Are you truly ready for retirement, or are you headed for a retirement disaster?
In this episode, April Schoen and Matthew Wallat share their insights on creating a comprehensive retirement plan to avoid common pitfalls and ensure a worry-free retirement.
In this episode, you'll discover…
The surprising similarity between an adventurous trip and retirement planning
The crucial step that brings relief and excitement to clients nearing retirement
How to adjust your investment strategy as you approach your golden years
The key to unlocking a successful retirement through systematic saving
The often-overlooked aspects of retirement planning that could derail your dreams
Mentioned in this episode:
Transcript:
April Schoen: Hello, and welcome. So glad you could join us today. My name is April Schoen, and I'm sitting here today with Matthew Wallat.
Matthew Wallat: Hi, everyone. How are you guys doing today?
April: So we're really excited to have you join us today as we're going to be talking about retirement success made simple. And I want to focus on a key word there, which is success. Retirement success. So as we're going through this talk today, I want you to think about what does that mean to you? What would it look like for you to have a successful retirement?
And just start jotting down some ideas about really thinking about what do you want retirement to look like? And what would be some of those key components where you would know, hey, this is a successful retirement or as I'm getting ready, I know that this is going to be successful. Here's what we're gonna be talking about today.
We're going to talk about some step by step strategies on how to help ensure that you can have a confident and worry free retirement. That's what I want to ask you today is for you being on this talk today, who would like to have that? Who would like to have a successful retirement? Do you want to have a retirement where you feel confident?
You know your money's working for you. You know, what your income is gonna look like now and in the future, because if that's you, then I'm glad you're here, because those are the things that we're gonna be talking about today. And, as we're gonna get into this, I first just want to tell you just a little bit about Matthew and I.
What we do, who we are, and how do we help clients. So Matthew and I work with a wide range of clients from those that are at retirement's doorstep, meaning they're about to step off into retirement. It could be that you're a few years from that. So you're thinking, well, I'm not there yet, April.
But maybe I'm in this five to eight year timeframe for retirement. And if that's you, then I'd be thinking too, as we're going through this, what are some things that I should be doing now, to make sure that I'm gonna be in the best position possible when I get there? And then what if that's not you? What if you're like, well, April, I joined this because I want to make sure that I'm doing the things I need to do today to retire.
But it's a long ways off. It's, 10, 15, 20 years away from now, and I really want to know, what are the things that I need to be doing today so that I can have a successful retirement. Again, if that's you, I'm glad you're here, because we're going to be talking about a wide range. And you're going to know exactly how that applies to you and which pieces are going to be most impactful for you.
So as we get into this today, Matthew, one of the things I thought about was last year how I went on a trip with my boys, and I wanted to talk a little bit about that trip that we took, because it was a point of interest. So I have two boys. When we went on this trip last summer, they were seven and 10. And this was their very first flight.
They were so excited. I know they were a little bit nervous as well. It's fascinating to kind of think about I'm going on a trip with someone when it's their first time and all of these new experiences. So like if you've been on a flight before, you know what it's like to go through security. You know how it feels when the plane takes off.
You know how to handle that bathroom situation on a plane. But for them, this was all new. New experience. And we were prepared as we possibly could be for this adventure. We talked about it. We watched YouTube videos. We had our bags packed, we got to the airport super early. We had plenty of time between our connections.
So was ready to do this. And this trip we took it was just me traveling with the two boys. My husband was, actually he was out of town as well, for a family wedding he was attending. So anyway, so as life often does, it definitely threw us a curveball, because our first flight out of Tallahassee was delayed. And so we were delayed getting to Atlanta.
And the longer we sat there waiting for this plane to take off the more nervous I became because I knew that that window for us to catch our next flight was getting shorter and shorter and shorter. And if you can believe this or not, the reason for the delay was a paperwork issue of all things. Paperwork. Some of you can resonate with me on on that and seeing paperwork issues in other parts of our lives.
So here we are waiting for this flight to take off height, all I could think about was like, what's going to happen when we get Atlanta? Are we going to make our next flight? I'm running through all the contingency plans. But what if we don't. So when we get bumped to another flight, will we be able to actually all still sit together. And that was my next main concern, because I didn't want us to be separated on some other flight.
But let me tell you about the boys, they were super excited. They thought this was super fun, because like I said, when we got to Atlanta, we had five minutes to reach our next gate. Five minutes, which is not a lot of time. And what I did is I told them. Hey, give me your backpacks. And we're just going to run to this next gate.
We just have to hold hands and keep up with each other. And we took off. And what was great is we did make it who were the last ones on the plane, but we did make it to our next flight. But what made me think about this from more thinking about today's talk and conversation is I know, we've all been there.
We've all had these times of uncertainty. And so if you are thinking about retirement, depending on how close you are, there's definitely some uncertainty around that too. And we can really think about the importance of being resilient, being adaptable. Being prepared as we can be. And that's really going to help you when you're helping get ready for retirement as well.
And the other thing is, is having someone with you to go alongside you and help. Because as nervous as I was, the boys didn't feel any of that. And that's because they had me as their guide. They knew that someone had been through this before, that I knew what to expect, that even if our flight got delayed, or we had to change flights that I've done that before.
I had navigated those challenges, and I could help them do it as well. Just like us taking this flight last summer, I want you to think about this journey to retirement, it could also be filled with some unexpected delays, uncertainty, even paperwork issues. But being well prepared, being adaptable, getting help and guidance can really make all the difference for you.
And here's what we're going to be talking about today. We're gonna start with the end in mind. We're going to talk about how do you create that comprehensive retirement plan? And we're going to start with the end in mind. We are going to cut to the chase, so you know exactly what needs to go into that. We're gonna talk about how do you then build a financial roadmap around your retirement plan?
And then how do we also avoid some common pitfalls? So let's get into this today of talking about how do we create a comprehensive retirement plan? Well, the first step is to understand when do you want to retire? And that might seem like a simple question. But I know Matthew, when we're working with clients, a lot of times people haven't actually thought about that piece.
About when do they want to retire? So I encourage you today to think about that. When do you want to retire. Again, what I found here, some people get caught up in the how. How am I going to retire? But we don't want to get caught up in the how, we just want to focus first on in an ideal world, when would you want to retire?
Another way I may ask this question is if we could wave a magic wand and have it any way you wanted it to be, what does that look like for you? And not just when do we want to retire? But what do you want your retirement to look like? Now that we're retired and every day is Saturday and Sunday, what are we going to do with our time?
It's so important that we have a plan that we're retiring to something and not just from something. So here are some ideas. Are we going to be focusing on a hobby that we want to spend more time on? Is it golf? Is it pickleball? Is it some sort of collectibles items that we have that we want to focus more on? Are we going to be traveling?
And if so what type of travel are we're going to be doing? How often? What sort of plan that we need to have for that? Are we going to be volunteering? There are certain organizations that we now want to spend more time with because we weren't able to do that in our working years. But now we're able to have a bigger impact from volunteering.
Are we going to stay in our current home where we currently live, or are we going to be moving somewhere? So these are all the things that we really want to focus on when we think of not only when do we want to retire, but at the same time, what do we want retirement to look like?
And Matthew, if someone said, if we asked them this question, and they said I don't know. What would you say would be some guidelines that we would give them, as far as like a typical retirement age? What do we see is like most typical when people retire?
Matthew: So most typical in the United States is about age 65 to 70.
April: Absolutely. That's not for everybody. That doesn't mean that you can't retire early. Some people don't really want to ever retire, and they want to continue working in some capacity. But if we're not quite sure, then that's a good starting place, I would say would be age 65.
A lot of people want to work to age 65, for health care reasons, because at 65 is when you can go on Medicare, so you've got health insurance. So that's always if we're not quite sure, that's a good starting point for us is to say age 65. Now, you may have some benefits through work, that would kick in at a certain age.
That could be 62, 65, 70. So there might be some of those considerations. I also find clients will make decisions about when to retire based on their Social Security benefits. So thinking about am I gonna wait till my full retirement age to retire? And Social Security is actually a topic that we can talk about, for the entire webinar, for the entire talk. And so we actually give an entire presentation just on Social Security.
So if that's something you're interested in, let us know, we'll make sure that you get invited the next time we have one of those webinars. But when we're starting to build this comprehensive retirement plan, we have to know what our goals are. Where do we want to be in the future? What are those financial goals that we have?
Because we've got to have a measuring stick. We've got to have a some sort of timeframe in mind to know we're working towards retiring at 65, for example. That doesn't mean we can't change it. But we got to have at least a starting point. So once we know when you want to retire, and what that's going to look like, the next thing that we want to do is we now want to understand your current financial picture.
So think about this. Where are we today? And I always say if we know the goal for the future, we know where you want to be in the future financially, and then we take a look and say, well, here's where we are today, we can easily look to see if those two things are in alignment. Meaning if we continue doing what we're doing today, for the next 5, 10, 15 years, are we going to wake up in the future and reach our goals? Or are some tweaks needed along the way?
Matthew: April, one of the things that I really love about joining this firm, it's the planning software that we use with our clients, from just starting out, graduating all the way close to that door towards retirement. Whatever stage of life you are currently in.
It's really the first time a lot of people get this ahh, like this light bulb in their head where they see their whole financial world where there's these four domains, and they work interdependently. And these four domains consist up your assets, which are something that we want to help you guys grow, as well as taxes, the liability section, taxes and debt.
We talked about cashflow how money moves on and off the balance sheet where we spend a lot of time with our clients. People feel like money comes in the front door and out of the back door. As well, as we talked about protecting. Protecting your today, making sure you're secure in retirement.
April: Absolutely. Protecting where we are today, but also having things in place to protect our future and beyond. Absolutely. And yeah, you want to have a way to understand where are you today? What are those financial pieces that you have in your world? And and how's that working?
One of our clients that I met with recently, we were going through and she actually found an account she didn't know she had. And I know that might sound funny. And you might be thinking how is that possible, but it's actually very common. And we see it a lot where something got set up a long time ago, and we just forgot about it, or we haven't really been getting statements on it.
And we kind of lose track of some of those things. So part of it is just understanding exactly what we have, how it's working, and what sort of tweaks may be needed on that. And specifically, I know Matthew, you were just mentioning assets.
So one of the things that we do in our work with clients is we do an investment analysis, where we take a look at here's what I currently have from like an investment retirement account standpoint, we peel back the layers of that onion to say well, what are we exactly invested in? First and foremost, so that they understand that.
And then is that how we need or want to be invested? One of my clients I met with earlier this year he had an investment account and when we did our analysis, we discovered he was 95% stocks and 5% bonds. That was very ultra aggressive. And that's not how he wants to be invested. I've been working with him for years.
And so I know he's he's actually more on the conservative side. And this is an account that just hasn't been looked at in a long time. It's done well, but it's gotten out of balance for him. So that's one of things that we want to look at is do an investment analysis, and really be thinking about our accounts in different types of buckets, and how should they be positioned for that?
Matthew: Especially positioned towards retirement. Those changes. If you don't touch an account for four years, and you're really close to retiring, there's things and tweaks that need to be made to make sure you have that secure retirement.
April: Absolutely. Or I was just thinking about someone else, where we had to flip some things. Where she had some retirement accounts that were very aggressive, that now they're going to be taking money out of them, we needed to pull back some of that risk and not be so growth focused. Because like I said, she just retired this year, she's starting to take money from those.
But then there were other assets that were invested too conservatively. And now we need those to be growth focused, because we're not touching those. And we're being very strategic about which accounts we're tapping into, and not for taxes, liquidity, growth, all those things. So sometimes it's just about looking to see what we currently have.
And then talking through, does that make sense? Or do we need to make some some changes in that regard? Now, one of things that we do for our clients is we do what's called a retirement rehearsal, or a retirement baseline. So it depends on where you are in your stage of career, how long we have until retirement.
As we get closer to retirement, it's easy to do this retirement rehearsal. So think of it a dress rehearsal, where what we're going to do is we're going to fast forward you to retirement, say, hey, I'm stepping off into retirement today, what is my income going to look like in retirement? What are all the different streams of income that I'm going to have?
Maybe I have Social Security? Maybe I have a pension? And then what are those other assets we have? Investment accounts, retirement accounts. How are we actually going to pull money from those, withdraw money from those to create an income?
And this is where we get into the granular details. I know, Matthew, for a lot of our clients, this is where we have a lot of confusion. Where clients have done a good job saving throughout their careers. Like I said, maybe they even have that pension, they know they're gonna have Social Security. But there's a lot of questions about what is this actually going to look like for me?
Matthew: Yes.
April: Or how do I actually start to structure this income? What's involved in that? How much should I be pulling out? What do I need to do about taxes? There are just lots of questions and decisions that we have to make around this piece. But the retirement rehearsal for me is, is very fun. Becuase for us, it's like a financial puzzle. We get to throw all the pieces on the table, all your financial pieces on the table and say, how do we put this together in the best way possible for someone?
Matthew: And for a lot of our clients that we meet with, a lot of them, just uncertainty of the unknown of what retirement really looks like. Now actually looking at it. And once people actually look at it, once we do this, it's just that awe of relief that you see in their faces. Like, wow, this feels amazing. Like, wow, this is actually what my retirement is going to look like.
I can live off this and have a great retirement. Because that's what we want our clients to do. Enjoy retirement. You've worked, 40, 50, 60 years for most of you people and you just want to enjoy retirement.
April: Absolutely. You know, I was just thinking about a client I met with a few years ago, and she came in for our retirement rehearsal meeting. And later, she told me, she was so nervous when she came in, because she thought I was going to tell her you can't retire. That's the fear. I think for most people, the fear is I can't actually afford to retire.
Or it's yeah, I can retire now, but I don't want to have to go to back to work when I'm 80. So those are some of the issues, some of the big concerns that people have. So that's why we want to look at these numbers in black and white. And I remember going through the retirement rehearsal for her and it looks really good.
She's gonna be it's such a great position she still has a few years before she retires. And she walked out of there on cloud nine. She said, April, this is the best meeting we've had. This looks way better than I ever thought that it could. And to your point, Matthew, it gave her like, you could just see it.
You could see the stress off of her shoulders, and how she felt more relaxed and knew exactly what this plan was going to be. And then one of the things we did is not just talk about, okay, here's what your income is going to be.
But then it's like, well, now how do we make it better? How do we tweak it and make it better between now and then? What are those things, those key components that we need to be focused on between now and retirement to make it even better?
Matthew: And also, if you want to tweak like retiring early, there are tweaks that can be made as well to shorten that time horizon. Not retiring at age 65, maybe at 60 for some people.
April: Yeah, absolutely. And so when I'm thinking about another client, too, we did a retirement rehearsal. And she really wanted to be able to retire. And we looked at it, like the numbers just didn't quite match up. Meaning she had an income goal that she wanted. She had a goal of this is how much money I want to have coming in to do the things I want to do.
To continue living my same lifestyle in retirement. And she was hoping she could retire the year. This is years ago. This was in 2022. So she was hoping she could retire then. And the numbers just didn't quite match up. Now that might sound a little defeating or disappointing.
But what was really good for her is then we asked the question, okay, well, if I can't retire today, then when can I retire? How much longer do I have to work to be able to hit those goals? And for her it two years. So it's this year, 2024. And she was like, oh, I can do that. That's no problem.
I can work two more years. But for her, it was just not knowing. It was actually I think, more stressful for her in not knowing how much longer that she needed to work to hit those goals. But when she had a plan, and she knew, okay, here's exactly what I need to do. Here's my plan. Here's what this is going to look like, it gave her that confidennce. And she said, oh, I can definitely do that.
So one of the things you want to do, too, is part of this retirement rehearsal, this is something that we do, but I encourage you to do this, something you can do on your own, is start analyzing your retirement income. And so start thinking about, first of all, what are those guaranteed sources of income that you're going to have in retirement?
Right off the bat, you're going to have Social Security. And then if you have a pension. Those would be two sources of guaranteed income. And that's going to be your retirement baseline. That's going to be the baseline or you can call it the foundation for your retirement income. And then from there, we really need to know how much more income will we need to continue living the lifestyle that we want to live.
And when we think about this for clients, we think about having discretionary income. So we need a bucket that's going to be discretionary income. This is going to be an account that's invested that we're pulling money from on a regular basis for not just our basic living needs. Hopefully a lot of that's covered by our guaranteed income.
But these discretionary things. I'm taking a trip, I'm remodeling the house, it's to enhance my lifestyle, whatever that looks like for you. But it's to have discretionary income. And then the other thing you want to have too, is you want to have growth buckets. So you want to have buckets that are continuing to grow on your balance sheet.
Because we all know you're needing more income tomorrow than you do today. This idea of inflation, we've got to have a way to combat that. And in fact, I was just thinking about another talk that we give, that's all about the risks that people face in retirement, and inflation is one of those. So we got to make sure that we've got a plan for that.
So once we're starting to think about this comprehensive retirement plan. When do I want to retire? What do I want to look like? Now I know where I'm currently at today. And I've run a calculation, I've run an analysis of what would my, based on today's facts, based on today's financial information, I have a rough idea about what my income is going to be in retirement.
What we can do then is to decide, again, those tweaks are needed. Are we on track? Are we on track to reach our goals? Do we need to make some changes? And when we are looking at this plan, we think about building your financial roadmap. And this is for really anyone who's on the path towards retirement, but thinking through how do we build that financial roadmap?
Well, the first thing that we want to start with is how much are we saving? And how much money from our income are we putting back on our balance sheet? Now, I am not a huge fan of rules of thumb, because I always ask, well, whose thumb are we using? Are we using my thumb, are we using your thumb, are we using Matthew's thumb?
So I'm not a huge fan of rules of thumb. But a lot of times we got to have some sort of baseline. So if you were just to ask me broadly, how much should someone be saving for retirement, I would tell you that you need to be saving 15 to 20% of your gross income.
Now, Matthew, let's talk for a few minutes about where that fits in? Or does that apply to everybody? What are some times that we would adjust those numbers either up or down, depending on their situation?
Matthew: So a lot of it has to do with if you're in the private sector, or you're in the public sector. Some people have pensions for the state of Florida, for example, where you don't really have to give that 15 to 20% becuase you have those guaranteed streams of income once you step off into retirement. Just starting small, as little as, if you are in the private sector a little bit more above this 20% would be better.
April: Absolutely. Well, and I think too, I think you bring up a great point there is thinking about those that have a pension. That probably means we don't need to save 15 to 20%, because that pension is going to be part of your overall savings plan. I think what we also have to take into consideration here is when are we starting to save?
Because if we're starting to save in our 20s, that's a very different calculation than someone who's just starting in their 50s. So if we're starting in our 20s, we have a much longer time horizon, we have a longer time to be saving money for our money to be working and growing for us. So we can save a smaller percentage.
If we didn't start then and we're starting in the later, now we have to catch up. So we might have to actually saving more than 20% to catch up depending on where we are and assets that we already have.
Now, one thing I want to comment here is you may hear that, this save 15 to 20%, and it might scare you. That might seem very daunting. You might think well I'm nowhere near saving that amount. Yeah, Matthew, what's the average savings rate in America today?
Matthew: So according to the US Bureau of Economics in May, it was 3.9%, which is extremely low.
April: 3.9. 3.9 is the average savings rate in the US today. So if your average, and I'm telling you 15, you're like there's no way, April, that I can get there. And what I would say to that is, and Matthew said this earlier, but we just want to start where you are. Start small, start where you are today. And let's get a plan to get you to 15 to 20%.
So how do you get there? Well, again starting where you are today and making some adjustments. But as incomes increase, maybe as debts are paid off and cash flow is freed up, and we're able to save more back on our balance sheet, there might be some things that we can actually restructure in that regard to give us more freed up cash flow to save more.
But it doesn't mean that we go from if you're saving four or 5%, that we're gonna just go automatically to 15 to 20. That's a really hard thing to do. I think about it as like ripping off a band aid. So here, it's more about just having a plan in place for how are we going to strategically over time get to that point?
Matthew: Yes.
April: I just don't want that number to frighten you, or make you even feel discouraged by it. There's always a way that we can work towards that. Now when we're starting to save, the first thing that we want to do is build an emergency fund. I'm sure you've heard this all before. And we harp on it too.
But you've got to have liquidity. You've got to have money on your balance sheet that you can tap into if you need it or you want it. So we always recommend building that emergency fund. Making sure you've got six months of expenses in savings for that, or at least six months of expenses in like liquid assets that you can tap into if you needed it.
Now from there, the next question becomes is where do I begin saving at? So two of the most common questions that I get from clients is how much should I be saving? And where should I be saving at? We've already talked about how much, now let's talk about where. And there's really only three places that we can save money.
And we think about those from a tax standpoint. Meaning what type of tax status accounts are they? And we think of taxable, tax deferred, and tax favored. And what we want to do here is we want to diversify our savings. We want to have our ongoing savings going into multiples different types of accounts.
So why don't you want that? We want that because we want to have more choices and options when we get to retirement about where are we pulling money out of. And that's going to give us more control from a tax standpoint. Okay, so let me walk through these three, and then we'll talk about that more in detail.
The first one is a taxable account. This would be like a non retirement brokerage account and investment accounts. You can also think of CDs, savings accounts, those are taxable too. But the big thing here is these are non retirement accounts. So they're ones that we put money in today that we've already paid tax on.
And then we most likely are going to be receiving a 1099 at the end of every year to pay taxes on interest, dividends, and capital gains. So one of things that we like about the taxable accounts is we don't have as much red tape from the IRS. There's not as many rules and regulations, which we'll get into a little bit on these other two accounts.
But definitely gives you more flexibility and control. Okay, so that's taxable. The next is tax deferred. And this is probably the one that you've heard the most of. Think of it like a 401k, 403b, a 457 plan. These are mostly employer sponsored retirement accounts. But traditional IRAs fall into this category as well.
So these are accounts that I put money in today that I have not paid tax on. So I get a tax deduction today on that. But then that account grows tax deferred, so I'm not paying taxes on it while it's growing, but every dollar that comes out in the future is taxed at your highest marginal rate. And that is a big key. It is taxed at your highest marginal rate.
You do not have as much flexibility, you actually have zero flexibility on how this account is taxed. So what I can tell you from working with clients that are in retirement, this is their least favorite place to pull money from because of the taxes. They don't want to pull money out of these accounts to have to pay the tax.
But the other thing we see, Matthew, is this tends to also be where everyone has the most amount of their money saved. And we joke a little bit about this sometimes, but the 401k has actually been the most successful financial tool in recent history.
And the reason it has been the most successful is that it is a payroll deduction. Because you've checked that box for this enrollment into this retirement plan. They started deducting from your paycheck, and you never have to make another decision about it.
Matthew: It's systematic and automatic.
April: Yeah, absolutely. Which we like that part of it. And we want to take that same idea of things being systematic and automatic, but putting it in other areas of our life. So tax deferred, again, put money in today, you haven't paid tax on it, grow tax deferred, take it out, it's taxable in the future.
Matthew: So April, if you could elaborate on like tax deferred, like stepping into retirement. A lot of people that I talk to think that they're going to be at a lower tax bracket, when they step off into retirement. Can you elaborate on that?
April: I'm so glad you brought that up, Matthew. You're right. A lot of people do think that I'm going to be in a lower tax bracket in retirement. But I can tell you from our work with clients is that they're not. Most of our clients are not in a lower tax bracket when they retire. They're in the same if not higher.
Again, they're in the same if not higher tax bracket. I also want you to think about this. Do we want to be, sometimes when we think about being in a lower bracket, that means we have less income coming in. And we don't have less income coming in. We want to have more income coming in.
At least the same, if not more, because we want to have the same lifestyle that we have today. Maybe we will actually do some travel. But no, I do not see that people are in a lower tax bracket in retirement. Okay, so that's why we definitely want to have some tax diversity.
The other type of account that we talk about are tax favored. And these are accounts that you pay tax today, you put the money in the account, but then it's going to grow tax free, and you can take it out tax free in the future.
So when we think about here on the tax favored, I'll give me some examples. Roth IRAs, municipal bonds, HSAs, cash value life insurance. Those are the big ones that we think of in this tax favored or tax free bucket. But again, these are things that yeah, we pay tax today. It grows tax free, and then again, if it's all structured properly, we can take it out tax free in the future.
So I'm gonna ask you a question. And that is, if you had the choice between here you are getting into retirement, and would you want the majority of your income to be taxed at your highest marginal rate, to be taxed at long term capital gains rates, which are typically lower, or to be tax free? Which one would you want to have more in?
Matthew: Tax free.
April: Tax free. I think that's a pretty simple question. If given the choice, which one would I choose to have more of my assets in, and it's going to be in that tax free, that tax favored bucket. So we really would encourage prioritizing these tax favored assets, such as Roth IRAs, and cash value life insurance in your overall plan.
Now, this is when I give you my disclosure that Matthew and I are not CPAs. Nor are we tax attorneys. So we always recommend that you work with a tax professional who can help guide you through some of these pieces. But when we're building these financial roadmaps, we think of how much should we be saving?
And then we think about where should we be saving out of our balance sheet? And that's really when we want to have diversity so that we don't have everything in those, especially those tax deferred vehicles, where we're paying taxes and all of that. We want to have some of that diversity.
So now let's talk about how do we avoid some common pitfalls. And again, one of the things I love about the work that we do with clients is that our firm has been around since 1970, which is a very long time. And there's a lot that's changed in almost 55 years. But there's also been a lot that we've learned in working with our clients over that time about what works and what doesn't work for our clients.
And so one of the things that we help coach and guide our clients on is how do we avoid some of those common financial pitfalls that we see. So we want to talk through that with you. One of the first things that we see as a common pitfall is lack of protection.
Meaning that we've just never met with someone, taken the time to really look through all the different protection components on our balance sheet. So Matthew do you want to talk for just a few minutes here about what we look at in that protection domain?
Matthew: So in the protection domain, we talked about checking your homeowners insurance, making sure you're properly covered. As we look at your car, and auto insurance. I don't know where you guys are located, but if you're in Tallahassee, if you drive down Apalachee Parkway, I mean, I couldn't even count on both my hands, the amount of personal a property casualty, personal injury attorneys there are.
As well as we talk about looking at disability insurance. Make sure that you're properly protected if you were to get sick or injured. Then we look at legal documents. A lot of clients come in they don't have legal documents yet.
April: Yet, being the key word.
Matthew: And then we also look at life insurance, that tax favored account.
April: Yeah, you know, one thing too on the the life insurance, we find, again, kind of one of those pitfalls is that a lot of times when we're relying on those group benefits, we're relying on that life insurance we have through work, and we just haven't looked at or thought about, well, when I retire, I'm gonna lose all that coverage.
So then what do I do? So we want to make sure that no matter what happens, you've got the protection that you need, and want in those kind of core key areas. And we talk about what happens if you get sued, what happens if you get sick, legal documents, and then also life insurance. We also recommend clients maintain their liquidity.
And again, this is just something I see that people overlook. But we want to make sure that we've got cash on our balance sheet that easily accessible if we need it or want it. And I understand why we don't, because a lot of times, we want to make sure that every dollar is working for us.
But we've got to have this buffer first. And I think of liquidity being that moat around your castle. It's really your first line of defense to any threats. So always want to make sure that we've got liquidity, both while working and as we're getting into retirement. And then another piece that we want to work on is managing and reducing debt and taxes.
So again, this isn't something we necessarily can just take care of all today. It's not like it's just going to magically go away tomorrow. But we want to have systems in place to strategically be reducing debt and taxes over time. Sometimes there are things that we can do right up front. Restructure, reposition accounts, things like that.
So sometimes we can get some really quick wins in this area. And then other times it's having again that plan for how do you really manage and reduce debt and taxes over time? Now, one of the things that comes up a lot for clients is how do I know that I'm making the right decision for me and my family? The right financial decision?
Because let's be honest, you have a lot of choices, right? There's a lot of choices that we have, there's a lot of information out, especially on the internet or on social media. So how do you sift through all of that to know that you're making the right decisions financially?
Matthew: So one of the things we do with our clients, through the planning software that we use is testing, test driving. It's like test driving a vehicle. We the four domains that we look at is the cash flow.
April: Yeah. So let's talk about that test driving financial decisions and what we mean by that. Before we make the decision, we want to see what sort of impact is this going to have on our balance sheet and cash flow income? We want to have a way to know what is the impact of this financial decision going to be? Because I know when we meet with a lot of clients, they are like, hey, I'm doing all these things.
I heard I should be maxing out my 401k, I heard I should be putting money in a Roth IRA. I actually heard I should have a stock account. I have all these things that I'm doing. But I may not know how this is actually going to look for me later, or am I doing the right things? Right? So we really want to have a way to test drive those decisions before we do it. But yeah, that's kind of what we mean there.
Matthew: And then we also want to evaluate impact.
April: Absolutely, right. Same thing. It's like, okay, if we're going to make some changes, whatever that looks like, I'm just gonna throw something out. If let's say we're looking at converting pre tax accounts to Roth's right, we're looking at converting maybe our retirement account to a Roth IRA. I know, you and I were just talking with someone last week about that. Well, we got to know what that impact is going to be.
What's that taxable income and impact going to be? What's that future income going to like and compare and contrast to decide should we do that or not? That's not something we want to do in a vacuum. We want to make sure that we're test driving it, that we're evaluating that impact. So we know not just the impact now, but later. Does that make sense?
Matthew: Also looking at making sure all these, all these four domains that I've mentioned previously about cash flow, liability, assets, and protection. They're all four interdependently connected. If you make one decision, let's say, in your 401k, in the asset domain, it has a rippling affect into the other four domains. Into taxes, into cash flow, into protection as well.
April: Absolutely. And that's one of the things that we look at is when we make a decision in one area, it ripples through the rest of our financial world. So we want to make sure that we are looking at as pieces. And we just encourage you to have a way to manage that and analyze that.
Doesn't mean that you have to work with us and use our software. But just make sure that you're analyzing that and you're using something to test drive those decisions and analyze as well, as you progress. And speaking of progress and tracking how we're doing. Let's talk about how do we track our progress.
So how do we know if we're on track? So again, today's talk we're really centered around getting ready, thinking about retirement, and how do we make this retirement successful, and make it easy. One of things we got to know is we need to track our progress. So again, as we talked about earlier, we want to have that financial roadmap first.
So we want to know when do we want to retire? We want to know where are we today? We want to know what are some of those things that we need to be doing between now and then to put you in a better position. And that's really going to be your roadmap.
Think about your roadmap towards retirement. And from there, we really want to be able to access our plan, adjust it, and we want to make sure that we're tracking our progress as well, which we're going to talk about.
I think about this roadmap, and how important it is for us to know where are we today? Again, thinking about where are we going? I know Matthew, you've mentioned too about detours, right? Sometimes there are some detours along the way and how do we adjust for some of those things?
Matthew: Yeah, with detours. It's like you left, let's say, take a family vacation, and you're going to New York, and you're driving, starting here in Tallahassee and you make the wrong turn and you go to when do you want to have those detours, when do you want to have those check in points where you make sure you don't just end up in Houston.
April: Right, right.
Matthew: Oh man, I missed the exit.
April: That puts you way off track. Absolutely. So we want to make sure that we've got some ways to do that. So you really want to regularly assess and adjust your plan. I was just meeting with some clients last week, and they're about 15 years away from retirement. And so we looked at a retirement rehearsal baseline for them.
And we know we're working on some things, what they're going to be working on between now and then which is great. But we're talking about how often do we need to be readjusting, reassessing this plan. And I was telling them that we really need to be looking at this again, at least every other year.
Meaning every year, we need to come back to the drawing board. Pretend that we've never done this before. And relook at, hey, how's our progress? And how are we really tracking towards our goals? And do we need to make any changes? And then as we get closer to retirement, we need to be doing that more often.
So what I think of here is like I said, these clients were 15 years out. So while we put a plan in place today for them, we really need to be relooking at that plan at least every other year. That doesn't mean that we're not meeting on an annual basis, of course, but we just need to be relooking at that retirement plan, at least every other year.
Now, as you get closer to retirement, and I would say if you're less than 10 years, we need to be doing that on an annual basis. So every year, we need to be relooking at your retirement projections. That means we're getting new numbers from Social Security, that means we might be getting new pension numbers, we're updating account values and saving rates and looking at all those components.
But we're relooking at that on a annual basis. And then once you get really close to retirement, I would say we're one year out, really, we want to have all of that fine tuned, I would say at least six months before retirement. That's going to alleviate stress for you.
Because my clients as they get closer to retirement, they tell me there's a lot of stress at work. They're trying to finish projects, they're trying to close everything out, they're trying to train new people. So they already have, they are already a little bit anxious and nervous about retirement anyway. So really as much as you can do ahead of time way to alleviate the stress for yourself, the better that it's going to be.
So having some tools and methods for how to track your progress. Okay. So let's talk about some key points and action steps as we just kind of recap what we talked about today. So first of all, one of the things I encourage you to do is if you don't have it already, but is to work on having that roadmap towards retirement.
And so that's really going to be building your comprehensive retirement plan. Looking at and analyzing what are those streams of income going to be for you? What are the things that we need to be doing between now and then to make it better, so that you're as well prepared as possible?
So one of the things I would encourage as you're listening to this, and you're saying, well, there's a lot that goes into that, I'm not sure where to go next. What I would tell you is to schedule a 30 minute discovery call with me and Matthew. This is a 30 minute call, where we're going to talk about your goals, your concerns, get some clarity. We're obviously gonna get clarity about what is retirement going to look like for you.
We're going to identify what are those key areas that we can be working on? Usually, we've got a couple of tweaks we can share with you. Like have you thought of this? Doing some brainstorming on some things. Really getting clarity and so that you also know exactly what you need to be focused on first.
So here's what you're gonna get with this call. Like I say it will be a 30 minute call. They are complimentary. We don't charge for the calls. Because I'll be honest, I don't know if we're a good fit to work together. So we don't charge for the call. It's a way for us to get to know each other a little bit and decide by the end, does it make sense for us to work together in some capacity?
So this call is really for you if you're motivated, you're an action taker, you are open to new ideas and you're willing to learn. The call is not for you if you're not motivated, and you're not willing to listen or hear some new ideas. But what I would say for those who would be interested would be to schedule a time for a call. You can do that a couple of ways.
We've got a QR code that you can use. That's gonna take you to my calendar, and you can book a 30 minute call. You can also go to our website, which is curryschoeninancial.com. And you're gonna see a button that says schedule a call.
So again, that website is curryschoenfinancial.com. And then you're gonna see a button for schedule a call. And so as we're wrapping up here today, I just want to again, commend you for listening to this, and really taking the time to learn about this important topic.
Matthew: Thank you guys for coming out with us.
April: Absolutely. So thanks for tuning in today. We hope you enjoy the rest of your day and I look forward to talking with you all soon. Bye now.
Voiceover: This material is intended for general public use. By providing this content, Park Avenue Securities LLC and your financial representative are not undertaking to provide investment advice or make a recommendation for a specific individual or situation or to otherwise act in a fiduciary capacity. If you'd like additional information about our services, you can visit our website at curryschoenfinancial.com or you can call our office at 850-562-3000. Again, that number is 850-562-3000. This podcast is for informational purposes only. Guest speakers and their firms are not affiliated with or endorsed by Park Avenue Securities, Guardian or North Florida Financial and opinions stated are their own. April and John are registered representatives and financial advisors of Park Avenue Securities LLC. Address 1700 Summit Lake Drive, Suite 200, Tallahassee, Florida, 32317. Phone number 850-562-9075. Securities, products, and advisory services offered through Park Avenue Securities. Member of FINRA and SIPC. April is a financial representative of the Guardian Life Insurance Company of America, New York, New York. Park Avenue Securities is a wholly-owned subsidiary of Guardian. North Florida Financial is not an affiliate or subsidiary of Park Avenue Securities or Guardian.
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