Ep 55: How Bonds Work: What Retirees Need To Know

On This Episode

Too many folks misunderstand bonds, how they work, and what role they play in a proper financial plan. We’ll address some of those bond related issues on today’s show.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Marc Killian: Welcome into another edition of the podcast, Retirement Planning – Redefined with John and Nick from PFG Private Wealth. And it’s time to talk about bonds and really what you need to know and how they actually work. And there’s a lot of conversation around that, obviously in ’22, certainly to the fact that nothing seems like a good idea as far as things go. And when the market is weird, often we run to bonds for the safety aspect, but there’s some things going on there too. So, let’s talk about how they actually work, what role they might play in a proper financial structure and how maybe this here lately, it’s been a bit of a different show in that regard. So guys, welcome in. Nick, what’s going on buddy? How are you?


Nick McDevitt: Pretty good, pretty good. Staying busy.


Marc Killian: Yeah, that’s good. Very good. John, and you? How are you doing?


John Teixiera: Doing all right.


Marc Killian: Yeah?


John Teixiera: Hanging in there.


Marc Killian: How’s the bond market? A little rough.


John Teixiera: Little rough if you’ve owned some already. Could be good if you’re buying some new ones.


Marc Killian: Yeah, right. And that’s the difference, right?


John Teixiera: It depends where you’re at.


Marc Killian: Depends where you’re at. So yeah, we’re going to talk about that a little bit. First thing I want people to understand is that the bond market is actually way bigger than the stock market. A lot of people don’t know that. That’s just an interesting little tidbit, but it is a lot bigger.


John Teixiera: Yeah. Yeah, a lot of people aren’t aware of that, but-


Marc Killian: There’s a whole lot more stuff in there. Right?


John Teixiera: Yeah.


Marc Killian: But let’s go into the misunderstandings, right? So first off, just why don’t you guys give us the basic gist of how a bond works, for folks who just might not know?


John Teixiera: Yeah. So, to break it down to its simplest form, a bond is basically loaning your money to a public institution or private entity. So, you’re basically saying, “Hey, I’m going to give you my money.” And for that, the company typically provides some type of interest rate for that period of time where they have your money. And as far as obligations go from that company or public institution, there’s a promise to pay you back. And that promise is only as good as the paying ability of that company. So, I think that’s bonds in a nutshell, if you try to break it down to its simplest form.


Marc Killian: Yeah, you’re loaning the company money, right? You’re lending them money versus as a stockholder you’re buying a piece.


John Teixiera: Correct.


Marc Killian: Yeah. Okay. Nick, what’s the difference between a bond and a bond fund? So, like an individual bond and a bond fund? Because most of us wind up with bond funds and we’re maybe not totally sure what it is we have, we just say, “Oh, I have some bonds.” But what they really have is a bond fund.


Nick McDevitt: Yeah. The reality is the difference as far as how it affects a typical investor is the important part to understand. So, with bond prices and interest rates having an inverse relationship, so again, if interest rates go up, bond prices go down, then the issue that somebody that has invested in a bond fund has is it’s a pool of bonds. And so, you’re relying upon the manager of that bond fund to manage the buying and selling of those bonds while trying to protect the value of your account and gaining interest. So, sometimes the easiest way to guide people through this, and obviously we’ve been having this conversation quite a bit lately with people, especially with how we’ve invested in fixed income in the last few years, is that if you own an individual bond, you have the ability to hold it until maturity. And when you hold it until maturity, you then receive the par value back. And this might be a little bit too much detail, but we’ll try to give people a good understanding of this. So, oftentimes people get confused with the difference between the initial issue of a bond and then when it trades in the secondary market. So, when a company initially issues the bond, that’s when they are receiving the loan basically, or the money from whoever purchases that bond initially. So, when they sell the bond, the bond sells for $1,000, there’s a promise to pay that the company issues with the bond as well as, “Hey, in the meantime we’re going to pay you an interest or a coupon.” So, let’s just say it’s 3%. So, company A, we’ll call them Apple, Apple issues a bond in 2020 for five years and they’re going to pay 2% over those five years. And as long as whoever holds that bond at the end of that five years, no matter what they paid for it, they’re going to get $1,000 back. That’s the promise.


Marc Killian: Okay.


Nick McDevitt: So, we’ll say John bought that bond initially, but two years into it he decides, “Hey, I no longer want this bond, I’m going to go ahead and sell it.” So, because of the market situation and what’s going on in the market, that bond in the secondary market, because interest rates have gone up, even though he paid 1,000, he can only sell it for 900, because that 2% coupon rate isn’t competitive.


Marc Killian: Right. Yeah.


Nick McDevitt: So, let’s say he sold it to me and I bought it for 900. So, I got a discount like, “Hey, I’m only getting 2% so I’m not going to pay less, so I’m going to get a discount.” And now my goal is I’m going to hold that bond until the end of that total five year period and I’m going to collect that 2%, but I’m also going to get the extra $100 on top, which makes my return, my overall return, my total return higher. So, the difference is that when people, as an individual, when they own those bonds individually, they have more control over holding that into maturity and essentially getting their par value back while collecting their interests in the meantime versus when it’s in a bond fund, that performance is strictly going to take place dependent upon how it gets managed. And we know obviously it’s confusing and it’s always a tricky spot of trying to help people understand and giving what might be too much information. But with this, I think a lot of times it’s the more you know, the better it is to try to understand it.


Marc Killian: Yeah. And we’re going to talk a little bit more about some normal things that we’re used to thinking about or hearing and how it messes us up a little bit. And John mentioned earlier, he is like, “Yeah, if you’re getting into a bond right now, higher interest rates, they look a little bit more appealing than someone who bought maybe a year ago, as the rates were down lower.” And to your point, you said the inverse reaction. I was always taught, an easy way to remember it is when rates are high, bonds die. So, little rhyme, helps you remember it. So, when rates are high, bonds die, because the value. Right? So, they have that inverse reaction. That’s just a good way to think about it. So, John, a lot of people consider them to be the safer, conservative part. I want to jump to the standard 60/40 for just lack of a better term. Right? We’ve grown up with this thing of when the market’s rough go to bonds, right? As you get older, go to bonds, because it’s a safer option and we feel as though it’s that safe, conservative part of the portfolio. Do you agree with that approach normally? And what’s your take on it this year when it’s also having a lot of trouble?


John Teixiera: Yeah, normally I’d say that you’re correct. Yeah, normally that is how it works. This year it’s a little different obviously with the Federal Reserve really trying to hedge against inflation. So, they have been aggressively raising the rates. So, that’s where you’re starting to see these bond values drop drastically. And I don’t know the exact number, but I think year-to-date we’re almost negative 10 to 15% in the [inaudible 00:07:35] bond index.


Marc Killian: Yeah. It was close to 15, last I checked.


John Teixiera: Yeah. That’s actually what’s happening in people’s portfolios where if the market was down, they have at least a bond portion that’s level or maybe down a little bit or up a little bit. But right now it’s like, hey, you’re getting two sides of it where they’re both getting hammered. This is where it’s important, and Nick mentioned, how can you mitigate that risk? And you can do it, it’s just a matter of structuring the portfolio and getting the right type of investments to understand, “Hey, in this type of environment, this is where I want to be.” So, it really comes down to, again, this is your investment plan. Like, “Hey, what’s your investment plan to mitigate this type of environment and how do you take some of this risk out of your portfolio?”


Marc Killian: Yeah. Nick, back to you, and the question I asked you a minute ago, people say, “Well, individual bonds themselves may not still be a bad option right now in this current bond environment, but it’s the bond funds that tend to be taking a bit more of an issue.” And to your point, you mentioned, actually maybe it was John who mentioned them being a pooled investment, but either way, right? And that bond fund manager, whereas an individual bond may still be an okay option. So, that’s really where you need to talk with your advisor or have an advisor to find out if you’re thinking about bonds, what’s the right avenue to go? Am I on track there or is that incorrect?


Nick McDevitt: Yeah. To a certain extent, for sure. And another thing that happens, one of the things that we’ve integrated into clients’ portfolios, and we did it a few years back, was bond ladders. So, exchange traded funds that hold bond ladders that mature at a set maturity date, so that way we can still use a pool of investment that’s a little bit more efficient to buy and sell, and we know when the maturity data is going to be, so we can act accordingly and adjust accordingly. So, there’s always this give and take, but using instruments like that, using individual bonds, are absolutely ways to take a little bit more control in the space and have less of a negative impact on the overall value of your portfolio.


John Teixiera: Yeah. And to jump in with what Nick’s saying there-


Nick McDevitt: Sure.


John Teixiera: … I think it comes down to ownership. When you have a bond fund, you don’t actually own those bonds, the fund does, you own a piece of the fund, but when you’re talking about individual bonds or this basket of bonds, that’s where you technically have ownership of that. So, you can control when it’s bought or sold.


Marc Killian: Okay. Yeah, that’s great information. Thanks so much for sharing that. So, guys, anything else that I might have missed on the bond, what we need to know area? Either one of you, feel free to jump in with something.


Nick McDevitt: I think from the perspective of overall for investors and just understanding in general the space that we’re in, one thing that we’ve done even recently is we’ve started to add in some shorter term CDs for clients, because that helps them get a decent rate of return because those rates of returns have gone up and it lets them stay a little bit more flexible with where we expect rates to go, which we still expect some increase on them in the next six to 12 months, where they can then stabilize a little bit. But just like anything else, it’s important to have … Different aspects of your investments have different jobs, and bonds and fixed income still play a necessary role. And realistically for people that are retired or are going to be retiring soon, a lot of the pressure on portfolios for the last 10 years has been all on the stock market because you really couldn’t get any returns on the fixed income side. So, now at least, hey, we can get four to 5% a lot easier on fixed income, which will help to generate returns and income for people, which it makes it a little bit easier for us to get a little bit more conservative in portfolios, which has been much more difficult over the last 10 years. So, there’s a little bit of a silver lining in here and as we adapt to a new normal like we always do, there will be positive to it. But when you’re in the midst of it and going through it, like we have this year, it can be difficult.


Marc Killian: Yeah, no, and that’s why I wanted to talk about it because again, we were taught this traditionalism and if you’re doing things on your own, you’re thinking, “Hey, I’ll just jump over to bonds, while the market’s been so rough this year after,” to your point, “the market being fantastic for the last 10, 12 years.” And it may or may not be a good move. Right? So, that’s just why, understand the basics, or maybe a little bit more than the basics, and then make sure that you’re having a conversation with an advisor. Bring somebody into the fold, especially if you don’t know what you’re dealing with, because there’s a lot out there in the bond arena. So, good stuff. Thanks for sharing on that, guys, I appreciate it. Again folks, if you’ve got questions and need help, jump on over to the website, book some time with them, reach out to them, let them know you’ve got some questions around bonds and how it works or what you’re thinking about doing, or strategy, conversation, questions, whatever that might be. And get some time with the guys at pfgprivatewealth.com. That’s pfgprivatewealth.com. A lot of good tools, tips and resources. You can send a message into the podcast. Like I said, you can schedule time to talk with the guys. Lots of good stuff there. So, pfgprivatewealth.com. And we’ll wrap it up with an email question again this week here on the podcast, Hoover wants to jump in on this, totally fine. Wendy had a question. She says, “Guys, our 401(k) plan at work now has a Roth option for available future contributions. Should I take advantage of that?” I’m curious too, guys, because actually my wife, they just offered that to her actually. She just got the paperwork I think about three days ago. So, what’s your thoughts on 401(k) Roth options?


Nick McDevitt: The annoying answer is it depends. The reality is that most likely it does make sense to take advantage of it. Some people cannot make contributions to regular Roth IRA accounts because the income is too high. So, this is their only way to be able to make contributions. Our feeling in general is that the more options you have from income sources in retirement, the better. So, especially if you don’t have any Roth funds built up or if your pre-tax funds are substantially more than your Roth funds, it’s a good idea to integrate that. And so, one thing that people have done to just start it, so as an example, let’s say that somebody’s contributing 10% of their income and maybe their company matches 4%. Okay? So, the match that a company puts in is always pre-tax. So, in reality, if they’re doing 10 and they get a 4% match, 14% of their income is going into pre-tax money. So, maybe you say, “Hey, out of my 10 I’m going to make it 4% Roth to match the match that they’re getting. The other 6% is pre-tax, and now it’s like 10 and four.” That could be a good place to start. And then maybe build it up where some people say, “Hey, each year when I get a raise, I bump up my contribution by a percent or 2% and try to build it up to make it match, until you’re maxing out.” But absolutely, building that up to build up some Roth funds for yourself is a good idea.


Marc Killian: Yeah. The limits, so if you think about a traditional Roth IRA, there’s earnings limits, right? You can only make a certain amount, I think it’s 144,000 for individuals, 214, somewhere in that neighborhood, I think, for married couples. And they change it all the time, but I think that’s ’22. But with a Roth 401(k) at work, there is no income limit. So, if she makes more than that, for example, she could still put money in.


Nick McDevitt: Exactly. Yeah. But you don’t have to deal with that income limitation anymore, which is great.


Marc Killian: And it’s a newer piece too, John, right? Not every company has this option yet, so they’re starting to come on more and more though.


John Teixiera: Yeah. Yeah, it is a newer piece. I’d say the majority of companies we run across now do have them.


Marc Killian: Okay, good.


John Teixiera: But I’d say we do run across some that still don’t offer it, but it’s catching on pretty quick because a lot of people do like that option.


Marc Killian: Yeah, for sure. So, I think definitely to answer the question, just make sure that you’re double checking, check the various different limitations. If you don’t have a professional you can bounce those questions off, certainly, hopefully the guys gave you some thoughts there. But you can always just call, reach out, and get a little bit more in-depth if you have some of those Roth 401(k) questions versus a Roth IRA, and those questions too, as well. But reach out to the guys, don’t forget to subscribe to the podcast, Apple, Google, Spotify, all that good stuff. It’s Retirement Planning – Redefined with John and Nick, and you can find them online at pfgprivatewealth.com. Guys, thanks for your time. As always, appreciate, have a good close out to the holiday season as that’s upon us, and we’ll see you guys next time here on Retirement Planning – Redefined.

Ep 54: Warning Signs: How To Spot Problems In Your Financial Life

On This Episode

Just like the lights on your dashboard can indicate if something is wrong with your car (like low tire pressure or leaking oil), there are indicators in your financial life that might point out that you have a problem that needs to be addressed.

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Check out all the episodes by clicking here.



PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Marc: Welcome in to another edition of the podcast. Thanks for tuning in to Retirement Planning Redefined with John and Nick here from PFG Private Wealth to talk with me about some warning signs, how to spot problems in our financial life. The years winding down, getting into the new year. It’s maybe a good time to have the radar out looking for things that we are doing maybe incorrectly that we can improve. If you got a warning light on your car, you’re probably going to take it in for service. So maybe the same thing financially speaking. What’s going on guys? John, how you doing my friend?


John: Hanging in there, getting ready for the holiday season.


Marc: That’s right.


John: Thanksgiving is next week, right? So yeah.


Marc: Yeah.


John: Doing all right.


Marc: The time we’re taping this, yeah it’s upon us. Nick, how about you my friend?


Nick: Rough couple weeks for Bill’s fans, but besides that, doing pretty good.


Marc: Overall though they’re still pretty stout, so.


Nick: Yeah.



Yeah. But it happens. It happens. Well,


John: Well the Bills kind of do this every year where they kind of, last year they did it too. They like a two or three games stretch where they just kind of lost focus.


Marc: Yeah. Yeah, yeah. They’re still young too, right? So be a lot too.


Nick: Still painful.


Marc: It is painful. This is true. Hey man. Lions, that’s all I’m going to say. Every time. Although two weeks in a row and we beat the Packers. I’ll take that any day of the week so.


Nick: We play you guys on Thanksgiving.


Marc: Oh well, I’m sure it’ll be a slaughter then. Poor Lions.


Nick: Let’s hope so. Let’s hope so.


Marc: The poor Lions. I just have no faith anymore after 30 years. Well anyway, let’s get into warning sign, right? There’s a warning sign right there that maybe I should move on. But let’s talk about a couple different things. Yeah, this is a pretty big one, this first one actually. So many people are getting ready, as they get ready for retirement, maybe they come in to see an advisor for the first time and they truly have no idea what it costs to fund their lifestyle. That’s kind of a big red flag. And I think many people come in to see folks like yourself the first time. They also kind of undershoot that number. Right. Oh, it’ll only take us three grand to fund our lifestyle. And you start digging in, you’re like, no. So they have no idea.


Nick: Yeah. Yeah. Usually the most painful process of the planning process is digging into the expenses and figuring out what that looks like.


Marc: Right.


Nick: The thing that we try to really emphasize and harp on with people is that it’s one thing to being able to, because there are a lot of people that say, Hey, I save X amount of my money. We’ve got some savings in the bank. And then we don’t pay attention really. And we carry some debt here and there, but we’re usually able to pay it off at a certain point and stuff like that. And it’s like, okay. So from a lifestyle standpoint, as they’re working, it’s not a huge factor. The problem is that when we don’t know what that is and we carry it over into retirement, not understanding what’s being spent and then it makes it really hard to create a plan and to figure out, hey, when you’re going to be able to comfortably retire, things like that. So just so many other things, taking inventory, understanding what numbers we’re dealing with and then trying to make adjustments from there is really important. Because we joke with people, we’re not the money police, but it is important for us to get a good understanding of where things are going from a money perspective so that we can help you plan for the future.


Marc: Yeah, definitely. And you got to have a good grasp on what it truly costs and most of us just wind up not doing that. So again, the big warning sign, if you truly don’t know what that is. John, maybe another warning sign is focusing on that magic number. Right. We’ve heard it for years and most people kind of do the million dollar thing and just use that because it’s easy. But that might be a warning sign. Why are you so hyper focused on a specific number if it maybe takes less or more?


John: Yeah. That’s 100% accurate. And I think that, I forget what company it was that came out with that commercial. What’s your number and what’s your nest egg number or your goal? And I think people got fixated on that. And it’s not necessarily what is your goal from a nest egg standpoint. It really should be what is your goal from an income standpoint so you can fund your lifestyle and how long can that income realistically last? So when we do planning, it’s a matter of hey, like Nick said, we look at, hey, what’s your lifestyle? How do we make sure you continue that and where are the assets? Where’s the money coming from to produce that income going into retirement? Because you can build up as much as you want, but if it’s not giving you income that you feel comfortable with, you’re going to not really hit your goals and stuff you want to do into retirement.


Marc: Yeah, yeah. You have a million dollars, right, and then you find out that 700,000 would’ve done it and you worked three years too long or you need $2 million and you stop too soon.


John: And things to consider, and actually we’re in an interesting time period now with this, is that the interest rate environment and also inflation kind of determines what your lifestyle is going to be because your nest egg could be with interest rates going up, it actually helps you a little bit more from an income standpoint. But with inflation happening, it’s kind of deteriorating your spending power.


Marc: Yeah. Yeah.


John: So long story short, there’s a lot of factors that go into this, which is why it’s so important to do planning versus hey I need to get to a million dollars because what does that even mean from an income standpoint?


Marc: Yeah, exactly. And the eight and a half, yeah I don’t care what the government official number is, but use your wallet when you go to the store and various things. It’s a lot more than that in many aspects of life to that inflation conversation. So it might be the official number, but I don’t know, I think milk’s like 50%, so milk’s a whole lot more. All right, mental image guys of what your parents did. It’s as easy for a lot of people. I’m a Gen Xer, so my dad wasn’t retired long, but I think back on it and I’m like, I don’t think he did any retirement planning. So it kind of worked out so great. I mean I could see people doing that, right? Well my parents really did very little and they seemed to be fine, so I’ll be fine. That’s not really the best idea to go off of because I don’t know how his financial life was completely different than what mine is 35 years ago.


Nick: Yeah. And the reality is, is that that generation, for the most part between their focus was with their parents coming out of great depression, things like that, it was paid down your debt. It was a much less expensive, even adjusted for a lot of different variances of inflation. Less expensive to own a home and they paid off their debt, they had social security, they had pensions and very much lived within their means. Lifestyle and consumption weren’t really kind of the name of the game back then. And so it’s just very different. So they went from having a certainty of income via their pension and social security to now people have to save money in a 401ks, need to learn how to generate income from that. We just went through a 10, 12 year period where as John just kind of referenced good luck getting any sort of return on any sort of fixed or conservative type of investment. And so it was just much more difficult. And that doesn’t even factor in the longevity aspect that we have to deal with. How much more expensive healthcare is.


Marc: Right. Yeah.


Nick: All these different things.


Marc: Yeah. No, it’s easy to do, right, especially if you’re doing the procrastination thing, you can kind of talk yourself into anything, but probably not the wisest thing to do. And again, that’s the whole point of the podcast is how to spot some of these warning signs in our financial life. Getting worked up about the current events? Man, I get this one too. How do you not, right? I mean at the time we’re taping this, it’s even crazier. I mean we’ve got all sorts of things, the market volatility, the election cycle being over, but still problematic. Bonds are down because of the interest rates. We’ve got still conflict thing. It’s hard not to let current events affect how you feel about your portfolio, but that’s also dangerous time for jumping in and just saying, well I’m going to make a change because I feel like I have to versus making sure that you have the right strategy.


John: Yeah, the media doesn’t do us any favors.


Marc: Oh gosh, no. Yeah.


John: With how they portray things and definitely,


Marc: It’s the sky is falling [inaudible 00:08:16].


John: The sky’s always falling. I think they obviously realized that negative media kind of grabs more eyes and more clicks. So that’s what they focus on. This is really where you want to always go back to the plan. And if you don’t have a plan, highly recommend you get one. So I’ll use COVID as an example. That one month period where the market was dropping significantly, the fastest drop potentially ever over that three week span, when Nick and I were doing quite a bit was when we were doing reviews with clients, we would look at the plan and say, hi, how does this affect your plan? Are you still on track? And when they would see that they were still good, the fear kind of went out, like okay, I kind of took that punch and I’m still doing okay. And then it helped them make better decisions and not having any knee jerk reactions. And I’ll say, I’m having the kind of same experience here. We’re doing reviews, obviously a lot of stuff going on, markets volatile. And we look at the plan and the plan still looks solid. People are like, okay, that’s good to know. I’m glad to hear that I’m still on track and this hasn’t affected my lifestyle going into retirement.


Marc: Yeah.


John: I think that’s what most people want to know is, hey, is all this stuff going to affect me? And if it does, how do I adjust to that?


Marc: Well people are kind of pleasantly surprised to find out it’s not been as bad as they thought. But it also depends on how your allocation was set up. It depends on how you were weighted your portfolio. Because 21, right, these two years back to back are pretty interesting, right? 21 was majorly up, 22 is all over the map and down. Right. Anywhere between 15 and 30% depending on the indices. And so there’s like, there’s just kind of this wide spectrum there and if you were heavily weighted in tech, then you’re taking a bigger beating than someone who wasn’t, right? So that’s all part of the game. It’s all part of how you’re strategizing and that’s why you’ve got to get these things done, working with a professional to help you through it. Last one, financial warning sign, the nursing home, long term care conversation, however you want to put it, kind of doing that. Well, almost like the parent thing, well it wasn’t a big deal. It probably won’t be for me or we’ll take care of each other or the kids will pitch in or that kind of thing. It’s just going to kind of naturally work itself out. It’s probably a big warning sign. Somebody mentioned longevity earlier in this conversation, right? That’s going to add to it.


Nick: Yeah. This is as far as the cost of healthcare in retirement, including whether it’s assisted living or nursing home facility care, it’s a really tricky one because obviously those costs have gone up substantially. It’s become more and more difficult for those that want to try to use insurance to help with it. Whether it’s a traditional long-term care or some sort of hybrid policy that’s become kind of a cesspool of space where it’s very difficult to find something. So it is difficult, but just like anything else, factoring it into the plan and understanding that hey, these expenses may be coming down the road and just making decisions, whether it’s with legal documents and or how you save your money to just try to plan for as many scenarios as possible is really important.


Marc: Yeah, definitely. You can’t just put your head in the sand. We are living longer, the costs continue to go up. They’re typically outpacing normal inflation. I hate to even think of what some of the numbers might be right now. So just don’t put this stuff off. Make sure that you’re thinking about these, looking and identifying these potential warning signs moving into a new year, especially moving into the new year. Take some action, start getting some things done. That’s going to do it for the main section of the podcast. We’ll finish off with an email question that has come in as well. And of course if you’ve got questions, need some help, stop by the website, pfgprivatewealth.com. You can find a lot of good tools, tips, resources, you can subscribe to the podcast, all that good stuff at pfgprivatewealth.com. And we’ll finish off with a question from a Charlotte who says, “Guys, I’m 60 years old and I’d love to retire and I think I can, but it seems like of course everyone I know waits till 65, 66, somewhere in that neighborhood. Is early retirement a bad idea?”


John: Yeah. Charlotte, I think one thing you got to realize is you want to look at your own situation. So whether it’s good or bad isn’t depending on somebody else, it’s really up to you. We’re talking about the nest egg and the income and lifestyle and the question really comes down to does your income sources going into retirement and nest egg allow you to retire at 60 to maintain your lifestyle till when the planning ends, whether that’s age 90, 95, or 100.


Marc: And she thinks she can, so why not? Instead of think, right, how about no? Right.


John: Correct. Yeah. If you think you can do it and you’ve done a plan that looks solid, definitely you don’t want to miss out on some fun years, especially earlier in your 60s when you can do more stuff.


Marc: Yeah. But if you just think or how certain are you, right? So do you have a plan or is this something you’re back of the napkin kind of thing? Are you kind of guessing this out? And I think the other piece in this, John maybe is did she take into account, hopefully she did the five year gap before she can get Medicare?


John: Yeah, that is the biggest thing. And that’s why we see a lot of people that hold off on retirement til 65 for that.


Marc: Yeah.


John: So when you’re doing your planning Charlotte, you want to make sure that you’re budgeting for independent plan, whether it’s through a specific company or the marketplace, whatever it is, you want to budget that into it and make sure you’re getting good insurance coverage because you never know what’s going to happen.


Marc: Yeah. Is early retirement a bad idea? Probably. I mean, no, it’s not a bad idea. It’s a bad idea if you don’t have a plan and can’t do it. Right. If you’ve got everything you need, then it’s a great idea. So that’s the importance of a plan. That’s the importance of strategizing. And that is why we do the podcast. So if you need some help, it is Retirement Planning Redefined. Reach out to John and Nick and the team at PFG Private Wealth at pfgprivatewealth.com and we’ll catch you next time here on the podcast. Don’t forget to subscribe on Apple, Google, Spotify, all that good stuff. And we’ll see you next time. For John and Nick, I’m your host, Marc. We’ll talk to you next time.

Ep 53: Getting It Right: Irreversible Financial Decisions

On This Episode

There are plenty of decisions that you’ll make in the retirement planning process that can’t be undone, so you want to make sure that you make the right call. On this episode, we’ll explain why these decisions are so important and can’t be undone.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Speaker 1: Back here for another edition of Retirement Planning Redefined with John and Nick once again, joining me to talk about getting things right the first time. There are some irreversible financial decisions or close to it in retirement and there’s plenty of things we’ve got to deal with. So we want to make sure we get it right as often as possible, right out of the gate, because some of these things just cannot be undone. So you guys being in Florida, mulligans, everybody plays golf. Mulligans are a thing, for sure. You didn’t see that? Some mulligan, its a give me. Let me do it again, kind of thing. But there’s things in retirements that you just got to get right the first time. So that’s going to be the topic this week. Nick, what’s going on, buddy? How you doing?


Nick: Good. Good. Staying busy.


Speaker 1: Yeah. Keeping rocking and a rolling. John, how you feeling my friend?


John : I’m feeling good. I’m feeling good. I’m looking forward to this topic. I’m actually a couple of weeks out from finish some construction in my house and I wish that the original builds and plumbers got it right and knew how to glue some pipes that wouldn’t have caused a leak down the road. But anyhow,


Speaker 1: Yes.


John : Looking forward to getting that construction done, so.


Speaker 1: Yeah, I tell you what, that’s a great point. Right. So we all want people to do their job right the first time. Certainly when you hire someone, that’s what you expect. But these are some decisions that many people do to themselves because so many people DIY retirement. Right. One of the benefits to turning to financial professionals like yourselves is to get these things right so that you don’t have to worry about having these issues that can’t be undone. So let’s walk through a few of these. We’re going to start with a biggie. Again, there’s a little caveat here, but for the most part, once you turn on social security, it is what it is. So you have to be sure that you’re, especially if you’re activating it early, that this is what you want to do. There technically is a do over, but most people don’t really go through it. So kind of explain if you will guys.


John : Yeah. So this is a big one because social security equates to roughly 30 to 40% of kind of average households retirement income going into retirement. So it’s important. And Nick and I, everything we kind of say goes back to the planning and this can’t be stressed enough because once you start taking it, let’s do over for the first year out of it, that is what it is. And I’ll kind of use an example of a client that we had where she was a survivor and she wasn’t fully aware of her options and the strategies she could use. And just luckily she was referred to us right before she started taking social security. And I don’t want to go too much into details, but basically the strategy that she was just going to take initially, I mean would’ve cost her a lot of money down the road. So we simply had to basically call social security, stop the payment and redo the strategy. But again, by not really having a game plan, she could have cost herself a lot of money down the road. And this doesn’t happen just for survivors. It’s anybody, whether it’s your taking your own benefit or divorced, things like that. So there’s a lot of things to evaluate when you’re taking social security and when’s the best time to take it.


Speaker 1: Okay. So and again I mentioned the fact that you can pull it back. Right. You have what one year. Nick is that right, correct? You have one year.


Nick: Yeah. So essentially the rule is that if you begin your social security benefits, you have 12 months to essentially reverse your decision that you started receiving benefits. You have to pay the benefits that you received back and then you can defer it again as if you never took it. So years ago, you used to be able to do that over a much longer period of time. And then the Social Security Administration caught onto that and they restricted it to a 12 month period.


Speaker 1: And let’s be honest. Most people, the reason doesn’t get really used very often is who wants to do it. Most people don’t want to, as soon as they hear, well, you got to pay the money back. They’re kind of like, eh, so I don’t want to do that. Right. So,


Nick: Yeah.


Speaker 1: [inaudible 00:03:57].


Nick: Yeah, it’s a tricky thing.


Speaker 1: Yeah.


Nick: It’s like we’ve had some clients inquire about this recently and their sub full retirement age, so sub 66 or 67 or somewhere in between there and in instances where, because where the confusion lies for a lot of people is they want to continue to work maybe, but shift to part-time.


Speaker 1: Yeah.


Nick: And they don’t realize that the part-time income is still in excess of the amount that they can earn without any sort of penalty, which for most people is around $20,000 for the year.


Speaker 1: Yeah.


Nick: And when you start to factor in the fact that you’re permanently locking in a lower benefit plus running the risk of having a penalty on top of it for the rest of your life, it’s not ideal. So,


Speaker 1: Right.


Nick: That’s definitely a major decision and something that we like to model out and test out for people.


Speaker 1: And again, so technically there’s a caveat to undo in a very limited window, but it’s just best to get this right the first time, because for all intents and purposes, it’s irreversible. You just don’t want to go down that path. Same with the spousal benefit situation here on a pension, should you be lucky enough to have one. Once you select this, I don’t believe there is any do-overs on this. It is what it is.


Nick: Yeah, that’s correct. This is definitely a topic that we go through in the classes pretty in detail. Years ago, it was a lot easier for people to mess this decision up. It still happens sometimes, but it’s less common because oftentimes the spouse has to sign off on it. But the reality is that having a really good understanding of what sort of survivor benefit you’re going to choose, if you are eligible for a pension through your employer is a major, major decision and something to take into consideration. And one thing to throw in here too, for those that live in the state of Florida, oftentimes the projections that they send you or that you can access easily online, I should say are options like one and two or A and B. And there are two other options that are oftentimes better options and you usually have to request those. So we’ve seen that be a mistake that people have made only thinking that they had two options when there’s actually four.


Speaker 1: Gotcha.


Nick: So that’s something and it’s important to know.


Speaker 1: Okay.


John : And what Nick’s referencing there is the Florida pension plan, the state pension plan.


Speaker 1: The state. Okay. Got it. Thank you. So John, what about life insurance? What is the kind of the impact here? Irreversible financial decision, somebody might say, well, can I just cancel it or whatever, right, kind of deal, but what are some important points to know when it comes to this?


John : Yeah. So when you’re doing planning, one of the things we look at is we start with the need for life insurance. And that really depends on dependence and some other factors, but it’s easier to get when your younger. So that’s one thing we take a look at and there’s different types of policies that allow you to convert. And not to get too much into the weeds, but the older you get, some health issues might come up where you can no longer get it. So that’s where it becomes very important to understand, Hey, is this something I really want to have down the road and does it work in my financial plan? And if it does, the sooner you can get it the better because things come up as we all know. As you get older, health issues come up. So you want to get it right the first time.


Speaker 1: And that’s where you could run into a problem, right, especially if you wait too long and then a diagnosis happens, then it could either make it impossible or certainly incredibly costly.


Nick: Yeah. Especially, we joked a little bit in the last podcast about John and I hitting 40 this year. And the reality is, is that I know, I know. Everybody I’m sure is shedding a lot of tears.


Speaker 1: A lot of our listeners are like 40. I would trade with you in a minute.


John : Let’s see, 40 back surgery this year. It’s a good year.


Nick: Yeah. All of a sudden I got tendonitis in my arm and my shoulders all messed up.


Speaker 1: And right now you have listeners going, I’m going to go in and slap him.


Nick: I know, I know. But the key, the point with this whole thing is that some of these things, maybe not some of the things that John and I talked about, but maybe a type two diabetes or some sort of health issue that pops up where it doesn’t in reality, necessarily in most people’s mind affect what your life is going to be like. It could have an impact on what life insurance is going to cost for you.


Speaker 1: Yeah, exactly.


Nick: And so you pay for it out of your bank account, but you qualify with your health. And so usually the sooner you can lock in any sort of coverage, the less expensive it is and that’ll pay off over time.


Speaker 1: No, you’re exactly right. I mean, we’re coming up, we were joking about this, but to really drive home your point, we’re coming up on the 10th anniversary for me of my open heart surgery. I was 41 years old. I didn’t think anything of it. And so it made it really difficult to get life insurance or get some different kinds of insurance once I had that happen. So I monkeyed around and waited too long. Right. And then I was like, well, I didn’t know this was coming. Now luckily it was more lifestyle and things. So after enough of a time period, I started to eventually get some offers, but it is more expensive. So it is important to definitely have this stuff in place if you can, sooner than later, because again, it makes the financial impacts pretty great. So definitely keep that in mind as well. And then finally, choosing a retirement date. We debated on this one, about throwing this on the list because people would definitely can argue and say, well, sure you could change your decision on this. If you pencil in a date to actually retire, you can just move it around as you need to. But if you want to take it that a step further, depending on how you want to go, if you’ve given notice at a position, maybe not, right, it may be something you can’t undo that. So just talk to me about the impacts of just either penciling in, choosing a retirement date to actually walk away just from different pros and cons.


Nick: Yeah. I can jump in on this a little bit. This is something where in reality, I think what we found is maybe a specific date is necessarily the key or the thought process, but understanding the range that you’re looking at and understanding what sort of cost you might be incurring if you do retire early. So for example, if your somebody that has saved and done a good job of that and is looking to retire early, call it maybe 62, understanding the impact of how much lower your social security benefit is, understanding what sort of costs you’re going to have when it comes to premiums for your health insurance. So as an example, we’ve got clients that are paying, some clients that are paying between eight and $10,000 a year for health insurance premiums per person, when they were used to while they were working, paying closer to three to $4,000 for the household. So that’s something that can have an impact on that retirement date, where maybe you’ve been thinking in the back of your mind, Hey, I’ve got a good nest egg. I’m just going to plan to go a little bit early, but didn’t quite realize the expenses associated with it. On top of that, from a planning perspective, we do have other clients that they knew that they were going to retire early. And so we put strategies together for leading up to retiring early. They were able to save some extra money into non-qualified or non-retirement accounts. And by taking their income in the first few years of retirement, out of those accounts, it allows them to qualify for certain subsidies for health insurance, which brings their costs down. So again, when we have clarity on what the goals and the objectives are in the financial world, there’s usually ways that we can plan around it and try to optimize it. And so having a good idea of what that looks like and the impact of the fallout from that goal and then planning around that, it allows us to be more strategic.


Speaker 1: All right. So obviously there’s lots of little things in there where again, you could make the argument that you could move some of these things around, but ideally we want to get it right the first time. And often, as I mentioned earlier, excuse me, when we’re doing it ourselves, we don’t know a lot of these little things, a lot of a little caveats and whatnot. So we want to get it right the first time. And that’s where working with a professional really comes into play. So if you got questions, you need some help as always make sure you’re checking with a qualified pro before you take any action on something here on this podcast or any other, you want to make sure that you’re seeing how it reflects and affects your specific situation. So stop by the website, pfgprivatewealth.com. That’s the home for the team, pfgprivatewealth.com. You can subscribe to us on Apple, Google, Spotify, iHeart, Stitcher, all that good stuff. Retirement Planning Redefined is the name of the show. You can look it up on those apps if you’d like, or just stop by the website again, pfgprivatewealth.com. We appreciate your time here on this week’s podcast. We’ll see you soon for another edition of Retirement Planning Redefined with John and Nick from PFG Private Wealth.

Ep 52: Retirement Planning From A Psychologist’s Point Of View

On This Episode

We always talk about the money side of financial and retirement planning. But what about the mental aspect of that big life change? Today we’ll break down an article written by a Licensed Professional Counselor (Kate Schroeder) for Psychology Today, titled The Psychological Investment In Retirement.

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Check out all the episodes by clicking here.



PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Speaker 1: Welcome into another edition of Retirement Planning Redefined. Thanks for hanging out on the podcast with John, Nick and myself, as we’re going to talk about retirement planning from a psychologicalist… Can’t talk, from a psychologist point of view. Say that three times fast. What’s going on, guys? How’re you doing this week?


Nick: Pretty good. How’re you doing?


Speaker 1: Apparently I can’t talk, but other than that I’m doing all right. What’s going on with you, John, my friend? How’re you feeling?


John: Pretty good. I think last time we spoke, I don’t know if I mentioned in the podcast, I was getting ready for kind of lumbar spine surgery. So, four weeks out and feeling pretty good, so everything went well, as far as I can tell and looking forward to rehabbing and getting back to normal.


Speaker 1: Good. Good to hear. Nick, my friend, I think we’re taping this just before the beginning of September. You and I are, I think John is too, football fans for sure. And so, it’s just around the corner. By the time we drop this podcast, it should be out. So, looking forward to the new season?


Nick: Oh yeah. Yep. Bills are opening up this season next Thursday night, so [inaudible 00:00:57] I’m pretty excited about that. Yeah.


Speaker 1: Very good. Very good. So good. Well, that’s always a fun time of the year for a lot of sports fans, so they’ll be happy to have that back. But let’s talk about, and I guess if you want to think about that analogy for a second of sports fans, we get kind of… Lots of people, sports fans get pretty depressed when the football season ends or whatever season it is that they’re into, sport they’re into. And then they get rejuvenated when it gets closer. Well, if you think about this from a retirement planning standpoint, a lot of people get pretty stressed, clearly, it’s a big difference, I understand, but I’m just kind of using that as an analogy to when it comes time to making that shift from working into actually being retired. So, there’s these big mental hurdles, if you will, to major life changes. So, we’ll put the link in the show notes as well, but we’ll break down this article written by a licensed professional counselor, Kate Schroeder, hopefully I’m saying that right, for Psychology Today and titled The Psychology of Investing for Retirement… Excuse me, The Psychological Investment of Retirement. As I mentioned earlier, I can’t talk today. So, let’s talk a little bit about this because, Nick, I know you got a little bit of a story to share along the lines of this as well, but a lot of people don’t consider, and this is kind of the first key point, the consequences of what that transition looks like when they walk away from something, the routine, the definition maybe, whatever term you want to put to it, that their life has had for a number of years, and they go into retirement. It’s a big, big hurdle for people.


Nick: Yeah. We’ve had a bunch of clients retire recently in the last couple of years, my parents have retired recently, so I see it a little bit more on the personal side with them and the transition for people, especially during a time we’ve had the last couple of years during COVID, post-COVID, people typically need purpose and structure. And so, for those that are not used to having that extra time, or maybe they weren’t self-employed, or maybe they got up and went to the office every day, they had that redundant kind of structure that at times, I’m sure they didn’t like, but maybe didn’t necessarily realize how big of an impact it had on kind of their overall life and their planning. Having all that extra time and having to find ways to fill that time and not kind of have it just turn into a black hole of sleeping in, just maybe watching TV, watching the news, doing things that aren’t necessarily healthy for you, or kind of keep your mind sharp and going. The feedback that we’ve gotten from quite a few people is that that transition has been a little bit more difficult than they expected.


Speaker 1: For sure. John, the author goes on to point out that the number one thing retirees struggle with is finding something consistent and kind of genuine or lasting in what they’re moving to. So, we need purpose as people, we need to find something that, I don’t know, makes us want to get out of bed, so to speak.


John: Yeah. Yeah. I would a hundred percent agree with that. I think finding something that has meaning to you or someone else, or really, I would say just helping people. I think what I’ve seen a lot of people where they’ve struggled with that, it’s like, “Hey, what do you enjoy doing? What can you do to help some other people or even family?” So, I’ve found a lot of people get fulfillment from that. So, whether it’s finding a charity that you’ve kind of probably, maybe want to participate in and never had time to, at this point, it’d be a good time. I’ll use my parents as an example, they watch my kids two to three days a week and that kind of gives them some consistency and purpose. It’s funny, my dad will actually… They’ve been retired for a little bit, but I can tell when he is getting bored, when he calls me up and he’s like, “Anything you need to be done around the house that I can come do?” And I’m like, “Yeah, sure, come on over.” So, for at least them, their consistency is their grandkids and kind of helping out family, but I think everyone needs to find kind of what’s important to them to give them some meaning and some level of importance to the ones around them and themselves.


Speaker 1: For sure. Well, as humans, look, I mean for a lot of ways we looked forward to retirement. We’re like, “Yes.” Maybe you’re tired of your job. You’re like, “I can’t wait to get out of here. This is going to be awesome. I’m going to do nothing.” But at some point the lack of structure does kick in and we kind of require that, we kind of crave that, I think as a species. We need some guardrails or something just to keep us on the track if you will. And so, people view their time off or that break as more of a stressful period because maybe there’s just nothing… Something productive is not there. Or even just the accomplishment of completing tasks. So, it can be that simple. And imagine when you guys are dealing with retirees, again, that’s the big hurdle. They have the excitement of wanting to be retired, but then at some point they do need that structure to be there. And maybe for some people that’s, Nick, I don’t know, going back to work or maybe finally starting some hobby thing they’ve always wanted to do. I’m sure you have clients ask about that.


Nick: Yeah. For some people it can be… We’ve had some clients that do a great job with it, that are almost more busy than they were when they were working.


Speaker 1: That’s the old saying, too. Right?


Nick: Yeah. Yeah. Have that mindset of maybe it’s lifelong learning, that sort of thing. And then they take up, whether it’s a sport or activity like golf. Or we had one client recently who has been trying to learn a new language and traveled and went and stayed in the country that they were trying to learn the language and kind of immersed themselves in it. And that was something that they really enjoyed kind of doing. And so, one thing just because this has been on my mind a little bit, just kind of seeing different clients go through it is just thinking further out, down the line, and even personally for myself, what are the things that I enjoy doing? What do I like to do? And one thing I’ve realized is, and it sounds pretty basic, but just getting outside, just being outside, even if it’s just for a walk or going for a bike ride, walking along the water, fortunately we have that here, can be a really good mental reset. So, that’s one thing I’ve heard from people where if they’re finding themselves maybe kind of falling into a routine that they’re not a fan of, having some sort of reset activity that kind of snaps them out of it, gets them going out, doing different things. It’s almost like the snowball effect where just doing one or two new things will oftentimes spur you into trying other things.


Speaker 1: Yeah, for sure.


John: Nick actually, and I’m following next month, you just hit 40 this year, so I think he’s giving some personal experience on his midlife reset here.


Speaker 1: Is it midlife at 40 or have we moved that to 50? Because I’m 50 and I feel like it’s now.


John: For myself about turn 40 next month, let’s say it’s moved to 50.


Speaker 1: Okay. All right. Yeah. I’m feeling it pretty heavy right this minute, so maybe 50 is better. You both got a ways to go, so that’s okay. So, I was going to pivot to your practice or just your clients in general. Do you see people that sometimes come in mentally prepared for this at all? And either whoever wants to answer, feel free to answer, but where they kind of come in and they’re already leading that charge by saying, “Hey, I’m a little worried about the transition,” or asking for advice on that, or even just saying, “Yeah, I’m prepared. This is what I want to do.”


John: Yeah. Yeah, I think we see that quite a bit. We see it a lot when, let’s say, one spouse is retiring early.


Speaker 1: Oh okay. Good point. Yeah.


John: I think when that happens, it’s the person that’s retiring early starts to think, “Hey, what am I going to do while you’re working?” So, I’ll say those people are typically thinking ahead of the game of, “Hey, while he or she’s working, I need to find something to do. And this is what I’m going to do.” And we’ve had people that get into photography or start doing kind of more physical activity, whether it’s running, bike and things like that, just kind of becomes more of a routine like we talked about. So, I’ll say yeah, I think we see a lot of clients that do start to mentally prepare for it. And normally if it’s a couple situation, it’s kind of what we like to do together, whether it’s traveling or whatever it might be, but we definitely see that quite a bit.


Speaker 1: Yeah. I’m five years older than my wife, and so she teases me already. She’s like, “I don’t know what I’m going to do if you retire before me,” she’s like, “Which you probably will.” She’s like, “I don’t know if I’m going to be jealous about that or not, it depends.” So, that’s yet to be seen in my life. Nick, when you guys have people that are struggling here, is there a role that you guys can play as advisors that help in that? Can you share other things you’ve seen or have you kind of encountered that where you do get leaned on?


Nick: Yeah. So, I would say what we tend to see people that have worked their whole lives, they’re transitioning into retirement and they have done a good job saving, but they have a little bit of a scarcity mindset. And they’re really concerned about whether or not they can afford something or by default, that’s one of the benefits that… That’s one of the things that have probably helped them throughout their working years save more money, was being a little bit more on the conservative side, but then in retirement they find themselves struggling to use the money that they saved up. And so, from a planning perspective, we try to tell people that, “Let us tell you now. So, whether it’s a thought process of you want to consider getting a second home in the mountains, or you want to bump up your travel budget for the first 10 years of retirement, or there’s a certain sort of, whether it’s a social club or a golf course or something that’s going to help kind of bring stability to your life, but you’re concerned about the money aspect of it. Let us run the numbers for you and show you that it’s okay.” And we go through different scenarios. And what we’ve found is because for many people, we’re trying to help them just improve their decision-making process when it comes to finances, and so we really try to help focus on the fact that we don’t want them to be self-limiting. The goal for us working together is to communicate for them to share with us what’s important to them, so that we can help get them there from a financial perspective, or at least give them the confidence they need to go ahead and make that decision. And frankly, we see that… We get emails or calls every couple of weeks on these people that are starting to make that transition and think about those sorts of things, so that’s probably the most fun part about what we do.


Speaker 1: That’s cool. Well, we’ll wrap it up with this kind of last little question here to follow this up. Is this something you guys actively include that’s kind of a softer side, if you will, of the financial planning process, not just the Xs and the Os? Is it something you think about as a team that you guys discuss these other parameters that’s not just again the Xs and Os? John, if you want to answer or either one of you guys or both.


John: Yeah. I think it is something that we consider and I think it’s a case by case, so not for everyone do we kind of go into this with planning, but specific individuals where we feel like, “Hey, maybe they need a little bit of guidance or a little assistance on some options, what’s out there, we’ll definitely go into it.” And in the classes that we teach and go through, there’s a section of the book that actually has some resources where pre-retirees, or retirees can go in and kind of see what’s out there. What are people doing? It’s always good to hear what others are doing to give you an idea of like, “Oh, I didn’t realize this was out there. I can do this.”


Speaker 1: Nick, anything else?


Nick: Yeah, I would just say kind of a little bit of what I alluded to in the last portion where just trying to get them to think about things more broadly, and instead of kind of going through… Because so many people, it’s like they have a friend or a brother or a sibling or whatever that did this or that did that. And they’re used to kind of sitting back and watching and maybe not participating as much. And so, them just really kind of being comfortable enough to open up to us, tell us what they really want to do, so that we can help figure that sort of thing out. From a financial perspective… To arm them with the information they need from a financial perspective, to be able to make the decisions that they want from a lifestyle perspective, I think is one of our top goals.


Speaker 1: Well, again, it’s a huge component of retiring, we get so focused on the Xs and the Os, making sure do I have enough money to retire, all that kind of stuff. And obviously that’s clearly important, but there is a lot to think about from the mental side, getting prepared to step away from maybe something you have been doing for 20, 30, 40 years, whatever the case is, how it affects the other person in your life. There’s a lot of little parameters that go into retirement other than just the money. And so, that was the point this week here on the podcast. Again, we’ll include the link to this reporter, this article from Kate Schroeder that we talked about here today on the show. And before we go, Nick, I wanted to give you a chance to mention, you guys have an upcoming class pretty soon here if folks would like to get involved. Give us a little bit of a rundown on that please.


Nick: Yeah. So, John had mentioned earlier in the session that we do classes and we know a lot of our clients have come through those classes, so starting on September 15th, we’ll be holding our normal Retirement Planning Today class at the Pasco-Hernando Porter Campus. It’s a two day session, so it’s about three hours each day. People can attend on the 15th and the 22nd, which are Thursdays, or the 20th and the 27th, which are Tuesdays. And so, we go through a full gamut of information. We bring an attorney to go through the estate planning portion of the class. And we always welcome those that have come through the class already, they’re always welcome to attend again as well. So yeah, just wanted to let everybody know that was coming up.


Speaker 1: Yeah. Good stuff. Now, this podcast is probably dropping out shortly before that, so what’s probably the fastest way to see if there’s still space available? Just to call the number? Just to call the (813) 286-7776?


Nick: Yeah, go ahead and give the office a call or shoot either John or myself an email and we can do the connection for you.


Speaker 1: Okay. So again, it’s (813) 286-7776 if you’d like to attend that Retirement Planning Today class, or you could email John or Nick, the basic way to spell their name, John, Nick@pfgprivatewealth.com. And there’s a lot of good tools, tips, and resources there. Guys, thanks for hanging out. John, I’m glad you’re feeling better, my friend.


John: Appreciate it. Thanks. Have a good one.


Speaker 1: Absolutely. Nick, thanks as well, buddy. And I’ll catch you guys in a couple of weeks.


Nick: Talk soon.


Speaker 1: All right. We’ll see you next time right here on retirement planning redefined with John and Nick from PFG Private Wealth.

Ep 51: Financial Planning Considerations When You’re In Between Jobs

On This Episode

Finding yourself between jobs can be frustrating—whether you were fired, laid off, or just had to step away of your own choosing. But it can also present some opportunities. Let’s discuss some of the challenges and opportunities that you need to consider if you’re between jobs.

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PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Here is a transcript of today’s episode:


Speaker 1: It’s time for another addition of the podcast. It’s Retirement Planning Redefined with John and Nick and myself, and talking about considerations to ponder if you find yourself between jobs. Guys, I want to frame this from the standpoint of 50 plus, okay? So, and maybe in that pre-retirement stage. Obviously we’ve seen the great resignation the last two years, people leaving jobs, fired, laid off, downsized, had enough, don’t want to go back to work, dealing with COVID, the fear of COVID, whatever it might be. Just that mindset of changing jobs later in life. Some challenges to be aware of. You guys got a lot of clients of various different ages, but again, I want to look at this from an older standpoint. If you’ve got references from a younger standpoint as well, but I’d like to look at this from a retirement type of standpoint. So let’s jump in and get started because I know we’re up against the clock today. But first how you doing John?


John: I’m doing all right. I’m on day 12 of COVID and looking forward to this slight congestion to go away.


Speaker 1: Fantastic.


John: Other than that I’m good.


Speaker 1: Oh, yeah. Well, day 12, that’s no fun. So all the best to get better soon. Nick, what’s going on my friend? How you doing?


Nick: Better than John.


Speaker 1: Fair. Fair point.


Nick: Yeah, just got back from some traveling up north to my hometown in Rochester, and I go each summer and it’s always kind of a good reset for me.


Speaker 1: Yeah.


Nick: So times with friends and family and a little bit cooler weather.


Speaker 1: I was going to say you got away from the heat didn’t you?


Nick: Yeah. Honestly it was still pretty darn hot up there a lot of the time.


Speaker 1: Yeah.


Nick: But cooler than here.


Speaker 1: Well, let’s dive in and take a look at some of these things. So again, whatever reason you’ve left, fired, laid off, walked away, you’re own choosing, whatever. If you’re 50 plus guys, maybe it’s not the worst thing. I want to try to look at a couple different angles. Maybe it’s time for a new career. I’ve talked to so many people who are like this job is super stressful, it’s just wearing me down, and you add all these other elements in the modern world of what we got going on. And some people just want to kind of scale back. If they’re financially in shape, it’s not the worst idea to maybe look for something that brings you some better joy and less stress. What do you think, John?


John: Yeah, I definitely agree with that. And it comes down to kind of what you just said there and kind of looking back at what we talked about a couple of weeks ago on saving for retirement. So if you have enough saved up, you are in the driver’s seat to go ahead and make this kind of decision of saying, “hey, I don’t enjoy this anymore.”


Speaker 1: Yeah.


John: My passion is X and I really want to do it. So, the more you have in the bank or saved up, the more options you have to go ahead and really consider what you want to do. Because it could take six months to a year to really get into that field [inaudible].


Speaker 1: Right. Are, we tapping into emergency fund money in that kind of vein?


John: You might have to.


Speaker 1: Yeah.


John: Again, everyone’s situation’s different. But you may have to do that depending on kind of where you’re at.


Speaker 1: And where do you guys usually go with emergency funds? Six months worth of expenses in case of a job loss or 3, 6, 9? What do you guys kind of tend to recommend?


John: Usually if there’s two incomes, we’re usually around six months. If there’s only one income that might kind of extend it a little bit longer than that.


Speaker 1: Gotcha.


John: And again, everyone’s situation’s different. I don’t want to speak for Nick, but I have certain people that are more conservative and they’re a minimum. They want one years and some two of emergency funds. And I have other ones that they’re fine with six.


Speaker 1: Yeah.


John: So every everyone is definitely different. But for me, I would say you want to be at least at six months because you never know what’s going to happen.


Speaker 1: Yeah. Okay. Well, Nick, actually it works well for you for my question. The next question which is, maybe that new career is actually a job for yourself, right? Maybe if you’re 50 plus and you’ve kind of had enough and you’re thinking about changing positions, maybe it’s because you really wanted to go into business for yourself. There’s a skill set that you have or whatever that you’ve always wanted to explore.


Nick: Yeah. So, one of the ways that we can look at this because obviously we end up being kind of a testing ground for people to explore some of these things. So the first thing that we try to do is put it into the plan. And with the software that we use, we can kind of model different things and be able to say to somebody, hey, if this is something that you’re looking for, do you have an idea of what it would look like from an income standpoint, or how long it’s going to take you? Or even work backwards and say, hey, let’s figure out how long you could try this new endeavor without having any income, so that you can kind of enter into it with some sort of game plan to look to see what’s feasible or what’s reasonable and kind of look at it that way. But it’s absolutely depending upon the field, it’s easier for some than others. Some fields it may not be kind of conducive. And there’s also something to be said for trying to build up your own business while working elsewhere. In reality, if you’re going to run your own business, you’re going to be working 60, 70, 80 hours a week anyways in the first few years. So kind of getting it up and started while you have something else going can kind of give you the light at the end of the tunnel, and give yourself an exit strategy without putting yourself through so much financial stress.


Speaker 1: That’s not a bad idea either. So, all right. So those are the emotional or the job type setup scenarios. So let’s talk a little bit, we talked about emergency fund or having some money to kind of stop gap us, but let’s look at some specific pieces to that. Guys, so John, health insurance, okay? If you’re walking away or have been asked to walk away, you may or may not have some healthcare options or even starting a business, right? Especially, again, if I’m talking 50 plus you might be still looking at 10 years let’s say before Medicare. So what do you do?


John: Well, you have a few options and kind of the first one people look at is Cobra. So, you are allowed to stay on your workplace plan for, Nick, was it 18 months, Nick. Is that right?


Nick: I believe so.


John: Yeah, 18 months. So yeah, you could stay on there, but we find every situation’s different again, but that typically can be very expensive.


Speaker 1: I was going to say, you got to have the funds for that though.


John: Yep. Then there’s the marketplace. Just making sure seeing what else is out there on an individual marketplace. And with the loss of a job, that’s considered a qualifying event so you should be able to jump right into another plan. And then also if your spouse is still working, there’s the opportunity to jump on him or hers plan. So, big thing when you’re doing this is you really want to look at the plan you’re going on and what benefits you need. The last thing you want to do if you have some health issues is jump onto a worse plan that’s going to be not beneficial for you and your family.


Speaker 1: Yeah, definitely. But it is something you got to think about. Don’t just walk away or again, whatever the reason is and make sure that you’ve got some sort of plan in place for the health insurance, because at 50 plus again, this could be, and at any age really, but certainly at 50 plus, problems tend to come at us more fast and furious as John and I know. We were talking about some things a little bit here, so they start to show up on you a little quicker. So you want to make sure you got a plan in place for that. Nick, is it a good time to talk about that 401k and roll it over? Obviously, if you’re walking away or been asked to leave, you don’t want to just leave it behind, correct?


Nick: Yeah. I would say that oftentimes that is the case. The qualifier and disclaimer, just to kind of give an example is understanding what the next steps are. So for an example, tying in with some of the questions that we had previously, if somebody’s going to be considering going into business for themselves, then maybe they’re going to need some sort of startup capital. One of the things that we’ve done with clients before is, and not all plans allow this, but they’ve been in a plan that allowed for loans on the 401k, even though they’re not employed there. And they were able to access the money to help with their startup costs and pay it back over time.


Speaker 1: Okay.


Nick: Versus if that money was in an IRA, and especially if they’re under 59 and a half and they needed some capital, incurring some taxes and penalties, things like that. So, depending upon what the next steps are in the overall strategy. If it’s a typical situation where you’re shifting to a new employer and there’s new benefits and you have other money you’re looking to consolidate and want an advisor to help you with your funds, then the rollover could absolutely be a good time to do that.


Speaker 1: So if that’s the case too, maybe it’s worth having a conversation about Roth conversions, right? So that could be on the radar as well, because then you’re taking advantage of maybe some of the tax opportunities now versus later. But more than anything else, I think just leaving it behind is typically not a good idea because you’ve got more control if you move it over as well as to tend to, can probably find some cheaper options as well. Because they can be a little expensive. So something to ponder.


Nick: Yeah.


Speaker 1: All right. John, last one, I’ll toss to you buddy. Any severance conversation that may come up? Now again, if you’ve been shown the door, you might get a severance package, or even if you’ve just volunteered to leave or whatever, you might get some sort of severance package treating it a little bit like a pension conversation. Sometimes they offer a lump sum. Sometimes they offer monthly installments. Maybe that’s some of the money you use to carry you over. But is it worth having a conversation about where you put that money and what you use it for?


John: Yeah, I think it is. And again, everyone’s situation’s different, and it’s important to understand where you’re at currently. Do you have that six months of emergency savings or a year? And really that will dictate quite a bit how you take it. Or just kind of going back to some of our questions here. Are you trying to start your own business? Like Nick mentioned it’s going to take you some money, some capital to get that started. If you are, maybe you do take the lump sum option. Or if it’s a monthly installment and you’re going to get extra money, you don’t need it, and you kind of do the math and it’s like, hey, if I do the monthly, I’ll get an extra whatever it is, 20,000, 30,000 over a period of time.


Speaker 1: Right.


John: Then you go with that option if you don’t need it. So I hate to sound like a broken record, but it all comes back to your plan and what fits your situation. But definitely with severance packages you just don’t ignore them and just take the first option they give you, you want to evaluate it and figure out what’s best.


Nick: And just to kind of jump in here.


John: Yeah. Yeah.


Nick: I think this is a good time to kind of remind people. And one of the things that we try to tell people is that, use us for clients that are working together with us. We have the core of their plan built already.


Speaker 1: Mm-hmm.


Nick: And we’re able to help model these sorts of question, and help them through these decisions to give them kind of at least the data they need from the perspective of finances. And then what that a lot of times does is because sometimes the concern of finances can be self-limiting. So a lot of times when we’re able to kind of paint a picture from a financial standpoint, it lets them then prioritize the rest of the factors that they need to take into consideration and figure out how to kind of attack this. But these are the sorts of questions that we’re here to help on.


Speaker 1: Yeah. I guess what I was going to say, if you’re 50 plus and whether you expect to be shown the door or not, or you’re choosing to leave whatever the case might be. It’s one of those situations where you have got to have a plan in place. And if you’re over 50, hopefully you do, hopefully you are thinking about the retirement journey, the future, whatever that might be, and you have a plan in place. And if you don’t, then reach out to the guys at PFG Private Wealth. Again, the podcast is Retirement Planning Redefined. If you’re catching this through a newsletter or something like that where you’ve come across it and you haven’t subscribed to it yet, consider doing so. You can find this on all the major platforming apps like Apple, Google, Spotify, all that stuff, and you can also find it all centrally located back at the main website, PFGprivatewealth.com. That’s PFGprivatewealth.com. Anything else guys that I might have missed before we go? If you’re thinking about job transition, I think just having a good strategy ahead of time is probably the best recipe. John, what do you think?


John: I agree with that. It definitely put yourself in a situation to adapt to whatever comes up because as we know, things are always going to come up.


Speaker 1: Always going to come up. Well, thanks for your time my friend. I appreciate it. I know we got to let you get out of here. You’ve got to go sit with some clients. Nick, thanks for your time as always my friend. I’ll catch you next time on the show. This has been Retirement Planning Redefined with John and Nick from PFG Private Wealth.