Micah Shilanski (00:00)

Welcome to the Plan Your Federal Retirement podcast. I’m your co-host, Micah Shilanski And we have a really good question that comes up today and sometimes comes up no matter what’s happened in the media is about, you managing your retirement plans based on what you want or based on what the ads and wall street is telling you to do? And there’s a lot of subconscious things that are out there, which kind of potentially working against you that you got to know what they are so you can overcome.

So to talk about this, I brought back on the podcast, my father Floyd Shilanski who has years of experience working with this hand in hand with clients and making sure we’re looking at the right things. So pops, welcome back to the pod.

Floyd Shilanski (00:36)

Appreciate

that son, thank you very much. You know, as you’re talking about that, I go, here’s from this age thing again, but yeah, I got a lot of white hair for sure. You know, one of the things that we were talking about before we got started was years ago, and when I go back to the late 70s, early 80s, the whole adage was when I talk to people, are you managing your money by money magazine? And I don’t even know if money magazine exist today, but each month it would come out and give a list of mutual funds that were the hot ones and then we’d see people

Bouncing back and forth with that which is crazy And today it’s social media. Today, It’s you know, it’s the headline news and people I find people get afraid they’re afraid to ask the questions because they don’t think they’re Where they need to be at or they’re afraid to ask the questions because they don’t want someone else to know kind of where they’re at So I think it’s a timely topic to try to get people to take Responsibility and learn what they need to know

to get ready to whether it’s retire, buy a house, finance, education, whatever they want to do.

Micah Shilanski (01:38)

Yeah. And this is one of the things you really have to look at how these things are set up, right? Cause your retirement is really important. And if you do it right, you know, it’s the last retirement that you’re going to need. so looking at this and saying, what are your motivating factors that are there? And again, ads do a great job, right? And I might throw ads, wall street kind of all together in that same thing, but they’re trying to motivate you to do a certain thing. And so we really got to step back and say, Hey, what’s happening in the background? So a lot of the custodians out there.

Now some of them are privates who don’t know their finances like Vanguard, some of them are public like Schwab and we kind of have a better idea of their finances. They make a lot of money like with a billion dollars a year based on trading activity, right? This is just what I’m getting from looking at their last year finances, kind of putting it through AI to kind of splice out some of these numbers.

but over a billion dollars in trading activity. So when you log on and they’re telling you what’s happening in the last 12 seconds, it’s not because they really want you to know what’s happening in the last 12 seconds. Everybody knows longer term strategies generally outperform in the long run, right? Versus shorter term strategies, but they make money on shorter term transactions. They make a ton of money with idle cash sitting there. Investors putting money aside, being concerned about the markets and sticking their money in a low yield money market account or a no yield money market account. It’s almost like,

of Schwab’s revenue last year was just in the interest that they’re making in the spread between what they make an interest and what they they pay out. This doesn’t make Schwab a bad company at all so I’m not trying to cast any disparages there and it’s very true with almost all of the custodians out there but you’ve got to know what motivates them and that may or may not be aligned with how you need to make money for retirement. so Pops this goes right in hand with like the ads conversation whether

Boy, gold is up last year, so everybody should go buy gold. Well, gold was up last year. Like if I have my time machine, it’d be great to go back and do that. But I don’t have my time machine. So does it really make sense to buy last year’s winner? How often are they a repeat winner?

Floyd Shilanski (03:34)

You know, Micah you’re 100 % accurate. You’re talking about gold. And earlier today that we had this conversation about silver. Back in the late 70s and 80s again, I remember, can’t remember, the brothers, they tried to corner the silver market and it went from under a dollar like to $30. And that’s when gold, under the Nixon administration, took us off the gold standard and gold ran to thousand dollars an ounce. I remember people standing in line trying to buy the physical gold.

because it was never gonna go down until it did. ⁓ So all these things come to play. Now you talk about money sitting in cash or money market accounts or those equivalents at Schwab or Fidelity or any other custodians. What happens is we get paralysis by analysis. People will get in and start looking for the highest yield, the highest rate of return, the safety, and they park their money and then they’re afraid. They’re scared to death.

my gosh, I might lose. And so there they wait and they wait for that best opportunity. You and I know that it’s easy to figure out when to take profits and get out of the market. What’s more challenging for you and I planning and figuring out how to get back in the markets, right? Yes.

Micah Shilanski (04:49)

Yes,

it was the aspect that when the markets are going down, okay, that’s one thing, but making that chance to buy it back in, in hindsight, it’s always easy, but it’s like catching a falling knife in the minutes, right? It’s a little bit more challenging, but if we step back and we get a look at more of this long term perspective, we learn so much more about retirement. So we’ll talk a little bit more about the markets, but let’s kind of dive into like how retirees actionable things, but

pops one of the things that we love to share with clients is I like the JP Morgan guide to the market. there this big assessment and in this year, think it’s on page 16. It has a, a chart that shows the annual returns in intra year declines. So what’s fascinating about that is you can say, my gosh, this last year, the market was up at it made so much money. Well, it made so much money in the end, but there was an intraday. What was the intraday low throughout the year?

And there’s sometimes the intraday, intra year low is like 30 % like in 2020, right? COVID it was a 30 % low. The next year is like a 25 % low, right? The market ended down that year at 20%. The next year, the market was hooked off. was up over 20%, but the intraday, intra year low was over 10 % down. So here’s those aspects we’re looking at. Like those markets absolutely are volatile and they fall. And then you get a lot of media, you get a lot of hype that you says you should make some changes. Well,

If you make the wrong changes, you go to cash. You’re waiting for it to go down. You could be selling at the loss and we miss that recovery that’s going to be there. So I’m not saying that’s a bad strategy. I’m saying, Hey, here’s a concern we have with that strategy. How do we approach it? How are we going to tackle that? So Pops, let’s start talking about like with the retiree and clients. Number one, how do you not keep up with the Joneses? How do you not fall in the traps of the ad cycles about what to buy, what to sell? And then how do we.

administer this? do look at this as we go through retirement?

Floyd Shilanski (06:44)

You know,

Micah it is by all means and everyone has a different opinion. Every advisor has a different opinion. So what I’m going to say is my opinion. And what I look at when I talk to clients is what are you spending right now? And if you’re making a hundred thousand dollars a year and after taxes, you’re saving, you know, $10,000. You’re not going to want to make that change when you retire. You become accustomed to the lifestyle that you enjoy. So.

I believe financial plan or retirement plan should be predicated on what you’re spending today. And I know this and you know this that the first year after retirement, you’re going to overspend kind of like when a client says, I’m going to build my house and I’m going to keep it under budget. And what do you and I know? It’ll be over budget by 10 or 15, 20%. Right? Yeah. So when you and I are working with them, even though they tell us they’re going to come under budget, what do we do? We plot and plan, right? To keep it on. We know they’re going to overspend.

And I do the same thing when I do retirement. If someone’s spending $100,000 net a year, I know the first year is gonna be 120, 130. And I use the bell curve analogy. And I think we’ve talked about this before. I know you’re gonna overspend, so here it goes up, up, up, up, up, 12 months down the road, 16 months down the road, it better be trending back down. Because if you continue to overspend, if you continue to exceed that budget we designed, that’s gonna affect the longevity of the fund. And we can’t…

base it on the markets doing 30, 40 percent, we can base it on a conservative. And I used to tell clients, and I still do today, and I’m used to it, net two, after taxes, after inflation, if you’re beating those two by two percent, you’re winning. Now, I like three, four, five percent after that, but you’ve got to keep up with that to make sure they work. But how many times today do we hear people that say, you know, I’m looking at an 18 or 22 percent return, or they go to AI and say, here’s my million dollars, how long it will last?

And AI will tell you exactly what it is and that becomes our gospel. But we forget about travel, we forget about sickness, we forget about grandkids or children needing help. All those things that could come in and murky the water just a little bit. So I’m a real believer, and I think you are as well, is that we need to design each financial plan, each retirement plan based on the individual what their wants and needs are.

Micah Shilanski (09:01)

That’s a hundred percent the case, right? Cause it’s always changed. And especially when we’re in this long bull market right now, it’s really easy to plan for the markets continuing to going up and not stepping back and saying, now when they come down, not if when they come down, what’s going to be our plan, but it goes to cashflow, right? What are you spending and what are we planning on spending retirement pops? I really liked that one. So that’s kind of the big thing is monitor your goals based on your cashflow, your lifestyle, your bucket list. Are you doing the things you want to do?

Right. you got things in your bucket list, awesome. How are we allocating money on a monthly basis? That, you know, on the big buckets guy, right? If we have great, want to do X amount of trips. Awesome. Let’s open a separate bank account. I love a separate bank account. Let’s put money, not just travel. I’m going to disagree with that one pops because the problem we open a travel account, you got a husband and wife travel can mean two different things. What’s it being used for? Like I want to go on a hunting trip. Kelly wants to go to Europe, right? That’s both travel, but that doesn’t count.

So we got to open up an account and we got a nickname and the nickname has to have three things in there to be really successful. Number one, accurately what it’s for. Number two, how much and number three by when, right? So great Europe in 2028 and it’s going to cost 20,000 bucks, right? Well, whatever those dollar amounts are for you, those should be outlined. What I love about that nickname and not just broad nicknames is now every time you look at that statement,

you read that and subconsciously your brain’s like, is this online with what I want to do or not? Now, if it’s not great news, it’s just a savings account, change the name of the savings account to what you want. But then when you see it or your bride sees it, you both see exactly what that money is to be used for. And now we get to be more intentional, right? We’re using that money a wee bit more intentional than just being broad spending in our return.

Floyd Shilanski (10:49)

No intentionality, Micah. So, so accurate. You’re 100 % correct. And that’s what we miss sometimes, intentionality. So the first year, know, I don’t know about your clients, but mine are typically, if they’re going to stay in Alaska, they want to travel. They want to go and do these different things, or they want to move and relocate. You remember, know, Ernie, he showed up for the office in his motor home with his snow shovel over the top of that class C and says, I’m driving South Floyd until someone looks up and says, what the hell is that?

then I’ll know I’m further enough away from snow. But everyone’s 100 % accurate. Everyone’s got different opinions, all right? And you and I know that there’s gonna be something that’s going to throw some sand, grease that’s gonna confuse things or muck things up along the way. Those contingencies. And that’s what I believe AI misses. That’s what we miss when we do the headlines and we do the comparisons. It’s what might happen. Now, I’d rather…

plan for it and not have it happen, but have reserves to take care of it versus, to hell with it, we’ll fix it when it happens. And all of a sudden it does happen. And now we’re draining down the reserves or we’re changing that travel from Europe in 2028 to replacing a car in 2026 because something happened. But building individual plans, not stereotyping, not lumping all yourselves together, but say, what do you want? What does your family want? What do you…

Micah Shilanski (12:12)

So the way that we’re going to, the way that we do this kind of one-on-one is we like right now, beginning at rose at the beginning of the year is we get all of our clients updated pension in the LASs, right? Love to get those and we’ll update a tax projection. That also tells us how much net income do you guys have come in it? It says, are we spending with where we’re on track to be? And looking at it honestly is a really good thing. Cause if you look at it says, ⁓ well I spent more because of this. And last month I spent more because of that. And month before I spent more because of that, right? We’re just justifying it with the realities we’re just spending more. So.

This isn’t a good or bad. is an accurate depiction of what are we actually spending our money on. That’s really needed. Then we’re going to back into a process you’re talking about to build an investment in tax plan that really meets those goals. And it’s not magical, right? We only have so many levers. get a pulse. We can do the best thing we possibly can, but we have unrealistic expectations. I’d rather know that sooner so we can start dialing things back in. action items for our listeners, because it’s all about action items. And what you guys do is number one,

You know, let’s look at our cash flow. Where’s our money actually being spent? Number two would be great. How am I going to replace that income into retirement? And number three, what’s your strategy for outpacing taxes and inflation as you’re growing through retirement? You really got to look at those three this year to make sure you’re on track for that successful retirement. Appreciate it to our listeners. Make sure you share, like, send this out. Our goal is to help another 1 million federal employees with retirement. We can’t do that without your help. So next time, happy planning.

Floyd Shilanski (13:41)

The content and plan your federal retirement is for general informational purposes only and should not be considered individualized advice. Investing involves risk including possible loss of principal and pass before does not guarantee

Micah Shilanski (13:48)

advice.

Floyd Shilanski (13:56)

affiliated with CWM, Government. ⁓

Micah Shilanski (14:05)

Plan your federal retirement is not