How to Eliminate Fees and Keep More of Your Hard-Earned Money

7.21.23: Audio automatically transcribed by Sonix

7.21.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
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.

Producer:
Welcome to Retire 360 with your host, Dwight Mejan. Dwight is a licensed fiduciary and financial advisor who always places your needs first. Dwight works hard each day to educate Americans like you on how to reach the financial freedom they've worked so hard for. And he can help you, too. So now let's start the show. Here's Dwight.

Producer:
All right, well, my name is Dwight Mejan, and I want to welcome you back. You've reached your destination for financial wisdom. No need to go any further, so don't touch that dial as we like to say. This is a show about you, about your money, your retirement, your future, and your freedom. As I like to say, money never sleeps. And if you tell me a person who says money isn't important, I'll show you a person that doesn't have any money. But hey, we are going to take you the next hour or so on a little journey. We've got a great show planned. I actually have just Sam Davis, my faithful producer here alongside me. Not just Sam. It is Sam. We don't have Mitchell with us today. He's out playing somewhere on the on the beach, but heading back tomorrow. So hope he's having a good time. Again, my name is Dwight Mejan. I'm your host of the show. This is brought to you by 360 Capital Management. We're going to talk today on the show about how to eliminate costs and concerns from your retirement plan. We're going to talk about steps that you can take today to help you win with your money, which is always my objective with you, our listeners.

Dwight Mejan:
And I want to welcome our first time listeners to the show. If you just found us, we're glad that you're here. If you want to find out a little bit more about us and check out more of our shows, you can go anywhere where you download your podcasts and you can just look up, retire 360. You'll find us there. We're on Facebook, we're on Instagram, we're also on YouTube. We have a YouTube channel. So you can go there and go to retire 360 show and you can go to our website. We are at Retire360Show.com and folks are listening to us out in the western part of the state. You can reach us at (828) 278-7814. And if you're in the central part of the Carolina around Moore County, we are (910) 235-0812. But am glad that you're here. Hey, don't hesitate to contact us when you have questions on anything, anything that we're talking about on the show today. Anything that you are perplexed by or maybe you're facing some decisions with your own retirement and you don't know where to go. If you're listening to this show, there's no cost. There's no obligation. We don't break legs, bend kneecaps here to to do business. We want to be your guide and we want to give you the fiduciary advice that we're obligated and that we love to provide.

Dwight Mejan:
Here we are independent fiduciary II's don't always mention that on the show, but I want everybody to know that for our listeners this week, we are still offering think for a limited time here left a little report we put these out for you, our listeners and we have a report that if you reach out to us, one of those numbers I gave you, it's basically a report that we put together on bond replacement and basically to help you potentially get some more yield out of that bond side of your portfolio, that fixed income. So get in touch with us, learn how we can delete fees on as much as 50% or more of your portfolio today. It's all part of our fee efficient and market efficient strategy to help you, our listeners and our clients to win with your money. So got a great show planned here. I'm actually going to have Sam get to the quote of the week here in a minute. That's normally something Mitchell kicks us off with, but I'm going to have Sam do that today. I'm going to share some good news with you. We haven't had good news in a little while. It's been a good, good news overall in the market. But some good news I'm going to share with you for the market update today. I've got a real interesting story that we'll touch on briefly here about a state and will of somebody that's very famous that you'll recognize.

Dwight Mejan:
And we're going to address whether or not you're paying too much in fees. And we can help you find that out. So we're going to talk about that. And then we're going to talk about how strong of an income plan that you have set up for your portfolio. You know, we say a lot on this show. It's not just about saving a large sum of money for retirement and hoping for the best. It's how are you going to begin to harvest that money for income purposes? Because in retirement, it all becomes it's all important, but your income plan is critical to your lifestyle. So we're going to talk about how strong your income plan is if you've been listening to the show because you're interested in improving your financial situation in retirement, let us help you with some one on one attention. Just give us a call. Go to that website, Retire360Show.com. We've got a little link on there. You can book a complimentary consultation with us. And there's never a cost or no obligation for that. So I'm going to bring you on here. Maybe you can share with our listeners the financial wisdom, the quote of the week. But first off, how you been, Sam? It's been a while. We you were not with us last week. You've been doing some traveling we talked about before the show today.

Producer:
Yeah, that's right. How I hope everybody is doing well. Thank you to all of our listeners across the state of North Carolina. Hopefully your summer is going well. I know down here in Atlanta, it is hot, it is humid, it is muggy out there. But get out there when you can and enjoy the sunshine for sure. And yes, I have been doing some traveling, a little bit of business, a little bit of pleasure. I've got traveling pretty much all the way from now until October this year. And then I'm going to settle in at home for the holiday season here in 2023. But it is that time of the week. It is time for the quote of the week.

Producer:
And now wholesome financial wisdom. It's time for the Quote of the Week.

Producer:
And this one comes to us from Albert Einstein, the genius himself. And Albert Einstein once said, The more I learn, the more I realize I don't know.

Dwight Mejan:
Carl Albert. I think he ties in with John Wooden with what you learn after you know it. All that counts, right? Think Einstein was also famous, Sam, for talking about the eighth wonder of the world. You know what that was, right? Yeah.

Producer:
Compound interest.

Dwight Mejan:
Compound interest? Yeah. He also said about that that he who understands it earns it, and he who doesn't pays for it. A little play on words there, but very, very true. You know, I shared, I think on last week's show just something I had come across. Sam was, you know, for some of the younger listeners who are tuning in, if you started saving, maybe you're listening. We can't encourage enough at 25. If you just put $100 a month aside for your future, 100 bucks a month and you do that all the way out until age 65 in a mutual fund or an ETF and just let that money sit and grow. You'll have your million dollars approximately in there over that 40 year period. But if you defer that for one year, just one year, you shrink that bucket of money, you just over $300,000. So that ten year period, 25% of your ability to save for 40 years, cutting that out costs you a huge difference, about $700,000. And that's assuming you don't add more to it. So definitely a very important concept is understanding, compounding and understanding time. You're a young guy, Sam, so hopefully you're doing that. You're doing you're heading the right direction.

Producer:
Yeah, I hope so. Compound interest is an amazing thing. It can work for you or against you like like Albert was saying. And, you know, whether you're young or old, don't underestimate what a little bit of time can do when combined with compound interest. So if you're kind of in that pre-retiree stage, consider those catch up contributions because it could make a big, big difference. People are living longer, Dwight. I mean, people are having four decades of retirement and so you've still got a lot more time than you think.

Producer:
Absolutely. Well, and you know, it brings up another point, Sam, is that there's a lot of our listeners right now that just have more money on the sidelines in cash than they expected. And I think we've got some points. We're going to talk about that today. But, you know, it's interesting. You know, we manage money here at our office for a lot of clients. And, you know, it's interesting. I've been looking at online money market accounts, not just at banks, because you can get sometimes some better rates through brokerage accounts. So just be careful if you're if you have a brokerage account, let's say it's being managed by a firm like Edward Jones, Merrill Lynch, Wells Fargo, whoever you use, make sure that money is not just sitting in cash and cash account doing very little. Your advisor should be calling you and watching out for that. If they're not, you know, just put some clients today in a 5.08% money market account inside a brokerage account. So while they're waiting and while we're waiting to figure out what to do or maybe when to re-enter the market, at least that money could be doing something better than where it was, you know, even a year ago when rates were considerably lower.

Producer:
Yeah, absolutely. And, you know, I think one thing that people can often overlook, Dwight, is inflation. And if you're just sitting there in cash, you know, you're yes, you're maintaining that account value, but inflation is eroding away how much your dollar is worth. I mean it just think back to what, you know, a lunch would cost you ten years ago or 20 years ago. You know, it's it's a lot less than it is today. So, you know, inflation is something that appears it's here to stay, although some are saying it's cooling off. We'll get to a little bit of that. But, you know, I've heard you say once before, Dwight, that the bank could be the safest place to lose money right now. So just be careful.

Dwight Mejan:
Yeah, absolutely. That is very good wisdom there for our listeners, Sam. But with that, we're going to kind of tune here or shift gears to look at the market update and wanted to share some good news. We do have some good news in the market, Sam, and our listeners. Number one, and this is for the first time in two years, wages are finally rising faster than prices. Americans growing paychecks surpassed inflation for the first time in two years, providing some financial relief to workers. But it's complicated the Federal Reserve's efforts to tame price increases. So if that trend continues, it bodes well for the US economy to avoid a deeper recession. And to our listeners, it really you know, it appears we're getting ever so close, although we don't want to call this too early, we could be heading possibly for that soft landing. We still have an important week here of, you know, corporate profits that are being released. We're going to get a little update about that. But it sure seems like we could be coming into that soft landing that I know a lot of us are hoping for, because last year was certainly a rough year for a lot of people who were invested heavier in the market. But. Those wages rising faster than prices. You know, you were just talking, Sam, about inflation. That's good news for all of us. And we hope to continue to see inflation going down. But we've still got a little bit more road to to get past to determine whether that's going to be real or not. So you got anything, Sam, you want to add on that comment?

Producer:
Yeah, Well, I think that the wage numbers are positive. The job numbers as well overall have been positive. We could be headed towards a soft landing. One other thing that's happening is that inflation is slowing in part due to a recovering supply chain. So interest rates definitely have something to do with it. But the supply chain is another part of the picture. I mean, it's basic economics, supply and demand. If the supply is not there, then prices must go up. So in the early days of the pandemic, it you know, how how quick do we remember? But we were all stuck at home. Everybody was ordering things. The packages, the boxes were piling up outside all of our doors. Meanwhile, truck drivers, along with both port and warehouse workers, left the workforce for Covid related reasons. I mean, just, you know, 2 or 3 years ago, we were all just still locked up in our homes. So that led to a severe product shortage. Price spikes, shipping containers were piling up in the ports. Remember, that was still happening in 2021. But many of those pandemic era supply chain snags have been eliminated. So the supply goes back up. It kind of is in line with demand. And there you go. The prices have started to stabilize.

Producer:
Another bright spot for sure in the economy. And I think the third big market update I wanted to make everybody aware of is that stocks are riding a positive wave through the first half here of 2023. I just did a review this morning with a client and, you know, very pleased, you know, to see their portfolio was up about just under 14%. And that's pretty close in line where the S&P is year to date, the S&P is up 16.4% year to date. The Dow is up 3.84% and the Nasdaq up 32.7. So just a very, very strong, robust year to date so far with the Nasdaq. And, you know, that's obviously more of the tech driven sector of the economy is what's really driving a lot of the growth. We've talked a lot about artificial intelligence, certainly a lot happening there as far as investment goes, a lot of chips being placed on companies that are leading the way in that regard. And, you know, obviously, this was very welcomed. You know, hopefully people are starting to see, if not already there some of those losses from last year for the most part, hopefully getting closer to being recovered. And that's that's a welcome spot, but it does also shed light. Sam. And for our listeners, you know, if this is the point in time where maybe you've made back most of your gains and you haven't rebalanced or taken a look at your portfolio, it's very important if you are uncomfortable to the point that, you know, you weren't wanting to look at your statement anymore or, you know, even look at your account online to pull it up.

Producer:
And you had a regular pattern of doing that before. You know, the recession last year before we saw this market really start to drop. It's it's probably a good time to start looking at whether or not you're in the right mix of assets. And we're going to get to that a little bit later in the show talking about some safe money versus your smart risk money. And that smart risk money is the money that you want to grow and you're willing to take some risk, but you want to grow that money responsibly. And it may be a good time to de-risk a little bit of that portfolio. And that's one of the things that we do for our listeners is that we will run a complimentary analysis of your portfolio. We'll expose the fees. We're going to get to a segment here. We're going to talk about that. But we will run that and give you some ideas complementary here of what you might be able to do to take less risk with the portfolio. And based on a historical comparison even to last year, we can show you how much your portfolio would have fallen and we could show you what it would have grown and just see if there's a better way to bring some more diversification into your portfolio. And one of the ways that we do that a lot of times is we're using alternative asset classes. That's a word that might be new to some of our listeners, but an alternative asset class is simply something that's that's not a traditional asset class. And a traditional asset class would be cash stocks and bonds.

Producer:
Alternative asset classes get into products like structured notes. If we have time today, later in the show, I've got a little segment I'll talk about that. But those alternative asset classes oftentimes don't bring more risk into your portfolio. They actually can bring a level, sometimes less risk, depending on how your other assets, whatever asset allocation you have. And we'll take a look at that for you, but definitely be looking at your portfolio. We're happy to discuss that with you. If you haven't heard from your advisor lately or you simply aren't receiving. The attention that you deserve through your work based retirement plan. Let's take a look at it for you. We'll be happy to do that. You can reach out to us at (910) 235-0812. If you're in the western part of the state, you can reach out to us at (828) 278-7814 or you can find us at Retire360Show.com and you can just click on a link there and set up your complimentary consultation. We'll look at how much you're paying fees and we'll give you some smart tax strategies as well. One of the things that we offer to our listeners is a tax map, and what that tax map does is it will help show you some ways that we can bring some tax strategies into your retirement plan. So give us a call, one of those numbers, and we'll be glad to to take a look at that. And we're going to take a quick break. And when we come back, we're going to talk about an interesting story that was out on the news here recently. Some of you perhaps have heard about it.

Producer:
New rules across Major League Baseball have shown their effects both on and off the field. I'm Jim Tarabukin. With the Retirement.Radio Network powered by Amara Life in 2022, the MLB Players Association agreed to a handful of new on field rules, with the goal to increase the pace of play. A pitch clock was introduced prior to the season, eliminating downtime between pitches the numbers are in and game times across baseball are down an average of 31 minutes this season. But the new on field legislation has led to necessary changes off the field. President of Life Flip Media Eric Mitchell, explains the controversy further.

Eric Mitchell:
It's controversial because everybody's so used to the seventh inning. That was it, right? Beer sales are shut off, so games are shorter. Beer sales are, you know, is important. There Also major sponsors of the teams.

Producer:
Mlb teams aren't governed to a league wide alcohol sales policy on how long into the game beer can be sold, but the seventh inning has traditionally served as that cutoff point. But according to the Associated Press, the Milwaukee Brewers and the Texas Rangers are two of five teams that will now sell alcohol through the eighth inning of their home games. Milwaukee President of operations Rick Schlesinger talked to MLB.com about his team's revised policy, saying, quote, If it turns out that this is causing an issue or we feel that it might cause an issue, then we'll revert to what we've done previously per the same report, the Miami Marlins and the New York Mets will halt their sales after the conventional seventh inning timestamp, but aren't ruling out potential changes in the future for the Retirement.Radio Network Powered by AmeriLife. I'm Jim Tabaka.

Producer:
At 360 Capital Management. We know you've worked hard to earn your money and you've worked even harder to save it when it comes to wealth management and planning for retirement, Dwight Mejan is passionate about helping people protect and grow their wealth. Visit Retire360Show.com to schedule your free consultation today it's a $1,500 value provided at no cost to you. Book yours now at Retire360Show.com. You're listening to Retire 360 with Dwight Mejan. Now back to the show.

Dwight Mejan:
All right. Hey, we're back. I'm your host, Dwight, and I want to welcome you to this hour of Retire 360 show brought to you by 360 Capital Management. Along with me here is Sam Davis. He's our executive producer. But also have him filling in with me today to help guide you with your retirement plan and help you win with your money. Sam, interesting story here that came out in the news. I'm gonna let you kind of kick it off here if you want to and just share with our listeners what came out from a pretty famous person. And I'll let you introduce who this was to our guests. She had a few songs that people knew about. I'll give you that hint.

Producer:
Oh, yeah, absolutely. So a handwritten will that was in a spiral notebook found wedged between couch cushions months after Aretha Franklin passed away. That was back in 2018. That will has been deemed valid by a jury in Pontiac, Michigan. So the July 11th, 2023. So this was really just a week or two ago. It ended a years long legal dispute among three of Aretha's four sons over which three informal wills found in her home should take precedence over the others. So there was the spiral notebook will found in the couch, but there were also two others that were brought into question. From what I understand, one was favorable to one son in particular. The other was more equitable among all of them. And so you can see and understand quickly, you know, how a how an internal family dispute turned legal dispute kind of escalated here. As a result, the four page document drafted in 2014 will now guide because it's been deemed legal, how the singer's multi-million dollar estate and royalties will be distributed among her heirs and I know this is very important, Dwight. Whenever an artist or some sort of creator passes away or even a business owner. But you know, consider, you know, her music will be listened to for, I imagine, generations to come. So there's got to be some sort of monetary value there. The family was disputing how that should all go down, but man, we found a will and a couch and now we're on our way to figuring out how that's going to be split up.

Dwight Mejan:
Well, and it's you know, it's a it's a good point, Sam. It's you know, we just can't emphasize enough the importance to our listeners, which is one of the reasons we put this in a segment here, the importance of just having a will. It's such a basic, you know, formal plan, a document that just needs to be put out there. And, you know, even if you get something notarized now, you know, every state's a little bit different with that. But I know in North Carolina it's pretty simple. It can be just something that you notarize. That's that's the safest way to do it. But it yeah, I can't imagine in Aretha Franklin's state case, you know, how long from her death that this is drag out in court and what the fees have probably been to hire attorneys already and they know the size of this state. And folks, if you want to mean, hey, we recommend lawyers, we think they're necessary, but if you don't have a formal will set up, you need to, you know, get a hold of an attorney or reach out to us and we will connect you with the right person. This is something that you do to to eliminate the disputes that we just shared with Aretha Franklin's kids. I mean, this is the type of thing that, you know, who knows if kids end up, you know, not talking to each other because of this, somebody might say, well, they had problems there already. If that was the case, that may be true, but you want to avoid all of that, if possible.

Producer:
Think another famous singer. Recent years that this happened to was Prince. I can't remember the size of Prince's event estate, but it was very large and it just wasn't properly buttoned down. And that will is going to take your wishes and your desires, and it's going to ensure that your assets are passed along to your loved ones in a timely manner. So if you have questions about how to properly create or establish a will or a trust, a trust is going to be a little bit more in depth. But some of our listeners, I'm sure, may need a trust, and they're wondering, Hey, how do I know if I should do a will or how should I do a trust? Give us a call, Reach out to us at (910) 235-0812. If you're in the western part of the state, it's (828) 278-7814. And we will help you. We'll be glad to help you in this area. This is just one of those areas for all of our clients. We ask this in meetings. I know I'm chasing a few clients right now that have sizable estates and don't even have the will yet set up, you know, So we're trying to move them towards setting a will up. It's not expensive. It's simple to. Do. It's just a few steps that you have to take. You can get this done in less than a day. If you have a simple estate, it can be done in in a matter of maybe an hour or less. So you have you got anything you want to add to that?

Producer:
Yeah, absolutely. Dwight, I know with everything that everybody has going on in their lives and then you add on top of it, okay, I need to plan for retirement. Now you're telling me I need to plan and have a will and an estate one one half day to figure this out. And, you know, pay a lawyer once is much better than I mean, look at this. Aretha Franklin passed away five years ago, and five years is a long time. But it's not uncommon to see two, three years in everyday disputes when people pass away. I was reviewing a case that was happening recently down in Florida, and it was a husband and a wife. They were getting close to retirement. The husband passed away in an untimely manner. He had a multi-million dollar business, but he had everything in the business. And it is probably going to take his widow years to get the assets of that business just because it wasn't properly documented. And now I expect there will be years worth of legal fees there. So I would say pay the piper early rather than later on this sort of thing. And also keep in mind that estates are not something that are only for Aretha Franklin or multi-million dollar business owners. If you have a home, if you have a car, if you have, you know, retirement savings that you would want, you know, to have some say in what would happen. You have an estate. So take the time, do the research, give Dwight and the team a call and we'll put you in touch with the right people.

Producer:
Yeah. Hey, and Sam, I've got good friends that are. That are lawyers. I know a couple of them, and they do great work necessary in our society. But if you have an estate that's in probate, there's an old joke out there that says, you know, attorneys get paid to work on something, not get something done. So, you know, we don't want to get it to the point where it gets in probate because from there, it's just a lot of delay and hold. And there is more billing going on to the cost of the estate average. Probate fees. I've looked into this in North Carolina. They range anywhere from about 6 to 7% of the estate. So just imagine having something buttoned down cleanly and not having to pay that 6 or 7% that could drag out for sometimes years. And I can only imagine, like you just mentioned, Sam, the case in Florida where the assets were held in the business. That's going to be a nightmare and unnecessary, totally unnecessary for the family to have to deal with those personal assets tied up in the business. So, yeah, you never know. No one's guaranteed tomorrow. So. All right. Well, we're going to change gears here again and want to talk a little bit about how efficient your portfolio. We talk about on this show, sometimes we talk about a term called an expense ratio. And many of our listeners don't know what expense ratio is, but it's basically the cost of the assets that are held within your portfolio.

Producer:
That's the simplest way to to say what an expense fee is. It's not. It's in addition to the fee that you're paying for your advisor. So let's just say you have an advisor that charges 1% to manage that portfolio. The expense ratio is an additional cost that's on the assets that you have. So for example, if you have a portfolio that's heavy in mutual funds, those mutual funds can range in cost from 0.1 or 1 10th of a percent to over 1%, depending on the type of fund that you have. And so that expense ratio is calculated by taking the management fees and dividing it by the total investment in the fund. So all of our listeners want you to ask yourself an important question How much am I paying in fees on my retirement savings? How much am I paying in fees on my retirement savings? Most people don't know the answer to that question. We don't know what the expense ratio is until we input someone's assets into the software that we use and it'll run it and tell us exactly how much somebody is paying. So it's basically. Sam just threw something up on my screen. It's a measure of how much a fund's assets are used for administrative and other type of operating expenses. That's what the expense ratio is. And I had a client who was actually a relatively new client that came to one of our workshops.

Producer:
We actually have one coming up this week on taxes, on taxes and retirement. And this individual came to this workshop and they came in and wanted to benefit from a tax map. They wanted to see the analysis of their portfolio. And when we ran it, this individual's expense ratio was, I would say, in the higher end of what we normally see. This person today has become a client, mainly because part of our. Commendations. And this wasn't exclusively why we recommended the asset allocation that we did, but based on what their risk tolerance was and some of their objectives, we asked a lot of questions when they came to our office. They came back and we ran an analysis of the portfolio and made some different recommendations. Well, they made a decision, they wanted to implement that and they were pleasantly surprised that the cost, which was really something this gentleman was very anxious about, of how much it was going to cost us to to manage his portfolio. He more than covered our cost to manage this portfolio through the savings of what his expense ratio was because we reduced his expense ratio to just just a little over one tenth of a percent. And that savings that we that we gave this person just through the portfolio recommendation, it covered our advisory fee and provided a whole lot more benefit in terms of taxation. Some things we were going to be working on in terms of his portfolio to move more money into Roth accounts, and that may be somebody's opportunity here who's listening right now.

Producer:
And we just encourage you to reach out to us. We'll give you our numbers here in a little bit and we'll take a look at that. So if you don't know that expense ratio, you need to find out what you're paying. You owe it to yourself to find that out. But we meet with many people who find out how much they were paying in management fees on their savings. They had no idea that their old advisor was overcharging for the management of their assets. So we'll look at that. Most people that I ask, hey, what's your, you know, management fee? I would say maybe 2 to 3 in ten know exactly what that is. So they'd never been told of what the fees were or what they were paying on assets such as target date funds. You know, a lot of you listening have these funds in your 401. K called target date funds. Some of you even have them inside, maybe a self-directed account that you have or an old 401. K, what a target date fund is the way you'd know if you have that is it'll say a certain year like it might say for example, the fidelity, you know 2030 fund and that just basically means 2030 is the projected year that you're going to retire or near that point in time.

Producer:
And the assets in that fund are managed in such a way to bring more conservative positions and an asset allocation strategy the closer you get to 2030. I'm not a huge fan of target date funds because you don't have any control over what the assets are. They're just kind of put over by a program a little bit each year and you're moving heavier into bonds, and we believe there's better places to put those. So if you're in one of those target date funds or you see them on your 401. K, you definitely want to reach out to us and we'll run a report for you and find some better options for you there. But yeah, mutual funds, you need to understand what the fees are that you're paying there, your bonds as and any other, any other type of assets. So if you want to find that out and you've been kind of curious on this segment to know what that is, reach out to us our phone number. I'll give that to you here. If you're in the western part of the state, you can reach us at (828) 278-7814 or call us at (910) 235-0812. If you're down around the Moore County area. So, hey, we're going to take another brief break. And when we come back, we'll take a look at our next topics, which is going to be your income plan. So we'll be right back.

Producer:
You're listening to Retire 360 to schedule your free No obligation consultation with Dwight visit Retire360Show.com. At 360 Capital Management. We know you've worked hard to earn your money and you've worked even harder to save it. When it comes to wealth management and planning for retirement, Dwight Migeon is passionate about helping people protect and grow their wealth. Visit Retire360Show.com to schedule your free consultation today. It's a $1,500 value provided at no cost to you. Book yours now at Retire360Show.com.

Producer:
All right. Hey, we're back. I am Dwight McGee, and I'm your host. If you're just tuning in, thanks for finding us on the dial. This is the retired 360 show, brought to you by 360 Capital Management. We have offices in the western part of the state. We actually have an office in Banner Elk, North Carolina, and we have offices in Southern Pines where I am at today. But we'll take calls at either one of those offices. We're going to talk a little bit here on a very important topic, your income plan. You know, when I think about the strength of a person's income plan, especially somebody who's nearing retirement, we always have these discussions at our office with a with a prospective client. And one of the questions that invariably comes up that I ask is, tell me a little bit about your income plan. When you retire, somebody's got a year left or six months. I say to them, What's next for you with your income plan? And I get all kinds of crazy different answers from people. Some of them are good. Some of them I could tell who hasn't given a whole lot of thought to it. But I would tell you that the biggest, probably the largest explanation that we get from people about how they're going to take money out of the portfolio is when they need it. They're going to just withdraw it. So it's kind of like having the big piggy bank.

Producer:
And if they going to go buy a new car, they're going to go travel, They're going to just make a withdrawal out of that account. But here's some things that you need to think about. What if the point comes where you this time last year you had, let's say, a half $1 million in your portfolio and at the first of the year it was $600,000. Well, most people at that point, number one, are thinking, I don't know what I want to take money out of my portfolio when it's down $100,000. So there's already a big problem is that they would like to take some income, but they don't really want to take it because in their mind they need to make back the 100,000 that they lost. That's one scenario that we get a lot of times. Well, I'm going to wait until my money grows back and then I'm going to do something different. Well, there's got to be a better defined income approach plan in retirement. You've got to have the first place I believe that it starts is you have to, number one, understand what is your budget, what is what we call your income gap that you have in retirement. And another question that's really ahead of this is when you retire, depending on what age that is, and if you're eligible, you're not retiring before 62, let's say somewhere between 62 or after.

Producer:
When are you going to take Social Security? Because for some people, they just go, I'm going to retire and I'm going to take Social Security. That might be the right option. But we'll just assume in this case that you are going to take Social Security and you have that whether you do or don't have a pension, the next thing you have to determine is what are my expenses? What are what does it cost me to live each and every month? And then you have to work those numbers backwards to say, okay, you're you're guaranteed income that you have, which if it's Social Security, maybe you're getting a small pension from the place you worked or you worked with the government or you were with the military, what do you have left to cover expenses? And if you have expenses covered or you're close to getting those expenses covered, what do you want to do in retirement in terms of your lifestyle? And then how much extra money a month do you need? So I believe it all starts and we believe here it begins with understanding what your needed income is in retirement. Then we can take an approach to say, okay, how best. Then if you need, let's say, $1,500 more a month. Gross How do we pull that $1,500 out of this portfolio? Well, there's a rule that's been around in finance for quite a long time.

Producer:
It's called the 4% rule. And what this rule essentially suggests is that retires retirees can withdraw 4% of their investment portfolio each year without running out of money. And this is assuming that they have a moderate investment portfolio. So this wouldn't be somebody who's, you know, big into aggressive stocks or they're into cryptocurrency with a big percentage of their portfolio. This is saying that you have a well balanced portfolio with good, solid companies in there. You've got a fixed income strategy with your portfolio. If you take out systematically 4% of that a year, you will not run out of money statistically just based on these simulations that have been run. So, for example, if you have $1 million saved in a portfolio and you apply this 4% rule, that means that you could take up to an additional $40,000 per year and not have a chance of running out of money as long as you keep that portfolio as a moderate investment risk. So. Don't forget, if you're withdrawing money from a tax deferred account, you're still going to owe taxes on any of those withdrawals. So this would be accounts like 401. K, a traditional IRA account, 403 B's. Maybe you work with the government. You got a 457 plan, something like that. You got to factor in what those taxes are so you can't forget about applying the tax rate to those withdrawals.

Producer:
So we like to come up with solutions for our clients that give them systematic withdrawals. One of the ways that you could do this is and we do this with some of our clients is if they want to be heavier in a stock based portfolio and they need, for example, that $1,500 a month, we'll raise cash either every six months or every 12 months and will have it sitting like, right now I'm using that money market account I talked about at the beginning of the show. We have some money market accounts that we can get our clients north of 5% and that money is completely liquid. So if somebody parks, you know, let's say $20,000 in that account and they're living on that monthly, we're using that withdrawal off that money market account every month, and it just feeds right into their checking account. So that's a good strategy. You're just pulling out 4% or less once a year and having that money go in there. Other products that we use is we could put them into an instrument, a financial instrument like structured notes. That is a securities product. That is not something that's, you know, insured like a bank asset. Again, I'll try to talk a little bit more about these towards the end of the show if I have time. If not, we'll get to them perhaps next week. But those accounts can typically kick out more yield than that fixed money market account that I was just talking about.

Producer:
But you got to just remember the rule. You don't want to go in and start taking out six, 7% and doing that consistently over a long period of time because as that market, you know, does its up and down thing, it's going to have periods where it's up, it's going to have periods when it's down. If you have to start liquidating assets and the market's going down, you run a much, much greater risk of running out of money. And wanted to just briefly on this point, talk about I talked about taxes here. If you have some of those accounts, tax deferred accounts, we have you know, we talk about Roth conversions quite a bit on this show. And I don't think I've ever really brought an illustration out. But I had somebody last week that was showing a Roth conversion strategy. And this particular individual and this is not to be applied to every individual listening to this because this person had some specific goals. So this is just an example for a particular client not to be, you know, used blanket statement on everybody here who's listening. Okay. We had $350,000 in a 401. K plan, and we ran this tax map and I showed him what would happen if tax rates remain the same. I showed him what his required minimum distributions would be, starting at age 73.

Producer:
He was 69 right now and I showed him that at 73, assuming a 7% growth, his required minimum distribution was going to be $16,000 starting at age 73. And I showed him every year thereafter what it was going to be. And I just assumed that, hey, if you just let RMDs come out based on what the IRS is going to tell you, you have to take I showed them the schedule of what it was going to be okay. And then I showed him what would happen is if we started to do a conversion of $40,000 a year into a Roth IRA account, and if he started to do that where he was at at the current age, he was I'm sorry, I said he was 69. He was actually 63. This individual I'm looking at the spreadsheet here. He started pulling 40,000 out and paying the taxes from that distribution. So all he did was he moved the money from an IRA, traditional tax deferred account, kept it in the same financial allocation model that we were using. We just moved it over inside of a Roth account so he could pay the taxes on it. His tax rate was at 22% level. Okay. And I ran this out all the way to age 100. And I just said, assuming that the same 7% grows, his Roth account is total taxes paid, he would have that done.

Producer:
Assuming a 7% return. He'd be done with RMDs at age 75, so he would not have to take any more. His Roth account at that point would be worth $675,000, assuming a 7% growth and taxes paid, he would have paid about 110,000 in taxes. So if he lived to be age. 90. So he started at 63 doing conversions. He was done at 75. His money tax free at age 92, his errors was to just under $2.2 million. Okay. Just under 2.2. If he just left that R&B be decided every year by the government, which they're going to calculate and the government is not going to calculate it, but they're going to require him to take the required minimum distribution. At age 90, his portfolio was going to have $1.3 million in it versus over 2 million. So lots of opportunities to look at Roth conversions. I know that is a little sidebar here from the 4% rule, but if you don't have to take money out of your portfolio because you don't need the income and you're not doing or your advisor is not talking to you about Roth conversions, then I would highly suggest you reach out to us and talk to us, give our office a call that R&D, by the way, for those of you that don't know what that is, RMD is a is a specific amount of money that has to be withdrawn from a tax deferred retirement account each year after you reach a certain age.

Producer:
And for a lot of you listening now it's age 73, but it is going to be going up to age 75, somewhere around the mid 2030. So there's some years you were born. We won't go into the, you know, whether yours is going to start at 75 or 73, but just know there's some great, great opportunities to look at Roth conversions. And that example that I just shared with you. You know, one thing I want to emphasize there, those numbers and I know I shared a lot of them, It you know, I didn't even take into account a change in tax rates. I just assumed and like I told this client of mine, I said, hey, if tax rates do change, you're going to be higher than 22%, more than likely if you just let you know, RMDs come out based on what the IRS mandates you do each year. And we don't come up with a strategy for Roth conversions, you're going to pay even more taxes. Okay? This strategy, if taxes didn't go up, was going to be the most optimal strategy for his portfolio and for his objectives. So very important that you understand, you know, when you retire, it's not put the kickstand down and just, you know, relax with your big bucket of money. You've got some other challenges ahead of you. And some of the biggest ones that we believe are taxes.

Producer:
And that's one of the areas that we can expose you to some ideas and ways that you can not eliminate, but that you can mitigate the taxes that you pay over your lifetime. So if I talked about something on this segment that you want to learn a little bit more about, reach out to me at my office. You can call (910) 235-0812. Maybe you're not getting guidance in that area of Roth conversions or maybe you're kind of just self-directing your account. Hey, we talked about earlier on the show, maybe there are some fee expense ratios that we could reduce. What if the cost of your reduction in your portfolio with the assets we'd use basically pay for our advice. That could be the case. We don't know until we run it. But there's no obligation or cost to you to have that analysis. So reach out to us. If you're on the western part of the state, call us at (828) 278-7814. Or you can go online, go to Retire360Show.com and you can set a complimentary meeting with us there. So we're going to take one more break. And when we come back, I'm going to talk about pensions. And if you don't have a pension, what you could do to create your own personal pension, it kind of combines into this 4% rule we're talking about as far as developing an income plan in retirement.

Dwight Mejan:
All right. So we're back and we're talking about the 4% rule we just got done talking about. And we're talking about your retirement income. If not one of the most. I would say it's not. You got to have a bucket of money. So it's very important. You got to have that bucket of money. But right behind it is you've got to have a well defined income plan. And we're talking about pensions. You know, there's some interesting facts here. I'm going to let bring Sam on here to share some of those. But we're going to talk about personal pensions in this segment just to kind of learn a little bit more. People wonder and we get questions on this all the time is, hey, I don't have a pension from my company, a defined benefit plan from my employer. You know, my dad had my dad. He worked for Pepsi for 36 years. And when he retired, he was in the union. He had a Teamsters Union pension. He passed away about 11 years ago. My mom is the survivor of that pension benefit. She had a little bit of a reduction on it, but is getting a chunk of that pension. But those days are over. You know, a pension plan is, you know, defined as an employee benefit that commits the employer to make regular contributions to a pool of money that's basically set aside for the employee in order to fund payments to that employee after they retire.

Dwight Mejan:
Okay. It's basically the employer setting aside your retirement account for you. That's that's what a defined benefit plan is. A defined contribution plan, on the other hand, is what most employers have shifted to. That is where you have the typical 401 K, where it's up to you to decide whether or not you're going to contribute. And I hope you are doing that. If you have a 401. K, you should be doing that. And then your employer, hopefully if you work for a respectable and honorable employer, is matching some percentage, hopefully at least 3%, I would hope would be the case, but more likely somewhere between 4 and 6% was what we typically see. So, you know, this is where, you know, the pension options when you leave a job, you've got a few things that you can do here. You can choose to take the money as a lump sum. Now, this is one of the things that we do for existing employees where we do what's called a pension maximization report, where we will shop that pension. If you have the opportunity to get a lump sum, we'll go and we'll match that lump sum to see if there's a way to get a higher benefit payment. Just got done with a client last week who was getting that very thing at age 67 next year. She retired a year ago and she has a lump sum option from the employer. She worked for a bank and that bank was giving her a lump sum option.

Dwight Mejan:
So I took that lump sum figure and we compared it. I went out and did some shopping in the market. She wouldn't have known where to go to do this. We went out, found a higher benefit and it wasn't by much, folks. We beat it. We beat it by about 5% a month, which was good. It's going to be the same amount for Guaranteed for the rest of her life. But folks, here's the difference. Very important that you listen to this. If you have an option to take a lump sum and you're not getting that shopped out. You're not doing yourself justice. You're not doing this the right way. Because if that payment could be matched or even sometimes if it's slightly lower, depending on what your other assets are that you're retiring with, it still might be better to take that payment even if it's slightly lower because in the lump sum pension benefit we have the opportunity through the instruments that we would use that if you die prematurely, the lump sum payment that's remaining. For example, I'm just going to use a rough number here. Let's just say you had a half $1 million lump sum. You put that in in a year later, you die unexpectedly. If you go the employer route, a lot of times that payment, more often times than not, is done. And the remaining amount of that money is kept by that pension company, that lump sum.

Dwight Mejan:
So your family doesn't see that benefit in the other way, where we shop at the balance of what wasn't paid out or approximate their amount is paid out to a beneficiary. So the point is you get to maintain control of that lump sum of money, you or your beneficiary. So very important that you take a look at or have someone like us take a look at looking at a lump sum option and then just doing some shopping for you. We do that if you're listening to this right now and you're going, Hey, I'm getting ready to retire, I'd love it if somebody could tell me if I'm getting a good deal. Stay tuned as we wrap up the show, we'll give you our contact information and you reach out to us. I will charge you nothing to do that work for you. Okay? That's that's our job as a fiduciary. We'd be honored for us to see that. And if we believe your option is the best, we'll tell you to go ahead and take it where you're at. But the pension is basically, you know, the promise of regular payments in the future in the form of an annuity is basically what it is. But Sam, you've got some pension facts. If I could call on you here just to share with our listeners, just share with them a little bit of what's been changing in the world of pensions there. Yeah.

Dwight Mejan:
So in the mid 1980s, around 60% of private sector workers in the United States had access to a pension plan through their employers during this period in the 1980s and in decades prior, pensions were a very common form of retirement benefit. And Dwight, if you think back to, you know, the 1950s and 1960s, it was not uncommon that somebody would work for one company for 30 or 40 years. And that company offered them a pension as a retirement benefit, and they maybe only had 1 or 2 employers for their entire lifetime. And and if they had to, one of them was probably the US military. And the other one was a company they worked for for 30 or 40 years. So 60% in the 1980s. But by 2020, the number of US workers covered by a traditional pension plan decreased to only about 16% of private sector workers who had access to a defined benefit pension plan. So pensions becoming far less common. You can keep in mind government employees are much more likely to have pensions, sometimes called a defined benefit plan. Both of my parents are actually government employees, one at the local level, one at the state level, and they both have defined benefit plans even still today. So if you are a government employee, you may still have a pension, but if you work in the private sector, it would be uncommon.

Dwight Mejan:
Yeah, that's great. Well, let's, um. We see a lot of federal people as well that come to our office that have, you know, those pensions like you talk about Sam, but it is increasingly smaller. And the question again is, you know, can I create my own personal pension? And the answer to that is, yes, you can. And we have a partners in our, you know, in our firm here, strategic partners that to be candid with you, Sam, this particular client of mine that came to me with the lump sum, I looked at it. I didn't think we were going to be able to probably beat what she had. I just gave those figures to the people on my team that that specialize in the pension shopping market. And they came back to me and said, Dwight, we had a carrier that about two months ago revamped their payouts. And this particular carrier is the one that we ended up beating her pension option with guaranteed payments. It's no different. You know, questions people have sometimes is is it safe? Is it just as safe as what my company was going to be? The answer to that is yes. You know, that's what your company does that, you know, for the government employees and people like that, they're taking a lump sum of money when you retire and they're giving it to an insurance company as a lump sum with your name on it. And the promise there is to send you a monthly check for the rest of your life based on the terms of what pension option you elected.

Dwight Mejan:
So same opportunity there exists in the private sector and more and more insurance companies. We are seeing I'm seeing it more I just saw it again this week are getting more competitive to go after beating these larger corporate pension companies. And that's the good thing about competition that we have, you know, in the United States, Sam, and to our listeners, is we have the opportunity, you know, to go shop this out. And there's a lot of companies that are competing for your money right now. They're after this segment of the population that's starting to retire right now called baby boomers. And they want to get a piece of the action. So they've just sweetened the pot of increasing the payouts on these products. So if you want to know if you're getting that best payout, reach out to us. I'm going to give you the number here in a minute. And I think with that, Sam, I'm going to anything you want to add here, Sam know, we're kind of wrapping up time here, but we'll save the specifics on how you can start that personal pension. Maybe next week when we continue the show. We'll leave off here. But anything else you want to add to what we've been talking about there on the personal pensions?

Producer:
Yeah, that sounds good. So as we wrap up, yeah, just about a minute left in the show, I would say it doesn't cost you anything but a little bit of your time to check. So whether you have a defined benefit plan or a pension plan, you can check and see what that lump sum could get you on the open market. Or if you don't have any sort of pension plan, you can establish your own personal pension with a safe and appropriate portion of your portfolio. And Dwight, you explained it perfectly. There's 75 million people that are preparing to retire between today and 2030. And here in the American land of opportunity, that means insurance companies are going to compete for your dollars and offer you the best deal possible on your retirement. So you have some leverage in this situation if you're preparing to retire. So get with somebody who has to sit on the same side of the table as you and see what you can get. Yeah, you.

Dwight Mejan:
Got one decision in that, don't we, Sam? We got to get that one decision right, because there's no do overs in this stuff at all when you when you elect that pension payout. But hey, this is all the time we got left for today's show. I want to thank you for tuning in and be a part of the show today. Just want to let you know we have a very special guest coming in next week, Mike Mazzoni. Stay tuned for that, especially if you're looking at the best way to build a strong defense in your portfolio. I'm going to leave it at that, but you're going to love the show. Make sure next week that you tune in. But thanks for tuning in today and we'll see you all next week.

Producer:
Thanks for listening. To Retire 360. You deserve to work with an experienced and licensed expert who will strategically work to protect and grow your hard earned assets. To schedule your free no obligation consultation with Dwight, visit Retire360Show.com or pick up the phone and call (910) 235-0812. That's (910) 235-0812.

Producer:
Investment Advisory Services offered through Brookstone Capital Management, LLC. Bcm A Registered investment Advisor. Bcm and 360 Capital Management are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents. Investments involve risk and unless otherwise stated, are not guaranteed. Past performance cannot be used as an indicator to determine future results.

Producer:
Registered Investment Advisors and Investment Advisor representatives act as fiduciaries for all of our investment management clients, we have an obligation to act in the best interests of our clients and to make full disclosures of any conflicts of interest, if any. Refer to our firm brochure the ADV to a page four for additional information and comments regarding safe and secure products and guaranteed income streams refer only to fixed insurance products. They do not refer in any way to securities or investment advisory products. Fixed insurance and annuity product guarantees are subject to the claims paying ability of the issuing company and are not offered by BWA.

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