The X’s & O’s
DIY projects have become a popular topic with all of the home renovation shows on television, but have you ever wondered how you might be able to put together a retirement plan on your own? There are many steps and factors that need to be considered if you choose to go this route and we will explain all of them on today’s show.
Listen to the podcast episode…
Brent Pasqua, Matthew Theal and Joshua Winterswyk
Matthew Theal: Welcome to The Retirement Plan Playbook. I’m Matthew Theal joined, as always, by Brent Pasqua. Brent, how are you doing today?
Brent Pasqua: Outstanding, Matthew. How are you?
Matthew: Oh, I’m doing great. No complaints at all. Also joined, as always, by Joshua Winterswyk, Certified Financial Planner. Josh, what’s going on today?
Joshua Winterswyk: Happy to be back from my trip, feeling refreshed. Ready to get this podcast started.
Matthew: Yeah. You went on a honeymoon, right?
Joshua: I did, yeah. We had a delayed honeymoon, so we got married back in June, but went to Europe for the first time with my new wife and we just had a great time. It was amazing.
Matthew: Now most people probably won’t get this reference, but did you visit the Theatre of Dreams?
Joshua: I did, yes. I got to see my favorite team in the world, Manchester United play Arsenal at their stadium, or at home, at Theatre of Dreams, Old Trafford and it was a dream come true. I’m glad I got to experience it with my wife and a little nervous for her, but she had a great time. It’s really neat. It was a lot of fun.
Matthew: So where did you go?
Joshua: We went to London, Manchester, Amsterdam and Barcelona, Spain. So we got a taste of Europe. Every place is a little different. And then I ended with Barcelona, which was nice because they had the warmest weather. So we even got to squeeze in a beach day in Barcelona.
Brent: Sounds like a well-deserved honeymoon trip.
Joshua: Yeah, it was just awesome. Thank you guys for covering me. I appreciate it, while I was gone, but it was just amazing. We loved it. Loved Europe and want to go back.
Brent: So, Matthew, what’s on deck today?
Matthew: Today’s show, we have a really special one for the listeners. Are you guys familiar with the HGTV and those home remodeling shows?
Joshua: Yeah, I watch them.
Matthew: Yeah. What’s your favorite one, josh?
Joshua: Fixer Upper.
Matthew: Yeah. So this is what today’s podcast is going to be like, it is going to be a do it yourself retirement plan. So we’re going to walk you, the listeners, through how to create your own retirement plan.
Matthew: And the idea is you can try this on your own and you might not have to hire professionals like us or it might make you want to hire a professional. But either way, we’re excited to get going. So Brent, what’s step one?
Brent: The first step in creating your own retirement plan would be to write out your goals, either by yourself or if you have a spouse or a partner, with your partner to determine what you actually want to do when you retire. I mean, a lot of us have different goals and passions and we still want to live a purposeful life beyond retirement. So there’s things that we want to do.
Brent: Some of those things that you might want to do is determine where you want to live, places you want to travel, things that you want to do. Maybe you want to play golf, maybe you want to take some classes or volunteer, but having a really good outline about why you want to retire and what you want to do when you retire is an important first step.
Matthew: Yeah. I find that most people, their main goal is they want to retire, right? So that’s the first one. And then usually they have like sub goals after that. “I want to retire because I want to travel,” or, “I want to retire because I want to spend time with my grandchildren. I want to retire because I’m sick of working and I want to play golf.”
Joshua: That’s the one that came to my mind. I’m just sick of working.
Matthew: Yeah. Yeah, that’s true. It’s sick of the nine to five grind, I guess.
Brent: Yeah, and I think that the important part, with your goals are, and where it can really help you determine, if you say, “Okay, well, if I work an extra year or two and I can accomplish more of my goals, is it worth me sticking out those last year or two?” I mean, if you don’t have a lot of goals and passions when you retire, then maybe you can actually retire early.
Brent: Putting those on paper, getting an idea of what it’s going to cost; important step.
Matthew: Yeah. I would say if you don’t have any goals, maybe you shouldn’t retire. A little devil’s advocate there because then you’re just going to sit around and watch TV all day.
Joshua: Have more time to think about it.
Matthew: That’s true too.
Joshua: And I think that it’s also important to really detail timelines, time horizons of the goals and then also set dollar amounts to the goals too. Whether it fits $1 million in my 401(k) or putting specific details for those goals I think is also important.
Brent: Yeah. I think there’s many people out there that have to get up so early and they’ve been doing it for so long. They’re just tired of being married to the clock that they just don’t want to have to get up early anymore too.
Matthew: Yeah, it’s especially miserable at this time of year when the sun’s not really coming up until 7:00 AM, I mean, you’re getting up at 5:00 AM it’s pitch black outside, right? Brent, what is an acceptable number of goals for a person to have? Like, what do you typically see when you’re working with pre-retirees?
Brent: Like the number of goals?
Matthew: Yeah, what’s the typical?
Brent: Probably at least three or four is a good basic foundation. It starts to outline the passions and then they spiderweb from there.
Matthew: Perfect. Anyone else have anything to add?
Joshua: No, that’s good.
Matthew: Joshua, after pre-retiree’s discovered their goals, what’s the next step?
Joshua: The next step is going to be creating a balance sheet. So what that means is taking a look at your assets and your liabilities and really writing them down. So creating a template that you can follow ongoing to writing down both assets and liabilities. And to explain what assets are, those include your home, your brokerage accounts, bank accounts, retirement accounts, rental properties. So anything that has an actual value that would be considered an asset would be written down on that balance sheet.
Joshua: And then also after you write down all of those assets, is writing down all of your liabilities. So mortgage, student loans, auto loans, credit cards, home equity, lines of credit, anything that’s a debt. And what we’ll want to do is then calculate what your net worth is. That’s just really why we’re using this tool is to calculate what the actual net worth is, which is your assets minus your liabilities. We’ll come up with that number and you can use, a couple of different ways to do it.
Joshua: Mint.com is one common software that you can use, it’s free online. You can use just an Excel spreadsheet to track your balance sheet or you can just write it down on a piece of paper.
Matthew: Yeah, absolutely. That’s the hipster way, right? Kind of old school.
Joshua: Yeah, buy a notebook. Nice leather bound notebook and write it down in your hipster notebook.
Matthew: Yeah, that’s really cool. The way I like to think, about when I’m working with clients is, assets are what you own, so anything you own is an asset and then a liability is anyone who you owe money to.
Joshua: Yeah, great way to put it.
Matthew: Good top level summary. And what we’re trying to do here by creating a balance sheet is for you to get a picture of what you actually have because most people don’t know. Right?
Matthew: Brent, anything?
Brent: No. I mean you don’t know. I mean, there’s statements that come in the mail, everything’s always changing, to finally get everything in one spot and get it on a spreadsheet. I think there’s a lot of people that do spreadsheets, don’t get me wrong, but there’s a lot of people that don’t.
Joshua: I think it’s just a majority of of people don’t. That’s what we see. It takes a lot of time to keep everything organized. With all the other things that you have going on with your life, once a month are you really spending the time of opening up all of your statements and writing them, the account balances, down to come up with your balance sheet? It’s just a task that doesn’t interest a lot of people to do every month.
Matthew: Yeah. When I get my mail and I get the statement the first thing I’m not thinking about is how excited I am to go punch that into my Excel spreadsheet.
Joshua: Right. Especially after a long day at work.
Matthew: All right. Let’s move on to step two. I’ll go ahead and handle step two and step two is going to be really where we start to get into the meat and potatoes of your retirement plan. We’re going to take a look at your current income, so what you’re currently making, and then you’re going to want to project out your retirement income.
Matthew: And another way to put this as we’re going to be starting to create your cashflow statement here, and this is going to be a two step process. So on the current income side, you’re going to want to write down or get, essentially, your statements together for all of your income sources. So your W-2 wages. If you’re a 1099 employee, you’re going to want to get all those 1099 slips. If you have rental incomes, you’re going to want to have an idea how much each rental brings in.
Matthew: There’s other sources as well, if you’re a business owner, you’re going to have a K-1 distribution. You’re going to want to pay attention to how much income you’re getting from the business. And then, also, if you’re an investor and you have a rather sizable brokerage account or savings account, you’re going to want to know how much interest in dividends are coming in every month.
Matthew: Another step you could do is to get this a little quicker, is to learn how to read your own tax return. But that could be a little difficult if you don’t have proper training. But what you’re going to want to look for is what your current adjusted gross income is. And one thing I’ll point out here, and this is a mistake a lot of people make, is when they start adding up their current income, they don’t take into consideration the amount of money they’re putting into their retirement accounts.
Joshua: Yeah, that’s important as well.
Matthew: So that money’s coming out before taxes. So if you’re saving 20,000 a year into your 401(k), which most pre-retirees should be, then that’s 20,000 a year coming off your income. So if you’re making a 150 you’re really only making 130 and I see that as a massive a mistake a lot of people make.
Matthew: After you know what’s coming in, one popular rule of thumb is you want to replace about 90% to 80% of your current working income. And that takes into account their retirement account contributions. So let’s say you’re making 200,000 that means you probably want to, at least, have a retirement income of somewhere between 160 to 180,000 per year. Does that sound about right, Joshua?
Joshua: Yep. Yep. Absolutely. And I think just one tip, if we’re giving this DIY segment is, in your next tax appointment, we know tax season’s coming up in just a few months, ask your tax preparer to really explain how your income’s broken down. And so you can see it on the tax return. And then that way you can always go back every year and take a look at your income and what you made and understand that a little better.
Matthew: Yeah. That’s a great tip. So after you get what your current working income is and an idea of what we might think you need in retirement, we’re not quite sure yet though, but we have one metric we could use; the 90%, 80% replacement rule. We needed to see what you’re actually going to be bringing in in retirement or even working part time. If so, how much money you’re going to make, what’s your social security income going to be? If you own a business, will you still own that business in retirement and will it be giving you income? What about trust income? Do you have trusts set up? If you do this trust can be distributed in an income to you. And then the same thing with the dividend interest and then is your employer offering you a pension? If so, how much is it going to be? You’re going to want to get those estimates. Brent, can you talk a little bit about, I brushed over, but social security?
Brent: Yeah. I think it’s important to really get a good idea of what you’re going to receive from social security since it is part of that foundational income that you’ll have in retirement. I think the first thing that you’re trying to determine once you start to get closer to retirement is, “What’s my fixed base going to be?” Whether it’s from social security or whether it’s from your pension and the first place to get a good idea is from social security.
Brent: As we talked about in the first podcast on social security, you can collect multiple different times from 62 to 70 and it’s actually 96 different times that would give you a different benefit amount. To determine when you’re going to collect your social security is going to be helpful in determining what your income’s going to be.
Matthew: Yeah. In social security, they give you three ages, right? What benefit numbers are they, again?
Brent: They’ll give you 62, your full retirement age and then 70. For the most part, full retirement age right now is 66 to 67 depending on what year you were born. But they’ll give you those amounts and that’s it. They’re not going to give you everything in between. Most people just don’t generally retire on those dates.
Matthew: Right, right. And, Josh, for the people listening who have never ever looked at their social security statement, where’s a good way they could find it?
Joshua: You can go to ssa.gov and you’ll be able to download your social security statement.
Matthew: Yeah. Creating an account and make sure your social security number hasn’t been stolen. That’s a good way to check, right?
Joshua: Yeah. And your earnings are being reported.
Matthew: That’s true too. Great tip. Anything left on social security income?
Brent: I think though, the last thing that makes sure to factor in, if you’re looking at the benefit amount that you’re going to receive, that you are factoring in, that most likely you’re going to be paying for Medicare and your social security. So that’s a deduction. And also, most likely, in most instances you’ll be paying some taxes on your social security. So you have to deduct that off. So even though you see that base amount there on your social security, it’s probably not going to be what you’re bringing in.
Matthew: Right. So you’re saying if my a base projected amount is 2,500 it might be after taxes and deductions closer to 2000?
Brent: Yep. I think this is just a really important step to the retirement plan. So just, taking your time and really researching all of these aspects of this step is really important to the success and I think it’ll help you also make decisions about social security, pension decisions when you’re planning for retirement.
Joshua: Sounds like a new column on that spreadsheet. Yeah,
Matthew: Yeah, no, definitely as a column or a tab if you’re an Excel Ninja. Brent, how should people approach their pensions?
Brent: If you do have a pension from an old employer? Is that what you’re talking about?
Matthew: Yeah, absolutely.
Brent: Yeah. So if you do have a pension from an old employer, there’s a lot … They’re also very similar to social security. You’re going to want to start to meet with your benefits department to figure out and have calculations on different years and ages that you can retire and the different benefits amounts that you’ll be able to collect from it.
Brent: Then are you going to include your spouse in collecting those benefits? So if you pass away that your spouse is going to receive some of that benefit? How much? They generally have anywhere from five to 10, maybe, sometimes 15 different options on how you can collect that pension, but it’s important to do that years and years and years before you retire to give you a really good foundational idea of what you’re going to have once you retire
Matthew: Right and the whole spousal collection. That’s a good way to see if one spouse loves the other spouse. Right?
Brent: Yeah. I mean sometimes like it’d be an indicator, I guess.
Matthew: Josh, anything left to add on analyzing income?
Joshua: No, it’s good.
Brent: I’m good.
Matthew: All right, let’s move on to step three. Josh what are we going to be talking about right now?
Joshua: Reviewing your current expenses, we just talked about and spent a lot of time about projecting and laying out your income, what it is now and what it’s going to be in retirement. It’s going to be the same way for all of your expenses. So understanding your current living expenses, both discretionary spending and nondiscretionary spending. And, Brent, I wanted to ask you, with laying out both discretionary spending, non-discretionary spending and looking at expenses, a lot of the times we think of creating a budget, this is what that means. Can you talk a little bit about creating a budget?
Brent: Yeah, I think it just gives you a good idea of what you have in non-discretionary spending. Things like your mortgage, your car payments, things that you have to make every single month. Getting that into a column, understanding what those fixed expenses are and then having your discretionary spending or things that you make choices on every month, things that you don’t have to actually buy. And then you could start to determine your savings. There’s different ways to do your budgeting, you could do a spreadsheet or you can use some of the outstanding free software that’s out there.
Joshua: Like Mint.com, I mentioned earlier.
Brent: YNAB. There’s a lot of them out there today.
Matthew: YNAB being an acronym for You Need A Budget. So if you Google, You Need A Budget that’s YNAB.
Joshua: I think to explain discretionary, non-discretionary, your needs and your wants. So really laying out what you need to live off of and then what you’re spending on what you want.
Matthew: Yeah, absolutely. Great points. Have either of you ever met with a client who has been 100% dialed in on what they spend per month?
Brent: Yes. Yeah. Some people have really elaborate spreadsheets on every single month spending.
Matthew: I personally have never found … I have seen people who do track a budget and they do a really good job, but usually what I find is they’re off in one way or another.
Brent: Of course.
Joshua: Yeah, I agree. That’s the same thing that I’ve experienced.
Brent: It’s hard to keep it accurate if you’re doing it yourself.
Matthew: So my favorite way with the clients to do this, if budgeting really isn’t your forte, is to take a look at your paycheck and see what your net cheque is. So let’s say it’s $10,000 a month, so 5,000 every two weeks. Fair pay, how much money is going into savings per month? If the answer is zero, well then you’re spending 10,000 a month. If the answer is, well we put $1,000 a month in saving, then you’re spending 9,000 I think that’s a really unique way to back into what you are actually spending.
Joshua: Yeah. Brent, actually, was the one who mentioned this strategy to finding out how much people are actually saving too is, how much was in your savings account last year? How much is in it today? At that point you get to determine, and if it was 20,000 last year and this year it’s only 10, you actually might have a cashflow negative situation that you spent more money this year than you actually made.
Brent: Yeah. My favorite’s always when when they tell me, “Oh, I’m saving $1,000 a month.” And then you ask them what was your savings account at the beginning of the year and what it is now. And it’s the same. Well, where did that thousand dollars go? Every month you’re finding another place to spend that thousand dollars.
Joshua: And I think a lot of times what happens is they save it and then a lot of times you’ll hear, well we took a big trip or we bought a new car or whatever it was and it was spent, but they thought they were saving it, but they were just saving it to spend it later on in the year.
Brent: Yep. They remodeled something in their house.
Matthew: Right. So I think the goal for our listeners here is for them to get an understanding of how much money do you need in retirement to save your lifestyle and accomplish your goals. That’s why we’re doing this step right here. We’re trying to figure out what you need. Brent, what’s a good tip for people who are planning on retiring early? Early meaning before the age of 65.
Brent: As far as what?
Matthew: What’s something they need to watch out for on the medical expense side? It’s early retiree before 65.
Brent: So if you’re going to retire early, one of the misunderstandings that a lot of people have, I think they either think that medical insurance is going to be way too expensive or it’s going to be way cheaper than what they thought. Medical is a big issue because if you are retiring anywhere from 60 to 65 and you don’t have employment, you don’t have medical benefits through your employer, you could be at risk then to pay for on your own.
Brent: And when you do that because you’re in that highest risk range because you’re not on Medicare yet, it’s going to be the most expensive, but it doesn’t always have to be based on that. It doesn’t always have to be the most expensive because it is based on your income. If you go on things like Cover California and you can start to do their research and spend the time, if you’re thinking about retiring to find out exactly what you’re going to be paying in medical expenses.
Matthew: Right, yeah, that’s a good point. And I think that’s something a lot of earlier retirees forget about is the medical expense in that. Usually what I’ve found is one of the larger expenses for early retirees.
Joshua: Yeah. And we’ve seen it as high as $1,000 a month even just for one spouse to be on Medicare from 62 to 65. That’s a lot of money to be going out of the financial plan just for medical expense because we didn’t plan for it or didn’t have an idea of what that expense was going to be.
Brent: Yeah. Sometimes the strategy that we work with our clients is just trying to minimize the income for those few years and it could come back to social security pensions and things like that because your medical costs per month is a lot cheaper when your income is lower. As soon as your income starts going up, your monthly premiums are going to start shooting up. You can control income, control costs there. Big planning tool.
Matthew: Great point.
Joshua: Yeah, absolutely. I think one thing that’s just really useful to summarize this step is embracing software. We use it here, but for clients to link up bank accounts to expense tracking software. This is a really easy way to get an idea of what you’re spending each month.
Matthew: Absolutely. And a lot of people aren’t comfortable with software, but let’s assume hopefully that if you’re listening to our podcasts that you are very comfortable with software.
Joshua: Yeah, yeah. Because you’re downloading the podcast or on some sort of device or computer that you’re going to be okay with linking up your bank accounts and stuff like that. But more than happy to answer any questions on software too. If you need some help along the DIY process. Matt, ready for step four. Do you have anything to add on step three?
Matthew: No, I’m definitely ready for step four. Let’s move on.
Joshua: Awesome. So how about you take this one, but talking about retirement accounts. So if we’re creating a DIY retirement plan, I imagine there’s some sort of retirement account that we got to be mindful of. So will you talk about that for us?
Matthew: Yeah, and in step four we’re going to really take a look at those retirement accounts and what we’re setting up here for is we know how much money’s coming in, right? We did that in step two, I believe. We know how much money you need now, we did that in step three. Do you have an income gap? Do you need to come up with money from somewhere? The majority of Americans who are retiring do have an income gap. So what that means is your expenses are higher than your fixed retirement income.
Joshua: So like your social security and your pension isn’t meeting your expense need?
Matthew: Absolutely. So then we have to look at their retirement accounts as a way to supplement that income gap. So when we’re talking about retirement accounts, we’re talking about your IRA, a Roth IRA, a TSP, a 403(b) and any deferred comp plan you have.
Matthew: Am I missing any sort of retirement account, I guess, set up IRAs?
Joshua: 457, the list can go on. There’s a lot of them out there.
Matthew: If you have a retirement account, this is what we’re talking about right now. And the goal here when you retire, is you’ve been saving this pot of money forever and it’s grown and it’s grown and it’s grown. Or hopefully it’s grown. And we need to turn that large balance into income. And that’s a big problem for a lot of retirees because they think of it as, “Oh, I have, a million in my IRA and my wife has a million in her IRA. We’ve saved 2 million. That’s great. We’re millionaires.” Well, now we got to turn that 2 million into income.
Matthew: And there’s a couple things to pay attention to. One, when you retire, what is your asset allocation going to be? So what’s your mix of stocks and bonds? Stocks, they’re more high risk, right, Josh?
Matthew: And bonds, they’re more safe. And, typically, most retirees are going to be recommended a 60-40 portfolio. So that would mean 60% want to go on to stocks, 40% into bonds. That would probably be the most aggressive recommendation for someone who is looking to turn their retirement account into income.
Joshua: Yeah, that’s pretty standard, right? I mean you look on any investment research, pretty standard allocation. I think a lot of people call it balanced.
Matthew: Yep. A balanced portfolio, essentially. You could go a step further and hack off 20% of stock and you’d end up in a 40-60, so 40% stocks, 60% bonds, and then the most conservative would be something like 20% in stock, 80% bonds. If you are really conservative and you’re … really don’t want to have any ups and downs in your retirement, you could purchase a 30 year bond and just live off the interest, though, even though I’ve always made that slight joke, took some clients who are conservative, I’ve never actually seen someone do it. So maybe it’s a veteran theory.
Matthew: But anyways, what we’re doing here is we are trying to get your portfolio set up so you could withdrawal money from it. And the goal is to fill that income gap. So how much do you need? Do you need 20,000 a year? 30,000 a year, 40,000 a year. We now know that. So let’s say you need 40,000 a year. That’s a good number. There’s been research done that shows that to get 40,000 a year, you would need to withdraw 4% of your portfolio for it to not run out of money in retirement.
Joshua: The rule of thumb, right? The 4% rule.
Matthew: Yep, the 4% withdrawal rule. Therefore you would need a retirement account with a balance of $1 million.
Joshua: So there you go talking about turning that lump sum or that pot of money into income, we’re doing it there.
Matthew: Right. Exactly. And for those of you who are really good at math, where that rule actually comes from is, it’s pretty neat. So let’s assume you earn no interest on your retirement account all through retirement. Let’s assume you’re, you’re retired for 25 years, which most people actually might even be retired for 30 years or more.
Joshua: You’ve got numbers coming up, right?
Matthew: Yeah, based on our retirement age and life expectancy, four times 25 is a hundred.
Joshua: Good math.
Matthew: Yeah, great maths. So that’s how the rule originated from. On the withdrawal side you could get a lot more complex. This is outside of the discussion for today’s show, but you could research guardrail, spending ratchets, you can research how to inflation adjust your draws. You could take more in good years and less than bad years. There’s a lot of different fun concepts that you could do on the withdrawal side and that financial planners help their clients with.
Joshua: Yeah, absolutely. I think it’s, you go in depth on the retirement accounts, it’s like a red flag saying, “Hey, pay attention to me because there’s this big transition coming in when I retire, which is, this pot of money I need to turn into income. And there’s a lot of preparation that it’s going to take to get that pot of money ready for that income stream and a lot of decisions to be made on it.” I think it’s just really important and now’s your notification to start looking into those retirement accounts and making sure they’re properly prepared for your retirement.
Matthew: Right, and absolutely. And I don’t think we want to scare people off either. So if you look and you have an income gap and say it’s 40,000 a year, we’ll stick with that number, but you have 250,000 saved. Obviously, the math doesn’t work, so you have to cut elsewhere. You’re going to have to cut those living expenses, you’re going to have to live more within your means because your account just will not cover a 40% withdrawal.
Joshua: Yeah, because you’re not creating enough income.
Matthew: Right. Exactly. Anything to add before we move on?
Joshua: What’s the next step?
Matthew: The next step is protection. So now we’ve created your base level retirement plan and we want to talk about the things you could do in retirement to protect yourself. I think the number one protection concept is life insurance. Josh, when would you need that in retirement?
Joshua: I think I want to take that a little bit of a different way with protection. Insurance in general, of making sure that everything is protected. So at this point if you’re entering into retirement, you probably have your, or hopefully, have your highest net worth and we want to protect that net worth. And so we want to protect not only your assets, your income, your life, which life insurance comes into play in that. So I think also, here’s another item to add to that retirement plan checklist, is to making sure that you do have proper insurance to protecting all of your assets, your net worth and getting all of them reviewed.
Joshua: And life insurance is one of those. Making sure that if something happens to one spouse or the other in retirement that the other spouse isn’t forced to make a lifestyle change, that they can maintain their same lifestyle throughout the rest of their retirement. Even if one spouse dies earlier than expected. So now it’s just a good time to get that reviewed. And I think it’s a really important piece. If you’re going to take the time to build wealth, we should also be taking the time to protect it.
Matthew: Yeah, absolutely. One reason why we could use life insurance is going all the way back to the income side. Maybe you do select a pension on one spouse’s life only. Well then that spouse dies, that pension goes away. So is there a life insurance policy in place to supplement?
Joshua: Right. Yep. And I think that’s a common strategy, Brent. I know that you’ve helped clients with that strategy too, where they might’ve already selected the pension or they just feel really strongly about selecting one life or another are one life only on the pension election and help them set up life insurance. Anything to add on on that?
Brent: Yeah, if you select a pension on one person and they pass away early on, a day after they collected their first cheque, it’s going to create a problem to the plan that there’s not going to be as much income for the surviving spouse. So there’s ways to protect it and you may want to take those into consideration.
Matthew: Yeah, absolutely. I think, also with protection, the topic of living trusts come up a lot. Brent, do you want to talk about living trust and why it’s important?
Brent: Yeah. Living trust is essentially a document that’s able to pass on your assets from yourself to your beneficiaries by avoiding probate. It’s an important tool to avoid probate, to make sure that everything that you’ve saved and worked hard for is going to go to the people that you want to give it to and not who the state thinks they should give it to you.
Joshua: It sounds like a pretty important piece to this retirement plan.
Matthew: Yeah, absolutely. Any other comments on protection?
Joshua: No, I’m good.
Matthew: All right. Any parting thoughts for the listeners today on creating their own retirement plan?
Brent: Yeah, I think based on what the CFP Board says, there’s really four steps in doing a proper financial plan, right? There’s gathering facts, which is your discovery. There’s the strategizing and looking at all the different options, some of the strategies we’ve talked about today, different things that you can do with retirement plans. Then implementing it and then monitoring it after, but I think the key factor to all of this is accountability and when you’re doing it yourself, it can be somewhat complicated to do all of it yourself and keep things up to date. I mean, just think about the cashflow report or your net worth sheet. You put all this stuff in Excel and then a day later your values change and are you going back in there and updating your net worth sheet?
Brent: There’s just so many factors here that constantly go into keeping a proper financial plan up to date. Nowadays it’s so awesome with technology and where technology is at. All of these decisions that you make can be done through software and that’s when we spend all this time building a client’s financial plan and then being able to take their different decisions and their different goals and throwing them into the plan and see what the outcome looks like for them. It gives them peace of mind knowing that their decisions and these goals that they have can have real numbers standing behind that.
Brent: It is hard to do it yourself, that’s why we always talk about having a planner because not every individual is going to know every different strategy you could use. They’re not going to know every different way to implement things. And so working with a planner makes it so much more streamlined, smoother, and most of the public doesn’t have access to the technology that we have.
Matthew: Yeah, absolutely. It’s the whole, “Well, I’m serious about getting in shape.” Well, if you’re serious about getting in shape, signing up for a gym pass probably isn’t going to do it. What’s going to do it is hiring a personal trainer and then even the next level step on top of that would be hiring a nutritionist.
Brent: Yeah. If you’re really serious about it, you got to take all the steps and do all the proper things.
Joshua: Hire expert help and having those people. Building your own team to help you achieve those goals. Same with personal fitness or finance.
Brent: Yeah. I mean, what I recommended last week was classes, taking classes that are run by an instructor. I mean it just pushes you to do harder.
Matthew: Yeah, absolutely. And the people in there create the competition. Right.
Joshua: And there’s people that are out there that the DIY strategy works for them. But I think that to really be efficient and to utilize all of those different strategies, like Brent just talked about out there, having someone that’s an expert on your team is going to just make that DIY plan even better.
Matthew: Yeah, absolutely. All right. Well speaking of recommends, Joshua, what do you have to recommend today?
Joshua: Oh, recommend section. My favorite. I’m going to recommend an Instapot. I don’t know which one of you guys have actually mentioned it to me, but I finally got one and I’ve had it, I think about a year now. And I use it all the time and I got the one that has a saute feature and the slow cooker and the pressure cooker and I love it. I can make a whole meal and not even have to turn on the oven or toaster oven or anything like that. I can make a whole meal in that thing and it’s just so fast. Just chicken, done, 20 minutes.
Matthew: Yeah, they’re great. You can essentially throw your crockpot away.
Joshua: Yeah, absolutely. I haven’t used my Crock-Pot since I got my Instapot.
Joshua: You have an Intstapot too, right?
Brent: Yeah, I just started using it just as you guys have talked about it more and it is definitely … when you don’t have a ton of time to cook and you’re not wanting to spend a ton of time in the kitchen that could speed things up really good.
Joshua: It’s nice. I did chicken soup in 25 minutes. Done.
Brent: Yeah and that’s from raw.
Joshua: Raw chicken, done. Just amazing.
Matthew: Yeah, they’re great. Brent, what do you have to recommend?
Brent: I have Nest, which is the doorbell and camera system that you can put on your house. And nowadays with people having so many packages delivered to your front door, you should probably have a camera on your doorbell system to know who’s coming to your door when things are being delivered, if somebody’s at your front door that shouldn’t be there. Put a camera on your backdoor if you wanted to, to just make sure you can have an eye on your house.
Brent: And also you can control your air conditioning system if you put the thermostats inside of your house, which is neat because if you forget to shut off the air one day. You don’t want your air conditioner running all day, especially not here in California because that adds up very quickly. And you can control, turn off, turn on your air at any point just through the app. Everything is done through the app. I found it to be a very neat feature and things to have just to make life easier.
Matthew: Yeah, that’s pretty cool. Especially living out here in the desert, right? In Rancho Cucamonga. In the summer it gets really hot or even this time here in the fall, it’s still pretty hot and if you could set your AC so you come home and your house is cool. That’s a nice feature.
Joshua: Yeah. I got the doorbell. Love it. I just love the notifications. Love that I can see, who’s knocking on my door, who’s coming up to my door. Really like it too. Haven’t got the thermostat yet, but I think that’s a … maybe that’ll be on my Christmas list.
Brent: Yeah, it’s neat. Very neat.
Matthew: I have no experience with either and I don’t plan on getting either, but that’s just because I don’t own a home.
Joshua: Yeah, that’s all right. It might be in your future sooner than later.
Matthew: All right, so my recommend for today is, I’m actually, it’s more of a broad recommend than than the two of you. But take a look at lululemon, and this is especially for males. I mean I know lululemon gets the vibe as being a yoga or workout gear, but they have great workwear, casual dress workwear, I wear to the office sometimes. They have great tech pants and collared shirts that you could wear that are much more comfortable than anything you’d find at Macy’s or JC penny. So definitely check out lululemon. I would say it’s worth the price and great quality. I know, Brent, you’re a big fan.
Brent: Yeah, you can use it for golf wear, you could use it for workout wear, you have casual wear. It’s great quality clothes, you just spend a few extra dollars that last you that much longer.
Matthew: We were just talking about lululemon at lunch. What, Friday? Last Friday?
Joshua: And one thing that you said though, they even tailor for you, right? Like if you need to get it hemmed.
Brent: Yep, if they don’t have a tailor at that store then they’ll size it up and then send it out.
Joshua: That’s awesome.
Matthew: Yeah. I think I’m going to get my dad some lululemon clothes for Christmas because he needs to step his clothes game up.
Brent: Well, hopefully he’s not listening to podcasts, Matthew.
Matthew: I don’t think he listens.
Brent: With all of our downloads I think he probably does.
Matthew: I doubt it but if he does and then he knows what he’s getting for Christmas.
Brent: Just tell your mom to make sure he doesn’t listen to this one, delete it off his phone.
Matthew: I doubt he listens.
Brent: Matt’s dad’s a doctor so he’s a busy guy. That’s why he’s saying that.
Matthew: All right. Anything left for today’s show, boys?
Brent: No, I think we’re good.
Joshua: Yeah. Good.
Matthew: All right, well, thank you for tuning in. We hope you enjoyed today’s show and hopefully you got some good tips on creating your own retirement plan. As always, if you’d like to read the show notes, visit retirementplanplaybook.com and we’ll have all the show notes listed out. You can read the transcript of the show and if you have any questions, drop us an email and we’ll be happy to do a mailbag episode one time. Thank you for listening and have a great day.
Brent: Thank you.
Joshua: Thank you.
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