RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:00:01]
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.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:00:37]
MIKE: Welcome to Safer Retirement Radio where you get the transparency that you deserve. I’m Mike Decker and I’m Clayton Bradshaw and today we’re talking about the steps, the, oh, there’s only five steps you need to take to enjoy a safer retirement. And here, let me define what a safer retirement is for all those who are new to the show. The industry gives you two extremes. One is all out risk the other is all locked up. Neither of them seem appropriate for any retiree to have to deal with those kinds of worry or inflexibility or whatever it may be. For the retirees that want to have their cake and eat it too, they want to be able to enjoy their retirement, have stability, but also participate with the markets and everything in between, a safer retirement then is for you.
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MIKE: We’re gonna talk about what those steps look like today and in one of those steps we are gonna be sharing the secret. There’s three planning techniques in this secret that are specifically focused on tax minimization that save retirees typically hundreds of thousands of dollars and this will be the first time on air that we fully disclose what we’re doing to save that kind of cash. It doesn’t make sense to pay more than you need when it comes to your taxes. It’s tax season right now and a lot of us are frustrated paying more taxes than we think we probably want to pay.
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MIKE: So, that being said, always pay your fair share of taxes. [LAUGH] We’re not promoting tax evasion by any means, but what we’re saying is it doesn’t make sense to pay more than your fair share and you have the ability to define what your fair share is by being proactive in your tax minimization planning.
CLAYTON: Mike, I think this is gonna be a great show today because we are gonna be talking about things that we really haven’t discussed a lot before. So, I’m excited to go through what these safer steps look like.
MIKE: Now, Safer is an acronym. Most people don’t know this, Clayton, but safer is actually an acronym and it’s the five steps for retirement planning.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:02:29]
MIKE: The first one is a Sherpa review. You know those guys, we were talking before the show actually, [LAUGH] how they’re perfect for CrossFit ‘cause they’re so buff. They’re so, they’re athletes that climb Everest every step of the way up and down professionally multiple times. That’s a tough thing to do, but they know the terrain so well. Well, we call the introductory review and the first step the Sherpa review because we’re like that, but for finance. See, we want to look at your plan as if we’re gonna walk every step of the way with you and we’ll talk more about that in just a second.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:03:00]
MIKE: The second part, the second step is the asset assessment. You’ve got assets. They’re all organized, or we think they are. Let’s see if the assets are doing what you want them to do. The big questions, and this is a bit of a story, fable, but does the king have clothes or is the king marching down Main Street with no clothes? That’s what we’re looking for because what typically happens is people come into our office and they’ll say, “I’ve got the best investments” and they parrot what their financial professional has told them without understanding what’s really going on.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:03:37]
CLAYTON: So, we’re saying we don’t want our clients, or other people’s clients to feel like the king, that they have just walked down Main Street and paraded in front of everybody without any clothes, that they know what’s going on with their investments.
MIKE: Yeah, and you know when you don’t have any clothes on when the market’s crash like 2008. We don’t want anyone to be embarrassed. So, the asset assessment, it’s at no cost to you, it’s a free service that looks over your assets and it’s quite powerful. The third step is financial flexibility. To claim, we’ve said before, but did you know, well, obviously you know, you’re on the show with me every week, but 12 percent of retirees have a written plan. It’s ridiculous.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:04:13]
CLAYTON: Only 12 percent of retirees.
MIKE: Only 12 percent of retirees have a written plan. So, what do we want to do? We want to show them what a written plan looks like and the beautiful flexibility that your written plan can also give you. That’s in financial flexibility, so we can give you many options and have a written plan for different scenarios. The fourth step is exploring efficiencies in that written plan. Just because you have a plan doesn’t mean it’s the best plan, okay? In football you’ve gotta sweep. That’s where you run around the side of everyone and hope that you get some yards. That’s a play. Okay.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:04:50]
MIKE: Is it the best play? Maybe not. Maybe you want to make some tweaks to it. Maybe you want to do something, these are football jargon, I know, but, let’s say baseball or soccer, or any sport. Just because you have a play doesn’t mean it’s the ideal play. You can enhance it. You can make it better, more powerful. We want to make sure that we can help you have the most powerful retirement plan that’s written to accomplish the lifestyle that you want to have and have the expectations met that you have for retirement and then the last one’s risk reduction. Why in the world do we want to take more risk than we need to? Well, let’s reduce risk. And we’re talking things like, uh, if the market crashes, how do we reduce that kind of risk?
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:05:29]
MIKE: If a spouse dies what does that look like and can we keep up with inflation? What does that look like? These are all different things that we’re gonna be talking about all today on Safer Retirement Radio. Let’s first talk about the Sherpa review. Excuse me, the Sherpa review and the asset assessment and Clayton, I had this just yesterday. A guy’s in the office and he’s just chatting and he says, “You know, gosh, I’m just freaking out right now and the reason why is I know this market can’t keep going up.” And he’s not a financial guy. He just has that gut feeling and you, Safer Retirement Radio listener, you may have it too.
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MIKE: This gut feeling inside, it’s just eating him inside, keeping him awake at now at night because the markets at some points, he feels are going to give.
CLAYTON: Well, that’s because historically they have about every seven to eight years the markets do and we are overdue for that give.
MIKE: Now, let me add some more color to the painting here. He has a great pension that he’s gonna receive for life from a reputable company. Okay, that’s a source of income. That’s great. He’s following the first principle of retirement planning and drawing income from principle guaranteed sources. That means sources that can’t lose money when the markets crash. He’s also got a wonderful realistic portfolio.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:06:48]
MIKE: It’s incredible. He’s getting a couple thousand dollars a month profit from his renters on top of the appreciation he’s getting from the home value, great situation. And then he’s got about a million dollars in his 401K. And every time I see him he says, “Mike, I can’t lose another 2-300,000 dollars again, like I did in the late ‘90’s, early 200’s.” And 2008, that killed me. Hundreds of thousands of dollars I lost. Now, I’ve worked my butt off to get them back. I have been disciplined financially to get them back.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:07:27]
MIKE: I can’t take that hit again. I emotionally just cannot handle it.” And I said, “Let’s call the guy, Joe.” I said, “Joe, tell me how you’re invested right now.” “It’s all in the 401K.” “How many 401K’s?” “All in one 401K.” I said, all right, “Joe, and what does that 401K look like?” “Oh, well, I don’t want to move it anywhere because I’m only being charged 50 dollars a month for my 401K.” Clayton, [LAUGH] you weren’t there. If I just told you, I want to keep all my assets in a 401K, but I’m scared of the market falling” and that’s my plan right now and I’m only paying 50 dollars a month for fees,” what in the world would you say?
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CLAYTON: I mean, it sounds like, number one, if you’re worried about the market it’s all in the 401K. It’s going to be in an account that isn’t gonna make you any money. You’re gonna be in a money market account that’s gonna be paying you ten basis points or less, so, .1 percent on your growth and your fees, at even 50 bucks are gonna eat away at that growth.
MIKE: Now, on top of that, I said, “Joe, okay Joe, help me understand this. Only 50 dollars, that literally the only fee you could have?” He says, “Yep, that’s the only fee I could have.” I said, “What are you invested in?” He says, “A bunch of mutual funds.”
CLAYTON: [LAUGH]
MIKE: I said, “Okay. Can you help me understand what some of these mutual funds are?”
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MIKE: He says, “Well, I’ll bring you the sheet, but here’s a, you know, here’s a few.” [LAUGH] And I said, “Joe, are you aware of what a 12B-1 fee is? I know that’s jargon.” He says, “Never heard of it in my life.” I said, “That’s how your 401K is paying for itself. That’s how those guys are making their money. It’s a hidden fee that’s a drag on your investments and had you not had that fee you would have done much better in the portfolio because it’s an extra percent or two on top of that.” He says, “What?” I said, “Yeah.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:09:21]
CLAYTON: Well, then another way that they term this a lot of times when you hear about fees on a mutual fund, the word that is used a lot of times is “Load.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:09:29]
CLAYTON: That is jargon, industry jargon for, “It costs you money.”
MIKE: Costs you money. It’s fees that they are not fully disclosing because they’re kind of elusive about it. So, here’s how the meeting went and for all of you listening, if you were to come in and visit with us, this is exactly how it plays out. I said, “Joe, help me understand what you want to do in retirement?” He says, “I want to retire in two years I want to do some humanitarian work while I’m still young. I feel that I can travel and help people at the same time and I’m gonna do it for about two or three or four years. And then I want to come back and I’m gonna, I have my membership at the local golf club and I’m gonna golf every weekday and then spend the weekends with my families and they’re all kind of close together.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:10:11]
MIKE: He says, “That is my dream.” I said, “Joe, okay, so let me get this straight. You want to go abroad for four to five years, three to four years, whatever it is, help people and travel, but all of your assets are at risk and if the markets crash you may be pulled out of your humanitarian work. Am I getting that right?” He says, “Yeah, that’s why I want to talk to you.” I said, “Okay, before we talk about solutions, Joe, I need you to understand the principles of retirement planning. When these principles are implemented correctly those fears that you’re telling me can go away. The stability you’re looking for can go away and I believe the income that you’re asking for is very possible.”
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MIKE: “We’ll find that out when we run the numbers and we’ll do that. You don’t need to do the math. We’re gonna do that for you.” And Joe says, “Okay. Okay. What are the principles?” I said, “Joe, the first one is to only draw income from principle guaranteed sources. Joe, talk to me real quick about what you feel, or your comfort level of receiving income from a pension.” He says, “Oh, it’s great. This company’s not going away.” I said, “Okay, how about your rental real estate? Are you concerned about your rental real estate?” “Oh yeah, you know, it’s, yeah, I think it’s good.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:11:23]
MIKE: I said, “Okay, now how about drawing income from assets. If the markets are down 50 percent what are you gonna do?” “I can’t take income from that. They’re not gonna recover.” When you draw income from accounts that go up or down it’s not as much on the up years that compromise your gains in the up years because all accounts that grow when you draw income from it compromise gains in the up years, but you need income. It’s when markets go flat or down that you accentuate losses and create a very, very expensive for yourself, one that tends to destroy a lot of rich people’s retirements because they ignore the first principle of retirement planning.”
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CLAYTON: Well, and Mike, for all of our listeners out there, one of the things that Joe has that a lot of people that I see don’t have is rental income and pensions. He’s got a pension. He’s got rental income. So, even if he does take a 50 percent hit that is going to hurt really bad but he still has a base layer of income. Now, for somebody that is only depending on those savings they’re gonna be up a creek without a paddle. They’re gonna have to go back to work and end their retirement.
MIKE: It’s gonna be tough. And then we went through the second principle and the third principle.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:12:33]
MIKE: The second principle is diversify by purpose, not just by risk. I said, “Joe, right now the only purpose your assets can do is grow ‘cause they ignore every other purpose that you could have in there” and he says, “Yeah, I need to roll that over. Let’s talk about what the options are.” And I said, “The last one is to use a distribution plan not a pie chart. The pie chart keeps you guessing. A distribution plan is, it’s also known as a written retirement plan.” He says, “Absolutely.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:13:00]
MIKE: And then we looked at his investments, found there’s a lot of fees happening and he says, “Okay, I want to take the next steps here. Let’s keep proceeding” and we scheduled the follow up visit for him to come in and see what his retirement could be by following the safer steps of retirement. Now, if you’re just listening to this right now and you’re going, “You know, gosh, that sounds, that’s the kind of clarity I’m looking for. I am parroting what my financial professional’s doing and I frankly don’t fully understand what he or she is getting.” Then this call is probably one of the most important calls that you’re gonna make of the entire week if not the entire year.
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CLAYTON: So, if you want to sit down with one of our fiduciaries, give us a number, or sorry, give us a call at our number, 833-707-3030.
MIKE: Yeah, you’re gonna get a friendly voice on the phone. They’re gonna gather your information and then we’re gonna call you on Monday to schedule that visit. But, Safer Retirement Radio listeners, just imagine this for a second. Just imagine you’re at your favorite restaurant and you’re grabbing lunch with a friend and you’re on time today and so you’re sitting down there, looking over the menu, just, it’s a rotating menu, all just so much fun here, and looking at what you want to get.
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MIKE: And then your friend comes in, a little bit more sheepist, like he just saw a ghost and you’re going, “Hey, Bob, what’s going on?” Your friend Bob says, “What do you mean what’s going on? Markets are down. It’s chaos out there. Are you not worried?” He says, “No.” You say you’re good. The big decision you’re gonna make today is whether you want a burger or a salad because, frankly, you already have a written plan that prepared you for these situations so you don’t have to lose sleep over it. But, you’re good to go. Your income is stable. You’re able to draw income from the account. And yeah, the assets that are at risk, they’re using two-sided models.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:14:53]
MIKE: You’re good to go. You’re making money today. Life is good. Now, the big question here, in this story is who do you want to be, the guy that’s all risk and the market will dictate how you’re doing each day or a guy that has a written plan, or gal? Written plan, prepared for these situations. Which one do you want to be?
CLAYTON: And when you come in, sit down with one of us, as fiduciaries. What you can expect from this visit, and we’re really proud of our offices, they’re very comfortable.
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CLAYTON: You’ll sit down. Our advisors are here, we are here to just find out what’s important to you. There’s no pressure. What it isn’t is it’s not a sales situation. We’re not gonna lock the door, throw away the key and make you sign something or commit to something. This isn’t a place where financial decisions are made. That first visit is just to understand what you’re looking for, what’s important to you and what your goals are so that we can then work towards building a plan that is specific to you.
MIKE: Yeah, here’s the thing. We’re local. We’re independent. We’re not owned by some big company on Wall Street that has the fancy signs or big buildings or anything like that. We’re your guy.
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MIKE: We’re your guys that’s legally bound to do what’s in your best interest and we just want to be able to have that conversation to help you enjoy a safer retirement. Call us right now, 833-707-3030. That number one more time is 833-707-303. Or you can go onto decekerretirmentplanning.com and get more information and sign up there as well. We look forward to the opportunity to visit with you. This is Safer Retirement Radio. I’m Mike Decker and I’m Clayton Bradshaw and we were just talking about what a Sherpa review is, or basically a second opinion from a fiduciary as well as an asset assessment.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:16:39]
MIKE: And we didn’t talk a lot about the asset assessment, but basically, we want to see does the king have clothes? Do your investments, are they doing what you want them to do or are they not? It’s that simple and it’s so eye opening, the conversations when people say, “Oh, it’s gonna do this” and we just stress test it a little bit and the eyes are wide open at this point and they’re going, “Oh no.” But it’s okay. Markets are up. Things are good. We have time to correct poor choices that another person would have recommended you.
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CLAYTON: Well, now with the market being close or at all time highs, now is a great time to look at doing this. It’s better now than after taking a 30 or 40 percent hit to your portfolio because that translates to a drop in potential income in retirement.
MIKE: Yeah, that’s one of the rough ones. And so, let’s talk, Clayton, about the third step to retirement, or safer retirement. The third step is financial flexibility. And here’s what I mean by financial flexibility. The industry is only offering you two options right now for the most part.
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MIKE: I get there’s some little nuances in between, but the industry’s offering you two things. One’s a pie chart, all at risk, you draw around four percent. Okay, pie chart, for those who don’t understand that, what that’s alluding to, means that your assets are diversified by risk and you hope the go and they never go down. Okay? That’s a strategy based on hope. It’s not a written plan and yes, if, what’s interesting is people say, “Well, it’s diversified, so, you know, markets go up and down, but everything’s fine.” Look at 2008. Look at 2000, 2001, 2002, when markets crash everything tends to go down together. It’s a cascade effect. It’s a waterfall.
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CLAYTON: And that was the dotcom bubble, right?
MIKE: Dotcom in 2000, in ’08 it was the real estate crash. Who knows what the next one is. I mean, I’ll throw this out there. The Coronavirus, what if that breaks out in China to an unforeseen level or scale and now we can’t receive imports or exports from China? We block that all off. Will that affect our economy? Yes.
CLAYTON: Well, and there was, even when they did that, when China started closing things down and everyone was in this, kind of, reactionary phase to what was happening the market did drop.
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MIKE: And that was just scare of the market. You know, it’s funny, [LAUGH] my wife got something from Amazon and it comes in a package that said, “From China,” which I thought was strange. I thought Amazon ships, like, from a warehouse that’s, like, within a couple blocks from me, but, you know, whatever. But, the package says it came from China. I guess that’s ‘cause it wasn’t Prime. It was [LAUGH] it wasn’t Prime. Any way. And we go, “Should we open it? Does it have the Coronavirus?” No, we’re fine, but the thought was still there. That’s just one example of many pin pricks that could start the contagion of the cascade effect of the markets tumbling down.
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MIKE: What does that mean to you? Well, if you’re using this one idea, the pie chart, all of your assets are diversified by risk. When everything goes down that diversification really doesn’t mean much to you at that point. And volatility, there’s good or bad. That means markets go up or down. You’re gonna participate with both, just how it works, all at risk. Are you comfortable with that? If no, I hope you’re calling us. The other side and this one really gets my goat, Clayton.
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MIKE: Clayton, I’m gonna, this is, for all you listening I’m being facetious here, Clayton, I’m gonna give you a quote, comprehensive, extensive retirement plan that illustrates down to the month everything that you need in one single investment that’s gonna give you 10 percent guaranteed every year that you own it and also 10 percent bonus at the beginning. By the way, this was a radio ad I heard this week.
CLAYTON: [LAUGH]
MIKE: And 10 percent bonus, blah, blah, blah and it’s gonna be the best thing ever and it’s too good to be true, but you better believe me because I’m a voice on the radio and I’m promising you the world. [LAUGH]
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MIKE: No. [LAUGH]
CLAYTON: Mike, I, having that conversation, I’ve heard that so many times from my clients, from people that I have met with, they’re like, “Hey, I talked to this guy or this gal and there’s this thing that they’re saying it’s gonna give me a 10 percent bonus right off the bat, or 20 percent. It’s gonna guarantee me seven or eight percent annually and then I’ll be set for the rest of my life.”
MIKE: Where does the money come from? Insurance companies, and yes, we’re talking about income annuities, they don’t grow money on trees. There’s a reason they have very nice buildings. There’s a reason why they’re doing very well for themselves.
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MIKE: It’s because this all, in my opinion, smoke in mirror marketing that confuses people into a product that illiquid, barely keeps up with inflation and…
CLAYTON: They’re expensive.
MIKE: [LAUGH] They’re expensive. I mean, you can’t have your cake and eat it too with one investment. That’s why the second principle exists. Diversify by purpose, not by risk, having many different types of investments. There’s no one investment that does everything you need, but it’s touted out to do so.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:21:57]
MIKE: So, let’s talk about financial flexibility, ‘cause the industry is not offering this at all. From what I understand we’re one of maybe two, maybe three companies that I’ve heard of that do this. Using a distribution plan you follow the three principles, and we’re the only ones that follow the principles, by the way, of all the three companies that may have the technology to do a written plan, we’re the only ones that follow the principles when writing the plan, which that’s important to note because the principles are time texted rules that when implanted correctly protect you from situations like 2008 where you don’t have to even change your travel plans.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:22:35]
MIKE: But, you put together a written safer distribution plan, okay? This plan can show you down to the month net of tax how much you can have for multiple investments that are coordinated to work together to accomplish your goals. It’s not one investment. You can’t accomplish everything with one investment. You have to diversify by purpose, not just by risk. You can’t put all your eggs in one basket. That’s financial…
CLAYTON: That’s detrimental to your financial retirement.
MIKE: It’s terrible. And so, when you have financial flexibility then you can have the open conversations for when life happens.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:23:12]
MIKE: One of the most common scenarios I see is, and I recognize it’s a bit stereotypical, so, for the families that don’t follow this, I’m not saying that everyone does this. This is just a common pattern that I’ve seen. I’ve seen a lot of times that the husband has done the finances and that the wife has done other responsibilities for the household.
CLAYTON: Or vice versa.
MIKE: It’s been vice versa. But, what’s interesting is when one spouse does the finances, if that spouse goes first the other spouse is up a creek without a paddle and has no idea how to handle the finances and that’s an extra burden on top of mourning of the loss of their spouse and is completely unnecessary.
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MIKE: So, when you have a written plan, here’s what I’m getting at, when you have a written plan both spouses know what to do and how to handle when one spouse is gonna pass. It’s gonna happen. Are you prepared for that? Is it written down your strategy to be able to do so?
CLAYTON: Well, and Mike, that was one of my favorite conversations to have, when couples would come in and one spouse would say, “I’ve been the one doing all of this. Here’s all of our stuff. I know what I want. I know what I’m looking for.” And then the other spouse kind of looks at ‘em and says, “Whoa. What am I supposed to do with this? What happens if something happens to you?”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:24:29]
MIKE: Yeah, avoid buses, don’t get hit by one, ‘cause can’t handle it right now.
CLAYTON: Yeah, and that’s, and I loved seeing the relief when the plan was there and the spouse who didn’t have the experience or didn’t have that confidence in managing the finances, when they saw that plan they could clearly understand and see, okay, I know that I’m going to be okay. I know that I will be able to manage this and if I can’t I know who I’m gonna be able to go to, being me as the planner, for that assistance to carry things forward.
MIKE: Yeah.
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MIKE: I had a client years ago, came in, she was a local educator at the schools and was a retired teacher and he worked Staples doing business to business sales and they both did very well for themselves. They saved up a wonderful retirement and they retired in their late 60’s and he died at 70 years old. It wasn’t too much of a surprise. We knew the health was dwindling. When he passed she came in and in one visit we reorganized a few things and she was able to properly mourn. I’ll never forget it.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:25:40]
MIKE: She bought a teacup pig as her new companion to help cope through the mourning process of her best friend who just passed. Sorry. ‘Cause I’ll never forget the conversations. They weren’t about finances at that point because those were taken care of. The conversations were about how’s she doing? Is she staying busy? Is she going on walks? Is she spending time with friends? The finances were good. The income was happening.
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MIKE: See, it’s those moments that most people forget to plan and when you have a written plan, then those, some of the most difficult moments in life are at least a little bit easier. When you have financial flexibility you have multiple avenues that are written down in a plan that get you to success regardless of what happens. That is so critical to have and yet so many people just say, “Well, when it happens my guy will just take care of it.” I can tell you right now, they don’t know how to take care it. They’re gonna be reactive to your situation and in these horrible spots you need to be proactive and have a plan.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:26:52]
MIKE: I mean, I don’t want to get biblical here, but I mean, I just think of the time where, was it Joseph, in Egypt, tells the Pharaoh, “Okay, let’s have a plan for when a famine happens.” Oh, guess what, a famine comes. They’re okay. Great, there was a plan. In your retirement plan if one spouse dies and there’s a pension what does that look like? If you lose half your social security what does that look like? How does it all work out? These are the conversations that need to be had and we have them in the third step, which is financial flexibility. And we also talk about long term care.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:27:30]
MIKE: Clayton, just so I take a sip of water here. Can you just walk our listeners through the long term care conversations?
CLAYTON: You know, long term care is an interesting one. Whenever somebody talked about, “Well, I need a long term care policy,” the problem, and I’ll say that up front, the problem with long term care is that if you need long term care you can’t afford it and if you can afford it you don’t need it.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:27:55]
CLAYTON: Now, that’s a generalized statement, right? I’m not saying that that specifically applies to everybody. But, that’s one of the things that we go through in making sure your plan has that flexibility that if something like a need for long term care comes up your plan has the flexibility built in that it can work around that, which leads into the next step, which is efficiency exploration.
MIKE: Yeah, and we’ll get that in just a second. I, just to talk about financial flexibility, if anyone wants to take, or wants to do this step with us, it’s not gonna cost you a dime. We’ll do the Sherpa review. We’ll do an asset assessment and we’ll show you your financial flexibility so you don’t have to deal with the other extremes.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:28:32]
MIKE: That we can show you and get you the transparency that you deserve so you’re not painted into a corner with what the industry’s offering, which is extremes right now. There is a silver lining. There is a happy medium and there’s a beautiful balance that happens when you plan and include the principles of retirement in your plan. And so, for everyone listening right now, I want to extend this heartfelt offer because here’s the thing. We’re a local independent company. We’re not owned by Wall Street. We’re legally bound to do what’s in your best interest and we put in countless hours to get you what is in your best interest.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:29:11]
MIKE: The research that we do, the technology we invest in and then the process to be simple so if you’re a really technical savvy investor or you don’t even understand the difference between a 401K or an IRA, you can come in and get confidence in your retirement plan and we can dive into those details and show you what happens. I hope you call us. We’re here for you. You can call us at 833-707-303. You’re gonna get a friendly voice on the phone. They’re gonna gather you some information and then we’ll call you and we’ll have an open conversation to see what you want out of retirement.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:29:50]
MIKE: And if it makes sense and you want to proceed then we’ll schedule a visit and you can visit us in one of our offices in Utah, Washington or California. It’s that simple. But, we are here for you.
CLAYTON: Now, imagine this. Imagine that you’re retired and you and your spouse, you’re laying in bed and your spouse wakes up and hits you on the shoulder and says, “What day is it? Is it Wednesday?” You’re like, you think, “No, no, no, it’s gotta be Tuesday.” And then you both kind of say, “Oh, you know what? It’s Thursday.” And you roll over and go back to bed because it feels like Saturday.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:30:27]
MIKE: Yeah.
CLAYTON: And that’s how retirement should feel, is that every day is Saturday.
MIKE: Mm-hmm. You’ve got the flexibility to do what you want. You’re in charge of your time. You’re not bound by a paycheck. You’re really in charge. That’s financial freedom. Here’s what the visit is. The visit is a time to where we can review what you want to get out of retirement. We’ll review the principles of retirement and then we want to understand what your current plan is. And if there’s holes to poke in there we’re gonna poke some holes. It’s an uplifting visit that moves you from where you currently are to a better place. But, here’s what the visit’s not.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:31:02]
MIKE: The visit’s not a time to bring your checkbook because it doesn’t cost you a dime. The visit’s not a place to make financial decisions. For goodness sakes, we just met you. The visit’s not a time where we’re gonna lock the door, swallow the key and say, “All right, it’s time to decide.” No, the only decision you could make in this visit is if you want to schedule another visit, but that’s up to you. We’re okay either way. Our bottom line here is to give you clarity and transparency to what you are currently doing in retirement and invite you to take the steps to a safer retirement.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:31:35]
CLAYTON: So, give us a call, our number, 833-707-3030. Again, that number, 833-707-30.
MIKE: You’re listening to Safer Retirement Radio. I’m your host Mike Decker and I’m Clayton Bradshaw and we’ve been talking about the steps to get to a safer retirement, safer being an acronym. A Sherpa review is the first step. You gotta review with a fiduciary who knows the landscape of retirement like a Sherpa knows the landscape of Everest. They can walk every step of the way. That’s our job. We want to be able to offer that to you. Then A in SAFER is an asset assessment, F, Financial flexibility and we were just talking about that.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:32:16]
MIKE: And if you want to hear the show again, you’re just tuning in, you can go to deckerretirementplanning.com and catch the show there or subscribe via podcast. Clayton, we’re gonna talk about efficiency exploration. Now, at the beginning of the show we said we’re gonna share a secret. First time on the air that we’re divulging three planning techniques that revolve around tax minimization, that save, typically, clients hundreds of thousands of dollars. Before we get there I just want to just highlight, when we talk about efficiency exploration we’re talking about social security optimization. We’re talking about income optimization.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:32:58]
MIKE: We’re talking about a number of things. This is efficiency to make your plan strong and powerful. But, today I want to focus on tax minimization. Part of it, this is a huge secret. The third one, I know for a fact no other financial advisory firm or retirement is using this option for your assets the way we’re doing because we invented it and it is next level sophisticated on the back end, really simple for you on the front end and it saves more money than anything else that I am aware of in the market.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:33:38]
MIKE: And I have yet to hear any financial professional do this. It is a huge secret and I’m a little nervous to even admit over the air because I’m nervous that people will take it out of context and use a complicated investment to something that is very simple to use when set up correctly. And that’s the huge part about this.
CLAYTON: And Mike, with these, I want to just let our listeners know as well, that what we’re talking about and going to talk about today, it’s not for everyone. It is for a select few, but when implemented correctly can have a massive impact on what you just talked about, tax minimization, income optimization.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:34:16]
CLAYTON: As well as estate preparation.
MIKE: Yeah, the first two, I believe, most all people can utilize. The third one is not for everyone, but those who do qualify for it, that it makes sense, oh my gosh. We’ve saved a couple of clients seven figures by using this technique. That is powerful. Let’s talk about the first one. When we talk about exploring efficiencies in your retirement we need to understand what a required minimum distribution is. For those who don’t understand what that is, Uncle Sam has said, “Okay, I’ve let you not pay taxes on your 401K, now that’s an IRA.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:34:54]
MIKE: Okay? Great, it grows tax free, but, when you take it out it’s paid as if you were taking income from those assets, kind of like your pay check. But, Uncle Sam said, “Well, hey, hold on. People are living longer than they ever have before. I need to start making my money back. I need to pay off my own debts.” So, required minimum distributions were put in place. Right now they’re at 72 years old or older and you have to take out assets from IRA and 401K accounts because Uncle Sam wants to get paid back.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:35:27]
MIKE: What does that mean? Well, in the story I had earlier, there’s a million dollars in an IRA account. It’s all in Joe, if you remember Joe from earlier in the show, it’s all in his 401K. It’s gonna roll over to an IRA. If Joe is 72 years old he is going to be required to take out some of those assets. Here’s the risk. If you have too much in IRA assets your RMD is forcing you into a higher tax bracket than is desirable.
CLAYTON: Now, Mike, when you say, RMD, you’re talking Required Minimum Distributions?
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:36:03]
MIKE: Yeah, the Required Minimum Distributions. I’m gonna be referring to them as RMDs for the remainder of this segment. What is absolutely critical when you explore efficiencies is to, it’s okay to have an RMD as long as that RMD is on the first or second tax bracket or the lowest tax brackets possible because it’s somewhat negligible and for the most part, it’s less taxes than you would be paying anyway. When you were employed, typically at the end of your career you were paying a higher tax amount because you were earning the highest amount, typically, that you have in your career.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:36:42]
MIKE: Okay, well, if you’re only earning less in taxes because of you RMD that’s okay. What I’m getting at here is that you need to sync up the burden the RMD is going to cause you in your retirement so you’re forced into a tax bracket that’s higher than desirable and causes you to pay more unnecessary taxes. You can decide how much you’re gonna pay in taxes and right now taxes are on sale. Can I do a quick aside?
CLAYTON: Yeah. I just want to kind of sum up what you’ve said, ‘cause you’ve talked a lot about a lot of specific things.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:37:14]
CLAYTON: The point that we are trying to make is that with an efficiency exploration we are looking at your income streams and how to optimize those so that they flow together so that you, we don’t want our clients to have to worry about this, so we simplify it as much as possible and that’s why we use and how we use the distribution plan.
MIKE: Yeah. The bottom line is we don’t want to have you paint yourself into a corner and pay more taxes later on. Here’s my quick aside. Debt, all time high, tax rates historically relatively low.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:37:48]
MIKE: Depending on how this campaign or the next campaign goes taxes on both parties, there has to be at some point, let me say it, not has to be, there’s going to be a point where both parties will have to come together and figure out how to raise taxes because it is unsustainable. When that happens, my opinion, my guess is that retirees will be paying an extra five to 10 percent of their total taxes, or excuse me, there’ll be an additional five to 10 percent addition of their total income from assets that will be paid to taxes.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:38:27]
MIKE: That’s a huge increase that now has significantly changed your lifestyle and you’re the one getting the blunt of it because our government has increased debt to an unsustainable level and you’re paying the consequences for their spending. That bubble is coming. I don’t know when it’s gonna burst. I don’t know when it’s gonna affect you, but if you don’t explore tax efficiencies and plan these efficiencies into your written retirement plan it could be a life changing political event for you. We don’t want that to happen. For me, all the clients that I visit with, and Clayton, I know you do this as well, we want to get you to as close of a zero tax bracket as possible.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:39:08]
MIKE: I had a call last night with a couple and within six years of their retirement, six to seven years of their retirement, right now it’s projected they are gonna have zero tax burdens throughout the rest of their retirement. They have over two million dollars and we got them to a zero tax bracket. How? Part of it is RMD. We looked at the efficiencies of the RMDs, the Required Minimum Distributions. But, the second secret that we’re disclosing right now is a big part for them, this one they did and that’s called and IRA to Roth conversion. Let me explain. IRAs grow tax free. That’s nice.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:39:47]
CLAYTON: Yeah, ‘cause that’s money that you put in pre-tax into the account, just like a 401k.
MIKE: No capital gains. But, when you take it out you’re taxed.
CLAYTON: As normal income.
MIKE: Yep. A Roth IRA grows tax free, so there’s no capital gains and when you take it out, as long as you’re past the age of 59 and a half there’s no taxes on it.
CLAYTON: Because you paid taxes on the money that went into the account.
MIKE: Roth IRAs are like gold in any retirement plan. They also pass to your beneficiaries tax free.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:40:18]
MIKE: So, what do we want to do? We want to take as much time as you’re gonna give us. I call it the tax runway, from when you either start visiting with us or when you retire, to the age of 72. We want to hack away and convert as much as we can from IRA assets to Roth assets each year through backdoor Roth conversions that allow you to get to a zero tax bracket and take advantage of the low tax rates right now before they’re too high.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:40:52]
CLAYTON: And one important note, Mike, as well, for those that aren’t quite there yet and they’ve got access to a 401K it’s worth checking with your benefits administrator to see if you can contribute to the Roth side of that 401K.
MIKE: Yeah. When implemented correctly, most retirees can get to a zero tax bracket to where they may even qualify for food stamps because they’re not paying taxes any more. They’ve, basically it’s a retiree saying, “All right, I’ve worked my whole life. I’ve put in what I need to to social security like I was supposed to as a citizen of this society. I’ve paid my taxes as a citizen to this society and I’m good to go.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:41:32]
MIKE: I’ve paid my dues and now It’s all about me.
CLAYTON: And when you say qualify for food stamps that’s not to say that you’re going to, if, two million dollars, that’s not to say you’re going to be poor. That’s, what we’re trying to get at is that your income will be taken care of outside of the tax burden so that on paper, as far as the IRS is concerned, you’ve taken care of that responsibility already.
MIKE: Yeah. Now, the last one here, the third step, and this one we’ve never talked about on air. This is the one that saves people more in taxes than any other strategy.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:42:05]
MIKE: Unless you can do the IRA to Roth conversion fully, this one right here creates a buffer between future political risk of taxes going up and your income. I call it the tax buffer, but really, and David McKnight calls it the rich man tax, or the rich man Roth.
CLAYTON: Yep.
MIKE: It is an index universal life insurance policy. For all of you listening right here, if you think you understand about life insurance, all I’m gonna ask is just reset what you know and listen in because what we’re about to say is, it could be life changing to you.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:42:44]
MIKE: If you can qualify, most of you probably won’t be able to qualify.
CLAYTON: Well, and hearing the word insurance, it always makes me cringe.
MIKE: Oh yeah.
CLAYTON: But, as a fiduciary, we have to look at every possible option that can be in our client’s, that is in our client’s best interest. That is our responsibility. We do not. We are not beholden to some big company. We are obligated to our clients to find them the best options available so that they can retire the right way.
MIKE: Yep. This is an account that is principle protected, so it cannot lose money, okay? It grows on the good years. When the markets go down you’re not affected. You can’t lose money on it. Okay.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:43:23]
MIKE: When you fund the policy it grows tax free and you take out loans, which are also tax free, okay? So, right now it’s like a Roth. It grows tax free and it pays you tax free, but what’s interesting, when set up correctly, an index universal life insurance policy grows off of the gross amount, not the amount of loan amounts.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:43:47]
MIKE: That’s a jargon way to say the following. If you have 100 dollars, for simple math in there, okay, and you take out 10 dollars right now the account value is about 90 dollars net. But, the gross amount is still 100 dollars and the account grows off the 100 dollars. So, let’s say you earned five percent this year or 10 percent or 15 percent. That percent is calculated off of the 100 dollars, not the 90 dollars.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:44:21]
MIKE: Why is this important? If you have a tax burden or something that needs to be taken care of you can pull funds out as a loan and just in a few years the difference between the net and the gross will offset and you’re essentially paying yourself back just by having the account.
CLAYTON: Now, Mike, we’ve gotten into a lot of complexity with this.
MIKE: Yeah.
CLAYTON: We’ve gotten into a lot of math. This isn’t a master’s level finance class. [LAUGH]
MIKE: Can you see why this has to be implemented correctly? [LAUGH]
CLAYTON: Right. These are, for all of our listeners, these are one of the most complex instruments available to retirees, or just to the general public. But, when used correctly in retirement these can have, the point that we’re trying to make is these can have a massive benefit as far as tax.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:45:06]
CLAYTON: Now, if you walk into your advisor’s office and you bring and you say, “Hey, tell me about this.” Your advisor, if they cannot explain it to you or you don’t feel like they are sure about how they work or that they’re implementing it correctly, a red flag should be going up all over the place.
MIKE: I would even say, if they haven’t brought it by now what this is, a red flag should be there. Don’t ask them about something they haven’t brought up because they probably don’t know how to really respond to it and they’re gonna repeat something they heard from some conference years ago. Don’t risk it. It’s not worth it because when these things are set up incorrectly it’s not right.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:45:40]
MIKE: I mean, for goodness sakes, Clayton, we have a lot of clients, about 25 to 30 percent of our clients think that this makes sense for them. And so, we fill out the paper work and we get the feedback of, “Okay, is this gonna work for you?” And we look at, then, the fees. There’s high fees in the first five or so and then we lower the death benefit and then the fees are virtually gone at that point, especially after 10 years, there’s, like, no fees. But, at the beginning there’s high fees and if you have poor health or there’s anything the insurance company is gonna think, “This might not make sense” they are gonna charge you an arm and a leg for it and mathematically, it doesn’t make sense for you to have this investment.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:46:23]
MIKE: That’s why we say when implemented correctly this could be, for some of you, the number one tax saving strategy in your retirement. But, you have to qualify for it.
CLAYTON: Well, and with these, too, the other problem with ‘em is that if you fund them the wrong way you lose the tax benefit.
MIKE: It doesn’t make sense. It doesn’t make sense at all to have it if it’s funded the wrong way or the fees are too high. And we just do a simple analysis, show you the data and then we make a recommendation, but you ultimately decide how you want to proceed.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:46:58]
MIKE: We don’t even tell everyone about this because it has t make sense and it’s mostly contingent on your health.
CLAYTON: Now, Mike, one of the questions, or one of the conversations that I’ve had with a lot of folks that have come in, is they’ll ask me, they’ll say, “Well, Clayton, I,” I guess they don’t ask the question, but they give me the statement that if they could have gone back 20-30 years ago and put all of their money into a Roth account they would be so excited to retire because they know that that tax burden would have been taken care of. This is another avenue
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:47:32]
MIKE: Yep. And it’s for those who didn’t do it 20-30 years ago. It’s those who want to do it in their late 50’s, early 60’s and it’s totally possible. For all of you that want to talk about tax efficiencies, this tax minimization that we’ve been sharing over the radio, or podcast, or you want to talk about social security optimization or income optimization, exploring efficiencies, I want to personally invite you to come into our office and visit with us to have these open discussions. This is one of the most critical steps to a safer retirement and you deserve to have this information specific to your retirement.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:48:06]
MIKE: Call us at 833-707-3030. Won’t cost you a dime, you’re gonna get a friendly voice on the phone who’s gonna say, “Hey, just need to gather some information from you.” Great, they’ll reach out to you within one business day and we will call you. Heck, if you’re in Utah I’ll probably be the one calling you and I’ll say, “Hey, thanks for listening to the show. Tell me what’s going on. What are you looking to do here?” And just gather your information. It’s very open, very fun, in my opinion.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:48:33]
CLAYTON: Now, imagine this. Imagine you’re in your backyard, you’re grilling something up and your neighbor comes over and says, “Hey, we’re thinking of going,” and it’s a good friend of yours, “we’re thinking of going on a cruise in a couple of months. We’re gonna go do a Mediterranean cruise why don’t you come with us?” If you’re retired, if you have a written plan you can say, “Great, let’s do it. We’d love to go.”
MIKE: Yeah, who cares if the markets are down? You’re prepared for that. Markets are good.
CLAYTON: If you don’t have a written plan, if the markets shutter between then and when it’s time to leave that might change your plans. But, if you have that confidence, if you have a distribution plan you will be able to say, “Yep, let’s go. That sounds like a blast.”
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:49:15]
MIKE: Yeah, and there’s the thing, Clayton. We’re local. We’re independent. We’re here for you. This visit is about you. We’re legally bound to do what’s in your best interest and we take that legal and moral responsibility extremely seriously. We’re here for you. So, the visit is all about you and answering your questions and providing you the insight so you can accomplish your retirement goals. Here’s what it’s not. It’s not some sales pitch. Heck, we’re not even saying you should make a financial decision or any investment decisions, especially when you first come in because we just met you. Don’t bring your checkbook. It’s not time to pay us anything.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:49:49]
MIKE: It is simply a time for you to get the information that you need to proceed in proper planning for your retirement. Or, if you’re currently retired, to make the adjustments while the markets are up so you can enjoy the retirement that you set out to enjoy.
CLAYTON: So, give us a call, our number, 833-707-3030, again, 833-707-3030. Now Mike, this has been a lot of fun to go through today, to talk about the safer steps to a better retirement.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:50:22]
MIKE: Yeah, just five steps to a safer retirement. It’s a simple process, but when it comes down to it not only is it simple, it is life changing. You get more financial stability. You get more clarity. Often times you’re able to retire sooner than expected and you get more income than you were expecting. I mean, it is such a liberating conversation and the best part about it is it’s not the extremes that the financial industry is touting out.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:50:47]
MIKE: Now, the last part about this, too, is the R in SAFER, it ends in R, which is risk reduction and what’s so cool is at this point we’re checking off the major risks that retirees face and we’re solving ‘em just left and right because the written plan is based on principle. So, if you build yourself on principle, you write a plan based on retirement principles, these principles solve a number of risks before you’re even aware that they’re a risk. For example, Clayton, a popular risk that we want to talk is about market risks.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:51:22]
MIKE: When markets turn every seven to eight years, which they typically do, that’s one retirees are pretty aware of. Do you think a lot of retirees are aware of interest rate risk
CLAYTON: Probably not, but that’s a big one right now.
MIKE: What’s interest rate risk, Clayton?
CLAYTON: So, right now, historically, if you look at the 10 year Treasury bond yield, we are near a historic low. We bottomed out in 2016. So, the problem with that is when you, if you’re holding bond funds and interest rates go up you lose money. You lose value on it.
MIKE: Bond funds are not safe money.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:51:56]
CLAYTON: And bond funds, another name for these, are a safe mutual fund that you’ve got in your 401K, a lot of times. That’s, and so, these, whether or not you’re familiar with the name bond fund, this is probably something that if you own mutual funds…
MIKE: If you’ve got a pie chart even.
CLAYTON: If you’ve got a pie chart, if you have told your advisor ever that you want to be in a safer, if you’re less risk, if you’re more risk adverse and you don’t like as much risk, you probably are going to be in a bond fund of some kind.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:52:24]
MIKE: Yeah, and the interest rate environment right now, interest rates being low, is really tough. I mean, everyone right now listening, and think of the 80’s, okay? Would you like to buy a home in the 80’s, given those rates that were available or would you like to buy a home today? Probably today.
CLAYTON: Yeah.
MIKE: Now, if you wanted to get a CD in the 80’s or a CD today, which one would you like? Probably a CD in the 80’s.
CLAYTON: Right.
MIKE: So, for retirees high interest rates are often really, really good because it creates more options for safer investments. But, low interest rates… and high interest rates are bad for the younger folks who are trying to get a house.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:53:01]
MIKE: But, for low interest rates, they’re good for the younger folks to get a house. They’re worse for retirees to just have less risk. It makes it very tough for a lot of retirees to retire how they want and not have to take the unnecessary risk that a lot of them are being convinced to do and there’s other risk. We’ve got inflation risks. For goodness sakes, eggs costed a different amount 30 years ago than they do today and if retirement lasts about 30 years, then they’re gonna cost a lot more in 30 years.
CLAYTON: Well, with what inflation historically has been versus what savings accounts are paying right now, you put all your money in a savings account because you’re comfortable with it, you’re going to be losing money even if you’re not pulling money out of that because inflation is more than what a savings account is paying.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:53:43]
MIKE: Mm-hmm. There’s liability risk, the spousal risk, the list goes on. But, what’s so cool is by the time we get to the safer step of risk reduction we’ve already implemented the principles and this long daunting list of all the risks retirees need to be worried about, people just sit back in their chair, “Oh, we’ve got that.” Yeah, because of this principle, it takes care of this, because that principle takes care of that. See folks. When you just focus on the principles all these risks are being resolved and you might not even realize that they’re being resolved, but the stress goes down.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:54:17]
MIKE: And here’s the principles just as we wrap up the show, where the first principle is only draw income from principle guaranteed sources because when markets go down and you’re drawing income from that account you’re accentuating the losses going down and now your income’s very expensive. But, when you draw income from a principle guaranteed source you don’t do that. It’s principle guaranteed. It cannot lose money. The second principle, diversify by purpose, not just by risk. There is no one size fits all investments. You have to strategically place them in a planned format that this will do that, that will do this. Divide and conquer.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:54:55]
MIKE: I mean it seems like a really fundamentally basic concept, yet when everyone has a pie chart that’s all diversified for one purpose and that’s growth. It does not account for all the other, the how you’re gonna draw income, how much you’re gonna draw income, how are you gonna minimize your taxes, how does it correlate with social security? The list goes on. Doesn’t do that. Pie chart, growth, that’s it. You can’t diversify by purpose not just by a risk if you’re using a pie chart, impossible, which is why the third principle is to use a distribution plan or a written retirement plan and not the pie chart guesser.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:55:28]
MIKE: You cannot get the information out of a pie chart. You also can’t get the information you need or have the financial flexibility if you’re gonna use an income annuity.
CLAYTON: Well, and Mike, if you walk into retirement and all of your assets are in a 401K, in a pie chart, you don’t know how much you can draw. You can’t answer these questions. But, that what I see so many people trying to do is they say, “Well, it worked for the last 20 or 30 years, it might as well work for the next 20 or 30” even though fundamentally the situation is different. You don’t have that income from a W-2 paycheck any more.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:56:01]
CLAYTON: You now are paying yourself out of your savings and so you have to find a way to protect it and secure it.
MIKE: So, for a quick self reflection survey, keep your eyes open if you’re driving, hands on the wheel, okay. I don’t want you to meditate and close those eyes. Let’s do some safety here on the road. But, a little self reflection here, if you have lost even five minutes of sleep over your finances and the market that means your plan is not suitable for you. If all of your assets are locked up and you can’t answer how you’re going to, locked up into an income annuity and you can’t answer how you’re going to combat inflation in the future that’s probably not a suitable investment for you.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:56:43]
MIKE: If you have a pie chart and are gonna take four percent from there and you think that’s significant enough and that’s a written plan, that’s not suitable for you because it’s not a written plan. It is a strategy built on hope with one purpose and that’s for those assets to grow enough that you can survive. I hope you all call us and take us up on this offer at no cost to you so you can get a Sherpa review and an asset assessment at the very least. It won’t cost you a dime. Call 833-707-3030.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:57:13]
MIKE: Just imagine this. Just imagine markets are down you’re mowing the lawn and having a great day enjoying the sunshine and enjoying your life. Your neighbors are freaking out, lawns kind of going to waste. They’re wondering if they have to sell the home even. Who do you want to be, the one enjoying your life or the one that has to reconsider everything because the markets went down that hard? You can choose right now, 833-707-3030. That number one more time is 833-707-3030. This is safer retirement radio.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:57:45]
MIKE: I’m Mike Decker and I’m Clayton Bradshaw and you can tune into the show every week, same time, same place on the radio station you’re listening to right now or you can catch it via podcast, just go to deckerretirementplanning.com. There’s a number of options as well as the transcripts is available. Thank you.
RR S3 E34 FIVE STEPS FOR A SAFER RETIREMENT [00:58:00]
