​The Wrong Advisors?

By Brad Thomason, CPA
 
 
People who are interested in pulling off a successful retirement often end up considering an awful lot of information over the course of the preparation phase.  In general, I think this is a good thing.  That said, if there aren’t some constraints on the openness to input, a number of problems, running the range from simple overload to damaging misinformation, can crop up.
 
So who should you be listening too?
 
Should you be interested in what billionaires have to say about managing your money?  Should you seek wisdom and counsel from someone who is younger than you that has already retired?
 
Maybe.  But maybe not.
 
I’ll pick on the early retirement guru first, not only because it’s pretty easy, but also because I realize a need to exercise a bit of caution insinuating that a billionaire isn’t a content expert on the topic of money.
 
If a guy who is forty-five wants you to watch his video about how he retired successfully at the age of thirty, you can save yourself the trouble.  Why?  Because at forty-five there’s no way that he could possibly know if his retirement is a successful one.
 
The true tests of a retirement plan come when you are in your nineties, after you have already lived without work income for many years, and after (to be blunt) you have already passed the life expectancy for your peer group.    
 
No forty-five year old has ever experienced anything like that.  As such, there is no basis for a declaration that the retirement was a success.  It’s like looking at the scoreboard at the end of the second inning.  They can say they successfully paid all the bills for the last fifteen years without having to have a job.  But those two claims are not the same.  Not even close.
 
Moreover, if you actually listen to most of these guys, they will soon start talking about their “side hustles.”
 
Folks, a ‘side hustle’ in Millennial-speak for, “I started a small business.”  Probably, “I started a small business, which is actually not that successful, but since I live really frugally, the little bit of money it does produce helps to delay the rate at which I’m depleting my other resources.”
 
In other words, they aren’t even actually retired, in the first place.
 
I think I can leave it right there.
 
As for the billionaires, I’m not sure they are your best candidate for advisor either.  But for a totally different reason.
 
I am prepared to stipulate, a priori and absent any other actual proof, that anyone who is a billionaire necessarily knows something about money and how to make it.
 
But a much more subtle point is the reason I would potentially discount what they have to say when the topic is how to manage money during retirement.
 
Most people, no matter what they manage to save, are probably going to get to the point where they have to start liquidating assets in retirement to keep the bills paid.  For something like 98% of the population, maybe more, that will be the case if they live long enough.  The longer a person lives, the more likely this becomes.
 
Billionaires are not in that boat, though.  If you are a billionaire, all other things being equal, it is likely that you can pay the bills from each year’s investment wins for far more years (decades.  centuries?) than a normal human life span.  But, still being human, you are susceptible to the same blind spot that we all are: assuming that everyone else is living in the same version of the world that you are.
 
When the odds of running out of money are nonexistent, then things like investment risk are sort of academic.  But in real life, for most people, being too aggressive can and has lead to severe financial damage and unmeasured heartache and regret.  Some people can afford the risks of pursuing maximized returns.  Most can’t.
 
I will stop short of saying ignore the billionaires.  But do keep in mind that one of the most significant financial events that most retirees encounter – the moment where you have to start spending down the principal – is likely not even on the billionaire’s radar screen.    
 
Real retirement stories don’t exist in the realm of the energetic middle-aged, nor in the land of bottomless riches.  As such, be thoughtful about how much guidance from those glamorous lands that you invite into your reality.