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ANNOUNCER: You’ve found it. It’s your safer place for retirement planning. Prepare to be coddled in pure fiduciary goodness with your host and President of Decker Retirement Planning, Mike Decker. This is Safer Retirement Radio. If you’re in or near retirement, listen up and learn about a math-based, principal-based approach to retirement that is designed to help you enjoy a safer retirement. These strategies are to help protect and grow what you’ve saved. And live the life you want today. So, grab a pen, because your safer path to retirement planning starts now.
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MIKE: Welcome to Safer Retirement Radio, where you get the transparency that you deserve. I’m Mike Decker.
CLAYTON: And I’m Clayton Bradshaw.
MIKE: And we’re having fun here in the Decker Retirement Planning studio, our radio studio here. So excited about the topic today. Four secrets that make up a safer retirement. Right now the big buzz is, is the market gonna crash? Is it not gonna crash?
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MIKE: We are gonna disclose four secrets today. One on income, one on risk reduction, one on tax minimization, and one on Social Security optimization for this whole hour. If you can only catch part of it, just stay tuned because… Well, not stay tuned, you can’t make it the whole hour, but you can also go to deckerretirementplanning.com and catch the full show. Because these are huge secrets. Clayton, we’ve never really dove this detailed and exposed this much about how to get a safer retirement on air ever before. So, this will be exciting.
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CLAYTON: The thing that I love about these secrets that we’re gonna be talking about today, is you mentioned if the market’s up or if the market’s down. These secrets are ways that you can deal with those market swings.
MIKE: Now, before we disclose the first secret, I wanna kind of preface the conundrum that I believe every retiree faces in retirement. And that is income. Here’s the example. The industry is trying to convince you that two plus two is the only way to get four.
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MIKE: But, hey, I was pretty good at algebra as a kid. And I’m pretty sure that three plus one also equals four. Four plus zero equals four. You know what, Clayton? Five minus one also equals four. Now this may seem a bit sarcastic and [bit up?] on semantics, but here’s my point. You talk to almost any financial professional, and here are the two plans in a nutshell you’re gonna get. One plan where everything is at risk.
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MIKE: You’re using a pie chart and you’re gonna draw around four percent. And the other one, by the insurance agents in the industry saying, “Hey, here’s an income annuity, let’s lock up your assets and throw ’em all in there. And you’ve got a self-made pension.” Both are extremes, and both are two plus two equals four. There are so many ways that you can create your ideal retirement. And what’s so crazy is, every person has such a unique retirement situation. Some people have large 401k’s, some people have lesser 401k’s.
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MIKE: Some people have rental real estate they wanna keep. Some people are gonna get out of it, because they don’t wanna do the maintenance. The list goes on. Yet, all we’re offering as an industry is a risky pie chart or a locked-in income annuity. Clayton, I mean, that doesn’t make sense. But you’ve seen this as well. I mean, what’s your thought on this?
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CLAYTON: And I could almost guess every time somebody was putting statements in front of me. “Hey, this is where I’m at. What can you do for me?” That without even looking…
MIKE: What’s your plan? And they’ll say, “Well, our strategy is…” Okay, so you don’t have a written plan.
CLAYTON: And so, they’d lay it out and they’d say, “All right. Here’s what it is. And I have a moderate risk tolerance and so here’s my pie chart.” And it was typically the same, I don’t know, 20 stocks or so.
MIKE: Parroting what they’ve been told to say.
CLAYTON: Yeah.
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MIKE: Because they don’t really understand it. And that’s okay. It’s not your job, Safer Retirement Radio listener, it’s not your job to be a financial expert. It is your job, though, to make sure that you’ve got a written plan that works for you.
CLAYTON: Well, and that pie chart philosophy of “throw it all at risk and ride it out with the market.” There is a time in our lives when that can work. In your 20s, 30s, and 40s, you’re throwing money into your 401k, you still have your income from work, so that strategy can work. But when you are over 50, when you are approaching or in retirement, now all of your assets are at risk and you have that risk of running out of money before you die.
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MIKE: People right now are losing sleep over the election and what that could do for the economy, but also, what if the coronavirus stops all imports and exports with China? What would that do for our economy? What if there’s some catastrophe over in Europe? Brexit’s still a talking point. So, there’s so many different ways that the pinprick could start the contagion for the next 2008. And no one knows the future.
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MIKE: I don’t care if you’re reading tea leaves or a crystal ball or whatever, no. No one knows the future on what’s gonna happen. So, here is the secret. The Safer Retirement secret on income. By coordinating your investments by the objectives that need to be met for your specific retirement, you can avoid the financial extremes. Let me explain. When I say coordinating the objectives that are happening, it means, “What does this clump of assets need to do?”
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MIKE: “What does that clump of assets need to do?” For example, Clayton, if I want assets to grow and I need them to be liquid, can they offer principal-protection as well? As in, they can’t lose money. Is that even a possibility?
CLAYTON: No. It’s not.
MIKE: Okay. Well, what if I want an investment that can give me stable income, but also capture all of the S&P on the good years. And I also want to minimize my taxes at the same time. Is that possible?
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CLAYTON: Not with one specific thing.
MIKE: Folks, there is no one size fits all investments. And so, when you have multiple objectives in your retirement plan, it is paramount to take those objectives, list them out and then write a plan on how you’re gonna accomplish those. And then invest in a way to achieve those objectives. That is the secret that so many retirees are missing. Because it’s not offered in either extreme option that the industry is telling you you have to do. Two plus two is not the only way that you can get four.
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MIKE: You can do three plus one. You could do six, oh, six minus how much? Two. Gets how much, Clayton?
CLAYTON: We’re back at four.
MIKE: My point is, whatever your starting point is, whatever that number is. Six, 12, whatever it is, you can always figure out the equation to get it to four. And then create your solution. In this analogy, four is the optimal retirement. And four, I just pulled out of thin air, because two plus two is four. That’s the condescending way to say, “Do you know math?” which is just ridiculous.
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MIKE: Of course, you know math. I mean, for goodness sakes, you’ve worked your whole life. You’ve saved for retirement. You are a savvy investor. It’s now about writing a plan that can accomplish the objectives you have in retirement. And we’ll talk about some of those other objectives more specifically today, like reducing risk. We’re gonna disclose that secret in a moment. We’re gonna disclose the secrets on tax minimization. But, Clayton, okay. Let’s say…
CLAYTON: Well, Mike. I wanna jump in here. I wanna talk about a couple of the headwinds that are facing retirees. And this is…
MIKE: Set the stage.
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CLAYTON: Right. And this is why we bring this up, that if you coordinate your investments in a distribution plan, you can avoid these financial extremes. So, right now, we are in a historically low interest rate environment.
MIKE: That’s tough for retirees. How is that tough for retirees though?
CLAYTON: Because we face interest rate risk at close to historic highs.
MIKE: Now, interest rate risk is jargon. Clayton, can you give me an example of when interest rate risk hurt retirees?
CLAYTON: So, right now, if you go out and you tell your banker or broker that you want to have some safe investments in your pie chart. They’re gonna throw you into bond funds.
MIKE: Okay.
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CLAYTON: And with that, if interest rates go up, you’re going to lose value on those bond funds. And I know I’m getting a little jargon-y here. But with the way that those, what are called, and I use air quotes, “safe investments”. The way that those are handed out to people, they are not safe right now. Mathematically they aren’t.
MIKE: Now, let me explain also why a bond fund may, and this is my opinion, I have to say that, ’cause it’s radio. You can’t have [suitability?] unless you come into the office. That’s what my compliance team wants me to tell you. But a bond fund may be considered less risky than a stock, because it has less volatility. Here’s what volatility means.
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MIKE: I don’t want to dive into the weeds of jargon. It’s that it could go up or down. So, a bond fund has less of a chance to go up like a stock would. It also has less chance of it going down like a stock would. It’s just closing in the up-side and down-side potential at the same time and hoping that you have more investments that go up than down. That’s what they’re trying to do with their diversification. But when markets go down, like in ’08, who cares how you’re diversified? Because they all tend to go down together.
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CLAYTON: Well, and Mike, that’s the other headwind, is that we are sitting near or at market highs. So, we are in a historically low interest rate environment. We’re historically high markets. And that creates a problem when somebody is in a pie chart. Because if you’re all on the equity side, or if you’re all on the bond fund side, you are at pretty big risk for that portfolio. Now, obviously it depends on your situation, right? If you’re in your 20s, 30s, and 40s, this strategy might still work, ’cause you’ve got years to recover if there’s a market crash or if interest rates go up. But if you are retired or near retirement, this could be a problem.
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MIKE: Now, I’m gonna throw something out there that may be politically divisive. I have no intention of getting political here, but I have every intention of getting political here. For a moment, on the little soap box. One candidate, I’m not gonna say who, in the election right now wants to add 62 trillion dollars by expert estimates to our current debt. Okay? I’m not debating whether this candidate’s cause is just or not. I am gonna say, though, that if 62 trillion dollars is added to our already high United States debt, the integrity of the United States bond may be compromised.
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MIKE: If you think that we can add 62 trillion dollars of debt to our already existing debt, and that your municipal bond or your federal bond or anything like that is going to retain value, you are sorely mistaken. So, how in the world can you find investments that are gonna give you some shelter from all this risk, when that would be considered a black swan event. Something that you can’t really plan for by diversification. You have to plan for that in other ways.
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CLAYTON: Well, Mike, the point that we’re trying to make with secret number one on the income side, is that if you avoid either end of that spectrum, if you are not all at risk, but not all locked up in an income annuity.
MIKE: Then what are you?
CLAYTON: You’re potentially in a great spot.
MIKE: Yeah. It’s called balance. You know, when they talk to people that work too much or they don’t work enough. Or they’re too extreme at one thing or the other thing. Balance. It also makes sense. I feel like Weekend Update. “Balance. It’s what everyone needs.” Including in your investments. So, when I say balance, I’m not talking about just diversifying by risk. What I’m saying is, you gotta have some investments that have the objective to provide you income for the next 20 years or so.
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MIKE: And they’re coming from sources that can’t lose money. So, if the markets do turn over, if a black swan event happens. Black swan event being defined, “something you cannot predict.” 9/11 was a black swan event. Black Monday, when the markets dropped 20 percent in a day was a black swan event. These are things you can’t calculate with a Monte Carlo simulation or diversifying by a pie chart. Because they disrupt the entire economy. When you draw income from those sources that can’t lose money, then you can avoid these black swan events, because you sail through them. Which is fine.
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MIKE: Then it’s fine to have assets that are meant to grow like they’ve been doing in your 401k for years. It’s suggested to have assets that are in emergency cash, but this is when you figure out the objectives that you want. And then you go for them. You work around those goals, not, “Well, I just wanna grow my assets as much as I can, and I hope it works.” That doesn’t work for retirees.
CLAYTON: So, Mike, it sounds like you’re saying to have some money in emergency cash set aside in case something goes wrong.
MIKE: It’s important. Do.
CLAYTON: You’ve got a source of income from a principal-guaranteed source.
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MIKE: Yeah. From investments or sources that cannot lose money. Because you cannot not have income. So, if the markets go down, what are you gonna do? Take a pay cut? No. You have to have that stability in your retirement. But not all of your assets should be in those principal-protected or accounts that can’t lose money.
CLAYTON: And then you’ve got that third portion, which is the growth portion of the portfolio. Is that what I’m hearing?
MIKE: Yeah. Yeah. It’s simply objective-based planning. What are the goals that you want?
CLAYTON: And for our listeners, this is, I like to use the analogy that for those in their 20s, 30s, and 40s that are using that pie chart, are using the 401k, it’s a similar strategy.
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CLAYTON: We know that you should have money in savings. One of the guys out there says six months’ worth. Right?
MIKE: Yep. I like that guy.
CLAYTON: I’m sure most of you can think of who I’m talking about too.
MIKE: Dave Ramsey.
CLAYTON: Then you’ve got your income coming in from your employer. And then you’ve got your money at risk in your 401k. So, it’s very similar to the structure that you’re already used to.
MIKE: Clayton, I wanna extend an offer right now to all those that are listening here that wanna get out of the extreme investment strategies and build a written plan that focuses around their objectives.
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MIKE: Any of you listening right now, at no cost to you, you can call us right now. 833-707-3030. Because when you call in, here’s what’s gonna happen. You’re gonna get a friendly voice on the phone, just gonna gather some information from you, so we can then call you on Monday and schedule the time, at no cost to you, to visit with one of our planners. They’re throughout Utah, Washington, and California. And we’re here to help you. And for all of you listening via podcast. “Well, I don’t live in that state.” That’s okay. We’ve got people in Texas, Michigan, Minnesota. East Coast like, Boston, New York area. I mean, we’ve got clients calling in from all over the nation. Because what we’re saying is so fundamentally different than the extremes. People like that silver lining.
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MIKE: People like the fact that we can objectively focus on their goals, their wants, their needs. And then accomplish them with a written plan, not a guessing strategy. A written plan for their retirement to be able to accomplish these objectives, and a plan that both parties, you know, spouses, both spouses can understand.
CLAYTON: Now, for our listeners, imagine this. Imagine you’re hanging out in your backyard, you and your spouse. And you’re enjoying the sunset. You’re sitting there and thinking, “Man, I’m really looking forward to doing something this summer. But I’m just not quite sure.”
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CLAYTON: And then your neighbor’s over there and you see them. They’re trudging off to work the next morning and you think to yourself, “Man, do I need to go back to work? Or should I be going on a vacation?” If you’re retired, if you have a distribution plan, you’re set to go on a vacation. You can go do those fun things that you want.
MIKE: You’re good. Because you’ve set yourself up for success. You’re following these secrets that we’re disclosing right now. So, for all of you, here’s what it is. The visit is a time where you can come in, it’s relaxing. We’ve got some fresh beverages you can enjoy. And you come in, and we talk about solutions. How to get the most out of your retirement.
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MIKE: We talk about how you can get all those Zs, right? Get a full night’s sleep and not have the markets affecting your day to day life. Your stress levels. Your concerns, that you can focus on what matters most to you. And for most people, typically it’s travel, it’s time with family, it’s pursuing those new hobbies. But here’s what it’s not. And this is very important. It’s not a time to bring your checkbook, because it doesn’t cost you a dime. It’s not a time where we’re gonna ask you to make investment decisions, because there’s no way you could even do that.
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MIKE: We’re not making investment decisions. We’re not asking you to commit to anything. We’re simply showing you the solutions that could happen and wanting to be objective based on what does your retirement look like? And how do we get there? It’s a great time. It’s a relaxing time. It’s a very fulfilling time, because typically what happens is stress levels are lowered and optimism is increased. Because they now see how they can do what they’ve wanted to do their entire life.CLAYTON: So, give us a call. Our number, 833-707-3030. Again, 833-707-3030.
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MIKE: This is Safer Retirement Radio, where you get the transparency that you deserve. I’m Mike Decker.
CLAYTON: And I’m Clayton Bradshaw.
MIKE: And we were just talking about the first secret to a safer retirement plan, which is by coordinating your investments in a distribution plan, you can avoid the financial extremes that the industry is trying to brainwash you that you have to do. You don’t. There is balance. There’s objective-based planning, and it’s such a fun thing to do. Especially for those who are calling us right now and they want to come in and visit with us. All right, Clayton. The second secret to a safer retirement revolves around risk reductions.
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MIKE: We talked a little bit about the headwinds here. I wanna talk to you about what is becoming more and more popular for an investment strategy. This is not a plan. This is a strategy for retirees. You’ve got companies like Schwab, Vanguard, Fidelity, that are doing robo-investing. And good for them. And I don’t mean that critically. I mean really, good for them. We have computers. We have technology and with Google Searches are so available, and you’ve got Morningstar and Bloomberg and all these different investment options.
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MIKE: You can really become a good savvy investor yourself, and really start to diversify a portfolio that would work for, like, a buy and hold situation. But that’s not the only way you can invest. And when I say buy and hold, and I say good for them, I think it’s appropriate for someone to be able to buy and hold in their 20s, 30s, or 40s. Because they have income stability, it’s coming from their employments. So, they can take those risks, low cost on fees. It’s like, next to nothing for these robo-investing portfolios you can do. What a great value. But do you wanna take a buy and hold risk in retirement?
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MIKE: Would you be willing to stomach what happened in 2000, ’01, ’02, which could happen? A three-year recession is possible again. Are you able to stomach a buy and hold where we have a 2008 again? Maybe you can. I’m suggesting most retirees can’t emotionally handle that. Clayton, are there some other headwinds that we need to talk about with us, before we disclose what the secret is to investing and which this secret is an alternative to a buy and hold strategy.
CLAYTON: Well, and I wanna talk to that point, Mike, that some folks, they’ll come in and they’re all at risk.
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CLAYTON: And they’ve been trying the robo-investing thing, and like I said, for some people, it very much works. But the thing to consider is, typically with those robo-investing options, you’re gonna be limited to what investments you can get.
MIKE: Sure. I mean you got SPY, maybe QQQ. You’ve got some S&P based investments and the standard of excellence in the industry is typically, “Can you keep up with the S&P?” Well, if you buy the S&P, you get exactly what the S&P gets.
CLAYTON: Yeah, but it’s becoming more and more weighted. There are two companies right now, I saw this earlier this week. Two companies right that are weighted to 10 percent of the S&P.
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CLAYTON: So, two companies carry 10 percent of the S&P. So, if those companies struggle, then there’s much bigger problems.
MIKE: Do you remember what those companies were?
CLAYTON: It’s probably Microsoft and Google’s parent company, Alphabet. Or Amazon. Or Apple. Because they’ve all hit that trillion dollar.
MIKE: Or Facebook.
CLAYTON: Well, those four companies have hit the trillion dollar mark at capitalization mark.
MIKE: FAANG kept the S&P alive for a couple of years when everyone else was losing money.
CLAYTON: Yeah.
MIKE: And no one really knew that.
CLAYTON: It’s been interesting to watch.
MIKE: FAANG, for everyone, just so you know, I’m sorry to say some jargon here. I try not to. FAANG is Facebook, Amazon, Apple, Netflix and Google.
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CLAYTON: Right. And that acronym is kind of going away because Google, when it came out, Google was its own entity and now it’s part of a parent company, Alphabet, so it’s now FAAAN, if you wanna, I guess, say it. There’s a lot of A’s there in the middle.
MIKE: FAAAN. Sound like a sheep.
CLAYTON: But I’d have some couples come in, and they would say, “Well, Clayton, we went through 2008, and we did okay.” I can tell you from experience, to our listeners, that those people that were able to stomach an ’08 in retirement and not go back to work, and they held on for the ride, were the most risk-tolerant people I have ever met.
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CLAYTON: And it was essentially a gamble that they did so. There wasn’t any proper planning. It was holding on for the ride. It was like being on a roller coaster without the seatbelt on. Without being strapped in. And they got lucky.MIKE: There’s one ride in Las Vegas that I did. It’s called the Big Shot. And quick aside, but it’s worth mentioning. It pulls four Gs going up 150-200 feet or so, on top of the Stratosphere. When I first did the ride, I was just a kid at the time, I passed out. Because the blood left my head. It was such an impact. And I was a smaller kid.
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MIKE: I regained consciousness at the very top of the ride, thought that it broke, because I was not cognitively all there, and then thought I was free falling to my death. I was terrified. I thought the ride broke. I wasn’t fully strapped in. I mean, I was, by standards, and I was fine. But I had no idea I was, and I was panicked. That same feeling is what happens to most retirees when the markets take the hit, which they tend to do every seven to eight years. Some people could stomach the idea that they were propelled 100, 200 feet above a skyscraper with the thought, this ride, I think, just broke, and still hang on and enjoy themselves.
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MIKE: That’s a very small percentage though, of retirees that can stomach that kind of risk.
CLAYTON: Yeah. Most folks that went through that, that were retired, they either went back to work, and we saw this a lot.
MIKE: We’re getting to the secret here in a just a second. It’s a huge secret. But we just need to make sure you understand the gravity of this secret.
CLAYTON: Right. Because of this massive headwind, of being at market highs, that’s why I bring this up. Because those that, I don’t want to say normal people. But most people that were kind of in the middle of that spectrum, not on those outer tails. These are the ones that had to go back to work. Or they moved in with their kids.
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CLAYTON: Or they had to sell their homes and take a loss and declare bankruptcy, because of how drastic this was. So now, Mike, why don’t you give the big reveal?
MIKE: Well, before I give the secret, I wanna ask you two or three other investment strategies or risk reduction ideas that are out there. I want just your opinion this, okay? I’m not leading the witness here. I don’t wanna ask leading questions. I’m gonna say a topic that’s a buzzword, and I want you to comment on it, okay? First one is, okay, ups and downs are irrelevant. I’m a dividend investor. Clayton, what does that really mean to you?
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CLAYTON: I love hearing when people talk about being dividend investors. So, AT&T was a big-time stock for dividends. But there’s something called creative destruction. And creative destruction happens when a company is so good at what it does, that it creates something new and then it falters because of that. It can’t keep up with the momentum. So, AT&T was the stock that everybody had. ‘Cause it paid a great dividend. But then the cell phone came out.
MIKE: The cell phone was invented.
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CLAYTON: Right? Or the other problem is, if a stock split happens, then the stock tanks, and that dividend, or if they don’t declare dividends, then that dividend, the stock price drops and you lose 20, 30, 40 percent of your portfolio, if you’re all in those stocks.
MIKE: Now the next one I wanna ask you then, is, and I have a hard time saying the topic without saying one of the company’s names. Many of them do this. Is timing stock market, individual online day trading, or things of that matter, Clayton. Can that lower your risk? What do you think?
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CLAYTON: This one really gets to me. So, I like to use the analogy. I had folks come in. I have folks come in and they say, “Listen. I’ve got 5,000 dollars set aside. I’m gonna get into day trading. I’m gonna spend two or three, four hours in the morning. I’m gonna make it big. I’m just gonna use 5,000 dollars. And if it’s gone, it’s gone. And it’s play money.” And they all say it, and then they all get addicted to it. They think they’ve found some program that’s gonna tell them how to time the market appropriately.
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CLAYTON: But I like to equate it to, I like to use the analogy of the tides, right?
MIKE: Is this a Tide ad or like, the tides of the ocean? You don’t remember that commercial? Laundry later. We should get paid to say that.
CLAYTON: I’m gonna take the assumption that we all understand how the tide works. Tide comes in. There is a shift and the tide goes out.
MIKE: Okay. With you.
CLAYTON: But all along, you’ve got those waves that are crashing in. The waves are coming in. Regardless of what the tide’s doing, the waves are crashing in.
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CLAYTON: Now folks that are doing that day trading and trying to time the market, these are the people that are trying to figure out when those waves are crashing in. But the market follows the tide. So, if you’re not following that tide, you are missing those big swings. And missing really where the capitalization is.
MIKE: Okay. Are you ready for the big secret now? One of the biggest secrets to risk reduction, and this applies to those who do wanna participate in the market, so this is not necessarily for income. We’ve already talked about that. This is not necessarily for emergency cash, we’ve already talked about that.
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MIKE: This is for those who want to reduce risk in the market while still having some sort of design or a way to not take the big 2008 crashes. They’re called absolute return models, or two-sided models. And here’s how it works. When you use two-sided models, they’re models that allow you to be in the market but have designed algorithms that let you know when the markets are going down. Like your tide analogy. So, you know when to be in or when to be out. Not timing the market but following the trends.
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MIKE: So, here’s the secret. Using two-sided models for a two-sided market can help reduce your risk while capturing potentially greater up-side. Let me say it this way. If you invested with the S&P from 2000 to today, okay. Buy and hold, you would have done okay. We had a great bull market for the last 10 years. 2000 to 2010 were rough. Okay, that’s fine. Now if you got rid of ’08 and 2000, ’01, and ’02, and you didn’t have those huge market corrections. Do you know how much more profits you would have had?
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MIKE: How much more money you would have gained? When you follow, like you said, the tides or the trends, you are able to have models that are designed to reduce the risk while still keeping up potentially with the S&P. That is huge and most financial institutions that are doing investment strategies or advice or things like that, are not using these absolute return models, or what we like to call two-sided models.
CLAYTON: Well, and so I’ll say that again, Mike. These models are designed to follow that overall trend or that overall tide of the market. So, when the tide starts going back out, these models recognize that.
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CLAYTON: They are designed to strip out that daily noise of the waves. Markets kind of have those little peaks and valleys every day. They’ll go up a little bit, they’ll go down. These models are not trying to capitalize on those small jumps. They are following the bigger picture, that overall tide or trend of the market.
MIKE: Now, Clayton, year to date, I think markets have pretty much struggled. They’re not growing rapidly. Would you agree or disagree?
CLAYTON: Yeah, I’d tend to agree. I mean, there have been parts where it’s done okay. And parts where it’s kind of faltered.
MIKE: Do you remember about where we are? In comparison to the S&P, NASDAQ, or just other indexes that people use as a standard?
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CLAYTON: Year to date, our accounts are beating the market by about a percent or two.
MIKE: That’s pretty cool. And when you’re only a month in, being a percent or two, when you compound that over a couple of months and you’re still beating the markets a percent or two. That adds up to a huge difference. I was looking at one of our written plans, and this one client had a long-term growth model. And they were using our two-sided models, and they had projected X. And I said, “What if we just do two percent greater than what we’re projecting right here?”
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MIKE: Which this projection was very conservative, mind you. And it was multiple hundreds of thousands of dollars extra to them towards the end of their retirement. Just by doing a little bit better. When you have down-side protection like this. When you have two-sided models, just a couple extra percent is a very real possibility. And what’s so cool is when you have a written plan, and you have these assets set aside for growth, long-term growth. Oh, Clayton. It makes a huge difference for retirees because they know if the markets are gonna tank like 2008, the models are designed to help get out of the markets before it’s too late. That’s a cool thing.
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MIKE: If someone told you, “Hey, 2008’s happening. You should probably sell right now. It’s gonna get pretty ugly. I know they’re down, market’s down like, three or four percent right now, but it seems like it’s gonna get a lot worse.” Okay. I sold. A couple months later it’s down 50 percent, but you didn’t deal with that. How cool could that be for you? That’s what we’re talking about when we say that one of the biggest secrets to risk reduction is not buy and hold, it’s not dividend investing. It’s not the fancy diversification of a portfolio. It is using two-sided models. That’s it. Yet so many people don’t talk about that.
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CLAYTON: Well, and Mike, and this isn’t to say for our listeners that all of the funds we’ve talked about utilizing and coordinating investments within a distribution plan. This is just one aspect of that plan.
MIKE: Just one aspect.
CLAYTON: There is still the need for the emergency cash, for the principal-guaranteed funds. So those that are in retirement or near retirement can benefit from a protected source of income. They can benefit from some activity in the market as well, and they still have that nest egg.
MIKE: So, this secret on risk reduction for a safer retirement, if you wanna learn more about it, see the actual performance of the managers that we’re using. And get more insight. We will have that conversation to you, for you, at no cost to you.
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MIKE: Right now, you can call 833-707-3030. When you call in, you’re gonna get a friendly voice on the phone. And they’re gonna just say, “Hey, just need to gather some information.” And then we will call you back on Monday. When we call you back to schedule your call or visit, just let us know, “Hey, I really wanna see what those risk managers are doing. I wanna learn more about two-sided models.” That way we will prepare that visit for that objective. We wanna answer your questions as best we can as transparently as we can.
CLAYTON: Now imagine this. Imagine you’re out at lunch. You’re meeting a friend for lunch. You’re having a relaxing day.
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MIKE: Do you think they’re ever gonna make company called TurboFax? Sorry. That’s just too punny. Keep going, Clayton.
CLAYTON: So, that’s the DIY method. But you’ve gotta hope for the best. That that software has guessed correctly and predicted your situation and what is gonna be best for you. It’s software that you enter everything in. But there’s a good chance that it’s not gonna ask you clarifying questions. It’s not going to try to seek more information from you. So that leads me to the next way to go about this.
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MIKE: Wait, wait. Hold on, hold on. Has this program that’s very effective ever said, “Hey, Clayton,” and I’m gonna use a fake number so I don’t tell your personal finance to the world right now. Let’s say, Clayton, you’ve got 100,000 dollars right now in one account.
CLAYTON: Okay.
MIKE: Okay. This company says, “Hey, Clayton, you’ve got 100,000 dollars in this one account. That seems like it’s gonna be a tax burden in the next few years or so. Do you wanna start minimizing that?” Have you ever been asked a question like that?
CLAYTON: No. And you wouldn’t. Especially with a software.
MIKE: No. It’s never gonna happen.
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CLAYTON: Because that software’s goal is to lower the amount of money you pay in tax every year.
MIKE: I use the software, for the record. But I’m also a financial professional that understands the other aspects of it. So, we’re not knocking the software. The software’s great for a cheap, affordable way just to check it off the list.
CLAYTON: Right.
MIKE: But is it best for everyone? Maybe, maybe not.
CLAYTON: So, that brings me to my next point, which is meeting with a tax professional. So, this is an accountant, this is a tax preparer. This is somebody who does this for a living. Their goal is still to lower your taxes on a year by year basis. So, they’re looking at, in this case, 2019’s tax situation.
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CLAYTON: And they’re trying to lower the amount of money you pay on taxes, so that they can say your effective rate was five or eight or 10 or 12 or 15 percent. Look how much money I saved you this year. Now there’s nothing wrong with this. But when you look at the third way to do it, when you meet with a financial professional, obviously they can’t prepare and submit your taxes for you. But they can set you up potentially for the best tax situation over the long haul. ‘Cause they’re gonna look at your 10 to 15 to 20 to 30 year situation.
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CLAYTON: And they are going to take the most steps. If it is a fiduciary, the most steps possible and necessary to minimize your tax burden over that time. And potentially save you hundreds of thousands of dollars in taxes paid.
MIKE: Thank you for setting the stage. Now, are you ready for, Clayton, are you ready for the secret?
CLAYTON: Let’s hear it.
MIKE: The secret when it comes to tax minimization, and this is a secret for a safer retirement, is as follows. With a written plan, you take about 10 years from now to 10 years out, and you deliberately make the decisions necessary to get you to a zero tax bracket,
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MIKE: Without compromising your tax situation or burden, of going to too high of a tax bracket. Here’s what that means. When you plan 10 years out from today, or for a lot of retirees it’s from today to the age of 72. 72 is important, because that’s when Uncle Sam starts saying, “I want my money back.” That’s relevant to required minimum distributions or your IRA assets. He’s forcing you to pay that. Before that happens, today, 10 years in your retirement, or less, how much can we convert from your future tax burdens, these are IRA accounts, so you haven’t paid taxes on them yet.
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MIKE: Your 401k accounts, you haven’t paid taxes yet on them. How do we convert them and slowly chip away at them, and convert them into appropriate accounts that will have their objective base that allow you to then get to a zero tax environment? There’s a lot of jargon I just said. Let me say it this way. Clayton, if I say, “Okay, you’ve gotta eat this elephant.” Your 401k is the biggest part of your retirement. You have a million dollars right now. Two million dollars, whatever it is. Easy math. You have a million dollars right now.
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MIKE: And in 10 years, Uncle Sam is gonna force feed you that by serving sizes that are going to really just feel terrible. They’re gonna be too much. You’re not gonna be able to stomach all that. Or I can give you just a small portion size right now, and you’re gonna have elephant for breakfast, lunch, and dinner right now, but it’s not gonna upset anything. It’s healthy for you, it’s good for you, it’s good for your plan. And within 10 years, the whole elephant will be gone, and you’re never gonna have to eat more than you want to. Which one are you gonna wanna do?
CLAYTON: A bite at a time.
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MIKE: A bite at a time. You eat an elephant one bite at a time, yet so many retirees to their knowledge or not, are kicking the tax can down the road and wanna deal with it later. Taxes are on sale right now. I mean, for goodness sakes, debt’s all time high. Taxes, historically, are pretty low. And over the next election, it doesn’t seem like, unless something crazy happens, that for those earning about 150, 160,000 or less of income, taxable income I should say.
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MIKE: You’re paying a relatively low tax rate. So, taking the bites now are easier to stomach, as opposed to kicking the can down the road and then if taxes go up, which at some point they have to. You’re having to take on way more than you probably wanna do, and it compromises the integrity of your retirement.
CLAYTON: Mike, one of the regrets that I see time and time again, meeting with people, is they wish that they would go back or could go back, and they wish they would have utilized that Roth a lot sooner. So, the point that we’re trying to make, I know this isn’t a finance class.
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CLAYTON: We’re not trying to give any specific direction here, but what we’re trying to say is, if you can put a little bit of money into a Roth now, and grow that to a lot of money, the tax that you paid getting in there is a lot less than when you’d have to pay it out if it were an IRA.
MIKE: Can I say it a little differently?
CLAYTON: Yeah.
MIKE: Okay. If taxes never changed, this wouldn’t matter. If you think taxes are gonna go up, would you rather pay money at a 15 percent effective tax rate, or maybe a 25 percent effective tax rate? That’s a 10 percent loss to your retirement income. We’ve got a client that we’re working with, and in seven years, they’re at a zero tax rate.
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MIKE: They have nothing that they owe the government at that point. They’re washing their hands and saying, “We were a great citizen. We contributed to our society. We paid our taxes and now we’re done. And we’re gonna enjoy the rest of our life tax free.” If that’s something that you wanna get to, then I would implore you to call us right now at 833-707-3030. And sure. You’re gonna get a friendly voice on the phone. Right. Over the weekend we’re closed, but we’ve got friendly voices that are answering these phone calls. They’re gonna gather your information, really simple stuff. We need to know what phone number to call you back. We need to know your name. That’s it. We’re not asking for how much you have in assets or anything intrusive.
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MIKE: It’s just, “Hey, okay, you want us to call you back, and you want us to call you back or contact you this way.” Great. Then we do that on Monday. It’s at your discretion and your direction. Then from there, we schedule a time for you to visit with us. No risk, no cost. But it’s a time to talk about the secret of tax minimization in a safer retirement. So, you’ve been doing all the imagine situations. But I wanna do this one. Imagine this.
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MIKE: Imagine it’s Saturday morning and it’s a beautiful spring morning, and today you’re excited, because you get out of bed and you’re going up to get your favorite activity in. So, you get up, you’re gonna do your favorite activity that day. It’s with your spouse. You’re excited to have whatever this activity is on a beautiful spring morning.
CLAYTON: Let’s say it’s pickle ball.
MIKE: Pickle ball. Whatever it might be. And as you’re getting ready for this activity, you’re eating breakfast with your spouse, and you turn on the news. Just happen to turn on the news that day. And on the news, it’s 20 years from now, mind you.
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MIKE: 20 years from now on the news, a new bill was just passed that affects the tax rate significantly. Are you the person that prepared so you’re zero tax rate and the political risk of trying to back this country out of its debt is going to weigh on you and it’s gonna ruin your day? Or are you gonna say, “You know, we already prepared for that. We’re in a zero tax bracket right now. The politician’s can do what they’re gonna do, we’re set.” Who do you wanna be? It’s coming in 20 years. Maybe 10 years. Some people speculate 2026. Whenever that is. Who do you wanna be?
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CLAYTON: When you come in and meet with us, we’re really proud of our offices. We know you’ll have a comfortable experience when you come in. You’ll sit down, face to face with one of our fiduciaries. With one of us and we’re here just to find out what’s important to you. To find out what you need and what you want out of your retirement. And then knowing that, we can work to build a plan together. This first visit is not a time to force a decision. It’s not time to make decisions.
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CLAYTON: You don’t even have to bring your checkbook. Because it’s not time to pay anything either. We are here to understand your situation, share some takes on our philosophy with how distribution planning could work in your favor, and find out if that’s the road you wanna go. But the point of this is to make sure you have all of the information before a decision is made. So, if this is something you want, give us a call. Our number is 833-707-3030. Again, the number 833-707-3030.
MIKE: This is Safer Retirement Radio. I’m Mike Decker.
CLAYTON: And I’m Clayton Bradshaw.
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MIKE: And we’ve been talking about four secrets to a safer retirement. The first secret was on income. The second secret was on risk reduction. And the third secret we were just talking about was on tax minimization. And if you’re just catching the show, and you wanna hear what those secrets are, it’s okay. You can go to deckerretirementplanning.com. You can catch the show, the audio or the transcripts. Or you can catch this show on podcast on any platform that you get your normal podcast. But we’ve only got 10 minutes left in the show, and we need to talk more specifically about the last secret. We gotta get to this one. It’s on Social Security. Clayton, I’m gonna give you the premise first.
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MIKE: We need to talk about the premise, and then we’re gonna disclose the secret here as quickly as we can. Here is the premise. It’s a bit wordy. So, everyone right now, listen up. I’m gonna say it twice. When it comes to Social Security, here is the conundrum. If you file too early, your income could be hurting. And if you file too late, you could be hurting your estate. Let me say it again. If you file your Social Security too early, as in around 62, your income could be hurting, because you’re taking your Social Security at a discount. But if you file your Social Security too late, like at 70 years old, you could be hurting your estate.
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MIKE: Clayton let’s talk about the first one here. What’s the problem of filing your income too early?
CLAYTON: Well, the problem that we see. In meeting with clients, one of the things that I see a lot of them try to do is, they say, “Listen. I’m gonna take my Social Security as early as I can. I’m gonna get everything out of it.” But that cuts your Social Security income down dramatically when you take it at 62, which is why your income could be hurting.
MIKE: It could be hurting. If you’re gonna live 81 years or less, that may be a valuable decision. A lot of people are living these days past that, which is why it may not be. Now, let me explain. If you’re taking your income too late, it’s called gap or bridge Social Security planning.
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MIKE: If you retire at 60, and you take your Social Security at 70, what is gonna provide you income for those 10 years? That’s dwindling your estate very, very quickly.
CLAYTON: And I saw this a lot. I see this a lot with clients, in putting the distribution plan together for them, I can show them that they’re going to run out of money before they make it to age 70 when Social Security starts. And that to me is silly, to spend all your assets just to wait to maximize Social Security.
MIKE: Mm-hmm. The theme, if today had a theme, besides four secrets to a safer retirement, is balance. Here is the secret to Social Security.
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MIKE: When you incorporate all income streams for your retirement, then can you understand the appropriate time for you to take Social Security and accomplish the objectives you have in retirement. For a lot of our clients, they’re actually filing around 68 to 68 and a half years old. Why? Because it’s the maximum income that they can receive without negatively affecting your estate, based on when they are also retiring. The variables are constant. There’s over 567, or there’s 567 ways to file for your Social Security.
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MIKE: There’s an infinite number of ways that you can write your written retirement plan, because it has to be custom to you to accomplish the goals that you have set out to accomplish.
CLAYTON: Well, and to everyone I meet with, I tell them not to look at Social Security in and of itself on an island. But you’ve got to look at Social Security as part of the bigger picture, which is where the distribution plan comes in. Because you can see how Social Security matches up with your pension or with your real estate income. Or if you’ve got business income from a buyout or your 401k assets.
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CLAYTON: You can see how all of those income streams tie together, and that way you can know, “Okay, if I take Social Security on this date, I know that I’m gonna be able to maximize it and get the most in retirement.”
MIKE: Yeah.
CLAYTON: But without a distribution plan, yeah, there’s things online. Tools that you can use to show you when to maximize your Social Security, and it’s probably gonna say do it at 70.
MIKE: It’s short-sighted.
CLAYTON: Yeah. As part of the bigger picture.
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MIKE: Most effective sports teams work best when everyone is working together. The same goes with your retirement and Social Security is one teammate on the entire team that’s meant to give you income for life. And I don’t mean like an income annuity. I mean, you’re creating the income that you need and want for the rest of your life by coordinating all their efforts together. It’s a beautiful thing. If you wanna learn more about this or get a Social Security optimization report from us as fiduciaries, you can call us right now. 833-707-3030. That number one more time, 833-707-3030. When you call in, you’ll get a friendly voice on the phone that’s gonna gather your information.
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MIKE: Just the simple stuff, so we can call you, get to know you more on Monday. And then we can schedule the time to visit and talk about what matters most to you in retirement. That’s it. That’s it. I mean, just imagine this for a moment. Imagine that you’re 60 years old right now. And you think that your retirement is about three to five years out from now. Imagine that then, you got the great news. Your spouse comes home and says, “Hey, I just realized, we can retire today.” Now you’re thinking, “Gosh, that one guy at work drives me nuts. I’d really like to pick up this hobby, and I really wanted to go to this destination here.
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MIKE: “Are you saying I can do that now?” And your spouse is saying, “Yeah. Here’s how.” And then shows you how it happens. What would that do for you?
CLAYTON: Now when you come in, these visits, what you can expect, is you’ll sit down in one of our comfortable offices and meet with us as fiduciaries, to understand what your situation is. There’s no pressure. It’s not a time to make decisions. It’s not a time to bring your checkbook. It’s just a time to make sure that there is understanding with what your needs are and make sure that you can understand what our philosophy is, and how those sync up. Our goal is to make sure you have all of the information before a decision is made.
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MIKE: Mm-hmm. So right now, you can call 833-707-3030 to visit with us at no cost to you. That number one more time is 833-707-3030. You’re listening at Safer Retirement Radio. I’m Mike Decker.
CLAYTON: And I’m Clayton Bradshaw.
MIKE: And as we wrap up, we just wanna say thank you so much for listening in on the show today. Today we covered the four secrets to a safer retirement. The first secret on income. Here’s the secret. Just one more time. By coordinating your investments in a distribution plan that’s objective-based, you can avoid the extremes in retirement.
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MIKE: The second secret on risk reduction. You don’t have to be just a dividend investor. You don’t have to be just a buy and holder and take on that inherent risk that Wall Street’s gonna throw at you. You can use two-sided models that are designed to make money in up or down markets. They exist, and it is a bit of an industry secret, but we are giving access to people just like you to be able to have these kinds of models that are usually only available to those who have three million dollar minimums and such.
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MIKE: Then we also talked about tax minimization and you can get to a zero tax bracket. It’s achievable when you have deliberate tax minimization strategies from now until about 10 years or so, and taking those deliberate steps each and every year to get you to a zero tax bracket, as opposed to a reactive, “Well, what happened this year? Okay.” And then you move on. And then the last one is with Social Security. This secret is huge. Hundreds of thousands of dollars are left on the table when people don’t do this secret. And that is, when you coordinate your income streams together, including income stream, you’re able to provide more stability, typically earlier and a better retirement.
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MIKE: That’s it, folks. That’s how you can get a safer retirement and those are just four of the many secrets here at Decker Retirement Planning. We invite you to subscribe via podcast to our show. Get it wherever you get your podcasts. Or go to deckerretirementplanning.com, where you can catch this show, transcripts, and much more great content. Thanks for listening today.
