Tariff Talk: How Global Trade Impacts Your Retirement

This episode dives deep into the current economic climate, focusing on how tariffs can affect the retirement landscape. We explore actionable steps to help secure your financial future amid rising costs and market volatility. 

- Understanding tariffs and their implications on consumer prices
- Historical context of tariffs versus the modern tax system
- How you can put your cash to work in during retirement
- Constructing a comprehensive retirement contingency plan 
- Diversifying your investments for a better chance at financial stability
- Health maintenance as a key factor to consider in retirement planning

To take a closer look at your retirement needs, schedule a complimentary consultation with our team at masterplanretire.com.

Have a topic or question you'd like Mark and Evan to address in a future episode? Email us at info@masterplanretire.com or call 770-980-9262.

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Visit masterplanretire.com to access our retirement checklists, podcasts, and schedule a complimentary consultation.
Call 770-980-9262 to speak directly with someone about your retirement planning needs.

https://masterplanretire.com/

Catch all episodes of our podcast at https://www.masterplanyourretirement.com/resources/episodes

Listen to Mark Fricks on Saturdays at 12:00 p.m. on XTRA 106.3 FM WFOM.
Sign up for one of our upcoming events at https://www.masterplanyourretirement.com/events

Purchase Mark’s book, The Road Less Traveled: Turning Your Retirement Worries Into an Excursion of a Lifetime, on Amazon: https://a.co/d/4fx94Al

Advisory services offered through MasterPlan Retirement Consultants, Inc., a Registered Investment Advisor in the state of Georgia. Insurance, tax and commodities services offered through Fricks and Associates, Inc. dba MasterPlan Retirement Consultants. The aforementioned are affiliated companies.

Transcript

Introduction and Episode Overview

Speaker 1 0:06

Will tariffs derail my retirement? Hey folks, thanks for joining us. Welcome to Master Plan Retirement's Retirement Roadmap. My name is Evan, with me, as always, retirement planner Mark Fricks. There's a lot going on in the news. It's been a pretty bombastic beginning to Trump's presidency. Thus far, a lot of talk about tariffs across the board 25 percent increasing China's tariffs on Mexico, tariffs on Canada. We all know that typically the consumers tend to bear the brunt of that weight Folks who are building up to retirement, who have been saving, who are ready to walk away from a paycheck. They have some serious things to consider here.

Speaker 2 0:46

Well, they do, and the problem is it's ever-changing. Every day it's something different and there's so many different ways to look at it. So just a quick little background here. The federal tax system came into being in 1913. Before then this entire country was run on tariffs and so you paid no taxes and so you just paid it, kind of when you bought goods from overseas, right. And so we've gotten away from that and now we've got some tariffs, we got the federal tax system and all that kind of good stuff. So you know, there's so many ways to look at it. You know, one way is to say you know, if we truly do enact these tariffs, our goods will eventually start going up, but do our taxes come down? Our goods will eventually start going up, but do our taxes?

Speaker 1 1:26

come down.

Speaker 2 1:26

I don't mean to laugh but I'm sorry, it was the Smothers Brothers show here or something. I'm not trying to be a comedian here, but that is true. You know that is economically feasible, but the pain in between and you know, I know Trump has said getting rid of the IRS is that feasible? You know there's so many moving pieces, but I don't think we're that far down the road yet. So a couple of things, and maybe you're going to cover this in our bullet points here today, but just kind of an overall picture. First of all, don't panic. Okay, but that does no good, okay. Panicking is just like panicking when the market goes down. It makes you make bad decisions. So, don't panic.

Speaker 2 2:06

Nothing's written to stone yet, and what I see happening is I think Trump is playing the businessman which is what he is and is using the tariffs as a negotiating ploy. He's already had several countries, you know, after he has threatened tariffs, to come back and say, okay, we'll give you this, we'll give you that Mexico. A prime example Red this yesterday I believe it was Apple has pledged $500 billion into the US economy to open up plants, to open up training centers, universities, consulting areas and everything else for chips and AI and all that and monitors and PCs and everything. And so why? Well, because 500 billion times a 20% tariff it's a lot of money. So that's money and jobs flowing back into the US. And people say, well, that's going to take five years. Well, actually they started one of the plants back in Trump's first term. And so you know again, there's a lag way there. And you know, I'm like most people, I kind of like the status quo.

Speaker 1 3:17

But change. There's so many things happening right now and tariffs are just one conversation. We had an episode recently about all the discussion of the federal worker layoffs. I mean that's going to really rock our workforce status and people looking for jobs Right now. Inflation is getting a little hairy. It's starting to go up again a little bit. We know what's going on with eggs. We know what's going on with groceries and gas right now. So, just like when we plan for retirement and look at opportunities for improvement or weaknesses, none of these happen in a vacuum where it's just on a job.

Speaker 2 3:55

Every action has an equal and opposite reaction. And so, if you have these layoffs, these people are now unemployed, they're now going to start collecting benefits, they're not being productive, and so that's going to hurt the economy. And then, along with that, is what about our services? I was reading about the National Park Service and people may go, well, that's just parks. You know, you start thinking about what parks give us and the education and how it makes you respected. And now they don't have enough people to watch vandalism and things of that nature and lead tours. And again, there's national pride in that. And that's just one area. You know, like IRS, yeah, I don't want a whole bunch of people sniffing around my tax returns, but I want my check pretty quick, so I don't want those people to let go and and and, as you. You know, as, as you know, and most of our audience knows probably what 35% of our clients are federal workers. So we are getting our phone is ringing off the hook, our classes are full. By the way, if you're a federal worker, we teach federal classes and we are touching on what's going on and maybe ways you can make this work for your retirement.

Speaker 2 5:03

Maybe not A lot of worried people. I get it, I understand it. I've been in that type of position many years before. It's disconcerting, but also reaching out for help in every area you can. We actually have a copy of the agreement? I was able to secure that that people are going to have to sign, to be paid through September, but then people that didn't sign are they going to get furloughed anyway? It's just, it's mind boggling and I wish you know whether you agree or disagree with what's happening or not. I think it's just moving so fast that it's just spinning people's heads.

Speaker 1 5:36

Well it is. I have my brother-in-law. He works for the US government abroad in a US aid type position. People don't realize you know he's worried. People don't realize the speed that this is happening is undoing decades of work. You know this is not. They say departments are wasting money, all this other stuff. Well, departments are also keeping diseases from crossing borders, from crossing into the US. They're keeping people fed, they're keeping warlords. That's protected, exactly. So there's a lot, there's so much more going and it's moving so quickly. My fear, and again this isn't retirement planning, but I'm just afraid of the ramifications hitting really quickly because we're not doing it intelligently. It seems I don't know, yeah, behind the scenes Much smarter people than I.

Speaker 2 6:24

Yeah, there's a, there's a lot of people talking, Trump and people around him talking, but really, what's going on behind the scenes? Maybe let's say this to get this reaction, but this is what we're really going to do, and and so we've seen some of that. But is that? Is that all of it? Again, you know?

Speaker 1 6:41

Maybe some 3D chess going on, that's right.

Speaker 2 6:47

A, maybe some 3D chess going on, that's right. A whole other board. We'll tell that story another time, but I can see. Was it the nuclear department where they let a bunch of people go and then they ended up recalling like half of them because they realized the people they let go are the ones watching over our nuclear stockpiles or something you know. Just that it almost feels off the cuff Shoot from the hip ask questions later, mark this page of people off or something like that, and I don't like that feeling.

Speaker 2 7:10

People don't like that feeling. I understand the goal. I understand cutting costs. I do think we're very wasteful. I also think that the majority of our federal workers are productive.

Speaker 1 7:22

I do too.

Speaker 2 7:23

I think it's just this. Like any corporation, right, like any larger company, there's some that skate along and they can hide underneath the you know, the shadows or whatever. So you don't go through just saying okay, if you've been here five years or less, you're gone. You may have just gotten rid of who knows how many thousands of great workers with new, fresher minds.

Speaker 1 7:43

Well, this is going to become a rant podcast before anything else, I think. You're absolutely right.

Speaker 1 7:50

Like you said earlier, about 35% I mean who knows a third of our client base are federal employees. So we talk to a lot of federal workers, even those who don't end up becoming clients. We're face-to-face with them at seminars, webinars. Who just come and decide not to work with us or they do Either way. We know their work ethic, we know what they're doing every day. We know the system they're working in is flawed, because they complain about what they have to deal with. It's part of what we teach as far as getting their retirement benefits, the process and time that that takes and how that's clunky and inefficient. So really, the inefficiencies are not in the workers. The inefficiencies are in the system that they have to work for and work within. It's the red tape, it's the bureaucracy, it's inefficiencies there. That's what's mind boggling about the whole thing. You're not fixing the system, you're just removing people out of it.

Speaker 2 8:39

That's not the answer yeah, you're not treating what's causing it, absolutely Just throwing drugs at it.

Speaker 2 8:44

Well, and and you know again, I think this is important to talk about. We won't spend the whole show on this. This is more about what you should be doing with all the things happening. But I had a federal worker tell me yesterday, one of our clients. He said the solution is is not be not keep your job because you're tenured, keep your job because you've earned keeping your job, and so that just makes sense. Now, that's a that's done in a lot in many companies, especially union companies. Many times that protects the worker, even if they're not doing a full-time job. Not every union, not every union worker Okay, but having having this guaranteed, hey, as long as I'm here, I'm good versus I'm being productive I think just that shift would help a lot. And again, this was based on one or two federal workers telling me this this is not me shooting off the hip or I read something somewhere, so I'm not here to solve all these problems. I wish we could, but we're going to see what we can do to work around them. Yeah, yeah.

Speaker 1 9:45

So back to what are we talking about today? It's basically how to build a retirement contingency plan. There's a lot going on in the world, and there always is, but right now it just is extra fear, extra anxiety around what's moving, what's going around. So we're just going to talk, to talk to what you need to prepare for, the things that you need to set up for yourself, and that really all starts with just an emergency fund, access to liquid cash, emergency fund available to you should you need it. We're talking about inflation, rising in prices, things like that. Readily available cash.

Speaker 2 10:22

Yeah, let's make sure that people understand the difference between cash and liquidity. So it's important to have cash that you can go to the bank and get it immediately, but I don't, under most circumstances I don't see somebody keeping $100,000 in cash unless they're needing it next week or whatever. So you know, with each client it's different. But how much do we keep in cash banks, liquid protected, but how much should we keep also in liquid but earning something a little bit more? So, whether it be a money market that maybe is offering a good rate which those have been pretty good beginning to come down, some maybe a very conservative portfolio of bonds that might get us a 3% to 6% return with very little risk whatever, but it's liquidity as well, and so that is an important part of that. Don't again, don't get caught in that comfort level of I've got a lot of money in the bank. That's great. Let's do something with it, yeah.

Speaker 1 11:19

Emergency fund and people look at three to six months. It really depends on how comfortable you feel and you know what kind of purchases that you have coming up if they were major purchases coming up, things like that. But in general people say three to six months of salary. I think that's. That's completely fair and safe. But, like Mark said, the second bullet point is don't keep too much in cash. You want to make sure that your money is working for you and your money is making money, even if that is, like you said, a money market or something a little bit more conservative on the active management side.

Speaker 2 11:51

But we really want to make sure that we're making the most of our liquid, non-qualified funds yep, and folks that have attended some of our classes maybe listen to some of our shows that we call the color of money cash. We color a yellow color. Yellow has has a significance. Yellow to me means caution, like a, you know, a yield light or a caution light or whatever. So it's comfortable to have a lot of money in cash but you need to be cautious because you're not making anything on it. So just kind of a tie around to hopefully you can go back and listen to a podcast about the color of money. We talk about the color of money in our tax class or actually in our retirement income class, maximizing retirement income. Check our website, which, by the way, is masterplanretirecom.

Speaker 2 12:35

A couple of things to look for. First of all, look under events. Events will tell you the classes coming up. Okay, there could be a webinar where you can sit in your pajamas and watch it. It could be a face-to-face in different parts around the Southeast. Okay, not just Atlanta area. That's an important place. So masterplanretirecom under events.

Speaker 2 12:55

The second thing to look for is there's this little greenish button that says schedule a meeting. So you're going to be offered, during this episode today, the opportunity to chat with one of us to be able to sit down and take a look at more of your feelings, more of your questions, your desires, your goals, your fears, right, about retirement, whether you're 10 years away or 10 minutes away. Okay, and so that'd be a chat. And then, with your permission and with your want and desire, we will then run a series of six to 10 reports to see are those fears real? Should you be afraid of taxes going up? Would it affect your retirement? Should you be concerned about your spouse passing away early? Then you know what to attack. And so, masterplanretirecom, schedule a meeting and also events and, by the way, we have phones here right 770-980-9262. We'd love to chat with you or schedule a time to meet. Perfect.

Speaker 1 13:57

Next thing, after you've got your emergency fund available, diversify your portfolio. And I don't mean just go buy a bunch of stocks through your app on Schwab. Work with a financial services professional. Work with someone who has access to multiple portfolios, that can accomplish multiple jobs, knows the truth behind diversity. And I also don't mean just diversify within a brokerage or within the stock market. There are other financial vehicles and other assets that you can diversify with as well.

Speaker 2 14:25

Yeah, I think it's important to have growth right and I think, Evan, you said it very well. You know, depending on how much money you have four, five, six, seven different types of portfolios, this one's going to do well in this kind of market. This one's going to do really, really well in this kind of market. We use actively managed portfolios almost entirely, and so our clients will come in and say you know, I got three confirmations of trades they did this month of this stock selling and this stock buying. Well, they're watching the algorithms, they're watching the economy, they're making decisions to do something to avoid those drops and try to make more money. So it's important to have that.

Speaker 2 15:01

But also some accounts that, when the markets are down, that have a protected principal I don't have to worry about it going down at all, and these typically have no fees. So it's just an account that can make not quite as much as the market, maybe more like five to seven, you know six to 8%. Our market accounts can make anywhere from six to 15. So not as much return, but on those bad years, that money's protected and it's a great place to take income from as well.

Speaker 1 15:33

You're also going to want to consider your future health care costs. We don't know what they're going to be. Excuse me, you also want to consider your future health care costs. We don't know what they're going to be, but we assume that they're going to be higher than they are now. Long-term care strategy is super important. They are now. Long-term care strategy is super important. We are talking about diversifying in different buckets for different jobs, different accounts, different portfolios that do different things. Maybe a couple of those are assigned to long-term care strategy and planning.

Speaker 2 16:01

And future medical expenses period, right, right.

Speaker 1 16:04

And you also want to know what Medicare will and won't cover for your situation. Medicare is not a blanket to cover everything. You need to know what is and isn't cover for your situation. Medicare is not a blanket to cover everything. You need to know what is and isn't covered for you. Maybe you have some employer benefits as well. Medicare works well with that, who knows? But you really need to find out. Talk to a financial services professional. We have some Medicare experts that we refer clients to and work alongside with as well, so feel free to reach out for that conversation.

Speaker 2 16:32

Real quickly on healthcare. I don't know if folks know this, but our average inflation rate over the last like 80 years or whatever, is like three to 4% really closer to 4%. Healthcare is over six to six and a half percent inflation. So it's not just that things go up, but healthcare is going up much well, 50% faster. And so having a plan, don't just think, hey, we'll work it out. Have a plan, let's design something that, hey, as this happens, we've got ways of keeping up with that or keeping track of that or covering that.

Speaker 1 17:10

I want to run through these really fast because there are a couple of bullet points I want to get to at the end. But we definitely want to create additional retirement income streams to avoid total reliance on social security. So if you have a pension, like a federal worker or some of the very few remaining from the corporate world, that's a guaranteed income stream. If you've got, you can create guaranteed income streams through your assets. Talk to a financial services professional about that. We don't want to be reliant on Social Security. Also, Social Security was never meant to fully provide for your retirement income. It was meant to be a supplement. So figure out. Do you have an income plan? If not, let's figure out where your income is coming from in retirement. How long is it going to last, when are your income gaps and how do we fill those gaps?

Speaker 2 17:52

And, by the way, wouldn't you like to have a contingency plan that, if Social Security isn't fixed and the payments drop by 21%, that you've got something to fill that gap with? Don't depend on others, like the government or whatever, to solve your problems? And most of our clients have done that. They've saved. They don't want to be dependent on anybody, even their kids or whatever, but have a plan, have a backup plan that, hey, if it does, maybe it drops by 10%. I don't want a 10% pay cut. You know it's certainly not going to go up by 20%. I'll tell you that right now. And so have a plan even for those types of things. And being a holistic planner, planner like we are retirement planner fiduciaries we're looking at all of those pieces, what ifs. We love the what ifs, so just wanted to throw that in there, I think that's great.

Understanding Tariffs and Their Impact

Speaker 1 18:38

Another point that is becoming more and more of a retirement planning feature maintaining your health as much as possible may also help keep your assets healthy. Health is wealth. We already talked about how expensive health care is becoming. Maintain that health. That's the richest you can be is a healthy person and a healthy body. And we talk to people all the time who are in retirement age and older who are saying gosh, I wish I had done this or done that. I just feel. I'm just feeling my age. I wish I had started running earlier.

Speaker 2 19:10

Yeah, so you know. A great example is you know, we work with clients that haven't retired yet and kind of transition them through the process of becoming retired and then the rest of their retirement. But some of them make a decision when now they have this more free time to get in shape, they come and say I've lost 20 pounds, I'm going and working out three times a week. Others you can kind of see deteriorate and so they're not taking that time to exercise, to eat right or whatever, and so that's a conscious decision you have to make. But think of the years it can add to your life. Think of just feeling better, more energy and all that kind of good stuff too. So I think that is important Keep those health costs down by taking care of yourself as much as possible.

Speaker 1 19:50

And then you know there's also a huge one, which is the B word, and that is budget Gosh. We said we were going to use that word. I try not to Re-evaluate your budget and your spending, also for the possibility of inflation. You know, we know things are getting more expensive. Save more, spend less. It's really as simple as that. And if you really have to take an aggressive stance, especially if you're pre-retirement, take an aggressive stance now so you can put more away for retirement. The more you save now, the more robustly you can live in retirement.

Speaker 2 20:22

I've found myself spending money much differently over the last two or three years. I'm going to more discount groceries, the big box, costco, sam's kind of places. Buying gas at Sam's or Costco is a whole lot cheaper Got to wait in line a few minutes. But just the little things, just trying to make my car last a couple years longer. Not eating out at these more expensive places, just cooking or whatever it may be. Don't door dash, that's like $20 more. Just take a short drive down to Taco Bell or whatever it may be. Don't door dash, that's like 20 bucks more. Just take a short drive down to Taco Bell or whatever it may be. But I mean just the little things. And again, not necessarily an official budget. I'm going to track every penny, but at least just look at what are you spending your money on and what kind of cutback on.

Speaker 1 21:04

Yeah, I want to go through a few things now that are currently protected from the government.

Speaker 2 21:10

I don't know how better as much as can be.

Speaker 1 21:12

As much as can be. But one of the things is compound interest. The market's going to go up and down, we know that. But when the market drops, as long as you haven't sold, guess what? You have the same amount of holdings as you did when it was up higher. In fact, if you can keep putting in monthly dollar cost averaging, when the market corrects, guess what's going to happen to that account? It's going to exponentially grow. Compound interest is extremely powerful.

Speaker 2 21:40

One little caveat If you're getting close to retirement, you want to be a little bit more careful with how you're investing, because you don't, you can't really afford that big drop. That's where you really need to be working with somebody that understands retirement and how to properly position so that you can still get growth. But two years away from retirement you don't want a 35% drop, so be careful with that as well.

Speaker 1 22:00

Number two. This is controversial. People might not agree with this. But Social Security benefits, they're still not going anywhere. We're not sure what's going to happen to the percentage that we receive. If nothing is fixed, then yeah, we know we're going to see a drop, but we've got time. There's going to be some changes made, inevitably. You've got your Social Security income.

Speaker 2 22:22

Yep, and what we believe is a lot of the changes as far as maybe a higher age, things like that will be on a generation younger. I think last time they made major changes, it was people age 40 and under that it affected. So if you're 50, 55, 60, the only concern about Social Security again is getting a cut in your check Again. I really believe that that's going to be fixed. I think they're going to use three or four different things to fix it. It's under study now. Then we just have to get Congress to get together and say, yes, we're going to take these four different objects. It's not just about raising taxes, but it's also not just about raising an age. You raise your retirement age to 70 for people under age 40. That's not going to help us for another 25 years.

Speaker 1 23:06

Right, we got 30 seconds, two more points.

Speaker 2 23:07

Roth IRAs Big time we got 30 seconds, Two more points.

Speaker 1 23:09

Roth IRAs Big time. Completely non-taxable, tax-free Roth IRAs huge, Two insurance companies, whether it's a life insurance policy or an annuity.

Speaker 2 23:22

That's completely separate system, Great tools for retirement. Got to make sure you have the need and you meet the need. That's there. So I don't have time. There we go. Appreciate you joining us. So, uh, I don't have time. Um, there we go, Appreciate, appreciate you joining us. So until we see each other again, just remember plan well and prosper. Take care of everybody. This was Retirement Roadmap Radio with Mark Fricks of Master Plan Retirement Consultants. To schedule a complimentary consultation, go to masterplanretirecom or call 770-980-9262. Thanks for listening and remember plan well and prosper. Thank you.