Posted on April 5, 2019

Critical Ways Timing Can Make or Break Your Retirement


Wealth from Wisdom is a weekly radio show from Carson Wealth.

Paul West: Your success or failure in retirement is going to be determined by one thing: timing. When you retire. When you withdraw money from Your IRA, your 401(k) or other retirement plan vehicle that you have in place.

Timing could be when you actually claim your Social Security benefits. Your timing could be many things but one thing’s for sure if you ignore the timing with all of these critical things related to your retirement plan: there could be, and I want to say could be, there will be financial consequences that actually happened. Hey, welcome to Wealth from Wisdom, I’m Paul West.

I’m super excited. Got a new guest on today. We have a professor on the show, Professor Hopkins, Jamie Hopkins, nationally acclaimed, been in many publications. Of course, we’re going to talk about your book today. So, Jamie, welcome to the show.

Jamie Hopkins: Thanks for having me on today, Paul. I’m really excited to be here.

Paul: Yeah, I’m excited to have you be here. You don’t look as nervous as you did five minutes ago before we started. I’m sure you’ll be great here too.

Jamie: Just sweating bullets for it, right?

Paul: Yeah, that’s okay. We’ve got an extra towel on the side. So you talk about this all day long and in today’s show, we’re really going to help share some ideas for people about how they can be better in their retirement and how they approach it and what they do.

You wrote this book that’s done pretty darn well for itself, and no, it’s not spelled incorrectly just to make sure our listeners understand, but it’s called Rewirement. And walk me through that. Why did you write the book and what is it about for our listeners?

Jamie: A lot of people, as you said, it’s not spelled wrong, it’s called Rewirement. And the idea there is rewire the way we think about retirement planning. And this really came from some of my research that I was doing initially on literacy rates of Americans. I was looking at what do they know about retirement, what they don’t know. And what we found out actually is that people know less about retirement planning than they know about basic finances.

And you know, I can’t say that was totally shocking, but it was discouraging. People didn’t know as much as we’d hoped about Social Security, about Medicare, these decisions that come back to timing that we have to make them and when we make them as very important. So I really wrote the book for consumers to try to help in areas that I saw misconceptions, biases creeping in, creating less secure retirements.

And how can we transform those? How can we take it to clients so then they can be the one making the right decisions? Understanding what to do and have a better outcome. And so that’s really where the book came from. And yes, it’s actually been better than I thought it was going to be. You know, everyone wants to write a book nowadays, but it’s had a positive impact on the world, so that’s a good thing. It’s a good use of time.

Paul: So first, congratulations to you. So I know you’re happy. Besides your family, other people bought it. Nationally acclaimed. Jamie, I think about, how many talks have you given over your career here? Just to professionals and to families?

Jamie: Well, I did three yesterday. So more than three. I know I’ve been on the road 66 nights are ready in 2019.

Paul: In a quarter of the year!

Jamie: Yeah, just a quarter of the year, so we’re just into April. I think last year I did over 150 different individual speaking engagements. That’s a lot. As you said, I do have a family. So, you know, my wife is kind of the hero on our side.

Because I’m only able to do those because somebody else supports me in being able to do those. The family’s very supportive and I love talking to people. It’s kind of what I do for a living. I talk to advisors, I talk to insurance professionals, I talk to regular Americans all across the country.

And sometimes I even get to go to other countries and talk to people. I was in Toronto a couple of weeks ago and you know, it’s amazing that people are people in a lot of different places, right? They worry about a lot of the same things. I usually ask groups: Who in the room is not worried about their finances at all? I’ve done that hundreds of times and I don’t think I’ve ever seen a person raised their hand. Not One. Not One yet.

It doesn’t matter how much money you have, if you have a lot, you don’t feel like you have enough, you still worry about this. Right. It’s because it drives what you can do in life, right? The money is just a means to an end. But if you want to retire, if you want to grow your farming business, if you want to send your kids or grandkids to school, that requires money at some point. So everyone worries about it.

Paul: They do. But what we see and we talk about all the time here on Wealth from Wisdom, is that people let this really important thing in their life fall down on their priority list. They just, they don’t make it happen.

I’m sure you see it. And that’s why you took trends you were seeing just trying to educate people. People will never make a move and do something until they’re educated. And a lot of times when they hear about retirement plans. I know you did the session for us here in Omaha earlier this week, and you even explained the difference between Simple versus a SEP versus an Individual 401(k).

Again, if I’m a business owner listening, they all sound interesting and they could be important to me, but do I want to spend my time looking at it? But what they forget or don’t know, maybe more importantly is that they’re costing themselves thousands and thousands of dollars to their own personal wealth by not evaluating that decision yet. Yet they’ll go explore a new sale for how long?

Jamie: Yeah, and that’s a very interesting behavior, right? We look at people and how do you behave? Well, will you drive an extra five miles to save $5 on a calculator? The answer is probably yes. Right? If you knew that down the road, right, you could drive down Dodge Street and save an additional $5 on a $10 item, would you go do it? And the answer is probably yes. You probably would.

Now, if you could save an extra thousand dollars on your taxes, on your retirement planning, would you take the time to do it? And a lot of people don’t – it’s a very interesting thing. And part of it is that it feels challenging. So part of what you have to understand is that advisors and advice are out there to help you. It’s a lot like other areas. Like, I’m not great at cars, so I don’t try to fix my own car. Could I save money perhaps by fixing my own car?

Paul: I really thought you would have been good at that. I just had this feeling. I thought everybody from Philly works on their own cars.

Jamie: That’s, that’s actually pretty true. We do a lot of our car work there. What do you do then, right? You’d go out and you find somebody who’s qualified to work on your car. You outsource it; you pay for that assistance to have your car fixed.

It’s the same for a lot of things in life and finances can be the same thing – either do it yourself or you should outsource. If you’re doing it yourself and you’re having less than optimal outcomes for you, you’re not real thrilled with it, then you should be looking at partnering with somebody, finding somebody that can help you.

How do you get there? One, you’ve got to find somebody that you want to work with, that you trust, that you know was good at doing what they say that they’re good at doing.

And another part is it, you’re really investing back in yourself when you’re getting help with your finances. I think that also means you have to care about what I use this term, your “future self.” You have to care about that person. You also need to know that person, right?

I don’t want to save for somebody in 30 years that I’ve never met before that I’ve never thought about, that I don’t care about. So if you start thinking about: what is it that you want to accomplish? What are your kids going to be doing in 30 years? Your grandkids, what are you going to be doing?

You really kind of set those goals. You take 10 minutes and think about it, you’re going to be more likely to go do something for that person, right? When you’re doing financial planning, it’s for the future. It’s not just for today.

Now sometimes we can help you out today too, but a lot of times it’s for this future version of yourself. So you’ve got to decide that you care about that person up front. And if you do, then we can kind of get something in place.

Paul: I think you’d make a great point. I love to use car analogies on the show since now you’re going to use one here too. But if you’re driving down the road, do you look out your front windshield or your rearview mirror bar?

Jamie: And I think I look out my front window more than my rear.

Paul: I hope you do. Otherwise. Are you driving backward all the time?

Jamie: I don’t drive a lot anymore. I’m with a lot of other people – shared vehicles. But I hope they’re looking out the front more, right?

Paul: The rearview mirror is for one reason only: to protect on what’s behind you. So I would say your memory, it helps protect you for what’s behind you, but your future goals need to be based on where you want to go. I think so many people are so worried about what happened in the past. We talk about all the time – the past is over. It’s done!

You may have seen, we’ve been having some commercials running lately, where I talk about tax prep versus tax planning. All tax prep is, you’re recording the past last year. Nothing you can do about it.

A lot of us here in Omaha are Nebraska fans – football season last year, it’s over. There’s a lot of excitement for the future. There’s of course a major excitement for us from a basketball perspective. We have a new coach too. So guess what happened? The pain of not making the NCAA tournament – that’s gone.

But people, some reason when it starts about their own money or their own personal situation, they can’t get rid of that pain. It’s a very interesting behavioral thing. So what did they choose to do? Nothing. And they sit and let it go idle. And your car analogy is great because if you don’t know what to do, you don’t know how to fix your car. You don’t, I certainly don’t. You take it to an expert.

Here we are in the spring season. So, of course, it’s pothole season and happening. So you’ve got to go get it fixed. You don’t really have a choice or you keep driving it until it’s eventually on the side of the road and you’re walking somewhere.

The same situation – look at your own financial situation. If you don’t fix it and you may keep going down the highway, you still may be driving, but you’re not getting to where you want to go and not certainly at the speed you want to get there.

You don’t want to be that person and we’ve all seen them, right? We’re driving down the street or the freeway and they have that red tank of gas. Walking and they’re walking a little bit like the walk of shame. What’s going to happen though is none of us want to be 85 years old, full of life, and broke.

That’s what I think is so interesting, you know, reading your Rewirement is helping people to change their mind on how they think about it and letting those past misconceptions go. I agree with you on. So if you have a calculator for $10 you get $5 off if you go five miles away, I may do it. But in 2019 you know, if I can get that same calculator for $8 from Amazon and they ship it directly to my house, is that incremental $3 worth it or not? I don’t know. I mean, but I’ve got to look at where the future is and what happens and how you get from point A to point B.

Let’s just simplify this for everyone. And the road for retirement for so many people has a lot of critical choices you make. Social Security, Medicare, taxes, your IRA, your 401(k), your pension. I can keep going for a long period of time as you know, too!

But one of the things that’s beautiful is you work with a professional, you get pointed in the right direction. If you want help making sure you’re going in the right direction, call us. (888) 419-8513. Hey, don’t make a critical decision that you’re potentially going to regret later. (888) 419-8513.

Contributing your money to an IRA or 401(k) is actually pretty easy. Even for some of you listening, it may be a default investment when you start with an employer. But when you get to the other side and you get this money out during your retirement, well that’s a whole different approach. If you don’t have this well-thought out strategy, you could trigger something that gives you a lot of pain.

No, not heartburn – taxes. And what happens with that? And really do you want to be that person who’s left with not all the money you’ve worked so darn hard your entire life to achieve?

Welcome to Wealth from Wisdom, I’m Paul West. Hey, I’m very lucky my co-host today, author of Rewirement, Jamie Hopkins, or should I call you professor Hopkins?

Jamie: I love Professor Hopkins.

Paul: All right – Professor Hopkins! So, Jamie, I enjoyed getting to know you here on the show a little bit in our first segment. Let’s get it in and talk about retirement and what’s important.

I mean, that’s why you’re the guest on the show today. You’re a nationally acclaimed speaker, author. Do you have any books here in Omaha? Maybe if I could help people out with them.

Jamie: We do have books here, right at Carson wealth office. I’m happy to sign them if anyone wants one. We’re happy to get them a free book.

Paul: So if somebody wants a book, we’ll send it to you. (888) 419-8513 Professor Hopkins – Rewirement. Well, let’s get to something here. I’m going to give you a question. It’s really challenging here because I’m curious where you’re going to go with this. So it’s so simple if you say it, but the reality of is so complex, but how would you describe what retirement income planning really is?

Jamie: You gave us kind of a great intro. Most people know saving for retirement is, right? You set aside money.

Paul: You put your money in your 401(k) is what most people think of it as.

Jamie: Yeah. Put money in 401(k), IRA, your bank, wherever you’re putting your money and you’re saving for the future. Now, income planning in retirement is so much different, and the way that I describe it as like trying to hit a moving target in the wind, right?

Your target is your retirement goals. It’s what you want to accomplish, what you want to do, what you want to spend your money on, leave to your kids, spend your time doing. Going to Nebraska Games when they’re winning, and you need money for tickets. That’s your goal. That creates that target and we’re trying to achieve that target.

And as I said, it’s moving. It’s moving up and back because of longevity. We don’t know how long we’re going to spend in retirement. There’s no telling how long we’re going to live. We can make some pretty strong educated guesses on that, but we don’t exactly know. You might spend one day in retirement, really unfortunate, or you might spend 35 to 40 years in retirement that makes planning for this so much more challenging.

Paul: A lot of people just dropped their drinks they were holding when you said 35 to 40 years in retirement because they haven’t thought that before.

Jamie: Yes. My friend and a co-director when I was at the American College, his name’s Professor David Littell, and his dad lived to 103. Mom was early nineties. David was an Olympic fencer. I know that’s your most popular Olympic sport, right? Fencing. But you know, he’s an Olympian so he’s obviously had pretty good genes and health. And he was a college tennis player too.

His dad lived to over a hundred, mom was her nineties. When you talk to somebody like David, he realizes that he could spend 40 years in retirement. Right?

Paul: Yeah. It’s a possibility.

Jamie: So he’s built a plan for himself that addresses that aspect of longevity that he does not want to run out of money in his eighties and nineties. So he’s built a retirement income plan that addresses that. It’s actually probably kept him in the workforce and additional year or two, which is very helpful.

Then kind of going back to wrapping up what I was talking about. We’re trying to hit this moving target in the wind and the wind’s a very important piece here too because things are going to change along the way.

Paul: It’s a lot easier to kick a field goal, hit a golf ball, when there’s no wind.

Jamie: Right. But think about a 30 year time period. How many things are going to change over the next 30 years? Look back over the last 30 years and think about all the things that didn’t exist 30 years ago, right? If you go back 40 years ago, most of the things in this room didn’t exist!

Paul: The iPad turned nine. The iPad turned nine years old this week, if you can believe it.

Jamie: Yeah, right. What is the iPhone, 11 years now or something? Twitter didn’t exist. Facebook was barely off the ground 10 years ago, right? I mean, most of those types of things weren’t around. Self-driving cars. Tesla wasn’t in existence yet, right?

Most of the largest companies, Amazon was losing billions of dollars a year a few years ago. Right? They were like one of the most unprofitable companies in existence. And you look at the largest companies, the new industries that have popped up, the different ways we do things and changed so quickly.

Well, imagine other things that are going to change your retirement: Social Security, Medicare, taxes. Well guess what? Our taxes in 2017 were a lot different than they were in 2018. Right?

And a lot of those rules change at the end of 2025 if nothing’s done. So either one will pass new laws or they’re going to change automatically based on the laws that are in place by the end of 2025. So we have built in changes essentially that will occur. And that’s usually not a shock to most people.

People know that change occurs. Right? Whether we like it or not, change occurs hopefully for the better. I know that people are hoping for some positive change from maybe some of the Nebraska teams next year. I’m good luck though –went to one game last year and that was the Minnesota game and we won that game. I think that was the first one in the season, too.

Paul: We were glad to have you there, but I don’t know if you’ve got full credit for it!

Jamie: I’m taking 50 percent credit with Frost – 50/50 split.

Paul: I’m sure you guys can split his income too if you’d like.

Jamie: I don’t think he agrees on that!

Paul: He’s probably not going to be that generous to you. So I love statistics. So here’s one that goes along with this. Life expectancy between 1800 and 1900 grew 9 percent, however, between 1900 and 2000, so the next hundred years, it grew 42 percent. So what do you think, I’m not going to say the next hundred years. What do we think’s going to happen the next 30 with all these things that are happening?

Jamie: Yeah. So there’s actually some doctors and researchers out there that believe the person who’s going to hit age 200 is being born right around now. Obviously, that’s part of technology, right? That technology is creating these advancements in longevity that we really have never seen before. Now another really interesting thing about that, right, that we were having this growth. People are living longer and still, many people underestimate how long they’re going to live.

Here’s a statistic that I find really amazing. If you have a couple that are both alive at 65 right? If you’re just looking at averages, there is a 50 percent likelihood that at least one of them will still be alive at 90. So if you’re talking about planning at 65 you actually should be expecting one of the spouses is going to be there at 90.

There’s still a very good chance that two of them will be alive at 90 and I think that shocks people because most people don’t view the world is I’m going to live to 90, 94 95, but that’s becoming a much more common thing. We have lots of people breaking a hundred now. That’s becoming much more common.

Almost everyone I know can tell me a story about someone who is reached age a hundred now.

Paul: In 2015 there were 500,000 centenarians. So people who are a hundred. So now they’re projecting by 2050, there will be 3.7 million and that’s just here in the United States.

Jamie: So there’s definitely some growth there, right? The lifestyle of those people are going to start to change too. And the lifestyle of our retirees are changing, right? The gig economy is changing things, right?

That we talked about it earlier, right? I ride mostly in car sharing apps and opportunities. That’s going to open up mobility for people who are in their seventies, eighties, nineties that otherwise weren’t driving. They were having difficulty moving from one place to another and all of a sudden now a car shows up, picks you up, takes you your location, drops you off and picks you back up. That’s pretty cool.

Eventually, I’m in the mindset there will be self-driving cars. How quickly, don’t know, but they’ll be on the road at some point. I think most people kind of get that the adoption can range, but at some point we’re going to have that too. Now all of a sudden I don’t have to rely on a person to come pick me up. A car is going to come pick me up when I’m 85 and take me to a new location to go see my doctor.

Paul: It’s a big difference. That’s a change. You can drive anywhere in the country. Let’s just take where we are in Omaha, Nebraska.

If you just go look at the number of healthcare facilities that continue to go up and people think healthcare, they think doctor or hospital, but really you should be thinking assisted living, longterm care, memory care, all of those things that go with it. I feel like everywhere you turn there popping up on every corner, why?

Because the future is going that direction. It’s inevitable based on everything that we see happen. I want to give you some real stories here of what I see in the financial planning world of what I do with a lot of our families. So I run, like you said, age 90, so actually every time I put up on the screen we run a to age 95 minimum. However, for others that actually feel and believe in the longevity story, we’ll run it to a hundred. Just did the one the other day to 110 of showing them what it looks like because again, now here you are. I love your analogy of, Hey, I’m using Uber and I’m 94 years old. Now I can get around, I can go do stuff and I’m happy.

I told the story several weeks ago, you weren’t on the show with me. I got a chance to meet legendary hall of fame announcer here from Omaha, his name is Jack Payne. He was 93 or 94 years, and he was flying through the airport by himself. I would have never guessed his age, but he was just going and I think we’re going to keep seeing more and more and more of that in what happens here.

One thing I asked you, Jamie, is how do people actually get over this? Like how do they understand? Because most people are like: it’s not going to happen to me. I’m going to die early.

But you don’t know. I mean, unless they got some crystal ball I’m not aware of.

Jamie: Two real quick things there, right? One is: what’s the downside of planning to a hundred? Well, I know what the downside is of running out of money at 90 when I’m still alive.

My great grandmother lived to 102 and she was 98 that’s actually when her husband died. And I remember she went to my grandfather and she said, how am I okay with money? And my grandfather said, dad left you enough. You’d be fine to 105, no change in your lifestyle. She goes, well what do I do after that?

When you get five or seven years from it, it’s pretty important then and we can’t have that situation where we run out of money.

Paul: We’ve been spending some time talking about just what true income planning is. Most people do income or retirement planning in terms of contributing. Then we just talked a little about distributing, but one of the things that we need to spend some time on, I’d like to ask you because it’s a part important part of your book and I will tell you in working with families across the country and you know what irritates them the most? Taxes! Over anything else – returns, insurance, all of that. Pretty simple.

You told the story earlier like, you ask when you speak and find out that people don’t feel like they’re truly comfortable financially. If I can tell you one thing, I’ve asked a similar question in front of an audience, but I had a different question. Hey, how many of you want to pay more in taxes?

Anybody raised their hand? No, of course not. No one wants to, it’s like this thorn in your side that you can’t ever get to go away, but you want to minimize the amount of pain. So as you look at and you’ve thought about in Rewirement in how important tax planning is, not tax prep, what would you share as to how important is tax planning and tax diversification for everyone?

Jamie: You just gave a great term there at the end, and that was tax diversification. People don’t like paying taxes. We know that right? This country was almost founded because we don’t like paying taxes right now.

This is a really kind of a fun thing. Do you know how much – when we have Boston Tea Party and we revolted from Great Britain – you’ve heard about this, right? It occurred at some point in our history. Most people know that one of the complaints then was essentially the colonies were paying back taxes to Great Britain without representation. Eventually became kind of a phrase. Now, do you know how much they were paying in taxes? You want to take a guess? It’s not a perfect accounting system, but from a percentage standpoint, a percentage of what we would call income today?

Paul: 52 percent.

Jamie: Actually, it was great last night. I asked the same question. I got 54 percent so smart people must kind of think alike here. The real answer? 1 to 2 percent. Yeah. They paid 1 to 2 percent in taxes.

Paul: 52 percent of 2 percent!

Jamie: Right. So yeah, right there. Like 1.1 percent real close, almost hit it right on the head.

And it’s amazing, right? Our founding fathers would revolt if they saw the taxes today. Now obviously the government provides more services than it used to the colonies! A little more.

It’s actually one of those things. They revolted and they were actually paying less taxes than they were in Great Britain when they move here, right? No, they still moved to a lower tax area and got mad about it.

People just don’t like paying taxes, period. So what that means is you don’t tax prep, right? As you said, tax prep is last year we do the best we can on that. But tax planning is important because we’re doing something for the future that we don’t like paying. And what that means is we should pay the least amount of taxes as we’re legally required to pay. That’s it. Right?

That’s not avoiding taxes – it is doing planning. The government wants to encourage us via taxes to do certain behavior. So one of the great tax planning vehicles out there is tax diversification through things like Roth savings accounts, doing Roth conversions.

If these are terms you haven’t heard before, it’s time to learn about them. And Roth savings is amazing because really what it is, you pay taxes today but then your investments get to grow tax deferred and then as long as you meet certain requirements to the account, you can pull the money out in retirement, right, without paying any more taxes. And that’s really cool in retirement because your income in retirement, your taxes, can also cause your Medicare premiums to be higher and your Social Security benefits to be taxed at a higher rate.

Paul: We call that the “triple whammy.”

Jamie: It’s the tax torpedoes. When all of a sudden we have distributions causing things to be taxed. But if we do tax planning ahead of time, we can lower our Medicare premiums and lower our overall tax bill in retirement.

So we have more money to spend on the things we like spending it on. I had a client that I was working with with an advisor one time and he said, I’m okay with my advisors and CPAs and attorneys making mistakes. I get everyone makes mistakes, but they can’t make six-figure mistakes. Because we had just shown him that he could save six figures in taxes over the course of his retirement through planning that he wasn’t being given advice on at that time.

Paul: Yeah. And I’m sure how he felt when he left that room was injured.

Jamie: Yeah. He was happy and upset at the same time.

Paul: You’re on both ways and the emotion, and I think what happens again is people let their life get busy. So then it’s always got to be prioritized. You’re so right. And I think that’s where people need to stop. And if they can do a Roth great, you know, tax deferral to become tax-free. That’s fun, right? It is fun because I don’t want to pay taxes. So I love your story about, you know, we’re all wired, as a human it seems like, we don’t care when it is where it is. We don’t care at what percentage or dollar, whether 52 percent or 1 percent, that we don’t ever want to pay taxes.

So why we don’t spend time to look at how we maximize this. And I’ll give you another example. So sometimes people think, oh, well I want to be invested in real estate or I want to get income from other sources and they don’t care. They don’t think about the taxes or they don’t think about the net tax effect or worse yet – I’ll share this with you.

So I’m going to say right now. So if you retired right now, and let’s just again for illustrative example say you had $1 million, but you needed to get, use simple math here, $50,000 a year out for the rest of your life. However, what if you decide to retire now, and like a lot of people, they love to chase risk in terms of return. So now it was all in a 401(k) and you’ve rolled it into an IRA. You kept your asset allocation yourself because you wanted to, for whatever reason,.

2020 we have a 2008 event and the market drops 35 percent and your 1 million goes to 700,000. Guess what? You still need 50,000 a year. You’ve got less money to do it from, but you’re paying taxes. So it’s like you’ve created this situation and maybe it would have been better to do a Roth conversion or a partial Roth, and I’m sure you talk about this in the book, is you got to look at all elements here, not just one pathway.

Jamie: Yeah. And that’s the whole thing with taxes – you can’t make these decisions when you’re doing tax planning in a silo, right? Like we can’t shut off the blinders and say, yeah, we just want to do this and invest in real estate, or we just want to do this and do you know, whatever it is. We have to look at the overall picture because taxes impact everything, right?

It’s this overarching umbrella across everything. So when we’re making decisions about one asset, one investment, one distribution, it’s having a longterm impact on our taxes, especially from retirement accounts. As we start hitting required minimum distribution, age of 70 ½, we’re now being forced into taxes, right?

Like we all have to start paying taxes on stuff that’s coming out of this account. If we didn’t do planning prior to that, we could be forced into higher taxes than had we just done planning the five years prior. Right. I don’t like paying taxes any more than anyone else does. I definitely don’t like being forced into higher taxes because I didn’t do planning.

Paul: So let me share with you. So I have somebody who’s got some, you know, profit-sharing plans. They have some taxable accounts, they have a little bit of Roth and they’re 62 and they’re contemplating that retirement decision.

So I visually show them again out to age 95 or they can run out of money or not. But also I run a five-year quick cash flow to show them. Simple. It’s, it’s complicated behind the scenes, but what you see is simple. But I always go out to age 71 why? Because I want to show him that little line item that shows them the distribution from their account that they’re forced to take. And nobody again likes that or likes paying taxes.

As I think about this, if you want a free customized tax reduction analysis that could show you how you could save thousands of dollars like Jamie just shared with you, give us call (888) 419-8513 we’ve got advisors standing by to help answer your questions.

Paul: Hey, welcome back to Wealth from Wisdom. I’m Paul West. My co-host today has been Jamie Hopkins. Jamie, it’s been a lot of fun having you on – author of the book Rewirement.

We’ve been spending some time talking about taxes. Our favorite topic there. Income planning. We’ve been talking a little bit about your returns and what things look like.

I think really as you look at retirement and I think what’s so fascinating, why I’m glad you’re on the show here today is this: you get to talk to people throughout the country. So we’re not isolated here in the Midwest. Those of us, you know us here at Carson wealth, we’re a nationally ranked and Barron’s and Forbes top advisor across the country, we work with a lot of families. But what we see is the same principles apply in a lot of things, especially about financial decisions.

I don’t always mean about real estate or your football choice or your basketball choice or whatever that is. But when we look at things that happen, people tend to think financially in a vacuum or in a silo, like you said earlier, Jamie. So what happens when people have their blinders on as to what’s happening? I would say one blinder that’s on, and I’d love to hear your take on how it impacts retirement for people, is blinders with the reality of such things as bear markets and recessions that happen.

Because right now we have this huge recency bias. We’re on a 10-year run and then people just forget that their accounts can go down. Fourth quarter, 2018 did give them a little bit of reminder, a little bit of pain, but this sharp jump back up has completely wiped that from their memory banks again.

Jamie: This is a serious topic, right? It touches on a lot of different things. It’s a topic that I’m getting more and more questions about when I’m out talking to people. I’d say for the last six years it really hasn’t been much of a topic, but it’s coming back: recession.

And you know, it’s a scary word to a lot of people because people still remember 2008, 2009, 2010. But we also now remember an amazing nine year period here in the United States where joblessness has just been dropping down, down, down. People are getting employed. Debt has been a little bit better in some ways by looking at it. The stock market has just been on an upward trend. Everything felt strong. Then all of a sudden we’re starting to see some indicators of slow down, right?

Some of the GDP growth might be slower in this quarter. We saw some of the job growth slow down and then we saw something that a lot of economists look at to help predict recessions, that’s what we call the bond curve or bond yield.

Really what we worry about is that the long term bonds – when investors are essentially saying, I don’t want to take that longterm position anymore – it kind of inverts, and we’re actually getting paid less for longterm than short term. In normal kind of investing, that shouldn’t be occurring. And that’s occurring right now.

Now that doesn’t mean that a recession is going to start tomorrow. It doesn’t mean that one’s going to start in six months, but it’s an indicator. It’s something to think about. Now the big takeaway about recession is that you can’t control recession. The Fed can’t control recessions. The president can’t control recessions.

It’s part of the market cycle. It’s actually to some degree healthy for markets to have recessions. It causes companies to go back and get lean so they can grow again. And so if we have one again that’s, we’re going to survive this.

Paul: It’s not if, it’s when.

Jamie: It depends if you’re still alive for it, right? So when we go through another one, right, if that’s starting to worry you, you start seeing news articles, you hear people like us talk about it and it concerns you. What that means is not that you can stop a recession from occurring, but that you need to stop what’s worrying you from occurring. That’s what you’re in charge of.

Paul: You need to do something about that thing that bothers you but you don’t do a darn thing about it. Yeah. I hope that makes sense. It’s that thing on your to-do list or your honey-do list or your task list or whatever you want to call it that you know is super important. But if you just get it done.

Here at the Carson Group, we use a philosophy called “traction.” It helps us to be effective as leaders in our organization and there’s a technique called IDS. Figure out the issue, discuss it and solve it. I love when you get to that solve part and something’s done cause guess what? You move on to the next thing, but you feel so good.

I can’t even tell you how many people come in this door or call us and they have a Trust that was written in 1997 or a Will that was written in 1997 and they still think it’s applicable today. But how many tax law changes have happened since then? How many different presidents and certainly styles of administrations have we had since then? So it’s not going to work. There’s going to be huge misses in there and you have to think about especially now if or when this downturn in the market happens. It is this gigantic impact to you.

Case in point, I have a local professional, again going to retire later this year. Has enough money to live the rest of their life. At least the way they want to. We built their financial plan. It looks like that. But guess what? They love to take a little bit of risk. You know, they love to buy themselves some individual stocks. I don’t like to talk about individual stocks on this show just for compliance reasons mainly, but that’s okay. But again, just think of the big name stocks you see all the time like in the FANG analogy or others that people love to buy. But what if this downturn in the market happens and all those great high flying stocks had been awesome the last several years aren’t flying that way anymore. How are you going to feel?

Jamie: Not good.

Paul: Not good at all. So the only way to avoid this is control what you can control. Like you said: I can’t control a recession. I can’t control the bond curve. Can’t even control bond price. I can’t control if I buy a Muni versus a corporate.

We talked about taxes earlier, but there’s another mistake I see people make all the time. I don’t want to pay taxes so I’m going to buy Munies, but they don’t actually run the analysis. Is the Muni or the corporate actually more beneficial for you on tax rates? Yeah, huge mistake people make. Why? A corporate may be more beneficial from you from a total return perspective or really a net return perspective after your tax payments. But not everyone thinks that way. Why? Because you’ve got those blinders are getting – must not pay taxes, therefore must only buy municipal bonds.

I’ve enjoyed having you on the show today. Jamie, any parting thoughts you want to share? Nationally acclaimed author, and you’ve been talking with our group about your book Rewirement. But any last thoughts for our listeners today, Jamie, and just what you see in the world of “rewirement?”

Jamie: I’m going to give you a three and I’ll be quick. One – have a plan for your debt, right? That’s very simple, but a lot of people don’t. So if you have debt – credit card debt, healthcare debt, whatever – have a plan for it.

Two, have a plan for saving for retirement. Three – Enjoy yourself, right? A lot of people forget that money’s there as a means to an end. So make sure that those things lead to something that you enjoy.

Paul: Yeah, I love it. Live your life by design, not by default. Enjoy your time here. I gave a speech the other day and I talked about it. We all have three decisions to make while we are currently employed or are heading toward retirement. I have my business goals, I have my family goals or my personal goals. Personal goals for a lot of people fall to the end of the list and not saying that’s a bad thing, but they cannot be forgotten. You need to refill your own bucket of your energy, your exercise. Food, or superfoods or secret superfoods or whatever they are. But also your personal financial situation if you want us to help look at it. (888) 419-8513.

Hey professor, I’ve enjoyed having you on the show today. Can you, will you come back to Wealth from Wisdom again for us?

Jamie: Yeah, absolutely. So happy to be on.

Paul: All right, thanks Jamie. We’ll talk to you all soon.

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