Taking a Moment for Gratitude: Thanksgiving 2018

Roger GainerRoger holds the coveted and well-earned designations of Chartered Financial Consultant (ChFC®) and Retirement Income Certified Professional (RIPC®) from the American College. He is also a licensed insurance agent for life and health insurance, a Certified Paralegal for Estate Planning, and a current board member of SASM.


How Smart is Warren Buffet?

Roger GainerRoger holds the coveted and well-earned designations of Chartered Financial Consultant (ChFC®) and Retirement Income Certified Professional (RIPC®) from the American College. He is also a licensed insurance agent for life and health insurance, a Certified Paralegal for Estate Planning, and a current board member of SASM.

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Podcast: Tax Reform & How To Prepare For Uncertainty

The following is the transcript from Episode 14 of Retire Happy with Roger Gainer, a financial and business audio podcast.

Roger: Purpose is understanding your why. Without that purpose, without that point, you can get buffeted back and forth with these different strategies and different challenges.

Clark: You’re listening to “Retire Happy” with Roger Gainer, president of Gainer Financial & Insurance Services, Inc.

Just about anyone you ask about money and retiring has their own opinion. How do you know what tools work and what should you avoid? In this episode, Roger explains how changes to tax policy can result in confusing times for individual financial strategies. He also offers three easy antidotes for this unease: establishing clarity of vision, efficiently pursuing your goals, and maintaining a focus on your plans purpose to ensure you’re making all the right steps. Thanks for joining us. I’m your host Clark Buckner. Let’s jump right in.

Well, Roger, welcome back, as always, really excited to talk with you today. We’ve got a couple topics in line all based around the theme how do you prepare for uncertainty. We’ll get to that in a minute. But first, hey, how are you? How are you doing?

Roger: I’m doing well, doing very, very well. We’re winding down the year and it’s a time to look back and reflect and look forward and plan. And I’d say this year more than most years, given all the stuff that’s going on out there, there are certain universal truths that hopefully we’ll get to cover today in our session. It will help people in any year.

Clark: Right. Well, you’re referring to is…we’re recording this at the end of 2017. However, the things that we are about to talk about, the things that you are about to share your insights on, they’re relevant always. But I’m catching you at a moment right now where not only have we had several interviews now here on the “Retire Happy” podcast, but we have seen a big year, a lot of big changes. There’s at this exact moment, taxes and tax reform, all of that, that’s been a buzzing question I know you have been receiving from your clients. There’s a lot of energy around it. And not to go too far down the rabbit hole, but would you want to maybe just paint a picture of what you’re seeing right now with your clients, what they’re seeing right now? And then we’ll talk about ways to overcome that uncertainty. I know you’ve got a couple of different antidotes, but we’ll get to that in a minute. But first, kind of what is just the state of the land right now? What’s going on?

Roger: Well, if you look back over the last 12 months, it has been quite arriving. I mean, I’m getting calls from people, let’s say, 2017 felt like a decade or certainly several years given how much really has happened. If you look back, we’ve had some political upheaval. Whether it’s good or bad, that depends on how you voted and how you choose to look at stuff. But there’s still been a lot of upheaval, a lot of change in Washington. There’s been a tremendous amount of challenging natural occurrences. We’ve had fires, severe fires here in Northern California. As we speak, there’s horrible fire still burning in Southern California. We’ve had floods and hurricanes in the Gulf area, in Houston, and parts of Texas and Louisiana. There’s been Florida, Porto Rico. There have been challenges in Europe and things in the war. I mean, it’s all over the place.

I know that a lot of clients and even colleagues and folks in the industry, there’s a lot of that deer-in-the-headlights feeling these days. People are almost frozen and unable to make decisions and just stressed out and depressed. And really, there’s so much reason for optimism. So certainly, we wanna get to some of those ways to navigate these challenging waters that many are feeling impacted by.

Clark: All right. The waters of uncertainty, I guess we could call it.

Roger: That’s a good one.

Clark: Right. And there’s always gonna be things, whether it’s a year like we’ve had now, but as we’re thinking about the future, and we don’t know the future, how do you talk to your clients or how do you normally just sit…generally, how do you walk and navigate? I like that word navigate. How do you walk through that with just finding peace because money is already so stressful? Let’s start from the top here of some of these ways to overcome that. How to you even begin to navigate that?

Roger: Well, the first thing I like to try to keep is balance. It’s so easy to spiral into all the bad things that are happening or at least my perceived bad things because remember, very few things are good or bad for everybody. So a lot of it has to do with perspective. And so the first thing to do is to maintain perspective.

I tick down a lot of items on a list that were kind of negative. Well, let’s look at the other side of that, that coin over the last 12 months. Some of those thing, the upheaval, people’s feeling about the election has led to increased participation in government and society by many groups that previously were disenfranchised. I’m one of those people that believes the more people that participate in the process, the better we all are going to be. So instead of disenfranchising folks, we are enfranchising folks. There’s been a complacency that is starting to shake off, and it’s always those kinds of increased participation that creates meaningful change in our history. So that’s very optimistic to me.

We have high employment. We haven’t had as high a level of employment in decades. For the first time in many, many years, there’s as many jobs looking to be filled as there are people looking for work. So, folks are being more selective about the kinds of jobs that they’re taking. To me, that’s a really positive sign.

Clark: Interesting. So, what you’re saying is, when you talk about balance and perspective, what might seem like a really challenging year, based on how you look at it, there are still good things and there are still good ways.

Roger: Yeah, we’ve had a record-breaking stocks this year. We’ve set more new highs than I think in any year in recorded history since we started having recording stock market history in the late 1890s…mid-1890s, excuse me. We’ve got a relatively stable economy. There hasn’t been a lot of ups and downs. We’re seeing pretty steady employment reports, pretty steady inflation reports, pretty steady profit reports. So that stability really is something that we haven’t seen in a long time. It’s been building and going on for a number of years, but this year was the first time, I believe, ever that we had an entire year, now, keeping my fingers across because we’re not at the end of December yet. But if December ends up as a positive month in the stock market, it’ll be the first year ever that we had 12 months where the market went up, no down months at all. That’s incredibly unique in stock market history.

So there is a lot of stuff that has been relatively positive. A lot of folks, in conversations I’ve had with clients, didn’t wanna invest in the stock market, would like to be worried about it. And yet if they took the plunge and did participate, they’d been rewarded here this year relatively handsomely. That’s not to say this will go on forever but that kind of stability does suggest that we still have more upside to go.

Clark: Good. Well, I’ve also heard you say before, as we’re thinking about how you prepare for uncertainty, I’ve heard you say a phrase before that is the antidote to fear is clarity. And I know there’s a lot of different antidotes that you have to finding peace with how you are helping your clients and all that. But the three antidotes I really wanna talk with you about today, I’ve heard you say clarity, efficiency, and purpose. So we can start wherever you want. Maybe we can start with clarity since that’s one of the first antidotes you think about. So what does clarity mean and how does someone activate that to use that to overcome the fears that they have?

Roger: Well, Clark, that’s a big part of our process is to gain that clarity. That’s really the majority of where we start when we engage a new client. There’s a number. I had a lady in here yesterday who’s been a client of mine for just about 10 years. And when she first came to me, she was stressed out, unhappy in her job, uncertain about whether she would have a secure future, really pretty much depressed. It was almost hard to meet with her sometimes. And now she’s traveling the world. She moved into a wonderful retirement community and she folk-dances, and she’s just happy as can be. She goes on folk-dancing trips and she’s made friends in different parts of the world. And it really came from clarifying what was bugging her and what she wanted.

She told me yesterday that she was talking to a friend of hers and she said I saved her life. Now, I think that’s a little bit of hyperbole and a little extreme. I didn’t save her life but what she keeps…she sent me cards and notes over the years and it said that she was able to cut through her stuff. And I believe it was the clarity and creating that vision, that purpose for her.

Based on the calls I’m getting, the emails that are filling up my email box from a variety of resources and what I’m reading both in the newspaper and online, this uncertainty is really freezing people. All these cross currents are coming in and the fear. We’ve got this tax reform and everybody’s worried about how is tax reform going to impact me. And many people are gonna get hurt by this tax reform. It’s more like a tax cut than tax reform because, frankly, it was supposed to simplify things. It’s made it actually much more complicated than it’s ever been.

That’s exactly what happened when Ronald Reagan simplified taxes in 1986. He doubled the size of the tax code. So it didn’t really get reformed, but within that, people are gonna start looking at how does it affect me. And it’s so easy to just focus on the tax element of it. The reality is if you focus too much on that tax element, you may miss opportunities. You may put yourself behind the eight-ball and not make progress towards those objectives.

So that clarity again, this is where that comes in. If you are clear at what your purpose is, why am I doing this? Why am I saving money? Why am I investing? What do I want my life to look like? If I’m sitting here three years from today or five years from today, looking back over that period of time, what has to happen to make me feel good about my progress, to make me happy with my progress? When I can answer that question, then I can pick and choose which of these changes serve me, which of these things that I can ignore. And instead of getting buffeted emotionally by everything other article, tweet, news broadcast, and locked up, I have reference point. I have that ability to sort through the clutter, if you will, and really sift out the things that are gonna serve me my purpose. It’ll make you happier once you have that clarity. I guarantee it.

Clark: Right. And it really sounds like, at the end of the day, it’s all about you. You keep talking about that individual focus. That’s what’s coming out to me loud and clear.

Roger: Well, think about it. How can you help others if you can’t help yourself? How can you care for others if you can’t care for yourself? It’s like when you get on the airplane and they tell you, if you’re traveling with young folks, and the oxygen masks come down, cover yours first and then help the people next to you. Okay. You’ve gotta take care of your own because let’s face it, nobody else is out there looking out for you but you.

So when you build your team, when you get your advisers together, when you have tax counsel, or legal counsel and financial counsel, these people, you have to vet them that they understand your vision, that they are part of your team to get you what you want. And nobody can take over that responsibility for you. There’s lots of ways that you can employ and build a team to get you that stuff. But nobody can tell you what’s important to you. You have to come to grips with that yourself and what your values are in those things. And then you’ll have the context to make those good decisions.

Again, I keep referring back to our process, but that’s where the Thought Organizer comes in. And if you’ve listened to previous podcasts, we’ve talked about this tool. It is available on our website, and you can use that tool. It’s the beginning of the process of gaining that clarity.

Clark: When you’re talking about also trying to cut out some of that noise and finding that peace with yourself, kind of finding that confidence within yourself, help yourself first, that, I think, is a good transition to that antidote. You talk about efficiency. I think, it seems like when you’re cutting out the noise, you’re creating efficiency. What does efficiency really mean though, in this context?

Roger: Well, efficiency, in this context, is really how we utilize capital money to deliver our lifestyle, both now and in the future. That’s what the efficiency I’m talking about. I find that most folks are leaking from their financial plan in ways that they don’t know about, unknowingly, and in many instances, unnecessarily.

One example is the way folks arrange their mortgage and financing of a primary residence. I see people utilizing strategies that seem logical. We’ve talked about this in other podcasts, and I’ve written blog posts about it. What seems to be important in a mortgage, do I get the lowest interest rate, is really not what are the actual cost of that mortgages. So we’re not gonna get too deep into that subject here but you can refer back to my blog and look up some of those articles. If we can plug that hole, that takes hundreds of thousands of dollars, in many cases, that we’re leaking out over a lifetime and put them back as an asset. When you do this, you can reduce the amount of risk exposure that you’re experiencing because you need to take on more risk to get a higher rate of return to overcome the inefficiency.

That was quite a mouthful to [crosstalk 00:17:50] completely confusing you, Clark?

Clark: No, that makes sense. So, efficiency, it’s more about eliminating the waste.

Roger: It’s how we use money.

Clark: Trying to plug all the holes.

Roger: Yeah, how we use money ever each and every day, understanding the cost of consumption. It’s not that we’re not gonna buy a car or go out to dinner or go on a vacation or enjoy groceries or buy new clothes. It’s how we finance that. Everything you spend money on is finance. I think maybe that’s that topic we will get to in the 2018, it’s understanding that all spending is finance.

All financial decisions have a financing cost, and so understanding how to deliver those different items that make up your lifestyle at a lower net cost, that’s what we talk about when we’re talking about efficiency, whether it’s reducing taxes, fees, hidden costs. It comes in many shapes and sizes. This is a real big reason to use an advisor is because a good adviser that is truly an advisor, not just an investment manager, is studying taxes, is studying alternative investments, is studying different strategies, is understanding risk management, estate planning, control issues, and all of these things and how to make it all work together. See, it’s that coordination and integration of all your financial decisions that leads to that efficiency.

Clark: I hear you. That makes sense, and that brings us to our third and final antidote, purpose. What is purpose? How does that fit with clarity and efficiency? How does purpose fit into how someone can prepare for the uncertain future?

Roger: Well, purpose is understanding your why. Without that why, then you’re kind of just chasing your tail, if you will. It’s like the guy we sat next to on a flight a number of years ago. I was in the window seat. My wife was in the middle, and this gentleman was in the aisle seat. And she was engaged in a conversation with him. And I was reading something from a conference we were just coming back from. And I wasn’t paying attention to their conversation, but all of a sudden, I hear, “Oh, and my husband is a financial advisor.” And this guy perked up and he wanted to meet me. And he leans across my wife, he looks at me, and he said, “Nice to meet you. I’m looking for an investment that pays 15% with no risk.”

I don’t know if he was testing me or what. The gentleman had started and sold a number of high tech businesses. He was worth quite a great deal of money. And I looked at him and I said, “Well, why do you want an investment that pays 15% with no risk?” And he looked at me and says, “Well, who wouldn’t want that?” I said, “I don’t know, but I wanna know why you want that.” And he couldn’t answer because he didn’t know what his purpose was, what his why. So he was going through the motions.

He was starting businesses. He was making tens, if not hundreds of millions of dollars, and he was still interested in having more, and yet the gentleman was…as I got to talk to him, he wasn’t happy. In fact, he was rather melancholy and lived a very melancholy life. He was kind of a shut-in hermit even though he was a young man, probably in his early 40s. He went to movies. That’s what he did with his life, and he went on his own. That’s what he and my wife were talking about, were movies and books and film. That was it. He didn’t have personal relationships. He didn’t have things that brought him joy. They’re just things he could observe and analyze. That was really instructive to me, money, they always say money can’t buy happiness. And that was just an immediate illustration of that fact.

So, when you get that purpose, why am I doing this? Do I wanna change mankind? Do I wanna improve things? Do I wanna make my family better? Do I wanna discover better health? Whatever it is, that becomes your filter and also becomes your focal point. So if things don’t serve that purpose, that why, then you just disregard them. You discard them. You don’t let them get in your way. That’s really why that becomes an antidote.

When we look forward to 2018, the first quarter is gonna be just filled with articles and commentary about the new Tax Act. This is gonna be the talk of the town. It’s gonna be on everybody’s lips, and you’re gonna start worrying and thinking. And I guarantee that there will be some new planning opportunities available as we dig through this 500-page monstrosity that, by their own admission, they’re not sure, the folks that are voting for it aren’t sure what’s in it. And I saw the head of the House Ways and Means Committee last week said, “We’re gonna have the mother of all Corrections Act,” that was a direct quote of his, to fix this thing next year because there’s all kinds of loopholes and stuff that are riddled throughout this legislation.

So as we in the industry get a chance to look at it, there’s gonna be lots of opportunities for you, but whether those opportunities make sense for your specific situation, without that purpose, without that point, you can get buffeted back and forth with these different strategies and different challenges. So, clarifying that purpose and what are your objectives, that’ll help you sort through all this stuff that’s gonna be coming down. We’re gonna be drinking from a firehose for a little while, with all the changes and information and data that’s gonna be coming out about all of this.

So, that clarity, that purpose is gonna allow you to pick those opportunities that are hidden gems in this legislation. At least I hope there’s hidden gems. There almost always is. There’s been some pretty onerous tax acts since I started my career in the ’80s. And almost every time, there’s something that you go, aha, I had no idea this was in there because most of the time, they don’t know either. That’s the fact.

Clark: Wow. So interesting, yeah.

Roger: When you look forward, and one of the things that…always remember what happened before. That’s the other perspective that will help. Every time we go through low volatility periods, and I talked about how there hasn’t been a market correction this entire year, there hasn’t been a down month at all. We’ve gone nine years without having at least a 10% correction in the markets, which is unprecedented, and it’s like winding a spring. We can ride this thing but, boy, it’s time to be very, very cautious and to make sure that these strategies, the profits that you’ve made over the last couple of years stay in your portfolio.

So I’m not suggesting people sell. I’m not suggesting people get out or ignore the markets. But if you know where you are in your life cycle, if I’m 40 and there’s a correction, let’s think about the last two major corrections. It took five years each time to make up for the lost ground. So if you are within 5 or 10 years of retirement, do you have the time? This is what I mean by clarity. If I don’t have time to recover, it doesn’t matter that I made 10% or 15% or 20% or 5% last year. What matters is that I don’t lose 10% or 30% or 50% sometime in the next two or three years. That’s way more important. It’s math and science. I’d be happy to go through the math with anybody that would like to understand.

And when you have the backdrop of clarity, of purpose, and you’re working efficiently, this frees you up and you’re thinking to make clear decisions about investments, risks, strategies, and those sorts of things. While there are opportunities and reasons for optimism, there’s also a big yellow light flashing, it’s time for caution. It’s time to read between the lines and to know where the exits are. Just like when you get on that airplane, the first thing they tell you is figure out where the closest exit is, in case something goes wrong. So know where your exit is from those financial strategies that might require change or rebalancing.

Clark: Roger, this has been super helpful. I really loved how you started off by talking about balance and then using clarity, efficiency, purpose, and how you navigate those uncertain waters. And I know you just said you’d be happy to talk with someone about the math, science, using your lens and your experiences. So the best way to do that…I know you mentioned it once, but we’re gonna mention it again because it is the first step that someone can take with working with you. That’s the Thought Organizer. So do you have any final things you wanna maybe add about the Thought Organizer and why that’s so important with the process you follow?

Roger: Well, the Thought Organizer, I always wanna remind folks, there are no wrong answers. It only takes about 10 minutes to fill it out and just whatever pops into your mind, you’re filling this out for yourself. You’re not filling it out for me or anybody else. The other thing is if you’re married, you have a spouse or significant other, that is your financial as well as emotional partner, you should both fill one of these out separately.

Clark: And then what?

Roger: Well, the number one reason for people getting divorced is finances, disagreements over money. So you wanna know where your differences are and gain clarity. There’s that word again. So if you and your spouse go to separate corners to each fill it out, then you can compare and see where you guys are on the same page and where you have differences, and then discuss those differences in perspective or feeling, because they’re both valid and they’re all valid. These are just emotions, but you can get on the same page with each other. It will take a lot of the retribution, the anger, the suspicions, the things that happen when you’re not sure where your spouse is coming from in regard to money.

This is the first step in that clarity of purpose and discovering your why is that Thought Organizer. I can’t emphasize enough why it’ll help you if you’ve never done this exercise. And then if you need somebody to help guide the conversation and help you apply that to you individually, anybody that’s listening to this podcast today, if you tell me you listen to the podcast, I’m happy to offer you a free consultation, about 45 minutes, and we can go over things and take that next step in helping you build your own clarity.

Clark: Roger, thank you so much, as always, really enjoyed our time together, and I can’t wait for our next session.

Roger: Well, Clark, I always look forward to this. I wanna wish you and your family just a great holiday season. And there’s so much to look forward to in 2018. Take advantage of it.

Clark: Thanks so much for listening to this episode of “Retire Happy.” Be sure to head on over to gainerfinancial.com to download your Thought Organizer to get started. Roger L. Gainer, ChFC, California Insurance License Number 0754849 is licensed to sell insurance and annuity products in California, Illinois, Arizona, Pennsylvania, and New York. Roger L. Gainer is an investment advisor representative providing advisory services through HFIS, Inc, a registered investment advisor. Gainer Financial & Insurance Services, Inc. is not owned or affiliated with HFIS, Inc. and operates independently. Thanks again so much, and we’ll see you next time.

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Podcast: State of the Art Income Planning

The following is the transcript from Episode 13 of Retire Happy with Roger Gainer, a financial and business audio podcast.

Roger: Retirement income planning is really the critical piece of the puzzle to financial security, happiness, and peace of mind in the long run. There’s a lot of ways to approach it, but stumbling into a strategy is not gonna lead to the results you’re looking for.

Clark: You’re listening to “Retire Happy” with Roger Gainer, President of Gainer Financial & Insurance Services Inc. Just about anyone you ask about money and about retiring, they all have their own opinions, they never run out of them. But how do you know what opinions are worth listening to? How do you know what tools actually work? And what should you avoid? But rest assured because, in this episode, Roger is discussing the tools and the strategies he uses when it comes to income planning. But he also shares some of the other common strategies that are out there that are being used right now by advisers today, along with the pros and cons of each of these. Truly helpful as you’re walking on this journey. Thank so much for joining us. I’m your host, Clark Buckner. Let’s jump right in.

Roger, welcome back to another episode of “Retire Happy.” Super excited to be back on the line with you. I always really enjoy these and we’ve got some good things we’re going to cover today. But first, just want to say a quick hello and check in to see how you’re doing?

Roger: Doing great. The sun is shining. We’re just waiting for life.

Clark: The sun is just always shining, right?

Roger: Well, it rained a couple of days ago, but it just is a beautiful day here in downtown San Rafael.

Clark: I love it.

Roger: Everybody seems to be getting ready for the holidays. The trees are in different colors. It’s just a beautiful autumn day and we’re very excited. It’s a great time of the year. You can feel the…

Clark: You can feel.

Roger: …holidays starting to get into full swing and that’s just always a wonderful time of the year as far as I’m concerned.

Clark: Good deal. Well, I am eager to talk about the topic “State-of-the-art Income Planning.” Now we’ll explain what that means. And it’s quite the epic title and it’s a phrase, you kinda spun together, you know, just a few moments ago and I love it. Let’s roll with that. So, we’re going to talk about, I know you’ve just got a new certification from…it’s called RICP from American College. We’ll talk about what in the world that is, why it matters. We’re going to talk about some of the different strategies that advisers are using today when it comes to retirement and to stay out of the weeds. But we’ll still talk about three or four of the main different styles and strategies and then finally, maybe we can get to some of the pros and cons to be looking out for when planning to retire happy. So, let’s just start from the top. So, what is RICP? What’s the certification? Kinda walk me through why you’re really pumped about this.

Roger: Okay. Well, sure, Clark. I’m very excited. I did just earn my RICP, well, about six weeks ago. It takes the American College about a month or so to check your background, make sure you finished all the prerequisites, and experience, and work requirements to be conferred the designation. It stands for Retirement Income Certified Professional. And the American College is currently the only place you can get that designation. The American College also conferred my CHFC, my Chartered Financial Consultant. They do CFP, a Certified Financial Planner, CFA, Certified Financial Analyst, MSFS, Master of Science in Financial Services, and a whole bunch of other financially-related degrees and designations. So, they are kinda the state-of-the-art for financial education in this country.

It is a university in Bryn Mawr, Pennsylvania, solely dedicated to that area of education. I decided to get this because it’s what I do. I’ve been helping people plan retirement income and the transition of retirement for really more than 25 years. And for years and years and years, I kind of felt like I was sticking out like a sore thumb because I always explain to clients that we look at accumulation strategies with an eye toward consumption. A quote that used to be on my website was historically attributed to Will Rogers, said, “The most important thing in any investment is the return of my money, not the return on my money.” Now I found out years later after doing some research that he never said that, but it sure sounds good and the…

Clark: That’s probably the case for a lot of people, isn’t it?

Roger: Yes, it is. Yogi Bear gets attributed a lot of things. So, like, “It ain’t over till it’s over.” He never said that.

Clark: Okay.

Roger: But it sounds good and it sounds like him. And Will Rogers certainly was the conscience of America. And I found, over the years, that everybody gets taught and told and explained, how to get money into investments, how do you contribute to your 401k, how do you finance and purchase real estate, how do you build a stock portfolio, invest in a hedge fund or, you know, those kinds of things. But almost never are people explained how to get their money back out and how to live off that money because, after all, if we’re saving for wealth, wealth in and of itself doesn’t do anything. It’s not going to keep you warm at night, it’s not going to fill your stomach, it’s not, like, you’re going to tear up a bunch of greenbacks and, you know, fry them up and eat them for dinner. That’s not what it’s for.

Clark: Okay. Yeah. I like the visual here.

Roger: Okay. So, well, money has to be for a purpose. And for most people, that purpose is not keeping score as much as it is to create security. See, there’s only two ways to live and that is you at work or money at work. The bottom line is to support your lifestyle, is that it requires income. Think about it. You can’t…say you own a house and you own it outright and you want to go down to the Piggly Wiggly or a Safeway and pick up dinner, it’s not like you can knock a couple of bricks off the porch, take it down, and hand it to the cashier and say, “This is $50 worth of my house.” Right? That just doesn’t work. So you need income. And income planning for previous generations was a lot easier, frankly. We had more people covered by pensions, so you didn’t have to really think about that income strain, it just came in, Social Security made up a larger percentage of people’s expenses, and we had higher interest rates.

You know, if we were having this conversation, Clark, back in say…oh, I don’t know…1980 when interest rates, you know, the prime rate was up at 18%, what would we be doing? We’d be out buying CDs, or treasury bonds, and locking in a very high coupon for years and years to come and just live off the interest. It would be a piece of cake, really. Where today, you know, 10-year treasuries are returning 2.3%, 2.4%. That’s not enough to live on for most people. So, this is why we’ve seen this evolution, some would call it de-evolution, of income strategies. It’s something Wall Street has tried to ignore for years and years and years.

I’ve always felt that it was a priority because I could see this day coming 15, 20 years ago where baby boomers would be retiring in droves because we were reaching our mid-60s and 70s. And how would we sell our assets and create income streams? Now, Wall Street kinda paid it lip service for years. And there was a generally accepted strategy where you could have 60% stocks and 40% bonds and draw 4% a year from that portfolio and inflate it by whatever the inflation rate was each year. And you had about a 89% probability, according to financial simulations, of having your money last a lifetime. And as far as Wall Street was concerned, that was good enough. It was based on a research paper done back in the ’80s and they said, “Okay, this is great.”

And why was it great? Because it kept your money invested and by keeping your money invested in a portfolio of stocks and bonds, they continue to earn fees. So, you know, they didn’t want to switch it to an income stream or move into an alternative strategy that didn’t continuously provide those fees. So this strategy was generally accepted. I’ll never forget, I was doing a workshop one day and I was talking about this strategy. And a guy raised his hand and I asked him, “What was your question?” He said, “Why would anybody follow a strategy that had an 89% chance of succeeding? I wouldn’t get on an airplane that had an 89% chance of getting to my destination. I’m sure not going to trust my future to a strategy with those odds.”

I thought that made a lot of sense to me. But now 2008 came along, 2009 and that blew up the 4% rule. Now generally accepted, it’s a 2.8% to 3% rule, which clearly isn’t enough for most people. So we have modifications on that. And we’ll talk about that a little bit later. But I went and got the RICP simply because I wanted to know what the state-of-the-art was, I wanted to see if the strategies that I’ve been pursuing for years were, in fact, valid based on, you know, the academic breakdown and analysis, and if there was any other information out there that could really help me both protect and secure happy retirement for my clients and found that there was a lot of stuff. And also that a lot of what I was doing is now coming into the so-called state-of-the-art.

Clark: Great. I think that’s a really good transition to talk next about what’s happening and the overall retirement business. I know you’ve just got this particular certification, so you’ve been kinda revisiting some of these different strategies and revisiting with just what all is happening right now. So, this next question is, in the context of what’s happening overall in the retirement business, what strategies are different advisers using for income planning? I know you’ve just talked about one a moment ago, but if you wanna…just to keep it high level three to four main ones…what are some of the Styles and then the why behind that? Why would that style be a good choice?

Roger: Okay. Well, first and foremost why, you know, income planning becomes the most important thing at this phase in life? For an entire lifetime, your working life, your bills are paid based on your ability to wake up, head off to work, and earn a paycheck, whether it’s in your own business or working for somebody else. And that’s how you pay your bills and you take, hopefully, a portion of that, you build it into savings and build some wealth and net worth. And people do a pretty decent job of focusing on that job. And the strategies we’re taught are wealth-building strategies, things like dollar cost to averaging and, you know, avoiding losses, diversification, all those wonderful things that you’ve learned about in building wealth. But at this transition in your life, it’s the first time you’re going to do something different, radically different, a 180 degrees different.

You’re going to now stop bringing in a paycheck for your financial security and instead, you’re going to turn to your money at work and you’re going to want a paycheck from the money at work. And so the demand is different. It’s a very awkward transition for many people, that’s why I focus on it. And there’s way more than just money involved in this transition as we’ve talked about before, Clark. But it does in my experience require a different approach and this can be incredibly uncomfortable, not just for clients, but for advisers. People in financial services who’ve done one thing one way because, frankly, their clients weren’t that old. So, they didn’t have to worry about people wanting to take money out. They just were worried about building more wealth and creating those investment strategies and that sort of thing.

I can give you a great example. I have a lady coming in later this afternoon and she’s working with another adviser. She came to me for kinda a second opinion and I went through our process. She’s pretty conservative, she really doesn’t want to experience much in the way of volatility or losses. And she started with these advisers, wealth advisers, investment advisers, about a year…just about a year ago, right at the beginning of 2017. And when she came to me, she’d been working with them about six months. She told me she really liked them. She thought they were quite intelligent. And I said, “Well, you know, you were working at a big corporate job. You were knocking down a nice six-figure income and you’ve just retired. Now, you’re, kinda, doing a little consulting work on the side. Your income has dropped dramatically” And I just said, “What’s the income point?”

And the adviser said, “Well, the portfolio is constructed. It’s spinning off about $45,000 a year.” Her problem was she needs $145,000 a year in income from that portfolio. So, when I sent her with that question, they said, ‘Well, we’re just gonna cash stuff in.” I said, “Well, why don’t you just take the cash that’s being generated when they make a trade or take profits?” And they said, “Oh, that messes up our strategy. So, we’re gonna sell things specifically to give you income each and every month.” And that’s fine except…then I asked her to find out what their tax strategy was? And the adviser came back and said, “That’s not our problem and it’s not our area of concern. Our concern is to make you money and your CPA is gonna take care of the taxes.” Well, I don’t know about you, but if you’re paying out 35% in taxes, that’s a drag on performance any way you look at it.

So anyway, we’ve been going back and forth trying to get an income strategy out of the adviser. And the adviser really works with… It’s become very apparent to me, works with a one or two portfolio strategies and then they just fit everybody into that strategy. So, their answer is, “Well, we’ll just cash it in.” Now they have come back recently with one of the four state-of-the-art options, but when you really analyze that option, it’s going to have a devastating effect on overall performance. So they said, “Well, we’ll just keep four or five years worth of your income sitting in cash or in short-term bonds, which we know are paying very much.” So, if she needs a $140,000 a year and they’re gonna leave that amount of cash five years’ worth, well, that’s, you know, almost 3/4 of a million dollars, five years’ worth of that money.

That’s a little over $700,000. And given the overall size of the portfolio and that much money sitting in non-competitively yielding investments, she’s going to run out of money. You know, as sure as I’m sitting here, I’ve worked through the projections. And she’s going have to never have a correction and earn at least 7% or 8% every year. Now the problem is, in a really great year, that manager only returned 6.5% over the last 12 months. So how in the world are they gonna give you those returns in bad years? In fact, she’s coming in today, we’re gonna have…that’s the discussion. You know, how is this going to be a viable strategy for you going forward?

So, one of the more popular Wall Street strategies is the systematic withdrawal strategy and all that says is you input a percentage withdrawal from your portfolio each and every year. And in years that the portfolio is up more than 10%, you can give yourself a raise and if the portfolio is down more than 10%, you have to take a cut in pay and adjust your lifestyle down. I think the drawbacks of that strategy are pretty obvious.

Clark: Right. Yeah.

Roger: And most of my clients are now looking to tighten their belts during retirement because the market was down. You know, I think that’s kinda goofy. Why should your financial peace of mind and lifestyle be that dependent on an outside index? But it is a valid strategy and mathematically, it makes sense. And what it does, if you’re willing to take that cut in pay, it will extend the life of your portfolio and because down markets aren’t gonna have as much damage by withdrawing money from your portfolio when the market is down the same amount. Does that make sense?

Clark: It is. So that’s systematic withdrawal and basically, it sounds like you’re taking some of the money out of the pile until the pile is gone.

Roger: Essentially that’s it.

Clark: Essentially.

Roger: And you hope that the pile isn’t gone before you are.

Clark: Right. Yeah. That makes… Yeah, that makes it… It’s real life, right?

Roger: Yeah. I have a lot of clients who come to me and they say, “A perfect strategy would be for me to spend my last dollar on my last day.”

Clark: What do you tell them?

Roger: Well, we can do that. Our strategy is that we’ll guarantee that that’s exactly what happens. However, you know, for most people they need that cyanide pill because they don’t know when it happens.

Clark: Oh, no.

Roger: And so when your account is empty, you better have that pill handy…

Clark: Yikes.

Roger: …because that’s your last dollar. So you better have the other side of that equation in place.

Clark: It’s just a lot of uncertainty, yeah. That’s just, like, slim, slim chances.

Roger: A lot of uncertainty, exactly. You know, and that’s one of the hard things is, you know, you don’t wanna leave a whole lot that you could have used or enjoyed more, right? I mean, what’s the point of struggling and scrimping and, you know, not enjoying your life, so you can leave a bunch of money to somebody else? I mean, I know that’s important to a lot of folks and we can build strategies to take care of leaving a legacy to others, whether it’s to charity, family members, dependents, etc. But what I’m really talking about is creating that confidence to enjoy the lifestyle of your choice and not run out of money. And if you’re worried about running out of money, that creates its own stress.

I was at a conference a couple of years back and the speaker was talking about this very thing, he said, “My folks were both school teachers and both retired with pensions. They lived a modest life and they enjoyed the things they enjoyed, but it was just a simple life. And now they’re retired, they have some savings, but they both have pensions.” And his wife’s folks owned a business, were very, very wealthy, lived an extravagant lifestyle. And the gentleman had planned out his life’s retirement based on the numbers. Your life expectancy is gonna live to this many years, and you need this many dollars and this rate of return and, you know, everything will work out fine. He’d set up his spreadsheets and figured out, you know, how much he could spend and he figured he’d be dying around age 80.

The problem was he’s still alive at 87, but he ran out of money at 80 and realized that that was going to happen at about 74. So he spent six years stressed out that he was going to run out of money and then he ran out of money and now they’re miserable. So, they really didn’t get to enjoy much of anything. And the difference is that reliable income stream instead of systematic withdrawal. So, that’s one of the cons of that strategy. Now it does get a little bit better if you add what this other adviser…if you have enough money to add that big element of cash. But for most people, it means having more than a third of your portfolio at a given time in cash and today, most cash strategies aren’t paying very much.

Maybe in a future podcast, I’ll talk about a strategy for cash that is paying more like 4% tax-free in liquid these days, but it’s a pretty obscure strategy and a lot of people just aren’t using it. So, what the bank is paying is less than a 0.5% for the most part.

Clark: I can, of course, understand if some of these other questions… This might need to be a continued conversation because I know over this whole podcast, it is…you know, we have these individual conversations, but it extends to one much larger conversation. But I did want to ask before we start wrapping up today, are there any other strategies you want to talk about, whether it has to do with tax diversification or accumulation?

Roger: Okay.

Clark: Anything else, in the last couple of minutes, you want to talk about of the strategy type and kinda what that could be a tool for someone?

Roger: All right. Well, I do want to talk about tax diversification. But let’s kinda just check off some of the other major strategies. One is called the flooring strategy. And I kinda referenced it, why it was easier in previous generations because they had pensions. So, flooring strategy says we set up guaranteed income streams that will cover all of your main bills. So, it makes sure you have a roof over your head, you know, transportation at your access, and food in the fridge. And it’s so all of your basic necessities are taken care of with highly reliable income streams, be it Social Security, pensions, or other alternative income streams that you cannot outlive. That’s what we’re talking about. Sometimes annuities are used in that, sometimes long-term bonds, real estate…it can be a substitute, but it’s not as secure as these other ones because obviously if a tenant stops paying, you lose your income.

So there’s a little element of uncertainty when we use real estate that we try to lay in some protections to make sure that if we’re going to depend on that real estate income for this purpose, that it’s highly reliable and very, very conservative. So, that’s the flooring approach. Another approach is called the bucket approach. And we have a bucket of money for what we’re going to be spending here in the next two or three years. And so the strategy that I talked about earlier is a modified bucket approach. They didn’t really have the other buckets designated. So then we have an intermediate bucket, if you will, that will pay our expenses in 5 to 10 years so we can earn a little higher interest rate. And then the third bucket is your rest of the life money and we can invest that a little bit more aggressively and harvest gains when they’re available to add to the second bucket for that intermediate-term boost if you will.

And then we’re harvesting off the intermediate term and putting it into the near-term bucket. So, a little more effort to track that, but still very, very workable and reduces the fear of market corrections and volatility in that main strategy. Now you did mention tax diversification and I’d like to just touch on that because it’s really been in the news a lot lately. We have the House of Representatives recently passed a plan. And it looks like next week after Thanksgiving, the Senate is going to be voting on their “plan for tax reform,” is what they’re calling it. And it changes quite a number of tax features. And for most people, over the next 10 years, as written, what’s been released, will actually increase your taxes. You’ll get a small drop in taxes in the next couple of years and then a fairly significant increase in taxes 6, 7, 8, 9, 10 years out for most middle-income and low-income Americans.

That’s just the way it’s been written and I don’t want to get into the weeds on that in this format. But the point is that Congress will never stop messing with taxes. So, if all of your money is sitting in a 401k right now and you’re looking at them increasing ordinary income taxes, see it doesn’t matter how good my strategy was. If I could earn an extra 2% or 3% over my lifetime, they can wipe that out by increasing taxes by a few percentage points. And all that hard work just gets wiped out with the stroke of a pen. So, that’s why one of the things we really focused on is trying to get clients to diversify under the tax code. Wealthy people understand this because they don’t earn income, they just have stuff that earns them income. And so when they change the tax law, they just shuffle the stuff around to a more tax advantageous posture.

And it’s possible for middle-income people to do the same, you just have to think about it in advance. There’s lots of different tools out there. There’s Roth IRAs, you know, when we can get tax-free income, there’s individual stocks and real estate, where we can do capital-gain-type taxation. So, this is the kinda stuff I’m talking about, not just being in that ordinary income, which is how your 401ks, IRAs, TSAs, Social Security, all that stuff, pensions, is taxed as ordinary income. So, you don’t want to be too vulnerable and just be in that one part of the tax code because then you’re really at the mercy of Congress.

Clark: Now how in the world do you keep track of all that, everything that’s happening with Congress, with the Senate?

Roger: I read a lot.

Clark: Well, I think it’s a good point because I think for some people who are trying to do all this alone, you need to have someone who’s living and breathing in in this whole world because everybody has an opinion about what you should be doing, but you’ve got to be… I’m sure. I mean…

Roger: It should be an informed opinion based on research. And today there’s so much “information.” It’s not all valuable information and there’s a lot of misinformation, the so-called fake news that’s out there. So, we have a process to parse through some of this stuff and look for confirmation from different perspectives and other resources. But, yeah. It can be daunting, but that’s what we expect from our professionals. If somebody hires me, I’m pretty sure they want me to be up on the state-of-the-art and understand how changes in tax codes is going to affect them personally, how changes in the investment climate or investment products is going to affect them personally. You know, when…I had a hip replacement last year and I certainly wasn’t going to do it to myself. So, I did a bunch of research, but I sure counted on…

Mostly I researched the doctor to make sure that they were up on the state-of-the-art and knew all that stuff. I found a great doctor, and we had a great outcome, and I’m just dancing these days. So any professional really needs to stay up on the state-of-the-art in their profession. The world’s a lot more complicated these days than it was 50, 60, 100 years ago.

Clark: Right. Well, for someone who is at that beginning stage, who’s trying to think through all their different options and starting to just try to get just a start with organizing their own thoughts on where all this stuff is, I’ve got to mention the thought organizer. And I always love to do this because this is always such a great spot to not just leave someone hanging, but actually give them, the listener, an actual opportunity to use a free tool that you offer that helps them navigate just the beginning waters for all of this. So, do you want to, kinda, provide some additional insight into what the thought organizer is and why it’s so important?

Roger: Well, sure and thank you. The thought organizer is really a first step on clarifying you’re thinking about what you want from your life, both intellectually, emotionally, socially as well as financially. That’s really what it’s designed to do, is to get you thinking and creating the contexts of, “What the heck am I doing all this for?” Until you know why you’re doing it, you know, understand your why, you’ll never ever be happy with what you’re doing. And as long as you can maintain context, it’s much easier to create that satisfaction and to frankly select strategies that fit. You know, we were chatting before we started today and I was talking about, you know, how good you feel when you’re buying new clothes and they fit properly, and you look in the mirror, and you look good, you feel good, and you’re just ready for anything.

You know, if they’re two sizes too small or too big, you’re thinking more about how uncomfortable you are then just what’s going on around you and enjoying being. Well, it’s pretty much the same thing with some of the strategies I’ve just mentioned. Those are basically, you know, fashions, different ways of approaching the same problem. So, when you use the thought organizer, and you’ve created your context, and you understand what things make you uncomfortable and what things you’re comfortable with and where you like to see your life in 5, 10, 15, 20 years, you start selecting those income strategies that fit, that are comfortable for you, that will lead to that peace of that mind, which is so critical in achieving happiness in your life.

And I know you’ve got a few years to go, Clark, before you’re really coming down that homestretch to retirement, but the sooner you start thinking about those kinds of issues, the easier it is, the more you are in sync, so that when you get here…you know, when I sit down with somebody who has never thought about these things and they’re in their mid-to-late 60s, it’s a lot more traumatic, it’s a lot more difficult, and there’s a lot fewer options available. So, yeah, the sooner you start on figuring this stuff out, the better and easier it’s going to be.

Clark: Thanks, Roger, as always, for sharing your experiences and talking about some of your different stories that really kinda help make all of this so much more real and understandable. I really appreciate it and I’m looking forward to talking with you again soon.

Roger: All right. I do too. Have a great holiday. Everybody, just enjoy your end of the year, all the goodies that come with it.

Clark: Thanks so much for listening to this episode of “Retire Happy.” Be sure to head on over to gainerfinancial.com to download your thought organizer to get started. Roger L. Gainer, CHFC, California, Insurance License #0754849, is licensed to sell insurance and annuity products in California, Illinois, Arizona, Pennsylvania, and New York. Roger L. Gainer is an investment adviser representative providing advisory services through HFIS Inc., a registered investment adviser. Gainer Financial & Insurance Services Inc. is not owned or affiliated with HFIS Inc. and operates independently. Thanks again so much. And we’ll see you next time on “Retire Happy.”


Are You Guaranteed a Happy Retirement?

Roger GainerRoger holds the coveted and well-earned designations of Chartered Financial Consultant (ChFC®) and Retirement Income Certified Professional (RIPC®) from the American College. He is also a licensed insurance agent for life and health insurance, a Certified Paralegal for Estate Planning, and a current board member of SASM.

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Podcast: Learn More About a Fiduciary Rule & Robo-Advisors

The following is the transcript from Episode 12 of Retire Happy with Roger Gainer, a financial and business audio podcast.

Roger: A lot of people are just plain intimidated and overwhelmed by this decision making process and understanding what they’re investing in. So this is my great concern is cutting off a large chunk of our population from really the financial education and support that they need to be successful.

Clark: You’re listening to Retire Happy with Roger Gainer, President of Gainer Financial and Insurance Services, Inc. Thanks for joining us. I’m your host, Clark Buckner. In today’s episode we’re going to learn more about a fiduciary rule, recently put in place by the Federal Department of Labor and how it’s gonna affect the advisors and clients when it goes into full effect at the beginning of 2018.

Along the way, we’ll also dive into the world of Robo-advisors. What that means? We’ll get to that. And how conflicts of interest can play an unexpected part in the world of finances. For more content like this, be sure to visit gainerfinancial.com. Enjoy the show.

Roger, welcome back. I’m so excited to talk with you today about an interesting topic. I’ll kind of tee it up in just a moment. But first, how are you doing?

Roger: Oh, things are great, you know. Summer seems to have exploded on the scene and it’s just a great time of the year. A lot is going on and we had a great client appreciation event last week. People had a great time and it’s just our way of saying thank you. And it just kinda opens up the summer season where it’s just non-stop. Good things going on.

Clark: Well, speaking of summer, you went on vacation recently, right?

Roger: Well, actually we went to a dear friend’s, kind of our godson informally, his graduation from University of Colorado in Boulder. So that was great. It was a great weekend. I hadn’t been back to Boulder for many, many years. My wife had never been there and…it’s just a great little town.

Clark: Wow, I love that. Well, good. I’m glad that we’re back together and I’ve got a topic in mind that would love to have your clarity on. So recently in the years, and there’s a lot going on in the news these days, but recently in the years there’s a new set of rules of the fiduciary standards.

Roger: You mean the Department of Labor rules that went into effect last week?

Clark: Right. So there’s like a new standard for advisors. There’s a lot of different opinions and perspectives on it. So with these standards…you know, what are they? What challenges does it create for both advisors like you and customers who are looking to plan for retirement? People who are trying to navigate, can seem very daunting and very overwhelming.

Roger: Well, you know, like any major shift in policy regulation, really in any endeavor, it takes a while to figure out exactly how it’s going to affect everybody. You know, when we had the healthcare overhaul a few years back, we didn’t know what that was going to do to premiums exactly and now we know. We’re a few years down the road. I kinda call that the law of unintended consequences.

But with this rule, we’ve changed the nature and the format for providing advice to folks about their retirement accounts. So this is a Department of Labor Fiduciary Rule. And it went into effect last Monday except it didn’t fully go into effect last Monday because they’re still taking a commentary, the Department of Labor. They’re still writing out some of these regulations and fleshing them out. And the full rule won’t be implemented and in place until January of next year. So we have some early parts. There’s some new disclosures that we have to offer. But I think maybe it will help people to understand what is different. What does it mean to be a fiduciary?

Fiduciary, the short version is I have to put my clients’ interests before mine. And I know a lot of people thought, “Well, wasn’t that the way that it was always supposed to be?” I voluntarily became a Fiduciary about 10, 11 years ago. I gave up my registered rep broker’s license, and I’m a fee-based financial planner now. And up until last week, about 15% of the industry operated voluntarily under the standard by becoming a registered investment advisor or affiliating with a registered investment advisor as an investment advisory representative, which is what I am.

So what that means is simply we sign an agreement with folks and I can do comprehensive financial planning for people looking at taxes and estate planning, risk management to, yes, investments and other business agreements, etc.
This is a more specific rule because it just regulates how advisors have to act in relation to helping people with retirement accounts. So what are those? IRA’s pretax contributions, deferred compensation plans that are ERISA plans, not deferred compensation that isn’t 401k’s, money purchase plans, SPEs, SIMPLE plans, and the like. So anytime you have money in a retirement account and you sit down with an advisor to discuss what’s in the account, this fiduciary rule is what’s in charge and dictates the engagement.

Clark: Okay. So when we zoom out a little bit and we kind of create this two different buckets with challenges that advisers have and then the challenges people looking for retirement help, people looking for assistance. What would be like maybe just two or three bullet points? We had a bullet way down like just top of mindset of what those are.

Roger: Okay. Well, for investors, one of the big concerns if you’re a middle income or lower income investor, in other words, you’re starting out, you’re just trying to put some money away, send it forward, build some capital, the liability is gonna be so high. It’s gonna be very difficult to find advice from anybody, anybody to discuss how do I get money out of here? What’s the best strategy? What kind of investments are appropriate for me?

In fact, many brokerage firms have already eliminated advice on IRAs and the like. They’ve jettisoned that business altogether because the liability is potentially very, very great. Again, the vagueness of the standards that have not been written yet have caused many people to give pause. It’s considered that Robo-advisors…and I don’t know if you know what that is, but there’s…

Clark: Yeah, how do you define a Robo-advisor?

Roger: Well, Robo-advisors are investment platforms that are run by computers. So you essentially go to a website, you register, you answer series of questions about mostly risk, and they make investment recommendations in portfolios that are managed by computer algorithms. So they really are Robo-advisors. There’s not a human interaction in that decision making process.

These forks are likely to flourish actually under this model, whether that is good or bad, only time will tell. This is a relatively new phenomenon. Robo-advisors have only been around for three, four, to five years. And we’re still working out some of the kinks and seeing how that works out for the investing public. I think there’s some potential there, certainly.

But otherwise, you’re gonna be on your own, you know, going to places like Fidelity or Vanguard making these decisions on your own, or paying somebody like me. And that’s where it really is gonna break down for that new investor or somebody that doesn’t necessarily have hundreds of thousands or millions of dollars in one of these accounts. They’re gonna have to pay me by the hour, and that’s gonna keep a lot of people away from working with somebody like me and getting advice.

So they’re kind of gonna be running around in the dark. And from talking with thousands of people over my career, a lot of people are just plain intimidated and overwhelmed by this decision making process and understanding what they’re investing in. So this is my great concern is cutting off a large chunk of our population from really the financial education and support that they need to be successful.

Clark: In previous podcasts, we’ve talked about how important it is to remove emotion, right? Remove emotion from making decisions. And I’m assuming about Robo-advisor, I mean, there’s obviously no emotion there, so that’s probably a good thing. But I’m curious, so, well, what do you think are some of the potential challenges based on the people you’ve talked over your entire career, or you just mentioned thousands of people, what do you think would be a downfall, even though they don’t have emotion and that’s a good thing, what do you think is a bad thing with that style or that tool of the Robo-advisor?

Roger: Well, one of the things I worry about and there’s been a lot of studies that show that people who work with advisors tend to not be as emotional in making financial decisions. And so if I’m working with a Robo-advisor and we start to see a crash like 2008, you know, is somebody gonna jump out and never get back in? Are they gonna say, “Oh, I can’t put money towards my retirement. I’m just gonna lose it anyways”? I’ve heard a lot of that in the early 2000s and again in ’08, ’09. “What the heck? I don’t wanna save it and then just lose it in the market. I might as well just have a good time now and worry about it later.” So I think there could be a reduction in participation in savings programs. That’s probably my single biggest concern.

Now one thing I’ve learned about people is people don’t like to be wrong. Even though being wrong gets you to the best right answer eventually and the most successful people got no or failed more often than others, people just don’t like to be wrong. I’ve had people come in here that were referred to me six or seven years before they actually showed up, because they were embarrassed about what they were doing. They didn’t think they were doing as well as they should be, or they didn’t think that they were in the right investments. And they didn’t want somebody to tell them they were wrong.

So they just didn’t come and seek advice just because of the ego, even though they felt a little bit overwhelmed or a lot overwhelmed in a couple of cases that come to mind, and they knew they weren’t on sustainable courses. They were just afraid to find out what they were doing wrong. And I’m just afraid that we get another downtown because you know they’re coming. It’s like buses, they just come periodically. Okay?

So you have to expect that they’re coming, but the question becomes, “When and how do I deal with it?” So if I have a bad experience with one and I say, “Gee, I’m never going through that again,” then, you know, you could end up frozen and not saving anything at all and find out you’re getting into your 60s and 70s and I can’t work anymore and I don’t have any money, and suddenly the social safety net is expanded dramatically. And that’s a potential unintended consequence. I don’t know that’s for sure that’s gonna happen, but that’s probably the single biggest worry that I have is folks that are doing it on their own.

You know, Suze Orman has always said, “You can do it on your own. You don’t need any help.” And I talked to a lot of those people and they either put their money in stuff and close their eyes and cross their fingers and hope it goes up and find out years later it didn’t, or they just don’t do anything. They’re frozen like a dear in the headlights.

Clark: Right. So they don’t have like an empathetic insight maybe or they don’t have like the human to human insight that you can’t replicate. Because you can meet someone where they’re at. Maybe they have been embarrassed, maybe they’ve felt the what if’s too long, and they’ve just been frozen in their tracks. It takes another human to reach out and say, “Hey, we can do this, or let’s take a look at things.” That seems to be much more empathetic than just, I don’t know, an algorithm.

Roger: There’s a big difference between money helping you sleep better at night or keeping you up and awake. And if you’re not confident in what you’re doing with it, it’s gonna keep you awake. It’s gonna become a source of stress instead of a source of comfort. And really a Robo-advisor can’t talk you through those things. Then it gets back to that, “I’m doing what somebody told me I should be doing instead of what’s comfortable to me.” There’s a lot of approaches. There’s a lot of different ways to get from point A to point B. To get from I’m working to I’m happily retired. And figuring out the correct approach for you, your psychology, your lifestyle.

You know, I had a couple in here yesterday. I hadn’t see them since November because they’re just that busy. And so we did a little bit of work for them in November. We did some investing because that’s what they asked for, but they know they want and need comprehensive financial planning. They’re paying too much in taxes. Their risk management is all out of whack. And they’re just super, super busy. But they were stressed out when they came to me that they weren’t gonna be able to retire.

Now we have a path and they’re so busy that we’ve selected tools that they can just look at once or twice a year that don’t need constant monitoring and attention, or even semi-constant monitoring and attention, because, frankly, they’re just too busy. They don’t have the time. So Robo-advisors will advise you within the parameters of their programming. But they can’t make those adjustments based on those kinds of psychological inputs. I can’t imagine some way, I suppose maybe eventually, artificial intelligence can be adapted, but we’re probably quite a ways from being that adaptive to figuring out that stuff.

Clark: All right. Definitely.

Roger: And so these folks, you know, we went over again what we did back in December and they said, “Well, what other alternatives?” We went over a few of those. And they said, “No, that’s just gonna take too much of our time.” So we’re really happy with this approach. It’s not an approach that would have ever, ever come up with the Robo-advisor. I can guarantee that.

Clark: Right. Well, I think that’s a great way to use a topic to kind of talk about how there have been changes and Robo-advisors being some thing that, you said, just a couple of years and still gonna take very long time for it to be really be at all comparable. But for where things are right now, probably there’s a little bit of a connection to the recent news that we’ve been talking about with the fiduciary standards changing or potentially changing and what that means for advisors and investors. So right now, I know you said this earlier, but I’m just trying to really wrap my head around it. So it’s moving away from the opportunity for it to be fee-based.

Roger: No, no.

Clark: Right?

Roger: No.

Clark: Oh, it’s only going that… Can you clear that up for me a little bit?

Roger: Yes, sure. It’s gonna be where it’s all fee-based. A lot of financial products historically have been commission-based and…

Clark: Maybe that’s what I was thinking of.

Roger: So, you know, you buy a mutual fund and the advisor earns a commission. You buy an annuity, the advisor earns a commission. You trade a stock. There’s a trading fee. Sometimes, you know, there’s a flat fee based on the percentage of the assets under management. AUM is what it’s referred to in the industry. And that’s become more and more, the more common model, but there are still products that advisors earn commissions on.

And so under this new standard, there’s going to be more disclosure about commissions, costs, fees, etc., which is I have no issue with that. You know, I’ve been lobbying to restructure commissions in certain lines of financial products for many, many years, but laughed down at a lot of conferences. And I’m hoping that we see some restructuring. I think it will be good for the client ultimately if we see some restructuring there.

But initially, it’s gonna change the focus from the customer to the advisor I think. It’s certainly gonna slow down processes because there’s gonna be extra layers of paperwork. There’s already a lot of paperwork compared to what is was 20 or 30 years ago, and now there’s gonna be even more paperwork that has to be done. Some transactions will take a little longer.

That’s not a huge consequence.

What I worry about is the vagueness of the implementation of this rule and I’m gonna be very hesitant to work with just anybody on their retirement and considering our entire practice is based on helping people successfully make that transition to retirement. It’s gonna be an interesting next few months, maybe even the next couple of years while this all sort itself out.

As one of my mentors said a couple of weeks back, “If you’re already doing things the right way and documenting everything and operating as a fiduciary and getting to know your client and all of those goods things, you shouldn’t have a problem.” So I’m not too worried in that way, but a big chunk of this rule was written by the plaintiff’s bar in such a way that I think it opens advisors up to tremendous amount of future potential liability. And I think there will be some frivolous lawsuits hiding behind this rule. And that’s the other big worry because that will add a ton of cost and make certain products frankly unattainable for the investing public.

Clark: I know we’ve also talked about, in the past, there’s no single product that is the match for everyone. That’s all about options to sort of navigate all that to find the best option on your path to retirement. But when you kind of boil all this down in all of this change and some of the worry that it creates with the vagueness and kind of the uncertainty, what do you think it’s safe to be optimistic about right now?

Maybe this is to the people that you’re advising, your clients or maybe this is to people who are kind of on that fence right now, maybe it’s the person you said earlier. Maybe they’re kind of like coming out of something or maybe they’re just kind of afraid. It is such intimidating stuff and it can feel very exclusionary and just flat-out intimidating. But what would you say is something that we can look forward to despite there being some changes in how that looks like it’s all going fee-based versus the commission-based?

Roger: Well, first, I think it’s an encouraging direction in terms of consumers. I will encourage all listeners to monitor how this evolves and keep in communication with your elected representatives to make sure that as the rules are fleshed out and the guidelines are published, that we keep it consumer friendly as opposed to attorney friendly. I think it’s gonna take a lot of vigilance on the part of the investing public to make sure that their needs and their interests are being kept in line. It’s not just the brokerage firms and the legal establishment enjoying the benefits of this. It’s really supposed to be for the consumer. And I’m afraid right now it’s not as consumer friendly as it certainly could be.

But coming out of it, if we stay and keep an eye on the right outcome, removing some of the conflicts of interest, and I wanna comment on conflicts of interest in just a moment, but, you know, I’m optimistic that ultimately, we can get this thing right. I think a fiduciary standard is a good thing. I just think it needs to be clarified, distilled in a little simpler in wording, complexity tends to lead to lawsuits. And, you know, I want people to get good solid advice that is tailored to their specific situation. So, on the other side of that, what’s an optimistic thing? I think there’ll be more fee-based advisors to choose from ultimately. Although we’ve already seen a significant exodus from the industry.

I was reading this morning that there are 22% fewer independent broker dealers than they were three years ago. And, you know, anytime we see consolidation to the bigger and bigger companies, usually it means that there’ll be fewer choices in the future and cost will increase because of a lack of competition. So because the cost of compliance is high, there might be fewer choices, but the optimism is that it comes from the ability of the rules as they’re being written to make it better for the consumer. I can only hope.

Clark: Right. Well, you said conflict of interest. You wanna touch on that before we…

Roger: Yeah. Thank you for that, Clark. I don’t think there is a profession on the planet that is not loaded with conflicts of interest. I think the medical profession is rife with conflicts of interest. The banking industry rife with conflicts of interest.

Certainly our elected officials, Congress, State Assembly, local governments, they’re just full of conflicts of interest. And even school teachers and contractors are loaded with conflicts of interest. And we can delve into that topic in the future. But anytime you earn money, you know, like [inaudible 00:26:15] said, “You have to take care of yourself first.” So whether it’s enlighten self-interest or whatever, you know, the best teachers still have to retain their jobs to be great teachers.

So we have tenure. Is tenure in the best interest of students? I just don’t know. Should doctors be able to own laboratories and then order lab tests that they’re gonna make money on? You know, hard to say if there’s excess stuff going on. Realtors when they sell a property, they wanna get that property sold. Is there a conflict of interest between them getting the property sold and paid or between getting top dollar for their client, and how do you know? You know, you could over negotiate and lose the deal.

So this focus on the conflicts of interest, you know, it’s not the only profession that has them and even this is not gonna make them go away. Another article that I read through some commentary on the Department of Labor, said that in fact some bad apples may be able to get away with even worse and more egregious violations because now the paperwork is gonna be even more complex and it’s easy to hide stuff in there.

You know, if you bought a house anytime in the last 15 years, you sat down and looked at the stack of papers and disclosures. And I understand why they’re all there and they meant well, but I can tell you when we closed on our house the title company representative was really upset that I wanted to read every single page of the stuff that they wanted us to sign. I’m signing it, I’m gonna be bound by it, I better know what’s going on and ask questions.

I’m afraid that there’s gonna be some abuses that will be slid into the paperwork and people can get away with it just by saying, “Sign here.” In fact, I have a situation with a client right now under the suitability standard. Their mom and dad were told to just sign here and now they’re in a really rough situation that we’re trying to get these folks out of. So that is something definitely to keep an eye on.

But, you know, I choose to be optimistic. That’s always my choice, if I can find a place to be optimistic. I would suggest to listeners that you might wanna sit down with a fee-based financial planner because at least my clients’ experience, they make money on investing in the advice that I give. In other words, I consider it my responsibility to find money or improve performance or reduce taxes in a manner that exceeds what you pay me. And if you can go in and look at that as an investment that you’re going to get a return on, maybe it will be a little easier for you to retain a fee-based financial planner to help you structure things in a way that works for you. So that would be advice I will give to our listeners.

Clark: That’s good. Well, earlier on, we were talking a little bit how it all can feel overwhelming. It’s easy to feel embarrassed or feel like you’re doing the wrong thing before you go and talk to someone.

So in all of that uncertainty, there is something, I know we wanna make sure we mention this on every episode, it is the thought organizer and the thought organizer is one of the tools out of the box…easy to access that you offer, and the thought organizer is an option for someone to fill out to sort of think about where are they right now? And take an honest inventory of what their goals are and then that’s just the first step to working with someone like you. So do you want to add anything about a thought organizer and why you built it the way you did?

Roger: Well, we built it the way we did to help people literary organize their thoughts. You know, there’s a lot of should versus a lot of want. “I should be investing in this type of a fund or in this type of an asset.” I’m gonna sit down this afternoon with a woman who filled out, the thought organizer said she is currently unwilling to accept downside risk on more than 10% of her portfolio. But she’s full of small cap emerging market funds, junk bond funds.

She’s got just a boatload of money invested in this high risk asset groups. And so my conversation is, she retained me as a second opinion. She’s paying an advisory fee for her assets under management. And I’m very curious to see what they suggested her suitability and risk tolerance were when they sat down with her originally because we have our folks fill that out without me or anybody else being around. We want to have it already filled and brought in.

So comparing that with what she’s actually doing, the thing she’s currently doing are not consistent with her comfort zone and with her objectives. So if you have an advisor, if you have investments somewhere, you can use that thought organizer to help you get a solid feel for how you feel about risk, what keeps you up at night, what are your priorities. And having that context the next time you go in and sit down and review that portfolio with folks at that the brokerage firm or Schwab or your advisor, the bank, or whomever you’re working with.

This gives you that context so that you can speak confidently about yourself instead of having them tell you what you should be doing or how you should be feeling. So that’s how I would be recommending people to use that thought organizer right out today.

Clark: That’s great. So all that is available at gainerfinancial.com. This is usually, when we start to wrap things up, I’ve always enjoyed our conversation and I know this is a lot of stuff and I know we could really keep talking and keeping the conversation going because this stuff is pretty complicated. But I really appreciate how you were able to break it down for me, someone like me to understand. So I’ve enjoyed it. Do you have any final things in your heart before we wrap up?

Roger: Well, I hope I didn’t serve to add to the confusion out there. This is one of those kind of topics where you can really find yourself in the weeds. But, you know, keep your chin up out there and if you have questions, feel free to give us a call, 415-331-9030. Happy to answer any questions about how this affects you or stuff you don’t understand. You know, we really want to see the level of discourse and decision making increased for everybody.

Clark: Excellent. Roger, thank you so much. I am looking forward to our next Retire Happy podcast.

Roger: Beautiful. Thank so much, Clark. Talk you soon.

Clark: Thanks so much for listening to this episode of Retire Happy. Be sure to head on over to gainerfinancial.com to download your thought organizer to get started. Roger L. Gainer, CHFC, California insurance license number, 0754849, is licensed to sell insurance and annuity products in California, Illinois, Arizona, Pennsylvania, and New York.

Roger L. Gainer is an investment advisor representative providing advisory services through HFIS, Inc., a registered investment advisor. Gainer Financial & Insurance Services, Inc. is not owned or affiliated with HFIS, Inc., and operates independently. Thanks again so much, and we’ll see you next time on Retire Happy.

Do You Have Enough to Retire?

Roger GainerRoger holds the coveted and well-earned designations of Chartered Financial Consultant (ChFC®) and Retirement Income Certified Professional (RIPC®) from the American College. He is also a licensed insurance agent for life and health insurance, a Certified Paralegal for Estate Planning, and a current board member of SASM.

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Podcast: Client Spotlight: Meet Andy

The following is the transcript from Episode 11 of Retire Happy with Roger Gainer, a financial and business audio podcast.

Andy: Well, I’m sitting out on the sun porch with my feet up on the coffee table.

Clark: You’re retired happy. That’s what it is.

Andy: Yeah.

Clark: I love it.

You are listening to Retire Happy with Roger Gainer, president of Gainer Financial and Insurance Services Inc. In this episode, Roger interviews a client who shares his story of retiring happy. Andy’s a retired high school teacher who worked with Roger to create a spinning plan that enabled him to live the life he and his wife always wanted. Now they enjoy the relief they gained from knowing where their income is coming from. Roger also talks us through how to apply this same approach, even during troubled economic times and how visualizing your financial plan can help you stay on track. For more content like this visit gainerfinancial.com. Thanks for joining us. I’m your host, Clark Buckner. Let’s jump in. So, Roger, you and Andy, you both met back in 2006 at a workshop. And just to keep it really high level, just to paint a picture of where things were, can you tell me really quick, Roger, where was the economy from your perspective, from a financial advisor’s perspective? And then let’s talk about where Andy was and what you did in order for Andy to in a really unique time be able to retire happy.

Roger: Well, yeah. It’s one of the things that most impresses me about our work together is, you know, when we met in 2006 everything was going gangbusters. The price of residential properties was jumping in leaps and bounds especially around here. So their house was going up in value 15%, 20% a year and stock markets were doing great. And when that’s all happening, you get kinda, you know, comfortable if you will kinda like today. And then 2007 hit and, you know, that was the year that they had always targeted, Andy and Christine, had always targeted for retirement. And when 2007 began, we really started to see a major shift early in that year. Real estate markets cooled off dramatically. In many parts of the country, we started seeing prices drop dramatically.

In the middle…towards the end of the year, we started seeing the stock market jump in and accelerate losses. And I know a lot of folks that targeted 2007 or 2008 for retirement just plain didn’t because their investments dropped in value and they just didn’t feel financially secure. But Andy and Christine marshaled on with that background and made what I think are great decisions, and that’s why I look forward to talking to Andy all the time. Every time he picks up the phone, he’s just the happiest guy I know. And that’s why they’ve been an inspiration and helped me with the type of planning I do with clients. They’ve really helped refine that. So Andy, if you can, go back to that time and when we first started working together in the spring of 2006 and kinda tell me what was going through your mind at that point about retirement.

Andy: Yeah. Both of us were doing pretty well in our schools.

Clark: When you say schools…so you both were teachers?

Andy: We were both teachers. I was teaching in one school in the northwest corner of San Francisco and Christine was teaching in another school in the northeast corner of San Francisco. We both felt pretty good about the jobs we were doing and we had been planning about looking forward to retirement and so on. We both…one of the big dangers in leaving a job is holding onto it for too long. You want to retire when most people seem to think you’re doing a good job. You don’t wanna wait for another year or two before they say, “Good God. We’ve gotta get that idiot out of here.”

Roger: It’s kinda like retiring on top.

Andy: Yeah. Fair enough. So we both left feeling good about the work we had done and we had bought a piece of land up here at a ridiculously low price. So we had a general idea of what we wanted to do and some sense of what it was gonna cost us to get this thing done. One of the steps Roger was talking about a few minutes ago was he advised and we finally agreed that we would take all the equity we could get out of the house we had in San Rafael. And that in fact left us having to pay back to the bank when we sold the house a fairly small amount of money. But in the meantime, we had lumps of cash that we could use for other things. We knew that our short-term 10-year income was going to be safe. We knew what it was and that it would…that would dry out to the end of 2017. We knew about Social Security, what part that would play in all of this stuff. And so we had remaining things that we wanted to…other forms of money that we wanted to start using beginning in the year 2018. So that was the 10-year process if you will between retiring and going on to some of the other policies that we’re not…we haven’t used yet but we will be using in the coming year.

Roger: So what you’re saying, Andy, is we put different buckets together for…to create the reliable income stream at the beginning of retirement and then we timed in additional income streams that would kick in. The next one kicks in in 2018 to match your spending requirements.

Andy: And in fact, I think there was great virtue in being able to do all this at the time that the economy was going down the tubes. Historically in the United States…I taught history for 40 years and historically there…yes, there had been all sorts of crashes here and there and everywhere but they don’t last forever. So if you start out at a low point, then you’re actually in a pretty good position historically, probably to come out pretty well down the road. And we do have a 10-year span. The road is coming around the corner this coming January. That makes a big difference. Even if our investments don’t grow at all from where they were last spring, we can plan ahead, we can live on the money we will be getting starting in 2018 and plan ahead accordingly. Yes, I’d like to have more. Why not?

Roger: Well, Andy, when we first started putting a spending plan together for you, an income plan, you and Christine sat down and really filled in the colors in the outline of your…what you wanted your retirement life to look like as far as dining out and activities and travel and all these other things. So we were able to put a spending plan together for both of you and I think…do you feel that that’s added to your happiness in retirement or peace of mind? Or what is the result of having that spending plan and knowing where your income is coming from? How does that influence you daily?

Andy: So the concept is we don’t worry about where our next meal is coming from. We do things that we want to do. We do things that we love and have loved all of our lives. For example, this is small but it’s important to us, we first met together in a summer school. We were doing somewhat different things back and forth and we got to know one another a little bit but we wound up becoming very close friends and we got married. And we do a lot of musical things together. I’m a…I play piano and organ. Christine is a choral conductor. So we’ve got a little program that doesn’t…going up here in a little church that doesn’t pay us a plugged nickel but that’s all right. We do it for fun.

Clark: And you tour too, don’t you, Andy?

Andy: Yeah. We’re going to be going to a festival over in Reno early next month that we’re a part of. That sort of thing. So the ideal, I think, the ideal plan for retirement is to do what you love. And we’re in a position of not having to worry all the time. And that’s a huge relief.

Roger: So Andy, one of the things that you talked about was how much you enjoy, you and Christine enjoy traveling. And you guys have been to some pretty interesting places since you retired. Name your two favorite trips that you guys have taken since retirement.

Andy: Oh. Only two? I’ll give you three. How’s that?

Roger: Okay. Three is great.

Andy: One was the Galapagos Islands and actually several other things that went along the same trip. Then there was a month in Britain where I was doing a lot of family history research. Third one was we went to Central and Eastern Europe where Christine’s father came from and met long lost cousins and spent some time there. Now I’m up to a fourth one. We went to New Zealand for, last February, for most of the month and had a wonderful time. And we’re going to Scotland to the Highlands and Islands next June basically for the month.

Roger: Well, that’s fantastic.

Andy: And these are all things that…neither of us particularly likes being part of big travel things. So we’ve never been on a great big ship and never will be on a great big ship. So Christine likes to plan out all of the…stay in this B&B, go to this site, blah, blah, blah, blah. And we…she’s been working on the Scottish trip since we got back from New Zealand.

Clark: Andy, I love the visual. I can see in my mind how both you and your wife, you’re traveling around the world. You have a great life at home, you’ve got beautiful scenery, you’re enjoying it, you’re retiring happy. So as we’re wrapping up here, Roger, if you could just bring it home. Take us back…snapshot of how it started in 2006, what you had to work with. Two private high school teachers, two teachers, what you could see with the timing and how you were both able to work together to create clarity with a thought organizer. Roger, bring us home on how it all fits together.

Andy: I’m going to take the liberty of starting to bring you home which is that Roger turns out to be a good listener.

Roger: Well, thank you, Andy.

Clark: Why is that a big deal for you?

Roger: Well, listening is a critical skill because when I work with a client, it isn’t about me. It’s all about the client. So it isn’t about trying to fit everybody into the same solution and I have to get to know a client. And we spent quite a while getting to know each other, didn’t we, Andy?

Andy: Yes, we did.

Roger: Okay. And really painting your picture is what I call it, you guys came with that outline of a vision. We wanna live up in the mountains. We have this piece of land and we’ve done some research and we kinda have a target date and, you know, and I’ve got some ideas that I want our house to look like. So here I’m working. I’m meeting some private school teachers who…if you know anything about the industry of teaching, they’re not the highest paid people in the education community. And they’ve done a nice job of saving on a regular basis but by no means did they come in with a huge seven figure portfolio. They were not worth millions of dollars. But they brought another thing that I thought was really impressive to me was a great attitude and an open mind. Now, Christine’s wasn’t quite as open as Andy’s to begin with, but as we got to know each other and we got to understand where they were coming from and where they wanted to get to, it was easier and easier for Christine to make decisions.

We started to execute a plan towards the end of 2006 and into 2007. We implemented a variety of strategies over the next couple of years, actually. But what was so impressive, to me, was that even though there were some bumps in the road, the market had slowed dramatically for selling their house when they did put it up on the market, and maybe we got a little bit less than we were hoping for but because we knew where they were going that was not a deterrent. It didn’t slow anything down. And your ability to retire on time and on your terms really very impressive. And I just wanna say Andy, I look forward to speaking to you guys every chance I get when we do phone reviews. And you guys came down here a couple of months ago which was great. I haven’t seen you in a year or so face-to-face. But it just…it’s like the ray of sunshine. You don’t answer the phone and, “Yes. Hello.” You’re always high. So Andy, if you could give any piece of advice to our listeners, whether they’re 25 like Clark or they’re just coming into the home stretch of retirement or they just went into retirement, what would it be? What would you say your secret to being so darn happy is?

Andy: You and your spouse need to have as clear a plan as you can about what you wanna do. Or even you could have a clear plan about what you don’t wanna do. You want to shape your own future. And increasingly, as you do that, you get a picture of what you’re going to need to make it happen and where you have to go to make it happen. Do all of this together. I think it’s far better to have somebody to argue with, to talk with for years as a way of coming up with a retirement plan. And don’t wait till the last minute to hope that somehow the light will come out of the clouds and tell you, “Do this.” No. Doing something takes a lot of work and a lot of thinking.

Roger: I think that’s great advice, Andy.

Clark: Excellent. Andy, thank you so much for being our guest today on the Retire Happy Podcast. Roger, always a pleasure. So final call to action. We always like to wrap up things with inviting the listener to fill out that thought organizer. So real quick. How can someone access that? What does it mean? And how does that get them connected to you?

Roger: Well, I think Andy summed it up perfectly, why you use a tool like the thought organizer. Because it…he and Christine were able to get on the same page, were really able to work towards a clear vision. And the thought organizer is a tool that’s designed to do just that, to help you begin that journey to clarifying your thinking and to getting on the same page with everybody that’s involved in the decision-making. So if you go to our website at www.gainerfinancial.com, scroll down to the bottom of the page and there’s a button that allows you to download the thought organizer. There’s no cost. And if you are single and doing it, that’s great. If you are married and doing it, make two copies and complete that in a room separate from your spouse and then compare your answers. If you do download the thought organizer and you would like to come and see if I can help you clarify your thinking, contact us through the contact us section of our website and I would be happy to extend a free consultation to see if I can help you achieve a happy retirement.

Andy: And when you’ve done all that then…when you’ve done that stuff, you begin to see the money as a tool, not as a big goal. It’s a tool to get you to the goal.

Roger: I think that’s the perfect sentiment to end on, Andy. That’s great.

Clark: Thanks so much for listening to this episode of Retire Happy. Be sure to head on over to gainerfinancial.com to download your thought organizer to get started. Roger L. Gainer, CHFC California insurance license number 0754849 is licensed to sell insurance and annuity products in California, Illinois, Arizona, Pennsylvania, and New York. Roger L. Gainer is an investment advisor representative, providing advisory services through HFIS Inc., a registered investment advisor. Gainer Financial and Insurance Services Inc. is not owned or affiliated with HFIS Inc. and operates independently. Thanks again so much and we’ll see you next time on Retire Happy.

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Podcast: It Can’t Happen to Me

The following is the transcript from Episode 10 of Retire Happy with Roger Gainer, a financial and business audio podcast.

Roger: Anytime we see a major disaster or something that catches the news, inevitably, the crooks follow in the wake and try to snag people who are naturally nervous.

Clark: You’re listening to Retire Happy with Roger Gainer, president of Gainer Financial and Insurance Services, Inc. It seems that every single time we turn on the TV, there’s news of yet another security breach and millions of Americans’ personal and identifiable information is at risk. Sadly, Equifax is just one more example added to the books of a worldwide impact from hackers throughout that try to take our information.

So on today’s episode, we’re taking a closer look at how you can protect yourself with these easy-to-follow steps, including how to not fall in the trap of common scams like phishing emails. Thanks for joining us. I’m your host, Clark Buckner. Let’s jump right in.

All right, Roger. Welcome back. I am really looking forward to talking with you today. There’s some really important things every episode we talk about here on Retire Happy. But right now, we’re about to talk about some of the recent data breaches, and not just specifically what is happening with some of these big security vulnerabilities that are impacting millions of people. We’re gonna be talking about some actionable tips that anyone can implement. And that’s kind of the main objective for today. So how does that sound to you? How are you doing?

Roger: Oh, I’m doing great. It’s a scary situation. And we’ve always talked to clients for years and years and years about protecting your identity, protecting your credit. I’ve known people who’ve had their identity stolen and it’s a nightmare. It becomes a full-time job trying to get your identity back. And so protecting it in the first place, it might make a couple of things a little more inconvenient in life, but it’s nothing compared to the inconvenience of trying to get your financial life back if somebody has hijacked your identity.

Clark: Out of curiosity, I don’t know anyone personally who this has happened to but are there just one or two general examples? I mean, of course, like, don’t have to mention any names of people, but just what that looks like zoomed in on an individual person’s life. What happens if their identity is stolen and they find out someone has been doing something that they, of course, didn’t authorize?

Roger: Well, there’s two main kinds of identity theft here. One is having your tax refund stolen which is happening more and more. I work with a lot of tax preparers and every year, there’s more stories. And last year, there’s quite a few more stories about people filing their taxes and applying for refund and getting a letter from the IRS that says, “You’ve already gotten your refund and there’ll be no refund for you.” And we’re auditing your tax return because somebody took their tax ID number and filed a false tax return, claimed a significant refund. And now that they’re…after the refund’s gone out, now they’re talking about audits and different things. Plus, the people who should be using that tax ID number are unable to file for their refund. They are gonna get fined for not filing a proper return and all those other issues. It’s really…it’s frightening.

And the other side is when your credit is stolen, if you get…somebody can open credit cards and lines of credit in your name, run up huge bills, and then not pay them which, you know, will drop your credit scores dramatically. So the next time you want to buy a car or refinance your house, you know, to even just apply for credit card, you’re gonna get turned down or charged a much, much higher rate. And usually, that’s how you find out that somebody’s stolen your credit history, hijacked it, is you’re applying for credit because you’re sitting in a car dealer, ready to buy a car and they come back and say, “Your credit score’s, you know, 500.” And you go, “What? Wait a minute, I’ve got great credit. And last time I checked it, it was 800. What happened?” “Well, you have all these delinquent bills.” And so it starts. And that’s when the nightmare happens, you have to contact creditors and the credit bureaus and the police. And it just…you have to come up with proof. The burden is on you to prove that you were hacked, not on the bank to prove that you were not.

Clark: Right, right. So what kinds of information generally is required for that to happen? And I think then that might be a good transition to talk about the most recent hack, the Equifax hack. I mean, there’s a lot of things like Equifax unfortunately, but that’s just the most recent one.

Roger: Yeah. The three big agencies for credit monitoring are Equifax, TransUnion, and Experian. So only Equifax was hacked, but they took 143 to 149…I’ve seen the estimates that high…million identities and they got the stuff you need to open an account, they got Social Security numbers, your address, your date of birth and where you were born. And so that’s usually the things that are needed to open a credit account. There are other people who were in dispute over their credit reports. Another 209,000 people whose entire credit report were taken, and then another 182,000 folks who were in the process of having their credit check whose entire credit reports were taken. Now those folks, they’re probably gonna have problems sooner than the others because their credit numbers, their credit card numbers and account numbers were stolen. And usually, thieves will wanna run those up really fast before somebody can shut those accounts off. But for most people, just about everybody that has a credit report, their base identity information was taken.

Clark: It’s really sad. It really is disappointing.

Roger: Well, you know, it is disappointing. The internet was never designed to be secure when it was first created, and this is one of the…why it’s so vulnerable. And, you know, this isn’t the first major data hack. The Social Security Administration was hacked not that long ago. This is why there’s such a movement to get rid of Social Security numbers as an identification. They were not intended to be identification numbers and as a result, the system just isn’t that secure when it comes to these things. I would expect something to come along in the next few years, but right now, we’ve gotta deal with the system that’s in place and that includes protecting your Social Security number.

Clark: So let’s talk about a couple ways to protect that, not just the Social Security number, but other essential things. Like, what…would you do both in response to a big outbreak like this and what should you be doing on an ongoing basis? Kind of two questions here.

Roger: Well, sure. Based on the outbreak, the only way to protect yourself, and unfortunately, it’s gonna be for years to come because 143,000,000 records. You may not get hacked for years, you know. Thieves go to what’s called, “the dark web” and they buy this information. I read recently that the kind of information that was stolen from Equifax fetches between $5 and $10 on “the dark web” so people go buy thousand of these things and, you know, just start opening accounts in those records’ names. To get through 143,000,000, it’s gonna take quite a while. So the first thing to do is to freeze your account, you know. This is, unfortunately, gonna be what we’re all going to be dealing with, like I said, going forward to protect your identity. So putting a security freeze on your account and you’d need to do this at all three credit bureaus.

This is gonna be a little bit annoying and kind of cumbersome and it actually costs money to do based on the state you’re in. It will be either $5 or $10. Here in California, it costs $10 per reporting agencies. So 30 bucks to freeze your credit accounts. Even here in California, the State of California Department of Justice Attorney General has put up a special bulletin on how to freeze your credit files and included there are links to Experian, Equifax, and TransUnion. So you can go directly. And I don’t recommend calling these folks, people are getting disconnected, they’re sitting on hold for a long time, there are just a huge volume of people trying to make…

Clark: There’s millions of people, right?

Roger: Millions of people are trying to freeze and they’re all trying to freeze right now. So be patient when you hit their websites, they’re, you know, not designed to handle the influx of people that they’re experiencing now. They’re doing things to improve the volume that their websites can handle but sometimes it’s been glitchy. Sometimes, the websites are crashing and you just have to come back and it’s just the way it is. So…but be patient and do it. I’m a little nervous myself because when you do put a freeze and if you’re applying for credit, say, for a car or in my case we’re trying to get an equity line, I can’t put the freeze on right now because the underwriters have to have access to my account and it takes a few days to freeze and unfreeze. So I have to leave this off until we get a decision. I don’t know when they’re gonna, you know, look at my credit reports. So we’re ready to go but we have to finish the underwriting process and then we can put a freeze on.

So the other thing you can do, which we have done…it doesn’t prevent people from opening accounts in your name…but you can put an alert and this notifies you after an account has been accessed. So, somebody makes an inquiry to check your credit, solicit you for credit. If somebody tries to access an account without my express permission, they’ll give me a holler. Like I said, it’s an after-the-fact kind of thing so that…it’s better than nothing, but it’s not as good as freezing your account. Now, the other thing is because of the alerts and the fact that freezing your account only will protect you against new…somebody taking out new credit in your name, you have to start paying attention to your credit card bills. So when those statements come in, scan them just to see that the things that are being charged are things that you actually spent money on. I know a lot of folks, they’re busy, the bills come in, they sit down to pay the bills or they do it online and they just click “pay.” So they’re not really looking at the detail on their credit cards, they’re just looking at, “How much do I owe this month?” And…

Clark: Right, or an “auto.” Sometimes it’s an “auto” thing too, right?

Roger: Right. A lot of times we set up auto pay on these credit cards just because we don’t have time, we can’t be bothered. But if somebody’s putting charges on your accounts, the sooner you come up with that information and tell the bank and freeze your account, the less liability you’re going to have, which brings me to encouraging folks not to use their debit cards. One of the protections, when you buy stuff with a credit card goes away if you use a debit card, and that is there’s a $50 maximum liability as long as you report to the credit card companies. So in theory, the bank works the same way with your ATM card. But think about this, if you charge something or you swipe your ATM card and that identity is frozen, and somebody takes thousands of dollars out of your checking account, it’s your money that’s missing while the bank does their investigation before they determine whether you get your money back.

Clark: Gotcha. I hear you.

Roger: It’s your money. When you use a credit card, it’s their money. Okay.

Clark: Right. Well, that also plays in the…a kind of larger theme of what you talk about too with, you know, using someone else’s money, using the bank’s money with growing your assets and all that. I think it’s just like, a very…like a micro example of that in a different context, but…

Roger: Well, it’s just another layer of protection because you’re using…the bank’s money is what’s being risked to those thieves who are stealing identities from credit terminals, at stores, and gas stations, etc. So…yeah. I’m one of those guys when I go into the gas station where they don’t…my gas station doesn’t take my credit card, it only takes the ATM card or cash. I feel all around the ATM scanner to see if they’ve put a separate device in there if it’s been altered in any way to grab the information off of my debit card, and then they’ll put a little pinhole camera. So usually today, there’s a little guard covering the keypad so your hand slides up underneath that, but sometimes some people put actually a little camera in there so that they can match the keystrokes with the magnetic information they’ve stolen by putting a “skimmer,” is what they’re called.

And to all feel around underneath there or, you know, get a little closer to keypad to make sure somebody isn’t looking over my shoulder, at the numbers that I’m punching in. So it’s just a…you know, again, people call me paranoid, but this is how your identities are getting stolen, this is how people are losing money in their bank accounts. People are watching them at the ATM, people are watching them at the gas station. And, you know, putting that in…those little gizmos that are credit card readers and leaving them on for a little while and then pulling them off before anybody that owns the gas station really notices. And they’ve collected, you know, information on dozens of credit cards or debit cards. And if they can combine that with the pin, it’s not real hard to go to an ATM and start draining your accounts.

Clark: Wow. How about we shift over to some of the other scams that are happening because this is just general advice, I know that you talk about but phishing scams, do you wanna go there next?

Roger: Yeah, and that’s a really good point. Anytime we see a major disaster or something that catches the news, inevitably, the crooks follow in the wake and try to snag people who are naturally nervous. So I’ve seen a couple of emails pretending to be Equifax, click on this link because your account’s been compromised, you know, or we’re the IRS and you’re in trouble, your account’s been compromised. Click here to get more information or specifics or I’m getting these phone calls at home now left on my answering machine, you know. This is the IRS and you will be prosecuted. You’ve committed some heinous violation and you better call right now.

So these are going up more and more and then, unfortunately, with all the natural disasters, here poor Puerto Rico today, with the hurricane and in all the Caribbean Islands, with the last few hurricanes in Florida and Houston area, and down in Texas in the Gulf. There’s tons of scams that come out of those too, from charities offering relief to contractors, and attorneys, and insurance adjusters, all kinds of service providers, you know. And they’re just reaching out and give me a small deposit or respond to this, register for your FEMA money, and then it takes $100 to register. All kinds of things like that come out of these types of big events that most people know about. And, you know, that group worry. And that’s what they’re playing on.

So be very, very careful. If you get an email that looks like it’s coming from one of these types of organizations, pick up the phone and give them a call because you’ll find that it’s rare that those kinds of communications come from the IRS or Social Security or your bank. They’re usually trying to reach you in a different way. So if you initiate the call, you look up the number. Don’t call the number that they left on your answering machine because obviously, that’s their number and they’ll answer it and pretend to be the bank.

Clark: That’s helpful to go through those. I know it’s no fun to talk about it, but it’s a real thing and it can keep people from their goals to retire happy and to live the life that they’re trying to live. So I think that those are some really practical tips that you’ve shared today. Do you have anything else on your mind about this?

Roger: Well, yeah. There’s a couple three things. We’ve given away security pens for, God, five or six years now.

Clark: And you’re talking about…this is a written pen, this is an actual…

Roger: This is…yeah. This is a Uni-ball, has a patented type of ink that actually soaks into the paper. So when you sign a check, thieves can’t do the acid-wash trick to change the payee and how much money the check’s been written for. It’s pretty common. People steal your bills from the outbound mailbox. That’s why never mail money…

Clark: Cash or check.

Roger: …or important communication by sticking it in your mailbox and putting that flag up. You know, where we live, they’re not dropping the mail through the slot and we can leave mail for the mailman by putting the flag up on our mailbox. Don’t do that with anything that’s important that’s outbound. Another thing…

Clark: That’s a pretty neat swag item, it’s not one of those cheapo pens. You’re giving away some pretty nice stuff.

Roger: Well, it’s a…you know, I have clients who come in just to get a new pen. They like the way they write and they like the security that when they sign something, they know it’s really signed. Another thing I would encourage our listeners to invest in is an outstanding paper shredder. And what’s important is it’s not a strip shredder, and it’s not a crosscut shredder. Those can be reconstructed. In fact, the identity protection workshop that I went to where I learned about these pens, the guy who put on the workshop showed us how fast he can recreate a document that went through a strip shredder or even a crosscut shredder. It doesn’t take very long if you got some talent. And, you know, that’s why a lot of people do dumpster-diving…criminals…and to gather information like that. We here at Gainer Financial, we use a…it’s called a “confetti shredder” and it turns paper into dust.

Clark: All right.

Roger: There is no way that any of our client’s information or our personal information is getting recreated into a document. Invest in a good shredder. You won’t be sorry.

Clark: And a not cheapo pen.

Roger: Yeah.

Clark: Come talk to you to get the pen.

Roger: Yeah. Hey, when you come in for a consultation, we’ll be happy to give you a pen. They come in both blue and black.

Clark: Well, I think that’s probably a good place to start wrapping up. And for someone who is wanting to come and meet with you and learn more about you, there is a first step they can take. You wanna talk a little about the idea?

Roger: The Thought Organizer?

Clark: Thought Organizer.

Roger: Yes, the Thought Organizer. Well, I find the single biggest step to gaining control over your financial life and peace of mind is to organize your thoughts about why are you even saving money, what’s it for, what do you want your life to look like. Once you create that context, decision-making becomes so much easier. Use the Thought Organizer.

Clark: Roger, thank you so much. It’s been another great conversation with you. I always look forward to these. And I am excited about when we can get together again soon.

Roger: All right, Clark. Always a pleasure. Take care.

Clark: Thanks so much for listening to this episode of Retire Happy. Be sure to head on over to gainerfinancial.com to download your Thought Organizer to get started. Roger L. Gainer, ChFC, California Insurance license number 0754849 is licensed to sell insurance and annuity products in California, Illinois, Arizona, Pennsylvania, and New York. Roger L. Gainer is an investment advisor representative providing advisory services through HFIS, Inc., a registered investment advisor. Gainer Financial and Insurance Services, Inc. is not owned or affiliated with HFIS, Inc. and operates independently.

Thanks again so much and we’ll see you next time on Retire Happy.

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How to Safeguard Your Retirement Savings

Roger GainerRoger holds the coveted and well-earned designations of Chartered Financial Consultant (ChFC®) and Retirement Income Certified Professional (RIPC®) from the American College. He is also a licensed insurance agent for life and health insurance, a Certified Paralegal for Estate Planning, and a current board member of SASM.