Ep 47: Understanding Financial Jargon: Investment Terms You Should Know

On This Episode

There are some important terms you’re going to come across as you prepare for retirement. Having a basic understanding of these will help you achieve financial success, so we’ll cover what they mean and what you should know on today’s episode. And don’t worry. We won’t go quite so far down the rabbit hole where we expect you to be able to explain how a company’s P/E ratio meshes with it’s Alpha and Beta ratings to determine how much stock you should buy.

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

Here is a transcript of today’s episode:


Mark: Hey everybody welcome into the podcast. Thanks for hanging out with John and Nick and I, as we talk about Retirement Planning Redefined here on the podcast. As always, don’t forget to subscribe to us on whatever platform you like to use. Find all the information you need at pfgprivatewealth.com. That’s the guys website pfgprivatewealth.com. Lot of good tools, tips, and resources to be found there. We’re going to have another conversation today about some financial jargon. This is more kind of investment terms you might want to know or have heard and maybe you want to get a better understanding on, especially if you’re sitting down and you’re shopping for a professional or something like that. You want to kind of understand some of these things that you’re talking about. Now we’re not going to go super deep. We’re not going to get into PE ratios and alphas and betas and all that kind of stuff, but we’re going to keep it kind of high level. So we’ll jump into that this week on the podcast, Nick, what’s going on, buddy? How you doing?


Nick: Pretty good. Pretty good. Staying busy. We’re recording this, just kind of closing up tax season. So happy that that is over for-


Mark: I bet.


Nick: Everybody that is at least not filing an extension.


Mark: Yeah.


Nick: But yeah, it’s obviously a lot going on in the world. So it’s been keeping us pretty busy.


Mark: Yeah that’s true. Very true. John, what about you buddy? You glad tax season’s over?


John: Yeah. Yeah. It’s a fun kind of hump to get over.


Mark: I like that little pause. It’s fun. Yeah.


John: Yeah. So, no, it’s good. It’s kind of a mark that people have on their calendar, so that’s over with, and really we start to kind of get busy afterwards.


Mark: Yeah.


John: Because a lot of people kind of delay meetings until after tax season, so excited to get back at it. And then also excited that NBA playoffs started. So Boston Celtics are playing the Nets right now.


Mark: Alright now, there you go.


John: Gearing up for that, so-


Mark: There you go. Very good. Well we probably should have done a show really on tax planning versus tax preps right after tax season because really tax planning is something you should be doing all year long with your retirement professional anyway, but we’re not going to do that this week. Maybe we’ll do that here in the next couple of weeks, we’ll come up and do something.


Mark: But for now let’s talk about some terms that people hear and probably should know. Maybe you know, maybe you have that kind of cursory high level view, whatever the case might be. Maybe you don’t. So let’s talk about a few of these. Let’s kind of start with fiduciary guys. And this is a term that I think people should know. They should know what it is. I kind of wish, and I was thinking about this before we started that our politicians had to do what fiduciaries have to do, right? They have that legal, moral, ethical responsibility to do what’s right for their client AKA us as American citizens. I wish our politicians had to be fiduciaries, but either way explain what it is and maybe a little bit of the difference between that and like suitability.


John: Yeah. So fiduciary, especially in our world’s investment advisor, it’s where the fiduciary is obligated to put the client’s best interests ahead of their own. So really looking to do what’s best for the client, regardless of any other factors. And what you mentioned there with as far as, how does that compare to suitability, where kind of like a broker has to recommend something that’s suitable for the client, so there’s a big difference when you start to kind of analyze that is something might be suitable for you, but it might not be the best thing for your situation.


Mark: Right.


John: Or maybe there’s other things out there that are better. So fiduciary has the due diligence and say, “Hey, I’m making this recommendation. And based on my expertise, my knowledge, everything I’ve compared it to this is what I believe is the best for you.” And also if there’s any conflict of interests for the advisor as a fiduciary, they must disclose that to you upfront.


Mark: Yeah.


John: So one thing, what people really need to do when they’re interviewing advisors or kind of taking that step to try to find someone to work with, it’s really one of the first questions should be asking. I’d say the good thing is the industry is really going in this direction-


Mark: Mm-hmm (affirmative).


John: Over the last, decade or so. It’s really been kind of going, fiduciary, fiduciary, so that’s.


Mark: Making that the standard, making it more the standard?


John: Yeah. Yeah, no, I think that’s a great point. So if I’m getting this right, then maybe to kind of break this down for people, and Nick feel free to chime in, but so if there’s three options available, suitability would say, “Hey, any of these three technically work for my client, but this one actually pays me better or there’s a reward of a trip or something like that attached to it.” You’re not doing the wrong thing by picking that. It’s still suitable. Whereas a fiduciary has to go with the absolute best thing for the client period. Is that a fair way to break that down in layman’s terms?


Nick: Yeah, I think that’s a pretty fair way to kind of break it down and it can get tricky because when you really get into the nitty gritty in theory, people can argue about what’s better now versus what might be better down the road and that sort of thing.


Mark: Right.


Nick: But if anything, I think what’s important for people to understand is the conflicts of interests, the potential conflicts of interest and where they come from. So, if you’re working with an advisor that is tied in with a parent company that has proprietary products, then they’re probably not able to function as a fiduciary. So-


Mark: Gotcha.


Nick: Understanding that there’s a conflict of interest, a potential conflict of interest, there is just something that people should ask about so that they understand it. It can be from experience just kind of chatting with people. It can get a little overwhelming for people to kind of really drill down understanding the difference between fiduciary and standard versus a suitability standard. But people oftentimes understand conflict of interest. And just to kind of piggyback a little bit on your short little rant earlier about politicians, many people would be shocked to know that many politicians are able to invest in companies even though there may be conflicts of interests.


Mark: Yeah.


Nick: And the fact that’s able to happen. And there’s some websites that track those sort of things, but oftentimes they’re privy to information that will impact a company in the marketplace and they’re able to take advantage of it even though, the rest of the country can’t do that, so-


Mark: Yeah, I was just even talking financially. In just their basic decision making when they pass laws.


Nick: For sure. For sure. But that’s a good example of them not passing laws that-


Mark: True.


Nick: Aren’t good for everybody.


Mark: Well and to John’s point, so there’s nothing wrong with asking, right? When you go in and sit down with someone, you just say, “Hey, are, are you a fiduciary?” Right? That’s a fair question, and there’s nothing wrong with asking that.


Nick: Agreed.


Mark: Yeah. Okay. All right. So let’s move on to the other big term right now that everybody’s getting hit over the head with, on a regular basis, and that’s inflation. At the time we’re doing this podcast guys, the CPI numbers came out a couple of weeks ago for March, pretty ugly. Gross is a term that has been thrown around quite a bit some of these numbers, 8.5% on the inflation, we’re talking what 48% on gas, 35% up on used cars, food 13 to 17% up. So inflation break it down a little bit.


Nick: Yeah. So inflation has to do with spending power of money. And so one of the easiest ways for people to kind of think about it is, you mentioned food for example, one of the things that we kind of joke around with people is they were able to a couple years ago, do you remember when you could walk out of Publix and get everything you needed for 70, 80 bucks versus it now costing 100, $120 for the same amount of stuff. And the tricky thing with inflation is that it’s there on a consistent basis year to year, but every 10 to 15 years, it kind of creeps up on us. And then we realize, Hey, this is kind of annoying.


Nick: And then obviously we have times we’re in right now where there’s some hyper inflation and kind of pocket books are getting hit. The one thing that I would say just to kind of pour some water on it is that although there are some real substantial issues that people are dealing with, there are some kind of, I guess, what we would almost call acute factors that are having an impact on it, that we would hope subside to a certain extent within the next year or two. But also there are going to be ramifications that we’re already starting to see where the FED is doing things to try to combat inflation, like increasing interest rates, which we’re kind of already on the docket, but has been getting pushed down. The cans been getting kicked down the road for a while.


Nick: And so things like mortgages, mortgage rates are now I think mid fives I read, whereas a year ago, closer to three. And I was just having a conversation with somebody to kind of put that in real world numbers. A half a million dollar mortgage at rates a year ago, a half a million dollar financed amount is from a monthly payment standpoint is equivalent to around 370,000 now, or if you look at it inverse half a million dollar mortgage at current rates is going to cost you around $700 a month more than it was a year ago. So that’s going to have a real impact on housing prices and a lot of other things as well. So those are some real world examples of how inflation kind of impacts our life.


Mark: All right. So yeah, obviously we’re hyper aware, we’ve talked about it before a little bit, but inflation we always kind of think of, at least I do it anyway, like calories, right? We know it exists and we don’t often put a lot of thought into it until it’s slapping us in the face, so to speak. And it’s definitely doing that right now, so a lot people very concerned about that. So when we are talking about that, what happens is you start thinking, well maybe I should take a little more risk or whatever the case is with my portfolio to try to outpace inflation or keep up with it or whatever the case is, especially in these crazy times. So that leads us into risk tolerance guys. So what is your risk tolerance? And is that a wise move to try to take on more risk to combat something? Usually it’s not.


John: No, it’s not. And this is one of the most probably important things in building a portfolio that someone should really take a look at, and it’s often overlooked. So risk tolerance is, to kind of bring it down to the simplest form is how much loss is an investor willing to take in their portfolio? How much volatility can they tolerate? So one of the things that we do when we are building a portfolio for our clients, the first thing actually is we have them go through a risk tolerance questionnaire to determine, are they conservative, moderate, aggressive? And from there we really help us design the portfolio so that way we can kind of match up the expected volatility of the portfolio with kind of what they could bear.


John: Because one of the worst things you could do investing is jumping around. And I hate to say it seeing a little bit right now I’ve already kind of feel a few phone calls I’m like, hey what should we do with the market? And if this volatility’s already got you nervous and it hasn’t really, it’s been a pullback but it hasn’t been anything too significant.


Mark: Right.


John: You really need to take a look at am I invested correctly because as we all know, as you shift to conservative or to cash, and then the next week the market just rally up and all of a sudden you just lost all. You realized your losses and didn’t get to recover from it.


Mark: Yeah, knee jerk reaction is not the best right now. Right?


Nick: Yeah. And I would even jump in with that too going along with what John said where I think we have hit that point where people have forgotten what it’s like to have bad markets, or even a normal market cycle of having a negative year. Even during COVID when the markets pulled back, 35, 40%, they bounced back by the end of the year. So it was never really realized. There was a short period of panic, but the recovery was quick, but.


Mark: Mm-hmm (affirmative).


Nick: There’s a lot of people that don’t remember that hey, there are going to be years where the market is down 10% for the year, the whole year. 12 whole months, so that’s something that’s interesting that’s happening right now that we’re seeing. Plus, historically where people would shift would be to fixed income or bonds. And that’s not necessarily a safe place right now, either. So we’re kind of in this, almost unicorn phase that only comes along every 50 or 60 years where there’s not a lot of opportunities in many places. And so there’s going to definitely have to be some patience involved-


Mark: I like that.


Nick: In the next 12 to 18 months.


Mark: Yeah. I like the unicorn phase. That’s a good way of putting it. It’s definitely been interesting, that’s for sure. So do you guys kind of with the risk tolerance, is it kind of that number kind of system? Do you guys do that risk tolerance kind of thing where you kind of give someone almost like sleep number, if you will. If you’re 100 or if you’re a 20, how does that work?


John: Yeah. So how we do it and I’ve used actually some programs that do that. They give you a risk number based on how you answer questions. We have a set of some pretty good questions that give us an idea of what that person can kind of stomach.


Mark: Okay.


John: And what their expected return is. It’s really, when you start to break it down, it’s a lot of the same questions just asked differently to really kind of understand how the person ticks.


Mark: Yeah.


John: So we do a real good job of figuring that out. And then as advisors, part of our job is to make sure we put them in the appropriate portfolio based on how they answer.


Mark: Yeah. Because it’s pretty easy to say conservative, and you go, what does that even mean? Right? Or I’m moderate.


John: Yeah.


Mark: Well what does that mean? That’s probably a wide window, right?


John: It is.


Nick: Yeah. And then I would say one of the things that without it sounding like a commercial for ourselves, one of the things that we do that’s a little bit different than some places that we do have what’s called like a tactical tilt to how we manage money, where if we do have significant concerns, we will tamp down the risk. So maybe if somebody’s normally in a portfolio that’s a 50/50 mix stock to bond and what we would consider a moderate portfolio, if we have significant concerns in the market, we may drop them down to 30% on the stock side of things in certain cycles where we have high concerns. So sometimes what we found is that helps allay some fears for some people that there’s some proactive potential changes, where if we really feel like it’s going to hit the fan, we will make that change.


Mark: Right. Okay. So risk tolerance, another big one then definitely making sure that you’re having that proper risk tolerance for yourself, especially in these inflationary times. When it becomes, it’s hard to not feel, I think as humans, we feel like if we don’t do something, we’re doing something wrong or we have to take action or therefore we’ve made a mistake. And sometimes doing nothing can be a smart move. Especially in volatile times when it comes to a financial standpoint, if you don’t know the correct answer, making no move might be a good place to start at least. That way you’re not having that knee jerk reaction. And then of course, talk with a professional. Get some advice, and get a good strategy in place so that you know the right moves to make at the right time. Let’s do another one here, guys, another technical one, dollar cost averaging, what is that?


Nick: So dollar cost averaging is the easiest example that most people have exposure to on a regular basis. And they don’t probably realize that they’re doing it is when people are contributing to their 401k. So every two weeks, a certain amount of your paycheck goes into your 401k and you have a set allocation and you are buying in to that allocation at whatever price it’s at that point in time. So the thought process with dollar cost averaging is that you are balancing, you’re investing over a period of time. Where sometimes you’ll be buying at a premium, sometimes you’ll be buying at a discount, but the objective is to continually invest and make sure that you are not trying to time the market.


John: And part of that is also what we’re finding with the current market where it’s at, with people with money on the sidelines, it could be a good way to kind of take some of the risk of putting all your money into the market and all of a sudden it dropping. So there’s a strategy to basically say every, if I have 100,000 I want to put into the market every month or so, I’m going to be putting in 10 grand into it. That way, if it does dip down immediately, I only have $10,000 at risk. So dollar cost averaging, as Nick mentioned, most people are doing the 401k, not knowing it, but if you have money on the sideline in a volatile market, or if you’re nervous, it is a good way to kind of get money that was on the sideline into the market.


Mark: Okay. All right. Well let’s do one more guys and we’ll wrap it up this week. Asset allocation, another big term we hear. We probably get that tossed around a little bit. Give us the kind of high level view of what that is. And because often I think people wind up feeling like they have a whole bunch of one thing and they’re diversified because they’ve, I don’t know, for example, I’ve got a whole bunch of mutual funds, so therefore I’m good. So explain what asset allocation is and is that correct? What I just said, is that really diversified or not?


John: Yeah. So asset allocation’s kind of taken diversification to a different level. You could have seven different mutual funds, but if it’s all the same type of funds, for example, like a large cap growth fund, they’re going to do the same thing in reality when the market goes up or down. So when you do asset allocation, you’re spreading your money, your portfolio within different asset classes, such as large cap stocks, small stocks that Nick mentioned, fixed income earlier, cash, some alternatives.


John: So what you do there is when you’re building a portfolio and again, starting with your risk tolerance and your goals, you determine, hey my risk tolerance is X, here’s my goals. I should be in a, let’s just call it in income in growth portfolio. Well, what’s the right mix of asset classes to make that work and to kind of bring it down to layman’s terms here? Imagine kind of cooking, you’re making recipe for a pie. The pie has certain ingredients to make it work and make it taste good. And that’s basically what you’re doing in your investments. It could be 20% large cap, 5% small cap, 20% fixed income, and our job as advisors and wealth management is we build that portfolio for the client if they hire us to do so.


Mark: Gotcha. Okay. All right. That’s a good way of breaking that down. You just think about like a pie. So, and who doesn’t love pie? So there you go. All right guys, thanks so much for the conversation this week. Good stuff talking about these technical terms, some jargon here. Hopefully we kept that pretty high level and it helped out with some of the things that you might be thinking or hearing. And if you’ve got questions, definitely reach out to the guys.


Mark: As always, before you take any action sit down. If you’re already working with them, maybe share this podcast with someone who might benefit from it. If not, if you’ve been listening for a while, just reach out to them, have a conversation, and chat with them for yourself. You can find all of it at pfgprivatewealth.com. That’s their website pfgprivatewealth.com. They’re financial advisors at PFG Private Wealth, which makes a lot of sense. So make sure you subscribe on Apple, Google, Spotify, all that good kind of stuff. That way you can catch past episodes as well as future episodes. For John and Nick I’m your host, Mark. We’ll catch you next time here on Retirement Planning Redefined.

Ep 45: Planning For Things We Can’t Predict

On This Episode

There are certain things in life we just can’t predict. If we knew the answers to some of these questions, planning for retirement would sure be a lot easier. So let’s see how you go about constructing a plan that addresses the kinds of questions to which you can’t possibly know the answers.

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Check out all the episodes by clicking here.



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

Here is a transcript of today’s episode:


Speaker 1: Hey everybody. Welcome into another edition of Retirement Planning Redefined with John and Nick from PFG Private Wealth. Find them online at pfgprivatewealth.com. That’s p-f-g-private wealth.com, where you can check out a lot of good tools, tips, and resources, schedule some time with the team or subscribe to the podcast on whatever platform you like to use. And on the podcast us this week, we’re going to talk about planning for things that we cannot predict. There’s many things in life that are just out of our control, and we can’t predict. Yet, we somehow have to figure out a way to bring these things into the fold when it comes to our retirement strategies. And if we knew the answers, these things would be a lot easier to do, right? Just like saying, if we knew when we were going to pass away, you guys could build the greatest plan anybody’s ever seen, but we don’t come with a timestamp on us. So we have to figure out a way around some of these complicated questions and construct a plan that handles these, but also works with the unknown. So we’ll get into that in just a second, but what’s going on, Nick? How are you doing?


Nick: Doing pretty good. Thanks.


Speaker 1: Yeah, how’s the old puppy doing? I’ve got mine next to me right now while we’re taping.


Nick: Unfortunately she passed like a month ago.


Speaker 1: Oh, I’m sorry, buddy. I didn’t mean to do that.


Nick: It’s all right. Oh yeah, no, I don’t take it like that. I was going to say something earlier and then I just kinda left it, but yeah, it’s been a bit of a crazy month.


Speaker 1: I gotcha. I’m sorry to hear about that. It’s always rough when we lose our little furry friends there as well, but hopefully things will get better for you. And we’ll talk about something, you can’t predict that kind of stuff. Right? We’ll get into that kind of conversation here in a second. John, what’s going on with you?


John: Today’s topic is pretty fitting. I couldn’t predict that the house I bought had a loose AC drain and currently all the floors in my master bedroom and hallway ripped up. It’s going well, as well as can be. So we’re adapting to the renovations in our house currently. I just send Nick some pictures of it and he’s like, whoa.


Speaker 1: Oh, wow. Well, I put my foot in my mouth already to start the show, so we’ll get into it. But I guess that fits really well though with the over conversation is, because there’s a lot of things. I mean, life is unpredictable, right? Murphy’s law, whatever you want to subscribe to. And so we still have to somehow plan for some things, look at the state of the world, right? Who would’ve predicted 7.9% inflation rate, who would’ve predicted. What we’re seeing in the Ukraine and so on and so forth. So it all affects the financial side. So we’ll turn our attention there as we typically do. And a lot of times guys with what you do for a living, I imagine, and I talk to advisors all across the country when they meet people that do what you guys do for the first time, almost inevitably somebody goes, Hey, so when’s the next market crash, right? They kind of like you guys, somehow some know this magical information that when the next it crash is going to be, well, you can’t predict for that, John, but you still got to plan for being able to retire in any economy regardless of what the market’s doing.


John: Yeah. And this point I’m going to say, probably goes for all of these things we’re discussing today. Is you really want the flexibility to adapt for any, I don’t say any, a lot of situations that come up in retirement and one of those are, a market pullback or a crash, so things to put yourself in a pretty good position is, we kind of stress this, is having a decent cash savings. So if the market is crashing, you can rely on your cash savings for income during that period of time. So you don’t sell any of your losers and realize those losses. So there’s a lot of things you can, you can’t predict it, but you could definitely set yourself up in a situation where you can adapt to it, to put yourself in a good situation moving forward.


Speaker 1: Yeah. And as I mentioned on the last podcast, we were talking about the fact that we were dealing with overconfidence as one of the money biases. And the last several years, it’s been easy to get confident in the market, but when we start to see these downturns or corrections, like we’re going through right now, people get nervous and they tend to do the wrong thing. So you can’t predict when it’s going to happen, but you want to make sure that you’re setting yourself up in a way to work through that. And Nick, similarly, we could talk about healthcare costs, right? I mean, who knows what they’re going to look like in 20 years? Now a good bet is probably that they’re going up more than likely, right? Unlike the market crash, where there is some historical data, I mean, healthcare costs, the reality is we’re living longer. So more than likely these costs are going up, but how can you plan for that? If you don’t really know, you just have to start, kind of chipping away at this. Maybe.


Nick: Yeah. It’s interesting because this is one thing that we can probably lock in that it will go up and will continue to go up. But from a practical sense, in a practical standpoint, the things that we can do are from a planning perspective, make sure that when we’re planning for them, for these healthcare related expenses that we understand what’s involved. So as an example, a lot of people think about, well, Hey, I know that my healthcare expenses are going to get higher later on down the road, but many times they don’t understand. And when we see this all the time that even their cost for Medicare, when they switch to Medicare in retirement, there’s a decent chance it’s going to cost more than what they’re currently paying for their health benefits through their work.


Nick: And because a lot of people have that concept that it goes down versus most likely going up from a premium perspective for a lot of people. Using a higher inflation number for those healthcare premiums and healthcare related expenses, which is something that we make sure that we do with clients where we’ll use a three and a half to 4% inflation number on healthcare related expenses in the plan, which tends to be, one to two points higher than the rest of the categories in for inflation.


Nick: So, things like that where we can’t predict it, but at least from a modeling standpoint, we can kind of, use a prudent person rule of, making sure that we at least model those things to be a little bit higher and faster, increasing costs, especially when we look at how those plans are being financed by the government, which is not great.


Speaker 1: Yeah. And that’s a great point because even in normal inflationary times, right? What is it the two industries that outpace even regular inflation on the regular is college tuition, right? And healthcare. So while college tuition may not be affecting as many of retirees or as maybe pre-retirees the healthcare certainly is going to affect them. So you got to take that into account and definitely start strategizing for those healthcare costs. Putting your head in the sand is not going to help you out 20 years later when you need it. And John, you could kind of make that same argument really about the tax rates. Right? The Smart bet, the money is probably on the fact that yeah, they’re going up, but God willing, you’re going to live through multiple administrations in retirement. So, to say, well, what are tax rates going to look like three presidents from now who knows, right? Administrations are going to do what they got to do.


John: Yeah. And that’s where, again, it’s important to flexibility to adapt to the situation and how you get flexible is diversifying your assets from a tax standpoint. So, and you might want to look at, increasing your Roth contributions, if you have a Roth 401k at work or eligible to contribute to a Roth IRA. So that could be a really good strategy. So that way, if tax rates are up, when you’re taking your income, you could say, Hey, you know what, I’m going to take some of my tax free income this year or for these next couple of years. And you can really adjust to that situation. And not just only with Roths, but you could go outside of retirement accounts and kind of deal with capital gains. But then you got the same issue there with what are the rates going to be?


John: What Nick and I have been seeing quite a bit lately is clients really over funding their HSAs and not using them, just letting them build up for retirement. Cause that would be a nice tax free distribution, if qualified for healthcare costs, which also piggybacks what Nick was talking about. About healthcare costs, not knowing what they’re going to be. So there are definitely different things you can do to allow yourself some flexibility. And one thing that we typically do when we’re doing planning is we do stress test these things for certain clients. Where we’ll look at some kind of market pull backs. How does your plan look like if there’s a 20% pull back? What if healthcare costs go up? What if inflation goes up? So there’s definitely things you can do to prepare.


Speaker 1: Now. Those are some great points right there because we, again, we don’t know what’s going to happen. The smart money is taxes are probably going up, we’ve got 30 trillion dollars in debt. There’s almost 40 plus trillion dollars in retirement money sitting out there, the taxes haven’t been collected on. So if that doesn’t have a bullseye on it, you’re probably kidding yourself. So trying to be as tax efficient as we can today could be beneficial. Because again, we have no idea what it would look like three presidencies from now.


Speaker 1: So these are, again, things we cannot predict, but we certainly got to still plan for some of the options that are out there. And Nick, I joked earlier that if we had an expiration date stamped on us, like a gallon of milk, you guys could build the greatest, retirement plan for each individual that they’ve ever seen, but we have no idea how long we’re going to live. And I could use my own self as an example for the listeners. My brother died at 50, I’m 50. My brother died at 57, my father at 63, my grandfather at 60, be easy for me to say, Hey, I’m going to spend all my money between now and the age of 65, because I’m not going to be here. So I’m going to party. But yet that’s not responsible, because what if I’m wrong? Technology has changed. And of course, what am I doing to my spouse?


Nick: Yeah, this is always an interesting one. It’s probably the source of the most quote unquote jokes from people. Whether it’s clients or people that attend our classes, that sort of thing. And really from a practical sense where this comes in is, how long do we plan for? So when we’re building a plan 99% of the time, we plan to age 100. And when we plan to age 100 for clients, we can see what, how much money’s there at age 85 and age 90 and all those sorts of things. And the thought process is that if the plan works until age 100, then the probability of it being successful up into, 80, 85, etcetera, is much higher. And the plan, what it will also help us do is for those people that do want to make sure that they spend their time early on in retirement, really doing the things that they want to do, no matter how much bluster there can be about, because again, usually it’s some sort of internal insecurity or internal bias that has them talking about passing away early.


Nick: But sometimes what we found is that, really they’re just saying that because they don’t want to deal with the concern of running out of money. It’s almost in a weird sense, comforting that, Hey, if I pass away early, then I don’t have to worry about money. This planning thing isn’t important. I don’t have to stress about it. No big deal. So in actuality, when you go through the planning process and you do see where you sit and you do see, Hey, maybe I can do the things that I want to do and I can still, make sure that there’s money down the road for a spouse, all these sorts of things. It actually really kind of tick up the confidence and they will enjoy those things much more than having that uncertainty because, and I’ve seen it across the board because what ends up happening. I mean, and again, just seeing it being in this business, people that had that thought process 60 today, used to feel like 50 70 today feels like it. when people were 60, 15 years ago, nobody realizes how old they are, or they have this perception of that they’re going to feel a certain way. And usually that’s not the case. So, planning for all scenarios is really important.


Speaker 1: No, definitely. I mean, my mom’s always joking. She’s 80 and she’s forever saying, I don’t feel it. when I, if I’m not moving or if I’m not doing anything, I don’t feel like I’m 80. She’s like in my mind I still feel like I’m 30 or 40. She’s like until I look in the mirror or I try to move a certain way.


Nick: Yeah. And unfortunately I had to go up to New York for a funeral this past month and my dad and I flew up and we walked into the room with some family members and stuff like that. And after the initial reminder that we’re no longer in the south due to how loud it was and all of the swearing. Somebody said something about because that side of the family, I was always one of the younger and I’m like, how old are you going to be? And I was like, I’m going to be 40 this year. And everyone looked and they’re like, and I was like, you know what? That means you guys are really old now. So, again, it’s that whole concept of people just don’t realize it. And the concept when you’re younger of what you’re going to feel like or what it’s going to feel like when you’re older, it never tends to be that way. So it’s important to really plan.


Speaker 1: Yeah. It definitely. So you got to plan for these things, even though we can’t predict them, how long we’re going to be around tax rates, healthcare costs, market crashes, whatever the case is, these things are again, probably going to happen throughout your retirement. And if you have a nice long retirement, which you certainly hope that you do, you might be retired 20, 25, 30 years. You’re going to experience multiple things with some of this stuff that you can’t necessarily predict for, but you still have to strategize to hopefully have the retirement that you want in any economy and any circumstance. So that’s where planning comes into place. And that’s what you got to reach out to the guys for here on Retirement Planning, Redefined with John and Nick at pfgprivatewealth.com. That’s where you can find them online, pfgprivatewealth.com. Don’t forget to subscribe to us on whatever platform you like to use. Apple, Google, Spotify, so on and so forth. And we’ll be back with more episodes coming up in a couple of weeks. Nick, thanks for hanging out as always. John Good luck with those floors, man.


John: Thanks. I definitely need and appreciate it.


Speaker 1: Absolutely. Nick, we’ll see you next time here on the podcast. This has been Retirement Planning Redefined with John and Nick from PFG Private Wealth.

Ep 39: Is Your Retirement Plan Out Of Tune?

On This Episode

Even if you have a solid financial plan in place, things can quickly get out of tune if you don’t make adjustments from time to time. Let’s talk about some of the areas where we often see people get out of tune in their financial plan.

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

Here is a transcript of today’s episode:


Speaker 1: Hey, everybody. Welcome into another edition of the podcast. Thanks for hanging out with John and Nick and myself as we’re going to talk about Retirement Planning Redefined once again. This week, we are going to chat about getting in tune. No, not instruments, and we’re not going to sing, because that might be bad, but we’re going to talk about getting our retirement plans into tune, especially because we all want to have that good solid piece in there that we know we’re going to be comfortable and happy and get the things we need out of it, but we also can drift off from time to time. So, we want to pull those back in, get the reins if you will. So, that’s going to be our topic this week is getting in tune. What’s going on guys? What’s shaking? How you doing?

John: All good.

Nick: Staying busy.

Speaker 1: Yeah, staying busy. How’s the dog? I know you got that dog that’s really old. Is she doing okay?

Nick: Depending upon your definition of okay, she’s doing great.

Speaker 1: Well, good.

Nick: Yeah, she definitely keeps me on my toes. I think she had to go out five times before 11:30 today, so that was fun.

Speaker 1: Holy cow.

Nick: Yeah.

Speaker 1: My mine’s 15 and she’s going deaf and going partly blind, but she’s still okay in that department. How’s yours doing? Is she having some hearing or vision?

Nick: Oh yeah. No, she can’t hear and her vision is not great, and so it’s fun stuff. I’m on the third floor of my building, so I carry her down every time to go out. She’s not a big dog, so it’s easy, but-

Speaker 1: It’s cute and it’s sad sometimes that she’s losing her hearing. I’ll be calling for her and she can’t figure out exactly where it’s coming from, because she’s not completely deaf. So, she looks around in different angles and I’m like, ‘I’m right next to you, you ding dong.’

Nick: Oh yeah, I know that look well.

Speaker 1: Pretty funny stuff. John, what’s going on with you buddy? I know you don’t have these exciting dog stories, but what’s happening?

John: Not too much. Just staying busy and I think as you’re aware, becoming a school parent, so that’s fun and then started my little one in gymnastics, so I have to head there tonight.

Speaker 1: Oh, nice. Yeah. You’re getting to that phase now where you got hobbies and activities all the time, right?

John: Yeah, play dates are starting to get formed now. I pick her up from school and it’s like, “Hey, I want to do a play date with my friend.” It’s like, “All right.”

Speaker 1: Yep, go, go, go. That’s all right, hey, at least we’re getting back to some of that stuff. So kids and stuff. I mean, everybody needs interaction, so it’s good that we’re here getting some of that stuff going on. Getting our life back in tune, so to speak. That’ll be my segue back into the topic here. So, let’s talk about how to get our financial plans or our retirement plan back in tune in case we’ve got out. We talked a couple weeks ago guys, and we’re waiting to see what the fine details are going to be, we’ll probably do a podcast on it, but tax considerations, future tax considerations.

Speaker 1: A lot of the stuff that’s right now at the time we’re taping this that’s before the house, it may go through, there’s quite a bit to the corporate tax change, there is bumping up. They’re trying to make it sound like it’s all going to be for the higher net worth folks, but $400,000, $500,000 is not that hard to get to for some of these things. So depending on where you’re at, tax considerations needs to be on everybody’s radar no matter what you’re making.

Nick: Yeah, tax considerations are definitely something that we try to focus on with clients. I think in our minds, the number one, the rule of thumb when it comes to tax considerations in regards to investments and retirement accounts is to have options. So, what we mean by that is not only a diversification in the types of investments, underlying investments that you have, but also in the types of accounts that you have.

Nick: You want to have accounts are going to be tax free down the road, accounts that will be taxed down the road and then maybe some accounts that are subject to income or capital gains taxes versus just ordinary income. So, the having options, building a personal moat and being able to have the ability to adapt and adjust, I think and staying nimble is the number one priority when it comes to planning.

Speaker 1: Having a personal moat, I like that. John, you’ve been getting so much rain, you might have your own moat, right?

John: Yeah, that’s funny. I do feel like it’s been raining every day. It’s just new house, it’s like we have this big yard and I walk back there and it’s constantly soaked and the pool’s always overflowing. So yes, I do have a personal moat keeping Nick out.

Speaker 1: Nice, I like that. Okay, so tax considerations. Again, lots of things happening there, so that could even be changing and that’s why it’s definitely important to make sure. It’s always important really, no matter what time we’re in, but I mean certainly when we get to retirement, tax considerations and what we’re paying is a big deal. So it’s not what you make, it’s what you keep, all that stuff.

Speaker 1: Life insurance. Fellas, having the right amount, well, ‘Hey, I’m retired, I don’t need it.’ That’s what most people say, or at least that’s the general consensus or rule of thought, but is that correct?

John: Sometimes it is. It really comes down to when you’re looking at, do I have the right amount? So, is there a need for it? If there is a need for it, then it becomes income replacement. So example, I go to retire and let’s say I do have a pension that’s life only. We talked about that a couple weeks ago and if I pass away, that pension’s gone, does my spouse need that money for her money to last at that point or for her to hit her goals?

John: If the answer’s yes, she needs that pension replaced, then yes, there is a need for life insurance. There’re other things that go into it, but that’s just looking at it from a retirement standpoint. It’s really replacing someone’s income or assets that are needed to generate income for the surviving spouse.

Nick: Yeah, and I would say just on top of that, I think probably the reason that we mentioned this in this conversation is just to not absentmindedly push it off the side. I think there’s a perception for people that no matter what, they’re not going to need any sort of coverage approach in retirement or into retirement. Just like anything else, we think it’s important to take inventory, and when you’re building your plan, to make sure that you vet out the different situations and scenarios.

Nick: Because when you were originally planning, you may have not expected to have a mortgage, you may not have expected to help out your kids with education costs or maybe at the level that you did, or a myriad of other things. So life comes at you quick, we think it’s important that… because so many people automatically assume that it’s just no longer a part of the conversation for them, that you make sure that it is or is and take a good inventory to see if it makes sense for you.

John: Yeah, definitely. Let me jump in here real quick.

Speaker 1: Sure.

John: This is really important for big business owners to look at as their near retirement, because a lot of small businesses, they are in essence the business, and if they don’t have any life insurance and something happens to them, sometimes we’ve seen businesses have to fire sale and stuff like that.

Nick: Yeah, if something happens to the owner, the business is relying upon the owner, the family expected to be able to sell the business and cash out and be profitable and sail into the sunset that can get derailed pretty quickly. So that’s another good example.

Speaker 1: Yeah, definitely. And you mentioned cash, just cashing out, but that was actually, cash is on my next one who doesn’t love cash. I mean, everybody loves cash. We want to keep a nice amount around. We feel like most people kind of have this, the higher the number the better. My kid, she’s 24 now she’s working, making good money for a change.

Speaker 1: Now she’s learning how to play this game with herself about, Ooh, how much can I get my savings account to grow? I’ll be chatting with her and she’ll be like, ‘Yeah, I’m trying to hit this number. And I’m adding a little bit more.’ And it’s nice to see her kind of start to play that game with herself where she’s trying to grow those accounts. And she enjoys always the fact they’re growing and that only happens more as we get older. So people sometimes want these pretty large amounts sitting around. So what’s the right amount to actually have, because I mean, at some point, we start talking about emergency funds and so on and so forth. I mean, what are you going to do with $100,000 sitting in the banking cash? Is that really too much? Is that the right amount? I mean, how do you figure that out?

Nick: Well, this is where our very effective, but also annoying answer of it depends comes into play. So, this answer possibly more than almost anything else is I think hyper dependent upon the people or the person that we’re talking about. Obviously there’s kind of the rule of thumb of, six to 12 months of expenses in cash. But really when we drill down further, one of the things that I like to run by people is to have them think of cash in a way of it’s the ultimate permission slip. What I mean by that is what amount of cash allows them to feel comfortable enough to not make irrational decisions with the rest of their money? So if having a year or 18 months, 24 months, even 36 months of cash allows them to be invested in a way that they should be with the rest of their money.

Nick: Then in my mind that the opportunity cost of that money, getting more upside, that cash getting more upside is worth it because it prevents them for them overreacting to things like market corrections like we’re having this week or these different sorts of scenarios and circumstances where one of the best techniques that has worked for us is going through and saying ‘Yes, the market just pulled back over the last three months. Let’s just say it did 10%.’ But if we can go to the client’s accounts and say, ‘Look at, you’ve got your next 18 months of expenses without ever touching your investment accounts is sitting there in cash for you.’ Plus remember that we’ve got somewhere between 30% and 50% of your actual investment and fixed income automatically their blood pressure, their heart rate, and their amount of emails and phone calls to us go down, which are all things that are positive.

Speaker 1: Really that’s the talk, starting talking about risk as well. And that’s my final bit on getting the plan in tune is having the right amount of risk for the time that you’re in and for the situation that you’re in. Maybe those two things go hand in hand, well, they all really go hand in hand, if you think about a retirement plan in general, but getting the right amount of risk is certainly important.

Speaker 1: And we touched on this a couple of weeks ago when we were talking about couples and how they sometimes they’re opposites in that regard. So you still have to find that that happy place that’s working for the plan. I think I saw an email for somebody in a couple of weeks back guys, and it was something like, my account haven’t done as well as the market this year and maybe I should change advisors. And it was like, well, wait a minute. You know, don’t just assume that it’s the advisor’s fault because it didn’t keep up with the market. How are you set up from risk? Are you exactly… Are you taking all as much risk as possible in that, which case the market return should be closer? Or are you very conservative and just don’t really know what you have and that’s why you didn’t perform as well. There’s lots of ways in variables to look at this correct?

John: Yeah. It’s definitely one of the most important things to look at when your overall portfolio is what is your or risk tolerance and how are you invested in? And what you just said is on point, we find that a lot where people are trying to compare not only to us, but other advisors like, ‘Well, the S&P did this, what did I do?;’ And then when you start diving into it, it’s, well, you’re a 50, 50 mix and that’s the S&P all 100% equities. It’s not going to be the same.

John: But definitely from a planning standpoint, we try to make sure people are invested correctly based on their risk tolerance. Because if you are more aggressive in your portfolio than you actually are, when you start to see a dip, chances are you’re going to panic and chances are if the dip is fast enough or goes down enough like in the COVID period, there March, April 2020, some people change courses and went from what they were, and then went to very conservative.

John: And then three weeks later, the market just rallied back and all the gains were lost if you were, are seeing on the sidelines. It’s important to really pick your risk tolerance, pick your portfolio and stay at the course based on the plan.

Speaker 1: Yeah, absolutely. I mean, you can’t panic. That’s usually the worst time to do it. It’s definitely one of those cases where we tend to do that. And that’s, again, the value I think of an advisor, because somebody can call up and say, like the pandemic crash or whatever, and say, ‘Hey, I’m panicking. What do I do?’ And you can walk through those scenarios without just locking necessarily locking in those gains by panic selling or whatever that case might be.

Speaker 1: So something to look out for, make sure you have your plan in tune, and they require a tune note, folks, these they’re not a set and forget it kind of thing, it’s not. Even life insurance, if you bought life insurance 25 years ago, and you hadn’t looked at it 25 years, it’s one of those things where we buy it, we think we’re never going to need it to look at it again, but no, that’s not the case.

Speaker 1: Stuff changes. Life happens. So make sure you’re making little tweaks, your plans should change and ebb and flow just like your life’s going to. And that was our topic this week on the podcast. And as always, we’re going to try to take at least an email question or two, if we can, if you’d like to submit your own, go to the website at pfgprivatewealth.com, that’s pfgprivatewealth.com drop us a line there and subscribe to the podcast while you’re there as well.

Speaker 1: We’ll see if we can get these two in at least one, we got a question for Nick, from Jamie. He says, ‘Nick, I’ve looked forward to retirement for many years and I enjoy the podcast. And now that I’m actually retired, I can’t shake the feeling that I’m going to run out money. So you got any solutions for fighting the feelings, or should I just go back to work?’ That’s one of these things where people get into that situation. It’s like they maybe don’t have a good plan or they’re just not comfortable. So they’re not really sure what it’s doing for them.

Nick: Yeah. So this is interesting because I would say that realistically, the majority of the people that work with us, their plans are pretty solid and we have a high level of comfort of them retiring. In those scenarios where, where we have a high level of confidence in their plan and what we’ve done, especially, because we use a lot of pretty of variables. We try to up the cadence of meetings or the amount of times that we talk and get them to start trying to view things maybe a little bit more like us.

Nick: So using things like the client portal that we have, where they can view their cashflow or their lifetime and see the different parts start to become more familiar with how the planning software works and get some of that comfort and affirmation that they’re online and on target is really, really important.

Nick: And then from the perspective of things that maybe aren’t quite as static, in our regular reviews, really trying to drill down and dig into what are the things that are concerning them the most? For example, for some people, the things that are concerning them the most might be taxes. We can work, show them and illustrate a scenario of a significant bump in taxes and show them how that impacts them specifically.

Nick: When I realized that I should ask clients that have serious concerns about how these specific things that they’re concerned about impact them specifically, because one of the things we’ve seen is that, it’s like, ‘Okay, I’m watching the news and the news says this is going to happen and freak out in twos.

Nick: They’re thinking in large terms maybe from societal standpoint and that’s understandable, but take that one step further and say, ‘Okay, well how does this impacting me? How impact my plan? How does this impact me? And then when we start to drill down, when they start to learn to do that, the amount of stress that they have starts to go away pretty significantly. ‘Okay, well I’m concerned about these taxes.’ All right, well, Hey, let’s take a look at the amount of income you’re in. Let’s take a look at sort of bracket you’re in.

Nick: Historically, even if we go back the last 20 years, how much that bracket has fluctuated and you see throughout 9/11, throughout the great recession, throughout the bounce back, throughout… Year bracket that you’re in has gone plus, or minus 3%, that’s not going to really have a huge packed on you or let’s even just let’s bump it up an extra 10%, those sorts of things or using that same sort of situational awareness with markets or, whatever else it is, health, those sorts of things. When people start to really think about how to impact them, it’s usually kind of a calming factor for them.

Speaker 1: Yeah, I think at the end of the day, if you don’t have a good strategy in place that makes sense to you and that you understand you’re going to have a hard time shaking that feeling and not feeling calm and feeling nervous about it. And that’s really where the right advisor and also the right plan comes in place. If you’re working with somebody and you feel like things maybe aren’t totally there, it’s okay to get a second opinion. Whether it’s Jamie or anybody else that checking out the podcast, find out if you’re working with somebody and you’re not sure that that’s the right fit, then get a second opinion and you may find that it is. It’s everything’s working swimmingly well, and that’s fantastic. Or you may find that you might need to make a change.

Speaker 1: And if you do, just reach out to John and Nick and schedule some time, have a conversation with them. Second opinions is part of the industry. So give them a jingle, have a conversation, pfgprivatewealth.com, that’s pfgprivatewealth.com and time wise, guys, I think that’s going to wrap it up for this week. So we’ll, we’ll take that next email question next time on the show.

Speaker 1: So reach out folks, let them know, to give them a cell, 8132867776 is the number to call. It’s just easier to go to the website, pfgprivatewealth.com, subscribe to the show and all that good stuff on Apple, Google, Spotify. And we’ll see you next time here on Retirement Planning Redefined with John and Nick and you guys have a great week. We’ll see soon.

Nick: [inaudible 00:18:25]

John: Have a good one.