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Retirement planning starts as soon as you get a job. But the act of saving money alone isn’t a plan. Taxes and inflation could end up eating more money than you save. 

Treating your money with purpose is the only way to reach your retirement goals. And if you want to retire stress-free, you need to know what that means to you. 

In this episode, I discuss how to set a course (and keep on track) for a sustainable and abundant retirement.

Show Highlights Include:

  • How to avoid unwanted stress in retirement planning with advice from a 116-year-old. (4:15)
  • How to replace the ‘junk’ in your portfolio with assets that provide purpose and pleasure. (7:32)
  • The ‘Ronald Reagan’ way to avoid bad advice online and craft the perfect plan with a professional. (13:15)
  • How to build an abundant retirement portfolio with a single number. (15:20)
  • How to protect your heirs and preserve legacy estates with the ‘Six Feet Under’ clause. (21:19)

To schedule your complimentary retirement track review, head to https://onecapitalmanagement.com. You can also call us at 805-410-5454 or text the word ‘TRACK’ and we’ll reach out to you.

Read Full Transcript

Welcome to Make your Money Matter, the show that aims to change the way we think about financial advice. So, you can make better decisions.

Brad Barrett is a managing director and partner at One Capital Management, a wealth management firm serving nearly 1500 clients nationwide. With over $2.5 billion in assets, they’re a group of advisors dedicated to ensuring their clients achieve their investment and retirement goals. And now here's your host Brad Barrett. [00:26.1]

Brad: Welcome to Make your Money Matter, the show dedicated to helping you create a better relationship with your money. I'm your host, Brad Barrett, and it's my goal to help you distill the best ideas when it comes to your finances so you can make more confident money moves. Here at One Capital Management, our mission is simple to help our clients and you listeners take control of your finances and build the life you deserve. Friends, you hear me say this each and every week, because today the challenge is no longer the access to information, but rather it's finding the right information and more importantly, how that information applies to you. And that's my commitment to you here each and every week on the Make your Money Matter podcast because after all your money matters. And I want to send out a big shout out for each of you who listen here each and every week, and if you haven't already done so you can go to our website at onecapitalmanagement.com. You can click on the media tab there and there you can download and subscribe to Make your Money Matter podcast. You can also download and subscribe the podcast on any platform where you would otherwise download a podcast, whether that's the Google podcast, the apple app on your phone, Spotify SoundCloud. And by the way, leave us a comment, let us know how we're doing. It's always good to get feedback. And if you like the show, tell somebody to like, if you don't like the show, I guess tell someone you don't like, but share it. [01:46.9]

Because you know what today's topic, I want to talk about something that I find we speak about here as advisors at One Capital Management to all of our clients and that's the keys to retirement and specifically three important keys when it comes to crafting your retirement plan. And as a quick note, when you hear me talk about a retirement plan or some of those planning aspects, if I'm talking to someone here who's maybe in their twenties or thirties or forties, and your kind of going, Brad, why would it be talking about a retirement plan? That's like for my parents or my grandparents. Isn't that what that's for? A retirement plan, just to be clear is also an investment plan. It's understanding where you are going with your money. Set differently, it's important to know what you are doing with your money and why you are doing it. So yes, setting a course for a retirement plan, even in your twenties or thirties is paramount to making sure that those goals and objectives you have happen. Wouldn't you agree? Setting a course and filling in that course, all those steps along the way with having a design plan is what keeps you on track to again, be at that stage in life, maybe what your parents are, or your grandparents are right now to be able to have a sustainable retirement life that is able to hit all those goals and objectives like we just mentioned. [03:03.8]

And in thinking about this episode this week, I actually came across an article written on JamesClear.com and James Clear, one of the guys I follow, I think he's a great author. His book called Atomic Habits is a great book. If you haven't read it. And he was talking about lessons, we can learn from the world's oldest living person. So real quickly, Bessie Cooper died a couple of years ago at the age of 116 years old. She was, and I “the oldest living person in the world. She was also one of the five oldest Americans in history.” So, this struck my attention, it was a quick article I was reading, she was born in 1896. Now, first and foremost, that just struck out to me. I mean, literally this is a person born before 1900, literally two centuries ago, if you think about it, right. [03:51.2]

I mean, 1896, you think about that and you're like, geez, that's a long time ago. She was married. Her husband Luther, they got married in 1924. Believe it or not, he actually died in 1963, which also seems like quite a long time ago. And she never remarried. She had four children, 11 grandchildren, 13 great grandchildren, and get this, two great, great grandchildren. Now during an interview with the Guinness book of world records, Cooper was asked about the keys to living a long life and she offered two pieces of advice. And the reason I'm bringing this article up today is because for two reasons, one, I think it actually plays into some of the keys I'm going to talk about as it relates to crafting your overall plan, your investment plan, your retirement plan. But two, I actually found these two pieces of advice she offered to be somewhat surprising. [04:40.9]

So, the first piece of advice she offered was I mind my own business. The second one, I don't eat junk food. So, let's talk about the wisdom in these two, very simple, but I think if you look under the cover a little bit profound statements and how you can use that to live a better life for all of us. Don't, we all want to learn from someone who's already gone through it? I think it's a really wise thing. So, let's talk about the first one. I mind my own business. Look, let's all talk about it. Stress is a killer. It's a silent killer. We all know it. I think now more than ever in our generation in particular, we know that stress is a killer and it can take years off of your life. And in some cases, it can end it altogether. There's no doubt that Bessie's mantra of minding her own business, helped her avoid maybe some unnecessary drama, useless comparisons, if you will and unwanted stress. That to me is a good lesson to learn. And it's a deeper wisdom, then again, it appears on the surface. [05:42.1]

So given how much we focus on our own lives, it would be really easy to convince ourselves that we're minding our business. When in fact we're probably doing the exact opposite. We care about the job we have, do we not? The house we live in, the clothes we wear and the car we drive. And there's nothing inherently wrong with that, I want to be very clear about it. Except that in many cases we think we are minding our own business, but really, we are somewhat slowly being sucked into comparing our lives to our peers, our neighbors, and our community. I talked about it on this show before. I definitely talk about it in our practice with our clients, especially because this is a very clear money context, sometimes. It's that keeping up with the Joneses or I call it the Kardashian effect. Nowadays kind of looking over your shoulder and seeing, Ooh, what car do they have? Ooh, that looks good. I think I want that. Or try to even one up that and trust me, I'm guilty of this as well. We're not immune to this we're humans. And I like being respected and praise as much as the next person. So, if those bring clout to our world, which sadly, sometimes they do, we tend to get wrapped up into it. None of us are blind to it, but truly minding your own business has nothing to do with comparisons. That's what I'm getting from this article. It means knowing that what you stand for matters. You know, distancing yourself from the unimportant and maybe unnecessary drama that has a way of seeping into our daily life. Because we want to live for the people around us instead of comparing it to the people, not around us. Wouldn't you agree? [07:17.1]

So again, a simple statement of, I mind my own business may seem really an odd statement to be made by the oldest living person in the world. But I thought a little more profound than just that. And so that leads me to the second piece of advice she provided. And it's, I don't eat junk food. Now, to be honest, I hit this one. This hit me hard. Okay, and if for anyone who knows me knows I am an absolute sweet tooth. You put a thing of Oreos in front of me. It's not just one or two for Brad, it is the whole freaking thing. It will go down so fast, it's scary. I love junk food. It's a problem. I deal with it, but it's a part of me. And so, this one to me, I laughed at it to be honest. And Bessie, apparently didn't eat junk food and I guess I would suggest that we shouldn't either. I know I try to curtail it quite often. But this piece of advice is I think a lot more than what we think about when it comes to maybe putting something on your plate. If it's not a good idea, let's say to fill your stomach with junk food, then it's probably not a good idea to fill your mind with junk thoughts or your day with junk energy or maybe even your life with junk people. Wouldn't you agree? I mean, the work you do, the enthusiasm you bring to life, the people you hang out with these aren't just life decisions, they're also health decisions. Wouldn't you agree? I mean, fill your plate with real food instead of maybe processed junk. And you'll go from overweight in my analogy to overjoyed. [08:44.6]

Trade, maybe watching TV for going on a photography, adventure and you'll go from consuming what someone else created to contributing your own work to the world. Surround yourself with people who are doing amazing things and you'll go from how could I ever do that to how could I not. The way you live and the health you enjoy are one and the same. You can't do “some healthy things” and then get on with your life. Your health and happiness are merely an expression of how you live your life. The good news is, that the best way to live a life is also the healthy way to live a life, right? Dedicating yourself to fulfilling work purpose. I mentioned this quite often on this show and I bring a lot in my practice personally, as an advisor here at One Capital Management, one of the books I recommend for a lot of clients who we start getting into deeper conversations is Purpose Driven Life. It's a great book by a pastor named Rick Warren. And it literally starts the first sentence of the first chapter starts with, it's not about you. So, understanding what a giver's high means, it's actually a studied item, understand that when we give to other people or we do good for other people in our community, we actually get some endorphins out of it. [09:53.6]

So again, dedicating yourself to fulfilling and purposeful work, exploring life with curiosity and enthusiasm and contributing to the world around you and surrounding yourself with people who are inspiring and exciting are great ways to not just live a wonderful life, but also live a healthy one. So those choices don't merely make you feel alive, they keep you alive. Crazy me, when you think about it that way, right? So, when we learn from the world's oldest living person, maybe Bessie Cooper, didn't get bogged down in the drama and the junk of life because she was too busy setting her sights on something else. When she was asked, what advice you would give to high school graduates? Bessie said, you can do most, anything, you set as a goal in life. Pretty crazy, right? So, Bessie Cooper didn't become the world's oldest living person by accident. She knew that what you put into your life determined how much and how long you got something out of it. [10:49.5]

So, you might be thinking, Brad, why are you showing me this story right now? Well, if you think about those key points, not just the advice of mind, your own business and don't eat junk food. Again, may seem very simplistic when you just read it kind of funny in a way, but there's more to it. There's more under the surface. So, when you hear someone like myself, a financial advisor has been doing this for nearly 20 years on stating something that I see every day and we here at One Capital Management as advisors see every day with clients who set that discovery meeting to sit with us and really truly go through, not just their quantitative and numerical data around a financial plan or an investment plan, all the numbers and stuff we need to go through but also the qualitative information, the goals, the values, the interests, the relationships. Money is at the core of a lot of what I was just talking about when it comes to Bessie Cooper. Wouldn’t you say? The junk food as an example, we want to fill our lives with things that are meaningful, not necessarily get wrapped up in what we have because we can't take it with us. I think we all know that. And the first one is mind your business, right. Again, we want to make sure that we stay in our lane and not compare ourselves to someone else. [11:59.3]

Financially, we see that all the time as one of the main reasons or drivers really, that gets people into debt. And we talk about that a lot in the show, there's a couple of episodes we'll go through on those specific items. But it also is a great segue, this article is reading about Bessie Cooper, the oldest living person who died 116 years old, some of the advices she was talking about also lends into what I would call the three keys into crafting a plan. And more specifically to her comment that she gave high school graduates, “when she said you can do most, anything you set as a goal in life.” A plan is about setting a goal, a destination. If you don't know where you're going, you can go anywhere, right? Some of that's freeing wouldn't you like to know you're heading towards something. And we talk about that when it comes to certain numbers or questions. In fact, last week, or a couple of weeks ago, we talked about on episode how much we should be contributing to a retirement plan. And a lot of it has to do is, well, first off, before we answer the question of how much you should be contributing, we didn't know how much you need first. If we start there, we can then back into that actual answer for each individual person. [13:08.8]

But on the three keys to crafting a plan, which really is where it starts. It's important to note that I think item number one, one of the most important things you can do, this is going to sound a little bit oxymoronic coming from a financial advisor, or maybe even self-serving in a way, but find an advisor. That's key component number one. Don't trade, internet advice or something you heard from a buddy or something you heard or read on a social media post as advice, or truly understanding your specific situation. If it's not me or us here at One Capital Management, my big thing about key point number one is find someone that you can build trust in. That's where you start. Ronald Reagan said it best “trust, but verify.” Find that trust and verify. Understand where that advisor's coming from. What is his ex, his or hers experience? What are their licenses and their credentials? Find that person that you can build trust in because that's where it starts. If you can find trust in someone, you can meet with someone, either kneecap to kneecap or nowadays virtually whether it's via zoom or a phone call. Reach out to your community, your relationships, you trust that you already trust maybe to have a referral. [14:21.4]

And again, that's why I, one of the reasons why we do this podcast, here's the, for us in our local community, in particular, to get out there and into our client community across the nation is to know that we want to be good stewards to our clients, but also our client's relationships. If we can help them, we can help you. And so, understanding that relationship, that advisor role is hugely important when it comes to again, the first pillar of crafting your retirement plan. And again, our retirement plan is not a retirement plan for those of you just listened here may be 55 or 60. It starts as soon as you have a job, let's put it that way. That's, that's a good starting point, right? You can design and craft your retirement plan. That may seem insanely far off, if you're sitting here 25, 30, 35 or 40 years old, and you're like, man, that's like 30 years from now or 20 years from now. The reality is if you set your goals, you can achieve them, but you have to set the goals and then have a plan that keeps you on track to reach those goals. [15:18.3]

And as we head into key point, number two, it has to do with money obviously, but that's a good key point number two. Now real quickly, stashing away money for retirement is, or any savings is both smart and necessary to increase the odds that you will be financially secure once your working career comes to an end. But the act of saving money is not in itself a retirement plan. I want to say that again, the act of saving money is not in itself, a retirement plan. You also need to be intentional and purposeful in establishing how much money you will need when and how you will spend it, how taxes might affect you and a host of other issues. So again, as we look into these key scenarios, the foundation, a pillar of crafting a retirement plan or investment and retirement plan in general starts with finding that advisor you can build trust in. [16:11.6]

And the second key component to crafting a great retirement and investment plan is knowing what your eventual income distribution will be. All right, let's talk about something real quickly. First and foremost, everyone loves talking about rate of returns, who doesn't, right. Especially if you are the one who's had a great return in an investment you've done before you want to talk about it. In fact, you're stoked about it, right? And by the way, if you're also listening here on the other side, we also don't like necessarily sharing, oh, you know what? I invested 10,000 over here and I just, I lost it. Or it's just not coming back to me. Like that's not fun. Okay. So, understanding that we love talking about the good and the bad of a rate of return, but very rarely and sadly, and what I want to talk about today is no one really talks about what your income distribution will be when you retire or said differently what your sustainable withdrawal rate is. I've said this on this podcast, before I say it heavily in our practice, and we've been firm heavily believe in this when it comes to our plans, is that the distribution rate, knowing what your distribution rate is or spending as a percent of your liquid assets in retirement is equally as important as a rate of return. Here's why here's a hypothetical for you. [17:22.4]

You're going and earning 8% per year as a hypothetical. But when we run the plan, you're spending as a percent of your assets that you save to live the lifestyle you want. You're spending 10%, you're earning eight, spending 10. Your net, negative 2%. Are you not? So, understanding what your distribution rate is, has a lot to do with how you manage a portfolio. So, building your portfolio, now, whether you're starting in your twenties or thirties, or forties, has a lot to do with the accumulation phase while you're working and saving and working, and saving, and it changes may change, why a plan is really important here when it comes to retirement. So, knowing your income distribution is really important, because probably the top concern among many retirees is running out of money, that fear of running out of money. And I've talked about this heavily in the show too, before we want all of our clients and anyone listening here live a life, both working and in retirement, when you end up getting there of abundance. Living and working in a life of abundance, not scarcity. You don't want to go into retirement or any time period, when you want to be financially free of having to work and feel anxious. You want to know that the plan that you have, that your money's working for you now and not you for it. It puts the money in your power, not the other way around. And I said says before money is a great employee, but a terrible boss. So, a plan helps get that relationship right. And [18:51.0]

And as I've said before in this podcast, and we'll talk about it more and more, and I know I've said this a couple of times here, is a distribution rate, a healthy, sustainable distribution rate, there's a lot of studies out there on this is somewhere between 4 and 5% of your assets. So, if you end up saving a million dollars, we can probably pull between 40 to $50,000 a year as a sustainable income distribution in retirement. This will supplement any pension you have. maybe any rental income you might have out there, social security. So again, dialing in what you know, on a forecasted basis, what your lifestyle will look like with those goals and objectives, and then backing into the numbers will then help us answer a whole host of questions as it relates to your retirement plan. So again, key point number two in crafting a great retirement plan is understanding and knowing your income distribution. [19:41.2]

And if those of you listening, right, who haven't done that before, or if you have built a plan before, and haven't really focused on that, or don't remember it seek out that advice, find that advisor. And if you don't have one, you can reach out to us. You can always call us here at (805) 409-8150. You can go to onecapitalmanagement.com and you can actually set some time right there with myself or any one of our advisors at One Capital Management. We'll be happy to go through a complimentary retirement track review meeting with you to help you define those goals and objectives. Okay. Little snapshot here, as we head into key point number three. [20:16.0]

As you can probably see, I'm doing a little bit of a beginning, middle and end discussion here when it comes to the three specific high level, key points and considerations when designing our retirement plan. Key point, number one, is find that advisor to help you build it. Key point number two is understand the big question out there is, do I have enough money to ultimately retire? And that could be when you're 40 or 65. I mentioned a couple of weeks ago, a prospective client I saw who wanted to be financially free by the age of 40, he was 25 years old. He didn't to retire necessarily, he just wanted to be financially free at the age of 40. So, we talk about retirement. It could just be that you want to do other endeavors than just work your entire life. So, it has to do with how we construct that. So again, a retirement plan doesn't need to be, you're working for 30 plus years, and then you retire. It can be whatever you want it to be. So, find that advisor to help you construct that plan and then know what your eventual goal is. We'll help you define that. So those are the first two key points. So, beginning find the advisor middle, understand what you're going for, and then build a plan along the way. And then thirdly, get your estate planning in order. Understand what are we call legacy assets, what you want to be doing with your money and whom you want to be leaving it to. That is important. I call it the six feet under clause, if you will. None of us like to really dwell on this topic by the way, but eventually our lives will come to an end. Ben Franklin said it best death and taxes, right. And it's vital. I think to have a plan in place with the right assets, get left to the right people in the right way. I want to say that again. The third key consideration here in crafting a retirement plan is knowing your legacy plan, understanding your estate planning, because it really is vital to have a plan in place so that the right assets get left to the right people in the right way. [22:03.6]

Now, perhaps surprisingly, even the wealthy and famous fall short with this sometimes. We've seen it here at our firm with certain clients. And we think that just because they're wealthy, they have a bunch of advisors and do it right. Well, sometimes it doesn't happen that way. I mean, when Prince died in 2016, it was discovered he had no valid will. And his huge estate has really been litigation ever since. Now, closer to home, I've personally seen situations where coming in with our perspective, clients were talking through it, property wasn't titled correctly. Beneficiaries may not have been listed correctly on certain accounts. So, this is a problem sometimes, and it causes problems for heirs. So again, as the third key component to crafting a really great retirement plan, you got to imagine, and certainly creating a retirement plan that covers all the bases of finding the right advisor, building the right plan and the goal you're going for. And one that covers the complicated estate planning matters to consider really, again, conferring with that professional. And by the way, here at One Capital Management, we don't have estate planning attorneys on staff. We have our strategic partnerships with really great tax advisors and estate planning attorneys to help navigate a lot of these complex issues that we work with with our clients. [23:17.2]

And of these three components, you can easily see that there's a lot of things that fall under each of those categories. Mainly key consideration number two of understanding the income distribution, well tax planning is involved in that. Readjusting your portfolio, understanding dollar cost, averaging, compound interest, all of the items that we build here, one capital management for our clients is an investment portfolio that fits into your plan. Not one that's just out there. I've said this before on the planning topic on I episode one or two of the Make your Money Matter podcast is that we can get siphoned into one, two or three different buckets when it comes to planning. And usually, people fall into that third bucket, I call it the financial junk drawer where we just have all these unrelated purchases or investments that we sometimes mistake for a cohesive retirement plan. But they're not, we all know that. I mean, just like our drunk drawer in our kitchen. I mean, it's all useful stuff I have in my kitchen, but they're not of any rhyme or rhythm to it. So, finding a cohesive plan that you put together, that's all tracking the same light that takes into consideration, not just the three components I mentioned, but taxes, healthcare costs, readjusting, and rebalancing, and actively managing your portfolio. These are all needs that come into those three camps. [24:29.7]

So, in summary, the three key considerations that I think we can take into understanding how to craft a retirement plan. And I think it has a lot to do with our good friend, Bessie Cooper, a 116-year-old world's oldest living person has a lot to do with the experience that we want to bring into an advisor for key consideration number one, finding that relationship that you can build that trust because an advisor will be a relationship you should have, in my opinion. You should have someone that fits into your friends, your colleagues, your relationships. We all have our advisors. Proverbs 15:22 says it best, ‘plans fail for lack of counsel, but with many advisors, they succeed.’ Find that advisor find that relationship, mind your business with the people you want to trust with your business, wouldn't you say? And secondarily to Bessie, Cooper's comment about not filling a life with junk. Don't be sold on the last thing you read, or some guy expressing it to you on some social media posts, something like that. Find discernment and seek that out from someone you trust and build the plan that's right for you. Find the advisor, understand your income distribution, and then know what you want to do with your assets. Three key considerations when it comes to crafting a retirement plan and an investment plan. [25:46.2]

Thank you for listening to Make your Money Matter. Before acting on anything discussed today, remember speak with a financial advisor near you about your specific situation, or if you'd like our help, you can visit us at onecapitalmanagement.com or give us a call (805) 409-8150. [26:04.7]

The information in this podcast is educational and general in nature and does not take into consideration the listener's 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. [26:28.0]

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