Retirement Questions The Baby Boomer Generation Is Asking

On This Episode

 

Each generation is currently navigating a unique part of the retirement planning experience. With many baby boomers preparing for the transition into retirement, we’re going to focus on some of the top questions this age group is asking in today’s episode. Stay tuned to see what you can learn from John and Nick this week on Retirement Planning Redefined!

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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:

Every generation is currently navigating a unique part of retirement planning experience. No matter what generation you’re in, there’s going to be different questions that you might want to tackle. So on this week’s episode, we’re going to talk about that from the baby boomer standpoint, here on Retirement Planning Redefined.

Welcome to another edition of the podcast, folks. Retirement questions that every generation should be asking themselves is the docket this week, and we’re going to touch on the baby boomers. We may come back around to some of the other generations right now, but I think for most of our listening demographic, the boomers are certainly going to be ones that want to pay attention. It’s interesting, guys, the boomer term has become polarized. It used to be one thing to say just baby boomers or whatever, but now they get a little offended, I think, with the whole boomer thing. It hasn’t gone very well on social media the last couple of years, but either way, we’re going to talk about that demographic from 1946 to 1964.

It’s so funny with these age things, they keep changing it. I was looking at the one for generation X, which is what I am, and now they’re saying late ’70s when it used to be like ’83 or something. So I think they just changed these numbers based on what they want to have happen for conversation pieces. But anyway, we’re going to get into that with John and Nick this week. What’s going on, John? How you doing, buddy?

John:

Doing all right. Actually getting ready for, Nick and I are bringing some Easter baskets to the local children’s hospital here. We’re going to be handing them out this coming up Friday.

Marc:

Oh, very cool.

John:

We’re excited for that.

Marc:

Yeah, very cool. That’s nice, you guys are always doing some cool charity things going from around the area, so very, very cool. What’s happening, Nick? How are you doing, buddy?

Nick:

Good. Staying busy, along the lines of what John was talking about, the group that we’re involved in, we’re working on a big derby party here in St. Pete, so big event. So that’s fun to works the other side of the brain, and then we’re just staying busy with… We’ve got one thing that’s been interesting, John and I were talking about it earlier, this area is growing pretty rapidly, and it feels like we’ve had more clients than ever that are looking to move out of the area and slow down a little bit. So, it’s starting to become a little bit of a trend recently, so.

Marc:

To move away from Tampa?

Nick:

Yeah, yeah. Move away from Tampa or further out to more of the outskirts of the area, but we’ve had some clients recently like Panhandle, Georgia, North Carolina. The growth here has just been pretty overwhelming.

Marc:

Monstrous, yeah.

Nick:

Yeah, and-

Marc:

There’s a lot of states that are that way, right? I mean, there’s a number of states where I think people, everyone’s flocking from places like New York and California, and it’s just like, okay, stop. We can’t handle it.

Nick:

Yeah, it’s interesting because this area, the east coast of Florida has always been like the Atlantic coast south, and then the west coast of Florida where we are has always been a little bit more low-key. Still a decent size, but a little bit more low-key, and it has that feeling like developers and everybody is trying to make it more similar to the East Coast. I think that’s kind of pushing some people out, but even because obviously Texas has been a place that’s been a popular area for people to move to for some of the similar reasons, whether it’s taxes or just how the government runs or whatever their reasoning is. But one of the biggest differences, just reading about Austin, which is I would say Austin’s most similar to this area in certain ways from a size perspective and all that, but they’ve had a huge drop, cost-wise in housing because they’ve been able to maintain supply. Whereas the housing here is just completely insane at this point, especially in St. Pete.

Marc:

I was going to say, across the country, it seems like it’s really inventory’s low. So, just a lot of people that just aren’t selling, well, because the prices of houses through the roof, so you’re not selling the one you’re in because you know that when you buy another one, it’s going to cost you just as much or more. So, it’s interesting.

Nick:

For sure, that’s definitely had an impact. This area specifically because of the influx, there’s also been some interesting articles about how much corporate owned, single-family housing there’s been. But I mean, you’re talking 11, 1,200 square foot houses in St. Pete for 800 and up, [inaudible 00:04:23] how things shift.

Marc:

It was on my list, a roundabout way to talk about some different questions that every generation should ask themselves. So housing certainly can apply to any generation. I mean, even folks in our baby boomer conversation today could have been thinking about downsizing or whatever the case is in retirement and that certainly could play into that question. So that’s one we tackled without really even setting it up to tackle it. So we’ll just jump in and talk about a few more of these things.

But again, with everything being so wild right now, it seems like from a financial standpoint all across the spectrum, whether it’s inflation, housing costs, food costs, whatever the case is, how do you manage all that? So risks, whatever risks guys, is going to be top of mind, especially if you’re a senior. My mom is 82 going on 83, and she’s constantly worried about the various different kinds of risks that may affect her at that age. Market volatility, social security, whatever it might be. So let’s just start with the market volatility. Whoever wants to take that one.

Nick:

Yeah, so from a market volatility standpoint, it’s very interesting from the perspective of how things seem to work these days from a market perspective. I don’t have the exact numbers, but I know last year, essentially needed to… The majority of the growth in the market, although we had a great year, the majority happened within a seven to 10 day market window. So your chances of if you’re not just holding and studying the market, your chances of really getting the returns that you’re looking for are very difficult. So volatility, the swings up are substantial and the swings down can be. I think a lot of that has to go, can be attributed to the algorithm based trading and high frequency trading and things like that have an impact on that.

Marc:

And if you’re a senior, none of that interests you, right? So I mean, that’s [inaudible 00:06:18].

Nick:

No. No. Yeah, absolutely not. But for a lot of people in that generation, they’re used to the returns being more steady throughout a single year or the perception from that perspective at least versus like, hey, if you miss a month and it was a good month, then your returns could be next to nothing. So it’s pretty interesting.

Marc:

Yeah, managing that risk, for sure.

Nick:

Yeah, it goes back to that classic perspective of the asset allocation continues to be as important as ever.

Marc:

Yeah, for sure. John, if you think he just mentioned steady income. So if you’re a senior, best approach for transitioning from a steady income like your job, for example, to retirement withdrawals, that’s usually a massive hurdle for anybody going into retirement but obviously right now, these are the boomers. I just read actually today that we’re taping this guys, I think four million people were going to be retiring this week, four million this week.

John:

It’s a good number.

Marc:

Crazy, right? So, how do you deal with that scared-ness of, okay, I had a paycheck last week and now I don’t, I got to use my retirement money and turn that into paychecks. That’s a big hurdle for people.

John:

It’s a huge hurdle for people. This is one of the biggest things we see when we’re doing retirement planning for clients that are transitioning. It’s, I used to work and get my paycheck every biweekly, whatever it is, and now it’s gone. There’s a fear of spending their money they’ve been saving all these years. I’ll tell you, the best thing to do in our opinion, is to develop a financial plan and a strategy for retirement income. So you really have to put the pen to the paper and determine, okay, what are my expenses? How much do I need? That’s going to be the first step. Then after that, it’s looking at, hey, what are my income sources? We talked about social security last week, we’ll touch on it a little bit more here, but hey, how much is social security going cover? Okay, what other sources do I have? Really evaluating where’s the money going to come from? Once most people see it, it provides peace of mind and a little bit of, okay, this is what I’m doing. You got to have the blueprint. Once the blueprint’s there, you feel much better about what your approach is.

Marc:

Well, we all want to know we got mailbox money coming. We all want to know that when we go out, and I know most of us don’t go to the mailbox anymore to get it right, but it’s the same idea that when you go open the mailbox, the check is there. That’s what you need to know. That’s that comfort factor that you need to know. So that’s turning these accounts that you’ve been building up through your working years into this retirement income. So certainly, that is an importantly huge question for baby boomers to ask themselves.

We’re talking about wealth and building wealth and working through the years. Nick, I’ll throw this one at you. I’m going to hop around here a little bit, but passing on wealth to the next generation without sacrificing your own retirement, is also another huge question that boomers are asking themselves because they want to know that they are going to be fine, but a lot of times they want to leave something behind. I just was looking this up real fast. Experts are putting that number between 40 and $100 trillion right now that they’re estimating in the great wealth transfer conversation, which is what boomers will be leaving to their kids and grandkids over the next 20 years. $100 trillion. Man, that’s crazy money.

Nick:

Yeah, it’s pretty wild. What’s interesting is I think the baby boomer generation has done a good job of accumulating assets and saving.

Marc:

Oh yeah, great job.

Nick:

There’s also, I would say, versus maybe their parents’ generation, they spend a little bit more. It’s interesting, a lot of the people, I wouldn’t even call it half-and-half, maybe around 30, 35% or 40%, leaving money for them is incidental, where their focus is primarily on themselves. A lot of times these are people that have done a good… They’ve helped the kids get through college, kids have good careers, and-

Marc:

Right, we’ve saved it, it’s ours, let’s party, right?

Nick:

Yep, so they want to travel. Obviously travel is the most popular thing that people tend to want to do. So having that conversation changes things. For those that are highly focused on leaving the money, and what’s interesting is where I’ve seen it happen a little bit more is because people like to, in their mind, it makes it easier for them to segregate money. So we’ve had a few recently where their retirement plan looks good, their thought process with the money that they have saved and accumulated and leaving it to their kids is incidental like, hey, if there’s money there, great, if not, we want to take care of ourselves first. But, they’ve also inherited money maybe from their parents or a brother or sister, and they say, all right, well this is going to be the money. I consider this found money, and so this will be money that I’ll try to leave and pass down. So it’s been interesting seeing that thought process.

But with the way that current estate tax exemptions are from a tax perspective and avoiding estate taxes, that sort of thing, for most people, that’s not an issue. But for those that are, maybe they’ve got kids that are high-income and they would like to leave them money that has less of an impact from a tax perspective, depending upon their situation, we might look into life insurance options or even converting to Roth options to help them pass on money and not have a major negative impact to their overall plan.

Marc:

Yeah, because you want to figure out how to… If you do have it in your mindset to transfer some wealth upon passing, and I think probably the healthy approach that a lot of people take is, we’re going to do what we want to do, we’re going to be fine, and whatever’s left at the end, fine, transfer that over to the kids or grandkids. You want to make sure that you’re doing that as efficiently as possible. So some strategizing there is certainly going to go into play.

John, I’ll throw this back to you, whether it’s leaving money behind or even how you set up your social security, because you talked about it a minute ago and readdressing social security. Maximizing social security could impact what you do have left over at the end to leave behind because that’s not something you can pass on. So it’s a matter of figuring out how you want to structure these things to maximize your benefits and get everything out of it that you can while you’re still here.

John:

Yeah, yeah, if you’re able to maximize your social security and figure out what’s best for you, what that ultimately does is you’re dipping into your own investments a little bit less because you have that strong social security income stream. So if there’s more investments left over, your beneficiaries, whoever your beneficiaries are, will have a bigger balance coming to them. So definitely, we talked about it before, we always stress on it. You don’t want to take social security decision lightly. You want to make sure that you’re strategizing for your situation on how to maximize those benefits.

I believe it was last week that we talked about the cost of living adjustment in social security. So if you delayed yours, people have been getting 6% or 7% increases, and if you were taking yours later, you get a bigger balance. Those 6% or 7% over the past few years have really added up. So, very important to make sure that you take what’s best for you in social security and not just take it lightly. I hate to say this, but you don’t want to listen to your neighbor on what they did because you’ll be surprised how many times we’re meeting with people, it’s like, my neighbor’s doing this, and it’s just like, huh, okay, well-

Marc:

That’s your neighbor, right.

John:

What does your neighbor do? Well, they’re in tech. It’s like, okay, well.

Marc:

It’s a little bit different, yeah. Well, thinking about that social security conversation, so getting a maximization ran, going through the planning process, going through a strategy session with you guys, and having it stress tested and having that maximization ran will help you see that because that’s a great point. Are you riding the horse that brought you, which is your retirement, or the government one? I know technically it’s our money, the social security, the government, but it’s like figuring out the best balance between those two when you’re going to start pulling things from whatever account. So, good stuff right there to think about when you’re talking about for generations. Go ahead.

John:

One thing Mark, with that. With social security maximization, a lot of people don’t realize is there are these calculators that you can look at and say, hey, you put in your numbers, you put in a spouse’s number, and it will shoot out, hey, this is the strategy, but it doesn’t take into account other factors, as far as, do you have a pension? Things like that. How you want to figure out what’s the best strategy is when you look at your social security and how it affects all your other assets and income streams, then you can figure out what the best approach is because when you just look at social security in a vacuum, there’s other factors in there that really make a big difference on what the best strategy is. A lot of people will just go online, hey, what’s the strategy, maximization strategy, but it doesn’t give the overall picture.

Marc:

A great point, really good point right there. So let’s wrap it up with one final piece here to think about, Nick. Of course, we could go forever on this topic, but we’ll just… Some couple of concise points to think about when you’re talking about addressing healthcare costs in retirement. Obviously for boomers, this is a huge concern, really for anybody, if you’re alive and human right now on the planet. Healthcare is obviously growing out of control, but certainly a big concern when you’re elderly.

Nick:

Yeah, I think, and this is almost a tiered approach. So the first thing or aspect that needs to be addressed is if you plan to retire before you’re eligible for Medicare. So having a plan in place and understanding what those costs could look like. So for the majority of people, if they want to retire before age 65 and they need to get healthcare coverage outside of their former employer, then we tell them to typically budget between $800 and $1,000 a month per person. For most people, that’s going to be a huge increase in costs. They might be able to float it and they also might be able to reduce that cost substantially if they have money saved that are non-retirement funds. So non-qualified accounts where we can keep their income on paper down and they might be able to qualify for a subsidy. So that’s phase one.

Then phase two is, once you are eligible for Medicare at age 65, making sure that we’re budgeting somewhere between 4,000 and $5,000 a year and having them talk to a person, and we’ve got a couple of resources that we’re very happy with and we refer people to, because depending upon their overall situation. Again, if they, especially people that are coming from working for a large company that maybe had really good benefits and they’re used to paying maybe a couple hundred bucks a month for coverage for themselves, that may actually be an expense that goes up.

Then the phase leading into those two things are, are you eligible for a health savings account at work? Are you putting money in? Then that money that is getting put in maybe something that we could use to help mitigate some of these costs and be efficient from a tax perspective. Then also help you cover maybe potential large, actual purely out-of-pocket medical expenses that start to approach and happen down the road when you get to your 70s, 80s, etc, where these things pop up. People live longer, whether it’s some sort of acute care or if it’s some sort of need for long-term care, which is expensive, but-

Marc:

Yeah, crazy [inaudible 00:17:57].

Nick:

Really, the key to that is the overall plan, making sure that we test those numbers out in the plan and that we’ve got a strategy to approach it.

Marc:

Yeah, because if you don’t take a strategy into account with that, if you’re married and you’re a senior and you’re like, hey, we’re going to just take care of each other because it’s just going to be cheaper, it’s a wonderful sweet and noble sentiment that has no basis in reality because it’s just not smart. It’s such a taxing physical thing, a mental thing, to take care of one another without having some sort of help in there. So you’ve got to plan and strategize for it, whether or not it is daunting to do, yes, but if you don’t start having those conversations, it’s only going to get worse.

I mean, my wife jokes with me all the time. I mean, I’m 52, and she’s like, I can’t pick you up now, I can’t imagine trying to pick you up when you’re 72. She’s 70, it’s just not going to work. So you’ve got to have a good strategy for healthcare to address the rising cost because it is going to continue to do so. Again, these are some questions for boomers to really think about and ask themselves.

If you need some help, if you need to sit down and start that planning session, that strategy conversation because you’ve been putting it off or you’ve addressed a few things, not all the things, whatever it looks like, reach out to John and Nick and get yourself onto the calendar at pfgprivatewealth.com. That’s pfgprivatewealth.com for a consultation and a strategy session of your own. Don’t forget to subscribe to the podcast, Retirement Planning Redefined on Apple, Spotify, Google, YouTube platforms, whatever, you can find us on all those major platforms. Just type into the search box, Retirement Planning Redefined, or again, go to pfgprivatewealth.com. That’s going to do it for us this week for John and Nick, I’m your host, Mark. We’ll catch you next time here on the podcast.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Don’t Make These Income Planning Mistakes

On This Episode

 

Are you planning for your retirement with the confidence that you’re making all the right moves? In today’s episode, we’ll unveil the crucial income planning mistakes that could jeopardize your retirement and show you how to craft a financial plan that’s built to last decades, not just years. Tune in to ensure your retirement strategy is foolproof against common pitfalls and ready to secure your financial future.

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:

Are you planning for your retirement with the confidence that you’re making all the right moves? Well, on today’s episode, we’ll unveil the crucial income planning mistakes that could jeopardize your retirement and show how to craft the financial plan that’s built to last decades, not just years. Tune in to Retirement Planning Redefined. All that, coming up next.

Hey everybody, welcome into the podcast, John and Nick joining me once again to talk investing, finance, and retirement here on Retirement Planning Redefined with the guys from PFG Private Wealth. John and Nick are financial advisors helping folks get to and through retirement. You can find them online, if you’ve got some questions, need some help, at pfgprivatewealth.com, pfgprivatewealth.com. And we’re going to talk about some income planning mistakes this week here on the podcast.

What’s going on, gents? How you doing, Nick? What’s going on, buddy?

Nick:

Good, good. Just staying busy. Just crazy that we’re almost April. I guess we’re approaching April at this point. Just had some friends in town, so that’s always a little bit chaotic. But no, everything’s good. No complaints.

Marc:

John, how’s it going in the crazy household that is yours my friend? You doing all right?

John:

It is crazy. I don’t want to get into it. But yes, it is a madhouse. I’ll leave it at that. But, yes.

Marc:

But having little ones always is, but that’s good.

John:

Yeah, you know well.

Marc:

Well, and it’s April, right? It’s a busy time of year, too, a lot of things happening with taxes and financial strategies and everything. Anyway, it’s spring, all that good stuff.

So, let’s talk about some income planning mistakes. Let’s kick it off with something simple. I teed it up a little bit in the intro there about being retired for decades, not just years. I know that we all fundamentally think that, John. We’re like, “Yeah, of course, we’re going to be retired for decades.” But somehow or another it disassociates, I think, as we’re getting thirties, forties, maybe even in our early fifties. We don’t really put as much thought to it, I guess, as we should.

For me, for example, all the men in my family die young. I’ve already had heart surgery at a young age, so I could easily jump onto that path of, well, I’m not going to live that long, so whatever. I am not going to really worry about planning for decades. But that’s just a bad move, especially if you’ve got people that you love, loved ones that you may want to make sure they’re taken care of too. So, ways to think about it, right?

John:

Yeah, the worst thing you could do is plan to retire for a few years, and next thing you know, run out of money, you don’t know what’s happening anymore. But no, we get this quite a bit where I can remember clearly Nick and I were doing a plan and the money around the eighties, it was looking a little tight. The person was pretty excited. We were like, “We need to make some adjustments to make sure it lasts age 100.” He is like, “No, I’m good.” He’s like, “I’m not lasting until 80 or 83.” And we were like, “Okay, well, we’ll still do our due diligence to make sure your money lasts for a while,” but [inaudible 00:02:55]

Marc:

What if you’re wrong? That’s the thing. And did this person have a spouse? Were they married?

John:

He had a spouse there. He was semi-serious, but we ended up making some adjustments to it. But that is something we had quite a bit. When we do our planning, we make sure it goes to age 100, because you can’t predict the future. And with technology and everything that’s going on now, people are living longer.

Marc:

For sure.

John:

It’s just the healthcare industry, there’s just always new innovative things happening. But it’s a mindset that I will say people need to understand.

And that goes with building a portfolio. Just had a conversation with a client this week, and we’re doing some things, and they’re just looking at everything short-term. I had to remind them and say, “Hey, you’re looking at a 20, 30 year period where there’s some long-term money here. Not everything is the next five years.” And just talking to her made her realize that of just saying, “Hey, I’m still invested for the long term. I can’t make adjustments just based on expecting the next four or five years.” So, that is a mindset people really don’t understand with the investment portfolio. You still have some long-term money, because your retirement is going to be 20, 30 years, not just four or five.

Marc:

No, a great point. Glad you were able to have that conversation with her and get her eyes moving. I think that’s a real value add right there that people don’t often take into account when working with a financial professional. We tend to think, “Well, it’s the X’s and the O’s. They’re going to help me figure out the dollars and the cents.” But there’s also really thinking through and behavioral analysis a little bit, behavioral changes that we have to walk through, because you guys see this day in and day out.

And Nick, I’ll throw number two over to you. Part of that, as John was just saying, “Hey, you’ve got to set things up for short-term and long-term,” social security is going to play a big factor in that. So, starting it too early could really change your long-term numbers.

Nick:

Yeah, there’s an extra emotional attachment to social security, which we very much understand.

Marc:

Whether you’re mad at it or not, whether it takes off or not.

Nick:

Yeah, and we totally understand that. For us, we always try to integrate the social security decision with the overall investments and the overall plan. Just like with anything, we always approach it from the perspective of, hey, our job is to tell you the impact of the decisions you may make, and then ultimately it’s your money.

But, for sure, one of the biggest negatives, especially if they’re financial situation is pretty solid otherwise, starting social security too early these days makes a difference. Really the last few years have really played that out. Anybody that started social security before COVID and maybe didn’t necessarily need to, between the inflationary adjustments that have happened, which they still would’ve received, that inflationary adjustment compounds with the delay. And so, the jumps in benefits for anybody that’s waited those few extra years have been substantial, and people that are starting it now are pretty happy that they waited, and it’s made a difference for them.

Marc:

Well, if you don’t have a strategy, you could be costing yourself tens of thousands. This could be big dollars over the course of your lifetime. I get it. We’re all terrified about what’s going on in the world, because every five seconds it seems like there’s some new, crazy, weird, wonky thing happening in the world that is 2024. But you’ve still got to make sure that you’re making the right decision so that these planning mistakes don’t come back to bite you 10, 15, 20, 25 years down the line. So, good points, for sure.

Hey, John, what about bonds? For years, you’d go 60/40. You’d go standard portfolio. You’d go to bonds as we age for safety. Last couple of years though, they ain’t been all that great. So, is it still one of those things where assuming it’s a safe source is a good move, or not?

John:

Yeah, I would say it’s not to assume that that’s going to be 100% your source of income. We’re going to-

Marc:

From a safe side, right?

John:

Yeah, yeah. We’re going to touch on inflation and things like that. We’ve talked about being retired for decades, so you want to make sure that you have some equities in the portfolio so you are keeping up with costs of living going up. If you’re just in bonds and fixed income, you’re going to lose out on a lot of upside. And then, if you look at the past years, although interest rates have gone up obviously the last couple of years, there was about a 15, 20-year period where you get a bond and it’s giving you two or 3%. That’s nearly not enough to supplement most people’s income.

Marc:

Oh, for sure.

John:

So, you definitely want to diversify, make sure you’re planning for the long term for some growth, and also you want to adjust to an environment where interest rates are very low and the bond yields just aren’t enough to sustain what you’re trying to do.

Marc:

And at the time we’re taping this here, it’s just at the very end of March, it’ll probably be out sometime here in April of ’24, Powell still saying that even though the numbers came back in, inflation was a tad higher, I think, just last month then what they anticipated core inflation. He’s still saying that nothing’s changed for him, and that they may be looking at cutting rates throughout 2024. So, who knows?

But Nick, that does play into inflation as John just teed it up. Our fourth point here is it’s going to play into it no matter what’s going on with the dynamic that we have right now. But even just basic inflation, even if you just go sticking with the normal 3% we’ve seen for years and years and years, if you don’t take this into account, and again, our topic being income planning mistakes, you are seriously messing yourself up, because five grand right now, if that’s your expenses, is not going to be five grand in 10 years. It just isn’t.

Nick:

Yeah. I would say too, especially in this area, I think there’s been some studies at the inflation rate in the Tampa Bay area has been higher than other places.

Marc:

Okay.

Nick:

I’ve had multiple conversations with clients where there’s been this… I think because there was such a period of scarcity in getting decent fixed rates, whatever it was, eight to 10 years, it’s like people are just taking a deep breath and just saying, “Oh, finally I can get four and a half or 5% on my money again,” which is great, but the issue is that some are assuming that it’s going to last for a long period of time. Last year is a really good example from the perspective of that five-ish percent, whether it’s a CD or money market or whatever, solidified last year. We had some clients that shifted more over, and we had many conversations about it. But again, it’s like the S&P then did, what, around 20% or something like that?

So, there was an opportunity cost there. When the market’s up like that, you really don’t want to lose out on those years. And so, the inflation is compounded. For example, even just people that are in Florida and live in a condo, maybe they’ve lived in a condo for a while, all the condo rules and association rules have changed. They’re like, “I’ve seen association fees double in the last two or three years,” and it’s really putting a lot of pressure on people. Even if their mortgage is paid off, but they’ve been on somewhat of a fixed income, there’s a lot of pressure happening there.

And so, yeah, we try to just keep emphasizing even if it’s a small portion of the money, even if it’s only 20 to 40% of the overall portfolio where we have something related to growth, more marketed towards that, getting them to understand that, hey, this is for money down the road. No matter where the rates are right now, the one thing I can promise you is they’re going to change. And so, that’s been a little bit of a different conversation than we’ve had to have probably, I’d say, the 10 years previous to that. So, it’s going to be interesting to see how people start to react when the cuts do happen.

Marc:

Yeah, because you’re talking about having to keep up with inflation, you need to have some stuff at growth. You’ve got to have some stuff at risk, basically, so that you can pick up gains in the market, things of that nature, wherever it’s coming from. But you’ve got to have some money out there taking a few chances, because you do have to keep up with or outpace inflation.

I guess that really just brings me to my last point here, John, and you guys can both jump in if you’d like to on this, but you’ve got to have other income streams besides just social security, plain and simple. That’s all fine and good, but you’ve got to have some other income streams and some of that needs to be safe, and some of that needs to help you with the future money, which is growth.

John:

Yeah, 100%, Mark. Social security might cover thirty to forty-percent of someone’s expenses, and covers a portion of what they need for income there, but really important to have some other income stream, whether that be real estate, whether it’s your investments.

Right now, we’re talking about rates, rates are really strong. We have a lot of clients looking into these income annuities, because they look really appealing right now. Because as interest rates go up, those annuity products typically tend to look a little bit better. So, just having that guaranteed income or just reliable income source to put on top of social security really gives a nice buffer.

I don’t want to speak for Nick, but I have found when you have your floor of guaranteed income, it helps you make better decisions even with your other money, where if the market’s volatile, but you say, “Hey, I have X amount of dollars guaranteed income coming in in this pool of money here that’s set aside for growth,” even when it’s a little volatile, it’s just giving you a little more peace of mind to saying, “Hey, I know my baseline expenses are covered, so I’m going to be okay.” We find that that does help people make better decisions when they have multiple income streams.

Marc:

Yeah, you got to do it, right, Nick? It’s just the point of the fact that you want to have that diversification not only in income but also with tax buckets. You just want to have some general good broad diversification in your entire portfolio.

Nick:

Yeah, absolutely. The diversification, and I alluded to it earlier, it’s just as important as ever. Having the higher floor on fixed rates has been helpful the last couple years, but the phrase that I’ve used quite a bit lately is zoom out. We need to zoom out and continue to zoom out, because that’s really important, for sure.

Marc:

That higher view of things versus trying to narrow in?

Nick:

Yeah.

Marc:

Yeah, I got you. Well, so there’s some income planning mistakes that we can certainly make, so make sure that you’re avoiding these. And of course, if you think, “Well, I don’t do this every day,” or, “This is something that I just can’t wrap my brain around all the time because I’m just too busy living my life and working my own job,” or whatever the case might be, that’s why you have a financial team to help you out.

So, if you need some help, and of course you’ve got questions, always reach out to a qualified professional like John and Nick before you take any action to see how something’s going to fit into your unique situation. They’re financial advisors to PFG Private Wealth. You can find them online at pfgprivatewealth.com. That’s pfgprivatewealth.com.

And don’t forget to subscribe to the podcast Retirement Planning Redefined on Apple or Spotify or YouTube platforms. That’s going to do it this week for us. We’ll be back with more on future episodes. So again, hit that subscribe button and we’ll catch you next time on Retirement Planning Redefined with John and Nick.