Ep 39: Is Your Retirement Plan Out Of Tune?

Even if you have a solid financial plan in place, things can quickly get out of tune if you don’t make adjustments from time to time. Let’s talk about some of the areas where we often see people get out of tune in their financial plan.

Helpful Information:

PFG Website: https://www.pfgprivatewealth.com/

Contact: 813-286-7776

Email: info@pfgprivatewealth.com

Disclaimer:

PFG Private Wealth Management, LLC is a registered investment adviser. All statements and opinions expressed are based upon information considered reliable although it should not be relied upon as such. Any statements or opinions are subject to change without notice. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investment involve risk and, unless otherwise stated, are not guaranteed. Information expressed does not take into account your specific situation or objectives and is not intended as recommendations appropriate for any individual. Listeners are encouraged to seek advice from a qualified tax, legal, or investment adviser to determine whether any information presented may be suitable for their specific situation. Past performance is not indicative of future performance.

Transcript of Today's Show:

For a full transcript of today's show, visit the blog related to this episode at https://www.pfgprivatewealth.com/podcast/

----more----

Speaker 1: Hey, everybody. Welcome into another edition of the podcast. Thanks for hanging out with John and Nick and myself as we're going to talk about Retirement Planning Redefined once again. This week, we are going to chat about getting in tune. No, not instruments, and we're not going to sing, because that might be bad, but we're going to talk about getting our retirement plans into tune, especially because we all want to have that good solid piece in there that we know we're going to be comfortable and happy and get the things we need out of it, but we also can drift off from time to time. So, we want to pull those back in, get the reins if you will. So, that's going to be our topic this week is getting in tune. What's going on guys? What's shaking? How you doing?

John: All good.

Nick: Staying busy.

Speaker 1: Yeah, staying busy. How's the dog? I know you got that dog that's really old. Is she doing okay?

Nick: Depending upon your definition of okay, she's doing great.

Speaker 1: Well, good.

Nick: Yeah, she definitely keeps me on my toes. I think she had to go out five times before 11:30 today, so that was fun.

Speaker 1: Holy cow.

Nick: Yeah.

Speaker 1: My mine's 15 and she's going deaf and going partly blind, but she's still okay in that department. How's yours doing? Is she having some hearing or vision?

Nick: Oh yeah. No, she can't hear and her vision is not great, and so it's fun stuff. I'm on the third floor of my building, so I carry her down every time to go out. She's not a big dog, so it's easy, but-

Speaker 1: It's cute and it's sad sometimes that she's losing her hearing. I'll be calling for her and she can't figure out exactly where it's coming from, because she's not completely deaf. So, she looks around in different angles and I'm like, 'I'm right next to you, you ding dong.'

Nick: Oh yeah, I know that look well.

Speaker 1: Pretty funny stuff. John, what's going on with you buddy? I know you don't have these exciting dog stories, but what's happening?

John: Not too much. Just staying busy and I think as you're aware, becoming a school parent, so that's fun and then started my little one in gymnastics, so I have to head there tonight.

Speaker 1: Oh, nice. Yeah. You're getting to that phase now where you got hobbies and activities all the time, right?

John: Yeah, play dates are starting to get formed now. I pick her up from school and it's like, "Hey, I want to do a play date with my friend." It's like, "All right."

Speaker 1: Yep, go, go, go. That's all right, hey, at least we're getting back to some of that stuff. So kids and stuff. I mean, everybody needs interaction, so it's good that we're here getting some of that stuff going on. Getting our life back in tune, so to speak. That'll be my segue back into the topic here. So, let's talk about how to get our financial plans or our retirement plan back in tune in case we've got out. We talked a couple weeks ago guys, and we're waiting to see what the fine details are going to be, we'll probably do a podcast on it, but tax considerations, future tax considerations.

Speaker 1: A lot of the stuff that's right now at the time we're taping this that's before the house, it may go through, there's quite a bit to the corporate tax change, there is bumping up. They're trying to make it sound like it's all going to be for the higher net worth folks, but $400,000, $500,000 is not that hard to get to for some of these things. So depending on where you're at, tax considerations needs to be on everybody's radar no matter what you're making.

Nick: Yeah, tax considerations are definitely something that we try to focus on with clients. I think in our minds, the number one, the rule of thumb when it comes to tax considerations in regards to investments and retirement accounts is to have options. So, what we mean by that is not only a diversification in the types of investments, underlying investments that you have, but also in the types of accounts that you have.

Nick: You want to have accounts are going to be tax free down the road, accounts that will be taxed down the road and then maybe some accounts that are subject to income or capital gains taxes versus just ordinary income. So, the having options, building a personal moat and being able to have the ability to adapt and adjust, I think and staying nimble is the number one priority when it comes to planning.

Speaker 1: Having a personal moat, I like that. John, you've been getting so much rain, you might have your own moat, right?

John: Yeah, that's funny. I do feel like it's been raining every day. It's just new house, it's like we have this big yard and I walk back there and it's constantly soaked and the pool's always overflowing. So yes, I do have a personal moat keeping Nick out.

Speaker 1: Nice, I like that. Okay, so tax considerations. Again, lots of things happening there, so that could even be changing and that's why it's definitely important to make sure. It's always important really, no matter what time we're in, but I mean certainly when we get to retirement, tax considerations and what we're paying is a big deal. So it's not what you make, it's what you keep, all that stuff.

Speaker 1: Life insurance. Fellas, having the right amount, well, 'Hey, I'm retired, I don't need it.' That's what most people say, or at least that's the general consensus or rule of thought, but is that correct?

John: Sometimes it is. It really comes down to when you're looking at, do I have the right amount? So, is there a need for it? If there is a need for it, then it becomes income replacement. So example, I go to retire and let's say I do have a pension that's life only. We talked about that a couple weeks ago and if I pass away, that pension's gone, does my spouse need that money for her money to last at that point or for her to hit her goals?

John: If the answer's yes, she needs that pension replaced, then yes, there is a need for life insurance. There're other things that go into it, but that's just looking at it from a retirement standpoint. It's really replacing someone's income or assets that are needed to generate income for the surviving spouse.

Nick: Yeah, and I would say just on top of that, I think probably the reason that we mentioned this in this conversation is just to not absentmindedly push it off the side. I think there's a perception for people that no matter what, they're not going to need any sort of coverage approach in retirement or into retirement. Just like anything else, we think it's important to take inventory, and when you're building your plan, to make sure that you vet out the different situations and scenarios.

Nick: Because when you were originally planning, you may have not expected to have a mortgage, you may not have expected to help out your kids with education costs or maybe at the level that you did, or a myriad of other things. So life comes at you quick, we think it's important that... because so many people automatically assume that it's just no longer a part of the conversation for them, that you make sure that it is or is and take a good inventory to see if it makes sense for you.

John: Yeah, definitely. Let me jump in here real quick.

Speaker 1: Sure.

John: This is really important for big business owners to look at as their near retirement, because a lot of small businesses, they are in essence the business, and if they don't have any life insurance and something happens to them, sometimes we've seen businesses have to fire sale and stuff like that.

Nick: Yeah, if something happens to the owner, the business is relying upon the owner, the family expected to be able to sell the business and cash out and be profitable and sail into the sunset that can get derailed pretty quickly. So that's another good example.

Speaker 1: Yeah, definitely. And you mentioned cash, just cashing out, but that was actually, cash is on my next one who doesn't love cash. I mean, everybody loves cash. We want to keep a nice amount around. We feel like most people kind of have this, the higher the number the better. My kid, she's 24 now she's working, making good money for a change.

Speaker 1: Now she's learning how to play this game with herself about, Ooh, how much can I get my savings account to grow? I'll be chatting with her and she'll be like, 'Yeah, I'm trying to hit this number. And I'm adding a little bit more.' And it's nice to see her kind of start to play that game with herself where she's trying to grow those accounts. And she enjoys always the fact they're growing and that only happens more as we get older. So people sometimes want these pretty large amounts sitting around. So what's the right amount to actually have, because I mean, at some point, we start talking about emergency funds and so on and so forth. I mean, what are you going to do with $100,000 sitting in the banking cash? Is that really too much? Is that the right amount? I mean, how do you figure that out?

Nick: Well, this is where our very effective, but also annoying answer of it depends comes into play. So, this answer possibly more than almost anything else is I think hyper dependent upon the people or the person that we're talking about. Obviously there's kind of the rule of thumb of, six to 12 months of expenses in cash. But really when we drill down further, one of the things that I like to run by people is to have them think of cash in a way of it's the ultimate permission slip. What I mean by that is what amount of cash allows them to feel comfortable enough to not make irrational decisions with the rest of their money? So if having a year or 18 months, 24 months, even 36 months of cash allows them to be invested in a way that they should be with the rest of their money.

Nick: Then in my mind that the opportunity cost of that money, getting more upside, that cash getting more upside is worth it because it prevents them for them overreacting to things like market corrections like we're having this week or these different sorts of scenarios and circumstances where one of the best techniques that has worked for us is going through and saying 'Yes, the market just pulled back over the last three months. Let's just say it did 10%.' But if we can go to the client's accounts and say, 'Look at, you've got your next 18 months of expenses without ever touching your investment accounts is sitting there in cash for you.' Plus remember that we've got somewhere between 30% and 50% of your actual investment and fixed income automatically their blood pressure, their heart rate, and their amount of emails and phone calls to us go down, which are all things that are positive.

Speaker 1: Really that's the talk, starting talking about risk as well. And that's my final bit on getting the plan in tune is having the right amount of risk for the time that you're in and for the situation that you're in. Maybe those two things go hand in hand, well, they all really go hand in hand, if you think about a retirement plan in general, but getting the right amount of risk is certainly important.

Speaker 1: And we touched on this a couple of weeks ago when we were talking about couples and how they sometimes they're opposites in that regard. So you still have to find that that happy place that's working for the plan. I think I saw an email for somebody in a couple of weeks back guys, and it was something like, my account haven't done as well as the market this year and maybe I should change advisors. And it was like, well, wait a minute. You know, don't just assume that it's the advisor's fault because it didn't keep up with the market. How are you set up from risk? Are you exactly... Are you taking all as much risk as possible in that, which case the market return should be closer? Or are you very conservative and just don't really know what you have and that's why you didn't perform as well. There's lots of ways in variables to look at this correct?

John: Yeah. It's definitely one of the most important things to look at when your overall portfolio is what is your or risk tolerance and how are you invested in? And what you just said is on point, we find that a lot where people are trying to compare not only to us, but other advisors like, 'Well, the S&P did this, what did I do?;' And then when you start diving into it, it's, well, you're a 50, 50 mix and that's the S&P all 100% equities. It's not going to be the same.

John: But definitely from a planning standpoint, we try to make sure people are invested correctly based on their risk tolerance. Because if you are more aggressive in your portfolio than you actually are, when you start to see a dip, chances are you're going to panic and chances are if the dip is fast enough or goes down enough like in the COVID period, there March, April 2020, some people change courses and went from what they were, and then went to very conservative.

John: And then three weeks later, the market just rallied back and all the gains were lost if you were, are seeing on the sidelines. It's important to really pick your risk tolerance, pick your portfolio and stay at the course based on the plan.

Speaker 1: Yeah, absolutely. I mean, you can't panic. That's usually the worst time to do it. It's definitely one of those cases where we tend to do that. And that's, again, the value I think of an advisor, because somebody can call up and say, like the pandemic crash or whatever, and say, 'Hey, I'm panicking. What do I do?' And you can walk through those scenarios without just locking necessarily locking in those gains by panic selling or whatever that case might be.

Speaker 1: So something to look out for, make sure you have your plan in tune, and they require a tune note, folks, these they're not a set and forget it kind of thing, it's not. Even life insurance, if you bought life insurance 25 years ago, and you hadn't looked at it 25 years, it's one of those things where we buy it, we think we're never going to need it to look at it again, but no, that's not the case.

Speaker 1: Stuff changes. Life happens. So make sure you're making little tweaks, your plans should change and ebb and flow just like your life's going to. And that was our topic this week on the podcast. And as always, we're going to try to take at least an email question or two, if we can, if you'd like to submit your own, go to the website at pfgprivatewealth.com, that's pfgprivatewealth.com drop us a line there and subscribe to the podcast while you're there as well.

Speaker 1: We'll see if we can get these two in at least one, we got a question for Nick, from Jamie. He says, 'Nick, I've looked forward to retirement for many years and I enjoy the podcast. And now that I'm actually retired, I can't shake the feeling that I'm going to run out money. So you got any solutions for fighting the feelings, or should I just go back to work?' That's one of these things where people get into that situation. It's like they maybe don't have a good plan or they're just not comfortable. So they're not really sure what it's doing for them.

Nick: Yeah. So this is interesting because I would say that realistically, the majority of the people that work with us, their plans are pretty solid and we have a high level of comfort of them retiring. In those scenarios where, where we have a high level of confidence in their plan and what we've done, especially, because we use a lot of pretty of variables. We try to up the cadence of meetings or the amount of times that we talk and get them to start trying to view things maybe a little bit more like us.

Nick: So using things like the client portal that we have, where they can view their cashflow or their lifetime and see the different parts start to become more familiar with how the planning software works and get some of that comfort and affirmation that they're online and on target is really, really important.

Nick: And then from the perspective of things that maybe aren't quite as static, in our regular reviews, really trying to drill down and dig into what are the things that are concerning them the most? For example, for some people, the things that are concerning them the most might be taxes. We can work, show them and illustrate a scenario of a significant bump in taxes and show them how that impacts them specifically.

Nick: When I realized that I should ask clients that have serious concerns about how these specific things that they're concerned about impact them specifically, because one of the things we've seen is that, it's like, 'Okay, I'm watching the news and the news says this is going to happen and freak out in twos.

Nick: They're thinking in large terms maybe from societal standpoint and that's understandable, but take that one step further and say, 'Okay, well how does this impacting me? How impact my plan? How does this impact me? And then when we start to drill down, when they start to learn to do that, the amount of stress that they have starts to go away pretty significantly. 'Okay, well I'm concerned about these taxes.' All right, well, Hey, let's take a look at the amount of income you're in. Let's take a look at sort of bracket you're in.

Nick: Historically, even if we go back the last 20 years, how much that bracket has fluctuated and you see throughout 9/11, throughout the great recession, throughout the bounce back, throughout... Year bracket that you're in has gone plus, or minus 3%, that's not going to really have a huge packed on you or let's even just let's bump it up an extra 10%, those sorts of things or using that same sort of situational awareness with markets or, whatever else it is, health, those sorts of things. When people start to really think about how to impact them, it's usually kind of a calming factor for them.

Speaker 1: Yeah, I think at the end of the day, if you don't have a good strategy in place that makes sense to you and that you understand you're going to have a hard time shaking that feeling and not feeling calm and feeling nervous about it. And that's really where the right advisor and also the right plan comes in place. If you're working with somebody and you feel like things maybe aren't totally there, it's okay to get a second opinion. Whether it's Jamie or anybody else that checking out the podcast, find out if you're working with somebody and you're not sure that that's the right fit, then get a second opinion and you may find that it is. It's everything's working swimmingly well, and that's fantastic. Or you may find that you might need to make a change.

Speaker 1: And if you do, just reach out to John and Nick and schedule some time, have a conversation with them. Second opinions is part of the industry. So give them a jingle, have a conversation, pfgprivatewealth.com, that's pfgprivatewealth.com and time wise, guys, I think that's going to wrap it up for this week. So we'll, we'll take that next email question next time on the show.

Speaker 1: So reach out folks, let them know, to give them a cell, 8132867776 is the number to call. It's just easier to go to the website, pfgprivatewealth.com, subscribe to the show and all that good stuff on Apple, Google, Spotify. And we'll see you next time here on Retirement Planning Redefined with John and Nick and you guys have a great week. We'll see soon.

Nick: [inaudible 00:18:25]

John: Have a good one.