2022 EP0212 - Planning Matters Radio - Caring For Loved Ones

Plan planning matters when welcome once again to planning matters radio show where we examine the personal financial issues of the day and try to have a little fun along the way. My guess as always is a Dave Ramsey trusted smart investor Pro. He's the author understanding your investment options and using fiduciary financial investment and retirement planner serving clients throughout North Carolina P. Rochon, welcome to the show. Another fantastic adventure in the world of high finance and discussing your money your investments in your retirement planning got so glad to be here and thank you for being part of program you want to talk to Peter Sean you can call him at 919300586 or go to his website www.rochonplanning.com that's www.richonplanning.com to be talking about what really one of the most important in many ways the most important aspect of finance it's the effect of caring for loved ones and and will how our finances can affect that right Peter you hit on Scott may be the most important thing about our money and as a guide. I would be fine living in a tent in the woods eating tree bark like really, you know, to me I'm pretty good right I mean I think that us guys we tended to have that attitude, but we still work hard and strive to earn money so that we can provide ourselves. Maybe a slightly more comfortable living. But truthfully, provide that comfort and security and confidence to our family members to our loved ones to our spouses to our children to our grandchildren.

I feel like I my son still young. He's 12 but I serve as the financial backbone II don't plan on supporting him forever. But if you ever needed to. I hope to be a place where he can come to for support. Certainly for my wife. I want to be able to provide that not even the in the position where I am providing now my parents with some level of financial guidance and and help and assistance so you know, I've I've heard that this sandwich generation is is a real phenomenon, and when it's discussed. It usually seems like it's a little bit older than I am. I'm 41 I hear discussed a lot with the baby boomer generation which I am a very young age of Gen X but I am seeing it and and it is a real phenomenon where we are more and more tasked with providing that financial support for family and loved ones, and at the root of it. Scott isn't the ability to do so. The number one most important thing in priority with our money is not just doing it. It's knowing that you could do it if the situation came up in the type of confidence and security that brings right Peter gathered that the fear of the unknown emergency that's just just around the next corner just above the horizon. Yeah right now mean we want to be able to provide for the what-ifs in life are what if the car breaks down. What if the tree falls on the roof.

What if somebody gets sick.

What if we've got college expenses or or or. We've got other things that come up.

What if we want to buy a new home or new car like there are so many what if's and then there's always like I can't think of another one. But what about the unknown right and what about that thing that's right around the corner that we don't know about. Those are those are the things that we want to be prepared for and if we have a plan in place if we have shot holes through that plan and it still works. If we go through the planning, design and discussion as though Murphy's Law was going to be reality into the future we can move through life with a pretty high level and degree of confidence with our money so that we can do the things that are actually really important to us is support that family spend more time with them. Create memories have experiences go on trips and have a fulfilling lifestyle 919-300-5886 is the number if you want to talk to Peter Sean himself that Social Security isn't that supposed to be that safety net that accounts for all these things is that what it was once supposed to be. Is that still what it is now.

Can you can take us through the Social Security situation. Well it it is supposed to be a safety net, but it's a very low threshold of safety right when you use a safety net.

That's not the desired outcome trapeze artist is the one that I can quickly think of that uses a safety net falling into the net is not the goal right. They want to stay up on the trapeze. Well, relying on Social Security exclusively is not the goal we want to establish a higher quality of life in retirement. Social Security was is has been was created as an anti-poverty measure the intention of Social Security is to keep the public and specifically disabled elderly retired individuals just above the poverty line. Well, the poverty line is exceedingly low if if you are qualifying at at the poverty level, really. You've got some major major quality of life issues. I am sorry to say that but it's true and and in American society we consider poverty is just poor. In other countries, but it's it's poverty here and it it really is not a the high quality of life that most that would listen to a program like this are used to accustomed to. Unfortunately even with that fact there are probably still a good number of listeners to this program work viewers of the podcast that don't have much of a supplemental plan to Social Security because statistics show that about 40% of the American retired public relies solely on Social Security as their source of income which either means that a lot of people were keeping expenses really really low, or that we have not done enough to save and prepare and build up some wealth to supplement Social Security and in my thinking is that way more falls into category. Be there so Social Security is at best a piece of the pie part of the equation that you'll be looking at in Europe.

Financial planning. Another thing that people talk about a lot but I'm not sure how much people really understand his pensions. Yeah, I feel like that was a something that my grandparents or my parents talked about a lot. I have my pension will always have my pension I can't take my pension what is a pension and how relevant is that in today's financial world. Well let me back up for a moment and say that both of these are part of today's conversation caring for loved ones because both of them have implications that ripple. After our own lifetimes right between a married couple. The choices and decisions that you make with Social Security will last not just for one person's lifetime, but for both people's lifetimes, and in some instances and and and qualities even after both people are gone impacts on the next generation so both of these are very important for careful consideration with how we use money to care for our loved ones and we tend to be as humans very shortsighted in a lot of ways, especially when it comes to our money. Sometimes we make decisions with our money that have negative consequences. By the end of the day or it's hard to make a decision to know how to handle money that has has implications toward the end of the month, but Social Security and pensions. These are lifetime decisions that we may make that decision at 62 or 65. We might not feel the ultimate impacts of that decision until 8592 or our spouse feels them after our lifetime, so you know, there are plenty of decisions in life that I can remember that have lifetime implications that were good decisions. The opportunity to take a job that that I jumped at and it worked out very well for me going out on the first date with my wife. You know a a fantastic lifetime decision, but I also can think of a couple lifetime decisions or decisions that I made that were not so great decisions that impacted my life Social Security is one of those you don't want to look back when you're 80, 85 years old and say well we really messed messed this one up. We should've done that differently back at 62 so there there's not necessarily in always right were not always wrong answer. There's kind of two schools of thought on Social Security a particular ticket 62 were taken 70 neither one of those or are universally right likewise with pensions, which in essence are an annuity offered by your company.

Social Security is an annuity that has forced enrollment through the government. I laughed when Obama care. The affordable care act was was sort of first being discussed are people like the government can't force me to buy insurance yes they can. They been doing it since 1985 with Social Security and yeah that's kind of long history as well.

It's been proven that yes, in fact they can, but pensions and Social Security are annuities a promise of lifetime payment offered through different entities. Now, an annuity can be through the government. Social Security through a a a company in the form of a pension, you can buy your own private annuities, but at at the core at the chassis. The goal and the outcome of an annuity is pretty similar, no matter what. Which one are you going with where you're looking at are discussing is that they promise you a stable secure income and in the financial world, not much can be said to be guaranteed in the financial world as much as anything can be an annuity is a guaranteed form of lifetime income payments.

So with a company.

There are couple things that can disrupt that guarantee.

One is if the company goes insolvent and you can turn to like Pam at Panera air pilots or or American pilots are united.

There was one other. They got renegotiated. You can look at some people who work for municipalities. I remember one county in California had to renegotiate pensions that were promised to workers, GM workers other than railroad workers. I know Illinois.

He was battling with his pension funding for a while.

So if the underlying entity has problems, then there can be issues with that guarantee of lifetime payment.

The second one is your choices that you make a lot of people see this high level of income and they jump at the highest one well that unfortunately often times leaves their spouse with no income.

If they predecease them and then leaves next-generation beneficiaries. No inheritance whatsoever from that pension. And so you got a way that carefully.

Do you take the most income or do you take a reduced income to also cover your spouse's lifetime. Do you take the money in a lump sum in order to personally control it so that you can pass some on to beneficiaries or reach in and pull out of it. In case of emergency or premature death. You know, if we get hit by that proverbial bus a month after receiving our first pension check the rest of that money may go back to the company to pay workers who outlive regular life expectancies so there's a lot of important decisions here when it comes to caring for your loved ones and making the best decisions to provide that financial support when it comes to these two big things.

The first part of her conversation. Social Security and pensions 919-300-5886. It's just under all the things were talking about, just underline how important is to talk with someone who knows what they're talking about Peter Sean is one of those people again. 919-300-5886 on the topic of Social Security how bored it is for the caring of our loved ones when you hear about the government borrowing from the Social Security fund are different things like that. What is happening is that something we should be concerned about what what it was that mean so there was kinda like this little box that was overfunded for a long time. I mean, at its core.

If you if you really want to break it down. Social Security is almost by definition, the grandest Ponzi scheme ever created what has happened is that current workers are paying into it. While current retirees are pulling out of it so they are literally using new investors money to pay off old investors kind of the definition of a Ponzi scheme but it is a government-backed one and as long as there was money in the box it was talked about as being well-funded. There was this trust fund. Well, many, many years ago. They sort of change the laws where they could use some of the money that was safely stored in that box for other purposes, and so that trust fund the Social Security box of money that is set aside to pay each one of us out because as I am working and paying into it. I have some reasonable expectation to one day also be able to collect on that weld that monies not just sitting there in my personal name. I kind of wish wish it was because I personally could probably go out and get a better rate of return and make better use of it, but some people would.

And so that's why this system was created to provide that kind of security for society for for our social welfare, but unfortunately, the government being the government. They have created ways they can use that money in the meantime, well, they tend to spend quicker than they collect and our debt and deficit and and running tallies on just about every line item expense prove that they're not the most responsible handlers of money and the Social Security trust fund has been no exception. So you know were probably going to see some changes there and I think that there are a few things that have been done before. To help solidify the system that will probably be repeated, but to a greater extent, and I fully expect that if there will be some new things that are probably also discussed when they comes time to do.

How do we make this system solvent.

I don't think that it's going to go away. I think that the the age that we will collect it will change again exchange previously. I think that some of it will end up being taxed at a higher level used to be tax-free. And then they put in a couple thresholds of income. The cost to be taxable, might my young worker here in the office said what is the Social Security taxes they're collecting and I talked to them a little bit about it and he said so I'll get that back in retirement. I said yes but it will probably be taxed back ways that way that's being taxed now technically it's not it's being withheld and held for you until a later date when they pay it back. They might tax the back one time that sure feels like it's being taxed that I agree but anyway yeah I think that it will probably will see another threshold of taxation on it and I think that the earnings limitation on on paying into Social Security that something is relatively new. I think Bill probably address that there there's a certain earnings amounts about hundred $30,000. If you make up $230,000. You pay in the Social Security with all of your income.

If you make $10 million you only pay into Social Security on the first hundred and 30,000 or so and at some point time I think they probably address that because the evil rich need to pay in to Social Security for everybody's benefit right right 919300586 great clarity on what type of thing that people gets bandied around all the time but thank you for that clarity on that topic yet where there is no trust fund based right and bottom will clarify that longer explanation to a much shorter one right so if we can't count on the government to take care things. What can we do ourselves to maybe take control of our retirement situation. What about life insurance life insurance is a fantastic financial vehicle right there. There are number of reasons why life insurance is important were talking today about caring for our loved ones. That's number one on the list right life insurance is there to help protect the people that we love.

A lot of times from the debts that we have accumulated or the loss of income that would occur if we were to die prematurely and so that's at its core. That's life insurance purpose. However, when you talk about the loss of income that will occur when one spouse predeceases the the other with Social Security or a pension. Life insurance can be a great way to replace some of that income right it's not necessarily next-generation beneficiaries that were talking about exclusively here with life insurance and there's a way that we seem to convince ourselves on the day that we retire that we no longer have a need for life insurance, especially if the kids are up and out of the house off the, the, the family payroll. If the house is paid off and then we look at our lump-sum retirement accounts as the largest amount of money we've ever personally possessed during our lifetime and we look at all those factors and say I don't need life insurance anymore. Well, the truth, and the bottom line is that retirement can be long and expensive and that lump-sum over the decades has a way of potentially diminishing and dwindling down and so if you can give your spouse the ability to refill that bucket and go on living a fulfilled lifestyle. After you're gone.

Wouldn't that allow you to spend more confidently and enjoying more time together a that's a big one and then be what if there are extensive medical expenses. Long-term care requirements. Toward the end of life.

Even if you still have a sizable chunk of money that can be depleted really quickly, so life insurance can actually refill that bucket or it can be used instead of the assets to pay for some of those long-term care expenses so really at any point in our life if we got a spouse. If we got children if we've got debt, or if we are spending out of our retirement accounts, life insurance is is a really really valuable component and can help us to financially care for our loved ones caring for your loved one. That's what it's all about here on planning matters radio 919-300-5886 is the number to talk to Peter shot himself and maybe get your long-term planning.

In order what about these long-term care expenses. Is there a point you hear the term bandied about. Is there a point where someone truly is self-insured or is that kind of a myth or or a misnomer. You know, if it were paying $200 a day for a nurse to come into our house for for four hours and to tidy up to take care of us to cover basic needs that we have that's $52,000 a year on top of the regular expenses that we already had. And as you go up in the level of care that's required that price tag goes up substantially.

IAEA nursing home room is anywhere from seven to $13,000 a month and that's not necessarily a private room nor the highest level of care that is required so these these expenses can be extensive and and I use that term often but not lightly so, in saying that sure if if you've got 10 million $50 million.

You could probably reasonably say I've got the assets to be self-insured. But here's the thing. The money is what's giving you that confidence and for one half of 1% of the growth on that money per year. In other words, if you had $10 million and you put it in a bank account and you were earning 1% on it per year you take half of that and you can probably by an appropriate amount of insurance that will cover and protect the $10 million that is giving you that confidence so yes, there's a wealth level where you could probably say that I'm self-insured, but people who can say that like to protect their money and so often times it's a it's a it's a factor of leverage can I provide protection for a reasonable cost.

That's what insurance is right.

If I've got a $400,000 home, I don't stick $400,000 in the bank and safe.

I'm self-insured know I go out and buy the cheapest insurance that I can in order to leverage it to protect that asset. And that's what long-term care insurance is really all about. And, in effect, any form of insurance. That's what it does you. You try to pay a minimum cost to leverage that and protect a potential catastrophic event or an asset that you don't want to see decrease in value so for not just the area, not just a financial standpoint but also the kind of mental well-being and confidence standpoint is long-term care insurance. Sounds like a good idea at almost any level.

If you can afford it. If you have enough money to afford not to have it that you have enough money to afford to have it and if you know that you really can't afford not to have it yet. Absolutely. You said it much more succinctly than I did. 919-300-5886 is the number to talk to Peter Sean what happens is a financial planner you talk with individuals you talk with couples and you talk about risk tolerance philosophies. What you what, how do you deal with when one person maybe has a different saving, investing, planning, lifestyle philosophy than their partner.

How do you deal with that discrepancy. I am a fantastic financial planner investment manager marriage counseling is a little bit more difficult, and I will let you know like there has never been. I will say never but like I don't remember a time when I've had two people who were exactly in line and in sync with their investment philosophy and their risk tolerance, and so there is always a little bit of back-and-forth there. I I would prefer to do things this way and they would prefer to do things this way and we have a discussion about that and find a reasonable place to meet in the middle and you know a lot of disagreements occur about money. So actually I'll take that first statement back you know some of financial planning for couples is a little bit of marriage counseling of money is one of the leading causes of divorce if you can have an intermediary there to help you work through some of those disagreements or places where your opinions on things are divergent that may in fact partially be the role of a financial planner where I find that there's kind of the biggest discrepancy that causes the most problems pertaining to our conversation today about caring for your loved ones though Scott is not necessarily in the risk tolerance, but in the attitude of that's my job.

I'll handle that and I I I see this a lot with married couples more often than not like maybe older generation married couples where there is one person that handles the money in the household and I'm using air quotes for you folks. Just listening on on radio they they handle the money that's that's my job and my responsibility and then the other person is completely in the dark about everything and doesn't know where the money comes from where it goes.

How to pay the bills and then the person that handles it passes away or is no longer able to handle it and things fall apart quickly ran so we really we have this this person for prevailing attitude that were doing the other spouse a favor by doing that and really at the end of it it's it's almost the exact opposite. We we really do no favors. If our spouse and partners in the dark about financial matters and in that other spouse. That is all in the dark.

They may have requested the survey. Finally, I don't want to hear about you take care of it is nine. These verily it's but but then that comes back to potentially bite them. We talked about all these kind of cautionary tales and things like that when it comes to taking care of our loved ones what about the other end with the legacy leaving a lasting impact leaping something that lasts longer than you do. That's a common aspiration or a goal for many of us, how is that in terms of prioritizing in terms of planning in terms of caring for our loved ones in the lasting legacy department as we wrap up today yet will I will first comment that if that is the desire of a spouse to cannot handle.

I do not care. I do not like talking about handling the money may be even more important to have a relationship with a trusted financial professional and wondering they are comfortable with. Even if you are completely comfortable handling the money and the investments at least having a trustworthy relationship established for them to fall back on.

You know when when looking at legacy. It may not be the top priority for everyone to leave the bucket of money to the next generation. In fact, 15 years ago in this profession I heard that a lot more than I do today is that I want to make sure to leave something behind to my kids.

Today it is if I have anything left behind. It's okay to go to my kids and and so it's not as big of a goal today as it was maybe a generation or a couple of decades ago, think that is what's the shift. I think people are worried about running out of money just just wanting to make sure that they have enough and then also kind of the attitude that hey I did a lot for my kids. During the course of their lifetime. They had a pretty good they are pretty lucky that that we were able to provide them with the life that they had and as a result, they're pretty well-established on their own so they don't need anything left behind. I'd rather enjoy my money.

That's not a selfish sentiment in any way.

I'd I don't think that there's anything wrong with that but here's the bottom line is if you have a plan where you have reasonable confidence that your money will last as long as you needed to your lifetime in a day more. Guess what, there is a even higher likelihood that it will last more than a day more and that you will be leaving something behind and in which case you should prepare the assets and the children for that transition, or whoever is going to be the recipient. Whether you know sometimes it's a church, a charity and organization. Some cause and there are some great ways to leave that behind. But if it is children preparing them for the inheritance that they may receive even if it's not a certainty.

So I think having discussions about your values about what it took to build up your wealth about what you do with your money on a regular basis among families is important now is something that my mom taught me very young. She was a single parent teacher in making ends meet in the household was not always the easiest thing is what gave me a lot of my perspective about money as we would sit down and balance the checkbook together and for me being a Dave Ramsey smart investor Pro I talk a lot about that in the company of my family. My son is 12 years old, but he is just opposed to debt or spending money he saved like he's got his birthday and Christmas money stashed away from the time he was six or seven years old and is like the banks not paying much in interest, dad, and I'm like I know he feels comfortable spending his gift cards but he will not spend money, and he asks a lot if we have any debt or how much we owe on the house is like a concern to him because we had those conversations and as you get into later stages in life. I have conversations now with my mom about making sure that she's got her boxes checked in and everything squared away for making sure that she doesn't run out during her lifetime and and we talk a little bit about if there's anything left over so I think that it's the values in the discussions rather than the value of the transaction transition of actual dollar amounts that are important among families to leave the best and most lasting legacy Sean family taking baby steps to a whole new level.

Here that's great and if you if you want to talk with Dave Brandt talk with Peter Mershon about these these great retirement options and if you want to really if you just think maybe what would happen if something happened to me. What would happen if something happened to my level what what what plan do we have in place if you don't know, you really need to call 919-300-5886 to talk to a Dave Ramsey smart investor Pro in Peter Mershon. Any lasting tips you want to take us out as we talk about caring for our loved ones in this tumultuous financial world would save just a quick quick checklist your preplanning on on any kind of event is important discussions about budgeting and spending and expenses bills knowing where they are where they need to be paid. Opening your mail is one of the foundational pieces for financial success in today's day and age, having access to accounts and crediting online usernames and passwords so that somebody can handle things.

Having your legal documents in place.

Having your beneficiaries up-to-date as decisions with Social Security and pensions are important, life insurance, a lot goes into it Scott and we go over all of that and the optimized planning review and strategy session and just I know were out of time so I appreciate the time today give me a call if you'd like to go through that 919-3005 86. Thanks so much Peter and future to join us next time on planning matters planning matters radio the content of this radio shows were fighting for agent of any investment strategy you were encouraging investment tax or legal advice from an independent professional divisor in any investment and/or investment strategies mentioned involve risk advisory services offered through virtual capital management is a registered investment advisor. Duty extends only to investment advisory advice does not extend to other activities such as insurance or broker-dealer services advisory clients are charged a quarterly fever as a commandment, belligerent, product and commission, which may result in a conflict of interest regarding compensation