[content_block id=1177]
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 are unmanaged and cannot be invested in to directly. Registered representatives securities offered through Cambridge Investment Research Incorporated, a brokered 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 flying solo today, Wednesday morning out there, think we can all say it’s a.. it’s nice to see that the precipitation that’s coming down isn’t in the white variety, although the rain looks like it’s gonna be around for a little while, although I think we can all be happy to see that the temperatures are.. have also turned a little bit warmer so hopefully we’ve turned the corner a little bit with that. And looking at the extended forecast, looked to be pretty mild, I think for the upcoming ten days or so that I’ve seen, but again looking forward to green grass, seeing all that snow melt, getting some of that stuff cleaned up or whatever, so. Hopefully we can say that spring is getting closer and we can get outside, green grass, flowers starting to bloom, things like that.
But getting into today’s program, wanted to kind of talk a little bit about the big concept stuff that we’ve talked about in times before. We’ve broken it down, but I think the overall retirement planning, I think still has a lot of confusion for those individuals that are nearing retirement, or that are in retirement wanting to know if they’re on track, if they’re on the right path to even be able to make that decision, and if they do, make that decision with a little confidence.
Most of the time when we meet with people, they’re solely focused on the accounts that they have, whether it be a 401K, IRA accounts that they have, things like that and what it’s return is. I guess, I mean as far as stocks, bonds, cash, whatever it may be, what did we earn? Did we earn 3%, did we earn 10%, well why didn’t we earn this percent? Well I don’t want to lose any money, yatta yatta yatta, whatever it may be. And although that’s a big part obviously of the overall planning, it’s not the only part. And I think people become so focused on that one aspect that they kinda lose focus on the other couple parts of it, the other pieces of the puzzle that go together for an overall retirement plan.
And I would have a strong argument to say that the other pieces that they’re ignoring have just as much, if not more, of an impact on their overall retirement plan than just if they earn 4% or 5%, or 5% versus losing 2% or whatever the heck it may be. But understanding how that goes into play, and I like to use the analogy as far as individuals, we talk sports a lot on here, lets just take instance those who are familiar with baseball. If you have a team that all their focus is on their offense, so we got hitters, we can hit home runs, we’re putting all of our focus on there, but we’re neglecting to practice, to focus on, to take care of, to make sure our defense is solid, to make sure out pitching is solid, to make sure our coaching is solid. You’re gonna have instances where the team yes they may score ten points or ten runs a game, but it’s not gonna be that good if they’re giving up 12 or 13 or 14 or 15 runs a game on a consistent basis.
Yes there’s gonna be some times because they have a great offense, that they’re gonna score 15 runs and they may win 15 to 14, but for the most part if you’re just focusing on one and neglecting the other, you’re taking two steps forward but you’re probably taking a step or two backwards at the same time. Same thing is for football, I guess you can say it’s the same way. If you have a great defense and we put everything into it, but we can’t score anything on offense, well you’re not gonna win as many games, you’re not gonna be as successful.
And I think when we take those just analogies and comparisons and we put them into the overall financial landscape, there’s a lot of similarities with some of those concepts, where if we focus solely on the investing portion of what we have and what we’re looking at for retirement, and neglecting the tax planning, neglecting the Social Security planning, neglecting what’re we gonna look at for healthcare expenses, estate planning so on and so on and so on. Those are all pieces of the puzzle that technically need to be accounted for and accounted for equally, because in a lot of instances what decision you make for each one of those has an impact, either positively or negatively, on the rest of your plan. And what it may potentially allow you or not allow you to do, and to do something with the planning things.
So, again investments are a big part of it, I am not kicking those all the way out and saying no they don’t matter at all. They do matter, and those are kinda the flashy thing that people focus on; what’d you own, what’d you make. It’s easy to see that and to talk about that, you hear that in the headlines, well what did the DOW make, what did the S&P make, what did the Nasdaq make? And then you hear all this, so again it’s easy, easily to get tuned in to that and to kinda compare that to what your investments are, but a lot of times when people see that then though they say well I heard the DOW was up such and such, how come my accounts only up whatever it is and not as much as what that is.
Well understanding what the DOW is is obviously if you’re to compare apples to apples, you would have to be invested in 100% stocks to have some what of a similar comparison to what it is. And a lot of people don’t wanna be able to, or aren’t in the position to be able to take on that much risk. So they have a balance, they’re diversified inside of their portfolio where they have some stocks, they have some bonds, so they’re not really comparing it so if all things equal and the DOW was up a bunch and your account is lagging, well it’s because you don’t have all your money in the game where as some of those other things do, so. Again, having people and helping them walk through what it is that they actually own, what it is that they’re actually comparing, I think is a start with that. But again as I said, these other pieces, the tax planning aspect, when we look at taxes, taxes are one of the biggest expenses probably right getting up there with healthcare, that you’re gonna have throughout your retirement.
And when you don’t have income coming in, and you can look at your taxes and say, what can I do to try to reduce my taxes, in a legal way obviously, but what can we do to do some planning whether it’s next year, five years, ten years, 20 years, 30 years down the road to do some tax planning that I can keep me in the lower brackets. Understanding that I’m going to pay taxes on a lot of my accounts that I have, it’s just understanding do I want to pay it in a lower tax bracket, or do I want to pay it in a higher tax bracket? And if there’s years where I have a lower income and I have some room inside of my lower tax brackets, so an instance the 10%, the 12% of what it is right now, if we have some room yet there and we still have some room to be able to take some income and still keep it at that lower rate, it is definitely something that we need to consider and see about filling up those tax brackets, and again taking accounts that we know we’re gonna have to pay money on when we take it out.
Usually your traditional 401K, your traditional IRAs, those tax deferred accounts where we got the tax deduction for putting money in and basically kicked the tax liability down the road, again, knowing that we’re gonna have to pay taxes on that at some point lets see if there’s some planning that we can do to pay less of it in taxes or more in taxes of it depending on what your decision is. I think that’s a pretty easy decision for people, I would say everyone wants to pay less taxes. So again, lets see if we can do some planning.
The Social Security aspect of all of that comes into play with this as well. This again is still a very misunderstood part of the whole overall puzzle, and especially when we’re talking about a married couple. Being able to coordinate the benefits between the both spouses is critical, it’s key to be able to maximize some of this and tie it in to the tax planning. Had an individual that was in yesterday looking to retire here in the near future looking at Social Security benefits with him, he asked if he would be able to still take half of his spouses benefit, because he heard that he was able to do that.
Well, we started looking at things, looking at his date of birth, and unfortunately he is no longer able to do that the way he thought he was gonna be able to, because of some of those deadlines that came in the Social Security system where they eliminated the file and suspend. They put a deadline on the restricted application for spousal benefits whereas if you were born after a date, you’re no longer able to do that. So unfortunately for him, he’s not gonna be able to do that, but again we went over a couple different scenarios where we’re gonna look to try to maximize his thing, his benefit on his behalf, and another thing what we’re trying to do is coordinate that again for any surviving spouse. One of the spouses passes away, one of the Social Security benefits is gonna go away. So whatever benefit is lower, that benefit is gonna be dropped and whatever benefit of the surviv.. or the two spouses, whatever benefit was the higher is the benefit that’s gonna continue. And 100% of that benefit is going to continue on to the surviving spouse.
So again it still makes some sense in certain situations to delay one of those benefits as long as possible as we can to age 70, just to try to lock in a larger benefit, basically a longevity insurance we kinda like to compare it to, for a surviving spouse. To understand that hey if one of us passes away, if my benefit is the bigger one and I pass away, I know that the surviving spouse is gonna be able to jump up and now continue that bigger benefit that we have for the rest of their lifetime as well. And again, using those claiming strategies, using that with some of this other tax planning thing, we quit our jobs, we retire from our jobs, our income basically drops to nothing if we have no pensions, anything like that, so all of a sudden now we are in a lower tax bracket.
Well, the easy thing is to, let’s flip our Social Security benefit on right away, well a lot of times, again, looking at every situation, every situation is different, I understand that. But what if we delay one of these Social Security benefits, tap into some of these tax deferred accounts a little earlier, allowing us to pay some taxes in a lower bracket for those couple of years. We’re pushing our Social Security benefit down the road, and locking in a larger benefit. There’s a lot of stuff that goes into it, changing the way people think about this is a lot, that’s a big thing that we sit down with is because they’ve understood and they have these myths I guess on Social Security that gotta take it early, gotta get my money back, so on, so on, so on, so on. I’ve heard them all, I would just like to sit down with you and kinda show you how that way of thinking isn’t necessarily true in a lot of instances, and kinda go from there.
And again, at the end of the day it’s your decision to be able to make when you wanna take these benefits, but I guess our job is to sit down with people, lay everything out on the table, and have them make an informed decision and understand all of the options that are out there for them, and how it applies to their overall plans.
So, again, we are out of time, goes fast when we start getting into some of these topics, a lot to kinda squeeze in to a short program, but if you have questions on any of the stuff that we went over, how it applies to you, what it may mean to your upcoming retirement, you owe it to yourself to be able to sit down and look at these big picture type of stuff and not just focus on one thing or who is the cheapest person out there yatta, yatta, yatta. We need to make sure that we look at the whole big picture and make sure that we’re making the best decision because again, we wanna do this, we wanna do it right the first time, and make sure we get that thing done. So again, this is Nate Kreinbrink 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 in to directly. Registered representatives securities offered through Cambridge Investment Research Incorporated, a brokered 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]