The Biggest Assets In Your Retirement Plan
Mar 4, 2020
If you really took inventory of your financial situation, you might find that you’ve been taking for granted some assets that make up a huge piece of your puzzle…
Here are just a handful of the things that we'll discuss:
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Transcript
John Stillman: Hello and welcome to Wright Money Tips. I'm John Stillman alongside Isaac Wright. Hey, his name is in the show. We named it after you, Isaac. Exciting stuff.
Isaac Wright: All kinds of celebrity factor going on in it, isn't it?
John Stillman: That's right. Well, when you're the president of Financial Dynamics and Associates and also a chartered financial consultant that just has celebrity and pizzazz written all over it. He's also the author of Navigate Your Way to a Secure Retirement. We're talking today about doing a checkup on your assets and a lot of the things we're going to talk about here today, Isaac, people would not think of as assets. I'll give you an example of what I mean later on. We'll talk about a couple that people do think about very often when it comes to their-
Isaac Wright: I thought this was a good little checklist today. Absolutely.
John Stillman: Never a bad time to sort of do a check in on where you are and where are you going, so we're going to help you do that today. The first thing on our list of assets that applies to most people is the 401k. Now when I say 401k, really, I mean your retirement account at work. If you work for a nonprofit or a school system, you know it's a 403b, if it's the federal government, it's the TSP, but that retirement account at work that you're contributing to.
Isaac Wright: Well, and I think everybody understands that they know that that's an asset that they're going to utilize at some point in the future. So this is one of the knowns of what I call the known assets in our list today. However, something simple to think about, and I think this is something that we also find, even though we have multitudes of information in front of us today and Google and all the above, but if you've been at your current job for a while, especially if you're accumulating money, getting free matched money from your employer, this could very well be your single largest asset depending upon how large this 401k or your retirement plan has grown. And the only thing I want to bring to your attention today, very simple but very powerful, is are you spending more than 45 seconds choosing the funds in your 401k account?
Isaac Wright: Do you have a process or do you have an understanding of what you are choosing as that money continues to grow? Of course the market's been doing great for 11, almost 12, going on that timeframe as far as years, bull market's been great for many, many years. Question is, do you have any clue, any understanding of potentially how much that could be if we have a pullback or if we were to have a bear market or even something similar to what we had back in '08 and '09? I just feel like people today, in some respects, can become lazy when everything seems to be going up. So just keep this in mind as you head through 2020. We're here again at the pretty much beginning of the year, first quarter. Please, if you don't have and don't understand how to pick funds, let us know. Again, our number right here, (804) 777-9999. You can reach out any time. Leave a message for myself. Happy to talk to you about this, but it's a big deal, especially if you're accumulating good money.
John Stillman: Another big asset that's not an investible asset necessarily, is your house, and that certainly needs to be part of the conversation when it comes to your overall financial plan. we can't just talk about the money in your IRA and your 401k. You have a lot of money tied up in that house, so how does it fit into your picture?
Isaac Wright: Well, and again, if it's not a 401k, your house can also very likely be your largest asset. And I think also when it comes to having an asset as large as potentially your home, your primary residence, is that something you want to reconsider as you start moving closer to retirement? I think sometimes people don't realize that, Hey, maybe I can sell this house and downsize. Maybe I decide I want to move into one of these new communities that really don't have to worry about any type of yard work or maintenance. Now granted, dependent upon that situation and what your house value is, sometimes there's money to be had. Maybe sometimes it's maybe just as expensive to make that transition, but just know if you have a large amount of equity built into your home and a situation arises where you know you're getting close to retirement, make sure that you're talking to a financial professional that also understands that your house can be utilized in retirement as an asset and/or dependent upon where you decide to live or move, it could very well be equity that can be released to be used for lifestyle expenses as well.
John Stillman: Important to understand how that all fits into everything. All right, so I mentioned earlier that we're going to talk about some assets that people don't really think of as assets. So when I say your social security benefit, and you say, "Oh, that's only a couple thousand a month. How big an asset can that be?" Well, let's think about that again.
Isaac Wright: Yeah, I think people sometimes don't really get the gravity of how long a monthly check can compound, if you were to try to take that money as a lump sum. And I think most people, just to put this in perspective, dependent upon your life expectancy, your social security could be worth four or $500,000 or more over the course of your lifetime. And sometimes, to be frank with you, I don't think people understand, let's call it, if you look at it from that perspective and if you were to live 20 or 30 years after you retire and you're collecting two to $3,000 a month in social security, how much money you would have had to save to generate that same type of monthly income. When you think about it from that perspective, social security is a very important asset when it comes to understanding how to generate income, when to collect social security and also dependent upon if you're married, whether or not to collect social security and protect your spouse based upon your benefits.
Isaac Wright: So again, just keep in mind if you're not receiving what I would call a level of respect around your social security benefit when it comes to financial planning, if somebody is just talking to you about buying a portfolio stocks and they're just blowing past some of this information when it gets close to retirement or even leading into retirement, please reach out. This is what we do. We're retirement and financial planning professionals. We're comprehensive. We want you to make good decisions around these type of topics. So again, reach out if you want to talk to me. (804) 777-9999. Visit our website at financial and estate planning as well. You can jump on my calendar on that.
John Stillman: (804) 777-9999 or financialandestateplanning.com. All right. Another thing that you probably don't think of as an asset is your future savings potential. This is money you haven't even earned yet, but it's still an asset.
Isaac Wright: Well, these, I'm going to make this quick because maybe you're at a point, you've reached a stage in life where your kids are "off the payroll". You're earning more money hopefully than you were earning in your younger working years. Maybe you've even paid off your house. So you had this tremendous savings potential because maybe you have a very positive cash flow month to month and are you taking advantage of putting money away during this time? A lot of times people are lazy. It accumulates in checking, it accumulates in savings and sometimes even worse when it accumulates in checking and savings, it's there and it burns a hole in your pocket where you could have put that money into a plan knowing that if you retire, you're not bringing in the kind of money you're bringing in today and that can compound very, very fast. So just keep in mind what I call and, John, you made this sound really good. Your future savings potential. Is there going to be a timeframe where you may be bringing in a lot more money than you're spending and how are you maximizing your savings off of that?
John Stillman: Certainly important. As you said, you know as your expenses go down, house gets paid off, kids are off the payroll. A lot of people find themselves in their fifties and early sixties with the ability to save more than they've ever saved. You can really make up for lost time really quickly with some of that. All right, the last thing Isaac, they tend to get overlooked. A bunch of smaller accounts. You know, if you left a couple of jobs and you've got a couple of 401ks dangling out there, you have a Roth that you started and you contributed for a couple of years and then stopped. You don't pay a lot of attention to some of these smaller accounts, but they're still part of your picture.
Isaac Wright: You know, it's weird how our mind works sometimes and when people look at money and of course people look at money a lot of different ways, but I do want you to know this from experience. I've seen people come in the door that said they have a bunch of small accounts here and there and they just almost don't even include it in their assets. They don't include it in their net worth. They don't even think about it in terms of how to use that money later on in retirement. Next thing you know they have several small accounts scattered around at different companies and if you accumulated all that together and we just had this situation recently, about $32,000 of "small money". Now granted some people may consider that to be small money. I mean I didn't grow up with large amount of money, so I think $32,000 is something you do want to pay attention to.
Isaac Wright: So you know, are you organized enough to understand the collective power of pulling all of these smaller accounts together? So I'll just want to say as we wrap up here, I consider that all these smaller accounts to be every bit as important, getting those assets together, getting them really set up for future goals that you may have and between that, your 401k, your house, how to handle social security and even the savings potential you may have in your higher earning years, all of that matters. And we wanted to create that checklist, so we hope you appreciate that today. Again, reach out, you can talk to me anytime. (804) 777-9999. John, really enjoyed that asset list today.
John Stillman: Yep. Something to be thinking about. Like I said, no time like the present to take inventory of what you have and what you will have if you're disciplined and you work your plan. So if you'd like some help from Isaac and the team, reach out. Call or text. (804) 777-9999. That's (804) 777-9999 or online at financialandestateplanning.com. This is Wright Money Tips. We'll be back with more in a couple of weeks. Stay tuned.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action.
Announcer: Advisory services offered through JW Cole Advisors, Inc., JWCA. Financial Dynamics and Associates, Inc. and JWCA are unaffiliated entities.
Isaac Wright: All kinds of celebrity factor going on in it, isn't it?
John Stillman: That's right. Well, when you're the president of Financial Dynamics and Associates and also a chartered financial consultant that just has celebrity and pizzazz written all over it. He's also the author of Navigate Your Way to a Secure Retirement. We're talking today about doing a checkup on your assets and a lot of the things we're going to talk about here today, Isaac, people would not think of as assets. I'll give you an example of what I mean later on. We'll talk about a couple that people do think about very often when it comes to their-
Isaac Wright: I thought this was a good little checklist today. Absolutely.
John Stillman: Never a bad time to sort of do a check in on where you are and where are you going, so we're going to help you do that today. The first thing on our list of assets that applies to most people is the 401k. Now when I say 401k, really, I mean your retirement account at work. If you work for a nonprofit or a school system, you know it's a 403b, if it's the federal government, it's the TSP, but that retirement account at work that you're contributing to.
Isaac Wright: Well, and I think everybody understands that they know that that's an asset that they're going to utilize at some point in the future. So this is one of the knowns of what I call the known assets in our list today. However, something simple to think about, and I think this is something that we also find, even though we have multitudes of information in front of us today and Google and all the above, but if you've been at your current job for a while, especially if you're accumulating money, getting free matched money from your employer, this could very well be your single largest asset depending upon how large this 401k or your retirement plan has grown. And the only thing I want to bring to your attention today, very simple but very powerful, is are you spending more than 45 seconds choosing the funds in your 401k account?
Isaac Wright: Do you have a process or do you have an understanding of what you are choosing as that money continues to grow? Of course the market's been doing great for 11, almost 12, going on that timeframe as far as years, bull market's been great for many, many years. Question is, do you have any clue, any understanding of potentially how much that could be if we have a pullback or if we were to have a bear market or even something similar to what we had back in '08 and '09? I just feel like people today, in some respects, can become lazy when everything seems to be going up. So just keep this in mind as you head through 2020. We're here again at the pretty much beginning of the year, first quarter. Please, if you don't have and don't understand how to pick funds, let us know. Again, our number right here, (804) 777-9999. You can reach out any time. Leave a message for myself. Happy to talk to you about this, but it's a big deal, especially if you're accumulating good money.
John Stillman: Another big asset that's not an investible asset necessarily, is your house, and that certainly needs to be part of the conversation when it comes to your overall financial plan. we can't just talk about the money in your IRA and your 401k. You have a lot of money tied up in that house, so how does it fit into your picture?
Isaac Wright: Well, and again, if it's not a 401k, your house can also very likely be your largest asset. And I think also when it comes to having an asset as large as potentially your home, your primary residence, is that something you want to reconsider as you start moving closer to retirement? I think sometimes people don't realize that, Hey, maybe I can sell this house and downsize. Maybe I decide I want to move into one of these new communities that really don't have to worry about any type of yard work or maintenance. Now granted, dependent upon that situation and what your house value is, sometimes there's money to be had. Maybe sometimes it's maybe just as expensive to make that transition, but just know if you have a large amount of equity built into your home and a situation arises where you know you're getting close to retirement, make sure that you're talking to a financial professional that also understands that your house can be utilized in retirement as an asset and/or dependent upon where you decide to live or move, it could very well be equity that can be released to be used for lifestyle expenses as well.
John Stillman: Important to understand how that all fits into everything. All right, so I mentioned earlier that we're going to talk about some assets that people don't really think of as assets. So when I say your social security benefit, and you say, "Oh, that's only a couple thousand a month. How big an asset can that be?" Well, let's think about that again.
Isaac Wright: Yeah, I think people sometimes don't really get the gravity of how long a monthly check can compound, if you were to try to take that money as a lump sum. And I think most people, just to put this in perspective, dependent upon your life expectancy, your social security could be worth four or $500,000 or more over the course of your lifetime. And sometimes, to be frank with you, I don't think people understand, let's call it, if you look at it from that perspective and if you were to live 20 or 30 years after you retire and you're collecting two to $3,000 a month in social security, how much money you would have had to save to generate that same type of monthly income. When you think about it from that perspective, social security is a very important asset when it comes to understanding how to generate income, when to collect social security and also dependent upon if you're married, whether or not to collect social security and protect your spouse based upon your benefits.
Isaac Wright: So again, just keep in mind if you're not receiving what I would call a level of respect around your social security benefit when it comes to financial planning, if somebody is just talking to you about buying a portfolio stocks and they're just blowing past some of this information when it gets close to retirement or even leading into retirement, please reach out. This is what we do. We're retirement and financial planning professionals. We're comprehensive. We want you to make good decisions around these type of topics. So again, reach out if you want to talk to me. (804) 777-9999. Visit our website at financial and estate planning as well. You can jump on my calendar on that.
John Stillman: (804) 777-9999 or financialandestateplanning.com. All right. Another thing that you probably don't think of as an asset is your future savings potential. This is money you haven't even earned yet, but it's still an asset.
Isaac Wright: Well, these, I'm going to make this quick because maybe you're at a point, you've reached a stage in life where your kids are "off the payroll". You're earning more money hopefully than you were earning in your younger working years. Maybe you've even paid off your house. So you had this tremendous savings potential because maybe you have a very positive cash flow month to month and are you taking advantage of putting money away during this time? A lot of times people are lazy. It accumulates in checking, it accumulates in savings and sometimes even worse when it accumulates in checking and savings, it's there and it burns a hole in your pocket where you could have put that money into a plan knowing that if you retire, you're not bringing in the kind of money you're bringing in today and that can compound very, very fast. So just keep in mind what I call and, John, you made this sound really good. Your future savings potential. Is there going to be a timeframe where you may be bringing in a lot more money than you're spending and how are you maximizing your savings off of that?
John Stillman: Certainly important. As you said, you know as your expenses go down, house gets paid off, kids are off the payroll. A lot of people find themselves in their fifties and early sixties with the ability to save more than they've ever saved. You can really make up for lost time really quickly with some of that. All right, the last thing Isaac, they tend to get overlooked. A bunch of smaller accounts. You know, if you left a couple of jobs and you've got a couple of 401ks dangling out there, you have a Roth that you started and you contributed for a couple of years and then stopped. You don't pay a lot of attention to some of these smaller accounts, but they're still part of your picture.
Isaac Wright: You know, it's weird how our mind works sometimes and when people look at money and of course people look at money a lot of different ways, but I do want you to know this from experience. I've seen people come in the door that said they have a bunch of small accounts here and there and they just almost don't even include it in their assets. They don't include it in their net worth. They don't even think about it in terms of how to use that money later on in retirement. Next thing you know they have several small accounts scattered around at different companies and if you accumulated all that together and we just had this situation recently, about $32,000 of "small money". Now granted some people may consider that to be small money. I mean I didn't grow up with large amount of money, so I think $32,000 is something you do want to pay attention to.
Isaac Wright: So you know, are you organized enough to understand the collective power of pulling all of these smaller accounts together? So I'll just want to say as we wrap up here, I consider that all these smaller accounts to be every bit as important, getting those assets together, getting them really set up for future goals that you may have and between that, your 401k, your house, how to handle social security and even the savings potential you may have in your higher earning years, all of that matters. And we wanted to create that checklist, so we hope you appreciate that today. Again, reach out, you can talk to me anytime. (804) 777-9999. John, really enjoyed that asset list today.
John Stillman: Yep. Something to be thinking about. Like I said, no time like the present to take inventory of what you have and what you will have if you're disciplined and you work your plan. So if you'd like some help from Isaac and the team, reach out. Call or text. (804) 777-9999. That's (804) 777-9999 or online at financialandestateplanning.com. This is Wright Money Tips. We'll be back with more in a couple of weeks. Stay tuned.
Announcer: Information is for illustrative purposes only and does not constitute tax, investment or legal advice. Always consult with a qualified investment, legal or tax professional before taking any action.
Announcer: Advisory services offered through JW Cole Advisors, Inc., JWCA. Financial Dynamics and Associates, Inc. and JWCA are unaffiliated entities.
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