SPEAKER 03 : 0:01

Welcome to Retirement Unpacked with Al Smith, owner of Golden Eagle Financial. You want a retirement plan that alleviates your fears about the future so you know your money will last. As a chartered financial consultant, Al Smith will help you find a balance between the risk and reward of the market and the safety of your retirement income. And now, here’s your host, Al Smith.

SPEAKER 02 : 0:26

Welcome to another program of Retirement Unpacked. I want to thank you for tuning in. I appreciate you listening and hopefully you’ll be listening to me on KLZ every week. I have some good information for you today. Some things you may have already heard before, but it’s a topic that I could probably do eight or ten times each year, and it wouldn’t be too much because it’s extremely important. Before I dive into that, I want to let you know about an upcoming event at the Belmar Library, March 19th. That’s a Thursday from 615 till 730 at the library. I and my Our team will be talking about essential tax strategies for retirement because a really important component of retirement planning is making certain that you’re receiving the income that you need to live and helping and determine how much of that income is going to be is how much you’re paying in taxes. So if that’s something that can be reduced or lowered or even brought down to zero, the planning becomes much more meaningful. because we don’t know what the tax rates will be like in the future, but with the right planning, some people can actually be in a zero tax bracket. Now, not everybody, but some people with some planning, we sometimes have the opportunity to make that happen. And if you are not able to attend the event, Call my office. Well, actually, call my office whether you want to attend the event or not. The office number is 303-744-1128. And if you would like to attend the event, just call and speak to me or one of my staff, and we’ll get your contact information and so forth. On the other hand, if you’d like to have a conversation with me, call the number, and we’ll definitely arrange a time when we can sit down and see if there’s a way that your path to retirement will be less tax burdensome than it is now. Topic today, this is something I’ve spoken about before and I will continue to speak about it, is mistakes people make as they are preparing for retirement. And it’s such a big topic, I could stretch it over four or five or six weeks, but I try and cover the mistakes that are the most significant, the most important mistakes. The first one is one that we actually have no control over at all. at the present and the reason we have no control over that is because we don’t have a time machine. So the most important thing people need to do as they prepare for retirement, which could be a mistake, is not beginning to invest and save for retirement at an early age. You’ve heard me speak about Albert Einstein saying that the eighth wonder of the world is compound interest. Well, I’ll give you a little bit of an idea how significant that is. a 25-year-old who decides to save $500 a month, and he’s going to invest that. And so we’re going to use an interest rate or a rate of return of 8%. And over a long period of time, that is not really highly aggressive because if we look over 50 years, the stock market, based on the standard and poors, has averaged 9%. But Someone age 25 who decides to save $500 per month when he or she is 65, that nest egg will grow to $1,314,339. And on the other hand, if someone isn’t so well disciplined at that time, and he or she waits to age 35, and he or she begins to save $500 a month, by age 65, he or she will have $499,699. So the ballpark numbers are if you begin saving at 25, 500 a month, you’ll have $1.3 million. If you wait to 35, save the same $500 a month, you’ll have a half a million dollars. That’s two and a half times as much by starting 10 years earlier, saving the same amount of money. Now, here’s one for you. Let’s say someone, for whatever reason, wasn’t able to begin saving till age 40. But he or she knew that he or she is going to have to save a lot of money in order to have a reasonable nest egg in retirement. So the 40-year-old saves $2,000 per month. Now what’s interesting is the 40-year-old saving four times as much as the 25-year-old has a smaller nest egg. The 40-year-old who saves $2,000 every month will have $1.1 million at age 65. And again, the 25-year-old had $1.3 million. Now what if somebody started even earlier? age 18, and let’s say he didn’t have to retire until a bit later, but he couldn’t afford or she couldn’t afford $500 a month, he or she could only afford $350. Now, most people age 18 aren’t thinking about retirement, but someone who does, and let’s say he or she is able to save $350 a month, keeping in mind the average car payment is about $700 a month. So anyone age 18 that is working and wants to buy a car, he or she would be really lucky to find a car payment below $350 a month. But what if he or she decided to continue with their older car and instead invest $350 a month? And instead of 500, well, if that person saved it all the way to age 68, that’s 50 years, he or she would have $2.2 million. That’s saving only $350 a month. Some people pay that for satellite TV. Some people pay that to Xfinity every month to have a big choice of channels. Many, many people, if they have multiple phones, watches, and new Apple phones and so forth, are paying half of that or more just on their cell phone bill. Okay, what if someone age 18 wanted to retire at 65 instead of 68? That $350 a month would still get that person $1.7 million. And again, that’s based on 8%. And so I think the important thing, not going to bury you with more numbers, but if you Google… How you can look at compound interest, just Google compound interest, and you’ll find a table that pops up and you can just put in different numbers of saving over certain periods of time. Once you do that, you’ll realize they also show you a graph, a curve. And compound interest doesn’t grow in a linear fashion. It grows in a very steep curve. And it becomes very steep when you get 30 or 40 years down the road. But I won’t beat that into the ground anymore because if you’re 35, you can’t go back to age 25 to begin investing for retirement. And if you’re 58, you can’t increase your 401k contributions that you should have done when you were 40. So if you have not fully begun saving and you’re working and earning money, start now. Absolutely. Call my office and people can start saving and investing with a very small amount of money. It’s surprising. My number is 303-744-1128. Those of you who have been working a while, the second big mistake people can make is not putting enough into your 401k to achieve the match. Now, not all companies match any longer. A typical arrangement is for an employer to match like up to 3%. Now, I suggest people put in more than 3%, but at the absolute minimum, you need to put into your 401k account an amount that will be matched by your employer. If you are younger, it’s not a bad idea to suggest some more aggressive allocations because if you’re younger and the market drops, well, your additional contributions will be at a lower rate and you can take advantage of what’s called dollar cost averaging, which means investing over time when the market has different values over that period. The next mistake, and clearly there are no shortages of mistake, but the next mistake is not considering taxation. And I don’t suggest that people begin thinking about taxation of their fund or of their nest egg or of their retirement accounts when you’re in your 60s. Because when you’re in your 60s, you have only a limited time frame to make any changes with regard to the taxation you’ll be participating in when you’re retired. That example I gave of the 25-year-old, $500 a month, he could put or she could put that entire amount into a Roth IRA as long as he or she has earned income that year. That’s $500 a month. That’s $6,000 a year. The limitation in 2026 is $8,000 a year. So he or she could actually put more money in that. But if he did or she did a regular IRA, then there would be money saved on those contributions. The total of $500 a month for 40 years, that totals $240,000. If the person, the young man or young woman, were in a 20% bracket, that is $48,000 that would have been saved in taxes on that $240,000 contribution. save $48,000 in taxes. And that assumes a 20% bracket, which many people are not in who are younger. However, at age 65, the $1.3 million is fully taxable. So what do you want to pay tax on, the $240,000 or the $1.3 million? When I do presentations and so forth, I talk about do you want to pay tax on the seed or do you want to pay tax on the harvest? In this case, if this young man or young woman had put this $500 a month into a Roth, he or she wouldn’t have had a tax deduction, but would have a $1.3 million tax-free nest egg at age 65. And if you know the rules… Roth IRAs do not have required minimum distributions. That means someone could take out no money out of the Roth or they could take a big chunk whenever they want to, because you can make your distributions from your Roth IRA on your schedule, not the IRS’s schedule. After the break, I’m going to have examples of other mistakes people make as they prepare for and move into and through retirement.

SPEAKER 01 : 14:13

Wherever you are on your retirement journey, a happy audit of your finances and goals with Golden Eagle Financial can help. Al Smith of Golden Eagle has helped hundreds of KLZ listeners get set up for success in their retirement. He will review what you currently have and discuss available growth options. With decades of experience, Al has tools to develop unique strategies for his clients using his knowledge of the market and diverse product options. This means your money works smarter for you. He takes everything into consideration, from how you want to spend your time and money in retirement to helping ensure you’re prepared for any unforeseen circumstances. Best of all, there’s no charge for the audit, so there’s zero risk to learn how you’re doing, like will your nest egg last or are your contributions adequate? Schedule your free happy retirement audit today with our trusted partner, Golden Eagle Financial, at klzradio.com slash money. Investment advisory services offered through Brookstone Capital Management, LLC. A registered investment advisor. BCM and Golden Eagle Financial Limited are independent of each other. Insurance products and services are not offered through BCM, but are offered and sold through individually licensed and appointed agents.

SPEAKER 02 : 15:20

Welcome back to the second half of Retirement Unpacked. We’re talking about the mistakes people make as they prepare for and move into and through retirement. The last one we talked about is not considering taxation. For younger people, if you have the opportunity to put money in an IRA or your company’s 401k, most companies’ 401ks has a Roth option. If that is similar to your 401k where you work, definitely put all of your money into the Roth if you are younger. Because that is going to grow and grow and it’s going to grow to be two or three or four or five times the amount you put in. So it’s far better to pay the tax on your contribution than it is to pay on the sum of money, which can be four or five times as large as what you put in. So that’s incredibly important, especially for younger people. If someone is well into their 70s and in a modest tax bracket, I don’t necessarily suggest Roth conversions under those circumstances. But for younger people, I highly recommend investing participating in your company’s 401k in the Roth option if they have that. If your company does not have a Roth option, talk to your human resources or the management and explain that you want an amendment to your company’s 401k plan document that permits a Roth option because that’s incredibly important, especially for younger people. Another one of the biggest mistakes, especially as people move closer to retirement, is not having a plan. You can be saving. You can be putting money into your 401k. You can be living frugally, which I don’t necessarily think that is the only way to save, by living frugally. But the point is, you need to have a plan. And Mike Tyson had the best way of describing how a plan works. He said, everybody has a plan until you get hit in the face. Now the plan should include a plan for when things don’t go according to plan. Now, that may sound silly or foolish, but nobody plans to have one of their children living with them at the same time that one of a couple, maybe a spouse or the person himself, has a parent living them. This is called the sandwich generation. If these folks are still working, but they’re assisting both a parent and children, maybe a son or daughter went through a divorce or something, it’s difficult to save for retirement if you have three generations living in a household. Now, this is very common in other cultures, especially other cultures that don’t have retirement plans, other cultures where it’s common for people to live multi-generational in a home. However, in our culture, it’s not. It happens, but it’s not terribly common, and it can seriously put a financial strain on an individual or a couple as they try and prepare for retirement. So what’s not planned for, like having a parent or an adult child who’s going through a divorce or something like this, living in the home, or even both, Because I know circumstances where people have had both, an elderly parent and a very small child in the home at the same time. Also, personal care. None of us knows what the last few years of our lives are going to be like. We could die in our sleep, like Chief Justice Antonin Scalia was still working. He died in his sleep. However, some people, before they leave this world, will spend a period of time it might be six months it could be two or three years where they will need assistance with personal care not necessarily medical care but a period of time when they will either have to have a relative or a paid person to help them with activities that they were previously doing independently none of us knows what that circumstance is going to look like for us. But recent statistics say that 70% of us who reach age 65 will need some kind of assistance for some period of time. So having that incorporated in the plan that you’re creating for your own retirement is incredibly important. If a couple needs $6,000 a month to live comfortably, but they haven’t allocated additional resources to pay for personal care or spending time in assisted living or something, then that $6,000 a month wouldn’t be enough for a couple because that’s about what it costs for one person in assisted living, and that’s not including any additional expenses. items. Assisted living often has additional services on sort of a cafeteria or a la carte basis. So not having a plan is an incredibly big mistake people can make. You can accumulate wealth, you can be maxing out your 401k, you can be doing all kinds of things. But if you haven’t sat down and created a plan to see what that would look like in terms of providing income in the future, and taking inflation into consideration, then that is clearly a mistake. Allowing your children’s emergencies to become your own emergency is another mistake. I learned, I try and learn a lot of things from the people I’m blessed enough to help and meet. And I met a gentleman one time and he had a son who was going through some difficulties and he asked his dad for a loan. And it was a pretty significant amount that he needed. And his father agreed that he would help, but he said, I’m not going to give you a loan. I’m going to give you a gift. And when this person died, this son who needed the money, he had other siblings. And so this person adjusted his estate plan accordingly. reducing the young man’s future inheritance by the amount of the gift. And a couple of reasons for this, because many times when a parent loans money to a son or a daughter, and the son or the daughter continues to have difficulties and defaults on the loan, so to speak, not only is that disastrous financially for the parent who might be expecting the money back, but it destroys the relationship. And that’s what this gentleman told me. He said he doesn’t expect compensation back for this, and he doesn’t want to destroy the relationship with his son because his son is unable to make payments on this loan. So I think that’s an important component is don’t allow your children’s emergencies to become your emergencies. Another thing, this I’ve talked about in my shows, you have to have a plan for joy and fulfillment in your retirement, a plan for how you’re going to spend your time. What are you going to do if you’ve been working, if maybe you’re self-employed or you have a job that’s stressful and it provides you with a very healthy income, but you really haven’t thought about how you’d like to give back. You maybe haven’t thought about places that you could volunteer. There’s all kinds of things people can do. If people like to ski, there’s a disabled ski program in Winter Park. There’s all kinds of opportunities with most churches where you can be of help. There’s opportunities with school systems to help tutor students. children, people who have a specific occupation like engineers and software engineers and so forth, they can be extremely helpful with young people who may have difficulty with math. If someone has good literary and English skills, they can be very helpful to young people as they may struggle with language arts, which We used to call that English or rhetoric. And we don’t want our children or grandchildren to be learning how to write based on AI. And AI has a very, very useful purpose. But the AI won’t necessarily teach our children why is the grammar from AI superior to what the child wrote. The AI won’t necessarily spell out those grammatical rules for the correct corrections of the child’s essay versus the AI version of that. One thing I wanted to talk about before I sign off today, there are radio shows that are saying that if your index annuity is paying very low returns, they can get you 10 to 12 percent returns. And these are index annuities that are guaranteed against loss. Okay, if something sounds too good to be true, it probably is. There are no annuities that have consistently over time paid 10 or 12%. But you may be hearing about that on radio shows. Don’t believe it. What you need to have is an overall plan on how products like that and good investment, common sense can help you as you move toward retirement. God bless you. Thank you for tuning in. Hopefully you’ll be here next week. Bye now.

SPEAKER 03 : 26:43

Thank you for listening to Retirement Unpacked with your host, Al Smith of Golden Eagle Financial.