Getting Prepped with Klaas Financial

Episode Transcript

Speaker 1 (00:03):
And our phone lines are open for you right now
at six oh eight three two one thirteen ten. That's
three two one thirteen ten. If you have questions for
our retirement planning professionals from Class Financial, joined this week
by Eric Schwartz and CJ Closs. As mentioned, they are
our retirement planning professionals. You can learn more about Class Financial.
They've got a great website coss financial dot com. That's
coss k l aa S Financial dot com and their

(00:25):
telephone number six oh eight four four two five six
three seven. No charge for that initial gets to know
you appointment tech Class Financial. It will be complimentary to
you again their number six oh eight four four two
five six three seven. CJ, how you doing this morning.

Speaker 2 (00:39):
I'm doing great, Sean Happy New Year.

Speaker 1 (00:41):
Happy New Year to you as well. And I'm looking
at class financial dot com right now. And you've got,
of course the winter scenes up on your up on
the thing and gets you're thinking about fun things to do.
And I saw some gingerbread houses and I realized you
had a little competition for folks that I didn't.

Speaker 2 (00:56):
Know you knew about that.

Speaker 1 (00:57):
I saw you post something on this How did you
do with the gingerbread competitions.

Speaker 2 (01:02):
I lost this yere Sean, I've I've had like a
five year wind streak. Yeah, and I lost because I
decorated with my youngest and we decided to go with
kind of a weird theme. We'll call it a scary
house theme. And people didn't like it.

Speaker 1 (01:17):
Oh and for folks that don't know you, you go,
there's a little competitive streak in yours slightly slightly Well,
better luck next year, and uh and uh it's it's
really good to talk with you again. We mentioned the
website two class financial dot com. Really good resource.

Speaker 3 (01:31):
Eric.

Speaker 1 (01:31):
How have you been, Eric Schwartz? How's how's your new
year so far?

Speaker 3 (01:35):
You know, it's it's going pretty well. I can't complain yet, Sean.

Speaker 1 (01:38):
You haven't lost any gingerbread contests, have you? No?

Speaker 3 (01:41):
No, But CJ's not lying. He's been on a pretty
good winning streak recent.

Speaker 1 (01:45):
He is, Yes, he has. And it's always fun to
you know, as we look forward to the new year,
and always fun to talk with you guys about about
some important conversations and fun conversations as well as you
talk about hitting retirement goals and how you kind of
make that a reality and it's a big deal for folks.
It's one thing to have kind of high in the
sky thoughts, is another thing to really start working on

(02:06):
that plan and working to achieve that goal. And we'll
get into that in just a moment. A couple of
things I mentioned, of course, the phone lines are open
six oh eight three two one thirteen ten. That's six
oh eight three two one thirteen ten to get on there.
You can learn more about Class Financial on their website
class financial dot com and there telephone number six oh
eight four four two five six three seven. And before
we get rolling on this week's conversation, another great feature

(02:28):
of the program is the Class Quiz question Leak your
chance to win a fantastic prize. This week no exception,
our friends from Class Financial provided a twenty five dollars
gift card to I Hop for the winner of the
Class Quiz question Leak. I'll tell you a bit, a
little bit later on the program how you can win
that little tip. Don't listen closely to the program, oftentimes
question and answer come up during the show. And before
we start talking about this week's conversation, let's actually roll

(02:49):
back to a couple of weeks ago and take a
look at class quiz question Leaku get the question and
the answer there as well. Yeah.

Speaker 3 (02:56):
So, as always, thank you to everyone for listening. From
a couple weeks back was Dean of Middleton and the
question was true or false. IRA contribution levels in twenty
twenty five will remain the same at seven thousand dollars
if you are under the age of fifty and the
answer to that is true.

Speaker 1 (03:15):
Yes, fantastic. Congratulations to Dean. You two can be like
Dean pay coals attention to the program a chance to
win a little bit. Later on in the show, as mentioned,
of course, we are going to be talking about successfully
hitting your retirement goals, and I guess Cejy that you
might want to discuss how much we need to save
today to make that a reality. Don't you want to
do that?

Speaker 2 (03:34):
Yeah? Absolutely, So we're excited to share strategies for ensuring
you're on the right path today to achieve the retirement
you dream about tomorrow. So visualizing the bullseye and systematically
working towards your goals is essential, and as we move
into twenty twenty five, this is a perfect time to
reassess your goals. So for many of our listeners over fifty.

(03:57):
Retirement that once seemed far away may now just be
five or ten years away. And the big question is
am I doing what I need to do to retire comfortably?
You know, how much will you need in your retirement
and investment accounts when you retire? These are questions you
might be asking now. According to Bank Rates twenty twenty
four Financial Regrets Survey, thirty seven percent of baby boomers

(04:20):
ages sixty to seventy eight say their biggest financial regret
is not saving enough for retirement. Pretty interesting. So darn
near forty percent of retirees sage sixty to seventy eight
say their biggest retirement regret is not saving enough for retirement.
So we generally advise that while some people need call it,

(04:41):
seventy to eighty percent of their pre retirement income to
maintain their lifestyle, others may not. So you'll often hear
us on the show talk about what we call rules
of thumb, and often people say, hey, our household brings,
you know, has one hundred thousand dollars a year of income.
How much of that will I need to live comfortably
and retire? I'm sorry retirement, And we will often say

(05:02):
seventy to eighty percent of that. The issue is rules
of thumb are terrible when you try to make individual
applications because if we were to take all the data
and average it up, that seventy to eighty percent number
might be true. But listen, Eric and I work with
people who need thirty percent of their working income in retirement.
We have others who need one hundred plus percent of

(05:24):
their retirement income in retirement or sorry, their pre retirement
income in retirement. So be cautious of the rules of thumb.
One good place to begin if you're thinking about how
much you need to replace would be just see what
your current take home income is, i e. What is
hitting your bank account. That is a good place to
start for building out what you might need in retirement. Now.

(05:48):
Maybe you started saving late or other financial responsibilities have
delayed your progress, but the key is to act now
so that so that you can move closer to your
target with every step. So what Eric and I are
going to do today is we're going to look at
five action steps you can take to help hit your
retirement bullseye in the future.

Speaker 1 (06:08):
Dokoin's Morning with CJ. Closs and Eric Schwartz our retirement
planning professionals from Class Financial, the website class financial dot
com that's coss k l as financial dot com and
their telephone numbers six soh eight four four two five
six three seven. So CJ. Let's get started on some
of those action steps and some of the areas that
you should be really focusing in on today.

Speaker 2 (06:28):
Yeah. Action step number one would be to shore up
your retirement and other savings accounts, So thank you know
four oh one K, four oh three B accounts. Question
you should be asking is are you maximizing your contributions.
We suggest that households save somewhere between ten to fifteen
percent of their gross household income towards retirement and take

(06:49):
full advantage of any employer matching that is available to you.
This is what we call free money towards your retirement.
And in twenty twenty five, you can defer up to
twenty three thousand than five hundred dollars into your four
to one K or four h three B think employer
sponsored retirement plan for the most part, and if your
age fifty, you can add another seventy five hundred dollars

(07:11):
to that. Twenty three thousand, five hundred for a total
of thirty one thousand. So again keeping it simple, four
O one K four h three B. If you're under fifty,
it's twenty three thousand, five hundred. If you're over fifty,
the maximum you can put in this thirty one thousand,
and beginning in twenty twenty five, here's interesting little factor.
If you are between the ages of sixty and sixty three,

(07:34):
you can contribute another eleven thousand, two hundred and fifty,
totaling thirty four thousand, seven hundred and fifty. Pretty interesting stuff. That.
By the way, that eleven two hundred fifty is your
catch up instead of that seventy five hundred we were
talking about before. But you get the idea. You want
to pause and say, am I contributing enough to my

(07:55):
retirement accounts to hit that ten to fifteen percent of
gross household income? And am I maxing out if I
have the capability of doing so? Now, IRA accounts are
a little bit different. If you're eligible, you can contribute
at least seven thousand dollars if you're if you're fifty
and younger, and then you have an extra thousand dollars
catch up if you're over the age of fifty for

(08:17):
eight thousand dollars total. Also consider funding a spousal IRA.
If you're married and your spouse isn't working, you can
contribute not only to yourself, but also to your spouse's
retirement account. And then, of course, depending upon your total
income and taxability of income, you may want to consider
wroth irays or WROTH for a one case, because that

(08:38):
offers tax free growth in the future if you leave
it alone long enough and if you get to retirement.
I would caution you we did a show on this
a couple of weeks ago in that probably too many
people are in our opinion, too many people are trying
to contribute to roth accounts because they don't understand how
the tax code works. But WROTH account especially if you're

(09:01):
looking at conversions or depending upon your age, can be
really great. And finally, if you're not contributing enough, a
lot of times Eric and I, just saying you should
contribute more is is not encouraging. And so one thing
to think about is just to say, hey, each time
you get like a cost of living adjustment or a
raise each year, as you flip into the new year,

(09:21):
consider increasing your contribution by one percent per year. This
will help you to slowly, over time build up to
that ten to fifteen percent target.

Speaker 1 (09:29):
Last time you and I spoke in person, CJ. I
had mentioned to you since doing the show and getting
regularly reminded, it's been quite I've taken that advice and
I've been I can't say enough about about how rewarding
that's been. When you see that, you see that statement
at the end of each year, you going, oh my goodness, nice, nice, nice, nice.
So it's really really good to hear from CJ, CJ.

(09:52):
Closs and Eric Schwartz, our retirement planning professionals from Class
Financial speaking up Class Financial. Yeah, haven't been to the
website yet, Head on over there. Check them out class
dot com. That's COSS k l A A S Financial
dot com and their telephone number six O eight four
four two five six three seven. No charge for the
initial get to know you appointment at COLSS Financial. It
will be complimentary to you again their number six oh

(10:12):
eight four four two five six three seven. Talk with
Eric a bit about things like CDs or bank savings,
other cash council, get some of those details and so
much more. Next as Money in Motion with COSS Financial
continues right here on thirteen ten. W I B A.
I answers to retire, talking this week with our retirement

(10:36):
planning professionals CJ. Closs and Eric Schwartz. They come to
us from Colass Financial, the website Coss Financial dot com.
That's Coss k l a a s Financial dot com
and their telephone number six O eight four four two
five six three seven. Talking with CJ and Eric this
morning about thinking ahead to your retirement in ways and
things you can do right now to reach those goals

(10:58):
and to make it a reality.

Speaker 3 (10:59):
Do forget.

Speaker 1 (10:59):
If you miss a part of the program, you can
always listen back online at class financial dot com. That's
Class k l a a s Financial dot com. Also,
while you're there, you can sign up for the weekly
Market Pulse newsletter. It's a great weekly snapshot of what's
been going on in the markets and some other great
information delivered to you in your inbox every other week
or so. It's again something I subscribed to a number
of years ago, and I love getting it. Also as

(11:20):
a link to the podcast again that available to you
at class financial dot com. So, Eric, as we kind
of break these these these action steps down, what about
things like bank saving CDs or other cash accounts. What
are what are some of the areas there that we
need to need to be aware of when it comes
to action steps.

Speaker 3 (11:38):
Yeah, so something you know, we'll talk about having an
emergency fund and making sure that you have that call it,
you know, six to twelve months of savings in the
bank just for a rainy day, right, we know, things happen.
But one of the things that's become important here over
the last few years has really been making sure that
we're being cognizant of the interest rates or receiving on

(12:00):
those dollars. At moderate levels, it erodes your purchasing power
over time. So when you're looking at where your emergency
fund is currently sitting, think about options like a high
savings account, a money market account, or or CDs. Now
I knows as interest rates fluctuate, the CDs and things

(12:20):
like that require a little bit more maintenance and making
sure you're you know, hitting the right timeframe and things
like that. But just really beyond making sure you have
money set aside, make sure it's sitting in a place
that's going to get you them some return in the
short term. Another really really important thing is is looking
at reducing or in some cases even eliminating your debt. Okay,

(12:44):
so debt can undermine your financial security and retirement really,
really easily. I think a lot of people here, you know,
especially in today's day and age, when you when you
buy something, it's not how much does it cost, but
it's how much is it per month? Right? People think of, oh,
I can finance it, and you know, over time it's
not even really that much money. Well, when you do

(13:06):
that enough times, it does become a lot of money,
and when you're trying to manage your monthly cash flow,
it becomes it becomes a lot more difficult. Currently, if
you look at the baby boomer generation, which is you know,
either in retirement or rapidly approaching, depending where they kind
of fall in that in that timeline, the average mortgage

(13:29):
for a boomer right now is about one hundred and
ninety one thousand, credit card debt is a little over
sixty five hundred, car auto loan or car debt is
over twenty one thousand, and there's you know, an average
balance of about forty three thousand dollars in student loans,
So plenty of debt out there stealing cash flow from

(13:50):
from folks, what can we do about this? So the
biggest I think the first step in most cases is
paying off your credit cards. So, especially as interest rates
over the last two to three years have begun to rise,
those interest rates are the first things to shoot up.
So tackle that high interest debt first. You can use

(14:14):
something like a credit Karma or annual credit report dot
com to kind of monitor your your accounts and stay
on top of that and make sure you're tracking your spending. Okay,
so create a budget. There's apps out there, like you
know y nab Stance where you need a budget. Personal
Capital is another one, I know, popular one for a

(14:35):
while with Mint that's been sort of absorbed into credit Karma,
so it still kind of exists at some level. But
find a way to make sure that you are tracking
what you're spending and that the biggest part is that
you're doing something. So I often talk to people and
they say, yeah, I have this app and you know,
it connects to my credit card, and I kind of

(14:57):
kind of watch it and see if I can, you know,
find some patterns or trends or whatever it might be.
But sometimes it's just like, hey, I have an Excel spreadsheet,
and I put my expenses in there because.

Speaker 2 (15:08):
It keeps me accountable, so it doesn't.

Speaker 3 (15:10):
Have to be super complicated. Make sure you're doing something
to manage your expenditures.

Speaker 1 (15:17):
Talking this morning with Eric Schwartz and CJ. Closs, they
are our retirement planning professionals from Class Financial getting a
list of some great action steps. Of course, as we're
into the new year, a lot of us focusing in
on bettering ourselves and bettering our future. Some really good
tips this morning. Don't forget if you miss any part
of today's program, I want to listen back to this
or other shows. You can always head on over to
class financial dot com. That's coss k l Aasfinancial dot com.

(15:40):
There twelve for whatever six oh eight four four two
five six three seven, No charge for the financial'll get
to know you, apployment dech colss Financial. It will be
complimentary to you again their office number right here in
Madison six oh eight four four two five six three seven.
We will talk a little bit about a little bit
more about action steps well. Also do the Money in
Motion listener question corner as well as the Lost Quiz
question a week we will do all of that coming

(16:02):
up next as Money in Motion with Class Financial continues
right here on thirteen ten, WIBI talking this week with
our retirement planning professionals CJ Closs and Eric Schwartz. Of
course they come to us from Class Financial online colssfinancial
dot com. That's k l aas Financial dot com and
they're telephone number six. So eight four four two five
six three seven, talking to this week about some action plans,

(16:24):
some steps to take when it comes to working towards
and achieving your retirement goals. Things you can do now,
things you can do today, things you should be checking
off your list. And CJ, what about paying off our
more mortgages before retirement? Is that something we should be
aiming for.

Speaker 2 (16:40):
Yeah, great question. But before I answer that, so to
remind you were looking at five action steps. First on
was shoring up your retirement accounts and savings. Number two
that Eric just went through here a moment ago was
keep an emergency fund, and then number three that Eric
reviewed was eliminate or reduce debt. The reason I wanted
to go through that is because now we are to
number four, which is planned to pay off your mortgage,

(17:03):
which falls right in line with Eric's original comment of
reduced debt. So here's why eliminating your mortgage reduces your
required cash flow to fund your retirement. Now, listen, everybody,
I live in the real world just like you, and
so I understand that sometimes life can throw your lemons

(17:25):
right and you do your best to make lemonade out
of that. But goodness, can you pay off your mortgage?
Sometimes it's not possible, that's okay, but if it is
within your control, we would suggest that you do so.
The second way I see this whole mortgage elimination play
out in the real world is a bunch of misinformation.

(17:46):
Misinformation Number one would be but CJ, it's good to
have a mortgage because you can deduct the interest. Listen, everybody,
Oh my goodness, that is such terrible guidance. If you
are holding onto a mortgage that could be paid off
because you want the interest deduction, then you're really bad

(18:08):
at math. You're just really, really really bad at math.
And I don't want to get into the actual math
of this, but especially nowadays under the Tax Cuts and
Jobs Act. This could change in the future. But under
the Tax Cuts and Jobs Act, you're limited on how
much mortgage interest you can deduct in the first place,
and the number of people who use that mortgage interest
deduction and get a huge tax benefit out of it

(18:29):
are few and far between, not to mention just the
risk it adds to your future retirement. And finally, another
kind of real world application that I see as it
relates to this whole payoff your mortgage or I should
say a kickback I receive, is people say, why would
I ever pay off my mortgage when it's three percent?
Then everybody knows I can get four percent on my

(18:50):
money market and savings account. Listen, if you want to
play the interest rate arbitrage game, that's up to you.
But I would say to you if we again survey
our clients and say, like in practice, when you are
in retirement, what do you like the most? Really high
on their list is being debt free because the cloud

(19:12):
is gone, right, the cloud over your head of like, oh,
I got to make sure I have three thousand dollars
a month coming in otherwise I can't meet my mortgage payment.
When your debt is gone, whether you've got an interest
rate arbitrage opportunity or not, you suddenly find that just
the cloud that was over your head is gone. So
long story short, pay off your mortgage. That is action

(19:33):
step number four.

Speaker 1 (19:35):
Talking this morning with CJ. Closs and Eric Schwartz, our
retirement planning professionals from Class Financial, always fascinating conversation, of course,
So we work through these action steps. We got one, two, three,
and four, which brings us now CJ to action step
number five.

Speaker 2 (19:52):
Yeah, so action step number five would be to automate
your retirement savings and focus on your goals. So when
we say automate retirement savings, We've talked about this on
the show quite a bit, but we have found that
people succeed or fail in reaching their goals not for
lack of knowledge, but for lack of execution. So let

(20:16):
me repeat that people succeed or fail in achieving their
financial or retirement goals not for lack of knowledge, but
for lack of execution. So what do we mean by this, Well, listen,
we all live, as I just mentioned before, in the
real world, and in the real world we have companies
marketing the heck kind of things to us, right, and

(20:36):
if you say to somebody, hey, you've got one hundred
dollars in your hand, you can either save that and
never see it again until you're sixty, or you can
take that one hundred dollars and buy the bright, new
shiny object that just got marketed to you and your
family a billion times through the TV. What do you
think people are going to do, well, They're going to
buy the object. So when we say automate your retirement savings,

(20:58):
one of the best ways to save for the future
in terms of like building out your goals is to
pay yourself first. And what we mean by that is, hey,
before that money ever hits your bank account, you deduct
it right out of there into your retirement account. Or
let's say you don't have a company sponsored retirement account.
Then is soon as it hits your bank account, literally

(21:19):
the next day is transferring out to your IRA. If
you don't do this, I will just warn you, the
likelihood of your success drops precipitously. So said another way,
if you are relying on what is left in your
bank account at the end of a month to save,
it's unlikely that you will meet any long term financial goals.

(21:41):
So we would suggest automating your retirement savings, automating the
building of your emergency reserve funds, and then finally within
that it's kind of like know thyself. And what I
mean is there's some people on the air right now
that are listening to me going, I have no idea
what he's talking about. I have no problem not spending money.
Like CJ, what are you even saying? I always have

(22:03):
money left in my bank account at the end of
the month. Great, God bless you. That's amazing. But there's
a lot of you listening to me right now who
are kind of like looking over your shoulder being like,
is he looking at me? Because you know exactly what
I'm talking about. You're the one who's like, if there's
money in the bank account, it just goes. I don't
know why, but it just goes. It's gone. You put
cash in my hand and it's gone. So know thyself

(22:25):
would just be know how you function and operate and
learn to build rules and systems and automation to make
sure that you still meet your goals within your bad
emotional financial patterns. Hope that makes sense.

Speaker 1 (22:38):
It makes perfect sense. Fantastic information and really good perspective
from CJ. Closs and Eric Schwartz, our retirement planning professionals
from Class Financial. It's a great day to start that conversation.
Of course, you can make an appointment with Class Financial,
not going to charge you anything for the initial gets
to know you appointment till I gotta dock bone get
a call. Six oh eight four four two five six
three seven. That's for the office right here in Madison.
Again that number slower six oh eight four five six

(23:00):
three seven. Learn more online COSS Financial dot dot com.
That's Coss Klaas Financial dot com. Also, while you're there,
you can always email a question in our Money and
Motion listener question corner, And this week Chris took the
time to write it. He says, I've heard that if
I wait to begin my Social Security until I'm aged seventy,
I will get a bigger benefit. Does it make sense

(23:21):
to plan for that if I'm unmarried? And I will
put that on your shoulders, CJ.

Speaker 2 (23:29):
That's a great question, Chris. I guess let's begin with
first off, thank you for submitting that question. And then
number two, just remind everybody that you can submit a
question online as well. But yeah, great question. If I
am unmarried and I've heard that social Security will go
up until I'm aged seventy, should I wait to do that?
And the answer is maybe, maybe, what do we say?

(23:50):
It depends. So here's what everybody should know. While you
can draw Social Security as early as age sixty two
on your own, what we call retirement benefit, full retirement
age is somewhere between age sixty six and sixty seven,
depending upon the year that you were born. Full retirement
age is just what Social Security would call your full
unreduced benefit. You draw before that, it's reduced, but then

(24:13):
they offer what are called these delayed retirement credits between
say full retirement age. It we'll call it sixty seven
up to age seventy, and if you wait, it grows
by about eight percent per year. So this is what
Chris is referencing. Should I wait? The answer is maybe
if you were married, Chris, I would say yes, very
very strongly, that might be a great choice, because what

(24:35):
happens everybody is if one of you can get to
the highest possible benefit amount, if the other one dies,
one of the Social Security benefits goes away, but you
keep the higher of the two. So if you're married
and you want to get one of those benefits as
high as possible, so that then if one of you dies,
you keep this really high benefit amount. It acts almost

(24:57):
like an insurance policy for the household. But given Chris
that you said that you are unmarried, the primary factor
there would be what we call break even calculations and
longevity calculations. So break even is just how long will
it take you to actually be money ahead if you
wait to age seventy And by the way, Chris, that
age is typically somewhere between eighty and eighty one. And

(25:21):
then and then number two would be mortality calculations, which
is just like, Chris, how long did everybody and your
family live? Right? And if you say, well, everybody my
family died at seventy two, I'd go, hmm, probably don't
wait till age seventy to draw your social security. Conversely,
if Chris says I'm healthy as all get out and
everybody in my family live to age one hundred, yeah,
then you might want to wait till age seventy because

(25:42):
as long as you live beyond eighty one or eighty
two when those break even calculations hit, you could be
money ahead. So listen. I hope that's helpful for everybody
to listen to me ramble through the different factors that
impact social security. But I will tell you be careful
of these rules of thumb. Again, all of you should
be meeting with your advisor accountant to come up with custom,

(26:04):
custom responses to these questions for your household.

Speaker 1 (26:07):
It's always interesting getting to getting some perspective on kind
of how the stuff can play out and some of
the considerations, and it's so important to have that personalized conversation.
One of the great things about Class Financial is at
first get to know you appointment at Class Financial. It's
not going to cost you a thing. Oh, I got
to just pick up phone. Give the call six so
eight four four two five six three seven. That's six
soh eight four four two five six three seven. Learn

(26:27):
more online cossfinancial dot com. That's coss klaas Financial dot com.
Time now for the Coss Quiz Question the Week. It
works like this. In just a moment, I'll ask you
the Class Quiz question the League. You'll then have thirty
minutes from the today's program to call the Class Financial
office right here in Madison at six oh eight four
four two five six three seven. If you are the
first call with correct answer, you'll win this week's prize,
which is a twenty five dollars gift card to I

(26:50):
hop this week's COLSS Quiz Question the week is this.
If you are fifty five years old in twenty twenty five,
how much can you contribute into your retirement plan at work?
Is it twenty five thousand dollars or thirty one thousand
dollars telephone number six oh eight four four two five
six three seven first gart correct answer won that twenty

(27:11):
five dollars gift card to IHOP don't for good as well.
That's class Financial office right here in Madison. Six oh
eight four four two five six three seven CJ. Eric.
It's always great chatting with both of you, guys. Have
a fantastic day and happy New Year. Thanks Sean, Thanks Ton,
Take care guys. Doctor Marty Greer comes your way next
from checkout vet here on thirteen ten Wiba

Speaker 3 (28:02):
S