Bogleheads® Chapter Series – PlanVision discusses investing topics
00:00:00.000 | (upbeat music)
00:00:02.580 | - Welcome to the Bogleheads Chapter Series.
00:00:06.560 | This episode was jointly hosted
00:00:08.320 | by the Tampa Bay and South Florida Chapters
00:00:10.720 | and recorded April 27th, 2021.
00:00:14.040 | It features Mark Zorrel, PlanVision's founder
00:00:16.640 | and colleague, Jason Lynch, discussing a variety of topics.
00:00:20.760 | Bogleheads are investors
00:00:21.880 | who follow John Bogle's investing philosophy
00:00:24.160 | for attaining financial independence.
00:00:26.800 | This recording is for informational purposes only
00:00:29.280 | and should not be construed as investment advice.
00:00:31.780 | Alrighty, so welcome everybody
00:00:39.360 | to the Tampa Bay and South Florida Chapters joint meeting.
00:00:43.780 | We're pleased to have Mark Zorrel,
00:00:45.520 | the founder of PlanVision, joining us this evening
00:00:47.400 | along with his colleague, Jason Lynch, CPA,
00:00:50.760 | and they're gonna be presenting two topics.
00:00:53.160 | We'll take time following each of the topics
00:00:55.400 | for question and answer sessions.
00:00:58.080 | And without further ado,
00:00:59.360 | I'll turn this over to Mark and Jason.
00:01:01.480 | - Great, thanks, Alan.
00:01:04.120 | By the way, I started PlanVision in 2012,
00:01:07.480 | even if it seems like it's been 20 years now.
00:01:10.720 | - Okay.
00:01:11.560 | - So I have a list of eight different topics
00:01:16.560 | or subjects that we're gonna go through
00:01:18.480 | as we talk about the considerations
00:01:21.000 | in instructing your investments before and after retirement.
00:01:23.880 | Really, it's not necessarily just the investments,
00:01:26.200 | it's the whole idea of planning and preparing for retirement.
00:01:28.600 | What are some of the important considerations
00:01:30.760 | that you would go through?
00:01:31.580 | And then we'll talk about the technology as well.
00:01:34.200 | But I, Jason is involved in these as well.
00:01:37.100 | I do, at this point, about 17 retirement plans a week.
00:01:41.720 | And so these concepts that we're gonna go through
00:01:46.040 | are very much a part of not all the reviews
00:01:49.080 | that I do and we do with our clients, but many of them.
00:01:52.240 | So very relevant concepts that we go through.
00:01:54.960 | So we'll just get started with the first one,
00:01:57.280 | and that is how to think about your healthcare costs
00:02:00.440 | as you approach retirement.
00:02:02.840 | Because this is one that seemingly scares so many folks.
00:02:06.360 | First of all, I wanna go through how you will buy healthcare
00:02:11.120 | or how you can shop for that or think about.
00:02:13.900 | When you turn 65, you will be eligible for Medicare,
00:02:17.040 | for the most part, unless you're working for an employer
00:02:18.960 | and have some employer coverage,
00:02:20.000 | or maybe you have coverage through the military.
00:02:23.360 | But you'll buy a Medicare supplement.
00:02:25.880 | But many people retire pre-65,
00:02:28.060 | and a lot of people have not shopped
00:02:30.920 | for healthcare on their own.
00:02:32.720 | They've got it through their employer in the past,
00:02:34.360 | and they're just used to the process of getting it that way,
00:02:37.720 | or maybe through their spouse's plan.
00:02:39.920 | But when you're going to start buying healthcare
00:02:42.440 | on your own, a few of the options that you have,
00:02:44.320 | the first one, or for many people,
00:02:46.840 | is they can buy COBRA through their employer.
00:02:48.760 | So that is the option where you can get healthcare
00:02:51.840 | as an extension of your employment
00:02:54.440 | with your employer that you left.
00:02:55.440 | You can buy it and pay the employer side of that.
00:02:58.440 | Many people are familiar with that
00:03:00.040 | and will elect to go with that.
00:03:02.440 | On the other hand, and many people,
00:03:04.520 | at least some of the people that we worked with,
00:03:06.820 | are not familiar with how to buy healthcare on their own.
00:03:12.600 | They haven't done that before.
00:03:14.440 | Depending upon the state that you live in,
00:03:16.660 | your state may offer an exchange.
00:03:18.600 | We have one of those in Minnesota,
00:03:20.040 | and I've been buying my healthcare since 2012
00:03:22.440 | on the exchange.
00:03:23.840 | So I go there and I shop for healthcare.
00:03:25.840 | Or you can buy it on the federal exchange, I believe.
00:03:29.320 | There's some states that do not offer a state exchange.
00:03:31.680 | But anyways, you go on there, you shop for it.
00:03:33.640 | I think in most cases,
00:03:35.040 | eligibility is in November, December for the following year.
00:03:37.920 | Anyways, the important point about this
00:03:40.280 | is that it's worth your time.
00:03:44.360 | And if you're going to be going out,
00:03:46.360 | if you're going to be retiring
00:03:47.320 | and no longer get employer-sponsored healthcare,
00:03:49.760 | it's worth your time if you've just assumed
00:03:52.960 | that you will use your employer's coverage
00:03:56.220 | to shop for healthcare on the exchange
00:03:58.880 | in the state that you live in.
00:04:00.380 | Now, it is likely that many people will say,
00:04:04.700 | oh, but it's expensive.
00:04:06.120 | Yes, it's likely going to be costly,
00:04:08.560 | particularly for those folks that will say things like,
00:04:11.200 | gosh, I've had great coverage for years,
00:04:13.440 | and they've been paying a small premium,
00:04:15.720 | or just haven't had to pay that much.
00:04:17.000 | It may be a bit of a sticker shock
00:04:18.420 | when they actually have to shop for their own healthcare.
00:04:21.400 | On the other hand, what has developed the last several years
00:04:24.960 | with the Affordable Care Act is that many people,
00:04:28.100 | even those people that have significant wealth
00:04:31.780 | will qualify for an ACA subsidy.
00:04:34.560 | And what that means is that instead of buying
00:04:38.200 | or using COBRA insurance from your prior employer,
00:04:42.240 | you may save quite a bit of money
00:04:45.040 | by buying your healthcare through the exchange.
00:04:48.220 | The federal government offers a subsidy
00:04:50.140 | on the premium that you pay.
00:04:51.720 | So I wanted to raise that as a point
00:04:54.000 | that we discuss with our clients.
00:04:56.000 | And we certainly have come across people
00:04:58.220 | who are very experienced investors,
00:05:02.380 | have done a good job of planning,
00:05:04.160 | but just simply weren't knowledgeable
00:05:05.440 | about how to shop for healthcare,
00:05:06.440 | and didn't even realize that the ACA subsidy was available.
00:05:10.380 | So that would be the first point
00:05:12.420 | that I would want to mention as you think about
00:05:14.540 | the transition for retirement upcoming
00:05:17.740 | is how do you want to get
00:05:19.420 | or where do you want to get your healthcare from?
00:05:21.900 | And a great place to go to,
00:05:25.020 | to get an idea of how much it's going to cost
00:05:27.540 | is just go to your state's website.
00:05:30.060 | And you can log in and you can price out some,
00:05:32.720 | you can price out some of the premiums
00:05:36.580 | that will be available.
00:05:37.580 | Now I've been buying it for years, as I mentioned,
00:05:40.560 | and I buy a high deductible plan,
00:05:43.300 | which means my out-of-pocket deductible is up to $13,000.
00:05:48.300 | And those are the least expensive policies.
00:05:51.340 | So, and for many of the people that we work with
00:05:52.900 | that have accumulated wealth,
00:05:55.100 | they're going to want to buy a high deductible policy.
00:05:56.680 | So that's the first consideration.
00:05:57.820 | Now, at this point, I wanted Jason to provide some thoughts
00:06:00.860 | and he's got, he does a wonderful job with our clients
00:06:04.420 | in going through how they may qualify for the ACA premium
00:06:08.780 | and some of the tax implications from that.
00:06:11.820 | - Right, okay, thanks, Mark.
00:06:13.980 | So, right, Mark alluded to, if you're shopping insurance,
00:06:18.200 | you may want to take a look on the, you know,
00:06:21.580 | the healthcare marketplace.
00:06:23.220 | Because the ACA premium subsidy,
00:06:28.140 | the premium tax credit as it's known,
00:06:30.420 | had been capped for households that earn,
00:06:34.880 | that have income of over 400% of federal poverty level.
00:06:40.260 | If you're over that threshold,
00:06:42.100 | the ACA credit disappears completely instead of a phase out.
00:06:46.700 | That is known as the ACA subsidy cliff, and it's dramatic.
00:06:50.900 | You could get a subsidy if you're within
00:06:53.580 | the income threshold.
00:06:57.140 | And if you go $100 over that limit,
00:07:00.420 | you don't get the credit anymore at all.
00:07:02.140 | You've fallen off the cliff.
00:07:04.100 | So, for a two-person household,
00:07:07.460 | that amount is about $69,000.
00:07:11.860 | A four-person goes up to about $104,000.
00:07:15.320 | And as Mark mentioned, some clients,
00:07:20.140 | some people that have wealth,
00:07:22.020 | don't have a lot of high income.
00:07:23.820 | They don't have much income anymore
00:07:25.540 | because they've retired now
00:07:26.820 | and they're managing their cash flow.
00:07:28.660 | Now, it's important to note that the American Rescue Plan,
00:07:33.140 | the plan that was signed last month,
00:07:35.140 | removes that cliff and it simply caps
00:07:38.740 | marketplace health insurance premiums
00:07:41.220 | at no more than 8.5% of household income in 2021 and 2022.
00:07:46.220 | Okay, great, but what does that mean?
00:07:51.060 | What that means is, if your household income
00:07:54.780 | is already more than 400% of federal poverty level, FPL,
00:07:59.780 | for a household of four people,
00:08:03.540 | if the benchmark plan premium in your area,
00:08:08.300 | in your zip code, is less than 8.5% of your income,
00:08:13.300 | you won't qualify for the credit anyway,
00:08:15.700 | regardless if there was a cliff or not.
00:08:18.060 | But, if the benchmark plan in your area
00:08:21.820 | is greater than 8.5% of your income,
00:08:25.220 | you're now eligible for the credit.
00:08:27.940 | And this will benefit many people
00:08:30.140 | who might not have otherwise been able
00:08:33.020 | to take advantage of it, and here's why.
00:08:35.020 | In the great state of Michigan, in Monroe, Michigan,
00:08:39.180 | in my zip code, 48166, a 54-year-old couple,
00:08:44.180 | both 54, with 120,000 modified AGI for this purpose,
00:08:50.260 | would get a monthly credit of $230.
00:08:54.100 | Okay, not a huge amount, 2,800 for the year.
00:08:57.480 | But, their friends in Bloomington, Illinois,
00:09:01.900 | zip code 61701, they're identical.
00:09:05.340 | They modified AGI, would get a monthly credit of $951,
00:09:10.060 | which is almost 12 grand.
00:09:12.580 | But, their cousins, who live in Charleston, West Virginia,
00:09:17.580 | also have $120,000 modified AGI,
00:09:21.580 | would get a monthly credit of $1,500,
00:09:26.020 | almost $19,000 against their premium.
00:09:30.780 | It's all, now, I cherry-picked these, of course.
00:09:33.820 | These are all based on your zip code,
00:09:37.100 | and I've been using, it's called
00:09:39.380 | the healthinsurance.org calculator,
00:09:42.760 | and we'll be able to have show notes for that,
00:09:46.900 | so that you can look at it.
00:09:49.100 | So, the main thing I wanna make here, the main point,
00:09:53.600 | is that don't assume that this premium tax credit
00:09:57.820 | doesn't apply to you, and that's for 2021 and 2022.
00:10:02.820 | - Yeah, all right.
00:10:04.660 | Thanks, Jason.
00:10:05.580 | Yeah, it's, I guess, a weird outcome of this law
00:10:08.460 | that we have clients with five, $8 million,
00:10:11.220 | they're getting a subsidy on their healthcare premium.
00:10:14.300 | Moving on to the next topic,
00:10:16.780 | I'm gonna discuss how to think about withdrawing money
00:10:20.460 | from your account.
00:10:21.680 | - Mark and Jason, if I could,
00:10:25.140 | we have a hand-raiser, Jody M.
00:10:28.700 | - Okay. - Has their hand raised,
00:10:30.020 | if they have a question.
00:10:31.260 | - And so...
00:10:35.420 | - No.
00:10:39.460 | Folks, unless there's something that's really critical,
00:10:43.680 | relevant to what they're talking about,
00:10:45.740 | let's try to hold questions until after they're done
00:10:48.380 | with a segment of the presentation.
00:10:52.540 | - Okay, I'll go ahead and move on.
00:10:55.500 | So the second segment I was gonna talk about
00:10:57.420 | was how to think about taking money out of your account.
00:11:00.260 | And certainly a lot of people will think,
00:11:01.500 | well, gosh, I spent all my life accumulating this money,
00:11:04.100 | how am I gonna live off this?
00:11:04.940 | And this can intimidate people.
00:11:06.420 | So I'm gonna talk about some considerations
00:11:09.180 | on your investments and how to structure those,
00:11:12.340 | and then a bit of just the mechanics
00:11:14.080 | of how you go about doing it.
00:11:15.500 | First of all, when I work with our clients
00:11:19.180 | and we talk about the structure of their assets,
00:11:21.660 | I basically break down their assets
00:11:23.940 | into three different compartments.
00:11:26.100 | One would be their, what we call their qualified money,
00:11:28.820 | IRAs, 401ks, 457 deferred comp, that is pre-tax.
00:11:33.820 | Any money that they have, which is tax-free,
00:11:37.320 | and some people have pretty large Roth IRAs,
00:11:39.540 | or they plan on doing Roth conversions,
00:11:41.780 | that's the other bucket.
00:11:43.700 | Then the final one would be their brokerage accounts.
00:11:46.460 | And I would throw cash in there as well.
00:11:48.900 | So the way that I view how they will invest
00:11:52.700 | or allocate their money is when are they gonna need
00:11:55.580 | to take that money out?
00:11:57.540 | For many people, it is likely going to be wise,
00:12:00.120 | and of course, these are generalizations.
00:12:02.540 | It's likely going to be wise for them
00:12:05.340 | to take money out of their brokerage account
00:12:07.180 | and their cash first and allow their Roth IRA
00:12:10.620 | and their qualified money to grow tax-free
00:12:13.700 | or tax-deferred longer.
00:12:15.000 | For many people also, one thing about their Roth money,
00:12:18.700 | depending upon how their plan looks,
00:12:21.220 | their Roth money is money they're never going to touch.
00:12:24.560 | Now, they may end up using it,
00:12:27.180 | but for many of them, it can just be a part of their estate.
00:12:29.280 | They just have enough of their assets
00:12:30.860 | where they're not gonna need to dip into their Roth money.
00:12:33.820 | And then the retirement money or the qualified money
00:12:36.180 | may be somewhere in between.
00:12:37.660 | They may start taking the retirement money out
00:12:39.220 | in three years, seven years, 10 years.
00:12:41.300 | They may not take it out
00:12:43.020 | until their required minimum distributions
00:12:45.780 | that begin at age 72 at this point.
00:12:48.700 | So an important concept when you think about that
00:12:52.540 | is when I think about the investments for my clients,
00:12:55.180 | 'cause that's what Bogleheads think about,
00:12:57.260 | is, oh, I gotta have the perfect asset allocation
00:12:59.460 | or otherwise I can't sleep at night.
00:13:01.260 | So a lot of times what they do
00:13:03.420 | is they'll look at their portfolio as a whole,
00:13:05.860 | and that kind of drives, I mean, personally,
00:13:09.020 | it drives me like nuts to think that way
00:13:11.420 | 'cause then you have to massage these portfolios
00:13:14.480 | to get the right percentage,
00:13:15.660 | and this account, and so on.
00:13:17.880 | So I've evolved in my thinking a little bit
00:13:20.540 | where I would focus more on the compartment of money
00:13:23.740 | and how soon are you going to need to access that money.
00:13:27.100 | So my point would be, if you have a Roth and an HSA,
00:13:32.100 | and you may use your HSA really as a long-term plan,
00:13:34.940 | and that's gonna be long-term,
00:13:36.860 | then you may want to just have that be 100% in stocks
00:13:40.060 | if you're comfortable with that.
00:13:42.540 | Really, regardless of the size of the Roth.
00:13:46.020 | The retirement assets,
00:13:47.740 | if they're going to be the second in line,
00:13:49.340 | you can still be maybe relatively aggressive with that,
00:13:52.020 | whatever that means to you.
00:13:53.380 | If that's 90/10, 80/20, 70/30,
00:13:55.780 | some asset allocation mix like that.
00:13:57.460 | And we do plans with retirees
00:13:59.940 | where they're retiring at 55, 58, 62,
00:14:03.180 | and it's clear from their plan
00:14:05.420 | that they're not gonna need to take their money out
00:14:07.060 | to RMDs, and then when they get to the RMDs,
00:14:08.900 | they're only taking it out 'cause they have to.
00:14:10.560 | So they can still afford, if they're comfortable,
00:14:13.100 | to be relatively aggressive with their qualified money.
00:14:17.200 | So then that just leaves their cash
00:14:19.820 | or their brokerage account.
00:14:21.920 | And that is money that, frankly,
00:14:23.680 | I would encourage my clients to think seriously
00:14:26.540 | about how aggressive they wanna be with that money,
00:14:29.320 | because that's money they may end up relying
00:14:31.480 | or using fairly soon.
00:14:34.260 | So the point about this that I'm making is,
00:14:36.700 | if you think of the money in your brokerage account,
00:14:40.820 | and I know this is somewhat heresy to some bogo heads,
00:14:44.620 | is that you might wanna actually have that in bonds
00:14:46.920 | or more stable-oriented assets.
00:14:48.700 | I know it's not tax-efficient,
00:14:51.220 | but still you've gotta think through
00:14:52.980 | when would you take the money out?
00:14:54.820 | And so I think that's an important consideration
00:14:57.180 | for people that are getting close to the point
00:14:59.500 | where they're going to start drawing on the money,
00:15:02.080 | because that's how I kind of think of their assets
00:15:05.660 | is the different compartments that they can take money from.
00:15:08.560 | So that was something I wanted to talk about
00:15:10.940 | when we think about withdrawing money.
00:15:12.860 | Now, another area is just,
00:15:14.100 | there are a lot of people that actually don't know
00:15:16.180 | how they're gonna take money out from their accounts.
00:15:18.820 | And it has gotten to be relatively simple.
00:15:20.660 | We'll talk a little bit about this on the technology area
00:15:23.220 | or how we think technology is gonna impact things.
00:15:26.140 | But yeah, you can have, if you have mutual funds,
00:15:28.480 | you can get set up for automatic distributions on those
00:15:31.180 | where they come out every monthly,
00:15:32.720 | or you can do them once a year or twice a year or quarterly.
00:15:36.920 | And you can just have the money sent
00:15:38.080 | right to your bank account.
00:15:40.600 | So when you think of taking money out of your account,
00:15:44.720 | it is actually really simple to do that these days.
00:15:48.800 | I find that my clients, as they get older,
00:15:51.960 | they tend to want to simplify things.
00:15:54.520 | And so they'll just say,
00:15:55.440 | "Look, just send me the money in January or whatever.
00:15:58.080 | I don't care if it's too much or whatever the case may be."
00:16:00.600 | Jason, do you have any thoughts
00:16:01.720 | that you wanted to add in this area or not
00:16:03.280 | on the withdrawing of the funds and the asset allocation?
00:16:06.360 | - No, I think you covered it pretty well.
00:16:08.200 | - Okay.
00:16:09.080 | So we're gonna get to another one.
00:16:09.960 | The third one here is the social security decision
00:16:13.160 | and some considerations about that.
00:16:15.540 | And that's a common one.
00:16:16.500 | We run different,
00:16:17.340 | we will run different scenarios for our clients
00:16:20.360 | on when they may think they will take out
00:16:26.560 | the social security or begin to receive social security.
00:16:31.080 | And for a lot of people, the default is,
00:16:32.500 | "Oh, well, I'll just take it later
00:16:33.840 | because I'll get more money when I take it later."
00:16:35.800 | So that's a natural way of thinking for many folks.
00:16:38.320 | Here's what I've learned over the years
00:16:40.080 | since I've worked with my clients about the socials,
00:16:42.600 | about the decision on when to take social security.
00:16:46.600 | Now I've run a lot of scenarios on these,
00:16:49.280 | just a lot of them.
00:16:50.840 | And in many cases, gosh, the dollar differences
00:16:55.840 | by the time you're 90 or 92
00:16:58.600 | in when you take social security,
00:17:01.160 | it's really a rounding error.
00:17:02.920 | I mean, now it's $80,000, $100,000.
00:17:07.080 | Now that was a big number when you were 25 and 30,
00:17:09.520 | but in a plan where the assets get to be $4 million,
00:17:12.680 | $5 million, that literally is a rounding error in the plan.
00:17:15.900 | So many times there can be very little difference
00:17:19.000 | in the actual amount of money that you have
00:17:21.240 | based upon when you take social security.
00:17:25.480 | But here's what comes into play on social security.
00:17:28.800 | As you're getting closer to social security,
00:17:30.360 | we tell a lot of our clients,
00:17:32.040 | they're 55, 58, 62, they wanna know,
00:17:35.920 | well, when's the best time to take social security?
00:17:38.360 | And I'll tell them, look,
00:17:39.200 | that's gonna be more of a game time decision.
00:17:40.920 | As you get closer, that will come into play.
00:17:44.700 | I think someone's got a question.
00:17:48.000 | We actually don't have any slides.
00:17:49.760 | So there aren't any slides here.
00:17:52.320 | So you will kind of figure out your social,
00:17:57.160 | when you wanna take social security, kind of how it goes.
00:17:59.520 | If you have a change in your health,
00:18:01.000 | that may motivate your interest
00:18:02.720 | in taking social security early.
00:18:04.720 | Clearly happens to people
00:18:06.200 | where they may become more skeptical about their longevity.
00:18:09.800 | And so they're gonna take social security earlier.
00:18:12.160 | If your assets are not performing well,
00:18:14.440 | when you're 64, 65, 66, you may say to yourself,
00:18:18.320 | look, I just wanna get this guaranteed paycheck coming in.
00:18:21.880 | Let's just start getting social security now.
00:18:24.560 | Another factor which I think may impact people more
00:18:27.040 | in years ahead will be if we develop more cynicism
00:18:30.800 | about social security and how much it's gonna pay,
00:18:33.740 | I think that may motivate people
00:18:35.640 | to begin to take social security earlier as well.
00:18:39.920 | Look, let's just lock it in.
00:18:41.120 | I don't know if they're gonna start cutting this thing
00:18:42.480 | in the future.
00:18:43.900 | But the biggest single factor in my experience
00:18:47.080 | in when people take social security
00:18:49.000 | or the reason to take it instead of deferring it to 70
00:18:53.240 | is 'cause they want the money.
00:18:55.120 | It's really that simple.
00:18:57.240 | The benefit of taking social security later
00:19:00.220 | means that you're going to have more money
00:19:03.160 | when you're 84, 85, 87.
00:19:06.600 | The problem is when you're 87,
00:19:08.540 | you're gonna wanna be 65 again.
00:19:10.240 | And so that is a realization that a lot of people have
00:19:13.960 | where they kind of look past the numbers
00:19:15.640 | with social security.
00:19:16.480 | And they'll say, look, there are things we wanna do now.
00:19:19.040 | We wanna spend, we're healthy now.
00:19:20.360 | We're gonna travel and spend time with our family,
00:19:22.880 | spend money on our family.
00:19:23.800 | And social security is a way for them
00:19:26.240 | to simply have more money now.
00:19:28.300 | And by the way, I have done plans with people,
00:19:31.680 | kind of the early retiree, the 57, 58 year old,
00:19:36.060 | where depending upon their spending level
00:19:39.000 | and the amount of social security they're going to get,
00:19:40.920 | if they take it early, and when I mean early,
00:19:42.720 | I mean 62 or 63,
00:19:45.200 | that actually improves their assets over the long run
00:19:48.740 | because it allows them to avoid dipping into assets
00:19:52.000 | from 62 to 67.
00:19:53.880 | That doesn't happen that much,
00:19:55.280 | but we've had enough scenarios
00:19:56.840 | where I can say that it is a legitimate outcome.
00:19:59.740 | Jason, did you have anything you wanted to add on social?
00:20:02.040 | 'Cause Jason gets involved in these as well
00:20:04.360 | with our clients.
00:20:05.340 | - Yeah, I'm on the side of the fence
00:20:09.880 | that although it is a rounding error, I agree with Mark.
00:20:13.320 | Social security right now
00:20:16.460 | is the only inflation adjusted annuity we can buy.
00:20:20.160 | And we buy that by waiting.
00:20:22.000 | And it goes back though to personal choice,
00:20:28.040 | because look, how many of us have a two and a half
00:20:30.900 | or three or three and a half percent mortgage?
00:20:33.880 | Does it make sense to pay it off early?
00:20:36.260 | Well, that's personal preference.
00:20:38.440 | Some people want to pay it off early,
00:20:40.800 | pay off the mortgage early,
00:20:41.840 | even though they could afford to write the check.
00:20:44.280 | Other people don't want to pay it off early
00:20:47.360 | because it's such a great rate,
00:20:48.560 | they think they can do better in the market
00:20:50.200 | even though they have assets to do that.
00:20:53.560 | So it's personal choice.
00:20:54.660 | With social security, some people want to take it.
00:20:59.120 | That's great.
00:21:00.040 | It's really not gonna affect people
00:21:01.920 | on the high end of the spectrum that have a lot of assets.
00:21:05.960 | Now, it will mess up
00:21:07.960 | when we're trying to do growth conversions
00:21:09.720 | because you're bringing in more income.
00:21:12.040 | You're in that really goofy social security tax bubble
00:21:16.320 | where even though, yes, you're in the 12% tax rate,
00:21:20.200 | based on how things go,
00:21:21.480 | you may be paying 18 to 20 to 40%
00:21:25.640 | for every additional dollar of social security
00:21:28.400 | based on the way that the bubble works.
00:21:31.600 | For people that are clearly past that,
00:21:33.860 | again, it's personal choice.
00:21:36.640 | I believe in delaying it longer rather than sooner,
00:21:41.640 | especially if one of the spouses is younger
00:21:45.040 | and if that younger spouse is a female,
00:21:47.480 | you typically want to delay
00:21:49.920 | in order to get the survivor to have
00:21:52.160 | as much as a benefit as they can get.
00:21:55.120 | I do have a couple of slides
00:21:56.960 | that I'm gonna pop up real quick.
00:21:58.800 | They're not designed to convince or confuse you.
00:22:03.440 | They're just a couple of slides
00:22:04.600 | I wanna show up to show graphically.
00:22:07.320 | The first slide, I have to give credit to where it came from.
00:22:09.920 | I went to a CPE class put on by the AICPA
00:22:14.760 | and Ted Sperensky, well-known in this area.
00:22:19.360 | He's a great presenter.
00:22:21.000 | He did a whole two-hour production
00:22:23.360 | and I just grabbed a couple of slides.
00:22:25.500 | The first slide I wanna show that he put up
00:22:29.160 | is this is the same age for a couple, the same benefit,
00:22:34.160 | and the different bars are the colors
00:22:37.200 | starting at age 62, early, full retirement,
00:22:42.480 | and then delaying to 70.
00:22:44.600 | Also, both dying, which probably won't happen together
00:22:50.760 | at 75, 85, and 95.
00:22:53.120 | The color coded is down here at the bottom where the dark,
00:22:56.960 | we start at 62, 66, 70.
00:23:01.560 | If you know when you're both going to die, it's easy.
00:23:04.360 | We know that, but because we don't know
00:23:07.080 | when we're going to die,
00:23:07.960 | that's why this question is a big deal.
00:23:10.200 | When should I start taking it?
00:23:12.120 | The main thing that I've learned
00:23:14.000 | is take it when you want to.
00:23:16.400 | If you don't need to take it,
00:23:17.920 | then you can think about if you want to delay or not.
00:23:20.160 | If you're gonna die early,
00:23:22.080 | yeah, take it as soon as you can.
00:23:24.440 | If you're gonna live to about your life expectancy,
00:23:28.280 | you know, it doesn't matter if you get a full retirement age
00:23:31.100 | or you delay because it's close.
00:23:34.320 | It's when you live longer, obviously, that you'll get more,
00:23:37.800 | but you may have to spend down other assets.
00:23:39.840 | Again, this is inflation adjusted.
00:23:41.840 | That's a huge benefit.
00:23:44.080 | One more slide I want to show.
00:23:46.760 | This is the bigger deal.
00:23:51.500 | If one of the couple is a low or no wage earner
00:23:55.360 | married to somebody with a full retirement benefit
00:23:58.080 | of $2,000 and the lower no wage earner is actually older.
00:24:03.080 | In this case, you know, no matter when you die,
00:24:08.080 | you probably want to take it as soon as you can.
00:24:09.880 | And that's just pure math.
00:24:11.280 | We went through, like I said, a large presentation on this,
00:24:17.180 | but I thought these will graphically show.
00:24:19.920 | Sometimes there's not a lot of difference when you wait.
00:24:23.200 | And other times there is a lot of difference when you wait.
00:24:26.200 | - Right.
00:24:28.720 | - Anyway. - Thanks, Mason.
00:24:30.000 | So I'm going to go on to the next topic here.
00:24:31.960 | Now, this one is fun for me.
00:24:35.680 | And it has to do with this decision
00:24:38.120 | about when you're going to retire.
00:24:41.360 | And this involves being honest with yourself
00:24:45.480 | and having some introspection
00:24:47.480 | and kind of evaluating your aspiration.
00:24:50.480 | And it's the decision
00:24:52.280 | about actually leaving your profession.
00:24:54.960 | And I've run into this one a lot.
00:24:56.560 | And so I've had to ask some of my clients
00:24:58.760 | and I'll acknowledge with them.
00:25:00.960 | This is for those out there that have not retired yet.
00:25:04.280 | Do you really have the courage to quit your job?
00:25:08.360 | Because once you leave,
00:25:09.580 | for the most part, you're not coming back.
00:25:12.040 | And then you got to figure out
00:25:12.960 | what you're going to do with your time.
00:25:14.120 | And man, that can really impact you personally,
00:25:17.160 | can impact your relationships with those close to you.
00:25:20.360 | So it takes a lot of courage for people to retire.
00:25:24.360 | I did this podcast because I kept on getting this complaint,
00:25:28.800 | or I wouldn't even say complaint, a comment from my client.
00:25:31.080 | They used to say this to me
00:25:32.120 | and I had to do a whole podcast on this.
00:25:34.080 | Oh, well, I can't retire because of healthcare costs.
00:25:38.240 | So they've got three and a half, $4 million.
00:25:40.400 | They're going to spend about 80, 90,000 a year.
00:25:43.600 | They got social security, got a pension,
00:25:45.480 | but they're going to keep working
00:25:47.080 | just 'cause now they actually have to pay for healthcare.
00:25:50.160 | And I would say to them,
00:25:51.240 | I don't really think that's why you're not retiring.
00:25:53.280 | I think you're rationalizing why you can't stop working.
00:25:56.880 | And they kind of agree with that.
00:25:58.400 | And so many of the folks that I work with,
00:26:00.640 | and maybe some of you out there,
00:26:03.120 | it kind of, it's a tough call to leave work forever.
00:26:08.120 | And so we can run the numbers for folks
00:26:11.480 | and they're going to look pretty great
00:26:12.800 | for many people that we do these plans.
00:26:14.200 | Some folks, they're going to be more challenged,
00:26:16.200 | but man, that transition involves
00:26:17.920 | a lot of courage for many folks.
00:26:20.160 | And as a kind of an addendum to that,
00:26:24.160 | or an additional consideration,
00:26:26.520 | for many people that we work with,
00:26:29.680 | many people here, many people you know,
00:26:32.960 | they are successful planners, successful savers.
00:26:37.680 | They've arrived at a good place.
00:26:39.640 | And so they're ready to transition
00:26:42.560 | or they are transitioning to retirement,
00:26:45.440 | but man, they have difficulty spending money.
00:26:47.880 | They can't do it and it's really a shame.
00:26:51.240 | I had a meeting with a guy last week
00:26:53.120 | and this is what he said.
00:26:54.840 | And we were talking about his investment allocation.
00:26:57.640 | I didn't use the word greedy to him,
00:26:59.520 | but actually that was kind of going through my head.
00:27:01.840 | And what we were talking about
00:27:03.480 | was his investment allocation.
00:27:05.560 | And kind of a default comment I have to my clients
00:27:09.560 | is that if were it me, and it will be me at some point,
00:27:12.880 | 'cause I will retire eventually,
00:27:14.280 | were it me, I would opt for more stability
00:27:18.120 | and give up growth.
00:27:19.200 | So that would be kind of how I would want
00:27:21.880 | to transition on into retirement.
00:27:23.400 | So I would have a more conservative portfolio.
00:27:25.720 | And in this guy's particular case,
00:27:27.040 | he was comfortable being about 85% stocks.
00:27:29.160 | And his comment was, well, if the markets don't cooperate,
00:27:33.560 | which for many people is like the biggest thing
00:27:36.400 | that they think about is how's my portfolio gonna do?
00:27:39.520 | Can I live off my money if the markets go down?
00:27:41.600 | And his comment was, if the markets don't cooperate,
00:27:44.360 | then I'll just reduce my discretionary spending
00:27:46.720 | for a few years.
00:27:47.800 | And I said, really?
00:27:49.600 | So between the ages of 62 and 65,
00:27:52.680 | you're not gonna like do much, really?
00:27:54.800 | You got one life.
00:27:56.360 | And so that just means you're gonna have more money
00:27:58.720 | when you're 85 or 90.
00:28:01.240 | But man, you weren't able to do things
00:28:03.480 | when you were in your 60s,
00:28:05.480 | which is really when you wanted to do things.
00:28:07.680 | And so that was a part of my point was that
00:28:10.680 | if you've been thinking about your future for so long
00:28:14.320 | and planning for retirement,
00:28:15.920 | or maybe not even thinking about it,
00:28:17.000 | but it was a methodical part of your process.
00:28:19.880 | And now you're there.
00:28:21.040 | And if you are successful, gosh,
00:28:23.320 | I wouldn't be hesitant about spending your money.
00:28:27.800 | It's okay to blow through some of your money as a retiree.
00:28:32.040 | So, and that is a difficult mindset
00:28:34.360 | for some people to get into.
00:28:37.040 | But man, it's just gonna be a shame
00:28:39.960 | if you've done the right things,
00:28:43.280 | but can't pull the trigger on,
00:28:44.720 | and I'm not talking about spending $250,000 a year,
00:28:48.200 | getting a nicer, taking a longer vacation,
00:28:50.360 | spending more money on your family,
00:28:51.600 | whatever's important to you.
00:28:52.760 | So I wanted to talk about that
00:28:54.640 | as you begin to think about this transition from retirement,
00:28:56.960 | or if you're already there
00:28:58.520 | and are thinking about how to spend your money.
00:29:00.360 | Now, this is kind of related to this one,
00:29:02.800 | but this one has been something
00:29:04.120 | that has always been a part of my conversations
00:29:07.240 | with the people that we work with.
00:29:08.960 | And it's about how you should think of your expenses
00:29:15.320 | when you think about your aging years.
00:29:19.440 | Now, the way that I view retirement is that
00:29:25.800 | for most people, depending upon when they retire,
00:29:28.080 | they're going to have a period of time,
00:29:29.560 | whether it's five years, 10, 15, 20 years,
00:29:32.520 | where they're gonna spend more money.
00:29:34.920 | But there's also going to be at some point or another,
00:29:37.560 | a drop-off in their spending, their consumption.
00:29:41.640 | And in some cases, it will go down dramatically.
00:29:44.520 | So when you think of the future,
00:29:47.040 | I would not be intimidated
00:29:49.920 | by the idea of spending down some of your assets.
00:29:52.480 | I think it's perfectly fine to do that.
00:29:54.120 | But I would think of your expense spending pattern
00:29:57.000 | as kind of a trajectory where it steadily goes up
00:29:59.640 | and then it drops down.
00:30:00.960 | In some cases, it drops down dramatic.
00:30:03.120 | And I share with my clients,
00:30:04.600 | my father, he's a great example of this.
00:30:09.160 | My dad's 89, he'll be 90 this summer.
00:30:11.120 | He still lives in his house by himself.
00:30:12.800 | And his health is generally pretty good,
00:30:14.960 | as good as it can be for somebody his age.
00:30:17.060 | But what is he gonna do?
00:30:20.080 | He can't spend money.
00:30:21.680 | He goes to the diner and he watches the ball game.
00:30:24.240 | That's kind of what dad does.
00:30:25.640 | He cuts the grass and he socializes with neighbors.
00:30:28.600 | He lives in Washington State.
00:30:30.000 | His biggest expenses is his property taxes
00:30:32.680 | and his insurance.
00:30:33.520 | But he spends about $28,000, $29,000 a year.
00:30:36.080 | Now, when mom was alive four years ago,
00:30:38.120 | they had cut down spending even before she passed.
00:30:42.360 | They were spending about $35,000, $36,000 a year.
00:30:44.920 | And in their heyday, as it were,
00:30:46.720 | they were spending about $65,000 to $70,000 a year.
00:30:49.320 | So even with inflation,
00:30:51.560 | which is the next point I wanna get into,
00:30:54.400 | their consumption had gone down.
00:30:56.200 | So I don't think it does you any good
00:30:58.360 | when you're planning for your future to simply say,
00:31:00.840 | oh, well, we're spending $95,000 this year.
00:31:03.760 | So when we're 88, we'll be spending $165,000.
00:31:07.080 | Like that's just not the way people behave.
00:31:09.120 | It's not how their lives unfold.
00:31:11.280 | So that's an important consideration
00:31:13.600 | when you think about your expenses over time.
00:31:15.600 | In a moment, we're gonna talk about long-term care,
00:31:18.540 | insurance, and how to think about long-term care as well.
00:31:22.040 | But that's an important consideration
00:31:25.000 | in how we do plans with our clients.
00:31:26.560 | In fact, we have a category we call initial retirement.
00:31:31.560 | And we suggested our clients use it.
00:31:34.160 | It's for a period of time, 10, 15 years,
00:31:36.260 | where you just have a larger number.
00:31:37.960 | And even for travel,
00:31:39.320 | we usually only do the travel budget
00:31:41.600 | for maybe 10, 15, 20 years as a part of their plan.
00:31:46.760 | Which leads me to the second point about inflation.
00:31:49.140 | And I've done some rants about inflation on my podcast,
00:31:51.860 | and I've really ran into clients about that.
00:31:54.700 | But when we do our projections for our clients,
00:31:57.020 | and we have these different graded expenses,
00:31:59.420 | I like to use 1.2% as an inflationary factor.
00:32:03.340 | I know that there are many models
00:32:11.580 | that talk about the importance of inflation
00:32:13.740 | and the real rate of return on your investments
00:32:16.800 | and the nominal rate of return.
00:32:18.240 | But gosh, I'd be very careful
00:32:20.360 | about using significant inflation numbers
00:32:23.280 | when you think about your plan
00:32:24.880 | and trying to figure out if you have enough money to retire.
00:32:28.400 | Because if you run a plan with, let's just say,
00:32:30.080 | a base return of inflation of even 2% or 3%,
00:32:33.960 | and you add that into the year expenses,
00:32:36.060 | and then you start to make decisions
00:32:39.200 | about when you can retire and when you can't retire,
00:32:42.320 | you're gonna be looking at some massive expenses
00:32:45.260 | when you're 85.
00:32:46.800 | So I would recommend using
00:32:48.160 | a much more modest inflation number
00:32:50.540 | in your planning purposes.
00:32:53.360 | And that actually kind of fits in
00:32:56.840 | with that prior comment I was making
00:32:59.600 | about where we even have recommended our clients
00:33:01.700 | that they have different expense categories over time.
00:33:05.540 | But I don't fear inflation at all.
00:33:09.900 | I mean, I certainly would fear inflation
00:33:11.940 | if we start getting rampant inflation in our economy,
00:33:14.960 | but just in day-to-day consumption expenses,
00:33:19.800 | inflation for retirees, that's not a concern that I have.
00:33:23.060 | Which leads on to the next point,
00:33:27.820 | which is long-term care insurance or long-term care costs
00:33:32.860 | and how you might wanna consider that.
00:33:34.760 | And Jason will talk about this as well.
00:33:41.860 | Do you need long-term care insurance?
00:33:44.060 | I actually am a proponent
00:33:45.300 | of people getting long-term care insurance
00:33:47.420 | if they are in the right situation,
00:33:51.400 | meaning that if their assets are enough
00:33:55.160 | where I think that they're in jeopardy.
00:33:57.100 | If your assets are pretty low,
00:33:59.500 | maybe less than 300, 400,000,
00:34:02.980 | I'm not sure long-term care insurance makes sense
00:34:05.700 | just because you don't have enough to insure.
00:34:08.760 | Maybe you can just spend down your money
00:34:09.920 | and then at that point you just qualify
00:34:11.380 | for medical assistance.
00:34:12.560 | On the other hand, if you have assets
00:34:15.460 | which are greater than some level,
00:34:17.300 | some certain level, 2 million maybe,
00:34:21.620 | whatever it happens to be,
00:34:23.340 | at that point, if your numbers project really well,
00:34:26.800 | I think you can definitely self-insure.
00:34:28.940 | Also, for many, their home is a pretty big asset.
00:34:37.180 | Their home may be valued at $700,000, $800,000, $900,000,
00:34:41.400 | and that's nice to have in your back pocket
00:34:43.920 | if you end up needing,
00:34:45.000 | or the last surviving spouse ends up needing care,
00:34:49.040 | they can sell that property
00:34:50.700 | and take a lot of those proceeds
00:34:52.000 | that will help pay for their care.
00:34:53.960 | With regards to long-term care insurance
00:34:57.240 | or long-term care in general,
00:34:58.940 | I don't know if you've ever been
00:35:01.500 | to one of these long-term care seminars,
00:35:03.260 | but we certainly used to have these trainings
00:35:05.960 | when I worked in a conventional distribution system,
00:35:07.940 | but the statistic is two out of every three Americans
00:35:10.940 | at some point in their life need long-term care.
00:35:13.500 | And my mom needed long-term care.
00:35:15.180 | She was in a transition care facility for about 60 days,
00:35:20.180 | went back home, went back into another one again
00:35:23.900 | for a couple of weeks,
00:35:24.980 | and then she went to a group home and passed away there.
00:35:27.940 | And so the long-term care sales industry
00:35:30.420 | will use that as a ploy, I guess,
00:35:33.860 | to get people interested in long-term care insurance.
00:35:36.740 | I've seen a couple of other studies, two others though,
00:35:38.660 | that talked about your real risk
00:35:42.180 | has an American over the age of 65
00:35:44.180 | of having an extended long-term care event,
00:35:47.020 | which is when it's really gonna get costly.
00:35:49.340 | And that's less than the area of 10,
00:35:51.180 | that's less than about 10% of people
00:35:53.560 | that are going to have
00:35:54.400 | a significant costly long-term care event.
00:35:57.340 | If you're going to, now,
00:36:00.620 | but I would definitely encourage people
00:36:02.540 | if they are interested to shop for long-term care.
00:36:05.580 | In my experience, kind of the sweet spot to look at it
00:36:09.140 | is your early to mid to latter 50s.
00:36:12.340 | Of course, if you talk with a long-term salesperson,
00:36:14.100 | it's like, whenever you talk with them,
00:36:15.300 | that's the right, if you're 10,
00:36:17.100 | that's the right time to take out a long-term care policy.
00:36:20.500 | And some concerns,
00:36:22.020 | and they do certainly raise an important point
00:36:25.620 | in that if you get diagnosed with a condition,
00:36:28.260 | and think, oh, maybe I should go get a long-term care policy,
00:36:31.060 | then you're gonna damage your ability to receive a policy
00:36:35.600 | once you get diagnosed with some sort of condition,
00:36:38.220 | which would possibly indicate
00:36:41.220 | a higher likelihood of needing long-term care.
00:36:44.420 | So yeah, so that's a bona fide factor in the consideration.
00:36:47.540 | But I think early to mid 50s,
00:36:49.420 | latter 50s is a good time to shop
00:36:51.200 | for long-term care insurance.
00:36:53.220 | Why would you get long-term care insurance
00:36:59.420 | even if you have significant wealth?
00:37:01.840 | There are people that do that,
00:37:03.940 | and they do it, in my experience, for two reasons.
00:37:06.540 | One is they're simply sensitive to long-term care insurance.
00:37:09.820 | Maybe they dealt with it with their parents,
00:37:12.020 | a family member, they're very aware of the cost of it,
00:37:15.340 | and they simply wanna take that off the table.
00:37:20.340 | And for some, it kind of frees them up.
00:37:22.320 | They feel like they can spend more money,
00:37:23.540 | 'cause they got rid of that one big giant potential thing
00:37:26.200 | that could happen to them,
00:37:27.580 | even though it's not really gonna devastate their estate.
00:37:30.580 | The other reason that people that have wealth
00:37:32.700 | will get long-term care insurance
00:37:33.540 | is just to preserve their estate.
00:37:35.140 | They'll use it as an estate preservation tactic.
00:37:37.500 | If you are going to get long-term care insurance
00:37:41.100 | and you're shopping for it, people say,
00:37:42.700 | "Well, I looked into it and it was pretty expensive."
00:37:44.460 | Well, if you're gonna get a long-term care policy,
00:37:48.260 | it's going to be expensive if it's gonna be a good policy,
00:37:51.820 | 'cause long-term care is expensive.
00:37:54.600 | So you can expect to pay, I don't know, four to six,
00:37:57.340 | maybe $8,000 a year.
00:37:59.220 | You can also get these upfront pay policies
00:38:01.460 | where you pay a lot upfront,
00:38:02.940 | get all the premiums out of the way.
00:38:05.700 | But like other insurances that we buy,
00:38:08.700 | when you buy long-term care insurance,
00:38:10.660 | you can do a fair amount of cost sharing
00:38:12.560 | with the insurance company.
00:38:13.960 | They have things called an elimination period,
00:38:16.660 | which is the period of time before the care policy kicks in,
00:38:20.460 | 90 days, 180 days, maybe 365 days.
00:38:23.740 | They have a daily benefit,
00:38:26.260 | and that's the amount of pay or the amount of cost
00:38:29.780 | that the policy will pay on a daily basis.
00:38:32.480 | So you could look at a policy where you might say,
00:38:34.840 | "Look, we can afford to pay for 30% each day.
00:38:38.340 | We just want somebody to help with the majority of the cost."
00:38:40.960 | So you'd be willing to pay on some of the daily benefit.
00:38:45.340 | Another big variable in a long-term care policy
00:38:49.060 | would be the inflation rider.
00:38:51.660 | These things come with an inflation rider.
00:38:53.520 | It's either simple or compound.
00:38:55.560 | Compound interest means that the money,
00:38:58.740 | the benefit that you're gonna get
00:38:59.780 | is gonna grow at a faster rate than a simple inflation rider,
00:39:02.620 | but it costs a lot more.
00:39:03.980 | That's a much more expensive policy.
00:39:05.860 | So you can massage the premiums
00:39:09.520 | or the cost of these policies
00:39:11.500 | by doing some cost sharing with the insurance companies.
00:39:14.480 | So those are some thoughts on long-term care.
00:39:17.460 | Jason, did you have anything you wanted to add
00:39:19.820 | on long-term care and your thoughts on that?
00:39:21.700 | Maybe the insurance carriers?
00:39:23.900 | - Yeah, just a couple of brief comments.
00:39:26.280 | So long-term care, when it came out,
00:39:29.140 | I don't know, 20 years ago, I mean, two years ago,
00:39:32.380 | it was a novel concept and it was affordable.
00:39:36.100 | I mean, people were talking about in their forties,
00:39:38.820 | "Go ahead and lock in a plan now."
00:39:41.180 | But what happened is the actuaries
00:39:43.420 | were not able to model the cost.
00:39:47.580 | And over a short period of time,
00:39:50.180 | many carriers got out of business
00:39:52.380 | and/or jacked up their rates to cover
00:39:55.060 | because the actuaries could not model these costs.
00:39:58.180 | It wasn't like the risk associated
00:40:02.800 | with early premature death or disability
00:40:06.300 | that they've had decades of research
00:40:07.940 | and decades of experience.
00:40:09.640 | Modeling and doing the actuarial numbers ended up,
00:40:15.780 | they were wrong.
00:40:16.780 | So it has become very expensive.
00:40:19.300 | And the danger is if you buy it
00:40:21.460 | for a number of years, decades,
00:40:23.540 | maybe you can't afford it
00:40:24.820 | right before you actually need it.
00:40:26.380 | So you have to be cautious and really think about
00:40:30.340 | how much you're going to rely on it.
00:40:32.980 | We definitely wanna buy it and we don't wanna use it
00:40:35.300 | because it's like buying a house insurance.
00:40:36.920 | If your home burns down, you're glad you have it,
00:40:39.140 | but you hope your house never burned down.
00:40:40.580 | Well, what if your house insurance just got higher
00:40:43.200 | and higher and higher and higher
00:40:44.360 | to where you had a debate,
00:40:46.180 | "Should I continue to buy house insurance?"
00:40:48.460 | Well, house insurance does not go up.
00:40:51.100 | And the reason being is
00:40:52.660 | because the actuaries have it nailed down pretty well.
00:40:56.740 | Long-term care insurance, I agree with Mark.
00:40:58.940 | If you don't have a lot of assets, you don't need it.
00:41:01.140 | If you have a lot of assets, you can self-insure.
00:41:03.820 | And the odds of running through your money
00:41:07.060 | are much lower than the industry would lead you to believe.
00:41:10.220 | It is there though, no doubt about that.
00:41:12.500 | Thanks.
00:41:14.980 | - Yeah.
00:41:15.820 | Also, I've talked with a few clients
00:41:20.340 | and shared this experience.
00:41:22.220 | It's interesting how people feel
00:41:23.300 | about their long-term care policies.
00:41:24.980 | Like when they buy it when they're 55, it's,
00:41:28.620 | "All right, I got approved.
00:41:30.140 | All right, we'll write the check for this thing."
00:41:31.700 | They buy it with reluctance.
00:41:34.320 | They're 65, it's more regular part of their budget.
00:41:37.020 | Now when they're 75, they're glad to have it.
00:41:38.900 | Then when they're 85,
00:41:40.260 | man, that's the one thing they don't wanna miss the payment on.
00:41:43.280 | They paid in this thing all these years,
00:41:44.620 | so they wanna make sure they get their money out of it.
00:41:46.540 | So a couple of other concepts I wanna go into,
00:41:48.460 | which are more general concepts.
00:41:50.060 | One is the idea of how to handle your investments in general
00:41:54.940 | as you get closer to, and I mentioned this earlier.
00:41:58.120 | For those that have been, and of course, Bill Bernstein
00:42:00.460 | has the famous comment about,
00:42:02.700 | "If you've won the game, why keep playing?"
00:42:04.860 | I'm not sure if he literally means
00:42:06.220 | take everything and just put it in cash.
00:42:08.160 | But I think what he's implying here is
00:42:10.740 | why expose yourself to unnecessary risk
00:42:14.140 | if you've already been a successful saver
00:42:16.460 | and your retirement's set up.
00:42:18.020 | And that is a comment I would share with my clients as well,
00:42:21.140 | is if you're already there, you've won,
00:42:24.060 | you have a successful plan,
00:42:25.820 | you've gotta figure out
00:42:27.820 | where you're gonna go with this thing.
00:42:29.800 | And if it were at me, and again,
00:42:31.380 | it will be me at some point, I hope to retire.
00:42:34.180 | I'm gonna take, I'm gonna be a much more conservative,
00:42:36.220 | much more cautious investor,
00:42:37.740 | even without regard to the interest rates at the time.
00:42:40.180 | So I would move my portfolio
00:42:42.460 | into more of a stable portfolio,
00:42:46.180 | whatever that means, 40, 60, 50, 50, 55, 45,
00:42:50.220 | or some sort of asset allocation like that.
00:42:53.300 | And I would encourage people to try,
00:42:55.780 | to the extent that you can really do this,
00:42:57.380 | and I know this is hard,
00:42:59.340 | but go through a bonafide thought exercise
00:43:03.020 | where you've retired,
00:43:05.180 | and we go through a really horrible financial apocalypse,
00:43:09.340 | not something that lasts for six months,
00:43:11.340 | and then the market goes back up again,
00:43:13.240 | or nine months, or a year and a half,
00:43:15.820 | but something that scares everyone to death.
00:43:18.300 | Markets go down by 50, 55%.
00:43:20.980 | Whatever the intervention is,
00:43:22.420 | that whatever, that whomever's doing is not working.
00:43:25.080 | 'Cause you can't get away from that when it happens.
00:43:28.420 | Whenever the markets go down,
00:43:29.740 | like the last bad one we had was March of last year,
00:43:32.740 | two worst weeks ever, here we go again,
00:43:34.700 | they shut down the markets three days.
00:43:36.260 | I actually had an email exchange with some buddies of mine,
00:43:38.620 | where we were trying to pick the low of the Dow,
00:43:41.060 | and we started to get really cynical.
00:43:42.700 | I was like, you know, one, whatever, it's gonna go.
00:43:45.260 | And of course, it settled down,
00:43:47.060 | but it went right back up again.
00:43:48.700 | What if that doesn't happen for two, three, four years,
00:43:51.780 | and you're still 80, 20?
00:43:52.820 | Are you really gonna begin to stop doing things,
00:43:57.140 | enjoying your life when you only get one retirement?
00:43:59.380 | So it's a good thought exercise to really think,
00:44:02.520 | it was a good thought exercise.
00:44:04.020 | What I don't like about it, it's just a thought exercise.
00:44:06.380 | It's like, it's not really what's happening at the moment.
00:44:09.880 | Now, the final thing I'll mention
00:44:11.580 | about planning for your retirement
00:44:15.780 | is when I have sessions with our clients,
00:44:18.860 | sometimes I feel like I'm pulling them out of this pit
00:44:22.220 | of weeds, where they're so bogged down
00:44:26.460 | in things that never matter,
00:44:28.820 | that they've lost track of the big picture.
00:44:31.640 | So don't lose perspective on what you've accomplished
00:44:35.860 | and where you're at, as you're thinking about your future.
00:44:39.460 | And what I mean by that is I would not grind
00:44:41.780 | over these numbers unless you kind of enjoy
00:44:43.580 | that kind of thing, and some people actually do.
00:44:46.260 | Are you making changes in your portfolio
00:44:49.200 | or thinking about changes to just do it?
00:44:52.780 | It's probably spinning wheels more than anything else.
00:44:57.900 | So I'd really try to take a few steps back
00:45:00.820 | and focus on the big picture.
00:45:03.380 | And where that really comes in handy
00:45:05.880 | is if you are hamstringing yourself
00:45:08.380 | from spending money on yourself or your family
00:45:10.900 | or things that are important to you,
00:45:12.140 | 'cause you're concerned about your plan
00:45:14.120 | when you've lost the perspective
00:45:17.340 | of how good your plan actually is.
00:45:19.040 | So that's kind of the topics that we wanted to cover.
00:45:23.860 | I got distracted.
00:45:28.820 | Those are the topics that we wanted to cover
00:45:30.320 | for some considerations in structuring your investments.
00:45:33.620 | Now, Alan, did you want to have questions on this
00:45:36.240 | before we moved on to the technology?
00:45:38.620 | Our technology comments will actually be more brief.
00:45:40.940 | So did you want to have a Q&A here if there were any?
00:45:43.580 | - Yeah, so why don't we take a little break
00:45:48.380 | and have some Q&A here,
00:45:49.660 | if you guys can submit questions by the chat.
00:45:53.540 | If people are not on camera
00:45:55.980 | and don't mind having their name pop up,
00:45:57.940 | I'll keep recording this for the time being.
00:46:00.960 | So please submit your questions.
00:46:04.520 | Or if you want to ask a question in person,
00:46:07.000 | raise your hand using the raised hand icon.
00:46:09.620 | - Do have Larry Alexander had his hand up.
00:46:14.760 | I don't know if that was intentional.
00:46:17.480 | - Lady Geek, you had a question?
00:46:24.960 | - Yeah, I just wanted to mention
00:46:26.920 | that during the choice of the medical insurance,
00:46:30.560 | what helped me greatly
00:46:32.160 | was to use a medical insurance broker.
00:46:34.800 | And there happened to be one near me,
00:46:36.840 | he helped my parents out,
00:46:38.020 | especially when you have to mix it with Medicare.
00:46:40.280 | That's not for me right now, but for my parents it was.
00:46:42.840 | He went through every plan.
00:46:44.120 | He came to the door and he,
00:46:46.760 | I know they take a commission, but it's no cost to you.
00:46:51.140 | And they signed on the spot
00:46:52.800 | because he spent like half hour, 20 minutes,
00:46:55.180 | you know, a long time with them and just said,
00:46:57.520 | what's your situation?
00:46:59.240 | Here's what you do.
00:47:00.660 | This is the clear cut choice.
00:47:02.120 | So I'm actually using one now.
00:47:04.900 | I'm actually also on COBRA.
00:47:06.240 | I retired last year and I found out that COBRA for me
00:47:09.520 | was cheaper than the marketplace because of my age.
00:47:13.580 | Maybe you should mention that the premiums
00:47:15.840 | go with your medical,
00:47:17.320 | the premiums of your employer
00:47:19.560 | go by the average age of the workforce.
00:47:21.560 | Since I'm an older person,
00:47:23.480 | it's actually more expensive if I go to the private market.
00:47:26.280 | So by going on COBRA, which actually is paying 102%,
00:47:30.640 | I still save nearly half
00:47:32.480 | of what it will cost me out on the marketplace.
00:47:34.320 | So when my insurance expires in October,
00:47:36.920 | I'll call my broker and say, just set me up.
00:47:39.520 | So I think that just saves a lot of work
00:47:41.760 | and I'll do my own research,
00:47:42.840 | but I just want to mention that,
00:47:44.800 | use a broker to help you.
00:47:47.800 | They do this stuff every day.
00:47:50.240 | - Yeah, definitely.
00:47:51.080 | I want to follow in on what Lady Geek said is that
00:47:54.720 | there are some really good people out there that are,
00:47:58.360 | and she's right.
00:47:59.200 | They work in this day in and day out.
00:48:00.920 | They know which plans and yeah,
00:48:03.120 | they're going to make a commission,
00:48:04.040 | but it's not untoward anybody.
00:48:07.800 | They're actually doing a good thing out there.
00:48:10.120 | So yeah, good point.
00:48:11.400 | - Yeah, and make sure that's not the same
00:48:13.220 | as a life insurance agent.
00:48:14.520 | It's a separate agency that does medical.
00:48:16.640 | Don't go to the provincial or med life
00:48:18.680 | or any of those normal websites you see on TV.
00:48:20.840 | It's a medical insurance broker and that's all they do.
00:48:24.120 | Okay, I'm done.
00:48:26.680 | - Yeah, it's a bit of a, you know, it's a specialization.
00:48:28.720 | Here in Minnesota,
00:48:29.560 | we have brokers from UCARE and Medicare or Medica
00:48:33.920 | and Group Health that can provide
00:48:36.040 | quality guidance to consumers.
00:48:40.160 | In fact, we did an hour long interview with,
00:48:42.160 | I can't remember her name,
00:48:43.480 | but she works for a national Medicare broker
00:48:45.800 | from out of Dallas.
00:48:47.040 | So, you know, we put that on our podcast.
00:48:50.480 | - All right, Martha, you had a question?
00:48:54.220 | Perhaps.
00:48:57.880 | - I think I may have seen some questions in the chat.
00:49:02.760 | Is that where they're going?
00:49:04.000 | - Martha, I think you're on, there you go.
00:49:05.600 | - Thank you.
00:49:06.440 | Sorry.
00:49:07.840 | Jason, I missed why there was such a difference
00:49:11.680 | with the zip,
00:49:12.560 | people living in different zip codes on the subsidies.
00:49:14.640 | Is it because of the way the states went into Obamacare?
00:49:18.840 | - Yeah, that's a big part of it.
00:49:20.040 | So, it has to do with the average,
00:49:24.580 | what the rates are in that particular county,
00:49:27.160 | because if you are shopping for health exchange,
00:49:31.860 | marketplace healthcare,
00:49:33.520 | it's based on the county and the zip code that you live in
00:49:37.200 | on how the plans are priced.
00:49:39.760 | So, that's exactly it.
00:49:41.520 | That's why I picked those zip codes.
00:49:43.240 | I mean, I picked mine
00:49:44.520 | and it happens to be a very low number.
00:49:48.080 | But West Virginia is notorious for having high plans.
00:49:53.080 | In particular, Charleston, West Virginia
00:49:56.560 | is one of the highest,
00:49:57.800 | way higher than Hawaii and Oceanside, California.
00:50:02.060 | So, it just depends on where you live,
00:50:05.620 | if it makes sense to use,
00:50:07.000 | especially with the removal of the cliff.
00:50:09.160 | - All right.
00:50:12.600 | There are a couple of chat questions here from Robert.
00:50:16.320 | I guess maybe this is just for the participants.
00:50:18.680 | How many clients,
00:50:19.680 | I guess participants limit their adjusted gross income
00:50:23.160 | by IRMA thresholds?
00:50:24.660 | - I didn't hear that.
00:50:28.920 | Jason would know more about that one.
00:50:30.340 | Did you hear that question, Jason?
00:50:32.040 | - Was it a poll question or a content question?
00:50:37.880 | - No, I think it was just asking,
00:50:39.680 | one of our participants is asking other participants
00:50:42.720 | about how many of them limit their adjusted gross income,
00:50:45.880 | or I should say, manage it based upon IRMA thresholds.
00:50:50.080 | I know for one,
00:50:50.960 | I tend to do that to some extent with Roth conversions,
00:50:54.120 | at least to factor that in.
00:50:55.800 | It's probably an individualized decision
00:50:59.080 | weighing the pros and the cons.
00:51:01.120 | - Yeah, I can jump in with a quick comment on that.
00:51:04.360 | I've had a couple of discussions with Mark
00:51:06.600 | and I'm going to share a slide here for everybody
00:51:10.640 | itching to look at another slide.
00:51:13.620 | Okay, so this comes right off the source
00:51:15.780 | as the Medicare website.
00:51:18.080 | And what this is, is for 2021.
00:51:22.240 | Generally, we know that the Part B is 148.50 per month.
00:51:28.660 | So for a couple that each have Medicare,
00:51:33.400 | they're going to be paying about 300 bucks a month,
00:51:38.620 | 3,600 a year for Part B coverage.
00:51:42.300 | Great.
00:51:43.300 | Well, what if they hit IRMA?
00:51:44.980 | Which IRMA ends up being additional premiums.
00:51:49.760 | It's called the income-related monthly adjustment amount.
00:51:53.540 | And if you are married filing joint,
00:51:56.640 | if you're over 176,000 up to 222,
00:52:00.620 | look, you're paying about, what, another 60 bucks
00:52:04.620 | each per month, per year.
00:52:07.220 | So it's not life-changing.
00:52:10.100 | It does start to add up.
00:52:12.140 | You know, when you get up to more than 222,000 up to 276,
00:52:17.140 | and here we're talking about getting pretty thick
00:52:22.520 | into the 24% tax bracket, you're doubling Part B.
00:52:27.520 | Again, not the end of the world.
00:52:29.660 | The numbers do start to add up after a while.
00:52:32.060 | Don't forget too, that's Part B.
00:52:36.020 | Part D, if you have a Part D plan, drug prescription plan,
00:52:41.940 | there's also an IRMA effect.
00:52:45.000 | If you're over 176,000, it ends up being 1,230 per month
00:52:51.260 | on top of whatever you're paying for your drug plan,
00:52:54.380 | 25 bucks a month more for a couple on Medicare.
00:52:58.460 | So again, not plan busting,
00:53:02.260 | but the numbers add up after a while
00:53:04.660 | in the 24% tax bracket.
00:53:07.200 | You know, when you get up over 222,
00:53:10.780 | you're looking at $63 plus the amount of your drug plan.
00:53:15.780 | So you have to be aware of it.
00:53:19.300 | And definitely, if you're close to it
00:53:21.420 | and can keep under the next threshold, sure, do that.
00:53:24.780 | But, you know, don't go without income.
00:53:29.780 | Spend your money, as Mark was saying earlier,
00:53:35.060 | because as I like to say, you know, go first class
00:53:39.260 | because your heirs definitely will.
00:53:41.480 | - True.
00:53:44.420 | Dan had a question.
00:53:47.060 | Why not keep taxable account in equities
00:53:49.380 | and replace them with equities in your IRA or 401k
00:53:52.780 | the same day?
00:53:54.540 | That way you were actually selling bonds
00:53:56.580 | and not taking the ordinary income taxes
00:53:58.480 | in your brokerage account.
00:53:59.780 | - Yeah, well, yeah, a lot of strategies.
00:54:03.840 | You have to be careful though, you could have watch sales.
00:54:09.020 | But no, I mean, it's a strategy for sure
00:54:13.580 | because you're maintaining your asset allocation.
00:54:16.360 | You're trying to sell strategically, tactically.
00:54:20.860 | Yeah, that's a good idea.
00:54:22.120 | - There was another one that just popped up there, Alan.
00:54:27.420 | - Okay, if you can read that.
00:54:29.400 | - Well, let me, I gotta figure out how to use this.
00:54:32.020 | Well, okay, why not?
00:54:33.260 | Okay.
00:54:37.180 | Okay.
00:54:38.020 | If you don't think you'll spend, okay.
00:54:40.780 | - I see, if you don't think, go ahead.
00:54:47.980 | - If you don't think you'll spend all you have accumulated,
00:54:50.740 | is there any problem?
00:54:51.860 | Okay, I'm laughing.
00:54:56.220 | Is there any problem taking the mindset
00:54:58.380 | that hey, this is your grandkids money?
00:55:00.460 | You can do whatever you want with your money,
00:55:02.140 | whatever your mindset happens to be.
00:55:04.380 | And so I think that's perfectly,
00:55:06.380 | because I think what you're talking about
00:55:07.820 | is either giving the money away while you're alive
00:55:09.940 | or just investing it in a way
00:55:12.380 | where it's really for your grandkids,
00:55:14.060 | which would typically mean you would invest it aggressively.
00:55:16.740 | There's nothing wrong at all with that.
00:55:18.300 | As long as, if you make that decision when you're 80
00:55:22.240 | or 79 or whatever, if when you're 90,
00:55:24.940 | you don't sit around and think, oh my, what was I thinking?
00:55:27.140 | How did I possibly end up with 100% equities?
00:55:29.640 | So as long as you can maintain that perspective,
00:55:33.180 | then yeah, that's perfectly fine.
00:55:35.500 | You know, we do plans with people
00:55:37.380 | that, and they're in this group, like people,
00:55:41.060 | not like, I mean, these are representative
00:55:44.140 | of people in this group.
00:55:45.140 | Maybe there are some people we've done this plans with.
00:55:46.880 | Where they can't, they haven't come to grips
00:55:49.380 | with how much money they have.
00:55:50.420 | Like they can't, they don't understand.
00:55:53.220 | The numbers are too big.
00:55:55.060 | And so they don't, you know,
00:55:57.460 | they've lost perspective on that.
00:55:59.500 | - One thing, I'll throw out relating to long-term care,
00:56:05.100 | a personal anecdote.
00:56:06.060 | My 89-year-old mother and my father,
00:56:09.100 | who passed away about 28 years ago,
00:56:12.220 | sold insurance in the end,
00:56:13.460 | selling long-term care insurance.
00:56:15.940 | I didn't know much about the details of that,
00:56:17.940 | but I think he was honest and tried to work
00:56:20.220 | in his client's best interest.
00:56:21.560 | But he, before he passed, made sure my mother
00:56:24.540 | had an excellent long-term care insurance policy.
00:56:26.780 | And she's paid the premiums every year
00:56:28.980 | for 25 plus or 28 years.
00:56:31.420 | And now her insurance company is Insolvent.
00:56:34.260 | It's based in Pennsylvania.
00:56:35.960 | It's in rehabilitation.
00:56:38.420 | I've read through the current legal filings
00:56:40.660 | and they basically are millions of dollars in the red.
00:56:44.180 | And now we don't know what percentage
00:56:46.700 | of the benefits she'll get.
00:56:48.060 | She'll get something because the Guarantee Association
00:56:51.180 | for each state then steps in,
00:56:53.500 | but it's really up to the state to decide how they fund that.
00:56:56.640 | And that's another consideration.
00:56:57.920 | Even though she started off
00:56:58.860 | with an extremely highly rated insurance company,
00:57:02.040 | it got sold and then resold and purchased
00:57:04.980 | and acquired by somebody else until they went insolvent.
00:57:07.860 | Probably some legal shenanigans that went on there,
00:57:10.020 | I suspect, but that's another consideration
00:57:12.500 | is the strength of the insurance company.
00:57:15.060 | And even if they are strong on paper currently,
00:57:17.660 | what will it be in 20, 30 years down the line?
00:57:20.620 | - That's a good point.
00:57:22.820 | If I could expand on that here a little bit,
00:57:24.500 | 'cause I hate the word guaranteed.
00:57:26.620 | You know who I worked for in 2008?
00:57:29.660 | I worked for Valek that was owned by AIG.
00:57:33.540 | We had people, it's happened twice.
00:57:37.800 | We had a little tiny office in Edina, Minnesota,
00:57:40.840 | corner office.
00:57:42.160 | Two people came into our office threatening our staff.
00:57:45.440 | You may not remember what was going on at that time,
00:57:47.840 | but AIG was vilified in this country.
00:57:52.440 | And before that though, AIG, I think,
00:57:56.480 | was one of the seven or eight companies.
00:57:59.000 | And I don't really remember this stuff,
00:58:00.020 | but had the most sterling ratings
00:58:02.780 | from the rating agencies here in America, from all of them.
00:58:05.740 | And we would promote that when we would go give
00:58:08.300 | presentations to one of the seven companies
00:58:10.460 | that have had a great rating for 80 years.
00:58:13.100 | And if you were to go read the Morningstar report
00:58:17.060 | and the ratings reports about AIG,
00:58:19.100 | they talk about the wide moat and all the businesses
00:58:21.580 | and how this is the most financially stable company
00:58:23.900 | in a matter of a weekend, right?
00:58:25.260 | I mean, that's not how long it took to happen,
00:58:27.320 | but basically AIG collapsed over one weekend.
00:58:30.020 | So, and so I don't know how to do that analysis, Alan,
00:58:34.820 | where you would come up with an answer
00:58:37.540 | about the financial wherewithal
00:58:40.380 | of these companies in the future.
00:58:41.660 | But it's a legitimate point.
00:58:42.860 | If you're gonna buy long-term care insurance,
00:58:45.340 | you know, that risk is out there, so.
00:58:47.880 | I think there's a quite,
00:58:53.460 | can we give an example of what you mean by big
00:58:55.880 | or what is considered average?
00:58:57.640 | That may be in the context of large assets.
00:59:04.740 | I think that I would relate the size of the asset
00:59:07.820 | to the amount of spending people have.
00:59:10.080 | So if you are people that,
00:59:13.580 | or if you're a person or a couple
00:59:15.440 | where you kind of like to go to Greece for three months
00:59:20.440 | and you're gonna have a really nice place there,
00:59:24.020 | and then you're gonna go to Hawaii
00:59:25.660 | or wherever you're gonna go,
00:59:26.660 | and you're gonna spend $350,000 a year
00:59:29.980 | for the first seven years of your retirement,
00:59:33.580 | we don't have many clients like that.
00:59:35.420 | But if you're gonna spend that kind of money,
00:59:39.200 | then your portfolio, if it's $3 million,
00:59:42.720 | is in jeopardy unless you're getting
00:59:44.060 | like a really big pension.
00:59:45.360 | You're gonna have to have bigger assets.
00:59:46.740 | Most of our clients are like that.
00:59:48.180 | So if the question is, what does the term big mean?
00:59:51.480 | Gosh, many people can get by on social security
00:59:54.460 | and they, $1 million, 1.2, they're fine.
00:59:57.380 | You just don't do that much.
00:59:59.220 | So I guess I would compare the size of the asset
01:00:02.460 | to the amount that they're gonna spend
01:00:03.980 | to determine if it's big.
01:00:06.180 | 'Cause yeah, that can be a very mis,
01:00:07.980 | that can mean, that's a term that can mean something
01:00:11.500 | to one person entirely different
01:00:12.900 | to something to somebody else.
01:00:14.400 | - Actually, I have something
01:00:16.740 | about a long-term care insurance.
01:00:19.260 | If I look at our family,
01:00:22.260 | most of the family members would not have benefited
01:00:27.260 | from long-term care insurance
01:00:29.900 | because it would not have kicked in before they passed away.
01:00:34.900 | Or they simply did not need to be in a home, let's say,
01:00:41.340 | care in their own home and the policy didn't cover that.
01:00:49.460 | Or maybe had dementia and the policy, the old policy,
01:00:54.380 | some of them didn't cover that.
01:00:56.080 | We had one family member who did have Parkinson's
01:01:01.300 | for many, many, many years
01:01:02.700 | and actually ran out the long-term care insurance.
01:01:06.860 | For him, it worked, it was critical.
01:01:09.620 | It was very, very important.
01:01:12.140 | But for most of our family members,
01:01:16.180 | they could have afforded the,
01:01:19.180 | without the, they could have made it
01:01:21.340 | without the long-term care insurance.
01:01:23.580 | - Yeah, you're right.
01:01:24.420 | I think that's the reality for most.
01:01:26.060 | And by the way, a comment I would make
01:01:27.940 | when we're talking about thinking about paying
01:01:30.940 | for long-term care,
01:01:32.280 | I'm uncomfortable with the strategy of giving away assets
01:01:36.900 | and going on medical assistance.
01:01:39.420 | And that's getting harder to do, I know, in various states
01:01:42.420 | 'cause they have look-back periods.
01:01:44.700 | But I think an important consideration on that too
01:01:47.100 | is simply the idea that you don't have any more money
01:01:51.140 | and just giving it all away.
01:01:52.780 | And you're losing some of your dignity when you do that.
01:01:56.580 | And frankly, you're losing control
01:01:58.100 | over what your options may be in the future.
01:02:01.240 | So for those that have wealth, they can consider doing it,
01:02:05.180 | but I consider that to be a fairly risky strategy
01:02:08.500 | and something I would have a hard time advocating.
01:02:11.100 | - Could you expand on that for people with wealth?
01:02:14.140 | We're talking about, shall we say, your average bogel head.
01:02:18.900 | (laughing)
01:02:20.220 | I mean- - Yeah, I know what you mean.
01:02:22.540 | No offense.
01:02:23.380 | - I mean, like, it's sufficiently, a nice retirement.
01:02:28.380 | - Gosh, yeah.
01:02:29.380 | - And what do you mean by spending down?
01:02:32.140 | How would we spend it down if we have social security,
01:02:35.380 | if we have investments and I have a pension?
01:02:40.380 | How would I even spend it down?
01:02:43.900 | - Well, do you mean give it away?
01:02:47.300 | Was that, I mean, for the long-term care?
01:02:50.300 | - No, you were talking about spending it down.
01:02:52.900 | And are you referring to spending it down
01:02:55.220 | so that Medicaid comes into play?
01:02:57.940 | Is that- - Oh, I'm sorry.
01:02:59.020 | I'm sorry, yeah.
01:03:00.060 | Yeah, so let's just say that somebody...
01:03:02.340 | No, I was talking about giving it away.
01:03:05.180 | I'm sorry, yeah.
01:03:06.340 | And people will try to do that.
01:03:07.580 | They'll give away their wealth to their family
01:03:09.300 | 'cause they'll say things like,
01:03:10.420 | I don't want the nursing home to get my money.
01:03:13.220 | So I'm going to give it away.
01:03:15.100 | - And how do they, what do they do
01:03:19.860 | if they're not in a nursing home then?
01:03:21.760 | - Well, they're out of money at that point.
01:03:25.900 | So, well, they may have enough to,
01:03:28.700 | they may have a pension or social security to pay the bills,
01:03:30.680 | but they're not spending that much money anymore.
01:03:33.180 | - Okay.
01:03:35.060 | - But yeah, I don't know if anybody's had any family members
01:03:39.340 | that could chime in.
01:03:40.180 | I don't know anybody personally that's ever done that.
01:03:42.300 | But I mean, that I know,
01:03:44.180 | I know clients that have done that over the years, so.
01:03:48.060 | - Well, actually I am saving my money
01:03:50.260 | because we do not have long-term care insurance.
01:03:53.940 | And that I worry about
01:03:56.820 | because I've seen with our family that when we get older,
01:04:00.740 | we do need assets to make our life more comfortable.
01:04:07.860 | For example, hospital beds, we needed a hospital bed.
01:04:12.460 | And the only type that Medicare would pay for
01:04:14.340 | was the crank type of hospital.
01:04:16.500 | They would not even pay for an electric hospital bed
01:04:20.000 | that would raise him up and raise him down
01:04:22.420 | at the push of a button.
01:04:23.940 | And so I said, well, who's going to pull,
01:04:25.900 | who's going to crank it up?
01:04:27.700 | Well, he has to get out of bed to do it,
01:04:29.300 | or you have to have aides there to do it.
01:04:31.040 | In other words, we have to think ahead and have,
01:04:33.580 | I always felt, and have enough money in the bank
01:04:37.160 | to pay to make our life easier and more comfortable
01:04:42.160 | when we're older and infirm.
01:04:45.920 | - Yeah, yeah.
01:04:47.580 | And go ahead, Algen.
01:04:49.760 | - I would just say basically self-funding,
01:04:52.260 | it has to be factored into the retirement plan,
01:04:54.460 | having sufficient assets to provide for that,
01:04:57.260 | self-insuring in essence,
01:04:58.580 | and making sure you have enough to fill the gap.
01:05:05.380 | - All right, any further questions
01:05:07.680 | on proceeding conversation topic?
01:05:10.540 | If not, I guess we can move on to the next topic,
01:05:15.700 | which should be of interest
01:05:16.960 | in our technologically advancing world.
01:05:19.320 | - Yeah, I do have Zoom meetings with my dad, who's 89.
01:05:24.520 | So yeah, things are changing.
01:05:27.140 | But, and this will be brief, more brief,
01:05:30.400 | but Jason and I chatted a little bit about
01:05:34.460 | some of our views on how we see technology
01:05:37.660 | impacting financial planning.
01:05:40.020 | Our business model, I mean,
01:05:41.900 | it's clearly based upon using technology efficiently.
01:05:45.380 | That's what our clients do,
01:05:46.500 | like you did and so on.
01:05:48.080 | And how you use video to support getting going with this.
01:05:53.740 | But it's this idea of financial planning,
01:05:57.580 | which is a part of what we do,
01:05:59.500 | it is my suspicion that in the future,
01:06:02.160 | there will be apps that will essentially
01:06:04.420 | make a lot of these decisions for us.
01:06:07.380 | Right now, they're not there yet.
01:06:10.280 | And I think it's gonna take quite a while
01:06:11.840 | to be able to integrate the different moving parts together,
01:06:14.780 | or at least a firm hasn't figured out yet
01:06:17.440 | if they invest a lot of the money
01:06:18.760 | that would be required to do this,
01:06:20.200 | that they're gonna get paid on this yet.
01:06:22.440 | Now, eMoney is a competitive,
01:06:25.440 | it's one of the more competitive products
01:06:27.920 | in the financial advisor space.
01:06:29.760 | Money Guide Pro is another good one and some other ones.
01:06:32.560 | And these tools are really good at doing planning
01:06:35.600 | and they have a lot of functionality.
01:06:37.840 | And right now they're used through firms like PlanVision
01:06:42.840 | and other advisory firms to work with their clients.
01:06:46.580 | But I would guess that in the future,
01:06:48.280 | there's going to be tools where consumers
01:06:51.840 | can go directly to the app themselves
01:06:54.740 | and will be able to do a lot of their own
01:06:56.440 | financial planning themselves.
01:06:58.640 | Artificial intelligence, I assume will be some part of that.
01:07:03.640 | The challenge may be the interpretation
01:07:08.520 | of some of the information or the data,
01:07:09.920 | which actually is still a lot of what we do.
01:07:11.960 | When we have these collaborative sessions with our clients,
01:07:15.280 | they've kind of moved all the way along
01:07:16.740 | and we're just helping interpret a lot of the information
01:07:19.440 | and providing comments on what they're seeing.
01:07:21.920 | But I certainly think that consumers are gonna be able
01:07:25.320 | to take a lot more ownership
01:07:27.120 | over their financial plans in the future.
01:07:29.840 | And this process of looking at your assets,
01:07:33.320 | oh, how are they going to play out?
01:07:34.560 | Am I going to run out of money?
01:07:36.220 | Oh, and then you have to go over
01:07:37.060 | and look at your investments and say, well, okay,
01:07:38.940 | based upon that, I got to make this decision
01:07:41.320 | and then I should structure my assets.
01:07:43.280 | I think that's going to be integrated a lot better
01:07:45.640 | in the future, where it'd be a lot more simple.
01:07:47.680 | So an example of where this might go
01:07:51.080 | would be for younger people,
01:07:52.240 | people that have debt in their 20s and 30s.
01:07:55.200 | There may be a point where the technology
01:08:00.200 | will essentially make that decision for them
01:08:02.160 | on whether or not they should pay off a loan early
01:08:06.200 | or invest their money.
01:08:07.640 | And that might be, who knows?
01:08:09.280 | It might be a model that might change
01:08:11.520 | based upon the dynamics of the markets
01:08:13.720 | and that kind of thing.
01:08:14.720 | So that's one area where I see technology improving that.
01:08:20.320 | And our firm is trying to be on the front of that too
01:08:24.960 | in how we use technology.
01:08:26.960 | But basically allowing people
01:08:28.200 | to do their own financial planning for the most part.
01:08:30.960 | And some of you probably use your own,
01:08:33.120 | some of these online calculators,
01:08:34.480 | which are getting better all the time
01:08:36.720 | and allow them to do quite a bit.
01:08:38.360 | This process of taking money out of your account,
01:08:48.600 | I would suspect that that would be simplified as well.
01:08:52.840 | The distribution mechanism,
01:08:56.240 | it is somewhat simplified right now.
01:08:59.160 | I would guess there are some people here
01:09:00.520 | that are getting automatic payments right now
01:09:03.040 | on their retirement plans.
01:09:04.200 | They don't have to think about anything.
01:09:05.440 | It just comes out automatically for them.
01:09:07.920 | But my guess is that distribution management
01:09:12.560 | and what account you take money from
01:09:16.160 | and which actual asset you take it
01:09:18.360 | will be taken care of in the future.
01:09:20.840 | And as a part of that,
01:09:22.520 | the tax implications of that as well.
01:09:26.240 | Again, this is all kind of tied into financial management
01:09:29.320 | or financial planning management as well,
01:09:31.640 | but more on the distribution side.
01:09:34.080 | That the technology will be developed
01:09:36.720 | to integrate all this information together
01:09:39.120 | so that the consumer needs to make less decisions
01:09:44.680 | about where to take money from and when to take it.
01:09:47.520 | So I would suspect that there's gonna be improvements
01:09:50.720 | in distribution management as well.
01:09:53.440 | And I guess as a part of that as well,
01:09:58.680 | if I didn't say this, is tax management too.
01:10:04.080 | That taxes will be much more automated in the future
01:10:08.360 | than they are right now.
01:10:09.600 | I mean, Jason, you worked at, was it TurboTax?
01:10:14.960 | - Yeah, I worked at TurboTax
01:10:16.400 | and I was a tax expert with them.
01:10:20.280 | - Yeah.
01:10:21.120 | - And yeah, TurboTax is fantastic.
01:10:23.920 | They've got the internal revenue code built in
01:10:27.480 | and merely by asking questions, asking the right questions,
01:10:31.520 | the software walks you through.
01:10:33.240 | There can be some very complicated returns
01:10:36.000 | that people are able to do
01:10:37.760 | if they answer the questions correctly.
01:10:43.000 | The decision though, on what to do.
01:10:46.400 | - Yeah.
01:10:47.240 | - AI has to come a lot, lot further along.
01:10:49.640 | But as far as actually tax compliance, yeah.
01:10:53.000 | I mean, it's phenomenal what the big firms do.
01:10:56.800 | TurboTax, H&R Block, all the software.
01:10:59.080 | - Yeah.
01:10:59.920 | - For sure.
01:11:00.760 | - Thousand ways to go.
01:11:01.600 | And actually we are, you know, we use Salesforce.
01:11:05.960 | And for those that use Salesforce,
01:11:07.400 | man, that is an awesome program.
01:11:09.400 | And that's integral to how we manage our business.
01:11:12.560 | But we're having some initial discussions
01:11:14.840 | with our Salesforce developer
01:11:16.880 | on how we can have more interactive data gathering sessions
01:11:21.480 | with our, like, I mean, the Salesforce tech system
01:11:26.360 | in gathering information from our clients,
01:11:29.000 | integrating that into our system
01:11:30.560 | and then providing them with advice.
01:11:33.180 | So that's a form of artificial intelligence, I guess.
01:11:37.520 | Even though it's somewhat, it's somewhat,
01:11:40.940 | you know, crude at this point.
01:11:44.300 | I've joked with some of my clients
01:11:45.700 | that hopefully someday I won't have to meet with them.
01:11:48.860 | But, so those are, you know,
01:11:54.300 | we'll see where this thing goes,
01:11:55.700 | but the financial services industry
01:11:59.620 | managed to escape the dot com craze.
01:12:02.660 | And all these advisors that thought
01:12:03.980 | they were going to lose their jobs,
01:12:05.060 | oh, they're still around.
01:12:05.900 | They still want to talk to us.
01:12:07.180 | But slowly it's encroaching on the industry.
01:12:10.020 | And there's more pressure on them.
01:12:11.220 | My gosh, with the robos,
01:12:13.220 | who I think are a much better option for people
01:12:18.220 | than going to, you know, sit in some advisor's office
01:12:23.420 | and charge you 1%.
01:12:26.020 | A robo really compressed that fee.
01:12:28.940 | And now it's coming down to, you know,
01:12:30.820 | 30 basis points, 25, 20.
01:12:32.860 | And, you know, you can, if you're,
01:12:35.940 | if you just want a simple fund,
01:12:37.140 | you can go to Target Date Fund, which is what I use.
01:12:39.100 | So a lot of pressure
01:12:40.380 | on the investment management side of this,
01:12:42.660 | but I think you're going to feel,
01:12:43.860 | see a lot more pressure as well,
01:12:45.980 | just on financial planning and guidance
01:12:47.620 | with artificial intelligence
01:12:49.420 | and the kind of the ability for programs like e-money
01:12:54.180 | to be done at the consumer's level.
01:12:58.980 | - Yeah, definitely.
01:13:01.820 | And to add onto that,
01:13:05.580 | younger generations are far more willing to use apps
01:13:10.380 | on their phones to apply for mortgages.
01:13:13.340 | Look, you can do your tax return, kind of complicated,
01:13:18.340 | your tax return with an app.
01:13:21.540 | You take a picture of your W-2 and documents,
01:13:25.220 | the program will upload them.
01:13:26.500 | You have to review it, of course,
01:13:27.780 | but younger people, not me,
01:13:30.420 | younger people are willing to do a lot with apps
01:13:33.820 | that as older folks,
01:13:36.660 | we want to sit across the desk or the Zoom call,
01:13:39.820 | but they're doing,
01:13:41.620 | AI is going to get there where you can do a lot more.
01:13:44.580 | They can do a lot more with the apps.
01:13:46.100 | So technology is clearly rolling forward.
01:13:50.740 | - Yeah.
01:13:52.580 | So anyways, those are just some thoughts,
01:13:53.940 | not too much to add there,
01:13:56.140 | but I think there's going to be a lot of pressure
01:14:00.620 | even on the financial planning side.
01:14:02.500 | Now, maybe a ways down the road
01:14:04.180 | in the financial services industry
01:14:06.900 | where bubble heads won't have much left to talk about.
01:14:10.340 | - Oh, we'll still talk.
01:14:13.580 | (laughing)
01:14:14.740 | - There's always oatmeal and Costco chicken.
01:14:17.100 | (laughing)
01:14:18.780 | - And whether you should invest in international funds.
01:14:21.580 | - Exactly.
01:14:24.260 | - Shall we open it up for questions?
01:14:26.940 | Lady Geek has her hand up.
01:14:30.420 | - Yeah.
01:14:31.260 | Okay, technology and a site administrator.
01:14:34.420 | Perfect confluence.
01:14:36.060 | Okay.
01:14:36.900 | Also, I'm also into,
01:14:38.620 | I promote the Bubble Heads wiki.
01:14:40.180 | I'm a wiki admin.
01:14:41.780 | But one thing, everybody,
01:14:43.340 | you're using the magic words of artificial intelligence
01:14:46.060 | and that's something I'm a little bit more familiar with.
01:14:48.500 | But what I don't hear are the magic words
01:14:52.460 | in financial planning to start,
01:14:55.140 | 'cause you're talking about investments,
01:14:56.820 | you're talking about taxes.
01:14:59.500 | What I don't hear is an app that says,
01:15:02.220 | that basically follows the financial planning article
01:15:04.900 | in the Bubble Heads wiki,
01:15:06.180 | which is first, do you have an emergency fund?
01:15:09.220 | Are you paying off your debts?
01:15:10.780 | What app can you give to a new person,
01:15:13.580 | like high school, college,
01:15:15.660 | that basically is gonna load in
01:15:18.020 | a ton of your financial information?
01:15:19.700 | So that's a privacy thing.
01:15:20.860 | But something that takes into account
01:15:23.460 | everything you're doing right now.
01:15:24.860 | What's your salary?
01:15:25.820 | Can you meet a monthly budget?
01:15:28.060 | Budgeting, personal capital.
01:15:29.980 | But are you ready to invest?
01:15:32.780 | You go, okay, you go to Betterment.
01:15:35.340 | No, you're not ready for Betterment yet
01:15:37.100 | because you don't have six months of emergency.
01:15:39.300 | What's in your bank account?
01:15:41.020 | Oh, well, I can sort of eat chicken this week.
01:15:44.460 | So I don't hear the words to tell a new person
01:15:48.820 | or a person just getting on their feet
01:15:51.900 | to say, no, no, don't get a mortgage.
01:15:55.380 | Your renting is fine.
01:15:56.900 | Where is the app that follows what I tell people
01:15:59.540 | in the Bobo Heads forums?
01:16:01.820 | Getting started.
01:16:03.020 | Don't just type it in the search box,
01:16:06.140 | financial planning, also planners,
01:16:09.020 | and see those basic steps.
01:16:11.300 | So I mean, I know Mark,
01:16:13.340 | it's beautiful applications
01:16:15.260 | and all your tools and everything.
01:16:17.260 | It's helping you run your business
01:16:19.260 | and helping people.
01:16:20.980 | But I don't hear the words,
01:16:23.380 | oh, first of all, I'm retired
01:16:24.860 | and I'm in a good situation here,
01:16:26.900 | but I don't hear the words to tell a person
01:16:29.540 | you're not ready, that says don't invest.
01:16:32.020 | I don't hear the words.
01:16:33.300 | Here's how to save.
01:16:34.420 | Are you meeting your budget?
01:16:35.460 | So let me give, I say Bobo Heads, we're very vocal.
01:16:38.740 | And I'm trying to help point things in that approach.
01:16:43.740 | Apps are focused on investing.
01:16:48.380 | Apps are focused on taxes.
01:16:50.380 | Where's the app that puts everything together
01:16:52.780 | like a super app or, you know,
01:16:54.420 | I can give all kinds of terms for that,
01:16:55.780 | but let's start.
01:16:57.300 | - Is this a question?
01:17:00.980 | Is there a-
01:17:01.820 | - Yeah, it's a question.
01:17:03.500 | Well, we also give a lot of, it's just something,
01:17:06.860 | maybe you hit a trigger point in me,
01:17:09.100 | but that's what I'm trying to-
01:17:11.180 | - Actually, I have the answer to that, Lady Geek.
01:17:14.700 | - Okay. - It's not an app yet,
01:17:16.300 | but I have to give a shout out to William Bernstein,
01:17:19.340 | because this is what I show Lady Geek
01:17:22.420 | and all the Vogel Heads.
01:17:23.260 | This is what I show to many of our new clients,
01:17:26.420 | especially the younger ones.
01:17:28.340 | And I say, look, take an hour to read this.
01:17:31.460 | If you don't live in the US,
01:17:32.660 | ignore the references to the US tax code,
01:17:35.820 | but the five hurdles will apply to you.
01:17:38.460 | And it's not an app, maybe I should write the app
01:17:41.020 | and split it with Mr. Bernstein.
01:17:44.740 | But this is what you're talking about.
01:17:47.260 | We just needed an app form.
01:17:48.940 | - Yeah, okay.
01:17:50.620 | It's a free download, you know?
01:17:51.940 | Yeah, yeah, so-
01:17:52.780 | - Yeah, I know, but I got to show them a beautiful picture
01:17:55.260 | before I email it to them.
01:17:56.980 | - So you say, that's what I said, very,
01:17:59.100 | it's just that I hear different things.
01:18:01.780 | I guess everybody has a different perspective
01:18:03.540 | and I like to work from top down.
01:18:05.060 | My background is just in engineering, so I retired.
01:18:07.660 | So I work at a big picture level
01:18:09.220 | and try and flow things down.
01:18:10.940 | So I want to get these people off on the right path
01:18:15.940 | before you send them down the path.
01:18:17.460 | That's all I was trying to do.
01:18:19.100 | And maybe there's something that has this existing,
01:18:22.820 | that's fine.
01:18:23.660 | - Yeah, that's what I would kind of what I'm alluding to
01:18:27.420 | is that there would be some sort of tool
01:18:31.340 | that some firms will begin to develop
01:18:33.900 | that would be based upon where you're at in life.
01:18:36.060 | And so if you're 21 and you start your financial planning
01:18:39.220 | that it would say,
01:18:40.060 | oh, well, you don't have enough money in the bank
01:18:41.500 | and you can't invest because you have,
01:18:43.900 | you know, a four and a half percent student loan,
01:18:46.060 | you'll deal with that first.
01:18:47.180 | That's my assumption of where this is all going
01:18:49.300 | with technology.
01:18:50.700 | Is that it'll be based upon where you're at in life
01:18:53.060 | and it'll, you won't have any,
01:18:54.980 | like I'm being glib here,
01:18:56.140 | but you won't have any decisions to make.
01:18:58.020 | Your thing will just say to you,
01:18:59.500 | oh, what are you doing?
01:19:00.500 | You don't need to be doing that.
01:19:01.620 | You can't spend that money.
01:19:02.620 | Get back in your house.
01:19:03.900 | - Okay, yeah.
01:19:05.980 | And one other aspect of financial planning
01:19:08.300 | actually includes estate planning.
01:19:09.820 | I like to encompass everything.
01:19:11.620 | Should you think about this about when you're 25?
01:19:14.180 | - That'll be quite an app.
01:19:15.660 | - Yes, it will.
01:19:16.620 | And it's a huge, but I say,
01:19:17.940 | should you be thinking about estate planning at 25?
01:19:20.620 | Oh, yes.
01:19:21.460 | - Yes, especially for the people that have children,
01:19:25.900 | because if you don't have your guardians,
01:19:28.060 | you have no business to even open an account
01:19:31.220 | because, you know, that's critical.
01:19:35.260 | - Yeah.
01:19:36.100 | - So I agree.
01:19:37.140 | - Yeah, okay.
01:19:38.020 | I feel much better now.
01:19:38.980 | Thank you.
01:19:39.820 | - There's a, Jim posted a URL there for a flow chart.
01:19:45.260 | I think it's for younger people as well
01:19:47.180 | to walk through some of these decision points.
01:19:49.500 | One thing I'm curious about,
01:19:51.980 | us bogleheads as a rule are generally financially savvy,
01:19:56.980 | otherwise we wouldn't be here or wanting to be,
01:19:59.420 | but we represent a small minority
01:20:01.660 | of the average population.
01:20:03.660 | So even with artificial intelligence and apps,
01:20:07.180 | I still think there's gonna be a tremendous need
01:20:09.180 | for advisors like yourself, if not in person,
01:20:12.100 | for handholding and explaining and coercing people
01:20:15.860 | to follow the recommendations.
01:20:18.820 | - Yeah, the notion that there's just like
01:20:23.260 | some sort of an orb that describes your financial life
01:20:26.860 | for you and you carry it around with you
01:20:28.300 | and it hovers and tells you where to,
01:20:30.940 | that might be 250 years away, like way out there.
01:20:33.700 | But yes, I think there's always financial guidance
01:20:37.780 | at some level or another for many folks.
01:20:40.540 | You know, it's interesting, but who is it?
01:20:45.460 | Bill Gross, the PIMCO guy, he's the CEO.
01:20:49.100 | Yeah, he has, it's a funny story, but I-
01:20:51.540 | - I'm a PIMCO guy.
01:20:52.820 | - Yeah, I'm a PIMCO guy.
01:20:54.580 | Yeah, but when I was at Valek,
01:20:56.820 | they brought in to speak his financial advisor.
01:21:00.260 | The guy had a financial advisor.
01:21:02.060 | So yeah, I think there's a role for financial,
01:21:06.260 | however you wanna characterize that person
01:21:08.900 | or the role that they play for individuals,
01:21:11.060 | for many people, whether they're bogal heads
01:21:12.980 | or people that aren't bogal heads.
01:21:15.820 | - By the way, I wanna add, we're continuing the recording.
01:21:19.380 | For anybody who, let's just go ahead
01:21:21.460 | and you can raise your hand or ask questions in the chat.
01:21:23.580 | If you wanna be on camera and wanna maintain privacy,
01:21:26.740 | you can turn off your video and/or change your name.
01:21:29.100 | But I think the recording will be worthwhile
01:21:31.940 | for other people to watch.
01:21:34.260 | - And what is interesting to finish the thought, Alan,
01:21:36.220 | about that, 'cause some of the folks are chiming in here
01:21:38.100 | about the role of professional.
01:21:40.140 | It is, yeah, personal finance is very personal.
01:21:42.700 | Gosh, we'll talk with, I will have meetings back to back
01:21:47.500 | with people that have attitudes that are 180 degrees
01:21:51.380 | different about their investments
01:21:52.660 | and how they're gonna spend their money.
01:21:54.860 | And yeah, and they may have an entirely different set
01:21:57.820 | of questions, even though their financial situations
01:22:02.140 | might even be relatively similar.
01:22:04.660 | - We have a question on web-based financial services
01:22:09.660 | that integrate a person's investment accounts.
01:22:13.380 | Has there been any significant security breaches
01:22:17.660 | in these services resulting in the compromise
01:22:20.780 | of the investment accounts?
01:22:22.780 | - Well, I'm not aware of any.
01:22:26.540 | If you're talking, yeah, if you're talking about
01:22:28.380 | like the personal capitals of the world,
01:22:32.260 | maybe companies like e-money or I'm not aware
01:22:34.620 | of any breaches that have occurred.
01:22:35.980 | It doesn't mean it hasn't happened,
01:22:37.140 | but it hasn't gotten news to the level
01:22:41.900 | that I would have heard about it.
01:22:44.100 | - Mark, I'm curious, since you have the option
01:22:46.540 | for most of your clients for them to connect
01:22:49.620 | to the aggregator in e-money,
01:22:51.220 | what percentage entered in manually versus actually connect?
01:22:55.420 | - I would say probably, I don't keep track of that, Alan,
01:22:58.100 | but I would probably say it's between 10 and 20%
01:23:01.900 | that manually type them in.
01:23:03.780 | And you know, our program e-money
01:23:08.580 | and the other ones too, probably,
01:23:10.780 | they're actually pretty easy to use
01:23:12.540 | if you type in your stuff manually.
01:23:13.780 | It doesn't really take that long
01:23:14.740 | once you do it a few times.
01:23:16.060 | Of course, a lot of people like the updating feature,
01:23:20.340 | so both can work fine.
01:23:22.940 | - Alrighty, further questions, folks?
01:23:31.260 | - Well, Jim K wanted to know why he had to establish
01:23:34.260 | an emergency fund before going with GameStop.
01:23:37.340 | - Well, I, as an, I don't know if it's an aside,
01:23:43.380 | but we actually, a very good friend of mine
01:23:48.300 | runs a hedge fund, right, as it were.
01:23:50.620 | And so I interviewed him, Stu,
01:23:52.260 | and he's a podcast on our site, to talk about this,
01:23:56.220 | because man, when that was going on,
01:23:58.460 | I thought to myself, there is so much being made
01:24:01.140 | about this, and it's, there's just not a lot of depth
01:24:04.300 | to this whole thing.
01:24:05.140 | And it was, to me, it was almost like watching
01:24:07.860 | a Netflix show, you know, unfold.
01:24:11.740 | You have these crazy folks in the Reddit website
01:24:14.620 | that are, you know, going after,
01:24:16.700 | going after a hedge fund.
01:24:21.180 | So it's just, it's kind of a weird dynamic,
01:24:23.300 | but I don't think there was a lot of substance to it,
01:24:25.220 | but it certainly got a lot of attention.
01:24:30.140 | - You know, I've got a question.
01:24:31.860 | I know eMoney is owned, I think, by Fidelity, actually.
01:24:35.380 | So you're dependent upon their developers
01:24:38.500 | to add capabilities.
01:24:41.180 | I'm just curious, from your business perspective,
01:24:44.140 | how much feedback are they getting
01:24:45.460 | from individual advisors,
01:24:47.860 | asking for additional, you know, capabilities being added?
01:24:52.020 | Is it functional as much as you'd like it to be, or?
01:24:58.180 | - I'm-
01:24:59.020 | - Are you handcuffed by whatever they decide to put in?
01:25:03.900 | - No, they're always doing updates,
01:25:08.380 | both software rollouts.
01:25:11.700 | Recently, in fact, just now, they're rolling out
01:25:15.540 | what they call a modernization of their report format,
01:25:19.540 | just to make it much cleaner.
01:25:21.900 | But there's a request that advisors can put in
01:25:27.900 | and if the request is already in, you just can vote it.
01:25:32.900 | You upvote it.
01:25:33.980 | If you think, yeah, that's a great idea,
01:25:35.740 | they need to add that.
01:25:36.820 | Here's an example.
01:25:39.340 | eMoney has almost, not quite an unlimited number
01:25:45.180 | of types of retirement plans,
01:25:47.460 | but the 457(b) is not actually an option.
01:25:51.980 | So when I contacted them, they said,
01:25:54.180 | "Oh yeah, that's a popular request.
01:25:55.620 | "We are working on it.
01:25:57.500 | "So just go into the survey, click on upvote
01:26:00.100 | "to put more votes behind it."
01:26:02.620 | And by popular opinion or popular demand,
01:26:05.700 | eMoney does direct improvements
01:26:08.020 | based on what the advisors are requesting.
01:26:11.220 | - And Alan, to add on that, I'm very impressed with eMoney.
01:26:17.180 | Their internal support is awesome
01:26:19.780 | and they do a really good job, I think,
01:26:24.860 | with their technology.
01:26:26.020 | So they're great to work with from a vendor's perspective.
01:26:30.500 | - No, I've generally been impressed with it.
01:26:34.620 | I use Personal Capital also,
01:26:37.180 | which has some surprisingly robust tools
01:26:40.180 | for the individual DIYer, it's very helpful.
01:26:44.500 | I hope that all these platforms,
01:26:47.860 | we just, the Chicago Virtual Society,
01:26:51.300 | Jim's chapter has been exploring a number
01:26:54.860 | of various tools available. - Tools.
01:26:58.100 | - And they have the new retirement folks on as well,
01:27:00.780 | which is interesting.
01:27:01.620 | Of course, they're developing that totally in-house.
01:27:04.620 | Probably don't have the resources
01:27:05.780 | that Fidelity and eMoney have,
01:27:07.460 | but it's nice to see multiple different platforms
01:27:09.820 | being developed and hopefully the competition
01:27:12.620 | will continue to push each one to a higher level.
01:27:16.380 | - There was a question here about the podcast.
01:27:20.140 | We have just been doing the podcast for our clients only,
01:27:23.940 | but it's, we're going public now.
01:27:26.940 | And so we're right now on iHeartRadio
01:27:29.820 | and Spotify, and we're trying to get out,
01:27:34.820 | like our, whoever does our distribution is trying to,
01:27:40.660 | that's actually the website, Alan.
01:27:45.140 | They can't get the podcast there.
01:27:46.740 | - Right, oh.
01:27:47.580 | - Okay, yeah. - Right.
01:27:49.260 | - So Jason put a note there, but on, we just,
01:27:54.220 | I'm not kidding, like in the last four days,
01:27:56.180 | we went on iHeartRadio, and then before that Spotify.
01:27:58.740 | We'll be on Apple, and yeah, Apple's the big one, iTunes,
01:28:01.700 | and then Google, and then there's another one.
01:28:03.420 | So we'll be on five podcasts soon, but it's just,
01:28:05.580 | it's planned vision.
01:28:06.500 | I don't know how, I don't use podcasts much,
01:28:08.940 | so I don't know how you find them,
01:28:10.220 | but I think you just type in the name, I suppose,
01:28:12.260 | and we'll pop up there.
01:28:13.420 | - Yeah, it's interesting with all the podcasts,
01:28:17.860 | and now a lot of them are going on YouTube,
01:28:20.460 | the kind of, people are getting saturated, I think,
01:28:23.020 | with content, and it's hard to sort it all out.
01:28:27.060 | - Yeah, you're right, yeah.
01:28:29.060 | - But I've listened to a number of your,
01:28:30.660 | the private podcasts for your clients,
01:28:32.420 | and they're excellent, and they're short and sweet,
01:28:34.020 | which is nice, little snippets of good information.
01:28:37.700 | I don't know if you-- - You know, I did that--
01:28:38.540 | - In that format.
01:28:39.700 | - I did that because when I was,
01:28:42.980 | well, the last six years of my life, I worked so much,
01:28:46.660 | that I don't have time for anything else,
01:28:48.300 | so I thought, well, I'll just do these short podcasts,
01:28:49.820 | 'cause that's what I could listen to.
01:28:51.580 | Lee, a client of ours,
01:28:54.740 | for clients who have worked with you for a while,
01:28:56.580 | what have they said they would do differently
01:28:58.460 | if they could retire again?
01:29:01.240 | Does that mean,
01:29:05.660 | like, would they retire later if they could,
01:29:11.100 | or retire sooner?
01:29:15.420 | - I don't know, I guess I can just,
01:29:17.180 | the vibe I get from some of my clients
01:29:19.420 | is some of them don't feel prepared for retirement.
01:29:25.420 | And I don't mean financially.
01:29:28.540 | I mean, they're not ready to not work anymore.
01:29:33.020 | They're scared of it.
01:29:34.540 | Some of them, man, best thing they ever did
01:29:36.700 | was stop working. - Right.
01:29:37.940 | But for retiring, for people that have been working
01:29:41.300 | for 20, 30, 40, 50 years,
01:29:44.420 | working is part of your identity
01:29:46.220 | and who you are. - Yeah, exactly.
01:29:47.420 | - And the psychologists say, do not retire from something,
01:29:52.300 | the job that's grinding you down.
01:29:54.380 | You need to retire to something
01:29:56.380 | and be emotionally committed to whatever that is.
01:29:58.740 | And it might be volunteering, it might be teaching,
01:30:00.940 | it might be another job.
01:30:02.280 | It might be crocheting at home.
01:30:04.700 | Whatever it is, you have to be emotionally engaged
01:30:07.860 | and be excited to get out of bed
01:30:09.620 | to do whatever it is you're gonna do.
01:30:13.500 | - Yeah, great.
01:30:14.340 | If people have the opportunity,
01:30:15.380 | a great thing to do is have a practice retirement
01:30:18.020 | where if you are able to slow down a little bit at work
01:30:20.420 | and devote more time to those pursuits
01:30:22.660 | that you think you want to continue with
01:30:25.060 | to see how it goes and be flexible.
01:30:27.180 | I know, I thought I knew exactly what I was gonna do
01:30:30.180 | during retirement and I had a whole list of things
01:30:32.860 | and I've probably only done 10% of them,
01:30:35.220 | but I've added 90% of other things I hadn't anticipated,
01:30:38.980 | of course, forced by the pandemic,
01:30:41.100 | but you have to be flexible.
01:30:42.220 | I think that's the key, regardless.
01:30:44.100 | And creative.
01:30:45.060 | - Yeah, I've been very inspired by many of the people
01:30:49.380 | that I've interacted with over the years
01:30:51.100 | who are still working.
01:30:52.620 | In fact, one of the clients I met
01:30:55.620 | when I started a group business was this,
01:30:58.100 | he's, gosh, he's gotta be 75 now,
01:30:59.960 | but they hired him when he was a 71-year-old former judge
01:31:03.060 | from Hennepin County here in Minnesota
01:31:05.060 | to be the executive director of a small nonprofit.
01:31:07.620 | So I interviewed this guy and one of the things he,
01:31:10.140 | like he, the staff can't keep up with him
01:31:11.980 | and he said he's very insecure about his job.
01:31:16.860 | And he said he feels like he has to justify
01:31:20.420 | to the board all the time why they hired this old guy,
01:31:24.940 | is what he said.
01:31:25.780 | I hired this old guy, I gotta keep on busting my ass
01:31:28.420 | so they can justify why they hired me.
01:31:31.260 | So, but a lot of people like that,
01:31:33.460 | just very inspiring people that continue to work
01:31:35.520 | in some capacity.
01:31:37.020 | Or other folks that leave and really find something
01:31:39.420 | that they enjoy that kind of re-energizes them
01:31:42.540 | and reinvents them a bit.
01:31:43.780 | That is one of the gratifying parts of the work
01:31:49.580 | that I do is, and Jason does,
01:31:51.500 | is to interact with these folks.
01:31:53.100 | It's pretty cool.
01:31:54.940 | - Found everything that you've said to be very accurate.
01:31:59.520 | It was very difficult for me to retire
01:32:02.140 | and I didn't for many years for that reason.
01:32:06.520 | And my husband went back to work.
01:32:08.620 | So, after he's home, we do have another question.
01:32:13.620 | What is the name of the insurance calculator
01:32:17.820 | that Jason referenced?
01:32:19.180 | - Oh, that's right.
01:32:20.660 | - Yep, I did put that up there.
01:32:22.260 | It's right-
01:32:23.140 | - Oh, I see, okay.
01:32:25.420 | - At 933.
01:32:26.820 | - Okay.
01:32:27.660 | - And that's, they just updated it to accommodate
01:32:31.260 | the change with the ARP, the American Rescue Plan.
01:32:34.980 | They did update it.
01:32:37.500 | And again, it is a tool.
01:32:40.500 | It's not the be all end all,
01:32:42.540 | but it's pretty remarkable if you plug in your zip code.
01:32:45.380 | - Hey, I wanna make a comment
01:32:49.220 | about this whole retirement talk
01:32:50.900 | because this has happened several times in my career.
01:32:54.100 | Even before I did plan vision,
01:32:55.220 | I was doing financial advising with Valak.
01:32:58.260 | One of the benefits of going through the exercise
01:33:00.940 | of doing a plan pre-retirement,
01:33:02.900 | whether it's eight years, six years, five years,
01:33:06.040 | to kind of get some clarification on the numbers,
01:33:08.460 | things change at work.
01:33:10.620 | Your health might change, culture might change, new boss.
01:33:14.820 | You wake up one day and the world looks different.
01:33:16.940 | And I've had several people that send me an email
01:33:21.940 | and say, "You know, I'd like to go over the numbers again
01:33:24.100 | 'cause I think I wanna go."
01:33:27.100 | Something happened and that's, you know, the plans change.
01:33:29.940 | So that's on the early side.
01:33:31.380 | Was that you, Miriam,
01:33:32.220 | that's saying you had difficulty leaving?
01:33:34.220 | - Oh, yes, it was impossible.
01:33:36.400 | For the reason you said that you are identified
01:33:39.920 | with your profession, with your job, with what you do.
01:33:44.160 | It is, what, 32 years, 34 years of my life.
01:33:49.160 | - Yeah.
01:33:50.000 | - Also, I felt that I had so much to offer.
01:33:52.820 | I had so much knowledge, so much experience.
01:33:54.880 | - Yeah, exactly.
01:33:55.720 | - To offer, I was good for the world if I kept working.
01:33:59.960 | It was good for, you know, it was just a good thing to do.
01:34:03.360 | And why would I waste my education
01:34:06.040 | and all my experience to retire?
01:34:10.100 | - Yeah.
01:34:10.940 | - And yet it was time.
01:34:14.300 | - So did you end up working two, three, four years longer
01:34:17.040 | than you needed to or felt like you should have?
01:34:19.720 | - I worked until I was aged out.
01:34:22.740 | - Oh.
01:34:24.520 | - I worked until I was aged out.
01:34:27.200 | My husband, but then went back to work.
01:34:30.800 | And he still works.
01:34:33.100 | - Yeah, I was very impacted by a speech I heard
01:34:38.100 | in the late '90s by a hospital administrator
01:34:40.180 | from a small town in Minnesota.
01:34:42.220 | And it's hard for me to not get emotional
01:34:44.860 | thinking about this.
01:34:46.500 | But he was, he explained, he had retired.
01:34:50.140 | He came back to talk.
01:34:51.060 | And he came back to talk about his retirement.
01:34:53.380 | But he was relating the story about his first week
01:34:57.060 | and his month and his first three months
01:34:58.580 | of not doing his job anymore and how devastated he was.
01:35:02.620 | He was the hospital administrator
01:35:04.500 | in a small to mid-sized town in Minnesota.
01:35:06.980 | And so he knew everyone.
01:35:08.140 | And he was a part of everyone's life.
01:35:10.580 | And nobody called him anymore for his help anymore.
01:35:13.640 | And it just did, yeah, it just demoralized him.
01:35:16.420 | - He knew so much.
01:35:18.160 | He could have done so much good for so many more people
01:35:22.860 | for such a long time.
01:35:24.780 | And yet now he's not doing that.
01:35:28.580 | - Yeah.
01:35:29.420 | It's a feeling of like, it just, you know,
01:35:31.420 | the song "Blowing in the Wind."
01:35:32.700 | It's just, you know, it's all just blowing in the wind now.
01:35:35.740 | - Of course.
01:35:36.560 | And when people, for some people,
01:35:38.300 | when they do this transition, now they're getting old.
01:35:41.000 | - No.
01:35:43.100 | - Retiring is for my parents.
01:35:44.700 | - Exactly.
01:35:46.200 | By the way, for those that haven't come across this guy
01:35:48.940 | before, some of you may.
01:35:50.780 | One of the best speakers I've ever seen is Ken Dykewald.
01:35:53.660 | And Ken is the founder of Age Wave.
01:35:58.660 | And he's been speaking on the baby boom generation,
01:36:01.180 | their influence on our economy.
01:36:02.780 | But he's a wonderful speaker and a very influential speaker
01:36:06.460 | on how people age and what aging is now,
01:36:09.820 | as opposed to what it was 30 years ago and 60 years ago
01:36:12.420 | and 90 years ago.
01:36:13.540 | Wonderful speaker.
01:36:15.060 | And you can go to YouTube and search him by name
01:36:17.460 | and watch some of his speeches.
01:36:18.620 | They're very moving when he presents.
01:36:22.860 | He's a big buck speaker, but man, he is powerful.
01:36:25.820 | And he talks about how people's attitudes
01:36:28.660 | have such a big impact on their quality of life
01:36:32.440 | as they age.
01:36:33.940 | And he has great examples of, my gosh,
01:36:36.220 | these people that are part of our popular culture
01:36:38.860 | that are still 75 and 85, and they're still,
01:36:42.580 | they're still significant and making a difference.
01:36:46.200 | - I'm curious something with, amongst your clients,
01:36:51.860 | do you have any that have embraced the FIRE movement
01:36:54.420 | or at least the Achieving Financial Independence part?
01:36:57.100 | And what are your thoughts on that?
01:36:58.980 | - You mean that cult?
01:37:00.020 | Actually, they're wonderful.
01:37:05.860 | I mean, that's one of the things about
01:37:07.940 | how the web hasn't impacted personal finance
01:37:13.420 | is that it's been a way for a lot of these people
01:37:16.740 | to kind of get together and realize,
01:37:19.580 | oh, there are other people that want to do this as well.
01:37:22.220 | And of course you have a lot of the bloggers
01:37:24.420 | like Mr. Money Mustache, who's the leader of that,
01:37:28.140 | the kind of leader of all that.
01:37:29.700 | But yeah, we work with a lot of the FIRE people.
01:37:32.420 | And we do plans for them, 'cause we have popped up
01:37:36.180 | in a lot of the Facebook groups there.
01:37:38.100 | And what they have going for them is many of them
01:37:43.100 | live well within their means.
01:37:44.800 | My gosh, they're saving 40, 50, 60%.
01:37:47.820 | A lot of them are doing indexing.
01:37:49.260 | They've been influenced by Jim Collins,
01:37:51.840 | who's got a good message about investing,
01:37:57.540 | or JL Collins, excuse me.
01:37:58.960 | So yeah, we have a lot of FIRE clients and it's,
01:38:03.320 | I was using the term cult in a positive way, I guess.
01:38:10.260 | But yeah, they're just folks that are very interested
01:38:15.580 | in financial flexibility.
01:38:18.080 | - Yeah, interesting.
01:38:19.580 | By the way, one thing, an expression I've heard
01:38:21.300 | when it comes to like revisiting early on
01:38:23.740 | your retirement savings and ability to retire
01:38:27.500 | is to get to the point, it might've been,
01:38:29.580 | you've been JL Collins who used the term,
01:38:31.220 | I'm not sure, the F-U money,
01:38:32.900 | getting to the point where you have the option to retire.
01:38:35.820 | And that can relieve a lot of anxiety
01:38:38.220 | and give you a way out if need be.
01:38:41.660 | Just something else to consider
01:38:43.940 | and a reason to build a financial plan
01:38:45.860 | and analyze it on a regular basis if need be.
01:38:49.280 | - Yeah, quick story was I was doing a review
01:38:51.480 | with a couple of good clients of mine,
01:38:53.480 | but they're in their late fifties.
01:38:54.880 | And I was kind of moved by them
01:38:56.840 | because they are in a tough spot.
01:38:59.740 | They've been squeezed and they just know
01:39:06.480 | that they're gonna have to work longer,
01:39:08.920 | even though they have a really good attitude.
01:39:11.960 | But I had two meetings with them.
01:39:13.760 | One was with both of them,
01:39:15.120 | and then one was just with her.
01:39:17.720 | And I could just tell from my interactions with her
01:39:20.920 | how their financial situation had taken a toll on her.
01:39:24.500 | There was just no way around it.
01:39:27.240 | And money can do this to people.
01:39:29.920 | Your finances can create so much pressure.
01:39:33.120 | So if people live within their means,
01:39:34.920 | if they don't have any debt,
01:39:37.940 | if they save a good emergency fund,
01:39:40.840 | if they've been good savers,
01:39:42.300 | at least that's one aspect of their life
01:39:44.600 | where they won't necessarily have to feel pressure
01:39:47.120 | if things aren't working out well for them.
01:39:49.320 | But if things are, if they're struggling personally
01:39:51.900 | or in relationships with their family
01:39:53.600 | or their job or something,
01:39:55.560 | to have mounting debt
01:39:56.700 | or never feel like you're ever getting ahead,
01:39:58.800 | man, that is so damaging to people's health.
01:40:01.660 | - Financial problems are not just money, it's-
01:40:07.120 | - Yeah, they carry over.
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