RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:00:00]
ANNOUNCER: You 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, principle-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, everyone, and happy holidays. This is Safer Retirement Radio. I’m your host Mike Decker from Decker Retirement Planning. And I’ve got my panel, part of my panel with me. I brought the same people from last week. Clayton Bradshaw, and I’ve got Cameron Archibald here joining me on the show so we can finish our segment, the 12 days of retirement.
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CLAYTON: Thanks for having us on.
MIKE: Clayton, yeah, it’s good to have you guys on the show.
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CAMERON: Yeah, it’s a beautiful December morning. Had some nice weather come in and kind of clear up some of the smog, so we’re excited to be here. Things are looking great.
MIKE: Mm-hmm. Let the mountains get snow and maybe avoid it down here in the Valley or in the Bellevue-Kirkland area right on the east side. For all of you listening, whether you’re in one of our radio broadcasts or you’re listening to us via podcast, we’re hoping you’re having a good holiday season.
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MIKE: Happy holiday where family can be around and friends and we can wrap up the year where time matters most. We’ve said it before; time is your most precious commodity, so let’s not waste it. I’m excited. This holiday season will be the first time that my family, my whole family, gathers together in years, just travel, schedules, marriages, in-laws, it’s the first time, and I am just ecstatic for all of this. It’s going to be a wonderful time to get everyone together for the first time in years and have a wonderful holiday season, so it’s especially special for me. That’s kind of redundant, especially special.
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MIKE: But either way. If you’re just tuning in for your first time, a couple of things to note, 833-707-3030 is the number to call if you for whatever reason, you hear something and you say, I want to do more research on that. I want to learn more. You can call that number, must be 55 years or older, have at least 300,000 of assets saved up for retirement, and you can get extended research, one on one time with us at no cost to you. Now, if you’re catching this show as your first show, we’re diving into the 12 days of retirement, and we’re starting on number seven today.
RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:02:38]
MIKE: You can go to the website, deckerretirementplanning.com, and catch the previous show or iTunes, Google Play, I Heart Podcasts, I think we’re on now, Stitchr, Soundcloud. We’re on Spotify; we’re on a lot of podcasts now.
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CLAYTON: Yeah, we’ve got… We’re pretty much on every major podcast outlet, so if you like podcasts, you like to subscribe and you like get those weekly updates, just subscribe wherever you can find a podcast, and you’re sure to find one of us on there. If you can’t, let us know, drop us a line.
MIKE: Yeah. Deckerretirementplanning.com. We also put our research on the website for the written form, had a great article go out this week.
RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:03:19]
MIKE: We’ve got a newsletter that people are subscribing to which is a lot of fun, we’re just presenting our research, mostly financial but I’m pretty proud of the lifestyle article. I wrote an article about hot chocolate and people seem to love that. All the different varieties so you’re not just… [LAUGH] Clayton’s laughing because I said that article would do better than his article and it has. People love hot chocolate.
CLAYTON: [LAUGH]
MIKE: But when all is said and done folks, retirement is a very special time. You’ve worked your whole dang life scrimping, saving, blood sweat and tears to get to retirement.
RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:03:49]
MIKE: Retirement is meant to be a time of enjoyment, of fulfillment. Not of stress and anxiety, and there’s a lot of people feeling that right now, especially with the doomsdayers, the bear-ish news casters saying oh, the markets are doomed and blah, blah, blah. They may be right but if you follow the three principles of retirement planning you can sail through the market turbulence unaffected. You can capture those gains in the up years like a lot of our clients have enjoyed over the last ten years. That bull market’s been phenomenal. And sure, the tides may be changing.
RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:04:26]
MIKE: The markets may be rolling over. But if you follow the three principles, these changes are not nearly as scary. Let me just illustrate them for all of our new listeners. First principle is to only draw income from principle guaranteed accounts. And maybe we’ll do a show just on what principle guaranteed accounts are available. Obviously there’s suitability purposes, they need to be involved with those are. But a principle guaranteed source avoids sequence of return risk, one of the most devastating risks retirees face, it’s the silent retirement destroyer. Most people are unaware of what’s going on with their retirement as they’re slowly compromising their gains in the up years.
RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:05:06]
MIKE: And accentuating losses in the down years. The second principle though is diversify by purpose, not just by risk. Most people understand the concept of diversification, when the markets go up or down we want to capture the gains in the up years but minimize the negative volatility in the down years. That makes sense to most people but when the rubber hits the road in retirement, you got to know what you’re going to pull and when you’re going to pull it. Where’s your emergency cash, what’s your income source for the first couple of years? What’s your income source in maybe 10 years?
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MIKE: What’s your income source in 20 years? How are you running this playbook, this plan? A pie chart is an oversimplification that’s destroyed a lot of people’s retirements. We suggest the third principle which is a distribution plan. We’ve created our own technology called a safer distribution plan that helps with tax minimization as well but overall if you can follow the three principles, diversify by… Draw income from principle guaranteed source, diversify by purpose, not just by risk, and use a distribution plan, not the pie chart guesser.
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MIKE: Statistically speaking, and our research indicates, that you have the highest probability of the most successful retirement of any other investment strategy out there. Great. Isn’t that fun?
CAMERON: [LAUGH] You know, on that first principle, to never draw income from a fluctuating account, I was reading one of Tony Robbins’s books the other day and he specifically talked about sequence of return risk. And it just sneaks up on people, you know. They don’t realize what they’re doing to those retirement accounts when they draw on them in the fluctuating manner and, you know, on the [INAUDIBLE] side.
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CAMERON: We’ve had clients come over who are shown that this is what’s going on with these-with these accounts that you’re drawing from in this manner and it’s very eye opening to them. I just want to put that plug for you know, we’re not the only ones saying this. This is a very important principle to protect your retirement.
MIKE: Mm-hmm. Thank you Cameron for that, and when all is said and done, follow the research. Not a quick fix scheme, follow the research. That simple. Let’s talk about the 12 days of retirement. Here’s a quick recap of what we’ve been talking about, and Clayton and Cameron, please feel free to join me.
RR S3 E25 THE 12 DAYS OF RETIREMENT PART 2 [00:07:36]
MIKE: But the first one was the importance of a distribution plan, which we kind of just talked about right now but number one, a distribution plan. Number two, two-sided risk models. Buy and hold is great if markets only go up but what happens when they go flat or go down? Two sided models, they’re designed to make money in up or down markets. 2008, the managers were using… Used two sided quantitative models, made money. I don’t know many people that can say that.
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MIKE: So two is for two-sided models. Number three, investment motives. This is the second principle of retirement planning but understanding what the limitations are of each account and how they can work together in a holistic approach. I don’t want to use the word holistic, it’s got kind of a connotation of only organic. I want to say holistic in the approach of looking at the whole picture. I don’t know if there’s any organic investments, I don’t know.
CAMERON: Maybe farming.
MIKE: There’s, yeah, there’s some commodities you can invest in there, but I don’t think like Facebook or [Feng?] that’s not an organic investment.
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MIKE: Anyway, we’re getting down a rabbit hole here. Number four is for fiduciary, the F-word of retirement. And it’s a good F-word, dare I say. But a fiduciary, someone that’s legally bound to do what’s in your best interest. Clayton, can you just walk everyone through what a fiduciary, what qualifies… What do you need to qualify to be a purebred fiduciary?
CLAYTON: So, yeah, Mike, happy to chime in. There are three checks that you can check with your advisor to see if they are a fiduciary and if you’ve got a pen here or a place where you can make some notes, I encourage you to jot some notes down on this because there are three checks to see if your financial advisor is a fiduciary. So number one, you want to see what license they have. So they need to be series 65 licensed. So not series seven, that’s an important distinction because the guys and gals that are series seven licensed, they are typically going to be the bankers and brokers that are out there.
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CLAYTON: And they are going to be pushing the product that their bank or their brokerage firm is telling them to sell. For example if you walk into Bank of America, Merrill-Lynch… If you walk into Bank of America, Merrill-Lynch and you ask them what you should get you can imagine what funds you’re going to walk out with.
MIKE: It’s going to be Bank of America funds. And that’s okay.
CLAYTON: Right, right. Yeah, and those might be in your best interest but you can’t know that because the second part is… So number one, the series 65 license.
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CLAYTON: Second part is are they independent? So this is the other side of things. If you walk into a major brokerage firm or a major investment house you’re probably going to walk out with the funds that they recommend, that they’re selling, that they’re pushing.
MIKE: Well, one of our [planners?] came from one of the discount firms, I won’t say who, because believe in talking ill of any other firm. Good firm, but he was told every day, here’s the list of what you can sell, now go do your job. And so when he came over and started working with us as a fiduciary it was liberating because he could say you know, gosh, based on what you’re looking for this is the best investment for you.
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MIKE: And even sometimes he would say… our [custodians?] TD Ameritrade, for whatever reason, if we can’t hold it, well, here’s how you can get a hold of it. That’s what a fiduciary can do.
CLAYTON: Yeah.
MIKE: People can’t do it otherwise.
CLAYTON: Yeah, exactly. And so with that you’ve got one final check then, so you need to see if they’re registered, that the firm you’re working with is a registered investment advisory. So again I’ll recap those three checks, are they series 65 licensed, are they independent, and are they a registered investment advisory.
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CLAYTON: So, if you walk into a firm that… Or your advisor can’t answer yes to all three of those questions then there’s a chance that they aren’t a fiduciary, they’re not going to give you the best recommendation for you that’s in your best interest. And I’m not trying to throw Bank of America, Merrill-Lynch under the bus. What I am trying to do…
MIKE: Wonderful companies, wonderful companies.
CLAYTON: Right. I’m just trying to bring up the fact that if you walk into a place that only sells… If you walk into a Toyota dealership and they only sell Toyotas that might not be in your best interest.
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MIKE: Thanks Clayton. Tony Robbins in that book, Cameron, you were referencing. It’s a fun book. I don’t agree with all of it but most of it I do agree with.
CAMERON: Same.
MIKE: They talk about the fiduciary statistics and at first glance about 33, 34 percent of all finance professionals are fiduciaries. Then he did some research, there’s something called the dual hat disclosure where someone can pose as a fiduciary, take off the fiduciary hat, and then put the sales person hat on and then sell you a product. And there’s a subtle disclosure, they say in between the transitions, and they’ll transition multiple times in any given call.
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MIKE: When you get rid of people that can do dual hat disclosure it’s one point six percent. One point six percent of all financial professionals, according to Tony Robbins, is a purebred fiduciary that actually meets all of those requirements. That should shock you. Statistically speaking who you’re working with may be a very nice person but would it upset you if you were being held back from the investments that were actually out there that could be better for you.
CAMERON: Well, and clients are coming to their financial professional to seek financial advice. They’re not likely going to be able to keep up with the back and forth, hopping between hats.
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CAMERON: I mean, they typically have done a great job accumulating and then need help distributing and being limited and not being able to get into the very best products and not working with a purebred fiduciary, that’s got to be frustrating afterwards finding out, you know, I thought they were of the one point six percent, they’re of the 33 percent, right?
MIKE: Mm-hmm. Here’s a silly analogy but I’m going to talk about Disneyland. What if you went to Disneyland and you were told you could only go on one ride? That ride may be a great ride but if after a couple rides of Splash Mountain, and you want to go over to Space Mountain and you can’t, that’s a frustrating situation.
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MIKE: A lot of… Most people are unaware that there are principle guaranteed accounts that are… Clayton, what are they averaging? It’s like six or seven percent? One’s nine percent, year over year, somewhere around there.
CAMERON: Yep. Yeah, they’re quite a bit higher than you’re going to see from some of the other more advertised products that are out there.
MIKE: They’re not [CDs?], we’ve got a guy that’s full time, this is how serious we take our research as a fiduciary firm.
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MIKE: A guy who full time vets principle guarantee products and is constantly looking for the best returning products out there. If you could get your hand on a principle guaranteed product that was earning six or seven percent year over year no downside protection, would that be of interest to you? If so why are you not already hearing about it from your financial professional? That’s all I’m asking. 833-707-3030 if you want to see what the fiduciary difference is, you can call us, we can talk more about that. We’re just recapping from our last show, which you can catch via podcast, safer retirement radio, just Google that or search for it on whatever podcasts you are, but we’ve got to go to five, because we’ve got so much content to go through today.
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MIKE: Five. Retire five… Start planning your retirement five years before you actually want to retire. If you’re currently retired, well, now is the best time. One thing that’s interesting is I almost want to write this on our website. If you’re reading this, chances are something’s wrong with your current retirement plan, you can feel it in your gut. And you’re looking to either validate that it is correct and your gut is wrong or there’s something wrong and you want to get it fixed. Many if not most of the people that walk through our door are currently retired and just feel that it’s wrong.
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MIKE: And when they come in we present the research, they then know, no, they know, now, that it’s wrong, and they now can get some clarity and proceed in a math based, principle based research foundational motion going forward in their retirement.
CAMERON: You know, a lot of these clients you’re talking about went through the 08 financial crisis, they’re starting to feel some of these, like you mentioned at the start of the podcast, the news articles and a lot of fear out there.
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CAMERON: And so it is a great time to gut check your retirement plan to check, is this still a plan that’s working for me or do I need to make some changes and come in and see, you know, we have so many clients who come over once they are retired and it’s almost like a big breath of… A sigh of relief, just, oh, okay. Yes, now this is what I want for this time in my life.
MIKE: Now, I got into the industry around 2011. So I missed the 2008 but I love hearing Brian’s story. Brian’s been in the industry, one of the founders, he’s been here for 30 some years, 33 years, Clayton’s signaling to me.
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MIKE: When he experienced 2008 using two sided risk models, he accounts that the phones were silent. No one was calling in a panic. He did have someone, a couple phone calls of incredible gratitude and tears being shed because they were making money in 2008 when people were losing their life savings, not just their investments, everything. In 2015 there was a flash crash. Immediately just, boom, I’ll never forget this. I was newer to the industry, I had been in it for about four years or so, still making my way so to speak.
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MIKE: Not a single client called out of panic in 2008 with the flash crash, that I can remember. And I was handling most of the servicing and the in-force business at the time. Two sided models, we’re going back to that but it’s beautiful, when you invest in a math based, principle based approach it’s so alleviating. Five years beforehand, the reason why we’re bringing this up right now is because a lot of people are expecting to retire in two or three years. A lot of people. If the markets do turn over right now and you’re buying and holding, that could be devastating.
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MIKE: 40 percent market correction, according to Morning Star, suggests it takes six years to break even. That’s a six year delay on your retirement that’s completely unnecessary. MIT and other researchers are also suggesting that the next 10 years will be about two to five percent average returns, as opposed to what we have been experiencing, an incredible bull market. That also delays retirement.
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MIKE: Folks, all we’re suggesting here is with fiduciaries who can plan your retirement five years in advance it gives you the advantage to be able to more effectively plan the life that you wanted and not delay it because life happens. It doesn’t have to happen to you though.
CLAYTON: Yeah, and too, Mike, one other thing, I know that we’ve mentioned a couple different investments that you can have. Obviously you want to have the structure, the plan, but with the two-sided models we’ve mentioned with the other principle guaranteed accounts, what we want to do is make sure that everybody knows what is out there, so that you can make the right decision for your own plan. Because what works for you might not work for your neighbors down the street that are getting ready to retire and vice versa.
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CLAYTON: So you want to make sure that you’re aware of everything that’s out there, that way you can fit what works best for you personally into the plan.
MIKE: Thank you. Simply put, you’ve done this before. I’m just kidding Clayton, you’ve seen hundreds of clients. Uh, number six, social security. Six. That was a punny one, okay. Six starswith an S, social security starts with an S. But either way, social security is a hot topic for a lot of people who are making limited educated decisions. I say limited educated decisions, it’s because the pie chart suggests that’s an independent income stream.
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MIKE: And then you’ve got social security, which is another independent income stream. Maximize them both as best as possible. Now, for all of you that feel like you may not live past 70, 60 to draw on your income may make sense. But for those who feel like they’re going to be healthy and probably will live to their 80s or 90s, which is a very common conversation right now, 70 is not your best bet. People think oh, well, I’m going to maximize my social security. No. Someone that’s going to retire at 60 years old, that has around a million dollars, mathematically speaking, and that’s assuming there’s no pension, no rental real estate, nothing on the side, just pure income from assets and social security.
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MIKE: The research suggests that 68 and a half years old for your social security. Who is telling you that? It’s easier just to default to 62 or 70 or full retirement age, move on, and sell you income annuity. Which happens so often. And it’s just, it makes me sick, because if they’re going to say mathematically this is what’s best for you, you’ve got to be able to back up the math.
CLAYTON: Well, some other considerations too Mike, is you’ve got to look at how much you have in assets because if you want to draw social security in your late 60s or at 70, some people do even though mathematically it’s not always optimized.
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CLAYTON: Do you have enough money to get to that point when you start drawing social security to optimize? So you’ve got to consider those things and that’s why having a whole plan to look at the big picture is what you need in order to understand and answer those questions.
MIKE: And this is called gap strategy. You can look it up online if you want. The gap strategy. Fill in the gap before social security starts. Here’s the saying that I came up with and I’ve loved ever since, because it effectively illustrates the… How you can’t have your cake and eat it too.
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MIKE: If you file too early your income is hurting, because you’re taking a discount to social security at 62. If you file too early your income is hurting but if you file too late you’re hurting your estate. And that’s what you were talking about, that gap investing. You’ve got to make up the difference until your social security comes on and then you can lower down the burden of your income from assets. But that hurts your estate. What’s more important to you, or a hybrid between the two, let’s make a decision that follows whatever agenda, whatever narrative you want, your retirement to say, and then pass on to your beneficiaries.
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MIKE: In the way that you would have it done. What’s cool for at least, for our safer distribution plan, and we’re going to talk about the next, the last six here in just a second, but I want to have this one last plug. A safer distribution plan, when you calculate it on the very right column, you see your projected net worth. In any given year you can say if I died this year, sorry to be gloom, but if I did this year. Let’s say it’s in 23 years. You can see the projected amount that you would pass to your beneficiaries.
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MIKE: How critical or important would that be to you to have that understanding? Well, I want to pass about a million dollars to my beneficiaries. Okay. We can make that happen. Well… I earned everything myself. I didn’t have an inheritance. I want my kids to not have an inheritance. Okay, well, let’s talk about the charitable donations, it would be, at that point. There’s so much to be had when you can put it all on the table and you can have the transparency that you deserve. Let’s now talk about number seven.
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MIKE: This is all new content, gosh, it took us 23 minutes just to get through this, the recap, but it’s a lot of valuable content for retirees and near retirees. Number seven, we talked a little bit about it right now but we’re going to talk more about it. Number seven is draw income from principle guaranteed accounts. Why seven? Because of the seven year market cycle. The seven year market cycle suggests that every seven or eight years, that markets crash and not just a little bit but pretty devastating.
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CLAYTON: Yeah, so I’ll chime in on that, Mike, with the seven to eight year cycles, if we look back we are well overdue for a market correction. I love that term, correction. [LAUGH]
MIKE: It’s politically correct to say correction, it’s really a crash, and it’s devastating.
CLAYTON: Yeah, taking a 30 plus percent drop.
MIKE: Let’s not put lipstick on a pig.
CLAYTON: So the last one we had was in 2008, so if you count back, seven years, 2001, that was the dot com bubble. So, oh, wait, it was the real estate bubble. Seven years before that.
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CLAYTON: 2000 to 2002 was the dot com bubble burst. Seven years before that was 94, Iraq had just invaded Kuwait, interest rate shot up. Seven years before that I’m sure most of you remember, October of 87, that’s black Monday. That was a 22 percent drop in a single day, and that was the culmination of about a 36 percent drop in the month and a half leading up to that. Seven years before that was 80 to 82, that was about a 46 percent drop. 70, where are we at, 70 to 73 to 74, about a 45 percent drop. 66 to 67 was a 40 percent drop.
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CLAYTON: And the list keeps going. So you can see that following this pattern of every seven years, that puts us well overdue for another correction.
MIKE: Now, I think that 2015 qualifies for one of those crashes but because of the manipulation of the fed we’re able to get through that a little bit quicker but it’s artificially manipulated to where the next crash is the time that we’re going to kind of get the heat of both crashes. That’s my opinion, we’re in uncharted territory, and so even the smartest, like, economist, are still saying this is uncharted.
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MIKE: Hypotheticals at best.
CAMERON: You know, and let me chime in here, Clayton, it’s been really interesting working with our clients who once they get into their safer distribution plan, you know, 60 to 70 percent of their assets are in principle guaranteed accounts, they don’t have to worry about these crazy market fluctuations.
MIKE: When you’re talking to them, Cameron, are they nervous about the market or are they just… What’s my income going to be the next year? I mean, what’s that conversation look like?
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CAMERON: Well, yeah, I think it’s very different from a conversation you might be having with a banker broker because instead of having this fear of what’s the market going to do all they say is well, you know, are we still on track, how’s our plan looking, how’s the income looking? Yes, smooth sailing. You know, everything is still chugging along exactly how it should be, it gives them that piece of mind.
MIKE: 20, 30 years where your income is coming from principle guaranteed sources. You don’t have to do 20 to 30 years. Some people will do 10 years and that’s perfectly fine.
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MIKE: The principle though is never… Or just draw income from principle guaranteed sources because let’s say it’s a ten year, whenever the market correction happens and no one can time the market. You can sail through unaffected. That’s liberating. That’s incredibly liberating. 20 years, great. You’re going to miss two market cycles. Great. Not miss the cycle but you’re going to miss the corrections, quote unquote, crash. That’s the beauty of drawing income from principle guaranteed accounts.
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MIKE: The first principle of retirement planning.
CAMERON: You know, and I’ve mentioned this before on the show, but often clients will be a little nervous, is this plan really going to work, you know, how’s the income really going to work? We lay everything out mathematically, these are the sources, these are the, you know, this is where your monthly checks are going to be coming from and especially after the first year, second year, they start to settle in, and you can just see them visibly relax, just in the way they communicate with us, oh, okay, everything is on track.
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CAMERON: We’re chugging along fine. Yes, I’m getting my monthly distributions, and it just, it brings so much calmness to their life in what is for a lot of retirees unfortunately a high stress environment.
MIKE: Mm-hmm. And it’s all [INAUDIBLE] you’re leaning forward here.
CLAYTON: Yeah, one last thing. If anybody out there wants to do some more research on this we’ve got a couple articles that we’re just posting on our website in the last couple weeks about how the fed is, and the government’s just about out of bullets when it comes to manipulating where we’re at.
CAMERON: That’s a good way to put it.
CLAYTON: Where we’re at in the market. So I know that you mentioned 2015.
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CLAYTON: We were kind of there with some manipulation but if any of the listeners want to do some more research and read about it, again, check out those articles under the safer market commentary on our website.
MIKE: Yeah, and you can subscribe at the very bottom. There’s a banner that says subscribe. It’s free to you, we put a lot of time into those, I mean, it’s incredibly high level financial commentary with fun lifestyle articles. We care also about your nutrition, about enjoying your life, and so we want to make sure it’s a whole fun enjoyable newsletter, but the main focus, the meat of it, and if you’re a vegetarian the mushroom.
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MIKE: Mushrooms are a great meat substitute, I tell you what. They’re nice and meaty and earthy, oh, I just love them. But anyway. The heart of it is high level financial commentary. We’ve got nothing to hide and we want to expose and share things that it kind of feels like the emperor has no clothes and we’re the ones saying hey guys, he’s naked. Anyone else see this? [LAUGH] And so I want to point out too, Clayton, you were going through the seven year market cycle.
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MIKE: We’re going to do an offer here in just a second but the seven year market cycle, what’s interesting is that the seven year market cycle is triggered by black swan events. Could you predict when Iraq invaded Kuwait? No. It was a geo-political event. Could anyone predict, unless you’re Doctor Michael Burry, is that his name? The big short guy. That’s an awkward title, the big short guy.
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MIKE: Anyway. He predicted the housing crisis but most people were caught flat footed. The tech bubble, we didn’t know that we were pricing tech stocks wrong until it hit us. These black swan events blindside us. If Trump gets impeached I’m not saying that I want him to get impeached or that he should or anything. I’m not being political at all but I am suggesting that if any president gets impeached and then after impeachment gets removed from office. That is a huge black swan event that could be very devastating to our markets.
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MIKE: And let’s say that he doesn’t get impeached but let’s say that he doesn’t win the election. There’s going to be a fundamental shift in a lot of these investments in the markets that could be happening over the next 12 months. That’s just the geo-political aspect of what we’re talking about. Actually, it’s just our domestic political side of it. Let’s talk about the geo-political, the trade war with China, that could affect it.
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MIKE: Or you’ve got pigs, Portugal, Italy, Greece and Spain who could be the pinprick. There’s so many things that are happening right now, it’s this balloon, keeps getting bigger and bigger. And the best part about it all is those who are following the principles of retirement planning don’t have to stress. It can just happen. Just blow over. Whatever. The income is still coming from a principle guaranteed place, two sided models are designed to make money in up or down markets.
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MIKE: Let’s talk about drinking some nice lemonade and sitting on our porch this summer.
CAMERON: Yeah, we can’t predict the next black swan event. I don’t think almost anybody can but we’re seeing…
MIKE: That’s why it’s a black swan event. [LAUGH]
CAMERON: Right, but by abiding by the principles now, you know, in a season of the market doing well, in a season of relative stability, then you help prepare yourself against the future volatility.
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MIKE: Yeah. If you want to have a conversation with us about this with your unique situation you can call us at 833-707-3030 and you can plan with us either, in one of our offices, we’ve got them in Kirkland, Seattle, and Renton Washington. We’ve got them in downtown San Francisco. We’ve got two in Utah, in Salt Lake, and in Lehi. Or if you’re listening to our podcast in a market that’s not being broadcast the radio show, you can always call us and we can plan with you digitally.
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MIKE: We’ve got several clients that are in Wisconsin and Minnesota, which has just been so fun to get to know you all up there. 833-707-3030 or you can go to deckerretirementplanning.com and on our home page you can click, there’s a little form to sign up for an introductory visit. It’s at no cost to you. The value is 2000 dollars because you’re able to get your own first iteration of a safer distribution plan. You’re able to sit down and have a conversation with a purebred fiduciary, able to optimize your social security and even talk about tax minimization. There’s so much value with just this one call or in person visit, whatever you would like. But it’s at no cost to you.
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MIKE: Must be 55 years or older and have at least 300,000 of assets saved up for retirement, but call now. 833-707-3030 or go to deckerretirementplanning.com and on our home page you can get started. Let’s go to number eight, shall we? Number eight. 80.3 percent, according to the OECD, is the life expectancy of a retiree today. 80.3 years old. Clayton leaned forward, he wanted to make sure that I said that right. [LAUGH] 80.3 years old. If you’re 50 years old you have another 30 years.
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MIKE: Let me break this down real quick, okay. When you’re born you don’t know anything. It’s so fun. Kids are just a blast. My sister had a kid recently and we were just up there visiting and the kid just basically coos and smiles, eats and sleeps, and something else, but it’s so fun. But the kid is just learning, and kids, as smart as any kid thinks they are, they really don’t know much, and until they’re 20 years old and they’re an adult and they’re in college or their technical school or starting their career, that’s the learning and growth period.
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MIKE: Then you’ve got your 20s to your 50s, that’s 30 years where you’re basically going to work hard, build your career, maybe have a family, have some travel, but you’re preparing for retirement. 30 years. And then 30 years of retirement. Let’s say you retire at 60 years old, 20 years of retirement. That’s a long time. Retirement is not what it used to be.
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MIKE: Back in the day it was you retire around 50 years old and died around 53. Three years of retirement. That sounds dismal. But that was life expectancy, that was the expectation for job and employment, that’s just how it was built. 20 to 30 years you can do a lot. 20 or 30 years of having stress about your income is also a lot. Mapping it out, following the principles, alleviates that so your 20 to 30 years of retirement that’s going to have, what was that, three or four market crashes?
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MIKE: Roughly speaking, you don’t have to have that kind of anxiety. You can leverage your own investments in such a way to organize it to where you’re just enjoying yourself until 80.3 years old or whenever the day is. That’s a cool thought. That’s something that’s liberating. What would you do with 20 years knowing that you could just know that you had 20 years of health and strength and you were just going to enjoy life, what would you do with that time? Time is our most precious commodity. 80.3, that’s the magic number as Wall Street Journal likes to have on their daily.
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MIKE: Their daily newsletter. Anyway. Let’s go to number nine here. Nine, this is symbolic of personal integrity or truth. That’s what the nine means for a lot of religions and a lot of… It’s a symbolic number of integrity. Are you living the way that you want? Are you being true to yourself? Let me just illustrate this and please chime in as you feel necessary. A lot of people just get by. That state typically is fear induced. There’s an assumption being created, there’s not enough research being done, and they’re an ostrich putting their head into the ground and they just want to get by, they just want to survive.
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MIKE: And that’s fine, because you’ll get through retirement hopefully if you’re incredibly modest with your spending and conservative with your investing, that you can get through. I will never forget someone that was up in Washington, we planned with years ago. Had a couple million dollars, 60 years old. 62. Technically. Did not think he could retire. Didn’t think so, wasn’t even a hope, was just going to keep working until 70. Was not in the best of health for the record as well and was expected to, he was guessing he’d probably pass around 72 to 75 years old. Was going to give himself, with millions of dollars, a retirement that would only last just five years or so, that was his expectation roughly speaking.
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MIKE: Because he was so scared of the market crash that could happen. Sure, he could ride the markets up but the markets crash happened and what if? What ifs crippled him. What ifs stem from the pie chart, what ifs stem from diversifying the pie chart and using the four percent rule and hoping that it works. When we put together his safer distribution plan and he realized how much money, not only he was taking way more money than he was expecting, he was going to retire about 10 years before he was expecting and he had so much left over cash that Teslas were a new thing at the time, he went out and bought himself… Or, no, his wife bought herself a Tesla.
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MIKE: He bought himself an Audi R8 the next day because he was set up for success and we could mathematically show him so by following the principles of retirement planning. By building a plan that was mathematically based. That is retirement integrity, that’s when you can live the retirement that you want as opposed to living the retirement that’s fear based, which is ludicrous, don’t go there.
CLAYTON: Mike, I talked to a guy one time.
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CLAYTON: And I bring this up because I don’t want any of our listeners to say this. He came in and I said all right, what’s your plan? Or what’s going on? How are things going? He had retired a few months prior and he said well, we’re not out of money yet. That doesn’t seem like… That’s just… I could tell his wife, the whole time, was uncomfortable and stressed about that comment. And yeah, sure, they had only been retired for about six months, and they still had a while.
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MIKE: Social security’s not a backup plan, it’s only meant to help 30 percent of your retirement needs at most.
CLAYTON: Yeah, you don’t want to be saying oh, well, we’re out of money, what do we do? When you’re still around. You want to make sure that your income outlives you and again, that’s why the distribution plan is there.
MIKE: Can you just imagine? Well. I’m 78 years old, that’s before 80.3 and I’ve got to go back to work. Is that a way to live? I just… Fear is such a toxic part of our life.
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MIKE: And if we can help alleviate that fear… Then the reason why I get up in the morning is fulfilled. Live the retirement that you want and have a plan that gives you the integrity to do so. I just don’t see it being any other way.
CLAYTON: And Mike, too, let’s say that maybe you do have all your income set. Maybe social security is enough for you to pay the bills on and you do want to just save up the money and pass it onto your next generation. The distribution plan still allows you to do that.
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MIKE: Yeah, and coordinate the efforts for if this amount is happening in this time or these investments here or you can diversify by purpose these different investments which can grow in different formats and can pass more tax effectively to your beneficiaries.
CAMERON: You know, we have clients, a few come to mind, that each year you know, they are in that age range, you know. Mid 70s and all they want to do is take social security and their required minimum distribution amount.
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CAMERON: They want to leave the rest to their heirs and each year, you know, having the benefit of a safer distribution plan they can see, so here’s what my RMD withdrawals will look like but then I could take up to X amount more. And sometimes they say well, let’s go on a trip. You know, let’s go do something with that fun money. Other times they say no, you know, we’re okay, let’s… We’d rather leave that for you know, the next generation.
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CAMERON: And it’s so cool that with these safer distribution plans they are custom tailored to you, your life, you know. You start retirement maybe with one expectation of this is how much I want and need and as you get into your safer distribution plan you realize I don’t need this much and it’s so cool to think well, what else could I do with these funds? I mean we have some clients who love to donate part of their RMD as charity because they don’t need the income and so we help them do that.
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CAMERON: It’s just so fascinating to see as people age sometimes priorities do change and you know, you have the flexibility to do that because they can see the numbers within their safer distribution plan. It’s not guesswork.
MIKE: Said beautifully, I can’t even add to that. Thank you so much, Cameron. Live with integrity. When I say live with integrity I mean living the lifestyle and the plan that you always wanted to enjoy, that’s mathematically based instead of living with fear.
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MIKE: Give yourself permission to enjoy yourself, it’s okay to enjoy yourself. It’s not selfish by any means. You work so dang hard for this, and if you want to have a conversation about making sure that your plan has integrity, that it can live to your expectations, and you want to go through the principles of retirement planning. You want to go through and get your own copy of the safer distribution plan, by all means call us. 833-707-3030. That’s 833-707-3030 or you can go to deckerretirementplanning.com and on the page you can fill out the little form there that allows you to submit a request so we can follow up with you within one business day.
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MIKE: To reach out and have a conversation. Here’s what it looks like. Our introductory visit we don’t ask anything of you. All we want to do is help you understand the research of retirement planning. We want you to have an understanding of your unique situation and how it correlates and reflects well with the principles of retirement planning. We want to help you understand, this is where you are, does that work for you? It’s a completely neutral setting and it’s all about you and your needs.
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MIKE: At the end of it you can decide if you want to continue to talk with us or not but this introductory visit that gives you a social security optimization report, that gives you a safer distribution plan, that gives you clarity on the retirees headwinds, the investment headwinds that you’re going to be facing whether you want to acknowledge it or not, this is a very real situation and then the solutions that are presented by a math based, principle based approach done through research.
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MIKE: That’s a fun conversation. Call us, if you’re 55 or older we’d love to have you. 833-707-3030. That’s 833-707-3030 or you can go to deckerretirementplanning.com. And on there you can click on the button on the home page, you can fill out the little form there and we’d love to have that conversation with you whether it’s in person or over the phone. Let’s talk about number 10 now, this will be fun.
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MIKE: 10, I’m going to refer to the 1040. We’re ending up the year here, tax season is upon us. Bum, bum, bum. But with tax season, did you like my sound effect? That was good. The tax season, the 1040s. This one really gets me and I don’t understand why more financial professionals or CPAs suggest this and Clayton, please, please chime in if there’s more clarity you want to give on here with your experience. But the 1040 essentially lines two and three, you’re paying taxes on income.
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MIKE: But if you’re reinvesting dividends these are nonqualified assets so it’s not in your IRA, it’s not in your Roth. These are… Your accounts from after tax funds that are also subject to capital gains, okay. These non-qualified funds, if you have a mutual fund and you’re receiving dividends and you’re reinvesting those dividends, you’re paying taxes on those dividends. Why would you taxes on income that you’re not receiving? You can find this on your 1040, it’s coming up soon. Lines two and three.
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MIKE: If you are able to, just put those investments into your IRA or Roth accounts, then you’re not taxed on the reinvestments of the dividends, which leverages the assets forward, it’s not leverage but it propels them forward much more effectively and other stocks that you may not, you don’t need to worry about the dividends being reinvested, you can use nonqualified accounts. This is just one of the many important tips of tax efficiency and tax minimization that blows my mind that so many people are not being told to do.
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CLAYTON: Yeah, whenever somebody comes in this is one of the tactics that we look at as far as tax minimization. Obviously you confirm with your CPA on what you should be doing with taxes but one of the things that we look at, we want to make sure to work with your CPA to make sure that the plan is minimizing taxes as much as possible. So in looking at lines two and three of your 1040, so that’s your dividend and your interest income. Again, like Mike said, if it’s coming from a qualified account we want to get the dividends reinvested so it defers those taxes.
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CLAYTON: Or, if it’s a nonqualified account just turn that spigot on and actually start using it as income so that you’re getting to benefit from the money that you are actually paying tax on.
MIKE: Let’s talk about some other tax minimization strategies. We’re on the topic, we’ve got ten minutes left. And tax season is upon us. IRA to Roth conversions. Can you do them? Are you being told to do them?
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MIKE: Is this even a conversation? This is one of the biggest tax savings strategies that is still okay with the IRS. There’s no workaround, there’s no secrecy or blah, blah, blah. The IRS is totally fine with it. And it is a huge tax saving strategy. Now, here’s my point. A lot of financial professionals deal with absolutes so here’s the big question.
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MIKE: Should I convert all of my IRA assets to Roth? Why are we even debating the extremes, all or none? There is a mathematical silver lining in here of how much you would be able to draw… Not draw. How much do you convert from your IRA to Roth, so that your IRA that’s left over, sure, you might have some RMD. But depending on how your plan is constructed and if you’re staying in the lowest tax bracket, I’d say there’s no need to convert it. Why convert it at a higher tax rate when you’re just going to leave it at the lower tax rate?
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MIKE: It’s a beautiful coordination that we can do here at Decker Retirement Planning and it saves people, I mean, tens, if not hundreds, of thousands of dollars throughout their retirement.
CAMERON: Yeah, it often will take your RMDs from your principle guaranteed accounts as income throughout the year, you know, instead of stressing, oh, I’ve got to make this big RMD withdrawal at the end of the year. Many of our clients find out at their annual review that hey, your RMD is already satisfied because we’ve been drawing per the safer distribution plan on those accounts every month.
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CAMERON: And it’s just such a more efficient way to take income in your 70s and retirement.
MIKE: And RMDs need to be managed. They absolutely do, or else they can get away from you. When I say RMDs need to be managed, be aware so many people did a great job in their 80s, in the 80s and 90s and even 2000s and put a lot of their assets in their 401k. But now they have to pay their income tax. Now they have at 70 and a half years old, regulations could change soon, they have the required minimum distributions.
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MIKE: We’ve had some clients come over after they were 70 years old and they are stuck in a higher tax bracket than they needed to because there was no foresight or preparation for the RMD management.
CAMERON: Another one to not forget about is beneficiary RMD. If you have a beneficiary IRA or Roth, you need to take out the required minimum distribution as well. And that’s something that we incorporate into the distribution plan as well.
MIKE: Thank you. And the last one we’ll talk about, we don’t have time fully dive into it, but it’s another one of the big ones. Is a tax buffer. This is something that we invented here at Decker Retirement Planning.
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MIKE: It’s totally fine with the IRS. There’s no workarounds, it’s just straight planning, good with CPAs, good with the IRS. But a tax buffer is an account that can grow tax free, it can distribute tax free, and what it’s designed to do is help eliminate the taxes in the over accounts so… And hear me out on this.
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MIKE: If national debt is all time high and tax rates are relatively historically low what do you think is going to happen in the tax future? How devastating would your retirement be if taxes went ten percent of your effective tax rate? We’ve been there before. We’ve been way higher than ten percent before. Way higher. Would that be devastating to add an additional ten percent to your effective tax rate? How would that affect your life?
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MIKE: The tax buffer is designed to mitigate that in the future, should taxes go up during your retirement. We call it the buffer because it helps be a buffer to you so this is not a devastating political risk that could change lifestyles. We don’t have time to go through the ins and outs of it but if you want to talk about any of these tax minimization strategies we’d love to hear from you, we’d love to have that conversation. Especially in January, when we get our ducks in a row before we file our taxes.
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MIKE: We can work with your CPA on this, 833-707-3030. Or go to deckerretirementplanning.com. One of our clients who had 13 million dollars, we gave him the tax buffer, it saved him seven figures in retirement. An extra million dollars. What would that mean to you? 833-707-3030 or you can go to deckerretirementplanning.com. In the next five minutes we’re going to finish the 12 days of retirement.
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MIKE: 11 right here, 11 because it’s not only a number but a mathematical symbol, absolute value, absolute value. Any number that is, this is what Decker Retirement Planning was built around. If you look at our logo we’ve got the absolute value within the name. Anyone that comes into our office, we feel that with a math based principle based approach backed by the extensive research that we do, that we can help make any situation into a positive. That’s a beautiful thing, help make any situation into a positive.
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MIKE: With time we’re just going to go into the last one here. 12, we’re going to talk about 12B1 fees. These are hidden fees that your banker or broker or salesperson, your financial professional, doesn’t have to disclose. They don’t have to disclose it but yet they’re making money off of it and it’s an extra drag on your investments. Understanding the fees you’re actually paying is huge. I can’t remember the financial company that did this, but they had a funny commercial about fees and the devastation that it drags on over the years.
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MIKE: Be aware of your fees, you can go to Morning Star or Bloomberg or other places. Can I say Bloomberg now? Is that political? Mike Bloomberg’s a part of the race now. We’re talking about the Bloomberg, the resource here. But the… Seeing the investments that you have and if there are fees you can look them up and see if they’re 12B1 fees or not.
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MIKE: C share mutual funds, another way you can kind of get a hint for that. A lot of discount brokerage firms require their salespeople to only sell C share mutual funds. That’s a hint. If you’re with a discount mutual fund, you’ve been talking to someone on their phones, I would highly encourage you to look into that. Variable annuities have three layers of fees.
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MIKE: There’s a lot of products that are heavy on fees, don’t let the fee tail wag the dog but if you can take a C share mutual fund for example, and Clayton, please comment on this as you feel necessary, but a C share mutual fund and an A share mutual fund, or a [no load?] mutual fund, basically, and invest in the same index without the fee, what does that look like for a difference roughly speaking?
CLAYTON: Yeah, you just want to be aware, generally speaking, of all of the fees that you’re going to be paying on the account. If you are paying fees on a C share mutual fund and you sell that you’re going to be taking a pretty big hit off of the back end.
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CLAYTON: And that’s what the problem is. Be aware of those fees, know what you’re working with, and if your advisor can explain it to you, if they won’t explain it to you then you’re probably not working with a fiduciary. So again that goes back to one of the previous days that we mentioned or points that we mentioned. Be aware of who your advisor is, make sure they’re a fiduciary because they will disclose what those fees are going to be.
MIKE: We’ve noticed a lot of our clients, we’ve stripped away the fees to where they’re getting around a 60 to 70 percent reduction in fees.
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MIKE: There are so many unnecessary fees out there, it’s just, it’s silly. And it doesn’t have to be you. We’re going to wrap this up. I’m going to go over all 12 days of retirement right now. If you’re just tuning into the show this was a two-part show, catch it at deckerretirementplanning.com. You can listen to both parts or you can go to wherever you get your podcasts. iTunes, Google Play, Spotify, catch the show, listen to it at your convenience but here we go.
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MIKE: Number one, use a distribution plan, not the pie chart guesser. That’s the third principle of retirement planning, but it’s the first one. You only need one distribution plan to carry yourself through retirement; it’s a beautiful thing. Number two, two-sided models that are designed to make money in up or down markets seems to be historically speaking much more effective than buy and hold. Number three, investment motives. Number four, work with a fiduciary. Number five, plan five years at least before your retirement.
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MIKE: Number six, optimize your social security. Number seven, watch out for the seven-year market cycle. Number eight, 80.3 is the average expectancy. Enjoy your retirement, and use all those years as best as possible. Time is a precious commodity. Number nine, symbolic of integrity. Live a retirement with the integrity so you’re living to your true self. 10, 1040 is another tax minimization; incorporate that. Number 11, absolute value. Make sure that you can enjoy your retirement and work with someone that can provide value to you.
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MIKE: And number 12, be mindful of fees like the 12B1 fee, just get rid of it. Thank you all for listening. We’ll be here same time, same place next year. Cameron, Clayton, thanks for joining the show. It’s been an absolute pleasure. Same time, same place next week. Take care, everyone.
