May 07, 2020

Five Ways to Help Your Finances Recover

The Effective Approach to Financial Recovery

Regardless of what is causing your financial setback, your path to financial recovery will require a set of action steps. You may believe your situation is unique, but many are walking the same path as you. The road to financial recovery reveals the exact actions you need to take to get back on your feet financially.

So let’s get started with the five ways that will help you recover from any financial downturn or crisis.

In this episode, you’ll learn…

  • Chris’ positive focus for the week
  • How your initial emotional reaction to the current crisis can play a big role in your decisions
  • The most important legal documents you need to prepare and update at this point
  • If you are a medical frontliner, we can offer a free medical power of attorney for you
  • Virtual process that we have in place to help you plan
  • How you can fix your legal documents at the comfort of your living room
  • Tax review and planning
  • Where to easily access the Secure Act webinars
  • Fortified income score
  • How much risk you should be taking into your portfolio

Links and Resources:

Follow us on Social Media:

Transcript

This is The Chris Berry Show, expert information on wealth, estate, and tax planning for the second half of life. Information that you can understand. Here’s your host, Chris Berry.

Welcome, this is Chris Berry. And today, just like every day on the show, we’re going to start with a positive focus. And I think the positive focus exercise is even more important in times like this because it’s really easy to get burdened by everything that’s going on, all the bad news. You log on to social media and it’s on one side funny memes and jokes and on the other side it’s getting political and people are attacking each other.

So, I think it is important to focus on the positives. And so, one of the positives is my children. They’re nine and seven. And they’re really taking this in stride, and some of the things that I would say positive about this situation is they’ve remained connected to their teachers. Their teachers have really stepped up and with Zoom meetings and virtual meetings, really have remained connected with the children, and giving the children opportunities to also connect with their friends as well.

And then, also the use of technology. My son, he’s been FaceTiming with his friends as he plays online games together. So, we’re still figuring out ways to, I wouldn’t call it social distance because we’re actually trying to be more social but keep that physical distance in place. So, if anything, I would say that’s a positive focus is just the way that my children have been kind of dealing with this big change. It’s tough for us as adults, let alone a nine and a seven-year-old. And then their use of technology trying to remain connected as possible with their friends and other families.

So, today on the show, what we’re going to talk about is this unexpected blow we’ve all experienced and five ways to help your finances recover. And I’m going to lay out five steps and this might sound a little bit familiar. And I’ve talked about this before but I was just interviewed by Kiplinger’s Retirement on this and put together an article called The Five Ways to Help Your Finances Recover.

And this could be used really during any type of crisis or downturn and that’s certainly what we’re in now. And I think there were warning signs that the stock market might falter this year. We are going into a presidential election. We’re on a 12-year run. But let’s face it, there’s always warning signs.

Most people expect volatility surrounding the presidential election. Whenever we move into a presidential election year, it’s always a little bit more volatile. And we knew that we’re on this record setting bull run and it couldn’t last forever. But I don’t think anyone predicted that a killer pandemic would upend every aspect of our lives where now toilet paper is more valuable than money sometimes.

And now, we have both the job market and stock market in a little bit of a free fall. So, if you’re wondering what to do next, understand you’re not alone. We’re all going through this together. But that said, what I’ve been talking to my clients and people who have been reaching out to us from this radio show, here are five ways that you can help your finances.

The first one is stay calm and consider your next move. So, we’re all going through a little bit of a scary situation where things aren’t quite the way they were before and so, one’s natural reaction would be to tense up. My undergrad, when I went to Grand Valley as part of the honor’s program there, but I was in finance as well as psychology. That’s why I have a finance degree and a psychology degree.

And from a psychological standpoint, I completely understand what’s going on. When you’re scared, when you’re tense, it’s hard to not act emotionally. But that’s where the help of an adviser, a counselor, someone else that you can bounce ideas off of. Someone a little bit more removed from the situation can provide some perspective.

And that’s really the role that we serve for a lot of our clients is not only I’m an attorney and an investment adviser, but part of that attorney, it’s being a counselor. And so, really what I found is that as we’ve been helping families, we first need to make sure that given the events that we’ve experienced that we make the right logical, intelligent decision to get through this and when we come out the other side to be in the best position possible.

Because if we’re paralyzed by fear and emotion, we might either do nothing which is taking an action in itself. There are some things that we should do. We can’t just put our heads in the sand and pretend that the world hasn’t changed. That’s taking an action in itself and that’s choosing inaction.

Imagine you’re in a situation where a car was coming right at you. If you just stand there, you’re going to get hit by the car. So, we need to take an action and not taking an action is an action in itself. And that’s probably not the right decision right now. The world has changed and we need to make some different choices based on that and they should be based on logic and numbers and intelligence, not based on emotion and reactionary.

Again, we can’t control the events. We have to get past the day to day fears and make intelligence financial, legal and tax decisions coming out of this because your retirement depends on this. This is important stuff. The rest of your future depends on the choices you make today. We can’t control the past. We have to think about what can we do today to put ourself in the best position today as well as put ourselves in the best position for our future self.

So, I just go back to the simple phrase of, “We cannot control the events, we can control our responses.” So, that’s the first thing is to kind of get our mindset right to be able to make decisions versus getting agitated and sometimes … Actually, I was listening to an interview with David Bach, sometimes talking to someone about your fears isn’t really the best way to handle things especially if that person is also scared or afraid.

And you can imagine this. Imagine you’re sharing your fears with someone else and they’re sharing their fears with you, and it’s just a downward spiral where you get more agitated and even more fearful. So that’s where we really come into play for our clients is we’re trying to be that voice of reason during this time.

And sometimes it’s helpful and this was the exercise David Bach was talking about is to actually write out kind of the worst case scenario and write out what that means to you. And sometimes writing has a different feeling than talking things out. So, if you are concerned or scared, maybe write out those fears versus sharing with someone else who’s also scared.

Or you know what, give us a call, we’re here to help you. We’re not going to send you into a fear spiral where now we’re going to make emotional decisions. I think one thing that we really pride ourselves on as our methodical and logical process in which we help our clients. Again, first thing stay as calm as you consider your next moves. We can’t control the events. We can only control our responses.

And then the next thing, so number two, first is stay calm as you consider your next move. Number two is update your legal documents. People are often surprised when they realized how out of date their legal documents are, even if they’ve bothered to create them at all in the first place. And one thing I found is within the last month or so, it’s just how vitally important it is to have your rule book in place, because right now the governments, some parts of it are shut down.

For example, trying to get a guardianship or conservatorship, good luck, because courts are really only handling emergency matters. In fact, I had a situation where kind of a sad situation with dad where … Well, we’ll call it a fictional client. Dad has dementia. One of the family members who really hasn’t been kind of part of their life at all came into the life of dad and kind of trying to steal his money and make decisions for him, and the dad just doesn’t understand what’s going on.

And so, we’re on the process of going through our guardianship proceeding to make sure that this kind of deadbeat in-law, family member doesn’t get control of dad’s finances or is able to make decisions with regards to his care. But unfortunately, the courts are shut down right now and so this matter isn’t going to get resolved.

So, that’s one of the most important things to understand is you need to have your own set of rules right now. You need to have your own rule book. And probably the most important thing is what’s called a medical power of attorney to document appointing someone to make medical decisions if you’re unable to.

For example, if you get a knock in your head, you have a stroke, you go to the hospital, you’re unable to make medical decisions, well, the medical providers are already stressed out enough with everything else going on, they need to know who the decision maker is. And so that medical power of attorney is probably the most important document and along with that is a financial power of attorney to be able to make financial decisions for loved ones.

And really, your rule book consists of a couple legal documents. So a comprehensive estate plan typically involves a trust, a will, a financial power of attorney, a medical power of attorney, and then we need to have some type of deed for your real estate. So if you own a home, make sure the home avoids probate.

And so those are the legal documents that almost everyone needs. And there’s a discussion whether you need a will versus a trust, but that’s a discussion for another day. But I would say majority of people do have a trust. And there are different types of trust out there, but a majority of people do have some type of trusts.

So you have your trust, your will, your financial power of attorney, medical power of attorney and we need to make sure we have some type of deed deeding your property. Again, right now that medical power of attorney is one of the most important documents you can have. And it’s so important. One of the things that we’re offering for any healthcare providers as a thank you for what’s going on right now, for you really being our first line of defense, so if you’re a nurse or a doctor, or EMT or something like that and you’re listening to the show, give our office a call at 844-885-4200.

And what we can do is we can put together a free medical power of attorney for you. So, again, if you are a healthcare professional right now, I have a lot of clients that are and I’m hearing stories from the frontlines. One of the ways that we want to thank you is put together that free medical power of attorney. So just give our office a call at 844-885-4200 and we can get that done.

Now, if you’re listening to this show and you haven’t had your documents updated since 2012, whether there’s changes in law in the financial power of attorney where there has to be some acceptance language or you don’t have any documents at all, understand that we can get things done right now. We are obviously an essential business with the financial management and the legal aspect and the tax planning that we do.

And we are trying to work as virtually as possible. And thankfully, the governor the other day issued an executive order that we can get legal documents signed without even being present. All we need to do is do it over some type of video conferencing softwares like, say, a Zoom or a FaceTime. So, we already have a process in place where if you’re looking at your situation, your financial house and you want to get your house in order, you don’t have that estate plan, you don’t have that will or that trust or those really important powers of attorney right now, we have a virtual process where you don’t even have to leave your living room where we can get these documents signed.

And what we will do is we’d have either a phone call or a Zoom web conferencing meeting where we figure out where you’re at. We use a tool called an Estate Planning Audit to figure out where you want to go. And if there’s a gap there, then we’ll go ahead and we’ll close that gap. We’ll design a plan to close that gap.

And maybe it’s a trust. Maybe it’s a will. Maybe it’s a financial power of attorney or a medical power of attorney. Well, we can have that first meeting where we figure out where you’re at and we can review whatever documents you have or we’ve done this thousands of times without even looking at it, I can guess probably what your documents say, or by the date that they were done, I would know that they have to be updated.

Or maybe you don’t have any documents at all, that’s fine too. But if you do have documents already in place, if you have an electronic copy, you can send them over to us. We’ll review it. We’ll walk you through that Estate Planning Audit so that you can get some peace of mind and maybe your documents are in tiptop shape and everything is great or maybe there are some things that need to be fixed.

For example, again, if you’re listening to this and you haven’t updated your document since 2012, those powers of attorney need to be updated for the changes in law. We just ran into this the other day where a bank was not honoring a financial power of attorney because it was older than 2012. So, if your documents are older than 2012, you’re sitting around in your living room right now, now is the time to get them updated. And you can do that right from your living room. You don’t even have to come into our office.

Again, and what our processes, our virtual processes, we have them phone call or a web conference meeting to figure out where you’re at, figure out what you need to do. Then it takes us at least a couple of days to put everything together for you and then what we’ll do is we’ll either mail out documents for you to review or we’ll send them over electronically.

You’ll have a meeting, a phone call or a web meeting with one of our paralegals to review the documents with you. If everything looks good, then we can have a virtual signing meeting where you can sign in our own kitchen table as long as you have some type of FaceTime or Zoom web conferencing open with us.

And then what we’ll do is we’ll get those documents from you. We’ll notarize them because with the governor’s new executive order, we can do remote witnessing and remote notarization so we can help clients throughout Michigan. And then you can have your rule book versus relying on the government’s rule book.

And again, this is vitally important especially that medical power of attorney. If you don’t have a medical power of attorney, understand even if you’re married or we’re talking about one of your kids or something and they’re adults, just because you’re related doesn’t give someone the authority to make these decisions. It has to be in writing.

And we can turn that medical power of attorney document around pretty darn quickly. So again, if you’re listening to this, I invite you to give us a call at 844-885-4200. And we can put together those legal documents for you without you even having to leave your living room.

So, this has been Chris Berry. We’ll continue the conversation as we talk about five ways to help your finances recover in these scary times.

(music)

Hi, we’re Madison and Ryan Berry.

Our dad is Chris Berry from the Castle Wealth Group.

The Castle Wealth Group used to be The Elder Care Firm but dad wanted the company to be broader in its scope of services.

To not only protect and preserve assets but to help people grow their assets to prepare for retirement.

As a certified Elder Law attorney and fiduciary financial adviser, our dad and his team at Castle Wealth Group can help you with lots of important things.

To tell you more, here’s my dad, Chris Berry.

Thanks, Maddie and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family and less for Uncle Sam and protect you against the devastating cost of long-term care. Our team is here for your family.

I invite you to learn more about the Castle Wealth Group at our next free workshop where you will learn the three steps to create a legal, financial and tax plan for the second half of life. Call us today to register at 844-885-4200.

The Castle Wealth Group, formerly The Elder Care Firm.

Learn more at thecastlewealthgroup.com today.

(music)

So we’re talking about five ways to help your finances recover, put yourself in a best position possible given these scary times. So the first one was stay calm as you consider your next move. Again, we want to make intelligent, rational, logical decisions versus operating from emotion.

Second, update your legal documents. One of the most important things is having that medical power of attorney. If you’re a healthcare provider, we’ll go ahead and put together your medical power of attorney at no cost for you as a thank you for your service. If you’re not a medical provider or a healthcare provider and you haven’t updated your documents since 2012 or you want a second opinion, we can go ahead and do that as well.

Give our office a call at 844-885-4200. And again, one of the things that is available right now due to the governor’s executive order is remote witnessing and notarization. So, we do have a process to get these legal documents done virtually where you can get them done from your own living room or your kitchen.

And we are an essential business. We’re working as virtually as possible but obviously, we have to be available to help our clients right now because things are happening. I had one of my client’s moms just passed away and it’s actually kind of sad because we can’t do any funeral or anything right now. Another client’s, a couple of clients who have loved ones in nursing homes right now. So it’s scary time. Things are still happening even though our economy is kind of shutting down and our governor is trying to shut us down as well.

So, five ways to help your finances recover, stay calm as you consider your next moves. Update your legal documents. Again, we have a process to get those updated right now. And again, with that first one of staying calm as you consider your next moves, inaction is a movement itself. And so, if you choose inaction, understand that’s your choice.

There are things that you can do for your family to put yourself in a better position as you go through this and we can go through this with you as well as when we come out of this. Third thing is review your tax plan. So, many people view taxes through what we call a micro lens of just trying to minimize taxes in a specific year versus looking at taxes through a macro lens of over your lifetime as well as what you leave to your loved ones and beneficiaries upon death.

But there’s a lot going on right now from a tax standpoint. And I’ve talked about this previously on the show before. And even going into 2020, tax planning was one of the biggest opportunities available because of a couple of reasons. First of all, we have the Tax Cuts and Jobs Act of 2018, which basically says taxes are on sale from 2018 through 2025 where if right now you’re in the 22% tax bracket, let’s say you’re a married couple making $100,000, that puts you in the 22% tax bracket.

Well, in 2025, that $100,000 will put you into the 25% tax bracket. Right now, if you’re at the 24%, that’s jumping up to 28%. So we knew taxes were going up since 2018. So we’ve been talking to clients about this tax planning concept. And then add on top of that that we just had the SECURE Act passed, that passed December 20th of 2019 so near the end of the year and it became effective January 1st, 2020.

And in fact, we had a lot of SECURE Act workshops for our existing clients because again, if you haven’t updated your estate plan or looked at your beneficiary designations, thanks to the SECURE Act, it’s something that should be reviewed.

And then on top of that, and this is my own belief, is I think taxes have to go higher in the future because prior to this year, we were $23 trillion in debt. And then with this CARES Act that just passed, it just added another $2 trillion in debts. Now, we’re at $25 trillion in debt as a country. And government is writing checks. We have this unemployment. Government is bailing out the airlines. So, apparently they’re getting the special treatment.

Well, guess what? That money has to come from somewhere. So, a lot of people think taxes have to go up and then with the market decline, now it’s an opportune time to look at moving money out of those tax deferred buckets. So think about things like Roth conversions. Think about pulling money from those tax deferred accounts, those IRAs, the 401(k)s, the 403(b)s, those are the tax deferred accounts. You pay tax when you pull the money out.

And if you think taxes are going up in the future, doesn’t it make sense to look at paying the tax sooner rather than later? Wouldn’t it make more sense to get tax on the seed versus the harvest? And I’m looking at this just from the way the laws are written. The laws are written five years from now, taxes are going up.

So just by paying the taxes sooner rather than later, you might save yourself 3% to 4% in taxes which doesn’t sound like a lot but that could be tens of thousands of dollars. And one of the things that we can do is run a tax analysis and figure out how much should you be converting to Roth or how much should you be pulling out of those traditional IRAs. Maybe looking at some alternative options as well because there’s two aspects.

One is how much should we move out of the IRA, and then second is where should we put it? Should we put it inside of an asset-protection trust? Should we look at indexed universal life? Should we look at a Roth conversion? There’s different options out there based on, again, what your goals are. And that’s where we always start. We start with what are your goals, then we develop the strategies to help you achieve the goals, then we pick the right tools to help you achieve your goals.

So, we do have a very strict process where as an attorney, I have to act in your best interest. As a fiduciary, I have to act in your best interest. Very different than a lot of people out there who hold themselves out as financial professionals when in reality they just have a suitability standard. So we always have to operate in your best interest.

And for a lot of our clients right now, it’s in their best interest to think about tax planning. And this is something that we can help you with. And we’re not talking about tax preparation though we do that as well. What we’re talking about is developing a tax plan for retirement and for what you’re leaving to the next generation because this is important not just for your retirement, but it’s also important based on what you’re leaving to the next generation.

Because that SECURE Act passed and now, we’re operating under the SECURE Act. And we actually just put together a webinar for our clients and friends on the SECURE Act. It’s basically the workshop that I was doing just for clients prior to this coronavirus pandemic breaking out. We’re having a workshop with 20 people there. It doesn’t make sense.

So, we have transitioned a lot of our educational pieces to workshops. And one of the things we’re in the process of doing is putting together what we call the Retirement Planning Masterclass where we’re going to dive into all five areas of retirement. So, income planning, investment planning, tax planning, healthcare planning, legacy planning and breaking each one of those out as a module.

So that will be something that we should have available within about a week or so. Because we really believe in education. We want our clients well-educated. My dad was an educator. He was a professor. He got his PhD from U of M in Psychology and went on to be a professor for over 47 years. So, I think teaching is in my blood.

So, look for those webinars. And the way that you’re going to be able to access that is you have to go to our website or just send us an email. You can email me at chris@castlewealthgroup.com and I can make sure you get those webinars once they’re available.

So, I was talking about reviewing your tax plan. So now is the opportune time and one of the things with the market downturn, if you were considering, say, a Roth conversion this year, typically we’ll wait until the end of the year to kind of calculate how much to do, how much to move out. But now is really the opportune time because the markets just took a dip and if you think the markets are going to recover anytime soon, then let’s pull the money out of that IRA when the markets decline so that we can capture the upside and maybe a tax free bucket. Maybe we can capture the upside in index universal life or inside of a Roth IRA. So now that money can grow tax free.

And if you look at kind of the timing of when we would utilize these assets because a lot of people ask, “Well, if I put it into a Roth, I’m not supposed to touch it for five years or something like that.” And my answer is yes because you want to allow that money to grow as much as possible. And if you do take it out, you could lose some of the tax benefits. But most people, there shouldn’t be a reason why you’d want to pull money out of a Roth sooner rather than later. That typically goes into that later bucket of money.

Again, think about your tax plan right now. And this is something that we can help you with. And this one of the things that makes us different than just your regular investment adviser. Maybe if someone at Morgan Stanley or Edward Jones or some stock broker that helps you with your investments or maybe you’re having your money at Chase or Fidelity, that’s investments planning and that’s important and we do that as well but really what we’re talking about, tax planning.

And it’s such a value add to our clients because you can’t really control the markets. If you have some guy who’s selling you hot stock tips, that’s not really our process or our philosophy. The market is going to do what the market is going to do. But taking control of your tax plan, I’m looking at it on a macro level versus a micro level, it is something that we can control.

And I think that’s important right now, is it seems … I think a lot of people feel like life is out of control right now. Well, taking control of your finances, of your legal plan, it’s something you can control. And again this gets back to the first concept, is we got to stay calm and consider your next moves. So there’s a lot of things out of our control right now. We have a governor who’s giving us executive orders every week. If you go shopping where you buy a can of paint, you’re going to get fined. And a lot of people feel like that’s giving up control and I’m with you on that.

But there are things we can control and so controlling our finances, making the right financial moves, making the right tax moves, that’s something that we can control. And if you want some more information on putting together a tax plan, looking at taxes not through a micro lens but through a macro lens, give our office a call, 844-885-4200, happy to talk with you and talk about what that would look like.

But basically, what we would do is we would use some of our proprietary software and we work with actuaries on this to calculate what would be your tax burden if you stay at the current route versus what would be your tax burden if we put together a plan of moving to a more tax efficient retirement. So this is something that we can assist you with if you want to see what that looks like.

And that will bring us to number four. And number four, so catching you up, the five ways to help your finances recover in this unexpected blow from coronavirus, number one, stay calm as you consider your next moves. Number two, update your legal documents. Number three, review your tax plan. This brings me to number four. And number four is fortify your retirement income plan.

So, because market volatility is always a risk and it’s something some investors might have forgotten during our long bull running. Trust me, I’ve been talking to a lot of people who subscribed to that concept of, “Well, I’ll just continue to collect my dividends and my interest and that 4% rule.” Well, guess what? We kind of took a punch to the face here, a punch to the gut.

So, this is where we have what we call the fortified income score. And it’s important to look at where your guaranteed retirement income streams are, such as social security or workplace pension. And we want to cover those monthly expenses because when you move into retirement, all of a sudden those paychecks fall. And if there is a short fall, you may have to find a way to close that gaps. Perhaps it’s working a few years longer or creating a plan to create more income in retirement.

And again, the last 12 years it’s been pretty easy. They’ll just look at, “Well, my investments will kick off enough interest and dividends to cover that income gap.” But if you subscribe to that philosophy, you just experience what the downfall of that is, is if the market declines, all of a sudden, your income declines as well. And it’s not anything to be ashamed of. There’s a lot of people that subscribed to that philosophy but this is the risk of it. And you’re experiencing it right now and it’s something called sequence of return risk.

So especially if you’re early or just moving into retirement and you didn’t have a retirement income plan in place, then it’s going to be a little bit of a … You’re going to have to dig yourself out of a hole a little bit and create that plan and maybe look at different strategies. And this is where … Again, I’ve had some conversations with some people that said, “Well, I can’t do anything now because the markets just declined.” Well, that’s not a plan, you’re making a choice. That’s an action you’re choosing and it’s probably not the best plan to have. Well, I don’t think it is even a plan. It’s making a choice not to have a plan.

So again, I think right now one of the most important things is to fortify your retirement income plan. And we have a tool called the fortified income score and I can share this with you. But basically, what we do is we look at your expenses or your income need versus your guaranteed sources of income and we come up with a score. And most people, at least a lot of the ones that we work with, feel comfortable in the 80% to 100% range. So think of it almost like a grade.

But I’ve seen some people, if you’re one of those people that were relying on that maybe 4% rule of, “I’ll just draw 4% of my investments whether they’re going up or down,” well, you’re experiencing what we call sequence of return risk and it’s not really a good plan when we have a lot of volatility. If everything continue going up always, then that’s great. But with this market volatility, that 4% rule maybe does not make sense.

And I have some whitepapers on this that can help explain it as well. If you’re interested in figuring out how this applies to you, give our office a call, 844-885-4200. And we can schedule a free strategy call or Zoom meeting right now. And with that, we’ll continue the conversation.

(music)

Hi, Madison and Ryan Berry here from the Castle Wealth Group, formerly The Elder Care Firm.

Our dad is Chris Berry.

He’s an attorney and fiduciary financial adviser which means he helps families plan, protect and preserve their assets.

The entire team at the Castle Wealth Group can help you with lots of important things. To tell you more, here’s our dad, Chris Berry.

Thanks, Maddie and Ryan. Here at the Castle Wealth Group, we can help you put together an estate plan to avoid probate, work with you on a tax plan to keep more money for your family and less for Uncle Sam and protect you against the devastating cost of long-term care. Our team is here for your family. I invite you to learn more about the Castle Wealth Group at our next free workshop where you will learn the three steps to create a legal, financial and tax plan for the second half of life.

Call us today to register at 844-885-4200, 844-885-4200 or visit us at castlewealthgroup.com.

The Castle Wealth Group, formerly The Elder Care Firm.

Learn more at the castlewealthgroup.com today.

(music)

All right, so we’re talking about five ways to help your finances recover in these scary times. Number one, stay calm as you consider your next moves. Now remember, we can’t control the events, we can only control our responses and not taking action is a choice in itself. Number two, update your legal documents. Right now, the most important document you can have is that power of attorney and if it’s older than 2012, it needs to be updated for those changes in law.

Number three, review your tax plan. Look at taxes not through a micro lens of minimizing taxes any specific year but review it in a macro lens. Look at taxes over your lifetime. Make sure you avoid what we call the widow’s penalty where one spouse passes away, how is that surviving spouse going to manage knowing that now there might be more tax on social security. You’re shrinking the tax bracket from going from married filing jointly to a single filing.

And then based on the SECURE Act as well, understanding what you’re leaving to the next generation and how if you’re leaving pretax IRAs to the next generation, you might be putting them in a hole from a tax perspective. Going into 2020, this was the biggest opportunity for a lot of retirees and on investors is looking at a tax plan based on The Tax Cuts and Jobs Act of 2018 to 2025, the SECURE Act and now we have the CARES Act.

Speaking of the CARES Act, one of the opportunities depending on how you’ve been affected by the pandemic this year, is prior to 59 and a half pulling money out of your traditional IRA or 401(k) penalty free. You could pull up to $100,000 right now.

So again, if you’ve been affected by the pandemic financially, one of the opportunities especially if you think taxes are going to go up in the future, is you can pull up to a $100,000 from your pretax accounts, IRAs, 401(k)s only if the plan administer allows you with the 401(k). Again, this is where the IRAs typically offer more freedom on 401(k)s but you could pull the money out of that account and pay the tax over the next couple of years. So, you’ve been able to spread out that tax.

Now, you might want to pay the tax all in this year especially if your income did take a dip. But the CARES Act which is just passed which adds again another $2 trillion in debt, gives us another tax planning opportunity. And if whoever you’re working with isn’t talking to you about these tax planning opportunities, not to throw any of the brokerage houses or broker dealers under the bus, but it’s typically something that they’re not talking to you about it. They’re saying, “Go talk to your tax professional.”

Well, give us a call at 844-885-4200. We’re more than happy to talk to you about tax planning, minimizing taxes, not over a given year but over a lifetime. Especially with the way the government is spending and giving everyone checks and adding another $2 trillion in debt. I don’t know how we’re going to handle this in the future.

Number four, fortify your retirement income plan. It’s been pretty darn easy over the last 12 years in this bull run to just assume that the market is always going to go up. In fact, I had a conversation with someone who … We were talking about different strategies and I recommended something and he commented, “Well, if I get 6% a year for the X amount of years, I’m going to come out ahead.”

I’m like, “Well, that’s great if you’d get 6% a year. But we’ve had lost decades.” So we had a decade where I think we actually lost 1%. I don’t have that right in front of me but from basically 2000 to 2009, over that time period, you didn’t get your 6% because we had the 2002 and then the 2008 collapse.

So, you don’t get that 6% every year even though that might be the average. And what you need to understand is there’s what’s called sequence of return risk. And if the market goes down early in retirement, that’s going to have a dramatic effect on your retirement. In fact, I have a graph, a spreadsheet I share with clients, especially my engineering clients. They always need to see the numbers.

So if you’re subscribing to that, that you’re going to continually earn 6% in the market and you can pull out 4% a year without any penalty, chances are you’re feeling it a little bit right now. So that’s why we need to fortify your retirement income plan. And that’s, a lot of times, where we start with our planning is we need to make sure that we have a good plan for income.

And we have a tool called the fortified income score where we look at how much, what’s your expenses or desired income is versus your guaranteed sources of income like social security and pension. And based on that, there’s a scorer associated with that on 1 to 100 and it’s kind of like a percentage. So think of it as a grade like a B is good, 80% is good. A lot of people like A, 90%, but I see a lot of people running around especially if you’re one of those individual subscribing to that 4% rule of … I was just reviewing with a family the other day of 42%. So, their fortified income score was 42%, that would be failing if you’re in school.

So, if everything goes rosy and it’s always going … The markets are going up, then yeah, it’s not as a big concern. But we know that the markets don’t always go up and that’s what we’re experiencing now. Now might be the time to fortify your retirement income plan and that’s something that we can help you with through our fortified retirement and legacy planning process. Just give our office a call and we can help you establish what your fortified income score is and maybe where you want it to be. 844-885-4200 to give us a call, you can visit us on the web at castlewealthgroup.com.

Number five, consider a risk realignment. And this kind of goes hand in hand with that income score. So, over the past 12 years while the market has been on a tear, it’s been easy to say you’re the kind of investor who’s willing to take on risk. But with this downturn, maybe it’s time to analyze just how much risk you’re really willing to deal with emotionally and how much risk you can afford. And there’s a great, great quote and I’m pretty sure it’s Mike Tyson or maybe is attributed to Mike Tyson. “Everyone has a plan until they get punched in the mouth.”

Of course, he was talking about boxing but it really applies to any part of life whether the hit comes from a health problem, losing your job or business or what’s happening to your investments. We’ve definitely been punched in the mouth by the coronavirus and it’s affected everyone. It’s affected me, it’s affected my family, it’s affected my clients and we can’t deny that. But if your plan failed because you’re too aggressive for your timeline, analysis could give you an idea of how the risk of your portfolio matches up realistically with your goals.

So let’s say we just got punched in the mouth, how do you feel about that? Are you able to kind of continue? Maybe now is the time to look at not just turtling up and just hoping everything blows over but maybe we should reevaluate our plan. Maybe now we should get a second opinion. Maybe you’re a do-it-yourselfer, have everything in Vanguard accounts and now, it’s a little bit scary out there and you need to run some ideas by someone. We’re here for you. Just give us a call at 844-885-4200. You can give us a call. We can bounce ideas back and forth.

And again, we have a very structured logical intelligent process to make sure that we’re making choices in your best interest, and we call it the fortified retirement and legacy process where we analyze five key areas for you, your income plan. We look at that fortified income score. We look at social security optimization, your investment plan, how much risk are you willing to take on.

And again, with everything going on right now, we need to be a little bit more honest with that question because, yeah, over the last 12 years, everyone said, “Yeah, let’s retroed up the risk because the markets have only been going up.” And really from an investment standpoint, you could throw a dart at the dartboard and chances are that investment would have went up the last couple of years.

But now, again, we’ve been punched in the gut and now we need to really rethink our planning. And if you need assistance with that or you want to bounce some ideas off, what we can do as a listener of the show, just say that you listened to the show. Give us a call and we can do a complementary Zoom meeting or a phone call where, first of all, we figure out kind of where you’re at. And before we even start talking finances or investments or legal planning, really it’s just how you’re hanging in there.

And that’s really the first question that I’ve asked as I pick up the phone and talked to clients on the Zoom meetings is, “How are you hanging in there? What’s changed? What’s something positive?” And I try to bring up back to that positive focus because a lot of people are looking at us as leaders and the first thing we need to do is make sure that we’re making calm, logical, intelligent rational decisions when it comes to legal, financial and tax planning. This is not the time to be making emotional decisions.

So, a lot of times when I’m talking to my clients or talking to people who call in from this radio show, one of the things that we first do is, not to get all wishy-washy or like essential oils and crystals but we need to get our mind right. We need to make sure that we’re making calm, rational decisions. And then from there, we look at developing that income plan. What is your fortified income score? Let’s look at our investments, how comfortable are we with the money that we have in the market? How much risk should we be taking on in that portfolio.

Third, we look at tax planning. This is a huge opportunity right now. I can’t stress this enough and for the people who are turtling up and not taking action right now, you’re missing a huge tax planning opportunity. Going into this year, this was really a sweet spot in terms of tax planning and then adding on top of that with a downturn in the market, there are some huge opportunities to come out of this over the next, say, five years in such a better position from a tax perspective. I can’t stress this enough. I really think that the taxes are going to have to go up with us being 23, was it $25 trillion in debt now. The tax train is coming.

And if you’re not pulling money out of those IRAs or considering a strategy that involve pulling money out of the traditional IRAs, pulling that money off of the train tracks to avoid this tax train that’s coming, you’re going to be hitting taxes because guess what, if taxes go up, the value of your IRAs go down. It’s no different than having an adjustable rate mortgage. Almost everyone agrees that the government has to adjust the tax rates up. Well, guess what? If they adjust the tax rates up, your million dollar IRA might be $300,000 post tax rate.

Now, well guess what? Instead of it might be only $500,000 instead of that million. So, if they adjust taxes, understand that the value of your traditional IRAs go down. So if you don’t have a tax plan for the next five years, you’re really missing a huge opportunity right now. And again, this isn’t something that your Morgan Stanley guy, no offense to them or Edward Jones or your investment guy. If you have an investment guy, that’s great. But you need to have a plan. There more than just managing investments. It’s all about having a true plan.

And again, you might have someone that does your taxes or you might do them yourself. Well, that’s looking in the rear-view mirror. We’re talking about looking forward, not looking at taxes from a micro lens but from a macro lens.

So, five ways to help your finances recover, stay calm as you consider your next moves. Number two, update your legal documents. Number three, review your tax plan. Number four, fortify your retirement income plan. This is where we look at your retirement income score and if you don’t have one or you’re not happy with it or you don’t understand how that works, just give us a call, 844-885-4200. And number five, consider a risk alignment.

And again, I was talking about the . First, we look at income planning, making sure that we’ve optimized social security. Second, we look at your investment plan, making sure we have the right amount of risk. Third, a tax plan, making sure that we have a plan for taxes putting yourself in the best position possible and making sure that we maximize what’s left to the next generation.

Fourth, healthcare planning, so looking at what is the best Medicare plan for you and then very important, looking at long-term care cost. Cost of a nursing home these days is $12,000, $13,000, $14,000 a month. The question is how are you going to go ahead and pay for that? And we have different strategies that we can utilize to help you plan for long-term care. And that’s something that’s been interesting, is I’ve seen a lot of clients or lot of people who we were going down the route of planning for long-term care but then with this market downturn, they’ve decided not to move forward with that.

And that raises two red flags to me. One, guess what? If you have a stroke, they don’t care how the market is doing. You’re going to have to find a way to pay for long-term care. And that’s just the cold hard facts. And then number two, that tells me that you don’t have a true plan. You don’t have a plan for market downturns. You should have a plan. The market is not always going to go up. Yes, it’s been going up for the last 12 years but that’s a little bit of an anomaly. The market is typically relatively volatile.

We typically have a dip every few years, like once within every 10 years, we have some type of dip. And if your plan didn’t take that into account, you’re making different decisions based on that, maybe it’s time for a second opinion. Because the clients I have been talking to who we’ve been working with to managing their finances, it’s a much different conversation than those people who have been doing it themselves.

Where a lot of times this is the way the call goes, I would say, “Hey, how are you hanging in there? Is your family safe and healthy?” “Yeah, yeah, yeah,” ask a couple of questions about the markets where I think it’s going. But a lot of times it’s, “Yeah, we’ll just follow the plan. We had our time horizons. We understood what they are. We understood that 2020 was a year of volatility.”

No one expected this, but again if you have a plan, if you have your fortified income score, if you understand the idea of time horizons in terms of your investments, then you’ll be able to weather the storm. But if you’re just looking at it just as how much money can I invest and I don’t have an income plan and let’s get as aggressive as possible and not look at time horizons, then yeah, you might be struggling a little bit.

And I’m not trying to put you down. There’s a lot of people on that bucket but again, you don’t have to be there. You have a choice. And it’s all about having a plan at the end of the day. So, if you are struggling a little bit, you have questions, you want to a second opinion, you don’t feel comfortable what’s going on given the events, you want some help figuring out what is the next response that you should do, the next action, give our office a call, 844-885-4200. We’re here for you.

If you’re a healthcare provider right now and you don’t have a medical power of attorney, we’ll do that for free. Thank you so much for your service. I looked at 9/11 and it’s time we thank our first responders, our firefighters. I think this pandemic, we need to really be reaching out to those healthcare providers. They’re really frontlines for us all. And I appreciate all the work and efforts. I have some clients who’ve been working nonstop 12-hour days and I just thank you for that.

So, thank you so much. Make it a great week.

Learn more about Chris Berry and how we can help your family by visiting online at the chrisberryshow.com. That’s the chrisberryshow.com. You can also call Chris Berry at 810-355-2584. That’s 810-355-2584.

This program content reflects the opinions of Chris Berry and his guests, not the Elder Care Firm, Prosperity Capital Advisors or the Castle Wealth Group and is subject to change at any time without notice. Content provided herein is for informational purposes only and should not be used or construed as investment or legal advice or is a recommendation regarding the purchase or sale of any security or to follow any legal or tax strategy. There’s no guarantee that the strategy, statements, opinions or forecast provided herein will prove to be correct.

Past performance is not a guarantee of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses which would reduce returns. All investing involves risk including the potential for loss of principal. There’s no guarantee that any investment plan or strategy will be successful. We recommend that you consult with a professional dedicated to your needs. This program is furnished by The Elder Care Firm.

Castle Wealth Group Legal in Media

Send Us a Message