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 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 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. This is Nate. James joining me this morning. I know we walked up the hill today for the first time of the year, so it was kind of nice, but we were joking around and it doesn’t quite feel quite warm springtime weather yet, how 70 degrees would feel definitely a lot nicer out there and then-
James Nelson:
Yeah, two weeks ago was better than this right now. So it’d be nice to get those temps back.
Nate Kreinbrink:
I know it’s not too bad, but we are getting there and I know middle of April, a lot of times we always start talking as far as at our office at least with NelsonCorp Tax is down there, right down the hall from us, tax deadline time. April 15th usually means the tax deadline as far as when you have to get your taxes filed or else have your extension turned in, that’s been extended this year again.
James Nelson:
Yeah. Another odd year just like last year. Deadline’s not exactly the same as last year, but it has been extended to give people a little bit more time. Although, from the volume that we’ve seen, I don’t know how many people are really going to be taking advantage of that. It seems like most everybody have gotten their returns done and things taken care of, but yet another goofy year when it comes to taxes with this extension.
Nate Kreinbrink:
Right. And I know, again, I think it’s May 17th or I believe is the actual deadline as far as to get that in. But like you said, I think a lot of people with them pushing the date back as far as when the earliest that you could have filed when they pushed that back a little ways, I think everyone just wanted to kind of get things turned in, get it taken care of. Now with that extension also means that you do have a little bit longer to make IRA contributions as well. And to any of those retirement accounts from last year, meaning your IRA account, a Roth end account. So any of those individual retirement accounts that you have, again, that does give you a little bit extra time to make a previous year contribution if you fall within the income limits and if you still have room to be able to do that.
Nate Kreinbrink:
So again, things to keep in mind, middle of April is not quite the same as what it used to be then with the taxes. No, James and I were kind of talking yesterday afternoon, this morning, and as far as where we wanted to go with and over the last couple of weeks month or so, we’ve kind of put together a little list as far as planning mistakes and things that people need to continue to be wary of, things that we continue to see over and over and over again. And we thought we’d just start kidding on a couple of those today during today’s program.
Nate Kreinbrink:
Obviously, we always talk about having a plan. And I think, simply put, that is one of the biggest mistakes that people come into our office with, or I guess you would say without, is having a plan. Just having that structure in place, the roadmap we call it, to say, “Okay, as I am transitioning from basically your accumulation stage,” so you’re working, you have income coming in, you have that steady paycheck coming in, “as I transition to retirement, what does this look like?” And really understanding what my expenses look like, jotting them down, making a budget, seeing exactly what it is we’re going to need versus what it is that we actually have in assets to be able to pay for those retirement.
Nate Kreinbrink:
And again, ask that question a lot as far as well, how much do I need to save for retirement? Well, it depends. Well, it depends a little bit more so on how much you’re going to need to spend, because how much you need to spend is going to dictate how much you need to have in retirement. And that simple concept, I think, is the biggest thing and having a plan to be able to tackle that is key.
James Nelson:
Yep. And Nate touched on the first one that we see is just failure to plan. The second highlight that I think we come across a lot is failure to communicate, and that’s generally between spouses. One spouse wants to go one direction, the other wants to go another direction or one spouse is the saver and one spouse is the spender. Failure to communicate is a big issue and something that we deal with in client meetings all the time.
James Nelson:
The third one kind of goes hand in hand with that and it’s just procrastination. A lot of people may have differences with a spouse or significant other on how their finances are going to be handled and then it just gets prolonged or pushed off and never get around to doing anything about it. So those are two that again, kind of go hand in hand, but things that we come across on a regular basis is just not communicating and getting on the same page for a couple. And then procrastinating, kind of putting off that saving, putting off that investing, putting off the conversations and planning in general can really come back to bite you later on.
Nate Kreinbrink:
Right. And again, it really does. And it goes back to that just being active and really start addressing the issue of planning for retirement as early as you can. And I think procrastination is a big thing that we discuss with people, especially the younger couples or couples maybe in their mid 40s or whatever, they keep putting it off, putting it off, putting it off. That saving a little bit extra for retirement on the to-do lists continues to get pushed down.
Nate Kreinbrink:
“I’ll get to that next year. Next year, we’ll do that. Next month, once we get this paid off, we’ll be able to do that.” Well, that next month, that next year always seems to be next month or next year and they never get started. I know we were coming up with an example and this is, I think, really drives home that point that if you invest $100 a month for 30 years at just let’s say at an average annual rate of return of 8% for 30 years. Okay, after that 30 years, you will have accumulated almost $150,000. So that’s again just saving $100 a month for 30 years given that rate of return.
Nate Kreinbrink:
Now let’s just take a couple then that would wait 10 years before starting to save that money. They would have to save about $260 a month for those 20 years in order to net that same amount of money as you would have if you would’ve started for 30 years. Now, again, we go to the very end of that and we say, “Well, what if someone waited until the last 10 years?” They would have to put away about $800 a month to achieve that same $150,000 total.
Nate Kreinbrink:
So again, where that comes into play is this, it’s the simple power of compounding interest. And the earlier you can start putting money away, letting that money accumulate, putting that money aside, again, once you get that budget made, you put a little extra away, you start being able to realize that, “Hey, I can live a little bit with this and still put money away.” Having that money aside is one of the biggest keys in getting started and getting over that hurdle is oftentimes one of the biggest things.
James Nelson:
Absolutely. So now changing gears a little bit, let’s talk about another one that we come across and that’s chasing the market, right, Nate? I mean, especially the last couple of years, that conversation comes up all the time. And with the technology and apps and information that’s so readily available these days, the Robinhood accounts, the GameStop disaster, all of these things are just in the news all the time. And it’s puts a spotlight on it. So chasing market returns is a big item and something that I feel like is becoming a bigger issue just because that information is so readily available and in the news and always kind of bombarding people. So having a plan, sticking with your investments and having a coordinated strategy obviously is the name of the game.
James Nelson:
But that’s tough to do when you see this excitement and people are talking about this, that, or the next hot stock. It’s really tough for people to stick to that plan, but it’s very important. It’s something that everybody needs to do. And we feel like chasing the market is another one of those items on our list that’s pretty dangerous and could be pretty detrimental for a client.
Nate Kreinbrink:
Right. I think that goes along with as far as trying to chase the market. But I think on the flip side, sometimes people don’t necessarily understand what it is they own and how that impacts them. So again, they’re trying to get aggressive. They’re trying to chase that big hit, but again, on the flip side, what do you actually own in your thing? And do you understand how that’s going to perform as far as different parts of the market cycle? And again, that is extremely key. And a lot of times what we see as far as 401k plans, whatever people don’t know, so they check a couple boxes whenever they get set up and they get put into target date funds or whatever the case it may be as kind of the default based off of their age and where they’re kind of going to hit 65 at. And again, they have a purpose for those.
Nate Kreinbrink:
But understanding how each of those things perform, again, when markets are up, when markets are down, the further they’re away from retirement, the closer they are from retirement and understanding what it is that they own from that. So again, having that plan, understanding what it is you own, we always say with retirement planning, there’s two different things and it’s fear and greed and how fearful are somebody to be invested into the markets and taking that risk and then how greedier do we want to get when things get great. And that’s really the two main principles that it comes down to when it comes to planning and then sitting down with people with stuff like this.
James Nelson:
Yeah. And there’s a certain group of the population that assume bad things aren’t going to happen to them.
Nate Kreinbrink:
Because they haven’t seen it in a while.
James Nelson:
Yeah, exactly. Markets-
Nate Kreinbrink:
Only last year.
James Nelson:
… Yeah. Markets have been good other than COVID last year for a couple months, things were rough, but things bounce back. So when things have been this good for this long, people just kind of forget that markets can correct and markets can go down dramatically and they could stay down for a long period of time, it’s not just straight up. So yeah, assuming things aren’t going to happen to them, I think, a lot of people can kind of fall into that category, especially when things have been so good for so long.
Nate Kreinbrink:
Right. We always say plan for the worst, hope for the best. And that’s really a strategy that you have to have to save, because there are going to be roadblocks going to come up. It’s not if they’re going to happen, it’s just when they’re going to happen. And are you prepared to be able to take that? So again, questions on any of this stuff, you’re entering this phase of your life, this phase of your working career, of retirement on the horizon. Am I ready? Can I do it? Give us a call. We’d be more than happy to sit down with you for a complimentary as far as visit consultation, as far as just to start giving you some advice, making sure that you’re on the right track to make those decisions and make those decisions with confidence and have a little peace of mind as you do that.
Nate Kreinbrink:
So give us a call. We’d be happy to do that. James as always, we kind of get going with topics like this, we run out of time. Did want to mention that every April, Nelson… or every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of April will be donated to Make-a-Wish of Clinton County. James as always, appreciate you joining me this morning.
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 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 NelsonCorp Wealth Management are not affiliated. Cambridge does not offer tax advice. For more information, visit our website at www.nelsoncorp.com.