Max Out Your Retirement Accounts - Shari Rash

[00:00:00] Speaker A: Foreign. [00:00:06] Speaker B: Welcome to another episode of the Worst Advice I Ever Got brought to you by your friends at Smith and Howard. I'm your host Sean Taylor, along with my producer, JB and today our guest is Sherry Rash. Sherry is a financial planner and the founder of GWA wealth, where she helps people, and specifically single women, make financial decisions based on the lives they are actually trying to build. Today we're going to talk about what happens when what sounds like responsible financial advice actually becomes the worst advice. At least in Sherry's experience. Sherry Rash, welcome to the Worst Advice I Ever Got. [00:00:42] Speaker A: Thanks for having me. I'm looking forward to talking about my bad advice. [00:00:46] Speaker B: Yeah, well, I can tell you we've heard lots of different worst advice. So share with our audience. What's the worst advice you ever got? [00:00:54] Speaker A: The worst advice I ever got was focus on retirement first. Max out your retirement accounts and basically everything else can just wait. [00:01:05] Speaker B: Okay. Well, you know, as a person that's been in the financial industry, CPA industry, it doesn't sound like a bad thing to focus on your retirement, right? Tell me more about the, the background of what you do and the background of this advice. [00:01:22] Speaker A: Yeah, so I am, I'm a financial planner. I have, as you mentioned, I have my financial planning firm and this advice first hit me perf personally, but I see it come up all the time with clients and potential clients. And yeah, on paper what I just said does not sound bad at all. But the problem is, is that it lacks a lot of context, a lot, it lacks some nuance and it's not complete information. My clients and potential clients, single women, they're taking this advice and just running with it and it really can hurt them in, in the time between today and retirement. [00:02:07] Speaker C: Did you get this advice from like one person? Did somebody say that to you? Or is this just a larger financial advice picture? [00:02:14] Speaker A: I don't ever remember having a conversation, someone saying, shari, this is what you need to do. But I mean you can everyone Google's financial advice. We, we go on to AI for financial advice that it's there, right? We don't have to look very hard to be told to max out retirement and focus on, on saving for retirement. It's scary to think about, like when I'm going to retire one day and it is solely on me. So you people find themselves over preparing or freaking out a little bit, if you will, financially about saving for retirement and then it just becomes their sole focus. [00:02:56] Speaker B: So, so I'm assuming, you know, as you were hearing this, the advice makes sense. So I'm assuming you ran with it for a little while. Is that fair? [00:03:04] Speaker A: Yes, I did run with it for a long time until I kind of had this light bulb go off personally. And also with working with my clients going, this can't be the only way. There has to be a modification here. [00:03:21] Speaker B: Yeah, I think another reason it's so promoted, you know, the tax benefit of it. Right. I mean, people point so much to the tax efficacy of doing this. Right. So I'm sure that's a major part of what made the advice, you know, sound and appealing, Right? [00:03:37] Speaker A: Absolutely. I mean, we, we could also say, like, that might not be the best advice is only focusing on this year's tax. Right. Because we'll, we'll, we contribute to our 401ks or anyone contributes to their 401k and they focus on putting money away pre tax to get the tax deduction this year. But that's, you know, short term thinking where in the long term that may not be the best solution for you. [00:04:03] Speaker C: So that's very funny too. Right? It's a short. You think you're actually taking care of your future self, but you're actually thinking about this in short term as you take care of your long term self, which is hilarious. You said you had like a light bulb moment. What was it? What was your like, wait a minute, this isn't working at all. [00:04:20] Speaker A: Had my first, you know, my first big girl job. I entered the workforce in 2008, which, you know, I'm 22 years old and I'm in financial services. And we all know what happened in 2008, which the market just crashed, right? The bottom came out and. But I'm working, I'm earning very good money and I'm just like, okay, I need to start saving for retirement. I'm 22, but I need to save for retirement for something in 40 some years because that's what I'm told I'm supposed to do, or that's what I feel like I'm supposed to do. So I'm socking as much money away as, you know, maxing out, putting as much money away. And in 2008, everything's going down, which means I am buying shares very cheap, right? My, my dollar has very good purchasing power when it comes to buying into the market. And then the next year, 2009, the market recovered and I'm like, holy mackerel, look at all of this money I now have. Like, this is great. I want to keep doing this and like, I should be doing this, right? So Then I just keep on putting more and more money away in my retirement. The end of 2009, I'm going to enter, actually another piece of bad advice. I'm like, well, my lease is coming due. I'm going to buy a house. Because enter the bad advice right here. Renting is throwing money away when renting is a waste of money. So my. I don't want to waste any more money. Let me go buy a house. On paper, I looked great. I bought it and I had no money to fix it up. I had no money to put into it. And I'm like, this doesn't make sense. I make, you know, six figures. Like I should be able to afford to paint my walls, you know, replace some carpets like this. And so like, that was like my first of, like, huh, something's not right here because again, I'm rich. [00:06:22] Speaker C: Why don't I have any money? [00:06:24] Speaker A: That's right, exactly. [00:06:25] Speaker C: That's what's happening here. [00:06:26] Speaker A: Exactly, exactly. And it was kind of just like a, something's off here. But like, I would look at my accounts, I'm like, I have this, I have money, like. And it was just very perplexing to me. And I. But it was like I unintentionally entered the trap that a lot of Americans do in that we have our worth, our net worth, tied up in two places, our retirement and the equity of our homes. And the problem with that is that neither of those are liquid. You cannot access it prior to 59 and a half without paying penalties. You could take a loan if your 401k allows it, but then you're paying a percentage rate on receiving your own money back. And then you're also losing money being invested in the market. So you really can't touch that money without paying penalties. And then obviously taxes, if it's pre tax as well. So it's not a liquid asset. It's there, you can see it, but it's not accessible to you. [00:07:34] Speaker B: So. So just to step back for a minute, we scare everybody to death that they won't have enough money to retire. So they start doing the responsible thing and they sock all this money away and then they can't get access to it, and now they're kind of strapped. That's essentially what the picture that you just painted says, correct? [00:07:53] Speaker A: Exactly. Yeah. It was at that point I had the home and even then I needed a repair to my car. And it was a thousand dollar, you know, repair, not the biggest deal. And I'm like, oh my gosh, like I'm strapped. Like that's gonna break me. It wasn't computing to me. Like I'm like what am I doing wrong here? So then it's like, well I spend too much money and I started going down those rabbit holes and it's like no, I'm not doing anything wrong. I was just doing almost too much of the right thing. Right. I wasn't looking at the today Shari what I need or even the intermediate term Shari and setting myself up appropriately for the intermediate term to not feel so strapped. [00:08:43] Speaker C: Well, there's a stand out there. It's, it's something like 50 some odd percent of Americans would not be able to pay an unexpected $1,000 expense like right now just based on the things if you got something. And so just even having that for people who make money sometimes like you can get yourself in this problem. That's, that's people who have good jobs and good things who are making bad financial decisions as much as it is people who don't make enough money. It's super interesting. [00:09:12] Speaker B: Yeah, you, you're doing everything right. You're being financially responsible, you're saving. I mean we really should. This is your story, your example. But you also advise clients. So I'm assuming you know that trap is what you see happen to a lot of people. [00:09:28] Speaker A: I do, I do see it happen to a lot of people. And it 100 affects you emotionally. Women especially are very emotional when it comes to money and because they're lack a lack of education, lack of understanding, men and women think and speak very differently about money. So we women look at money as far as what can it do for me versus men looking at it as far as like percentages and accumulation and it growing. So women especially if, if I have, if I, I don't have the money saved or my money can't do anything for me, I start to then bring that on personally and it becomes a [00:10:13] Speaker B: whole, [00:10:15] Speaker A: a whole head game of you know, I, I'm, I'm not good at this. I'm never going to be good at money. I spend too much. You start beating yourself up. If you go and seek advice, that person giving you advice back may not be speaking your same language. Especially if you know women are going to like well meaning fathers and uncles and brothers like they're literally not speaking the same money language. So she may leave the me, you know, the conversation going, I spend too much, I'm irresponsible, I'm never going to get it, forget it, I give up. And that definitely it's it's, it happens so often and, but the, the, the emotion of it 100% becomes a thing that then you have to address. [00:11:02] Speaker B: I've never really thought about it this way, but sitting here having this conversation, it's almost like we say we've made this money, we really don't need it for 40 years because that's when life happens. But life happens like in our 20s, [00:11:16] Speaker C: our 30s or 40 years is a long time. [00:11:18] Speaker B: Yeah, right. I mean that's essentially what you're saying. Whether you're a single woman or you're, you know, married with three kids and college tuition. Life happens. [00:11:28] Speaker A: Yeah, it does. There's a lot of life that we live between, you know, starting our first job and, and retiring. And you can still save for retirement without it being in a retirement account. And I think that's where a lot of people get tripped up on that, is that we can still save with the goal of retirement in mind. Doesn't have to be solely in your 401k or in an IRA or Roth IRA. And the benefit is that by saving it in a non retirement account is that it is there for when life happens, when you have the business opportunity, for when you want to get the second home, for when your kid needs braces, whatever it is that would then have the flexibility to use it for whatever you want. And I find that the flexibility is really empowering, especially for women. [00:12:16] Speaker C: Yeah, it's less of a math problem of like, here's how much money I need when I'm 65. Like that's not the question you should be asking. The question is what do I need to actually live my life in like a, a day to day and that becomes like a really a personal thing. I feel like what's happening is a lot of people are trying to take a complicated thing like, like finding out the money for how to live your life and try to make it easy. And that's what people are doing. Oh, look at how easy this is. Just set it and forget it. Put away this retirement and doing a thing. So as you're trying to sell this quote unquote to, to other people, what do you tell them is like important to look at when they're thinking about their financial future? [00:12:55] Speaker A: We have to, there's a process to your, your finances and we need to make sure we're doing, following the process. So then you do have the flexibility which then creates empowerment. I find that many women have, don't feel comfortable making big decisions about their money if they're not confident in the little decisions, we address all of that stuff first and we go down the pathway of checking account, emergency fund. Yeah, I want you to save for retirement, contribute up to the employer match. Right. And then let's look elsewhere. What are your goals? What are you looking to achieve? We're still going to save money. You're still saving, you're still investing? Well, we, we may use a different vehicle. So then 50 year old you can accomplish a goal and then, and also retired, you can then accomplish a goal and still retire. [00:13:51] Speaker B: I think for a lot of entities, right. I mean most people go to work for a company and the company has a, a benefit plan. The HR department says you should, you know, contribute as much to this. It's a great way to save for retirement. This is a very generic piece of advice that's many times not given by financial planners, just an HR department. And it's not necessarily always in the best interest of the participant. Do I have all that correct? And do you see that with your clients? [00:14:19] Speaker A: Absolutely. And I think the biggest, the message from here is if you're receiving financial advice and it's just like a one liner, like contribute to your 401k or you know, from the HR person, like they don't know anything about you, they don't know anything about your situation. So receive and receive it, take it in. But that doesn't mean you have to just completely follow it. And that even goes to like what you hear in a podcast, what you read in an article. Like, I see so many women diying it right now because they're hearing, oh, I should buy this stock, I should do this, I should do that. It's like, yeah, but they don't know anything about you. So like you need to have a trusted resource where they know everything about you financially. You can say, I heard this, should I do it? Then you can actually make those decisions in an educated way. And I think that that's what is the missing piece is that we're just taking all this random advice and implementing it to their lives. And the people giving it don't know you. [00:15:20] Speaker C: Is the rise of, you know, social media and financial advice in 27 seconds and all these things making this problem better or worse? [00:15:29] Speaker A: It's making it worse. I mean it's, it's more people are becoming empowered and they're researching their about finance and money and that's awesome. But just because you heard it on a podcast or read it in article doesn't mean it's the best advice for you. So take everything and Bring it back to you and what is the best for you? And that's, that's the part that I think is missing is what's the motivation of the person saying all of this stuff, giving this advice? That's what I would say is bring it back to you. There's great advice out there, but just because it's great advice doesn't mean it's great for you. [00:16:11] Speaker B: So, Sheri, before someone maxes out on a retirement account, what are the factors they need to consider? [00:16:17] Speaker A: Their, their first, their liquidity. Can you afford that? It's, it's great on paper to max it out, but can you actually afford max. What does that mean as far as a reduction in your paycheck? Also, like, how do you feel about taxes in retirement? Right. We, we've talked a lot about pre tax. So are you okay with having, you know, a 30% IOU to the government on this pile of money that you're accumulating? [00:16:45] Speaker C: The least favorite question to any millennial, and probably soon to be Gen Z, can I afford that before I buy it? Nobody wants to ask that question. [00:16:56] Speaker B: To follow up on that, you talked about employer match and maybe contributing up to that. Can you talk about that and maybe just how that sounds, like maybe that's the benchmark you want people to get to. And then beyond that, let's evaluate. Is that fair to say? [00:17:11] Speaker A: That's, that's, that's correct. So an employer match is, and every company is different. So they may say, well, we match 6% into, into the retirement plan. So if you, but you need to put in 6% in order for us to match, quote, unquote, the 6%, so it's free money that they're putting into your account for you, you would need to finance, find out the nuance of your own particular plan. But all in all, employer match is a great thing because it is free money. And that has been created instead of the pension where with the pension the employer would just give you a paycheck for the, for the rest of your life when you retire. Well, most companies can't afford that, so they've, they replace the pensions with 401ks, which are defined contribution plans where you have to contribute to it. But then their way of having some skin in the game is that they will also contribute money to your account on your behalf. So yes, if, if your employer offers a match, take, generally speaking, take advantage of it because that is free money. If you're not contributing up to the match amount, which there's a percentage you're missing, you are, you are leaving money on the table. So that is generic advice that, you know, fits most people. [00:18:35] Speaker C: Well, that's what we're talking about too, right? It's like it's not about not doing any one thing, it's about maximizing what you're doing. Absolutely. [00:18:43] Speaker B: Generally speaking, how should a young person just getting started in their career or somebody who's just working for themselves, right. Be thinking about what to spend, what to save, what vehicle to save it in? Like, generally, how do they even begin to approach that? Because most people don't think they need a financial plan when they're just getting started. [00:19:04] Speaker A: And I would say to, that is, if you have financial questions, you could use a financial planner, right? You can use the financial advisor. And if you, if you can't find one that will work with you because you don't have enough money, quote unquote, then you just haven't found the right one yet. Because there, there are, you know, thousands and thousands of financial advisors, financial planners out there and every single one of them is different. And a lot of them work now in, in a, in a fiduciary capacity, meaning they're legally obligated to act in your best interest. But what that also means is you could just sit there and talk to them and pay for their advice and so you don't have to have any money. So there are some planners that will just say, hey, work with me hourly, ask me all of your questions, I'll answer them and then maybe I'll see you in six months or I'll see you in a year when you have more questions, whatever it is. So I would say, you know, if, if, if financial advice is something you're seeking, you can get the answers out there from a professional that's not on TikTok. And yeah, it'll cost you, but I guarantee, Well, I can't, I can't say the word guarantee, but I'm confident you'll get the, a good ROI on the, the money you are putting out for, for that advice. But I mean there are, there are financial rules of thumb out there that, that are good, you know, as far as how much you should have in an emergency fund, like three to six months. But again, three months, six months. Those are two very different numbers. What works for you? It could help just talking that stuff out with someone, setting a budget. I'm not a big fan of budgets because I think restrictive and they don't work for, and I know they don't work for 70% of the population, but having some guardrails around your spending, automating your savings. Savings, you know, looking at what you can actually save in a realistic way. I find that sometimes people are too aggressive with what they think they can save each month. So if you say, like, I'm going to save $1,000 a month into this account, but like you end up having to put things on credit cards in order to stay afloat, then you're, you're, you're saving too much. You're being too aggressive. So there definitely are some financial rules of thumb that someone that's young can implement pretty easily into their financial life. [00:21:32] Speaker C: You said a lot of people, like 70% of people can't follow a budget. Like, what's that about? Why not? [00:21:38] Speaker A: Well, budgets. Okay, here, here's a whole nother episode we could, we could talk about. I. But budgets in general are restrictive. They, you know, if I were to say, jb, how much do you spend each month? You're likely going to rattle off like your basic expenses, like, here's my mortgage, here's my utilities, here's my car payment, here's this, here's that budget. And budgets can do a good job at tracking that. But it's inevitable. As soon as you say, I'm setting a budget and I'm going to send, I'm going to spend X amount on gas, you're going on a road trip, gas prices went up. Something out of your control happened where you're blowing your budget. Budgets don't do a good job of accounting for the one off stuff. Like the things that happen maybe once every six months. But we're always surprised when we get the bill, but we know it's coming. My HOA fee, my car insurance, right, like, oh, dang, I just got this bill. I know it's coming every six months, but I forget about it. And that's the stuff that puts people in credit card debt because they don't think about it, they don't account for that in their budgets. And they just, you know, just spend it. They just put it on a credit card and. Because their budget's already spent. So, yeah, I mean, budgets in general, it's not the way our brains work. And it, they lack flexibility, which is why they don't work for most people. [00:23:03] Speaker B: Going back to your previous point about financial planning and when to do it, you're saying it's just sound advice to use the financial planner to build the, the foundation, to build the basics. Do I have that right? [00:23:16] Speaker A: Correct. We enter adulthood, we enter the Workforce, we graduate, college, whatever, whatever we're doing, we're just expected to just know how to manage money. And that's not fair to young adults entering. It's not fair to anyone to just be expected to know how to do this if we've never gotten the education. [00:23:36] Speaker C: So that's a job of that, right, with educating people. You know, I don't need to know that the mitochondria is the powerhouse of the cell. Maybe tell me how to do my taxes would be more helpful information. [00:23:47] Speaker A: Exactly, exactly. So, and this is so working with a professional who, I mean, and it's like, this is what I went to college for. This is what my degree is in. So I have a chiropractor appointment later today. I didn't graduate college and think I knew how to adjust backs because I'm just expected to know how to. That's what they went to school for. Like, so, so we're, we're, we're just expected to know this stuff about money without any formal training on it. And that's a lot of pressure to put on ourselves. So that's where the financial planner can help you and give you that education that you likely never got. [00:24:25] Speaker B: What should someone look for when they're evaluating a financial planner? [00:24:31] Speaker A: I love this question. So definitely you want to go and go on a couple of first dates with some planners. And you don't have to also be tied to location. Most planners can, you know, meet on Zoom. They're licensed, you know, so. So you don't have to just have someone in your town. I actually wrote a blog post a long time ago about like 10 questions you should ask when interviewing a financial advisor. And so have the, have those, have some questions ready. But then you're going to get a vibe if you're sitting across from them or if you're looking at them on the computer screen, you're going to get a vibe from them. I like them. I'm comfortable around them. You have to like your advisor. If you don't, you are never going to have a fulfilling financial relationship with them. Because like you said, Sean, like a major life event happens. Well, what always is associated with the major life event? Money. So a financial advisor or your planner will be, when a life event occurs, one of like the first five phone calls you make or should be. And if you don't like them, you're never going to call them. And then your money is going to suffer as a result of it. [00:25:45] Speaker B: Sherry, as we close, I think what we're hearing here is that People want to do the right thing. So what advice do you give people now when they're trying to do the right thing with their money? [00:25:55] Speaker A: The advice I give is what is your right thing? And if it's leaving money to your children, if it's getting out of debt, what's going to make you sleep better at night? And then let's create a plan around that, because your right thing could be completely different than someone else's. [00:26:14] Speaker B: That's a great point. That's a great point. I think we all try to build this universal, prescribed picture of someone who's done it right. You know, they have this much in retirement. They've got no debt. They do this, they do that. But that universal picture of what the right thing is is not necessarily fair and not yours. Yeah. Yeah. Well, I think today the episode, Sherry, has been wonderful. I think what you've brought to our listeners is something that seems universally sound but can unintentionally put people in a pickle in a bind. And so thinking about it earlier on as they're getting started and getting the advice of people like yourself is probably a great idea. Sherry, what can they do to get in touch with you? Tell share with our listeners if they wanted to get in touch with you and ask some questions, how they can do that. [00:27:10] Speaker A: Sure. My firm is called GWA Wealth. My website is gwawealth.com so you can go there, learn more about me, schedule a call, and I call it, start the conversation. Because that's all we're doing is we're just talking about what's going on in your financial life. I also have a podcast called Everyone's Talking Money. And this is where we bring the emotions and the financial of money all together. So you get advice, but then it also talks about how does money affect us. So I put out episodes there weekly and you can find me wherever you listen to podcasts. [00:27:50] Speaker B: I like that. Start the conversation. I'm excited that we started the conversation today. Sherry, thanks so much for joining us. [00:27:56] Speaker A: Thanks for having me.