Business Innovators Radio - Interview with Clark Smith President of Golden Years Financial Discussing Retirement Challenges

Starting point is 00:00:00 Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have with us Clark Smith, who's president of Golden Years Financial and will be talking about retirement challenges. Clark, welcome to the program. Thank you, Mike. I appreciate it. I'm happy to be here. Hey, I'm looking forward to learning from me.

Starting point is 00:00:36 I just find that so many people with their life experiences and background just have different perspectives on topics. So I'm excited to hear what you are guiding and teaching your clients on about retirement challenges. But give us a little bit of your story and background before we dive into that. How did you get into the financial services industry? Well, Mike, it was really twofold. When I was. two, my grandfather on my mother's side passed away. And my grandmother at the time, this was 1967. And she was relatively young.

Starting point is 00:01:12 And by 1975, she was broke. And she lived until she was almost 104. She, in fact, was still living by herself at 102. But she went broke in 1975 and didn't pass away. until 2011. So for the next 36 years, the family had to chip in to support her. And that showed me at a very young age, the importance of being prepared for retirement. Because she was thrown into it.

Starting point is 00:01:46 She had never worked, and she was not prepared. And then when I was in college, probably my junior year of college, I had an investment professor that was very interesting. And I changed my major to finance because of him. And when I finished graduate school, I started work at Dean Witter in 1990. Back in that day, we were what we're called stockbrokers. But sometime in the early 90s, I became, if memory serves me correctly, I was the youngest retirement planning specialist that Dean Witter had.

Starting point is 00:02:24 Wow. that's really interesting that you um you had two kind of what i call you know pivotal moments number one from the family with the grandmother that's a huge pivotal moment that that almost is a linchpin to guide yourself and then also a mentor you know a professor that you know guided you that way and i'm sure that you take some of those experiences in in your work with clients and try to give back and guide and serve and motivate and encourage and things like that. So I think that is spectacular to hear kind of those beginnings. And obviously your grandmother had retirement challenges. What do you find are some of the biggest challenges or misconceptions that people face in retirement?

Starting point is 00:03:07 You know, Mike, a lot of times people view retirement as the finish line. It's a reward after years of dedication and hard work. But it can reveal a lot of unforeseen. challenges that really tug at people's heartstrings. Imagine entering a new phase only to find your income streams start dwindling. When that happens, it creates a real, a constant undercurrent of anxiety for people. The stock market's unpredictable dance, if you will, can turn what some people think was a want solid financial plan into a real balancing act. And that can leave retirees feeling very vulnerable.

Starting point is 00:03:56 And then we've got inflation. I mentioned my grandfather passed away in the late 60s. That was opening the door for a very inflationary time period. And that relentless march of inflation just erodes the purchasing power of people's money. and that turns things that were once just simple pleasures, things like just going out to eat, into luxuries that can be out of reach. Health issues might arise unexpectedly. When health issues arise, it causes a lot of pain in the family. It causes a lot of worry, but paying for those health care issues can be painful for a family.

Starting point is 00:04:42 And that can change in your styles. you know, in our country, about 70% of the, of Americans wind up needing long-term care at some point. And that can, that can transform someone's golden years into, you know, just a quest for dignity and security. The one thing I found over the years is that the number of people that pay a lot more in taxes than they have to is large. when I was when I started at Dean Whitter we kind of had a nickname for people that paid more than the minimum amount that they legally owe and that was

Starting point is 00:05:24 these people were very patriotic they were paying a lot more in taxes than they had to and so we we just kind of nicknamed them as very patriotic and as a full red-blooded America American. I'm very patriotic, but with my taxes and with my client's taxes, my objective is constantly, how can we pay the least amount that we legally owe, keyword being legally owe? Yeah. I like your example about that unpredictable dance regarding the markets and kind of gives you that word picture of it's certainly not a walt. It's certainly not something smooth and consistent.

Starting point is 00:06:09 be some of those, you know, I don't know, you know, craziness with market volatility. What are some of the things that you bring to your client's attention to make sure that they're being prepared for market volatility? Productility is not that difficult to be prepared for if we've got an income stream set up to begin with that allows us to know we've got enough money coming in every month to pay the bills and we've got enough money coming in every year to do the fun things that we want. You know, it's not just how much money does it take to pay the bills and that's how much income I need because, you know, if you think about it, when we retire, we typically have a list of

Starting point is 00:06:53 things that we've always planned on doing. It may be driving Highway 1 in California, you know, spending a month on the Amalfi coast in Italy, taking a trip around the world, visiting Thailand, just going to see the grandchildren. We typically have a list of things that we want to do that means we spend more than just enough to pay the bills. And when people have enough income set up

Starting point is 00:07:22 that they can do what they want and pay the bills, market volatility becomes a different animal. Obviously, in retirement, we need to, you know, kind of choke the volatility down on the portfolio to some degree. But to what degree, it often depends on how much income we have coming in. If we have enough income, we can often take a little bit more risk than if we don't have enough income. And it's different for everybody. You know, I'm certain that you would agree with this. There is not one retirement plan template cookie cutter that works for everybody,

Starting point is 00:07:59 and you just dole it out to everyone. Nope, everyone's got different needs, different income, different volatility, risk tolerances, all of those things. So you've got to have that vision of where that client,

Starting point is 00:08:12 you know, where you together come up with, what does retirement look like? So that, so that then you're given some good advice, not just here's something you could have downloaded off the internet. You need someone that's going to come alongside you and really give you that qualified quality advice.

Starting point is 00:08:27 So, you know, like you mentioned, these are very personal traits. And the personality of the traits involved really test the resiliency and the adaptability of the plan. But one thing I stress with people is that a big part of my job is to know them as humans to the point that I can keep them out of situations of making mistakes that may be mistakes for them, but wouldn't be a mistake for them. but wouldn't be a mistake for somebody else. And that only comes with that deeply personal relationship. Yes. And I'm sensing some, a good measure of empathy layered in there, right?

Starting point is 00:09:09 You know, because it's like you've got to care about people, care about their outcome, and you probably are projecting, you know, your upbringing, your grandmother going, wow,

Starting point is 00:09:19 I need to prevent that from happening to the next person and the next person. And you can't help everyone out there because you're only one person, but you can help this client and that client. When you're thinking about some of those retirement challenges that we're talking about, you know, the volatility and inflation and taxes, all of those things, are there any that carry a little bit more important than the other? Income seems to carry more weight than others because, like I said earlier,

Starting point is 00:09:47 if there's enough income, then the rest of the plan can look different than it has to look if there's not enough income. And properly addressing income. I mean, if you think about it, if you've got enough income coming in every month, you can handle most challenges that are thrown your way. Isn't that the truth? You know, oh, inflation reared its ugly head. And to one person, it just devastates them. To the other person, it's like, oh, that's kind of a bummer.

Starting point is 00:10:21 But I've got plenty of income because I planned ahead. inflation affects different people in a different manner. If there's enough income, it doesn't really affect your lifestyle. If there's not enough income, a 10% increase in prices can be devastating. That's where you go from being able to go out to eat, you know, once a week to going out to eat twice a week, I mean, twice a month, once a month, every other month. And worrying about it in between those times having that stress and worry. Yeah. The stress, worry, angst, hand, you know, just wringing your hands over, can we afford this?

Starting point is 00:11:11 You know, I remember in college, for instance, my wife and I were married at a young age. And I had to do all the grocery shopping because I could, I had the ability to, kind of keep a running tab of how much money we were spending. So if we had a $110, we didn't get up to the register and find that we had spent $120. And we're going to start putting stuff back. And inflation can cause that to happen for people. Yep. You know, when we were talking about risk of volatility, you know, you were saying that income and really impacts that.

Starting point is 00:11:48 But yet these emotional challenges, you know, when people are dealing with, the pit in their stomach going, ooh, I can't afford to do this or go out as often. It really challenges retirees in a way that they might not have expected. I would venture to say that most people would say, I expect retirement to be, you know, rainbows and unicorns and wonderful. Talk a little bit about some of the guaranteed income solutions that you try to guide your clients to, not specific recommendations, but just, you know, just the concepts of making sure that they're able to weather some of that risk and volatility with having, you know, some guarantees and peace of mind.

Starting point is 00:12:28 Yeah. So that's very dependent on how much money people have as well as how much money they want to lead to the family at the end. One question I asked people routinely is, and this is in the beginning, you know, to rank these three statements in order of importance. and typically only two of them are mutually exclusive, so only two get ranked. But we want to take care of our own retirement first. Is that the most important thing for you?

Starting point is 00:13:00 We want to leave as much money as possible behind for the children. Maybe that's the most important thing. Or we want to enjoy our own retirement and whatever's left at the end goes to the kids. And, you know, some people leave. and say, you know, I want my last check to bounce. How income is set up in retirement is dependent in large degree on the answer to those questions. Because if somebody wants to leave the kids the most money possible in that situation,

Starting point is 00:13:41 there's a lower amount of income needed and often, you know, obviously a life insurance policy would be a. appropriate in that situation so that we can ensure that they leave the most of money to the kids at the end. For people that want their last check to bounce, they would likely want more money in annuities because they're probably going to spend that principle, but the income is going to be guaranteed for their entire lifetimes. What's more common is the people that say, you know, we want to set our own retirement up so that we enjoy it. We do want the children to inherit, but the children's inheritance is a secondary concern.

Starting point is 00:14:25 And for those people, you know, a lot of times there's a combination of maybe an annuities in the portfolio, maybe not, maybe a laddered CD portfolio. Depending on the amount of money, maybe we can use a bond portfolio for that. when we use the laddered CDs in the bond portfolio, and they work in conjunction with annuities very well. But when we only use those things, people have to have a full understanding of interest rate risk. You know, they can put money in expecting rates maybe 5% when they start. They can put money in then and look up a few years later,

Starting point is 00:15:02 and now rates are down to 2%. Well, to get the same income out, they have to make another deposit. I remember when I started in the early 90s, you know, it was pretty easy to get six, seven percent in tax-free municipal bonds. In fact, I remember one lady told me one time, I don't remember the particular year. I'm going to say it was maybe 92 or so. I was talking to her about a 6% tax-free municipal bond, and she told me she would never consider anything less than a 6-5%. percent tax-free bond. And, you know, that landscape changed, and it's not come back since then. So the amount of money that people need, or the way we set fixed income, the way we schedule their income in retirement is very much dependent on what objectives they have, how much income they need, and how much money is there to create the income from.

Starting point is 00:16:03 And you know what I love about those questions and I'm sure you have got other, you know, batches of questions that you use to guide your clients through the process of planning retirement. It's like they're answering them, but you're listening to them through the lens of, okay, well, based on what they're saying, this is a recommendation. And probably when you make some recommendations, it's never a demand like you must do this, but it's, hey, how would you feel if this and how would you feel about that? they seem to coincide based on the questions you're asking based on their responses,

Starting point is 00:16:38 and you're coming right back to them being congruent with what they're already answering. So it's so much different than just going in and talking to someone and all of a sudden going, here's your plan, and they feel like I barely met you. So I love that interaction, that questioning process. So a big part of it is in the beginning of the process, one question I asked people, is how closely does your current financial approach match the retirement lifestyle that you envision? And repeatedly, I have people say, you know, and this is after a bit of reflection, they'll say, you know, I really have no idea. And so that standpoint is just a matter of, you know, what steps could we naturally take?

Starting point is 00:17:32 to bring their visions closer to reality. Yeah. And you mentioned the concept of the take it or leave it plan. In graduate school, I had a class as a cases class. And we had to create plans for different situations. And you had to create three plans. And for every plan, you had to create the, Worst case scenario, best case scenario, and expected scenario.

Starting point is 00:18:11 And I still take that approach when I'm building a plan. And the plan that I typically present to people is the one in which worst case scenario still gives them everything that they want in retirement. Sounds like you can't lose in that scenario if you've covered all those bases, huh? covered them as well as possible. A 1968 to 1983 environment is a very challenging environment to take any plan through. But, you know, that is the approach that we take. You know, I'm sure you would agree if someone said, well, how, at what age should I start planning for retirement? And you would probably say as soon as possible, because most people, I would think, put it off. But how does addressing these kind of challenges we're talking about differ when you're addressing them in retirement

Starting point is 00:19:10 versus during the working years when you've got a little bit more runway? So I'm going to separate that into two distinct phases. We've got the accumulation phase and the distribution phase. And if I understand your question correctly, the accumulation phase is really pretty easy. We're just trying to accumulate as much money as possible during that time period. And during that time period, I'll use the two most recent ones, 2000 through late 2002 and late 07 through early 09. Both cases, the stock market went down roughly 50%. When we're in the accumulation phase, those time periods are actually our best friend.

Starting point is 00:19:58 we're typically working, we're putting money in our 401K plans, and so as the share prices go down, we get more shares per dollar invested. And since we're continuously putting money in, we're accumulating more shares. So when the recovery comes around, we don't recover at the same slope that the market does. We recover in a much steeper upward slope than the market does because all the additional shares we picked up all the way down. There's a dramatic difference in the distribution phase. In the distribution phase, we're taking money out. Therefore, if the market goes down 50%, we have to sell twice as much to take out the same amount of money as we did at the top. The time period to really start making a shift because there's a big challenge in retirement that requires a fundamental shift in the approach that we take versus our working years.

Starting point is 00:20:56 that shift really needs to start happening about five years before we retire. You know, when we're working, that regular paycheck acts as a safety net, cushions financial risk, and the paycheck provides a real steady foundation. But in retirement, once that paycheck stops, suddenly the landscape changes dramatically. And we've got to make that, we've got to make that. we got to make that mental shift before we actually retire. Yeah. Yep.

Starting point is 00:21:33 And it's not making that mental shift on a dime. It's like a gradual process. And knowing that you need to start a little bit ahead of time and kind of dip you toe in the water and make those changes and trust someone guiding you through the process. So I think that is super, super important what we've been talking about here, Clark. If someone is interested in learning a little bit more about putting their retirement into perspective, what's the best way that they can learn a little bit more about what you offer and reach out and connect with you? Well, that's interesting. And the local area, we teach a retirement planning class.

Starting point is 00:22:12 We teach you to local colleges and universities. And you mentioned a mentor earlier. and what I'm about to talk about now is often more true for men than ladies, but not necessarily. So I had a mentor in my career, and I think a lot of us have mentors that are really a lot like a lighthouse. You know, they guide us through. We know that they're not going to steer us wrong. They're going to steer us in the right direction, and they're going to be there for us. there was a gentleman that was a mentor of mine

Starting point is 00:22:52 beginning in the mid-90s and he told me that because I was talking to him at that time I was still what most people would consider a stockbroker at that time as most of us were in the industry and I was talking to him about

Starting point is 00:23:11 at some point my career getting into retirement financial planning and he told me then that when I got into retirement financial planning, I would meet with two types of people. I would meet with the type of person that is going to secure their retirement and they were going to have the retirement

Starting point is 00:23:31 that they wanted because they were going to take the steps necessary. And I would meet with people that were in the information gathering phase. And one thing he told me about people in the information gathering phase, and I found this to be consistently true, is the most difficult thing for them is to understand when it's time to go from information gathering to action. Yeah. Because, you know, the best doors don't slam open. They typically gently sit there until someone recognizes that it's their turn to walk through the door.

Starting point is 00:24:10 But sometimes those doors slam shut. And the challenge for some people is to recognize when that door is open and walk through it while it's open before it slams shut. Yep. Wow. Yeah. So before the external forces, maybe wind slams that door shut or, you know, the financial, you know, environments slam that door shut. You need to gather that information, find that mentor and reach out and take action. I think that is spectacular.

Starting point is 00:24:44 I love that word picture and analogy. So what's the best way that people can reach out and connect with you, Clark? So the website is the best way. The website address is golden years ria.com. And it's important to keep in mind that making that transition, while it requires a new mindset, it transforms what could easily be a source of anxiety into an opportunity into an opportunity. opportunity for empowerment and an opportunity for peace of mind. Because setting the portfolio, setting the portfolio up for retirement is just one of those

Starting point is 00:25:26 little changes that really everybody hit sooner or later. And when we look back, you know, things like this barely even register. And everybody, everybody I've ever dealt with, I believe, that's gone through that transition has said, you know, I'm really glad I did this. Awesome. That sounds excellent. I thank you so much for coming on. I just love your perspectives and I really appreciate your time, Clark. Mike, I do appreciate it. You've been listening to Influential Entrepreneurs with Mike Saunders. To learn more about the resources mentioned on today's show or listen to past episodes, visit www.com.

Business Innovators Radio - Interview with Clark Smith President of Golden Years Financial Discussing Retirement Challenges

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