Thursday, March 4, 2021
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It’s Not About the Money

By Judy Loy
ChFC®, RICP® and CEO of Nestlerode & Loy, Inc.

It will be 27 years in April that I have worked at Nestlerode in the finance industry. Things have changed a lot since I started, with the advent of inexpensive laptops, the internet and smartphones. It has revolutionized how we do business and the speed at which information flows. To go from a simple Straight-Line Calculation for retirement to a Monte Carlo Simulation, which better estimates risk, return, inflation and other variables for a successful retirement; it’s amazing what can be done in seconds that used to take hours. There is one thing about my career that I realized early on but has really come to the forefront this year and will never change: it’s not about the money.

You may think being an advisor is all about numbers, growth and investments. It is certainly that, but it’s also a lot more. The realization hits home when the couple you have advised for more than a decade comes to their retirement date. The work, the savings and the plans come together to create the next phase. With grandkids, travel and less stress, it also involves anxiety over beginning their next 30 years. Yet, to be able to urge them to do the travel because of the successful planning feels almost as important to me as it is to them.

There are many different types of retirement for couples and individuals just as there are different priorities in life. The general rule of thumb is 80 percent of your pre-retirement income for retirement; however, the “average” person can vary greatly from this amount.

I have a type of client called the “minimizer,” (my word, not theirs). These are couples, or individuals, who often face high-pressure jobs and wish to retire early.  To do so, they are willing to minimize their expenses in retirement for a slower pace. They plan on living on less than 80 percent of their pre-retirement income. The big catch here is having affordable health insurance coverage if under the age of 65 (65 is the age of Medicare eligibility). In these situations, many mention a job at Lowe’s or Wegmans for health coverage. They cut cable, use one car and make sure mortgages are paid off before they retire. This still requires planning, as inflation over this longer time frame can deplete spending power and unplanned emergencies can derail a tight budget. For them it’s not about the money, but about enjoying their time after years of work.

We then have the other end of the spectrum, “the maximizer.” These folks want to enjoy retirement at the fullest, which can sometimes be expensive. Travel, time with family and maintaining a large social calendar are on the top of their lists. Travel can be expensive and is often a wish in retirement. Maximizers may need more than their pre-retirement income in retirement. This is difficult to create. The best way to create more in retirement is to retire later. Waiting until 70 to retire permits an individual, or family, more years of retirement contributions, maximization of social security and less time in retirement. In the case of maximizers, some retire from full-time work and do consulting or part-time work to supplement their retirement income if they wish to retire earlier or have more flex time. Again, running through scenarios to see what mix (retire later, save more, work in retirement, etc.) will work long-term is essential.

One of the most stressful times in financial life is when clients face an “inflection point.” This can be retiring, taking care of an aging parent or losing a significant other and it is typically planned or unplanned. The hardest is the widow or widower who has not handled finances before the death of their spouse. The loss is devastating and the stress of that loss, along with the unknown, can lead to more stress. This is true whether the surviving spouse is well-off or not. Therefore, it’s critical that even though one spouse is typically in charge of investments/finances, both should attend meetings and have a knowledge of where and why. It’s not about the money, it’s about the peace of mind during an incredibly difficult time — to have a trusted advisor that is familiar and knows the family can lessen the financial stress or worry.

In the end, it’s about giving a child a brighter future through college, traveling to visit grandchildren or leaving a stressful, full-time career for a slower pace. It’s not about the money.