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 Kreinbrink. I have Mike Steigerwald with me today. August is flying right by.
Mike Steigerwald:
Sure is.
Nate Kreinbrink:
The kids have less than a week and back in school.
Mike Steigerwald:
Back in school.
Nate Kreinbrink:
I think a lot of the area teachers, I think some of the Quad City schools haven’t been even back in maybe on the Illinois side.
Mike Steigerwald:
Yep.
Nate Kreinbrink:
Teachers, I think for the most part, are back this week.
Mike Steigerwald:
Oh yeah. Summer is come and gone.
Nate Kreinbrink:
Yeah. Enjoy the last couple days. Hopefully they stay dry. I know it’s been kind of a wet little stretch here and definitely needed, but hopefully we got some nice couple days here for the last few days of summer vacation. It’s kind of starting to feel maybe a little fallish.
Mike Steigerwald:
It does, yeah.
Nate Kreinbrink:
Football season’s getting underway, volleyball season’s getting underway. Some of the fall sports are there. Baseball season is starting to get a little meaningful, I guess you would say.
Mike Steigerwald:
Yes, certainly meaningful. That’s a good way to put it.
Nate Kreinbrink:
Football’s getting underway. It’s just starting to have that transition a little bit and kind of ready a little bit, but hopefully –
Mike Steigerwald:
Still okay with having some nice weather.
Nate Kreinbrink:
Yes, absolutely. We don’t need any of that cold football weather yet quite this early, but it is moving right along.
So today’s program, I know third Wednesday usually has Andy on here talking taxes. We had a little change of schedules. He’ll be joining us next week. Talking with Mike a little bit on the way down and kind of going through a bunch of topics. And I think it all comes back to just talking and the importance of planning. I know we talk a lot about that even when Andy’s on. We talk tax planning versus tax preparation specifically with taxes.
But I think that retirement aspect of it and that retirement planning is again, is so crucial to being able to make that decision with confidence when you get there. And a lot of people I think sometimes make that decision and hope that what they did is going to be enough and that it’ll work out. But the reality is we’ve seen it in real life over the last few years as far as this economy and pricing and cost and being able to kind of navigate through some of those changes, and is your plan able to hold up to some of those changes as they go, I think is extremely important. And the earlier that you kind of start that process, I think the better prepared you’ll be and the more options you’ll give yourself when you get to that point.
Mike Steigerwald:
Absolutely. And Nate, that just brings up a point that there’s so many aspects and so many decisions to be made at that time when you’re ready to potentially pull the plug. It’s time I’m going to hang it up and retire. Well, all of these things, if you haven’t thought about them, they’re thrown at you at once and can oftentimes be overwhelming, first of all, if you’re doing it all at once and don’t have the plan already in place. But secondly, there could be ramifications for the decisions that you make and there’s timelines at certain points of you’ve got to check this box or this box. And if you’re really not prepared, it could really come back to bite you for the long term. And I think that’s just something that goes back to, again, preparing for this stuff.
And all of these different types of planning, we talk, like you mentioned, Andy talks tax planning, we talk retirement planning or financial planning. There’s estate planning, right? I mean, do I have all my ducks in a row for if I’m not here tomorrow, that kind of thing. So all of these things get thrown at people that are ready, that are thinking retirement all at the same time and some really important decisions to be made.
Nate Kreinbrink:
Well, and I think too, when you look at it, there really is no one size fits all strategy for everybody when they’re planning their retirement. Everybody’s situation is different. Everybody’s asset base is different. Everybody’s kind of wishlist is different, what they want to do with their money, what they want their retirement to look like. And oftentimes when you call these 1-800 numbers and you get the advice on one specific area, they’re not looking at all the other areas as far as how that fits into what it is that you want to accomplish. They’re just strictly looking at that one area that you called them about. They don’t know your situation. They don’t know what other assets you have. They don’t know what your social security is. They don’t know what a number of pension is. They don’t know what your tax situation is.
So when we look at this, it’s really like putting together an individual puzzle for everybody. And a lot of times with those individuals as they transition into retirement, the old adage of you don’t know what you don’t know really comes out. And being able to maybe point some things out that people weren’t aware of as far as social security planning, tax planning, Medicare planning.
Mike Steigerwald:
Yeah, health insurance in general. Yep.
Nate Kreinbrink:
And all that with it. I think those are some key aspects that, again, we could do a show on each one of those topics and we have. But again, when you see how they fit together in the grand scheme of things, and like you said, a decision today is going to impact another area tomorrow or the next day or maybe five years down the road.
And when you get to retirement and you shut off that guaranteed income stream with a paycheck, and then you flip over to your assets and having them be your income stream throughout retirement, nobody likes unexpected changes. And I think sometimes people think they’re doing the right thing, they don’t mean any harm by it, but then all of a sudden there’s this big tax liability that’s staring down at them five years down the road, 10 years down the road. And the ramifications of what that might mean as far as more of your social security getting taxed, Medicare premiums possibly jumping, being up into the next tax bracket, losing some of these deductions that you may get. And again, all of them may be reasonable in certain situations, but if we can avoid them in others, we want to make sure we look at that.
Mike Steigerwald:
Yeah. It’s all about trying to make the best decision for your situation. So again, all of these things kind of mush together and you’re hit with them all at once. And if you don’t have a plan in place to have thought about these things and the decisions, and again, it all comes down to making, again, the right decision for you and your family in this situation because you bring up the social security topic, and I know we’ve talked about it before on the program, but that decision to turn on your social security benefit is not only your decision. If you are married, it also impacts your spouse and the larger benefit lives on for the surviving spouse. So those decisions need to be considered when you’re faced with these processes coming all at you at once.
Nate Kreinbrink:
And I think when you look at this, it all boils down to, again, there’s a huge importance in today’s world. I mean, the transition years ago from pension plans to 401 plans and how that has kind of integrated itself into the average workplace retirement plan. And then so that importance of saving. So everyone is like, well, I saved this. I saved this. So you’ve amassed this pile of assets. And you feel good and you did the sacrificing, you did the saving. And now you get to that point where, okay, I’ve got this, now what do I do?
Mike Steigerwald:
Right.
Nate Kreinbrink:
And so again, there’s that kind of education of saving, saving, saving, but then you get to retirement and now what? Nobody ever focuses on how do you unwind that pile of assets that you have in the most tax efficient way. Because again, at the end of the day, it’s not what you have, it’s what you keep. And the most common retirement asset that people have are 401k plans, oftentimes pre-tax. So it’s all going to be taxable to you when you take it out. So if you need X amount of dollars a month, you may have to take out a little bit more to withhold the tax in order to net what it is that you need.
So when you look at this, that planning aspect is extremely crucial. And we have planning software and sit down and kind of walk through these things and we go through the explanation, but I think sometimes when people see it in a picture format or a graph format or just looking at the concepts from a visual standpoint, they can kind of see and help visualize what it is we’re talking about, about some of these unexpected tax jumps or unexpected consequences that may be staring at them down the road. Because again, we all hope that everything is going to be great in retirement, but if we can plan for the worst and hope for the best, we can be prepared for those unexpected changes.
Mike Steigerwald:
Yep. Yep. And I think that’s just made me think of another point, Nate, when we start talking with clients or people that are, again, at this point in their lives where they’re making these decisions on retirement, one of the first questions that we ask regarding putting a plan together is how much will you need? What kind of cash flow do I need to generate from my various income sources? Whether that’s my social security check or pension or withdrawing from my retirement accounts, how much will I need? And usually, very common, you ask that question and people give you the most blank stare. They really never thought about it. They really don’t know. And that all comes back to that planning piece. I mean, start thinking about those things now and really trying to piece together how much cash flow will I need to live, to be able to do what I want to do in retirement.
Nate Kreinbrink:
Right. And I think too, when you start looking at that, Mike, again, when people give us that answer, again, you’re 100% correct and there’s usually a blank stare like, I don’t know. Well, then they go back to, well, I usually bring home X amount of dollars on my paycheck. That’s what I need. Well, when you back into it, wage income and retirement income aren’t the same thing.
Mike Steigerwald:
Correct.
Nate Kreinbrink:
Because of all the other stuff that is taken out of your wages with FICA tax, oftentimes state tax, retirement accounts, all these different things that are coming out to net you that. So if you just need X amount of dollars, all that deductions and withholdings are not coming out of your retirement income because for the most part, I mean, Iowa, Illinois, it’s just subject to federal tax.
Mike Steigerwald:
Correct.
Nate Kreinbrink:
And so you don’t have your FICA tax, you don’t have your state tax, you don’t have your 401k coming out of that.
Mike Steigerwald:
Deductions. Yep.
Nate Kreinbrink:
So when you start thinking about what it is you need, we need to come down to a little bit number and budgeting is a big part of that. Keeping track of what you need a few months or a year heading into retirement will give you a better idea as far as what it is that you need to live off of.
Mike Steigerwald:
Yep.
Nate Kreinbrink:
So again, all good stuff. Again, we can get going on this and we’re running out of time, but give us a call. We’d be happy to kind of sit down with you and go through your situation with you and see what track you’re on and kind of help navigate through that world.
I did want to mention real quick before we run out of time that every month, NelsonCorp Wealth Management is wearing or is doing a charity of the month. The charity for the month of August is the White Oaks Therapeutic Equestrian Center in Morrison.
Mike, I appreciate you joining me this morning.
Mike Steigerwald:
Yep.
Nate Kreinbrink:
Again, this is Nate and Mike 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 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.