17 minute read

Facebook Live Series


Jean Chatzky Interviews: Steve Gresham

Jean Chatzky, educational fellow with the Alliance and founder/CEO of HerMoney, recently spoke with Steve Gresham, chairman of Whealthcare Solutions, Inc., and senior education advisor with the Alliance about how to be proactive and ask your financial advisor the right questions during times of market volatility. This interview originally aired live on Facebook and has been edited for length.

In this conversation, you’ll learn:

  • How to give an advisor specific instructions so they can actually help you reach the objectives that you have
  • How to think about investing amid the current market environment
  • Why protected lifetime income is a crucial component for any retirement income plan

Watch the full video interview on the Alliance for Lifetime Income’s Facebook page.



Jean Chatzky:
I’m Jean Chatzky, and I will be talking with Steve Gresham about your retirement, your money, these uncertain times, and how you can handle everything that is happening around you. I know you’ve got a ton of questions, so we are going to try our very best to provide you with some solid answers. But before we do that, Steve has had an amazing career in the retirement space. I can’t think of a better expert to be sitting with at this time.

Steve, can you introduce yourself? Tell them a little bit about you, where you came from, and how you grew this specialty.

Steve Gresham:
I can, absolutely. I think anybody who spends any time working in the retirement world has done so because their personal story has led them there. I was fortunate to be the oldest of four children. I knew all four of my grandparents.

They all had very, very long lives, and they taught me an awful lot about what it’s like to be an older person. I had terrible tragedy when I watched my grandfather, who retired, lose all of his money in the ’73, ’74 stock market crash, and had to move to another state. So that was ’73, ’74, and my education began early.

When I graduated from university, I was off into the financial business and I never looked back. So I’ve mostly done that since 1980, and I’ve had my most recent run, before I went back to the world of being an entrepreneur, working for Fidelity Investments, where I managed the retail strategy up until the end of 2017.

I am just delighted to be here and see if I can help.

It’s sort of like the pilot who asked the restless fliers, “Would you rather depart on time or arrive on time?”

Jean Chatzky:
We talk a lot, at HerMoney especially, about our money stories and about how these events that happen around us when we are kids, really do have an impact on our lives. Whether or not people talk to us about them, we take in everything that’s happening around us, it stays with us. These are formative events and formative memories.

I listen to you talk about 1973, and I’m wondering if you can explain a little bit about how it’s shaped your philosophy on saving for retirement?

Steve Gresham:
Well, there are several different aspects of it, especially the way you’ve introduced it. Because first, if you have the ability to actually know an older person well, they are a fountain of information to begin with.

My grandparents were not shy at all about sharing their views of the past and what I should do in the future. That had significant impact on me. It was very interesting the way they would talk about how they had gotten to where they were. None of them were particularly successful financially, but they were okay, they were independent. So, I learned a lot about independence and about preparation. They also talked a lot about their friends, who were not as well-prepared, in many cases. But I think to your point, kids pick up on issues, especially issues that cause stress, like to see the stress in their parents or their grandparents. And the stress was obvious, especially when my grandparents had to sell their home.

Jean Chatzky:
Oh, boy. Absolutely. For all of the people who are watching, and the questions are starting to come in. What questions should we be asking our financial advisors right now, if we have an advisor? And if we don’t have an advisor, what questions should we be asking of ourselves?

Steve Gresham:
Well, it’s an interesting time. I’d like to say that financial advisors are there for you when the markets are rising, but they really earn their keep when the markets are not.

A financial advisor, for a lot of people, is a person who should be a confidante, someone who is helping them to prepare, and someone who is thinking proactively. And the reason I say “should be,” in this particular moment in time, is that I think we’ve run a long way over the last 11 years where things were going great, and we have a tendency to be a little bit lazy as advisors or clients to continue to do well.

But along the way, every single one of the clients has been getting older, and we’ve been getting closer and closer to those retirement years, and now is the time to prepare. I would like to be able to say every client is prepared. But I find, unfortunately, that most of them are not. And when I say most, I mean that they don’t have enough of a specific set of instructions for their advisor.

My orientation right now for clients is, “Have you given your advisor specific enough instructions so they can actually help you reach the objectives that you have?” And again, that takes an awful lot of work and I suspect a lot of people could do a better job. I would start right there with an introspective look and ask the question, “Do I really have a plan?”

But an awful lot of people are not comfortable talking about their personal financial situation. I think we have to get over that part.

Jean Chatzky:
Right, what do I want from my money?

One of our viewers is asking about some steps that he can take now, but also in the future, to make sure that his money is protected in times like this. I’ll dip into this one and then I’ll turn it to you, Steve, from my perspective, I think the question is, again, what is that money for?

When we look at the money that we’re going to need in retirement, we want to make sure that we are going to have enough to pay for our essentials. We want to make sure that we are going to have enough to put food on the table and a roof over our heads. There’s this concept that financial advisors rely on called the M.U.G.

M.U.G. stands for a mortgage and utilities and groceries. Some also throw healthcare in there, and that’s your essential expenses.

So I think that the goal is that you want to make sure that you have enough coming in from sources that you can depend on, to know that those essential expenses are covered, by making sure that you’ve got that from social security, any pension income, any other sources of protected income, like an annuity. And then you’ve got growth happening on the side because we need that as well.

What’s your feeling, Steve?

Steve Gresham:
Well, I think you’re exactly right. Most people have a tendency to view retirement as something that is in far off land, and they make it kind of abstract. Then the financial advice industry, sometimes also goes along with that and makes it equally abstract. We’re talking about a point in the future, and then quite often of course, you can never save enough for all the things you might possibly want to do.

There is sometimes this tendency to feel a little bit helpless. It seems like a gigantic mountain, an achievement I could never possibly reach. So, it can be very frustrating to think that, “Will I ever really be able to get there?”

The easier thing to do, like Jean said, is to begin to separate, “What do I have to have?” and use that sort of a security blanket. The M.U.G. analogy is terrific. Let’s use that as sort of a base and think of it like building a house. That would be the foundation. I don’t care what we build after that, let’s get a solid foundation and let’s make it simple. And that’s the place where protected income, which is annuities, pension plans, and social security, fit in. Everything after that, is really something that you must work for. But that is also where the tradeoffs can be.

If something as simple for a lot of people, is, “Would I want to move from my current home to maybe a smaller home? Or maybe I want to get a vacation home and maybe I would move there.” Well, that’s not exactly essential, but you could put a good program in place to work on that topic. Over the years I’ve noticed people do a much better job of saving, and then also investing, when they begin to think of an objective that they would like to achieve. People are very achievement oriented.

I think that’s where it works best. But from this perspective, it also limits the number of accomplishments that you could have or the different number of objectives that you would have, which is what I think causes a lot of trouble as well. If everything’s important, nothing’s important.

Jean Chatzky:
That is very wise, actually. If everything’s important, then nothing is important. Another viewer wants to know, should we continue to put money into the markets right now?

I got to tell you what, I am. I’m continuing to make my 401(k) contributions and I’m continuing to invest in the pre-selected portfolio that I have set up for myself because I know that I’m a lousy market timer, and I don’t even believe that most of us should be trying to do those things.

Even if we just look at 2008, the people who sold out at the bottom and then sat on the sidelines for years, those people are in far worse shape than people who have lived through the past couple of weeks of downturn. I’m a believer that you just keep your money in if you can afford it. If you can’t afford to pay your bills, you lost a job, you’re having trouble right now, then soft pedal those 401(k) contributions. Take that money when you need it. Thankfully, some government stimulus is coming our way, and that’s good, but take care of what you need to take care of. But this is not a time when I think we don’t contribute if we have the money.

What do you think Steve?

Steve Gresham:
Well, it’s all about time horizon and how you feel. Because at the end of the day, you can’t be uncomfortable. There is stress associated with so many other things going on in our lives right now, if your investments are making you stressed, then you should be talking to somebody, like Jean, to help you feel better about what you’re trying to do.

But it really is about time horizon. Time horizon is funny because we’ve got an economy now that has, through the miracle of modern medicine, created longevity without necessarily the guarantee of quality. As you get older, it could be that you are wanting to do lots of things, and you would need to have the income to be able to finance that. You want to try, as Jean said, stay the course because your course could be an awful lot longer course than you may be aware.

Now, on the other hand, there’s a balance there, which is not trying to maintain an investment philosophy that was right for you when you were much younger, and then again, thinking about what really makes sense. It isn’t so much that the time horizon there gets you in trouble, it’s that you have to be a little bit more realistic about your needs to pull money away. When you have a very long horizon, a portfolio that is connected to that time horizon is going to go up and down an awful lot more than one that is set for a shorter period of time.

That’s how pension funds manage their money. So for retirees who are much closer to their retirement date or people who are still on the plan in retirement, they are invested in an awful lot more conservatively on behalf of those people than the people who have got 30 or 40 years to go. So, I examine the time horizon almost more than almost anything else.

At the end of the day no matter what you do, even with your personal health, if you have not educated yourself, you will not know how to pick the right advisor.

Jean Chatzky:
Another viewer says his mother-in-law took half of her total savings out just two days ago, which was a panic move, in his opinion, but she’s 79. I mean, for people who are looking at their plans and they see their plans kind of squashed, what do you think the wise move is?

Steve Gresham:
I wish that we could look back in a couple of years and say, “Boy, Gresham was brilliant for what he told me that particular day talking with Jean.” I think the reality is, look at where this market is. If you were invested in this market, Jean, as you said, this particular bull market kicked off on March 6 of 2009, after a very, very scary period of time in the country and in the world meltdown of the financial crisis. It took a lot of temerity to be able to invest at that moment in time. If you did, then you ran the Dow Jones from 6400 to 29,000. It isn’t as though this entire story has collapsed. Again, it hasn’t collapsed in its entirety.

But I think the reality is, most people are back to where they were perhaps a couple of years ago. I mean the S&P 500 in last year alone, in 2019, was up 29%, and the total return of long-term bonds was 11. We’ve been compounding at almost 18% a year since 2009. The chances are, if you walked back just a couple of years, you might be saying to yourself, “Well, if I had known what was going to happen recently, I might’ve gotten out.” And if we say, “Well, you maybe got out two years ago, you would’ve gotten out too early.” Which would have been worse?

It’s sort of like the pilot who asked the restless fliers, “Would you rather depart on time or arrive on time?” In this case, what we’re saying, is you might have done okay and if you had pulled the plug in 2018, and just put everything away in protected income sources and cash, should you have done that? Well, here’s your chance.

Jean Chatzky:
Well, let’s dive into that concept of protected income. When we talk about protected income, what I think people don’t understand, is that social security is really going to cover only about 40% of most peoples’ pre-retirement expenses. So, you got this budget, and your living expenses, and you retire. Social security is going to cover about 40% of that. About 17% of people in this country are still fortunate enough to have traditional pensions. The rest of us have retirement savings.

From my perspective, I like the idea of taking a chunk of that retirement savings. It’s something that I’ve talked about for years. Not all of it, but a chunk of it, and using it to buy a paycheck essentially, that will last as long as I live, maybe as long as I live and as long as my spouse lives, depending on how we are going to set it up. You do that with an annuity and the SECURE Act, which just passed, basically allows these tools to make their way more into 401(k)s, so we’re going to start hearing more about them. A lot of people are wary of these tools because they have had high fees and have been complicated. They are, fortunately, getting simpler in more recent times.

But what’s your feeling on the balance of this need for protected income versus the need for growth?

Steve Gresham:
Well, I think it’s a very important question, especially for those people who have taken money out of markets, what’s next? And is that money going to go back in if you’re 79 years old? I’m not so sure that’s the right thing to do. And it could be, depending on the market and what else you have.
But I think it’s about objectives and I think it’s about being confident that you have a plan. Again, my experience is that people think they have plans but they’re sort of plans. They’re not firm, they’re not written down, there’s no specific numbers. The great thing about many annuity products, is the ability to create certainty. Certainty of results, certainty of what the payment’s going to be, certainty of timeframe. I think that’s an enormous advantage right now.

Jean Chatzky:
We’ve got some more questions. Should younger folks take advantage and put more towards their 401(k) and individual investments right now? Any other advice around capitalizing if we don’t expect to take money out for 20, 30, 40 years?

I think that is where you can be a little bit more aggressive when you don’t need the money immediately. But I also think that means more money in stocks, and yes, capture that 401(k) match. If you’ve got a 401(k) match, grab every free dollar if you can. If you can do more than that, do more than that. Think about putting some money into your health savings account, as well. That can be a great supplemental retirement account. But what I also think is important, when we talk about longevity, is that retirement is a long time. Retirement can be 30 years.

So how do we think about the fact that we still must be in these waters that feel risky at a time when maybe we won’t be working anymore?

Steve Gresham:
I think that’s one of the most important challenges for the entire society. As I lead off, I was fortunate to know all four of my grandparents. The youngest one died at 83, the oldest at 102.

The issue though about investing and about time horizon, is to create a habit. And Jean, you’ve talked about this for years, having the right habits as you get started. I’ve got adult children and that is the one thing that we don’t even talk about, which is if you have not maxed every single retirement savings opportunity and put time on your side, then everything else just pales in comparison. Because just the habit of living with 5% or 10% less income, which I know sounds difficult –

Jean Chatzky:
Can we hear it for 15, please? I mean, including the matching dollars, including the matching dollars.

Steve Gresham:
Of course. But the idea of being able to even put something away is a habit, and the habit has a payoff, which I’ve tried to describe to my kids, that they now see, is that you get the benefit of independence. The greatest opportunity that you’ll have later, is to be able to say, “I was able to take care of myself.” And that comes from a habit established early.

Jean Chatzky:
I’ve been talking to some behavioral economists over the past couple of days, and behavioral psychologists, and right now, human beings seem to be very quick to act. We have this bias toward action and making fast moves with long term money is often the wrong thing to do. Even just walk away from it for a couple of days, turn off the news for a couple of days, or pick up the phone and call an advisor.

I do this for a living and I picked up the phone a couple of times in the past weekend, talked to my advisor because sometimes we just need a sounding board that is saying, “Yes, you’re okay, you’re doing the right thing.” We need to feel heard, and so if you have an advisor, I think, “This is what we pay you for, right? It’s okay to pick up the phone and call.

Steve Gresham:
Absolutely. Unfortunately, there’s so many parallels between personal finance and personal healthcare. How many people do we both know that won’t call the doctor because they don’t want to bother them or they’re going to be embarrassed? That’s what they’re there for, and they will tell you that. It’s such an important concept for people to be willing to talk about this issue. But an awful lot of people are not comfortable talking about their personal financial situation. I think we have to get over that part.

Jean Chatzky:
Steve, any final words of advice for people in terms of how to get the help that they need? If there are people out there who are saying, “I don’t have an advisor, I would like to get some help,” what’s your best advice for finding somebody to work with?

Steve Gresham:
Let me back that up a little bit to say, even if you have a financial advisor, just because the markets have been running strong for so long, I think it’s very, very important to reevaluate that relationship, to make sure that this is the right person at the right time, answering the right questions for you. For me, I think working with advisors right now, whether you have one or not, really requires significant attention to three things.

The first one starts with you. Be fantastically honest with yourself. Be very candid with your partner, spouse, or family, about what your actual needs are going to be in the categories that we’ve discussed here today. One, is what’s essential? What is maybe nice to have, and hopefully will have, and then what would be the luxuries? This way you can prioritize and set real objectives that you can then work with an advisor to accomplish. I find that too many times people run in without that level of specificity, and then they get a little bit intimidated, and the advisor sometimes doesn’t know better, and so we end up with sort of a half-baked plan that has not really got the level of specificity it needs.

The second thing is at the end of the day, no matter what you do, even with your personal health, if you have not educated yourself, you will not know how to pick the right advisor. You really do need to educate yourself and that’s why, Jean, anybody that’s following you is going to fill that category well. But this is an ongoing exercise because as you get older because there’s more complexity.
Lastly, is to do some research and talk to people. Pretend you’re looking for a new primary care physician, which almost everyone has probably been forced into doing in the last few years. It’s really important for people to talk to all kinds of people. Talk to your accountant. If you have an attorney, talk to your attorney. Talk to your friends about what it is about their advisor that they love the most. And then if they have any way that you can connect with them, I’m sure they’ll take your call.

Jean Chatzky:
That’s fabulous advice. Thank you so much for being here. If anybody’s looking for more information, will have a lot about the topics that we are talking about today, including ways to cover your essential expenses and figuring out if you’ve been able to do that.
Thank you so much for joining us, Steve.

Steve Gresham:
Thank you, Jean.

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