The Most Important Aspects of a Comprehensive Retirement Plan with Derek Gregoire and Matthew Peck

[EPISODE]

Derek Gregoire: Welcome, everyone, to another edition of the SHP Retirement Roadmap Show brought to you, of course, by SHP Financial. I’m Derek Gregoire, joined by Matthew Peck. And today, we’re going to continue a conversation on what we feel are the five most important areas that have to be covered as you are either in retirement or looking forward to retirement. Whether it’s 5, 10, 15 years, or tomorrow, we want to make sure that you are well covered for your retirement. And there’s so much more to think about in a retirement plan than just the dollars and cents. And we’re going to get into that shortly but, Matt, how are you doing? Everything good?

Matthew Peck: I’m doing fantastic, Derek.

Derek Gregoire: If you don’t know, a lot of us, SHP Financial was started over 20 years ago and we started in Pembroke, Massachusetts

Matthew Peck: Schoosett Street.

Derek Gregoire: Schoosett Street. And then we eventually, in 2003, 2005 made our way down to Water Street in Plymouth with a cool location overlooking the water. And then in this space, we’ve outgrown two spots and now we’re pretty secure in this spot for the last several years.

Matthew Peck: Yeah. I always, and sorry to interrupt, Derek, but I’m just always so proud of seeing the sign on the wall or seeing the sign on the building, seeing SHP Financial on the building here on Water Street. Always brings a smile as I get out of the car.

Derek Gregoire: Yeah. Drive by the building. Actually, our studio is looking, facing the building on the road. For some reason Evan, our producer, didn’t give us the Ocean Room. All those conference rooms on the ocean, and we’re in the studio facing the park.

Matthew Peck: Right.

Derek Gregoire: But with that being said, we have a lot to get into today. And I think how everyone asks what makes SHP different, why we continue to grow, well, I feel like with us and our close to 50 staff members, the main goal is to continue. We feel like we have something really helpful and almost like a way to help, to share, to like, obviously, we could have cashed it in with a few hundred clients years ago and just sat and taken care of those clients really well. But our vision was to continue to grow so we could provide this support with so many more folks across the south shore of New England. And that’s where we are now because the average firm and if you’re listening and you have investments, 401(k)s, IRAs, the average firm, if you sit down with them or if you think about your last review with your advisor, a lot of times what we’ve been told is, hey, we just sit down. We have a cup of coffee and they say, “You’ve made money. You’ve lost money. Stay the course. The market goes up. And that’s really the entire plan.” And that doesn’t build a lot of confidence. It kind of builds some uneasiness.

So, with us at SHP, you’ve noticed and hence the name of the show, we call it the SHP Retirement Roadmap because the roadmap is more than just investments, which we’re going to get into today. But having a roadmap for retirement, look, you can’t just have a pile of 401(k)s, IRAs, bank statements. That’s just the dollars. But what does that mean? What does it mean in terms of how much income you can draw off of it? That’s what we talked about last week was income planning coming up with expenses, cash flow. When you retire, basically, you’re unemployed. That’s a better word for unemployed.

Matthew Peck: Yeah, right.

Derek Gregoire: And we need to fill that paycheck with your assets that you’ve worked hard to save. So, building an income plan and how that’s done is crucial. Building an investment plan where you get into that today and how that looks because there are so many aspects of investment planning. Next week or in the future, we’re going to look at tax planning. It’s a whole world. If you ignore tax planning in your retirement, think about it, if you have an IRA and 401(k), you’ve paid $0 in taxes on those assets if they’re pretax, which most of them are. For the rest of your life and if you pass on to the next generation, those assets are fully taxable. And think about it. Right now, tax rates are pretty low as much as it doesn’t feel that way when we pay our taxes each year. Historically, they’re very low and they’re set to go up in a couple of years. So, wouldn’t we take advantage of maybe doing some tax planning strategies now, while we know where the tax brackets are, instead of waiting a few years until they’re most likely higher? So, tax planning is a whole other world we’ll get into.

Health care planning, I mean, I can go on and on about the world of Medicare, Medicare Supplements, private health insurance before 65, long-term care, prescription drug plan. I mean, there are so much that goes into health care. You need a plan to cover that. And finally, legacy and estate planning. That’s, you know, how do you take the assets you have? Make sure they go to the next generation, charities, churches. Whatever you want to send that money to in you’re passing, make sure it goes there in the most tax-efficient way possible. So, I know it’s a lot of words but at the end of the day, Matt, you can see that there’s a full SHP retirement roadmap. That’s what makes us different and our team here makes us different because instead of having just paying for, most people pay 1% or more for just a pile of investments and that’s it.

Matthew Peck: Oh, absolutely and I kind of want to go back to two areas very briefly. One, you mentioned about how we, as sort of the leaders of the company or founders of the company, could have decided to stop, cap the amount of clients that we’re going to help, cap the amount of staff and teammates that we would need. But our vision was more to grow because I think one of our guiding lights was the idea of the ripple effect of the fact that the more families that we helped, that was more husbands and wives and spouses, that was more kids and grandkids, that was more charities and churches that would benefit, right? So, the more families we’re able to help, the more we grew, the more that ripple went out across all of sort of Eastern New England and we have clients now in California and all over. But also, what I love, too, is the internal ripple effect. You know, now that we have close to 50 teammates, there’s been, what, three or four babies over the past year or so. There’s always new homes and new babies on the teammates and on all the shipmates, as we call them. And that means so much.

Derek Gregoire: Of course.

Matthew Peck: I mean, that to see a ripple effect right in your own building is amazing and to see all the relationships that have, I think, there’s been weddings that people have gone to. And those are all the things that to see that just bring a tear to my eye because of the impact that that growth has had. And the second thing I want to talk about, just because obviously today is about investment planning, is that on one hand, okay, maybe this session or this recording is going to be the more typical one in regards to investment planning and, oh, stocks, bonds but there’s so much there. Like, for example, knowing your risk, when it comes to knowing the difference between a fiduciary and a broker, knowing the difference in a mutual fund and an ETF, knowing how you build an investment plan that fits with the four other world or five total. I mean, again, as much as it might seem typical, it’s really not because there’s so much to just that one sort of piece of the pie in regards to the entire roadmap.

Derek Gregoire: Matt, that’s well put. I wasn’t even thinking about that. But over the years, I’ve challenged myself like having a strong faith and being faith-based like what’s my mission field and how do I help? And I feel like, to me, one of the best ways I can do that is through the business, right? I can have conversations with folks. I can share my faith. I can talk about just the planning we do in general is a way that we as a team can better folks, better people situations, because I truly think like you can’t really have an investment plan unless you know the tax ramifications. And you can’t know the tax ramifications unless you know what type of income you need. So, all that works together where I can’t imagine getting near or in retirement or even ten years down the road and not having a plan that looks at all these things. And what I find is the average person and if you’re listening right now that comes into our office in Water Street in Plymouth or if it’s Woburn or Hyannis if they’re in different areas, it’s 99% of the time and I don’t have an exact number, but that’s my guess.

Matthew Peck: That’s not really scientific but it’s a high number.

Derek Gregoire: It’s a high percentage of folks that say, “Oh, my gosh, I was listening,” or, “I saw you on TV,” or, “My friend was talking about you guys and we’ve saved money, but we have no idea what it means. We have too much tax ramifications. The only thing anyone talks to us about is this is how much you made or how much you lost.” So, there’s a lot more to get into it, income, investments, taxes, health care, and estate planning but today is about investments. Before I get into that, I just want to offer, we did put together, for those that are interested, a guide that I’d highly recommend you get your hands on. Basically, it goes into a little bit more in-depth. It’s a high overview. It’s not specific to your situation, but a real in-depth guide that goes into building the five worlds for your retirement and what each one entails. So, there’s no charge to get it. I think that’s the best way to get educated right now before we get into our topic here. But all you have to do is go to our website. Well, it’s SHP Financial but the website to get the guide is SHP Guides, that’s plural, SHPGuides.com. You can go on there, plug in some basic information, and the guide will be downloaded right to your computer, phone, whatever it is. So, again that’s SHPGuides.com. Get educated. That’s the first step in getting to building a good retirement.

So, with that being said, Matt, investments. So, I think the first thing we should talk about with investments is everyone says they’re an advisor, right? And sometimes people just sell insurance and annuities. Sometimes people can just do the stock market and stocks, bonds, mutual funds. But one of the things people ask us all the time is, are you a fiduciary? And some people don’t even know what they’re asking, but they heard that’s something useful to ask. So, can you explain the difference like kind of what that world looks like?

Matthew Peck: Absolutely. So, to the first point, that’s something I always got a kick out of in this industry where everyone could be an advisor. I mean, so I don’t blame people when they walk in to our firms or they hear the term like, “Okay. Oh, he’s a financial advisor. She’s a financial advisor,” but you don’t necessarily know what’s behind that curtain. In a very, very clear distinction that everyone needs to understand is, are they a fiduciary? Now, that can be through a license that they have or sometimes it is a combination of licenses, but a lot of it boils down to how you’re paid, which we’re going to get into. But the reason why it’s so clear or so important to work with a fiduciary is that they are obligated, legally obligated to put your interests first, the client’s interests first. And that is so important when you’re dealing in investments because there is a lot of hidden fees. There’s a lot of what are called 12b-1 fees on mutual funds. There’s a lot of sort of kickbacks, and that’s probably not the right word to use but commissions might be a better one to use it.

And so, you need to know that any recommendation that you’re receiving is coming from a fiduciary, coming from someone that’s on your side of the table that has your best interests, again, legally obligated to have your best interests at heart. And you need to know that. And so, I think that’s the most crucial thing because I think everyone else below that, they might act like a fiduciary. They might say like, “Oh yeah, I treat you like a fiduciary,” but the question is, are you a fiduciary? And he or she needs to be able to answer yes, obviously, in our opinion. But you need to ask that question just flatly, “Are you or are you not a fiduciary?”

Derek Gregoire: Exactly. And Matt’s like, “Hey, listen, I got my CFP.” Everyone can just call himself an advisor.

Matthew Peck: Yeah, right. Well, that’s the other part, too, just to pick that up a little bit. I mean, I sometimes liken these licenses, even if they’re a fiduciary, mind you, so this is to toss a little bit of shade but think of it this way, right? When you get your license to be able to sell and make money off of stocks, bonds, mutual funds, ETFs, all that stuff, I liken it to a driver’s license where, “Okay. Hey, guess what? You can now drive a car because you have a license.” Does that make you a good driver? There might be bad drivers out there. They have a license so they can drive. They can get behind the wheel of a car.

Derek Gregoire: They can parallel park.

Matthew Peck: Right.

Derek Gregoire: I don’t have to do that anymore.

Matthew Peck: Back in reverse. Yeah, right. I have a whole thing with my kids right now. It’s like, “Use the video.” I’m like, “No. I like to do this.” But it doesn’t necessarily make them a good advisor. Just because they have a license to drive or a license to advise on stocks, bonds, mutual funds, annuities, so forth, doesn’t make them a good advisor. And I think that’s why we’re willing to make sure personally CFP and here at SHP to make sure that we had certified financial planners because that allows you to say, “Okay. Not only does that lady or gentleman have their license, but now they’re a good driver. You know, now they have proven that this is something that they truly are dedicating their life to because it’s not an easy designation to get.”

Derek Gregoire: Exactly. It’s so funny. Random side topic but my wife, my son left. Actually, I’m not going to throw anyone under the bus but somehow the garage…

Matthew Peck: Theoretically. So, this is a theoretic wife with a theoretic…

Derek Gregoire: The garage door got in the way of her backing out. Not to say that happened somehow. And so, we had little repairs to do.

Matthew Peck: Yeah.

Derek Gregoire: We had like a rental or a loaner and I was backing up. It didn’t have the mirror. It didn’t have the camera and I was like lost. I was like, “Oh my God, how do I do this?” I’m so used to relying on that thing. I was like, looking at the screen. Nothing happened. Like, I had to turn around and use my mirrors. And I feel like it was a risky endeavor.

Matthew Peck: Yeah. You could absolutely rely on those things too. And I’m like completely without using those things, especially like when it comes to like the parking lots and getting like nicely between the lines. I mean, it does.

Derek Gregoire: Speaking of risk, we talk about when you’re building a retirement plan and this goes back to an income plan, an investment plan. There are all the five different plans of retirement: income, investments, taxes, healthcare, and estate planning. They’re all related. But income and investments are like brothers, sisters, right? They’re so close because when someone’s building a retirement plan, we can’t really build the investment portfolio until we have a plan to cover their income. Meaning last week, let’s say you needed 50,000 a year out of your portfolio or let’s say you need $100,000 to live and 50,000 came from Social Security, meaning you need 50,000 out of your portfolio. Well, the first thing we have to do is position some of your assets to cover that income gap because you need 50,000 a year. So, ideally, we don’t want that money coming every year from high-risk stocks, bonds, mutual funds because then there’s a chance that every year when you need more money to supplement, we don’t want that to be at a loss because then you’re selling at a loss. And that’s one of the worst things you can do in retirement is selling at a loss to cover expenses because now you have less earning power in those assets.

And it’s a very, well, we’ll talk about this later but it’s called sequence of returns risk. And it can become devastating into your retirement if it’s not planned for. So, assuming, we have your safety bucket built up for we have a cushion for emergencies. The car breaks down, the roof leaks. Let’s say there’s some money in the bank or whatever that’s available if you need it. That’s the first step. Next step is to build your income plan. Make sure you have enough assets in the income buckets to make sure we’re covering your day-to-day living for the next five, seven, ten years, if not longer. Only then can we look at the investments, which is for long-term growth. And you might say, well, I’m 58 or I’m 68, and I don’t have time to recover. Well, if we build the plan, we can still make time to have some portion of your assets still invested for the long term, as long as we cover the short and medium-term years. So, we always like to cover risk from a number of 1 to 99. So, one, think of like a speed limit. One is all your money in a bank or a savings account, checking account. You’re not going to make as much. The upside is not as high. You’re not going to lose anything.

Ninety-nine is having all your money in some new AI stock that just came out and you could triple your money overnight or you could lose all your money overnight. And so, all of our clients have an assigned risk number. So, let’s say if it’s a 35, maybe if the S&P is up 30, you might be up 15, 12. If it’s down 30, maybe you’re only down 10 to 12. So, it’s all about making sure each client should know, Matt, what their risk is and what they’re comfortable with based on their plan before we can recommend the proper investment strategy.

Matthew Peck: So, a couple of things to kind of expand on it. I mean, the first time, same as mentioning everybody, that they need to know the difference between a fiduciary and a broker-dealer or a fiduciary and just your “advisor.” He mentioned making sure that your financial advisor is a fiduciary. You should also know the difference and this risk report does help and a good plan does help too, know the difference between risk tolerance and risk capacity. So, risk tolerance, I think a lot of people are aware of, which is okay, “Hey, Derek, do you consider yourself an aggressive investor, moderate investor, etcetera?” So, I think a lot of people just know their risk tolerance. And it’s also fascinating where, generally speaking, men, they like risk and women like risk less. And sometimes there are some behavioral issues there. But most important, I think people understand what their risk tolerance is. A good advisor and a good plan, especially one with the five worlds and a true roadmap can show people what their risk capacity is. How much can you afford to risk without things blowing up, without selling on a low lot like Derek was mentioning?

If you’re not investing within your capacity and you’re at overcapacity and there is a loss, then that’s a mistake. That’s a mistake in retirement. And most if not all mistakes in retirements, there’s no fixing them. You can’t go back in time. Obviously, there’s no time machine. And so, having a good plan will allow your advisor to get your risk capacity. And then we use knowing your number, knowing what your risk number is, and getting this type of reporting on your behalf is so helpful because as Derek was mentioning, now you know if I build a portfolio in a certain way that historically speaking because past performance is no guarantee of future results, but historically speaking, okay, here’s how high it would go on a great year like 2013 and here’s how low it would go on an awful year like 2008. And you can then make an educated decision to say, “Yes, I’m comfortable with that range.” I’m comfortable with, “Hey, I’d love to get as much as I can, but I certainly want to set my floor to how much risk that I’m comfortable with at this point in my life or in my career.”

Derek Gregoire: Yeah. And so, when someone comes into our office and we’re building out a plan for them, this is crucial because we need to set guidelines and like, what’s those things on the side on the road, on the highway, that bump when you go over them?

Matthew Peck: Yeah, right.

Derek Gregoire: So, a lot of times we’re building a plan we’ll say, “Hey, based on your plan, you have the capacity to take this much risk.” And based on that, maybe it’s a 45 risk score. Now, we have a few clients that are lucky enough to have huge pensions where we’re talking 30,000, 40,000 a month and some obviously not. That’s not the norm but we have several clients that have these high pensions where there is capacity. They could have a 90 risk score because even if their investments were fluctuating, they still have the income coming in. But even risk tolerance says, “Hey, I know I can take that risk, but I don’t want to. That would be painful if I lost X amount of dollars.”

Matthew Peck: Yeah. And you’re sweating. You’re uncomfortable. It’s no fun. And it’s funny you say that, too, both capacity and end clients because I have a client that single woman had worked, career woman. And so, she’s got great pensions, I mean, literally, and she saved it. She saved a lot. She doesn’t spend a lot. All of her pensions and Social Security cover everything and the rest of her portfolio are almost like one or two stocks that for the companies that she worked with. And so, yeah, her risk numbers was an 80 and it’s like, well, her name is Karen. It’s like, “Well, hey, you can stay there if you want. I mean, you have the capacity for it, but now you have the tolerance for it.” And I love those types of conversations because your advisor is who should tell you your capacity. The advisor is the one that should say, “Okay. Hey, this is how much risk you should or should not take.” But then with the help of the report, well, the plan will then give you the capacity. The report will then help with the tolerance aspect. And so, that combination of how the consumer, how the client feels with how the advisor feels, that’s how you bring those two together to truly get the good risk profile and a good investment plan.

Derek Gregoire: Exactly. At least clients can where our clients, we feel like are more connected to their money than ever because they have a portal they can go on. They can see their plan in real life every day. They can see their risk number. They know their risk capacity. They know their risk tolerance. So, it’s really about have knowing. Once you have confidence in what’s being built for you, then I feel like you can go enjoy retirement knowing that this is something you don’t have to worry about every day.

Matthew Peck: Well, and just to jump in, to go back to the fiduciary aspect, I mean, I think that’s also why clients are our clients, obviously, in my biased opinion, feel that connection with their money because they also feel that connection with their advisor to know that their advisor is a fiduciary that’s acting in their best interests, that has to put them first. It has to put the plan first. And so, I always joke around that with our clients that we become a small little family shareholder because, obviously, we’re not running a charity. We do charge a certain amount to manage the portfolios and to build plans, but now we’re part of that plan. Now, we don’t want to see it fall off a cliff. We want to manage sequence of returns. We want to manage the underlying portfolios because we’re a part of this now. And obviously, people don’t have to stay with us forever but that’s the intention, at least. We want to be their last advisor and we want to be the kid’s advisor.

Derek Gregoire: Exactly.

Matthew Peck: So, having that connection, I think, on a relationship-wise as well as whether it’s fiduciary or the risk report, it shows you how we start to really bond with our clients and provide, in my opinion, of course, high-quality advice.

Derek Gregoire: Well, that’s the thing is most of our clients, as we have so many good relationships with, it’s all about trust. And they trust us to act in their behalf beyond just knowing that we’re fiduciary. They trust that we’re going to do the right thing for them and their families. And so, I think one of the things if you’ve saved up enough money and you’re taking excessive risk, I would have a risk profile done on your portfolio because Warren Buffett, I’m not going to say it exactly like he said it, but basically, he said, “It’s insane to risk what you have in order to obtain what you don’t need.” So, think about it. It’s insane to risk what you have in order to obtain that what you don’t need. Meaning, if you’re up 25, nothing in the fourth quarter of a football game, you’re probably not going to throw a Hail Mary. You’re going to run the ball, run the clock out, and be safe to get the win. Just like as you’re getting ready for retirement, if you’re taking a lot of risk and you’re getting to that finish line or getting close to it, why bother especially if you’ve saved enough to be okay?

So, one of the things that I also recommended, I’m going to go back in the second, Matt, but almost like taking a retirement readiness quiz, we’ve also put together, whether it’s a guide to SHPGuides.com, we also have a quiz that you can take. It takes about 5 minutes and it’ll provide you a report of what some of the areas you might be missing in your plan. So, that’s simple. It’s easy. Again, just the way we can try to help educate you as much as we can, just go to SHPQuiz.com. That’s SHPQuiz.com and you can take the quiz, see where you are, see if you’re ready for retirement and go from there. So, Matt, we have a couple of minutes here. Closing thoughts? I know we talked about sequence of return risk. I know we talked about fiduciary. We talked about investments just being one piece of the overall puzzle. Anything else that we should get that we should talk about?

Matthew Peck: Well, I think just the last little part, quickly, is same as you should ask the advisor if they’re a fiduciary or not, you should also ask the advisor how they’re paid. A lot of broker-dealers will get paid if they sell specific mutual funds. I mean, we do use mutual funds here at SHP but we make sure that we use institutional shares, no loads, that type of clean investment style. And same with what are called ETFs or exchange-traded funds. Those are also a very low-cost way of building a portfolio but it goes back to obviously knowing your risk. It certainly goes back to answering that question or asking those questions of how they’re paid and whether or not they’re a fiduciary. And we certainly welcome everyone to come in and I’d be happy to share how we’re paid and how we’re not, how we are fiduciary and how we are paid, and how as an advisor, we’re on your side of the table. So, those are just great questions to ask either in your current relationship or if you’re about to enter one.

Derek Gregoire: Yeah. I know we tried to make some jokes about the show, but this is real life important information. You know, like you said, Matt, you get one chance at retirement and then that’s it. And so, we want to make the best of it. We don’t want to risk it. We don’t want to leave any stone unturned. And again, we’ve seen when you talk about fees and so forth, I mean, I can count so many times over the last 20-plus years that we’ve started the company, different advisors talking to us here about clients coming in, paying like 1% to 3% in fees between like annuity costs and all these other fees. And then it’s like, is it worth this money? I mean, sometimes it could be 100,000 a year in fees, 70. This is real money. And they said, “I had no idea I was paying that much. And for the value I’m getting, sometimes I get a review, sometimes I get a call, sometimes I get a birthday card but there’s not much beyond that.” And so, as you’re getting ready or if you’re in retirement, please don’t kind of second guess it. Don’t leave any stone unturned or make sure every I is dotted, every T is crossed.

And so, that’s what we’re trying here to help you do. Our offices are right on the waterfront in Plymouth, Mass. We also have offices in Hyannis and Woburn and Braintree, if that’s easier. But Plymouth’s our main office with most of our employees and our staff. Again, we’ve been doing this 20 years. So, look, if you’re saying, “Hey, I just want a second opinion,” or, “I want to make sure my risk number is where it should be,” or, “I want to make sure I have a plan that covers all aspects,” come in for a cup of coffee. There’s no charge. There’s no obligation to do so. Obviously, there are minimums that do apply, but we want to make sure we point you in the right direction for your retirement. So, in order to book a visit, super easy, the number is 508-276-4109. Once again 508-276-4109 or you can book a meeting and get a ton of good information right online at SHPFinancial.com. Again, that’s SHPFinancial.com. Thank you so much. Have a great rest of your weekend and week ahead and we look forward to talk to you next week right here on The Retirement Roadmap brought to you by SHP Financial.

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