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EP4: The BIG Questions

February 04, 2020

GulfCoast Financial Podcast: EP4: The BIG Questions

Peter Richon:              Welcome into GulfCoast Financial with John Kuykendall, your resource for a common-sense approach to planning for a more stable, secure, and confident financial future. Along with us providing the information as always is veteran of the financial and retirement planning industry, John Kuykendall, President and Founder of GulfCoast Financial. John, welcome back into the program.


John Kuykendall:        Thank you, Peter. Glad to be here today.


Peter Richon:              It’s always a pleasure having you on the program, John. I enjoy the time we spend together where you provide the perspective and the guidance that savers and investors today need in order to achieve what we envision retirement to be about. I believe that you would probably agree there’s some big questions and big challenges that we all face as we strive for a more stable, secure financial future.


John Kuykendall:        Oh, yeah. There are a lot more problems today than there ever has been before. It’s just people today retiring, they need to make sure that they’re ready to retire before they even – they should have thought about it 10 or 15 years ago, but before they do it, we definitely need to do some planning.


Peter Richon:              Certainly, never too early to plan, but also never too late. Where ever we are today, that’s the best time to start and begin or to evaluate and see if we need to be doing things different in order to make more, and further, and better our progress. If you’ve got any questions or concerns about where to start, how to make that progress, or how each and every one of your dollars in your accounts is going to be properly utilized for a comprehensive plan for your future, pick up the phone and give GulfCoast Financial a call at 386-755-9018. That’s 386-755-9018.


                                    Aside from being our resource for this information here on the program, John does extend the opportunity and the offer for radio show listeners to come in for a personal review and evaluation, a meet and greet where he’ll help you look over your accounts and your assets and make sure that they are properly positioned. Again, that review, very valuable opportunity. Similar reviews could easily be valued at over $1,000 to $1,200, but John makes that time available for radio show listeners on a completely complimentary free of charge basis. 386-755-9018 is the number for you to call to take advantage, 386-755-9018. You might want to write that down.


                                    On today’s program, we are going to be covering some of the big questions. In our progress and process, we run into many. Sometimes how we answer those will affect our path in life and our financial wellbeing. I imagine, John, one of the biggest questions you probably hear coming in or that savers and investors are seeking an answer to is, am I ready to retire?


John Kuykendall:        Yeah, everybody has a question. There’s a large segment of the population now that is very concerned about retirement and how much they’ve set up. With all the Baby Boomers turning 65 every year, that is a question we hear over and over again.


With a prospect last week we’ve been working with for about two or three years, and it seems that every time we get started, there’s something that happens in their life: a death, an illness, a hurricane actually in this case because of the hurricane that came through last year. We put it off. Now, we’re at the same spot we were three years ago. We’re trying to get ready for retirement. We’re trying to consolidate assets. In the meantime, we’ve had thousands of dollars that wasn’t working for him the past two years because it was in a checking account. You can’t put off retirement planning. It has to be done anytime you’re ready, but we need to do it as soon as you think about it.    


Peter Richon:              Procrastination’s not our friend.


John Kuykendall:        No, it’s not. We don’t move forward if we procrastinate. In this day and time, as I’ve told you over and over again, we’re having more and more people come to us who are – have been retired for five, six, seven, eight, ten years. Now, all of a sudden, we’re having to go on a budget. We’re having to cut back our lifestyle because we’re running out of money.


Peter Richon:              Unfortunately, it’s easy to overspend early on and not notice the effects that’s going to have long-term. As you go and grow closer maybe to that time where you see things coming at you, unfortunately like a train on the tracks ahead of you, that can be a little scary. That’s when people start to worry. I guess on the other side of that question, not am I ready to retire, but how can I prevent running out of money once I do?


John Kuykendall:        Yes, that’s where we like to talk about our three-legged stool, Peter. We talk about Social Security, we talk about your investments and your 401(k), and then we talk about your guaranteed income money. Those legs have to be balanced or we’re going to run out of money during retirement. We’re planning for anywhere from a 30 to 35-year retirement now.


Peter Richon:              You mentioned the guaranteed income and the Social Security. I imagine that’s another one of the big questions in planning is how and when should I claim my Social Security to make sure that the rest of my assets last that 30, 35 years?


John Kuykendall:        Yes, and that’s one of the things that we really do is with all the software that’s available today in the Social Security planning, that is a valuable part of deciding, when am I going to take my retirement? How’s it going to help me? What am I trying to do? So many people I’ve heard in the past has said I’m 62. I want to draw my money because it’s going away. That’s not true because if we ran out of money, which we’re projected to run out of money I think in 2033, 2034, somewhere in there, you’ll still have enough money coming in to pay $0.77 on every dollar.  


Peter Richon:              Right, so not the end to Social Security, but rather, at that time, they’re just projecting that there begins to be a shortfall.


John Kuykendall:        Correct; if I take my income, my Social Security at Age 62, I’m taking a 27% plus hit right then. If I do that and then we end up having to cut back and I’m taking another 23% cut, you can see that I’m going to have half of the Social Security that I could have had if I waited. If you don’t need the money and if you’re still working, you should never take it at 62 because of the penalties that are incurred: $1 for every $2 you make over a certain amount. We need to make sure that we understand how to plan.


                                    Now, in this particular case with this client we were working with last week who’s been procrastinating, he’s full retirement age. He’s already started drawing his Social Security before we got to talk to him. His wife just reached full retirement age. What the software recommended is she file on hers now and then we’ll take a spousal later because his is going to be more. The thing is that we want to make sure that we have that guaranteed income for the surviving spouse whoever it is, the male or the female. That’s just more guaranteed income they have coming in.


Peter Richon:              Social Security is pretty complex. There’s far more intricate decisions, options than most people realize. Being that it’s for all intents and purposes a pretty permanent, lifelong decision, we really need to put some study and some work into that decision ahead of time. I know you gentleman at GulfCoast Financial, John, you spend a lot of time with your clients helping them arrive at an optimal conclusion on how to take full advantage.


John Kuykendall:        Yeah, the one thing we want our clients to understand is that if you go down to Social Security and say I want to file my benefit, on my benefit, I want my Social Security, they’re going to give you your check. It may not be the best way for you to file because there are – while there’s not as many ways to file as there used to be because of the change a couple of years ago, there still are a number of ways that we can file and maximize our Social Security, especially as a couple. You want to make sure that you’ve been educated and that you have that in hand before you go to Social Security.


                                    We had an example, Peter, a couple of years ago where a lady was divorced from her husband. They’d been married for 20 years. We wanted her to file on his Social Security. She was at full retirement age. No reason she couldn’t work and make as much as she wants and still receive Social Security.


When she went to Social Security, they tried to talk her into filing on hers. If she had done that, it would have meant the difference of about $1,200 a month that she’s going to get at Age 70, more if she just waited until Age 70 and filed on hers. In the meantime, she’s getting close to a $1,000 free by drawing on his.


Peter Richon:              Some advanced tactics and strategies that could maximize what we get from Social Security. Of course, John, the more we get there, the less strain, and stress, and reliance is going to be placed on our own personal assets. That can be the difference in several hundreds of thousands of dollars swing either way.


John Kuykendall:        Oh, yeah. Every time we do the Social Security Maximization software, it’s anywhere from 2 to $300,000 difference that they can make over their lifetime.



Peter Richon:              Wow, so that’s an important decision, folks, not one to be overlooked or taken lightly, not one to go with the crowd on because your decision is for you and your family. Your spouse will have implications and ripple effects on that decision even after your own lifetime. We need to make sure that this is a good decision.


The team from GulfCoast Financial, John Kuykendall and the team there can help you understand all of the options that are available and make sure that you’re making a wise, well-informed decision with your Social Security. Again, just one of the big questions in our planning progress and process. If you’d like help with that, give them a call, 386-755-9018. That’s 386-755-9018.


Another big question here, John. I imagine when folks come in and they may bring some statements along with them and show you where they have various monies invested, how should I be saving or investing my money or am I properly aliquoted? Do you hear that one?  


John Kuykendall:        Oh, yeah, we hear that all the time. We want to be more conservative in retirement than when we were working, or if we’re getting ready for retirement, we want to be more conservative. What we don’t want to do, we want money working for us. We don’t want to have lazy money as they say.


What we need to do is make sure that we’re maximizing the returns as much as we can without taking any more risk than we need to take for our level of lifestyle. The old adage was that if I was 60, then I’m going to have 40% of my money in the market and 60% in bonds. I don’t believe that’s true today. I think we need to invest our money the way that we can get the most out of it, but at the same time, take as little risk as possible. We need to make returns. Our money needs to work for us. If it’s not working for us, we’re going to run out of money a long time before we end up leaving this earth.


As I said before, I think I mentioned this on one other occasion, that Medicare Part B in 2000 was $40. Today, it’s $135.50. That is a real example of the last 18 years what inflation does. People have to make money.  


Peter Richon:              Absolutely; that lazy money, money not working hard enough for us to even keep up with inflation, we may feel like it’s comfort food like it’s keeping us safe, but it’s like comfort food empty calories there. It’s losing money safely essentially. If we had to write a check for the difference in inflation and what we actually made off of that, we might feel a little bit different about that safe money.


John Kuykendall:        I think the problem is that I’m earning less than a percent in the bank.


Peter Richon:              We need to keep money in the bank, too.


John Kuykendall:        Sure, we need to have money that’s liquid, that’s available to us right now. We don’t need to have all of our money invested, but I can’t have a large amount of my money making 1% when inflation is 3%. I may not be – I don’t have market risk, but what I have is purchasing risk.  


Peter Richon:              By that, you do mean the lack of ability for that money to keep up its purchasing power?


John Kuykendall:        Yes, that’s right. I’m going to be able to purchase less goods in the future with the money that if it was working hard for itself. You’ve got to remember that’s getting your paycheck because when you’re in retirement, you don’t have a paycheck. You need to make sure that the money that you have is earning now for you while you’re in retirement. It’s generating a paycheck for you.


Peter Richon:              Do you have options available, John, that can keep our money safe like a lot of folks want it to, but maybe get a little bit more horsepower and growth?


John Kuykendall:        Oh, sure. There’s always money market accounts that pay more than what the local banks are. Also, there are fixed annuities, which a fixed annuity is a contract for a number of years and pays a set interest rate so that when I give my money to insurance company, I know that I’m guaranteed to make a fixed amount over a period of time.


We also have what we call fixed indexed annuities, FIAs, which you invest with the insurance company. You are in the indexes or in the S&P 500, but you’re not directly in that market. You can’t lose your principal. Every time you make gain, that gain is locked in. There are a lot of conservative ways that we can play the game to get you more money without you having to take more risk.


Peter Richon:              Again, if lazy money, or losing money safely, or not keeping up with inflation is a concern or a question of how to address for you, give GulfCoast Financial a call. They can show you many options across the spectrum in the financial world. They’ve got access to just about everything out there and can make sure that you’re weighing your priorities and finding and selecting the right way to save or invest your money. There is a difference between saving and investing. That’s the risk that you place on your capital. They’ll help you through that process, 386-755-9018.


You brought up insurance there, John. I believe that maybe another one of the big questions. Many different times, and places, and utilization, and types, and information out that on various approaches to insurance, but the question of do I need life insurance anymore is probably a question that we need to address as we transition to retirement.  


John Kuykendall:        Yeah, life insurance isn’t the life insurance that we used to sell 5, 10, 15, 20 years ago; certainly changed over my lifetime as I’ve been in this business now for 40 years. Life insurance today will –can generate for you a tax-free income. If we build up the cash value, we can take that cash value out. As long as the policy enforced, there’s no taxes owed on that money that we take out.


It can also be used for terminal or chronic illness. In other words, if I’ve got a long-term care need, I can get a percentage, 70, 80% of that value of that life insurance policy out now and use that to cover that illness. Life insurance today, we’re using it more as a means to protect my retirement and as a way to give me access to some tax-free money so that we can better plan our taxes, better plan our lifestyle. It’s a way to – we’re not just covering debt. That’s what we used to say buy term, buy a lot of term when you’re young.


Peter Richon:              Invest the rest.


John Kuykendall:        Yeah, and it will pay for the – if something happens to you, the family will be paid. The wife will be able to pay off the house, send the kids to college. Everybody will be happy. That life insurance is still there for those needs, but now, we’re looking at seniors. It’s really gotten a lot easier to put life insurance on people even my age, 74, because the life insurance companies have created these new policies for us which really protect us in retirement.


Peter Richon:              I see some common mistakes that I think even I could point out with life insurance. Number One, not having it when you need it, which is, of course, the day that we pass away traditionally. The second is maybe not having enough. Perhaps the one that is coming to mind with this conversation, John, is that we reach a point where our asset level gives us confidence that we no longer need to carry life insurance.


That’s maybe in our 60s to 70s, somewhere where we’re retiring with the largest amount of money that we’ve ever had. Over the course of the decades to comes with spending, and market volatility, and just the cost of life in general, maybe that asset level that gave us that confidence might have a habit of dwindling. Wouldn’t we be more confident in spending and sharing our lives together with our spouses and family if we knew that there was a way that they could replace the assets that were giving us that confidence?


John Kuykendall:        That’s right. In one instance recently, we put two $200,000 life insurance policies on a couple; one had 200 each. The reasoning behind that was it provided us long-term care benefit. It provided us with if one of them passed away, it made up for that difference they’re going to have in their income.


Don’t forget if you’re a couple on Social Security and one of you pass away, you get to take the highest Social Security. You don’t get to keep both of them. There’s going to be a natural shortfall there any way in your lifestyle. Life insurance can help you make up for that.


Also, a lot of old life insurance policies – and I saw one the other day were written based upon certain assumptions that what the market was going to do. If that market didn’t do that, in this particular case, this individual’s premium was going to quadruple from what he was paying because the policy was failing. He had to put extra money in it to keep the policy going. Don’t forget, as we get older, the cost of insurance in those policies cost more. That policy wasn’t built right. It was going to cost him $40,000 a year to keep this policy.


Peter Richon:              That’s an unpleasant surprise.


John Kuykendall:        Very unpleasant. It would have been nice if he’d known that a couple of years before that happened because he could have made a change, gotten another life insurance policy, but because of his health, we couldn’t help him. He either had to pay the $40,000 or lose the policy. We also offer, Peter, an analysis on what life insurance, what you have, how it works, and what we think about that policy as far as you being able to keep it.


                                    Remember, as we get older, those policies are designed so that the life insurance part of that costs more. It has to come out of that cash value of those policies. A lot of polices are crashing now because that just doesn’t work. A lot of term policies are going – we met with a client the other day. His term policy was $378 a year. It was going to go to $2,500 next year because it matures.


Peter Richon:              Yeah, wow. We need to understand that and of course that insurance coverage. One of the questions that we should address at all points in every phase of our financial life whether we’re 20 and just starting out, or 60 and retiring, or 75 and looking at income replacement for our spouse, or even legacy planning whereas, John, you pointed out some aspects of life insurance can be used to address potential long-term care medical expenses into the future. Lots of different utilizations, lots of different times, again, lots of information and schools of thought, but you need to have an individual conversation about your needs. That’s what the team for GulfCoast Financial and John Kuykendall can have with you, help you review old policies or determine what’s the best next one for you to pick up if needed, 386-755-9018 if that’s one of your big questions. Again, 386-755-9018.


                                    We never have enough time on this program, John, to cover of course all the material and information. Another big question is going to be taxation into the future. I think many workers and savers and investors understand taxation on wages, but far fewer probably understand the implications of taxation on growth on our accounts and the income taken from investments once we retire.


John Kuykendall:        That’s right because up to 85% of your Social Security can be taxed. A lot of people think that Social Security is tax-free. It is pertaining upon how much you make.  


Peter Richon:              If it’s your only income essentially, right?


John Kuykendall:        Right, and as you talked about, as we take those earnings out of those other investments, that IRA, that 401(k) that we’ve had and we take those withdrawals, those count as ordinary income. That can push your Social Security up where it is taxed. I think we’ve talked about on this show before taxation and how everything that we do in retirement is rippling effect as far as taxes go. The more money we take out of our accounts, the more money that we earn, the more money that is paid to us in dividends and capital gains, all of those things have a rippling effect on how much money we’re going to pay in taxes in retirement.


We need to have a handle on that before we do it. What we stress is we want to know where our clients are. We want to know what position they’re in so that they can come to us and say, okay, I need another $20,000 for my 401(k), how is that going to affect me, and we can tell them.


Peter Richon:              Again, we need to understand this because, John, even though it’s an accepted assumption that we’ll be paying lower taxes in retirement, that’s not necessarily written in stone or in the tax code. Nowhere does it say taxes go away once we retire.  


John Kuykendall:        Nowhere does it say that taxes can’t go up. Everybody complains about taxes, and I do myself, but income tax, federal income tax is at an all-time low. We’re paying less taxes now than any time in history. Can you imagine that when this 2017 Tax Act is repealed or if it’s repealed sooner and they change it so that we’re taxed on all capital gains, we’re taxed on everything from Day One, how much that’s going to affect your retirement? We need to have some way to plan some of that in.


Peter Richon:              Again, talking with John Kuykendall about the big questions in planning. Taxation going to be one of those variables outside of our own control, but there are steps that we can take to plan accordingly. If you would like to understand income in retirement, and the taxation implications, your tax liability, and how to morally, legally, and ethically address and minimize that, pick up the phone, give a call. As part of the income planning process, John helps map this out all the time and make sure that you are making wise, informed, efficient decisions on how to create income with taxes in mind as you’re creating that income map. 386-755-9018 to have that conversation, 386-755-9018. At a certain point in time, maybe it’s not everybody’s desire, John, to leave behind a legacy, but if we have mapped out that income plan, chances are certainly increased that we will.  


John Kuykendall:        Oh, sure. The thing we’re trying to do is we want to make sure that we still have money left over when we leave this earth. That money, the majority of our clients want to leave it to the grandchildren or to the kids. That’s what we’re trying to do is we’re trying to make sure first that they have the lifestyle that they want while they’re here. Secondly, that we can pass on something to the grandkids or the kids that will help them in creating their lifestyle.


Peter Richon:              Again, if you would like to sit down and look over your plan for your financial future, the roadmap for how you will structure your assets and your dollars and monies to help you achieve and accomplish the goals that are important to you, pick up the phone, give GulfCoast Financial a call, 386-755-9018. How about some smaller questions? Maybe not the smallest deal in the world or investment any of us will make in our lifetime, John, but do you ever hear and talk with people about whether or not they should pay off their house or help the kids or grandkids through college?


John Kuykendall:        The one thing about that, Peter, is that in the United States, we’re tied to our credit reports. Everything you buy from your car you buy or whatever, anything you get a credit card on is based upon what your credit score is. The better the credit score, the better interest rates you’re going to get. We had an example here where we had a prospect who came to see us, needed help.


He had just paid off his house and he inherited a couple of grandchildren. His daughter passed away. The kids had no place to go so he took them in. Between getting them set in school, doctors visits, clothes, they had nothing. He ended up getting about 30 to $40,000 in credit card debt. Had to actually remodel the house; they had to add on a small room, enclose the garage so that they would have a room for one of the girls.


Because of that, as soon as he paid off the house, his credit cards immediately went to 29% even though he was on time because all of his debt was installment debt. Then we went to the bank and we said, okay, we’d like a home equity loan to pay this off. They wouldn’t give us the loan because his credit score was a 90.  


Peter Richon:              You paid off your house. That’s your money, but ask the bank for some of it, their question is, how do you plan on paying us back.


John Kuykendall:        Right, and this was a 200 and something thousand-dollar house that was – had nothing borrowed on it. I tell our clients to be careful with that. I think it’s a great goal, but we need to make sure that all of that money is not sitting in the house and not working for us.


Peter Richon:              Pros and cons with everything. We need to understand both sides of that as we are making some of the difficult decisions with our money on this program. With John Kuykendall, we have been addressing and discussing several of the biggest financial and retirement planning questions. While having a plan doesn’t guarantee that you reach all of your financial goals, it certainly helps in that progress. Many times in life, the unexpected happens. That’s why having a plan is so important.


                                    The plan is where you address and document how you will approach some of the potential risks and variables that do happen in life, Murphey’s Law. John Kuykendall has helped countless individuals, and couples, and savers, and investors structure those plans, and review, and check up on them on a regular basis making sure they’re keeping up with your changing life and the changing times around us. If you would like to make sure that you’ve got a plan in place, or just address any questions, or make sure there have been no red flags or holes that have been left unaddressed, pick up the phone and give GulfCoast Financial a call, 386-755-9018. That’s 386-755-9018. John, I’m sure there are lots of other big questions that you help people address, but we appreciate you covering a few of them on the program with us today.  


John Kuykendall:        Thank you very much, Peter. It was great to be here.


Peter Richon:              Always a pleasure every time we get the opportunity to speak with John Kuykendall. I do encourage you to give him a call for that complimentary review. Similar reviews can easily go upwards of $1,000 to $1,200. John makes it available to you for free. If you’re serious about planning for your financial future, willing to invest a little of your time, he’ll donate some of his to help you out, 386-755-9018. He’s looking forward to hearing from you soon or talking with us again next week right here on GulfCoast Financial.