A question I got recently from another syndicator is “Who do you go to for unbiased retirement investing advice?”
This is a great question. Before I give my answer, however, I want to remind you that this article is my opinion only, it is not legal, tax, or financial advice – always consult your professional team to get advice relevant to you.
There are at least three different components of this question worth discussing.
The first is about receiving unbiased advice. I don’t believe there is such a thing. Every piece of advice you get, including from me, is biased. The person giving you advice is doing so based on their experience and that makes the advice inherently biased since, if their experience was different, their advice would likely be as well. So instead of trying to get unbiased advice, I suggest being aware of the bias and using that to get as useful a set of information as possible.
Start by getting as clear as possible on what you are trying to accomplish so you can tailor your request for advice appropriately. In this case, when do you want to retire? What are your goals for retirement (e.g. lifestyle, cash flow needs)? Are you looking at leaving a legacy? The answers to these questions will help personalize the advice in a way that helps you get what you are looking for. There is a big difference in the answers to “What should I invest my 401k in?” and “I want to retire by 50 with an income of $150k/yr and leaving at least $1M to charity when I die. I currently 25 and am making $200k/yr in my job, own my own home, and have $50k in a 401k and $25k in other savings. What should my plan be?”
Once you have that clarity, get advice from people who have done what you want to do, since their experience is likely the most relevant to you. Everyone has an opinion, but getting advice from people who have never done what you are trying to do isn’t going to be as useful or insightful since they don’t have the real-world knowledge about the problem you are trying to solve. Think about who you would be better off getting skydiving advice from – a navy seal or someone who has never been on a plane? Seems obvious, right? Similarly, in this case, the advice you would get asking someone who has never had a retirement account, or isn’t planning to retire until they reach 65 (when your goal is 40), is much less valuable than if you were talking to someone who retired at 40 and now runs their own charity, or someone who has a retirement account with millions of dollars in it, or at least someone who has managed retirement accounts with millions of dollars in them. Even in these cases, however, you need to be aware of the biases that come into play based on the advisors experience: a broker at Fidelity is never going to advise you to put your retirement money into real estate syndications while someone who has made a fortune building their own business isn’t likely to recommend a 401k or brokerage account.
This ties in to the second aspect of the question, which is that there is likely no single best piece of retirement advice. Like many real-world situations, retirement is both intensely personal and involves a huge number of variables, many of which you don’t control (or even influence). This makes it really important to understand your current situation as well as your goals, since generic advice is going to have to be filtered based on those factors. Unfortunately, most of the advice that you are going to see, especially financial advice, is overly generalized in an attempt to be relevant to the most people. As a result, while parts of it may be useful to you, it likely isn’t the best advice for your situation. The lack of qualifiers and hidden assumptions associated with this advice also make it hard to understand what applies to you and what doesn’t. Thus, while you may see the same advice repeatedly across different sources, it is unlikely to be the best advice for you.
To the extent possible, I try to develop models (ie spreadsheets) that let me test specify the assumptions that I think are most relevant and evaluate different scenarios to see how robust a particular approach is. You can see an example of this where I talked about why investing in real estate is likely better than the stock market for retirement [1]. Because the assumptions are clear, you can change them and see under what conditions the advice holds up and when it doesn’t.
Of course, because you don’t know what the future will actually bring (where are our flying cars? They were supposed to be here by now) it is unlikely you will have everything figured out perfectly. However, by evaluating the robustness of multiple pieces of advice, you can create your own plan that has both a high probability of working and that mitigates the potential downsides.
The third and final dimension of this question comes from the realization that this came from a syndicator. That implies that the question may be more how can he help his investors get good retirement advice than seeking good advice for himself. Getting this right requires spending the time to understand where the person you are trying to help is coming from and where they want to go. Once you understand that, you can identify the best people for them to talk to, and give them some ideas to start the conversation with. For example, they may need to talk to a CPA (to understand the tax implications of different strategies, such as 401ks being taxed as ordinary income on withdrawal), investment advisors who understand both alternative and main stream investments (to understand how these different assets can fit into a comprehensive portfolio), or someone who has achieved financial freedom in the timeline that they are looking at (so they can see a path they could follow to get to their target destination).
Overall, a great question. What else am I missing?
If you have any questions or comment about this post, please email them to me at blog@mbc-rei.com, I will reply to the questions that are straightforward and will turn the questions requiring more detailed answers into future blog posts.
For additional reading:
- https://mbc-rei.com/blog/where-to-put-your-investing-dollars-rei-vs-the-stock-market-the-numbers-2/2
This article is my opinion only, it is not legal, tax, or financial advice. Always do your own research and due diligence. Always consult your lawyer for legal advice, CPA for tax advice, and financial advisor for financial advice.