Exclusive Interview: Sean Wintz, Executive Director of Financial Planning, Edelman Financial Engines

Advisors are Reporting a 50/50 Split Between Clients On Track for Retirement and Those who are Falling Short - in Which Half are You?

Ric Edelman: I want to welcome my good friend Sean Wintz. He is executive director of financial planning at Edelman Financial Engines. Sean has been in this field for 25 years. Prior to that, he was a decorated Navy vet. My good friend Sean, welcome to the show.

Sean Wintz: Thank you. Thank you for having me, Ric. It's a pleasure and an honor.

Ric: Everybody's worried about their retirement security. You deal with hundreds of clients; you're managing hundreds of millions of dollars in assets on behalf of so many people who are so focused on retirement security. What can people do?

Sean: I think one of the critical aspects is to understand retirement, understand where you are in the process and in the cycle. Are you 40 years old and just starting to get into the peak years of earning where you can accelerate savings? Or are you retired? As you've always said, take a long-term approach and build a well-diversified portfolio. Stick with it. Save, save, save. Stay out of debt, keep cash as a mitigating force. Life is always uncertain. Markets are always uncertain.

Ric: How often do you discover when people come to you saying, Gee, I'm not sure if I have enough money to retire...You go through their numbers. You look at their income and expenses and their assets and so on. How often do you discover that they were right to be worried they don't have enough money to retire as opposed to being able to say, Oh, you're fine, you're in surprisingly good shape, better than you thought. How often do you find people in those two different camps?

Sean: I probably say a 50/50 split.

Ric: So obviously the half of those folks who get the thumbs up and congratulations - good for you, pat on the back. Keep doing what you're doing. That's easy conversation. It's sort of like going to the doctor if you don't have cancer. That's an easy conversation. The tests are negative. Good for you. But what do you say to the other half where they really don't have enough money to retire? That's a pretty tough conversation to have, isn't it?

Sean: It is a very tough conversation to have, but I also think it's a critical one. I look back at my mother and God bless her, she didn't have that conversation and didn't know what she was careening toward. And so I think it's really critical to get that sort of course correction in for them. It is a conversation where you're ruining someone's dreams, where they have fantasies of the beach next year and you're telling them that's probably not going to happen.

Ric: All right. If running off to the beach next year is not going to happen, how horrible is the situation? I mean, what generally are you able to say to them? Is that just a couple of tweaks, you know, work another year or two? Or are you telling them they're never retiring?

Sean: So some are a couple of tweaks, some hey, get grid of some debt, save a little more. Probably of that 50, they're probably 10% I would call that hard case that it doesn't look very good and we're going to have to extend your working period out five, 10 more years because there was no planning there and it's just impossible. The numbers just don't make it.

Ric: Or they're going to have to make a radical shift such as moving to much lower cost housing.

Sean: To move in with the kids. There are those conversations.

When You Need to Have a Tough Love Financial Planning Conversation

Ric: Let me give you a takeaway from this that I'm hearing, and I want you to address what I suspect many of our listeners are thinking. Sean, you're describing that roughly half the time people who come to you are in great shape economically, and that's wonderful. But half the time they're not. And in some small portions of those, you're going to give them a really set of bad news. I mean, people aren't going to want to hear that for sure. It's sort of like saying, I'm not sure if I'm feeling that well, I really don't want to go to the doctor because I'm afraid of what the doctor is going to tell me. I'd rather be in the dark. I'm afraid to face my situation. What do you say to folks who are listening to us right now who are like, I don't know if I want to go to a financial planner. I'm not sure I want to hear what they have to say. What's your response to that?

Sean: The reality doesn't change and the information will help you change some of your reality. That's the powerful piece. You are set on a course that's going to fail. So let's get you the information. And armed with information, we can at least have a better shot at a better outcome. Increased probabilities of success versus careening blindly into failure. I think it's you have to face reality.

Ric: And the sooner you do this, the better off you're going to be. The sooner you do this, the easier it is to make those changes.

Sean: When's the best time to start a diet? Yesterday. 

Ric: It's well said. Everything is best yesterday. Whether it's quitting smoking, going on a diet, starting to exercise, starting to save, the best time is always yesterday. So let's do the second-best thing and do it today. All right. Another question that you're getting an awful lot, I'm sure, considering we're in a recession, you know, whether it's official or not, we're feeling like it's a recession people are facing. The opportunity to retire. But that means that no more paycheck from work and that means they're going to be dependent on their investment, income, pensions, Social Security. So should you, all other factors being equal, you can choose to quit your job now and retire - should you or should you keep working until the economy stabilizes? Should you retire during a recession?

Sean: It is, again, dependent. But I look at it quantitatively and qualitatively. Quantitatively, do the numbers support it? And then qualitatively, are you miserable? Are you going to sit at that desk and die? But yes, you can retire in a recession. It is still dependent on your assets, your savings, your debt load.

Ric: And so the message I'm hearing from you is don't assume you shouldn't or can't retire during a recession. Don't make that assumption. Talk to a financial planner and let's get the question answered for your own personal circumstances. 

Sean: Exactly. Therein lies the rub. Talk to a financial planner. Get the numbers crunched. The numbers. People don't know the numbers. And it's critical. They go talk to financial advisor and see what that number is and where you are in the queue.

Ric: All right. Let me shift over to those who are already in retirement. You know, these are folks who have money and a lot of places they're getting Social Security. They have money in a 401k or other retirement plan at work, a 403b or a thrift savings plan or what have you. They've got brokerage accounts, an IRA accounts, they've got bank accounts, you know, money in lots of pockets all over the place. And they have resources available to them in a variety of ways. And they're in retirement. They need income. Where do they draw that income from? Which account do you take from first?

Sean: We take a look at their taxes. We want to be as tax efficient as we possibly can in the account.

Ric: And it's not merely tax efficient for this year, but on an ongoing long-term basis. What's long-term tax efficient? Because a good decision this year might prove to be a really bad decision in future years.

Sean: Exactly. Are you selling your home next year and moving to where you're going to have a large capital gain in the home and you're taking ordinary income or you're taking capital gains or have the flexibility to choose the pool of money to take from based on your taxes. I was going to say, again, it's critical to talk to a financial advisor and see what's needed, which way makes the most sense for you.

Ric: How do you know if you have the right investments in the right accounts? How do you know if your money is properly invested?

Sean: You'll sit down with a financial advisor and you can take a look at your investments. Do I need to take money out of the CD because it's not serving me? And do I have time to maybe get a little more tax deferred growth in the current market environment that I pull money out of savings versus pulling money out of the market since it's down? So we have to take a look at it all again on a case-by-case basis, sitting down in front of a financial advisor going over it all with you. 

Ric: We're talking with Sean Wintz. He's executive director of financial planning at Edelman Financial Engines. Sean, when people come to you and they show you where their money is invested, are you discovering that people are taking more risk than they should or more risk than they realize they're taking? 

Sean: Absolutely. One of the, I think, tenants, especially the last couple of years, where we had some pretty good some would say outlying market returns, folks risk tolerance is a relative thing. Markets are doing well. I can take more risk. And so that's what we're finding. People were taking much more risk than they should have because markets were up and they didn't realize that when markets come down, that risk plays into volatility and that volatility is what is going to harm you when you need to take a fixed amount from the portfolio. So, yes, much more risk than they should.

Ric: And when you tell this to folks, what's their reaction?

Sean: They were like, I don't believe you. Why take less risk?

Ric: It's easy to be up when you're up. The trick is to be up when you're down.

Sean: Exactly.

Ric: And one final question for you, Sean. Social Security, that is a huge item for every retiree. The fundamental question, the most important about Social Security. When should you start?

Sean: If you wait, you get more. You have to sit down and devise an overall plan. But there are those situations where you need the money now, then you have to take it.

Ric: All of these issues explain, I think pretty eloquently the value and the importance of talking with a financial planner. Sean. If somebody wanted to reach you or your colleagues at Edelman Financial engines, how would they do that?

Sean: Go to PlanEFE.com/Ric and request to chat with an advisor.

Ric: That's Sean Wintz here on The Truth about Your Future. He's the executive director of Financial Planning at Edelman Financial Engines. And as Sean said, if you want to reach him or his colleagues, visit PlanEFE.com/Ric. Sean, thanks for being with us on the show.

Sean: Thank you, Ric.

Ric Edelman: Sean and I actually spoke for a lot longer than you just heard. You can listen, watch or read the entire conversation. Just go to TheTruthAYF.com.