No matter when somebody asks me what's the right time to start saving for retirement, (0:04) if they're 18 years old or 65 years old, my answer is always right now. (0:09) Welcome to Retirement Decoded by Money Pickle, where we talk about personal finance, (0:14) explore strategies for building wealth, and unlock the power of working with an advisor (0:18) so you can fast-track your financial freedom. I hope you enjoy and subscribe.

(0:25) Paul, as we look ahead into 2025, I know there are a lot of people that have retirement on their (0:30) mind. What's interesting, in my career, I turn around and grow companies. That's what I do for (0:35) a living.

In the process, I get to work with a lot of CEOs and founders of companies, especially (0:41) CEOs of mature businesses. I was talking to one guy in particular, and he was telling me, he's (0:46) like, yeah, Steve, I want to retire one day. He's like, to be honest, I don't even know what the (0:52) heck I'd do with myself if I retired, because for the last 30 years, I've been building this (0:57) business.

This is my family. This is who I know. This is what I do on a day-to-day basis. He's like, (1:02) sure, I could walk away with millions of dollars, but he's like, I make plenty of money right now. (1:08) That's one of his big hesitations to actually retire. I want to hear your experience, Paul, (1:13) and jump right into this conversation, because retirement is much more than just financial (1:19) planning, planning from a financial perspective.

There's also an emotional side of it. Maybe you (1:25) talk a little bit about that. Yeah, absolutely, Steve. We find that regularly with clients when (1:30) it comes time for them to retire. First of all, I look at retirement planning and say, (1:34) we're not planning for a finish line. We're planning to have the ability to work because (1:38) you choose to work, not because you have to work anymore.

We have a lot of conversations with people (1:43) about before you pull that plug and you say, I'm going to walk away from my job, you need to know (1:47) how you're going to fill your day. You need to know what your identity is going to be. Particularly, (1:51) I find for men in high level positions, even more so than women, for whatever reason, (1:56) they identify themselves as their job.

If you walk up to someone at a party and say, (2:00) what do you do? Most of them tell you what they do for a living. If their entire life has been (2:05) what they do for a living, and then all of a sudden that is gone, they need to expect some (2:09) emotions. They need to expect to feel things they've never felt before.

I can tell them all (2:14) day long that I can send them enough money every month to live, but we need to help them identify (2:18) what does living mean at that point. A lot of them haven't given time to think about that. We (2:23) really try to make sure that they sit down and do a deep dive into what's important to them.

What (2:27) are they going to do with their day before we actually pull that trigger? I like that. I like (2:32) that bigger picture and just starting from a macro perspective. As the managing partner of (2:37) Granite Bay Wealth Management, you come across a lot of individuals at different phases of life.

(2:43) Those that are on the tail end that are looking for retirement, looking towards retirement, (2:48) rather, what type of advice do you give them? Where do you even start? If I came to you, (2:54) for example, and said, hey, look, Paul, next year I want to retire. Maybe the year after, (2:59) max three years out, I want to be done. Where would you even start with me?

(3:03) Well, I think the first thing is to make sure that you have a foolproof stress-tested plan (3:08) that takes into account all the contingencies that could happen in the financial world.

(3:12) It's not uncommon for someone to show up in our office with a spreadsheet where they say, (3:16) you know, I've got $5 million and if I take 4% a year, it's $200,000 and I'm good because that's (3:21) all I need. But they're obviously leaving out a lot of the unknowns and the things that can happen, (3:26) such as what if you have a bear market in the first year of his retirement? And what if it's (3:29) an abnormally long bear market in the last three years? You need to stress test the plan for those (3:34) unknowns before you can feel comfortable on the financial side, knowing that you can walk away.

(3:38) And then you got to think about where is that cashflow going to come from, right? I think the (3:42) days of, let me just buy CDs and dividend paying stocks and live off the income really are gone.

I mean, we've got inflation kind of rearing its ugly head in the last couple of years and you've (3:52) got the investment returns that are very heavily weighted towards just a certain segment of the (3:56) market. So people have to figure out how am I going to generate the returns I need to meet my (4:00) goals while still figuring out how to generate cashflow. And it's not quite as simple as I think (4:05) it was years ago.

So we would try to get them to figure out, first of all, do I have a plan that (4:09) works? And if it statistically works in good times and bad, now how do I put that into buckets (4:15) to get the income and the money that I need when I do make that leap? And what does a plan actually (4:20) look like? Do you have like a roadmap with squares and circles and it kind of looks like a monopoly (4:26) board where you're moving somebody along in a sequential manner? Or like what does the tangible (4:32) plan look like? Because I talked to a lot of financial advisors and like, yeah, this plan, (4:36) this plan, like what does the plan, like how does it even manifest itself?

(4:41) So I've never been a big fan of a plan being a document or a piece of paper and a point of time (4:46) because it should be an ever evolving, breathing, living document, right? Things change every single (4:52) day in our lives. So the software that we use that I'm a pretty big fan of is just a Monte Carlo (4:56) simulation, which most folks in our industry use some variation of, but it creates essentially a (5:02) probability distribution where I'm kind of a stats geek. And so I like to look at all the inputs (5:07) of how are you invested? What are you making? What are you living? What are your goals? Where (5:10) are you spending money? And it'll run a thousand hypothetical scenarios of all those things and (5:15) give us a probability distribution of what works.

And so we try to find the sweet spot where you're (5:20) doing everything that you want to do and track where you fall within that distribution of returns. (5:24) So if I look at someone five years from now and they're tracking in the bottom of that distribution, (5:29) I'm still okay as long as we test this right to begin with to know that they could withstand (5:33) those bad times. So for us, it's really just that page of looking at how do all of these things (5:39) mesh together in tracking out in the future.

And with any statistical analysis, obviously the (5:44) further away you get from today, the more of the variables there are. So you're going to track that (5:48) and make sure that you are staying inside of a zone that works.

(5:52) Now, are there things when somebody comes to you and says, Hey, Paul, like I want to be done. I want to retire (5:56) here at like two years. Is there like a checklist or are there like five things or two things that (6:01) you say, okay, you definitely need to have your financial house in order in these two or five, (6:08) 10 areas in order for it to be feasible. Like how do you like evaluate that?

(6:13) Yeah, well, I think where you have money is important, right? I had a conversation with a (6:17) client the other day, wants to retire at 62 years old and he has all of his money in retirement (6:24) accounts, but he's insistent that he doesn't want to take social security until he's 70.

(6:28) So that's a different topic. We could talk about when to take social security, (6:31) but I had to point out to him that his tax rack is actually going to go up significantly if he (6:35) does that because he's going to be taking all taxable money, right? He didn't take the time (6:39) to look at his buckets early on to know that he has things to fill out that are after-tax (6:44) money that are tax-free money. There's a whole bunch of different ways that you can fill up that (6:49) retirement income stream so that you're not just getting crushed with taxes.

And if everything is (6:53) tax-deferred and you have to worry about that taxes, then you've got to make sure that your (6:57) plan accounts for the fact that if I need $100,000 to live, I really might need $145,000 to live (7:03) because I'm paying such a heavy tax burden on everything I take out. So making sure you have (7:07) the right buckets is important. And then thinking about healthcare, right? If someone wants to (7:11) retire early and they're not eligible for Medicare yet, healthcare is going to be a huge expense.

(7:15) So you've got to figure out where you're going to pay for that and fill that gap. I'd say those (7:20) are a couple of things that are most often overlooked. And the last one is just when to (7:24) take social security, right? There's a big debate is do I take it as early as I can, burden the hand (7:28) or do I postpone it because I'm getting 8% a year until age 70? The answer is not the same (7:33) for everybody, right? It depends on where you're taking your income from while you defer.

So you (7:37) really got to take that into account too and figure out what works best for you.

(7:41) Yeah, very nuanced there. As we look into 2025, what about inflation? Because obviously that was (7:47) top of mind for a lot of people out there in 2024.

Should people be worried about inflation? (7:53) I know you don't have a crystal ball, neither do I, but what are your thoughts on that?

(7:57) Well, inflation is a part of our everyday life. It always has been in some way or another, (8:01) even when it's low. One of my favorite quotes is inflation is the cruelest tax of all because (8:05) it's a hidden tax.

People obviously need to think about it, but if you have your investment plan set (8:11) up properly, inflation should over the long term, in my opinion, kind of come out in the wash, (8:16) because when you have an inflationary time period, then you can lock in higher interest rates on some (8:20) of your fixed income stuff. That increased money supply and spending is going to drive profits (8:25) on companies and potentially make more money in the market. So it comes with good and bad, right? (8:29) Cost of everything goes up, but your returns hopefully should go up as well.

So I wouldn't (8:33) say you don't need to worry about it. You need to plan for it, but you plan for it with an appropriate (8:37) investment mix that is set up to withstand that inflation and still meet all of your goals. (8:42) We tend to use a historic average of roughly close to 4% annualized inflation in our plans for the (8:48) life of people's retirement, which is a little high based on what history has been, but I would (8:53) rather assume costs go up by more than they do and be happy than the other way around.

(8:58) Yeah, just being conservative. So let me ask you this. What if somebody is worried about retiring (9:05) and let's just say that they're like, okay, well, what if I retire? We have this giant party, (9:10) we have all our friends over and we're like, hey, Steve's actually retiring this year and we (9:15) celebrate.

And then the next year or in that same year, the market has a major collapse and major (9:22) correction. What then? Well, I would say if your plan falls apart in year one with a bad market, (9:28) then your plan wasn't very solid to begin with. There's a bear market about every four and a half (9:33) years.

So the one thing that I can tell you with absolute certainty is if you retire in your 60s (9:39) and if you're fortunate to have a good long life, you're probably going to live through three or (9:43) four bear markets during your retirement. So you have to have an investment mix that is set up to (9:48) be able to withstand that. And that's where that stress test comes in with the statistical analysis (9:52) to see what happens.

It includes time periods like the Great Depression and says, how would my (9:57) plan work out? But the other thing that people need to keep in mind is that the average bear (10:01) market lasts for 11 months and recovers to break even in about 26 months. So let's say one starts (10:08) on the day you retire. Well, by year three of retirement, you should be right back where you (10:13) started.

So as long as you have an appropriate mix of assets that has liquidity available in the (10:17) early stages so that you aren't forced to sell something at the wrong time, then that really (10:21) should not have an impact on a well-thought-out plan. Yeah, that makes sense. Okay.

(10:27) So we're set on from a financial perspective, let's go back to like mindset, psychology, et cetera, as it relates (10:33) to retirement. You were talking about like this mindset shift that needs to occur. Like, (10:38) how do you actually talk people through that? Like, hey, you need to go get a hobby or go like (10:44) volunteer at the local food bank.

Like, what do you say to somebody? How do they (10:49) actually start to plan for the psychological shift that needs to occur? Well, one of the things I (10:56) like to do is ask them, pretend that I told you, you never have to go back to work. What are you (11:01) doing tomorrow morning when you wake up? And I like to sit there with uncomfortable silence as (11:05) long as I can, because a lot of times I don't have an answer, but that discomfort that they feel in (11:10) trying to come up with an answer will give them an idea of what it's going to feel like when they (11:13) actually have nothing to do. Right.

And so I think that just forces them to think of that, that (11:19) feeling. And so my advice to them is, first of all, you need to structure your day, right? Just (11:23) because you don't have to get up and go to work in the morning, doesn't mean you don't set an (11:26) alarm. Like maybe you need to have a workout routine.

Maybe you need to have a volunteer (11:30) routine. You still need to have structure in your day or your mind's going to kind of start to (11:35) get soft and go a little crazy. And I think that also that social interaction is important.

(11:41) You know, there's an epidemic of loneliness in the country, I think in a couple of key demographics, (11:46) young people who are stuck on social media and it's retired people who are no longer in their (11:50) workplace. So if you don't figure out a way to have a community of people that you are seeing (11:55) every day, that you're interacting every day to have conversations and keeping your mind sharp, (11:59) then you're slowly going to find yourself lonely and depressed.

(12:04) So I ask them, who do you interact (12:08) with that you don't work with? Right? What hobbies do you have? What can you volunteer for? What (12:08) passions do you have? So that hopefully before they retire, they know that this is what I'm doing (12:13) with my time.

Sometimes someone will tell me, oh boy, I got tons of things to do. I can't wait to (12:17) tell you about them. And that actually excites me because then I can just help them with the math.

(12:20) But the people who don't have an answer, then it becomes almost more of a therapy job than (12:25) a financial job. Yeah, for sure. Well, and it's interesting because when I think about my life, (12:31) you know, the thought of retiring and just being done, and I know this isn't what you advocate, (12:36) but you know, like sitting on a couch, eating potato chips and watching reruns, it sounds like (12:42) a terrible way to live life.

So, you know, to me, retirement is waking up and being able to do (12:49) whatever the heck I want. Right. And I have a lot of freedom right now in my job. I own my own (12:54) company, but still I can't just be like, I'm doing whatever I want today because I have client (12:58) meetings and there's obligations that I still have.

But I think like one day when I'm quote (13:05) retired, you know, I could still, I always joke around. I'm like, I'll go operate a surfboard (13:10) shop in San Diego and I'll, you know, work 20 hours a week and be happy as can be. It doesn't (13:15) mean that I have to be done, like not working, not like engaged in something. So do you ever (13:20) advise people against retiring?

(13:27) Well, it depends on how you define retire. As you just said, retire from your primary line of work that has made all your money, that has been your life (13:31) is different than retire from work. Right. So I advise people all the time, consider a part-time (13:37) job, not because you need the money, but because it gives you a social outlet.

(13:40) I have one client who is an avid golfer and he got a job mowing the greens at his local golf course. (13:47) And what he got for that was he gets to play golf for free. Now he's worth many millions of dollars (13:51) and he can pay to play golf, but he loves free stuff and he loves golf courses.

(13:56) So he, so he (13:56) gets up at six in the morning and he goes out and he mows greens and then he gets to play nine holes (13:59) and go home. He's happy as could be. Right.

(14:03) So there's a million different ways to do that. I've (14:03) got another client who was really into gardening and she started to volunteer at a local garden (14:08) shop and she didn't even want them to pay her. She just wanted to be able to make arrangements.

(14:12) Right. So whatever those hobbies are that you do, I mean, we have (14:15) very, very low unemployment and we have people having a hard time getting help. (14:19) There are going to be small businesses that could certainly use your help and use the help of people (14:23) with experience and knowledge and a passion for what they're doing.

(14:28) If, and if they don't (14:28) need the money, I hope how great is that for a small business employer? Just be like this person's (14:31) here because they love it. Yeah, exactly. Well, and I think it's fascinating.

(14:36) I don't know what (14:36) your thoughts are on this, but it seems like this whole concept of retirement is kind of a, (14:42) new age, modern type idea. Because if you look back in history, I don't think there, (14:47) this was like a widespread thing back in the 1600s or back in the dark ages where it's like, (14:53) oh yeah, one day you're going to like retire and live life on a beach and with like social (14:58) security and Medicare and like these new social programs coming out at the turn of the century.

(15:04) I mean, this is all like a newer phenomenon in other countries around the world. Like (15:10) there isn't that conversation about retiring. So how do you think through that? And do you think (15:15) we'll ever get to a day where it's like, yep, just kidding. Like I know we sold you this whole (15:19) dream of retiring, but it's not really feasible for the masses anymore.

(15:26) Well, that made me think of a quote from a book that I read one time, one that said that retirement itself is based on a flawed premise, based on the idea that you (15:35) spend your most vital working years doing something that you dislike so much that the (15:39) goal is to stop doing it. Right. That's, that's kind of a way to live a life, right?

(15:47) So the idea (15:47) of mini retirements, I wouldn't, wouldn't mind seeing part of retirement lifestyle, right? Where (15:52) people say, I'm going to take a year off or a couple of years off at various points during my (15:56) life and then come back into the workforce.

(16:00) I don't think our current workforce is set up to (16:00) really allow for that or culturally, like people feel like they're bailing if they do that. But I (16:05) think that would be great. Do I think we're ever going to get to a point where we say, (16:08) just kidding on retirement? Not really, because I think we have this social safety net in there (16:13) that people have begun to expect it now.

And so I think it'll always be part of our lives, (16:18) but the other thing you got to remember is that right now, this is the first generation ever (16:23) where we are expected to have saved for our own retirement, right? I mean, pensions were the norm (16:28) up until, you know, whatever, 20, 30 years ago. And so a lot of the people who are towards the (16:34) retirement now, they worked for the company for their entire life. And then the company just paid (16:37) them as a thank you for the rest of their life.

Then we started saying, we're not going to do (16:42) that anymore. You've got to save your own money. And so we have these people who either are on both (16:47) ends of the scale. They didn't take it seriously, and they have no money, and they're forced to (16:50) work. Well, the other end is they took it so seriously that they over-saved and they have (16:55) more money than they could possibly know what to do with in retirement, but they still want to work.

(16:59) So I feel like work's going to be part of everybody's life. It's just going to be a shift (17:03) in how they look at it. I absolutely agree with that. And maybe you could talk a little bit about (17:08) this and maybe provide a little bit of encouragement because I run another podcast.

(17:12) It's called (17:12) Boosting Your Financial IQ. And I had somebody reach out recently, and this isn't the first time (17:17) I have people reach out all the time with the same question. They're like, Hey, I'm, you know, (17:21) 55 or 65 or 70, fill in the blank, right? I'm X years old.

(17:29) And I didn't do a good job saving in (17:29) the past. And now they're starting to think about retirement more seriously. And it's like, (17:34) Hey, where do I even begin? And, you know, I don't know about you, but when I think about (17:39) like mathematically, how do you even catch up to that? Even if you make, let's say you make 250 a (17:45) year and you have like maybe 500 grand in assets, you're like, dang, I need to like figure out (17:51) retirement.

Even if you start putting money in a 401k or IRA or stocks or whatever it is, like (17:57) the chances of growing that to, you know, $5 million in the next decade are pretty slim. (18:05) Unless I'm thinking about it incorrectly, unless you like own a business or some type of asset that (18:11) it's going to appreciate quite a bit. What are your thoughts on that, Paul? And like, what would (18:13) you say to somebody like that?

(18:19) Well, I mean, first of all, the answer is how to catch up. You can't, (18:19) right? You can't, you can't make up for what you didn't do so far. You're never going to catch up (18:23) where you would have been if you started earlier. However, no matter when somebody asks me what's the (18:28) right time to start saving for retirement, you know, if they're 18 years old or 65 years old, (18:34) my answer is always right now, because I can't go back and make you do anything differently than (18:38) you've already done.

(18:44) Right? So the best we can do at that point is, is there's a plan that works for (18:44) you. It may not be the plan you like, but there's definitely a plan that works for you. So sometimes (18:48) you have to give somebody a reality check to say, based on where you're at and what you can (18:54) comfortably save in your current lifestyle, here's what retirement looks like for you.

(18:58) Right? And so (18:58) you play around with how long you have to do that for to hopefully get to the point that they can (19:02) live with, but there's no real catching up. I mean, people still need to live their life and (19:07) still need to pay their bills. So we'll talk to them a little bit about budgeting, talk to them (19:11) about where they're prioritizing their money, and try to get them to save as much as they can.

(19:15) But the most important thing is give them a real look at 55 years old, if that was when they're (19:20) asking the question of here's what retirement looks at at 60, 65, and 70. And whether you like (19:25) it or not, that's the situation you're in. So let's start to adjust your lifestyle now so that (19:29) you can be okay with that.

(19:35) Love it. That's great. A lot of great insights, Paul, I really appreciate (19:35) you being on the show today and just sharing your wisdom with the audience.

(19:40) I appreciate you having me, Steve. It's fun. I didn't know what to expect coming in, (19:43) but I enjoyed talking to you.

(19:48) Yep. Thank you. And thank you once again.

(19:48) And for you, (19:48) those of you who are listening, you just heard the conversation of me and Paul Stanley. Like I said (19:53) before, he is the managing partner at Granite Bay Wealth Management Company. And I will provide (19:59) links in the show notes down below if you want to get a hold of Paul and to learn more about what (20:05) he's doing in his practice to help individuals just like you to plan for retirement and beyond.

(20:11) Paul, I hope you enjoy a great day. And once again, (20:15) thanks for being on the show and for everybody else, take care. Cheers.