You in 2015 vs. Now: Why Future Planning is Difficult

[00:00:00] Adam Werner: 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. 

[00:00:28] Ben Haas: Hey Adam. How are we doing today? 

[00:00:31] Adam Werner: Doing just fine. How about yourself? Good. 

[00:00:33] Ben Haas: Excellent. 

[00:00:34] Adam Werner: Yeah. 

[00:00:34] Ben Haas: Excellent. Excited for our podcast today. It's a good one. I feel like we've been working on it a little bit. There's a lot to unpack here. 

[00:00:41] Adam Werner: Yeah. Yes. There's many different ways that this one can kind of go. 

[00:00:46] Ben Haas: Yeah, and I think it really, let's just jump in it. 

It speaks to, it speaks to relationship, and I'll even say long-term relationship with clients. You know, oftentimes we are kind of tasked with answering big questions. Like, am I gonna have enough money to do what I want to do and not run outta money? And you think about all that goes into answering something like that, not just for us as planners, but like for our clients. 

And the longer we're trying to project out, the harder it gets to feel confident in like, direction and outcomes, and things of that nature. So gosh, let's just unpack it. Like, let's talk about what makes answering that question so hard and clearly we should spend some time talking about how we believe we can help plan, make planning easier. 

[00:01:34] Adam Werner: Yeah. Yeah. Even just something as simple as well go through the thought exercise. Who I was 10 years ago? Right. Theory. The title of the podcast. Yeah. Who I was, you know, maybe in 2015. How does that compare to how I am now? And for a lot of people going through maybe some self-reflection, I think it quickly becomes apparent. 

That's why planning is so darn difficult, is because we're working with so many different assumptions. Personally and otherwise, but there's this illusion, right? In the behavioral finance world, it's either the end of life illusion or the kind of the end of history illusion that is on both sides of the extremes of who I am now is who I will forever be, and the way that I think and feel about certain things is how I will always think and feel about these things. So if that's the case, then planning in theory is very easy. But studies kind of show that people underestimate the amount of change that they may go through. 

And the flip side is also true, where people may expect more evolution than maybe they actually experience in life, which again, just makes it very hard to plan for five years, 10 years, 30 years into the future when we're thinking about retirement. Am I making decisions today that I'm gonna be locked into for the next 25 years? That doesn't necessarily feel great. 

[00:03:01] Ben Haas: It's amazing. I'm really glad you started there 'cause it's not just the change that we know they will go through, but it's, it is the change around them. And I'm glad you brought up assumptions. We're not just talking about change in their life and in the world around it, but the assumptions that we have to make that are these calculations, right? 

People come to us and we were kind of trained, you and I the whole idea of smart goals, like let's, we gotta put numbers to these things. How much time are we working with? What is that end goal? What do we need to do to get there? And while I get it, it's fun to like think about a math equation, having a crystal clear number at the end of it. 

That is just not planning, that's not the way that it goes. And we've, I know we say it like within our own walls, and we probably transparently say it to clients too. We can build whatever plan we want right now. It's already out of date, right? Things are going to change. And when we think about, I'm gonna give one quick example and then I'll turn it back to you. 

At some point there was just this story of un, unfortunately a plane crash, but you've got, let's say, a plane leaving San Francisco and it's destined to, or hopefully destined to land in Washington DC and if they were just one degree we're talking about, oh, one degree turned the wrong direction, they're gonna end up 50, 60, 70 miles off course. 

Right? So I just think that's a great way to maybe start the podcast on we're making all these assumptions and your life with data and the world around us. But the reality is any bit of course change could really take us far off the map, or consequently, like how are we supposed to help, you know, course correction to the right. 

May put us in a much, much better position than we anticipated. 

[00:04:45] Adam Werner: Yeah. And so that's all great points. I just had a conversation with a client a couple days ago that, funny that we were talking about this as a topic of the podcast and just had this conversation. This client recently retired. 

Had been visiting this very remote piece of I'll say land, right? It's forest and lake and just very serene land in Minnesota. 

[00:05:10] Ben Haas: Yeah. 

[00:05:10] Adam Werner: And have been visiting there for the last 30 years. Loved it. Retired, bought a little plot of land. Started to do some of the work, you know, to enjoy this spot of quiet for himself and quickly found out it's not what it was. 

It's not the experience that I had, you know, maybe in the past. 

[00:05:29] Ben Haas: Yeah. 

[00:05:30] Adam Werner: The environment has changed. It just wasn't exactly what he was kind of envisioning, and it was, he was going through the process of trying to determine, well, now what am I gonna do with this property? Am I just. Am I gonna figure out how to make it fit, right? 

Or am I going to abandon this project now that for the longest time it just felt like this is what I'm going to do. And now once you get there, maybe not. And that's where, that's why, you know, planning can become so difficult because it, there can be things that just seem, I can't envision a world where, I'm not doing this thing and let's plan as if I'm gonna continue doing it forever. And then we all know stuff changes. And can happen rapidly. 

[00:06:11] Ben Haas: Where will I live? What will that cost? Like who will I be surrounded by? Where are my children, my grandchildren going to be, how am I going to get from A to B all the way down to what, like, what is my health going to look like? 

What am I gonna be even capable of doing? So, yeah. Yeah. So much goes into this. I'd love to just make a little pivot into like, let's talk about some of those data assumptions. Like let's really prove the point that we are, we're dealing with assumptions and the way to maybe work through this is to make sure we're not just building plans, but we're reviewing them frequently. 

Like, so let's just live there for a second, but then let's just maybe talk about how we approach planning to just try to make long-term planning better. 

[00:06:55] Adam Werner: Yeah. So even just all of the things you just kind of rattled off, where will I live? What kind of car am I gonna drive? Or where am I? Or maybe it's not even a car, right? 

Depending where I'm living. Is public transportation a thing? How am I going to pay? Like what does that cost? My health? That's an unexpected or maybe a variable expense. And I think that leads me to one of the biggest assumptions when it comes to long-term planning is how much am I going to spend? 

Because that dominoes into everything else. So even just some of those variables potentially having very wide ranges of expense and spending need will have that domino effect of, okay, well if my expenses are a hundred thousand, then maybe what I need to have saved and set aside is very different than if I need to spend $200,000. 

Then that whole math equation greatly shifts, and then maybe the timeline to get to said goals can greatly shift. 

[00:07:54] Ben Haas: Right. 'cause we're also making assumptions on what is my savings going to bring back to me? Right?. And we've certainly experienced with many different people. It's not just, Hey, we're seeking this type of return, but we have to find a way to stay invested, right? 

To not set ourselves back when things get super hard and difficult and emotional. And we know that the timing also of those returns, like can change outcomes. The sequence of returns matters, and not that you can control whether the market's up or down in the year that you retire. But there's a lot of planning things we need to do. 

Where if we made a long-term plan 10 years ago that said, I'm gonna work for 15 years, but now hey, life got in the way, I gotta return, I gotta retire sooner. There's a lot of planning that does need to go into making sure that portfolio is ready to produce income a little earlier than later. So yeah lots of different assumptions just on the math side. 

[00:08:49] Adam Werner: Yeah. And well, and to that end, maybe diving deeper it's not just your own kind of personal side of things. Where there some of that you can control. It's what's happening in the world around us, right? Again, use the 10 year look back 2015, how different was the tax code in 2015? How different were expenses and inflation 10 years ago? 

Like all of these things have influence over your situation that are out of your control. So, so sometimes you're you, the royal you in this scenario, right? All of us have to find ways to adapt to these new environments. And these moving assumptions, we often say, you know, planning doesn't happen in a vacuum. 

You pull one lever and now you, in theory, that adjusts 10 different ones. And we want to avoid some of those unintended consequences. So it's not just, well, here's what I can control and here's what I'm gonna worry about. There are often a lot of other variables and assumptions that go into long-term planning that, to your point, we can't control. But then that's where that ongoing review needs to happen so that if course corrections are needed, it's more, I'll go back to maybe our analogy when we talk about making changes to our investment portfolios, it's the dimmer switch. We're making small adjustments rather than we're so far off track now we have to take a huge course correction. 

And usually those require multiple steps and maybe some not so kind trade-offs when you're making big moves that may not feel as comfortable than just making small tweaks over time. 

[00:10:32] Ben Haas: Yeah, no doubt about it. So I think that's gonna speak to, and let's maybe move into what are some of our philosophies and like how can we make sure we're doing everything we can to help people through this process? 

Yeah. I think you hit, I think you hit the nail on the head. When we started our career, I almost looked at financial planning as like a transactional experience, right? Somebody hires us to draft a plan and then, I mean, we've heard it from recent clients that hired us just last year, like, Hey, just build the plan for me and I'm really good with implementation, and then that should carry me for a period of time and that may be true. 

But I do want to recognize that there's problems with that, right? Not only are there going to be changes in little course corrections that we wanna make, but I think over time we also find that like priorities may change. We find that relationship, things change, jobs change. 

There's just more change than we often think, and just like a more recent podcast where big believers in the whole fix fine flourish, right? It's okay to be in a fine stage, but what we really need to find the opportunity then to do is make sure that this plan is still truly aligned to the things that are gonna serve you. 

And that's where I think long-term planning needs to be broken down into these small. Bite-sized pieces. And while I know we probably have clients that roll their eyes when they hear from us, Hey, it's time for us to review this. Yeah, I don't believe we get out of, come out of those meetings and they go, that was a waste of time. 

We're learning more things about them. They're hearing more things from us on things that we need to pay attention to. 

[00:12:07] Adam Werner: Yeah. And some I would say oftentimes. Even if it's just checking that box to make sure nothing needs to change, that is still a positive outcome, right? Be better to review it and say, great, we're still in great shape, rather than the opposite of we're fine. 

We'll talk later. Years go by and now we reassess, or now we finally get together and review and it's, all of these different things have changed and now it does feel like it, there's a lot more heavy lifting to get back on track, then had we just stayed on top of it over time? It's very natural. 

[00:12:41] Ben Haas: I mean, think about our meeting yesterday, like client comes in, had just recently bought a second property. 

Like they're planning ahead for retirement. They take this mortgage, we make the plan to like pay it off. Gosh. As a, this is the same client like experience two weeks ago. Like we made this plan to pay it off. And in both cases they came in and like not a proactive conversation, just, oh you know what? 

We took our cash reserve and we paid it off. Like we just didn't wanna have it. Alright. Totally fine. Right? But there's, yeah. If we didn't have that meeting, we didn't know that, and now we weren't able to talk about, that's great. But now let's course correct over here. Like, now what are we paying attention to make sure we're back filling that? 

Yeah. Great example. 

[00:13:17] Adam Werner: Yeah. It just speaks to, I don't wanna say the danger, but the difficulty when we want people to have goals, right? We need something that we're aiming for. But sometimes the hurdle becomes if it is a hyper-specific goal of, you know, I wanna live in this region and here's what I'm gonna do and here's what I'm gonna spend, we know that people change and we've seen, we've talked to clients that have had very grand kind of retirement plans, and then when they get there, and maybe it's just a matter of time. Yeah. 

Right? And I'm now a different person and I'm different different part of life and health is d whatever those different variables are just, it's not the same. 

And that's something just as simple as where I'm saving, leading up to retirement. Just having, I'll say just having maybe rigid ways of thinking is where I think people can back themselves into a corner and just remove some of that potential future flexibility. You know, I, I believe the whole idea behind saving into a 401k or a 4 0 3 or any pre-tax retirement plan is I'm gonna be in a lower tax bracket in the future. 

Yeah. So why would I not put all of my money, defer all the taxes while I'm working and earning and pay lower taxes in the future? As long as that's the case, great. But what if that didn't work out exactly as, you know, we envision. 

[00:14:45] Ben Haas: Well, your RD is huge. 

[00:14:47] Adam Werner: Yeah. Because it, yeah, because again, there, there are other aspects of planning that you can't control. 

Right? The tax laws are one of them. So yeah, just even something as simple as making a, just a concentrated bet in any, you know, scenario. Yeah. Yeah. Right? Even just thinking about where I'm saving, that's where I think that gray area in the middle, we live there, but I think for a lot of people it becomes difficult to envision a scenario where I'm not, I'm not banking on things going perfectly smoothly, but I'm also not banking on everything kind of going terrible. But what if it was just somewhere in the middle? Which I think is where, you know, 90 some percent of planning really occurs is let's just build in some contingencies. 

[00:15:32] Ben Haas: Some flexibility. 

[00:15:32] Adam Werner: Because this doesn't work yeah, well, right, right. Yeah, flexibility. People are gonna hear that a lot in this podcast. Just giving yourself options to make decisions that it doesn't necessarily mean that there's a perfect decision and there's an awful decision, and you, it's a binary choice. You're either gonna be right or you're gonna be horribly wrong. 

Often, hopefully, through good foundational planning, it's gonna be somewhere in the middle. You're gonna hopefully have many good choices. May not be the best and it may not be the worst, but having a handful of good outcomes, hopefully gives people the flexibility to decide. Where are they prioritized? 

What trade offs are they willing to accept? And again, hopefully, as long as those outcomes are still good, that's, yeah, that's what we're aiming for. 

[00:16:20] Ben Haas: God, there's so much to unpack there. Great job. Now I have to remember all the points you made, flexibility. It's just a, it is a, principle we believe in. 

And here's why. I'm gonna go back to the human element of this. I know that we have certain people that we've tried to work with. I'm gonna say it kindly coach out of feeling like there needs to be this perfect decision every time. Like I have to maximize everything. And there's just so much danger in that because again, that's where you're truly banking on your assumptions being right to go, this is gonna maximize my outcome in the future. 

Part of the conversations that we want to have is just to understand truly what you prioritize. Like how is this money supposed to serve you so that when there are just these, maybe off the wall occurrences, like we did not build a plan where somebody was going to buy an RV during COVID because what do they value? 

Experiences and spending time with family, and that was the only way to do it during that time, right? Somebody may have gone, well, this wasn't a part of my plan. Like I can't just drop that money on this. But you get into a conversation on, well, but how is this supposed to serve you? To your point, flexibility because there was some non-retirement savings, now they were able to repurpose some dollars that really did serve them within the plan. 

So I do love the fact that you're pointing out flexibility is a big part of our key to long-term planning, but so is just align your money to purpose, right? It does not have to be earmarked for this specific thing with this specific amount at this specific time because we all know it's just probably not gonna go that way. 

Build the good habits, right? Build the habit that's gonna leave you to have that option. That's gonna give you that choice. I, you used that word too. I love it. Get it So that you have these abundance of choices when it does come time to like, at a pivot point, make a big decision. But that's key. Be flexible. 

Have to be flexible, not only in your mind, but maybe with where you're saving and where you're able to pull money. 

[00:18:18] Adam Werner: Yeah. And that's where maybe the term it's okay to feel like you're winning by not losing. Yeah, right there. There again it's, no, it's maybe knowing what to avoid and not necessarily needing all of the answers before you, you start your planning process. 

[00:18:37] Ben Haas: Yeah. So maybe just kind of wrapping this all up, when you and I were kind of talking about, well, what does this really mean for what we need to do? And I think we hit on some of the points of flexibility and, you know, making sure we're aligning money to purpose. Some of this does just come back to fundamentals. 

If you are able to be proactive in certain ways with the areas of financial planning that we need to cover then you are putting yourself in a better spot and I'll, you know, chime in here as you will. I think in the life cycle of how we've met most of our clients, there usually is this fix, right? 

We need to put out a fire, we're focused on something. And it's not that we don't check the boxes on all the other things that are important within a financial plan, but I do think once that fix is made, maybe it does draw the attention away from some of those fundamental things that we maybe should go back and check, because if those are covered, then in the future, again, we're just giving ourselves more flexibility and choice that one of those things doesn't become a problem. 

[00:19:37] Adam Werner: Yeah. Yeah. And so even just, I'll say diversification and thinking of, you know, we talk about diversification. I think people understand diversification as an investment idea, right? A way to kind of spread out your exposure to risk. I'm not gonna put all my eggs in one basket, and I think that applies here when it comes to the planning side. 

We don't necessarily call it diversification from a planning perspective. We say flexibility, but I think the idea is the same. Right? You're not putting all of your eggs in one basket. This is my one planning strategy that I'm going to clinging to. Yeah. Come hell or high water. This is the plan. 

It's having maybe several different strategies. Going back to my comment earlier of, it's okay, hopefully an okay outcome is to have several different, okay outcome decisions in front of you so that you're not facing, or you're not painting yourself into a corner where it feels like I don't have any options. 

This is my only path now forward, and it doesn't feel good. I'm not happy with the trade offs that come along with that. So even just something as just viewing it through that lens of diversification when it comes to planning. I don't know if that's, maybe that's clear as mud. But that's just the way that I kind of try to think about it. Going and even going back to something you said earlier, we want, certainly, we want clients to have the good habits and habits over goals is a good starting point. 

Yeah. And that's not to say people should not have goals. We absolutely, it helps to have something to aim for. I think it's just more of the permission to not, you know, this is my goal and not tie yourself to it forever knowing that things will change around us, and we know that our own lives and our own feelings will adapt over time too. 

[00:21:34] Ben Haas: Yeah, a hundred percent. If we tie ourselves to a goal, we either win or lose, and that doesn't always feel great. If we tie ourselves to the habit, we can celebrate progress. We can celebrate little wins. We can take these in bite-sized pieces. We start to identify with just being a healthy financial person, and that's maybe the way that we wanna approach this conversation, right? 

Long-term planning's hard. We're gonna, we're gonna go through hiccups, things are gonna change. As long as we can continue to identify as a healthy financial individual, then we'll be here. To check in, we'll be here to help make adjustments. But psychologically we don't want you ever waking up in the morning and going, I don't know where I am. 

I don't know if I'm doing the right things. Oh my gosh, life is changing. I have to start all over with a plan. No. Long-term planning's hard. These things will happen. But hopefully the value in the relationship comes from conversation and flexibility. 

[00:22:28] Adam Werner: Yeah. So maybe to put a button on this going back, I dunno if it was two or three podcasts from this one. 

You know, my, my job sucks, or, my work is not fun. Can I afford to do something different? Just your point on building the right habits, right? Those, some of those examples of clients that we've worked with that have gone through that planning idea behind, I don't love what I'm doing. 

Can I afford to do something else? I'm not fully retiring, but I just have to get out of this job. They were able to do that because they had the good foundation, right? They had the good habits. They gave themselves flexibility when that time came because of what they built on the front end. So I think that just, that proves the point that we've seen that come to fruition with clients. 

[00:23:15] Ben Haas: Yeah. Bingo. So if you got a plan, let's check back in on it. 

[00:23:21] Ben Haas: Yeah. This is good. I think this is like, kind of our bread and butter. So I hope the energy came through for people. Planning can mean a lot of different things, so, you know, for us to kind of describe what we really mean and I think what it really entails. There's data, I get it, but planning is far more frequent conversations and talking through things, making sure, yeah, we're aligned. 

Yeah. Yep. 

[00:23:45] Adam Werner: Well said. 

[00:23:47] Ben Haas: Alright, sir. Till next time. 

[00:23:49] Adam Werner: Okay, see you then. 

[00:23:50] Ben Haas: Bye. 

[00:23:51] Adam Werner: See you. 

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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Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice.