Wealth from Wisdom

Overlooked Expenses That Could Blindside You In Retirement

August 17, 2019
Wealth from Wisdom
Overlooked Expenses That Could Blindside You In Retirement
Chapters
Wealth from Wisdom
Overlooked Expenses That Could Blindside You In Retirement
Aug 17, 2019
Carson Wealth
Learn what overlooked expenses could blindside you in retirement on Wealth From Wisdom.
Show Notes Transcript

The last thing you need is a big, unexpected expense when you’re retired. Learn what overlooked expenses could blindside you in retirement on Wealth From Wisdom.



Speaker 1:
0:00
Okay, and here's the legal Mumbo jumbo. The opinions voiced in wealth from wisdom with Rod Carson are for general information only and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consult a qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk including possible loss of principle. No strategy assures success or protects from loss. Past performance is no guarantee of future results. Advisory Services offered through Cwm LLC, an SEC registered investment advisor.
Speaker 2:
0:30
The stock market hit another all time. Records as much as $10 billion in social security benefits go unclaimed every single year. Federal Reserve announced that they will raise interest rates by 250 skyrocketing cost of healthcare in retirement could now run 350,000 words hard and save for retirement. That's great, but it's what you do with that money that really matters. Welcome to wealth from wisdom with Carson wealth. Carson wealth is a Barron's hall of Fame Advisor at recognized by Forbes magazine as one of America's top wealth advisors and they're right here in Omaha. This is where you can count on straightforward and objective advice that can help you make the most out of every dollar you've saved for retirement. Welcome to wealth from wisdom with Carson wealth, you
Speaker 3:
1:14
with an unexpected expense. While you're still working, chances are you can recover it rather quickly, but if you're getting a paycheck every two weeks, that makes life simple. But what if you're not? Either you're retired or maybe you've gone through some form of disability, maybe you're unemployed, but if you get blind tied with the big expense when you're retired and you don't have a way to go back and recover from it, that is truly a different story. He could force you back to work. It could put a serious dent in your lifestyle, in retirement, and you may never ever recover from it. Hey, welcome back to wealth of wisdom. I'm Paul Wes. Today I'm joined by Aaron Wood. Aaron, welcome back to the show. Glad to be here a long time. Yeah, last two days, right? So, Hey, I'm, one of the things we want to talk about is those overlooked expenses that can blindside you in retirement.
Speaker 3:
2:03
And brilliant. I want to talk about ones that can just even blindside you right now. So a, the dog days of summer are still going, but there are about over, uh, for many schools, especially those of us here in the Midwest, uh, school starts before Labor Day. Yes it does. Yes. So many people are in the process or have even gone back to school. So what's one of the biggest expenses everybody has? Kids. Oh yeah. Back to school is not cheap. No. Uh, well I'm sure target and Walmart and all the other places love it. Uh, I have two children in high school. One is also the third is going to be an eighth grader and we went to the store and I, I'm gonna decide never to go at 1:00 PM again on a Saturday. Right. During back to school season. Oh, that's rough. Yeah. I can't say we did any better cause we did the same thing both Saturday and Sunday.
Speaker 3:
2:52
Oh, you went back. Did you forget something? No, we went one day with the eighth grader one day with the kindergarten. I have very two different styles. Yeah. You couldn't take them both at the same time. No, I can't handle that. Alright. Too much for you, Aaron. I get it. But a lot of us, you know, I don't wanna talk about the expenses of just going back to school. There's expenses of actually paying for school. Uh, and one of the biggest expenses people have is actually paying for college. So it's often overlooked and people don't account for it in two ways. One just inflation costs. Uh, but what you don't realize is, is school costs often go up faster than inflation. Oh, yes, it does. Yeah. So what does that mean? School costs $10,000 here in 2019. It's probably going to cost 10,000, 500 or 10,700 next year. And that just keeps building on top of that. So I'm going a short period of time. A, you're going to be paying way more than you can ever anticipate. Uh, I think back, I went to a private school for high school and I couldn't remember, uh, what I paid my senior year. And now I have, you know, two children are going to be jr they both go to private high schools. Uh, and one of them is paying a little over four x what I paid for my high school, what, 26 years ago.
Speaker 4:
4:16
Well, and are they paying more for high school than you did for college?
Speaker 3:
4:20
Uh, they are actually, that's scary about it is. Uh, uh, and so let's talk about what are some of the best ways. So very few of you are ever going to have the opportunity to say, Hey, I got an extra 25,000, 50,000, 100,000 laying around to pay for college. So you've gotta be smart. And most people invest in vehicles here and they usually put away a certain amount per month. So they sit with a financial planner or they do a calculator. I can tell you one of the best ways to do this is through a five 29 plan. Um, and Aaron, let's talk through some of the benefits and the pros and cons here with everyone. So for those of you don't know that five 29 plan or a college savings plan is often what people call it, uh, are most likely state specific. So what you're able to do is invest in, in a plan sponsored by this state and then that state may offer you a tax benefit. But since everybody hates paying taxes, what's one of the biggest benefits of using a five $29 you put in as long as when they come out of the account. So when they're withdrawn are used for educational purposes like college? Yes. You don't pay any taxes on the gains, correct? Yes. Simple.
Speaker 4:
5:31
Yeah, very easy but effective so well. And it's one of those that it's growing tax deferred and it comes out tax free. So it has the benefit in two places that you let it grow from when they're an infant to the time that they actually needed it. But then when you're actually pulling it out, then it's coming out tax free too. So it very, very beneficial. And then if you're getting the tax deduction on top of it every year, you're putting the money in. Well now you've got three positives. Yeah, you do
Speaker 3:
5:58
for sure. I mean, and that's a win, win, win for everyone. So a lot of times when people have children or grandchildren, I just recommend, I mean just day one, you should just start putting x dollars, whatever you can afford or be comfortable with. Or some people just like round numbers, I would guess, and I don't have the data on this, but I would guess most people decide to put in $100 a month. I would guesstimate. That's probably even numbers. Sound good. Yeah, it sounds simple. It's enough to sound meaningful is a c note so that it's not so much that you feel like you're going to break the bank, that if you keep putting this money in, and by the way, you can invest it in the market, you can choose now you can easily do it by age based too. So it's not complicated for those individuals who don't want to spend a lot of time researching investments.
Speaker 3:
6:50
You can do age-based. You start with, you know, more aggressive when they're young and then automatically becomes more conservative the closer you get to college age. Yeah. Hands down. One of the smartest things people can do because do you really want to sit in time? Your Kid's five 29 plan? No. Could you imagine that? Oh sorry Sally. You know, I put you in the aggressive and now you're a senior market. Had a rough bump. That's not a good conversation to have. Yeah. I put 1200 in a year for 18 years and I should have had just even with minimal growth, what? 20 some thousand dollars and yet now I only have 15,000 because I timed the market. Yeah, no, I mean, so put in something simple. And by the way, if you have grandkids, this is another great thing you can do is help them with the five 29 plan.
Speaker 3:
7:35
This is one that I actually wish families would think about more often. My kids have more toys, well not the 13 year old anymore, but my five year old has a type of toys for toys. Yes. Xboxes are not cheap either. But you know, we have everything you can think of it and she doesn't need those. It's to the point where I find toys and I'm like, oh, you haven't played with these for six months. I would be very happy. So for if, uh, the grandparents in my life are listening, by all means, I will put the money in the five 29 plan. We don't need any more toys. And I think a lot of parents felt that same way. I would much rather have the experiences. So you want to take the kids and go do something with them, you know, go to the zoo, go to a movie or put the money in their five 29 plan, much better use than the toy that's going to get forgotten in a day.
Speaker 3:
8:19
Yeah. And it just keeps building. And so by the way, the beauty of it is, so Aaron would, you can put, you're the owner, you're the contributor to the five 29. But if a child decides not to go to college or they got a scholarship, now what can you do? Well in my case, I'm just going to move it to the other child in my family or I'll say, but for grandkids, yeah, you can, you can change the beneficiary, no cost, no harm, no foul through all of that. And if worse case, you didn't have anybody else, you didn't have a another child or you didn't want to wait for grandchildren or you didn't have a niece or nephew, you could actually take the money yourself. That's right. But two problems, you have to pay the penalty and the pay the techs tax twice. So there's a 10% penalty.
Speaker 3:
9:04
Uh, and by the way, then you're going to pay taxes on this. So this is something to watch out for. But the beauty of it is, is you immediately, um, can save or transfer for college in a simple way. I'd also talk, what if, what if you're listening right now? So you're in your seventies, you're in your sixties, you love your grandkids, um, and you want to do something to help them. So the IRS has actually helped us. [inaudible] no, I didn't stutter. The IRS is actually helped us here. And what they've done is, so there's this little known thing called a gift tax. That's right. So that if you give less than $15,000 a year, you don't get charged per person. Thank you for the clarification. You don't have to pay what's called a gift tax. Now how much people pay attention to this. That's a whole different story.
Speaker 3:
9:52
However, there's a rule with five 29 plans that you can actually gift five years worth and roll it up to the front. So 15 times five, you could actually today put $75,000 into a five 29 plan per person. Yes. So if you have two grandkids, you can actually do 75,000 times 250,000 correct. Or for two grandparents, you both could do that. So the reality is if you actually wanted to give up to 300,000 again, I'm not saying people will, but people do do this. If they have the economic means, and this is part of their financial plan. Now think about if they did that right now and how much longer that could last.
Speaker 4:
10:34
Absolutely. And it's something again that, you know, grandparents, lots of times, uh, want to give that money or when someone passes away, they want to make sure that something is left for the grandkids. This is a fantastic way to be able to, to leave those assets and know that they're going to go for something really beneficial and great for a long time. Coming. Another quick rule around this with grandparents and giving money, lots of times people forget that they can pay the education at GE education directly institution. I know it was a hard one. I was trying to get education institution in one sentence so you can actually pay the institution directly for the education as well. And you wouldn't have to count that against your gift tax either. So you have a grandkid and you want to give them $15,000 and you've already maxed that out, but you still want to help, uh, you can actually give directly to the institution. Yeah,
Speaker 3:
11:21
a lot of great ways to do this. Also, if you, um, have an IRA and you're above 70 and a half, you can also do a qualified charitable distribution to pay one of these institutions as well. And you may be saying, oh my gosh, you're speaking a lot of jargon to me, Aaron and Paul, this is a lot of details, but these are the things that matter. I mean, everybody wants to fight over, oh, my return on my investments is 1% better than someone else's, but everyone hates paying taxes. So if we can be smart about how we invest for our kids and grandkids, uh, and by the way, so here in the state of Nebraska where we're based, we actually have up to a $10,000 tax benefit locally for providing each, each year's contribution. So not only do I get tax deferral, depending on my tax status, actually get a tax benefit with this.
Speaker 3:
12:12
Yes, a double way to do this. Now, there's a lot of ways to look at this in how you approach it. If you want help talking through some of the best ways to make investments in your future. By the way, sending kids to college is obviously one of the best things you can do for their future. If you have questions or want us to help answer any questions you have here, we're at (888) 419-8513 that's (888) 419-8513 if you prefer to email us a question about five 29 plans or education savings, you can send it to info@carsonwealth.com we'll get back to you right away. Hey, you're listening to wealth from wisdom.
Speaker 2:
12:49
Do you own an annuity? Inflated fees and commissions could be costing you an arm and a leg. Get straightforward and objective advice from Carson wealth by calling (888) 419-8513 are you caring for an aging parent? Are you concerned about the skyrocketing cost of healthcare and longterm care or do you have questions about how to best manage an inheritance? We can help call Carson wealth today at (888) 419-8513 and now back to wealth from wisdom with Carson wealth.
Speaker 3:
13:19
People believe that Medicare's going to cover most of your healthcare and your medical expenses in retirement. Guess what? They're wrong. Unfortunately, that's just not going to be the case. Hey, welcome back to wealth from wisdom on Paul West joined today by Aaron Wood and today we're talking about overlooked expenses, things that could blindside you. No one wants to be blindsided. Uh, we've all seen it in football hits. Nobody liked that. Um, of course there's that famous movie, the blind side, one of my favorites. That's a good one. Yeah. It's one of those movies. Actually, I'm going to tell you, Aaron, I don't know if you're flipping through the channels ever or channel surfing. It's one of those movies that sucks me in almost every time I, I a clip through it. The other one for me is the Shawshank redemption. That's the popular one. Yeah, that's probably why they keep reshowing it on.
Speaker 3:
14:06
T and t, T v TVs and all those other ones. Do you have any of those movies that suck you in? Well, I have to admit, I have not had cable in about seven or eight years now. So the Netflix in my house doesn't quite have that same issue, doesn't have that same problem. Go look for something. But the problem, the flip side of Netflix is that it's always showing you things that you should be watching. And so mine is dominated by cartoons. Yeah. So, um, you know, we're talking about things to avoid, um, expenses costs. And I was channel surfing this weekend and I got to tell you, I got sucked into something. Um, and we were just talking about education planning. In our last segment. I have three teenagers. A lot goes through your mind. Are they being safe? Uh, are they Julian, are they doing drugs?
Speaker 3:
14:58
Are they drinking, are they driving responsibility? Do you know what Julene is? Or producer, yes. Just want to share with you. I don't know from experience, but I just know, okay. But so a lot of a lot goes through your mind. Um, so you've ever seen those things on Netflix has ever pop up. Those 30 for 30 specials that ESPN is created, telling Logan's life stories and things like this. So I, I just saw probably one of the best one I, and if you have a teenager or a grandkid who's a teenager, um, it was the gentleman by the name of Chris Heron, h e r r e n a, and it's called the first day. Um, and so why share this with you? Cause it just sucked me in not only as a parent, but he is a public speaker and he goes to high schools around the country and talks about drug use.
Speaker 3:
15:52
By the way, Chris was a great basketball player, I believe you went to Fresno state. He then went to the Boston Celtics. Uh, but he had heroin addiction. So here he is a professional athlete and what he does is he does a motivational talk. When people come to tell you don't do drugs, what do they put up on the screen? A picture of somebody who's missing their teeth in jail and looks like they do drugs, right? Yes. Very stereotypical. And he takes a different viewpoint of it. He actually says, I want to show you a picture of what it looks like the first day. First Day they take drugs. That's what they look like. It's like every other kid in school, every other kid in high school, the Star Athlete, somebody who's doing really well, somebody who looks completely normal, but something in their brain said, I'm not good enough and I need the influence of alcohol or drugs to make me better. Whether it's peer pressure, whether it's family problems, a divorce, drugs internally within their family. No one talks about what did you look like that first day in, should you have made better choices there or no one talks about are people who don't smoke cigarettes or jewel, um, or do e-cigs. Now of course is the trend. Don't you really think that everyone says, oh well all the cool kids are doing it. But aren't you actually smarter by being the one who is strong enough to stand up to not do that? Yeah,
Speaker 4:
17:25
Eh, you know, we both see it. We have the kids that are living in this situation right now and we both went through it ourselves. And the thing that blows me right now is jeweling it, it's everywhere. It seems like we get something from the school every year saying how big of a problem it is, how much more addictive it is. And it, it's that same thing. It doesn't matter how many times you tell someone how addictive it is. That peer pressure seems to get the better of someone in a instant of a bad decision.
Speaker 3:
17:52
Yeah. Well I mean, and we talk about all the time growing up, we all knew about right smoking. So you know, if you put a cigarette in your mouth that there's a huge warning on sign on it that you might get cancer. Um, and of course there was the visual effects. You could see it. Um, and of course Julene and these e-cigs, you know, have some similar warning labels on it, but they're so discrete now you can't see it. Kids are hiding in the bathrooms and locker rooms. It's so easy for them to access. But then peer pressure comes along with it and I think it's a challenge that all in the face and we didn't, we don't know enough right now. I mean we don't know enough from a healthcare standpoint. We don't know. You know, how toxic these types of things can be. And I guess what I really got out of it Aaron, was the more you talk with your kids and the more you say, Hey, you know what? It's okay to talk to me. Yeah. How are you really feeling?
Speaker 4:
18:46
Agreed. I, I've been surprised even at the amount that the eighth graders know already and those conversations we've had in our house of who has come across these things already, who is seen them already. It's not something I was prepared for for an eighth grader, but I'm glad that those conversations are happening because we see it on the other side of what happens when you retire and what happens when you've made these poor choices and now the medical insurance costs add up and it's hard. We're talking about, you know, w where do you get blindsided and getting blindsided by these additional medical costs. Is Hard.
Speaker 3:
19:19
Yeah. Um, so of course I was watching it. One of my children was in the room with me towards the end. And of course the theme of it for a parent is sit down, just have a conversation with a kid. How you feeling? No, not, oh, I'm good. No, no. Really, how you feeling? Are you happy? Are you comfortable? Just be honest with me. So of course I started doing that immediately upon the show was over and responded too soon. Dad, you know, you just saw this from here. But the point is is I felt remiss if I didn't ask and I think that's one of the mistakes we want to share with you. So those of you listening, if you got a chance to have this conversation with your kids and your grandkids, and I know this isn't financial and you're listening to wealth from wisdom, a part of the wealth from the wisdom we're trying to share with you here is wealth isn't financial always.
Speaker 3:
20:06
No, that's just a part of it. You have family wealth. What is family wealth? Enjoying each other's company, being around each other, sharing stories, talking about memories, laughing, crying and all those things. Wealth is something that, you know, death can't take away from you, right? Wealth is something that you've built for yourself. So as we build financial plans for people, a big component of it is how do they achieve true wealth? How do they achieve this family wealth. Um, and you know, we talked in the first segment about saving for college and helping people be successful. The second segment, you know, we're talking about how to avoid, um, mistakes that children make, but also then I
Speaker 4:
20:48
want to help you later in life is health care is so expensive in, you know, we see all day long. I mean, right now the cost for a private room in a nursing home is $97,455 per year. Yeah. Per Year. Insane. Yeah. By the way, it's just an increase of 5.5% from a year ago. Anybody think that's going to go down? No. No. It's going to continue. Oh by the way, if you're gonna be semi-private, you know, to save yourself some costs, 85,775 how does that make you feel, by the way? Every time I see those two numbers, they're so close to each other. The private room guys, for an extra thousand dollars a month. Yeah. So now you're talking 30 days a month, you're talking to an extra $33 a day close to that. Just rounding there for everyone. $33 a day to not have somebody else in your room in a house in a heartbeat you would say it.
Speaker 4:
21:42
But if you looked at it over a year, okay, that's $12,000 and by the way, your budget may not be able to afford it because of how you've invested in how you saved. And that's why you have to start looking at thing. These things. Now, I don't care if you're 20 to 30 to 40 to 60 to 72 82 and there's other things about, you know, health in our life that are really important. We talk about the average cost of health insurance a lot. And the average cost to an individual, but we haven't spent a lot of time talking about specific people. So, uh, those with diabetes, we always say you should expect more, but diabetes out of pocket average is an extra $10,000 a year. Wow. People with heart disease or who have had heart issues as an extra $12,000 a year. So those are some big out-of-pocket things that we know, you know, if you can control your, your eating.
Speaker 4:
22:34
Um, diabetes is better regulated if he, again, health and eating and exercise and heart conditions, uh, those are things we need to look at every day. Yeah. So I say this frequently here. Um, so those of you who are working and have an employer, you actually have an investment account in disguise. And I call that the health care savings account or the HSA. It's your favorite. It is my favorite. Is it your favorite? Because it is the one that I think has the biggest triple effect right now. You have the ability to put in the 7,500. A lot of individuals don't have a raw 401k at their work. And maybe their income levels to high a to do a Rosseau so they could do the backdoor Roth take some extra work. But the HSA is a great place where this, you can do your family $7,500 a year, so a higher limit than the Roth. You can choose to take that money now if you need it for medical costs or you can choose to save it. So in our family, I max out the 7,500 we put that money in an investment and we don't take it out and so we're using it very similar to a Roth account. I keep track every year at the end of the year I log into our insurance account and I pull all of our medical expenses and if for some reason I have an emergency, I can go back and take that money later. Yeah, and it's what I
Speaker 3:
23:46
look at it is and why it's such a great investment vehicle is if you keep contributing down the road, you're going to need that money. At some point you're going to retire and most likely your monthly medical expenses aren't all going to be covered or your prescriptions are not all going to be covered. And now imagine you have this bank you've saved. That is, what'd you say, the triple tax savings there and who doesn't want to save that type of money? No one. So I tell everyone, obviously we highly recommend you max out your 401k plan or at least as much as you can in your ability, but yeah, or at least a minimum get to your match. But equally maxing out your healthcare savings account as much as you possibly can because you don't know when you're gonna need to access it. And at least if you get it, I'm going to tell you over your, you know, max out of pocket costs from your healthcare insurance, at least get it above that level. So if you have a catastrophe and you cannot contribute, at least you have a way to do that. If you want help and understanding healthcare savings accounts and how they help you. We have advisors standing by at (888) 419-8513 that's (888) 419-8513 or you can email us@infoatcarsonwealthdotcomcarsonwealth.com will help answer all your questions related to taxes and things related to health
Speaker 2:
25:12
care savings account. You're listening to well from wisdom, any major decision in life is worth getting a second opinion and financial planning is no exception. Let's talk about how you could make your money go further in retirement than you ever thought possible. Call Carson wealth to schedule your free initial analysis now at (888) 419-8513 do you have a lot of assets but are short on cash? Learn how you could leverage your assets to free up cash with Carson wealth by calling (888) 419-8513 and now back to wealth from wisdom with Carson wealth. Are you welcome back to author wisdom all last joined by Aaron Wood, eight. Today we're talking
Speaker 3:
25:51
how about some of these overlooked expenses that could actually blindside you in retirement? Uh, we've talked about taxes, we've talked about not saving for your kids well enough. Are Smart Enough? I don't know if well enough is a grammatical phrase I want to use frequently. We'll go with it. Alright. Sorry for any of my grade school grammar teachers, I apologize. I did learn better than that. Hey, but do you know that for a lot of people that the fees they're paying and not realizing it or not receiving value from their fees is one of the biggest expenses they have. And here's a stat I think you know, I like stats. I'm not going to drill you or question you on these cause that's always fun. I surprise you Aaron. But 92% of Americans don't know the costs involved with our 401k plan. [inaudible] surprise me why most everyone thinks it's free.
Speaker 3:
26:44
Is Anything in life free? Oh No. Actually for free advice from your uncle. But that's usually, I did drink a bottle of water for free the other day. Okay. That's such a rare tea. Where'd you get that at? So we were at the county fair and I actually had walked past some of the concession stand, you know, the traveling places so that I could find someone local that I could donate my dollar to for my bottle of water. And one of the local organizations was giving them away for free. Huh. While promoting their brand. So they were, yes. It's rare for those things to happen. Uh, but 72% of people think they're paying nothing. So they don't realize there's a couple fronts. So one, in a former k plan, you have to have someone who administers the plan that actually does the rent that let's not, you know, brush over how much work that actually is.
Speaker 3:
27:32
That means every single deposit you're putting in, how you're investing that money, what the returns are of that money, your account balances. They are keeping track of everything. So we want them to do their job incorrectly and they're going to send you your tax information. Yes. So there's a cost to that. No one does that for free. You're not going to be the business owner here and own a 401k administrator firm and be like, oh, we're going to give this for free to everyone. Yeah. That doesn't happen. And there's a lot of regulations they have to follow as well. Yeah. So there's a myth. A second myth is related to the investments inside of my plan costing me zero. Correct? Huge. So usually investments are in two forms. One, the trend is moving this way of putting low cost exchange traded funds, or the short acronym for them is ETFs.
Speaker 3:
28:24
So, but those often have expense ratios inside of there. Uh, but another, and so those can average anywhere from 10 basis points, which stands for 0.1%. I mean I've seen them up to 70 basis points. So if you have $1 million and you're in a 70 basis point retirement plan, that is $7,000 per year of cost. Now, you may not see it as a line item on your statement, but trust me, it's coming out of that ETFs return to you. So it comes out your gross. So what you get is your net return and most people don't see it. I'm very rarely do I actually see it on a statement. They will show them once a year when that gigantic book comes out and it says, Oh, here's your updated book for the year on your following k who rates that thing? The one that when it sits on your counter after you're bringing in from the mailbox, it goes directly into your trashcan without opening that were recycled bin.
Speaker 3:
29:27
Yeah, that one. Yeah, that one right there. So it does usually your professional Aaron, I mean you're in the business, so you're a CFP and you give advice all day long. So, okay, you go open that book. How long do you think it would take you to locate it inside the book? Oh, even with the, I'd have to go to the index and find it. It's gonna take me a longer than it should cause it's huge. Bootsy, 60 to 90 seconds, it's gonna take you and you're a trained professional and not because you, but you got to go check out, okay, I'm going to go look at the index or table of contents and then I go find that section and then I go find it on that page. And then, yeah. So now take 99% of you that are not trained professionals like Aaron Wood or myself, and then you're supposed to go find that what's going to happen.
Speaker 4:
30:13
Oh yeah. People get like knowing you give up. Yeah. But the other part that is hard is you and I both have access to tools where we can actually look this up faster. Not every single retirement plan is on these types of tools. Some of them are very, you know, localized to an organization. And so then it's even harder for individuals to find what they're looking for. They can't just Google it and get it. Uh, you really do have to look in those books. Yeah.
Speaker 3:
30:37
So I'm going to give you a warning sign. If your 401k plan or four oh three B. So four, three B means you're like at a school, so a teacher or you're at a hospital and a nurse. Um, if your 401k plan is sponsored by an insurance company. So if it's by, I don't want to name their names, but there's enough of them if it's by an insurance company, I can almost assure you, I can't promise but I, I would tell you the majority of the time you are paying above average expenses. And the reason why is because they got to pay the company for all of the benefits that they're offering or not offering to you. I'll give you an example. People bring us copies of their 401k statements all the time for us to review. If you want us to do that. Again, this is complimentary.
Speaker 3:
31:27
We just give you our thoughts both quantitatively on what it looks like. Our more importantly, quantitatively, yes. Uh, eight eight, eight four one nine 85, 13. Again, complimentary for us to do that. But the fascinating part, Aaron is his number one, we look at risk, but number two, we just show you how much fees you're paying. So let me, let me ask you this question, Aaron. If somebody statement, and this was just recently that they had a statement, a 401k plan, and it was by a very well known insurance company, you know who advertises on regular television, not Netflix, but regular television and it said they're invested in an s and p 500 index fund. Okay. All right. So in your world of knowledge, if they're invested in s and p 500 index, what should be the expense ratio they should expect to be in an index based fund?
Speaker 3:
32:22
Ah, you're going the low, you know, 10 basis points to 20 basis points, right? Yeah, sounds very fair. I think you're dead on accurate. This was 50 almost 50 basis points. Why? And the place was brilliant. It basically said insurance s and p 500 index. You, what did they do? They put it in their own and just charge more fees. Where if it would've been in an ice shares or a black rock or a first trust or a state street or other very low cost, 10 to 20 basis point. So now think about that. Who's making the extra 20 basis points, the insurance company. So again, most consumers or investors would have no idea to look at that. So then the recommendation may be, hey, there's many companies have the ability to allow you to transfer it to your own personalized brokerage account that you could have trusted professionals like Carson or yours in your local market, help you not make that same mistake.
Speaker 3:
33:26
Yeah. So here's another question for you, Aaron. So a lot of employers have gone to having an IRA, excuse me, a 401k or a Roth 401k. So if I have the choice, which one's better for me? Depends. Come on. You don't want to give me just a straight one. Which one's better? Well, I would prefer the Roth. However, you do have to take into what you're looking at your tax situation. So if you are a person who is going to put your $10,000 in or 20,000 what, you know, whatever you are able to do that year and it's going to lower you into a lower tax bracket, well then the 401k is going to be better. The better option because it's going to give you those pretax and lower your taxable income. The rough on the other hand is going to grow tax deferred and come out tax free.
Speaker 3:
34:11
And so we're always talking about, you know, you're growing that nest egg of your IRAs or your 401ks and that can turn into a tax mountain for a lot of individuals. And so if you have the ability to have a Roth and you're controlling that future tax tax bomb, there's no tax on the future. Yeah, and I think it makes a lot of sense. Now remember though, you still get taxed on it, right? So when it goes in, don't think that you're putting the money away tax-free and then growing tax deferred, you are paying taxes on it. So be smart about it, but it, it gives you a great component there to invest in, have a tax free vehicle at some point in time. We help with a lot, you know, individuals who have both plans. It's not always all or nothing. You can put 5,000 to one and 10,000 and to the other one.
Speaker 3:
34:57
And so we can look and say, okay, here's approximately what your tax bill is and here's a good way for you to be able to do it. Can I put a, what is the limits now? 18,500 so can I put 18,000 and change into both? No. So I can total so I can put 10,000 in pre tax on a regular 401k and then the remaining 8,000 balance plus a into my Roth, but I've got to pay taxes on it so I may actually be 10,000 plus of income to put in. Okay. Make sense? If you got questions on that, I know can be complicated, but your Roth versus regular 401k is one of the smartest ways for you to save for your retirement and not make a mistake. And if you've been kicking this can down the road stop, give us a call. (888) 419-8513 that's (888) 419-8513 hey, you're listening to wealth from wisdom and we'll be back
Speaker 2:
35:49
in a moment. Have you ever wondered how do other people get away with paying fewer taxes than everyone else? Learn how you could save thousands of dollars in taxes by calling Carson wealth at (888) 419-8513 social security risk, taxes and healthcare. This is where you can count on straightforward and objective advice on the biggest challenges with investing for retirement. And now back to wealth from wisdom with Carson wealth. Hey, welcome back to offer wisdom. As
Speaker 3:
36:19
Paul has joined with my cohost, Aaron would also want to thank our producer meg today who's learned the word Julene. So glad you understand that they're, um, so what actually, why do people, jewel, I was wondering this, why they want to show off in front of their friends or to their board. So in today's show we've been talking about expenses that can blindside you in retirement. So let's talk about one five letters. B O r e d board. Yeah. What do people do when they're bored? Spend money. Yes. Golf. Let's make it to eat. Let's your, these movies. Let's, let's go see friends. Let's travel. Let's go on a trip. All of those things. Uh, boredom creates, I'll call it also probably overeating. Cause when you're bored, I need to snack. I need to go do something. I'm bored. I'm in your retirement can be dangerous.
Speaker 3:
37:12
Yeah, it really can. And those of you listening, and I don't know what I would do the rest of this weekend, what's going to happen? Uh, boredom is probably one of the biggest things we see, especially for those of you that are just in retirement or looking at retirement and you're like, oh, this is awesome. I've worked with my financial planner, by the way, who better have been a fiduciary? I've harped on that enough on the show and they've built an income plan for me, which also includes how much money's coming in, but how much money is going out? And then they get in retirement and I say, I'm going to golf, I'm going to go to bridge club, I'm gonna do whatever. And then life happens. And I'm sitting there a month later, two months later, hope gay twiddling my thumbs. Uh, what should I do next?
Speaker 3:
37:59
Well, we've seen it. How many times do they come in, you know, for that three month after retirement check out, things are going and yeah, we kind of knew these things were gonna happen and then they come in at, you know, six months or nine months and they just blew their budget right out of the water. Yeah. Frequently. And even though that happens, by the way, even people we build the best plans for because we're humans at the end of the day, right. And so we're gonna make mistakes. Uh, by the way, I've read that we have as humans, the attention span is actually less than a goldfish. So that should make us all feel really good. Uh, so what do we do? We have to find something else to do. So, okay. We'd go for a walk. All right. Well, Hey, I live in Oman, Nebraska, so I can go walk at an outdoor mall. So I'd go to a place like village point. Whenever you wanna start walking in there, oh, I'm going to drop into a store. Best buy shields, what? DSW, whatever you [inaudible].
Speaker 4:
38:55
It's the target effect. You went there for one thing and you left with a car load.
Speaker 3:
38:58
Yeah. You didn't mean to. All of a sudden it just happened. Why are grocery stores in Costco brilliant at putting the milk in the back of the store?
Speaker 4:
39:09
Well on Costco's brilliant cause they move things around too so you know where it is and you go in to find it and then you can't and they moved it to another aisle.
Speaker 3:
39:16
Yes. And just one aisle over. But it throws off your entire routine. Does you know what proximity it's in, but what do you go, I'm going to go, I have for your retirees. Say this all the time. I'm going to go walk around Costco. Why? Cause it's neat. It is but dangerous. Have you ever walked out of there with buying nothing? No. Probably not. Because you're good there for a reason. Yeah.
Speaker 4:
39:36
Yes. I have got in there and got a prescription and got out without buying anything else and I thought that was impressive.
Speaker 3:
39:42
But you still have to walk past a lot of stuff to even get to the prescriptions. Yes. The only thing that you don't have to walk very far to get is the membership count. Yes. Right. So inexpense we want you to avoid is the boredom expense. And I would rather have, do you plan for in retirement that your living expenses during your first, I used to say four years, but I'm thinking because of longevity, I'm going to say your first five years, I'd rather have you ramp it up 25% agreed. And you may say, Oh Paul, that's agregious that's too much. But the reality is is we see this happen all the time. What happens again, your three to six months out, you originally had said, hey, I have a $5,000 travel budget. What happened? You've booked three trips in the next six months.
Speaker 4:
40:29
Well, and you can, that's the other part of it. I mean, when you're working, you have so much vacation time and so you plan those trips very purposefully, but now you're retired and you find a good deal.
Speaker 3:
40:40
Well thanks. Thanks. Groupon or whoever else for that. Um, by the way, are you or do you fall on the camp of the people who enjoy the vacation more are planning the vacation more [inaudible]
Speaker 4:
40:50
ah, the vacation more. And I will say that we vacation quite a bit. Uh, as you know, my husband and I are both scuba divers, so we are going south to somewhere warm and tropical as much as we can scuba dive here. Uh, I prefer not to. There are people who do it. I'm not one of them. I have no desire to go in a dark place that I can't see. Um, but, uh, you know, we, we do things really cheap. We do the, the Airbnb is, we do the homeboys. Uh, we go to the grocery store and even when we're on vacation, I'm not going out to eat three times a day. We're not spending that extra money. And so our vacations are really airline tickets and the place we're saying,
Speaker 3:
41:27
yeah, if I would say you, what you've done is you've created a balance to say, all right, because we know we traveling and we like to go places where we can scuba dive when we're there. We can't make the conscious decision of eating out for every single meal. Yes. Like we have to be smart about it. I don't want to come back 10 pounds heavier. Well that, that, that's an important point too, but I think that's the trade off. So, Hey, you're in retirement and your travel budget goes up. Then you know what? When you're back in Omaha or back, wherever you live, then you have to choose to maybe not go out to eat as much because you're just shifting your budget. Or what I can say is you're, you're pulling your levers, you're pushing your lever up. It's more costly to travel, but you're pulling your lever down for how much money you're spending on your going to eat allowance.
Speaker 3:
42:15
But you can't let boredom win out here because otherwise you're going to make mistake. And that's why when we ask people what are you going to do in retirement? It's two reasons. One, we want you to avoid the boredom effect, but two, there's again statistical evidence that shows you need your cognitive brain that is your brain period to have [inaudible] activity because it actually helps in keeping you healthy for longer. Yes, it doesn't have to be like working, but it can be reading. Correct. Learning, just watching jeopardy count probably cause it does make you smarter, I think. Well you have to think a little bit and you know there's other things, spending time with your grandkids or doing the other activities. There's things that lots of people do on a frequent basis where they spend the day every Thursday with their grandkids or they know that they're going to see a certain friend the first Tuesday of every month then and have coffee.
Speaker 3:
43:09
There's lots of routines that everyone creates, but it's also part of that spending plan. We talk about how is it that we want to enjoy our money and what do we want to do with it. And sometimes people come up with really great things that we don't necessarily anticipate being part of this spending plan, but they're pulling those levers and they're adjusting something else. One of the, uh, individuals I was talking to the other day is building a pirate ship, which I just think pirate ship, pirate ship for his grandkids. And I just thought, wow, that is such an interesting thing. They live south of Omaha. Okay. So they have quite a bit of land and the grandkids are really enjoying some pirate theme things that they're doing together and they're building a pirate ship. And I just thought that was a fantastic way of showing that, you know, they're building something that staying on their property, the grandkids are quite young, they're going to get many years of enjoyment out of it.
Speaker 3:
44:02
And it's something that will continually keep working for the family as a whole. Yeah. And does he have the economic means to do that? Yes. Okay. But he's probably got a plan put in place and he feels confident that he can spend the money and the time building out something like that because he's not worrying about this. Here's what I'm telling people get bored and retirement. So what do they also start doing? Watching CNBC OR MSNBC in the morning with their cup of coffee in letting them selves be influenced by the news, talking get notifications on their phones. Where do those people get paid to do talk? Yes, like we do here on the radio, so fair enough. But we don't sell advertising here. Aaron, on wealth for wisdom. We're just trying to share, but CNBC and MSNBC, they're trying to sell ads, so our, they sell ads shock or all of those things. So they want you to come back and watch and listen the next day or stayed in the next segment because they can sell more ads. What are they doing? They're not getting what's best advice? They're trying to scare you. We're not. If you want real free advice, that's about you. (888) 419-8513 that's (888) 419-8513 hey, on behalf of Aaron Wood, I'm Paul last. Thanks for listening to wealth from wisdom
Speaker 5:
45:20
risk, social security, income taxes, estate planning. Every week we talk about how to make your money go further in retirement right here on wealth from wisdom with Barron's hall of Fame Advisor Ron Carson.
Speaker 1:
45:33
Okay. And here's the legal Mumbo jumbo. The opinions voiced in wealth from wisdom with Rod Carson or for general information only, and are not intended to provide specific advice or recommendations for any individual to determine what is appropriate for you. Consulted, qualified professional. All indices are unmanaged and may not be invested into directly. Investing involves risk, including possible loss of principal. No strategy is sure of success or protects from loss. Past performance is no guarantee of future results. Advisory services offered through CW m L L C an SEC registered investment advisor.
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