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Retirement Advice from someone who has done it.

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The Ultimate Retirement Plan | Wade Pfau | Ep 63

[Music] welcome to the market call show where we discuss what's happening in the markets and the impact on your Investments tune in every Thursday on Apple podcast Google play Spotify or wherever you listen to podcasts hi Wade how are you doing I'm doing great thanks for having me on the show you know I'm so happy to have you here if you're in the retirement income planning business or if you're a financial advisor or a money manager somehow managing money in the space for retirement income planning everybody has heard your name you've been around in this field for a long time and as I was looking through your uh resume from various sources it's like okay well what are we going to exclude you know there's because there's so many things that you have done but I thought I would just kind of just fill in for viewers that don't know you a little bit about you um you know you're an active researcher and educator about retirement income strategies you know you do a lot of speaking I know you're going to be speaking here in Denver uh pretty soon uh you are a professor are you still a professor of retirement income at the American College of financial services I am currently yes and the director of Retirement Research for McLean asset management and in-stream uh you did your PhD in economics from Princeton and you did interestingly you did a dissertation on Social Security reform which we hopefully we'll talk a little bit about later uh you're also a fellow CFA Charter holder like myself um and you've got lots of AD you know accolades and some great books in particular one that I really like that you've done is a retirement planning guidebook uh 2021 uh and then you have that safety first retirement planning how much can I spend in retirement etc etc you've done some stuff on reverse mortgages The Unwanted stepchild that actually is a useful tool for many people yet not quite known by many so uh with that said I I was just curious tell me a little bit about your background where did you grow up so uh well I was born outside of Detroit I lived there until I was 15 moved to Iowa after that my my mother is originally from Southwest Iowa so I graduated high school in Des Moines Iowa and then went to the University of Iowa after that so pretty much midwesterner lived a number of different places afterwards including New Jersey Pennsylvania Tokyo Japan for 10 years and then now I live in Texas you live in Texas now yeah actually these pictures behind me and all are all the places I've lived over the years so it's so so you so you grew up in Detroit mostly it sounds like but moved all traveled a lot um how did you go from you know studying what did you study Finance initially when you were in college in undergrad economics and finance economics okay so how did you go from economics and finance to just being so focused it seems like you're focused on retirement income planning well yeah I mean uh financial planning as an academic field is still pretty new and even I entered the PHD program uh in 1999 and actually Texas Tech University started the First Financial Planning PhD program in the year 2000 so it wasn't even an option at that time but academic economics is very mathematical and theoretical and I was always looking for ways to apply to more real world type activities and that's ultimately how I made my way into financial planning indirectly you mentioned the my dissertation on Social Security reform that was testing how in the early 2000s there was a proposal to create personal retirement accounts to carve out part of the Social Security tax and put that into like a 401k style account and I was simulating how that might perform and ultimately that's the same sort of thing I've made my career on at this point which is just writing computer programs to test how different retirement strategies perform in looking for ways to get more efficiency out of one's asset base for retirement now that was during the bush 2 Administration if I remember correctly wasn't it and so and uh what were your findings in that what was your general thesis or not thesis but your general conclusion well at the time what I determined was that it could be made to work but it wasn't obviously a better approach and now in hindsight I realize more and more that there's so little in the way of protected lifetime income that carving out more of Social Security which is that inflation-adjusted protected lifetime income and exposing that to the market as well uh probably would lead to worse outcomes for many people than we do need some risk-fooled income and so now that traditional pensions are going away Social Security is one of the last holdouts and so it probably wouldn't be the best idea to private or not privatize but uh create personal the defined contribution 401K style accounts out of those Social Security contributions very interesting and we'll we'll touch a little bit more I have a lot a few questions on Social Security uh in general um you know from a macro perspective and also a micro perspective personally for uh people so um one of the things that I really like about what you've done is that you kind of take more of a approach that I'm kind of used to like more of an asset liability management approach when you think about funding ratios rather than the traditional way that you hear financial planners talk about it I really like your overall framework and one of the things that I I think is very helpful is your retirement income style protocol your resubm Matrix can you explain a little bit uh to the viewers about your ideas there and and what how that helps an individual determine their overall approach to how they should tackle their retirement income plan yeah absolutely and that's really one of the the confusing aspects of retirement income is there are different strategies that people can use and unfortunately just there's a lot of disagreement and arguments about one strategy is better than all the others and and by what I mean by that is you have What I Call Total return which is just a you build an Investment Portfolio and you take distributions from it throughout retirement you have different bucketing or time segmentation strategies and then you also have strategies that will focus more on having protected lifetime income through annuities or other tools to cover your Basics before you start investing on top of that and they're all viable strategies at the end of the day and that's an important point that Advocates of Investments only don't appreciate how powerful the risk pooling that annuities can do to offer more income how that is competitive with anything that the stock market might do and so people really have options about what they're most comfortable with and that's what the retirement income style awareness is about developing a questionnaire to help guide people in the direction as a starting point which of these different retirement strategies resonates best with your personal Outlook and preferences you may not ultimately choose the the strategy coming out of that but at least it gives you a starting point to say okay it seems like I might look here first as a way to build my retirement strategy and ultimately if that helps me connect to a strategy that resonates and that I can stick with through thick and thin in retirement that can help give a better outcome because they're all viable strategies but where a strategy doesn't work is if you're not comfortable with it and you don't stick with it and you you bail on it during a market downturn or something like that that that's what the retirement income style awareness is really designed to do is just provide that initial talking point on which kind of approach might work best for me to to think about as a starting point yeah I like that because what it's doing is it's basically more holistically looking at how you would can solve the problem and typically you'll find advisory firms that will will overweight if you will one over the other they're like I'm a Time segment guy or I I hate annuities it's all Total return annuities are a scam or uh you know I will never buy an annuity or uh you know Etc et cetera and risk pooling is is something that's really important but it's also very complicated and I think that's why a lot of people have shunned annuities and annuities have changed a lot over the years um and you know coming from my background you know which is more of a total return approach that's great if you have a lot of money but in in other cases you know I think that you can you can you can look at the problem from a optimal way of doing it or you can look at the problem from a way that's actually going to get implemented and work and what I like about Risa is it's practical pretty much all the stuff that you're doing is practical it's not completely theoretical one problem though with that is that you can have somebody who has a safety first for example mindset but their situation is such that if they have a Safety First with 100 of their Capital that they're very unlikely to be successful can you can you expound a little bit upon how you would think about that in terms of giving advice to people in that scenario yeah so that scenario is probably more they do have a safety first mindset but they've been pigeonholed into a total return strategy but they're ultimately not comfortable with the stock market and therefore maybe most of their Holdings are in cash or in bonds which doesn't support a whole lot of spending power and that's you kind of there's three basic ways you could fund a retirement spending goal the first is just with bonds or with cash not really offering much yield on top of that and then to try to spend more than that the um the probability base perspective is invest in the stock market and the stock should outperform bonds and that should allow you to spend more throughout retirement the safety first approach is more now let's build a floor of protected lifetime income that then brings in with an annuity the the risk pooling the the support to the long-lived helps provide more spending power than bonds alone as well and people have that option and it's when the safety first person gets pushed into a total returns probability based strategy and just doesn't invest in the stock market they're ultimately left with bonds which which is the least efficient way to fund a retirement spending goal over an unknown lifetime very true and you know I guess a lot of people did take that approach probably when I first got in this business 20 over 20 years ago there was a lot of people that were doing that who were retired back where the municipal bonds were paying it was it was conducive the market was conducive for that we had high interest rates that were in the long-term secular decline so you had capital appreciation from those bonds he also had reasonably good uh tax-free interest yields that were working for people and inflation was falling um and so now we potentially could be in the opposite inflation Rising who knows how yields are going to work themselves out but um it when you're looking at this um you you bring up this concept of some of the retirement risks and and you have like these uh longevity sequence of returns spending shocks Etc of of the risks that you're seeing out there which one would you say has had the largest impact negative impact on people that they really need to solve for you know longevity sequence of returns spending shocks and surprises well longevity in a way it's the overarching risk of retirement and it's misnamed because it's a good thing it's if you live a long time it's just as an economist will point out that the longer you live the more expensive your retirement becomes just because every year you live you have to fund your expenses for that year so the cost of retirement grows with the length of retirement and then it's when you live a long time not only is there that issue that you're having to fund your budget but then there's just more time for all those other types of risks to become a problem as well with the macroeconomic environment with changing public policy with inflation even a lower inflation rate still is slowly eating away at the purchasing power of assets and then the spending shocks are things like big Health Care bills helping adult family members having to support a long-term care need to to pay for care due to declining cognitive or physical abilities and so forth and so so it's really that longevity is if you don't have longevity there's not really time for the other risk to disrupt your retirement too much and that's why longevity usually gets listed as the primary risk of retirement interesting I hadn't thought about that so a lot of the other risks are kind of correlated to the longevity element um so so really tackling that that that could be one of the biggest parts of all the surrounding risks around that you you talk a little bit in your book a retirement planning guidebook you talk about quantifying goals and assessing preparedness and I I had mentioned before that I like that you're taking your approach more like a Alm or asset liability management type of of an approach which basically that's what it is um and uh and I don't think the average person thinks about it that way they tend to think about it as like I have so much money and I'll be able to with draw so much from it sometimes there's unrealistic expectations about it but one of the common things that I've seen is that most people are not spending the time they need to do on budgeting really to actually even come up with a number or help come up with a number of what your present value of assets need to be to be prepared do you have any kind of practical tips for people and their advisors on how they can actually think about and execute a good budget not only just you know come up with one but actually implement it well now that technology can really help with that and so if people are comfortable with some of the the different websites or software that Aggregates all of your different expenses different credit cards and so forth into one Excel spreadsheet that's a very easy way to to start budgeting now for people who mostly pay in cash that can be a lot more complicated these days I don't use a lot of cash so I just simply when in the rare case that I have an ATM withdrawal I'll just kind of call that a household expense for that time period and not worry about breaking that down much more but uh when you start having those credit cards or debit card type expenses now the the software may not categorize them in the way you desire and so I usually try to not more frequently than once a month but maybe once a month once a quarter download the expenses while I can still remember well enough if I have to change some of these categories and so forth to then be able to keep track of all my expenses and know exactly then pretty much to the scent almost what I spent that year and then to start thinking about well were there any anomalies of course there's always going to be anomalies and to make sure you budget in that sort of thing but that really once you have a few years of expenses down and once you think about bigger Big Ticket items like car purchases and things that can really give you a foundation to start projecting ahead at what your expenses may be in the future as well and then then you have a way to start thinking about well how much do I need to fund those expenses and that's the whole idea of that asset liability matching do I have the resources necessary to fund your expenses are just your liabilities and do you have the resources to be able to fund that with a level of confidence that you feel comfortable with hmm interesting so I I had a meeting with a client actually who was forced into early retirement and a former engineer and keeps meticulous records has for years and uh he gave us the actual numbers for the last three years and I I figured out what the compounded rate was and it was a lot higher than the inflation rate reported by the bl by the government so um I I think there's some disconnect there between you know how we model and reality um you know uh when you look at financial planning software and you look at the assumptions that are the number of assumptions that are involved in the financial software and you know even if you're not taking Point estimates if you're doing Monte Carlo or whatever stochastic process it's very difficult to come up with a robust plan so I'd like I'd like for you to give me some and I know this is kind of a big general question do you have any general tips to people who are doing this modeling on how and for and for clients actually for for individuals and how they can make their retirement more robust to be able to deal with all the changes that can happen in the world like you said public policy changes Market changes Etc yeah you will have to revisit things over time and and as you get new information about your spending make revisions to the budgeting but uh it's still just a matter of when you're like round up your expenses or be conservative with some of your projections there's some categories that are challenging as well like healthcare and when someone switches to MediCare at age 65 that could lead to an entirely different set of health care expenses and with all your expenses on Health Care in the past you might have to completely upend that and and and do a reset there so it is challenging but if you're trying to build in conservative projections the default is usually whatever you believe your expenses will be you just adjust that for inflation every year and most people don't really do that they tend their expenses don't tend to necessarily keep up with inflation over time now that can get complicated but the way I describe it in the retirement planning guidebook is you'll have one particular budget through ajd and then you'll have another lower expense budget after ajd but also building in what if there's a long-term care event and so forth how much additional Reserve assets would I like to have set aside for out-of-pocket expenses that sort of thing and then it's not going to be perfect and it's going to need revised over time but I think you can start to get fairly confident like I've sort of done these exercises I'm still far away from the retirement date and of course I may be wrong but I I think at this point I have a sense of what my expenditures will be or what they can be at least uh over the longer term Horizon of course subject to new technologies new inventions everything else that can happen uh that would change your expenses but at least roughly speaking I think you can start to figure these things out yeah um I guess I'm coming from a practitioner who's been doing it for you know 25 years and seeing the the the conventional wisdom by the best experts at each point in time and looking at how people have actually fared without advice and what I've found consistently is that changes in in particular with government policy has led to uh sub-optimal choices for people who are trying to optimize to the typical cfp advice so and let me let me uh back that up a little bit with with uh some some examples um education planning what was optimal has changed in my career probably four or five times um let me just put it this way I I have put more emphasis in tax diversification and diversification and stuff in how you do things now because what if you if you over optimize in these scenarios it's sub-optimal does that make sense right if like if you designed everything to handle one particular public policy and then it changes on you like right now Roth IRAs or Roth accounts are incredibly attractive to have Assets in but something could change it could just be not that they might necessarily ever tax a Roth distribution but they could add a required minimum distributions or they could count it in the modified adjusted gross income measures used to calculate taxes on Social Security benefits or to calculate higher medicare premiums and so forth and so if something like that happened and you'd been doing all these Roth conversions to get everything into the Roth account yeah that would be overdoing it and subjecting you to that particular risk so I do think tax diversification is is quite important so that you still have flexibility and options because the the uncertainty is the rules will change and we see that every couple of years we just in late December 2022 secure act 2.2.0 came out and that has changed a number of different public policy matters related to retirement income it's gonna and that will continue to happen over time so so be flexible and part of that is just not overdoing things making sure you stay Diversified with with how you're approaching planning yeah in today's environment what we see a lot is is people that have taken the advice of Max 401K uh you'll get a lot of tax deferred and and what's happening is is they're coming to retirement with a large very large 401K plans and things like that and then they just get nailed in taxes and in fact I'm finding a lot of people pay more taxes when they're retired than they did in some cases than when they were not retired um and uh and and it becomes an issue it becomes a real issue then they have estate planning issues and things like that so um uh I just I'm glad that you said that about the the tax diversification I think more than ever especially given our our current you know country's economic condition there's a lot there's we're going to have lots of changes and they could be very large changes uh in particular if you considered quote unquote rich um so I'm sorry I put my little uh two cents in there but getting back to your book uh you have this concept of the retirement income optimization map um again going back to the assets and liabilities and all of that and when you're you when you're you talk about optimizing that's that's why I brought up the the concept of optimizing I I think there's optimizing within ranges one of the concepts that I've kind of looked at and you talked about you talk about different people's retirement styles um one of the issues that you can look at is like matching the duration of your expected liabilities up for a certain period of time so let's say you have a certain percentage of your portfolios in a total return portfolio and then and then another percent that you're you're cash matching or your duration matching matching for one to five years or whatever uh I think some people call that time segmentation you can call it many different things if forget about psychology and how somebody feels if you are just a rational investor a rational person what would you say the optimal length of time is on average for somebody retiring 65 say to cash match or to duration match uh you know their near-term expenses at one year is it five years is it 10 years I know that's a a loaded question but if you forget about forget about psychology and just go pure rational mm-hmm well pure rational the the total return investing approach which has less emphasis on trying to duration match uh can work and also if you then use a an income protection or wrist wrap type strategy you you have that income floor in place that is lifetime so it's already kind of duration matched to your liability so time segmentation is certainly a viable strategy in terms of my personal preferences it's my least favorite strategy so the whole behavioral point about time segmentation is if I have five years of expenses in in cash or other fixed income assets I don't have to worry about a market downturn because I feel confident that the market will recover within five years and I'll be fine and that that story that's a behavioral story and it just doesn't resonate with me personally I I can understand it resonates with others but it doesn't resonate with me personally and therefore I don't necessarily think about what sort of like front end buffer you need in place too to somehow be rational or optimal also that's where something like a reverse mortgage can fit in in a really interesting manner because if you set up the growing line of credit on a reverse mortgage that can be the the type of contingency fund that you can draw from so that you don't necessarily need to have as much cash or other assets sitting on the sidelines to fulfill that role so I would look more at some other of course you need some some cash but I tend to say less rather than more and maybe look at some other options as well about how to have that liquid contingency fund that's great so so basically the in in the guaranteed income sources plus plus reverse mortgage could uh provide a buffer provide a floor so that you could have uh less cash and and you're generally getting a higher expected rate of return on the annuity than fixed income securities and your at at least at the present time a reverse mortgage line of credit grows at a faster rate than the cash which can be used tax-free when you need the money uh so you can see that Evolution that Carol davinsky is one of the famous planners and researchers in this area and in the 1980s he talked about the five-year Mantra which was have five years of expenses in cash now cash you create drag on you're not able to get as high of potential returns with the money you have in cash so he gradually lowered that down to two years in cash and then when he came across reverse mortgages and in subsequent research and and descriptions he talked about having six months of cash alongside a reverse mortgage growing line of credit so I think that's an example of I I think something like that sounds pretty reasonable that's that's that's that's really helpful so and I want to Circle back to reverse mortgages here but before we do if you don't mind I'd like to talk a little bit more about social security uh so we're kind of getting into the realm of the the guaranteed side of things not the total return side of things um or or I more more knowable income sources um I was just looking at the kind of the statistics right now total debt in the United States is really huge um we're running very large deficits project to be like 2 trillion we have a Pago system right now in Social Security and even if we taxed it's been argued by many people even if we taxed every billionaire 100 that would barely make a dent in our current situation so we have huge unfunded liabilities off balance sheet uh type unfunded liabilities how can we really expect Social Security to keep up with inflation and will it be there for quote unquote you know what I'm saying well it will need reforms it's very unlikely to Simply disappear for my own personal planning I I assume I'll get 75 percent of my presently legislated benefits but for people who are younger as well further away from their their 60s uh the social security statement they receive assumes the zero percent average wage growth as well as zero percent inflation and the reality is there's probably going to be a positive real wage growth over time so you're presently legislative benefit could be a lot higher than what your social security statement is implying and therefore when you offset a benefit cut with the uh the wage growth that can be expected over time you may not have that much less in terms of what you're going to plug into your financial plan but yeah I certainly we don't know how the reforms will shake out but if nothing is done sometime in the 2030s Congress would have to legislate a benefit cut and to keep the system so that enough payroll contributions are coming in to cover exist current benefits that cut would have to be somewhere in the ballpark of 20 to 25 percent so I just simply assume I'll get 75 percent of my presently legislated benefit as part of my financial plan is is it fee Is it feasible feasible to actually get Social Security in a funded situation or is it gonna is it most likely going to stay Pago in your if you had a crystal ball oh it yeah it's always been pay-as-you-go and right so the buildup of the trust fund was an effort to just build up some reserves in anticipation of the changing demographics where there's more and more retirees relative to the workers paying contributions uh they try to keep Social Security funded over the 75-year time Horizon and so it's never permanently funded but yeah with a 25 20 to 25 percent benefit cut that would be sufficient to get the system to be expected funding funded fully over the subsequent 75-year time Horizon that's that's really helpful um thinking about it that way in terms of just potentially a 25 less is a reasonable way to look at it I think um the that part of it's not so hard what's harder to understand or to get a grasp on is whether or not that's going to be what that means in real terms for for a retiree um if we continue on a certain path and inflation is is in a different scenario in the future how how do you think about scenario when or inflation when you're when you would set up a plan or a retirement plan what how would you what kind of what kind of uh of Monte Carlos if you will would you put on on your inflation expectation so I do well I tend to just try to think of everything in today's dollars so that the inflation's factored out of it but I the way I think about long-term inflation is the markets tell us what they expect inflation to be if you just look at the difference between a treasury bond and then a tips treasury inflation protected security with the same maturity uh the difference between those two is what the markets expect inflation to be in if they thought it would be different they would invest in one or the other to get that aligned inflation is coming down now and even over the next five years at this point markets are only factoring in an average inflation rate of about 2.1 to 2.3 percent so it seems like markets really expect inflation to come over to come under control even over 30 years right now the markets are building in about a 2.3 percent average inflation rate which is below historical numbers and in terms of if I'm building a Monte Carlo simulation right now I'd to be a little more conservative there I'd base it around a two and a half percent inflation rate with historical volatility and inflation is around four percent so so you're basically an average of 2.4 or 2.5 and then uh standard deviation is like four basically okay so uh that that sounds reasonable um I I guess what is interesting about that is I guess if you assume that we have typical real rates of return for different asset classes that that all works itself out if you put it in present value terms um but if that's not the case and and it should stay that way ultimately it should stay that way but you could have major moves in markets in people's uh time Horizon when they retire which leads us to sequence of returns conversation uh when people retire you can have these you can have these big shifts in markets things things are rough right when somebody retires uh we uh remember I told you about that engineer we had a conversation with forced into early retirement right when the market topped uh the good news is is he had two types of annuities that worked out perfectly for him in the sequence return can you explain sequence return risk for listeners and and what it means and how to you know strategies to mitigate that a little bit more and just one quick last comment on the inflation too like if you thought when I said these low inflation numbers that that's ridiculous inflation would be much higher well then you'd benefit from investing in tips because they'll provide you a real yield plus whatever inflation ends up being and so they'll perform better if inflation is higher and they've already discounted that that was one of the best performing uh fixed income markets uh in the last couple years so but anyhow but but yeah a sequence of returns risks so that's it whenever you have cash flows going in or out of a portfolio the order of returns matters and it's when you start spending in retirement that it matters a lot more so it's like the market could do fine on average over the next 30 Years but if the market goes down at the start of my retirement I'm not having to sell more and more shares to meet my spending needs and sell a bigger percentage of what's left to meet my spending needs such that when the market subsequently recovers my portfolio doesn't get to enjoy that recovery and so it can dig a hole for the portfolio and the the average return could be pretty high but if you get a bad sequence of market returns right at the start of retirement it can really disrupt that retirement and lead to an implied much lower average rate of return than what the overall markets were doing over your retirement Horizon yeah so and in terms of actually uh let's say you're coming up on retirement so this is a common scenario you're retiring in 10 years or five years what should an investor be thinking about doing to transition from that accumulation to distribution phase to kind of mitigate that sequence of return risk so when people start thinking about retirement I think that's where the first step take that retirement income style awareness to get a sense of what sort of retirement strategy might work for you because that's where you then have um different options if you're more of a total return investor that's the whole logic of the target date fund and so forth is just start lowering your stock allocation but still investing in a diversified portfolio as part of that transition into retirement if your time segmentation the easiest way to think about the transition is instead of holding those Bond mutual funds you start exchanging those in for holding individual bonds to maturity like if I'm 10 years before retirement every year for the next 10 years I could start buying a 10-year bond and then when I get to my retirement date I have the next 10 years of expenses covered through these maturing bonds if you have more of an income protection or risk draft strategy the the options would then to be thinking about well if I have an income gap I'm trying to fill where after I account for Social Security or any pensions I'd really like to have more reliable income to meet some basic expenses well you could start looking at purchasing annuities that would turn on income around your projected retirement date as a way to have that transition into retirement and so they're all viable options and it's just a matter of taking the the route that you feel most comfortable with very good that's really really helpful um now I I guess at least is a little bit into the what I would call the traditionally unloved unwanted stepchildren annuities and reverse mortgages uh you know they've gotten a bad a bad rap for so long but they're so useful in in as tools I would say probably the reverse mortgage is the least understood and uh and and one very helpful um tool I think maybe because of just the history of them and how they used to be structured versus how they're structured now um can you give me a sense about how to think about reverse mortgages for people is it only for people who are you know can barely get their their plan together with their assets or or does this also work for people who have a cushion but they should still do a reverse mortgage more yeah I mean the conventional wisdom a lot of times is that the reverse mortgage is a last resort consideration after everything else has failed and maybe then just a way to Kick the Can down the road a little bit but ultimately that retirement wasn't necessarily sustainable since about 2012 that really the focus of the kind of research retirement planning financial planning type research was looking at how reverse mortgages can be used as part of a responsible retirement plan and so it's not that a lot of advisors may just think the reverse mortgage is only for someone who's run out of options but but that's really not the idea it's we have different assets and it's back to that real map the retirement income optimization how do we position those assets to fund our goals and the reverse mortgage provides a lot of flexibility about how to incorporate our home equity asset to help fund our retirement plan and it can lead to a lot more efficient outcomes than just simply say leaving the home sitting on the sidelines and saying well I've got the home if I have long-term care needs I'll sell my home to fund the long-term care something like that otherwise I'll just leave the home as a legacy asset for my beneficiaries there's much more efficient ways to incorporate home equity into a retirement plan and that's what the whole discussion around reverse mortgages is how can I I use a reverse mortgage to help build a more efficient retirement plan and not as a last resort but as part of a responsible well-funded retirement plan it's just another Diversified tool to a source of source of of assets that you can use that's not just sitting there I just had a conversation with a client yesterday that is about to retire in a few years and uh that is exactly what he said that other property that I have in that other State uh I'm just gonna keep that as a that'll be my I'll sell it if I need to you know there was a conversation about health care contingency and um uh long-term care and things like that and that was his rationale um and and in discussions with clients there has been a a ton of resistance you've been really good at putting out information that shows why it makes sense to have it as a potential use so can you explain a little bit about the the line of credit portion of it and how that how use how that could be advantageous yeah and it really it goes back to this idea of sequence of returns risk and if you look at a reverse mortgage in isolation it may look expensive or whatever else but it's how does it fit into the plan and by reducing pressure on the Investments it can help lay the foundation for a better outcome and the the growing line of credit is one of the most misunderstood aspects of the reverse mortgage and I think it was partly unintentional and it may sound too good to be true in a way it probably is and we saw in in October 2017 the government put some limitations on the growing line of credits so it was incredibly powerful before then it still quite powerful not as powerful as before for new uh anyone who opened a reverse mortgage before October 2017 was protected to have those Provisions in place for the entire life alone but if you wait and then after October 2017 you still have the growing line of credit it's not as powerful but but the idea is I believe the government assumed people would open reverse mortgages because they want to tap into the funds but financial planners realized with the variable rate not with a fixed rate but with a variable rate home equity conversion mortgage you do have to keep a minimal loan balance of say 50 to 100 dollars but otherwise the rest can be left as a line of credit and that line of credit grows at the same way the loan balance would grow and so you can understand why if you borrow money the what the loan balance will grow over time well it just happens to be the case that the kind of neat planning trick is if you open the reverse mortgage and 99 of it is in the line of credit the line of credit is growing over time at the same rate that the loan balance would have been growing and ultimately this improves the odds dramatically of having a lot more access to funds over time if you open it sooner and let the line of credit grow versus just waiting to open it at the time you might actually want to start spending from it yeah how has it been limited uh limited versus the way it used to be what what are the limitations well they increased the initial mortgage insurance premium which is not directly to the line of credit but then every every so often used to be more frequently we're now getting overdue at this point with it's been over five years but they revised the tables that determine the principal limit factors of what percentage of the home value can you borrow and so as part of that 2017 change they uh lowered the the borrowing percentages and also they lowered I mean this this part's a good thing but they lowered the ongoing mortgage insurance premium that would cause the loan balance to grow at a slower rate but it also in turn caused the line of credit to grow at a slower rate so it before that change I was running simulations where if you opened a reverse mortgage at age 62 there was like a 50 chance that within 20 years the line of credit could be worth more than the home and that's no longer the case it's still there's still a probability that the line of credit could grow to be worth more than the home but it's not nearly as dramatic as what I was Finding before the rule change that's very interesting because the line of credit growth rate is tied to interest rates and home prices have somewhat of an inverse relationship to interest rates to some degree but it's basically positively skewed so it's not it's hard to know but uh uh but yeah that's that is a great planning tip and it's interesting because we have had a lot of friction with this discussion with uh clients uh mentioning to them because they just have it in their head that I'm going to lose my home and I'm going to there's all these things that can go wrong and then you have to explain it's a big education process and of course they are required to do education as well no we don't sell reverse mortgages but we always you know if we if we you know we mention it to people as a source and you know having it there makes a lot of sense uh and and the same thing with the annuities um you know I have a love hate relationship with annuities but I'm becoming to love them more and let me tell you why before it was all commission driven you know and we're fiduciaries we don't do commission stuff now with the Advent of finally the insurance companies have really gotten to the point where there's at least enough of them now doing products that make sense with the guarantees I mean there was always companies out for a long time there's companies out there like Americas Etc that had just pure plain vanilla uh va's variable annuities that had just lowered your expenses and maybe eliminated a surrender or something but the guarantees is where the real there were folks too much on tax deferral and not enough on guarantees what were the guarantees is really really what we're really looking for here uh and the only way you could even get them you guarantees would be if you did a commissionable product so we'd be handing you know we would be referring people to Insurance guys who were selling commissionable products and then sometimes you don't know what's going to happen after that happens uh with that client so now thank God we have uh we're in a scenario now where the where the financial industry has finally caught up to what needed to happen with annuities yeah the only annuities yeah yeah the only annuities and there's it still has a lot more to be done it's it's you shouldn't be overlooked and I think what happens one of the reasons that I think they're so helpful uh for people is that risk tolerance is time variant people say their risk tolerance is X and then as soon as you have a market decline then their risk tolerance is all all of a sudden why which is more conservative and and uh these annuities can help people psychologically overcome that right you can always look to something that is either staying equal or growing and you can also have growing income streams during the Gap we see that a lot there's a gap between uh when they get Social Security and when they retire and it kind of fills that Gap and it's funny when I was when I was I actually had my assistant who's also a CPA excuse about my financial planning system I had to read this book first and she uh she said it sounded like like you uh were like in the room with him uh because there's so much stuff in here that you and I agree with it's amazing uh before not even knowing you so and I think it might have to do more with the approach of taking things more from uh your academic background and your CFA background it gives you a different perspective than what kind of the traditional financial planners had who had come more from a sales background and now what's happening is is we have uh the whole industry is now moving in the I think moving in the right direction and I think you've been a big uh reason why that's happening so I I really want to thank you for that all your work is really making a difference I want to talk a little bit about Medicare if we can and health insurance this is probably one of the most the hardest part is the medical the medical discussions in some ways um people don't want to think about long-term care people don't want to think about health costs I was looking at some of the statistics you know long-term care statistics is how much it costs it's a big number how would you how would you model the contingency planning you know for let's just start with long-term care how would you model that would you model it as a present value number or would you try to put it as a as something that's over time how how would you how do you approach that yeah actually so I did try to make the retirement planning guidebook as comprehensive as possible and and so I as part of that developed a long-term care calculator and the the basic logic of it is develop a scenario that you would feel comfortable that if you could fund that scenario uh you'll feel like okay things things will work out whether that's three years in a nursing home whatever the case may be but develop that scenario where you're saying okay at age 90 I will spend the next three years in a nursing home right now in the United States the average cost for a semi-private room in a nursing home is a little bit under a hundred thousand dollars I'll say in today's dollars a hundred thousand dollars a year but then I'm gonna plug in the the math gets complicated but you've got what's the inflation rate in long-term care what's the overall inflation rate and then back to this whole idea of the asset liability matching like what's the investment return discount rate you're comfortable assuming as well and also recognizing that if I do go into a nursing home I don't have to also fund my entire budget of a like if I thought I was going to spend 80 000 a year well I'm not going to be going on any sort of trips I don't have to go to restaurants or anything uh a lot of my other expenses would reduce not not 100 but they would reduce so plug it in what I think is a reasonable reduction to the rest of my budget and then you get calculated a present value of here's how much money I'd have to have set aside as a reserve asset to feel comfortable that I would be able to fund this long-term care need and and be able to have a successful retirement and for people who are worried about and who may be paying out of pocket for long-term care that could be several hundred thousand dollars to be blunted on average that's what it comes out to I actually had a coffee with a gentleman and he said uh what is it just tell me what the number is I said well it depends on your age he says no just tell me what the number I said it's roughly about 300 000 roughly on average it could be more it could be less uh you know uh okay and and there's there's there's different ways you can fund it right you can do long-term care insurance uh traditional Standalone you could do um you know life insurance policies that have embedded features you could do if you can't like qualify for um you know you know get a policy you can maybe get it embedded in an annuity of some sort you can sell fund um so it's not an easy thing that you can uh solve it with a quick answer um but but it's important to have in a plan and I and I like the fact that that uh you've emphasized that a lot in your work um it's just it's just great that that people are thinking about it from that perspective I want to switch gears a little bit um and talk a little bit about tax efficiency uh you know taxes are such a huge part of the impact of a plan and there's so many different angles to it and and the tax rules change so much um I'll tell you one of the challenges that I have asset location the concept of balancing you know where you put a certain asset according to us is tax efficiency versus keeping an asset allocation in line right up you know operationally keeping it in line with the objectives and then as money is being spent taking it from the right place it's a challenge even with excellent software and then sometimes I'm finding that it doesn't actually work out as planned so can you can you give me some practical tips on how to deal with asset location well the the basic logic of asset location but yeah I mean in practice it gets incredibly complicated as you're spending from these accounts to think about also rebalancing and making sure you're keeping the right asset allocation between stocks and bonds and the NASA location is where do you keep these things but generally just is a basic guideline your taxable brokerage accounts of course you want some cash there for your liquidity but otherwise that's your most tax efficient stock Investments so if you own stock index funds and so forth the on a relative basis they're most likely to be best off in your taxable account because a lot more of their returns will be those long-term capital gains that get the preferential tax treatment then with like your tax deferred IRAs and 401ks that's more of a place where less tax efficiency so bonds and so forth maybe lower returning type asset classes and then for your Roth accounts the Roth IRA and so forth that's where less tax efficient but higher expected return type asset classes could go the Emerging Market funds and small cap value and that sort of thing and that does also work with distribution ordering as well because the Roth will be what you tend to spend last and so also having these uh riskier asset classes that may have more growth prospects over the long term that can be a good place to set them aside since you're not likely to be spending from those accounts until later in retirement okay yeah it I think for a lot of people it's a little bit of a daunting thing and in practice it can be with contingencies and things like that can be hard to to do correctly and keep managed and I know there's good news is there's good software now that that helps with that um as far as tax efficiency the other you mentioned the order of withdrawals I mean traditionally you know you have the you know your traditional order of withdrawal that you would you would uh do in in the past a lot a lot of recommendations has been you know you want to take from your taxable accounts first right let those tax-free tax deferred accounts grow and then and then you start taking from those other sources but you make a really good point that that's not always the best thing to draw that taxable account down too fast can you expand upon that a little bit well the yeah the the basic tax efficient distribution is spent down taxable assets than tax deferred like IRAs and then tax exempt like Roth against last but you you can do better and so the the better approach is to have a blend of taxable and tax deferred until the taxable account depletes and then a blend of tax deferred and tax exempt after that and as part of that blend you can do rock conversions to in the short term pay higher taxes if that can better position you to pay less taxes over the long term and to have a higher Legacy value from assets over the long term yeah and then getting more specific than that it's there's no you really got to run the the individual numbers on a case-by-case basis but generally there's the opportunities to sustain your assets for much longer by having a more tax efficient distribution strategy that digs into that taxable plus tax deferred and then later tax deferred plus tax exempt exactly and and that's why it's important while you when you're an accumulation phase make sure you have some tax diversification if you can yeah have Assets in all those different types of accounts yeah so that you're not nailed so bad uh later on uh and then there's a lot of complexities that can happen with happen that we see quite a bit with concentrated stock positions and things like that which is probably outside the scope what we're talking about today so um and lastly here last last topic here non-financial aspects of retirement this is a huge huge huge thing uh it's funny it was the last towards the end of your book and I'm glad that you talked about it uh because uh there's I can't tell you how many times um you know you see people think that they're going to be happy sitting on the beach and then they they do that and they're miserable uh or or spouses that wind up hating each other for some reason can you tell can you give us some ideas about um like what should people be doing like say they're five years into retiring or ten years into retirement retirement What should people be thinking about doing to kind of get their their overall lifestyle satisfactory when they actually do retire yeah and and that's this is in some ways more important than any other Financial stuff because with the finances it's easier to adapt but work does so many things in a person's life it's not just that it provides a salary and you need a way to replace all the other aspects of work such as structure to the day camaraderie feeling part of a team feeling like you're creating value for a society all these different aspects that you need to be able to replace with something that gives you motivation to wake up in the morning in retirement and so to say simply it's not the best starting scenario if you retire because you hate your job you want to be able not to retire away from something but to be able to retire to something you want to have and it gives you purpose and passion and meaning to give you the motivation to wake up and and have something be active each day because in all too many cases people just they start doing passive things like watching too much television or surfing the internet too much and that can lead to a really miserable and unsatisfactory retirement wow that's huge that's interesting have something to retire to so uh and and start figuring that out sooner rather than later right not don't wait till the very end and go yeah what am I doing uh and sitting there staring at your wife or your husband yeah that's the idea that there's all these things you you want to get done but you just think well when I retire then I'll have more time to do it well if it's something you've been holding off on doing for the past 40 years it's not likely that just having more time in retirement is what you need you may just simply either not be interested if it's a hobby like oh I want to go back to playing the guitar or something if you're waiting for retirement to do that sort of thing there you go that retiring may not be enough and then people might start feeling bad that you no longer have the excuse and that's where if that sort of bad feeling compounds it can create a spiral like a downward spiral where people just become less engaged and less positive and it can even impact Health which then in turn makes it harder to be engaged and involved and and can lead to downward spirals it's really important to try to avoid that and as part of that not waiting for retirement to to consider all these other aspects of your life outside of work but making sure you're nurturing relationships and having hobbies and having things outside of work so that it will then be easier to transition into the retirement yeah that's great so is there anything as we close here is there anything that you're really excited about that you're working on right now that you want to share or is there at all right now I am just trying to get the updates done for the retirement planning guidebook and where we're doing the best we can to build out that retirement income Styles ideas uh something that people can benefit from and uh the other main research area is with the tax planning as well that I think this will be a Hot Topic and I've already done a lot of work in that area but it is such a complicated area that just trying to push forward as well about like Roth conversion strategies and and how to best Implement those in a most of the work in that area just assumes a fixed rate of return and with the reality of not fixed rates of Returns on your Investment Portfolio that also dramatically complicates some of those tax planning decisions so I'm continuing to push ahead in those areas interesting so more stochastic modeling in your future yes stochastic modeling and now you're probably going to be uh that Technology's got to be in there somewhere too any plans uh that you want to announce or share with new technology that you're going to be coming out with or software programs or anything like that or I mean I just have this Vision in my head if I were you I'd be doing something like that but I mean I'm just saying yeah don't Envision creating tax planning software but uh the retirement income style awareness that's where I'm putting on my efforts in terms of having software and that's an easier problem than the tax planning problem definitely yeah there's a lot of changes always yeah you'll be coding to your uh blue in the face all your staff would be so uh the uh it's interesting I I I'm actually going to be diving into that that profiling software that you have um I had a conversation yesterday about that so that's very good so where would people uh would you like people to send you see learn more about you um anything that you're up to oh yeah uh so my website retirementresearcher.com all one word retirement researcher and if you go there you can sign up every Saturday morning we send out an email with different articles and things and then my retirement planning guidebook is on Amazon or any other major book retailer and also I do have a podcast as well they're retire with style podcast with Alex mergia who's my a co-co-researcher and and co-founder of the retirement income style awareness excellent all right Wade thank you so much appreciate you coming on it's been a pleasure thank you the information in this podcast is informational and General in nature and does not take into consideration the listeners personal circumstances therefore it is not intended to be a substitute for specific individualized Financial legal or tax advice to determine which strategies or Investments may be suitable for you consult the appropriate qualified professional prior to making a final decision wealthnet Investments is a registered investment advisor advisory services are only offered to clients or prospective clients where wealthnet Investments and as representatives are properly licensed or exempt from licensure [Music] foreign

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Can You Retire Early at Age 50 or 60? – Retirement Spitball #EarlyRetirement #RetirementSpitball

Andi: Happy New Year, friends! Let’s kick it off with some spitballing. Can Clark Kent’s dad in Hutchinson, Kansas
retire at age 50? Will Devin in South Carolina be fat and happy
or cutting calories if he retires at 59 and a half? Can Scott Magic in Idaho retire to a good
and simple life at age 60? Gina and her wife are 52 and 58. Can they retire in four years, and how much
should they be putting in their Roth accounts? Joe and Big Al kick off 2024 with more early
retirement spitballs, today on Your Money, Your Wealth® podcast 462.

Plus, Frenchie in Maine needs a spitball on
a Roth conversion strategy with Canadian retirement funds. And since Frenchie would like me to talk more,
I’ll tell you what I know about target date funds. I’m producer Andi Last, and here are the
hosts of Your Money, Your Wealth®, Joe Anderson, CFP® and Big Al Clopine, CPA. Joe: We got Martha Kent from Hutchinson, Kansas. Martha Kent. That's Clark Kent's mother. Al: Really? Joe: Yeah. Al: Wow. Good memory. When it comes to movies, you don't miss anything.

Joe: Steel trap. “Hi guys. A long-time listener. Sometimes I skip new episodes because of the
new format.” We have a new format. Andi: I think she's talking about the fact
that there's derails at the end of each episode. So that means that the episode itself is kind
of shorter. She says there's less meat, so she- we actually-
we emailed her and asked her about it and said, what do you mean? And she said she just racks them up and then
listens to- she binges them a bunch at a time. Yeah. So she can get more meat.

Al: Because we have more humor? Joe: There's less meat, Al. Al: Yeah. Joe: Where's the beef? Where is the beef? Al: We're doing our best. We don't have enough. Joe: How many people do you think remember
that commercial? Al: Well, certainly I do. Andi: All the people our ages. And mine. Andi: Yeah, the 3 of us collectively. Joe: “So I find myself feeling left out. But since it's your show, here's my info.” I still don't get it. What the hell is she talking about? Al: She wants more meat. She wants less derails and more questions
answered. Joe: Less of this, what we're doing right
now. Al: Yeah, the BS part. Joe: Got it. Andi: Get on with it, will ya? Joe: “I'm married, both 45. I'm self-employed. Husband has two part time jobs. Can't get him to work full time with benefits
because he doesn't like the-“ Andi: – monotony.” Joe: -monotony. I knew it. Al: You were gonna say monotone? Joe: Monotone. I hate that monotone. “We don't really drink since, well, we're
trying to manage, then enjoying our retirement, right?” Andi: Can’t do both, I guess.

Al: Do you agree with that? Joe: No. Al: Me neither. You got to enjoy the journey. Come on. Joe: “We have one pet and one long paid
Ford SUV and beater Benz. Not being born here, we are subject to numerous
advice on savings, retirement, getting rich. Here's our situation. We have about $100,000 in various bank accounts. We have various 401(k)s and some Roths, some
403(b), about $170,000, $23,000 in a 529 plan, a couple of brokerage accounts, $30,000, business
account, $25,000, Valek that started 4.5%, now steady 3% that would get to $125,000 at
retirement, $35,000 in precious metals, crypto at $90,000.” Wow. Crypto in new case.

Brokerage accounts, 401(k), cash. I mean, you name it, it's in there. Al: It's- we got it all. Joe: Wow. Al: I'll take one of those. One of those. Joe: Yes, and one of those. Oh, that came out? Yes, I would love one of those. Al: Well, I heard good stuff about that. Let's get some of that. Joe: Yeah, I just talked to my neighbor. You have one of those? Okay, we're getting one of those. “We got over a million in credit card points
worth $12,000 in cash.

Do you count your credit card points as cash
on your balance sheet?” Al: Well, you can cash out some of them, so
I suppose. I don't. Joe: I want one of those, actually. Al: Because I use them. Joe: She's like, yeah, I got $12,000 in credit
card cash points. What do you got? Al: So let's add that up. Add it to the- Joe: Add it to the list. Okay. “Or maybe 3 round trip, first class, New
York to Dubai tickets, $60,000.” Al: Yeah, they'll take care of the credit
card points, I guess. Joe: Okay. “Return of premium and life insurance.” Oh my god, four savings, $30,000 in 15 years.” So she bought a life insurance policy. She's projecting out what it's going to be
in 15 years.

Al: She has one of those too. Joe: Yeah, one of those. That’s four savings. How many timeshares do you think she's got? Al: Probably a couple. Joe: “Second house worth about $330,000
that has $30,000, 3% left to pay. Getting $1500 a month from long term renters,
but can probably get $1800. A primary home worth $440,000 has $120,000
left. Originally planned to pay the second house
in two years, and the other using the rent money in additional in 5 years.

The way we grew up, and not having a full-time
job with stable paychecks, it seems better to have no debt.” I agree with that. Al: Yep. Joe: “We make about $130,000 a year, maybe
spend about $50,000 a year, and would at least put $12,000 in a Roth a year. So are we good?” I got one of these. I got one of those. Al: We got enough. Joe: And we got a couple of these. What do you think? Are we good? Al: I got 9 things.

Do I need 12? Joe: Hey, did I mention I got 12,000 points
on the old credit card? Al: Okay, you got 10 things. Joe: “Can my hubby stop working at 50 if
I can get $80,000 a year? I know we have a very low interest rate, so
we might just pay the required minimum on our primary. Should we get a reverse mortgage?” You haven't had one of those yet. Al: Yeah, that's 11. Joe: Oh yeah, I think we need to get a new
car. Let's go, get one of those. Oh, it's about $40,000. Thanks.” Al: So I got some comments. If you truly are spending $50,000 And you're
making $80,000? You're good. Joe: You're good. Al: Yep. Now, I just did 5 years inflation on $50,000. That's about $58,000. But here's my comment. I think you're spending more than $50,000. If you're making $130,000. So just take a very careful look at what you're
spending before you decide that this is the path that you want to do.

Because if I take your current assets at $500,000
ish for 5 years, 7%, we had $12,000 a year that gets you to $750,000. That's a great number. But very difficult to turn that into a big
retirement income. I have a feeling you're spending more than
$50,000. So that's my number one advice to you is try
to figure out what you're spending more carefully instead of maybe spend like $50,000, like,
like what is the real number? Joe: We don't give advice here, Big Al. Al: Oh, did I say advice? Joe: Yes, you did.

Al: Sorry. Joe: You probably rephrase that. Al: Yeah. I would. Joe: Some ideas that you should consider. Maybe double check your budget. Al: Here's what I would think to do. How about that? I would figure out what I'm really spending
and then come up with the plan. Joe: All right. Sounds good. Good luck. Joe: “Hey, guys. Scott Magic here from the great state of Idaho. No potato jokes, please.” Al: Do you even have any? Joe: No. Al: Not me either. Joe: Nothing's coming to mind. Al: Yeah. I got nothing- when I hear no potato jokes. It's like, I, I wish I had one. Joe: Yeah. Still nothing. ‘We drive a Chevy Tahoe, paid off, and have
no debt other than our $200,000 mortgage.

Our weekend drink of choice is a cold hazy
IPA and some red wine.” I would pass on both of those. Al: So that's common drinks in my household,
hazy IPA and Annie likes red wine. And I do too. Joe: “We have two boys, age 15 and 13, that
need to leave the nest soon.” Al: That's not going to be that soon. Joe: “spitball our game retirement plan,
the wifey wants to pull the plug at 60 and live the good simple life.” I don't even know what that means, but it
sounds pretty good. “My wife's 45, I'm 48, making a combined
income of $220,000 a year. We add $25,000 per year to 401(k)s, plus employer
match.

We recently opened up Roth accounts to plan
to max them out as eligible over the next 15 years. Here's our current breakdown.” Alright, Scott Magic wants to retire at 60,
so what do we got? We got 15 years Al, that's kind of the time
frame for wifey and 12 years for Scotty. Al: Yep, so I ran a 13 year, just kind of
split the difference. Joe: Ooh, 13, okay. So they got “$450,000 into a 401(k) plan,
they got $4000 in Roth, they got $30,000 in CDs, brokerage account is $5000, the goal
is to add $5000 per year, savings is $60,000, no pensions, super lame.” Al: So I’ll just tell you, I got $550,000. Joe: And he's going to add $50,000 a year? Al: Yeah, more like $40,000 because of the
Roth IRAs. Joe; No, but plus he's got a match too.

Al: Yeah, yeah. And I didn't even add that, but anyway. Joe: Okay, hold on, let me finish here. “So I'll take Social Security at 65 and
her at 70. When we retire, our house will be paid off,
and we plan to keep our fixed expenses modest. That said, I plan to spend $100,000 a year,
so it'll probably be more like $120,000. I feel like we are on track with time, but
curious what you guys think. Do you think we need to step up our game,
or just stay the course? Love the show.

Keep up the good work.” Al: Okay. Now I'll give my number. I'm thinking in 13 years, they'll have about
$2,000,000. Joe: $2,000,000. Al: And I do that starting at $550,000, adding
about $40,000, 6% per year, 13 years, about $2,000,000. Then, if he wants to spend $100,000, I just
took the lower figure, 13 years, 3% inflation, it's about $150,000. Okay, so $150,000 into $2,000,000, that's
a 7.5% distribution rate. Now, I know we haven't included Social Security,
and we're not even sure what that means, but in my way of thinking, that's a little bit
high for the stub period.

I would probably say you're not quite there,
although you're not that far off. If it were me, I would probably maybe work
one extra year, perhaps, maybe two extra years, or at least have some part time income for
5 years to kind of take care of the stub period where you're utilizing too much of your portfolio. That's what I would do. Joe: Yeah. So if you look at $85,000 is what the distribution
would be at 4% when they turned 60. They could probably take, I’m going to say
5.5% because of the bridge, because they're going to receive Social Security of roughly
maybe $50,000.

Maybe that's too much. But let's just say $85,000, that's the future
value, 13%. Let's go 2% present value. Could they spend like $55,000. If they can live off of $55,000, then I would
say they're on track. Al: Right. Because of inflation. Joe: But they want to spend $100,000. So they're- Al: So here's another way. I would say it. You've got $2,000,000. I agree with you about 5% is where I'm comfortable
or more comfortable, right? So that's $100,000. But you need to spend $150,000 given inflation. So, so you're short about $50,000. So maybe you get a part time job or maybe
you work an extra year or two. Joe: Right. Well, what I did is I looked at If you look
at the future value of their current savings of what they're doing at 7%, it's $2,100,000. I think you use 6%, maybe it's $2,000,000. And then you look at 4% of the $2,000,000
or 4% of whatever number, I had $2,100,000, so it was like $85,000.

That's the distribution rate from that portfolio. Then I just took the present value back to
today of what that would be given inflation. So the present value of that $85,000 is like
$55,000. So if you're comfortable living off of $55,000
a year until you bridge to the Social Security, then you could probably beef up your spending. Then, yeah, if that's modest, but if you want
to spend that $120,000, you got some work to do. Al: Yeah, so we're short around $50,000, which
is what I got kind of the other direction. So short $40,000, $50,000, something like
that. Joe: All right, good luck, Scotty Magic. Love the name, too. Al: Wish I had that name. Joe: Yeah, I'm changing my name to Joe Magic. Al: No, that's not as good as Scott. Joe: I know, Scott Magic. Joe: I'm actually changing- just rhymes.

Al: I'm actually going to change the whole
name to Scott and Magic. That's really good stuff. Andi: For the same price of a Retirement Spitball
Analysis – that is, free – you can fiddle with the numbers yourself using our retirement
calculator at EASIretirement.com – that’s EASIretirement.com. E-A-S-I stands for education, assessment,
strategy, implementation, the four building blocks of a sound retirement plan. Go to EASIretirement.com and create a login,
then enter your income, savings, and expenses, and see your chance of a successful retirement
in about two minutes if you take the quick path, or maybe 8 minutes if you go the more
comprehensive route.

If your odds of a successful retirement aren’t
as high as you’d like, you can change the numbers and see in an instant how much increasing
your savings or working longer changes your retirement projections. You’ll get more charts and graphs than a
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now for free at EASIretirement.com – that’s EASIretirement.com. Joe: We got Devin from South Carolina. “Hey guys, I'm a new listener, but love
the great content and thoughtful approach.” We have a thoughtful approach, Andi? Andi: Somebody does.

I don't think it's here. Al: According to Devin, we do. Joe: I think this is like a release approach. Al: Not much thought goes into it. Joe: It's not at all. It's like, hey, let's- Al: Let’s throw it up there and see what
happens. Joe: Yeah. You know, well, thanks Devin. “I drive a 2022 Subaru Outback-“ South
Carolina. I was thinking Seattle. They have Outbacks in South Carolina too. I guess. Al: Sure they do. 4-wheel drive. Need it. Joe: All right. “Wife drives an ‘18 Acura MDX.” So that sounds sexy. Al: That's a big car. Joe: “When sitting on the porch, contemplating
retirement, my wife enjoys a little red wine.

When I don't care about the caloric intake,
it's a hazy IPA for me. When I do care, it's a nice little vodka tonic.” Al: Ah, okay. Joe: “I'm 57 and my wife is 59. We are preparing for retirement when I turn
59 and a half in 2026. And our target income in year one is $140,000
after tax. Our situation is a bit different because of
a variety of expected income streams.” Not different at all. I think it's very common. You know when your nose itches, does that
mean someone's thinking about you? Have you heard that wives tale? Al: No, I have not heard that. Joe: You've never heard that? Andi? Andi: No, I haven't.

Joe: What? Al: It usually means you have an allergy,
as far as I know. Joe: I think it means that someone's thinking
about you. Anyway, I might have an allergy or someone's
really thinking about me. Andi: Someone's talking about you. Joe: Or someone's talking about me. Andi: Yeah. Al: Yeah, that could be. Joe: That could be. Probably not positive either. Andi: It also means allergies, infections,
respiratory irritants. Joe: Well, I got it all. All right. “Our situation is a bit different because
of a variety of expected income streams. I'll be eligible for a small pension of approximately
$18,000 a year. An annuity income of $38,000 a year.

I'll also have deferred comp of around $482,000
total future value, 5% growth that pays out approximately $34,000 for 15 years, estimates
ranged between $25,000 and $48,000. Will be eligible for Social Security of $17,000
a year. When my wife turned 67 and $65,000, when I
reached my full retirement age. I will wait until 70 if the expected cash
flows in drawdown rates cooperate. I'll also have a bonus the first 3 years of
retirement that will provide an additional $200,000 in income. I'll be debt free, including mortgages and
my pre-tax total investments will be about $2,600,000 when I retire, which will include
$300,000 of cash to help protect against sequence of return risk.” Al: Wow, Devin, you're on top of it. Joe: Killing it. “I plan to use the cash to help take the
pressure off the withdrawal rate the first 7 years to meet my target 3%. Once Social Security kicks in, I think I’m
in good shape. We both plan on working part-time for a while. But aren't taking that into consideration. Thoughts?” Absolutely killing the game. Al: Yeah, I'm not worried about this at all.

Joe: Yeah, and I'm gonna have another $700,000,000
that will come in from an inheritance. I don't know, what do you think? Al: Thoughts? Joe: Thoughts? Al: Well, here's the quick numbers. If you add up fixed income before Social Security,
it's $90,000. He wants to spend $140,000. Joe: He's already got $2,600,000. Al: $50,000 shortfall. That's a 2% distribution rate on $2,600,000. Joe: And then you got Social Security that's
going to cover probably the remaining of the shortfall. Al: And you got the extra $200,000 of income. Joe: And he's got another $300,000 in cushions.

And if I look under my mattress, I got another
about $400,000 there. Al: So yeah, Devin, you're good. Joe: All right. Thoughts. No, that's our thoughts. “Fat and happy with my IPA, or cutting calories
with my vodka and soda. Thanks a bunch.” I think he's pretty fat and happy. Al: I think he's all set. Joe: Congrats. I think congratulations on everything that
you've done. Right. “Part two. Sorry, should've mentioned, of the $2,600,000-“,
he just wants to mention $2,600,000 again. Al: Just get it out there. Joe: Just throw it out there. Just in case, just so you didn't hear it. Al: And he's gonna play it for his neighbors. Oh, listen to this. Devin From South Carolina. Joe: Hey guys, you gotta listen to this podcast. It's the best. Oh, Devin, is that you? Al: Did I mention $2,600,000? Another $200,000 coming in 3 years? Joe: Oh boy, Devin.

Al: My Social Security is going to be $65,000. Joe: “I should have mentioned, of the $2,600,000
in retirement funds, only $300,000 is in an after-tax brokerage. So with this, and my cash, I do have some
opportunity for Roth conversions before Social Security kicks in. I have less than $20,000 currently in Roth
and have been limited with income restrictions.” Oh, so he's just telling us how much money
he makes without telling us how much money he makes. Al: Yeah. We have a sense. Joe: “Now my company only recently introduced
the Roth option in the 401(k). I'm still anticipating a lower marginal tax
rate in retirement, so I'm still currently contributing pre-tax. I will have a window for tax planning, but
I will have a challenge of my deferred comp, pension, and annuity flows that will all drive
my taxable income up. After and before someone suggests the annuity
was a mistake, I made that call 15 years ago and I moved on and embraced the benefits of
a lifetime guaranteed income. It is what it is.” Yeah. Just accept it.

Yeah. Just looks in the mirror and says, you know
what? People like you. Al: I'm good with that. Joe: People like you. Al: You know what? Joe: That's what he does. Hey, Devin, just remember, you got $2,600,000. Al: That's right. And did I mention? Joe: Goldarn it. People like you. Al: And did I mention $2,600,000? Joe: As he's brushing his teeth, $2,600,000. So good. You know what? You bought that annuity, Devin, but it's okay.

Al: And honey, you got $2,600,000. Joe: It is what it is. He's fat and happy. Congratulations, Devin. Al: This is awesome. Joe: Very good job. It's okay. People make mistakes, but it sounds like you've
made up quite well for whatever mistake of the annuity purchase. But, hey, guaranteed income. It is what it is. Al: Yes, I agree with that. Joe: Go for it. Joe: We got Gina from Washington. She goes, “Hey, I'm a state employee with
a Roth 457 just became available to us. I am 52 and have been maxing out my 457 with
$30,000 a year. However, I was told I can start contributing
$30,000 to Roth. I don't know how much they should contribute
of the $30,000.

We have $400,000 in a brokerage account, $200,000
in IRA, $100,000 in a Roth IRA, $250,000 in our 457 plan. Debt on the house is about $200,000. We each make around $120,000 a year.” Okay. Good start here. “I drive a 2019 Mazda CRS-” Andi: I think that's CR5. Joe: Oh, that is a CR Mazda CR5. That must be like kind of a SUV type. Al: That'd be my guess. Andi will check for us. Andi: Yep. Joe: “-picked for the Consumer Report Safety
Rating.” Andi: Yeah, it's an SUV. Joe: Yeah. “Wifey drives a 2022 Toyota Tacoma pickup.” Okay. Al: Wow. All right. That's impressive. Joe: “We roll around in a 2011 Winnebago
as time permits prior to retirement. Wifey is a longtime friend of Bill W.” Andi: That means she's a recovering alcoholic. Al: Oh, okay. I didn't know that. Joe: Wow. So. Al: So doesn't drink apparently. Joe: Okay. Bill W. Al: Used to perhaps. Joe: “I learned I enjoy Guinness after a
trip to Ireland last month. I'm 52, wife is 58. Two questions. Can we retire in 4 years? How much of the $30,000 allowable should be
put in Roth? We both work for the state, so this would
apply to both of us.

The state we live in is the home of Starbucks,
Microsoft and Amazon. Not sure this guess could be any easier, but
the town is where beer was made. The slogan was ‘It's The Water’.” Al: You remember that slogan? Joe: No. Al: I do. Olympia beer. Joe: Olympia. Andi: Wow. A beer slogan that Joe doesn't know? Al: Well, he was just a kid. Actually- Andi: Oh, got it. Al: Just a very- you weren't even born probably. Joe: I've had Olympia beer. Al: Have you? Joe: I have, when I was in Portland. Al: Got it. And I've spent time in Olympia.

I used to have a client. I used to have a, back in my CPA days, I used
to have a corporate client that I would go up once a year and spend some time in Olympia,
the capital of Washington. Joe: She wants to retire. Al: Yeah. Well, they. Joe: Oh, Gina. Sorry. Al: Yep. So want to retire in 4 years. So they've got about $1,100,000 right now. And if I just take $1,100,000, 4 years, 6%,
adding $30,000 per year, then they'll end up with about $1,500,000. Let's start with that.

That's kind of liquid assets available. So can we retire in 4 years? Let's see, we make around $120,000. How much do they spend? Does it say? I don't think so. Also, we don't know, they both work as state
employees. We don't know what the pension is. So I need to know what they're spending. I need to know what the pension is. But let's pretend you have no pension whatsoever. Let's say you got $1,500,000 and you're retiring
around 62 and 56, what would you say? 3% conservative, so 3% so $60,000 you could
live off of, maybe $70,000, something like that. Joe: So they're saving $30,000, are both spouses
saving $30,000? Al: Well, it doesn't say it, that's why I
don't know. I just took one $30,000. I did it conservatively. Joe: They both work for the state, so it would
apply to both of them. Al: It would, but whether they're both contributing,
I don't know. But really, the two main things we're missing
is what they're spending and what the pension looks like.

Then we could actually answer the question
sensibly. Joe: Okay. Let's just say 6 years from now. Well, I'm sorry, 4 years from now, they're
gonna have a- Al: They have $1,500,000. Joe: $1,500,000 to $2,000,000. Depending on if they're saving $30,000 or
$60,000. If they work for the state, I would, I'm assuming
that they'll have a pension. Al: I'm assuming that too. And so at $2,000,000, let's call it 3%, they
can spend anywhere from $60,000 to $80,000 until they bridge the gap to Social Security
or the pensions. So it depends on what they're spending. If they can live within $60,000 to $80,000
a year, I think they're pretty close. If not, they'll probably have to work a few
more years. But the whole Roth question is really going
to be based on their tax bracket in retirement. Al: Correct. Joe: And so what we need to understand more
is the pension amount if they have one, because that's going to be taxed at ordinary income. And so if it's a large pension, then we would
probably say, well, I would defer to Roth.

If it's no pension, then it's like, well,
it's going to be maybe a, how do you file? Are you filing a joint return? What is your taxable income? And then it might toggle a little bit, depending
on how much do you want to put in Roth versus non-Roth, but it, they have more deferred
monies than Roth monies. So maybe write us back and give us more details
and start next year with 100% Roth, and then we'll tell you either to toggle back or not. Al: We may fine tune it later. Joe: Yes. Al: Yeah, I do, I sort of agree with that,
Joe, because it would appear that everything they have is deferred, including the pension,
right? So this would give them more tax diversification. Gina didn't tell us anything about monies
outside of retirement, so we don't know if they have any. Joe: Well yeah, they have $400,000 in brokerage. Al: Oh, missed it. Sorry.

You're right. Joe: That's it. We're done. That was awful. That was nuts. That was a complete, utter disaster. So I apologize well in advance for that. Andi: For a good retirement spitball, the
fellas need to know four things about your finances: number one, how much do you, and
your spouse, if you have one, have saved for retirement in tax-deferred, tax-free, and
taxable accounts? How much fixed income will you have in retirement,
that’s number 2 – for example, from Social Security and pensions? Number 3, when do you want to retire? And finally number 4, how much you expect
to spend annually in retirement, preferably adjusted for inflation? Don’t forget to give us whatever name you’d
like us to call you, and your real location, in case state taxes factor into your spitball.

Then, we want to know where or when you listen,
how you found us, and of course, what you drink so Joe and Big Al can really get into
your situation. Click the link in the description of today’s
episode in your podcast app, go to the show notes, click Ask Joe and Big Al On Air, and
send in your retirement spitball. Joe: Got “Hi Fellers. Please call me Frenchie or some other name. There are a lot of Franco-Americans up here
in Maine.” Mainers. All right. So up in the beautiful state of Maine. Al: Maine. Yep. Love it. “I just started listening to the show about
two months ago.

Really enjoy your podcast. I think Andi should talk more.” Andi: Okay. I'll work on that Frenchie. Thank you. And by the way, this email is from October. So now they've been listening for 4 months. Joe: No, they can't- Al: Yeah, they're not sticking around. Joe: Totally done. Al: She's never going to hear this answer. Joe: Totally done. Frenchie. Sorry. “Give the woman some space, boys.” Andi: Thank you, Frenchie. Joe: Some space. Okay. We're crowding your space? Al: Well, let's just read the question and
have Andi answer. Joe: All right. Sounds good. I don't know if that would be compliant. Al: It might not.

Joe: It might be the end of us. Andi: I can give the laywoman's answer and
then you guys can correct me and laugh. Joe: All right. “I think Andi should talk more.” All right. Well, you got it. “Give the woman some space. I drive an inherited 2000 Toyota Avalon with
the sunroof.” Al: Well, you can't get rid of it, it's got
a sunroof.

Joe: I don't drink much, but when I do, I
like a plain gin and vodka- gin or gin or vodka. Al: Gin. Yeah. Joe: It's like I don't drink a lot- Al: I have both together. Joe: – but when I do, I want half gin, half
vodka and some ice. Little 6 ounce pour -please. Okay. “I am one of your few impoverished listeners. I'm 53 with a net worth of a mere $370,000
or so.” Al: That sounds pretty good to me. Joe: That's significant. “Basically, I just started working regular
after many years of starting and stopping due to frolicking and moving.” Al: Frolic? Joe: Yeah, everyone needs to frolic around
a little bit. Al: That's enjoying the journey. Nothing wrong with that. Joe: And then you just got to buckle down
and like, all right, here, listen to some- Al: It's like you wake up one morning. Joe: There's no finance podcast. Al: I frolic. You lie. I found YMYW. Let’s get to work. Joe: Yeah.

Okay. “I lived in Canada for 9 years and I have
about $120,000 Canadian dollars in a retirement fund. I can take that out without penalty and would
have to pay about 25% flat rate tax. I was thinking of doing this over the next
3 years or so, including this year- including this year.” In Canada, the fund is basically in our traditional
IRA equivalent, which charges a 1% management fee along with the fund expense ratio.” For someone that's been frolicking around,
he's fairly pretty tight on expense ratios. Al: Yes. Joe: The equivalent of an IRA flat tax there
in Canada. Come on, Frenchie. Al: It's because she's been listening to YMYW. She looked into all this. Joe: For a few months. Yeah. Andi: She probably listens because she's into
finance, even though she has been frolicking. Al: Okay. So she's pretty tight on what she's got. Joe: Yeah. “I could transfer it here in the US and
put it in my company Roth 401(k), paycheck to paycheck since as one of your impoverished
listeners, I don't contribute enough to meet the maximum contributions anyway each paycheck. To fund, I can put it in here as an expense
ratio of about 0.5% and no management fees.

So basically for each of the next 3 years,
I could take out a chunk, convert it to American dollars, let it sit in my money market fund
and each paycheck, max out my Roth 401(k) until the year's chunk is gone. What do you think?” So here's what she wants to do. She's got this money in Canada. She wants to pull the money out of Canada,
pay the tax, let it sit in her checking account. She wants to contribute to the Roth 401(k)
through her employer. Her paycheck is still needed to cover monthly
living expenses. So if she's going to max out the plan or contribute
more to the plan, she needs a little cushion in the checking account that she's going to
live off of from the Canadian retirement fund.

Al: Yes, I think that's super clever. Joe: Very much so. Al: It's kind of like a Roth conversion in
a roundabout way. Joe: She's taking the money out, paying taxes
on it, but she's getting money into the Roth. But the money to go into the 401(k) has to
come from her paycheck. Al: Yeah, because you can't do a Roth conversion
with a Canadian pension. Joe: Yeah, and you can't write a check from
the chunk that she took out and say, hey, this $20,000 I want to put it in, it has to
come paycheck to paycheck from her employer. Al: So the net impact is the same as a Roth
conversion, which is brilliant. Joe: Love it. Andi: I would have said the exact same thing. Joe: Yeah. Al: I know you would have. We should have let you talk. Joe: Okay, Andi, what do you think of target
date funds? Andi: Good, bad or other? Well, so if you don't want to pay any attention
to what you're doing, then it might work out well, just so long as by the time that you
actually are getting close to retirement, you spend a little bit more time looking at
it and making sure that you are invested properly for your risk tolerance.

Joe: Look at that. Al: Pretty, pretty clever. Okay, we're going to shut up now. Joe: She wants to go on a little 2040 target
date fund. So if you don't know what you're doing, this
is what you do? Is that what you said, Andi? Al: That's what she said. Andi: Or if you're not interested, if you're
not interested in actually managing it, you know, if you just want to invest and set it
and forget it. Joe: So what you know about Frenchie, do you
think she's interested? Andi: It seems like she's pretty darn interested. Joe: I know, right? Al: But she also wants to frolic and not think
about it. Andi: No, she's been doing that. Now she's buckling down.

Joe: She's geared up, bro. Al: Oh, I guarantee you in 6 months she'll
be out there frolicking on some level. Joe: You think it's just too much? Al: No, I think it's like, you know what,
when- Joe: It's a calling? Al: It's you want to enjoy the journey. Clearly Frenchie enjoys the journey. She will continue it out- continue at some
shape or form. Joe: You like to frolic around. Al: I do. Joe: I know you do. Al: Yeah. That's why I have Pure Financial manage my
$10. Joe: “When I reach retirement in about two
decades, because I'm improvished- “ am I saying that right? Andi: Impoverished. Joe: “-impoverished, remember? If the distribution of the target date fund
is 50% stocks/50% bonds, when I go to withdraw each month, can I choose whether if I'm taking
money from the stocks or the bonds? Or is it going to be one big stock/bond bucket
that is all mixed together? Thanks for spitballing, boys.

Thanks for creating the content, Andi. That allows the boys to spitball in all their
glory. I know who the credit goes to. Frenchie.” Andi: Thanks, Frenchie. Joe: No, you want to get, I mean, I agree
with Andi. I think as Frenchie gets closer to retirement,
you probably want to have a little bit more sophisticated strategy than a target date
fund. Because if you're taking distributions from
the overall account, it’s going to be pro rata, depending- if you take $100 out and
it's 50% stocks and bonds and target date fund, they're going to sell that. Al: So, yeah, the target date fund. So you picked 2040 because that's when you're
planning to retire and the fund itself has a glide path, which just means that earlier
it is, the more equities.

And then as you get closer to retirement,
it becomes more bonds, more safe money. But that's the problem, right? The problem is, is that the right investment
strategy for you? Maybe not. That's number one. Number two is when you take money out, you
can't decide to take it out of stocks and bonds. It's just pro rata out of the same account. So at the very least, probably as you're getting
close to retirement, you may sell out of that account and have some stocks and some bonds,
you know, mutual funds, index funds, whatever they may be.

So you can decide which side you want to take
the money out of. And which side you do, if stocks have gone
up, you pull some profits off and have your distributions that way. If stocks have gone down, let them recover,
take some money out of the bond or the safe money side. Joe: All right. That's it. We're outta here. Thank you. The show's called Your Money, Your Wealth®. Andi: Drinking by calories, friends of Bill,
and Franco-Americans in the Derails, so stick around. Help new listeners find YMYW by telling your
friends about the show, and by leaving your honest reviews and ratings for Your Money,
Your Wealth in Apple Podcasts, and all the other podcast apps that accept them.

Your Money, Your Wealth® is presented by
Pure Financial Advisors. Click the “Get An Assessment” button in
the podcast show notes at YourMoneyYourWealth.com or call 888-994-6257 to schedule your free
financial assessment, in person at one of our many offices around the country or online,
a time and date convenient for you, no matter where you are. Chances are, one of the experienced financial
professionals at Pure will be able to identify strategies to help you create a more successful
retirement. Pure Financial Advisors is a registered investment
advisor. This show does not intend to provide personalized
investment advice through this broadcast and does not represent that the securities or
services discussed are suitable for any investor.

Investors are advised not to rely on any information
contained in the broadcast in the process of making a full and informed investment decision. (The Derails).

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10 Surprising Truth Nobody Tells you About Retirement

10 surprising truths nobody tells you
about retirement. Retirement age has gradually shifted as the years have
passed and the lifespan of the human being has improved from the advances in
technology being made in leaps and bounds
depending on the country in which you live in, retirement age varies but for
the most part the retirement age is still within the mid 50 to 60 year range
retirement and the benefits that come alongside the aging process are expected
to decline as the amount of money being invested into programs like Social
Security is decreasing year after year there are many misconceptions involved
in the retirement and aging process some bearing truth while others are just
misconceptions the following are ten surprising truths for retirees
themselves have shared about retirement number one boredom is definitely not an
issue one of the main worries younger people
have considered is what exactly retired people will do it themselves after they
find themselves having no work to do what goes on with their lives after so
many years of going through the motion is often a question asked to retired
people the answer is almost anything and everything retirement is the segue into
reliving the life they had before their lives became tied down from stress keep
in mind that the current age for retirement is still rather young with
many couples able to travel pursue their hobbies discover new things to do
together and make memories number 2 retirees will downsize and reduce their
cost of living most retired couples will end up downsizing into a home that is
more practical for the new financial status not to mention the amount of
space needed is a lot less especially when all the children have grown up and
moved out consequently the cost of mortgage utility payments and more
decrease with the smaller space number 3 retirement can say a lot about married
couples one of the biggest wake-up calls is the idea in the situation where both
partners are no longer working there's a lot of time for one to get on the
other's nerves oh this is all out of love wife's have been known to send the
retired husbands out of the house number four planning for retirement should
definitely be considered and adhered to retirement can seem like such a long way
away when in reality the process approaches sooner than you think when
you consider all the various milestone payments and such come
and add up there never seems to be enough money to store away for a rainy
day and saved for retirement at the same time sticking to a plan and
resolving to set aside a certain amount with every paycheck during the working
years is a good way to get started number five the main concern after
retirement is health even though money is a big worry for many retirees most
are actually more worried with their health whether it be physical or mental
some depend on work to keep themselves grounded to reality and enjoy their
daily routines physical health is of course another viable concern with the
body running less efficiently as it used to regardless most are in good shape and
condition to do some physical activities like walking traveling and some even
using their golden years to go on and actually join in on a sport number six
people on the edge of retirement are more concerned than they let on some
like to brush it off to the edge of their concerns while others are
extremely vocal and their concerns about what life is after retirement financial
health and other issues are their biggest concerns that can't always be
avoided or helped sometimes the only way to combat a fear is to go through it
instead number 7 retirement lasts longer than you think
retirement beginning in the general 50s range to the point in which you leave
this earth this doesn't sound like a lot in comparison to the other stages in
life but retirees often comment on how the time goes quickly it seems to last
longer than they expect number 8 many end up continuing to work many retired
folks will end up working out of sheer purpose or doing jobs that they had
wanted to do before such as volunteer jobs within the community and doing jobs
that they may have been interested in learning about before number 9 there is
no definitive amount of money to save for it money can be saved for as long as
needed but there is no definitive baseline in which people should begin
saving at or a number in which they should be saving – thinking about what
you want after retiring is a good way to gauge what finances should look like
number 10 Social Security should never be depended on as a financial cushion
Social Security doesn't exist in every country although many countries share
similar financial benefits for retired individuals however due to the amount of
people aging in a more massive quantity than there are young individual
can lead to these programs being removed in the future or have an alternative
method conclusion retirement is a whole new journey in life but the process
isn't as scary or as complex as society makes it out to be with proper planning
and execution the retirement process can be worthwhile and made into a truly
memorable part of life you

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Transitioning to Retirement Part 2 (1 to 5 years before retirement)

yeah hobbies is a big thing because a lot of people say i don't know what i'm going to do in retirement because i have no hobbies but they'll say i don't play i have no hobbies so you have to you've got five years to start to think about that a lot of people wait till it's too late and there's so much stress on them they have no hobbies they don't know where they want to live they're not talking to their spouse we want to prevent all of that today we're talking about transitioning into retirement and this is part two of our three-part series if you remember and if you watched it the first part is five to ten years out today we're going to focus on your planning and things you need to do one to five years out before you leave your business and enter this third phase you know this is going to be a hard transition in your life if you aren't prepared and if you don't plan when we entered this phase we looked for help we looked everywhere but the only thing we could find was financial planning help and that's not what we needed and that's why we started this company because we realized we were struggling a bit and had to figure out how to pivot to make this time of our life as good as it could be so here we are retirement transformed in part one which was five to ten years out we gave you four strategies to work on the first was planning the second was understanding risks and when we talk about risks in retirement it's things like your loss of identity and creating a new identity your loss of community and creating a new community and those 40 hours of free time that everyone gets back the other thing was building a vision for your retirement five to ten years out you want to start thinking what is it going to look like and you also the fourth thing is start thinking about habits and routines what are some good habits you want to bring forward what are some bad ones you need to stop we want to make sure you go back and watch that episode the link is pasted below in the notes so we're going to build on those strategies today as we look at the one to five years out you know and in this time frame by now one to five years from your retirement date you do need to have a financial planner in place and so you have the financial planner your vision should start being clear and assuming it's your choice to retire you have a time frame and a date you know you have to start getting comfortable with the idea and getting more overall clarity time is going to go by really quickly now you know we both retired a lot earlier than we thought and because of that we weren't prepared you know i was at the peak of my career and i decided to sell my company i was 55 years old and i planned on working another 10.

Everyone wants to work to 65 right but i only worked for five and you know simultaneously my company was sold to a competitor and i stayed during the integration for three full years but i found that it wasn't going to work for me anymore so together in december of 2018 we left together and our entry into retirement was rough you know we we spent a year traveling the globe we went to italy uh florence uh where else are we london london bora bora bora bora was great but we did that we entertained family and friends for a summer that felt like a year we realized we didn't really have a purpose and one day we looked in the mirror and neither of us liked what we saw no we didn't we didn't we didn't we didn't look good and we didn't feel good and the thing is we don't want that for you this transition is hard and the more prepared you are the better chance of success you'll have so here's some additional steps that you should be taking one to five years out before retirement now this comes from our experience our success and our failures but also from many of the clients that we work with you know the first thing we're going to ask you to do and you might roll your eyes is to buy a journal aligned or unlined journal a cheap journal just something to start writing in something you can start documenting your thoughts and we're going to give you a little structure on that but writing is better than electronically typing it start recording your thoughts your feelings your struggles and your successes you know the reason that writing is better than electronic is it forces you to actually slow down you can't get the words out fast enough so you have to actually think of the words and write them and you retain it better when it's electronic even if you're a good typist you can just bang them all out you're not really allowing your brain to slow down and focus so journaling and writing is really important it's funny when you said bang them all out because you're a one finger typer two fingers this one and that one anyway be a place for you to gather your thoughts but more importantly to break up your journal into buckets and i'll tell you one of the buckets can include our five pillars physical wellness mental wellness relationships that you want to deepen or let go of your spouse partner alignment or misalignment wherever it might be and the last bucket is wisdom sharing you want to start thinking about what is it you're going to do after your career ends to get fulfillment to make good use of all of your skills and your experiences to to to serve others in a way like what jody and i are doing with this business and you want to start listening to your voice and writing it down and we're actually going to go deeper on wisdom sharing today because that's for the next five years you really want to start thinking about how that's going to fit into your life so this journal is going to incorporate kind of where you are now and you're going to put some reaching statements in to figure out where you'd like to be and then you're going to be able to do some research and organize your thoughts right and some other areas to put in the journal to start thinking about is travel plans if you want to travel write it down and figure it out and start thinking about it we have the greatest travel agent by the way that helps us figure some things out but you also might want a vacation home right and you also might want to think where do you want to live in the next 30 years right and how's that going to impact or affect or include your children and family how does that where you live how does your location impact your hobbies yeah hobbies is a big thing because a lot of people say i don't know what i'm going to do in retirement because i have no hobbies or they'll say i don't play i have no hobbies so you have to you've got five years to start to think about that a lot of people wait till it's too late and there's so much stress on them they have no hobbies they don't know where they want to live they're not talking to their spouse we want to prevent all of that we also want to give you a place where you can put down some aspirational hobbies yeah maybe learning a language or going to an art studio or picking up a new sport start painting start painting yeah mark's laughing at me because i want to start painting i just haven't had the time four years ago i gave you the whole painting kit the easel and all of the things and they're still in the closet maybe i'll go now okay okay there you go all right second thing to do we're going to focus the rest so the first is the journal that was all the big journals get a journal and start writing right and you know write and then put it away take it back out again put some tabs in there on these different sections i think you'll really enjoy it but let's talk about wisdom sharon because this is really a core component of your retirement transformed and one of the things that we did ourselves and we do with our clients and we share with this in a very deep way in our online course is to figure out some things about yourself so we want you get a blank piece of paper and we want you to put five columns in there going left to right and the first column really is to list all of the jobs and the roles you've played over your entire career or your life in the last 30 or 40 years and sometimes it's easy to break it into buckets the last 10 the previous 10 whatever it might be sales role ceo and you want to go back as far as you're comfortable with i know for me i went back 20 years i know for mark he went back to his first job out of middle school which was cutting lawns paper boi oh paper boi paper boi when did you cut lawns after that because you went all the way back i wasn't allowed to use lawnmower it was too little so you pick the time frame that works for you but in that first column you want to list all those jobs that you had and then put the date because the date the second column the date just so you kind of have a reference but really where it gets interesting is the third column we want you to write down what did you love about that job what what excited you about it why did you like it so much what emotion comes to mind when you think about being a paper boy or cutting lawns or right i happen to be the world's greatest waitress which helps me helps me be a good mom of six kids carrying plates the fourth column is perhaps what did you dislike about that role because if you didn't like it you clearly do not want to take up that type of job right or that that service in your retirement if you don't like it and then the fifth column is what has this job or role taught you and then to sum it up you want to go through those sheets and do a whole bunch of them pick your top five it's critical it's all we want you to do is what were the top five jobs or roles that you played in the last 30 years so that's probably a pretty big and a pretty busy sheet for most people the second thing we want you to do is list your strengths and values as they speak to you go through and list them and get a top five for each strength or value and once you have that combine that with your top five jobs and see where you land and start writing about it you're gonna start getting a little clarity on what it is you think you might want to do the other thing to do as you're writing and thinking about it you've got you know one to five years left of work start paying attention to your to your days now so you went backwards now going forward if you have identified sales leadership as something you like really pay attention when you're doing it now you know if you're a finance person and you love working on spreadsheets is that really what you see yourself doing after so it's really important it makes makes me think of that what was that book that uh we read um wisdom at work by chip conley yeah we'll put those notes down below wisdom at work by chip conley the making of a modern elder an awesome read it's a really interesting book about his role in airbnb and the other thing to do during this phase if you're not already is start volunteering in any way shape or form you know it could be at the food bank it could be anything but you want to find a way to volunteer board service well i'll tell you it makes it easier to find your volunteering niche after you've gone back and you've looked at what inspires you in different roles and what your core values and competencies and where you get your juice from and then you figure out how much time you have now with the one to five years still working and then you figure out how to launch into a volunteering role and every community needs you now look these next five years are going to be a challenging time they're going to go fast we don't want you just to coast and all of a sudden end up thinking oh my god i'm leaving in 12 months the next video is about the last 12 months but we want you to do everything we talked about in the first video and this one to get you ready for that and that way you'll land in this phase fully prepared and listen if you enjoyed this please share with your friends and also please subscribe by clicking the subscribe button below and don't forget to join our free facebook community the link is in the notes as well it's a great place to start to build a community for your retirement phase thanks so much for listening and we look forward to being with you again soon you

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How to start planning for retirement at age 25 | (Roth IRA, 401k and Planning Mindset)

In this video, we're In this video we're going to talk about how to start planning
for retirement at age 25. So if you're just starting out
your retirement planning. This video is for you. And if you're looking for the basics in retirement planning,
you've come to the right place. Because I'm going to start out this video
talking about a couple of strategies and types of accounts
to help get you on track. For your retirement so we can take action
and get that ball rolling. And then I'm going to talk about
three tips to help improve the chances of your reaching
your retirement planning goals. And then we're going to talk about
what I think is the number one key ingredient
to reaching your retirement planning goal. So if you can make this one change you're going to dramatically increase
the chances of you reaching that goal. And I'm going to prove it to you. What's going on, guys? Welcome back to the Channel
or if is this your first time at the channel Welcome to the channel.

My name is Travis Sickle,
and let's jump right into it. So before we get into the strategies,
I do want to explain why age 25, why am I making a video on retirement
planning for the age of 25? And that is because it's really
at the beginning of your life, of your retirement planning life
in order to save for your future. So you have this massive runway in front of you
and an opportunity that you need to seize. It is not an option. It's something that you need to do
and it's going to open up more doors later on down the road. It's going to give you stability so you can make the decisions
that you want to make. So whether retirement
is actually not working or financial independence,
it's really the same thing. And that is the reason why I'm using these concepts
in these strategies in this video.

For somebody that's 25 and that's somebody
that's closer to retirement, because we're not going to talk a lot
about what retirement will look like, because the truth of the matter is you probably have no idea of what you want
your retirement to look like. So I want to give you the tools and
the strategies to get that ball rolling. But still keep those doors open for you
and give you as much financial independence as possible at the age of 25. So let's go ahead and get started. I would like to take a minute
to thank the sponsor of this video Aura, the new standard in digital
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So visit or a dot
com forward slash Travis for 50% off. Let's start with the first strategy or
type of account and that is the Roth IRA. Now here's how the Roth IRA works. It's going to come from your checking or your savings account
because it's already taxed and it's going to go into this
individual retirement account, I.R.A. And in this type of account, you're going
to make what's called a contribution. That's you putting the money
into the Roth IRA And you can invest it in anything like stocks, bonds, mutual
funds, or ETFs. Now, over time,
hopefully this money's going to grow. Now, that growth and the contributions
in retirement will come out tax free and that growth in the tax free dollars
is the reasons why so many people talk about the Roth IRA
and why so many people love the Roth IRA, because you're getting all that tax free
growth. Now, the contributions can come out
any time so what does that mean? There's flexibility in the Roth IRA.

So if you make a contribution
into the Roth IRA, realize that you actually need that money, you could take it out a day, a week,
a month, a year later. There is no time limit on it,
and you can take it out for any reason. That is your contribution. The growth needs to stay in there
until retirement. Now, there are a lot of other reasons
or ways you can take the money out of the Roth IRA early,
and that is for first time home purchase or education planning or the contributions
for just about anything. But here's the deal. Leave the money in the Roth IRA.
Don't touch it. It should be an absolute last resort
that you would take a dollar out of the Roth IRA before retirement. So we talk about it a lot on this channel. And a lot in the industry
that the Roth IRA is more or less like the Swiss Army knife of retirement plans
because it could do so much.

But the truth of the matter is
if you want to maximize that, Roth, keep the money in there, keep it growing,
keep it working harder for you over time. Now, when it comes to the Roth IRA,
you can put up to $6,000 into the Roth IRA. And here is a breakdown
of how the contributions into the Roth IRA can be made. So if you did it yearly,
you can do up to $6,000. But if you broke it down monthly,
that would be 500. If you did it weekly,
that would be $115.38 or daily at $16.44. Now, the reason I wanted to show you
that is you can kind of understand how much you need to set aside
in order to maximize your Roth IRA but even at $6,000, it's probably not enough for you
to reach your retirement planning goals. So while the Roth IRA is a great savings
vehicle, it's not going to solve all of your retirement
planning needs. So let's go ahead and take a look of why that is
and what it would look like over time. So if we make these contributions
starting in age 25 at $6,000 every year, we want to check to see how much money
we're going to have at age 50, 60 and 70
Just so we can show you how this works.

Now, I'm going to use for this example
a $6,000 contribution each year. But we're going to break that down monthly
because that's the most likely way that you're probably going
to save almost every single person that I know saves monthly or per paycheck. One of those two is usually the way that
we're putting money into these accounts. So for the Roth IRA,
we're going to make a $500 contribution for 25 years age 25 up to age 50.

So let's go ahead and start there and I'm going to show you
what this math looks like. So if I break out our calculator,
we have to first go 25 years and then we're going
to have to assume a rate of return. So the way we can
look at the rate of return is we can look at this matrix chart of the S&P 500. And don't worry,
it looks complicated, but it's really not. If we scroll down,
all I want to show you on this chart is how the S&P 500 has done from 1926
to 2020.

The point of showing you
this is to show what a reasonable expectation of a rate of return
is over a long period. Of time. And this is the S&P 500 and it basically
captures roughly 80% of the market. So it's the most widely used metric for performance in the stock market
with the S&P 500. So let's assume a 10.3% rate of return
each and every single year. So let's go ahead
and pull this up on this screen here and we can see that
we are going to say for 25 years at 10.3% And we have nothing save today
but we're going to make $500 contributions each month
for the next 25 years. And that will work out to 704,000. Now, I'm going to round here just to
we can do some easy math, but I'm going to rate 704,000.

And then let's bump that up to age 60
So that's 35 years. And that's going to work out
to 2 million, 69,271. So let's just put this in as 2.1 million And then we will go from age 70. So age 70 would be for 45 years. So for 45 years, that's going to give us
five point around that up to 5.9 million. We can come back in and add add more, add more numbers to this later on. So what we'll do is here
is 6000 to age 50 is 740,000. But there's a bit of a problem there. And that problem is 704,025
years is not going to be worth 740,000. It's going to be worth less. How do you figure that out? Basically, we have to look at inflation. So if we take this $704,000 and we bring it back to today's dollars,
that means we have to discount it. Don't worry. Big terms discounting for 3%
and I'm choosing 3% for inflation. So inflation is one of the causes
of why prices increase over time. So while you're going out and spending
a dollar on that same gallon of milk today, it's not going to get you
as much milk tomorrow or you're going to need to have more money.

So that is why inflation is so important
to look at. But we don't really feel it because it
just slowly creeps in over time. So if we go back to our original example
and we figure out how much that's going to be,
that's going to be our 704,000 And if we reduce this down by 3%,
what is that today? That's going to be
the equivalent of 333,000. So I'm just going to write 333 K
right here because this is today. This is what we're looking at for today. So let's go ahead and do the same
for our 35 years or age 60. So what is that going to look like? So if I put a zero there
and put $500 back there and that is going to be 10.3% there, that's going to be our 2,069,271,
we could do exactly the same thing.

We can zero that out
and we can bring this at 3%. That is going to be $725,000. So let me go ahead and write that here. $725,000. And then we can look at the final number,
which was 45 years at 10.3% and we have nothing saved today. $500. That is going to be 45 years. 5 million, 875,840. Same thing we can discounted back at 3% and that is going to be $1,525,822.76. So let's go ahead
and just write that out really quickly. And you don't really need to know
exactly how to do all of this math. If you're just starting to get comfortable
with retirement planning, then you can kind of get an idea,
hopefully from this video on exactly how much you actually need
to start saving.

So that's 1,525,822. So you can see it is drastically different
when you're looking at 1.5 million in today's dollars. But that's really
when we're age 75.9 million. So you can see that we really
we really need to boost our savings in order to not only get a good a positive
rate of return of hitting 10.3%, but we also need to make sure
that we're accounting for inflation. So it's not white as rosy as we originally had thought we did 5.9. $9 million when we're age 70. But that is how
you would want to take a look at it. Now, a rule of thumb would be
that you could live on roughly four
to 5% of your total nest egg.

Now you're going to see reports out there saying you really can't do that
because of longer retirements. But there are a lot of other problems
of retiring early, such as not getting Social Security
and then having to dip into your retirement plan and not having those years
where you're earning more money. But we're going to leave that off
to the side because I want to get you set up correctly
so you can start to save and get on track. So let me talk about one other point
about the Roth IRA before we move on to the next type of retirement plan
that you need to save into. So that is the income limits. So if we're taking a look at the income
limits here for the Roth IRA, if you're filing your taxes as single
or head of household and you make a 125,000 or less,
you can make that full $6,000 contribution. But if it's over 124,999
or 125,000 or greater, then it's going to be a reduced amount,
possibly zero.

So if it's over 125,000,
it begins to phase out. Now, this means a reduced amount of that
6000 as you get closer to the 140,000 mark, then you can't make
a contribution directly into the Roth IRA. We're not going to talk about it
on this video. I do have videos on phase out. Same thing for Married filing jointly
that is going to go from 198 to 208,000. Now for Married filing jointly,
that is your combined incomes for you and your spouse. So it's not just your income. It's also inclusive
of your spouse's income. Just food for thought if you're married, filing jointly
for the first time or something like that. You need to understand that it's combined. It's 198 to 208 for 20, 22. All those numbers go up to 129 to one 44. Married filing
jointly from 204 to two. 14. Now, the next type of retirement plan
that I want to talk about is your workplace plan. Now this could take on 41
K 43 B for 57 TSP. Anything through work. Now this is really important
that you're making these contributions into your retirement plan
at work for a variety of reasons. First, you need to save for your retirement
planning Second, you have a match at work.

Now that match is basically free money. If you don't make the contribution
and you have a match, you're not going to get it. So it's really important
that you make that contribution into your retirement plan
to at least get the match. But from the numbers that you saw before,
you're likely going to need to save
even more than just a match. So as soon as you can get it up
to ten, 15 or 20% or even more, depending on how much money
you want in retirement. So the math is going to work exactly
the same as I just showed you, that you're going to make
this contribution.

You're going to have a projection
on how much, which is just an estimate, an estimate on how much you can
or you can earn in your account each and every single year. We use the S&P 500
just to give us some direction You could be a little bit
more conservative and use lower numbers like 9% or 8%, seven or six. But all the numbers
are going to be much smaller. Doesn't mean
that's how you're going to end up. But having the right projections
match with the right investments means you're going to reach your goal.

Think about it
just like anything else you've ever done. If you have a goal, you have a plan,
but you don't execute on it. You're not to reach the goal. But if you have that goal,
you have that plan and you do execute. You do follow through. You're going to have a lot higher chance
of reaching that goal, but it's not guaranteed. Same thing with your retirement plan, something
that you need to constantly revisit.

Not necessarily make changes to,
but revisit and make tweaks, possibly save even more to reach the goal. So that is a little bit on two separate types of accounts, the Roth side
and your retirement plan at work. Now, the retirement plan at work
could have a Roth side to it, which I haven't talked about. But generally when I'm talking
about a retirement plan at work, it goes in pretax. So now we have an aftertax account,
which is the Roth, and then we have a pretax account,
which is your retirement plan at work? That's what we're talking about right now. So let's go ahead and compare the two. So you can understand the balance.

And that is a key right there. The balance
between these two types of accounts. So I want to talk about how
they are taxed. So if we look at this page right here,
I have written out our paycheck of a Roth IRA. So this is going to be an after
tax dollar. That means you're going
to get this paycheck of a dollar. It's going to get taxed in this assumption, I'm
assuming a 12% tax bracket.

So that means $0.12 on the dollar
are going to be withheld. So that means you're left with $0.88
This goes into your checking account. From your checking account, you can make
the contribution into the retirement plan. Now, if you remember
before this illustration, right here, checking account into the Roth IRA,
that's where we are right here. Go from the checking account
and making that contribution. That's my short for contribution. And you're going to make that full 88 cent
contribution. Then you're going to get a rate of return
or zero are. So this is how well you're performing. Now, I'm just giving you an example And we're going to double our money
over time, whether it's five, ten, 15 years, it doesn't
matter. It's just an illustration. So if we double this $0.88
with this investment it will be a dollar 76 when we take the money
out in retirement as a distribution. It will not be taxed because it comes out
tax free in retirement.

So it's going to be a dollar 76. Now, let's compare this
to the pretax type of account. So our $1 in our paycheck
doesn't get taxed at the federal level. So that means it skips all of this
and it goes directly into the account. So our contribution is the full $1. So you get to take
what would have been is $0.12 and you get to keep it
inside of the account. Now, let's just compare
the taxation of these accounts. So if we look at this
and we use the same investment, it would double
because it's the same investment. So you get the same rate of return
so that $1 would then work out to be $2. But assuming
we're in the same tax bracket, when we pull it out in retirement,
that $2 will be taxed at 12%. That means we're going to be left
with a dollar 76, which is exactly the same as the Roth IRA. So for most 25 year
olds, the Roth IRA and the Ross side of the retirement plan at work
is going to seem like the way to go. But the real question is
how do you make that decision So you want to look at things
like your credits and your deductions.

So whether or not you would qualify
for either a credit or a deduction would be dependent on your income. So you need to kind of
have some forethought, some planning involved
when you're making that decision. So it's
going to be dependent on your family size. If you're married, filing jointly,
you're filing status, if you're single head of household,
whether or not you have kids now or whether or not
you're going to get a raise or a bonus. There are a ton of things
that are going to go into the decision of whether or not you should put
into the pretax or the post-tax, the four for one K, the traditional side
or the Roth 401 K credits and deductions. So the name of the game is to smooth
your taxes over time. And that is what that illustration showed
when we're making that decision, because we were assuming that we're in that 12% tax bracket today,
but also tomorrow. But that's not always the case
because if we look at these tax brackets here,
we could see that over time they increase.

So if you're single
and you earn more money, the more money you make, the higher
your tax bracket goes. So if you're in the 24% tax bracket
and you're making $90,000, it might make sense
to put in a little pretax money so you don't have to pay any of the 24% tax bracket and just jump into the 22%. But this gets magnified
if you have certain credits or deductions because it's in addition
to your federal taxation. So it does get a little complicated,
but if you take a step back, look
where your income could possibly fall. See if there's any credits or deductions
that are pretty close. And then you can help make that decision
or start to make that decision and where you should put those retirement
planning dollars. Now, there is a third type of account
that is for the self-employed independent contractor, or if you have
a side hustle, you could possibly qualify.

And that is the sole 401 K. Now, the reason I want to throw it into
this mix, if you don't have a W-2 job, you own your own business. This could be a great option. But even if you have a W-2 job
and you just want to save more then if you have a side hustle,
then you could possibly qualify to open up a solo for one K and get even more money
into your retirement plans. Now, the solo for one K, the reason
you would want a solo for one K, even if you have
a retirement plan at work, is that you have the flexibility
of giving, getting even more money into your retirement plan. So you can only put up to 19
five for 20, 21 or 20,500 as the employee into your retirement plan
at work in addition to a match.

Now, depending on your plan,
you might be able to make a nondeductible contribution
to get it up to the maximum the absolute maximum of 58,000
for 2021 or 61,000 for 2022. So let me go ahead
and pull it up on the screen just so we can clear clarify
that a little bit more now for the 401 K for three B
most for 50 sevens including the solo for one
K, this is how much you can put in as an employee,
but you might not be aware that you can actually get up to 58,000
into all of these plans or 61,000 into all of these plans, meaning a four
or one K and a solo for a one K combine
This Roth IRA down here is separate. That's a separate 6000 that will actually
aggregate with the traditional IRA. But let's stick to the basics right here
for the 401 K and the solo for one K, it would be combined.

So for example, as an employee,
if you put in 10,000 into your 41 K at work then you can only put in $99,500
into your solo 401 K. So the solo for a one K
could be a great way. You can get a little bit more
into that retirement plan. Plus as a self-employed
independent contractor, somebody with a side hustle,
if you open up that solo for one K, you can make up to a 25% matching
contribution, also known as a profit sharing
contribution for the solo for a one K, but it's going to give you a little bit
more of an edge for your retirement planning gold, which you can see by
the math, is so important. The longer time frame that you have
and the more that you're saving, the better off you're going to be
when it comes to your retirement.

Plan. So it's really important
that you take action on this stuff and start to save into the rough start
to save into your retirement plan at work. And if you need to do more,
go out and get a side hustle. If you don't already have one,
earn a little bit more and put it away because that's going to help boost your retirement plans significantly versus
obviously not doing that. Now, here's
where we're going to change the mindset.

So tip number one to improving
your success is finding balance. So everything I talked about
was just focus on saving for your retirement,
and that's great. If you're super excited
about getting on track, go ahead and start saving
and get the money into the round for one case for three days
and get that ball moving. But you need to find balance
and that means you need to make sure that you have a cash reserve,
making sure that your insurance is like your income protection,
also known as a disability policy, is in place
along with life insurance if you have a need, and also making sure
that you can live life today. If you can't pay the bills,
then there's no sense in saving for retirement
because you've got to pull that money out. And then there are penalties
and consequences to doing that. So find balance. And again, if you need to go back
to that step I talked about before, where you get a side hustle and get us dollar for one case,
you can save more and earn more. That's what you need to do.

So number one, find balance. The second thing
that we want to talk about is the speed. Understand that things don't happen
really fast. You need to start
making those contributions. So even if you looked
at these numbers before and you thought,
you know what, 1.5 million, that seems like a lot of money
when I have nothing saved or 5.8 million, that is a ton of money,
especially when you're starting at zero. How am I supposed to get there saving
just 500? But just understand, it's important
to understand the speed of things don't happen
quite as fast as you think. Now, the third point is understand
one of the most important concepts of these three tips, and that's
understanding that you live on an island. You cannot keep up with the Joneses.

Don't even try. There's a good chance that most of your friends
and family are living above their means. They're spending more than they're earning
or they're not saving enough. They're not balanced. So just understand that, that if you're
looking at somebody who has a similar job and you're looking at their lifestyle, chances
are they're living a higher lifestyle than they're actually earning
and they're not saving enough. You have to be comfortable
living like nobody else on an island
by yourself in a mental state. I know that's super difficult
for so many people to do it because they're like, Well, I earned this
and I know this person earns that and they're doing this, this, and this.

And I might be able to do anything. Well, if you want to do those things, you got to go out there and earn
more money or get a side hustle or change something that will allow you
to do what you're trying to do. But you've got to find the balance. You've got to control the speed,
and you got to understand that you can't keep up with the Joneses,
that you live on an island. If you can start to do that, you're going
to greatly improve your chances of reaching your retirement planning goals
and not have so much stress. And that's really, really important. Which brings me to the last
and what I would think is the most important part of retirement
planning, investing and just living
a financially responsible life. And that is patience Patience is the number one key to reaching
your retirement planning goals. It is not complicated. You don't need the next hot stock
Tip of the day.

You don't need
the ultimate trading strategy. You just don't need any of that. You can make a lot of minor tweaks to your retirement plan in which
which account you save into. You and how often
you rebalance and stuff like that. But the truth of the matter is it comes
down to patience that so many plans fail because we're not applying patience
So I told you I would prove to you that patience pays off,
and that is super valuable. Now, I'm going to direct it
to another video. I did a couple of weeks ago
on performance, and I'm going
to give you the rundown on it, and then you can go ahead and watch
the video. I'll put the link in description
at the bottom. We took five accounts over a decade
and we looked at the performance, and this is money that we manage
that my firm manages.

And we started with 300,000
and we contributed two and a half million to these accounts
or the accounts that we were taking a look at made contributions of two
and a half million dollars among all the accounts over a decade, and that resulted in a $19.7 million gain So those accounts made 19.7 million. So that was incredible performance
relative to the S&P. 500 and it beat it
handily over that time frame. And the one attribute was patience. We weren't buying
and selling a lot over that decade, and we probably won't do a lot of buying
and selling over the next decade. It is taking the time
to understand your retirement plan and when the timing is right
to make those decisions. So if you know what you need to do
each and every month, you make that contribution into the Roth IRA or make that contribution
into your retirement plan at work, or earn a little bit of extra money
on the side.

It has a tremendous impact on your ability to reach your goals at the end of the day. And I wanted to use that example because it's there bigger numbers than most
people are used to. And a lot of people
talk about getting good rates of return, but they're usually talking about like $500 or like,
I bought a stock and it tripled. Okay.
How much money did you have in there? And they're like, Well, $500. That's not going to really move
the needle. But over time, if you continue to apply
those concepts it equals a lot. And that's where we get 300,000, make a two
and a half million dollar contribution. So roughly 2.8. 3 million into 20 to 23 million. That is a significant change in those lives of those accounts, and
it was really attributable to patients. So it all comes back to it. And we're not talking about patients
for like a week or a month or even a year. We're talking about patients year
after year because if you look at the starting point
and you look at the ending point and the math that I just showed
you with 10.3%, guess what, 10.3% is not going to happen
every single year.

Even if you hit 10.3%,
you mean it was nine or if it was 8%, you're not going to hit
that every single year, even though that's how we run the math
and the projections. So for coming back to that,
we're not necessarily off track. We're at 10.3% every single year. It's about conceptually
understanding that over time, that's what we're going to hit. We're going to have great years and we're going to have down years
and possibly some more years in there. Maybe there's a recession in there. Maybe there's two or three, I don't know. But if you're applying patients
you're going to increase your chances of reaching your retirement plan
and goal success. So right off the bat,
a couple of strategies on what you can do to improve your retirement plan,
both with types of accounts and how you're thinking
about your retirement plan. So let me know in the comments down below
on any questions about starting your retirement
plan at age 25.

And I will do more videos on this. Let me know in the comments down below
if you enjoyed this video. Be sure to subscribe and leave your
comments down at the bottom..

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How To Save Money For Retirement | Financial Planning in Excel | Funny |

Have you Missed boarding Train? Not because you reached late But because you were saving money Something like this happened with my friend So she planned to visit Ahmedabad(India) during Navratri Festival As trains from Ahmedabad to Mumbai are always fully booked She booked train tickets in advance , to get good seat On the day of journey, she thought to book Uber to reach Train Station She checked Car rental and found it being Rs.150 She thought how come this amount is so big for such a short distance Then she called me and asked me, " Can you please drop me to Station?" I said," I am not at home, I am at market.

You hire Auto Rickshaw and leave for station." She said, " None of Auto Rickshaw driver goes to station." "They only pick long distance travelers" I said, " Hire Uber then" She said, " I checked Uber and you know how much they are charging?" "Rs.150. Who charges this big amount for such a short distance?" " For this much amount, I can eat Gathiya Jalebi(Snack & Sweets), 3 times" I said, " Then how you will go? Will you walk that much distance?" "If you are late, then there is no Shahrukh Khan waiting in train to pull you inside train." She said, " Ok, let me see" With this she cut the phone and you know what she did, she boarded City Bus Now City Bus rode at its slow speed There is so much traffic outside station and bus is so big to get through it So Bus got stuck in traffic.

By the time my friend reached station Train had left the station So she lost train ticket money as she could not board it Then hurriedly booked overnight bus for Ahmedabad and payed big money to book it So this is my Miser friend who doesn't know how to really save money When she returned back from Ahmedabad, I asked "So how was Navratri festival? Did you go to any club to celebrate it or not?" "Everywhere ticket price was so costly! I celebrated in my society only" Really! You didn't go to Friends Garba Club too? NO NO If you wanted to play in society only then you should have stayed in Mumbai itself You could have saved more money Why did you put so much effort, to travel that much long distance Hey, I am saving money for Retirement Very good, you should definitely save.

Anyways this festival comes every year And dancing in this festival after retirement is much more fun Bones get good exercise And if any thing adverse happens then go for physiotherapy You anyways saved for this only, right? Even I want to enjoy but if i spend like this everywhere then at retirement, I will have to earn money from dancing only. That situation will not come, if you have saved as per your retirement goal If you know that I need this much money at retirement then decide on that basis, how much you should save every month or year Spend rest money on yourself. Let me show you one Retirement Planner where you can enter money you want at retirement and this sheet will guide you how much you should save per year Spend rest money on yourself This is the retirement planner sheet In highlighted box, add total savings that you are putting aside for retirement You can include amount from type of savings that can be withdrawn at short notice like Banks FDs, PPF, Market Value of Mutual Funds Market value of stocks Cash at home and in savings account Do ensure to add provident fund value too After adding all these amounts, enter total sum in highlighted box For example, I enter Rs.10 Lakh (1 Million) Do not add property value in this sum as property can not be sold fast Now in this green box, put your current age? Please put correct age Else you will get wrong answer For example, I enter age as 32 Years Now write age at which you want to retire Some may plan to retire late or some may plan to retire early like 55 years, then write that age in this box For example, i enter 60 Years Next box is Life Expectancy Life expectancy at India is 70 Years which i have entered in this box Are you doing some exercise or not? Or this also you are saving for retirement Yes yes, I am doing it.

I do broom and mop everyday, on my own. Seriously, Ok. I know you are saving money, spent on your domestic helper But believe me, exercise make our body parts quite flexible. That's helpful at old age specially when you would dance after retirement Write Life Expectancy age as per your current life style In next box, you need to write your monthly salary At this salary level, you are living comfortable life ,at this point of time along with managing your other expenses My current salary is just nothing I deserve more money But I settled on less salary as my Boss is very good Otherwise I was getting very good salary offer So here also write the amount that you are currently getting For example, "Its Rs.85,000 per month" Inflation is approx 5% which I have already added in this box In this box, write returns that you are targeting on your entire investment If you want retirement fund in surplus Then you need to target this as minimum return Do not write un-realistic returns like 40% or 50% As you need to keep your risk capacity in mind If you do not have risk capacity to take, then do not write that much return in this box Think this as minimum return only If you get better returns that this ,then its profit, but here target only minimum return For example, I target minimum return of 18% before tax Next box enter effective tax rate taking into account total income, assets and short term capital gains For example, I enter 15% which is also tax rate on short term capital gains Here in this box, return after tax is 15.3% At this rate, the assets will grow for next 28 years Now enter amount that you are saving every month In this amount, do add your's and your employer PF contribution As these amounts are also part of your monthly savings For example its Rs.30,000 per month Next box shows your expected pension income at Retirement This is the amount that you should receive every year in your account, post retirement At this retirement income, you can maintain, your current life style, after retirement Next is Asset Value on Retirement (Before Tax) This is future value of your existing assets, that you are saving for retirement, on the day of retirement When you withdraw this amount post retirement, then its after tax value is 59,932,476 (Rs.59 Million) Next row shows amount that you NEED at Retirement age to live a comfortable life In next row, the box highlighted in blue color shows difference between Assets at Age of Retirement and Cash needed at Retirement Here this is positive which means you have sufficient funds for retirement In fact its surplus Let's say I reduce savings to Rs.20,000 Check this blue row, where fund has become negative showing that assets did not grow Now I change this to Rs.25,000 Here again the fund has become positive, so this much monthly saving is sufficient for you Next rows shows return required for Retirement income These assets also need to be invested otherwise the value will decrease due to inflation Say you pay tax of 10% on retirement income So the return that you should target, including tax and inflation rate is 14.48% If I increase savings today to Rs.30,000 per month, then return required at retirement, reduces which is now 11.86% If I do not withdraw short term gains and keep invested for long term so here tax rate is 0 Due to this, surplus increases at retirement and return required at retirement also reduces And if you are really 32 years, then you can take big risk too hence you can target higher returns too Let's say I changed target return to 22% Can you see surplus increase and return required at retirement too decreased With this excel sheet, you can track your savings and assets by changing monthly savings, or target returns or by changing tax rates WIth this excel you can monitor if your assets and savings are on track or not Wow! This is amazing excel sheet.

As per this, I already have good retirement fund so remaining amount i can spend on myself This year for sure, I am going to visit Friend's Club, to celebrate And will take airplane to go to Ahmedabad. I have lot of money Oh is it! You have totally changed. Now you will be taking airplane Oh My God! This time I will also visit Ahmedabad but not via plane, I will take train Link of this excel is in description, so you too can use it See you Next week.

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Retirement Planning: I’m 66 Years Old With $800,000, Can I Retire?

we all want to know do we have enough can we retire and how long will our money last well the key in retirement is to compound good decision after good decision and what that does is that helps to optimize your overall retirement assets and increase the probability that you do have enough and you can retire and most importantly you don't have to to live with anxiety throughout retirement worrying if you have enough or not in this video we're going to look at a 66 year old with 800 000 saved and really get into some of the nuances of different decisions that have to be made in the potential outcome of those various decisions [Music] hi i'm troy sharp ceo of oak harvest financial group certified financial planner professional host of the retirement income show and certified tax specialist the purpose of these videos is to help get you thinking along the lines of what decisions need to be made and how they are all interrelated from social security to health care to investments in asset allocation to managing risk to taxes to really get get you thinking about all the decisions that have to be made and how one decision impacts other decisions as we go through these what you'll start to see with retirement is that it's just as much an art as it is a science because everyone's situation is so unique everyone's circumstances are so different so we're going to look at some different variables here but we're going to start out with some very basic ones so first we have john and jane just a sample case male female both age 66 and just retire now we're in texas so we put texas as a state residence but obviously if you live in a state with an income tax a state income tax there would be a little bit different scenario but that's why the customization is so important okay so retirement period so we like to assume a long life expectancy and the reason is that the age 85 population segment in this country is the fastest growing population segment out there also according to pew research which i brought this article up here when we look at the projection of growth this is the estimated number of people over 100 years old over the next 30 years in 1990 there were 95 000 people over age 100.

In 2015 451 thousand by 2050 this is a pew research study by the way 3.6 million people estimated to be over the age of 100. this is advances in science and technology and medicine and treatment to help people overcome various diseases that they may they may find themselves with in retirement so underestimating life expectancy is a big mistake for a retirement planner because if we plan for 95 or 90 and you don't make it that far well you have that money you're secure but if we plan to 82 and you make it to 90 well guess what that's a big problem so when we talk about life expectancy this is one of the pieces of financial planning that is specialized to you and yourself you know your health you know your longevity you know what health problems you may or may not have of course we can customize this for your particular situation but most people from my experience underestimate the advances in medicine technology and science that will continue to extend our lives as time progresses we have treatment right now for various diseases and cancers that even five ten years ago we didn't have so underestimating our life expectancy is one of the big mistakes that people make now if you do have health conditions if you smoke if you drink you're probably not making it to 95 that would be customized for your particular situation but generally speaking i'd much rather plan for you to live to 95 and you don't make it there then plan for you to live to 85 and then you make it to 95 and then the plan obviously would be insufficient because there wouldn't be enough money to pay for health care to keep up with inflation taxes etc so that's why we put the life expectancies at 95.

okay this particular couple what we're trying to do is account for spending and retirement of sixty thousand dollars per year of course this is after tax so if most of your money is inside a 401k or an ira there is a tax problem there to get 60 000 out we have to pull more than that after taxes to be left with 60. healthcare this is the average medicare cost for a 66 year old couple in this country now it may be a little bit more a little bit less for you depending on your prescriptions and various out-of-pocket costs but this 9 400 this is the average including medicare premiums out of pocket costs for health care expenses for a 66 year old couple in this country okay so social security john has he will file his normal application at sixty six and a half and receive thirty six thousand dollars jane will then file spousal benefits in this scenario which is um a lot of times what we see working with clients where the husband files social security and then the y files for spousal benefits of course your situation may be different again this is where customization comes in but 36 000 and 18 000 are the social security benefits now here's something very important when we look at the breakdown in assets this is where retirement planning starts to get very very fun for us because it start it's putting that puzzle together but where it becomes very complicated for for most people because they don't understand the challenges that come with having too much money inside that 401k so we did a breakdown here six hundred thousand inside the 401k and 200 000 inside the brokerage account there are literally millions and millions of different ways that you could take retirement income from this breakdown of accounts you could take x amount from the 401k take x amount from the brokerage account brokerage of course when you say this this is a non-retirement account a non-ira optimization comes into play when we we are we identify what is the appropriate amount to take out of that 401k and what is the appropriate amount to take out of the non-ira in order to not just reduce taxes today but look at the impact over the course of your retirement which income distribution strategy makes the most sense for not only today but over the next 20 to 30 years so this is the breakdown here we're going to when we look at the tax analysis in a few minutes it's going to make a lot more sense we're going to look at the top 100 different income distribution possible strategies and the impact that they have over a long period of time okay so very simple we're not looking at real estate here so a net worth of eight hundred thousand dollars because yes when you have equity in your home it's a great thing to have you can pull that out for emergencies later we just want to isolate the financial assets that this couple has saved look at them spending sixty thousand dollars a year after tax with inflation uh inflation by the way we have it two and a quarter percent i'll touch on that in a little bit because we received some comments about inflation and health care costs now health care obviously is increasing a lot more than general inflation in the economy but we just want to isolate with these financial assets is that enough to answer the big questions can i retire stay retired and maintain my standard of living so when we look over here at a monte carlo analysis so this button what we're going to do is we're going to hit it it's going to run a thousand different simulations looking at a thousand different market returns over the course of time we just have them in a basic 60 40 portfolio again asset allocation is a big part of a successful retirement but we're just trying to to provide information based on what the majority of people out there are currently doing with retirement okay so this comes in at about 87 percent so 87 percent you may be saying well is that a good number is that a bad number the truth is it doesn't really matter too much it's just a snapshot in time what's most important with a financial plan and a retirement plan is that you stay connected to this over time when markets are up or down and you have various returns over time and you're spending money as well you run into what's called sequence of returns risk which is the combination of taking money out and market losses if you take out five percent you lose 20 you're down 25 percent in a single year now if that happens in consecutive years that's where the sequence of returns risk comes in when you're in the distribution phase of retirement so yes 87 percent i would feel comfortable myself retiring if this came in at 87 percent for me because that means 870 out of a thousand simulations i die with money now it's more nuanced than that of course but what's most important is that we're tracking this over time is it staying at 87 percent is it going up is it going down that's what's really important this is nothing more than a snapshot in time now when we start to look at before we get to the tax analysis i want to come over here to what's called the play zone in this particular software that we use and i like this because it shows what happens if we spend a little bit more money or less money how does that impact our probability of success so right now we have this couple spending sixty thousand dollars after taxes let's say they wanted to spend seventy thousand though seventy one look at the impact that this has it drops it from 87 to 41 that is a massive change in probability of success now what we would do in this situation if somebody wanted to spend 70 000 of course we can customize a plan where seventy thousand is spent maybe in the first five years seven years ten years with the intention of eventually tapering it back down to an inflation adjusted sixty thousand per year so inflation adjusted sixty thousand per year what does that mean well 60 000 today if you take that out of your portfolio it will buy more goods and services than if you take 60 000 out of your portfolio in the future this is a basic time value of money concept inflation erodes our purchasing power over time so to have the same purchasing power in the future of 60 000 today we probably need to pull out 68 69 70 71 000 something in that range we'll actually look at this in a second but the 70 000 this assumes we spend 70 000 today after taxes and it's just inflating at two and a quarter percent over time now i said i would talk a little bit about inflation and right now what's going on as i record this video is we are going through a period of a bit higher inflation in some areas other areas we absolutely don't have any serious inflation the truth of the matter is whatever you believe inflation to be when we customize a plan like this for you we can look at various amounts of inflation but if you start to put it out at four five six seven percent it's very likely you're not going to have enough money to keep up with that level of inflation unless the investment returns are that or greater now positive news there is typically in high periods of inflation stocks have performed well but when we look at inflation inputs and inflation estimates it's been 12 plus years where general inflation in the economy has been under 2 we are starting to see some inflation now most experts believe that it's transitory and by the time we get to next year inflation should normalize but we'll see most importantly again what we do is we stay connected if inflation does start to to sustain itself in a way that gets above two and a half three three and a half four percent well that's why we have a financial plan we start to adjust for those changes same thing with taxes same thing with markets same thing with everything in retirement our health our goals and in the circumstances we find ourselves in they change throughout retirement that's why when we look at something like this it's just a snapshot in time we need to be able to be flexible and pivot based on whatever circumstances come our way okay so taxes i want to look at taxes now we have this this is a different software that we use to look at taxes we'll overlay this software and the outputs from this one to the other software along with a few other ones that we use then of course the human element is the most important when combining all of this together but what we're looking at here is the top 100 distribution strategies for this same couple number one tax planning and income distribution scenarios the number one ranked strategy of course is up top it shows an estimated ending balance of 663 000 and taxes paid over the course of retirement of 42 sixty so ending balance of six sixty taxes paid of about forty two thousand if we come down here to the very lowest ranked strategy so i went to number eleven it's number 101 ranked cumulative taxes 156 000 with an ending balance of 170.

so that's over a 500 000 or so change in an estimated ending balance and a hundred thousand plus in additional taxes paid what's cool about this software is it isolates everything else except your distribution strategy how much are you taking from the ira how much are you taking from the non-ira are you doing any roth conversions so being able to isolate everything else and just looking at those variables shows us very clearly that the tax planning and income planning component for this couple in this scenario john and jane is extremely important it's the difference isolating everything else between finishing with about a hundred and seventy thousand estimated or six hundred and sixty thousand so as you can see income planning tax planning play a very critical part in the overall retirement plan this software that we looked at over here this one is assuming what we call a conventional wisdom distribution strategy now this software is that's the software's weakness this does not do a great job tax planning but when we overlay the tax planning software with the financial planning software here when we get the 87 percent and we get it all done this gets it up to 90 95 96 99 a lot of times the big takeaway here is that retirement is not just about your investments it's about having a plan that looks at your investments and manages risk but also generating income tax planning and health care planning along with estate planning estate planning is very important if it matters to you what happens to your assets when you're gone so we always keep a link in the description if you want to reach out to us set a consultation have a phone call and see if this type of planning is appropriate for you it may not be appropriate for you you may not be a good fit for what we do and that's okay hopefully we still can provide value and help you become a great have a greater understanding of retirement but if you do want to talk to us there's a link below you can schedule an appointment and of course share this video with a friend or family member hit that subscribe button and thumbs up if you liked it and if you don't like it hit the thumbs down that's fine too and if you leave a comment we're gonna make an attempt to address those comments in one big video of course we can't respond to every single comment or provide personalized financial advice but feel free to comment below that helps you to know that there's engagement with this video and they'll help share it with others so they can learn as well

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Why is Everyone So Tired in Retirement?

you know after slugging it out for over 30 years in Corporate America I was exhausted when retirement arrived I really needed a break and I needed a break too so we spent the first few months in retirement really doing nothing nothing meaningful right well hanging around kind of lazy mornings turning into lazy days into lazy weeks and maybe even lazy months but we knew something had to change or we were doomed we wanted our dreams of a fulfilling retirement to become a reality so we had to make some changes so today we're going to share with you some strategies that you can try so that you're full of energy every single day and take on anything that comes your way but before we go further we'd like to introduce ourselves my name is Mark Rollins and I'm Jody Rollins and we started retirement transform not only for us but for all of you and the other 10 000 people turning 65 every day now we don't focus on anything Financial none of the aspects financially or retirement but we focus on lifestyle Health relationships and more and listen if you're new here please hit the Subscribe button and also the notification button so you'll get notified when our videos come out so let's jump into all the things that tend to make you and me tired especially in retirement okay the first thing that gets you tired too much downtime and that might just be for instance watching too much TV and I don't know if you know this or not but the average number of hours people over the age of 65 watch TV each week is 38 hours a week that's like Couch Potato syndrome it is and you have to be careful with that because it does make you tired nothing wrong with watching a Netflix series or some TV but you can't do it six or eight hours a day yeah lack of movement will really keep your body and your mind tired you have to find ways to move your body even 20 minutes a day just getting out walk 10 minutes One Direction and 10 minutes back and you will feel very different what happens if you walk seven minutes one way and four minutes back and then you have to do 10 jumping jacks oh and then all right because you're going to be late yeah but there's a scientific study multiple scientific studies that say moving 20 minutes a day can extend your life by five years who wouldn't want that exactly exactly so the first one is too much downtime the second one is poor nutrition and we know you've heard this before but please just make believe you're hearing it for the first time poor food choices fast food sweets and too much eating out or even eating late is bad for you being mindful of what your comfort food is and how much you go to it is also something to be aware of yeah I think that you know for us we're getting a lot better with nutrition and really because we're starting to really pay attention to what our ordering tells us about sleep and how we feel but also just our body when we put certain foods in our body we really pay attention to how we feel and having wine or drinks and a late dinner at night we both know we're going to have an awful night's sleep but you didn't bite on comfort food comfort food I you know I need to stay away from comfort food fried chicken Oreo cookies chocolate chip cookies that's the stuff that my mother always made for me and it was Comfort I I need to stay away from that yeah and I know I know it's hard to in retirement to stay away from wine and drinks maybe that's me but um you just be mindful of it and to give your yourself and your body a break from it is really a good feeling yeah and all of what we just talked about leads into the third uh item to make you tired which is getting poor sleep and honestly we need to do an entire video on sleep because I just looked and we really haven't spent enough time on this and the importance of getting a good night's sleep most people need seven to eight hours of good sleep in order to feel good and have high energy absolutely and you know the eating late too much alcohol just doesn't help that you a good portion of our lives in Corporate America and you as an entrepreneur entertaining clients and living that way eating late entertaining clients some wine with dinner and we knew it wasn't sustainable so what makes us think in retirement that that would be sustainable well it's funny because our last five years of work really we were probably working harder than ever before we were entertaining harder than ever before that was our normal and when we got to retirement that normal didn't work for us it really didn't so you just have to be able and to think about making some life changes and it's not easy but it's doable so we have sleep as the third one good sleep quality sleep not just time in bed right the fourth one is really lack of routines during your career you had your routines wired I know you did you had a morning routine during your career and then you were off to work and your day was planned a lot of time your schedule was filled before you even got into the office but many people enter retirement and the last thing they want to do is have a routine I know and you know we hear that a lot but we also hear from our clients when they start with a routine even a basic routine going to bed at the same time getting up at the same time and it doesn't have to be 5 a.m like me I mean you don't get up at five minutes you've got your own routine I don't sleep I do but you have a routine once they start plugging in a routine getting up at the same time every day plugging in a little bit of uh walking for 20 minutes and exercise maybe on top of that doing some meditation with a app like headspace mindfulness that really starts to kick in their energy level and makes them feel better in their retirement phase and you know I really resisted this idea of setting a regular time to go to sleep and a time to wake up in retirement and I don't know if you remember I pushed back pretty hard on Mark started at like 10 o'clock we're gonna you know go to bed at 10 o'clock or you know he wants to be in bed at 10 o'clock which really many wanted to be asleep at 10 o'clock which meant bed 9 30.

Yeah but you also weren't going to let me go to bed alone that's just a me thing right so you so you dragged along with it I did you laid there with your eyes open for an hour in the beginning well I would read or something but but oddly enough our clock kept kind of going backwards the other thing I'd say about routines is I got a call this week from one of our 25 year olds we have two 25 year old twins Jordan that lives in New York City and she said you know something mom starting Monday getting back to my routine and I found that so interesting that the self-care part of routine and sleep and waking and all of that is being ingrained in the younger generation which is great it is great so another reason that you might be tired you could have some underlying health issues that you don't know about it's so important to go to your doctor at least once a year and have things checked out because as we age things in our body change and it could be that there's something going on that's keeping you awake at night that's making you feel tired during the day so going to see your doctors on a regular basis is so important yeah there I mean there could definitely be some issues going on that need to be addressed and you know we have friends that actually have said to us we never go to the doctor because we don't want to look for trouble and I'm just not sure that that's a great way to live through this phase of your life yeah and you know in retirement if you're not exercising and you're eating and drinking more than you used to you're going to gain weight a lot of people gain weight in retirement now all of a sudden you pick up an extra 10 15 20 pounds and it's slowly so you don't notice it but that leads to diabetes so you want to get your heart checked you want to get your body checked you want to go see your doctor I recently went to the doctor and found out that I had plaque buildup on some of my arteries that's it yeah it's a scare I suppose but it also has helped get me focused on doing the right thing eating better exercise and getting good sleep yep because that you're on could be out of balance again this goes back to checking with your doctor you know if you're not sleeping and you're gaining weight and you're having trouble going to the bathroom or you're going too much you know find out why it's just not something to sweep under the rug yeah you know if you're getting up four times a night to go to the bathroom it could be as simple as you shouldn't drink water two hours before you go to bed or it could be something else or it could be a medication that you shouldn't take in the afternoon you should take in the morning or yes the important thing we're trying to get across here is see your doctor check your meds you know I was pre-diabetic seven years ago and I changed that with diet and exercise so you can actually be proactive and make some changes as well don't have your doctor just say here's some meds talk to them more about what some of the things you can do to change your lifestyle to become healthier so we hit the doctor we hit the meds let's go to the seventh thing that we came up with you know dehydration dehydration for sure will make you tired that's a no-brainer it leads to all sorts of problems poor sleep heart rate issues blood pressure problems brain damage even death you had an episode a couple of summers ago with dehydration I did I was working in the yard I was working really hard I was sweaty and I wasn't drinking water did all that work it was a hot humid day showered we got dressed to go to dinner we walked down the street to have dinner you know I don't know 500 feet and right in the beginning of the dinner basically long story short I just went down and I fainted and I had to be taken to the hospital and that was preventable it's not hard to effects you need to drink one half your body weight in ounces of water that's a minimum I weigh 160 pounds that's 80 ounces of water a day that's seven to twelve glasses of water a day it's not that hard right right it really isn't it really is and it's so so important to do that so listen it's okay to have lazy days it's okay to splurge with food and wine you know it's okay to binge watch TV but not every day not for your optimal retirement it just isn't sustainable and there's nothing worse than feeling tired all day long and you know people that say that right they get up and they say oh tired midday they're like oh my God I'm so tired yeah don't you get tired of hearing people say how tired they are yeah and maybe some people just say it but you don't have to it doesn't have to be like that right you want to try a day or even a week implementing what we shared today and see if there's any changes that play take place see how you feel you actually might like it you might find a new normal and it becomes a habit now we hoped you like these strategies and changes that we talked about today check out our next video extend your life in retirement by avoiding these four bad habits these are definite changes you need to make so watch this video to go deeper on extending your life and being healthier

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The 401(k) Project: Retirement Planning and Education Series, Chapter 1

Hi everyone
welcome to chapter one of our retirement education and planning series
what we're going to be referring to as the reap series reap for short
i'm josh noel i am a independent financial advisor and i am the owner of
gulf coast financial advisors which is located here in fairhope
alabama for those of you all not familiar with lower alabama or fairhope
we're near the gulf of mexico i'm joined today by matthew eichman he
is the national retirement plan leader for qualify plan advisors now
qualify plan advisors or qpa as you'll hear us refer to them
is the qualified retirement plan division of prime capital investment
advisors of which my firm gulf coast financial
advisors is part of their network of independent
financial advisors in matthew's role he he oversees the
firm's retirement practice and he also sits on the
investment advisory committee which is tasked with overseeing
about 10 billion dollars worth of assets and that number is growing
matthew also has a background as an erisan attorney and he was a previously
a partner in an employee benefits boutique and in
that in that capacity had nearly 17 years of
private practice experience so with all that said matthew
how you doing good josh how are you today doing great
well uh matthew before we dive into our topic today of chapter one let's do
let me have a brief disclosure advisory services offered
through prime capital investment advisors a federally registered
investment advisor overland park kansas the following
commentary and responses are the opinions of myself josh noel and
matthew eichman and are not necessarily the opinions
of pcia are for information on educational purposes only and
are not and should not be considered investment advice past performance is no
guarantee of future results no guarantees expressed
or implied all right so matthew what uh what you and i are going to talk about
today is we're going to be diving into chapter
one that's really going to touch on the main uh the main thing going on in
our world here in in july of 2020 uh we're dealing with a global pandemic
and kova 19 has impacted so many parts of
our lives both personal and professionally but
what you and i are going to be discussing
is the impact in particular on qualified retirement plans
now as opposed to just sitting here and telling folks
uh what we think from our perspective as you as an executive of a large qualified
plane division and me as the owner of a boutique financial
planning firm what we really want to do is we want to look at the different
perspectives that people may be viewing these things
you know one perspective we're going to look at is plant participants how is
cova 19 affecting their view as a plant participant
the other view we're going to be looking at will be from
fiduciaries what are you know what is a fiduciary looking at that
and then i know there's a couple more perspectives you want to you want to
uh talk about so with that said i'd like to go ahead and turn it over to you
yeah thanks josh and i think that is absolutely critical you know we don't
want to think about a retirement plan in a vacuum or overly
academic but instead we really need to think
about the people who were involved with the plan
and so you know whether whether you're a human resources professional or you're a
cfo or a controller or a ceo or a business owner or you work in benefits
or whatever that might be we need to be able to put ourselves in
the shoes of the other people who are working with the plan
and so frankly for each person listening here today
it's important to think about those multiple perspectives how do we put
ourselves in the shoes of a planned participant
for starters how do we ask ourselves and answer the question
this is what they're feeling and this is what
they're experiencing and frankly if you think about that
josh the the biggest thing that's really impacted them from a retirement plan
perspective it's these huge market swings think about being an employee
who has a full-time job doing what he or she does
all the time then hit with the pandemic so then we're in this position where
there's maybe a change in his life or her life and maybe we're missing out on
some social activities and maybe youth sports and maybe a graduation and then
maybe there's concern about whether this individual will lose a job or have
hours cut and then all of a sudden you throw these
big market swings out there and if you're a participant in a retirement
plan like how would you possibly make sense
of the headlines look at those josh i mean
the dow's jumping 700 points on hope and then when the stock market is up the
economy is down and is the volatility going to be greater or is it going to be
less and so ultimately that's the biggest
concern it's not about making sure that every
individual in this entire country understands
the stock market or every aspect of it the real question is
how are we handling that emotionally what type of behavior
are we experiencing or concerned about when it comes to employees
and so ultimately you know if you work in an hr department or you're a business
owner or you work within finance isn't that really where we need to start
in the middle of the of all this don't we really need to say
okay what are they experiencing and then how
do we set them up for success how do we help employees to understand
not only how to sift through that headline risk which is significant think
about the way in which a really sharp or a
poorly worded or an extremely worded headline
might push one of your employees to make a big rash change in the marketplace the
number of people across this country who panicked in march and decided on
march 23rd to move their money into cash and have since missed out on about a 30
market run up after that it's really sad it's really sad and the closer your
employees are to retirement the less likely it is that they'll ever
recover from that decision and so josh as you know when we're working with plan
participants the number one question that we hear
during the pandemic is not help me better understand
equities help me understand fixed income help me
understand large cap small cap mid cap technology funds real estate
funds the question we get is what should i do
what should i do well that's an incredibly challenging question to
answer isn't it i mean josh i wouldn't even be able to answer
your question from you what should i do because i need to have a conversation
with you to work you down a path so that we
understand a roadmap to put you where you want to be so when you when you think about how
that roadmap works josh obviously you know it depends a bit
on how an individual may be invested within
a retirement plan that's probably the right place to start
well and also matthew i think that it goes
it's worth very to say that not only
this with that chart you shown that showed that that
humongous drop we had right in in equity values come combine that with the
fact that we had 11 plus years of a pretty stable
climb so you know one one thing that i think we as humans
demonstrate pretty consistently is we have very
short memories and uh you know a lot of people have only been
investing in a time period where they've seen they've seen some dips
you know they've had a couple small miles corrections over the
past 11 plus years but for the most part it's been fairly smooth sailing
and and that smooth sailing not only translated to the planned participants
but it also to the planned sponsors the human
resources folks uh even all the way up to uh you know to
the people that were housing the plans and whereas not a set and forget it but
it was yeah i mean it just needed a little bit
of nurturing well you take you combine that with what is
really a once in a generation probably once in a
multi-generation event with the cova 19 not only
impacting everybody from a health perspective but also
having a severe detrimental effect on the market and you know volatility
going through the roof historical levels of volatility so i
think that you know to circle back around to what
you said is you know how do you the number one question we get is what do i
do well you're getting those questions from
not just playing participants you're also getting from human resources
business owners playing sponsors um up and down the chain so
i did yeah so well yeah certainly josh and i i think you know sometimes
sometimes analogies can be cheesy uh but my mind works with analogies
it's the best way for me to understand how do we
make an apples to apples comparison and help people to also understand what
we're in the midst of and the way that i would describe or recap
what you just said is that the retirement plan industry has
been on a bit of an autopilot feature for a while
and let's think about how that works think about if you're a pilot and you're
in training and you know that there's this autopilot feature
perhaps you don't pay attention to the classes that teach you what you need
to do when that autopilot's not there or perhaps you don't go to the classes or
perhaps the classes aren't offered couldn't we argue that that's really
happened with a lot of employees across the country
you move to automatic enrollment oh i don't have to make a decision about
whether to participate oh i don't have to make a decision about
how much to save you move to automatic escalation oh
cool somebody else is going to increase what i say you move to a qualified
default investment alternative or a qdia oh great well i don't have to make a
decision about how i'm invested then what happens when we hit the
turbulent skies and all of a sudden the autopilot comes off and the individual
has to grab a hold and make sure that we're going to land
that plane and that's really apply that analogy to an employee a
participant in a plan and think about how they can achieve that smooth landing
which is what they're trying to achieve when they get into retirement and
frankly josh i i believe that the best way to handle
that for a retirement plan participant is for
each individual to have a road map to work through
and those roadmaps really divide into one of two primary categories
the first category i would say for plan participants who are in what we might
describe as a do it for me solution that'd be somebody
who's in a target date fund or they're in a managed
account or some sort of risk-based portfolio
well in that setting they nonetheless need a roadmap to work through and to
manage as you said the emotions that can overwhelm them when they have
this short-term memory as you described and so
for anybody out there working with plan participants
who are in that do it for me type of solution they still need to be educated
on what they have they need to understand how that vehicle
will work what's the point to putting somebody into a conservative
target day fund for example if they don't know that when the market
bottoms on march 23rd that they haven't lost as much as the
broader market so we want to make sure that all those
plan participants out there are aware of what they have and then
reassess what they have go through a new risk profile
understand what works for that particular individual and then josh you
know the most critical point for those people
need to commit to a strategy at the end of the day right
need to determine at the very end of the process
what will i do if this happens in the marketplace and it reminds me a little
as you know i'm going on a family vacation tomorrow to yellowstone
and we've known the entire time that there's a possibility
that one of my boys would have state baseball on the last day of our vacation
and we've said the entire time that when the schedule comes out we may
need to depart yellowstone a day early and we've known that the entire time and
when the schedule came out yesterday and i said we have to come home a day early
my wife said no we're not and i said well we had to
commit to our strategy we've got to stick to our strategy and we're coming
home early and i think it's the same thing for those plan participants
and and then and then josh you know i mentioned there's really that's kind of
two camps you've got the those who are in the do it for me but of
course you know you know there's still many people in retirement plans you say
hey i want to pick my own investments i want
to do it myself well even there it's probably even more
important to have that sort of road map in place
to ensure that there's a reassessment of what the portfolio
looks like and ask each individual how did you get there
and does that still align with what you want to do today and how you see your
future and have that conversation right there
josh that's that's an absolutely critical point in time
as we look across the country i have seen investment advisors take
one of two extreme approaches some have faced the pandemic and have
said you know what this is so overwhelming i don't have
good answers i'm going to avoid the conversation and probably take advantage
of relaxed expectations and i'm going to work less
and others have said we are needed more now
than ever before we are clearly in the midst of
a worldwide emergency josh i know you're working ridiculous hours right now
we work with many people who have said this is the time when i have to be there
and so we're in that road map stage for a do
it myself investor and this is the time for the conversation
so if you work at the retirement plan and you haven't been talking to
your advisor or your broker whoever works with your plan
shame on them i mean that's this is when your people need help the most
yeah i've said publicly before matthew that in my opinion
uh i've i haven't had this much value in 11 years and i may not have this much
value for the next 10 years right right now is
when the value uh provided is most important and you
know to on in regards to what you're
discussing with planned participants um your back for we did have or we had
folks come in uh new clients come to our practice that had
panicked and had cashed in and you know at that point
the damage is done you just got to try to nurture the thing back
to a healthy status and you've also had quite honestly to
on the flip side that you had 401k plan participants that
um that stuck it out right and who knew that we would have a fairly monumental
callback of some of the gains my pivot to you or
to anybody that is watching this video is um can anyone tell me if this is over
because if you can tell me that we're through the woods and we're not going
with this again fine then let's just hey we survived that
bout let's just let it rip next time i don't think that's going to be the
case so i think now for someone that uh maybe was fortunate enough to have a
plan and was able to weather the storm for whatever reason maybe was not
approaching retirement where the panic button was close there at hand
uh but now is a time where there's really the most value
that you're probably going to see in a couple of decades of
how do i how do i accommodate the fact that this is not going away
no one knows no one knows the future of the virus no one knows the future of the
economy but we can all have enough common sense
to say that we're in for a bumpy ride so
particularly as a planned participant i think that's a great way to segue to uh
to our human resources is on plan participant
probably now is not a bad time to if you even if you feel like
you're maybe it's too late maybe the damage is undoable that's not accurate
there's a way to come in and put a road map particularly as maybe if you're
coming toward towards the end the the end of your accumulation years
so that's what i'd like to say as we transition to the human resource
perspective yeah well you're spot on there you know
there's that old chinese proverb that tells us you know
the best time to plant a tree was 20 years ago
and the second best time is today and i think it's really easy for people who
you know made what what proved to be a poor decision perhaps in march or maybe
in april or at some point in time and to see that and throw their hands up
in the air and say hey i can't get back from that
so i'm going to give up on trying and what i would say is
let's not look backwards right now let's look forward only let's start today
and say what what i chose to do in march or didn't choose to do in march
that's either a sunk cost or it's added to my value and i have more to play with
now so let's look forward and i think for human resources professionals josh
that's particularly the case and so don't look back but let's say what do we
need to be doing now and and you know the biggest part of
that of course will be understanding and implementing
new ways to be able to communicate and and that's going to start with
you're working in in hr and with respect to any sort of benefit
programs it's going to require an embrace of technology you know the
fact that people are tuning in to watch our mugs
right now josh tells me that we've got people here who have embraced technology
but you know recognize the way in which communication previously occurred is
that maybe if anything you'd be sitting around a conference
room table and maybe you'd have a conference line if somebody wasn't there
but the need now to become comfortable to be
able to be in that position and whether you're using you know webex or
zoom or adobe or whatever platform you might be using
to recognize that's not just the future that's the present
we got there so quickly and if you go back several months people probably
thought yeah that might become more popular and it
might become more widely used it's happened it's there we've got to be
there and and so i think for human resources professionals it's it's
absolutely critical to say how am i going to embrace
technology but you know what's kind of interesting
about that josh is that it's not merely a matter of saying
okay how do i figure out that how do i download the zoom app or how do i make
sure that i have a webcam the ultimate question is how do we make
that effective how do we become really darn good at
using it so that we can connect with our employees and so when you're
in hr that would be the way to personally challenge yourself is to say
okay i've got this set up and i know how to use microsoft teams or
i know how to use webex but how do i make this a truly
interactive experience for the people who i'm working with and
that to me would be i think the biggest challenge but it's doable
and it's actually kind of fun because the expectations
for being absolutely perfect have changed and really what people
are looking for is effort and creativity and energy and josh you certainly can
bring that to the table by embracing technology
well and i think what we've seen to uh to build on our previous conversation
about the the fact that we had an 11-year
pretty consistent uh pre-consistent bull run i mean not
only was it a bull run it was a bull run with some of the the least amount of
volatility that we've seen in the history of the
market so you combine those two things it's not that people get
lazy it's not that people got careless it's just
to be fair you know sometimes like you said earlier matthew you know we thought
the autopilot was just flying this plane just fine and we were
going to be fine till we landed well what we're what we're seeing on
that is with with this covet thing coming into
the mix and with the relevance of technology
being pushed more or less in our face i mean you and
i have a camera and a microphone in our face right now
something we may not have done three months ago but with this being pushed in
our face what was what the where everything we
were a lot of people thought things were trending was
more of a high technology lower human touch lower human value
when it came to being a a human resource or a plan sponsored business owner
offering these type of plans and when in fact the reality is the
difference is completely the opposite direction
you are now in my opinion you are now with the technology tools that you have
available to you with the things that are going on with
the market with the fact that these are people investing in this plan where
you are part of that process where you're part
of the overseeing of it you're wanting people that will actually want more
more contact they want more touches they want even if it's even if it's
electronically driven they want a human element behind it i
firmly believe that and i think that's one of the things
i know we try to do down here and i and i will give kudos to
prime capital investment advisors and qualified plant advisors i think you all
done a great job with that as well providing you know it's math with the
human touch it's technology with emotion provided well you know josh
we've got you know we've got a network of of
retirement plan educators across the country
who have a lot of experience you know behind the windshield and in the
airports and in the airplanes and and one of our best educators is a
woman named terry lewis she's just incredible with people
and terry would describe herself as an old school communicator
i mean she didn't like the the movement to email
and and doesn't want to just pick up the phone but she wants to see people
face to face she wants to see them in person and it's been really fun to watch
terry evolve throughout this process the way in which
she has said people really enjoy this the way in which that i mean if terry
and i have a call that we need to have just a one-on-one call we'll hop onto a
zoom meeting just because it's so much more personal and it's been really fun
to see people evolve and be open-minded in that regard
and really josh terry works a lot with human resources professionals and she's
really enjoyed the way in which those who are very
proactive have said oh cool you can you can provide more service to
our people you can reach more of our people
more frequently in an environment that works for them
let's do it game on and that's been really fun to watch
well matthew i want to ask you about our third our third leg is looking at this
from different perspectives the fiduciary's perspective i'd like to
i'd like to see what your thoughts are on that
well great you know josh i think that's an it's an interesting point because
it's hard for people within an organization
given what we've been through and what might be ahead of
many of you for a you know from an economic perspective or a financial
perspective with your organization to think about fiduciary matters with
your 401k plan or your 403b plan being front and
center obviously when you wake up in the morning and you look at the list of
things that are going to be absolutely critical to the day-to-day
operations and potentially survival of your company
it won't rise to the top but i would argue
that fiduciary responsibilities are more important now more than ever
for a couple of reasons one as josh referenced earlier
geez people need help more than ever before like the decisions that
fiduciaries make now matter more than ever because we're not
on autopilot we actually need to make sure that we have experienced captain
and experienced pilot manning that plane and getting us to
where we need to go and then secondly it's absolutely
critical because of the pace at which we're seeing developments
and so for example josh you know a starting point has to be the cares act
right i mean i think we have to recognize right up front
that you know the karazak did a lot for businesses across the country it was
intended to help out small businesses and with retirement plans it did a fair
number of things i mean many probably know that it added this
enhanced distribution option it also added this ability to take out
bigger plan loans or to not make repayments on loans for the
rest of the year and so for anybody whether you're in human
resources or you're a fiduciary it's critical
to understand the bullet points you see here on the screen
what what were the choices wouldn't it be interesting to give a multiple choice
test to people who work within retirement
plans and just ask them to identify what the choices are
so much complexity so many confusing misconceptions about what was possible
and then for every organization to say what did we choose
i would love to pull everybody who might be watching this and say
hey what did you choose and see the degree to which that matches or doesn't
match with what the particular organizations
chose and then how do we communicate that to our
employees and and then really josh what we're seeing most right now is
the emergence of irs and departmental labor
guidance that says to us how does this work now
practically speaking when somebody takes this type of distribution
what paperwork do we have to give them how do we handle withholding
the devil is truly in the details when you get there
and you know just within the last couple of weeks the irs put out notice 2020-50
2020-51 2020-52 and the irs is saying hey we get it this
is really really challenging but we know that you need help and so
josh when i think about issues for fiduciaries right now
i start with the cares act what's interesting about the cares act
is that unless we get additional congressional action
that extends the applicability of it it's going to be somewhat of a point in
time a short-lived impact so then absolutely
will be important for fiduciaries to say okay
how do we move forward and what do we focus on as we move forward and
you know i think the critical thing there for fiduciaries to understand
is that all of these different issues and these different developments
fit under this very expansive fiduciary umbrella so
if i put myself into a fiduciary's shoes i've got to recognize that the things
that should govern my decisions start with these primary or these
preliminary duties the duty of loyalty what is the duty of
loyalty the duty of loyalty is for a fiduciary to make decisions
in the interests of participants and beneficiaries
did you notice i didn't say the duty of a fiduciary is to
cover his or her tail the duty of a fiduciary is not make sure he doesn't
get sued or she doesn't get sued frankly the duty
of a fiduciary is to make decisions in participants
interests and not their own but you know what happens
if you take that approach you actually protect yourself better because you make
better decisions when you're guided by the right motivations
and then fiduciaries have this other responsibility it's this duty of
prudence well what's the duty of prudence it's
the duty to fulfill your responsibilities with the
care the skill the diligence and the prudence of someone familiar with the
matter so ignorance is not an excuse fiduciaries can't say well i didn't do
that because i wasn't aware of it in fact that's one of the worst
possible answers and so when you think about this fiduciary
umbrella you can see the list right josh you've got the karzak decisions but then
even more importantly that duty of prudence are we holding a meeting
to make sure we're going through a consistent process that shows the care
that shows the diligence are we looking closely at plan fees understanding
how those become more important important to a participant's balance
over the course of a career are we aware of the potential conflict between the
supreme court's opinion in the intel case which says that
participants have to have actual knowledge of something
before the statute of limitations starts to run yet the department of labor just
put out a new regulation that says hey you can disclose things to them
electronically by sending it to an email address you
have on file and you don't even have to check whether they got it
well if i were a fiduciary i'd be hearing those two things and i'd say
well that sounds like really great really terrible news how do i reconcile
the two so there are tremendous challenges for
fiduciaries and unfortunately if we get too
concerned about the risk element then we don't focus on the true risk
which is that their employees won't be you know prepared for retirement
and you know josh you mentioned earlier my you know my background as an erisa
attorney and i think sometimes it probably surprises people that when they
say to me what's the number one risk that i face as a fiduciary and a lot of
them would think what probably a price say you're going to get sued
right or you're going to get audited well here's my answer to that
well the likelihood of getting sued it's actually statistically pretty low
now if you're in the middle of it that doesn't mean it's a pleasant
experience but statistically it's actually lower than some think okay so
how about becoming audited by the irs or the department of labor
not fun right if you've ever been in the middle of one of those they're not very
fun and you want to make sure you're prepared
if you're not prepared they can become very miserable but statistically again
not as likely as the greatest risk and the greatest risk is
that organizations are not using their plans to their maximum potential
not focusing on employees in the right way and saying our number one reason for
doing this is what it's an employee benefit
plan it's to benefit our employees and so
throughout all these developments and i know josh we're going to talk about this
more in the next series within within this this podcast or the next
item within the podcast series it's that focus on wellness it's
absolutely critical and i think that through more
conversations and throughout this series we're going to really focus on
the ability to enhance the wellness of participants
and as you enhance their wellness guess who else becomes well
the fiduciaries and then guess who else becomes well
your company your organization and really it is astonishing the more that
we talk about this and the more that we think about this the way that it all
rolls up together and we understand how everything's so
interconnected despite our you know our attempt here josh to
try to split things up so that we can share it in a way that it
becomes manageable to consume it's also interrelated that sometimes
it's even hard to draw those lines yeah i completely agree with that
matthew and i and to be honest with you i'm i'm very excited to see how
uh this this thing gets knitted all together
now for those of y'all that have participated in this video please
understand that this is chapter one of a uh basically a four chapter
retirement education uh planning series uh this one we wanted
to kind of lay the groundwork on how we felt you know kobe 19 had
impacted plan participants human resources
business owners fiduciaries all that and i think matthew did a fantastic job
doing so if you all will dive into what we're
creating here we're going to be supporting this chapter one and the
following chapters with additional supporting content
you're going to have white papers you're going to have articles blogs you're
going to have clips you're going to have videos
you're going to have some things that actually are going to help you
in your day-to-day activities as it relates to qualified plans not just
matthew and i getting on here and and talking you're going to have a lot of
supporting documentation uh that eventually as we build through
this 8 week campaign is going to lead to a a webinar at the
end that we'll have in the link of these videos how you can
go ahead and start participating and getting ready for that event
uh matthew i'm going to give you the the final closing but i do want to lay out
uh y'all come back this was chapter one this was retirement plans and
retirement plans in a cobia 19 world chapter two will be financial wellness
during covet and beyond it's gonna be huge chapter three will be reducing
liability uh particularly what does the cares act
and deal all changes mean for your plan you want to know and then uh lastly
we're gonna talk about benchmarking uh that's that's something that every
everybody related to a plan should know about plan sponsors
business owners things that nature so that's what we have coming up
um i'll be i'm gonna let matthew take us home
but we'll say matthew fantastic job hey thanks josh i appreciate that and
appreciate the opportunity in the conversation and i think probably my
closing comment to share with everybody relates
to this term that i've seen in a small number of publications but it
really gives me pause and that's the idea that
as a result of the pandemic and the way in which people are working in different
places in different settings that we're entering what's called a low
touch economy and for anybody out there who believes
in the the need to provide service to others
anybody who's in the customer service field or you have customers or you have
clients what does low touch suggest to you low
touch to me suggests somebody trying to say i don't want to have to work as hard
and frankly i think a low touch economy is the absolutely worst description we
can come up with for what your people want and need as we come through this
and hopefully eventually out of this i believe that people
merely want to experience those touches differently
and i believe that now as we embrace technology and we bought webcams and
mics to have in our offices etc we're more well equipped to be able to
do that and so to me it's it's a new normal it's a new
way to try to provide information but plan participants human resources
professionals company financial professionals business
owners i believe we're in an era where they they want to need more touches and
so that's why i hope people come back and join us as we work through this
series because you need more you need more than what
you've been getting your employees need more than what
they've been getting and so we're in a position to
to try to deliver on that i really look forward to it

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