All Episodes

September 14, 2023 • 45 mins
None
Mark as Played
Transcript

Episode Transcript

Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
In your corner, saving one investorat a time. I'm working for clients,
not companies, all while bullyproofing portfolios, totally committed to sharing academic truths
of botomistic always representing Main Street andnot Wall Street. Team, it's your
Sun Money team and this is theSun Money Investment Show with Drown financially by

(00:23):
theirs. Hello and welcome to theSound Money Investment Show with Brown Financial Advisors.
I'm Greg Brown and I'm James Barton. We are a registered investment advisor
firm. We are independent. Wedo work for clients and not companies to
receive. If you're complementary and personalizefinancial income plan, give us a call
five one three five seven five Nsixty five four. If you're seeking advice

(00:46):
on all four one K four threeB some type of employer sponsored plan,
perhaps even anyway analysis. Here's thepoint. If you're no longer with the
company, then as a rule,your money should not be there either.
We can help you take control,roll that out, whether it be a
tax neutral I array or split itoff via the anyway. Give us a
call five one three five seven fivenine six five four email. Share your

(01:08):
thoughts to team team at Brown FinancialAdvisors dot Com home offices in Milford,
but we also have locations in BlueAsh, Westchester, and Florence, greg
Well. Today, we're going todiscuss six common misconceptions about retirement, So
avoiding common misconceptions and biases that cancreep in it can impact your golden years,
either favorably or in kind of anunfavorable basis. As biased tend to

(01:34):
do now planning for major life events. While it can be exciting, it
can be stressful. Some of theevents that might be included could be a
big wedding day, having a child, grandchild, even starting a new job,
buying a home. How about retirementitself, and even family vacations.
A lot of squabbles about that.But there's also this, uh, it's

(01:56):
kind of like this, this sublimetruth that more people spend time each year's
planning their next vacation they do theirretirement. So it kind of fits in
somewhere in this, doesn't that allthe events, you know? Nonetheless,
they require some thinking, some deepthought, some planning, a planning process,
and as people enjoy a planning process, some do some they would rather

(02:19):
do anything, maybe even go thedentist. Besides coming in and talking about
financial matters. James. You youhave clients and prospects just as I do,
that would come in and it'll behim or just her, and they're
just saying, I've tried to get, you know, old Joe to come
in. It just just didn't.This thing you got to kind of sort
of make it your thing. Youmentioned that about the dentist. I hear
that drink taxias and I'd rather goto the dentist than do this, you

(02:40):
know, with with with that what'sthe gas with the nitrogen and or the
what's that called nitrous ox side,Yeah, you know a little bit of
that and some modern day numbing solutions. It can be an experience that just
not like it used to be.You know what, a financial planning with
that's gonna be a pretty smooth andfun and we call it a nerdy fund
process actually, And then the resultis you get a highly visual result.

(03:02):
You can follow along and it simplifieswhat some might think are complicated subjects and
it's exciting to see the projection ofwhat can be your future and you just
step into it, own it,make it happen, and enjoy the windfall
the benefits of it. All andthen that feel and seem better already and
much less stressful, having a plan, working the plan, rather than just

(03:23):
kind of stumbling forward hoping that itjust somehow works out. That sounds chaotic,
that's already stressed me. I don'twe to get back to our subject.
You know, we can avoid misconceptionsand as mentioned, make it exciting
and also as mentioned, reduce thestress involved. So I suppose all this
boils down, what type of personare you? What are your interest what's

(03:45):
the most important aspect to plan properlyfrom your perspective to become the successful person
you want to be in all phasesof your financial life. So as we
move forward today, today we'd liketo discuss those important aspects of retirement planning.
How to avoid the misconceptions, thebehavioral biases that many people often have
when it comes to the planning forthe retirement and misconceptions. You know,

(04:05):
they can be common in every areaof life, especially when it comes to
this thing retirement. Golden Years.There's a song like that, Golden Years.
I don't remember who saying that,Maybe it's Clapton or something. I
don't know, but they should beGolden is in good and they should be
like the best years of your lifewhere you have all the time to do
all the things you've been waiting todo, and then you get there,

(04:27):
you know, don't look stumped.It's time to execute. Oh you should
have a plan for that too.The social calendar, your activity calendar,
your family calendar, your vacation calendaryou're always want to get to. And
the bucket list. Two and James, you mentioned this a lot, and
we'll shows I would say probably sixor seven times a year. Rare.
Every day is a Saturday. Thatcould be an expensive proposition if you hadn't
thought it through, and your walletin your purse matches your aspirations to do

(04:49):
so. So let's look at thesephases of life and retirement as relates to
misconceptions and even biases with a fewthought provoking questions. Well, when you
mentioned buises, something that we hearonce in a while that's a little bit
entertaining is people say they don't likeannuities, but they like the concept of
social security. Very true, andthen once you explain that they're really the

(05:12):
same thing, just administered by thefederal government. The Social Security program is
an annuity program. So either aprivately owned or privately purchased annuity or the
government version of an annuity. It'skind of the same thing. I just
that just yesterday doing a review withthe client. We're just reviewing the facts
of their sources of income, andthey kept saying, and you know,

(05:34):
and don't forget my pension. Sothere's his pension, his soal security,
her SO security, a little bitof income from realty from a child.
They kind of set up in aninst receivable and sold the house to one
of those you know, sweetheart dealswith the family. And then she keeps
in bit, don't forget my pension, And I said, you don't have
a pension. She said, yes, mister Brown, the pension that you

(05:57):
set up for me. I said, okay, you mean your annuity,
the lifetime income writer that you're gettinga paycheck for life that She said,
yes, you called that once upontime, you called that. It's kind
of like buying your own additional SoCsecurity check. And she said, so,
yes, that too, because it'sincome for life. And sure enough,
now she's right. She had theright perspective, Jane, just like
you're saying you want a self fundedpension, conceptually you can have that.

(06:20):
Practically speaking, it's using a fullyinsured instrument to give you guaranteed income stream
for life, so that while youhave a pulse, you have a paycheck,
and then the restaurmenty can be investedmore at risk if you choose,
or less risk whatever in between,because you don't have dependency on it.
Your cash flow is taken care ofby these other variety of fundamental income sources,
including your self funded pension. Soa good reminder, yep, people

(06:43):
oftentimes hear bad things about the news. Don't like annuities. They're good,
they're bad, they're ugly. We'vehad shows on that. But when it
boils down to the concept of it, if we don't tell you you know,
the vehicle, the product up front, we kind of tease you with
the characteristics the benefits. You know, you want something that can go up
with the market's upside and none ofthe downside where you get some of the
gains, none the losses that cangive you a paycheck for life every month

(07:08):
while you're alive, and maybe whenyou pass there's a check that continues to
your spouse. I'm liking it sofar, I only part of your investments.
It will never be at risk.Bet have the income to help your
cash flow so that you can goto the mailbox and there's always money.
Yeah, you got me, Yougot me. What is that thing?
What is that thing? Is that? Is that a mutual fund? Now?
Is that a CD? Oh?Absolutely not any of those other investments.

(07:30):
When the account balance goes to zero, you stop going to the mailbox
because there's no money for you.This even if you play by the rules,
take the check monthly for the restof your life. Even if the
account goes to zero, you stillhave a paycheck. Why because you still
have a pulse. Hey I'm likingthat. Now. What is that thing?
Agin? Well, in this case, it would be a fixed indexinuity
and we wouldn't recommend you running getit by your interrans agent. We will
advise you, as financial advisors withadciary standard, to put your innswers first

(07:54):
in every situation, to find andisolate the best product us your situation according
to a plan. A plan likewe're talking about today and what you know,
bias People have bias against nuities justas you're touching on NOPE. We
need to make sure we throw outbias. We focus on your purpose,
your need. We align the productsand strategies, approaches and and and you
know, methods to equal what youneed done. And then the grand reveal

(08:18):
is what gets that done? This? Why didn't know that did that?
Well, there's a lot of things. We don't know a lot of things
we don't know some things, youknow, what you don't know might hurt
you. Let us help you.It's you know, complementary process coming in
and we'll review where you're at,everything you have. We'll have you back
to share all the findings, theresearch, the results. You know,
internal spreads, fees, margins,loads, all the brokenness of your existing

(08:39):
investments, how they don't align withyour actual purpose, what risk you're taking.
You are not aware of the feesand expenses you're completely you know,
maybe oblivious to total cost of ownership. Will lead out there, put it
together and say what do you thinkthis will work? Once you agree,
yeah, i'd like to do that. I'd like to do something it works,
So let's get together and talk aboutyou We'll show you exactly the plan
and then you'll see a few andthen you just determine if you see if

(09:01):
it and we work together, wedon't, and we agree to disagree or
we agree to start the journey anyway, James, that's a thought provoking point
for me. What are your thoughtprovoking questions? Well, we may not
be able to get to all tenbefore the break, but let's start with
this. As we get older,or maybe it's the individual I we the
me As we get older and closerto retirement, should we start quote unquote

(09:22):
de risking or that means maybe investingpredominantly in bonds or investing something that is
an effective bond replacement strategy. Hopepoint is, should we become more conservative
with our investments as we get olderand closer to retirements? What are some
financial investments that should be considered tohelp avoid market volatility? And again that's

(09:43):
depending upon your overall risk or tolerancefor market risk when it comes to your
investments. What kind of income strategyor perhaps even a plan should I have
if I don't have a pension.Is there a way too, as we
mentioned a little bit earlier, togenerate a self funded pension? How should
I prioritize the tax status? Thatmeans the qualified versus non qualified, traditional

(10:05):
versus ROTH When it comes to investmentaccounts, that means not only my contributions,
but also the distributions from those differenttypes accounts. Is there a sequence
or a prioritization for those What isbehavioral finance? What is investor perception and
why does it matter? What exactlydoes it mean to have a bias that
affects your money, your investments,your portfolio, your nest egg. What

(10:28):
strategies can a good financial professional useto help avoid these biases, these behavioral
biases? Why don't more financial advisorstalk about this side of investing in finance?
And what should I look for whenchoosing the right financial professional for me
or for we or for us?Greg any thoughts? Yeah, I think

(10:50):
you need someone that's holistic, canhelp with all the aboves so you can
be on track right up front andnot go all over town trying to find
solutions. It's kind of like diggingfor treasure without a treasure map. But
that's all we got there, allright. I'll fund about the outphas five
one, three, five, seven, five, nine, six five four
call us we can help, butstay tuned. Listening to the sound Miney
Investment Show with Brown Financial Advisors herein fifty five care se de talk station.

(11:11):
Opinions expressed are solely those of BrownFinancial Advisors and should not be interpreted
as specific advice. Materials presented arebelieved to be from reliable sources and no
representations can be made as to itsaccuracy. All ideas and information should be
discussed in detail with one of ourqualified investment advisors prior to implementation. Market
based investments involve risk, and pastperformance is no guarantee of future results.

(11:33):
Insurance based investments offer guarantees based uponthe claims paying ability of the issuing company.
All insurance, tax and mortgage servicesare offered through Brown Insurance and Tax
Advisors LLC. Brown Financial Advisors andBrown Insurance and Tax Advisors are affiliated companies
and may only transact business in thosestates in which registered or were otherwise legally
permitted. Welcome back to the SoundMoney Investment Show with Brown Financial Advisors.

(11:56):
I'm Greg Brown and I'm James Borton. We are independent RIA. That's a
registered investment advisor firm. We doour for clients, not companies. That's
main street in Wall Streets. Ourfront number five one three, five seven,
five nine six five four, website, Brown Financial Advisors dot Com,
Email team at Brown Financial Advisors dotCom and our home offices in Milford,

(12:16):
but we also have locations in BlueWestchester and Florence Gregg. Well, as
we continue with some of the misconceptionsabout retirement and misconceptions and biases, they
can impact what we're referring to isthe golden years, the golden years being
retirement and assumptions won't even break thatdown, you know, Assuming things when

(12:37):
it comes to different areas of lifecan have an effect on outcome and something
as simple as choosing which movie towatch or how are you going to go
about building a home, and howeveryone sees that project from different perspectives,
with different expectations that aren't always insync or aligned, and that part of

(12:58):
life that we always we just alwayswant to kind of be in that narrative
of people's minds. How do theythink of us, what do they envision?
Will think of your retirement as avision? What do you envision it
as? And then we kind ofwork back. We used to say,
you know what, if you couldgo twenty years in the future, take
a look around, run back tothe present, and start changing things rapidly

(13:20):
based on what you had just learned, Well, we can bring that to
the table for you and help youconstructively be unemployed for two maybe three decades
and survive to tell the tale,to have the cash flow to succeed on
purpose. And we'll factor in themisconceptions, the land mines, the biases
that can work against you. Sometimesbiases are on board programming their discernment.

(13:43):
They're helping us to understand better whatrisks and pitfalls and opportunities and benefits really
look like and kind of thread theneedle and all points in between. And
if you think about it, that'sreally what retirement can be about. What
can work against you? Well,we know we've already mentioned bias. Can
We know that the headwinds of marketsgoing up down in sideways and volatility can

(14:07):
be spooky. Properly invested, theycan be beneficial. In fact, volatility
brings about opportunity. We know thatyou'll need a certain amount of income,
might need to escalate it with thecost of living. Some of these are
unknown. We have to do ourbest to make adjustments along the way allow
for the things we don't know rightup front, day one. So as
we go through a few hands selectedimportant ones, if you will, to

(14:28):
discuss today key common misconceptions as wellas some other assumptions, all sides of
the story before jumping to a conclusion. Put it together, put the picture
together, then lay out the piecesto align with the picture. Used to
say, what if you drop apuzzle box on the floor. Your job
is now to pick up the pieces, align them, put them together,
act like you're having a good timedoing so, and get that darn thing

(14:52):
to look like the picture on thepuzzle box. That's what we'll do together,
James, Well, you mentioned severaldifferent words or buzz phrases, the
bias, the assumptions to jump intoconclusions. All these are forms of emotions.
So sometimes if we kind of takea step back and say, are
you letting your emotions control or dictateyour investment decisions? Usually that's not a

(15:13):
good thing. And if you wantreally to understand things fully or make an
honest or have an honest opinion aboutsomething, it's like when it comes to
your investments, you know, thisis where we fit in. One of
our jobs is to help inform,educate, explain exactly what you're invested in,
why you're invested in it, Andit's it's really better to have more

(15:35):
information than less. Maybe the analogyis what the watch. It's like,
do you want to know just whattime to day is or do you want
to know how the watch works?Depending upon you know how people think.
Maybe I'd say more engineer types theyare fascinated with how does that watch work?
And others are just simply It's like, hey, I have a basic
understanding of this. Just tell mewhat time today is and how are my

(15:58):
investments doing? What have you doneme lately? So when we sit down
with Perspective clients, we often askthem why their money is invested the way
it is, and some of themost common responses we get is number one,
I don't know or I don't remember. Number two maybe is because a
financial advisor told us to invest ithere, and number three is it got

(16:19):
selected for me. Number three isusually for employer based accounts where somehow,
some way they just got put intoa default target date fund and they don't
really understand remember or know why thathappened. It's pretty simple. It's based
on your age. So depending uponyour age, your target date fund is
based on that, and incrementally,as you get older and closer to retirement,

(16:44):
your target date fund will dial backyour market risk. Now that may
or may not be the correct approachfor you, because again, individually,
how do you want to be invested. Not everyone agrees with investing exactly how
their age is. Doesn't mean thatjust because you got a year older,
you drive a little bit slower onthe interstate, or that you become more
conservative. But then again it might. So that's again knowing more about you

(17:08):
and how either it's the individual youor the collective you should be invested.
But you know, again along withinforming on some of the common misperceptions or
conceptions about retirement. This is kindof the call to action. So if
you have any questions about today's show, if you need help preparing for retirement,
if you're looking to better understand yourinvestments, come see us. Call

(17:30):
us our fundumber five one three,five seven, five nine six five four.
It's a complementary consultation again five onethree, five seven, five nine
six five four call us. Wecan help Greg well, So we misconceptions
going forward here, all retirement savingsshould be qualified plans such as iras four
winks and four O three b's.That is a misconception. We'll label it,

(17:53):
you know, Exhibit one. Shouldall retirement savings being qualified plans.
What does that mean exactly? Well, employer sponsored plans, qualified plans such
as four one KS deal four threeb's traditional ROTH, And well, I
wouldn't say, you know, ROTHis tax free. That's what we're going
to have a distinct difference here.But it still has a qualification to it.

(18:14):
That's kind of like a distinguishing orthe picking of the knit about tax
qualified versus tax deferred or tax free. So the label qualified kind of means
that particular bucket of money has specialtax treatment. And like James said,
deferred, that means, you know, by not paying the taxes now,
you pay the tax later, maybeyou get a tax credit. It reduces
your income in the present. Butthere's a tradeoff, right, and trade

(18:37):
off is when you take out themoney later and it's taxed, then what's
the tax code look like? Whatare the prevailing tax rates? How much
will it cost you to get itback out? Would have been cheaper in
hindsight to pay the taxes on thedollars you put in when you first put
them in, kind of like payingtaxes on the seed as the old farmer
story goes, or wait till lateras it becomes bountiful and grows, and

(18:59):
you have what's called the harvest,and then you pay taxes in that larger
yield, being the harvest, wouldthat be in fact a larger taxable amount,
Yes, and dollars it would bypercentage. Maybe because we don't know
the future. We don't know whatwe don't know about that The other tax
quality formed James just mentioned the labelthat equals wroth roth is you went ahead
and took paid the taxes. Themoney it goes into that particular bucket has

(19:22):
the freedom to grow without future taxation, So the compounding of that growth will
never be taxed to you. It'scurrently anyway inheritable to surviving spouse beneficiaries,
and errors also on a non taxablebasis, will never be taxed. Again.
Pretty sweet. However, James isoftentimes reminding us all that after you
die, a roth has provisions thatmust be taken out. It's not like

(19:47):
you necessarily specifically required minimum distribution likeyou have with iras, where you reach
a certain age, you have totake a certain amount each year, whether
you need it or want it,or need it or not. That kind
of thing. So you're kind ofpaying taxes the money you don't need to
pay taxes on. But you havetoo because Uncle Sam's tired waiting on his
tax money. But these particular qualifiedplans were speaking of in the employer sponsored

(20:08):
environment. For one case, forprofit companies where you participate in employee and
you do some contributions, they dosome matching. There's a program set up
for that four or three b's typically, and that not for profit organizations hospitals,
schools, and so forth, andindividually owned qualified accounts might sound a
little redundant here, but traditional irasetax deferred, never been tax until you

(20:33):
take it out and hello tax man. Steps simples. These are forms of
business oriented small business employer plans kindof let the more individualized too, smaller
companies and roth iras. Roth irasyou can contribute to directly individually up to
a certain amount, just like traditionaliraise. The difference is you're putting money

(20:53):
into the roth after tax. Termqualified back to that that the plan whatever
in question, has certain irs,government requirements, offer certain tax benefits,
and that's what makes it qualified.What's non qualified? Sometimes refer to that
so people can connect with what we'retalking about. Hey do you have an

(21:14):
ira Yes I do. It's withsuch and such, it's it's this much
and okay, do you have anon IRA, Well, that's like AKA
also known as non qualified, doesn'tqualify for any special tax treatment. What
is a non qualified type of account? In that case, traditional you know
what it is. It's it's moneyyou've put in after tax. But it's
not a ROTH. The gains willbe taxable, only the gains because you

(21:37):
already paid tax on the principle onthe amount that you're savings. So keep
that in mind. Another form oftraditional the plan contributions have not been taxed
yet, okay in the in thetax deferred world traditionals in traditional IRA means
you haven't been taxed yet because ithasn't been considered income yet. So out

(21:59):
of your total compensation, the amountthat goes into a traditional IRA can reduce
your tax bill income as mentioned,that lowers tax bill now. But now
you have this money that grows upon you over the course of time,
becomes larger and has a future taxrate that we don't know that we'll be
applied and result in tax dollars beingpaid to Uncle Sam. Is that good?
Is that bad? We'll look atit. Be part of your plan,

(22:22):
So keep all that in consideration.We'll come back. We'll kind of
look at the ROTH aspect of thatand the five year seasoning rule when we
return our fundnumber five one three,five, seven, five nine, six
five four call us. We canhelp, but stay tuned listening to the
Sound Money Investment Show with Brown FinancialAdvisors. You're on fifty five KRC the
Tax Station. Welcome back to theSound Many Investment Show with Brown Financial Advisors.

(22:49):
I'm Greg Brown and I'm James Barton. We are a registered investment advisor
firm. We are independent. Wedo it for clients, not companies,
and it does all start with theplan means actually having a plan, long
watch to own and why you ownedit. So when you're seeking advisal on
an old four one K four threeb IRA rollover, investment planning, retirement
planning, income planning, tax planning, social security maximization, a ROTH conversion

(23:15):
analysis in any way analysis and forsome perhaps even an end service rollover all
those in more, we can help. Five one three, five seven,
five nine six five four our websiteBrown Financial Advisors dot Com, email team
at Brown Financial Advisors dot Com,and our home offices in Milford. But
we also have locations in Blue Ash, Westchester, and Florence. Y'all,

(23:36):
Well, we kind of left offwith misconception about all retirement savings being qualified
plans. We looked at what thatmeans. Qualified means tax qualifications and definition.
It think it's special tax treatment onthe bucket of money you're investing in.
And with that, the two majortypes are deferred, which you pay
taxes later. In ROTH, youalready paid taxes. The money you can
put in there up to define predefinedlimits will be tax free, grow tax

(23:59):
free, be you transferable at death, tax free, et cetera, et
cetera. So we kind of getdown this thing more with the roths.
We talked about traditional get a taxcredit because it lowers your income in the
current tax here, but over timebucket of money grows and there will be
a tax book because it's never beentaxed yet. ROTH, on the other
hand, the contribution has already beentaxed. Funds grow tax free basis.

(24:22):
Distributions are also tax free, subjectto a five year seasoning rule, which
you come back to. I wantJames to explain that, but now is
a rule. Retirement plans are subjectto ten percent early distribution penalty. If
we drawn prior to age fifty nineand a half. So remember you know,
with the taxes and a penalty,there are a few exceptions. We
won't even really deal with the exceptionsright now. We want you to look

(24:45):
at your long term investing. Isa sacred cow. I don't know if
I should say that as sacred abox of money at time capsule, time
capsule, There we go, therewe go. Anyway. Factors can consider
in general employee matching, employer matching. You're the contributor, the employers the
matcher. If you have a favorablematching program with your employer. The rule

(25:07):
of thumb always is take the freemoney. If you need to do six
percent to get a three percent match, then do six percent, not seven,
not eight, privately invest that privatelyinvested where Well, let's look at
that. So let's say you've doneall you can do at the workplace that
makes the most sense, and we'veadvised you through it according to plan,
and here we go. The othermoneys you have, well, you might

(25:29):
say eight, mister Brown, Ihave. I have twelve thousand dollars burn
a hole in my pocket each year. It's surplus. I have absolutely nothing
attached to it for a current expenditurenear term. It's just long term.
I can let go of this,pretend like I don't even have. It's
dead to me until I retire.Okay, excellent, twelve thousand. What
do we recommend. Let's say you'reage fifty and above, fifty and better.
How about that and that twelve thousand? We say, number one,

(25:53):
always invest tax free. First,number two, invest tax friendly. Second
number three invest tax trapped. Ifyou have to tax trap where you pay
taxes later, it's trapped until youpay the tax later. You don't know
the tax bill, right, Solet's focus us in the first two.
Out of the twelve thousand dollars,your age fifteen above, you can put

(26:14):
in seven thousand per year, sixtyfive and seventy five hundred. Okay,
seventy five ten changes, so seventyfive hundred, and there's now a super
catch up. But we'll get tothat later. Catchup, not mustard,
not mayo. Keep you gotta keepall this straight. So out of twelve
thousand, if seventy five hundred isgonna go to your roth first and foremost,
what's that leave forty five hundred dollarsthe other forty five hundred dollars can

(26:37):
go into your non IRA non qualifiedaccount, which is tax friendly. What
are you gonna pay on that,James? What are you gonna pay on
the growth of a non qualified account? Well, depending up on how you're
invested, you might pay taxes ata capital gains tax rate. So if
your ordinary tax rate is say twentytwo, twenty four, twenty eight percent,
and your long term capital gains aretax at fifteen percent, that's a

(26:59):
pretty good trade off. Indeed,so that's pretty tax friendly. The wrath
is tax free. Non qualified investingis tax friendly. And then the IRA's
four one, k's four three,b's, SEPs simples, et cetera.
Those are tax deferred, their taxtrapped. You pretty much need to use
them. They're part of the mix. Balance it out and make sense of
it now, James, back tostepping back a little bit. I let's

(27:22):
say I have a wroth and I'mgoing to take some of this money out,
and I'm just confused. I don'tknow what to believe. I hear
there's something kind of a five yearseasonal rule. Can I take money out
of my wrath after I've put itin the answer is yes, now couple
different things about this, and thisis maybe too much information, but here
it goes at any age, atany stage at you know, think about

(27:45):
this, your roth contributions. You'redirectly contributed to your roth IRA no matter
what your age is. You canwithdraw those contributions at any age without any
taxes or any penalties. Now,once again Greg mentioned before that should be
account the last resort. So whenyou're looking at where to get emergency funds
or financing from, your retirement accountsshould be the last resort. So as

(28:11):
far as the other part, whichis the rule, the five year season
rule means, and this goes backto your contributions part, you can withdraw
your cost basis, but you cannotwithdraw the growth prior to the five years
or prior to age fifty nine anda half without the government coming down hard
on you with taxes and our penalties. So that's the point about retirement accounts
is that as a rule, andthen there are exceptions to the rule.

(28:33):
So as a rule, there's afive year seasoning period, there's a ten
percent early dispution penalty, and againall these are centered around the age of
fifty nine and a half. Now, when it comes to the contributions,
there's also some factors to consider thatyou know Greg mentioned before about as a
rule, contribute up to the employermatch and then start privately investing. Well,

(28:55):
here might be an exception to thatrule. If you're in a really
high income bracket. Now, thismight be where the husband, the wife,
the individual, the collective, youhave a really high level of income
wage income at that you might becapped out from privately investing inside your iras.
The government has rules that heavily incentivizeretirement based plans that are employer based

(29:19):
versus the individual plans that you controlyourself. So there might be times when
it does make sense from a taxperspective to go above and beyond just simply
the employer match. You know whatyou get for the employer match, and
maybe perhaps max out your contributions throughyour employer based plant. Now, as
far as the rule of thumb abouttraditional versus ROTH, it is based on

(29:41):
the age also, so the youngeryou are, the more since it makes
to invest into a WRATH account.And again the tradeoff is if you're in
a really high tax bracket now andconceivably in retirement, you'll be in a
lower tax bracket later then maybe youdo want your tax breaks now, which
is a traditional versus the WRATH whichyour tax breaks later. So there's there's

(30:02):
many factors to consider. It's nota one size or one income level that
fits all approach. It's just sometimesthe best approaches do a little bit of
both and invest again at least upuntil the employer match and perhaps even more,
but depends upon your individual circumstance.We can definitely help you with analyzing
that, Greg, any thoughts onthose now, I think you've covered it

(30:25):
well, and we've covered workplace andtax deferred and tax free investing and IRA
and RATH traditional versus RATH non qualifiedsimple step, you know, the whole
thing. I think that's and theseare major vehicles people do step into and
invest through the organization or company andprivately. That's a good reminder if you
are self employed or if you havesome type of employer employee relationship where it's

(30:48):
a business relationship. A sep Iray sometimes can also be combined with a
traditional or roth iray and you cansometimes do both. Again, you know,
this is where you put the littleaspect of well sometimes right, So
now, misconception Number two, Retirementis a finish line. Again, perspectively,
we sometimes think of this as we'vereached the end of the race.

(31:11):
We're done, We've had this greatsense of accomplishment. And you know,
the analogy is it might be likerunning an actual race, graduating from high
school, college, some type oflarge project. For many people out there,
paying off that mortgage, that's oneof those times to celebrate and say,
yay, we made it. Sowhatever it may be, reaching the

(31:32):
end is really what we all strivefor. And it seems especially true when
looking forward to that retirement date.And once again, if you're in control
of when that retirement date actually occurs. So think about it. People start
working, usually in their teens theirearly twenties, and they continue working it
seems like until they well, notthey die, but they retire at around

(31:52):
the age of sixty five. Whysixty five because again, insurance Medicare kicks
in at that particular age. Atthat stage, that's oftentimes what people are
striving for is I gotta at leastmake it to Medicare, and then I'll
have good insurance for the rest ofmine forever. So it's safe to say
that you know that twenty thirty fortyyears is an extremely long journey to reach

(32:15):
retirement, and most people think thatthey've reached the finish line when they finally
to retire. In some ways they'reright, but in other ways, think
about this. You still probably haveanother twenty to thirty years of your life
that you still need to live andretirement. This is why we think it
should be instead viewed as a newbeginning that could last usually for two,

(32:36):
if not three decades. Yeah,think about climbing a mountain. This is
one of Greg's favorite ones, whereyou take the exact same steps getting to
the top as you would getting backto the bottom. Right, Well,
maybe not, but sometimes the mostdangerous part is the part going back down
from the top. So the stepsor financial vehicles that got you to retirement
are likely not the same ones thatwill get you through retirement. That's the

(33:00):
reminder two about the going up versusthe coming back down, the contribution phase
versus the distribution phase. Grag anythoughts, Yeah, a couple as you're
wrapping up this section on qualified accountsand just kind of transition to finish line.
Retirement is a finish line. Iwas thinking just these are all reasons
to come see us, so wecan look at what you have, look

(33:22):
where you're going, and provide youthe best options, and how you continue
to fund in the workplace, howyou fund privately to get your private plan
started up and running and just keepon going. And then the second thought
was relative to racing and finish linesand such. It is a new beginning.
How long is it gonna last?Don't know. Probably have a better
handle when you're going to retire thanhow long you're going to spend in retirement

(33:44):
when you do. And this isdinosaur talk. We used to run four
forties. I don't know what itis today. We ran into cow Pasture's
track. You pass the baton fourtimes around the track, you make it
around, there's a final kick.Okay, that's kind of leading up the
retirement. Then in retirement kind thislong distance run where you pace yourself because
you don't know how long you're reallygoing to be running, just so I
hope it's gonna be long. Don'twant to overexert, don't want to under
exert, you want to finish finishWell, those are my thoughts, but

(34:06):
I know we need to break allright. For fun Number five one three,
five seven, five ninety six fivefour calls. We can help,
but stay tuned. Listening to thesound Many Investment Show with Brown Financial Advisors
here on fifty five krs the talkstation. Welcome back to the sound Many
Investment Show, Brown Planning Show Advisors. I'm Greg Brown and I'm James Barton.

(34:29):
We are an independent RIIA that's aregistered investment advisory firm. We do
our for clients, not companies.Our fun number five one three, five
seven, five ninety six five four, website Brown Finescial Advisors dot com,
email team at Brown finescal Advisors dotcom. And our home office is in
Milford, but we also have locationsin Blue Ash, Worcester and Florence.

(34:50):
Greg, time to skip this stoneacross the old farm pond. We have
six misconceptions. We're on number three, so we need at least three or
four more skips here. So let'sgo misconception three. Investing more predominantly in
bonds as you grow older? Maybemaybe not. The bonds really de risk.
Do certain portfolio styles balance out riskand equity growth versus the stability of

(35:10):
the bonds in a certain blend?Well, you know what interest rates go
up, bond values go down,yields increase, a new bond investor does
better than the older, existing bondholder. That's why we actively manage bonds
in different durations, typically shorter wheninterest rate short term long term aren't that
much different. When longer term arebetter, we lean a little more long

(35:34):
term. But as you all,we all saw together from the easy chair
of watching the markets. In twentytwenty two, interest rates shut up rapidly,
bonds went down. Bonds had thethird worst in recorded history in terms
of returns. They were negative tothe point rivaling some equities. Stocks and
bonds are both down. Made portfoliospretty darn volatile unless you're in a better

(35:55):
mix on purpose, with the planup front and properly invested, makes a
difference. The most foreign k peoplepassive investors just suffered it straight up,
and that doesn't need to be thatway. So should bonds be predominantly in
your portfolio? Should you invest soconservatively? Should you invest so conservatively just
because you retire that you retire likeyou die? Absolutely not. How old

(36:19):
are you older if you looked atmy day to birth? Yes, does
that mean you need to invest conservaivelybecause you retired, not necessarily really,
how many years do you think you'regonna be on the planet. If you're
a household there's two of you,how likely both going to leave the planet
at the same time. You mayhave the same time horizon as most younger
investors. If you're planning for ten, fifteen, twenty thirty years ahead,
then theoretically you could invest fairly riskyfor the reward that you would get in

(36:44):
return may not be appropriate volatility,It might not be appropriately risk in terms
of tolerance for you. But gotto break the stigma of how you invest
just because you retired. Now,so bonds we want the right mix for
the right reason. We can useother asset classes to replace bonds. We
can use ensured annuities to give youthe ability not to go backwards. So
your bonds, you know, theycan go backwards. Were just made that

(37:05):
point, but these won't. They'llgive you a reasonable yield over time similar
to bonds, but without going backwards. How much do you need a yet
side if you don't go backwards?Interesting point. And then the other part
of your portfolio can be the equitiesof the stocks with dividends, even when
years of the stocks are down,you still have dead ends. We want
to get what's the answer. Thispredominantly bonds when you get older, not

(37:25):
necessarily what's right for you, exactlywhat are we going to do what is
right for you? James, Well, let's delve a little bit into behavioral
finance and the biases and just kindof a little bit of explanation of this.
Most people do not process information solelybased on objectives and statisticals. There's
that word statistics statistical numbers, whichmeans that financial planning processes can be quite

(37:52):
subjective. So here's some examples ofthese biases. These behavioral finance issues start
with this affinity bias, very commonIt goes something like this, We tend
to buy stuff or invest in stuffbased on how we personally feel about ourselves,
our ideals, what we like versuswhat we don't like or care about.

(38:13):
Another one is confirmation bias, veryso commonly. We see this where
it's probably happened to you before.It goes something like this. We as
consumers, when it comes to buyingsomething or investing our own money and something,
we tend to make decisions and thenattempt to confirm that decision that we
made is the right one. Weask the one that we agree with.
If they agree with our decision,guess what you're going to get for The

(38:36):
answer is yes, I agree,you made a good decision. Greg.
What's recency bias? Recency? Well, what have you done for me lately?
I'll do great things. I wantto invest in that too, because
I want some of that. Wemight have already peaked. If something has
already gone up, done its thing, and then you decide to invest in
it, it might be a littlelate. So the inclination that what happened

(38:59):
most recently without considering overall performance,experience, other very important factors, it
doesn't give you the right justification toinvest in something. So translation, people
sometimes choose to have short term memories, and we do it on purpose.
So typically we don't want to rememberthe bad stuff because it's painful, so
we choose not to. That isremoving a very important opponent of reality.

(39:21):
Just talk to so many They justkept reading me the facts about inflation,
what things cost in nineteen thirty,what gold was in nineteen thirty, And
it was saying something I don't knowhow accurate as it didn't check it directly,
but like one hundred and twenty fivedollars. One hundred fifty dollars an
ounce could buy a two thousand dollarssuit today. Then it was one hundred
fifty dollars suit, best suit,envy of the town, for one ounce

(39:43):
of gold. Kept making that pointthat the world's ending by an economics is
going to destroy the country. Theeconomists we know it is all but imploding.
It's like, my gosh, howsad to live in such a deep
dogma that you drown in it.Well, I can tell you that the
point I made was what was thedow in nineteen thirty one hundred and fifty
seven, one hundred and fifty sevenpoints? Then I asked him what gold

(40:05):
was today? He said about twothousand, So okay, close enough.
What was it twelve years ago?About two thousand? What has it done
in between? Gone down, comeback up the same level. I can't
invest like that people. I needbetter returns. Oh yeah. Then I
asked him, I understand you thinkgold's going to go buy that same suit
today for two thousand dollars, butthe same one ounce of gold. Well,
if I don't just invest in cash, I invest in equities. What

(40:30):
did the DAL do over the sametime, thirty four thousand, six hundred
a two hundred and two hundred,two hundred to one ratio. Gain What
did gold do? One hundred andfifty became two thousand today? What's that
ratio? Twenty times? I'll taketwo hundred times over twenty times. Thank
you very much. Be careful withyour thoughts. So recency bias and just

(40:52):
bad facts, bad data, anda vacuum not considering all things well.
In other words, that covers ournext one, which is a reality versus
perception. So Greg gave a greatillustration of the reality, which is gold
is not the end all be all. And look at this way. If
it was such a fantastically great investment, why are the people selling it?
You know, watch the commercials onFox sometimes with maybe more of an open

(41:15):
mind about what is it that they'reselling versus what they want you to buy.
So the perception in this person's mindwas that gold was the greatest investment
of all time, when in reality, compared to the stock market, it's
been left in the dust. Yeah. Remember, we don't invest in cash,
we invest investments. His thought wascommodities. We were looking at equities.

(41:35):
Equities outperformed all other asset classes inthe major benchmarks that people throw at
you, from treasuries to bonds tosee these, to golden commodities and to
equities. Equities is always the topline over time. There's got to be
disciplined focused, believing capital markets.Everything trickles down from the products, goods
and services that companies provide to people, your consumers, and provide value back
to shareholders anyway, and misconception incomeis not your concern who. That's like

(42:01):
saying I don't need cash flow retirement. Thout, cash flow is not retirement.
It's like relationships with that commitment isnot a relationship. So when you're
working and putting away money so youcan retire someday, the main focus is
what not income. Ah, goodpoint. James was making that earlier.
When you're in that pre retirement newbeginning and you're in the race to get

(42:23):
to the finish line, which isonly a new beginning for the next race
with a different pace, you arenot as focused on the income. You're
focused on growth, So you mightbe looking at growth stocks and equities and
different things. It can grow yourmoney exponentially over time, adjusted for the
risk, accepting the risk being disciplined, appreciating outcome, getting close to retirement,
starting to transition, morphing into anotherapproach that would be more income focused.

(42:46):
We can have a balance between somegrowth to adge inflation over a long
period of time, keep your moneyalive, and having the cash flow to
provide for the need to supplement yourother sources of income to fill what's called
the income gap. So you knowyou need to know this. You cannot
invest the same way in retirement asyou did pre retirement. You can have

(43:07):
things like sequence of returns. Earlynegative returns in the earlier years of retirement
can set you back years in suchway you can't overcome it because the difference
is you're not just saving, you'restarting utilize the money that you've saved to
pay yourself money. And we oftentimeswith the real world of the street definition
retirement is paying yourself back with youknow, large sums of money from the

(43:27):
money you invested over time. Youknow how well how long the rest of
your forever. So we need todo a lot of income planning when ahead
of retirement, not income investing,but planning so we know how to transition
well. We need to know theirinvestments are going to align with the finish
line so that you have the moneyneeded by product to contributions, matching discipline

(43:49):
and growth, so that you havethe bucket of money to then transition to
a hybrid version of that ongoing growth, but with income, so sol security,
pension plus what equals your lifestyle.We need to fill the income gap
with the right investments, and weneed to start that process today. Come
see us on that. We'll lookat everything you have, we'll build a
plan. We'll do the analysis,so share the results. We'll project the
plan, Share the plan, sharethe recommendations. We won't hold anything back.

(44:13):
You'll know the total cost relative torisk. You'll have the right selection,
the right arsenal for your objectives,and you just decide people want to
work together or not. Okay,let's really quickly get to the next and
maybe the last one. Two.Number five, retirement means your life is
no longer useful. That's when peopleare tied up in what they do versus
who they are, so their jobversus what they are in life. Number

(44:36):
six and this is something that wereally should spend more time on. But
what standard of care our financial professionalsheld to. This is where We set
ourselves apart by having a fuduciary standardversus what most other advisers have. That's
a major difference that should not beoverlo Putting your interests first in every situation.
That's what it is, not thecompany, but you. You are

(44:57):
the boss, all right. Wewant to thank you for listening today.
Un about dolphas five one three,five, seven, five nine six five
four again five one three, five, seven, five nine six five four
call us we can help and behalfof Greg myself. James, thank you
for listening today. Have a greatwe can remember this sound money where good
things are believable, achievable entry foryou. What n
Advertise With Us

Popular Podcasts

Dateline NBC

Dateline NBC

Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com

Stuff You Should Know

Stuff You Should Know

If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.

The Breakfast Club

The Breakfast Club

The World's Most Dangerous Morning Show, The Breakfast Club, With DJ Envy And Charlamagne Tha God!

Music, radio and podcasts, all free. Listen online or download the iHeart App.

Connect

© 2025 iHeartMedia, Inc.