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Money is a difficult topic to discuss with other people. This makes it tempting to do it alone when it comes to planning your retirement.

This is a mistake.

Even with the necessary knowledge, your emotional connection to your money can blow up your retirement.

In this episode, I discuss how financial advisors can grow your money faster and why a financial advisor is helpful (even if you don’t have a lot of money saved).

Show Highlights Include:

  • What Edmund Hillary’s climb of Mount Everest teaches you about not wasting the money you’ve worked hard to save (3:00)
  • How “Liquidity Events” can ruin your retirement if you don’t have the proper guidance (5:01)
  • Why a financial advisor can effortlessly add 4% to your retirement returns if you choose the right one (9:42)
  • The surprising reason managing your own plan sabotages your ability to retire without a side job at Wal-Mart(11:15)
  • Why financial advising goes beyond managing money and how it can impact your health and mental well-being (12:57)
  • The retirement-destroying mistake first responders make in hiring a financial advisor (even if you don’t have a lot of money) (16:35)

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. If you want to find out more about me or our team at ONE Fire and Police and set your free retirement tracking meeting, you can go to our website, PensionAttention.com. Again, PensionAttention.com or you can give us a call (805) 409-8150 again, (805) 409-8150. [01:13.7]

Mount Everest, the tallest mountain in the world stretches over 29,000 feet above sea level, which gives climbers around the world the ultimate challenge. Now in 1953, Sir Edmund Hillary became the first ever known person to successfully scale the summit of Mount Everest. He was accompanied by his Sherpa Tenzing Norgay, a Sherpa like Norgay is a native Himalayan guide who knows the mountainous regions of the central Asia area and they help climbers complete their expedition and preparing hiking routes and sheltering them from life threatening elements. During his attempt, Hillary actually fell into a canyon, but he was actually saved by Tenzing’s prompt action, securing a rope to his ice ax. A surplus knowledge and experience is what makes them invaluable. Now decades before Hillary successful climb, a man named George Mallory attempted the same feat and some actually believe Mallory reached the summit of Mount Everest years before Hillary did. Unfortunately Mallory never returned from his journey. His remains were discovered in 1999. He was found actually in his rappelling gear indicating he was on his way down the mountain. [02:22.1]

He had actually also told his wife that he would leave a photo at the summit if he was successful. And this photo was not in his possession, giving you a more proof that Mallory did indeed make it to the top of Mount Everest. So why is it that most people have never heard of George Mallory because unlike Sir Edmund Hillary, he had not successfully made it down the mountain. In fact, the majority of deaths on Mount Everest occurred not on the ascent, but on the descent. The difference between these two men and their efforts is that Hillary had a guide, a Sherpa, a guide who had the experience and the knowledge of the terrain, which was the key to Hillary's success. So why is this story important? I, I think it's an incredible illustration of the retirement planning journey. Look, many of you do a terrific job of accumulating income and making it to the top of your financial mountain, so to speak. [03:13.8]

But the challenge is making it down that mountain, the descent, really into the income distribution and preservation years. I mean, end of the day, we're talking about your assets here, your hard work, it's never lost on me or my team. The trust that is given to us by our clients to help them manage not only their investments, but the overall plan, but again, the end of the day, this is your assets. So we want to be good stewards with you and provide our experience and knowledge. And I am speaking proverbially as the we for advisors. Okay. And I know that for a fact, for us at our team at ONE Fire and Police, but we want to provide you that real world experience and expertise and overall knowledge base to help you get you there. Because end of the day you have 25, 30, 35 years on eventually when you start looking at retirement or drop exiting. We want to make sure that that mountain, that you've built, that you've been successful at with regards to a great pension number, deferred compensation and drop balance. These are all great benefits that you earn. So we want to make sure that we're getting down that mountain. That's just not me talking because it's a good analogy. It really is a good picture of making sure what you've built now becomes useful for you in the way that it enhances your lifestyle. [04:31.0]

And we do that by the income distribution phase and what I mean by that is liquidity. Now as a term in our industry that's used sometimes called liquidity event. And I know it's a little bit lost on a lot of people, but it sounds a lot sexier than it really is. But in reality, what it is, is it's making sure that your dropped a for comp plan that you've been saving, you know, your entire career for, all of a sudden, sudden becomes accessible to you. And how we use that for you is what matters. That's how you supplement your lifestyle above and beyond pension. Said differently, and I use this a lot with my clients, imagine your deferred comp plan and drop. And for this case, we'll add in your vacation and sick time. And maybe even your bank hours as your lump sum liquidity available to you to supplement your retirement. And what I mean by supplement is create an income distribution or a distribution from those assets to add to your pension. Okay? [05:23.7]

So for example, let's create a case study here for a second. This happens with a lot of my clients and it's very common. So hopefully you relate to this, okay? Imagine you go from active duty to retirement. And in retirement you have around a $90,000 pension amount. So $90,000, but your lifestyle is on $120,000. Okay? So you have $120,000 going out $90,000 coming in. Okay. Now we're going to forget taxes for the moment. I'm just building a case study here and we'll go through that with our planning with you. So you can give us a call to go through your specific amounts. Okay. But on this case, study and track with me for a second $90,000 coming in on pension, $120,000 going out as your lifestyle. So where is that? $30,000 coming from? It's no longer coming from overtime. Okay. Cause you're now retired. Right? And the idea, at least most of my clients don't want to have to go get a Walmart greeting job. Okay. We don't want to have you do that unless you really want to. Okay. So where's that $3,000 coming from. That's where you get into the notion of working smarter, not harder instead of the 30 years on the head, on the job where you went to work and you did the overtime and you put in all the effort there. Now you're building a team like with us, for example, to have some trust in knowing that when we send you dollars from your account, your money, right. It's in order to build a supplemental income on top of your pension. [06:35.5]

Now what's important about the planning with that aspect is to put that in relation to your overall liquid account, this is where an advisor becomes a huge advocate here, because it shows you not only you as the client and your assets, that you're entrusting to someone. Okay. But it also tells us as an advisor, right? Where you stand in terms of your distribution rate, if that $30,000 in my example, okay. And you have a million dollars, again, as another example here between differ comp plan and drop $30,000 divided by a million is 3% that shows you have a 3% distribution. Okay. Historical average has always been, you want to have the distribution rate around 4 to 5%. There's a lot of studies on that that have been shown, right? So if you think about that, you're under the national average, you're under the sustainable distribution rate, which is a good thing that tells you a lot of discussions that we would have them with you as a client. Something we'll talk on this podcast about as well, with regards to how that distribution rate relates to your investment management. [07:31.8]

Your need not want yet, but you're in need to have a certain return, right? That also puts helps. You put things in context with regards to how much you feel you need to earn. Okay. It's not a tableside conversation at the kitchen because someone says you're in 10% and you need to earn 10% or you're behind. That's not the case. The good thing about planning is, and what an advisor comes in to help you with is put your picture in perspective. If you only need 3%, then we have a conversation to have around. We can go and earn more than that. Okay? That's a conversation we'll have together about what you want on top of what you need. And that's where I think an advisor becomes a huge advocate for you. And so if you haven't done so already find someone you can build trust in, do it today, the sooner, the better, because the idea is to build that trust with someone to help you build this overall plan. If you'd like to use us, we have plenty of experience and I got dedicated fiduciary advisors on my team that I've trained personally with my over 12 years of experience, working with active and retired service members, give us a call (805) 409-8150. You can also go to our website at PensionAttention.com.

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. [08:54.4]

To put some things into perspective when it comes to why having an advisor is an important aspect for clients or for individuals looking at building their overall retirement plan. There's been some studies recently that have come out different ones from Envestnet and Russell investments, in Vanguard, quantifying the advisors alpha, so to speak. The Delta, the difference that having an advisor adds to your overall portfolio and really your financial planning. Now I'd recommend you look into some of these studies and understand the metrics around it and I'm happy to go through those with you as well. But the key takeaways is that the industry studies have estimated that professional financial advice can add between one and a half percent to 4% on portfolio returns over the long-term, depending on the time period of how returns are calculated. But you can see there's a Delta there and my takeaway personally, from my experience is also in that said differently. It's like taking the sharp knives out of the drawer for a lot of clients when it comes to investments. [09:52.1]

And I say this to a lot of clients, my personal account for my wife and I, and my family is not managed by myself. Most people are kind of shocked by that saying, wait a minute, you got all 15 years in this business and you know how to manage assets and that's all true. But the end of the day, I'm still a human being with emotional connections, no different than you listening on this podcast. I related it sometimes to this, when I'm at the station. Now you got to remember I've been in this station pretty much my entire life. I mean, I grew up as a fireman son, right? So we would do obviously the Christmas and Easters. And obviously you had to spend a lot of time at the stations. And as much as I've been around the station and around the trucks, if you were to look at me and say, Hey, Brad, go turn that truck on, I would look at you like a deer in the headlights. It's going from a guy who spent a lot of time member as a civilian granted, but a lot of time in stations. And what I'm trying to get at there is it's a lot, like you can turn the markets on, on Fox or CNBC or whatever it is you're listening to. Right. And study the markets, listen to people, even watch maybe Cramer and his mad money and all that good stuff, everyone does out there for entertainment purposes. It doesn't mean you're the right person for the job when it comes to managing assets. [10:56.7]

I'm not saying you're not either. I'm just saying, look at it. In context, I'm using my own personal experience to share on this podcast because I want to share that even though I have the experience of doing it, I know my limitations and my limitations aren't essentially for me or my experience or knowledge, cause I have that right. But it is still that I have a emotional connection to my money. So I offload that connection. I want someone to look at it unbiasedly, right? I want someone to look at objectively. The same portfolio manager I have from my clients is the same portfolio manager I have for my family and my 401k. Just like your deferred comp plan, it's my 401k and my personal assets are managed by our team. So even someone in the business of advising clients with their investment management and overall retirement planning still chooses to offload that for the same reasons I mentioned to you is the reason why an advisor has so much value to building a retirement plan, that succeeds, and to take the sharpen highs out of the drawer, as I mentioned for even myself, right? And that's a key component that had maybe not just won't show up on paper in terms of like a net return. [11:59.4]

So I'm trying to add a little other experience and real world examples of what I'm saying is, and I hear this a lot from clients as well and I share this notion is that I want to keep myself away from me about spendings on certain areas I don't need to spend on my advisor internally keeps me in track, right? Helps me with understanding how my assets should be managed and then the actual investment management itself, so to speak right, stays on track with the plan we put together. Now we've talked a lot about the money management in the past few minutes with regards to why having an advisor is of such value, but a one on one relationship with a financial advisor, such as myself and my team. It isn't just about money management. It's largely about providing an ongoing planning structure, one with accountability to offload that burden off of you and to know that you're in good hands with that experienced person to help you guide you down that mountain. [12:50.1]

And to really ultimately give you peace of mind while you are pursuing and living the goals that you want to have. Now, if you haven't set those goals and you wanted to find those, that's where an advisor comes in as well. Now I'll stop here and say that again. It's important if you haven't done so already and it doesn't have to be us. I'm a big advocate to find an advisor you can build trust in, but I really recommend you do so. You can give us a call (805) 409-8150. You can also go to our website, PensionAttention.com and you can schedule a free retirement tracking meeting. We'll literally walk you through where you currently are right now. So if you're sitting and listening this right now saying I got five years on or 10 years on, or shoot even 25 years on. Right? And you haven't looked at your investment options in a while, or you haven't put this plan together that I talked about last week. And then I'm talking about today as well. Or you haven't built the relationship with an advisor and you see the value in doing so, or at least you want to explore further the value of doing so, right then I urge you to set that time. It's really; it's more about you than anything. Give us a call. (805) 409-8150. [13:52.9]

The value of an advisor long-term is there, T=the studies show it. I've definitely seen it firsthand from my own real world experience that I want to share with you. But it's also about the shorter term goals as well. For some of you listening maybe with a year or two on, or maybe even 5 to 10 years on that retirement still seems a little bit further away having an advisor doesn't just mean you have to do it only for later, or really focus only on long-term stuff, right? A lot of it has to do with the short term impacts that we do today that matters. I talked a lot about this last week on our podcast with regards to why planning matters. And the planning we're talking about in the overall picture is setting the goal first and working backwards. For example, when I'm at stations, I asked this question at almost every station meeting I have. And usually it's responded with pretty much everyone raising their hands. And the question I ask is this, when you first started contributing to your deferred compensation plan, how many of you did so based on what you can afford? [14:53.8]

Again, most of the hands go up largely because that's usually the singular focus we get so dialed in on and it makes sense, there's nothing wrong about that. But I urge you to look at this. The end goal is what matters. Wouldn't you like to know, Hey, that $100 I'm putting in every two weeks, every other Wednesday, when we get paid, right? That $100 I'm putting in, I currently have a $50,000 balance on my deferred comp plan. What's that going to look like 5 years from now, 10 years from now, 20 years from now, right? The best part about what we do as planners and advisors that we can set these courses for you, right? We'll be able to show you what that is. Without making any changes, let's just track where you're currently at. Okay. Then from there we can work backwards. We say, okay, that $50,000 now, all right, with a $100 going in till $200 a month will be X amount within 10 years by the time you retire. Then we put that number in your overall picture and say, Hey, okay. So now that you know that number, right, and we combine that with drop estimations, we were able to get your overall number, that then we can derive the actual plan that I talked about when it comes through distribution planning. [15:56.9]

If you don't know that it's massively important that you focus on some of those things because whatever years you have on right now, I don't care if it's two years on or 20 years on. Okay. It's important for you to put that in perspective because tracking that's the first step in this whole thing and finding an advisor to add value to you, someone you can trust, lean on and go to is the relationship you want to start cultivating today. Now for the biggest misconception that's out there that I really want to share with you. If you're listening to this podcast right now, and you feel like, gosh, I don't know that I have enough in my deferred comp plan to warrant hiring my own advisor or an advisor that would care enough to deal with my current assets. I promise you that is not true. Don't let that get in the way of you reaching out to an advisor, to help you build the plan that you want to build and meet you where you are at at whatever balance you have in the deferred comp plan, whatever you're contributed to for compliment, whatever years of service you have, reach out to someone. [16:57.2]

And if you'd like to find more about me and my team at ONE Fire and Police, you can go to PensionAttention.com or give us a call (805) 409-8150. And again, we will build your own retirement tracking and forecast where you currently are at for free. And if it's not us again, find someone that you can find that same service in. You can build trust in because end of the day, what I really want to share with you is that having an advisor, having that Sherpa, so to speak, or that guide someone with experience and knowledge of the terrain is what will help you get from active duty to retirement and to live the life that you want to live with the goals that you have set out for yourself. Thank you for listening to Pension Attention. Next week, we're going to go over the six things to avoid when it comes to investing, I'm looking forward to it, but until then stay safe. [17:48.8]

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. [18:11.6]

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