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Making Smart Decisions with Josh Tirado
7 minutes | Sep 1, 2021
Why you need a financial advisor for your divorce
Josh Tirado: [00:00:20] Welcome to the making smart decisions podcast. I'm your host, Josh Toronto. And today, we're gonna touch on the importance of a financial advisor. If you're getting divorced now, this advice applies equally to both men and women, but in my 22 years of experience, I believe that men need to heed this advice even more.[00:01:25]So the divorce process is often awful and draining and takes too long. Whether that takes too long, the six months, or whether that takes too long is three years until everything is resolved. Whatever it is, it generally takes too long and feels way too long, and is draining at that point. You have many other things going on, and you may not be making the smartest decisions.[00:01:45] I'm talking about one for your current money and investments and to whatever's going to happen with assets being divided up through the divorce. I've personally worked with some people where there's a big discussion about what they're gonna do with the house. And it really came down to one person, loved the house, one of the house, the person didn't want it, which is great.[00:02:03]But the person that wants to stay in the house was like, okay, I where'd, I get the money from, to pay off the equity in the house to the other person. They thought they were gonna have to sell the house individually assets. I asked them. Do you really like the house? Their response was yes. I love the house.[00:02:16] I want to stay here. Bearing in mind that this is the man in the relationship, I showed him a way to use money from a different source to give the property the proper amount of equity. To his wife so she could get a different property. And he was able to maintain the house, and it was affordable. He was thrilled because he thought he had to sell the house and lose the house that he works so hard to remodel and get the way he wanted, and he loved it, and she did not, and she wanted to move on, and he thought he was gonna have to lose it.[00:02:43]He did not. I've also run into people that through the divorce, if I'm divorced, the decree said one partner or the other partner, a set amount of money. It never said where that money had to come from or what form it was in. And in talking to partner one, they just wanted to write a check from the first available thing to give it to partner, to make the whole thing go away.[00:02:59]But in hindsight, that would have cost them a lot of money in taxes and penalties and put them in an inferior position. So we were able to discuss, okay, here's where we should pull the money from. And we did it in a systematic, intelligent way. And it's saved partner, number one, quite a bit of money in taxes and potential penalties partner.[00:03:18] Number two, they got everything they were owed and in a timely fashion. And we're happy with getting the money, and partner one realized that if they'd done the way they were going to do it without first consulting with me, it would have cost them far more in taxes and penalties. And we were able to avoid that.[00:03:33]really. Work with a financial advisor. It could be that depending on the relationship, both parties may want to keep the same financial advisor, or you might want to find somebody else. I see pros and cons to both or the past several years of my clients. Some clients have gotten a divorce.[00:03:47]They both retained me. We had a relationship, though. Going back to the prior one case, 10 years, the other case, 15 years, we worked together before the divorce. And they both knew that no one knew the situations better than I did. And they both hired me separately. And we split up the relationship and the contract so that each in our separate contracts, I couldn't divulge Anthony on either side.[00:04:07]And I worked with both sides. I knew the kids. I knew the husband and wife. I knew what they wanted to accomplish, and we worked together, which helped make it more amicable, and everyone got what they needed. And we were able to work with both sides. Now, the attorneys, still two separate attorneys, got their fees.[00:04:22]And it still dragged on longer than it needed to. But when the rubber met the road of where money was coming from, what was going here, what was going there, we were able to work together, sorted out, and it worked very well. I spoke to the clients that have also divorced the same thing I worked with both sides.[00:04:35] And some of them were a couple of years removed from divorce now, and both sides continue to work with me. And it goes smoothly. If the divorce is much more contentious or much angrier, it doesn't hurt that one side. It's a different advisor, but I really think that both people should have some advice.[00:04:51] So it's handled properly. And honestly, especially when the divorce decree comes down from the court and says, X number of dollars needs to change hands. And it doesn't say where it's from. It gives us a great amount of planning to do to protect both parties. And oftentimes, to the divorce decree, we need to get X number of dollars in insurance.[00:05:08]Life insurance in place to support the divorce decree. At that point, we take a look at, okay, what sort of insurance do we already have? What sort of insurance do we have from work? And what are the most cost-effective options? If we have to add more in what type of insurance do we have to add to the portfolio to fulfill those obligations w we can set that up and make that happen as well, instead of the person who's trying to.[00:05:28]Shop around on their own online. We were able to do it in a much more systematic, intelligent, and cost-saving manner. The reason I want to focus on men is this isn't necessarily reflective of my client base. But nationally, the number I see is that oftentimes the man leads the financial discussions with the advisor.[00:05:47]when the divorce occurs, the wife will often get thrown adviser, but the men tend to circle the wagons and internalize and don't reach out to their advisor for help. And I think they really need to reach out to their advisor for help, or if they're advisory to someone who helps them manage some money or make some investments.[00:06:03] And I don't have a true relationship where they're meeting with the person several times a year and doing the planning. They need to start that you need to find someone who can do true planning and work with them to help them through that process. So men don't. If you're going through a divorce, please don't ignore that.[00:06:16]Take care of your own mental health and take care of your financial health. And consults and professionals. And anybody going through a divorce should have a professional. I see it where the men often neglect that aspect, and it's not good financially for anyone involved. So that's my 2 cents on the divorce.
10 minutes | Sep 1, 2021
What do clients like the most about working with financial advisors?
Josh Tirado: [00:00:20] Welcome to making smart decisions podcast. I'm your host, Josh Tirado, and today we are discussing a very fun topic. The topic of what do clients like the most? In a recent survey of my clients, the number one and number two items they liked the most and why one was the educational aspect. Where we take complex things, make them simple, actionable, relatable, and explain how this will benefit them or discuss those two or three options and let them make an educated decision on which route they want to take that they're most comfortable with. So the educational aspect was big.[00:01:37]The second component was constantly looking for something new to add value, whether it's an investment strategy, whether it's a product that's out there, whether it's a change of philosophy, whatever it is staying current. And I really think that's one of the main advantages of working with an advisor, and I'm biased, but working with a fee-based advisor.[00:01:54]Who is working off of a plan with you? Not just managing assets because we're having serious discussions. For my average client, three times a year, and we're going over different things. And each year, we try to bring some additional value. I might not have a brand new topic. Every three or four months.[00:02:07] We might not need one, but we're constantly searching for something. So one finding unique. Things that can add value to the client and then to being able to translate those unique opportunities or products to the client to make an informed decision. And I want to touch on the product side a little bit of it.[00:02:23]Because again, this comes up time and again, and I make this comment jokingly to many clients, but I often referenced the old golden rule. And I slight twist on it. So I would say, the golden rule. He who has the gold makes the rules. And I know that it's not the true golden rule, but it's very applicable while investing as your money grows.[00:02:41] And as you put more aside and reach different levels of wealth, more opportunities pop up. I can offer clients who have an account balance of over a hundred thousand dollars that I can't offer to someone with an account balance of 25,000. I can offer things to someone with an account balance over 500, over a million, or at different income levels.[00:02:58] There are different things out there. And everyone grows and gets access to these things eventually if the money keeps growing. But what I want to say that there are certain things that we can offer to most people, Almost everyone. It depends on your situation, but there's a lot of value out of things.[00:03:11] And I want to touch on a few of them very quickly. One of them is 401k management. The vast majority of people out there that are still working have a 401k. It doesn't apply to everybody. It's currently about a third of the client, a third of the companies out there offering 401ks, but it's growing dramatically every single month is the ability for the advisor.[00:03:28]Working with a money management firm to have a contract with the 401k company and your employer to be able to go in there and manage your 401k on your behalf. So if you have a self-directed option inside your 401k, which allows you to create a little brokerage account, that is the window we were allowed to use, and then we have a signed agreement.[00:03:45]what we do is we go in through that brokerage window. And we're then able to put new investments in your 401k and actively manage those investments. So it used to be that this was all on you. And in a lot of cases, it still is. Like I said, only about a third of the companies out there offer this, but for the ones that do it, it's a tremendous way to have more choice in your 401k and someone watching it for you in real-time.[00:04:06]for my clients have been using it over the past two years, results have been. Very good across the board. So I'm quite pleased with it, but either you have an advisor helping with the 401k or an advisor helped me with the 401k and can directly access the 401k through a money management firm.[00:04:21] And help you manage it. Now, when I say directly access it, we're not asking for a username. We're not asking for a password. We're not taking control. We're assigning all the appropriate forms as though you're opening up a brokerage account. That account is within your 401k, and we're using an amen money management company.[00:04:36]Just like we may be using a third-party money management firm to help manage some of your money outside of your 401k. We're using a similar firm to help manage it within your 401k. That's a great advantage. And another thing is alternative investments. Now you do need to have a minimum net worth and a minimum household income.[00:04:51]Either both or one of the other has to be even higher, but as long as you have, as long as you reach the minimums, you have access to alternative and investments. Now, so alternate investments are great. Some are not. Some have received a bad rap in recent years. Some have been a real advantage.[00:05:03]Two people, but they're often in things such as currency, real estate, several oil and gas partnerships. Sometimes I know a lot of those. Were used heavily in the eighties, and I had a lot of trouble. But there are several different things out there. Some of these alternative investments are restrictive because they're privately held. Some are in mutual fund form.[00:05:20] So they're very illiquid and publicly held. So there are a number, different ways to do it. But what I suggest is it's not the same old as some stocks have some bonds. Even at a more modest level of money invested, you can have access to stocks to bonds. Still, also if you're interested the real estate and some of the other alternative investments. New ones are coming out all the time now. It takes a while for them to get, be regulated, and be approved on different platforms to be sold or used in your portfolio.[00:05:44]But there's a lot of options out there, and new ones are coming to market all the time. Recent events or the past year with COVID and the economy, different things have really limited some of the alternate investments for folks. And some have just made the very liquid ones available and the illiquid ones not as available now. I don't want to paint anything with too broad of a brush.[00:06:02]Some of the liquid ones have many advantages and are great, but there's no one size fits all. Each thing is on a case-by-case basis, but the alternatives are great. So far, we've already touched on helping you manage your 401k, some alternative investments that are not as correlated to the rest of the market and get your returns from a different type of asset.[00:06:17]That's really great. I want to mention some, there are some annuity products out there, and they're becoming so popular. I think they'll eventually end up with their own asset—class their own category. Many people refer to them as buffered products, and essentially you have an annuity where you're still offered upside potential where you're tracking an index for the market.[00:06:33]But if the market goes down, the insurance company issuing the annuity has a clause in there where they will absorb the first certain percentage of loss. So if your account, a lot of them that I've used are, is 10%. So if the account goes down 10%, they absorbed the first 10% of loss over the first year.[00:06:49] there's a trade-off there. You're also not receiving a hundred percent of the index. So you're tracking the SME 500, and you're probably walking away with something close to 90%. If it goes positive, 90% of the positive return, but that's an exchange for them being willing to absorb 10% of the loss. Now.[00:07:03]If this sounds familiar to some people, it's because they basically took the best parts of a variable annuity and the best parts of an indexed annuity and smashed them together. So it's not as extreme where it's only investing, or there's a hard floor where you can't lose any money, but your returns are limited.[00:07:18]And they went into the middle where they're providing some safety net with generally higher returns, higher participation, in the indices. So you have the chance of a higher rate of return. There are some other nuances to it involving the lack of fees and smaller things. But they're becoming very popular.[00:07:32]I've used them successfully in my practice for the past. Going on eight years, and a lot of advisors are starting to offer them. It is not a one-size-fits-all. Again, that product has to be the right fit for you and match your goals and objectives, but it's neat. An option that didn't use to exist.[00:07:44]I just haven't used it for seven or eight years. Maybe they ran a little bit before then, but they're really coming into their own now. And it's another great option. So now we're looking at 401k things. We're looking at alternative investments. We're looking at being able to add a layer of safety and protection through this buffered style.[00:07:59]An annuity product even a touch on insurance, it used to be that you had life insurance or long-term care. And now you have combinations where they're called hybrid policies, where it's long-term care on top of a life insurance chassis, for lack of a better term. And you're able to get the benefits of both insurances rolled up into one product.[00:08:16] You're spending one set amount of money to cover both problems. So multiple birds, one stone, and it becomes very efficient from a planning standpoint. There are things out there, and there are things out there that you don't often see when you're just reading some financial articles. Are you using A free calculator? You find online, and forgive me. I don't want to bash all financial calculators. I even have some on my website. But they're a far cry from having an actual collaborative relationship with an advisor and discussions in multiple meetings to put together a plan for you. And then multiple meetings implementing that plan year over year after year.[00:08:45]We can accomplish a lot more, but using some of these tools works really well and has a lot of value to my clients. I'm going to compare the use of these tools to adding salt. To the soup, a little bit adds many flavors and a lot of value to any recipe. Too much can ruin the whole thing.[00:08:59]again, it's one of those, I won't say tread carefully, but it's one of the things where, Hey, each thing is not right for everybody, but if it's right for you and your situation, it can add a lot of value, So I just wanted to touch on those things as to what the clients like the most I've heard recently.[00:09:11] And it's these different types of products.[00:09:13]
8 minutes | Aug 30, 2021
The State of Pension Plans in the United States
Josh Tirado: [00:00:20] Welcome to the making smart decisions podcast. I'm your host, Josh Toronto. And today, we are discussing pensions. Is it a sheep, or is it the Wolf? Or is it just a Wolf in sheep's clothing? Let me jump into the pension thing here and try to delineate a little bit.[00:01:19] When I am talking about pensions. I am talking about pensions from companies, not from the government, and quasi I mostly pension from smaller branches of government. So not necessarily federal pensions, but maybe something along the lines of that, of a state pension. [00:01:35]The vast majority of people no longer have a pension 40 years ago, the vast majority of people. I had a pension, and that was a big push on retirement. Pensions became very expensive. They were hard to manage. They went away. The 1980s saw the rise of the 401k, and that really replaced the pension.[00:01:49] So it used to be that, Hey, I had a pension, the company put so much money aside. Maybe I contributed to it. Maybe I didn't, depending on what setup you had. And when you retired, you got a certain amount of money, which was guaranteed for all these years in your retirement. And it was awesome. And everyone worked towards their pension fund people for years joked about the gold watch, and I got a pension.[00:02:05]When I retired, the pension became hard to manage. It went away. And the onus of retirement transferred from the company you worked for over to you with the rise of the 401k. Because now you're consuming your money. You're getting a match from the company. But now you have to manage the investments that are in their project.[00:02:21] How much is going to be in there? So it's no longer the company during a pension taking care of you. It's you taking care of your own money? Pensions used to be far and wide, very accepted, very common pensions are not that anymore—several large companies over the past 10 years.[00:02:35]Have eliminated their pensions for people under a certain amount of time, say employees are there for less than five years, less than 10 years. And new hires, no pension people that have been there longer than that, the pension's there, but it's frozen. And then you have some older people that they know will be retiring out or taking a package in the next five years.[00:02:50]And their pensions remained fairly unchanged, but the companies had moved away from pensions. Let me discuss that for the few of you out there that still have pensions. Let me touch on that from a private company. Again, I see this left and right with my clients. The pensions are being frozen.[00:03:02]The pensions are going away. They might give you a lump sum, payout of some money towards your 401k, but then the pension is going away. So when I am doing retirement planning for my clients and have a pension, what is becoming increasingly popular as a stress test is. We don't count their pension at all.[00:03:17]It used to be that we would say, what if something happens? You don't get the projected pension cause it's 20 years out. And maybe the company doesn't do as well, or maybe they freeze it, and we would show them a reduced pension. My clients are savvy.[00:03:28]They're smart people. And not just smart because they choose to work with me. But because they are smart, savvy people. We're looking at the associated risks with the pension and the companies' health, they're working for. Even the healthiest companies are getting rid of them.[00:03:40] So we've actually started just eliminating the pension from their retirement planning projections. And we want to make sure that they can afford to retire on their own. And if they get the pension, great, it's gravy, but they're not relying on it. So I caution you if you are not doing. [00:03:54] a [00:03:54] Josh Tirado: [00:03:54] separate IRA or Roth IRA or 401k, and you're just relying on a pension.[00:03:59] And you're not within five years of retiring. That will probably not work out for you as well as you initially thought. That is the overwhelming trend in the United States today. So please be very careful again, we don't even consider their pension. If they're more than five years out from retirement or dramatically reduce the pension projection, the federal government will do everything in their power to stay.[00:04:20] And I'm jokingly saying, stay in business. But the government can raise taxes, collect more money and continue to govern the people, and make their pensions work. They make the pensions happen now—several government pensions of receiving the pension. You're not receiving social security, so you are not able to quote-unquote double dip there.[00:04:35] So please bear in mind that, Hey, if I'm getting this pension, you're not getting social security again. The pension there is more reliable, but we don't know how much you're going to receive from that pension, or could it be changed in the future? So please, once again, take a little control, take some more of the money into your own hands and do some other outside investing, just online, a pension.[00:04:53]Then we have this kind of strange hybrid scenario called smaller pensions where it's state-run. Some states have done a very good job of managing their pension fund. And the ones that pop into mind first are just the States that are managing the pension fund for teachers, police, firefighters, state workers, that sort of thing.[00:05:11] some other States have horribly mismanaged it and even passed rules where they were allowed to borrow money out of the pension plan, to cover expenses and nothing to do with the pension, with no requirement to pay it back and no requirement to pay themselves any interest. So now, not only is that money has not been returned to the pension plan.[00:05:25]But that money was not invested. Earning return for the pension plan during that same period of time. And now you have a woefully underfunded pension, which will result down the road in people receiving a reduced pension. Potentially, the States could even default. There are some States that when COVID hit, and they were running this so much economic, no grant, they had already been in economic trouble for the previous 10, 15, 20 plus years.[00:05:46] But COVID hitting amplified it to the point where there are some States considering, and they publicly announced this, the governors publicly announced it, that the States would consider bankruptcy as a way to restructure the debt and what the obligations of the state were. It would be interesting to see if those pensions were going to, depending on the bankruptcy court, if those pensions would be protected.[00:06:07] Or if they only had a fund the pension with some minimum amount of money or who knows what was going to happen. But all I know is that if I was relying on a pension and I plan to receive a pension from the state for my years of hard work, and that state was in such bad financial straits, it was considering going bankrupt.[00:06:25]And the pension fund is massively underfunded. I'm not going to feel too comfortable about that pension. And I know a lot of people that are working on getting their 25 years, so they can get out and get their pension, but there are talks repeatedly about what's going to happen with that pension.[00:06:38]I know some teachers in that position. I noticed some police officers in that position and some firefighters in that position. It's scary because, in many instances, they don't have separate money put aside. Even if you're on a state level with your pension, please put money aside into your own IRA or your own brokerage account and work with an advisor.[00:06:55] So you can plan around the pension, and if you get the pension and it's unchanged, terrific. But there's a really good chance that Your pension will be changed. Very high likelihood that your pension will in the future not be in the same position that it's in now or what's projected to be.[00:07:08]So again, please put some money aside to offer yourself there. So, in general, pensions are great. I want to count, consider them to be gravy and not the main source of retirement. I'm very concerned about the state of pensions. Moving forward in this country.
8 minutes | Aug 30, 2021
Sequence of Return Risk
Josh Tirado: [00:00:20] Welcome to the making smart decisions podcast. I'm your host, Josh Tirado, and today we're going to discuss sequence risk or sequence of return risk or something that sounds really boring and dumb and not useful to you. But in reality, it is actually a major major risk to your retirement and your investments.[00:01:26]That's what we're gonna jump into today. So let me give you the definition of what sequence risk is. According to Investopedia, sequence risk is the danger that the timing of withdrawals from your retirement account will have a negative impact on the overall rate of return available to the investor.[00:01:40] Let me boil that down for you. Timing is everything. When you pull your money out of your retirement accounts can affect how much it is their long-term. Now that makes sense to me, but in reality, it's just math. Okay. It's math. It's boring, but it can really affect you. Obviously, the stock market and your investments, whether it's stocks, bonds, real estate, what have you? It does not go up in a straight line. It can go up and go down. It can go sideways, different things. You can have several bad years in a row followed by several good.[00:02:11] You have several good years followed by several bad. You can have interspersed and in differing magnitudes. Whenever you hear people talk about the market, you often hear, Oh, over any 10 year period, the market has returned X or Oh. Since people start investing in the market, it has averaged this sort of return and gone up.[00:02:28] Yeah. That's an average. That is not what you're getting every year. It can be more. It can be less. I'm amazed that people jump in, and they're like, after so many years, Hey, the market's supposed to average this. I don't have that. I have this. It could be more, it could be less, but that's based on timing. And that's based on the sequence of returns within the investment.[00:02:47]Now that gets magnified. When you go to retire, and you're going to pull your money out. Let me take this a step further. In my world, you see many things to say, sequence risk sequence of return risk That sort of thing. When I do a financial plan for someone, and we're focused on the retirement and the withdrawal, there are two main things in this sort of realm that we stress test for one is called bad timing.[00:03:07] And I think bad timing is the most practical implementation of sequence risk. Bad timing says, statistically, the worst time to lose money. Or have poor returns is in the first two years of retirement because it's at that point that you have simultaneously stopped, contributing, started withdrawing. Now your seed money, which needs to grow like a snowball rolling downhill, has been reduced by less than optimal returns.[00:03:33] Okay. Maybe you were planning on 8%, you only got 4% of your planning on something positive, and you actually went down and lost money. So those first two years are imperative that you really protect them because you can't dig yourself into a hole there. After all, there's no more money coming in to fill in the hole, and that money needs to grow to protect you.[00:03:49] Long-term. One of the main things that we stress test against is bad timing, where we take a look at what you're invested in and the likelihood that you'll lose money. And, those first two years of retirement, when I say lose money, It's not guaranteed. Still, historically we can look at how the investments you're holding have fared in different years and how much on average they'll go down, and we can look at, okay, here's the likelihood that they will go down in this first two years.[00:04:11] And here's the percentage they could go down. One way you get rid of sequence risk or the bad timing risk is to diversify properly. Because rarely does everything go down or go up at the same time. So we start to reduce the overall amount of risk, and we properly diversify. And by doing that, we can dramatically reduce the chances that you will lose money in those first two years of retirement, which is the most important, but secondarily and almost as important is we run a Monte Carlo simulation.[00:04:40]When I say the chance of you making a certain amount of money for a certain number of years, you're not living your money, is based on this Monte Carlo simulation. What do you mean? The money? Carlos simulation in my world with planning takes a look at.[00:04:51]Not just your overall portfolio, not just the average you're holding, but it takes a look at the different types of stocks, the different types of bonds, the different types of real estate, whether it's large-cap, small company, international, whatever it is, it looks at all. And then it takes a look at historical what they've done as far as when they've gone up when they've gone down.[00:05:09]And what is the likelihood of that happening? And the Monte Carlo simulation runs a thousand plus sometimes depending on what you're running a couple of thousand different scenarios with different sequences of returns. So a lot of good returns in the beginning followed by bad, a lot of bad followed by good, and vice versa.[00:05:24] And it does it for every asset category that you're currently invested in. And then, we'll run a scenario showing that for all the asset categories that we plan on you being invested in. At the time of retirement, you will give you your probability of your money lasting and how much is in there. A lot of the free planning software that's out there takes a look at what average returns are and says to you, here's the number you need to have when you go to retire.[00:05:46]But that number is really a moving target because that number might be there on the day. You retire. But your life expectancy after you retire may be 30 years. So that number is one snapshot. One day, we need to take a look at what you are invested in overall, how much you need to pull out of there, what sources you're pulling it from.[00:06:02]And this sequence of return risk over five, 10, 20, 30 years. In fact, we look at the sequence of return risk. As to your proper asset allocation while you're still accumulating money leading up to retirement because in what order you get, your returns or losses in the market affect you even leading up to retirement.[00:06:19]It's amplified in retirement. But it's all-important. So when you deal with the professional, we'll stress test for bad timing at the beginning of retirement. We will run a Monte Carlo simulation to stress, test you for the sequence of return risk during your accumulation phase. And we'll rerun it for the projection when you retire in your withdrawal phase to make sure that money will last.[00:06:40] And then, on top of that, we still make sure that at the proposed end of your plan, there is still extra money there. There is still a buffer because you need more money. It would be best if you had that safety net when you're just trying to figure out a number or look at some free software to give you a number of some projections.[00:06:56]I have never seen it where it considers all of these different variables and stress tests it for you. And that's really what you get with the professional. And that's really important. So sequence risk sequence of return risk may sound really boring. But if you don't address it, it could be one of the number one detriments to you having a successful retirement.[00:07:13]
11 minutes | Aug 1, 2021
Joe: Hello, and welcome to the show. My name is Joe Woolworth. I produce the making smart decisions podcast with Josh Tirado. I'm here today with Josh Tirado and David Morgan. The founders of the Amplify program that we are going to learn about today. [00:00:31] So let's get started, guys. Josh, tell me a little bit about Amplify.[00:00:35]Josh: So amplify as a program that we created, and our slogan is your immediate and sustainable giving strategy.[00:00:40]Joe: Great. So you guys are going to work with individuals to help nonprofits by helping individuals give more money to nonprofits, basically. [00:00:48] Josh: That is correct. Our end goal is to get more money to the nonprofits for today and in the future, hence our immediate and sustainable giving strategy. [00:00:57]Joe: how did you guys come up with this idea?[00:00:58] Like, what was the logic behind partnering up on this? [00:01:01] David: . I've been in the nonprofit space for a while, and one of the problems I think this solves is. Everyone's going after more followers, and it's really about quantity. And that can make you look good, but a lot of nonprofits have a problem getting to the depth, and connecting to givers is how they'd like.[00:01:18] And so I think this can do that. It offers a tool to say, yeah, we'd love for you to, for example, buy our coffee. But what if you can connect with us more deeply, even in a generational way. And so I think this removes an obstacle in being able to do that. [00:01:33] Joe: And David, you have experienced in the nonprofit world.[00:01:36] David: Yeah. Around 2013, my wife and I founded love abounds and just really briefly. So we do village development in Zambia that looks like clean water. Right now. We have two homes for abandoned children, and we have a women's empowerment project that teaches women to be entrepreneurs themselves by farming chickens.[00:01:55]That, and then. Also, really quick to Condi coffee is a coffee company that we started that funds all of that or helps fund all of that. So we've been in the space for a while, and we really enjoy it. I love entrepreneurship in all its forms, and I liked that you. [00:02:09] Joe: guys, obviously. Are passionate about people giving to nonprofits because it can make on people's, and now you're forming this amplify program to help people be better-equipped givers.[00:02:20] So tell me about the strategies on how you guys are going to help people amplify their giving. [00:02:29] Josh: So I'd like to touch on just two examples of two topics of two strategies we can use. And these strategies really came to light because, as David mentioned, he's been in this space or working.[00:02:38]As director of a nonprofit and working with nonprofits for a long period of time, I've been working with nonprofits and specifically several churches for the past 22 years to help with giving. And the same problem came up repeatedly; where there's some legacy giving where people wanted to give a family gift when someone passed away. However, all nonprofits need operating capital.[00:03:00] Now they need money. Now it helps them for their mission, not just necessarily in 20 or 30 years. Over the past 20 years, we see the same problems over and over again. And Dave and I thought you know what? There has to be a better way. And what if we came up with a formalized program to help the nonprofits and put together a nice structure for their giving.[00:03:18] And that's where we originally came up with amplify. So two examples I want to discuss one helps to amplify the current gifts. The other one helps to amplify future gifts, and there are several different planning strategies we can utilize. But here are two prevalent ones. The first one is called the donor-advised fund.[00:03:35] What this allows the person to do. This is the person donating the money. They can donate virtually an unlimited amount of money into a donor-advised fund. Now, the donor-advised fund sounds technical sounds nice. The platform I use, they have actually branded it as the giving fund. I think that's a more accurate description.[00:03:52] The donor can donate a virtually unlimited amount of money into the fund. And they receive a tax break on the entire amount that they contribute to the fund. Now, it says the fund, and it's not one mutual fund. It's actually set up as a brokerage account. They have control over managing and working with the professional to manage the brokerage account's investments and grow it.[00:04:13] And from there, they determine. Which qualified five Oh one C3 charities will receive some of that money. And if they're having a great year, they can donate more. If they're having a down year, they can donate less and donate to one charity. They can donate to multiple charities. You have total control over it, but the donor receives Benefits cause he had a huge tax break.[00:04:31] They can manage the money. And we also encouraged them to turn it into a legacy. Play, involve the children. If they're older, involved, the grandchildren, get them involved. So that way, they're getting in the habit of donating and enriches their souls. And it's a great family thing as well as the actual dollars.[00:04:48] And then when the original people pass away, they can even leave it to the family, and the family can continue to manage it and donate to the charities, and you can create a great legacy. But what's great is you're managing the money. You're growing the money, but you're giving it now. So you can see what's happening.[00:05:03] You can see the fruits of your labor and the fruits of your donations with the nonprofit and the nonprofit benefits because instead of waiting for the person to pass away to receive the gift, eventually, you're getting more money now. And if that person was going to donate a set amount of money, now they're getting a tax break on that money, which allows them to donate even more money if they want to kick in some of those tax savings and it's invested.[00:05:24] So that gift can really start to snowball year after year and create a perpetual gift. So the donor advice fund slash giving fund is a great strategy where everyone benefits now, instead of necessarily in the future, [00:05:37] David: from a non-profit perspective, I think many times, donors can feel like it's really risky to give a big gift.[00:05:46] And that makes sense. So what you want is somebody who has the expertise of having done this before the financial aspect, the estate planning aspect. To be able to say, yeah, you're in safe hands. This is what we can do in a very predictable way. It's not giving the non-profit a large some, and we're not sure what will happen with it.[00:06:07]I think nonprofits are really leaving a lot of money on the table just because. There's no program to guide and answer questions from this perspective. [00:06:18] Non-profits are just—overworked, underpaid. And I think what's daunting to them is doing a whole nother campaign to raise more money from the same people who usually give them money. So that's an obstacle they're trying to overcome. What's beautiful about this is we don't have to be a part of some giant campaign that takes a lot of energy and money.[00:06:40] We are. Asking people, is this a strategy? Is this a tool that could help you? And if so, that can make a huge impact with very little time and energy spent on the nonprofit. [00:06:52]Josh: I fully agree. And what you're saying is it's not the reaching out to your members or the people who donate for another ask of more money instead, you're empowering them and giving them that tool that you said, but you're empowering them and giving them that tool to show how they can give more money.[00:07:08] David: Exactly.[00:07:09] Joe: Yeah. When you guys are describing it, I've never heard of anything. You got a financial advisor and an attorney who focuses on estate planning coming together, saying, guys, we want to help you figure out how to maximize your impact with your giving.[00:07:20]. I've also never heard of some of these strategies that you're talking about, one of the questions that I had that I'm just curious right about, is this for super-wealthy people? Is this for people that have millions? [00:07:29] David: definitely not. I'll let Josh speak to it, but I think this is very approachable for all different size nonprofits and donors. [00:07:38] Josh: I fully agree. And if your question is it for people with a million dollars to donators and for people that have a hundred dollars to donate? My answer would be yes.[00:07:44] We have enough strategies, and all the strategies are scalable that they can work for virtually anyone at any time. [00:07:50] Joe: So if you're planning on regularly giving to organizations that you're passionate about, this could be something that could really help you amplify your gift. [00:07:56] Josh: Absolutely. This will dovetail in and allow you to give a bigger, better gift and a more sustainable gift as well.[00:08:01] David: So you're talking about [00:08:02] Joe: giving funds. What's [00:08:03] David: another strategy. [00:08:04] Josh: Okay. So the donor advice fund AK the giving fund. Is while we're still active. Now we want to donate on an ongoing basis. The other most popular giving strategy is to leave something to a nonprofit.[00:08:15] Once we pass away. One of the major obstacles when it comes to that is people also want to leave something to their family when they pass away. And they're very concerned because oftentimes, there are limited funds, and people generally tend to want to take care of their family before the nonprofit, before the charity.[00:08:31]And they don't want to say okay, I'm gonna drink this money to the charity. Disinherit their family. So we came up with a strategy that we have coined the split, inherent strategy. So using some different financial tools and some different estate planning techniques, we can take a set amount of money.[00:08:50] And again, amplify that gift. So the donor can leave a substantial amount of money to their family and leave a substantial amount of money to the charity at the same time. So no one is left out. Both parties get a good sum of money. And while working with two professionals like David and myself, Chances are, we can show you techniques where you would already be able to give more money to your family than you thought you were going to be able to in the beginning, and also leave a gift to the charity simultaneously.[00:09:18] That's where our client, the split inheritance strategy, where you can benefit a larger number of people or causes. [00:09:25] David: From an estate planning perspective, I think this is really a classic example. Someone will tell me, okay, I want to leave $25,000 to X nonprofit. Since it's completely unpredictable, what the exact size of your estate will be, I have to tell them, Hey, that's risky.[00:09:41] What if there's only $30,000 in your estate? You're disinheriting your family. But with this, we can predict how much is going to be in these accounts. And so we're taking away that risk. We're not, and there's no way where that we're going to disinherit the family. [00:09:57]Joe: It doesn't have to be one or the other.[00:09:58] And like you were saying, even involve those family members in that process with you and pass on a legacy of giving and making an impact, which is really cool.[00:10:06] David: Absolutely. So [00:10:07] Joe: how do people get in contact with Amplify? [00:10:11] Josh: So to hear more about the Amplify program, David and I have put aside time on our schedules, and you can go to in the show notes; there'll be a link to Calendly, and you can go in there and schedule a follow-up 15 to 20-minute phone call with David and myself.[00:10:24] We can answer all of your questions, do a little bit of a deeper dive and explain how it can actually help and benefit your nonprofit. And from there, the next action step after we have that discussion is if you like what you hear. And you think it's a good program and your charity could benefit from it.[00:10:39] You would, then we then roll out the full version of it to the members and anyone interested in donating [00:10:45] David: completely free of cost to the nonprofit. So if you're [00:10:48] Joe: working in a nonprofit or you're an individual that represents a nonprofit and you want to help your people amplify or giving, go ahead and click that calendar link.[00:10:55] Find out more. [00:10:56] Josh: I would say that you can also send us an email in addition to clicking the Kelly link. Josh at JT financial group Works. If you're finding this podcast based on our landing page on the website, there are links there as well to the email.[00:11:12]You can email us or click on the County link to set up your free 20-minute consultation with David and me; we can answer all of your questions, do a little bit of a deeper dive and show you how this could potentially add value to your organization.[00:11:25]Joe: We look [00:11:25] David: forward to talking to you. [00:11:27]
13 minutes | Jul 31, 2021
401k advice you actually want
Josh: Welcome to the making smart decisions podcast. I'm your host, Josh Toronto. And today, we're going to cover 401k help that you actually want. So most people would classify their 401k help as discussing it at work with their coworkers. Hey, what are you doing? This is what I'm doing. Hey, how was your return?[00:01:45] Hey, what fund are you in? But in the days of COVID, which we're currently in, fewer and fewer people are working together fewer and fewer people have that chance to discuss that at work. And I really wouldn't classify that as advice, although that's what most people get. 401ks for the vast majority of Americans is their largest investment.[00:02:02] It's their largest saving and investment and investing vehicle towards retirement. Hands down, and most of the time, you get a match from the employer. So that adds extra value there because you're getting an immediate return on your money. In fact, most 401k plans. Now, instead of you opting in, you have to opt-out once you've been there a certain amount of time. You're auto-enrolled in the 401k.[00:02:21]However, you're auto-enrolled in the 401k, and they pick a plain target-date fund. Really what you need to do is look over all the offerings and put them together. Okay, what areas do I want to be in? And let me put together a proper asset allocation and make sure that it works in concert with all my other investments, much easier said than done, especially for the vast majority of 401ks and403bs, because you're not receiving any personalized attention.[00:02:45] I don't want that to sound biased, or I'm saying, Hey, take my advice. Cause your 401k company isn't helping you. I am actually the person that has created an administered 401k's for many companies. So if someone at the company has a question regarding their investments, I'm the person they call. So I'm on both sides of this.[00:03:01] I get it. The fact of the matter is we're in there to educate people when it comes to the 401k, but the level of availability we have and legally some of the restrictions we have on what advice we can give with your 401k. If you're lucky enough to have an advisor or a professional associated with your plan, the amount of advice we can give you is limited.[00:03:24] The selections in the plan are limited. So the advice we're giving is based on what's available in the plan. And oftentimes, it's only safe to use mass allocation advice, not individual holding advice. So most people aren't getting the level of 401k help that they want. However, even though what I'm about to talk about has been in place for some years.[00:03:44] It is really just starting to gain traction now. When I say 401k healthy, you actually want and can use. Here's what I'm referencing more and more 401k plans have a feature in them where it's a self-directed brokerage account. And it's usually the bigger ones. The plans that Fidelity administers often have plans that Schwab administers often have.[00:04:05] There are some offered plans, but there's a self-directed brokerage account option in there. Let me say what that is. So when you look at your 401k, and you say, okay, what are my investment choices? You might have a couple of handfuls of funds that are in there. And by the way, it is always set up where it's mutual funds.[00:04:18]That's part of the structure when it comes to the 401k. You have target-date funds because those are the default funds that people automatically go into. And then there's usually some individual funds that cover different categories, stocks, bonds if you're lucky, real estate, different things, and those are your choices.[00:04:35] But what companies have done is they're allowing you to have this option called a self-directed brokerage. It basically allows you to open up a small brokerage account inside your 401k. You move some, your money over into that brokerage option.[00:04:48] And within that little brokerage account, you can put in there virtually any investment you want. You can do other funds from other places, and you're not limited to the small number of funds that are generally offered in most 401k plans. It opens it up to you. It's self-directed. Just look at the names. The name implies you're the one picking the funds that you're putting in there.[00:05:07] You're managing them, you're monitoring them, but you have this brokerage option. Most companies do not advertise it. It's in there, but it's usually at the bottom. It's usually in the fine print. You don't know about it, but more and more companies are offering it. What can happen is you come to someone like myself, and I review your 401k statement, and I find out that, okay, your company offers a self-directed brokerage option.[00:05:29] I then dig a little bit further and find out, okay, your 401k provider has signed an agreement that allows your 401k plan to work with an outside advisor or an outside consultant and through the use of some different third party money management firms that we work with,[00:05:46] they have that agreement to go in there. So what we're allowed to do, and by the way, you do have to sign a lot of paperwork for this. Okay? It's not just snap your fingers. You call Josh and say, Hey, do this for me. It's very official. But what it allows us to do is we are then granted access into the 401k to utilize this little brokerage option.[00:06:04] You open up this brokerage account, and we're allowed to access it, and then we can put the investments, other investment choices inside that brokerage account and manage it for you. So no different from if you gave me a check and I put it in a brokerage account, and we selected your list of investment options, and we managed it, and we traded in and out of things, and we rebalanced and did all the good things that we do.[00:06:25] We can do that within the brokerage account, inside your 401k. So now, instead of not getting advice and being limited to just a handful or two handfuls of funds through this brokerage account window, you move your money into there. And professional money managers can go in there, put together a custom portfolio for you and then actively manage it all within the confines of your 401k.[00:06:49] And you're not writing a separate check for it. Now to that end, it is not free. All the mutual funds have fees. There are still management fees. But there's also a number of those fees already in your 401k. However, it's just redirected towards the people managing your money instead of the old, instead of the current 401k, those investment options, a large portion of that is redirected over to the new money managers and professionals handling it for you.[00:07:13] Now I've seen cases where the total fees are the same as what the person was already paying inside the 401k. I've seen it where they're a little bit less I've seen when they're a little bit more, that's an individual thing that's based on how complex you want to get that's based on which one of the different money management firms we utilize and how their fees are set up.[00:07:30] So again, that's all variable, just like it is with any other advisor on the open market. However, it's contained inside the 401k. You're not writing a separate check, and oftentimes they try and make it where you're paying about the same, whether you are using an advisor or not within your 401k, with the fees.[00:07:45] Cause a lot of the time, you don't see those fees, especially as a participant, you can call and get the documents and dig into them and get the full fee disclosure. 99% of the public does not do that. But if you're someone, you're working. You have a 401k high balance growing balance. You're contributing to it, whatever.[00:08:04] And you want advice probably about a third of the companies out there now allow this and that number is growing it's growing exponentially and we can go in there and we can do that. I don't know how many advisors there are comfortable working in this space, but this is a real opportunity, and it's a real asset and allows you to get advice and a much better, much better situation.[00:08:26] And a much better outcome for what is, for most people, your largest investment and the largest investment that has been an untapped largest investment that people are not getting advice on. Now you can put together a custom portfolio and have it managed. It's really a great thing. It's really a win-win. It's going to keep growing.[00:08:43] It's going to become it is own. The planning category really has become that there used to be one or two companies that dominated it. Now I can think of four or five companies that are money management companies that work in that space that do an excellent job. And they're each offering some different flavors of things.[00:08:57] So you, if you work with an advisor who does that, you have many choices. Suppose your advisor doesn't do it. I'm not saying necessarily to switch to an advisor that does that, but maybe. You work with an advisor that can do that for you. Maybe you keep your old relationship and just the 401k part.[00:09:15] You can work with this other advisor, or maybe you want your advisor to start offering that if they're so good. But it should be offered. It's important. We can do a lot of things within that space and not ignore that asset. Now that's not every company. Some companies do not allow it. In fact, some companies don't even have publicly traded mutual funds in there.[00:09:34] They have their own version of it. Let's call it Acme company. They have the Acme large-cap value fund, or they have the Acme bond fund. So it's even more tightly controlled. But if you have the option. And with that, you should work with an advisor to do the best you can with whatever you have. But if you have the option to get the 401k advice that's useful and have a professional be able to go in there and help you manage it, it's a huge opportunity.[00:09:59] And I've seen numerous studies that show, especially the 401k when someone works with a professional so that your 401k is not on set it and forget it, but it's actually being managed, and someone's watching it. The result is much better. You point higher on average return than someone who ignores it.[00:10:18] So it's wonderful advice that you can get that can help you. Now, what I want to caution you, though, is like anything good. There are going to be people jumping into this space. They don't know what they're doing or just trying to get that piece of business from you and are not working with you as a whole.[00:10:34] So your 401k is great, but it still needs to fit into your overall strategy and what you're doing with your other investments. And what you're doing with your life. So I've had some people that look at it and say, Oh, this is what we're going to call the pre-roll over the market. Meaning, Oh, I can work with this person, their 401k.[00:10:50] And then when they leave their job or retired and I can roll that money over well, that's dinosaur attitude. I don't like that. It's not to you just doing that to your foot in the door to get the assets later. The 401k is its own category. It is its own asset. It's something that you should receive help with.[00:11:06] And someday, when you leave that job or retire, maybe it makes sense to roll a 401k over. Maybe it makes sense portion of it over. Maybe it makes no sense at all to roll it over. So I don't think someone should view it as, Oh, this is my way to get in the door, and then eventually I'll get the app. No.[00:11:20] This is a way to work with your clients and serve them and put them in a better position. And help them out, and it's its own standalone category. So when I'm saying, find someone who works in this space, it should be part of the entire picture. It should be part of an entire holistic view. It should not be someone who's just trying to get in the door who eventually wants to control those assets.[00:11:42] But in my humble opinion. This is the best 401k advice and service that you can get. And it is growing, and the niche is growing, and people are responding to it. And the American people need something like this. So it is a wonderful thing.[00:11:56] So if you have a 401k and you're not receiving help on it, Please look for help as always, feel free to contact my office. We can educate you on it. We can run the numbers. See if you are allowed to get that sort of assistance within your current 401k plan or not, but she got some help because this can be a major factor over the course of your life in your 401k or 403b space.[00:12:17]
7 minutes | Jul 31, 2021
The Giving Fund
Josh: Welcome to the making smart decisions podcast. I'm Josh Tirado. And today, we are covering donor-advised funds. Hold on, stop. Don't roll your eyes. Don't go to sleep. A donor-advised funds. It doesn't sound fun, right? Ooh. What's yeah, I'm gonna move on.[00:01:42] Don't move on. Listen to me for a second. . Donor-advised fund is the overreaching category. The one I use, they actually call it the giving fund. So the giving fund is a lot more fun. Let's dive into that just a little bit. This is actually important. A growing segment of the financial world is something called donor-advised funds, or in this case, the platform I use they've branded it, the giving fund.[00:02:07]It's a concept and its actual financial instrument. Cause that's the false certain rules. It is set up to enhance your giving to a charity, to a qualified charity, to a 501c3. The way it works is you set up this, and we call it a fund. It's actually the way I set it up as it's set up as a brokerage account.[00:02:27] With the investments in there, you get to pick the investments, but you put a certain amount of money into the fund, into the brokerage account, and that's your donation. Whatever you put in there, you're getting a tax break on, and as the rules currently stood before now, things could change.[00:02:40] Okay. But at this date and time, it was essentially unlimited the amount of money you could put in there. So you can take it. Five thousand fifty thousand five hundred thousand. You move it into your giving fund, your donor-advised fund, and you get the deduction on all the money you put in there. And then the money's in there, and the money grows, but to access the money that comes out of that has to be given to a qualified charity.[00:03:06] So it allows you to maintain control of the money, control the investments in the money and give it to whatever charity you want. It doesn't have to go to all the one charity doesn't have to go all at once. You can mix up what charity it goes to. You can change up and not give something that year. You can give more.[00:03:23] The next year, you can give lots of small gifts. You can give one big gift, whatever it is it's up to you. The bottom line is you get a massive tax deduction by doing it, especially if you know that you're going to give anyway. By doing this, you get the tax deduction, you get to control the investment, and you get to give it to the charity.[00:03:40] So the charity is getting the money. So that's a win for them. You are getting the tax breaks. So it's a win for you. And get this, people start to involve the whole family in it. So it might be, the parents might be the grandparents, whoever has some money puts in this fund, but then they.[00:03:54] Incorporate their kids. They bring their kids in. They bring their grandkids in to help them manage it and give them ideas about a good charity. What's a good cause that they want to support. And then it becomes a whole family thing, and they're passing on the virtue and the value of giving of taking pride in that of managing the money.[00:04:13] And those funds can be left in there. And the kids or grandkids can take it over. When the parents, grandparents, whoever passes away, the kids can take it over. It becomes a family legacy. So it could be the Smith family fund, and it could carry on for potential generations where that money's in there, and it's growing, and they're doing it out to different charities.[00:04:33] And the flexibility is amazing because if you're having a down year and you don't want to donate as much, you don't, you're having a great, you want to donate more, fine. You come across something that really touches you, and you want to give them more money. Whether it be a one-time gift or ongoing, you can do that. Also, you don't have to.[00:04:47] So there's great flexibility in it, but it teaches. Giving and teaches responsibility, and you can pass on those values in that legacy. So I encourage anyone that if they do this if they can share with their spouse, share it with their family, let their family know what's going on. And if they really want to incorporate the family into those decisions and you can really make a wonderful difference in your own lives and the lives of your favorite charity, as long as it's set up correctly And you haven't approved 501c3.[00:05:15] This money can go out from there. Now there are special bookkeeping compliance rules that have to happen behind the scenes. So you can't just open up some brokerage account and throw money in there and say, Oh, okay, this is what I'm doing. And I get a deduction. It doesn't work like that. It has to be set up correctly with the correct administrator following the correct rules and reporting to make this work.[00:05:35] So you still need to see a qualified professional set this up and have it work. And you still want to advise on it because it's an asset, and you want it to grow, and you want it to last as long as you can and enrich the lives of as many people as possible. So that's where I wanted to touch on the donor-advised fund part sounds neat, but in reality, call it.[00:05:53] It is it's. It's a giving fund. It's helping out a charity. It's creating a legacy. It's creating a culture of giving and adding value. And that's what it can do. And it's amazing. Cause nothing else like that exists. And many times people say, Oh, I want to leave a gift to a certain place. When I pass away, and that's wonderful, and we can help you do that.[00:06:13] We do that all the time, but I also advise people to look at this strategy as well. So the charity can use the money now and see how they're using it and the good work they're doing. And you don't have to wait to pass away, leave the money. You can still do that. But give some money now, so you can see how they're using it.[00:06:32] You can enjoy it. You can feel that warmth from giving. It's often said that the person doing the giving receives more than the person receiving the gift. So if you can do some of that during your lifetime and enjoy it and see the fruits of that labor and leave a gift in the end, this is hands down the best way to do it.[00:06:49] So if you have any charitable inclination. I advise you to research it or contact us to educate you and set something up in the realm of donor-advised funds.
9 minutes | Jul 31, 2021
Emotional sense over financial sense
Josh: Welcome to the making smart decisions podcast. This is Josh Tirado, and today we are covering things that don't make financial sense, but they make wonderful sense for you. So I'm calling this version this snippet emotional sense over financial sense.[00:01:46] And this is going to be a brief storytime, but follow me on this for just a minute. Go with me. Here's my thought on this. We need to follow some rules that make financial sense to make you the most money to protect you. Take care of yourself. However, emotionally, they're not the best thing that's suited for you.[00:02:08] They don't allow you to sleep at night. They don't make you feel comfortable. They're not good. And I'm going to buck the system a little bit and instead of saying, suck it up and do this and make it through the hard times. And. No, emotionally, your financial plan and investments have to make as much sense as it does financially.[00:02:26] Otherwise, you're never going to be comfortable. You're never going to sleep well at night. You're not going to buy into it. And it's going to affect your relationship with your financial advisor, where you need to have trust and a two-way street. So let me tell you a couple of stories where I'm just going to illustrate the emotional sense of our financial sense and that this is how I work with my clients, that we have to be emotionally.[00:02:47]Comfortable as well as financially comfortable. Okay. So the first client we're going to call him John that's because his name is actually John, this is a real client on a phone call with John just a week ago. And John says to me, Hey, Josh, I'm thinking about contributing to my 401k.[00:03:04] I haven't up to this point. I'm thinking about starting my 401k. Would that help me see, it's a good idea. And I'm just like, okay, hold on one second. Let me go back through my notes. Now when I was younger, I used to think, Oh, I have a great memory. You don't have to write anything down. One, you need to write everything down.[00:03:18]And two, I heard a saying that a short pencil is better than a long memory. And the more notes you take, it's better for a myriad of reasons, but we're not going to get into that. I go back over my notes and go back to John and John. The reason you haven't done your 401k, and we've been doing other things, and other strategies, are that your employer doesn't offer a match.[00:03:37] And I'm a big proponent of you do the 401k to get the match because that's free [00:03:41] money [00:03:41] Josh: beyond that. You can do some other things that depending on the situation, are more advantageous than a 401k. And I say, John, your employer, doesn't offer a match. What's going on? Did it, did he change? And Jen goes, no, there's still no match, but I think I want to do a 401k.[00:03:56] I'm like, okay. Why is that? And then that's when John breaks down for me now. John has excellent discipline. He's a good saver. Good family-man. Great guy. But he says to me it's not so much about the investments. You can help me select the investments there. I know there are good investment choices, and yes, it's great that it's tax-deferred.[00:04:15] I know there's no match. He goes, but here's the bottom line. They're taking it out of my paycheck. It comes out every two weeks, and they contribute. And I don't have to think about it because it's essentially forced savings. Yes. I'm very used to taking my paycheck and allocating money, different things.[00:04:31] But if I don't see it, I'm not worried about it. It's one less thing off my to-do list, and it would be good. So at that point, I said yeah, let's do your 401k then, John because it made the most sense for him. He didn't have to worry about it. It was set up automatically. It wasn't going to hurt him.[00:04:49] Was there something else we could have done that was maybe when to be better under some circumstances? Yes. But if he was going to have a hard time doing it or it wasn't going to get done, what's the point of that? So the fact that John could do it automatically, we jumped on board. He started doing his 401k.[00:05:05] And even though there's no match. He's happy. We're putting more money aside. It's easier on him—so emotional sense over financial sense that worked wonderfully. Let's move on to another client. And I actually have a couple of clients like this, their savings accounts, and they're very blessed in this respect, but their savings accounts are huge.[00:05:23] They routinely put money in their savings accounts. Every paycheck, they get bonuses from work. It goes into the savings account. And at some point, I have to say them, okay, once we get over a certain level, you need to not put any more in savings. We need to reallocate it to something else because you have too much in savings.[00:05:38] Most people have too little. They have too much. But where I say three months worth of living expenses, six months worth of living expenses. We're talking that they have a year, two years' worth of living expenses, put aside in savings and then younger people. And that money is essentially lazy because it should be invested in working for them.[00:05:56] So I explained to them, they understand that concept. However, we set their threshold much, much higher. Instead of saying three months of emergency money, six months of emergency money, we set it close to a year worth of emergency money. We might set it at a certain dollar number that makes no sense, but having that much money, is there a cushion, is there a safety net?[00:06:15] It lets them sleep at night. Is that money earning anything it's not, or it's earning a tiny thing? Could it be earning a lot more and working smarter and harder for them? Absolutely. But then they're not going to be comfortable. So we leave their savings much higher than it needs to be because it allows them that comfort level to invest their other money, maybe a little bit more aggressively and where it needs to be.[00:06:38]So emotional sense over financial sense. The last example I want to give is some people that are. Bent on paying off their mortgage. That is their main goal. I want to pay them a mortgage. I don't want to have a mortgage. And I explained to them right now with interest rates on a mortgage 2% and change. It is so low.[00:06:57] Have the mortgage use other people's money? And use your money for something else. Don't tie it up in the house. There's a lot of things concerning appreciating versus depreciating assets and liquidity of your money. And there are a million things I don't want to go down that rabbit hole, but the bottom line is for many people with how low the interest rates are, where they could buy a refinance.[00:07:16] It doesn't make sense to pay off the house. You can do something much better with the money. I have a lot of clients who wanna pay off the house. That's their goal. A lot of them had a lot of debt when they were young. They worked hard to get out of the debt. This is our last big debt. This is our last big goal.[00:07:29] If I get this paid off, I'm going to feel really good. And it's a goal I want to work towards. So you know what? We put together a plan, and we're working with them to pay off the mortgage. And every time they say to me, I know it's not the smartest thing, but I have to do it. And I tell them, don't apologize, your plant, it's your life.[00:07:45] If that's what's coming both of you and we can still accomplish your other goals, then you know what, it's not foolish. Pay it off. Is it the smartest thing from a practical financial standpoint? Not necessarily, but emotionally they want to get it done. So we work with them to pay off that mortgage.[00:08:02] Those are just three examples, and I'm sure there are things in your own life. I know people who still like to spend a bunch of money getting their fancy mocha, super frappe, a latte thing every day. I know many people in the national media say no, don't do that.[00:08:15] You could save that money every day. And over the course of your lifetime, it'll add up, and you'll have X number of additional dollars when you retire. Yeah, that's true. But you know what, if that's it, that's the little bright spot in your day. That's the little perk during your lunch break. That's the, to get you going in the morning.[00:08:28]Then that latte buys you a whole lot of joy every day for the next 30 or 40 years. And yeah, you could have a few more bucks when you're 70 or 80, but if you're doing what you should do and you don't need those extra few bucks, enjoy your life. Ha had the latte. So again, emotional sense and financial sense.[00:08:45] They need to work together. And that's how we work with clients. And we really feel that's very important because you need to be comfortable and you need to know what you're doing. I know why you're doing it.
8 minutes | Jul 31, 2021
20 MSD tactical practicalJosh: Welcome to the making smart decisions podcast. I'm your host, Josh Tirado. And today we will be briefly discussing our proprietary investment strategy called practical tactical. This is something we came up with a number of years ago, and this is the investment strategy. We follow at JT Financial Group. This is our take on what historically has been called a core and satellite strategy.[00:01:48] So the practical part is the base is the core of the investment account is the core of the structure of the foundation. The tactical part is the overlay we put on top of the core on top of the base, where we have some more advanced strategies that usually involve more risk. Strategies that could involve a go-anywhere type of investment.[00:02:10] We're not limited to one certain category, one certain country, one certain place some strategies that might also involve market timing. Not in the sense of, Oh, I can time the market and it works great. No more of a sector rotation-type strategy as to where we are in the economic cycle and trying to invest.[00:02:26]In concert with that. The tactical part is where I feel. We add a lot of value. It's where people come in. It's where individual research comes in. It's where different investment theories come in. And that's where we're adding the value. That's where we're adding the additional return. So the practical part, our base is often more traditional investments, stocks, bonds, ETFs mutual funds, and it's the core holding.[00:02:51] So we know long-term that part's going to be a little, we're going to rebalance, but it's going to be a little bit more passive. And we know the average returns we should probably get for each category in the market. Then we add value. And a lot of people can view it as adding beta which is the additional return.[00:03:08] So how we diversify from the market and how we offer more value, something that's more proactive instead of reactive is the tactical part. So that's our overlap. So it's not just, Oh, I need to hold this much in these different asset categories. It's okay. We're going to hold this much in these asset categories, but we think this ETF is going to perhaps outperform these mutual funds can outperform these stocks are poised to outperform.[00:03:35] So we're trying to add value to the core. But then on top of that, in addition to that, we're also adding value from a tactical standpoint, with what are we doing? There are certain money managers we use who have the edict of wherever you think the best value is. The old deal phrase where the juice is worth the squeeze and that could be in virtually any asset category or anywhere.[00:03:57] And we give them a small amount of money, but that small amount of money I liken to adding salt to the soup. It doesn't take a lot to make a very big difference. So the tactical part can be a very small part, a very small portion of the overall portfolio. But by doing that tactical part, if that strategy doesn't work great, it doesn't massively impact the portfolio.[00:04:21] But if that strategy does well, to use a sports analogy, they're hitting a home run, it can massively impact the overall portfolio in a positive way to the good. So our practical tactical is that we are taking care of our base. We're not taking unnecessary risks. We're trying to get the best possible options.[00:04:40] Within our base. And then we're adding the tactical part on top, again, the best possible option, but we're adding tactical on top of that to get some more value. And that has been our proprietary strategy for a long time. So let me just say to anyone listening to this, if you're, if you'd like this, if you're contemplating working with us, there are two groups of people on either end of that.[00:05:02] That spectrum that I know is not really a great fit for us. And we've learned that over the years the person wants the hot stock tip and wants to constantly be jumping into the market, trying to time something. And again, what's the latest hot stock tip hot idea. That is not what we're about.[00:05:19] We are planning first and taking the appropriate amount of risk necessary to get the returns necessary to reach our goals. We don't see value in taking additional risks to get additional returns just for the sake of making more money. If you don't need that money to achieve your goals, you're taking on a lot of unnecessary risks.[00:05:37] And your risk-reward proposition starts to go downhill rapidly as you're trying to get more and more return because you're taking on exponentially more risk for a little bit of return. So we view the appropriate amount of risk to get the appropriate results to achieve your goals. So the person who is very stock tip oriented very, Hey, I want to get the most money every single time.[00:06:00] I want 20% all the time, regardless of risk. That's not the space we're in. That person would be better off going someplace else. Conversely, on the other end, this, someone who is very passive when it comes to investing and just wants to invest in an index fund and say, okay, I'm going to hold that for the next 50 or 60 years.[00:06:22] And I think I know what the market's going to average amount, what my return is going to be. That is also not space where you're in, because if you're just going to buy one thing. And ride the ups and downs and hold onto it for 40, 50, 60 years. You need to keep your fees as low as possible. So that way it's not pulling down the performance.[00:06:42] And you were just strictly trying to go with the average and see what the average is. Our take is more in the middle where we do have some that are passive or a little more passive. That's our core. And then we do have tactical, which is hedging a little bit more on the other end towards, Hey, we're taking more risks.[00:06:57] We're trying some different things, but it's a measured blend to get the results we're looking for. If you think about the boat metaphor, the boat analogy. If you're out there sailing and everything's going along just fine, you keep sailing. The wind stops and our strategy. If the wind stops, we take to the oars and we start paddling to keep us going towards our goal.[00:07:19] So if the wind's blowing, we ride that out. The wind's not blowing. We are manually doing things and we are using our oars to advance our cause. And that's what we were doing all the time. No matter what, everything should work hard for you. No lazy money. The tactical practical works the absolute best. If those concepts make sense to you, that you want someone always working for you and you like the idea of we're not taking a necessary risk, but we're trying to get you the best return and the best risk-reward port.[00:07:49]Profile then that is our specialty. That is what we've been doing for 20 plus years. That is what we do very well. And it dovetails in with the overall financial planning that we do for every client. And it works very well. So if that sounds like you, we would be a good fit and we can further explain practical tactical to you and show you how it works in a real-world scenario.
8 minutes | Jul 30, 2021
Everyone has a plan until you get punched in the mouth
Josh: Welcome to the making smart decisions podcast. I'm Josh Toronto. And today, we're opening with a quote from Mike Tyson. Mike Tyson famously said everyone has a plan until they get punched in the mouth. This was in response to a reporter's question regarding whether or not he was worried about fighting Evander Holyfield.[00:01:47] There's a lot of hype leading up to that fight. Holyfield's camp kept promoting. Hey, we have a plan. To beat iron Mike Tyson. And up until that point, he was unstoppable. After that fight, he was still unstoppable, but his famous quote about being punched in the mouth resonates with many people. I've also heard it said in the military with generals that no plan survives the battlefield.[00:02:07] I want to go with that and take it as a modern-day spin on. It's not how many times you get knocked down. It's how many times you get up. Let me unpack that a little bit, what I'm viewing right now, what I see in the market, and what I'm hearing from people. And seeing people do not assume my clients.[00:02:22]But other people is this issue with people, get scared. People get punched in the mouth, bad things happen. Things don't go according to plan, but this is life. And I feel as though we have to roll with the punches. I got licensed. I became fully licensed, and I was advising clients as far back as when I was 20.[00:02:43] And that was between my sophomore and junior year of college now, right when I graduated college in 2000, which he got officially makes me feel really old in 2000, 2001, the tech bubble burst. And that affected a lot of people's investments. Now my clients were properly positioned, so it really wasn't that bad on my end, but I saw many people in the market where that was a big issue.[00:03:02] People got scared. They lost money, knee jerk response. They pulled out of the market, and it took them a very long time to get comfortable again and go back into the market. And consequently, they missed a lot of opportunities to make money—a lot of opportunities with the market's rebound. A lot of opportunities to say I'm not too fond of this sector; this scares me.[00:03:21] I don't like what happened. Let's go into something else. Instead of doing that, they just backed out. They pulled out, and they got punched in the mouth. And they got scared, and they ran, and it affected their money long-term. The same thing happened in 08' and 09'. Now don't get me wrong—the greatest downturn, possibly the greatest downturn in history.[00:03:41] We're very close to having a global economic meltdown. It was a perfect storm of a lot of bad things. But a lot of people got scared, and a lot of people ran for the Hills. Now, if you're part of your strategy that you planned out is at certain points that it's okay to move your investments to cash or go to safer investments or not be in the market or whatever your plan is.[00:04:00] That's great. But a lot of people didn't have a plan. Many people lost money, got scared, jumped out of the market, essentially locking in those losses. And to this day, I am referred to potential new clients. When I meet them, they still have money sitting in cash on the sidelines, going back to 2008 and 2009.[00:04:22] It is now 2021. And that money has been sitting there in cash. It didn't make anything, and it didn't recover. They moved it there. They locked in their losses. It's a problem that doesn't need to be you. That shouldn't be you. Things happen. I have one particular client. We'll call him Joe years ago, and we were on track where he was saving money investing.[00:04:44] We were all set up. He was going to retire early, and it turned out that Joe had a brain tumor. Joe eventually had surgery. Joe survived. However, it knocked him back by a couple of years until he went through full recovery and went back to work. So now we aren't trying to make up ground. From what happened to him years ago, but we're going to be okay.[00:05:07] We have a plan. Joe's working on it. We're doing other things. It'll be okay. He got punched in the mouth. He got back up. He kept going, ever run into people where, Hey, I'm five years out from retirement. This is going to be awesome. And literally, the next week, they find out that they're closing down their location for their company.[00:05:28] And they're not being offered a package, and they're being shown the door, and suddenly they're no longer five years out from retirement and everything. They were counting on. It didn't happen. And companies suspend bonuses sometimes, and bad things happen, but don't give up. You can have your moment.[00:05:45] I understand things stink, and you have your little pity party, but then you get back up. Because that's the value of what we do. We continue to move forward. We change the plan. There's a reason I meet with my client, my average client, three times a year because, as I've often said, we're going to a destination.[00:06:06] If your turn by turn instructions, have you veer off just a little bit, or if you're a big ship in the sea and you start going astray by just a single degree. It doesn't take very long before. You're very far off course. So we meet three times a year. We review stuff regularly.[00:06:23] Things happen, people lose jobs. The market goes up and down. People get divorced. There's an illness; people decide one day, I don't want to retire and go to the beach. I want to travel the world. I want to go to the mountains. I want to do something totally different. Their kids move across the country, and suddenly I'm not staying here anymore.[00:06:40]The house has paid off. I want to move cross country things happen. So the importance of planning and you keep going, and you refocus, and you work on it, and you do well. And that is some timeless advice, but I want to say to anyone out there who's going through a rough patch or something negative happened.[00:06:58] Don't stay down. It happens. She gets punched in the mouth. You alter your plans. You move forward. The worst thing you can do is quit. Once you quit. And once you give up, you're locking in those losses. Nothing good is going to happen from that time forward. As a mindset, [00:07:13] let's focus on the understanding that our greatest laid plans need to change continuously because this is real life, and things are changing all the time.[00:07:23]
4 minutes | Mar 2, 2021
The Emergency Fund
Josh: Hi, I'm Josh Tirado. And on this episode of Making Smart Decisions Podcast, we are going to touch on the emergency fund. What is it in? Do you need one? Most financial advice starts with the basis of you should have an emergency fund. And a lot of people just view that as a savings type account and yes, you should absolutely have that it might seem pretty simple, but let's dive down into that a little bit deeper when it comes to the emergency fund, the old rule of thumb was you should have put aside three months worth of living expenses.[00:02:12] Not three months worth of your salary, the three months worth of your bills, and your living expenses to get you through something tough[00:02:19] Over time, what I tell my clients is that has evolved and I recommend a good starting point is three months' worth of living expenses. Ideally, you want to get up to about six months worth of living expenses. The reason being if you suffer a sickness or an injury or some other sort of serious issue, and you cannot work, studies show that most people are back to work within six months. If you could have six months' worth of living expenses, put aside most illnesses and injuries that you'll be able to recover from them within six months and get back to them.[00:02:51]So I think the emergency fund is important. I think you should shoot for three months' worth of living expenses, build up to six months worth of living expenses. And then depending on your situation, take it from there. More is not bad in that sort of situation. But also bear in mind. It doesn't just have to be sitting there in a savings account.[00:03:08] It could be invested in something very conservative, earning you more money than a savings account, and still be relatively liquid where we can get a transferred back into your bank account or into your hands within. 24 48, 36 hours. So if there really is an emergency, you can still have your hands on the money within a day or two.[00:03:29] It doesn't have to be where you need that money that day. So for many of my more conservative clients, when their emergency fund continues to grow, we will keep a portion of it in savings or checking as cash. And the rest of it, we do start to siphon it off into an investment account where they can earn something on it, and it is still.[00:03:48]Very accessible and relatively liquid. do think the emergency fund is a basis for very many people. I think you just start with that. And I think the three to six months of living expenses is also a good rule of thumb.
20 minutes | Feb 23, 2021
What questions to ask when interviewing a financial advisor
You're listening to making smart decisions with Josh Tirado. Today's topic is what questions to ask when you're interviewing a financial advisor. So essentially, I'm giving you the questions to ask when you're interviewing me. Here's what to ask me when I'm trying out for the job of being your advisor; I started this off because this is a very, very often asked question on Google. And if you Google, what questions to ask an advisor or how do you interview a potential advisor money manager, There are an absolute ton of questions out there. What I find interesting is most of them, especially at the top of the search, are very operational in nature.[00:02:20] They're having to ask your advisor questions, such as what clearing firm are they using for the investments. What is this fee? What is that fee? what is the timeframe to handle X, Y, or Z? How are you handling these options? But nowhere are they going into asking about what is the person's investment philosophy? What value you add the does the firm offer?[00:02:42] Do they have any unique value proposition? How often are they going to be in touch with you as a client? Are they going to be conducive to your needs or not? but rather than asking questions to form a relationship.[00:02:53] And to truly interview the person that you're to going to be trusting with your money. They're asking things that are very operational, very basic in nature that I really don't think help you make a decision or gain a comfort level to work with that professional. The other issue I have with a number of questions or questionnaires out there. Does he give me the questions to ask? And then they don't tell you what the answer should be. So what good does the questionnaire have if you ask your advisor all of these questions without getting the answers? Then you have no point of reference.[00:03:22] If the answers are a quote, unquote, good or bad, or right for you and your needs. So, what I'm going to tend to do today is give you a number of what I think are valuable questions, my answers to those questions and how it relates to you[00:03:38], number one. Are you a fiduciary? My answer is yes. And I think the answer should be unequivocal. Yes. A fiduciary legally must put their client's financial interests ahead of their own. And not all financial advisors are fiduciary. The last two people that have interviewed me to become their financial advisor.[00:03:58] The number one question they asked me was, are you a fiduciary? in this day and age and moving forward, I think the answer has to be yes. Why would you hire a professional who wasn't legally required to put your interests ahead of their own? I mean, that's, that's the whole reason you need trust behind it.[00:04:12] But I think that's the right step forward in starting that conversation. Are you a fiduciary? My answer is yes. I think the answer should be yes. Question two and question three, roll into another. Let me give you both questions and then tell you how those answers for most advisors will probably overlap.[00:04:31] And the next question is, how are you compensated for your services? And the fourth question is, do you get paid by anyone other than your clients? So this goes into there's a variety of ways. Advisors can be compensated; they can be compensated via commission. They can be fee-only where they're just charging a fee to manage your money, or they're charging a fee for the advice, the financial. [00:04:53] planning [00:04:54] Josh: or, in my case, I'm, fee-based I say fee-based because 80-90% of my practice is based around the fees for managing money and the fees.[00:05:05] First and foremost, for doing the financial planning for my clients. There are still some investment options out there that longterm are cheaper for you as the client to do on a commission basis. Then on a fee basis. And one of the big pushes right now, in the compliance-world, related to my field, is to try and make that a level playing field that if you're charging a fee, at some point, you stopped the fees of the fees equal to what, the commission would be.[00:05:31] Or the commission structure is more in line with what a fee structure would be. And I think that's, that is excellent. That's a great move forward, but there's still. Some investment strategies and some investments out there that just by the nature of how they're structured, presently in 2020, are not offered on a fee platform.[00:05:51] They're only offered in a commission format. The next question is, are you paid by anyone other than your clients? Again, that's what fits into are you paid commissions by some company as opposed to the fee?[00:06:05] So I really think these two questions go to go together. The other followup is if you're paying a fee, what are the terms of the fee you want to know? Are you paying an hourly basis? Are they going to bill you every time you meet for the hours they spent with you and behind the scenes, are you paying quarterly?[00:06:23] Are you paying semiannual? Are you paying annually? What is the structure? Does it fit, with your needs and your budget? And most importantly, based on the fee you're paying, are you getting the services that you need in the want for what you're paying? I don't need to have a discussion with you about value.[00:06:42] You understand the value, but oftentimes "You get what you pay for" really does resonate, even in this industry. [00:06:51] The next question. Is what is your investment philosophy or approach? Now? I think this is an important question. I also think it's kind of a loaded question. As things change over time, your needs are going to change. Perhaps your advisor's philosophies are going to change. Not only because they've had a change of heart, but they're adapting to the environment and what's going on around you.[00:07:16] There's an old saying that everyone's strategy works right up until it doesn't. Mike Tyson often said everyone has a plan until they get punched in the mouth. Things change. The world changes rapidly. So there's nothing wrong with adjusting your strategy. If anything, I think that's a smart move, but you do want to know what their basic philosophy and approaches. If someone's very aggressive and you're very conservative, you're not going to get along.[00:07:39] It is not going to be harmonious—type practice. So ask him about their philosophy and approach, but understand that that can change over time. And as it changes, that's a conversation they should have with you, but don't be alarmed. Don't hold it against them. If it's changing, it's probably changing for the right reasons.[00:07:56] In my case, we've, we've trademarked an approach that we call practical tactical. The practical part being is there are a core investment philosophy and a core of stable investment holdings that, that we view the base of your strategy. It can be in different accounts. It can be different investment products, different investment types, but we have a core.[00:08:19] The tactical part is then the overlay. I liken it to adding seasoning to a soup. It doesn't take a whole lot to change the flavor and add a whole lot of taste to it.[00:08:29] So our strategy is practical. Tactical. Some places use something similar. They referred to it as core and satellite. some firms refer to it as just being properly diversified. It's all in how they structure it, but there should be some sort of philosophy.[00:08:44] Next question. Do you specialize in certain types of clients now while this is not necessary? It is really nice. If you're in a particular situation in your, in your financial journey in your life, or you work in a particular field or for a particular company, and that advisor specializes in that field, that company, or your individual needs, Now I've heard that some people have said to them, other advisors I met, I said, Oh, who is your ideal client?[00:09:11] What markets do you serve? And they look at me and say something like, Oh, I focus on serving women. I handle the female market. I'm like, okay, that's great. That's still the majority of the population of the country. So when I'm looking at this, I'm saying. Are you doing financial planning for retirement?[00:09:30] Are you doing financial planning for college? Are you just focused on managing the investments? Are you doing a full plan for someone? Retirement planning. A lot of people focus on the accumulation phase. There are far fewer that focus on the distribution phase. Once you retire, making that money last for you as long as possible.[00:09:49] So there are different specialties. So definitely ask what they specialize in, what type of clients they'd like to work with for me when I look at what type of clients like to work with are nice people, fun people. When I ask my clients for referrals or my clients give me referrals, they notice in somebody in.[00:10:06] Then I'm going to enjoy working. They know I'm not the guy that's calling somebody with a hot stock tip. They know, and the person that's there, that's reliable, and we're doing sound planning. . So find out what sort of people, your potential advisor specializing.[00:10:22] This goes right into the next question. What services do you provide your clients? Well, depending on what services you provide, those services are just going to support the type of client or the specialty that you work in. The next question is, do you have any minimums for me to work with your firm.[00:10:38] Do I need to bring over a certain level of assets or a certain amount of money to invest with you? This is especially popular. If the firm is charging fees based on the level of assets, this is less popular, or the minimums can be reduced if you're doing holistic planning. So I'm doing a financial plan with someone they're paying me for the time.[00:10:57] To help sit down with them, review their goals and objectives, clarify them, and develop a plan to reach them. Then I give them advice on how to reach those goals. It has nothing to do with how much money they're giving me to manage. So there's a distinct difference there. Do I have a minimum? Does my firm have a hard minimum?[00:11:17] No, we do not. However, on my website, you will see that we have a suggested level of household income, and we have a suggested minimum level of assets. That is something because some of the more advanced planning techniques that we use do require a certain level of assets or income to qualify or to participate in them.[00:11:34] So it is a little bit easier, and we can provide more value to the client if we're at certain levels, but we do not have a hard minimum. Next question. How often will we meet? Some people want to meet annual semiannual, quarterly. Some people want to have, and this flows right into the next one. How often will I hear from you?[00:11:54] Meaning the advisor and how so the meeting and how come I hear from you? Kind of go hand in hand. over the years, I've tried semiannual. I've tried quarterly; quarterly seems to be too often. And for people that are very busy, it's a lot to meet quarterly. Semi-annual. It is never quite enough to really review your money only twice a year.[00:12:16] So it might seem odd, but the trifecta is the ideal number of meetings for my clients that I found over the past 20 years. So we will meet three times a year. Oftentimes two of those are in person. One of those is virtual. They will receive regular emails from me, newsletters from my, phone calls, if something's urgent, of course, or even text messages, if something's urgent.[00:12:39] And I encourage them to let me know whenever there's a major change in their life at work promotion, demotion bonus, someone gets married, someone passes away, someone's born relocation, whatever it is, I want them to reach out. So you're going, we have three formal meetings a year. The communication is ongoing and.[00:12:58] That two-way communication is very important. So you can constantly adjust the plan and make those turn by turn directions and change it for the client to get the best possible outcome.[00:13:09]Another question, why did your last client hire you? And that feeds right into the next question of what do your clients like about working with you? I feel those are two sides of the same coin because what the clients like is going to be a reason why they hired you. This is important, and this is the spot where the advisor can give you their mission statement, their value proposition, or whatever they think differentiates them from other advisors.[00:13:38] In my case, The top three things that clients have resonated with when we've researched with the clients is why they hired us. is our focus. The three main focuses are the first education. first and foremost, we are educating them.[00:13:51] So that way, they're comfortable. They sleep at night; they understand what we're doing. But second, the educational part is also for me constantly taking classes constantly going to a different symposium, a different meeting. Researching different investment products, researching different investment ideas, constantly trying to learn and bring them best.[00:14:10][00:14:10] Now the followup of that is we are never pushing. We are trying to introduce ideas. We're trying to add value. If the client's not comfortable with it, they're not comfortable with it. I only want the things that align with their values when they're comfortable with it. So we'll share ideas if they don't want to do it.[00:14:26] That is fine. We'll find another way to do it. Or. We'll just put it on the sidelines in perpetuity, or we're constantly trying to often the best of what's out there and then let them make the decision if they're comfortable or not. And then third, I want to say we're here and we treat clients like family.[00:14:45] It may not be the family that they were born into. It may be the family that they want to have the desire, but we treat the clients like family, and we treat them very well. So what brings them in the door is the education. On both sides, the ongoing ideas and options and strategies to constantly improve what they're doing and then the being there for them and treating them like family.[00:15:08] And I really hope that you get something similar to that when you speak to whatever advisor you're interviewing. Next question. How do you measure success with your clients? And here are a couple of examples of client's ability to achieve their goals. How a client feels about their money and how much money they've made or lost in the past year or over the years, you need to make sure that how the advisor view success is the same way you're viewing success.[00:15:37] So the two of you are aligned for me. It's about the clients achieving their goals and reaching milestones along the way that we know they're on pace to achieve their goals. Of course, the return on their money matters quite a bit, but again, There should not be looked at in a small part or in a fishbowl because some client comes to me and says, for instance, Oh, how did the, what was the return on this investment in the last quarter?[00:16:03] Well, that investment strategy might not have performed well in the last quarter, but might not have been designed to then investment strategy. Might've worked really, really well over the past three or four years, but the last quarter to economically, that strategy was not set up for success. So I advise that if you're looking at the returns on the money, It should be a portion of the overall value that the advisor brings.[00:16:26] But look at it more longterm a year, two years, five years, 10 years, and go through a couple of economic cycles because the short term for better or worse can be very, very misleading. The experience also comes into play there. Have they been through downturns? Have they been through recessions? Have they been through depressions?[00:16:45] Have they been through a pandemic? How have they helped guide their clients? So you also have that level of not just how they are viewing success. But again, that feeds into the other question of how often are they in touch with you? Are their goals aligned with yours? The next is, are there any conflicts of interest I should be aware of?[00:17:04], for instance, and this was cited in an article as an example of the conflict of interest that one adviser might charge a higher fee for a certain service than another advisor. Well, each advisor has different strengths and weaknesses and sets the practice up the way they want.[00:17:21] They might be charging more than a different advisor because they're actually much better at that service or that specialty. They might be charging more because they're located in an expensive metropolitan area, as opposed to a very rural area. It's not necessarily a bad thing, but that could be considered a conflict of interest.[00:17:40] So a fiduciary has to give you a copy of certain disclosure documents, and it will list if there are any conflicts. And if there are any, how they address them, how they avoid them[00:17:51] next question is, how does your team work together? To work with me and then feeds in the next one up. Will you coordinate your advice with my tax situation? how our team works with the client and especially when it comes to tax advice, is we are open to working with. All of the client's professionals, we would ideally like to be the leader of the financial team and help to organize things.[00:18:14] But quite often, the client already has a CPA in place. The client already has an attorney in place. The client oftentimes already has a banking relationship in place, and we need to work with all of them to achieve the ultimate goal, so coordinating with the other professionals in their lives.[00:18:31] It Is absolutely paramount. And we incorporate all members of the team. If they don't have a certain member, they don't have an accountant, or they don't have an attorney.[00:18:41] We can help them in finding one, but we definitely want to have an open line of communication with all of their professionals. So when it comes to, how do you coordinate their tax situation? Other things we work with all those other advisors. The final question is what happens next. So you're having the meeting with the advisor, and you like [00:19:00] him [00:19:00] Josh: or her.[00:19:01] And for instance, in my firm, we do an introductory call. Some people call it a discovery meeting. Some people call it a right fit, meeting some to call an introductory meeting, but there's a 20 to 30-minute phone conversation. First, I don't ask them to send over statements or any personal information. And we have a conversation about whether or not we're a good fit. And if we'd like to work with one another and we take it from there and from there, or the advisors should be able to list.[00:19:23] Next steps. Ideally, there's a timeline, but they can list. Okay. Here's what we're going to cover in our next meeting or meeting after that. Here's when we'll sign some documents, here's when everything will be set up, here's when we can review it together and make sure you're comfortable, but they should be able to give you what the experience is going to look like and the timeline you can follow.[00:19:41]. And that is the most comprehensive list of questions I was able to find that I think it gives you some real insight as to whether or not the relationship will be successful and whether or not you're making a smart decision in hiring that advisor.
10 minutes | Feb 16, 2021
The Back Door Roth IRA
You're listening to making smart decisions with Josh Tirado. Today's topic is the backdoor Roth IRA. In the last year to the backdoor Roth IRA, concept has gained popularity. If you Google it, you will find a number of articles online, explaining and detailing the backdoor Roth IRA. And also a lot of times it's.[00:02:04] Heavily sprinkled with the author's opinion on the strategy. So I want to talk today about some of the rules concerning the backdoor Roth IRA, how you could utilize it. If it's something that is for you or not, and what you want to consider. First and foremost, let me say that consulting with your professional.[00:02:23] When it comes to the tour Roth IRA, whether using a backdoor Roth IRA or doing some sort of Roth IRA conversion, you definitely have to speak with your professional because we have software. We can run multiple scenarios and compare and contrast and see if this is the right strategy for you. For some people, it's a home run. For some people, it should really be a no go.[00:02:44] And there is a large amount of a gray area. But a lot of it's dependent upon your strategy. And what I don't like is a lot of the articles I'm finding online concerning the backdoor Roth IRA concept, as I said before, heavily influenced by the author's opinion and a lot of the opinions for or against the concept.[00:03:02] Are based on some outlier factors and really what would not have applied to the majority of people out there, but what would apply to the minority. So they're looking more for the exception than the rule. the Roth IRA, there are some limitations to contribute to a Roth IRA.[00:03:21] There is an income limitation. [00:03:23]For instance, in 2019, if you are a single head of household person filing your taxes. If you make less than 122,000 modified adjusted gross income, you can contribute a maximum of $6,000 a year to Roth IRA. If you're age 50 or older, you can contribute $7,000. That's been adjusted in the year 2020. You have to make less than 124,000 modified adjusted gross income to maximize your contribution.[00:03:53] Above 124,000 up to 139. The amount you can contribute is reduced and above 139,000. No contribution is allowed. If you are married and filing jointly, the number that you have to make is less than 196,000 from 196 to 206,000; your contributions are reduced a to 6 and above no contribution is allowed at all above that.[00:04:16]Also, the contributions are available. You can make them up to the following year. So say you wanna make a 20, 20 contribution and you're now in 2021, cause you wanted to see how your income is going to look to see if you're going to be allowed to contribute or not. You can still make a 2020 contribution in the year 2021.[00:04:32] It just simply has to be done earlier than April 15th or whenever your taxes are filed. And before that, you can make a contribution for the preceding year. Again. It's something to 6,000 a year or 7,000 a year for age 50 or older. And you do have to show that you made some income.[00:04:49]also you can be, you can, there are different rules concerning the spouse, whether or not the spouse is working, the spouse can also potentially contribute. So what we're looking at here are people that would like to do a Roth IRA, but make, and I'm doing air quotes that are making too much money to be able to contribute to one.[00:05:05] So this concept of a backdoor Roth IRA has become very popular. there are a few methods. The two most popular are if you're working and you're enrolled in a 401K plan, and your 401k offers a Roth 401k option, you can utilize that regardless of your income, you can contribute to the Roth portion of a 401k.[00:05:25] And it's also not subject to the six or $7,000 limit. It's subject to the normal 401k contribution limits. So you can put even more money into it. That's pretty straightforward. The other concept is to contribute to a traditional IRA, the six or $7,000. And either you can do it right after you contribute, or you can wait and let it build-up, but you contribute to a regular IRA, traditional IRA, and then you do a conversion and convert the traditional IRA over to a Roth IRA.[00:05:56] The conversion is not subject to your income. So if your income is above those thresholds, you can always convert a traditional line. At least the way the law stands. Currently, . you can convert a traditional IRA to a Roth IRA. Now the main difference here is traditional IRA is pretax money where your contributions tax-deductible, a Roth IRA is using after you've paid tax post-tax money.[00:06:21] So there's no deduction. And if you make a contribution, there's no deduction. They will both grow tax-deferred, but in the end, everything you pull out of a traditional IRA will be considered ordinary income. And it'll be subject to taxes, normal income tax, a Roth IRA will grow tax-deferred, and then every single pull out of it, both principle and gain will be completely tax-free.[00:06:45] So the trade-off is you don't get the tax break in the beginning, but in the end, everything you have in there is completely tax-free. Now there's a lot of speculation about what our tax is going to be in the future. If this is a good strategy or not, if you are receiving a lot of your income down the road and , if it's coming in the form of capital gains on other investments, that's currently taxed a lower rate than income.[00:07:09] However, most people are relying on income and retirement coming from IRAs and other pretax sources. So it will be counted as taxable income. It is very nice to have options when you go to utilize your income in retirement. And when I say options, some money is pretax. So when you pull it out, it's taxable; some money has been contributed after tax.[00:07:32] Maybe it just went to a brokerage account. Or where you went into a Roth IRA at that point, it gives you options. We can say, okay, somebody should come out of a traditional IRA where it's taxable. Some of that can come out of a Roth IRA or another investment where it's not taxable, and you can really have much more control or what your taxable income looks like in any given year in retirement.[00:07:55] So I liked the idea of being able to access to a Roth IRA as well as a traditional IRA.[00:08:01]I won't say it's a problem, but where a lot of these articles come in is they're suggesting that depending on the level of income you need or what tax bracket you're going to be in retirement, maybe doing a Roth or rough conversion is not a good idea, but a lot of these articles are addressing some in their forties or fifties.[00:08:17] And it's hard to project when you retire, and you're in your sixties, seventies or eighties, and you're going out 20 or 30 years, what tax rates are going to look like, what tax bracket you're going to be in. So I'm very much of the opinion of it is great to have some pre-tax money and some after-tax money and straddle the fence, if you will.[00:08:35] So no matter what the landscape looks like, you can adjust accordingly. So when it comes to a backdoor Roth, we really have to analyze the number of features going in. Where are you getting the money from? How are you going to pay the taxes on the Roth conversion? Do you want to give up the tax deductibility now, and will it really benefit you?[00:08:54] Generally speaking, when I found clients is the longer that they're invested, the better, the Roth will work for them. And if they have an outside source to pay the taxes, do when they convert a traditional IRA to a Roth, because you're going from pre-taxed after tax. So it's going to be taxable at that point.[00:09:12] What I find is if they have to tap into that investment to pay the taxes, do it's a huge hit on that investment. And generally, those scenarios don't work out, but if they have an outside source to pay the taxes and they have a long enough time to stay invested, the Roth quite often is a better strategy.[00:09:28] Again, one size does not fit all. It's very individualized, but I really want to touch on the backdoor Roth, demystify it and just let you know, it's two very sound legal, financial strategies. To get access to Roth IRA money, whether you should do it or not. Again, consult your professional more than happy to take that phone.[00:09:48] Call that email, visit the website, happy to run those numbers for someone, and help walk you through. Suppose it's a smart decision.
9 minutes | Feb 9, 2021
Life Insurance and Marijuana
You're listening to making smart decisions with Josh Tirado, and today's topic is life insurance and marijuana. before you start going into your preconceived notions of this topic of life insurance and marijuana, let me start with a quote from a very old hall of fame baseball player, Yogi bear. He was asked once, what is the best type of life insurance to have?[00:02:06] And yoga was quoted as saying, I don't know which type is the best, but I know that none is bad. So [00:02:12] let [00:02:12] Josh: me start first and foremost with the need and the importance of life insurance. And at the time this is being recorded. It is September and September is actually national life insurance awareness month.[00:02:24]But on the topic of life insurance, things over the years have changed dramatically in regard to life insurance and marijuana. And this has been brought to my attention because, in the last several months, I have literally handled half a dozen insurance cases for people who are using marijuana and needed to upgrade or update their life insurance.[00:02:47]And almost every one of these people is a professional who has a very high household income. They all married with children, but marijuana is being used for a number of different purposes. Some of them it's recreational. Some of them it's strictly medicinal and prescribed by the doctor.[00:03:03] Some are in States where medicinal marijuana is not yet legal, but marijuana is being used for medicinal purposes. To allow them to not use some traditional pharmaceuticals. The marijuana was able to take the place of some other drugs that they don't want to have to continuously take, and they can use less marijuana with the same effects than taking the prescription drugs, and they've admitted it to their doctor.[00:03:27] It's in their medical records, and it's all on the up and up. But these people are very concerned, saying, I'm using marijuana. And a number of cases, technically it's still illegal. at least on the federal level with not the state. And they're very concerned as to how it's gonna affect their life insurance.[00:03:41]I'm here to tell you that things have changed dramatically, but let me give you a little background. I'm insurance licensed now for 23 years. And when I first started, you can not test positive for marijuana and get life insurance. You would be declined because it was drug use, and they did take, they did test the urine samples for THC.[00:04:00] To make sure you weren't using marijuana. And if you don't realize this marijuana is fat-soluble, so it stays in your system for quite a long time. And this was always a concern for people that use it recreationally, fast forward 20 something years, and the trends companies have much more data to go on.[00:04:17] And this is what every insurance company bases their prices and their acceptance on is their own individual data, which is why some insurance companies are more favorable towards health issues than others. I have some companies that are very lenient. If someone has heart disease, I have some that are more lenient.[00:04:34] If you're diabetic, I have some that are more lenient based on your height and weight. if you're a little too heavy for your height, those things come up, but each company has a different appetite, and based on their own data, they decide what's a good risk or not even comes to tobacco.[00:04:48] Now, they have a lot of information over a lot of years concerning marijuana. So they're able to adjust that. And this is, let me make one point here. This is where it's important to have access or use an insurance person that has access to a number of insurance carriers. I have over 30 insurance companies I can utilize, and no one company is the right fit for every person and every need.[00:05:09] And the appetite of the insurance company changes over the over time as well. Sometimes they feel they've taken on too much risk in a certain area or certain health conditions, and they move on to another area. But the bottom line is there's a number of large—respect insurance companies, a-rated insurance companies, national companies that are very lenient or accepting towards marijuana.[00:05:30]when we look at the marijuana use, if you're admitting to it and it's in your doctor's records, there's no need to be scared. There's no need to hide first and foremost. One of the questions asked when you apply for life insurance asks about drug use, different things, ask about marijuana use.[00:05:47] The important thing is that you admit to it and say, yes, especially if it's in your doctor's records. Cause it will be found out anyway. And you don't align the life insurance application because the last thing you want to do. Is pass away, go to use the life insurance, and they have to do an investigation because there are concerns that you lied on the application. so first and foremost, if you're using marijuana, don't say no and try to cover it up because if they find it, they then feel that you lied about drug use, and he will be declined coverage. when the question is up to you, use marijuana, you say, yes, they ask frequency and purpose, and you let them know.[00:06:25] For some companies, as long as it's recreational, it's below a certain number of times per week. you don't even get rated. You can't get the best rating. You can't get super preferred or best preferred a slight preferred, but you can still get a healthy non-smoker or preferred health rating for some companies, depending on the amount of marijuana you utilize, they will give you a smoker rating.[00:06:47] Or a light smoker ratings. So you'll still get a standard healthy person, but there'll be more of a surcharge added on for smoking. Cause they're going to classify as tobacco use. And it does matter if medicinal or not, if you're using it in an edible form, if you're smoking it, whatever the delivery system to your body matters too.[00:07:06] So you tell them how often when you're using it, how you're using it. Okay. And that can help your agent determine which company is the right fit for you. And they can find a company that best meets your needs, medicinal or not. So when the marijuana question comes up, don't be scared. Don't think you're on meth and get turned down.[00:07:24] Don't think that it's going to cost you a lot more money. There are good companies out there that will double-take you. the one caveat I've seen is I know some of them that was declined because it was not medicinal marijuana, and they were using it multiple times a day, every day. And the that was just too much to not have a prescription for, but if you're using it to reduce your dependence on some sort of another drug, (by the way, when I say the itger drug, I'm referring to prescription drugs) if you're using it to, reduce or get rid of your dependence on some other drug, or you're simply doing it too, improve the quality of your life, or you're using it recreationally, or you're using it because.[00:08:06] 2020 has been such an awful year, and this is what's helping you through. You're still able to get life insurance and get it on a favorable basis. The other thing I would like to bring up as well is in this day and age, because of social distancing, everything that's going on. A number of insurance companies have also gone away from traditional underwriting, where they're doing blood and urine, where they're simply doing a questionnaire and a 10 to 15 minute telephone interview.[00:08:33] Now. If you answer yes to certain questions, one of them being marijuana, they will usually then require a followup, blood, or urine exam two to confirm that. But in most cases, you can get insurance up to a million dollars of coverage without having to go take a physical exam, they might need to pull doctor's records.[00:08:50] But again, some online questions and a phone interview is enough to get what they need to be able to it. Tgat fun Life insurance and marijuana discussion. It may not be as racy or controversial as you thought. But, if someone is using marijuana, please, don't let that'd be a reason to not get the life insurance that you and your family should have.
7 minutes | Feb 2, 2021
Fiduciary Responsibility and working with a financial advisor
Josh Tirado: I'm Josh Tirado. And you're listening to making smart decisions. Today's topic. I want to discuss the fiduciary standard and how that applies to financial advisors in this segment. I'm also going to discuss my personal experience and how this plays into my practice, but please know that this is a very touchy subject.[00:02:02] The standards for this are influx, constantly changing. I am going to try to be as weary and correct as I can be in doing this. So according to in grant, this is not the end all be all, sure, but according to Wikipedia, a fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.[00:02:25] Typically a fiduciary prudently takes care of money. Or assets for another person. Now that fiduciary definition is a little different than Wikipedia. That's a little different in Merriam Webster's dictionary. And right now the sec security exchange commission and, the CFP board certified financial planning board and different entities are working on the wording of what they feel is the appropriate fiduciary.[00:02:52] Definition and responsibility and standard that they can hold members to. there's a lot of going back and forth with that. But what I want to say is that the core of it is trust. The fiduciary responsibility is that someone is trusting you to help them handle their affairs, their decisions, their money, their assets, the underlying thing is trust.[00:03:14]And trust can be very subjective. It's hard to define that where it's going to be legally binding, but as far as I'm concerned, whoever you're working with as a financial advisor, the number one thing, the first thing that needs to be there is that level of trust. Whether they're fiduciary or not, whether they're required by law or not, that's a discussion for a different time, but I feel that it's not just a legal responsibility, but that's a moral responsibility that there should be trust there that you're acting in the other person's best interest at all times, because that is why you're being hired as an advisor that you put that person's interest ahead of your own.[00:03:55] So to me, the fiduciary responsibility is very important. And let me just discuss a little bit of how it fits into my own personal experience. So I've been insurance licensed for over 22 years now. I have been securities investment licensed, over 20 years now. So my practice has span the time when I have seen the tech bubble.[00:04:18] Burst in 2000, 2001, I have been here through the financial crisis and the corresponding mortgage and housing crisis in Oh eight Oh nine. now I'm around now living through 20, 20 COVID-19 and all the craziness that the market, the job market, interest rates, inflation, everything that everyone is seeing right now.[00:04:41] So my experience I have been through three major. Downturns and recoveries, and I've helped my clients through them. And each one has been very different. The reasons that caused it have been very different, but the underlying what happens at the end of the day with the money going down, the money going up, and handling someone's emotions, and that trust.[00:05:02] That's continuous that's dealing with humans and the human condition and trusting and caring for people and guiding them through what has happened in each one of those instances. So to me from day one that trust a fiduciary, that moral responsibility has always been there, but now legally it's becoming more important than ever.[00:05:24] And you do need to ask your advisor and you're interviewing someone or your current advisor, ask them if they're a fiduciary. Because there's a certain licensing to have. There's a certain title on what they need to have. depending who they're governed by, they might be a fiduciary. They might not be.[00:05:39] if you've worked with your advisor for 40 years and you trust them and they're awesome. They're probably putting your best interest ahead of their own, and they're doing what they should, whether they're legally responsible or not. But I think that fiduciary and that trust level are extremely important.[00:05:55] And I do not think that should be overlooked in today's market. That should be question number one. And also the feeling you have for that person, that gut feeling. Do you trust that person? Do you get along with that person? Do you like that person? Because I'll tell you right now. I'm much more proactive in reaching out to my clients, and they are in reaching out to me.[00:06:16] They hire me for a reason. They know I'm there, I'm working for them. during good times, people are usually happy during the bad times when people grumble and complain. And I'm very fortunate. My clients are educated on our strategies. What we're doing,g when things start to go down or things are happening, geopolitically or things go quote unquote, bad.[00:06:35] Generally speaking, my clients are not too worried and I'm reaching out to them, but that is when an advisor is most needed, most effective. And that's when the trust and the fiduciary responsibility really kicks in when things are not going perfect. When they're not going smoothly, when they have to help you through things financially, emotionally, and help manage the situation.[00:06:57] That's when a good advisor is worth their weight in gold. And that trust has to be there.[00:07:03]
5 minutes | Jan 26, 2021
Investing in 2020 & beyond - Survival of the Fittest
Welcome to making smart decisions with Josh Tirado. Today's topic is investing in 2020 and beyond the survival of the fittest. Now, if you think back to school and learning about the survival of the fittest, but I imagine it is a lion running across a Prairie, tackling another weak animal, and having lunch. And if that's not what you imagine it is now, because I just planted that thought in your head, but that would be completely wrong.[00:02:07] When Darwin actually looked at the survival of the fittest, one of them reads organisms best adjusted to their environment are the most successful in surviving and reproducing. Therefore, it is not always the biggest, the strongest, the fastest, but rather the animals or organisms that are most adept at adapting to their environment because, in the wild, the environment is always changing in the market and in society.[00:02:33] And especially in 2020 and beyond, because this year has been amazing. Things are constantly changing, and people who just. Sit by and go with the flow or stick to whatever they've been using that has been working for a long time and aren't adapting will be passed by. So it's not often, you probably hear survival of the fittest compared to investing, but in this case, I feel that is very important.[00:03:00]2020, and moving forward, there are a lot of things going on, geopolitically, the market interest rates, the pandemic we're dealing with. And things are changing, and they're changing rapidly. People who can adjust their goals, their investment strategies, they're planning to adapt to that environment will survive and thrive.[00:03:21] People who are not adapting will be left behind. I feel that one of the greatest attributes that a person can continue doing throughout their lifetime is learning. And the learning also applies to investments. In fact, in a recent poll of my clients, the top two reasons that clients chose to work with me and have stayed with me over the years are, first and foremost, the issues they're educated on.[00:03:48] The planning concepts that we're using the topics, the investments they're in, and they've gained a comfort level with their strategy. And what they're doing second is this survival of the fittest type theory. Clients have commented that they're getting new and better ideas. for me on a regular basis, and they feel so they're very cutting edge.[00:04:09] That doesn't mean we use every single idea with every single client. And it doesn't mean that we're looking at things that are a flash in the pan. Things need to have a track record. Things need to be well-vetted, but in constantly trying to improve, you don't have lazy money. You don't have things sitting on the sidelines.[00:04:25] You know that things are moving, things are changing. And if you adapt, you will do a better job and be able to hit your goals quicker. When I put together a financial plan for someone, I view it as the roadmap to their success. And that's why our slogan is guiding your journey, but constantly evaluating what's going on and looking and changing and adapting is essentially the turn by turn instructions to keep you on that map, headed in the right direction and achieving your goals.[00:04:55] So when I look at investing in this crazy year of 20, 20 and beyond, I think some things are gonna change a number of years ago, people started using the phrase a new normal, I do think some fundamental things have changed, and people are going to have to adapt. So the better you can adapt forward, the quicker and most efficiently you can reach your goals.
11 minutes | Jan 19, 2021
This is Josh Tirado. You're listening to Making Smart Decisions. And this episode, we're going to touch on longterm care insurance. So when it comes to the topic of longterm care insurance, there has become more public acceptance recently, but for a very long time, People did not want to discuss longterm care insurance.[00:02:00] They would actually just rather discuss life insurance, longterm care insurance because the concept of being here and not being here was easier than the concept of being here, but being physically impaired in some way and needing longterm care. I started selling longterm care insurance and handling it from my clients about 20 years ago.[00:02:18]the market for it has come. Full circle. it's come so far in 20 years. It is amazing how much better is now. It also amazes me, the understanding that the general public has and the need for it. And also the level of care. brief history when longterm care first started out, they were called nursing home policies.[00:02:37] designed to cover the cost of a nursing home over time, though, that has greatly evolved in longterm care has actually become an anti nursing home or facility type policy where the purpose of longterm care is to help you stay independent and in your own home and deal with whatever has happened to you.[00:02:54] And if possible, recover from it and go back to living, as opposed to saying, we're just covering the costs of what's going to happen for the nursing home. It's actually much more of a recovery and lifestyle enhancement type policy. So it will cover a number of things. But what I want to address is when it first came out, and a lot of people still have this preconceived notion when it first came out, I very much likened it to your auto insurance.[00:03:20] You paid for it, you had it for your entire life, and you really hoped you never used it. And in the end. All that money for all those years was gone. You didn't get anything back, but you were happy that you didn't use it the way they structure longterm care insurance. Now, previously, that what I just described was a traditional longterm care insurance policy that only, I think, comprises about I'd say 10 or 20% of longterm care insurance that is put in place today.[00:03:46] And out of my personal practice, I haven't used a traditional policy in over eight years. The new policies are hybrid policies. this is going to get a little technical, maybe a little nerdy, but you'll see why this is important.[00:03:59] Just second longterm care insurance is governed by the laws for health insurance. premiums can be raised coverages, and things can be changed. The newer policies. Or a hybrid policy where it's a combination of a life insurance policy and a longterm care policy, but the base of it is life insurance.[00:04:20] So the whole policy is governed by the laws that govern life insurance, not the laws that govern health insurance and those laws are night and day different. it's more advantageous for you as the consumers, the end-user to have it based on life insurance. You now have a base of life insurance with a longterm care insurance rider on top of it.[00:04:39]And with that allows you to do is not lose out on your money. the way it works now is the money you put into that policy is going to stay there, and it will also provide longterm care. It will also provide a life insurance benefit. So he'll get from the standpoint of. If you need longterm care, this hybrid policy will provide you with longterm care benefits.[00:05:00] If you passed away and did not use your longterm care, this hybrid policy will provide you with a life insurance benefit. If, at any point you decide, I don't want this policy. Either you're older, and you need or want the money out of it, and you don't want to use it. Or something has drastically changed within healthcare in this country.[00:05:18] And longterm care is now paid for by the government or becomes passe. And you no longer need it at any point. If you want to cancel a policy, depending on which policy you have, you can get back a hundred percent of the premium that went in. Some policies give you back about 75 or 80% of the premium that went in.[00:05:34] But there is a few more benefits. so there's a little bit of a trade-off with what direction you want to go in, but you can get back most or all of your premium. So if you think about it that way, what does actually becomes is a different asset allocation you think about, okay, where can I pull the money from?[00:05:55] And what was it doing, where it was, and move it over into a hybrid longterm care policy. And that money is now providing me a life insurance benefit. It's providing me a longterm care insurance benefit. And if at any point I need my money, I can get my money back out of it without there being a penalty.[00:06:13] your money's still sitting there as an emergency fund. Now you can look at and say; my money's not making a return when it's sitting in that policy. True. But at the same time, you're also no longer paying a life insurance premium, or longterm care premium is covered. Bring those for you at the same time.[00:06:28] I can't say it's a no-lose type of situation, but it covers you. If you need care, it covers you if you pass away. And if at any point you want to get the money out and cancel the policy, you can take your money out. So the policies have come a long way from what they used to be.[00:06:42] And. It is the fastest-growing insurance or investment product currently in the country. And if you look at the number of people that will need longterm care, at some point in their lives, it's yes, you have better than a 50% chance of meeting it. And the fact of the matter is statistics show women need it more often than men.[00:07:06] That's just something because our life expectancy isn't as long, we tend to die first. And, oftentimes there's, a woman in the household to help take care of the man. So maybe he doesn't need the care. It's important for men and women, but there's a almost a 50/50 chance that men will need it.[00:07:22] And there's a greater than 50/50 chance that women will need it. on a personal note, I put my mom's policy in place probably about 15 years ago. And it was before these hybrid policies came to be, so hers is still a traditional policy because it was that old.[00:07:40], but from a personal standpoint, I did it because. My father had ms. I had ms for a lot of years and didn't need longterm care and needed that help before he passed away. And I can see what it can do to a family, one, the stress of having to care for someone and to the cost. So personally, I've always thought it was important, but it has become so important now If you are a fiduciary advisor to your clients, if you're a field near fee-based advisor, doing planning for your clients, the courts have even determined that longterm care is so important that it must be offered to your clients. So I know for a fact there's been a number of cases, one specifically in Texas, but there's been a few cases brought up, in recent years where.[00:08:26] An individual or a couple has sued their financial advisor because the financial advisor did not recommend longterm care insurance to them. And then they had health conditions that required longterm care and how much it costs and the devastation it did to their net worth. They felt that if that person was a true fiduciary, they should have made them aware of longterm care.[00:08:48]They brought suit against them, and the court sided with the clients, not the advisor. So in some States, if you are not recommending it for your, to your clients, and educating them on it, you are not standing up to your fiduciary responsibility. So I personally have a form that once new clients, assisting clients, whoever, if you're 50 or what, as soon as you turn 50 or over, we are having a discussion about longterm care.[00:09:12] And I'm having to actually sign a form saying that you've been educated on it either you already have it, you've applied for it, or you've chosen. Not to take that route, and you do not want to get longterm care, but anyone 50 and over I'm absolutely having a discussion. I'm recommending him. Now, bear in mind that is an insurance product.[00:09:30] It is still based on your health and your insurability. So it's not guaranteed that everybody can get it as you can't. There are things we can do to work around it, but I think it is very important, especially in this day and age, when Most times these hybrid policies you're paying for it out of already existing assets.[00:09:46] You can get paid for it. Lump-sum, spread out over five years, 10 years. Some of them can even spread out over longer, but you're just reallocating money to this problem. You're not necessarily having to pull more money out of your budget to fund this and potentially lose the money. You're simply reallocating money.[00:10:02] That's already there. And you can be used in a variety of ways. The other thing I just want to touch on briefly when it comes to longterm care, and it says so many people will need it. Oftentimes it's simply used for the short term. You might need it for a couple of weeks, couple months, maybe you're recovering from some sort of joint replacement.[00:10:21] You're recovering from heart surgery, you fell, and something broke, or something happened, and you need assistance. Longterm care. Can come in after you've exhausted. The health insurance that pays for that, the longterm care can come in and help pay for that until you've recovered enough. And then you can go back of longterm care back to living your life, and then whatever's left there.[00:10:43] The rest of the value of your policies is still sitting there for perhaps the next time you use it. So please don't think of it as a later in life or end of life situation. This can actually be very enabling to continuing to have a healthy and active lifestyle.[00:10:59]
11 minutes | Jan 19, 2021
The 529 Plan - Saving for College
Josh Tirado: A topic that comes up very often. Is college savings? No, specifically, 529 plans. When I look on social media, on Facebook, on LinkedIn, within my neighborhood groups and a lot of affiliate groups that I'm in, that topic comes up often where people are looking for help with that looking for professionals to work with somebody when it comes to college savings and 529.[00:02:05]A couple of key takeaways. I want to mention to that understanding the strategy behind the investment, instead of just saying, Oh, I want to go do that for college, but let's first take a look at what the strategy is and what makes the most sense for you. [00:02:17] the reason it's called the 529 plan and most things in the financial universe when you see a combination of numbers or numbers and letters, it's actually referring to the tax code that references that investment. So if five to nine plan is simply referencing the tax code that allows you to save money and I'm doing air quotes for college on a tax-deferred basis.[00:02:38] And as long as you pull the money out of your 529 plan, for qualified secondary education expense, any growth in that money is also tax-free. Now when five first came out, it was strictly designed for college. It's now been expanded. It can cover college and cover masters, a doctorate in cover private high school.[00:02:54] It can actually cover private kindergarten also technical school culinary school. It will cover any sort of education and related expenses. So you can use it towards books, supplies, room, and board. It will cover anything related And five to nine. Is that part of the tax code that gives you that advantage so far in away over the years, if, when it comes to college savings, 529s are the gold standard.[00:03:19] I mean, that's really where it's at. that's the number one tool that we can use, but let's discuss the strategy behind the 529. And if it makes sense to do a 529. For you, when people approached me about doing college planning for their children, the very first thing I want to say to them is.[00:03:33]Is your retirement plan done? Is it properly funded? Do you have what you need to handle retirement? Because you can always borrow money to pay for college. You can't borrow money to pay for your retirement. it's very akin to the airplane analogy. If the oxygen mask all down, you secure your mask first, then help others around.[00:03:51] You make sure that your longterm planning is in place first. And then if you can afford it, then look into doing. College planning [00:03:59]you take care of your financial planning, retirement planning. Your financial house is in order before the children. I've had some clients who've come to me later in life, and they were very proud to tell me that they pay the way to put all three of their children through college.[00:04:10] But the too late in life, despite my best efforts, we were unable to get them to retire in the timeframe that they wanted or to retire in the manner that they wanted because they didn't have enough money put aside because they. Put it into their kids first. So my goal is, and this is not being selfish.[00:04:28] Make sure you're taken care of first, before you help the kids. That way, you're not relying on the kids to help you down the road. Cause you, you can borrow for college. So first and foremost, take care of that. If you've met with a professional and you have a good financial plan, a good retirement plan in place.[00:04:43] And you can still save for college for your children. That's terrific. Now let's move on to that. One thing I want to say is people get very overwhelmed because they say, I want to pay for my kid's college, and you look at the cost of college and then fast forward to when your kids are going to be in college at the current growth rate.[00:04:58] And it's an astronomical amount of money. And people say, I can never save that. Why even bother? something's better than nothing. So if you want to put money aside and have something where you can help the kids or have a gift for your children, Then, by all means, do it, but please don't expect, especially with multiple children, please don't expect to be able to put aside enough to pay for the entire thing.[00:05:16]Now, that being said, this is me personally. I do think the college landscape and that educational landscape will be revamped in the coming future. The cost of higher education has grown at the same rate or faster than healthcare. I recently spoke with someone, and they were complaining because they have a child who's recently out of college and they're looking at jobs, and they're looking at taking an entry level position as reception person.[00:05:42] And the reception job required a four-year degree yet did not pay nearly enough money for that person to be able to pay back their loans for their four-year degree. So the standards that are being set are. a little ridiculous in the end, the cost has gotten out of hand, and as more jobs are requiring a four-year degree or a master's, the cost of entry is going up, but that salary is not necessarily going up in proportion to the cost of education to get the job.[00:06:06] So I do think in the future, something will happen in college will perhaps not be as extreme of an expense as it is currently; the other thought process is college going to be right for your child? You probably know your child better than anyone. If your child is going to go into a field that requires an advanced degree and college is a necessity.[00:06:24] Okay. If you, perhaps your child, has an entrepreneurial spirit and a lot of ideas and does not want to go work for somebody else, doesn't necessarily want college and wants to try out, business. I have clients where, when we're discussing the future, it's not just college savings, it's future savings.[00:06:41] So we might put some money into a 529 for college, but if the child isn't going to go to college or culinary school, the technical school wants to do something else or putting money aside in a brokerage account as well. And we're growing money there. So the parents could give that to the child to use, to start a business or sort of entrepreneurial effort that doesn't require college or.[00:07:03] If your child gets scholarship sports or academic, and they don't need the money in the 529 plan money in a brokerage account, doesn't have the same constraints as the 529 plan. And you can give them that money perhaps as a down payment on our first home or something else. If they didn't have a college expense.[00:07:22]from a strategy standpoint, there's a number, different ways to skin a cat. But if you're purely looking at education, 529 is the best. Now, let me also tell you a couple of really neat things. About 529 said it seems to be most people. Do not know 529. If you have one child who needs it, and one child who perhaps gets a scholarship and doesn't need it, or decides not to go to college, that 529 can be transferred over to your other child.[00:07:45] That money isn't wasted. The money can be transferred back and forth between siblings. As a matter of fact, the money can actually be transferred to anyone in the family once removed. So that five 29 could be actually used for a niece, a nephew, a brother. It can be used for yourself. If your child doesn't need it, and you're going back for a degree, you can use it for yourself.[00:08:04] Remember you are the owner, the child's just a beneficiary, and that beneficiary can be changed to other people within the family. So that money doesn't have to be lost. For some reason, somebody is in a 529; the child doesn't need it at all. And there's no one else that needs it. The money just continues to grow tax-deferred and will become treated as an additional IRA.[00:08:23]as you get older and go to retire, once you reach shifted nine and a half, you can take it out, and it follows all the IRA rules instead of the 529 rules. two things that have that I've used with my clients that have worked really well. They do not tell their child that they have 529.[00:08:37]It could just be me, but we've seen it work really well, where if the child thinks that they have to work towards paying for college, or they have taken out a loan for college, that they might, that they oftentimes will work harder. And. take it more seriously and see the value in the education instead of just being handed to them.[00:08:54] So you don't tell the child about the 529, let it be a happy surprise once they're in school, or perhaps your 529 will help pay for junior and senior year, but you don't tell them about it freshmen sophomore year to see how they do. The other thought process is also. Take out, perhaps take out the loans or borrow from someplace else early on in college.[00:09:14] And then at the very end, use the 529 to pay those loans back. So if the college takes four years, and for some people in some majors now, five is the standard. It gives you those additional four to five years, and have the money invested in making a return while you're taking loans out that are deferred.[00:09:29] And then use it to pay back those loans. So you can actually get some extra years of growth on the money, depending on the mentality of your child. Again, perhaps don't mention it to them, let it be a happy surprise, and then decide if the five trends even for your situation. But that's it.[00:09:46] And the other thing too is, The five 29 plan invest in mutual funds. So when you hear a five 29, Oh, I'm doing five, try an investment for my child. Okay. Each five 29 is sponsored by a state. Some States have one, some States have multiple plans that are offered, but essentially it's a set plan with a list of mutual funds in it from different professional companies.[00:10:06] You get to pick those mutual funds, or they have an age-weighted option where it's more aggressive when the child is younger and automatically gets, More conservative as a child gets older and closer to college, but essentially you're just investing in a pool of mutual funds. Think of the 529 is shallow tax protection around that investment[00:10:23]and like Forrest Gump. That's all I have to say about that.
10 minutes | Jan 19, 2021
Strategies for your 401k
Josh Tirado: hi, I'm -Josh Tirado, and you're listening to making smart decisions today.[00:01:46] We're going to jump into the topic of 401ks. I like to start with when I meet with new clients is the discussion around don't take my advice at face value. I want to discuss this with you. I want to discuss. The strategy, why the strategy works for you, or a different strategy or different direction we should go in.[00:02:05] I need you as a client to be comfortable and to be able to sleep at night. You're hiring me as the professional to bring the knowledge and teach you to help implement it. But I need you to be comfortable with it. On the number of topics I want to discuss today, I would like to review the strategy behind the different topics and not just take what every advisor says at face value.[00:02:26] when it comes to 401ks, there's a lot of news out there that says 401k is a great strategy, best thing since sliced bread. And when you dig a little bit deeper, most advisors, the canned advice, contribute up to the company match within your 401k.[00:02:42]that's very good. That sounded vice, but let's discuss why you want to do a 401K in the first place. 401ks became popular back in the eighties.[00:02:52] That was because, in the mid-eighties, an average mortgage rate was 12%. good mortgage rate was 10% CDs are paying 14% taxes were extraordinarily high. Many individuals said I'm going to do a 401k where I can contribute the money pretax and have it grow tax-deferred, not pay taxes.[00:03:12] Now pull the money out in retirement when I'm in a lower tax bracket. So at that point, Hey, I'm deferring taxes now. And I'm in a much higher bracket only to pull them out later on when I'm in the lower bracket or living on less money and in the lower tax bracket. And it made a lot of sense. And that strategy has worked very well for those people.[00:03:30]Fast forward to 2020, and the issue is income tax brackets are at an all-time low, as far as the country's concerned. And for the vast majority of my planning clients, their income and retirement. It is going to be very similar to their income or reworking. So they're not necessarily retiring on less or much less than when they were working.[00:03:50] So they're not going to go into a lower tax bracket because of that. And also, tax rates are very low right now. I don't have a crystal ball, but I would venture to guess that 20, 30, 40 years from now, tax rates will probably go back up. So it doesn't make a lot of sense to defer your income right now into a 401k.[00:04:09] At a lower tax bracket, pull it out in the future at potentially a higher tax bracket. That's something we want people to think about when we decide how much money should go into a 401k. If you have a foreign key available to you, I think it's terrific because there is a match.[00:04:26] So often, what I see most commonly are employers that will match. 25 cents. For every dollar, you contribute 50 cents. Every dollar you contribute, even a true match, and to do a dollar for dollar match for your contribution, but up to a certain percentage of your income. Normally, it's 50 cents on the dollar up to 4% or 5% of your income.[00:04:47]And the suggestion is to contribute if you're going to afford it, at least that much because you're getting free money from the company. So no matter what you invest in, if it grows, if it goes down, if it's just sitting in cash and doesn't do anything, you've got an immediate return on that money. You have 25%, 50%, a hundred percent return on your money.[00:05:06] So even if you don't do anything with that money, at least you're getting the free money on top of it. So that's great advice. But when I see people putting 10%, 15% of their income into the 401k, they're maxing it out there. They could eventually have a tax situation. So I bring it to their attention.[00:05:25] That's a really good point for discussion. For most Americans, their 401k or the total, their foreign caves will be their largest retirement based asset. The issue is it's also the investment that offers the least support and the least amount of advice. So if you're thinking about your 401k, are you working with a professional at your company that's sitting down and helping you to choose your asset allocation?[00:05:47] Are you rebalancing? Are you making smart strategic moves within your 401k? Not to mention that quite often, the options available on a 401k are quite limited. It will be your largest investment, your largest retirement asset, yet you're receiving no help on it. And this is where I like to step in; when it comes to 401ks, there's a couple of ways I can help my clients are doing fee-based financial planning.[00:06:13] So they're coming in to do their retirement plan. And part of that includes their 401k. So as part of their plan, I'm S I can see what the available foreign on options are. We can advise on whether they should be invested in their 401k, whether or not they should be rebalancing, and make sure that strategy works in concert with everything else that they're doing.[00:06:32] So they're getting good 401k advice. So if you're a pro rational who wants some advice and help on the 401k, you're going to get unbiased advice in the 401k. The other option is some companies, some money management companies out there that can work with your existing 401k.[00:06:48] So instead of saying I review it quarterly, they make suggestions on how to change things around. What we can do is work with one of the money management firms. We're able to go into your 401k and change around the investments, offer additional investments, and then actively manage those investments and manage your 401k while you're still working at that company.[00:07:09]that option is offered to a lot of people that are working at fortune 500 companies. That can be a great thing. So two things there is you don't have to do the foreign NK alone, one for. For a fee, you can get through advice in the 401k, have someone else watching and helping you or two; we can step in, be very proactive.[00:07:26] Your company allows and can go in there and put in a tailored investment plan within your 401k and actively manage it for you. The last thing I want to touch on today when it comes to 401k's and let me make this very clear, this is not, Me giving advice. And this is not a solicitation of any sort.[00:07:45] This is just meant to be explained to you about your options and facts. If you have left your job, whether you start a new job or not, or have an old 401k, and you recently left your job, and you have options for what to do with your 401k, I wanted to go over what the options are. I run into many clients who have.[00:08:01] Numerous old 401ks floating around. Cause they didn't know what the options were, and there are people right now. And because of the way the economy is, you may have willingly left your job, or you may be furloughed, but that 401k money, is important. And you need to know what the options are to pick what's best for you.[00:08:16] What to do with that money when you know what the company. So there's three main: proactive options and one kind of passive, reactive option. So option one is you can leave that 401k where it is with your old company. Most of the time, within limits, sometimes there are requirements that you have to move it.[00:08:32] But the majority of the time, you could leave that 401k with the previous company and let it sit there. Option two is you can move your old 401k and roll it over into a new 401k. With your new employer. If you're currently employed, option three is you can roll it over into an IRA. Now that IRA can be an IRA that you manage yourself, that IRA can be an IRA that you work with a professional, and they help you manage it, but you can roll it into an IRA.[00:09:02]the last option is you could cash in your 401k. Generally speaking, not the advice I want to give, but it, again, it really depends on your situation, but if you cash in your 401k, there will definitely be taxes. Do since all that money was pre-tax. And there's potentially a penalty. So in most cases, not the best option, but you can cash it in.[00:09:22] You can leave it; you can roll into a new plan. You can roll into an IRA. I suggest that if you're in a position where you have a 401k, and you have to make one of these four decisions that you speak to professional, weigh your options, see what's available, see what works best for you. And then take some sort of action taking no action.[00:09:40] It'll stay where it is in that plan. And that's a strategy; doing nothing is still a decision. It's still a strategy to leave it where it is. And you should at least be informed as to what your options are and then act on one of those options accordingly.[00:09:52]
1 minutes | Dec 21, 2020
Making Smart Decisions with Josh Tirado Trailer
Welcome to the Making Smart Decisions Podcast with Josh Tirado.
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