April 18, 2026 • 40 mins
The Kowal team help plan your retirement
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Speaker 1 (00:00):
It's news Talking wy Said and the Retirement Clinic on
the air with your host Aaron Kowal with Creative Planning. Aaron,
good morning, good morning.
Speaker 2 (00:13):
How are you.
Speaker 1 (00:13):
I'm fantastic as always, but I'll get better.
Speaker 3 (00:18):
Remember that it sounds like my dad. Sounds like my dad.
Speaker 1 (00:22):
It is your dad. I stole that line from your father,
who used it for years on the show, and I've
always gotten a chuckle out of it. I'm great, but
I'll do better. I'm fantastic, but I'll do better. That
means he's an optimist, Aaron, I would think you're kind
of a half glass full type of guy. You're an optimist.
Speaker 3 (00:39):
Yeah, I'm I'm an optimist. Yes, I am so absolutely.
You gotta be right, I mean, I think so. There's
too many things to worry about. Let's focus on the
good here. I think you're right speaking about good, Yes,
speaking about good. Today. Today is my daughter Clayer's fourteenth birthday.
Oh they declaire fourteen years old?
Speaker 1 (01:03):
Boy, time flies.
Speaker 3 (01:04):
Right, madness, Well, happy birthday, Claire. One month's yeah, one month.
My oldest daughter Leah turned sixteen, which is just insane.
So watch out out there on the roads.
Speaker 1 (01:16):
Uh huh, that's that's that magical age. I remember that
with my daughters getting the and I just remember driving
with them to get their hours in for tempts. Every
state's different, I know, but you know in Wisconsin you
got to get those hours in. And I was just
terrified because I don't mean to embarrass my oldest daughter, Peyton,
but she she pulled over on the wrong side of
the road, like facing traffic and just stopped. I go,
(01:38):
what are you doing? She was on the shoulder and
she goes, well, you know we're told to do that
and get your hazards on. I was just practicing it.
But you got to be in the right side of
the road. You can't face traffic and do it. Oh okay.
So there is a learning curve to driving. It's not
just a physical attributes, you know, and being aware of
cognitive abilities. It's the knowing the ways of the road.
(02:01):
That's where I'm a half class, empty kind of guy, Eric,
because there are so many bad drivers out there. I
still blame the cell phone. Yeah it's a.
Speaker 3 (02:09):
Fun Yeah, well there's always been bad drivers. But yeah,
so Lee's pretty good and so happy birthday to Claire.
I can't believe fourteen now going to going to high
school next year.
Speaker 1 (02:21):
So great advice from an elder years ago when I
was raising my young girls and they said, Paul, the
days are long as a parent, but the years are
short and they go by fast and they do. That's
one hundred percent accurate. Aaron, we will jump into retirement
talking a bit. I do want to get some background.
I mentioned Creative Planning, of course, but for years the
(02:43):
Kowal Investment Group, and you just now have more tools
at your disposal with Creative Planning. You still do the
show on Saturdays, and of course the market updates during
the Dan o' donald show five days a week in
the afternoon show at three and five pm, and we
talk about retire The locations around town are the same
in Brookfield and we're seeing Delafield up in Port Washington.
(03:06):
Your license in all fifty states. Creative Planning dot com
for more info, or please check out the Retirement Clinic
dot com. And we need to do this at least
one more week, so I'll do it right now. That
you were big kind props by the Wall Street Journal
as the best registered investment advisory firm in the country.
(03:28):
This happened back in I think February, right.
Speaker 3 (03:32):
Yeah, yeah, I mean that's that is fantastic, you know,
and I think well deserved as well. No one does
all the things that we do, you know, it's not
just that is why we joined Creative Planning. You know,
it's not just doing a financial plan or cash flow analysis.
But we can do We do everything now. We are
(03:56):
able to do tax tax planning and actual filing for taxes.
We can do the estate planning and create generate estate
planning documents and do really in depth planning. We can
sell businesses, uh, investment bankers, any business services. So if
you outsourced you know, CFO, we can take care of
(04:19):
that or for for one case. The Creative Planning is
one we don't talk about much on here. With Creative
Planning is one of the top advisors for for one
case in the country, in the country, so we're running
company for k plans. We have a deep bench uh
for great pricing as well, so if you any idea
(04:41):
on pricing and get a free second opinion. I know
companies have to do due diligence on on fighting what's
best for their employees, you know, so give us a
call for that. Uh really there's anything financial creative planning
can do, and there's a lot of things that are
that are including the service too do state planned like
map so at least get you know, a graphical idea
(05:04):
for where your money goes when you die and then
gives you idea on how to adjust that too. So
I think the Wall Street Journal honors are well deserved.
It's you know, their creative planning is the benchmark in
the industry. So we're very blessed to be affiliated with Creative.
Speaker 1 (05:23):
That's well said, and yeah, kudos to everybody at Creative Planning.
On this program, we hear from a lot of your advisors,
your own father Jeff Kowaal joining us soon with a
segment of it's a Baron's article, but he's going to
give his thoughts on it, and it's and it's interesting.
It's couples with age gaps face financial challenges. How do
(05:45):
they navigate those? So couples with age gaps, we'll get
into that. And it's funny you mentioned for one case
as one of the main thrusts of a creative planning. Well,
that's where you're going to start the show with Aaron.
You you've got comments on people that leave a company,
whether it's by on their own or they're let go fired,
as Donald Trump used to stay staying right, I mean
(06:06):
that was that was it you're fired? That he was
known as what happens there? Your four to one K
is sitting stagnant? Can you fund it? Let's start with
that topic, because I find it fascinating. I know a
lot of people that you know, I got this four
one K plan from this company's just sitting there.
Speaker 3 (06:22):
Yeah, we see that all the time, that people sometimes
have a handful depending on how much they've jumped around.
We were seeing it more with millennials as they get
a little bit older. Here, I'm on the older side
of the millennials. They say, I'm a zenial, which is
(06:43):
have a mixture between Gen X and and millennials. We
have a lot of characteristics of both, and I really
do empathizer or identify with with that. But the millennials,
I guess I'm the exception here, have tend to jump
around jobs to from different companies quite a bit more
(07:06):
than generations past. So we see that a lot where
there's abandoned for and k so. But many people assume
that leaving an old four and K alone is the
safest choice, but that assumption is often wrong. When you
leave a plan behind, you lose active oversight and coordination
with your broader financial plan. Over time, the account balance
(07:29):
becomes disconnected from your tax strategy, your income plan, and
risk tolerance. You should have a tax strategy and income
plan and be aware of your risk tolerance. Anyways, most
people do not rebalance or review those accounts regularly, and
that creates a silent drift that can materially change outcomes.
Old for and k's are frequently invested in default allocations
(07:50):
that no longer fit the individual. You know, we talk
about compound interest. Also, Paul, I mean an older fur
and K will have more time to grow and double
and double again as it's left there. So I mean
that could be real, you know, real money. You're leaving
target date funds, which honest I've never been a big
(08:13):
fan of. But target date funds, for example, maybe far
more conservative or aggressive than what someone actually needs. And
can we say, you know, true for target date funds
if for plans you're still in Also, uh, the allocation
was designed for the average participant, not a specific retirees situation.
And that's where I have a problem with it is
(08:34):
that they are designed for for the average person. When
we do very specific planning, uh, and everyone's situation is
very specific to them. That's why it's called personal financial planning.
As people get closer retirement, this mitche mismatch becomes more
impactful and the result is either unnecessary risk or missed growth.
Fees inside old plans are often overlooked and can be
(08:57):
higher than alternatives. Many employer plans have institutional pricing, but
just as many have layers of administrative or fund level fees.
Participants rarely go back and review the cost structure after
leaving employment. Over a decade or more, even a small
fee difference compounds significantly, and that drake quietly reduces long
(09:17):
term wealth. Hey, Aaron, I got to ques back to when.
Speaker 1 (09:21):
People move to a new job, to a different job,
or whatever they do, maybe they stop working for a year,
take us some sort of sabbatical. They may start up
another four to one K plan at the next company. Right,
that's fairly common, I would think. When So that got
me to think, and how long do Americans stay at
their jobs? You know, on average what the Bureau of
Labor Statistics say, And this is as of twenty twenty four,
(09:44):
so it's got to be pretty accurate. Three point nine years,
so four years is the average span for Americans to
stay at one job. That's pretty short. I would think
it'd be I've been at my same job for thirty
six years, so that's a long time. I was thinking
as more like seven eight. That means we jump around
a lot. There could be a lot of those plans
sitting stagnant, not working for you.
Speaker 3 (10:07):
Right, you know, I h I have the same way.
I've been in the same well entity. We've joined Creative
Planning by I mean junk co Investment Group. It will
be in a couple of months, it'll be twenty one
years ago. And ye boy, have time flies when you're
having fun?
Speaker 1 (10:22):
It does?
Speaker 3 (10:24):
And so you know that's that is actually surprising. I
thought it was longer as well. But that means there's
a lot of extra plans. There are a lot of
plans that can be out there. So you can move
it to an IRA or and or a roth IRA
that you self direct with self directed IRA roth IRA
(10:46):
depends if you have after tax money and the account
and then you can also roll into your current four
one K as well. So there are a couple options there,
but you know, there is coordination problem with multiple old
forun case, people change jobs several times and end up
with accounts scattered across different providers. Makes it harder to
(11:09):
manage overall asset allocation and risk exposure. It also complicates
beneficiary designations and estate planning. Simplicity is real value, especially
as accounts grow. So I mean, just think of this, Paul.
I mean, people change jobs or lose jobs and get
a divorce and then get a new job, and they're
so wrapped up and what they're what they're doing. They
(11:30):
don't update beneficiaries. And you know, so you might have
an old four and K that might have an ex
spouse uh named the.
Speaker 1 (11:39):
Beneficial that's not that's not cool.
Speaker 3 (11:43):
It is horrible.
Speaker 1 (11:44):
And then then forget about it entirely. Oh crap. Yeah,
I was meaning to get to that. And this is
why you have advisors there. And this is what you
guys do. I mean, you work with families. Life happens, divorce,
you know what is it? The three d's and a
B divorce, death, disability, and birth life events?
Speaker 3 (12:00):
Right yeah, yeah, yeah, life. You know, life happens, and
and so you got to be aware of that going on.
I mean, you say I'm overwhelmed, I got like, well,
I mean you got to be aware. And that's why
people work with with us to me, is to make
sure that these things get handled, uh, you know, handled
appropriately and thoroughly, so that you know you're not potentially
(12:26):
either leaving money on the table or or you're not
leaving money to someone you can't stand. And not all divorces,
you know, obviously there are a happy ones, you know,
where you have a good relationship, but so you may
go money to money may go to someone you hate,
so that has to be h I mean, if you
(12:48):
don't hate change jobs, that is something that needs to
be you know, accounted for. Another big one is requirement
of distributing. Planning for those becomes more difficult when accounts
are fragmented. Each four one K may have its own
rules and distribution requirements. Unlike iras, you generally cannot aggregate
r m ds across a multiple fore one k's. This
(13:09):
increases the likelihood of mistakes or misdistributions. The penalties for
these mistakes can still be meaningful, so you might not
take money out from from a four one K or
or you know enough or might miss it figuring it's
in a four one K. You know, investment options inside
old plans are often limited compared to what is available outside.
(13:30):
Many plans restrict access to certain acset classes or strategies
that can limit flexibility when trying to manage taxes or volatility.
And in today's environment, having access to a broader toolkit
really doesn't matter. Being stuck in a narrow lineup could
be a disadvantage for a long long time. I mean,
you know, even now a lot you know for and
k's you know, we're started as a way for workers
(13:58):
because to save money, the pensions were going away to
find benefit plans. We're going away in favor of defining contribution.
And you know, we saw through the nineties, especially in
these nineties two thousands, early two thousands, a lot of
these pensions go away, They became underwater, that distributions are
(14:20):
going out, and a lot of these companies struggled. You
think of airlines and automakers and telecoms. It really had
a problem with that. And and so you know, the
four one K rose and as a way for people
save money. But now we live in a litigious society
(14:42):
people see at the drop of a hat, and we
talked about that with insurance too. But employees have gone
after employers because investments might be too risky or for
myriad reasons. So now a lot of a lot of
these investments are.
Speaker 1 (15:00):
Some of us.
Speaker 3 (15:01):
I shouldn't say a lot, you know, some of them
are here to protect the company so that there isn't
a lot of volatively volatility in there. So a lot
of times you can get it on the board, Okay,
I recommend that because you can make your own choices
outside of that instead of going with what everybody in
the company has and so invest So beneficial designations are
(15:22):
frequently outdated on old accounts. We talked about this a
little bit. People forget to update them after major life
events like marriage, divorce, children create serious issues. Uh, there's
a behavioral issue tied to set it and forget it.
Thinking people mentally check the box and then stop engaging
with the account entirely. That lack of attention often extends
to the rest of the financial life over time. This
(15:43):
leads to missed opportunities and avoidable mistakes. Passive neglect is
not the same as disciplined investing and we talk about
not touching your accunts all time. You do have to
pay attention. You don't have to be making changes the
all the time, but you do have to pay attention,
and so consolidation can provide clarity and control that most
people do not realize they are missing. Bringing accounts together
(16:04):
allows for unified investment strategy and also makes tax planning
withdrawal planning far more efficient. The ability to see everything
in one place improves decision making, and simplicity drives better behavior. There,
you know, there are still cases we're leaving a forward
can place makes sense, Strong intuitional funds, unique plan features,
or credit or protection may justify staying put. However, that
(16:26):
should be a deliberate decision, not a default. Too many
people never evaluate the pros and cons. Intentionality is the
key difference.
Speaker 1 (16:34):
I think, Aaron, you're making some great points. I also
think some people just set it and forget it. I
know I've got a four to one can I know
I contribute. I look at the page, I even check
the balance every now and then. But some people honestly
don't make any changes over the years and just set
it and forget it. You can be a little bit
more proactive than that, Aaron, Right, you don't want to
just kind of let it sit there.
Speaker 3 (16:56):
Right right, and you can you know, it's okay to
look at it and decide not to make any changes.
Speaker 1 (17:01):
The key is to look at it, yeah.
Speaker 3 (17:03):
And make sure that that it's going in the right
you know, that still matches what you want, you know.
And so and there's I think some misplaced loyalty to
old and old companies also, like they took care of
me for this long, they're going to keep taking.
Speaker 1 (17:19):
Care of me.
Speaker 3 (17:20):
In reality, in today's day and age, that might be
true in a small company, they might still care about you,
but in these big fortune five hundred companies, publicly traded companies,
they don't care about you. When you're in an ex employee,
you know, it's the care goes because they have other
They have current employees to worry about and stockholders too,
(17:41):
so and that's where they're fiduciary lie. If fiduciary duty
lies is to the shareholders. So that is something to consider.
I have another topic we can get into real quick
here before our first break. But there's an article from
Creative Planning, and if everybody wants that, I can get
it's called a fresh look at what retirement is for
(18:05):
Many people view planning for retirement as a financial event.
After all, we tend to spend our entire life saving, investing,
and sacrificing so one day we'll be able to leave
work behind. However, when it was the last time you
considered how your financial preparation translates into what you want
to experience in the next phase of life and drove
our retirement lifestyle and whether you hope for more time
(18:26):
to pursue hobbies and interests, the freedom to explore a
new purpose, the flexibility to spend more time with loved ones,
or something entirely different. Taking time to align your priorities
with your finances can help you be more intentional in
shaping your vision for retirement. So we talk about a
new perspective on retirement. In recent decades, the general perception
(18:46):
of retirement has shifted from a passive final phase to
the next active chapter of life. Today, a healthy retire
we can expect to live in retirement for twenty to
thirty years or even longer, which makes it more portant
than ever to think carefully about your ideal retirement lifestyle
and what a fulfilling retirement looks like for you. So
rather than viewing retirement years is the end of something,
(19:08):
consider them as an opportunity to find new purpose, new routines,
and new relationships. Sources such as five necessities for Fulfilling
retirement another article can help you further explore what you
want this next chapter to include. You know, I have
a lot of clients, and my mom was the first one,
and then I have a lot of clients that have
just mentioned the retirements is well, first, it's weird, you know,
(19:32):
you go from working to not working, and then you
know it's people. The cop frequently comment to me to say,
I don't know, however I had time to work. I'm
so busy in retirement with all these things that they're doing.
I don't know, however I had time to work.
Speaker 1 (19:49):
You know. So that's a good problem. That's a great
problem they have. By the way, erin.
Speaker 3 (19:54):
Yeah, hobbies. It keeps you young too, And that's the
whole point of this article. You know, we're not gonna
have time to go through the whole thing, but that's
you know, that's the point is it keeps you young.
Retirement is not a natural thing. I mean, you know,
humans for thousands of years it worked and then died.
(20:15):
You know, they still or they or they help take
care of families became too uh, you know of the
of young kids and stuff to work, but a lot
of times it was work until you physically couldn't anymore.
And now people are retiring when they they could work,
they absolutely could work. But you know, the humans are
also living a lot longer too, so we got to
(20:36):
fill that time. And so the clients that really thrive
in retirement are the ones that find purpose, the ones
that you know, take on hobbies that don't just you know,
people have seen it where they don't have hobbies. Uh,
and just the age a lot faster.
Speaker 1 (20:52):
Find a hobby something.
Speaker 3 (20:53):
You find a hobby, find it where social animals get
find a group and get involved.
Speaker 2 (21:00):
Have volunteer.
Speaker 1 (21:01):
There's so many things to do. I mean, the community
is huge, right and maybe it's your church, maybe it's whatever.
I'm a I'm a grandparent now, so Aaron, it's natural
to spend more times with the family and the grandkids,
which I want to do for those that aren't grandparents.
Whatever it is. You know, everybody talks about golf. It
doesn't have to be golf. We're just a week removed
(21:21):
from the Masters, which was one of my favorite. Uh.
It is my favorite sports event of the of the year. Uh.
And a lot of people just spend time on the
golf course. Maybe you play pickleball. That is a big one.
Speaker 3 (21:36):
Yeah, yeah, that that is a big one. That's growing. Uh,
you know as well pickleball, and no else is paddle
p A D E L. Yeah, that's growing as well,
which is a bishmash with a bunch of paddle sports.
Speaker 1 (21:50):
Yep. And and visits see the emergency room are up
as well, because I'm telling you that's how I tore
my meniscus, so so be it right. I got it
fixed and I'm back on the court. It is what
it is. But it's good to get out move be social.
We are social animals. We don't sit in the rocking
chair in the front porch with an afghan over our
(22:12):
lap anymore. I think I think times and generations have
changed that. And we're going to actually kind of hear
from Jeff after the break Aaron, that is a little
bit about it's about what couples do, but couples that
have an age gap, I think that's that's what he's
going to talk about. And you're seeing that more now
than he did years ago. Right, husband's maybe twenty thirty
(22:33):
years older, or maybe the wife is older than but
there's an age gap there. So Jeff is going to
focus on that. I also want to give us your
phone number for people that have questions. Aaron, you work
specifically with this type of situation, and that is the
four to one k rolling it over right, Yeah, and
getting hit.
Speaker 3 (22:52):
That's what we do. I mean what we do. I've
been doing my entire career. It's what creative planning and
our wonderful financial advice I have all worked on and
it's you know, as one of the things we do best.
So let us take a look. I mean, you know,
we have our meanings are free, they're kind of complimentary. Uh,
(23:12):
and you know what's the risk. The only thing you
spend is some time and you'll get you'll leave getting
a lot better, a lot clearer picture on what's going on.
Speaker 1 (23:23):
Take advantage of that complimentary get together, talk to somebody,
get a second set of eyes on your plan and
see if you're on the right track. To reach out
to creative planning two six two five two two forty
forty two six two five two two forty forty or
the name of the show is a great way to
remember the website, The Retirement Clinic dot com. Pass shows
(23:44):
are podcast and archived and a lot of good information
at the Retirement Clinic dot com. We will hear from
Jeff after the break, Jeff or Aaron. Any more thoughts
on on that segment with the four to one K.
You don't want to be complacent. You don't want to
We just had tax SAI what three days ago? Today's eighteenth.
That's a deadline April fifteenth. We know we got to
our taxes done unless you file for an extension. Maybe
(24:06):
it's because there's no deadline here that people tend to procrastinate.
Any thoughts on that.
Speaker 3 (24:12):
Right, No, you hit the nail on the head. Don't procrastinate.
Get this taken taken care of her, at least looked
at so you can check that box to make sure
that you're still head in the direction that you want
to be going in.
Speaker 1 (24:27):
And when I mentioned all the contact and for your
all over social media as well, so give them a
like and follow and just go to Createiplanning dot com
for more information along those lines or call two six
two five to Aaron Kowal. We'll be back. We're gonna
hear from Jeff Cowal shortly as well with that segment,
and I'm Paul kronforced on WISM every Saturday morning, ten
(24:49):
o'clock the Retirement Clinic. We continue and we'll be right back, Good.
Speaker 2 (24:53):
Morning with Jeff Cowaugh.
Speaker 4 (24:54):
Looking at different situations that we've seen over the last
thirty eight years, One that comes up periodically is an
age gap between spouses. A lot of times it's not
necessarily a second marriage, though it could be many times.
Like one client we just brought on, they just met
(25:14):
a little later in life with a ten year age gap.
They had kids and had to address issues of college
education while planning for retirement. This Baron's article addresses some
of those competing objectives. It's titled Couples with age gaps
face Financial Challenges How to navigate them.
Speaker 2 (25:37):
Let's give a little bit of background.
Speaker 4 (25:39):
Couples with big age gaps face unique financial challenges when
children are still at home. These challenges multiply, forcing families
to balance retirement, college funding, and financial security. Most US
couples are close in age about two years apart on average,
but census data shows that roughly eight to nine percent
(26:01):
have age gaps of a decade or more, putting partners
on staggered financial timelines. We've got college staring us down
in ten years, says Annie Galvin, forty four. She's a
marketing professional, Washington, d C. This is in the Baron's
article whose husband is fifty four? So Annie's forty four,
(26:22):
her husband's fifty four, and their son is eight.
Speaker 2 (26:26):
And Annie says.
Speaker 4 (26:26):
My husband will be eligible to retire right around the
time our son starts college. So they've built retirement savings,
they have a five to twenty nine plan, they've got
insurance policies, and are now forced to play these pieces
together in a more coordinated framework. Overlapping retirement and child
related expenses create pressure points. Number one concern is that
(26:51):
the older person is scared and concern that there's not
going to be enough money for the younger person.
Speaker 2 (26:57):
I understand that.
Speaker 4 (26:58):
I see that, especially when you love somebody, you want
to make sure that they're taken care of it if there's.
Speaker 2 (27:04):
A longer time frame.
Speaker 4 (27:07):
And the article goes on to say the couples with
large age differences need to plan for assets to last
across more years of spending. That's a really long runway.
Even when families recognize extended timeline and advisors say they
often underestimate how costs evolve and again.
Speaker 2 (27:27):
Understanding the income gap.
Speaker 4 (27:29):
One A big risk comes when one spouse retires or
reduces income while expenses remain high with children at home,
younger spouse to continue saving during those years is important.
Required minimum distributions from retirement accounts can complicate cash flow
if one spouse is forced or take out required minimum
(27:50):
distributions and the other is not. This I thought was
pretty interesting because it says the good news in this
is that when one spouse retires may end up in
a lower tax bracket, and that could be an opportunity
to convert tax deferred retirement accounts into WROTH accounts. Tax
deferred I raise for one case, into WROTH accounts. Since
(28:13):
the converted amounts are taxes ordinary income, you'll be a
lower tax bracket.
Speaker 2 (28:18):
Taxes will be lower.
Speaker 4 (28:19):
Such a key point when income drops. Don't miss the
opportunity to pay less in taxes on conversions. I like
ROTH conversions a lot of times, regardless of the tax,
but tax free is so powerful that if you can
take advantage of one spouse retiring and then doing wroth conversions,
that can be very powerful and be long.
Speaker 2 (28:40):
Lasting for the remaining spouse.
Speaker 4 (28:45):
It often makes sense for the older spouse to delay
social Security benefits and the younger spouse to claim earlier.
Speaker 2 (28:51):
We do this a lot in our practice.
Speaker 4 (28:53):
Delaying the older spouse's benefit increases the eventual survivor benefit well.
Earlier income from the younger spouse can help offset withdrawals
during that stretch, so again, social Security plays a big
part of this as well. A couple more items in
the article. The Baron's article extend earnings to bridge the gap.
(29:16):
If the older spouse can continue to work beyond normal
retirement age, that can also help have that income coming in.
One last item, I'm sure there are a lot more,
but one that needs attention is long term care. The
cost of care of one spouse if one spouse becomes
incapacitated is frequently overlooked. Absolutely, the cost is extremely high.
(29:40):
The older spouse is likely to need care first, often
while the younger spouse is still working or supporting kids,
and without a plan, long term costs can rapidly drain savings,
endangering the retirement of the spouse, so the age gap
planning is different. There's a longer pay time you have
(30:00):
to plan for. But as usual, planning, planning is the key.
Give our office call. We addresses all. We address all
areas of planning, the cash flow projections, the long term
care needs, wills and trusts, taxes, all those things we
can handle in our office. Give our office a call
(30:21):
now at two six two five two to forty forty
or go online to the Retirement Clinic dot com. Schedule
your appointment with us, regardless of your age difference. Start
your planning now. Make sure that you address all these
areas regardless of what the age gap is between you
and your spouse. Makes sense to do a lot of planning.
(30:43):
Come on and see the creative planning at the Retirement
Clinic dot.
Speaker 1 (30:48):
It is that time on the Retirement Clinic. Welcome back
to w I s N with Aaron Kowal with Creative Planning.
I'm Paul kron Force. This segment is the weekly feature
we call well both Management and Preservation. Aaron, what's going
on this week?
Speaker 3 (31:05):
All right, this week we're gonna be talking about asset
location versus allocation, where you hold assets matters more than ever,
so most investors focus on asset allocation, which is how
many is divide across stocks, bonds, and other investments, alternatives,
private equity, all that stuff. And while that is important,
asset will location is often overlooked. So asset location refers
(31:29):
to which accounts hold which investments, and this can have
a significant impact on after tax returns. In many cases,
it's one of the easiest ways to improve outcomes. So
different types of accounts are taxed differently. That's no surprise.
I'm not revealing any mysteries of the universe here. Tax
will accounts, traditional retirement accounts, and WROTH accounts each have
(31:52):
unique roles. Placing the wrong assets in the wrong accounts
can create unnecessary tax drag. For example, holding tax inefficient
investments in a taxable accounts can increase annual tax liability.
Proper placement helps minimize this, so income generating investments are
often better suited for tax deferred accounts. Think iras, where
(32:17):
you don't pay the tax on the money until you
take it out of the account, and at that point
it's all income taxable. So income generating stuff and better
suited for tax fert accounts. Bonds in certain alternative investments
can produce regular income that is taxed at higher rates.
Placing these in tax deferred accounts can reduce the immediate
tax impact. This allows more of the return to compound
(32:39):
over time. It is a simple but powerful adjustment. So
some you know, some income from income producing investments is
tax doordinator income. So why have that in non taxable
or I'm sorry, in taxable accounts when you can be
paying apple gains on that, which is a lower rate.
(33:01):
So growth oriented assets are often ideal for WROTH accounts. So,
since WRATH accounts grow tax free, placing high growth investments
there can maximize long term benefits. This is especially valuable
for younger investors or those with long time horizons. The
compounding effect can be substantial. Strategic placement enhances this advantage.
(33:24):
You know, this is one that's not super intuitive. Clients
don't really get. I have one client, Marty's his name,
that that really got it. And he's like he wasn't
gonna spend all his money money, you know, but he
you know, has WROTH accounts, and so just put I
(33:47):
don't want any bonds in there. Make it very aggressively.
You're you know, but he's like, you know, in his
eighties he said, I'm not going to spend any of this.
It's going to my kids, you know, and they can.
So let's go as aggressive as as we can, which
is you know, sometimes people don't really wrap their minds
around it that he's thinking that, you know, decades generations
(34:09):
down the road instead of well, money, Mic go down
this year and I'll be in trouble. So that that's really,
you know, really wonderful. And taxable accounts can be which
you know, regular brokerage account right, taxable accounts can be
used for more tax efficient investments.
Speaker 2 (34:29):
UH.
Speaker 3 (34:30):
Index funds and ETFs with low turnover tend to generate
fewer taxable events.
Speaker 1 (34:35):
UH.
Speaker 3 (34:35):
This makes them more suitable for taxable environments. And imagine
capital gains becomes easier with the right assets in place.
Efficiency matters more as portfolios grow. You know, this is
something that's not always you know, readily apparent. You have
to really dig into some of these funds like mutual
funds and others to see what the tax drig is
because I can you know if you're in the wrong
(34:58):
things in a taxable account. I mean, the funds themselves
are going to be struggling with it, but you got
to be you want to be more efficient with some
of these, so and then you know it plays a
big role. Asset location also plays a role in withdrawal strategies.
Having different types of accounts allows for more flexibility in retirement.
(35:21):
Investors can choose where to withdraw from based on tax considerations,
and this can help manage tax brackets and reduce overall liability.
Coordination is key, uh, you know require minimum distributions. We
talked about that probably every show add another layer of complexity.
Assets held in traditional retirement accounts will eventually be subject
to rm ds, so strategic asset location can help manage
(35:44):
the size and impact of those distributions. Planning ahead makes
us more manageable, and it reduces surprises later. Many investors
end up with suboptimal acid location simply due to account history, contributions,
rollovers in market performance, creating balances over time and without
potential adjustments, inefficiencies persist. Periodic review is necessary to maintain alignment.
(36:06):
Small changes can have a big impact. Acid location becomes
more important as wealth grows. The larger the portfolio, the
greater the potential tax impact, and what seems like a
major inefficiency can translate to significant dollars, so high net
worth households benefit the most from getting this right. It
is a leverage point in planning, and the goal poll
is not perfection, but improvement. Even incremental changes in acid
(36:29):
location can enhance after tax returns. And this is an
area where thoughtful planning adds real value, which is the
only kind of planning we do is thoughtful planning. It
is often overlooked because it is less visible. However, its
impact is very real over time.
Speaker 1 (36:47):
I like what you said, We're not looking for perfection, improvement.
I had to think about that for a little bit.
That's good stuff. Erin before we break anything. You want
to ps that.
Speaker 3 (36:58):
Too, No, I mean that's really what I've talked about
it for for years and years and years by clients
is you know, we got to look at different tax
you know, buckets, because we talked about stocks, bonds, uh,
you know four and then domestic and alternatives and all
that stuff. But we don't Yeah, we don't ever really
(37:18):
talk about h well, I mean we do, but you know,
you don't see a big articles on this, a lot
on tax location and where it's kept. So that is
something that we really try to help with clients and
what what buckets to hold? Which funds or which accounts
I'm sorry, securities and.
Speaker 1 (37:35):
Yeah, the tax impact, it's a it's a real thing, Aaron.
If people want to reach out Creative Planning dot com.
More importantly, one phone number for all locations here in
southeast Wisconsin. That number two six two five two two
forty forty with Aaron Kowal. I'm Paul Kronforce, the Retirement
Clinic on I N We'll be right wrapping up today's
(37:56):
retirement Clinic before we say goodbye to our listeners, and
we're back next Saturday at ten o'clock. Don't forget during
Dan o'donald's show, those daily market updates three and five
PM news blocks done by great advisors and guys like you,
Aaron Cowall, thanks for another great show. If I want
to reach out, thank you. What what do you prefer
phone calls or doesn't it really matter?
Speaker 3 (38:18):
Doesn't matter, reach out to us Creative Planning dot com
or the Retirement Clinic dot com two six two five
two two four zero four zero if you want to
reach out to me for that that article on what
retirement looks like from Creative Planning Aaron dot co waalkow
al Aaron dot co wal at Creative Planning dot com
(38:40):
as well.
Speaker 1 (38:41):
Good stuff We heard from Jeff about the age gap
in couples married couples and what to do there. And
there's so many h so much info in four oh
one k plans that are sitting stagnant to do what
Aaron just said, simple a phone call away two six
two five two two forty forty What was Cowal Investment?
The group is now. Creative Planning locations are the same
(39:03):
on Bluemont Road and Brookfield in delafield'cine Port, Washington, Phoenix, Arizona,
Cape Coral, Florida. License in all fifty states until next Saturday.
Thank you for joining us. Remember the Retirement Clinic dot
com for more information. News is coming up next WISAID Milwaukee.
The preceding program is furnished by Creative Planning and SEC
(39:23):
registered investment advisory firm. Creative Planning, along with its affiliate
United Capital Financial Advisors, currently manages or advisors on a
combined three hundred and twenty five billion dollars in assets
as of June thirtieth, twenty twenty four, the host works
for creative Planning, and all opinions expressed by the host
and or their guests are solely their own and do
not necessarily represent the opinion of Creative Planning.
Speaker 4 (39:44):
The show is designed to be informational in nature and
does not constitute investment, tax, or legal advice.
Speaker 1 (39:49):
Different types of investments involve varying degrees of risk, and
there can be no assurance that the future performance of
any specific investment or investment strategy, including those discussed on
the show.
Speaker 4 (39:59):
Will be profit suitable or equal any historical performance levels.
Speaker 1 (40:02):
The information contained herein has been obtained from sources deemed reliable,
but is not guaranteed. If you would like our help,
request to speak to an advisor by going to creative
Planning dot com. Creative Planning, tax, and legal are separate
entities that must be engaged independently.
It's news Talking wy Said and the Retirement Clinic on
the air with your host Aaron Kowal with Creative Planning. Aaron,
good morning, good morning.
Speaker 2 (00:13):
How are you.
Speaker 1 (00:13):
I'm fantastic as always, but I'll get better.
Speaker 3 (00:18):
Remember that it sounds like my dad. Sounds like my dad.
Speaker 1 (00:22):
It is your dad. I stole that line from your father,
who used it for years on the show, and I've
always gotten a chuckle out of it. I'm great, but
I'll do better. I'm fantastic, but I'll do better. That
means he's an optimist, Aaron, I would think you're kind
of a half glass full type of guy. You're an optimist.
Speaker 3 (00:39):
Yeah, I'm I'm an optimist. Yes, I am so absolutely.
You gotta be right, I mean, I think so. There's
too many things to worry about. Let's focus on the
good here. I think you're right speaking about good, Yes,
speaking about good. Today. Today is my daughter Clayer's fourteenth birthday.
Oh they declaire fourteen years old?
Speaker 1 (01:03):
Boy, time flies.
Speaker 3 (01:04):
Right, madness, Well, happy birthday, Claire. One month's yeah, one month.
My oldest daughter Leah turned sixteen, which is just insane.
So watch out out there on the roads.
Speaker 1 (01:16):
Uh huh, that's that's that magical age. I remember that
with my daughters getting the and I just remember driving
with them to get their hours in for tempts. Every
state's different, I know, but you know in Wisconsin you
got to get those hours in. And I was just
terrified because I don't mean to embarrass my oldest daughter, Peyton,
but she she pulled over on the wrong side of
the road, like facing traffic and just stopped. I go,
(01:38):
what are you doing? She was on the shoulder and
she goes, well, you know we're told to do that
and get your hazards on. I was just practicing it.
But you got to be in the right side of
the road. You can't face traffic and do it. Oh okay.
So there is a learning curve to driving. It's not
just a physical attributes, you know, and being aware of
cognitive abilities. It's the knowing the ways of the road.
(02:01):
That's where I'm a half class, empty kind of guy, Eric,
because there are so many bad drivers out there. I
still blame the cell phone. Yeah it's a.
Speaker 3 (02:09):
Fun Yeah, well there's always been bad drivers. But yeah,
so Lee's pretty good and so happy birthday to Claire.
I can't believe fourteen now going to going to high
school next year.
Speaker 1 (02:21):
So great advice from an elder years ago when I
was raising my young girls and they said, Paul, the
days are long as a parent, but the years are
short and they go by fast and they do. That's
one hundred percent accurate. Aaron, we will jump into retirement
talking a bit. I do want to get some background.
I mentioned Creative Planning, of course, but for years the
(02:43):
Kowal Investment Group, and you just now have more tools
at your disposal with Creative Planning. You still do the
show on Saturdays, and of course the market updates during
the Dan o' donald show five days a week in
the afternoon show at three and five pm, and we
talk about retire The locations around town are the same
in Brookfield and we're seeing Delafield up in Port Washington.
(03:06):
Your license in all fifty states. Creative Planning dot com
for more info, or please check out the Retirement Clinic
dot com. And we need to do this at least
one more week, so I'll do it right now. That
you were big kind props by the Wall Street Journal
as the best registered investment advisory firm in the country.
(03:28):
This happened back in I think February, right.
Speaker 3 (03:32):
Yeah, yeah, I mean that's that is fantastic, you know,
and I think well deserved as well. No one does
all the things that we do, you know, it's not
just that is why we joined Creative Planning. You know,
it's not just doing a financial plan or cash flow analysis.
But we can do We do everything now. We are
(03:56):
able to do tax tax planning and actual filing for taxes.
We can do the estate planning and create generate estate
planning documents and do really in depth planning. We can
sell businesses, uh, investment bankers, any business services. So if
you outsourced you know, CFO, we can take care of
(04:19):
that or for for one case. The Creative Planning is
one we don't talk about much on here. With Creative
Planning is one of the top advisors for for one
case in the country, in the country, so we're running
company for k plans. We have a deep bench uh
for great pricing as well, so if you any idea
(04:41):
on pricing and get a free second opinion. I know
companies have to do due diligence on on fighting what's
best for their employees, you know, so give us a
call for that. Uh really there's anything financial creative planning
can do, and there's a lot of things that are
that are including the service too do state planned like
map so at least get you know, a graphical idea
(05:04):
for where your money goes when you die and then
gives you idea on how to adjust that too. So
I think the Wall Street Journal honors are well deserved.
It's you know, their creative planning is the benchmark in
the industry. So we're very blessed to be affiliated with Creative.
Speaker 1 (05:23):
That's well said, and yeah, kudos to everybody at Creative Planning.
On this program, we hear from a lot of your advisors,
your own father Jeff Kowaal joining us soon with a
segment of it's a Baron's article, but he's going to
give his thoughts on it, and it's and it's interesting.
It's couples with age gaps face financial challenges. How do
(05:45):
they navigate those? So couples with age gaps, we'll get
into that. And it's funny you mentioned for one case
as one of the main thrusts of a creative planning. Well,
that's where you're going to start the show with Aaron.
You you've got comments on people that leave a company,
whether it's by on their own or they're let go fired,
as Donald Trump used to stay staying right, I mean
(06:06):
that was that was it you're fired? That he was
known as what happens there? Your four to one K
is sitting stagnant? Can you fund it? Let's start with
that topic, because I find it fascinating. I know a
lot of people that you know, I got this four
one K plan from this company's just sitting there.
Speaker 3 (06:22):
Yeah, we see that all the time, that people sometimes
have a handful depending on how much they've jumped around.
We were seeing it more with millennials as they get
a little bit older. Here, I'm on the older side
of the millennials. They say, I'm a zenial, which is
(06:43):
have a mixture between Gen X and and millennials. We
have a lot of characteristics of both, and I really
do empathizer or identify with with that. But the millennials,
I guess I'm the exception here, have tend to jump
around jobs to from different companies quite a bit more
(07:06):
than generations past. So we see that a lot where
there's abandoned for and k so. But many people assume
that leaving an old four and K alone is the
safest choice, but that assumption is often wrong. When you
leave a plan behind, you lose active oversight and coordination
with your broader financial plan. Over time, the account balance
(07:29):
becomes disconnected from your tax strategy, your income plan, and
risk tolerance. You should have a tax strategy and income
plan and be aware of your risk tolerance. Anyways, most
people do not rebalance or review those accounts regularly, and
that creates a silent drift that can materially change outcomes.
Old for and k's are frequently invested in default allocations
(07:50):
that no longer fit the individual. You know, we talk
about compound interest. Also, Paul, I mean an older fur
and K will have more time to grow and double
and double again as it's left there. So I mean
that could be real, you know, real money. You're leaving
target date funds, which honest I've never been a big
(08:13):
fan of. But target date funds, for example, maybe far
more conservative or aggressive than what someone actually needs. And
can we say, you know, true for target date funds
if for plans you're still in Also, uh, the allocation
was designed for the average participant, not a specific retirees situation.
And that's where I have a problem with it is
(08:34):
that they are designed for for the average person. When
we do very specific planning, uh, and everyone's situation is
very specific to them. That's why it's called personal financial planning.
As people get closer retirement, this mitche mismatch becomes more
impactful and the result is either unnecessary risk or missed growth.
Fees inside old plans are often overlooked and can be
(08:57):
higher than alternatives. Many employer plans have institutional pricing, but
just as many have layers of administrative or fund level fees.
Participants rarely go back and review the cost structure after
leaving employment. Over a decade or more, even a small
fee difference compounds significantly, and that drake quietly reduces long
(09:17):
term wealth. Hey, Aaron, I got to ques back to when.
Speaker 1 (09:21):
People move to a new job, to a different job,
or whatever they do, maybe they stop working for a year,
take us some sort of sabbatical. They may start up
another four to one K plan at the next company. Right,
that's fairly common, I would think. When So that got
me to think, and how long do Americans stay at
their jobs? You know, on average what the Bureau of
Labor Statistics say, And this is as of twenty twenty four,
(09:44):
so it's got to be pretty accurate. Three point nine years,
so four years is the average span for Americans to
stay at one job. That's pretty short. I would think
it'd be I've been at my same job for thirty
six years, so that's a long time. I was thinking
as more like seven eight. That means we jump around
a lot. There could be a lot of those plans
sitting stagnant, not working for you.
Speaker 3 (10:07):
Right, you know, I h I have the same way.
I've been in the same well entity. We've joined Creative
Planning by I mean junk co Investment Group. It will
be in a couple of months, it'll be twenty one
years ago. And ye boy, have time flies when you're
having fun?
Speaker 1 (10:22):
It does?
Speaker 3 (10:24):
And so you know that's that is actually surprising. I
thought it was longer as well. But that means there's
a lot of extra plans. There are a lot of
plans that can be out there. So you can move
it to an IRA or and or a roth IRA
that you self direct with self directed IRA roth IRA
(10:46):
depends if you have after tax money and the account
and then you can also roll into your current four
one K as well. So there are a couple options there,
but you know, there is coordination problem with multiple old
forun case, people change jobs several times and end up
with accounts scattered across different providers. Makes it harder to
(11:09):
manage overall asset allocation and risk exposure. It also complicates
beneficiary designations and estate planning. Simplicity is real value, especially
as accounts grow. So I mean, just think of this, Paul.
I mean, people change jobs or lose jobs and get
a divorce and then get a new job, and they're
so wrapped up and what they're what they're doing. They
(11:30):
don't update beneficiaries. And you know, so you might have
an old four and K that might have an ex
spouse uh named the.
Speaker 1 (11:39):
Beneficial that's not that's not cool.
Speaker 3 (11:43):
It is horrible.
Speaker 1 (11:44):
And then then forget about it entirely. Oh crap. Yeah,
I was meaning to get to that. And this is
why you have advisors there. And this is what you
guys do. I mean, you work with families. Life happens, divorce,
you know what is it? The three d's and a
B divorce, death, disability, and birth life events?
Speaker 3 (12:00):
Right yeah, yeah, yeah, life. You know, life happens, and
and so you got to be aware of that going on.
I mean, you say I'm overwhelmed, I got like, well,
I mean you got to be aware. And that's why
people work with with us to me, is to make
sure that these things get handled, uh, you know, handled
appropriately and thoroughly, so that you know you're not potentially
(12:26):
either leaving money on the table or or you're not
leaving money to someone you can't stand. And not all divorces,
you know, obviously there are a happy ones, you know,
where you have a good relationship, but so you may
go money to money may go to someone you hate,
so that has to be h I mean, if you
(12:48):
don't hate change jobs, that is something that needs to
be you know, accounted for. Another big one is requirement
of distributing. Planning for those becomes more difficult when accounts
are fragmented. Each four one K may have its own
rules and distribution requirements. Unlike iras, you generally cannot aggregate
r m ds across a multiple fore one k's. This
(13:09):
increases the likelihood of mistakes or misdistributions. The penalties for
these mistakes can still be meaningful, so you might not
take money out from from a four one K or
or you know enough or might miss it figuring it's
in a four one K. You know, investment options inside
old plans are often limited compared to what is available outside.
(13:30):
Many plans restrict access to certain acset classes or strategies
that can limit flexibility when trying to manage taxes or volatility.
And in today's environment, having access to a broader toolkit
really doesn't matter. Being stuck in a narrow lineup could
be a disadvantage for a long long time. I mean,
you know, even now a lot you know for and
k's you know, we're started as a way for workers
(13:58):
because to save money, the pensions were going away to
find benefit plans. We're going away in favor of defining contribution.
And you know, we saw through the nineties, especially in
these nineties two thousands, early two thousands, a lot of
these pensions go away, They became underwater, that distributions are
(14:20):
going out, and a lot of these companies struggled. You
think of airlines and automakers and telecoms. It really had
a problem with that. And and so you know, the
four one K rose and as a way for people
save money. But now we live in a litigious society
(14:42):
people see at the drop of a hat, and we
talked about that with insurance too. But employees have gone
after employers because investments might be too risky or for
myriad reasons. So now a lot of a lot of
these investments are.
Speaker 1 (15:00):
Some of us.
Speaker 3 (15:01):
I shouldn't say a lot, you know, some of them
are here to protect the company so that there isn't
a lot of volatively volatility in there. So a lot
of times you can get it on the board, Okay,
I recommend that because you can make your own choices
outside of that instead of going with what everybody in
the company has and so invest So beneficial designations are
(15:22):
frequently outdated on old accounts. We talked about this a
little bit. People forget to update them after major life
events like marriage, divorce, children create serious issues. Uh, there's
a behavioral issue tied to set it and forget it.
Thinking people mentally check the box and then stop engaging
with the account entirely. That lack of attention often extends
to the rest of the financial life over time. This
(15:43):
leads to missed opportunities and avoidable mistakes. Passive neglect is
not the same as disciplined investing and we talk about
not touching your accunts all time. You do have to
pay attention. You don't have to be making changes the
all the time, but you do have to pay attention,
and so consolidation can provide clarity and control that most
people do not realize they are missing. Bringing accounts together
(16:04):
allows for unified investment strategy and also makes tax planning
withdrawal planning far more efficient. The ability to see everything
in one place improves decision making, and simplicity drives better behavior. There,
you know, there are still cases we're leaving a forward
can place makes sense, Strong intuitional funds, unique plan features,
or credit or protection may justify staying put. However, that
(16:26):
should be a deliberate decision, not a default. Too many
people never evaluate the pros and cons. Intentionality is the
key difference.
Speaker 1 (16:34):
I think, Aaron, you're making some great points. I also
think some people just set it and forget it. I
know I've got a four to one can I know
I contribute. I look at the page, I even check
the balance every now and then. But some people honestly
don't make any changes over the years and just set
it and forget it. You can be a little bit
more proactive than that, Aaron, Right, you don't want to
just kind of let it sit there.
Speaker 3 (16:56):
Right right, and you can you know, it's okay to
look at it and decide not to make any changes.
Speaker 1 (17:01):
The key is to look at it, yeah.
Speaker 3 (17:03):
And make sure that that it's going in the right
you know, that still matches what you want, you know.
And so and there's I think some misplaced loyalty to
old and old companies also, like they took care of
me for this long, they're going to keep taking.
Speaker 1 (17:19):
Care of me.
Speaker 3 (17:20):
In reality, in today's day and age, that might be
true in a small company, they might still care about you,
but in these big fortune five hundred companies, publicly traded companies,
they don't care about you. When you're in an ex employee,
you know, it's the care goes because they have other
They have current employees to worry about and stockholders too,
(17:41):
so and that's where they're fiduciary lie. If fiduciary duty
lies is to the shareholders. So that is something to consider.
I have another topic we can get into real quick
here before our first break. But there's an article from
Creative Planning, and if everybody wants that, I can get
it's called a fresh look at what retirement is for
(18:05):
Many people view planning for retirement as a financial event.
After all, we tend to spend our entire life saving, investing,
and sacrificing so one day we'll be able to leave
work behind. However, when it was the last time you
considered how your financial preparation translates into what you want
to experience in the next phase of life and drove
our retirement lifestyle and whether you hope for more time
(18:26):
to pursue hobbies and interests, the freedom to explore a
new purpose, the flexibility to spend more time with loved ones,
or something entirely different. Taking time to align your priorities
with your finances can help you be more intentional in
shaping your vision for retirement. So we talk about a
new perspective on retirement. In recent decades, the general perception
(18:46):
of retirement has shifted from a passive final phase to
the next active chapter of life. Today, a healthy retire
we can expect to live in retirement for twenty to
thirty years or even longer, which makes it more portant
than ever to think carefully about your ideal retirement lifestyle
and what a fulfilling retirement looks like for you. So
rather than viewing retirement years is the end of something,
(19:08):
consider them as an opportunity to find new purpose, new routines,
and new relationships. Sources such as five necessities for Fulfilling
retirement another article can help you further explore what you
want this next chapter to include. You know, I have
a lot of clients, and my mom was the first one,
and then I have a lot of clients that have
just mentioned the retirements is well, first, it's weird, you know,
(19:32):
you go from working to not working, and then you
know it's people. The cop frequently comment to me to say,
I don't know, however I had time to work. I'm
so busy in retirement with all these things that they're doing.
I don't know, however I had time to work.
Speaker 1 (19:49):
You know. So that's a good problem. That's a great
problem they have. By the way, erin.
Speaker 3 (19:54):
Yeah, hobbies. It keeps you young too, And that's the
whole point of this article. You know, we're not gonna
have time to go through the whole thing, but that's
you know, that's the point is it keeps you young.
Retirement is not a natural thing. I mean, you know,
humans for thousands of years it worked and then died.
(20:15):
You know, they still or they or they help take
care of families became too uh, you know of the
of young kids and stuff to work, but a lot
of times it was work until you physically couldn't anymore.
And now people are retiring when they they could work,
they absolutely could work. But you know, the humans are
also living a lot longer too, so we got to
(20:36):
fill that time. And so the clients that really thrive
in retirement are the ones that find purpose, the ones
that you know, take on hobbies that don't just you know,
people have seen it where they don't have hobbies. Uh,
and just the age a lot faster.
Speaker 1 (20:52):
Find a hobby something.
Speaker 3 (20:53):
You find a hobby, find it where social animals get
find a group and get involved.
Speaker 2 (21:00):
Have volunteer.
Speaker 1 (21:01):
There's so many things to do. I mean, the community
is huge, right and maybe it's your church, maybe it's whatever.
I'm a I'm a grandparent now, so Aaron, it's natural
to spend more times with the family and the grandkids,
which I want to do for those that aren't grandparents.
Whatever it is. You know, everybody talks about golf. It
doesn't have to be golf. We're just a week removed
(21:21):
from the Masters, which was one of my favorite. Uh.
It is my favorite sports event of the of the year. Uh.
And a lot of people just spend time on the
golf course. Maybe you play pickleball. That is a big one.
Speaker 3 (21:36):
Yeah, yeah, that that is a big one. That's growing. Uh,
you know as well pickleball, and no else is paddle
p A D E L. Yeah, that's growing as well,
which is a bishmash with a bunch of paddle sports.
Speaker 1 (21:50):
Yep. And and visits see the emergency room are up
as well, because I'm telling you that's how I tore
my meniscus, so so be it right. I got it
fixed and I'm back on the court. It is what
it is. But it's good to get out move be social.
We are social animals. We don't sit in the rocking
chair in the front porch with an afghan over our
(22:12):
lap anymore. I think I think times and generations have
changed that. And we're going to actually kind of hear
from Jeff after the break Aaron, that is a little
bit about it's about what couples do, but couples that
have an age gap, I think that's that's what he's
going to talk about. And you're seeing that more now
than he did years ago. Right, husband's maybe twenty thirty
(22:33):
years older, or maybe the wife is older than but
there's an age gap there. So Jeff is going to
focus on that. I also want to give us your
phone number for people that have questions. Aaron, you work
specifically with this type of situation, and that is the
four to one k rolling it over right, Yeah, and
getting hit.
Speaker 3 (22:52):
That's what we do. I mean what we do. I've
been doing my entire career. It's what creative planning and
our wonderful financial advice I have all worked on and
it's you know, as one of the things we do best.
So let us take a look. I mean, you know,
we have our meanings are free, they're kind of complimentary. Uh,
(23:12):
and you know what's the risk. The only thing you
spend is some time and you'll get you'll leave getting
a lot better, a lot clearer picture on what's going on.
Speaker 1 (23:23):
Take advantage of that complimentary get together, talk to somebody,
get a second set of eyes on your plan and
see if you're on the right track. To reach out
to creative planning two six two five two two forty
forty two six two five two two forty forty or
the name of the show is a great way to
remember the website, The Retirement Clinic dot com. Pass shows
(23:44):
are podcast and archived and a lot of good information
at the Retirement Clinic dot com. We will hear from
Jeff after the break, Jeff or Aaron. Any more thoughts
on on that segment with the four to one K.
You don't want to be complacent. You don't want to
We just had tax SAI what three days ago? Today's eighteenth.
That's a deadline April fifteenth. We know we got to
our taxes done unless you file for an extension. Maybe
(24:06):
it's because there's no deadline here that people tend to procrastinate.
Any thoughts on that.
Speaker 3 (24:12):
Right, No, you hit the nail on the head. Don't procrastinate.
Get this taken taken care of her, at least looked
at so you can check that box to make sure
that you're still head in the direction that you want
to be going in.
Speaker 1 (24:27):
And when I mentioned all the contact and for your
all over social media as well, so give them a
like and follow and just go to Createiplanning dot com
for more information along those lines or call two six
two five to Aaron Kowal. We'll be back. We're gonna
hear from Jeff Cowal shortly as well with that segment,
and I'm Paul kronforced on WISM every Saturday morning, ten
(24:49):
o'clock the Retirement Clinic. We continue and we'll be right back, Good.
Speaker 2 (24:53):
Morning with Jeff Cowaugh.
Speaker 4 (24:54):
Looking at different situations that we've seen over the last
thirty eight years, One that comes up periodically is an
age gap between spouses. A lot of times it's not
necessarily a second marriage, though it could be many times.
Like one client we just brought on, they just met
(25:14):
a little later in life with a ten year age gap.
They had kids and had to address issues of college
education while planning for retirement. This Baron's article addresses some
of those competing objectives. It's titled Couples with age gaps
face Financial Challenges How to navigate them.
Speaker 2 (25:37):
Let's give a little bit of background.
Speaker 4 (25:39):
Couples with big age gaps face unique financial challenges when
children are still at home. These challenges multiply, forcing families
to balance retirement, college funding, and financial security. Most US
couples are close in age about two years apart on average,
but census data shows that roughly eight to nine percent
(26:01):
have age gaps of a decade or more, putting partners
on staggered financial timelines. We've got college staring us down
in ten years, says Annie Galvin, forty four. She's a
marketing professional, Washington, d C. This is in the Baron's
article whose husband is fifty four? So Annie's forty four,
(26:22):
her husband's fifty four, and their son is eight.
Speaker 2 (26:26):
And Annie says.
Speaker 4 (26:26):
My husband will be eligible to retire right around the
time our son starts college. So they've built retirement savings,
they have a five to twenty nine plan, they've got
insurance policies, and are now forced to play these pieces
together in a more coordinated framework. Overlapping retirement and child
related expenses create pressure points. Number one concern is that
(26:51):
the older person is scared and concern that there's not
going to be enough money for the younger person.
Speaker 2 (26:57):
I understand that.
Speaker 4 (26:58):
I see that, especially when you love somebody, you want
to make sure that they're taken care of it if there's.
Speaker 2 (27:04):
A longer time frame.
Speaker 4 (27:07):
And the article goes on to say the couples with
large age differences need to plan for assets to last
across more years of spending. That's a really long runway.
Even when families recognize extended timeline and advisors say they
often underestimate how costs evolve and again.
Speaker 2 (27:27):
Understanding the income gap.
Speaker 4 (27:29):
One A big risk comes when one spouse retires or
reduces income while expenses remain high with children at home,
younger spouse to continue saving during those years is important.
Required minimum distributions from retirement accounts can complicate cash flow
if one spouse is forced or take out required minimum
(27:50):
distributions and the other is not. This I thought was
pretty interesting because it says the good news in this
is that when one spouse retires may end up in
a lower tax bracket, and that could be an opportunity
to convert tax deferred retirement accounts into WROTH accounts. Tax
deferred I raise for one case, into WROTH accounts. Since
(28:13):
the converted amounts are taxes ordinary income, you'll be a
lower tax bracket.
Speaker 2 (28:18):
Taxes will be lower.
Speaker 4 (28:19):
Such a key point when income drops. Don't miss the
opportunity to pay less in taxes on conversions. I like
ROTH conversions a lot of times, regardless of the tax,
but tax free is so powerful that if you can
take advantage of one spouse retiring and then doing wroth conversions,
that can be very powerful and be long.
Speaker 2 (28:40):
Lasting for the remaining spouse.
Speaker 4 (28:45):
It often makes sense for the older spouse to delay
social Security benefits and the younger spouse to claim earlier.
Speaker 2 (28:51):
We do this a lot in our practice.
Speaker 4 (28:53):
Delaying the older spouse's benefit increases the eventual survivor benefit well.
Earlier income from the younger spouse can help offset withdrawals
during that stretch, so again, social Security plays a big
part of this as well. A couple more items in
the article. The Baron's article extend earnings to bridge the gap.
(29:16):
If the older spouse can continue to work beyond normal
retirement age, that can also help have that income coming in.
One last item, I'm sure there are a lot more,
but one that needs attention is long term care. The
cost of care of one spouse if one spouse becomes
incapacitated is frequently overlooked. Absolutely, the cost is extremely high.
(29:40):
The older spouse is likely to need care first, often
while the younger spouse is still working or supporting kids,
and without a plan, long term costs can rapidly drain savings,
endangering the retirement of the spouse, so the age gap
planning is different. There's a longer pay time you have
(30:00):
to plan for. But as usual, planning, planning is the key.
Give our office call. We addresses all. We address all
areas of planning, the cash flow projections, the long term
care needs, wills and trusts, taxes, all those things we
can handle in our office. Give our office a call
(30:21):
now at two six two five two to forty forty
or go online to the Retirement Clinic dot com. Schedule
your appointment with us, regardless of your age difference. Start
your planning now. Make sure that you address all these
areas regardless of what the age gap is between you
and your spouse. Makes sense to do a lot of planning.
(30:43):
Come on and see the creative planning at the Retirement
Clinic dot.
Speaker 1 (30:48):
It is that time on the Retirement Clinic. Welcome back
to w I s N with Aaron Kowal with Creative Planning.
I'm Paul kron Force. This segment is the weekly feature
we call well both Management and Preservation. Aaron, what's going
on this week?
Speaker 3 (31:05):
All right, this week we're gonna be talking about asset
location versus allocation, where you hold assets matters more than ever,
so most investors focus on asset allocation, which is how
many is divide across stocks, bonds, and other investments, alternatives,
private equity, all that stuff. And while that is important,
asset will location is often overlooked. So asset location refers
(31:29):
to which accounts hold which investments, and this can have
a significant impact on after tax returns. In many cases,
it's one of the easiest ways to improve outcomes. So
different types of accounts are taxed differently. That's no surprise.
I'm not revealing any mysteries of the universe here. Tax
will accounts, traditional retirement accounts, and WROTH accounts each have
(31:52):
unique roles. Placing the wrong assets in the wrong accounts
can create unnecessary tax drag. For example, holding tax inefficient
investments in a taxable accounts can increase annual tax liability.
Proper placement helps minimize this, so income generating investments are
often better suited for tax deferred accounts. Think iras, where
(32:17):
you don't pay the tax on the money until you
take it out of the account, and at that point
it's all income taxable. So income generating stuff and better
suited for tax fert accounts. Bonds in certain alternative investments
can produce regular income that is taxed at higher rates.
Placing these in tax deferred accounts can reduce the immediate
tax impact. This allows more of the return to compound
(32:39):
over time. It is a simple but powerful adjustment. So
some you know, some income from income producing investments is
tax doordinator income. So why have that in non taxable
or I'm sorry, in taxable accounts when you can be
paying apple gains on that, which is a lower rate.
(33:01):
So growth oriented assets are often ideal for WROTH accounts. So,
since WRATH accounts grow tax free, placing high growth investments
there can maximize long term benefits. This is especially valuable
for younger investors or those with long time horizons. The
compounding effect can be substantial. Strategic placement enhances this advantage.
(33:24):
You know, this is one that's not super intuitive. Clients
don't really get. I have one client, Marty's his name,
that that really got it. And he's like he wasn't
gonna spend all his money money, you know, but he
you know, has WROTH accounts, and so just put I
(33:47):
don't want any bonds in there. Make it very aggressively.
You're you know, but he's like, you know, in his
eighties he said, I'm not going to spend any of this.
It's going to my kids, you know, and they can.
So let's go as aggressive as as we can, which
is you know, sometimes people don't really wrap their minds
around it that he's thinking that, you know, decades generations
(34:09):
down the road instead of well, money, Mic go down
this year and I'll be in trouble. So that that's really,
you know, really wonderful. And taxable accounts can be which
you know, regular brokerage account right, taxable accounts can be
used for more tax efficient investments.
Speaker 2 (34:29):
UH.
Speaker 3 (34:30):
Index funds and ETFs with low turnover tend to generate
fewer taxable events.
Speaker 1 (34:35):
UH.
Speaker 3 (34:35):
This makes them more suitable for taxable environments. And imagine
capital gains becomes easier with the right assets in place.
Efficiency matters more as portfolios grow. You know, this is
something that's not always you know, readily apparent. You have
to really dig into some of these funds like mutual
funds and others to see what the tax drig is
because I can you know if you're in the wrong
(34:58):
things in a taxable account. I mean, the funds themselves
are going to be struggling with it, but you got
to be you want to be more efficient with some
of these, so and then you know it plays a
big role. Asset location also plays a role in withdrawal strategies.
Having different types of accounts allows for more flexibility in retirement.
(35:21):
Investors can choose where to withdraw from based on tax considerations,
and this can help manage tax brackets and reduce overall liability.
Coordination is key, uh, you know require minimum distributions. We
talked about that probably every show add another layer of complexity.
Assets held in traditional retirement accounts will eventually be subject
to rm ds, so strategic asset location can help manage
(35:44):
the size and impact of those distributions. Planning ahead makes
us more manageable, and it reduces surprises later. Many investors
end up with suboptimal acid location simply due to account history, contributions,
rollovers in market performance, creating balances over time and without
potential adjustments, inefficiencies persist. Periodic review is necessary to maintain alignment.
(36:06):
Small changes can have a big impact. Acid location becomes
more important as wealth grows. The larger the portfolio, the
greater the potential tax impact, and what seems like a
major inefficiency can translate to significant dollars, so high net
worth households benefit the most from getting this right. It
is a leverage point in planning, and the goal poll
is not perfection, but improvement. Even incremental changes in acid
(36:29):
location can enhance after tax returns. And this is an
area where thoughtful planning adds real value, which is the
only kind of planning we do is thoughtful planning. It
is often overlooked because it is less visible. However, its
impact is very real over time.
Speaker 1 (36:47):
I like what you said, We're not looking for perfection, improvement.
I had to think about that for a little bit.
That's good stuff. Erin before we break anything. You want
to ps that.
Speaker 3 (36:58):
Too, No, I mean that's really what I've talked about
it for for years and years and years by clients
is you know, we got to look at different tax
you know, buckets, because we talked about stocks, bonds, uh,
you know four and then domestic and alternatives and all
that stuff. But we don't Yeah, we don't ever really
(37:18):
talk about h well, I mean we do, but you know,
you don't see a big articles on this, a lot
on tax location and where it's kept. So that is
something that we really try to help with clients and
what what buckets to hold? Which funds or which accounts
I'm sorry, securities and.
Speaker 1 (37:35):
Yeah, the tax impact, it's a it's a real thing, Aaron.
If people want to reach out Creative Planning dot com.
More importantly, one phone number for all locations here in
southeast Wisconsin. That number two six two five two two
forty forty with Aaron Kowal. I'm Paul Kronforce, the Retirement
Clinic on I N We'll be right wrapping up today's
(37:56):
retirement Clinic before we say goodbye to our listeners, and
we're back next Saturday at ten o'clock. Don't forget during
Dan o'donald's show, those daily market updates three and five
PM news blocks done by great advisors and guys like you,
Aaron Cowall, thanks for another great show. If I want
to reach out, thank you. What what do you prefer
phone calls or doesn't it really matter?
Speaker 3 (38:18):
Doesn't matter, reach out to us Creative Planning dot com
or the Retirement Clinic dot com two six two five
two two four zero four zero if you want to
reach out to me for that that article on what
retirement looks like from Creative Planning Aaron dot co waalkow
al Aaron dot co wal at Creative Planning dot com
(38:40):
as well.
Speaker 1 (38:41):
Good stuff We heard from Jeff about the age gap
in couples married couples and what to do there. And
there's so many h so much info in four oh
one k plans that are sitting stagnant to do what
Aaron just said, simple a phone call away two six
two five two two forty forty What was Cowal Investment?
The group is now. Creative Planning locations are the same
(39:03):
on Bluemont Road and Brookfield in delafield'cine Port, Washington, Phoenix, Arizona,
Cape Coral, Florida. License in all fifty states until next Saturday.
Thank you for joining us. Remember the Retirement Clinic dot
com for more information. News is coming up next WISAID Milwaukee.
The preceding program is furnished by Creative Planning and SEC
(39:23):
registered investment advisory firm. Creative Planning, along with its affiliate
United Capital Financial Advisors, currently manages or advisors on a
combined three hundred and twenty five billion dollars in assets
as of June thirtieth, twenty twenty four, the host works
for creative Planning, and all opinions expressed by the host
and or their guests are solely their own and do
not necessarily represent the opinion of Creative Planning.
Speaker 4 (39:44):
The show is designed to be informational in nature and
does not constitute investment, tax, or legal advice.
Speaker 1 (39:49):
Different types of investments involve varying degrees of risk, and
there can be no assurance that the future performance of
any specific investment or investment strategy, including those discussed on
the show.
Speaker 4 (39:59):
Will be profit suitable or equal any historical performance levels.
Speaker 1 (40:02):
The information contained herein has been obtained from sources deemed reliable,
but is not guaranteed. If you would like our help,
request to speak to an advisor by going to creative
Planning dot com. Creative Planning, tax, and legal are separate
entities that must be engaged independently.
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