Navigating life’s milestones

0:00 Welcome to something more with Chris Boyd. Chris Boyd is a certified financial planner, practitioner, and senior vice president, financial advisor at wealth enhancement group. One of the nation's largest registered investment advisors. We call it something more because we'd like to talk not only about those important dollar and cents issues, but also the quality of life issues that make the money matters matter. Here he is your fulfillment facilitator, your partner in prosperity, advising clients on Cape Cod and across the country. Here's your host, Jay Christopher Boyd. Come to the program. I'm Chris Boyd. I'm here with Jeff Perry and Russ Ball. We are all from the AMR team at wealth enhancement group and glad to have you joining us for another episode of something more.

0:46 Um, it's, uh, the dead of winter. We were just talking to Russ and I, as we were getting the show started, feels like a, it's cold season coming on and, uh, not, uh, not as cold where Jeff Perry is. So hopefully, uh, staying healthy there. Um, we are coming to you from our studio here in Hyannis and Jeff is coming to you from Florida. I am, and it's cold here. Relatively speaking. It's only been in the sixties. Oh, geez. Hard to hope. Yeah. This is Arctic. I'm to call it the, uh, Arctic front or something's named for it. Yeah. Sleeping statement for, for Florida at least.

1:28 Well, this past week, Florida had record level snow in the, uh, big bend and Pensacola area. Oh, wow. My brother on the Gulf of America, the Gulf of America, right at the top of the Gulf of America. Yeah. Russ, you were saying, yeah, my brother lives in, uh, right, right outside New Orleans and, uh, I woke up in the morning, he's, uh, texted a picture, walking the dogs in the snow. Yeah. Wow. And that's the last thing you'd expect. So first time in years in, uh, New Orleans, I would snow. All right. But that's not really what we're going to talk about today. Sorry. I got a, we got a little sidetracked, um, changing seasons. Um, we are really intending to talk about, yeah, changing seasons.

2:12 That's a good, that's a good segue, Jeff. Um, changing seasons of life. As people go through different phases of their planning, we were talking about some recent client experiences and having seen them through, uh, the range of the, the arc of their financial plan. I was just saying one of my, um, longest clients, uh, just passed away. Um, I think really my first client, uh, uh, if, I don't know if it was my client in insurance, but I had worked with them in insurance when I started insurance, but my first client, when I started as, um, uh, in financial planning and, and working with people in investing and, um, in those days, um, you know, we were, I was, I was a registered rep of a broker dealer.

3:03 And so the way we did things was we sold a mutual fund and different, you know, trying to fill out and figure out what was the right mix of funds for people to meet their needs. And, uh, this family was, uh, my first client in that experience and have been with me all along the way. And, um, uh, across my career and more across their experience from going through, um, and this particular family, they had won the lottery, uh, some, some lottery winnings, not all disclosure, not all of our clients win the lottery. Yeah, exactly. Uh, and they were friends of our family and, um, went to my, uh, my dad for their estate planning and, uh, now that my brother who was friends with their, their kids and, um, in any case, it was, um, um, a circumstance where they were planning for their future and starting on their, their path to retirement is, you know, when you win that kind of money, you start thinking, what should we do?

4:14 You know? Um, was, I don't want to get too much into detail, but were they clients? So they won the lottery. Were they clients before they won the lottery? Uh, not of mine. Um, I think, no, I think that was what the catalyst that got started on saying, okay, you know, um, given the, their, you know, new financial circumstances, how should they think about their planning? Yeah. I got them really focused on their estate planning, their financial planning of, you know, various types. Um, so in those days, uh, the estate tax threshold was much lower. So there was some concern about having liquidity for estate taxes.

4:57 Right. So that involved an insurance component. There were things about, you know, their, uh, cash flows and, you know, income. And, um, you know, they thought about, uh, spending time in Florida. And so they just started all the, you know, the planning of, well, how shall they do this, what, what will be their priority and keeping, uh, uh, kind of, uh, a cautious eye they didn't, you know, they wanted to have, uh, some risk and some performance, but they also want to be very careful with the money they had, yes, which is not always the case when you hear it, uh, yeah, go ahead.

5:37 Lottery winning winners who just fail at it. Right. They just, usually they're so extravagant or they're super generous. I'm rich. Oh, they make bad investments. You know, everyone with a, everyone who didn't make it on a shark tank is knocking at that door. Right. Yeah. Yeah. So, you know, they were very, very careful and, um. And then, um, you know, over time, you know, just the cashflow through retirement and how things were going. And, uh, along the way, uh, he passed and she lived on and, uh, we continued to be a resource in helping think about things, uh, her care needs changed over time, you know, and we talked about a different, would you want to do this?

6:24 Would you consider doing that? You know? Um, so had, had some important conversations, but ultimately it was matter of what's preferred, what, you know, what, what they want. And, uh, so it was good. And ultimately, um, just recently, um, um, this client passed, but it's, it's the kind of, you know, kind of, it's, it's sad when I was saying to Russ, that's one of the drawbacks of, uh, uh, we work with retirees and, um, we see them through, uh, the beginning to end. And it's, it's, you know, we've, we've had a lot of clients that over the years and as a consequence, you know, some have passed and it's, uh, it's one of the, one of the parts of the business that's, um, you know, personal, you've, you have a connection with all these people and, and, you know, you care not to, it's hard not to, right.

7:17 Yeah. We care about their, their journey, you know, and they share so much with you. They share their, their fears, their hopes, their dreams. They share when good things happen, when challenges happen. Yeah. So you become closer to a lot. I mean, different, uh, family members passed along the way. Anyway, you know, you, you, you connected to that kind of thing. So in any case, um, Uh, this brings me to an interesting article. I came across that maybe we can, um, deviate from the specifics of this, but it's, it's, you know, um, uh, kind of related to this topic.

7:58 There was an article in, uh, the February Kiplinger, uh, uh, article, the cover of the magazine talks about, you know, just the very issues of retirement, um, getting the right advice in retirement and, you know, it has the graphic on the top where it's got all these street signs pointing in different directions for, you know, withdrawal strategies, charitable giving a state planning, long-term care, minimizing taxes, social security, planning, uh, generating income, creating a budget, all these things that, you know, we, we do and our routine with the way, how we think about working with clients and thinking through how shall they, um, how can we help them in thinking about the issues they need to plan for as they go through their, um, retirement journey?

8:51 Chris, let me ask you kind of a foundational question based on that. When should someone people listening, some are a brand new people to the show, a brand new to getting their finances in order, some are retired, some are wealthy, some are not. When should someone consider seeing a financial advisor? Like, yeah, uh, now, uh, right. You know, I guess the answer, right. You know, no, I'm, I'm kind of being flippant, but you know, I think as soon as possible is, is the best answer. Um, that, um, if you're, uh, starting out, um, you're better benefited by getting a little, uh, advice, a little counsel, Jeff, I mean, we've had a number of clients that you've done a great job in kind of saying, getting them on the right path, thinking about, um, how do they either reduce their debt load or plan for their cash?

9:45 You know, like set us, how much do I set aside? How much do I plan for savings and investment? So on the early end of things, it's like as soon as possible. Right. And, and the challenges, of course, you know, and along the way, many stages along the way, you say, I just don't have enough, right. And that's going to be true for lots of people, you know, no matter what stage of your journey. Uh, a lot of times people feel like, oh, I'm not sure I have enough to be thinking that way. And that's really why maybe, because you got to prioritize and think about, uh, what should or shouldn't I do? And, you know, the decisions about how to plan for where your money goes.

10:28 And you can't get stuck, right. I don't have enough, therefore I won't do anything. Yeah. And it can be emotionally draining. Let's say when you're, when you're upside down in, in the, you know, things are going the wrong direction and it's not as though it's always like an easy fix, you know, I don't want to make light of things. On the other hand though, uh, you know, sometimes fresh eyes can say, well, maybe you want to consider this. And sometimes it's, um, it is not easy. It, you know, it's, it's, it's challenging. It's difficult, but taking that, uh, difficult path can get you to the other side more, uh, rapidly.

11:08 And, and I think sometimes it's a little bit of perspective of, you know, just, well, let's look at the math. I mean, this is, this is arithmetic, you know, like what can we do? Um, I don't have enough. Well, maybe we should think about a roommate or, oh, maybe you want to think about a cheaper car or, you know, well, maybe we need to think about a different job, you know, whatever it is on that early end. Right. There's, there's lots of, you know, things to consider. Uh, it's not to say that it's easy, but there's ways to think about it. Right. Yeah. Go ahead. I think, especially for younger people, um, just like taking a step back and actually thinking about it, like, wow, this is actually a plan.

11:49 It's not just like going, you know, paycheck to paycheck. Oh, like, uh, yeah. Winging it. And, and it's about creating efficiency and starting to actually build wealth. I think that's, those are the discussions I have with my, my friends as, as their de facto, uh, advisor, um, is like, there are a lot of things that they just haven't really thought about. And when we look at a financial plan, we're looking at like your goals, your big picture goals. And sometimes that's the place to start where, uh, a lot of people are thinking about their goals in five years and 10 years and 30 years. So, and, and that can get people excited, right? When you're thinking about something, progress ultimately. Yeah. There's some small steps towards something that, that makes you like, it changes the mindset where it's, it's framed differently instead of framed as like a sacrifice, uh, it's framed as progress, working towards opportunity and progress.

12:43 Yeah. Yeah. So that's a great point. You know, and then, you know, as, as things evolve, uh, people's increases and there's greater opportunity. And sometimes it's just executing on fundamentals, right? Um, we know, you know, blocking and tackling or whatever it is, right. Yeah. We know that just keep doing the right things and, uh, not getting off track by getting, um, you know, uh, taking, making some bad decisions along the way. Right. You know, bad decisions may be the wrong way to say it, but the idea of like getting, getting distracted, overextending, um, that kind of thing are easy to do along the way. So you want to keep on a path that keeps you in that wealth creation phase as, as you were talking about it, Ross.

13:30 And, you know, I think, um, some of this is just keep doing the right things, you know, in, in time is your, is your, uh, your, your, um, it's your advantage in this, that given time things compound and wealth has increased over time and there will be bumps in the road with markets disrupted. And these are the inevitabilities of it all, but, um, uh, don't overextend. Right. Um, uh, so, and then, you know, the, with the buying habits and spending habits and all of these kinds of things, keeping some perspective and, and sometimes a planner, um, you know, we talk about, um, accountability partners when it comes to coaches and things like this.

14:16 Sometimes it's not even, you know, it's not accountability as much as just like, you know, keeping you on track, you know, you doing these things and sometimes it's strategy. Oh, have you thought about the mega backdoor Roth or, you know, whatever it might be, or, you know, and sometimes it's just, um, uh, you know, thinking about, well, how much can I afford when I want to do this goal? You know, we had a client, uh, not long ago, uh, by a, a second home. Um, uh, you know, it's, uh, unexpectedly to us, but it was something that they, they saw a lot of value in for, uh, the possibility of a future retirement home.

14:57 Uh, the, the importance of family experience, you know, they're going to have a lot of family time there. Super common goal. Yeah. So, I mean, you know, and, and their income, when we, we kind of went through it, it was like, yeah, it seems like, you know, it's going to create equity. It's going to, it's something you can afford. Um, it it's, you know, there's a, there's a value element of it as well. So it was like, it was kind of all these, uh, virtues, uh, built in. Um, now it does add some expenses cause you got to, you know, utility bills. But, um, but in this, in this particular instance, it all seemed like it was a good, it was good math, you know, but, um, and then, you know, as we, as we get later in life, we start thinking about one of the things that we run into a lot is people are spending time, um, racing to the finish line, if you will.

15:52 And they're, they're thinking of retirement, uh, away from work as, uh, the finish line when in reality it's, it's its own beginning, right. But it is a time when people reassess how much risk do I want in my portfolio? Should I be as aggressive as I've been in the past? Um, it's a time when then people start thinking about how am I going to manage these cashflows? You know, we talk about all the social security decisions and, uh, you know, social security turning on and retirement start don't have to be the same time. But, uh, if I'm not turning on social security, I'm spending too much of my money, you know, this kind of thing. Well, on the other hand, that might save you money over your retirement.

16:36 You know, that's a tough one for people to process, but it really is, but it's, yeah. Uh, we talked about pensions, same idea with pensions. If you have a pension option, go ahead. Continue with that. No, it's the same. Um, you know, like people struggle about wanting to take social security or they take it at the default. Sometimes it's to take it as soon as possible. Right. Sometimes people have pensions that they can turn on right away for one benefit or they can delay it until they reach a certain age, 65, maybe if they're a government employee and delaying that. Um, and especially if they have a long life expectancy is often a better choice than just taking it when they can, when they're accessed, when they have access to it, it can provide them greater income security and greater cashflow in retirement while if they're still able to work, let's say before that 65 and that's, or use their savings, which is really counterintuitive for folks.

17:33 Yeah. Yeah. So, uh, in the end, these are the things that, you know, part of the planning can help assess and evaluate, which is the best way to do this. But there are other related things, you know, um, when it comes to, um, this one is the cashflow, you know, how my withdrawal strategies, where do I take it from, uh, sequence, yeah, which, which bucket, if you will, my retirement account, my Roth account, my taxable money, you know, where do I draw from when, you know, um, when it comes to the portfolio design. So similarly, where should I put which kind of risk and so forth sometimes is part of the equation.

18:15 Tax efficiency too, like Roth conversions, um, that kind of thing. I think that's a big decision that needs to be made. We seem to be talking about that a lot lately. Don't we? Especially with, uh, the thought that maybe the tax cut and jobs act may be extended, gives people more of a window perhaps to entertain that notion of. Should I do some Roth conversion? We, we had an interesting conversation yesterday where, uh, you know, on the one hand, it was yesterday, maybe the day before, anyway, recently this week where we were talking about, you know, on the one hand, uh, you could, you have this very narrow window within your tax bracket, uh, to, that you could fill. Uh, at, at, at when you stop working, if you were to go into the next tax bracket, um, it probably makes sense because you're going to be pushed into that tax bracket anyway, later on because of distribution requirements.

19:12 And, um, by doing, filling that tax bracket, we were thinking you'd probably actually stay in that tax bracket and then get lower because you'd have much less income later on, uh, that you're over the lifetime. You'd have less taxable income, uh, by, by doing some of this planning. And then the other variable we're thinking about is, well, if one of you passes before the other, you know, speaking of tax brackets, that's exactly that's exactly the tax bracket is going to be harder to deal with. You'd be pushed perhaps even to even higher tax bracket for a single person, whereas this would keep you in lower tax rates.

19:56 So just when you started piling it all together, it's sort of like, okay, this really could make sense for you as a strategy in your circumstance. Again, it's circumstantial. Everyone's instances are a little different. So, uh, but that was a good example of a, an instance where a little bit of tax strategy, a little planning could really make a difference over time. And then when it comes to legacy, uh, what their beneficiaries receive, it'll, it'll be materially better because, you know, when you think about it, a Roth IRA, if you receive that, uh, I have 10 years to take it out, same kind of 10 year rule applies for that, um, beneficiary, um, inherited IRA, whatever you want to call that.

20:40 In this case is a Roth. If it's an IRA, it's a traditional IRA. I've got 10 years to take it out. I I've probably will have annual distribution requirements along the way. And by the 10th year, I've got to get it all out. Uh, that could be a big, big tax. If I don't either way, I'm looking at probably, you know, more taxable headaches where, um, for the Roth, I can keep it in that Roth all till the 10 years and then take it out. And there's no tax consequence for the beneficiaries. So, you know, I mean, no, one's going to complain whether they get a traditional or a Roth. They're going to be thrilled to get that inheritance, but if they could pick one, but yeah, if you have the choice.

21:27 Um, so in any case, that's one of those things. Um, tax planning is another element of this that we find we're talking more and more about, um, capital gains, um, as something people are more and more focused on, we're talking about, you know, Harvesting capital losses along the way and trying to come up with strategies that can help people to navigate some highly appreciated assets without, you know, having a massive tax day, you know, which nobody wants to have that big, a long legacy position suddenly have a huge tax. Sometimes there's some strategies we can look to, to try to navigate that a little bit.

22:09 So we've been talking about that too. It's such a strong sentiment for some people that they will not sell something that should be sold because they don't want to pay the tax. Yes. Yes. Too much risk in the process. Whatever reason it should be sold. Yeah. There it's, you know, it's too much of your portfolio or the outlook for the company isn't good, whatever it is. They just, that's very resistant because they don't want to pay taxes. We've had clients say, well, gee, do you think it'd be better to have it go down in value? No, no, no. That's not paying 25% capital gain tax, but you still want the, you'd rather have the gain in that.

22:54 At the time, you have to go down 25%. I'll pay less. Yeah, exactly. Not, not as appealing though, in reality. And then, you know, the other thing that I found, we, we talk about as part of our plan for retirees is thinking about the, what ifs, what if one, somebody dies sooner than expected and how does that change cash flows? How does it, I mean, obviously it has some impact on, you know, the, the heartbreak of it all, but the, the, the cash flows can be affected. Oh, security. We lost, exactly.

23:35 And then there's also the, you know, yeah, some expenses change. You know, maybe, you know, we need to hire someone to do some of the things that spouse did. Maybe it changes where we want to live. Yeah. The expenses don't get cut in half. No. Yeah, that's right. We were talking about that recently, but it, you know, there may be some reduction, but it's not, there's other increases, right? And then, you know, you still own the house, you still have property tax, insurance, utilities. Those, those aren't going to change really all that much. You know, you're still going to have those expenses that, you know, maybe you have one car instead of two.

24:16 Okay. That, that changes a little bit, you know, that kind of thing. But, but, you know, and there's the whole issue, like, do I want to, do we want to, where would you want to live? Would you stay here? Would you live closer to other, you know, family members? Would, would it, you know, what would there be the ability to live independently as someone ages or whatever? Um, and long-term care becomes one of those conversations. Uh, what if, you know, the, what if, what if, right? That's the big, what if though, really? I mean, it can be really, yeah. It's the one that can really interfere with someone's perceived plan with what they're going with their cash.

24:57 And then what's the impact on the survivor, right? Um, so, you know, um, we run into people who, um, have absolutely no idea whether they will or won't have a long-term care, uh, constant, you know, event. And we run into other times when it's kind of clear there is going to be one. And so how are we going to deal with that? What's let's do some planning. Well, we do run into clients that say, we're not going to have this event. Yeah. I'm going to take care of, we're going to take care of each other at home. That's our plan. And they're firm about it. That's true. That happens. And as much as they, um, believe that, and we hope that's the case, it's not always.

25:41 So, you know, usually in that case, I'll say, well, you know, well, assuming you're, even you're, if you're at home, if you had full-time need for full-time care, you know, those costs are going to be similar to being in a nursing home. Uh, you know, sometimes more, but, but you could, you can kind of still do that thought exercise about the costs, the full-time care, wherever it might be. Right. Um, so, um, but that needs some thought and some consideration. And then, you know, I think we, uh, we talk about estate planning a little bit, um, legacy, uh, considerations, um, charitable, you know, intentions.

26:25 How do you want to be remembered? Right. Yeah. I think about that a lot. And I think, um, you know, it's, it's one of these things where you think, well, well, anyone have noticed if, uh, if I'm gone, you know, uh, that I was here, will, will the, will the world have been improved in any way, but, you know, for my, uh, my role in it, you know, and, uh, I think people, I think that's important to some people to think about, you know, what's, what's my legacy. Um, and that sometimes that's about family. Sometimes that's about, um, charitable intentions. Um, it really differs from person to person. What, you know, what is their priority about, you know, when it comes to your financial plan, then we, we see this, uh, experience from all angles, you know, from early origins to, uh, uh, end of life.

27:19 It's, it's challenging. Um, it's not easy for people at any stage along the way, sometimes to, you know, really navigate this, um, on their own and having a helping hand along the way, someone who's been through it with, um, some experience can be a real resource. Sometimes it's a opportunity to challenge your perspectives. We tend to make assumptions. A lot of times we get caught in our own, uh, bubble, you know, what we see and think about, and sometimes, um, it can really add value to have a second set of eyes and what don't, you know, right. You know, that old question of what don't I know about this subject, right?

28:02 If you're in your own cocoon and you think everything's been fine, everything can be fine, but what don't you know? Not all rumsfeld, rumsfeld, right. The known unknowns and the unknown unknowns or something like that. Right. And every part, you know, we do the same things applies to law and medicine and all those things. Yeah. Yeah. So if, if we can be a resource, that's why we're here. Uh, let us be a resource to you. And, um, we're happy to be, be able to help if we can. Um, we offer a complimentary consultation. It's available to you just by asking, uh, reach out to us, uh, either by phone or by email.

28:43 We'll give you that information as we wrap up the show until next time, everybody keeps driving for something more. Thank you for listening to something more with Chris Boyd. Call us for help, whether it's for financial planning or portfolio management, insurance concerns, or those quality of life issues that make the money matters matter. Whatever's on your mind. Visit us at something more with chrisboyd.com or call us toll free at 866-771 -8901, or send us your questions to amr -info at wealthenhancement.com. You're listening to something more with Chris Boyd, financial talk show, wealth enhancement, advisory services, and Jay Christopher Boyd provide investment advice on an individual basis to clients only proper advice depends on a complete analysis of all facts and circumstances.

29:32 The information given on this program is general financial comments and cannot be relied upon as pertaining to your specific situation. Wealth Enhancement Group cannot guarantee that using the information from this show will generate profits or ensure freedom from loss. Listeners should consult their own financial advisors or conduct their own due diligence before making any financial decisions.