Transitioning into retirement is going to be a big change for a lot of people. Likely you have been used to the routine of working for the past 20 or 30 years. Retirement is going to cause major changes to not only your routine but also your financial situation. The best thing you can do when gearing up for retirement is begin planning, and begin planning early.
One of the recommendations Victor makes in this episode is to begin planning for taxes when you are in retirement. If you would like to download a FREE retirement guide for taxes just text TAX to 609-554-5936.
Make It Last with Victor Medina is hosted by Victor J. Medina, an estate planning and Certified Elder Law Attorney (CELA®) and Certified Financial Planner™ professional (CFP). 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 transcription…
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: Everyone welcome back to Make It Last. I am your host Victor Medina, I’m so glad that you can join us for another edition of the best advice in the legal and financial retirement world. You are lucky to be listening to the show because there is no other show like it, anywhere in the world.
In fact, I’m going to go out so far to say that this is the best show that talks about legal and financial planning being hosted by a state plan attorney, who is also a certified financial planner.
I’m excited for today’s show because we’re going to be talking about how you entered the sort of the uncharted borders of the new retirement life. If you enter the unfamiliar world of retirement, what should you focus on first?
I’m going talk to you about that today, and I’m going to tell you that one of the things that has me excited about it is, the truth of the matter is that, trying something new can often be very nerve‑wracking.
Are you going to be successful? Are you going to face challenges? What if it’s not for you? Can you go back to the way things were, if it wasn’t?
Many times, making a decision to try something new is cutting off doing what you were doing in the past. If that’s the way that we deal with everything, what does it feel like if you picture it around your potential retirement? It could probably be very, very stressful.
You could work a career that spans 20 or 30 years, or more. Where I’m located, there are a lot of people who work for Johnson & Johnson, and Johnson & Johnson is basically known for equaling. You will work there for 30 years of your life, and then you will retire.
That change happens, you start to wonder, “Am I going to be OK? What if life in the next phase is not what I wanted it to be? How can I change things to be happier there?” There’s a lot of questions around that, and we’re going to talk about that.
We’re going to talk about what steps you should take first, how you establish a game plan so that you’ll be comfortable as you step forward into this new lifestyle.
I remember somebody once told me that when you retire everybody feels like Saturday, so let’s make sure that you are prepared to enjoy all the Saturdays of life that you have for yourself. Before I do, I want to talk to you a little bit about some upcoming things that are on the schedule.
If you’re interested in learning more about state planning and elder law planning, I have a couple of speaking engagements that I want to talk to you about, and then I want to share with you a little news about some personal stuff that’s going on. I know that some of you may be really interested [laughs] in doing that as well.
Listen, upcoming talks. First of all, I am going to be speaking for the older adult ministry as part of the Pennington Presbyterian Church in Pennington, New Jersey. That’s going be around 12:30 on Friday, April 5th. Yeah, April 5th. If you’re interested in joining us, you can reach out to the Pennington Presbyterian Church and see if you want to join us there.
I’m going to be on a panel for Conversation of Your Life, and that’s going to be on April 16th. That’s going to be generally in Mercer County area, so you may want to get in contact with the Conversation of Your Life, or COYL, organization, and see where they are holding that, see if you’re interested in joining us for it.
I’m also going to be holding a seminar in May. We’re going to talk in details a little bit more, but they’re going to be held here in our offices. It’s 230 West Delaware, which is our main office. We’re going to be using our Community Resource Center, which holds about 35 or 40 people, so it does tend to sell out. The two dates for that are May 9th and May 14th.
If you’re interested in learning more about this kind of planning, making sure your ducks are in a row, making sure that you’ve got all of your affairs in order and you’re not going to be devastated by the cost of long‑term care or anything like that, make plans to join us. The 9th is going to be at 1:00 PM, and the 14th is going to be at 6:00 PM.
If you’re interested in doing that, we’ve got a new way for you to communicate with us. We’re going to give you the opportunity to text the word invite, and you’re going to go ahead and text that to 609‑554‑5936. The number again is 609‑554‑5936.
If you text the word invite, I‑N‑V‑I‑T‑E, we’ll know about that. We’ll reach out to you and put you on the schedule, on the invitation list, so that you can join us on May 9th or May 14th at our next seminar. That’s really exciting, and in fact we have a couple of other offers on that which I’m going to get to when we get to the meat of today’s show.
Again, we’re going to be talking about here essentially how to prepare for retirement. We’re going to talk about what the retirement red zone is, what common mistakes people tend to make when they’re nearing retirement.
Should you be taking less risk? What kinds of financial vehicles can be used to provide income? What kind of professionals should you have in your life? Those are going to be the types of things that we’re talking about.
To set this up, I want to bring you back. I want you to think through to your first day of high school. Now, that’s going to cause some trauma for some of you people, [laughs] thinking back about what that was like. Your first day to college. Your first day in a new job.
If you were just starting out on a new journey, there’s probably a lot that you didn’t know. There’s probably a lot that you couldn’t have predicted that was going to be happening. You didn’t know what to expect or what your experience was going to be. The idea behind that lack of knowledge is that it can be extremely stressful.
It’s easy, I think, to find the discomfort in starting anything from scratch. I’ve written three books so far. We’re on the verge of publishing a fourth book. We’re very excited to share that with you, news about that in the near future.
Anytime I sit down to write, there’s a big difference between sitting down with a blank sheet of paper and sitting down and editing something that is already on the page. By far, writing down new stuff on a completely blank sheet of paper causes more discomfort.
It makes me sick to my stomach sometimes because I just don’t know how to get going. I don’t know what it’s going to end up being there. That discomfort is often because I don’t know what it’s going to look like in the end. I don’t know how I’ll end up.
If you think about that in the same way as you think about retirement, and getting through retirement, that’s often brand new and unfamiliar for other people that are going through that. While it’s something some people look forward to for a long time, and that makes it exciting, there’s probably a lot of uncertainty related to that as well. It’s a huge step.
I help people on a daily and weekly basis navigate the legal and financial side of their decisions to move on and start this last phase of their life. When they get to their retirement, that’s the point in time where they finally feel mortal. They know that in retirement, they can’t go on without an estate plan any longer.
They’re going to end up needing to plan for this stuff. They got to do the full adult thing and be ready to take on that next phase, because they don’t know what coming on there. It’s the same thing with their financial life. Most of what brought them to this point in time is going to change. It’s going to be very different.
I want people in that decision, when they decide to make that change. Often, by the way, is part of the reason why people fail to make that decision or make that change. I want them to be comfortable with the decision. I don’t want them looking back.
I think that they should have a financially independent retirement. A retirement that gets them on the legal side with piece of mind and at ease. I want to help them forge a plan to work towards that mission. One of the ways they can do that is they can start to think about the tax strategies for retirement.
One of the things they’re going to have to think about that’s different is the way the taxes are going to impact their life. Many times, people have just gone through life without really thinking about the taxes at all. They just paid what they paid, because they made what they made. There’s nothing that required a lot of thought towards that.
I want to help people start to deal with it. What we did is we essentially created a set of tax strategies for retirement. In this guide that I created, I’m going to end up sharing with you things like the Roth IRA conversion. Pros and cons of converting your tax‑deferred IRA to a tax‑free IRA.
We’re going to talk about the four different categories of taxation, and how each impacts your income and investments in your retirement. We’re going to talk about which of your investments fall into the taxable, tax‑deferred, and tax‑free investment categories. At what point in time are your Social Security benefits going to be taxed?
We’re also going to have strategies to put in efficient investment and tax planning things together, so that it helps maximize your retirement income. The whole idea is that this guide will essentially help walk you through that. I want to give that away to you.
What you have to do in order to get it is you need to text the word tax. Text the word tax, T‑A‑X to 609‑554‑5936. Take your phone out right now go 609‑554‑5936. Just put the word tax in there and send it off. Then we’ll get you your free report. It’s again, that number 609‑554‑5936.
Look, this is a fantastic guide, because of all the questions you get asked every day, you should not ignore the question how much of your money is actually yours? Not what the current value is, but how much will end up in your pocket and not the government.
You still owe taxes on some of that. There are tax efficiencies that you can have. You might be overpaying on stuff. It’s confusing. It’s complicated, but this complimentary report will help make sense of it, and how all of these things impact retirement so it’s get it today.
It’s complimentary. It’s absolutely yours. It’s your money. You deserve to know what’s at stake. Don’t do the [inaudible 11:09] any favors. Get your top complimentary tax report that we’re sending out. Me, Victor Medina to you got a text, the word tax to 609‑554‑5936. We’re tax to 609‑554‑5936. I think you’re going to like it.
Now, look, that tax thing is just one of lots of parts of retirement that could cause you to be quite anxious about what the future holds. As I said to you starting anything new, it can be nerve‑wracking, but I don’t want you to procrastinate, thinking about this stuff, because it’s not going to get any easier over time.
Depending on what you want in retirement, you may want to reconsider your investment vehicles and financial strategies, and how your legal plan is doing. It’s not everything that you do financially and in the way that you set your life translates very well to when you retire. You want to have that plan together.
One of the first things I want to talk about is the retirement red zone. Now, if you are a football fan, you likely know what it means to be in the red zone. In fact, my favorite station to watch when it’s football season is the red zone channel.
The red zone on a football field, it’s the 20 yards that are closest to the end zone in which a team is going to score. A team in red zone efficiency and strategy can be considered one of the most important statistics or measures to gauge their offensive success.
It’s no secret that if you don’t get the ball over the finish line, or if you fail on that, that team is going to be committing a lot of costly mistakes and could lose the game. By the way, one of the reasons why that area is so important is it ends up shrinking the field.
You can do a lot on the field when you have a long runway to get there. If you’re starting on the 5‑yard line or the 10‑yard line, and you’re making your way all the way down the field, the defense is spread out. You have the entire field to use.
Once you get inside of that 20 yards, the defense creeps up on you, and that field is much, much shorter. We’re going to use that same concept to apply to retirement. The retirement red zone can be considered the five‑years before or after you retire.
These are the years where your financial life is the most susceptible and the most affected by common mistakes and common missteps. Your game plan, when you enter retirement red zone, needs to be loosely defined to help you get to and through retirement.
This is the point in time where there are fewer allowances for mistakes. This is the time in your financial life where the defense has crept into you. By the way, the reason why they’ve done that is time. You had all the time in the world when you were back on the other end of the field.
You had a lot of time to make mistakes about retirements to make mistakes about how things are going to be invested and how things were going to be working for you. As you get closer and closer and closer time has run out.
Time is your biggest defensive strategy the thing that you’ve got to overcome. What are the keys to creating a red zone, financial, and legal plan? One of them has to do with risk management. As I’m going to talk to you today, throughout today’s show, managing risk when you’re in retirement takes a whole new meaning when compared to how you perceived and managed the investment risk while you were working.
The same thing can be applied in terms of risk management, not only to the financial side but also to the way that you manage your legal life. It was very easy back in those days not to worry or plan for the risks that were related to needing care over a long‑term basis because you were young and it was pretty much easy to ignore ‑‑ manage that risk by basically ignoring it.
There are risks that creep up in and near retirement that you simply can’t ignore at all. When you are thinking about how to set up this plan, you have to take into account risk management, because a failure to do that brings the defense in even closer, which means that you have less time to get it done.
Next part of a red zone plan, so we get risk management, is an income needs analysis. Now, when you retire, your paycheck, or probably the best portion of your paycheck is going to go away. That leaves you in a position where you don’t know exactly how much is going to be coming in.
You know how much you have saved up, by the way, but you don’t always know how much you’re going to need to come in in order to may make your bills. Are you going to need more income than you were making before? Where’s that going to come from?
How much income are you going to need on a regular basis to live comfortably in retirement? Your income needs analysis will give you the answer to that question.
Next thing after that is a financial plan structure. A well‑thought‑out financial plan is the glue that holds risk management and income needs together. I just had a meeting with a client before this show. We were talking about how to adjust their portfolio in order to understand how to maximize the return that they were getting for the risk that they were taking. There’s some strategy around that.
We also looked at their income needs analysis. We went through all of the things that they were going to need, and understood that this plan needed to adjust what they were doing in order to hold together and risk management and their income needs.
In fact, we were able to increase their chance of success in retirement by reducing their risk to meet their income needs, and having a plan that’s moved these assets into different time horizons.
This was like their game plan. If they went forward with this, that used to be the binder that the coach would be holding on on Sundays. Nowadays, it seems like they’re all using tablets. It’s the tablet. It’s the tablet with a weekly game plan, leading into Sunday’s game day. That’s going to be their financial plan structure. That’s going to give them their game plan for retirement.
When you think about that, by the way, you want to strategize around this as hard as the people who run professional football teams do. They start on this on Monday for the next Sunday’s game, and they think about all the contingencies that are out there.
For you, you might be thinking about your savings and your retirement life, and how you’re going to invest or manage your retirement portfolio to get there. The other component of that is a complete financial and legacy plan.
Financial vehicles, all on their own, are not enough to the story. We want to think about what would happen to your assets when you pass away, or if you had to get a long‑term care illness, or something like that, if you suffered from one of those.
You want to think about that within a context because your retirement game plan is going to include things that knock you further back than from where you started. You want to have those considered, too.
That’s going to be a large part of the estate planning that you need to get done, to make sure you’ve got your ducks in a row and make sure that you have a plan in case somebody gets sick. Certainly, if you are married, making sure that the illness of one spouse doesn’t financially devastate the other spouse.
Those are the elements of a good retirement red‑zone plan. Get out ahead of this, is my recommendation. Sit down with somebody and start discussing these objectives and how your life is going to change retirement, because it’s better to go in with a plan ‑‑ risk management, income needs, a financial plan structure, and then a total financial and a legacy plan. That’s the legal component.
Listen, we’re coming up on a quick break here. When we come back, I’m going to talk you about the three different phases of your financial life…
Victor: …and then we’re going to talk about fundamental changes that you should consider, how to create a retirement plan that you can actually follow. Get those through to you so that you can enter this unfamiliar world of retirement not with a blank page, but with information on there and some good confidence.
Even though the world’s going to be a little bit different, you are going to be prepared for that, and that uncertainty is not going to throw you.
We’ll be right back after this quick break on Make It Last.
Announcer: Life is better when you have your legal ducks in a row, and one area attorney can help you get your financial ducks in a row as well. Victor J. Medina fills dual fiduciary roles, an estate planning and certified elder law attorney, and also a credentialed, certified financial planner professional.
Through his law practice and independent registered investment advisory company, Mr. Medina serves high‑wealth individuals seeking conservative advice and a professionally‑managed approach to retirement wealth management.
Learn more about Victor’s 360‑degree wealth protection strategies. Call 609‑818‑0068. That’s 609‑818‑0068. Or listen to the newest episode of Make It Last Radio, Wednesday mornings at 11:00, on 1450 talk radio.
Investment advisory services offer through Palenti Wealth Advisers, LLC. A New Jersey and Pennsylvania registered investment advisor.
Victor: Hey everybody, welcome back to Make It Last. Today we’re talking about what it’s like to enter the unfamiliar world of retirement. How can you prepare for this next phase?
We started first talking about the retirement red zone and how you need it to get yourself ready to play that part of the game. You’re so close to the finish line, how do you have a game plan ready to do that? In order to understand why it’s so important to do that, I think we should go over the three financial phases of life.
Because a lot of our questions about, “Why is it that you, Medina, thinks that things change so much when you leave the workforce and enter retirement?” Beside the fact that I’ve got newfound time on my side and freedom, what’s so different about that?
I’m talking more now than just the idea that you’ve got time on your hands, I’m talking about how quickly things can change from a financial standpoint. Some people do nothing different and they don’t even acknowledge they change financially, just keep investing and handling their finances the same way.
I recently had a meeting with a client who told me ‑‑ a prospective client ‑‑ who said to me, “Look, I’ve been doing very well the way that I’ve been investing so far.” I agreed with her. I think she has been doing very well doing what she’s done before, but there’s way more to it than that.
Because what you were doing before, was things that you were doing in your first financial phase of life. Maybe this will help put it in perspective for you. If you think about your first phase as the accumulation phase, that’s basically the time when you get that first real job and you’re able to put money away.
Now maybe, in the company that you had had a 401K with a match, and you were smart, you took advantage of that, you put away money, and you let the company put away money. You just started to live on less and save more and you were just building your nest egg.
During that time, by the way, where you have just saving as your goal and not at all using that money ‑‑ no drawdown ‑‑ you probably are going to be investing pretty aggressively. With one thing in mind, just accumulate as much as possible.
You’re going to end up investing very aggressively, taking a lot of risk on that because you feel like you can, and you’re going to be saving at the same time. Because you’re doing both, there are a few things that happen that you will never see the impact of. The first is that the volatility of your investments probably doesn’t mean anything to you. It’s nothing at all.
One, you’re barely looking at it. You’re probably focusing on other things in life. You’re probably focusing on getting a job, maybe getting married, raising your kids, can I buy a home, but your investments, the stuff that’s in your 401 (k)? You are barely paying attention to those things.
If the investments themselves are on a bit of a roller coaster, they’re going up, they’re going down, if that’s what’s going on with it, it doesn’t impact you. You don’t care.
You’re barely looking at it, and if you did look at it, you’d know you couldn’t use it, because there’s a penalty if you take money out before 59 and 1/2. You’re not going to do that, so it’s probably totally OK that you invest aggressively.
The other thing, by the way, that’s making this go better, is that you’re regularly still putting aside money. It’s not like you took the last $100 to your name and threw it in an account, and prayed and hoped that it grew into enough for a retirement. You’re probably taking $100 every paycheck, taking $100 every month, using that to add to the pile, and then investing that as well.
Because you’re in a constant growth mode, this is why we call it the accumulation phase. Because you’re constantly in a growth mode, your investments can again be pretty aggressive, and it’s not really going to bother you.
The next thing that you want to think about after that, the next phase, is the preservation phase.
The preservation phase is a form of a transition that you make prior to officially retiring. It depends on your personal risk tolerance, but any time between the 5 and 10 years outside a retirement, that’s a good time to start thinking about it in this way. You can’t focus just on accumulation any longer. You can’t be full‑hearty about your investments as you’re nearing retirement.
Part of the reason for that is we’ve run out of runway. We are at the end zone, the defense is up close us, we don’t have time any longer. It’s time to start backing the investment risk down little by little as you get closer to retirement.
By the way, there are some investments that help you do this, although I don’t think that they’re always the best for everyone, but the concept is right. There are a lot of things out there called target‑date funds, and a lot of companies put them together.
What they’ll do is they will put a target date of sometime in the future. Generally, they do them in five‑year increments, so you might see one for 2020, and then 2025, and 2040, and 2060. These are all retirements dates out in the future, and what you can generally predict is that the investments are going to be invested more aggressively the longer that retirement date is out in the future.
The further away it is, the more you’re going to see that investment be aggressively invested, but then the idea is the closer you get to your retirement, the safer they’ve made the investment. They’ve dialed down the investment risk.
Look, I don’t think that the target date itself is the panacea of investments. I don’t think we can throw everything in there, but what they do with the investments, how they manage them, which is dialing down the risk the closer you get to your retirement, is exactly what we’re talking about here in that preservation phase.
I would probably take that one step further, and the one step further is that you probably need to reduce your investment risk by diversifying your investment products.
If all you’ve ever done is hold one target‑date fund, there is an inherent risk in doing that, because the fund itself may not be well diversified. If you ended up having individual stocks, probably isn’t a great idea to hold on to those as the only thing that you’re doing, and then sell that and go to cash for that. That’s not a great way of mitigating your investment risk.
The numbers say you’ll be less risky, but we’re thinking about diversifying your investment products. That’s a way to reduce the risk so that no one particular thing starts to threaten what your retirement is.
If you have all of your money in cash, that’s not lowering your investment risk entirely. While the balance is probably not set to go anywhere, you’re also not going to have that money do anything to grow with the rate of inflation.
There are risks in the investments that are not just market risks. There’s longevity risk, there is inflation risk there is tax risk, but what we’re trying to do is mitigate the all of those risks and start to ratchet that down.
Slowly by slowly and again, mixing your investment products is a good way or one of the ways to think about doing that. Finally, the last phase is the distribution phase and distribution is really kind of a two‑prong definition. It’s spanning both your living years in retirement as well as those years are beyond. which is just a very nice way of saying after you die.
The majority of retirees are going to need to rely on their retirement nest egg for some form of supplemental income and that’s the distribution taking what you have saved over this period of time in doling it out to you, that’s distribution.
Distribution is also that after you die, taking your assets and leaving them behind to your loved ones. That’s the second kind of distribution and both of those are important to plan around in that phase. Some of them go to the heart of the sort of economic analysis around investing.
That’s all about retirement analysis, which is to say, Look, just pulling water from the well and just dipping the bucket back down every single time just distributing out what you need from the same investment structure. Probably not, the best way to think about distributing assets. May not be the most tax efficient way, may not be the way that best helps control for risk.
As a result, you want to think about that distribution phase, that part of it that you’re kind of doling out your money one way, and you may want to think about distributing the assets after you’re gone in a different way. And you just might help with an example.
A lot of people have stuff in their IRAs and the IRAs are essentially how they are having their savings and what they’re going to be leaving behind when they die.
Great, it’s fantastic. This is exactly what we want in that scenario. But we want to think through how to distribute that afterward because IRAs are very special.
One of the things that we like about IRAs is that we could have tax‑deferred growth. And if we leave them behind to the next generation, the right way, they can continue to enjoy some tax‑deferred growth. Combining those two things is you having text for growth for both of those areas, is an important thing to plan around distributing these assets.
Now, those are the three phases of sort of your financial life, right, phase one is accumulation, phase two is preservation and phase three is distribution. And I think that there are probably five fundamental changes that you ought to consider making in order to get through that preservation phase and entering the distribution phase. OK? So we’re through accumulation.
I told you that part was different. We’re entering the preservation phase and considering distribution phase because distribution phase is coming, right, we’re gonna have to start to live off of this stuff. The first thing to consider, by the way, is what’s your retirement going to look like?
You need to define your retirement life and how you’re planning on living it what you’re going to do with your time? The phrase that we use before is every day is Saturday. Well, we can’t do the same thing on Saturday for the rest of our life.
What are we going to do with that time? And you need to think of these things not only from a financial aspect, but you also need to think about this from a social aspect. Knowing what your lifestyle can look like or will look like, will help you plan how you’re going to fill your time and create a new daily routine, a new seasonal routine.
It’s going to help you understand what it might costs to kind of live regularly live that way, and with that information, you’re going to learn some stuff. You’re going to learn how likely it’s going to be that you can, in fact, be successful in retirement if you want to live a life but when you investigate that with your finances, it turns out you can’t do it.
Well, guess what? You’re going to be miserable two ways. You’re going to be miserable when you can’t do those things any longer, and you’re going to be miserable when you’re out of things to do anything with because you spend all of your money. We want to make sure that your understanding both of those things in serving that because as I said to retirement can be scary.
Sometimes people are very comfortable with the numbers that they have in retirement. Sometimes people are comfortable with the idea that they have money, but they’re really uncomfortable about what they’re going to be doing. They haven’t been working on defining their purpose. Once they get into your retirement and people can get to be lost souls in that situation.
It often means circling around with different friends. As a result, one of the things that people don’t realize is that your circle of friends while you’re working, has a lot to do with the environment that you’re in kind of maybe the neighborhood that you live in what your kids are doing, you know, it’s really circumstantial. It’s about the environment around you.
When you’re in retirement, it’s also about their environment around you. The one thing you don’t know is whether or not the people around you saved the way that you did, whether or not they put together a life that would allow them to continue the life that they had in retirement in for a lot of folks. It’s just the fact that that people don’t save the same way.
If they don’t save the same way, then they’re going to have to sort of live a different life they’re going to have to go through in live a different quality of life and maybe even find some new friends because the friends that they had weren’t the friends that they can continue to have in the future. OK?
Think about the way your retirement is going to look like. The next thing I want you to do is to think about your team of professionals. Because one of the first questions that you should ask is whether or not you’re going to do everything on your own, or whether or not you’re going to ask for help from professionals, and it’s totally up to you.
The way that I would help people think about it is to say, look, if doing this work makes you happy, fulfilled, if it gives you purpose, then doing it on your own, probably OK. But if making decisions around this and dealing with the impact of those decisions, and understanding how to react and changing if that causes you to stress, if you want a purpose of life that is different than that, then you need to assemble a team. OK?
What am I talking about here is probably a little bit unique, because they think that there are ways of situated that team that can be better than other ways. So traditionally, the team consisted of a financial advisor and estate planning attorney and a CPA, were somebody to help you prepare for your taxes, OK? And in an ideal world, those three professionals have working relationships with one another.
Let me tell you the way that it often works and so I’m going to give you a sneak peek to this. Many times the financial advisor will make a referral to an estate planning attorney and the reason why they’re doing that is that an estate planning attorney throw some business back their way.
They say, “You know what? I have this client. They need a will. I think you do good work, and you did give me a couple of clients the last month. Let me give you this one.”
For a period of time, they might have a great working relationship, but then something happens. They’ve each run out of new people to send one another, and so they both move on.
The financial adviser finds a new estate planning attorney where they can get new clients from, and the estate planning attorney, heck, they make a new relationship with another financial adviser.
They start fresh. They go in, and they end up putting together a new relationship and let that new relationship spark their continued growth. The thing about that is that unless the financial adviser and estate planning attorney are married to one another [laughs] ‑‑ and maybe sometimes even in that circumstance ‑‑ it’s not going to last.
It’s not going to last. It’s not going to be there for as long as you need to go through your retirement. I’ve seen this happen time and time again. When I started out, primarily as an estate planning attorney, one of the things that I would talk to other financial advisers about before we did this is, “Hey, look. I can’t send you back clients.”
The truth of the matter is that I work with lots of different financial advisers. For the most part, I don’t encounter new people who don’t have help on both of these areas. It’s not like I’m meeting somebody that needs an estate plan, and by the way, needs a financial adviser. I’m not going to be able to kind of feed you in that way.
It would limit the people that would work with me because I couldn’t promise them a quid pro quo back. Then I realized there were a couple of things that were happening in that that made it not great for my client. The first thing is my client didn’t get served by seeing the best person over and over again. I didn’t have the relationship with that person.
I was dependent on the financial adviser coming back to me. I also couldn’t supersede some of the advice that I knew that they were getting that was wrong or modify their relationship in a way that I knew was better for them. Essentially making sure that somebody was a fiduciary in their life. I realized that my clients deserved more.
My clients were the heroes of their own story, and I was taking them on a journey that did not get them to the promised land. I needed to change that.
One of the things we did to change that, is in addition to creating a regular client‑care program so that we were checking in with them on a regular basis, we began to offer them the opportunity to consolidate their financial and legal planning under one roof.
That’s a way of modifying the professionals around you that totally supercharges it, because then in that scenario, you don’t have to worry about having people lose something in translation. You don’t have to worry about them moving on from the relationship that was working, and moving on to another one that’s got a new relationship for whatever they have coming up. You don’t have to worry about that.
That way, you keep everything under one umbrella, and there’s a lot of efficiencies to having a single Batphone that you pick up any time there’s crime in Gotham City. You pick up the Batphone, and that person handles everything.
For you, I would strongly recommend that your team of professionals look like a single professional that can help you in each of these areas.
Victor: That’s something that we do, and we do in a unique way, because the same estate planning attorney that can put your plan together, is the same financial adviser that can help you navigate through retirement.
We’ve got a few more of these, but I’m also coming up on a break here. Let me take a quick break, and we’ll come back and keep talking through how to navigate the unfamiliar world of retirement. I’ve got three other things that you’re going to need to do in order to help make that change and get ready for the next phase. Stick with us. We’ll be right back after this quick break.
Announcer: Imagine if the attorney you trust to protect your legal interests could also be trusted to protect your retirement wealth. One trusted adviser, dual fiduciary roles, Victor J. Medina.
Mr. Medina is an estate planning and certified elder law attorney with a national reputation. He is also a certified financial planner professional.
Through his law firm and independent registered investment advisory company, Mr. Medina provides 360 degree wealth‑protection strategies for individuals in or nearing retirement. His unique approach offers advantages to high‑wealth individuals seeking conservative advice and a professionally‑managed approach to their retirement wealth.
Learn more. Call 609‑818‑0068. That’s 609‑818‑0068, or listen to the newest episode of “Make It Last” radio, Wednesday mornings at 11:00 on 1450 Talk Radio. Investment advisory services offered through Palante Wealth Advisers LLC, a New Jersey and Pennsylvania registered investment adviser.
Victor: Hey everyone. Welcome back to Make It Last, and we’re talking to you today about how to enter the unfamiliar world of retirement set up for success. I spent some time in the last segment talking about some fundamental changes that I think you should consider.
One of them was thinking about the way your retirement is going to look like and planning around that. Next thing I talked about is the professionals around you. I think you should have professionals if you’re going to get stressed out by handling this on your own.
The best kind of professionals you’re going to have the best team that you can have those officiating your team, the team of one. If you’re able to do that with your estate planning attorney, also being your financial advisor, I think that you’ll gain more efficiencies off of that.
Next thing in terms of fundamental change is how’re you going to get a paycheck in retirement? It’s now time to analyze what your monthly income is going to look like and where it’s going to come from. You looked a little bit at retirement in that first phase, figure out the life that you want to lead.
Now that you understand that that’s the life that you want to have, how’re you going to generate that? Are you going to have social security? Are you going to have a pension? Are you going to have both?
My parents, I’m fond of talking about on this…in fact, they’re like characters in my radio show. They exist here and I should probably be paying them a small salary to be guesting [laughs] on the show.
My parents who’re both schoolteachers, in retirement, it turns out that they got a pension, but because they worked for the State of Connecticut where they did not contribute any portion of their income towards Social Security, they got no Social Security. They just have the pension. That’s how they’re going to generate their paychecks.
For you, it might be different. You might have Social Security and no pension. Maybe you have both. Will you have rental income?
One of the things that I’m working towards in my retirement is that I own the building, their houses, my companies. In retirement, I may or may not sell off my companies, but I’ll have the building that might have rental income. That might be way that I create a paycheck in retirement.
You might go after a part‑time job as a way to supplement that. By the way, part‑time job has got a dual benefit in getting a paycheck in retirement. The first one is, it gets you paycheck. The second thing, it keeps you out of trouble.
Not every day is a Saturday. You’ve got a couple of working [laughs] days in there that you’ve got to account for and you can’t spend on those days, actually make a little easier.
Once you’ve counted up all of those sources, question is, is that income going to be comfortable enough to live in retirement? Do you have what we call an “income gap?” Most people have an income gap. Part of it because why is that Social Security just doesn’t cover everything.
Very few people have got a pension. A lot of people don’t want to work in retirement. Retirement was to not work. “I’m going to go I get another job after that.”
From that…by the way…again, parents with what they’ve got going on. My dad’s got a job. My dad has a job in South Carolina. He works on the golf courses that are out in Kiawah Island. He sits there and he points at people, say, “you can go start over there” and “start over there” and they drive around and helps people who wants to play from family time, but he makes minimum wage.
They don’t pay him the salary direct deposited. He gets salary in the form of a visa check card. He gets his money deposited on this little card that he has. He spends from it, but look, for a minimum wage is less than minimum [laughs] wage for that. It’s fine, right?
What he does is he keeps himself out of trouble and every once in a while he gets to golf on there. It’s actually a dual benefit in retirement.
For a lot of people, they don’t want to work. They don’t want to work in retirement. They’re going to have this income gap. For you, if you’ve got an income gap, that’s the thing that your nest egg has to cover.
The question is, where’re you going to pull that money from? What types of financial vehicles are going to fit your individual profile that’ll help you create a paycheck? Are you going to use an annuity? Are you going to have dividend paying stocks?
Are you going to own a real estate investment trust or other real estate investment vehicles that’ll throw off an income based on the rental income that the underlying assets have? You’re going to have bonds? They’re going to pay off an interest? What are you going to use to fill that gap?
By the way, not everyone will have exactly the same right answer. There’re some answers that are better for some people than other ones. Even within the world of annuities, there are some annuities that are going to solve that problem one way. In other annuities, that are going to solve that problem a different way. Which one is going to fit for you?
Now you know what’s coming. You listen to this show. You know that I’m going to tell you that one of the best ways to figure out the answer to that question is to engage your professional. Many times, your knowledge gap compounds your income gap problem.
I love you. I do. I love you. You are my favorite people out there, but the idea that you know better than the people who work in this world professionally…I just think that you’re doing yourself a disservice. Working with a professional would help that.
What’s the plan to mitigate risk? That’s the fourth fundamental change. Making sure that you have enough growth opportunity without being overexposed to market losses is one of the toughest tasks for anyone to complete, because you’re weighing two competing interests. You want to have enough to grow without having so much in there that if you lose it, you can’t overcome what the loss is.
You have to navigate that. In order to do it, one of the things you should do is probably start to analyze how much risk you’re comfortable exposing your dollars to, because that’s going to drive behavior.
If you are uncomfortable with having money exposed that way, you’re going to start to do some crazy things when it comes to your investments. You’re going to start to move them around. You’re going to do things that you shouldn’t do. We want to make sure that your risk exposure matches your tolerance.
On top of that, you’re going to have to analyze what your risk needs to be to be successful in retirement, because sometimes you need a little bit more than what you’re comfortable with. The math suggests that you’re going to have to expose yourself to a little bit more risk in order to make it through retirement.
There are smarter ways of doing that and not so smart ways of doing it. The smarter ways of doing that take some of the stuff off the table that you’re going to use in the short term and starts to time‑segment that. Time‑segmenting your investments ‑‑ looking at the short‑, mid‑, and long‑term horizons ‑‑ starts to put together a better plan in retirement.
First of all, the risk that you’re exposing yourself to means that it will have enough growth in the future, but because it’s not stuff you need in the short term, you won’t change off of that investment strategy.
It’s a way of hijacking or hacking your brain around the concept of risk so that you can be exposed to the right amount of risk, even if you are uncomfortable with it being in your portfolio, yourself.
You’re going to have to make decisions about certain kinds of investments in order to help mitigate that risk. Here’s one of those things that I advise and then I never move off of…doesn’t matter what you ask me, when you ask me, I’m coming up with the same answer. You have to go to a financial advisor that has all of the tools, all of the tools in their toolbox.
It can’t just be some one thing that they’ve got. If your advisor doesn’t have the tools that’ll help you understand your positioning in a very simple way and then maybe implement the stuff that will fix it, you’ve got to move on. Find somebody else that will have what you have, to not only see what you’re at going forward, but also be able to offer you the solutions.
The last one that you should think about in terms of making a fundamental change is thinking through how you’re going to sustain the plan through retirement. This all boils down to “How often are you going to address, review, and alter ‑‑ change courses on ‑‑ your financial plan, if you have to?”
What type of relationship you have with your financial advisor is key, here. Are you going to meet on a regular basis? Does the advisor have discretion to make changes with or without your consent? What kind of review process is the whole team going to follow?
Here is another way where the efficiencies of having some of these issues under one umbrella ends up working to your benefit. If you’re able to have your legal plan and your financial plan handled under one roof ‑‑ even if you could have the tax done under one roof ‑‑ then your review process gets efficient.
It’s all done at one level and you can course‑correct based on having one team ‑‑ one umbrella, one place ‑‑ knowing everything that’s going on, and knowing how one impacts the other.
The idea, here, is that you’re going to have a retirement plan. You want one that you can, essentially, follow through retirement. A well‑thought‑out financial plan in retirement should encompass everything we’ve talked about today, and it needs to be easy to understand, and easy ‑‑ by the way ‑‑ to explain to someone.
You want to know whether or not you have a plan that works. Be able to explain that to somebody who you’re having coffee with in about five minutes. I would challenge you…because I think that for the most part, most people will look at that and it will take a longer five minutes to explain what they have and why they have it.
Many times, most people don’t even know what they have, never mind why they have it. I think it’s a myth that investment plans and retirements are hard to understand. They should be simple to understand. In our world, our clients understand, “I got money for today, money for tomorrow, and money for next year or longer than that.” We have a short‑, mid‑, and long‑term horizon.
What I did is I carved it up into these buckets, and with these investments. This is the reason it works. When I need money, I pull it from here. When I need money in this circumstance, I pull it from there. You want to break down your financial plan into different categories. Think about your investments, your income, your estate planning, taxes, and your health care.
If you’ve done that, and you’ve got it in a way that you can explain, then you’re going to be in a great situation. Those five categories that you should be able to explain in five minutes…investments, income, estate planning, health care, and taxes.
Going back to the offer for today, I’ve created a report for you that if you want to learn more about taxes in retirement…totally easy to do. All you have to do is go and text the word “tax” to the number (609) 554‑5936. That’s (609) 554‑5936. Text the word “tax”. T‑A‑X to that number, and we will get you this complementary report that will help you understand all about retirement taxes.
We’re going to have a bunch of information coming up in future shows. If you want to think about joining us on an upcoming seminar, we have a workshop set in May, May 9th at 1:00 PM or May 14th at 6:00 PM.
Text the word “invite” to the same number (609) 554‑5936. “Invite”, I‑N‑V‑I‑T‑E, and we will get you on the list for that workshop. We would love to have you in our office and meet you there.
Otherwise, this has been a great show, helping you understand how to navigate the unfamiliar world of retirement. Any questions? We’d love to talk to you. Email us at firstname.lastname@example.org.
If you loved this show, remember that it’s available on Apple Podcast, Spotify, and anywhere that you can get a podcast.
Victor: Share this with a friend. Go back and listen to all of the other episodes that we have. We’re coming up on number 100. This is episode 98. We will have a cool century worth…well, not a century, but it’s 100 shows that we will take you through.
Otherwise, I’ve been Victor Medina. This has been Make It Last, where we help you keep your legal ducks in a row and your financial nest egg secure. Catch you next time. Bye‑bye.
Announcer: Investing involves risk, including the potential loss of principal. Any references to protection, safety, or a lifetime income, generally referred of fixed insurance products, never securities or investments.
Insurance guarantees are backed by the financial strength and claims‑paying abilities of the issuing carrier. This radio show is intended for informational purposes only, it is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual situation.
The host of this show is not affiliated with or endorsed by the US government or any governmental agency. The information and opinions contained herein, provided by third parties, have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed.