Business Innovators Radio - Interview With Jeff Brummett Financial Advisor with Greenline Financial Services – Silent Retirement Killers

Episode Date: November 22, 2023

Jeff is an Amazon #1 best-selling author, past two-time Inc. 500 Company president, public speaker, popular radio talk show host, and a 25-year executive management and entrepreneurial leader. He is one of the most prolific and sought-after financial public speakers for tax-efficient retirement planning.My team and I take the time to educate each client as to how the game is played. We customize that educational process to fit your individual goals, concerns, and financial capacity. No smoke and mirrors. Only hard facts and proven financial strategies have weathered even the most volatile of hard times.Learn More:https://www.greenlinefinancialservices.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-jeff-brummett-financial-advisor-with-greenline-financial-services-silent-retirement-killers

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 back with this Jeff Brummet, who's a financial advisor with Greenline Financial Services, and we'll be talking about silent retirement killers. Jeff, welcome back to the program. Oh, it's good to be back, Mike. This is always a lot of fun. Thank you.

You're welcome. And, you know, I always think, wow, you know, you've got such a way of bringing up a topic and going, you know, silent retirement killers. I don't want anything to kill my retirement and certainly not the silent kind because you don't know about them. Like previously we had mentioned to the word subtle, you know, subtle and silent are scary words. So get us launched into this conversation about. about retirement killers because I know that a lot of people think, oh, I want to retire at this age and my money needs to last this many years and I would need to make sure that that's going to happen. Well, all of a sudden, we have been taking better care of herself and the healthcare

system is a little bit better. So maybe those numbers we've been told in years past, decades past have now expanded out. So what are some of those hidden X factors out there people need to know about to make sure that money does not run out? Yeah, yeah, absolutely. Well, let's start with the one that you just hit longevity, right? I mean, there are two sides of longevity. Everybody wants to live longer, you know, and we're doing that for sure today. And for the most part, we've enjoyed a much higher quality of life as we've aged through retirement. I mean, you think about the number of people today who are well into their 80s and are still on the golf course.

Yeah. My wife and I, we earlier this year, we went on a European cruise and I was just blown away by the number of people who were, you know, in their late 70s or early mid 80s who were hiking up, you know, treks with us and just having the time of their life. So we are living longer and, you know, we're learning how to do it with, you know, with better health as a result. But living longer brings challenges from a financial standpoint. When you think about it, I mean, you know, when I was a kid, My grandparents, my grandfather, my mom's side, he died in his late 70s.

He was 78. And I remember at his funeral, you know, the minister, the pastor, you know, in the eulogies that were given and everything, talked about how he had lived a long, full life, you know, because he made it into his late 70s. Now, in that era, that was, there were, I mean, most of his friends were already, you know, they didn't make it and that he graduated high school with, you know, I'm not saying that people didn't live because I, you know, on the other side of that, uh, that fence, I, I had grandparents who lived in their 90s, but that was, that was truly an exception for their age and their generation, right?

It's not that it didn't happen, but it was the exception. But I remember my, my, uh, my grandfather dying at age 78 and that was a, that was a ripe old age for that day. Look, if you die at 78 today, people are wanting to know, you could hit by a car or something because that's what happened. Yeah, that's not what happens today. We expect, I think most people, you know, expect to live into their 80s. I have a father who's retired down in Florida and he turned 81 this year. And this guy, he still's playing golf and he's the president of his homeowners association. And it's a pretty large homeowner association down there. And he's on another board with a with a conglomerate of homeowners associations that live within a certain region.

And I swear, I go down there, the guy works harder and more hours than if he had a full-time job. And he's loving life, you know, sharp mentally gets around. He's, you know, putting all over the place. But that's just the way it is today. So think about the possibility that as we, as we retire, let's say in our 60s today, many of us are going to live into our 90s. that's a 30 year retirement.

You know, we used to talk about working for 30 years and retiring. Well, now we may, some of us may actually be in retirement, doggone near as long or longer than we were actually had our working careers. That's a long time to live in retirement on fixed incomes. So that risk, you know, that in and of itself is a silent, you know, risk. Sure. That multiplies our peril during retirement. Because it's an unknown.

Yeah. Right. Look, it's easy for me. You know, people come in all the time saying, hey, I want one of the things I need you to help me with is an income plan for, you know, retirement. So let's sit down and do that. And we do. You know, it's a big part of what we do, income planning, right? And it, I kind of, I kind of laugh. I'll always say, well, this is, you can make this real easy on me. All I need to know is the day you're going to die. Yep. And I'll be, it makes my, I'll just back into the numbers and we'll make sure that you have plenty of money. The problem is, they look at you like you've got four heads. Like, what?

It's like, you're not serious, are you? But so what's the backside of that? Backside of that is, do you want to plan for dying or would you rather have a plan for living? And if we're going to do a plan for living, then we have to acknowledge, hey, we don't know how long it's going to be. So we need to plan for a long haul, right? We need to plan for living. And that's, that's the plan that gives you, you know, the most sleep at night.

and the least stress along the way. I do not want a plan that says I got to die by this day or I'm out of money. That doesn't work for me. So longevity is one of those unknowns and risks. What are some of the other retirement killers that people don't thickly think about? Yeah. So when you look at silent retirement killers, you know, longevity certainly is one of those things. But there are other silent retirement killers too.

And they all, at the end of the day, Mike, they all revolve around a single principle. And that principle is negative numbers. So when we get through to the point where we're now retired, the negative numbers, and by negative, I don't care whether it's a market loss, market pullback, whether it's a tax increase. You know, a lot of people, they don't, you know, nobody likes tax increases, regardless of what they say politically on the outside. Nobody likes paying more in taxes. I mean, why? Well, because it means there's less there for me to, you know, do the things that I want to do. And so tax increases are really at the end of the day negative numbers just like a market

loss. There's no difference between a 10% market loss pullback and a 10% tax increase fundamentally and practically speaking for the average. Because the bottom line is it's not in my back pocket Yeah, there's 10% less in your back pocket. That's what it means. So negative numbers are kind of silent killers because we, you know, on the front side of retirement, we have time on our side. You know, we're still working. We still have an income. And it's our income that's supplying our need.

And so when we see market losses, for example, negative numbers there, they don't really bother. And it's not that they're in, you know, anybody enjoys them, but they don't worry us. They don't bother us. They don't impact us. Why? Well, because we're not pulling money out of that account. We're not touching the money yet. Right.

But once you start to touch the money, once you get to that stage in life where now you need to start touching that money, then losses become a big problem, huge problem for us because of the negative math involved. And so a lot of people are not trained to understand in, you know, intuitively. They've always said, hey, the market will come. come back. Well, okay, maybe, but the difference is you're, you're now forced to pull money out of this account. And I have a, I got a PowerPoint that I, that I do for a lot of the webinars when we hold online teaching events. And the single comment that I get probably more than any other comment when I ask people, you know, what was it that that really struck you the most, in the most profound way that made you want to reach out to us and have a second conversation,

a follow-up conversation. Inevitably, Mike, it is that portion of the webinar where I pop through up some slides and I start talking about, you know, the impact of having to touch the money and how all of the mass starts to flip on its head and get wacky when we look at how our portfolios perform over time because now we're pulling money out. So that's a silent killer that a lot of people don't, they don't understand. And let me give you just an example. And it's unfortunate that we're not able to capitalize on the visual medium here because visually,

it's even more stunning. But let me just walk you through a little bit of very unlikely math. Okay. So let's say, let's just present a couple of scenarios here. You're trying to make a decision on which financial advisor to hire. right? And so one of the guys that you interview with, he comes in, and this is, you know, fictitious for just for illustration teaching purpose. So work with me here. Okay. So one of the guys says, look, Mike, I have this crystal ball and it's always been right. And it allows me to see into the next 25 years or so into the future to know

what the financial markets are going to do. And this is why our clients always get such a high, reasonable rate of return over time in their portfolios. And my crystal ball, it says that with our strategies, the best we're going to be able to do is we're going to be able to net net average after fees for the next 20 plus years, 6.1%. Now, I know you probably want more, but I'm telling you, that's the best we can do. That's the home run. Okay. And I know how to do it. And I will guarantee you at the end of the day, 20 years down the road, you will have earned that 6.1%. Now, you take that with a grain of salt.

You go into the next guy and the next guy says, well, I don't have a crystal ball, but here's what I can do. Because of our strategies and the way they work and the way they're structured, I know that I'm going to be able to get you somewhere in the four to maybe four, five percent. So let's say 4.9%. I think that's probably what we're looking at top, top for you, okay?

Just being honest. But I'm, you know, I know we can do this. Well, if you're going to pick an advisor, which one are you going to pick, Mike? Well, you would obviously go with the one with a higher number. Sure, because he, he was going to deliver a 20%. I mean, if you do the math, 6.1 versus 4.9, well, 4.9 is 20% less. in terms of average, you know, rate of return over that, that 20 plus year period. So, yeah, you go with, you go with the guy who's going to give you 20% more, right?

So I throw these two slides up and I show the real life example of what the S&P 500 actually returned over a 23 year period from the year 2000 to the end of 2020, right? And these are with dividends, you know, reinvested, right? Anybody can check the math. And then I put a, I just follow the 4% rule. I, you know, I put a million dollars in the account. We start with $40,000 withdraws following that 4% age old 4% rule. And we index to a cost of inflation. And in our case, we think inflation is going to be a little bit higher than what it's been for the last 30 or 40 years moving forward. So we do a 4% cost of living adjustment to the end. So we're just following the 4% rule, right? And the income that we're able, remember, we started with a million in this case. If we averaged the S&P 500, which beats 80% of all managed money, it's what it's, it's the, the tool that we measure financial advisors because most of them can't par that course, right? So if we got, if we beat 80% of all the managed money out there, here's how much income we would have been able to take out of that account following the four. percent rule. $947,223. We didn't even get to pull the million dollars that we handed our advisor at the beginning. We didn't get to pull at all.

We are out of money when we're, uh, we reach 2016. In fact, we didn't make it through that whole year because we, we ran out of money during that year. But our advisor, if you run it all the way out to 20 plus years, he, he got us what he said he was going to get. Right. average net of his fee ends up being 6.16%. But you might be focused on the wrong thing given your scenario.

That's right. We're focused on the average rate of return. If we'd have taken that guy with the 20% less average because of how the math works out, what he eliminated was he eliminated the volatility and he never went backwards. Yeah. We never took a loss. And so in his case, at the end of when we ran out of money in 2016 with our first advisor experience, we were broke. We still had $700,000 over $700,000 in the account.

And by the end of 2022, we had taken a cumulative withdrawal of $1.4 million in income withdraws, which is $400,000 more than we, you know, started with. and still had almost 400,000 left in the account. Because the 4.9 advisor needed to continue saying, but asterisk, let me explain what that means. We are going to be careful of this and we're going to be preserving that. We're going to have safety and security and we're going to make sure that volatility is leveled out. And that's where that big difference is, is leakage out of the accounts. Yeah, so you asked the secret silent killers, one of the secret silent killers,

is people not understanding how to measure total return once they have to start touching the money. Total return is very simple when we're growing our accounts. It's all about the growth, right? Yeah. And it's easy, right? But once we start having to touch the money, total return, the formula by which we measure total return changes. Because now it has to include income plus growth. See, it's not just about growth anymore.

Well, Jeff, you were a business owner for a long time, and I watched Shark Tank religiously every single episode. Isn't it very similar to the entrepreneur that says, I did a million dollars last year in revenue and they throw a party? But then when you ask the other question, oh, what was your profit? Oh, well, we lost 400,000. So it doesn't matter the top line. You got to factor those expenses in and go, oh, but. So same with what you just said. The rate of return of X, that sounds all fine and dandy until you go,

What about this and this and this number and this fee? Now your actual net return is only, boom. Yeah, we're talking about just growth, top line revenue. You know, there aren't any expenses there. It's, that's wonderful and that's easy. But if you've got expenses, and in our case, metaphorically, we're talking about expenses now in terms of income, you've got to consider how much income am I going to be able to pull out of this and then also what kind of growth am I going to have after the income? It's the income plus growth formula that equals total return.

And in the example that I just kind of walked you through, even though the average annual rate of return was 20% less, we ended up having a total return with income plus growth left in the account of $1.8 million with that 20% less performance compared to just the income, because we had no growth, we ran out of money at $900,000. thousand. So it was almost double the, from a nominal standpoint, you know, it's almost double the, the income and, and growth scenario. So that's, that's the first, you got to understand total return equals income plus growth when you're in retirement and touching the money. The second, uh, big secret silent killer are fees.

Mm. management fees. Fees. That's some leakage right there. Yeah. Yeah. We're so used to paying those. I mean, you pay fees on everything.

I hate fees paying them personally. I, you know, I remember, I'm old enough to remember days where banks didn't have fees on anything. You know, I could go put my money in the bank, and they were, they were privileged to have my money. And they actually paid me a fee to keep it. Right. Now you've got banks charging you a fee to store your money so that they can turn around and loan it back to you. But we're so. it everywhere. Like our, even our power bill, our cell phone bill, you look at, you know, it's

14 lines. It's not just your invoice. And 11 of the 14 lines are fees, not taxes. Yep. Yeah, right. And I'm getting ready to take a flight tomorrow. And you can't look at, oh, the price is X and compare airlines because one airline charges a fee for this and that and seats and baggage and So fees is a big deal and it kind of lumps into that negative number phrase that you used. And it makes me think about you really can't do much about market loss or taxes because as humans and as individuals, we can't do anything about that. But we can do something about fees when we know about them because we can make sure our money is with an advisor in an account that has as little as possible. So that's a huge piece. Yeah, fees are a big.

In fact, they're probably the number one killer, silent killer. If you talk about an X factor, if you said, hey, if you could, you could just give one big time X factor that can very secretly, silently destroy your retirement. I would tell you the most secret subtle factor are fees because you're so used to paying them. And you really don't understand how that negative number year in and year out can make a difference in your overall account balance. how long that that money lasts. In fact, I'll just, we'll piggyback on the story that we started. If I took that that account with the 4.9% and by the way, in our, in our, you know, little calculator where we show this on our on our webinars, we show the fee, the management fees. And on that particular account, they had the same. Both advisors charged a 1.5% management fee, which is,

you know, it's pretty common, pretty standard, almost, you know, considered the NASCAR. average right now, right, for independent managed type money. And so that 4.9 included that 1.9% or 1.5% fee every year. Okay. If all I did was was take that fee away, okay, backed it out and said, we're not going to charge you a fee. Same exact, you know, returns, terms of annual, you know, rates of returns each individual year. What happens is, is you put that back that, you know, when you add 4.9 to the 1.5, do the math, you get 6.4, right? 4.9 plus 1.5 equals 6.4.

And 6.4 was actually higher than the 6.1 for that the S&P actually did over that same period of time. 80% of managed money didn't beat that. So by just eliminating the fee on a lower performing asset, you know, over time. Yeah. And substantially, and here's where the, here's where the math gets just, you scratch your head and you say, that can't be right. But here's the impact on it, Mike. If you eliminated that one and a half percent fee on that portion of your portfolio,

your total return increased from $1.8 to $2.5 million. $1.5% fee literally cost you over $700,000 during that point of something year. That's right. It is a silent killer. And this is one of the reasons why we have this conversation with our clients all the time. Say, look, part of our goal and part of the secret sauce to our success is we're going to look for strategies that can lower the overall fee structure in your portfolio because we actually understand how that math can silently, secretly destroy you in your retirement. And as a result, I think right now, if you looked at our average portfolio fee structure across our entire client base for the people who we're right for, that fee structure

ends up being somewhere between 40 basis points and for those who don't know what a basis point is. So real simple, one percent fee, that's 100 basis points. So you're looking at a 0.4% fee up to maybe a top end of 0.7 or maybe 0.8. But you're looking at substantially lower fees, which is going to just make a huge difference, all things being equal. It would make a huge difference, obviously, because you're keeping more of your money. But fees are a secret silent killer for sure, absolutely. Unbelievable.

And who would have thought that, oh, 1% and 1.5.0. you would have almost like ignored it. Yeah. If you were stealing 1% for me every year, I would never know that you were stealing. It makes a big difference. Cumulative and compounding. So any other silent retirement killers, I'm sure that we can list 437 of them, but any other main ones that you focus on with your clients?

Well, taxes are a silent killer because you're used to paying those too. But again, it's a negative number. So creating tax efficient income strategies in retirement. is also critically important to maximizing your success. And it's also one of those things that, just like fee structure, the earlier you start these things, the more, I'm talking about positive strategies, the more time they can compound in your favor. So it's important whether it doesn't really matter which silent killer we're talking about.

The sooner you address them, the better you're going to be for sure. And I agree with that, just like, you know, you want as much runway as, possible. And I know that we hear a lot of talk about IRA Roth conversions. So maybe briefly, let's wrap up with that because I think that a lot of people think, oh, but I don't want to trigger taxes right now, but is there a benefit to doing that? Yeah. So it's a great question. And I see, you know, taxes, particularly with our debt. And as we stand today, I think our debt is projected to be somewhere between $33, $34 trillion by the end of this year. You know, we're laid into to 2023, obviously, but it's a big problem. And because of the debt and the interest rates going up,

everybody kind of realizes that, oh, no, you know, taxes, where, where are they going to go? Well, if you think they're going to go down, you know, you're smoking something, you probably not should be smoking because the math says otherwise. I mean, just a simple math says otherwise. So tax efficiency. You know, most people, they're, you know, they've saved traditionally in, in IRA or 401ks that are tax deferred. So what in essence, we've done is we've created a tax time bomb. But you know, it's interesting. I have found, I see this all the time, a lot of advisors using this tax discussion, particularly with regard to Roth conversions, right? Where everybody, not everybody actually knows this, but, you know, while you're working, you can make enough

money to where you can't contribute. They won't let you contribute to a Roth, you know. And, but what a lot of people don't know is that once they've got all this money in a, in a regular IRA or a 401K, they can, all of it. It doesn't matter. Bill Gates could convert his, if he had one, which I'm sure he doesn't. But if he had IRA, he could convert it to a Roth. It doesn't matter how rich you are. You can do Roth conversions. But the question is, are Roth conversions profitable? And I, see a lot of times advisors use this as a hook to bring people in, you know, and, because everybody, look, you know, everybody understands the principle that a, a taxable dollar at the end of the day is not worth as much as a tax-free dollar, right? So it seems, you know, hey, we got to figure

out how to get you more tax-free dollars. But the truth of the matter is, and this is one of the things that we kind of walk our clients through as part of the educational process is, does it make mathematical sense. And it comes down really, Mike, to a question, are we wanting to eliminate taxes from a standpoint of so that we as the individual pay the least amount of taxes in our lifetime? Okay. Well, probably. Yeah. And sure, there are a lot of people who say, yeah, absolutely. This is about me. I want to, I want to, you know, keep more of my money. But it's very, very different if the goal for that money is not necessarily use. You individually paying the least amount of taxes, but you're trying to pass on the most, you know,

uh, uh, in terms of value to your, let's say your heirs, your kids, etc. And that question is not as, it's not as clear cut. And this is the area that I see a lot of advisors not under, they don't understand it and, uh, and they don't think about it. But before we start doing a break even analysis, and this is something that we do for all of our clients, if we're looking at, you know, tax income strategies, we want to do a break-even analysis. How long does it take us to get ahead of that curve if we do a Roth conversion? And it's going to vary from person to person, depending on their age,

their tax bracket, their marginal, you know, situations, etc. But it also depends on whether or not they're trying to set up their kids for the most inheritance. And sometimes Roth conversions, believe it or not, just like some of the non-intuitive math that we've discussed in some of our previous sessions when you've interviewed me, the same thing happens when you look at passing on the most money value. And I'm talking about, you know, not paying taxes on it. There are ways that we can grow the account without doing Roth conversions if we're trying to pass on the most money to our kids that would preclude. and eliminate the Roth conversion. In other words, if we did the Roth conversion and that was the gold, we'd actually hurt ourselves. So you got to pay attention to the math at the end of the day. 100%. As we've said many times, it's not just this one point of focus. It's not the rate of return

because there's a lot of extra things. It's not just the, you know, pushing down on the seesaw because the rates went up or down. It has a cumulative effect. So as with anything, there is not one solution. There is one cookie cutter that works for everyone. And then Jeff Brumman is just saying, next, let me set yours up. It's different. It's vibrant. It's creative. That's the fun that I'm sure you have is working with people to say, oh, given this and this and this in your situation, here's some things to think about. And then you're rolling up your sleeves and really, really putting a great plan together. So if someone is interested in learning some more about these silent retirement killers, how can they do that? And also reach out and

connect with you. Yeah, the best way is probably through our main website, Mike. And that is greenlinefinancial services.com. From that website, you can get to all of our radio shows. We have a couple of different shows that air. And of course, you can even get to my calendar. If you want to have a conversation with me directly, our calendar is there. My personal calendar is there. But it all starts really with the main website, greenline financial services.com. Perfect. Well, Well, Jeff, thanks again, once again for coming back on and giving us your perspectives. It's been very refreshing, and I appreciate your time. Always a lot of fun, Mike.

Thank you. 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.