RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:00:01]

MALE:  You found it.  It’s your safer place for retirement planning.  Prepare to be coddled in pure fiduciary goodness with your host and president of Decker Retirement Planning, Mike Decker.  This is Safer Retirement Radio.  If you’re in or near retirement, listen up and learn about a math-based principle-based approach to retirement that is designed to help you enjoy a safer retirement.  These strategies are to help protect and grow what you’ve saved and live the life you want today.  So grab a pen because your safer path to retirement planning starts now.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:00:38]

MIKE:  Hey, everyone.  Happy holidays from us here at Safer Retirement Radio.  Hoping you’re enjoying a Black Friday weekend.  Is that the right way to say it?  Shopping like crazy right now, or maybe you’re at home relaxing.  That’s what I prefer to do while everyone’s getting busy at Walmart and Target.  I like to take it easy with my family at home, play some card games, enjoy that quality time.  But whatever you’re doing to kick off the holiday season, hope you’re enjoying yourself today, from the bottom of our hearts here at Safer Retirement Radio.  And also for all of you enjoying a wonderful Thanksgiving, hopefully, we had a great time there with quality time with our family and friends here.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:01:15]

MIKE:  I’ve got Josh and Cameron here.  Josh, Cameron, thank you for joining me on the show today.

 

CAMERON:  Thanks, Mike.  Appreciate it.

 

JOSH:  Yeah, it’s great to be back.

 

MIKE:  We’ve got a line up here, four different segments we’re gonna be covering, about 15 minutes or so each of them.  Packed show today here on Safer Retirement Radio, so stay tuned for a lot of great, hearty content.  Hearty content, like chili.  It’s chili season.  It’s comfort food season.  All right, but anyway, with all that being said, as a quick reminder, if you’re just tuning in the show for the first time, the number to remember is 833-707-3030.  We’re diving into a lot of details about retirement planning, lifestyle planning, financials, the whole nine yards here.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:01:56]

MIKE:  If you hear something you like, you can always call that number, 833-707-3030 and then we will call you the next business day and reach out and schedule a visit at no cost to you.  Must be 55 years or older and have at least 300,000 of assets saved up for retirement to qualify for that no cost visit.  But we’re here for you and we hope that we can empower your not only holiday season, but the rest of your life to be fun and fulfilling.  That’s it, nice and simple.  You can also go to DeckerRetirementPlanning dot com and on the page there.  You can get a lot of great content.  Also, you can get started right there and submit a request to do one of our visits.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:02:36]

MIKE:  But enough with that.  Let’s get started here with some great content.  We’re gonna be talking about today buy and hold, what that means to you in today’s market.  There’s a lot of changes happening simply in different companies.  The structure, our economy, and even in different industries.  And we’re just gonna point a few holes in there.  If you’re buying and holding, that’s fine.  If you’re not, that’s fine as well.  All we want to do is present you data and research and make a few observations so you’re empowered to make the best decisions for you.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:03:07]

MIKE:  Then we’re gonna be talking about taxes a little bit, just some house cleaning before the end of the year.  We’re gonna be talking about RMDs, IRA to Roth conversions, gonna be pointing out your 1040s here, and a few quick changes you can make that could save you a lot of money.  So very excited about that.  And then we’re gonna talking about different income planning strategies.  We’ve got the bucket approach as the big target here.  We’re gonna be either supporting or poking holes into, as objectively as we can.  And then last but not least, we’re gonna be talking about planning vacations in retirement.  And I think this is an important observation here.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:03:42]

MIKE:  A lot of people are a bit gun shy about planning these elaborate vacations, because what if the markets turn over?  Well, what if I don’t make enough money?  What if I spend it all?  That fear is based on guessing and assumptions, and well, here at Decker Retirement Planning, we like to use math to enable you to make those decisions.  We’ve got some fun stories here about a family that went to Africa, a client that moved to Kenya for a month and just did some hiking, a motorcycle diary situation.  [I’d like?] to tell you though this was just up in Washington and Oregon, very peaceful.  But some great stories there.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:04:19]

MIKE:  And that’s what it’s meant to be.  Empowering you to enjoy your life how you want to.  So excited to dive on.  Let’s talk about buy and hold, gentlemen.  Did you hear the news about Darigold and their bankruptcy?

 

JOSH:  No, I didn’t hear that.  What’s going on with them?

 

MIKE:  You didn’t hear about this?  Darigold is not keeping up.  They’re not making enough money.  Darigold is, well, they’re out of [business?]  They’re one of the biggest manufacturers…  I hate to say manufacturers.  That really objectifies cows.  But they produce a ton of milk.

 

CAMERON:  Is Dean Foods their parent, or Darigold is the brand?  I don’t remember from the news.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:04:57]

MIKE:  Dean I believe is gonna be buying Darigold.  That’s the idea, which will be a large purchase.  But they’re not keeping up with it.  Something that’s interesting that I’ve noticed, and my wife is a nutritionist, that’s her passion, but almond milk, macadamia milk, cashew milk, all these alternative milks have significantly disrupted the dairy industry.

 

CAMERON:  Yeah, oat milk is up 600 percent this year from last year.  It’s absolutely insane.  I didn’t know oat milk was a thing until a couple weeks ago.

 

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MIKE:  It’s just so fascinating.  But something on the marketing side of the milk industry that they did is they trotted out the idea that calcium or milk comes… calcium comes from milk.  It’s a great resource.  Well, lately with these, a lot of vegan researchers, they have successfully, I believe, pointed out that milk does have calcium in it, but it’s so acidic that it pulls more calcium out of your bones than allows it to go into your bones, and so it’s a net negative calcium intake to your body.  Now, whether that’s true or not, and I’m not a dietician, a lot of people have reverted to alternative milks, or just given it up altogether.

 

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MIKE:  The almond industry is exploding in California, especially, but across the nation.  My point here is, I want to point out milk was such an easy thing.  Everyone drinks milk, milk comes from cows.  There’s a lot of cows, especially in Wyoming, nice and simple, right?  These other industries that just seem so stable are getting hurt and they’re changing.  There’s a lot of meat producers, for example, Foster Farms is out there, there’s a number of them out there, that are expecting and pivoting their own companies to give plant-based meat out there.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:06:51]

MIKE:  We saw the disruption of Beyond Meat and the impossible meat, with the Impossible Burger, the Impossible Whopper, which is quite delicious.  I was quite convinced when I tried it, to be honest.  Our economy is based on innovation.  It’s based on change.  The idea of buy and hold for a 30 year period, which is the average retirees bit, is a bit risky.  Here’s what I’ll point out.  Here’s a few stocks that were sure things back in the day, but maybe not so sure anymore.  And feel free, Cameron, Josh, to comment on this as you feel necessary.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:07:25]

MIKE:  But anyone remember ATT?  Love ATT.  My cell phone is ATT.  The cell phone really hurt ATT and Bell.  They didn’t think it was-they thought it was a fad for a while.  They didn’t pivot correctly, and ATT stock plummeted when the cell phone got poplar.  Plummeted.  And I don’t believe it’s fully recovered since its heyday.  Now, ATT was the stock that you buy your snot nose kid, give it to them for 30 years, and it was fine.  It was a sure thing.  Not anymore.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:07:55]

MIKE:  A few other examples out there.  Toys R Us, remember that one?  Every kid loved Toys R Us.  Then Amazon came in.  Disrupted the industry.  Borders Books.  I haven’t seen a Borders Books in years.  My point here is in different industries, as we progress technologically speaking, is buy and hold the best route?  I would argue no.  Here’s my point.  Cameron, you were gonna say something?

 

CAMERON:  It’s just interesting because we always view the economy, we’ve used these big companies, you know, maybe the Amazon is our generation’s Toys R Us.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:08:33]

CAMERON:  You know, right now we may think Amazon will be here forever, there’s nothing that could possibly disrupt it.  And for a number of years, that may be true.  But as you’ve mentioned and as we’ve seen, there’s been so many large companies that have done innovative things over the decades that have made other companies obsolete, or at least reduced from where they were at the height of their game.

 

MIKE:  Now, let’s be clear about different buy and hold strategies.  There’s buy and hold because you like the company.

 

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MIKE:  Last night I had a game night with some family and, well, one of my cousins put 500 dollars a number of years ago, like 10 years ago or so, into Apple.  He grew those funds a lot.  So there’s value investing, there is emotional investing, there is company investing.  There’s a lot of different ways you could technically buy and hold.  I’ve got a dear friend up in Gig Harbor who is an investor.  Different philosophies.  He’s a value investor and does rather well for himself.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:09:37]

MIKE:  But he’s all about finding the value and willing to change companies, ’cause he’s not loyal to any one company.  He’s loyal to the value that the company can provide.  If anyone here is a buy and hold investor, all I’m suggesting is make sure you’re aware of the value that company is providing, because value today is being perceived very differently.  For example, isn’t it interesting that Uber, one of the top transportation companies, owns no cars?  Or one of the leading hospitality companies owns no hotel rooms or real estate?

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:10:07]

MIKE:  That’s Airbnb and its up and comer, I guess second place, VRBO.  Times are changing on how we value our investments.  All I’m suggesting is if you want to buy and hold, one, be aware there’s the seven year market crash, which is typically 30 or 40 percent crash every seven or eight years, and in retirement, you’re pulling your assets from that, so it’s a very expensive timeframe to pull your assets while you’re trying to ride out the markets and the ups and downs.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:10:38]

MIKE:  Now, if you’re listening and you’re in your 20s, 30s, or 40s, that’s fine.  You can ride those out.  You’ve got a paycheck.  But when, and this is the first principle of retirement planning, only draw income from principal guaranteed sources.  If you’re value investing, that’s fine.  Just make sure that you don’t have to touch it until the markets can recover, which according to Morningstar, about six years for a 40 percent correction to be able to break even again.  Now, there’s some other options out there.  I’m just gonna suggest one of them.  This is the one that we help our clients out with, and those are just two sided models.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:11:10]

MIKE:  And I say just, that’s a pretty big just.  But here’s essentially how they work.  In the market, there’s a lot of indifferent indicators that are out there, and we’ll use the 200 day moving average as one of them.  This is a simple concept people tend to get right off the bat.  The 200 day moving average essentially is the-well, take the average price of your stocks over the last 200 days, and is today’s stock above that or below that?  If it’s above that, you’re in an uptrend.  If you’re below that, you’re in a down trend.  That’s maybe an oversimplification, but what we’re looking for are where the markets are going.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:11:46]

MIKE:  Here’s a different analogy.  If you’ve been to the beach, I hope everyone here listening has to be the beach, because it’s a wonderful place.  If you’ve been to the beach, the tide comes in and the tide goes out, and there’s a lot of noise in there that are called waves.  The waves are always crashing.  Do you want to try to invest off of the waves, or would you rather invest with the tides?  You can only do one or the other.  Two sided models use indicators like the 200 day moving average to find out which way the tide is moving and capture those gains.  It’s a beautiful thing that has averaged around 16 and a half percent.  Yes, that’s correct, 1-6 point five percent since 2000.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:12:28]

MIKE:  How well has buy and hold done?  If value investing is so good, how come quantitative models are able to outperform them?  I would suggest it’s because they can skip, the indicators will point out they can skip these market downturns and still keep up with the S and P and the markets on the up years.  And I’ll even extend an offer.  If you’re interested in seeing what these models do, there’s a lot of them out there, there’s a lot of them that are crap.  Just gonna throw it out there.  Any kid with a completely can technically make one.  The vetting process is extremely important in working with two sided models.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:13:03]

MIKE:  But if you find the good ones, and we pay a lot of money to get access to the largest databases to find the best ones.  We’d love to show you their names.  Show you what their performance is and show you how you could essentially minimize your risk in the volatile times that we’re experiencing here.  Especially if you want to capture some upside when the markets are being told it’ll be about two to five percent on average for the next 10 years, that’s dismal.  Let’s get past that.  Call us, 833-707-3030 to schedule a visit with us at no cost to you to review these two sided models as an alternative to the buy and hold strategy.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:13:41]

MIKE:  We’d love to show you our research.  We’d love to have the open conversation if it makes sense for you or not.  We’re fine either way.  833-707-3030, or you can go to our website.  There is a little section on the front page that says I’d like to have a review with you.  You can talk about the two sided models, specifically highlight that.  But we’d love to have that conversation with you, because when it comes down to it, we want to get you the transparency that you deserve.  Plain and simple.  833-707-3030.  Let’s dive into our next topic here.  We’re talking about taxes.  If you’re just tuning in, this is Safer Retirement Radio.  I’m Mike Decker, with Decker Retirement Planning.  I’m here with Cameron Archibald and Josh Hunsaker here.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:14:19]

MIKE:  We’re talking about buy and hold, but we’re gonna talk about taxes, and in just a moment, we’re gonna talk about income planning, specifically bucket strategies.  Is it right for you?  Cameron, it’s a busy season for you, as you head up all of our servicing accounts.

 

CAMERON:  You know, it is a busy time of the year.  You know, we’re getting closer to the holidays.  Interesting thing about retirement accounts, a lot of the deadlines that you normally associate with taxes are April 15th.  With retirement accounts, there are some deadlines you need to be aware of that are at the end of the year.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:14:54]

CAMERON:  So that would be the 12/31/2019.  Two of those specifically are dates for required minimum distributions.  Any of you 70 and a half or older, and kind of the ones that kind of can catch you are the beneficiary IRAs.  Those can have RMDs as well that are specifically that have to be drawn out before 12/31 of the current year as well.  So don’t let that one catch you, folks.

 

MIKE:  Can I ask you a dumb question, Cameron?

 

CAMERON:  Go ahead.

 

MIKE:  It’s a dumb question because I do know the answer, but I want all of the listeners to be aware of this.  Do you have to be 70 and a half years old to have a required minimum distribution of a beneficiary IRA, or does it affect all ages?

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:15:35]

CAMERON:  You do not.  That is not a dumb question.  That’s actually a great question.  We get clients and, you know, if clients were to pass away early, you could have a beneficiary as little as a two or three year old, who could technically need a required minimum distribution on their beneficiary IRA.  Obviously, in that case, they would have a guardian helping them, but yes, the IRS has created a table from year zero on.  So don’t you worry, Uncle Sam will get his cut of those taxes.  So…

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:16:07]

MIKE:  What’s the most forgotten deadline or task at the end of the year?  These are the last minute requests that you get typically December 25th, it’s Christmas, office is closed, and on the 26th, you come into the office and scramble to get a few things done.  What are the typical calls that you see?

 

CAMERON:  Almost always Roth conversions.  You know, my team and I stay pretty on top of the minimum distributions throughout the year.  We’re helping clients satisfy them as part of their safer distribution plans.  We’re really checking in in the fall, hey, hey, we need to get your, you know, RMDs taken care of.

 

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CAMERON:  But those Roth conversion, a lot of clients think, oh, well, this is great.  I’ll wait until the spring to see what my tax situation is and then do a Roth conversion.  Sorry, folks, it’s actually got to be by the end of the year.  And so that task specifically what you’re talking about is I do come into the office on the 26th and I’ve got a few requests to do last minute conversions.

 

JOSH:  So, can I ask on that?  I’ve never understood this, and the answer might just because ’cause the IRS said so.  But why can you do an IRA contribution after the end of the year, but you can’t do a conversion after the end of the year.  I’ve never understood that.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:17:21]

CAMERON:  Yeah, I wish I had a better answer for you.  I’m kind of in the same boat you are.  It would make the most sense in my mind to do it in the spring, after you know exactly where you are with taxes.  But this is one that they just do mandate…

 

JOSH:  ‘Cause the IRS said so.

 

CAMERON:  Yeah, pretty much.  And so if someone’s trying to forecast should I convert this year, often a good strategy is meet with your financial planner or a CPA in November, December, and say this is, you know, how much I’m gonna take in as income this year and this is where, you know, how much I want to convert.  And unfortunately, that’s kind of your best strategy.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:17:56]

MIKE:  Well, and let me comment to this a little bit.  The IRS isn’t just some big boss that says so.  This is regulation that’s set up by our government, and then the IRS is there to enforce it.  All of these different exceptions, policies changes are done by legislation that goes through there, and the legislation doesn’t always take into account all of the other moving parts of our tax code.  I mean, for goodness sakes, our tax code is bigger than I believe the Bible, the entire Harry Potter series, all the Lord of the Rings, and War and Peace combined.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:18:28]

MIKE:  I mean, it’s so extensive and so complicated that it’s almost like each action has to be individually talked about, passed, and then enforced.

 

CAMERON:  And to that point, too, I was thinking about it while Mike was talking there.  I believe it’s because a Roth conversion counts as part of taxable income.  So if you’re doing like an IRA…

 

JOSH:  Right, but then IRA contribution reduces taxable income.

 

CAMERON:  But not increases it.  And so I think they’re saying before the end of the year, we need to see exactly kind of the ceiling of your income, and then go to reduce it through…

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:19:02]

MIKE:  And let me ask you this question.  If you got paid, let’s just say your employment pays you 10,000 dollars January 15th.  Do you want to put those taxes in December?  Can you get paid and put your taxes in the last year?

 

CAMERON:  Well, it kind of depends on what the last year looked like.  [LAUGH] [OVERLAP]

 

MIKE:  No, you can’t move your taxes around like that.  So…

 

CAMERON:  Right, right.  It’s…

 

MIKE:  And it’s off of the income, essentially.  Now, you can do Roth contributions for the previous year.  There’s no taxable situation.  You are adding nonqualified assets to a Roth account, assuming you can do that.

 

CAMERON:  Right.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:19:40]

MIKE:  But IRA to Roth conversions, it’s income tax, essentially situation.

 

CAMERON:  Right, right.  Yeah, that’s correct.

 

JOSH:  Yeah.  I totally get that.  It’s just it’s always frustrating to me, ’cause you never really…  In this case, you’d have to pay your CPA in December and then again in April, just to make sure that you’re getting the most out of your tax situation.  It’s always bugged me.  It’s something that I just can’t get over.

 

MIKE:  Well, they have to draw the line somewhere.  As long as we all know where the line is, then we can play in the sandbox and play by the rules.  But IRA to Roth conversions, that is a big one.  A lot of people are not aware.  We actually have our own calculator that we developed.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:20:16]

MIKE:  We’re not CPAs, but down to the dollar, we can tell you this is how much you can convert to your Roth accounts.  And the beautiful thing is we have it in different tiers.  So, for example, you’ve got the different tax brackets, and we can say, okay, if you convert this much, you’re gonna go right to this tax bracket and then stop right there.  And it’s December.  We know how much you’re gonna take from income for the rest of the year.  There’s only a couple of weeks left.  And if you want to do a little bit more, you can go to the next tax bracket and this is as far as you can go.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:20:48]

MIKE:  Obviously, 32 percent is a ridiculous amount of money to pay for taxes for your IRA to Roth conversions.  I don’t believe anyone ought to go that far.  But typically, there’s one or two tax brackets for most people that they can move up to, as long as their investments can offset the burden that the taxes, or the taxes that were paid in the conversion.  If your accounts are making three to five percent a year, it may not be that effective for you to go an extra tax bracket up and convert a lot of assets.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:21:22]

CAMERON:  And age is also a factor.  I mean, we’re not likely to recommend any of our 80 year old clients to do Roth conversions because of the timing that their then Roth investments would need to create.  It just isn’t there to really maximize that benefit.  They’re probably just better to leave it in traditional.  Kind of the closer you get to those upper ages, the more of a conversation needs to be had around whether or not, because then you’re also looking at required minimum distributions as well.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:21:54]

MIKE:  Now, our accounts have been averaging 16 and a half percent since 2000 in the accounts that we’re converting IRA assets to Roth assets.  Can you see now it makes sense for our clients to have a lot more wiggle room to convert more assets, because it’s made up over time.  No one, in my opinion, should convert all of their IRA to Roth assets.

 

CAMERON:  No.

 

MIKE:  I don’t think it makes mathematical sense.  All the research that I’ve conducted does not stipulate that makes sense either.  However, some people just like having that organized.  They just like 100 percent, okay, it’s all this way.  I don’t have to worry about it.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:22:30]

MIKE:  Okay, that’s a personal preference.  It’s not mathematically or objectively what’s in your best interest, but if that’s how you want to proceed, that’s just fine.  But IRA to Roth assets, that conversion, just keep in mind, folks, Roths grow tax free and distribute tax free, and distribute to your beneficiaries tax free.  Sure, they might have an RMD.  They have to drain it.

 

JOSH:  But they’re not taxed on it.

 

MIKE:  But they’re not taxed on it.

 

CAMERON:  It’s not taxed, yeah.  You asked earlier what’s one that’s commonly missed around RMDs, and it’s not only the beneficiary IRA, but especially the beneficiary Roth.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:23:04]

CAMERON:  Sometimes we’ll tell clients, hey, you’ve got a beneficiary RMD for your beneficiary Roth, and they say, “No, I don’t.”  And we say, “Yeah, yeah, you do.”  “But I don’t have to pay taxes?”  “No, but you’ve got to take it out.”  “Why?”  “So that, you know, you can either invest it into the economy in the form of spending, or invest it into a nonqualified account, and therefore get taxed again.”  So…

 

JOSH:  But, Cameron, what happens if somebody has a beneficiary Roth IRA?  Is it the same penalty if they don’t take that RMD?

 

CAMERON:  That’s correct.  It’s up to 50 percent of the penalty, or of the RMD amount.  And so that’s why we always want to be extra careful around RMDs, to make sure we’re helping clients have the best information to take it out.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:23:44]

CAMERON:  And, you know, you’ll get a number of letters from anyone who holds any IRA or RMD assets around January of that year.  And then, you know, fast forward to December, you’ve long forgotten about those letters.  It’s really important and helpful to have a financial advisor in your corner and their back office team to help navigate, you know, what is the best source, what is the best timing to make sure that, you know, it’s like Mike said.  We may not like all the rules, but it’s important to know them, so that we can navigate them.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:24:18]

JOSH:  Right.  So I’ve got one more question for you on RMDs and Roth conversions.

 

CAMERON:  Really putting me to the test here today, Josh.  [LAUGH]

 

JOSH:  [LAUGH] And I know the answer to this, but it’s something I didn’t know until a little while ago, and so I think some people might not know.  But can you use an RMD as part of a Roth conversion?

 

CAMERON:  Now, I hope you’re not giving me a trick question here.  From what I understand, you cannot.  The RMD has to be satisfied first, and then you can convert above that.  Basically, you’re asking and people will ask can I over-satisfy my RMD.  No, anything above the RMD amount is just taxable income.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:24:58]

JOSH:  Right.  And if you take, for example, if you have an IRA and you take an RMD, that money can’t be put into a Roth, right?  It has to go into a nonqualified?

 

CAMERON:  That’s correct.  And so sometimes clients will think, well, I’m going to double pay my RMD this year, and next year I won’t have one.  And unfortunately…

 

MIKE:  Yeah.  [LAUGH]

 

JOSH:  [LAUGH]

 

CAMERON:  No, I’ve heard that a couple times.  You know, so no, you know, gentle correction there.  Unfortunately, each year it does reset, and it’s based on that previous year 12/31 balance.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:25:27]

MIKE:  Mm-hmm.  Now let’s talk about RMDs for a little bit.  This one really gets my goat, okay?  RMDs, required minimum distributions, Uncle Sam’s gonna get his money back and that’s fine.  When you’re 70 and a half or older, you’re just gonna take a little bit of your IRA accounts, traditional IRA, not your Roth accounts.  Quick summary.  Here’s what gets my goat.  For the duration of the ’80s and ’90s, we’ve been told, and 2000s, oh, 401(k), best thing since sliced bread.  Put all your assets or as much as you can in your 401(k) and defer your taxes, and oh my gosh, it’s gonna grow and it’s gonna be great.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:26:02]

MIKE:  That’s neat.  But at some point, you have to pay taxes on it.  A lot of people just didn’t get the end game here.  There’s a lot of IRA assets in the market that have to be taken into account.  They have to take their RMDs.  Not only does that really screw with the markets every December, ’cause a lot of people who forgot about their RMDs now are gonna have to sell their RMDs, which tricked, or it triggered last December.  At least allegedly that’s what people are claiming, that had that downside.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:26:37]

MIKE:  But here’s what gets my goat.  If your portfolio, if you’re 72 years old and you’ve got a couple million dollars, you’re stuck in the top tax bracket for life, and there’s basically nothing you can do about it.  How is that good financial planning?  How is that a situation that sets you up for success, because you’re paying more on your taxes than you had to?

 

CAMERON:  I think there’s a couple assumptions baked into that.  First assumption is that your tax rate will be lower in retirement, and with taxes at an all time low now, does anyone really think their taxes are gonna go down over the next 20 or 30 or 40 years and not up?

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:27:20]

MIKE:  Not with national debt being as high as it is.  At some point, it has to go up.

 

CAMERON:  That’s exactly right.  Second assumption is the person who told you to invest and defer the taxes was likely-and, you know, we’re not trying to throw shade here, likely an accountant or somebody who helped you with taxes for that year.  You know, they do have the benefit of reducing your taxable income for that year, but once those accounts grow throughout your working life, you’re paying taxes on all of it, not just your contributions.  And so, you know, do you pay taxes on the seeds or on the harvest, as Tony Robbins put it.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:27:56]

MIKE:  Mm-hmm.

 

CAMERON:  You know, and that’s an analogy a lot of people can get behind, is let’s pay taxes on the seeds that we plant, and then the harvest can fully come to us without more taxes.

 

JOSH:  So it sounds like if you have a lot of IRA assets, that’s gonna grow tax deferred, which has its benefits.  But it also, in a way, grows tax deferred for the government as well.  But at the end of the day, when you actually pay taxes on it, they’re gonna get a lot more of that if it’s all pre-taxed the whole way through.

 

CAMERON:  Yeah, you’re essentially growing the government’s retirement account alongside yours.  [LAUGH] And that’s kind of unfortunate.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:28:33]

CAMERON:  You know, the one thing to keep in mind there is, you know, if you’re in that situation, all is not lost.  You know, there’s some great tax strategies that we have in order to minimize the long term effect of those.  But it might just be helpful to realize, you know, you look in your 401(k) and you see a balance of 500,000 or 800,000, a million dollars.  Just remember this is all still pre-tax, and that can help adjust your predictions, your estimations, your expectations, as far as once I get these dollars in my hand, what does that look like.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:29:07]

CAMERON:  And it’s really helpful to be able to see this in the form of a custom-tailored safer distribution plan, to say okay, yes, now I can see how all these income streams together, including these pre-tax IRA assets look when they come into, you know, our household as monthly income.

 

JOSH:  So I just want to throw out a quick tidbit.  A lot of people don’t know, but a lot of 401(k)s, not all of them, but some of them have Roth options in them, and you can do a Roth conversion within your 401(k).  Not everybody has the option, but it’s worth sometimes talking to your HR department, asking if that’s an option available to you.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:29:43]

CAMERON:  And, you know, you remember if you’re able to set up contributions as Roth, that’s even better.  But remember if the company does match, their match has to be pre-tax.  And so keep that in mind, that again, your entire 401(k) you’re looking at is likely not Roth, unless you’ve been extremely intentional with making it that way over the years.

 

MIKE:  Mm-hmm.  And we always defer to your ISA [PH], your administrator policy, and your HR department.  We are simply commenting on what we’ve observed throughout the years.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:30:16]

CAMERON:  That’s right.  Just seeing trends, seeing common things that have come in.  And so yes, please speak with those departments, as Mike mentioned, to make sure that you know your situation best for your unique spot.

 

MIKE:  Yeah.  Now, here’s the beautiful part, okay, about the RMD conundrum that a lot of Americans are facing.  Until you’re 59 and a half, just wait.  Just wait.  Can’t do much.  If you take out of your IRA assets, with a few exceptions, if you take out of your IRA’s assets before you’re 59 and a half, there’s an extra 10 percent penalty.  It’s not worth it, okay?

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:30:54]

MIKE:  But once you’re 59 and a half, you have roughly 10 years, this is a 10 year gateway, open sprint, marathon.  Whatever you want to call it.  It’s a window of opportunity to then plan your tax burdens throughout the rest of your retirement.  This is the time to be proactive.  And if you’re proactive and mindful about what you’re trying to accomplish here, it is a beautiful thing because you can get your taxes to a near zero tax burden if you do it right.  There’s a lot of variables in there.  We can go through a couple of them here in just a second.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:31:31]

MIKE:  But all of you who are 60 years old, roughly, 59 and a half and older, guiding you through deliberate preparations and proactivity on your assets until you are 70 years old can not only just save you six figures, we’ve had clients save seven figures on this.  We call this a safer tax plan.  Here’s a few things to keep in mind.  First one is you’ve got 10 years to successfully do your IRA to Roth conversions.  How much do you do each year?  How much do you convert?  Do you convert?  Does it make sense to convert?  Where are your assets coming from?  How are you pulling your assets?

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:32:12]

MIKE:  Can you create little windows of opportunity to create more conversions than less conversions?  You can’t do that with a pie chart.  You can do that with a safer tax plan.  It maps it out for you and tells you down to the dollar, based on current tax rates how much you can convert each year, and then we say, “Now confirm with your CPA.”  Your CPA will say, “Gosh, this is great.  Let’s do it.”  Everyone is a happy camper.  Those 10 years are critical for all the tax preparations that you will be either burdened with or alleviated from for the rest of retirement.  It’s a beautiful thing, safer tax plan.  IRA to Roth conversions, RMD management.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:32:49]

MIKE:  We even want to look at your 1040s as well, ’cause lines two and three on there, a lot of Americans seem to be paying income on income that is being reinvested back into the funds.  They’re being taxed on it.  Doesn’t make sense.  Those assets that you’re being taxed on the dividend reinvestments probably should be IRA assets, so you’re not taxed on them.  It just goes right back into it, and save your nonqualified assets.  These little adjustments make huge differences, yet not enough people are talking about it.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:33:25]

MIKE:  When it comes to our slogan on this show, get the transparency you deserve, you betcha, we want to make sure that we can map it out and say, “This is what it looks like, here’s how much you can save.  Does it make sense?”  And it’s so fun.  It’s so fun to plan that out.

 

JOSH:  Can I ask a quick question here?

 

MIKE:  Sure.

 

JOSH:  Cameron mentioned something a second ago that a lot of times when you’re in the accumulation phase you have a CPA who, I don’t want to say they’re incentivized, but a lot of times they want to maximize your tax return, and so maybe a Roth conversion isn’t something they recommend at that point.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:33:59]

JOSH:  Are there firms out there that would get any kind of a kickback off of suggesting a Roth conversion?

 

MIKE:  No.  I mean, CPAs are, typically they’re fee-based for their advice.  I’ve never really seen anything otherwise.  So it’s not a matter of their education or what they want to do.  It’s really a matter of what are you asking, what does it look like.  They typically, and this is a gross over-generalization, but CPAs are typically historians, saying as things were.  Financial professionals are how they want them to be.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:34:33]

MIKE:  And the best situation is when your financial professional and your CPA get together and work together.  It’s a paradox that when it works together in harmony creates the optimal situation for you.  So it’s really, it’s a seesaw.  I mean, one side or the other.  It doesn’t have to be that way, but that’s typically what I’ve seen.

 

CAMERON:  Yeah.  I mean, if you were to go to your CPA and say, “Hey, I want to convert 20,000 of my 401(k) to Roth this year,” they’re gonna say, “Okay, that means you’re gonna pay X amount more in taxes.”  And if their job is to help you minimize taxes for last year, that’s probably something they’re not…

 

MIKE:  Right.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:35:10]

CAMERON:  Not gonna suggest.  And maybe, you know, if you were able to explain to them, well, this is the long term strategy and this is why, and I’ve already got the cash set aside to do it, it’s a bit different conversation.  But like Mike said, you’ve just kind of got to look through the lens of who is giving me advice and what are they incentivized to kind of guide us in what direction.

 

MIKE:  And one point to that too is most CPAs are doing tax minimization management essentially from a pie chart.  The CPA can’t see into the future.  Nothing’s really been planned.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:35:43]

MIKE:  And so they’re doing their best given the information that they have.  When you bring a CPA a safer distribution plan or a safer tax plan more specifically, it allows them to do their job much better.  If you went to a doctor and said, “Hey, my leg hurts,” and that’s all the information you can give your doctor, how well do you think your doctor is gonna be able to help you?  Not very much.  I mean, they know it’s your leg and that’s about it.  If you say, “Hey, I feel this pain in this part of my leg, in these situations,” that’s a lot more information to give the doctor, and there’s a higher probability of success of treatment.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:36:22]

MIKE:  If you give your CPA a pie chart and say, “Minimize my taxes,” they’re gonna go, “Okay.  I guess we have this here to look at and that’s really it.”  And these are very smart people.  My brother is a CPA for Deloitte.  Very smart guy.  We have a bunch of CPAs that we use in San Francisco and in our different offices in Washington, and we have a CPA relationship for decades with one of the guys in Washington, and then a bunch in Utah as well.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:36:54]

MIKE:  The point though is your CPA will do his or her best job given the information that they have.  If you don’t give them the information, they can’t help you to the extent that you may want, which is why we developed a safer tax plan, because it combines the power of a CPA and a financial professional together, creating the highest probability for the most success for what you’re trying to accomplish.

 

JOSH:  I think on that same note, we’ve had a lot of clients that they’ve connected us with their lawyers that are helping them set up their trusts.

 

MIKE:  Mm-hmm.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:37:26]

JOSH:  And in those situations, same thing.  We can provide them an outlook of the safer distribution plan, and that really helps with all of the planning going forward. Not just CPA, financial planner, but your lawyer as well.  All those things working cohesively definitely helps to get you to where you want to be or where you want your assets to be.

 

MIKE:  Oh, yeah.  I mean, if you can say this is your projected estate in 10 years, after all income and expenses are done, that’s a pretty powerful projection for any attorney to get involved and say, “Okay, do you want all this to go there?  Do you want some of this to go to charity if it hits a certain watermark?  Do you want some to go to charity and some to go to beneficiaries?”

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:38:06]

MIKE:  I mean, it’s a really cool conversation, but most people are unable to have it because they just don’t have this technology.

 

JOSH:  Yeah, we’ve had a couple of them come back and say we really like what you guys have done there.  It makes it a lot easier to plan out how to handle any kind of transition in the future.

 

MIKE:  Well, if you want more information on this too, right now you can give us a call, 833-707-3030.  That’s 833-707-3030.  And when you call and they’ll gather your information, so on Monday we’ll reach out to you and schedule a time at no cost to you to visit with us.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:38:40]

MIKE:  Must be 55 years or older, have at least 300,000 of assets saved up for retirement.  We are retirement planners, not accumulation planners.  We’d love to help you.  And we see everything from 300,000 to 30 million.  I mean, we see a lot of different variations, but every client gets the attention and respect that they deserve.  And that’s the critical thing here, especially the safer tax plan.  There’s essentially infinite variables, but when you come in, we can dial it down and say, okay, this is your situation.  This is where you may want to go.  Here’s the research.  How do you want to proceed?  Nice and simple.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:39:13]

CAMERON:  Not only that.  Kind of the final bit I’d like to say on this is, you know, simply because you set up your safer distribution plan in one way, with one set of assumptions or projections, then each year that situation may change.  Each year you may have life situations that come up that you hadn’t been anticipating financially or lifestyle-wise, and it’s nice to be able to check in at your annual review and go over this information again.  And you can really see, okay, are we still on track with Roth conversions, we still on track with minimum distributions or any of these things that we’ve talked about today, it really is a massive value add to be able to see now each year I get to see where we are, you know, in reality, in real time, as to where we were a few years ago when we started this plan.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:40:02]

MIKE:  Oh yeah.  So call 833-707-3030 now for a safer tax plan review.  We’ll show you the technology and how it can help your CPA significantly in their tax minimization strategies.  But also you can go to DeckerRetirementPlanning dot com.  On there you can click the button on the right of the screen that says get started, and right there schedule a time that makes sense for you to come in and visit us.  Even the holiday season, it’s worth your time.  There’s still a month left for you to do some of these critically important tax minimization strategies.  833-707-3030 or go to DeckerRetirementPlanning dot com.  I’m Mike Decker, from Decker Retirement Planning, with Josh Hunsaker, Cameron Archibald.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:40:43]

MIKE:  If you’re just tuning in, this is Safer Retirement Radio, where you get the transparency that you deserve.  Let’s talk about income strategies.  This is our next topic here, topic number three of the day.  Bucket strategies is a point of contention today.  A lot of people are starting to bash on them or compliment them, either way.  I think this is interesting though, in that a lot of talk of does it make sense or does it not, and the interesting part is there’s one gentleman, and the name escapes me right now.  He wrote a book about bucket strategies and how it should be done, and many people have defaulted to the idea that that’s the only version of a bucket strategy.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:41:21]

MIKE:  And his is basically you divide up your assets into three different buckets, or quote/unquote “pie charts,” essentially, and you diversify them.  In one you draw income for a little bit, and then you switch it up and draw income from the other one.  Not only is it complicated, but it’s ambiguous.  And ambiguity only leads to other ambiguity.  Ambiguous initiatives lead to ambiguous results.  It’s just unstable.  Some people are reinventing what they think is the bucket strategy here, and they’re talking about systems of withdrawals, [flooring?] and then the bucket approach here, and your retirement could last from five years or 40 years.  That’s a lot of time or change or variables.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:42:03]

MIKE:  That’s all fine, but I want to go through some of what the misconceptions are of what people are claiming the bucket strategy is and then what a safer distribution plan is.  Gentlemen okay with that?

 

CAMERON:  Sounds good, let’s dive in.

 

MIKE:  So first and foremost, it’s important to review your goals, spending needs, get your budget, find out what your number is.  Whether I’m on the ski lifts or hiking in Moab, whatever I’m doing, when people find out I work in finance, they say, “Oh, I’m retiring.  How much do I need to retire?”

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:42:40]

MIKE:  Even if I knew how much you had, which I don’t like to ask that in public in casual conversation, just a little uncomfortable about that.  I feel like that should be in a private setting.  It doesn’t matter.  What matters is how much you have, how much you want to live, what other income streams do you have, and then how much do you need.  We’ve had multimillionaires comes in and say, “I need X amount to survive my lifestyle, or to keep up with my lifestyle.”  Couldn’t do it.  It was just impossible and they were receiving horrible advice, but they wanted to believe the bad advice.  I pray and hope that they will continue to have the gains that they need to sustain their lifestyle, because in our opinion, it was unsustainable.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:43:23]

CAMERON:  No.  Had to tell them, well, you’ve got to keep working for a while longer if you want to be up to that level, right?

 

MIKE:  Yeah.

 

CAMERON:  We’re not afraid to break down the math and show them the reality of where they’re at.

 

MIKE:  But on the contrary…

 

JOSH:  As far as when you’re vetting your financial planner, might be important not to go with a yes man for your financial planner.

 

MIKE:  Yeah.

 

JOSH:  Need somebody who’s gonna tell you what the actual situation is.

 

MIKE:  Well, and on the contrary, we’ve had clients come in and say, “Gosh, I don’t think we can retire for another 10 years,” and we find out they could retire today if they wanted to and receive more money than they needed.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:43:54]

CAMERON:  I think that’s the more typical case and a lot more fun.  You know, they come in and they’re nervous and think, wow, we’ve got to work another 10 years.  And we run the projections, show them the distribution plan, and they say, “Oh, so I could retire today?”

 

MIKE:  Mm-hmm.

 

CAMERON:  Yeah.

 

MIKE:  Yeah.

 

CAMERON:  And, you know, countenance change.  You know, it’s a different conversation.  Everyone’s excited, and it’s just a fun thing to be a part of.

 

MIKE:  You know, I remember one conversation we had years ago.  This is before we started working together, Cameron.  This was years ago.  A gentleman out of Washington came in, had just over four million dollars.  Did not think he could retire.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:44:32]

MIKE:  I mean, I still remember the day.  He had the old, oh gosh, what was it?  The old Dodge minivan from the mid-’90s that was rusting.  Worked all day, didn’t have many hobbies because they’re expensive.  Was just losing sleep over his retirement and the idea that he might be able to retire.  Had his own firm, was a partner of a technology firm up in Washington, was making great money, but just could not handle the idea of losing retirement because of 2008.  Very real.  This is around 2011, and he and his wife, I still remember them vividly the day.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:45:14]

MIKE:  They were driving beater cars, which frankly, more power to you.  If you don’t drive a nice car because you want to be frugal, that’s great.  There’s no judgement here on what kind of car you drive.  But I remember vividly they did that intentionally because they were trying to save every bit they could.  We did three iterations of the plan and went through some basic education of retirement planning and the principles of retirement, which are draw income from principal guaranteed sources, diversify by purpose, not just by risk, and then use a distribution plan, not a pie chart.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:45:47]

MIKE:  Before the plan was even done, he and his wife both went out.  He bought an Audi R8 and she bought a Tesla.

 

CAMERON:  I love it.

 

MIKE:  They had more money than they knew what to do with and did not realize it.  That’s the fun conversation that we have over and over here at Decker Retirement Planning.  Oh, and by the way, a distribution plan is code for bucket strategy.  We’re not trying to pull one over you.  We just want to make sure we can clarify toxic bucket strategies versus distribution planning with purpose.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:46:18]

MIKE:  So typically we see there’s the go go years, and go go, slow go, and no go are typical across the industry.  I like to call them your travel years and your casual years.  No go is pretty dreary, if you ask me.  But go go, your first five years or so of retirement.  Then your slow go is five to 10, and the no go is the remaining after years.  It just kind of falls apart.  There are no investments out there that properly I believe represent that kind of structure in a suitable manner.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:46:51]

MIKE:  What kind of investment is going to pay you a principal guaranteed source effectively during the most expensive travel years of your life, that’s liquid for five years.  It’s just lack of preparation and ultra conservative.  I think there’s some risk there with just simply inflation.  Unless you can properly have some risky investments, oh my gosh, that kills me to even say it though.  It just, it feels unbalanced, of putting too much in the wrong spot or too little, hoping it’s gonna go a lot longer than it will.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:47:27]

CAMERON:  Yeah, there was a story I heard the other day on the radio where a former NFL player came in and he had-not to our office, but he had something like 23 million in CDs, and that was the only investment he’d used since he had retired from the NFL, and was just terrified of the market.  And it took a, you know, financial professional to help him see, look, this is too conservative, you know?

 

MIKE:  Yeah.

 

CAMERON:  And he could do better.  So…

 

MIKE:  Gosh, with rates as low as they are, I mean, it’s really hard to keep up on just CDs.

 

CAMERON:  Yeah.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:48:01]

MIKE:  Really hard.  So what goes in each bucket?  Well, three pie charts as your three quote/unquote “buckets.”  That’s not appropriate.  Liquidity is a big issue here.  This goes into the principle, the second principle.  Diversify by purpose, not just by risk.  You need to not only understand what you have to work with, but how to work with what you have.  Josh, you put a lot of plans together.  A lot of people, they come in there, they’ve got bonds that we can’t, we don’t want to touch until they mature.  They’ve got CDs you don’t want to touch until they mature.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:48:37]

MIKE:  They’ve got annuities.  Some have been annuitized for income rider, some has [not?]  You see a lot of different assets.  When it goes to building the plan, what is the typical thought process on best practices of what goes into each bucket?

 

JOSH:  That’s a great question, and every plan is gonna be a little bit different.  We’ve seen clients that come in with-one client came in with I think over 40 bonds that all had different maturity dates.  And the nice thing is we can build that into the plan.  Each of the different, like Mike said, the distribution plan is a bucket plan, or a type of bucket plan.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:49:15]

JOSH:  And we just build it based off of what each type of investment that they have, how it fits into each bucket.  So essentially, each bucket has its own characteristics.  Some of the buckets are built more for liquidity.  Some of them are built for principal guaranteed income.  Some of them are built for growth.  And depending on what investments they have, we build not only the type of investment that it is, whether it’s a CD, a bond, a mutual fund, even REITs.  We’ll take whatever type of investment it is and build it into a specific bucket, taking into account the dates that they’re supposed to mature and make sure that that’s all accounted for.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:49:52]

MIKE:  Mm-hmm.

 

JOSH:  And that’s applied toward their income, so you don’t come up with-you know, people think of CDs as a safe and semi-liquid investment.  But you don’t want to incur fees by taking those out early.  You need to account for the maturity date of the CD in comparison with when you need to take the income.

 

MIKE:  Mm-hmm.

 

CAMERON:  Yeah, and I think one of the biggest differences with, you know, our safer distribution plans and a typical bucket strategy, where seems kind of mixed together, kind of jumbled, is we are extremely aware of any liquidity schedules.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:50:29]

CAMERON:  We have that perfectly dialed in within your safer distribution plan, and factored in so that we can help you get on top of those, you know, the correct timing of when to withdraw from different investments and kind of be your Sherpa throughout that process.

 

JOSH:  Yeah.

 

MIKE:  If I were to break down a proper distribution plan, dare I say a safer distribution plan, there’s really three goals you’re trying to accomplish.  The first one is the easy one.  Make sure you have emergency cash aside for when life happens.  You need a new roof, need a new car.  Maybe not a new Tesla, but just something, just in case.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:51:10]

JOSH:  That’s what insurance is for.

 

MIKE:  Yeah.  [LAUGH]  For when life happens, you have cash set aside.  And everyone’s different.  Some people have 20,000.  Some people have 200,000.  I’m being a little hyperbolic here on the extreme, but we have seen it because they have-they know near term purchases they want to buy.  We’ve had a lot of clients that say, “Okay, well, we’re gonna buy a cabin right upon retirement.”  So we put the money aside ready for that purchase.  That’s responsible organization.  The second purpose is to make sure that your income is planned out for at least 20 years.  At least.  I mean, we could do a 15 year income plan, or 15 years of income organization.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:51:49]

MIKE:  But essentially what we need to look at is where you’re gonna draw your income from.  Are they principal guaranteed sources, and can you sail through the next one or two market crashes that happen.  They happen every seven to eight years, historically speaking.  There is one that’s supposed to come soon, whenever that happens.  But our clients don’t have to worry about that, because they’re drawing income from principal guaranteed sources.  Plain and simple.  It’s a beautiful thing.  And the accounts grow when the years go up.  They don’t lose money in the years [that they’re?] gonna go down.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:52:22]

MIKE:  That’s the principle.  The third part of it is long term growth.  Just like in your accumulation years, you may have done rather well for yourself because you didn’t have to touch your investments.  You had an income.  You had a paycheck from your employer.  If you can facilitate a similar situation for your riskier investments, when I say riskier, I just mean they can lose principal, and you give them a 20 year time horizon.  By golly, that’s a good situation to be in.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:52:53]

MIKE:  You’re basically recreating with your own assets the very environment that you lived in your 20s, 30s, 40s, and 50s.  If you take all of your income and do a pie chart and draw income from it, you have created accidentally-and I say accidentally, it may have been unintentional, a different financial situation that is more devastating, or could be more devastating.  We want to create a similar situation to have the highest probability of success for you, and that’s done with a safer distribution plan, not the three pie chart bucket system that I don’t believe works.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:53:32]

MIKE:  Just by the evidence that we’ve read about so far.  It all really revolves around distribution, our principle number two, diversify by purpose, not just by risk.  But you’ve still got to have flexibility.  Cameron, can you talk a little bit about the flexibility that you see with clients?  They’ve been with us for a couple of years, and life changes and you re-work their plans.  Just a little bit about what that looks like typically.

 

CAMERON:  Yeah.  You know, sometimes it coincides with around the time that you have your annual review update.  Other times it’s an unforeseen life event.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:54:09]

CAMERON:  Sometimes it’s you had set up your income plan with the assumption that some real restate sale was gonna happen in a couple years or some business something that did or didn’t go through, or it went through better than expected.  Sometimes it’s an unforeseen inheritance that you received, that you say well now what do I do with this.  Or hey, we’d like to actually put off taking income-I get this one a lot, and this one cracks me up, where clients say, “Hey, I know we had planned on taking income now.  We’re loving our jobs.  Is it okay if we don’t take income and keep working for a couple more years?”

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:54:49]

CAMERON:  And, you know, the answer is always of course.  You know, it’s your money and, you know, any income not taken will only help your future growth of your plan.  And so we do have that flexibility to say, you know, we always ask the clients, “Hey, it looks like you were gonna retire on this date.  Is that still the plan?”  That may be a few years out.  And the clients can really, you know, internalize that and say yes, this is the time, or no.  And sometimes it’s, you know, I mean, there’s so many different things that can happen once you start your distribution plan.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:55:20]

CAMERON:  But we’ve built in the flexibility to be able to react to those in a way that you can then see not only is, you know, now we’ve made a decision or in some cases, life happens and a decision is made for us.  Here’s the numbers.  And having the numbers to back up your emotions is so beneficial to be able to make better decisions.

 

MIKE:  Yeah.  Let’s live to the fullest and let math get us there.  It’s a fun situation.  If you want to see what this looks like, a safer distribution plan, and get the transparency that you deserve, call us right now, 833-707-3030, or go to DeckerRetirementPlanning dot com, where you can sign up on there at no cost to you.  Just ask that you’re 55 years or older and have at least 300,000 of assets saved up for retirement.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:56:05]

MIKE:  We’re here for you.  We’re here to give you the transparency that you deserve, and a situation to where you can live your retirement how you always wanted to live it.  It’s a fun situation.  Call us, 833-707-3030, or go to DeckerRetirementPlanning dot com and click on the button, get started right there.  We’ve only got two minutes left.  I’m gonna wrap up here with the last segment here in 30 seconds.  But when you incorporate the principles that govern proper retirement planning, especially the third principle, you can plan the retirement that you want.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:56:39]

MIKE:  It’s very common for us to have a retiree say, “Well, I want to do this for the first couple of years,” and we inflate their first three years to give extra travel funds.  It’s very common.  There’s so much that can be done to a custom plan that cause our clients-here’s some of the latest ones, a trip for the whole family to go to Africa for a week.  A month in Kenya without any electronics or communication.  Just enjoy a trip with safaris and hikes.  Or a motorcycle trip up and down the coast of Washington and Oregon.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:57:14]

MIKE:  Folks, when it comes down to it, this is your time of your life and your retirement, and it’s a beautiful time if you plan right.  Go to DeckerRetirementPlanning dot com if you want to catch more.  If you want to catch this show or any other show, you can always go to wherever you get our iTunes podcast, wherever you get your podcasts, iTunes, Google Play, and all the content is transcribed on our website as well at DeckerRetirementPlanning dot com.  Thanks for listening in with us today.  Cameron and Josh, thank you for joining me today.

 

CAMERON:  Thanks, Mike.

 

JOSH:  Oh, it’s been a great show.  Thank you.

 

MIKE:  Enjoy the holidays here.  We’ll be back same time, same place next week, or get us early via podcast on Fridays in the morning.

 

RR S3 E23 END OF YEAR TO DO FOR RETIREES     [00:57:52]

MIKE:  This is Safer Retirement Radio.  I’m Mike Decker, and our goal here is to get you the transparency that you deserve.  Thanks for listening today.

 

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Decker Retirement Planning Inc. is a registered investment advisor in the state of Washington. Our investment advisors may not transact business in states unless appropriately registered or excluded or exempted from such registration. We are registered as an investment advisor in WA, ID, UT, CA, NV and TX. We can provide investment advisory services in these states and other states where we are exempted from registration.