Transcript Episode 133: Recession Protection

Listen to this podcast (30 minutes)

In this Podcast:

• Stress-Testing your portfolios
• How do I protect all the money that I’ve saved over my lifetime?
• Markets, Inflation and Taxes can erode the money put away for Retirement
  • What happens if inflation continues to be high?
• Roth Conversion strategies
  Have a written strategy in place, and have it monitored on an ongoing basis
  • Pre-Tax IRA or Roth IRA?
  • Reclassifying assets that might have tax advantages
  • Using Life Insurance to save money
  • Cash, money market or savings account with a 401(k)
• Distribution:
  Exactly what will retirement dollars be needed for?
  Money not needed until later in life can work harder over time.
  • How to take money out
  • When to take money out
  • Where to take money from
• All Hands Analysis^TM looks at the bigger picture

Narrator

This is Retire South Shore radio, a weekly program designed to educate you on all your retirement options and introduce you to mark Rowlette, founder of South Shore Retirement Services for the latest on free seminars. To obtain a report or to set up a consultation, please visit RetireSouthShore.com Retirement Services and real-world retirement solutions, looking at the whole picture to design a complete strategy, including retirement planning, Medicare decisions, and legal documents. Now, here’s Mark Rowlette. And your host, Jordan Rich.

Host Jordan Rich

Hello and welcome and Happy Labor Day weekend to one and all. I’m Jordan, of course and joining me as always is Mark Rowlette, founder and president of South Shore Retirement Services, and we’re going to be talking about how you can have a happier, more secure retirement. Planning is the key and the All Hands Analysis can help you with that. But before we do any more in that vein, let me just say Congratulations, “Dad”, this is a big milestone weekend for you. Tell us why.

Mark Rowlette
I know. It’s a weird, weird weekend. Nieve, as you know, I have three daughters and Nieve is the eldest and she is moving into college this weekend. She’s going to Emmanuel in Boston so it’s not too far away. But for her. During the week, I got a text from Lauren, who was away. And she said, can you talk to me? She’s kind of freaking out about moving and she’s like, I’m not ready to move, I’m like, you’ll be fine. I’m right down the street, I’ll pop in during the week, if I have free time. And we can go grab lunch. So pretty big, big step for your eldest or your first to go off to college. And then to add to that, Lauren, my wife, is also going back to college as well. So she’s starting new maths in the next couple of weeks, to further her education as well. So like two college students in the house, one of whom I married to.

Host Jordan Rich
Well, this particular weekend is the weekend for relaxation for many, but also the stress of moving kids into school, particularly downtown. Good luck as we know. But it’s a wonderful, wonderful milestone, and there’ll be some tears shed but very, very proud moments, congratulations to Nieve and to all the other students, grandchildren and children of those listening.

Mark Rowlette
I got a tip from my client’s daughter, who I talked to last week, and she said if you’re bringing in a U-Haul truck to move her stuff in, do not go down Storrow Drive because you’ll get stuck. And I said no, I’m putting it all in the back of the pickup truck. She has that much stuff right now.

Host Jordan Rich
So well, it’s kind of appropriate that we talk about this. Because when you when you examine the idea that you, Mark, and your lovely wife – you’ve planned a lot, and you’ve worked very, very hard to enable your daughter, this one to go to school and the others as well. But it’s the same principle in play when we’re talking about retirement. I mean, we should be also thinking about our own futures and futures of our kids and grandkids but our own futures. It’s almost a step up to another level of graduation in life when we retire. So that’s the focus today. But overall, what would you say is on the minds of many of the people you talk to at this moment?

Mark Rowlette
Well, I think you know, the last two years, we’ve talked a lot about tax strategy in retirement, how to navigate through making sure that you’re not overpaying on these accounts, like your 401Ks and your IRAs. And I think that’s obviously still critically important. But I think people are just really nervous about the usual stuff that people get nervous about, even more so now than ever. And what I mean is things like, inflation is exceptionally high, the market is really volatile. And no matter how news channels and papers spin the data, or change the definition of what constitutes a recession, the fact is that we appear to be right in one right now.

So a lot of our clients are saying to us, “So what do I do now to protect all of the money that I’ve saved over my lifetime?” And, you know, being Labor Day weekend, I think it’s an appropriate way to position it to say, “How do you how do you make sure that the fruits of your labor, so to speak, the money that you’ve been able to sock away over the last 20, 30, 40 years, isn’t just imploded upon because of things that maybe you cannot control?” And, you know, markets, inflation, taxes, all of those things erode the money that you’ve put away, and I chatted with a lady last week, first appointment. She was not putting any money in her 401k. She worked full time, then she’s working part time for the same company. And she said, I’m not putting any money in my 401k. And I said, “Well, your company matches your 401k to a certain amount. So why wouldn’t you put it in for the free money?”
She said, “Well, I don’t want to put it in and then watch it, you know, put in $400 in a month and have the $400 I put in now be worth $200.”

And I said, “That’s a fair point.” And I get it. And that much, that’s what makes people really nervous. And they said, “Well, maybe we look for something that is, you know, a cash account or money market account a savings account inside of your 401k.” So at least you get to capture the matching dollars from your employer. And, and it was like a light switch went off in her head because she wasn’t looking at it from that perspective. Because, in her mind, if you put money into those sorts of plans, you have to put it into the market. And you don’t necessarily, if you don’t want to. But I think that’s the general thing that’s making people very nervous is what happens if the market goes down further and doesn’t come back quickly? What happens if inflation continues to be at the high, high rate that it’s at now? How is that going to impact the next 25-30 years of my life?

Host Jordan Rich
Keep listening, dear friends. This will be an ear opener as very many of our programs are, but before we continue markets into the detail here a bit, want to remind you about the 15-Minute, No-Obligation Strategy call. It’s a way to meet quickly without any obligation. It’s free. And if you’ve got that nagging question or a basic issue with what’s going on in your life, and you want to get a quick response, then check out the 15-Minute, No-Obligation Strategy call. You can make an appointment for this free phone call online at RetireSouthShore.com. So Mark, I think most people at barbecues and get-togethers or dropping off their kids are aware of the economic issues out there. We pay for gas, we pay for food, soon heating oil, which is going to go through the roof. So we know that there are a lot of issues at play, there is definitely a recession in the minds of many as you said so well. So let’s talk about some of the things that we can do to protect ourselves, all of us in this room, particularly the retirees.

Mark Rowlette
Listen, I mean, it affects every single one of us, I think about it as well, I’m 46 years old, I’ve many years hopefully to go before I think about retirement for myself. But you know, the economic uncertainty that’s going on is making lots of people think about, “is this going to be another 2008?” I’m not trying to fear monger at all. But I think you have to plan for the worst and hope for the best, right? And always. So there’s a number of things that obviously you can do to at least reassure yourself that, if the bad happens, if the worst of a recession impacts all of us, how’s that going to affect you. And I just built out a few ideas and things that you should be thinking about. We talked about stress-testing portfolios, and that’s what we do for our clients. They come in and we run, strategies, retirement plans, financial plans for them at really, really doom-and-gloom scenarios, because I’d rather do it that way. Maybe it’s not sexy to show not show a client at nine or a 10% return. But the thing with financial services, it’s really easy to manipulate numbers and make things look as rosy as possible. But you have to be realistic. So I start with stress testing a client’s portfolio or, if you’re listening, stress test your own portfolio.

And how do you do that? Run things under really conservative assumptions, right? Don’t (assume) that you’re going to make 15% every year. Run it at a really conservative number, right? Conservative numbers can be 4 or 5%. Fixed Interest is now four plus percent, which is great. So you can run it that way. Run your portfolio or run your retirement strategy. With “what if the next 10 years has really high inflation, how is that going to impact me so you’re not running some low inflation rate across the board for the rest of your life? But then I think you should delve deeper and look at what you’re actually going to need dollars for, what you’re going to need to spend them on in retirement, and how that might change. Because maybe the dollars you need the first five years of retirement, you don’t need the next five years because maybe you’re wiping up some student debt, you’re helping your kids, or going to mortgages that might get paid off. Look at your portfolio from the perspective of, “if I had a 20% loss in my portfolio for the next three years, like a 2008 or 2001 type scenario. How is that going to impact me? If I was assuming that I was going to make an average long-term of 7% return and I only made five? How’s that going to impact me? So it’s basically pushing to the limits the stress testing of your portfolio on your overall retirement plan. It’s not just about your money. What happens if somebody were to pass away early in a couple and one of the Social Security benefits was gone? What happens if somebody passes away, Social Security is gone and the other person is left with a big IRA account that now they have to draw money from? And now they’re a single filer? How is that going to impact? Is that going to be the make or break? Is there going to be “red”, meaning are you going to run out of money?

Host Jordan Rich
So the All Hands Analysis approach itself to retirement services really is looking at the full picture, the long range picture. I always like to use metaphors. It’d be like comparing a phone size screen, which we all have, to an IMAX screen in a movie theater, you get to see everything laid out. And that’s the best way to prepare, isn’t it? to know what’s out there?

Mark Rowlette
Well, I think it’s really important to not just isolate one thing. You can’t put all your money under the mattress. Maybe you can, maybe you have that luxury to not have to do anything at all to make your money work for you. But for the most part, people want to try and earn returns on their account. The All Hands Analysis looks at the bigger picture, making sure we’re building out an income strategy that provides you with the monthly income that you need, making sure that your assets are growing. Wealth management – that’s our business, right? Managing people’s money. Making sure that your money is working as hard as it needs to work – not as hard as you think it needs to work, not as hard as you think you can tolerate. But as hard as it needs to work at a minimum, making sure that your tax strategy is on point.  

From a from a disclosure standpoint, I can’t give tax advice, because I’m not an accountant. We build tax strategies for folks. But our team of CPAs can give the tax advice if a client wants that, making sure that if somebody were to get sick and needed care, that there are resources available. So taking care of Medicaid, Medicare, doing the Medicare Supplement side of things when you go into retirement, Stu Millard takes care of that. And then tying everything up by making sure that you have a solid estate plan, the basic legal documents, making sure you’re protected against the death tax that Massachusetts has. Bill Caldwell is a wonderful attorney who’s been offering very low-cost legal work to our clients the 499 package that we that we do. Having that accomplished under one roof makes people really comfortable. Everyone working in unison as a team for the greater good of the client, as opposed to five different professionals working in five different areas and not knowing what the other ones are doing.

Host Jordan Rich
We’re talking today about protection during times of recession and it’s debatable wordplay what a recession is these days, apparently, but we all know it when we’re in it. And I think most people are very aware of the economic situation. So Mark, when we come back, you’ve got more basic tips that are really going to make people feel a little better as they munch on those hamburgers and hotdogs this weekend.

(begin pre-recorded segment)

Host Jordan Rich
When it comes to making key decisions about your retirement education is so important. So you’re invited to Register now for an upcoming free seminar on taxes in retirement, sponsored by the All Hands Analysis team at seltzer Retirement Services, a host of taxes and retirement seminars upcoming September 13 and 14th at the beautiful Scituate Maritime Center, each of these starting at 6:30pm. And then September 15, and September 20. There are seminars scheduled at the lovely Mirbeau Inn and Spa in Plymouth. Each of these will start at 6pm. Food and refreshments are served and you’ll have an opportunity to meet representatives from South Shore Retirement Services and learn more about such a key issue, Taxes in retirement. Register now online at RetireSouthShore.com That’s RetireSouthShore.com.

Narrator
One of the biggest stressors when it comes to retirement is the obvious one. Will you ever have to worry about running out of money in retirement?

Host Jordan Rich
That is the key question and proper retirement planning. Working with the All Hands Analysis team can truly help. Here’s Mark Rowlette, founder and president of South Shore Retirement Services.

Mark Rowlette
Most of our clients have a person when we meet with them somebody who has helped them accumulate their wealth during their working lives. But distribution going into retirement and starting to take money out of these accounts, is a totally different animal. It’s not just about returns. Returns are important, but strategizing on what’s the best way to take this money out, how you should take it out when you should take it out, and where you should take it from is critically important when you’re transitioning into retirement

Host Jordan Rich
Schedule your FREE 15-minute strategy call today just visit RetireSouthShore.com That’s RetireSouthShore.com . Investment advisory services made available through a EA Wealth Management LLC AEWM. AEWM and Seltzer Retirement Services are not affiliated companies.

(End pre-recorded segment)

Host Jordan Rich
Welcome back. This is Retire South Shore radio again, the website is so important because you can get all kinds of great information RetireSouthShore.com including updates on the latest seminars and webinars. And we’ll tell you more about those specifically during the show, of course with me Mark Rowlette, founder and president of South Shore Retirement Services. And we’ve been talking about the recession and the period of downtime that we all experience, whether it be through inflation or our investments and our stock portfolios, whatever. We all know we’re on the negative side right now. So what are we doing to protect that? You talked about the stress testing of your own situation and the help that you can give? What are some of the other key elements here, Mark?

Mark Rowlette
A lot of people who listen to the show, who come into the office – they’re still working, right? They haven’t quite retired yet. So they’re looking at trying to maximize as much savings as possible to take the pressure off of their money when they actually do go into retirement and need to start using the money.

So I think knowing what your options are, knowing if an IRA makes sense for you, should I fund a pre-tax IRA and take that deduction now? Should I fund a Roth IRA? Should I continue to put money into my 401(k) plan? Should I utilize other savings vehicles? Life insurance is a wonderful vehicle to be able to save money into. Most people say “What do you mean life insurance? If I die?” Well, maybe it’s not. maybe life insurance can be utilized. Well, I know it can be utilized as a savings vehicle, because I use it myself for that very reason. And different types of tax qualifications will help you be able to control what tax bracket you are in, in retirement by not having all of your eggs in one basket. You’re everyone’s heard that that phrase before.

But even people who are already retired can still be saving, I don’t mean putting more money away. What I mean is reclassifying some assets that might have taxes to be taken out of, at some point reclassifying them now while we’re in the low tax brackets that we have, which are lower than they’ve been in more than a decade. And getting the taxes done getting them out of the way now. So when you do actually need that money, you’re not sitting there hoping that taxes aren’t going to completely cripple you. Because they’ve continued to rise and trying to navigate those things, along with trying to navigate your Medicare premiums. Because they’re tiered based on how much income you have as well, is overwhelming for a lot of folks.

Our clients have this comforting feeling when we say “Well, we’ll help you with that.” We’ll take care of that. We’ll navigate through and figure out what’s the best strategy for you now, and if it needs to change and evolve over time. Because we meet with our clients so much, we’ll know when to change it and how to change it and what the impact is going to be.

Host Jordan Rich
You know, what’s remarkable is we all put things off. We all tend to stall on certain tasks, but of all the tasks, retirement planning it in the way you do it and the way your team does it, is actually pretty easy on the client, because it’s not that decision has to be made snap right then and there in the office or on the phone. You get time to see the horizon, if you will, get time to map out what you want to do with the help of people who know what they’re doing. I mean, again, for procrastinators, and I’m one of them, this is the last thing in the world, you need to worry about procrastinating on. Because there are good answers awaiting you.

Mark Rowlette
Yes. A lot of our clients have people that they’ve worked with prior to coming on board with South Shore. I often say to them, and say to everyone, “If the people who you are paying to take care of your money are not proactively reaching out to you giving you solutions that answer the questions that maybe you didn’t even ask because it’s not your forte, well, that’s a problem for me.” Or that should be a problem for them as well.

Clearly we get paid to manage clients’ accounts. That’s what we do. It’s this industry standard. I often say to people, you know, free advice is worth just that – nothing, right? So you if you’re paying someone, if somebody’s taking care of your money and helping you with your retirement strategy, you want to make sure that they’re the ones helping you – not you’re the one reminding them that you’re still there, and you need some assistance as you get closer into retirement.

Host Jordan Rich
That’s such a key element, the communication, which we’ve talked about many, many times, and it’s true, and you keep adding team members, too, which makes it even more efficient. So when you’re talking about maximizing the money you have, even before retirement, an important facet, this leads to the next one. And I know we talk about the bucket system, and we love to talk about our bucket systems. But this is where it’s important to take stock, no pun intended, of what you have, and where it is, and where it’s growing, etc. Talk a little bit about that.

Mark Rowlette
At the beginning of the show, we were talking about protecting your nest egg for retirement. But I don’t mean that from the perspective of putting your money into something that cannot lose money, not that there’s anything wrong with that.

Protecting the lifestyle that you want to have in retirement, does not necessarily mean that you shouldn’t have your money in the market. I’m speaking very generally, because I don’t know one person over another until we sit down and talk to them. But I think too many people as they get closer to retirement, have their nest egg basically in one sort of investment, one sort of strategy, and as they get closer to retirement, it gets more and more conservative.

And that logically makes sense to the layperson. But I look at it from the perspective that now, all of your nest egg is conservatively invested to give you the income that you need today and tomorrow. But maybe, if you split the money out and have it bucketed out where you have some money for today, some money for tomorrow, five years, seven years, 10 years, 15 years, it doesn’t mean the money’s tied up, it just means that money that is not needed until later in life can work harder. Because if it goes in the right direction, you’re going to make more money, make more returns. And if it goes in the wrong direction, you don’t need to touch that money now. So you don’t need to be held hostage or hold all of your portfolio hostage to provide the return today. Doing it that way allows clients to not make knee-jerk reactions when markets go down, because they have pools of money that can provide them with the income that they need for a long period of time, to allow themselves to ride it out.

But it also presents some opportunities. We have lots of clients. I mean, I don’t have some special market that doesn’t go down when everyone else’s goes down. But we have a lot of clients that have pre-tax money in accounts that have lost value because the market’s down. We look at an opportunity to say well, should we pay the taxes on that now? Do a Roth conversion for a piece of that money? We don’t have to sell what you’re holding, we just get a discount on the taxes because the account’s down and then we get to ride it back up in a in a tax-free account when things improve, and they will improve at some point.

Host Jordan Rich
Your chance to get a question answered, free, no obligation is available to you anytime, and you can set it up by appointment on your schedule. It’s called a 15-Minute, No-Obligation Strategy call. It’s been very successful. And a lot of people have just gotten the answer they need at the time. And maybe they’ll ask for more information. But it’s a wonderful, wonderful way to connect. And to do so, go to RetireSouthShore.com for all the details, or call the office and I know it’s the weekend and people will be back first thing during the week right after the holiday.

And they will get back to you. Call 781-836-4214. You know, before we get to our final points on protecting ourselves during the recession, you really do enjoy the challenge, if you will, of being creative, because every client is different, every client is unique. And it must be a thrill to know that you can help people through not only difficult times, but help people in prosperous times, succeed. And that’s the goal, right? Every day you get up to go to work. That’s what you want to see happen for your clients.

Mark Rowlette

Jordan, it sounds like I’m selling a sales line, I love what I do for a living. Everyone here in the office is engaged and enjoys what they do here in the office. I clearly make a living doing this. But you mentioned the 15-Minute Strategy Call a minute ago. Sometimes I talk to people on the phone, and I know that they’re not going to become a client.

But there’s always something that I’ve said, Damon La Tanzi has said, and Erica Wright has said to them on the phone that gives them some solution to a problem that they were having. And that’s an awesome feeling to be able to do that. And clearly, I would love every single person to become a client to the office. But I know that’s not the case. So being able to help people sit with someone for an hour, and I realize they’re really vulnerable sometimes when they’re sitting in the conference room with us, because they’re nervous that it’s not going to work out. They’re also nervous that they’re sitting talking to a financial person and they’re waiting for “where’s the rub” when you’re going to hit me with the you know, the sales pitch. We don’t pitch. I’m not a sales pitch person. Not everyone is a good fit for our office. And I’ll tell clients that or I’ll tell people that, I don’t think that what we do is what you’re looking for.

But to be able to sit with the right people, the right couple, and map out that they’re going to be okay, and to be able to see the look on their faces when they see the logic behind what we’re talking about? That’s a really satisfying feeling for me, I’ve done this for 25 years that more than 25 years at this point. It doesn’t get boring. It doesn’t get mundane. I don’t get jaded with everyone at some point and I was on vacation last week as you know for a little break but I love it. And that’s why I’m passionate about what I do and what everyone does.

Host Jordan Rich
I know you do. That’s why I brought it up and I’m not I’m not just blowing smoke here. I truly know this for a fact. I wouldn’t have recommended people including my own family members to talk with you and get guidance and get help before we wrap up, and we will have to wrap up in a moment. Yes, the final point is to just be ready for just about anything. It doesn’t mean panic, but it means be ready.

Mark Rowlette

You have to be ready for anything. And the hope is that a lot of these things don’t happen. But being ready for any eventuality, within reason, puts you in a much stronger, much more comfortable position because this is your retirement, right? We want to guide people through it. And I understand people’s concerns and people’s reservations about stopping work and going into retirement. But it’s yours, right? So you have to take charge of it.

So you can’t not look at the what-if scenarios. You drive to work every day in your car, you don’t anticipate getting a flat tire. But if you did, you have a spare in the back of the car though you hope you don’t have to use it. But you do want to make sure it’s there and it’s working. And it’s solid.

So how do you put yourself in a situation that you’re able to be ready for anything is to have a plan. I know that sounds cheesy, but have a plan, have a strategy in place. Have it written out, have it monitored on an ongoing basis, have conversations with the people who are helping you with their money. If it’s not us, whoever is helping you with your money, make sure that you didn’t, you know, weren’t the most important person in their world when you were coming on board. And now you’re not the most important person in their world, make sure that you have an open line of communication with the people who are the professionals that were helping you in the first place.

If you don’t, and you feel uncomfortable, then do something about it. Change. You know, it’s okay to change. Change is hard, but it doesn’t mean it’s wrong. So I would encourage everyone to just make sure that they have a written plan, strategy, retirement strategy, whatever you want to call it, that that assures them that if this happens, this is what the impact is going to be on me.

Host Jordan Rich
Sage advice, very wise words from a very proud dad who’s taking his daughter, his eldest to college this weekend. All I can say is get ready for some tears. But in a week or so you’ll say, “Boy, it’s a lot quieter around here.”

Mark Rowlette

And then I had a bunch of my friends that were dropping their kids off, like over the course of the last couple of weeks. And you know, moms were crying. Dads were like, I wasn’t going to do it. I wasn’t going to do it and then driving home they were they were like “I was a mess driving home when I dropped her off.” So yeah, you know, she’s going to be great. She’s going to have a wonderful time in college.

Host Jordan Rich
She is going to love it. And by the way, being in the city is a great, great gift for a kid like your daughter.

Mark Rowlette

She’s getting tickets to Fenway Park, she told me. For six bucks, they can go to a game and at that college, she’s going through Emmanuel I think.

Host Jordan Rich
There you go. There you go. Yeah, Mark. Good luck on that. And congratulations and of course, have a nice holiday weekend to everyone.

Mark Rowlette

Thanks so much. Take care.

Narrator
You’ve been listening to retire South Shore radio a presentation of South Shore Retirement Services for the latest on free seminars. To obtain a report or to set up a consultation please visit RetireSouthShore.com. Stay tuned for more real-world retirement solutions. RetireSouthShore.com.