Episode Transcript
[00:00:00] Speaker A: Welcome to all Things Financial, the show that helps upgrade your financial literacy. Trey Peterson and Yellow Se Coutts are retirement planning specialists here to provide a unique and conservative approach to managing your money. Now, here are your hosts, Trey Peterson, AGN Coutts.
Hello. Welcome to all Things Financial. I'm Trey Peterson, and I'm here with my business partner, LSA Coots, and we help those in and during retirement. If this is your first episode, welcome. We're excited to have you with us. If you listen to several. Thanks for coming back. As you know, we've got a holistic planning firm where we do everything from fiduciary financial planning to health insurance, life insurance, Medicare, long term care. We help with Social Security and anything related to anything related insurance and investments. And our goal is to help you retire once and retire well. Today we talk about avoiding retirement mistakes, and we have some specific ones before we dive into that yellow, say, what's the quote of the day?
[00:01:05] Speaker B: The quote of the day is, burying your head in the sand does not make you invisible. It only leads to suffocation. That's by Wayne Gerard Trotman.
[00:01:16] Speaker A: So what do we want to do today? Our goal is to help you get the help that you need and avoid a lot of common landmines that people run into. So I'm really excited. So we're going to start off with ten mistakes that too many people or too many retirees are making. What you can do to improve your plan. Today we're going to talk about not forgetting your RMD's. You know, one of the things that we see so often is that people forget that at age 73 or 75, they're going to run into something called required minimum distributions and you want to know how to address them. If you are seven or eight years out from retirement or closer and you haven't had a conversation around reducing RMD's and what tax strategy would look like for you. That's something that we can help with. And then we're going to touch on the national debt right before the election, as many of you know, which is coming up and is very exciting. And then what would it be like to work with us? We've had a lot of people call in and say, hey, we've listened to you, but how do you do things? And so we're going to touch on that as well. So under ten mistakes that too many pre retirees and retirees are making all hit number one. Yellow sales let you take the next one. Number one is carrying debt into retirement. So one of the biggest issues that you might be thinking is, man, we got to get these credit cards paid off. We got to get the car paid off. It'd be really nice to be mortgage free in retirement. Can we double up those payments? Can we knock it out or at least reduce it significantly? You know, one of the things that I found is a lot of people are not aware that their credit cards interest rate is somewhere between 19 and 29% almost always, you know, so one of the things is, can we knock off some of those, some of that bad debt that, you know, you're paying such a high interest rate and you're throwing away so much money and, you know, I don't know about you, yellow say you've probably never done this because the systems that you have in place. But when Steph and I first got married, I'll never forget, we bought a couch on a zero interest credit card, and we made payments every single month. And I handed off to my wife and I said, hey, why don't you handle this? We'll put it in your name, build your credit.
[00:03:26] Speaker B: No, I've never done anything like that.
[00:03:30] Speaker A: And I'll never forget because we're sitting on the couch one night and she goes, oh, no. And I said, what? And she goes, we missed the twelve months of free interest. It's the 13th month, and they added all the interest back. I think it was at like 9%. So it wasn't insane. But it's like, man, here we spent, I don't know what it was like $1,200 on interest or something like that. That had we just realized that we were within a few days of losing, you know, the interest free time period, we wouldn't have had that. So, you know, one of the things is people are busy, people have a lot on their plate. And I would say a lot of the people that we sit down with when I ask them, what's your interest rate on that credit card? You know, they don't know. So one of those strategies is maybe using a HeLOC, maybe you've got an equity line of credit off your home, home equity line of credit, and that might be at, you know, four or five or 6%. Maybe you roll your credit card debt onto that while we build a twelve or 18 month timeline to get you debt free. You know, maybe you have a car payment and you realize, hey, you know, right now, the average car payment in the United States is like, I heard it's like $750 something crazy. But it's like, hey, what if we get that paid off, so that in retirement, when your paycheck stops and now you're just living on Social Security, maybe you have a pension, personal savings. Now you don't have to draw as heavy on those assets that you've spent all this time building up. So, you know, one of the things we found is a lot of the happiest families that we serve, they go into retirement debt free, or at least having all of the bad debt paid off.
[00:05:04] Speaker B: Yeah, I think that that's important to distinguish, like, the good debt from the bad debt. You know, debt's just been a big issue, just in general. I was looking at some of the numbers from the survey of consumer finances, and they said that debt for those under the age of 65 has actually doubled from 1992 to 2022, which that's not really concerning because it's in line with inflation. But what is concerning is for the people that we actually serve. So they also included a number for those between the age of 65 and 74. And for that segment of the population, debt has more than quadrupled. So they're overrepresented in terms of the amount of debt that they have, which is crazy because that's the people who typically want to have the least amount of debt as they're approaching retirement. So that was kind of interesting. And of course, credit card debt is a big one, too. So for those that are 70 and older, mortgages are actually account for about two thirds of the debt. For those kind of in their late sixties and seventies, which is kind of, you know, one of those things where in the past people would say, hey, hang on to your mortgage, you can write off the interest, but now with the standard deduction being as high as it is typically that interest rate deduction, unless you have enough itemized deductions, it's really not going to help you all that much. So I don't know what your thoughts are on paying off your mortgage now. I guess it really depends on, you know, today it depends on, is it a recent mortgage? Most people aren't refinancing in this environment, but if you have a mortgage from a couple of years ago where the interest payments were, you know, two or two or 3%, maybe that's not the worst thing.
[00:06:34] Speaker A: So, yeah, one, I think, too, it comes down to this, is there's not a right or a wrong decision, depending on what you value the most. So, you know, almost every week, one of the families that we serve, they'll call me and they'll say, hey, we owe 80,000 on the house, or we owe 150,000 on the house. We have 300,000 sitting in checking, saving cds. Should we pay it off or should we just keep paying the mortgage? And what I'll say to them is, you know what? If you have that 300,000 sitting in a savings account that's making four to four and a half, and your interest rate is four to four and a half, I would pay it off. But if you have an interest rate at 2.5% to 3% or maybe 2%, and that money's in the market and it's averaging seven, 8910 percent, in my opinion, why not continue to keep the mortgage, make money on your money, while you make those payments at 2%. So what it comes down to is a lot of people say that just makes math sense, right? That's just on paper. If I'm making 8%, my interest rate is two and a half, I'm going to keep paying the mortgage every month. But then we have families that say, you know what, I know I'm giving up five or 6% return on that money, but I'm going to sleep better knowing that the mortgage is paid off. So I'm going to pay it off anyways. That's just an intentional decision. That peace of mind matters more than the interest that you're making, and neither of those are right or wrong. It just depends on what your priorities are.
[00:07:59] Speaker B: Yeah, I would especially agree on the peace of mind when it comes to credit card debt. So right now, you know, I've always kind of heard this, and I think most of us know, like, how do we get our credit score score up? And one of the things that you need to do is look at your utilization rate. That means I if your credit card allows you to have up to $10,000, that's your credit card limit. How much of that are you utilizing? And right now, people are utilizing around 30% of their overall limit, which isn't too bad. But the problem is about 10% of people are currently in delinquency, so that's a huge number. And if you're in delinquency, you're not paying, but if you're utilizing 30% of that debt and a lot of it's being carried forward. Trey, you already mentioned the average APR rate on credit cards. I think when we first started doing the podcast, we would just say, hey, it's north of 20%. Well, now it's 22.63 on average, starting basically in the second quarter of 2024, the latest reporting that we have. So people are paying more in interest on the credit card debt that they're carrying forward. They're utilizing more of their credit card credit limit than they have in the past, and our delinquency rate is at an all time high, as well as just the amount of overall consumer debt that we have. All time high, which is not a good place to be in considering, especially with the last stat showing that retirees are carrying a lot of that debt.
[00:09:18] Speaker A: Yeah, 100%. Number two, skipping a retirement budget. Man, we see this a lot. Even yesterday, I was sitting down with a gentleman and his wife, and they've done a great job saving their retirement nest egg was nearly $3 million. Neither of them have ever earned over 150,000 a year to get to 3 million on a good salary, but not what we would call as a high income salary. Really impressive. But I said, what do you think your monthly expenses are? And he goes, oh, we live on about 10,000 a month. And so I said, well, let's take a look at that. And I said, between you and your wife, because they both brought in like 150 a year, I said, you guys are netting like 18 grand a month. So I said, if your expenses are 11,000, that means that you guys have an extra $7,000 per month and you're saving $84,000 a year. I said, where is that savings at? And he looked at me and he goes, no, no, we're not saving anything.
He goes, but I can't believe our expenses are 18 grand a month. Well, what ends up happening is even though they're not 18,000 every month is while it might build up for a few months, then they make a big purchase. Furniture, replacing the roof, helping their daughter with college. And we found that they are literally living on of that 18, 17,000 a month, their savings is only growing by 1000 a month, year over year. So the reason I say that is don't skip the budgeting. You know, one of the other couples I sat down with yesterday, so literally two examples from my day yesterday from the six families I met with, I showed them that if they can reduce their expenses by $1,000 a month instead of their money lasting only until they're 82, which, as we know, most people are likely to be on that their money lasted until they were 88. So just by reducing expenses by $1,000 a month over a 25 year period, their money ended up lasting, you know, basically six more years. So really, really significant. Make sure you know not just what your fixed expenses are, but know what your outgoing is. Dave Ramsey says it really well. He calls it zero net budgeting. Add up all of your net income every month and then look at how much is being saved. Most people are living on the total net amount. Anything you want to add to that?
[00:11:44] Speaker B: Yeah, I think there are really two big problems that I, I see. I met with somebody yesterday that they, I mean, they're, they have these two problems to a t. Number one, people just aren't honest with themselves about how much they're going to spend in retirement. And, like, even when you go through a budget, like, why is it such a difficult conversation? Like, you're, we're going through this line by line, and people are either in disbelief, they're in shock, but even after the conversation, they still kind of hang on to the. Whatever they thought they. They spend. They still, they're reluctantly agreeing to the fact, like, for your client, that $17,000 is what they actually spent. And then number two, the other problem is, I think people, you know, they don't want to make any compromises. They don't. They don't want to, you know, maybe cancel one of their streaming services or really count up how many times a week or a month they're going out to eat and just deciding in advance, hey, instead of three or four times, it's going to be one or two times, because, you know, you've worked hard to finally get to retirement. You've worked for the last 30, 40, 50 years, whatever it is for you, and you want to make sure that, you know, these are your golden years, and you want them to be as golden as, as possible, and you're not willing to make any compromises. But in reality, for a lot of people, I know it's not a popular thing to say. You might have to cut out certain things to make sure that your money lasts as long as you need it to. So I would say those two big problems, if people could just be realistic, and then also if they'd be willing to accept a few compromises on some of the things that they absolutely think that they need, whatever that item is. I think that overall, we could help with a lot of plan integrity in retirement.
[00:13:13] Speaker A: Yeah, really good.
Number three, you want to head into that?
[00:13:18] Speaker B: Yeah, I think the last thing I'll say, having a financial plan, before we jump into that, this kind of ties into it, too. I think in a lot of podcasts, not just podcasts, just people in general, we've really been beating up on the 4% rule. Basically, the idea is if you don't take more than 4% out per year, then your retirement savings, your assets, they'll last you throughout all of retirement. You won't run out. And actually, we've been beating up on it because of longevity, life expectancy, and also inflation. Like, how could you possibly take out just 4%? And that's why we've used a lot of, in many cases, we've used annuities to help solve for income because many of those annuities will guarantee a larger payout than just 4%. But there was an interesting study that I found for Morningstar, and this was last year, November of last year. So it's not that old. And they basically did a study, and they found that if people stuck to the 4% rule, on average, there's a 90% probability that they're going to have enough funds left. They're going to have something left in their retirement savings after doing that for 30 years. And they used a pretty conservative model, like a balanced portfolio, a 40 60 portfolio. And they said, hey, if this 40 60 portfolio follows historical norms, if you don't take out more than 4%, there's a 90% probability that you're still going to have something left after 30 years. So I know we kind of make fun of the 4% rule because maybe it should be the 3% rule with how long people are living, but that's kind of interesting thing that, you know, that kind of leads into not having a financial plan, which is the third. The third thing that we're going to talk about, not having a plan, not knowing where you're pulling from, how much. A lot of people are randomly taking distributions. Right. Things come up and they just randomly take distributions. There is no discipline or there is no strategy to how much and where they're pulling from. And I think that's where, you know, you can do that, but you might find yourself halfway through retirement, you know, facing a financial emergency or a crisis because you don't have enough and you're not really on track to making sure that, you know, you have something 30 years later, depending on when you started your retirement.
[00:15:19] Speaker A: Yeah. No, absolutely.
All right. Number three, not having a financial plan. Sorry. Is there anything that we want to add to that?
[00:15:27] Speaker B: I think we probably cover that. Maybe we jump to number four. A lot of these kind of tie in nicely to each other.
[00:15:31] Speaker A: So. Man. Number four, I've got a great story. So spending too much, too early and great story. I mean, by a sad story. So one of the things that we see is a lot of people underestimate how much money they're going to spend on the front end of retirement. I would say the first year, two years, even you look in those first three to five years, you have six Saturdays and a Sunday. When you think about it, we spend the most amount of money in our working years on Saturdays because we're not working now. All of a sudden you have six of those. And an example I would give is we have a client I used to serve at my old firm, so I shouldn't say we have one. I had one. And he never made more than $60,000 in a year. He had accumulated a nest egg of 1.7 million because about half of his retirement was in his company's stock. And he had a little bit of luck. The company crushed it and it left him with, again nearly $2 million of retirement nest egg, never having earned more than $60,000 in a year. Now, one of the things I'll tell you is that when you make 60,000 a year, 1.7 million feels like, and it sounds like you won the lottery. And what he ended up doing is within the first, like, twelve months of retirement, he upgraded his truck, he bought a new fishing boat, he bought a new ice house. You know, he helped a family member with some medical bills. And I sat down with him and I said, hey, I'm really concerned. I said, in your first twelve months of retirement, you've spent $300,000 between these four different items and Yellowstone. He looked at me and he goes, there is no way I've spent that. I want to see every single distribution that I've taken. And he was mad.
I printed it off. And I walked through every time that he requested money. And typically there's two ways that you pull off your retirement assets. There are those that they take a paycheck, which typically, in addition to your Social Security, maybe a pension, your advisor sends you 1000 or 2000 or 5000 or name that number, 10,000 a month. And so he was getting like four grand a month. But then on top of that, he would call in whenever he needed money for the fish house, the boat, the truck, and those were bigger chunks of money, medical bills for that family member. And his first year, he'd spent over 300 grandd. And we went line by line, and between the monthly payments and those random distributions, he goes, oh my gosh, he goes, I've spent 300,000. And it took him 40 some years to build the 1.7. So I said, hey, I said, we got to slow down or you could run out of money. And so the reason I say that is he thought 1.7 million gave him the ability to spend whatever he wanted. And then it quickly hit him that, well, that's a lot of money. This money has to last 25 to 35 years. You know, so one of the things that we do with people is we sit down and we go, hey, what are some of the big expenses that you see coming up? Does it make sense to pull half of that money? Like, if you're thinking about making a big distribution in 2024 and you wanting to buy something soon, like a new vehicle, maybe you take half the money out this year and half the money out January 1 so we can split up that tax bill. So we think about it tax strategically, but then also, how much money overall do you want to spend in your first couple years of retirement? I think one of the things I love about what we do, Ylsa, is we're not here to stifle people's spending or stop them from doing those bucket items, but we want to make sure that you're not running through the assets at a speed that scares you, especially if now we have a bear market and that half a million dollars is 300,000, or that million dollars is now 600,000, or that 3 million is now 2.1 because of a market downturn, because we've doubled our debt since 2020. We have a new president coming in. Whoever wins, half the country is going to think that it's the end of America anyways. I won't keep going and going. You know, one of the things that we often see is, in a great way, people will celebrate retirement, but they say yes to everything instead of yes to the things that are most important.
[00:19:52] Speaker B: Yeah, it's a huge ditch that we see from time to time. Sometimes it's the opposite, right? Sometimes people struggle to spend any money, and I think that you need to find that middle ground, probably.
Sometimes people come in and their experience with their previous advisor is he's always pumping the brakes, telling me I can't spend my own money. Nobody's telling you what to do with your money. It's your money. But at the same time, like, it's in our best interest to make sure that you can remain one of our clients and not just for the first five or ten years. Because once you're out of money, like, there's not a whole lot we can do. If you have a Social Security pension and no retirement savings, like, we're happy to meet with you, we'll be friends, but there's not a whole lot of advice after that. So we want to make sure that you have your retirement savings, that it's going to provide for you for as long as you need it to. So, you know, we want you to have a dignified retirement. We don't want you to overspend. We don't want you to also, you know, penny pinch and, you know, because you're living in fear, and ultimately your kids or grandchildren, whoever your beneficiaries are, they're going to spend your money. We want to make sure that you get to enjoy retirement, enjoy what you've worked hard for. So.
[00:21:01] Speaker A: Yep.
Great. What's the next one?
[00:21:08] Speaker B: Quitting your job too early. I think we see this a lot, and I think, and I don't know if this is an indicator that somebody quit their job too early or maybe they just had the wrong expectations about and for retirement, but how often do people end up going right back to work? If that's any indication, you quit too early. I don't know. Or maybe, at least, maybe lots of people get a different type of job. So maybe they didn't quit too early, but they transitioned thinking that they're going to stay retired, but they don't.
[00:21:36] Speaker A: I think we see people quit too early, but I think with the families that we serve, we see people almost quit too early often. And what I mean by that is they intend to, and we have a conversation, and they realize that it isn't a wise decision. So, you know, sometimes everybody knows this, but it's good to say is that sometimes the way that we feel isn't the right thing. You know what I mean? So there's a quote that said, not everything that you think is correct. And so the reason I say that is, I don't know that on any podcast. I've been able to share three stories from the day before. But yesterday I had six appointments, and I had one with one of our clients, and she's wonderful.
And she just said, is there any way I can retire in six months? And I said, you know what? I said, I would love to tell you. Yes. And I said, but based on your expenses and your assets, if you retire in six months, you're going to end up going back to work in your mid seventies because you're going to run out of money. And I said, as much as I want to tell you, yes, and there's a lot of advisors that want to tell people whatever they want to hear. I have a responsibility that when you retire, that you can have financial peace, really, until you take your last breath. And I know that seems like a big thing to say, but the worst thing that happens is somebody retires because they're the ready for it, and they find out five or seven or ten years down the road that now they're going to be dependent on somebody else because they're literally going to be out of money, or now they have to sell their house to fund their retirement, and they got to spend the last years of their life renting something. And that rent goes up every single year due to inflation, and they can't afford to stay in the rental because they're running out of assets. So I know that sounds heavy, but one of the things that we do see is people wanting to quit too early. And what I would say is meet with your advisor, get a second opinion from us and find out, is it doable to retire as early as you want to? You know, we have families that we serve that they've got millions of dollars, but they understand that if they retire at 62, they're going to have a huge expense in health insurance because now their employer isn't offsetting the cost. And before you get on Medicare, on average, you're probably going to spend $1,000 per person, which is two grand a month. And if you have bad health, even more if you have a decent plan, and now all of a sudden you add $2,000 a month of expenses to the expenses you already have for the next 36 months, it's significant. So we want to help make sure you're not quitting your job too early. We want you to live and use your assets, but not run out anything you want to add before we move on to Social Security. Too early.
[00:24:22] Speaker B: Yeah, I think it's just, it just comes down to the numbers. Like, we can take the guesswork out of that, and the last thing you want is to retire too early and then constantly be stressed over the, like, the integrity of your plan. Like, that's not a dignified retirement. So take the guesswork out. Maybe you're counting down the days because you had a number in mind. You thought, hey, I'm going to retire at 63, 64, whatever that is. And I think that sometimes we get so committed to that number that we're, you know, that we're literally counting down the days. But we might need to readjust that and have something that's really going to, when you finally retire, give you that peace of mind that you want while you're retired.
[00:24:59] Speaker A: Yeah, absolutely. The next one is taking Social Security too early. You know, we had a meeting last week with this couple yesterday.
[00:25:08] Speaker B: I'm like, Trey, this is starting to sound a little unbelievable.
[00:25:11] Speaker A: Yeah, not yesterday. I know. If I had four stories from yesterday, you know, call me a liar and hang up.
I've never had three, though. No, this one was from last week. And I met with this couple and they've done a great job. I mean, they had, you know, they had significant assets. And I said to her, I said, hey, for tax strategy, it may make sense to delay your Social Security a couple of years and live off of some of your money that isn't making six and a quarter percent a year. And she looked at me and she goes, I'll listen, but I've already decided I'm starting next month.
And so I said, okay, well, we don't have to spend time on that if you're, if you're decided. So one of the things I'd say to you is, you know, look at your Social Security like you would a pension that you've worked for because you've worked for it. Look at your Social Security like a retirement account, an IRA, a that you've contributed to because you've contributed to this and be intentional of when you take it. Because really we all have two goals with Social Security. Number one is how do we maximize it over our lifetime? Meaning if you do a break even chart, if I delay my benefit, how long do I have to live for it to be worth it? But then also look at, hey, if I live off some checking or savings or maybe some bonds that are not making any money and delay my Social Security, now I need less of my investments for the rest of my life. Oh, and by the way, Social Security has a cola, a cost of living increase. So not only are you getting a guaranteed six and a quarter or 8%, but you're getting a cost of living increase on a larger dollar amount. But you also pay less taxes on this source of income than you would from any money that you pull from a retirement account. So I would just say is instead of pre deciding when you're going to take this benefit because that's what all of your friends did, sit down with a retirement planning specialist that has spent time studying Social Security and look at the options. Because if you just turn on your Social Security, you only have twelve months before you can change course and correct it. Let's take the time upfront to maximize this benefit you work so hard for that way, even if you do turn it on right away, because for some people that does make sense at least you've ruled in all of the options before you ruled them out.
[00:27:39] Speaker B: Yell, say, well said.
[00:27:42] Speaker A: All right, skipping a portfolio rebalance. I'll let you in on this, being that that's your arena on our team.
[00:27:48] Speaker B: Okay, so maybe I'm going to try to say something a little more controversial, you know, to get more viewership.
No. Well, I don't know. I talked about rebalancing, I think, I don't know, three, four podcasts ago, and the importance of rebalancing. And a lot of times, you know, if you do rebalance at all, right, usually you're going to be in the trigger based rebalancing camp or like the calendar based. Right? Calendar. You just have it, you know, set at a certain time, a year or maybe once a quarter or twice a year, whatever it is. And that's when rebalance, we don't do that. We do more of a trigger based rebalancing. We have certain thresholds that we hit, and then once we hit those, we rebalance. So that could happen any time of year. So maybe I'll just start with the pros. Like, why would you want to rebalance? Well, the first thing that, the first reason why you would want to rebalance is probably you've determined with your financial advisor, maybe through a questionnaire, through a series of questions, or that financial advisor getting to know you, you've determined that, hey, this is my risk tolerance. This is how much risk I want to have in my portfolio, my account. This seems like it lines up well with who I am, with my investment objectives. Okay, well, eventually, when you start out, that's fine. It's going to be exactly according to that risk tolerance. For us, we have ten portfolios ranging from the g zero to the g 100. Obviously, with the g zero being the most conservative and g 100 being the most aggressive. So initially, when you pick one of those portfolios, you're going to be right on target. But eventually it's going to drift. The market is going to change. The stocks and bonds are not staying the same, obviously. So what we do when we rebalance, we bring your portfolio back into alignment. It's going to align, we're going to sell certain positions and we're going to repurchase other positions to make sure that it reflects your initial risk tolerance.
So overall, if you think about it, you're implementing investment 101. You're buying low and you're selling high because when your portfolio is misaligned, we repurchase the stocks that are bonds that have underperformed and we sell off the ones that have overperformed. But the counter argument to this and the reason why I even bring this up, especially when things have been so volatile over the last, I don't know, it's forever at this point, a lot of our clients are giving us some pushback, and the pushback sounds a lot like this. Like, hey, like, why are we selling the winners and repurchasing all of the losers? Right? I know that you're getting me back down into the g 60 or g 70, whatever it is, but you're selling all the stocks that have been performing so well only to buy the ones that haven't been, like, why would you do that? Like, the stock that's doing well, maybe it's likely to continue doing well, and it doesn't seem to make a lot of sense on the surface for a lot of folks. So, you know, the other thing is, you know, sometimes people are concerned that we're not doing it thoughtfully. And I want to, like, you know, put your mind at ease. Like, if you're one of our clients or if you're considering working with us, we're not just selling things off without putting any thought into it. And what do I mean by that? So, like, you know, when you're rebalancing an after tax portfolio, that's where a lot of the concerns come in. Like, are you really going to sell those stocks? You haven't even held them for a year, right? You're going to force me to pay ordinary income taxes because you're rebalancing. And depending on the frequency, like, what is that going to look like every year? So I want to make sure that people know that when we manage your portfolio, we're being very thoughtful with the type of investments that we have and the asset classes as well. We're not putting, typically, if somebody has a Roth IRA, a traditional IRA, an after tax account, we're not being careless in the types of investments that we use to fund each of those different types of accounts because they all function differently. And we know that eventually, when we do a rebalance of your portfolio, we're thoughtful because we've placed the correct investments in the correct types of accounts that allow us to be as tax efficient as possible. So just to put your mind at ease on that, you know, because sometimes these are, you know, this is the, a little bit of the pushback that we're getting. So I don't know, is that probably not very controversial? But I do realize that there is, you know, there is a counter argument to every, you know, everything that you do. And there isn't just one way to do something.
[00:31:43] Speaker A: And I think one of the things, and you can hit on this yellowsticks, I won't, I won't step into your world too much. But I think one of the big changes that people make when they come to work with us is a lot of people are stock heavy in specific companies where we are 80% ETF's and 20% mutuals, mutual funds or something similar to that. And so one of the things that people get with us is more diversification. And I think that when you are in and nearing retirement, even though you want maybe some home runs, it's less about the home runs and taking the big risk, and it's more about stability and good returns over time. So if you'd like more information on how we invest money, we'd love to sit down with you. Yellowstone can discuss in detail what that looks like. And we can do kind of an x ray on your portfolio. Yellowsta can put it up against one of the guardian portfolios. And we can talk about efficiency, returns, dividends and cost. I think that's a great thing to end that segment. Anything to add before we jump on withdrawing from retirement accounts early?
[00:32:47] Speaker B: No, I think that's. Yeah, let's move on to that topic.
[00:32:50] Speaker A: Okay, great. So if you have a retirement account, an individual account, and maybe a roth, do you know where to pull from and in what order? And do you know when to start? You know, I would say when we teach our financial classes, one of the things that I hit on is, do you know how to fund your first year, two years, three years, five years of retirement. And almost every class, people will say, man, we did a great job saving, but we've never had the conversation of when should we touch the accounts, which account should we touch first and how do we do this in a tax strategic way? In fact, most people, they have a financial advisor that's a generalist, meaning that advisor has done a good job helping them grow their assets. He's been a good partner to them, or she's been a good partner to them. And then they've got somebody that prepares their taxes. We call that a tax preparer, but they don't have a tax strategist. And now they're coming into a new season of life, and they're not working with somebody that does tax strategy or that gives them a spend down plan, showing them where to pull money from and in what order. So one of the things that we see is people pull money from a retirement account too early when often they should be living on tax free dollars, checking savings not appreciated non qualified or non retirement accounts. Do you want to touch on some of that as you kind of oversee the investments in our office?
[00:34:19] Speaker B: Yeah. And maybe just to use a few examples, you know, we have a number of folks who are like hanging in there until the age of 65 because they think that they can't afford health insurance, right. So they're waiting until their Medicare eligible and they're staying in a job that maybe they don't necessarily need that to make sure that they have enough in retirement savings, but they're just, they don't want that huge cost. And I would say in those earlier years, you know, if your income is low, clients who have retired, a lot of them are applying for Mnsure health tax credits. And for them, they want to keep their income as low as possible. So that would be a good reason not to create any taxable income because it's income based, depending on how much income you have, that determines how much of a healthcare tax credit you receive. So if you increase your income, you might eliminate the health tax credit savings that you're getting. And by the way, it's an advanced credit, it's an upfront credit. So that could be a reason for a couple of years where you really want to make sure you're mitigating how much income you have. Another thing to consider is eventually, like when you project out your required minimum distributions, which we'll talk about next, you might realize, hey, like between my Social Security, the pension income I have, maybe the part time job that I have, or whatever your sources of income are, the RMD is creating income needlessly. The required minimum distribution, it's forcing me to increase my income to such an extent, I don't need the additional income. So for some people, maybe for you, you're thinking, hey, I'm going to live off of some of those pre tax dollars in those earlier years of retirement when income is low, going to get some of those IRA or pre tax dollars out while I'm in a lower tax bracket so that later I have a lower required minimum distribution because you're lowering your IRA balance and it's, it's a percentage based off of your total IRA balance that you're forced to take out. So that would be a few reasons to do that. Other people have entirely different reasons to do Roth conversions because they want to pass on money as effectively and tax efficiently as possible. So there's, you know, there's a variety of things. Like if you add in charitable contributions for someone who gives charitably, that could totally dictate a completely different strategy for you. So not to, you know, spend too much time on that, but, you know, it's, it's, it's really, it's an. The answer is going to be individual and unique to you based on your specific circumstances.
[00:36:35] Speaker A: Absolutely. All right. Number nine, forgetting your physical health. Man, it can be so easy to fall into laziness and retirement. In fact, you know, one of the things I've noticed is we have time, actually. Oh, it's easy for us. No, but I think one of the things I found is, you know, people that specifically, if they have a job where, like, we have one gentleman that we serve, and I'll never forget, he walked in and he was like, don't even say it. He goes, I know I've gained, like, 50 pounds, but, you know, his job was to read meters, and he did a great job saving, but he went from walking. You know, I can't remember what it was, like 20 or 30,000 steps a day to basically sitting in a chair watching tv, and within, like, six months, you put, like, 50 pounds on, you know, so one of the things that we'd encourage you to do is if you have a job, especially, that isn't already sitting at a desk, maybe you have some sort of construction background, or your feet are on the ground and you're moving. When you retire, be intentional to not stop moving. Get your steps in, hit the gym. You know, I think even I, unrelated to your health, just the way that you feel, being tired, being exhausted, you know, that's not how you want to start your retirement. You want to feel your best. You want to be high energy. This should be one of the greatest seasons of your life. It should be intentional. You should be doing the things that you want to be doing. And if it's done right, I think your retirement years are the best years of your life. Anything to add to that?
[00:38:04] Speaker B: No, that's, that's good advice.
[00:38:06] Speaker A: All right, number ten, hit it.
[00:38:10] Speaker B: This one might be a better one for you. Not staying active in your social circle. I don't know if I'm qualified to talk.
[00:38:16] Speaker A: Well, you are. Tell them what not to do.
[00:38:21] Speaker B: Don't be like me.
My wife absolutely loves being social. She would hang out. She'd invite people over every day of the week if she could, and I'd be fine to just, you know, check in every couple of years with my closest friends.
[00:38:36] Speaker A: Well, here's what I would say, right, is most people don't realize how social they are in the workplace until they retire. And I, you know, we have, y'all said, we have one gentleman that we serve. This is a couple years ago. He's still with us, but I'll never forget, he said he couldn't wait to retire. And then once he retired, he couldn't believe how much he missed some of the jerks at work.
So the reason I say that is, you know, even though maybe you're burnt out on your job. And, you know, one of the things I found is, in every season of my life, before it was over, I was ready for the next season. You know, high school, college, changing careers, changing businesses. You know, before I was done, I was done. And maybe there's a lot of you listening that, you know, you're a year, two years, or three years from retirement, and mentally you're done. But you know, that the finish line isn't there, you know? So what I would say to you is, before you retire, have a plan of some things that you can do to stay social. You know.
Here we go. Are you ready for this? Is this number four or five? I'm going to reflect on a meeting from yesterday. One of the couples I met with, she's been in a book club for 20 years. You know what's really cool about that is she did it while she was working, and they've continued it into retirement. So even though she left work and she left the workplace and she left the people that she saw every single day, she has an evening, one night a week, every week, where she gets together with a group of women and they're in a book reading club, and they talk about the book. And what I love about that is that she's continued to stay social. She didn't isolate herself. She didn't get bored. And because she kept that group going, now she goes to lunch with women in that group. She goes to breakfast. They work out together. So the thing I would encourage you to do is don't wait until you retire to decide what you're going to do in retirement. Start looking for things and trying things six months, a year, two years, three years, five years before retirement that you can continue into kind of those golden years. You all say. When I used to think golden years and retirees, I used to think of, like, an old person. And when I look at the average family that we serve, the average age of that person, whether it's a couple or a single individual, is 65 years old, we have so many families that we serve, individuals that they're like triathletes, they're doing ten ks, five ks, half marathons, and they're staying active. And there are high energy hikers and bikers and snowmobilers. And then we have people that are 65 that haven't gone for a walk in two years. So I would just say is that your health and your social life oftentimes are tied together. And so we just want to encourage you to continue those things, find those things before you plug in, before you pull out the plug on work so that you can continue to have great relationships. Because in my opinion, and I'm a little bit more probably into this, bought into this than you are Yellowstone. That's not good or bad, is that the quality of your life is dependent on the quality of your relationships. And so if your relationships are not quality, your friendships, your marriage, the way you communicate with your parents, you know, get those things in order because the quality of your life is dependent on those. You know, I was meeting with a friend recently, and he actually pastors a large church in Maple Grove, and they've really just built an amazing ministry and church family there. They've got a private school. But what he did is we had this leadership class and he put up this chart and he said, how old are you? And everybody would write in their age, and then he'd say, how old are your parents? And then everybody would write in their parents age and he'd say, so, if your parents are 70 years old and life expectancy is 85, you don't have 15 years with your parents. If you see them four times a year, you only have 60 more times to see your parents until they're gone, if they live that long. If you see your parents twice a year, you don't have 15 years with your parents, you have 30 more times that you're going to be in the same room before they're gone to interact with them. Be intentional about those interactions. If there's regrets, if the relationship's not going well, maximize it. You know, for those, maybe you only see your parents or your kids one time a year. If you only see your parents one time a year and they're 80 or 70 years old and they live to be age 85, you only have 15 times left for the rest of your life that you get to be in the same room as your mom or your mom and dad. So I would just say to you, stay social. Be intentional. Fix the relationships that need to be fixed, because the health and the joy of your life is going to be dependent on the health and the joy of your relationships.
[00:43:48] Speaker B: I was going to say, man, you had me sold at the book club story that I'm going to hang my head on when it comes to.
[00:43:58] Speaker A: I hope everybody joins a book club after today.
[00:44:02] Speaker B: We're either alienating half of, like, the people who listen to this or, like, really just encouraging people to do something in retirement.
[00:44:09] Speaker A: Hey, let's end with this yellow say. We have people that, you know, they're in our areas. We have an office right here in Burnsville, Minnesota. We have an office in St. Louis park. But really, you know, we're set up to serve people all over the country for somebody that's listening that says, how are these guys different than the people that I work with? What would you say? What makes us different? What separates us as retirement planning specialists versus an advisor that just works with everybody at every age? What does that look like? How are we different?
[00:44:38] Speaker B: I think that you and I, what we offer is we've integrated so many different services and so many different aspects of retirement.
And, you know, we've both taken a personal interest in these things. It's not that, you know, I don't sell anything on Medicare, right? I don't do anything on long term care. I'm not an estate planning attorney, but I've really taken a personal interest in seeing how all those different pieces, how they work together with the investment side of things. Like, I'm competent, I'm proficient in Social Security. I can give somebody advice on all these areas, you know, maybe not legally, but I can have a conversation on any of these things. On top of that, we've actually partnered with people who can help them in those areas. So when we tie everything in, it's not that someone is being exposed to the long term care conversation the first time they meet with an attorney. Like, we've had these conversations, and everything just fits together seamlessly. And we really, you know, like, kind of like what you're talking about. We don't just help people, you know, when it comes to their investments. We help people with a strategy when it comes to retirement. Like, I can't tell you how many people, Trey, you've set them up with organizations and things that they can do in terms of their volunteer time in retirement to help keep them busy encouraging people to, you know, like you said, like, fix the relationships that have been broken because, hey, you know, it's not worth it, right? You might only have 30 more times that you get to see your parents. And just like, you know, just an overall. I would say we have an overall approach that really just ties in so many different aspects in life in retirement. And we really do, you know, we really put forth an effort to make sure that we do that well.
[00:46:11] Speaker A: Yeah, that's well said. I would say if somebody were to ask me for my elevator speech of what makes us different, you know, most of the families that we serve, we are not their first financial advisor. Now, we certainly have a handful of individuals and families that they've told us, look, I've managed my money in the 401K or in the IRA, and I've never hired an advisor. I didn't believe in paying half a percent or 1% or one and a quarter percent for that person, but they've come and said, but I've never retired before. And you guys don't just offer your services, depending on assets at half a percent to one in a quarter. You guys are holistic planners, meaning I can get my estate planning done. I can sit down with a Social Security expert, Medicare expert, health insurance expert, long term care specialist, a fiduciary financial advisor. You have everything in one place, and all of you, including the tax advisor, literally are under one roof serving me. I love the idea of being in a place that has everything so I don't have to go all over. I love the fact that every specialist communicates with each other to make sure that I'm being served correctly. And I love that your average client looks like me, acts like me, has the same problems that I do, because what I tell people is, you should be somewhere where their ideal client is you. They have your amount of assets. They have your RMD's coming up. They have, you know, all the. All the things that you're dealing with, you are who they've helped hundreds of times. And a lot of the families that we served, they had a great financial advisor in the fact that they did a good job growing the assets, but they realize that they're charging or paying somewhere plus or minus around 1%. And all they're getting is, is somebody picking their funds. They're missing out on everything else. And so a lot of these families have said, hey, I appreciate that my advisor has helped me get to this point, but I also realized that I'm in a different season. And now, because I'm in a different season, I need somebody else to take me to a new place. And I think that's where we really fit in. So if you'd like a second opinion to either confirm that you're in the right place or to find out that maybe you're missing out on some things. Yellowstone. I would love to have a light conversation, review what you have in place, point out what's working well and what could be improved. We'd love to have that conversation with you. Feel free to give us a call, shoot us an email. We love the fact that you've joined us on this podcast, and we'd encourage you to listen to some of the other 24, 25 other episodes that we have. And we're just excited to meet you. You know, we may be a fit now or down the road. One of the things I also say to people is if you have a great relationship with somebody, do you have somebody in second place? That if your advisor retires or passes away or moves on because of something significant, that you've started another relationship. So now you're not stuck in this moment of urgency looking for somebody or just being with the person that they chose for you. So come meet with us. We'd love to be in second place until we can be in first place. And I really think that you're going to find that there's a big difference at all things financial and guardian wealth strategies. Yellow say anything to close?
[00:49:33] Speaker B: Yeah, I think the last thing I'll say is it doesn't have to be a book club. It could be this podcast, right? This is. You can gather around listening to this. I'm just kidding. I think we covered everything. Looking forward to seeing you guys next week.
[00:49:45] Speaker A: Have a great day. Thank you for your time.
Thanks for listening to all things financial. You deserve to work with retirement planning specialists who care about your money and take a unique approach to your financial and retirement needs.
[00:49:59] Speaker B: Visit allthingsfinancial.com and set an appointment today.
[00:50:17] Speaker A: You 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 predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
