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Episode #604 - Elder Care Options for Singles

Words like contentment and gratitude seem trite nowadays, but is there more to them?

Roger: Well, hey there. Welcome to the show dedicated to helping you not just survive retirement, but to have the confidence to lean in and rock it because you're focused on the right things.

Today on the show, we are going to start exploring elder care with an expert in the area, which is a really important topic as we age, for sure, but also for those that are single and retiring on their own and the resources that they need to have available. So we're going to start exploring that part with Kathy McNair, an expert in the area. In addition, we're going to answer some of your questions related to asset allocation, based on our great chat with Charles Ellis a few months ago. And I think we have an NUA question thrown in there to boot.

Now let's talk about gratitude and contentment. They feel trite nowadays. Gratitude. Just be thankful for what you have. You can't be sad if you're thankful. All of these things are true, but when we hear them over and over, they just get a little trite. They sort of lose their meaning.

I was in a client meeting the other day and connected a dot. That was a big aha moment for me. I wanted to share that here. So over the last year or so, as we've expanded the team at Agile Retirement Management, I have Troy in our meetings, who is an amazing planner. I don't know if he's been on the show yet, but Troy conducts the core part of the meeting and that allows me to be an active listener and interrupt to interject a question or thought. Being an active listener in a meeting, for us anyway, has been a game changer because when you have more than one person in a meeting, you have the ability to notice things that might just fly by if you're the one conducting it. We were talking with this particular client, wonderful couple we've worked with for six, seven years now. They are, and have always been just naturally at ease, content, and they've always been grateful. And I commented on that to them. Then Troy's conducting the meeting and I started to just think about it. I was listening, I guess maybe I was distracted, but I was thinking about it. But it reminded me a little bit of, like when you exercise. Like I mountain bike and when I hike. I don't listen to music. I am just present in my environment and oftentimes I'll see people go by and sometimes they're blaring their music without earphones and are listening to music or have something in their ear. I wondered if that's very similar to how we lead life. Many of us, or, you know, whether it's news or social media or the radio or podcast, always have something coming into our head. I'm wondering if being grateful and content with life gives us the space because we're not distracted by all these inputs to lean into each other, into experiences and pouring into people. It gives that space mentally to be able to focus on things that are more important. Whereas someone that isn't as grateful or, or content is always searching, reading of an article, always feel like they're missing out or they're not enough, etc. So all that noise clutters their head. That doesn't allow them to focus on the people they love or experiences and other things. So I'm wondering if really being content and grateful are the means to creating the space to think about creating a great life and focusing on other people. You may think that's total bs, I don't know. It's a Roger wisdom. It was dot I connected and it was really impactful for me, so I wanted to share it with you. With that said, let's move on to the show first, starting off with a Rockin’ Retirement in the wild.

ROCKIN RETIREMENT IN THE WILD

So in the Rockin’ Retirement in the wild section, we want to hear from you and what you're taking action on to create a great life. This one comes from Roger, and I'm blessed to have been part of this journey. So it's nice to see an independent email, where I know the person with them, explaining some things that they're doing to really rock retirement.

Roger says,

“Kimberly and I are embracing retirement as we an opportunity to live fully, give back and, and reconnect with things that matter most. After decades of demanding careers, we're now focused on what brings us joy, travel, spending quality time with our friends and family, leaning into our passions. Kim continues to work part time as a realtor, while we've shifted gears into volunteer service, home projects, hobbies I once set aside for my career, like amateur radio, flying, and restoring vintage electronics. I'm also pursuing an accreditation to help fellow veterans navigate the VA system. I can imagine that's needed, something I feel deeply called to do. Most of all, we're building a retirement life that's intentional, active and meaningful on our own terms. We've named our home Into the Mystic and that says it all.”

Well, huzzah. I love that. That's great. Into the Mystic. Jim Morrison song, I believe with some double meanings of just leaning into life, I assume. Bravo to the two of you. Knowing you as I do, I am impressed by your intentionality. So keep it up.

With that said, let's get on to our main segment on elder care.

INTERVIEW WITH KATHY MCNAIR

Elder care is the specialty area in law and we're going to talk about it in detail with our guests. But it is also of special importance for those of you that are retiring solo. Today we're going to bring on Cathy McNair, who has been a practicing elder attorney for over 20 years. She's a graduate from Boston College of Law, earned her bachelor’s degree in psychology from St. Lawrence after graduating from law school, has served as an attorney for the Greater Boston ARC in the Guardianship program, and is founder of senior solutions info.com which is her law firm.

What I love about Kathy, because she was someone that I met inadvertently. She is on a second mountain type of journey to help organize resources in this area for solos. This has been a gap, it still is a gap of resources of as I grow older, as a solo, who's going to be my executor, who is going to help make decisions if I don't have family or close enough friends to rely on? She has put together a passion project, soloallies.com because this is something that's important to her and she's not one of those people that's naturally on the podcast circuit or trying to be a quote unquote influencer. Oh, I hate that term. She is just passionate about this because she's done this for over 20 years in her practice and now is trying to coalesce resources to help individuals that are retiring solo. So, let's have a chat with Cathy to get a survey of the topic of elder law.

All right, Kathy, it's great to have you here with us. Now, you specialize in elder law. Give me a little bit about your background, how long you've been doing this, and what exactly is elder law? Sure.

Kathy: So, elder law is a certain type of law where we're kind of focused on issues that impact people who are probably about 60 years old and older, but especially usually in an estate planning context. So, from one standpoint, it would be, you know, making sure people have legal documents in place they need to plan for their future, like wills or healthcare proxies, trusts, power of attorneys, things like that. But it can encompass planning for long term care and, and other, aspects to really just prepare for the future and make sure that people are ready. Then there sometimes crisis does arise where people didn't prepare for the future that I will get involved and help out with too. So I've been doing this for 25 years and I've really enjoyed every minute of it. I love working with my clients. I feel like they teach me a lot and hopefully I help them as well.

Roger: So how is this different than just an estate planner?

Kathy: So an elder law attorney would be more focused on thinking about issues that can arise as somebody gets older. Like one big issue is the expensive cost of long term care, and sometimes we think about ways where we can protect assets in that situation. We also want to make sure that our clients have fiduciary in place in case they can't take care of their own bills anymore, if they ever have a crisis and they are in a situation where they're just not able to take care of things, who is going to be able to do that for them and also thinking about how they're going to leave their legacy at that end of their life. So things like that. We also get involved with cases that involve guardianship or conservatorships for people who fail to plan and the court needs to get involved.

Roger: Now what are the differences between those two terms?

Kathy: So, a guardianship, if you have somebody who did not have a healthcare proxy or a healthcare directive in place and they have a medical emergency and they can't communicate their wishes, then it's important to have a document designating somebody to make those decisions. If they don't have that, then the court needs to get involved and the court needs to pick somebody to make those decisions for you. That person is called a guardian. The conservatorship is fairly similar, but that has to do with control of your finances. So if you are in a situation where something happens, you can't pay your bills anymore and you didn't have a power of attorney document in place designating somebody in advance, then the court will appoint somebody to do that for you. That term is a conservatorship. Okay, so those are some of the cases that we deal with.

Roger: I was talking with my son about this stuff recently. He's an ICU nurse and he is a becoming very familiar with these things. It's very acute to him when those documents aren't prepared and things haven't been communicated because he's dealing a lot with end of life and families and conflicts in terms of extraordinary efforts. Et cetera. So it's an important thing to have in place.

One question I have for you, and this actually just came up the other day, Kathy. I was speaking with a client that actually lives in Boston, so maybe I'll connect you. I'm guessing you've dealt with this more and more.

They're dealing with a situation like this with their mother. Their mother is 89 and in her home and is having issues cognitively, but nothing is diagnosed. That generation, like a lot of generations, loves their house, but it's becoming unsafe and unfeasible for her to stay their alone. Her daughter and her siblings have been essentially putting their fingers in the dike to make sure that she is safe. They worry about the stove being on, etc. They're struggling with how to even approach this. They don't have the diagnosis. They think she would be better in a place that had the facilities and the care, but they don't even know how to approach that.

Kathy: Right. A tricky spot because I'm sure they care about her and they want the best for her. Sometimes as people get older, they have a hard time recognizing that they might need more help or they need to rely on people, and that's so hard to navigate.

Roger: There's pride involved and there's. Cognitively, they can't. Yeah.

Kathy: I know I've worked with so many clients who, you know, they're just super strong, independent people. Like, one of my clients was like, a sheriff. You know, it's so hard for the sheriff to start realizing he needs help from his kids more. so those cases can be really hard.

I would say probably the best thing you could do is just start with a conversation with your parents or the person you care about and let them know that you just love them, you want the best for them. They should make sure that they have certain documents in place because, you know, life is uncertain, and without these documents, then the court will need to get involved, and it will just be difficult for everybody. So, if they could have the documents in place and also try to get organized or accept help, you know, if the kids could offer, mom, can I help you get organized? You know, can we sit down and go over your bills? Or can we see what's happening? Or, you know, can we go to lunch someday at this retirement community where I think people are actually surprised when they see how nice some of these retirement communities are. I mean, I know I'm super impressed by them, and I'd be happy to go to one. You know, it seems so nice.

Roger: Well, and some of that is, I think, stereotypes of old folks home or assisted living and then the words that are, that describe those make you feel like you're, you know, they're intimidating. Like you're right. Many of them are very nice.

Kathy: So, I mean, I think just to try to approach it from a place of, you know, love and concern and just. But if it gets to a point and this happens, where sometimes people just can't accept, can't ever realize that they do need help in a situation like that, if somebody is really putting themselves in a spot where they're not taking care of themselves or it becomes dangerous and they don't have the legal documents in place, then it might involve a guardian or guardianship situation.

Roger: Yeah, my, my counsel to them not being an expert in this area because they were already worried about functions like you need to really lean into your doctor to let them make a judgment and then start to have conversations with an elder attorney.

Kathy: Yes. that's actually really good. We basically will say the same thing in our office. Sometimes we get calls from children who will say, oh, my mother wants to create a power of attorney. Right away there's red flags going off in our head. You know, like, your mother wants to create the power of attorney, but your mother's not calling me, you're calling me. So, I mean, in a case like that, if there's any question of cognitive ability or the ability to understand, we will usually ask for a letter from the doctor to confirm that somebody does have capacity. I actually had somebody come in where they had the letter from the doctor, but it was clear to me that there was no capacity at all, so I wasn't able to take the case. I mean, hopefully any attorney would always try to make sure that the client has the proper capacity before them.

Roger: If they don't have the capacity to sign the document, you actually have to have the court step in, because that's getting behind the curve of getting these things in place.

Kathy: Exactly. I know throughout my career, I've. There's been plenty of cases that have come into our office where we didn't draft the documents, but maybe another attorney did where there is one bad kid out there, you know, out of the children. There's sort of like the troublemaker child who's trying to leave everything to themselves and leave out the other siblings or family members. And, and those situations are really bad and they take care of, they take advantage of, like their mother who, you know, doesn't really understand what's going on, and ask her to sign all kinds of papers.

Roger: So, let me ask. I've dealt with those situations, so I can totally relate to that. Let me ask you this. So it sounds like, is a power of attorney enough or is it this. Not guardian. What'd you call it? Conservator.

Kathy: Conservatorship.

Roger: Conservatorship. Is that different than a power of attorney?

Kathy: It is different from a power of attorney. So as long as somebody is cognitively aware and capable, a power of attorney is the way to go because it's simple and straightforward and it makes sense. The conservatorship really only comes into play for somebody who doesn't have that capacity. Or if the person who's appointed is the power of attorney, starts doing things that are questionable, then the people who are concerned can bring an action in the court to have the power of attorney removed and have the conservator appointed. So generally a power of attorney is enough.

The most important thing about that power of attorney is you've got to trust the person you choose because you're basically giving them full authority to access your bank accounts. It can be a license to steal in the wrong hands. So if there's any question about whether you can trust that person, you should not choose them.

Roger: Doesn't a power of attorney endure even when the person granting it is cognitively not capable anymore?

Kathy: Yes. So power of attorney, there's a certain term that's used, durable power of attorney. Almost every power of attorney that somebody would sign should be durable. So which means it continues on even when person becomes incapacitated. The whole intention of the power of attorney is that the person that you're choosing and giving the authority to help you wouldn't use that authority until you couldn't do it yourself. I mean, I think in the best case scenario there might be almost like a transition period where if somebody knew they were declining, like, unfortunately, if they got like a diagnosis of dementia or something, they would start to bring on the person that they've chosen to be their power of attorney to start helping them. and, and sort of have like a transition period. Like, oh, you know, this is the income I get these. These are my assets. This is my financial advisor. I want to introduce you to the people that are important here. These are the bills that I typically get, you know, just to kind of almost train them. But I'd say that's an ideal situation.

The more likely situation might be that somebody has some sort of event or crisis that just happens, and they might go from being able to take care of things for themselves to just not. I think one of the key things you can do to plan and prepare for that is just to get as organized as you can right now and to make things easy to find. I have a website. It's called soloallies.com and I have a free organizer on that website that you can download that has, you know, everything that you would need to gather and get together. You don't have to have passwords in there or specific account numbers, but just to lay out at least where your assets are. If you have multiple bank accounts or if you have life insurance. I feel like life insurance is one of those things that people probably don't realize they even have or, you know, if you come on as power of attorney, it's hard to know about that life insurance policy. So just get as organized as you can.

Roger: And we'll have links to that. So give me the website again. We'll have a link to this in our weekly noodle email but give me the link.

Kathy: Okay, sure. So it's soloallies.com.

Roger: This is separate from your law practice. Why did you start that?

Kathy: In my law practice, I recently celebrated my 25th anniversary, and I was kind of just thinking about, you know what some of the most meaningful work that I've done during my time as a lawyer. I really have this theme of there are a lot of people out there, as they get older, who don't have anybody that they can really count on. I've been involved in those cases in different ways. I've been appointed by the court to help some of those people. I've had a lot of them, come to me and ask for help, too. I just wanted to create a resource, especially for the people who are aging and don't have a close family to count on. I think that there's some special considerations I need to think about. I wrote a book and I created a website because I just don't think there’s a whole lot of resources out there.

Roger: There are not many.

Kathy: No. I think it's tough if you are single and you're getting older and maybe you don't have kids to rely on.

Roger: That power, durable power of attorney if you don't have a built in.

Kathy: I just felt like it was a good time for me to try to do something to something different and something to help a population that I just think is, doesn't have a lot of resources.

Roger: We have these conversations all the time. We have a number of clients that are in this situation, never married, no children, a lot of family either not close or not there in those situations. That, and that was like the impetus for this discussion. We're going to have you in the club to talk to solos because I think how do you solve this? Who is my power? How do I find a durable power of attorney or a trustee if I don't have someone naturally built in?

Kathy: I'd say the first stop is that you want to talk to an attorney about it. I would recommend an elder law attorney because those are the attorneys that are trained in that field, trained to help older people and are most likely to be able to help you. Like, I'm a member of the National Academy of Elder Law Attorneys and almost any attorney that, that would be involved with that organization would probably be able to point you to some resources in your area. Some lawyers will serve as power of attorney and I have served as power of attorney for some of my clients. There's a category called a daily money manager, some of those people will serve as power of attorney. But you really want to check out person that you choose. You want to make sure that they have some sort of license, you know, like an attorney. We have a license to practice law for each state and in Massachusetts we have the board of our overseers that's sort of making sure that we don't do anything wrong. There is a way to go and check and see if there's any record of public discipline. These things are really, really trusting somebody with a lot. I think you just have to be so careful, especially in the world we live in where there's constant scams.

Roger: But I, I think that is the hard part of it, right? Because whether it's an advisor that's regulated or an attorney that's regulated, there are plenty of nefarious people, there are plenty of incompetent people, and there are plenty of people that are just in the middle somewhere. Not bad, not good. How do you even. I mean, are there any checks and balances for it to appoint an attorney as a durable power of attorney, et cetera?

Kathy: I think for seniors who are aging without close family to rely on, the key is you want to start building your team immediately.

As far as checks and balances go, like, the financial advisor on the team and the attorney's on the team, and maybe you have a social worker on the team and to have a meeting with the people on your team at least once a year while you're still healthy and capable and able to do things but bring everybody in on that team. There are ways through legal documents to kind of add in checks and balances. if you have a trust, which is a tool that attorneys will often use, there’s a role called a trust protector. So you can, you could have somebody named on there who could ask to see an account or see what's going on with the bank statements, and maybe that's even just a friend. I think in general, appointing a friend as your power of attorney is a whole lot to ask and maybe too much to ask of somebody, especially if they're the same age as you and that they might just get overwhelmed. But like, say, for example, you did name a professional as your power of attorney, like a lawyer, you can name a trust protector who could be your friend or your financial advisor could be the trust protector too. But just to have a second set of eyes who could ask, oh, you know, can we see the account? Can we see what's going on?

Roger: Yeah, I think that's, that's a great structure. The one issue with friends I have seen and even family as trustees or in the role that you're talking about is they're emotionally involved in the life of the person. Especially for a trustee, you want somebody that is following the trust document and they, they are caring but dispassionate to an extent, right?

Kathy: I think so. Also it helps to have somebody who kind of knows what they need to do. I mean, there's so many considerations. There's tax, like income tax considerations, and you can hire an accountant but even then, that’s a lot of complicated stuff.

So a power of attorney and a trust, they can almost have two different roles. If you have a trust, and this gets fairly complicated. The trust really only controls assets that are in the name of that trust that you have actually changed the title of the account into the name of that trust. Whoever the trustee is, they have the power to deal with the assets in the name of the trust. But sometimes what will happen is people will go to meet with a lawyer to do their estate planning documents and they'll create a trust and they'll never change the title of their assets into the name of the trust. Then the trust doesn't really control those assets, usually until you die. Then your will usually leaves everything to the trust, but the power of attorney, that person is the only one able to handle assets that are in your name alone. So I mean, I have been involved in cases where one person was the trustee and one person was the power of attorney, and they're two different people. But in a way, that could be a system for checks and balances too.

Roger: So, it sounds like whether you're solo or you're not, but you want to prepare for when you're not going to have, you want to be protected when you're not going to have the ability to advocate for yourself. The number one step is to start building your team earlier. You know, it's always better to plant a tree as early as you can. Then it's helpful to have some checks and balances. Like if you're solo, an attorney, there are attorneys that will act as durable power of attorneys. There is a service, there are services that will pay bills, but have some checks and balances. And it Sounds like soloallies.com is your attempt and your work to help to organize some resources. Because literally, even I don't know where to go because I don't have attorneys in my network that do this stuff.

Kathy: Absolutely. That's exactly what it is. I'm just trying to gather resources in one spot and you know, hopefully as time goes on, there will be more resources and more options. I mean, right now, as far as power of attorney goes or fiduciary, you know, there's some like, actually like trust companies, but they, they actually usually want to deal with like a lot of money. Right?

Roger: Yeah.

Kathy: Like the people, the banks that will be trustees, they're used to dealing with a lot of money. So for just somebody who's doesn't have a whole lot of money, it can get tricky finding somebody to help you. I feel like for somebody with a more moderate estate, an attorney or the other category would be like a daily money manager. I think they probably would be the most reasonable. I do have some of those resources on my website. There are certain states, California, Arizona and Oregon, they actually have like a regulated license fiduciary job.

Roger: Okay.

Kathy: But where you have to like, go through certain training and you get certified by the state in order to be in one of those roles. In a state like that, you actually have to have a license, which I actually think that's great. I would like to see that happen everywhere.

Roger: My guess, this is a big gap that that is trying to fill and that you're trying to fill. I appreciate your service on this and am excited to hang out with some singles in the club to talk about this topic because I know it's really important to them. They don't know how to solve it.

Kathy: I see that all the time as people will come to me. The hardest role to solve sometimes is the healthcare proxy role, because if you don't have a close family member or friend, it's very hard to hire somebody to be in that role because you're basically asking them to be your emergency contact and you're asking them to be available if and when anything happens to you, which nobody really knows when that could be.

I know I have served as healthcare proxy for some of my clients and I'm willing to do it in certain cases, but I feel like I can't take on too many of those cases either because it's hard. You know, I'm only human. I go on vacation or me, you know, I go to sleep at night. You know, it's hard for me to be available 24 7, but. But I do try to put a system in place where, you know, in our office we have, we have other attorneys, we have a staff. So if I go on vacation, I try to have somebody there to back me up. But I think it's hard. Most attorneys would never want to be healthcare proxy for somebody. They won't do it.

Roger: That's a big responsibility.

Kathy: There's another category of people called geriatric care managers who, you know, help people navigate issues as they get older, like if they need more care or where they should live. But they tend to not want to be healthcare proxy either. So it's, that can be a reality, that's the hardest role to find. I'm hoping there's more options out there for people soon because right now it's just tough.

Roger: Yeah. Thank you so much, Kathy.

Kathy: Oh, thank you.

LISTENER QUESTIONS

Roger: Now it's time to answer some of your questions.

If you have a question for the show, go to askroger.me and you can type or record a question and we'll do our best to help you on the show.

We had a couple questions related to our interview with Charles Ellis a few months ago. amazing man, legendary investor and thinker when it comes to investing, author of Winning the Losers Game as well as many other books. We'll have a link to that interview in our noodle email. But there are some questions that came out of that discussion.

JOE HAS A QUESTION ABOUT THE CHARLES ELLIS INTERVIEW

The first one is from Joe, and Joe says,

“Charles Ellis stated that he does not own any bonds, but does have what he describes as bond equivalents, like cash or the equity in his house or Social Security he would put into that category. The last five years of work and first five years of retirement can be really tricky if there's a sequence of returns and the market downturn hammers your portfolio while you're drawing money to pay for your life. Very few retirees have a pension now and many early retirees are starting to draw assets before they have Social Security or pensions turn on.

I can see his point in his personal situation of being heavy in equities with his age, Social Security, wife's income, etc. But what about the rest of us in this red zone of early retirement?”

Joe asks for some further explanation of his answer as it relates to, well, him and people more on the early stage of retirement.

From my discussion with Charles Ellis, my impression was Joe that he always had pretty much all equity. He was very barbelled, he had some cash and he looked at his assets differently. But he was pretty much 100% equity with the most of it. That was what I understood from his comments. That works for him for a variety of reasons that we likely don't have clarity into and you hit the nail on the head.

Well, when we hear how someone does their retirement plan, it can help inform our thinking. When we hear someone explain how you should do your retirement plan, that can be helpful. But none of these are ever prescriptive because every situation is different and that's why process is, I think Joe, so important because a process will help you create a bespoke plan for your specific situation in an organized way, rather than say, here's a cookie cutter, one size fits all.

So what are some of the areas where everybody is different? Well, number one is in the amount of social capital we have, which is our Social Security, perhaps a spousal security pension payments that we're going to be receiving, whether those pensions are index based or excuse me, inflation adjusted or not, annuity income that we receive, everybody is going to have a different number for their Social Security or social capital payments, those guaranteed payments.

Second, everybody is going to have a different amount of money, the amount of financial capital they have, which is going to dictate how they allocate their assets. If you are Mark Zuckerberg or someone worth a gazillion dollars, even into the 10, 20, 30 million dollar range, maybe you could have all equities because you have so much excess money that even a market downturn is not going to change the feasibility of your plan. So everybody's going to have a different amount of money and that is going to influence how much they have in equities and how much safety they want to have to protect against say markets going down. So that's going to be different for everybody.

Age is going to be different and you hit that on the head. Charles Ellis, if I recall, was 87, you know, his time horizon is much shorter. Perhaps he is investing for he's at one, he's in his slow go years. Although his may be faster than most, he's in his slow go years, Perhaps he's investing really for the next generation, we don't know. Whereas someone in the early stage of retirement has a much longer time horizon. Goals are going to be different. How much it costs to pay for your base great life and how much that is relative to your Social Security, your pension or annuity payments. Everybody's going to be different. There goals will be different. How much excess spending you have for travel and gifting and hobbies, etc. That's going to be different. Whether you're investing for your life or multigenerational goals are going to change how you invest.

Recently I was having a discussion with a client who has more resources than they need for their life. We were talking about their Roth accounts and how really yes, they've been doing a lot of Roth conversions. How yes it is their accounts, but really in the scheme of things, this money is going to go to their children. So when they do Roth conversions, in some ways that is gifting to their children because they're prepaying the tax and they're moving money into tax free assets that will grow, that will ultimately be inherited by their children. Since it's going to be inherited by their children, the time frame is 20, 30 years plus they're virtually in all equities. This is going to be different for everybody. These are some of the quantitative things that you have to work through for yourself. You're not Charles Ellis. You don't have the resources. Everything is different for you, just like it's different for your neighbor or anybody else that emails in with a question.

Now, let's go to some qualitative things. Everybody is different there in our knowledge and our desire to build a portfolio of knowledge around retirement planning. Some of us are more interested in this than others. Charles Ellis is an expert. This is all he’s done and thought about. He's very sophisticated in his understanding of capital markets relative to what he needs, etc. That allows him to have much more confidence in his decisions. You or me or someone else are going to be at a whole different level. That comes into play into how we allocate our assets.

Then the last qualitative one I'll just mention is the psychological profile of each of us is going to be very different. So we're getting beyond the spreadsheet. This is where tools like the RISA and quality conversations around what we're trying to accomplish are important. Because mathematically, the numbers may say, you should have, say, all equities or whatever percentage of equities, and all the math works, but psychologically, it doesn't fit who you are in terms of having comfort to be on that ride. That is really important because you view risk and define risk very differently than someone else. You view your life very differently than someone else. We all have our own benchmark for that. We may need to make sure that we match the withdrawal strategy and the portfolio to provide you the psychological or emotional confidence to actually lean in with life.

So, a silly example would be, okay, I'm Roger. I'm 58. I used to love roller coasters. I would say I like to be on a roller coaster. You know, you go to Six Flags. You go on, you know, the Gemini or whatever. You know, it wasn't Six Flags growing up for me. It was Cedar Point. You go on these crazy roller coasters. I can handle that. Everything physiologically about me says, Roger can go on a roller coaster and be fine. The difference from young Roger to older Roger is I just don't want to go on the ride. Doesn't matter whether physiologically or mathematically, I can handle it. I don't enjoy them anymore. If I were to go on one, I may survive, but I'm not going to enjoy the journey. Same thing when it comes to how you fund your life. It doesn’t matter whether mathematically it should be all equity. So all of these key differences need to be thought through in order to build a plan you can have confidence in. The way you do that is not by, well, Charles does it this way, so I'll do it this way or so. This is how you do it, so I'll do it that way. There's no perfect answer. What you need is a process to get to your way in a logical fashion. So I wouldn't worry too much about how Charles does it because I agree with you, Joe. You are different and you should have a plan that fits Joe.

JOE ASKS FOR AN EXPLANATION ABOUT SOME COMMENTS IN CHARLES ELLIS’S BOOK

Now, our next question is related to this, and I kind of already answered it, but we'll just hit this question as well. Maybe this is from another Joe. I don't know if it's the same Joe or not.

“Can you explain some comments from Charles Ellis about his new book Rethinking Investing, specifically chapter 7 and 8 which advocate including all stable assets or bond equivalents.”

The examples given, I guess in the book were home equity, the present value of future Social Security assets, et cetera, in the asset allocation calculation.

“For me and probably for most people, your homes and Social Security are so significant that if we included those to figure out how much we should have in stocks, we would have 100% in stocks.”

So how do you reconcile that is essentially what Joe's trying to get to and we're sort of talking about the same thing. When you use the present value of your Social Security benefits or your pension benefits and put those on what we call a household balance sheet, that's a separate way of looking at a balance sheet. It comes from the pension world and there's actually some value to doing it that way. But in this case I would agree with you, Joe. I wouldn't do that for asset allocation purposes.

When you're approaching your asset allocation for retirement, it's going to be multiple allocations depending on time horizon. You know, different pie charts for different time horizons. That's why I always call them a pie cake, because they're different pie charts stacked on top of each other. The core intent of allocating the resources in retirement is to have clarity on how you're going to fund your life in the near and midterm. Absolute clarity, not kind of, on how you're going to fund it. Absolute clarity, which for me would be building an income floor and prefunding the early years and then allocate the long term assets more for growth. Now that could be 100% equities depending on your particular situation. It could be 80, 20, 70% equities, 30% bonds, doesn't have to be 100% equities. But I would not use the approach that he described as the way you just described it here. I would go and build your pie cake from the ground up based on what you need to accomplish for your life.

So hopefully that helps.

BRIAN IS THINKING ON DOING AN NUA WITH HIS COMPANY STOCK

All right, our last question. We're going to pivot here a little bit. We're going to a question on company stock net unrealized appreciation, and this comes from Brian.

Brian: Hi Roger, this is Brian. I started listening to your podcast on my drive home every day about six months ago. I started with episodes in 2019 and have listened to all of them up to the present day. They've really helped me understand retirement planning and have really energized me to plan for my retirement.

But here's my question. I'm a few months away from retiring and have a fair amount of company stock in my 401k. I'm thinking of doing an NUA with the stock. I understand all the tax benefits and most of the rules about doing an NUA, but what I don't fully understand is the mechanics around doing the actual transfer and how that works. Some of the materials I've read imply that you have to do a full distribution of your entire 401k at the time you do the NUA and others imply that you can do this independently of what you do with the rest of your 401k. Any insight you can give on this so I can make the correct decision is greatly appreciated.

Keep up the great work. Thanks.

Roger: It's great question, Brian. Let's just go through a couple basics on NUA, which is taking a highly appreciated stock out of a 401k and moving it to an after tax account and then only incurring the cost on the cost basis initially. So what are just the. Let's get to the mechanics.

Number one is, rather than go to the Internet, you want to coordinate this with your plan administrator. That's key. Now is the time to work with them specifically because they're required to operate now. You can always use the Internet and resources like us to confirm what you're hearing.

What are the mechanics when you do an NUA? You're going to want to have a taxable brokerage account set up to receive the company stock and you're going to have an individual retirement account ready to receive the rollover from the non-stock assets.

How do you actually implement this? Well, the key requirement is you do need to do a full distribution within the calendar year. So you're going to contact your 401 plan administrators, you're going to ask for an in-kind distribution from the company stock to your taxable account. Then you're going to request a direct rollover of the other assets to your IRA. You want to make sure you give yourself enough timing that all of this happens within the same year. So from a tax reporting standpoint, you're going to receive a Form 1099-R, Box 1 will show you the total distribution. Box 2A is going to show you the taxable amount, which should reflect the cost basis of the stock. Then Box 6 is going to show you the net unrealized appreciation. The cost basis is taxed as ordinary income, so you may want to consider doing an estimated tax payment as part of that. Now that stock sits in your account, keep track of your cost basis. That's the mechanics of it. You just got to work with your 401 providers. Assuming they understand this, the key things have got to happen all in one year, and you're going to have two different distributions that you're requesting. An in-kind for the stock and a direct rollover for the non-stock assets. If you're talking with your 401k administrator and they're not talking about these two different distributions separately, then you may want to press a little bit because it's very common nowadays because this stuff gets complicated so that you might not be talking to the right person. So knowing this structure will equip you a little bit better to identify. Oh, wait a second, they're not telling me what I think it actually is.

All right, with that, let's move on to our smart sprint.

TODAY’S SMART SPRINT SEGMENT

On your marks, get set, and we're off to set a little baby step you can take in the next seven days to not just rock retirement, but rock life.

All right, in the next seven days, pick an activity. It could be exercising, it could be hiking, it could be riding your bicycle. I would say, preferably, you're doing it by yourself and don't listen to music, podcasts, books or anything.

Allow yourself to be present in your environment and allow yourself and your mind to wander. Be present. Give yourself some space.

BONUS

So last month we aired some classic episodes because I needed some time to get a project over the finish line. That is very impactful for my life and for clients, et cetera. This is the first time I'm talking about it publicly. That project is that my firm, Agile Retirement Management has merged with Align Financial, Tanya Nichols firm. You may be familiar with Tanya Nichols. She comes on the show a lot and you'll be hearing her on the show more. She is also a coach in the Rock Retirement Club. Tanya and I have been on this journey for over nine years and she is just an awesome person, an awesome operator, and we complement each other very well. We finally got this over the finish line. We are merged as one firm. Currently, we are keeping our same names. Ultimately, we're going to rebrand into Retire Agile later this year.

We'll share more about that because we're excited about it, but honestly, now that it's done, all the work occurs in getting these two houses put together as one. We're really excited about that and I think it's going to be a special thing. It'll allow me to focus more on the podcast and visionary stuff and make sure that we're honoring our promises. So that's what we've been working on.

Just a little FYI. I hope you're working on something really fun for you too. Have a great day.

The opinions voiced in this podcast are for general information only and not intended to provide specific advice or recommendations for any individual. All performance references are historical and do not guarantee future results. All indices are unmanaged and cannot be invested in directly. Make sure you consult your legal, tax, or financial advisor before making any decisions.