Follow These 10 Steps to Make Sure You Are Retirement Ready

Episode 6: Audio automatically transcribed by Sonix

Episode 6: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only, and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment, and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to All Things Financial, the show that helps upgrade your financial literacy. Trey Peterson and Yelisey Kuts are retirement planning specialists here to provide a unique and conservative approach to managing your money. Now here are your hosts, Trey Peterson and Yelisey Kuts.

Trey Peterson:
Hi. Welcome to All Things Financial podcast. Trey Peterson and Yelisey Kuts. And we're excited because we have episode number six today. And we're going to talk about ten steps to get you ready for retirement. Before we dive in, I just want to remind everybody one of the things that we offer is a complimentary analysis. And what I would call as a retirement spend down plan. One of the things that we run into often is people have done a great job saving. They've done a great job paying down their debt. But one of the things they don't realize is that when you go from accumulation to your spend down phase, one of the biggest things that you need to do is have a plan for knowing which investments to touch. In what order. When do you turn on Social Security? What do you do for that pension if you're single or if you're married? Do you include your spouse? If you do, at what percentage? And I think one of the things that makes Guardian unique is that we do holistic planning. So we make sure that, uh, whether it's our one of our financial advisors who's a fiduciary, whether it's our Medicare agent, whether it's our Social security expert, our certified financial planner, we make sure that all of those components are coming together to help you minimize your taxes so that you end up paying every dollar that you own taxes, but not a dollar more.

Trey Peterson:
So if you have, uh, if you've never had a spend down plan put together for you, and maybe you manage your money or you have an advisor but you've never sat down with a strategic tax advisor, uh, one of the things that I think we do great USA is showing people how to minimize tax and retirement. So you can find us at G wealth.com/atf, which stands for all things Financial. Yeah. And and the podcast episodes, they're all obviously on Spotify, Apple podcast. Uh, you can actually, uh, search them online at ATFPodcast.com. The YouTube channel will have short clips, uh, that are just clips throughout, um, what we've talked about in the podcast that are 3 to 4 minutes long, you can see those there as well.

Producer:
And now for some Financial Wisdom. It's time for the quote of the week.

Trey Peterson:
Well, let's start off with our quote of the week. Uh, and it's actually by Michael Jordan. So that's kind of fun. Obstacles don't have to stop you. If you run into a wall. Don't turn around and give up. Figure out how to climb it, go through it, or work around it. Yelisey what do you want to say about that?

Yelisey Kuts:
Well, I, I know we're talking about Michael Jordan, and it's not because we want to get into a debate on who's the greatest of all time. I know you think it's LeBron, but let's just let's just assume it's Michael Jordan I'm kidding. So Michael Jordan, the greatest of all time. Uh, you know, have you seen that movie air that just came out? Yeah. It's excellent I watched it a couple. I think it was like maybe about a month ago. Uh, I thought it was really great, too. Um, you know, it's it's interesting. You know, he, uh, he managed to sign a contract with Nike. Where the. He got company stock or equity stake in the company. And I think to this day, he gets like 5% royalties on every, uh, Jordan brand shoe that is sold. Like, I don't know, I don't know how accurate these numbers are, but, you know, whenever you look up somebody's net worth on Google, uh, you just assume that, you know, you take that with a grain of salt. But, uh, Forbes has him at $3 billion.

Trey Peterson:
And if I remember right, it's it's a thanks to his mom, who negotiated ownership for the first time for an athlete. So, uh, just another example of if you have a great mom, you can't afford to be average. So we're supposed to be talking about how if you have a great advisor, not you're in the wrong podcast. Yeah. So it takes both. Um, so let's jump in ten steps to get ready for retirement and ten years or less. Uh, step number one. What is it you say? Uh, diversification, diversify your growth. Um, you know, diversification isn't everything. Because, you know, we've seen that, um, in periods of recession or when the market, um, retracts a little bit, sometimes it really doesn't matter what holdings you have. Uh, sometimes everything is affected. Um, but just to just briefly, just to kind of give you a textbook definition of, of diversification, um, it's, you know, rather than concentrating your money in a single company or industry or maybe a sector or asset class, um, you kind of broadly spread your, your investments through a range of different companies, industries and asset classes and various things. Um, and the idea is not to have your eggs in one basket. Now, you know, the upside is like, if you pick a winner, you could make a lot of money, you know? And we were just talking about this like the Magnificent Seven, right? The stocks over the last, there's about seven stocks that I think that everybody refers to as the Magnificent Seven and maybe five of those that are truly magnificent.

Yelisey Kuts:
Right. Uh, but over the last five years, if you had one of these, like, you're probably doing okay, right? Um, you know, for instance, Nvidia is one of those stocks over the last five years, it's up like 2,100%, 20, 100%. You know, it's like, what's that? It's it. I'll take it. Tell me where to put the money. No, exactly. It actually, you know, I was I was joking with a client about this. We have a client that has a substantial amount of his of his retirement nest egg in in Nvidia. Like good luck telling that guy that he needs to be more diversified. But I'll make a case for diversification here in just a second. You know of course Nvidia they make all the all the systems and software for AI, all the GPUs, the graphic processing units and companies like Google, Microsoft and meta like they're buying from Nvidia, you know, March, uh, if you look at just like year over year, I just looked this up. So from like March of this year to March of last year, Nvidia is up 270% in year to date. It's like up 80% or so like the Dow Jones and S&P have been led to new highs this year because of Nvidia like and I'm you know I'm not the first one to make this parallel.

Trey Peterson:
But and I'm not trying to suggest that Nvidia is overvalued or they're about to crash and burn or anything like that. But the case for diversification is this in the late 90s, like we saw a bunch of internet based stocks, they were leading the charge and they were bringing the market to new highs, like in the same way, from 1995 to 1999, the Nasdaq went up from a thousand points to 5000. And, you know, we all kind of know the story. That's where it peaked. And we're all familiar with the.com bubble and what happened next. But during the.com bubble the Nasdaq dropped 75%. And it took 15 years for the Nasdaq to recover back to 5000 points, whereas finally trading above that. So I'm not, you know, trying to suggest that there's a disaster waiting around the corner. We're about to lose, you know, 80 or 75% of the holdings that you have. Uh, but but, you know, it took the Nasdaq 15 years to recover, and that's the Nasdaq. Some of the companies that were represented during that time by the Nasdaq, like they never recovered. And that is the importance of diversification. Like we don't want all of our eggs in one basket, whether it's one stock, one sector, one industry, one asset class, because you might not have 15 years to to recover, like if you're already in retirement, you're drawing or you're relying on those the savings that you do have to help pay for your bills, like, hey, you know, you might not have 15 years.

Yelisey Kuts:
So that's the importance of being diversified so that, you know, no matter what happens in the economy, you're in a position that you can sustain some of those losses. Whenever we do have a recession or a downturn,

Trey Peterson:
When I think diversification matters even more, as you're getting close to retirement, you know, I think about, uh, I'll just make up a name, but, uh, like, our client, Jesse is an example. So she retired at 65. She had 80% of her 401 K in her company's stock. And even though she made around 60,000 a year, basically for 42 years, I think she was at like 40 to 60 grand, uh, when she retired, her company had done so well that even though she didn't start saving for retirement until she was 40, because she was a single mom raising two kids, she ended up with a nest egg at 65 of 1.6 million. And again, 80% of that was her company's stock. So we had the conversation, you know, does it make sense to still have 80% of your funds in your company? And even though the company had had great performance, she knew and I knew that no matter what the future brought, that if something happened to that company and it impacted 80% of her portfolio, that it was too much risk. So what we ended up doing you, Elsa, obviously, you know, with you managing the money in the market, if you remember, we ended up reducing that stock to about 40%.

Trey Peterson:
And then we diversified over time away from it. So she still was able to hold some of the stock that really made her a millionaire. But we were able to make sure that if something did happen with that company, that it didn't impact the fact that she could stay retired. So I think when we talk about diversification, I think it's always important. But it's especially important in your preservation season of life. Yeah. And and I and I remember how difficult that was for her. And I think one of like the challenges is like if you, if you during your investment career, if you've managed to like truly pick a winner. And for some people, Apple was that winner. Yeah. I'm thinking of a specific client too. Where where they had a huge and they still have it. Right. And we've encouraged them to diversify away from that. Not because we're we're saying, hey, you're going to get a better return. We don't know if you're going to get a better return. But we're trying to do is to protect you from the downside risk that you could experience. But the one thing I would say is, like all of these conversations are difficult. Like we grow attached to these funds that in this case for that that lady, that that client of ours, it it made her a millionaire.

Trey Peterson:
And one of the things that I've noticed in, in terms of, um, how people react or how or at least the feeling that people have that I just want to caution against is like sometimes you end up overestimating your abilities as an investor. You've had success with one stock. It's maybe made you very a lot of money. You've done very well with that one position. And sometimes you tend to think that like, hey, like you can do that over and over, and a lot of times it's not very repeatable. So you overestimate your abilities. And that could lead to some costly mistakes too. Absolutely. Let's move on to the second one eliminating debt. So I think one of the most important things is people prepare for retirement is eliminating all debt if possible. Now, I will say we have a lot of families that we serve that have been very successful, and their plan looks great and they haven't paid off their home, but a lot of them have interest rates that are under 3 or 3 and a half or 4%, and they're averaging 8 or 10 or 12% in the market in their 401 K. And so when they ask us, do we pay the house off? One of the things that we always recommend you say is we go, well, there's two ways to look at it. The first way is that you're making a lot more money by carrying the loan.

Trey Peterson:
The second way is that if you sleep better at night by paying your house off, that may be worth it to you. So is it an emotional decision or is it a math decision? Now, as far as eliminating debt, one of the things that we were just reading is that as a country, we're paying $357 billion just to service the debt that we have. So that's basically just interest for those who missed last week's podcast. That's 17% of the total federal spending just to pay the interest on the debt that we have. Right. Significant. Yeah. I mean, like we're borrowing more money just to pay the interest on the debt that we have. And obviously to to bring that back to what it's like for consumers, for consumers. We talked about, I think maybe 2 or 3 podcasts ago, how much people are carrying in credit card debt from month to month, and how that number is on the rise. And for for us, we're talking about the April like that would be the equivalent of what we have to pay on a national level in terms of carrying our debt. For many people, it's the Apr on their credit cards. And you had a great example that you shared with me right before we started. Yeah. So I think a couple things. One is the example would be in yellow, say we're obviously talking about this, but right now the average interest rate is over 20% on credit cards.

Trey Peterson:
And so a yellow standard we're talking about is could you imagine if both of us or all of our listeners could jump in on an investment? If you came into our office and we said, hey, we have an investment where you can be on the other side of the credit card, borrowing money to people at a 20% annual interest rate. And we said, could you imagine being on that side in the compounding interest? Unfortunately, most of our listeners are on the side of the borrowing where they're paying the interest. And I think one of the things a lot of people don't do well is when they go and they look to see if we retire and we take on Medicare and health insurance, and we have assets of a half 1 million or 1 million or a couple million bucks or 5 million bucks, and we spend five grand a month or ten grand or whatever that nut is. Most people right in their fixed expenses, and they end up finding out that they spend 20 to 25% more per year than they think, because they didn't include the landscaping, they didn't include, you know, reroofing the house. They didn't include updating the vehicle. And what we found is when you have bad debt, it's really hard to live on. What you lived on while you were working.

Trey Peterson:
I think a good goal is to get a get rid of your debt so that in retirement you can live on 75 to 80% of what you've been living on while you. And if you're married, your spouse are still working. So one of the things that we're big fans of is eliminate your debt. And yellow say, I know you and I have talked about this, but for our listeners that don't know where to get started, we can certainly help. But a great third party resource is Dave Ramsey with Ramsey Solutions. He has a 12 week course that you can join for less than $200, and they're probably the number one group in the United States for helping people eliminate debt. Build an emergency fund. We have a lot of clients that, you know, they might have a million or a couple million bucks in their retirement, but they've always lived paycheck to paycheck and they've never had an emergency fund. And he does a great job of teaching you how to do that over time. Yeah. And I just read a study. I can't remember who came out with it, but they they they said the number one thing that gives a family financial peace in 2023. So this was last year was if that family had an emergency fund of $30,000, now, you might be a listener that you or you and your spouse have always had an emergency fund like that, or you may be a couple that you've never done that because whatever is there, uh, you spend it.

Trey Peterson:
So one of the things I'd encourage you is, well, reaching a $30,000 savings goal may be daunting, especially if you're not a high income couple over a year, two years, three years. I think most people can get there. And if you do, you'll end up living the rest of your life 30 days ahead and in financial peace instead of 30 days behind. So just to kind of summarize, knock out your debt. Over 49% of Americans are still not paying off their credit cards every single month. And we want to get you into the 51% of people that are. Yeah. And I love what you said. Like, if you could choose an investment that that paid you 20%, like if you could, if you instead of like stocks and bonds, what if you could choose credit card debt? You could put that in your portfolio, not credit card debt like a consumer. But from the other side of it, it has the credit card company does. If 50% are are carrying their balance forward like that would be a very compelling investment. I'm not sure you'd want the stocks, bonds, mutual funds and ETFs like give me the credit card debt, 20% returns on that. Like why create a windfall for the credit card companies. And by the way, like creating, uh, that, that um, that extra money just to be able to have a little bit of a cushion, a little bit more liquidity, that emergency fund that you're talking about, like, how are you going to do that if you're carrying your credit card balance forward? It's important to consider paying those things off so that you can put yourself in a better position, um, and just be a little bit stronger as you approach retirement in terms of your savings.

Trey Peterson:
Uh, I do have a few rules of thumb. I just wanted to mention, you know, your total debt. By the way, for those of you that are that are taking notes and and really looking at at your budget seriously, your total debt shouldn't exceed more than 36% of your gross income. And by the way, when you're looking at your mortgage or whatever you pay for housing, that shouldn't exceed 28% of your gross income. And, you know, as we're talking about credit card debt, as as you know, it's considered consumer debt. Um, I've mentioned this. I think, uh, maybe even in the first podcast that we did, but the quarterly report on household debt and credit shows that US consumers, the debt balance that they have is increased to 17.5 trillion in the fourth quarter of last year. It's up 4.4%. Consumer debt should be no more than 20% of your net income. And I know like you know, most people are hearing these numbers and and everyone's situation is so different.

Trey Peterson:
So I know that, like most people aren't going to fit into like a textbook definition or whatever, you know, we're prescribing and saying that you should do this. But like I share these benchmarks to give you something to strive towards. And even as I say these things, like a lot of this, like it applies to me in my own life personally, as I'm saving and planning for retirement. But just, you know, being being very conscious in terms of my own budgetary planning and everything. But this is especially good for a lot of our young listeners who, you know, we've spoken to a few of our clients who really find a benefit for their kids, who are maybe starting out and just starting to develop a lot of these habits that will hopefully carry them through their career and into retirement. Yeah. Excellent. Number three, maximize your retirement contributions. You want to touch on that? Yeah. Um, you know, I think we've talked about all the various different types of plans, IRA contributions, 401 403 B's, a few of the differences there. 457 that actually have, uh, additional differences in terms of contribution limits. Um, but just making sure that you're taking advantage of the employer sponsored plan specifically, you know, if your employer is offering a match, like maybe you don't want to defer your compensation, maybe you need as much of it as you can just to pay for your ordinary household expenses. Wherever that is.

Trey Peterson:
You know, it's it's giving up free money. At the end of the day, that's what you're doing. Like, if you're not taking advantage of at least the match, like if your employer is contributing up to 5% of your salary and you're not making that 401 K contribution, like that's free money, you're just giving that away. You know, not everybody has an employer sponsored plan. For some people it's just their their traditional IRA. This year you can you can put up to um is it 75, $7,000. Yeah. $7,000 into, uh, the traditional IRA. If you're over the age of 50, you get to do an additional thousand dollars. That's a grant. You can defer up to $8,000. You can reduce your taxable income by that much, $23,000 into your 401 K, your employer sponsored plan, plus a $7,500 catch up provision. Like, take advantage of that. Just be financially prudent and look to see like hey, by doing that over time, especially if you start early, the difference that that can make in terms of your retirement is huge. Absolutely. All right. Number four maximizing your retirement income plan. So this is one of my favorite things to talk about. So yeah let's say you're a series 65 fiduciary. Your licensing is overseeing all the money in the market. I'm a retirement planning specialist. I kind of focus on the relationships, the safe money and what I would call your self pensions. So whether that's through, uh, a specific insurance product or a no fee annuity.

Trey Peterson:
So one of the things that I love doing is helping people look at all of their assets, whether it's Social Security, whether it's pulling you in to talk about everything at Charles Schwab or Fidelity or Vanguard, uh, or those funds are talking about, uh, pensions. So one of the big questions I get a lot is, hey, I have this pension through work. Do I turn on an income stream and give up the asset, or do I move the asset? And do we manage it in the market or what are my options? And so one of the things I always show people is the first thing that we need to do is we need to look to see, do you need more income in retirement? I think one of the things that surprised me is how many families that we serve that they've done a great job saving a retirement nest egg, and they live off of Social Security and a pension alone. So triggering an additional pension or another income source that they have to pay taxes on, of money that they don't need to take it out of an investment to put it in their savings account. That isn't growing near as much as the investment would. Doesn't make sense. So the first thing is in deciding, do you take a lump sum or do you annuitize it is. Do you have an income need? If you don't have an income need, you don't want to pay tax on money that you don't need.

Trey Peterson:
And what a lot of people don't realize is when you annuitize your pension through work on almost all of them, you give up the asset. So if you pass or if you're married and you and your spouse pass, there might be a quarter of a million or a half $1 million left. That money does not go to your beneficiaries. The insurance company ends up keeping it. So the other thing that we look at is what percentage is the payout. So a lot of times we have school teachers that come in and they have a pair of pension. And a lot of times, you know, that pays out a great rate. Depending on where your pension is from, they'll guarantee a seven or an 8% payout. But sometimes people come in and there are companies only guaranteeing a 4% payout. And if something happens to them in their spouse, they lose whatever money is in that. So what we're able to do sometimes is move that chunk of money to an insurance company that'll pay them a pension just like the annuity at work. But instead of giving up the asset, you keep control of the asset. That way, if something happens to you and your spouse, your kids get the money, whatever's left that you've worked so hard for. So if you have a pension that you're considering taking and you've never done an analysis or what I would call a retirement plan to see how to best use those funds, one of the things that we can help with is calculating what makes sense for you.

Trey Peterson:
Uh, you can reach us on our website at G wealth com or on our phone number, which we're going to have listed below. But you also say, what other things do you think about when you think about maximizing the retirement income plan, or our listeners maximizing the retirement income? For most people, it really just comes down to the need that you have and the sources that you have to work with. Like you can't just magically create sources of income that you don't have. Uh, but you can be diligent to see, you know, what's the best way for me to position myself considering what I have. And one of the things that I wanted to touch on is annuities. Um, it's, you know, love them or hate them, uh, most people have a very strong opinion of annuities. And I think a lot of it probably comes down to maybe a lack of education, but also like, you know, people hear things and somebody had a bad experience. And and really, you know, a lot of times that experience is limited to a very specific type of annuity. But I just wanted to discuss a couple. Of things. And this is related to, um, just just how they function in general, especially fixed indexed annuities.

Trey Peterson:
So, you know, for a lot of people, they don't have pensions. We've, you know, we've discussed this, that, you know, most of the people today, they don't have a pension. And one of the biggest reasons, the fundamental reason to even consider an annuity is to reduce longevity risk, the risk of outliving your assets. And Trey, who's who's that gentleman that talked about how like he saved enough for you know, basically all the projections show that he had enough to make it till the age of 80. And he came into our office and he was like in his late 70s or something. And, and, uh, he talked about all the planning that he did early on, but his biggest fear was outliving his assets. I obviously haven't heard his name, but what was more, is there any more to that story that that makes sense for this situation? Well, I think there are two things. One of the things that people don't realize is that when you have assets, it's not just about having them, but it's knowing which investments to pull on in what order. So one of the things that we're able to do for him is we were able to show him what order he should touch, the checking, the savings, the non-qualified money, the pre-tax money in the Roth. I think one of the biggest mistakes that we see people make is they touch the Roth right away.

Trey Peterson:
And without getting into details today, one of the things that we can show you is why your Roth money should be touched. Last, but I think the other piece that you're talking about, you say is, for him, what he needed was guaranteed income because he was short on assets. Right? And he was like worried about his kids having to take care of him for the last couple of years because he did a really good job making sure that he'd have enough until 82 or 83. But at some point, you know, his assets would run out, especially if there was, you know, a correction of the market surge to pull back a little bit. So that's where, like, annuities could fit into your planning because they help with the the risk of outliving your assets. Now, one of the things I wanted to mention, and this is, you know, this is kind of diving into the weeds a little bit, but, you know, typically whenever you you seek out an annuity, it's you're entering into a contract with an insurance company. All annuities are through insurance companies. Um, and, and really all of them have very different guarantees and bonuses and the way that they calculate the income and the cash value, all that can be very confusing. But one of the things that's important to know is, uh, fixed fixed annuities and fixed indexed annuities, whenever you give your premiums over to an insurance company, what they do is they then take those premiums and they seek out high quality fixed income options for themselves, like they take those premiums and they look to invest in high quality fixed income options.

Trey Peterson:
And if you consider that, imagine like two years ago, in March of 2022, rates were like barely above 0%. I think they were like at 0.25, the discount rate that the fed set at 0.25% like it, it was at at as low as it gets. And obviously that a lot of that was in response to Covid, uh, in March of 2020. That's when we really lowered our rates from, you know, 2.25%. So historically low rates. So an even lower rate. But if you're somebody who bought an annuity or invested into an annuity during that time, during that two year window from March of 2020 to March of 2022, like you gave your premiums over to the insurance company and in turn, they purchased an investment themselves. But the availability of investments like that were paying a decent rate, like they just weren't available to the insurance company. Maybe it was still the best decision that you could have done at that time, but the availability was I mean, it was slim pickings, right? They they couldn't exactly invest into anything that would have a great return. Now, the problem is, you know, you fast forward to today when rates are really, really high.

Trey Peterson:
Like there's no way that the annuities from 2020 to 2022 could compete with the interest rate environment that we're in today. Like there's just no way like that. You know, it's it's it's it's not possible. The underlying investment of the annuities today is much stronger in the annuity companies able to pass that on to you. And the reason why I mentioned that is over the last few months, we've had a number of people that have been in and we've actually been able to improve the position that they're in. You know, normally you're looking at a surrender charge if you try to do anything different because there's a holding period that you have to maintain before you replace the annuity. But based on the rates that we have today, the the annuities are so much more competitive and not just from like an initial standpoint, where sometimes an annuity company gives you a bonus or something to offset, uh, to offset the surrender penalty that you might be dealing with. But more than that, the indexing strategies themselves put you in a position where you have more growth over the life of the contract. And I'm not saying everybody should go out there and replace the annuity. I'm saying you should probably take a look at it, because the environment that we're in today, even though everybody's complaining about the interest rate, you know, if you're out there and you're shopping for a fixed or guaranteed source of income, like an annuity, like if you're trading a pension for yourself because nobody has one anymore, and you want to make sure that you're you're dealing with a risk of outliving your, your assets and retirement like it's worth looking at that.

Trey Peterson:
It's worth looking to see, hey, how competitive are these? Rates and what's available to me today. And can I improve my position right now? Well, I think one of the things that has been so surprising to you and I is we probably have listeners just like we have families that we serve, that they bought a ten year annuity three years ago, four years ago, five years ago, maybe even up to ten years ago. And one of the things that you and I have seen for the first time in our career, that even though some of these clients have a five year old annuity that has a penalty, maybe 5 or 6%, there are other A-rated companies that are giving a bonus to offset your loss. Now, obviously all the numbers are different depending on the type of product that you're coming from. One of the nice things about Minnesota is we have something called suitability. And with suitability, one of the things that you have to show that the advisor has to show is that if we move money from a current annuity into a new product, it has to be equal or ahead of where you were.

Trey Peterson:
You can't take a loss. So what's nice about that is clients know and families that come in that you can't replace a bad annuity with a worse one, or an average annuity with a worse one. The only way to move it is if we can improve it. And so we've had a lot of clients the last two months that they had an annuity that just hasn't performed, and they thought they were stuck for the full ten years, and we were able to help them get out of that dud and into an investment that has a lot more upside, that also has lower fees. I know a couple of weeks ago, we met with a few couples that they came from variable annuities. They didn't know that their fees were averaging 3% a year, and we were able to get them in something that had less than a 1.2% fee. For some of them, they got into a true no fee annuity. So if you haven't had an analysis done in your annuity is three years old or older, one of the things that Elsa and I can help with is we can look to say, hey, is this still the best investment for your safe money for that guaranteed income stream? Or is there something better? And while I would say that, you know, typically over time things get better, I would say for the next ten years, we may have another six months or nine months where these annuity replacements are the best that they've been in the last 15 years.

Trey Peterson:
So if you have an annuity and you want it to be reviewed, you may already have what's best for you. But now is a great time to get a second opinion. You can give us a phone call and ask us, hey, can I get an annuity review done and you'll have a better understanding of what you have and if it can be improved. Yeah. Uh, one more thing to add, you know, and nobody really sees this. You know, obviously our team on the backside is, uh, is having to deal with this all the time. But I love the fact that, you know, we we run into people that sometimes have like 30, 40 or 50% of their retirement savings in an annuity. And one of the things you've told our team is that we're we're never going to do that. We're never going to put the client in a position that, um, that just it just puts them out of balance. And you're so diligent on that, making sure that we're not just, you know, making a replacement unless we have a substantial improvement, we're not making a replacement if the improvement is marginal or barely there. And like, I love that everybody on our team knows that whether it's you or anyone in our office or another advisor that we have here, like we're not just going to replace something for the sake of replacement, we're actually going to to look to see we're going to shop the open market.

Trey Peterson:
We're going to see, hey, what's out there and who's the best company. If it's income that you need, we're going to find the company that guarantees you the highest amount of income. If you're not interested in income, not all annuities are designed for income. Some of them today are designed for accumulation. We're going to find you the product that has the best ability to grow over the time of the contract. We're going to find the company that's A-rated that has the best renewal rates. And we really, really do our due diligence to make sure that we're doing what's in the best interest of the client. And also like, you know, we're not going to be overexposed, like, we're not an annuity shop. We're not just searching for an annuity replacement or an annuity sale. Like, that's not what we're doing. Annuities, when they're used properly, can be a powerful tool for retirement, especially for income planning. But we just want to make sure that, like, hey, I just wanted to say that like we take that very seriously because there are a lot of places out there that, you know, unfortunately, we see sometimes where a huge percentage of a client's assets are tied up in an annuity and they have liquidity needs where it's it makes it inappropriate. Right. Well, I think that's a big part of whoever you work with.

Trey Peterson:
You want to make sure that they fall in a fiduciary model and they have your best interest and not theirs. So we talk a lot about that. Uh, number five today is plan for your retirement expenses. I think we've kind of beat that one. Uh, everybody understands that. Let's move on to number six. Prepare for medical costs. Yelisey you want to touch on that. You've worked pretty closely. I'll say this really quick in our office. I think one of the things that people find really helpful is that we're not just an insurance and investment firm. We actually are holistic. So on our team, you have your LSA that oversees all of the finances under his fiduciary, uh, series 65. License. In this office, you have all of your safe investments, your no fee and low fee insurance and annuities that I manage to make sure that people have some preservation. And then you've got Christine, who's there for all of your health insurance and Medicare needs. And she's independent, which means she's not married to a specific company. She has access to everybody, and she does what's best for you instead of just using the one company that she's married to, like a lot of captive agents. And then we have tax advisers like Jim Nelson and like Matt, who are so helpful and helping people have a strategic tax plan where most people just have somebody that prepares taxes.

Trey Peterson:
And then we have Ryan, who's a Social Security expert. So whether it's Social Security, Medicare, estate planning, investments, insurance and annuities, we have an expert in every area. But one of the things that I always tell everybody is. You don't have to be the best at everything, but you need to know somebody. That is when I wrestled for Apple Valley High School here in Minnesota for our local listeners, we were the second best wrestling high school wrestling team in the country. And I'll never forget, one of my coaches came up to me and he said, Trey, you don't have to be the best at everything, but you need to have a coach in your life. That is so he said. As an example, if you want to be the best at a double leg takedown, there's a coach in this room that's one of the best in the country because we had NCAA All-American coaches, he said. If you want to know who's best at bottom and getting on and getting free, he goes, we have a coach for that. And I've actually carried that through in building our business and that I don't have to be the best at everything, but I need to surround myself with people who are. And when it comes to medical costs, it's the same thing. Don't do it on your own. Meet with somebody who's an expert in this area.

Trey Peterson:
And the other thing I think a lot of people don't know, Elsa, is that whether you purchase this, uh, insurance plans or Medicare on your own or you work through a specialist like Christine, your costs are the same. So you might as well use somebody that's an expert to help you make sure you get it right the first time. What else do you want to add to your list? Well, this topic in particular, uh, I don't know. I'm just going to be upfront. Um, by the way, my my wife thinks that I have some growth and maturity that needs to take place at least how I approach this topic specifically. But I don't know, I just, you know, I look at health care costs, it's expected to be like the largest expense that most people have in retirement. And like, I don't know, I just I, I hate the idea of it. I hate the I really don't enjoy this topic at all. It's an important topic. And and here's where I'm coming from. Like every dollar that you have to spend on health care related expenses, like if you have a catastrophic health care event in retirement, like that's a dollar that of your hard earned money that isn't going towards one of your top five bucket list items. It's not going towards the vacation. And I know that this is like it's an it's an inevitable thing. It's something that all of us have to deal with.

Trey Peterson:
It's part of being what it means to be, you know, a human being, right? Everybody has to deal with these types of things. Um, but I just, I don't know, I think most people, unfortunately, like, they're, they're underestimating their need for health care related expenses. And I'm, I'm right there with them. Like, I wish that it wasn't a thing. I wish that we didn't have to, uh, have such a huge portion of our retirement savings, uh, dedicated to making sure that we can survive, like, catastrophic health care events, like, it's. I don't know, it's just it's one of those topics, like health care can have, unfortunately, a harmful effect on your savings. Um, and it's an essential part of life, and I just, I don't know, I just kind of have this love hate relationship with the topic in general. But at the same time, like, I'm encouraging all of our clients, making sure that, like, we're not overlooking this as a potential, uh, budgetary expense when whenever we make projections. Yeah. I think before we move on, I'll just pull up one red flag that we see we've had people that they retired at 62 or 63, and they never priced out what the cost of insurance would be before Medicare. And I think it's shocking to people because depending on what your health looks like and if you want a bare bones plan or if you want a pretty robust plan, that costs can be anywhere from 250 a month up to $2,000 a month, not including deductibles, not including coinsurance.

Trey Peterson:
So one of the things that I want to encourage our listeners is before you retire before age 65 and pull the plug, you need to sit down with the specialist to say, what is this going to cost me from now until Medicare? If I end up leaving work before age 65 and the cost is so significant. I had a couple the other day. They've done a great job saving. They've got strong Social Security, they've got strong pensions, they've got a nest egg of a couple million dollars and they've got real estate. They ended up both working until 65 because they didn't want to incur the cost of Medicare before 65 because they go, look, we have the money, but we know that later on we may need this, depending upon what happens with our long tum care. So we can't afford, in our opinion, to give up that money for three years. So they each ended up working three more years because they didn't want to pay that huge cost over the three years. So I say that to say is it's important that you count the cost before you pull the plug on retirement, if it's before age 65, to to piggyback off that, like for every person who ends up waiting until 65 because they don't want to pay for their own health insurance, they're waiting until Medicare eligibility.

Trey Peterson:
Uh, I actually read a study that fidelity conducted, and they said that they found that on their I think they're looking at their client specifically that they were surveying, uh, one third of all retirees who claim Social Security benefits at the age of 62. Like, normally you just think like, hey, everybody claims that at 62, or maybe they're just replacing the income that they lost or looking to do that. But one third of the. People that they surveyed said that the reason why they filed at 62 was to help pay for those health care related expenses until they became Medicare eligible, like, you know, making a decision to file for Social Security. Like, we can't say this enough. It's more than just a transaction. It's more than just a one time decision. You're making a 15 or a 20 or a 30 year commitment, depending on how long you end up living in retirement to do that for, you know, to, to basically help with a short terme need, like filing a 62 just so you can have something until the age of 65 to help cover your health care needs. Like that just doesn't seem like a good decision. Like it's not it's not that it's the wrong decision necessarily every time, but to have one third of people file for Social Security, just simply to help with that one need in terms of health care, shows how important it is and how costly it is, right? Yeah.

Trey Peterson:
Well, I would say too, if you've never met with a Social Security expert, somebody that has software that's designed to help you understand your options in our office, Ryan Moffatt is our social security expert and he does a complimentary analysis for anybody that's been to one of our classes or anybody that's listened to one of our podcasts. So I'll also say this if you have an interest in attending one of the four classes that we teach, whether it's Social Security and Medicare, whether it's our tax and retirement class, which is one of my favorite, which is focused on minimizing tax and retirement, whether it's the estate planning class or retirement planning A to Z, shoot me an email and my name, which is Trey, at google.com and just in the subject line, say, please send me upcoming classes and I'll have either Jessica or Lisa send you a list of the upcoming classes that we have in the Burnsville, Lakeville, Prior Lake, uh, Faribault, uh, Elko New Market, Bloomington, Eden Prairie area. So we'd love to help with that. Now, number eight is planning for Long Tum care. One of the things that I'll say on this and I'll say you're welcome to jump in. Uh, but I oversee kind of the insurance branch and all things financial. And one of the things that we always want to have a conversation on is, does it make more sense for you to be self-insured or to rely on an insurance company to cover some of your long tum care costs? I think what's nice is you say you and I are not married to buying a long terme care plan, whether it's traditional or whether it's a paid up or a return on premium long Tum care plan.

Trey Peterson:
But what we are married to is having a plan. Are you going to self-fund it, or are you going to use an insurance company to cover all of or a portion of that long tum care cost? And if you've never reviewed that, you should look at the options so that you can strategically and intentionally decide, are we self-insuring this? Or are we going to pay an insurance company to take on some of that risk? There's not a right or a wrong answer, but you should have a plan around that. You'll say anything to add to that? Yeah, I know we said that we have ten, uh, topics to get through, but this might be the last one. And speaking of Long Tum care, I really hope that maybe in the next couple of weeks we do just a deep dive on Long Tum care and have more time dedicated to that. But there are a few things I just wanted to add. And like, you know, if you were to ask a group of people like, let's just say you had a bunch of retirees in a room and you ask them to raise their hand if they think that they're going to end up in a nursing home, or like if they're going to need long terme care.

Trey Peterson:
Like I think you'd have very few hands go up if you were to ask that question. But if you ask the same group of people to raise their hand, if they think that the person next to them might end up needing care or require going into a nursing home, like almost every hand will go up. And I know that because I've asked those questions in the classes that we've taught. And, you know, the interesting thing is, you know, the probability according to the long tum care gov, the probability of needing care, it's like 70% of people, 70% of people age 65 and older will need some type of long terme care during their lifetime. And then, according to Limra, 3.1% of Americans have actually purchased Long Tum Care insurance and Trey, like you're right, not everybody needs long tum care insurance. There's a lot of other options out there. Long terme care insurance. Like, you know, just for the sake of time, we're not going to go into all the pros and cons, but, you know, to to basically, uh, summarize this like, you know, there's a lot of options that, you know, sometimes folks are using life insurance or even annuities, or maybe they're self-insuring on long terme care.

Trey Peterson:
But what I have to say is like probably more than 3.1% of people need long tum care insurance. There's a variety of different options available that are like that are that haven't been available historically. They're available now. But, you know, we really need a little bit more time to jump into this topic. But the biggest thing I'll say is, you know, you need to plan whatever your plan is like. You need to have a plan and planning to have your son or daughter in law take care of you like that's not a plan. Like they don't come visit you now, like, and they're not going to they're not going to be your best plan for long terme care. So we just want to make sure that you're aware of that and that you're building. That into your retirement planning. Like I said, we'll do it. We'll do a deeper dive on this topic in the future. Yeah, wonderful. Last thing we'll say is we highly recommend meeting with a licensed financial advisor and an insurance professional to make sure that you have a balance of the right portfolio, the right investments, and potentially the right insurance products. And that's yellow. And I we're right here in Burnsville. We'd love to hear from you. We'd love to do a second opinion on your overall retirement income plan. Uh, feel free to reach us. Our phone number is below. Our website is below. We hope you have a wonderful day. And thank you for joining us for episode number six on All Things Financial.

Producer:
Thanks for listening to All Things Financial. You deserve to work with retirement planning specialists who care about your money, and take a unique approach to your financial and retirement needs. Visit all things financial.com and set an appointment today.

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short terme investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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