[content_block id=1185]
Announcer: It’s time now on KROS for Financial Focus, brought to you by NelsonCorp 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 representatives, 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 NelsonCorp 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 today. We were just talking, what a difference a day makes as far as the weather out there. A little chilly, and obviously a little wet out there today.
James Nelson: Yeah, no doubt about it. The next several days don’t look that great. Winter’s back, and unfortunately, so yeah, it’d be nice to get back into the 60s at least.
Nate Kreinbrink: Yeah, we were kinda spoiled there Friday, Saturday, Sunday, Monday, I mean even yesterday, as far as decent temperatures, being able to go on out and be comfortable out there, but like you said, looking at the extended forecast, there was one of them that had that white snowflake thing on there again as a possibility depending on what temperatures are. So we’re not quite out of the woods yet, I guess it just goes to the unpredictability of the weather here in the springtime in the Midwest.
James Nelson: Yeah, exactly. That snow can stay north, we don’t need any.
Nate Kreinbrink: Yeah, I did see that up there in Minneapolis way, as far as the snow amount that they’re supposed to be getting over the next couple days, and again, they can keep it up there, but I think ultimately, it’s not gonna help our floodwaters and some of that flooding as that kind of melts and continues to wash down. So we just hope that gets taken care of and that there’s no real issues, anymore major issues than what it already has been.
James Nelson: Yeah, I was just gonna say that. We don’t need the rain either, with the river levels where they’re at, so…
Nate Kreinbrink: So we were driving over to 3M for some workshops or whatever and just looking at the 84 over there as you’re driving through Albany and into there. I mean that water’s getting up there, and it’s crazy how high that stuff is coming.
James Nelson: Yeah, yeah. Hopefully it’s crested and works its way down here in the next week or so.
Nate Kreinbrink: Over the past few weeks or whatever, we’ve talked a lot about taxes, and obviously rightfully so. Tax season, less than a week until the deadline, as far as on Monday, with the 15th, as far as able to file your taxes or file for that extension if you’re eligible. So again, we have focused a lot on that, of last minute things that you can do for your taxes for 2018.
But again, looking at the big picture, taxes are just one part of the overall planning process. And we’ve hit, kind of individually, a lot over the individual parts of the financial planning, but I think it’s good to look back on just the importance of just general planning for your retirement, just to have some kind of basis idea.
When we sit down with individuals, sat down with new clients last night, and just kind of got into a lot of these discussions, and I think it opens people’s eyes a lot to see how your Social Security decision comes into play, how the accounts that you have and how they’re taxed, whether they’re tax deferred in your traditional IRAs, traditional 401(k)s, if they’re tax-exempt, tax-free, like your Roth 401(k)s, Roth IRAs, if it’s just a taxable account, and how you can look to coordinate those to control your tax liability throughout retirement.
And then, of course, you look at Medicare expenses, you look at pensions, you look at all this type of thing, and I think it’s important, and again, I think people often overlook the fact of how all those different parts, they’re not individual decisions, one and of themselves. They need to be coordinated, they need to be worked together, because again, what you make in one decision will probably have an impact on one of the other ones.
James Nelson: Absolutely, and we talk about it all the time. The tax planning should take place during the course of the year. The retirement planning should take place five, ten years before you actually retire. We’ve had clients come in and you know, “I’m looking to retire next month,” or next week. You can’t really do anything at that point. It is what it is, but leading up to retirement, those five, ten years, positioning assets. Like you said, Nate, what type of accounts do we want, where do we want asset positioned going forward. It’s not just looking at one year or one scenario, we’re looking over the course of retirement, how things match up. So that’s the big item.
A lot of people see us as the guys that manage the investments. That’s kind of the cool, sexy part of the job, but there’s a lot more to it. Investments certainly have their place, and certainly a big part of the discussion, but the tax planning, the Social Security planning, the Medicare planning, all of those things tie together, and people just don’t have those conversations, we find.
We sit down all of the time with new clients, and they’ve never had these conversations, never really talked about how assets should be positioned. “I just save it in my 401(k), and when I retire, it kinda is what it is,” and we find that a little planning can go a long ways to setting people up, putting the money in the right type of accounts and positioning those accounts for a much better retirement.
Nate Kreinbrink: Right, and I think that the points you made as far as just sitting down and talking with the clients and understanding what it is they’re trying to accomplish. I know a lot of times when people come in, they sit down with us, soon as they sit down, they bring out their statement, and they hand it to us and say, “Okay, here it is,” when that’s one of the last things that we really even look at, because we sit down, and we have a conversation with them and just truly understand what it is that they’re trying to accomplish and then get them to understand that the decisions that they make as far as where they’re taking money out, when they’re taking Social Security, may have an impact on their overall goal of their assets.
Some people they come in, and they say, “Well, I want to take out a little bit of this in income, but my main goal is I want to leave a big chunk of this to a charity of my choice,” or, “I want to leave this to the kids or the grandkids,” or whatever it may be. But yet, the decisions that they’re making, they’re drawing down those accounts, so they’re obviously limiting the amount that they’re able to do with that later on.
So if we can understand what they’re trying to accomplish, understand the different types of assets that they have, and try to direct them in the path as far as to optimize what it is that they have. I mean, if they’re looking for just some income, and we can look at some different vehicles to guarantee the biggest amount of income that’s gonna come to them in a monthly basis over the course of their lifetime, we may take a little bit just to guarantee that they’re gonna have with their Social Security income, with this other guarantee income that we’re gonna have, that they’re bare necessities are covered.
So at the very least, their bills are covered, and they don’t have to worry about necessarily as much, the market swings that are gonna go and that are gonna affect their account, which in turn can maybe maximize the amount that they leave to a charity of their choice, or whatever it is that their wishes are. But again, they all go hand in hand. The left hand needs to know what the right hand is doing, and when we make decisions, they need to be in accordance with each other.
James Nelson: Yeah exactly, and what you just brought up kind of goes hand in hand with the estate planning discussion. That’s overlooked all the time. How many times have we talked to clients that have money in a 401(k) plan or an IRA, and an ex-spouse is still the beneficiary, or they don’t have a beneficiary, and the asset could go through probate when it really doesn’t need to. So estate planning’s a big item too.
You talked about clients that have the strong desire to give money to grandkids, kids, charity, what have you. Having those conversations, deciding on what assets should probably go to the grandkids, or what assets should go to the charity, just having those conversations can really go a long way, because again, people don’t always think about it in that fashion. “Hey, I’m giving ’em a buck, doesn’t matter what account it comes from,” when in reality, it does. There’s a lot of planning we can do just by maybe even tweaking beneficiary forms to maximize client’s goals.
So you’re exactly right. Estate planning goes hand in hand with a lot of these discussions as well.
Nate Kreinbrink: I think, and another big term that always keeps continuously coming up with clients, is diversification, and what they perceive diversification as versus what, in reality, they actually have. I mean, people think diversification, they think of the different funds that they have, or the different asset classes that they have inside of their investment accounts, but then they always go back to say, “Well, I’m gonna have an account here. I’m gonna have an account here. I’m gonna have an account over at this place, an account over at this place, because I want to diversify my investments into different places.”
Well, in actuality, when you would sit down, I’d be very hard-pressed to say that they’re diversified by their asset classes just because they have their accounts in different buildings. What usually ends up happening is, they’re allocated roughly the same in this place versus this place versus this place versus this place. So when the market does the swings, all of their accounts are getting impacted and affected exactly the same. So, as far as from an asset class standpoint, they’re not diversified at all, they’re just diversified by the buildings, the roofs that their accounts are under.
So again, it’s hard to coordinate and to make all those accounts work together if they’re all spread out across different places. I’d compare it to when you go and get new tires on your car. You’re not gonna go to four different places and get one tire from every single car that you go there. You’re gonna go to one place that you feel comfortable with, that’s gonna take the best care of you, and you’re gonna get your tires done there, all four of them, on your car, done at the same time.
Your accounts, again, you need to make sure that everything is moving in the right direction, because otherwise you may make a good choice with one of these accounts, but a bad choice with another one at a different place, you’re gonna take two steps forward, you’re gonna take two steps back, or whatever. Or you’re gonna have some gains, but you’re gonna end up paying it all back in taxes at the end of the year. So that coordination is vital, and again, people need to understand what it is that they actually own, and understand how they’re working together.
James Nelson: Yeah, and how about coordinating the 401(k) plan, too, right? I mean-
Nate Kreinbrink: One of the biggest assets that people probably have.
James Nelson: Absolutely, 20, 30, 40 options in a 401(k) plan, and oftentimes, they own the exact same thing in the 401(k) plan as they do in an IRA or an after-tax account, when in reality, there’s tens of thousands of different investments that you can get outside of a 401(k) plan. Why are we owning the same thing, rather than having some diversification? And maybe owning some things in the IRA or the after-tax account that I can’t get in my 401(k) plan. So, it just makes sense, but again, you don’t have those conversations, we don’t look at the overall picture, then it’s impossible to coordinate those investments and that’s a big item for a lot of people.
Nate Kreinbrink: Exactly, and again, all this stuff is complicated, and I always tell people, “I would have no idea what I’m doing if I go out and try to work on my car.” To expect a normal person, the average person that isn’t working in this in an everyday basis to understand all this stuff, it’s nearly impossible. Your retirement decision is one of the biggest decisions probably, maybe one of the most stressful, hopefully one of the most happiest decisions that you ever make, but again, you need to have a plan in place to make sure that you’re prepared for it.
Again, if you have questions on any of this, be happy to sit down with you and just go over things and just have discussions and maybe bring up some points that you may or may not be aware of, to again, make sure that everything is laid out and when you are making this decision, you’re the most informed as far as what you can be.
James Nelson: Absolutely. We’ve got great software that can map out a lot of different scenarios and we’d be happy to sit down with anybody and walk through that.
Nate Kreinbrink: Yeah, and before we do run out of time here, time goes quick when we get into some of those topics, but did want to mention that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of April will be donated to the Fulton Food Pantry building expansion project.
Again, James thanks for joining me.
James Nelson: Absolutely.
Nate Kreinbrink: Again, Nate and James with NelsonCorp Wealth Management, bringing you this week’s Financial Focus. Thanks again for tuning in, and have a great rest of your week.
Announcer: Financial Focus is a production of NelsonCorp 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 representatives, 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 NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.
[content_block id=1539 slug=button-for-all-tv-and-radio]