The Influential Advisor
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The Influential Advisor
090: "Engineering Your Finances: The Tech Professional's Roadmap to Financial Success" with Stanley Leong
Episode Summary: A tech professional in her 50s had everything planned—enough saved to retire at 55. Just one problem: 80% of her net worth was company stock. Stanley Leong warned her to diversify. She agreed but couldn't bring herself to sell, feeling it would betray the company that made her successful. Then 2008 hit. The stock crashed. Her retirement at 55 vanished—she worked another decade to rebuild.
Stanley, a former engineer who survived the 2002 tech crash, now helps tech professionals avoid this exact mistake. After 20 years managing tech wealth, he reveals why brilliant engineers fail at one critical decision: when to sell company stock.
About Stanley Leong: Former IBM and Agilent Technologies engineer turned wealth advisor with 20+ years specializing in tech professionals. After experiencing the 2002 tech bubble firsthand, Stanley transitioned to financial services to help others navigate the unique challenges of tech compensation. Author of "Engineering Your Finances" and expert in RSU diversification, mega backdoor Roth strategies, and tech industry retirement planning.
Critical Insights:
"Don't fear capital gains. Capital gains means you made money. You want to pay more capital gains than anyone—that means you made more money."
"I work with you to avoid that one big mistake." "What mistake?" "I don't know, but it's out there."
"The moment I could walk away, work became enjoyable." —Client who achieved financial independence
A tech professional in her early 50s, had a retirement plan that looked solid. She'd been a diligent saver her entire career, had enough money to retire at 55, and felt financially secure. There was just one problem 80% of her net worth was tied up in her company stock. When she met with Stanley Leong, he warned her it was too risky. She needed to diversify soon. She agreed completely and promised to sell, but month after month she couldn't bring herself to do it. She felt like selling would betray the company that had made her success possible.
Speaker 1:Then 2008 hit the stock dropped significantly. Her dream of retiring at 55 disappeared and she had to work another decade to rebuild what she'd lost. Today, on the Influential Advisor podcast, stanley shares insights from his new book Engineering your Finances the Tech Professionals Roadmap to Financial Success. As a former engineer who survived the 2002 tech bubble crash and now has over 20 years of wealth management experience, stanley understands why smart tech professionals make costly mistakes with RSUs and company stock. He'll reveal the specific diversification strategies and tax-efficient approaches he's developed to help high earners take action before it's too late.
Speaker 2:Sam, the first thing I wanted to ask you in the book you tell this great story about going from being an engineer to a financial advisor. Could you tell us what led to making that career change?
Speaker 3:Yeah, I certainly was an engineer. I worked at IBM for a couple of years in New York and then moved out here to California to work for Agilent Technologies. In 2002, I bought my first house here in California and moved in on a Saturday, sunday. I remember sitting in my house, just like enjoying, relaxing, so proud of myself for getting my first house. And then, monday, I went to work. A manager called me into my office, into his office, and said that I had been volunteered to participate in the workforce reduction program.
Speaker 1:Was that the formal name of it, or was it?
Speaker 3:It was. That was exactly what they said, and I was young and naive. I didn't even know what that meant.
Speaker 2:Like oh, that sounds great, what does that mean?
Speaker 3:And he just shook his head. He's like you're getting laid off, so unfortunately.
Speaker 3:I got laid off, and it was obviously then a very stressful time for me financially. I didn't really know what to do. Should I sell my house I just bought? Should I cash out my 401k to pay my mortgage? And I think the most frustrating thing was I didn't have anyone to go to for help. I'd ask my parents they said one thing. I asked my friends they say another. Colleagues would say something different. Yeah, as I was looking for new jobs engineering jobs I came across an ad for a financial advisor opening at a large financial firm, and I remember thinking, no, that would be neat to be a financial advisor. Not only would I be able to answer my own questions and figure out what to do for myself.
Speaker 3:It was 2002, the tech bubble would just burst, a lot of people were getting laid off, and so I thought maybe I could help other people as well. And then my wife, who was my girlfriend at the time, also encouraged me to try something different, and so I went in for the interview, somehow got past that and got through a couple other interviews and then finally got the offer. I remember driving home from that offer thinking, yeah, how hard could it be to be a financial advisor. And then the next three years of my life were the most miserable, terrible years of my life Just building up a business from scratch, building up the client base, a lot, very long hours, and back then we got all of our clients through cold calling. If you've ever done cold calling before, it's one of the most miserable things you can do. So a really tough time. Those first few years it even affected my health, my relationship. Even my wife was giving my resume out behind my back to her engineer friends, hoping I'd go back to engineering at one point. So pretty tough time.
Speaker 3:In 2006, I actually went, took the jump and went independent. So I became an independent franchise owner of a financial firm and that's eventually evolved into the practice I have today. I started getting my feet under me, started building up my client base of technology professionals and now I love it Now. I couldn't think of a better career. It's so rewarding emotionally. I look forward to seeing my clients every day. I look forward to going to work. It's wonderful. I tell people all the time that getting laid off was, in hindsight, was the best thing that could have happened to me. I certainly had to pay my dues to get to where I am.
Speaker 1:So, stan, I heard that you mentioned technology professionals. What led you into working with technology professionals?
Speaker 3:Initially, after I went independent, as I was building my practice, I just realized at one point that I have a lot of technology professionals as clients. So initially it was unintentional. And then, once I realized that I started digging deeper into the workplace benefits, the common issues they have, the common situations I see, and eventually started building up a business specifically to appeal to technology professionals and then ultimately writing this book as well.
Speaker 2:Stan, recently you've written a book. Could you tell us about the purpose behind writing that book and why was now the right time for it to come out?
Speaker 3:A couple of years ago, I had lunch with a client who was a longtime client of mine in the tech profession. I asked him why do you work with me? And his answer actually stuck in my head. He said I work with you because I want to avoid making that one big mistake in my finances. I said great, what's that big mistake? And he said I don't know. I don't know what the mistake is, but I know it's out there and I don't want to make it. That's why I hired you, and so I had that in mind when I was writing the book.
Speaker 3:I wanted to get the information out there to more people and help tech professionals from making some of those common mistakes that I see that make, and I've been doing this over 20 years now. I've seen all the mistakes that can be made some can and I also thought it was very timely, just because we're in the information age. Now there's so much information out there. Some of it is good, but then some of it's not. There are people giving financial advice on TikTok now AI for financial advice, right so it's really tough to figure out what's right and what's not.
Speaker 2:You're saying we shouldn't ask Chat GPT about our financial questions.
Speaker 3:From my experience it's very simple financial questions, Chat GPT gets right. But as soon as you add just a little bit of complexity to it, all of a sudden, it's wrong, like half the time, at least so far. Yeah, so chat GPT not necessarily the best financial advisor just yet. In fact, I had a client a couple of years ago. I had recommended to a client to do a relatively straightforward strategy called backdoor Roth.
Speaker 3:I later got an email from their CPA saying how we couldn't do this, how it was bad, it was going to cost the client all these penalties, taxes and so forth. And he referenced an article online as sort of as backup. And so I read the article and turns out the article was written in like 2012. And so when you read the article, it is correct for 2012. But since then a lot of tax laws have changed and it's completely wrong now for 2025. If a CPA can get their taxes mixed up because of all the information online, I just imagine a normal person trying to figure out their wealth management. It can be pretty difficult. So I wrote the book as a way to try to guide tech professionals through all the noise of the information and try to get to the answers quicker.
Speaker 2:Stan, when you're working with these tech professionals, how do you guide them in thinking about building their investment strategies?
Speaker 3:A couple concepts that I think are really important with investments. One is the first. One is pretty simple just understanding the purpose of what the investments are for. When I was younger before I was a financial advisor, I think if I had an investment portfolio and you asked me what is this money for, I'd probably just say I just want it to grow right. More money is better, so isn't that good enough? But the purpose of the money is actually really important, for several reasons. One it does guide the investment strategy right. If I'm saving for a vacation home in a couple of years, that's very different investment strategy compared to saving for retirement 10 years out. Plus, I have to have it last another 30 years while I'm drawing money from it. So it does guide the investment strategy. But the other one, too, is it also puts the risk into context.
Speaker 3:I have a client. A couple of years ago, when the meme stocks were getting big, gamestop had just taken off. Exactly GameStop had just taken off. Of course, right when GameStop was at its peak, a client called me and he had read. He said he had read all these people are getting rich on GameStop. Maybe he should get in on this, and so I told him it's a lot of risk, it's speculation. You could realistically lose most or all your money. And he said maybe that's worth it. Right, if I could also make a lot of money. How do I tell if it's worth it?
Speaker 3:And so then we put it in the context of his goals. This was retirement money he was going to use and so we said, okay, his retirement goal was retired 60. If we did say, worst case scenario, lost all that money, then what would happen to his goal? And in his case it turns out it would have delayed retirement by about five years. And as soon as he saw that he said oh no, forget it, I don't want to do that. There's no way I'm risking five years of my retirement just to play around with this. So by putting the risk into context of his goals now all of a sudden made the decision a lot easier to make. So understanding the purpose helps define the investment strategy as well as puts the risk into context.
Speaker 1:I was just going to add that money is such an emotional topic and I don't know that we realize it as much as it is. For example, I have a financial advisor and even though I can go to ChatGPT and ask basic questions about stuff, it's like I just feel that it puts guardrails on my decisions. I've just found that talking to someone like yourself, especially that knows your client so well tech professionals is so helpful.
Speaker 3:Yeah, and I do find, on that note, I work with a lot of tech professionals. They're very analytic, they're very logical, so you would think of all types of people the tech professionals make the least emotional decisions. From my experience, it's actually the opposite. Tech professionals oftentimes are the most emotional when they make their decisions, and I think part of it is just because they're so good at logic, reason that they're able to talk themselves into rationalizing whatever it is that they want to do. And so, whether it's selling stock, whether it's buying stock, whether it's emotional and a lot of finance, all finance decisions are in some way emotional. Tech professionals can sometimes fool themselves into doing what, emotionally, that they want to do.
Speaker 2:Since you work with tech professionals, I was reading in your book about these workplace benefit mistakes, and so what kind of mistakes do you see people making with their stock options or their RSUs? What comes up time and time again, that you're able to help them to work through?
Speaker 3:Yeah, I'd say the perhaps the most common thing that I see is just an over-concentration of employer stock. I think it kind of sneaks. I don't think anyone intends to do this, but it just sneaks up on you. You start working at a tech company. They offer RSUs which is great because it's kind of like a bonus every year, and purchase plan, which is great. You get a discount on the stock, usually when you buy it, and so you enroll in that and then you don't think much of it afterwards. And then five years, 10 years, 20 years down the line you're still at that company.
Speaker 3:The stock price since it has gone up and now you have all this stock that you've just been accumulating through all these years. For some it's a very large portion. You never feel like it's a good time to sell. If it's up, then you have capital gains. You want to be have to pay. So no one wants to sell when it's up because they're going to pay out these taxes. If it's down, no one wants to sell because it's down and they think it's going to come back up.
Speaker 2:And so emotionally.
Speaker 1:There's no good time to sell.
Speaker 3:But that does lead me to perhaps the second big mistake people make, and that is just being afraid of capital gains. I tell my clients all the time don't be afraid to pay capital gains. Capital gains is actually a good thing. Capital gains means you've made money. I joke with my clients you actually want to pay more capital gains than any of your friends and anyone you know, because that means you've made more money than anyone.
Speaker 2:That is a hurdle for them to get over, because most of us, just we have ingrained in us that we don't want to pay taxes, and so are they able to see it once you explain it in that way.
Speaker 3:Yeah, sometimes.
Speaker 3:It's still back to the emotional decisions. A lot of times they nod and say, yeah, oh, that totally makes sense. And then they still have trouble selling it with whatever emotional tie they have to it. And from that, what do you find works? How do you show people if and when it's a good, the right decision, yeah, so I typically I'll give them some options and just go with what they're more comfortable with, For most obviously depends on everyone's unique situation.
Speaker 3:But for a lot of folks just selling the stock just makes sense Pay the capital gains, Don't be afraid of it and just be happy you have all this money and diversify and invest appropriately. For some it might make sense to just sell on a schedule over a year or two, just split up the capital gains a little bit. That may or may not help financially, but emotionally that feels better to do. You could always do what they call reverse dollar cost averaging, so you just sell a little bit at a time, a month at a time. If the objection is more, oh, what if the stock goes up or down, then selling it, just committing to also X amount over each month, can help. It depends on what the obstacle is emotionally.
Speaker 3:There are other strategies as well to defer capital gains that some clients may have heard of. Some of your listeners may have heard of. There's exchange funds and there's tax loss harvesting using direct indexing. There's some more complicated strategies out there. They're not available to everyone. Some require a certain net worth and so forth. But I would caution with those types of strategies. You're not getting away with not paying capital gains tax. You're simply deferring them. And when you defer them you're likely going to pay even more later because hopefully that investment keeps growing and then it's going to be even more painful later. So for the right situations they can sometimes be appropriate. But I tell people there's only two ways to not pay the capital gains tax, Three, I guess. One is just don't make money. But no one wants to not make money.
Speaker 2:It's not the best option, yeah not the best option.
Speaker 1:The two other ways is to die If you die and the money gets inherited, another terrible option, not the option you want In that case, is it like a step-up in basis, where the people that inherit the money they don't necessarily have to pay the capital?
Speaker 3:gains. Is that correct, exactly, essentially, the capital gains is waived if the money is inherited.
Speaker 1:And then I imagine it goes back to the goals and what are you trying to do with the money? And just what you were saying earlier, the decisions. It depends, right, Exactly.
Speaker 3:Yeah. And then the second way is if you give it to charity, then you likely won't have to pay capital gains either. But on the first one with the inheritance, just a story. I did have a client a couple of years ago who came in. She had about 100,000 in a small biotech company that she worked for years ago and she was older, she was in her 80s, and she worked for maybe 20, 30 years ago and accumulated this stock through a stock purchase plan. Back then they didn't have electronic records and she had no idea what the cost basis, what the cost of the stock was.
Speaker 3:She'd need to figure out the capital gains and so typically when that happens, if she were to sell the stock, she'd basically have to pay capital gains tax on the entire $100,000. For her that would have been about $20,000 in taxes. She didn't like the company. She didn't think it had much promise, so I had recommended she sell it. She didn't want to pay the capital gains though. She didn't want to pay the capital gains though.
Speaker 3:So her strategy was as we talked about with the inheritance because she was older, I'm just going to hold onto it. When I die, my son will inherit it or my kids will inherit it and then they won't have to pay any capital gains. I still try to encourage her to sell it. If it's not the right investment, it's not the right investment. We have a in the tax industry. We have a saying that don't let the tax tail wag the investment dog, which basically means don't let the tax decision basically take priority over the investment decision, and I tried to encourage her to sell it. She didn't want to pay the capital gains.
Speaker 3:The very next year the stock dropped by 50% and so now, instead of a hundred thousand, it's worth 50,000. So if you think about it at this point, if the kids inherit the money, they get 50,000. If she had sold it a year ago, she would have paid capital gains, She'd have $80,000. The kids would have $80,000. So the kids missed out on $30,000 just because she was afraid to pay capital gains. So it's just kind of an example of why you don't want to be afraid of capital gains, because then that often makes you make some bad decisions.
Speaker 2:Is there a way other missed opportunities that come up with benefits for tech professionals? Are there ways that high earners can maximize the benefits that they receive that you help them with?
Speaker 3:Probably one of the common strategies I use with tech professionals through their employer benefits is something called a mega backdoor Roth, and I explain the details more in the book. But that's essentially contributing to an after-tax 401k and then subsequently converting that after-tax into a Roth position, whether it's Roth IRA or Roth 401k. That's a strategy that's a very good opportunity for high, especially high income earners, but it's often missed, and I think a lot of. It's just a lot of times confusion with the terms. I had a client that I quite recently come in and I asked if they were maxing out their 401k and he said yes. And then I asked specifically what about the after-tax portion? Are you maxing that out? And he said yes, but then when I looked at his pay stub, it turns out he wasn't contributing to it at all, which was also a surprise to him. And I think the confusion with him was he thought after-tax was the same as Roth 401k and that's a common mistake because technically, roth is after-tax as well. Though I can easily understand why that mistake is made, in financial terms the after-tax 401k is different from Roth. You can actually contribute to the after-tax 401k above and beyond your pre-tax and Roth contributions, so that's a common mistake that's made and then that misses out on a very big opportunity for that net mega backdoor Roth.
Speaker 3:Another common mistake I see is with HSA, a health savings account. Now, not everyone has the ability to contribute to a health savings account. You do have to have a high deductible health insurance plan, so it's definitely not for everyone, but for people that do have it it can also be a really good strategy to build up tax-free money. But the mistake people make is they often confuse the HSA with an FSA, the flex spending account, which I think most of us are more used to. The main difference between the two is the flex spending account is, for the most part, use it or lose it. Right, you have to use it. If you don't, then by the end of the year you lose most of that money. Some listeners out there that have been through this experience where, accumulated money into this flex spending account, you haven't used it all. It's getting towards the end of the year and so now you have to go to the convenience store and stock up on Tylenol and first aid kits just to use all the money.
Speaker 1:Use it or lose it. Yeah yeah, this sounds like the government. I used to be in a business that we sold a lot of stuff to the government and, as you can imagine, at the end of the fiscal year it's like okay, we need to spend all of our money and they start buying all this stuff that they don't need just so that they don't lose their budget the following year. When that's applied to a personal level, that's just like bad incentives.
Speaker 3:Yeah, exactly. So there was a time where you were allowed to buy over-the-counter. Originally, you were allowed to buy over-the-counter medicine, to use the FSA, so people would just stock up on ibuprofen or whatever. And then there was a time I think it was around COVID when they said you were not allowed to do over the counter, it could only be prescription, and so that's when the first aid kits started becoming popular. I remember my wife actually going to the store and just stocking up on first aid kits because they still qualified, even though ibuprofen didn't. And then, since then I think they've brought back.
Speaker 3:The over thethe-counter is allowed. But the HSA, the health saving account, is different. It is not use it or lose it. Once the money is in there, it's yours indefinitely, and so just that small difference really changes the overall strategy. So with the HSA, you actually don't want to use it, you want to contribute as much as you can to it, but you don't want to touch it. You want to leave it in there and let the money grow tax-free for as long as possible. So when you go to the doctor and you're going to pay the copay or you go to the pharmacy to get your medicine, just pay out of pocket. Do not use the HSA and let it grow so that you have a big tax-free bucket in retirement. So I think that's an opportunity that's missed a lot of times just because we're so used to the FSA and using it right away.
Speaker 1:And I'm just thinking as I'm hearing all these things, it's like they all sound like there's potential. I couldn't imagine making all those decisions without having someone like you as a sounding board, who has experience and expertise in doing this with many people. And so it's. Should I do the HSA? Should I do the? Should I put it over here? Should I do this? Should I pay the capital gain? Should I do the megaback or Roth? One is just being aware of what's available, and then two, it's if I make this decision, how does it impact that decision? It seems like there's so many moving parts that have to be integrated.
Speaker 3:Yeah, and I'd say, over time too, we tend to sometimes forget the strategies we're using. Right With that HSA one, my experience has been I've had to tell clients over several years not to spend the money. I'll tell them not to spend the money in one meeting and then six months goes by, we don't talk about it, and then they go to the doctor and they're just in such a habit of using the money that they use it and then the next year when I remind them, hey, how's the HSA doing? And they're like it's like they never heard me the first time. So sometimes I have to repeat it a couple of times just to get them out of that habit of using the money just because they're so used to doing it.
Speaker 2:And speaking of that, so you wrote about something called the tax time bomb in retirement, which I would like to avoid personally, but I might need some reminding on this how to not to get there. So could you explain what that is and talk about the strategies you help people with to avoid ending up in a scenario like that?
Speaker 3:Yeah, yeah. So I think a common thing I hear from tech professionals is that they believe that they're going to be in a lower tax bracket when they retire, and that is true to a degree. I've helped a lot of people transition into retirement, and we do find, in general, that your taxes drop initially when you retire, but when you get into your mid 70s 80s, they often jump back up, sometimes even higher than when you were working. And the reason for that is one in your 70s, you're probably taking Social Security at this point, so there's more income coming in. And then, secondly, the big one is, you have required minimum distributions. In your mid-70s, the IRS is basically forcing you to take money out of your IRAs or 401ks, which means they're forcing you to pay taxes on it as well, and so that's what we call the tax time bomb, and that is a very big issue, especially for technology professionals. I see that pattern happen a lot with technology professionals. There are a couple of ways to ease that tax time bomb. One is a lot of what we just talked about. The mega backdoor.
Speaker 3:Roth is a really good way to build up tax-free money, and by having tax-free money, then, when you're in a higher tax bracket. Pulling money out tax-free is very favorable. The HSA again is another way to build up that tax-free money. And then another strategy that I often use with clients is when they first retire, as I mentioned, they do get into lower tax bracket. We can use that lower tax bracket to their advantage while they're in the low tax bracket and move money from IRA to Roth, which is what we call Roth conversion. You do have to pay taxes on that money the year you do the conversion. But if you're in a low tax bracket some people are even in a 0% tax bracket when they first retire then you pay zero or very little taxes when you do the conversion. So money doesn't pay, you don't pay much taxes on it to put it into Roth and then it's tax-free from then on out. That's a popular strategy as well.
Speaker 1:I know that there's some contribution limits for people when they put it directly into a Roth. There's contribution limits, and is it the case that when you do a backdoor Roth or a mega Roth that you don't have those same contribution limits?
Speaker 3:Correct. Yeah, that's correct. So for this year 2025, if you're over 50, you can only contribute $8,000 to a Roth IRA, and that's only if you make a certain amount or less. So my high-tech earners they can't even contribute directly at all because they make too much. Mega backdoor Roth there's no income limitations to contributing to the after-tax and there's no income limitations to converting it to Roth. No worries about any income limits with the mega backdoor Roth.
Speaker 1:Why is that?
Speaker 3:How come they limit it going in directly but then they allow for it to come in the back door. Is that just quirk in the system? You might have to talk to the tax auditors, but I'd say it, for the most part, it really is a loophole. It became available in 2010. Before 2010, you couldn't do these strategies. One reason is if you made over a hundred thousand dollars back, then, you couldn't convert money to from IRA to Roth, whether it's after tax, 401k. So none of these strategies worked before 2010.
Speaker 3:In 2010, they changed the rules. I think it unintentionally opened up a lot of these backdoor type of strategies, but since then they have pretty much come out and implied that there's something called a regular backdoor Roth and then the mega backdoor as well. It's pretty much they know what's happening. It's pretty obvious now that it's happening, people are doing it and they've actually come out and pretty much implied it's okay. So at this point it's so. I think it was just initially an unintentional loophole that was created due to just tax law changes. But at this point the IRS is pretty much saying OK, it's OK to do. I think partly because you're moving money into a Roth which is after tax. That means you've paid the taxes already and so they actually like that you're paying taxes now rather than later.
Speaker 1:In this point of clarification between a backdoor Roth and, I think you said, a mega backdoor Roth. How are those different? Is it just the number or is there something else different between?
Speaker 3:them. The mega backdoor Roth is using the after-tax 401k which you can contribute. The limits are the calculation is a little more complicated, but you can contribute usually between $20,000 to $40,000 a year into that after-tax 401k and then move it into a Roth position. The regular backdoor Roth is just contributing to a traditional IRA, which is again $8,000 limit if you're over 50, and then converting the traditional IRA to a Roth IRA. I do talk about that in the book a little bit as well. You have to be careful. There are some things to watch out for to make sure it's done correctly. As with any tax law, it's always more complicated than it seems, but that's also a way to build up tax-free money. The mega backdoor to Roth is simply called mega because you can put a lot more in to after-tax wealth.
Speaker 2:Stan, I wanted to ask you, with your clients, why is retirement planning in tech different than what people would be doing in other industries?
Speaker 3:I think one big difference is in the tech profession, as you get older, you become less employable, you become less desirable, Whereas in most other industries it's the opposite. Right, the older you are, the wiser you are, the more experience you have, you're more valuable In tech, for whatever reason. The older you get, the less valuable you are. I have a client that when he was in his late fifties he got hired onto Google and he used to joke that he single-handedly brought the average age of the Google employee up, because everyone at Google he worked with were like in their 20s and 30s. And so, unfortunately, that's the downside of getting older in the tech industry. And so we do encourage our clients to plan for an earlier retirement, maybe earlier than they actually want to retire, just to prepare for that, just in case. And so sometimes, instead of calling it retirement, we call it financial independence. It's you can keep working if you want to. You don't have to retire then. But now you're working because you want to, not because you have to.
Speaker 3:Yeah, I have a client that actually wasn't in the tech industry, but he was in his early 60s and he hated his job. He just every time we met, all he'd do is complain about how terrible his job was, and so he wanted to retire in, I think, 66. And so we prepared his finances for it, everything. He got to 66 and he could retire and I just remember he was so happy. We even high-fived in the meeting. Everything was great. And then I met with him maybe six months later and asked him how retirement was, and he said, oh, I'm still working there. I thought it was strange but I didn't think much of it. And then every time I met with him kept asking and he kept saying he's still working there. So maybe two years later I finally said you used to complain so much about this job, why are you still there? And he said the moment I realized I could just walk away, it became enjoyable. I think that's a positive side effect to having that financial independence.
Speaker 2:I like that term financial independence and so when you're working with clients, how do you help them to see what that looks like?
Speaker 3:Obviously, it means different things to different people, and so one of the exercises I do go through with most of my clients initially when they come to me is just to visualize what does financial independence look like for you, like where are you going to live? Who are you going to be with? Where are you going to travel to? What are your hobbies? Are you going to play golf all day? Are you going to play pickleball? Where are you going to travel to? What are your hobbies? Are you going to play golf all day? Are you going to play pickleball? Whatever, what is it you're going to do? I find this is important one, because it helps you make the right financial decisions. Especially, the earlier you go through this exercise, the more easier you can adjust whatever financial decisions you have to make, and then it's also more motivating to save for retirement, to do the things you need to do to get there.
Speaker 3:I have a client that came to me in their mid forties and their goal when they retired they wanted to live in a cabin that was in the mountains on the East coast, that was close to some family that they had, and they were just. It was just a dream to them. They figured they would just go and, in a couple of years before retirement, start thinking about it and planning for it. But as we talked about it, we're talking about what town they're going to live in and it just became more and more real to them, and so they actually decided they wanted to set aside some money into a separate account just earmarked for this goal. And so we started diverting some cash flow into this account, investing it.
Speaker 3:And then years later now they're in their early 50s, they still haven't retired yet, they haven't gotten there yet. But just a couple years ago, it turns out, there was some opportunity to buy some land in that exact town. They were looking for it at a really good deal, and so we actually took some of that money that we had diverted and used that to buy the land. So now they have the land, we've got a plan for how we're going to build the cabin and where they're going to live while the cabin's being built. So we've got it. It's all laid out pretty well, and so it's become really real to them. Having gone over the vision and exactly, really clearly defining what the goal was really helped motivate them to go down that road.
Speaker 1:Is that something that you do with all your clients?
Speaker 3:Yes, absolutely so. We go through that exercise and some folks have a very clear vision already, especially if you're closer to retirement. Sometimes Others, if they may be younger or just haven't thought about it, it may be the first time. Oftentimes it's the first time we've ever talked about it. What's interesting is oftentimes with couples, it'll be their first conversation about it and someone will say, one person will say, oh, I want to do this. And the other person will look at it and be like I had no idea that you wanted that.
Speaker 2:You wrote about some of these patterns that you noticed, some good patterns and some bad patterns. Could you tell us about those regarding financial decisions that you see come up time and time again?
Speaker 3:Yeah, absolutely. So I'd start with the bad patterns Again. Probably the most common thing I see is that over-concentration of employer stock. I have a story about that. A client came to me in 2006 timeframe. She wanted to retire at 55. She was in her early fifties, so it was like four or five years away. We calculated her numbers and, sure enough, she was able to retire at 55. She was a really good saver. That was great. But the vast majority of her net worth was in company stock I'd say 70, 80%. And so I did tell her our analysis is all assuming that you were in a diversified portfolio You're taking a lot of risk with having all this individual stock. And so I did tell her our analysis is all assuming that you were in a diversified portfolio you were taking a lot of risk with having all this individual stock, and so we really need to sell most of it if you can. And she said oh, that makes sense, she'll do it. I met with her a couple months later and she still hadn't sold the stock, and so I asked don't forget to sell your stock, it's really important. So yeah, I know I will. And so it's the same pattern Six months later, she hadn't sold it.
Speaker 3:A year later she still hadn't sold it. She finally confessed to me that she just emotionally couldn't sell it. She had been at the company her whole life. She's where she is because of the company. She felt like it would be a betrayal of the company to sell the stock. I tried to convince her otherwise. There are CEOs of companies that sell their stock all the time. It's not a betrayal. Unfortunately she didn't. And then 2008 happened. The stock plummeted and then she couldn't retire. It actually delayed her retirement by about 10 years. She is retired now, everything's going well, but it was a very difficult price or lesson for her to learn at the time, so that's a bad pattern.
Speaker 3:I see that's one of several stories that I've seen with that, on the good hand, related almost a very similar story. But tech professionals tend to be really good savers. I'm not sure why that is, but especially the high-income earners and this is not true with most other industries I know doctors, attorneys, business owners who really make a lot of money, but they also spend a lot of money and they don't save what they should. But I rarely run into that with tech professionals, for whatever reason. They're really good savers and so that's a good pattern.
Speaker 3:I see a very similar story of another client who's in his mid fifties, works for a tech company that wasn't doing so great a year or two ago. So they were starting to offer these early retirement packages which he was offered. He actually didn't want to retire. He loved working at that company, he loved what he did.
Speaker 3:But he was afraid if he didn't take the package and then he got laid off a little bit later, then he would have lost out on the package and he'd be in trouble. And so we ran his numbers and again, because he was such a good saver, it turns out he could actually just pull the trigger, retire today without the retirement package and still be okay. And so that gave him the confidence of making that decision. He decided not to take the early retirement package, knowing that if he did get laid off a little bit later he'd be okay anyways. That gave him. I remember him saying that he was the only one at work that wasn't stressed out anymore. Everyone else was trying to figure out let's do the take it or not. But he felt good about it because he knew he was okay.
Speaker 1:It's amazing, when you have that clarity, that what a change it can make. And it's not that your numbers are any different, it just means that you, your goals, are set and you have clarity and you have, you have a plan right.
Speaker 3:Absolutely.
Speaker 2:Paul had talked about. With all these moving parts, dan, that it seems like you really want to have a professional in your corner that's helping you to think through, and you talked about your client that wanted to avoid the one big mistake. So how do you motivate somebody who's been putting off working with an advisor to do their financial planning? What can you say that helps to motivate them along?
Speaker 3:I think it depends on where they are in their life. Certainly, the older clients tend to have their own motivation. Retirement's coming up, so there's a little more urgency there. And then, as I mentioned too, when we visualize what that goal is and what are you going to do in retirement, the motivation is much more apparent. If I just said I just crunched some numbers for you and said, okay, you need to save an extra $500 a month in order to retire, you may or may not want to do it, you might do it just because you feel like you have to, but it might be a burden. If we go through your goals and we start talking about what it is you're going to do and where you're going to live and how much fun you're going to have and how great your life's going to be, then all of a sudden you want to save that $500 a month, or even more, so you can get there earlier. So that definitely helps motivate For the younger clients or younger folks that I talk to.
Speaker 3:I like to tell them that how much you save in your early years, your 20s and 30s, really has a big impact to how much you end up with in the long run, sometimes so, like the 20 year olds, that maybe they're just getting out of college and starting their career.
Speaker 3:If you just save $200 a month from ages 20 to 30, and then you stopped and never saved again and you invest in the market, got 10% average return at 65, you'd be a millionaire. You have just from the savings from ages 20 to 30. If you wait, on the other hand, you wait till 30, and then you start saving. Now you have to save a lot more per month and you have to save for a lot longer just to get to that same point. And so how much you save in your early years really has a big say on how much you end up with in the long run. And oftentimes when I show them, especially when I talk about being a millionaire, that motivates them to save. And even if they can, I tell them too even if you can't save 200 a month, if you can just save 50 a month, 100 a month, whatever it is, just sock it away, because, again, those early years are really important.
Speaker 1:So, given you mentioned you joked earlier about the gentleman who at Google and how he raised the average age of the people so your clients, what's that? If you work with technology professionals, is it you're working with the ones that are the pre-retirees, so that they're older, or do you have a lot of younger mid-career clients as well?
Speaker 3:Yeah, I myself have a little bit on the older, later career, I would say mid-40ies on up through folks that are also retired. Yeah, I do have a million dollar minimum for new clients myself, so that that does limit. The most younger folks don't have that much accumulated much yet. My client base is more mid forties up.
Speaker 2:Stan, tell us how can people get in touch with you and get a copy of your book?
Speaker 3:Yeah, so my book is available on an Amazon so you can always look that up. But if you wanted a free copy, you could always email me at engineeringyourfinancesatgmailcom. And. Happy to send a free book as well. Just to get the information out there.
Speaker 2:Stan, it's been great talking with you today. Thanks for being so generous with your time. Great Thank you. It was a lot of fun.