Taking my own advice
Retirement is a strange thing, and most of us don’t spend nearly enough time thinking about it before we actually get there. It is even more profound when you have spent over forty years inside the plans for other people’s retirement finances and dreams. I am not retired — yet — but I recently decided to take the advice I have given so many others over the years, and it is remarkable what happens when you sharpen the focus and distill where you have been and where you are going.
Why you should listen to me at all
Let me clarify one important point, because it justifies whether you should invest any of your time in what I have to say. Anyone who has spent forty continuous years in financial services certainly has experience. That alone is not enough. The majority have spent forty years doing the same thing: selling a product to solve your financial needs. The products have evolved, but the process never has — find a prospective client, find their “hot button,” provide a solution for that problem, and cash the commission check or charge the fee the financial world provides.
For the first ten years of my career, I was the same as all of those financial representatives. For the next thirty, I became something quite different. Every day meant taking out a clean sheet of paper, meeting with people, and crawling inside their retirement hopes and dreams — understanding the price tag of their retirement and how they were going to pay for it with the wealth they had accumulated. Every plan was a one-off, custom designed for their exact situation. The framework was often the same; the inner workings never were.
What can I teach you from all of those experiences? Run the numbers: thirty years as a fiduciary planner, times forty-five working weeks a year (seven weeks of vacation — not), times forty hours a week, is 54,000 hours inside personal retirement plans — not one product sale repeated 54,000 times. Here is what all of it distilled down to. It may seem too simple. It is not.
The great exchange
You work your whole life. For that work, you trade life for money.
If you worked for an hourly wage, you traded your life for money by the hour. If you worked for a salary, you traded it by the year. At retirement, you cannot get back any of the life you traded. The money you received paid for the life you lived outside of work — and the excess you accumulated will now fund the rest of your life, where the exchange runs the other way: you will spend the remainder of your years exchanging money for life.
The formula is simple. You transition from exchanging life for money to exchanging money for life — from the earning years to the spending years. When you worked, the focus belonged on your wage: maximizing how much money you got for the life you traded. In retirement, the focus belongs on costs: maximizing how much life you get for the money you trade back.
Living inside retirement plans is where you see all of the costs, not just the lifestyle ones — the quiet fees, the silent tax drainage, the escalating tax cost of required distributions, the real net value of wealth passed to your family, the cost of declining health, the costs buried inside every product with “no fee.”
An optimized retirement plan is the one that manages costs best — not the one with the greatest potential to grow. Your portfolio can only compound on the capital it has; costs destroy both the capital you traded life for and all of its future growth. And before anyone objects that growth matters — it does, because thirty years of inflation is itself a cost, the erosion cost, and only growth pays that bill. But every growth decision is, underneath, a cost decision: what a guarantee costs in surrendered upside, what volatility costs a portfolio being drawn down, what doing nothing costs most of all. Look to the man on the hundred-dollar bill. His words are worth even more in retirement than they were in his century: a penny saved is a penny earned.
Where I come from
For years, people have told me that I see things other people miss. I do have a different viewpoint than most. I got free lunches in school growing up — I know what low income is, because I lived it, and I hated it. I understand the value of a dollar and I tend toward frugal regardless of how much wealth I have. (I can tell you with certainty that almost no retiree ignores the cost of things in retirement, regardless of how much money they have.) I served on submarines in the Navy, and when you live hundreds of feet under the ocean on man-made light, man-made air, and man-made drinking water for ninety days — without sunshine, loved ones, or a thousand other things we take for granted — you learn efficiency, and you assign a greater value to life than most people ever will. Those pieces go into every plan I build, from a perspective about as far from a sales approach as it gets.
The fiduciary’s job — and the golden mile
In 1996, after ten years of “selling” financial products as a broker, I became a fiduciary, with an obligation to always put my clients’ needs and goals first, before my own. It is a noble pursuit, and if I am being honest, it carries real challenges — because you still practice it inside an industry driven by profit and sometimes greed, forces that do not align with the true needs of the consumer and that blur objectivity wherever marketing and advice collide.
I have always said a fiduciary’s job is to research and present the pros and the cons of any product, program, or service in a balanced, unbiased fashion, so the consumer can make a truly informed decision about their specific situation. The roadblock few consumers ever see is the limited universe of solutions in a typical sales presentation. Think of it this way — I’m a car guy, remember? Pull into your local Ford or Chevy dealer’s lot, and the universe of solutions for your new vehicle is limited twice before you say a word: to the brand that dealership offers, and to the inventory it has in stock.
Most larger cities have what is often called their “Golden Mile” — nearly every major brand of domestic and import cars and trucks on an almost endless map of dealerships. (They are aptly named: DEAL-er-ships. They all have a deal for you.) The best vehicle for your family’s needs and budget is probably somewhere along that mile — not necessarily at the dealership where you are sitting. And when you find the right vehicle, the only thing left is price. This is where most people get car buying wrong. A car is a commodity: a blue Ford F-150 with the options you want is the same truck in Boston, Miami, Anadarko, Oklahoma, or Bayou La Batre, Alabama. Wherever you buy it, it runs the same and carries the same warranty — so price is king. I have traveled thousands of miles to pick up a vehicle I wanted at the price I wanted to pay; today, a dealership five states away will deliver it to your driveway.
Time to be the educator
I have navigated that ocean of choices for over forty years, and I want to help people see inside their retirement plans and portfolios with greater focus and understanding — the income, the costs, and the growth, with every price tag in the open. I have been a loyal student of personal finance for over forty years. It’s time for me to become the educator, and to share what I know before the lights go out and it is lost to time. That is why this site exists — and why it is called InsideYourRetirement.com.
— Bruce J. Smith III
