Ep 43 : Don’t Fumble Your Retirement In The Financial Red Zone

On This Episode

In football, teams are extra careful not to make a mistake when they get within about 20 yards of scoring points (known as the Red Zone). They’ve typically worked hard to get to that point and don’t want to cost themselves by throwing an interception or fumbling the ball and giving it to the other team. On this episode, we’ll explore the financial equivalent of the Red Zone and discuss how you can really mess things up if you’re not careful during this phase of your life. If you’re approaching retirement, this is a fundamental conversation you won’t want to miss.

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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 Killian: Hey everybody. Welcome back into the podcast. It’s time to talk football a little bit here on retirement planning, redefined with John and Nick. We always talk finance, investing finance and retirement, and we’re still going to, but we’re going to talk about not fumbling your retirement in the financial red zone. We are in the playoffs at the time we are dropping this. Now we are recording just before they’re starting. They’re starting this weekend. And so this will come out while the playoffs are rocking and rolling, but that’s all right. We’re still going to talk about this analogy, because it works really well for this time of year. And we’ll get into that in just a second. But first let me say, Hey to the guys.


Marc Killian: Nick, what’s going on, buddy? How you’re doing?


Nick McDevitt: Good.


Nick McDevitt: This was a good reminder to ask John on when I’m going to get paid for my second place finish in the Fantasy Football League.


Marc Killian: Nice.


John Teixeira: I don’t know what Nick’s referencing here. We do not gamble here, so I’m going to give Nick a nice handshake and pat in the back for drafting the second best team in the league.


Marc Killian: There you go. Okay. Well what’s going on with you, John. You’re doing all right?


John Teixeira: Doing good. Trying to get some recapping from our last session of their great resignation, and actually trying to get some contractors to send me an estimate based after they came to my house has been a challenge.


Marc Killian: Right? I know.


Marc Killian: I was talking with some contractors not too long ago and they’re like, right now, all I got to do is show up and I get like 50% of the jobs, you know?


John Teixeira: Yeah.


Marc Killian: And, they’re not wrong, you know? So there’s a lot going on. Well, I know you guys are both football fans and guys both come in from the same division, actually. We got a Patriots fan and a Bills fan. So living in Florida, which is interesting, and especially considering that you got radio right around the corner now, but either way, we’re going to talk about this financial red zone and football and a little analogy to go back and forth. And as I said, the games are starting for the playoffs and you guys are going to be actually competing against each other. Your teams will be anyway. So we’ll have some fun with this. So do me a favor real fast. John, I’ll let you start. Tell me what’s the financial red zone? Go ahead and talk about the football red zone if you want as well. I think most people know it, but just real quick and then tell us what the financial equivalent is.


John Teixeira: Yeah. Football red zones, when you get 20 yards of scoring. So, right before the end zone, really important place to be efficient, making sure that everything’s tightened up. The defenses plays a little bit harder here because the shorter field. So just really important to make sure the offense is doing their best and making sure everything’s done right, which leads into what we call the financial red zone, where we would consider that last 10 years before retiring and can range for five to 10 years after retiring, but the analogy goes well where. This is probably the most important part of your retirement is making sure that, Hey, you got 10 years left or you’re five, 10 years into it. You cannot make a mistake.


Marc Killian: Yeah.


John Teixeira: And it’s important to make sure everything’s lined up and you’re being as efficient and careful as possible to make sure you hit all your goals and maintain the lifestyle that you want going into retirement.


Marc Killian: Yeah, for sure. So it has been pretty easy. Right? So just think of it like that, same scoring red zone. Now maybe you’re not trying to score necessarily in the financial red zone as you’re talking about retirement, but there are some things to pay attention to because turnovers, as you mentioned with the football analogy are more critical. So Nick give us some reasons why people need to pay attention to that?


Nick McDevitt: Yeah. There’re a few things here and obviously it’ll all depends on the plan, but in many ways, from an accumulation standpoint, time is no longer on your side. The goal is obviously to save as much money as you can. And once you get into that 10 year window, hopefully you’re in your higher earning years and you’re able to save more money. Maybe there’re less kids on the payroll, et cetera. And it’s also important from the standpoint of the money that you’ve saved up to that point, making sure that it’s invested properly, it’s a lot easier to have a half a million dollars double in the last two years than it is to have a hundred thousand dollars catch up to $500,000 or things like that.


Nick McDevitt: So, that’s some money that you’ve been able to build up once you’ve entered into that red zone and then how that money’s going to accumulate, leading up through retirement is an important time. So, really making sure that your decisions are coordinated together and you’re not really just, Hey, I just saved this amount of money and I put it into this, and I don’t pay attention to it. Usually isn’t the best sure strategy.


Marc Killian: Yeah.


Nick McDevitt: It’s just much more difficult to recover from mistakes that are in this period.


Marc Killian: Yeah. So, If you’re in a good place, right, this is when a lot of times teams will start looking at taking the knee, right? If you’re in a good spot from a financial standpoint, you want to start taking that victory formation because you’re trying to protect the ball. And John, I’ll go to this next one, but I’ll make you happy by bringing something up here when you’re talking about, some of the mistakes that you see people make getting a little too risky. Think back to that Seahawks Patriots game, Super Bowl, a few years back, I think it was 2015. Right? And the whole world knew the Seahawks were going to punch that in with Marshawn Lynch, running on the one yard line, but they took a risk. They threw it and they got intercepted and it cost them the Super Bowl.


John Teixeira: Yeah. That was a big risk.


Marc Killian: Right. It sticks in my mind seven years later, right?


John Teixeira: Yeah. It’s funny. I watched some of the man of the arena with Brady, it’s been background noise at this point just when I’m doing stuff around the house and they replayed that. And it was interesting to hear the people talk about it, but yeah, that was a big risk. And that’s a big mistake that we see for clients when they’re nearing retirement is they are taking too much risk and that can happen quite a bit in your 401k, because you’ve just picked a fund when you first started at that company.


Marc Killian: Right.


John Teixeira: And typically everyone unfortunately chases returns in their 401k. They just look at a fund and say, this did, will they pick it? But as you’re getting that red zone, it’s important you evaluate what you’re in because if you’re taking too much risk and we have a 2009 type recession, it takes a little bit to fully recover from there never mind that you got the mindset of, Hey, I just lost 30% of my portfolio.


John Teixeira: I don’t want to lose any more. Should I get more conservative? Which will seep into people as you get closer to retirement. So if you make that shift and get conservative, market bounces back within a two year period, you miss a majority of that recovery. So important to make sure that how much risk you’re taking your portfolio is the right amount of risk for you and your plan. We go back to, again, the planning, having the right distribution strategy, as you’re in the red zone, very vital to your retirement success and scoring.


Marc Killian: Yeah. Well, Nick, before I go to the next point here, I’m going to give you a chance on this as well, because if you think about, what he was just talking about, making sure that your portfolio’s not taking too much risk. This market is on a 12 year run. It makes it really enticing and really hard for us to not go. I can eek out a little more. Right? I can squeak out just a little bit more, but that’s when you start putting more at risk on the table.


John Teixeira: Yeah. And you know, because ultimately what ends up happening is what we’re trying to do is, is manage decision making and what ends up happening. And the reason that we try to de-risk a little bit in the situation is so that there’s not an overreaction. So, the easiest way to prevent an overreaction for an individual is to have a plan. So you can remind yourself of, Hey, this is why I’m doing what I’m doing. And you have something to go back to show you, Hey look at, this plan tells me that if I do X, Y, and Z, that I’ve got a pretty solid chance to have a comfortable and successful retirement. And, if you’ve got ice water in your veins and you can handle, a 40% dip in a year and something in a year that where things happen chaotic and it doesn’t even blip your iWatch then that’s one thing, but most people can’t.


John Teixeira: And when that feeling of anxiety starts to creep in, as you start to log in your account more because we’re going through a pullback happens and it pushes you to make a poor decision. That’s when the snowball starts rolling down the hill and that’s where we can really get into trouble.


Marc Killian: So, well, even if you’ve got ice water in your veins, there’s a good chance, your significant other doesn’t, right?


John Teixeira: Yeah.


Marc Killian: Oftentimes there’s that split in the investing philosophy many times where one is a go getter and one is a bit more conservative. So you want to make sure you’re just not taking too many chances in the red zone. If you got a good plan, you got a good strategy. Your team is so “winning the game,” then again, consider taking that knee, take that victory formation, at least start hedging your bet, that way you’re not going to have too much at risk because you got to still outpace inflation. That’s a given, but you also don’t have to necessarily continue to throw the ball, 40 yards down the field.


Marc Killian: So for those that are paying attention, John, that are being proactive, why is retirement planning easier for those folks once they do get to the financial red zone?


John Teixeira: Yeah, I’d say the biggest thing we see when someone goes through a planning process and they get to see it, it provides them a blueprint and a roadmap of what they can expect. And that roadmap of blueprint really gives people a little bit peace of mind so they can see the cash flow, they can see the money and it really comes down to, they can see their goals and what they want to do. So it makes it come to life. So that makes a little bit easier versus the unknown of, Hey, you try building the house without a blueprint, it makes a little bit harder. Right? So, the financial plan is that blueprint and just gives people peace of mind, which ultimately they make better decisions.


Marc Killian: Yeah.


John Teixeira: So you can look at things, income stream, social security, when is the best time to take it or my pension options. When you have the plan, you can test those. So you feel confident in, Hey, I already looked at this and I know what to expect. What’s the best option for me in my family and what we’re doing. So, the plan is key in making sure you make sound decisions and it provides people, again, sound like a broken record or a peace of mind that what they’re doing is right.


Marc Killian: Yeah. Definitely. Any couple of little bullet points Nick to toss in there.


Nick McDevitt: Yeah. I would just say that, the people that are doing well are the people that are able to zero in, in this financial red zone. Part of the reason is because everything starts to feel a little bit more real. Sometimes people have a really hard time thinking about 30 years down the line.


Marc Killian: Right.


Nick McDevitt: And the numbers seem out of whack and the variables seem super unpredictable, and things like that. So oftentimes once we’re in that zone, we have a good idea of what the numbers are going to look like from an income stream standpoint, whether it’s the social security or you have a pension or Hey, there’s lead at the end of the tunnel of having the mortgage paid down, or the kids are going to be off the payroll in two years and that’s going to free up X amount of income per month to be able to save. So, you feel there’s hope and momentum on the side and the people that do well with planning, they really lean into that and are really able to take that momentum and move themselves forward strongly.


Marc Killian: Yeah. So let’s not fumble the football in retirement, the financial football, if you will, if you got some questions, need some help, you should know what to do by now. Hopefully you’re already working with John and Nick. There’s a good chance of just catching this because you already are. And you’re checking out the podcast and you get the information. But if not, definitely stop by and reach out to them at pfgprivatewealth.com. That’s the team’s website, a lot of good tools, tips and resources at pfgprivatewealth.com. And you could drop us a line as well. We take email questions. Of course, they all get answered, but we also take some from time to time here and use them on the show. And that’s what we’re going to do to wrap things up.


Marc Killian: So, whoever wants to tackle this, no pun intended, go for it. My brother tells me that I have way too much money in the bank and he’s probably right. I got about $150,000 sitting in there now, but I just like knowing if there in case I have an emergency, this is Frank by the way. And so Frank says, is it really that bad to have that much in my savings account, take it away.


Nick McDevitt: So, this is an interesting question because oftentimes for most people, the answer might be yes. However, the thing to remember and what we try to harp on with people is that, it doesn’t necessarily matter what your brother, your sister, your mailman, your coworker, your dog walker, everybody’s willing to give their opinion or their advice on financial topics. And it’s important to take your situation, put in a perspective. If you’re somebody that makes $300,000 a year, then maybe that 150 is a good amount. If you’re somebody that makes $40,000 a year and you’ve got 150 in cash, then there’s a good chance that you’re not saving into things that have more upside and more growth for you. You probably have been a little bit wary of the market or didn’t know how or where to invest.


Nick McDevitt: And there’re things that you can do. Maybe you’ve never saved to a Roth before and we could start putting money into a Roth. Maybe you haven’t adjusted your 401k contribution in eight years. And that’s part of the reason that this money is saved up. So, there’re ways that we can take a portion of it and save it into vehicles and then maybe adjust. One of the things that we’ve seen is adjusting from here, moving forward. So in other words, it might make you very uncomfortable to take a hundred grand out of that 150 and put it to work, but maybe we can take 25 and put it to work, but also we’re going to aggressively save moving forward with the income that you have and and figure out where that pain point might be to put money away.


Marc Killian: Yeah.


Nick McDevitt: So it really is a function of what your expenses are. Things like, do you have dual income in the house? Is the house paid off? Dual income, you could probably have a little bit less in there. If the house is paid off, definitely put more money to work. So, it could be, but just like everything else that we talk about, it depends. And the easiest way to really truly answer that is to look at it through the lens of the plan and go from there.


Marc Killian: Well, I guess I would say John, probably what’s your definition of liquid, right? In getting to it, obviously a lot of people see, they want to see a certain number. I’d ask myself if I was Frank, what kind of emergency constitute 150 grand and/or what do you consider liquid, right? If it’s something you need to get to within three to five days, often there’re many types of accounts you can do that. It doesn’t have to just be money in the bank.


John Teixeira: Yes. So, liquid would. A lot of different people view it differently. So one would be, Hey, I can get access to this without any penalty. And that would be number one of being liquid. Another version would be, Hey, I can get this without any penalty or taxes, you know? So that could be another version of someone considering it liquid, but yeah, there’re different buckets to choose from when you need access money. And it’s important you work with an advisor to figure out what are the penalties and very important what are the tax consequences for accessing this cash?


Marc Killian: Yeah. Okay. Well, Frank, thanks so much for listening. Hopefully that helps you. I know you how you don’t want to admit your brother’s right. So technically you don’t have to. So if you’re like me, I never want to tell my brother he is right. You can just certainly say it depends. Right? So everybody’s situation is different. That’s going to do it this go round for the podcast. Don’t forget to subscribe to us again at pfgprivatewealth. That’s where you can find all the things from the team at pfgprivatewealth, which is John and Nick’s company there. So find it online at pfgprivatewealth.com.


Marc Killian: We’re going to wrap it up, but guys, I’m going to give you a chance to say what you think is going to happen for the Super Bowl since we’re dropping this beforehand, who’s winning the Super Bowl this year? John go.


John Teixeira: Good question. I’m going to have to say, I think the 49ers might win.


Marc Killian: Okay. All right. He’s calling the 49ers. Nick, who you’re going with, buddy?


Nick McDevitt: I’ll go with the Packers.


Marc Killian: Wow. Neither one of you guys took the team.


John Teixeira: I was going to go with the Packers, but Adam Rogers always chokes him.


Marc Killian: He does play.


John Teixeira: He is like notorious for NFC championship game. Let me play awful. Last year I think Brady threw three picks in the second half or third quarter or something.


Marc Killian: Yeah.


John Teixeira: And he couldn’t capitalize on it or fourth quarter, whatever it was. I don’t know.


Marc Killian: There you go. Well, folks, let us know what you think. And we’ll be back with more on the podcast in February. So probably after the Super Bowl. So, we’ll see if the guys are right and we’ll talk to you next time here on retirement planning, redefined with John and Nick.