A great interview with one of the leading minds on retirement planning, best selling author Tom Hegna:
Peter Richon: Welcome in to the program. This is GulfCoast Financial with John Kuykendall, Founder and CEO of GulfCoast Financial Services. Each week on the program, John challenges a bit of the status quo and the talking heads on what it takes for you to truly build for, achieve and maintain your financial success and confidence.
John, we always appreciate your time. Welcome back.
John Kuykendall: Thank you. It’s great to be here, Peter.
Peter Richon: Always a pleasure, John, and you always bring along some great guidance and information.
John, I’m a big fan of lists, and this week I found a list. This was from a recent article from U.S. News, and it went over 50 smart money moves. We’ve got a fantastic interview coming up a little later in the program, but I thought maybe you would have a tip or two for us on some smart money moves of your own, or maybe borrowing a couple from this list that we should be covering.
Lists make life a little easier. My wife leaves them around for me at the house. If there was a financial checklist that you could design, what are some of the top items that might be on that?
John Kuykendall: We have to set ourselves on some budget. We have to figure out what our financial goals are, what we’re trying to accomplish, and then work backwards from that. Many of the people nowadays – and budgeting is not something that’s brought up very often – don’t like to work on budgets. They don’t like to live on them because they’re refining. The thing is, is that budget will enable you to reach the goal that you’re trying to accomplish.
Peter Richon: Maybe, John, the reason why people don’t like budgets is they feel limited by them. When you’re talking about creating this retirement budget, it’s really not about limitations and not being able to do things you want to do; it’s about making sure that you can, right?
John Kuykendall: That’s right. I mean, everybody wants to do things now because they think, well, you know, I’m physically able; now is the time in life when I need to be making these decisions and going place and doing things, buying that large screen TV or whatever, but we need to put everything into perspective so that we can make that retirement the kind of retirement we want.
Peter Richon: That budget that you encourage people to look at and review, again, it’s not about the limitations. Although you like people to track the spending that they are doing, so that you can create a spending plan for them in retirement, because, you’re right, we want to be able to do all the things that we want to, and we like to do them early on, but we would also like to continue to be able to do that through all the years of retirement. I think that’s where a little bit of the budget really pays off in many dividends.
John Kuykendall: Right, it’s really a spending plan. We don’t want it to be a limitation to the point that we don’t enjoy life today, but we have to save for tomorrow. I know that back several years ago, I used to say that if I didn’t carry any cash with me, I wouldn’t spend as much money; that if I had cash in my pocket, I was going to buy something.
Peter Richon: Those credit cards make it easier today, though.
John Kuykendall: That’s right, and people say, “I don’t carry cash,” but they’ve got a debit card, which is the same as cash today. You just need to really put yourself on that budget, work up your spending plan. Include some fun things like vacations and save for those things now, but also put away some money for the future.
Peter Richon: John, if somebody doesn’t really have a budget or a spending plan, or doesn’t feel like it would be the best time of their lives to create one, you help out with that process, and you do make this a fun and entertaining exercise as much as it can be, right?
John Kuykendall: Yeah, we like to make it as fun as it can be. It’s certainly not something that everybody has great joy in doing, but we can do that here with our clients. Like I said, we want to make the plan so that we don’t limit what we do today; we just make sure that we’re making the right decisions and spending the money properly, being good stewards of what money we have.
Peter Richon: Before we go any further, I’d be remiss in not mentioning the fact that John Kuykendall and the team there at GulfCoast Financial Services are your resource, ladies and gentlemen, for help and assistance in creating that plan for financial stability and confidence moving into and throughout retirement.
If you’ve got any questions, if you’d like to get that plan put together and in writing, understanding all of the different aspects of your plan – the fees, the taxes, the risk that you’re taking, the income sources that you will have available for spending throughout retirement – pick up the phone and give a call, 386-755-9018, that’s 386-755-9018, 386-755-9018.
We do have a financial and retirement planning guru and author of several books, Tom Hegna, who will be joining us a little bit later in the program. John, can we continue creating this list? Are there any other big items you want to encourage people to have checked off as they plan for their financial future?
John Kuykendall: I think the one thing we need to do is resist, what I want to say, is the retailer’s enticements or the strategies to get you to spend money. I have a story about a client who got a little key in the mail from one of the automobile dealers, and it said, “Hey, if you come down and test drive a car, we’ll give you a $50 gift card.” So she went down and got the $50 gift card, test-drove the car, but then they enticed her into buying a new car, so the trip to the dealership cost her more than the $50 – trust me.
You have to be aware of that. Mama used to say there’s no free lunch. We need to be aware of marketing gimmicks and not do that impulsive buying – that was the word I was looking for. We need to make sure that we plan out our purchases, think about them, walk away from that initial purchase enticement. If it’s something we can afford and is in our budget, then go back and do it. I’ve seen a lot of people buy a lot of stuff that they don’t need.
Peter Richon: John, the way that you have described setting up the plans for retirement, previously here on the program, is that that budgeting you spoke about earlier, that’s sort of one side of the plan, and then there is extra additional discretionary money over on the other side so if we did need or want to splurge a little bit – buy a new car – we knew the available funds that we had to do those kind of things.
John Kuykendall: Yeah, and even in retirement we try to set that up so that – we just worked with a lady last week, and we set aside money for a new roof in five years, and we set aside for a purchase for a car in two years. That was the way we set up her plan, and it really looked good when we got through with it. That’s the kind of thing we want to do, is we want to make sure we got our retirement set up, but also we need to have discretionary money.
I read an article recently – I think it was this last weekend – that said there is a large segment of the population that does not have $400 saved for emergencies. In other words, if they had to spend $400 right now, they couldn’t find the money.
Peter Richon: That’s shocking and speaks to the lack of financial education and stability that many out there face. I know you deal with a different echelon at GulfCoast Financial Services, John. You’re generally dealing with folks who have a serious chance of being successful in maintaining a quality of life and standard of living throughout retirement.
Ladies and gentlemen, if you need help crafting that plan, again, the team from GulfCoast Financial Services and the Founder and CEO, John Kuykendall, would be happy to hear from you, sit down with you. They do extend to you the valuable offer and opportunity for a complimentary review.
Similar reviews could easily go upwards of $1,000 to $1,200 for the time and the work that they’ll put into helping you plan and craft and design that plan, but they make this available to you on a complimentary, no-cost, no obligation basis. If you’re willing to invest a little of your time, they’re willing to donate some of theirs. Give a call if you’d like to take them up on that offer, 386-755-9018, that’s 386-755-9018.
Now, I’d like to pivot because we’ve got, standing by here, someone who has been considered a retirement guru by many. He’s an advisor to advisors across the country, as well as helping tens of thousands of individual savers and investors understand what it takes to craft their retirement plan. He is author of the book Don’t Worry, Retire Happy, host of the PBS special by the same name, and he also authored the book Paychecks and Playchecks; Tom Hegna once again joins us on the program. Tom, we certainly appreciate you joining us here on GulfCoast Financial.
Tom Hegna: Thank you very much for having me.
Peter Richon: Always a pleasure, Tom. We know that retirement has certainly changed and evolved from the last generation to this generation of Baby Boomers, who is now in the midst of, really, the peak of retirement for them. What do today’s retirees and pre-retirees really need to be doing that’s a little different than maybe what we though of retirement in the past?
Tom Hegna: In the past, your parents had pensions and Social Security, and they could just go about their retirement and have fun and enjoy it. Now people have assets, and they’ve been trained their whole life not to touch those assets – we’ve got to protect it, we’ve got to save it, we’ve got to grow it. They got paychecks every two weeks their entire working career; they spent those, but they’ve been trained not to touch their assets.
Now, they get to retirement, they’ve got this big pile of assets that psychonomically they’ve been programmed never to touch those things, and many people are going to go to their graves never touching their assets, which is why the PhDs who study retirement say you should take a portion of those assets and turn those into guaranteed paychecks and playchecks, kind of like what your parents had. They had a pension; you’re going to need to do that yourself with some form of annuities to give you guaranteed lifetime income that you can never outlive.
You have to take that number one risk in retirement – longevity risk – off the table. It’s fallen from the company who gave you the annuity in the form of a pension, to where you’re going to have to do that yourself in order to be happy and be successful in retirement. You’re not going to be happy and successful in retirement if you just have money in the stock market – I can promise you that. You’re going to be nervous, you’re going to be miserable. People with assets are miserable; people with guaranteed lifetime income are happy.
John Kuykendall: Tom, we have spoken many times about retirement and how it’s changed and, of course, one of the things I’ve found with my clients is that it’s certainly a big lifestyle change. That's something that people have a hard time getting into. How does beginning to make withdrawals from retirement accounts affect retirees from a psychological perspective?
Tom Hegna: Like I said, they have not been trained to take their assets, so it’s very hard. They don’t want to take too much, so most of them take out too little, and they live what I call a just-in-case retirement. They don’t want to touch the money – the interest rates are low, the market is so volatile – what should I do? – so they’re living this just-in-case retirement, and here’s what it looks like. They don’t touch their money, and they don’t touch their money, and they don’t touch their money, and they don’t touch their money, then they die and the money goes to the kids.
I say to people, “You know, you told me when you retired that you were going to join the Country Club; you’re going to buy new boats; you’re going to go on a cruise; you’re going to see the world. Have you done that yet?” They say no, because they’re living this just-in-case retirement, and then they die and the money goes to the kids. What do the kids do with it? They join the Country Club; they buy a new boat; they go see the world. All of the things I write about is to teach people that they should be going on those trips, and they should be joining the Country Club. You shouldn’t leave that to your kids to do that.
I tell people this all the time, two things: number one, you’re not getting any younger; number two, you don’t get to take any of it with you. If you just kind of think on that for awhile – you’re not getting any younger, you don’t get to take any of it with you – then you’re going to start saying, man, I should really start spending this, but how can I spend it if I’ve got it in the market? I might take out too much, the market might crash, and that’s why the market isn’t going to work for distribution in retirement. It’s fine for accumulation, but for distribution, you need to have guaranteed lifetime income so that you have peace of mind, that you can be happy, that you can spend your money. It’s that spending of money in retirement that allows you to enjoy your retirement. It’s the travel. It’s the cruises. It’s the dinners out. It’s bottles of wine with your friends. That’s how you enjoy your retirement. I always tell people, I don’t care how many millions of dollars you got stashed in some account somewhere – if you’re scared to death to do anything with it, then it will do nothing to help you in retirement.
Peter Richon: Tom, shifting focus a little bit, before the interview today, you shared some exciting news with me that you yourself are planning on retiring very soon.
Tom Hegna: I said what good would it be if the guy who wrote the book Don’t Worry, Retire Happy doesn’t retire and he’s not happy? Look, I’m not going to full-retire tomorrow, but tomorrow starts my trial retirement. I’ve blocked out my schedule. I have a couple events I have to do that were booked last year, but I’ve blocked off the next 90 days. We’ve built a house up in Flagstaff, and joined the Country Club, and I’m going to play golf every day, play tennis, workout. I’m going to live the retired lifestyle for 90 days, and I’m going to see – can I do it? Does it drive me crazy? Do I drive her crazy? Does she drive me crazy? Am I bored? So I’m going to do a trial retirement this summer.
I’ve got guaranteed income coming in. I don’t have to worry about my income. I don’t have to worry about this market going down 300, 400 points today – it doesn’t bother me a bit – because I’ve got peace of mind, I’ve got guaranteed paychecks for the rest of my life, and I’m going to go out and try to have some fun.
John Kuykendall: Congratulations on your retirement. It certainly wasn’t expected. You’ve been very active recently. I’ve read both your books. I’ve seen a lot of your webinars working for a lot of companies now. That’s a big announcement and a big accomplishment for you. You have spoken on or talked about retirement planning all over the world. With that being said, is there anything about your retirement that you’re worried about?
Tom Hegna: I’m not worried about anything financially. It’s just you never know with health and everything now. Thank goodness we’ve both been healthy, but you don’t know what’s going to happen. That’s an unknown, of course, is health. As far as financially, no matter what happens, I’m going to be okay. If the market goes down, I’m going to be fine. If interest rates go up, I’m going to be fine. If interest rates go down, I’m going to be fine. If somebody sues me, I’m going to be fine because all my money’s protected.
See, all these brokers – and Ken Fisher – they can help you grow your assets, but they’re not going to protect your assets. There are so many risks in retirement. Everybody thinks that it’s about having this big pile of money in retirement. That’s not true. There are two main components to a successful retirement, financially. Number one, you want it structured so you have increasing income for the rest of your life, that needs to be increasing to deal with inflation, and component number two is risk management.
You have to take these key retirement risks off the table – risks like market risks, sequence of returns risk, long-term care, taking out too much money. Those are all risks in retirement, and a diversified portfolio is not going to do that for you. You’re going to be miserable in retirement if you’ve got a diversified portfolio. I don’t care who you are, you’re going to be miserable. It’s guaranteed income that makes you happy in retirement, and all the research shows that.
John Kuykendall: Tom, you mentioned that you’re not worried about retirement from a financial perspective. Of course, that’s not something that everyone could say. You’ve been very successful in your career, teaching about how to plan for retirement, but that confidence is probably in large part due to the fact that you have followed much of your own research and advice. I’m wondering how you structured your plan differently than the majority of savers and investors who are worried about their finances supporting them all the way through their retirement.
Tom Hegna: I own 11 income annuities. I’ve studied retirement now for over 30 years, and I’ve learned that retirement is not about the stock market, not about the bond market, not about real estate. Those products can all help you, but a financially successful retirement is really about having income and increasing income for the rest of your life, so that would be one thing.
Number two, I have long-term care insurance so that if my wife or I need long-term care, we don’t have to go to a nursing home; we can stay in our house, and the nurse has to come to us. They make the doors wider. We’ve got a policy where we can stay in our house.
Finally, we’ve left life insurance to our kids. We have four kids, and one day we were sitting around saying, “Hey, how much should we leave the kids?” “I don’t know; what do you think?” I said, “Well, if we bought a one million dollar second-to-die life insurance policy, name the four kids as beneficiaries, when we’re both gone, they’ll get a million bucks tax-free. I mean, that’s $250,000 a piece tax-free; let’s start there.” So we bought a one million dollar second-to-die life insurance policy and named the four kids as beneficiaries. That policy is completely paid up. Do you know what the total cost of that million dollar policy was? $150,000. Let’s think about that.
For fifteen cents on the dollar, we leave a million bucks tax-free to our kids. Hey, who gets to spend all the rest of the money? We do. See, I teach people you need to spend your money; you need to leave them life insurance because you can do that for pennies on the dollar. These are the things I write about. These aren’t my opinions. This is math and science. I have structured my retirement to be the optimal retirement. I’ve read all the White Papers from the top PhDs around the world on retirement. Most people aren’t out there reading White Papers and how to do it the right way, and they watch Ken Fisher on TV – the guy who’s ridiculous and leading people right off a cliff – and they listen to him, and they listen to all these other people who voice their opinions. Everything I talk about it mathematical, scientific and economic facts. That’s what I write about, that’s what I speak about, and that’s what I live. I don’t just talk the talk; I walk the walk.
Peter Richon: We talk often on the program about challenging the status quo and some of the talking heads. What do you feel is the greatest danger financially to today’s retirees and pre-retirees from following the advice that they are hearing or maybe in the advice that they are not receiving?
Tom Hegna: Let me give you a real world example. We’ve been told our entire lives that markets go up, and they go down, and they go up and down, but over time, they always go up; that’s what we were taught. Guess what? The Japanese were taught that, too, because their market was going up for a bunch of years back there in the 80s. You know what? The Japanese market’s been down now for over 30 years.
So now think about that poor 65-year-old Japanese guy who was told markets always go up. He retired at 65, the market crashed, he’s 95 now, and the market has not come back. Let me ask you – how do you think his retirement went? I bet you a million dollars he never made it to 95. I bet he died by age 70 because the stress probably killed him.
The market is not going to solve your retirement problem, okay? It’s not about assets. It is not about assets. It’s all about income. The happiest people in retirement are not the people who have the most assets – they’re the most miserable people in retirement. The people who are the happiest are the people who have the most guaranteed income. They got pensions. They got Social Security. They got these checks coming in every single month. Market goes down, they don’t care; they go play another 18 holes of golf. That’s exactly how I’m going to live my retirement.
People are getting the wrong information from these talking heads that are up there trying to get their assets under management, because they get the 1% fee on all their money, and they try to badmouth annuities. Look, I can prove to anybody out there who doubts me. Here’s a simple challenge, and you can work with Ken Fisher to prove me wrong. All you’ve got to do is build a portfolio that you think I cannot beat. “We’ll put all the good stocks in here; he’ll never beat that one.” Yeah, you build that portfolio. I’m going to reach into your portfolio. I’m going to remove some of your bonds. I’m going to replace it with a lifetime income annuity. Do you know what that will do to every single one of your portfolios? It’ll lower the risk and it’ll increase the returns. That is a very, very simple challenge. If I am wrong, you should be able to prove me wrong just like that. But here’s why you can’t.
Inside of a portfolio, the way that guaranteed lifetime income functions, it functions like a AAA rated bond, with a CCC rated yield, with zero standard deviation. See, these are mathematical, scientific and economic facts. These are not opinions. I don’t stand up and talk about opinions. I don’t write about opinions. Everything I write about is based in math and science, and people can check it, and double-check it. I tell them right in my book, do your due diligence on me as well as you’re going to do it on anybody else, but all of my research is backed up by math and science.
Peter Richon: I know it’s just a trial retirement for you, Tom, but what are you most looking forward to?
Tom Hegna: I’m just looking forward to working on my golf game. You know, I used to be pretty good at golf. When I’m out there on the road traveling 200 days a year, I just don’t get to play, I don’t have the feel, and so I’m really looking forward to that. I really want to play some more tennis – I used to play tennis – and then I want to workout more. I want to get the strongest I’ve ever been.
I want to just have a great retirement when I finally pull the ripcord for forever, but, right now, I’m going to just take 90 days to do it. I’m going to be speaking again in the fall, but then I’m going to take some time off in the winter and go skiing and stuff, and then next year, I might take four or five months off in the summer, and then I’m just going to – it’s step number three in my book; it’s called a hybrid retirement. I’m just going to ease my way into retirement; I’m not just going to pull the ripcord and be 100% retired. I’m going to phase it over three, four, five, six years – however long – and I’ll probably speak for many years. I might speak at some big functions. If they have something in Greece – yeah, I’ll go to Greece for two weeks and I’ll speak or something, you know, but I’m not going to be doing three seminars a day for five days in a row and driving 700 miles in three time zones. I’m not going to be doing that anymore, like I’ve been doing.
John Kuykendall: Tom, you authored books, hosted TV shows, and you’ve spoken all over the world. What has been the most rewarding part of your career?
Tom Hegna: I think in the insurance industry I’ve had a tremendous impact on changing the narrative. The insurance industry was just like the brokerage industry. For many years, it was all about accumulation, accumulation, diversification, asset allocation and all that stuff, and I’ve totally changed that narrative in the insurance industry, that it’s not about assets; it’s about income and protecting risks, and that only insurance companies can do this. You know why they call them brokers, don’t you? Because you’re broker than you were three weeks ago. The brokers can’t do that.
You’ve got to put insurance products into your portfolio to retire optimally. You need to have an annuity. You need to have some life insurance. You need to have some long-term care insurance, or you will live a sub-optimal retirement. Again, those are facts; those aren’t opinions. I think just being so forceful on that narrative has really helped a lot of advisors and, in turn, that’s probably helped tens of millions of people around the world, because I speak around the world, so I guess that would be the most rewarding.
John Kuykendall: Tom, like many of us, you’ve had a long career – I know I feel like I’ve been working forever – doing a lot of what you had to do in order to be able to spend retirement doing more of what you want to do. We wish you good luck and certainly hope that you enjoy it.
Tom Hegna: Thank you very much. I hope your listeners take that longevity risk off the table. I hope they understand it’s about risk management and having income in retirement. That’s what a successful retirement is all about – because then you can spend it! It’s the spending of money that allows you to enjoy it. It’s the travel. It’s the cruises. It’s the dinners out. It’s bottles of wine with your friends. That’s how you enjoy your retirement. It’s not about assets.
Peter Richon: Glad we caught you before you retired, but good to hear you might be back on the speaking circuit, if on a somewhat limited basis.
Tom Hegna: Oh, yeah, I’ll be back. This fall, I’ll be back out there.
Peter Richon: Tom, we appreciate your candor, your perspective, your insight, the guidance that you have provided to us over the years on the inside of the industry and sharing much of that advice with our listeners here on the program.
Tom Hegna: Thank you very much, Peter.
Peter Richon: An exciting announcement from an authority in the world of retirement planning, multiply published author, host of the PBS special Don’t Worry, Retire Happy, Mr. Tom Hegna announcing his retirement here on the GulfCoast Financial radio program. We appreciate his time in sharing that big news with us and the listeners here on the show.
John, Tom mentioned that he himself has structured his retirement around guaranteed income, around the certainty that these income streams are going to provide for him throughout his retirement. Do you feel like this is a good way for maybe more people to learn about and consider as we’re looking toward our own financial futures?
John Kuykendall: Oh, certainly. That’s one thing we try to structure when we talk here about private pension plans. What we’re trying to do is figure out how we can get a guaranteed income coming in, to supplement Social Security, so that we know that we have a paycheck coming in that we’ve set up for ourselves. We’re not going to have that pension anymore, so we have to make sure that we have that paycheck.
Peter Richon: And those are the kinds of things that you set up for your clients there at GulfCoast Financial Services?
John Kuykendall: You bet. That’s what we work with. We’ve got the software. We work through it. We work on taxes. They all forget about taxes. They’re an important part of retirement, and we need to make sure that we don’t pay anymore taxes than we need to.
Peter Richon: We had fun with John Kuykendall today. We appreciate Tom Hegna joining us on the program.
Ladies and gentlemen, if you have questions, if you have concerns, if you are thinking seriously about planning for your financial future and you’d like to move through it with stability, confidence and peace of mind, you need to have that plan put together, that checklist for your financial progress. Pick up the phone and give a call, 386-755-9018; that’s 386-755-9018 to take advantage of that time, that complimentary review and retirement planning strategy session – 386-755-9018.
John, any parting words for the listeners for today’s program?
John Kuykendall: No, I think it was a great show. I’m really excited and saddened for Tom because I’ve been a follower of his for a long time. I wish him all the best in his retirement.
Peter Richon: We may hear from him again sometime soon. This is sort of just a trial retirement for him. Maybe that’s something that we should all just try out on a trial basis.
John Kuykendall: Well, I think it’s great that he can do that because he’ll certainly see whether he likes it or not, but at least he’s ready for it. If the trial works out and he really likes it, I know that he doesn’t have to come back to work; he’s got enough playchecks and paychecks.