Latest / Money In Motion with Klaas Financial / The Roadmap to Retirement: 6 Common Pitfalls

Transcript

The Roadmap to Retirement: 6 Common Pitfalls · Money In Motion with Klaas Financial

0:00
Speaker 1: And you know what that means. Phone lines they are
0:02
Speaker 1: open for you right now. Love to get your retirement
0:05
Speaker 1: related question answered right here on the show this morning.
0:09
Speaker 1: It's the real leased to do. All I got to
0:10
Speaker 1: do is pick up phone, dial in telephone number to
0:12
Speaker 1: get on the air. Six oh eight three two one
0:15
Speaker 1: thirteen ten. That's six oh eight three two one thirteen ten.
0:18
Speaker 1: Love to have you join us. Got a retirement planning
0:20
Speaker 1: professionals from Class Financial, CJ Closs and Eric Schwartz be
0:23
Speaker 1: talking this week about some of the pitfalls to avoid
0:26
Speaker 1: when it comes to retirement planning. Of course, as we
0:29
Speaker 1: talk with Eric and CJ, as I mentioned, phone lines
0:32
Speaker 1: are open to you, so it's a great opportunity to
0:34
Speaker 1: get your question answered on air. Also, Class makes it
0:37
Speaker 1: real easy to contact them if you head on over
0:40
Speaker 1: to Classfinancial dot com. That's Coss k l aas Financial
0:44
Speaker 1: dot com. They've got a great email address there. You
0:46
Speaker 1: can also schedule a complementary chat right online at Cossfinancial
0:50
Speaker 1: dot com. Or of course you can always give them
0:52
Speaker 1: a call at the office six oh eight four four
0:55
Speaker 1: two five six three seven. Don't forget that first conversation
0:58
Speaker 1: that gets to know you. Chat with the phone at
1:00
Speaker 1: Coss Financial. It will be complementary to you their number
1:03
Speaker 1: six oh eight four four two five six three seven
1:06
Speaker 1: And again phone lines are open to you this morning
1:08
Speaker 1: at six oh eight three two one thirteen ten at
1:11
Speaker 1: six oh eight three two one thirteen ten. And joining
1:13
Speaker 1: us this morning are CJ. Closs and Eric Schwartz of
1:16
Speaker 1: Klass Financial. CJ, how have you been? You got a
1:18
Speaker 1: little time off there, Good to have you back.
1:21
Speaker 2: I did have a little time off. Yeah, it's good
1:23
Speaker 2: to be back on the show with you, Sean.
1:24
Speaker 1: Perfect timing as well as as we've got a lot
1:27
Speaker 1: of stuff to cover this week. And Eric, how have
1:29
Speaker 1: you been.
1:31
Speaker 3: I'm doing great, Sean, just just holding things down here
1:34
Speaker 3: while CJ was gone.
1:35
Speaker 1: Well, I know how this works between you and Malia.
1:38
Speaker 1: You know, keep it, everybody, keep it, everybody on Tassy.
1:42
Speaker 1: It's great to have both of you, and we've got
1:43
Speaker 1: uh oh. By the way, I mentioned Malia, and obviously
1:45
Speaker 1: a lot of folks know Malia from the program many
1:48
Speaker 1: many years still of course with Class Financial and she
1:51
Speaker 1: you can of course learn more about Malia CJ. Eric,
1:53
Speaker 1: everybody at Class Financial. I mentioned the website. You can
1:56
Speaker 1: get to know everybody there as well at classfinancial dot com. Uh,
1:59
Speaker 1: let's let's get into this week's conversation, which is going
2:02
Speaker 1: to be about about roadmaps and how to avoid some pitfalls.
2:06
Speaker 1: Another cool thing is we get into that conversation, it's
2:08
Speaker 1: a really great benefit to pay close attention. Not only
2:10
Speaker 1: is there great information, there's a chance for you to
2:12
Speaker 1: win a fantastic prize. Our friends from class Financial have
2:16
Speaker 1: provided a twenty five dollars gift card to Sephora. I
2:18
Speaker 1: tell you a little bit later on the program how
2:20
Speaker 1: you can win that. But again, as we get into
2:22
Speaker 1: this week's show, it's a really good good tip to
2:24
Speaker 1: listen closer to the program because just about every show,
2:27
Speaker 1: the question and answer come up during the program. Let's
2:30
Speaker 1: actually roll back and take a look at last week's
2:32
Speaker 1: Class Quiz question week get the question and answer there
2:35
Speaker 1: as well.
2:35
Speaker 3: Eric absolutely Sean. So last week we talked about I
2:39
Speaker 3: think probably one of our most popular topics, social security,
2:43
Speaker 3: and also delved a little bit into the conspiracy of
2:46
Speaker 3: Big Calculator as well. But the question last week was
2:51
Speaker 3: what is the earliest age that you can begin collecting
2:54
Speaker 3: traditional Social Security retirement benefits? And we gave you two
2:57
Speaker 3: choices age sixty two or sixty five, and the answer is,
3:01
Speaker 3: of course sixty two. And we actually had a winner
3:04
Speaker 3: from near our other office last week, Arnie from Rockford.
3:08
Speaker 1: Oh, congratulations, I love that name. Arnie is well. Congratulations.
3:11
Speaker 1: You can be like Arnie as well. Listen closely to
3:14
Speaker 1: the program for your chance to win that prize against
3:17
Speaker 1: twenty five dollars gift card to Sephora. So, as I mentioned,
3:20
Speaker 1: of course, we're going to talk about some of the
3:21
Speaker 1: pitfalls when it comes to things to avoid when it
3:25
Speaker 1: comes to retirement planning, and there's some six mistakes that
3:28
Speaker 1: folks really need to focus in on. CJ. Let's kind
3:32
Speaker 1: of get the big picture of the overview of this stuff.
3:35
Speaker 2: Yeah, that's right, Sean. So, as retirement planners, we ideally
3:38
Speaker 2: want to help people avoid these common these six common mistakes.
3:43
Speaker 2: We want our listeners to hear these potential pitfalls and
3:46
Speaker 2: proceed with caution. The more aware you are, the smoother
3:50
Speaker 2: your retirement journey can be. As you can imagine, there's
3:54
Speaker 2: obviously more than six pitfalls to avoid in retirement planning,
3:57
Speaker 2: but we are highlighting the six most common we have
4:00
Speaker 2: seen over the past fifty years of being in business.
4:03
Speaker 1: As we talk about this stuff, let's then kind of
4:06
Speaker 1: jump in and kind of get that list going. CJ.
4:10
Speaker 2: Yeah. So I'm going to start with the first couple
4:11
Speaker 2: of pitfalls here. Pitfall number one to avoid in retirement
4:15
Speaker 2: planning is underestimating the cost of longevity and inflation. Again,
4:21
Speaker 2: this is pitfall number one, underestimating the cost of longevity
4:24
Speaker 2: and inflation. So we often refer to this pitfall as
4:27
Speaker 2: the longevity tax, since it highlights the penalty of living
4:31
Speaker 2: longer than expected and having your savings essentially taxed away
4:35
Speaker 2: by the compounding costs of inflation. This pitfall centers on
4:38
Speaker 2: two distinct but compounding risks that threaten to deplete your
4:42
Speaker 2: savings faster than you expect living a long time, known
4:46
Speaker 2: as longevity risk, that's the first factor, and the risk
4:50
Speaker 2: of costs of goods going up, which is known as
4:52
Speaker 2: the inflation factor of the inflation risk. So starting with
4:56
Speaker 2: the longevity risk aka living too long. The problem is
5:00
Speaker 2: that people tend to project a conservative lifespand often based
5:04
Speaker 2: on family history or average life expectancy, and they structure
5:08
Speaker 2: their savings to last only until that age you know,
5:11
Speaker 2: think think age eighty. The real risk is that one
5:15
Speaker 2: or both spouses live well into their nineties or beyond.
5:19
Speaker 2: As you can imagine, that could become a problem. This
5:22
Speaker 2: is the longevity risk factor. If you're running out of
5:24
Speaker 2: money in your eighties and you're living into your nineties,
5:27
Speaker 2: that's a problem. The second part of this is the content,
5:30
Speaker 2: which is the inflation risk. We call this the silent
5:34
Speaker 2: killer risk. The problem is that while your investments generate returns,
5:38
Speaker 2: the cost of goods is also constantly rising you to inflation,
5:42
Speaker 2: which is silently eroding the purchasing power of your fixed
5:45
Speaker 2: income and savings. Therefore, as you can imagine, if you
5:49
Speaker 2: underestimate your longevity and don't account properly for inflation, it's
5:54
Speaker 2: entirely possible that you live the final years of your
5:57
Speaker 2: life without sufficient resources to maintain you're expected standard of living.
6:02
Speaker 2: So again, be cautious of that pitfall number one, which
6:06
Speaker 2: is underestimating the cost of longevity and inflation. Now, pitfall
6:11
Speaker 2: number two to avoid in retirement planning is ignoring long
6:14
Speaker 2: term care costs. So we often refer to this pitfall
6:18
Speaker 2: kind of in street terms as the wildfire risk, since
6:22
Speaker 2: it has a low probability of happening to any one person,
6:25
Speaker 2: but the cost can be catastrophic and quickly deplete a
6:29
Speaker 2: lifetime of savings. So again, sometimes people go long term care. Wildfire.
6:34
Speaker 2: What are you talking about? Well, what's the risk that
6:37
Speaker 2: a wildfire is going to jump up near your house
6:39
Speaker 2: and burn down your house? I suppose it depends where
6:41
Speaker 2: you live. Right in parts of Canada or in California's
6:44
Speaker 2: supposed to be a higher risk. But you get the
6:46
Speaker 2: idea low probability. But if it happens, it's catastrophic. So
6:53
Speaker 2: don't ignore the cost of long term care. This pitfall
6:57
Speaker 2: is characterized by the failure to recognize that standard health insurance,
7:02
Speaker 2: including Medicare, does not cover the expenses associated with extended
7:08
Speaker 2: non medical, skilled nursing care to help you might need
7:11
Speaker 2: with daily living activities bathing, dressing, eating, due to age,
7:15
Speaker 2: chronic illness, or cognitive impairment. The costs associated with long
7:19
Speaker 2: term care are often shocking to those who haven't planned
7:22
Speaker 2: for them. The care is typically provided in three settings,
7:26
Speaker 2: all of which carry a substantial price tag that varies
7:29
Speaker 2: dramatically by state. The first of those three kind of
7:33
Speaker 2: settings is home health aid, also known as in home care.
7:37
Speaker 2: This carries a national annual median cost of about seventy
7:41
Speaker 2: eight thousand dollars per year. The second category is assisted
7:45
Speaker 2: living community. This carries a national annual median cost about
7:49
Speaker 2: seventy one thousand dollars a year. And finally, the third
7:55
Speaker 2: setting is nursing home also known as AKA A private room,
8:00
Speaker 2: carries a national annual median cost of about one hundred
8:03
Speaker 2: and twenty eight thousand dollars per year. So, as you
8:07
Speaker 2: can see, ignoring long term care costs and ending up
8:10
Speaker 2: with you in home care, assisted living communities, or nursing
8:14
Speaker 2: home private room care can be catastrophic. Now, a common
8:19
Speaker 2: retort we hear for this pitfall is well, it's not
8:22
Speaker 2: very common and it probably won't happen to me. However,
8:26
Speaker 2: let's address that. According to the US Department of Health
8:29
Speaker 2: and Human Services and its agencies, approximately seventy percent of
8:33
Speaker 2: people turning age sixty five today will need some form
8:38
Speaker 2: of long term care during their lifetime, and the average
8:41
Speaker 2: length of time that care is needed is over three years. Now,
8:46
Speaker 2: please don't misunderstand me, everybody, this I'm not saying therefore
8:49
Speaker 2: go out and buy long term care insurance. That's that's
8:51
Speaker 2: not what we're saying here. What we're saying is don't
8:56
Speaker 2: ignore it, don't not pay attention to this, because there's
9:00
Speaker 2: a bunch of research that's been done. It's actually called
9:02
Speaker 2: the spending smile in retirement or the spending frown in
9:05
Speaker 2: retirement that looks at people spending throughout retirement. It tends
9:09
Speaker 2: to grow in the early years and then go down
9:10
Speaker 2: in the later years, but the last few years before
9:13
Speaker 2: death skyrocket. And who can tell me, well, there you go.
9:18
Speaker 2: It's the in home care, the assisted living, and the
9:20
Speaker 2: nursing home care costs. And if those final years get
9:23
Speaker 2: extended out, because say you have Alzheimer's but your body
9:27
Speaker 2: is still alive, it can be catastrophic to the value
9:31
Speaker 2: of your portfolio.
9:32
Speaker 1: Those are some pretty big numbers. As we talked this
9:33
Speaker 1: morning with CJ. Closs and Eric Schwartz, they are our
9:36
Speaker 1: retirement planning professionals from Class Financial. Of course, you can
9:39
Speaker 1: learn more about Class Financial all on their website Class
9:42
Speaker 1: financial dot com. That's Coss klaas Financial dot com. Great
9:46
Speaker 1: website resource. Not only to learn more about Class Financial,
9:49
Speaker 1: you can schedule a conversation right online. You can also
9:51
Speaker 1: sign up for the weekly Market Pulse newsletter. It's a
9:54
Speaker 1: nice weekly snapshot of what's been going on in the markets.
9:56
Speaker 1: Also linked to the most recent podcasts. Speaking of those podcasts,
9:59
Speaker 1: when you're at class financial dot com, you can listen
10:01
Speaker 1: back to this in previous shows as well. Again, that
10:03
Speaker 1: available to you at coss financial dot com. That's Class
10:07
Speaker 1: k l aa s Financial dot com. They're tele for
10:09
Speaker 1: number six oh eight four four two five six three seven.
10:12
Speaker 1: Don't forget that first conversation at Class Financial. It will
10:15
Speaker 1: be complimentary to you. It's not going to cost you
10:17
Speaker 1: a thing. They're tel for number six oh eight four
10:18
Speaker 1: four two five six three seven. Looks into our conversation
10:21
Speaker 1: with Cjen Eric, we'll talk a little bit more about
10:24
Speaker 1: and work our way through our retirement planning roadmap and
10:26
Speaker 1: those pit falls you want to avoid. We will do
10:28
Speaker 1: that next as Money in Motion with Coss Financial continues
10:31
Speaker 1: right here on thirteen ten. Wu ib A, you've got
10:34
Speaker 1: a question, still got a line open for you. Love
10:36
Speaker 1: to hear from you this morning six oh eight three
10:38
Speaker 1: two one thirteen ten. That's six oh eight three two
10:40
Speaker 1: one thirteen ten, joined this morning by CJ. Closs and
10:43
Speaker 1: Eric Schwartz. Our retirement planning for professionals from Class Financial website.
10:48
Speaker 1: Cossfinancial dot Com. That's Coss k l a A S
10:51
Speaker 1: Financial dot Com. They're teugh for number six O eight
10:53
Speaker 1: four four, two, five, six, three seven talking about the
10:56
Speaker 1: six pitfalls to avoid in retirement planning. We got the
10:59
Speaker 1: first two down, and Eric, what's the next retirement planning
11:03
Speaker 1: pitfall that folks need to need to avoid?
11:07
Speaker 3: Yeah, So, pitfall number three that we're gonna be talking
11:09
Speaker 3: about here is entering retirement with significant debt. So we
11:14
Speaker 3: often refer to this pitfall as the retirement squeeze, since
11:18
Speaker 3: debt payments can severely compress retirees budget and really leave
11:23
Speaker 3: a little room for essential expenses or even beyond that,
11:27
Speaker 3: leisure expenses.
11:28
Speaker 1: Right.
11:29
Speaker 3: The core problem with debt as you enter retirement, regardless
11:33
Speaker 3: of the type of debt or the interest rate associated
11:35
Speaker 3: with it, is that consumers often underestimate the swing in
11:39
Speaker 3: moving from working income to retirement income, which is often
11:44
Speaker 3: based on social security and pensions and portfolio withdrawals. Right,
11:48
Speaker 3: there's a shift as you move from your working years
11:51
Speaker 3: to your retirement years. And when you're working, right, you
11:54
Speaker 3: have the option of finding a higher paying job or
11:57
Speaker 3: getting a second job. If you have significant debt and
11:59
Speaker 3: you're your expenses are kind of closing in on you
12:02
Speaker 3: in retirement. The last thing you want to do is
12:04
Speaker 3: go back to work right and feel like you're being
12:07
Speaker 3: pressured into finding a part time job just to make
12:09
Speaker 3: ends meet. Not to mention that sometimes in retirement your
12:13
Speaker 3: health can decline and pretty rapidly, and that can make
12:16
Speaker 3: it difficult for you to continue working to find that
12:20
Speaker 3: extra income and cover your expenses. So, as a retirement
12:24
Speaker 3: planning firm with about fifty years of experience, we highly
12:27
Speaker 3: suggest that our clients and the general public plan to
12:29
Speaker 3: retire debt free. Now, we are also realistic. We understand
12:34
Speaker 3: that sometimes this may not be possible, but so if
12:37
Speaker 3: you do have debt remaining as you enter retirement, it
12:40
Speaker 3: should be at a really manageable level. So typically, keeping
12:44
Speaker 3: your debt payments to no more than about twenty percent
12:47
Speaker 3: of your gross retirement income is a good rule of
12:50
Speaker 3: some and hopefully as you move into retirement there's a
12:55
Speaker 3: plan to actually pay that off in a reasonable amount
12:57
Speaker 3: of time. So that's pitfall number three, entering retirement with
13:01
Speaker 3: significant debt.
13:02
Speaker 1: Talking about number four.
13:03
Speaker 3: Here, the pitfall we want to avoid is failing to
13:07
Speaker 3: create a realistic retirement budget. So this is a really
13:10
Speaker 3: really common one. As you can imagine, as people get
13:14
Speaker 3: close to retiring, they get very anxious to retire. And
13:18
Speaker 3: so CJ and I will talk to folks and they
13:21
Speaker 3: you know, you start you suddenly start to realize that
13:24
Speaker 3: they're they're shrinking their budget really rapidly in hopes that
13:27
Speaker 3: it will allow them to retire earlier, not understanding that
13:31
Speaker 3: you know, a lower budget means maybe not the retirement
13:34
Speaker 3: lifestyle they imagined. Right, So we often refer to this
13:38
Speaker 3: pitfalls as budget blindness, and so many consumers will refuse
13:42
Speaker 3: to look honestly at those future costs, you know, leading
13:44
Speaker 3: to a financial surprise and retirement. The main issue really
13:49
Speaker 3: is miscalculating the true cost of retirement living. And CJ
13:54
Speaker 3: was talking earlier about the spending smile, which basically describes
14:00
Speaker 3: the fact that spending early in retirement is generally higher.
14:04
Speaker 3: We call these the go go years, the early active
14:07
Speaker 3: years where you're spending spending more money traveling or just
14:11
Speaker 3: getting out and doing things, and then followed by the
14:15
Speaker 3: slow Goo years and then the no go years. Right,
14:18
Speaker 3: So expenses will change over time, but it's really important,
14:22
Speaker 3: you know, as you're moving into retirement, not to just
14:25
Speaker 3: assume while I can live on less just because I
14:27
Speaker 3: want to be done working sooner. And a lot of
14:29
Speaker 3: people assume that their expenses are going to drop significantly
14:32
Speaker 3: once they stop working. It's just not what we see
14:36
Speaker 3: in reality. It's true that that retirement income is often
14:39
Speaker 3: less taxed than you're working income, you know, because you
14:42
Speaker 3: don't have payroll tax withholdings and maybe your income's coming
14:47
Speaker 3: from more tax resources. That does not necessarily mean that
14:51
Speaker 3: you will spend less, and in fact, in our experience,
14:55
Speaker 3: it's actually the opposite, which is why when we're helping
14:57
Speaker 3: people get ready to retire, we just are are sort
15:02
Speaker 3: of hardwired to add in additional spending just to make
15:05
Speaker 3: sure that people are in a good spot. So we
15:08
Speaker 3: suggest creating a realistic, detailed retirement budget prior to actually,
15:13
Speaker 3: you know, telling your boss you're not coming back.
15:15
Speaker 1: In which which feels good by the way, from what
15:17
Speaker 1: I talking this morning with Eric Schwartz and CJ. Class.
15:22
Speaker 1: They are our retirement planning professionals from Class Financial. Of course,
15:25
Speaker 1: you can learn more online great website Class financial dot
15:28
Speaker 1: com that's Class klaas financial dot com. A lot of
15:31
Speaker 1: great stuff for you there also great opportunity to give
15:34
Speaker 1: them a call six so eight four four two five
15:36
Speaker 1: six three seven. That first get to know your conversation
15:38
Speaker 1: at Class Financial. It will be complementary to you again.
15:40
Speaker 1: They're telephone number six oh eight four four two five
15:43
Speaker 1: six three seven. We'll consider our conversation with Cjen Eric,
15:46
Speaker 1: we'll talk about pitfall number five and number six. We'll
15:49
Speaker 1: do the class quiz question League. We'll do all of
15:51
Speaker 1: that next as Money in Motion with Class Financial continues
15:54
Speaker 1: right here on thirteen ten, Wuibi talking about retirement roadmap,
15:59
Speaker 1: the pitfalls you should avoid and when it comes to
16:02
Speaker 1: retirement planning. Of course, talking this morning with CJ. Closs
16:05
Speaker 1: and Eric Schwartz. They come to us from Class Financial.
16:07
Speaker 1: They are our retirement planning professionals. You can learn more
16:10
Speaker 1: online the website class financial dot com. That's k l
16:14
Speaker 1: AA S Financial dot com right telphone number six oh
16:17
Speaker 1: eight four four two five six three seven. No charge
16:20
Speaker 1: for that initial get to know your appointment tech claus Financial.
16:23
Speaker 1: It will be complimentary to you again. Their number six
16:26
Speaker 1: oh eight four four two five six three seven. So
16:29
Speaker 1: we've we've really got some great information so far on
16:32
Speaker 1: the first four. Let's keep that going CJ. Let's talk
16:35
Speaker 1: about number five and and how folks should avoid that
16:38
Speaker 1: as they approach retirement.
16:41
Speaker 2: Yeah, so pitfall number five to avoid in retirement planning
16:46
Speaker 2: is assuming your home is your retirement plan. So there
16:50
Speaker 2: are many different street names for this risk, including some
16:54
Speaker 2: of the following. House rich cash four is one of
16:57
Speaker 2: those names. Another street name is the downs downsizing delusion,
17:02
Speaker 2: or my personal favorite, which is the reverse mortgage roulette.
17:07
Speaker 2: So you know these are again these are different street
17:09
Speaker 2: names for the pitfall, which is assuming your home is
17:13
Speaker 2: your retirement plan. So assuming your equity in your home
17:17
Speaker 2: is your retirement plan simply because you will downsize in
17:21
Speaker 2: retirement is not only super risky, but also may not materialize.
17:26
Speaker 2: Many retirees' wealth is heavily concentrated in their home equity,
17:31
Speaker 2: often at the expense of liquid investments, savings, and retirement accounts.
17:35
Speaker 2: This creates a financial situation where a person may be
17:38
Speaker 2: house rich but simultaneously cash poor. Now, I do just
17:42
Speaker 2: want to address something here because for some of you
17:45
Speaker 2: you may be going, how could this be a pitfall?
17:47
Speaker 2: Given that I've heard cost financial do entire shows on
17:51
Speaker 2: eliminating debt as they head into retirement, As a matter
17:55
Speaker 2: of fact, Eric just addressed you know, carrying too much
17:58
Speaker 2: debt as a pitfall. So how can I I both
18:00
Speaker 2: pay off my mortgage, be debt free and have that
18:03
Speaker 2: be a risk. Well, just like in everything in life, everyone,
18:09
Speaker 2: there's balance here. So if you do a good job
18:12
Speaker 2: and you pay off your mortgage, you know, we're happy
18:15
Speaker 2: for you. Good job, big thumbs up. But if you
18:18
Speaker 2: do that at the expense of saving anything into retirement
18:22
Speaker 2: accounts or investments, and so you end up with a
18:26
Speaker 2: lot of equity in your home but no money to
18:29
Speaker 2: live off of. And then you come to Eric and
18:31
Speaker 2: I and say, but good news, don't worry. My home
18:34
Speaker 2: is my retirement plan. This is the scenario we're talking about. So,
18:39
Speaker 2: while your home is a super valuable asset, it is
18:42
Speaker 2: not easily converted into the cash flow you need for
18:45
Speaker 2: daily living in retirement without significant costs, risks, or relocation headaches. Furthermore,
18:52
Speaker 2: while you may be able to downsize in retirement, there's
18:55
Speaker 2: no guarantee that the new home you purchase will actually
18:58
Speaker 2: cost less. Therefore, we suggest that you both pay off
19:02
Speaker 2: your mortgage and consider downsizing in retirement as needed, while
19:07
Speaker 2: also saving into retirement accounts at work and in taxable
19:10
Speaker 2: investment accounts for diversification, liquidity, and risk mitigation. So listen, everybody.
19:15
Speaker 2: Here's a simple example of this. We have a lot
19:17
Speaker 2: of people we work with in northern Illinois with an
19:20
Speaker 2: office in the Love's Park, Illinois area. And for those
19:24
Speaker 2: of you who can hear us on the air, you
19:25
Speaker 2: can attest about what I'm about to say. The homes there,
19:28
Speaker 2: the price of the home compared to say Madison, Wisconsin
19:32
Speaker 2: is significantly less, probably half on average. Now, I don't
19:36
Speaker 2: want to go down the rabbit trail property taxes in
19:39
Speaker 2: northern Illinois because those are quite high, but they're also
19:41
Speaker 2: high in Madison as well. But here's the problem. If
19:44
Speaker 2: I can buy a home for say three hundred grand
19:47
Speaker 2: in Love's Park, Illinois, that would be worth six hundred
19:50
Speaker 2: thousand in Madison. Good news, I can probably get that
19:53
Speaker 2: paid off faster. Bad news when I go to downsize
19:58
Speaker 2: and move from love Park, Illinois to Nashville, Tennessee, or
20:03
Speaker 2: to know parts of Florida, because I heard there's no
20:06
Speaker 2: state income taxes there. What's the problem. Well, my three
20:10
Speaker 2: hundred thousand dollars home that is a downsized home in
20:14
Speaker 2: one of those communities is actually not enough to cover
20:18
Speaker 2: half the purchase price. So be ever so cautious with
20:22
Speaker 2: assuming that your home is your retirement plan. You need
20:26
Speaker 2: to probably meet with a financial advisor, talk about your
20:29
Speaker 2: future goals and make sure that you're balancing between paying
20:33
Speaker 2: off the mortgage, saving into retirement accounts, so on and
20:35
Speaker 2: so forth.
20:36
Speaker 1: Great perspectives this morning. As we talked this morning with CJ.
20:39
Speaker 1: Closs and Eric Schwartz of Kloss Financial online Class financial
20:42
Speaker 1: dot com that's class klaas financial dot com. Talking about
20:46
Speaker 1: the six pitfalls to avoid in retirement planning, We've got five,
20:50
Speaker 1: which brings us to number six. Eric, take us down
20:53
Speaker 1: that home stretch with number six, my friend, all.
20:56
Speaker 3: Right, pitfoun number six to avoid in retirement planning is
20:59
Speaker 3: neglect to plan for incapacity and asset transfer. So let
21:03
Speaker 3: me just briefly define what we're talking about here. When
21:06
Speaker 3: we say incapacity, we mean you have not passed away,
21:10
Speaker 3: but you are not for some reason, you are not
21:12
Speaker 3: able to make decisions. Maybe it's a cognitive decline, or
21:17
Speaker 3: you know, maybe you're in some sort of accident and
21:19
Speaker 3: you cannot make your own decisions. So it's one piece
21:22
Speaker 3: of this, that's the incapacity portion, and then the asset
21:25
Speaker 3: transfer is obviously when folks pass away where their assets go.
21:30
Speaker 1: At that point in time.
21:31
Speaker 3: So we refer to this pitfall as the legacy leak,
21:34
Speaker 3: since there's a financial cost associated with poor planning. Now,
21:37
Speaker 3: these costs can be court fees, legal costs, unnecessary taxes,
21:42
Speaker 3: and inheritances of assets by the wrong beneficiaries. So this
21:47
Speaker 3: pitfall is basically the failure to complete the essential legal
21:50
Speaker 3: and administrative paperwork right when you are making decisions about
21:56
Speaker 3: where your money is going to go at death. It
21:59
Speaker 3: is some thing that nobody likes to do, and when
22:01
Speaker 3: they finally do it once, it's difficult to get people
22:05
Speaker 3: to revisit it. Then after it's like, hey, I checked
22:07
Speaker 3: that box like you told me too. But your loved
22:10
Speaker 3: ones will thank you so because they will not be
22:13
Speaker 3: forced into slow, expensive and stressful court processes. Okay, Therefore,
22:19
Speaker 3: we suggest to our clients and the public that they
22:21
Speaker 3: review their beneficiary designations every few years or whenever there's
22:25
Speaker 3: a major life change, and that they plan for their
22:28
Speaker 3: incapacity by drafting documents like a durable power of attorney
22:31
Speaker 3: for finance and a Healthcare directive for medical decisions. One
22:36
Speaker 3: thing I hear all the time from clients, Well, my
22:41
Speaker 3: will says that it gets split up among my kids,
22:43
Speaker 3: So I'm not worried about the beneficiary designation. If you
22:46
Speaker 3: have a beneficiary designation on an account, it does not
22:49
Speaker 3: care what your will says. The will has no influence there.
22:52
Speaker 3: So we need to make sure that when you're opening
22:55
Speaker 3: retirement accounts or even investment accounts that you put beneficiaries on,
23:00
Speaker 3: that those are set up correctly. And now I'm not
23:04
Speaker 3: suggesting that it's not important to make sure you draft
23:06
Speaker 3: a will and maybe even a trust to handle a
23:09
Speaker 3: state administration, but beneficiary designations are also super important and
23:16
Speaker 3: it's it's very accessible in something you can easily talk
23:19
Speaker 3: through with an advisor or retirement plan custodian.
23:23
Speaker 1: A lot of great stuff this week, Eric, you had
23:26
Speaker 1: one one more thing. I apologize that I feel like
23:27
Speaker 1: IM gonna know.
23:28
Speaker 3: That was actually all I was going to go over there.
23:30
Speaker 1: Shot that's good stuff as always from CJ and Eric,
23:33
Speaker 1: a retirement planning professionals from Class Financially. You can learn
23:36
Speaker 1: more online thwbside class Financial dot com. That's coss k
23:40
Speaker 1: l A a S Financial dot com. You can listen
23:43
Speaker 1: back to this previous shows on the website. You can
23:46
Speaker 1: also do a conversation. Start a conversation right online at
23:50
Speaker 1: class financial dot com. There's a nice little link right
23:53
Speaker 1: at the top to do just that again. The website
23:56
Speaker 1: coss financial dot com. That's coss k l a A
23:59
Speaker 1: S Financial dot com. And now's give them a call
24:01
Speaker 1: six oh eight four four two five six three seven.
24:04
Speaker 1: Don't forget no charge for that initial get to know
24:06
Speaker 1: your appointment tech Loss Financial. It will be complimentary to
24:09
Speaker 1: you again their telephon number six oh eight four four
24:11
Speaker 1: two five six three seven. You're also going to want
24:13
Speaker 1: to hold on to that telephone number because it's time
24:15
Speaker 1: now for the class quiz question the week. It works
24:17
Speaker 1: like this, just moment to ask you the class quiz
24:19
Speaker 1: question leak. You will then have thirty minutes from the
24:21
Speaker 1: today's program to call the Class Financial office right here
24:24
Speaker 1: in Madison at six oh eight four four two five
24:27
Speaker 1: six three seven. If you are the first caller with
24:30
Speaker 1: the correct answer, will win this week's prize, which is
24:32
Speaker 1: a twenty five dollars gift card to Sephara. This week's
24:35
Speaker 1: class quiz question of the week. Is this true or false?
24:39
Speaker 1: According to the US Department of Health and Human Services
24:42
Speaker 1: and its agencies, approximately seventy percent of people turning sixty
24:46
Speaker 1: five today will need some form of long term care
24:50
Speaker 1: during their lifetime. Is that true or is that false?
24:53
Speaker 1: Telephone number six oh eight four four two five six
24:56
Speaker 1: three seven, first call. Correct answer when the twenty five
24:59
Speaker 1: dollars gift cards is four and again, don't forget. That's
25:01
Speaker 1: Class Financial's office right here in Madison at number six
25:04
Speaker 1: O eight four four two five six three seven. The
25:07
Speaker 1: website class financial dot com. That's Class klaas Financial dot com. CJ. Eric,
25:13
Speaker 1: it's always fantastic hanging out with both of you guys.
25:15
Speaker 1: Have a great day and we'll do it all again
25:17
Speaker 1: real soon.
25:18
Speaker 2: Thanks Sean, Thanks Sean.
25:19
Speaker 1: Dake care of course. CJ Eric come to us from
25:21
Speaker 1: Class Financial website, Class financial dot com. We're gonna head
25:24
Speaker 1: out to the National Dog Show where doctor Marty Greer
25:27
Speaker 1: is standing by. Yes, she will be showing dogs at
25:30
Speaker 1: the dogs show. As a matter of fact, Thanksgiving Day
25:32
Speaker 1: you'll see the doctor on national television. So we'll talk
25:36
Speaker 1: with uh doctor Greer from Philadelphia. We will do that
25:39
Speaker 1: next as Madison, the morning and ask the experts continues
25:42
Speaker 1: right here. I'm thirteen ten double you, I B I