Masterclass 1.0 - Class 3: Retirement GPS Part 2 – Monitoring and Managing Plans

welcome everyone we're going to give everyone just another few moments to join and then we'll get started

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all right we'll let everyone trickle in but go ahead and get started we have reached the top of the hour welcome to

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the income lab master class uh just a couple of housekeeping items before I pass it over to Justin is this is a CF

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cfpc event um you may have submitted your cfp ID at the beginning but also at

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the end we have a survey where you can submit that as well um keep in mind that there is a requirement of at least 50

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minutes of attendance for the C event to get your credit um also if you have a

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question please submit it in the Q&A and we will address as many questions as we

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have time for the ones that have the most likes will be addressed first so

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please keep that in mind if there's something that one of your peers had submitted and you'd like to hear the answer uh please like the question um

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with that I will pass it over to Justin and we'll get started all right thank you Taylor

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thanks everybody for joining us uh for our third session of the retirement income planning master class uh with

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Jason juel um today we're going to be um completing our coverage of how to build

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a plan the workflow on on Plan Building um and then moving on to

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discussing monitoring and managing plans there's a big part of that workflow which is tax smart distribution planning

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and we have two sessions that will really dive deeply into tax planning so uh if you feel that we're

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giving that very light touch today that's because uh you're going to get a lot in sessions four and five uh note

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also there's a three- week gap before our next session on May 28th um between

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now and then we'll be sending out some videos with um answering some of your questions that we weren't able to get to

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live um also please check out the website for the master class we have all

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of the materials from past sessions um slides

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takeaways um recordings of the sessions uh we have some extra videos in there as

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well so there's a lot to do uh when you're not on these uh on these sessions

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with us so let's uh just do a quick recap of

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where we were um from session two so again we were um we were walking

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through the steps to building a retirement income plan and we talked about how because um we're shifting to

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how much can I spend what would make changing that a good idea from this idea of probability of success which in

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session one we really went over lots of reasons that that's not a great way to talk with clients we started with the

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resources plan it all starts with what can you afford and that means um uh you

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know all the things that you can use to fund your plan and then we talked about adding things to that resources plan um

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to build what we call a core plan which is what everything is going to be based off of so quick review of of that the

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resources plan is all of your Investments and income streams and so on we also went over some best practices

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for the Investments and the cash flows um and in the core plan we talked about

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adding those extra key or mandatory or High um uh important expenses to the

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plan and we talked about how really what you're doing there is you're taking the answer what can I spend and you're kind

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of saying okay great I can spend this much but actually what if I group some of that into a final portfolio Legacy

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goal or you know a big vacation or buying a lake house and so you're sort of you're adding more itemized goals um

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and then the plan is still answering the question okay but what else can I spend we also talked here about the different

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between those key expenses which we call other variable expenses the difference between that and a baseline expense

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which is really just a way of taking that you know what can I spend number and sort of you know coloring it in a

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little bit more uh showing okay this much goes to groceries this much goes to you know gas and so

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on So today we're going to start with um The Next Step once we have a core

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plan which is scenario planning um so we really want to make

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sure we have a good core plan with all of the information that we're that we we we know for uh before we get

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going um in scenario planning and this is you know lots of ways to talk about this scenario planning AB testing uh and

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so on and maybe my first question for Jason will be you know can you give us some examples of the kinds of things

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that you typically find yourself doing at this step in scenario

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planning absolutely yeah so just to kind of level set you know so within our practice decumulation is really the core

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of what we do and it's ultimately the number one reason we Garner assets typically our clients are already

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working with an advisor um they've had an experience typically that's in their accumulation phase and they come to us

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for decumulation right how to turn their hard-earned money into income and so

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scenario planning gives us an opportunity to really reveal um our core competency and it

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allows us to really win clients win prospects uh through building their

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confidence and trust and ultimately like I said gring their business and so scenario planning really shows that you

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know we're we're listening to our clients what's important to them and their families and ultimately

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demonstrates the value of of why they work with us why they work with you so

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scenarios would include you know you got your Social Security claiming you got your pension options of course you're

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GNA have some what if scenarios uh long-term care maybe if you got a health event at the end of of plan

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and then of course gifting and giving so you know you think about social security it's it's a it's a core component um you

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know we're fortunate to work with some affluent families but I think the statistic goes one-third of Americans

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Sole and only income is social security two-thirds of Americans the majority The

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Lion Share of their income comes from Social Security and so claiming options incredibly important uh for many folks

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and so my my understanding is that when Social Security was enacted there were actually 567 claiming

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combinations uh there aren't as many today because of some some different rules and such but ultimately claiming

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is still important and determining if 62 is appropriate 67's appropriate 70 is

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appropriate some of you might be saying okay Jason well have you actually helped clients pursue Social Security at 62 and

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the answer is yes uh traditionally those scenar would be maybe you got a high income earner um and um they have a

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higher Social Security so we might delay their social security until 70 and we've got maybe a younger spouse who earned

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lower wages and it can make sense but at the end of the day you know I kind of use a phrase and that is when I'm

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working with clients I just acknowledge that Social Security is a component and and that your neighbor may have started

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and filed for Social Security at 62 and your cousin may have filed for Social Security at 70 that doesn't necessarily

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mean you should do the same so how does it apply to your individual situation and what's really optimal for you and

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your family the same applies to those pension options right lifetime survivorship

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lumpsum you know you've got the wh ifs and areos like buying a vacation home I

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actually helped six clients purchase uh really pursue their retirement dreams of

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owning a second home just in the last number of months and so it's whether they buy out right what's the size of a

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down payment how do we structure the loan uh those are a couple what fs and then you know of course you got the

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long-term uh care whether they self-insure or whether um you know they

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should should have some some coverage to help cover some of those costs so you

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can build those within the scenario planning as well and um typically in

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that scenario what we will do is we'll build uh a long-term care event kind of

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the last three to five years of their plan to show the influence uh of that

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event and then last but not least is going to be gifting and giving you know

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you think about gifting and giving a lot of times in in my and the clients that

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we work with legacy's really not an end of life goal of theirs you know we use

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the phrase you get what you get and you don't throw a fit but the way we think of legacy is being able to actually gift

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with a warm hand gift with a beating heart uh when your children are in need

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when they are younger when they're maybe not as prosperous and they're earning years and they really need help with

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that down payment um or child care or whatever those those costs may be and so

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it's super rewarding for our clients to be able to gift and to give while they are alive to see the Charities and their

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family reap the benefit of those dollars so those those are a few that come to mind

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Justin yeah those are those are great examples um and it connects back to from

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the the first session of the master class talking about you know what it is people are hoping to to accomplish in

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retirement what they want retirement to be all about and part of that is you know having a building a legacy while

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they're alive um and and letting them know that they can do these things or like you said maybe they have a lifetime

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dream of that you know lake house or something um those are all great ways to do it as we're doing this let me just

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share kind of in a practical sense how you might do this kind of thing so here I have a core plan and best practice is

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to copy the plan and then just make as make one or two changes just to see what

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the effect is of that change so for example um purposely I made this a a

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plan where they took social security as early as possible let's just uh and we'll we'll

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name this plan also [Music]

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um and there you go so now we have this plan Social Security at 70 and we'll see

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the effects of that and you can evaluate those effects you know using okay what can I spend how does that change you see

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that it went up um so it was

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181 and now we're at 192 just because uh we're adding that Social Security which

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is adjusted for inflation and so on but if I added the lake house or I added helping the kids with the down payment

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that the the spending capacity would go down um I know we talked about this a little bit Jason before what um how do

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you talk with clients about this stage of planning um I know you had some some

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ways to think about it yeah you know so planning is really specific to each individual client no

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client is the same and so with with this kind of advanced planning if you will

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with these different scenarios it just allows us to really help clients understand okay here's what I'm eligible

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for here's the lifestyle that that my resources can support and then by by

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adding these kind of oneoff or what if type scenarios it just shows that we're listening um

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and ultimately it shows that um you know life can be lumpy and your retirement

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can be a lumpy but um you know we want to make sure that you can still fulfill those dreams and uh live out the life

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that that you deserve yeah um I know also you

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mentioned um that sometimes this is more of a typical situation delaying Social

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Security um the reason delaying Social Security often shows this effect is um

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the amount you're taking it is is going to be higher when you hit 70 and especially you'll see that effect if

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you're using the retirement smile or the age-based plan so basically every dollar of inflation adjusted pension you can

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add um results in more than a dollar of of of current spending but as you

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mentioned that that doesn't mean that that's always the right thing to do Jason so I just wanted to um point out a

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place where you might see that um so for example you know these folks have fairly similar primary Insurance

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amount but if I made one of these folks have less than

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half um of the Pia um then and let's go

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ahead and uh you know move this in a little bit now you'll see okay waiting

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till 70 break even not possible for John meaning don't delay why because starting

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in uh you know may of 2028 the the uh the benefit would be the

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same so there's no reason to to give up um give up a point there um in fact for

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him taking it um quite a bit earlier is probably going to be better because no matter what he's going to get a raise

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when uh when Mary starts there are some points where it might be um it might be too too early for him to take well this

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is in the past right but uh so you can use these sliders to explore those

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situations um so it looks like for him um starting this month is not a bad

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idea and then you have a bunch of periods where Break Even is just not a good idea so yeah basically he should

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start as soon as possible is what we're seeing here so good good point on that no rules of thumb uh apply to everyone

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and that reminds me Justin of our our question we had you know a few weeks ago and that was regarding the 4% one and

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the video shot uh here yesterday that I think is g to going to be available to

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folks and when you think about you know kind of that retirement smile it just reminds me with the idea that clients

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want to have a certain degree of income um they don't necessarily care how they get the income they just want to know

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that that income is going to be consistent and then this allows us as professionals to determine okay what is

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really optimal with that social security for the election ages the combinations

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what's optimal around pensions and you know how do we really deliver what we have um you know ultimately conveyed to

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our clients and to make the most tax efficient decisions possible and I I I don't think I've mentioned this before

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but the whole reason I was was interested in income lab was the the

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distribution strategies the tax planning I'm going to stop there because I get really excited about it I know that's

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what to come over the next couple weeks but uh that was the reason we signed up

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for income lab and uh the retirement GPS was really a bonus and what we've

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learned is is ultimately the driving factor in what clients enjoy the

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most yeah on that on that we'll release that video uh I think that's slated for

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next week but we do address the question that sometimes we get from clients which is somebody might come in with some you

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know they've done some Googling basically and uh they come in saying I'm supposed to take 4% um this is actually

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a really good visual to show them that that's very simplistic and not appropriate to Simply apply to uh every

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situation so here's you know here we're taking uh you know 19,000 Plus in portfolio withdrawals

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early on then it's dropping it's dropping it's dropping it's dropping you know 19,000 you know times 12 is much

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more than 4% of their uh of their current balance but that's okay because uh life is complicated and we don't

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apply rules of thumb um to every situation yeah back back of the nap

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calculations you don't need an advis for that right yeah if that really were what you were uh supposed to do you know no

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one would be a retirement adviser so

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um so uh let's get to the uh The Next

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Step here which as I mentioned is creating tax Smart Plan we're going to

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have two sessions on this okay but I do want to just give everybody one tool

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right now that we're going to be using um in those two sessions and it actually could be useful even if you're not doing

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tax planning um and uh it's it's a it's it's a step

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that's um really important to understand which is um so far we've been talking

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about building retirement Plans by asking the question what can can I spend and all of the the things we've been

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doing up to this point uh depend on asking the question that way given my

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resources what can I spend given my resources and my specified goals what else can I spend and it's a really great

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way to evaluate those scenarios and by the way if there are scenario planning

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situations that you would like us to cover session six is going to be uh all sorts of um examples so please submit

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those and we'll we'll uh you know we'll we'll choose some um but there are

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situations where you have already determined what a decent net of tax

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spending level is that you that you could Target um and income lab allows you to change

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the question for a plan we call it the primary question the plan's primary question from how much can I spend to

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how can I spend my target amount net of tax um as I said if if you just build a

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plan in income lab by default it's asking how much can I spend this is a great way to begin kind of a discovery

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phase of retirement planning exploring options and so on um it is although you

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can show it in um in net and gross of tax and I'll show you how to do that here um so I can go to this this little

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uh this little tool menu as your friend um this is kind of a advisor tools for

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the display right so I can I can show net of tax um but we often get a question you know why would you ever

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show gross of tax at all isn't net of tax all that really matters and I would

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answer that a couple ways um one is um no actually at least in the United

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States and in a lot of countries people think of their income in Gross of tax terms if you were so you know uh uncouth

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as to ask someone how much they make they would answer you in Gross of tax terms right that is just what they would

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say they would they would never give it to you in net terms so people do think of their income in Gross of tax the

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other reason that's really important is actually your income is gross of tax and

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then the tax system determines what your net is so if the tax system changes your net will change but your gross won't um

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so an IRA will support a certain amount of withdrawals it doesn't care what your uh tax rate is it could be zero it could

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be 50% either way the withdrawals at support so the same same goes for your pension and so on so gross is an

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important feature however in retirement there especially early in retirement we will

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often see things being particularly lumpy um that could be because you're

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doing Roth conversions that could be because you're selling a business or a house or you're buying a house and you

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have to take a bunch of money from an IRA or something so there can be lumpiness and so that's where how can I

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spend some Target net of tax um can be really helpful um in order to you know

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not change the amount you're spending for all time but just to gross up your income your gross income in those years

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where you need a little extra um so the idea would be if you're you know if you're uh I don't know um buying a house

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and you know paying for it from an IRA may not be a great idea but let's say you're doing it um it's not that oh

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we're going to buy the house and eat noodles that year no let's uh let's continue our normal consumption plus buy

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the house so the place to do that there's a couple spots but probably the best is um I go to the expenses

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Tab and I have established a desired

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Baseline spending amount and I can see hey the plan's primary question is how much can I spend

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let's change that to I don't know why that says that but it's not

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uh and now it should uh it should answer that question it'll be I don't know why

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the 12 is not showing up here that must be an issue with my UI um so it'll it'll Target

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12,435 um in net of tax income so um

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shifting over to you Jason this is definitely an advanced um Advanced

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setting and we'll be covering it a lot more in uh in our next session and and

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and tax planning and so on um but let me just ask you you know if you were using

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this you know how would you talk us through how you would choose kind of a a a target a net of tax spending level

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that you would use in in a place like this well number

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one I start with how much can I spend that's absolutely the first place to

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start which will give you a range of kind spending levels and then you know as you think about you know how can I

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spend X net of tax there's really two main times that's going to be anytime

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there's that lumpiness which you referred to and referenced especially early in a plan say kind of that first

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10 years if you will that's when you know maybe we're executing Roth conversions we've got lumpy income due

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to maybe the an asset sale or maybe there's an expense like paying for a

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wedding so on and so forth so that's that's typically when we would we would take that approach yeah and the place

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where you can um just to remind people and I go back to a how much can I spend

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plan and share this um a good place where you can get a

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feel for that is is here I mean really we're we're you know this is right in the middle you know net we're at

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16,000 um you can you can look at a range of spend

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ending you know here it's kind of between 16 and 18,000 a month right so

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this is already telling you um you know even even net right if we're talking maybe it's a you know 10 20% um

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effective tax rate probably probably 1015 um you know we're not going to be

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recommending that these folks spend 50,000 a month right that that's going to be out of bounds and on the other

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hand if they are expecting 6,000 obviously they can afford that um but it's well within their means and now

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there might be some opportunities for the kinds of things Jason was talking about like um you know talking them

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through you know gifting at you know the best times and uh and so on so um just

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to wrap up on this again we're going to be covering this a lot three weeks from now um but especially going to use that

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how can I spend it's not typically your first step as we saw the first steps are

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you know build a resources plan build a core plan do scenario planning um it's typically after that or around that

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period where you might start um doing some uh some targeting of a specific uh

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a specific uh plant the other place where you might find a need for this is

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um if you're using life Hub um a lot with a client uh and if that client

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really just wants to see all the numbers match up perfectly so kind of the engineer type client because in life

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Hub um if you're doing a you know how much can I spend plan

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um the the Baseline expenses that you have are not they're not defining how

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much you will spend this is just again this is just kind of a way to to list

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some stuff uh in a plan when you're asking how much can I spend the the

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software is answering the question how much can you spend so in this case is a good example it's saying look you can

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afford 242 your total expenses that you've told us about are 198 so there's a surplus

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and that's fine you're really just saying you would be living well within your means if you did this right but sometimes a client would prefer to just

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see all the numbers match up perfectly and so in that case uh using you know targeting you know more the 198 or in

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this case the 149 in Baseline expenses would be the the way to go

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okay um last couple steps here before we get to the uh the uh the meet of the

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second part of today are just wrapping up the plan any you know kind of um

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final final pieces so I call this a complete plan so you've done your

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resources plan you've done your core plan you've done scenario planning you've done tax smart distribution planning um maybe you've switched to

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Target a specific net level okay now we kind of add in the you know like color

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in the edges essentially so if you need to add a little bit some baseline expenses things like that that completes

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the plan um so embellishing the the Baseline

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expenses making it kind of polished and ready to go um and at that point you are

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you know you've probably been talking with the client quite a bit about scenarios options and so on but you're

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going to um be choosing uh a plan to actually Implement and

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monitor um so this piece which is one of our takeaways uh for today is a a way to

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kind of walk a client through the process of of uh of retirement income

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planning in this way and um I guess at this point I would

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say you know Jason this last step this step of implementing and monitoring um

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hey first of all when when would you do this um you know at what point in

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somebody's life are you doing this you know before retirement at retirement in retirement yeah the implementation is

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really at retirement right that's kind of the go live date but to give clients a sense and to set the expectation you

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know I know we've talked about the formula before happiness equals reality

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minus expectations you know as retirees they have a lot lot of fear and anxiety

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and there's just this unknown uh of this these uncharted waters when they do

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retire so to give them a taste and a flavor of what the guardrail system

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looks like and what their spinning capacity would be I will demonstrate and show them you know here's here are your

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resources here's the capacity um and ultimately here are those guard rails top guard rail bottom guard rail and as

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your portfolio fluctuates up or down this would be the influence to your to

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your re to your your spending capacity and so it's really just being a guide with them um on their Journey versus

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just giving them a map uh to use themselves and ultimately just kind of talking through different sorts of

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adjustments that could be made the Cadence of updates um and then you of course you can use the retirement stress

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test to show them how their portfolio would have performed what their income

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their spending capacity uh would have been and the changes that would have

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been suggested due to maybe the the great financial crisis um or maybe the

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stagflation period or a number of other do bubbl so on and so

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forth yeah that's I think it's a great idea to use um the retirement stress

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test for setting the expectations um one thing just consistently psychologically

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all of us we just we just connect better with a story than we do with a statistic

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um you know I I love math and statistics but the stories just just stick with me

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a lot more so being able to show them hey for example what what kind of things might you be able to expect okay in this

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one we would have made an adjustment in 09 why because we would have hit the lower guard rail uh but then by 2014 we

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would have we would have had a raise we would have had more raises and so on and then again in 2022 we would have pulled back from that

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higher rise I think that's a great way to go also as you talked about you want to set them up for size and Cadence of these

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adjustments right so um what sorts of things might lead to an adjustment and how big could they be um I think that's

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a great and that's oftentimes a shocker I will admit oftentimes a shocker when

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you evaluate uh the resources the balances in their portfolio the fluctuations that

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could occur up or down and then how that correlates with their income U and when

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we review these scenarios historical scenarios usually it's quite eye opening

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um and it gives them this confidence it gives clients this confidence that okay gosh we this is retirement is maybe a

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little less anxious um and maybe these these

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unknowns I'm I'm not as fearful as as I originally thought yeah

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definitely um so let's talk through a little bit um of

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you know what's happening um when you set a plan to be monitored so we just

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all the work we did so far was about designing options

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exploring and so on um once we are in the monitor phase the

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the one key thing to understand it as an advisor is you know no longer asking the question what can I

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spend and you're not even asking you know how do I spend you know $10,000 net

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of tax Instead at this phase you're now asking should I change

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anything because the default is no keep doing what you're doing um I like to

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joke that clients want you to keep them on track make sure that they're good but they also want you to leave them alone

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and let them live their life right so we don't want you know a call from our adviser every day or every month you

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know adjusting things just tiny bits and so that's why um we use guard rails it's kind of a behavioral piece of just like

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hey go live your life we'll let you know when there's enough of a change that it's worth making an adjustment um I

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know the other nice thing Jason we talked about this in the first session was just scalability um because once you

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set a plan to be monitored uh in income lab that's called implementing a plan it's happening automatically in the

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background um you don't actually have to do anything uh it's just done and and

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this is another question we get a lot is you know how often are you communicating with clients about how they're doing

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where their guard rails are and so on is that something you're doing all the time or did you kind of maintain your normal

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Cadence of of meetings yeah so one thing I want to add here is you know we we segment our our

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client book and we have kind of a a meeting series iies and we meet with the

33:29

majority of our clients we call them wealth plans we don't use the term review review is looking in the rearview

33:36

mirror planning is about looking forward we don't want to focus on what's happened in the past uh we want to focus

33:43

on what's what we're expecting in the future and how they can live their life in the future and so we do um meet every

33:53

we meet basically every six months and um the way that we function within our

33:59

practice is during those wealth plans we really talk about the resources we talk

34:05

about the spending capacity and often times most of our clients are under spending you know Justin you referenced

34:12

that just a few moments ago maybe their spending capacities 20,000 and they're only spending six you know those

34:19

conversations can are there can be really revealing really eye opening and

34:25

so how do we help our clients understand the potential of their wealth

34:32

and to allow themselves to give themselves permission to spend some of

34:37

their dollars and to give them confidence and that's where we really talk a lot about you know kind of you've

34:44

got a life expectancy and then you have a health expectancy and your lifespan

34:50

and your health span hopefully run in sequence to one another but we know of folks who have um passed away too soon

34:57

or maybe had elment ailments um at a young life and it really derailed their retirement and so we have those

35:04

conversations intentionally that way it's in the back of our clients minds but the reality is there has to be a

35:11

trigger moment for them as individuals to truly understand okay life is short

35:19

tomorrow isn't guaranteed I just had a meeting yesterday uh with with a couple

35:24

clients they've been retired for about 7 years years and the husband went into

35:30

aim and um had had a heart issue had the health scare and our conversation

35:36

yesterday was much around gosh we've got these bucket list items that we've been delaying that we we haven't scheduled

35:45

these trips to Europe to Antarctica to Iceland and we're gonna we're going to

35:50

structure those we're going to schedule those and we were able to run kind of that advanced scenario to show okay

35:56

here's your spending Capac capacity here is this um goal that you have you can

36:02

absolutely pursue that goal and it is not going to result in derailment of your financial plan and the reality is

36:08

there's still going to be money left over at end of plan as you pursue those goals so you know I just I go back to

36:15

the idea that you know there's there's often times a textbook answer when we're

36:21

guiding clients um and that textbook answer clients are not necessarily comfortable

36:28

with um and clients have their own psychological answer so our job as

36:33

advisers is to help them get as comfortable as possible to follow the text while still being able to lay their

36:40

head down at night and get what's called return on sleep you know as advisors so

36:47

often we talk about return on investment ROI ROI ROI is valuable that's important

36:53

but at the end of the day if our clients can't lay their head down at night

36:58

doesn't really matter what the RO is we need to make sure they get return on sleep and that's where it just brings

37:04

this entire you know retirement GPS full circle because you've got resources

37:10

youve got spending capacity we lay out our income structure optimal times

37:15

Social Security pensions various goals and then ultimately we we we tell our

37:20

clients to go live their life and sure we meet every two you know two times a year and we've got calls in between

37:27

based on size of clients we might we might call them six times in addition to those wealth plans plus a birthday call

37:34

plus an anniversary call but those calls are they're personal in nature they really are because with the GPS you you

37:41

your your plan is set and until we hit one of those guard rails until one of those alerts fires you get to live your

37:47

life and that's that's rewarding that's empowering and that's what our clients really like the most so I don't know

37:54

that I addressed your question Justin but I just I I wanted to fill in you know what I'm thinking about as an

38:00

advisor and kind of how I deliver to clients and I just think it's so valuable so take away goad I think you

38:08

did I think you did no that was that was great that was great I haven't coined R return on sleep so go ahead and use that

38:16

but it it it it seems to resonate really well with clients so I I that gets back

38:21

to you know the uh permission to spend peace permission to go live your life without fear and so on that talking

38:27

about in in the first session as well so as I said once you set a plan to be implemented and by the way to implement

38:33

a plan you just um go to this little three dot menu and hit Implement um what

38:39

happens then is it's no longer asking what can I spend it's asking should I change something should I change what I

38:46

spend and so if you have an implemented plan it's being monitored basically this dotted line is going to be going up and

38:52

down getting closer to one of these guard rails um over time and you can see that happen in the retirement stress

38:59

test is a g great place um to do that we actually have a new feature coming out as well that will show you the actual

39:05

history of an implemented plan and where it was with respect to guard rails um

39:10

over time so the question that we often get then is okay great my I'm going to

39:17

be getting nearer or farther away from guard rails what is causing that to

39:22

happen or what could lead to a change I guess is so you know you're just chugging along hopefully your clients's

39:28

living their life and then at some point on one of those six-month you know meetings or whatever your structure is

39:35

as as a as a practice um there may be a change and there are really three types

39:40

of changes you could see in income lab inflation adjustments so really just a cola cost of living adjustment um a

39:47

change in the mix of income or hitting a guard rail um an inflation adjustment is

39:52

exactly what it sounds like so this is actually a visual from that new feature that's coming out this is the plan history for this particular account the

40:00

plan was implemented in 2021 you see they hit an upper guard rail here and then these blue ones are just inflation

40:06

adjustments you can see in the background if I was doing you know inflation adjustments every month just

40:13

keeping up with CPI I would have this light blue line well we're not going to do that right I mean that's that's just

40:18

silly so we're waiting until the adjustment in this case is at least 5% so you can see okay now I'm behind

40:25

inflation oh okay let's jump back up right um that's an inflation adjustment

40:31

it's easy we're tracking CPI for you so we'll let you know when an inflation adjustment would be a good idea a change in the mix of income so

40:40

maybe a pension starts maybe a social security starts maybe another social security starts okay well that doesn't actually change your income but it does

40:46

change how you're making it up and so time to make it it's just an administrative change to the withdrawals

40:52

we'll let you know about that as well and then hitting a guard rail this is

40:57

where people really wonder okay yeah great but what causes you to hit a guardrail inflation being higher or

41:05

lower than expected returns being higher or lower than expected withdrawals or additions

41:12

to the account being higher or lower than expected and just time

41:17

passing right so think about it this way in this these folks are spending

41:23

11,300 if they still have $2 million 10 years from now that 11,300 is a lot less

41:30

risky than it was you know 10 years before right because they're funding a shorter lifespan so any of those things

41:38

it's the combination of all of them that give you the guard rails and that cause you to uh to hit one of them so it's not

41:45

necessarily one thing it'll depend on the on the plan itself

41:52

um so I think um we have uh We've covered really most

42:00

of of um what we plan to today so we have some time for questions Justin if

42:07

you don't mind maybe maybe before we jump into because I know we've talked about this before I think the audience

42:13

will appreciate you know just some some maybe best practices around kind of

42:18

client meetings during a review like what do I cover what do what do great

42:23

cover as an advisor so you know as I think about that I always lead off a meeting um and I'll just ask them you

42:30

know what's your top priority that we need to address today or if you want to get a little more

42:35

creative um you know I'll I'll use a phrase and say you know what do I need to cover today so with YouTube get in

42:43

your car you look at each other and you say that's the best meeting we've ever had so you know we've all rode to

42:51

meetings with our spouse and we always have you know kind of that debrief after

42:56

a meeting and and how can we

43:01

provide a really impactful takeaway to really Empower our

43:08

clients so I will ask that question and it just kind of sets up the visual of gosh okay what what what would make this

43:15

meeting really impactful but you know as we go through the course of the meeting we really talk about lifestyle needs um

43:23

you know how's their income feel currently um specifically based on

43:28

inflation what we've seen recently with the cost of goods cost of gas cost of groceries um and so it's definitely

43:35

impacting people's lives whether it's impacting their income directly and them

43:41

feeling comfortable or uncomfortable they still like to talk about it and they like to hear that it's being

43:46

acknowledged and they likely have friends or family that have been impacted so they like to talk about

43:52

inflation and kind of how it feels now that their grocery bill is uh you 150%

43:58

of the cost today than what it was in 2020 we also talk about the income sources which you just kind of showed

44:04

that staggered um look you know if we need 10,000 in income where are we

44:09

generating income from whether it's Social Security whether it's pension and a best practice to really lay out there

44:16

is you know if a client has if they're early in retirement social security hasn't kicked in yet and they're

44:23

generating 10,000 from distributions it's important for them to understand

44:28

that hey when Social Security kicks in we're going to offset your distribution dollar for dooll you're still going to

44:34

get the 10,000 we're just going to be withdrawing less from your portfolio we're going to lean less heavily on on

44:42

your assets so that's that's valuable and then also reviewing just kind of those top and bottom guards so that they

44:50

understand when adjustments income adjustments would Trigger or would occur

44:56

and then last but not least Le which is definitely my favorite part which is the tax planning the Roth conversions the

45:02

tax savings and ultimately we talk about you know I think we're all willing to pay our fair share to the government but

45:08

we aren't looking to tip and based on the current strategy it does appear you're tipping the government is that by

45:15

Design or should we look at at a different approach which I know once again I'm getting ahead of us here but

45:22

uh a couple weeks we're going to jump into that now that's I mean yeah I think I I

45:28

I had intended to ask exactly that like what are you going to cover in a meeting like that so that's that's perfect um

45:33

and actually we have a few questions that are on these topics so maybe I'll just

45:38

ask them or cover them how often are you checking this for clients each month are

45:45

you updating things monthly or is there some other Cadence yeah so it's so we we use the

45:52

integration tool and we ultimately use the alert um for for being checked so that's

45:58

the scalability piece you we tried to we tried to um automate the best we can and

46:05

that's the way we've done it in the past yeah rely on income lab yeah so if you

46:13

if you can do Integrations that's best if you don't have Integrations the software will use your target allocation

46:20

and look at indexes and say okay how did those do and let's guess which way this went so you still don't necess

46:26

necessarily have to check it every month you said you do every six-month meetings that's probably plenty um and I can

46:33

share quickly here how to do a um let's

46:41

see so if you have an implemented plan and let me see if I've got one that does no I don't unfortunately um so if I if I

46:49

implemented this plan um I would have an option here on the implemented plan I'd

46:54

have one that says reconcile and um that will allow me to just do a

47:00

quick I think of it like balancing your checkbook um if you don't have Integrations um maybe it says that that

47:06

$100,000 Ira we think it's worth 110,000 but it's actually 112 okay just quick do

47:12

a quick you know just just change that up reconcile the plan so you still can

47:17

use this if not all of your accounts have an integration that'll give it to you um but um but yeah basically once a

47:24

month at the beginning of the month we are updating the plans we're stepping It Forward one

47:30

month in time right so now you're a month older you're month closer to Social Security you're a month closer to

47:36

long-term care you're you know you you walking down that uh retirement smile

47:41

all that stuff's happening and you have new account balances we know what happened with inflation all of that and

47:47

somebody asked that they said uh still a little fuzzy on what exactly implementing a plan is what you're doing

47:53

when you implement a plan is you're saying hey software do all that work for me update the plan completely as much as

47:59

you possibly can and then let me know if it's calling for any changes because again an implemented plan unlike the

48:06

designed plan is not asking what can I spend it's asking should I change what I

48:12

spend um and as Jason said that's not necessarily it's not necessarily if it's calling for a pay cut you may decide

48:18

there are other changes to the plan to make you know you're going to start looking at priorities and and really

48:25

it's it's this is not sort of okay let's mechanically just do whatever the computer says what it's telling you is

48:31

good time to have a conversation is that million dooll Legacy goal for when I die is that

48:36

really as important as I thought it was let's see um right that's the kind of thing that happens if you hit a if you

48:43

hit a guard rail and let's say Justin that we've got some volatility in the

48:48

market we hit a lower guard rail and it does

48:54

recommend reducing income what we found is most clients

49:02

naturally tighten up their Pur Springs in a down Market it's not that we have

49:08

to encourage them to do so more times than not they actually want to tighten

49:13

their first strings even more so than what the software is recommended and so the conversation is

49:20

more about the markets and the speed in which markets recover and the strength

49:26

of their plan and how they can weather this storm um and still still giving them the

49:33

confidence to to continue to pursue their dreams even though we are in a down Market to make sure that they're

49:39

not making unnecessary sacrifices and and spending and tighten up the bir

49:46

strings even more than they should right yeah that uh Global financial crisis example I was showing before that was

49:52

actually a relatively aggressive plan um but even so its adjustment its

49:58

recommended adjustment it might have been less than what they had already done just by you know kind of clamming

50:04

up in that situation CO's an interesting example because uh you know many people

50:09

had to cancel vacations and things so really the spending was cut for them whether they liked it or not um so

50:15

another good example um somebody asked how does the monitoring and alert system work um because you mentioned you just

50:22

depend on that um that does not go out to clients that it's just advisers you

50:28

get an email uh every month when the updates are done um and in the app

50:34

itself you'll see um I'll share what that looks

50:43

like so I did go ahead and implement this but um this one has an implemented plan you would see one that says needs

50:50

attention and up here you'd see how many need attention you'd go there and it'll tell you hey this is what happened it's

50:57

calling for a cost of living adjustment or hey it looks like Social Security started so we just got to change our

51:02

withdrawal amount or um you know more interestingly you've hit a guard rail

51:08

and and here's the recommended uh uh or what the plan is calling for in terms of

51:13

adjustment um so this is all totally uh you know advisor

51:19

oriented um and you know as as Jason said it's not necessarily though you got

51:25

to drop everything and call the call the client that day a normal Cadence is fine um you know that's the great thing about

51:31

retirement is that things actually happen relatively slowly so no one month

51:37

of spending is probably gonna you know undo somebody's plan um so all right

51:43

let's see some other plans here um or are some other questions one

51:50

one thing I would throw out there is I think a lot of advisers I know I've been

51:55

this way before I was kind of fearful to deliver bad news um not to the degree

52:00

where I climb under my desk or anything like that but i' get maybe my heart it would get up a little bit if I had to

52:05

deliver kind of a difficult conversation so when I'm when I'm meeting with clients I talk about our relationship

52:13

being a marriage and and that might sound unusual right and I'll even acknowledge that you being married to

52:19

your advisor but my understanding of a marriage is communication is incredibly important and we really need to have a

52:26

two two-way line of communication and that communication

52:31

sometimes can involve some difficult conversations some uncomfortable conversations but those uncomfortable

52:37

conversations help us get better they help us improve and they help us stay on

52:42

track and so I just give them permission to deliver difficult news to me when

52:48

they're thinking of it and I ask for for their permission for me to do the same in a very candid way and a respectful

52:54

way but that communic is really important so then by having that kind of

52:59

phraseology early in the relationship and often when they do get a call as it

53:05

relates to a down Market in their portfolio potentially hit a guard rail it's it's it's not as

53:11

intrusive had you not planted that seed had you not had that early

53:18

conversation and set the stage for what to expect this kind of gets to a question that um that we've also gotten

53:26

before which is you know um well my clients don't want to adjust or or things like that in your experience has

53:34

that been an issue I I have had it happen absolutely

53:43

yeah yeah and it and and that that conversation was with a a client that

53:52

had a high level of spending needs and ultimately they didn't feel that they

53:57

could cut back and so we had to monitor the plan appropriately and it just

54:03

involved a few more touch points um just from a compliance standpoint on my own

54:10

side as well as a comfort standpoint for the client yeah yeah it's interesting a lot

54:17

of these plans are going to start out actually relatively conservative so if we go back to that concept from the

54:24

first session of what's the most likely amount you can

54:29

spend right if you were just no emotion I want the you know I want the the

54:36

square on the roulette wheel or the square you know that I would on the crabs table I'm going to put my money on

54:41

well you just go with the 50th percentile you go to the one where you're equally likely to be overspending or under spending most people are

54:48

actually building in a buffer which is why this red guard rail is so far away

54:54

from the green here right you're saying Hey I want it I want to start out spending so that things could get quite

54:59

a bit worse before I have to make a change that's what this is really saying so you're kind of leaning into our risk

55:05

aversion loss aversion right if yeah maybe maybe a a again a person with ice

55:11

in their veins could spend a lot more and just take their lumps if they had to um so you're saying in in some

55:18

situations maybe you've got more of a spin Thrift or someone who has you know expectations that are a little too high

55:25

um they will will just be spending already closer to needing and make a change and you just have to deal with

55:31

those situations as they come and you know ultimately it was it was a dee

55:37

rooted psychology of of why this individual didn't want to change he had

55:43

a a decent relationship with his grandparents but he wanted to have a much better relationship with his

55:49

grandkids and um trips that they take together entertainment that they pursue

55:55

together uh you know he flies all over the country to see his grandkids and that's that's admirable it really is and

56:02

and so you can't fault the person for that we just have to understand that there are pros and cons if we have this

56:09

fixed income and we absolutely want to pursue these goals no matter what the markets provide us um just understand

56:17

there is a marriage between your resources and your spending capacity and if you're comfortable with spending less

56:23

later in life because you are healthy now and tomorrow isn't guaranteed let's

56:28

just let's go in knowing that and let's just let's talk through those details and clients just want to be understood

56:35

at the end of the day and Market volatility we grow numb to that as

56:40

advisors because we deal with it every day and you know we have a very

56:45

clear-cut expectation and belief that the markets are going to recover but but clients don't have that belief they

56:51

don't have that same expectation so that's our job from a behavior Finance stand point from a psychology Finance

56:58

standpoint to really know our clients um and and to help them navigate these

57:04

these difficult times and and psychological times

57:09

right um we did have a question you mentioned you implement PL start monitoring them at retirement somebody

57:15

asked well what would happen if you did it before then just so so everybody understands if you implement a plan

57:22

before retirement that's fine what you're doing is you're asking the software to automatic Ally update the spending capacity in guard rails for you

57:29

so before retirement it's not asking should I change it's still asking what can I spend so it's just like

57:34

automatically updating what can I spend and so as you approach retirement you're going to zero in on what what the real

57:41

spending level will be so it's perfectly fine to up to implement a plan before that but just so you understand

57:48

everything we've been talking about about hitting a guard rail and so on that is only in retirement you really

57:54

can't ask should I change my retirement spending if you're not yet you know

57:59

retired and Jason just a question on that do you implement prior to retirement or just as they approach

58:06

retirement at

58:11

retirement yeah it's just it's more setting the stage and giving them a

58:17

taste of of the software so they're introduced that way it's it's not a

58:23

complete 180 moving from one software to another

58:28

another all right we have so many questions it's uh we're definitely going to be making some uh some videos to get

58:36

some of these uh some of these taken care of so look for those in your emails

58:41

also please um check out the website that we have for this master class there

58:48

are lots of takeaways um and you know things that you can download things that you can use

58:54

for you know marke on social media you know a piece like this that you could use with clients if you're talking with

59:00

them about your process um lots of stuff there along with videos of uh you know recordings of these sessions as well as

59:08

as we do these Q&A you know recordings um we'll put those up there we've done a

59:13

few sort of bonus pieces as well we did something on um the uh regret Zone and

59:20

the and the retirement smile um that uh I think you'll like and talking with

59:25

people people about the the subject Jason mentioned about health span and lifespan and and spending while you're

59:33

uh you know when it when you're around and it matters most um so please check out all of that and um we hope to see

59:41

everyone in three weeks when we dive into Jason's favorite topic uh tax smart

59:46

distribution planning which is a really a great area very rich lots of value for clients so um please join us then and

59:54

with that thank you Jason and thank you everyone for joining us we'll see you all soon thank you