In today’s episode, you’ll learn more about:
- What most financial plans focus on and where they fall short
- How a real plan connects taxes, income, investments, healthcare, and estate planning
- Why spending and life transitions are critical to building a plan that actually works
- How a financial plan becomes a decision making tool, not just a report
- A real example of how planning helps navigate an unexpected life change
Listen Now:
The Smart Take:
Most people think a financial plan is a set of projections… a retirement number… or a long report that tells you whether you’re going to be okay.
In reality, many of those plans end up as 60–90 page documents that sit on a shelf and rarely get used.
But a real financial plan should do a lot more than that.
In this episode, we walk through what a financial plan should actually do, especially for pre-retirees and retirees making important decisions around retirement, taxes, income, and long term planning.
This episode gives you a clear framework for what a good financial plan should look like and how to tell if yours is actually doing its job.
At True Wealth, we focus on building financial plans that are designed to be used, helping clients make better decisions as life changes.
Go Inside the Episode:
0:00 – Intro
2:50 – Step 1: What Really Matters
4:45 – Step 2: Understanding Spending
6:04 – Step 3: Building the Plan
7:39 – What the Plan Allows You to Do
10:42 – Using the Plan in Real Life
13:25 – Final Thoughts
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The Hosts:
Kevin Kroskey, CFP®, MBA – About – Contact
Tyler Emrick, CFA®, CFP® – About – Contact
Episode Transcript:
Tyler Emrick:
Most people think of a financial plan as a set of projections. There may be a retirement number or a big report that tells you whether you’re going to be okay. And, in a lot of cases, that’s exactly what you get, a 60, 70, maybe a 90-page document that ends up sitting on a shelf. But a real financial plan should do a lot more than that.
Walter Storholt:
And that’s why, today, we’re going to talk about and walk you through what a real financial plan should actually do and why most plans fall short when it comes to helping you make real decisions. Welcome to Retire Smarter. I’m Walter Storholt, as always, joined by Tyler Emrick, Chartered Financial Analyst, Certified Financial, and one of the wealth advisors at True Wealth Design.
And it’s a great topic, Tyler, because we’ve talked previously about what it looks like to go through maybe an initial review meeting or even just to see if you’re a good fit to work with an advisor. But then we turn that page to the really important part of, like, “All right, we’re going to work together. Now, what’s that plan really look like?”
Tyler Emrick:
Oh, absolutely. And, I’ll tell you what, I mean, the spectrum of what an expectation of what a financial plan is, I mean, it is so broad. And you’ll get so many different answers depending on who you’re talking to and what it means to them, so, today, we just want to kind of look under the hood and tell you a little bit about what we think is very important in a financial plan and how you should be using it, and because I know most listeners have seen those big reports, if you’ve ever worked with a financial advisor. I mean, hey, my first ones early in the career was in a very… It was an actual binder, Walt.
Walter Storholt:
You had a binder. Okay. Nice.
Tyler Emrick:
And it had a thick… Yep. And it was a-
Walter Storholt:
With spirals?
Tyler Emrick:
It was handed. Yes, yes, big spirals. I remember cutting the holes in them to get them to fit into the actual binder itself. It was always such a pain.
Walter Storholt:
That’s probably hard for you to envision doing these days, right, cutting holes and going through all that.
Tyler Emrick:
Yes. No. Killing all the trees-
Walter Storholt:
Yes.
Tyler Emrick:
… for sure, but they were, they were the big, thick binders that had everything in there. But a lot of the families that I would talk to afterwards, some would certainly read it, but others, hey, they would get it. “Hey, this is nice and pretty,” and then it would kind of be sitting on the shelf. We don’t want those financial plans to be on the shelf, so kind of how should we be thinking about them is what the topic is of today for sure.
Walter Storholt:
Yeah. Well, I would imagine that the first thing we should think about is tying it right back into the discovery meeting, because we pretty clearly would go from that initial visit to see if we’re a good fit to work with one another. But that’s only a 20-ish-minute conversation, right, just to see if, like, “All right, do we want to move forward and look at the plan?” So I imagine that’s going to be a very natural flow and tie-in from that conversation.
Tyler Emrick:
Yeah, it is. Right? I mean, hey, we would have that 20-minute call. If things are a fit, hey, we come and we do that discovery meeting. My discovery meetings can be a bit longer than that, Walt, I mean, granted I try to keep them to an hour. Sometimes, we can get up to an hour and a half, but I promise you-
Walter Storholt:
I’m sure most people are okay with getting a little bit longer conversation. Yeah.
Tyler Emrick:
Yes. Yes. Yes. But, yeah, but then, once we’ve kind of decided, “Hey, this is a fit. Let’s work together,” now, we’re in like plan mode. Right? So the first step is really trying and understanding and clarifying, well, hey, what really matters, right, because a financial plan shouldn’t just be that report. It should be truly a decision-making tool. Right? It should connect your taxes, your income, your healthcare, your estate planning goals, all of that into some type of high level, thousand-foot view of, “Hey, where are you going? Where’s the family going? What are the big decision points that are in front of you?”
So that’s really the first step, Walt, is really clarifying, “Well, hey, what matters? What matters in your situation?” And this is some of the funnest conversations that I get to have because it’s different for everybody. But we definitely have the typical ones, right? “Hey, what really matters?” “Well, I want to retire. How do I get there?” As you could imagine, that’s a big one, Social Security, healthcare. “How do I support my family? Hey, I want to change my lifestyle in retirement. I want to travel a little bit more. Can I do that?” Right?
Having that conversation and that back-and-forth is invaluable as we start to get a framework for where you’re headed because, if we don’t know where you’re headed, how are we going to be able to plan for it? How are we going to be able to make decisions in the here and now that put you in a better position to accomplish those goals? So I think that, that conversation, we are not afraid to spend as much time as we need to to truly understand what’s in front of you, what’s important to you, and what are some of those big decision points. You can kind of think of it as a roadmap, right, Walt-
Walter Storholt:
Yeah.
Tyler Emrick:
… of, hey, what’s coming and when, and what do we need to be aware of, right? So it really does expand on that discovery meeting, fill in gaps and really kind of sharpens those priorities so, that way, we’ve got a framework to work under. Right?
Walter Storholt:
You talked about expectations versus reality. What about when it comes to the financial plan? We talked about it in the terms of the discovery meeting in that first conversation, what that looks and feels like versus the expectations. What about the plan itself?
Tyler Emrick:
Yeah. So, once we have that roadmap of what we see the future looking like, those big planning items, the next thing we normally want to kind of take inventory of is understanding your spending, and those spending, and how we expect that spending to change during a big transition, whether it’s retirement, a job change or something like that. So it doesn’t necessarily mean that we necessarily go in and get a budget, but it also doesn’t mean that I just kind of take your word for it either. Right?
I remember, earlier on in my career, a lot of my spending conversations were, like, “Hey, how much are you spending per month? Okay. Great. Let’s build a plan to keep that.” Right? But, in actuality, your spending is going to change quite a bit, or at least most family spending will change quite a bit over time, throughout retirement, throughout these different life transitions. So we got to make sure that we’re starting from good data. So we definitely want to take an inventory of kind of your lifestyle and spending expectations so, that way, we can understand, hey, what’s going to drive your income planning? What’s going to drive your tax planning? It might drive certainly healthcare decisions and all those good stuff, so we definitely take some time understanding that spending, and then we can kind of go in and build the plan.
Because we have a little bit of an idea, or really a great idea, of what your roadmap looks like in those life transitions, then we understand your spending. Now, we can start to make those projections, do that fancy Monte Carlos simulation and start to project out over a long, happy, healthy retirement and try to understand how your assets change, how your spending changes and kind of get down to that crux of, like, “Hey, are you moving in the right direction? And are you going to be able to accomplish what you’re wanting for?” Right?
So, once we have that plan, now we’re going to get to the fun part of being able to use that plan to make better decisions in the here and now, right, because, that plan, what it does, Walt, is it gives us a little bit of a framework for how your assets change over time. It gives us a framework for where you’re going to pull your money from over the course of your retirement. It gives us a bit of an understanding of how your tax situation changes over the course of retirement or a long 30-year horizon. So these are really important, key insights that we can then use to actually evaluate and provide more granular advice for you and really start to get down into where the true dollars-and-cents savings can happen and some of those other things helping you with some of those decisions. Right?
Walter Storholt:
Yeah. You can’t go through the testing and the experimentation and adjusting variables without the plan being there first. So it makes tons of sense.
Tyler Emrick:
Oh, absolutely. And, once we have it, that’s exactly what we’re going to do. One, we’re going to go in and say,” All right. Well, let’s test out this plan. We’ve got decisions we got to make. We got to understand when you want to take your Social Security.” Well, what if you take it early at 62? What if you wait ’til 70? How does that impact the plan results? Maybe you have a pension plan and you’re trying to decide, “Do I take it monthly? Do I take the lump sum?” Well, hey, we’ve got this plan built out. Let’s test it under both scenarios, see how the results change, see how it impacts your tax picture so, that way, we can kind of get down into some of those granular decisions, I mean, shoot, even healthcare decisions, Walt. We talk all the time about, once you’re on Medicare, you’re going to be on Medicare at 65. What if you need healthcare before age 65? Well, you might be on individual healthcare through the ACA. There’s tax subsidies and all these other quirks that kind of go into that, your withdrawal strategies.
All these things, when we have that plan built, we can go in and test them, evaluate trade-offs, communicate those trade-offs to you and help you kind of get down to a decision that kind of works for you and your family. Right? And another thing that I think is often misunderstood or looked at, but that plan, things are going to change. We might need to stress test that plan for certain bad-case scenarios. Right?
Walter Storholt:
Not everything is-
Tyler Emrick:
One of the big-
Walter Storholt:
… going to be rosy. Right.
Tyler Emrick:
You got it. Right? I mean, the big one would be testing against like a great financial crisis for like 2008, right, the housing market bubble. Well, what happens if we go through something like that again? How much would we expect your investments to go down? Are you okay with that? Well, you’re probably never okay seeing your accounts go down. But what emotionally does that bring? How does that impact the plan? Can you afford to lose a half a million dollars of your investments and still have that plan kind of go and be okay so we can use that to really develop that investment strategy and how much risk that we want to take on.
Another big one would be long-term care. It comes up quite a bit, whether you’ve had a family member go through it or you just know how expensive that it costs can be. We can stress test the portfolio against that and try to kind of say, “Hey, what would happen if you or your spouse were to need a long-term care need?” How does the plan look? How would we alleviate that concern if the results don’t look as good as what we want to? What happens when that diagnosis comes and maybe you’re heading into a long-term care facility, and that Medicaid crisis planning kind of comes into play?
So all these things stem from that financial plan. Whether it’s making those decisions, stress testing the plan, it’s really going to give you clarity on these outcomes and give you the confidence to kind of make whatever decision that you have in front of you, and that you’re doing it through the lens of your whole financial picture not just, “Hey, should I take Social Security now or wait?” Right? Or, “Hey, I got this tax issue that I need to work through,” or, “healthcare.” Like it all is integrated as we kind of talk about so much here on the podcast and on the YouTube channel, so I kind of think back.
Like one of the… A perfect example is a situation that I’ve just went through within the last handful of months with a family where the spouse was working, loved her job, but planned to work a few more years, and then, all of a sudden, things changed at work. And those changes really created a lot of stress, a lot of, “Hey, I don’t know if I want to do this anymore.” Right? So her first email was, “Hey, can I retire? Can I stop working? How much do I got to make if I stop working? I don’t know how much longer I can do this.” Right?
So, when we have that plan built in, they just came in, and what we did, Walt, is we just ran through all those what-if scenarios that she was thinking through in her mind to try to help her gain the confidence on, “Well, what decisions do I need to make, and can I do this?” Right? So we tested, “Hey, well, what if you didn’t work anymore? What does that do to how much you can spend in retirement? How much is left in the estate? What are some of the key drivers if you wanted to go now from a healthcare standpoint?”
All that stuff came up, but we’re able to kind of test it in real time, show those results, communicate them clearly and then kind of run through, “Well, hey, what if you took another job and you made this much?” Right? And it really, after an hour, hour-and-a-half-long of running through that, you could almost see the stress lifted off her shoulders on just, “Hey. Like, all right, I think I have the information now to be able to make a decision on do I continue working, do I not?”
And this is a very real life scenario where all that hard work… I mean, I’ve been working with that family for a number of years. All the plan updates, all the conversations of understanding their goals and their spending and what they’re trying to accomplish all came to a head to help drive that one conversation. Right? If you don’t have someone that understands your situation like that, it becomes difficult, Walt, to go in and like how do I-
Walter Storholt:
Yeah.
Tyler Emrick:
“How do you quantify that?” “You’re starting from square one.” “What?” “I got to build a whole plan. We got to understand what’s important to you.” But, when you have that in place and you’re consistently tweaking it and updating it, when life throws these curveballs, you’re just able to kind of go in and really acclimate to them much, much more quickly.
Speaker 3:
What would your life look like if you designed it around your true wealth? It’s a powerful question and one that True Wealth Design helps individuals, families and business owners answer every day. With a fully integrated approach to financial planning, tax strategy, investments and business advisory, their team can bring clarity and confidence to every part of your financial life. Take the first step toward a stronger financial future with a no-cost, no-obligation discovery meeting. Just click the link in today’s show description to get started.
Walter Storholt:
Yeah, so you’re not coming in and, now, going through the planning process and walking out with that binder, a bunch of documents, and there’s going to be some looks-under-the-hood, it sounds like. There’s going to be some numbers going on here, but still much like the discovery call. You’re still hitting on a lot of the softer side of planning through this stress testing, through looking at the numbers. It’s still more so answering these softer questions, if that makes sense.
Tyler Emrick:
Oh, absolutely. And you’re still going to get a 90-page plan from us, too. But you’re also going to get a summary of that plan and a much smaller document that has your more granular recommendations and things on it to synthesize it. And also, too, from time to time, you’re going to see us reach into that plan to help you make key decisions such as the family we just talked about. Right? “Hey, I got a curveball. I can’t work anymore. I don’t want to work here anymore. How does that impact it?”
We see it quite a bit with investments, too. We’ve seen quite a bit of market volatility here at the beginning of the year. Last year, there was the tariff talks back in April where we had a lot of volatility. These are the times when you really lean on that plan. You can go back to it. You can use that data, bring it back and run whatever test that you want, talk through it and help understand or gain an understanding of how it impacts your situation so, that way, you can make whatever decision is best for you and your family at that time.
Walter Storholt:
Well said, Tyler. It’s a great look under the hood at the planning process at True Wealth Design, although I know we’ve only scratched really the surface of all that goes into it. But it’s a great way to kind of look at what that first real visit looks like beyond kind of the initial appointment, the first true planning meeting that you then have, and what that plan starts to look like as it gets developed and the questions that it answers. Really, really helpful.
If you’ve not gone through this kind of planning before and would like to engage with Tyler and the team at True Wealth Design, it’s very easy to do that. You can set up that 20-minute discovery call that sometimes goes a little longer. Probably, when it’s going well and when you are a good fit, I would imagine the distance on that meeting tends to extend a little bit, so that’s okay. But it’s an initial discovery meeting with the team. You can schedule it very easily. Click the link in the description of today’s show to find that and schedule directly from wherever you are. You can meet in-person in Northeast Ohio or from wherever you are in the US. It’s very easy to reach out and set up a remote meeting as well.
And you can find all the information, past episodes, lots of great resources and book that meeting as well at truewealthdesign.com. Just look for the “Let’s Talk” button and you can get to the same place that we’ve been describing.
Tyler, thank you so much for the help today. Good luck at this planning process. And we’ll talk again soon.
Tyler Emrick:
Absolutely.
Walter Storholt:
All right. Take care.
That’s Tyler Emrick. we’ll see you next time on Retire Smarter.
Speaker 4:
Information provided is for informational purposes only and does not constitute investment tax or legal advice. Information is obtained from sources that are deemed to be reliable, but their accurateness and completeness cannot be guaranteed. All performance reference is historical and not an indication of future results. Benchmark indices are hypothetical and do not include any investment fees.