Ep #17: Why It's Important To Have A Retirement Transition Plan

Benjamin Haas |
"It is absolutely common for people to have a sense of anxiety going into retirement because they say I don't know what I'm going to do with myself. So helping them identify what were the parts of the jobs that you really found rewarding and let's find a way to have that be a part of your life. That's something we want to help people do too. We can connect people with each other. Find a mentor, have somebody that's gone through the process, be able to help you get through some of those tough conversations and anxious moments". ~Ben Haas

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Full Transcript:

Benjamin Haas  00:24

Hey Adam, how are we doing today?

Adam Werner  00:27

Just fantastic. How are you?

Benjamin Haas  00:28

Excellent. Love to hear it. I'm good. I'm ready for this. I love this topic, it's probably the most, well, I shouldn't say that. I was going to say the most rewarding part of our work. It's definitely one of them. Let's not leave people in suspense. I think we are probably most frequently and correct me if you think I'm wrong, but we're probably most frequently found around retirement. When people start to feel the weight of that kind of decision and we often say there's a lot of moving parts to that. I think one of the hardest things for us to try to convince people of is that it doesn't have to feel like you're just flipping a switch so I'd like to just talk about retirement today as a transition period and how we can do really meaningful work for people, not just with some of the financial numbers, but in helping them actually psychologically get to a good spot with what retirement can mean. Again, within the framework of this is a transition period in your life, it's not a circle date on a calendar.

Adam Werner  01:37

I think that maybe part of that misconception or just part of that, circle the date on the calendar is just, that's the way it used to be. You worked at the same company for 35 years, 40 years, whatever that is, and then you retired. You got your pension, you collected Social Security, and you just live the rest of your life. I think just the cultural shifts or just the shifts in our world, in our country, it doesn't have to be that way. We certainly see it, not everyone works at the same job for 50 plus years. There are transitions throughout their working life so getting to retirement does not have to be that. Alright, here's the spot I'm going to hit it and now I got retirement ahead of me, now what? It really can be and we certainly see it more with our clients more and more now. It really is that transition into retirement, whether it's working part-time, consulting, whatever that is, there can be a temporary plan essentially, to get to what they want to get to.

Benjamin Haas  02:44

Yes, I guess that's what I want to talk about today. That temporary plan to me is, I don't know, a sweet spot of two to four years to retirement, or maybe let's stay in COVID conversation here. Maybe working from home just doesn't work for you or maybe you're in a job and health has changed. You physically can't do your work anymore and now there's like panic that if I can't work, am I going to be okay? I think I want to talk about today, what are some of those checkboxes that we would want to go through with people to say, you're going to be okay and by the way, here are the things that you don't have to have an answer on as it's okay not to know. We're going to try to give confidence. I'll start first if that's okay.

Adam Werner  03:29


Benjamin Haas  03:31

I think you said it, the ability to work part time or to engage in meaningful work outside of your, what has been maybe your career or everything else that you've had going on, is absolutely something we're seeing more of. Working part-time consulting, I think being able to pair that up with some sort of other decision around income, whether that's Social Security or what do you have in savings? I would say, let's tfull-time of how you're going to recreate a paycheck and if it's not the full time work, let's figure out those gaps so that you can fill them or know how you would be able to fill them through some sort of other earned income.

Adam Werner  04:10

Yeah and maybe again, we certainly see it, it could be just to throw out an example, let's say if the target for retirement was 65 but they had that in their mind of that 65 is just the date because I know I have to make it to Medicare. Then I can start collecting Social Security and it's just that date, because that's a round number, essentially in life, but they wouldn't retire sooner if they could. Maybe it's even just giving that context or that perspective of, you could retire a year or two or whatever, earlier. But then here's what the tradeoffs would be here. Here's another way or here’s a few variables that you can plug into this, that can support potentially an early retirement and it's just we don't view it that way.

Benjamin Haas  04:52

Right and that's where I think it's really important for us to articulate this is not an independent decision. That's one of the big checkboxes, let's figure out how you're going to cover healthcare, especially if you're not 65. But if you have a spouse and you're of different ages, and one's going to maybe transition into retirement before the other, can we easily solve this problem by just using somebody else's benefits? Does your employer have its own retiree benefit plan? How would you bridge the gap to 65? If you want to work part time and you can't get health care, then let's stack on top of that, what is that expected expense? Part of this transition period is figuring out the answers to the things that may be daunting to you but if we can help you do that research and try to put this puzzle together, maybe it gives you more confidence and more confidence to make that move sooner.

Adam Werner  05:44

I think we view retirement, there are many variables or many different options to solve that, or to at least give that confidence moving forward that they're going to be okay. I think that's ultimately the biggest risk, or I think the biggest hurdle to making that decision on retirement is, am I going to be okay, are my assets going to support me for the rest of my life? I don't know how long that's going to be. Therefore, if I just continue to work, I'm not going to hurt my situation from that aspect.

Benjamin Haas  06:22

Maybe we should use those words. Retirement in itself kind of feels like something permanent. We, I guess in certain contexts, we want to refer to it as making work optional. Having some financial freedom to feel like, Alright, I don't need to go and do this job anymore. But how many I mean, I really do want you to think about how many people that we have led through the process of getting to retirement that six months later, or in our next quarterly meeting, we're like, hey, by the way, I picked up this consulting gig, I really love it. Sitting still is not something I think that people, at least in our experience, aspire to and figuring out what comes next, or how they're going to meaningfully fill their day, what am I going to do all day, it's okay to let that breathe and figure out how that's going to happen. If some of this financial stuff that we can take care of on the front end with you gets checked off the list and you can have some confidence around it.

Adam Werner  07:18

I think that's the key point you made right there of making sure that they are okay from a financial standpoint because, as you said, we certainly have clients that shared with us after they retired, that they've picked up the consulting job or part time jobs to keep themselves busy. The thing that they actually like, it's almost like a hobby but they're getting paid along the way. We also see the flip side of that, that is they're volunteering within their community. There may not be the monetary reward but it fills a lot of that sense of community or that sense of purpose that they may lose when they leave their career or they leave their job. So even just filling that portion of it is important.

Benjamin Haas  08:00

Maybe that's not as part of our job description, what we're supposed to be doing for people but we've gotten a lot of people to this stage. We've seen what works for certain people and not and that's not to say that one size fits all, but it is absolutely common for people to have a sense, I would say of anxiety going into retirement because they say I don't know what I'm going to do with myself. So helping them identify what were the parts of the jobs that you really found rewarding and let's find a way to have that be a part of your life. That's something we want to help people do too. We can connect people with each other. Even from that standpoint, find a mentor, have somebody that's gone through the process, be able to help you get through some of those tough conversations and anxious moments.

Adam Werner  09:26

We're viewing retirement as that transitionary period but then also even just trying to figure out what you may want out of retirement. You don't have to have that answer in a day or in a weekend that will transition. I think we were certainly viewing this in the context of retirement transition. You don't have to have the answer on day one. You have said before, it's very easy for people to know what they're going to do on day 10 and maybe that's just, you know, wake up, have a cup of coffee and do nothing but day 1000 in retirement? Who knows? I don't know what's going to change between now and then and that's okay. I guess the point is that we want to get across is that you don't have to have the answer. Just like we're viewing this retirement as a potential transition. Figuring out what you want out of retirement may go through several stages of evolution until you figure out what actually fits for you and your situation.

Benjamin Haas  10:49

I think we see the transition into retirement being most successful when people do have a year or two before they retire, we like the idea of test driving that retirement. This is the time to really log all your expenses and really be sure that we understand, what are my needs? What do I want? What am I setting aside for uncertainty? Then if you've got some legacy goals, let's build that in. I think it's really important to use that time to figure out how we're recreating those paychecks and is it going to work before you flip the switch? That's the data driven confidence that I think we can give.

Adam Werner  11:25

That's the part of it that it's the innate feeling of, am I going to be okay and not really knowing the answer to that in retirement. You just saying, test driving it beforehand can give you a pretty good simulation. Now, maybe it's clearly not the day to day if you're still going to work, it's hard to simulate retirement but from an expense and income standpoint, test driving that to know, when I retire, if it is a point in time or if it is a transition, to know that I can cover these expenses and not have to worry about that. We can give all the data in the world that says hey, your plan is showing 100% probability of success, you don't have to worry about it, you can retire yesterday and we've seen that that still doesn't necessarily translate to the feeling of, Oh, I can go do this from the client perspective. Data does not always equal feelings so being able to get a feel for that. I think you said it very well, being able to test drive that process can help add to the confidence of going through that transition into that next phase.

Benjamin Haas  12:41

So start now and you know, even there, if there is some sort of gap that would need to be filled, we want to know that now because while you do have maybe less of a runway two to four years out, then maybe it's a conversation of well, where are we saving? How are we doing that differently? We need to start transitioning a portfolio to be ready for income a couple years out, too. I think there's a good checklist here of let's figure out what your holdups would be, let's figure out if part time work or consulting is something that you'd like to build in with a buffer. Let's look at the cash reserves, let's understand expenses. Let's figure out the health care part and if we can check a lot of those boxes, well then let's mentally and emotionally start to prepare ourselves to because I think that's where somebody can go from having, as you said, a great written financial plan to I still don't know if I'm comfortable with it. We need to work on that so I really do like this idea of people can transition into retirement, it doesn't need to be a flip of a switch.

Adam Werner  13:44

It really is all of those variables that we talked about, the different scenarios that can get paired together, going through those helping prioritize because certain variables are going to be less important or more important depending on someone's perspective. Prioritizing those, seeing what fits together to build that plan that that feels appropriate, or at least feels like a fit and let's test drive it.

Benjamin Haas  14:11

Well said. Thank you for the insights once again here, sir. Have a great rest of your day and I'll see you on this podcast again soon.

Adam Werner  14:20

You got it. Thank you.

Benjamin Haas  14:22

Thanks, Adam.

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