Markets crash. Taxes shift. Congress waffles on Social Security. You can’t control any of that. And stressing over it won’t help. What will? Focusing on the four things that actually move the needle in retirement.

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Disclaimer: PFG Private Wealth Management, LLC is an SEC Registered Investment Advisor. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. The topics and information discussed during this podcast are not intended to provide tax or legal advice. Investments involve risk, and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor and/or tax professional before implementing any strategy discussed on this podcast. Past performance is not indicative of future performance. Insurance products and services are offered and sold through individually licensed and appointed insurance agents.

Marc:

Market crashes, taxes shift, Congress waffles on Social Security, you can't control any of that, and stressing about it will not help. So, let's talk about the things this week that we can control in our retirement.

Welcome into the podcast, everybody. This is Retirement Planning - Redefined with John and Nick from PFG Private Wealth, and guys, we're going to talk about a couple of examples of stuff we can control in our retirement world, because there's a whole lot of stuff we can't control, right? So, let's have a chat about some of that this week. What's going on, John? How you doing, my friend?

John:

Doing good. I'm doing good. How are you?

Marc:

I'm hanging in there. We were just chatting before we jumped on here about the AI getting crazy. We can't control that either, so we got to factor that in, right?

John:

No, no. I think [inaudible 00:00:50] right now.

Marc:

Yeah, we got to factor that in when we're looking up information and things of that nature, so that's another piece we can't control, so be careful out there with that. Nick, what's going on, my friend? How you doing?

Nick:

Good, good. Staying busy. The heat is on here.

Marc:

The heat is on. That's right.

Nick:

Yeah, we are inching our way into summer.

Marc:

Yeah, well, it's that time of the year. It's hot and rainy on a regular basis, but let's get into this conversation this week here. I got a couple items I want to run through. Like I said in the teaser, you can't control what happens in the market, guys, right? Look what happened earlier this year. We knew the tariff thing was going to start. Took a bit of a beating for a while, then it started to rebound pretty well, but you can control how you're positioned, right? That's obvious, but people forget that. When they see the market taking that dive, they panic, "Oh, my gosh, it's going down. The S&P is down 12%, that means I'm 12%." Well, no, John, not really. Not if you're not 100% exposed to the market risk, right? That's the point.

John:

Yeah, that is. This is actually perfect timing for what's been going on this year.

Marc:

Exactly.

John:

We're doing some of these reviews, and we really kind of pride ourselves on making sure people are invested in the right asset allocation per their goals and their plan and their risk tolerance. So, when people put on the news, it seems like doom and gloom, and we're doing some of these reviews and it's like, "Oh, okay, that's good to hear." And part of that is you can't control what the market's going to do, you can't control what politicians are going to do and how that might affect the market, but you can control how you at least take a look at your overall investment portfolio and how you structure it to be able to ... Not saying you're going to weather every storm, but to limit some of the volatility that's happening.

Marc:

Sure. Yeah, I can't even begin to say how many advisors I'd talked to where most of them only had a few nervous Nellies, right, and that's okay. It's understandable. A couple would call here there during the height of some of that there in April and saying, "Oh, my God, I see it every five seconds. It's down 12%. I need to go through my numbers." And so they'd run through the portfolio with them and they're like, "You're only down about two at this moment," because they're like, "Oh, well, two's a whole lot better than 12." Well, yeah, so that's the point of not buying into just the straight media all the time and understanding what your risk tolerance is and how much you're exposed to it, so that's one area.

Nick, another area is kind of the same thing. It's the great multi-risk multiplier. It's our longevity. We don't have a stamp on us that says when we're going to pass away. It would make things easier and scary all at the same time. But you can control how much emphasis you put into your lifetime income streams, like, how are we setting up these lifetime income streams? And that longevity factors into market risk and all the other stuff too.

Nick:

Yeah, for sure. As we kind of start going through the planning process with clients, and then obviously the clients that have been with us for a long time, things will kind of ebb and flow depending upon how well they tolerate things like the market, how focused they are on upsider growth. And we've had multiple clients over the last, I'd say, 12 to 24 months where they've had substantial run-ups in the market over the last 10 years, and have wanted to carve out a certain amount to just kind of give them additional baseline of income.

And I think one of the things that's really brought that home to people has been the inflation factor that we've kind of dealt with over the last couple of years, where it's like, okay, they were chugging along and things were going great and felt very comfortable, and then prices and inflation really kind of kicked into gear. And we have a conversation about, "Well, hey, if this happened 10, 12 years down the line, are there things that you would do differently than you've done previous to now?" And a lot of them have wanted to increase that baseline, especially with Social Security being in the news as much as it is, and for a lot of people, that being kind of their baseline lifetime income stream.

Marc:

Yup. For sure. And these four things we're talking about this week, guys, they all really play with one another when it comes to building that retirement strategy. And of course, if you need some help, please reach out to a qualified professional before you take any action, like John and Nick. Again, you can find them at pfgprivatewealth.com.

But John, I'll kick it back over to you, where we're still waiting to see what's going to happen with the passing at the time we're talking for this Pick the Top Podcast, the Big Beautiful Bill is still hanging out there, and taxation is a piece of that. So, part of what we're waiting to find out is, are the Tax Cuts and Jobs Act that we're currently under, are they going to expire at the end of 2025 in just a few months, or are they going to extend that, right? So we can't control what they're going to do, but we can start thinking about how to be as tax-efficient as possible.

John:

Yeah, this is a big one, because taxes are just an eroding factor in your money, and it's best to avoid unnecessary taxes at all costs. And the best way to do that isn't trying to predict what taxes is going to be in the future, it's positioning yourself where you can adapt to any situation. So, if tax rates do go up quite a bit, you have some tax-free money or some after-tax dollars somewhere that you can take advantage of. So, it's important to look at, hey, kind of call it asset location, where are my assets and how are those being taxed? And if taxes go up, how do I adjust? Or if taxes go down, maybe that's a good time to make some moves and make some adjustments.

And part of this is, and I found this quite a bit when we're bringing on prospective clients that maybe haven't worked with an advisor or working with an advisor, they're really not projecting what their taxes are going to be in the future. It's just kind of like, "Hey, what's my return? How have I been doing?" But with a comprehensive plan, you can actually look at it and say, "Hey, based on today's numbers, here's what taxes look like. And if taxes go up, you're going to be in a bad situation the way you're currently positioned." So we want to just stress how important it is to allow yourself the ability to adapt.

Marc:

Yeah, and Nick, I'll keep that conversation going with you for a second, because if they do nothing, the tax code is going to revert back to the Obama administration era, so rates will go up, brackets will change. If they extend the TCJA, which a lot of people are hoping for, then our tax rates will probably stay the same. And if you're doing Roth conversions, for example, that's going to be great, because you're going to have a longer timeline now to Roth over time and do converting, whereas if the tax rates go up, maybe that changes your strategy.

Nick:

Yeah, for sure. And I think the biggest takeaway in the biggest point that this proves is that things continually change. And so, having a proactive plan on how you want to address ... And really what this boils down to is your distribution plan or your withdrawal plan, and how heavily dependent is your withdrawal plan on current environment?

And even just to bring that up, I think one of the things that we've found, and we've emphasized it with clients, especially over the last 10 years or so, but clients that have taxable investment accounts, so non-retirement, non-traditional, non-Roth, but just regular taxable investment accounts, they really find themselves in a position to be able to adapt to the environment better than people that don't. So, things that pop up that happen, whether there's a substantial withdrawal that needs to happen, or just flexibility on cash flows, their ability to be able to adapt to what's going on is significantly better, because ... And we are a fan of Roth conversions when they make sense, but there is a risk there from a timing perspective. There's absolutely risks, so that's something that I think is important to point out.

Marc:

Well, the fourth one, we said we were going to talk about four items today, guys, and of course you know it's coming because I hadn't mentioned it yet, that's Social Security. We can't control what these folks are going to be doing up there on Capitol Hill, but we can control our strategy, or least start to kind of look, like, how heavily is it relying on Social Security? Or the conversation, John, of when do you turn it on? When do you not? How does that affect your withdrawal strategy and withdrawal rate from other accounts? So, that's something you can control.

John:

We can control when you take it and when to defer it and what to do with it if you take it. And again, just going back to the plan on this and stress-testing the plan, how does someone's plan look like if Social Security loses the cost of living adjustments that we've seen recently, which have been pretty significant over the last five or six years. What does the plan look like if all of a sudden that stops? Are you in good shape? And if you're not, how can we mitigate some of that risk? And maybe that does make a difference as to when you take it or how you take that distribution there, but that's one way to look at it.

Or assuming, going back to the Social Security podcast, if people are listening, if they don't make any changes in 2034, there'll be about roughly 21% reduction in your benefit. What does your plan look like in that situation? Are you in a good position to weather that storm? I mean, ultimately, we do think they'll make some adjustments to it, but you just want to just know what would happen in that situation, and how do you adapt to it.

Marc:

Yeah, I mean it's certainly a big one that you're going to wind up. You're running different stress tests and different kind of scenarios just to kind of see how all this stuff's going to play in with each other. And Nick, I'll toss it back to you for a final point. Anything I missed on those four items that we can control? Those are four pretty big ones. Is there anything else you'd like to touch on, or did we tackle it?

Nick:

No, I think those are good. I know just one other point, because there's been some talk about the tax bill that's going through Congress right now, and there was some initial discussion about making Social Security benefits tax-free, and at least from what I've read, that's not the case in this. I know I've had some clients kind of bring that up and ask, and obviously we never know what happens once it kind of works through the Senate and all that kind of stuff. But they did end up, I think, the way that they had handled it was they put in something about an additional credit for seniors, an additional tax credit of, I think, maybe up to $4,000 or something like that, but-

Marc:

Yeah, I think that's where they're still kicking around. It went through the House, right, so now it's still got to go through the Senate, and they're still kind of arguing back and forth about what's going to be what, so yeah.

Nick:

Yeah. And the reality is that the other thing that this tax bill does point out is that from the standpoint of in the future, and the amount of debt that the government has and all that kind of stuff, there are risks of things that will be taxed in the future that maybe aren't taxed now and stuff like that. So yeah, I think the emphasis is really beyond anything else is that whatever strategy is best today is probably not best tomorrow.

Marc:

True.

Nick:

And so, the ability to be able to position your assets in a way to kind of adapt, like you mentioned, income streams, have pre-tax money, have Roth money, have taxable brokerage account that's more subject to capital gains versus ordinary income taxes. Even if you're in a position where you can invest in something like real estate, maybe when the prices are a little bit more reasonable, but where you can use the tax benefits of real estate, that's something that could make sense for people. So, it's just giving yourself the ability to adapt to whatever's going on is the most important takeaway I think people should have.

Marc:

Yeah, at the end of the day, there's a lot of stuff that we cannot control, but there are many things inside that subsets that we can control, and that's where working with a financial professional can certainly help. So, if you're not already doing so, sit down and have a chat with one. Talk about your unique situation on something you hear on our podcast or any other. Don't just take action without running that through your specific and unique scenario. And of course, John and Nick can help with that. If you're not already working with them, then reach out to them at pfgprivatewealth.com. That is pfgprivatewealth.com. You can call them at (813) 286-7776. And don't forget to subscribe to the podcast on Apple or Spotify or whatever podcasting app you enjoy using. It's Retirement Planning - Redefined, and share the podcast with others that might enjoy the content and get a useful nugget of information along the way as well.

So guys, thanks for hanging out and breaking it down. I always appreciate your time. We'll see you guys next time here on Retirement Planning - Redefined with John and Nick.