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IRMAA: The Hidden Medicare Penalty You Might Be Paying

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Medicare isn’t always as free as you think. In this episode, we’ll explain IRMAA—the income-based surcharge that can raise your premiums and shrink your Social Security check. Learn what triggers it, who’s most at risk, and a few smart planning moves to help keep more money in your pocket.

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

Speaker 1:

I think Medicare is free once you hit 65. Well, not quite. If your income’s too high, there’s a hidden surcharge that can quietly shrink your social security check by thousands a year. It’s called IRMAA, and we’re going to talk about that today here on Retirement Planning Redefined. Hey everybody, welcome into the podcast. Thanks for hanging out with John and Nick and myself as we talk, investing, finance and retirement. And guys, we’re going to talk about Aunt Irmaa this week instead of Uncle Sam. Seems like there’s these two relatives that got their hand in your pocket. I’ve always been taught to call IRMAA, the Aunt Irmaa that comes by and pinches your cheeks really hard instead of the cool one that gives you candy when you’re a kid. So we’re going to talk about IRMAA, and what it is and why it exists and all that good stuff this week. How you doing, John?

John:

I’m doing all right. How are you?

Speaker 1:

Hanging in there. Doing pretty good. Looking forward to chatting with you guys about this, learning a little bit about what is IRMAA and what does it do to us. And Nick, my friend, how are you?

Nick:

Pretty good. Staying busy in the red zone for wedding planning and all that kind of stuff. And we are in football season so-

Speaker 1:

There you go.

Nick:

… I’ve had to adjust my sleep schedule a little bit.

Speaker 1:

Exactly. So between planning and football, you’re burning the candle at both ends.

John:

Monday is a little slower for Nick-

Speaker 1:

Little slower. Gotcha.

John:

… the last three weeks, especially with the Bills, how good they look.

Speaker 1:

Yeah, for sure. Yeah, my Lions look pretty good on Monday night this pastime.

Nick:

You sure do.

Speaker 1:

Yeah. Well, let’s get into the conversation a little bit, guys. What is IRMAA and why does it exist? Whoever wants to start?

Nick:

All right, I’ll go ahead and start. So essentially IRMAA is an acronym that refers to essentially an income related monthly adjustment for the cost of Medicare part B and D. So essentially back in ’03, as the plans both Medicare and social security continually get reevaluated due to the pressure that they’re under from the standpoint of expenses and flows in, they decided to put this into place where to kind of tier it where people that were earning income currently, so if you’re single earning income greater than 106,000 or married filing jointly earning income greater than 212,000, the premiums for part B start to go up. So this is something that we’ve dealt with quite a bit with clients.

It’s based upon modified adjusted gross income, which nobody knows what that means, but it is a term that everybody’s heard or most people have heard. As a reminder part A, there is no premium charge as long as you worked you or your spouse or former spouse work 40 quarters. This applies to the part B and part D. And it’s not a penalty from the perspective of how they look at it. It’s not like you’re doing something wrong. It’s more along the lines of almost just like tax brackets where lower income, lower bracket, the same thing on this, lower income, lower premium.

Speaker 1:

Gotcha. Yeah. And that interesting piece that catches people is that it’s a two year ago look back. So they’re going to adjust it based on what you made two years back. So as you move into retirement, that could feel a little… You’re like, wait a minute, why is this going up? But they’re looking at maybe the last couple of years.

Nick:

Yeah, for sure, and there is a form that people can fill out. We oftentimes help people fill them out. I think we’ve done it twice in the last two weeks where you can basically contest it. So especially if you’ve just retired and you were previously high income and they look back those two years, you can let them know that, “Hey, moving forward, this is going to be my income, it’s going to be reduced.”

Speaker 1:

Gotcha.

Nick:

Explain why, and oftentimes you can get it amended moving forward.

Speaker 1:

Okay. And John, so hit us with some numbers here. So who’s at risk paying the most? Obviously, there’s some data in here and Nick explained that the more you make, but what’s some of those guidelines?

John:

Yeah. So just looking at the base levels here, single father who’s modified adjusted gross income is over 106,000. Then they’re going to be at risk of basically, we know it’s not a penalty, but basically paying more for part B.

Speaker 1:

Right.

John:

And if you’re married filing jointly, it’s over 212,000. And the more you make, there’s different phases of it where you might pay $74 and then it’ll go up a little bit more as the modified adjusted gross income is up.

Speaker 1:

Yeah, we’ll talk about that here in just a second. So obviously it’s not hard to get to 212 for a lot of couples, so this could impact a lot of people obviously.

John:

Yeah, so no, we do see this coming up quite a bit lately, and where we see it is when someone hits RMD age, where if they’ve been sending so much money into pre-tax buckets and all of a sudden it’s, hey, you have a 50, $60,000 RMD, you have two social securities, and with the cost of living adjustments the last five or six years, some of these social security payments are getting pretty large compared to what they were about six or seven years ago, with the run-up in the market, these are getting really large. So that’s where we start to really see it come into play is high income earners have been saving a lot into their pre-tax accounts, and all of a sudden, it’s time to pull out of those. You can be forced into this.

Speaker 1:

Gotcha. Yeah.

Nick:

A couple other areas I would say too is if there’s a situation where for whatever reason there’s one spouse and a married filing jointly situation where one spouse is still working, other spouse is retired, and we’ve seen people, especially if they do it before they come and speak with us where they look and see like, “Oh, I should only pay the one 70 a month for part B,” and not realizing that there is this test and the retired spouse goes on Medicare instead of going on their spouse that’s still working’s plan, health plan and not realizing that the income is going to take them over the threshold and they’re going to pay more on part B than they would have if they were just a part of the plan at the work. And then…

Speaker 1:

It’s kind of sizable too, right? I mean, you’re talking-

Nick:

Oh, yeah.

Speaker 1:

… it could be some big chunks of money here.

Nick:

Yeah, for sure. I mean, especially if you get to… So single 167 to 200K is almost an additional $300 a month for part B and 57 on part D. So that’s another $4,000 a year on an expense aside. Married filing jointly at that same amount, 334 to 400, and we’ll see issues like this too, where maybe there’s a small business owner or self-employed or maybe them in one or two employees and their premiums, they had been running through the business and they attempted to switch over to Medicare at 65 and/or fed some issues with people almost being, not necessarily forced, but almost forced that way with their policies when they are over the age of 65, if it’s a small or a one person individual plan and not realizing that, again, that their premiums are going to be substantially higher than they expected. So it definitely happens more than people realize.

Speaker 1:

Yeah. Well, John, you talked about what triggers it, a lot of the times being RMDs, people moving into that. What are some other things that might trigger IRMAA?

John:

Yeah. So what we’ve seen in the past where people run into trouble, and this is where if you listen to our podcast, we always talk about being able to prepare for unexpected events and having a balance. But let’s say someone has most of their money in pre-tax and their dream home comes up and they really want to buy it and they got to jump through some hoops to potentially get it. They can afford it, but the majority of the money is in the pre-tax account and they got to pull it out, maybe a down payment or whatever it might be that could put your income up more than you expected. The unforeseen medical expenses where all of a sudden things are going along great, and emergency happens, you need to pull 20, 30 grand out to cover some medical expenses. That happened. I mean, oddly enough, I just had someone I think have to pull out almost 40, 50 grand for dental expenses unexpectedly, which as everyone knows typically not covered by any type of insurance, even if you have dental insurance, it’s not covering that-

Speaker 1:

Right. Right.

John:

… what you need that for. So things come up, family emergencies. Another scenario I’ve seen in the past, just trying to give people some examples of things to consider before they make any moves that are permanent. Home sales, let’s say if you had a second property, you’ve been depreciating it and all of a sudden it’s like, “Yeah, it’s time to sell this,” or you’re forced to sell it. There could be some pretty large capital gains that would actually put you above these thresholds as well.

Speaker 1:

Yeah. So basically it’s income generating items, right? That’s what’s going to trigger it. So I guess the opposite being said, Nick, is that things like Roth IRA withdrawals for example, wouldn’t trigger it, right? Because it’s tax, it’s not against your income.

Nick:

Yeah, Roth IRA withdrawals, HSA distributions, income that you might receive from a reverse mortgage and then a life insurance policy loan are all things that could be helpful. One thing I’ll say additionally is in line with this and with some of the reasons that will cause this. We’ve had clients quite a bunch recently where they’ve got substantial non-qualified money, so non-retirement money and they’re looking to get a new home and/or they’re in the process of selling their current home, looking at the new home, trying to avoid costs associated with mortgage, et cetera. And instead of selling the holdings, which oftentimes, especially over the last 3, 4, 5 years have substantial gains built in that then have this cascading effect that would impact this and that sort of thing where we’ve been using essentially what’s called a pledge asset line or a line of credit on non-retirement accounts.

So they can take a loan bridge that period of time, get the access to the funds, have to pay interest, but it’s non-taxable transaction, and then use that money, do it, wait for the sale of the original property and then just pay back the loan. And that’s a perfect example of where with IRMAA where that could be an unforeseen consequence of somebody just maybe doing a traditional way, “Hey, I’ve got this money here, I’m just going to cash out. Yeah, I’ll have to pay taxes.” But that’s in their case or their thought process, they might prefer that versus having to get a mortgage or paying a bunch of extra fees and expenses associated with the mortgage or having to go through the process of underwriting, et cetera, and this additional impact on IRMAA for a year.

Speaker 1:

Gotcha.

Nick:

So yeah, it’s just one of those things where it’s almost like a multiplier effect that falls down and just kind of a snowball going downhill.

Speaker 1:

Well, let’s talk a few strategies guys as we wrap up this week on ways to maybe avoid or at least lower IRMAA, again, if it’s income related. Obviously, John, you talked about the RMDs. Obviously, conversion could be one way to do that, a Roth conversion. Yeah?

John:

Yeah. And this goes back to the stressing, making sure that you have a plan in place to adjust to any situation. So what we find is let’s say someone retires 62, 64 when we’re doing the plan, we can estimate their taxes, what they’re going to be now and in the future. And if we see a period where it’s like five or six, seven years before RMD age is like, “Hey, we could start doing some Roth conversions here,” and what we’ll do is we’ll estimate how much of a conversion to do to make sure they don’t jump up into a higher tax bracket. So what that will do, ultimately, it’ll give them a little bit more tax-free income so we don’t trigger the IRMAA and then also it will lower their RMD. So IRMAA doesn’t get triggered by that. So again, that’s a great way to try to avoid any future IRMAA surprises basically.

Speaker 1:

Yeah. Yeah. And Nick, what’s some other ones besides that? I mean, obviously, that’s going to be probably a bigger one for many people, but I mean like tax loss harvesting, things of that nature.

Nick:

Yeah. So if you have non-qualified assets and you’re working with somebody that manages your account and/or you’re handling it yourself, you want to make sure that you’re taking advantage of tax loss harvesting in that account. Inevitably, any portfolio is going to have some winners and losers at the end of the year. If you can sell off some of the losers to offset previously recognized gains and/or get yourself some losses on paper to use to offset future gains, that’s something that you can absolutely do. The qualified charitable deduction, being able to send money directly from your IRA qualified charitable distribution to reduce your taxable portion of the RMD that you have to take can be a great tool as well.

So you just want to… We always talk about with clients that it’s really essential, should we have the time, you really want to have the three buckets of assets to generate income and retirement, those being pre-tax Roth and unqualified assets. And this is kind of a perfect example. I had a conversation with a client earlier, them just wrapping their mind around, hey, a distribution from a non-retirement account doesn’t necessarily mean that it’s taxable. And oftentimes those are some of the most flexible accounts and could provide quite a bit of a lot of different options on how to take income and reduce some of these hidden expenses like IRMAA.

Speaker 1:

Yeah. So, I mean, it’s a sneaky one that can get some folks, and again, we want to make sure we’re being as efficient as possible with anything, and that’s why a good strategy for your situation is important. I mean, these things can exist to affect all of us, but how you handle it, how you work with it, and based on your income and so on and so forth, and how you’re pulling money and where you’re pulling money and when you’re pulling money can go a long way. So it’s something worthwhile to make sure you’re sitting down and having a conversation about that hidden Medicare penalty, if you will. However, you want to look at it. It’s still something that frustrates people.

So if you need some help, get yourself onto the calendar. Don’t let it sneak up on you and eat into your income. Reach out to Nick and John and have a chat today at pfgprivatewealth.com, that’s pfgprivatewealth.com or call them at 813-286-7776. That’s 813-286-7776. Or again, just go to pfgprivatewealth.com, schedule that 15-minute chat, have that 15-minute chat and subscribe to the podcast on whatever app you enjoy using, Apple, Spotify, so on and so forth. Guys, thanks for hanging out and breaking it down. Always appreciate it. We’ll see you next time here on Retirement Planning Redefined with John and Nick.

The 4 Things You Can Control in Retirement

On This Episode

Markets crash. Taxes shift. Congress waffles on Social Security. You can’t control any of that. And stressing over it won’t help. What will? Focusing on the four things that actually move the needle in retirement.

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Marc:

Market crashes, taxes shift, Congress waffles on Social Security, you can’t control any of that, and stressing about it will not help. So, let’s talk about the things this week that we can control in our retirement.

Welcome into the podcast, everybody. This is Retirement Planning – Redefined with John and Nick from PFG Private Wealth, and guys, we’re going to talk about a couple of examples of stuff we can control in our retirement world, because there’s a whole lot of stuff we can’t control, right? So, let’s have a chat about some of that this week. What’s going on, John? How you doing, my friend?

John:

Doing good. I’m doing good. How are you?

Marc:

I’m hanging in there. We were just chatting before we jumped on here about the AI getting crazy. We can’t control that either, so we got to factor that in, right?

John:

No, no. I think [inaudible 00:00:50] right now.

Marc:

Yeah, we got to factor that in when we’re looking up information and things of that nature, so that’s another piece we can’t control, so be careful out there with that. Nick, what’s going on, my friend? How you doing?

Nick:

Good, good. Staying busy. The heat is on here.

Marc:

The heat is on. That’s right.

Nick:

Yeah, we are inching our way into summer.

Marc:

Yeah, well, it’s that time of the year. It’s hot and rainy on a regular basis, but let’s get into this conversation this week here. I got a couple items I want to run through. Like I said in the teaser, you can’t control what happens in the market, guys, right? Look what happened earlier this year. We knew the tariff thing was going to start. Took a bit of a beating for a while, then it started to rebound pretty well, but you can control how you’re positioned, right? That’s obvious, but people forget that. When they see the market taking that dive, they panic, “Oh, my gosh, it’s going down. The S&P is down 12%, that means I’m 12%.” Well, no, John, not really. Not if you’re not 100% exposed to the market risk, right? That’s the point.

John:

Yeah, that is. This is actually perfect timing for what’s been going on this year.

Marc:

Exactly.

John:

We’re doing some of these reviews, and we really kind of pride ourselves on making sure people are invested in the right asset allocation per their goals and their plan and their risk tolerance. So, when people put on the news, it seems like doom and gloom, and we’re doing some of these reviews and it’s like, “Oh, okay, that’s good to hear.” And part of that is you can’t control what the market’s going to do, you can’t control what politicians are going to do and how that might affect the market, but you can control how you at least take a look at your overall investment portfolio and how you structure it to be able to … Not saying you’re going to weather every storm, but to limit some of the volatility that’s happening.

Marc:

Sure. Yeah, I can’t even begin to say how many advisors I’d talked to where most of them only had a few nervous Nellies, right, and that’s okay. It’s understandable. A couple would call here there during the height of some of that there in April and saying, “Oh, my God, I see it every five seconds. It’s down 12%. I need to go through my numbers.” And so they’d run through the portfolio with them and they’re like, “You’re only down about two at this moment,” because they’re like, “Oh, well, two’s a whole lot better than 12.” Well, yeah, so that’s the point of not buying into just the straight media all the time and understanding what your risk tolerance is and how much you’re exposed to it, so that’s one area.

Nick, another area is kind of the same thing. It’s the great multi-risk multiplier. It’s our longevity. We don’t have a stamp on us that says when we’re going to pass away. It would make things easier and scary all at the same time. But you can control how much emphasis you put into your lifetime income streams, like, how are we setting up these lifetime income streams? And that longevity factors into market risk and all the other stuff too.

Nick:

Yeah, for sure. As we kind of start going through the planning process with clients, and then obviously the clients that have been with us for a long time, things will kind of ebb and flow depending upon how well they tolerate things like the market, how focused they are on upsider growth. And we’ve had multiple clients over the last, I’d say, 12 to 24 months where they’ve had substantial run-ups in the market over the last 10 years, and have wanted to carve out a certain amount to just kind of give them additional baseline of income.

And I think one of the things that’s really brought that home to people has been the inflation factor that we’ve kind of dealt with over the last couple of years, where it’s like, okay, they were chugging along and things were going great and felt very comfortable, and then prices and inflation really kind of kicked into gear. And we have a conversation about, “Well, hey, if this happened 10, 12 years down the line, are there things that you would do differently than you’ve done previous to now?” And a lot of them have wanted to increase that baseline, especially with Social Security being in the news as much as it is, and for a lot of people, that being kind of their baseline lifetime income stream.

Marc:

Yup. For sure. And these four things we’re talking about this week, guys, they all really play with one another when it comes to building that retirement strategy. And of course, if you need some help, please reach out to a qualified professional before you take any action, like John and Nick. Again, you can find them at pfgprivatewealth.com.

But John, I’ll kick it back over to you, where we’re still waiting to see what’s going to happen with the passing at the time we’re talking for this Pick the Top Podcast, the Big Beautiful Bill is still hanging out there, and taxation is a piece of that. So, part of what we’re waiting to find out is, are the Tax Cuts and Jobs Act that we’re currently under, are they going to expire at the end of 2025 in just a few months, or are they going to extend that, right? So we can’t control what they’re going to do, but we can start thinking about how to be as tax-efficient as possible.

John:

Yeah, this is a big one, because taxes are just an eroding factor in your money, and it’s best to avoid unnecessary taxes at all costs. And the best way to do that isn’t trying to predict what taxes is going to be in the future, it’s positioning yourself where you can adapt to any situation. So, if tax rates do go up quite a bit, you have some tax-free money or some after-tax dollars somewhere that you can take advantage of. So, it’s important to look at, hey, kind of call it asset location, where are my assets and how are those being taxed? And if taxes go up, how do I adjust? Or if taxes go down, maybe that’s a good time to make some moves and make some adjustments.

And part of this is, and I found this quite a bit when we’re bringing on prospective clients that maybe haven’t worked with an advisor or working with an advisor, they’re really not projecting what their taxes are going to be in the future. It’s just kind of like, “Hey, what’s my return? How have I been doing?” But with a comprehensive plan, you can actually look at it and say, “Hey, based on today’s numbers, here’s what taxes look like. And if taxes go up, you’re going to be in a bad situation the way you’re currently positioned.” So we want to just stress how important it is to allow yourself the ability to adapt.

Marc:

Yeah, and Nick, I’ll keep that conversation going with you for a second, because if they do nothing, the tax code is going to revert back to the Obama administration era, so rates will go up, brackets will change. If they extend the TCJA, which a lot of people are hoping for, then our tax rates will probably stay the same. And if you’re doing Roth conversions, for example, that’s going to be great, because you’re going to have a longer timeline now to Roth over time and do converting, whereas if the tax rates go up, maybe that changes your strategy.

Nick:

Yeah, for sure. And I think the biggest takeaway in the biggest point that this proves is that things continually change. And so, having a proactive plan on how you want to address … And really what this boils down to is your distribution plan or your withdrawal plan, and how heavily dependent is your withdrawal plan on current environment?

And even just to bring that up, I think one of the things that we’ve found, and we’ve emphasized it with clients, especially over the last 10 years or so, but clients that have taxable investment accounts, so non-retirement, non-traditional, non-Roth, but just regular taxable investment accounts, they really find themselves in a position to be able to adapt to the environment better than people that don’t. So, things that pop up that happen, whether there’s a substantial withdrawal that needs to happen, or just flexibility on cash flows, their ability to be able to adapt to what’s going on is significantly better, because … And we are a fan of Roth conversions when they make sense, but there is a risk there from a timing perspective. There’s absolutely risks, so that’s something that I think is important to point out.

Marc:

Well, the fourth one, we said we were going to talk about four items today, guys, and of course you know it’s coming because I hadn’t mentioned it yet, that’s Social Security. We can’t control what these folks are going to be doing up there on Capitol Hill, but we can control our strategy, or least start to kind of look, like, how heavily is it relying on Social Security? Or the conversation, John, of when do you turn it on? When do you not? How does that affect your withdrawal strategy and withdrawal rate from other accounts? So, that’s something you can control.

John:

We can control when you take it and when to defer it and what to do with it if you take it. And again, just going back to the plan on this and stress-testing the plan, how does someone’s plan look like if Social Security loses the cost of living adjustments that we’ve seen recently, which have been pretty significant over the last five or six years. What does the plan look like if all of a sudden that stops? Are you in good shape? And if you’re not, how can we mitigate some of that risk? And maybe that does make a difference as to when you take it or how you take that distribution there, but that’s one way to look at it.

Or assuming, going back to the Social Security podcast, if people are listening, if they don’t make any changes in 2034, there’ll be about roughly 21% reduction in your benefit. What does your plan look like in that situation? Are you in a good position to weather that storm? I mean, ultimately, we do think they’ll make some adjustments to it, but you just want to just know what would happen in that situation, and how do you adapt to it.

Marc:

Yeah, I mean it’s certainly a big one that you’re going to wind up. You’re running different stress tests and different kind of scenarios just to kind of see how all this stuff’s going to play in with each other. And Nick, I’ll toss it back to you for a final point. Anything I missed on those four items that we can control? Those are four pretty big ones. Is there anything else you’d like to touch on, or did we tackle it?

Nick:

No, I think those are good. I know just one other point, because there’s been some talk about the tax bill that’s going through Congress right now, and there was some initial discussion about making Social Security benefits tax-free, and at least from what I’ve read, that’s not the case in this. I know I’ve had some clients kind of bring that up and ask, and obviously we never know what happens once it kind of works through the Senate and all that kind of stuff. But they did end up, I think, the way that they had handled it was they put in something about an additional credit for seniors, an additional tax credit of, I think, maybe up to $4,000 or something like that, but-

Marc:

Yeah, I think that’s where they’re still kicking around. It went through the House, right, so now it’s still got to go through the Senate, and they’re still kind of arguing back and forth about what’s going to be what, so yeah.

Nick:

Yeah. And the reality is that the other thing that this tax bill does point out is that from the standpoint of in the future, and the amount of debt that the government has and all that kind of stuff, there are risks of things that will be taxed in the future that maybe aren’t taxed now and stuff like that. So yeah, I think the emphasis is really beyond anything else is that whatever strategy is best today is probably not best tomorrow.

Marc:

True.

Nick:

And so, the ability to be able to position your assets in a way to kind of adapt, like you mentioned, income streams, have pre-tax money, have Roth money, have taxable brokerage account that’s more subject to capital gains versus ordinary income taxes. Even if you’re in a position where you can invest in something like real estate, maybe when the prices are a little bit more reasonable, but where you can use the tax benefits of real estate, that’s something that could make sense for people. So, it’s just giving yourself the ability to adapt to whatever’s going on is the most important takeaway I think people should have.

Marc:

Yeah, at the end of the day, there’s a lot of stuff that we cannot control, but there are many things inside that subsets that we can control, and that’s where working with a financial professional can certainly help. So, if you’re not already doing so, sit down and have a chat with one. Talk about your unique situation on something you hear on our podcast or any other. Don’t just take action without running that through your specific and unique scenario. And of course, John and Nick can help with that. If you’re not already working with them, then reach out to them at pfgprivatewealth.com. That is pfgprivatewealth.com. You can call them at (813) 286-7776. And don’t forget to subscribe to the podcast on Apple or Spotify or whatever podcasting app you enjoy using. It’s Retirement Planning – Redefined, and share the podcast with others that might enjoy the content and get a useful nugget of information along the way as well.

So guys, thanks for hanging out and breaking it down. I always appreciate your time. We’ll see you guys next time here on Retirement Planning – Redefined with John and Nick.

Should You Gift Money While You’re Alive or Leave A Legacy?

On This Episode

You’ve worked hard, saved well, and now you’re thinking about giving back—maybe to your kids, your grandkids, or a cause you care about. But should you wait and pass that wealth on later, or give while you’re still around to enjoy the impact? Let’s talk about how to make that decision with confidence.

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Marc:

Welcome in once again to another edition of Retirement Planning, Redefined with John and Nick, and we’re going to talk about gifting money while you’re alive or leaving a legacy. You work hard, you saved well, so let’s talk about how to gift and leave a legacy.

Welcome into the podcast everybody. Thanks for hanging out with John and Nick and myself as we talk about these topics this week. And guys, it’s gifting, right? So I want to go over some basics here. It seems like there’s been a trend the last couple of years for people to enjoy their retirement legacy with the family versus the old way of you pass and you’ll leave a check, right? Here’s your inheritance, we’re gone, that kind of thing. So let’s talk about that a little bit this week on the show and just kind of see what you guys are seeing in your neck of the woods. How you doing this week, Nick?

Nick:

Good, good. How about yourself?

Marc:

Doing pretty good’s. How’s the wedding action coming?

Nick:

Planning’s moving along.

Marc:

Nice.

Nick:

Did some, hopefully we got the food picked out, so trying to check off all the big things, so.

Marc:

That’s important. Got to have that good food going on for sure. Well, good. Kudos. Good. Glad to hear that. And John, my friend, how are you this week?

John:

I’m good. I’m good. Summer just started for the kids, so getting used to waking up in the morning and they’re hanging out with me as I’m getting ready for work-

Marc:

And they’re ready to go.

John:

Versus me just dropping them off. Yeah.

Marc:

That’s right.

John:

It’s a lot of fun.

Marc:

There you go. Are you guys seeing this trend that I talked about, not necessarily a new trend. It’s been going on for a number of years now, but I think where people just want to maybe enjoy some experiences with their loved ones while they’re still here versus just leaving that check, so to speak? Are you guys seeing that in your practice as well?

Nick:

Yeah, I’d say so. We’ve had, what are we on now? A 14, 15 year bull run from the standpoint of people have kind of exceeded what their perspective on goals was for the money that they might have in retirement and, so especially I would say, at least from what I’ve seen, the vacation side of things is kind of the biggest thing that people have been doing where they’ll do a large family vacation and pay for the kids and their families to go so that they can all enjoy that together.

Marc:

Yeah, that’s very cool. And we’ll talk about some of the numbers and things in just a few minutes, but John, I’ll kick this over to you. I’d say the first step probably still should be, make sure you are covered first, right? We all want to leave and do things for our kids and loved ones, but don’t sacrifice your own retirement in order just to do that. Is that a fair place to start?

John:

That is 100% where you should start. The last thing you want to do is start gifting and spending money on a vacation, and then you look at it and you’re like, “Oh man, I don’t have enough money to live anymore.” So first thing we do in this situation where it comes up with clients is like most things we say, we look at the plan and we will stress test it and look at different scenarios to make sure, hey, if this were to happen, how does your plan react to it? So we’ll throw out some scenarios out there, whether it’s healthcare, inflation, social security, things like that. And if the plan looks solid, we will typically give somewhat of a green light of, we think you should budget X amount for this. Or we can also look at scenarios where Nick talked about vacation, but we’ve seen some others where it’s like, “Hey, I want to help my son, daughter with a home purchase.” And with the way prices are going now, it’s very difficult for first time homeowners to be buying houses. So we’ve seen a lot of people basically lending, not giving money to their kids for buying homes. So we will put that in the plan and say, “Hey, what does your plan look like if you were to give X amount for a down payment?”

Marc:

Gotcha. Okay. And we’ll talk about some of those numbers and ways to do that here in a few minutes. So I would say if step number one, as John pointed out is make sure you are covered. The next step number two is maybe just kind of clarify your motivation. He kind of touched on that a little bit, but why are you giving, I mean, again, we all love our kids. We want to help, but what’s the purpose? Is that an important kind of factor to decide through?

Nick:

Yeah, I’ve had some recent conversations where maybe there’s specific topics like, okay, we’re off conversions, and because somebody has read or seen an article or something like that, the thought process is, all right, well let’s go ahead and let’s convert all of our qualified money to Roth accounts and leave the money to them. And a tricky thing with that can be, as an example, is maybe their kids are not in the same sort of economic space as they are and they’re not going to ever make nearly the same amount of money. Them taking a hit right away from a tax perspective maybe doesn’t make sense, so try to take them back to the initial point in, Hey, what’s your motivation? What are you trying to do? What’s most important to you? Is it making sure that your plan is structured well to protect you first and then start to do some giving while you’re alive? Or is it more focused on you want to give after you pass away and let’s structure your assets accordingly?

So just so many things, making sure that you fully understand what your objectives are because it can be a little bit of the shiny new thing or a shiny new strategy that weren’t familiar with at first or initially, and then once you go through and evaluate it in more detail, maybe it doesn’t make a whole lot of sense. But yeah, really understanding how account types work, what your goals are and really what your focus is really important.

Marc:

And of course, working with a financial professional is going to help you identify that because often we’re not going to know what the account types and the rules and the taxation things are going to be, so that’s why you want to turn to the pros on that. So let’s get into some of the numbers a little bit, guys, because I actually want to point out a couple of things that based on what you’ve said so far, and just kind of ask you some clarifying questions on that. But let’s start with understanding the gifting rules. So John, what’s some of the numbers that we need to know if we just want to gift money in general?

John:

So you want to look at what is the gifting amount before you trigger having to file a gift tax return or putting that on your return that you gifted money. So this number changes from year to year typically, and in 2025, it’s $19,000 per person. So example, let’s say you have a mother, father, and they want to gift to a child. They can each give $19,000 apiece.

Marc:

So married couples 38 grand, right?

John:

Yes. So that’s a good starting point. And then if you have grandkids involved or whatever, you can start gifting to that. So it’s $19,000 per person per year without triggering the gift tax filing.

Marc:

And that’s hefty. Now I’m sure somebody listens going, “I love my kids, but I ain’t giving them 38 grand.”

John:

Again, everyone’s situation’s different.

Marc:

And you can do that. And it doesn’t matter if it doesn’t have to be family either, right? This could be anybody, right? You can give 19,000.

John:

It can be anybody. Yeah. If you want to just find a random person in the street, you’re more than welcome to-

Marc:

Your favorite podcast host. I mean, podcast hosts need love too, so I’m just saying.

John:

Yeah. So that’s definitely the starting point. If you’re going to be gifting money to any particular individual. If you want to help out with tuition and medical expenses, as long as it’s paid directly towards those institutions, you don’t have to file any type of gift tax return.

Marc:

Now, I wanted to ask you about that because a minute ago you guys were talking about helping with school. Now you can’t gift the money and pay the loan, right? It’s not paying the student loan, it’s paying the tuition. There is a difference there, correct?

Nick:

Yeah. And you want to pay it directly to the institution.

Marc:

Gotcha. Okay. That’s important to know too, right? I’m sure from a tax standpoint as well. All right. What about QCDs, John? Can we do that in that arena as well? If you want to do some gifting?

John:

Yeah. So let’s explain what that is. So it’s qualified charitable distributions from your IRAs. Nick and I use this quite a bit. So when we’re doing the fact-finding with clients, one of the main, not one of the main, but one of the questions we go through is, do you do any charitable gifting? And if they check that box, we’ll typically find out what institutions and how much they’re giving. And once someone hits RMD age, a great way to save on taxes is gifts directly from your IRA. So you could save quite a bit depending on how much someone’s gifting. So example, we have someone that doesn’t necessarily need their distribution from the IRA, and they were just taking money out of just cash flow, whether it was social security or pension, they were gifting it to their church. What we would typically do is say, “Hey, let’s kind of switch this. Let’s go to, let’s pull out of the IRA.” Let’s just use number. Maybe it’s 10 or 15 grand and we’re going to go directly from the IRA to the charitable institution. In this example, it’s a church, and you don’t pay any taxes on that amount that came out.

Marc:

That’s ideal, right? And Nick, thinking about how you, if you’re a charitably minded person and talking about leaving a legacy, since this kind of rolls into this conversation, people often ask, “Well, which account should I use for what?” And John mentioned that earlier. So if you’re thinking about leaving money to your kids and you’ve got money in a Roth, you might want to leave the kids that right? And then maybe QCD some money from the IRA over to the church, for example, because that’s a tax benefit to everybody. Correct?

Nick:

Yeah, for sure. That makes sense. I would say to one kind of red flag, or at least something to be very aware of and had this conversation recently with a client is, while you’re alive, if you’re in a position to be able to gift and if you’re in a position to be able to choose where you want to gift money from, avoid gifting from highly appreciated assets from the standpoint of let’s say there’s a property or there’s a taxable brokerage account that maybe you’ve held 10 different stocks for 20 years and they have a substantial gain. If you gift that while alive, then the recipient, when they sell those is going to pay taxes on the gain versus if you gift it after you pass away, those investments will get a step-up in cost basis, which can save a significant amount of money from a tax perspective. So I would say where you gift from is absolutely, probably if this is something that’s important to you, that’s where the largest amount of strategy comes into play and doing it from the right place.

Marc:

Nick, any other things we missed as far as with the QCD or some of the numbers there?

Nick:

Yeah, one thing that we have run into is that some custodians, including the one that we use, Charles Schwab, they don’t send out a specific tax document when somebody processes a qualified charitable distribution. So that’s something that you want to keep records of and indicate that you’ve done that with your tax preparer. We’ve had a couple of clients where they were anticipating that they were going to receive a specific document that laid out exactly what they did, who it paid to, and that sort of thing and that was not the case. It shows the distribution via the 10-99, but they have to notify the tax preparer and usually provide some sort of documentation showing that they made that gift to a charity. So just from a best practice sort of standpoint, that’s something to keep in mind.

Marc:

All right. All right. Good stuff guys. So as always, if you’ve got questions and concerns, need some help when it comes to any kind of the financial pieces, the X’s and O’s when it comes to retirement, you always want to check with qualified financial professionals who do this day in and day out. And John and Nick certainly do so if you need some help, reach out to them online at pfgprivatewealth.com. That’s pfgprivatewealth.com and don’t forget to subscribe to the podcast on Apple or Spotify or whatever podcasting app you enjoy using. You can reach out to the guys on the website. You can also call them at (813) 286-7776. And don’t forget to tune in for new episodes as they come out. I appreciate the time guys. Thanks so much for being here and we’ll catch you next time here on Retirement Planning, Redefined with John and Nick.

Get yourself a plan, get yourself a strategy. Reach out to John and Nick today at pfgprivatewealth.com, that’s pfgprivatewealth.com, to get started on your situation or to tweak your situation and dive into that process with the guys. You can reach out to them at 813-286-7776. Or again, find them online at pfgprivatewealth.com. Don’t forget to subscribe to us on the podcast on Apple or Spotify, or whatever platform you like using. We’ll see you next time here on Retirement Planning Redefined with John and Nick.

What Should You Actually Do When the Market Drops?

On This Episode

The headlines are loud, the markets are messy, and your gut might be telling you to do something — anything — right now. But what should you actually do when your portfolio takes a hit?

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Marc:

The headlines are loud, the markets are messy, and your gut might be telling you to do something, anything. So what should you actually do when market downturns happen? Let’s get into it this week here on ‎Retirement Planning – Redefined.

Welcome onto the podcast. Thanks for hanging out with John, Nick, and myself as we talk investing, finance, and retirement. And, guys, with all the volatility and stuff happening, I thought it’d be a good idea to maybe address some of this stuff. And we’ve got four key questions maybe to ask ourselves when we’re going through some of this volatility and let you guys give some people insights on what you’re seeing and what your thoughts are when it comes to this kind of stuff. So welcome on this week, John. How you doing, buddy?

John:

I’m doing all right.

Marc:

Yeah? A little busy?

John:

Just getting ready to start a kitchen remodel, which is bringing its own gut check, but doing all right.

Marc:

That is true. Very true. And Nick, how are you doing, my friend?

Nick:

Good, good. Staying busy. Obviously a little chaotic right now, but knee-deep in wedding planning. So that’s fun.

Marc:

So let me ask you guys, before we get into this, when we’re seeing this kind of volatility, do you get many calls? I’ve talked with all kinds of advisors and most of them say a couple, a couple panicked people, but for the most part, their clients have a strategy and a plan in place and it makes it a little easier to handle when there’s volatile times like this. Is that kind of the same for you, or what are you seeing out there?

John:

Yeah, I’d agree with that. As we mentioned quite a bit in our last podcast, our last sessions, our practice is generally planning based. So a lot of times people are comfortable with where they are, and we do a good job of reinforcing here’s where you are, here’s your asset allocation, here’s how we structure things for a downturn or some volatility. So I think we do a really good job of making sure people are in the right asset allocation, and not only that, but structuring their assets where when they are using their funds for retirement, we have a plan in place to draw on specific accounts when we are expecting this type of volatility.

Marc:

Makes sense. Yeah. Gotcha. Well, as you mentioned, gut check as that kind of goes. So let’s jump in and do these four items here. And that’s the first one. Nick, I’ll let you start if you want to. So when is the last time you checked your strategy? When’s the last time you checked your plan? I hear people saying, “Oh, the market’s down year-to-date, the S&P’s down 13%.” Well, are you down that or are you only down maybe two or three because you hopefully were properly diversified, right? So when’s the last time you checked in on your plan and do you need that gut check? What’s your thoughts?

Nick:

Yeah, so we try to make sure we’re updating plans. We’ll go over general numbers each year. And then one thing that we focused quite a bit on last year with clients was updating expenses. With having the inflation like we did for a while, the expenses are obviously a huge driver for clients, and so a lot of our clients are updated. And I know John kind of touched on how many are reaching out. And I would say obviously compared to the clients that we have, there are some that do. And I think the good part about the planning, those that had the planning, we’re just reinforcing and reviewing what we’ve discussed in the past.

I had a couple conversations earlier today with similar thoughts and sentiments, and even though most clients know that they have some sort of mix between stocks and bonds, they rarely think about the bond portion not being as volatile. And so that’s something that even where in our minds it might kind of feel basic, these little things, and just kind of talking through and reminding clients about what they actually have, why they’re positioned the way that they’re positioned and why we did the plan. It’s also a reminder for us. We’ve had some clients that maybe six months, 12 months ago, like, “Hey, should we get more aggressive,” et cetera, et cetera. And we kind of emphasized that we’ve had a really good run for a really long time, and at a certain point there’s going to be some sort of pullback. And so I think those clients that both from a being too conservative or being too aggressive standpoint are kind of happy that they have a plan.

Marc:

Gotcha. Okay. And so John, that would probably lead to the second step, which is if you are doing that gut check and you do feel like there’s some things you need to do, where are you at with your risk? As I mentioned a second ago, people see the headlines and it makes them panic. It makes them worry, it makes us easily agitated. “Oh, it’s down 13%.” But if you’re not taking 100% risk, you’re probably not down 13 whole percent, right? So it’s about having that risk tolerance adjusted as well.

John:

Yeah, and like Nick mentioned, I just had a scenario where this actually came up. They’re watching the news and it’s doom and gloom. And I’ll tell you, I put it on for a little bit sometimes and it’s like, all right, if you’re watching this all day, I could see where people are panicking. But when we did their review, the person was down minimal year to date, and they’re like, “Oh, that’s it?” And it’s just like, “Yeah, you’re doing all right.” And then when you reference the plan and you actually show them, “Hey, based on what just happened this last week, you’re still in good shape and here’s a strategy if this volatility continues, this is how we’re going to handle it if you’re withdrawing from the portfolio.”

And then I will say that what Nick said there as well of, people, when things look good, it’s like, “Hey, should I get more aggressive so I can earn more?” And it’s really important just to stay the course because you do have these pullbacks and when you do get more aggressive and let’s say all of a sudden the market pulls back like we’re in the middle of right now and you can’t handle that risk, that’s when you jump ship and then all of a sudden there could be some news that comes out. Literally there could be one bit of news, especially in what we’re dealing with right now and the market could just completely do a 360 and just be positive quite a bit.

Marc:

Yeah. At the time we’re taping this, we saw that to open up today. It went up about 4% in the first half of the day, and then it started to cool back off. So there’s still a lot of things flowing back and forth, Nick, and that again leads back to strategy, right? So that’s the third piece of this conversation. Do you have a strategy and are there some things that we should look at, try to find the positives or the silver linings of downturns? What are some things we could maybe, some smart moves we could be looking at?

Nick:

Yeah, just even before we get into that, I wanted to touch on John’s last point, just from the standpoint of part of the conversation that we’ve been having with people is that the volatility in the markets, both good and bad, are so much quicker than they were years ago. There’s a lot of people that are used to prolonged just slow bleed downturns. And where from hour to hour, day to day, you can have a correction and then claw half of it back within a few days. And just kind of shifting out during that period of time can be pretty deadly for a portfolio.

But from the standpoint of what can be done now or what could make sense now with what you alluded to, dependent upon, it is a good time to kind of do that check on overall risk, potentially integrating in some rebalancing of the portfolio. We try to have clients have some cash on the sidelines no matter what. And it could be a decent time to average in some of that money if they’re looking to reinvest.

For those that are still working, I think the emphasis that we put on is buying at a discount when you’re averaging in every month and that sort of thing. And then even from the perspective of, and it’s something that we are reviewing, tax loss harvesting in taxable investment accounts can be something that makes sense. I will say that unless there’s, so many people’s positions are up or vary in the green that it can be a little hard even still with this pullback to get some losses and offset some gains and that sort of thing. But we can also take advantage of some of the losses to offset future gains as well. So those are all things that we’re reviewing.

Marc:

Yeah. And a lot of people are taught, have been wanting to do Roth conversions, for example, right? Well, I mean, kind of silver lining when your accounts are down a little bit in a 401. Maybe you’re doing some conversions over to Roth and you’re paying lower taxes because the balances are down. And then when the market comes back, because it tends to do, as long as your plan calls for it, then you’re gaining that money back tax-free. So different kinds of silver linings. You have to work with a professional, you have to work with an advisor to find your way through some of these tougher times. And so that brings us to the final point, which is unhelpful behaviors, right? So what are some things, guys, we need to stop doing right now if we’re getting stressed out? John, you kind of hit it perfectly on the head, said you watched it for half an hour or an hour and it’s like, “Yeah, no wonder people are getting down, right?”

John:

Yeah, it’s definitely doom and gloom out there. So I would say whatever station you’re watching the last couple of weeks, it’s definitely everything’s negative.

Marc:

And that’s their job. We have to be realistic about that. That’s all they’re going… They’re not going to talk about the positives very often, right? They’re looking for the eyeballs from the panic, right?

John:

Yeah, hundred percent. I think negative news typically rates better. So that’s why you continually see the negative news drip on everybody. But back to one thing you mentioned there, Marc, about the Roth conversions. I just want to point out that is a great strategy when the market dips down, if you’re currently implementing a Roth conversion strategy. It is typically a good time to do it when we’re having a pullback.

Trying to time it perfectly is obviously going to be difficult to do, but you just try to do your best with that. But when you are converting, just want to make it clear to anyone listening, you typically want to, when you’re converting for the strategy of a lower balance and paying lower taxes on the specific shares, you want to do a Roth conversion, that’s you keep your shares. So you’re doing kind of a transfer of shares over to the Roth versus cashing out and sending the cash over and then rebuying it. So just be careful. If you’re working with an advisor, just understand, hey, if we’re doing a Roth conversion, are you cashing it out? Are you transferring over the shares? Because we feel it’s best to transfer over the shares so that we don’t have to rebuy them.

Marc:

Yeah. No, definitely. I just was thinking that that was another little piece, so thank you for kind of taking it a little deeper, if that’s part of your current strategy. So yeah, turning off the news is certainly a helpful behavior. What else, Nick, you got anything else that you’d like to chime in on that topic?

Nick:

Yeah, as somebody that has sometimes a tendency to doom scroll a little bit and try to suck in as much information and try to be able to understand different points of view and all that kind of stuff, it is important to take a break. Something as simple as getting outside, going for a walk, having a conversation. One of the things we try to emphasize with our clients is that if you’re getting to that point where severe high level anxiety, maybe concerned about starting to make poor decisions or overreact to anything, is just reach out. Usually the feedback that we get when we just have a conversation with somebody is that able to give perspective. And realistically, what happened yesterday in the markets, which we had a fake post about a change to the tariffs and the market swung like 7 or 8% in five minutes and all this other stuff, really kind of emphasizes the fact that volatility is different than it used to be and overreacting can be something that really hurts you and your overall position.

Marc:

That’s a great point, right? I mean, we’re certainly, the doom scrolling, the second by second feedback, you have to have a strategy, right? And our own worst enemy is ourself. We tend to jump out and do things and then we lock in those losses. So again, before you take any action on something you hear from even our conversation or any other thing that you hear that they’re financially based, you should always run that past a financial professional as it relates to your specific unique situation, as the guys pointed out numerous times today in the show.

So if you need some help with that, stop by on the website or give them a call and set up a time to chat, pfgprivatewealth.com, that’s pfgprivatewealth.com, or call 813-286-7776. Guys, thanks for hanging out and breaking it down a little bit. Hopefully people keep their heads and we’ll see how this plays out. It could be short-lived, it could be a little longer term. So get a strategy. At the end of the day, that’s what’s important. So the guys can help you with retirement planning redefined. We’ll see you next time here on the podcast.

Inside the Advisor’s Office: What People Are Actually Concerned About

On This Episode

Ever wonder what other people talk about with their financial advisors? A new survey of nearly 400 experienced advisors reveals the biggest concerns, challenges, and financial goals their clients are facing today. From retirement planning to healthcare costs to working longer than expected, we’re breaking down the key takeaways and how they compare to what we see in our own client conversations.

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Marc:

Ever wonder what people are talking about with their financial advisors? Well this week on the show we’re going to discuss a new survey of nearly 400 experienced advisors revealing the biggest concerns, challenges, and financial goals that their clients are facing. We’ll see how that compares with what the guys see here on the show. Let’s get into it this week on Retirement Planning – Redefined.

Welcome to the podcast, everybody. Thanks for hanging out with John and Nick and myself as we talk investing, finance and retirement. And guys, we’re going to share this survey. We’ll put a link into the show descriptions as well for folks that want to check it out, but want to run some of this information past you guys and see does that correlate with what you’re seeing, do you think it’s accurate, not accurate, and just spitball and talk a little bit about some of the stuff out here.

The survey was done of nearly 400 experienced advisors all with around 20 years or more of a business, practicing business, so interesting. They didn’t really say exactly the age bracket of all the people they were talking to, so there could be some folks that are not necessarily retirement age. They could be younger as well as older, but I want to run down some of this stuff and just get your guys’ take on it.

How you doing this week, John?

John:

I’m doing well. Daylight savings is messing with me a little bit, but I’m adjusting pretty well. And one of my kids, actually both my kids, they’re testing for an honor belt in karate.

Marc:

Oh, nice.

John:

So they’re excited.

Marc:

They’re going to whoop on you. Be careful.

John:

It’s funny you say that. They’re running around the house kicking me now. It’s like I wanted to get them into some self-defense stuff, but now I’m getting kicked.

Marc:

So now you got to walk around with some pads on.

John:

Pretty much.

Marc:

Make sure you’re not getting beat up too much. Very cool. Well watch the shins, man. They’ll get you in the shins.

Nick, how you doing, buddy?

Nick:

Good. We’re staying busy.

Marc:

He’s like, “Good.” Well, let’s break this down a little bit, guys.

John:

That’s the sound of a guy that’s in the middle of planning a wedding.

Marc:

Right? That’s what I was just thinking. He’s like, “I got to make another decision. I don’t want to make a decision.” Let’s jump into this and we’ll see if we can make this easy for you this week, Nick.

So seeking out a financial advisor, the first part of this survey, advisors in the survey said 52% of their clients have sought out financial advisors to help with the retirement planning. About 34% surveyed were just looking for somebody to build wealth with. And in an era where everybody can call themselves a financial advisor, does that strike you as interesting? What do you guys think about that, 52% looking for retirement planning versus 34 just looking for some sort of wealth building, whoever wants to start?

John:

Yeah, those numbers seem accurate to me. Well, I guess I’m a little surprised it’s not more looking for help with retirement planning.

Marc:

Okay.

John:

I’d say the majority of our clients are retirement planning based, “Hey, I want to make sure my plan’s good. I want to make sure I don’t outlive my money.” As far as building wealth, that does come up quite a bit, and Nick will jump in as well, but I’d say most of our clients are looking for retirement planning and just making sure they’re on track and making sure that they’re making the right decisions.

Marc:

And it’s two different mindsets too, right, Nick? I mean, so you need to decide what it is that you’re looking for. I mean, not to say that you couldn’t work with a retirement planner who also can help you with some of the wealth building, but it is a different skillset as well. If you’re just looking for someone only to help you build the wealth, that’s a little bit easier, I would think.

Nick:

Yeah, and I would almost, if I were to say maybe put that in other words, we talk with people at the three phases of money as far as their life goes are accumulation or growth, distribution, taking their money in retirement and then transfer when they leave money. And so I would say from that initial, that wealth building, that’s most likely accumulation focused. And because so many people accumulate their money while working in their 401(k)s and that kind of thing, I think it tends to be a little bit of a different conversation and it’s those people that as you get closer to retirement. So without having ages, it does make it, the numbers are interesting, and I agree with John, I would’ve thought maybe it’d be a little bit higher from the standpoint of the retirement planning side, but-

Marc:

Well, I mean, if you’re just trying to grow the money, again the market’s been, obviously we haven’t had a prolonged downturn, and it’s been choppy here lately, but we haven’t had a prolonged downturn since ’08, ’09, so there’s a lot of information out there about saying it’s a little bit easier to build the wealth. But the preservation stage, which retirement is a little bit more complicated. There’s more things going on than just the portfolio.

But with that in mind, check this out. Over half of the survey of financial advisors said the average client asset minimum was 760,000. I found that to be good. I know different areas are going to be more or less depending on the economic state of the area, but when you often hear that people aren’t doing a very good job saving for their retirement future, three quarters of a million dollars is not bad.

Nick:

It’s definitely interesting to see the numbers and how they’ve changed over the last five to seven years where, and you mentioned it earlier where we’ve had a long prolonged period of time with the market going up, and so there’s quite a bit of people meeting with us or ending up with more money than they had thought that they would or that sort of thing. There’s a little bit of concern with that that only lasts for so long and that there’s some correction and all that kind of stuff to happen. But absolutely, definitely that puts most people in the wheelhouse of where they need to be to have a successful retirement.

Marc:

I mean, it’s not bad. John, do you guys have a minimum? I mean, I know different advisor firms do different things. You can’t service everybody. There’s only so many hours in a day. So you’ll hear something where somebody says, “Well, we work with people with 250,000 who have saved or more in assets,” or some or a million or whatever. Do you guys have a breakdown?

Nick:

We don’t have a set minimum that we advertise or market.

Marc:

Okay.

Nick:

I would say that the majority of the people that meet with us tend to have what many institutions have as their minimum. So in other words, a lot of places will tell people, like you referred to that, they’re looking to work with clients that have 250,000 or more just from an efficiency standpoint of trying to make sure that they can service their clients and that sort of thing, and so we end up above that with most clients. But the reality is, is that the conversations that we have with clients are really we don’t keep that rule set in stone because for us, it’s more of a relationship-based.

Marc:

Individually based kind of thing? Okay.

Nick:

Yeah, and really it’s something we’re looking for people that are serious about planning. I would say if you were to draw a line between what we were talking about earlier where a growth or retirement planning in a more broadly focused strategy, so they’re focused on that. They’re serious about it. We reference like, “Hey, we don’t want to convince you that you needed an advisor. We want you to know that you need one and we want to interview for the job,” kind of concept.

Marc:

No, that makes sense because I mean if you’re giving suggestions and someone’s not willing to take them, you’re just wasting each other’s time versus… Yeah.

Nick:

Exactly, and we found that that’ll waste more time than in theory working with somebody that maybe isn’t where they’re going to be yet. And also-

Marc:

It needs to be a reciprocal relationship.

Nick:

For sure. Communication’s super important for us because we’ve also found that we’ve had people come in that maybe are under that 250, but their parents are wealthy and they ended up being a teacher or something that maybe didn’t allow them to save as much money as some sorts of jobs, and they’re going to inherit money and they need assistance that way. So I’d say we’re pretty comfortable with our process and how we approach that sort of thing and really look for it on a relationship basis, communication basis, and how we all get along.

Marc:

That makes sense. And it’s got to be a two-way street. I mean, when we do the podcast, it’s not designed to turn every listener into a client if they’re not already a client, but it is designed to say, “Hey, if it’s the right relationship field going both ways, then we’re happy to help if we can.” That’s pretty cool. So that’s a good way of looking at that.

John, check out some of these top concerns. Let me know what you think here. So no surprise, number one, outliving their assets, 38% of the people surveyed. That’s pretty much always number one, right? Outliving your money.

John:

Yeah.

Marc:

31%, generating reliable income streams, a pretty high number as well.

John:

Yes.

Marc:

Okay. Then it drops off to a pretty stark, down to 12% for a future stock market crash. Now with some context here, this survey was completed at the end of last year, so it was December of ’24. Do you think that number’s gone up recently?

John:

I would willing to bet that number’s gone up. I think we were talking about the market, the last real big downturn was ’08, and I think in the last 10 years, we’ve only had two years of the market being down, the S&P 500. I think it was, what, ’22 and 2014, I believe.

Nick:

I’d almost say that’s a leading indicator that there’s going to be, it’s one of those things. Once people get that comfortable, that’s usually when it comes.

Marc:

I mean, it’s been a while, right? So because nobody’s worried about it whenever it’s riding high. We only seem to worry about it whenever we’re in the middle of it falling a little bit. But the one that really surprises me is all the way down to 8% for healthcare costs. Now if you guys are focused more on helping people with retirement planning and strategies, that to me, again depending on the ages of the people that answered this survey, healthcare costs at 8% seems awfully low because it’s pretty costly, and we need to be having those conversations when we’re, especially as we’re getting older.

John:

Yeah, for sure. This one, it is very important, and I think it’s same thing we’re talking about the stock market where it’s been doing well. And when you’re healthy-

Marc:

It’s great.

John:

…you think you’re going to be healthy for a long time.

Marc:

You don’t think about it. Right, exactly.

John:

You don’t think about it all. It’s back of your mind. I’ll tell you where we see a lot of people concerned about it is if they had to do some care for their parents. Then it becomes top of mind of like, “Hey, this was a lot that I just went through.” And taking care of them or seeing, whatever, if they have to go into a facility, and then in turn that’s where we see the most of our clients that are concerned about healthcare costs is if they had to take care of a loved one.

Marc:

Nick, according to the survey on that topic, advisors that were surveyed in this, were saying that clients should be more concerned about healthcare costs at around 54% unanticipated healthcare cost. Will you agree with that as well? Because I mean, obviously it comes out of the blue, it can totally derail the whole strategy.

Nick:

Yeah, I think part of that is, from an advisor perspective, the whole concept of long-term care, obviously I’d say many advisors have a good grasp on long-term care, but I think it’s become increasingly difficult for advisors to help clients plan for that with insurance or certain products that are out there. If we went back 10 years and from, let’s just call it 2015 back through maybe 2005, that was the golden era per se for clients to be able to secure a reasonably priced policy from a long-term care perspective. So I think maybe that ties into the concern that advisors have is that at the end of the day it’s a really expensive problem that clients can have, but it’s also an expensive solution that a lot of clients are reticent to spend on something that may not be an issue, especially in a state like Florida where all of the insurance, people have serious insurance fatigue here.

Marc:

Oh, I’m sure.

Nick:

So it’s a funny thing. The one time I actually answered a soliciting call earlier this morning was from State Farm calling me to, and they asked me if they could shop my car insurance for me, and I said, “Sure, let’s try it.” And sure enough, it was going to be $1,400 a year more than what I’m currently paying.

Marc:

Thanks for the help.

Nick:

And she laughed too, and she’s like, “Well, can I call you in six months?” I was like, “You can try.”

Marc:

You can try.

Nick:

I don’t think you guys are going to come down that much. And so it’s just crazy with what people are paying here. And so I think, long story short, I think that really ties into it as well for advisors.

Marc:

And I’ll hit you with this last one, John. I’ll let you start and then I’ll let Nick jump in if he wants to. And again, this survey was completed at the end of last year, so you can’t take the current market downturn into this conversation. But according to the survey, an average of 63% of clients age 55 or older intended to work to 65 and beyond. 63% of people wanted to continue working up to 65 or beyond, yet only 30% of those clients are actually still doing it. So I guess my question is, does this surprise you that people want to keep working longer? And if so, what are some of the main reasons why you guys are seeing people want to work into their older ages?

John:

It doesn’t surprise me. I think with the shift really since COVID of being able to work remote, I’ve seen a lot of people that sit there now thinking like, hey, I work from home. I can travel still and log in. And it’s given them a comfort of just saying, yeah, I’m making good money. I can continue to do this.

Marc:

Feather than nest some more, right?

John:

Yeah, so it’s just building up the nest egg and allows them maybe to feel comfortable doing some more travel that they otherwise maybe wouldn’t have felt so comfortable doing. We talked about the fears of outliving your assets, so I’ve seen a lot of that. And then there’s a lot of studies out there saying, just keeping sharp of mind. So I’ve seen that where people are like, “Hey, I don’t want to retire because I want to stay active. I want to have a purpose and continue to do things.” So I think I’m not surprised by that number.

Marc:

Interesting.

John:

Because we’re having more conversations of people wanting to work longer because they enjoy what they’re doing. And with Zoom, it’s become very easy to continue to work longer.

Marc:

Well Nick, I’ll give you this last piece here. 48% of those people feel like they don’t have enough saved to live on through retirement. I mean, you’re talking about half. So half of the people surveyed don’t think they have enough, so that sounds like it just comes back to just not truly having a plan or even really knowing what it is that you’ve got. They’ve probably never sat down and really pulled this stuff together so they don’t feel confident.

Nick:

Correct. I think you nailed it there. The uncertainty of not having a plan and not knowing and understanding what things look like really oftentimes causes procrastination, and then all of a sudden it’s 5, 7, 10 years later and there could have been a couple of small tweaks or a couple of small adjustments. I mean, in reality, there’s been so many times when within 30 minutes if John and I meeting with somebody the initial time, we can tell three to five things that they could do that wouldn’t have a significant impact on their life, but would have a significant impact from a positive perspective on their overall planning. And so whether it’s informing themselves and holding themselves accountable or working with an advisor, which we have found, and there’s been a ton of studies that have found that having that partner to help guide them through the decision-making process, that there’s significant value there and the average rates of return and all that kind of stuff show that because of the decision-making.

Marc:

Well, think about what you’re going through with the wedding planning stuff. So there was a thing a couple years ago we were talking about, some of the most stressful events we can do in life, one of them was planning for a wedding. One of them was planning for retirement, right?

Nick:

Yeah.

Marc:

There’s a lot of decisions to be made. And so having somebody to lean on I think goes a long way into removing some of that stress because it does get overwhelming. And at some points you’re just like, ah, screw it. I don’t even know what to do anymore. So being able to talk with guys like yourselves and say, “Okay, look. Here’s some thoughts we had,” or, “Here’s what we were afraid of,” or whatever the case is, it gives you that sounding board to bounce some ideas off of and maybe get some reassurance.

Nick:

Yep, fully agree.

Marc:

Yeah, and so are you having that same problem from the wedding standpoint?

Nick:

Right now we’re interviewing planners-

Marc:

There you go.

Nick:

…and the prices have gone up, so it’s-

Marc:

But you’re looking for help, right, because it’s a lot.

Nick:

Yeah, absolutely, absolutely.

Marc:

John, you don’t want to be the wedding planner?

John:

No, no. I did that 12 years ago-

Marc:

I got you.

John:

…and I want no part of that.

Marc:

I got you. Well, all right, guys, good conversation as always. Thanks so much for hanging out. So at the end of the day, I mean you find these surveys are pretty interesting. And I think a lot of this stuff comes back fairly similar each time, is that people are looking for some assurance. They’re looking for some clarity in some of these situations, so that’s the point of running through the planning process is finding out what do you got, where do you stand and how’s it working for you, and do you need to make some changes?

Often people feel like we’re going to have to do some major overhaul, and it scares them. But a lot of times when you run through the planning process, many people are in better shape than they realize. You just need some tweaks here and there. So if you want to have those conversations for yourself, reach out to John and Nick and get started today at pfgprivatewealth.com. That’s pfgprivatewealth.com. Get yourself onto the calendar for a consultation and a conversation.

And don’t forget to subscribe to us on Apple or Spotify, whatever podcasting app you like using. Retirement Planning – Redefined is the name of the show with John and Nick, and we’ll see you next time here on the program. Thanks, guys. Take care of yourself.