Chris: Priscilla, I'm really excited about the conversation today. I say that every time to start the episode, but I like talking about this stuff.
But some of the things that we've seen from clients going through from their working years all of a sudden into retirement, it's this question about being going from an income producer to an income consumer.
And this conversation is geared more towards that phase of life.
But there's several different phases of life that we experience, throughout. You know, you know, our childhood all the way to our adult years. Let's start there with those four different phases of life that that you brought up that I think is fascinating because it talks about some of the challenges that we face during that, but also how we transition and then better set ourselves up for success when we decide to all of a sudden wake up and say, I'm going to live off of what I've built today.
Priscilla: Chris, most of us start with, a phase that I would call survival. It's just getting from one paycheck to the next, getting the bills paid. Getting your financial life a little bit under control. And then most of us then move at some point to accumulation. Now, that's usually the longest phase of our financial lives.
And accumulation then segues into preservation because as we worked hard for decades to build our financial wealth, then suddenly at one morning, we wake up and we say, ooh, you know, I worked hard to accumulate all of this. Now I want to preserve it. And then we segue ultimately into distribution, which actually has sort of two parts. One part is, I am distributing my assets that I built up during my accumulation phase.
I'm living on those. And then the second part of distribution is post death. But today I think we'll focus on that transition from accumulation and preservation into distribution, because that is psychologically the most challenging.
Chris: And it's the most common question that we get from clients and our prospects that are sort of nearing this phase of life. I know you and I are big proponents of, you know, running financial plans and projections, trying to build confidence that people can make a decision to walk away from work. I often think that the people that are the luckiest are the ones that are working because they want to you know, if you're within ten years of potentially retiring, you should run some projections. If you're within five years of retiring, not only should you run some projections, but maybe start to focus on shifting your investments or your allocation to, you know, obviously preserve, but but prepare yourself as well to start generating income from it. That's the question we often get.
And I'd like to share some client examples around this is how are how am I going to get a paycheck if I stop working? Where's my money coming from? I've got a trust account, I've got an IRA, I've got a Roth IRA. Maybe I have a pension. I've got Social Security. Like, where am I going to get my money?
So let's see some client examples there.
Priscilla: Oh, I can think of one example where the client said exactly that. I just want to replace my paycheck every two weeks.
Let's say it was near every other week. And so we said, well, that's really easy. You know, we've already in preparation for your retirement, we've already shifted many of your assets from growth, orientation to an income orientation.
We'll just do an electronic transfer into your checking account. It'll look just like your paychecks. He absolutely loved it. And then was really fun. Is now every year we say, well, what kind of a raise would you like? That was a perfect example of addressing the need to replace the paycheck.
Yeah.
Chris: And that's that's a big hurdle to overcome. You know, mentally, for a number of years, I worked with a lot of senior level execs at Disney. And what's fascinating about Disney is that they get paid weekly.
And so I was working with this executive that said, you know, hey, when I retire, like, when am I? How am I going to get my paycheck?
And I had a similar conversation to you. It's like, well, we'll send you money to your bank when and however often you need it, so we can send it monthly. We can send it quarterly, you know, what does that look like for you?
And they said to me, they said, Chris, well, at Disney I get paid weekly. I'm used to getting paid weekly.
Can we set that up? And the answer is yes, of course. So we set up for this executive to get paid weekly. But in preparation for this executive to retire, I felt like it was very important six months to a year in advance of making that decision to start making those transfers to their bank account so they can get comfortable with it coming in.
And what that actually did was that built a really nice emergency fund, you know, in their bank account to allow for them that not only do they have enough cash savings on the side in case, you know, lightning bolt hits our house, but they got used to seeing how the portfolio performed while sending that money every single week to where when they walked away from, you know, work, so to speak.
They were comfortable from a financial aspect,
We often look at it as financial advisors. If there's a math component of it. You know, there's running projections, there's which account do we send you money from to help minimize taxes and maximize the money that's going to you. But there's also that psychological component of it as well. We're dealing with clients, some that have an abundance mindset towards money, some that have a scarcity mindset towards money.
But oftentimes it's more about what you're retiring to, not what you're retiring from. Most of our personal net worth gets tied up into the work that we do day to day. And sometimes it can be scary for clients to transition into retirement because they don't have much of what they're retiring to.
Priscilla: That's a perfect example of a Japanese concept called ikigai. Iki means life and guy means worth.
What is your purpose? Why do you get up in the morning?
Right. During our lifetimes, a lot of us think, well, I have to get up in the morning because I have to go to work.
Once you transition into retirement, it's hopefully you've transitioned that attitude. Attitude is everything from I have to get up, I want to get up in the morning because I get to fill in the black. I get to go to art class, I get to travel, I get to coach kids in in literacy, how to read whatever that new purpose is.
So getting back to the concept of ikigai, there are basically four pillars of ikigai. The first is what do you love? What is your passion? Second is what are you good at? That's your work. The third is what does the world need? And the world could be my family, my community, my, church community. It could be the county, the state.
It could be the world.
And then the fourth pillar of ethics is what do you get paid for? Or what can you get paid for? Well, happily, during retirement, that pillars done. What do you love to do?
What are you good at and what does the world need? When you find your ikigai, you will go from I have to get up in the morning to I want to get up.
Chris: And we get to work with some of the most successful people in this country. We're very lucky in terms of the clientele that we serve, but that doesn't mean that all of them have that purpose for what they're going to do with their time afterwards. I can think of clients that some clients spent their life, you know, building things and being an engineer, and they do retire to to making things, whether it's art or little trinkets or doorknobs, to people that spend their time playing pickleball to golf.
And they have a passion. There are some people out there that just quite, quite aren't sure what their they're going to spend their time doing. What advice would you have for those clients? I mean, obviously we need to solve the financial component to make sure they're confident financially, but then where do they go to find purpose to spend their time and be happy?
Priscilla: You know, for someone who is struggling to find their purpose post retirement. I would say, first of all, please know that you are not alone. Depression among early retirees, those who are haven't quite found their purpose yet. Depression is very common. And so, this is not an unusual feeling.
And, it's not a sign of failure. It's simply a sign of you are now in the transitionary period. And if you need to get help through this transition, please do that. You can talk to your friends, your family, your trusted advisors. If you have a religious person or, you know, sort of an elder, the village elder in your life, talk to them.
Talk to others who have gone through that transition to find out what worked for them. And then you can you'll figure it out, you know, if you were successful, in your career, you're going to be a really successful retiree here.
But, you know, maybe think back in the early stages of your career, did you have it all figured out?
But try to think of retiring to something as opposed to retiring away from something.
Chris: I love that you bring that up. I mean, I think about a few different examples, some, you know, high level executives or business owners, they retire. And now all of a sudden they they're the president of their HOA. Bad decision. You end up becoming miserable.
But, there are communities and groups, whether it's like an aged 55 and up community that are, you know, designed for people in the same stage of life for you that have activities that maybe you're interested in.
People, I find when I go to those communities because my dad lives in one now, he knows more neighbors in this community than he ever did in any other neighborhood that we lived in growing up, which is really cool to see. If you're retiring and you're going to a new location, sometimes there are these newcomers groups that are available for you, the for the first couple of years to get introduced to new people.
So there's a lot of opportunities for you to kind of build a community, find some purpose. There are also clients that really enjoy volunteering or making an impact. I have a family member. I call him Uncle Bruce. He's actually my dad's childhood best friend, but I call him Uncle Bruce. He worked for years in the golf industry, and now that he's in this sort of next stage called retirement, he's the golf coach for a women's high school team.
And he loves it. He loves coaching these little girls to learn how to play golf and traveling and, you know, teaching them. And it's sort of kind of renewed that purpose because he loves golf so much. And he would have just been bored playing golf with his buddies every day. And so he feels like he's giving back a little bit to a younger generation, something that he loves so much.
And I think a lot of us have that opportunity to find this ikigai that we're interested in.
Priscilla: you know, sometimes when people retire and they're, they're working towards finding their ikigai, finding that that new purpose they tend to develop habits that are not particularly healthy.
And one of those habits, for example, is, not staying physically active. I need to stay physically active. That's really so, so, so important. You know, eat right, drink enough water, you know, do all of those things right to get good sleep.
But, the other thing is becoming obsessed with what's going on, is the portfolio. They were perfectly comfortable trusting their advisor pre-retirement. But suddenly, post retirement, even though the quote unquote paycheck is still coming in, they want to check and see what the bank account looks like that it's coming from.
And so they'll go to the Martin portal. I've seen this. I can't tell you how many times they'll go to the Martin portal every day. It's like they get a cup of coffee, they open up the Martin portal, and then the rest of their day is either great or not so great, depending on what the number is.
Chris: I've seen it time and time again to people, you know, feel their their sense of purpose or, you know, net worth, personal net worth based off the number that they see on the screen or on a statement. And look, it's it's important to be informed about what's going on in your portfolio and to make sure that the income is coming in consistently and that your dollars are still there to meet the other goals and wishes that you have.
But getting into the habit of letting it cause whether or not you have a good or bad day or create stress, I would I would shy away from that if you're if you're feeling those sorts of feelings, we should just run some projections
to to show you, okay, here's the impact. If we were to have a down market or if you were to have a long term care need, or if you wanted to spend more on travel, those types of projections can help bring back confidence and get you away from looking at the day to day.
Yeah. In fact, I did this recently with some clients that, you know, they're lucky they've got a pension. They've got Social Security, they've saved a few million dollars in their home is pretty much paid off. And, we were talking to them. I said, you know, hey, you're in a really great spot financially. Like, is there anything else that you would like to do?
You've got two boys there on the East Coast who travel a little bit, but like, even if I just sent you the dividends and interest from your account, you're not touching principal. Would that would that cause you to enjoy life a little bit more? And they looked at me as if like, I can do that. You know, they was they were surprised.
Of course we can do that. And so over the last couple of years, every quarter, we've just been sending them the dividends and interest. So that way they can get a little bit more life out of their wealth without having to worry about, you know, if something were to happen, are we going to be okay financially? Yeah, this this whole transition from being an income producer to an income consumer, I've not lived it.
I'm 46 years old. But I've, I've helped consult with it. I think that running projections, setting up sort of transfers in advance, you getting comfortable with where the money is going to come in from can be a huge step in the right direction towards you. Having confidence of stepping away from work. What other things would you add add to that to that list?
Priscilla: Well, you know, numbers don't lie. Yeah. And so I think that concept, creating or updating, you know, for most of our clients that's not creating a financial plan, it's updating the existing financial plan and keeping an eye on that. Periodically we have a report called a Capital Close Chart, which, shows the top line is the market value of the portfolio.
And then there's another line that says here's how much you put in and here's how much you have drawn. And we have a lot of clients where the top line keeps going up and the withdrawal line, you know, keeps going down because they take more and more money out here. We have many clients who've taken out more than they started with and still have millions left in their portfolio.
That simple little picture is so powerful in telling your personal financial story. So I think being empowered with having knowing that the numbers work for you
there's a little exercise I want you to think about, and that is pretend that you're 100 years old and write your today self a letter with what you wish you knew at that age.
Now for you. You know that that's a pretty long span between your age and a hundred. For me, it's not so much. It's a little coarser. But when you do an exercise like that, one of the things that will come out is something that sounds like, I wish I had fill in the blank. I wish I had traveled more, I wish I had flown first class, I wish I had shared more of my well for my children.
If you write this letter to yourself, be really honest and and then reflect on what's in that letter. You may find that you do decide to first to fly first class. You may you may make different choices.
Chris: I'm glad that you brought that up. I mean, I read a book recently, it's by a gentleman by the name of Samuel Bloom. It talks about the five different types of wealth. So it just goes beyond just your assets. It's health. It's, you know, wellness. It's your mental, you know, stability. And one of the things that he challenges you in this book for people my age, 46 or even younger, it's are the decisions you're making today, the decisions that the 80 year old self of you would be happy with?
Yeah. And it's really challenged me this year to think, I mean, I've got a six year old and a three year old. I want to do a lot of fun activities with them. But I'm 46 and so I better get in shape. It caused me to kind of rethink some of the decisions that I make day to day.
And I've, and I find myself more frequently looking at a decision and saying to myself, what would the 80 year old version of me be happy that I made this choice or a different one? And that's sort of the opposite. But it's steering you in the same direction. Is kind of the advice that you're giving as well. And I think that there's some tremendous value to that.
Priscilla, thank you so much for joining me today. It's been a fun conversation. If you're nearing retirement or in retirement, and you want us to look at where your income is going to come from or what the projections look like, or even if you're in retirement and you want a little bit more confidence to make some of those spending decisions, please reach out to your Morton advisor.
