BUILDING A TAILOR-MADE RETIREMENT PLAN FOR 2022 TPWS: Audio automatically transcribed by Sonix
BUILDING A TAILOR-MADE RETIREMENT PLAN FOR 2022 TPWS: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.
Producer:
Registered investment advisors and investment adviser representatives act as fiduciaries for all of our investment management clients. We have an obligation to act in the best interest of our clients and to make full disclosure of any conflicts of interest, if any exist. Please refer to our firm brochure. The ADV to a Page four for additional information. Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges, as described in the annuity contract guarantees are backed by the financial strength and claims paying ability of the issuer. Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs, and may not be suitable for all investors. It is not intended to project the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
Producer Sam Davis:
Welcome to take point on retirement with your host Erick Arnett. Erick is a fiduciary and licensed financial advisor who always places your needs first. The experienced team at Take Point Wealth Management takes pride in knowing they've helped so many pursue the financial future of their dreams, and they can help you too. And now let's start the show. Here's Erick Arnett.
Erick Arnett:
So welcome everybody to take point on retirement radio. This is Erick Arnett, and of course, I'm joined by my DJ extraordinaire, Mr Sam Davis. Great to have you here this morning broadcasting out to the Nature Coast and all of Tampa Bay. Super exciting. We're in the Nature Coast now, like we've always been real exciting the fact that we're also broadcasting down there in Tampa now. So. Good morning, Sam, and how are you doing and how are your holidays?
Producer:
I'm doing very well. Holiday season was good. The hustle and bustle of the Christmas season and New Year's is behind us and I'm ready to tackle 20 20 to the best I can. You and I are both working remotely as we kind of enter the tough cold and flu season. I tested positive for the coronavirus earlier this week, so just a message to all our listeners to stay safe and keep your loved ones safe the best you can. Thankfully, it's not too bad, just a little bit more than a cold as far as what I've experienced. But we're working from home and we're not going to let that stop us sharing messages with all you pre-retirees and retirees out there.
Erick Arnett:
Yeah, it seems like once again, COVID variant x y z is on the rise, but we were somewhat prepared for that. I think the markets in general were aware of that, that that was going to happen. You know, we had the pandemic hit us pretty hard here in Florida and June, July, August, which is kind of like our winter. I think for the most part, they were forecasting that, hey, once the cold season hit up north, we'd start to see the same situation up there. Good news is it appears that that American variant is a little less severe, highly contagious, of course, probably more contagious. So it's probably going to touch all of us at some point the entire human population, the entire United States population. So we've got to be careful, protect the vulnerable, protect our retirees, you know, be sensible out there, especially if you're younger. If you're sick, just stay home, take care of yourself. Don't go around grandma and grandpa, you know, smart stuff like that. But if you're a retiree or pre retiree, there's no better time than now to pick up that phone and give us a shout. (352) 616-0511 Or just go to my website, take point wealth management or take point on retirement either one there and up on the right hand cordials you bought me, just click it to schedule an appointment. You'll get right on my calendar and it's just a casual 15 minute chat to see what your biggest concern is right now, going into twenty twenty two to prepare for your retirement. So what that being said, I think, you know, we tend to get rambling on this show because there's so much to talk about Sam. But I think that you have got some questions that our listeners have been firing into you, and I'd love to just jump right on that here in twenty twenty two and talk a little bit about what's concerning folks out there today.
Producer:
Yeah, absolutely. Let's get started. And if you listeners ever have any questions, just go over to take point on retirement. You can reach out to Erickand his team there. Ask your questions and we can talk about it on the show, and they can also help get you set up with planning for retirement. But the first one today comes from a listener down there in the Sunshine State, and they're asking Will Social Security keep up with the cost of living? And I think this is a great question for January. Twenty twenty two, as retirees and people who are drawing Social Security right now are going to be experiencing the largest cost of living adjustment. To their Social Security benefit and many, many years,
Erick Arnett:
Thank goodness they got it right this year, I mean, we saw record inflation, the highest inflation that we've seen in 30 some odd years. So the government, Social Security Administration, whoever it may be that pulls those strings decided that they were going to give us or give our retirees a nice increase. We usually planned for two percent increases annually. Some years we've seen folks get them and some years we haven't. But this is great news for our retirees in our retirees because of course, they certainly need that. But that brings up the topic of Social Security at such a it can be such a confusing topic and situation for our retirees, even our pre-retirees. It's never been more important than today. So if you're out there listening and you're close to Social Security age or you're in Social Security age and you're wondering, should I take it? Should I should have I taken it? Should my wife be taken Social Security? Whatever questions you may be, it doesn't hurt to do a review of that, and we have an awesome, awesome gift, awesome program that we're giving out to all of our listeners. And if you take the time to pick up the phone and give us a call or even schedule that 15 minute chat, we're going to do a free Social Security maximization report for you and your spouse. Or if you're single, we'll do it for you as well, because it's not as simple as, Hey, you know, I reached sixty two, I should take my Social Security.
Erick Arnett:
You know, you can be hurting yourself long term with a reduced benefit, maybe hurting yourself as far as tax penalties, say, am I get this question all the time? And I thought since this question came up on Social Security, I would dove into it a little bit. A lot of people are fearful that Social Security. I hear this all the time. Social Security's going to run out. It's really not the case. So we've got to, you know, be careful of all the rhetoric out there in the fear mongering and really dove into the details. I'm just looking at an article here from AARP. Very reputable source. Obviously, they do their homework. They know this stuff inside and out because this is all they do is cater to and their main audience, obviously as retirees. So I wanted to read this little report. And according to the Twenty Twenty One annual report, Social Security Board of Trustees, the surplus in the trust funds that disperse retirement, disability and other Social Security benefits will be depleted by twenty thirty four. That's one year earlier than trustees projected in their Twenty Twenty report. However, it's important. Ok, it's important to like that's the headline, right? So everybody thinks, Oh, Social Security is going to be done, it's going to run out.
Erick Arnett:
I'm going to, you know, they're going to stop sending my check and twenty thirty four. That's not the case. That's not what this means. So Social Security, that doesn't mean that Social Security will no longer be around. It means the system will exhaust its cash reserves and will be able to pay out only what it takes in year to year in Social Security taxes. So if this comes to pass, Social Security would be able to pay about seventy eight percent of the benefits to which retired and disabled workers are entitled. So it's not quite the doomsday scenario that people think or may have been told the money in the trust funds or what they call the Old Age and Survivors Insurance Fund is the official the official name of it? And one for disability benefits, as well as comes from three sources, actually. So it's important to know that eighty nine point six percent from the twelve point four percent Social Security tax paid on most American workers earnings through FICA, payroll taxes and your employer matches is paid by self-employed people through their IRS returns three point six percent from income taxes, Social Security recipients pay and 6.8 percent from interest on the money in the trust funds, and there's about three trillion dollars in the trust fund. Ok. And they only get about six point eight percent of the funds from that actual trust fund.
Erick Arnett:
So really, what's going to occur is, you know, where the concern may lie in why our lawmakers will have to get together and figure something out here in the near future is that they will continue to be able to pay the benefits. But there'll be no more money left in the trust fund and that money is going to come directly from payroll taxes. So it's so one of the concerns is is that as the baby boomers are retiring, we have like thousands and thousands of baby boomers retiring every day and. On Social Security, will we have enough workers behind them to pay those taxes and keep the benefits going? So that's the big concern. And so we are starting to see some demographic concerns there where we may not have enough workers to pay into the system. So. But that's just all speculation at this point, you know, so I think that our lawmakers will get together over the next 10 years, hopefully, and come together with a good solution, whether it is going ahead and raising some taxes and creating some surplus taxation to go ahead and get the trust fund pumped up again. Or potentially what they're going to do is for us, younger folks, you and I, you know, they're probably going to reduce our benefit a bit or they're going to say, Hey, you and I have to work a little bit longer.
Erick Arnett:
And that's OK. You know, it is what it is. You know, our we we're going to have to make those adjustments. But please, please, please people don't think that this is total doomsday scenario out there where they're just going to all of a sudden cut Social Security. Twenty thirty four and the checks are going to stop coming. But for us, younger folks, it is important that we really do plan. And I think that that starts to caveat into some of our next questions. As far as you know what, you can't just rely on Social Security income to provide for your retirement and to provide for your lifestyle in order to be comfortable and live, option golden years. So we've got to plan now. So you're not going to be dependent on that Social Security check Social Security check was just really meant to augment. Pensions and personal savings, it was not meant to be the end all and be all. So that's really important. So if we plan properly and we do our retirement plan, which by the way, we offer completely free and complimentary here at take point wealth management. Obviously, if you call in or you click that appointment chat session up in the upper right hand corner, we are going to do that full maximization report for you. We're going to do a full blown retirement plan for you, which covers all of the all of the variables, whether it's estate planning, long term care insurance, taxation, investment management all the way.
Erick Arnett:
Know finding out what your true financial speed is and what you need to make in order to get to and through retirement. And then we take that and we test that plan. We throw a thousand scenarios at that plan to see how it's going to hold up over time. So there's never been a better time. It's twenty twenty two. Heck, my wife and I, I'm a financial planner for twenty two years. My wife and I are sitting down this week to do our annual budget and our annual financial plan and to make sure we're still on track to meet our retirement goals. And so it's a great time before we get back into the hustle and bustle of the new year, we get kind of sucked into our our old routine, sit down with your spouse, sit down with your partner, or if you're if you're alone, just sit down and start kind of mapping this stuff out. And if you need, if you have questions, give me a call and I'll help help you through it. So. Great question there. I guess I probably got a little long winded on it, but I just really wanted people to know that, you know, it's not the the doomsday scenario that the media may project.
Producer:
Yeah, it sounds like Social Security essentially is is secure and that there is a cash reserve element to the way that this program is designed. But really, how it works is that the younger working folks like you and me, Eric, our payroll taxes, those are the funds that are actually paying people who are receiving benefits right now. So it is it is currently designed well, but as you explained, it looks like there will need to be some tweaking down the road. And you also talked about this is a great time to sit down with your spouse or or if you're by yourself, sit down with the financial planner like yourself. Or even if you have a spouse. Make an appointment with Eric. Give them a call. (352) 616-0511 (352) 616-0511 or if you're not one to make phone calls, just head over to take point on retirement. Click that. Set an appointment button and you'll have an appointment in just a couple of minutes and you guys can get that budget and that retirement plan in place just here as we get started in twenty twenty two, and it really is a great time to do that with tax season just a couple of months away. Next question, Eric, someone's asking How much will my income need to increase to keep up with inflation? We know Cola is going to help them out a little bit on the Social Security side, but when we consider the other sources of income during retirement, how much will income need to increase to keep up with inflation for retirees?
Erick Arnett:
If we have inflation kind of, you know, on that average clip of four to five percent a year, then you you've got to be growing your money by four or five percent a year, right? So we recommend that retirees compensate for that inflation by properly preparing for their retirement income projections. So you've got to prepare for your retirement income projections. I'll say that again, income projections. So how are we getting income? Where are we getting income? Number one is we don't want to run out of income, right? The number one concern for retirees and pre-retirees, of course, is they don't want to run out of money. And so all those factors kind of factor in when we're doing our planning and our long range planning, which, by the way, our financial plan for you goes out to age ninety five. So. We're planning, you know, for 30 or more years and and so it's important when we're doing those projections, you know, we factor in, you know, that increase in inflation every year. And so when people kind of just do raw planning, you know, we've all done it, you know, you kind of sit down and just say, OK, I've got five hundred thousand dollars, and if I draw four percent a year, that's going to be twenty thousand a year, which is going to augment my Social Security, you know, between my wife and I, we're making sixty thousand a year. So eighty thousand a year, that's plenty.
Erick Arnett:
We're going to be great. And that's the end of their plan. And so unfortunately, that's not taking into account that you're probably going to have to draw more than twenty thousand in the future, right? You're going to have to maybe draw up twenty four twenty five thirty as it goes, and it's going to keep increasing every year to and through retirement. I mean, we've seen it obviously just as an example in this past year, how much everything has gone up, OK? And this is a real concern for our retirees and even our retirees. I've had folks tell me like, Hey, it looks like I'm probably going to have to work a little longer. And if that's the case, that's the case. But that's something that will work out through our planning. Do I need to spend less? Do I need to make more? Do I need to work a little longer? Do I need to defer Social Security? Should I start taking it now? How is that going to impact me tax wise? So, but the most important thing is that people factor in the fact that the cost of living in inflation is going to increase. And so obviously, if that's the case and you have an investment portfolio or you have some type of investment vehicle that isn't keeping up with that, you're going to see erosion and not only you're going to see erosion, but you're also going to see the purchasing power of those dollars erode.
Erick Arnett:
So I was doing some planning last week with a guy and, you know, it was interesting to bring to light for him that, you know, not only is inflation four or five percent, but you know, you've also aren't earning enough on your portfolio, you're not even making four or five percent. So it's a double whammy. Not only are you losing purchasing power, but inflation is rapidly eating away at your dollars and your portfolio as well as you're drawing money out. So really, really important. You know, that number I call everybody has their financial speed. You know, what is the number that I need to retire on, as well as factor in inflation in my need for increases in income to make sure I have that correct number? And then what do I how much can I draw off of that in order to reach my goal? So there's a lot, a lot of fine, fine, intricate details. It's not just as easy as saying, Oh, I'm going to pull four percent and I should be good for 30 years. So great question. And so much to kind of talk about there. And that's why I urge people to call in (352) 616-0511. If you're out there driving around or you're listening here on the Saturday, I'm manning the phones today will set you up an appointment and get going on that stuff.
Producer:
Yeah, absolutely. Give Erickand his team a call. You don't want to end up in one of those melting ice cube retirement situations where you're struggling to keep up with inflation and they can help you plan for that. Next question Retirees are wondering what are their options for the money that's in their 401K plans or their other pension plans? What are the options for that money?
Erick Arnett:
That's a great question and one that I've obviously heard for years. And and one of the misconceptions is, is that while because I have this 401k, I just got I just got to kind of leave it there at that company. And that's not the case. So you have particularly if you've turned 60, you have the power and the control to make changes and be able to move that 401k. There's a whole world of choices out there for you. You just have to take a couple of steps in order to free that money up and have, you know those those different choices that might be better for you. So. So, yeah, you know, you can leave it invested in the company plan. Some advantages to that might be the employer's paying for the fees or you're taking advantage of low cost fees in the plan, which is helpful. But you know, I've worked I actually manage in company corporate plans myself. And, you know, a lot of times that company after you leave or you retire, they they want to kind of push you out. They want they want to get rid of you. So it's not going to be something that you can just leave there inevitably. And so and what we find, what we show most folks, is you can set up your own IRA, roll that money over to your own individual IRA with no tax. Answer at all. And now have a plethora of choices that are going to be more suitable for you and may be creating your own pension fund.
Erick Arnett:
Maybe, you know, having an index annuities, it may be having some other choices investment wise as opposed to just whatever mutual fund lineup they have. Or it may be that you just have these target return funds, which I'm not big a big fan of, so we can tailor your 401k to your own individual needs. And that's what's important. So, you know, so you can leave it there at the company plan. We don't really recommend that because you don't really control that at that point. But, you know, sometimes you have the option to annuitize and receive income for life. So you've got to be very, very careful about that. I've had folks make choices that they didn't really think out carefully, and now they're stuck in that pattern and it's not beneficial or the best one for them. So you've got to be very careful before you opt in or opt out of any annuities. And of course, you can withdraw the account balance, pay taxes and then invest the funds. So one of the things that we're big proponents of is, you know, take that for one k, roll it over to a Roth into what we call a Roth conversion. Roll it over into a Roth account. You will pay taxes on that for one K, but you're going to pay taxes at these current tax rates, which are historically low, where all time low tax rates and we know right, Sam, that more than likely taxes are going to have to go up in the future.
Erick Arnett:
And because of all of the benefits and all of the blank checks that the government is writing right now, which is trillions and trillions of dollars, we're at 30 trillion in debt right now and running. And so we're going to have to pay for that somehow, right? Obviously. So putting yourself into a tax free bucket now is highly beneficial for your future. In fact, we have a book right now that we're giving out to callers and listeners as a free gift and we can ship it out to you. And all you got to do is give us a call or click and that chat button in the upper right hand corner of my website. Take point wealth management and I'll get a copy of that book out to you called the Power of Zero. So imagine this. Imagine you're in your retirement years and you have complete control of your money. You've kind of taken Uncle Sam out equation. And whenever you need that money or when you want to withdraw that money to do something or live on, it's it's tax free. You also are not going to be required to take required minimum distributions at age seventy two. You may not want to take that money out of that account, but guess what, if it's still in an IRA or a four one K, you're going to be required to take it out and they're going to tax it. And, you know, whatever tax rates that may be in the future, which are probably going to be much higher, more than likely.
Erick Arnett:
So, you know, gaining control and really gaining control of your money and your finances and taking Uncle Sam out of the picture because sometimes people get kind of they look at me and they kind of in a funny way when I tell them, you know, do you realize that Uncle Sam is like a 30, 40 percent partner here? They own 30 or 40 percent of your your your hard earned retirement dollars, and they kind of look at me like, you know, what do you mean? That doesn't sound right? Well, it is because in fact, it can be a 70, 60, 80 percent partner and take as much as they want in the future if they raise taxes. So, you know, plan now, get out ahead of it now, and I'll show you in our Roth conversion software inside of your retirement plan when we do that free retirement plan for you, how amazing that tax free cash flow really blows up in the future and really grows your retirement funds on the back end hugely, hugely impactful. So if you have questions about that and you're listening, you know you don't quite understand or just give me a call, we'll chat about it. I'll walk you through it. Super easy. (352) 616-0511. And so great question and lots to talk about there. And of course, you know, everybody's situation is different, so we're not giving blanket advice here, and that's why I urge folks to call in Sam.
Producer:
Yeah. So it sounds like there's a lot of options for that money that's in your 401K or your pension plan. And that Roth conversion could be a good strategy. And if you're interested in talking to Erick about if that's a good plan for you, you can just visit, take point on retirement or give them a call. At (352) 616-0511. That's (352) 616-0511 and give them a call because taxes are on sale, so to speak. And and if you could get ahead of it. Out, like Erick says, you could save so much money in the future when it comes to planning for retirement, and we've got just a couple of minutes left before our first break. But a listener is wondering what are my biggest financial risks in retirement?
Erick Arnett:
Yeah. So obviously we, you know, we've been kind of hitting around is running out of money or, you know, really being impacted by some kind of life event. So for many retired Americans, I mean, the largest financial risk is the cost of health care. I mean, that's one of the things that may keep people up at night. So either in the hospital or long term care provided in a facility or even at home if you're going to get home health care. The costs of that in the future? Well, even right now, they're extremely high, but in the future, it's just going to get higher and higher. I mean, I think of this one client that I have currently and, you know, did years and years ago, probably 20 years ago, did their retirement planning. And now they're in their eighties and you know, they've had a stroke and they're in. They want to stay home, but they have an in-home health care provider who is there every day to take care of them. And that bill is running seven to eight thousand dollars a month just right there for that. So there's a number of insurance companies that offer contracts and different solutions to reduce these risks. But the cost of insurance coverage can be high. So, you know, prior to the retirement risk and the cost of insurance should be considered within the total financial planning process. So we've got to really take a look at that. How is your health? What is your past health history? What are your what is the health of your parents? You know what kind of lifestyle you're living. And so. And do we have enough saved to self insure? Or should we look at different types of products to help bridge that gap and reduce that risk? So typically, leveraging the cost of insurance is a great way to go. And so definitely something that's super important and a big part of our advanced planning process that we offer clients for completely free and complimentary.
Producer:
Yes, planning for your health in the future is just as important as planning for your finances. And really, they kind of go hand in hand when it comes to planning for retirement. Talking with ErickArnett of Take Point Wealth Management, you're listening to take point on retirement visit, take point on retirement to schedule your free consultation today. Take point on retirement. We'll be right back.
Producer Sam Davis:
You're listening to take point on retirement to schedule your free no obligation consultation. Visit Take point on retirement. Welcome back to take point on retirement schedule, your free financial consultation now at take point on retirement.
Producer:
And welcome back to take point on retirement. Speaking with ErickArnett of Tech Point Wealth Management Visit Take point on retirement to schedule your free no obligation financial consultation today. Welcome back to the show, listeners and Eric. Thanks for being with us again this week, sharing information with all the pre-retirees and retirees out there.
Erick Arnett:
Thanks so much, man. Great to be here and super excited about twenty twenty two and getting off to a fresh start and getting all those retirees and pre-retirees in here and getting their plans solid and ready to rock and roll. So it'll set themselves up for multiple, multiple future new years.
Producer:
Yeah, it always feels good just to flip the calendar to a new year, get a new number. And as we flip the calendar to 2022, it does feel like a fresh start. But in many cases we're still dealing with some uncertainty out there in the market, and a lot of people are concerned about the volatility and investing in a safe way. But still seeing good returns is right at the front of people's mind when they're thinking about planning for retirement and considering their own personal finances. So could you tell me a little bit about smart, safe investments? What are the options out there for people that are trying to invest safely? And can they still expect to see good returns while investing safely?
Erick Arnett:
Yeah, such an in-depth topic and conversation. And and so, you know, I think that's why it's so important to get a hold of me and let's get together either over a Zoom meeting or you can come to my office or we can just chat on the phone because I really need to walk people through this. You know, it's so, so important. I think at this point in time for a lot of multiple reasons that we follow as as market professionals. So, you know, and one thing comes to mind, Sam is as I was talking to a gentleman the other day who called in on the radio show and we just set up a Zoom meeting and and we got together and chatted on the phone or via Zoom for well over forty five minutes. Even though we only scheduled a 15 minute chat, we really got into it. And one of the things that just really bothered me. And there may be a lot of listeners out there kind of in the same position, and I'm reaching out to you specifically. You know, this gentleman was telling me that, you know, I was going through all different types of scenarios and and I was examining his portfolio and, you know, and giving all kinds of different ideas and talking about different things we can do to optimize things and just make things better.
Erick Arnett:
And he had said to me, he's like, You know, I just thought about this. He's like, I haven't heard from my current advisor. And in over three years, I mean, it's well over three years, you know, he hasn't. They don't call him. And I just thought to myself, That's crazy, like you. If your advisor isn't talking to you at a minimum and doing an annual review at a minimum, then you're you're really not being served properly and you deserve so much better. So at take point wealth management, you know, we're going to, at a minimum, want to get together annually and go through everything from A to Z and make sure you're still on track with your retirement plan. Part of my promise to my clients and it's in the name of my company, and that's why I named my company. Take point is, I promise you, I'm going to take the lead and I'm going to take point and I'm a stay engaged and constantly be out ahead of things and looking forward to what it is that we need to change. Or, you know, it could it be a small tweak in the portfolio and we get into the smart, safe discussion and you know, so we feel as though there's really two main buckets that you can put your money smart, safe and smart growth.
Erick Arnett:
And so smart, safe is is just that the word safe, it's a safe investment. You know, you can grow your money with safety and get market upside. So your principal and your gains are 100 percent protected. This strategy is super low cost, sometimes even zero zero percent fees. You know, you have to have a time horizon of at least seven to 10 years. And potentially now we've seen these types of strategies earn anywhere between five to seven percent, sometimes years much higher, but that's an average. If we took a 10 year average, so. And they also have options to put on what we call guaranteed income riders, so. And what I'm talking about is a fixed indexed annuity. And I'm not saying that everybody out there needs a fixed indexed annuity. That's not what I'm saying. However, you might want to educate yourself and and have the discussion and find out exactly what it is and and how it works, because we feel pretty strongly that, you know, the bond market, which has been typical typically the conventional way to hedge against the stock market or to create income interest to your portfolio. We think that there's some serious challenges ahead for the bonds and the bond market. So as interest rates rise, bond values decrease and we'll pull that data out of your current portfolio and just show you how much risk you actually have in your bond portfolio.
Erick Arnett:
Because a lot of folks are like, well, have bonds. And that's and that's because I don't want any risk and and I put bonds in there so I can be at a low risk. Well, guess what? Bonds have risk as well. If we can invest your money and hedge the stock market, as well as potentially create future income and get really good solid returns with no downside and one hundred percent you protect your principal. And by the way, this strategy has no interest rate risk. So most of the portfolios out there right now have for our retirees or even our retirees. If you're listening, you probably have 60 percent, maybe 50 percent, maybe even higher percent in your bonds. I was talking to a gentleman the other day saying he had no idea he had bonds in his portfolio. He just thought he had a bunch of mutual funds and had no idea that over 30 percent of his portfolio was in bonds. And so it's such an important time more than ever to make sure you know exactly what's inside your portfolio and what's inside those mutual funds or those ETFs or whatever. And we'll break that down for you. We dissect it. We x ray and we'll break it down and show you exactly what kind of exposure you have in each asset class.
Erick Arnett:
And that's super important because the feds already come out and said that they're going to raise interest rates probably three times next year if interest rates increase by one percent. And if you have high risk bonds in your portfolio, you could see, you know, negatives, you know, single high single digit negative returns in your portfolio. In fact, the aggregate bond index was actually down this year for twenty twenty one. So think about it at fifty percent of your portfolio was in bonds and you lost money in that side of the portfolio. Well, guess what? You are also paying a management fee or some type of fee, right? So you also paid a fee on a losing asset class. So if we can remove that fee, remove that interest rate risk, protect your principal, it's just going to be a much better strategy going forward for your safe money than holding bonds right now. So, you know, super important to really examine that Sam and get into it and and see you really owe it to yourself. If you're out there listening to take the time just to get that education, to see if the benefits of replacing bonds with index annuities, which we call our Smart Safe Plan, is good for you and is going to work for you.
Erick Arnett:
So once again, you can imagine this you can get market like gains without the market risk and protect your hard earned assets. Generate a consistent income for retirement. Grow your money tax deferred. Eliminate the advisory fees you pay for the bond income. So if you're getting low bond income and you're also losing principal and you're paying a fee on top of that, you're talking about a major major drag on your money and your retirement dollars. So I get really passionate about this portion, and I'm so glad you brought this up, Sam, because it's a great, great topic and this is one of the biggest ones that I think folks in twenty twenty two really need to get a handle on because I do believe there's going to be increased market volatility this year, for sure. You know, the stock market is pushing to all, all, all time highs and more than likely in twenty twenty two, we're going to have some type of correction. And yeah, you have to have exposure to stocks and you have to have exposure to growth, but you've got to be careful that it's the proper balance for you. And how are we hedging that with other investments to create somewhat of an anchor or a bui if the market does get volatile so. Great. Great question. Really appreciate that one.
Producer:
Yeah. And it's so important to be protected from loss. You know, you can just use the example of one hundred thousand. Let's say you had one hundred thousand. Invested at risk in the market, and let's say the market has a tough year, it goes down 10 percent, so you just lost ten thousand. But then the next year the market bounces back, it grows 10 percent. Well, you didn't get ten thousand back. You're getting 10 percent from 90, so you're only at ninety nine thousand. You didn't get it back. So it takes a lot more to get back after a big loss. And you also talked about that example of of a client that didn't know what was in his portfolio. And we've got a five step checklist for reducing taxes, which is something that I think everybody wants to do and growing assets during a retirement and step number one on that checklist is analyze your portfolio and Eric. Talk to me about what it's like when someone comes to you. They show you what they have and you're combing through it. What is that like when you get with a client and you're analyzing their portfolio?
Erick Arnett:
Yeah, it's it's it's obviously for us. It's it's what we do every day and and it's our passion. It gets into education, right? And the more we can educate our clients and our retirees, I mean, so much better equipped, they're going to be to face whatever challenges come their way. They're going to be able to truly put together the best plan for them, the most optimized plan. And so when we analyze the portfolio, we have tools to pull out exactly what your risks are, what the measure of risk is inside of that portfolio in the specific assets that you have in it. And we find that a lot of times portfolios aren't truly aligned with with people's risk and risk tolerance. And we also find that sometimes people are taking too much risk. They don't need to take elevated levels of risk to meet their goals. Or we find that people are not taking enough risk in order to provide for the returns that they need. But analyzing that portfolio, we're going to pull out the risk. Here's a big one, too. We're going to pull out the fees and expenses, and a lot of times there's a lot of hidden fees, a lot of hidden expenses, and that can slowly deteriorate and eat away at your retirement. So it's super important. A lot of people tell me I don't pay any fees or I don't have any expenses, and and I point out to them that, you know, they didn't build build those big buildings on Wall Street, you know, with with with no money.
Erick Arnett:
So there are expenses and we just need to show you what they are. And so you truly have an understanding as to how much your portfolio is being taxed and fees, commissions, expenses. And so and then of course, you know, is the portfolio tax efficient, you know, and when I say portfolio, I mean, you could have multiple buckets or multiple portfolios, you might have an IRA or a Roth, an annuity, a pension, you know, a savings account like, so let's analyze that and see if it truly is going to provide the income that you need. And then how are all those assets correlated? You know, one thing that from the time I got into this business, what I love to do with all the great software tools that we have in the industry is I would sit down with folks and they would say I've got 20, 30, 40 mutual funds in my portfolio, so I know I'm well diversified. I said, OK, you may be, so let's check that out. So when we do our portfolio x ray and we pull out the correlation of all the asset classes, a lot of times we find is that there's a tremendous amount of overlap and people don't really have the diversification that they thought they did because those mutual funds, those ETFs, all those individual stocks or wherever they're holding in their accounts, they might be doubling up or being held in several mutual funds where you have too much exposure to technology or too much exposure to, you know, particular asset class.
Erick Arnett:
So you know, you've got to be very careful if you get over weighted in one area or another. And so finding out what if you have a, you know, we have the tools to find out if your portfolio is truly diversified and you want to have non correlated assets, you don't want everything to be the same. So it's just like a fruit basket. You know, if if you have a fruit basket and all you have in there is bananas. Well, if bananas go bad or bananas are out of season, you're in trouble. But if your fruit basket has grapes, oranges, bananas, mangoes, you know, avocados, you name it, you know you're going to be in a much better position to weather the storm and even, you know, put up better returns over time and risk. And by having those uncorrelated assets, you're really lowering the risk of your portfolio. So super, super important there,
Producer:
And the next step on this checklist is is assessing your income needs during retirement. I think a lot of people assume that their their needs and their expenses are going to dramatically decrease during retirement. That's not always the case. Sometimes it goes back a little bit. But Ericktalked to people about hearing from them what they expect during retirement and assessing their income needs.
Erick Arnett:
It all starts with budget, right? Monthly expenses. And the first thing we do when we sit down with folks is ask them, You know, what's retirement look like to you? What are you doing in retirement? Are your golfing? Or are you boating or are you gardening? You know you're traveling. What exactly is it that you're doing? Do you have a wish list or a bucket list? You know, and let's plan for that. Do you have some large expenditures on the horizon? Maybe you're retiring and you want to buy that new car or you're thinking about moving or downsizing or buying a new home, whatever it may be. We've got a plan for that, too, but I find this very interesting and not to be critical at all because heck, I and I'm sure you do as well. We all fall short sometimes when it comes to this. And that's why my wife and I are sitting down this week to really examine and dove into our budget. And what did we spend in twenty twenty one and and what does it look like? We're going to spend in twenty twenty two and then how can we budget ourselves to where we're still putting the money that we need a way to reach our retirement goals so we have to do a budget? Ok, so you've got a budget while you're working and still working and you've got a budget in retirement, so you have to have two budgets, OK? And so, you know, so then we talk about, OK, yeah, what are we doing now, which is very different than what we're going to be doing in retirement? And then how does that look expense wise? So we'll help you walk through that and really determine what your budget is and your monthly expenses are going to be in retirement? It's not OK to just kind of guess at this because it has a huge impact long term on your retirement plan.
Erick Arnett:
Huge. I mean, I can show people that, hey, if you increase your expenses and pull just a thousand more a month on average out of your portfolio, how much it's going to impact you and potentially hurt you on the back end of retirement, where you can potentially run out of money. So it's really, really important to get this right. And and so, you know, OK, we've got that monthly expense figured out now, how are we going to cover that? What type of retirement income do we have coming in? What are our income sources, including Social Security, pensions, whatever it may be.
Erick Arnett:
But and then we have to figure out, do you have what we call an income gap, a retirement income gap? Real simple, the amount of money that you have coming in and guaranteed sources like Social Security and pensions, is it going to cover your monthly budget if it does not cover it, whatever that shortfall is that your retirement income get? So we have to figure out how are we going to fill that gap? Lock that in. Also protect it from inflation to where you're never going to have to worry about that monthly income ever again. So there's ways that we can do that, OK? And so super, super important to figure out what that retirement income gap is and and sometimes folks don't even have a retirement income gap, and that's OK. So that leads to a whole nother discussion that how do we position your assets or how do we position your retirement plan to to to a company that's so super, super important as all these are, but most important, we just don't want to run out of money, right?
Producer:
Absolutely. So the first two on that list just to review with people, analyze your portfolio, know what's in there, know your risks, your expenses, your fees that you're paying and the correlation of those assets. Number two that we just talked about assessing your income needs, you know, how much money are you going to need during retirement? Successful businesses all have a budget. You and your family should have one, too, when it comes to planning for retirement and number three is investing in a smart financial plan. So that means following the rule of one hundred, we've talked about that before. It means having your smart risk and your smart safe with fixed indexed annuities. If that's what you need to fill that retirement income gap, Erick can help you get that smart financial plan in place. Talk to us about what it's like when you're working with clients and you want to get that smart financial plan in place because when you're in retirement, you don't want to be spending all this time following the stock ticker and worrying about if you're going to have enough money, you want to have that annual meeting with your spouse and with a with a financial adviser like yourself, make sure that plans are on track. So talk to us about having a smart financial plan.
Erick Arnett:
Yeah. So you know, if if you if you go through this exercise and you truly follow this path and we can build you what we call our smart financial plan. You know, you're going to have so much more confidence and clarity in your future and what may come your way, so it's it's truly in depth and you want to have some risk and some growth, of course, but you also need to be very safe with your money because if you end up taking any substantial losses in the first five years of retirement, it's super, super impactful. So we have this spreadsheet we run for folks that's called the sequence of returns. And if you have negative returns in the beginning of your retirement versus at the end of your retirement, it's a substantially different amount of money. So, you know, truly impactful. So you've got to be careful and make sure that your portfolio is positioned properly to weather all storms. And quite frankly, it's rewarding to us because once we get this plan in place, our phone typically really just doesn't even ring anymore. I mean, sometimes we have to reach out to people and be like, Hey, you OK, let's review things. You know, they truly feel confident they have the clarity. The education in their head hits the pillow at night, and they know that they're in that smart financial plan and they can weather all storms and they're not worried at all. So I want to take the worry. And what what what is the number one thing that causes us worry? It's the fear of the unknown, right? So if we can alleviate that to our best ability, then you're just going to have so much better happiness and so much more of a stress free retirement.
Producer:
So after you have that portfolio analyzed, you know your income needs during retirement, you've got that smart financial plan in place. The next thing is investing in tax free accounts, and we've talked about tax buckets on this show in the past few weeks. We've talked about Roth already today, but Eric, tell us just a little bit about tax free accounts.
Erick Arnett:
Yeah. So this is kind of the next step in our advanced planning once we get that solid plan in place. Now we can do some advanced planning, right? And how do we, you know, not only potentially alleviate taxes, but at least reduce the burden of taxation in the future? In a great way to do that is to invest in tax free accounts like the Roth IRA. We'll also can create what we call a LARP. It's a life insurance retirement plan for some folks out there. They don't qualify for the Roth IRA or if they did a Roth conversion, it just might be way too impactful for them tax wise because they're earning too much money currently. So there's other ways we can use whole life to create that tax free retirement for you in your future. And also, you know, you're shielding the money from Uncle Sam and taxation. You're properly planning for estate planning and protecting your money. And so you avoid probate all kinds of benefits to it. But super, super important once we get to that level is let's really dove in and talk about how do we get to that tax free bucket? And I mentioned it earlier on the show. If you want this book called The Power of Zero Super Great Book, we send it out all the time. We get great responses from it. Very insightful. Go ahead and get a hold of us. I'll get that book out to you right away. So it's going to really, really show you the impact and how important is to to start investing in those tax free accounts. And we can help you set those up and get those rocking and rolling as soon as possible.
Producer:
Yeah. And if you want to copy of that book or if you just want to meet with Erickabout your retirement future, give them a call (352) 616-0511 That's (352) 616-0511 or just visit take point on retirement. We've got a few minutes left in the show. We got to wrap up this checklist. The last thing on this checklist is just being sure to follow that four percent rule, and we talked about the four percent rule over the last few weeks. Let's remind the listeners one more time. What is the four percent rule?
Erick Arnett:
Yeah, so real important that you're not, you know, over drawing money from your retirement account. So, you know, there's world renowned experts, economists, actuaries that have been studying this data for years, no matter what type of portfolio you have, no matter what type of risk you're taking. If you truly don't want to outlive your money, then it's important to really kind of stay close to that four percent rule. And that's simply how much what percent of my drawing off my portfolio or my retirement plan per year. So real, real important to not get into five six seven eight nine 10 percent. You know, I tell people like, Hey, look. If you have a banner year, one year and for whatever reason, we're blessed with big returns in the markets or sometimes these indexed annuities hit these big returns based on just kind of what's going on in the economic climate in the marketplace, then yeah, you know what, you maybe you spend a little bit more on that year. You go take that trip or you buy that new toy. But for the most part, you really want to be careful and stay close to that four percent withdrawal rate.
Producer:
And we've got just a couple of minutes left in the show, and we've got one more question from a listener. And we actually talked about this question a couple of weeks ago on the show, and it touches on the topic of uncertainty. And so I want to bring it up again as we flip the calendar to a new year. And there's still some uncertainty there on the table. But they they're saying the idea of not working, which is kind of what retirement is, not working, makes me feel uncertain about our financial future. How can I know that the resources I've gathered will help me meet my needs for the rest of my life? And I just feel like this hits at the heart of what you guys do at Tech Point Wealth Management. So could you help answer this listener's question?
Erick Arnett:
Yeah, absolutely. So I mean, this is this is the purpose, right? This is the whole purpose of this show. This is the whole purpose. Purpose of our practice is to get you to get to that point where you're doing your financial plan and your retirement plan and we can get you to the most optimized plan for you. And so, you know, the purpose of financial planning for retirement, you know, that's the main reason. Remarkably, you know, many individuals work 40 plus years of their accumulating all kinds of wealth, and then they only spend a minimal amount of time analyzing projecting their income at retirement. You know, we'll spend all kinds of time planning trips and we'll work our butts off at work and do all this planning. But we won't sit down for a couple of hours and do a true income plan, Social Security plan or financial plan in order to make sure that, hey, we know that we're going to get to and through retirement, no problem. So super, super important is just 20 20 to just get that plan done. Once you become a client to take point wealth management, we review that plan every year for you. And so if we have to make changes, we will. So if there's life changes or market changes or whatever changes may come our way, it's something that's not just static. So super, super important is to get started with that planning.
Producer:
And if you have any questions that you'd like us to answer on the show, or if you'd like to have Erickand his team help get started on planning for your retirement future and helping you find financial freedom, give them a call (352) 616-0511 That's (352) 616-0511 or just visit. Take point on retirement and you can schedule an appointment there. Eric, thanks for joining us on the show. We'll see you next week.
Erick Arnett:
Thank you so much. Great being here with everybody and look forward to next week.
Producer Sam Davis:
Thanks for listening to take point on retirement. You deserve to work with a private wealth management firm that will strategically work to protect your hard earned assets. To schedule your free no obligation consultation, visit, take point on retirement or pick up the phone and call (352) 616-0511. That's (352) 616-0511. Investment Advisory Services offered the Brookstone Capital Management LLC. Bcm, a registered investment advisor, BCM and Take Joint Wealth Management are independent of each other. Insurance products and services are not offered through VCL, but are offered and sold through individually licensed and appointed agents. Investment involve risk and, unless otherwise stated, are not guaranteed. Fast performance cannot be used as an indicator to determine future results.
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