Retiring With Honors: Financial Planning Lessons From The Classroom

From time to time, we like to look at issues faced by people in other professions outside of the financial world and see what kind of retirement planning lessons we can learn from these other professions. Today, we’re seeing what we can learn from teachers and the issues they face.

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Transcript Of Today's Show:

Speaker 1: Welcome into another edition of the podcast. It's Plan With The Tax Man with Tony Mauro and myself to talk investing, finance, and retirement, and we're going to retire with honors on this podcast. Basically, I want to do some financial planning lessons from the classroom, and we should probably insert a chorus of boos right here, because no one likes the classroom. I don't think many people do, anyway. But we always take these different analogies and ways to look at finance and retirement, and how we can draw parallels to other things in life, and so we thought why not do this? And school is kind of ending, although I guess it might have made more sense to do this when school is starting, but we're going to do it as school is ending and hang out with Tony a little bit. So, let's get into it. Tony, how are you, my friend?

 

Speaker 2: I'm fabulous. Early May, the weather's getting good, and like you said, the kids are getting out of school. I got a couple of in-laws that are retiring from teaching, so this is kind of appropriate.

 

Speaker 1: Oh, fantastic. That works out really well, then. Were you a good student or were you an average student? What kind of student were ... Elementary school, middle school Tony, what was going on there?

 

Speaker 2: Elementary school, middle school, and even some of high school, I always got good grades, but always wanted to do the minimum possible. I didn't really find out how I should have been doing things until college. And so, I was a good student and never had any problems, but always wanted to work ahead and basically, again, do as little as possible, which-

 

Speaker 1: Yeah, well, a lot of kids are that way, right? And you and I are, well, we're children of the '70s, I guess, but teenagers of the '80s, right?

 

Speaker 2: Yeah.

 

Speaker 1: And it was definitely a back and forth at that time period, for sure. Well, because that's our first one, Tony, is homework. Nobody likes homework, right? I mean, there's always maybe one kid that was like, "Oh, I love homework," but for the most part, nobody really liked homework. And some teachers, I know of several teachers, they don't necessarily enjoy giving it out either, but sometimes, it's a necessary evil. And if you think about what you guys do, you guys try to do most of the work, but sometimes you need the client or the potential client to do a little homework.

 

Speaker 2: Yeah, we do. And back in school, I mean even to this day, we always still talk, friends and I, of how we really wanted to work hard, so we never had homework. You always try to get it done-

 

Speaker 1: Just do it at school.

 

Speaker 2: Right, somewhere. But in the retirement planning area, in all financial planning areas, I mean, really, the people that are going to try to go at it themselves are going to be in for a lot of work, a lot of homework, and they're going to be-

 

Speaker 1: Oh yeah, especially the DIY, yeah.

 

Speaker 2: Yeah. The DIYers are going to be in for that, so you better just plan on it. Otherwise it's going to be painful. Or that's what leads, in my opinion, to a lot of people not doing anything, because they feel like it's too much work and they don't know where to start and they just don't do anything. But a good advisor basically is going to do most of the work for you, but you do have to help out some. It can't just be total hands-off, because then it's not your plan, then it's my plan. And so we want to try to make it fun and enjoyable so it's not work, and you have an interest in it, and not try to make it so complex that you feel like ... I mean, I was terrible in science and just didn't want to be there ever, and so we don't want to make it like that either. So you've got to try to think about it in those terms, especially when you're working with a advisor. They are going to take a lot of the work off of you.

 

Speaker 1: For sure. Yeah. They're going to try to take as much out of there as they can for you, but you've got to have that vested interest too, because let's be honest, if you're not putting in a little effort, are you even inclined to exact the plan, to go through it and follow the steps and do the things that you need to do if you don't have some buy-in? So, while we all hate homework, we certainly want to make sure that we're doing the things that we are being assigned by our financial professional, if you will, for lack of a better term. And usually that's some pretty easy low-hanging fruit, so it's not like it's a real big deal.

 

All right. Let's do number two here on the financial planning lessons from the classroom. Standardized testing, which has been a big topic of conversation for many years now, isn't always ideal, and I think I agree with that most of ... Overall, I think I agree with that. Not everybody learns the same way, so my wife's very analytical, I'm very visual, or whatever the case might be. And I think that's probably fairly similar in the financial world, when you think about ... To me, I guess my mind goes to the cookie-cutter, one-size-fits-all plan strategy in this regard.

 

Speaker 2: Yeah, I mean, it's another one. I always have to relate it back to my own experiences. I'll tell you, when I was a kid, I was like one of those guys, I hated these standardized tests. Back when I was a kid, it was called Iowa Basic Skills. Everybody had to take this, and I can't remember if it was a day or two, but literally, we were just filling out little bubbles on sheets and we didn't care. Well, if it was standardized, we always thought, "Well, we'll just make little designs and get through this," and not even really try, which is terrible. But I do think, getting back to the financial world, it's the same thing. If you just take some boilerplate financial plan, or you just take, say, one mutual fund, for example, and you're just going to put all your money in it, you're probably going to be okay. But probably, probably. There's really no plan there, and I don't think that people should just take a standard boilerplate type of plan and try to adapt it to what they're trying to do. I think it should be other way around. It should be custom to what you want to do, rather than some standardized thing. And that's where an advisor's going to be able to help you all along the way there, rather than just saying, "Here, do this. Here's a template, and if you do this, you should be fine," and never come back and see me [inaudible 00:05:57]

 

Speaker 1: And that's the thing, there's the operative term right there. "You should be fine," right?

 

Speaker 2: Yeah, you should. Yeah. Right.

 

Speaker 1: And it's like, "Well, I don't want to go with 'should.'" To me, that'd be like my mechanic fixing my car and saying, "Well, I put the tire back on. I think I did a good job. You should be fine."

 

Speaker 2: Yeah, you should be fine.

 

Speaker 1: Well, if I'm doing 70 miles an hour, I don't want to know that I should be fine. I want to know I am fine.

 

Speaker 2: That's right. And I do some flying on my own.

 

Speaker 1: Okay, there you go.

 

Speaker 2: I'm a private pilot, and boy, when it comes out of maintenance, it's like, I want to know that this thing, you didn't miss some screw on something or whatever, because I don't get a second chance, and-

 

Speaker 1: Right. Have you seen that meme, Tony? Well, it's a meme, it's a real picture, but they turned it into a meme where it's a guy on a ... I don't think it was Southwest. I can't remember which airline it was, but he's out there with duct tape, taping, I guess, part of the cover on one of the engines, part of the housing around it.

 

Speaker 2: Oh, right, yeah.

 

Speaker 1: And they're like, "Yeah, yeah, it'll be all right. It'll get to the next ..." and the person inside the plane that took that picture had to be terrified. Did they stay on the plane? Did they get off? Right? Be like, "Ah, duct ..." I mean, duct tape's great, but I don't know if I feel like airplane great.

 

Speaker 2: Yeah. When I was training, in the small plane, I walked out one day and we had duct tape on the wing.

 

Speaker 1: Okay. I guess it's a thing.

 

Speaker 2: It was a bird strike, and it cracked. And I went and asked, I said, "Geez, we got duct tape on this wing? I mean, am I going to be okay here?"

 

Speaker 1: Right.

 

Speaker 2: I mean, I'm sure I would.

 

Speaker 1: Well, you're a brave man if you did it, but still.

 

Speaker 2: I did it. I did it. He said, "No, no." He explained it all, but yeah, it is interesting because I don't think we want a lot of shoulds in retirement plan and probabilities. I mean, we want to be able to show people, based if you do this and this over this time period ... I like to use, and I don't like to share it with them, but I like to use a lot of analysis with the computer and say, "If you do this, you've got a 95% chance or 97% chance of never running out of money." That's something people can relate to, not, "Well, we hope you don't run out of money," type of thing. We want to give them some facts and things like that, so anyway, but-

 

Speaker 1: Yeah, some assurances are certainly ... No, that's a great point, though. It's a great analogy. All right, so number three on my list here is everything has pros and cons. Certainly that is definitely the case when it comes to education, or when it comes to what it is that you do. I mean, look, teaching, hats off to teachers. It's a tough gig. Teens and tweens are annoying, or they can be, right, because you're dealing with the unruliness and all that kind of stuff. And when you think about what it is that you guys do, whether it's a product or whether it's trying to just build a plan for someone, there's pros and cons to everything. Nothing is going to just be perfect. You've got to work your way through the situations.

 

Speaker 2: Yeah, and after we do a plan for somebody, and then you get to, of course the products area, how we're going to do this plan is, I like to explain that ... Obviously the pros are easy, but I like to say, "Look, everything's got a few downfalls, and here's what this is." I mean, it doesn't matter if it's a 401k, an IRA, a mutual fund, I don't like to spend two hours talking about each particular thing, but I like to point out the cons, so to speak. It's just like in work and everything else in life, there's some things about it you don't like, or may not be all that good. And then the client gets to decide, okay, well there's enough things here that I do like about this that this makes sense in my plan. Same way with our jobs. I mean, when we get kind of sick of them, just like in teaching, and I do give them a lot of credit, I do think it's a tough profession, and it seems like around here they're always cutting budgets and everything else, they just don't want to pay them, right? But that's a whole different story.

 

Speaker 1: Sure.

 

Speaker 2: But if you get sick of it, then in your job, you know, tend to leave. And obviously as an advisor, if the particular product portion of things, or the plan changes, it's up to us to advise a client, "Hey, this just doesn't work in your plan."

 

Speaker 1: It's just not working now. Right, yeah. And oftentimes, that's maybe an investment that's going to be with the dog investments, if you will. It's no longer performing adequately, or there's too much risk, or something like that. And that kind of walks in nicely to the strategy of laying things out ahead of time. Number four here, most teachers plan out, often they plan out, their lesson plans for the whole year. They have the guided curriculum, I suppose, from the school district, but they still kind of plan things out for the whole year. And if you think about your financial plan, that's similar fashion, right? I mean, you guys should be laying out a plan multiple years. Now, granted, you need to be flexible that it's going to change, because life's going to happen, but it's still the point of having a roadmap over, let's say, two to five years before retirement, and then the first couple years of retirement, and so on and so forth.

 

Speaker 2: Yeah, and today it's a lot easier than it used to be 10, 15, 20 years ago in the financial world. I remember when I was growing up with teachers, I didn't really realize why they stayed after school, and really they were working on their lesson plans and updating and things, and I'm sure they've got better tools now too, like we do. But yeah, these days I technically won't really get into a relationship with a client unless we do a financial plan beforehand. It's very easy. We can do it on the computer. At least we've got a starting point, because otherwise, it's really them just telling us facts and us just off-the-cuff giving advice, and it's like going to the doctor. I mean, there's all kinds of analogies out there, but they're not going to simply sit there and tell you what ... or how to treat you without knowing what's going on.

 

Speaker 1: Yeah, I mean, well, think about this. So for a doctor or even for yourself, kind of looking at the profession, you could probably walk in and say, "I've got a cough and I got this." And they probably have a pretty good idea of what's wrong with you, right?

 

Speaker 2: Yeah, they're going to give you something, yeah.

 

Speaker 1: I mean, they probably could tell you what they want you to take or whatever to get better, but to be on the safe side, they test it. They test you, they do some checks, or whatever. Well, I mean, you've been doing this a long time, Tony. When somebody comes in and they first lay out the information that they've got, what they've got saved and what different accounts, you've been doing this long enough, you could probably put together a plan on the spot. But that's not the smart move. That's not the prudent move. Your job is to really dig deep and find out and get the right plan, and I think maybe that goes back to that cookie-cutter thing. You can walk into someplace and get a cookie cutter because they've seen thousand versions of you, but yet at the same time, those are just those universal pieces that affect us all, like when to take social security. I have the 401k. How do I turn it on? That's all universal, but individually, Tony, you're different than I am, and so on and so forth.

 

Speaker 2: Yeah, and I think at the heart of it, if we as advisors, we're going to do that, I don't think the client's getting the value that they need, number one. And they're paying us to do this, whether it's in a fixed fee, asset-based type of thing, or even some advisors still charge commissions, but it behooves us to get to know the client and figure out really what they're trying to do rather than just blanketly advise them.

 

Speaker 1: I mean, you have the skillset. You certainly could identify that quickly.

 

Speaker 2: We could, absolutely.

 

Speaker 1: But that's not doing service, right, that's not providing good service, so maybe that's [inaudible 00:13:40]

 

Speaker 2: No. That's more of the dinner party chat. Somebody asks you something and you just throw something off-the-cuff and you're talking general.

 

Speaker 1: Yeah, okay.

 

Speaker 2: If you really want a plan, I think it has to go way deeper.

 

Speaker 1: Yeah. Okay. Well, let's do two more here on our retirement classroom analogy and then we'll wrap up. Age-appropriate instruction is important, certainly for teachers. You're not teaching calculus to first-graders unless they're a genius.

 

Speaker 2: That's right.

 

Speaker 1: But same thing, kind of, with you. There's different aspects of what you do where maybe not quite that diverse, but why talk about RMDs? Yes, you could can get into it a little bit and say, "Okay, we're going to put together a strategy for RMDs when you turn 75 based on the new Secure Act rules," let's say for you and I, it's 75. But if I'm only 55 and seeing you, that's probably not the main focus at that time.

 

Speaker 2: No, and really, a lot of the strategies that we use have to do with your age and where you're at in the whole process, because like you say, the easy part, no sense in talking to a young person about RMDs and like you said, and annuities or anything else like that. And at the same time, you get a little older, I think some of the retirees, you have to keep it basic, and you certainly don't want to be ... There's a lot of regulatory things where we have to go through of making sure that whatever we're recommending is appropriate for the client in their situation. That's on a regulatory aspect. But we should know better as advisors what a client can handle and whatnot. And you usually can tell from talking to them, and sometimes it's to their detriment. They want to be over analytical. But you want to make sure that you are being appropriate, not only for their age, but their investment knowledge, things like that, and it doesn't have to be overly complicated. I think sometimes we as advisors tend to get too much in the weeds with some of that.

 

Speaker 1: Mm-hmm. Yeah. No, I think that's a great point. And again, there's definitely age-related items when it comes to retirement planning, depending on how long you're ... Now, if you're walking in the door at 60 saying, "I want to retire at 62," then obviously you're going to get right into all of the stuff. But again, if you're starting with a financial professional at 45 or 48 or 50, we talked, Tony, often that we kind of ... Memorial Day's coming up, right? We're taping this in about the middle of May. Memorial Day's coming up, and it's not technically the kickoff to summer. It's technically not summer, but we all treat Memorial Day as the unofficial start to summer, right?

 

Speaker 2: Yeah, I do.

 

Speaker 1: Yeah. Everybody does, right? Well, 50 is kind of that unofficial start to retirement. We all start to get a little more serious about it when we get over 50, I think. Then our mind starts to go, "Eh, maybe I better start thinking about this stuff a little bit more heavily." So there's going to be age-appropriate instructions involved with working with a financial advisor depending on your age. Does that make sense?

 

Speaker 2: Yeah. I mean, it makes total sense. I think for people, especially now that I'm 55, you start really starting to think about, and so are our clients at this age, it's not only retirement, but when to call it quits? What's my monthly income going to be? And that essential question, are we going to be okay? In other words, am I going to have enough money at the end to basically do what I do now, and hopefully a little better?

 

Speaker 1: Yeah, there you go. All right, well, let's do the last one here, and this is just lifelong learning is a great habit to develop. All of my teachers, all the teachers I've ever come across, they're always like, "Hey, never stop learning. Never stop." And I think that's a folly of being young. We all know that. We were that way too. You see a 16 year old or a 17 year old or a 20 year old, and they think they know everything. How many of us have felt that way and said that about our own kids or grandkids or nephews or nieces or just in general? But I think a smart person, a truly smart person, realizes that life is always bringing us something to learn. And if we don't accept that and learn along the way, we probably don't grow very well as a person. And the same thing holds true with what you do. I mean, you continue to go to educational events and things. You've been doing this a long time and you pretty much know all the ins and outs, but there's always something new to learn.

 

Speaker 2: Always something. It always amazes me. My son has fallen into this group, although I think he's starting to get it now at 26, so hopefully, yeah, I think he listens to these sometimes, so I'll put them on the spot. But a lot of college students, they get out and say, "Well, I've got a four-year degree," or maybe even a master's, "and that's it for me. I've learned all I need to learn. I'm done with school," and they find out very quickly that I need to be learning something, depending on what type of profession you go into and whatnot. So I would say for all the young people listening, don't stop trying to learn, because in this day and age especially, life is just going to pass you by so quickly with technology and whatnot. But in the financial sector, same way. Even us, for me, unfortunately, I have a lot of masters in terms of continuing ed requirements and that kind of thing, so it's kind of forced upon me. But for clients, they need to really, at least not do too much homework on their own, because we were talking about that earlier.

 

Speaker 1: Sure.

 

Speaker 2: But if they're interested, they need to at least try to keep abreast of things and what's going on.

 

Speaker 1: Yeah, that cursory knowledge, for sure.

 

Speaker 2: Yeah, just some things. And if not, ask your advisor. That's what they're there for and that's what you're paying them for. They're going to have a lot of the answers, and if they don't, they're certainly going to be able to get it for you. We certainly want to be [inaudible 00:19:18]

 

Speaker 1: Yeah, we preach often here, Tony, know what it is that you have and why you have it, right?

 

Speaker 2: Yes.

 

Speaker 1: And that's still that lifelong learning, right? So, if you're thinking about getting into a particular investment, then know a little bit about it. Don't just want to jump into it because it's got a cool logo, right?

 

Speaker 2: That's right.

 

Speaker 1: You want to know a little bit about it, or whatever the case is. So that's the podcast this week. That's just kind of taking some analogies there, and I think we did a good job talking about, thinking about how we learn in the classroom, and teachers and applying that too, because really that's what you are as well, Tony. You're a teacher. It might be finance and taxes, but you're still teaching and educating.

 

Speaker 2: Yeah. That's what we're doing. I mean, we're basically taking the stuff we've learned over the years. It's in between our two years, and advising people, which is [inaudible 00:20:03]

 

Speaker 1: Yup, which is teaching, yup.

 

Speaker 2: Yeah, teaching.

 

Speaker 1: Coaching, teaching, whatever you want to call it, right?

 

Speaker 2: Yeah.

 

Speaker 1: Kind of falls in the same category. So, if you got some questions or concerns, get yourself onto the calendar, if you're not already working with Tony and his team at Tax Doctor Inc., and reach out to him, yourplanningpros.com. That's yourplanningpros.com. A lot of good tools, tips, and resources at the website there. You can reach out to them, subscribe to the podcast on Apple, Google, Spotify, all that good stuff. And we will see you next time here on Plan With The Tax Man. For Tony Mauro, I'm your host, Marc Killian. We'll catch you next time.

 

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