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Remember the thrill of shaking a Magic 8 Ball to get answers to your childhood questions? Would we ace that math test? Would we be famous someday? Well, today, we’re bringing a bit of that magic back. But instead of asking about pop quizzes and playground crushes, we’re turning to the Magic 8 Ball for advice on something much more important: your retirement planning!

What would the Magic 8 Ball have to say about these common retirement questions if it had the wisdom of a financial advisor?

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Disclaimer:

Speaker 1:
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.

Speaker 1:

You all remember that thrill of shaking the Magic Eight Ball to get answers to those childhood questions we couldn’t wait to find out? Would we ace that math test or be famous someday? All those crazy fun questions we had when we were kids. Well, this week on the podcast, we’re going to do the Magic Eight Balls Guide to Retirement Planning with John and Nick here on Retirement Planning Redefined.

What’s going on everybody? Welcome into the podcast. Thanks for hanging out with John and Nick and myself as we talk investing, finance, and retirement. And we’re going back to our childhood with the Magic Eight Ball. Going to have a little fun with these things and shake it up and see what kind of answers we get for retirement. Then of course, let the guys give us some proper answers just in case the Magic Eight Ball gets it wrong. But guys, what’s going on this week? Good to talk with you as always. Nick, how are you buddy?

Nick:

Good, thanks. Just staying busy.

Speaker 1:

Staying busy, rocking and rolling. Very good. John, my friend, how are you?

John:

I’m doing all right. Getting ready for this upcoming storm we have, so.

Speaker 1:

Oh, big fun. Yeah.

John:

Getting to the grocery store quick, so all the crazies don’t run me over.

Speaker 1:

Nice. Now you got little ones. Do they still sell the Magic Eight Balls in the store? I think they still make them. Don’t they?

John:

They do. I think we had one at one point.

Speaker 1:

Nice.

John:

And it didn’t work very well, so anytime they asked a question, it would end up on the side and they’re like, what does it say? And I don’t know.

Speaker 1:

I can’t see it. You got to reshake.

John:

It was definitely something good that entertained them for a little bit.

Speaker 1:

Yeah.

John:

But like any little kid nowadays, it lasted all for about 20 minutes.

Speaker 1:

Oh, yeah. Yeah.

John:

Like, all right,-

Speaker 1:

Well I’m a wee little kid of the 70s, so I thought they were great. That and the Etch A Sketch and the Stretch Armstrong, I was a happy dude, so. But anyway, let’s have a little fun with this, this week here and I’ll toss you guys out a question. You kind of give us the Magic Eight Ball and your answer to it, or at least what it maybe should be, so to speak. Right. So we’ll make it easy to kind of get things started. John, I’ll toss this one to you. Should I start saving for retirement now? What’s the Magic Eight Ball say?

John:

Magic Eight Ball is going to say yes, definitely. The sooner you can start the better. And that goes for anybody, whether that’s you in your 20s. I have some clients that right out of college started and now they’re in their late 30s, and when we do reviews occasionally, it’s always like, “Hey, really appreciate you kind of getting on me for starting to save,” because as life happens, expenses are going up, they have kids and stuff like that, it’s harder to save. But when they didn’t have too much going on in their early 20s expense wise, they were definitely built up a nest egg, so.

Speaker 1:

Yeah.

John:

If you haven’t started at any point, wherever you are, 20, 30, 40, it’s good idea to start.

Speaker 1:

Yeah, I mean 50 as well, right? I mean it doesn’t make a difference at this point. Waiting yet another day only causes you more problems, right? So should you start now? Definitely. And I’ll give you guys kind of a little primer on the Magic Eight Ball. So we kind of looked through some of the stuff. They have, I guess what you’d call the green, kind of the positive answers, right? Stuff like the one John just got there, yes, definitely, most likely, out look good, that kind of stuff. Then they had that kind of middle of the road, nah, not so sure, right? Reply hazy, ask again later, better not tell you now, that kind of thing. And then of course they had the negatives, which was my reply is, no, very doubtful, don’t count on it. So on and so forth. So we’ll use those answers to kind of kick things off with each one of these episodes and then let the guys expand on it like John just did. All right Nick, so your turn, give it a go. Is a million dollars enough to retire on? What says the Magic Eight Ball?

Nick:

That’s definitely a reply hazy, try again answer on that one. A consistent conversation that we have with people, whether it’s somebody that we’ve worked with for a while or somebody that has come to us and we’re kind of taking them through the planning process is that everybody’s situation is different.

Speaker 1:

Sure.

Nick:

People love to compare things with each other, whether it’s cars, houses, finances, whatever. And we try to make sure that people understand that comparing themselves even to a sibling or a neighbor or friend doesn’t necessarily make sense. Some of the most common examples that we’ll see are people that maybe they have pension plans because of the sort of job that they have.

Speaker 1:

Yeah, they saved a million, but they got a pension versus someone who saved a million and doesn’t. That’s a dramatically different setup, right?

Nick:

Correct.

Speaker 1:

Yeah.

Nick:

Correct. Yeah. And so assets are important obviously, but really the end game for assets in retirement is to generate income. So ideally people will have the combination of both, but having an arbitrary number like a million dollars is something that doesn’t make a whole lot of sense. And I know that recently there’s been some kind of articles in the news about, I think we just hit the highest percentage of millionaires in the US.

Speaker 1:

Right.

Nick:

And even from that perspective, dependent upon the situation, again, a million dollars isn’t what it used to be. So it really just all depends. We’ve had clients that have had five or $6 million going into retirement that when we look at their plan, they’re going to burn through that in 15 years because they spend too much. And we’ve had clients that are retired with five or 600,000, but they have their expenses very much in check, they have no debt and they live within their means and their plan looks great.

Speaker 1:

Yeah, there you go. I mean there’s three of us here on this podcast and it might take a million for one and 500,000 for the other and two and a half million for the other. Right. It all just depends on where you live, how you live, all those sorts of things. So yeah, reply hazy, try again. And really what it comes down to is get a strategy, get a plan, and get the numbers crunched for your specific situation and then you’re going to understand exactly what you need to get to. You’re going to have a better outline versus just kind of a shaking the Magic Eight Ball.

And I think the idea behind some of this too was fun. You know how you guys in the industry know this. There seems like there’s always advisors out there that have a little crystal ball on their desk and they like to say, “Let me check the crystal ball,” when somebody asks them a question and they’re like, “Well it doesn’t work today.” And that’s because it’s not a sound way of doing things. So we thought we’d take that kind of analogy and apply it to this week’s podcast. So back to you, John. Can I rely on social security for my retirement?

John:

Say out look not so good.

Speaker 1:

Right.

John:

Yeah, definitely not what you want to be banking on. It’s a good source to have.

Speaker 1:

Sure.

John:

But you do not want it to be your only source.

Speaker 1:

It’s big dollars. I mean it can be big dollars for a lot of people. And I think an interesting question, and I put it this way, is I’ve got a family member, a loved one who totally survives on social security only, but it’s not what she wanted, right? So could you do it? Yes. But is it ideal? No.

John:

Yeah, no. I think on average social security covers maybe 30, 40% of someone’s retirement income. So you have to look at where’s the other money coming from. So just planning on social security I would say is not a very good plan.

Speaker 1:

Very true, very true. Well following that up there, Nick, give us the Magic Eight Ball answer here. Is it wise then to have multiple sources of retirement income?

Nick:

It is absolutely as imperative as you can get to try to have different sources of income. A conversation that we have with people consistently is that from the perspective of planning, the one thing that we know and that we can absolutely count on every single year, year after year, is that there’s going to be change. And so anything that you can do to build in options, build in flexibility, allow yourself to adapt and pivot to what’s going on is essential. And part of that is income streams, not only diversifying assets, but diversifying income streams.

Speaker 1:

Definitely. Right. So you definitely want to have those. Social security is a big piece of it, but it doesn’t need to be the only one. You need to have multiple sources of income streams. All right, John, back to you. Can I expect to have fewer expenses in retirement compared to when I’m working? What’s the Magic Eight Ball say?

John:

I’d say don’t count on it. Again, I don’t know, we’ve kind of preface this quite a bit and we’ve even said it today, everyone’s different. So we’ve had some people where expenses have gone up during retirement because they want to vacation more, they want to do more things with the family. So I wouldn’t say plan on that necessarily. And the only way to really find out is to do a comprehensive plan, but then there’s going to be curveballs that come at you, whether it’s health expenses. That tends to not go down as we get older. So maybe something could be dropping off.

Speaker 1:

Right. Right.

John:

But you never know what’s going to get added. So do your plan as best you can and try to be as accurate as can. But I wouldn’t have that be like the bulletproof, like, hey, my expenses are going to drop so I should be good.

Speaker 1:

Well, that’s a great point because a lot of times people say, hey, here’s our back of the napkin math. We think if we curtail this a little bit and this a little bit, we can make it work. Right. We can kind of squeak into retirement. But then you get there and you think, I don’t want to do that, right? And there’s certainly a lot of conversation around regrets that people have when they’re talking once they get to retirement and they go, boy, I wish I would’ve spent more in those early years when my body would’ve let me go out and do some things that I wanted to. Right. So can I expect fewer expenses? Yeah, probably not, right? Because like you said, things are going to drop off, but other things are going to add and of course don’t count on it. I think that was the answer Rhonda Thomas gave me when I asked her to the seventh grade dance, I think she said don’t count on it. I think she must have got that from Magic Eight Ball as well.

Nick:

That’s stuck with you.

Speaker 1:

Yeah, right. Exactly. It stuck with me. I’m still wounded Rhonda, if you’re listening. All right, so let’s do the next one here. Should I review my retirement plan annually? Nick, what says the Magic Eight Ball?

Nick:

Without a doubt on that one. Going back to what we talked about earlier, things constantly change. So updating the plan is really important. The most recent example of why that’s important has been inflation over the last couple of years. So when we do a plan and we put in an inflation increase every year in expenses, the software still requires us to kind of update those baseline numbers. And so what we found and what we’ve tried to emphasize to people is that us capturing and updating those baseline numbers every two or three years is really important and gives us a much more accurate projection from the perspective of planning. So,-

Speaker 1:

Gotcha.

Nick:

Those annual reviews are important.

Speaker 1:

Yeah. And that’s how you kind of keep track of the expense changes or the income source changes or added a grandchild, want to change this, whatever the case is. So all those annual things are certainly important. Your life’s going to change, your plan has to change along with it. All right, John, will my retirement plan be affected by future changes in tax laws? Not to get political, but you have to talk policy and certainly when it comes to taxation, that’s going to be part of the conversation. I mean, seems like everything is political these days, but if you’re thinking about future changes in tax laws, you’re going to have to certainly think along those lines as well. So what says the Magic Eight Ball when it comes to will your plan be affected by it?

John:

Signs point to yes.

Speaker 1:

35 trillion? Maybe. Yeah.

John:

Yeah. So you definitely want to take that into account. I mean if you look at maybe people that retired in the 70s and then all of a sudden the 80s, your social security is getting taxed, you weren’t really anticipating that happening and then,-

Speaker 1:

Oh yeah, the IRMAA tax, right? That gets a lot of people blindsided.

John:

Yeah. So you could count on taxes changing. Whether it’s going to go up or down, again, we don’t have our crystal ball, but we have the Magic Eight Ball here. Something’s going to happen and you should be planning for that. One thing you could do when you’re running retirement plans is you can have the ability to stress test it, to take a look at it. So definitely plan on it.

Speaker 1:

Yeah, I mean you figure, look, regardless of where your political bent is, we’ve got a lot of debt and so taxes are going to have to change. And even if it’s not this particular administration change, this current election, right, God willing, you live long enough in retirement. If you last 20, 25, 30 years in retirement, you’re going to see multiple administrations come and go. And that’s going to mean multiple tax law changes because they do that every so often. Right. So the odds of that happening are pretty great. So signs point to yes, you should consider how taxation is going to affect you because it is one of the biggest pieces of your retirement strategy. What is that old saying? It’s not what you make, it’s what you keep, right? So make sure you’re talking with qualified professionals like John and Nick when it comes to dealing with all this stuff. Let’s do one or two more and then we’ll wrap it up. Nick, let’s toss this over to you. Let’s see here. Should I focus on paying off debt before increasing retirement contributions?

Nick:

So I would say depending upon the debt, most likely.

Speaker 1:

Okay.

Nick:

From the perspective of consumer debt like credit cards, all that kind of stuff,-

Speaker 1:

Bad debt, right?

Nick:

That can absolutely, it’s hard to argue that that’s not unimportant. One thing that can be a slippery slope for people is it kind of tends to depend on their behaviors. We’ve had clients that have been good income earners but have at different times had debt problems. And in certain ways, whenever they pay off the debt, the debt comes back up and then they kind of find themselves not saving at all. So it’s oftentimes kind of a balance of both. One of the most common sorts of comparisons from a perspective of debt is mortgage. We found that over, we had a lot of those conversations when interest rates were really low and we kind of emphasized with people to take advantage of those low rates and that’s come to be a pretty beneficial sort of decision. So I would say in order, consumer debt for sure, trying to do both consecutively, both at the same time, obviously ideal, and then just kind of working through the plan and prioritizing what makes the most sense and how to deploy the money.

Speaker 1:

Yeah, definitely, right? I mean, debt’s going to be a big component of that as well, and certainly getting rid of that, the higher interest stuff is always a good idea. So the final piece then here guys, and John, we’ll let you wrap it up since you started it. Should I consider working with a financial professional as I near retirement? This is kind of a layup for you, but I’ll give it to you anyway. What do you think?

John:

Appreciate that layup. Answer is yes. As you’re getting closer to retirement, it becomes even more important to make sure you’re working with someone to update the plan or start a plan and take a look at it. I would say you don’t have to wait until you’re near retirement. I think the answer is yes at any point.

Speaker 1:

Yeah.

John:

Even my younger clients, they always appreciate having someone they could talk to and bounce some ideas off of, whether it’s not always comprehensive planning, but it’s someone you could talk to discuss things.

Speaker 1:

Exactly. Because there’s so many nuances out there and it just continues to grow and get more complex. So certainly not a bad idea at all to get qualified professionals on your side. So if you need some help, reach out to the team at Pfgprivatewealth.com. That’s Pfgprivatewealth.com and don’t forget to subscribe to the podcast on Apple and Spotify or whatever platform you like using. It’s Retirement Planning Redefined with John and Nick from PFG Private Wealth. And we’ll see you next time here on the show and enjoy the Magic Eight Ball. We’ll catch you later.

 

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.