Wealth from Wisdom

How to Manage Your Largest Asset

December 22, 2018
Wealth from Wisdom
How to Manage Your Largest Asset
Chapters
Wealth from Wisdom
How to Manage Your Largest Asset
Dec 22, 2018
Carson Wealth
Show Notes Transcript

Your IRA or 401k may be your largest asset, and the single most important key to retiring successfully. Aside from looking at your balance every month, when is the last time updated or rebalanced your investments? Join Paul West and Erin Wood to discuss the critical mistakes people make with their IRAs or 401ks, and how you can avoid losing your money in retirement.

Speaker 1:
0:00
Okay. And here's the legal Mumbo jumbo, the opinions voiced and and 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. 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 and SEC registered investment advisor
Speaker 2:
0:31
Doug 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 the skyrocketing cost of healthcare and retirement could now run 350,000 for retirement. Today is a whole new ball game. It's loaded with challenges, obstacles, and trap doors that you can do this and we can be your guide. Welcome to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson, and straightforward and objective advice and how you could make your money go further in retirement. And now here's your host, Ron Carson, your IRA or your 401k, maybe your largest asset and the single most important key to retiring successfully. But aside from looking at your balance on your statement every month, and by the way, if you've been doing that recently, it's probably going the wrong direction. When is the last time you actually updated or rebalance your investments?
Speaker 2:
1:25
I hope it's not at 10 o'clock at night after you've had a couple cocktails and making that decision. Hey, you're listening to wealth and wisdom. I'm Paul West and today I'm joined by a special guest, Aaron would or director of planning. And welcome to the show, Aaron. Thanks for having me, Paul. Hey, glad to have you here. And we're going to spend some time today talking about really these critical mistakes people make with their Iras and 401k's were here in December. Uh, you know, the holiday season, it's just, it's here, it's right around the corner. People are going through the hustle and bustle and um, you know, they're gonna start thinking about financial things as part of the holiday season and really is, we're looking at the end of the year. You're also going through your benefits. For those of you who are employed, you're going through your health benefits, you're four o one k contribution percentages and because of this market volatility we've been experiencing over the last several months, you've probably now looked at your 401k statement from November and it looks different than it has in oh quite a while as an errand.
Speaker 2:
2:20
I think there's a lot of people who are going to have some, a heartaches the next few months as they're looking through the markets. Yeah, they are. And it's, it's, the reality is, and we're going to talk about some strategies to help you out, but if you don't do the right things, you're going to get clobbered by taxes and your Iras and 401k's. You could be paying way more in investment fees than you even imagined in. Ultimately when you get to that great day of retirement, what is your strategy to actually get money out? And those are three things that are really important. So if you actually blindly withdraw money from these accounts in your retirement, Aaron, this, there's all these taxes and penalties and fees that are just waiting there to catch up and grab you. So coming up on today's show, we're going to reveal what we call the seven common mistakes with your Ira 401k and your other retirement accounts.
Speaker 2:
3:11
So like if you work for a school system or hospital, they call that a four o three B, but we really just categorize them, Aaron, all in the same way. So let's get to mistake number one. And that is you're retired and you get to this age of 70 and a half and there's a three initials and those are r and, d, the dreaded RMD or required minimum distribution. So it's great that what we put money in our four o one k or an IRA, that it keeps deferring our need to pay taxes. However, the government is smarter, stupid. You can pick which on here and choose, is it age 70 and a half. They said, all right, we've waited long enough. You need to start paying us some tax on what we, you've deferred for so long. So this is often a Aha moment or surprise to a lot of people and they don't plan for it.
Speaker 2:
4:01
So it's approximately 4%. So say for example, you've saved $1 million, your RMD when you're 70 and a half is approximately $40,000 but what if you didn't need that money or you do need that money but 40,000 is it 40,000 is it Aaron? No, because now you're going to pay the tax on it. Yeah. Ordinary income tax, not capital gains. Ordinary income. So you're at a 25% tax bracket. You're 40,000 is now 30,000 and state taxes and other things. And now you could be looking at what you thought was a great thing is now way less than you ever thought of before. So what we have to have people do is begin to address this early to get out in front of potential problems. And I call this tax planning. So what's coming up in January and February? I Bet Aaron, there's a lot of our listeners that are do it yourself, tax preparers, they're using intuit or TurboTax or h and r block online, all of those things.
Speaker 2:
4:59
And what happens, and you see this all the time and planning because you have tax professionals on your team, you have trust percent professionals, you have a state planning professionals. People just get all their numbers in February. They, I'm pretending, I'm typing right now. And they type it all in the system. They hit the submit button and they get a refund or they wait to submit because I to pay money. Correct. And then what happens then? They're trying to fail if they have to pay where the money's coming from and if they're getting money back, they're generally already spent it before the checks ever come. Or unfortunately for a lot of people, you know, Christmas bells that up and the credit cards come in in January and February and now they're trying to dig out of a hole. Yeah. And they but they don't plan for the next year either is they just go, they get it done and they're so happy to get taxes done, crossed off their to do list and the refund check in or the page check to the government that they move on and they move onto their next thing in life and this is such a big mistake and this is why we believe in what we call tax diversification.
Speaker 2:
5:57
You should have enough counts that are actually taxed all the time. I know that sounds counterintuitive, but it's true. You should have accounts like your 401k in your area that are tax later and then if you can have accounts that are tax rarely your Roth Ira maybe interest from municipal bonds or there's even some types of life insurance that can make a lot of sense, but let's not forget HSS by, by the way, I think is Hsa is one of the most underutilized techniques out there. Absolutely agree and they're new so people don't quite understand them yet. Yeah, I love it. I've been using it as part of our high deductible plan here at the Carson Group for several years. You know, I put in as much as I possibly can because I don't know when we're going to have a challenge here, but the longer that builds up in my lifetime, I can use it.
Speaker 2:
6:44
So if I'm no longer working, I can still use it for core expenses, medical expenses, and people don't think about that in by the way, it's tax deferred. Right. And that can be tax free as long as it's used for a qualifying event. And even if you save it until you are retired it first time reason you're using it for nonmedical expenses, then you just have to pay the tax. Yeah. And so great. I mean that's, that's not a bad proposition, but at the end of the day, I mean is it, we've talked about this on the show all the time. Our healthcare costs are going to be high anyways at any point. So the likelihood of me not using that over my lifetime is pretty slim. I would say impossible. Impossible. There's rarity that I would say impossible is a big word. It is. You know, you can still only put in a, you know, the Max per year, so 7,000 per family.
Speaker 2:
7:35
Uh, even if you did that now until retirement, the likelihood of you not using that through your retirement years, I'm going to say it's pretty impossible between you and a spouse. Well, I'm going to go, there's a movie quote said, uh, the chances are slim to none. And I think slim just exited the building. I think that's the one that actually is now going to test our producer Jamie, to see what that actually movie was from. And I'll see. She'll Google it here shortly so she'll have it figured out. Um, pay. Speaking of that and spending, you know, we're in the holiday season here, Erin, and I think it builds financial stress more than any time of the year. Cause a little bit of it is, especially for those of you that have children and grandchildren, you don't know when to stop. And now they're saying the average family's gonna spend over a thousand dollars this Christmas season and they're going to do a lot of things.
Speaker 2:
8:21
And I think those of us that have children, I know you have young children, I have teenagers and I heard a really neat phrase the other day. How did it share it with you? Because we struggle this in our household too, is a lot of people want to make sure you spend the same amount I asked for a child, but you also want to give them the same number or quantity of gifts. Then you run it. All of these complications, and by the way for me is I've watched my children get older, the gifts just to get more expensive because of technology and what they want and versus is not cheap. No, no. Or iPhone or anything else. So here's something I thought was really interesting for spending technique and they said you should get each child for things. You know this, this is what we do actually.
Speaker 2:
9:04
Is it really? Yeah. So what are the four things? I want to hear what yours are and see if they're the same as cipher something. They want something to wear, something to read, something they need. And then we actually do a fifth one in our family, which we call something to do. And it's a family activity for all of us studios. So sometimes it's, um, bullying. We went to great Wolf Lodge. Um, but that has actually helped me tremendously because my youngest who just turned five, that is all she's ever known. So when she makes her Christmas list, like she only expects those. Uh, and then my older one who is 12, we've been doing this with him since he was private and seven and it has made my Christmas stress drop like you wouldn't believe because I'm not running around trying to even up the kids.
Speaker 2:
9:48
I'm not, oh, they each have to have this number. I have to get this price, like here's the four categories and I fill them. Uh, and we're done. Yeah. So I liked it. So you said something they need something to wear. Yes. Something to do. Yes. And I forgot that's what they'd already, okay. Something to read. Thank you. So Mike, slow over here. That's fine. Need where want read. Yeah. So how do you deal project? How do you protect yourself on that though? So I love the categories and I love you set the expectations with the family on that, but if something they need, um, or want or, and one of them's $300 and the other is $30. Yeah. At some point they're going to notice the, I'm going to call it the inequity from the financial status. Boy, I would agree with most of those categories.
Speaker 2:
10:35
They're pretty simple. I mean, someone has a $15 buck and someone else has a $20 book, they're not as noticeable. It's the want category that I would say is the one that, uh, has been a little bit more difficult. Um, but we have an age spread in our house, so it's definitely the, uh, junior high one who has the big one. Yeah. Uh, so I think, you know, I have twin 15 year olds and of course both there once I would say fall in this category because they turned 16 here in the spring. Our vehicles. That's a really expensive Christmas gift. Yeah, well, um, they can be listening to show that sign that's not happening here over the little, I'm just going to break that one to them at this point. I actually have already told them. So you know, back to, you know, protecting yourself from RMDS and taxes and it's a good example actually is people overspend over the holidays and they don't figure it out until the bills start coming in.
Speaker 2:
11:25
Or they go look at their credit card statement. They're like, gosh, I don't, I thought I spent $500 and I spent $1,200. Well, the same thing happens with you and from a tax perspective and your retirement because you, you set up all these things, then all of a sudden you don't realize that my social security becomes taxed, my RMD start getting taxed. Um, medicare and all of these costs compile and you're sitting there, Aaron, like this is all a sudden, it's like crap, what do I do now? And you have to really be smart about this. And so, you know, one of the things that I think it was really smart as we came up with those called a tax reduction analysis and we're able to do that for families. So if you'd like a tax reduction analysis, and this is complimentary, just a way we can help look at that for you.
Speaker 2:
12:10
Eight eight eight four one nine 85, 13 if you're the type of person that wants to pay less in taxes, and if I haven't found very many people that want to pay more in taxes, that's for sure. Give us a call. (888) 419-8513. If you prefer email, you can send an email to info@carsonwealth.com or you can go to our website, Carson, wealth.com we actually have what's called the retirement readiness indicator. If you go under tools, you can go take that on your own. No obligation. We'll, you know, be out there pinging you so you can take that or he can call us. (888) 419-8513 you're listening to wealth from wisdom, trust, transparency, accountability. These are the values that drive line Carson Carson. Well, you're listening to wealth from wisdom with their until the famous advisor Ron Carson, he's a published author and has been featured in Forbes, investment news, the Wall Street Journal, CNBC and more.
Speaker 2:
14:19
Now back to, well from wisdom with Barron's hall of Fame Advisor Ron Carson, more than 52 million Americans have stashed away over 4 trillion. That's what the t 4 trillion in your 401k accounts. Hey, I'm going to clap for you. That's awesome. That's great. And contributed. The money is actually the easy part. If you've hit the easy button, as long as you hit that button and you're putting it away, getting this money out though, this is where it starts to get complicated and there are all these trap doors out there that could cost you thousands of dollars. An Aaron, you know, one of the things we're talking about here in today's well for wisdom is seven critical mistakes you can avoid in looking at your Iras, 401ks and your other retirement accounts. I want to say, Aaron, I'm talking about Aaron would my guest today. So welcome Erin, glad to have you on the show.
Speaker 2:
15:04
It's fun being here. Glad you're back. You've got such high ratings here. We had to bring it back quickly. So we're glad you're here. And so as we think about this, and we've been spending some time here, you know we're in the holiday season and we're talking about how much money we're spending. I loved with what you shared about the four categories of gifts earlier and we talked about in our segment one about mistake number one was about your RMDs and be careful with taxes. Mistake number two is not understanding this thread of what we call your sequencing of withdrawals. And that may sound like a complicated thing, but it's really not. And here's why. If you retire in a bear market, this could be one of the most dangerous things you do because of the following the return. Do you compound during the first five to 10 years of your retirement or the most critical ones you have?
Speaker 2:
15:52
Absolutely. Or probably more importantly, I would say downside protection is you're retiring, you have $1 million, $2 million, let's use $2 million for the example here. So you're retired and you know, $2 million we'll help you last throughout your lifetime. You've got your social security and whatever other income you have. But if we're in a 2008 type environment, and I'm not saying we are, of course the fourth quarter here in 2018 is shaping up to be the worst quarter we've had in the market and the market, I mean the s and p 500 since the third quarter of 2011 seven years ago is a long time. And so what if we get and went into a 2008 environment and your $2 million becomes 1.2 yeah. How's that going to make you feel? Well, and it's not just the down or the market that hurts. If you're in retirement and you're taking money out, it's the double whammy.
Speaker 2:
16:45
It's how you're going to get taxed on it too. I mean that is, that sounds painful. That's like drinking that one extra cup of egg Nog that you're just not, you shouldn't have done it. And it's, no, I'm not at all. So I'm not sure. That's a good analogy. I can't do it. I can't either. I have a sip, but it goes well with our downmarket conversation then. Yeah, throw it away. Don't, don't risk it. Don't risk and downside protection in here for all of it. So as we think about the stock market and how this relates, I mean we get a lot of questions in the show and I would certainly say your investment allocation is absolutely important, but people get fixated on an errand. It's like this shiny object. It's fun to talk about. It's fun to look at. But the reality is is there's more benefit gain than actually tax avoidance than there is market based return.
Speaker 2:
17:34
And so a lot of times people don't look at it and by the way everyone, I shouldn't say everyone, the high majority of people you are going to be in for a big surprise here come January and that is your accounts. When you get your 10 90 nines from either your brokerage company or your investment advisor, they're going to show gains for 2018 and yet depending on how we end up this last week of the year, you're going to be down and you're going to go, what in the world is going on? How did I have to pay taxes and yet I lost money. Yes, that's really going to confuse people because it hasn't happened a long time. Well, if you're in mutual funds, you're used to this all the time because what happens to you, which by the way, if you are get out or have ever professional look at that for you so that way you can stop paying all those costs and those silly capital gains that they pushed through to you every December, every year.
Speaker 2:
18:29
Actually, I just saw vanguard just posted their capital gains and they were pretty high. Um, and I was surprised to see that here. Um, so it was like, Oh, I'm a vanguard. It's easy as low cost. Well I just saw their capital gain, distribution push and it came out and it's again a shocker to a lot of people. It's a kick in the teeth. If you're been in those mutual funds and now you're watching the mutual fund go down in December, comes out and they kick out all their capital gains and it happened so late in the year, people don't have enough time to really think about it. And how do we maybe do some tax loss harvesting? It's really difficult for them when it happened so late in the year. It is. I mean, and I think we're looking at, I mean I'm talking a little bit this week.
Speaker 2:
19:08
I mean we're essentially 10% down from our high and this includes the dividends and so obviously the Fed rates and those things are happening. Trade is becoming a big deal. By the way. I was actually online the other day buying something. I'm actually for a charity event and for the first time ever when I went to go hit by, it had something on their head and seen before state tax. No. Ooh, Tara fee. Oh, it's being manufactured overseas. And so the business here actually started implementing eight terror fee and passing it onto us, the consumers. So I'm going to, I'll be really fascinated if I start to see more of that happen. I have not seen that yet. I haven't either. So you heard it first here on welfare wisdom. Yeah, but I mean as we look at the overall economy, I mean there's just a lot going on.
Speaker 2:
20:02
And so I don't know how you get into retirement and you don't put yourself at some downside protection. I mean, I think that's something we're really good at here at the Carson group is we help protect the downside for people. And if you let the upside always take care of itself, you're always going to be a better spot, both financially. And I won't even say emotionally, you're not going to be scared if you, you're not going to have this fear. You're going to be able to sleep better, all of those types of things. I was reading a fascinating article the other day and I wanted you to share it with you. So Aaron, there are 11 sectors in the s and p 500 I don't know if a lot of people know that they think the s and p 500 the market, but there's these sectors, so consumer discretionary, consumer staples, energy, financials, health, industrials, materials, real estate, technology, telecom and utilities.
Speaker 2:
20:50
So as we look at where we are year to date, what do we think the best performing sector is year to date, and he guesses of those 11 I have no idea. All right, I'll tell you that. Utilities interesting, right? You would've thought technology maybe and it was in the lead and they've kind of ping pong some back and forth. Healthcare of course has been up as well, but the bottom sectors materials, and I think that's interesting. But here's, here's something I'm not going to tell you and I'm going to ask you another question that I have it prepped you for yet, Aaron. So you love these. I know Jim loves these as well is, so as we go back all the way to 1962 if we think about all of those 11 sectors, which ones out perform, and so I'm going to give you two categories, consumer staples or technology.
Speaker 2:
21:41
Which one do you think outperformed the other over the last 50 years? I want to thank consumer staples, but my fear is that technology has some big names on it. So when you look at the run ups of the googles and the apples and the Fang stocks that we hear everyone talk about, I don't know if they have a big enough game and then the last few years to actually push out consumer staples. So you are thinking like most people, so they, they go to the recency bias, they go to what they know most, which is the appeal of the technology technology. They're looking at their phones, their iPads, all of those things. So you're correct in both fronts. So actually consumer staples wins. And actually it wins by a long shot. See the long shot I would have questioned. So if we go back from 1962 to the present consumer staples, I mean again, I'm telling you it's not even close.
Speaker 2:
22:40
And I think about consumer staples, so we'll call it, there's a great article, um, boring if you think about it, what cause what is consumer staples, food diapers needs versus wants to face Napkins. So all those things, you know, Kleenex is our producer needs plenty of them over there today and hope you feel better by the way. JV and needs absolutely. We can't live without them. It's like Maslow's hierarchy. We need those basic things. I'm sure we love the technology part. And actually, oddly enough, you can guess what year 1999 technology actually took the leap. What's happened since then? Of course the tech bubble and then it hasn't been able to catch up since then. Now certainly recently, last couple of years has done a little bit of ketchup. But I would say that's a great analogy and I read the article was, is that consumer staples may be seem boring, but in the reality is, is they've done the best things for people over time.
Speaker 2:
23:36
And that's why if you don't have the right asset allocation in place and you may think, oh that's boring, I want, and especially right now, like everybody loves to talk about the Fang stocks. So Facebook, Amazon, Netflix, Google, I'll throw alphabet in there. Um, but they may be hot for a short period of time, but are they gonna withstand your retirement portfolio over the next five years or 10 years? And I'd be willing to say they will. I mean it's a technology changes so fast that it's something else is going to come up and take his place. One of those is not going to exist. It's just going to happen worst. Which one? Oh that's terrible. I don't have a crystal ball on this, but we do know technology's changing fast. And so one of them that's there today is going to get surpassed by something that probably hasn't even been invented yet.
Speaker 2:
24:25
But you know, this goes back to that need versus wants is right in line with the sequencing conversation. Because one of the first things we need to talk to someone about and these downmarkets his needs versus wants and is it a right time to maybe not take so much money out of your portfolio and really just focused on those fixed costs. Yeah, it's okay. We had to like to say it's to tighten your belt a little bit. That's all right. Um, spend a little bit less, just go out to dinner one less time or, um, maybe I really don't need to make that extra target run or whatever else happens or they don't need to go log on to Amazon and have that feeling of the box. Yeah. Or the way of course, this is the biggest holiday delivery time of the year. So there's more deliveries this week, of course, the u s postal service than any other week in the entire year.
Speaker 2:
25:14
And I think, um, I don't know about you actually. I do know because we talked about this the other evening is whether you send out holiday cards or not, I do not send out holiday cards. Well, we do. So I won't hold that against you for very long. Uh, but it is interesting because I think that is absolutely the trend and I think about there's going to be less and less people do. Then I think about the US Postal Service and that's why they have to keep raising rates. That's why they struggle and I'm, I'm glad they have these partnerships with Amazon and other things to keep helping them out because people love packages. People love getting things except for junk mail. We all hate. They all. I am doing my part in the home delivery. Yeah. I might not send out a Christmas or holiday cards, but I do my part in home delivery for sure. Yeah, I've, well we all, I think we were all doing that from here on and that's why everybody is actually moving to free shipping. Right. Cause now it's, it's, it's the expectation that that happens. Hey, if you're looking at your 401k and you want a complimentary analysis of what it is and how it's working for you and how much risk you're taking, give us a call. (888) 419-8513 we have a digital allocation tool that will give you unbiased fiduciary advice on what that looks like. (888) 419-8513 (888) 419-8513
Speaker 3:
26:33
you're listening to wealth from wisdom. He seems good times and bad times and he's got the gray hair to prove it. You're listening to wealth from wisdom stamp
Speaker 2:
26:41
with Erin's hall of Fame Advisor, Ron Carson. He's a published author and he's been featured in Forbes, investment news, the Wall Street Journal, CNBC and more. Now back to, well from wisdom with Barron's hall of Fame Advisor, Ron Carson. Hey, do you have an IRA? Four zero oneK or other retirement account. And besides looking at your balance on your statement, and if you've looked at it recently, the numbers going down is not going up. So what was the actually the last time you updated your portfolio or rebalance this or just had a professional look at it. And I bet you if you're listening, you have it or you logged in didn't like the number and I logged out real quickly because it bothered you or I hope you didn't do this one. You logged in, looked at it, and because you were looking at it, you made a decision and went and made a change without putting any thought into it, except that was in that moment or where she even yet.
Speaker 2:
28:44
And that you went and you looked at all of the holding possibilities, all the things you could choose. You looked at whatever had the best return for this year, and then you moved all your money into that or a portion of your money into that. Well, that's revisionist history. That's a mistake and you have to avoid it and hey, you're listening. Well for wisdom. I'm Paul West. My cohost today is Aaron would head of financial planning for the Carson Group. And we're talking to you about seven common mistakes that people make in the IRA and 401k and in this segment, you know, we're going to talk about some things that make a lot of sense. I like to call him, no brainers arid, but people don't take advantage of. So let's talk about mistake number four. People miss out on catch up contributions. Oh yes. Not Hines. Sorry, I say a terrible joke there.
Speaker 2:
29:26
That was for our producers. She gave it to me. Um, but not making the ketchup contributions when you're 50 or older. So if you're behind or you want to supercharge it is what I would say is you can make these contributions to really help yourself. I mean, and now if you think about it, it's an extra wa $6,000 a year, right? Aaron? Yes. So $6,000 a year, assuming no growth from age 50 to 60 is an extra 60,000 but I didn't think you'd be silly if you assumed no growth. But really if you don't take the money out until you're age 70 or you keep working, that's 60,000 could become times two is 120,000 but actually if it is grew modestly over that time, you could be looking at an additional $200,000 to help yourself. And so let's look at it this way. I think we talked before in the prior segment about sometimes it's okay to tighten the belt buckle with the expenses.
Speaker 2:
30:20
Why wouldn't it be okay to say, Hey, if I can put an extra $500 away per month or $250 per pay period, can I do that for my family because I get to put more money away. It gets to grow tax deferred. I think it's such a silly thing that so many people just don't do. I'm curious, why do you think people don't do that? Well, I think lots of times they don't think about it or sometimes it's daunting to think about the number, like so many things you, we get these typical raises and the easiest thing to do is just going crazy. You're here Ronk savings don't actually take the raise into your house. You don't, you're not used to the money. You don't see it. And so I think sometimes people just aren't thinking about it, but there's so many more options besides the farmland k and there's a ketchup on a Roth and just like catch up on the HSA.
Speaker 2:
31:04
And so there's plenty of places that they can be looking at their tax diversity as well as the additional savings opportunity. Yeah, hands down. I mean it can be too many if you think about the number overall, but if you go look at everything you're doing, all of your expenses and what's coming in and out of your paycheck, it's one of the smartest thing to do. And also for if you're listening and you're a business owner that you have, whether an LLC s corp or other thing, there's a lot of cool things you can do that also have catch up provisions that aren't just Iras. Your four zero one k's, you mean there's actually enough solo 401k visual. Okay. Yeah, there's call it. Yeah. You can actually put in 61,000 yeah. And Aaron you and be like, oh, 61,000 I can have that. But really if you're owning your own business and you have the way to do this and it helps you in your retirement, it creates some diversity and you can help defer taxes.
Speaker 2:
32:01
That sounds like a pretty dark good thing to me. The individual k has always been one of my favorite options for small employers because not only do they have the ability to put their money in, they have the money to put some in as the employer as well. And so that 61,000 you know when you're looking from both sides, it's not as hard to get to is some people think it is. Yeah. And don't be intimidated by it. And if you don't have to go all that way, but it's, it's more so, I mean right now is if you're over 50 and you can put in the 24 five but if you'd get it all the way up to 61 and you can afford to do that and it makes sense for you, why wouldn't you do that? And by the way, if you haven't explored this with your financial or CPA professional, we can help you again just to help give you more information.
Speaker 2:
32:44
(888) 419-8513 or if you prefer email, you can send us an email@infoatcarsonwealth.com and we can help give you more information about how you increase your ketchup contributions or as a small business owner put away 61,000 or more. So let's go to mistake number five and that is not thinking about a Roth conversion or at minimum going through that analysis to figure out if it can save you taxes. And again, with the new tax laws, yes, I mean it's just people forget about it. Hey, here's what people do. Also, what do they do? They go online and Google Google's their best friend and they, and they type in Roth conversion and then they go, and by the way, the first two things that come up, if you don't notice it says add. Those are paid ads trying to get you to go on their website. So those are people trying to sell you something, which means the Roth conversion information is going to be steered in a way to help to get you to do business with them.
Speaker 2:
33:41
So I just caution you, is no different than like go into a fair, uh, go into a food festival and there's all those vendors, what do they want? They want to sell you something, but when you go to Google it's the same thing. It's just done in a digital way. And I think people forget that Aaron. Yeah, I would agree. And you know, sometimes the first thing that pops up happens to me what you're looking for. And sometimes what you're looking for, especially in the financial area isn't for a couple of pages. No, it's not. And W when you're thinking about a Roth conversion, it's not just, hey, I'm going to input these five pieces of data and it's going to tell me a yes or no. It's unfortunately, it's not that simple. It's not one plus one equals two. No, it's an Algebra equation that you need to think about multiple variables.
Speaker 2:
34:23
But one of the variables is quantitative. I agree it is the numbers, but the other is qualitative and what's happening in your life and decisions that you're going to make down the road that also influenced this decision because there's a few things people forget about is one, if you take the money out of the IRA and put it in a Roth and you were planning on maybe giving to charity you later, all right, now you can give your charitable contribution through your RMD and not pay taxes on that. So you'd give up that ability. The other part of is what if you're planning on leaving some of this money to your children? Uh, you know, if you have a child who has an high income earner, leaving them an IRA is probably not a great idea. Uh, that would be very not tax efficient for your child.
Speaker 2:
35:04
Uh, but you know, moving that to a Roth would be a great thing to do for a child. And so some of those things that people want to think there was more about what is the intent of the money long term. Yeah, absolutely. And I think those are such important points because it is and about just the number. And I think one of the benefits we now have with the new tax, a job act and this new tax plan is it makes it beneficial. And I think people need to really think about what they should be doing. Now. There's some things that you got to look out for. So like three characterization, new rules, um, and if people aren't aware of that, uh, but I think it's, you got to have the right financial professional place and somebody that understands not just the numbers but the tax that goes along with it and you need a combination together.
Speaker 2:
35:48
So by the way, if your tax professionals not talking to you about this, but your tax professional also better be asking you what you just said, how are you going to keep working? What do you want to do for the gift? What other accounts do you have? You cannot make this type of decision in a vacuum. And unfortunately, I think CPAs as we now are a tax accountants typically are looking at what happened over the last year. So it's a very historical focused, most of them are not looking at planning for the next year. And so working with a financial professional to help you in that area is extremely important. It absolutely is. And I think when we talk about this with people all the time, um, they need to understand it. I mean, and they look at, there's simple things like, you know, what is my actual earnings or my AGI here, adjusted gross income because there are limitations.
Speaker 2:
36:33
So that's one hurdle that you either have to be above or under in order to participate in these types of programs. And I think a lot of people will look at just that and base their decision. But then there's other techniques and there's ways, you know, you and I talk about it sometimes, um, other ways to supercharge Roth type vehicles and way too complex for today's show. But smart financial professionals, by the way, Aaron, you're a CFP. I'm a CFP, a certified financial planner. If you're not familiar with that term, if you are not working with a firm that has CFPs on their team, go run, get away. Here's why they actually have hit this minimum level of knowledge and not when I may say minimum exhaustive amount. It's like what a doctor or the people go through. So they actually go and they have a fiduciary and ethical responsibility when they provide planning advice to give you advice that's in their best interest.
Speaker 2:
37:29
And very few of us, unfortunately Aaron in this profession of financial advisers have that designation. Yeah, it's really small in comparison. It's a, I think 80,000 across the whole country have the CFP. So was basically about 25% one out of four, but not all of them are even practicing. Really if you think about it, if they're not working with clients, there's quite a few that are in the academic world. So the best thing that a person can do is actually go to the CFP website and you can look it up. It will tell you all this, the fps in your area. And so they have CFP board has a website, let's make a plan and you can look up all the CFPS. Yeah. So, I mean, if you want more information of what a CFP is or what a fiduciary is, give us a call. (888) 419-8513 will help explain it in a simple way to you that you understand. (888) 419-8513 could you make your money go further in retirement? Learn how unwell from wisdom with Barron's hall of Fame Advisor Ron Carson,
Speaker 3:
41:21
fewer taxes in retirement you could learn right here and right now on wealth of wisdom with Barron's hall of Fame Advisor, Ron Carson according to an interview on, and I quote
Speaker 2:
41:34
here, 92% of Americans don't know the costs involved with their 401k plan and 72% belief they're not paying anything at all. Obviously nothing could be further from the truth and quote, Hey, I'm Paul West Co stay on welfare. Wisdom is Aaron Wood and there, and I just hear that phrase and I believe it. I absolutely believe that most people have no idea what their pain and were shed probably assume and we know what assume means. And so we won't repeat that. Oh, they're here is they have, they think they're paying it and it's free, but it's not the end. These things can be laden with the expenses and fees that you're unaware of. And worst yet, and I saw this Aaron recently, and it just, it just irks me by the way. I can't stand when people have deceptive techniques in working with their clients. And so, uh, you, you know this, we're fiduciaries, we're a registered investment advisor.
Speaker 2:
42:28
We're in the business of providing advice for a fee. We don't make our own products. We don't sell anybody anything. We don't have sales quotas. And that crap that goes on in this industry, sorry to get so passionate, but it just drives me crazy. And here was a great example. So someone was in a proprietary 401k plan and they had, one of the investment choices was this fun companies, s and p 500 so the client had put, you know, a big allocation of their, for one candidate and what do they think? Oh, I got a low cost s and p 500 index. And you, you know, you can go buy a lot of things. I VV and a spy, you know, all those things that have the market for you is very low cost ETFs and this was actually 49 basis points or 0.49% to have them buying the exact same thing that they could have basically got for six basis points.
Speaker 2:
43:23
So they were costing themselves 0.43% per year more because they had no idea. But the bad part was was this company made it look like through their marketing materials that you're getting this low cost s and p. But the reality was is they were essentially pocketing all of that. And that happens so frequently where people think just because it's in their employer plan that it is a good a right option. And some of the laws have gotten better about employers needing to do a better job of that, but there's still quite a few. They have bad options. Yeah, it's, it's, it's sad. So if you want actually a complimentary look at this and buy that will give you the quantitative numbers, will just tell you what the fees are and your expenses. We have to look at your statement. So if you want us to do that, (888) 419-8513 or if you want to email info@carsonwealth.com but I mean, I think so much can be saved from families on those unneeded fees.
Speaker 2:
44:21
Now I do believe that if you want good advice, you need to pay for it. You know, whether your CPA, your attorney, whether you're a financial planner, all of them, if they provide value. And I think one of the interesting things Aaron is, is, you know, it's so many times when you have a comprehensive financial planner. And I know we talked about being a CFP in our last segment, but you find uncovered value that is so beneficial. And I joke, I still get the newspaper. So you call me old school. I still send out Christmas cards, so you can still call me old, whole school. Um, but there's this thing that comes out once a year and it's the unclaimed assets. Oh yes. Yeah. And so what do people do? They look for their name yes. And if they find yes or at least your relatives, uh, I feel like I get a call from my mother in law frequently if I'm in there or not.
Speaker 2:
45:06
And so you go look it up and all of a sudden if you're actually in there and you have unfound value, you get excited. Yeah. Right. Well, the thing is, is it took someone else to find that for you in the same thing with working with financial professionals, they can very frequently find value that is to your benefit and not selling you anything on it. So one of the values and I think is one of the most under figured out things, I can't think of a better word. And that is, let's go to mistake number seven. And that is people don't have a plan for passing on their IRA and 401k to their loved ones besides just listing their name as beneficiary. But that actually could be a big, big mistake. And there's two sides to this. One were tight. We can talk about people having the wrong person who is no longer part of your life.
Speaker 2:
45:56
Yeah. Divorces happen and people pass away. And frequently when we're looking through beneficiaries, we find that the wrong individualist. Don't listen, I can't tell you the number of times that someone has literally hugged me for finding those types of mistakes. But the other side of that is having children or minors listed as your beneficiary. There's a whole slew of issues that we have to talk about with that side. Yeah. I mean, and people that make so many mistakes of um, you know, putting an IRA in a trust, they don't realize that there's immediate taxation that goes on with that. Um, but also, you know, I think one of the best things people can do though is, is put a trust as a beneficiary often if it makes mistakes. Like it depends on the situation. If you have minors, um, that can play a role. And by the way, hiring the right trust professional, there's one of the most important things you can do.
Speaker 2:
46:50
Um, and one of the things, and this, this, this disturbs me by the way, is so when I asked people who they have most, most people set up a living trust, pretty common estate planning thing to do. Yep. So you then have to choose a trustee and oftentimes is one spouse or the other. It's a trusted friend or family member. But when life gets more complicated, you have to name a corporate trustee or successor trustee. Yup. So who do most people name the bank? The bank. Why? Because that's where they know that they can do it at or that's the only place they knew that they can do that. Yeah. Or because they got their checking account there. So they figured, and that's just, that's, that's mind boggling to me, Erin, because I'm going to go let someone make a decision about my money that I've worked so hard in my life and knows nothing about, you know, not just about me but my beneficiaries.
Speaker 2:
47:43
Yeah. My three kids, maybe my grandkids is a point and they're going to go make all these decisions. And that's why, again, trusted registered investment advisory firms and firms like Carson wealth. Here we have actually a trust department so that way we can be a trustee for our families. And there's so many people that we work with. They would say we would rather have you become trustee. We've sat you, we've done our financial plan through, you understand us, you know that Tuesdays are our favorite day of the week cause we could be with their grandkids or you know that we love vacationing in South Dakota or we love going to Wyoming or all those things. You know, our kids and their passions and those things. And there's that emotional element that go along with it. So if you actually have a trust and you don't even know who your trust professional is and you want some unbiased advice about that, we're happy to help.
Speaker 2:
48:34
(888) 419-8513 but let's also go back to mistakes people make. And I think you brought it up briefly. I just wanna bring it again. If you have gone through a life of that, either a divorce or a death, you got to update all of your beneficiaries on your accounts. And I can't tell you how often this has missed and well, and it's easy to miss. I mean if you think about it, you have your four one k at work, you have a life insurance provider, like every single document needs its own beneficiary updated. And so you're not logging into some of those accounts very frequently or if ever. And so something changed and you forgot to update your beneficiary on your life insurance at work. Yeah, and it happens all the time because those companies, your one k provider or your brokerage account is, they're not going to know that your beneficiary is no longer here.
Speaker 2:
49:20
Yup. They have no idea. You have to notify them. Or worse, it's your ex spouse and boy don't we see that all the time. Aaron, I'm planning documents very frequently. Unfortunately it happens way more than people realize and people have to look at that. And really when I think about all of this is you have to have the strategy of place about really is we've been talking about today, show how and when you withdraw your money from your accounts, how do you pay less in taxes? How do you minimize those investment expenses and how do you get the best possible return while minimizing your risk? And especially in those first few years of retirement, having that downside protection. And especially here in Q four 2018 holiday season, we've been watching the market. You know, I look at the accounts Aaron we've have and this downside protection we're doing great.
Speaker 2:
50:07
I was just fun to show someone that actually, you know, several of our people, depending on what you're invested, it could actually be up over that time period and it's fascinating, but you've gotta have the right plan together and we call this our retirement account analysis if you want help in us to look at that. (888) 419-8513 (888) 419-8513 hey, I'm Paul Weiss. I really enjoyed having you on the show today. Erin. Thanks for your insight. Thanks for having me, Paul. Glad to (888) 419-8513 we'll talk to you again soon. 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:
50:49
Okay. And here's the legal Mumbo jumbo. The opinions voiced and 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. Consult a qualified professional. All indices are unmanaged. I may not be invested into directly. Investing involves risk, including possible loss of principle. No strategy. Assure success or protects from loss. Past performance is no guarantee of future results. Advisory Services offered through Cwm LLC, an SEC registered investment advisor.