Jim Dandy, Advisor, DAN discussed on Peak Financial


Area with an office in Roseville and so often on the program. We talk about how important it is to have a written plan for retirement and to be well established for your retirement future and go into it armed with the right kind of plan, But Jim and Dan, I know that that's easier, said Then done. It's not a click of the fingers and everything happens. You guys have built guidelines. You have built a structure around how this plan is supposed to happen. And I'm wonder if you could take a couple of minutes today. Gonna walk us through inm or detail. What you're planning process is like what the philosophy is behind the planning process. Walter, we have Ah rules based system that we adhere to at our firm and we have seven very specific and exacting rules that we live by and developing every single financial plan for every single one of her clients. If you follow these seven rules, do you have a super Super Hi chant of being successful in retirement. And then why don't we talk about the first rule that we live by in developing a full financial plan? Well, Jim rule number one in our seven rules to live by former time security is always avoid large losses using what we call the golden rule of 5 to 10%. Well, that simply means is you must position your portfolio to make sure if we have another market downturn, a major market downturn like 4000 and two or 74,000, And when the market lost over 50% you need to make sure you don't have more than A 5% lost up to a maximum of 10% loss. Because imagine that you have $2 million in your portfolio and you go through one of those big losses and you lose 50%. Your $2 million goes down to a million. And you now must earn 100% on your million to get back up to even If instead we can reduce your potential risk down to 5%, the $2 million will still have a loss, but it will be reduced from a million dollar loss down to 100,000 are lost now, instead of only having a million dollars left in your $2 million portfolio, we have 1.9 million and to make them 1.9 million back up to two million. We only have to earn a 5.3% recovery gain, and it's how then you can get ahead. Suffering. A big loss will be the most devastating thing. To your retirement success. The second rule that we live by is what we call minimizing the fees inside your portfolio. You cannot get out of fees. When you're working in the financial industry. Whether you're managing your money yourself or you have a financial advisor. There are fees. There's a lot of fish. You don't see we do a full analysis here. We call them the fee analysis we have outside third party resource is we use we take a client portfolio, how it's configured whether stocks bonds, mutual funds or exchange traded funds. We hand this off to the research firm, they come back, and they tell us the exact fees. Most clients think they're only paying their financial advisor to the advisor is only telling them what they're charging them and whether that's 1% or 1.5% of your portfolio value. That's what you think you're paying in fees, but that's not accurate. Every client it pain, additional fees. Those are feet that you don't see inside your portfolio. For example, if you have mutual funds inside your portfolio, you are probably pain in excess of 3% in total fees to have your money. Manage. Yes, you're paying your financial advisor, possibly 1%. But when they're selecting mutual funds of mutual fund companies do not work for free. There's lots of people, lots of computers, big buildings. You're paying another anywhere from 1 to 1.5%, typically with mutual fund fees. Inside those funds of mutual fund managers are buying and selling stocks or bonds to the course of the year. There's an internal trading cost that you don't see the average internal trading cost is 1.44% annually. So if you add up just so three fees, and there's other fees as well, you could be paying 34 or 5% in fees. And what's the third rule that we live by in developing a portfolio number three is you must significantly reduce volatility because volatility will kill the opportunity for you to generate a significant amount of income that's guaranteed to last for as long as you live volatility will on Lee reduce your chances of success to retirement. So that's the goal, making sure you don't go up and down the same amount that the stock market's going up and down. We have to overhaul your portfolio to minimize volatilities. How about number four? Jim is to earn a reasonable rate of return. Don't try to hit The home run and retirement. You're now in your sixties or seventies or possibly eighty's just earn a reasonable rate of return. We configure portfolios to make sure that you have an opportunity for growth. But we're about risk mitigation. We're going to de risk your portfolio so that you have less risk in which it meets. Yes, you're going to have probably Ah, lower way to return them the stock market, But it doesn't mean you can't earn a reasonable rate of return because the main goal of retirement is making sure your money is safe. Safety is the most compelling concern you should have in retirement. Don't lose your assets. We give you statistics all the time on these shows, because if you lose half your assets and your down 50%, you actually need 100% ready return just to get back to even you do not want to be in that position. So, Dan, what's the fifth rule? We live by and building a retirement income plan? It's managing taxation, understanding taxation, managing it, most importantly, knowing that you're not probably going to be in a high tax bracket when you retire. Let's say you generated $200,000 of gross income in retirement. Most people think they're going to get killed with taxes when in reality If you live in the state of California, you're going to pay about 18% in total taxes on your 200,000. That's going to be about 12% Federal in 6% State tax, Not too high of attacks at all, and you're going to do well. You could take us much income is you want and you will not get killed with taxes by understand exactly how the tax code works. How about number six Jim Dandy, sick world We live by generating income into retirement and a client only has two choices. Neither generate what we call maybe income. That's income that's going to be generated off your portfolio interest dividends, growth, etcetera, or they can generate what we call certain income and clients don't often there, Sam with that meat by certain income. There are financial instruments that we use and developing a portfolio that actually will give you certain income. It's guaranteed for as long as both you and your spouse live even if you live to 120 years of age. That means that that income coming off of that financial instrument is going to be there every single day every single month for as long as you live, it will never go down. It'll only potentially go up in value, depending on the product that we use. And of course you can use maybe income that's income coming off your portfolio. But when we designed an income plan, we're trying to design it specifically to what you're trying to achieve. And if you want a pension income stream off your assets, there's a way to do it, and it's called certain income. So Dan what's the seventh rule that we live by in retirement security. The seventh is the most important rule and that is heavy written retirement income plan that will then tie everything about your money together in the document. You have a retirement income projection. Little show exactly how much income you're going to get every year for as long as you live and each year where each income source comes from. It will include a income tax projection. Little show as you increase your income to live the lifestyle you plan during retirement..

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