[content_block id=1189]
Announcer: It’s time now on KROS for Financial Focus, brought to you by Nelson Corp 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 indexes mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member FINRA, SIPC.
Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and Nelson Corp 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. This is Nate, got James joining me this morning. We got a … Made it through the Easter weekend. Kids are back in school after a little break there. Amazing weather-wise for Easter weekend, one of the nicest that I can think of in quite some time. I know Easter egg hunts and just being able to be outside on Sunday was pretty nice, especially like you said, where we came from over the past couple of months.
Being able to sit outside, got a little sun I think too, a little bit. So it was nice to actually feel that outside a little bit.
James Nelson: Yeah, exactly. Now the rain and the cooler temperatures are back for the rest of this week it looks like and maybe even early next week. Didn’t last too long.
Nate Kreinbrink: Didn’t last too long, kind of back to I guess normal. But I guess if normal is 60 degrees with a little chance of rain, that’s kind of normal I guess per se for this time of year. It’ll definitely continue to make the grass grow. I know I gut mine for the first time this past weekend, and so it starts. Now we got to every so many days get out there and keep it cut and short, I guess.
James Nelson: Yep, yep. The yard work’s back already. So, yeah.
Nate Kreinbrink: Last week, Andy and I talked. Andy with our Nelson Corp tax solutions joined me last week. We kind of talked tax season, some things that he saw over the course of the tax season, how the new tax laws impacted people when they filed this year. He said it was fairly normal for people to get a little smaller returns back this year, but when you look at back to 2018 when your paycheck was a little bit bigger with each check that you got throughout the course of the year, you add that on top of the return that you got, people for the most part came out ahead. They just didn’t get it all back at the same time when they did their refund. They got it back paid out throughout the course of the year.
Talked a little bit about that. Again as you transition from tax preparation time, ends kind of at the tax deadline, unless you filed an extension. But now we transition into the tax planning part, and some of the things that we can still look at and do if the return or the refund that you got maybe wasn’t as big as what you were expecting. If you had to pay in more than what you were expecting, some things that you can possibly look at to counteract that as you move forward for when we go 10 months, 11 months from now when you file your 2019 tax return. Hopefully it’s a little bit more advantageous for you.
Again, any questions on that, give us a call. We can definitely sit down with you. I know that’s what Andy always loves to do this time of year where he can catch his breath after tax season. Be able to sit down with people again and do that tax planning rather than just basically looking back and saying, “Okay, this is what you had. This is what you owe, and it is what it is.” Being able to have some of those things and make some changes to it.
James Nelson: Yeah, absolutely. We beat that drum up here all the time, and there’s a big difference between tax planning and tax preparation. As you mentioned, this is the time to sit down with your financial professionals whether that’s financial advisors or accountants, and actually do that work and do the planning because when you’re in the mix of the tax season, number one you’re not going to get the accountant for any amount of time, and number two it’s pretty limited in what you can do at that point.
Anyway, yeah. This is the time to do it. You’ve got all year, or most of the year left. Make sure you are thinking about a lot of these items and certainly, like you said Nate, give us a call if we can sit down and help.
Nate Kreinbrink: Right. I know another portion and another topic that James and I really wanted to kind of mention a little bit today as we were discussing what we were going to talk about was pension buy-outs. There’s been a few of them of the local businesses in the area that have been offering these pension buy-outs to some of their employees, some of their key employees, whether it’s age, years of service, whatever it may be.
A lot of times, people get that and they look at the numbers and they look at all these different options that they have on there, and their head just starts spinning like, “I don’t even know what to do. I think it’s good, I think it can help me. But which one is the best?” If you take a lump sum, if that’s an option. If you take the monthly payments, is that an option? Do you go 50% survivor? 100% survivor? Does it offer healthcare insurance with it?
There’s so many different options that come along with some of these offers that these companies apply to, and each one is different and each one of these options affects an individual differently as far as are they even ready to be able to make that decision to walk off the job, and what is going to be the next step? Are they able to just walk off and, “Okay, this is retirement? I was going to do it in a few months anyways, I’m just taking it a little bit earlier now with [inaudible 00:05:22] this. Or is it maybe not quite the time for me yet, even though as nice as it may seem, it may not quite be the right time.”
I know James, you’ve sat down with a few of these people and went over some of these options with a lot of these people lately.
James Nelson: Yeah, and so it continues. I mean, a lot of these companies have been moving that direction. It just keeps going that way. The pensions are a liability to a lot of these large employers. They’re buying them out, they love when employees take the lump sum option and in the right situation, that can work out well for the employees. Most people like seeing that big number and, “Oh, I’m going to jump on that one.”
Well, it depends. It depends if you’ve got a spouse and the age of that spouse, and the age of the employee at the time of the offer. Like you said, Nate, a lot of people get these offers but the math just doesn’t work. It’s not quite the right time, they’re just a few years shy or they can’t carry the health insurance. They’re prior to age 65 and don’t want to spit up a couple thousand dollars a month for themselves and a spouse.
So you’re right, we really have to sit down, look at these options, and yeah. From what we’ve seen so far, there’s a lot of people that are jumping on it and in a position to retire. They’re able to take advantage of it, so that’s been great. But jumping on the lump sum may not be the best situation, just depending on your age and spouse’s age and what your financial pitcher looks like.
Everybody’s different and we love sitting down and running those numbers, and going through a plan.
Nate Kreinbrink: Right, and I think the big thing that always jumps out at people is that big lump sum number. I think it’s very eye-catching to a lot of people, and for some people, a lot of people that may be the route to go as far as the flexibility, the liquidity, the options that they have with having access to that block of money rather than paid to them in a, basically a pension amount where every month they’re going to get a certain amount for their lives and possibly a spouse’s life.
But again, understanding how that is going to fit and how it’s going to impact your other one, your spouse, your overall retirement plan. I know a big aspect of a lot of these pension buy-outs is the healthcare, as far as are you able to stay on a company plan up until 65? I mean, if you’re 61, 62, 63 and you walk off the job and all of a sudden you no longer can take the healthcare through it, you’ve got to fund your own healthcare. You can only stay on the COBRA plan for so long, until you get to that 65 Medicare age.
What also comes into play then is another spouse. If a spouse was on your plan through your employer and now all of a sudden you take that buy-out and you’re no longer employed there, you no longer have insurance. Well, that’s two of you now that have to go into the open marketplace and get insurance until you guys get to 65 or where you’re going to have to switch over to that spouse’s plan. Whatever the case it may be.
But again, that’s a part that again, if you’re going to have this chunk of money that’s coming over and you think, “Oh yeah, this is great!” Well then all of a sudden if I got to pay a chunk larger that I wasn’t expecting to healthcare every single month, that’s going to eat into some of the decision that you’re going to make and you may not be as well off as what you thought you were just because of the simple fact of you overlooked the healthcare portion.
James Nelson: Yeah, and that’s the biggest decision. I mean, everybody we’ve sat down with the last several years since our healthcare system has changed dramatically, the people prior to age 65, the number one question is, “How am I going to pay for the health insurance?” If a spouse is already retired or retiring at the same time, and we’ve got to come up with the money to fund a year, two years, five years of out of pocket healthcare costs, that is just really tough to do at current healthcare expense level.
So you’re right, that’s the driving factor for a lot of people and it continues to get worse, unfortunately. Everybody knows that healthcare prices are still going up, and there’s really no sign of stopping.
Nate Kreinbrink: Right, and I think again it’s just important to understanding what these options are, how they impact you because again, with a lot of these things there’s no do overs. Once you make that election and it’s in force, you can’t go back and change your mind at that point in time and say, “Oh yeah, something changed. I want to go back and redo it.” Well, you’re locked into the decision you make.
So it’s important to understand how your decisions and how it fits into the overall retirement plan. We talk about this all the … A lot of times, a lot of weeks that we’re in here, the different aspects of it, how it all fits together. I know I sat in on a meeting last night with a couple that the lady said, she goes, “I listen to you guys all the time and I hear a lot of these things that you guys mention on the radio. Actually sitting down with you in a meeting and seeing how it all comes about and what it all means and how it all comes together,” she goes, “it’s pretty neat to see how that is.”
She goes, “I don’t catch everything when you say it on the radio, but now when I see it, I understand it a lot more.” So again, I think that’s the important part of doing it. We try to cram so much information into these 10, 11, 12 minute segments every Tuesday morning. But there’s so much more to that, and so much more to get in depth and especially on an individual basis as far as … because everyone’s situation is different. I know a lot of times we say, “Well, should you do it, should you not?”
It does depend, because there are so many different factors that go into decision making when you make these decisions for you that are different than your family members, your coworkers, your neighbors, or whoever else it may be.
James Nelson: Every area impacts the other, right?
Nate Kreinbrink: It does!
James Nelson: Taxes, investments, social security strategies, Medicare. All of these fit together and it’s a lot of info, but the best way to put yourself in a good position and stay retired is going through that planning process and understanding how each impacts the other. It’s good and it’s good to hear that people are listening to the program and understanding some of the topics that we talk about and now are able to utilize it for retirement.
Nate Kreinbrink: Perfect. Before we do run out of time I did want to mention that every Friday, Nelson Corp 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.
Well James, appreciate you joining me again today.
James Nelson: Yep, absolutely.
Nate Kreinbrink: Again, Nate and James with Nelson Corp Wealth Management bringing you this weeks’ 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 indexes mentioned are unmanaged and cannot be invested into directly. Registered representative securities offered through Cambridge Investment Research Incorporated, a broker dealer, member FINRA, SIPC.
Investment advisor representative Cambridge Investment Research Advisors Incorporated, a registered investment advisor. Cambridge and Nelson Corp 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]