Littlejohn Financial

What’s A Financial Plan? Do I Need One?

True Wealth Podcast - Financial Podcast by Financial Advisors

There are many layers of a financial plan: the real question is, do you need one? Ignorance is not bliss: learn about ways you can start planning for your future today.


Episode Highlights:


  • The critical benefits of starting financial planning early in life, particularly in your twenties or thirties, to ensure a stable financial future.
  • Evaluation of the current financial landscape, including income, expenses and future goals, to create a comprehensive plan.
  • How to establish and balance short term and long term financial objectives to maintain motivation and track progress.
  • Examples of practical goals such as building an emergency fund, paying off debt, or saving for significant life events. 
  • Assessing your personal risk tolerance to choose appropriate investment options, whether conservative or aggressive.
  • Aligning investment strategies with your risk appetite to optimize financial growth and security.
  • Key considerations for retirement planning, including projecting retirement income needs and planning for healthcare costs and longevity.
  • Being realistic and transparent about your financial situation to avoid underestimating expenses.
  • Benefits of diversifying your investment portfolio across various assets such as stocks, bonds, and real estate to manage risk and enhance returns. 
  • Strategic allocation of assets based on time horizons and financial goals.


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00:00:00 Significant time on getting this thing really crafted. And then they drop a bomb on me at the end of it. And they’re like, I got $200,000 of gold too. And I’m like, that would have been nice to know at the beginning. 


00:00:00 That’s great information. 


00:00:00 Yeah, because that completely changes the entire picture here. And you were super stressed out this whole time about your financial plan. And you’re willing to actually spend on some of that gold that you have, well that changes everything. And now that lifestyle that you wanted is very doable.


00:00:40 What’s going on, everybody? This is Matt Dickson. And with me in studio today for the True Wealth Radio Show is.


00:00:46 Justin Bruggeman. 


00:00:48 Justin. Wow. This is what? Three part series now. 


00:00:52 Three weeks in a row. 


00:00:53 Yeah. So we are on a roll. We’ve been going over a lot of really good material and we’ve got more of that good material for you today. Justin, talk to me a little bit about what’s on the agenda for today’s show. What can listeners kind of expect? 


00:01:08 Yeah, we’re going to talk about what, well, the pros of having a financial plan and what is included in a financial plan? 


00:01:19 I think that’s a really important thing for us to talk about because a lot of the times when I’m fielding a phone call from someone who is just inquiring to the firm, you know, they have a lot of questions and they don’t necessarily know how to ask those because they don’t really know what it is they’re looking for, because they don’t really know what goes into a retirement plan. And so you get a lot of comments like, I have some assets in my retirement account and I’ve got some savings, but I’m six years away from where I think I might be able to retire, but I don’t know if I can retire. Can I retire? I need answers to these questions. So I think this is a really good show because people don’t know what they can expect. 


00:02:04 Right. 


00:02:05 So talk to me a little bit about some of the things that kind of go into a financial plan or kind of that comprehensive wealth management. What does that really look like, Justin? 


00:02:15 Right, and so I guess to start off, what is a financial plan? So we’re even gonna go to the actual definition because it can be interpreted a lot of different ways, but the process of assessing the current financial situation and future goals and how to achieve them. 


00:02:35 I think that’s a big one, the future goals part, because a lot of the time, you know, people are just looking at, what do I have and is that good enough? But they’re not looking at what, is it that I actually want to achieve, not what, is it that I feel like I just have to achieve. 


00:02:50 And the best part about financial planning is, one, it’s subjective, and two, it is different for every person. There’s not a cookie cutter, you know, just save this amount and that’ll, you know, you’ll be fine, which yeah, there’s a dollar amount that probably is fine. But I mean, you have differences in clients. Some clients are spending $15,000 a month in retirement and others are spending three. 


00:03:17 Right. So looking at where you at currently versus where do you want to be in the future and trying to run some projections based on those numbers. 


00:03:26 And also adding things into it that can break a plan. Or, you know, a death is a big one that can really break a plan. But a good plan should have, you know, stated insurance coverages for situations like that. But to kind of start out with how, what’s all incorporated inside of a financial plan is the first part is what is your income and what are your expenses? 


00:03:55 And are they expected to, you know, have a big change in the next couple years, because maybe you are pretty confident you’re coming up on a significant raise. 


00:04:05 Right. 


00:04:06 You know, and if you omit that from your plan, that could really change the dynamic of the conversation. 


00:04:14 And it can change, like, maybe how much savings it is to get to where you want to even be. You could be in this job searching where you’re kind of bouncing around some jobs, kind of finding the… what you want to do for the rest of your life scenario. 


00:04:29 Well, and I want to bring up something that just kind of hit my brain. One of the things that I’ve noticed is a lot of times people wait until the 11th hour and they’re like, all right, I’m ready for my financial plan. And I’m like, if you had only come in five years ago, we could have crafted things to look so much differently today because there’s not very many levers that we can pull. You’ve kind of backed yourself into a corner. And now we only have so many option sets. 


00:04:58 Yeah, because you shift the time horizon a lot. 


00:05:01 Right. 


00:05:02 And so– 


00:05:02 Because as an example, what if you wanted to retire early? Maybe you should have saved a little bit into a savings account, a joint account, some brokerage account where you have access to money that’s outside of a retirement account. 


00:05:15 Exactly. 


00:05:15 So I think getting into the financial planning piece a little bit maybe earlier than you naturally think that you should. It might really benefit you. 


00:05:25 And it could even be as typically they’ll say, you know, you should review your financial plan every single year. 


00:05:31 Right. 


00:05:32 But… So say you’re in your early 20s or, you know, even early 30s at that point is maybe it doesn’t need to be looked at every year. Maybe it’s every three years, every five years. 


00:05:44 Yeah, it doesn’t have to be every single year.


00:05:48 Or, you know, a quick update, you know, not a lot of changes. But even starting at that young is, I mean, maybe you get married, maybe you have children, and children shift the planning. 


00:05:59 Yeah. 


00:06:01 Maybe you’re saving to buy your first home, maybe you’re saving to buy your second home. 


00:06:06 Well, a lot of the times, people don’t really know what they’re saving for, and it makes them a lot less likely to even save in the first place, because they, like, say it’s a married couple, right? Have you actually sat down face to face with your spouse and said, What is it that we want our lives to look like in five years? Because if you look at each other cross-eyed, like why would you even be saving in the first place? Because you don’t have a plan, right? So I think setting a financial goal is a really, really big piece. 


00:06:37 Yes.


00:06:37 And you don’t have to start with anything exotic. For a lot of people, honestly, it’s as simple as, hey, we don’t have six months of our income saved up. We don’t have a nest egg.


00:06:50 Right.


00:06:50 So I can say, hey, maybe that’s a good spot to start or hey, you got behind on your credit cards. You’ve got credit card debt and you’re getting hammered at 30% interest. Pick that and make that the goal, but at least have a goal. And I think that’s where a lot of people fall short. They don’t have short-term goals. They don’t have long-term goals. And so where’s the money going and what’s it doing? There’s not really, like a use case or a purpose for those assets. 


00:07:18 Because there’s a lot of baby steps involved in it. 


00:07:22 Yeah. 


00:07:23 I mean, it may not be as, you know, if you’re swimming in some debt and you don’t have an established emergency fund, you don’t need a financial plan. You need to accomplish those goals first, then graduate to the planning aspect because it’s also you run the risk of too much information where people will just, being like paralysis, I guess is, you just do nothing. 


00:07:49 Yep. 


00:07:50 And so establishing those goals are very important, but when it starts with the income, the expenses, any assets you have versus the liabilities you have to get your net worth.


00:08:00 Well, and I’ll challenge the person that already has the net worth, right? Because how many times have you run into the person and they have a lot of assets or they have a considerable estate, and then they walk in and they’re like, I’m just saving, I’m going hard at it and they’re doing wonderful, right? Like they’re knocking it out of the park. But then when you ask them, well, why did you save all this money? 


00:08:22 Right. 


00:08:23 They look at you cross-eyed and they’re like, well, I don’t know. And I don’t know what I’m gonna do with it. And I don’t know when I wanna retire. And they don’t, they’ve never thought about it. They just put their nose in the grindstone and they just hammer, hammer, hammer. And then they never stopped to smell the roses along the way or do any of the fun stuff or, you know, they don’t know what it’s for. 


00:08:42 Yeah.


00:08:43 And then you can wind up 75, 80 years old one day and you’re like, you know, you’ve really slowed down and you’re like, well, gosh darn it. I wish I would have done something back when I was 65 or 60 years old, but time flies by. And if we don’t stop to analyze this stuff, it’ll go by in a hurry. 


00:09:03 Well, what is the most common thing you hear when, you know, even, we have clients come in and we’re doing, you know, planning is I should have, came in earlier. 


00:09:12 Oh yeah. 


00:09:12 Should have started earlier. 


00:09:14 Yeah. 


00:09:14 Because it’s harder to play catch up. 


00:09:17 Right. And if they had just like, contributed an extra $200 a month. 


00:09:22 Yeah. I can make a drastic difference. 


00:09:24 Right. Or, you know, maybe they had, way, oh, I mean, this sounds kind of weird. Maybe they almost over contributed to their retirement accounts and they have no, like, money on hand. 


00:09:38 Yeah.


00:09:38 And so it’s all wrapped up into something that they can’t touch. 


00:09:41 Yeah, they can go–


00:09:42 Without penalties or something. So there’s so many different little tiny areas or like little rabbit trails that you can go down and you end up in kind of a bad spot and you’re like, well, I just didn’t know. And that whole ignorance is bliss, doesn’t really apply to your finances. Ignorance is not bliss. 


00:10:02 And what I’ve noticed that works the best and I think is the most important is scheduling the… those goals.


00:10:09 Yeah.


00:10:09 And stating what they are in, short term and long term. 


00:10:12 Right.


00:10:12 Because if your only goal is, I want to have $2 million in retirement assets when I’m 65, that’s great. And that’ll get you there, but you’re missing everything else in between where, you know, maybe it is, I don’t have a home. So you didn’t save the way you’re supposed to do, supposed, should have, you know, when you’re renting for 30 years, when that money could have been used to– 


00:10:38 Some of that money. Some of that money. 


00:10:39 Asset that’s appreciating. 


00:10:41 Yeah. 


00:10:43 And then having the balance of short and long term is, well, have some within one year goal. 


00:10:49 Yep. 


00:10:49 Have two year, five year, 10 year goals and then have a retirement. 


00:10:53 Well, and I hate to say it, but a lot of people look at this and they’re like, I just talked to this one guy this one time and he said to kind of do this. And so I do it. I’m like, do you know what you’re in? Right? Like, do you know what type of retirement account you even have? And is that beneficial for your unique tax situation? Right. Because maybe you don’t need the tax savings today. So maybe the Roth could be a better option for you. Or maybe you’re in a really, really high tax bracket today and you need some tax savings. And so–


00:11:28 And you don’t even necessarily have to be in a really high tax. 


00:11:31 You don’t.


00:11:31 But it just means you may have cash sitting on the sidelines, and you’re eligible to be contributing to something that will save you taxes. 


00:11:40 Maybe you have a small business and you’re kind of jamming your future self by not letting that business make some contributions on your behalf. There’s so many different ways that you can. like screw it up in a small way. 


00:11:55 Yes. And you didn’t realize it.


00:11:56 No, you didn’t know that you were doing it, but it’s because you never took the time to talk to someone. So in the event you do want to talk to someone and you need someone, you know, we’re around, this is kind of what we do. Like, you can look us up. You can even text the office line, I believe. So you know, if you want to shoot us a text message and say, hey, I need some help on retirement planning, you can do that too. The phone number to text is 541-375-0898. Like how I plugged that in. 


00:12:31 I do. I’d appreciate that, Matt. And also, I mean, even if it’s, even if it can be not retirement plan. 


00:12:39 Yeah.


00:12:39 It can be anything that’s money related. 


00:12:45 And there’s so many different options based on how much risk tolerance you have. Right. Like if you’re a super aggressive investor versus a really conservative investment investor, there’s so many options out there. And most people don’t know what those options are, you talk to someone, right? It’s not as intimidating, I think, as you would assume that it is. 


00:13:08 Right.


00:13:09 I can’t tell you how many times I’ve had someone call. They’re not a good fit for what we’re doing, but I’ve been able to have a 40-minute conversation with them on the phone. I’m not charging them for that, and I’m just giving them all the information that they need in order to go make the right move for them. And then sometimes people call thinking that they don’t need our services at all and they just have a question and then we get to talking and they’re like, whoa, like that’s kind of above what I’m comfortable doing. Do you mind just doing it for us? And I’m like, yeah, we probably can. So it just depends on your situation.


00:13:44 And the majority of people are more than capable of figuring all this out. But do they want to spend the time? 


00:13:50 Well, do they have the time to do it? 


00:13:51 Or have the time? Yeah. And sometimes that’s just the case, I don’t want.


00:13:55 I don’t have, I know how to spray. I know how to spray for bugs around my house. 


00:14:00 Right. 


00:14:01 But guess what? I don’t have the time to do it. And so I pay someone to make sure the ants aren’t in my house because the cost of me having to hear my wife complain about ants in the house is not worth it to me, I would rather pay the $30 a month to have someone do it. And so I farm that out. And a lot of people decide, hey, I don’t have the time to watch the stock market. I don’t have the time to, you know, be in the loop on this stuff. I’m just going to farm that out. And that’s okay. 


00:14:33 Yeah. And so establishing the short term and the long term goals is extremely important because if you just have long term goals, you never, you don’t know if you accomplish them, really, till the end. 


00:14:44 Okay. So, Justin, here’s what I want to do. I want to talk a little bit more about retirement planning and what goes into it. 


00:14:50 Okay. 


00:14:51 But I think we need to take an obscene profit break. 


00:14:53 Perfect. 


00:14:54 So, let’s go ahead and take that break. And then when we get back, we’re going to talk a little bit more about retirement plans and all that other fun stuff. You guys are listening to 93.9 FM and 1240 KQEN and the True Wealth Show will be right back. 


00:15:12 Alright everybody, welcome back to the True Wealth Radio Show where myself, Matt Dickson and?


00:15:20 Justin Bruggeman. 


00:15:21 Are bringing you everything that you need to know about retirement plans. And do you need one? Is it time for one? What actually goes into one? Well, all that and more. So hopefully you caught the first part of the podcast. If you did not, you can always go check that out. It’s going to be on our website, Justin, where did we leave off and where the heck are we going? 


00:15:45 Yeah, well, we got through which number one, assessing your current financial situation, number two is setting the financial goals and number three that we’re kind of getting into right now is the retirement planning aspect of it. 


00:16:00 Okay.


00:16:01 Which, and then this is one, is there’s always a rule of thumb, you know, you save enough money to try to replace between 70 and 90% of your pre-retirement income. It changes for everybody. 


00:16:13 Well, and I think it also, correct me if I’m wrong, but I look at this and I’m like, it’s also kind of an estimate because, inflation, right? 


00:16:22 Yeah.


00:16:24 They’re going to claim inflation was, blank percentage last year. And I’m going to just say, I don’t believe it because I feel like it was more than whatever you’re going to claim that it was. And so if you get a lot of years of back to back inflation, maybe you need more than that 70 percent or 80 percent or whatever they’re recommending. 


00:16:44 People are probably feeling that about now. 


00:16:46 Right. Like I feel bad for you if you just retired and then you’re in your first little wave of retirement and you’re having to pull extra because inflation’s hitting you pretty hard. Like we’re all feeling that. 


00:16:57 Yeah, the hardest things that I’ve noticed to really project out was one, inflation. I mean, you can use historical averages. Two is, healthcare costs. 


00:17:08 Or how long you plan to live. 


00:17:10 And longevity is another one. 


00:17:12 That’s a huge one. 


00:17:12 It’s a huge one. 


00:17:13 Right, like the difference of you living to age 75 versus 95, like that changes the picture dramatically. I just went through this a couple times, these last couple of weeks with people where we’re looking at the numbers and they wanna retire early. And then I’m like, okay, well, what if you lived to 95 instead of 100? It made a difference, right? Those last five years, especially as things continue to get more expensive. And that’s why you gotta take the retirement plan with a grain of salt, I feel like, because there are so many things that you have to assume in order to make a financial plan. 


00:17:54 Yeah, I mean, you plan for the alternatives as you can plan for higher inflation. You know, the what if scenarios, what if inflation is higher? 


00:18:04 Well.


00:18:04 What if tax rates change? Because trying to estimate taxes 30 years down the road. 


00:18:09 Well, and this is why I like what you say, right? Like, plan like, worst case scenario. 


00:18:14 Yep.


00:18:14 Don’t try and justify your whole retirement plan on a best case scenario, because what if you have five years of a down market? 


00:18:24 Yep.


00:18:25 Or what if we actually have World War III and it takes six or seven years for us to get through that? And your retirement accounts aren’t what they were yesterday. There’s so many different things that play a factor in this. And I think that erring on the side of caution a little bit, it can be a good thing. 


00:18:43 Yeah, and you can even kind of put guardrails around it and putting it as, alright this is if things go extremely well.


00:18:50 Right.


00:18:51 This is, you know, your cap of kind of, what you should take on a monthly basis and then you have, the other end is this is bad.


00:18:59 And this is why–


00:19:00 This is your low point. 


00:19:01 Wouldn’t you say it’s really important to be looking like, especially in retirement, it’s really important to look at this thing on a yearly basis because if you have, for example, a bad year in the markets, maybe you’re drawing a little bit less out of your accounts. Or on the flip side of that, if you have a really, really good year, maybe you go ahead. Yeah, you actually take that trip to Europe that you really want to take. 


00:19:29 Right.


00:19:29 You don’t take the trip necessarily on the year where things are down, but maybe you take the trip on a year that’s good. And so being flexible, I think in retirement is a really big piece.


00:19:40 And I even like for people, try to do the plan to retire a little bit earlier than you even expect. And because that is if things go great, yeah, maybe it’ll work. But then if you’re just planning for that one point and you don’t get there, then you can just be mortified and just defeated. And so that’s never a good thing either. So it’s like I want to retire at 50, 55 would be great, but if I have to 60, 65. Yeah. 


00:20:13 Why not? And what about, you know, there’s also the potential sometimes for, even though you have officially retired, maybe you do some part-time job that you love and it’s your passion and it keeps you active out in the community. It makes you a little bit of income and then you’re not stressing that retirement account as much or maybe you’re not depending on that social security as much as you were before. That can be an alternative too. And so depending on your unique circumstances and what you’re willing to do or what you want your life to look like, it can make a big difference because some people, you know, what you want your life to look like, they’re like, hey, I just want a garden. I just want to stay home. I don’t want to travel. I just want to hang out at the garden. I want to have my grandkids over. And it’s simple. It’s cheap. And that’s what they want. But some people are not content with that. They want to travel. And so that lifestyle cost, that kind of goes back, I think, to what we talked about, you know, at the first part of the show was setting some goals and really being honest with yourself. Because if you go in and you make this financial plan, but you’re not being honest with yourself, if you come in and you’re like, I’m going to spend $3,000 a month, that’s easy. But you’re not being truthful. Your actual spending is like $5,000 a month. Well, your financial plan might not pencil how you hoped it would. So being realistic with yourself is a very big piece of that. 


00:21:40 Being realistic and transparent because if you plan for something and you’re, you know, like what you just said is, I want three, but I need five. And you plan for three. 


00:21:51 Yeah. 


00:21:52 You’re gonna be in a world of hurt. 


00:21:53 Well, you just mentioned it again, transparency. I did a financial plan for someone and we got to the end of this thing and we had spent some, you know, significant time on getting this thing really crafted and then they dropped a bomb on me at the end of it and they’re like, I got, you know, two hundred thousand dollars of gold too. And I’m like, That would have been nice to know.


00:22:15 That’s great information. 


00:22:16 Yeah, because that completely changes the entire picture here and you were super stressed out this whole time about, you know, your financial plan and you’re willing to actually spend on some of that gold that you have, well, that changes everything. And now that lifestyle that you wanted is very doable.


00:22:35 And most commonly what I’ve run into and I’ve seen is, which this is being, very generic saying, somebody retires at 65. 


00:22:47 Okay. 


00:22:47 If you retire at 65, typically you have about 12 years, of where you actually are spending more money. You know, you’re traveling, you’re spending time with the grandkids. Typically, when people get in their late 70s, early 80s, they don’t tend to do as much. 


00:23:06 Right. 


00:23:07 So maybe the need in your 80s isn’t the same as the need in your 60s. 


00:23:12 True. 


00:23:12 And so you can account for that. And that can change. And some of it is some people say, well, I can’t retire. Well, you can, whether you should or not is a different story. 


00:23:25 Absolutely. 


00:23:25 And it’s a matter of adjusting the numbers to be realistic because it might… things change. And if you’re, especially on a fixed income and retirement, if you have to put a new roof on your home, that can change it quick. 


00:23:39 Right, so it can benefit you to plan for those. 


00:23:43 A new vehicle. 


00:23:44 Yeah. 


00:23:44 It can change, especially even without, especially if you’re a new car buyer. Another $40,000, $50,000 cars now. That can change the expenses in retirement tremendously. 


00:23:56 Yeah, and I think one of the other big pieces too, especially as you’re getting older, is looking at what, is it that I actually want my estate to do over a long period of time? Do I have heirs? What do I want them to get, if anything? And then who gets what? And that can really actually shift the dynamic of how you handle those assets. And sometimes, especially, like if you live in Oregon and it’s not a real super tax friendly state for, you know, when you pass away. 


00:24:30 Estate taxes, yeah.


00:24:30 Yeah, estate taxes and stuff, you know, maybe that kind of changes the narrative where if you have a large estate, maybe you’re looking at something like gifting some assets away or being strategic with how you set things up so that the tax implication is less and the errors get more. 


00:24:51 And it could be as much as moving your primary residence out of state. 


00:24:56 We’ve seen that. We’ve seen it save people a considerable amount of money. 


00:24:59 Yeah, and then another important one, especially with retirement planning, is choosing the right accounts. 


00:25:06 Oh, it’s huge. 


00:25:08 When does pre-tax investment, you know, make sense versus post-tax investments. Like the difference between traditional IRA or Roth IRA or some 401(k)s have Roth options. Whether that makes sense now or not, or maybe it saves money to convert later. 


00:25:28 Sure, it makes a difference.


00:25:30 So we can really drastically change the type of accounts. And again, like there’s no magic number. It’s different for everybody, but figure out what that number is you need in retirement on a monthly basis, and then you can plan around that. And you gotta throw in some curve balls in there too. 


00:25:48 But Justin, I have some more curve balls actually that I wanna talk about now that you mention it. But before we get to those, do you mind if I take it, I’m seeing profit break. 


00:26:00 No.


00:26:00 Okay. All right, everybody. Welcome back to the True Wealth Radio Show where Justin and I are covering retirement plans and we’re super stoked to give you all the stuff that you need to know. Well, maybe not all of it, but how about a lot of it? 


00:26:16 Some of it. 


00:26:16 Some of it. Okay. Because there’s a lot that goes into a retirement plan and everyone does it a little bit differently, right? Like, no two plans are probably identical to each other. 


00:26:28 No. 


00:26:29 And we kind of talked about maybe some of the key points that goes into building one. But Justin, when we were heading into the break there, we were starting to get into talking a little bit about kind of the strategy portion of this thing, you know, looking at your risk and how often do we need to kind of go over things? Do you want to kind of continue talking about that a little bit for us?


00:26:56 Yeah, so the investments, well, it also depends on what the goals are. So, I mean, time horizon is a big thing with regards to investment strategy. 


00:27:09 Yeah. 


00:27:10 So depending on what those goals are and what your time horizon is, it may shift how much risk you’re willing to take, because I mean, if you have a 30 year time horizon where you don’t even have access, like in a retirement plan, you may be more risky with those assets–


00:27:30 Yeah.


00:27:31 Than saving up to purchase a home. 


00:27:33 Okay. 


00:27:35 And so it can drastically shift, but your people have, typically a risk tolerance, how much risk they are willing to take. And it does not necessarily mean that that is for every single account. It’s for the blend of everything to kind of stay within a risk tolerance. 


00:27:54 Okay. 


00:27:55 Depending.


00:27:55 Yeah. 


00:27:57 And then, you know, asset allocation, you know, diversifying assets, you know, having some stocks and bonds and maybe some real estate involved can be preferred, I guess, with that would be the way. 


00:28:10 Yeah, if you have the ability to have assets strung out over different areas. It just… it goes back to that comment I think I made earlier about all the different levers that you can pull. It’s like, well, if you have a bunch of money in your retirement account, but you’re 45 years old.


00:28:25 Right.


00:28:26 And you need a hundred grand because whatever. If you had maybe a rental property that you had equity in and you’re like, I have to get to this money and I didn’t expect to have to spend a hundred thousand dollars. Okay, I’m going to let this piece of real estate go and now I have access to the money that I needed. And then you didn’t have to deal with the penalties around that retirement account that you had. So like you said, it’s really beneficial to, if you can have money in different places so that you can, you know, be a little bit more liquid and on your feet. 


00:29:03 Yeah, and then there’s people that are, you know, they like to have a lot of the money and, you know, stocks, bonds, those assets, and then there’s other people that really like their money in real estate because, and they may be over concentrated in real estate, but that’s what they know. 


00:29:20 Sure. 


00:29:21 And there’s nothing wrong with that at all. It’s just understanding that the risks that come along with either one. 


00:29:30 Yeah. 


00:29:32 And access, a lot of time when people want to retire early can be problematic because of the 59 and a half rule for IRAs where you can’t access the money without penalty. Some 401(k)s have different rules in them that if you’re 55 and retired, you have access. But for the majority of it, as a blanket statement, I guess you could say, 59 and a half is kind of the ballpark to be able to access retirement funds. And so retiring earlier than that takes strategy. 


00:30:02 Right. And here’s the thing I think a lot of people don’t think about is what if you’re not going to be taking your Social Security until, I mean, maybe even take it early. You take it at 62.


00:30:14 Yeah. 


00:30:15 What are you going to do for the… roughly those two years in between where you don’t have social security paying you? 


00:30:22 And you’re no longer contributing to social security too. 


00:30:25 Exactly. 


00:30:25 Which can change the numbers a little bit too. 


00:30:28 And sometimes people really need to wait till full retirement age in order to start drawing on their social security because they are really dependent on the income. Right. Like some people, it doesn’t matter. They’re like, hey, I’ve got all these pensions over here. That’s enough income to meet my needs, to pay the bills. And then the other stuff is the fluff. But not all people are like that. Sometimes you are income dependent and that’s why it’s really important to look at the whole thing and say, wait a minute, let’s be tactical about how we do this. 


00:30:59 Right, and longevity is another one with social security, is a big difference. 


00:31:04 Yeah, like your health is shot. It’s like, well, maybe it’s okay to take it early. 


00:31:09 Yeah.


00:31:09 But–


00:31:10 As it may make sense.


00:31:11 Maybe everyone in your family has lived to 110 and you’re like, well, maybe let’s delay this till 70. I don’t know. But I think you’re right. The strategy there is really important. One thing that I look at and say is also really important is insurance, right? Because now does everyone need it? And that’s not what I’m saying, but I’m saying in certain circumstances, insurance plays a huge role. Especially health insurance. This one we don’t talk about a whole lot. But man, if you end up in the hospital and you’ve got a million dollar bill and you didn’t have health insurance, I mean, it’s possible that you end up medically bankrupt, right? 


00:31:56 Oh no, I have a million dollar child with medical events and I am thankful for insurance. 


00:32:03 And yours is an example of one of those things where it’s like, you were being careful. It was a fluke accident, right? Like you weren’t, you were on a four-wheeler, but you were just putting, around in the yard and something out of the blue happens. And then it’s a million dollar medical bill, but you had the insurance. And so look, you’re not medically bankrupt. Congratulations. 


00:32:24 And now I get to never complain about the cost of insurance, but–


00:32:27 Right. 


00:32:27 That’s a whole nother scenario.


00:32:28 Yeah. But health insurance is just one piece of the mix. You also got to look at life insurance, right? I look at this personally, and I look at my own situation, and I’m like, okay, I know what our bills are. I know I have a child, and I just know my family dynamic. And I’m like, if something happens to me, and I’m out of the equation, that’s a really big income hit for my wife, and that completely would change the way that she’s able to raise our child. And I look at that and I’m like, I need to have adequate life insurance because in the event that something happens to me, I wanna make sure that not only is my wife taken care of, but my kid is taken care of, and not just taken care of, but I want her to be able to mourn me being gone. I don’t want her to have to go to work, right? I want her to be able to just stay home, be a mom, raise the child and not have to worry about money. So I’m willing to pay that extra amount to make sure that she’s taken care of, that the kid is taken care of. And it doesn’t have to be forever, right? Like he needs to just be able to be old enough to be out of the house. So realistically, he needs to be, you know, they both need to be kind of covered and taken care of until he’s 18 or 20 years old and he’s out kind of doing his thing. You know, maybe she wants to go back to work or do something, or maybe she wants to go back to work even sooner. I just want her to have the flexibility to do whatever she feels like is best and not have to let money make the decision for her. 


00:34:13 I mean, me and you, we both have life insurance. 


00:34:16 Yeah. 


00:34:17 It’s not enough life insurance for my wife to be financially set for the rest of her life. That’s not the point of it. The point of it is, you know, pay off, you know, debts and things we have and then give her the ability to live and take care of the children. 


00:34:31 You don’t want her to have to worry about a mortgage or a car payment or any of that stuff. Yeah. 


00:34:37 And there’s a lot of… life insurance is great in a lot of different ways and it can do a lot of cool things. Is even having, you know, you can use life insurance for business reasons, is so, say, you know, you’re a partner in a company and one of the owner… owners passes away.


00:34:59 Right.


00:35:00 You can have a policy on them to be able to, say, purchase the rest of the company to own it outright.


00:35:05 Right. 


00:35:06 And then differences in, like pensions with survivorship benefits, the difference in the pension may be cheaper to just go buy a 20 year term policy. 


00:35:18 Yeah. 


00:35:18 To cover if something happens to you, because if you’re [live], it’s you, it’s still going to pay. So, and then there’s just kind of math and figuring out if that cost makes sense. So it… life insurance is awesome. 


00:35:31 Yeah. 


00:35:31 And it can be used in a lot of different ways strategically. 


00:35:35 Yeah. 


00:35:35 Because there is, no blankets, like everybody needs a 20 year term policy when they hit 20 years old. 


00:35:40 No.


00:35:42 That’s not necessarily true. 


00:35:44 Well, and what, I mean, here’s the other thing to think about, too. Maybe you don’t have a wife and a kid. Maybe it’s just you. And you’re like, you know what? No one’s really depending on this income. I don’t need the life insurance. Or maybe you don’t have anyone that’s dependent on you. But in the event that you die, you want to leave something behind to someone that you love. 


00:36:07 Or maybe it’s, you have enough assets where there’s no need.


00:36:11 That’s true too. Yeah, you’re sitting on $10 million. Maybe you don’t need a half a million dollar life insurance policy. 


00:36:19 So there’s a lot of really great things life insurance can do. It’s not necessarily for everybody, but it’s unique in the things that it can do. 


00:36:28 Yeah. You know, okay, so we’ve kind of talked about, you know, going back over this, we’ve talked about setting some goals and we’ve talked about knowing your… what your unique financial situation is. We’ve talked about kind of planning, getting in and doing that maybe a little bit earlier than you thought. We’ve talked a little bit about investment strategy and insurance. I kind of want to transition us over into, you know, you’re at that point where, you know, maybe you’re approaching retirement really quickly and you’re ready to start, or even, you’re even ready to start pulling some of those assets out of a retirement plan. I wanna talk about taxes, right? And everyone’s probably listening to this and saying, I don’t wanna talk about taxes. Yeah. Well, let’s talk about maybe how you can pay less in taxes. But we’ve gotta take it, I’m seeing profit breaks. So when we get back, Justin, I’m gonna ask you to talk to our listeners about how, can they be savvy and pay less in taxes? Are you ready for that? 


00:37:33 I’m ready. 


00:37:33 Okay, this is the True Wealth Radio Show. You’re listening to 93.9 FM or 1240 AM on KQEN, we’ll be right back. 


00:37:41 Justin, we’re back on the air and we’re wrapping up an awesome segment on everything you need to know about a financial plan or a retirement plan. And when we left off, I gave you a little bit of a cliffhanger saying, hey, talk to me about tax planning. How do– 


00:38:01 Taxes. 


00:38:02 Yeah, taxes, our favorite subject. Talk to me about maybe, like how you can navigate that in a smart way. 


00:38:12 Well, it’ll really depend on what assets are available and what type of accounts that they are in. 


00:38:19 Yeah. If you only have one account in social security, we probably can’t get super exotic. 


00:38:25 Yeah, probably. Maybe, depending. But even so we’re just, this is blanket, like assuming, you know, somebody has a Roth IRA, a 401(k) and some after-tax assets. 


00:38:39 Right. 


00:38:40 So it can be a strategy of, in retirement, especially so, say, you retire early, where there’s no income, you’re not taking social security. There’s no pension. You just have this gap years.


00:38:51 Okay. 


00:38:53 That can be a potential is all right. It is. I have no income. 


00:38:57 Yeah. 


00:38:57 That’s when you can start pulling a lot, some, out of IRAs. 


00:39:01 Right.


00:39:02 Traditional IRAs or 401(k). Sorry, not necessarily Roth IRA because that’s going to be tight. 


00:39:07 I thought you were going to start talking about Roth conversions.


00:39:09 No.


00:39:09 And I’m like–


00:39:10 Maybe. 


00:39:11 Yeah. 


00:39:12 But depending on if it’s necessary or not, because maybe your income needs aren’t that high and you just want to drive down your 401(k) assets and then you can use the tax-free stuff later. It’s very unique for every single person. Roth conversions are great too in that same scenario. Whereas I have no income. Let’s take a distribution, we’ll convert it to Roth, pay the taxes on it, as long as you wait five years, it’s all tax free. 


00:39:45 Right, and the growth of that money. Yeah, and that’s the big one, right? Like say you managed to get $100,000 out of, you know, your traditional account, whereas it grows, so does the amount that you gotta pay taxes on. But if you get it over into that Roth and then you can let that thing grow over the next 10 years or something and then you get to access all of it without paying taxes well, if you wanted to buy the beach house and you know, all you had was your traditional account, if you got to pull $300,000 out in order to make that purchase happen, well, that’s gonna suck because you’re gonna lose a lot of it to taxes. But if it was over there plunked in the Roth and growing over there, maybe you go pull it out of that account where you’re not gonna drive up your income for the year. 


00:40:34 Right.


00:40:34 So there’s a lot of different things that you can do. And I think that’s one of the reasons why you actually pay your financial advisor. 


00:40:42 Yeah.


00:40:43 Right? Like everyone gets hung up on this fee. Well, I’m paying this guy 1.2% or I’m paying this guy 1% or whatever that fee is, right? And then it’s like, well, did the guy that was charging you 1% do any planning for you at all, or did he just say, I’m gonna manage your assets? Well, was it worth the 0.2% that you’re paying extra to the other guy in order to set you up to where you’re saving thousands of dollars on potential taxes? 


00:41:11 Right.


00:41:11 Right, and so I think that’s also one of the things I look at when I try and evaluate, is this person worth it? Because sometimes they’re not, but sometimes they are, and it really depends on what, is it that they’re offering you and what is it that you’re looking for. 


00:41:25 And especially, with not understanding how the taxes can implicate things. 


00:41:33 Yeah, you don’t know. 


00:41:34 [It won’t] change. It may be a thirty thousand dollar savings in taxes. 


00:41:39 Or maybe your estate was in bad order. And because you didn’t have a trust and everything was set up or not set up at all, maybe you were going to pay the state an extra hundred thousand dollars in state taxes just because you were never pushed or prompt to take care of your estate. So there’s a million different ways that you can, you know, pay more than you necessarily should in either taxes or whatever, penalties. There’s a bunch of ways that you can kind of go down the wrong path. 


00:42:12 Estate planning is another big one. And even the most important part of an estate plan to me. 


00:42:19 To you personally, yeah. 


00:42:21 Is updating beneficiaries.


00:42:24 Right. 


00:42:26 Because that can change and it can cause a mess.


00:42:30 It can. 


00:42:31 And so you don’t want… you can update your beneficiaries at any time. So if you’re not sure, please go and check. 


00:42:39 Yeah. 


00:42:40 Because, you know, things happen, families change, the dynamics of family change, and you want things to go where you want them to go. 


00:42:49 Yeah. That’s just a big piece of the thing is making sure that, you know, your estate is honored the way that you want it to be honored. And there are ways that you can set things up to where you just… you feel good about how you’ve done it and what the plan is. And it takes a lot of stress off of people when they know that things are in order. So there’s that. For me, you just mentioned that a big thing for you is making sure beneficiaries are in line. I look at this and I also say, one of the big things for me is going back ever so often and looking at what the plan is, right? And then saying, are we in alignment with what the plan really is, right? Because sometimes people… they get older and their plans change or something happens in their life. And you need to be able to adjust your goals and your strategy and review things and say, my risk is lower today than it was five years ago. Or the market has really slid down and I’ve got cash on the side, I want to be more aggressive because I want to try and buy this thing cheap. And so I think meeting with your advisor and talking and establishing a plan and reviewing that at least every year is a really good way to make sure that everyone’s on the same page and that you’re in the right spot. 


00:44:22 And then another one that’s kind of important, which is going back to risk tolerance, is just because you’re retired, doesn’t necessarily mean your risk tolerance should drop tremendously. 


00:44:35 Right. Because what if you have so much that you’re never going to run out of money and you want to be very… while I’m dropping the word, you want to be very liberal with your giving to others, right? You want to bless other people. So, you can afford to take a little more risk. 


00:44:57 Even more of that is too, is, say you live into your 90s, you still have a 30-year time horizon. 


00:45:04 That’s a long time. 


00:45:05 Even in–


00:45:06 That’s a lot of market cycles. 


00:45:07 And even in the economic conditions we’re in right now, when you have inflation going crazy, and you’re not able to capture some of that upside with what’s going on. You can find yourself going backwards. 


00:45:23 Right. 


00:45:24 Even though you’re spending the same amount of money, everything’s gotten so much more expensive. You may need to take more. Your risk tolerance may be higher to capture the upside parts of it to be able to ride you to 90 and 100. 


00:45:40 Mm hmm. That’s true. Okay, well, Justin, I hate to break it to you, but we’re out of time. So.

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