Announcer:
It’s time now on KROS for Financial Focus, brought to you by Nelson Core Wealth Management. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and Nelson Core Wealth Management are not affiliated. Cambridge does not offer tax advice. Now here’s today’s Financial Focus program.
Nate Kreinbrink:
Good morning and welcome to this week’s Financial Focus, brought to you each and every Wednesday morning right here on KROS. Well, this is Nate. James, joining me again today. We were joking on the way up. I think it’s officially Christmas break. Kids are on school, all the local schools now I think are on Christmas break. Although, I don’t think we’re going to have a white Christmas. It’s still that time of year.
James Nelson:
Yeah, it’s fine with me. I don’t need any snow yet.
Nate Kreinbrink:
That snowblower can stay in the garage a little more longer.
James Nelson:
Yeah, that’s right. We’ll catch up in January and February probably, but yeah, Christmas break, fun time of year for the kids anyway.
Nate Kreinbrink:
It is and it’s hard to believe that we are talking about that already. Just seems it was Halloween and summertime and kids just starting back to school. Years flying by as we get into this. But again, like you said, exciting time of the year. Holidays, spend it with family, with friends and then being able to enjoy it and appreciate the year that we’ve had. And it’s been an interesting year. As we had said, as far as with the weather, being able to adapt with it, not knowing if we’re going to get to snow, not get snow, what’s going to come.
Nate Kreinbrink:
Midwest, we always say, if you don’t like the weather wait a day because it’s going to change on us. It that ability to be able to adapt. And I think what we saw throughout the course of obviously last year but then of this year in 2021 was that same theme and the term that comes to mind as being able to adapt and how you’re able to take the situation and no matter what the outcome is, being able to take that and apply it to your life and this year, I think we’ve seen that in the markets more than ever.
James Nelson:
Yeah, absolutely. And we talk about it all the time and it hasn’t been more true than the last two years, is just being able to adjust and change things on the fly. I can’t tell you how many clients that I’ve either had conversations or put plans together, talking about a retirement date somewhere here in the future and then COVID happens. All of a sudden, maybe plans change a little bit. Employers have been dealing with those issues, record number of retirement. Retirees going out last year. I think the numbers are going to probably be pretty close again this year. And again, Nate touched on it but being able to adapt and being able to change and that’s what we do. Life happens, whether you retire early because of a situation like we’ve been dealing with, maybe a health situation, not related to the pandemic but things happen and people need to be able to adapt and be able to adjust on the fly. And again, that’s where the planning comes in and that’s why we do it.
Nate Kreinbrink:
Well and that planning you said is so key. And gain, none of us have a crystal ball that works a hundred percent of the time, a hundred percent accurate all the time. But again, it’s being able to put things in place and saying, okay, what about the what ifs that happened in life? Because it’s not if they’re going to happen, there’s going to be things that come up that we’re not expecting, whether it’s an unexpected health situation, an unexpected expense that comes up, emergency that comes up, you’re going to have those things throughout life. Everyone does but it is how you react and if you have the ability to be able to take that in stride and still make that to your plan you’re going to be better off. Then we’ve seen it with people as far as retiring, possibly earlier than what they thought they were going to do. Whether it was being forced to maybe with a health situation.
Nate Kreinbrink:
Maybe it was just getting to a point where, you know what, enough is enough. I’m done. I’m going to try to make this thing work and can I make this work and being able to make that decision doesn’t just happen overnight, unless you put the things in place throughout your working career, in order to have them in place, to be able to make that decision and make it work. And that’s where the planning comes into play to get people on the right track as early as we can, so they can have those options later on.
James Nelson:
It also plays into the actual individual investments that we talk about on a daily basis and what we own in our portfolios and what clients could potentially own inside their retirement plans while they’re still working. It’s an all weather portfolio. We’ve got to be able to make returns, make money in different periods of time. And we’ve been on a wild ride here the last two years. There’s been some big winners and some big losers when it comes to the investment world and being able to adjust and being able to see those trends and pick out those investments ahead of time can really make a difference. Volatility has been relatively low for most of this year. It’s been pretty smooth sailing until we hit the fourth quarter here and markets are bouncing around all over the place. So having that all weather portfolio where you’re not loaded up on just one area or one investment or one sector being able to have a diversified portfolio but also being able to adjust and willing to adjust on the fly, could really make a difference too.
Nate Kreinbrink:
Right and I think as far as you said with the portfolios, a lot of the changes that we’ve made over the last couple of months necessarily hasn’t changed the mix between stocks to bonds to cash or whatever. It’s changing the type of stock funds or type of equity funds that we own because of those opportunities that you said. And you mentioned as far as when is the time to be in certain sectors or whatever and how can you massage it and take advantage of some of those. So again, not necessarily changing the overall mix but how the specific equity positions are allocated into these different sectors.
James Nelson:
Yeah and just take this year, for example, just recently with the Fed’s conversation about interest rates come next year. If you don’t know how interest rates going up is going to affect your portfolio, you probably should. So the Feds talk just recently about raising interest rates two or three times come next year and we haven’t seen that in a long, long time. Interest rates have been low or trending downward for a long time.
James Nelson:
Now we’re in a period where the Fed’s going to raise rates and how’s that going to impact my portfolio? How’s that going to impact my bond holdings specifically? Inflation’s been running hot recently, as hot as it’s been in a long, long time too. And again, how is that going to affect my portfolio and what investments are going to be able to take advantage of a situation like this? So there’s some big variables. There’s a lot of change these days and being able to stay on top up of it and keep up with it and try to get out in front of that curve so you can take advantage of the situation is absolutely critical.
Nate Kreinbrink:
Right and you mentioned inflation and we were going to see it next year with the social security cost of living adjustment at 5.9%, which again, on the surface seems like a good thing but again, adapting to what that also means now for your Medicare premium and we see that next year’s part B, the first tier of your Medicare premium’s going to go from 140 ish dollars, what it is now up to $170 next year for that first tier. So again, that increase that you’re going to get with your social security benefit for a lot of people, the majority of it is going to be wiped out with that increase to their Medicare premium. So again, higher expenses to go along with that, being able to adapt to it and again, that’s not even touching on the five tiers that you have for Medicare because obviously if that first tier goes up, those next tiers subsequently are going to go up as well. So again, we want to be able to make sure that we watch our income to stay in between those tiers where we can help it too.
James Nelson:
Yeah. And we’ve talked a lot about the investment side and what’s gone on in the markets but what about on the tax front? There’s still some-
Nate Kreinbrink:
Good luck.
James Nelson:
Yeah, exactly. There’s still some conversation there about whether or not something could get done next year, as far as some tax changes, that’s always going to happen. We’ve seen it time and time again where there’s a new regime in Washington and the rules change a little bit. So again, we just talk about staying up and staying current on what’s taking place because again, there’s some planning that we could probably be doing ahead of time to position a client situation or person a little better off going forward.
Nate Kreinbrink:
Right and I think we’ve had a lot of discussions with the tax front is being able to just give yourself options in retirement. Again and those options usually rely on creating different types of buckets and those buckets vary based off of how the money inside of each bucket is taxed, with the tax deferred, your traditional IRAs, your traditional 401ks, money being taxed when it comes out of there, as opposed to the flip side with a Roth IRA, there’s no deduction as far as money going into it but it comes out tax free and having those two types of buckets throughout retirement and being able to adapt to whatever regime is in office at the time, whatever tax rates are at the time, as far as when you need money.
Nate Kreinbrink:
But again, having two different things to say, if tax rates are lower, maybe we look at the Roth a little or the tax deferred account a little bit more. Tax rates jump away high, well then we may have to shift over and take a little bit more out of the Roth there in those high tax years. But again, those options and those things don’t happen overnight. There has to be some planning earlier on to be able to create those buckets in order to have those options later on.
James Nelson:
Yeah. Change is inevitable. We all know what it seems to move faster than it ever has before. So, having a plan that can be flexible, having an investment plan that could also be flexible, given the current situation is vitally important. It’s what we focus on each and every day.
Nate Kreinbrink:
All great stuff. Again, want to wish everybody a very Merry Christmas from myself, from James and the entire team at Nelson Corp Wealth Management. Just wish you a very Merry Christmas and hope it’s a safe, happy holidays for everybody.
James Nelson:
Yeah. Merry Christmas everybody.
Nate Kreinbrink:
Before we do run out of time, I do always want to mention that every Friday Nelson Corp Wealth Management is wearing jeans for charity. Money raised in the month of December will be donated to the Clinton and Comanche Knights of Columbus Ladies Auxiliary. As always appreciate you guys joining us, Nate and James with Nelson Corp Wealth Management, bringing you this week’s Financial Focus. Thanks for tuning in and have a great rest of your week.
Announcer:
Financial Focus is a production of Nelson Corp Wealth Management in Clinton and Davenport. The opinions voiced in this show are for general information only and are not intended to provide specific advice or recommendations for any individual. Any indices mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member of FINRA, SIPC, investment advisor representative Cambridge Investment Research Incorporated a registered investment advisor. Cambridge and Nelson Core Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information visit our website at www.nelsoncore.com.