Unpack Your Financial Baggage: How to Battle the Misconceptions of Retirement Planning

Schuler Books

2660 28th Street SE

Grand Rapids, MI 49512

(616) 942-7330

www.schulerbooks.com

Unpack Your Financial Baggage: How to Battle the Misconceptions of Retirement Planning

ISBN 13: 9781948237772

ISBN 13: 9781948237826 (e-book)

Library of Congress Control Number: 2021905819

eBook ISBN: 9781948237826

Copyright © 2021 Lou Melone

All rights reserved. No part of this book may be reproduced in any form except for the purpose of brief reviews, without written permission of the author.

Printed in the United States by Chapbook Press.

"You cannot escape the responsibility

of tomorrow by evading it today."

– Abraham Lincoln

Contents

Introduction: The Misconceptions Inherited from Generations Past Are Carried around in Your Mental Suitcase

I. Alphabet Soup of Credentials and Advice: Chauffeur Knowledge

II. The Plan: The Silent Killer is Revealed

III. The Principles and Practices: The Critical Variables that Dictate the Success or Failure of Your Family’s Most Cherished Long-Term, Real-Life Goals

IV. The Practices

V. The Portfolio: The Countercultural Revelation and The Bucket Approach

VI. The Power of Compounding

VII. The Anatomy of Investor Returns: From Stimulus to Investor Return…How the Brain Works

VIII. Bear Markets and Corrections: Life-Boat Drills for Financial Freedom

IX. Market Corrections

X. Market Bubbles/Manias

XI. The Value of Advice: Is Your Advisor Worth the Price?

XII. Annuities: The Good, The Bad, and The Ugly

XIII. Summary: All I Want to Know is Where I’m Going to Die…So I will Never Go There.

About the Author

As a board CERTIFIED FINANCIAL PLANNER™ professional, Lou provides comprehensive financial planning strategies for higher net-worth families to help protect, preserve, and grow their current levels of wealth and plan for retirement.

With over 25 years of financial planning experience, Lou has focused on helping answer two critical questions, which most investors desire:

Do you know exactly how much money it is going to take for you to retire in comfort?

Do you know how much money it is going to take to remain comfortably retired?

Lou has championed a personalized and simplified approach to financial planning that is grounded in behavioral investing, with a strong commitment to a fiduciary standard of care.

Lou began his career with Dean Witter which merged into Morgan Stanley. He then moved his practice to Smith Barney, which merged into Citigroup. Decades ago, Lou recognized that many larger firms in the financial services industry were more focused on selling products than acting in the best interest of clients. As a result, he launched the registered investment advisory (RIA) firm Budd, Melone, & Company to provide comprehensive financial plans that are free from product conflict and put the client’s interest first.

The final step for Lou was to launch Melone Private Wealth, which remains dedicated to meeting the fiduciary duty every day. Melone Private Wealth is a goal-focused, planning-driven firm aspiring to deliver the industry’s premier client experience with carefully curated financial plans that are uniquely customized to each family’s retirement goals, while using the most advanced technology.

This book is a continuation of Lou’s dedication to teaching personal financial planning. Lou’s simple and straightforward approach to explaining difficult financial industry concepts is part of his client-centric approach, which resonates with audiences that range from accountants to wealthy families to business owners to anyone who is struggling to understand the financial planning industry.

Lou has been recognized for his work and exceptional unending client care standard by being named a nine-time winner of the prestigious Five Star Wealth Manager Award as seen in Forbes/Fortune Magazine and Hour Detroit Magazine.

Lou’s unique perspective on financial planning has not gone unnoticed as he has been published or interviewed by Thrive Global, Authority Magazine, Civic Center TV, and DBusiness Magazine’s RJ King for his How to Grow Business podcast. Additionally, he is a past columnist for DBusiness Magazine, Detroit’s Premiere Business Journal. The accounting profession recognizes Lou’s financial planning acumen as he is a past Contributor to the Michigan Association of Certified Public Accountants’ (MICPA) knowledge hub, The Business Edge.

He has been a sought-after speaker for the MICPA since 2001 on topics that have ranged from Behavioral Finance, Comprehensive Financial Planning Process, and Types of Qualified Plans for Small Business Owners. In addition, Lou acts as a consultant for the MICPA Financial Planning Task Force.

The accounting profession is not alone in seeking Lou as a speaker and advisor as he presents planning/behavioral finance seminars to executive retiree groups at Fortune 500 companies, as well as other small to mid-size companies.

Introduction

Someone is sitting in the shade today because someone planted a tree a long time ago.

– Warren Buffett, chair Berkshire Hathaway

Tens of thousands of buffalo are stampeding through the open plains. The sun gleams down, trying to find its way through the immense dust cloud covering the landscape as this thunderous herd of loyal followers is led by the traditions and habits of a lead buffalo. The members of the herd are unaware of it, but they are racing towards the cliff to face a certain death.

Comparably, tens of millions of people are stampeding into retirement on their last major financial run expecting a retirement lifestyle of independence and dignity. Like the buffalo, they are following a leader off a financial cliff, due to the traditions and habits that have led to a misunderstanding of long-term planning—not to mention the prehistoric cognitive bias that is tugging at their behavior. In this case, the leader is not a person, but an archaic set of principles and practices hauled around in their minds by generations of misinformation and a culture that works against long-term planning. These ideas are packed into a mental suitcase that many people carry with them through retirement planning.

Your suitcase is full of these money habits and the traditions that come from our culture. You think to yourself, How in the world did I get this much stuff in here? I don’t remember even packing my suitcase, but it’s full. I won’t get to where I want to go with this much stuff, and it’s too heavy of a burden to carry around. You pause one more time and reassess thinking, "This can’t be mine." However, as you mentally check its contents, you realize, yeah, it’s yours!

For up to sixty years you have been packing your suitcases – unconsciously – with inaccurate and unclear financial strategies and decisions. As you visualize your next thirty years, you have finally come to a realization that hits almost everyone at this point in life: it is time to repack my financial baggage to ensure our future; otherwise, my family and the generations thereafter will never get to where they want to go.

The best way to visualize this realization is through an initial conversation between a prospective client (or in this case the Suitcase Carrier) and a financial planner—a conversation which happens daily across America.

This is the mother of all misinformation. Although you may not see it yet—soon you will. With this simple two sentence statement, it is as if a hydra-headed beast of a misconception has jumped out of your suitcase with the focus on terms like money, safe, and market. But I digress, let us continue with the conversation.

We have now uncovered the sister hydra-headed beast of delusion in the suitcase with phrases like stocks are risky, at our age, and market crash. The beasts are knocking the contents of the suitcase out onto the floor. Sorry, back to the conversation.

Over my twenty-five years in the planning industry, with history as a guide—the only guide we have—I have learned that anything is possible. However, two things absolutely ring true:

• Successful investing is goal-focused and planning driven. In contrast, failed investing is market-focused and event-driven.

• Successful investors act constantly on their plans. Conversely, failed investors react continually to the markets.

Pause for a moment and read those last two points above again. Did you read them? Now, again. The wisdom of financial planning and the key to unpacking your misconceptions in the suitcase are wrapped up in these two simple but powerful statements.

You see, this entire conversation (or verbal dance) we have been witnessing, whether you are aware of it or not, has been rooted in two deep-seated unknowable uncertainties. First, the initial questions posed by all clients/prospective clients is nothing more or less than unconsciously asking permission to unload the suitcase, which means permission to stop carrying around the long-held worries that their history, conditioning, and the media have been telling them that they need to worry about.

And second, the concerns about current events, markets, economics, pandemics (or whatever) are never really the issue. The issue is an unasked question from them to the planner: