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When it comes to our vacations, we plan every single detail to make sure everything is perfect. We understand that hope is not a strategy when it comes to pulling off a memorable trip.

So why do we do the opposite with our retirement? Most of us put some money away, never look at it, then hope we’ll have enough saved up when it’s time to retire.

This approach will have you working until you die.

In this episode, I discuss the best way to plan and set goals so you can retire when and how you want.

Show Highlights Include:

  • The Steven Covey principle for a prosperous and relaxing retirement (5:13)
  • How to squeeze the most value of our your goals to carry out a successful plan (6:13)
  • The 3 retirement planning categories and how they predict your ability to retire when you want (9:21)
  • Why “Great American Novel” retirement plan reports are worthless and how to plan your retirement on a single page (10:04)
  • How to transform your “junk drawer” of assets into a financial windfall (13:12)
  • Why $1 Million is a terrible retirement goal (16:08)

To schedule your free retirement tracking meeting, specifically for first responders, head to http://pensionattention.com/ or call us at 805-409-8150.

Read Full Transcript

Welcome to Pension Attention, the best show for first responders who want to take control of their finances.

After advising Los Angeles city firefighters for over 12 years, financial advisor, Brad Barrett now shares how you can grow your wealth, build your legacy and enjoy a life of freedom. And now here's your host, Brad Barrett. [00:19.9]

Brad: Welcome to Pension Attention, the show for you, first responders who want more out of their deferred compensation and pension plan. My goal with this podcast is to reach you where you are at whatever stage in your career you are in to provide my nearly 15 years of experience working with both active and retired service members on their investment and retirement planning. My team of fiduciary advisors at ONE Fire and Police are dedicated to ensuring you take control of your finances and build the life you deserve. Before we get started, you can go to our website at PensionAttention.com to find out more about our firm ONE Fire and Police, and to schedule your free retirement tracking meeting. You can also call us at (805) 409-8150. Again, that's (805) 409-8150. [01:13.8]

2020, I mean, I think we all can agree it's been quite a year, quite a shakeup for everyone, and it's all lost on me that when reaching out to our clients and at all the planning meetings we get involved with and our review meetings, we're able to go through quite a lot of the uncertainties and fears around a year like this and that's what inspired this podcast. So I want to be open and starting on our first episode here, that Pension Attention is designed to provide the topics that we go through with our clients and really what we go through in our station meetings when we get to visit you guys that has been lost this year a little bit. So we're going to take each week and take an episode of topics that we discussed both in our client meetings and again, some of the more higher level topics we discuss when rest stations visiting with you. So for our first episode, I want to really go through one of the larger discussion points and really what sets the tone for any of the other topics we'll discuss and that topic is planning. And why putting a plan in place is so vital in ensuring that you have a happy and healthy retirement that has your assets protected and growing and it's also producing income for you to supplement above and beyond your pension. [02:32.2]

Has anyone ever asked you what your plans were for the weekend? Or maybe if you've made plans for say a family vacation? We often think things out in our personal lives because we want to ensure that things don't go wrong, we want to ensure success. I mean, after all, when taking a vacation who wants to miss their flight, I mean, no one wants to arrive at their hotel without a reservation. And planning comes before doing; in a way planning creates a blueprint for potential success. It increases the odds that if we follow our plan, we will enjoy success. We'll arrive at the airport on time for our trip, and we'll be greeted at our hotel with great anticipation. And planning encompasses setting goals. Now, as many of you know, I'm an avid Kings fan and using the NHL as an example for a minute, do you think that every team starts to season off with the same goal in mind, the goal to win the Stanley Cup? I mean, I would say they do, and I think we all can agree. [03:24.58]

So what then do you think makes the difference between the team that wins the cup and the ones that don't? Now for argument's sake, there's obviously teams with more talent and we need to put those players on the teams. It was a business structure behind it. Okay. There's also strength of schedule and different conferences, that all plays a factor. That's essentially like the environment we're in no different than the market or the economy that we're in. That sets the tone for what we, as individuals are trying to set our goal towards. Now, unlike the Stanley cup, being the goal for NHL team, the goal for us is to have a retirement that is sustainable, that our assets are protected and that we can drive income off of the assets that we've saved to supplement our pension. [04:11.1]

Now real quickly, if you're listening to this and before we get started on the meat of the overall planning discussion, we're going to have, if you're sitting here listening and going, you know, I really haven't looked at my retirement plan in a couple of years. You know, it's been about five or 10 years since I got on the job and I set up the deferred comp plan, and I really haven't looked at the investment options. More than anything, I really urge you to give us a call. You can call us at (805) 409-8150. You can also reach us on our website, PensionAttention.com and find out more about our team at ONE Fire and Police. And you can set up your free retirement tracking meeting to take a look at where you are right now and make sure we define the goal for you and make sure you hit that goal. [04:50.0]

Having worked in the financial service industry now, for almost 15 years, I spent a lot of time in planning sessions. And when it comes to planning, there's an author, Stephen Covey, who's credited with the simple but profound statement, ‘Start with the end in mind.’ In other words, what's your goal? What are you trying to accomplish? We've just briefly discussed this and skimmed the surface and I want to go through this a little bit more for each of you that are listening. Years ago, I was first exposed to a really interesting study that I found and it focused on the 1979 graduates of Harvard Business School. The graduates were asked if they had, and I'm quoting here, “Clear written goals.” What the study found out was only 3% had written goals and plans. 13% had goals, but they were not in writing and 84% had not set any goals at all. [05:39.0]

Now here's what I found absolutely astounding, 10 years after the initial study, the same Harvard MBA students were interviewed again and here's what was concluded. The 13% of students who had goals, but hadn't committed them to writing were earning on average twice the amount of income as the 84% who had no goals at all. Now here's the kicker. The 3% of students who had written goals were earning 10 times as much as the other 97% combined. Pretty wild, right? The differentiator being written goals and plans to achieve them. Now, for those of you, who'd like to learn more about the Harvard study and more on this topic, you can go to PensionAttention.com. But you'll also enjoy reading a wonderful book by the author, Mark McCormack, and it’s titled ‘What They Don't Teach You at Harvard Business School.’ Now, ultimately does this all make sense? I mean, we all know we should have a written goal and the plans to achieve them yet for some reason, many of the prospective clients that we see don't and few of us really do if we really think about it, right? [06:39.7]

A few years ago, the investment company, Charles Schwab conducted a study of a thousand retirees. They found that nearly half of those surveyed, spent five fold, more times researching and planning the purchase of a new car than choosing an investment strategy and their retirement plan. For the past few years, I've been involved with Kingdom Advisors, that's actually a biblically based advisory network. And one of the things I bring into my practice is taking a look at a biblical sense of what it means to plan. Proverbs 15:22 is a great verse on this, ‘Plans fail for lack of counsel, but with many advisors they succeed.’ So planning is a part of the doing, he wants us to do what he has planned for us. So we need to basically take the stewardship of what we're had been able to been entrusted with our career, our assets, and be able to work them for good, for the good of protecting you, protecting those loved ones around you, because that's the ultimate goal, right? [07:37.8]

Especially those of us with kids to make sure that what we do with our money, what we do with the good stewardship of our health, right and our career, and being able to bless those around us. And over the years, as you can imagine, we've met with countless prospective clients and current clients, all like you and all have been in these meetings with really very little planning that has been put into place until they meet someone like us. Everyone expresses the concern about their retirement. Can I retire? Will I have enough money to retire in their ideal situation is to make sure before we go into topics like how your investment should be managed, right? Or what insurances you should have or not have. We need to put the overall plan in place and have a written concise plan. I found that people generally fall into three planning categories and yes, as you're listening right now, I bet that you indeed fall into one of these three. [08:30.7]

Do you know how much you should be contributing to your deferred compensation plan? Are you getting the most out of your current investment options? Looking at entering or about to exit the drop program? go to www.pensionattention.com to find out how we can help. [08:47.0]

The first category is someone who has completed absolutely no planning for retirement. And I mean, no planning whatsoever. There's an old adage here, ‘No one plans to fail, they just fail to plan.’ For those of you that are newly on the job, or maybe five or 10 years on and really think that retirement further off and you know what I'll deal with that later, this category tends to be the majority of those individuals. And I urge you, if it's not us, I'm a big advocate. as many of my clients can attest to. I'm a big advocate of finding an advisor and someone you can trust and in, if you want to give us a call and go through our planning and what we do for our active and retired fire and police give us a call (805) 409-8150. You can also go to our website at www.pensionattention.com. [09:35.0]

Now the second category is someone who has actually taken some time and effort to plan for their retirement. They may have met with an investment advisor in conjunction with other professionals, say a CPA or an estate planner, and as composed and elaborate retirement strategy, there might've been some, you know, 80 page document filled with charts and graphs and hypotheticals and probabilities, and of course, pages and pages of disclaimers and disclosures. In essence, it's a largely computer generated great American novel of your retirement plan. And after spending maybe thousands of dollars on the report or a lot of your time, it's really seldom read or understood by anyone. So let me ask you, if you don't understand your own retirement plan well enough to concisely articulate, say to your spouse, how can you reasonably be expected to successfully execute your plan? I don't believe you can. [10:25.0]

So the whole thing just comes down to some pointless exercise, maybe making you feel better, but likely not accomplishing much. It's important to note here as I go into our third category, that when it comes to planning, most of us don't need the same level of planning as say Jeff Bezos. I mean the average American should have a coordinated plan that pulls together all of their retirement plans, their pension benefits. For those of you that have social security credits prior to getting on the job or your spouse does, we would go through that as well as it relates to the windfall provision, something we'll talk about and really your cash savings, and then tying that all into your assets like your home or other real estate and your cash flow. And all of that needs to be balanced against your standard of living in retirement, not someone else's, YOURS! And it should be an uncomplicated plan in which you understand why you are doing what you are doing with your retirement assets. And of course it has to be a plan that you can explain that you understand. [11:25.1]

Alright, the third category, now, this one's kind of funny. This is the category I call the junk drawer. I'll often meet with someone who over the years has made a whole bunch of unrelated financial purchases. And now years later, mistakenly thinks those purchases are a part of some big cohesive plan. For example, maybe when they first got married or first got on the job, you got a life insurance policy. You know, when you're going through the drill tower at the end, you're signing all these Conseco policies and what have you, and then have your first child and you start a college savings plan of some sort. And now maybe you're getting closer to drop or drop exit and you're starting to look at some of the union policies with regards to long-term care insurance. These are all financial decisions that were made in somewhat of a vacuum, they're made on their own merits and really not in coordination with the other or as a part of a larger plan. Now, despite all that today, it's thought of as a coordinated plan. But as you know, especially listening these past 10 minutes, it's not, and that's why I call this third category, the junk drawer, because it's somewhat like the junk drawer in our kitchen. And I've been throwing stuff into my drawer for years and just a bunch of unrelated purchases. They're all valuable, so I don't mean to downplay the purchases themselves, but its all standalone items none are coordinated with the other. [12:41.6]

The good news here and what I want to really stress on this category is for your financial junk drawer, many times these items can be pulled together. Synergies are often possible, but they each need to be analyzed, then, you know, like putting the pieces of a puzzle together will weed out the bad and keep the good and make sure everything fits into the context of the true plan after we've defined that goal for you, like we talked about and build the plan systematically to reach that goal for you on an individualized and tailored basis. So I have to ask which category do you fall into one, two or three? Did you fail to plan or did you create a plan that you don't really understand, or maybe you're entering drop or getting towards drop exit, and you're really armed with more of your drunk drawer. Don't judge yourself at all. In fact, it's not what we did yesterday, it’s what we do today and beyond that matters. So regardless of which category you fall into, you can set a new direction or maybe just make a course correction. [13:43.0]

I just finished a book called Atomic Habits by James Clear. And in the book, it was a really interesting study that I found that relates to a lot of what we're talking about here. Now, my sister, who is an aeronautical engineer, will probably be laughing when she listens to this kind of going, like, what is Brad talking about? But the math made sense to me, and it has a lot to do with what I described to my clients when it comes to setting the course for the goal you're trying to achieve. Imagine you're flying from Los Angeles to New York City. If a pilot leaving from LAX adjusts the heading by just 3.5 degrees south, you will land in Washington, DC instead of New York. I mean, such a small change, right, is barely noticeable at takeoff. The nose of the airplane moves just a few feet, but when magnified across the entire United States, you end up hundreds of miles apart. Similarly, what I'm discussing here today on planning, the small changes you're making that may not seem large at the time, end up affecting the course of where you're going to be when it comes to retirement and that boils down to everything, even on the granular level, with regards to how much you should be contributing to your deferred comp, it's something we'll about on our later episodes. [14:53.0]

With regards to managing your cash flow and your active duty pay versus overtime that house purchase you have, or maybe a refinancing discussion that's happening right now, right now with a lot of low interest rates, all of those decisions you're making have a big impact. And if you don't have a plan put together for all of those decisions to fit into and to cohesively work together, then I urge you to give us a call (805) 409-8150. Again, you can also set a meeting on our website at www.pensionattention.com. Wherever you're at in your career right now, again, if you've been a year on, just get out of your probation house, or you're like four months left, say, before you drop exit, what you do today does matter, because what I've noticed in almost 15 years of working with active and retired members is that majority of the retirement word that gets discussed has a lot to do with an end goal. Like by the time I retire, I need to have X amount in my deferred competition and drop planning and I have this amount in my head. [15:55.0]

Now there's nothing wrong with that, but again, like I said, it's important to put that in context, that's a key word here, Context! Over the years, I've always heard this number and you're probably listening, thinking of the same number, a million dollars. If I just had between my deferred compensation plan and the drop balance, a million dollars. And I'm going to forget for a second VC and SK time or bank hours, right. And I think that number is great and it's fine, it's a large number. You know, I understand that. But what I mean by context is if you compare that to say an 80 or 90 or a $100,000 pension amount in retirement as well, and you have say $120,000 of a lifestyle, well, that extra $20,000 has to come from somewhere and it's going to come from your retirement savings, right? No longer going to come from overtime, because you're now retired. [16:44.0]

So we need to make sure we put in context, what $20,000 will mean to you as an income draw from your retirement plan, based on the balance you have. And that gives us a percentage of what we call your spending rate. That tells you so many things that makes you comfortable with the biggest question you're going to have, which is, can I retire? Do I have enough money to retire? It also lets us know as our investment manager, before we talk about aggressive or conservative something we'll talk about in our later podcasts as well, but it gives us a great context as your potential investment manager here to understand how we should be managing your assets. If you show that you need a two or 3% distribution rate, well, right there, we have a great, great, healthy conversation for us to have around. Do we need to carry on all this risk if we really only need two or 3%? Now I'm stressing the word need there because obviously as us as Americans, we also have the other four letter word of want. Need and Want, right? [17:40.9]

So we need to put those in context again, using that word again, context with regards to your plan, what is that you need first, what we call needs based analysis. And we got to marry that with what you want. That's where we go from in the nerd world of my world, right? We call it quantitative versus qualitative. Okay, quantitative being the numbers, running through the distribution rate and those items, right? And then the qualitative being the quality of life, the goals that you want to have, and we need to put those together in an overall plan for you. [18:11.3]

Thank you all for listening today. If you found this informative, you can go to our website to find out more PensionAttention.com or you can give us a call at (805) 409-8150. Again, both on the website at www.pensionattention.com or on our phone number (805) 409-8150, you can call and talk to one of my advisors to be able to set your free retirement tracking meeting. In that, we'll be able to take a look at where you currently are when it comes to your deferred comp plan and pull some of the pension numbers and really build that retirement plan that we're talking about. Because before we start any other topic on this podcast or in your financial life, putting the plan in place makes all the difference. [18:52.0]

Next week on Pension Attention, we're going to go over, ‘Why you need a Financial Advisor? An advisor you can build trust in to help you build this plan that we talked about today. I'm looking forward to it, but until then stay safe. [19:05.3]

The information in this podcast is educational and general in nature and does not take into consideration the listeners personal circumstances. Therefore it is not intended to be a substitute for specific individualized, financial, legal, or tax advice.

To determine which strategies or investments may be suitable for you consult the appropriate qualified professional prior to making a final decision. [19:28.3]

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