Reliable Wealth Financial Hour Podcast
When you're ready to retire, there are decisions to make that will impact the rest of your life. Father and son team, Bob and Cole Falter and the Reliable Wealth Financial Group share retirement income strategies and tips for navigating your retirement journey.
For additional information and important disclosures please visit www.rwfhour.com
Reliable Wealth Financial Hour Podcast
Retirement financial planning. There’s more to it than you might think.
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Financial planning for retirement goes beyond managing what you’ve saved. Bob and Cole Falter with The Reliable Financial Group explain how they approach retirement financial planning including tax planning and estate planning.
For additional information and important disclosures please visit www.rwfhour.com
This is the Reliable Wealth Financial Group podcast with Robert and Cole Falter, their family. And they're a team helping you navigate your retirement journey with tips to optimize your savings, strategies to protect what you earned, and ideas to help keep your retirement assets on track. Now, from Reliable Wealth Financial Group, here are Robert and Cole Falter.
SPEAKER_03Good morning, Cheryl. How are you, you cheetah you?
SPEAKER_00You better explain that, Bob.
SPEAKER_03We were just talking about chronotypes. How many of you out there know what a chronotype is? Good morning to our listeners. Good morning, Cole. How are you doing? Good morning. I'm doing good.
SPEAKER_02Excited to be here. Excited to talk about chronotypes. And how are the dolphins today? They're doing good.
SPEAKER_03Aren't you? You said you were me. I'm a dolphin. That's my sleep chronotype. That's your sleep chronotype, and I'm a bear, you know? So we're all three different.
SPEAKER_00And uh I am a cheetah, by the way, which is why he said that.
SPEAKER_03Yes, a visualizer that takes off in a spurt and gets things done. That's pretty cool, you know. I like that. So, with that in mind, we're gonna talk about a lot of great stuff, aren't we, today, Cheryl?
SPEAKER_00We are. We have a lot of information to share. And you know, Bob and Cole, this is tax season. I mean this is the time of year when everyone starts to get their forms from their employers, when you start to think about how to calculate your taxes, what you might owe in taxes. So, Bob and Cole taxes in retirement are often misunderstood. What do you guys feel is the first or most important thing to know about taxes in retirement?
SPEAKER_03Wow, that's a loaded question. What is the most important thing? There are several things, but I think the first thing to understand, I would say paying less on taxes thanks to the things that were put in place, but it all depends on your pre-tax income. Pre-tax income.
SPEAKER_00What if someone has most of their retirement savings in a pre-tax account, such as a 401k?
SPEAKER_03Sure. So taxes could go up in the future. As a matter of fact, we've been told that they've been held down this year. There was supposed to be a big tax overhaul of all the brackets. And I think that happened. Some of the brackets changed, right, Cole? A lot of the brackets changed. And when it comes time for an RMD, that money would be taxed as income. You know, if you miss an RMD, you could be assessed a penalty. And that's pretty hefty one, too. Pretty hefty one, 25%. You know, that penalty used to be 50%.
SPEAKER_00So it's better than it was.
SPEAKER_03Better than a sharp stick in the eye, but it's not as good as a cushy comforter, you know. So the taxability of your Social Security benefits is determined by what the IRS calls your provisional income. So as you can tell today, we've jumped in and we're starting on taxes. Today, I think for our listeners would be a great day to take some notes. If you're able to, take some notes because we're going to use some terminology that you might want to refer back to, but provisional income is really, really important. You need to understand how that works.
SPEAKER_00Well, I know that you guys are not CPAs, but you do work in concert with CPAs. Can you give us just a really general overview of what provisional income is, how it's calculated? Sure.
SPEAKER_03Provisional income is calculated by taking your adjusted gross income. That's on your tax return.
SPEAKER_00Okay.
SPEAKER_03So there's three things that go into this equation. That's why I'm saying it's uh a little bit complicated this morning, but we'll get through it.
SPEAKER_00So, Bob, here's the thing. I think a lot of people don't understand that their benefits could be taxed.
SPEAKER_03Right, yeah. Because you know when FDR set up Social Security way back in the 1920s, 30s, uh, he promised it would never be taxable. And then along came Ronald Reagan's era, right there. Inflation went sky high, and Social Security started to be taxed, and then Bill Clinton jumped into office and boom, he threw the ball further down the court. So now Social Security is definitely taxed, 85%. That's why tax planning in retirement, tax planning, not like a history teacher looks back and just covers history, right? Someone that's proactively deploying methods and ways of looking at your taxes in the future. What are your future income streams look like? That can keep your provisional income below the IRS threshold. The money that's withdrawn is considered income.
SPEAKER_00It just really relies or depends on, I guess I should say, your income. The guidelines that we're giving you today are really general.
SPEAKER_03Yes, right. I think Cheryl, you qualified it earlier that we're not accountants, but we do work very closely in concert with some really good accountants. And if you don't have one or you need somebody, you know, certainly give us a call. But it's important that you have a tax planning accountant. And we take the general guidelines and then we have the accountant tweak them and tweak them. And there are certainly ways that you can lower your income if you're planning. But if you're waiting until January 1st to start taking write-offs and doing RMDs and doing, you know, January 1st, or you're, you know, you're waiting until then to do your um Roth conversions or things, you know, it might be too late. You might need to start earlier and see this year.
SPEAKER_00Yeah, that'll impact next year if you've waited until January 1st. So, Bob and Cole, I know over time we have talked about buckets and kind of thinking of assets in different buckets when when referring to financial planning. So, can you do the same thing for taxes? Put them in different buckets?
SPEAKER_03Yes, you sure can. Let's go over just three buckets. So, what I'd like you to do now, if you're listening this morning, is visualize this with me. Okay. Um work for a particular company long time ago where we did a visualization session often, once a week or once a day, you can go in and uh do a visualization. So if you got a piece of paper, turn it sideways and draw three buckets. The bucket on the left is the taxable bucket. Okay? The bucket in the middle is the tax deferred bucket. The bucket on the right is the tax-free bucket.
SPEAKER_00I like that one.
SPEAKER_03Okay, tax-free. Everybody likes the tax-free, don't they?
SPEAKER_00Yes, of course.
SPEAKER_03First one, the first tax bucket that's on there is your taxable bucket. Things that are taxable. All right. What are the taxable things? Brokerage accounts, bank CDs, savings accounts, things that as they grow and they're focused on growth, whether interest and dividends, the interest and dividends, capital gains is taxed annually or when realized, right? You got it. You have to report those things on there as income and taxable. Now, what's in the tax-deferred bucket? Okay, and we show these on the whiteboard. When you come in for a meeting, we sit down and go over this on the whiteboard and show you kind of where we operate and how we move money from one bucket to the other bucket. Because the second bucket is the tax deferred. Deferred. That's the bigger of the two gifts that the IRS gave us. When they set up 401s and they set up IRAs, the first 401 came out. And 1963, Studebaker failed, left everybody out on the streets. So the IRS had to step in and say, hold on, these people need to be able to save on their own. They can't just because pensions had, you know, everybody was mismanaging pensions. So traditional 401s, IRAs, traditional IRAs, 457 if you work for the city or the state, a 403B if you work for the hospital or a school. Those are all contributions are pre-tax. You didn't pay taxes. Withdrawals from them are taxed as ordinary income. That's where the RMD bucket comes in.
SPEAKER_00Okay.
SPEAKER_03The RMD bucket. Okay, it's tax deferred. You put it in non-taxable, it grows non-taxable until you take it out, then it's taxable. So then the third bucket. So we got taxable, we got tax deferred, 401s, IRAs, 403Bs. Then we got tax-free.
SPEAKER_00I want to know more about tax-free.
SPEAKER_03We're trying to move from the taxable and the tax deferred over to the tax-free. Because then you can live very simply in that little cabin in the woods that you designed or that house in the North Carolina, whatever. So your Roth IRAs go into the tax-free bucket. Well, kind of, because we got to talk about legislation risk here. Unfortunately, you know, it's a thing that's on the table. Roth 401Ks go in this bucket. What about health savings accounts? So those are all considered tax-free accounts. Okay?
SPEAKER_00Are they really tax-free? I mean, you have to pay taxes at some point.
SPEAKER_03Yes, and you don't qualify for Roths if your income hits certain levels. So it's a very limiting bucket. Now, contributions in that bucket are after tax.
SPEAKER_00You've already paid after tax, exactly. So it's not like they don't qualify for taxes.
SPEAKER_03Right, right, exactly. So it's after tax withdrawals, including all the growth, are tax-free in retirement. Now, there's another tax-free that we use a lot now, but you do have to qualify medically for it. And that's the indexed universal life. So we can use that just like a Roth, but it's actually much bigger than a Roth, and it's a Roth on steroids. So we use that one if we can. We'll show you all those in a combination on the whiteboard as you sit and eat your blueberry muffin and drink your coffee in your first meeting.
SPEAKER_00That's right, right there in the office. We're going to talk more about changes when we get uh into the show a little bit further because we're going to talk about estate planning. And that's where changes can really impact things going forward. So more on that on the way.
SPEAKER_03Let's kind of define a little further for our audience that are listening this morning. What is the accumulation phase and when do we start that? We start the accumulation phase as soon as we start working, almost, don't we? Yep, that's right. We're doing some kind of saving, you know, because my two daughters who are 22 and 23, and Cole, we all have our savings, you know, accounts and we put money in religiously or we put money in consistently. And once we start seeing that nest egg grow, now it's kind of like a hands-off thing. I don't want to touch that.
SPEAKER_05Yeah.
SPEAKER_03You know, uh, Lauren and Molly just got back from Dallas. They flew out to a wonderful Christian retreat that they went to for two or three days, and it was a little expensive because they spent three or four nights in a hotel and they had to rent a car, and you know, and Lauren was like, I really don't want to spend the money to do this. But once she got there, you kind of say, that's why I saved.
SPEAKER_02Yeah.
SPEAKER_03So I can do this and I can enjoy this retreat. You know, and they went into one of those big Western stores. You know, we had that scary phone call that look at all the stuff I've found. I might have to buy another suitcase.
SPEAKER_05Oh no.
SPEAKER_03To get it all home. No, we don't want to go there. But, you know, you're you're in the accumulation phase as you're working and you're putting money away for retirement. Yeah. And you want to leave it alone. Some of it's qualified money, some of it's non-qualified money, but there's a lot of things that we can help you with, but as you're accumulating and you're growing your accounts, then you start making the transition about four or five, six years before retirement. You're ready to retire, you've been working at this job for 30, 40, 45 years. Now it's time to pull the plug and step back and say, now I'm going to enjoy my life. Yeah.
SPEAKER_02Right? Before we get there, let's talk a little bit more about the accumulation phase. Okay. Because I think if we point out a couple things and then we jump into distribution, you can see how the strategies used to accumulate don't work. Right. When you get into retirement. Okay. So in the accumulation phase, there's a method of investing that we often talk about, which is pretty well known. Right. One of the best ways to accumulate is dollar cost averaging.
SPEAKER_03Hmm. Dollar cost averaging. I've heard that before. What does that really mean when I'm dollar cost averaging? This is another if you're taking notes this morning on our show. This is another thing to write down, because most of you know the definition of dollar cost averaging. But if you don't, let's help you with that. The market's up where it is today and you're putting money into your accounts. You're 25 years old, you're 35, you're 40 years old, you're listening to the show, you're saying, yeah, okay, I'm putting money into my accounts. Now, as the market starts dropping and it goes down, remember the shares that you're buying today are 100 cents on a dollar because the market's at its high point. Every time you buy shares, when I say shares, I mean shares of a mutual fund, shares of stocks, shares of any of those things that are in your investment portfolio. They're 100 cents on a dollar, you're buying them at top dollar. Now the market starts dropping, and when the market starts going down, Cheryl, the share price goes from 100 cents to 90 cents to 80 cents to 70 cents. Now, what does dollar cost averaging mean when you get there, Cole?
SPEAKER_02Dollar cost averaging means that whether the share price is $100 or whether it's $50, I put in the same amount monthly every month during the accumulation phase. So let's just say that's $500 a month, and that's taken out over a couple chunks of my weekly paycheck at work. Right. That $500 a month buys five shares when the shares are at $100. Right. But that $500 a month buys ten shares when the shares drop to $50. So I'm rewarded when the market drops because I can buy more shares for a cheaper amount.
SPEAKER_03And very smart investors actually, as the market starts down, Cheryl, they double down. They put in twice as much because you're buying depressed shares. You're buying shares that are on sale.
SPEAKER_00On the belief that they will then be worth more.
SPEAKER_03On the belief that the market will and the market always comes back. But how long does it take for the market to come back? That's the big question.
SPEAKER_00That's the huge question.
SPEAKER_03$64,000 question.
SPEAKER_02How long is this going to take? But if you're in the accumulation phase, you're working. Yeah. You have a steady income coming in that hopefully, if you have the right job and you're good at what you do, is going to stick around for a long time. Yeah. So you have time to hold. Right. If the market drops, that's the best time to buy because you're holding.
SPEAKER_03You're in for the long haul. And that describes the accumulation phase. Your dollar cost averaging. This is the mindset that we should train all of our children to use for financial education. It's kind of where I'm at right now. Yeah, yeah, exactly. When you're putting money in, put in the same amount all the time. That way you don't even miss it. It comes out of your check, you don't even see it. It goes right into your retirement plan. And if the market starts dropping, now you try to figure out a way to put more in because you're buying shares of mutual funds at less cost. But now let's talk about what happens when you move to the distribution phase.
SPEAKER_00So, Bob and Cole, if I have a 401k, that's been my primary savings account because it goes in automatically from the paycheck, and I don't have to worry about it. So my retirement savings are in a 401k or a similar workplace retirement account. So I know how much is in there. Right. Can I just start pulling money from there to pay for my expenses in retirement? Why not? That's why I saved it.
SPEAKER_03That's a good question, Cheryl. That's the sixty-two thousand dollar question right behind the other one. You can, and that's what a lot of advisors or stockbrokers recommend that you do, but that can be a recipe for disaster. And let us explain why. Because what happens when the market starts to drop now and you're moving into the distribution phase, you want to take income out. We now have what's going on, it's not dollar cost averaging. We refer to it as dollar loss averaging because it's reverse dollar cost averaging, which is a big term that you want to write down, but here's how it works: no longer am I buying and putting money in, I'm selling and taking money out. Think about those $100 shares. You bought five shares for $100. You put in $500 a month. Now you want to take out $500 a month. And so you take out $500 a month by selling five shares. What happens when the market starts dropping, Cheryl? The market starts dropping and it goes from $90 to $80 to $70 shares. Now you want to take out the same amount, $500. You got to sell twice as many shares. Right. You got to sell twice as many shares.
SPEAKER_02Oh man. You know, why so why is that a bad thing? Because I think hearing that surface level, it's like, okay, well, I bought the shares at a cheaper price versus a more expensive price. I was putting money in, didn't matter what happened. I kept putting money in. Now I'm taking money out. Right. Why is it bad to sell twice as many shares?
SPEAKER_03Because not only will you be taking money out, but the stock market's taking money out of your portfolio at the same time. The share price is going down and you're taking money out. That's a recipe for disaster because you'll see your balance go down two or three times as fast. Yeah. And we could share a story, but I don't know that we have time this morning. Yeah. But we've met several clients that have gone through that where they've been dollar loss averaging, so to speak.
SPEAKER_02Well, and I think the big thing is you're selling your asset. You're selling the thing that it's supposed to produce income. Yeah. Your shares of mutual funds and stocks or whatever is in your portfolio, that's supposed to provide income. If you're selling your asset, there's no more.
SPEAKER_03Yeah, you're burning for the principal. And and here's the big thing that sets them apart. When you're in a mutual fund or you're in an IRA with mutual funds or stocks, normally your interest and dividends that those are spinning off, the eggs that those chickens are laying, you're only getting one, one and a half, maybe two percent. So if your portfolio is three hundred thousand, one and a half or two percent is six thousand dollars a year. If you're only getting two percent, what happens when you turn 73 and you have to take a required minimum distribution? What's the percentage you have to take out? Four percent. But you're only able to take out two percent from interest and dividends. So what do you have to do? You have to sell the principal if you're still in a 401k. And that is the primary reason that we use a whole new strategy where we're investing in interest-bearing exchange-traded funds, bonds, preferred stocks, all the investments that produce income. And we can produce much, much more than a mutual fund. You know, bonds and corporate bonds and preferred stocks, they're designed to give you income. Yeah. In the form of interest and dividends. In the form of interest and dividends. And that way you can take your income from the interest and dividends and not touch the portfolio. You're not selling shares. That's right. That's the big, big difference. And that way, when you sit down and you decide, I'm getting ready to retire, I've accumulated my wealth, I'm ready to take a look at retirement, and we have, you know, kind of a advisor insight that we're going to share with you. You know, four or five different things that you should be looking at that uh you want to just definitely line up and have a meeting with your advisor prior to retiring. Define your lifestyle before you set your budget. That's really important.
SPEAKER_00And that's not maybe as easy as it sounds. It's really thinking about how you want to live once you're retired.
SPEAKER_03Right. Yes. And you know you're gonna have more time on your hands. Sure. More time generally means when I'm off on a weekend, I get all kinds of projects done. And those projects cost money. Yeah, that's it. You know, Tammy and I said, What do we want to do this year? Let's work on the steps on the side of the house. That's not an inexpensive project because it's concrete steps going down that have kind of eroded. So if we're gonna come in and we're gonna rebuild the whole project, I'm not gonna do it. I gotta pay somebody to do it. Uh, you know, so now we're defining our lifestyle. Would I rather spend the money on that or would I rather go to Greece?
SPEAKER_00Can't I do both, Bob?
SPEAKER_03You can if you plan for it, Cheryl. You certainly can if you plan for it. And your lifestyle, when you're in your 60s and 70s, you don't want to do the things that can be detrimental to your health. You want to pay someone to shovel the snow off your roof. You don't want to climb up there at 75 and shovel the snow off your roof. You know?
SPEAKER_05Mm-hmm.
SPEAKER_03Things like that. The other thing you want to do is make your money last for a longer life. One of the biggest mistakes retirees overlook is their longevity. They say I'm only going to live to my mid 80s, but then they wind up lasting until like Grandma Sally. My you know, wife is down there in Christiansburg taking her to the doctors this morning. She got another little spot of skin cancer on her arm. You know, and she's down there at 92. People are living longer. People are living longer because technology, medical advances, and it's wonderful. As long as you have a quality of life. You know? Of course. Now, what about the structure of your income? How are you going to take your income? How much more of an income would you get if you waited? Because the thing you don't want to do in return. Retirement is run out of money. What happens when you run out of money? You become dependent, dependent on somebody.
SPEAKER_05Mm-hmm.
SPEAKER_03Dependent on the state. Dependent upon your children. Yeah, your children. And you know, have to move in with one of them, which is not really a comfortable situation, because you're ready for uh you want to maintain your dignity when you're retired, right? Of course. That's the thing that you're looking for. So you need to set a safe withdrawal rate and say, I'm going to take four, five, six percent, you know, and I am going to take out my required minimum distributions. I'm going to live on those. So those are all things to talk about.
SPEAKER_00You know, I was thinking that if you come in two to three years before retirement and really start putting together that reliable wealth retirement income map, that takes us back to the first thing we talked about. And that helps you define your lifestyle before you actually set a budget. You can look and say, okay, here's what I'd like to do. How can I get there? How can I make that happen?
SPEAKER_03And think about it this morning. You could either do that and call us and help us set you up on the retirement income map, or you could go back through that American Psychologist Journal study and swear all the way through retirement.
SPEAKER_00I recommend option one.
SPEAKER_03I recommend option one.
SPEAKER_02You know, we've seen a lot of clients that make a uh reasonable income use these to avoid taxable income down the road. Right. The strategy is we're developing tax-free sources of income, right? So rather than taking money out of a taxable source, we're developing a tax-free source. And so in these plans, like an indexed universal life insurance policy, these plans grow indexing with the market. That's why that first word indexed means that your money is indexing with the stock market. But the idea is you're sharing in market gains without taking all of the risk that the stock market has. And so these plans are really good long term because not only are you investing in a vehicle that indexes with the stock market, you're taking advantage of stock market returns, but it's also buying yourself life insurance, protection, and it can turn into a tax-free source of income down the road. And so there are many strategies around how to develop this, but oftentimes we've found that it's a great vehicle to use instead of doing a Roth conversion to take it from a taxable source into a tax-free IUL. Right. And because of a couple reasons. That tax-free income source that I had mentioned, but also this money that's going from taxable to a life insurance, it's leaving much more of a tax-free death benefit, much more of a legacy than it would if you just left it to the near age. Interesting.
SPEAKER_00So let's move ahead to estate planning. You know, there is so much to know about that, and so much that I think many of us tend to push off till later. So let's talk about why it's important. Cole, let me start with you. A will is one component of an estate plan, but it is probably the one that we tend to not want to deal with. Okay, but we all know it's important. Why, why, why should we do it now?
SPEAKER_02Well, I think the most important reason as to why you should do it now is because you never know when life will take a turn for the worst. Right. And unfortunately, you have to plan and prepare for things like that. You know, we wish and hope that we live until our late, you know, hundred tens, hundred twenties, and we're healthy.
SPEAKER_03But is that our knees and our knees still work?
SPEAKER_02Yeah. You know, and our ankles still work. You know, you have to plan for things like this because we've seen far too many situations where they don't, the clients or the prospects or just friends and family that we know. Um, you know, our listeners may have some friends or people that come to mind when I mention this, but people that didn't plan with a will or a trust or identify what they want their estate to look like when they pass. And it can turn into a very difficult situation.
SPEAKER_03Absolutely. And when we get into that estate planning, we sit down and we have a way that we can connect with attorneys and we can do all the pre-work for them so we can help you whether you need the will or you need the trust, we can identify all that. But that's a whole separate meeting, isn't it? Oh, yeah.
SPEAKER_02It's really a whole separate meeting. And it's something we talk about in our retirement income map. Yes. So it's part of it. But the big thing is that you are planning for these things.
SPEAKER_03And that's where we go back to tax planning, estate planning, retirement planning. There's all kinds of planning you do, nursing care planning and shopping. We talked a few shows ago. I do not want to plan to go to Alaska where it's slippery and cold and dark and retire in a nursing home. They've already told me it's $35,000 a month. That's right.
SPEAKER_00Most expensive state, we think, right?
SPEAKER_03Yeah. So there are ways we can get around all this. You know, remember the Swiss Army knife that had a little screwdriver and a switching.
SPEAKER_00I love those little scissors, yeah.
SPEAKER_03Yeah, the scissors were cool. Well, you know, the IUL Index Universal Life is kind of the Swiss Army knife of Roth conversions because it creates a huge legacy that a Roth doesn't do. It gives you protection as well and death benefit, and the cost is low, and this is not your father's insurance company anymore. People with cancers that have had them in the past are getting standard ratings. That's unbelievable, Cheryl, because 40 years ago, 30 years ago, when I was selling life insurance only, you really had to qualify and pretty much walk on water in order to get a decent life insurance policy or a plan.
SPEAKER_02And at the end of the day, you still do. Yes. You do have to qualify. A big part of using indexed universal life or permanent insurance as a tax-free bucket, you do have to qualify health-wise. But we're seeing a lot more clients do qualify. Yes, they do. And it fits for a lot more people than just high net worth or super healthy. Right. It fits everyone in between as well.
SPEAKER_00And I think really the biggest part of estate planning for many people, making sure that they leave something behind, that what they have to leave behind goes to the people they intend it to go to. So what do you think is maybe one of the largest mistakes that people make when estate planning?
SPEAKER_02I think one of the biggest mistakes, Cheryl, is really overlooking or failing to coordinate beneficiary designations. And so what do I mean by that? Well, all of your retirement accounts, 401ks, IRAs, all of your insurance policies, life insurance, annuities, they all allow you to designate beneficiaries. And so what this is, is these are you know a handful of people that when you pass, you'd like this money to go to. Typically, husbands and wives designate their primary beneficiary as their husband or wife, their spouse. But outside of that, you can designate contingents. And so this would be, you know, me and Anna get a policy or a bank account or a life insurance, whatever it might be. If I pass, I want everything to go to Anna. Let's say something happens to where we get on a plane and we both crash and we both pass. Right. Where do I want that money to go outside of us? And so it's important to identify that when you sign up for these plans. Yes. I think that's the biggest mistake because beneficiary designations supersede your will. And a lot of people don't realize that. But it's important to understand that when you're designating beneficiaries, when you sign up for this account, whatever it might be, if it goes to probate court, that will supersede what your will says. Yes. And so it's important to think, you know, how do we want this money to pass on?
SPEAKER_00So, Cole, is it important to have that contingency in there? Because what happens if you pass and the person you named as your primary beneficiary is no longer with us?
SPEAKER_02Yeah, it's very important to have contingence in place because we've seen a handful of times that happen, to where the client passes or whoever passes and their primary beneficiary is no longer alive either. And so it gets tricky there. If the contingents aren't specified, then uh things can get very tricky.
SPEAKER_00But what about probate? That's a word that kind of hangs in the air that we hear, but I'm not sure everyone's entirely clear on probate. What is that?
SPEAKER_02Probate is the process of you know settling your estate. Right. The problem is it's public and it's in court. And with a will, wills tend to go to probate. Wills will always go to probate. They will always go to probate. Yeah. And so in that case, you know, if if you're not designating beneficiaries and you do have to go into probate, and you have all of these people that are associated with you saying, I have a share, and I have a share here, and I know this person, and I'm related here, you know, it can get very tricky if either beneficiaries aren't designated or your will isn't updated. And oftentimes, even if you do have an updated will, it's still in probate. So you everyone can see what's going on in probate. Meaning you're gonna have people calling your children if you pass, trying to sell them this product or sell them this home equity loan or whatever that looks like because all of those assets are now available to the public.
SPEAKER_03And that can cause a huge problem. And we have, and you listeners out there, have seen this happen. And maybe you don't realize it this morning, but you've seen this happen. Think about the entertainer Prince. You know, Prince passed away, and when Prince passed away, he did not have his will in order. And it took six, seven, eight years for his estate to be settled because it goes to probate, and all these people start coming out of the woodwork saying, Hey, I want part of that. You know? Jimi Hendrix, same thing. Elvis Presley, same thing. You know, it's just story after story we can relate. But it's important that you have everything tied up in a nice, neat little bow, and you occasionally have we talked about this and I heard it on one of the podcasts. You pull out those life insurance policies, you look at them. I know the plastic sticking to the letters, and when you pull it out, it's 25 years old, but you got to get them updated. You got to have somebody look at the beneficiaries. Yep. You know, so that's all part of what we do in our comprehensive planning for our clients.
SPEAKER_00One more thing I'd like to talk about with both of you is what happens if you face a health crisis. Is there something in the estate plan that can help guide your family, your loved ones in that situation?
SPEAKER_02Yeah, absolutely. This is actually a big piece of what we talk about when we start working together with a client. Specifically with investment accounts, there's always the option to designate a trusted contact. And so this is someone that you're close with to where if something did happen health-wise and you weren't able to communicate or make decisions on your account, this trusted contact could step in and guide through the process with us.
SPEAKER_03So that's why it's important that we not only talk to our seniors, but we help their children. You know, if they bring in their children, Cole's working with several of our clients, kids that are his age. When I say kids, I mean they're they're in their 20s and 30s and 40s. Where I mainly work with the seniors, he works and identifies with them, and then they set up a relationship and they get the same chocolate chip cookies, they're just newer.
SPEAKER_00Well, earlier in the show, we talked about the evolving nature of a retirement financial plan, how it changes over time. So, Cole, is that the same with an estate plan?
SPEAKER_02Absolutely. Yes. Whether it's family members passing away or different life events that happen that make you say, you know what, I want to change who this money goes to if something happens. All of those changes need to be updated. And so that's why it's important to regularly visit your estate plan. We tend to talk about it quite a bit in our client meetings and reviews because oftentimes life changes. You have to make sure those changes are updated.
SPEAKER_00New uh grandbabies come in. That's right.
SPEAKER_02Yeah, exactly. Yes, exactly right. Yeah, it doesn't always have to be bad change, it could be good change. Yeah, it could be good change.
SPEAKER_03One of the things that I determined when Cole has a five-month-old and two children several years ago, right, Cole? Uh, I bought some gold and silver and gave it to him for the kids. Okay? Some little coins that he could talk about in a story. And your your son looks at the coin and he sees some really cool stuff because it's from Australia. Yeah. You know, and it really opens their eyes, but it also shows them the principle of saving.
SPEAKER_00We talked a little bit about RMDs earlier, and this is something I meant to ask you then, so I'm going to circle back to it. And that is that at 73, that's the age now, correct? For required minimum distributions. So say you are required to take out a certain amount of money, pay taxes on that, and then you have this lump sum in your hands. Does that lead to overspending, do you think?
SPEAKER_03It turns me immediately from a planner to a spaver.
SPEAKER_00Ah, yep. There's that word again. You're right. Way to pull that back out.
SPEAKER_03Yeah, so it can. However, okay, let's do the however. Because that's a valid question, very important question, and a real concern for some of our listeners. I've told my wife I'm going to fix that bathroom upstairs. You can use that RMD to help you start the bathroom, right? But I've also earmarked part of it to buy some life insurance to pass on to my children so that when something happens to me, I not only have the nursing care, long-term care benefits, I have the death benefit that will help them get instant cash and avoid probate problems. I can set up the attorney and do the will. I can do the estate planning. I can do all the stuff I need to do by correctly using my RMD or correctly using an income stream that we set up with interest and dividends.
SPEAKER_00So you can talk about options for what to do with that RMD.
SPEAKER_02Well, typically that's the way we like to lean because some clients need it for spending money, but oftentimes it's extra money that they weren't planning on taking. Right. And so it's identifying, you know, with this amount that's required to come out, what's the purpose, right? What's the purpose of your money? And so that's where we can look at legacy options to where you pass it through the form of life insurance. We can look at investment options to where it's growing and it's not just going to your checking account, whatever that might be.
SPEAKER_03We've talked about a lot of stuff today. Today's been just an action-packed day. But let's really focus on the business model and the business plan that Reliable Wealth Financial Group does. And a lot of people put it in an IRA and they start using it as an income stream. What I mean by that is they're set up in accumulation strategies using mutual funds and stocks and growth-oriented vehicles, but they've moved to the distribution phase of life. They've gone from accumulation phase where they're putting it away, saving it, to the distribution taking it out. That can backfire terribly when this market comes down. And do you believe, Mr. and Mrs. Listener out there, John, Mary, Paul, whatever, in the next 30 years, you're 60, 65, 70 years old, in the next 20 to 30 years, could we have another market drop? I believe we could. I believe it's right around the corner. And so we try to prepare for that by making sure we put guardrails on your investments, making sure we watch things closely. That's our business model is to create interest and dividends, create income, income from interest and dividends, whatever the amount of interest and dividends are. But that's why we set up our account and our business model the way we do. Because we're trying to make sure that we're getting income, that you won't touch the principal and kill the chickens, you'll just take the eggs.
SPEAKER_00You know, retirement financial planning, Bob and Cole, is it's complex, but it doesn't have to be complicated.
SPEAKER_03Right. Well put, Cheryl. Very well put.
SPEAKER_00There's so much to talk about and so many options. And one thing that we point out every week is that not every option is right for everyone. So that's why you want to really get to know each other.
SPEAKER_02A lot of the strategies that we talk about on air are just that. They're strategies, they're tools, they're things that might improve your situation. But at the end of the day, until we know the details of where you're at, until we identify that current scenario, we really can't improve upon it with the right tools until we know where you're at today.
SPEAKER_03Exactly. And so imagine for a minute, if you would, you decided, like my wife did, to redo the whole kitchen. Okay? And she wants to redo the cabinets and the colors and the countertops. And that's fine. Okay, she's saved for that and she's done that. Now, you call a carpenter, he comes in and says, Yeah, I can knock this out and I can redo the tile floor. I can have all this done in two to three weeks. Oh man. And then he opens his toolbox. You see a hammer and a saw. And you're like, Hold on a second. Hold on a second. I think I might have the wrong carpenter. And then you hire another guy, and he comes over, gives you a quote, and he brings all these tools, custom things that he's going to do, and he's really going to do a job on the doors, and he's going to fix this. He's going to show you how to put the floor down, and he's really going to do the extra above all the other stuff. Which guy would you hire, Cheryl? The first guy with the hammer and the saw that uses one way and one way only, or the guy that has a lot of different variations, able to put the doors, the soft closes, the drawer. You know what I mean?
SPEAKER_00I want the guy who's going to do what I need done.
SPEAKER_03Right on. The guy who's going to do what I need done. And that's kind of why we've designed our business model the way it is. When we work with clients, we want to make sure we have all the tools in our toolbox, whether it's a Roth conversion, an IUL. You want to avoid probate, you want to do the trust, you want to do the will, whatever it is. So if you're a listener and if you're out there and these are concerns of yours, whether it's RMDs or Roth Conversions or IULs, you want to talk about this stuff, please feel free to reach out because what we do is help.
SPEAKER_01Be sure to like, follow, or subscribe to the Reliable Wealth Financial Group podcast so you'll never miss an episode. To learn more about the Reliable Wealth team and to check out the Reliable Wealth Financial hour, be sure to visit our website, reliablewealthfinancial.com. Insurance products are offered through the insurance business of Reliable Wealth Financial LLC. Investment Advisory Services is offered through Single Advisors Wealth LLC. Single Wealth and SEC Registered Investment Advisor. Reliable Wealth Financial and Single Wealth are unaffiliated companies. Single Wealth does not offer insurance products. Registration with the SEC does not apply a certain level of skill or training. Insurance products offered by Reliable Wealth Financial Group LLC are not subject to investment advisor requirements. Investing in both risk, including the potential loss of principal, no investment strategy to guarantee profit or protect against loss. Insurance and annuity guarantees are backed by the financial strengths and claims the ability of the street company. Consult with qualified financial tax and legal professionals for guidance before making financial decisions.