Ep 24: Importance Of Risk Management & Asset Protection

On This Episode

When it comes to retirement planning, many people focus on filling in an income gap, or making sure they will have enough money to get them through retirement. While this is fundamental to the plan, it’s important to make sure your assets are protected. John and Nick will explain what investment vehicles have some sort of protection and will also give a hypothetical example.

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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:

 

Speaker 1: Hey, everybody. Welcome in to Retirement Planning – Redefined with John and Nick of PFG Private Wealth, serving the Tampa Bay area. Thanks for tuning into the podcast. As we talk investing, finance and retirement, and we’re going to jump in and get started with the conversation. Guys, I hope you’re doing well. We were kind of laughing right before we started the session recording here that John’s been doing some swim lessons with his kids and it’s been going really well. And I wanted to make the joke that Nick, you finally learned how to swim.

 

Nick: Yeah, no, all joking aside, I can swim and swim well, but besides that-

 

John: You’re welcome, Nick. We’ve been doing some Zoom swim lessons [crosstalk 00:00:41].

 

Speaker 1: Zoom tutorials on swimming.

 

Nick: Yeah. I get in the bathtub with goggles and see what happens. But no, I’ve been doing well. Things are starting to slowly get back to normal from the standpoint of, I want to say last week I went out to dinner for the first time at a restaurant outside in a few months, so that was pretty cool. So things are slowly starting to get back to normal, although it’s going to be interesting is some of the numbers seem to spike here, how things will adapt over time, but no complaints, no complaints here.

 

Speaker 1: Yeah, it will be interesting to see as this cluster bang of a year continues to wobble on. So we’re about halfway through 2020 at this point. So we’ve still got a lot to go, so we’ll see how it shakes out. But that’s good. Glad to hear that there’s some good positive spots here and there. So let’s jump into our topic. So let’s review the importance of risk management and asset protection. Let’s just start with a basic overview, Nick.

 

Nick: Yeah. So for those that are listening that have been through our class that we hold at the local colleges, this will sound a little bit familiar, but we’ve had a couple of things pop up with clients and questions from friends and things like that. So we thought it would be a good topic to re-review where oftentimes people get focused on the fun or more exciting aspects of planning, which may be investments or talking about retirement and those sorts of things, but really risk management is a super important part of overall planning because really the objective is to increase your probability for success by reducing your risk. And then ultimately, overall the goal by doing that is to do it while keeping your costs down. So when we go through the planning process with clients, we do review their property and casualty insurance. We’re looking for how their accounts are titled. We’re looking and analyzing things from the standpoint of, “Are we making sure that things are protected?”

 

Nick: So we always like to make sure that people do realize, because it isn’t necessarily something that is top of mind and oftentimes, when you talk to people, the reality is that when they’re shopping out their homeowners insurance, their car insurance, they end up having been with the company for a long period of time. Usually it’s price dependent. So we’ve seen where people made a change to cut costs, six, seven, eight, nine, 10 years ago and now they’re in a completely different financial situation and they haven’t made adjustments to correlate to that from a risk management standpoint. So we just kind of want to walk some people through that.

 

Nick: So one of the first things that we review and talk about and help people to understand are that, there are certain assets that are creditor or protected in the state of Florida. This is something, again, we’re not attorneys, we’re not property and casualty agents, but these are topics that we review. And this is one of the perfect examples of something there where we can provide feedback, give you help, provide you with questions to ask and then help connect you with or you connect with an existing relationship that you have with a property and casualty agent, with an attorney if there are legal documents that need to be involved, that sort of thing. But in the state of Florida, it’s important and many people know that you can declare your primary residence as your homestead.

 

Nick: And there are a lot of protections built into declaring your home a homestead. So many people just focus on the tax benefits and that’s one thing, but really it provides a creditor protection and asset protection for your home. So that’s a big deal. If you own non-qualified annuities and/or have life insurance that has a cash value component to it, those are protected in the state of Florida. Qualified accounts, so in other words, 401k, IRA accounts, those accounts are protected in the state of Florida. One kind of caveat to that where we’ll have some people say, “Well, hey, I’m 60, 70 years old and I’ve got these accounts and my home, why do I need any sort of additional protection?” And one of the things that we like to remind people are that those qualified accounts, you do have to start taking money out at a certain point. And at the time that they go from qualified to non-qualified that becomes something that could be available.

 

Nick: From the aspect of different types of trusts, there are certain types of trusts that can be set up to provide protection for assets that’s absolutely 100% in the realm of working with an attorney. John’s going to talk about one of the misconceptions that a lot of people have when it comes to trusts. And just a basic thing that is important for people to consider, let’s say you own a business and you are not structured as an LLC, you could be putting yourself a little bit of risk from that standpoint.

 

Speaker 1: Yeah. Certainly there’s a lot of pieces in there. So again, homestead, annuities, qualified accounts, LLC, certain trusts, some of these things are the protected assets or at least in Florida. John, what are some of the non protected?

 

John: Yeah. So some of the non-protected assets would be cash accounts or your bank accounts, things like that, CDs, non-qualified investment accounts. Someone might have a brokerage account that they’re just putting money into monthly, or just maybe just put a lump sum in there. Just understand that just because your retirement accounts are invested and you have investments there and they’re [inaudible 00:06:27] protected. If it’s in a nonqualified account with investments, it’s not protected.

 

John: One other thing with the qualified accounts is to understand that there are limits to what is actually protected. So actually an ERISA plan, which is a 401k, 403(b) type plan, it’s typically fully protected, no matter what the amount is and IRA, and this does go up, it used to be a million, and I believe right now it’s about 1.3 million if an IRA is actually credit protected.

 

John: And then a recent rule change in the past few years, inherited IRAs are no longer credit are protected. So it’s important to understand that if you inherit an IRA from somebody, it is not credit protected at all. Something that will come up, Nick mentioned with the homestead where your primary home is credit protected, any secondary home you have is not. So that’s a misconception we see sometimes if you have a rental property, or let’s say your, like a second vacation home, it’s not credit protected. And then with the businesses, if you’re a sole proprietor and you never develop any type of LLC, so example I have a [inaudible 00:07:32], but I’m not LLC, that is not creditor protected. So that’s why it’s important to, if you’re working with an attorney, you want to ask these questions, “Hey, should I create an LLC with the business?” And you definitely want to have them help you draft the documents so they’re done correctly.

 

John: One of the biggest questions we get when we’re doing planning and part of the planning is we look at the estate side of it. We don’t draft any documents, but we are knowledgeable enough to have people ask the right questions and point them in the right direction. But it’s with trusts. A lot of people feel like, “Hey, if I set up a trust, does that protect my assets?” And if it’s a revocable trust, the answer’s no. So a revocable trust basically just get to the meat of it. You still have control of that trust. So you either are owner of it, or you make decisions of it. And basically with that, it’s still considered part of your estate [crosstalk 00:08:22] and for that reason it’s not credit protected.

 

Nick: Yeah. And just for further emphasis on those protections kind of tend to kick in after you pass and the trust stays, but while you’re alive, it’s includable in your estate and it doesn’t provide those protections. And one other caveat or thing to consider think about are for those non-qualified accounts, non-qualified investment accounts or non IRA, if you hold them jointly in the state of Florida using Tenancy by the entirety for those types of accounts, if you hold it with a spouse, so it has to be with a spouse to use that, that does provide some additional level of protection. Although it’s not the same as like a retirement account per se.

 

John: Definitely, as you can tell, it gets confusing. So you definitely want to ask the right questions if you’re wanting to know what is and what isn’t and just asks the right people and adviser will know enough, and attorney would definitely be the best resource.

 

Speaker 1: Yeah. I’m definitely say if you’re working with an advisor, obviously bring the conversation up with them, have them bring the attorney in and so on and so forth. And of course, John and Nick can help you in that arena as well. Now you mentioned property and casualty, so let’s do a quick review of that as well. What are some things to consider?

 

Nick: Sure. So the main types of property and casualty policies that people are going to have are going to be their car insurance, homeowners insurance, and maybe an umbrella policy. So one of the examples that we tend to give from the perspective of a car insurance policy is, really just walking you through a scenario. So when you look at your car insurance policy, you’re going to see that there are limits that are provided, that are referred to liability, and then you will see a designation for what’s called uninsured motorist or UIM.

 

Nick: So the example that we usually use is, let’s say John and I are both driving down the highway and we get into an accident. So we’re both in our late 30s, business owners, our incomes continue to go up. John has a family, I don’t, but if something happens to me, I do have assets going to parents and brother and that sort of thing. So let’s say we’re driving and we get into an accident and because John likes to multitask a lot, he was texting and it’s his fault. So we’re going to blame him. So I have the-

 

John: Wait, wait, wait, full disclosure, I never text and drive. I do multitask, but I do not do that.

 

Speaker 1: Good [inaudible 00:10:57].

 

Nick: That’s good. That’s good. So we get into an accident. I have damages, fairly serious damages and I’m going to go ahead and I’m going to sue him. There’s kind of a negative connotation oftentimes with the whole aspect of suing somebody, which the reason that we use this example is because, here we are, we’re friends, we’re colleagues, in many ways business partners, that sort of thing. But the reality is, is that if there’s damages and mistakes happen and mistakes are made, ultimately my responsibility for me and family is to try to become whole again, from a financial standpoint. So I go ahead, I sue him. The first thing that’s going to be reviewed and looked at are going to be his liability limits. So the liability limits protect him from lawsuit, from somebody else when he is at fault, essentially.

 

Nick: So let’s say he has one of the most common levels of coverage that we see is what’s called like 100/300. So what that means is 100,000 per person in the accident, a total of 300,000 in the vehicle. So in this instance, in this situation, I’m the only person in the vehicle, so the maximum amount of his car insurance company is going to pay out that they’re going to send their lawyers to deal with this lawsuit, the maximum amount that they’re going to pay out is 100,000. If I happen to have other people in the vehicle, that’s where that 300,000 limit would come into play. But let’s say my damages are 250,000 and the most his insurance company is going to pay out as the 100. So, now what? So at that point, what’s going to happen, there’s going to be kind of a different phases. So I’m going to have an attorney. And my attorney is going to look at, “Hey, does John have additional assets that are not protected, like we talked about earlier that are available through suit?”

 

Nick: So that’s something that he’s going to request, some sort of inventory, financial inventory, asset balance sheet via the lawsuit. The other thing that they’re going to look at is, “Hey, Nick, do you have uninsured motorist coverage?” And luckily because I do this sort of thing I have planned ahead and I have uninsured motorist coverage. So what uninsured motorist coverage does is it protects me in the case of having damages that are above and beyond what the person who inflicted the damage has. So in this case, my limits for uninsured motorist, let’s just say there are 250,000, I can essentially sue my own insurance company to fill in that gap, to get me up to that 250,000, so that coverage has protected me.

 

Nick: So the liability limits protect the person at fault against the person having damages and not having enough coverage. So, because we do see people oftentimes outright reject uninsured motorist coverage, and knowing that, especially in the state of Florida, people are often underinsured or uninsured, having uninsured motorist coverage is something that we think is important to have a level of protection.

 

Nick: So the same scenario, I was injured and John had coverage and I had substantially much more significant damages. Let’s say that I was permanently disabled and I wasn’t going to be able to work anymore, so the amount that the amount of protection and coverage that I’m looking for is going to be substantially more than the 100,000 that John has, or even the 250,000 that I have in the uninsured motorists. And that’s where something like an umbrella policy could come into play. So what an umbrella policy will do is, it’s a type of coverage that essentially goes above what you have for the auto coverage.

 

Nick: So an umbrella policy can be both liability and uninsured. So in this example, what we’ll use for the example is we’ll say, “Hey, Nick has an umbrella policy. And because my damages were a million dollars and John’s insurance company has paid out 100,000, my insurance company has paid out 250,000, there’s still a gap of 650,000. Essentially, I can go ahead and sue my insurance company from the standpoint of the umbrella to try to fill in that additional gap. So if John had had an umbrella policy, they would have tried to use that for protection. But in this scenario, me having an umbrella policy and being the one that had the damages really comes to the point of being able to protect me in my assets.

 

Speaker 1: Yeah. And certainly it’s important to review your risk management, your asset protection, because something like an accident can certainly derail retirement plans, it can really wreak a lot of havoc and other things that you had going on as well. There’s countless stories out there along situations like that. So if you’ve got some questions or concerns about this week’s topic, and you need some help, reach out to John and Nick, and of course they can help point you in the right directions for some of the things they don’t do as mentioned earlier. It’s always important to review and have these conversations about all these little assets. It’s not just about income, which obviously that’s super important in retirement, but there’s all these other little facets. So this week we focused on some risk management and asset protection when it comes to some of the things that are protected in Florida, not protected and a bit about the property and casualty as well.

 

Speaker 1: So reach out to them if you’ve got questions on these topics at 813-286-7776, to have a conversation about your own situation, 813-286-7776, or share the information with a friend who might benefit from that well and go to pfgprivatewealth.com to learn more about John and Nick and their practice, pfgprivatewealth.com, a lot of good tools, tips, and resources. You can also click on the podcast page, you’ll see that right at the top. And you can subscribe to us on whatever platform you like to listen to. And we would certainly appreciate it. Guys, thanks so much for your time this week. As always, I appreciate all that you do to help us out here and continue to do a good job with those swimming lessons there John.

 

John: Thanks.

 

Speaker 1: And Nick, maybe one day, you can take the floaties off, you’ll be good.

 

Nick: Hopefully.

 

Speaker 1: All right, guys, have a great week. We’ll talk to you soon. Stay safe, stay sane, and we’ll see you next time here on Retirement Planning – Redefined.

Ep 23 : Should You Be Thinking About Refinancing?

On This Episode

With rates being at historic lows, a lot of clients have been asking questions about refinancing. So this week we answer the biggest questions people have.

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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:

 

Marc: Hey everybody. Welcome in to this edition of Retirement Planning Redefined with John and Nick from PFG Private Wealth. And we’re here today to talk about investing, finance, and retirement. And we’re going to talk about refinancing actually a little bit here on this first podcast. Guys, what’s going on? Nick, how are you, buddy?

 

Nick: Doing pretty good. We’re staying busy. Today we’re in the little bit of a midst of a market pullback, so today’s been an interesting day. But besides that pretty good.

 

Marc: Good, good. Yeah, it’s been a little all over the map the last week or so the market has been for sure. So John, how are you, my friend?

 

John: I’m good. I’m good, I’m actually just started coming back in the office this week. So it’s been nice to say the least, although I miss seeing my kids 24/7, it’s nice to have a little break from screaming madness. It’s a good change.

 

Marc: Yeah. A little mental break from time to time is certainly a good thing. Well, I mentioned we were going to talk about refinancing. So a lot of people have been sending questions in that they are thinking about it with the rates being what they are. So let’s dive in and talk about it. Why refinance?

 

John: Yeah. So over the last month, Nick and I have got a lot of requests of just really helping clients as far as just analyze, “Hey, you know, the rates are dropping, and is it now a good time to refinance?” And, full disclosure, we’re not mortgage brokers. We’re not in that industry, but we’re familiar with our clients’ situations. So we’re able to at least help them navigate and ask the right questions in this situation. So we’ve definitely seen an uptick over the last month. So we figured this would be a good time to kind of discuss it.

 

John: So just understanding really initially what a refinance is. And it’s basically, you’re taking your current mortgage and you’re paying it off with a new one. Some reasons why you might want to refinance is obviously the biggest one is lower interest rate environment, which we’re seeing currently. And when interest rate’s lower, and Nick correct me if I’m wrong, typically rule of thumb, a 1% drop, you may want to look into it. It could really reduce your monthly payments, and over time it could really help you build equity in the house as well, if you’re going to be in there longterm.

 

John: So, just a quick example. A 30 year mortgage at 5.7%, let’s say 300,000 mortgage balance. The payment on that’s about $1700 per month. Let’s say the interest rate’s dropped to 4%. That same 30 year mortgage payment’s going to be about $1432, roughly $271 per month saving. You’re looking at about $3,250 per year, which is a pretty big number. And then especially if you’re looking at, if you still have 20 years left in the mortgage, that can really add up. So, that’s one thing you want to consider.

 

Nick: Yeah, I would say one of the other times where it can make a lot of sense is, let’s say for example, you took out a home equity line a couple of years ago and use the home equity line either to make improvements on the home, purchase a second home, use it for a down payment on a second home, or whatever the reason may be. A lot of times those equity lines had a really, really good rate in the first year or two. And then they start to kind of jump up. So the consolidation of the two together, and while reducing the payment and also potentially reducing the term of the loan can be a really useful scenario, situation for people.

 

John: Yeah. And I’ll say one thing, when we do a lot of planning with clients, one of the biggest goals we see is, “Hey, I want to make sure my mortgage is paid off when I go to retire.” So now could be a good time to analyze and say, “Hey, I’m 10, 15 years out from retirement. Do I want to adjust to a 10 to 15 year mortgage?” And we’ve been finding in this environment, we’ve seen clients keep the payment the same as they’re currently doing, but they’re shortening the terms. So again, it’s really just a matter of your situation and what works for you.

 

Marc: Well, are there any right moves? I mean, how can we determine is it the right move to make, is there some things, some bullet points we can kind of consider? Obviously talking with the qualified professionals, the right people, goes a long way, but is there some things we could go through on our own checklist ahead of time?

 

John: Yeah, I mean, the main thing really is how much are you going to be saving monthly? So you kind of start there and evaluate that. And then you kind of look at it longterm. One of the biggest negatives with refinancing is the closing cost, which can range from application fees, to recording fees, and whatever else. And we’ve seen them range from 1% to almost 4% sometimes.

 

John: So you want to evaluate, “Hey, is it worth refinancing, incurring those costs into my mortgage?” And that’s where it’s important to work with someone to help you analyze and crunch those numbers. And one of the biggest things that we’ve seen, it depends how long you going to live in the home. So you want to ask for an amortization schedule whenever you’re looking at it to say, “Hey, if I’m going to only be in the home for 10 more years, does it even make sense to refinance this?” And that’s one of the biggest things I think people don’t take a look at, is just figuring out, “Hey, how long am I going to be in this house and does it make sense.”

 

Nick: Yeah. That term, that length of being in the home is probably the biggest reason that it may make sense for somebody not to refinance. Because the reality is that the monthly payment, if it’s staying the same or reducing, if it’s very small, because there are costs associated with refinancing, it may not make a whole lot of sense unless you have kind of a strategy and a longterm plan. So we have seen those scenarios where people have said, “Hey, we don’t plan on being here any longer than a couple of years, does it make sense for us to spend this, to do that?” And we recommended no, dependent upon the situation. So that’s absolutely something to keep in mind.

 

Nick: I will say as well, that there are companies out there that will kind of advertise “no closing costs” or “we pay your closing costs,” that sort of thing. And while that may be true, and they still may be offering good rates, one other thing to make sure you do is we always recommend get three offers from three different companies, banks or lenders, because we’ve seen, “Hey, we’ll pay your closing costs, but you’re going to pay more on the rate.” You know, they make it one way or another. But we’ve had clients recently getting quotes at anywhere from 2.5, to 3, 3.25, dependent upon the length of the term, dependent upon if it’s their primary residence versus a rental property, those sorts of things. So, all things to consider, keep in mind.

 

Marc: Well, if you are refinancing, some might say you’re resetting the clock. You’re adding years. I mean, obviously you’ve got to have these conversations. You might get a lower rate, but you might be tacking on more years.

 

Nick: Yeah. And I would say that it’s rare that we’re going to recommend anybody tack on any extra years. The one thing that I will kind of comment on is, their other habits have a big impact on whether or not something like that could make sense. So for example, if somebody is, by default, a very good saver, and let’s say a 30 year mortgage will add on five years. But let’s say it’s going to free up $500 a month. And the reality is that they’re not going to be in that home for more than another 10 years. And they’re really good at recapturing that money. So in other words, instead of paying that $500 a month, they’ve proven over time that they’re a good saver and they’re going to actually save that $500 or even set up a schedule to save that money right away. And maybe they’re very comfortable in the market and investing and their thought process is, “Hey, I’d rather have control of this extra $500 a month than have the lender or the bank have control of the money.”

 

Nick: That’s a scenario that we may consider saying, “Okay, that’s something that could make sense for you.” But I would say that it’s pretty rare where we’re going to really kind of give our okay or green light on somebody extending the term of their loan. Usually it’s keeping it the same, reducing it a few years, and if we can reduce it four to five, six years and keep the payment the same, that’s oftentimes a win for the client. Conversely, if the reality is that having that mortgage payment a little bit higher for them is a forced, quote unquote, savings by reducing their liabilities, that’s something that we take into consideration and that’s the important part of us understanding and knowing our clients, knowing their tendencies and helping to put them in a position to succeed.

 

Marc: Well, if you’re thinking about refinancing, again, you need to go through of these questions. Why do you want to do it? Is it the right move? Have the right conversations with the correct people. John, anything in the summary that you want to add as we kind of wrap up this podcast about this?

 

John: Really, just if you’re thinking about it, just make sure it aligns with your overall financial plan and your goals. It’s just important. You don’t want to do it just because the rate has dropped. You really want to make sure it makes sense for you. And we highly recommend working with people that understand your situation versus just someone random that’s just trying to go ahead and “Hey, let’s just do it” just to do it. So definitely want to do due diligence and make sure that aligns with what you’re trying to accomplish.

 

Marc: Yeah, because I’m sure a lot of people keep getting things in the mail, right. “Our rates are so low.” I mean, I think I get something probably almost every other week to contact whomever about refinancing. So, that’s a great point. You want to make sure that it works in conjunction with what you’re trying to accomplish and not just doing it for the sake of, because we keep getting hit with these things that are like, “Oh, let’s look at this rate.” So on and so forth, right. Have a conversation, make sure the whole scenario plays out correctly in the way that you want it to. And we talk about that often on the show anyway, is make sure whatever steps you’re taking, whatever you’re doing, it’s part of your overall plan and an overall strategy to get us to and through retirement.

 

Marc: So that’s going to do it this week for the show, Retirement Planning Redefined. If you’ve got questions again about today’s topic, make sure you reach out to them and let them know you’d like to have a conversation. We’ve already had quite a few people bring this up, which is why we talked about it today. So give them a call at (813) 286-7776. If you’ve got questions before you take any action, (813) 286-7776. You can also go to PFGprivatewealth.com. That’s PFGprivatewealth.com. Don’t forget to subscribe to the podcast by hitting the subscribe button on Apple, Google, Spotify, whatever application you like to use. But check the guys out there at the website. And with that, gents, I’m going to let you go this week. Thanks for your time, as always. I hope you stay safe and sane, and we’ll see you soon.

 

John: Thanks.

 

Nick: Thanks. 

Ep 22: Case Study- Implementing Roth Conversions

On This Episode

We spent last podcast talking about what exactly a Roth conversion is. Today we will examine a financial plan and see how implementing Roth conversions can potentially improve this situation.

 

Case Study Before Implementing Strategy:

Dual income Household: Ages 55 & 53 

  • Existing Accounts:
    • $500k Pre-Tax 401k Funds
    • $25k Roth IRA Funds
    • $50k Cash
    • Mortgage on the home – paying extra on mortgage ($250/m) (5% rate on 30 year loan, 10 years in)
  • Income:
    • Person 1: $110k
    • Person 2: $60k
  • Current Savings strategy:
    • Total Joint Savings 18% of income ($30.6k/yr.) – all into pre-tax
    • Each person has 3% company match for pre-tax ($5.1k/yr.)
    • Total being saved: $35,700
      • EE Contributions: $30,600
      • ER Contributions: $5,100

 

New Strategy:

    • Refinance Mortgage to a 15 year loan with significant reduction interest rate lowers total monthly payment, allows for $250/m extra payment recapture & additional $150/m savings
    • New Total being saved: $40,500
      • 401k EE Contributions: $21,400
        • Pre-Tax: $15,900
        • Roth: $5,500
      • 401k ER Contributions: $5,100
      • Roth IRA Contributions: $14,000
    • Person 1 strategy: EE Total: $23,600, ER Total $3,300
      • EE Pre-Tax 401k Contribution: $11,100 (10%)
      • EE Roth Contribution: $5,500 (5%)
      • ER Pre-Tax 401k Contribution: $3,300 (3%)
      • Max Roth IRA: $7,000
    • Person 2 strategy: EE Total: $11,800, ER Total $1,800
      • EE Pre-Tax 401k Contribution (No Roth Available): $4,800 (8%)
      • ER Pre-Tax 401k Contribution: $1,800 (3%)

 

Subscribe On Your Favorite App

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:

 

Marc: Hey, gang. Welcome into another edition of The Retirement Planning Redefined Podcast with John and Nick from PFG Private Wealth. Mark Kelly in here along for the ride as we talk investing, finance and retirement with the guys. And this week, actually, we got sort of a follow-up to our prior podcast. We’re going to talk about implementing … Really a case study about implementing Roth strategies into your plan, some things to think about there. Again, if Roth conversions are on your mind, this is a great podcast for you. And as always, if you’ve got questions or concerns, let the guys know. Reach out to them at PFGPrivateWealth.com. John, what’s going on this week, man? How are you?

 

John: I’m good. I’m good. Nick still hasn’t taken me up on that race offer, but I picked up some yoga in the meantime.

 

Marc: Oh, okay.

 

John: So, I’m doing well.

 

Marc: All right. So rowing and yoga. After a couple of weeks, you should be lean and mean and you should be ready to roll.

 

John: I’m trying. I’m trying to get in shape for when I go back out in public.

 

Marc: Did you get the quarantine 15?

 

John: Yeah. A lot of Oreos eating over here.

 

Marc: Oh, yeah. I hear you. Nick, how are you doing, bud?

 

Nick: Pretty good. Pretty good. Yeah, John’s definitely going to have to spend a little bit more time rowing before he can catch up. I’ve got a month head-start on him.

 

Marc: Oh, okay.

 

Nick: And luckily, the irony for me is because I’ve been forcing myself to get out I’ve actually been losing weight, which is kind of nice.

 

Marc: Oh, nice.

 

Nick: And going out to eat a little bit less. It’s funny when you see what kind of difference that makes, for sure.

 

Marc: Yeah. It really does. And everybody has their vice. Oreos, as John was mentioning. Everybody’s got their vice. Yeah, during the quarantine, in lockdown, I certainly was no stranger to my own vices as well. And I was like, “Yeah, this isn’t good. I’m getting fat.” Not happy about it so I’m right there with you, John. Wasn’t Oreos but just as bad.

 

Marc: Anyways, let’s jump into our topic this week and talk about this case study, really, and ways it helps you see implementing how a Roth conversion may or may not work. Nick, take it away. Give us a quick breakdown on what this is and just walk us through it.

 

Nick: Yeah. What we wanted to do with this session is kind of mix it up a bit where … One of the things that we found just communicating with people, especially in the classes that we typically do is when we walk through almost a little bit of a case study and give a sample example of a household, what they have in assets, what they have in income, how they’re currently saving and the things that we can do with pretty minor changes within the structure available to really try to improve their overall situation and planning.

 

Nick: The scenario that we had put together was a dual-income household, ages 55 and 53.

 

Marc: K.

 

Nick: And their existing accounts were pretty heavily dominant to the pre-tax side. Half a million dollars in pre-tax 401K funds. They had about $25,000 in Roth accounts, $50,000 in cash between checking and savings, 30-year mortgage … About 10 years in to a 30-year mortgage. And they were paying an extra $250 a month towards the mortgage to try to get it paid down.

 

Nick: One of the most common questions that people have when they come in to see us or come into a class is, “Hey, I’m saving. I’m doing a good job with saving. But am I saving in the right area? Should I be paying this extra money towards the mortgage, et cetera?” The breakdown in income was person one, $110,000, person two, $60,000 of income. So, total household income of about $170,000. And the reality is that both of them were getting a company match into their 401K and they were saving … Between the two of them, they’re saving essentially 18% of their income but they’re putting it all into pre-tax accounts. The Roth accounts that they have on their balance sheet are essentially accounts that they’ve had for a long time. They funded it early on and then at a certain point they got phased out because they made too much in income.

 

Nick: Their main question or, I should say, potentially goal when they came to us was, “Hey, again, we have a good income. We’re living comfortably. We live within our means. We save a good amount of money. But are we doing it the right way?” One of the first things that we did was evaluate the mortgage and, really, what we’ve seen in John’s work on these quite a bit with a few different clients is that mortgage rates have obviously dropped in the last …. These clients were 10 years in so mortgage rates have dropped. And they went ahead and spoke to their credit union and they were able to refinance. One of the things you always want to look into is try to keep down closing costs, et cetera. And they were able to reduce the payment.

 

Nick: And so, really, with rates where they are, they were able to go from having 20 years left on their mortgage to refinancing to a 15-year mortgage, which is something that they felt much more comfortable with. When we discuss mortgages, we always have the conversation of pure finance decisions versus a comfort level as well. They were able to reduce their monthly principle and interest payment by $150 a month over their 30-year. Essentially, what we’re able to do is we’re able to recapture the $250 a month that they were paying extra towards the mortgage to try to shorten it, take five years off the mortgage with the refinance and save an additional $150 a month. Really, we’ve got a $400 a month savings plus we shaved five years off the mortgage automatically. The goal being how do we redeploy that money?

 

Nick: John, any tips for people when they’re looking for refinancing on the mortgage and some things to look into?

 

John: Yeah. One thing, you just want to analyze what the rates are, what you’re currently at. I know a lot of people use the rule of thumb of basically if you can lower it by one percent it might be a good idea to at least look into it, and that’s where we start is look into it depending on what rates are and what your current rate is and then work with an advisor or some type of mortgage specialist to evaluate exactly, does this make sense for me? A decent website just to see where rates are at is BankRate.com. Just be wary putting your name into anything because we have had some people where they … “I put my name into this. I’m getting bombarded with phone calls from everybody.” BankRates is a good place to view but ultimately, you definitely want to work with someone and just figure out what’s best for your situation.

 

Nick: For sure. From there … Again, part of the emphasis for us, and I know that a lot of our listeners and our clients have heard us talk a lot about the importance of balancing … Trying to create some sort of balance or equity in portfolios from the standpoint of we want to diversify future taxation and current taxation. With this client, they were very heavy on the pre-tax. Half a million in pre-tax, only $25,000 in Roth dollars. Client one, essentially their plan at work allows for Roth 401K contributions where client two, their plan does not allow for Roth contributions. That’s one of these things where sometimes households we’ve seen when there’s a dual-income household they try to make everything even and it’s not always the best strategy when we look at it from a global standpoint.

 

Nick: The other thing that we’ve seen people not necessarily consider or quite realize or understand is that when their employer is making a match contribution for them, those match contributions are pre-tax contributions so there’s additional money going in. Previously, for the household, they were contributing on their own about $30,000 a year into retirement accounts and they were getting about $5,000 a year of company contributions. And now, after the refinance, what we’re actually able to do is increase the amount that they’re saving.

 

Nick: One of the first things that we’ll look at for clients is the income test on whether or not they have the ability to contribute to an individual Roth IRA account. This household came in underneath the limits, which means … And they’re over the age of 50, which means that all of them are able to contribute $7,000 a year into a Roth IRA account. The benefit, obviously, of having an individual IRA account is that they’re going to have some more flexibility on the investment options that they have and if they want to work with us and have us invest the money for them, they have that option. Whereas when they’re dealing with accounts that are strictly held at their employer they’re required to use the funds that are inside of there.

 

Nick: Previously, again … And I know it gets a little confusing in this sort of format, but essentially they were saving $30,000 a year pre-tax. Their employers were putting about $5,000 a year pre-tax. So, about $35,000 a year pre-tax into accounts and then another $3,000 a year into their mortgage, extra. Now what we’ve done is we’ve said, “Okay, we’re able to recapture those dollars from the mortgage and the total amount that’s going to be saved has increased up to $40,000 a year, which is a nice jump.” That breakdown is going to be $14,000 between the two of them into Roth accounts, $7,000 each. The employer contributions are staying the same, so that’s still a little over the $5,000. But client one, because they have access to both pre-tax and Roth options in their 401K, they’re going to put a little less than $16,000 a year into the pre-tax and about $5,500 into the Roth per year.

 

Nick: What we’ve done, in this case, is where previously they weren’t putting any money into Roth accounts, they’re not approaching $20,000 a year of Roth contributions that they weren’t completely aware of how to be able to take advantage of that. And again, we think that that’s a super important step to be able to build in diversification to not necessarily … If a conversion down the road makes sense for them, they can do a conversion. But if we can do it up front, take advantage of the low tax rates that we are currently in in this current environment and not have to worry about future brackets from the standpoint of dealing with conversions, this is something that really allows them to start to build up their Roth funds.

 

Nick: John, do you want to talk a little bit about … From the standpoint of how we might adjust their actual holdings and risk allocation in a Roth versus the traditional funds?

 

John: Yeah. One thing that you want to look at when you’re looking at allocation, overall funds, it’s typically … And I say typically because everyone’s situation is different. You want to be more aggressive or take a little more risk in the Roth IRA or Roth 401K accounts because that has more potential for growth so that gives you a little bit more, again, potential to have more money down the road in a Roth bucket, tax free.

 

Nick: Yeah. We like to try to capture that upside, especially because when you look at it from the standpoint of the total amount of funds when you look at the overall nest egg, the money that’s in the Roth is a lot less money so we feel a little more comfortable taking a little bit more risk with those dollars because it’s a much smaller chunk of the pie. And then we dial back the risk on the pre-tax dollars because that’s a bigger piece of the pie and try to create some balance. And for anybody that may have gotten tripped up with some of the details, because we know there are a lot of moving parts in this, we will have the breakdown in the show notes to be able to walk you through to check that sort of situation out; to see if something like that might make sense for you.

 

Marc: Okay. All right. Absolutely. Definitely a little bit different this week on the podcast, but it’s certainly and interesting way to take a look and see about how different strategies can be implemented into unique scenarios and help things along. As Nick pointed out, follow along with the show notes. They’ll have a break down in there for you, as well, on that. And anything else we need to wrap up with this week on implementing this case study that we were talking about?

 

Nick: I would say that the biggest thing is just for people to make sure that … Again, where people will often times analyze the decisions that they’re making from an investment standpoint is with the sorts of holdings they have and not necessarily with the types of accounts that they have. Just making sure that the methodology that you’re using and how to save and put money into accounts is something that you’re looking at and looking into, whether it’s with your employer, asking, “Hey, do we have a Roth 401K option in our plan?” And if not, getting a few people together to try to push for something like that can really open up options for you. That sort of process is always important.

 

Marc: All right. There you go. All right, folks. Great episode here this week on Retirement Planning Redefined. Hopefully you enjoyed this case study; a bit of a break down and look into implementing Roth strategies. Again, follow along with the show notes on the website. Go to PFGPrivateWealth.com, click on the podcast page. That’s PFGPrivateWealth.com and then you’ll see the podcast page. Click on that and you can follow along in the episodes. And, of course, subscribe to us if you have not yet done so on Apple, Google, Spotify; whatever platform you like to use for your podcast needs. And if you do have questions, if you do want to talk about a conversion or implementing a strategy, reach out to John and Nick. Let them know you want to chat by calling 813-286-7776. That’s 813-286-7776, serving the Tampa Bay area. Get on the calendar, have a chat with them.

 

Marc: Please, before you take any action you should always check with a qualified professional like John and Nick at PFG Private Wealth. And with that, guys, we’ll say goodbye this week. Hope you guys have a great week. Stay safe, stay sane and all that good stuff. For John, Nick, I’m Mark. We’ll talk to you next time here on the show and we’ll see you later on Retirement Planning Redefined. 

Ep 21 : Roth Conversions

On This Episode

With our tax brackets being at historically low rates, many people are looking at implementing Roth conversions in their plan. John and Nick will explain what exactly this concept is and how this may be able to save you some dollars on taxes in the future.

 

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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: Hey everybody. Welcome in to this edition of “Retirement Planning – Redefined” with the team from PFG, private wealth serving you in the Tampa Bay area. John and Nick once again with me on the show, as we talk investing, finance, and retirement. Nick, buddy, how’s it going? How you doing, man?

 

Nick: Pretty well. Pretty well. Just still kind of moving through this pretty crazy time, but no complaints. Pretty fortunate overall.

 

Speaker 1: Good. Good, good, good. John, how you doing, my friend?

 

John: Doing good. Doing good. Recently purchased a rower. Nick sold me on it. He got one about a month ago, and he’s been ranting and raving about it. And I joined the club. So, done a couple of sessions and excited to do a little more.

 

Speaker 1: A rower. So it’s like an exercise machine, like one of those rowing, or actually going out and rowing in a boat?

 

John: No, no. Rowing in my garage, an exercise machine.

 

Speaker 1: Gotcha.

 

John: Once I get good, I might link up to Nick and we’ll race down some fake river on a video screen.

 

Speaker 1: There you go. We’ll have to set that up. We’ll have to shoot that on Zoom or something. That’d be good.

 

Nick: Yeah, ranting and raving may be a little bit of an overstatement, but.

 

Speaker 1: Just a little?

 

Nick: As to be expected these days.

 

Speaker 1: Gotcha. Well, there you go. Well, hey, at least you’re exercising, doing things to stay fit. It’s good for stress and all that kind of stuff as well. So, always good.

 

Speaker 1: Well, listen. Today on the topic, basically we’re going to talk about Roth conversions. If you determined a Roth was right for you, are you interested in converting if we’re going from a traditional to a Roth? Things of that nature. So, we’ll just jump in and start talking about it here today on the podcast. John, let’s kick it off with tax liability. If you’ve determined that a Roth is right for you and you are interested, let’s talk about some of the key components to maybe consider in tax liability would certainly be one of those.

 

John: Yeah. Yeah. Just understanding how a Roth conversion works. When you convert a traditional IRA to a Roth IRA, you pay income taxes at your current tax rate, and in return for that, you’re getting tax-free withdrawals during retirement. And we’ll talk about different strategies with that as we go on on this. But just to give an example, let’s say someone’s taxable income is $100,000, and they meet with their advisor and decided it’s a good idea to do some type of conversion. They say, hey, let’s go ahead and convert $50,000 of your traditional IRA to a Roth. Your new taxable income for that given year is $150,000. So that’s how it would work from a tax liability standpoint. Whatever amount you’re converting ends up being added to your taxable income for that given year.

 

Nick: Yeah. And the biggest thing we like to just remind people when they do a conversion is they want to make sure they have the money off on the sidelines to pay that tax. They don’t want to do it with the converted money, especially if they’re under 59 and a half.

 

Speaker 1: Okay. All right. So, with some of the monies and stuff like that, you want to, again, make sure you’re having those conversations, to the guys’s point. So what kind of strategies should we employ to kind of work our way through this? Kind of like the lump sum approach, we do it over time? There’s lots of conversations out there about ways to go about a conversion.

 

John: Yeah. So one of the things that we do, we focus quite a bit on retirement planning. And when we do that, we’re able to actually model out and estimate what someone’s going to pay in taxes throughout their retirement. And we have certain scenarios where someone might go ahead and retire early. And let’s say, they retire at 62, and they don’t really have much income coming in other than maybe lowered social security amount or they have some non-qualified, basically non retirement assets that they don’t have to pay income taxes on. And we would look at that. There could be a period from 62 to 72 where they’re not paying much in taxes.

 

John: So what we’ll do is we’ll develop a strategy over that five to 10-year period where we’re actually converting the traditional IRA in increments throughout that period of time to really take advantage of that period of time where they’re in a lower tax bracket.

 

John: Well, if you look at that through the life of someone’s 20, 30-year time horizon, that can make a big difference in their overall tax liability throughout their plan. So it’s a nice thing to be able to look at and say, hey, what am I going to pay in taxes? And how can I take advantage of paying less ultimately overall? I know I’ve been talking a lot here. I’ll let Nick jump in on kind of the flexibility of having different buckets of money, whether it’s pretax and after tax, going into retirement.

 

Nick: Yeah, really, both fortunately and unfortunately, one of the things that we tell people that they can count on while they’re working and then in retirement is that there will be changes. And usually the area that there’s most often changes are in tax law. And we’ve seen that over the last couple of years. And so, sometimes people get a little bit caught up on the thought process of which is better, pretax or Roth money. And in our minds, and when we say it a lot, but we try to continuously emphasize it, is that it’s important to have options. And so, to have options, you need to adjust how you contribute or take advantage of Roth contributions and that sort of thing, so that not only are you diversifying from an actual investment standpoint, but from an account type standpoint, which means giving yourself flexibility from a tax standpoint as you take out withdrawals. We find that really, really important.

 

John: Yeah. And where that comes into real life is, let’s say someone wants to buy a car in a given year. They don’t want to take out a loan. You don’t want to take out 40 grand out of a taxable account. That’s really going to increase your tax liability, where if you had some Roth money, you might say, hey, I don’t want to pay any more taxes. I’ll just pull it from that. Or it could be some type of health emergency where it’s unexpected and you’re pulling 40 to 50 grand out in one pop for whatever reason. So, it’s nice to have that option to avoid paying unnecessary taxes.

 

Speaker 1: Okay. So, when we’re talking about doing these conversions, obviously clearly taxes right now are lower. And so, that’s something that is appealing to people, but we also have been dealing with this down market. Is that another component that should be obviously considered? And what’s your thoughts from a conversion standpoint with that in play?

 

John: Yeah. And everyone’s situation is different, and this is something that, this recent downmarket, some people took advantage of, where basically, the market dropped almost 30%, 40% from the high. And they went ahead and said, let me go ahead and convert my IRA and this lower balance, pay tax on the lower amount, so when it recovers, basically everything’s tax-free moving forward. So, just a quick example of that is, say you had an account that was a $100,000 before the market dropped. Assuming 15% tax liability on that money, and it’s a $15,000 tax hit if you were to pull it out. After a 40% drop, the account balance is 60 grand, and a 50% tax on that is $9,000. So you’re looking at about a $6,000 tax difference at that point in time. But the reason you would do it is obviously after market downturns, just typically recoveries and all that growth that you get is now tax-free moving forward. So, that’s a nice little benefit.

 

Speaker 1: Well, and again, any time you’re thinking about that conversion, always check with your advisor, always talk with an advisor. If you’re not working with one, reach out to John and Nick and have a conversation with them about it. But it’s certainly, even before the whole COVID thing in 2020, it’s just been a very popular conversation point, due to the fact that the tax rates that we’re in have been so low. So again, if you do have questions around, is it a good time to convert, should I convert, things of that nature, make sure you’re running your specific scenario past a qualified professional financial advisor like John and Nick. And of course, you can always reach out to them at (813) 286-7776. That’s (813) 286-7776. Or go to pfgprivatewealth.com.

 

Speaker 1: Okay, guys, another place to consider would be the legacy portion. Is that something we should throw into that mix for converting?

 

John: Yeah. So a Roth IRA is actually a great vehicle to pass on to beneficiaries because they receive it tax-free. So, some strategies that Nick and I have implemented with clients in the past is basically converting it so their heirs can get it tax-free, and kind of this scenario where someone doesn’t necessarily need the IRA money for income today. It’s more of a kind of a cushion for them. And the goal is to pass it on to kids, grandkids, whatever it might be. So, to just kind of give a situation here, client’s 68. Don’t need the money for current income. Tax bracket’s 12%, one of the lower ones. And kid’s, daughter’s, in a 35% tax bracket. So, the strategy that this person is doing is, over a 10 to 15-year period, again, going back to estimating the taxes, they’re converting pieces of the IRA to a Roth. Okay?

 

John: Now you’ve got to remember that retirement really is a 20 to 30 -ear period. So you could do this over 10, 15, 20 years. Okay? So during that 10 to 15 years, they’re basically just making all that IRA money. They’re paying taxes in a lower bracket. It’s becoming tax free. So when they do pass away, their daughter in this situation inherits it tax-free. In this current situation, the daughter is actually in a 35% tax bracket. So you could see it as a big tax savings there, because once the daughter inherits it, it’s all tax-free, versus her paying it at 35%. So, kind of just summary, the client pays the taxes at a 12% tax bracket, daughter inherits it in a 35% tax bracket, but it’s tax-free because of the conversions happening.

 

Speaker 1: Okay. And with the stretch going away, does that make that strategy more appealing at this point? Nick, what do you think?

 

Nick: Yeah, I would say, so previously what would happen if we had these kinds of conversations, in a good scenario, or I would say maybe a pretty typical scenario with what John just outlined is, maybe it’s a widow. And between Social Security and pension houses paid off, etc., so they have good income. They don’t really need to take much from their retirement account. They have a daughter that’s a physician, making a really good income. And the strategy is to pass the money down. Well, previously, they might have said, hey, if we pass traditional IRA money to the daughter, it’s not as big of a deal. Ideally, a Roth would be better, but with the way that stretch IRAs work, she would only have to typically take a small amount each year out, but do it over her lifetime. Now that that money needs to be taken out in a 10-year period versus over the daughter’s lifetime, the tax impact is much more pronounced and harder to navigate.

 

Nick: And so, we’re pretty confident that these sorts of conversations with those changes are going to happen much more consistently over the next couple of years. So, that’s just kind of a good example of why and how some of the recent changes make it important to be able to adapt and be flexible.

 

Speaker 1: No, I definitely agree with you. And obviously, there has been a lot of changes. There were changes to start the year. And then, of course, the COVID changes also altered some things. So, if you’re thinking about or have questions about, again, going over a Roth conversion, if it’s right for you, how you want to implement that into your overall plan, or maybe you don’t have a plan and you need to do all of those kind of pieces, well, reach out to John and Nick at PFG Private Wealth and let them know you want to talk about it. It’s certainly a huge topic point, and it can be a very beneficial component or tool to your retirement planning tool belt, if you will. So, definitely have that chat with them. (813) 286-7776. That’s (813) 286-7776. And don’t forget to subscribe to the show, “Retirement Planning – Redefined” on Apple, Google, Spotify, or whatever platform you like to use for your podcasts.

 

Speaker 1: We’ve made it available for you to find at the website pfgprivatewealth.com. That is pfgprivatewealth.com. A lot of good tools, tips, and resources to be found there as well. And of course, you can always just search it out by typing “retirement planning redefined” on whatever platforming app you choose.

 

Speaker 1: All right, guys, is there anything else we need to address with the Roth conversions this week before we go?

 

John: No, I think we’re good. Appreciate your time.

 

Speaker 1: Yeah. As always, we appreciate you guys stopping in, chatting with us for a few minutes. If you’ve got questions about those Roth conversions, again, reach out to them, folks, here on “Retirement Planning – Redefined.” John, Nick, you guys enjoy the rowing machines, and I’ll be looking forward to that competition coming up soon. And we’ll catch you next time here on “Retirement Planning -Redefined” with John and Nick, financial advisors at PFG Private Wealth.

Ep 20: Peeling Back The Curtain

On This Episode

On this week’s episode, we check in with John and Nick on how things are going personally with their families, communities and clients.

 

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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: Hey, everybody. Welcome into this edition of Retirement Planning Redefined with the team from PFG Private Wealth. Got John and Nick here with me as always, financial advisors. Guys, what’s going on? Nick, how are you, my friend?

 

Nick: Oh, doing pretty good. Just been just like everybody else, working remote, working from home, kind of biding my time through this process.

 

Speaker 1: Yeah. Yep. John, yourself?

 

John: Yeah, pretty much the same. Like Nick, working from home and just keeping myself occupied with some things to do around the house.

 

Speaker 1: Yeah. I saw somebody, a lot of times people say, well, we’re all on the same boat together. And I thought, I don’t think that’s quite accurate. And so, I saw something that was cool. It said, we’re all in the same thunderstorm together, but we might be rowing different boats. And I thought, that’s probably a little more accurate. We’re all in the same massive storm here and everybody’s got different little nuances. The different states are doing different things, different people are dealing with economic issues, issues different than others, health issues, personal issues, stress issues, whatever. So it all falls into a same storm category. I thought that was kind of a cool way of putting that.

 

Nick: Yeah, I think the personal experience that people are having, like what you said, is pretty drastically different from not only region to region and state to state, but family to family.

 

Speaker 1: Yeah, true.

 

Nick: Dependent upon what occupations are and/or just … there’s so many different factors that it’s going to be interesting to see what movies come out down the road and the different forms of media and when we can actually look back and just kind of-

 

Speaker 1: Oh, yeah. That’ll be really interesting. Yeah, for sure. Well, we’re going to go easy today, actually. We’re just going to keep it in this vein. We’ve been spending so much time talking, doing multiple series parts on different things. We thought we would just scale it back a little bit this week and just have a conversation about just life and just peel the layers back, if you will. So we kicked it off a little bit with personally you guys are doing okay. How’s the families? Everybody okay there?

 

John: My end, yeah, everyone’s good. We got to just remind some people listening, I got a one year old named Aria and a four year old named Olivia and my wife Jenny. So yeah, we’ve just been quarantining here and trying to keep them busy, and they’re definitely keeping us busy. Nick knows, I threw out my back a couple of weeks ago. I think I was just chasing around the kids and then doing way too many home projects now that I’m stuck at the house half the time, so.

 

Nick: I definitely, I haven’t thrown out my back and I also have not had to chase around a one year old and a four year old. But I’ve been able to, a couple times, spend some time with immediate family, parents, brother, sister-in-law, nieces. And my brother and sister-in-law, they’re still working. My sister-in-law is a nurse and my brother has a business that’s considered essential. And so, my nieces are nine and 10. And so, my parents, they haven’t been working because of everything. And so, they’ve been able to take care of the nieces that’s extra time with them. I got to see the experience of what it’s like for them to attend school remotely and some things like that. So it’s been a little bit different perspective.

 

Speaker 1: Are you zooming in and being a guest teacher for a day? Uncle Nick going to teach them about whatever?

 

Nick: No, definitely not. I quiz them on some things here and there, but some of this common core stuff and some other things, it’s pretty, pretty wild. So I’m there for moral support.

 

Speaker 1: John, you got to give us the skinny. Can he substitute teach?

 

John: Definitely not.

 

Nick: Only due to patience.

 

Speaker 1: You got the math down, right, but the patience level maybe is a little different?

 

Nick: I could present and not allow any questions.

 

Speaker 1: There you go. There you go. Community-wise, how’s things in your specific area? We pulled the curtain back before here on the show. Clearly, you obviously were social distancing. We’re all remote in our houses doing the podcast, but even prior to that, we were already doing that because I’m actually in another state when we do these shows. Of course, you guys are there together at the office or whatever the case might be. But how’s the community near you? How’s things going there?

 

John: Yeah, so pretty good. Nick and I are both involved with a nonprofit group called the 13 Ugly Men. And one thing that we did as our membership here, we did Feeding Tampa Bay. So we donated a hundred thousand meals to those in need during this time that you need to eat and don’t have the funds to go ahead and do that. So that was pretty cool, because we did a match donation and then we coupled it with a Facebook Live event where we had a DJ playing and then people were tuning in. Maybe they were bored at home and needed something to do during happy hour and they locked in and have a little bit of music to listen to. So it was interesting to see, using the Facebook platform to engage in our guests that usually attend our events and using that platform also to raise dollars. And again, Nick and I are both in that group together. And then, Nick’s also involved with Casa so he can jump on that because I know they did some type of thing, Nick, so.

 

Nick: Yeah, so Casa’s a domestic violence organization in Pinellas County in St. Pete and I’ve been on the board there for, it’s got to be over, around close to 10 years now at this point. And may have mentioned it in a previous podcast, but when this whole thing was starting, I had been following the news in pretty significant detail and my main venue to gather news is Twitter. And on Twitter, I had seen a post by the founder of the company Slack, which is a tech-based company that’s actually stood out over this period of time. I know they’ve gotten a bigger footprint during this period of time, but…

 

Nick: So the founder of Slack, they had gone public last year, and he and his fiancé had created a foundation and they had decided to donate a million dollars total to four different sectors of nonprofits. And I had come across it and they did a matching program. It was a five-to-one matching program. So essentially, if a local organization that fit into their four tiers, and one of the tiers was domestic violence, if that organization was able to essentially secure donations and then forward the proof of donation to their foundation, they were going to match at five to one. And, pretty amazingly, we were able to rally both the board and local donors to raise, we raised $25,000 locally and the founder of Slack matched it with $125,000. And so, we were able to raise $150,000 in less than 24 hours.

 

Speaker 1: Wow.

 

Nick: Which was pretty awesome.

 

Speaker 1: Yeah.

 

Nick: So, it was pretty cool.

 

Speaker 1: No, both of those are amazing. That’s awesome, guys. Kudos for that. That’s really, that’s great. And I imagine that, obviously, those things are very well received. We’re seeing a lot of that stuff happening all over the place, but that’s really awesome. You guys are continuing to do that right there in the backyard, so to speak. And with your own clients, obviously, right there in your backyard, again so to speak kind of thing, how’s things going with that? We briefly talked about some of that a couple of weeks ago. Still going okay with the working remote? Are people adjusting to that a little bit better? How’s that going?

 

John: So yeah, I think people are. Nick and I have actually been doing, before all this happened, we started doing more remote meetings. And I think clients are finding that it’s actually a pretty efficient way to meet and it actually maybe helps us meet with them more often, where they’re not having to drive and coordinate schedules and it’s just a little bit easier. So I think one of the things we’ll see coming out of this is that we’ll probably, even when this is over, probably start doing more remote meetings with the screen shares. And then once we get back into the office, we’ll probably do more video stuff. But I think things are going to change and go more in that direction based on people just becoming familiar with the platforms and being comfortable with it.

 

Speaker 1: Yeah, it’s one of the things that we’ve seen a lot as well. I interview a lot of people all across the country and some, especially for the client base being retirees, pre-retirees, a lot more folks have embraced it I think than initially thought, which I kind of thought that’d be the case. I mean, just because you’re older doesn’t mean you’re not tech savvy. But I know that there’s points where some folks feel a little uncomfortable still and it is different, I suppose, being on a platform like Twitter or Facebook, for example, versus being on a Zoom call with a camera coming in and catching you in the living room. But again, you’re scheduling these things and you’ve got time. There’s secure ways to do document portals for transferring delicate information. And that stuff’s been out there, in the cloud anyway, for a while. So I am generally seeing across the country that more folks are embracing it than I think maybe some skeptics originally feared.

 

Nick: Yeah, I would definitely agree with that. It’s pretty typical. Oftentimes, whether it’s new technology or adaptation to what’s going on is oftentimes spurred by what’s happening around us. And so, the platforms have been around for a while and the reality is that they’re pretty easy to use once you get through it for the first time or so. And really, the communication with clients initially was getting everybody to hold the line. And one of the things that we’ve been seeing maybe for the past week, week and a half, maybe two weeks, and we had a conversation with a client today, is the disconnect between the market and what’s happening around us still being in … Florida is just opening up now, but a lot of other states are still locked down and things like that, is that the market’s responded and pulled back from its lows for the last month plus now.

 

Nick: And people, from what we’ve seen, they haven’t really caught on yet that the market has responded pretty positively and we’ve bounced off the lows pretty significantly. So, that’s one of the things that we’re going to be working on from a messaging standpoint moving forward is, obviously, we don’t know what’s going to happen over the next six to 12 months.

 

Speaker 1: Right, right.

 

Nick: From the standpoint of finances and the market and where things are, it’s not nearly, I think what a lot of people … the feedback that we’ve gotten from people is, when we’ve explained how much they’re down from the beginning of the year, has been like, “Oh, that’s it?” Which is always good to hear. But it’s been an interesting thing, because John and I are so knee deep in it day to day that it’s just a good example of the importance of communication, helping people realize where we really stand from the standpoint of how the market works and their overall plan.

 

Speaker 1: No, that’s a good point because a lot of people initially, obviously, do the ostrich thing, right? It’s going down as bad as it was in March. And you don’t want to open your statements, you don’t want to look. My brother, he’s 62, he was in that. I kept talking to him through things. And finally, matter of fact to that point, Nick, that you just made about a week ago, he finally looked and he goes, “Yeah, it wasn’t as bad as I thought.” And I said, “Well, April,” I said, “Technically April, it kind of got lost on the shuffle of all this, but April was one of the best Aprils the market’s ever had. It’s 28%.” Now granted, from the bottom, not from the top.

 

Speaker 1: But still, you got to find those silver linings, you’ve got to find those little victories where we can get them. And like you said, there could still be plenty of volatility ahead. Who knows? But doing the ostrich thing usually doesn’t do you any good either. Because I kept telling him, he’s like, “Well, I don’t want to look. I can’t handle it.” And I said, “Well, okay, but let’s go on the bad foot. If it was bad news, the sooner you find out, the sooner you can start to address it. If you just keep ignoring it, it’s like a cavity. It’s going to get worse.” I was like, “And then you end up being pleasantly surprised anyway.” So you have to look at it through the right perspective, the right lens.

 

Nick: For sure.

 

Speaker 1: Yeah.

 

John: For sure.

 

Speaker 1: Well, you mentioned Florida reopening. So how’s that going with the phase one thing? You guys have been on that this week, at the time we’re taping this?

 

John: So, yeah, yeah. It’s been this week. So far for me, I haven’t done anything different. I’m still in quarantine mode.

 

Speaker 1: Right.

 

John: So, I think one of the biggest differences is certain stores I’ve been to are now requiring face masks. So now when I go in there, you just see everyone with a mask on, where maybe two or three weeks ago that wasn’t the case. I don’t know what Nick’s been doing different, but I think we’re in the same boat.

 

Nick: Yeah. Not too much different on my side. I will say, because I do live in downtown, in downtown St. Pete here, it’s been interesting to … Each day I’ve either been going for a bike ride or a walk or something to get outside. And they started putting tables out. There’s a lot of sidewalk dining here, so they started putting the tables out because the restaurant capacity is 25% inside, and then they have outside seating.

 

John: Oh, interesting.

 

Nick: So starting to see some people sitting at tables and more people walking around. The beaches opened up on Monday. And the park that I go through, it’s called Vinoy Park here, the last month or so, every single day at the park has been, people did a pretty good job of distancing, but pretty packed. You could just tell people needing to be outside. And starting Monday, the park was empty, which is kind of shocking. So I don’t know if everybody that was going to the park automatically went to the beach. So it’s going to be interesting to see how things continue to progress.

 

Speaker 1: Yeah. Interesting in the state difference too. Obviously, you guys are in Florida, I’m in North Carolina. Your restaurants are doing outside dining and limited seating. We are in our phase one, but that’s not allowed. There’s still absolutely nothing inside restaurants at all. It’s still take out only. Which, it’s a strange point, we went to pick up some stuff for Taco Tuesday and my wife wanted, she said, “Let’s do Taco Tuesday.” And there was 25 people standing outside waiting to get their order. It’s like, you might as well just let them in or let a portion of them in, because there’s still that many people, there were in a pretty small window in a strip center trying to wait by this one door. So yeah, it’s interesting how the different areas are doing all the different things.

 

Speaker 1: So we’ll hope for continued improvement and all those good components that come with it. And I think what we’re going to do, we’ll wrap this up. I just wanted to touch base with you guys and just see how things are going. So I’m glad we just had a little bit of an informal chat, not necessarily the X’s and O’s this week. But I was going to ask you a question, just a fun little hypothetical I’ve been asking all this week. What’s something you’re looking forward to? If things get back to normal, what’s something you would enjoy seeing or doing once again? John?

 

John: So I’m looking forward to not doing swim lessons in my pool and bringing them back to a school, because I’ve been YouTubing how to teach a one year old and a four year old how to swim and I’m not a very good teacher. So that’s something that I look forward to.

 

Speaker 1: Okay. Nick, what about you? What’s something you look forward to?

 

Nick: For me, I just really look forward to sitting with some friends, watching sports, and perhaps eating something that tastes very good and drinking something that tastes very good.

 

Speaker 1: There you go.

 

Nick: Yeah, that’s what I’m thinking about.

 

Speaker 1: All right. There you go. I imagine neither one of you are in a boat alone for that one. There’s probably a fair number of those. Real quick, I was going to ask one more thing before we go. How’s your school systems looking? Ours have said that schools, as of now, plan to reopen in mid-August, which would be obviously for the next school year. I imagined since you guys sound like you’re ahead of us, they’re probably having those chats too?

 

John: I think the school, the current year is definitely not going to be … Nick, if you know, just jump in. I believe the current year is not going to be going at all.

 

Speaker 1: Right.

 

John: The plan is to start back up, which is mid to late August down here.

 

Speaker 1: Sounds like the same thing. Yeah. Okay.

 

Nick: Yeah, yeah. I think around the same idea.

 

Speaker 1: All right, well there you go. So-

 

John: And I’m sure all the parents are looking forward to that happening.

 

Speaker 1: I think that was one interesting side effect to all this. People are like, wow, the whole teaching home thing, it’s a lot harder than people think it is, so.

 

Nick: Yeah, I’m thinking that the teacher unions are getting their talking points ready to roll for a few months from now and working on a bump in pay, for sure.

 

Speaker 1: Exactly, exactly. Well, all right guys. Well, thanks for your time this week. I appreciate it, as always. I hope you guys continue to stay safe and stay sane. And folks, if you need some help, you’ve got some questions. Well, first thing, definitely subscribe to the show. We’d certainly appreciate it. And you can do so by going to Retirement Planning Redefined, you just search that out. Retirement Planning Redefined on Apple, Google, Spotify in the little search box for podcast. Wherever you get your podcasting apps, just type that in and you can find it and subscribe to it that way. Or you could go to their website, which is PFG Private Wealth.com that’s PFG Private Wealth.com.

 

Speaker 1: If you’re already subscribed or a client, then that’s great. We certainly appreciate you tuning into these. And if not, give them a call if you’ve got some questions or concerns, (813) 286-7776. That’s (813) 286-7776. But definitely hit that subscribe button and we’ll see you next time here on Retirement Planning Redefined with John and Nick, financial advisors at PFG Private Wealth.