Ep #134 Recreating Retirement Paychecks - Where Planners Earn Their Keep

[00:00:00] Adam Werner: Hi everyone, and welcome to AB Conversations, where we will help you CFP your way out of it. A podcast where you get into the minds of a couple certified financial planners on how we think and feel about everyday financial planning questions, and what should really matter most to you. A healthier financial life starts now. 

[00:00:26] Ben Haas: Hey Adam. 

[00:00:28] Adam Werner: Hey. 

[00:00:29] Ben Haas: Welcome back to podcast. Hope you're doing well today. 

[00:00:32] Adam Werner: Here we are again. Yes, spring is has almost, yeah, spring has almost sprung. It's feeling nice. 

[00:00:39] Ben Haas: Yeah. And if I recommend everybody in this general area where we live, Pennsylvania, like go outside, don't listen to the news. That's kind of the theme this week. 

[00:00:49] Adam Werner: Good advice. 

[00:00:50] Ben Haas: Topic today is gonna be around recreating paychecks and when you and I, kind of had a, a recent client experience, I'll ask you to share it. I think it kind of both set us back on our heels a little bit to go, you know what we sometimes, because this is the nature of our work. 

We don't recognize how important it is to maybe go through some of these details, and this is kind of where we earn our keep, you know? 

[00:01:11] Adam Werner: Yeah. 

[00:01:12] Ben Haas: People that come to us ready to retire have a lot of questions, and I think we found that some of those questions, they may seem real big, but it may just come down to the simple little things on how we put the pieces of the puzzle together. 

So can I ask you to kind of share the client experience we had and let's use that as a launching off point. 

[00:01:32] Adam Werner: Yeah, there, there is one most recently, and I'll share that, but I think it is we've been hearing it, I think more consistently in the last couple of years. Just that, so the client says to us, getting closer to retirement. 

I've ,done in his mind, the easy part of saving. Which for a lot of people, that's not the easy part, but in his mind, I've done the easy part of saving for retirement. I've been disciplined, I've set my investments, I've kind of forgotten about them. The good thing to do, let the market do its thing over time, they've been rewarded. But now he's coming to the point where retirement is not that far off and he is not quite sure how to go about recreating income in retirement from all of these savings and investment buckets that they have going. 

[00:02:19] Ben Haas: Yeah, and that's, I guess that's the part that kind of put me back in my heels. 

Like some, we think it's so simple to go, okay, how are we gonna get you paid? When are we gonna get you paid? How are we gonna make all that happen? We're gonna connect these accounts. There's things that we just naturally do, but if we can put ourselves in that client's shoes. They've got many different accounts. 

Sometimes it's old employer accounts. Now it's current employer accounts. They saved in Roth IRAs. Maybe they got some bank accounts, maybe there was an inheritance. They have pension decisions, like at some point, it's not just what account do I tap into, but they're taxed differently. I have many different investments inside of them. 

Which investment am I selling? All of a sudden there's like this paralysis by analysis 'cause it just feels overwhelming. 

[00:03:06] Adam Werner: Yeah. Well, for sure. And I think, you know, even just those logistics on how am I getting paid? How do I set that up? When do I set that up? Is that something I can do on my own? 

Do I set up a systematic, you know, payment? Can I set up a direct deposit from these accounts to my bank? How do I actually make this happen? And that is part of, like you said, we take that for granted when clients work with us and they get to retirement. That's what we do. We kind of work through those logistics and let's take it from the conceptual. We know we need to fill this income gap, whatever that is, but actually here's the action items and for, again, people that work with us, we're hopefully doing as much of that heavy lifting as we can. 

Ben Haas: We've said this in different spaces. You and I are trying to do a way better job recognizing that the advice is one thing, right? 

[00:03:57] Ben Haas: We're gonna ask those questions to think about, all right, what kind of paycheck are we recreating for what purposes over what time? What's gonna serve you? What's possible long term? But then the next step is to actually put those, that advice into motion. To actually, logistically connect accounts. To actually, logistically turn off dividend reinvestment and make sure money is flowing, how it's supposed to, to actually set review meetings where we can go, is this cashflow working? 

Right? Yeah. This is a, there's a lot of puzzle pieces here that from, Hey, this advice sounds good to getting it done. Yeah, that's what I think recreating paychecks and people being like, I don't know how to do that. What maybe they're asking is after we get that advice, like, how do I actually get this done? 

[00:04:41] Adam Werner: Yeah. And hopefully that's where we can de-complicate the process. Right, right. Just help put that into action. And I think part of the issue that I think a lot of people face is, it's a big puzzle, right? You have all these different moving pieces. As you said, it could just be different income streams. 

Some people may have pensions for their situation, some may not. That may factor into, okay, where, where's income coming from? It could be rental properties. We've had that conversation with people recently. Do I keep this in retirement? Do I liquidate it? Do I not wanna deal with this anymore? But just the fact that people have these many different puzzle pieces, and the fact of the matter is the puzzle pieces are multidimensional. 

And they can be put together in many different ways. There's not often a black and white or a right and wrong. There's a lot of shades of gray that, okay, this puzzle piece doesn't just go in this one spot. It could go in three different spots. And part of our job is to help navigate efficiently building this puzzle for somebody. 

[00:05:38] Ben Haas: Maybe that's the second level of where we gotta earn our keep. You know, I feel like we've set it in different places. You're gonna go through this retirement experience, hopefully just one time. We've gone through it many. So part of the job is to be able to look around the corner and understand how one part of the plan affects the other. 

We talk about healthcare expenses prior to Medicare and not wanting to show a lot of taxable income if you need to go get your own insurance. There's the dynamics and dominoes of social security and pension election. We could probably go through a lot of the different puzzle pieces and, you know, maybe they're their own podcasts at some point if we haven't addressed them. 

But I like the way that you put that, that it just. I think about my own experience. You know, something like a home project. At some point, I know there are things that I can probably do myself and I'm excited to do them. I like the challenge. I like learning. I like reading, but at some point I just, I can't click the button to order something, 'cause I can't know 'cause I haven't done it enough or I haven't done it before. I know there are dominoes to this decision and I don't want to get two thirds of the way there and go, oh my gosh, but I didn't know this. And now this affects all the way back six months to step one. And I've wasted a lot of time and money. And I, I think maybe this whole idea of retirement planning is kind of like a parallel of, you know, me doing a home project and building something. 

You don't know what you know, and then that just at some point creates anxiety to make a decision or, you know, you make a decision and you're just really not confident about it. 

[00:07:08] Adam Werner: yes, that's very well said. And I think, you know, one of the points that I know we make over and over when it comes to planning is it's, there's very rarely a one size fits all approach or that kind of, that silver bullet answer for people. 

Yeah. Because it is so situational. You know, I mentioned it earlier, it's, it can be dangerous to get advice from friends, family, you know, coworkers, neighbors, you name it, because their situation is not your financial situation. Even if it feels similar, you just, you never know all of the true makeup of somebody's financial life. 

Right. Just something as simple as we have pensions and this other couple doesn't can greatly affect how hard do they need to lean on their investments? Does that mean taking from different investment buckets? You said it earlier, right? You have a non-retirement account that is taxed differently than a traditional IRA, which is taxed differently than a Roth. 

How does that affect the timing of social security? If you have a situation where both you know, spouses and the couple have their own, you know, decent social security record, there's a much different set of advice for that where there was only one income earner for the majority, you know, of the career, where now you're having to deal with the spousal you know, benefits and trying to factor that into the long-term projections and what may make most sense over time for a couple versus, you know, just making a straightforward election. 

[00:08:34] Ben Haas: Yeah. Certainly no one size fits all these puzzle pieces. I'm just wondering, you know, is there anything we can share then in, in this theme of like, people may seek out information at that time and I hope that they reach out to a planner. I hope they reach out to people like us that, you know, really I would say specialize in this type of work. But just broad stroke here, if the goal would be for the next three, five minutes to de-complicate the process of like recreating paychecks, is there anything that you would say is kind of evergreen in the way that we would talk about wanting to recreate those paychecks? 

Like what education can we give there? 

[00:09:12] Adam Werner: I think it starts with the three bucket theory on our side. Right? Okay. Just making sure you have your savings and investments structured in a way to support your retirement spending. We did a podcast specifically around that question mark. 

[00:09:25] Ben Haas: Sure. Yes. 

[00:09:26] Adam Werner: Or link to it. 

[00:09:27] Ben Haas: Yeah. 

[00:09:28] Adam Werner: But yeah. 

[00:09:29] Ben Haas: Yeah. Give the 60 second version then, you know, because I think it does speak to these questions on how you recreate paychecks. 

[00:09:36] Adam Werner: Hopefully it gives the peace of mind to stomach some of this market volatility that we're experiencing. So the first bucket is your short term bucket. 

We would say one to two years worth of your spending need in retirement. So whatever that gap is, say you have pensions and social security, whatever needs to come from your savings, whatever needs to come from your investments. 

Having cash, one to two years worth, that buys you time to hopefully ride out market volatility. 

That middle bucket, we call it three to five years worth of that spending need in something safe ish, right? It doesn't need to be cash, but bonds, things that are paying you a fixed income. Maybe it's dividend paying stocks, kind of on that margin. But certainly that can be, that can have some volatility that goes along with that. 

But that middle bucket should be producing income that's refilling that first bucket, your cash bucket while you're spending it, and then your long-term bucket is, you know, your seven plus years. Hopefully you're not gonna need to touch that money for seven years. You have your first two book buckets filled. 

That is your growth bucket. That's where you have exposure to stocks, have exposure to things that do have some volatility embedded in them. Again, as we're seeing right now, and hopefully you buy yourself that seven years worth of time and peace of mind that things can go negatively for quite a while and it's not going to affect my retirement income, my paycheck. 

[00:10:58] Ben Haas: When I think about parts of that process that make people feel better. Cash is such an important part of all this, you know, to make sure as you're getting prepared for retirement, that you have that buffer. It's a buffer from the market. It's a buffer from your own cash flow at home. You know, something goes wrong that you didn't anticipate. 

It just, it serves you so well to not be focused on that. Not being an income generator. I mean, we're getting a little yield right now, but its purpose is to provide any size paycheck, whenever you need it, and give yourself permission to not be worried about the market. Without that, you're gonna see market volatility and you're gonna be stressed. 

[00:11:38] Adam Werner: Yeah. And even, something, and this is going to sound incredibly self-serving, but even something as simple as what we did for many clients in December of 2024, which was, hey, we know for certain people that are, taking regular withdrawals from their accounts, or we know they're gonna need to take an RMD sometime in 2025. 

Let's put that in cash, right? In a money market fund so that no matter what happens in the markets in 2025, it's already there. It's in a safe space. We know you're gonna need to take it. It's there. We don't have to hopefully worry about the whipsaw of headlines from day to day. Something just as simple as reviewing your account for rebalancing opportunities over time. 

[00:12:20] Ben Haas: Exactly. Well, and that was my next thought. You know, some of this, if we're trying to simplify right, de-complicate it, the logistics of how am I getting paid? There's a lot of power and I hope, and I think we've been told by clients a lot of comfort in just knowing that they can automate that, right? 

Yeah. It is hopefully something as simple as if these investments are paying income into cash within that account that we have that account linked to your bank account and on a monthly basis, quarterly basis, you get to dictate all this. You tell me whether you want it on the first of the month, the 15th of the month, or the 18th, just because you get to, you get to determine all that and automate it in a way where it does feel like work. It does feel like, I knew for 35 years of my life I was getting paid on the second and fourth Friday of the month. Right? Yep. You can run your retirement just like that. 

[00:13:11] Adam Werner: And we have clients, we have accounts that are set up for biweekly income. 

[00:13:16] Ben Haas: Sure. 

[00:13:17] Adam Werner: Right. 

[00:13:17] Ben Haas: That's what they're used to. 

[00:13:19] Adam Werner: Exactly. That's how they ran their expenses. Yep, to be able to recreate. It just, it gives that comfort level to your point, that hopefully it doesn't feel like, well now I have to completely change the way that I've done things financially at the house level. If it's just setting things up logistically, so to your point, turning off dividend reinvestment, which for many people while you're accumulating, you want those dividends to compound and grow over time. 

You wanna buy more shares. But now that you're flipping that, switch the other direction to say, now I wanna start to live off of these accounts. Something as simple as that. Just turning off that dividend reinvestment. So there is cash accumulating without you having to do anything differently. You're not having to make a buy or sell decision, it's just happening with your investments that are kicking off income. 

[00:14:06] Ben Haas: Well, and the, we know that the other good byproduct of that automation is, it does take away some of the stress over. Market timing and is this the right time to buy? Is this the right time to sell? Something's going on in my life. I don't want to touch my investments. Well, that's why we had the three bucket theory. 

We had cash. That's why we're automating it. It just, it gives, I hope, a little bit more peace of mind. I have one more thought on this whole idea of recreating paychecks. If what you were used to was a certain cadence, we have many clients that we also kind of do the yearly review to make it seem like, okay, well, when you were working and things are going really well, maybe you were getting bonuses. 

Maybe you were getting profit sharing. You know, let's treat your investments the same way when we have these good years, let's talk about taking that off the table and now this is excess for spending, for gifting however money serves you. I think we have a lot of clients that follow that same process, and I hope that is of value to them too. 

[00:15:02] Adam Werner: Yeah. Yeah, I think that's on the individual basis and that's where I think it is very situational. But yeah, I think just being able to hopefully create an environment that doesn't feel like it's a complete shift, right, from what they've been used to while they've been working and earning, to try to keep that as consistent again, it just comes back to that comfort level. 

It just hopefully makes that transition into retirement a little bit easier, and hopefully a hell of a lot less stressful. 

[00:15:30] Ben Haas: So if we can de-complicate the process, if we can kind of share what's possible and then give some education on the, I'll call it the nuts and bolts, like behind the scenes, here's how we're going to do this for you. 

Yeah. At the end of the day, we know very much this is an advice-based industry, but it's also a service-based industry. And to be the people that they, that can get the phone call to say, all right. How can we change this? What do I need to change? Here's what's going on in my life. We should be able to make little minor adjustments to the logistics here to make sure that your needs are met no matter what those needs are. 

[00:16:07] Adam Werner: Yep. Yep. Agreed. 

[00:16:10] Ben Haas: Anything else you wanna add? 

[00:16:12] Adam Werner: Nope. It's why we're here. If anybody's going through this and feels like they are facing this just daunting task of, I'm worried about retirement because I just, I don't know how I'm going to pay myself in retirement. Yeah. Am I gonna turn these savings into income, lean on us. That's why we're here. 

[00:16:31] Ben Haas: You got it. Thank you, sir. 

[00:16:33] Adam Werner: Happy to do it. Alright. Thank you. 

[00:16:35] Ben Haas: Till next time. 

[00:16:36] Adam Werner: Bye. 

Hey everyone, Adam and I really appreciate you tuning in. Please note that the opinions we voiced in the show are for general information only, and are not intended to provide specific recommendations for any individual. To determine which strategies or investments may be most appropriate for you, consult with your attorney, your accountant, and financial advisor, or tax advisor prior to making any decisions or investing. Thanks for listening.  

Investment Advice offered through Great Valley Advisor Group, a Registered Investment Advisor. Great Valley Advisor Group and Haas Financial Group are separate entities. This is not intended to be used as tax or legal advice. Please consult a tax or legal professional for specific information and advice. 

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