Transcript
Speaker: Made on Zencaster. Hello and welcome to The Independent Minds, a series of conversations between Abecedah and people who think outside the box about how work works with the aim of creating better workplace experiences for everyone. I am your host, Michael Millward, the managing director of Abecedah.
Speaker: Today, I will be learning about a new way of financing retirement from talent retention expert, David Alemian. As the jingle at the start of this podcast says, the independent minds is made on Zancaster. Zancaster is the all -in -one podcasting platform on which you can make your podcast in one place and then distribute it to the major platforms like Spotify, Apple, Amazon, and Google YouTube Music.
Speaker: Zenkaster really does make making content so easy. If you would like to try podcasting using Zenkaster, visit zenkaster .com forward slash pricing and use my offer code ABACEDA. All the details are in the description.
Speaker: Now that I have told you how wonderful Zencast is for making podcasts, we should make one. One that will be well worth listening to, liking, downloading, and subscribing to. As with every episode of The Independent Minds, we won't be telling you what to think, but we are hoping to make you think.
Speaker: Today, my guest independent mind is David Allemonion. Did I say your name correctly, David? alimian Aleemian. I get so many names wrong, but I do apologize for what I'm trying my best. I will get it right before the end of this podcast. I promise all David is a talent retention expert who has taken a strategic look at how employers can help their employees finance their retirement lifestyle.
Speaker: David is based in Oceanside, California, USA. It's not somewhere that I have ever been, but David tells me some fantastic things about it. So if I do get a chance to go, ah book my travel arrangements with the Ultimate Travel Club, because that is where I can gain access to trade prices on flights, hotels, trains, and package holidays, as well as lots of other travel -related purchases. There is a link to the Ultimate Travel Club and an offer code in the description.
Speaker: Now that I've paid the mortgage, it is time to make an episode of The Independent Minds. Hello, David. Hello, Michael. Thank you for having me. Great to have you here. I think ah you may actually be the second guest that I've had from Oceanside, California. Oh, isn't that nice? It's obviously a hotbed of innovation. It's a beautiful place. It really is.
Speaker: I have seen some pictures and I know that you're telling the truth from there. It looks proper California. It is the image of that sleepy little surfer town that people have in their minds when they think of Southern California. Yeah, I can hear the Beach Boys as I'm looking at the pictures. It sounds great.
Speaker: yeah But like I say, Oceanside is a place of innovation. So tell us a little bit about your career and how you came to be now a talent retention expert and looking at retirement. It was a long journey, actually. I've been in the retirement planning business for 30 years. And what I found is that most people aren't prepared for retirement.
Speaker: and they can't afford to put money away for retirement. Here's what I found. Not everybody, but most people live a lifestyle equivalent to their income. The more they make, the more they spend when they hop from one job to another. Yeah, it's true. if They hop from one job to another for more money. Do they put any of it away for their future? No, they buy more lifestyle. I'll give you an example.
Speaker: of life. They go from their parents' house to an apartment. They go from an apartment to a condo. From that condo, they buy a house. They get married. They have kids. Anybody with kids knows kids are expensive. if They buy a bigger house. After a while, they have a fantastic lifestyle. Very little savings. Potentially a lot of debt, I should think, as well. Oh, man. Yes, a lot of debt because all of it's financed.
Speaker: in so many cases. Over these 30 years of retirement planning, I've sat down with countless couples from all walks of life. in And in all income levels, people are not prepared for retirement. And most of them, I would say, I'd sit down with them and they'd say, I'd say, so what are you doing now? so Well, I have a 401k or an IRA or whatever.
Speaker: And I'll say, well, how much do you put into it? They go 3 % or 4%, meaning of their salary. And I'll say, well, how much is that? They go, I don't know. And it's true. Or I'll say, well, will it be enough when you retire? And they'll say, I don't know. And you know something? They can't know. Because the qualified plan, in other words, the 401k or IRA,
Speaker: It doesn't really work to do what it's supposed to do. It can't because of the way it's designed. Let me explain for people who don't live in the United States that a 401k is a type of pension plan that that people across the United States can have access to. Similar type of plans exist in most most countries, but it's important that although you're based in California, the principles of what you're talking about are universal.
Speaker: Yes, how this journey really started. I was talking to my wife oh years ago, back around 2010. And I was a little frustrated because of trying to help people, but they didn't have money to put away. And I said to my wife, I said, if we can put a man on the moon and return him safely to Earth,
Speaker: With 60s technology, we can certainly figure out a way for people to be able to save for retirement. And that started me on a journey. I hadn't thought about this before, but let me describe what a vast number of people are going through as they approach retirement. You have all of these various different things that you borrow money in order to be able to have, in order to have the lifestyle that you want.
Speaker: And yet, one of the things that just struck me is that that term, living within your means, the first time that we might actually end up doing that is once we're retired. Because our income will be reduced and there won't be the the disposable income to finance debt in the way that there is when you're working. Well said.
Speaker: But there's another problem. And that problem is that when you work, you get paid. It's fee for service. You work, you get paid. You stop working, you stop getting paid. But the bills keep coming. And they go up because of inflation. And so today, we have more people working well into their retirement years than ever before.
Speaker: And we're living longer, which means saving it for retirement becomes an even a more enormous task. yeah The problem is, at some point, your body breaks down and it says, you can't work full time anymore. So people do something called semi -retired, but really semi -retired isn't There really isn't such a thing as semi -retired. You're just not working as many hours. Does that make sense? Yes. As I was going through this journey, i was I had been helping a lot of doctors and people in the medical field save for retirement. And I was having a conversation with someone and they said, do you know that there's a shortage of doctors? And I went, there is? And he said, yes. And this is, again, back around 2010. And I looked into it.
Speaker: And yes, there's a massive shortage of doctors in the US, and it's growing. Actually, the medical profession calls it the graying of physicians, meaning the physicians were getting older, they were retiring, and there weren't enough physicians coming up to take their place. So this shortage was growing. Then I looked into it deeper, and I saw that the nursing shortage was five times as bad We're short in this country right now, and this is before COVID, about a half a million nurses. That's a lot. Digging deeper, I found out it's not a shortage of doctors and nurses. It is a shortage of people with skills. There aren't enough people with skills to go around. Now, this is key to how I developed my solution.
Speaker: people are hopping from job to job because the market the labor market favors the employee. So they're going to whoever's going to pay them the more more money. And the average US worker changes jobs every 4 .1 years.
Speaker: And the cost to replace someone one with skills is more than double their salary. It's 213 % of salary to be precise. That's an average for all workers. Younger workers change jobs even more quickly. Yes. Employers know they have a turnover cost.
Speaker: That is the key to solving this dilemma of funding retirement. We look at history, and that's where the answer is, hiding in plain sight. There was a time when people used to spend their entire career at one, maybe two companies. Why? They wanted that lifetime pension.
Speaker: and they would stay with a company for as long as it took to get it. But then the 401k came along and the traditional pension went away and it made retirement plans portable. They could take it with them from one job to the next. Same thing happened in the United Kingdom as well. I love the two words, what if, because when you say what if,
Speaker: Whatever follows those two words could be anything. So what if we could take that turnover cost and take a portion of it and invest it in our employees in the form of a retirement benefit?
Speaker: And the employer would pay for 100 % of this and but but this benefit. It costs the employee zero. They don't have any money to put into it anyway because they're spending it on lifestyle. In exchange, because nothing's free and this isn't a fairy tale, the employee agrees to stay with the company. It could be for five years. It could be till retirement. It could be anything in between.
Speaker: And there's a written agreement that outlines all of the details. So what we have just done is we have instantly eliminated that massive turnover cost. And we've taken a portion of it and put it into the plan. Now, that was the initial design that I came up with.
Speaker: But over the years, it developed and morphed into something so much better. And what what I did was I made it so that the employer always owns the plan, the fund. The employer. The employer. In other words, instead of being a cost, like a traditional pension plan,
Speaker: it is now a growing and compounding asset on the company's books. Now, you've heard the expression, smart people make their money work hard for them. This is your money working very, very hard. So it grows and it compounds. And over time, that compounding gets bigger and bigger. And what it does is it creates a fund big enough to create a lifetime income for the employee. And unlike the limitations of like the 401k or those types of plans, it has none of those restrictions. We can literally make it big enough so that the employee has an income equal to or greater than their working year's income.
Speaker: For someone who's concerned about retirement, that's a really tough thing to say no to. And if your company is giving that to you, it's almost impossible to walk away from. So that solves the problem of the talent shortage while simultaneously solving the retirement dilemma for the employee.
Speaker: What you're recreating, I suppose, is the the job for life or the employer for life that existed pre -1960s, 70s, where someone would become an apprentice or even a ah trainee solicitor, trainee accountant with one employer and would be able to see that their whole career with that organization was mapped out with a result at the end of it that there would be some form of pension. You are recreating that but actually tying people
Speaker: Tying people in may be the wrong word. You're incentivizing them to recreate that by giving them additional pension benefits. Yes, exactly. Now, since you brought it up, do you know that the pension plan in the US started in 1875 by American Express?
Speaker: and they did it o and it's true hey didnt do nicely thank you yes And they did it as a way to attract and retain workers. It was so successful. The other big companies followed suit, the railroad and so on and so forth, industrial firms. So that by the thirties, it was the the the standard as how people saved for retirement.
Speaker: And the heyday was from the 50s all the way up to 1978. It what was the heyday of the pension plan and that kind of fund. When 1978 came along, was the Revenue Act of 1978 from Congress.
Speaker: which had a section in it called Section 401K. And that basically destroyed something that was working for over a hundred years.
Speaker: you know yeah It seems like come pensions were established in the United States before they were established here in the United Kingdom. It was in the early part of the 20th century, so some 20 years after the United States, that we introduced the state pension, which was aimed at getting people who were too ill to work out of the workforce. This also permeates many other things that have to do with the workforce.
Speaker: and with production and and the economy. For example, which company do you think would have better products, better customer service and better services? The company that has constant turnover and pretty pretty much half the people are pretty much new,
Speaker: or a company where you have the best of the best and they've been on the job for years and years and years working together like a well -oiled machine. Obviously, company B. That highlights one of the costs of having a changing workforce. It's not just the cost of recruiting a new person. You also have the cost of training that new person till they can reach the the same standard as an experienced worker. Exactly. When you add all of those costs together, you can end up with, like you say, something that can be a pretty hefty investment in a pension.
Speaker: But one of the things that you said was that this is a pension that is held by the employer for the employee. So it's not something that moves with the employee if that employee leaves. But what do you envisage happening to the money if that employee did leave? Great question. Would they lose the money? Would it go it into a general fund?
Speaker: What sort of conditions would you see an employer applying to the operation of that scheme? Great question. Thank you. Great question. It depends. like Now, there are several ways of how an employee could leave. They could quit. They could become sick or disabled and unable to work. Or? They could be dismissed as well. either yeah Or they could be fired. They could pass away. Not everybody gets to live to a ripe old age.
Speaker: So, here's what happens. The employer can recover up to their investment in the employee, their financial interest in the employee. Any balance would then go to the employee.
Speaker: So the the actual capital that the employer had invested into this ah supplementary pension plan would remain with the employer, but the interest compounded interest earnings from that investment would be the employees and they would take that well with them when they left. not only Exactly.
Speaker: exactly so the employee In other words, the employer cannot make money off of this plan. The employer has no incentive to dismiss or fire an employee so that they could get their money and so they could make money off the employee. The only thing the employer can do is recover their investment.
Speaker: So there's no incentive for an employer to say, oh, I'm going to make money off these employees and then I'm going to get rid of them and I'll start something with a new one. They can't do that. That's not how it's designed. This would be money that the employer would play into the the plan. It wouldn't be money that was but taken from the employees earnings at all. This would be something separate from the employee. Over and above. or above The employees. you know In other words, when I so when i sit down and I talk with clients, they say, the market favors the employee because there aren't enough people with skills to go around. So we need to be competitive. You need to be competitive in pay, vacation time and other bent health benefits and so on. This
Speaker: is the crown that goes on top. This is the thing that will attract them and retain them because the biggest financial challenge that people have is saving for retirement. For many of them, it's the thing that keeps them awake at night, especially when they're like mid -career and later, because by that point,
Speaker: They find this so far behind. They don't know how they'll ever can give up, catch up, or even or even ever be able to retire. Yes, I think there may be an increasing number of people who are worried about retirement once they start to think about it. Once they reach one of those points which could be in their 40s, in their 50s, whenever it is, you you start to think, well, how am I going to finance retirement?
Speaker: But it's still not a and still not and ah cool thing to think about. it's it's People think about lifestyle. They think about today. They don't necessarily think about the future and what will happen when the in their 60s or their 70s. You're absolutely correct. What sort of strategies do you think could be applied to increase understanding of the need to plan for a retirement?
Speaker: For a lot of people, all they need to do is look at their parents or their grandparents. Serious. The last thing that we ever want to do is to turn into our parents. Conversations about retirement always make me think that we will never retire and have a retirement in the same way that our parents or grandparents have had.
Speaker: So even great grandparents, the people who were retiring in the sixties and the seventies have had what was envisioned to be a retirement. You didn't work, you went on holidays, you had your hobbies, your pastimes, all sorts of various different things. Our parents have had a large part of that, but not in the same sort of way. But now because everything is getting more expensive and you have to plan so much earlier and invest so much more,
Speaker: it is something that people do put off and the consequence is that we have to do more to stay healthy for longer in order to be able to earn income past the age that our parents and grandparents had retired and were growing apples and going on holidays and all sorts of relaxing things. we The reality is that we will not have the same sort of retirement as we saw our parents or our grandparents have and what we will have depends upon the amount of money that we are prepared to invest and when or how old we are when we start to invest that there's something else when our parents retired we weren't living as long that's true we're living longer now and did you know that the fastest growing age group
Speaker: are centenarians, people over the age of 100. And another age group that is absolutely huge that most people don't know about is super centenarians, people over the age of 110. I kid you not, if you look into it, there's more centenarian super centenarians than you would think. Add to that,
Speaker: the advent of AI. What AI is going to do to healthcare care and longevity is going to be amazing. We're really going to start to live a lot longer because of the advances in medicine and healthcare and the knowledge of what we need to be doing to benefit our bodies so that we'll live longer and so on. And live longer in a healthy way because exactly nothing I suppose is as expensive in terms of health care as being a pensioner who's not well.
Speaker: Do you know, my best friend is 90 years old. He works full time. He's a loan officer and a business broker. He actually just got his business broker's license at the age of 90. Congratulations. yeah It's great. He's great. He works out five days a week.
Speaker: And every Saturday morning at 8 a .m., we have a mastermind phone call where we talk for between a half an hour and an hour. Every Saturday almost without fail. Pretty amazing. That sounds like fun.
Speaker: ye Today has been fun, David. I've really enjoyed it and learnt quite a lot. You've certainly made me think about what I need to do in order to plan my retirement. that But at the moment, thank you very much. It has been certainly very interesting. Well, thank you for having me. I've enjoyed our conversation. So have I.
Speaker: I am Michael Millward, the managing director of Abecedah, and I have been having a conversation with the independent mind, David Alemian.
Speaker: david Aleemian, thank you very much. You heard it correctly at least once. A talent retention expert. You can find out more about both of us at abocida .co .uk. And David also has a website. What is the website address, please, David? The the website is davidaleemian .com. I will put a link to that website in the description. There's an awful lot of information in the description.
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Speaker: Remember, the aim of all the podcasts produced by Abecedah is not to tell you what to think, but we do hope to have made you think. Until the next episode of The Independent Minds, thank you for listening and goodbye.
