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Transcript
00:00:00:00 – 00:00:03:08
Mike
What types of financial tools are you using there?
00:00:03:09 – 00:00:03:19
Zach
Right.
00:00:04:06 – 00:00:19:10
Mike
I’m going to tell you what we use pretty much every time. And I’m going to use a word that some of you, as you’re listening, you might say, oh, I don’t like that word. We use indexed annuities. That’s what we use almost exclusively.
00:00:25:25 – 00:00:44:15
Zach
So this is from Business Insider, and they have a report that they’re sharing with us in this article. And it’s all about early retirement. Being the new normal. And they’re not saying COVID has affected this. This is the new reality. People are retiring earlier than ever according to this data that they have.
00:00:44:20 – 00:00:55:28
Mike
Yeah, I was talking to my 16 year old daughter on that one. I said, Honey, what are you can do for a living? She goes, I don’t know, but I want to be retired by the time I’m like really old like by the time I’m 40.
00:00:56:09 – 00:01:18:20
Zach
I love I love that. Love that for her. All right. So let’s dove into this article, Mike. So what Business Insider has done, they have a survey from the Federal Reserve Bank of New York. They surveyed about 1300 American households. And the average chance adults expect to work beyond the age of 62 is right at 50%. And that’s down almost a percent and a half from last year.
00:01:18:20 – 00:01:27:09
Zach
And it’s the smallest share since this survey began in 2014. So people are expecting to stop working by 62 more and more each year it seems.
00:01:27:10 – 00:01:46:27
Mike
Okay so what I heard you just say let me make sure I heard this right. You’re saying that the research is now and by the way Federal Reserve Bank of New York. Yep. That’s what I would call a really good source by the way, in case y’all are wondering out there where you’ve got maybe on one end of the scale National Enquirer, maybe not the greatest source, right.
00:01:47:15 – 00:01:50:21
Mike
The Federal Reserve Bank of New York, we can pretty much count on them.
00:01:50:21 – 00:01:52:18
Zach
Pretty reputable. Yeah. To quote from.
00:01:52:22 – 00:02:05:22
Mike
And but what they’re saying is they’re saying that half of people surveyed, the half them are basically saying, look, I’m done by 62. Yeah. Half a work longer. Half done by that.
00:02:05:22 – 00:02:13:21
Zach
Yeah. And get this, Americans that say they would work beyond the age of 67, that fell to a record low of 32.9%.
00:02:13:27 – 00:02:21:04
Mike
Okay. So a third of people think they’ll work past 67. Two thirds. They’re done by that.
00:02:21:05 – 00:02:22:28
Zach
Yeah. Okay. Yeah.
00:02:23:04 – 00:02:38:13
Mike
Got it. So basically what we’re hearing is that people are wanting to retire sooner. Yep. And that means that that retirement age of 62 half of the people want to be done by then and then by 67. Two thirds want to be done by then.
00:02:38:14 – 00:02:39:07
Zach
Yep, pretty much.
00:02:39:15 – 00:02:42:20
Mike
So the question I guess is, you know, are they going to be ready?
00:02:42:20 – 00:02:48:22
Zach
Yeah. Like, what questions do you need to have answered if you’re like, Hey, I want to retire early or I’m done, I’m ready to be done.
00:02:48:27 – 00:02:51:14
Mike
Yeah. What’s your favorite phrase? What do you love to say all the time?
00:02:51:15 – 00:02:56:16
Zach
Well, we say it a lot, Mike, and I know I love saying it. It’s an investment plan is not a retirement plan.
00:02:56:24 – 00:03:17:24
Mike
Yeah. So if you were to ask me if you were to say, all right, Mike, you’ve been helping people for over 25 years and I like how you said get to and get through retirement. Yeah. Here’s what I know. You know, I’ve done this long enough. Here’s what I know. I know a lot of these people who are retiring at, say, 62 or even if it’s between 62 and 67.
00:03:18:15 – 00:03:48:02
Mike
I know a lot of them have advisors and the problem is that a big, big chunk of these advisors are not retirement advisors. Right. They are investment advisors, or they might call themselves financial advisors, but they’re not retirement advisors. And here’s what I mean. I had this actually come up about a week or two ago where a couple had come in.
00:03:48:17 – 00:04:18:22
Mike
They had been working with an investment advisor for the past 15 years, I think it was. And this couple had accumulated a pretty good amount for retirement. They had accumulated about one and a half million dollars. And like, we think we can retire. We just want a second opinion before we pull the trigger. So they have about a million and a half saved and you know, when we went through the discussion because, you know, we always want to really dove in and learn about their situation before we can, you know, give really any opinion.
00:04:18:22 – 00:04:37:02
Mike
Sure. We learned that when all was said and done, they needed to take about 45,000 of income out of these accounts. Okay. So if you think about it, like, okay, a million and a half dollars. 45,000, what percentage is that? It’s like 3%.
00:04:37:03 – 00:04:38:05
Zach
Yeah, not a whole lot.
00:04:38:09 – 00:04:51:15
Mike
And so there advisor I said, Well, what does your advisor say about this? And their response was, Well, by our advisor tells us, like, you got plenty of money, you got nothing to worry about. No problem. Yeah.
00:04:51:15 – 00:04:54:22
Zach
3%. Nope. No Big Easy. Yeah.
00:04:55:11 – 00:05:14:27
Mike
And I said, Well, why? Why did you reach out to us to get that, you know, get second opinion? Why are you asking us to give you a review here? If your current advisor says you’re in great shape. Yep. And there comment was, you know, they said because on the radio, you talk about a lot of things we don’t hear about from our advisor.
00:05:15:11 – 00:05:39:22
Mike
Like, he never talks about taxes because I hear you talk about taxes. All the time. Yeah. He never talks about, you know, what, if the market crashes, what are we going to do? Then you guys talk about that a lot and we just, you know, we don’t know what we don’t know. You said that retirement represents a fundamental shift in life.
00:05:40:21 – 00:06:01:23
Mike
And when you have a fundamental shift in life, guess what? Your financial planning probably also has to have a fundamental shift to match that And they said that really resonated with us. Yeah. When we talk to our current advisor, he’s basically telling us just there’s not really much reason to make any changes. And we feel like there’s a bit of a disconnect.
00:06:01:23 – 00:06:12:21
Mike
We just want to visit and, you know, are we missing something here? Right. And this is a great example, Zak, about how an investment plan is not a retirement plan. A hundred.
00:06:12:21 – 00:06:13:02
Zach
Percent.
00:06:13:10 – 00:06:42:09
Mike
Because their advisor was telling them what every almost every other financial advisor would tell you, hey, you’ve got a million and a half dollars, you only need 45,000. It’s a 3% distribution rate. You’re good Don’t worry about it. Life is great. For 25 years, I’ve heard that. You know, advisors telling people that, yeah, it these advisors are only looking at an investment plan.
00:06:43:18 – 00:07:09:06
Mike
So when it comes to your retirement, I can think of at least three other plans that you have to have before you say green light or red light on this retirement idea. Right. And those three areas, we’ll break them down here throughout the show. But here are the three areas you need to think about. Number one, you need an income plan to replace your paycheck.
00:07:09:28 – 00:07:26:13
Mike
Now, this couple, they have a million and a half dollars. When we ran the analysis on their portfolio and said, well, how much income is your portfolio generating each year? Was it generating 45,000 of income? No, it was generating like 20,000 of income.
00:07:26:13 – 00:07:27:08
Zach
There’s a gap there.
00:07:27:18 – 00:07:51:02
Mike
And I said, Well, your portfolio is only generating 20 grand. You want 45, whereas the other 25 going to come from. And guess what? The advisor would say to that or says to that, I’ll just sell some positions. Well that’s great if the market’s up. What if the market’s down? Right. So we have an income plan that we need to think about putting together.
00:07:51:06 – 00:07:56:23
Mike
Second area that they need to have a plan. Zak what’s my favorite topic?
00:07:57:00 – 00:07:57:19
Zach
Taxes.
00:07:57:26 – 00:08:04:21
Mike
What about taxes? Right. Almost all of that. One and a half million dollars. They had words in what? What do you think it was? Invest in a.
00:08:04:21 – 00:08:05:10
Zach
41 K.
00:08:05:19 – 00:08:21:13
Mike
Exactly. For one case and IRAs and things like that. And I asked them, what is your plan? What is your advisor recommend you do to manage the taxes on this for one K over time? What do you think that answer was?
00:08:21:26 – 00:08:22:29
Zach
We don’t really ever talk.
00:08:22:29 – 00:08:50:14
Mike
About they never talk about taxes. Right. Okay. Well, maybe that’s something to pay attention to. And then third is risk. When you think about it, there are two things out there, you know, that you don’t control that could really affect your financial security retirement after. There’s three things. One, what if the market doesn’t cooperate, you know, between 2000 2009 for ten years a market or nothing from 1970 to 1979 thereand basically nothing.
00:08:50:20 – 00:09:08:06
Mike
What if we get another ten year period like that where the market earns nothing. How would that affect your retirement plan and your security? Well, my advisor doesn’t really talk about that. What about your health? What if you die too soon or what if you get sick along the way? Or are you going to be okay? Well, they don’t really talk about that.
00:09:08:17 – 00:09:31:24
Mike
What if inflation goes out of control for a while? Well, I didn’t talk about that. So there’s a lot of things. We’ve got income planning, tax planning and risk management planning that we need to do on top of investment planning. And like is usual, their advisor didn’t help with any of those things. And when I ask them questions like, well, what is your advisers say about this or that?
00:09:31:25 – 00:09:44:07
Mike
And they say, Well, my advisors never brought it up, but, you know, we haven’t really brought it up to him either. Sure. My pet peeve is, wait a minute. Aren’t you paying them to be an advisor?
00:09:44:08 – 00:09:46:14
Zach
Yeah. Shouldn’t they be asking you these questions? Yeah.
00:09:46:14 – 00:09:57:05
Mike
If you’re paying someone to do a job, isn’t it their job? It’s not your job to bring this stuff up to your advisor. Sure. It’s their job to bring it up to you. Yeah, right. And so there you go. That’s my pet peeve.
00:09:57:07 – 00:09:59:16
Zach
So that’s your only pet peeve? The only one you have.
00:09:59:17 – 00:10:10:02
Mike
Oh, I have. Oh, my gosh. So many. Yes, like my. We could open up that Pandora’s box. We could. Mike, do you have any pet peeves about politicians? It’s like.
00:10:10:13 – 00:10:11:09
Zach
Oh, what am I doing?
00:10:11:10 – 00:10:12:02
Mike
Your topic right?
00:10:12:04 – 00:10:12:23
Zach
Shows over.
00:10:13:29 – 00:10:22:10
Mike
Going back to this couple. So they’ve got one and a half million bucks. And by the way, Zach, I mean, we see a lot of people these days with over $1,000,000 in there for one case right?
00:10:22:11 – 00:10:34:13
Zach
Yeah. Mike, that article we actually talked about at the start of the show, they reference a study done by Fidelity. And this year, the number of for one case, an individual IRAs holding at least $1,000,000. It’s at record highs.
00:10:34:17 – 00:10:53:03
Mike
Yeah. And you know, guess what? As you’re listening, you might sit back and say, what, $1,000,000? Holy cow. That’s nothing. I’ve got $3 million in my for one K or something. Yeah. Great. Good job. Or you might be sitting there saying, oh, my goodness, $1,000,000. I only have like three 50. Yeah. You know what the took it is. Okay.
00:10:53:16 – 00:11:11:17
Mike
Whenever we talk about these examples on the show, it’s not how much money you have, right? I mean, you might have more. You might have less, and that’s okay. I’m just trying to illustrate, you know, the things you need to be thinking about. Let’s go back to our couple, John and Mary. They’ve got this million and a half dollars.
00:11:12:01 – 00:11:34:06
Mike
They only need $45,000. It’s two and a half percent. But I’m sorry, it’s a 3%, rather, that they need. Gosh, I can’t believe I just misspoke there. They only need 3% income. The problem is their portfolios not generate enough. And they don’t have an income plan. They don’t have an investment plan. But And so as I spoke them, I got all these details.
00:11:34:06 – 00:11:55:00
Mike
We put their information in our planning system live. And right away, at the end of that first meeting, with them, we were able to kind of check out a couple of things. And so here’s a couple of things we looked at. We said, all right, assuming you get we said 5% rate of return because we don’t ever we don’t want to go crazy there.
00:11:55:03 – 00:12:18:20
Mike
Right. We want to assume conservative numbers. Yeah. I mean, we’re talking about retirement. This is an erratic couple decision. Once you retire, you never want to go back to work. Let’s make sure we’re not getting aggressive with our assumptions. Let’s be conservative. So we said all right, let’s assume you’re in 5% a year and you’re given their income, Social Security and all this other stuff, like how long will your money last?
00:12:19:10 – 00:12:40:05
Mike
And according to the software and assuming that tax rates didn’t change, which we know they will and all that other stuff said, look at this, it looks like your money should last till you’re about 98 years old. Now, how would you feel about that, knowing your money lasts till you’re 98 years old? What do you think they said?
00:12:40:13 – 00:12:42:14
Zach
Yeah, we like that. Sounds pretty good.
00:12:42:14 – 00:12:54:16
Mike
It feels pretty good. Now, this couple, you know, they were in like 63. 64. Right. For them that’s like 25 year. Well I’m sorry, 35 years. Yeah. Right. Not quite that far. 30. Yeah.
00:12:54:17 – 00:12:55:02
Zach
30 years.
00:12:55:10 – 00:13:17:16
Mike
Whatever it is. 35 years. Yeah. We don’t think, you know, if we live another 30 years I mean they’re really healthy. Mm. And guess what, when you’ve got a couple 64 63 and they’re healthy. Mm hmm. There’s a pretty good shot that at least one of them. Usually the wife live to 95. Right. So she lives to 95 money less to 98.
00:13:18:06 – 00:13:40:29
Mike
That works right? Mm hmm. So I said okay, so everything on the surface looks good. What your adviser’s saying you got plenty of money. Nothing to worry about on the surface. That looks okay. Looks like this works. Mm. Well, but what do we say? There’s some things that could happen that you don’t control. That might affect this financial security.
00:13:41:24 – 00:14:12:10
Mike
So the first question I always like to ask is what happens if the stock market decides it’s just going to be flat for the next ten years? What if for the next ten years, the market earns essentially nothing? Now, there’s this great chart This Warren Buffett chart, it’s a it’s a Warren Buffett. He likes to compare the value of the total stock market to the value of our economy, the size of our economy, because that relationship tells him.
00:14:12:23 – 00:14:45:29
Mike
Is the market fairly valued? Is it undervalued or is it over value right now? That comparison tells us that the market is strongly overvalued. And the last two times the market was strongly overvalued like it is now. Once was in 2000. Once was in 1969. Both times the markets were strongly overvalued, according to Warren Buffett’s measurement. The next ten years, the markets earned essentially nothing.
00:14:46:00 – 00:15:03:05
Mike
They were flat. So I was like, Hey, we’re there now. If last two times markets are nothing for the next ten years now we don’t know what the markets are going to be in the next ten years. But we can certainly say, hey, there’s a chance, a pretty good chance I might earn next to nothing the next ten years.
00:15:03:20 – 00:15:17:14
Mike
What if that happens in this couple? We learned right away we said, Oh, look, your money should last an 88. But if the markets are flat for the next ten years, listen to this. Suddenly their money would only last to their 84.
00:15:17:25 – 00:15:19:17
Zach
Not feeling as comfortable about that.
00:15:19:18 – 00:15:38:29
Mike
I’m not so happy anymore. And I just simply said, I said to them, Do you think there’s a reasonable possibility that the markets might be kind of flat for the next ten years? Their comment is, Well, yeah, based on the chart, I could see that happening. And I said, And if it happens your money runs out of 84.
00:15:39:00 – 00:15:42:22
Mike
In your opinion, would that be a problem? What do you think they said?
00:15:42:23 – 00:15:44:03
Zach
Yeah, that would be a problem.
00:15:44:07 – 00:15:50:07
Mike
Yeah. And by the way, they also said, why doesn’t our advisor. Why? Why hasn’t he ever shown us this?
00:15:50:08 – 00:15:55:13
Zach
Yeah, because all they’ve heard is you’re good. We’re fine. Nothing to worry about. And plenty of money.
00:15:55:14 – 00:16:14:27
Mike
Yeah. It’s like the advisors almost a little, I don’t know, cut in sending. Right. Right. And that happens sometimes, unfortunately. I said, well, right away, if the market doesn’t cooperate, you might be in trouble. We also put in a couple of scenarios for what if one. Like the husband. I never pick on the wife. What if the husband.
00:16:14:27 – 00:16:33:00
Mike
What if he dies a little earlier than anticipated? Are you going to be okay? What if one of you need some kind of long term care, whether it’s in your home, where you have to go somewhere? Will you be okay? And then both of those situations, the surviving spouse in this case, the wife, in our example, moneys running out in the late eighties.
00:16:33:00 – 00:16:55:25
Mike
And she’s like, well, what if I lived to 95? So already we’re seeing you have an investment plan, but already you don’t have a risk management plan. You don’t have a plan to protect yourself against market risk. Or health care risk. And that’s a problem if you want to retire. You got to address that stuff first. Yeah, because this couple, they’re in there, they’re 64 63 they’re really healthy.
00:16:56:07 – 00:17:16:06
Mike
The odds of one of them are going to live to 95, maybe both of them into their nineties is very high. So that’s a problem. And well, if one of them dies too early, it’s a problem. If one of them gets sick along the way, it’s a problem. It’s like and they’re sitting there talking and they’re like Mike man, and they’re just they’re look each other kind of shaking their head.
00:17:16:06 – 00:17:43:22
Mike
They look at me, they’re like, Mike, our advisor, never talk to us about this. And by the way, it’s not like their financial advisor is a bad person. They’re not. There are three levels, level one. Those are the financial advisors that come from what we call the product, the product providers. So product providers are like Vanguard and Fidelity and Schwab and, you know, places like that, TD Ameritrade, they all have advisors that you can hire to work with you.
00:17:43:23 – 00:17:56:04
Mike
Right. They’re very inexpensive. Usually they’re a college kid, you know, kid right out of college just following their little systems. Right. And they do a pretty decent job helping you with basic asset allocation. That’s what they.
00:17:56:04 – 00:17:56:26
Zach
Do. Yeah.
00:17:57:15 – 00:18:06:01
Mike
Level to advisors. Those are investment advisors. Now, usually they work at these big firms, you know. You know, all y’all know their names.
00:18:06:01 – 00:18:07:25
Zach
On every street corner of a big building.
00:18:07:25 – 00:18:33:01
Mike
You got it. That’s where you find them. Again, good people. Yeah, but what their job is, they are primarily they help you with investing at a more sophisticated level than what you get at, say, a fidelity or Vanguard or something like that. One of those advisors. Right. They help you at a higher level of investing. They help you better, you know, hopefully do a better job growing accumulate in your money.
00:18:33:01 – 00:18:37:19
Mike
And that’s what they do. They help build investment plans.
00:18:37:20 – 00:18:38:02
Zach
Yes.
00:18:39:08 – 00:18:49:11
Mike
However, when you’re getting close to retirement, it’s time. That’s when you often need that level three advisor, the holistic planner. Because, Zach, what do you like to say?
00:18:49:18 – 00:18:52:04
Zach
Investment plan is not a retirement plan. There you.
00:18:52:04 – 00:19:09:17
Mike
Go. An investment plan is not a retirement plan. So here you are at a level two advisor. Good person. That’s who this couple, Jon and Mary, they had one a level two advisor they had a great investment plan, but they didn’t have a retirement plan. So when they’re asking me, Mike White, now advisor, ever talk about this? I had to go back.
00:19:09:17 – 00:19:31:14
Mike
I said, well, probably because that’s not really their job. You know, that’s not what they really do. If you want these types of answers, you need to talk to someone who’s a level three advisor, who’s a holistic planner. That’s more what we do, right? And we don’t do it for everybody. We specialize in retirement planning. Right? Right. The next area we wanted to talk about here said, Okay, well, what about taxes?
00:19:31:28 – 00:19:51:07
Mike
Right. My favorite topic. So here you are. You got one half million. It’s all in Ira. And for one K, for the most part, I think there’s like 100,000 or a couple hundred thousand outside. But almost all the money was in an IRA or a 41 K like. So what is your plan to keep your taxes to a minimum?
00:19:51:07 – 00:20:15:13
Mike
They’re like, What do you mean? And I said, Well, let’s take a look at this. And this is remember, this all happened in the first time they visited with me. I said, Well, let’s click this tab that says tax and we let’s add up all the taxes you’re projected to pay over your lifetime. We added up that number and sack it was over $1,000,000 that they’re projected to give to the IRS over their lifetime.
00:20:16:11 – 00:20:27:00
Mike
And I said, if you just keep doing what you’re doing here, you’re going to be given over $1,000,000 to the IRS. How do you feel about that?
00:20:27:19 – 00:20:29:03
Zach
They were not happy.
00:20:29:08 – 00:20:47:27
Mike
Yeah. Who would be happy with that? Yeah. I mean, not all at once. You know, give it to them all at once. But over time, I mean, it really adds up. Like, well, let me ask you this. To what degree are you you know, do you visit with a tax advisor every single year to see if you can knock that number down?
00:20:48:05 – 00:21:08:25
Mike
Like now we just do our own taxes on TurboTax, right? Well, what about your current advisors? He talked to you about this at all. Now, he doesn’t really do taxes and that’s, again, the level two advisory. It’s not their job. It’s it’s just not what they do. Right. Right. Whereas like us in our office, we visit with our clients every single year and look at this stuff.
00:21:08:25 – 00:21:27:27
Mike
Right. So I asked and I said, well, let’s play with this a little bit. What? Let’s just pop in a couple of of, you know, tax free let’s do some Roth conversions, like let’s put in. And I took like literally 2 minutes and I said, this is not optimized. Let’s just throw in a couple of numbers here. Yeah. Let’s see if it would make sense.
00:21:28:14 – 00:21:52:16
Mike
And within a two to three minute span from just let’s throw some stuff against the wall and see if it sticks kind of stuff, we were able to take over $1,000,000. We got the under 600,000. We saved over 400,000 of future taxation just by playing around with a couple of quick Roth conversions. Mm hmm. And I said I said, look, this is not obviously optimized.
00:21:52:16 – 00:22:15:11
Mike
You can tell I spent no time on this. Right. But already do you see the value of doing some tax planning every year? I mean, if you aren’t over the next several years of your retirement, if you can reduce your taxes by roughly 400,000 or more, well, that’s money you’re not giving the IRS. Where does that money go?
00:22:15:22 – 00:22:17:02
Zach
It goes right back in my pocket.
00:22:17:06 – 00:22:28:06
Mike
Yeah, it goes in your pocket. Right. And I said, John, Mary, do you believe that you could maybe spend that 400,000 more wisely than the people in Washington, DC?
00:22:28:16 – 00:22:29:07
Zach
Yes.
00:22:29:16 – 00:22:37:09
Mike
And do you think that’s better served in your pocket and maybe someday, maybe your children versus going to the people in Washington, D.C.?
00:22:37:10 – 00:22:37:29
Zach
Definitely.
00:22:38:10 – 00:22:52:19
Mike
Yeah, of course. And so would it make sense to you that having some tax planning is part of your retirement planning? Does it make sense to have that as part of your planning? Like, should that be an integral part of what you’re doing here?
00:22:52:20 – 00:22:53:12
Zach
No doubt about it.
00:22:53:19 – 00:23:14:15
Mike
And by the way, by doing that, guess what? It did. Made their money last longer. Right now, they’ve got money last season instead of running out when they’re 98. That remains lasting forever. I shouldn’t say forever. Well, past age 100. Because why? Extra money in their pocket. They’re not given the IRAs. Yep. Well, let’s talk about the other thing that we haven’t talked about yet, which is income planning.
00:23:15:02 – 00:23:38:19
Mike
So here they are. And in this case, they they have $1.5 million. Right. And they had their portfolio was generating when we ran a report like $20,000 of income. But they wanted 45,000 of income. And I asked them where you can get the other 25,000. They said, well, our adviser says he’ll just sell positions to make up the difference.
00:23:38:29 – 00:23:59:19
Mike
Mike. And that’s great if the market’s going up. But if the market’s going down, that’s a problem. Right. You don’t want to sell when the market’s down because nowadays you lose money, but your shares are worth less. So when you’re selling those shares like you’re selling at a loss and you just start a downward spiral and I’ll tell you this, more people go broke in retirement following that approach than probably anything else.
00:23:59:20 – 00:24:05:07
Mike
Yep. So I said, all right, let’s look at could we put together an income plan for them?
00:24:05:08 – 00:24:05:17
Zach
Yeah.
00:24:06:07 – 00:24:30:12
Mike
And so whenever we do income planning, we we like to keep it simple. There’s no reason to complicate it. There is no reason to complicate it. Income planning, retirement, if you know what you’re doing, can be pretty simple and straightforward. And so in their case, all we did, we looked at some different options. And here’s the option that they liked.
00:24:30:13 – 00:24:48:15
Mike
I’ll just tell you the one that they liked. I’m not going to sit here and tell you 14 different ways to do it. Sure. And usually I say, look, here’s three approaches we could take what feels you know what what seems to jump out at you. And the option they liked was this. They said, what if you take on this one and a half million dollars, we need 45,000 a year, right?
00:24:49:01 – 00:25:16:00
Mike
What if we take 500,000 of it or a third of our money and let’s put it into something that is safe and protected, that we can just take that 45,000 out every year. Until it’s gone. Right. And then the other million dollars, we’ll put that more into a growth account and we’ll just let that grow. And so the idea is imagine this 500,000 goes into an income based account.
00:25:16:01 – 00:25:36:16
Mike
Mm. 1 million goes into a growth account. That’s simple. And then we said, Okay, what are we going to do on the income account? We’re going to pull the 45,000 out that they need every year until that income account is gone, till it’s down to zero. So we’re going to take that 45,000 out until 500,000 goes down to zero.
00:25:36:17 – 00:25:36:27
Zach
Yeah.
00:25:37:09 – 00:26:05:06
Mike
And that’s going to probably take, you know, 12, 1314 years. And during that 12, 13, 14 year period, the million in the growth account, we’re going to invest it intelligently with pretax showing against market declines so that it grows to replace it. Yep. This is not difficult to do. Now the question always comes up. Mike, you put that 500,000 into an income account.
00:26:05:17 – 00:26:29:08
Mike
What types of financial tools are you using there? Right. I’m going to tell you what we use pretty much every time. And I’m going to use a word that some of you, as you’re listening, you might say, oh, I don’t like that word. Uh huh. We use indexed annuities. That’s what we use almost exclusively. And some people, when they hear the word annuity, they just cringe.
00:26:29:12 – 00:26:29:22
Zach
Right.
00:26:30:05 – 00:26:57:08
Mike
And because maybe you’ve heard bad things, it’s like, oh, they’re expensive. I saw an ad on Facebook that I should be worried about annuities or scared of annuities. Etc.. Well, I got to tell you this. I’m a certified financial planning professional. I’ve absolutely focused on retirement planning for 25 years. We are true fiduciaries, meaning I only do I only care about what’s best for the client.
00:26:57:28 – 00:27:22:26
Mike
And here’s what I can tell you. I can tell you if you aren’t using annuities for the income piece of your planning in retirement, you are missing out that you are you do not have an optimized portfolio. In fact, you would do better in almost every single case if you used annuities and the research supports my position, not anybody else’s position.
00:27:23:07 – 00:27:54:17
Mike
Research tells us there are articles out there from, you know, from academia that says and like I know I’ve got an article here that I saw recently where it said when they did analysis for people in retirement when they were taking income, that every single time that annuities were included as part of their overall planning, every time they included annuities in the planning to deliver income.
00:27:55:06 – 00:28:28:19
Mike
Not sometimes, not usually, not every now and then every single time that annuities were included, they got better results. People’s money lasted longer. They had more financial security every not sometimes, every time. So if you’re online and you say, hey, beware of annuities, or you don’t hear all that type of stuff, look, here’s a problem. The word annuity is used in about 14 different ways.
00:28:29:11 – 00:28:57:11
Mike
There are only certain types of annuities that we use, and they work really well. Should you be aware? Beware of some types of annuities? Yeah, probably But should you be aware of all annuities? No, that’s just silly. Right. It’s like anything else. So that’s an area we could do a whole show on annuities, but just be aware that if you’re using the right types of annuities, they can make your retirement a whole lot more secure.
00:28:57:18 – 00:29:15:17
Mike
You get more income and your money lasts longer. Right. So just make sure you’re paying attention to that as one of the options. Keep an open mind and make sure you’re talking to a fiduciary and a net and someone who specializes in this area before you make decisions in that area.
00:29:15:18 – 00:29:16:18
Zach
Got yourself right there.
00:29:16:19 – 00:29:38:00
Mike
I know I almost call myself an expert. You can’t do that anymore. All right. Hey, we’re getting to the end of the show. Jon Mary there adviser said you’re fine. You’re good. Stop worrying. Nothing to worry about. And poor Jon and Mary, they’re listen, the radio show, they’re saying, I don’t know. Mike, you talk about a lot of stuff that our advisor doesn’t talk about.
00:29:38:14 – 00:29:59:27
Mike
We want a second opinion by coming in for that second opinion. We were able to identify that. Yeah, it looks on the surface like you’re good, but there’s a lot of things that could happen that could really messed us up. You’ve got an investment plan. You don’t have an income plan. You don’t have a tax plan, and you don’t have a risk management plan.
00:30:00:23 – 00:30:16:28
Mike
And we were to show them, here’s how you cover those bases. Here’s the best part. They ended up at the end of the day working with us. But the best part of it all was this when it came down to figuring out what they you know, what our fees were turn out. Our fees were the same as what they’re paying now.
00:30:17:14 – 00:30:36:15
Mike
And they looked at me like, Mike, you charge us the same thing. Our advisor charges us. Why wouldn’t we work with you? I mean, you do so much more than our advisors. It’s like we’re at the stage of life. We need help in all these areas. And you obviously do it. Our advisor doesn’t. Why would? What are we missing?
00:30:36:16 – 00:30:53:22
Mike
I’m like, that’s the cool part, is you’re really not missing anything. It’s just this is where we specialize. And because we specialize in an area, we should be pretty good at it and we should be pretty cost effective at it. Right. But anyway, it’s a free process. Whether they worked with us or not, they would have gotten benefit.
00:30:54:02 – 00:31:17:15
Mike
You can do the same thing if you’re retired. If you’re nearing retirement, why not double check what you’re doing? It’s free to do it. Our process is free There’s no cost, no obligation. And I like to say it’s a no brainer, right? Just pick up the phone. Give us a quick call. Let’s start the process, Zach. What’s the phone number they need to call?
00:31:17:16 – 00:31:34:04
Zach
Mike, it’s 512886 50 50. Again, it’s 512886 50. Eight 50 it’s after hours to get our answering service is going to get your name, your number and a good sign for us to call you back during business hours. And we’ll start this quick, easy and painless process.
00:31:34:04 – 00:31:44:17
Mike
That’s the key. Zach, we want it to be the easiest path to your retirement plan. All right, that’s our show this week, folks. Hope you enjoyed it. Look forward to talking to you again next week.
