RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:00:01]

ANNOUNCER:  You’ve 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 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:00:37]

MIKE:  Happy New Year everyone from the bottom of my heart and Clayton’s heart.  From Safer Retirement Radio, this is Mike and Clayton with 58 minutes of packed content here, all about living your retirement dreams.  Clayton, thanks for taking the time today.

CLAYTON:  I love being on.  Thanks, Mike.

MIKE:  We’ve got four segments we want to be talking about today.  We’re gonna start off the new year by the fundamentals of retirement.  These are the principles that helped a small group of people who heard our call, sail through 2008 unaffected and have captured a significant amount of gains through this last 10-year bull market.  So, if you wanna learn what they did, stick around.  We’ll be talking about that, as well as context.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:01:16]

MIKE:  Context is king.  And there seems to be a big disconnect between a lot of financial advisors and their clients.  That’s you.  So, we wanna be able to connect those things, as well as tax season has begun.  Oh, it’s our favorite.  But really for us, we’re not CPAs, so we’re not overwhelmed with it.  But we wanna be talking about the top tips on tax savings strategies, not only this year, but for planning out this year, five years from now, 10 years from now, and the environment that we’re in.  So, stay tuned for that, as well as transitions.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:01:48]

MIKE:  I’ve got a fun personal announcement that only close friends and family know.  My wife is probably gonna kick me for doing this over the radio before she announces it on Instagram and our Facebooks and stuff.  But it’ll be fun anyway.  I’m excited.  She knows and she’s fine with it.  All here on Safer Retirement Radio, and the number to remember is 833-707-3030, or deckerretirementplanning dot com.  If you like what you hear, and you wanna get more, a safer retirement ROI where you maximize your retirement can be done through our simple process.  Review, optimize and implement.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:02:28]

MIKE:  That simple.  Yet, so many dividends, so much more out of life we can get, just by following the maximization of a safer retirement ROI.  Lessening the risk, increasing the outputs.  Oh, it’s a good time.  That number again is 833-707-3030 or you can go take us up on our offers today at deckerretirementplanning dot com.  Clayton, are you ready for our first segment, Principles of Retirement?  This one’s so important.  I even wrote a book about it.  It’s a small book.  It’s an e-book.  You can get it on our website.  But what’s interesting is the industry standard is a variable.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:03:11]

MIKE:  The standard is a variable on two levels.  Isn’t that interesting?  The standard is a variable.  Here’s the industry standard.  Grow your assets in accumulation mode.  I have no issue with that.  And then with your variable accounts, just draw four percent from those accounts each year and you’re good to go.  Now there’s two ways you could do that.  Four percent from whatever the balance is January first.  Or four percent and then just add a little cost of living adjustment and hope that your assets do well.  But then you got MIT here saying, “Well, over the next 10 years or so, it’s gonna be anywhere from two to three to five percent returns at best.”  I don’t think it’s gonna work very well.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:03:50]

MIKE:  And from 2000 to 2009, it didn’t work well for a lot of retirees.  Yet, that’s the industry standard.  It’s just a bunch of fancy numbers.  They’re trying to get you into a pie chart and, anyway, folks, these principles are what helps our clients through the 2008 to where they didn’t just sail through it unaffected.  They made money in 2008 and, I’ll admit, I was not smart enough to see that the bubble that was gonna blow was the housing market.  I did not know that.  But you know what?  When Iraq invaded Kuwait, it affected the markets.  I wasn’t smart enough to know that either.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:04:30]

MIKE:  Each of these crashes, I’ll admit to not being smart enough to know.  But there are very few people smart enough to see them before they happen.  Very few people in America.  Chances are your financial advisor is not one of them.  But the principles set you up so whatever black swan event is-a black swan event is something you can’t predict, or just your normal crash, like a dot com crash.  I guess that was a black swan event as well.  That you’re not having to stay up late and having sleepless nights worrying about your retirement finances.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:05:06]

MIKE:  They give you the structure to not worry about your finances throughout retirement.

CLAYTON:  And Mike, when you’re talking variable accounts, these are accounts that can go up and down in value, right?

MIKE:  Sure.  Which is most of people’s portfolios.  Right?  Stocks, bonds, 401k’s.

CLAYTON:  So, 401k’s.

MIKE:  ETFs, mutual funds.  They all go up and down.  Which, for a 10-year time horizon, that doesn’t sound that bad.  Because you’re in accumulation mode.

CLAYTON:  Sure.

MIKE:  You don’t need those dividends.  But Clayton, let’s go through the first principle of retirement planning.  There’s only three here, folks.  So, listen up closely.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:05:42]

MIKE:  But this is the recipe for success that you can take your unique situation, put the principles on there, and if they follow the principles, then you’ve got a lot less to worry about.  Yet, you’re maximizing the up years, you’re helping yourself protect in the down years.  And you set yourself up for incredible transparency in retirement, which means to maximize the travel years, while still helping yourself through the casual years.  Let’s go through it.  The first one is “Draw income from principle guaranteed sources.”  This is the first principle of retirement planning, and here’s the reasoning behind the principle.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:06:20]

MIKE:  Should all of your assets be in principle guaranteed accounts?  No.  That’s an extreme.  And for all of you that saw Star Wars recently, you’ll know that only Siths deal in extremes.  Should all of your assets be in principle guaranteed accounts?  No.  Absolutely not.  We’ll get to that in the second principle.  But where you draw your income, it is not appropriate to say, “Gosh, you know, this year there’s a market crash and we’re down 40 percent.  I guess we’ll just take less income.”  Do your bills go, “You know, markets are down, just pay us less than what you usually do?”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:07:00]

MIKE:  I’m pretty sure your water bill and electrical bill and general gas and maintenance don’t just disappear because the market’s down.  They stay consistent.  So should your income.

CLAYTON:  And when you talk principle guaranteed accounts, you’re talking types of investments that cannot lose.

MIKE:  Can’t lose money.

CLAYTON:  That you can’t lose money on the account, right?

MIKE:  Yeah, I don’t care what it is.  I don’t care who insures it or guarantees it.  It could be a bank, insurance company, a federal government, a municipality.

CLAYTON:  Municipality.  Yeah.

MIKE:  I don’t care how it’s guaranteed.  And we could even have an in-depth conversation about corporate bonds, and are those really, really good.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:07:35]

MIKE:  Just, folks, for all of you listening right here, like Argentinian bonds or corporate bonds that are triple B, if they just go down one level, they’re probably gonna implode.  Because there’s more corporate debt now than ever before.  But, quick aside, it just has to be in a guaranteed source.  That’s all we’re saying, because when a principle guaranteed account can go one of two ways.  It can be principle guaranteed and liquid, which is your money market account.  Or it can be principle guaranteed and have growth, but then you have to structure out the liquidity.  Like a CD.  Can you invest in a CD and then just pull it out whenever you want?  No.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:08:13]

MIKE:  You need to understand the maturity timeframe that a CD would have.  But you can coordinate that so you know what you’re gonna get and you can structure out your income so regardless of what market is happening, the second one I talked about is the ideal situation.  That you’re capturing the gains in the up years, but if the markets crash, who cares?  Your income is not being affected negatively.  That’s the first principle.  Pure and simple.  Yet, it is so critical to follow.  So critical.  Only draw income from principle guaranteed sources.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:08:51]

MIKE:  The second principle, Clayton, is you gotta diversify by purpose, not just by risk.  So, I just said earlier, to not have all of your assets in principle guaranteed accounts.  Some people may want that.  I am suggesting that it may be an extreme resort based on fear.  I don’t like doing financial planning based on fear.  I like doing it on positive outlook that’s math-based.  And we do all the mathematics for you, folks.  If you’re gonna come in and visit with us, don’t bring your calculator, we have a few.  I even have a calculator watch.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:09:26]

MIKE:  But anyway, the point is, diversify by purpose, not just by risk.  Some assets you can set in a category that can grow long-term.  These are assets that could be at risk, because you have a 10-plus year time horizon.  If markets do go down, and you decide to buy and hold, you may be able to ride it out.  If markets do go down, and you’re using what we typically recommend, a two-sided risk model, you might even make money in the down years.  That’s what they’re designed to do.  And then capture the gains in the up years.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:09:56]

MIKE:  But whatever it is, if assets can lose money, then you need to be able to have a long-year time horizon, where you don’t touch them.  Principle guaranteed.  You can ladder it, you can structure it.  We use a safer distribution plan to where we structure it.  We organize it.  ROI.  Organize.  Optimize.  We set it up to where if the client needs 10 years, 20 years, whatever it is, they’ll be structured out, so they know that to a period of time, their income is guaranteed.  It is good to go.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:10:27]

MIKE:  That’s some incredible transparency, yet it also illustrates the confidence that you have in your own finances, to where you don’t have to lose sleep over what the S&P is gonna do tomorrow.

CLAYTON:  And with this, Mike, you’re talking about the investment triangle, it sounds like.  You’ve got…

MIKE:  Yeah, would you walk us through that real quick?  I didn’t articulate it openly, but I think that’s an important moment of understanding investments, through the simple triangle.

CLAYTON:  Sure.  And for our listeners out there, if you want a good visualization of what we’re talking about right now, that e-book.  Again, it’s a pretty quick read.

MIKE:  Principles That Govern Proper Retirement Planning.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:11:05]

CLAYTON:  Yep.  Our website at deckerretirementplanning dot com, you can go and download this.  You can read it and you can get a visualization of what we’re talking about right now.  So, with the investment triangle, you’ve got the three different aspects to an investment.  You’ve got liquidity.

MIKE:  Mm-hmm.

CLAYTON:  You’ve got a high rate of return.

MIKE:  Yep.

CLAYTON:  And you’ve got principle protection.

MIKE:  Yep.

CLAYTON:  Well, guess what, folks?  Pick two.  If there was an investment out there that was fully liquid, gave you a high rate of return, and was principle protected…

MIKE:  Throw it all in there.

CLAYTON:  I’d love it.  Let’s do it all.

MIKE:  You can’t have your cake and eat it too.  Sorry.

CLAYTON:  Right.

MIKE:  But you can if you understand the second principle.  “Diversify by purpose, not just by risk.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:11:45]

CLAYTON:  Sure.  And so, with these, as you pick two of these, you can get all three built into a plan.  It’s just a matter of putting the funds in the different aspects.  So, let’s say for example, you’re looking for a liquid account that is principle protected.  Well, guess what?  That comes in the form of a savings account.  Folks.

MIKE:  Great for emergencies.  Emergency cash, discretionary cash.  Near term purchases.  Not a good long-term investment plan.  Can’t keep up with inflation if you’re in a money market or a savings account your entire retirement.

CLAYTON:  ‘Cause you’re probably getting between one and a half to two percent if you’re lucky.

MIKE:  At best.

CLAYTON:  And that’s on the highest yielding savings accounts.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:12:26]

MIKE:  The best bank right now, the last I saw, was an Argentinian bank.  That seems good.

CLAYTON:  That seems safe.  Don’t put your money in an Argentinian bank, folks.

MIKE:  Please don’t.

CLAYTON:  And that’s one of the things that…  You alluded to the guarantees earlier.  One of the things that our fiduciaries will talk about with all of the investments and wherever you feel your money should go, they talk about the weight of the guarantee behind the specific investment.  So, if you’re curious to learn a little bit more about that, our fiduciaries can walk you through and they can talk about what investments are appropriate for you.

MIKE:  Mm-hmm.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:12:58]

CLAYTON:  And your needs and your situation.

MIKE:  For example, a Toys R Us bond probably wasn’t the smartest idea, given the context behind what was going on behind the scenes.

CLAYTON:  Yeah.

MIKE:  But maybe an Apple or a Microsoft bond, I’m just throwing out reputable companies, I’m not suggesting you go out and get one.  Do your due diligence, talk to a licensed professional.  But they seem a little bit more stable than Toys R Us was.  Yet they’re both technically corporate bonds.  And that’s to go within in the ratings, the rate of return.  Does it make sense for your plan?  There’s a lot of other mechanics that go in there.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:13:33]

MIKE:  But just understand the source.  Who’s guaranteeing it.  Federal government, pretty good guarantee.

CLAYTON:  Sure.

MIKE:  I don’t think, in spite of the political environment that we’re in, that the federal government is going to collapse.  I just don’t think it’s gonna happen.  At least not in our lifetime.

CLAYTON:  And if it does happen, we have much bigger issues to worry about at that problem.

MIKE:  That’s true.

CLAYTON:  Or at that point.  So, we talked about the emergency cash portion of that investment triangle, so I wanna talk a little bit about the risk portion.

MIKE:  Mm-hmm.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:14:02]

CLAYTON:  So next is, let’s say you want something that’s gonna provide you a high rate of return.  But you want liquidity out of it as well.

MIKE:  Mm-hmm.

CLAYTON:  Well, that’s gonna be in, what we call a risk profile, right?

MIKE:  Yeah.

CLAYTON:  So, you’re gonna have accounts that are…  This is stock market purchases, right?

MIKE:  Stocks, bonds, mutual funds, ETFs.  And I say bond funds, I should say.  Those are the liquid ones.  Bonds you wanna hold to maturity unless you’re Bill Gross.

CLAYTON:  Yep.  And so, you can get that high rate of return, that liquid aspect with those risk funds.  Those stocks, those ETFs, those mutual funds.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:14:41]

CLAYTON:  And then finally, you’ve got the other aspect.  You want something that provides you a higher rate of return, but it is principle protected.  That’s gonna be looking at principle guaranteed accounts.  And these are gonna be things like, CDs.  Bonds are an option.

MIKE:  Mm-hmm.  We have a lot of clients that come in with annuities.  We can use those without surrendering them as well.

CLAYTON:  Yeah.  Sure.  Yeah.  Certain types of annuities, right?

MIKE:  We’ll talk about income annuities in a moment.  And some issues that we have with them.

CLAYTON:  Yeah.

MIKE:  But anyway, it’s the principle.

CLAYTON:  Yep.

MIKE:  And there’s a lot of options there.  You’ve got a buffet on principle guaranteed accounts and risk accounts.  And even savings accounts.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:15:19]

MIKE:  But it’s important that also you understand what is out there.

CLAYTON:  Right.  And so, the point of this investment triangle is that you get investments that are giving you all aspects.  You’ve got access to your funds.

MIKE:  Mm-hmm.

CLAYTON:  You’ve got funds that are working for you.  Plus, you also have that emergency cash portion.  You’ve got some protection there.

MIKE:  Yep.

CLAYTON:  So, it helps that, I guess diversifying by purpose, not just by risk helps you accomplish those goals that most retirees that we see are looking for.

MIKE:  Mm-hmm.  And that brings us to our third principle.  What’s interesting is, you can understand, “Okay.  I need to draw income from principle guaranteed sources.”  That’s the first principle.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:15:58]

MIKE:  And you can understand, “Diversify by purpose, not just by risk.”  But those still leave retirees in ambiguity.  And ambiguity only leads to ambiguity.  You must have structure to implement these principles.  And you do that through a safer distribution plan.  A distribution plan, in simple terms, is a spreadsheet that maps out every year, down the month that [attacks?], until age 100 or whatever age you decide to cut it off.  I’ll just say how it is.  But it’s much more transparent than a pie chart, where you’re led to be guessing every single year.  And you pivot every single year.

 

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MIKE:  A distribution plan has just as much flexibility as a pie chart would suggest.  However, it maps it all out so you can see your pain points.

CLAYTON:  But it’s gonna answer those questions, “Can we retire?  How much can we draw so that we don’t run out of money before we die?  When can I retire?”  It’s gonna help you map that out.

MIKE:  “Where’s my biggest tax pitfalls and how do we help avoid them?  What’s my estate if I passed at 70 years old, 80 years old, and 90 years old?  How do I want that estate to pass?  What are the accounts that would be suggested to be passed that accounts?  What’s the percent of IRA to Roth?”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:17:10]

MIKE:  And all of those questions, that’s a lot of jargon that we’re throwing out there right now.  But that’s our responsibility, is to help guide you through that.  So, when it comes down to it, you can focus on maximizing your lifestyle and enjoyment throughout your retirement, because it’s set up correctly.  And these principles set you up correctly.

CLAYTON:  And with that, it’s gonna be about what is…  The distribution plan helps you know that those things that are important to you, you’ll be able to do and enjoy those things in retirement.  So, for folks that hear all this jargon that we’re talking about.  I mean, that’s our responsibility to know that and stay up on top of that.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:17:47]

CLAYTON:  But for those that come in and meet with us, it’s about finding out what’s important to you.  It’s about how are you and your spouse gonna be?  Let’s say one of you doesn’t live as long as the other one, and the other one’s gonna need some income.

MIKE:  Mm-hmm.

CLAYTON:  It’s taking care of your spouse.  And so those things, I think for most folks, these are very real things that are very important.  And it does answer those questions.

MIKE:  These are issues and trials and problems for people just like you.  And if you wanna talk with us about it, it won’t cost you a dime.  You can call us 833-707-3030 or go to deckerretirementplanning dot com.  That’s 833-707-3030.  But, Clayton, this reminds me of a story I wanna share.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:18:26]

MIKE:  I’ve got two clients that came in years ago.  The first one was so scared of the market.  And this may sound like you.  Just scared of the market, knew it was gonna go over.  Talked to their broker and filled the entire portfolio, yes, 95-plus percent of their portfolio, because they had some emergency cash on the side, was in privately held REITs.  Those are real estate investment trusts.  Let me just say what just happened.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:18:58]

MIKE:  95-plus percent of this gentleman’s portfolio was invested into a dividend play of privately held assets that cannot be liquidated unless someone else wants to buy them.  This is in 2013 that it happened, because the ’08 crash scared him, and then he was told, “Well, real estate’s on the rise again, it’s all fine.”  And for the most part, it has been.  Here’s the issue.  If we have another real estate debacle, and these REITs stop paying the dividends, he is up a creek and cannot sell them.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:19:37]

MIKE:  It took me two years to unwind the disaster.  He did not understand the principles.  And specifically, it was the third principle.  He had a pie chart of REITs that paid x amount of dividends or targeted x amount of dividends, that he had no control over.  There was no distribution plan.  There was no structure.  He got the first principle.  He even got, kind of, the second principle, but he didn’t diversify by purpose.  It was just diversified by, “Let’s get rid of my fear.”  Without recognizing the other side of the coin, which instilled a lot more fear.

 

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MIKE:  Two years.  Had the market crashed, had dividends dried up, had these trusts changed their outcomes and projections, all of his assets would have been locked up and he would be, in the extreme, near homeless.  Because he had no income at that point.  This was a terrible and toxic situation that a financial professional put someone in that just disgusted me.  Now here’s…

CLAYTON:  How was the follow-up conversation with him, once it was all corrected and he saw the bigger picture?

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:20:55]

MIKE:  We went skiing.  I mean, elated that he saw clarity, and flexibility of the plan that followed that principles.  And if anything went sideways, we could adjust.  That’s the beauty of the principles of retirement planning, what we just talked about, is he was set up for the ability to have the flexibility and live the retirement.  He was an avid skier.  He loves going heli-skiing at least twice a year.  Single guy.  Had a girlfriend, and they were getting pretty serious, and she was just phenomenal.  I say was.  It didn’t work out.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:21:36]

MIKE:  But at the time, we were pretty excited about it, but when all is said and done, his retirement was all at risk, because he locked it all up and didn’t realize the conundrum of it all.  Now, I wanna give you the opposite.  We had a client in 2007 meet with us.  Lived in Washington and had some houses in Oregon and a few other places.  He was a real estate genius.  I mean, he understood how to buy and sell homes with rentals.  He had vacation properties.  He was brilliant when it comes to real estate.  But like most people in the real estate industry during 2007 and 2008, did not see it coming.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:22:17]

MIKE:  But he saw value in the principles and liked the idea, especially of diversifying by purpose, not just by risk.  We had a great two-sided model that was working at the time, for his risk assets.  We laddered his principle guaranteed, so he had 20 years of income that was mapped out, without any hard commitments.  So, there was no income annuity for life.  It was structured and mapped out, principle guaranteed accounts that, at the end of the day, he chose ’em.  We educated him, and he chose them.  And then 2008 hit.  Had he done what he was familiar with his entire life.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:22:53]

MIKE:  Had he tried to use tools in the second act that he had learned in the first act, and not transitioned to the new way of investing, he would have been destroyed.  And this is why I’ll never forget it, Clayton.  He was enjoying his summertime.  He has a beautiful house in Oregon on a lake down there.  And when the ’08 crash hit, and it kept getting worse and worse.  And his income stayed the same, and his portfolio was making money.  He drove up to our office at the time in Redmond.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:23:31]

MIKE:  Interrupted a meeting and in tears said, “Thank you.”  We may not be the smartest kids in the block, but we understand the fundamentals of retirement planning.  We understand the principles that set people up for success so they can enjoy safer retirements.  I will never forget that thank you.  Because it saved the rest of their life.  It held his integrity intact.  He didn’t have to hang his head low, being a very prestigious real estate investor, and have to become a Walmart greeter or a bank teller.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:24:11]

MIKE:  Just to pay the bills.  While selling his dream vacation homes.  Now for you, you may not have that opportunity of enjoying the vacation homes.  You may not be a genius in real estate.  But here’s what you do have.  You have a life.  You probably have a family.  You have loved ones, whether they’re friends or family that you wanna spend time with.  You have purpose.  You probably have things you want to do in retirement.  That is what needs to be protected.  That’s what needs to be articulated into a plan that follows the principles.

 

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MIKE:  So, regardless of what your income is, what your asset size is, that you can still maintain that life, and maximize it to its fullest.  And that’s what we’re doing here every day at Decker Retirement Planning.  Maximizing people’s life.

CLAYTON:  So, it sounds like these two individuals that came in, they were given flexibility.  They were given clarity.  They were given direction on how they were going to be able to enjoy what they had worked 20 to 30 years to actually do.

MIKE:  Yeah.  Unaffected.  While most of their friends were having to go back to work.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:25:27]

MIKE:  For me, when I retire, and it’s a few years away.  I say a few years.  I love what I do.  So, I don’t expect to retire 30, 40 years from now.  But when it comes down to my retirement, I’m speaking for myself now.  I expect to actually retire and not go back to work.  I expect to transition to the next phase of my life and enjoy every second of it.  For you, that may be a similar situation.  And if you’re in that situation, if you’re in the court where you take your finances seriously, you take your retirement seriously, and you wanna actually be fulfilled.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:26:06]

MIKE:  And complete what you have on your bucket list, then I hope you call us, because we’re helping people do this every single day at Decker Retirement Planning.  Here’s what Safer Retirement ROI.  It’s a review.  It’s optimization, and then should you choose to move forward, then it’s implementation.  It’s not ready, fire, aim.  That’s malpractice in finance and it happens all the time, and I can’t stand it.  Here’s what the introductory visit is.  It’s a review.  Here’s what it’s not.  We’re not making financial decisions.  We’re not asking you to write a check for us.  We’re not even bad-mouthing your financial professional.

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:26:43]

MIKE:  We don’t care what they told you.  We wanna know where you are, how it’s organized, and what’s the probability of its success.  And then we wanna put an overlay, the safer distribution plan.  The structure, the third principle that so many people are missing, and then give you clarity in saying, “Does this work for you?”  If it does, great.  We can have another visit and optimize it.  To get rid of the tax burdens.  To do all the ins and outs that set yourself up for success.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:27:12]

CLAYTON:  You know, some people will come in and they need a lot of direction.  Because they have just been saving money in their 401k for their whole career.

MIKE:  Yeah.  You’ve had a couple of these visits.

CLAYTON:  Yeah.  And they’ll come in and they just think, “You know what, I know I’ve gotta move on to the next step, the next phase.  What do I do?”  And they need a lot of direction.  But there’s others that come in that…

MIKE:  You ever have those people that say, “I don’t know the right questions to ask.  I just know that there are questions I should be asking.”

CLAYTON:  Yeah.  So, this is the other group of folks that comes in.  90 percent of their portfolio, they know where it is.  It’s been invested.  They’ve been working with their advisor.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:27:51]

CLAYTON:   And they come in and they just think, “Listen.  I’ve just had a little bit of…  I just wanna get a second opinion.  It’s just a second review.  I’ve been with my guy for 20 years.  I’ve been happy with him, or my gal for 20 years.  I’ve been happy with her.”

MIKE:  Mm-hmm.

CLAYTON:  “And I just wanna check and just wanna get an unbiased, kind of, different opinion.”  These folks come in.  We’re able to find out what’s important to them, and help give them that clarity that, on the review, of the safer retirement ROI, they can see that yes, everything is good.  Or maybe there’s a gap or two that they need to be filled.  Or maybe what they want to do and what their goals are, nothing in their plan is gonna help them do that.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:28:31]

MIKE:  Sometimes they’ll come in and they have no idea how dangerous their plan is, like the REIT guy.  But when those conversations happen, it’s a very healthy situation.  Because the clarity is there.  And you can be proactive in finding solutions before you have find Plan B.

CLAYTON:  With anybody that comes in, it’s just making sure you understand the features and the benefits and the detriments of what the investments are.

MIKE:  Mm-hmm.

CLAYTON:  It’s helping you see both sides of the coin.

MIKE:  Get context.  For all of you listening right now, if you’re 55 or older, and have at least 300,000 of assets saved up for retirement, it’s at no cost to you.  We hope you take us up on this offer and call us.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:29:10]

MIKE:  833-707-3030.  Call now.  833-707-3030.  We’re helping people every day here at Decker Retirement Planning.  In Washington, Utah, and California.  Helping people enjoy a safer retirement.  You can also go to deckerretirementplanning dot com, and there you’ll be able to sign up for our service as well.  Ask for the Decker Review.  That’s how you can get that full review that can help maximize your lifestyle in retirement.  I just mentioned context, Clayton.  Context is king.  Now I’ve got some quotes here, prepared for this one.  And I even started the show with this.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:29:47]

MIKE:  A lot of folks have a disconnect with the advice their financial advisor’s giving and their actual situation.  And I don’t think it’s any fault to either party. I just think things are being taken out of context.  And here, just for fun, is three examples of being taken out of context.  Folks, all of you listening right now, you remember the Wizard of Oz?  And how we quote the Scarecrow saying, “Can’t you just give me a brain?”  And the Wizard says, “You don’t need them.”  What we think, over and over, is the Wizard saying, “You don’t need a brain, ’cause brains are stupid.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:30:24]

MIKE:  Blah, blah, blah.  Fill in the blanks.  People are stupid.  And it goes down all sorts of different rabbit holes.  But here’s what’s actually happening.  Here’s what’s said.  Dorothy says, “I think you are a very bad man.”  She’s confronting the Wizard.  And he says, “Oh no, my dear, I’m a very good man.  But I’m a very bad Wizard, I must admit.”  And then the Scarecrow says, “Can’t you give me a brain?”  And then the Wizard says, “You don’t need them.”  Here’s the context that we are forgetting.  You are learning something every day.  The Scarecrow was and wasn’t realizing it.  A baby has a brain, but it doesn’t know much.  Experience is the only thing that brings knowledge.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:31:00]

MIKE:  And the longer that you’re on Earth, the more experience you are sure to get.  See, it’s the experience that he was trying to allude to, and what the writer of the Wizard of Oz was talking about it is, enjoy the experiences, that’s how you’re gonna learn.  Having a brain is not enough.  You need to have the other part.  Now, sure, it’s a fictitious story.  Scarecrows don’t come to life.  And they don’t have brains.  Humans have brains.  I understand the neuroscience behind learning, okay?  But all that aside, the lesson that’s trying to be taught is, it’s not just having a brain, it’s having the experiences that let you learn.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:31:33]

MIKE:  But we take that out of context all the time.  Here’s another one that I think is…  For all of you folks that are listening right now and wanna catch these at your convenience.  Little snippets.  We have a videographer that records the radio show every week, and then we post on our Facebook.  So, you can like us at Facebook, or follow us, I should say on Facebook.  So, you can get our feeds here.  But it’s a lot of fun.  I asked him, I say, “Hey, do you remember Romeo and Juliet?”  Remember that scene, it’s the most famous scene, I think.  Or second most famous scene maybe in Romeo and Juliet.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:32:07]

MIKE:  “Romeo, Romeo, where art thou, Romeo?”  And what’s interesting, is the amateur plays even do this scene wrong.  “Where art thou, Romeo?” most of think is “Romeo, where are you?”  And she’s on the balcony and she’s looking all pretty, and she’s got a nice dress on, and there’s a party in the background.  But she’s in despair.  And Romeo climbs the balcony and says, “Juliet, I am here.”  Doesn’t actually say that, but that’s the simplification of it.  No.  None of that is true.  In the actual, original playwright, what Shakespeare was trying to say was, “Where art thou?” meaning “Why, Romeo?  Why are you a Montague and I’m a Capulet?”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:32:50]

MIKE:  “Why do we have to be born under different stars?  Why is this an issue that we are facing?”  When you change that scene to “Why” and “Where art thou, Romeo?”  He’s actually there in person, you get some more context of their actual struggle.  Now I get back when Romeo and Juliet was there, find friends and smart phones didn’t exist, right?  And that could be an alternate, but it wasn’t the actual way that it was being portrayed.  They were having a discussion about their issues.  Yet, so many people take that out of context, because we don’t understand Olde English.  “Where art?” is another way to say, “Why?”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:33:31]

MIKE:  Interesting, right?  The last one’s my favorite.  And this is not meant to be political.  Just some context.  Al Gore.  Clayton, let me just ask you, ’cause you didn’t get prefaced on this part.  What did Al Gore invent?

CLAYTON:  I believe he invented the internet, Mike.

MIKE:  Yeah.  Yeah.  You know that’s not true.

CLAYTON:  I do know that’s not true.

MIKE:  But everyone would say, “Oh, Al Gore claimed that he invented the internet.”  That’s not true at all.  Actually, Declan McCullagh, he was a writer for Wired, changed and misquoted Al Gore, which then went viral, and he has never been given proper context of what he actually said.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:34:10]

MIKE:  Here’s what he actually said in an interview of Late Edition on CNN.  Al Gore said, “I took the initiative in creating the internet.”  Meaning making sure that government funds were being allocated to help build an infrastructure that would support the internet.  He was in government.  He didn’t invent it.  He just knew and saw the vision that the internet would be a big deal and wanted to help support it.  That’s all he was saying.  Yet he’s being misquoted over and over again.  By inventing the internet.  No.  He just wanted to help.  And good for Al Gore.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:34:48]

MIKE:  For seeing a vision and contributing to what we see as the internet.  Because without the internet, if the internet went down right now, oh, we’d be in a state of panic.  It has elevated our life for the better.  And I wanna give him fair credit to what he said on CNN that one night.  Do we understand the advice that we’re giving or are we taking it out of context?  Here’s my favorite.  “Well, Mike, you know, I gotta admit.  Heard you on the radio.  I came in, I was interested in your tax minimization here.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:35:21]

MIKE:  “But I really feel like I’ve got a great plan.  But just for conversation’s sake, let’s see what’s going on here.”  Let’s call him Bob.  I don’t know why.  I’ve seen a lot of Bill Murray.  I think about “What About Bob?”  “Bob, let’s see what you got here.  Bob, I see you’ve got an income annuity.”  “Yeah.  I know you talk ill about income annuities, but I gotta tell you, Mike, this one’s one of the good ones.”  “So interesting, Bob.  Walk me through what’s happened.”  “Well my guy said that it’s guaranteed seven percent every year I own it, or more if the market does more than that.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:35:57]

MIKE:  And I said, “Well, Bob, you know, that sounds pretty nice.  And the markets can do more than seven percent in a year.  Especially if it’s invested in like, the S&P or a good index.  And if it has downside protection, that sounds like a good situation.  Can I take a closer look at that?”  And he says, “Yeah.”  And then, as Bob’s handing me over the information, Bob also says, “Yeah, and the best part was, I got a 10 percent bonus just for investing in them.”  “Bob, I’m getting a little suspicious here.  There’s no such thing as free money, and I’m pretty sure insurance companies make a lot of money on these income annuities.”  He says, “No, I know.  But this is one of the good ones.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:36:33]

MIKE:  “All right, Bob.  Let’s call the insurance company and see what’s really going on here.”  He says, “All right.”  And Bob is confident as can be.  I say, “All right.”  So, let’s make up an insurance company ’cause I don’t like speaking ill of any company, insurance company ABC.  Okay?  “Hey, insurance company ABC.  We got an account here, the account is 111222333,” just making up an account number here, “I got Bob on the line.  Bob, can you give me a person to talk to the insurance company?”  Bob says, “Yeah, it’s no problem.”  Bob’s on speaker phone.  We’re in the office together.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:37:05]

MIKE:  I say, “All right.  All right.”  Clayton, I’m gonna have you play the insurance company here.  Just walk you though.  All right.  All right.  “So, Bob here, thinks there’s a seven percent guarantee on the account.  Clayton, is that correct?”  You say, “Yes, well, that’s correct.”

CLAYTON:  Sure.

MIKE:  I say, “Okay.  Is that correct on the cash value or the phantom account?”  And the insurance company would say?

CLAYTON:  They’ll pause awkwardly.  ‘Cause now they know.

MIKE:  They don’t get asked this question very often.

CLAYTON:  Right.  Right.  So, they’ll say, “Well, it’s not on the cash value, it’s on the…”  They call it the accumulation value or the phantom value, is what we like to call it.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:37:43]

MIKE:  And then, Bob starts getting a little bit nervous.  And usually interrupts one of our fiduciaries and says, “Wait, wait, wait.  What do you mean, not the cash value but the accumulation value?”  And, Clayton, what’s the typical response you hear?

CLAYTON:  “Well, the cash value is the money that you put in and the accumulation value, that’s the money that you’ll draw out eventually.”

MIKE:  Okay.  And then what I like to ask is, “Okay, and how do you determine what he’ll draw out eventually?”

CLAYTON:  Well, and I’ll preface this, Mike, with what they’re trying to not say is, “We’ve got a room full of actuaries that’s crunching some numbers, and we think we know how long he’s gonna live and that’s where we’re pulling the number from.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:38:26]

MIKE:  So, then this is when I turn to Bob and I say, “Bob, what I’m hearing here,” or Clayton, and you’re playing the role of the insurance agent.  “Bob, what I’m hearing here, is that they have an arbitrary account that’s then divided by an arbitrary number that they decide to give you your rate of return.  It seems likes it’s in their favor.”  And Bob goes, “Yeah.  I had no idea.”  And I say, “All right, insurance agent Clayton, if Bob were to initiate this income annuity right now, what would be their rate?”  And then, Clayton, you give me a number.  I know we don’t have the account value and all of that.  We’re not gonna calculate it all on the air right now.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:39:08]

MIKE:  It’s too many numbers.

CLAYTON:  Sure.

MIKE:  You’re driving right now.  Focus on your driving.  But we then create a number and then I go to my window.  I like to write on the window in my dry erase.  I think it’s fun.  Who writes on their windows?  Well, we do, ’cause it’s fun.  And I say, “All right, Bob.  Here’s value x, divided by what they’re saying.  And here is your monthly income and hmm.  If you live to this age, Bob, your average return is 1.8 percent.  Are you happy with that?”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:39:39]

MIKE:  Bob says, “1.8 percent?  No.  I was promised seven percent guaranteed every year.”  Folks, you may be in a similar situation like this.  Most people that have annuities that come into our office experience this.  And I’ll be frank, it’s not the funnest of conversations to have.  But it’s the right conversation to have.

CLAYTON:  Yeah, and Mike, so I had these conversations as well.  And when these folks would come in and we’d talk about, “All right, well, how does this…  I’ve got this thing that I got into a couple years ago, and this was the intention.  This is how it’s gonna work.”  And I say, “All right.  Well, do you mind if I call the insurance company?”  We go through what you just talked about.  We go through those steps.  Just get ’em on the phone.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:40:20]

CLAYTON:  And at the end of that phone call, the reaction that I get most of the time from folks is one of frustration.  And they feel like they were cheated, to a certain extent.

MIKE:  Mm-hmm.

CLAYTON:  Because through all of this, and one thing you didn’t mention, is yeah, you might get seven percent guaranteed for the seven years that you have to own it, or 10 percent.  Or sorry, 10 years that you have to own it.  And you’re gonna get your 10 percent bonus.  A lot of times these don’t ever vest unless you turn that income rider on.  And, by the way…

MIKE:  They can’t vest.  You don’t get the bonus and you don’t get the guarantee unless you turn the income rider on, which is an expensive way to have an insurance pay you your own money back.  At a rate that they decided.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:41:02]

CLAYTON:  Right.  And, by the way, these also cost anywhere from one to one-and-a-half percent per year of your own money.

MIKE:  Oh yeah.  There’s usually a fee on them.

CLAYTON:  Yeah, so then if you, let’s say you turn it on and a few years later, you pass away.  Lot of times these don’t transfer to your estate.  And your beneficiaries are not getting the benefit of your hard work, that you weren’t able to fully benefit from.

MIKE:  Mm-hmm.

CLAYTON:  ‘Cause now it’s sitting in the pocket of the insurance company.

MIKE:  Where art thou, Romeo?  Context is king when it comes to your investments.  And that’s a big part of a safer retirement ROI.  We start with the review.  We need to understand what you have, and make sure that there’s clarity.  That you understand how these investments work, and how they’re gonna proceed.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:41:45]

MIKE:  See, there’s comfort when you understand your own finances.  We don’t expect anyone to have a CFP in finances or a doctorate in financial theory.  It’s very simple.  Here’s your cash value, here’s the historical of what it has been performing.  Here’s what it’s expected to do.  Are you comfortable with that?  Here’s the ramifications, and we have our safer distribution plan software.  Here’s what your income is gonna look, should we use these investments?  Are you okay with that?  If you say no, okay.  Here are your options.  We’re really good about getting people out of crappy situations.  I gotta admit.  The REIT guy?  That was over a million dollars in REITs that I unwound.

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:42:23]

MIKE:  A million dollars goes a long way when it’s not tied up into privately held assets that you can’t do anything with if things go sideways.

CLAYTON:  And these conversations, I love having these conversations with folks.

MIKE:  Mm-hmm.

CLAYTON:  To help them understand what is going on in their plan.  And sometimes they are frustrated, ’cause they feel like they had a good relationship with their advisor, and they feel slighted to some extent.

MIKE:  Mm-hmm.

CLAYTON:  And that’s not our intention with the advisor.  Our intention is just to make sure you fully understand what it is you have, how it’s used.  That’s part of that review portion is just making sure you are fully aware of where you sit.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:43:03]

MIKE:  Mm-hmm.

CLAYTON:  And so, for those out there that are listening, if you’re looking for understanding, that’s what we’re here to help give.  Is just clarity on where you’re at and what you’ve got.

MIKE:  Mm-hmm.  So, if you’re listening right now and wanna have some additional clarity, from a purebred fiduciary.  One that’s legally bound to do what’s in your best interest, hope you call us.  833-707-3030, so we can schedule a visit for you.  And here’s what it looks like.  When you call in, our call center over the weekend is gathering your information.  We’re taking a weekend holiday.  We don’t work Saturdays or Sundays.  On Monday, our closest office will reach out to you and say, “Hey, we’d love to schedule a visit.”

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:43:45]

MIKE:  “What works with your schedule?”  And it could be me, if you’re in Utah.  It could be Daryl or Jess up in Washington.  It could be Katie in San Francisco.  But we’ll call you.  We’ll say, “Hey, what’s best for your schedule?”  And then we put it on the schedule there and we say, “Great.”  We send you just a one-sheet document that we ask you to fill out to give us some context of how you’re doing.  We don’t need all of your statements.  We just need one sheet.  Makes it easy for you.  You send it back to us and we’ll prepare for your visit.  And then we review your plan with you.  We help you understand the different headwinds and pitfalls and things like that.  And kind of stress test real quick your plan, to make sure that you’re set up for success.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:44:25]

MIKE:  Here’s what it’s not though.  It is not a place to make financial decisions.  We’re here to get clarity, not execute decisions.  It is not a place to write a check for us.  We’re just reviewing your assets.  We haven’t done anything for you.  We’re just reviewing your current state.  So, leave your checkbook at home.  Because it’s not gonna cost you a dime.  It is not a high-pressure situation.  For goodness sakes, it’s a place to get clarity, so you can have comfort in your retirement plan.  It’s one of the biggest stresses retirees face is their finances.  Let’s alleviate that.  You can do that by calling us at 833-707-3030, or you can go to deckerretirementplanning dot com, and on there, there’s a little area where you can fill out your information and get started with the Decker Review.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:45:07]

MIKE:  Or a specific topic.  If you wanna talk about taxes or Social Security.  Whatever it may be.  But when it comes down to it, folks, maximizing your retirement life starts with a safer retirement ROI.

CLAYTON:  And for those listening, if you are catching the podcast or a later recording of the show, and maybe you don’t live in or near Seattle or Salt Lake, and you live in a different state, just give us a call.

MIKE:  We work with people in all the different states.  We’ve got a couple clients in Minnesota.  Got a couple clients in New Jersey.  That’s a fun one.  We get a lot of calls from New Jersey and Florida.  They find us through the podcast.  Which you can get and get every Friday morning.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:45:48]

MIKE:  The podcast release first iTunes, Google Play, iHeartRadio, wherever you get your podcasts, you can find us.  Just search for “Safer Retirement Radio.”  We’ll pop right up there.  Let’s talk, we’ve only got 15 minutes or so left in the show, Clayton.  And we’re only halfway through our content.  It’s been fun so far.  I wanna talk about the tax season beginning here.  And if we don’t have time, we can talk about life changing transitions next week.  You okay with that?

CLAYTON:  I am.

MIKE:  Tax season has begun, folks.  And make sure you schedule your time with your CPA or TurboTax, if that’s the way you do things.  But man, is it busy for these folks.  And I feel for them.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:46:29]

MIKE:  Corporate tax, there’s different seasons.  You got your different fiscal years and all that, but for citizens.  I’m gonna use that word.  For the citizens of the United States of America that pay tax, we’ve got this one window.  And it can get pretty stressful.  Let’s make that the least stressful as possible.  And plan ahead.  Now for tax season, it may be from now until April.  But the tax race is something that we don’t talk enough about.  And what I’m about to say, I hope you turn up the radio here, because it could literally change your life.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:47:09]

MIKE:  What most people don’t understand is the time from now to 72 years old, is the time where you can effectively implement tax minimization strategies.  At 72 years old, according to the new Secure Act which just passed, is now when RMDs, which are Required Minimum Distributions, start.  This is how Uncle Sam twists your arm and starts getting paid off of your 401k’s and your IRAs.  If you don’t realize it, please take note.  Uncle Sam is your biggest beneficiary of your retirement assets.  The biggest beneficiary.  And Uncle Sam’s got a lot of debt right now.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:47:49]

MIKE:  And he needs some help.  He needs some help.  You ever have your kid say, “Hey, I’m in a bind, can I get some income?  I won’t make rent this month.”  When they’re in college or whatever.  That’s kind of like how Uncle Sam is right now.  He’s in a bind.  And he’s gonna need some help and he’s gonna do it partially through RMDs.  Required Minimum Distributions.  But from your age right now until 72 years old, when implemented correctly, the strategies we’re about to go over can set you up for success in such a way to where you’re at a near zero percent tax bracket.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:48:26]

MIKE:  To where if income taxes go up, and RMDs change again, or whatever may happen in the tax environment.  Who cares?  You’re good to go.  There was one client I was working with, actually this week, in particular.  And we were able to articulate their plan.  In seven years, we get rid of all of their taxes.  In seven years.  And in seven years, not only is their retirement assets, their income from assets, tax free, but, Clayton, if you’re taking only income from tax-free sources.  And you don’t have to worry about capital gains, because all of your risk assets are being bought and sold, are in a Roth account.  How much do you pay on Social Security?

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:49:13]

CLAYTON:  Depending on your income, your Social Security tax drops down to as low as 50 percent.

MIKE:  It can be zero.  If you’re under a certain threshold.

CLAYTON:  Yep.

MIKE:  If the IRS thinks you’re in poverty, and you’re taking six figure income, that’s a really good situation.  When implemented correctly, from now to 72 years old, you can do this.  There are two ways we’re gonna talk about right now.  Real briefly.  We only have 10 minutes left in the show.  But the first one is properly implemented IRA to Roth conversions.  Now, you don’t have to wait to 59-and-a-half to start doing these.  You can do them in your 401k.  You can do them in your IRA.  It just needs to be done correctly.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:49:53]

MIKE:  So, work with a financial professional to assess your unique situation.  But you can start hacking away at these.  Clayton, can you just walk us through real quick the benefits of a Roth?  And why Roth’s are considered gold, at least in our practice?

CLAYTON:  Yeah, the Roth is…  For those that are listening and wondering what a Roth is or where it applies, is we’ve got the IRA accounts.  You have the pre-tax money that goes into the IRA, or you can do a Roth IRA, where that’s after-tax funds that are going in.  And the benefit of the Roth is that you can get growth that is tax free.

MIKE:  Mm-hmm.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:50:29]

CLAYTON:  Distributions that are tax free.

MIKE:  Mm-hmm.  Keep going.

CLAYTON:  And it will pass on to beneficiaries tax free.

MIKE:  Oh.

CLAYTON:  And I wanted to make sure, so I’ll go through those again.  Growth is tax free.  Distributions that are tax free.  And it passes on to beneficiaries tax free.

MIKE:  Huge tax minimization and tax saving strategy.  And guess what, right now, with taxes at near historic lows, taxes are technically on sale.

CLAYTON:  Taxes are on sale.

MIKE:  How about that?  I know we’re over the holiday season, but taxes are still on sale.

CLAYTON:  I like it.

MIKE:  Until they change regulation.

CLAYTON:  So, it sounds like what you mean by taxes are on sale, doing those Roth conversions, it sounds like, now is a great time to do those conversions.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:51:09]

MIKE:  Let me put into perspective here what’s going on.  Okay?  I’m gonna put into perspective the tax burden that retirees are facing in the future.  Okay, here’s the stage.  National debt, all time high.  Tax rates, near all time low.  Clayton, where do you think taxes are gonna go in the near future?

CLAYTON:  Let me see.  Up.  Right?

MIKE:  Okay.  I’ve asked an eight year old that, and they got that.  So, I think we’re all on the same page.  That’s probably what’s gonna happen.  The future is never certain, but it kind of is in this situation.  I don’t see another way out, unless for some reason we do some…  I don’t know.  I don’t wanna say anything, because they’re outlandish ideas that may cause some political unrest.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:51:50]

MIKE:  But anyway.  The tax bubble at some point needs to pop.  And taxes eventually have to go up.  I know that is not something you may wanna hear right now.  But the taxes are going to go up at some point.  They just have to.  That’s my opinion.  McKnight’s opinion.  And a lot of other very smart, Ed Slott, one of the best CPAs in the nation.  His opinion as well.  So, here’s some context.  Let’s for simple measures say that you are taking 100,000 dollars of income every year in retirement.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:52:30]

MIKE:  And your effective tax rate is 15 percent.  So, let’s say you pay 15,000 in taxes and your take home is 85,000 annually.  That’s about 7,000 every month, okay?  Now let’s say that they do raise taxes.  And let’s say that we get about halfway to where they were in the 60s, 70s, or 80s.  Let’s say your effective tax rate is now 25 percent.  Clayton, a 10 percent increase, which is not out of the realm of possibility, takes you from a net annual income of 85,000 to 75,000 a year.  That means you’re getting around 6,250 dollars per month.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:53:11]

MIKE:  You lost 750 dollars a month.  Think of all that you can do with 750 dollars a month in retirement.  Yet, the political risk and the tax environment that we’re in just infiltrated your retirement plan.  That’s the risk that we’re running right here.  Unless, when implemented correctly, these tax minimization strategies are done.  The IRA to Roth conversion sounds like, and used to be, the biggest tax saving strategy.  But no.  It’s actually the second biggest tax saving strategy right now.  At least that we have found at Decker Retirement Planning.  Because we invented one that I believe is better.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:53:54]

MIKE:  And according to our plans, is saving people more money.  Before I move on the next one, Clayton, do you have anything to say on the IRA to Roth conversions?

CLAYTON:  Yeah.  Just to sum up.  I mean, I know there was a lot of numbers thrown out, and we wanna make sure that we get comfortable talking about some of this industry jargon.  So, for those that are listening, talk with your CPA.  Get your money, your IRA, your pre-tax money, as much of it converted over to your Roth as you can.  Again, check with your CPA on how much that is, so that you can avoid unnecessary taxation.

MIKE:  Mm-hmm.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:54:27]

CLAYTON:  But doing that now, while taxes are at historic lows, will allow you to avoid those potentially increased taxes in the future.

MIKE:  And if you wanna come in, we’ll show you, at no cost to you, a safer tax plan, which gives you the blueprint and then take to the CPA and circle the areas and say, “I’m gonna pay too much taxes this year, this year, and this year.  Let’s help minimize that.”  Because you can’t know that with a pie chart.  But you can know that with a Safer Tax Plan, which is a tax focused distribution plan that we have developed.  833-707-3030 if you wanna see one of those.  With the limited time here, I wanna talk about the tax buffer.

CLAYTON:  I’m excited for this one.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:55:03]

MIKE:  This one.  A brief overview.  There’s a lot of retirees that are around 66 years old, and they don’t have enough time before the RMDs start to fully minimize their taxes.  Like had they would have started at 55 years old.  For those people that are listening right now, you still have hope.  There’s something called the tax buffer.  We invented it.  Here’s what it does.  It grows tax free, it distributes tax free.  It’s like a Roth.  Is it Brian McKnight or David McKnight?  The guy who wrote “The Power of Zero.”

CLAYTON:  David.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:55:41]

MIKE:  David McKnight.  He calls it the “Rich Man Roth.”  But you don’t need to be rich to have one.  But the beautiful part is when you take assets out of it, you take it out as a loan, not as an actual distribution.  And the policy is able to grow off of the gross amount, not the net of loan amount.  So, when you take assets out of the tax buffer accounts, you can have this account pay your taxes for you, so your income is able to go to you gross each year.  And that you make your money back because it’s growing off the gross, not the net amount.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:56:24]

MIKE:  That sounds very technical, and for all of you that are not as tech savvy, I apologize for that.  But here’s what it means.  Taxes go up, you have a way to buff out those tax burdens without affecting your retirement.  Like the 750 dollar a month burden that you have that you just lost.  You can get rid of that.  And if taxes, for whatever reason, don’t go up, you use it as income.  There’s two ways you can play the tax buffer play.  It’s kosher with the IRS.  And it allows you to not hit these massive pitfalls that will be plaguing so many people in the years to come when taxes go up.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:57:01]

MIKE:  We’re out of time here, folks.  It’s been a fun show so far.  Clayton, thank you for joining me on the show.  If you wanna catch this show, again, you can go to deckerretirementplanning dot com, and catch this show.  If you wanna take us up on the tax buffer conversation, call us right now.  833-707-3030, or sign up at deckerretirementplanning dot com.  If you wanna catch this show every week, you can follow us on Facebook.  You can follow us on Instagram.  You can also subscribe via podcasts, iTunes, Google Play, wherever you get your podcasts.  This show is about providing you value.  And we wanna help you implement it right so you can maximize your retirement through a safer retirement ROI.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:57:38]

MIKE:  And ultimately fulfill the dreams that you’ve dreamt for so many years.  Thank you all so much for listening.  We’ll be back on the radio.  Same time, same place next year.  And most of all, Happy New Year.  Hope you had a great New Year’s, and that 2020 is the best year yet, from the bottom of my heart.  Thank you for listening.

 

RR S3 E28 RETIREMENT FUNDAMENTALS & HUGE TAX     [00:58:00]

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.