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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.
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MIKE: Welcome everyone to another edition of Safer Retirement Radio with me, Mike Decker, and Clayton Bradshaw here joining me on the show. We’ve got a pack show line up for you today. Quick tip on fraud, only applicable to this year. We are going to explain some fraud tips on how to help avoid them, as well as the bulk of the show, the 2020 updates dates and changes that you gotta know if you’re retired or near retirement or a tax paying American. Which is all of us [LAUGH]. But we’re also gonna go over some 2020 predictions of the financial conundrums that could happen and how to help avoid those. As well as retirement abroad.
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MIKE: If your retirement maybe isn’t the best, in the best of shape, and you’re gonna be squeezing some pennies in America, there are some other solutions that are incredible. And if you have a nice nest egg too, these are also applicable to you. But some really cool things that you can do in your retirement planning process, to see some nice places and live a little bit cheaper. And then we’re gonna be talking about the retirement timeline. Did you know, Clayton, that memory loss is gonna be a big issue regardless of if you have dementia or not? And yet retirees are pushing back their date, they’re closing their window in of the years they can actually enjoy their retirement.
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MIKE: We’re gonna talk about how to solve all those issues, help you retire earlier all today on Safer Retirement Radio. How about that, Clayton? Was that good? You ready to jump in?
CLAYTON: I’m excited for it. Let’s get started today, Mike.
MIKE: Now, Clayton, before we get started, just a quick reminder a number to remember, 833-707-3030 if you like what you hear and you wanna schedule a visit with one of our fiduciaries. We’re located in Washington, California, and Utah. In major cities there in those states. As well as our podcast listeners that listen to our radio show that we rebroadcast on podcast.
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MIKE: Call us, we do virtual visits as well. But the bottom line is, if you hear something and you think, gosh. I’d like to learn more about that. We would love to have a visit with you. It’s complimentary, it’s part of our process, a safer retirement ROI. That first step is review and it doesn’t cost you a dime for that. You can learn more at Decker Retirement Planning dot com. You ready for the biggest fraud tip that is only applicable of this year. It’s only applicable. Have you ever heard of a fraud tip that’s only applicable for one year ever?
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CLAYTON: And this one’s an easy one too, to do. It requires force of habit, but let’s talk about it.
MIKE: The year is 2020, welcome. 2020 is interesting because, well, it’s repetitive and it’s fun if you’re a numbers person. But it’s easily manipulated. If I were to sign, let’s say I signed a document. I signed it 1-24-20. I abbreviated it. Clayton, what could you do to that document?
CLAYTON: So if I were an unscrupulous individual.
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MIKE: A street youth.
MIKE: A recluse, a hood rat.
CLAYTON: I could then add, or maybe I could enforce this if it were a year older. So I put 2019. I put just add a 19 to the end of that 20, now it’s a whole new year that that was signed in.
MIKE: Mm-hmm. Or 2017.
MIKE: Whatever you want. So folks, for all you listening out, this is a huge fraud tip that you must know right now for this year only. Anytime you sign any documentation, do not abbreviate the year.
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MIKE: Always put 2020 which can help awkward situations for when something may come up. My wife and I watch a lot of SVU, so I guess we only see the underbelly of New York City. But it’s better to be safe than sorry. I mean, for goodness sakes, this is Safer Retirement Radio. But never abbreviate your documents, it’s just not worth it there. Now, other changes, there are 20 20 20. 20’s a really big year. And I don’t mean that because it’s fun to say 2020, you know.
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MIKE: There’s so many jokes that could be made on eyesight and make it super punny. But one of the biggest changes that has happened in years, over a decade, that’s effecting retirees and near retirees. This is huge.
CLAYTON: This is, I think I know what you’re talking about. This is the biggest legislative change to your retirement in the last 13 years at least.
MIKE: Last 13 years. So before, no. Just joking there. But no, it’s 13 year, big difference here.
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MIKE: We’ve come a long way. It’s been in the act for a while. It’s gone through being kicked around. This is technically been called the secure act. The news hasn’t nicknamed it yet. For example Obama Care is not the actual name of the act. But we all know it as Obama Care and we find these policies get their nicknames. The secure act hasn’t had a nickname and Trump’s impeachment and the articles and Iran have taken a lot of precedent here. So we’re gonna take a moment right here and let you know important changes to your retirement so you don’t miss them.
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MIKE: The first one, Clayton, when are requirement minimum distributions now required to be taken?
CLAYTON: They’ve bumped the age up from maybe 70 and a half. So this is maybe one of the things that the listeners have heard and why this is applicable. [It’s?] because if you’ve heard something on the news, your RMDA just changing required minimum distributions. That’s when you have to start paying those taxes on your IRA’s.
CLAYTON: They’ve moved it now. That you have to take those distributions on IRAs from 70 and a half. It is now moved back to 72.
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MIKE: Now for all you folks that have a 401k or an IRA, I’m just gonna let you know how it is. Uncle Sam is your biggest beneficiary. Those a pre-taxed dollars. Which means when you take those funds out of that account, you’re gonna be charged the income tax. Federal, state, both, depending on where you are. That is surprising to me that Uncle Sam said hey, I’ll give you two more years before I start making money back. I don’t get it. Clayton, I don’t get it. But I am so grateful for it because it extends the tax runway of doing effective tax minimization strategies to minimize the taxes while taxes are on sale right now.
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MIKE: And they are on sale. My prediction, they’ll be on sale until 2026. Which gives a lot of retirees a little bit of a runway, and we’re not gonna go down the tax rabbit hole right here. But RMDs, there’s a lot of people that took their first RMD this year and they don’t have to next year. ‘Cause 71’s okay. But they’ll take it the next year. A little bit of whiplash there. But 72 is the time that Uncle Sam’s gonna be saying, all right. It’s time to start taking assets out so I can get paid. Which makes sense, ‘cause Uncle Sam has a lot of debt. And when you have a lot of debt, you want to get paid.
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CLAYTON: Yeah. And for those that are listening that think oh, well, what’s two extra years to be able to do that? It is a big deal. That’s two extra years you can space out having to do Roth conversions. Being able to save a little bit more. There’s a lot that you can do in that space.
MIKE: Yeah, in two years you could save yourself a couple hundred thousand dollars. Depending on how taxes go in the future. That’s not insignificant. I’m just casually throwing it out there, but that’s not insignificant at all.
CLAYTON: Yeah. Right. So if you feel like, oh, this doesn’t apply to me. If you are under 72, if you have pre-tax money in a 401k, in an RIA, then this applies to you. This is a big deal for you.
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MIKE: Oh, it’s huge. And the fun part here, Clayton, and when people come in they’ll say, hey Mike. You know, I’m 63 years old. Now I have until 72 years old. How do I get to a near tax free environment. And there’s essentially different accounts. There’s your IRA account which grow tax free but distribute [been?] paid tax. We like growing tax free, we don’t wanna pay taxes necessarily when we’re taking that as income. Then you have other accounts that, like a Roth that grow tax free and pay tax free. And then you have your accounts that, well, you’ve already paid taxes on it but you have capital gains to worry about.
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MIKE: Structuring this with a Safer Tax Plan is a really fun thing. They’ll say, hey Mike. How do I get there. I’ve got a conversation actually tomorrow with a couple. They live in Arizona and in seven years, they will be in a situation, according to our projections in a Safer Tax Plan, to a zero tax retirement. Now they had 80 percent of their assets in a Roth account. So I’ll admit this one was a little bit easier than most. But can you imagine, you don’t even have to pay tax on your social security and you could technically qualify for food stamps because the government thinks you are a pauper. And they’re earning six figures in retirement.
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CLAYTON: So if you’re listening and you think I’m not sure what those accounts mean. Or maybe, does this apply to me or not? Give us a call. We’re happy to talk you through it. Whether you want the actual help kind of structuring everything or you just wanna talk a little bit more about how it can help your situation, our fiduciaries can talk you through it. They’re happy to do so.
MIKE: Yeah, it’s 833-707-3030. 833-707-3030 or go to Decker retirement planning dot com to schedule that visit. I love talking about taxes. I think when it comes to retirement planning, income and taxes are the two most fun conversations to have.
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MIKE: Oh, they’re so fun. Because it’s such an empowering moment when you can use the technology like we have. A Safer Distribution Plan, a Safer Tax Plan. And structure it to where, eyes wide open, we can identify the [paid?] point before they even happen. Oh, it’s fun Clayton. As you know, you did it. You did it. Back to the secure act and whatever they’re gonna call it in the news. Whatever the nickname is, the retirement changes. We’ve got spouse and non-spouse IRA changes. So for example, if your spouse passes, you can take that as a beneficiary IRA.
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MIKE: Or it’s your account. But you’re doing it off of your life expectancy. They altered it. Kind of to help out the spouse a little bit which is a good situation. But, and here’s the big kicker, if you pass to a beneficiary that’s a non-spouse person, this is one of the biggest changes I think of the update. There used to be something called a stretch IRA. What it means is, you could stretch that IRA out until cows come home. They did not care. That is gone.
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MIKE: Imagine if you’re gonna pass a million dollars to, let’s say, you only have one kid. We’ll make it simple. Do you think it’s helpful, considering the principle of the lottery effect, to give a kid a million dollars and force them to take it all in a 10 year span.
CLAYTON: You know, I’ve thought about this. I’ve thought about, let’s say…
MIKE: You’ve got a couple of kids. Would you be okay with that?
CLAYTON: No, not at all.
MIKE: It could ruin your kids.
CLAYTON: Yeah, yeah.
MIKE: Uncle Sam wants to get paid back, so it makes sense from their side.
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MIKE: But from the psychological wellbeing of the kids. Kids, adults, I don’t care how old you are, the lottery effect is a very real disaster just waiting to happen. And this is what’s setting it up.
CLAYTON: Yeah. Well, and for those when we say lottery effect, for those that aren’t familiar with what that is. The lottery effect suggests, so you think about what happens when somebody wins the lottery. They get 10 million or 50 million or 100 million dollars paid out at the lottery.
MIKE: Mm-hmm. Yeah.
CLAYTON: Typically within, we’ll say five years, they’ve blown it all. If they were married, chances are they’re divorced, their ex-spouse took half.
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CLAYTON: They went and bought cars they couldn’t afford, houses they couldn’t afford with property taxes. They sure truly couldn’t afford.
MIKE: Bankrupt, out of job, and divorced, estranged from their kids. It destroys families.
CLAYTON: And inheritance can do that same thing. Not to the extent for most people, they’re not gonna inherit 50 million dollars.
MIKE: Mm-hmm. Yeah.
CLAYTON: But it can have that same effect on people.
MIKE: Most clients that have walked through our door, that I have talked to, this is my own personal anecdotal history. Is they have their trust set up for a lot of their assets that are non-qualified.
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MIKE: That means they’ve already paid their taxes on those accounts. Because on an IRA, if you’re a TD Ameritrade Schwab or whatever the account is in, they have list the beneficiaries and it takes care of itself. It’s a simpler transaction at that point. Now, oh, I can only imagine being an estate attorney right now. You’ve got to incorporate in there, you’ve got to change beneficiaries to go to a trust then distribute it out and then handle the taxes. But then if it all goes to a trust, does that make sense to have all the taxes paid out in one year? I mean there is so much right here that if you have assets and you want to be mindful of your beneficiary, talk to a financial professional that is a pure bed fiduciary.
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MIKE: Remember there’s only one point six percent of all financial professionals that are fiduciaries. But talk to one with your attorney on how you can make sure that what you want your assets to do will happen because the rules just changed. And I feel bad for everyone that died this year so far and did not get the opportunity to fix their estate planning. But if you’re listening right now, you have an opportunity, thank goodness.
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CLAYTON: Yeah. And in time, I think the point you’re trying to make Mike, is it’s a very complicated process. There’s a lot of intricacies, ins and outs, that sure if you didn’t have anything else to do during the day, you had 40 hours a week to learn about it and study it, you could eventually figure it out.
MIKE: Mm-hmm. Mm-hmm. It sounds like hell. For us, we get giddy about it because we love this. But…
CLAYTON: That’s what we do for 40 hours a week [INAUDIBLE], right?
MIKE: Yeah. But for most people, that’s worse than nails on a chalkboard.
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MIKE: And it’s not expected that you have to be an expert in finance. But it is expected for you to take the initiative to make sure that your ducks are in a row. Because right now, the ducks are not in a row. Every American, I would wager, because of this change their ducks are not 100 percent in a row. That’s my opinion.
CLAYTON: And you know, with this, with all of the kind of tax news that’s been out there with this secure act which really just effects retirement accounts, it’s kind of the code for that.
CLAYTON: But with all that that’s going on.
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CLAYTON: As I listen to the news, and you’ve talked to different financial advisors and they’re gonna give you different points of view on their philosophy. And you should do this and you should do that and this approach and that approach.
MIKE: Mm-hmm. Mm-hmm.
CLAYTON: But the message, I feel, has been pretty uniform across the board is that now is a great time to take advantage of the low tax breaks.
MIKE: Oh, taxes are on sale, on sale, on sale. It is incredible. When you take into perspective the tax environment that we’ve had in the past, Brian McKnight wrote a book called The Power of Zero. The Power of Zero is referring to a product called the Index Universal Life Insurance Policy.
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MIKE: It’s an insurance policy, it can grow tax free, and it loans out money tax free. It is a productive estate planning financial tool that can be used in retirement. However, it’s not applicable to just people that want an IUL. There’s a lot of other ways. Like we do a lot of IRA to Roth conversions. Similar concept. The bottom line here though, is his first two chapters are the best chapters I have ever read when it comes to the tax bubble that is going to burst at some point. Compliance hates when I use absolutes. But here’s my case.
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MIKE: Taxes are relatively low. And when you consider the taxes in the 60s, 70s, and 80s. They’re all right. We’re doing okay when it comes to tax rates. I’ve looked at [bulk?] parties, the Democratic and the Republican, or Trump I should say. President Trump and their tax plans in the elections. And you know what? The majority of Americans will not be effected that much unless you’re earning 200 plus thousand dollars, it’s relatively the same. So right now, the alarms are not going off in my house. But that doesn’t mean it’s only going to be there for indefinitely.
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MIKE: We’ve been at higher tax rates. And if taxes do go up to help out with the insurmountable amount of debt, my goodness. That’s a life changing political black swan event. That is a horrible situation for retirees that is lifestyle changing. It’s life changing if it were to go down there. Brian McKnight suggests that it has to go down there. I am agreeing with Brian. I don’t have to agree with everyone, but I do agree with Brian McKnight on this.
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MIKE: Clayton, did you know that social security and the interest that we have to pay on our debt takes up more than half. What is it, like 60 to 80 cents on the dollar of every dollar they get?
CLAYTON: It was… Social Security, Medicare, Medicaid, and the interest payments on the taxes.
MIKE: Yeah. Just the interest, not paying it back. Just the interest.
CLAYTON: 66 cents on the dollar.
MIKE: 66 cents on the dollar. So that means the remaining 34 cents has to pay for everything else including payback.
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MIKE: 34 cents on the dollar to pay for everything else. Do you think taxes, Clayton, are gonna remain historically low indefinitely? What a leading question, I know.
CLAYTON: I’m just gonna laugh at the question because we all know the response for that.
MIKE: It’s scary.
MIKE: No doubt it’s scary. But our clients who are coming in and implementing the Safer Tax Plan do not have to have that fear.
CLAYTON: And so it sounds like you’re talking about accounts that are portable. IRAs, these can be moved from one institution to the next.
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CLAYTON: But what about these folks that are, I don’t want to say stuck, but what about these folks that only have the option to have access to their 401ks? What about them?
MIKE: Well if they only have access to your 401k and you’re under 59 and a half, invest well. And if your employer offers matching, match it, that’s free money. But if not, I’m suggesting that may not be the best solution. There’s a lot of other options that are out there and it’s not expected for you if you’re not a financial professional to understand how to do this, a job of a financial professional.
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MIKE: I am not gonna walk into an operating room and do brain surgery on someone. Heck, I’m not even gonna attempt to do pinkie toe surgery because I’ll probably give them gangrene and they’ll die or amputate their foot. That’s not my specialty. Sure, I can wash my hands and use a syringe that’s been there. But I’ll probably cut something wrong. I’m just saying, it’s okay to not feel like you have to do it yourself. That’s an abuse and it’s manipulation. A safer retirement ROI, the first part is review.
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MIKE: All we want to do, if you were to call us, is to help open the curtains and see clearly what it looks like. And it is so fun to minimize people’s tax burdens in the future. Because with a pie chart, you can’t really see what’s going on. It’s very convoluted. With a Safer Tax Plan, you can pinpoint to the month when your tax burdens are gonna start taking into effect and how to alleviate them before they become a burden. Clayton have you ever heard about these couponers that will loop coupons together and then they buy like, 100 dollars’ worth of stuff? And the cash register says zero dollars, have you heard about them?
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MIKE: They’re enthusiasts. That’s kind of how I feel about taxes and income planning. I love looping things together and you’re going to pay your taxes. But when you can pay your taxes on sale, it’s much more gratifying than paying full price which is where the numbers suggests are going to go. The compliance department’s gonna be happier that I say it that way.
CLAYTON: Yeah. Yeah.
MIKE: You know, ask me at the bar how I really feel later, right?
CLAYTON: Yeah. Yeah.
MIKE: That’s so to speak.
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MIKE: But anyway, it’s huge. And regardless if you have 500 thousand of assets, 5 million, or 50 million, this is a huge conversation that we are wanting to have with people right now. If you are willing to have it with us. It won’t cost you a dime, don’t bring your checkbook. No financial decisions will be made but the review is eye opening. Call us at 833-707-3030 now. That’s 833-707-3030 or go to Decker retirement planning and on our home page you can sign up for a complimentary review.
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MIKE: And on there you can put a Safer Tax Plan so we know you want to talk about taxes because you’re sick and tired of paying more taxes than you want to. I don’t blame you. I don’t blame you.
CLAYTON: And maybe your advisor, your guy or gal that you’ve been seeing for years, has everything in a row that you feel.
CLAYTON: You might as well get that second opinion.
MIKE: Might as well.
CLAYTON: It’s not gonna cost you anything. That way you can have confirmation that all the ducks are in a row.
CLAYTON: And if they are, great. If there’s not, then you know where the holes are.
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MIKE: Second opinions are great. Did I ever tell you about my second opinion?
CLAYTON: Let’s hear it.
MIKE: So I have, I guess, according to medical professionals that have told me this, there are four sizes of your esophagus. Basically large, medium, small, and my size which is apparently the smallest. I chew my food up a lot because I don’t want to choke on it. And it’s fine, there’s no health issues by any means. But when I, about four or five years ago, apparently stress or something like [that?] happened. But when I would swallow, I felt a lump or I perceived a lump that was in my throat.
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MIKE: So I went to an urgent care. Not an emergency but like, oh, well I’ll just go to urgent care and see what they have. And he says, well it could be cancer. You should probably get a second opinion on this. So I go to a throat doctor and it was an eye, ears, nose throat, yeah, a doctor.
CLAYTON: ENT, yeah.
MIKE: And he says well, it’s good you came in. No, but you should see a masseuse, your neck is really tight. And what you’re feeling is a muscle knot that needs to get worked out. And I said thank you, I’m glad I don’t have cancer.
CLAYTON: Those are two very different extremes.
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MIKE: Very. I mean, I was sweating bullets until he said, nope. It’s good you came in, but no. You’ve got tight muscles in your neck, go see a masseuse. I still had to pay for it, my insurance and HSA wouldn’t cover it. But still, bottom line is a second opinion is a wonderful thing. We call them a fiduciary review because fiduciaries are legally bound to do what’s in your best interest and we are peer bred fiduciaries.
CLAYTON: And something else you mentioned earlier that I don’t think we talked about on the show today, is you mentioned a Safer Retirement ROI.
MIKE: Yeah. ROI, that’s our process. It’s really simple.
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CLAYTON: But we’re gonna be talking about that a little bit more later in the show, right?
MIKE: We’ll talk about it later in the show, but essentially this is how we feel things need to happen for any financial professional. This is our process. Being math based principle based firm, objectively we want to build you a retirement that can sustain the rest of your life. We first start by review. You ever heard the expression ready, fire, aim?
MIKE: I hate that. Hate that. And there’s a lot of financial professionals that will listen to you talk and then say, all right. Here’s your plan. And then do the arrogant takeaway close of saying all right, you want to do it?
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MIKE: And they don’t even know what it is? And there’s not even enough context behind it to do a plan. So we start with the review. We wanted [to?] review, what is going on and how it can happen. And then we optimize it. That’s the O. That’s the part where we’re minimizing your taxes, we’re maximizing your income, we’re planning for the beneficiaries, we’re going through the ins and outs to optimize your plan. And then we say, okay, do you understand your plan? And if you say yes, this makes sense, and then we will go to implementation. Would you like to proceed or would you not like to proceed?
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MIKE: Those who don’t implement it, doesn’t cost ‘em a dime. But the value they got out of it, I’ll tell you what. Take that to the bank. I have yet to meet someone who did not come in and learn something that made their retirement easier. When I say easier, I mean save them a ton of money. Helped avoid a tax catastrophe. Helped, and this is one of my big ones, helped create their estate planning with their attorney a situation that would not ruin their kids’ lives.
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MIKE: ROI, maximizing your retirement is done by first reviewing, then optimizing, then implementing should you want to do so. We are a no pressure environment. We just want to give you the facts and let you, the educated person who for goodness sakes has worked and saved your whole life. If you have a retirement savings, good for you. You’ve done a few things right. If you don’t, I’m not suggesting that your life is a mess. There is some horrible things that can happen that can be financially devastating to people.
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MIKE: Divorce, illness, the list is gonna go on. So I’m not suggesting that if you don’t have retirement savings that you’re an idiot, that’s not the case at all. I’m simply applauding those who have retirement saved up, good for you, good job. You are competent enough, you’re smart enough to put your retirement together. It just helps to bring in a specialist to help you along the way. You’re not an idiot. And any financial professional that has that fancy jargon that’s supposed to confuse you into it, just get rid of them.
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MIKE: That’s so annoying. [LAUGH] Anyway, that brings me to actually my next point on the secure act. Because financial professionals use a lot of fancy words to confuse people into buying crappy products. Annuities are now available in 401ks and I can’t stress this enough. And Clayton, you’re laughing because I bet you, you can’t even count how many times you’ve had to have this conversation with someone that had an income annuity or a variable annuity. Yeah. That seven percent you thought was guaranteed, it’s not actually guaranteed.
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MIKE: It’s a fictitious account that it’s guaranteed on. I can, I mean, how close can we get to Mr. Ponzi and his scheme before someone whistle-blows it. How close can we get to Bernie Madoff and the crap that the pulled.
CLAYTON: This just makes me cringe because I know there’s gonna be a lot of 401k plan advisors that are gonna say, great. Now we can push an annuity as an option when somebody gets to a certain point.
MIKE: And here’s the pitch. Hey, you know how your company doesn’t offer you a pension? Well guess what. In your 401k, you can start investing and do a self-made pension and here’s how.
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MIKE: We’re gonna grow your assets into 401k that we’re managing for you and we have, quote, “low fees”. Oh, and guess what? It’s guaranteed seven percent. Can you believe the accumulation value on that? And then we’re just gonna divide it by an arbitrary number that are actuaries then decide. But then you get a lifetime income of whatever happens. You get lifetime income just like an income. Stop.
MIKE: That is not at all close to the reality of what is actually happening and it makes me sick how many people have been taken advantage of income annuities.
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CLAYTON: Yeah, and that’s what it’s gonna be like. I ran into this as lot with folks that would come in and say, hey, yeah. I met with this guy or this gal that they really thought that this was a great thing and they said hey, just put 50 thousand or 150 thousand dollars into this and it’ll take care of you.
MIKE: Yeah. That’s a lot of money by the way, for anyone.
CLAYTON: Yeah. But there was no end goal. There was no plan. There was no why are we doing this? It was just, here. This will give you some income later in life, good luck.
CLAYTON: Hope you can figure out how to use this. Don’t call me unless you want to buy another one.
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MIKE: I was, you know, at Breckenridge. This was the day that I could go do the black diamonds because my family skis green circles and it’s just petty. But anyway, skiing at Breckenridge, beautiful blue bird day. And love talking to people on the chair lifts. And I say, hey what do you do? And he says, oh, I’m a pilot. And we get chatting here and he says, what do you do? I say, I’m a financial professional. He goes, do you sell annuities? I said, what do you mean? He says, my mother got coaxed into some sleazy insurance salesman to buy some income annuity and I am pissed.
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MIKE: And I said, yeah. That makes sense. And I asked him a few questions and I said, was there a guaranteed percent? He says, yea. Was it even relevant to the cash value? Nope. Did your mom know any of this? Nope. Yeah. Sounds about right.
MIKE: And it’s sad. It’s really sad, unless you want an average return of one point eight percent. Which is the average we’re seeing come through our door. You’re over your income, and income annuity is not a fit for you. That’s my suitability.
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MIKE: Here’s my suitability. Would you be happy with one point eight percent average annual return for the rest of your life? If answer is no, okay. Good talk. Let’s move on.
CLAYTON: Do you know what other accounts are paying one point eight percent right now? Savings account. And they’re fully liquid.
MIKE: Oh, anyway. There are annuities out there are effective if it’s a cash play for accumulation that you are handling your own distributions. I don’t want to blanket statement every investment out there. But do you know how many out there are earning over four or five percent?
CLAYTON: You’re finding diamonds in the rough at that point.
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MIKE: I can count them on my hand. And there’s over 14 thousand indexes and [chassis?] and I can count them on my hand.
CLAYTON: There’s a lot of stuff out there. So with all this, before we get into it because we can go down into the technical discussion of it but that’s our passion. So we would love to talk about that and we could for hours and we have. But we don’t want to bore any of you with that. Yeah.
MIKE: Not right now, not on radio. We don’t want you to fall asleep at the wheel.
CLAYTON: Right, so with that we just want to give a word of caution for anybody who has a 401k, you’re not quite ready to retire, your work won’t let you roll it out of their plan yet for various reasons.
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CLAYTON: Just, I hope the red flags go up if somebody starts talking to you from your 401k plan administrator about getting an annuity.
MIKE: Mm-hmm. If you have one, call me. Right now. Please. So we can do a simple review and show you how it’s actually working for you. I don’t need to do business with you, but this is a public service to help you understand what it actually is and then you can make an educated decision saying yes. I want to keep it. Or what are my options?
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MIKE: Probably not gonna liquidate it right away either, because it’s probably illiquid and we’ll have to wait until it is there. But at least we can educate you and we’d be happy to do that. Call us at 833-707-3030. What’s interesting is those who think they have a good annuity are the ones that typically don’t call because they’re believing the lie that they were told. They don’t want to believe that they were lied to. So if you have an annuity and think it’s good, call me. I would love to be proven wrong. 833-707-3030 schedule a visit or a call.
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MIKE: We can dive into that. I have yet to be proven wrong. All right. Let’s dive into some important dates here for 2020, and then we’re gonna talk about the 2020 predictions. Okay, there’s a fun kind of kick off to the year. Dates simply, tax April 15th, that’s a very common day but this year it’s on a weekday. So there’s no confusion on that. Just pay your taxes before April 15th. If you want to extend your taxes that’s fine, just make sure you don’t owe the IRS anything. Owe the IRS, isn’t that ironic?
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MIKE: Owe the government something that the IRS is overseeing. But make sure that you don’t owe anything, because if you extend and you owe money, you have to pay the interest or the fees of missing the deadline on that. It’s not worth it. I extend every year because I get my payback. You want to hear something funny about extending? If you filed an extension, you have a statistically less likely chance of getting audited. I have no issue if I got audited. I’m a tax paying citizen, I believe that we need to pay our fair share and all of that. But I just don’t [need?] the hassle. [LAUGH] It’s that simple.
CLAYTON: That’s fair enough.
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MIKE: I don’t want to deal with the hassle. And the majority of audits are booked before April 15th. So, extension, if you don’t owe the government anything it’s not that bad of a route. That’s a fun fact that I heard, I can’t actually statistically back that up. That’s just a rumor that happens within the financial professionals. Which a lot of them do extend for that reason, isn’t that funny?
CLAYTON: That’s pretty great.
MIKE: IRA, this isn’t a date, but IRA contributions, six thousand this year if you’re 50 or under. If you’re 50 or older it’s seven thousand.
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MIKE: You got an extra thousand for catch up period, that’s not that bad. Be mindful of the contributions. It doesn’t make sense to have 100 percent of your assets into IRA funds because then every time you take income in retirement, you’re paying income taxes. There’s other efficient ways to do that. So get with a financial professional or get with one of our purebred fiduciaries to be aware of, should I be contributing right now? Or should I not? Should I contribute to a Roth, to an IRA, or whatever the situation may be.
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MIKE: CPAs are a great resource, but typically CPAs are historians. Financial professionals are predicting your future, projecting your future.
CLAYTON: Well, and it’s points of views and they’re both right. Financial professionals, if they talk about converting to a Roth or using a Roth that’s because they’re looking at a longer time horizon, 20 to 30 years in most cases.
MIKE: Mm-hmm. Mm-hmm.
CLAYTON: For CPAs, they’re looking at the one year time horizon. They’re just looking at the last year, how to lower your effective tax rate as much as possible.
CLAYTON: But the difference is what’s that gonna do to you in the future.
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CLAYTON: Right? So be mindful of that. Another point with IRA contributions is with the window for 2019 contributions is still open.
CLAYTON: So that is another consideration when making your contributions that now until I believe it’s April 15th, you can contribute to your IRA for 2019.
MIKE: Mm-hmm. That’s correct. That’s correct.
CLAYTON: So if you want to put a little bit more in there and pad your savings a little bit more, you got a little bit extra. Maybe that Christmas bonus came through and you didn’t spend it all on the holidays.
MIKE: Good for you.
CLAYTON: Yeah. You’ve got a little bit extra you can toss in there.
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MIKE: Now let’s talk about Medicare, Medicaid. The enrollment period is now, and it goes until March 31st if you’re 65 years or older. Make sure to enroll, even if you don’t need it, enroll. Because if you don’t, there’s a penalty. And it’s so unnecessary that there’s a penalty there. But if you’re 65 years or older, enroll. There’s different packages, different plans, Google’s a great resource for this if you need some help with it. Or there are Medicare, Medicaid professionals that can help you with that. But it’s unnecessary to not enroll and pay a penalty. So enroll. March 31st, that deadline.
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MIKE: Let’s talk about 2020 predictions now. These are predictions and talking points to be aware of and folks, what we’re talking about here is not just to be aware of or pay attention to. But what we’re talking about may have financial implications in your retirement depending on the outcome. So to be mindful with all that, the flu season’s upon us. So I want to talk about healthcare. You’re not sick, I’m not sick, thank goodness. Let’s stay in this studio for as long as we can while everyone else gets sick.
CLAYTON: Yeah. No kidding.
MIKE: The flu is just terrible this year.
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MIKE: Oh, it’s horrible. But what’s interesting is the healthcare industry, Clayton, is dominated by the government, insurers, and employers. They’re really the ones setting the rules and regulations on how the healthcare system is happening. What also is interesting to notice, is that the out of pocket expenses is coming up to the same amount of expenses in America as we spend on travel.
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MIKE: Seems like if I could be paying a bill because I got sick or I could go to Hawaii for a week, I’d rather pay for Hawaii for a week. But yet we’re paying more and more in healthcare costs because of the environment.
CLAYTON: Yeah, either we’re getting sick too much or not going on vacation enough.
MIKE: Well the trouble is we’re living longer than we ever have before and we’re sicker more than we [ever?] have before. That’s a conundrum. Now I believe in genetic individuality. Obviously we all look different, we all act differently. But bio individuality suggests that our bodies are gonna process food differently.
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MIKE: Food equals nutrition or energy in our body. We eat, we have energy. Thermodynamics. Your input is gonna be relevant to your output. I’m not a thermodynamics specialist. That’s not my calling in life. But what you eat is going to produce a result to your body.
MIKE: I’m gonna be very hyperbolic here. If you only ate bacon for the rest of your life, you have a high probability of not feeling well for the rest of your life.
CLAYTON: Oh but it sounds like it would taste so good though.
MIKE: It tastes so good. So in the moment it would be good. But there are a lot of fads out there.
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MIKE: Veganism, the vegetarian diet, the paleo diet, the keto diet, the 80 20 rule. There’s a lot of fads out there. For all of you retirees, this is probably the biggest health cost saving advice that I could give you. There’s something you can do. Actually, I didn’t tell you I was gonna talk about this before the show, Clayton. [INAUDIBLE]
CLAYTON: Hey, this is great.
MIKE: I’m curious to see what you think about this.
CLAYTON: Yeah, let’s hear it.
MIKE: There are tests that you can take, blood work that can be done, that look at your genetics and find out genetic mutations, predispositions, or subtle autoimmune disorders that you may have.
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MIKE: For example, there is something called MTHFR. MTHFR mimics celiac and lactose symptoms so you can’t have gluten or milk or dairy products. But it’s not that extreme, it’s a bit subtler. What it means is it can’t digest gluten, it doesn’t know what it is. It confuses it with another protein that would be harmful for the body and attacks it. Or fully it can’t digest what sits in the gut for a long period of time until it eventually just kind of breaks down and goes through your system.
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MIKE: It creates brain fog if they were to eat gluten and dairy in this genetic mutation as well as other systems that create resistance for your body to do what it wants. Which slows down the healing process and speeds up the decay of your body. If you had that, I bet you most medical professionals, or if you feel foggy after you eat a lot of bread and dairy, most medical professionals are not gonna know how to identify that. How do I know that? My wife has MTHFR and it took her 10 years of talking to medical professionals and appointment after appointment, doctor after doctor to find it.
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MIKE: Until she found a holistic medical doctor, medical professional, that ran the test, found the research, and then said if you just get rid of gluten and dairy in your life, you’re good to go. For me, I can eat gluten until the cows come home. And boy, I tell you what, sourdough bread and all the different ins and outs, oh. It is good for me. But she doesn’t eat that. Bio individuality. We are eating in our house in a way that allows our bodies to maximize the health benefits and let ourselves heal ourselves to extend our life to be the healthiest possible.
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MIKE: And we’ll talk about the time frame in a little bit. But any person who would be willing to be nutritious conscious about their health, I’m not suggesting that you need to eat certain ways. For example, my wife needs to eat red meat to get the iron because she’s iron deficient based on her bio individuality. I have no problem getting iron in my diet and so I have fish once in a while and I eat a lot of fruits and vegetables and stay healthy. A lot of beans. When you eat how your body wants you to eat, you avoid a lot of the health problems that are extremely expensive and very frustrating to deal with in retirement.
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MIKE: Doesn’t cost that much, but if when you call, look for a medical doctor that has a holistic background. Holistic and medicine tied together is a very beneficial situation and it can save you tens if not hundreds of thousands of dollars later on in your life. When implemented correctly.
CLAYTON: Well, and it’s like, so my wife and I we’ve got different dietary needs. So we typically stick to different diets.
CLAYTON: Similar situation that you’ve got going on, but I can’t relate ‘cause we don’t have those same health issues.
MIKE: Different genetics.
CLAYTON: Different genetics, different diets.
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MIKE: Mm-hmm. What’s your ethnicity? I’m Lithuanian, Irish American.
CLAYTON: So, I did one of those genetic tests and it took….
MIKE: Are you English? You look English.
CLAYTON: Yeah. Yeah. I’m like 75 percent from like the UK, so.
MIKE: Have I told you my wife is?
CLAYTON: She is…
MIKE: She’s Japanese, Chinese, Italian, Bohemian, Irish, and Korean. All mixed together. That’s a confusing bio individuality so we had to really dig to figure out what in the world her body was doing.
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CLAYTON: That’s quite the melting pot. Yeah. Yeah. Well and you mentioned those different doctor types. So, you’ve got the allopathic medicine doctors, those are the MDs, right? Those are the ones that study the traditional medicine. They go to the medical school.
MIKE: Medical doctors study medicine, medicine is take a pill and it fixes you.
MIKE: DOs are holistic doctors that want to use nutrition and other ways to heal you. And then you have your nutritionist, your dietitians, and the other subcategories of medicine that could influence that as well. It just can’t be all in one.
CLAYTON: Right, so the doctors and the DOs are the doctors of osteopathy, right?
CLAYTON: That’s what you’re referring to?
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CLAYTON: Yeah. And then you’ve got your naturopaths as well that are at the other end of the spectrum.
MIKE: I’m not suggesting one over the other, I’m suggesting get them all in the same room if you can.
CLAYTON: Right. And the tie in, I think, for those that are listening or just tuning in and hearing us talk about, this is a retirement radio show, right? We’re talking about medical needs and doctors.
MIKE: Yeah. Healthcare costs are going up.
MIKE: Do you want to take pills that are more and more expensive, or do you wanna help your body heal itself and not?
CLAYTON: And does your plan account for those increased costs over time?
MIKE: Yeah, it’s about 300 thousand I believe is what I last heard of medical expenses a lot of retirees are going to have if they need long term care insurance.
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CLAYTON: Yeah. It’s frightfully expensive.
MIKE: Do you have 300 thousand just laying in the couch cushions?
CLAYTON: Right. [LAUGH]
MIKE: I mean you have to account for that. And I know we’re talking about nutrition and health and medical professions, but a lot of it also has to do with proper planning. And we’ll talk about the principles of proper planning here in just a moment. But it’s the whole picture and what it all looks like. Man, we’re running out of time here. So we talked about healthcare and the importance of understanding minimizing your costs, be healthy, exercise.
CLAYTON: Take care of yourself.
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MIKE: Take care of yourself. Your costs will have a higher probability of going down. The next one we’ll talk about is student debt. Now I know it’s a hot political topic. I don’t want to get political at all on this show. For goodness sakes, we are tired of politics since the last election. It’s just bickering. It’s all about who is right and who’s smarter. I don’t care. What is right is what I care about.
MIKE: Student debt is becoming an epidemic and here’s why it matters to anyone that has money, small or large.
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MIKE: It’s the defaults that could happen if student debt gets so out of hand that students cannot pay their debt and they start defaulting. That right there could be a pinprick that starts a contagion for another 2008. Clayton, do you remember what happened in 2008?
CLAYTON: I do remember.
MIKE: Not just the market crash, do you remember like why the market crashed?
CLAYTON: Right, it’s because you had all of these supposedly high rated mortgage backed securities that were stacked up like Jenga blocks. On the lowest tier, these were these C rated instruments that were the foundation that was holding up these triple A rated options or investments.
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CLAYTON: So that’s the same thing that’s going to happen again if this bill comes due and there’s no one there to pay it.
MIKE: In a little bit different way, but yes. I mean it’s not mortgages, it’s now student debt. And who’s holding the debt? Where is it? Who’s holding it? Who’s accountable for it? Who’s packaging those debt or bonds as well that are going to go to someone else to carry that burden and how’s that all look?
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MIKE: It’s a very complicated situation. And if you want to be really depressed about it all, just watch the big short and you can relieve 2008 and remember how crooked the system’s going to be. Now, there may be some changes happening if Bernie Sanders or Elizabeth Warren have their day. There may be some drastic things that are happening. And I’m not suggesting that’s good or bad, I’m just saying that there would be change that would be significant in the whole environment. But student debt is just one of the massive issues and defaults are devastating for a quick financial downturn. Every seven to eight years, there’s an 80 percent chance, roughly speaking, of a significant market downturn.
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MIKE: We didn’t have a significant one in 2015, but we had one in 2008 and 2001. The pattern proceeds, I guess in the past, and it goes down for years and years and years. Corporate debt, we’re not gonna dive into this too much, but I want to just throw this out there as well. There is more triple B rated corporate debt than ever before.
MIKE: If the corporate debt goes down one grade, then major pension funds and 401, a lot of portfolios that are required by law to hold investment grade debt will have to sell it.
CLAYTON: Well and…
MIKE: That’s an avalanche of problems.
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CLAYTON: Yeah. And I want to touch on that just a little bit. Because there are effectively two groups of ratings for bonds. You’ve got investment grade and you’ve got junk bonds or high yield bonds is what they…
MIKE: Junk. High yields is the nice way to say junk.
CLAYTON: Yeah. Junk bonds is the most appropriate.
MIKE: Russian roulette bonds.
CLAYTON: Yeah, that’s the low rated. You might as well be in a stock. That’s kind of where you’re at. It could go up, it could go down.
CLAYTON: You’ve got all those issues. So, but there’s two categories. Investment grade and junk.
CLAYTON: And businesses have figured this out and so that’s why, even though you hear triple A rated and double A, single A, triple B.
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CLAYTON: Those all fall into that investment grade, but you can still be triple B, get that investment grade but one wrong move, one wrong step, and you are now in the junk bond territory with the double B rating.
CLAYTON: And that’s where you need to be mindful. So if you’re concerned about this or you think you might have some bonds in your portfolio, just give them a quick scan.
MIKE: Mm-hmm. Okay.
CLAYTON: On your statements, see what the rating is of them.
CLAYTON: Another indication is what is the power rate on that bond. But that’s a different topic for another day. Check the value of the bond, go through your statements, if you want some help with that give us a call.
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MIKE: Now, other topics to be mindful of is climate policy, identity theft or security policies, and I’ll even say Homeland Security as well as a policy. Let me talk about, real quick, Homeland Security. Homeland Security is because in 2011 for example, horrible day. Not 2011, 911 2001. Horrible day. Black swan event. Really didn’t help our economy. Okay? I know people say war sells.
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MIKE: It’s still a terrible thing and it hurts our economy. Iran is a very big deal. If that escalates, it could significantly hurt our economy. It could instill fear into an overbought market which has a cascading effect going down. If we go to war with China, we’re in a trade war right now, but it seems to be working out okay. But if it doesn’t work out or something happens or North Korea decides to fire some missiles, fear in the economy is devastation. And stocks go down. Like clockwork, it happens when these tragic moments happen.
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CLAYTON: And we see that. If you look, just grab a chart of the S&P 500 and look over the last five years, if you see a drop of more than one or two percent in a day, if you look at the news from that week you’re gonna be able to see something tied to that event.
MIKE: Mm-hmm. Some fear. So I want to go back to identity theft and crime. There’s [gonna?] be some policies in there. I don’t think that will affect us financially as much as just make sure that no one’s stealing your money.
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MIKE: Identity theft is a huge issue. And though the markets may be fine, your cash may not be. Pay attention to the policies in the news that are happening there. Make sure that you’re protected from the different sketchy places that are out there online.
CLAYTON: Yeah, and you can get the credit monitoring services, you can freeze your credit through the different agencies. There’s a lot of steps you can take that are simple and inexpensive to be able to protect yourself to give you some peace of mind at night.
MIKE: Mm-hmm. Mm-hmm. Now, with climate policy, I’m not being political here at all. I’m only looking at this from an economic standpoint from the consumer price, okay?
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MIKE: Climate policy, we don’t fully understand what it could look like over the next 10 years. There’s a lot of development, a lot being figured out. The first wave that I noticed of climate policy was at my local grocer. They said it’s gonna cost you a few cents to buy a paper or plastic bag. The intention is to use reusable bags and pay for the costs if you are gonna use something like a paper bag that’ll be recyclable. And frankly, I don’t really mind that. I mean, my wife and I we have our little, we love Lululemon clothing.
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MIKE: I think their T-shirts are incredible. So we have these Lululemon bags that we’ll bring to the grocery store and we’ll fill our groceries in there and take them home. And it’s reasonable and it’s sustainable. And that’s all fine. But what would happen if all plastics were taxed for all goods? What would happen if oil were taxed if it were put into products? What would happen if diapers, I just found this out, takes 100 years to decompose, are taxed because of the lack of their ability to decompose.
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MIKE: There’s a lot of what ifs and hypotheticals that we could do that would drive costs up. And if they drive costs up, it could create rapid inflation. It would adjust significant lifestyles that we’re wanting to live. There’s two kinds of inflations to be worried about. The first one is the one that government controls. And that government can control it. We’ve got the Fed in place, they can manipulate it, they can print money, they can take care of that. But the other one is the goods related inflation. Clayton, I know you didn’t live in World War Two.
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MIKE: Or World War One. But have you heard the stories about people taking a wheelbarrow into the bakery to buy a loaf of bread?
CLAYTON: Yeah. And that’s scary to me. You think about that, that inflation for that to happen. I remember hearing a story about…
MIKE: And to be clear, I’m not suggesting that climate policy is going to be the cause of this. I’m saying this is one of the sectors or types of policies among many others that if gotten out of hand, could create rapid inflation like this.
CLAYTON: Right, and there’s other countries that have experienced this within the last 20 years.
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MIKE: What’s that, Argentina, Venezuela, did Japan have it? Japan didn’t have it. They just have negative interest rates. Which is a little crazy.
CLAYTON: Yeah, they’ve just dropped their interest rates negative. So there have been a few, but I’ve heard stories of folks that would get paid in the morning. And they would give them their paycheck and actually give them a chance at break to go and cash that paycheck and do their grocery shopping. Because if they didn’t, by the time they got off work and got to the store, that paycheck would purchase them half of what they anticipated.
MIKE: Mm-hmm. Government cannot control this kind of inflation.
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MIKE: And so it’s something that is a reality. Again, I don’t think it’s gonna happen in the near future, but if you’re retirement’s over 30 years, are you set up for this? And a way to help protect yourself through this, it’s simply the principles that govern proper retirement planning. I’m gonna just go over them real quick if that’s okay with you, Clayton.
MIKE: The first principle is draw income from principle guaranteed sources. In high inflation, in high volatility situations, when you draw income from a principle guaranteed account you’ve cut out the downside risk. So your income is guaranteed.
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MIKE: And that’s just a straight up principle. Any retiree that draws income from principle guaranteed accounts, they do not have to worry about market crashes, the volatility, and the different ins and outs. Our clients, we recommend to plan your income for the first 20 years of retirement and then you can make adjustments going forward. The second principle’s to diversify by purpose not just by risk. And that’s just simply to say there is no one investment that meets all needs. And you can’t diversify yourself into perfect investments simply by risk.
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MIKE: 2008 is one example of many to where you can’t draw income from a fluctuating account and ignore the first principle and so what do you do? You diversify by purpose, by having some assets that are accounted for income and you ladder them out appropriately. Then you have some account that you don’t need to touch for 20, 30 years. Those can have risk because over time, the projection would be just fine. Then you have your emergency cash or discretionary cash or near big term purchases. The bottom line is, structure it for success, don’t diversify with hope of risk.
RR S3 E29 BIG RETIREMENT CHANGES IN 2020 [00:56:10]
MIKE: The third one is to use a distribution plan and not the pie chart guesser. This third principle allows you to articulate not only the retirement that you want but identify the big pain points before they are pain points and we can resolve them. There’s a reason why we vaccinate our children. Now let’s assume, I know this is another hot topic here, let’s assume there was no direct correlation with vaccines and autism. Let’s assume that vaccines were 100 percent safe and good to go. Vaccines prevent the problem before it happens.
RR S3 E29 BIG RETIREMENT CHANGES IN 2020 [00:56:40]
MIKE: Distribution planning in a Safer Distribution Plan prevents the problems before they happen. That’s the point of it. So for anyone that wants to get involved and see it, a Safer Distribution planner or a Safer Tax Plan, call us at 833-707-3030. We’re here helping people maximize their retirement. Retiring years before they thought they could and getting more money than they thought they could and reducing the risk by 70 plus percent. We love doing it every day in our offices in California, Washington, or Utah. That’s 833-707-3030, Clayton, we are out of time. Thank you for joining me on the show today.
CLAYTON: Thanks for having me, Mike. Love being here.
RR S3 E29 BIG RETIREMENT CHANGES IN 2020 [00:57:18]
MIKE: Now for all of you, same time, same place next week. We’d love to have you on the show on the same radio station. You can also catch us via podcast, iTunes, Google Play, iHeartRadio, wherever you get your podcasts. We’d love to have you listen. Next week we’re gonna be talking about living retired abroad as well as the retirement timeline. Understanding your health and the clock is ticking. How do you maximize everything that you want? Also on our website, we have a series of book called A Safer Retirement Series. We’ve written them for the Safer Retirement for the engineer, for the medical professional, for the attorney, for the pilot. The list goes on. You can download the first few chapters for free on our website at Decker retirement planning dot com. Hope you enjoyed. I hope you’ve enjoyed the show. We’ll talk to you same time, same place next week.
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.