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Retirement planning requires some flexibility
Financial planner Benjamin Brandt of the Retirement Starts Today podcast joins Doug to discuss the importance of having a written financial plan and flexibility. These two aspects aren’t as contradictory as they seem, because both put the individual’s financial goals first.
Benjamin shares the values he emphasizes with his financial planning clients. Should you emphasize these points in your own personal financial plan?
Follow Benjamin on his podcast on iTunes and at www.retirementstartstodayradio.com. Benjamin has even created a special page for The Goldstein on Gelt Show listeners at www.retirementstartstodayradio.com/gelt.Read the Transcript
Interview with Benjamin Brandt
Army vet and financial planner Benjamin Brandt shares his insights on investment and retirement. What’s his take on mortgages when you’re retired?
Douglas Goldstein: I’m very excited to have on, The Goldstein on Gelt Show, Benjamin Brandt who is a Certified Financial Planner.
He’s also in charge of his own financial planning company. He’s based in North Dakota. Benjamin, how you doing today?
Benjamin Brandt: I’m doing fantastic. Thanks for having me.
Douglas Goldstein: One of the things that we often talk about is the importance of planning and thinking ahead. Guys like you and I espouse that whole philosophy.
At the end of the day, there’s a certain amount of work that gets involved in that, and that work is writing it down.
Unfortunately, my experience has been that a lot of people don’t want to write down and plan for whatever reason. What’s your experience there?
Why Don’t People Like to Plan and Think Ahead?
Benjamin Brandt: It might just be human nature, or maybe it’s a part of procrastinating.
Most people, when it comes to retirement planning, are flying by the seat of their pants. They don’t have a written financial plan, thus they have no course of action when the market turns sour, which of course it will eventually.
They don’t know why they’re in the market, or how much of their portfolio should be in the market, or how often they should rebalance or anything like that.
They’re just completely flying blind. That’s something that I think should be avoided at all costs.
Douglas Goldstein: What are the main components that you like to put into a plan for people?
Benjamin Brandt: With our firm, we focus specifically on retirement income investing. We want to look at: What are your goals? What is the monthly cost to those goals? How can we set up a portfolio that can provide that income to you on a sustainable basis for as long as you plan on living?
A lot of variables and a lot of unknowns, but after our financial planning appointment, they will have answers to those specific questions such as, what should I be invested in? Why? For how long and for how much?
Like I said, when the eventual downturn does come, they’re not the weak cans that get easily shook out of their 401(k) positions because they don’t have any idea why they should be invested.
When the market is doing well, I think people stay invested because everyone else is doing it. When the market turns south, just because your neighbor is invested, this isn’t enough of a reason to keep you in your positions. Terrible things usually happen after that.
Douglas Goldstein: What about the people who say, “I’m just a long-term investor. I’ve got income, maybe I’ve got Social Security or a pension but I’m trying to grow my portfolio.” Isn’t the best way to make money, over the long term, to invest in the stock market? Who needs those plans?
Accumulating Wealth Vs. Living Off Your Wealth
Benjamin Brandt: That might work for a certain percentage of people. I think that when you are accumulating your wealth, you should look at it differently than when you are living off your wealth.
You might be shooting for an 8% or a 10% return while you’re accumulating, but you might not need an 8% or a 10% return while you’re living off of your assets.
If your number one goal is sustainable income, you should invest in a different way than if your number one goal is maximum net worth at the end of my life.
You might be taking way more risk than your portfolio needs for you to take.
We would call that “marginal utility,” I guess, in the economics world. I think a lot of people are just investing for maximum potential net worth, and if we use military terms, “accuracy by volume.”
I don’t think that’s appropriate for most people.
Douglas Goldstein: I like that term. I guess I should have mentioned when I brought you on that you are an army vet. You were in the Army National Guard, right, and spent over a year in Iraq?
Benjamin Brandt: Yes. We were the 141st Combat Engineers attached to the First Infantry Division. We specialized in route clearance for the military.
Douglas Goldstein: Now you specialize in route clearance for clients who need to get rid of the obstacles towards retirement?
Benjamin Brandt: That’s right. A totally different style of minesweeping, but it’s very similar.
Douglas Goldstein: A lot of connections. I like finding these connections. A little while back, I had the honor of speaking to a world chess champion on this show, on The Goldstein on Gelt Show, a woman named Susan Polgar.
As a result of the discussion, we ended up researching the parallels between chess strategies, and tactics and investing.
We wrote a book called Rich As A King, about how the strategies of a grandmaster could be applied to investing. My guess is you see that kind of thing on a regular basis.
Benjamin Brandt: I’m going to check it out. Can I find that on Amazon?
Douglas Goldstein: You can find that on Amazon. In fact, everyone can find it, and you can check it out at richasaking.com. We’ve got a lot of supplemental information there as well.
Benjamin Brandt: People often ask me, “How much carryover is there from your military service to financial planning?”
I think the main carryover is an opposite. In the military, they teach you to rely on your training and to act without thinking. I think in financial planning, most of the time we should think without acting.
Douglas Goldstein: Thinking is probably something that people, for some reason, don’t want to do when they’re handling their money.
It ends up being very emotional. In fact, I often joke that even though my title is a financial advisor, I spend a lot more time as a marriage counselor.
Just getting husbands and wives to talk reasonably about their money is a real challenge.
Benjamin Brandt: Absolutely. I agree 100%. I think a lot of times, we like talking about our problems but not necessarily doing something about them.
Like if a client calls and they’re panicked about the market downturn, which happens every so often. Talking people down from a ledge can pay our financial planning fee for a decade if we convince someone not to settle at the bottom. Let’s talk about it, but not necessarily act on it.
Douglas Goldstein: One of the problems that unfortunately happens is a lot of people begin getting to their financial planning a little bit late. They’ll come, not in their 20s and 30s, but in their 40s and 50s.
What are some of the preparations you think people should start making when they start a little bit too late?
What Preparations Should People Make When They Are Late in Financial Planning?
Benjamin Brandt: We always talk about the benefits of starting soon. I’ve never visited with a wealthy person that said, “I wish I would have waited a bit longer to start.” Everyone always says, “I wish I would have started sooner.” Even if they started at 12 with their first job, mowing lawns, they wish they would have started at 10.
The reason for that is because compound interest does all that heavy lifting.
If you start off later in life, a lot of times you have to learn how to do more with less, and not necessarily from a financial planning or a net worth perspective.
You’ll have to learn how to create a financial plan and incorporate things like deferring Social Security, or incorporating part time income, or incorporating a low-cost investment strategy.
Sort of penny-pinching when it comes to financial planning. Actually carrying out the financial plan in a very economically sound way.
People might try to bridge that gap if they started saving late, by taking on more risk than they should be able to, from a risk management standpoint. I wouldn’t advise that; I would pursue low-cost investing.
Try to create a lifestyle for yourself that you don’t want to retire from. That would include part income for most people. That’s going to stretch your portfolio a lot further if you started out later on in life.
Douglas Goldstein: I think that’s good advice. The issue of not taking on added risk comes at a time like this when interest rates are so low.
A lot of retirees or pre-retirees are saying, “If I can only make 1% or 2% on my money, I guess I’ll have to put more money in the stock market because I need to make 4%, or 5%, or 6%, or 10%.”
Then they get an incredibly rude awakening when things don’t work out well for them. They just don’t understand the risk reward.
Benjamin Brandt: Some people are able to take on risk, but you should only take on risk in the appropriate timelines.
If you’re going to retire five years from now and you’ve got 100% of your portfolio in the stock market because you’re trying to “catch up”, you could be setting the table for disaster.
Douglas Goldstein: Let’s think of another way to avoid disaster. One of the mistakes that people make is they go into retirement when they’re still heavy with debt.
I’m not talking about student debt; hopefully they’re done with that, but even things like a mortgage.
What’s your take on a mortgage when you are retired?
Mortgages in Retirement
Benjamin Brandt: I really like to see clients’ debt free when they get to retirement. I wouldn’t necessarily go as far as advocating that you cash out a 401(k) to pay off your mortgage.
That’s one more thing that we can incorporate if we start planning for retirement as soon as we can - to kick out that debt.
It’s the same reason that I advocate for low-cost investing using index funds and ETFs. There’s only so much horsepower a portfolio can kick off on an annual basis and be sustainable.
I’m sure you’ve covered things like the 4% rule and things like that in your broadcast.
If we lower our costs of investments, we can take out more income, all things considered. This exact same concept applies with debt.
If we can reduce our debt obligations on a monthly basis, that’s just more horsepower for the engine. Either we’ll keep that in the portfolio and take advantage of compound interest, or we’ll be able to spend that money in retirement without taking on the additional investing risk as far as increased equity exposure, things like that.
The same reason I like low-cost investing is the same reason I like a debt-free retirement.
Douglas Goldstein: I think it has to do with also reconsidering your expenses.
For example, some people are so used to paying certain insurances or even life insurance that they simply don’t need any more when they’re retired.
They’ve been paying into it for so long that they continue to do it even when it’s well beyond its need.
That just eats into their monthly cash flow. Do you find in general that people think that they need life insurance much longer than they do?
Benjamin Brandt: We’re creatures of habit. You’ve had this life insurance policy since you were 32 years old, and you bought your first house, and you got married and had two kids.
It’s like an old pet. You don’t want to put old Theodore down. Once you become self-insured, you don’t necessarily need these life insurance policies anymore.
There’s no reason to nickel—and-dime yourself to death, if you’ve got a portfolio and you’ve got an emergency fund and you are nearing the end of your working career.
That life insurance policy that you have becomes a different animal. For most people, they just don’t need it anymore.
Douglas Goldstein: I think that’s great advice. Benjamin, before we wrap it up, could you tell people how they can follow you, follow your work, and maybe get this special resource that you set up for us?
Benjamin Brandt: Sure. You can check us out on iTunes or your android device. Our show is Retirement Starts Today Radio. For your listeners, I created a special page on my website retirementstartstodayradio.com/gelt. I have got a thank you there for checking out our podcast, as well as a couple of my favorite blog posts for you to read, and our latest episode as well.
I hired a private investigator to follow me around to prove a point about financial advisor transparency. You can listen to that episode on that page I mentioned.
Douglas Goldstein: That sounds fantastic. Benjamin Brandt, thank so much for your time.
Benjamin Brandt: Appreciate it very much.