Well hello there. Because none of us knows what the market’s going to do in the window of time leading up to your retirement. If you stay growth heavy right up until the end of your working years and the market drops, you could find yourself retiring with a lot less money than you expected. On the other hand, if interest rates fall right before you retire, moving to income suddenly could leave you stuck with lower payouts than you might have locked in earlier.
Listener Question: Growth vs. Income
And this is where another listener question that we received ties in perfectly. We’re gonna take time to answer it. Karen from Sacramento wrote in this, I’m five years away from retirement. Wouldn’t it make sense to keep pushing for growth while I’m still working and then just switch to income once I stop?
And Karen, that’s a logical thought. And of course that’s exactly what we’re talking about. That’s exactly what most people think. The problem is though, life doesn’t always cooperate with the plan. What if the year you plan to retire happens to be the year that the stock market drops by 30% or more? If your strategy is to flip the switch that year, you’d be locking in big losses at the worst possible time.
Gradual Transition to Income
That’s why the gradual approach works much better. By slowly transitioning to income first over a number of years, you reduce the risk of bad timing and you smooth out the bumps in the road. Think about it this way, extremes are rarely good. All growth and no income leaves you exposed to market downturn when you need the stability. All income and no growth too early could limit your ability to keep up with inflation. The sweet spot is somewhere in between shifting gradually as your priorities change.
Certainly, Karen, I hope that helps answer your question. I know your thought is logical, but the problem is, is that if you wait too long, you could be putting yourself in a risk of not having the amount of money you planned for retirement.
The Risk of Waiting Too Long
That’s why waiting too long usually doesn’t make sense. If you retired in the last 10 years and you waited until the last minute, you got away with it because the market’s done really well. But if you’re gonna retire in the next 10 years, the question then is, what’s the market going to do right before you wanna retire? That’s the risk that you’re taking.
If you’d like to learn more about how to get known growth in your portfolio so that you can have a predictable stream of growth that we had talked about and not have to rely on unknown growth. In my new book, More Life Than Money, I wrote chapter five all about that, the difference between investing for capital appreciation or investing for income. I’ll send you More Life Than Money, absolutely free of charge. You’ve just gotta give us your information and ask for it. To do that, go to providencefinancialradio.com/. Once again, it’s providencefinancialradio.com/book. Leave us your information and we will go ahead and get it right out.
You’re gonna enjoy reading it though, so you can learn how to have known growth instead of unknown growth. To get your free copy of More Life Than Money, go to providencefinancialradio.com/book and it’ll be on your doorstep shortly. Thank you for staying tuned in. My name is Anthony Sro. You’re listening to the Providence Financial Retirement Show. We’re talking about whether or not you and your advisor are speaking the same language.
Understanding Growth vs. Capital Appreciation
We’ve already had a lot of conversation up to this point about the difference between what they mean when they talk about growth versus what you mean when you’re thinking about growth, and there’s a significant difference. One of the questions that I get all the time is this, Anthony, if income planning is so important for retirees, why don’t more advisors do it? Why do so many advisors focus on growth in the form of capital appreciation?
It’s a fair question, and the answer goes back to how most financial advisors are trained. The vast majority of them start their careers at a big Wall Street firm. Here’s the thing, Wall Street figured out a long time ago that if they keep clients invested in growth-oriented products that are generally designed for capital appreciation, they make more money. Growth products usually have some type of capital appreciation associated with them. Those products usually carry higher fees and commissions, so the firms profit more and the advisors who learn in that environment are taught to think that way.
This is where early experiences really matter. Think about fishing. If you grew up learning to fish with nothing but a worm on a hook, chances are that’s still the first thing that you reach for today. Even though there are lures and other techniques that might be working better, you’re probably still fishing with a worm on a hook because those early lessons shape the way you think.
The same thing happens with advisors. They learn the Wall Street growth-first model early in their careers, and those habits stick. There’s another piece to this as well. When advisors start out young, most of their clients are probably their own age folks in their thirties and forties who are still working and saving. And for that stage of life, growth-first strategies make sense. If you are decades away from retirement, capital appreciation is a reasonable way to build wealth.
The advisor sees success with that approach and assumes it’s gonna work forever. The problem comes later when their clients begin reaching retirement age. The advisor never really makes the shift even themselves. They keep giving the same growth-oriented advice, not realizing that their client’s needs have changed. The result: retirees end up with portfolios that may have worked while they were saving, but don’t provide the income and stability they need once they’re drawing money outta their accounts in retirement.
Why Growth-Oriented Portfolios Persist
Let’s be honest. Growth-oriented portfolios are easier to sell. They sound exciting. Let’s put you in a strategy where your money can double. That’s a lot flashier than saying, let’s create a steady stream of income. The truth is reliable income doesn’t always sound flashy or exciting. In retirement, though, it’s exactly what you need.
There’s one more consideration though, and that is the ego factor. Some advisors like to talk in ways that make them sound sophisticated. The more technical and complex, the better they feel about their expertise. Here’s the irony though, if their clients don’t understand what they’re saying, they don’t look smart.
Does this mean that growth investments are bad? Of course not. Growth has its place, and younger investors should absolutely take advantage of it. When you hit retirement, though, your priorities shift. At that point, the advisor who’s still stuck in the Wall Street growth-first mindset may not be the right fit for you anymore.
Bottom line is this. Most advisors push growth because that’s how they were trained, and that’s how the industry rewards them. It’s not necessarily malicious, it’s just habit. If you’re in or near retirement though, you can’t afford to stick with an advisor whose mindset hasn’t shifted with your need. You need someone who understands that income comes first in retirement, and growth should take a back seat.
Known Growth vs. Unknown Growth
The question that you have to answer is, what would you prefer? Would you prefer to be in investments where the growth is unknown? Maybe you grow, maybe you don’t. Investments that involve a high degree of market timing, or would you rather be involved in investments that are gonna give you known growth through interest and dividends?
If you’re wondering the same thing and you just don’t have enough information and would like to learn more, we’ve put together a short animated video that talks about the difference between investing for income or investing for capital appreciation. I’m gonna send this to you. Absolutely free of charge, if you want it, you just have to ask for it.
You can do that by going to providencefinancialradio.com/video. Once again, it’s providencefinancialradio.com/video, and you’ll get an email shortly with a video that you can just press play and watch right on your computer. It’s animated, so it’s really fun to watch, but it’s also very power-packed because we’ve spent a lot of time wordsmithing it to explain what the difference is between unknown growth and known growth.
To get your free animated video emailed to you, just go to providencefinancialradio.com/video and you’ll have it shortly. I’m Anthony Sro. You are listening to the Providence Financial Retirement Show. We’re talking about whether or not you and your advisor are speaking the same language after everything we’ve talked about today.
Speaking the Same Language
Speaking the same language, redefining growth, and shifting from unknown growth to known growth. It really all comes down to one question. Do you truly understand what your advisor is telling you? You’d be surprised how often the answer is no. Many people come into my office and when I ask them to explain their portfolio, they kind of shrug their shoulders.
They know a few key buzzwords, but they don’t really understand what they own or why they own it. That’s a problem. If you don’t understand your investments, how can you feel confident about your retirement? Sometimes this happens because clients are afraid to ask questions. Let’s face it, nobody wants to feel embarrassed. Men especially are guilty of this. They’ll nod along in an entire meeting saying, “Uhhuh, yep, I get it,” when the reality is they’re lost. They don’t wanna look like they don’t know what’s going on, so they stay quiet. The result: they leave just as confused as when they walked in.
Other times it’s because the advisor isn’t really listening. They’re too focused on showing what they know rather than understanding what the client needs. They keep using industry jargon, layering on charts and statistics, and the client gets left behind. That’s why I believe that one of the most important things to look for in an advisor isn’t just knowledge or credentials. It’s connection.
Do you feel like this person gets you? Do they speak in terms you understand? Do you feel comfortable stopping them mid-sentence and saying, “Hey, hey, hold on. Wait a second. Explain that to me in plain English?” And do they respond with patience or are they irritated?
Advisor Analogy: Doctors and Communication
Let me give you a quick analogy. Let’s go back to doctors again. If you meet with a specialist and they start rattling off a bunch of medical terms you’ve never heard before, how do you feel? Probably overwhelmed, maybe even scared. But if that same doctor slows down, draws a simple diagram, and explains it in everyday language, suddenly you’re calm and you know what’s happening.
It’s the same with financial advisors. The information may be complex, but the explanation shouldn’t be. Earlier in the show, I mentioned that here at Providence Financial, one of the compliments that we often get is the fact that on my show, this Providence Financial Retirement Show, and in my book I speak English. It’s very understandable, and if you’ve been listening to this show, then you know that to be true firsthand.
I also wanna point out something else though, that I often see clients who prefer female advisors. The reason is simple: women tend to listen differently. They often take more time to connect, ask questions, and really hear what the client is saying. That doesn’t mean male advisors can’t do the same thing. It just highlights how important listening and empathy are in this business.
The best advisors, regardless of gender, are the ones who combine technical knowledge with the ability to communicate and relate. Here’s the truth: if your advisor isn’t connecting with you, it doesn’t matter how brilliant they are. If you don’t understand what’s being said, if you don’t feel comfortable asking questions, if you leave meetings more confused than when you walked in, then you’re probably dealing with the wrong advisor.
Retirement Planning is About Understanding
Retirement planning isn’t about how much your advisor knows. It’s about how much you understand. You should never settle for a relationship where you feel talked down to, or ignored, or left in the dark. The right advisor is one who’s gonna make you feel heard, who explains things in a way that you understand, and who helps you feel confident about the road ahead at the end of the day. Peace of mind in retirement doesn’t come from charts and graphs or industry jargon. It comes from clarity, and clarity only happens when you and your advisor are truly speaking the same language.
If this is the first time that you’ve kind of thought about it this way, maybe it started to actually make sense to you, but just in a way that you’ve never considered it before. But in my new book, More Life Than Money, I spent an entire chapter talking about the different kinds of advisors. And I also talk about the difference between investing for unknown growth and known growth. I also talk about 10 other more common mistakes that I often see retirees make over my 26-year career.
Being a retirement advisor, I would like to send you a copy of More Life Than Money, absolutely free of charge. You just have to ask for it. And to do that, all you need to do is go to providencefinancialradio.com/book. Once again, it’s providencefinancialradio.com/book. Give us your information and a brand new hardcover copy of More Life Than Money will show up on your doorstep very shortly within just a couple of days.
To claim your free copy of More Life Than Money, just go to providencefinancialradio.com/book and we’ll get it right out. You’re gonna enjoy reading it. I’m Anthony Sro, and I certainly hope you’ve enjoyed today’s show, and I hope I’ve spoken English to you in a language that really makes the concept I’ve discussed very understandable.
Thank you for staying tuned in today to the Providence Financial Retirement Show. I certainly hope you’ve learned something that will give you more confidence and clarity in your retirement so that you can have the peaceful and stress-free retirement that you deserve.
Once again, I’m Anthony Sro. You’ve been listening to the Providence Financial Retirement Show. Have a great week, everyone. God bless.
Disclaimer: This transcript is provided for educational and informational purposes only and reflects a general discussion from a live radio broadcast. It is not intended as personalized financial, tax, or legal advice. Individual circumstances vary, and listeners should consult a qualified professional before making decisions.