In the next ten years, it is said that 50 million baby boomers will turn 65. That means many will be thrust into planning their retirements, if they haven’t already. These days, what people tend to get are a number of infomercials from financial shows on radio, which is unfortunate for those who really want to learn. Your Thrive experts show you what real financial education looks like. They cover a number of important topics about retirement and the investments that come with it. Not forgetting the emotions that could possibly ride with the process, they also give insights into how our fears and stress impact our financial decisions.
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Thrive: An Infomercial
David, we missed you last time. It’s nice to have you back on the chair. How are you?
I’m doing excellent, glad to be back. We’ve got a great show lined up. We’ve got a lot to talk about.
Karen, how are you?
I’m great. We’re happy to be back.
It’s nice to have you back as well and we’ve got an interesting dialogue and some good topics of conversation. Bret Elam is joining us as well. How are you?
I’m doing fantastic, Krause.
David, I’ve started to try and educate myself a little bit more and I think your push and the push by Thrive Financial Services to get educated is important and it’s starting to resonate. CNBC.com, “50 million Baby Boomers will turn 65 in the next ten years.” I know you’ve said that, maybe not in that exact term but you’ve talked about that. Karen has talked about that, yet retirees don’t understand the process. It’s staggering. It’s a big number.
One of the things that I enjoy and I hope that we’re delivering on is exactly what you said is education. A lot of times when audiences tune into a financial show or on radio, nine times out of ten, maybe 99 out of 100, it’s more of an infomercial. Where people are trying to move a specific concept or product or whatever it is. I hope that we get the point across to our audience and especially having you be part of this, people might think it’s conjured up a little bit, but you’re a regular Joe.
I’m the audience.
It’s wonderful that you’re part of this because sometimes after a show you’ll say, “I was a little confused.” It’s great feedback because then when we can keep improving the show because we want people to walk away after listening to us going, “That’s a great idea. That cleared up some misconceptions,” or whatever that takeaway ultimately is. We’re going to try and keep getting better and better because we’re not celebrities, we’re not radio people per se. We’re wealth managers, we’re financial planners and our craft is trying to educate people and advocate for them through this process. We love having you be part of it. The fact that you’re injecting, getting yourself intertwined on the education, by bringing that staff from CNBC. That’s awesome.
We’ve known that for a long time, 10,000 Baby Boomers a day. When we started doing this, it was for the next seventeen years. We’re further down the curve now, but it’s equally as important. I know Karen’s going to cover some stuff and we’re going to be a little bit more interactive with each other because I think that’s going to help with the message. We want people to know that we’re Philadelphians, were local, we work local. We love being Philadelphians. We’d love being a great sports town right now. Great stuff going on. Hopefully, the audience will continue to build. The tribe will get bigger and we’d love to hear the feedback. We get phenomenal feedback, whether it’s email or a phone call or people visiting our website at ThriveFinancialServices.com.
When I read that one I was like, “I can’t wait to do the show.” I can’t wait to be able to say that even though, we’ve been talking about it, but it’s a staggering number. When you go one layer below and they say retirees don’t fully understand social security income. I know we’ve had so many examples in many of our past shows about that very topic.
We’re passionate about everything that’s involved in planning your retirement successfully and that’s one part of it. I met with a couple and I’m saying things from the female perspective, but this mom stayed at home, took care of her children. She raised great children. They are educated. She’s a great grandmother, but she didn’t actually have enough credits in the Social Security System to even get a Social Security check. She thought she wasn’t getting one. They were so relieved to find out that you can get a spousal benefit. She can get approximately 50% of what her husband’s full retirement income benefit is going to be. They were thrilled because it makes an extra $1,000 to $1,500. It makes a big difference when you’re planning retirement. They did not know they had that income coming in.
Joe, just somebody coming out to one of our workshops. They saw some form of promotion about our workshop or heard the show, they show up. They don’t expect a whole lot. Then they come in for a consultation because they’ve got questions in their heads and something as simple. We do this every five or seven times every single day. Somebody comes in with the expectation that they’re not going to qualify, who don’t know of any alternative to qualify for a Social Security benefit and ends up walking out with an extra $1,000 a month that’s due to them. That’s a big deal and it’s just by attending a workshop. There might be readers going, “I can’t believe somebody didn’t know that.” It’s all relative. Maybe on Social Security they didn’t understand that, but somebody else you know who may have significant assets and knows how Social Security works, doesn’t understand the tax laws. Bret’s had a couple of people come in that there were some interesting things.
Getting back to the tax conversation about those long-term capital gains and/or those Roth opportunities. We do it at the workshop, we get our clients that come in front of us and prospects. That’s always finding not only necessarily a mistake but opportunities to take advantage of the system. That’s all part of that Thrive Retirement Roadmap Review. Whether you meet us during a workshop where you want to visit us on www.ThriveFinancialServices.com or you can always reach out to us at 1 (800) 516-5861 to find out more information on any of these topics we’re going through here now.
We talked a little bit about how we deal with people that we’re meeting for the first time. Have you ever heard the saying and the customer is always right? Not that we call a client or a new person, a customer. It’s not exactly true in the financial world. The customer is not always right. Ask yourself this question for you may already have these questions, “How am I doing on my finances?” Take a look at our website.
We can help you or how are you doing on your finances? A lot of the questions that people have when they come in they meet with us for the first time. We ask them, what are your major concerns during retirement? It comes down to two major questions I have is, “Do I have enough money and will my money last during retirement?” Another question that people ask is they want a second opinion on their current financial situation and can they avoid mistakes in the future? Here are some things that people think and it isn’t always the right thing to do.
I remember what they say, Krause. You could never get a second opinion from the one who gave you the first.Have you ever heard the saying the customer is always right? Well, the customer is not always right. Click To Tweet
I’m still thinking about the opening example that Karen used where a client or potential client came in for a conversation, under the assumption or the thought that social security was not a part of their retirement and was not an option or an advantage for them. I don’t want to make light of it if whether it’s $1,000, whatever the number was, I almost feel it’s irrelevant. The point being that what you don’t know sometimes puts you at a disadvantage. It pays so much to learn.
We’re the experts and please come in. Set a time to meet with one of us. We love to educate you and give you some information and you want the right guidance. The market’s a little crazy up and down lately and some people’s instincts are, “It’s time to get out.” Is that the right decision? Is it or isn’t it? You need talk to somebody. You want a heart surgeon to give you an opinion on a current situation with your heart. You’re not going to go to a dermatologist. That’s what we say. Be careful who you’re taking your advice from.
David, let me ask you to weigh in on that. You’re getting from each individual client that you talk to lots of feedback, lots of concern over the market. “It’s volatile. It’s up and down. What should we do? Should we do anything?” How do you manage that conversation?
The key thing is one size doesn’t fit all. Everybody has an absolutely unique situation and that’s what most people don’t realize. We have a lot of people who are self-managed. They’ve got their money at Vanguard or Fidelity or a bigger brokerage like that and they’ve come up with a model of how it’s going to be invested. I ask them, “Where did you come up with that?” It’s usually, “I can’t even tell you. I’ve read this, I read that.” When you dive in and ask very directed questions, most people don’t have clear answers for themselves.
That’s okay to realize that you don’t have a clear answer.
It’s probably an enlightening situation because the thing that concerns me is there’s a different set of rules for retirement than there is during your accumulation. When you’re growing your money, you can operate under a certain set of guidelines. When you’re ready to start distributing, you only got one chance on that. You’ve got to make sure that it’s right. It’s interesting that we’ve see many times that somebody read Money Magazine or somebody read Kiplinger’s or somebody read something and say, “That’s where I got my information from.” After we did the analysis, the strategy was almost completely opposite and that was very eye-opening.
What I said to the person or not just one individual is when you read something, they make a blanket statement because it’s got to be general. They don’t know your specific circumstance and that specific circumstance requires a specific strategy. Sometimes it’s not the strategy that the magazine or the news article or what they heard Kramer say on CNBC or whatever. That scares me. It’s like WebMD. If you go on to WebMD and you put the things that you’re experiencing, the symptoms they come out with this is what it probably is. I would prefer to go into a doctor, have the appropriate tests done and come up with better diagnostics. That way you can get the right type of prescription.
Off of that Karen, I would say, every individual that’s going to come to the workshop or who has come to the workshop is completely different.
Everybody is different. What everybody needs is different. Their different money on a monthly basis. That’s something that we ask people when they come in to think about that, what’s your number? What do you need in retirement for your monthly income? That’s such an important question because you have to have something to work towards for retirement. Another area we ask people, do you have a will? Do you have trust? They don’t maybe think they need to have those, but after sitting down with us, another area where they need better planning, which Bret will probably touch base on a little bit more is proper tax planning. You don’t want to get caught paying too much in taxes in retirement. It’s going to drain your accounts.
We talked about wills, estate, power of attorney and all that stuff. I shared that story with my parents. My mother battling chemo and my father going into the hospital with heart issues and we talked about how they didn’t have those documents and we were chatting about it all the way to the hospital. The good news is my mom is out of the hospital. She celebrated the big 70, but we’ve already made the appointment. We’re sitting down with that attorney where we’re getting those documents in place.
Karen’s topic when the customer isn’t always right in the financial world. We need to spend our money on wills, power of attorney documents, even having the basics done to make sure that what we hope we want to have happen with our money happens out there. That’s all part of that Thrive Retirement Roadmap Review process. If you’re interested in a visit to a store and one of our workshops coming into the office or have a telephone conversation.
The one thing that I take from this radio program, no matter what’s happening, no matter how much noise you’ve got to get yourself educated. Trust me when I tell you that it is so important to be educated, especially if you’re a Baby Boomer and if you fall into that category.
I want to continue what Karen had started when we talk about when the client isn’t always right in the financial world. Here’s another topic for us, “It’s fine that my returns aren’t that good because my fees are usually low.” Think about that and the important thing is that what we’re netting after fees. When we net out our expenses, that’s what we should focus on. This is my 20th year in business. I grew up working for Wachovia, Wells Fargo out in Chester County so I couldn’t get any closer to Vanguard and working for a bank at the same time.It’s okay to learn to realize that you don’t have a clear answer. Click To Tweet
Working with so many clients down there out of that Vanguard world. Sharing to them and educating them what funds and what investments are out there and we’re always conscious of fees. Fees are important, but it’s not the number one reason that we should invest in something. It’s always looking at what is my net return after fees. If I’m earning 10% with a 1% fee, would you rather have that or earn 13% with a 2% fee? It’s all about what we net at the end of the day when we’re looking at investments like that.
Bret, we had a new client of ours, who we sat down and we helped on a couple of areas and his desire was to say self-managed, which we respect. One of the things about Thrive, if somebody does want to engage us as a client is we’re not all or nothing. We just want to create a relationship and if it’s helping you on wills and estate planning and things like that, we’re happy to do it. If it’s tax, we’re happy to do it. If it’s investment management, we’re happy to do it. If somebody wants us to watch over and be a steward for the whole plan, we’re happy to do it. This particular couple, he loves being self-managed. He enjoys the process and everything else. We helped on a bond alternative strategy and left the rest of his assets that happened to be at Vanguard.
After the analysis is that he never rolled over his 401(k) plan into a self-directed IRA. His 401(k) plan was actually at Vanguard. When we looked at the statements, we pulled out the plan documents, we found out that his fees were going to be substantially lower. The assets were going to be exactly the same. Whatever Vanguard mutual fund or ETF he had in his 401(k), it’s available at Vanguard in his IRA. Just by changing the structure from a 401(k) to IRA, he now is going to save and sometimes you gain by subtraction, paying lower fees. He had no idea. He said, “How come nobody told me that?” There’s no incentive for the plan to tell you that and you didn’t have the time to do the research to understand that so by coming in we were able to do that for that particular client.
In its simplest form, that’s a monster example of what a conversation can yield. It’s unbelievable.
Many times, that gentleman had come in and visited with many other advisors and said, “No one’s ever said that to me before.” It’s always looking out what’s right for the client at the end, education and advocacy.
One other thing that’s unique is we here at Thrive, Karen, Bret, and myself operate as a team. Even though I had the interaction, when I sat down and we were going through the investment portfolio, that’s something that Bret brought up. There are so many times that I might be doing something and Karen or Bret will bring up, “Did you think about this and vice versa?” Three minds are better than one and it does when somebody becomes our client, you get us as a team, not individuals. We think that it has a lot of strength in it.
I think it does be smart enough to know what you don’t know.
Krause, next topic. When the customer isn’t always right in the financial world, here’s one for you. “My accounts are down. I don’t think things are working. It’s time to change things up.” The individual investor is usually wrong when they make changes to their portfolio. Have a plan, be prepared. Have a plan so that you are a so you are tempted to make changes when things go down. “Do I get in? Do I get out though? What’s that number?” You’ve got to have goals and then once those things happen.
Karen you think people have in your opinion, from the clients that you’ve spoken with, you think people have trouble sometimes figuring out where the starting point is in the plan?
In the overall plan? Absolutely. I think some people make take more time planning a vacation than they do actually sit down and start planning out their financial plan. Don’t wait until it’s too late. The earlier you start, the less money you have to start saving. The later you wait, things are going to happen. You’re going to have children. You’re going to start having to pay for college and weddings. If you have a plan and you start early, you’re not going to be shocked at what it’s actually going to take to retire and you’re going to be able to retire.
Let me ask you this. If I’m listening to a radio show and I’m a Baby Boomer but I’m on the edge, born in ’64, ’65, whatever that edge is and I don’t have a plan yet. I’ve thought about it but I’ve never thought about it to the point that I’m ready to act. I’m in limbo with a lot of even the discussions that we’re having. How do I start? How do I begin? I know it’s easy to say come to the workshop or sit down. One thing to say it, another to get somebody motivated to do it.
Joe, from what we’ve heard and every time somebody calls, one of the good things is that most people do have a plan. I can’t tell you it’s the right plan or it’s spot on. If you’re in your late 50s and early 60s, you’ve been employed or you have your own business, you’ve probably been saving money all along and you’ve built up some type of a nest egg. We know that about our audience. It’s that shift from, “I work. I get a paycheck. I know what my expenses are. My expenses are what I make minus my investment into my 401(k) or whatever it is.”
Things go out the window once you stop working because you’ve got Social Security, maybe you’re lucky you have a pension and then you’ve got your retirement assets. If you were hoping to retire in that 65 to 70 range, you may be in retirement for twenty, 25, maybe even 30 years all of that’s got to less that period of time. I know the question you asked is where do I start? I’ll tell you what we see the biggest stumbling point is trying to figure out what your expenses are going to be in retirement. It’s the one thing that people come in that we end up working with them and modifying the number.
Karen had somebody come in and we were sitting talking about it and their monthly budget number, “What I’m going to need in retirement is $2,500.” “Let’s take a look at everything.” We look at everything. Then we started asking the question, “Did you include health care costs? Did you include taxes in that? Did you include charity? Did you include vacations? Did you include gifts?” “No, I forgot about all that stuff.” “We get it, so let’s go to work.”What everybody needs is different. Click To Tweet
We start calculating that up next thing you know, it’s $4,250 a month in expenses. Joe, is there a difference about building a plan that’s going to supply $2,500 a month versus one that needs to provide $4,250 a month? If you were working on a plan that was designed to pay out $2,500 a month and you find your expenses are $4,250. There’s a good chance at that money plan was going to run out and that’s not something you want to have happen.
The point being there is in the conversation, in the meaning, in the sit down, in the evaluation. Flushing out some of those details is so important. Then the willingness to be self-aware and to stick to it and do it.
We meet with people five to seven times a day. We don’t know your number, but we know what people tend to forget. A lot of times people are working so their health care is covered by their company. When you retire, you’re going to get Medicare. Is that going to be enough?
What if you retire early and Medicare’s not kicked in? Do you know how to plan that gap where you may not have healthcare costs that you have to get them covered because they’re not employer-sponsored and you’re not yet at Medicare? We deal with that all the time.
Is it safe to say there’s almost no way to go at it alone? If you do somewhere in the process you’re going to stub your toe.
There’s a good chance as you were to stub your toe. They just don’t know all the questions. It’s hard to know what you know. I don’t know what I don’t know. Go to our website, ThriveFinancialServices.com. There’s a lot of great information on there. Give us a call. We can send you out different stuff before you make a commitment to come in. We’ll have a conversation on the phone with you if you want. You call us at (800) 516-5861. We’ll answer some basic questions. If you like us, maybe at some point you could trust us, then you can come in and sit down with us and we’ll go through with you. I really wish I could take the experience that our clients get and broadcast that out and see that there’s no hassle whatsoever.
We’ll answer some basic questions. If you’d like us, maybe at some point you could trust us, then you can come in and sit down with us and we’ll go through it with you. I wish I could take the experience that our clients get and broadcast that out and see that there’s no hassle whatsoever.
David talked about, “How do I navigate healthcare before potentially that Medicare piece of it?” It came to mind, I sat with someone who had become a client. We’re starting to put the puzzle pieces together. When we first met them, they had 65 as the date circled on their calendar when they are going to retire. One of the first questions when people tell us that is we say, “If we can show you how to retire early, are you interested in that?” They look at you with eyes wide open like, “Absolutely.” In meeting together, we started continuing the conversation that it was real that they are going to get out at the end of 2019. Real quickly the intentions were we’re going to turn on the pension payments, we’re going to turn on Social Security, that’s going to be fine because we know if we wait on collecting that income.
It will be less money than we have in our pocket I said I’d put the big time out and I said, “Yes, what you don’t understand and what we’ve been chatting about preliminarily and it’s coming to fruition and now we can take our time and I can continue to educate you on how it works. That income that you are going to show of almost $60,000 of income was going to mean that between yourself and your husband you are going to pay almost $3,500 a month for your health care premium. That doesn’t include copays as those include deductibles. I’m talking about the premium because they were not yet 65. They were both going to be 61 at the end of 2019.
$3,500 a month times 12.
That’s $42,000. What I had said was, “We can collect the pension.” They work for a Fortune 500 companies so they’re praying to get a severance package, to get some health care bridging there. In lieu of that I said we can collect the pension because it wasn’t going to grow between when retirement at age 65, but we can’t touch Social Security. The pension income that we’ll have will be enough that all of a sudden, the exact same income, the exact same lifestyle was going to cost them $200 a month, not $3,500 a month. It’s part of the process and you said you’re going to stub your toe at some point in time trying to figure that yourself.
Bret, understand you walk them through the process of how to go to the exchange, how to qualify for this subsidy and then do the analytics of showing them by you spending $3,500. Of course, you can’t do it. You’d have to tap your assets. If your healthcare cost is only $200 a month, $3,300 less than cost, you don’t need to be tapping the assets to fill that gap.
That’s exactly right and the fact that we weren’t going to take Social Security, remember Social Security grows 8% every year. Those three years they weren’t going to take Social Security, now all of the sudden, those Social Security checks grew by 8% a year for both of them that they are going to turn it on January of 2023, in their example, once they’re both age 65. It’s navigating them, taking somebody by the hand. We take it slow because it’s all new, it’s against the grain, it’s going against conventional wisdom and educating people in terms of putting those puzzle pieces together.
What the logic that the typical audience is having or think is this is the way to do it, not experimenting with maybe scenario A, B and C. We present what we think is the right, get it rationalized in their head if it’s appropriate, if it fits. If they can comply with it, now you see economically a much better option. That’s why I tell people all the time. Conventional wisdom isn’t always the way to go with it because your situation is different. Everybody’s unique.
We’re still waiting to see that health care episode on CNBC or Money Magazine.Have a plan; be prepared. Click To Tweet
I think in this one-hour program, we shared three examples. Three different individuals and all three examples yielded an incredible positive return for the individual.
Remember as we’re speaking that we are fiduciaries, so we are legally-bound to do what’s best for the consumer at all times. Ethically that’s in our grain so that’s not a problem. When you’re listening to this information, it is a case by case basis and we take a lot of time in explaining and educating so that they get it.
There’s a passion about it. It’s a win. I’ve had the cancer in the past and when you get through anything, anything that’s critical and you come out the other side, you’re like, “That was a win.” It gets the juices flowing for you. The key is never to forget that experience because you could take life for granted and you can get back into your normal routine. We see this with our clients a lot of times that epiphany the light bulb over their head pops in and lights and they got it. That’s a big satisfaction for us that we were able to communicate and articulate in such a way that somebody understood it, applied it, and was reaping the benefits of that.
If a client or an individual comes to the workshop, they take and absorb some of that information that leads to a conversation and then you get the beauty or the benefit of sitting down with Karen or David or Bret and starting to understand what you have.
The workshop setting is watching a CNBC episode and then it’s figuring out how can it all apply to me and that’s why we invite people in to figure out, “Look at all this information. Does it make sense? How can I pull money from my IRA tax-free? How can I sell some of my stock and not potentially have to pay taxes on it?” That’s what the workshop process is all about is education and advocacy. The more information you have, the better knowledge you have, the better decisions that you can make.
Krause, in terms of concluding this episode, I’m going to go through this list. Whether you’re self-managed, whether you meet us during the workshop, whether you work with an advisor. Think about these questions in terms of grading yourself on your financial life. Do you know how much money you have? We meet people that have can have five, ten, fifteen. I’ve even seen as probably as many as 26 different accounts. You’re like, “I forgot I even had that account.” Keep track of all that. The second one we talked about a little bit earlier, do you know how much you need to spend? Why is that important? A direct correlation is to how much we’re going to pay in taxes in retirement. If I don’t need as much money, I’m not going to pay as much taxes, but need more money going to have to spend more money in taxes.
Do you know how much risk you have? That’s a big one. We’ve been talking about Riskalyze for quite a while, but that’s part of that Thrive Retirement Roadmap processes. One of the things that we weigh is your portfolio versus your Agita level. Do you know how much we’re paying in fees? I chatted about that a little bit ago. I don’t need to hammer down anymore on that, but that’s always an important thing. People a lot of times we’re uncovering that for people as well. Most importantly, and this is such a big deal, do you know what your retirement income streams are going to look like? Having that mapped out, having clarity with that, given you the freedom to go out there and spend on the things that you want to do in retirement.
I hope our audience absorbs the information provided on Thrive Retirement Roadmap all presented by Thrive Financial Services. On behalf of David, Karen and Bret, I’m Joe Krause. See you next time.