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 bringing you in today’s show. Second week of March is upon us, and I don’t think anyone is complaining about Mother Nature and the weather and the temperatures and seeing the grass starting to green a little bit. Again, we pushed clocks ahead this past weekend, so evenings are lighter a little bit longer allowing getting home from work, getting home from school, and being able to enjoy it. I know we’ve fired up the grill one evening and then had the windows open a little bit, which is definitely a welcomed feeling. And looks like we’ve got a couple more days of it, a little front coming in, possibly Friday afternoon, and seeing what extent we will get of that new front storm, whatever it is, I guess when it gets here and then going with it.
But again, say in middle of March, spring, sports on both sides of the river are well underway. Spring training is going on. March Madness. If you’re into basketball, men’s and women’s is conference tournaments. Tournament will start here next week. Again, an exciting time and like seeing the transition, I guess you would say, to spring. Obviously we know we can get different weather and then it’ll change in what we’re going to get here in March. But again, being able to enjoy some warmer temperatures has definitely been a pleasant sign and hopefully is a sign that winter is, for the most part, is behind us. So fingers crossed and we’re going to go with that.
But again, getting into today’s show, I know again, David Nelson was on last week, first Wednesday of every month with the 30-minute live program, talking about markets, some of the things that we’re seeing in the economy, obviously that has continued into this week. Tariff talk, again, economic activity. Unemployment rate is going to be coming out, the latest one, again, all factoring into what we’re looking at moving forward. The grand scheme of things is remaining disciplined. Having a plan, knowing that there are going to be market cycles like this. Understanding how some of these decisions impact us as we continue on with, again, investing in your own personal account, your employer plan at work, knowing what your allocations are, what you have exposure to, what type of risk are you taking on. Again, all big questions in the big scheme of things and understanding, again, different parts of market cycles. What is happening with the current economic activity, what is happening versus maybe what should be happening.
A lot of things that go into it, so make sure that your plan is able to adapt and that you have a plan when these times come up, because again, when we talk about market corrections, it’s not if they’re going to happen, it’s when they’re going to happen. They are a reality of investing. And again, having the discipline to remain to your plan, taking some of the emotional part of those decision makings, and again, having a plan to do it will help you kind of hopefully smooth out some of these cycles. And again, if you have questions on where you’re at, where you should be at, am I in the right stuff? Again, give us a call, we’d be happy to guide you in the right direction and see where you’re at and what you’re trying to accomplish with it.
But again, for today’s topic, I wanted to dive into something that’s came up with some of the more recent meetings that I have on multiple occasions. And that is the question of, man, this retirement thing is a lot more complicated than what I thought it was. You think retirement, you think you got everything ready to go. You just let your employer know that, “Hey, this is going to be my last day.” You walk off the job and boom, you’re retired. Well, there’s a lot of things that you need to take care of when you actually get to that point, let alone some of the planning and having a roadmap a year or two or however long it is prior to that to have an understanding.
But again, when you get to that date, it’s game time and some of these things that we talked about and some of the decisions that we did, well, now it’s time to put those in place. And again, when you’re leaving, you let your employer know, two weeks, “Hey, I’m going to retiring at the end of next month.” Giving them that heads up. When you get to that point, again, if you have built up vacation days, if you have sick days or referral days, again, are you able to have them paid out in a lump sum? Or are you just going to say, “Hey, this is my last day, I’m coming in, but I’m using vacation days up until this point, this is my last paycheck?” How is that going to play itself out? How will they allow you to do that? Employers are different in sometimes how they handle those. So again, having a little bit of an understanding prior to that and how you’re going to utilize some of those days that you may have built up.
The other one is, again, when you officially have that separation date, a lot of people say, “Hey, I’m going to be retired. I want to do this.” Well, we can’t really do some things until you get that final paycheck from your employer, including any vacation days or separation pay or whatever it may be. Once you get that last paycheck, there’s usually a week or two before your plan will show that you are officially separated, that you are non-active. So that is the official sign that say, yep, they have you listed as retired. So again, knowing when those dates are, how quickly they are.
And then again, if you have a plan at work, what are your plans with it? Are you going to keep it there and continue to manage it? Are you going to look to roll it to an IRA, to a Roth account, wherever it may be? And there’s pros and cons, which could be a whole separate show in and of itself. But again, understanding the differences between leaving there versus rolling out and which one kind of checks the most boxes for you and what you’re trying to accomplish with that. Again, if you’re fortunate enough to be at an employer that you are eligible for a pension, when you let them know when your last official day is, you are going to be receiving a pension packet in the mail. Again, this will be probably 20 plus pages of information that you will need to fill out to see again, how you want to have that pension plan paid out to you.
A lot of plans are similar, but there are uniqueness options to each one in the area. Again, how you’re going to have that paid out to you. If it’s a lump sum option in there, you just want to roll over your entire pension over to an IRA account, you have the liquidity, but again, you are responsible then for managing it or whoever you roll it to is responsible for managing that. But you control how that money is distributed to you and how it’s going to be taxed moving forward, and then turn that lump sum into cashflow for you throughout your retirement.
And then there’s options as far as the monthly payout, single life where it’s just paid to you. Any beneficiaries or surviving spouses would not receive anything. With all the other options then where you have a joint life payout where you are going to get X amount of dollars as the employee every month while you’re alive, if you pass away and your beneficiary is still alive, they’re going to get X amount of dollars paid out to them. Usually that’s in the form of a percent. 50% of what you’re getting would be paid out to them, 75%, 100%. Sometimes there’s a 10-year certain where somebody’s guaranteed to have payments for 10 years through that time period.
So again, understanding what all those different options are, not just for you, but if you’re going to choose one that pays out to a beneficiary, to a surviving spouse to make sure that maybe they’re taken care of should you pass away, continuing that cashflow, every decision you make is going to impact the amount that you personally will receive. The higher payout to a beneficiary, in most instances, going to have a little bit lower of a payout to you while you’re alive because that pension plan is essentially insuring two separate lives. So again, you want to make sure that we understand that, how is that coordinated with, again, how you’re claiming social security, how you’re claiming your other retirement assets. Are you going to be working? Do they have a pension? And again, all these things need to go into it to say, which one is the best one for me?
And again, one of the most important things is when you retire, how are you going to continue to get insurance? If you’re age 65 or older, you can just transition right into Medicare when you retire. However, if you are not yet 65 and you are going to be retiring, you will need to find out a way to get insurance to cover that gap to get you to 65, whether you go to the marketplace and purchase it on your own, whether you utilize COBRA and just continue with the company plan. But the difference is that you are paying for 100% of that premium each month, not having any offset by your employer.
So again, looking at all those different options, how are you going to get from retirement to 65 to switch to Medicare? And then on top of that, if you had a spouse that was on your plan, again, how are they going to get insurance? You may be retiring in 65, your spouse was on the plan with you, but they are not yet 65. Well, now we’ve got a little bit of a gap that we’ve got to find insurance for that spouse to get onto it.
So again, a lot of things that go into it. A lot of questions that need to be decided and work through. But again, all important things because again, we always say most people only retire once. So again, having to get everything right in one try, it’s not like you have five different times of experience where you’re going through this. However, we have been able to help navigate many, many people through this process and some things that have stood out that we want to make sure that is taken care of with that.
So again, a lot of things just on that front before we’re really even talking about cash flow, social security, claiming benefits. Again, how do we break down the assets that we have saved? What is your tax rate when you’re working versus now versus when you’re 73 or 75 and have to take money out of these accounts? Where’s your income at? Can we do any planning to maybe reduce your income enough to not get bumped up into the next tier for Medicare? Again, a lot of stuff that goes into it, but again, like I said, the overwhelming response to this as we help people through this is, again, this is more complicated than what I thought it was going to be. So if you’ve got questions, give us a call. I’d be happy to help you through this process and take some of the worries hopefully out of it for you.
I did want to mention real quick that every Friday, Nelson Corp Wealth Management is wearing jeans for charity. Money raised in the month of March will be donated to the Felix Adler Children’s Discovery Center. Thanks again for tuning in on this Wednesday morning. This is Nate Kreinbrink with Nelson Corp Wealth Management 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 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. For more information, visit our website at www.nelsoncorp.com.