Join us today for the Saturday Night Special with Eric Brotman author of Don't Retire.... Graduate!...
Today's guest is Eric Brotman, author, podcast host, and financial advisor talking about financial literacy and financial independence.
In tonight’s Saturday Night Special I talk to Eric Brotman author of Don’t Retire… Graduate! We talk about the four stages of developing financial independence. Eric shares how the concept of retirement is outdated and not needed. Eric and I also talk with you about the reason that it’s always time to start focusing on these foundational goals.
Join in on the Chat below.
00:00:00 Thanks for joining us on tonight's Saturday night, special episode 72, I'm Eric Brotman from the don't retire graduate podcast. I challenge you to invest in yourself, invest in others, develop your influence and impact the world by using your time, your talent and your treasuries to live out your calling. Having the ability to plan for the future is key. And one way to be inspired to do that is to listen to this,
00:00:27 the inspired stewardship podcast with my friend, Scott Mader. You've gotta be more than that. There have to be things that have mattered to you. And so I consider retirement a graduation from one stage of life to another. And I think it's something it's an, it's a period of advancement. It's a way to get to, to Scott, 2.0 or 3.0
00:00:58 or 4.0 rather than retreating. Welcome. And thank you for joining us on the inspired stewardship podcast. If you truly desire to become the person who God wants you to be, then you must learn to use your time, your talent and your treasures for your true calling and the inspired stewardship podcast, who will learn to invest in yourself, invest in others and develop your influence so that you can impact the world.
00:01:35 In tonight's Saturday night special. I talked to Eric Brotman Arthur of don't retire graduate. We talk about the four stages of developing financial independence. Eric shares how the concept of retirement is outdated and really not needed. And Eric and I also talk with you about the reason that it's always time to start focusing on these foundational goals. Now, one area that a lot of folks need some help with is around the area of productivity.
00:02:06 Getting not just more things done, but actually getting the right things done can be really, really tough. I've got a course called productivity for your passion. That's designed to help you do this, and then to hold you accountable and walk with you so that you can tailor productivity, not just to be getting more done, but actually getting the right things done.
00:02:33 What's more, we take the approach of looking at your personality and how you actually look at things in the world and tailor the productivity system to your personality. Because the truth is a lot of the systems that are out there are written really well for somebody with a particular personality type. But if you have a different approach to things, they just don't work,
00:02:55 but there's tools and techniques and approaches that you can take that will work for anyone. And we help you do that and productivity for your passion. Check it out email@example.com slash launch. Eric D Brotman CFP is the CEO of BFG financial advisors with over 25 years of experience. As a trusted advisor, he currently is a financial advisor, wealth manager, mentor and host of the podcast.
00:03:36 Don't retire. Graduate. Eric believes that financial literacy is the key to wellbeing and is on a mission to help families and professionals achieve financial freedom. Eric is the author of several books on personal finance, including retire, wealthy, the tools you need to help build lasting wealth debt-free for life. The tools you need to free yourself from debt and pay less taxes now for strategies to help reduce your income taxes legally.
00:04:04 And at the end of the show, I'll share a link to where you can go and download those resources for free. Welcome to the show, Eric. Thanks, Scott. Glad to be here. Well, you talked a little bit and I mentioned it in the intro. How one of the ideas that you have is that the concept of retirement, at least the way that we kind of think of it is a little bit outdated.
00:04:31 What'd you talk a little bit about what do you mean by this and what do you propose instead? I'd be glad to, I think it's a lot outdated, the concept of retirement. As we know, it started in the, in the 1860s as a way to put folks who were considered past their prime out to pasture. That sounds dreadful to me.
00:04:51 And, and even if you look at the word retire in, in the UK, it means to go to sleep in the U S it means to retreat or, or withdrawal. And I don't know anyone who puts themselves through a rigorous academic program and build a career and build a reputation and grows a financial life to then disappear in withdrawal. So I think this idea that retirement is the absence of work to me is,
00:05:18 is old thinking. I think it's the absence of needing to work. So financial independence is a wonderful thing and, and we should all strive to be financially independent, but this idea that we're going to be idle for what could be 25 or 30 years or more, it's just unhealthy. And, and people don't thrive unless they have purpose and meaning and reasons to get out of bed every morning.
00:05:39 And it doesn't have to be for money. It could be that you have some other mission. There are things that are important to you and you want to do it. And that's, that's terrific, but there's gotta be a reason you can't, there's not enough golf courses or shuffleboard. It's just not gonna work. You can't do daytime TV for 30 years.
00:05:53 Well, I don't know. I know a few people that might argue with you on that. Well, most of them aren't Thriving. They might be a, they might be alive, but there are they living. Right. You know, it's a, it's a different thing. Well, and you know, I think too, that it's, it's important to recognize that in the 1860s,
00:06:12 you know, what was the life expectancy to where now, like you said, if somebody retires at 62 30 more years is not out of the question by any stretch of the imagination, you know? So, so why would you spend a third of your life with, with a LinkedIn profile that says retired? Like, you've gotta be more than that.
00:06:35 I mean, there have to be things that, that matter to you. And so I consider retirement a graduation from one stage of life to another, and I think it's something it's an, it's a period of advancement. It's a way to get to, to, to Scott 2.0 or 3.0 or 4.0, rather than retreating, it's something to celebrate, but not with a disappearance.
00:06:55 You know, for, for, for hundreds of years, cultures have, have honored their elders. They were the, the, the, the elders were on the council. They were the ones who were the great thinkers. We put ours out the pasture, like they're useless. I don't get it. I think there's still something to be said for experience and wisdom.
00:07:14 Even if you have less vitality than maybe you did 30 years ago, there's something to be said for experience and wisdom of why should we give that up? So what do you propose? Instead? I propose reaching financial independence and having a, having a plan that is more than just a financial plan for what the next stage of your life is going to look like.
00:07:36 So it is more of a life plan. It is understanding what you have to do financially, but also recognizing that you need to have purpose. You need to have a mission and it can be volunteerism. If you want to work for the food bank and help your community, that's terrific. If you don't need the money and you want to do something like that,
00:07:56 that's great. If you want to use your experience and do consulting and work three days a week, or work three months a year, or however you want to do it, just so you stay in the game. So you stay relevant. So you stay networked and connected to humans. I think it's a much better plan and you can still have the bucket list and you can still go see the Machu Picchu if that's what you want to do.
00:08:18 But ultimately, a bucket list isn't enough because a bucket list is great if you have six months, but if you can have 30 years, you need a lot more than just check the box. And now I'm done. And I quit for me. So I think that, I think it's redefining retirement as advancement, not retreat. So One of the things that you talk about in,
00:08:42 in the book, don't retire graduate is these four phases that we all need to go through to begin to prepare for what you're talking about for graduation to retirement, as opposed to beginning retirement or whatever other language we want to use. So kind of walk us through what those four phases are at a, at a high level. And then maybe we can dive into a few of them,
00:09:05 a little deeper. I use the four phases, like four years of college. And so the, the book was written like a curriculum where you start with your freshman year and you have two semesters and you start with cash management, one Oh one and, and debt management, one Oh one and things that are relatively straightforward. And they're perfect for younger professionals.
00:09:25 So this is really about starting out and starting on the right path and paying yourself first and starting good habits so that you're prepared for what's coming down the pike 30, 40 years, because this whole idea that I don't have to worry about it yet. Cause I'm so young time when it's on your side is the most powerful thing there is. And so if you start early,
00:09:46 it prepares you for almost anything. It's like building the foundation before you build the house. So that's your freshman year. Your freshman year is cash management, debt management, basic risk management and learning what financial planning is about. The second phase is your sophomore year. And so think about college. That's your you're picking your major. You're figuring out your path,
00:10:07 what are you going to do? And so that means making some life's big decisions, decisions about buying a first home or getting married or having children or some of the things that, that decisions that young adults and folks in their twenties and thirties, especially are going to begin to potentially make. And so how do you deal with that? What are the,
00:10:26 what are the conversations you need to have with a, with a spouse and what is the impact of having children on your finances? And if you have kids, you know what that is? So we begin with financial planning and financial independence and this whole idea around that in the sophomore year. And that includes basics of investing. You know, I consider investing both a science and an art while we're in school,
00:10:50 let's take a science class and an art class on investing. So that's what that looks like. And it talks about portfolio design and it talks about investments in that way. Then you go to your junior year, your junior Year of your, of your working life is What I would call your peak earning years. This is where you're hitting your stride. You're 45 to 60.
00:11:08 You're making the most money you're likely to make in your life. You've got new kinds of tax issues. You're starting to think about aging. You might be in the sandwich where you've got kids to educate and parents getting older that you're worried about. You have to think about estate planning and asset titling. And you know, it starts to get a little more complicated,
00:11:27 but if you're ahead of it, and if you're already on the right track, it's all manageable. These are things you can handle. And then the, your senior year, that's where you present your thesis, you're making your Mark. And so this, this last stage, this is where you have courses, which I call retirement readiness. And it means what are the decisions?
00:11:46 What are the things you have to do a year or two or three before you retire it informal way? What are the things you have to make sure you elect at retirement? Like some of them you have to elect. For example, if you, if you're fortunate enough to have a pension, you're making that election once there's no Mulligan, right? You know,
00:12:03 if, if you're electric security doesn't have mulligans anymore, you're going to elect it and you're going to live with it. And of course, none of us know our own mortality or what's coming down the pike. So you're always making a calculated decision on things like that. And then the last piece of it really is after you retire, not only staying engaged,
00:12:24 but figuring out what your legacy is going to be, what are you leaving behind? That's a lot more important than your IRA or some life insurance. What are you leaving behind that is visions and values and stories and, and, and history and, and family, and all of the things that, that make you, you, and that create what I believe is a type of immortality that is a better type of immortality than slapping your name on a building.
00:12:51 So, You know, that reminded me, as you were saying, the, the, you know, figuring out the best time to start at the end insurance, people will tell you all the time. You know, if you tell me the day you're going to die, I'll tell you the day that you should buy insurance. It's the day before that,
00:13:06 you know, I mean, obviously right. But none of us know that obviously. So which, which I think is important to say too, because yes, you're laying out for years here and, and, you know, kind of freshmen, sophomore, but it really is a continuous process that we kind of, you need to be thinking about. It may not always be age dependent,
00:13:28 because again, I know people that have reached their peak earning years, what most people would consider peak earning years at 30, you know, can happen. But it's also a phase of, you know, kind of phase of life question as well. You're absolutely right. And, but there, but there are also common themes regardless of age, because age really isn't the barometer.
00:13:51 But, but certain themes of buying a first home is always going to happen before, do we downsize or not? You know, you spend your whole life getting a bigger and bigger, a bigger house only to then get a smaller, smaller, smaller house, which is fast versus the decision. Yep. Yeah. It's fascinating. When you think about it,
00:14:05 it's like, Oh, I'm going to get my life is going to be really complicated. And then I got to make it easier somehow. And so you have to think about, am I downsizing? Like where can I age in place? You know, what do I need to be close to for my retirement to be rich, quote, unquote, am I close to my hobbies?
00:14:22 Am I close to my family? Am I close to the things that I love to do? If I'm a beach person, Colorado is not where I should retire. There's no ocean front property in Colorado. No, but there might be some in Arizona someday. If you jumped in to get ahead of it, you never know. So Talking about, well,
00:14:44 let's, let's back up and kind of go to the freshman year. So this is laying that foundation stage. Like you talked about, you know, paying yourself first controlling debt, risk management, these sorts of things. So if someone's at that stage where they're kind of starting out, why is this kind of the focus area that you have them pay attention to?
00:15:06 Because this is habit building. And it, you know, when you're malleable as a young professional, you're, you're making decisions sometimes for the first time and the habit you get into might become lifelong habits. So for example, if you're in the habit of contributing to your 401k, when you get your first job, you're far more likely to contribute to your 401k forever.
00:15:27 And that makes a difference. You're going to be faced with decisions you've never made before. You're going to choose employee benefits. I remember the day I got my first employee benefit package, almost 30 years ago, I was lost and I went, Don't make it easy either. I'm going to go for advice. I went to my dad, which health plan do I want?
00:15:46 And you know, the advice he gave me may not have been right for me, it may have been right for him, you know, and, and that wasn't him doing something wrong. It was him not really knowing either and us being in different situations. So It may have also been right back when he chose it. Well, that doesn't mean,
00:16:05 you know, it doesn't mean it's still right, either because things change That that's true. And you know, a lot of young people, a lot of young professionals have made decisions at 18 about student loans and they're coming out of school and they, they need to get their first job. They need to choose their benefits. They have to figure out where they're going to,
00:16:21 where they're going to live. Is it going to be an apartment? Are they going to have three roommates? Are they going back to mom and dads? What are the options? Do you have those choices? And, and how are you going to get out of that debt if that exists and how are you going to begin saving whether it's for a home or in most cases,
00:16:36 just for your own ability to move out. You know, I think it's perfectly fine to move back with mom and dad for a finite period of time, get on your feet, pay off some student loans, build a nest egg, but you know, you shouldn't be 40 years old and playing Xbox on dad's couch at some point. It's good to adult As a,
00:16:56 so I have a 17 year old son, senior in high school. And for awhile, we had some neighbors who were young men in their mid twenties who were living in a place that was paid for by mom and dad, not working kind of just, and so my wife and I used that as a, a constant example of, you know, we would literally walk by and point at them and look at my son and go,
00:17:21 and he's like, I know I'm not doing that. There's no, I'm not, I, I I'm either going to school or I've got a job or else, mom and dad, aren't helping. And I'm like, exactly, that's right. That's right. We're not enabling, you know, it's not going to happen. Help him in every way,
00:17:39 help him launch. But you know, don't catch fish for him forever teach them to fish. Right. Right. And of course my, you know, to, to his credit, my son, a few summers ago started his own lawn care business and raised about three grand in three months. So, you know, he knows how to work. I'm not worried about it.
00:17:57 I hope he funded a Roth IRA. He actually did not, but it was for a specific reason, he was raising money for a specific purpose. And he used it for that purpose. So that that's, we, we talked about it. We, we did talk through, here's your options. Here's what we can do. What do you want to do?
00:18:11 So, you know, you could have put money in a Roth for him. I know, but we, at that point in time, we weren't in a position to be fair. Right. Fair enough. So as we move to that second phase, so let's say somebody laid that foundation. And again, to to point out, because I I'm a,
00:18:26 I'm a coach. I work with a lot of people. Sometimes you're reaching this phase later in life, sometimes earlier, whatever it is, but let's say you've moved on towards working towards financial independence. And we've used that term a couple of times. So I also want you to define it for Viet folks. What does that actually look like? What does that mean for your average?
00:18:45 Joe Financial independence is the moment where work is optional financially. It's the moment where you have enough resources, be it an income source, like social security or pension, or enough of a, of an asset base that you can turn that into income, that you can take this job and shove it. That is the moment. And it's not for everybody.
00:19:07 And, and that's not saying that everyone should do that, but their financial independence is that moment where you're working because you love it, or because you want something to do, or because it engages you or enriches you, or because you want to, you want to have abundance and you want to have additional resources, all of which are fine. But until that point where you are working,
00:19:26 because you have to, it feels different. It's compulsory. It's like being told what you must do rather than what you're able to do and working because you love it is totally different than working because you have to, and that's not to say working because you have to, you can still find something you love to do. And, and hopefully that's what you're doing anyway.
00:19:47 You're doing what you love, but you're still doing it because you have to. And so that, that to me is what financial independence is. And, and retirement is not the absence of work. It's the absence of needing to work. So the one of the things, and I'll, I'll back up your story a little bit. I had the experience of when I was working in the corporate world and I was,
00:20:09 you know, highly compensated employee in senior leadership, all of those sorts of things. And they began to do layoffs and everyone is worried about the layoffs. My wife and I had done a very good job of getting in a financial position where it was okay. You know, I, if they had laid me off, I would have taken the severance and not a big deal.
00:20:29 We would have been fine. And it was interesting to be the only guy in the building, walking around, going lay me off, don't lay me off. I really don't, you know, whatever, you know, it's, it's okay to not be stressed about it, where, you know, everyone else that felt like was really concerned about the situation.
00:20:48 It really does put you in a different place, mentally, physically, emotionally health wise, everything. Yeah. I, I had a, a guest on my podcast who was a former physician who left the practice of medicine to join the financial world. And he said something that it's so simple and it's so brilliant. He said, money is like oxygen.
00:21:10 If you have enough, you don't think about it. And if you don't have enough, it's all you think about. It's all you think about. I mean, that's kind of a, that's a very profound way to look at it. And if you have enough money, a little more money, it's not going to change anything. It's not gonna matter.
00:21:22 Just like if you have enough oxygen in your lungs, a little more doesn't matter. But if, if you're concerned about where that next meal's coming from or where that next rent payment or mortgage payment are coming from. And, and I think it's imperative that employers recognize that having employees were, who have financial wellness matters. In fact, you know, our firm,
00:21:43 we we've done financial wellness programs for some big companies and, and met with their employees and the company pays for this because they're like, well, if our employees are worried about where their next, you know, their next payment's coming from, or they're worried about debt, or they're stressed about money, they're not going to be thinking about work. And we want them to be able to focus on their jobs.
00:22:03 So we want them to be financially literate and we want them to be financially well. And there's only so much that an employer can take responsibility for it is not the employer's responsibility to do this. In fact, I would argue it's selfish for the employer to say, I want you all to be okay financially, so that you're not strapped so that you're not a seeking another job just for the paycheck or Asking for payroll advances all the time,
00:22:28 right. Or, or, or the worst case scenario skimming from the register. You know, like, you know, you have the whole spectrum of, of Are not participating in things like 401ks and other opportunities that they have to, And people routinely do it wrong. The 401k people have grown to, I think, mostly understand, but people don't understand health savings accounts at all,
00:22:51 right. They're the greatest tool ever invented. They are the single greatest tax tool in the U S tax code. And people don't know about them and they're not using them properly. And with just a basic education on them, you can really change your financial future, reduce your financial, your, your future tax burden, prepare for health emergencies and do all of those things simultaneously.
00:23:13 Like it's obvious if it's what you do every day, but you know, I'm not a nephrologist. If I had to tell you what was going on in my kidneys, I couldn't help you with that. Well, and again, that speaks to the need for, you know, through self-education like reading your book, listening to podcasts, those sorts of things,
00:23:33 but also by working with experts, by working with people that, you know, know the field, that is a valuable tool in this process as well, because, you know, not just listening to everybody because there's an expert on every corner and they usually contradict each other, but actually doing the vetting and finding the people that you can trust and following,
00:23:55 Not only do they contradict each other, but they often don't take their own advice. And I would urge you never, ever, never eat in a restaurant where the chef won't eat. Right. Okay. If you and I are of similar financial means, similar ages, similar situations, your portfolio better look a heck of a lot like mine, or you're going to want to know what I'm doing differently and why.
00:24:17 And it's fair to ask that we actually, in the, in the book, there's actually an entire chapter dedicated to how to find a financial advisor, the questions to ask and how to interview, not because there are necessarily right or wrong answers, right? Because you need to know the answers. And, you know, I have been asked, I started a consulting practice and I work with financial advisors around the country and help them grow their,
00:24:39 their influence as financial advisors. And one of the things people ask me all the time is why would you be working with other financial advisors? Aren't they competition? Isn't that a threat? And I said, absolutely not. I said, first of all, there's an abundance mentality. There's a great need for what financial advisors do. And an incredible shortage of advisors,
00:24:57 particularly good ones. Secondly, the client or the, or the family who's going to choose advisor a is not going to choose advisor B, right? There's a culture fit in the same way that two doctors don't look at each other like competition, they're going to say this, patient's going to be better for me or better for you. And there's, there's so much opportunity that I don't,
00:25:18 I don't foresee, I don't, I don't believe other financial advisors are our competition. In fact, I want them to be doing a wonderful job because it makes the industry better. Right, right. Yep. Same, same mentality of, you know, again, I, I work as part of what I do is financial coaching. And I was on the phone earlier today with the financial coach,
00:25:42 helping him with website copy and kind of figuring out some things that he needed to tweak. And he's like, how much do I owe you? I'm like, I know I'm doing this because I want more good coaches out there, you know, has nothing to do with getting paid. That's not the point. I just know people need it. I want more good coaches out there.
00:26:01 That's the end of the, that's the goal. And that speaks to not only your character, but also your confidence. If you know that you're doing the right thing and that you're doing a good job, you don't want other people be smirking. What you do for a living. You know, the good cardiologists are not happy about the cardiologist who's putting in stents that aren't necessary.
00:26:21 You know what I mean? Like it's not like all boy that cardiologist really screwed up. I'm going to get more business now. No, it's, cardiology's in news because of this. And now when I recommend a stent to a patient, they're going to say, is that really something, I need something on eight. So you get a second opinion.
00:26:36 Right? So, so to me, the Bernie Madoff's of the world, didn't create more opportunities for us so much as they, they be smartest, all of us and, and made everybody look bad. And it's one of the things that, to this day, we still have to, we still have to explain how we're different than a Sanford or a,
00:26:53 or a Maydoff or all these people, because consumers have no shot at understanding this stuff's got. And as a coach, you know, this, if, if you're, if you're coaching clients get to the point where they're ready for a financial advisor or wealth manager also, and I think a lot of people use because they're different. But when that occurs,
00:27:14 you know, you want to make sure that they're armed with the ability to understand what's being explained to them because, you know, and, and that's not to suggest that you have to go into chapter and verse it's it's okay for a client to tell me, I don't want to know how the watch works. I just want to make sure I know what time it is.
00:27:33 Right? There's nothing wrong with that. There are other folks who are like, I want to know the alphas, betas and standard deviations. And if that's what you want, we can do that. We're certainly trained for that. But most consumers, I would no sooner go to my, my, my mechanic and ask him to explain fan belt, timing.
00:27:51 I don't even know if that's a thing. So There's a timing belt and there's a fan belt, but So that's why I don't work on Cora Scott. I think What my fan belt on my timing belt, and that's why my car is not working. We all have our skillsets and you need to trust the experts, but you're also not. Consumers have no way to know.
00:28:14 Who's really an expert and who's snake oil, right? It's very difficult. And unfortunately the bad apples do a lot of damage to the bunch. And so I think it's imperative that we not only make advisors better. And to your point, make coaches better coaches, because it's good for everybody. It's also really important to weed out the ones who are doing harm,
00:28:36 right? You know, the Hippocratic oath matters. Do no harm first, do no harm. And I will walk away from a situation. If I, if I say to somebody, you know what, I would love to work with you, but you don't need us. We're not the right place for you. Or this is, you know, what we would be charging you to do.
00:28:53 What we're going to do is frankly, more than you should spend on what you need at this point. And we're still going to be here in five years. Let's get you something that, that might be a little bit more basic because that, that meets you where you are at the moment. And then we'll cross the next bridge and that's reach enormous Goodwill.
00:29:09 Exactly the same thing that, you know, again, as a, as a coach, it's like when we get to the point where they need a wealth advisor or a financial advisor, I'm very clear. That's not what I do. Let's get you with the people that, that's what they do, who they really know what they're doing, because that's what you need now.
00:29:25 You know, same thing like taxes. I know enough about taxes that I could pretend to know what I'm talking about. I'm not going to do that. If you've got a tax situation, we're going to get you with a tax professional, because that's what they do. You know, you got to find the experts. Yeah, it's true. And I feel very well versed in tax and I have a CPA.
00:29:45 Yep. And by the way, my wife and I use a funny Mutual advisor and you are one, I am one, We use a financial advisor and the reason we do, and of course, it's an advisor within our firm, but we want to sit down. Cause I have to take off my, my advisor hat and put on my husband hat.
00:30:02 Because if I don't, W w I'm gonna, it's not going to work. Our conversations won't work. It's a lot, like if you were a therapist And you and your wife needed marriage counseling, you're not going to be the therapist in that counseling session. Yep. That's the same thing for us. Yeah. Yeah. Well, and it is,
00:30:21 I mean, I think that's in all of this fits into that, that second area, that second phase where, you know, you're beginning to educate yourself, you're beginning to work towards financial independence. And as we've said, a couple of different times, you know, it is for one it's alphabet soup for one thing, you know, their letters and numbers,
00:30:39 you know, all sorts of terminology and all of this. And so it's laying, you know, you've laid the foundation in the first phase. Now you're starting to build the house. Right. Well, okay. Before you ever build the house, you got to dig the moat around that castle protected. Yeah. You're always going to put the foundation down before you start picking curtains out.
00:30:59 And, and so I think it's real important to have risk management plan. And that's not just a euphemism for buy insurance. It's, it's make sure you have the right asset titling the right beneficiaries, the right legal documents, the right ownership structures, the right tax structures. I mean, there's a lot of different kinds of risk management. Insurance is a tool in that kit,
00:31:19 but it is certainly not. It's certainly not the only one. And there's lots of people, unfortunately, who wind up with things that aren't the right fit because it's, what's on Or it's what their brother-in-law or somebody else's selling right now, which is another story. Yeah. And I've also helped clients that have gone into the situation. And you've mentioned beneficiary had more than one client.
00:31:42 Who's had a situation where they discovered that, you know, for instance, they forgot to take the, now ex-wife off of the beneficiary. It's been 10 years. Guess what? It doesn't matter. You know, it, it, And people don't understand that and they think, Oh, I have a will. So I'm good. Yeah.
00:32:03 And Your beneficiary designation, you know, I use the ex-spouse one a lot, but even if it was, if you had a child and you named your child as a contingent beneficiary, and then you had more kids, but you never changed it, you might be only leaving money to your oldest And, and, and inadvertently excluding your other children and creating potential family conflict and drama and all sorts of problems.
00:32:30 And, and it happens. And some of the drama isn't because you forgot to name somebody. Like we've seen people be left pieces of real estate homes or farmland, or other types of things where there's seven siblings and they can't agree on how to handle it. And it creates it. It destroys Thanksgiving because it, it, there was nothing articulated. There was nothing planned and to people want to sell it.
00:32:55 And two people want to rent it. And three people want to live in it. And it's a disaster. And in the absence of real communication, which is a lot of the coaching ballywick of course, but you need real communication. You need reasonable transparency. You need to be forthright and, and, and honest with one another. And then you need to make hard decisions And then communicate them.
00:33:22 Sometimes, sometimes you leave. You know, we see folks in their legal documents, we see folks naming all three of their kids as their medical attorneys. In fact, I said, well, what if they disagree on what to do with mom? You know, why not name? One of them explained to all of them, why you're naming the one,
00:33:39 because, because he, or she's a nurse, or because he or she is local and can get to the hospital, we're naming one person. Let us tell you why. And then please consult with your siblings to the extent you're able. But the doctor needs to know that there's one person who can talk to him or her. And just the same thing with the financial powers.
00:34:02 If you need to have all four kids sign off on an IRA, distribution, you're doomed, they can't agree on what movie to see, Or what flavor of popcorn to get Or anything like that. I mean, you, you, you can't assume that people who can't agree, not because they're bad people, but because we all have different opinions and backgrounds.
00:34:23 And, and, and in some cases, the kids who are trying to agree on that are also married to people. And those people they're married to have real strong opinions about, Hey, this would put a deck on our house or, or it just, And it doesn't even, it's not even about anyone being even selfish or bad or manipulative, if nothing else,
00:34:41 you're creating stress, even if they all end up agreeing the process of getting to that agreement is stressful in an already stressful situation. I mean, because honestly, if you're needing medical, you know, if that's happening, everybody's already stressed out. I guarantee it, you know, there's already bad stuff going on. That's how you got there. So,
00:35:02 you know, you've escalated the emotion you've escalated. The stress you've created more potential for a fight, not what we want to do in that situation. You're a hundred percent, right? When you move to the third phase, you know, that's this kind of, that w we've come into a career now, usually we've started moving up the ladder, so to speak,
00:35:25 or, or maybe we've started our own business. And now we've got it to the point where it's no longer a job. It's actually a business then, you know, because so many of us, when you start your small business, you're usually starting a job. And hopefully you transitioned to it being a business. All of these sorts of times that captain,
00:35:42 you talk about these high earning years and now kind of turning and beginning to think about estate planning, other sorts of risk management and future management, legacy management tools. I would say that as much as we just talked about the alphabet soup and the fact that folks don't understand it, I think this area is even less understood quite frankly, because for instance,
00:36:04 I know a lot of people that say, Oh, I don't need an estate plan. I don't need a will because I'm not rich. It's like, wait a minute. So talk a little bit about why these are important. And again, you know, Joe Schmoe, why does, why should they care about this stuff if they're not rich? Well,
00:36:21 it's funny because there's a chapter in the book, which is risk management and protection two Oh two, which is called estate planning. Isn't only for the rich, right? You nailed that one. And it's true. There's much more to an estate than, than some will reading. Like, you'd see in Hollywood, this third phase of your life, it's not only that confusion and that these people haven't done this before,
00:36:45 you know, in the same way, you know, when you're getting married, sometimes a lot of your friends are getting married. And so you almost, it's not as Moses, but, but you're sharing these stories with your peers. You don't do that with estate planning. You know, people are like, Oh, tell me about how you plan a wedding or where are you sending your,
00:37:05 your kindergartener or, I mean, you talk about these family decisions, or I'm thinking about buying a house. What was your experience? How much did you put down? Who is your real estate agent? People talk about that they don't talk about the estate planning. So what are you planning to do when you die? Bill? It's just not a conversation we have.
00:37:20 And so people have never done it before. At the same time at this phase in your life, a lot of times you're facing complexity. You've never faced before you're facing taxation in ways you've never faced before you're facing the need to manage or grow and accumulate significant wealth. And as that occurs, you're now dealing with things that have much more dire consequences.
00:37:42 If you mess them up, if you're going to make an investment mistake, please make it at 24, not at 64. And so that's, so you no longer have time on your side. You can't afford a mistake in, in the same way and the mistakes so that the stakes get much higher. And so I think at that's at that phase of your life,
00:38:00 that's where you need tax advice maybe for the first time. But definitely at this point, you need legal advice and not necessarily your starter legal advice, you need sophisticated legal advice and, and you need investment advice because now you're dealing with a number that is designed to ultimately help you create income. And so in this phase of your life, you are accumulators,
00:38:23 you're dealing with taxes. You're also dealing with family on both ends. Do I pay tuition? Do I pay for mom's nursing home? Do I pay for my own retirement plan? How do I do three? And that's stressful too. And, and so if you've got parents in their eighties or nineties, and you're dealing with some of those things, and you've got kids who are 17,
00:38:47 you've Got a whole slate Of things that we're not, it's not the kind of thing we can necessarily learn from our peers, because they're all so different. So, you know, to me, this is a, this is a point where you have to start treating your real money seriously. And the, the, the things that you can get away with in your twenties and thirties of picking a target fund and leaving alone,
00:39:12 or, or picking a couple of stocks or, or just hoping for the best, no big deal, and if you're wrong. Okay. But when you get to the point where you're managing what is going to have to replace your income at some point, a mistake could mean you're working an extra five to 10 years. In 2008, we learned some real expensive lessons for some folks.
00:39:36 And by that, I mean, people, everyone was different, but there are only three kinds of people in, in the investment world. There's buyers, holders, and sellers. And if you're a buyer 2008 created the most incredible opportunity ever. And if you had the stomach for it, you made a bunch of money. And if you're a holder,
00:39:52 it costs you time and you lost three years, four years, five years, and then you recovered. But if you're a seller, now you've got this orchard, that's bearing fruit. And in order to live, you have to not just pick fruit, you have to chop branches off the trees. And when that occurs, you are guaranteed less fruit.
00:40:10 The next year, there's less trees. And that is a self fulfilling prophecy. And it's a problem, right? So this is a moment where you have to treat your serious money in a very serious way. And that doesn't mean you can't have fun money someplace. There's nothing wrong with maintaining an account and doing some of your own fun stuff. But don't do that with the,
00:40:29 with the, the nest egg, do that with something that, that you're having some fun with, knock yourself out. I'm not going to tell you not to do it, but don't treat your, don't treat your nest egg. Like it's Caesar's palace. Yeah. They're all in mentality of, you know, the poker game only works in a James Bond movie.
00:40:48 You know, when it's a dramatic effect in a TV movie, that's fine. But if you're playing with your retirement, Retirement, only thing in life, you can't borrow for. Yeah. The only thing, everything else, whether it's education or now one would argue you can't borrow for healthcare. But the reality is there are ways there are, there are organizations that can help.
00:41:10 The fact is retirement. And particularly things related to elder care, you can't borrow for them, and you're going to get whatever lifestyle and whatever options you have that you've planned for. Right? And if you've planned for the ability to choose your own continuing care community, or to be in an active 55 and over place, or where to be on the beach in Boca,
00:41:30 Raton, you win. But if haven't and you wind up in a facility, you would not have chosen for yourself. It's dreadful. I mean, it's dreadful anyway, but it's worse when you don't have choices and you don't have some extra comfort. Well, and it takes, and again, it takes away that power of choice and that you're, it's kind of like working when you have to,
00:41:50 at that point, you're also doing that phase of your life because you have to, you've lost your power of choice. And, and I would argue no one would want that for themselves or for their parents, by the way, or anyone they love. Well, correct. And there's lots of people who are, there's lots of people who are helping their parents financially with this idea that I wouldn't want that for mom and dad any more than I'd want it for me.
00:42:15 But the reality is there are some tools and wealth replacement tools that you can use. And insurance is one of them where you could look at saying, look, mom and dad, I'm, I'm, I'm going to take care of your long-term care expenses, because I want you to have some choices. And I don't want to have to come out of,
00:42:30 I don't want to have to pull money out of juniors college fund so that I can put you in a assisted living. So I'm, I'd rather pay insurance premiums if you'll give me the permission to do so. Yeah. And the other alternative a lot of times is if they're just paying for things out of pocket, they're now setting themselves back, correct on their ability to create financial independence,
00:42:52 which usually just passes it down the line to where now their kids are stuck in the same situation. Well, and, and taking care of children is having kids is the most expensive decision you can make. And, But they are worth it. I'll just say that out loud. I love my daughter. Don't get me wrong. They are expensive creatures.
00:43:12 And so what happens is there's this tendency to put their interests before your own. And some of that is just being a mom or dad. However, once they're grown and you've got adult kids, if you continue to put their interests ahead of your own, it will, you'll eventually run into trouble. So if you have four children and you've paid for four college educations,
00:43:33 and they all decide to go to grad school and you pay for all their graduate educations, what I will tell you is you're going to have some really well-educated kids, which one are you going to live with? Because you're not going to be able to take care of yourself. And so I liked to be in a position where I could say to both of them,
00:43:49 my parents and I have, you don't have to leave me a nickel. I good. I got this, but please pretty, please don't leave me with your bills. You take care of you spend your last nickel on your last breath and we'll all high five, and we'll miss you forever. But please don't, don't put us in a financial position.
00:44:09 That's going to be, that's going to be disruptive or degenerative. Right. I've, I'm laughing because my mother and I basically had the exact same conversation a number of years ago, where I'm like, mom, if best case scenario, that last check that you write clears. Yeah. And, and, and we're, we're good. You know, everything else I could care less.
00:44:32 Okay. You can do that. We're ha we're good. We're good. We're golden. That's, that's the key so much like the airline safety lecture, where I say put, please secure your own mask before securing the mask of the, of the people with you. It's the same thing with this take care of yourself and, and, and make sure everyone's taken care of themselves.
00:44:52 To the extent they're able, that doesn't mean you can't help. It doesn't mean you can't be generous and thoughtful and all of those things, it just means when it comes to the, the real nest egg, you have to manage your own and your retirement has to Come first. It has to. So I think we've kind of covered some of this already,
00:45:10 too, but your, your last phase of the book is, is that, you know, right before graduation. And I know, I know we haven't covered all of the things that are in the book, and you talk a little bit more about, you know, income producing assets, getting ready. What is the timing factors of getting ready for retirement?
00:45:28 Cause again, like you said earlier, sometimes there's decisions you make that you have to make right now become really impactful. Would you unpack that a little bit? Sure. Absolutely. And, and that's another thing we're not prepared to do. And consumers aren't prepared to do is to create income. It's one thing to figure out how to build a nest egg,
00:45:47 how to accumulate money. It's actually a pretty simple formula. You put X dollars away for Y years at Z percent and you have X, you know, you have whatever you have. That's pretty simple. That's math, turning it into income is not simple because turning it into an income is figuring out not just what the gross is going to be, but what the net's going to be.
00:46:05 How's it going to be taxed in the future? What's the capital gains rate likely to be in 20 years? I don't know what going to be in 20 days, quite candidly, but what's the ordinary income tax going to be. You know, this whole idea that an entire generation said, put all the money you can into tax defend to tax deductible,
00:46:23 401ks, and IRAs, and so forth because you're in a higher tax bracket now than you will be when you retire. Number one that is planning to fail. That is saying, I'm going to have less money then. So therefore I'm taking a pay cut. Oh, so there's a really pessimistic view, but it's, but it's So saying, Oh,
00:46:39 I'm sure this, the multi-trillion dollar stimulus packages are not going to cause higher taxation down the road. All things being equal, that's oblivious. So it's important to have tax diversification. It's important to have income options. And there are three primary income strategies we talk about in the book. And that is a total return strategy and asset segregation strategy and an annuitization strategy.
00:47:02 And they're very different. And they apply at different stages of your lives based on what your nest egg looks like and what you need your withdrawal rate to be. If you can live on 1% of the assets you've built, you can live to be 300 and you'll never run out of money. On the other hand, if you need 8% of what you have,
00:47:20 you've got a 15 to 20 year runway after which you're broke and there's everything in between. So how do you structure that and how do you do it? And then you asked to unpack some of the decisions. You know, I, I, we break it down into, into half a dozen primary decisions that have to be made either prior to or at,
00:47:38 or right after retirement. One of them is any debt restructuring. If you have a traditional mortgage debt that you're going to maintain into retirement and you need to refinance it, you must refinance while you're still working. Because once you're not banks, aren't gonna lend you the money, even if it lowers your payment. So you, you have to take advantage of the fact that your tax returns still look like you have plenty of income.
00:48:01 If you're going to do anything with debt, long-term care. If you're going to do anything related to insurance, you got to do it while you're young enough and healthy enough and able to afford to do it. So that has to happen before you retire, retiring. A lot of times, that's Medicare elections figuring out health insurance. If you retire early health insurance is now one of the biggest problems people face if they want to retire when they're 61.
00:48:24 So, so health insurance is an issue. Medicare at 65 is an issue, pension elections. Am I taking a joint and spousal pension? Or am I taking a single life pension? And how does that impact my, my widow or widower and so forth. So all of that, and that's that those are one time, a lot. You're going to make it.
00:48:40 And that's that. And then you have your social security claim. Do I claim early? Am I going back to work? Do I claim at full retirement? Do I claim at 70 so that I take advantage of, of the higher payment, but then I need to live past a certain age to break. Like, and that's the, how long you going to live?
00:48:59 And I would rather bet on myself than against myself, unless I have knowledge that questions, my mortality, right? So if we have a client who's, who's truly not healthy. We might make a different decision than if we have a client who's who's 68 years old and playing tennis three days a week. And the last, Especially when you find out that their parents and their grandparents,
00:49:20 all their nineties, that that is predictive, but certainly no guarantee of any, not a guarantee, but it does make you bet a little bit more on them. Yeah. There's a lot of people who don't expect to live as long as they do. In fact, you know, one of the things we tell folks in retirement is that number one,
00:49:39 you're likely to live a lot longer than you think. And number two, life is going to be a lot more expensive than you expect. And some of that's just Scott, some of that's just obsolescence. Think about people who retired 25 years ago now have internet service providers. They didn't budget for that because it didn't exist. You know? And, and that's a simple example,
00:50:01 but the reality is with planned obsolescence and with technology improvements and with other things, we might have bills every month, 10 years from now, for stuff that hasn't been invented yet, that we haven't even thought of. And some of it might be kind of required. I mean, 20 years ago, you might've thought I can live without email and without the internet,
00:50:18 now you can't even open your bank statement or pay bills without it. So you better get it. So it's no longer optional. It's like Back in the back in the days, internet was an option. It's part of the kind of four walls. Everybody has to have it kind of thing. Yep. Traded because people don't need a home phone anymore.
00:50:34 So you're shifting. And so the sixth and final decision to make is to do some insurance reviews at that point, because there may be insurances in place you don't need anymore. So if you're retiring, you probably don't need to keep disability insurance. For example, you may not need to keep, if you've built your nest egg and you've made your pension elections,
00:50:52 you may not need to keep some of the life insurance you have anymore. It may not be necessary if it's permanent great. But if it's term, you may not need to pay for it, your car insurance, things like that. Some of them get less expensive when you're retired, because you're not commuting. So you want to check on some of these little mundane things,
00:51:07 but they can, they can really add up. And it's, it's not just saying, Oh, I'm going to cancel Netflix to save myself 16 bucks. Some of them count, add up in a really profound way. And that's a good time to review it, sort of take inventory and figure out what is my strategy going to be for income and what are the decisions I need to make.
00:51:25 And when do I need to make them and try to leave everyone. When, when, when you do leave this earth, try to leave your T's crossed and your I's dotted to the extent you can to make it as easy as possible for the people you love to handle the stuff, because there's a lot of it it's a lot to do. And it's under duress.
00:51:47 Yeah Know, and, and again, it's usually being made at a time when there's other stuff going on too. There's never a good time for this, You know, to suddenly have to drop what you're doing and plan a funeral is not what anybody wants to do next Wednesday, but that's how life works. And so, and, and that's not to say you want to be morbid and morose and be thinking about that all day long.
00:52:11 No, just know that your ducks are in a row and then just leave them be Well and be prepared correctly. Again, it lowers, it lowers stress. It makes life easier on everybody. It's, you know, acknowledging that we're all here for a limited period of time, which as we get older, feels like a shorter, shorter period of time than ever,
00:52:31 you know, a hundred years sounded like forever when we were seven. And now it feels like, well kind of we're at the we're at the midway point or past. So it's, it's, it's important to, to, to leave your affairs in order. And it's important to leave behind the things that are important. And so we spend a bunch of time in the book.
00:52:48 I spend some time talking about legacy and about and about telling stories and sharing visions and sharing values and sharing histories. Like where do you come from? Because we lose it. You know, I, I never met my great-grandparents, but I've heard lots of stories about them. The fact is though, my kid has not. She's hearing stories about my grandparents,
00:53:11 but not my great-grandparents. It's just, it's gone too far. The generations have sort of stopped. And so, you know, my father-in-law passed when my daughter was about four years old. She doesn't remember him. And when he died, one of the things that I was trying to do was come up with lots of pictures, not only for the,
00:53:27 for the funeral, but Justin posterity. And he always had the camera, got he wasn't in very many pictures. And so we learned some really hard lessons. And, and so I've gone to the, to the extent of hiring a media company to do legacy videos for each of my parents. I said, mom and dad, I'm giving you the most selfish gift I will ever give anyone because this is a gift for you to tell your story.
00:53:53 But it's a gift for me to be able to hear it and relive it and share it with my kids and with my grandkids who, by all accounts, you're unlikely to ever meet. I want you to, I want that history. I want them to be able to see what my parents were like, what their grandparents or great parents, even if they're not in the room,
00:54:09 I can still hear my grandfather's voice in my head, but what I wouldn't give to have a video of him telling his story. And it's just, things are so much more important than money, right? Financial planning is, is, it is so much more than just alphas and betas and rates of return and interest rates that stuff's important. You got to do it,
00:54:32 but those are table stakes. Like how do you really make a difference? And as an advisor, how do I, and how does our team really make a difference for the families we represent? And it's not transactional, it's all relational, all of it. Well, and, and, you know, I, again, having seen lots of different clients and numbers and taught,
00:54:58 you know, had these conversations over the years, the, the point that I make is the truth is the numbers are there to be a lens. And to tell you stories and to help you, you know, check alignment and these sorts of things, the important stuff is, you know, what are your values? What are your priorities? What's really,
00:55:16 what's your why behind why you're doing this? What legacy are you leaving behind? You know, what impact are you making on the world? A lot of different ways. You can phrase it and talk about it and lens it. But it's, it's really, that's the important stuff. The numbers is just the tool We're in complete alignment. You're, you're absolutely right.
00:55:36 And you know, there are a lot of financial professionals who lose sight of that, right? And there frankly are a lot of families and individuals and clients who lose sight of that too. I'd rather talk about, did we do five and a half percent or five and three quarters percent this quarter? And you want so badly to say it doesn't matter.
00:55:55 It matters, but it only matters so much. Right. Did you, did you have avoid debt? Did you stay healthy? Did you make good decisions? Are you still on track for your big goals are, And that's all that. And that's all that matters. The rest of it, how we got there, it's a long and windy road,
00:56:12 you know, that, you know, sir, Paul told us that it's a long and winding road. You're not going to it. This is not linear. And it's, it's certainly not. It's certainly not a straight line right now. Life is never a straight line. And anyone who doubts that, remember we're recording this in 2020. So yeah.
00:56:35 Yes, we will never forget this year. That's for sure. It will be a year to remember. So you can check out Eric over on Twitter, he's brought men planning or find him on his firstname.lastname@example.org. You can learn more about his podcast. He does have a great email@example.com. He's on LinkedIn, as he brought men. Of course I'll have links to all of this in the show notes,
00:57:00 as well as links over to the book as well. It's a great, a good walkthrough of all of the fundamentals that we've talked through today and kind of helps you unpack them. He goes into a lot more detail in the book than we have time for today. Eric, is there anything else you'd love to share with the listener today? The only thing I'll suggest is that financial planning resources are available and some of them are free.
00:57:24 And one of the ones that we put out, I put out an ebook and the landing site is low tax book.com. And if you go to low tax book.com, you can download a white paper. And it's about the four places where most Americans can put money where it's never taxed again. And we started to touch on it during our call today. And some of it is his Roth IRAs,
00:57:45 and some of that is health savings accounts and so forth. But it's, it's a way to, in a very simple read in a very short read, it's a way to figure out how to create some tax diversification for yourself and how to grow some wealth that way. And of course, don't retire. Graduate is on Amazon. The book is, is out.
00:58:04 The workbook is coming. The workbook is a 21 exercises as a result of the book that are all the extra credit assignments with worksheets. And essentially you'll be building your own financial plan in a very inexpensive way. Not everybody can afford a wealth management. And then of course, we work with families all over the country and would be honored to, to chat with your listeners as well.
00:58:26 Awesome. Thank you so much, Eric. I really loved having you a lot of great content today. Appreciate you being here. Oh, it was a lot of fun and I wish you continued success and a happy new year.
00:58:55 but act on what you've heard and find a way to live your calling. If you enjoy this episode, please, please do us a favor. Go over to inspired stewardship.com/itunes rate. All one word iTunes rate. It'll take you through how to leave a rating and review and how to make you're subscribed to the podcast so that you can get every episode as it comes out in your feed until next time,
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You've got to be more than that. There have to be things that matter to you. I consider retirement a graduation from one stage of life to another. - Eric Brotman
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