20 Planning Matters Radio - Richon Planning

Plan to fail. When planning matters radio was on wind radio. Sean financial investment advisory firm Sherry firm.

I am a local favorite investor probe today on the program about money, finance, and all the challenges that we face trying to build for and achieve financial security and stability. I hope to protect assets, identify opportunities and make sure to protect your paycheck into and throughout environment and my lovely wife Amber helps to protect the paycheck during your working career. More on the supplemental insurance health insurance and life insurance as well as 401(k) and so combined. We try to and strive to protect your paycheck through all walks of life and there are many challenges to protecting that paycheck.

What if your insured with your sick. What if you have an accident. What if in retirement. There are market corrections, or your spending through your money too quickly.

How do you make sure that you can rest assured and be confident in your financial situation and your lifestyle. How can you make sure that those that are dependent upon you are also confident and comfortable in their lifestyles. That's mainly what we do it Jean planning we been practicing for a combined about 25 years. If we do not have the product that suits you and or your family's needs.

We have the relationships with people who can assist you if you would like to give us a call we can offer a complementary portfolio financial review would be happy to do that for you. Just give us a ring at 800-338-5944. That's 800-338-5944 Amber you know what I see is one of the biggest challenges to building and maintaining financial success and confidence, but that Peter procrastination and apathy to many people not paying enough attention or not caring to pay attention to their financial situation, folks. You don't have to spend a great deal of time doing this. You don't have to be a full-time financial planning professional, but it does deserve some time and attention. Maybe 30 minutes a month would be ample time to make sure that your plan is on track that your investment portfolio is doing what it should that it reflects your values and your goals yet Amber we have a retirement crisis in America and you know why because none. The people spend that much time on it. I think most people get three extra dollars in their paycheck and they've got a do my coffee back on their under their pushing their shopping cart ready to put 10 more things in the cart but look, guys. It's super important that you focus on where you're going to be when you cannot earn a paycheck anymore know when I get it on me making ends meet is tough. I grew up in a single-parent household. My mom was a teacher so it's tough sometimes to make ends meet.

But you also need to take your planning and your financial future. Seriously now, no one can take it with you, so don't not live today and save every penny and not do anything that makes life worth living and fulfilling all of your life because I've seen both sides of this. I've seen plenty of people that were scared to spend any money and they pass away with a pile of it and their kids blow it in about 16 months, but I've also seen plenty of people who haven't taken the small amount of time and dedicated it to just making sure they're on track to setting up ways to automatically save a couple dollars a month toward retirement and then we get to retirement age and were not able to retire or we don't want to be forced into lowering our standard of living, changing our comfort level in retirement. Just because we haven't been serious enough. Haven't taken the time to dedicate a minimal amount of that time and to take a few dollars and put them away towards our financial future.

I know there's a ton of people out there like that. I'm sure there's quite a few people to who had not even reached the point to where there thinking about retirement. There still worried about if they get hurt or sick on the job and they can't pay their bills. If you guys are in a situation where you get hurt and you cannot work. We have the products for you know when youth should start think about retirement went that the day that you earn your first dollar, the day that you earn your very first dollar, you should start putting some of it away for the future. Now again bills are bills.

They are real, they are due today and that cup of coffee and that nice flat screen TV and the kids need this and that seems to pop up you higher priorities more immediate needs, but we really have to focus on putting something away toward retirement studies are showing.

We do have retirement crisis.

The majority of Americans would change their standard of living if they missed just one paycheck if they were out of work for one month, it could spell financial hardship.

Retirement is 30 years or more of unemployment. How are you going to make that money that you've saved last for 30 years, especially if you haven't even taken saving that money very seriously, so we do have plans we can set them up for you. We can talk you about how to establish IRAs or Roth IRAs or brokerage accounts where you can invest for more immediate purchases, but you can grow your money over time.

We can help you analyze your company 401(k) make sure that you're taking advantage of the match, but just make sure that you've got some savings going that when we get to retirement. We can make something of it and we can protect our standard of living. How much do we need or how much should we or I'd be saving for retirement. Will Dave Ramsey says that after you've gone through the baby steps one, two and three big step one is have $1000 in the bank. That's your emergency account baby step two is handle any and all debts that you have except for your house do them in order smallest to largest. That's the debt snowball. That's really what Dave is is maybe most famous for his debt snowball process.

Step three is fully fund your emergency account.

So now were really building up some cash and that cash purpose is to avoid emergencies and avoid going back into debt. Step four is beginning to save for retirement and invest and Dave suggests that you save 15% of your income of every dollar that you make and dedicate that toward retirement. I've heard pay yourself first.

Pay yourself first 10% do some quick math. Your most people's careers is about 30 years 30 years before saving 10% of the money that we made. By the time we retire. We've saved a whopping three years worth of income. And let's say we got fantastic returns over that 30 year period and we double. We quadruple, we've now got 12 years worth of income again. Retirement can last 30 years 30 years plus. In fact, one of the flaws that the financial experts are seeing in the way that retirement plans are designed is that they traditionally have only been designed for 30 years and many people are living longer than 30 years in retirement.

Our retirement can be as long some cases longer than our working career. So stepping that up from the 10% to the 15% really gives us just a little bit more juice. Now, how much should we have for retirement. That's completely an individual type of question because some people will be absolutely fine.

Having saved only 100,000 or 200,000 for retirement. Some people need a million or 2 million. It all depends on your budget and how much your expenses are. I remember a day pretty early in my career I was excited because I was going out to meet a cardiologist. He was working at a local hospital. I had a conversation with him on the phone and I was pretty excited because everything that we talked about. I understood that he had some sizable assets and when I got to meet him. We started to talk about what he envisioned retirement to be about what his budget was and he was spending about $400-$500,000 a year and he had less than a million saved you wanted to retire in just about five years and I broke the news to him that in my opinion he needed to make a lot more progress or cut down substantially on what he was spending he did not agree with me and that same day. I also had an appointment with a deli manager at a grocery store chain. This deli manager. The conversation he didn't have nearly as much save but when I had that same conversation with the deli manager about what he envisioned retirement to be about and what his expenses were he was going to be more than fine with the amount that he saved because his Social Security alone was going to replace enough income for him to maintain his expenses and his standard of living so moral of the story is there is not an earmarked arbitrary amount of money that says you're ready to retire. It could very very widely. It could be 100,000 could be 200,008 could be that you've got 1,000,000 1/2 dollar saved and you're not ready to retire.

Similarly, your age doesn't tell you if you're ready to retire. I saw a recent stat that 9% of workers plans to retire before the age of 60 something like 23% plans to retire at age 65, which is Medicare age is probably the reason why that one substantially higher but more than 38% of those polled said that they didn't plan on retiring until age 70 or that they never planned on retiring at all. Let's back up just for a second. I know that you said that there's no arbitrary amount of what I need $100,000-$200,000 amount for me to be able to retire, but let's break that down for a second. Let's just say, and I'm sure I'm saying this because I know there's tons of listeners out there that have not started for retirement have not started saving for retirement that are making $40,000 year $50,000 year $60,000 a year. Let's break that down so $100,000 I've saved for myself.

I'm feeling proud of myself I got $100,000 in the bank. If I'm only spending $20,000 a year to that set me up properly for retirement now because of quick math on that. If you're spending 20 and you got 100 you got five years worth of income. There so it boils down to budget okay so let's break this down. What should we be doing and how do we know if were making progress. Your first step is if you've got a 401(k) with a match on it. You absolutely should be contributing to that. That's whatever the match is that's an instant return on your money. There's no other place where you can get that kind of guaranteed return investing money if they match 100%, dollar for dollar up to 5% of your salary. You should be contributing 5% of your salary because that's 10% automatically over your salary each year they get saved you are getting a 100% return on that investment, even if they only match 50%.

You put in $10.

They give you five. There's no other place that you can go and you can get that kind of guaranteed return were $10 is going to turn 15 for you so we can treat our 401(k)s. That's for folks who have the ability to do so and have the match and have the match.

Do I have another option for myself if I'm in that middle income tax bracket to be able to start saving without a 401(k). Sure, absolutely and and even with the 401(k) you can save on your own independently bank the right absolutely in a bank.

It will want the 1% layer or in an investment vehicle that's got the opportunity for more growth, but your IRAs or your Roth IRAs are the second place that you would go and it depends on your tax situation if you need a tax break today or if you believe taxes are going to go under. Some people are saying that I don't have a Roth IRA borrowing it in writing that up yourself so when you work for a company and they offer a 401(k), you are a participant in a plan and if they offer it to the CEO or the janitor they have to offer it to you but you are a participant in that plan.

If you are saving on your own you're the owner of that account. The difference is that the company has already set up the account for you if you want to save independently. You have to set that account up and then you can begin contributing to it and you can decide what investments to to invest in the form of folks out there who have their money in a banking account pick up the phone. Give us a call 800-338-5944. Your banks are giving you a very small percentage of return you want to take a different look at some different options for that money that you're saving yet.

In fact, excess cash in the bank is losing purchasing power. So if I did have $100,000 sitting in the bank. I am pretty secure with right it's safe I can get to it when I need it's liquid but I'm earning 1% on and then at the end of the year I get a tax I get a 1099 have to pay taxes on that 1% that I earned.

So I'm really earning less than the stated interest in money. The terrible multitasker will inflation is real right so the cost of goods. The cost of living goes up every year so historically, inflation has averaged 3%, which means that my hundred thousand just lost 2% and I think the people would feel differently about keeping their money in the bank if they had to write a check for that loss of purchasing power. I call it losing money safely or lazy money and so if you've got excess cash over and above your emergency account sitting around you really need those dollars to work for you. Your dollars are your employees and you need them to work for you to create an income to live in retirement or to grow that income base for your retirement and so we can set that up for you. I can help you decide and select the investments to take advantage of in your 401(k) or outside the 401(k).

If you want to get some savings going there options there as well and 401(k) by the way is not the only kind of plan like that there.

There are lots of them. If the military has the TSP nurses, hospital workers have the 403D higher income individuals have some options as well. If you own a company, you're the that the single employee owner and we are bringing a substantial income. I have an example, a gentleman came in the other day he was earning like $900,000 a year. He was looking for a way to save money and we opened up with Holly for 12 E3 for him. He can put away up to $225,000 a year into this plan earmarked specifically for retirement defer delay paying the taxes on it because he's under the probably the correct assumption he's going to be in a significantly lower tax bracket in retirement.

Now I don't make that assumption with everyone but when you're talking about someone earning close to $1 million a year.

Once they retire. There probably going to live off of substantially less than that.

So there's plenty of ways to structure the plan under which you saved, but the bottom line is you need to be saving and then the second part of your question was how much do we need once we get to retirement or to know that we are prepared for retirement.

I do some quick back of the napkin math on and it does involve the budget. Nobody loves that word so let's simplify the budget. Just look on your bank statements. How much are you spending, and I like to ask people to bring their last 10 to 12 months worth of bank statements. Let's look at the front cover. We don't have to dig through every penny every expenditure every time you stop for gas or a cup of coffee just on the front cover.

You got for numbers you're beginning balance your credits your debits your ending balance. The debits is what I'm concerned with. That's how much you're spending. That's how much it takes for you to support your lifestyle. Let's figure out what that averages out over the course of about a year and that should tell us what you need to maintain your lifestyle on a month-to-month basis take that number. Subtract any sources of income that your money that your investments don't have to generate for you. So Social Security and if you got a pension subtract that. What's left is called your income gap, your income gap is the amount that your personal savings are going to have to generate for you.

Multiply that by 12 to get the years worth of income gap and then multiply that by about 25 because retirement can be a long time and then multiply that by your tax rate. If you have deferred paying taxes because taxes don't go away in retirement that gives you the approximate retirement number and this is an exercise I go through with everyone who was asking me. Am I ready to retire. Whether it's 10 years out 15 years out or you're planning on retiring in two years. This exercise is going to indicate how prepared are you or if we need to maybe adjust those goals here is on planning our goal is to help protect people through all walks of life. And Peter you do an excellent job of helping people get to and reach their retirement goals. What would you say the most important thing is when planning for retirement that you do the work.

My job is basically to create the plan but I can't force you to abide by right I can basically create a checklist timeline action items recommendations for what people should be doing, but the responsibility for that is on her own shoulders these days and that's not the case.

A generation ago.

If you look back at retirees in the late 70s and early 80s, most of them had pensions from a company that promised to support them for the rest of their years throughout retirement companies stopped doing that they are all in big trouble now they realize how much of a burden that was how much would responsibility that involved financially and they said that it didn't make sense for their businesses. Bottom line, and so they came up with the 401(k) they cut pensions down and they told people hate start saving for yourselves. The problem is that not enough people started saving for themselves and so the responsibility of it is really the hardest part. People have to take the serious they have to be proactive.

I'm sure there are a lot of people out there that are saying that I cannot afford a financial advisor. What would you say to this people well if you if you can't afford these type of things today.

How's it going to be when you don't have a paycheck right.

The cost for the financial advisor. It is negligible. It is minimal. I'm talk about the cost of actually saving that money that people need to focus on my services basically pay for themselves. I can be compensated in one of three ways.

There are three different compensation models for financial advisors. There's fee-only they charge for their time and their expertise. It's up to you to enact and manage the recommendations accenting there's fee-based that is I am helping you on an ongoing basis, monitor, manage, rebalance, implement the planning and based on the amount that has been invested. That's how I make my compensation as a percentage of that balance and that fee should be justified by an increase in your performance right so again it's paying for itself, and that incentivizes you to do better because when you do better if you made an observer, you make a rash. Yet there we both want you to make more money because when you make more money. The advisor makes more money and were paid a lot more on the last way right, which is where the company pays us so commission based.

You know there's there's this stigma of moral superiority in the financial world of making fees versus making commissions and I think that it's somewhat misplaced because there's nothing wrong with making a commission off of a sale if you stand behind it and you provide ongoing service now I get it that some financial advisors make a sale and then write off in the sunset and you never see we do not do that at Rochon playing but that's problematic to me. If somebody's making a large amount off of a sale and then does not provide the service after the fact that they got compensated for that is an inherent problem, yes. Bottom line here is yes, we can make compensation off of the third style commission base.

If there's a product out there and the most common example of this is like life insurance or annuities.

I don't manage life insurance. I just have access to the companies that do and so somebody needs life insurance. I go out my shop all the companies and I find the best one that companies going to compensate me and pay me for finding a suitable client that needs their product and yes there is one claim death right and we are monitoring that on an ongoing basis. Can we find a cheaper policy during your lifetime.

Can we find one that provides better benefits can we maintain the same cost and increase the death benefit. I'm sure there are a lot of people out there that are holding a traditional life insurance policy, whether it be term insurance, which means it ends at a particular time period that you've selected 10 years 20 years 30 years. That is a way to get a lower premium, a lower cost to you or a second way that you can pick up his whole life insurance policy over a period of time. Usually it Sounded 100 which you owe no more premiums on that if you're holding one of those two policies. It may be a better benefit for you.

If we take a look at that because these days. What I know what Peter and I are concerned with.

I'm 37 years old.

He 38 years old. What if one of us was tapped out. You know Peter is the higher income earner and our family. What if he got sick with a terminal disease. What would we do. We have tons of life insurance policies that act actually help you pay for those medical expenses that you have yet even long-term care.

A lot of the newer types of life insurance policies actually offer they call it a bucket of money concept.

The insurance company knows there on the hook for a bucket of money with 100% certainty.

You were going to pass away at some point in time there's going to be a death benefit.

The company understands that what if you get sick before you pass away. They still know that there eventually on the hook for that money and they will allow you to use it during the course of your lifetime. They will advance that death benefit to you to pay for those care costs so a lot of the newer styles of life insurance for the same cost that people are paying for that old one include that additional benefit and some people have Artie built up that cash value and could pay off such a policy and never have premiums again. I thought a lot about my grandparents on the show. I love them dearly. They raised me there at 11 my life. Then both of them have unfortunately passed away, and yet they owned a very successful heating and air conditioner company my entire life and as I watch them get older they both got sick with terminal illnesses.

At the same time, one with kidney failure and the other with colon cancer and with that successful business and the lump-sum money that they had squirreled away which I called their legacy that they should have been able to leave for their children was burnt up. You know they want all of your money before they will pick up and offer Medicaid and I know you want to go on Medicaid and way when most people are thinking whenever I turn 65. All my medical expenses are taken care. You know I have attic here and and it's all good, but to be honest with you that's not the case at all. They depleted every single last dollar that my grandparents had squirreled away and you know then then they got the care that they needed and some people say well if that happens to me. If I don't have a good quality of life on them and take a long walk off a short pier. Well, you know, the nursing home has locks on the doors and their intended to keep the residence in an alive and paying. So it's not as easy as you think. When that quality of life as you live in Oregon now. I mean that. It's just not realistic. Plus your loved ones don't want to make that decision and so a financially responsible person is going to put in place safeguards and mechanisms where they can remain financially independent. Even if they become care, dependent, and that is a part of the life insurance that I think is overlooked. A lot of times now we were talking about compensation right. Let's go back to that for a moment because when you purchase that life insurance policy when you purchase an annuity. There is a commission that's generated, and in the financial world, especially, I think on the annuity side there is a stigma that is somehow a less ingenuous way to make money internally in in the financial industry. There is a conflict there between fee-based advisors or fee-only advisors and then commission based sales and and they look at each other as as evil or less than if I could take two identical people. Same situation and in one case they got $100,000 will say I can protect their money. I can give them a lifetime of guaranteed income and I am compensated not out of their pocket, but from the company that offers those guaranteed and then on the other hand, I could take that other person same $100,000 and put it at risk in the market give them no guarantees, and over the same time. I make more money except I take it out of their account rather than the company paying me. I just don't see where there is one that is better than the other and I know that that is not how it's viewed, but do the math and often times the fee-based advisor is making more money.

That's not the problem to me. The problem is in the service that they provide are you getting what you are paying for, and we explain how we make money before any transactions are made. We explained the process. We explain the pros, the cons the benefits. The disadvantage is what you should expect to get out of that transaction and were were very straightforward with that but in my opinion there is no one approach to planning that is better than another all the time.

It is very situational. It is very specific.

What do you need in your plan.

You need to build and grow money fantastic. That's probably some kind of investment based management. You've got time on your side you want to turn one dollar into two and hopefully into four eventually fantastic. The stock market and investing in equities is probably the best route to go. On the other hand if you've already built up an amount and you're not going to plan on working any longer and you need to replace that paycheck.

The uncertainty in the volatility of the market is not just uncertainty and volatility in the market its uncertainty and volatility in your lifestyle and so maybe then the approach is not the best to ride out the market at that point in time the safety the guarantees the predictability of lifetime income probably does play a valuable role in your comprehensive planning and again this is all part of protecting your paycheck through all walks of life is you got understand all of the tools out there and when and how each one is appropriate.

That's where the value of paying for a financial professional really pays off.

Cost shouldn't be an objection that it shouldn't be prohibitive to you and that's why we offer the initial meeting on a complimentary basis and in about an hour's time will help you answer an address straightforward.

Your questions and will help you understand where you're at and what possible options that you have. To him to make more progress or to achieve your goal.

If it's not for you. It's not free health were not the right fit them or not the rate they are under no obligation we sit down with you. We have that conversation and I've got my new book, understanding your investment options that if you do want to know what choices you have in the pros and cons of each and when and how their appropriate.

This book goes a long way in helping you get that understanding give us a call.

Love to hear from you again first 10 callers to the program along with the complementary review and a consultation will offer you a copy of the book understanding your investment options. Call now 800-338-5944 is 800-338-5944. Always a pleasure having you along with us.

We love to hear from you again, this is Amber Rochon and Peter Rochon from our family to yours. We look forward to hearing from you for talking with you next happy Easter everybody planning the content of this radio show is may result in this regard