Wealth from Wisdom

5 Expenses that Could Blindside You In Retirement

May 19, 2018
Wealth from Wisdom
5 Expenses that Could Blindside You In Retirement
Chapters
Wealth from Wisdom
5 Expenses that Could Blindside You In Retirement
May 19, 2018
Carson Wealth
Show Notes Transcript

Do you think you have a bullet proof budget for retirement? Learn 5 huge expenses that could blindside you, and the strategies that could help protect yourself on this Wealth From Wisdom episode.



Speaker 1:
0:00
Okay. And here's the legal Mumbo jumbo, the opinions voiced and well from wisdom with Ron Carson and 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
This done market hit another old 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 200 and the skyrocketing cost of healthcare and retirement could now run 350,000 planning for retirement today is a whole new ball game. It's loaded with challenges, obstacles, the trap doors that you can do this and we can be your guide. Welcome to wealth from wisdom with bear and hall of Fame Advisor, Ron Carson. Straightforward and objective advice and how you could make your money go further in retirement. And now here's your host, Ron Carson.
Speaker 3:
1:08
It's a movie we've seen far too many times. You know what someone assumes they have a water tight budget for retirement. They're sure they've accounted for everything, but remember, this is foreign territory to them. And soon they discovered they miss something. It could decimate their nest egg, and now it's too late in the game to do anything about it. So they're faced with really, if you think about it, one of two ugly scenarios. One, make drastic cuts to their lifestyle or to polish up their resume to get back to work. It sounds fun, doesn't it? Hey, welcome to welfare wisdom. I'm Paul last and today I'm going to do everything I can to help ensure this doesn't happen to you. When you see when your tire, my paycheck goes away. You're no longer getting it every two weeks or once a month, however you're getting it today.
Speaker 3:
1:57
But you're getting in your lifestyle for your entire retirement in a way you've never had before. And it doesn't really matter how much money you have because now you're looking at it through a different Lens. Every expense becomes magnified every time you break out your wallet, your checkbook, you think twice because you don't have an endless supply of money. But imagine if you've actually expensed and thought about every item for your budget in retirement and you're not going to get blindsided by an expense you never saw coming or you that you grossly underestimated. And this happens all the time. Think about when you go to the store and you get some milk or some ground beef prices go up and you don't want to be surprised when that happens. Actually, it makes me think about, you know, think about when you bought an airline ticket.
Speaker 3:
2:48
Remember in the past you'd buy an airline ticket and you thought it was $200 but then you went to pay for it after all the taxes, fees and other costs associated with it, it was $260 you didn't feel like that was fair because you got hit with an unintended expense. And by the way, I'm super glad, I'm sure most of you, if you booked an airline trip recently, they give you the total cost when you're analyzing it. Instead of you having to figure all of that out. So at least, hey, the airlines have benefit, we've seen is they have improved that. But what happens in new your retirement, if you're hit with one of these unintended expenses and you get trapped, so I'm going to spend time with you talking about the five costly expenses that could blindside you in retirement, including three tax traps you never seen coming.
Speaker 3:
3:37
Why did they call inflation the silent killer three, how to avoid a health issue from turning your life and do a financial disaster and plus one thing you could do now to protect everything you work for. So actually just said blind side, it makes me think of the movie. I think blind side, if you haven't seen the Sandra Bullock movie is certainly one of the favorites in our household. And when it comes on TV a little bit like the Shawshank redemption, I get sucked into it. You start watching it. It's exciting. It's, you love the emotion that goes with it. Um, the entire thing related to it and blindside unfortunately on today's show could be a very different thought process for you because there's these traps out there as you think about your financial life. So what are those traps? So let's talk about three of them and the first one, and by the way, I know we hear on the welfare wisdom show, love to talk about acronyms.
Speaker 3:
4:31
So I'm going to give you your first one here. And I know many of you are frequent listeners, RMD. So what does an RMD stand for? Required minimum distribution. So is you've been socking away money throughout your life, into your retirement plan, and now you moved it from a 401k or four O, three B into potentially an IRA, an individual retirement account. Well guess what? You've been doing what's called tax later. That account is going to get taxed at some point. But what happens is, is the government doesn't want to wait until you pass away to actually get their taxes. So they created something called this RMD. So when you turn 70 and a half, you would actually be forced to take a distribution. And for the first year it's about 4% a little bit less than that. So what if you're in this situation, and this is where the tax trap lies.
Speaker 3:
5:28
Not only will you have to be forced to take this distribution, but that's now ordinary income. And Are you actually gonna have to sell an investment if you haven't prepared for it? Is it going to be when the market is? Maybe not at a point when you want to sell something. So now you've got to make the double whammy of sailing something potentially when you don't want to. And the big deal is what it does for your potential tax bracket. I know many of you are trying to keep your medicare costs on a monthly basis as low as possible. And as you're aware, there's multiple tax brackets. We've talked about that on the wealth from wisdom show many times. But imagine now because you're forced RMD, your medicare goes up extra dollars per month, your social security becomes fully taxable or up to 85% taxed.
Speaker 3:
6:19
Think about that. That is a tax trap. So if you haven't had someone help you think through the s word here, sequencing, helping you think through the best way to sequence your different types of taxable accounts. So tax now I got to pay it right now tax later like I've talked about or another one is what's tax never. I mean there are account possibilities to be tax never, but a professional has to help you think through those and there's nothing more frustrating when a listener calls in and we're talking to him and there haven't prepared for these and they got hit with a tax trap. But what they could have done is you got to remember many of you out there, whether you're doing your taxes on your own, are you using a professional, you are recording history with a tax prepare, you really have to be a tax planning or tax planner type concept to help you avoid these big mistakes.
Speaker 3:
7:18
And I think about it, we see it frequently and certainly more than I'd want to, even though we certainly on this show talk about it, which is when you are sequencing these, how do you best Paul? And there's techniques you can use. One of them is you can actually use an RMD to give to charity. So think about the money you're giving to charity. So whatever dollar amount you're giving to whatever charitable, imagine. Now if you actually didn't want to, um, use your RMD for personal needs, you could gift it, um, up to 100,000 to a charity. That's a great technique. You get the benefit, you don't have to pay taxes on it and you can potentially stop yourself from going into that additional medicare monthly payment part bracket. You can maybe, you know, help protect yourself on social security's, get further taxed, all things that go a long way.
Speaker 3:
8:14
And by the way, speaking of social security, uh, I mean, I, you imagine this, you've worked so hard your whole life and then you're getting more taxes on it. And so you have to be mentally prepared for this. But don't make an assumption on what the right amount is or wind appropriately time for you to file. Everybody is different. I talk about this all the time. The backyard barbecue every week here as part of the wealth from wisdom radio network, we get phone calls in from people asking about social security. So if you want help on that, you can call us (888) 419-8513 but it's a, it's, it's, it's ironic to me that everybody calls has a preconceived notion on what they should do, but almost every time that's come directly from someone else that told them what they did. But Hey, if I like pasta and somebody else like steak or somebody like steak and I like chicken or somebody like chicken, but they like Tofu, you just because someone else liked it doesn't mean I'm going to actually consume it the same way and the same for your social security.
Speaker 3:
9:22
But this isn't then just about food. This is about real money and I'm talking tens of thousands, but many times we're talking hundreds of thousands. Yeah, you heard me right? Hundreds of thousands of dollars for people that they can save by making the right decision. And there's things that are important, their spousal benefits, um, and other components that you got to really figure out the right time to enact it. And don't make a mistake on assumption. And if you can, if you, if you're listening today and you've filed within the last year, so less than the last 12 months ago, please talk to a professional just to make sure you did the right thing. The other third tax trap I want to talk about in this segment is estate planning. So if you, if you really want to look at estate planning, most of you think it's not important or maybe you're not going to hit the brackets.
Speaker 3:
10:16
The reality of is the word p for probate, excuse me, the letter p for probate of you don't want your money tied up in courts for a long period of time. And then what's that gonna do? It's gonna cost your estate thousands and thousands of dollars in probate and legal fees. And worse yet, your state could get double taxed for certain items. So do you really want this to happen? No. So for example, as you think about how you own your homes and your cars and you know, most people think about investments and they hear the t word of trust and they think, oh, I don't need a trust. Well you may or you may not. Most people though from an estate planning technique and helps them divvy up their assets and the way they want to in accordance with their will and can help save them thousands of dollars, but probably more importantly time.
Speaker 3:
11:14
I mean I actually think about all of our assets we have, what are we all value the most time? I can't stand. I think many of you have heard, I was talking to the show my least favorite word in the vocabulary and dictionary is the B word of busy. I can't stand when people say I'm busy. What you're doing is you're just really, you have to prioritize your life and pick what the most important ones are for you. And that's why I don't like these people coming in and they have RMD. Those required minimum distributions problems that could really force them to withdraw all this money in their retirement account when the market is up or down and whether you want to or not because they're going to get hit with this avalanche of taxes. Then worse yet is that tax rate. Each year it goes up and up and up, higher and higher and higher and accurate of the government is gonna end up with more of your money inside these accounts than you do.
Speaker 3:
12:07
But that is preventable. It's so is an a hope. Our listeners understand that you don't want this money that you've worked so hard for taken out of your pocket. It's, hey, you know what? If you want to learn more about that and how we help people. (888) 419-8513 (888) 419-8513 you know, if you're the kind of person is I'm thinking about there that needs the most out of every dollar and you want to make sure you've saved so hard while your working career and your 401k four o three B or other retirement accounts. Simple way, get an analysis done. (888) 419-8513 I'm Paul last and you're listening to the welfare. Wisdom radio network.
Speaker 2:
12:48
Trust, transparency, accountability. These are the values that drive Ron Carson and Carson wealth. You're listening to wealth from wisdom with Barron's hall of Fame Advisor, Ron Carson. He's a published author and has been featured in Forbes, investment news, the Wall Street Journal, CNBC, and more. Now back to well from wisdom with Barron's hall of Famer Advisor Ron Carson. You've created a budget for retirement. You think you've covered all the bases as soon after you right
Speaker 3:
13:16
tire, you get blindsided by an expense you never saw coming or worse yet that you grossly underestimated. I know that's right. We are human. We do make mistakes, but it's a huge financial setback that you don't want to seriously impact your lifestyle in retirement. Again, we've seen this movie way too many times, like groundhogs day. I don't think I can watch groundhog's day every time either. Um, so welcome back. I'm Paul last year. Listen to the wealth from wisdom and you know, there's so many ways we can help you all with straight forward and objective advice. And today we're talking about five expenses that could blindside you and your retirement. And this segment we're going to reveal why most Americans underestimate the devastating cost of health care and longterm care and retirement and how you could protect yourself before it's too late. Speaking of not too late, I would like to welcome my cohost here, Jim Caldwell to the show. Glad to have you and look forward to your commentary, uh, on healthcare and expenses and helping avoid those traps. For our listeners. Thanks Paul. Glad to be here. Yeah, well, you know, I know you've been gone for a couple of weeks, so we're glad to have you back. You're spending some time down in Florida and actually, and I actually think of that's probably one of the epicenters of the healthcare. Um, and thinking about expenses,
Speaker 4:
14:26
it sure is. We have a number of people down there that need to address that issue. Some of them are, are tough questions that we have to the answer for them. And then we had a situation yesterday, which was really a happy ending where we did a plan for a household and, and the good news there was that the husband retires, his pension through the state of Florida, includes health care coverage at no cost to them. So there's one of the good stories, but then obviously we're going to discuss some of the not so good stories.
Speaker 3:
14:57
Well, we hope there's a happy ending to all these stories where people have a good outcome and the way they approach it. So let's think about this. The average 65 year old healthy couple today. Yeah. Healthy, good spirits, all of those things. You're projected to potentially spend $404,000 on medical expenses. Holy Cow. That's almost half a million dollars. If you're 65 year olds today that you're going to smack it, and by the way, when you turned 75 it's expected that it'll be 15% of your overall spending per year. Imagine right now, as you do a budget, let's say you spend $10,000 a month, whatever your number is, 1500 of it is just for medical. It's crazy gym.
Speaker 4:
15:42
But here's the thing, it's difficult and I've seen this in real life where it's difficult to estimate what your prescription costs are going to be. That's where people are really getting hurt now because you don't have that crystal ball as to what could happen to you. It's kind of like as you get older, you're like an old car. We just kind of replaced the parts or or change the oil to keep it running. Right, but it's the prescription drugs and that type of stuff that can really hurt also.
Speaker 3:
16:06
Yeah. Well, I look at, I mean, I pulled up some charts preparing for today's segment, Joe, and I'm not going to drill you with questions because I know that's your favorite thing. So in $2,016 today, we spend $3,400 on health care per year per person. Okay. So it doesn't sound terrible, right? Actually it sounds like a lot. So what do you think we spend in 1970 oh, I just, can I tease you right? And I said I wasn't going to ask you a question that I just fired one. I, yeah. Oh, I'd say 2100 400 so I mean, think of how that cost. So another just fascinating, by the way, many of you listeners know, I love statistics that go along with it
Speaker 4:
16:49
and he loves to make sure, I don't know the answers to the questions too, but that makes it fun. That's fair. Fair.
Speaker 3:
16:54
So let's look at prescriptions. I think we all feel like, I can't believe how expensive expensive prescriptions are. So in the 1970s prescriptions grew just under 8% per year. And in the 1980s they grew just over 12% in the 90s they grew 11% in two thousands they grew almost 8% and actually from 2010 to 2016 and there are only growing 4%. So we think about that. They are growing a lot, but it's relative, right? So the dollars are probably similar, but the percentage wise where actually they're not growing as fast as they once were. But it doesn't matter because when you hear the phrase like I just shared with you, $404,000 you about fall over because of that cost. So even if you're a healthy now, you never, never know what the holds. So if you have ways to protect yourself and there's a lot of things you can do to look at, save enough, um, longterm care if it's appropriate for you.
Speaker 3:
17:58
But to make matters worse, we're really going to live longer than ever before. So as you think about living longer than ever before, there's new challenges you encounter. One of those challenges is taking care of a family member. A parent, um, are, could be a parent in law and many of us have to experience that. Jim, and I know you've been involved with that. And so helping people understand that there's two, there's two potential challenges here. One is financial, you know, that are you now going to have to take financial care of your parents, which is a possibility for people. I'm not saying you personally, Jen, but I'm just saying people do this too. And I think this is something important, you know, on the show. And this is wealth from wisdom. And one of the things we've learned is it's not as much the financial care, it's the emotional care, the wear and tear, the wear and tear care giver first is the Care Receiver.
Speaker 3:
18:53
And I have seen that in dozens of situations firsthand where, and I can look at what my wife's going through with her mother. She just worn out. Um, I've seen situations where the care giver ends up passing away before the person receiving the care. So that's tough. You're right. The emotional part can take over and make the physical part impossible. Yeah. And so imagine you don't have to worry about the financial because you put a good plan in place, you're still going to have to deal with the emotional part. Um, and actually it was interesting earlier today, uh, I was talking with Kelsey who's our vice president of talent runs human resources for our organization here. And we were talking about this gym, uh, is, is should this be a benefit for, we don't call employees employees here at the Carson Group, we call them stakeholders because we think everyone's got a vested stake in the success and future of the business.
Speaker 3:
19:47
But it's, should you give people time off as part of a benefit package to help take care of their family? We let them do, they go off for kids. But should you do it for the other direction for if their parents are not healthy and they need help. But I don't know. I mean, as I think you know, here we are, you know, almost to 2020 is, is that a benefit that's going to be needed for the future for employers? So I'm curious, you know our listeners today, I'd love to get your feedback on that if you think that's a worthwhile benefit. (888) 419-8513 but I just, the amount of time that people spend here, Jim, is enormous. So Paul, I look at, here's what I look at. I look at longterm care, longterm care piece to me is a retirement game changer and we've used that term in a number of meetings and now I'm going to throw a question at you. I've been just laying in the weeds waiting to do this. You know we both love football and it's getting closer to football. So he's an what do you think the most important play in football is? Well, the victory formation because I mean you one okay, you weren't ready for that answer.
Speaker 4:
20:51
You miss that. It's the punt play. And I'll tell you why the punt play is a game changer because for bad things can happen. You can have a bad snap, you could have a blocking error up front, you can have the punt blocked, or you can add the punt return for a long gain or even a touchdown. And the way I equate that with longterm care in someone's portfolio is if you don't have longterm care in place, the only thing that can happen is bad. You have to go into your portfolio financially and start to drain that away to provide the proper care. So now I do have an emotional or financial problem, but that's going to become emotionally draining because you've seen your assets that you've worked all your life for a road down. Yeah.
Speaker 3:
21:36
So interesting analogy to use their gym. And I think when maybe the help for our listeners is, is what are some of the average costs here? So as you think about, if you're in a private room in a nursing home, that's gonna cost you about $8,000 a month. Yeah. A month. So that's almost a hundred thousand dollars a year. Stayed in Nebraska, $7,500 right now per month. Now a semi private room. He's going to be less expensive, but about $85,000 a year. So again, that's a $12,000 difference. It's $1,000 a month. Now you're going to look, okay, what's the trade off $12,000 versus your own private room? What's best? And so if you're in a tough financial situation, guess what? It doesn't matter anymore. You're going to choose the option that's going to extend the benefits for the longest period of time you can. And He, here's a trivia question for all you listeners.
Speaker 3:
22:31
So as longterm care covered by Medicare, no, it's not even our producer, Jamie. Got that right. So good job, Jamie. And you know, if you realize this, don't make assumptions. Medicare doesn't cover everything and it's not this incredible thing that's out there. It's helpful for people. Don't get me wrong, I'm not trying to bad mouth it, but don't assume you have access to Medicare and all of these worries go away. Medicare is just a tool, one of the financial tools that you have. Yeah. So Jim, I mean, I think about other things in terms of costs is you look at healthcare. Um, time do you like remodel your home? I think about how many people because of mobility issues change and want to move from a multilevel or two story to a ranch. Now you go make change.
Speaker 4:
23:21
We had to do that with, with my father who at 88 couldn't go up and down the stairs anymore. Not only was that an emotional problem for him to leave this home, but it's also physically now it's easier on him, but he just misses where he was. Yeah, I'm sure. But there was a huge cost involved because you had to make the halls wider in the bathrooms different and all those good things that go with that.
Speaker 3:
23:43
A lot of people put in ramps if they got steps in their front yard and you got to make those investments and that's not only time but it's money. It's emotions that go forward with it. And I mean if you've been a good saver your whole life and you've saved, you know, $1 million or several million dollars, you may feel confident gym. But ultimately you could lose a big chunk of that in your retirement because of multiple reasons. You know, taxes like we talked about in the first segment, healthcare costs like we're talking about here, but you do really have more opportunities to do things with your money. But you got to take advantage of don't fall in the trap of not preparing for longterm care or not preparing for your RMDs. Um, and and thinking about all those decades of hard work, all the sacrifice, the late nights, the trips, all those things that go with it could be for not because you didn't plan accordingly.
Speaker 3:
24:33
You didn't think about ways to reduce your income taxes. You didn't think about ways to maximize your social security. He didn't think about ways to lower your medicare premiums or you just paid too much in fees and expenses. So if you actually want a private high net worth analysis directly with me, you can actually call us at (888) 419-8513. I'd be happy to go over this with you. Jim and I and our team can help. By the way, fate, best part about this. No cost to you. Just give us a call. (888) 419-8538 by the way, even if you have an advisor or the dreaded B word broker right now, that's okay. It's probably stuff you haven't heard about or they're not engaging with you. You should be talking about this. (888) 419-8513 you're listening to the welfare wisdom radio network.
Speaker 2:
25:21
He seems good times and bad times and he's got the gray hair to prove it. You're listening to wealth from wisdom with Aaron's hall, the Same Advisor,
Speaker 3:
25:29
Rod Carson,
Speaker 2:
25:30
he's a published author and has been featured in Forbes, investment news, the Wall Street Journal, CNBC.
Speaker 3:
25:37
Now back to wealth from wisdom with Barron's holiday,
Speaker 2:
25:39
same advisor, Ron Carson.
Speaker 3:
25:41
Great. As you're planning for your retirement, it's the things you don't know that could actually get you. You're listening to. Well, from wisdom. I'm Paul Western. When I call, how's Jim Caldwell and this is the show where you can count on us for straightforward and objective advice. I know you're listening to the radio, you're listening to this on podcast and we're really talking about five expenses that could blindside you in retirement. You know what, in this segment we're going to talk about are you getting gouged by fees and backdoor expenses that you don't even know about and what's the most important thing you could do to reduce or eliminate it? Or here's a, here's a great statistic. 67% of Americans, yeah, that's two out of three of you. Don't believe that you pay any fees with your phone. One K plan, you're wrong, you're dead wrong. You do.
Speaker 3:
26:27
And hopefully you work for an organization that helps disclose those, what they are. And by the way, if you're receiving a service that's providing you value, I think we're all good in paying fees. And I think, I don't even think about paying fees if I'm receiving value for people, that doesn't matter. I mean if is doing what they're supposed to be doing, I hire someone to mow my lawn and they do a good job. Guess what? Pay Him Fam. I hire a contractor to build that ramp to help support my elderly parents. They do a good job paying them. There's The v word of value associated with it. Um, so it's amazing to me. People don't understand that. And also think about fees. And I talked earlier about airlines. I remember that the day of you'd buy an airline ticket and they say it's $200 but after all the fees and taxes, it was really $247 and 37 cents at least disclosure wise, the airlines are now showing you exactly what the fee is upfront, but if you're getting stuck with embedded fees in your expenses, so by the way, those of you are in mutual funds.
Speaker 3:
27:29
I hope you realize there are fees associated with, it's called the average expense ratio. You can Google it, look it up, look up your fund. There is a five letter symbols called the ticker symbol that you can look up and it'll tell you exactly what the average expense ratio is. Most people don't realize, Jim, that's approximately for equity based funds around 70 basis points or 70 basis points. For those of you that don't know what that means, that's 0.7% but you don't see it. So you don't think you're being charged it. And that's a huge mistake we see people make Jim is just because it's not visible to you. Trust me, it's costing you. It's coming out of your return. So when they go calculate how much money they've made or lost, they then take that fee out to then price that for you. What people don't understand that at all.
Speaker 4:
28:17
So I'll give you the real life story today. I uh, I was in St Louis Airport and we had a gate change. So the guy next to me and I were doing some work on our laptops. We fold everything up. I kind of introduced myself, he talks to me. We were walking down the hall, we ended up spending about an hour together. And then we got on a plane and sat together and actually he brought up what his portfolio was and how it was done. And he has a portfolio full of mutual funds. And I was explaining to him trying to be somewhat neutral that well you, you think you're paying this, but do you really know what you're paying? And we talked about if you call five advisors and it's, let's say you just Franklin income fund mutual fund, everybody knows you're going to get five different answers. They don't know what your, what is being charged in there. So I googled up exactly what you just said, a couple of his funds and uh, yes, he's very interested in coming in and having a conversation.
Speaker 3:
29:07
Yeah, well I mean people don't understand. I mean especially if you look at international funds, those now go over 1% or more complex strategies go over that. And again, if there's a benefit to your portfolio, and maybe it's something you look at, but I don't want people to make mistakes to think that they're not being charged because they are. And just because it is not visible, you should be asking him. But here's the other big consequence of fees and expenses related to mutual fund and that is tax inefficiency. They are not tax efficient and what's where she at Jim, and we haven't had years like this in a while, actually we probably did a couple of years ago so you can have a negative or return year but have positive tax consequences in terms of actual having to pay taxes on gains even though you're losing money and they talk about a double whammy.
Speaker 3:
30:01
Wait a minute, my account value went from a hundred thousand and 95,000 but I get my tax statement and I've got to pay taxes. How in the heck does that work? That doesn't sound very good. Or how about, how about the, the person that buys something late in the year, let's say November or something and they ended up, they ended up getting a 10 99 the following year for a capital gain distribution and they're looking at you like, why? Why did it happen to me? I've only been in here two months. I didn't make that much money. Why am I being taxed on it? Yeah. And you don't get it. And it's frustrating for people. So what I would suggest is you need to understand what you're being charged. And Jim, there's a lot of people that try to get income. So there's a lot of, I call it the word products, not solutions.
Speaker 3:
30:41
There's products. People are sold within comments, sometimes they're tied to real estate. So think about many of you invest in real estate investment trusts, and so you'll get, you know, 5% 6% 7% yield on these things. But the challenges is when you go to sell them later, you don't realize all the embedded expenses. I mean, Jim, we've looked in our career, so many of these and people bringing them to us all the time from the wealth of wisdom radio show. And by the way, if you want us to analyze like a rate you have, you can call us (888) 419-8513 but think about this, if you think you can sell it for a hundred but because of all the internal costs, it's actually you can only sell it for about $89 and it's, it's crazy to me, but people, they get so fixated on yield and what they're getting annually from that they don't look at the total cost and ultimately for them their total return.
Speaker 3:
31:35
Well, and the other piece of that, and I had to work on one of those a week ago, uh, when I was traveling is it's the liquidity piece. Okay. So what they used to have, and not to bash reach today, but just using it as an example, they would price it out at $10 a share and you would, your statement would always show that $10 it never fluctuated. Nobody, nobody came in and made that a reality. Now the rules have changed and they have to show a true net net asset value. So it could be seven $58 people are now losing account value and they're wondering, well, should I stay in this? And now they cut the dividend and they're like you talked about the sweet spot. So trying to get out of those is a real issue also. And all the while you're still paying those high internal fees.
Speaker 3:
32:18
Yeah, no, you definitely are. And it's as, it's a big mistake people make. So let's keep down the path here of strategies to help people. And I think this is really interesting. So let's talk about budget and what they average retired amid Americans budget looks like. So let's think through, if you're 65 and older or even now, um, the average American actually retires age 62 so it's not 65 but you spend $1,294 per month on housing, $571 per month on transportation, $480 per month on healthcare. I think that's low for 59 on food, 205 on entertainment, $228 a month on insurance. $191 on conscious cash and just $294 miscellaneous. That's a lot of stuff all over the place, Jim. And I mean, I don't even know if people look at it and why I want to, things I think we hear is people look at the end of the day and my net cashflow positive or negative for the year.
Speaker 3:
33:18
Do I have more income coming in than what I spend? And I think while yes, that's important, there are ways you can influence that so greatly as you're maintaining a budget. And for those of you that like, Oh, I've never kept a budget, I don't want to do it. I'm not saying you got to look at every single penny. I don't want you to be so worried about that. You're not enjoying life because hey, I don't know about you Jim. I think we only get one shot at this earth. So we better [inaudible] not a dress rehearsal, Paul. No, it's not. Um, it's also not a spring game. It's, you know, we're going to be in the real one at all points in time. So helping figure out though where are those costs and how to avoid some of them or minimize them is a big deal I think.
Speaker 3:
34:00
I think when you're also looking at budget, you know, and we do a budget, we do an expense worksheet here when we do a financial wealth plan for our, for our clients. But go back and start early with your tax planning. And I know you probably talked about this in the first section, tax planning versus just tax returns, but also if you're contributing to a four o one k with before tax dollars, do you have the option to do a four o one k Roth where you're doing it with after tax dollars, which down the road is going to lessen that tax bite. Cause we see, see it all the time people coming in, when you look at their pie chart with assets, sometimes 60 to 80 to 90% of it is in retirement accounts, which means someday that's all coming out. Ordinary income and that is going to mess up even the best household that has put a budget together.
Speaker 3:
34:46
So tax planning using the different retirement vehicles could come in very handy. Yeah, so I mean I think one of the things Jim is we look at that for people is understanding how much their pain in their investment fees and their expenses because that is another budgetary item. But most people just, they don't know. And so I'm going to gas. Most of the starts today aren't sitting there on a computer googling all of their individual tickers are symbols to say what's their expenses? You know what, I can make it easier for him. Jam. So let's do this. If you want, get us a copy of a statement or so just send us positions or email that into us or if you want call and we'll give you a free analysis. Simple and easy to read that can show you your investment fees and expenses so you can understand it. We'll do that for you. All right. Sound good gym. We'll have people, I'm all in (888) 419-8513 good way to help you. Eight eight four one nine 85 13 was everything else you buy on the world, you know what you're paying for. I think about this. Do you really know what you're paying for your investments? So we'll help you with that. I like the idea here. (888) 419-8513 you're listening to the well from wisdom radio network.
Speaker 2:
35:52
How could you make your money go further in retirement? Learn how next unwell from wisdom with Barron's hall of Fame Advisor Ron Carson. Is it possible you could pay fewer taxes in retirement and keep this money for yourself? You could learn right here and right now on wealth and wisdom with Barron's hall of Fame Advisor Ron Carson. Hey, retirement. It's
Speaker 3:
36:14
foreign territory for everyone and if you miss, you're just underestimate one major expense. It could decimate your life savings. And guess what? At that point it's too late to do anything about it. Hey, welcome back. I'm Paul West and you're listening to the wealth from wisdom radio network. I'm joined by my cohost, wealth advisor, Jim Caldwell. Hey Jim. So we've been talking about these five expenses that could blindside your retirement. And really here in our final segment, we're going to spend some time talking about inflation, how it impacts you and strategies to protect yourself from the unexpected. So when I say the word inflation gym, most people start to tune us out. And I don't know why, because I do know why. Actually this is why we call it the silent killer because people don't think about it or not. And during the break, you were sharing a story about tangible and intangible.
Speaker 3:
37:03
I thought it'd be great for our listeners to hear that. So what we look at is, is we have two different ways of, of providing services. You have tangible where you purchase something where you could see it, feel it, touch it, it's an immediate end result, and you pay a commission or a price for that. Okay? Whereas in our industry, we're providing an intangible. It's a service, it's, it's visible, but you can't feel it, see it or touch it until down the road. When you see the execution of let's say our planning process are so security analysis, uh, our ability to keep fees in line with what people are looking for and help them put together that budget. Yeah, well I mean what happens is that things bite you. So like when I was telling an earlier segment in 1970 but in today's dollars you spent $400 a year on healthcare or excuse me, and now you spend 3,400 so that's a major, major difference.
Speaker 3:
37:56
Well that just power of rising costs, inflation and all those things that go with it. And you may think of one or 2% a year is not that much. It's not going to affect me. But there's another word. I'm a throughout here, longevity. So now if you are living longer and there's inflation and your money is a certain finite amount, the longer you live, the more your savings and income are going to be whisked away. So with increasing lifespan, this is now a trouble spot for people. And Jim is, we model out for people we used to do age, what, 85 90 right now for most people it's 95 195 right? Yeah. Actually I had somebody ask us the other day to run it out to 110 because they've got great longevity in their family. So they said they'd rather overprepare. Sure. So I'm curious, you know, if our listeners are doing that, I actually heard if somebody ran a life insurance, um, proposal because a client asked it to run it out to age 130 because this individual thought they were going to live that long.
Speaker 3:
38:55
It's a long time. Wow. Hey, I hope I do, but I want to be in great condition and in that state, but I want to make sure I budget for my inflation and as I think about this, Jim, let's move on to expense number five. I don't need to beat up inflation anymore. People get it. You got to pay attention to it. Let's just talk about the unexpected. Life is full of surprises. Unfortunately. Surprises can be good. Surprises me be bad. But things are going to plan. And I think about, I got to drop a car analogy. I haven't said one yet on the show today, Jim and you and Ron make fun of me for them, but I'm going to keep telling them anyways. So here's one. You go out and you're about ready to go somewhere. You go and you look at your car and you'd go flat tire.
Speaker 3:
39:38
Yeah. That's frustrating. Right? Unexpected. So you've gotta do, you've gotta put the spare on or if you have a service you call the service. Or if maybe there's just, you're thinking is there enough in there that I can get to a service station and get some air in it to then get it to wherever else ruined in the room. Yeah, exactly right. There's your, there's your risk. Yep. And so now that you can do, but then like I've actually recently had a tire that was pretty low, so I go take it and fill it up and three days later, year is low again. So guess what? Probably the proverbial or the real world, Neil. And the tire. So I go take it and no surprise nails in a spot that tire air repairable and there's not enough tread. So anytime we get a new tire, ouch.
Speaker 3:
40:20
Yeah, well then you go look at the rest of your tires and you're like, Ooh, those are all pretty low tread. Do I need to get those? And from what you thought was going to be a simple patch job, 2025 bucks now turns into, Oh, do I need two new tires or four new tires? Unexpected. And while this is not a huge number of these things are going to continuously keep happening to what if you have a family emergency, then you have a health issue, your spouse, your parent, your kid, that turns into an issue. What about if you get disabled somehow? I mean, those things happen. I mean, and I'm for way more than you probably realize. What if you need to give that help to the caregiver? Um, what have you have a home repair? Well, how long did it, how many of you, and I bet there's a lot and I'm one of them, Jim.
Speaker 3:
41:05
I'm guilty here is I just like running my air conditioner till I think the day it conks out in. I don't run it in every day right now, but it's an old air conditioner. But I know that expenses coming out on the horizon where I'm going to have to pony up here and get a new one. Well I think we just, we put off the inevitable. I mean it's human nature and you're going to try CRESTA haters. You're going to try to get every ounce of cool air out of that conditioner that you can and you'll deal with it down the road. And you know when you look at, you talked about a disaster to property.
Speaker 4:
41:34
I mean look at places like Florida without hurricane seem to be more prevalent or maybe out in the plains where you get tornadoes and all that. A lot of people because of the cost of insurance on their home, they decide to self insure and now you have a real problem because I mean you got a choice. If you place gets leveled and you have no coverage, what do you do? How do you deal with that? Yeah, I mean I, how do you deal with it? Well, you just pack up what you can save and, and hope you can go find another place. But the other thing is
Speaker 3:
42:04
buddy Jim, Jim moving in,
Speaker 4:
42:05
move. I'll do, I'm moving on up. As George Jefferson said, the other thing I worry about the unexpected is a downturn in the market. I mean, nobody has that crystal ball. I mean, we don't know when it's going to happen or if it's going to happen, but we have to assume it will at some point. So what if the timing on that is not good? You're getting ready to retire. You're, you're, you're third and goal at the three yard line to get in the end zone to retire and we have a 10% downturn and there is no defense in that portfolio or you're retired and you're taking systematic withdrawals from your accounts and all of a sudden we get that downturn. What does that look like in your, in your big picture? So these are things you have to try to plan for. But as I said, nobody's got the perfect crystal ball.
Speaker 3:
42:44
No, I mean, and that's the unexpected right now that everybody's forgetting about it. Actually, I think it's worse than inflation. The moment which is a major stock market correction, Jim and I know we're in the business of providing advice to people and we don't spend a ton of time about the market. But if you think about it, it's been 10 years since the last major correction, the one before that was seven years. It's going to happen again at some point. And No, I'm not predicting today or tomorrow or anytime, you know, very, very near term. However it is going to happen. And Are you really prepared for it? So imagine the market drops 30% do you have yourself positioned away? All of a sudden, if that happens, so your $1 million goes to 700,000 what are you going to cut on your expenses? Now you've got to take your RMD off 700,000 and you're forced to sell something at a loss at the wrong time, wrong time.
Speaker 3:
43:40
It's going to frustrate you. So we like to call it downside protection. Jim, how do you protect your downside with your investments? It's one of the most important things to do because you've worked so hard, you've made sacrifices to get ready for retirement and it's your money. I mean, don't forget it's your money. Don't let these other things influenced what you do. I mean, if you put a $20 bill on a table, most people, and we're like, they see it, the value of real money, but when it's in an account and they're logging into an online platform like TD Ameritrade, fidelity, etc. It doesn't always feel real to them and they're, it's amazing me. They're willing to click a button to place a trade or make a decision without really thinking about it. But if that was sitting in front of them, they'd probably be shaking in Germany when they, because, oh my gosh, I'm going to make this big of a decision and yet they don't put any thought into it.
Speaker 3:
44:31
Now there's plenty of people that can do it, but they've thought through the right steps of how do they keep their taxes low? How do they have the right asset allocation plan in place? How do they get the most out of their social security? You know, how to, you know, keep their medicare premiums at a low place and really ultimately to help get income and retirement. And if you need help with all of those or if you want us to give you some advice and you can call us at (888) 419-8513 but nobody's going to get through 30 or 40 years of retirement by winging it, winging it is not going to help you. Let us show you how we can help you make a difference. That's (888) 419-8513 on Paul West, joined by Jim Caldwell. And thanks for listen, the wall phone wisdom radio network
Speaker 2:
45:16
risks, 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:
45:29
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 CW m L L C an SEC registered investment advisor.
×

Listen to this podcast on