As the year gets underway, we’re answering the seven financial questions people ask us most, covering investing, retirement, taxes, Roth strategies, and Social Security. These are the same questions that come up in almost every planning meeting, regardless of where you are in your financial journey. In this episode of Wise Money, we’ll walk through how to think about each one and why the answers are rarely one-size-fits-all.
Season 11, Episode 21
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Transcript: Answers to the 7 Most Common Financial Questions Everyone Is Asking
It’s time for Wise Money with Korhorn Financial Group with certified financial planners Kevin Korhorn, Mike Bernard, and Josh Gregory.
Segment 1: Welcome to another episode of the Wise Money Show with Korhorn Financial Group, where every week we’re helping you take your next wise step in your financial life. Thanks for being here, friends. My name is Mike Bernard. I’m your host. I’m also one of the certified financial planners on the program. And with me in the KFG studios, my business partners and fellow CFPs, Kevin Korhorn and Josh Gregory. As the year gets underway, we’re hearing the same big questions again and again, from retirement concerns to taxes to the market and social security. And so today on the Wise Money Show, we’re asking and answering the seven financial questions people are asking us the most. We love to to engage with you and when you reach out with questions, we’re hitting a lot of them today, like sort of the the most common. You’re going to be familiar with a lot of these. We’re going to help you walk through and how how do you answer them? But to leave a question for the program, we have several different ways. You can call or text us. 574222000. That’s 574222000 online wisemoneyshow.com is the web page. You can leave leave questions right there as well. And then all over social media, wherever you’re at, we are there as well. Many questions show up on the YouTube channel. So, you can engage with us that way. You know, we are all uh long- winded. I’d say that that the long form talk show comes easy and natural to us. But uh I I hope we can get to the top seven. That’d be a big accomplishment for us. But um as financial planners, we get a lot of questions throughout the year and you run into someone out in public and it inevitably it’ll turn to, oh, how much are you able to give uh someone each year without it being taxable? Like that’s one of the most common. Or should I do a Roth IRA? There’s common common financial questions that we just get thrown at us sporadically. To me, it’s always what’s the market going to do next, right? Or which which stock should I be buying right now? I it I don’t know. I must uh be a boring conversationalist if that’s how uh a lot of people lead into a conversation with me. But but I’ I’ve got the seven most common. Oh, Kevin, you got Well, you know, people don’t know what to ask. They don’t know and they don’t know how to ask it. And that that it does seem like um you know, you think, okay, this person is if they’re a certified financial planner, certainly they’ve got the teachers version of the textbook and they the answers are in the back and so they know the answers and I just need to know what the answers are. Well, here here’s a version of that one, Josh. The first one of of the top seven, the first one is, is now a good time to invest? and and and I think that question is sort of like evergreen. People are always wondering that, but certainly right now after what’s happened in the market the past several years and the concern about an AI bubble. So guys, how would you answer that? Is now a good time to invest? Well, it you know that is a that’s a difficult question and it’s hard to sometimes it’s hard to answer these questions without seeming obtuse and I as a financial planner want to encourage financial literacy. I want to encourage people being excited about their financial life and not discouraging. I I remember one time and we have an employee benefits department and we do retirement plans and we were we were working with some folks that had a retirement plan and the gale there said um the the the last person who had served them when when he came in he asked her a certain question and she said I felt so embarrassed I didn’t look at my 401k statements for several years and I just it it made me kind of like nonfunctioning financially and it really stuck with me cuz I thought man I think there are a lot of times there can be unintended consequences um or if you give a flippant response to this well of course it’s a great time to invest what do you think and so I would never want to be that guy I would and the answer that I would give. I would always want to be an encouraging answer. I would want people to get excited and motivated. But so, but it’s not a short answer. And a lot of times you think, well, someone wants a short answer and let me give you a short answer. And you said, we got to get to seven today, so I want to I want to move quickly here. I would tell people the the your long-term dollars, it’s always a good time to invest. Yeah. Now, I don’t like how the market’s valued right now. I don’t like what percentage if you invest in the S&P 500, what percentage of that’s going to go into seven different companies. Um, there are lots of things that I don’t like, but you can I don’t remember a time in the last 32 years where there wasn’t a bunch of stuff to not like about the stock market. And so, if you’re going to just be a not liker of the stock market, maybe you’re a saver. If you’re a saver and not and not an investor, then go for it. Just realize what you are going to have to save over your lifetime is so much more than if you’re willing to put some of these dollars at risk. That’s exactly right. That’s where my mind went as well because boy, there are some goals that it’s just not practical to save up for. You have to invest your way towards retirement because you need so much growth on those dollars that you do put at risk. It’s part of the formula, right? In order to achieve long-term goals and build wealth or or financial strength for the future, you got to have cash available to save or invest, you have to be able to put it at risk into investments that can, yes, maybe bounce around in value, but they will go higher over time, we would expect. And then you just need time. And to me, the risk in asking the question, is now a good time to invest? It almost implies, well, if you’re someone who has a lump sum of cash, like you just sold some major asset, you’re wondering, is now a good time to put it in the market? Maybe you just received an inheritance or some sort of a windfall. Very important question. Is now a good time to put it into the market? If instead you’re someone who is slowly building overtime towards those long-term goals like saving for college or retirement, then to me, I I would go back to what Kevin said. If if these are long-term goals and you have long-term dollars, then it’s always a good time to be in that contribution mode. It needs to be about the habit and the rhythm, the pattern of savings, not worried too much about, well, what’s the market going to do next year? Yeah. Yeah. I mean, if the question is, is now a good time to get started on getting an an 8% compound annual growth rate uh over time so I can I can beat back the impacts of taxes and inflation, it’s always a good time to get started on that. If the question is, is this a good night to go to the casino? Then the answer is no. It’s probably never a good night to go to the casino. I think that the question behind the question is are we going to see a drop in the market this year? And I I think that’s very possible. Kevin, I I think you said it very well. There’s a lot of things that we don’t like about the market right now, but it’s always a good time to be investing for the long term for sure. So, all right. Question number two is connected to to this, and I think this is probably it’s I mean, we’re hitting the seven biggest questions, so this is they’re all like the biggest. Am I saving enough for retirement? Oh my goodness. Like, is 6% enough? Is 8% enough? Is 10% enough? Am I saving enough for retirement? Now, there’s not obviously a universal answer to this, but this is a universal question. Everyone is wondering, how do you answer? I I agree that it’s pretty universal. I I can’t think of a client who hasn’t asked this question or it’s been on their mind or one of the most important things they’re trying to resolve in their financial life. Am I am I on the right pace for this goal? And I gotta tell you, I I don’t know of another way to answer this question confidently than through the process of financial planning. You know, to to me, this is a function of um well, your retirement goal is different than your neighbors and it’s different than your parents and it’s different than what your kids are going to be pursuing someday. It really is unique to you. So, how how can it be so unique to you and yet so universal? It’s because it’s such a hard one to answer. The fact that it’s unique means that there’s no one-sizefits-all approach to be able to just say, “Hey, based on rules of thumb, uh, yeah, you’re you’re on pace.” Man, I would be careful of any of these online calculators or people who kind of back of the napkin just sketch out, yeah, uh, here’s how much you need to be contributing. There’s so many variables involved and it needs to play into, well, when do you want to be retired? How much do you want to be living off of? Do you have capacity to save more? So you might not be saving exactly the right amount right now, but this is all that is available. And so maybe the goal needs to adjust potentially. Then again, how much risk are you willing to take with your investments to let them grow for the future? How much time um can can you give it? So um to to me, this is something it’s a process that you go through with your financial advisor to uniquely define what is the pace that’s for you and then measure your progress towards it. So, it’s an ongoing conversation as well. Yeah. I I like the idea of always um So, Dave Ramsey says save say 15%. And I like to blame that on Dave Ramsey cuz when I tell people you should save 15%, they think I’m trying to make their life miserable, which I’m not. But I would say, okay, if I’m if I started on day one and save 15% of every dollar I made, you’re going to be just fine for retirement. Yeah. Yeah. Uh you want to know the answer. There’s five factors that all weigh in. That’s that’s your unique financial plan. You got to work with your CFP on that. To get started on those five factors, you can download our guide. Go to wismoneyguides.com. Download that. We’ve got more coming up here on the Wise Money Show with Korhorn Financial Group.
Break 1: Hello YouTube. Thanks for being here. This is the Wise Money Show. What you’re watching right now is our weekly 1-hour talk show that airs right here on this channel 10 a.m. Eastern time every Saturday morning. Also on podcast at the same time and also on a couple local radio stations at the same time as well, which is why the content’s structured the way that it is, broken up the way that it is, has breaks and so on. That’s for the radio station. But we’ve got lots of content right here designed and crafted just for you here on YouTube. Uh next Yep videos that air all throughout the work week, shorts as well, helping you get the right clarity and confidence so that you can take your next Y step working with your CFP in your financial life. So make sure you hit that subscribe button, turn on notifications, you’re ready to wear every time we drop new content, and leave comments and questions below as well. We appreciate it. Kevin, I’m so glad I didn’t interrupt you. you were you were taking the long road. It’s perfect answer, Lindsey. I would star that one as maybe a potential short or something. Um is is spot on in my opinion. I don’t give out awards, but you would get the gold star. That’s good. Oh boy. Not a golden glove. Not a golden glove. I don’t know. Golden microphone. I don’t know. All right, we’ll pick it back up. Let’s get in the ring and see if I can get a golden glove. Uh we’ll pick it back up with am I saving enough for retirement? Any additional like context there or maybe some encouragement to give and then we’ll get to question number three. Okay. All right.
Segment 2: What are the financial questions that you have right now that if you had clarity on them, you would have even more confidence, even more boldness to go after your financial goals? That’s why we want you to be working with your CFP so you can get those questions answered. But we’re helping with the top seven financial questions people are asking us right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name’s Mike Bernard with me in the KFG studios, Kevin Korhorn and Josh Gregory. Stay updated on all Wise Money content. You can find us online wisemoneyshow.com and then all over social media. Wherever you’re at, we are there as well. Search the wise money show. Hitting the top seven questions that we’re asked right now. Some of this is because of where the market is, where the economy is, and some of these are just evergreen questions. I mean, this one, question number two, am I saving enough for retirement? That is an evergreen question. It feels like that question or some version of it comes up in the first 45 minutes of every first financial planning meeting. Am I doing enough? I we want you to have clarity and confidence, right? For sure. For sure. I I I I go back to the Bernard paradox and I just think, okay, if I’m thinking about retirement, where I don’t care if I’m in my 20s, 30s, 40, 50s, 60s, wherever I am, what what is what’s my checklist of what needs to be done before I retire? And really, no matter where you are age- wise, you just need to be cleaning up your balance sheet. So, if you’re in your 20s, you probably need to get your student loans gone, get your car payments out of here and get working towards the the dream of owning a home. If you’re in your 50s, it’s probably there’s probably some debt that needs to be cleaned up or getting the kids’ college paid for or whatever it is. But I would I would say if you can, this is where I have a lot of confidence with the clients that I serve. If they’ve mastered their cash flow and they own their cash flow, then it really doesn’t matter how much money they have because they can do it. Now, if cash flow owns them, it is it’s so it it’s not impossible, but it’s it’s real tough. It’s very, very, very, very tough. And if you’ve had years and years and years of habits that allow your cash flow to manage you instead of you managing your cash flow, man, it is tough. It It’s tough. It It’s kind of like having I’ve had friends that have gone into rehab. And if you have a friend that’s going into rehab, don’t look at the percentage of success because you’ll be discouraged. Yeah. And so I think I’ve seen it. I’ve seen where folks take the next right step and the next Y step and the next Y step and they get there. Yeah. But it’s not easy. Yeah. Uh yes, I will explain quickly the Bernard paradox. And this is if you if you spend a lot of money, right, and and no value judgments. Go out and live your life and have fun and have it be abundant. Live it to the full. If you spend a lot, then you need to have a lot saved up. You need to have even more. So this question of am I saving enough for retirement? Yeah. If you if you spend a lot, then you need to save up a lot. But listen, spending a lot means you don’t have a lot of margin to save up a lot, right? Get that? Well, the opposite is true as well. If you don’t spend very much, then you really don’t need to have as much saved up for retirement or for for your financial future. However, if you don’t spend a lot, you actually have more margin to save up a lot. That is the Bernard paradox and it’s catching fire. Let’s No. So, so I agree. It’s it’s dependent on your situation. Question number two, work with your CFP. Build out that plan. We want you to have clarity and confidence and it’s right there. Working with your CFP. Question number three is the most common question that we get on YouTube. We just talked through this uh in a in a show just gosh maybe a month ago, and that is should I do a Roth conversion this year? man. Uh, you know, coming into the new year here, I’m there’s so many fresh stories from the end of last year where we were addressing this very question with a lot of new clients. And I I’m remembering one client who came in, we had about a month to do some planning and get rolling on uh, you know, their their financial strategies and everything. And this was one of the questions that we actually raised for them because uh we were looking at their overall um portfolio, their their nest egg for retirement, their assets were all in pre-tax accounts. So think traditional IRA, traditional 401k, that sort of thing. In other words, it’s money that hasn’t been taxed yet and it’s all going to be taxed when they pull it out in retirement. And so we got to talking about, hey, you know, a stronger position when you enter into retirement is to have some tax-free money available to you. And that’s what the Roth IRA provides. And so one strategy to consider is moving money from the IRA to the Roth and paying the taxes in between. Well, how do you decide? and and we kind of took them through a a process and it started with just considering well what tax bracket was he going to be in in 2025 versus 2026 and beyond. And it became evident to us that actually he was in a temporarily low tax bracket in 2025. And this was part of the reason why we made this kind of a time-sensitive urgent thing to be considering. So if you believe that now is a time when you could pay less tax today than you would otherwise out in the future, then this has to be something that you you definitely consider. Um to to me it’s also then that the next step was well if we do the Roth conversion, how will we pay the tax? Because every dollar that comes out of that IRA and goes over to the Roth IRA is treated as income on your tax return potentially. um at least that was the case in his his situation. So we were going to be creating some unnecessary tax, unrequired tax. It was just going to be early tax though. And um we we defined that we quantified how much this would be and then it was well do we have the cash in his financial life to be able to pay that bill. Because the alternative would be when you pull money out of an IRA and move it over to the Roth IRA, you could have some money peeled off the top and sent to the IRS and to the state if you wanted to. Problem was he was under age 59 and a half and that would have created not only uh those taxes, but also some penalty on the money that went to the the state and to the feds. So in his case, he had a substantial amount of savings that really wasn’t earmarked for anything. and we were able to use some of those savings to pay the bill. After you have all that in place, like you’ve got sort of the the all the raw materials to build something great, a great strategy, then it becomes work of we’re building an actual tax projection to model out well, what’s the sweet spot here? What is the right amount to convert? Because the government will let you convert as much as you want. It’s all about how much tax pain are you willing to endure and how much uh liquidity or cash do you have in order to pay that bill as well. So that’s how we arrived at uh whether or not this was a good idea in his situation and then if so what was the right dollar amount. You need to ask and answer this question for your specific financial situation every single year. I don’t know if you’ve looked at the national debt right now. It’s it’s it’s enormous. I don’t know if you’ve counted the number of tax law changes that have happened over the past 5 years. You can’t count that high. It is incredible. You have to be actively looking, how can I get more of my wealth growing tax-free. That doesn’t mean you need to be doing a Roth conversion every year, but it does mean you need to ask and answer this question confidently every single year. Now, question number four, arguably, you know, like right behind the Roth conversion is this one. When should I take social security? You need to optimize your social security, not just make an emotional decision. So, let me answer that question with four more questions. When do you want to be done working? What’s your marital status? What’s your health history? And what does your retirement income strategy look like? And each of those questions, you might have a real quick answer, but each of those questions plays into how you should optimize social security. And so often because you’ve been paying into it throughout your entire career, because you’re not promised tomorrow, because we aren’t promised the government solveny tomorrow or social security solveny tomorrow, you don’t even run through those questions. It’s just an emotional bam, I’m turning social security on immediately. For many people, you should. Yeah. But not for everyone. Well, and you know, one more uh I guess uh headwind on that decision is everybody around you, most people are making that decision, as you said, Mike, as early as possible. And so, if you’re getting advice from your neighbor or your brother-in-law or whoever, uh there’s a good chance that they took it at the earliest possible date and did not do this type of optimizing. Um to me this every decision is unique for the reasons that you just said Mike because uh you may have resources that would allow you to live your life and enjoy a great lifestyle early in retirement before ever needing to turn on social security because you’ve got other resources available that maybe those other individuals didn’t have. If that’s the case, you have a little bit more freedom and flexibility to do this type of optimizing. And it could allow you to live off some other resources and maybe take advantage of some of those Roth conversions in the early years of of retirement, all while postponing your social security, letting it grow and mature to the biggest possible payout, and uh you set yourself up for great financial uh cash flow in the future. All right. What are some other financial questions? the most important ones that we’re getting asked right now. We got that more coming up on the Wise Money Show with Korhorn Financial Group.
Break 2: All right, good. We’ll pick it back up. Okay. So, so what’s the what’s the difference in my social security if uh instead of taking it at 62, I wait until 70? What percent is it higher? 140 or no 100? I’m going to say over 100%. I’m gonna say 135. You’re close. Really? Uh, are you talking about monthly benefit or like the compound? I would I get $1,000 I get $1,000 at 62. What would I get at 70? I could Yeah, I could see that. I think it’s about a I think it’s about 1,700. Is that a universal statement or does it matter like what you’re earning during those years? Like assuming you keep working? I I wouldn’t get that deep. I would I would get I would just get partially nerdy here and just say more than double. I guess that was what I was trying to say. Like a $1,500 monthly amount at 62 is going to be close to what? Four grand. No, I don’t think so. No. Okay. What I’m looking at is saying it from if I wait from 62 to 70, it’s about 76 to 77% higher than at 62. Now, I don’t know if this factors in I’m working or whatever, but this is this is where I the the folks that we are working with are folks that are in in their late 60s and they they’ve been successful. they don’t they haven’t needed the money and they’re saying, “Well, what do I do about social security?” Yeah. And that’s where you got to go back to your questions because if I’m beyond full retirement age, then it’s not going to be impacted by my earnings. So then you go back to your questions, right? How how healthy are you? I mean, when you go to your Thanksgiving or Christmas is a bunch of 90 year olds eating, you know, a carnivore diet. Uh, and if if that’s the case, that’s the dream. Uh, I hope I can still do that. I know. But have you ever and I I I have met the person who I you know you and I don’t I don’t want to judge people, but you can get a sense for whether you think someone’s healthy or not. And if you see someone and they they look like they’ve got one foot in the grave, another on a banana peel, and they say, “Yeah, but you know, my you know, my dad’s still alive and he’s 97.” And I’m like, “Ah, your dad made it. I’m not sure. I’m not sure that’s going to work out.” All right. Anyway, we’re pick back up Social Security. This third third segment and then we’ll probably get into the fifth question. Fifth question it is. Let’s go. But this is the third segment. Third segment. That’s what makes up. Okay. All right. Uh Okay.
Segment 3: As you approach retirement, how should you structure your investments? This is a one of the most common questions, one of the most common mistakes. We’re helping with that right now. This is the Wise Money Show with Korhorn Financial Group. Thanks for being here. My name is Mike Bernard with me in the KFG studios, Kevin Korhorn and Josh Gregory. every episode of the Wise Money Show on podcast. Wherever you listen, just search the Wise Money Show. Subscribe to it there. Rate it there as well. That’s helpful feedback for us and helps other people find this helpful content. So, we appreciate that. We’re talking down the seven most common questions that we get right now. And many of these are evergreen. Some of them though are unique right now because of where we stand as an economy and stock market and sort of what’s going on in the world. And so, we want to talk through them. Number four is a universal question that is evergreen. It happens. This comes up all the time and and that is when should I take social security? Now I think people ask that but their question they’re really asking is can I take my social security when I want to? And I want you to know that your certified financial planner that’s working through all six areas of your financial life, they are in your corner. They want you to succeed and they’re not there to try and convince you to do something that you don’t want to do. If there is a planning case, as Kevin would say, a planful case for you to delay social security, whether it’s to the next calendar year, whether it’s for a couple of years, whether it’s all the way until age 70, they’ll make the case and present it from a comprehensive approach to your financial situation. If you say, “I don’t think so. What’s plan B?” Yeah, that’s that’s appropriate. That’s okay. So, don’t don’t uh be be guarded with this question just because you don’t want your CFP to tell you something you don’t want to hear. No, go in, work it out with them. I’ve had I’ve had more people um where we’ve we’ve planned through and there’s a legitimate case to delay social security. I’ve had more people say, “Yeah, I agree with you, but I’m still going to take it early anyway.” then I can count on two hands. So that’s normal. Don’t shy away from it. Optimize your social security. Anything else you guys would add there? Nope. Okay. All right. That’s the fourth question. The fifth most common question that we get and I mentioned it often leads or often comes from uh a big mistake that people make and that is how should I invest when I’m close to retirement? This goes back to question number one. Is now a good time to invest? And if you recall, our our qu our answer was flavored with, well, is it long-term money? Well, question number five, how should I invest when I’m close to retirement? Well, you’re suddenly realizing that, yeah, not all of this money is long-term anymore. So, what should I do? Well, I think the risk is that a lot of people think none of it is long-term anymore. That’s the risk, right? that they swing from growth mode, you’re in accumulation mode throughout your working career, and then when you get to retirement, you need to like slam on the brakes, move everything into safety mode, and you’re just going to draw off of these accounts. And we’re always quick to remind people that, yeah, there is some of this money that you’re going to need in year one. Some of it you’re going to need in month one because you want to go do some cool celebratory trips or some projects around the house or whatever. There may be some short-term goals that are going to demand some cash, but most of this money is actually going to be used later in retirement because retirement is going to keep getting more and more expensive as time goes on. Inflation will have an impact during your your retirement uh decades. And so, if you have a long-term um time horizon for many of these dollars, you need to still have a long-term game plan for them as well. So then the question is this, how do you invest both for income and growth? Most people believe that’s paradoxical, right? That those are they’re at odds with each other. So what’s the structure? How do you do it? You know, we’ve done entire shows before, episodes of the Wise Money Show on uh how to create a personal pension plan. And this is just how you structure your investments into different buckets. And uh the first bucket is the peace of mind type bucket where you’re going to have one to two maybe even three years worth of cash depending on how conservative you are or how nervous you are about the the market’s outlook in the short term. This is just where you’re going to spend uh you know your your lifestyle dollars. But then you need some money uh in a 3 to 10year bucket that would be more income generating investments. This is what’s feeding that first bucket. It’s uh it’s what’s generating a safer rate of return that is predictable for you. But that can’t represent your whole portfolio. A significant amount of your assets need to be in the third bucket which is your growth portfolio. And this is the the money where you are uh invested for the long term more like when you were in your 30s or 40s. you’re you’re growthoriented because you need that money to be compounding for you so that it can replenish the earlier buckets when the time comes. You guys think we are in or forming an AI bubble right now? And and and and if we are, how do you manage that with when you’re on the cusp of retirement? I I I don’t know. I I don’t think it’s knowable. I think it will certainly be noble in hindsight. I look at the circular nature of the payments and the deals that these tech companies are doing with each other and I I can’t make sense of it. And so, and I’m not the smartest guy in the world, so it’s it’s no surprise that I can’t make sense of it, but it it really should not be this complicated. And so, a lot of the numbers don’t make sense. And I remember I remember talking to my good friend Jack Flock a long time ago and we were looking at Microsoft and the performance of Microsoft in the ‘9s. And he said, “Well, it’s not this isn’t really possible or sustainable.” I mean, what do you mean? He’s like, “Well, just take this 30% growth and do it year after year. It’s not long before Microsoft is bigger than the entire world financially.” And so, you’re like, “Ah, okay. Yeah, I see what you’re saying.” Yeah. And I do think um so much wisdom can come from looking back on history and saying, “Hey, have we learned any lessons along the way in the past?” And the dot bubble, you use the word bubble there, Mike, um it is one where I think directionally all of the economists and the talking heads on TV and everything, they were right that the internet age was transformative. like it was redefining all parts of life, but it wasn’t happening immediately. And it took 10, 20, 30 years for that to truly take hold and for their predictions to be true. And it’s I I fully believe that the AI age is also equally transformative, maybe even more so. Uh but will it be here tomorrow? I don’t know. I I think maybe this will take some time for it to truly get traction in the economy. Well, I can tell you this. If you’re running a business and you think it’s going to be here tomorrow, you’re going to be sorely disappointed because as we sit on the AI council at Corhorn Financial Group, my oh my, it is uh that is a very patient process. Let’s just say that. Well, so yeah, there’s there we won’t know, you can’t know if we’re in a bubble until well after the fact. And so I would turn the question on its head from speculating about whether we’re in a bubble and instead how do you position your portfolio for continued for for continued growth if the market gives us that but also downside protection if and when we need it. But the the personal pension plan achieves that. Right. Exactly right. It is dealing with one of the most important and significant underappreciated risks that uh new retirees are facing. It’s something called sequence of return risk. It means that if you you’re going to run into some negative years in the market. You’re going to have ugly scary performance at some point in your portfolio. The the risk is is that if it comes too early in retirement, it’s hard to recover from because you are kind of cannibalizing your portfolio. You’re selling investments at depressed prices in order to just live life. Well, the way you avoid selling things at depressed prices is maintaining enough cash on the sidelines to be able to live life for an extended period of time. That’s exactly what the personal pension plan does for you. This is why it has to be part of the conversation that you’re having with your certified financial planner as you transition into retirement. And and part of that I would also consider what strategies what investment strategies do you use within that personal pension plan with within those strategies or excuse me within those buckets. And you know one of them could be hedging. And there’s a lot of different ways that you can pull that off. But with diversification just just you know don’t have all your eggs in one basket. It’s very possible when the market catches a cold, all of those baskets fall or move in the same direction at the same time. When you need diversification to show up, sometimes oftentimes it doesn’t. Hedging can help ensure that you do have protection show up when you need it. There’s a lot of different ways to get to get that hedging. Could be individual call options, could be uh different uh collars and strategies, could be exchange traded funds. You want to work with your certified financial planner to see if something like that is appropriate? If so, how much of your portfolio? If so, what types of strategies should you use? All right, that’s the fifth question. How should I invest when I’m close to retirement? We’ve got the next two top financial questions we’re getting asked right now. That more coming up here on the Wise Money Show with Korhorn Financial Group.
Break 3: All righty. I am we are not doing a bonus question plus these are all sort of like these are all bonus questions. Yeah. Yeah. All right. Four segment land on the plane questions six and seven. Uh we can similar to to the previous show. We can go along with number six and then sweep up number seven. So it doesn’t need to be 5050. I do have a twist for number seven. All right. Here we go. Let’s have some fun as Mike Bernard would say.
Segment 4: Thanks for being here. This is the Wise Money Show with Korhorn Financial Group. My name is Mike Bernard with me and the KFG host Kevin Korhorn and Josh Gregory. Every episode of the Wise Money Show is on the Wise Money YouTube channel. Go check it out. You can go to YouTube, search the Wise Money Show, subscribe to it there. Turn on notifications so you’re aware every time we drop new content. You can leave questions there as well. You can share episodes. We hear this all the time. If you’re listening to it and you say, “Oh gosh, I’m near retirement. That’s a great financial habit that my kids need to be implementing.” You can share the episode with them. Do so. Go to the Wise Money Show on YouTube. Talking about the top seven questions that we are asked right now, uh most common questions that we’re asked as financial planners. Question number six, we are almost to this season. How can I pay less in taxes? Yeah, that’s a great question. And I before I asked that question, I would ask a different question. I would ask, should I be paying less in taxes? That’s great. Because the question that answer is always yes because if I should, then let’s figure out how to do it. But I we’ve worked with lots and lots and lots of folks where they should be paying more because the amount of tax the the the rate at which they can pay taxes in their current situation is considerably less than if they do nothing and and delay and defer it to the future and whether it’s them paying the taxes in the future or their heirs paying the taxes in the future. So, this is where when you’re when we’re talking taxes, I I really want to be thinking 3D chess. Who who is going to eventually pay tax on these dollars and what kind of tax? Is it ordinary income tax? Is it capital gains tax? And what should it look like? And what what are the tools that I’ve been using? And what are the tools that I should be considering? Uh I agree with with all that. I think those are the the fundamental questions to ask. But if your goal is to reduce your exposure to taxes over your lifetime, one principle to keep in mind is that you have to um do what you can to put yourself in a position where someone else isn’t dictating to you how much you have to pull out of your taxable accounts. So think required minimum distributions, for example. By the time you reach age 73, the government is forcing you to pull a minimum amount out of your accounts. Well, that, you know, it might not even be money that you need to live off of necessarily, but you have to pull it out because they want you to count it as income so they can tax you on it. Well, what if there was some work that you could be doing earlier in retirement or even before retirement to reduce some of your exposure so that those required minimum distributions aren’t accidentally pushing you into a higher tax bracket than really where you would want to be. Uh so this is one way that you just keep yourself in more of the driver’s seat on the amount that you will end up showing for for taxes. Um, but then also it might be your own decision- makingaking that forces you to pull some major chunks out of your retirement accounts. Maybe uh you’ve decided, hey, we’re going to do a major project around the house or some major expenditure. And so you kind of get to that year and you just start cashing stuff in and before you know it, you’re finding yourself paying more in taxes than what you realized. This is why even in retirement, it’s important for you to be still going through the financial planning process, working with your certified financial planner to talk about what are the goals that you want to be achieving even after you’re in retirement. Because if these are known expenses that are out on the horizon, maybe you could be doing something along the way to be cashing in enough investments or repositioning some some assets to where you’re paying a little bit of tax along the way instead of one major chunk all in one year. Yeah. What are what are some of the most overlooked tax reduction strategies? I I to me I would say the HSA and so often I think partly because of the flexible spending account the FSA came first um and a lot of payroll and HR just still like they’re they’re familiar with that one and so they promote that one that’s the use it or lose it and so it’s sort of been ingrained habitually to well I set money aside only up to the amount that I think I’m going to have in medical expenses for the year ahead and so therefore When you apply that thinking to your HSA, you are underutilizing, I would say, one of the most versatile tax instruments, tax planning instruments available to you. So, maxing out the HSA, potentially even shoeboxing it, I would one of the most overlooked tax reduction strategies. What else? uh you know it’s still relatively young but the qualified charitable distribution for those who are in retirement is one that we still meet people all the time who have not heard of this or that they don’t realize oh I they’re actually a really great candidate to be utilizing it because they are charitably inclined they are in a habit of giving but they’ve just been giving the same way for the decades and they haven’t paused to recognize hey there might be an even better strategy now uh if you’re over age 70 and a half and you have IRA dollars that you’re taking distributions on, you need to be talking to your certified financial planner about QCDs is what we refer to them, but it’s qualified charitable distributions. Yeah. Especially for the folks that are no longer itemizing and they’ve made the the standard deduction amount so big and they’ve also put in the salt tax limits. And so so you have the all the these these headwinds and it’s like man this is a great way to get money totally tax-free to organizations that I care about. And then the other thing is I mean you I can’t say QCD without saying donor advice fund. And so to me I I would really want to have a great operating system for how do I handle my charitable donations. Exactly. because you might be um if if you were calculating your own uh itemized deductions instead of taking the government’s standard deduction each year, what if you came up real close to the freebie that the government’s getting uh giving you, but you’re just not there? One way to kind of uh tip the scales in your favor is by doing uh charitable giving, like bunching it up from year to year. And a donor adise fund is one way to do that. Um, it just allows you to maybe bounce back and forth between using itemized deductions and standard deductions. The net result is that you pay less taxes ultimately. All right, number seven. Question number seven, and this I would say is is the question that is most often felt and is rarely asked and that is am I doing okay financially or am I going to be okay financially? I don’t know how you would answer that question without a comprehensive financial planning approach to your financial life. You may ask that question to your investment advisor and it might be confusing because your investment adviser might now be saying, “Oh, we’re also going to throw in a retirement analysis for you and and blah blah blah.” If if that retirement analysis is not built in with all six areas of your financial plan, then it doesn’t have the right inputs. It’s not it’s not going to give you the clarity and confidence that you’re desiring. And that’s what that’s what you’re looking for with question number seven. Am I doing okay financially or am I going to be okay? Comprehensive financial planning. That is the way to get to that clarity and confidence. Yeah. Because I to me this question is almost begging for comparison of some sort and and it’s a risky question to be asking because if you choose the wrong comparison you know you start comparing yourself to your neighbors and you know you can only really see the the public part of their financial life. You know the house they live in the car they drive where do they go on vacations that sort of thing. And you could compare yourself there. How am I doing that way? that will rob you of your joy faster than anything else I can think of in your in your financial life. So, so maybe that’s not the best one. Should you be comparing yourself to past generations? You know, are we doing a little bit better than those that came before us? Uh maybe maybe that’s one way you could be comparing yourself uh to where you have been in the past yourself. Are we making at least positive progress in our financial life? To me, financial planning though is giving you a clear target to be able to compare your progress towards. Am I making uh the right strides on a regular basis so that the goals that are important to me are coming within reach? Am I uh am I on the right pace? Am I doing the right things? That’s the way that you want to play the comparison game. Um, this is what your certified financial planner can help lay out for you so that it is crystal clear to you. Uh, and the comparison game doesn’t have to rob you of your joy. Instead, it could actually, uh, give you encouragement and maybe positive momentum. You get the last word, Kevin. All right. Morgan Hel, one of our favorites, uh, talks about the difference between rich. I’m rich. You can see by the car I drive, the house I live in. I’m wealthy. You can’t see it. Yeah. So, what do you want to be? Do you want to be rich or wealthy? And and he says, “The hardest financial skill is getting the goalpost to stop moving.” Yeah, that’s great. Work with your certified financial planner. They’re going to help you answer these questions specifically for your unique financial situation, and you will have clarity and confidence that am I going to be okay? Am I okay financially? You’ll have that confidence without the comparison game. Work with your CFP on that. That’s all the time we have for today. On behalf of Josh Gregory, Kevin Korhorn, all of us at KFG. Have a great weekend. We’ll see you next weekend for the Wise Money Show with Korhorn Financial Group. Securities offered through Silver Oak Securities, member FINRA/SIPC. Advisory services offered through KFG Wealth Management LLC. Join business as Korhorn Financial Group. KFG Wealth Management LLC and Silver Oak Securities Incorporated companies are unaffiliated.
