[00:00:00] Speaker A: Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.
[00:00:17] Speaker B: You're tuned into the Retirement Planning Pipeline, the show that helps you take control of your financial Future. Whether you're 5 to 10 years from retirement or just getting started, we've got the strategies, tools and experience to help make the most of your nest. Eg.
Retirement planning specialist David Pipes is a trusted voice in retirement planning, helping Americans navigate 401k rollovers, income planning, tax strategies, and everything in between.
Now let's dive into today's show and start paving the way to your smooth retirement. Alongside retirement specialist David Pipes, here's your host, Jim Tarabokia.
[00:00:51] Speaker C: Hi everybody. Welcome to this week's edition, a brand new episode of the Retirement Planning Pipeline, the show that delivers experts, insights, actionable advice and real world financial strategies to help you retire confidently and comfortably. Thank you for making our show a part of your weekend. I'm your host Jim Taribokia alongside retirement planning specialist David Pipes. David will be along in just a moment. The Retirement Money Balancing act Managing today's financial pressure without sacrificing tomorrow. Coming up on today's show, the retirement savings mistake nearly 90% of retirees actually make, plus the simple habits behind a million $401k. And when today's economy squeezes tomorrow's retirement, that's all on the way. But first, before we get the show started, as always, I do want to encourage our listeners to go ahead and schedule that 100 complimentary consultation with retirement planning specialist David Pipes today. It's a free offering just for listening to this show. Our listeners can meet with us to review their own financial situation. For your family, for your business, there's absolutely no obligation. Visit retirementplanningpipeline.com to get started. All right, David, welcome in. Let's kick off the show with this the simple habit Behind a million $401k, retirement wealth is usually built through consistency, not perfect market timing. As we've talked about on previous episodes in this show, when you hear that someone has accumulated $1,000,000 or more in a 401k, it is tempting to assume they picked the right investments at exactly the right time. But according to Fidelity's latest retirement analysis, it's something much less dramatic and much more useful. The typical 401k millionaire is 58 years old again that according to Fidelity and has been saving for on an average of 25 years right around there. In other words, substantial retirement wealth is usually not created by one brilliant decision. It's built through years of consistent contribution, employer matching dollars and the discipline to keep going through those uncertain markets. When you look at that statistic, it really puts retirement wealth into perspective. We tend to hear about someone with a million $401k and immediately think they must have picked the perfect investments. They must have known exactly when to get in or when to get out of the market. But the reality is much more complicated than that. We're talking about, again, roughly 25 years of saving, consistent contributions and those employer matching dollars, the market weathering those storms, the ups and the downs. So you know, David, when you sit down with someone who's trying to build substantial retirement savings, how important is that consistency and what do you tell people who may be spending too much time trying to find the perfect investment instead of simply focusing on the habits that can actually build wealth over time?
[00:03:32] Speaker D: Yeah, first of all, you know, good to be here. Episode 44 Jim, you know, we're getting a lot of feedback and, and, and I absolutely love it. That's the first thing that I want to say is thank you all the listeners out there.
We've got a couple people called in last week and then had some questions. So I know, you know, you're going to ask some questions later, Jim, but great point. We bring up about the 401k strategies and I think, you know, being consistent is important, but I think one of the biggest things that a lot of you listeners out there that you're really thinking about, you know, more of is the consistency of spending. Right. And how to maximize the potential for the spending power over your period of retirement. Right. So what I always say is, you know, if you don't use math, you won't be able to calculate that. Right. So everyone spends so much time on the investment portions, which is exactly what Jim said. And it's sad to say that that's not what you need to be spending your time on. Right.
What you need to understand is a simple concept. Your money, your funds that you've accumulated over time are going to decrease at a faster rate than they increased. And everybody asked David, how does that, how does that make any sense? Right. It shouldn't be the same time or doesn't it matter how much you're going to spend and the odds are in that 401k when you are being able to compound over time. Okay. When you're putting money in and investing instead of taking money out. Okay? There's a parallel.
It's called a parabola, okay? And that mathematical graph is an exponential. And I don't want to get too nerdy on you here, but the compounding formula grows over time at what's called as an exponential rate, okay? Compounding rate. When you go ahead and start taking that money out, everything turns the opposite way. So now instead of your increasing compound, you are a decreasing compound, and that exponentially decreases, okay? What people don't understand is, is that when you're spending that money, you're taking your money out at certain points of time. It's totally different than putting money in. And again, I don't want to get too nerdy on you, but you have to be careful when it comes to utilizing your 401k, because that million bucks could. Could be nothing. So what I always tell clients is this. When I first come up front, the first thing that I say is, in, Jim, you can. And you know this about a lot of the stuff that we talk about, a lot of episodes. The first thing we need to talk about is how are we proportioning assets of income and in growth, okay? For all that time frame, your entire. Your entire life, you've been in growth, okay, because you're accumulating for your retirement side. So great job. You've done what everyone wants to do. You've accumulated growth over the lifetime. You've maximized your compounding interest, your exponential formula, and you've now grown this nest egg. Now, how do we proportion that into income and growth? And we talk about this a lot, but they have to be separated. All right? So now I need to take what I need for income. I need to put it into a different bucket, a totally different bucket. What that's going to do is it's going to utilize what I can use for that income and to maximize my income for my client. Now it will give me the other side of growth. Now I can leave the growth alone like I've done my entire life, not worrying about taking money out because I've been plugging money in, okay? So that growth stays growing. But when I take the income portion out and I. And I hold that as a separate, basically a separate fund, or a separate, I would say, type of fund, that's going to definitely increase what you can have down the road, it's going to really profit what you can do for yourself and your portfolio in the long term, right? Where if the market has those upwards turns, you have your growth Set up for that for those accounts, great. But if the market does have a downturn, which we're hearing a lot now, and some crazy stuff's going on with the market, it's being very, very weary. So that's my one thing, Jim. I think people spend too much time on what too much time on the investment that it's in not the proportion of breaking up the income and the growth. They keep it in that same bucket, Jim.
[00:07:31] Speaker C: Yeah, And I think it's an important distinction because you don't have to be a financial genius to build a meaningful retirement account, but you must be consistent. So let's make this kind of practical for the listener here, okay? So if someone is in their 30s, 40s, or even 50s, and they look at their 401k today and they think, I am nowhere near a million dollars. And I think that in those numbers, this is just my opinion, I think those numbers of 30, 40, 50 year olds saying that, they're saying that more and more often. What are the habits and steps they should focus on right now to put themselves in a stronger position for retirement?
[00:08:05] Speaker D: I think, first of all, staying consistent is very, very important. But I think overlooking what you're going to need. Okay, Okay. I think that too many people put money away and they're not focusing on how aggressive they are. Okay.
I cannot stress enough, okay.
At a younger age, right? You want to be aggressive. You really, really do. I mean, you want to be, I would say, almost fully aggressive.
I do like real estate too, though, Jim. I do.
And I'll tell you this, I'm going to give the listeners a little bit of my outlook.
The more math that I do,
[00:08:43] Speaker A: the
[00:08:44] Speaker D: more equations that I solve, the more people that I meet, the more clients that I help, I am seeing more of a trend, okay, towards people are just putting money away and not taking care of it. They're putting the money in their 401k and they're letting these mutual funds just be there.
All right?
And I think a lot of people are missing the term of diversification.
And people think that diversification is having, you know, assets that, you know, maybe your stock market portfolio is bonds and stocks, right? You're diversifying their portfolio. Some are fixed income, some is, you know, growth accumulation.
But I think people are missing what diversification is and that, that really is asset class diversification.
[00:09:34] Speaker E: Right?
[00:09:34] Speaker D: It's not if it's not within the market, if you're in the market. And this is my true belief, okay? This is what I believe. If you're, you're in the market. You're in the market to grow. You're not in the market for a fixed income. You're not in the market to, you know, to play around and pay someone a fee for nothing. Okay, Right. You're in the market and if you're paying a fee, you're paying a fee for what? For your money to grow as much as it can possible on great years. You want it to grow a high amount.
Right.
So I think that any type of diversification in the market is just, it's just not, it's not going to help that much. I just, just don't believe so I think that, you know, believing in growth and believing in earnings and believing in the growth of companies, right. If a growth, if a company, you know, exponentially, you know, increase their revenue or their profit, you can say that that company is, can be valued at a higher price.
[00:10:27] Speaker C: Of course. Yeah.
[00:10:28] Speaker D: But if you're having companies that are just, you know, consistently, you know, having the same income or the same revenue over time, it's a different way to look at that company. Okay, So I believe there's a way to be aggressive with portfolios, but also know that you're investing in safer companies because of their growth, if that makes sense. Jim. Right. People classify that risk is so much more different. But there's, there's ways that we can maximize as a financial advisor and make sure that when you're aggressive, you're not going to be, you know, ignorantly aggressive.
[00:11:03] Speaker C: Right.
[00:11:04] Speaker D: We're not going to invest in 100 grand in a company that's just like, just a startup company and they have no revenue and they have no profit.
That's where it gets really, really risky. And I have a lot of clients that love doing that. Right. And that's fine. Take your money and do what you want. You know, I mean, I, I have, you know, probably 5% of my assets in emerging companies that don't create profit yet.
But the same time I have 90% of my assets that are somewhere that I know that I can trust on those companies. Right. There's no way that company is going to say, oh, I'm bankrupt, because their income is increasingly. It's just nuts. And that's where I think people don't understand. And Warren Buffett always said this. If you invest in those valuable companies, not just at the good price for that company, but a company that is earning its way up with the value is an amazing structure. So I, I think that being aggressive there is, is, is a great point for those 30, 40, 50 year olds stop just investing in those ETFs and the mutual funds, start looking at companies that are that can be valued that way. Find an advisor that can help you do that and it can really push towards that down the road, especially with your IRAs.
[00:12:17] Speaker C: And again, to wrap up this segment, most retirement millionaires are not overnight success stories. They're long term savers who consistently contributed and captured employment dollars and remain committed through changing markets. You may not be able to control what the market does next, but certainly you can control the habits that give your retirement savings the opportunity to grow. Are you contributing enough to capture your full employer match or do you know whether your current savings rate puts you on track for the retirement that you want? Well, give us a call today and we'll help you answer those questions. 850-565-1705. Again, that number, 850-565-1705. Or you can visit us on the web as well@retirement planningpipeline.com we can help you evaluate your retirement saving strategy and identify practical steps for strengthening your plan.
Later on in the show, we'll talk about why waiting for required minimum distributions may lead retirees to spend too little during some of their healthiest and most active years. But after the break, when today's economy squeezes tomorrow's retirement, this is the retirement planning Pipeline. We're back in a moment.
[00:13:24] Speaker B: Visit Retirement Planning Pipeline to schedule your free, no obligation, complimentary consultation today. The retirement planning Pipeline will return in just a moment.
[00:13:38] Speaker A: Retirement should feel secure, not uncertain if market swings heavy feeling uneasy. You've probably heard about annuities, but what aren't they telling you? You deserve the full story. That's why we created a free guide that explains the good, the bad and, yes, even the fine print. Inside, you'll learn how annuities can create guaranteed lifetime income, what fees and surrender charges may apply, how the different types of annuities really work, and whether an annuity makes sense for you. It's clear, straightforward information so you can make a confident decision. Call Amerilife now to get your free guide to annuities, the good, the bad and the fine print. Call 866-55-49546. That's 866-554-9546.
[00:14:18] Speaker B: Silex annuities contain withdrawal charges, interest and bonus recovery and market value adjustments that may apply to withdrawals made during the withdrawal charge period. Silox annuities are products of the insurance industry and not guaranteed by any bank nor insured by fdic or NCUA NCUSif not a deposit not insured by federal government agency. Guarantees are based on the claims paying ability of the issuing insurance company. Restriction supply may only be offered by a licensed agent welcome back to the Retirement Planning Pipeline Alongside retirement Planning specialist David Pipes, here's your host, Jim Tarabakia.
[00:14:48] Speaker C: Welcome back to the Retirement Planning Pipeline. Thank you for making our show part of your weekend on WCOA News Talk 104.9 with new episodes every Sunday at 10am and as we dive back into today's show, reminder, if you like the content we're providing, subscribe to the YouTube page, our YouTube page YouTube.com and search retirement Planning Pipeline for weekly video highlights and special content. Retirement planning isn't about chasing the next hot investment. It's about making informed decisions. And that's why we'd like to send you a complimentary copy of our educational guide, the Good, the Bad and the Fine Print Understanding Annuities for Retirement Confidence.
Inside you'll learn how annuities work, the different types available, the potential benefits, the trade offs, and the important contract details you should understand before making any decisions. There's no cost and no obligation, just straightforward information designed to help you become a more informed retirement investor. Call us today at 850-565-1705 or visit us on the web at retirementplanningpipeline.com to request your free copy.
When Today's Economy Squeezes Tomorrow's Retirement Practical Ways to Keep Making Retirement Progress when higher prices, expensive debt and economic uncertainty strain the household budget Many Americans know that they need to save more for retirement. The problem is that tariffs, higher fuel prices and elevated interest rates are creating financial pressures throughout the economy. And that pressure, eventually it reaches household budgets. Businesses facing higher costs may raise prices, slow hiring, reduce employee benefits, or postpone expansion. Consumers then feel the effects through more expensive goods, higher borrowing costs, and greater uncertainty about their employment. In that environment, telling someone to just save more is not especially helpful. The better question is how can you protect your long term retirement progress when today's expenses are demanding more of every paycheck? So David, this is a challenge. I think a lot of people listening can relate to whether they're big time clients of yours or people maybe who don't have as many assets. I think a lot of people can relate and they know they need to keep making progress toward retirement, but at the same time they're dealing with higher everyday expenses, expensive debt and a lot of economic uncertainty. And when that household budget is already being stretched, simply Telling someone you need to save more for retirement doesn't exactly solve the problem. Problem. So when you're working with someone who wants to continue making retirement progress, but feels like today's economy is squeezing every dollar out of their budget, where do you tell them to start? What are some practical ways that they can protect their long term retirement goals without putting their current financial situation under even more pressure?
[00:17:29] Speaker D: Yeah, I, I think people a lot of the times and, and I say this so much, but like the expenses and I say this to my wife more than I do anyone, right? It doesn't matter how much you make, it doesn't matter what you save. It just matters how much you spend. Because spendage expenditure is always going to, it's always going to catch up in the long run to everything that you have going on. What you don't realize is the little expenditures every single month, every single, you know, year are what's going to really add up. I mean, I put it in perspective, right? If I spend an extra, let's say two or three grand on something that year, right? That's a vacation, okay? That's a cruise. That $3,000 was only broken up right into about 250, $255 a month. When you think about that, okay, that's four weeks out of the month.
That's only 60 bucks a week that you need to not spend on something else.
That's like five, six coffees out of Starbucks a week. Imagine in a person's life. And if you, all you listeners out there, I'm telling you it's the most important thing to think about.
We, my, my wife and I, what I do the most of is I create as much as I can off of my back on the expenditure way, okay? So I like to look more into alternative cost.
Okay, well, hey, if my bank account says it has something in it, I know I can spend it.
So what we'll do is, is we'll, you know, after the credit cards are paid off, I'm putting everything in an investment account.
I really think that a lot of people should be doing this.
Even if that investment account is in a money market making 4 to 5%, okay, let's say it's making 3.5 to 4%.
Okay?
It's not in your checking account. So not only is it not is it making more money, right? But you don't have the room to spend it.
So your mind adjusts to what you can spend.
If you wake up in the tomorrow morning and you've got $10,000 in your checking and savings and you're like, whoa, this is the most I've had, you know, in a while, you know, oh, we could. We'll go out some nice dinner. You spend 200 bucks on a nice dinner, maybe 150 bucks. Okay? Do that, you know, once a month, right? That's two grand.
Two grand a year, right. Just one extra dinner. But if you're putting that money away into an investment account, I think one. That's one of the biggest things. Put it somewhere where you can't see it and your wife can't see it, okay? Or your husband, whoever the spender is. And my. My life is definitely my wife. Okay? But the same time, right, I think that people are more into, oh, I gotta. I better spend it now. I won't need it later.
And the odds are, man, people are living longer, you know? You are, right? But you don't need a lot when you live, okay? So, I mean, if I had to say what you could do, I mean, it's definitely put more. Put more money away even if you don't spend it. I mean, I know some clients that put away like 200 bucks a month when they were, you know, working and they didn't even look at it. Now it's like 100 grand, okay?
From back then to now, that 100 grand is going to pay for, you know, that maybe the 10 years from now on to their, you know, their big trip they take every single year.
But the idea is it's always going to have a place and a purpose. If you don't have a place and a purpose, you're going to spend it.
You're not going to get away from inflation. It's just not going to happen. Inflation is going to be there, and it's always been there, okay? You're not going to get away from, you know, companies making money off you.
I mean, everyone's going to make money somewhere. It's just going to happen, right? Whether you go to a grocery store, whether you go to a wholesale food market, whatever you're going to, you know, and we can go into all that. But you guys know, I mean, you know, Sam's club trip is going to save you more money than going to a, you know, a food line, right?
People know that kind of stuff. I think the more important. And that's all boring crap. No one wants to hear about that, right? What you want to start thinking about is this, the concepts.
If you could put yourself in the right place, okay? Put yourself in the right place in the in, in, in the right mind to, you know, put money away, right. In a place where it is like, you know, it's liquid. You're not gonna, just gonna put money away where you can't touch it, you know, I think that's one of the most important things. Right. Even if you're like, I have a buddy that buys 200 of Bitcoin every single month.
[00:21:54] Speaker C: Interesting.
[00:21:55] Speaker D: At least he's doing something with it.
[00:21:57] Speaker E: Right?
[00:21:57] Speaker D: Right.
Hey, David, is this good? I said, look, man, putting 200 bucks away into something like that, I don't care if it's risky or not, you know, your dollar cost averaging, you know, you're buying it a lot of different prices and you're putting away, you know, I mean that it's, it's a great place to be in, in a mindset. It's a concept. Right. So get that money out of your checking and savings. That's my, that's my biggest thing.
[00:22:24] Speaker C: Yeah, I get that. I, I, it, We always hear that, you know, with, with when you said. I'm glad you brought that up because talking about checking and savings, you're not getting much interest from just leaving your money, David.
[00:22:34] Speaker E: Right.
[00:22:35] Speaker C: And checking. And even if it's a savings account, most banks are not offering too much interest. Right. I mean, it's kind of a waste of time, so to speak.
[00:22:44] Speaker E: Right.
[00:22:45] Speaker C: Just leaving.
[00:22:45] Speaker D: I mean.
Yeah. And, and again, people, people will ask these questions, but Jim, no one's gonna help themselves, man, until, you know, you've gotta discipline in concepts, man. Discipline and concepts, you know, and there's a, there's a big problem right now in the United States with that. Just because like spending money, I mean, I'm the same way. So.
You know, my dad is the opposite, you know, I mean, that guy. But he's different though. I mean, he'll stash money in his savings account and that thing will be on an all time high. I'm. What are you doing? Oh, it's just there, you know, it's just there. I'm like, dad, your car's brand new. You know, you don't have any hurricanes in mid Maryland, so I mean, come on, man, you're not gonna need anything crazy expensive, you know? Well, it's just a safety net. I'm like, dad, you haven't spent more than a thousand dollars on something your entire life. You know what I mean?
Yeah. Put it away. Oh, oh, good, good.
Guess you're right. You know, I'm like. But again, it's not everyone's gonna be Different, Jim, we have to realize that too, man. I mean, you know, you're gonna be different than your parents, too. So a lot of my clients, you know, they tell me their problems and, and I give them some recommendations, but it's really depending on them, right? They have to know what they want. They have to have their own goals. Everyone has their own goals that they want to reach and they don't want to reach. So.
But that's the last thing that I really like talking about is I like clients to spend money when they want to. I think the older generation, too, I think it's a less of a problem with the older generation. I think people that are retiring now know what that, that time of essence is, know what the money's worth because they, you know, that's what they did to, to get here. Right. You know, but now my generation and, and 40 year old and younger, we're gonna have some problems.
I mean, I can already see it, you know, but that's just because people aren't even able to save because, you know, the jobs aren't paying enough to even live a comfortable lifestyle.
And I think a lot of that's to do with, you know, you know, other economical issues. But we're going to have downturns and upturns, you know, but save yourself and put yourself in the right position to do those things.
[00:25:05] Speaker C: So again, saving for retirement in today's economy may genuinely be harder, and a good financial plan should acknowledge that reality. The answer is not perfection. It's finding a contribution you can sustain, capturing available employer dollars, controlling expensive debt, and making deliberate adjustments as conditions change. A smaller step forward is still better than just abandoning the journey altogether. So pick up the phone, give us a call today at 850-565-1705, or visit us on the web at retirement planningpipeline.com Go ahead, do it right now. Retirement planningpipeline.com 850-565-1705 Schedule that free no obligation consultation. This is the retirement planning pipeline.
[00:25:47] Speaker B: Your retirement questions deserve real answers. Call 850-565-1705 to schedule your free no obligation consultation. Today.
[00:26:05] Speaker C: There's a moment in retirement that nobody really talks about. The moment when something goes wrong and you realize the money coming in every month is no longer coming from a paycheck. I'm Jim Tarabokia for the Retirement Radio Network, powered by Amerilife. Picture a Tuesday morning in retirement. The coffee is brewing. The phone is sitting on the kitchen table. Your spouse is playing the sounds of top hits from three or four decades ago echoing off the walls. And there's nowhere you have to be. No commute, no boss waiting for you to respond to an email. The morning belongs to you. And then you hear a drip. You look up and there's water coming through the ceiling. The roof needs repairs. Nothing catastrophic, but repairs add up. And it can mean taking money from an investment account you hadn't planned on touching and can leave you wondering whether the next unexpected bill is right around the corner. Financial Advisor and Retirement Radio Networks Matt McClure explains how retirement planning isn't always about predicting every expense that will come your way. Right?
[00:27:03] Speaker A: I mean, you're never going to anticipate every expense that retirement may bring. But a strong plan is going to give you reliable income reserves that you can access and flexibility to make adjustments when life inevitably changes.
[00:27:18] Speaker C: This is one of the realities of retirement that doesn't always seem to make it into the dream. You spend years planning for the predictable of when will I retire? How much money will I receive from Social Security? How much will I need each month? Answering these questions with precision only to be sideswiped by one of life's unexpected occurrences. And that's where having a well organized emergency fund proves its worth. During your working years, that money might protect you if the paycheck suddenly disappears. But in retirement, the paycheck has already disappeared. So maybe the better question isn't how big should my emergency fund be? Maybe it's how prepared am I for the unexpected? Because life doesn't happen in a vacuum, and neither does your retirement. The goal of retirement isn't simply to have enough money for the life you planned. It's to have enough capital behind the resilience for the life you didn't. For the Retirement Radio Network powered by Amerilife, I'm Jim Tarabokia.
[00:28:14] Speaker B: Planning for retirement doesn't have to be overwhelming. Get expert insights, tools and personalized strategies to secure your Future. Visit Retirement PlanningPipeline.com today. Your retirement, your plan, your peace of mind.
[00:28:31] Speaker C: Is the retirement planning pipe bite blind? If you missed any part of today's program or want to catch up and even listen to previous episodes, go ahead and subscribe and listen to the show in podcast form on Apple, Spotify or of course, whichever platform you enjoy your podcast. All right, hey, stay with us because coming up, the retirement savings mistake near nearly 90% of retirees make. We'll get to that in just a little bit. But right now, as we do each and every week, it's time to unveil this week's financial wisdom quote of the week.
[00:28:59] Speaker B: And now for some financial wisdom. It's time for the quote of the week.
[00:29:08] Speaker C: And our financial wisdom quote of the week comes to us from legendary football coach Nick Saban. And Nick says, quote, success doesn't come from pie in the sky thinking. It's a result of consciously doing something every day that will add to your overall experience.
Legendary football coach Nick Saban providing us with this week's financial wisdom quote of the week. Very appropriate. We've entered fall and we are now in pretty much the trenches of both the college and the NFL season. And a quick reminder, of course, be sure to visit us on the web@retirement planningpipeline.com Leave us your questions. We'd love to answer them right here on the air. Again, any questions that you may have, visit retirement planningpipeline.com and leave your message.
[00:29:52] Speaker D: Come on down.
[00:29:57] Speaker B: As we test your financial knowledge in Right or wrong.
[00:30:07] Speaker C: All right, it is time for, as we do each and every week, to test your financial knowledge with a game called Right or Wrong. The rules are simple. I asked David a series of questions and statements, and he will tell me if my statement or question is, is right or wrong. And if you're listening on the radio podcast side, watching on YouTube, feel free to play along. All right, here we go with today's right or wrong. David, our first statement of the day, right or wrong. Once you retire, it's usually best to leave your IRA and 401k untouched until required minimum distributions begin.
[00:30:41] Speaker D: Absolutely wrong. Jim. I think everyone, this is a, this is a big topic. I think someone called in about this, you know, because everyone wants to say, if I don't need it, I just won't touch it. And it's just the worst thing to do. The government kind of wants you to do that because then they make you take money out and you have no, you have no, you know, control over, you know, down the road, right where the money is going to be taxed at. Okay. And why I say that is I have clients that are worth 2, 3 million dollars and they're taking out 80 to 100k, but they're in the know, the 24, 32% bracket and they can't get out of it.
Make sure you're efficiently taking money out and if you don't need it, reinvest it. But the IRA is meant for retirement. It's an individual retirement account. Okay? So when you retire, it's not meant for you to keep it in there. The government penalizes you and Also, if it's passed down to heirs, you can see a lot of problems with the 10 year rule, the inheritance rule, with the Secure Act. There's a lot of things that can happen and be taxed. You know, you could pay 10, 12% higher in taxes. Let's say it's a million bucks. I mean, you're paying extra hundred grand to the irs. You want to do that? Okay, so take it out. Learn how to learn how to use it efficiently now with your brackets now, right? That's what I always sit down with the client. Look, we got this gap, you know, your AGI is here, we can adjust it there. We can bring this out and make sure that the rest of it can be taken out later. And also, you know, obviously taking money out when you're retiring, maybe 62 to 65, you're now making it easier on yourself when you're RMD age, because the RMD's percentages, right. It might be a lesser amount because you're taking money out now if you don't need it, we'll reinvest it. Great. We'll put it somewhere else, you know. But learn how to definitely start to distribute.
[00:32:25] Speaker C: All right, second statement, right or wrong, most people who become 401k millionaires get there by making a few especially successful investment choices.
[00:32:36] Speaker D: This is false. You know, 401ks are, are not like that at all. So if you guys know what 401ks are, they're basically target date funds or mutual funds inside of those 401ks and you know, all they're doing is just riding the market. You know, they're riding an indice, you know, or a special group of funds that certain that someone has and they're diversified in a certain aspect, but their volatility is not like a normal stock is. So it will not create the wealth that fast that anyone's ever seen. A lot of those 401ks millionaires are made from just consistently investing in the value over time. Right. It's not much about picking the right investment. Okay. And you know, those 401ks have limited options and they're pretty dang easy.
Now having your stock somewhere else and rolling over 401ks and IRAs, then we can talk about having different investments to create more volatile and more volatile, you know, securities with maybe a higher room for growth. But not a 401k. No.
[00:33:41] Speaker C: Okay. Right or wrong, if higher living costs make your current retirement contribution unaffordable, temporarily contributing less can actually be better than stopping completely.
[00:33:55] Speaker D: This is, this is Right.
Smaller contributions can definitely preserve a savings habit. It's pretty tough, though, because you're still able to actually save.
Right. But you also want to make sure
[00:34:08] Speaker C: that
[00:34:12] Speaker D: you're comfortably living. Right.
What I also think that's important is to make sure that what bracket you're into, if you're in a higher bracket and you might stop contributing 100 bucks a month, but technically that's only, you know, with you have state taxes and everything else and you can only technically 75 to 80 bucks, right. So you're still giving money to taxes, too. So I think contributing sometimes helps if you're in a higher bracket and you know, it means less the cost of the dollar, but same same way, Jim.
[00:34:42] Speaker C: Okay, that makes sense. And finally, right or wrong, taking a hardship withdrawal from your 401k only creates a temporary setback because you can repay the money later.
[00:34:53] Speaker D: This is wrong, okay. When you would draw money out of there, in general, you can't, you can't put it back.
You know, that's, that's the tough part. You know, loans are different, okay? But withdrawals, you, there's nothing you can do.
You know, it's definitely gonna hurt quite a bit.
Definitely gonna hurt with, with, with taxes in your, especially being tax deferred. If there's anything that I can say to anybody out there, you want to avoid taking a big withdrawal out of a 401k or IRA, you want to do a consistently yearly basis, right? Maybe even monthly basis.
You do not want to do it all lump sum at one time. And if you do, it's going to hurt you. And I'm telling you, and if you have to, it's different.
If you have to, it's the last source you have, do it. But it's the last thing I would ever do.
Okay?
[00:35:51] Speaker C: And we will play more Right or Wrong next week. But in the meantime, if you have any questions or statements that you'd like us to answer on a future right or wrong statement, write us at retirementplanningpipeline.com and we'll answer them right here on the air in a future segment. Coming up next, the retirement savings mistake that nearly 90% of retirees make. You don't want to miss that. It's on the other side. But as a reminder, if you have any questions, pick up the phone, give us a call at 850-565-1705 or visit us on the web at retirement planningpipeline.com to schedule that free, no obligation consultation. We'll break here. This is the Retirement Planning Pipeline. We'll be right back.
[00:36:30] Speaker B: Your retirement questions deserve real answers. Call 850-565-1705 to schedule your free no obligation consultation today.
Missed Part of today's show the Retirement Planning Pipeline is available wherever you get your podcasts and@retirement planningpipeline.com welcome back inside
[00:36:59] Speaker C: the Retirement Planning Pipeline, the show that delivers expert insights, actionable advice, and real world financial strategies to help you retire confidently and comfortably. I'm your host Jim Tarabokia alongside retirement planning specialist David Pipes. Thank you for making our show, as always, a part of your weekend on whichever platform of your choosing.
Education first, decision second. That's what retirement planning should be all about. There's a lot of information and misinformation about annuities today, and that's why we've put together a free educational guide called the Good, the Bad and the Fine Print Understanding Annuities for Retirement Confidence. This booklet explains the different types of annuities, how they may fit into a retirement income strategy, and just as importantly, the limitations, trade offs, and contract details you should know before making any decisions. We believe informed people make better financial decisions. If you'd like your complimentary copy, simply give us a call at 850-565-1705 or visit us on the web at retirementplanningpipeline.com there's no cost, no obligation, and it's yours free for listening to the Retirement Planning Pipeline.
All right, let's move on with our final segment of today's show, the Retirement savings mistake nearly 90% of retirees make Saving the money is only half the job. You also need a plan for spending that money. For decades, retirement savers are taught one basic lesson, put money away and try not to touch it. But after retirement arrives, many people continue treating their savings as if it's off limits. New Vanguard Research found that only 8% of surveyed retirees with less than $1 million in retirement savings regularly use that money for everyday expenses. The others either make occasional withdrawals for specific needs or wait until required minimum distributions force them to take money out. And that may sound financially responsible, but excessive caution can also keep retirees from enjoying the money that they've spent a lifetime accumulating. So David, this is such an interesting shift in the retirement conversation because for 30 or 40 years we've been telling people the same thing. Save your money. Invest it, don't touch it. Let it grow. But eventually you reach retirement and the purpose of that money changes. You're no longer just trying to accumulate wealth. You're trying to use that wealth to support your retirement lifestyle. And when you see retirees being extremely cautious about spending their retirement savings, how do help them make a transition from a don't touch the money mindset to actually using their savings to fund the retirement that they've worked so hard to build?
[00:39:31] Speaker D: This is a tough, this is really, really tough. And, and I, I love that you know, that we're talking about this because there's, there's got to be a motive as a financial advisor when it comes into helping a client spend their money in retirement. Because I feel like everyone, everyone that retires has, has that problem, right? I mean, they have a big issue of wondering how much they can spend, when to spend it, what to do, you know, how to spend, when to take it out. I mean, the, all the questions come up, but I think these people have been brainwashed their entire lives of just putting money away. And, and, you know, now they've got so much of it to where they're able to kind of pick what they want to do, but they're not spending it on what they want to do. It's, it's a weird term. It's a weird thing to understand, but I'm seeing these people with millions of dollars not do the things that you think they want to do. I mean, it's just ridiculous because they don't, they're. All their lives they've saved, Jim, and they don't, they don't want to spend it because they're just so used to not spending.
All their mind says is save, save, save, save.
And they have to switch that mindset up. I think one of the biggest things that I do for clients that really helps clarify and it gives them a clear, you know, a clear mindset on when they can actually split those funds is taking care of the income side and splitting it from the growth. And I say that every single episode that you, that you're going to hear me on, but I'm really, really. And it's the solution to almost every problem in retirement because when you're able to take care of that income side and, and it, and it keeps the client secure. It keeps the client, let's just say, you know, at ease. It makes it simple for them to retire. It makes them simple to know that they can do the things they want to do, and it's going into their checking account and their savings account and they know they can spend it. And now they still have that growth side where the income side is taken care of. They know that Money's coming in for the rest of their life.
They don't have a problem. Right.
I think that's something that everyone doesn't talk about. And when that happens, the client becomes more clear about their retirement. They start to think about the things they want to do, where they want to travel, what they want to spend it on.
Because now they have a fixed amount in their mindset. They know they have. And they've got more money to touch if they want it. But the income's coming in. They don't have to worry about is my money going to ever last or is it going to do this, or I can see my money dwindle down.
That's already a plan. The plan's already there. Right. And I think that everyone out there, they don't. All the advisors, they're not talking about how to separate the income from the growth. They're just talking about how to keep it in the same portfolio. Portfolio. And dwindle down that money. And it makes clients weary, it makes clients not look forward to retirement or not want to spend too much because they don't know they're getting told a set amount from a client or from a. From a financial advisor that they can spend. And it's making them angry. I don't blame them. I mean, if I got told when I retired how much I. I can spend or else I'm done for, I'd be like, I'll do what I want to do.
[00:42:51] Speaker C: Right.
[00:42:51] Speaker D: Right.
Ultimately, it's the client's choice, Jim. And, and sadly, in this world, you don't see for you, I mean, a lot of listeners out there can. Can tell you, I mean, you know, and I'm probably gonna get some calls on this. They're gonna say, david, you're absolutely right. You know, I mean, my financial advisor or my Corporation or my 401k or whoever I've talked to is telling me to take out this much money or be careful with this or not spend it here, to not spend it there. And it's like, that's not what the goal is. The goal is to set up income to make sure that every single goal of what that client wants is met first. Then the rest is growth. Right. But that income goal is. Is that's what they've worked for their entire lives, Jim.
[00:43:33] Speaker C: Right.
[00:43:34] Speaker D: This is what we need to protect. This is what we need to make for the client so that they can feel like their entire retirement is what they built in their life, not what I want them to build or what I want them to do. It's what the client wants first, and then the plan comes around it. Once you have the income set, gross. Great. We can, we can definitely worry about that after.
[00:43:54] Speaker C: Okay. You know, you mentioned something in there, though, and in this segment, I want to tie everything together. It really sounds like to me that there's a mindset shift that needs to happen with retirees, right? If they really want to use their money properly in retirement, there has to be a mindset shift from saving, saving, saving, saving, to being willing to live that lifestyle. So when you meet with clients, it's hard because you. It's not. It's not math. And I know you like math, and I know that you use math to help people with their retirement planning.
You're looking at it from a psychological standpoint. Now, when you meet with people psychologically, how do you change that mindset of, well, we saved all of our lives, but now we need to feel comfortable mentally to be able to spend that money in retirement to live the lifestyle that we want.
[00:44:43] Speaker D: I think giving an income stream, I think that that starts with everything, right? And if you want to start small, start small.
But setting up a certain amount of income stream to see how they're feeling, right?
If they don't spend it, Everybody has qualified AD. Everyone's going to have an IRA or 401k, 43b, tsp, whatever it is. If you can start a small distribution from there into a and make sure it's the income fund, make sure it's coming in for the rest of their life. And you can make sure that now they're seeing what it's like to spend, they'll get a feeling, right? Start small. I mean, you don't start big. Client has a million bucks, Maybe start with $2,000 a month, right? Give them something extra that they can spend. And when they're starting to feel that they, they'll start seeing some of the expenditures that they want.
But I think everyone has to, you know, kind of weir their own way into it, you know, you can't make a client spend money.
This is not gonna happen.
Trust me, I've tried. You know, because a lot of my clients have, you know, all these aspirations to do crazy things, and they have all this money, they're just going to get to the kids. I'm like, why aren't you guys. Well, I'm trying. I'm like, no, you're not. You know, you talked to me about wanting to go to Iceland. Well, you haven't booked a trip yet. You know, you taught Me to me about wanting to go Italy. You haven't booked a trip yet? Well, we've got this. That. No, you know, so sometimes it's about not making excuses for them because a lot of advisors do that. They'll go, oh, well, yeah, you're right. You don't need any money. You know, we'll just keep investing it.
But is that really what's going to make your client happy?
[00:46:16] Speaker C: Right?
[00:46:16] Speaker D: You know, I mean, you want happy clients.
[00:46:18] Speaker C: You.
[00:46:18] Speaker D: I mean, that's a relationship thing, right? I mean, I want to see every client of mine with a big smile on their face when they. When my name pops up. I want them to say, man, that guy helped me live the best retirement I could ever ask for. Not, oh, well, he's done great with my money for, you know, 10 years now. I don't want to be that guy. I want to be the guy that goes, man, dude, I couldn't have lived this retirement if it wasn't for him, you know. Holy crap. My. Because no one talks about how much you make. Everyone talks about how much you spend.
[00:46:49] Speaker C: Right?
[00:46:49] Speaker D: Right. Facebook post of you going out or, you know, big boat purchase or a big car purchase or, you know, going to, you know, skiing in the middle of February, a beautiful mountain, or all these expenditures of what you see, you don't see the count. That's growth in the background. Right.
So generating that income for a client is that. That turns the, you know, the client's face into a beautiful smile. And that's, I think, the. One of the best things about this. This job and this career that, you know, this business that I set up for myself and my clients that I love doing is making sure that they're. They're happy with spending. If they don't spend it, we can always reinvest the gym. But I tell you what, no client has been mad about more income in their pocket, so.
[00:47:33] Speaker C: Oh, wow. Well, see, another. Another point, too, I want to make really quick here as we wrap up the show. Social media can be very deceiving. You don't see what's going on behind the scenes. You only see that pretty resort where people are. Anyway. Anyway, you. So you did not say for retirement to wrap up today's show to simply just to get to the finish line with the largest possible account balance. You save that money to help support the life you want after work. A thoughtful retirement income plan can give you permission to enjoy your savings today without losing sight of the security that you may need tomorrow. Give us a call. 850-565-1705 set up that free no Obligation Consultation or you can visit us again on the
[email protected] get started today and schedule that free no Obligation consultation. And if you missed any part of today's show, don't forget to subscribe to the program in podcast form on Apple, Spotify or wherever you get your podcasts. And be sure to subscribe to the show on YouTube. Search Retirement Planning Pipeline on YouTube for clips and special content as well. Thanks for listening. This is the Retirement Planning Pipeline. Have a great week everybody.
[00:48:40] Speaker B: Thanks for listening to this week's episode of the Retirement Planning Pipeline, the show that helps you take control of your financial future. Whether you are five to 10 years from retirement or just getting started, Retirement Planning specialist David Pipes has the strategies, tools and experience to help you make the most of your nest egg. Take control of your financial future and get started today by visiting retirementplanningpipeline.com and if you missed any part of today's show or want to catch up on past episodes, be sure to subscribe to the Retirement Planning Pipeline wherever you get your podcasts.
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[00:51:17] Speaker A: Everything is more expensive these days, it seems like, and that includes back to school supplies. Yes, it is that time of year. You know, whether the kids are just now going back to school or they've been back for a couple of weeks. There are a lot of expenses for parents and grandparents as the students do go back a lot to keep up with here. Joining me now to talk more about that is Laura Manfred, who is consumer credit card executive at bank of America. Laura, thank you so much for being here. Really appreciate your time.
[00:51:47] Speaker E: No, thank you for having me.
[00:51:49] Speaker A: Well, yeah, I mean, you know, we've seen it with everything from gas prices to grocery prices. I guess, you know, it's back to school supplies are not exempt from this inflation. All these cost increases that we've been seeing for a while now.
What are some ways that people are sort of feeling that pain and what are some good, good strategies to navigate through it as the kids do? Go back to class.
[00:52:13] Speaker E: Yeah, there's a few things I would say. I'd say start by auditing your inventory you have at home. You probably have a lot of leftover notebooks, pens and pencils from the previous school year that you don't even remember you have. And then from there create a list of necessities. That way you're not tempted to make a lot of impulse purchases when get to the store. And then when you're at the store, be aware of the credit card that you're using. Make sure you're using one that aligns to how you're spending. So as an example, the bank of America customized Cash rewards card gives cardholders 3% cash back in a category of their choice and that includes online shopping. So that's a great back to school tool to earn more. And right now, new cardholders can earn a 6% cash back bonus in the category of their choice for the first year. So think about whether you want to earn cash back or points. All of that can be used to help offset costs throughout the school year. And then lastly, I'd say layer your discounts, use digital coupons, pair that with store offerings, ask about student discounts. They're on tech apparel. You can also sign up for verification sites like Unidays or Student Beans and unlock even more savings. And I'd also say look at whether you want to go to secondhand or refurbished options. Not every item has to be brand new to get great quality. And there are a lot of verified refurbishment programs that offer course materials, technology, apparel, all at a fraction of retail prices. So be aware of how you're making those purchases so you can make smart decisions.
[00:53:32] Speaker A: Yeah, absolutely. I'm all about refurbishment, especially technology. I feel like there's a lot of just, just maybe not the most recent generation technology, but maybe one generation prior that's still great that, you know, it might be refurbished out there. Just make sure it's a, it's quality work that's been done, of course, and, and kind of, you know, cross your T's and dot your I's there.
And that's especially important. You know, I feel like for teens and young adults, maybe as they're going to high school or even to college now, how are, you know, there are some ways, I'm sure to learn that there's a lot of, I guess, social interaction, for lack of a better term on my part that goes on where they want to be, you know, accepted in their social circles and all of those things. But how can parents, and maybe grandparents, other guardians out there sort of set limits and educate as that process takes place?
[00:54:28] Speaker E: Yeah, I think, you know, as teens start earning their own income, whether it's from a part time job or even their allowance, what you can do is teach them to divide it into three buckets. 50% for their needs, 30% for their wants and 20% for savings. And now that 30% for their wants can be their official fund budget and how they can think about how they want to spend that. And so it's a great way for them to start budgeting and thinking about the activities they want to do, how much is it going to cost and start setting spending limits for themselves so they can start to think about keeping their finances in check without sacrificing their social life. And what they can do is think about what are those trade offs? Do I want to go to the friend's birthday party or do I want to go to the concert and start to prioritize those decisions. The last thing I'd say is talk openly about what we're going to call loud budgeting. And that's encouraging teens to just be upfront with their friends about what they can and can't afford. Rather than trying to overspend to just keep up with everybody, maybe suggest a cheaper hangout spot. Be honest about, I can't go to this outing because I don't have the money right now. They're going to get more understanding from their friends than they expect. And many of their friends might be feeling the same way. So just feeling comfortable about openly talking about these things becomes important.
[00:55:36] Speaker A: Yeah, it does not grow on trees, as the old saying goes. And making sure that the kids understand that, I think is great. And, you know, looking back on, I think, my own sort of financial journey, especially as a teen, when I got my first credit card, I just sort of signed up because I got an offer I believe in the mail, and I was like, oh, great, I'm going on vacation and I'm just gonna spend this money like it's nothing.
But there are ways obviously to do it better than I did it as a teen.
And how do you do that as a parent to sort of teach kids to start that product like building credit responsibly. You talked about the budgeting piece and obviously, you know, building credit is part of that, but it's also part of their financial health for the future.
[00:56:24] Speaker E: Yeah, it is. And I think teaching what we're going to call the golden rules of credit at an early point in their life is important. So make sure your teen understands the fundamentals of credit, which are pay the bill in full and on time every month, keep your balance well below the credit limit, and you got to treat that credit card just like a debit card. You only spend what you have in the bank. You know, nowadays with credit, debit, online purchases, making sure they understand that all of those different forms are all tied to real hard earned money, and thinking about that becomes important. The other thing you can do is start early by having them build their credit, but under your supervision. So what you could do is you can add your teen to your existing credit card account as an authorized user. And so what that does is it's a nice, safe way to help them start to build their credit score, they're going to start to establish a credit history before they even apply for their own credit card. And now when it comes time for them to apply for their first credit card, being there to help them figure out what's the right card that matches how they're spending.
Don't just get one that has a lot of attractive perks that you're not going to even use. It might just be a no fee. Card that offers rewards on everyday expenses like gas, dining, groceries. And that might be a better fit for a teen or young adult than a premium travel card at a high annual fee. So having these conversations early and helping them understand how credit works is a critical first step.
[00:57:44] Speaker A: Yeah, and I think too that, you know, understanding that the credit card is not an emergency fund is an important thing as well. How do people, just as this last question as we wrap up here, how do folks start building that emergency fund or some sort of financial safety net for those unexpected things that inevitably will happen?
[00:58:05] Speaker E: Yeah, I mean, it's always good to just set goals for yourself, make them small, make them achievable so that you're not deterred by it. We prepare for bad weather. We got to prepare for financial surprises that could be house repair, car repair, medical bill, and even for kids teaching them how to think about that you need to sometimes replace that lost toy. You got to start savings. And a great way, a nice rule of thumb to do that is work toward the cushion of three to six months worth of living expenses and some ways to do that. And even for kids, as they grow into teens or young adults, getting them in the habit of just automatic saving tools, things like set up automatic transfers from your checking account directly into a savings or what we're going to call your dedicated emergency fund. It can be $5, it can be $10. It feels small, but it adds up over time. And it's more about getting into the habit of building those savings. At bank of America, we have the Keep the Change program, which as an example, it automatically rounds up your debit card purchases to the nearest dollar and it transfers that change from your checking, your savings. So it's just about getting in the habit of just savings and making it automatic.
The last thing I'd say is find the hidden money.
Take a look at where you're spending. A lot of it is on monthly subscriptions or memberships that you're not even using. Look at the streaming platforms. Gym fees. Cancel the ones you're not using. You've just now found free cash. You haven't sacrificed anything in your lifestyle because you weren't using it anyway. And now those funds can go into an emergency fund. So it's all about starting small, setting those targets for yourself and slowly building that up.
[00:59:35] Speaker A: That's great. And one last thing here, Laura, anywhere that our listeners and viewers can go for more information.
[00:59:41] Speaker E: Yes, they can. Visit bettermoneyhabits.com for more savings advice.
[00:59:47] Speaker A: Perfection. Bettermoneyhabits.com will send folks in that direction. Laura Monfered is a consumer credit card executive at bank of America. Laura, thank you so much. Really appreciate the tips and appreciate your time very much.
[00:59:58] Speaker E: Thank you for having me.
