401(k) plans and Retirement. Being Financially Secure Enough to Live Out Your Dream


Okay. We are podcast number one seven, and I got Margie, wig up in the studio, and we are ready to go today today. We're going to be talking about, fiduciary responsibilities once again, and we're going to be talking about four oh one K's, and so Margie. Let's you know, one of the biggest parts of our American dream is building wealth. Right. What is retirement towards retirement? Right. Right. And so let's start with that. What is retirement? When do we get there? Some people put an age on it. I'd say it could be as young as forty today. Yeah. Could be little so little young knocking. What are you gonna do with the rest of your life kinda thing? That's the question. I sometimes he started a second career. Well, there you go. But they're not truly retired. Just started just Regan. Yeah. Change a life change. Right. Right. But when we think about the American dream, one of those things to be financially. Well off enough that we don't have to go to work. We might choose to work. We may choose to do things in our lives that should be our choice. And we have the chess, I guess, -actly that's the whole purpose. You know. So it's not an age. It's not age sixty two or sixty five or seventy or fifty five or whatever you know, it's not some arbitrary number. It's whenever you've accumulated enough wealth that you can now, sustain your lifestyle without the need to go and punch a clock would show up for somebody else's benefit. Yeah. Yeah. It's called freedom. Isn't that beautiful and one of the things is that the tools that people use the most Jim is a 4._0._1._K? Yeah. I think that's when we talk investments today is not just about where everybody's mindset starts heading to is that for a one K. Well, it is one of the most. Used or, and it might not be an actual 4._0._1._K. I mean there are some similar kind of company. Retirement plans might be a sap four zero three b it might be a simple IRA might be a traditional IRA. It could be real estate to maybe. Is that factor into a portfolio? Well, it factors into your overall. Well, yeah, but real estate is not generally, it could be held in an Irish it's. Yeah. But it's whenever you can accumulate, you know, wealth that investments so that you can now start to take revenue from matter. So to sustain your lifestyle. So instead of a paycheck, you're paying yourself, and hopefully, you can be taking what's built up in there as return investment, not the principal? We've exact. Now are talking strategy that sounds great. But one of the biggest issues is, how do you trust it? Number one, too many people pass up this opportunity when they're working, and they need to know that these plans exist, and they need to know what does my company offer. What's the match oftentimes if you're not participating in your four one K you're leaving money on the table. Because if there's a company match that's could be thrive. Prisoner done that Margie. So I know very well with that. And I know the downside of what? Yeah. Well, there's a gentleman, I want to bring up, this whole idea of, what does that mean the fiduciary responsibility? Whether big fat word fiduciary, the F word in the financial industry when you talk f-bomb in this industry, you're talking, we're talking about the do Sherry, and what the word means is that I must do if I'm acting as a fiduciary. I am acting in the best interest of the other right. Whoever I'm being fiduciary up. Yeah. So if you're an owner of a company or an stock owner in a small company or an family owned business or part of a committee that makes these decisions about a plan about a 4._0._1._K or four three beach, you are required to act as a fiduciary and that means you must. Act in the best interest of the employees, not the best interest of the company. And not the best interest of the advisor or the brokerage firm. But in the best interest of the employee, what's, this is one of Fred reshow bring up a gentleman is name is Fred reshi is known as the Orissa law expert. I mean he is the guy recognized throughout the industry. The industry throughout whenever there's a lawsuit in this area. He is called in on both sides often, you know, one side or the other thing. Yes. Chessel give his opinion. So you really wanna fall on the right side of Mr. Fred. I, I mean that big time. Yeah. Because to fall on the wrong side of him as to, to have heaven or hell to pay. Right. But here's a statement he makes in 4._0._1._K specialist magazine. Okay. This is an industry magazine. This is quoting Mr. Fred region. My biggest frustration with the plan sponsors. Is that they truly don't understand what it means to be a fiduciary. They don't understand in committee meetings that their duty of loyalty is to employees, ease not the company. Wow. What a big statement. Now, he's saying this in a broad statement, he runs into this really regular basis like this is what the man does and for that statement. I mean if anybody out there is either Ana committee of four one K committee in their company, an owner of a company that offers a 4._0._1._K simplysafe Ray or any kind of retirement plan someone in a family owned business, they might want to heed and make sure because the cost of not following this can be huge. What can be the cost? Well, for example, one of our favorite action. I say that tongue in cheek providers of such plans is fidelity. Fidelity had a lawsuit brought up by its own employees against fidelity really. Isn't that surprising you don't want because they were using funds that had higher expenses. They had the same fund, but with a different expense structure. So the employees were actually paying more in fees and expenses for their investments than they needed to. So you're going to be careful. What are you paying on those internal fees? What are you really getting from that brokerage firm? Right. This can be very costly. Because what now that lawsuit, what they can do is they can go back and look at from this point to this point, you would have made on this make X. Let's say you would've made a thousand dollars more on your 4._0._1._K number. Fly that times a thousand employees two thousand employees. Now you've got some big bucks are being paid to the employees to the plan. Participants so really has to be thought about in a lot of these brokerage firms. Do not even qualify. The company knew. This was happening. Well, I don't know. You would think they'd no I mean, after all fidelity runs in this case, the watchdogs happened to be the employee's. Okay. Employees should be wear. So there's lots of reasons if you're a company owner you cannot divest yourself fully of your fiduciary responsibility. And in the risk the laws are two levels of one is not even a true fiduciary it falls under section twenty eight and that is just they go by what is called an acceptability. Level of in other words, it's acceptable to be sold suitability. It's called. So that's a suitability criteria previous podcast. We talk about two level for Doshi area responsibility. And that lower level is what brokerage Roy's are generally at this time being held to now there's movement in the industry to get them to be held to a higher level. Okay. Which the highest level of is under section thirty eight which simply states, that you must do. What is in the best interest of the employees, which means lower fees? Here's an understatement from Mr. riche Frederick. Good investment advice is one thing. So that's one thing you want to watch sure reasonable expenses on those investments is another, not having bad effects, or conflicts of interest is the third. In other words, this. Whole issue a revenue sharing in the conflict of interest at that can bring up when you're dealing with a brokerage firm. Okay. We'll talk about that a little bit more in future podcasts and help with appropriate withdrawal rates in the future. So that's the fourth thing. So you lists four things that are really important to the employees. Yeah. Good investments. Good investment advice, reasonable expenses. Nobody's gonna work for nothing. Right. And of course, we don't expect to pay zero. We do want people to stay in business, of course. Yeah. I mean what my investment advisor to stay in business because I want that you want the mutual fund money company to make money. The thing is reasonable is reasonable, what's unreasonable is churning your portfolio for no particular reason. That's just an aside number three. Is that the effects of conflicts of interest? And then appropriate withdrawal rates is the fourth see if you have a properly designed portfolio, what we're finding when we do the analysis of various 4._0._1._K's, people are missing out on fifty percent of their growth, no matter what they have it's really sad. If you're retiring right now with a five hundred thousand dollar rollover, that sounds like a nice little nest egg, doesn't it? Yeah, sure it should probably be a million dollars startling hearing that news. What do you think you can take in terms of income off of million dollar for a one K? Let's say now you're going to supplement your income so dollar amount. You mean what do you think is why I would guesstimate reasonable could be somewhere between thirty to forty thousand dollars a year? And I know that's right ballpark, right on, on that kind of surprised that you, you know, maybe maybe you've been listening to me hop. GM. You've been listening, I can't believe we go through these. I'm getting as much as the other listeners great four percent. And that would be you'd be really stretching it at four thousand a month. You're getting close to that five percent level and got to be hard to keep up with inflation and keep up with the market and keep things not to all of the time. If I got twenty five years to work, yet that might not be very much money at all a quarter of a century later. Exactly. Well, the idea is that at the time that you retire, you might set what your income levels are, but your portfolio should actually continue to grow out, your retirement, and we should talk about that keeping up with inflation, and depending on how long of a retirement period. If you tire at age fifty five or people put that out there for some reason, I was just beginning in fifty five. Come on. Of people are just getting started. Right, right. There was a second, another career for me at that put it's nice to know that somebody could just sit back and still be young enough to enjoy a lot of life. Fifty five is that kind of age? That's true. Most when I say the word most you can just take it with a grain of salt. But as I listened to people, they think that until they get there, and then it's they want to do something else, and maybe they do want to do something that you don't have to make a paycheck at, or if it is, they don't care what the paycheck, has maybe they wanna go back and teach kids, right or etc. Or something, you know, do some charitable work, and that's good. But they again going back shit early. They don't wanna have to do it. Yeah, yeah, that's the difference. But then you really have to have those dollars to stretch over a longer period of time. Right. Right. That's a big fear too, is when people think they're going to outlive, the income or there, that's a huge retirement. One of the biggest fears whenever we do our Merican dream experience. We ask a question. What are you three big, fears write them down? We do a little exercise there and invariably health concerns, come up, and then, of course, not having enough money, my money, not lasting as long as I do kinda thing and. Yeah, that's a very real fear. Okay. We'll listen. I think we've covered some ground today, and I'm really excited about this. I think next week we've got what just pick up again and kind of keep on this trajectory because I think we're getting a lot of meat out in each one of these kids. So hopefully folks, have a question you're encouraged to go ahead and submit those questions to Margie, and we'll get to those, and I think you can look forward to learning a lot of these podcasts. That's it for today.

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