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Redrick Terry: It is now time for For Your Money, we’re joined by David Nelson, CEO of NelsonCorp Wealth Management.
David, welcome back.
David Nelson: Thanks Redrick, appreciate it.
Redrick Terry: Absolutely. We’re talking about transitioning into retirement today. Obviously not something people do on a regular basis, which often leads to mistakes being made. So, what’s that main mistake that you see when people make that decision?
David Nelson: Probably two. The first one is emotions. Emotions get in the way, emotions can help people make good decisions in a lot of things, but when it comes to money, no. Emotions, we need to keep them out of there. We have discussions with people as far as you know, “I hate my job; bottom line, I’m retiring” and then we have to look at the numbers and say you may or may not be able to.
The other biggie is not having a financial roadmap. Most individuals can kind of picture the first five or ten years of retirement, they have really difficult time thinking in terms or year eleven, twelve, thirteen, fourteen as far as what’s it going to look like. And being able to lean on a financial roadmap that was created back day one, can be very helpful as far as for those individuals trying to picture the second half of the football game, or the second half of the basketball game. The first half is year one through ten, second half is gonna be year eleven and beyond, so it’s really important that individuals look at that. We don’t want them being blindsided down the road.
Redrick Terry: Absolutely, and it is common for people to think of planning for retirement as simply what they’ve saved versus what they’ve spent so in talking with you, there’s a lot more to it.
David Nelson: There’s a lot more to it, and the chart that we brought today is going to illustrate here. I’ll try to walk people through as far as the biggies.
Probably number one is longevity. How long am I going to live? And the average person in retirement, if we take a couple, a husband, wife, what have you, bottom line it’s going to be twenty years plus. So we’ve got to plan and we’ve got to have our money with us that entire time.
Taxes are a biggie. What can we do as far as to reduce our taxes?
Social security, and last week Nate from our office spoke about social security. Take a married couple, as far as social security, probably the low end is going to be “this is half a million dollar decision”, you got to get it right. For a married couple that lives normal life expectancy, that maybe they had a little extra money, that’s a million dollar decision right there.
Medicare, health care costs I’ll touch on a little next week.
Investments, asset allocation if big. Estate planning, we hear from people “I don’t have a big estate, I don’t need to worry about that”, the smaller the amount of money that you have, the more important it is to get that one right. So that’s really big.
And then expenses, what do we have for debt, that we have today. Again a really important one, as far as individuals understand that piecing all this stuff together is going to be a determining factor how comfortable is their retirement going to be. We want them to have a happy, safe retirement and the only way you’re going to do that is we have to factor all these variables in. Seems boring doesn’t it? [crosstalk]
Redrick Terry: It’s very important nonetheless. And also importing having options during retirement.
David Nelson: Yeah.
Redrick Terry: What do you mean exactly by options?
David Nelson: So, options in my mind basically center around, the biggest one centers around whether the government’s going to tell you as far as what you’re going to do in retirement, or you’re going to be in control of that. And primarily that’s the difference between a Roth IRA and a traditional IRA.
With the traditional IRA, which is where the bulk of the people out there have their money, they have to pay taxes as far as when they take that money out. With a Roth, if we choose to make this decision proactively today, individuals can minimize their taxes as far as over the balance of their lifetime. They’re going to have one year they’re not going to like, but then the balance of it is that income that’s going to come from that is going to be tax free. So you have options at retirement, versus the government telling you as far as when you’re taking it out, how much you’re taking out et cetera, et cetera. We want people to have options.
Redrick Terry: Yeah, and its important to know all of them.
David Nelson: Exactly, exactly.
Redrick Terry: All right David, thanks so much for joining us.
David Nelson: Thank you Redrick.
Redrick Terry: And if you missed any mart of our conversation, we’ll make it available for you on ourquadcities.com.
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