Ep 58: Fore Your Retirement: What Golf Teaches Us About Financial Planning

On This Episode

Are you a golfer? Even if you’re not, the game of golf can teach us valuable lessons about retirement planning. For example, hitting a hole-in-one might be thrilling, but it won’t necessarily guarantee your overall success. And just like you need different clubs in your golf bag to play a round, you need a well-balanced approach to your investments in retirement. But perhaps the most important lesson from golf is the value of having a caddy. In retirement planning, a financial advisor can help you navigate the hazards and make the most of your financial “clubs.” Tune in to this episode to learn more about how the game of golf can help you plan for a successful retirement.

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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:


Marc: Back in for another edition of the podcast. Thanks for hanging out with John and Nick here with me. Talk investing finance and retirement here on Retirement Planning – Redefined. We’re going to have a little fun with this podcast conversation, a little golf lesson and tie-in to financial planning or retirement planning. So this will be fun. It’s right up your guys’ alley. John, just a few weeks back, you guys had your annual golf tournament, and we had talked on the prior podcast, it went really well. I should have had this ready for you. We could have talked about it then, but that’s okay.


John: Yeah, yeah. It’s all right. If you want to ask questions about it, I can definitely tell you. It was a great event and we donated to Boys and Girls Club of Tampa Bay and Tampa Hope, which provides homeless shelter stuff. So, yeah.


Marc: That’s awesome. Yeah.


John: Yeah.


Marc: All right, so are you a big golfer yourself?


John: No, I’d like to be when I can get back at it, but I’m not very good. It’s been on my to-do list to take some lessons and be able to get on the course, but I like-


Marc: Well, you don’t have to be good to like it. I think that’s most people.


John: Yeah, no, I like going on the cart and driving around and hanging out with my buddies.


Marc: There you go. Nick, what about you? Are you a golfer at all?


Nick: I wouldn’t call it golf, personally, I go out and I hack for-


Marc: Yeah, there you go.


Nick: … about seven or eight holes-


Marc: There you go.


Nick: … and then I’m pretty much done at that point.


Marc: You’re a hacker. Okay.


Nick: Yeah, maybe now that I’m in my forties it’ll be something that I reengage with, but I enjoy being out there when it’s the nicer time of year, the cooler time of year here. It’s fun to hang out with buddies and go and be out, but it tends to be a four to five hour chunk. So it just depends on my mood, I guess.


Marc: Yeah, it certainly can be fun. It can be a frustrating sport, but it’s easy to do, and of course it’s obviously a very popular sport for retirees and pre-retirees, so it’s easy to do some financial analogies with it. Since you guys just had that golf tournament and raised some money, which, again, is fantastic. This’ll be a little fun podcast conversation. So let’s jump in and talk about some lessons we can get from the game of golf financially speaking, and we’ll just have a little fun with this. So hitting a hole in one. I’ve actually seen this done live in person. I was playing with some friends a couple years back and we were playing with…. we got put with an older couple and she won the day, she was killing us. She was right down the fairway every time. We were all left and right around the sun. She was awesome, but her husband, on a par three, popped one up and lo and behold dropped it right in the hole. It was just totally awesome to see that happen. Thinking about this guys, I think about getting lucky in the market one time. Because this guy’s attitude changed when he got the hole in one. He was super excited. He obviously was very cool, but you could see the rest of the day he felt pretty cocky about his game. I would imagine that from a market standpoint, that could be the same thing. You do really well on one investment in the market and you think, oh, I got this whole financial thing figured out, and it might not be that easy.


Nick: Yeah. It can be interesting. Just in general, and you alluded to it, people like to talk about their wins more than their losses. That’s something that we see quite a bit. It’s a similar concept as when you have a friend that goes to Vegas and they talk about how they hit on a certain thing, but not necessarily that they came back less money than they started. It’s that concept. The goal when we’re focusing on financial planning, retirement planning, that sort of thing, is a long, well-thought-out strategy that encompasses multiple decisions, builds in options for different scenarios and really is just more strategic than having a single goal in trying to necessarily get lucky.


Marc: Well, and John, I was going to say, I think most golfers would agree that a hole in one is a little bit of skill, but a whole lot of luck. Maybe that’s the same thing to be said for the market, but you can strategize properly with your retirement and not just be wishing for luck, I suppose, in retirement, right?


John: Yeah, yeah, you definitely want to have a strategy and a plan versus just rolling it all in one event, unlikely event really happening. So you want to make sure that you put together the strategy, and again, you’re just trying to hit, bring it to baseball, those singles and doubles consistently, versus always trying to go for the home run.


Marc: Well, like I was saying, the gentleman’s wife, at the end of the day, he got cocky because of that fairly early, and he clearly was going to beat the two younger guys that he was playing with that day, me being one of them. I think he felt like the day was his because of the hole in one. But she wound up winning the day from having and shooting the best round because she was consistent. To your point with baseball there, she was right down the fairway, 150 yards every time. She ended up just kicking our tush because, like I said, we were all over the map, somebody else’s hole and everything else from slicing and all sorts of good stuff. So consistency, while a hole in one is sexy, consistency is probably the better idea for a strategy. So let’s talk about clubs in the golf bag. This is a fun analogy to think about too. You’re probably not going to go play golf and go Happy Gilmore and just show up with a driver and a putter. You need some more things in there.


John: 100%. This goes with your investments. You can’t just have just one tool in the bag there. You definitely need to have different investment vehicles doing different things so you really hit your goals. In case with golf, you make sure you get the best score possible. Same thing with your retirement planning and investments. You want to have different investments. Here’s the term everyone hears, diversify. You want to have different investments in your portfolio, investment portfolio, and different investments overall, whether that be some fixed income stuff, and then especially nowadays with the rates being the way they are, CDs are definitely a great option right now. So you want to have the different irons, different drivers, different-


Nick: Yeah. One thing that people tend to obsess about is, “What’s best, what’s best, what’s best? Should I have this or should I have that?” So frequently our answer is, “Well, it depends,” and or, “Yes, all of the above,” and it dovetails into this where, “Sure, you do want to have some funds that are going to be pre-tax and also some funds that’ll be tax-free later on,” and really focusing on the fact that just because something is better right now doesn’t mean it’s going to be better later. So the ability to be able to adapt and pivot and adjust to whatever the scenario is, is super important.


Marc: Yeah, and that’s the point of, “It depends,” sometimes with that answer because while it’s not the flashiest of answers, because it’s not a set it and forget it. Your strategy is going to change. Just like the club you’re going to have to pull out of the bag may change. You may think it looks like a simple 7 iron shot, but as you start to look at it and evaluate a little bit more, you might realize that it’s not, you got to go with a different club. So different clubs do different things, different investments do different things. Having that arsenal, I suppose, at your disposal is really what you want to do, versus, again, like I said, just trying to be Happy Gilmore out there and use a driver and a putter only. Probably not going to go the way you want to go. That comes to the final one here for this little fun analogy, guys, is listening to a caddy. Now, granted, when a lot of us go play golf, we don’t have the luxury of having a caddy, but you may have some friends who you’re doing a foursome or whatever and they’re giving you some advice or things of that nature. And while you don’t want to ask your friends necessarily for financial advice, if you ever have got the chance to play with an actual caddy, it’s pretty freaking cool. A true professional can really make the difference. I’d say that’s an easy analogy to what you guys do.


John: Yeah, 100%. I will say having an advisor in your corner, just someone to talk to, ends up having… people end up making better decisions with that. Just go back to the most recent thing, COVID here, where I would say the first month of that was really calming people down and talking them off a ledge. I’ll tell you how many times we heard, “Oh, I’m so glad we got the chance to talk because I was getting really nervous and thank you for your time.” So just having that resource of someone to bounce some ideas off of or just talk things through, ends up in the long run helping someone out financially more than they realize.


Marc: Yeah, definitely. Again, it’s the little things. It’s not always just the Xs and Os, sometimes it is having that sounding board, “Hey, I’m thinking about this idea. What do you think?” “Okay, this is a good idea because X, Y, Z,” or, “This is maybe not a good idea because X, Y, Z.” So it’s certainly important to have those conversations and if you need some help, reach out to the team. Obviously, as always, they’re here to help you with this, to help you get to and through retirement. Pfgprivatewealth.com is where you can find them online. Pfgprivatewealth.com, and drop us a line while you’re there, send an email in to the website if you’d like to have your questions answered. Of course, they’re going to certainly do that with each and every question, but we also take those from time to time here on the podcast. So yeah, let’s wrap up with one or two here guys. We’ll see how we can go, see how many we can get through. We got Claire, and she says, “I’m supposed to retire next month, guys, but I haven’t really done any planning at all.” Yikes. “I just realized that I still need to figure out Social Security options, pension options, Medicare options, and as well as what I’m just going to do with my time.” Wow. “Should I push my retirement date back until I figure this out?” Guys, that’s a interesting one and a tough one. Not trying to pick on her, but she’s done zero planning and thinking about retiring in a month.


Nick: Yeah, probably not a good idea. There’s two ways to address this. Well, what we would say to somebody in this situation is, “Okay, yeah, you need to focus ASAP on putting together a plan,” because usually when this happens, it’s because of anxiety of what the answer is going to be. It’s the concern that whatever the results are of the plan are going to say, “Hey, retiring is not a good idea,” or that the plan doesn’t look good or that sort of thing. So taking the action to do something is really, really important, and you can’t rewind time. So getting that plan in place. Would recommend holding off on the retirement until you can put the plan in place. Just there’s probably options in strategies that they’re not familiar with that can be put in gear sooner than later and could help to make that retirement more successful, because people’s ability to reenter the workplace after they have exited is often much more difficult than they realize.


Marc: Yeah, John, I’d say probably just call somebody, right? Get started. Don’t wait one more minute, right?


John: Yeah. Mistakes can be costly and it sounds like Claire has a lot of important decisions to make, especially with the Social Security and the pension there, one wrong move on that, you could be losing thousands of dollars, basically, is what I’m getting at.


Marc: Yeah, yeah. Yeah, so you got to get a strategy, Claire. Do you need to push off retirement? You’re just not going to know until you figure the two… Her question is, “Should I figure this stuff out?” Yeah, get in, sit down with a professional and find out where you stand and they’ll be able to help you determine is retirement next month even possible? I guess my question would be, how do you know that you could retire next month? She says, “I’m supposed to.” Maybe they’re going to retire her from the job. Maybe she’s been told. I don’t know. It could be one of those types of things, but either way I would get in to see a qualified professional, ASAP, and of course John and Nick are here to help. So 813-286-7776. All right, final question here. We’ll do one more. Lee says, “Guys, I don’t understand the Social Security spousal benefit. My wife worked for about five years before we had kids and hasn’t worked since, but she does have some benefit of her own. What is she entitled to? How does it work?”


Nick: This is a good question, and the reason that we wanted to review this with people is because sometimes the tricky part with dealing with planning, retirement planning, is the jargon or the terms that people use. Sometimes they mix up the terminology and that can lead to mistakes, which can lead to big problems. In this case, from a spousal benefit standpoint, in general, people are eligible either for a benefit of their own based upon their own work history, and that is only valid if they have 40 quarters of work. So 10 years of work. Now, if they are married, and there are some additional scenarios, if they were previously married but married for at least 10 years and are divorced, there are some options on spousal benefits at that point. There’s so many different scenarios that if somebody’s situation is complicated, we highly recommend that you reach out to an advisor that’s familiar with this space. But in this specific example, the spouse working for five years is not going to be eligible for her own benefit. She is going to be eligible for a spousal benefit, and that spousal benefit is a calculation factored on the primary earner’s income and how long they’ve paid into the benefit and that sort of thing. So this is something that we would tell, “Hey, we can help with this scenario. The main information we’re going to need is going to be the Social Security statements, and then we have some software that helps us pick, show what those numbers look like. But the spousal benefit is going to be a factor of the primary income earner’s benefit amount.”


Marc: Okay. Yeah, so definitely can get very complicated. Thanks for sending the question in. Hopefully that helps you out, but definitely have a conversation with a qualified financial professional. Reach out to John and Nick to talk more about Social Security and eligibility and all those good things and how it plays into it. 813-286-7776 is the number to call, or stop by the website, pfgprivatewealth.com. That’s pfgprivatewealth.com. Don’t forget to subscribe to the podcast on Apple, Google, Spotify, all that good stuff. As always, we appreciate your time. You can catch past episodes by subscribing or check out future episodes when they come out. Thanks for your time today, for John and Nick. I’m your co-host, Mark Kelly, and we’ll see you next time here on Retirement Planning – Redefined.

Ep 57: Retirement Expenses For Which You Forgot To Plan

On This Episode

Are you preparing for retirement but feeling confident that you have covered all the expenses? Well, think again… It turns out that many retirees overlook some crucial expenses that can leave them financially vulnerable. In this episode, we explore the retirement expenses that most people tend to forget, including skyrocketing medical bills, unexpected travel costs, taxes, and much more. We’ll discuss practical tips and strategies to help you plan for these expenses and ensure a secure and comfortable retirement.

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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:


Marc: Hey everybody, welcome into the podcast. Thanks for hanging out with John, Nick and myself here on Retirement Planning Redefined as we talk, investing, finance and retirement with the guys from PFG Private Wealth. And this week we’re going to get into retirement expenses for which you might have forgotten to plan for, which certainly happens. So on this episode, we’re going to discuss some practical tips and strategies to help you plan for these expenses and maybe secure a more comfortable retirement. Guys, what’s going on Nick? How are you buddy?


Nick: Pretty good, pretty good. I got some friends coming into town next week and then family trickling in over the next month, so it’s going to be a hectic month.


Marc: Yeah, that’s not bad though.


Nick: That time of year.


Marc: There you go. And spring is upon us, so that’s always good. We’re into March, so that’s a good deal there. John, what’s happening buddy? How are you feeling?


John: I’m feeling okay. Getting there. Getting a little stronger each week so excited about that.


Marc: There you go.


John: But feeling pretty good. We just wrapped up our golf tournament, nonprofit charity golf tournament.


Marc: Oh, fantastic. Yeah.


John: And looking really good. It was a great time. Nick was out there helping me out because I couldn’t lift anything heavy, but it was a great turnout. And it’s year three and looking forward to year four. So.


Marc: That’s awesome. Yeah, fantastic. Always good to hear those success stories. So let’s share some things this week. Let’s get into the podcast here a little bit and talk about some expenses that we might encounter in retirement. And maybe we planned for them, maybe we haven’t. Hopefully we have. But let’s start with a big one obviously, medical expenses. I mean, typically they outpace normal inflation a lot of times. It seems like medical’s just constantly on the rise. So how do we address some of this stuff?


Nick: Yeah, what’s actually been probably at least most recently with a bunch of our clients, the dental expenses have been pretty wild. I know my parents have kind of run into this too. It seems like once you get into your sixties almost everybody has some sort of major dental work and it’s almost impossible to get out of there for less than 10 grand. So it’s interesting too because without going on a massive tangent, dental practices and offices seem to have really gotten down the financing aspect of things. And really they tend to run the businesses pretty tight and costs have gone up pretty substantially.


So yeah, those dental expenses can be a big deal. We tend to make sure that we have a fair amount of money budgeted each year for healthcare related expenses for clients and making sure that we’re allocating the right amount for insurance premiums in that sort of thing. But yeah, those numbers really do add up over time.


Marc: Yeah. They can get pretty staggering. I think it’s what is the average person what, $250,000, something like that in retirement and medical expenses. So I certainly can take off there for sure.


John, what about unexpected travel? Obviously that’s one that when we think about travel as part of our retirement strategy, but where would we find unexpected travel in that situation where it kind of creeps upon us and costs us more than we realize?


John: Yeah, so one thing we’ll always say is things are always going to come up, you can plan as best you can, but something’s always going to come up whenever life happens. So we’ve seen a lot of times where it could be funerals, long distance where people are having to go places they weren’t expecting to go, obviously. And just hotels stay, travel, whether they’re for a week or two, seeing some of that. Or caring for family members that don’t live in the state. So it’s traveling other sides of the country. We’ve seen that quite a bit.


Marc: I’d say, that’s probably a pretty big one, especially for as your retirees, you might have to go take care of a sibling or something who’s having a long-term care event, extended stay. I think my sister had to do that a while back as well. So that’s a great point.


John: And then there’s always the, which I think we’ve all experienced the destination wedding invite where it’s like, oh man, do I really want go to this place? And it’s just like, okay, all right, let’s start adding up the cost. And if it’s a family member, you typically feel obligated to go.


Marc: Yeah, so that’s good point.


John: Those are some of the top three we’ve seen in our practice.


Marc: Do I really want to go to Cabo? Yes. Do I really want to go for my niece’s wedding? No.


John: Sounds about right.


Marc: Yeah. or something like that. Right. So definitely some places where expenses can come up. The medical obviously certainly can get really costly, but then again, so can parental or child assistance. I mean, Nick, more people now are than ever are in the sandwich generation where they’re taking care of maybe an adult child to some degree, helping out and they’re also taking care of their own parent. That’s one thing I’ve heard about.


Nick: Oh yeah, yeah, so the child’s assistance thing, we saw it quite a bit like back in the years, immediately following the great recession, was kind of the first time I had seen that quite a bit where kids were getting out of school, graduating from college and having a hard time finding a job. So back to the parents and some help and that sort of thing.



And then we got that again in the COVID too.


Nick: Yeah, exactly. That’s what I was going to say. From the standpoint of when COVID hit, that was something that impacted quite a bit. The job market’s still pretty good for a lot of fields, but have definitely seen that. And I would say a lot of our clients are also entering into that period of time where there’s more assistance needed for parents. My grandmother’s been living with my parents for, I want to say over 10 years now, but she just turned 90 and now it’s becoming even tougher. And we hear about that quite a bit from clients. And then if their parents are out of town, that’s some that have brought them into town or they travel fairly regularly to go see them. Yeah, it’s a lot on the plate.


Marc: And that’s an expense that can really derail your retirement. I imagine thinking using your parents there as an example, if they weren’t prepared for 10 years of taking care of grandma, I mean that’s an added expense that you just weren’t planning for.


Nick: Yeah, there’s the financial aspect and then even from the standpoint of we are focusing for this on the financial side of things, but even from a lifestyle and mental health standpoint or even just your ability to be able to do the things that you planned and wanted to do, whether it’s travel, that sort of stuff. It can be difficult, for sure.


Marc: Sure. Yeah, definitely affects the family dynamic along with personal relationship and everything because it’s a full-time gig. It can be, for sure.


Nick: Oh yeah.


Marc: So a lot of times we are focusing on the expenses here, but that’s a good point to bring up as well. So planning and strategizing for those things that can maybe be overlooked or forgotten, certainly important. Taxes, John, is the next one. Now we got a plan for taxes, hopefully we’re doing that. But are we thinking about the possibility of a tax hike because it sure does seem imminent.


John: It does, doesn’t it? You figure with all the spending happening, at a certain point, taxes we’ll have to go up. But that is definitely one that I know we cover quite a bit in our planning is making sure clients are flexible and to adapt in an environment where if tax rates do go up, we really try to make sure people have the ability to adapt to the situation. But I will say this is often overlooked where it’s, oh, you’ll have less income. So your funnel, lower tax bracket is kind of what you normally hear, but it’s definitely something that you want to be able to adapt. So perfect example of this, having some tax free money into retirement where tax brackets go up, you can basically say, Hey, this next three or four, five years, I have at least some Roth IRA money I can pull from where it’s not going to really impact my lifestyle too much. But taxes go up 7%. That’s a big, big dip in your nest egg or your living, your lifestyle,


Marc: Especially if your income stays the same. So your income stays the same when your tax rates jumps from you said what, 7%? So let’s say we go from 25 to 32, that’s not so great, you’re not going to feel so good about that.


John: Yeah, and something else I’ll say we see quite a bit with this is where there’s big expenses in a given year. So we talk about, I know I think we’re probably going to touch on it later, but if there’s like a home remodel expense or whatever it might be, or we had the recent years with COVID, like, hey, I want to buy an RV or whatever it might be, it’s big purchases can also affect those where you might be pulling out 50, 60 grand extra in a given year and if all your money’s pre-taxed, that’s going to be a pretty big hit to you in that year.


Marc: And that’s a good point. So Nick, I know you’ve got a list of a few things to think about in that department from maintenance or repair. Now again, we could strategize for the RV, we could strategize for, and I think this is maybe the point people missed, you tell me if I’m wrong here Nick, but if you’re getting close to retirement and somewhere in retirement, you’re going to probably have to replace your roof, start planning for that so that it’s not an unexpected expense versus just going, oh well now we found out the roof is damaged and we need to repair it. That’s a little different. So I don’t know, what do you think?


Nick: Yeah, for sure. From a planning perspective, the way that we typical typically handle that is we have home maintenance and repair expenses on an annual basis and then we will oftentimes every X amount of years add in an extra bump so that we can show people how we model that out and try to factor that in and build that in. But yeah, absolutely. One of the things that I’ve seen too is I guess and this is definitely not for everybody, but there’s a fair amount of people that like to purchase vehicles cash and just not having the car payment. And that’s something that has been a transition for a bunch of clients where just kind of emphasize with them, they may keep a vehicle for 10 years and so when they do make that new purchase, if we’re taking money out of qualified retirement accounts to do that, you’ve got to take out X amount more and then that hits you from a tax perspective, where really stretching out the payment, taking advantage of lower rates that dealers often offer. Just even little things like that where you may tweak how you’ve spent the funds on certain expenses in the past to just take into consideration what your new reality is in retirement.


Marc: Yeah, definitely.


Nick: It’s important.


Marc: Yeah, if you strategize again, you won’t be caught off guard by some of these expenses that you didn’t plan for. But John, the last one, I mean we got caught off guard for sure on the last one. Many people don’t plan for inflation normally, even when it’s in a normal 2% or 3%, let alone what we’ve just been going through.


John: So yeah, the last couple of years have been interesting for inflation. In a normal environment, it’s obviously not this type of hike in a given year. I mean coming out of a pandemic and then obviously with the Fed raising rates the way they have been doing to try to combat some of that. So normally it’s pretty slow and then all of a sudden it’s like you go to the grocery store and it’s like, whoa, what just happened? I’m paying almost 20% higher for milk or whatever it might be. COVID definitely made things interesting with the supply chain, everything like that, which added to it, which we’re starting to see come down a little bit. But this is a big one that you definitely want to put into your financial plan and you want to stress test the plan saying, Hey, what if inflation does hit 2%, 3%? It’s something that we typically do as well. And if you’re working with somebody, you should do is different categories have different inflation rates. So one thing with medical is historically that has been higher than the normal inflation, which you said would serve around 2%. We normally inflate that about 4%. And if you’re planning to pay for, at this point, most people when they retire aren’t paying for kids’ education but might be paying for grandkids because that’s what they want to do. So you got to pay, that has a different inflation rate. So it’s cool to be able to adjust each category with a different inflation rate when you’re doing planning. So if that’s something you are working with an advisor, you want to ask that question, is the inflation rate you’re giving me kind of general over everything or are we actually putting different inflation rates on different categories?


Marc: That’s a great point.


Nick: And just to jump in here on this one too, obviously inflation has been in the news so much lately. One of the conversations that we’ve been having with people is that really from the standpoint of news, the inflation that they report on, what CPI is really such a specific bundle of goods. Anybody that’s been paying attention to expenses over the last five, six, seven years, they’ve been going up. And so just kind of reminding people that this is happening every year. We just get really mad about it every 15, 16, 17 years, over and over again, rinse, repeat. And so really making sure that they understand that. And also just to another take on the inflation side of things is when they’re looking out over the nest egg and the plan and they kind of look to see, all right, well, I’m going to have X amount of dollars in 20 years, or I’m targeting to try to have X amount of dollars in 20 years or at life expectancy and making sure that they understand, hey, is that in present value? Is that in future value? Because 20, 25 years down the road, that number can start to seem a little, if things are going well, like unwieldy or super optimistic when in reality it could be just when you use the right and when you look at it the right way it’s similar to where you’re at today and stuff like that. So just not having that false sense of security if it’s not warranted is always important. But yeah, inflation’s an important topic.


Marc: Yeah, I mean you got to plan for these expenses. Some things we can’t plan for, but many can, or at least we can try to somewhat strategize for things we think are going to happen because inflation’s always going to be there, tax rates are always going to be there. We don’t always know what they’re going to be, but then some of those other items we can certainly try to strategize for. And by not having the conversation, you’re certainly not doing yourself any favor. Let’s finish off with an email question, guys, whoever wants to take this one and we’ll wrap it up. Thomas wrote in and he says, “Look, we’re retiring in two years and plan to sell the house and move to the beach, and values are still pretty high in my neighborhood to sell the house, so I’m wondering if I should sell it now even though we’re not ready to move and just rent a couple years.” His overall question is, “It a bad idea to rent at this stage of life?”


John: Yeah, that’s a great question. This seems to be coming up quite a bit with what we’re kind of seeing happening in the housing market right now. I wouldn’t say it’s necessarily a bad idea to rent at this stage of life. I’d more look at it from what’s going on in the housing market, the economy. So that type of strategy right now could be a pretty big risk depending on what happens. Example, if you were to sell your house and anticipate buying in a couple of years. If house prices, again, who knows what’s going to happen, dramatically go up over that next two year period, you could be putting yourself in a really bad position financially depending on what happens. I talked to someone who actually did something like this during COVID where they said, Hey, house prices went up a little. It was right when the boom kind of started where they looked at it and said, house prices are going up. They’re really high. I think they’re going to go down like they did in ’08 and this gentleman sold and then two years later, I mean they kept going up.


Marc: Right.


John: So now basically he’s caught in a tough spot where he was renting for a couple of years and for him to get back into the same house he just sold, I mean he’s paying almost $200,000 more. That’s a big swing. So I don’t know if it’s worth a risk, let’s put it that way, to do that type of strategy because none of us have that crystal ball.


Marc: Yeah, it’s an interesting proposition. A friend of mine did exactly this, Thomas. So he sold his house at the peak actually about eight months ago. I guess maybe that was the peak in this area or that area. But yeah, he decided he was going to get an RV and just drive around camping for a while and he is waiting for the housing price to come down before he goes and gets another place. So he banked on that strategy. He feels like he made the right decision. He’s enjoying the RV time. But every scenario is going to be a bit different with this, to John’s point. So I think it’s always worthwhile to kind of crunch some numbers, run some numbers, get a strategy put together and just stress test some things. Not only just that question from the email this week, but just a general topic that we talked about this week. Have a conversation with a financial professional like the guys at PFG Private Wealth. Get onto their calendar, have a chit chat with them. Stop by the website, check it out at pfgprivatewealth.com. That’s pfgprivatewealth.com to talk with John and Nick and the whole team at PFG Private Wealth. And don’t forget to subscribe to us on Apple, Google, Spotify, whatever platform you like to use. We appreciate your time, as always. Thanks for hanging out with us. For John and Nick, I’m your co-host, Mark. We’ll catch you next time here on Retirement Planning Redefined.

Ep 55: How Bonds Work: What Retirees Need To Know

On This Episode

Too many folks misunderstand bonds, how they work, and what role they play in a proper financial plan. We’ll address some of those bond related issues on today’s show.

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More Episodes

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:


Marc Killian: Welcome into another edition of the podcast, Retirement Planning – Redefined with John and Nick from PFG Private Wealth. And it’s time to talk about bonds and really what you need to know and how they actually work. And there’s a lot of conversation around that, obviously in ’22, certainly to the fact that nothing seems like a good idea as far as things go. And when the market is weird, often we run to bonds for the safety aspect, but there’s some things going on there too. So, let’s talk about how they actually work, what role they might play in a proper financial structure and how maybe this here lately, it’s been a bit of a different show in that regard. So guys, welcome in. Nick, what’s going on buddy? How are you?


Nick McDevitt: Pretty good, pretty good. Staying busy.


Marc Killian: Yeah, that’s good. Very good. John, and you? How are you doing?


John Teixiera: Doing all right.


Marc Killian: Yeah?


John Teixiera: Hanging in there.


Marc Killian: How’s the bond market? A little rough.


John Teixiera: Little rough if you’ve owned some already. Could be good if you’re buying some new ones.


Marc Killian: Yeah, right. And that’s the difference, right?


John Teixiera: It depends where you’re at.


Marc Killian: Depends where you’re at. So yeah, we’re going to talk about that a little bit. First thing I want people to understand is that the bond market is actually way bigger than the stock market. A lot of people don’t know that. That’s just an interesting little tidbit, but it is a lot bigger.


John Teixiera: Yeah. Yeah, a lot of people aren’t aware of that, but-


Marc Killian: There’s a whole lot more stuff in there. Right?


John Teixiera: Yeah.


Marc Killian: But let’s go into the misunderstandings, right? So first off, just why don’t you guys give us the basic gist of how a bond works, for folks who just might not know?


John Teixiera: Yeah. So, to break it down to its simplest form, a bond is basically loaning your money to a public institution or private entity. So, you’re basically saying, “Hey, I’m going to give you my money.” And for that, the company typically provides some type of interest rate for that period of time where they have your money. And as far as obligations go from that company or public institution, there’s a promise to pay you back. And that promise is only as good as the paying ability of that company. So, I think that’s bonds in a nutshell, if you try to break it down to its simplest form.


Marc Killian: Yeah, you’re loaning the company money, right? You’re lending them money versus as a stockholder you’re buying a piece.


John Teixiera: Correct.


Marc Killian: Yeah. Okay. Nick, what’s the difference between a bond and a bond fund? So, like an individual bond and a bond fund? Because most of us wind up with bond funds and we’re maybe not totally sure what it is we have, we just say, “Oh, I have some bonds.” But what they really have is a bond fund.


Nick McDevitt: Yeah. The reality is the difference as far as how it affects a typical investor is the important part to understand. So, with bond prices and interest rates having an inverse relationship, so again, if interest rates go up, bond prices go down, then the issue that somebody that has invested in a bond fund has is it’s a pool of bonds. And so, you’re relying upon the manager of that bond fund to manage the buying and selling of those bonds while trying to protect the value of your account and gaining interest. So, sometimes the easiest way to guide people through this, and obviously we’ve been having this conversation quite a bit lately with people, especially with how we’ve invested in fixed income in the last few years, is that if you own an individual bond, you have the ability to hold it until maturity. And when you hold it until maturity, you then receive the par value back. And this might be a little bit too much detail, but we’ll try to give people a good understanding of this. So, oftentimes people get confused with the difference between the initial issue of a bond and then when it trades in the secondary market. So, when a company initially issues the bond, that’s when they are receiving the loan basically, or the money from whoever purchases that bond initially. So, when they sell the bond, the bond sells for $1,000, there’s a promise to pay that the company issues with the bond as well as, “Hey, in the meantime we’re going to pay you an interest or a coupon.” So, let’s just say it’s 3%. So, company A, we’ll call them Apple, Apple issues a bond in 2020 for five years and they’re going to pay 2% over those five years. And as long as whoever holds that bond at the end of that five years, no matter what they paid for it, they’re going to get $1,000 back. That’s the promise.


Marc Killian: Okay.


Nick McDevitt: So, we’ll say John bought that bond initially, but two years into it he decides, “Hey, I no longer want this bond, I’m going to go ahead and sell it.” So, because of the market situation and what’s going on in the market, that bond in the secondary market, because interest rates have gone up, even though he paid 1,000, he can only sell it for 900, because that 2% coupon rate isn’t competitive.


Marc Killian: Right. Yeah.


Nick McDevitt: So, let’s say he sold it to me and I bought it for 900. So, I got a discount like, “Hey, I’m only getting 2% so I’m not going to pay less, so I’m going to get a discount.” And now my goal is I’m going to hold that bond until the end of that total five year period and I’m going to collect that 2%, but I’m also going to get the extra $100 on top, which makes my return, my overall return, my total return higher. So, the difference is that when people, as an individual, when they own those bonds individually, they have more control over holding that into maturity and essentially getting their par value back while collecting their interests in the meantime versus when it’s in a bond fund, that performance is strictly going to take place dependent upon how it gets managed. And we know obviously it’s confusing and it’s always a tricky spot of trying to help people understand and giving what might be too much information. But with this, I think a lot of times it’s the more you know, the better it is to try to understand it.


Marc Killian: Yeah. And we’re going to talk a little bit more about some normal things that we’re used to thinking about or hearing and how it messes us up a little bit. And John mentioned earlier, he is like, “Yeah, if you’re getting into a bond right now, higher interest rates, they look a little bit more appealing than someone who bought maybe a year ago, as the rates were down lower.” And to your point, you said the inverse reaction. I was always taught, an easy way to remember it is when rates are high, bonds die. So, little rhyme, helps you remember it. So, when rates are high, bonds die, because the value. Right? So, they have that inverse reaction. That’s just a good way to think about it. So, John, a lot of people consider them to be the safer, conservative part. I want to jump to the standard 60/40 for just lack of a better term. Right? We’ve grown up with this thing of when the market’s rough go to bonds, right? As you get older, go to bonds, because it’s a safer option and we feel as though it’s that safe, conservative part of the portfolio. Do you agree with that approach normally? And what’s your take on it this year when it’s also having a lot of trouble?


John Teixiera: Yeah, normally I’d say that you’re correct. Yeah, normally that is how it works. This year it’s a little different obviously with the Federal Reserve really trying to hedge against inflation. So, they have been aggressively raising the rates. So, that’s where you’re starting to see these bond values drop drastically. And I don’t know the exact number, but I think year-to-date we’re almost negative 10 to 15% in the [inaudible 00:07:35] bond index.


Marc Killian: Yeah. It was close to 15, last I checked.


John Teixiera: Yeah. That’s actually what’s happening in people’s portfolios where if the market was down, they have at least a bond portion that’s level or maybe down a little bit or up a little bit. But right now it’s like, hey, you’re getting two sides of it where they’re both getting hammered. This is where it’s important, and Nick mentioned, how can you mitigate that risk? And you can do it, it’s just a matter of structuring the portfolio and getting the right type of investments to understand, “Hey, in this type of environment, this is where I want to be.” So, it really comes down to, again, this is your investment plan. Like, “Hey, what’s your investment plan to mitigate this type of environment and how do you take some of this risk out of your portfolio?”


Marc Killian: Yeah. Nick, back to you, and the question I asked you a minute ago, people say, “Well, individual bonds themselves may not still be a bad option right now in this current bond environment, but it’s the bond funds that tend to be taking a bit more of an issue.” And to your point, you mentioned, actually maybe it was John who mentioned them being a pooled investment, but either way, right? And that bond fund manager, whereas an individual bond may still be an okay option. So, that’s really where you need to talk with your advisor or have an advisor to find out if you’re thinking about bonds, what’s the right avenue to go? Am I on track there or is that incorrect?


Nick McDevitt: Yeah. To a certain extent, for sure. And another thing that happens, one of the things that we’ve integrated into clients’ portfolios, and we did it a few years back, was bond ladders. So, exchange traded funds that hold bond ladders that mature at a set maturity date, so that way we can still use a pool of investment that’s a little bit more efficient to buy and sell, and we know when the maturity data is going to be, so we can act accordingly and adjust accordingly. So, there’s always this give and take, but using instruments like that, using individual bonds, are absolutely ways to take a little bit more control in the space and have less of a negative impact on the overall value of your portfolio.


John Teixiera: Yeah. And to jump in with what Nick’s saying there-


Nick McDevitt: Sure.


John Teixiera: … I think it comes down to ownership. When you have a bond fund, you don’t actually own those bonds, the fund does, you own a piece of the fund, but when you’re talking about individual bonds or this basket of bonds, that’s where you technically have ownership of that. So, you can control when it’s bought or sold.


Marc Killian: Okay. Yeah, that’s great information. Thanks so much for sharing that. So, guys, anything else that I might have missed on the bond, what we need to know area? Either one of you, feel free to jump in with something.


Nick McDevitt: I think from the perspective of overall for investors and just understanding in general the space that we’re in, one thing that we’ve done even recently is we’ve started to add in some shorter term CDs for clients, because that helps them get a decent rate of return because those rates of returns have gone up and it lets them stay a little bit more flexible with where we expect rates to go, which we still expect some increase on them in the next six to 12 months, where they can then stabilize a little bit. But just like anything else, it’s important to have … Different aspects of your investments have different jobs, and bonds and fixed income still play a necessary role. And realistically for people that are retired or are going to be retiring soon, a lot of the pressure on portfolios for the last 10 years has been all on the stock market because you really couldn’t get any returns on the fixed income side. So, now at least, hey, we can get four to 5% a lot easier on fixed income, which will help to generate returns and income for people, which it makes it a little bit easier for us to get a little bit more conservative in portfolios, which has been much more difficult over the last 10 years. So, there’s a little bit of a silver lining in here and as we adapt to a new normal like we always do, there will be positive to it. But when you’re in the midst of it and going through it, like we have this year, it can be difficult.


Marc Killian: Yeah, no, and that’s why I wanted to talk about it because again, we were taught this traditionalism and if you’re doing things on your own, you’re thinking, “Hey, I’ll just jump over to bonds, while the market’s been so rough this year after,” to your point, “the market being fantastic for the last 10, 12 years.” And it may or may not be a good move. Right? So, that’s just why, understand the basics, or maybe a little bit more than the basics, and then make sure that you’re having a conversation with an advisor. Bring somebody into the fold, especially if you don’t know what you’re dealing with, because there’s a lot out there in the bond arena. So, good stuff. Thanks for sharing on that, guys, I appreciate it. Again folks, if you’ve got questions and need help, jump on over to the website, book some time with them, reach out to them, let them know you’ve got some questions around bonds and how it works or what you’re thinking about doing, or strategy, conversation, questions, whatever that might be. And get some time with the guys at pfgprivatewealth.com. That’s pfgprivatewealth.com. A lot of good tools, tips and resources. You can send a message into the podcast. Like I said, you can schedule time to talk with the guys. Lots of good stuff there. So, pfgprivatewealth.com. And we’ll wrap it up with an email question again this week here on the podcast, Hoover wants to jump in on this, totally fine. Wendy had a question. She says, “Guys, our 401(k) plan at work now has a Roth option for available future contributions. Should I take advantage of that?” I’m curious too, guys, because actually my wife, they just offered that to her actually. She just got the paperwork I think about three days ago. So, what’s your thoughts on 401(k) Roth options?


Nick McDevitt: The annoying answer is it depends. The reality is that most likely it does make sense to take advantage of it. Some people cannot make contributions to regular Roth IRA accounts because the income is too high. So, this is their only way to be able to make contributions. Our feeling in general is that the more options you have from income sources in retirement, the better. So, especially if you don’t have any Roth funds built up or if your pre-tax funds are substantially more than your Roth funds, it’s a good idea to integrate that. And so, one thing that people have done to just start it, so as an example, let’s say that somebody’s contributing 10% of their income and maybe their company matches 4%. Okay? So, the match that a company puts in is always pre-tax. So, in reality, if they’re doing 10 and they get a 4% match, 14% of their income is going into pre-tax money. So, maybe you say, “Hey, out of my 10 I’m going to make it 4% Roth to match the match that they’re getting. The other 6% is pre-tax, and now it’s like 10 and four.” That could be a good place to start. And then maybe build it up where some people say, “Hey, each year when I get a raise, I bump up my contribution by a percent or 2% and try to build it up to make it match, until you’re maxing out.” But absolutely, building that up to build up some Roth funds for yourself is a good idea.


Marc Killian: Yeah. The limits, so if you think about a traditional Roth IRA, there’s earnings limits, right? You can only make a certain amount, I think it’s 144,000 for individuals, 214, somewhere in that neighborhood, I think, for married couples. And they change it all the time, but I think that’s ’22. But with a Roth 401(k) at work, there is no income limit. So, if she makes more than that, for example, she could still put money in.


Nick McDevitt: Exactly. Yeah. But you don’t have to deal with that income limitation anymore, which is great.


Marc Killian: And it’s a newer piece too, John, right? Not every company has this option yet, so they’re starting to come on more and more though.


John Teixiera: Yeah. Yeah, it is a newer piece. I’d say the majority of companies we run across now do have them.


Marc Killian: Okay, good.


John Teixiera: But I’d say we do run across some that still don’t offer it, but it’s catching on pretty quick because a lot of people do like that option.


Marc Killian: Yeah, for sure. So, I think definitely to answer the question, just make sure that you’re double checking, check the various different limitations. If you don’t have a professional you can bounce those questions off, certainly, hopefully the guys gave you some thoughts there. But you can always just call, reach out, and get a little bit more in-depth if you have some of those Roth 401(k) questions versus a Roth IRA, and those questions too, as well. But reach out to the guys, don’t forget to subscribe to the podcast, Apple, Google, Spotify, all that good stuff. It’s Retirement Planning – Redefined with John and Nick, and you can find them online at pfgprivatewealth.com. Guys, thanks for your time. As always, appreciate, have a good close out to the holiday season as that’s upon us, and we’ll see you guys 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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More Episodes

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 42: How “The Great Resignation” Could Impact You Or A Loved One’s Retirement

On This Episode

Droves of workers are retiring early or taking a break from work as they change career paths. It’s become known as The Great Resignation. On this episode, we’ll highlight some of the key takeaways of a recent Forbes article and explore a lot of the impacts on retirement planning from across different age groups in the wake of this massive workplace shift that’s underway.

Forbes Article: https://bit.ly/3JtbbeQ

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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 in to the podcast. Thanks for tuning in to another edition of Retirement Planning Redefined with John and Nick, as we talk investing, finance, and retirement. And we are going to discuss the Great Resignation on this podcast. And if you’re not familiar with that, well, that’s been all the mass exodus of people leaving work over the last three to four to five months. And we’ve got some interesting key takeaways here to talk a little bit about this. Droves of workers retiring early, or taking a break as they consider this career path, that’s been called now the Great Resignation, and there’s a Forbes article, we’ll probably take a link and put that in the show notes as well. But guys, what’s going on? How you doing Nick?



Nick: Good, good. Staying busy, kind of getting rocking and rolling to start off the new year. So, you know, I think a month or two ago we had hoped that maybe it’d be a little less chaotic from the standpoint of the whole pandemic thing, but I think everybody’s just kind of plugging away and recovering from the holidays.



Mark: Yeah, definitely. John, how you doing my friend?



John: I’m good. I’m good. Doing good.



Mark: Yeah. Nothing, nothing too crazy going on. Into the new year all right?



John: Yeah. Yeah, it was quiet. So just hung out with family locally here and in Tampa area. So it was just a nice little break and like Nick said kind of excited to be back to doing some work here and the holidays it’s always nice, but at the same time, I’m kind of ready to get back at it.



Mark: Yeah, exactly. So have you guys heard this term, the Great Resignation, are you guys a little bit aware of this and what’s your thoughts? We’ll get into it here, some data here in just a second, but just have curious if you’ve heard it or not.



Nick: Yeah, I definitely have. I think it’s interesting. I think depending upon who you talk to, their interpretation of it is a little bit different, but in my mind it’s really, it’s kind of, to kind of think about it from the perspective as almost like a real estate market, there’s a buyer’s market and there’s a seller’s market. And I think that really what’s happened is not all, but many companies have been slow to kind of improve wages and pay and benefits and things like that and so this has kind of put things into kind of the worker’s hands a little bit more and given them a little bit of leverage from the perspective of competitiveness from a company standpoint. And that obviously, that doesn’t deal with the people that are in between or are waiting to kind of figure out what they want to do with their whole life, that sort of thing, but more specifically, the people changing jobs and how difficult it’s been for employers to keep employees.



Mark: Yeah. I mean, it’s definitely all over the map and John, we’re going to talk a little bit about it from the different age groups, but for the most part, we’re going to look at it as it affects retirees and pre-retirees, but have you seen some of this stuff? Are you familiar with it?



John: Not necessarily the term itself, but yeah, we’ve seen a lot of this with our own clients that are basically doing some job changes or just outright, just retiring early which I know we’re going to get into. But yeah, we’re seeing quite a bit of this. And then we see it when we’re trying to personally and work wise trying to get service work done. It feels like-



Mark: Big time.



John: Feels like no one’s working anymore. My local Dunkin’ Donuts here, I can’t go in to get a coffee because they don’t have enough workers, so everything’s drive through. But it just [crosstalk 00:03:23] seen across the board.



Mark: And that’s part of it. Yeah. And that’s part of it. So a lot of times, I think, when we think about this what’s happened in the pandemic, we automatically go to the lower paying scale jobs, the fast food type jobs, and that’s definitely a big piece, but for an example, 4.2 million people quit their job in October of 2021. So just a couple of months ago and there’s been a lot of other people quitting. So there’s been, I think somewhere now around six, six and a half million, I think over the last four to four and a half months. And it’s not just the lower end stuff. And of course it’s also unknown how long these people will stay out of work. Some of it could be retirees or pre-retirees that are just like, you know what, I’m not going back.



Mark: I’ll use my brother as an example, he’s 63 and he’s like, as long as they keep me working from home, I’m going to stay. But the minute they tell me, I have to go back to the office. I think I’m going to pull the trigger and retire early, even though his plan calls for him to wait till 60, his full retirement age, which I think is 66 and seven months or something like that. So let’s talk about it from that’s kind of standpoint, guys.



Mark: I’ve got three takeaway categories here, or actually four. I’m going to kind of give you guys the headline and let you guys roll from there a little bit on this. Okay. So we’ll dive into it, hit it however you’d like, not just the lower income scale, but also the upper end, or people just closer to retirement things that you might be seeing or hearing. So number one, if you are going to step away early, taking a break from Social Security, whether it’s short term, long term or whatever, don’t sell short that, the impact that, that can have to your long term benefits.



Nick: So, depending upon how long you are out of work, it’s important to keep into consideration that when you’re not earning an income, you’re not building up your Social Security credits and so that’s something that can impact you down the line. And I’ve actually had this come up a little bit lately where people don’t quite grasp the impact, the positive impact of Social Security, or how much, or how important it is to their overall plan. So it is a big deal and you want to make sure you still have your 10 year minimum work history. It’s important to remember that, really the benefit that you receive is a cumulative kind of record of your highest 35 years of income.



Mark: Right.



Nick: So every year that you have a higher year than a previous year, adjusted for inflation, that’s going to knock out the other years and you really kind of help bump that benefit up.



Mark: Right. And if you’re stepping away in your fifties because of this Great Resignation type of thing here, that’s some prime earning years. So that’s where I say you could be putting a big dent in that.



Nick: Yeah, absolutely. And realistically it always does kind of go back to the whole plan concept of that we really try to harp on people about, is we have had some people retire early because we have had a bull market for the last 10 years and they’ve done a good job with saving and those sorts of things, but we kind of verified it through the planning, the whole retire really early on a whim or not really looking at it from an analytical standpoint can definitely be pretty, pretty dangerous.



Mark: Yeah, for sure. So you definitely want to make sure that if you are stepping away from Social Security, you’re looking at what it could do to your long term strategy, six months, a year, retiring early, whatever the case might be. Just make sure you’re strategizing that with your advisor.



Mark: John, talk to me a little bit about takeaway number two, the 401k isn’t a rainy day fund, is kind of the category I had. Because over the last two years, and even the last six months, there’s some pretty interesting stats about what people are doing with their 401ks.



John: Yeah, yeah, for sure. I mean, during COVID 2020, there was some ability to actually access for 401k funds or retirement funds without any penalty.



Mark: Right.



John: And not even have to do a loan and that’s gone away. So now, not that… Fortunately for our clients, and I think we do a great job educating them, we haven’t really seen too much of this where clients are taking out 401k loans. But I have had conversations with some individuals that have done that. And it’s just kind of like, “Hey, how much can I pull from my fund? I did this, what are the impacts of it?” So it’s just important to fall back to the plan. And we do a… One of our biggest recommendation’s to make sure that people have an emergency fund and whether it’s three to six months or a year of emergency savings, because, as you know the pandemic hit in 2020 and no one saw that coming and you just don’t know what’s going to happen in the future. So it’s important to have an emergency fund to help out in certain situations like this, so you avoid pulling from the 401k loan because you really want to let those assets grow for your retirement and not access it for rainy day funds- [crosstalk 00:08:10].



Mark: Kind of a stop gap.



John: …. on things like that.



Mark: Yeah, yeah, yeah. What’s some negative impacts of doing that though, John? I think one of the things people get lost on is just the compounding of it over time, right?



John: Yeah. So you take out 40 grand out of it, basically, especially, let’s say you did that in 2020, let’s say you took out $40,000 there, you just lost the compounding over the next year and a half, two years of which has been really excellent in reality [crosstalk 00:08:33] with what the market’s done. So not… You’re just not losing that $40,000, you’re losing what that $40,000 could have grown to, which is the importance of having, again, the rainy day fund, so you can let that money in there, let that money grow for you and earn and work for you.



Mark: Yeah.



John: And then nevermind then you’re paying money back into it that are after tax dollar. So there’s a lot that goes into it that you really need to evaluate it. Sometimes it’s you have to because you have nothing else to pull from.



Mark: Right.



John: But it’s always important to plan and make sure that you… This is the last resort.



Mark: I hear a lot of advisors say taking that loan against it is usually the later, like if it’s kind of like the last in the line, if you really need it, okay, here’s where we can go. But let’s try not to. Just simply from a multitude of reasons, especially with the resignation, right? If you take a loan against your 401k and you leave the job, you have to pay that back. Correct?



John: Yeah. That’s a great point that you bring up. Most companies will give you 30 days to pay it back. So example, you take out that $40,000 and all of a sudden it’s, “Hey, we’re downsizing,” and you get a pink slip, and not only you got, now you all of a sudden you got to pay 40 grand back to your 401k within, a 30 day period, maybe 60 day period. And if you do not pay it back, you’re going to be paying taxes and penalty on that, on those dollars.



Mark: Pretty stiff. Yeah.



John: Yeah.



Mark: Yeah. So that’s another takeaway for that. And Nick, let’s stick with the 401k for a minute for the next one. If you are in this kind of nomad thing where you’re jumping out of one job, you’re waiting a bit, maybe going into another, looking for a better option for yourself, seeing who’s hiring, whatever the scenario is, take that 401k with you, right? Don’t just leave it back behind at the old place.



Nick: Yeah. It can be, realistically the more accounts people have, the more places, the more often things are overlooked, not checked up on, not taken care of, so we definitely are fans of consolidating. Whether it’s rolling it into the plan at your new employer or rolling it into an IRA where you can control the assets yourself or work with an advisor to manage them for you. Just like so many other things, it’s one of the things that former or past employer 401k plans are oftentimes one of the most overlooked and non-adjusted things that we’ve seen people kind of not take care of.



Mark: Yeah.



Nick: And then they lose a lot of long term money on it because of that.



Mark: Well, you got to think about the vested portion too. Right? So if it’s, let’s say you’re 50 or something like that, and you’re pondering this, make sure you under… that you’re getting the fully vested part before you jump on. There are some people that could say, well, all right, maybe I’d better stick this out a little longer or whatever the case is.



Nick: Yeah, absolutely. There are some people that… It’s much more common for people to move from one employer to the next these days. Especially in certain industries where they can be almost more of a tech role or consultant role, things like that. And sometimes, because of that, their employer has put in a decent amount of money, so an employee’s contributions are always vested, it’s always their money, but they could have substantial employer matching that vests over three to five years. Or some other sorts of benefits, even if it’s not exactly the 401k, but maybe there’s a stock plan that has vesting. It’s important to take those things into consideration because we’ve seen people leave tens of thousands of dollars on the table.



Mark: Right.



Nick: Not realizing that it was a factor they should have taken into consideration before they switched employers.



Mark: Yeah. Don’t leave that behind. Right? So definitely take it with you, whether you’re rolling it from the old one into the new one. And if you do it properly, it’s not going to, it’s not an issue, right, Nick? So if you’ve got it in the old one and you roll it to the new one, you just go through the proper channels and there’s no taxable event and so on and so forth. Same thing if you move it to an IRA, correct?



Nick: Correct. Yeah. The goal is always to make sure that it’s rollover, it’s not taken as a lump sum distribution-



Mark: To yourself.



Nick: Yeah. So you always want to make sure that when the rollover happens, it gets paid directly to the new custodian. So it’s not written out to you. It’s written to the new custodian, whether that’s a Fidelity or a Vanguard or whoever it may be, it’s paid directly to them, the funds go over and that avoids there being any sort of tax liability or penalty if somebody’s under the age of 59 and a half.



Mark: All right. So let’s go to the fourth takeaway here, guys. I’ll let you both kind of jump in and out on this. John, I’ll start with you. It seems like this whole resignation thing is kind of tailor made for those early retirement dreamers. Kind of go back to my brother’s conversation there about, Well, if they… I’ll retire a couple years early, if they make me go back to the office kind of thing, but I’ll work from home.” So it’s enticing for sure, but point out some challenges to just ponder if you are retiring early, ahead of what you originally planned, you guys kind of divide up a few of these, if you would, but John go ahead and start with a couple of bullet points to think about.



John: Yeah. One of the things that I think about is qualifying for Social Security. The earliest you can draw Social Security is age 62. So, if you’re retiring at let’s just call 57, you got a decent gap of where you can’t take any Social Security. So you really have to evaluate are there any other income sources coming in like a pension or maybe some real estate income or whatever it might be. And then if there isn’t, is your nest egg able to sustain your plans. [crosstalk 00:14:06].



Mark: Five years, yeah.



John: Yeah. Is it able to work if you’re using your nest egg to basically live off of for that period of time. So those are one of the things. And then you always want to of look at as one, we’ve had situations where one spouse might retire early and the other one’s still work and they say, “Hey, we could live off of just one income for the time being. And if we need any extra money, we have the nest egg that we can pull from as needed.” So that would be a big one to really look at.



John: Another one that we come across quite often is healthcare coverage. I’d say one of the main reasons that people don’t retire. From our standpoint, what we see is really healthcare. So they wait till they’re 65, so they can draw on Medicare. And prior to that, they just kind of look at the cost of going to the Marketplace and say, you know what, this is probably a little too rich for my blood, so [crosstalk 00:14:55] kind of hold off.



Mark: And if you use your example of 57, I mean, you’re talking eight years, what are you doing in that gap? Right.



John: Yeah. And we’ve seen everyone’s situations different in what their premium is, but I’ve seen some premiums for individual at that age at $10-11,000 per year. Nevermind, the coverage isn’t as good. So that’s [crosstalk 00:15:12]-



Mark: And that’s not per person too. Right. So if you and the spouse.



John: Yeah, yeah. Yep. That’s per person.



Mark: Can your retirement accounts handle that for that setup that we just talked about or whatever the case might be and then realizing that that’s also, that your retirement is now going to be longer, right, because you’ve retired early, so it’s the kind of great multiplier. So those things just kind of compound and go up from there. Nick, do you agree with that and what’s some things you see?



Nick: Yeah. For sure. It’s definitely a slippery slope when you start to factor in. We’ve got some clients who work for large employers, their total health premiums for the households can run $2-3,000 a year for both of them. So when you go and you take… You go from $2-3000 for both of you while you’re working to somewhere between $8-20,000 a year before Medicare age, it can be pretty substantial. And oftentimes, for many people, there’s going to be a price increase, even when they’re on Medicare from if you were working for a company that was a larger employer and had pretty inexpensive health benefits. So that makes a huge, huge difference.



Nick: And one way that some people have managed things from that perspective are with some of the Marketplace options out there will kind of connect people with specialists that can help on the medical insurance side of things. And you may be able to take money from taxable accounts that don’t have large gains to put your income lower so that you don’t pay as much, but in reality, to be frank, usually the only people that can do that are ones that have saved substantial amount of money into a non-qualified account, which usually means they have a lot of money. So, it’s less of an issue. So really looking at that, looking at the different types of accounts, when you create your withdrawal rate, and figuring out, hey, how can we keep your income taxes low, not a only for a short period of time when you’re in retirement, but kind of building flexibility throughout your retirement, where you’re not just letting this tax bomb grow, or you’re not using all of your Roth money first or leaving it all for the end.



Nick: It’s usually kind of a bit of a balance. So we harp on it a lot, but this is really where there’s so many factors and things like this. That this is where kind of software and the tech tools that we have today really help us tailor make a plan, come up with a really good income and liquidation strategy, help us figure out what kind of gaps are we going to have between the time that you retire and when things like Social Security are going to kick in to help supplement the income, and then when Medicare’s going to kick in to help reduce expenses. So, it’s definitely a puzzle and fortunately we enjoy putting the pieces together.



Mark: Right. Well, look, if you’re on the fence, well, if you already did the resigned and walked away, hopefully you had a plan in place, but if you’re not, if you’re among some of those folks that are still considering, I’ve heard some interesting stats that they think that’s going to happen. Again, early on the first half of 2022, make sure you’re talking with an advisor about all the different things that could happen if you do step away early. Most people, hopefully do, but sometimes you just get frustrated or whatever the case is. And a lot of it does have to do with this kind of going back to work, staying working from home, it got good to us, we really kind of, in some ways, very much so enjoy being able to work from home, in other ways we kind of missed the camaraderie. So there’s a lot of different things to just kind of take into account before you pull the Great Resignation.



Mark: And with that, we’re going to wrap it up this week. We’re going to knock out an email question here real fast. Whichever one of you guys want to tackle this, but we’ve got one from Rebecca who said, “Guys, every six months or so I tell myself, I need to start saving more for retirement and I pretend like I’m going to get serious and actually do it. But then I can’t stay motivated to increase my savings. I’m putting a decent amount in the 401k and I have a pretty nice balance there, but it feels like I could be doing more. It’s the beginning of the year, I want to be more motivated. How do I do it?”



John: This comes up quite a bit. And I’d say the easiest way to save is probably the 401k, because it’s done through payroll and you really, once you start saving in to it, you really don’t miss the money coming out into it and you can always adjust it. And we’ve had some people where they say, “Hey, I’m putting enough into my 401k, what else should I do?” And the first step is just really just setting up an account and you can start with as little as $25 a month, or $50 a month, but once that account’s open, it’s much easier just to say, hey, let me up this. So I would say the first step is look at the 401k and if you don’t want to continue contributing to that, just open up an account somewhere with your advisor or on your own and just set it up monthly, and then you can always adjust it as needed.



Mark: Yeah. Or maybe a Roth, right? If she wants to look at a tax, something more tax efficient. So…



John: Yep.



Mark: That’s another way to look at it. But yeah, I think if you automate it and you just put it in play, Rebecca, that should hopefully get you… You just, if you don’t see it and you don’t think about it and it’s just happening in the background, then that’s the beauty of it, so then you don’t have to worry about necessarily getting motivated. But another way might be to sit down with a professional and start getting some advice. It doesn’t matter really on your age, the sooner, the better. So if you got questions, need some help, reach out to John and Nick, go to the website, pfgprivatewealth.com. That’s pfgprivatewealth.com.



Mark: Don’t forget to subscribe to the podcast on whatever platform you like to use, Apple, Google, Spotify, iHeart, Stitcher, just type in Retirement Planning Redefined, or again, just find it all at their website, pfgprivatewealth.com. If you got questions, need some help, John and Nick are here for you.



Mark: Guys, thanks for hanging out. I appreciate it. Talking to me about the Great Resignation and we’ll talk about it in a couple of weeks here, we’ll see what’s going on.



Nick: Thanks, Mark



John: Thanks.



Mark: I appreciate your time as always. Guys, thanks for hanging out with me. We’ll see you next time here on the podcast, with John and Nick, this is Retirement Planning Redefined.