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July 21, 2022 at 03:03 PM
“It’s better to live rich than to die rich,” Samuel Johnson, sage 18th century writer and scholar, inferred.
But you can do both, insists Jake Northrup, financial planner and founder of Experience Your Wealth, in an interview with ThinkAdvisor.
He calls the concept of retirement obsolete. “Retirement is a villain,” the certified financial planner argues.
His strategy is to not wait until retirement to do the things you’ve dreamed of but instead, use some of your income or savings to experience that good stuff while you’re still young.
Saving along the way and not using your long-term investments for as long as you keep working are key, he stresses.
Northrup recommends that his young clients with families — the bulk of his practice — “phase into retirement as opposed to jumping right in the water.
“Our plan is to earn more longer in a way that allows you to work when you want, wherever you want, how you want, doing something you love,” he adds.
The advisor, 30, founded Experience Your Wealth in 2019 after five-plus years at Ballentine Partners in Waltham, Massachusetts, where, as a senior wealth advisor, he worked with ultra-high net worth clients.
In the interview, he discusses his current strategies, which include job-income reduction — what he calls “semi-retirement;” taking a pause in saving for retirement and using that money to fund a longed-for passion.
In addition, in this market downturn, he recommends saving for a big trip, say, in a high yield savings account not exposed to the market, while keeping long-term investments in place.
Akin to the FIRE movement but with the emphasis more on “Financial Independence” than “Retire Early,” Northrup’s tack is for younger people to “save for flexibility and optionality in the future so they can make decisions that are aligned with their values.”
His clients are “travel-loving young families who don’t buy into the work-nine-to-five-until- you’re-65 concept” and then abruptly retire, he says.
His firm has 55 clients and ongoing revenues of $350,000.
The peripatetic Northrup has designed his practice so that he himself is able to work from anywhere in the world — and has: Antarctica, Argentina, Greece, Italy, Portugal and most of the United States.
The chartered financial analyst, who graduated with a bachelors degree in business administration and finance from the University of Massachusetts Amherst, has been an adjunct professor at Boston University, where he taught retirement planning and employee benefits for BU’s Financial Planning Certificate Program.
ThinkAdvisor recently interviewed Northrup, who was speaking from his home base in Bristol, Rhode Island. Here are highlights of our conversation:
THINKADVISOR: What’s your message to prospective clients?
JAKE NORTHRUP: In our marketing, we say, “Retirement is a villain.”
Really. In what way?
You don’t want to just save for retirement. You want to experience your life.
We want to help you align your money with your life as soon as possible.
Our plan is to earn income longer — doing it in a way that allows you to work when you want, wherever you want, how you want, doing something you love.
It’s experiencing the life [you wish for] throughout [the years] as opposed to waiting until retirement.
How and why did you come up with this idea?
I realized that I can have much greater impact on someone’s life when they’re making their money as opposed to when they’ve already been paid their money [in retirement].
But what about the need to have a nest egg for retirement?
Instead of saving for retirement, we urge our clients to save for flexibility and optionality in the future so they can make decisions that are aligned with their values.
You’ve said that the concept of retirement is obsolete. Please explain?
When Social Security was created, most work was physically demanding. Now the majority of work isn’t, depending on your career. So you can likely work longer.
Going from working at 100 [mph] to hitting the brakes to zero isn’t as popular anymore. It’s unhealthy for someone to work their whole life and then suddenly stop.
You need to engage with people and keep active. That’s why a lot of people who “unretire” pursue possibilities that motivate them.
What’s “unretire”?
Some people retire, and then six months later start a business or pursue a hobby or work part-time.
Why else is retirement “obsolete”?
You may not want to stop working because you love what you do or want to turn a long-held passion into a business venture.
If you earn income for a longer time period, it allows you to experience your [longed-for] life along the way as opposed to waiting until you “retire” to pursue your dream.
Does your philosophy have much in common with the FIRE [Financial Independence, Retire Early] movement?
We resonate with the first part, financial independence, but not as much with the retire early part.
We aren’t 100% aligned with the foundation of the FIRE movement, which is to retire as early as you can. We don’t do the planning around, “I want to stop working at age 45,” say.
Are there certain financial requirements to using your strategies?
It all comes down to cash flow. We really get into the weeds with clients on that. It’s the heartbeat of their finances: what’s coming in, what’s going out.
You don’t want someone to be spending more than they’re taking in, especially when they don’t have enough saved up [yet] in investment accounts to support them.
We discuss how much their finances would be impacted by things like taking a sabbatical or buying a vacation home or changing jobs.
What’s the demographic profile of your target client?
We work with travel-loving young families that have greater than $200,000 worth of household income and who don’t buy into the “work nine to five until you’re 65” concept.
They want to do things a little differently. They want to find the right responsible balance of paying down debt and investing for the future but also experience the “right now.”
What if clients have complex financial needs? Can you help them?
Yes. We start with that young family niche and then look at their [particular] planning needs.
They can have things like equity compensation: stock options or restricted stock in public and private companies. These [present] unique planning opportunities for us.
And clients that have greater than $100,000 of student loan debt — doctors, dentists, veterinarians — have unique needs too.
The third [of these groups] is business owners or people that are aspiring to own a business.
What are some of the main differences in how you’re building financial plans for your clients?
The clients are of an age at which they can reduce income, like taking a step down the ladder by getting a lower-paying job. We call that semi-retirement.
We ask them: What’s your semi-retirement age, and how much income do you need to be earning [at that stage]?
