How Does A Financial Advisor Retire? (The Emperor Has No Clothes?)

Several years ago, there was a financial study that found that most people spend more time planning a family vacation than they do retirement and estate planning. I get it. Its is an uncomfortable topic: Is one afraid to stop working for fear that 1) they may run out of money, a more realistic concern with recent rampant inflation, geopolitical concerns, and interest rate hikes; 2) since they have been working for so many years, subconsciously they always have defined themselves as a____________(at least at social functions) and may feel odd saying that they are “retired.” Since for several years I have been working from home, I recall going to the supermarket one morning during the week and felt this weird sensation when I saw so few shoppers my age that I thought the other shoppers were all looking at me as if I was unemployed. I felt like shouting, “Hey, I’m still working successfully and am not a loser.” Reflecting on that insecurity in the past now makes me realize that retirement has a wide range of feelings for all of us which, with proper planning, will allow us to enjoy the fruits of our laboring years.

For those in the financial services industry, there is a large divide between advisors who are primarily compensated on commissions on the sale of products compared with advisors who tout that they are “always” acting in the clients’ best interests since they are compensated on the recurring fees they receive on “managing” their clients’ assets in part or in whole. Suffice it to say that there are advisors in both camps who truly act in their clients’ best interests with or without a “fiduciary” legally imposed obligation and similarly advisors in both camps who do the opposite.

Formulating a retirement plan whether one does it at an early stage of one’s working career or when one finally or officially stops working, you will see rarely ends up playing out as a person anticipated. Naturally, unforeseen life events take place so developing and anticipating as many contingencies that may occur will assist in the transition process creating less anxiety for you and your loved ones.

Assuming that you start with the timing of commencing social security, that decision, although on its face simple, does involve taking a holistic approach to all the other contingencies, e.g. your anticipated mortality and whether your assets are adequate enough to bridge you to age 70 to take advantage of the eight percent simple growth of your payment.

As you can imagine, I have seen poorly planned or unaddressed legacy issues leave siblings or family members ceasing all contact when elder family members passed due to perceived inequities in the asset distributions. Incredible that family members spend a lifetime together sharing feelings, good times and bad times, caring for each other, yet poor or inadequate planning leaves them forever lost to each other. Not what the elder family members ever could have thought possible. I am afraid to relay I have seen this in my practice more than most folks could believe.

Please read my article My Long Term Care Story As An Advisor (October 2021 Broker World issue) to see how my parents failed to plan for long term care expenses, and to this date my mother’s assets have been completely been wiped out leading to my siblings and I paying for her ongoing care—which is now well over 10k per month. Query whether parents really think that without proper planning that they can assume their children will be financially responsible for them whether they can afford to or not? I would submit that is not the case from either side’s perspective.

It is truly challenging to address retirement issues for fear of running out of funds, so do you need to change your lifestyle or rush out and try to do any supposed bucket list item you’ve been dreaming of for so many years before you are physically unable to do so? What is “enough” (assets accumulated)? Most people don’t drastically change their lifestyles upon that Monday morning when there is no job or work to be done. Some gradually see the “finish line,” slow down, and then say, “I’m going to start exercising, start taking more trips, start a new hobby I’ve been procrastinating about undertaking, or volunteering for a cause that I care about, take classes, read more books, join clubs to make new friends.” The list can be endless. Is it really realistic? One client told me over many years that it was not a matter of if he was going to get divorced but just when, e.g. when his kids left middle school, then when his kids left high school, then when his kids graduated college. As of this writing, he and his wife are still married and his kids both have graduate degrees and young families.

Can one truly flip a switch and now finally start living what some would say is a life like they always really wanted? The concern as you age may not only be “Do I have enough funds to last?” but also “Will my health allow me to be as active as I thought I always wanted to be?”

Sitting down with a reasonable advisor and attorney seems to be a fundamental starting point. There are many pundits, and I am including friends and family members who opine some approaches but probably more conflicting ones. I used to joke that a New Year’s Resolution we should all attempt to abide by is not to follow the advice of one’s brother-in-law. I do not always practice what I preach, since being divorced and remarried I have fallen for this approach on a couple of occasions.

Bad or little to no planning will create a poorly managed retirement and a burden on our loved ones to figure out the mess we left.

Not surprisingly, I recommend you still sound out referrals for that”‘reasonable trusted financial advisor and attorney.” To use a common maxim, no one approach fits all but building buckets of streams of income for you and your loved ones, talking with family members about your intentions, possibly with your advisor/attorney, may ease the challenges upon hearing your plans and contingencies. Personally, my wife and I have set up several annuities supplementing our lifetime income and have a modest amount of life insurance and long term care coverages so as not to burden our children. We have addressed the needs of one adult special needs child, another challenging task in and of itself. Finally, I can go to the supermarket during the week and not have to feel uneasy—although during COVID wearing a mask was not that bad.

Ross Friend, JD, CLU, ChFC, FLMI, consults with advisors nationwide specializing in premium financing for professional and business owners.

Friend received a BA summa cum laude from Boston College and a JD from Emory University, where he was the editor of Emory Law Review. He has the distinction of being a FINRA arbitrator and is a frequent speaker at industry conferences and company meetings.