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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Check out all the episodes by clicking here.

 

Disclaimer:

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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More Episodes

Check out all the episodes by clicking here.

 

Disclaimer:

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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Check out all the episodes by clicking here.

 

Disclaimer:

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.

Ep 50: Can You Get An A+ On Our Retirement Planning Quiz?

On This Episode

Don’t dread this as much as you hated hearing these words as a kid, but it’s time for a pop quiz! We’re putting retirement planning preparedness under the microscope with 5 critical questions to which you need to know the answers. So sharpen those pencils and let’s see how ready you are for retirement.

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More Episodes

Check out all the episodes by clicking here.

 

Disclaimer:

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 the podcast. It’s Retirement Planning Redefine with John and Nick and it’s pop quiz time. We’re going to have a little fun here with a retirement pop quiz. And don’t worry, it’s only five questions and it’s multiple choice. So we make this pretty easy. Guys, did you enjoy pop quizzes? When you hear that phrase, do you automatically get filled with dread or with joy? Nick, I’ll start with you. How you doing buddy? What’s going on?

 


Nick: Oh, pretty good. Fortunately, I was a pretty good test taker, so never bothered me that much.

 


Speaker 1: Okay.

 


Nick: But, so I luck out that way, but I know a lot of people dread it.

 


Speaker 1: Oh, for sure. Well, you know what? You are the first person, congratulations that I’ve talked to when I’ve doing the pop quiz that have said, all right, let’s do it. I have no problems with it.

 


Nick: I don’t know if I can go that far, but yeah.

 


Speaker 1: Oh, there you go.

 


Nick: At least not depressed.

 


Speaker 1: Not depressed. Okay. John, what’s going on my friend? How you doing?

 


John: Ah, doing all right.

 


Speaker 1: Yeah.

 


John: I was in between, it depended on the class.

 


Speaker 1: Okay. Okay.

 


John: If was something I enjoyed,

 


Speaker 1: Yeah.

 


John: It was, let’s roll. If it was something I dreaded, I was like aw man.

 


Speaker 1: I think that’s fair. I think, well, this,

 


John: Got to throw this at me right now.

 


Speaker 1: Yeah. I think that’s fair. But this should be pretty easy, because this is right up your guys’ alley obviously. Right. So this is retirement planning, pop quiz. So folks can play along with us here. I’m going to basically give you guys the question, give you the multiple choice answer. Let you give us the best answer from the choices. And then if you’d like to elaborate on something different or why none of them are a good idea feel free to do that as well. And I can never hear pop quiz anymore without thinking of the movie Speed from the 90s now. I only hear the Dennis Hopper going pop quiz, punk.

 


Nick: Great movie.

 


John: That was just on TV the other day. I was scrolling and I saw, and I’m like, oh man, like Nick just said, this is a really good movie.

 


Speaker 1: It’s a remote dropper. Yeah.

 


John: Yeah.

 


Speaker 1: Yeah. You’ll drop the remote and watch it. So, pop quiz for the guys here. Let’s see how we do. This is kind of just a retirement pop quiz, just five basic questions to check your preparedness or what you might have done and see if we should do things differently or whatever. So number one, I’ll give this one to you, John. At what age should people start saving for retirement A, when they begin working B, after they buy their first home or C, once they’ve paid off all their debt?

 


John: I’m going to have to go with A, when you begin working. Everyone probably has a different situation, but I’ll say that as soon as you start making income, it’s good to start saving towards retirement or saving in general. And yeah I’ll use one of my clients as an example, started out young, I think started with me when he was 24. And a big question was, Hey, I’m making money. What should I do? And we just started overfunding his retirement accounts. And seven, eight years later life happened, two or three kids.

 


Speaker 1: Sure.

 


John: Bought a house, all this stuff. And with all the expenses, he can’t save as much, but he’s built up such a nice nest egg from his 20s that he’s really in an excellent spot. So we just really started out strong and,

 


Speaker 1: That’s a good idea. Yeah.

 


John: Everyone’s seeing those charts where the sooner you start, the more you have at the end, but yeah, there’s a lot of truth to that. So I would say as soon as you start an income and have some money, I would definitely sock it away because you don’t know what the future’s going to hold.

 


Speaker 1: Now that’s a great idea because then when you do, when life does happen, which I was thinking about that with the home thing, it gets tougher. So then if he’s only able to put just a little bit away from time to time or on each paycheck or whatever, from the job getting the match or whatever, then you’re already up on the game a little bit. So I like that. Nick, want to chime in at all?

 


Nick: Yeah. I think the answer is just yes. As soon as you can start saving, you should even, and I know it’s something that’s talked about a lot, but even if you can just save up to the match and kind of get some free money from your employer,

 


Speaker 1: Right.

 


Nick: The sooner because it’s more about habits than necessarily the amount and just kind of getting used to creating smart habits is really a positive thing that last a long time.

 


Speaker 1: Yeah. That’s a good point too. And let’s be honest. See, come on, when you paid off all your debts, does that ever happen? Like we’d always be chasing something. Right. Somewhere through life.

 


Nick: Yeah. There’s always something.

 


Speaker 1: Yeah. Well I’ll do it after I this or I’ll do it after I that. Right. So you don’t want to go that route. All right, Nick, I’ll give you this one here. Number two, which of these is the best estimate of how much income you’ll need in retirement, A 50% of your income, current income, B 85% of your current income, C, 100% of your current income or D, none of the above.

 


Nick: This is one of those questions that I’ll probably annoy people with on the answers. There should maybe be like another option that lets you pick multiple. So the key kind of word in this is need. So in theory, 85% is probably the number for a lot of people.

 


Speaker 1: That’s kind of what we hear, right? That’s the term we hear. Yeah.

 


Nick: But at the same time, from the standpoint of many people that we talked to, they’re looking to, especially after the massive market run that we’ve had over the last 10, 12 years, even including this pull back recently, a lot of people have ended up with more money than they expected, and they’re wanting to do things and travel and enjoy, and it becomes less about need more about what actually do you want to do? So I would say somewhere between 85 and 100%. One other thing that we’ve seen for some people is, especially those that work at large employers. We’ve had a couple people pointed out recently in the last six months. We’ve got some people that were used to paying 100 to maybe $200 a month for health insurance per person. And now when they see what they’re going to pay with Medicare and so to supplement things like that, there’s some expenses that maybe are higher than what they expected. So I would say somewhere between that 85 and 100% is where a lot of people end up.

 


Speaker 1: Yeah. Yeah. I think we hear the 85. John, I used to hear this comedian. It was pretty funny a way of looking at it. If you’ve ever been on puddle jumpers. Right. Any of us that have gotten on a plane where you go to little island hopping or whatever, they ask how much you weigh. Right. Because then they say, well, you go, well, why? And they go, well, because we want to know how much fuel to put in. And this guy goes, well, fill it up. Here’s my credit card. Right. It’s on me, I’ll pay because the idea is, so you don’t want to just get sort of to retirement and then say, well, 85% enough. I would say 100% is what a lot of people are hoping for because they typically don’t want to go backwards in their lifestyle. Is that a fair assessment?

 


John: Yeah, I would say so. The big thing that typically where I think most people assume 85% is the mortgage might be gone or maybe you were saving 15% into your retirement account. So, that’s a spend that’s gone, but 100% is you want to maintain the lifestyle. But everyone as Nick kind of stated earlier, everyone’s different and everyone’s situation’s different. So very important to do a plan and make sure that you’re living off the income you want to live off of versus just needing, so.

 


Speaker 1: What you need. Yeah. Okay. Fair enough. All right, John, back to you and I’ve kind of basically just going back and forth with you guys a little bit here.

 


John: Yep.

 


Speaker 1: Number three, which of these do you find that retirees fear the most, pretty easy one here I think A, not leaving enough to the kids, B running out of money or C nursing home care? John, what say you?

 


John: I’m going with B, running out of money. That seems to be the biggest fear, because I think most people don’t want to go back to work. And then we hear a lot of times where we’re doing plans and it’s Hey, I don’t want to be old greeter at Walmart at some point. So, let’s make sure that the plans solid. So, one thing to alleviate this fear when we’re doing planning is, we try to be conservative with the rate of return we’re using, the expenses to make sure, Hey, it’s better to air on the side of caution versus be aggressive with these things because last thing we want to do is hit your mid 80s and you’re looking at your accounts and you starting to get a little nervous, so.

 


Speaker 1: Exactly, exactly. And I think that’s, everybody’s going to say B, although Nick, C is right behind it for many people. I mean like neck and neck.

 


Nick: Yeah. Yeah. There’s definitely in theory, I think a lot of times B and C, C can lead to B, realistically in other words, Hey, is there going to be enough money left over for me to have respectable care towards the end of my life? So ultimately it ends up leading to do I have the money, sort of thing, or have I planned properly and do I understand how that ties together? But yeah, I’ve got a few clients. What I’ve seen that a little bit more too is in a lot of single clients that they’re heavily focused on that, especially women oftentimes,

 


Speaker 1: For the long term care, you mean?

 


Nick: Yeah, for sure. And a lot of men like to use the line, just take me out back and that whole thing.

 


Speaker 1: Yeah.

 


Nick: Hear that plenty as well. But there’s so many people that are living longer and it’s, I was just up North and we were kind of, I was talking with friends and kind of seeing some long time friends and their parents that I haven’t seen in a while. And there was a bunch of friends who parents still had one of their parents alive, usually the mom and they were all in their 90s and,

 


Speaker 1: Right.

 


Nick: Still doing pretty well. And, but the circle of care needed to help make sure that they maintain. And my grandmother was with my parents and I know how difficult that is. And it’s a lot of work. So that’s definitely something that people are concerned about.

 


Speaker 1: Yeah. It’s got to be on the radar. It’s got to be part of the plan. And if you plan right, hopefully you won’t have to worry about either one of those. And then if there’s something left over, then you can do A as well and leave some money to the kids. So it’s all possible, but it’s got to have some strategizing going on there. It’s got to have some retirement planning redefined if you will. All right. So let’s see. Nick back to you here for the lead answer. Number four, which of these examples best represents a diversified retirement plan, A, a mix of 60% stocks and 40% bonds, B three rental homes and a good amount of cash in the bank. So rental income there. C, 10 to 12 different mutual funds or D, none of the above.

 


Nick: My answer is D none of the above. A lot of people, I think they think about like a 60, 40 mixes.

 


Speaker 1: Traditional, right.

 


Nick: A pretty traditional answer, but in our minds, this is the emphasis on the plan. For example, I’ll just use two sets of family members. So you’ve got one set of family members where there’s a pension involved. So that pension, between pension and social security live within their means, expenses are covered. They never saved as much as maybe they would have if they had had higher income and were able to save more. And they’re in a very comfortable position from a retirement standpoint whereas maybe another set of family members, a sibling earned more money over time, but also spent more money and don’t have as many kind of income producing assets going into retirement. And there’s a lot more stress there. And so, really the plan from a diversified plan standpoint, it’s really ends up being a function of people’s risk tolerance and how much sort of risk they’re willing to take. You can tell somebody that, Hey, 60, 40 mix of stocked bonds is great till you’re blue in the face, but if they don’t have market tolerance, then it’s never going to work.

 


Speaker 1: Right. Yeah.

 


Nick: And so, you have to adapt and adjust, and that’s our job as advisors.

 


Speaker 1: Yeah. And John, typically those 10 to 12 different mutual funds, they’re probably large cap. Right. So there’re probably a ton of overlap in there and 40% in bonds, I mean, bonds aren’t doing so great.

 


John: Yeah. I think, to kind of back when Nick’s saying here, when you look at what’s going on today in this market year to date with equity stocks being down and then rates going up, which in turn fixed income markets are down. So both of those at this point in time are down 10 plus percent. So that’s not a very good,

 


Speaker 1: Yeah.

 


John: Diversified strategy for this period.

 


Speaker 1: Yeah. 60, 40 is that traditional portfolio split. And it had its place for a long time, but it just doesn’t seem to be the case for many people, more and more people right now. So it’s always best again, to get it kind of customized. So yeah, I would say none of the above, or at least maybe a little bit of each of these three kind of sprinkled in is more diversified than just one of them. All right. Last question, John will lead off with you here. To make sure you do not run out of money in retirement, only withdrawal blank percent from your portfolio each year A, 1%, B 4%, C 6% or D just find a different strategy altogether.

 


John: Yeah. I’m going to go with D on this. The rule of thumb typically we hear is 4%, but I’m going to say this is one you definitely don’t want to live by the rule of thumb and you want to customize a plan to yourself because everyone’s going to be different. And if you just live by a rule of thumb on this one, there’s a good chance that you’re going to hit that fear of most retirees and that’s running out of money. Or if you’re just doing 1%, you might not be living to the best of your ability. So, definitely here it’s D and do a plan and figure out what’s your strategy.

 


Speaker 1: Yeah. Nick, do you concur with that one?

 


Nick: Yeah. I think an example from this is the last really seven to 10 years where a lot of people that were maybe risk averse, avoided some of the market. And we know that it was very, very difficult to get any sort of return on conservative money. So whether it’s cash in the bank, CDs,

 


Speaker 1: Right.

 


Nick: Bonds, those sorts of things. And so it made it difficult for people that were conservative to be able to sustain that sort of withdrawal rate and really it kind of emphasize the importance of having an overall balance. But yeah, again, one of the things that we tell people oftentimes is that one of the good things about kind of planning in the financial world is that there’s something for everybody, and that can be one of the bad things too, because it makes it hard for people to navigate. But usually, once you really kind of drill down and figure out what people are comfortable with, there’s some sort of solution out there, or combination of solutions to kind of get them to the point that they need to be. And that’s kind of the importance of planning.

 


Speaker 1: Yeah, definitely. And the 4% rule, it was a fine rule of thumb for a while, maybe back of the napkin. But most of the time you hear people say it’s more like maybe 2.9 or 3.1. And so it’s just better to find a specific strategy altogether versus relying on in general. Again, if you’re out to dinner and you’re just doing some quick math and you say, Hey, we’ll use 4% or something like that. Maybe that’s one thing, but really at the end of the day, getting it dialed in for what you actually need to do, get a strategy, get a plan and get started if you’re not working with a qualified professional, like the team at PFG Private Wealth. So reach out to John and Nick, if you need some help and you’re not already working with them and your checking out the podcast. You can find them online at pfgprivatewealth.com. That’s the website, lot of good tools, tips, and resources.

 


Speaker 1: You can contact them that way. You can subscribe to the podcast, whatever you’d like to do. Find all the information again at pfgprivatewealth.com or reach out to them at 813-286-7776. Guys, you did well. You passed. So thanks for hanging out and playing the game with us here on the show. And we’ll see you next time on Retirement Planning Redefined with John and Nick.

Ep 49: What To Do As You Count Down The Days To Retirement

On This Episode

We’ve assembled a list of priorities to keep in mind as you count down the days to retirement.

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Disclaimer:

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:

 

Mark: Hey everybody. Welcome to the podcast. It’s retirement planning, redefined with John and Nick and myself talking about the countdown to retirement. What to do on those days, as we’re getting closer, working our way towards it. We’ve assembled a list of priorities to keep in mind, as you are counting down those days to retirement. And we were getting ready to get this podcast started and we were kind of laughing at some of the things that we seem to run out of in this whole supply chain issue, had ourselves a good giggle along the way. So hopefully we’ll have a good podcast for you to tune into as we talk about these things, because there’s some good stuff on here. And guys at the time we’re dropping this, I think we’re going to drop this right after Memorial Day if I’m not mistaken. Anyway, it’s right around it.

 


Mark: And Memorial Day is kind of the unofficial kickoff to summer. It’s not technically summer yet, right? I think it’s what June 20th or something like that. But when we get to 50 and a lot of times, if you want to think about this countdown 50 plus, it’s kind of the unofficial kickoff to retirement. We’re not actually retired yet, but we start thinking about it, paying more attention to it. So on and so forth. So John, the first one on my list is getting healthy and staying healthy. Many of us develop chronic issues in our 50s. So it’s a good time to put some thought onto this so that you can actually enjoy those golden years.

 


John: Yeah, 100%. I would even because I’m sure, I don’t know in the previous podcast I talk about my health issues, but I think it’s important for everyone at any age, especially though I will say 50.

 


Mark: True.

 


John: Focusing on health and getting to the gym and just do whatever makes you feel good. But when you have an health issue and you can’t do the things you were doing, I’ll tell you it’s quite a, it’s a challenge. It’s quite upsetting. And I’ll say from the clients that we work with, we see a big difference in those that actively in retirement are working out, maybe seeing a trainer a couple of days a week to those that are not. And as you age, I think it’s more, it’s very important just to stay active because you’re not recovering like you were in your 20s.

 


Mark: No, I think that’s a great point. I like that too. Yeah, we should start sooner. Right. But if you kind of want to put a, some sort of a time table or something to it when we get, and it kind of works with our conversation for retirement, just get there, start making some of these changes. So you can really enjoy what we call the go go years. Right. So when we first get to that early days of retirement. And then this is a really big one, we could kind of merge two and three together, but we’ll do them a little bit separately, but two Nick, is the free time. Now there’s a lot of it. And maybe silver lining in the pandemic has been the fact that many couples got to realize life together, 24/7 working from home, being at home.

 


Mark: Because that’s what retirement is. That’s a big shift that we don’t often talk about. We put a lot of focus on saying, yeah, we want a big travel and we want to go out and play a ton of golf or whatever. But like there’s a lot of free time and you’re spending it with that significant other that maybe you guys didn’t see each other for eight, 10, 12 hours a day. Now you’re together all the time. I don’t know how many advisors I talk to where they’re like, they have funny stories about one spouse or the other saying get them out of my house. They’re driving me nuts.

 


Nick: Yeah. The time challenge can be significant. I can tell you two things that I would recommend against. And those things would be watching a lot more news and,

 


Mark: Right.

 


Nick: Deciding that social media is going to be your new hobby.

 


Mark: It’s not your friend. Right.

 


Nick: If anything, there’s a pretty good documentary on Netflix. I forget what it’s called, but it’s about social media and really kind of the big data side of things and how the algorithms work and really kind of feed into things. And in general, there’s been a lot to handle for people over the last few years with the pandemic and everything else going on. So can not underestimate the importance of having constructive hobbies, doing things that kind of keep you sharp or engaged. And even from the standpoint of being social, things that you can do both alone and with others. The relief that people get from a psychological standpoint of being engaged with others and doing different things, kind of being out and about is really, really important and it’s going to help keep you fresh. It’s going to help you be able to focus on the things that are important versus the things that aren’t, and that you don’t have control over. And so, making sure that you’re developing hobbies, and we would say that that’s even separate from things like travel and that type of thing where,

 


Mark: Right, right.

 


Nick: Being inquisitive, doing things that have your brain still working are really important.

 


Mark: That’s a great point. And John, I mentioned blending two and three together. So two was determining what you want to do with your free time. Three, we put post retirement career, maybe career is too heavy of a term, but a post retirement something. Right. Retire away, like if you hate your job, let’s just say you despise it and you can’t wait to retire and you’re leaving with nothing else to go to. Like, I get that frustration, but I think people tend to be happier if they’re retiring to something. And maybe that’s not necessarily another career, but something like, even if you took a year off and literally did nothing, I’m sure you guys have story upon story of retirees who first enjoy doing nothing. But as humans, I think we crave some sort of structure, something to help us kind of fill the time and fill the days.

 

John: That’s 100%. It’s important to really start thinking about that. And I can’t tell you how many times we’ve been in meetings and it’s when do you want to retire? And the response is, well, I don’t know if I’m ever going to retire, but I want to leave this job at this age.

 

Mark: Right. Right.

 

John: So it turns into what am I going to do next? And I think kind of what you said there. My mother watches my kids and that’s kind of a level of importance to her and she watches them two or three days a week, and there’s actually a study where grandparents that kind of are helping out their children, watch their grandchildren actually live a little bit longer. And I think it’s all about that level, feeling important.

 


Mark: Yeah.

 


John: So whether that’s watching grandkids, my clients had started to be a realtor and they actually end up making more money than they were at their previous job. So whatever it is, it’s just making some type of level of importance. Whether it’s making money, helping out family, volunteering is just feeling like you got to get up and do something in the morning.

 


Nick: And a good way to kind of sum that up as purpose.

 


Mark: Purpose. There you go.

 


Nick: Purpose. When people feel like they have a purpose for both themselves and those around them, they tend to do a lot better.

 


Mark: Yeah. No I’m with you there. And we used to retire at let’s say 65 and you probably were passing away at 67, right? So sitting on the porch for a year or two and doing nothing felt great because we were tired. We were worn out. The concept of retirement is a little less than a 100 years old. So a lot of stuff is actually changed quite a bit. So a post retirement, something or another post retirement purpose instead of career. I like that. Thanks, Nick. We’ll use that. And going forward is a great way to think about that on this countdown days to retirement list. Let’s go to number four, Nick. So why don’t you throw us some things to think about in the opportunity to save more. Again, I mentioned 50, right? So at 50 plus, some stuff starts to change and there’s actually some good time to catch up a little bit or just cycle a bit more away if you need to.

 


Nick: Yeah. Oftentimes whether it’s in their 50s or early 60s, people have, maybe they have children coming off the payroll and they don’t necessarily plan to figure out how are they going to be able to recapture some of those dollars that they’re used to spending on the kids and kind of help them really build up their retirement and maybe catch up from all those years of taking care of the kids. That can be something that’s a big deal. One thing that’s come up multiple times in the last, I’d say three to four weeks with what’s been going on in the market is, we have clients emailing or calling us asking, Hey, the market’s down, should we stop saving? And, the way that we try to kind of explain to people is that markets are cyclical.

 


Nick: We have had this period of time, 10, 12 years, where the markets have generally gone up and people’s conception of what, or I should say, perception of what, typically happens in normal cycles, one to three to four year cycles is a little bit thrown off, but an easy way to think about this is that this is why we have a plan in place. You want to continue to save. And if anything the thought process is that you’re buying at a discount from what things were previously. So in a lot of ways, the market’s on sale. And so continuing to average in and chipping away and taking advantage of the benefits of being able to save money pre-tax, or those sorts of things is an important thing.

 


Mark: Yeah. It can make a huge dent, right? We’re hopefully making the most money we’ve ever made and all that good kind of stuff. So 50 plus there’s should be some good opportunities to sock a bit more away. And that might help John with number five, which is reducing down the debt. So even if you’re not necessarily putting more away into a retirement account, because you’ve done a good job or whatever, maybe the focus is take some of that extra money with the kids being off the payroll and get rid of some of that, especially bad debt.

 


John: Yeah. 100%. I mean, with rates being as low as they have been, we have seen a lot of people go into retirement with mortgages, but you’re at 2.6%, that’s nothing crazy, but let’s take mortgage out of it. Other debt definitely recommend trying to get that down and off completely, but get it off your books because when you go to retire, it’s a big cash flow, where’s your income coming from? Social security, pension, investments. The last thing you want at that point where there’s no longer a paycheck coming in is debt. What that’s doing at that point, it’s really eating into kind of things you want to do, which we talked about for hobbies or enjoyment. And then on top of it, it actually adds some stress level to Hey, I need more income coming in to pay out all these bills and all this debt. So definitely before you hit retirement, it’s good to be debt free. It’s easier to pay off the debt in your working years than when you’re not working.

 


Mark: Yeah. And on the concept of the house, right, there’s always the arguments back and forth there, the different things. So certainly, that can also still be on the get debt free list if you’d like. I don’t think it’s a bad idea to necessarily get rid of it, but just make sure that you’re doing that smartly and not being house rich cash poor as the saying goes or whatever the case is. So just kind of bear that in mind.

 


Mark: But yeah eliminating, if bought an RV or the big plans where the RV in retirement, maybe getting that paid down, if you bought it a little early or whatever, or boat, or I don’t know, muscle car, whatever it might be. Right. Just get rid of the stuff that you’ve got some debt on. And then Nick, the final one here, number six on the list on just counting down stuff is the risk conversation. So if we’re reducing our debt, maybe we ought to also think about reducing our risk. Now last year, people would’ve said, I’m not reducing my risk, the market’s on fire, but right now they’re like, okay, well let’s maybe reduce the risk. Point being at 58 should we be investing like we’re 38?

 


Nick: Yeah. So risk is an interesting word. And we wanted to take a little bit of time to kind of chat about this because there are different types of risk, and depending upon who you talk to, how they rank the different types of risk via priority is different. So for example, inflationary risk, which is something that we’re dealing with right now, that’s a risk. So in other words, losing the spending power of our money via inflation is something that we need to keep and take into consideration. However, we’re in this kind of perfect storm where taking too much risk, if you’re shifting money out of cash per se and moving substantial amounts of money into the market, you’re dealing with a significant amount of market risk. And then we have interest rate risk from the perspective of, as they’ve increased interest rates, that’s really pushed down the prices of bonds and bond funds.

 


Nick: And one conversation that we’ve been having with people is them not necessarily realizing that the bond market and even if you look at the most general bond index is down almost 10% year to date. And so we’ve been trying to take a lot of time in one-on-one meetings with people to try to explain how this has an impact and really this is a, with what we’re dealing with right now is probably the best case in the last 15 years or so to show people why it’s important to be diversified and understand that trying to fully time the market, whether it’s from the stock side to the bond side, to the cash side, real estate, et cetera, it can be really tricky. And when things are going great, it’s hard to remember that, but right now it’s showing us that it’s really important to make sure that when we think about our risk, that we’re taking into consideration poor times, not just great times and understanding that just because maybe throughout the majority of your investing career, taking less risk has meant, Hey, let’s reduce our stock exposure and increase our bond exposure.

 


Nick: It doesn’t mean that that’s always going to stay flat or go up, there’s risks along with that too. So, diversification, understanding that sometimes we do run across periods of time where we just kind of have to take our medicine where all markets have been up for the most part over the last 12 years. There’s going to be times where we run into corrections, which is kind of what we’re dealing with now. And we have to be patient and try not to go overboard with overreacting to the short period of time. Sometimes looking at the lens through the last, even one year, two year, three year period of time and realizing that in the scheme of things we need to just kind of stay steady.

 


Nick: But yeah, in general, I would say that making sure that you kind of do an update on what you feel comfortable with from a risk parameter. Now is a good time to reevaluate that. Because what we have seen is that people have been comfortable with a certain amount of risk over the last 10 years, because things have just been going up. And so now that things aren’t just going up, what they thought of risk and how they feel comfortable managing it is substantially different than it has been.

 


Mark: Yeah. Oh definitely. Our risk tolerance level’s been like, yeah, I’m fine. I’m fine with the risk. I’m fine. Whoa, wait a minute. I’m not so fine now, right?

 


Nick: Yeah. The risk over the last 10 years has been okay. I’m okay getting 8% instead of 15%,

 


Mark: Right.

 


Nick: Not oh, I’m okay being down negative 11 versus negative 20.

 


Mark: Yeah. Yeah.

 


Nick: Everything’s been more on the positive side of things and even with COVID, we had the fastest bear market in history where it boomeranged right back up. And so even though that only happened a couple years ago, people have already forgotten about that.

 


Mark: Oh yeah. Yeah.

 


Nick: So, yeah. And I can’t emphasize enough the importance that this sheds on having a plan and thinking longer term.

 


Mark: Well, there you go. So that’s some countdown items to think about for the days towards retirement, sixth list, list of six things there, excuse me, that you can think about and address towards your retirement strategy. And those are the things that you’ll go through when you have a plan put in place when you’re working with a team like the team at PFG Private Wealth. So if you’re not, then reach out to them and have a conversation, set up some time to get that started, pfgprivatewealth.com, that’s pfgprivatewealth.com. That’s got all the tools, tips, and resources there. You can schedule some time. You can reach out to John and Nick and the team and get started that way. Of course, you can also find the podcast, subscribe to us on whatever platform you like to use there. So you can catch future episodes as well as check out past episodes. Again, pfgprivatewealth.com. That’s going to do it this week for the podcast for John and Nick. I’m your host Mark. We’ll see you next time on Retirement Planning Redefined with John and Nick from PFG Private Wealth.