Retirement Roadmap

Holistic Retirement Planning: The 3-Circle Plan (Money, Taxes, Legacy)

• Mark Fricks • Season 4 • Episode 2

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Holistic retirement planning isn’t a buzzword — it’s a framework for how real life actually works in retirement. Your investments matter, but they’re only one piece of a plan that has to coordinate income, taxes, and legacy decisions (and the ripple effects between them).

In this episode of Retirement Roadmap with Master Plan Retirement Consultants, Evan and retirement planner Mark Fricks break down what “holistic” really means, why the old-school “buy and hold + check in once a year” model often falls short for today’s retirees, and how a truly comprehensive plan helps you avoid mistakes you don’t have time to undo once you’re on the “descent” side of the mountain.

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SPEAKER_00:

All my teaching information should be discussed in detail before qualified representatives prior to advisory services offered by Master Plan Retirement Consultants, a registered investment advisor in the state of Georgia. Mark Fricks and Master Plan Retirement Consultants are not affiliated with or endorsed by the Social Security Administration or any other government agency.

SPEAKER_01:

What is holistic retirement planning? Hey folks, welcome back to Master Plan Retirement's retirement roadmap. My name is Evan, and with me as always, retirement planner Mark Fricks. Thank you for joining us. In today's episode, we discuss the concept of holistic retirement planning and why the old ways of retirement planning no longer suffice for today's retirees. Mark, a lot of times we find folks who don't really know the concept. Holistic retirement planning is kind of a funny term to use in the financial industry. Some people assume I guess that comes with a variety of essential oils, with my plan being a holistic plan. You can laugh there. But that's something that we're seeing more and more common now. Holistic retirement planning and what that means versus the old guard, the old ways of doing things. Trevor Burrus, Jr.

SPEAKER_02:

Yeah, so uh my background is the old investment advisor model, which is basically you you sit down and you say, we're going to invest in these four portfolios and we're going to buy and hold, and then in six months we'll meet, or in a year we'll meet, or maybe I'll give you a call and say, hey, things are weird, let's change something. And maybe you would maybe help with uh a little bit of estate planning or whatever, but it was not a a big picture. And so where I came from in in in 2008, uh we all remember what happened in the market. And my background is the fact that here we would have uh this uh let's let's say a widowed uh uh woman here, we're meeting with a client and she's down, let's say 35%. And we're trying to explain to her, well, you know, the market's down 50%, so we're beating the market, let's hang in there. And that's what drove me to create Master Plan uh along with the other co-founders. And and we want to to not only have an income plan, an investment plan, but so many other things can affect it. And and I think our first challenge when we started Master Plan was conveying that message, just like you said. What does that mean? What is holistic? What uh you know, what does that encompass? What does it include? And and so that has been almost an ongoing battle, although it's getting easier because more people are understanding. Um I'm lately I've been kind of calling it family wealth management because it has to do with not only the people we're talking to, but their children, their grandchildren. Um it it it goes much further. Wealth throws me off because not all of our clients are wealthy, right? Um but but they have you know enough to retire on, so that kind of throws me off. But it is really a an entire generational plan that we put together.

SPEAKER_01:

Yeah, absolutely. And I think one of the biggest differences, I mean, the the term financial planner is thrown around in so many and it can mean a hundred different things, and we see that.

SPEAKER_02:

Can I can I insert a little story? So um no names mentioned, um, but um I was close to this uh colleague and he uh was an All-State insurance agent. And back the 90s, I guess, All-State decided they wanted all of their agents to get a license to sell mutual funds. So he came in and said, Guess what? I said, What? I said, I'm a financial planner now. Right. Right. So I'm like, let's talk. So but yeah, that it's it it is a term that's thrown around a lot. There's really not a lot of regulations as to, you know, if I've got a mutual fund license and I say I'm a financial planner, I'm not really jeopardizing my license. It's just like you said, a term that's just thrown out very easily.

SPEAKER_01:

Right, absolutely. And uh I think the first thing to note as far as the holistic retirement planning picture is by holistic we mean comprehensive. And just like you said, um a typical investor, uh the old school way of thinking of financial planning is yeah, I'll take your money, I'll invest it, we'll build up your IRA, your Roths, whatever, and when you're ready to retire, yeah, that that's how much we forecast you having. Of course, you know, that's there's no guarantees in that, right? Um whereas holistic is a comprehensive plan, meaning yes, we have to look at the growth. We have to especially look at the income planning, which is not often looked at. Income planning is a massive part of your money management, and that's not often looked at for retirement planning from most financial advisors, quote, you know, in in big quotations. But it's comprehensive. So, yes, we need that money management, we need that growth, we need that income plan, but then we also have tax planning, tax strategy for the next 10, 20 years beyond. We'll talk about that a little bit. We have in past episodes um estate and planning, uh legacy planning, just like you mentioned, is not just your generation, but what about your next generation? What kind of legacy are we building? What are we passing off? Are we doing that efficiently? Or we're passing off a tax problem. Absolutely. And all of these three main major areas, there are dozens of areas in between that are specific to each individual that walks in the door. And we know the reason we have to look at the plan comprehensively is because what happens? If you make a change in one area, inevitably it's gonna affect something else. And all of those things have to be coordinated together. And that's where the holistic retirement planner meets you right in the middle of those.

SPEAKER_02:

Yeah, it it's uh you you kind of picture, as you described, three circles or pies, and you know, one's money management, which is not just investing, like you said, it's uh six or eight different areas. Uh when to turn on Social Security, how to maximize your pension. If you have one, I could go on for a few minutes here. Then you move into tax planning, which probably might have the biggest effect on your money of all different things, whether it be investments or whatever, and then estate planning, but all these circles connect or overlap because like you said, you make a change in one, it's probably going to affect four, five, six other areas. Yeah. So it's not just as simple as saying, well, we're going to um turn on social security at age seventy or six to seven or whatever. What is the ripple effect of that?

SPEAKER_01:

Yeah. So absolutely. And some people think I mean we'll get into the individual three areas of the circles. Um, but I would do want to back up for a minute, too, because what makes a retirement planner different than just an investor or a financial advisor is the specifics of what they do. Um most of our lives and our careers, a few decades or more, maybe, who knows? Um, that's our accumulation phase. And really, we all have different needs, whether we have families or or you know, dependents, things like that. Maybe there's some other things that we have to consider. However, accumulation is pretty simple. Um maybe you have some retirement accounts, maybe an employer-sponsored plan like a 401k or something. The job is to grow. Grow your money, save, hopefully your company can match, hopefully the market is growing. Um long term it does.

SPEAKER_02:

Long term it does, absolutely.

SPEAKER_01:

So, long term, the whole job is to grow. Once you are in that retirement planning preliminary sphere, where now we're starting to look at the next phase of our life. All that money that we've accumulated is going from the accumulation phase to the deaccumulation phase, and now we have another 30 years or more, maybe, depending on when you retire. How does that money last the second half of our life? Our golden years hopefully keep them golden.

SPEAKER_02:

Right, right. One of our ill illustrations we used to use, don't use that much anymore, is uh is a mountain. And on the on the uh uh the the ascending side or the climbing side, there was like three decisions to make. You know, do I participate in my 401k and how much? Uh do I use a Roth or traditional? Do I need life insurance and do I need disability? I mean, that that's pretty simple, right? Um but the de-accumulation or the descending side of the mountain, once you've reached the peak of retirement, is uh, I mean, there's a dozen decisions to make or more. And uh, you know, the old story is um uh where do most accidents, when you're if you want to do use a mountain climbing theme, right? Most climbing accidents happen on the descent. Eighty percent of all accidents uh in mountain climbing happen under the descent, which uh, you know, you can talk about why and why not. That's not the important part. The important part is in the retirement planning, that's where the mistakes can be made, and you don't have time to correct most of them.

SPEAKER_01:

Yeah. I mean, timing the weather, finding the right trail, your visibility might be different. You're also tired by that time. You're tired. Your ration's gonna last. I mean, our clients are 75 are a little bit tired, right? Right. Well, some of them. Some of them outrun me, I'm sure. Exactly. But yeah, so that just wanted to speak a little bit to the main difference of uh of retirement planning versus just regular investment planning. Um so we did mention the three main areas of focus being money management, tax planning and strategy, and estate and legacy planning. And again, there are dozens of areas between those, and it's going to be different for everybody, which is what makes our job really fun and unique. Everyone brings a different story in. Um, and so you've got a whole brand new plan with each person who walks through the door. Uh but the first area, the first circle, uh money management. Two big areas, growth and income.

SPEAKER_02:

Right, and and and that's where we start when we work with our planning client in most cases is um income first. You know, our income plan, our our um uh the uh software we use, the the illustrations we use, it's first about what income do you need and where is it coming from. So we start with Social Security and how do we maximize that, and then how we fill gaps. So that's that's a major part, and and I've never had anybody walk into our office with an income plan. They might have kind of this illustration from some software that's 30 pages long that really is meaningless, it really is. Uh so we start with income and then but we still have to have some growth because that monthly income is not going to cover that new roof we need. And so we need some growth over here or that new boat we want, okay, or whatever it may be. And so we we start with that and uh and maximize that. So how do we maximize the income? You know, what tools do we use to do that, whether it be timing of Social Security, or what other tools that can produce income, that's their only job. Efficiency is what it's all about. And and then, like you said, on the growth side, you know, we may end up with six or eight different portfolios because again, I have people walk in, they're in their 60s, they have one big portfolio to grow. Yeah. And it's and that's a 40-60, which means 40 percent stocks, 60 percent bonds. That's from the 80s, right? So we divide it up. We want a we want a you know, a conservative one, a moderate one, an aggressive one, or whatever it may be, different flavors because different portfolios react in different markets. Right now, our gold and silver portfolios have doubled and tripled over the last 18 months, right? And so our clients are really liking us for those recommendations. But also our stock portfolios are doing very, very well as well. As the market changes, different portfolios do differently. So that growth and income is a very important part of that money management circle.

SPEAKER_01:

Yeah, absolutely. And I don't want to get too deep in the weeds. There have been other episodes in the past about the color of money, how different uh the term color of money, different types of money have different jobs, um, and we're being very broad in the sense of saying growth and income. But you know, you mentioned social security, and that's another point that we hear frequently. Um some clients of mine said, you know, we've our current financial advisor, you know, before they came to us, you know, we asked them when should we take social security? And he basically said, I I don't know, when do you want to take it? And you know, timing your social security can be crucial because, you know, barring the discussions about what's going on with government and everything else right now, that that's a whole nother ball game, but we're very confident that's still gonna exist. Um it might look a little bit different, but it's gonna be there. We know Social Security is gonna be this guaranteed check, and we also know that after a certain age it's growing, compounded, guaranteed 8% after your full retirement age. If you can hold off a little bit and have that guaranteed check and then maybe supplement with some of that other money, again, it's different for everybody, but an individual income plan written out.

SPEAKER_02:

What drives me crazy are the articles that come out, you know, you should always turn on social security at this age, or always turn it on this age, and and we we call that investor pornography, by the way. Um but because it is it's just junk. It's just it's meaningless. They're just trying to capture a big audience. Every situation, I've got some people it's best to turn it on at at at 68 and a half or whatever it may be. We have great software, but that's not the final piece of the puzzle. The final piece is our experience and their situation, and how do we marry all that together to make their Social Security as efficient as possible. Uh we even have the life expectancy discussion, right? What's your health? What's your family history? Because if you have a shorter family history or maybe you have some health issues, might want to turn it on earlier, regardless of the growth of it. So so many factors come into that. Um it's almost a planning session in itself.

SPEAKER_01:

Yeah, yeah. And I don't want to harp too much more on the money management since we have some other stuff to talk about. Right. But another really key factor on that income planning is knowing whether or not you have an income gap at some point in your retirement. Uh basically, you might have your guaranteed income in retirement, Social Security. Maybe you're blessed enough to have a pension in today's world, uh, maybe some other part-time income or whatever. But eventually that level of need, what's coming in and versus your level of need, with the cost of living increase, your level of need is eventually going to out for many people is going to outpace uh what's coming in the door. Uh we know cost of living adjustments on most pensions and Social Security even don't keep up with the actual rate of inflation.

SPEAKER_02:

Half the rate of inflation in almost every case. Many pensions don't go up at all. You know, so you've got that flat rate, and then you can just see the the income gap getting bigger and bigger every year. Imagine having to take$15,000,$20,000 out of the stock market to add to your income and the stock market's down all of a sudden 25%. The average um bear market is a negative 35%. That happens every five years on average. And so in retirement, you have to treat that money totally different than when you're working. Because when you're working, bear markets don't matter as much because you're putting money in at a cheaper rate. But when you're retired, you can't afford to lose half your money because you supplemented your income with a volatile stock market account. Right.

SPEAKER_01:

So income and growth, we don't want to outlive our money. Long life sounds good unless you outlived your money, right? Um the second circle would be tax planning. And we've said this before. Tax strategy is different from tax reporting, um, like a CPA would do. They reporting history, what happened this year. Um we're looking ahead, next 10, 20 plus years in retirement. How do we to how can we create a tax strategy to take more power out of the IRS's hands, not be as beholden to what's going on with our current tax rates and um have a little bit more tax-free income, hopefully, um stretch our money and the efficiency of our dollar a little bit more?

SPEAKER_02:

Well, I think the whole story starts with the fact that we have a sincere belief that taxes will be greater or higher in the future. Um, you know, if you run the numbers and and you just say I've got this much money in an IRA, and if I use it for a lifetime versus converting it to a Roth and paying taxes and use it for a lifetime, you come out even. But that's with no tax increases. So if you believe taxes are not going to go up in the future, don't worry about a whole lot of tax planning, okay? Um but again, we don't know. We have a firm belief taxes will be higher. 38 trillion plus in debt. Um we've got uh Social Security in trouble, we've got Medicare in trouble, and we have a political environment where to get elected, a lot of people are promising a whole lot of gifts, right, to get elected. And so a lot of money going out the door, and now we want to increase military spending as well. And so we firmly believe, and guess who pays most of the tax? The middle class. Um you've got this situation where most people we work with, we firmly believe will be in a higher tax bracket in retirement. And so I like it I like what you what you said as far as taking the power out of the IR uh the IRS. The IRS, when you take money out of a traditional IRA, 401 care, whatever, you're in paying taxes as you go all the way through the future. And so if the taxes go up by 10 percent, you have to take 10 percent more out. But if it's in some type of tax-free environment, taxes could be 90 percent like they were back in the late 40s, early 50s, that was the top bracket, 90 percent. Actually 94 percent, I believe, was the very top bracket. Then you'll run out of money. And you know, so so very important to uh at least diversify your tax situation.

SPEAKER_01:

And uh that's that's the most important term, I think, is tax diversification. Just like diversity of investments, you have to look at the tax picture as well. Yeah, we've got some non-qualified capital gains rate taxes. Most of our retirees have the majority of their money in tax-deferred accounts, 401k's IRAs, meaning that's the highest basically account that you can be taxed, the highest rate. When you yeah, it grows tax-free, and you get a deduction when you put it in, grows tax-free. But when you're in your retirement, when you take it out, you're taxed at whatever level that you were at. And again, we don't know what that those brackets are gonna be or what other taxes are gonna be increased. I mean, we've we see the cost of living is really difficult right now. Uh, food, energy right now is really high. Um you compound some of those things and then put it in a high tax environment, what's ending up in your pocket is pretty low. So, yes, if we can move more of that, have a strategy of moving more of our money to tax-free and we have some clients who are really aggressive on that, trying to get as much as possible. But we don't necessarily that that think that that's necessary for everybody, but a good diversity of tax qualified accounts.

SPEAKER_02:

Well, there's also the the the problem with required minimum distributions. Oh, I don't need my IRA mark, we're good with all this other money, and I got some Roth money. You're forced between the ages of 73 and 75 to take money out, and every year it's a greater amount. By the time you're in your 80s, you're having to take out 12, 15 percent of that IRA. Add that to your other income, now what's your tax bracket? Right. So it's a big, you know, it's a pretty big deal.

SPEAKER_01:

So well, and you know, this moves to a third circle, estate and legacy planning, and like I said earlier, these circles can affect each other. And what you do now for your tax planning can affect the next next generation. If your heirs inherit an IRA, they're gonna pay taxes on those withdrawals. If they inherit a Roth, which is tax-free when it comes out, it's gonna come out tax-free in their 10 years that they have to get it out. So estate and legacy planning is for you, end of life, control now, but also for the next generation, making sure that control is there, making sure things pass well. Um, the biggest thing to remember though is estate planning, documents are not an estate plan. Right. Everything has to work together, make sure that they coincide and exist in the same plan.

SPEAKER_02:

Yeah, you can have uh the the the greatest will, the most expensive will, you can have a beautiful living trust, uh, you can have all the right documents, but if they don't interconnect with your accounts, with the titling of your accounts, the beneficiaries of your accounts, and then re-reviewed every two or three years as well. You know, we in part of our annual review is every two or three years is to go back and say what changes have occurred, not only in our clients' lives, but in laws. Tax laws. Um I know in many states recently, over the last five years, uh health care directives have changed, uh, financial powers of attorney, a law uh I'm sorry, financial uh financial powers of attorney have changed. And so if your documents haven't been updated, there's a chance they may not work very well. And so it's just all those pieces coming together. And um again, if you just go to An attorney and say, I want a will, they'll give you a will. But maybe you need something else, or maybe you need help again, understanding the language. And by the way, if you leave it to this person here or this person, or leave everything to your spouse, you pass away, your spouse gets remarried, what happens to your kids? And then you know what the most important part is, right? Who takes care of the little dog when you pass away? By the way, I know pets are very important. So just messing around here as well. Should we mention the ma uh the website? Yeah. So um Masterplan Retire.com. Uh if you're watching us, you probably have it on the screen right now. Masterplan Retire.com is our website. If you're listening, visit that website for a couple of reasons. Number one, very quickly, is uh a treasure trove of information about retirement. Uh checklist, information, all of our episodes, whether it be podcast, YouTube, whatever, um, all of really good stuff. But uh most importantly, there's a little button that says schedule now. And you push that button and you actually uh are able to uh get on our calendar for a complimentary consultation. It's a chance, like Evan says, uh, 30 minutes of talking about your dreams, your goals, your fears, your worries. Um, what is my retirement picture going to look like? And then uh, if you want to take the next step, still complimentary, we'll run a series of seven, eight reports to see where you are. And maybe the fears are not necessary, or maybe there's some fears you should be having that you didn't realize, and we'll reveal those to you. So Masterplan Retire.com or 770-980-9262.

SPEAKER_01:

You know, we could fill your ears with horror stories and gotchas and all these other things. Um, but back to the comprehensive, holistic look, um something as simple as um ha like you said, you could have the the most expensive, well-written trust in the world. It could be thorough, it could be 300 pages long, you could, you know, paid$8,000. We're real proud of that thing. But um, if your accounts, your IRAs, um anything with a beneficiary on it, don't have that trust as a beneficiary, or not in the trust's name, depending on how you want to to uh to to create everything. Um it's kind of a waste. That beneficiary is gonna direct where that money goes. I mean, um, you know, there are people who forget to put things in the trust and or maybe don't remember, and and estate plan is beyond just a trust or a will. It's also just how are your accounts benefit beneficiaries on your accounts. There's so many things, of course, but um you gotta make sure it works together.

SPEAKER_02:

Well, do you want to also have some control over how the money is is is is sent out? What if you just left uh all of your kids, all of your money, and it's all in IRAs, or a lot of it's in IRAs, and they immediately take it all out and they're taxed at, you know, 40 percent or whatever, and that was not your desire, or maybe uh, you know, my child inherits all my money, and then their husband or wife comes up and says, Um, I'm not happy, I want a divorce, so half that's mine. Okay, and so how do you protect that kind of situation? Lawsuits, there's so many different areas you can talk about. We can have two shows on estate planning, of course, we've done it before. Um, but but again, making sure it's got to be part of the overall plan, every little nick and nook and cranny, right, has to be looked at to make sure that, because that's the one spot that'll get you. The one spot that's missed could very very well be the spot that messes you up.

SPEAKER_01:

Right. Um and closing out on estate planning, you know, we have some really great episodes where we actually are interviewing estate planning attorney, Sarah White, um, who we work with. She's an associate, works with our clients um all the time in our office. We also have an elder care attorney, David Hurley, uh, from Hurley Elder Care here in Georgia as well. We interviewed him about a six to a dozen episodes ago. Um, that's really important to check out a lot of really great information there. But wrapping up, we do just want to reiterate that there's a difference between financial planning and retirement specific planning. So make sure that your financial advisor is a retirement planner if you are in that sphere of life and you are entering that stage or even thinking about, okay, preliminary planning years, you need to have the broader picture, the broader conversation about how everything works together.

SPEAKER_02:

And if you work with somebody like us that is holistic, comprehensive, then these attorneys we mentioned and uh tax attorneys, the CPAs, they're all part of our team. So if you come through us, you kind of get the whole conglomerate of all these pieces because again, they've got to be communicating. So if you go and get an attorney to write your will and you go somewhere else to give do your planning, there could be a disconnect. But anyway, we are out of time. We're glad you joined us. So until we see each other again, remember, plan well and prosper.