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, Inc., a broker-dealer, member FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors, Inc., 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 Kreinbrink with NelsonCorp Wealth Management, bringing you today’s program. A little cooler out there today. Had a nice little storm that came through with some of the heat and humidity that we’ve had here over the last few days.
We knew that this was a high probability of coming in and popping up at some time, and obviously through the area we definitely got that yesterday afternoon and into the evening. So hope everyone stayed safe. We definitely got the moisture we needed. Grasses will start greening up and need to be mowed probably twice a week again, but hard to believe that we are already into the end of June. It’s July 4th is next week, and summer is just moving right along. It’s hard to fathom how quickly that goes.
And we get through the July 4th weekend, and summer just continues to go, and won’t be too long and we will start to be thinking about back to school again and all that end of summer activities, which I know there’s probably a lot of parents, teachers, and especially students that don’t want to push that along too quickly, and either do I, but it will be here before we know it.
So I know a lot of the summer activities through the schools, kids camps, obviously softball, baseball programs, seasons are kind of coming to the end, tournament time where things kind of ramp up a little bit and you kind of see those come to a close. So wish everybody the best of luck as those times come in the coming weeks.
So today’s program, and a little recap from last week, we had Andy Ferguson with NelsonCorp Tax Solutions on as the third Wednesday of every month where we talked taxes, did a great job as far as talking scams and how those seem to kind of pop up at frequent times. And this is a time where you’re starting to see kind of an influx of some of that. So again, if you get letters in the mail and you’re questioning them, bring them to your tax preparer. Let them do it before you overreact and see if they are legit or what it is that needs to be done to reconcile that.
Again, as a general rule of thumb, the IRS, the Social Security Administration, the Medicare will not personally call you unless there has been a call that has been scheduled. Whether it’s email, whether it’s texts, whether it’s calls, they normally do not reach out to you that way. So again, if you get one of those and they seems like it’s legit, but again, they’re causing pressure or urgency to react to do something, again, make sure you run that by somebody else and get a second opinion before, again, we start giving out any of that information via email, via text, via the phone call when they do some of that stuff.
So again, just be cautious. Again, it never hurts to get a number, run it by somebody else and then ask to call them back. So make sure we are protecting ourselves from any of those scams that may be out there and again, always seem to rear their ugly head.
So for today’s program, I know we talk quite extensively on a number of different topics, tax planning, Roth conversions, investments, markets, interest rates, social security, Medicare, all these different specific topics. But at the end of the day, they all kind of steer back to the general landscape as far as what we focus on, and that is having a plan, having a plan at different stages of your life in order to make sure that we are kind of on track to reach our goals, to be able to retire at a specific age, to be able to adapt to any of the uncertainties, to any of the volatilities that are bound to come up.
And I think we’ve seen it over the past few years that they are going to happen. It’s not if they’re going to happen, it is when they’re going to happen, and we need to make sure that what we have in place is going to be able to kind of bear that times, and again, put ourselves in a position to be able to move forward when we get to better times. And again, it is different times of your life, whether you are just starting out saving and putting money away. Where are you putting that money away? Understanding the different types of buckets that you can put money in.
We talk all the time as far as tax deferred, tax-free ways of saving, whereas tax deferred is your traditional 401(k), traditional 403(b), traditional IRA. You get that tax benefit up front, money grows tax deferred, but that money is 100%, and any gains that you make on that money is 100% taxable on the back end when you take that money out.
So again, that is an option to look at as opposed to, again, the tax-free world where we’re talking about Roth 401(k)s, Roth 403(b)s, Roth IRA accounts. Again, you don’t get that tax deduction up front. You pay with after-tax money, so that dollar that you put in there to a Roth account, again, does not lower your income in the year that you put it. The trade-off is as long as you meet certain qualifications that that dollar, again, later on down the road and any gains that that money gets, it comes out tax-free later on, usually after age 59 and a half when you’re at that retirement age.
So again, there’s different ways of looking at it. There’s different situations. One set of, I guess, guidance is not the same for everybody. Everybody’s situation is different. And again, we say it a lot of times when people ask us questions. Well, it depends, and again, it does depend. There’s a lot of different factors that go into it as far as income now versus income later, cash flow now versus cash flow later. What are we looking at doing? What are our goals with some of our assets?
And all those come into play when we kind of look at big picture planning for individuals to see what is probably the best as far as what they’re looking at doing at that specific time, knowing that as we’ve seen over the last few years, that laws change, rules change that we are adapting by. So we have got to be able to adapt to that. And again, what we had thought was going to be the best thing, there’s new rules in place, so maybe we switch gears a little bit to take advantage of those.
Again, all that goes into place to, again, maximize what it is that we are saving and maximizing what our savings is going to turn into cash flow for us later on. We always say, it’s not what you have, it’s what you keep. So if we have this big pile of money, but yet we’ve got to pay taxes on it on the back end when we need it, we don’t really have as much as maybe what we thought we did.
So again, all that is important to keep in mind, and as I said, during your different phases of working, of saving, of planning for your retirement, this again, having that plan and making sure that you are still on that same route and moving in that direction is imperative to make it as successful as possible. Again, when you’re starting out, where do you save? If you have a work plan, make sure you are taking advantage of any match that a company is willing to give you.
Again, that’s free money that you need to take advantage of. So if you’re putting a little bit in there but not taking advantage of the match, but yet you’re saving outside of the plan, you need to make sure that you are putting in that full amount to get that extra money that put into your account just to start building that up and getting it as big as we can.
As you transition through your working career, again, life’s changes. Maybe your debt has been reduced a little bit and you’ve got a little extra to save. You’re taking full advantage of the company plan with any match that they’re willing to do. Now, where do I start saving? Again, this depends on what you’re looking to accomplish with it. Again, where you are able to, what is your income, what are your options that you’re able to contribute to?
So again, that is, again, when you transition to that phase, you start looking at a little bit closer of knowing what your budget is going to be as you transition into retirement when you don’t have those paychecks coming in. How are we going to be able to fund this retirement? And again, when you start getting to that phase, that’s where you’re going to focus to see where we need to start saving money and what is the best instrument to make that happen.
As we get within a couple of years of retirement, and when that is going to become a reality, it’s going to be extremely important for you to start kind of really narrowing down what it is you’re going to need to live off of. Again, what are our bills? What if we have any debt? What is that debt? When is that debt going to end? Okay, and now we switch to how much are we going to need to do that and how are we going to pay for that? Social security is going to start coming into play, and I harped on it the last time when I talked on social security is that when you retire and when you file for social security need to be two separate decisions.
So again, when that says is that just because you retire is not a good reason to turn on your social security. Now, I’m not saying that that may not be the best time for you to do it, but again, it needs to be two separate decisions and we need to look at that as two separate decisions that we make in order to do that. If you have any pensions, what pension election are you going to do? If you’re married, what percentage are we going to potentially leave to a survivor for our benefit that we’re going to get? And some of those things all come into play.
And if there’s a shortfall between any social security and/or pension, where’s that money going to come from? If we’ve done our kind of planning leading up to it, hopefully we have different buckets to pull from, whether it’s a traditional IRA or whether it’s a Roth IRA, is it going to be taxed? Is it tax-free? And where are we going to be pulling that additional income is to get us through what we need to live off of, at the same time, trying to manage our tax situation.
Again, we always say taxes and healthcare are going to be your two biggest expenses in retirement. Healthcare, we’re kind of stuck with paying what the premiums are for the coverage that we choose, whereas taxes, we can do a little bit of planning and kind of control that a little bit. And again, if we can get our same income with paying less in taxes, that just means more in the individual’s pocket and less in the IRS’s pocket, which again, I think is the ultimate goal as far as maximizing what it is that we have to make it last as long as we can throughout that time period.
So again, as you’re getting through these different phases, there’s different planning, there’s different questions that come up. There’s different things that we need to make sure that, again, we are just on that right track. We are still on the same route that we had started with and we didn’t get sidetracked anywhere as far as reaching that goal of retirement. And again, a lot of it is just remaining disciplined. I know we see ups and downs in markets, we see ups and downs in the news and the headlines and volatility and some of that stuff.
But again, there are opportunities out there, and remaining disciplined, investing and saving and all that is a very emotional task that we have to manage and maneuver through. When we’re trying to do that on our own, sometimes we don’t necessarily make the best overall big-picture decisions. So again, having that plan, having someone there to guide you and walk you through some of those steps is definitely going to make that a lot less worrisome, take some of the stress out of making those decisions, kind of give you the reassurance that, yes, you are still on the right track, yes, we are still moving in that direction and looking at it from that standpoint.
So again, a lot of questions that keep coming up to it. Again, I get talking on some of these things, and again, it’s very imperative because that retirement planning is thrown on the shoulders of employees and they’re supposed to make decisions that are going to impact the rest of their life, but don’t necessarily understand everything that’s out there, how it all kind of intertwines with each other.
So again, having that guidance, having someone that has been through it numerous times, knowing what to look for, knowing the questions that they may not even know that they needed to ask, and kind of walking them through that. So if you got questions on any of that, I would be happy to sit down with you to go over some of that stuff just to kind of get you on that track to making that decision.
So again, I’m running out of time here, but I did want to mention that every Friday, NelsonCorp Wealth Management is wearing jeans for charity. Money raised in the month of June will be donated to the Clinton Humane Society. Thanks again for tuning in this week for this week’s Financial Focus. This is Nate Kreinbrink with NelsonCorp Wealth Management. 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 the 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, Inc., a broker-dealer, member FINRA, SIPC, investment advisor representative, Cambridge Investment Research Advisors, Inc., 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.