Micah Shilanski 00:52
Welcome back to the Plan Your Federal Retirement podcast. I’m your co-host Micah Shilanski, and today we are going to get into a really passionate topic about us. You know, we talk a lot about the technical stuff, which I love, quite frankly, I love geeking out on that stuff. I love geeking out on taxes. I love going through that. But I want to talk about the things that when I got my CFP, what they didn’t teach me that has the greatest impact in our clients lives. And these are things that sometimes we think we can’t control. These are things that sometimes we think are are not part of the equation. And what I want to tell you, they’re 100% part of the equation. And to help me get more in depth in this conversation, I’ve been doing this around 25 years, helping clients retire going through this, but I invited back on the podcast a great advisor working in our office, John Raleigh, and so John’s back on the podcast, and John, you’ve been doing this for what do we say about 31 years? Is that correct?

John Raleigh 01:42
31 years, been through a lot of ups and downs with this, the markets in this career and dealing with money, so…

Micah Shilanski 01:49
Yeah, emotions, markets, like all of those things, right? That go hand in hand, and the more time progresses on, the more everything repeats itself. Isn’t that true?

John Raleigh 01:59
It just comes in a different package. But yeah, it seems to be all about the sack. Exactly.

Micah Shilanski 02:04
It was a different label, right? There’s always another event coming around the corner, and I promise it’s just like the last one, it’s going to feel like it’s completely different and new. It has a different label, I’ll grant you that, but, but they’re very similar. And so John, let’s talk about one of those, those things. And this came up when we were pre gaming this, we had a slightly different plan for the podcast, but we started talking we started talking. I was like, Oh, this, this is actually something that we see all happen a lot and have a big impact, and it’s how money actually can hurt. And we need to talk about this in multiple contexts, not only yourself, but your spouse, but your kids. But one of the things they don’t talk about in the CFP program, I don’t know. It’s been 20 years since I’ve taken it right? So maybe they do it now, but they didn’t talk about it then I still don’t hear it talked about enough right now, which is the emotional decisions around money and how money used incorrectly can cause a lot of pain.

John Raleigh 02:54
There’s no doubt about it, people just don’t understand, well, I say people, you understand if you’ve saved money and you put money aside and you’ve built wealth, whether it’s through hard work, whether it’s through investing, whether whatever it is, you know that you you know how you got there, and you’re very protective of it. Unfortunately, if you’re not in that building process, you’re in the receiving process at some point in the future, it’s very difficult to understand how difficult it is, and it’s very difficult to understand the value of the amount of money that’s there and how difficult it is to replace it. We could go back to what do they save? Five years after somebody wins a lottery, most of the time they’re bankrupt. If you think about it, a big inheritance, or giving money to kids, it’s, it’s, can be sort of like winning a lottery.

Micah Shilanski 03:45
Now, in this is the all, not there’s the aspect of just an inheritance when you pass away, this could be giving it to it’s, while you’re alive. Could be spouses, right? Not all spouses are the same with how they handle money and going through things. And we have to remember that money is a tool, and in how we use that tool is gonna have a very big impact on the difference, right? It’s saying, okay, great. Well, you know, I have a hammer and I need a hole in order to put something in, I could use a hammer to create a hole. Okay, it’s probably not going to do a really great job. It’s going to get a hold on at the wall at the end of the day. But, you know, what, if I had a saw, or, you know, with something another tool, I could do a much better job getting it done. And that’s the same thing we talked about with money. People tend to think that money solves problems, money doesn’t, money amplifies issues. And so if you’re in a good state, and you’re in a good financial decisions, and you get money that you can understand – very key concept right there is understanding it – money is going to help in a lot of ways, if you cannot understand the money, now, all of a sudden, we’ve created this massive issue, and this has nothing to do with intellect either. This doesn’t matter how smart you I’ve seen extremely smart people, multiple PhDs, et cetera, be absolutely horrific with money. And I’ve seen very simple blue collar workers just be really disciplined about money and really create wealth. So these two things aren’t connected. It’s about discipline. It’s about habits and and money intelligence, or emotional intelligence around money, is what I would say, are really key components of this flow. What do you think about that John?

John Raleigh 05:17
I think totally. I mean, you brought you brought up a point of, I’m in Florida, so I’m in a mostly retired community, and when I came down to here, to Florida, there was the retirees, the professionals that service the retirees and the service industry. And that was it. There were very few families with, I mean, with kids and stuff. It was, it was a different place. And it was amazing. The people that had money or build something that retired down here were not the ones in flashy cars. They were not the ones that were throwing money around. I mean, there was a book even came out. I forget who wrote it, when the Millionaire Next Door, that’s what they were. And yet, they were retired CEOs of major, major corporations, depending on where it comes from, money can be extremely positive, and it can be a major deterrent. And unfortunately, the determinants are the ones that we ran into college. Everyone sell out.

Micah Shilanski 06:06
So let’s kind of talk about that, right? We’re talking about money and how it impacts things. Couplel of things come to mind, John, you brought up a great thing, if people don’t have experience with things that people that win the lottery, right? This is about, this is just like, in my opinion, reading a book about swimming, but never getting in the water. You can read all about what swimming is like, but until you jump in that water, and especially, I’m up in Alaska, the water is slightly reduced temperature from Florida. Florida waters, I would probably say, right? So when you jump into our nice, frigid Alaska waters, the first thing that happens is you lose your breath. It’s like you get you suck a bunch right in the gut, and all that air leaves. So you can read about that in a book all day long, a survival book, but until you actually do a polar plunge and jump in that water and feel what it’s like, you don’t know how your body’s going to react. You don’t know emotionally, what you’re going to do, regardless of what it says to do in the book. And that’s the same thing what happens with money. And my theory is this is why people who win the lottery or get massive inheritance go broke very quickly, is they almost think it’s this unlimited funds, and they don’t know what to do with it. Now, John, one more comment I’ll make that. I want to kick this back over to you with some questions. But one of the things that I think is, no matter how many parents I talk to, no matter where in the world they are, we all want a better position for our kids. We all want our kids to do better. None of us as parents would want to set our children up for failure. If our kids had addiction issues, right? We would not be supplying them with the issues for their addiction and making the problem worse and worse and worse. And so we all know that cognitively. But when it comes to money, I think we’re a little disconnected from that. Say, Hey, I know Johnny’s not really good with money. When I die, he’s gonna get the entire amount. Okay, great. How much is that? Million and a half, $2 million whatever that going on is the cape. You think Johnny’s gonna make good decisions with his $2 million Oh, my God, I’m dead and gone. So it really doesn’t matter. And then John, in your experience, when that happens, what happens to Johnny in those cases?

Micah Shilanski 07:55
One of the mistakes that I see as a financial advisor after federal employees go to retire is not understanding how it’s different. When you’re in accumulation mode, saving money for retirement, building your TSP to you’re in the distribution mode, pulling money out of the TSP, sometimes we think that we can manage everything the same. Then it comes to retirement, and we all of a sudden, we have this flood of different types of emotions. And it normally happens to people that generally aren’t emotional about investments, and if you are, it happens to you even more. So we put together a guide for you, a free guide in order to help know what questions you need to ask, know what learning lessons are out there, and how should you build a proper distribution plan with your TSP? This is so important, because how you got here in order to be able to retire is not how you’re going to stay retired. There are some differences that we need to keep in mind and more supporting. We have to come up with a plan that not if, when the market goes down for a long period of time, how do we say dispassionate investors? How do we hold for the long run, but have a plan that you won’t run out of money. In order to get your free guide, jump on our website at plan-your-federal-retirement.com/tspafterretirement. That’s plan your federal retirement.com/tspafterretirement. Take control of your retirement savings. Get this guide so you can make smarter decisions about your retirement. Untill then happy planning.

John Raleigh 09:22
That’s unfortunately, a very sad thing, because they don’t know how to manage it. They don’t know how hard it is to build it. So therefore, it’s easy to spend. I have seen numerous times someone will receive a million dollars, and they don’t think about going on spending $100,000 tomorrow. Why isn’t that a million dollars at the end of the next year? I mean, in other words, they don’t, they don’t understand how hard it was to get that money in and how to take that money out. It’s really sad, because whether it’s a parent trying to take care of a child, whether alive, where there’s some really good things parents can do that, you know, to help a child or even an adult child, but when they’re gone, unfortunately, yes, you’re not here, but a lot of times, you made decisions through your life, being the parent in how to handle the money, and it’s why you were successful, and that hasn’t been passed to the air, that hasn’t passed to the person that you handed the money to. I mean, like I think about, I’m sure in your career, I mean, you’ve run across where a parent has given somebody $10,000 and next thing you know, they need another $10,000 because it was waste.

Micah Shilanski 10:32
The money was actually gone, right? Then you have another kid to get 10,000 bucks to, and they just put it right in the bank. Again, that money, and they were both raised in the same household. And it’s very tough. It is very challenging with this. And I know from my own family circumstances, my oldest sister is kind of the black sheep of the family, and we have a lot of financial issues with her and working through this, right? So I understand the problems that I just see it as a sibling, not as my own child, right? But I do understand the issues, but we got to be really clear in making sure we’re not hurting them, and this is where it comes down to education. Now delayed conflict is amplified conflict, right? So if your point of view is saying, Hey, I’m not gonna worry a’ll be dead this is going to be somebody else’s problem, you’re just creating a bigger problem down the road. This is Micah’s opinion. I could be pissing off my entire audience, and that’s not my intent whatsoever. But John and I have these conversations with widows. We have this conversation with, you know, people that inherit money when we’re sitting on side of the table, and be like, Hey, this isn’t what Bob and Sue would have wanted, but this is what they’re doing with it. And so the reason we want to talk about this is share some of these issues and kind of talk about some solutions with that. So John, we can spend all day on this podcast, quite frankly, talking about things that have gone wrong. It’s different situations. Massive taxes had to be paid, millions of dollars being spent within a couple of years, someone else coming in, taking advantage of a spouse and blowing all of the money. Right? There’s a lot of things we can do, but instead of focus on the problems, let’s talk about some solutions. So what are some things that let’s say someone is built up a very nice nest egg, right? They really haven’t talked about money with their kids, and now, regardless of their age, their kids are adults now, but they’re a little bit concerned. It says, hey, if we give this money to them, what’s going to happen with it? What are some things we could do while they’re alive?

John Raleigh 12:17
First, I wanted to just jump back to complete, yeah, what you had said there that making a decision is important, but not making a decision is making a decision. If you decide to bury your head and say, Whatever happens, I’m not going to be here, you’ve made a decision, decision that it’s okay, whatever happens, that’s where it starts. And then, and then once, once you get past the point say, Okay, I want to do the best as I can for my kids. That’s when the decisions become processed and and it means maybe spending some time discussing money with them. And I know this is a hard thing to do. My grandparents generation never talked about money. My parents generation were very, very reserved about talking about money. Nowadays, because of the internet and everything, everybody talks about money and talks about it all the time, and there’s all sorts of crazy ideas that come up, but talking with your kids, helping them understand what $1 means, and what taking $1 or piece of that dollar out, how that affects it long term is really important, and you can say compounding money, investing, rates of return, all this other stuff. It doesn’t it doesn’t matter, because they’re not experiencing it. One of the solutions might be trying to maybe take baby steps with them before you’re gone, if it’s going to be a gift, or while they’re living, and sit there and say, Okay, I’m going to have you manage this sort of money and gift it to them and say, let’s see. Let’s see how you handle it.

Micah Shilanski 13:46
Oh, John, I love that. Now, one of the things that we always talk about it in my family is a prophet’s not known in his own place, right? So what does that mean? Parents don’t know anything to the kids. It gets to a certain point where the kids start to coming back to you and seeing that. So this is where I love outside authorities coming in and helping. So with our clients, I tell them to say, I’m happy to sit down with you, with your your son, your daughter, etc. We’ll go through things. Now. Funny thing is, I’m probably not going to tell them any brand new information that you don’t already know, but they’re going to hear it completely different, right? So that’s always a benefit. Another great one is Dave Ramsey. He has great information on just cash flow management, how to save money, how to go through things, right? So if you have a child who’s to spend the Rift, having them go through a Dave Ramsey program is probably a really good place to start, to start getting those that foundation of how to use money, etc. So I love that stranger in a uniform concept coming in, and then John pulling a little bit what you said, Let them experience something, right? So the first time that, you know, I want to go, you know, survival training. And do you know wilderness survival? And you know, if you get wet in Alaska, if you get cold, you know, I fly an airplane, God forbid there’s a water landing, right? I don’t want to practice that on a real airplane, upside down, landing into a lake and see if I can get out of the water, right? That’s not a good environment for me to set up for success. Well, that’s the same thing of taking a kid who’s not financially literate with money, and then giving them a mass inheritance at the same time, you’re crashing a plane to the lake, and you’re hoping they’re going to figure it out. Now, I’m going to break this down into baby steps, right? You’re gonna Okay, learn how to swim. Read about these other things. Take survival classes. You’ll get work with the Coast Guard. Actually, up here, the Coast Guard puts on a class about how upside down landing in pools. And it’s really great. They get you in this little aircraft. I don’t know what this has to do with money, but it’s a cool story. They get you this little aircraft, they put you up on, kind of the high dive, they flip it over, they crash it into the water, and then you’re strapped in. You got to learn, all right? How do you open the doors? How do you orient yourself? Right? What do you do? A blindfold, like all of these things. So God forbid, if that ever happens, you know what to do. And John, do you know, with the Coast Guard stuff, they do that training all the time, but they always start with the basics.

John Raleigh 15:52
And I was a civilian qualified to be on Coast Guard boats, coming from a non uniform side, the drilling did every time. I mean, when you left the dock sometime during any sort of mission we were on, unless it was the search and rescue, there’d be a man overboard drill, there’d be there’d be all engine fire, there’d be, I mean, in other words, and it’s announced, and you are, you are to follow a process to be able to take care of it right away. And it was done over and over and over, and it got to the point where it was so second nature, when something like that happened, you had it. You had it without, you know, without a problem.

Micah Shilanski 16:28
I love that.

John Raleigh 16:29
But we don’t do that with money. Micah.

Micah Shilanski 16:30
We don’t, and we should, right? I love that. Thought it should be so second nature, God forbid you gotta, you know, lump my money, or maybe it’s from a good reason, right? Not just an inheritance, right? There should be an initial default chain of action, of things that you should be thinking about, but where most people go to is they start spending the money before they have the check. And it’s a gross versus net conversation, right? How does it affect them? Financially? I’ve seen a lot of people upgrade vehicles, cars, houses, etc, and they boost up their monthly nut how much that month they need. Where now they were on track for retirement because of this inheritance, they’re now off track for retirement. Can you believe that? Someone was on track for retirement? They got an inheritance of hundreds of 1000s of dollars. In this case, it was just shy of a million bucks. They increased their standard of living so much because of that, they were off track for retirement. This is a real life thing. That’s fine right now. This is a real life case that that’s happened, and it’s because they didn’t understand this large sum of money. They didn’t have these default processes in mind that said, hey, when these things come in, this is exactly how I need to handle them. And then we could expand upon it more. We’ll get into this podcast. But how many marital issues are going to be caused by this as well, because husband and wives aren’t on the same page, and you have to work through these different set of problems.

John Raleigh 17:46
And wait till you hit the tax bill at the end of the time that you didn’t plan for, because any better.

Micah Shilanski 17:51
So we can look at these cases of survival things, saying, Okay, it’s really important. You could look at the man overboard drill, probably really important, right? I’ve never been man overboard on a boat, I would imagine, if I was, I’d really want that crew trained, and then had to get me back on board, you know, engine fire. Yeah, we could see the severity of this situation. And so we all think that makes sense. Oh, financial independence, making sure I don’t go broke in retirement. I got to move in with the kids, making sure I can pay for all my bills. That’s not really that important. I’ll deal with it later, when that comes up, right? And I’m going to say, and granted, more bias. This is what we do. But this is massively important to get the foundations correct. Not only you, but your kids need those as well, and that starts with you setting this up correctly for them.

John Raleigh 18:33
And making that decision to do that pretty point, no waiting. They’ll take care of it. Then when I’m not here, it doesn’t matter.

Micah Shilanski 18:37
Yeah, all right. Well, this podcast is all about action items. Again, it’s a little bit of a different than normal. I hope you guys enjoyed this. This is again, we wish to speak from experience, right? Not just great fun book knowledge, but actually experience and things we see working with federal voice every single day. And this is definitely one of those things. So it’s all about taking action Action set number one, share this podcast, send it out. That’s right. We’re goal is to help another 1 million federal employees with retirement, and we cannot do that without your help. John, what’s another action item our listeners should be thinking about this week?

John Raleigh 19:12
If you’re married, talk to your spouse. If you’re not married, confide in somebody to be able to try to figure out how to avoid the pitfalls that are out there. They’re like mountains, and if you don’t pay attention to them, they’re going to do it. So make sure you begin to put a process in place, or at least a sheet to follow for the drill of what needs to be done if something happens.

Micah Shilanski 19:36
That’s what I was going to say, is I want a simple one pager, right? In case of emergency, right? Something of this nature happens. What are we going to do? It’s always easier to talk about that before the event has taken place when there’s less emotions, not no, but not none, but less emotions on the table. To go through that action plan, and sometimes with my clients, and sometimes the conversations are a little tough, their action plan is simple as call Micah. That’s it. They said, You know, this is too much for us to handle. We’re going to call Micah. Actually have a couple of those calls this afternoon, of things that have came up, sudden changes in the client’s life. And they’re like, Hey, we just need to talk with you before we we’ve already mentally started spending this money. But before we do the rest of this, right? What steps do we need to take? And we’re going to sit there, just hand, hold them, walk them through these things. That doesn’t mean you got doesn’t mean you got to hire us, but you have to have a process for that to go through. So John, I love that action item. It’s fantastic. Perfect. Well, John, as always, thank you so much for joining us on the podcast to all of our listeners until next time, happy planning.