We Get Mail: Q&A Episode 2

Retirement planning gets complicated quickly when you start asking the questions most people avoid. What happens if long-term care becomes necessary? Should you trust a pension payout or take control of the money yourself? And how much should Social Security really factor into your plan if the future feels uncertain?

In this Q&A episode of Retirement Roadmap with Master Plan Retirement Consultants — “We Get Mail” Part 2 — Evan and retirement planner Mark Fricks continue answering common retirement questions from clients and listeners, covering family financial habits, Medicare and Medicaid misconceptions, pension decisions, 401(k) strategy, and whether Social Security should still be part of the retirement equation.

We cover:

00:10 – We Get Mail Part 2 (Intro + how to submit questions)
02:30 – How do I get my children to be more financially minded and take retirement planning seriously?
07:17 – Won’t Medicare and Medicaid cover my medical bills late in life?
10:48 – Should I take my pension as a lump sum? Can’t I earn more if I invest the funds?
15:10 – My 401(k) does not offer a match. Is it even worth contributing?
18:41 – When planning for retirement, should I just assume Social Security is going away and leave it out of the equation?
23:54 – Closing thoughts

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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

Welcome And Helpful Resources

SPEAKER_00 0:10

Hey folks, welcome back. Thank you for joining us. Welcome to Master Plan Retirement Consultants Retirement Roadmap. My name is Evan. With me as always, retirement planner Mark Fricks. And today is QA part two, or as you said in our last episode, We Get Mail Part 2. Part due. Part due, I'm sorry. We're gonna have to take that again. Yeah, so that's this is really an opportunity to walk through some questions that we get pretty regularly, that we see quite a bit, or misconceptions even. And as I mentioned in the previous episode, if you have a specific question about retirement, uh we would love to answer that or feature that in a future episode. You can reach out to us at info at masterplanretire.com. Shoot us a quick email there, or just go to our website, masterplanretire.com. Um there you can find links to reach out to us for contact. You can also schedule your complimentary consultation to discuss your own retirement. There's a ton of features on the website, including links to different episodes like the one today, including our classes. We've got our seminar and webinar schedule on there as well and multiple other retirement resources. So check that out, masterplanretire.com. Mark, before we jump into part duh, is there anything else we can do for you for you or anything we'd like to talk about?

SPEAKER_01 1:32

I tell you what, our tax class is one of the most popular classes we teach. And so keep an eye on, go to go to the website, bookmark it, and go to uh events. And um about a month ahead of time that we'll be teaching a class, it will pop up. Sometimes it's a dinner class, sometimes it's an educational class with uh no food, but more content. So it depends on what you're hungry for, right? Yeah. Uh sometimes it's on Zoom. Uh so but just it's it's our favorite, most uh attended class. Social Security is a great class, estate planning is a good one, uh, federal employee benefits, a very good one. It's uh uh it's a complicated uh area, and so we are certified in that area as well. Uh but yeah, check out the events, uh it's a great place to get educated and build that foundation, and then when you come in to get your specific help, you already have a nice layer of understanding and knowledge.

Getting Kids To Care About Money

SPEAKER_00 2:28

Absolutely. Question number one. We actually covered this in a previous episode, uh, but it's a great concept. How do I get my children to be more financially minded and to take retirement planning seriously?

SPEAKER_01 2:41

Well, you know, that's a good question. Uh we have a lot of clients that want to bring their kids and grandkids in. We do take a couple of them on as clients. Uh I don't think you can make anybody, especially somebody younger, do anything.

SPEAKER_00 2:53

Yeah.

SPEAKER_01 2:54

Um you can encourage, uh, sometimes we'll send home a book with them that's uh a good simple, hey, how should you plan for retirement for somebody your age? I think that's a great book. We're glad to send it to you if you if you contact us. Um I think it's called the New The New Age of Retirement or the New Era of Retirement. New rules, I think. New rules of retirement, yeah. Um so but it it's funny, you'll have a you'll have a client that says, I want all three of my kids, kids being 20 or even 30 or 40 years old, by the way, here. Um say, yeah, I want them all to come see you, and then after six months, maybe one. Okay. And so part of it is mentality, and and you know, the bad part is is in in 20 years when they're 50 or 60, they'll wish they had. But I don't know uh how you can you really can't make I'll tell you what's what might be a good idea would be with our clients, meaning that we will have a family meeting. And so you bring in not only the client couple, but uh you know, the kids, some of them are gonna be trustees and executors of the estate, and so we share with the whole family only what the couple gave us permission to share, but I think that might get them more interested not only in what's happening with their parents and how will that transfer to the next generation, but also maybe pique their interest from a standpoint of my parents did a good job with this, maybe I should start thinking about it. So that would be, I think, one idea that I would have. Do you have any ideas?

SPEAKER_00 4:18

No, that's uh similar. I uh on that similar train of thought, um, it can be one, yes, it can be really difficult as a child to listen to what your parents are telling you to do. Like, you know, we know we we know that that's uh some of us even have aversions immediately. I'm not talking about you, I'm just saying. Um, if if it's hard to listen to your parents when they're telling you you should do something sometimes. I understand that. Um and it's can be really hard, hey son or daughter, you should really start putting money away. Well that there's there's that's just an order. There's no background or education onto why that needs to take place. So I think the first step is um understanding of the environment to where that is needed. And I think a great way to approach that is a family meeting, like you said, that maybe is for the parents, saying, hey, this is for us to show you where we are, what our plan is in retirement, what will be happening, what the estate plan is, how to go through these things, and why. And I think that, like you said, Mark, that's opening the door to understanding the environment first of why there is a need for planning and for saving and for opening a Roth or whatever that you you want your kids to become more minded of that. Um the action is only going to take place after they understand the need. And then that inciting incident, then they'll say, yes, now I see that there's a problem on the horizon, now I can understand the environment, now I will choose to act and be more proactive in my own. And I but I think that's a great idea. I think if you can bring them into your own first and not make it about your kids having to do something or being behind or anything else, but say, this is what we're doing, this is how things are working, these are what make these wheels turn and why we're doing it, um, then that will help them to start reflecting on theirs. And it's the first step in education, I think.

SPEAKER_01 6:09

Well, it's a and and a lot of times we'll do this over the holidays, like because all the kids I again, we're we may be talking about uh kids that are in their forties and fifties and and maybe live in another state and have their own kids and they're busy, you know. They got but finally they make it to mom and dad's for Christmas. Well maybe they come in a day or two early and get it, you know, because everybody's going to be together perhaps, you know, or maybe some of them will be together. So that could be a good time to do that, maybe between Christmas and New Year's. We are open. Um, a little bit lighter staff, but are open that week. And yeah. And so something like that. We kind of have um, and even if it's not with us or with an advisor, maybe just on vacation with all your kids, have one night where you sit out and say, we want to share some things with you and and have something a little bit less formal.

SPEAKER_00 6:52

Make it fun family pizza night and movie afterwards or something, make it an event that's not just, oh, we have to get serious.

SPEAKER_01 6:58

Right.

SPEAKER_00 6:59

This is a gathering for us to spend time as a family, but while we're here, let's discuss this.

SPEAKER_01 7:03

Or you could play a Monopoly or Life.

SPEAKER_00 7:05

That's Yeah, life.

SPEAKER_01 7:08

Teach.

SPEAKER_00 7:11

Hopefully the games where everyone's a winner.

SPEAKER_01 7:13

Yeah. Sure. That's the way it works.

Medicare Medicaid And Long-Term Care

SPEAKER_00 7:16

Um the next question. Won't Medicare and Medicaid cover my medical bills late in life?

SPEAKER_01 7:24

Um depends on what bills you're talking about. So Medicare, so once you reach 65, of course, you're eligible for Medicare. Medicare part A, you have paid for your whole life, uh, if you worked uh and paid into FICA. Uh so Medica Medicare Part A is no cost in retirement. In most cases, uh it covers facility, it covers hospital and hospice. Um part B, you pay for it during retirement, uh, and the price varies based on your income. Uh it covers doctor visits, x-rays, all that ancillary stuff that goes on. Uh, and then there's various other things. You can get a supplement, you have to get part D for drugs, so forth, and so on. So it does cover a good bit. The better the supplement you get, the more it covers. If you go the advantage route, you have a copay. Um, but what it does not cover is extended long-term care. Okay, so there is a misconception out there that, hey, I'm I'm gonna be on Medicare, my long-term care be taken care of. Your first 30 days is mostly covered, your next 30 days are partially covered for skilled nursing, which means I broke a hip, I've got to go to a home or something like that. It requires a hospital stay first, and then you go straight to the skilled nursing facility. But uh home health care, um, uh assisted living, memory care, or long-term, long-term care is not covered. Now, if you spend down all of your money, you could qualify for Medicaid, which is a state-sponsored, partially funded by the federal government, but also funded by the state. But it basically means you're broke. And so you go to a Medicaid uh type nursing home. Um, sometimes they may not be quite as nice, sometimes they are. I'm not cutting any of these down. You just have a uh less of a selection of beds and rooms and things of that nature. Uh, so it is not the most desirable way. You do get care, that's the good part. There is a shortage of those beds. Many times there's a waiting period. Um three, six, three months, six months, depends on where you live. So um it's nice to have your own plan. And if you've done a good job over the years of accruing money, we can squeeze more out of that money for long-term care that hopefully will take care of one or both folks. I don't know what the latest numbers are, but I think if a couple reaches 65, there's like a 70% chance one of them will need some form of long-term care. That may be off a little bit, but it's pretty darn close. So plan on the probability of that happening, how are you gonna handle it?

Pension Lump Sum Or Monthly Check

SPEAKER_00 9:57

Yeah. Yeah, and you know, we mentioned this in the previous Q ⁇ A as well, with the long-term care crisis on the horizon of so many um so many of the boomer generation aging into that bracket, and our infrastructure for long-term care facilities, nursing homes, things like that is far behind. And even Essentially the personnel. It's so much more important to be able to choose where you want to go rather than just I don't really have the opportunity or the finances to be able to choose where I'm going to stay or my loved one is going to stay. Um so it's absolutely needs to be part of your strategy. Um yes, we are thankful that these government benefits exist, but they are not to be relied on solely and they're a safety net, 100%. Perfect. Uh sh okay, here's a great one. Should I take my pension as a lump sum? Can't I earn more if I invest in the funds?

SPEAKER_01 10:56

Yeah, so this is uh individual question. Everybody's different, every situation is different, but what we see so basically a pension um is of course what's called a uh defined benefit plan. In other words, we we are defining how much you're going to get in retirement. Um and that definition is based on how many years you work, how much money you make, all that kind of good stuff. And then when you retire, you get a guaranteed check. That's a great thing. Most of those are gone. Federal government, state governments still have some. Large corporations still have them. Some some corporations still have them. But in many cases, not government, but many, well, some government, uh, but a lot of the private pensions will give you an option. They'll say, okay, we'll either give you a check as long as you live. We'll give you a little bit less of a check if you want your spouse to keep getting some of it if you pass away. Um, or you can roll over the lump sum, which may be$100,000,$200,000,$300,000 into your own IRA, no taxes on that rollover, and create your own income stream. And what we see in most cases is that's a better option because now you control the money. If it's uh an annuity pension that pays out a check, um it has to you have to turn it on at a certain time, and like I said, there are restrictions on what happens when you pass away. If you've got if it's in your own IRA, whether you purchase an annuity with it, whether you put it into an investment, you totally control it. If you don't use it up, it goes to spouse, it goes to grandchildren, it goes to children. So it's much more flexible, and if you do give it a couple of years to grow, and you don't need it for a couple of years, it can be a bigger payment than you were going to get in the pension amount. So much more flexible uh to do that. And like I said, probably nine out of ten times we will let the client control it by getting into their own IRA. We call it creating a private pension plan.

SPEAKER_00 12:48

Yeah, and that's one of the more powerful reasons that we would roll it. Um one, let's keep in mind we're not withdrawing our uh we're not taking it all and withdrawing that um pension lump sum. We are rolling it to an IRA. Um so then it is under the IRA rules, IRS rules. So uh yes, the control is huge. The fact that you can take what was a pension just for you and now convert it to something that could be a joint income stream and even last after you pass and your spouse can get something the full amount as well. Um it can also be inherited uh if there's anything left or if you both pass before. Um there's just so much more control. There's uh you know, pensions often will have a pretty low cost of living increase every year. If they have one at all. If they have one at all. And so there are more tools out there now that uh can create income streams that will can grow and compete with inflation, if not outpace inflation. Um some of the long-term care things we talked about, you can add some long-term care riders to these. There's so many options. Um that's not to say that you should always roll it, but you need to look at your needs. Uh, you need to look at the needs of those around you, your spouse, your family, things like that. Um because there's the considerations against it would be, okay, if you want to roll it into, let's say, an annuity, typically those annuities, to really get the most out of them the way we're talking, they need to mature a little bit. So there's going to be a few years before you're gonna be able to turn that on, at least. So do you have a strategy to fill that income gap before you turn on the annuity? So just like everything else we talk about, uh it depends, right? But uh everything has caveats, everything needs to work together strategically. Um so hopefully that gives you more insight into not being able to give you a yes or no answer.

SPEAKER_01 14:37

I think uh just like it's flexibility is the key word. And just like when you take a 401k, uh a big 401k and build it into six or eight different accounts, each with a job, that gives you more flexibility and more efficiency. Same thing with a pension. If you roll it over to your IRA or IRAs, maybe some of it goes into an annuity for income, but you didn't need as much as you thought, rest of it goes into growth or whatever, like you, you know, like we were talking about. So just flexibility and efficiency are probably the two key words.

401k Without Match Still Worth It

SPEAKER_00 15:09

Absolutely. Uh, next question. My 401k does not offer a match. Is it even worth contributing?

SPEAKER_01 15:17

Yeah, so what I would do if I had a 401k that did not offer a match, I would start by maximizing my own personal Roth or IRA. And this year's limit, if you're over age 50, I think is 8,600 a year. Uh your spouse can also do one whether they work or not. As long as one of you has earned income of that amount, 8,600 um or more, then you you can actually do two of them, 8,600 each. You the reason I would do that, the the main uh reward for 401k is of course that free money. Hey, you put in 5%, we'll put in 5%. You definitely want to put in 5%, okay? But anything above that, or if they don't offer a match at all, you get more flexibility, a higher level uh level of uh investment strategies, a lot more choices, a lot more activity that we can do more trading in. You're very limited at 401k. And 401ks are not cheap. Yeah, they are filled with mutual funds that each have a built-in fee that you don't see. And that's between a half percent up to almost two percent that will suck away some of your you know um uh rate of return as well. And so um I would I would first uh like I said max uh uh max out your own for uh IRA or Roth. If you are able to put away more than that, then you can go back over to the 401k and start putting money in that as well. So um that's kind of a big deal. And again, if they match 5%, go to 5%, and then if you can put in 5% more, put into a personal IRA or Roth as well.

SPEAKER_00 16:51

Yeah, that's a great strategy. If they don't offer any matching, then yeah, open up your own Roth or IRA. Um but if if they offer match, get that free money. That's part of your salary package. I mean, they include it in that. Make sure you're getting that free money. Um, and then anything above that, a good strategy, open up your Roth over, you know, outside of there and and find a solid index fund to follow or talk to an advisor to give you some uh that's what I should be saying. Talk to an advisor and to to help you. Holistic advisor.

SPEAKER_01 17:18

Yes, indeed. Uh real quickly, uh I do want to mention masterplanretire.com. You'll see it here on the screen if you're watching via video or YouTube, um, but it's masterplanretire.com. Why is that important? It is a treasure trove of retirement tools. There are checklists, there is educational classes, there are um there's a little button, I call it the magic button, schedule a meeting. You push that button and our calendar pops open and you will see openings. Why would you want to do that? It is a uh two-part meeting complimentary where we will, first of all, have just some casual discussion with you. Tell me about your dreams, your goals, your fears, uh, what is it in your life, in your retirement, in your future that could derail you, things of that nature. Then we will run a series of six to nine reports to really see where you're at. Maybe you should not be afraid of this particular aspect of your retirement. But hey, did you think about this part? This one would really trip you up, right? The effect of higher taxes on retirement is huge. That's a good report. The effect of bear markets on retirement is huge. That's a big report. So if you know what the problem is, let's deal with it. Let's have a strategy for that. So that button will take you to our calendar or 770-980-9262. Uh one more time, masterplanretire.com.

Should You Count On Social Security

SPEAKER_00 18:41

Next question. When planning for retirement, should I just assume Social Security is going away and leave it out of the equation?

SPEAKER_01 18:49

Uh we've actually had a couple of clients that say just don't count Social Security. Uh, and that is fine. I mean that that's uh if you can, yeah. But um our sincere belief is Social Security will be around for generations to come. It could look different, it could smell different, it could be a different amount. Uh there's been seven or eight major changes in Social Security since it's been around since the late 30s. And so it's always evolving and changing. Right now, if they don't do anything to fix it, it's not going away. Your payment will drop by around 26%. In the 2030s. In the 2030s. Okay, so even then it's not going away. It's just we're gonna lose one of the funding mechanisms, which is the big trust fund or savings account that helps fund it. It's being depleted. Uh so we'll still have two of the funding areas. We've talked about it before. So I would still include it, even if you wanted to include 75% of it, as opposed to 100% of it, you could do that. Um, but I think they're gonna fix it. There's too many people that that will be a it's not just retirees, it's not just every American over the age of 62 to 70, but it's people on Social Security disability. Uh, you know, it's it's special needs adults that are on it, even even kids that have parents that are older or are getting a little bit of social security to help them out. So this is not just a this many people, this is a this many people. And if you're listening on radio, my my arms got bigger, by the way. Uh so it's um uh yeah, we can plan with or without it, uh, but I think you need to plan it being there if we want to reduce the amount, we can.

SPEAKER_00 20:25

Yeah, I I mostly agree with that uh for today's retirees. I think if you are retiring and and you're of retirement generation now, then yes, if there's any change to it, it might be twenty percent less, right, if they do nothing. But for my generation, 30 years from now, um you have time to plan without it. And there are too many things going on politically, economically, to guarantee anything 30 years away. So I think it depends on your timeline. And I think I really do. And I think right now, if nothing changes, then it will go away in 30 years. My personal belief, and without getting into digging into the politics and things like that, if there aren't enough changes correctly, or if things continue to go a certain way, then yes, it it's not looking great for a lot of our benefits in 30 years. I do have hope that things will be that will will be improved as we have to find answers and the more immediate one in the 2030s, making sure that we figure out the trust fund problem. Um, and that's gonna be incremental. Um but if you have a longer time horizon until your retirement, I do think it would behoove you to take a little bit more responsibility and to maximize your savings um in order to plan for the unknown. And tell you what, even if you do that and we still have social security, guess what? You're in a better place than you would have been otherwise.

Budgeting Habits That Boost Savings

SPEAKER_01 21:46

So much of our population, especially um I won't I won't call out any generation, every generation, uh we've become a a society of instant gratification. Put off getting in that new car. I mean, if if you buy a car. That that will last 15 years. Keep it 15 years. Don't trade every three years. Put that money away. I mean, make some sacrifices, and these are not intense sacrifices. Just until last year I was driving a 11-year-old car. And until all the lights started coming on on the dashboard, I drove it because why I I didn't have a car payment. You know, so I spent 10 years without a car payment. So uh, and and hopefully you're savings for the next car you pay cash for. Don't buy new. I mean, just all these little things. Don't go to Starbucks three times a day. Go make make your own pot of coffee. It's it's cents on the dollar. That'll taste better. And probably yeah, it definitely tastes better. I'm just saying. Hey, enjoy life, but also take a look at what you're really spending. Now, we're talking about kind of an ugly little subject here. It's called budgeting, okay? Uh so don't want to get too far into that, right? But look at what you're spending. Most of us don't even know what we're spending. We don't know what we're spending it on. All of a sudden we're just short of money at the end of the month. Well, I can't save money. Yeah. Take a second. Maybe that next bigger house, maybe it's not needed. Maybe maybe you put off buying the next house until interest rates fall back down. Just don't feel like everything's gonna be done because I want it right now.

SPEAKER_00 23:13

Yeah. Yeah, it's hard. And and uh actually reach out to us. We have some budgeting um spreadsheets that are really helpful for organizing yourself. But it is hard, and it takes uh several months to get things rolling to where you want them to be. It's gonna be incremental adjustments like anything else, creating new habits, things like that. But first finding those ex places of excess where you can cut back or maybe you're not uh tight enough on, and just start a little bit, a little bit at a time, and you'll start to get that. And when you see the results over time, it'll inspire you to pursue it even more.

SPEAKER_01 23:46

Yeah, yeah. Uh pay yourself first.

SPEAKER_00 23:48

Yeah, 100%.

Final Thoughts And Sign Off

SPEAKER_01 23:50

Which that's what's great about 401k is is it comes out automatically before you see it. So that's a positive. So great show. Um good topic. Um you can find part one before part two. Today was part two of uh we get mailed or we we get questions. But um uh again, masterplanretired.com is our website. Hope to see you uh whether it be in an appointment or at a class or whatever. But until we do see each other again, plan well and prosper. Take care.