EP34: GulfCoast Financial - Time Tested Strategies for a "New Normal"
Peter: Welcome into GulfCoast Financial with the Founder and CEO of GulfCoast Financial Services and our resource for a commonsense approach to planning for your financial and retirement future. He is John Kuykendall. John, welcome back in.
John: Thank you, Peter, it's great to be here.
Peter: It's always a pleasure, John. GulfCoast Financial Services voted Best of the Best in Financial Services by the Lake City Reporter with an office of convenience down in Gainesville. John, I have to imagine that for the most part, right now, you're meeting folks virtually, over the internet, or just that old fashioned phone call.
John: You're right, Peter. Things have changed a lot. The old face-to-face and the handshake before and after the meeting have gone away to the virtual. We're doing a lot of Zoom meetings with our clients, meeting with them. Then also doing some Facetime and then calling them on the phone and talking to them. It's a new norm for us, and certainly different than anything I've ever been involved in.
Peter: The new normal, John, was a buzz word I heard thrown around after the 2008 financial crisis. Pundits, and political figures, and politicians were saying, hey, we've entered into a new normal. Today appears like we're entering into another new normal. The baby boomer generation who's in the midst of entering into their own new normal, the peak of their retirement transition, they've probably seen more new normals than just about any other generation.
John: I'm one of those. I'm on the front end of it. I've got to tell you. I was just thinking when you were saying that. I think in my lifetime we've had more new norms than any time in history. I really like history. The 9/11, the 2001 when we changed the airports, the way we flew, the way we got ready to fly changed the flight industry and travel, immensely from what it used to be.
Even in 2008 with the real estate boom, it's taking a long time to overcome that. Even though the stock market's had a great run, real estate and other things have been slower coming back. Now, yeah, we're in the new norm of social distancing. I was listening to a YouTube thing this morning from Bill Gates, a presentation that he made on CNN. He was saying that the social distancing will go on way past this COVID-19.
Peter: Yeah, I tend to agree. I think even after they wave the all's clear flag, the people are still going to be hesitant. It's not like this virus will have gone away, it's just they're trying to get everybody back into some type of regular habit and routine, and productivity, I think the big one.
John: I'm more concerned – I am concerned, of course, about people's health and their safety. I'm also concerned about business and our business environment, and especially the small shops, the mom and pop shops that have been around for a long time, how they're going to be able to come back from this and operate even halfway like they used to. It's certainly been a hair-raising experience, I guess I should say, for us who are businesspeople.
I'm thinking about the economy and what drives the economy. I'm thinking about – being a small businessman, I know how much it costs for me for my insurance, my overhead, and my taxes. Then I'm thinking, if I didn't – if I was dependent on the customer coming in day, after day, after day for me to survive, there's no way that we could have done that.
Peter: There are some attempts at help and assistance out there, John. I know that you have a quick list – quick hit items that people are needing to be aware of. The tax filing deadline being extended, the deadline for making 2019 contributions to our qualified accounts, the waiving of the requirement for minimum distributions from those accounts.
All of these things, stimulus checks, of course, obviously, but student loan augmentation and the ability to withdraw money from our retirement accounts, penalty free, up to $100,000. All of these things aimed at helping us float through this time and maybe assist to keep more people off the unemployment lines. All of these, I think, also probably have some pros and cons and need to be carefully considered depending on our situation.
John: That's right. I mean, the thing is is that a lot of people, even though we've eliminated the required minimum distribution for 2020, a lot of people live on those. They're going to have to draw them anyway. There are certain segments of my clients that don't need them and have been just reinvesting the money back. What that does is it gives us an ideal time to think that, well, if my RMD was $30,000, and I don't have to take it this year, but I included that in my taxes last year, then maybe I should do a Roth conversion.
Go ahead and take that $30,000 out and move it into a Roth. Pay the taxes on it now, so that it will grow tax free in the future. That's something that I don't want a lot of people – I want people out there to understand and not miss that opportunity. Even though we're not required to take it, it may be a good time to think about putting that money in a Roth.
Peter: Being strategic and identifying those opportunities, and that's really what I think a lot of your time here over the past couple months, John, has been about, helping your current clients, and helping investors with questions or concerns. Identify where there are still opportunities to do better to improve our outlook and our progress.
John: That's right, Peter. That's what we try to do here. We work on that income plan. We work on that tax plan. We work on Social Security maximization. We try to do everything that we can for our client to make sure that we are able to help them have the best retirement. We maximize everything that we can.
You talked about the fact that we can take money out of our IRA now, without the 10% penalty. We have three years to pay the taxes on that. That also may be a great time to go ahead and move up to 100,000 out of your deferred account, put it into a Roth, and then pay those taxes over three years. Kind of like something the government gave us eight, or nine, ten years ago where we could defer the taxes and not have to pay them all up front. Certainly, a lot of people are going to need to pull that money out and pay the taxes on it because they don't have a job, or they've been laid off, and they need the money to live on.
I was just reading the other day about the fact that the number of people that could survive six months without a paycheck, it's astronomically small compared by population. People weren't prepared. People spend to the limit in this country.
Peter: If we have stable income still, are lucky enough to weather this, or we don't have stable income, and we've been laid off or furloughed. John, I would assume that your recommendations on what to do in those situations and then what to do with particular accounts that we may or may not have access to is probably going to be different depending on where somebody is in the consistency and reliability of their paycheck and their income first and foremost.
John: Yeah, everybody's plan's different. Everybody's needs are different. We have to look at it individually and then decide what's best for them. We definitely will be looking at doing a lot of Roth conversions this year. We started looking at it the end of last year. I just think that now is an excellent time to get as much money into a Roth as we can out of the IRAs, or the roll-over IRAs, 401Ks.
Even though we've got the stimulus plan, and now the Federal Reserve's come out with another 2.3 trillion on top of that, somebody's got to pay for that. One of the ways the government can pay for that is raise taxes. I've got to believe even more than I did a month ago, two months ago, that today is the lowest tax bracket you'll ever have.
Peter: Again, if you would like help and assistance. If you would like to get a qualified professional's perspective in spotting and identifying those opportunities, pick up the phone, give a call, 386-755-9018, 386-755-9018. Even if you are facing some difficult decisions here, when and how to access some of those retirement accounts, or if you were planning on retiring and want to make sure that you still have enough and are still in a position to do so.
Pick up the phone. Give John Kuykendall and his team there at GulfCoast Financial Services a call. They're happy to talk that over with you, help you analyze, review, evaluate the plan, the assets, the investments, and structure of the plan to make sure that you are making forward financial progress, 386-755-9018, that's 386-755-9018.
John, when we look at this market performance, I mean, we took a big loss. We've come back up significantly since then. Losses tend to count more than gains. market volatility is something that's going to affect us. Then if we add on top of that and compound it with the fact that we are making withdrawals during volatile or down markets, that really puts a lot of additional pressure and stress on the portfolio, doesn't it?
John: Yeah, it really does, Peter. I mean, we've talked about that sequence of return here several times on the show. It really does. People think that if I lose 10%, I just make 10%, and I'm back to even. That's not true as we know. The more we lose, the more we have to make to get back to even. If the market was off – was a little loss, no more than 37%, then we've got to be back over 50%. We've got to make 50% before we get back to even. Then we can start making money.
Now, if we're pulling money out for living because we have to pull money out of our accounts, then that just makes it that much harder to get back to even. Our accounts are going to go down faster. People say that we're reaching the Japanese market, which has been stagnant for a long time because their baby boomers, they maxed out. Then for a long period of time they did nothing, actually. The market started going down after the peak.
We have to be careful of that. We're in that era. The baby boomer's population is certainly peaking. It's coming in. Harry Dent talked about this in the 80s and 90s. Now, we're there. If we look at the Japanese market, it certainly shows that after the baby boomer's peaked, the market went off and has been off for a number of years now.
Peter: Yeah, 30 years, since 1990, the peak of their baby boom generation. Since that time, it really has never recovered. Their curve leading up to that point looked very similar to what our market did. Around that same time, they started adding a lot of money to the economy, and inflating things, and then the peak of the baby boom generation, it sounds eerily similar John. Are you worried about the US seeing the same trend of 30 years of down or sideways markets?
John: I'm certainly worried. There's been a lot of talk, even before we had this virus, about our market slowing down and the growth not being what it was. Still having growth, but just not the same kind of growth. I think that could be where we are. I hope it's not. That trend's not great, especially with the United States, and the way we live, and the way people live.
One thing it's really showed us, I've talked to a lot of people, friends to make sure they were okay across the state. I think I've put 80 miles on my car in three weeks. We're not driving like we used to because we don't have any place to go. We're not spending money. We're staying home. We're finding things to do at the house that we've been putting off for years, fix this, the to-do list that you always put off on.
Our lifestyle has changed. Hopefully, maybe some of that consumption that we're known so great for will slow down, and we'll be able to keep the economy going. We need to be ready for that. The economy may not be as robust during your retirement as you thought it was going to be. We can't count on that. We've got to work up a plan that gives us predictable, sustainable income based upon realistic expectations. Then if we get more, that's great. If we don't, at least we're able to have a good lifestyle during retirement.
Peter: John, the fact that that's being discussed, the fact that that's a possibility to consider, does that not really emphasize the fact that now is the time to get that retirement income plan put in place?
John: Yeah, it's past time. If you're within 10 years of retirement, you should have already had a plan. If you're in retirement, you still need a plan. As we've said on this show before, that plan needs to be al living, breathing, document that you live by that you change as things change because things do change. You need to understand where you are. You can't go on a trip without a road map. At least know where the gas stations are and where you're going to sleep a little bit. You can't do that. You've got to plan.
Peter: You wouldn't build a house without a blueprint.
John: No, that's right, you wouldn't build that. You have a blueprint. The government will require you one. I don't know why the government doesn't require us to have a retirement plan. We need a plan to make sure that we're on track and that we know where we're going. We cannot get into retirement thinking that I'm going to be able to spend as much as I always spent, and that the market's going to make it up for me.
I talked to a lady this morning, a new client of ours we picked up a couple of weeks ago. We were explaining that to her that working up her income plan, what we wanted to do was make sure that she had a sustainable income that came in every month, Social Securities, pensions, annuity checks, whatever was going to come in every month. Then the market would be our growth bucket that would fund the new car, the trip, the things that we wanted, but we didn't need to pay for living expenses, the house, the rent, the food, the electricity to keep us going.
I explained to her, I said, what happens – if your husband dies, we're going to lose one Social Security check. You get the biggest one, but you're going to lose one. How many people think about that? Very few people think that my income could be cut into a third when my – if something happens to my spouse.
Peter: A half, yeah, a third to a half reduction, and then compound that with even before all of this, John. They were telling us in 2033 that Social Security was probably going to run into a little bit of trouble and bumpy road there. I mean, if we've got one source that is a major part of retirement that they're already telling us is going to have to face some changes, and we know if a married couple, one passes away, we've got a reduction, we've got to plan around that for a sustainable, secure retirement.
John: We've got to be able to plan for long-term care, which is part of that whole package. After we got through talking to her, Peter, it was really neat. We talked to her. What we were doing was restructuring some of her products so that we could give her the plan that she wanted. She said, "I like the idea of having that monthly check and having that doubler. You're going to give me a double a check for five years if I go into a nursing home, or I need in-home healthcare. Can I put some more money into it? I'd like to make sure I have a little bigger check. I mean, that's when they know they've got it.
Peter: Sure, absolutely, well, if you'd like to have a plan, ladies and gentlemen. If you'd like to have that confidence that you understand how you will generate a consistent, reliable income into the future; how you will replace income streams that may disappear or be adjusted; how you can have increasing income to help you address inflation; and how you can have additional income to help protect against those potential long-term care medical expenses, that's all part of the lifetime retirement income plan that we’ve talked about here on the program.
There are a few different types of planning that John Kuykendall and his team can help you with, a market recovery action plan, a principal protection action plan, that lifetime retirement income plan, and just an overall review and analysis, a forensic financial look at your situation, a retirement planning strategy session. If you'd like to take advantage of any of those, they do not charge for their time for that initial review and evaluation. It's absolutely free of charge. You're willing to invest a little of your time. They are willing to donate some of theirs.
They can meet with you, virtually, over the great technology options that are available or just start with a phone call. As we get through this, probably an in-person meeting there as well. Get that conversation started. Understand where you're at, what your options are for moving forward. It can be so beneficial in helping you make well thought through, informed decisions, and feeling more confident about your financial future.
Give them a call to get started, 386-755-9018, that's 386-755-9018, 386-755-9018. John, I know a lot of people have, through the years, benefitted from your services and from that review and strategy session. Just because we're facing market volatility now doesn't mean that that's going to stop. In fact, now is the time for that to continue or even become more people taking these matters and their financial future seriously.
John: That's right, Peter, I mean, we've tried to help as many people as we can. We'd love to help anybody out that needs any help. As you said, there's no cost. It's a no obligation plan. Everyone needs to have some kind of planning done. Don't go on this retirement road trip without a plan. It won't work.
Peter: Pick up the phone. Give GulfCoast Financial Services a call, 386-755-9018, 386-755-9018. John, we always appreciate your time. Thank you for providing us the information, the guidance that you do.
John: Thank you, Peter. It's great being here. Have a good week.