Just want the episode title says…these are the top 25 tips from the first 25 shows. It’s like concentrated Make It Last…just bring your notebook, because Victor flies through all 25 tips.
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and elder law attorney and Certified Financial Planner™. Through his law firm and independent registered investment advisory company, Victor provides 360º Wealth Protection Strategies for individuals in or nearing retirement.
Click below to read the full transcript…
Announcer: Welcome to “Make It Last.” Helping you keep your legal ducks in a row and your nest egg secure with your host Victor Medina, an estate planning and elder law attorney, and certified financial planner.
Victor J. Medina: Hey, everybody. Welcome back to Make It Last. I am your host Victor Medina. Let me tell you, I’ve got to get right into the show today. This is going to be a good one.
If you haven’t already gotten out a note pad and a pencil, I’m going to vamp for a few seconds and let you go and do that because on this week’s show I am going to talk to you about the top 25 tips from the first 25 shows. We are going to go down rocket style. We’re going to nail through this.
I’m going to give you eight different tips for each segment, segment one, two, and three. We are going to go right into the substance of it. I’m going to encourage you to get a note pad. These are going to be the title of the show and what we talked about. I’m going to give you the top tip from that show. Then we’re going to be able to condense it.
Those of you that didn’t listen to the first 25 shows, [laughs] you’re going to get a chance to catch up and get a crash course on it.
Let’s go through this. Let’s jump right in. We’re going to try to get through as many of these as possible. I’m hoping to get through all 25. If I’ve done this correctly, we’ll give them all equal time. If not, I’ll be rushing through the last ones, so you’ll be able to gauge how well we’re doing on this.
The first show actually, broadcast right before a tax time. It was, I think, April 15th is when it broadcast, or April 16th or something like that. Given all the Mondays, we had extra time to do some taxes.
I was giving you last minute tax tips on that first show. The number one tip, or actually the first tip is keep your shoebox.
If you remember from that show, I talked a little bit about a grandfather who had put together all of the receipts in a shoebox. It turns out that when he got audited, he showed up to the auditors with the shoebox and gave all of the evidence and all of the paperwork and ended up getting more money back from the IRS than he had claimed. [laughs]
Keep your shoebox together. It just might save you.
On the second show, we talked in deep detail about the Department of Labor fiduciary rule. Remember, that’s the rule that requires somebody who deals with your retirement assets to be working in your best interest.
Before this rule, nobody had to do that. They could do whatever they wanted and just give you something that’s suitable. They have to give you something suitable. They didn’t have to look out for your best interest. Often, they get paid their own pockets at your expense.
One of the tips that I shared in that show was to request a fiduciary pledge from your financial advisor. When you meet with this individual, ask them to sign a fiduciary pledge. That’s a statement that you can find online. You can download from the Internet. Basically, it will outline what they are going to be doing.
They are going to be acting in your best interest. What’s interesting about that pledge though, is that most financial advisors are not allowed to sign it. They are not allowed to sign it because it’s contractually with the company that pays them.
One of the big Merrills, or Morgans, or Edward Jones or something like that. They’re not allowed to be working in your best interest. They actually work for the company. That will highlight pretty quickly who’s working in your best interest and who is not.
The third tip, it came from a show where I talked about the difference between trust and wills. If you remember, I helped you understand that there is no magic rich number that you should be using trust or not. Trusts are not just for the rich, and they tend to be better than a will, because of the amount of control that we can put on there.
I shared with you the idea that we can leave inheritance castles behind, allowing your inheritance to pass to your daughter, and then protect it from divorce, creditors or follow up bloodline. Consider using a trust as part of the basis of your plan. We do it about 90, 95 percent of the plans that we put in place, because it tends to work so much better.
The fourth tip, we talked about in that show the risk of getting older. As you get older some of the things you need to consider. We highlighted different kinds of care that you may need as you get older. You might need care in your home, assisted living or skilled nursing care. You might not always be able to control that.
The sooner that you start to explore your living options and your care options, and start to discuss those with your family, the better situation you’re going to be in for the future. We talked a lot about home healthcare aides and trying to figure out where we can go and get that best care in those situations. We talked about assisted living facilities.
These are conversations that you need to have early. You need to have the conversations about how you’re going to fund that earlier. You’re going to want to put some form of a plan in place, so that it can be followed in case something happens to you catastrophically, where you don’t have the opportunity to be managing that on your own.
It’s a discussion you’re going to want to have with your loved ones. It’s going to be a discussion you’re going to want to have also with your spouse, and the people who are going to be managing your affairs down the road.
The fifth tip comes from a show that we talked about annuities. Annuities, the A word, this is one of the biggest investment products that are sold to people. They are pitched by a lot of insurance agents. They are often pitched by people who are not insurance agents but have an insurance license, and they’re part of brokers.
You think, “Well, that’s not an insurance agent, they work for one of the large companies. They must be securities or investment based. They must be looking out for me.” They’re just pitching you an annuity.
I want you to know the three different kinds of annuities. Generally, there are fixed annuities. Those are fixed immediate annuities that just pay out money at a certain percentage. There are indexed annuities which can grow, depending on the performance of the index.
In fact, we’re going to have a tip a little bit later in the program that comes from a show just on fixed indexed annuities. Then there are variable annuities.
The tip for this one is to stay away from the variable annuities because the variable annuities are the ones that are essentially investment products wrapped in an insurance wrapper where there are high expense ratios, high fees that are associated with that.
I haven’t found a situation yet in which I can recommend them. Stay away from variable annuities. If you have them, they’re not good for your portfolio.
The next tip comes from a show where we had a special guest, Lisa Kelly, from CareOne, who’s one of the regional directors. We talked about assisted living. The tip that I want you to consider is that assisted living often gives you an opportunity to have respite care.
This may not be something that you’ve electing for yourself. This might be something that, in fact, that you are caring for another person. Remember that you can always take a break. The respite care usually is two weeks to a month or so where the person who requires care can audition an assisted living facility. It can give you a break.
Maybe you need a vacation. Maybe you just need some time to yourself to recharge the batteries. Assisted living facilities will give you the opportunity to do that. No matter what your level of care is, whether it’s somebody that has dementia issues or something like that, consider a respite care stay as a preliminary step to investigating long‑term facilities and long‑term care.
The next tip, we discussed IRAs in pretty broad detail. The biggest tip that we can give you from that show is remember the penalty for not taking out your required minimum distribution. If you don’t take out your required minimum distributions, you have to pay an excise tax of 50 percent of that amount.
It’s calculated as a percentage of the value of the last December 31st. Remember this can get tricky because if you have a 401(k) and an IRA, you actually have to withdraw from both accounts. If you have an IRA and an inherited IRA, you have to withdraw from both accounts.
If you have everything in an IRA, just your own IRA, you might be able to withdraw just from one account as long as you know the totals from all of them. It is important to make sure that you’re aware of that.
Then the last tip, before we take a break, it came from another show with a special guest. We had Anna Byrne on who authored a book about a widow’s guide, talking about the first year after losing a spouse. The best tip that I can give you from that show is to go and buy that book.
Look up Anna Byrne, B‑Y‑R‑N‑E. It’s available on Amazon, and it is a great gift for somebody’s that recently lost a spouse. It’s a great guide if you’ve lost one of your own to try and figure out what’s the next steps. Phew!
Victor: Those are eight tips in the first segment. I rushed through them.
We’re going to take a break. When we come back, I’ll give you the next eights tips from the next eight shows. If you didn’t get a notepad already and you heard how fast we’re going, this break is the time to do that.
Don’t not listen to the commercial. That’s important, too. We’ll come back. I’m Make It Last.
Victor: Everyone, welcome back. This is Make It Last. We are going through the top 25 tips from the first 25 shows. We are doing it bullet point style. We are rushing through these, so get your running shoes on. We are going through these as quickly as we can.
Now we went through the first eight. We’re going to start with number nine. Actually, number nine comes from another show with a great guest. I had Tom Marik on. Tom Marik’s a personal friend of mine. He’s also a colleague. He is a Swiss‑based SEC registered advisor.
Essentially, what he does is, from Switzerland, helps people invest their money internationally. We think about international investing from the perspective of, “Was it a tax shelter?” No. It’s none of those things. At least not the way that Tom works. What we’re thinking where with international investing is getting broader diversification.
The products that are available, the investments that are available overseas, are different from the investments that are available here. While you can’t craft a pretty good portfolio just to doing money that’s here, if you’re willing to investigate investments overseas, you can get broader diversification.
In the next tip for the next show, we spent more time on the fiduciary rule. Folks, do you know how much I think it’s important to have a fiduciary on your financial advisor relationship?
That is the most crucial thing that you can do, because then those are the people that are looking out for your best interest. That’s the thing that makes it a profession, as opposed to customer relations. This is what brings it out of being a car salesman, and actually somebody’s working with you.
Lawyers have been doing this forever. I’ve been doing this since the first time they gave me a bar license working with my clients. Doctors have been doing this. Accountants do this.
Now we need, need, need, need financial advisors to do this as well. This tip is actually a cautionary one. There is a fiduciary rule in place, but I need you to remember that that does not protect your after tax money.
The only thing that the fiduciary rule have impacts are advice on your retirement account. Once you have money in an after account from retirement, they’re not required to give you advice in your best interest. They can absolutely rake you over the calls the way that they did before.
I don’t want this fiduciary rule to give you false confidence when it comes to who you’re getting advice from, or what’s important. That’s why it’s super, super crucial for you to make sure that you have a fiduciary who is your financial advisor, and ask them about that. Ask them about it.
The next show we talked about living will and advance healthcare directives. Remember, these are the documents that help determine what kind of care you receive if you become incapacitated, or if you’re terminally ill.
The biggest advice that I can give you on that is, make sure that you’re using your state form. I look at the demographics from the downloads from the show on the podcast, and I know that it’s available online. Sometimes we get listeners from across different states.
You don’t want to be using a generic advanced healthcare directive. You want the one that your state has approved, so there are no hiccups when you go to present this to a hospital, or whoever’s making these decisions.
Make sure that you are using the state form. A bonus tip on advanced healthcare directive is, spread the love. Spread the word. You want these documents to be in the hands of the people that are going to need to use them down the road.
Next tip is talking about the show from selecting a best advisor. We talked about what some of the power is in using an advisor that is competent in multiple areas, and then specifically competent in your area. Let me give you an illustration with our firm.
We do estate planning, and we do retirement planning. We help advice people on the financial and legal side, who are at that stage. We have dual competency between the Certified Financial Professional, a CFP designation, the RICP designation, the law degree, with 15 years’ worth of experience.
We are central in the lives of people that are planning for retirement and transitions after that. You want to be working with somebody that is specific or experienced in your area, and that’s their focus. I’m not a great, for instance, education planner.
I can’t help you deal with college education as effectively as I can with retirement. Find somebody that’s in your niche and work with somebody that is used to dealing with people just like you.
The show after that covered powers of attorney. These are the documents that help somebody manage your financial life. If something happens to you, becomes incapacitated, the number one tip from that show is, remember that these powers of attorney grow stale over time.
The document that you signed 10 years ago may not be effective when we need it. We want fresh documents. We want them at least every three years. Although, we really do caution that you should sign them every year, and that’s part of our client maintenance program.
We re‑sign these documents. To know whether or not it’s going to be effective, what you should be doing is field testing these documents. That is to say, you take your power of attorney and actually try to use it out in the world, and play make‑believe with the financial institution.
Say, let’s pretend that I’m incapacitated, “Would you want this power of attorney?” The time to figure that out is actually today. That’s what we want to do with that.
Next episode talked about mutual funds, and specifically, expense ratios on mutual funds. A lot of people who were use mutual funds, use them to diversify their portfolio, so that in fact, they can have a representation of multiple asset classes.
One of the things that people don’t investigate is the cost of those investments. One of most egregious people in these areas is Fidelity. We just reviewed a portfolio that was made up of entirely of Fidelity funds, and they’re all over one percent per year, and they’re passively invested.
There’s no reason for them to be this expensive. You’re going to want to look up the expense ratios on Morningstar to see where they’re at. Our most expensive blended portfolio’s about 0.3 percent. It goes down from there.
I would look at the expense ratios as one of the hallmarks whether or not you’re getting all of the money that you should be getting from your investments. It’s important to look at that. There are other hidden fees, but the expense ratio is one that you can look up and determine on your own.
Show after that talked about long‑term care insurance. As a reminder, there’s two different kinds. There’s premium‑based and there’s cash‑based long‑term care insurance. One of them is term life insurance.
You pay it, and if something happens during the term while you’re paying it, they’ll basically pay out on the policy. There are no guarantees on that about the premium not going up. In fact, if you stop paying the premium, you have no more policy.
The cash‑based ones are either like a lump sum that you can put into there, or you can 10‑pay it, pay it over 10 years. Once it’s paid up, you don’t pay any more premiums. You can even get a policy that increases in value over time.
Consider a cash‑based long‑term care insurance policy if you’re, in fact, insurable, young enough on that ‑‑ young enough being, probably, younger than 70 or so, 72 ‑‑ looking at one of those policies and then buying that lump sum.
Next show after that talked about proactive income tax planning. That’s the strategy that says you should be doing your tax planning by December 31st, but more importantly, thinking about things like your IRA.
If you’re married, your ability to take income under your IRA is greater than when you become single. One of the most powerful things you can do is fill your tax bracket bucket while you’re still married, and that will reduce the taxes that might be owed after one spouse passes away.
This is a big chapter in the financial book that I wrote. It’s called “Make It Last, Ensuring Your Nest Egg is Around as Long as You are,” that’s Chapter Five in that book. I want you to go and get that book. Read that chapter.
It will illustrate a little bit more about this proactive income tax planning, because on this kind of a show, I have no time to go [laughs] into the detail on that at all.
Next after that was Fixed Index Annuities. We’re going to wrap up with this one before we take a break. Fixed Index Annuities are the kind of annuities where people promise that you’ll have absolute principal protection in market‑like performance with no downside.
A lot of people think about that marketing pitch, and say, “Well, there’s no reason that that should actually be true.” There are reasons why it can be true. It’s because of the way that they use options to participate in the index.
People should not have 100 percent of their money in Fixed Index Annuities. Looking at Fixed Index Annuities as a replacement for a bond portfolio, or looking at a flooring strategy for retirement income planning, which we’ll talk about in the next segment, is actually a pretty powerful way.
You either look at that as guaranteed income down the road, or you look at that as a way of fixing a bucket for mid‑term money down the road. I think that fixed indexed annuities do have a place in a retirement portfolio, and we do illustrate them when it’s appropriate.
You might want to look at that, but again, work with somebody who is a fiduciary because they’re going to present to you the best options on that, someone who’s just an insurance agent is going to look for the one that pays the highest commission.
That was the next tip. When we come back, we’re going to do the last seven or eight or so, of the top 25, and then that will wrap up this show. It is going by in a blur. Stick with us when we get back on Make It Last.
Victor: All right, we are back. This is Make it Last. We’re going through the top 25 tips from the first 25 shows, and we are going through them as quickly as we can. It’s only a 30‑minute show. I’ve got to get them all done. Get your notepad ready, let’s dive right back in on the last seven or eight of these.
We’re going to start with number 18. Number 18 comes from a show dealing with dementia. In that show, I talked about kind of the advice that we would give somebody that’s being a caregiver for someone with dementia, with someone that has these concerns of cognitive decline and how they get through that.
I’m going to get away from the practical for a second, and just talk to you as a friend. If you’re in this situation, I think that the number one tip that I can give you is to make sure you take care of yourself first. Get help, get legal help, get financial help, get professional help. Use a geriatric care manager. Bring in extra help from company, but too often, we self‑sacrifice thinking that that’s the right or noble thing to do.
When in fact, the person that we’re caring for, would probably want us to care for ourselves as much and not sacrifice it, but we see it happen over and over again.
I have a client now that I’m working with and throughout the ordeal of caring for her husband, she’s lost about 80 pounds. That is not healthy. None of that is healthy in her life.
Now, we’re trying to right the ship, but not everybody gets that benefit of that advice. I’m sharing it with you here. If you’re in that situation, if you know of somebody in that situation, urge them to take care of themselves first, and go get the help that they need. That’s the best way that they can serve the person that they’re caring for.
Let’s go to [laughs] from something really soft to like how to take care of yourselves as a caregiver, to something really concrete like, New Jersey and Pennsylvania Inheritance Tax.
Real quick tip, let’s remember the numbers. In New Jersey, the estate tax is currently at $2 million, and when we get to the next year, January 2018, it goes away altogether, but New Jersey still has an inheritance tax.
If you leave money to someone that is not your child or grandchild or charity, you will owe some inheritance tax. In Pennsylvania, they have an inheritance tax that applies essentially to everybody, but a charity. If you leave money to your kids, it’s four‑and‑a‑half percent that you pay on the first dollar of that.
As we think about this type of planning, there’s stuff that you can do around. You can transfer money more than a year before you die in Pennsylvania, and it would be exempted from inheritance tax.
You want to think about that and be working with a financial and legal professional that can help you plan around potential inheritance tax down the road.
Next show is one of my favorite, favorite shows. We’ve talked about the top three investing mistakes. It’s a reminder, here they are. Mistake number one is stock picking. Mistake number two is track record investing. Mistake number three is market timing.
I’m going to combine those and tell you that my number one tip is, “Don’t make two of those mistakes.” [laughs] I don’t want you to track record invest. I want you to find and follow the money for the people that have been doing well because what they did in the past is no indication to what they can do in the future.
You want somebody with a smart strategy, but picking somebody based on what they’ve done in the past is not the right way to do it.
We salvage my mother‑in‑law’s investing because before she started working with us, she would hop from one fund to another fund, basically whatever reported is doing well, she would move money from there. It’s not smart way to do the strategy.
The second thing…Reminding me another friend of mine who is a smart lawyer in the world and he said, “Look, every quarter, we change our investments, my investment advisor.” I said that is the worst thing that you could be doing.
You know all they’re doing is getting rid of all the dogs, that way your portfolio looks like it’s doing good, but in fact we’re losing a lot of power. The second half of that is market timing.
Too many people are making guesses about what’s going to be going on. We’re in the third‑largest economic expansion in history, and every one is predicting a downturn, maybe it will happen, probably it will happen, but I cannot tell you when. If you moved cash today or you moved cash six months ago, you missed that period of time.
It’s important not to market time or do track record investing. Next show after that, I actually discussed about what happens to your IRA when you die. Remember, one of the most powerful things that you can do is prepare that IRA for a stretch out that what you leave behind can actually grow tax‑deferred with only a minimum coming out of that account.
The way that you do that is set up the beneficiary designation. In a show like this, I cannot go into that, again, about how exactly you do that, work with a professional, but review your IRA designations and make sure that they are set up for stretch‑out.
The next show after that we talked about reviewing your estate plan. Too many times, we think about estate planning as being something that is a set it and forget it type of event that once it’s all set up, that said we don’t have to look at it again and nothing could be further from the truth because so many things change over time.
Your financial and your personal situations change. The tax laws change. The state‑of‑the‑art of the planning changes. All of these things adjust the focus from something that was perfectly sharp, when you put it in place to something that is now out of focus down the road.
You don’t want to start with dollar one every time that you have to make an update. What we’ve done in our law firm in the way that we handle our clients is that we have a client maintenance program, which is just a fraction over the initial planning cost, and it gives people a new plan every year.
We’re essentially just updating it with minor word‑processing changes to make sure that everyone has the most up‑to‑date plan that they can have.
In a perfect world, it would be every year, but you should be looking this at least every three years and at least every three years reciting your powers of attorney and advance healthcare directive to make sure that those don’t grow sale, IEC, the tip from number 13 from the last cycle.
We don’t want these powers of attorney to grow stale. Update them every three years.
The next step comes from a show called retirement income planning. This comes from a designation that I recently got. I accomplished the retirement income certified professionals, RICP designation.
I was pretty proud because that’s a program that could take up to a year. We actually did it in 30…I did it in 30 days, got that all done and part of the reason we were able to do that is that I knew a lot of this stuff coming in. It is what we’ve been dealing with clients and we’re focused in the retirement space, we knew a lot of the strategies going in.
The two strategies that you should be considering are bucketing and flooring. Bucketing is about time segments ‑‑ short‑term, mid‑term, and long‑term. Flooring is about essential expenses versus discretionary expenses.
We shouldn’t go into retirement just thinking that we’re going to make systematic withdrawals out of the account and never paying attention to a smarter strategy about how get it to the end. We need money to last. We need it to grow. It needs to last 20 or 30 years. It’s important to make sure that we have a smart retirement income strategy.
By the way, whether you use bucketing or flooring, it can often be driven by your asset level going in. If you’re more modest, you’re going to look at flooring as being the peace of mind strategy where you get a bottom number for your required expenses, your necessary expenses.
Bucketing is for people that have got a little bit more space on it, and have some time horizons. They’re not really as concerned about the essentials because they have those covered. It’s just about smarter utilization of that money, how you marshal it.
Show after that, I covered planning for minor children, a little deviation from our focus. I talked about that topic in large part because we do see people whose grandkids are recently born. And so they’re trying to help their kids with some legal planning and financial planning, say how do you have your affairs in order in case something happens to you.
It’s catastrophic, it’s unlikely, but if it does happen, you want to make sure that this is in place. Number one tip from that show is think about naming short‑term guardians in addition to long‑term guardians. Short‑term guardians are the people that are going to show up and prevent the police from taking your grandkids in to custody, just because there’s nobody with the legal authorization to care for them.
We want short‑term guardians as much as we want long‑term guardians. Finally, show 25, I talked about long‑term asset protection, long‑term care asset protection, just making sure that you’ve got everything in place so that as you plan for this, you were able to protect assets and not have them all spent down for nursing home or Medicaid expenses.
Number one tip is sooner is better than later. You want to be in front of a competent elder law attorney before there’s a need. There’s still stuff that we can do if you come to us in crisis, but we do so much more good if you go visit us before there’s an actual need.
That’s it. [laughs] Those are all 25 tips. Take a deep breath because I’ve taken a deep breath. I’ll give you a bonus tip by the way. We’ve got a lot of feedback. It seems to be the show that people liked the most and the tip was, “Buy great yogurt.” Don’t forget my whole Greek yogurt with fage, buy great yogurt.
Hope you enjoyed this show, a little deviation from the way that we normally do things. I do want to talk to you next week about some stuff that has come up, some new fiduciary‑related information plus the next topics that we’re going to go into.
We’re glad to be back with this show for another 26‑week run and hopefully going to be expanding our reach soon. Be on the lookout for that.
If you’ve enjoyed this show, please share it with your friends. They can subscribe on iTunes, leave a great review. They can download this show. Anyway that they can get it, I think this is important enough information for you to share across the road.
Don’t forget to tell your friends about it. I want to thank you all for being on this journey and your patience on this show. We went through these things pretty fast.
Join us next week, when we’re going to talk a little bit more about this retirement planning stuff. This is Make It Last, helping you keep your legal ducks in a row and your financial nest egg secure, and we will see you next Saturday, take care.
Announcer: The foregoing content reflects the opinions of Medina Law Group, LLC, and Private Client Capital Group, LLC, and is subject to change at any time without notice.
Content provided herein is for informational purposes only and should not be used or construed as investment or legal advice or a recommendation regarding the purchase or a sale of any security or to follow any legal strategy.
There is no guarantee that the strategies, statements, opinions, or forecasts provided herein will prove to be correct. Past performance is not a guarantee of future results. Indices are not available for direct investment.
Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. All investing involves risk including the potential for loss of principal. There’s no guarantee that any investment plan or strategy will be successful. We recommend that you consult with a professional dedicated to your needs.