market environment that we've been in. And so now they're wanting to change their more conservative investments that they have here to be able to capture some of that gain. And that's greed taking over. You're seeing all these gains out there in the market.

You're saying, well, let me get that with all my money. Well, again, if you're close to retirement, you can't afford that kind of risk with all your money. We set up the plan initially with a very clear strategy and clear mission in mind, and we can't just up and change that on a whim just because the market is doing well right now. That's the cycles that the market runs in as we get closer and closer to the top.

And we've seen all-time highs almost weekly for the last couple of months. Usually when we're in an environment like that, we see a lot of greedy decisions start to take over. And I don't mean greedy from the standpoint of you're trying to hoard as much money as you can and step on other people. No, that's not what I mean.

It's just that at some point you need to stop focusing on maximum investment returns with all of your money. You're listening to Mr. Stillman's Opus, and I have the conductor sitting down here, actually, talking about the seven deadly sins. We've been through pride, envy, wrath, greed.

And next on the list, John, interested to hear what you're saying about this. Sloth. Yeah, so sloth laziness, essentially.

Hanging upside down. Also that. I don't see that as much, but sometimes. So we usually see this manifest itself really in the form of procrastination. It's so easy to kick the can down the road, not make a decision. If it doesn't feel pressing right now, well, let's make the decision another day. And I'm guilty of doing that in many phases of my life, so it doesn't surprise me when I see people doing that in their financial life.

I wanted to ask you about sloth before, but I put it off for a few weeks and finally got around to it. Well, I'm glad you finally pulled the trigger on that. But so often, people get scared and intimidated by the idea of financial planning. But the reality is, in a lot of cases, if you'll just pull the bandaid off and do a little bit of work, it makes it so much easier down the road. And then you have the stress lifted off your shoulders of not knowing where you stand and the stress of worrying about, am I going to have enough or not?

If you just go ahead and do the planning up front, it makes it a lot easier down the road. So sloth comes back to bite you when you put it off too long, and then maybe you miss out on some opportunities, or you do get hit by this market crash that you could have avoided. So many things can happen. Okay, next on the list, seven deadly sins. Gluttony.

What do you have to say about that one, John? So gluttony, of course, that's when you keep eating and eating and you can't get enough of something. And I've seen this happen with folks and certain stocks, or maybe even industries. So this is essentially what happened in the dot-com crash. People were being gluttons for technology and telecom stocks. And because those two sectors were such a massive percentage of the average portfolio, when those two sectors crashed, even though almost everything else in the market was fine during that three-year period, those two sectors crashed. But because people had been gluttons on those two sectors, almost everybody lost money. So if we hadn't been gluttons on those couple of areas of the economy, probably would have made about 8% through those years instead of losing 40 or 45. So you just have to be very careful of, just because something's doing well right now, we don't want to binge on that particular thing. We still need to be well-diversified.

We still need to have a lot of different things happening with our money to be sure that we're not exposed to too much risk. Mr. Stillman says there are seven deadly sins when it comes to your financial planning for retirement. Pride, envy, wrath, greed, sloth, gluttony. And I've been looking forward to this one. I want to hear this. Lust. What do you think?

So this kind of ties into some of the other ones that we've talked about. But where I see lust in the financial world is people lusting after big returns. So if I can average 8% a year for the rest of my life on my money, I'll really be able to leave a lot to the kids. Or if I can lust after that return for the last 10 years of my working life, I'll have this much when I actually retire. When the reality is we can't have all of your dollars exposed to that kind of risk, like I said before. Some of that money, the money that you're going to need for income within the next few years, we can't be chasing those kinds of returns. We really need to dial back the risk a little bit, be sure that it's more optimized for protection and income so that when you retire, you know that the money is there. So don't be lusting after the big returns if you're retired or getting close to retirement. Again, if you're 37, go for it.

Take the risk. You've got a nice long timeline on that money. But most of our clients aren't 37. Most of our clients are 57 or 67.

And lusting after big returns is not what you want to be doing at that phase of your life. Well, John, the seven deadly sins to recap, pride, envy, wrath, greed, sloth, gluttony, and lust. There you have it. John will be glad to talk to you about any of these. Come in for a comfortable conversation. This has been Mr. Stillman's Opus. I hope everything was melodic and harmonious to your ears today. Thank you very much for joining us. I'm Ron Stutz, along with John Stillman.