Moving Your Retirement Goalposts: Worth the Risk?

Hello and welcome in to Mr. Stillman's Opus.

I'm Ben George alongside John Stillman over at Rosewood Wealth. John, what's going on today? How are you?

Always a pleasure. Doing well, doing well. Have you moved the goalposts in terms of what your expectations are for Carolina basketball or what's that looking like these days? I don't really want to talk about it. That's okay. Still processing some things.

Still processing. Well, I know that the expectations early were national championship and this goalpost moved and just getting the tournament and then, you know, goalposts are gone at this point. But the reason I ask, you know, beyond your fandom for Carolina and your passion for the Tar Heels is because we're talking about retirement goalposts and how sometimes we often move our goals, our priorities, the way we approach certain aspects of our finances.

And it's not always the best thing, is it? Well, so I want to make clear there's a difference between moving the goalposts, which is, you know, the rules that you've set for yourself and changing those rules versus making changes to your financial plan or your retirement plan. If your financial plan can't be flexible enough to accommodate legitimate changes in life that, you know, necessitate changing something about your plan, then it's not a good plan. That has to be able to change and maneuver just like the Constitution. If we had the Constitution exactly like it was when it was first drafted, we would be living in a much different world today. But, you know, we do have 20 some amendments to the Constitution. So we have to be able to make amendments to your financial plan.

But that's different from what we're talking about today with moving the goalposts. I like that. We'll start off then with cash.

I guess this can go either way. You can, you know, set yourself a goal for how much you need for, you know, feeling secure or for an emergency or whatnot. And you could, you know, have that and then start adding to that as you go further. I'll feel more comfortable with adding more.

Or the opposite. You can say, well, I've got enough cash. I think I can maybe pull some of this out and and start getting a little bit more aggressive with it to try to invest and try to get a bigger return. So I have actually a few clients in this boat where their income in retirement, their monthly income is more than they spend. So in those cases, they might have two or three thousand dollars a month coming in excess to what their income needs are. So what happens is that money just piles up in the savings account. Right. And so you might be adding twenty to thirty thousand dollars a year to the bank.

And there's one particular gentleman, single guy, late 60s. And I asked him years ago, I said, now, how much is what's your comfort level for having a buffer in the bank, for having your emergency fund in the bank? Like, what makes you feel good? I'm telling you that thirty to forty thousand dollars is plenty sufficient. But I would like to hear from you. What's your comfort level for money in the bank? He said, you know, a little more than that. Fifty thousand, though, anything over fifty thousand. I don't think I need to keep in the bank. I said, great, perfect. That's fine. It's more than I would leave in the bank.

But if that extra cushion gives you comfort, by all means, let's do it. So here's what we'll do. You're at thirty five thousand now. By the end of the year, with this excess income you have, you're going to be at fifty thousand in the bank. So next year, let's start figuring out, OK, well, what do we do with your two or three thousand extra dollars a month instead of just piling it up in the savings account? He said, sure, great.

We'll talk about it. So, you know, next time we get together, he's at like fifty eight thousand dollars in the bank. And I said, OK, you've got your fifty thousand.

We don't have any expenses on the horizon that we can identify. What do we do now with this eight thousand and with your excess monthly income moving forward? He said, I don't know. I kind of feel like, you know, where I'm at now, fifty eight thousand, maybe sixty thousand is more my comfort level.

And then, you know, over and above that, I'll do something different with it. OK, fine. I mean, the goalposts move, like not the end of the world. It's still not a completely absurd amount of money for him to have in the bank. If sixty thousand is his comfort level.

Well, you can see where this story is going, Ben. We had this same conversation every year for years and years, and he now sits at one hundred and twenty five thousand dollars in the bank. And that is now his comfort level. And so the goalpost keeps moving in terms of how much money he feels like he needs in the bank. It's whatever he has today.

This is comfortable. And so basically, I don't think that's ever going to change. I've just kind of accepted the fact that, all right, well, he's just going to pile up a lot in the bank.

And does it drive me crazy? Absolutely it does, because that's a lot of lazy money that's sitting there not doing anything. But, you know, his income needs are taken care of.

It's not hurting. It's not going to hurt him long run to have that money in the bank. It's just that he's not taking advantage of the opportunities he could take advantage of. So, you know, you kind of pick your battles on that stuff. But that's a great example of what you're talking about of somebody moving the goalpost on how much cash they should have. Yeah, I mean, I would assume that at some point, though, do you as an advisor, like how do you walk that line between accepting and running with whatever the client wants to do versus providing that pushback and saying, well, you know, we really need to take X amount of money that you have in cash and put it to use somewhere else?

Is it all just about once you project and if they're fine having as much cash as they do, you're OK with it or how do you get to that point? So, again, it's kind of a pick your battles thing. And if it's just the kind of thing where I say, all right, well, this is not as efficient as it could be. But the main issue is that it bothers me and it doesn't mess up your plan.

I'm not really going to arm wrestle you about it. But if it's the kind of thing where you're piling up so much money in the bank that needs to be growing because we know based on your income plan, yeah, your income is fine now. But 15 years from now, when you're 82, we're going to need money that has grown and it has been able to produce us an income down the road. If that's the situation and I know we need that money to grow, then I'm going to spend a lot more time pushing back and say, well, look, we have to do something with this excess cash to make your plan work.

So you just have to understand when it's actually a crisis and when it's more just somebody has a different preference than me. Right. Well, the good news is that it sounds like that person doesn't fall into our next category here about people that put off saving until the next year.

Right. They they like to say, well, I've got stuff I need to take care of at this point, but I'm going to get serious. I'm going to get serious starting next year and I'll start to take the steps I need to.

I guess it's pretty obvious what some of the risks might be. But is it worth it to keep putting things off? So there will occasionally be people who say things like, you know, our daughter is in her last year of college this year and then once we're done paying for college, then we can really get aggressive with our savings and they'll stick to it. You know, they're done the next year with tuition and now they're going to start throwing several thousand dollars a month, maybe into a brokerage account to sort of make up for lost time because they were behind. But then you have other people.

In fact, I just talked to one last week. It was exactly this situation of, you know, three years ago it was, well, we're going to have to get a new car this year. So we're not really going to have the wiggle room to do anything other than the basic minimums that we've been putting in to our retirement accounts for now. So, you know, next year, though, we won't have a car to buy.

So we'll do it then. And then next year, what happens? Well, you know, we had to get new windows in the house. Those windows are really old. You know, it was causing our heating bill to be higher.

So, you know, we had to get the new windows. And so it just becomes something like that every year. And you can always justify it.

You can always explain it away. But at some point you're going to have to stick to the rules that you set for yourself, which was, OK, I've got some stuff on my plate this year. But once I get that off my plate, then I'm going to get the plan going next year.

All right. We're talking about ways that people will move the retirement goalposts and whether or not it's worth the risk. Speaking of risk, that's our next one. Should I reduce my risk? You know, people will often say I can just get to X amount in my savings. I'll start to make things more conservative so I don't have as much risk. So how often do you see people move the goalposts in terms of how much risk they they're both comfortable with, but also how much risk they take on? Yep.

So great example of this. There's a lady who I've been working with for 10 years. She's a great income earner and she's single.

One kid who's I think and the kid is probably I mean, not a kid, the kids in his thirties. Right. So her son lives out west. You know, she's fully on her own, earning a great income. So she's really able to put a lot of money into her 401K. And years ago, when she was at, I think about seven hundred thousand dollars in her 401K, I was saying, look, to do what you want to do in terms of retirement income and the income streams you're already going to have in place, you're fine. We don't really need you to save more for retirement. So what we really need to start focusing on is protecting what you have. You're invested pretty aggressively right now, but we need to protect what you already have in the pot. And she said, well, I really want to get to a million dollars in the 401K.

I said, but why? Like, what is that based on? What is that desire based on? You don't need a million dollars to retire. Like, we've talked for years about what you want retirement to look like. I'm telling you, we can do that with the money you already have. So why a million dollars? I don't know.

It would just make me feel good to see that seven digits in there. So I said, OK, well, just understand we're running a little bit of a risk that you might take a hit. And now suddenly we do need you to work a little bit longer and add more aggressively to that pot.

So I don't think that's going to happen, but OK, I understand. Well, what happens in 2020, beginning of the pandemic? She takes a big hit on her 401K.

She says, oh, you know what? I should have listened to you. I should have dialed back the risk a little bit.

But, you know, I'll I'll make up for it. Now, obviously, with 2020, it wasn't such a big deal because all that money came back pretty quickly. I mean, by August of that year, we'd recovered everything we lost at the beginning of the pandemic. So that one turned out to not be a bad deal, not too bad a situation. However, then I was thinking, OK, well, this is this was a learning opportunity for her. So now she'll understand. All right, we need to dial back the risk. She said, well, that came back really quickly.

Let's just, you know, let it keep riding. At this point, she was over eight hundred and fifty thousand, I think. So getting close to her arbitrary goal of a million.

Yeah. And then 2022 happens. And so now by the end of first quarter last year of 2022, she was saying, oh, you know what? You really should have pushed me harder on taking some of that risk off the table because now I'm even further from the million dollar goal.

So now I don't I don't really know how long we'll keep playing this game. At some point she will want to retire and, you know, she'll probably have enough at that point. It depends on what the market does from this point forward. She has enough in the 401K right now that still we could just go ahead and dial back the risk and know that she's going to be fine. But she mentally and emotionally is not given up on this goal of I want to see a million dollars in there.

So she's going to keep rolling the dice and, you know, ask me in five or six years how it worked out for. It's one of those where if you've won the race. Right. Why?

Why keep competing? If you're there, just take what you got. So the risk, obviously, that one is pretty significant as we see.

All right. Last one I've got for you picking a retirement date. This one I'm sure moves quite a bit, you know, for different reasons. But you have something in mind and then just continue to kind of push it back a little bit further, a little bit further for whatever reason. What's what's the risk here?

So it's not so much a risk as it is just a missed opportunity. So and I have a myriad of clients in this boat. Ben, what's your position on myriad as noun versus adjective? Because some people would use it as a noun and say, I have a myriad of clients. Other ones would just say I have myriad clients. Do you have a strong.

I would say noun. Yeah. OK, so we're going to go with a myriad, a multitude of clients I have in this boat where I've told them for years they can retire. And I think in some cases it's that they don't completely trust the financial side of it. And they just want a little bit more buffer there. And even I'm saying, no, you're fine.

You can retire whenever you want. They just haven't completely bought into that idea. There are others who I really thought that was the case. And I'm thinking to myself, why can I not convince them that they're OK? And really what I've learned over the years is it's not the financial piece that's keeping them at work.

It's all the other stuff. It's not knowing what they'll do with their time or not knowing what their social life will look like. You know, and they when they don't really have a plan for that, often they'll keep working, even though financially they don't need to. Now, there are people that keep working because they love it.

I have several clients, some in their 70s, a couple in their 80s that are continuing to work because they just like it. And in other cases, maybe it's like, well, yeah, I mean, I don't love it every day necessarily, but it's better than anything else I can think of doing. So if you can come up with something else I do with my time, yeah, OK, maybe I'll do that. But for now, this is fine. They're paying me pretty good. Might as well stick around.

So it really depends on the person. My goal is to get you to a place where, one, you can retire and then also that you understand and have confidence in that plan so that is not the financial piece that's keeping you at work. And then if you want to keep working for some of these other social reasons or time management reasons, by all means, do it. But my goal is to get you to the point where the financial piece is not the thing keeping you there.

Very good. Some great examples, great stories about how this is all kind of happened and people have you've worked with. I think it helps kind of paint the picture much better. But I think ultimately, though, you're one of the biggest reasons why you work with an advisor is to help you.

Well, maybe I say this, but I listen to some of your stories. Maybe you weren't able to prevent them from moving the goalposts, but someone to kind of help keep you in check when you do want to move the goalposts. Right. Well, and that's a point I should make for all those examples that I'm giving you of people who move the goalposts.

There are a dozen to offset the one where I'm saying, hold on now. Now let's think about our rules. And then they do abide by the rules that we had laid out together for them.

I'm kind of giving you the examples of the people who don't do that. Gotcha. Well, if you want to get in touch with John and pick his brain on anything or follow up with any questions about what we discussed today, you can always do so at Rosewood Wealth Management dot com or call or text 800-545-2991. But more importantly, let's keep those goalposts in check as much as possible. Right, John? Absolutely.

Keep them, keep them where they're planted unless there's a reason to move them. There you go. Well, thank you for listening to this episode of Mr. Stillman's Opus for John Stillman over at Rosewood Wealth Management. I'm Ben George. Take care. Carolina Wealth Stores doing business as Rosewood Wealth Management is a registered investment advisor in the state of North Carolina. The material presented is intended to be general information and should not be construed by any consumer as the rendering of personalized investment advice.