Lori and I have been
working with a financial adviser on our retirement plan. We’ve been facing down
a whole host of decisions regarding risk assessment, asset management, and
prudent reserves. We’re not rich – we both work for the government. We’re about
as middle class as they come. And in about ten years we’ll both be leaving our
jobs and joining the wonderful tribe of Retired People. We hear they’re nice.
We hope we fit in.
You find yourself pouring over charts indicating that you
will be eighty-years-old in 2038 and ninety in 2048, if you make it that long.
We set up our plan so that we’ll be stone cold broke by the time we turn 98. If
we make it past that we’ll just have to go out and get a part time job. Walmart
door greeter or something.
It’s been a revealing process. You lay yourself bare. Our
financial advisor knows more about the details of our private life than all of
our friends put together. It doesn’t work if you keep secrets. Think about it.
Like the forensic accountants currently dissecting the Trump family’s
bowl-of-spaghetti financial entanglements with Russian oligarchs, your
financial planner is going to go over every penny of income and expenses with a
fine-toothed comb – all your habits, foibles, obsessions, and weaknesses will
be dragged out into the light of day. Sometimes when I’m in his office I feel
like it would be easier to stand on the conference table and take all of my
clothes off.
One of the surprises about financial planning – it’s a
lot like philosophical self-examination. You have to come clean about who you
are, what you have, and what you want. You have to clearly articulate your
values – what matters most, what matters least, and what doesn’t matter at all.
You have to be assertive and direct, but you have to be humble and willing to
be led. You have to be very, very clear on what you know and what you don’t
know. If you get that wrong, everything goes wrong. When in doubt, which will
be most of the time, take the advice.
Naturally, (and I say naturally because this is the same
boat the overwhelming majority of us are in), we haven’t saved enough for
retirement. These next ten years are going to be austere as we try to close the
gap, or more austere than I’d previously imagined.
There are two mistakes people commonly make in their
retirement thinking, and I was making both of them. One, I assumed that once
you retire your expenses go down. Wrong. Most people spend more when they
retire than when they’re working. They start traveling more. And of course,
later in life, healthcare costs skyrocket. And two, I forgot to account for
inflation. Ten, twenty, and thirty years from now, things are going to cost a
lot more. Think of how much a gallon of milk, a gallon of gas, or a movie
ticket cost thirty years ago – they’ve nearly tripled. This is why your savings
will lose 67% of its value over a thirty year span.
And this is why working with a professional financial
planner, preferably a fee-only planner, is so important. A fee-only planner
charges you for their services like a dentist, a plumber, or an attorney. All
other types of financial planners earn money on commissions from the investments
they steer you toward. In other words, you can never be sure that their
investment advice is untainted by self-interest. Are they pushing investments
that are best for you, or that yield the highest commission for them? Despite
their best assurances, you never really know. I’m not saying that commissioned
sales people are inherently deceitful – I’m sure they’re mostly wonderful folks
– but their business model is ripe for abuse, most of it beneath the surface
and hidden from view.
The other way that estate planning is like philosophy is
that you have to face the fact that you are going to fade away and die, and a
good financial planner, like a good philosopher, is going to help you do it as
consciously, joyfully, honestly, and compassionately as possible. In both
endeavors – financial planning and philosophy – the goal is to embody the
principle of no-harm: no harm to yourself and no harm to anybody else. Only
when you honestly, courageously, and unflinchingly face the fact that you are
going to grow old and die can you rightly set your affairs in order to maximize
benefit and minimize needless suffering.
Another benefit of financial planning is the way it
challenges and changes your relationship with your stuff. As you grow older you
begin jettisoning excess baggage, if only out of kindness for the friends and
relatives who are going to have to endure the miserable task of emptying your
house or apartment when you’re gone. Show them a little love. Get rid of all the
extra crap right now, the stuff you could easily live without. You’ll be
shocked by how much bigger your home feels, and how much freer you’ll feel.
But the biggest benefit of estate planning by far is the
way it lifts guilt, shame, and worry off your neck. You no longer have to regard
the future as a dark, menacing cloud full of uncertainty and danger. You know
that no matter what happens, you’ve seen to it that you will be financially
supported throughout. Your affairs are in order. Your investments are safe. Your
insurance is sufficient. Your tax strategies are maximized. In the event of
your death, your spouse is taken care of. And in the event of both of your
deaths, a calm and rational process unfolds for the dispensation of whatever
assets remain. You just don’t have to stay awake at night worrying about that
stuff anymore. How much is your peace of mind worth?
And all of this for only a few thousand bucks. It is
money well spent. I only wish I’d done it sooner. I feel like grabbing every
twenty and thirty-year-old I know and forcing them to make an appointment with
my financial planner. But I know I can’t. It’s not my place. But because of the
miracle of compound interest, a tiny monthly investment into retirement savings
over a forty year span is a gazillion times better than even the most
aggressive savings plan begun in one’s forties or fifties.
With all that being said, it’s never too late to take
what you’ve got and make it better. The only thing holding most people back
from hiring a fee-only Certified Financial Planner (CFP) is fear and shyness,
two things I know a lot about. Thankfully, my life-long philosophical training
and hard-won life experience convinces me of one simple, unimpeachable truth –
problems don’t get better by ignoring them.
Facing the fact of one's own impending decline and death, facing the facts of one's own spending habits, and facing the fact that your years of denial and avoidance have yielded little but frustration and anxiety, you finally pick up the phone and start the process. It's going to hurt. But not nearly as much as the alternative. Winter is coming. And even the squirrels know how to hide nuts for later, when all the trees are bare.
