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Ron: This is the Mach 1 Market Moment with the team at Mach 1 Financial Groups in Northwest Arkansas. This is the Mach 1 Market Moment with Mike Frost from Mach 1 Financial Group – your retirement planning income specialist. Mike, let me ask you a few questions here about asking better questions. A lot of people I know you talked to them every day, have questions about their retirement plans, but we find that they can often be asking much better questions. The first question on my list here is – How much money do I need to have saved in order to retire? Again, that may be different for everybody.
Mike: That’s exactly right. It’s going to depend on everybody’s situation. The better question would be what it kind of lifestyle do I wanna have in retirement? And the only way we can get to that is if people have a budget, because if you don’t have a budget, you’re kind of guessing on how much you’re spending. Once we know how much people are spending, then we know how much they currently have & what kind of assets they have, then we can figure out – OK, this is how much we’re gonna need in retirement and a lot of things will go into that, you know, budget is one of them. What is your tax is going to be?
You do have Roth IRAs where you won’t have any taxes, or is it all in IRAs, which you’re going to pay taxes on? We don’t know how much this point. And then what are your goals? Do you want to travel around the world? Then that’s gonna require more funds than people that have a very tight budget. So it really depends on what kind of lifestyle & what your goals are going to be, to determine how much you’re gonna need to have saved to retire.
Ron: And here’s another question that folks need to think about and decide before they retire. Should I get long term care insurance or just roll the dice?
Mike: Well rolling the dice may work for you in Las Vegas or a casino, and it may not. But for long term care insurance, if you’re over 60 there’s a good chance that you may spend some time in a nursing home or a skilled nursing facility, so should be prepared? Absolutely.
Long Term Care insurance is an asset protection tool. In the state of Arkansas, here in northwest Arkansas right now, if you were going to a nursing home, it would cost you probably $6000 to $7000 a month.
Ron: That’s still a lot.
Mike: That is a lot for anybody. What we see is, you know, couples have worked their whole life. They saved up, saved up. They got a retirement plan, and then one of them goes into a nursing home and they spend all their money in the nursing home. And then that couple that partner dies leaves a spouse healthy with no money.
So, we really need to take a look at that. And again, it’s by individual if long term care makes sense or not. Now, there is a new product out that Mach 1 is offering, and it combines long term care insurance along with life insurance. Today most Long Term Care insurance plans go up every year, some as much as 75% so it prices people out of the market when they need it the most. Then, if you don’t use your Long Term Care insurance, you paid all of the premiums for nothing.
This new program you could buy Life Insurance policy but also has a Long Term Care policy. So if you never use the Long Term Care piece, then you’re gonna get the life benefit when you die. We’re all gonna die at some point, and if you do use a long term care policy piece, then you don’t have a life insurance. So either way, you’re going to get benefit of using this policy. And that’s something that Mach 1 here offers and we would love to talk to anyone about it that may be considering Long Term Care insurance. Contact us HERE.
Ron: The next question I’m going to ask here is probably one you’ve heard 1000 times from folks sitting in your office and that is – how can I get the highest possible return on my money?
Mike: That’s a great question and if we had a crystal ball, we’d give everybody the right answer, and the answer is, nobody knows for sure. Nothing works all the time for everybody. Uh, and really, we think that’s probably not a good question to ask anyway. We all want to make higher returns – we got it, but really, what’s most important is how much return do I need to make on my assets to retire to the lifestyle that I want?
That kind of goes back to something we talked about earlier — What is it that I want? What are my goals. We use a nice tool here at Mach 1 that we call retirement analyzer. We plug in all your information, your budget information, your asset information and we come up with a rate of return that’s going to get to the the desired lifestyle that you want in retirement. And then we start talking about where do we invest it to get that return?
You know, if you only need a 3% return, why take the risk to get a 10% return? 10% return would be great, but you’ve got a lot more risk. We’d like to use the analogy if you’ve got the game won and you got one minute left, do you want to throw a Hail Mary pass when you could just run the ball and run the clock out? So that’s kind of what our approach is. Let’s figure out what kind of return do you need to get the lifestyle you want and then we start talking about the investment options.
Ron: Here’s a question that may take a little explaining here. Where can I pay the lowest fees for financial advice? A lot of people just don’t know how that works.
Mike: Well, again – the question is, is the lowest fees actually what you’re looking for? Or are you looking for a good return? Or possibly a retirement plan? What is the goal? If you just want low fees, then you can go out here and get any mutual fund you want and go for it. Or you can use a robo adviser that gives you kind of a canned amount – but if you want someone that’s gonna talk about your situation, what’s going on in your life and kind of put a plan together that’s designed just for you, then there’s gonna be more fees – so where can you get the lowest fees? Probably not the right question is.
What kind of advice do you need? Do you need a lot of hands on or do you need a little? That’s where I would direct most folks. For 401ks you think about those- you might say “I don’t pay any fees for 401k’s”. Okay. Yes, you do. There’s lots of fees. Mutual funds. “There’s no fees on mutual funds”. Absolutely. There’s hidden fees in mutual funds.
So, make sure you know what you’re looking at. Make sure you peel the onion back and see where all the fees are. There have been studies that show that people that use financial advisors, achieve higher rates of return than those who don’t.
Ron: You’re listening to the Mach 1 Market Moment here. One last question on my list today, Mike Frost – what can I do to pay less in taxes this year?
Mike: Well, the great news is, taxes are on sale. We are in the home of Walmart here in Northwest Arkansas. We kind of coin the term ‘taxes are on rollback’. In 2017 Congress passed the act where it lowered our taxes in 2018 and that sunsets January 1, 2026.
So we’re in some of the lowest tax rates tax brackets right now that we may see in our lifetimes. So how can you pay less taxes? Not only this year, but in your lifetime?
Well, let’s say you have a large IRA that you have tax deferred. Now may be a good time to do a roth conversion when the taxes are lower and we know they’re lower, we know they’re going up in 2026. If I could pay taxes now at a lower rate than I will be after 2026 maybe when I’m in retirement, you’d be smart to pay taxes now.
The question was, how can I pay less taxes this year? It might not be the right question. It’s how can I pay the less tax over my lifetime?
Looking at that, and we do this every day, we look at peoples situation says and then say – You know what? When you get to retirement, here’s your tax bracket, from what we know today, you know, again on your 401ks, your IRAs, you are not the sole owner of that account. You have a joint owner and that joint owner is the government because they’ve let you put money in tax deferred, and at some point you gotta pay taxes coming out.
What you don’t know is what that tax rates gonna be after 2026. We know what the tax rates are now through January 1 of 2026. So if you want it for certain, now is the time to be thinking about doing roth conversion. Now, it’s not right for everybody. That’s why you need to come make an appointment here at Mach 1 and let’s go over your situation.
Again, it’s a complimentary call. We will do all the legwork, all the analysis and show it to you and then you get to decide – Yes, that might be something I want to do – or – No, that’s not something that I want to do. That is a big deal doing a roth conversion. There are a lot of tax implications involved there. So that’s what I would talk about. Look at what the tax rates are now versus what they could be in retirement, and it may be better off to pay the tax now than later.
Ron: Mike, you’re awfully good at answering questions, and so are the other guys at Mach 1 Financial Group. But I know there are lots of folks out there listening who have other questions that they’d like to relay to you and you can certainly give them or peace of mind by giving them some reasonable answers. What will a conversation be like when they come into your office and sit down for a conversation?
Mike: We would love for them and to give us a call or email us, make an appointment & come in.
First thing we’re going to do is find out what their goals are. Is it retirement goals? Is it college education goals? Is it taking care of parents? What are your goals?
That could include estate planning, that could include tax planning, income planning – It’s comprehensive planning. We have got to find out what are your goals – and part of that – once you figure out what your goals are, long term – then we figure out where are you today?
What kind of assets do you have today? What’s in your 401k? Your IRA? Do you have stocks? Bonds? Whatever?
All right, so now here’s where we are today & here is where I want to get to. Our job is to create a path to get to those goals, and we use some nice software it’s called Retirement Analyzer & it helps us do that. We’ve got a few other things that we can do and then we present that to the potential client, and at that point they could say – No, I like that part. No, don’t like that part and we’re gonna make some adjustments in there.
The software that we use allows a lot of flexibility. For example – when do I take social security? Should I take it at 62? Most often that’s not the optimal time to take it. Sometimes it is, but this software helps us determine decisions like that. So that’s kind of what they can expect. Figure out what the goals are. Figure out where you are today and then develop that plan to achieve those goals,