Nine Mistakes

CJ and Maleeah talk about the nine mistakes people make when preparing for retirement.

Episode Transcript

(00:00):
This is Money in Motion with ClassFinancial, a fun and informative show designed
to help you get answers to allyour retirement questions in one place, and
our phone lines are open for youright now at three two one thirteen ten.
That's three two one thirteen ten.Gets you on the air with our
retirement planning professionals from Class Financial,CJ, Class and Malia Quavis. You

(00:23):
can learn more about Class Financial ontheir website Class Financial dot com. That's
Klaas Financial dot com. The telephonenumber six O eight four four two five
six three seven, no charge forthe financial gets no you appointment at Class
Financial. It is complementary to you. Again, they're telephone number six O
eight four four two five six threeseven and of course telephone number to get

(00:45):
on the air with CJ and Maliasix O eight three two one thirteen ten.
That's six O eight three two onethirteen ten. Couple of things keep
in mind during the program mentioned checkingthings out on the website. I gotta
mention as well, we'll do theClass Quiz Question of the week coming up
a little bit later in the show. Chance to win a fantastic prize a
twenty five dollars gift card too BestBuy pay close tension. Typically, both
the question and answer to the CoastQuiz Question Week come up during each week's

(01:08):
program. Before we start our conversationthis week about mistakes people need to avoid
with retirement planning, let's say helloto our retirement planning professionals, CJ.
How are you doing this morning?I'm doing great? How are you?
Sean? Doing really well? Andof course joining us as Malia Quavis Malia,
where the heck have you ben?Did you get some vacation time or
something? Yeah? I did.I spend a lot of time waiting for
an airplane to show up. SoI'm happy to be back. Yes,

(01:32):
that is happy. That is theabsolute worst. Good to have you back.
And we've got again a very excitingand very informative, informative show ahead
about some mistakes folks need to avoidwhen it comes to retirement planning. Mentioned
the Class Quiz question the week againchance to win a twenty five dollars gift
card to Best Buy that provided byour friends at Class Financial. And before
we start this week's conversation, let'stake a look back at the Class Quiz

(01:55):
question leak from a couple of weeksago get the question and the answer there
as well. Yes, So thanksfor listening during the summertime, all of
you callers that try to get theright answer after our shows two weeks ago.
Our question was true or false thetwo most common forms of employer contributions.
Notice I said employer contributions into afour oh one K plan included include

(02:20):
a non elective three percent contribution ora matching formula. So we had a
great discussion two weeks ago about employersand what they can do in designing their
own four one K plans for theiremployees. So the correct answer to that
was true. Congratulations to Tom ofWaterloo he got that answer correct. And
listening carefully today for the question youcan win something too, and you mentioned

(02:45):
also last a couple of weeks ago, the program great opportunity if you did
miss any of that show. AsMillia mentioned, of course, it is
kind of that summer holiday season,a lot of us taking road trips or
heading out of town to go visitfriends, family, or spend some time
on the beach. If you missany part the program, you can always
listen back at class Financial dot com. That's Klaas Financial dot com. While

(03:05):
you're there you can sign up forthe weekly Market Pulse newsletter. It's a
great weekly email you'll receive it givesyou a snapshot of what's been going on
in the markets. Also a linkto the most recent program that available for
you at class financial dot com.Tell number six to eight four four two
five six three seven and the numberto get on the air this morning six
O eight three two one thirteen ten. That's six O eight three two one
thirteen ten. So this week we'regoing to be talking about nine mistakes people

(03:29):
need to avoid with their retirement planning. What should we then be aware of
when it comes to our own planningCJ. Yeah, being retirement planners,
ideally, we want to help peopleavoid these mistakes, and so we're going
to go through a bunch of commonmistakes nine to be specific, that we
see people making as they approach retirement. So if you have your pen and

(03:51):
paper out, you can write thesedown or by the way, we do
post this podcast to our website,so you can always go there and re
listen to it if you don't havepen and paper in it. But starting
with and what we're going to do, by the way, is we're going
to name the mistake, and thenwe'll give a little bit of an explanation
for each of these nine. Somistake number one is staying too aggressive in

(04:12):
your portfolio as you approach retirement.So this one is somewhat intuitive, but
we see it commonly. It's thisidea that, hey, I want to
make up for lost time, andso I know I'm close to retirement,
but gosh, the market's done really, really well, and some of my
friends have said, I can dumpit in these few stocks and I'll make
a lot of money. And soI know I'm getting close to retirement,

(04:33):
but I just really want to ekeout every bit of return that I can.
This is not a good idea becauseultimately, the years in which you
can and should be taking on morerisk are the years that you are further
away from retirement and don't need incomeout of that portfolio. As you get
closer to retirement, whether you feelahead or behind, you should, in

(04:57):
most circumstances look at backing off thatrisk. Do investments that can generate income.
These are known as fixed income investments. Whether this be a money market
fund or a CD or a bondof some sort. That's typically what people
will start to back off into asthey get closer to retirement. So again
mistake number one staying too aggressive inyour portfolio as you approach retirement. Don't
do that. Mistake number two isretiring without considering health insurance costs. As

(05:24):
a matter of fact, of thenine we're going to discuss today, this
is one of the top. Asa matter of fact, the most common
age we see people retiring at isage sixty five. For anybody who knows
when Medicare begins, that's at agesixty five. And you know why people
are waiting till sixty five to retire, because then they can just flip onto

(05:45):
Medicare. If you don't flip ontoMedicare because you're not sixty five yet or
you're not eligible, then you needto be aware of a few common options
that are available. Common option numberone would be COBRA. COBRA stands for
Consolidated to Bust Budget Reconciliation Act.We're going to go read the act,
have fun with that, but theidea of it is COBRA is this government

(06:06):
required extension of your group health insuranceplan for employers with twenty employees or more
for up to eighteen or thirty sixmonths. Again, you need to actually
talk to your employer about this,make sure they're part of that requirement.
But the idea here is you canstay on that group plan instead of having
to hop to something else for someset period of time. Now here's the

(06:30):
key. This can be expensive becauseif the employer was covering a good portion
of that cost before, now you'regoing to be in charge of all of
that premium plus an extra two percentfor administrative cost. So you're going to
want to be aware of that option, but also aware of the cost.
Another option we see again if you'reretiring or just leaving employment before age sixty

(06:51):
five is your spouse's health insurance.So if a spouse or partner and they
have health insurance it's available to youthat you can jump on. That could
be another good option. Another onewould be if you're a veterans. Sometimes
you can get VA benefits, andso that's something to kind of pause if
you are a veteran, talk tothe VA and see if you have kind
of a health plan that you canget there. And then finally is the

(07:14):
Affordable Care Act. So Affordable CareAct is just think of this as the
major medical insurance that you can getif Cobra doesn't work or Cobra has run
out, or you don't have aspouse's health insurance. You don't have VA.
You're under sixty five, so Medicareis not there. You need to
get a health insurance plan. Thisis where your state exchange comes into play,
which is the Affordable Care Act.You can go to healthcare dot gov

(07:38):
and get more information about that.This varies greatly. They call it the
Affordable Care Act, although I chuckleat that naming methodology. And this is
not a political statement, by theway. This is just I chuckle at
it because it's really not affordable formany people. It's affordable for some,
and that's good. If your incomeis low enough, it can be really
affordable for you. If your incomeis higher, it can be super not

(08:01):
affordable. And so just you're gonnawant to get educated on what that looks
like. Really important information this morningfrom CJ class emleequabas our retirement planning professionals
from Class Financial. Great opportunity rightnow, get on the air if you've
got a question six o eight threetwo one thirteen ten. That's three two
one thirteen ten. Learn more aboutClass Financial on their website Class financial dot

(08:22):
com. That's Class klaas Financial dotcom and their telephone number six O eight
four four two five six three seven. No charge for the ninitial get to
know you appointment at Class Financially.It is going to be complimentary to you
again the number six O eight fourfour two five six three seven. So
CJ. Mistake one two aggressive numbertwo not thinking about health insurance costs.
What is mistake number three, myfriend? Yeah, Mistake number three is

(08:46):
not being tax wise. So again, sometimes we run into people who will
even listen to the show for yearsand years and years, and they'll come
in and say, hey, I'mnear retirement. I've ever heard of you.
Guys, I feel like I knowyou and I heard your concept about
being debt free when you enter retirement. So good news I am. And
we go fantastic so happy for you, and we say how did you do

(09:07):
that? And they say, well, yesterday I pulled two hundred thousand dollars
out of my four oh one Kplan and paid off my mortgage, and
we go, you did what?So here's the point. I'm making everything
in context, right, So beingdebt free absolutely, but of course you
pull two hundred thousand dollars out ofyour four one K plan. That will

(09:28):
add two hundred thousand dollars of incomein many circumstances. So the point being
you want to be aware of taxconsequences relative to decisions that you make as
you approach retirement and especially as you'rein retirement. Another example of this would
be at age seventy three now formost Americans is when required minimum distributions begin.

(09:50):
Well, it's actually either seventy threeor seventy five, depending upon when
you were born. But that's anothertax element that's going to be forced upon
you, whether you understand it ornot, and it'll be important for you
to have an accountant or financial advisorwho can walk you through the implications of
these different tax consequences. Very importantstuff there for sure. Talking with our
retirement planning professional CJ Closs and MaliaQueas great time to join us right now.

(10:13):
If you've got a question about retirementplanning, we'd love to get you
on the air six O eight threetwo one thirteen ten. That's six O
eight three two one thirteen ten.We'll get you on the air with Malia
and CJ. With your question.Don't forget as well. You can learn
more about Class Financial on their greatwebsite class financial dot com. That's Klaas
Financial dot com. And the telephonenumber six O eight four four two five

(10:35):
six three seven. It's for theoffice right here in Madison. No charge
for the initial get to know youappointment at Quass Financial. It will be
complimentary to you again their number sixO eight four four two five six three
seven, and the phone lines areopen six A three two one thirteen ten.
That's six O eight three two onethirteen ten. We'll continue our conversation
with CJ and Malia about those mistakesyou need to avoid when it comes to

(10:56):
retirement planning. We will get thosethose mistakes folks they often see, and
then of course we'll take your callnext as Money in Motion with Class Financial
continues right here on thirteen ten WIBA. This is Money in Motion with Class
Financial, a fun and informative showdesigned to help you get answers to all

(11:16):
your retirement questions in one place,and the phones are a little open for
you right now at six O eightthree two one thirteen ten. That's three
two one thirteen ten. Gets youon there with CJ, Class and Malia
Quavis. They are our retirement planningprofessionals from Class Financial to website Class Financial
dot Com. That's Klaas Financial dotCom. Also, of course their telephone

(11:37):
number for the office here in Madisonsix O eight four four two five six
three seven. No charge for theinitial get to know you appointment Class Financially,
it will be complimentary to you againtheir number six O eight four four
two five six three seven. Breakingdown the nine mistakes people need to avoid
when it comes to retirement planning andCJ made us, got us through the
first three, made us aware ofsome very important things to member. What

(12:00):
about choices when it comes to takingyour pension if you have one, are
their potential mistakes to avoid in thatdecision? Malia, Yes, and so
we've devoted a whole show on thisin the past. As far as just
slowing down. So if you areone of those lucky people, which is
a diminishing number in the private sectorat least that is going to have some
type of pension coming to you asyou go into retirement, we would just

(12:24):
say take your time evaluating your pensionoptions. So that's our mistake number four
when people don't fully evaluate those Infact, Sometimes people will come into us
as CJ said, you know,hey, yeay, I paid off my
house. How'd you do that?Well, people say, oh, I
signed up for my pension a fewmonths ago and this is what I chose.
And I'm not saying that they necessarilyalways choose the wrong option, but

(12:48):
they haven't evaluated all the special optionsthat you have available to you and understanding
what your specific situation may dictate inthe type of income you want for now
and into the future for your lovedones. So sometimes people will say,
well, well, my buddy Iworked with him for thirty years and he
picked this choice for his pension,so I just did the same thing.

(13:09):
So that's where we say slow down. What you want to do is look
at the different pension options. Sothere's usually going to be a single option,
which is usually the highest payout.There's going to be a joint option,
which is usually a fifty fifty orsome other calculations similar to that,
meaning that if you chose joint,it's going to be a lesser amount per

(13:33):
month. However, upon your passing, the remaining fifty percent or I should
say, the same amount would continueon for your surviving spouse and there's usually
like maybe ten different options depending onthe type of pension, how it was
structured. And finally we're seeing moreand more of this as a lump some
option. And again sometimes people sayI just want all the money out right

(13:56):
now and then I can invest itmyself, and that may be the right
choice, but we want to makesure it makes sense in your situation because
that will be your lump sum.Of course, we want to keep it
tax efford so you're not going tojust have it paid out directly to you.
You would roll it into an IR A because that would keep the

(14:16):
tax status the same, meaning thatyou're not going to have to pay income
until that's distributed month to month orhowever you're going to take the money out.
So you just want to be verycareful because this is a life decision,
usually irrevocable, and you want toget this right. So you might
have your Social security, you mayhave a pension, you may have investments,
but we want to make sure ifa pensions coming to you, that

(14:37):
you're taking it in the right mannerfor yourself. So mistake number five,
which we talked about two weeks agoagain with our retirement director on our show
is about not maxing out a companymatch. So we were talking about from
the employer's perspective, well, froman employee perspective. If you're not act

(15:00):
sing out your four oh one Kor four to three B contribution and your
company is offering a match to saythree percent, and you're not putting any
money in for any particular reason,you are just leaving free money on the
table, which we don't like toleave free money on a table. So
we want you to make sure you'rereviewing your four one K documents sign up

(15:24):
maximize that amount to make sure thatyou're getting the match at a very minimum.
So for example, if you contributesix percent of your salary, your
employer might match three. Every planis different, but you want to understand
the particulars of your plan. Again, as retirement planners, we want you,
especially as you're approaching retirement, you'reprobably in your highest earning years.

(15:48):
So we're going to tell you wewant you to shoot to max out your
four h one K contribution, whichin twenty twenty three is twenty two thousand,
five hundred if you are under fifty, and if you're over fifty,
an additional seventy five hundred, sothirty thousand dollars. If you are able
to put forth that effort of dollars, we would like to see that added

(16:11):
if possible. So max out yourcompany match is what our opinion would be
really nice. Oh that's gonna reallyquick say, had a really nice feature
if your if your office, ifyour workplace offers it. Fantastic stuff this
morning, So we chat with Maliaand CJ. Don't forget I got a
phone line open for you if yougot a question six O three two one
thirteen ten. Learn more about ClassFinancial on their website class financial dot com.

(16:33):
That's klaas Financial dot com. Tellphone number for Class Financial six O
eight four four two five six threeseven. Sorry about that, Malia,
what's what do we need to knowabout? Mistake number six? Yeah,
so four was not fully valuating yourpension options, Mistake number five not MAXI
now a company match, and numbersix is not looking at your Social Security
income figures properly. So we alwaystell our listeners to go to SSA dot

(16:59):
gov at what your options are goingto be the approximate amount you should be
receiving at various ages, and somany times we see people perhaps taking their
Social Security income too early. Sometimesthey don't understand that the longer you wait,
the higher the actually monthly benefit willbe. And remember that the earliest

(17:22):
you can draw in most circumstances.We're not talking survivor or anything, but
most circumstances you can draw at agesixty two, So that's the earliest.
But remember that your full retirement age, and again you can see this on
SSA dot Gov is probably in thearea of sixty six or sixty seven years,
depending on the year you were born. So most of our most of

(17:45):
our listeners today are probably going tofall into that category if you're born after
nineteen sixty. So what you needto understand is if I pull it too
early, meaning before that full retirementage, there are income limits if you're
still working. So that's very veryimportant to understand. Nobody likes to feel

(18:06):
like they're receiving a benefit and thenthey feel some of it is getting pulled
back because that's exactly what Social Securitywill do. So for example, in
twenty twenty three, if you're actuallyretiring this year and you have not reached
your full retirement age, your incomelimit is actually fifty six thousand and five
twenty okay, But if you retired, say last year, and you're still

(18:30):
working, your income limit is twentyone thousand and two forty. And so
what that means is if you makemore than that, they're going to deduct
a dollar for every two dollars overthat amount from your Social Security benefit.
So the point here is you wantto sit down with your financial planner or

(18:51):
your accountant perhaps and find out,you know, doesn't make sense for me
to draw my Social Security if I'mstill earning good wages because effect of that
benefits going to get pulled back.Does it make sense to wait till my
full retirement age because at that pointI can earn as much as I want
and my Social Security benefit will notbe affected. And then finally, we

(19:11):
talk about this many times, iscan I actually wait till age seventy perhaps
or anytime after my full retirement age. If I wait between full retirement age
and age seventy, I will receivean additional eight percent per year for those
three years, depending on when Iactually decide to collect. So eight percent

(19:33):
increase per year again kind of soundslike free money. So if you can
wait and maybe pull a pull incomefrom other sources be at your pension and
perhaps your investments. It might makesense, especially if you're married, you
would want to look at what makessense in your situations. So we just
want people to slow down. That'sreally what we're talking about this morning.

(19:55):
Look at those Social Security income figuresproperly, really important to see as to
be made. And you definitely,as Malia mentioned, you want to take
it slow and of course understand thestuff. We're gonna break down a couple
more mistakes seven, eight and nine. We'll get those with CJ. Will
also do the class quiz question theweek next. Don't forget in the meat
time. If you haven't been tothe website yet Class financial dot com.
That's klaas financial dot com. Checkthat out. Not only can you listen

(20:19):
back to this in previous show's podcast, you can also sign up online for
the weekly Market Pulse newsletter that atclass financial dot Com. The telephone number
six O eight four four two fivesix three seven. No charge for that
initial get to know you appointment techClass Financial. It will be complimentary to
you again their number six O eightfour four two five six three seven.
We'll take it down the home stretchnext as Money in Motion with Class Financial

(20:41):
continues right here on thirteen ten WIBA. This is Money in Motion with Class
Financial, a fun and informative showdesigned to help you get answers to all
your retirement questions in one place.Absolutely great show this week. As always,
don't forget if you miss part ofthe program. Maybe you stepped out

(21:03):
to grab that cup of coffee.Quite jealous of you. Drop the grandkids
at kiddles off at school. Iguess no school time this year's summer school.
Maybe band practice I know a lotof kids are doing. Maybe a
miss part of the show. Youcan always listen back at class Financial dot
Com. That's Klaas Financial dot Com. And as we've kind of worked our
way through these mistakes that folks needto avoid when it comes to retirement planning
a lot of these things, wego much deeper in depth than some of

(21:26):
the previous show's podcasts as well,So definitely check it out online. Class
Financial dot Com. That's Klaas Financialdot Com. TELF number six O eight
four four two five six three sevenNo charge for the financial gets to know
You appointment at Coloss Financially eight iscomplimentary to you. Again. The telephone
number six O eight, four,four, two, five, six,
three seven. As we're talking aboutthe nine mistakes to avoid when it comes

(21:48):
to retirement planning, we left offat number six. That would naturally bring
us to number seven and CJ.What other mistakes should we be avoiding?
Yeah, so mistake number seven thatwe see people making as they approach retirement
would be planning to work in debtitly, So this thing comes from people who
know they haven't saved enough, andthey go, I'm just gonna always work,

(22:10):
and we say, oh, well, that is not ideal. Obviously,
it signals that maybe they feel theyhaven't saved enough. Although often people
are more critical of themselves than theyshould be, just as an FYI,
So often they'll eventually meet with usand we'll say, oh, you're you're
in better shape than you might think. But this idea that I'm just going
to work indefinitely actually is often forcedupon you that you can't. So fifty

(22:36):
three percent of workers expect to workbeyond age sixty five to make ends meet
in retirement. This is according toTransamerica's Center for Retirement Studies. Yet you
can't count on being able to bringin a paycheck if you need it,
And the reason is because while morethan half of today's workers plan to continue
working in retirement, the reality isthat just one in five Americans age sixty

(22:59):
five and over are actually employed.That's about twenty percent. And this is
according to the US Department of LaborStatistics. So you see the mismatch,
don't you. Fifty three percent saythey're going to twenty percent? Actually only
are now? Is it because youknow people met with us and figured out
they're doing better than they thought theywere. I doubt it. I think
it's probably more health issues pop upand they're just not able to continue working

(23:26):
the way they thought they'd be ableto. Mistake. Number eight is putting
your kids first before your retirement.So I know some of you are cringing
right now, because I get it. I have three children and often that
you know, you have to sacrificeso much for them that even throughout retirement,
this behavior continues. And what canhappen is you, you know,

(23:49):
you sell your soul to get themthrough college, and then they don't quite
launch the way that you wanted tothem too. And then and then the
grandkids come along and you want tohelp them, and before you know it,
you're actually working into your seventies becauseyou have to, because you've given
all your money to the kids andgrandkids. Be cautious of this. You

(24:10):
can while you can borrow for likepurchasing a home or borrow for purchasing a
car, you cannot borrow for retirement, and therefore your kids are in a
better place to be able to borrowfor their needs than you are to be
able to borrow for your retirement.So don't make the mistake of putting your
kids first for too long. You'regonna eventually have to prioritize yourself so that

(24:34):
you can get some money set asidefor retirement. And finally, mistake number
nine is drawing too much out everyyear from your portfolio. So think of
this as the at the at themoment you retire, as you're stopping that
working income, you're launching into retirement. And that launch point, as you

(24:55):
can imagine, is critical. Rightit's have I saved enough? How do
you answer that question? And oftenthis launch point can be clouded by the
fact that people don't know what thatmath should be, so they say,
yes, I've paid off my debt, I've saved enough, I know I'm

(25:15):
in good shape, and we'll saywhat's your plan and they say, my
plan is just to pull ten percenta year out of my four O one
K plan for the rest of mylife. And I'm sixty I'm sixty years
old today, we go dope,oh no, that's not going to work.
The launch point is predicated on reallybad math because you're planning to pull
too much out of your account.So long story short, just make sure,

(25:37):
in our humble opinion, you know, seek out professional guidance as you're
starting this launch point of retirement,just to make sure that you've checked all
of those boxes so that you're notgoing to be, you know, God
forbid, eighty two years old andrunning out of money, needing to find
another place to live. And thereyou go. There are are nine mistakes
to avoid as you get close toretirement, and one great way to avoid

(26:00):
these mistakes is to work with retirementplanning professional. In The folks at Class
Financial love to talk with you.All I gotta do is give him a
call six O eight four four twofive six three seven No charge that initial
get to know your appointment at ClassFinancial. It will be complimentary to you
again their number six O eight fourfour two five six three seven. The
website Class financial dot com. That'sklaas Financial dot com. Mention the telephonomber.

(26:21):
You want to hold on to thatas well, because it's time now
for the Class Quiz Question the Week. It works like this, In just
a moment, I will ask youthe class quiz question the Week. You
will then have thirty minutes from theend of today's program to call the Class
Financial office right here in Madison atsix O eight four four two five six
three seven. If you are thefirst car with correct answer, win this
week's prize, which is a twentyfive dollars gift card two best Buy.

(26:42):
This week's class quiz question the Weekis this, what is the earliest age
you can pull your Social Security benefit? Telephone number six O eight four four
two five six three seven. Firstcall correct answer win the twenty five dollars
gift card two best buy. Andagain that's Class Financial's office right here in
Madison six to eight four four twofive six three seven. No charge financially

(27:03):
gets no appointment at Class Financially.It will be complimentary to you again their
number six O eight four four twofive six three seven. See Jamie It's
always great chatting with you guys.You enjoy this most beautiful day. Thanks.
Thanks, We'll head to the fairnext here on thirteen ten WIBA.
This is Money in Motion with ClassFinancial Asset Advisors LLC, a registered investment

(27:30):
advisor registered with the SEC. Thecontent of this show is for informational purposes
only and should not be considered individualinvestment advice. Class Financial does not offer
tax or legal advice. Any opinionoffered during the course of this show is
the opinion of that particular investment advisorrepresentative, and not necessarily the opinion of Class Financial