Are You S.M.A.R.T. About Your Retirement | The Retirement Income Show | Retirement Planning at 62
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Mark: Glad you’re with us today for The Retirement Income Show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group, A+ rated by the Better Business Bureau of Euston. You can find out more on the website oakharvestfinancialgroup.com. Of course, you can always search for choice videos over 100, on YouTube, just search for Troy Sharpe and Oak Harvest, there’s no cost, a lot of great information there, and of course the office located at 920 Memorial city way right off I-10 & Bunker Hill. Any questions? Give him a call. 800-822-6434, 800-822-6434, no cost, no obligation, no pressure to do just that. 800-822-6434. Today, Troy is talking about retirement basics. Income, it’s where it all starts.
Investments are really important, but that’s not a retirement plan. We’re going to talk about the importance of having a plan, what is a retirement plan and all of that. There are things you need to know, and there’s probably things that you don’t know. Troy, let me give you an acronym and then you can go wherever you’d like to. I’m talking retirement here. The acronym is from the word SMART, S, sources of income, M,medical, A, asset allocation, R, risk, T, taxes. That would be retirement basics right there. Wouldn’t it?
Troy: That’s Oak Harvest Retirement Process, but backwards. When we talk about Oak Harvest Retirement Process and that’s what you got there. What was your S in that first-
Mark: Sources of income?
Troy: -sources of income. That’s our step two in Oak Harvest Retirement Process. The M was medical, so that is step four. The, A, you said asset allocation. That’s step one, investment management, risk management, determining the proper asset allocation, because without the proper asset allocation, you’re probably taking too much risk, you have no idea where you’re going to get your income from, and you have no idea what your taxes will be in the future. Asset allocation and investments and managing risk, that’s why we have it as step one. R in your acronym.
Mark: Was Risk, would you cover right there and asset, and then T was taxes.
Troy: Risk, it’s a bit redundant from the previous one and then T for taxes, that’s step three. Now, why is taxes step three for many of you listening, probably most of you listening taxes is your number one concern and rightfully so for a lot of you, but here’s the thing. If you don’t know how much your portfolio is expected to grow, you have no idea what your taxes will be in the future.
The thing that often gets overlooked is the fact that come 72, you are forced to distribute from your retirement accounts. If your retirement account is growing at 8%, you’re going to have much greater or much larger required distributions come 72, and then your RMDs, that’s an increasing percentage that you must withdraw every single year. If you predecease your spouse, she can do a inherited IRA or a spousal rollover, typically the spousal rollover will work, but it doesn’t eliminate those required minimum distributions.
Now, he or she, the surviving spouse, is in the single tax brackets and they still have to take the same usually, could it be a little bit less if it’s prior to RMD age that you pass away and she rolls it over into what’s called a spousal IRA, those rules are tremendously complex. If I have time in this segment, I’ll talk a little bit about a case that we’re going through right now and the importance for planning not just your needs, but having conversations with the children. Getting back to why asset allocation, investment management risk management is number one is because if we don’t have an idea of what our accounts will grow at, we can never plan for income or taxes, it’s just not– You can do it, I guess, but it’s not going to be optimized.
It’s going to be flying by the seat of your pants, we’ll make changes every year with no understanding of how these decisions that we’re making today impact the future. If I boil it down to what we provide, the number one value we provide you, it’s very simple, it’s sitting down having a conversation, “Mr. and Mrs. Jones, how are you doing? Look, this is what’s going on in the markets, this is what’s going on in the economy, this is what’s going on in your portfolio, and these are the things we need to be aware of, and start to act upon to optimize or to improve your financial future.”
Those conversations that we’re having with you are we doing Roth conversions? What bracket are we targeting when we’re doing Roth conversions? Why are we doing those? How does it impact the RMDs? How does it impact your social security, possibly your Medicare taxes? How does all that connect, explaining it to you, being a partner by your side and going through retirement with you, hands down that is the number one value that we provide people. That’s really what a retirement advisor should be doing. It’s much, much different from a broker or just a financial advisor because anyone can call themselves a financial advisor these days.
That’s a tremendous value but the number two value that we provide you is optimizing the distribution of your accounts in a way that provides income as efficiently and in the highest manner possible but the taxation of that income, this is value. This is for some of you, it’s millions of dollars. For most of you, it’s hundreds of thousands. If you don’t have any money, then it’s not a lot of value but obviously you’re probably not listening to this show if you don’t have any money.
Getting back to the Oak Harvest Retirement Process in the process that we go through from a planning standpoint but also when you pick the phone up and give us a call you’re going to go through our Oak Harvest Retirement Process process. This is the first thing we have to do is get to know you so we can start to build out this plan. By the way, the phone number if you do want to reach out to us, it’s 1-800-822-6434, you can always visit us on the website at oakharvestfinancialgroup.com or go to the YouTube channel, just simply search for Oak harvest on YouTube, you’ll find over 100 videos, and you can, on your own time, get to understand some of the planning strategies and some of the things that we do get to know me a little bit more personally, as far as what I’m doing with clients and my philosophy when it comes to managing investments and risk and income and taxes, the estate side of things, the healthcare side of things.
All that Oak Harvest Retirement Process related information you can find on YouTube in video format, watch at your own time laying in bed late at night, early on a Saturday morning, after the golf round or whenever you see fit. Step two, Retirement Process, income planning. Why is this step two? As opposed to the acronym there, Mark, the SMART acronym you gave us. If I don’t know how the portfolio is managed, and it doesn’t have an investment philosophy or an investment policy moving forward how can I ever know how much income I can take out when I’m planning for income. Typically, I want to have some money in a bucket that is secure and safe and can get me through short term volatility in the market.
Then I want to have a bucket that’s designed for growth, absolutely long term growth but the allocation between those two buckets with respect to the money that you have inside a retirement account, and outside of your IRAs and 401 K’s because the tax characteristics of that money can determine which investments you put inside that bucket which ultimately then dictates the distribution strategy with respect to the tax policy, or the tax strategy.
That probably was confusing, especially over the radio but main point, main takeaway there is the income, the investment portfolio, oftentimes dictates the income side and where we have those investments, the IRAs, the non IRAs, works in conjunction with the income plan and the tax plan that all needs to be working together. That’s why we have the income number two in this Oak Harvest Retirement Process process because we need to first have the risk managed as part of step one and we need to have an idea from the investment growth perspective so we can then figure out the income side of things.
Once we have those two taken care of now we can tackle because we’re not working with variables anymore, we’re not working with, well, we’re still working with variables because planning is a lot of variables but we now have a little bit more certainty with what the portfolio growth looks like and also where we’re going to get our income from. Now that we have those two figured out now we can really start to tackle taxes.
The big thing with taxes is we don’t just want to look at this year, it is the number one mistake that people make in retirement, when it comes to planning for taxes. They’re only looking at the impact that their decisions have this year. When we’re modeling and when we’re forecasting and we’re looking out into the future and doing this type of analysis for clients, oftentimes, the best tax decision that you can make for this year is one of the worst tax decisions you can make for 10 and 15 years down the road.
Without the perspective or context of what the future looks like in the impact of the decisions you’re making today has on the future, you’re lost and you’re just willy nilly making decisions without any insight into how that’s going to affect you long term and then you’re unable to quantify the pros and cons of all of those decisions. 1-800-822-6434, this is what we do. We quantify the impact of making various decisions and then have those conversations with you and your family and act in your best interest. We don’t ever make decisions when it comes to planning there. It’s your money. You’re the CEO, you and your spouse. We are the CFOs. We provide the analysis, the insight, the research, the context, to have a conversation so we can make better decisions together as a team. The goal here, of course, is to help keep more money in your pocket. Less in the government’s, have less risk, generate more income. Oak Harvest Retirement Process. Not smart, Mark.
Mark: It’s a different order.
Troy: Yes.
Mark: You think about it. Because we got a few minutes left in a segment, since I’m on a roll with acronyms, I’ll give you another one, team. The Oak Harvest Financial Group Team is here to help. Together, everyone accomplishes more. How about that?
Troy: That’s a good one. Teamwork makes the dream work.
Mark: There we go. We’re rolling them out today.
Troy: When I started the company, the goal was to have– I went through the story with my grandparents. I don’t have time to go through it now but the vision came from what I went through with my grandparents and we simply wanted to have a firm where if my grandparents walked through the door, unequivocally, they would sit down with someone who would look out for their best interests no matter what but not just a one person or a two-person firm, because those firms, even though they may have the big brand name on the mantel behind them or on the outside of the building when you walk in, you’re really just dealing with one or two, maybe three or four people.
Retirement planning require to do it right. It requires so many more people. Now if I just had a firm of 30 clients, I could handle it with me and maybe one other person but I’m not making an impact on the world. I’m not changing the amount of lives that we could possibly change by just keeping it small and having just me and another person but that’s how a lot of the financial industry works. You’ll have 100, maybe 200 clients in a three-person firm. Some of these big investment firms, they’ll have six or seven people and 3,000 clients. It’s impossible to do any planning with that type of structure. It just simply is.
We just expanded we’re undergoing a renovation right now. We have over 1,000 clients we have 33 employees. We’re hiring to get to 33 right now. I think last count word about 29 but I have five to six hires I have to make over the next couple of months. Couple of CPAs and attorney. Teamwork makes the dream work. We can get more into that on the next segment.
To do it right, to have the income, the investment, the taxes, the health care, the estate side of things, and then to have one shop where you can walk over here to the investment advisor or the financial planner, walk over here to the CPA, walk over here to the attorney and then those professionals can work together when you go home to make sure that everything is taken care of. That’s the vision. That’s the dream and that’s why the team was the most important aspects of the firm that you choose to work with.
1-800-822-6434. 1-800-822-6434.
Mark: If you think about it, you’ve never retired before. You think back to 2008 401ks were becoming 201ks and people are like, “Holy cow, I’ve got to go back to work. I didn’t plan for the market to drop like that and all my money was sitting in the market so I had a lot of risk and now I’ve got to go back to work.” I don’t want to go back to work unless you want to.
Some people just want to be active and they want to go back, get a part-time job, be a consultant, what have you, but the idea is what as a pre-retiree, what are some of the things that you really need to know that you probably don’t know about retirement? That’s where we’re headed next. This is Retirement Income Show with Troy Sharpe, the CEO and founder of Oak Harvest Financial Group back right after this.
