Ep #168 - Retirement Sweet Spot: The Intersection of Time, Money, and Health

Ep 168 

[00:00:00] Ben Haas: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now. 

[00:00:27] Adam Werner: So at the risk of having another podcast focused on what feels like a lot of our podcasts recently have been focused on, Ben, right? The idea that the clients that we work with, you know, having spent decades saving and investing, and then retirement arrives, and it's hard to flip that switch from saver to spender, which we've done a podcast specifically on that. 

You know, that, that uncomfortable feeling that happens for a lot of people. 

That is, "This got me here. These habits got me to this point," and it's, it's hard to psychologically now move past those habits and turn into, "Hey, now I'm gonna, now I'm gonna spend down these assets." But you found an infographic recently that pretty much distills down a lot of what we're hearing and feeling from clients. 

That is, there's this window in life where money, health, and the availability of time, the freedom of time, overlap in people's lives. And we shouldn't assume that window is going to last forever. So it kind of fits into our theme of, you know, the fix, fine, flourish kind of philosophy that we've embraced, meaning we want clients to do what they want, when they want, if they want to do it, and leveraging their dollars and their hard work to accomplish that. 

[00:01:48] Ben Haas: Yeah, I think, you know, it really struck me because we end up in these conversations with clients and we're doing our best to understand, like, what they value. Because oftentimes the decision to spend in retirement is a difficult one, right? And for many different reasons. Because we are making assumptions on where life is going to take us. 

We are trying to do our best as financial planners to, like, have some concrete math behind it, but sometimes it just comes back to somebody's emotions and their interaction with money. So yeah, I really loved... The graphic came from a book, really. The concept is Die With Zero by Bill Perkins. And people that have done planning with us, maybe they've heard us talk about that, because even our planning tool will often say, you know, this tool is judging success by having $1 left on the day that you pass away, so, right? 

It's not to save so much all your life, delay gratification to the point where you pass away and you have all this money. Maybe that's your objective, and that would be a different conversation. But this chart just did such a good job of talking about where these things intersect. 

Meaning, you know, when we're young, I'm gonna say young, 20s, 30s, younger than we are in at this point, you know, your health is high, but you don't have the savings, you don't have money. You know, during your working years, money's starting to accumulate, but my gosh, you got three kids too. Like, I have zero free time, you know, to enjoy these things. 

So you get to that, you know, quote unquote, "retirement age" where we hope for people they've got their health, they've got money saved, and now they have that free time. And this is supposed to then be, I think, the sweet spot for people to potentially really enjoy things. And I know we've said this in different podcasts too, because those still are maybe the go-go years before the slow-go years and no-go years of your health is probably going to diminish, you know, whether that's in your late 70s, early 80s. 

I hope we all live, you know, long and healthy lives. But, you know, at that point, to have the money and not be able to enjoy it in the ways that you might have means you've missed that window. So that's a long way of trying to describe this graphic of, I think, just a really awesome illustrative piece on this is the time to really be talking about how money's gonna serve you and the things that are most important in your life. 

And that may mean, by the way, spending it. 

[00:04:07] Adam Werner: Yeah. And what's been maybe more eye-opening for me, and maybe I'll lump you into this with- in, with this too the amount of money that people have saved doesn't necessarily change this problem, 

right? We're, we, we have... And the thought here being it's this saver's dilemma, right? 

Those habits of just being disciplined and setting aside for the future doesn't necessarily align with, "Okay, well, now I'm here. It is now, quote unquote, 'The future.' In theory, I should be spending this money." But again that psychological component doesn't just change overnight. So even with people, in our opinion, that have more than enough to do what they want when they would want to do it, still struggle to spend some of these dollars, right? 

The idea of just taking a, a bigger trip, you know, spending $20,000 on a 

trip, we had this conversation with a client recently. That for somebody with many millions of dollars, that shouldn't be a difficult decision in our opinion, right? Assuming all other planning work is done and we've kind of built some contingencies in, right? 

There's big caveats here. But i- it's just been interesting for us and for me to kind of see that the balance that somebody holds in all of their savings and investments still may not allow them to spend $20,000 on what could be a huge life experience for them and their family. It still is a big hurdle to kind of get over. So it's part of our job then becomes asking really pointed questions and almost sounding like a toddler at times of, "But why?" 

Right? It's, "You've saved this money, but why?" And we get an answer, and then it's, "But what is it about that leads to whatever the thing is," right? We were just trying to dig dig, dig and hopefully get to some sort of root that is, that we can help navigate to help change some behaviors and some approaches to this, like, hoarding mentality. 

[00:06:14] Ben Haas: Yeah, 'cause it's all their experience with money. There's a reason why they're having a hard time disconnecting from it, and it's not that, you know, th-this concept of showing this graph I know that it-- I would know that we would present it in the right way here, Adam, where we're not gonna scare somebody, like, into spending. 

But it-- I do believe that it, part of the illustration is to just do that, to show that there is a cost to waiting, that, you know, we've worked with clients, like you said so well, that have spent decades preparing for retirement, but we also have clients that got into retirement and passed away three years later, right? 

And let's not just, let's not use that really horrible example, but health has diminished quicker than, you know, maybe they were hoping for. So you can't assume, you know, when we're running these illustrations to age 95, that doesn't mean they're gonna be healthy for all 95 years. So if part of what they've shared with us is, "We wanna travel, you know, we like to be outdoors. 

I wanna play with my grandchildren. I wanna enjoy an active retirement," then yeah, it-- some of this is let's not look at this retirement plan as linear, that we may need to, especially right now, the market's actually been pretty good for the last couple years. Th- that we need to have these conversations on striking while the iron's hot and looking at the sweet spot if they have their health, I want us to be able to confidently say to them, "Yes, do these things while you have all three." It doesn't mean you're spending recklessly, but it does mean recognizing that there is a cost to waiting, too. 

[00:07:43] Adam Werner: Yeah. And something that I think we've started doing more frequently is test driving some of this spending mentality, right? 'Cause the idea of let's say somebody... We believe somebody could take an extra $50,000 from their savings and investments and spend it in any given year on what they would wanna do. 

The odds of us getting somebody to go from, "Well, we're not spending anything extra," to, "Well, here's $50,000. You go spend it," that's probably not a realistic exercise for somebody to go to. That money's probably just gonna sit in a bank account and not accomplishing what we would want to see them accomplish with those dollars. 

So sometimes it is just setting up the logistics on, let's just test this with here's 5,000 extra, here's 10,000 extra. Just start to work that muscle that again, we're just, we're hoping to get people just more comfortable with that approach earlier in retirement if it's possible. 

[00:08:39] Ben Haas: I do think our responsibility is to find the way that they can relate to them being okay if they spend these dollars, right? Because a lot-- I think a lot of the I don't want to spend this now," or, "I don't want to take this now," is still really this unknown for where life is going to take them, right? 

It's very easily, "But what if I need that money later?" So how can we model things, like you said, how can we shift money around into different buckets and just say, "All right, we're gonna put this here, permission to spend, and, you know, see where it's at a year from now." You know, maybe we're gonna judge success by how little is there. 

You know, there's different things that I think we're trying, like we're trying to learn as planners how we can help people with this. But I know that the answer is not to just be cautious all the time and let's just not spend it, and I may need it later. You know, again, we're not trying to give them permission to just spend recklessly, but we do want to help make sure that they're not passing on opportunities to do things they would feel really good about while they can do it. 

[00:09:38] Adam Werner: Yeah, because like you said if often for these types of clients it is that but what if I need it later? And of course, the safe answer to that is always going to be, well, then just continue to save it, right? Then just sa-save it for later, and then you know in the client's mind, if it's there later and I need it, great. 

I'd rather that than the alternative being, well, yeah I maybe took some extra t-trips, I spent a little bit extra earlier in retirement, and now here I am later in life and I have a long-term care event, and maybe I'd want some of those dollars back. 

So, it is critical to go through the planning process on the front end to build some of those contingencies in, right? 

Model maybe some additional spending earlier in retirement. Again, just to stress test that plan, right? Those projections, just to hopefully... Number one, it's kind of fact-checking our own thought process, but it's also again, kind of stress testing their own longer-term plan that it hopefully gives them some confidence to ease up on some of that maybe anxiousness or the, the stress around spending. 

If we can poke a whole bunch of holes in the plan that would say, "Yeah, but if you spent this amount of money, you know, before you were 70 and it still looks good in the long term, even with some negative, you know, scenarios that we can throw at it," again, that's where we want to be cautiously optimistic for people. 

Again, you're-- like you said, we don't wanna just drive someone down a path that now feels like it's reckless spending. That, 'cause that is clearly not our MO. But within reason, we want to give enough perspective and context and some concrete, you know, projections to hopefully give some peace of mind or some confidence to start. 

Again, going back to my example of let's just start somewhere to test drive it. We don't need to go from zero to 100. Let's just start moving in that direction. 

[00:11:34] Ben Haas: Yeah, and I'm gonna give other examples of that because while you were speaking, I was trying to take a quick note. Dipping your toe in the water with those things can come from, I think, the financial planner perspective too. So maybe I'm saying this to other planners out there, and maybe there's zero planners that watch our podcast. 

You know, this enhanced senior deduction right now is a little bit of extra money that people that have IRAs may be able to take out without feeling like we're, you know, doing something that wouldn't be responsible from a tax perspective. The, the market has been good, taking gains at the end of the year and saying, "Hey, Mr. 

and Mrs. Client, here's your bonus check for the year." You know, maybe when they were in their earning years, that's kind of how things happened at work. Like, "Hey, when a bonus comes, we get to spend a little bit more." I just think there are, to your point, there are the little ways to test drive this, but it's all still coming back to does that give the people that we are trying to serve permission to spend if that's difficult for them at a phase of their life that, again, we do not want that door to close when it comes to health? 

[00:12:36] Adam Werner: Yeah. 

[00:12:38] Ben Haas: And their ability to do things. 

[00:12:40] Adam Werner: Yeah, so I think it, it is that idea of like giving-- they need to give themselves permission to use some of these dollars, right? For my current self and not my future self, because that is such a-- it's an entirely different challenge for these people you know, that we're talking about in this scenario, these, these clients that just they struggle to, to flip that switch. And again, our... Maybe I'm doubling down on kind of what we now maybe have both said twice. It's kind of our job to help balance that 

whole approach with, again, taking a prudent approach to, yeah, sp-spending on the here and now versus making sure there's still some contingencies and some buffers built in and the what if I need it later is still feasible. But yeah it's hopefully giving people a little bit more confidence to do a little bit more. And I know we said it earlier, but there-- this has stuck with us, and I love that you and I both will take certain things that clients say, and now it just becomes like part of our rhetoric. That idea of a client that recently told us, "It's not just what I want to do when I want to do it, but it's if I also want to do it." 

So hopefully leading people more towards that direction, give-giving themselves permission to enjoy some of these funds sooner than later. 

[00:14:02] Ben Haas: Yeah. The goal is not to die with the most amount of money. I think that even for the clients that we speak with that say, "Hey, you know, somebody paid it forward to me, I really want to do the same," or, you know, "Charities mean a lot to me, I don't want to, you know, spend it all on myself." But gosh, I just, I don't want the other end of it either, where again, we're sadly seeing clients pass away. 

We're seeing clients have health problems earlier than anybody would wish for them. I've just, I've really like opened my eyes to talking about this sweet spot, so I hope it was helpful today. 

[00:14:33] Adam Werner: Yeah. 

[00:14:35] Ben Haas: I guess that's it. 

[00:14:37] Adam Werner: Hard cut. 

[00:14:39] Ben Haas: As always, thanks pal. 

[00:14:41] Adam Werner: Thank you. 

[00:14:42] Ben Haas: Bye  

[00:14:49] Ben Haas: Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.  

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