On The Money Podcast Transcript: Make July 4th your “financial” Independence Day

Chris:

Hey there, Central Florida. Welcome into another edition of On The Money presented by the Certified Financial Group on WDBO 107.3 FM and AM 580 Orlando’s News and Talk. We are here taking your calls right now at 844-580-WDBO, 844-580-9326. Financial Times calls them one of the top 300 firms in the country and you can join them live on the airwaves right now. 844-580-WDBO, 844-580-9326.

Chris:

We are joined by the [Oracle of Orlando 00:00:34], [Joe Bert 00:00:34], and [Denise Kovach 00:00:36]. They are both certified financial planner professionals at the Certified Financial Group. And what kind of questions will we be fielding on the show today?

Joe Bert:

Denise and I are here… as we have been for more than 30 years… to answer any questions that might be on our listener’s minds. As we say in our intro, we go through life trying some of these, trying some of that, and wake up at age 55 years old, and find out what we might have is a collection of financial accidents.

Joe Bert:

So we are here to kind of clean up those questions that might be on your mind. We have to make decisions about our 401k, about a mutual fund that we’re looking at, about a reverse mortgage, about refinancing your mortgage, about annuities, life insurance, long-term healthcare, IRAs, 401ks, stocks, bonds, all that stuff. These are the things that Denise and I and 10 other certified financial planner professionals do for our clients day in and day out at the Certified Financial Group for a fee.

Joe Bert:

But on Saturday morning, we are here absolutely free. So if you have any questions about anything that might be on your mind, things that you might’ve heard, things you want to talk about, Bitcoin… whatever it might be… we are here. So give us a call because the good news for you on this rainy weekend, Saturday morning, starting out to be a kind of a crummy day. It looks like it might be coming all the way through the holiday, Denise.

Denise Kovach:

I think so. About a 60% chance of rain today, tomorrow, Monday, and then we’ve got Elsa out there. I think she’s turning into a tropical storm, but not really sure yet.

Joe Bert:

It’s that time of year.

Denise Kovach:

Yes it is.

Joe Bert:

It’s that time of year. Anyway, so we are here and the good news for you… excuse me, this is live radio… is that the lines are absolutely wide open. So if you have any questions, pick up the phones, and dial these numbers.

Chris:

844-580-WDBO, 844-580-9326… those lines are wide open right now… 844-580-WDBO. And while we get ready for people to line up their calls here, we can go ahead and dive into our topic of the day today. And it is fitting for the holiday… the Let’s Make Our 4th of July a Financial Independence Day, and consider what may derail your retirement, and then make necessary changes.

Denise Kovach:

Yeah. Revisit your progress each 4th of July, too. So think about it today, and this time next year think about it again. It’s a date…

Joe Bert:

Date.

Denise Kovach:

…that’s easy to think, “Well, I got to sit down and think about this stuff.” There’s a reason we celebrate the 4th of July, becoming independent. That was more than 200 years ago. Yet, may I ask you… do you feel independently secure? [crosstalk 00:03:01].

Joe Bert:

Financially independent. Oh yes.

Denise Kovach:

Mm-hmm (affirmative) And the way that you prepared for your retirement? Are you nearing retirement? Are you starting to wonder if you have enough money? You’re not alone.

Joe Bert:

Mm-hmm (affirmative) Got it.

Denise Kovach:

In a research that was conducted by the [Employee Benefit Research Institute 00:03:19], only 30% of the participants that responded said that they were very confident that they would have enough money for a comfortable retirement.

Joe Bert:

I believe it. In fact, I’m surprised is even that high at 30%.

Denise Kovach:

Uh-huh (affirmative).

Joe Bert:

If they really thought about what it’s going to take to get through your retirement years… if people really understood it… they’d be less confident.

Denise Kovach:

You got that right. And only 60% said that preparing for retirement stresses them out. How many of your clients have you met over the years that took a little bit a while to get the information, to wrap your arms around their situation, and to help them along if you will?

Joe Bert:

You’ve seen, and I’ve seen, and the other certified financial planners with the group have seen over the years is that people generally don’t come in to see us until they’re feeling some kind of financial discomfort.

Denise Kovach:

Anxiety.

Joe Bert:

Anxiety, some pain. All of a sudden they wake up. They say, “Retirement’s not too far away and are we really ready to do it?” And it’s when you hit that tipping point that they come to see us. There’s nothing to be ashamed of. And believe me, there’s nothing that we haven’t seen in over 40 years now that we have not seen. We are here to help you. And it is with Denise and I, and the 10 other CFPs doing it. I know you’ve got more to cover that, but we’ve got a caller coming in, I see. Right, Chris?

Chris:

Yes, we do. We’ve got Bill calling in from right here in Orlando. So let’s transition over the phone lines and welcome Bill onto the show.

Joe Bert:

Morning, Bill.

Denise Kovach:

Good morning.

Bill:

Hi.

Joe Bert:

What’s up?

Bill:

Absolutely. Thanks for taking my call.

Joe Bert:

Sure.

Bill:

This is kind of a basic one so I apologize in advance for my inexperience. I’ve been with my company for about 15 years and we’ve always had a 401k option which I’ve been contributing to. And recently they have the option to have a Roth 401k as opposed to the standard 401k.

Bill:

I’ve been debating, “Well, is this a good move? Is this a bad move? What should I do with my current situation?” I’m about 35 years old, about 15 years in with the company. Don’t plan on switching companies if that makes a difference. But that’s where I stand right now.

Joe Bert:

Okay. Well, before we answer the question, let me address how you prefaced your question in that just said that this was simple or whatever… I forget how you said it… This is for our audience. As we say in the intro, they don’t teach us this stuff in school.

Denise Kovach:

Mm-mm (negative).

Joe Bert:

We tried to figure it out. We talked to a coworker, we read [Kiplinger 00:05:44], we watched CNBC, we listened to people on the radio all weekend long. And boy, there are some really wackos out there… I can tell you that… that they want to give you advice, want to sell you some stuff.

Joe Bert:

And so you go through life trying some of this, trying some of that, and you really don’t know and you’re confused. Oftentimes that confusion leads to not doing anything. So life goes on… two years, five years, 10 years, 15 years. All of a sudden you look back and say, “Where did those years go?”

Joe Bert:

So we appreciate your call, and we appreciate all of our listeners calls. Because I guarantee you, if it’s on your mind, it’s out there with 648 other people that are listening that just don’t want to pick up the phone or can’t pick up the phone.

Joe Bert:

So getting to your question, should you do the Roth? That depends. It depends on what your income is. Are you married?

Bill:

I am.

Joe Bert:

Depending on what your income is, here’s our general rule. We believe that you should not use a Roth if you are in more than a 12% tax bracket, which right now jumps you from the 12% to the 22% tax bracket. Do you know what tax bracket you’re in, Bill?

Bill:

I don’t off the top of my head. I definitely think I should know, but I [crosstalk 00:06:51]

Joe Bert:

Oh no, no, no. Believe me, I guarantee you that 98% of our listeners have no idea what tax bracket they’re in. Let me tell you where you are. If you’re married, filing a joint return, and if your taxable income is over $81,000, you are then in the 21% tax bracket.

Joe Bert:

Now your taxable income is after your standard deduction. So take your income, your wife’s income, subtract away the $25, $26,000… or whatever it might be… for your standard deduction. And then you’ve got your taxable income. If you’re over that amount… over $81,000… in my estimation you don’t want to do a Roth.

Denise Kovach:

And let me expand on that, [crosstalk 00:07:30] why we feel that way? Oh, go ahead, Bill, first. Please.

Bill:

Oh, I was just saying I understood. Thank you. That’s a very helpful line to draw.

Denise Kovach:

Well, let me kind of expand on that if you don’t mind, Bill. One of the reasons we feel like that is we can take advantage of what we know in the tax law today. So if you are in that 22% tax bracket, like Joe was just saying, then it might behoove you to go ahead and make those pre-tax contributions.

Denise Kovach:

Let’s say you put in a thousand dollars into your traditional 401k, and you’re in that 22% tax bracket, you just saved yourself approximately $2,200. That’s sort of generic, but that’s exactly how that works. So we take advantage of the tax law we know today. We can’t predict what tomorrow’s going to bring as much as we’d like to.

Denise Kovach:

But how I feel… and I don’t know if the rest of the planners feel the way I do… is at the end of the day, what’s going to happen to us people… those of us who have Roth IRAs… and we go to take distributions, are they still going to be tax-free distributions? I remember back in the ’80s, when social security benefits were tax-free benefits to everybody.

Denise Kovach:

Well, then all of a sudden the rules changed. I think the IRS needed a little bit more money to fund more… whatever it was that they were doing… so they means-tested social security benefits. And that means if you make X amount of dollars or over this, then so much of your social security benefits are going to be taxed. Are they going to do this with Roth IRAs? I don’t know. I would think if they need the money, they would go for this pool of money. Absolutely. So another thing to consider.

Joe Bert:

So here’s what Denise is saying. What you’re doing by doing the Roth is, you’re giving up a guaranteed tax deduction today for a promise of tax-free income in the future. And there’s no guarantee that it’ll always be tax-free. So once again, if you’re great, if you’re in the 22% or higher tax bracket, grab that tax deduction, which is the bird in the hand versus the bird in the bush. Bird in the hand is worth two in the bush, right? That’s what they say.

Denise Kovach:

If you say so.

Joe Bert:

In fact, let me direct you to an article that I wrote some time ago. It’s still valid. I wrote it for Kiplinger. It’s Roth, a Wolf in Sheep’s Clothing. Roth, a Wolf in Sheep’s Clothing. You can Google it and it’ll tell you what you may want to consider if you’re looking at a Roth.

Joe Bert:

In fact, you bring up an interesting point, Bill. On the way in… I’m always listening to talk radio on the weekend to see what other folks are saying and doing out there… and there’s 101 guys today out there on the radio acting as quote unquote, fiduciaries, offering to send you free checklists, free guides, free whatever, whatever, whatever.

Joe Bert:

And this was the pitch. In fact, this is exactly how they said it. They said that, “We had a client that had $500,000 in their IRA. That’s all they had.” And they ran the numbers. Some actuary ran the numbers. And the actuary came back and said, ‘”If you leave the money in the IRA and take it out as required with your required minimum distributions, you will pay $310,000 in taxes over your lifetime.”

Joe Bert:

Okay. That’s designed to scare the hell out of you, and frankly, to get you concerned about taxes, and then do something. Well, what you’re going to do… and what they want you to do… is to convert it into a life insurance policy.

Denise Kovach:

Oh, lord.

Joe Bert:

To cash it out, pay the taxes today. They say, “Pay a little bit of money on the seed, not on the tree. Pay the taxes today, but then they get all this tax-free income going forward. What you forget is the fact, if you cash out a half a million dollars in IRA… particularly if you’re doing a lump sum… which hopefully you wouldn’t do that… but that money that’s gone to the IRS is lost forever, not earning anything.

Joe Bert:

So you got to be very, very careful about these people that want you to convert it to a Roth. There’s a lot of gimmicks out there to sell insurance, and this is where you want to be very, very careful. So that’s our words of advice for this morning, Bill. You have any other questions?

Bill:

That’s it. Thank you so much. You’ve been very helpful.

Joe Bert:

Okay. We really appreciate your call and thanks an awful lot for listening and have a great holiday weekend.

Bill:

And try to stay dry.

Joe Bert:

Stay dry.

Chris:

Absolutely. Bill, appreciate you kicking off the show that way.

Chris:

If you want to take up a line you can. 844-580-WDBO, 844-580-9326. We’re planning tomorrow…

Group:

…today…

Chris:

…with the Certified Financial Group on WDBO.

Chris:

(silence).

Chris:

Welcome back to On The Money right here on WDBO 107.3 FM and AM 580 Orlando’s News and Talk. We are live. You want to join us at 844-580-WDBO. 844-580-9326 is the number to call in. You can also check us out on facebook.com/onthemoneyfl. You can watch live and interact that way by leaving a comment in the Facebook comments section. We’ll talk about it live on the air.

Chris:

But the easiest way is through those phone lines right now. 844-580-WDBO, 844-580-9326. Let’s go to those phone lines here. We’ve got George calling in on this day. George, welcome to the show.

Joe Bert:

Good morning, George.

Denise Kovach:

Hi, George.

George:

Good morning. How are you guys doing?

Joe Bert:

Good? What’s up?

Denise Kovach:

Great.

George:

So I got a little bit of one on the lighter side for you. It’s clean, but it’s funny. You know these robocalls, that bug you to death all day long?

Joe Bert:

Oh yeah.

George:

And then they come and they want to sell you a burial plot and a desk, and they come to the “Well, who do you want to leave your money to? Your parents, your brothers, sisters, whatever?” I said, “No.” I said, “My pussycat.” They say, “What?” I said, “Yeah, you heard me. My pussycat.” [crosstalk 00:13:21].

Joe Bert:

There you go.

George:

“Well, you can’t do that,” they say. So I say, “Well, why not? [Leona Helmsley 00:13:27] left her fortune to her dog.” [crosstalk 00:13:29]

Joe Bert:

That’s right. You can do it. That’s right.

George:

That will teach them.

Joe Bert:

There you go. So you still getting the calls, George? They’re still calling you, huh?

George:

Man. Every day.

Joe Bert:

I know.

George:

How do you blocked that? Do you know?

Joe Bert:

I know. Well, if it’s an unidentified call, I don’t answer it. Do you? What do you do?

Denise Kovach:

No, I don’t either. But the thing is, if you do block it…and I’ve tried this on several different occasions… they will call back on a different number.

George:

Oh. From a different number? [crosstalk 00:14:00]

Denise Kovach:

It’ll be the same three numbers… very similar to my phone number. So the 407 and the blah, blah, blah. But the last four digits will be different. So they’ll continue to call. I don’t know how to get rid of them.

Joe Bert:

Well, I don’t answer them. If it comes up on my phone, it’s identified, I don’t recognize the number, I don’t answer it.

Denise Kovach:

Is that why you don’t ever answer my phone calls?

Joe Bert:

Well, if you were in my contact list, I would answer it. But if you’re not in my… you were in my contact list. I always answer your calls.

Denise Kovach:

This is a test.

Joe Bert:

Well, thanks for the call, George. And you have yourself a great holiday weekend. I know we want to get back to Denise’s topic here on… I’m sorry. Cut you off there when we had our first caller. Go ahead.

Denise Kovach:

We have priorities here and I get it. But I was talking about things that people can do to derail their retirement. So one of the things is you need to decide what kind of lifestyle you want to live.

Joe Bert:

Yeah.

Denise Kovach:

It’s going to make a big difference because some lifestyles are easier to fund than others. Such as it won’t take a big financial investment to perhaps bake cookies.

Joe Bert:

For a living?

Denise Kovach:

For a living. The investment’s not going to be as much as… let’s say if somebody wants to jet set around the world.

Joe Bert:

There you go.

Denise Kovach:

Each of those are great.

Joe Bert:

You got to have a passion for it.

Denise Kovach:

But you do. There’s nothing wrong with either lifestyle, but you need to know…

Joe Bert:

What’s you’re going to do.

Denise Kovach:

What you’re going to do and you need to plan for it. Because if you don’t, you’re not going to have the funds to enjoy the things that you want to do. I think a big thing in retirement… it’s medical expenses.

Joe Bert:

Oh, that’s the biggest.

Denise Kovach:

People need to consider medical expenses. They’re very expensive, they’re unpredictable, and as we get older… I should know… our bodies begin to break down a little bit.

Joe Bert:

Speaking of medical expenses and older, let’s bring up our upcoming workshop, which is July the 31st.

Denise Kovach:

Are you sure?

Joe Bert:

I’m pretty sure. July 31 at our offices in Altamonte Springs.

Denise Kovach:

It is.

Joe Bert:

[Gary Abele 00:15:52] is going to be doing his famous Medicare. Everything you need to know about Medicare, and long-term health care, and all those things that you face when you turn 65 and you go off of your employer’s plan. I can tell you when you turn 65, your mailbox explodes with solicitations for medical insurance. And there are 101 different ways in which to skin that cat.

Joe Bert:

Gary is an expert in this. And if you want to sign up for that, that’s July 31 at our office in Altamonte Springs. At the new time… by the way… is from 11 to 1. Because starting next week, our executive producer here, Mr. Kyle Cassandra, tells me that we’re going to be broadcasting from our new studio in our new offices.

Joe Bert:

So we will be broadcasting live from 9 to 10 and then Gary will kick off his workshop from 11 to 1. And I’m sure he will be serving a lunch. But that’s the one that fills up fast. We can only accommodate about 25 folks in our new learning center, we call it, with state-of-the-art facilities. Go to our website. That’s financialgroup.com, financialgroup.com.

Joe Bert:

You can make a reservation right there and book your spot. And then the week before that, I believe [Rodney Ownby 00:16:58] is going to be doing a workshop on everything you want to know about mutual funds.

Denise Kovach:

That is correct. Again, it’s from 11 until 1. You can register online. Go to our website, it’s financialgroup.com, and go to events and it right down there. Just put your info in and wallah.

Joe Bert:

Hope to see you there.

Chris:

Yes, absolutely. And we still got phone lines open and we can take your calls right here, right now at 844-580-WDBO, 844-580-9326. We’re planning tomorrow…

Group:

…today…

Chris:

…with the Certified Financial Group on WDBO.

Chris:

(silence).

Chris:

Welcome back to On The Money presented by the Certified Financial Group on WDBO 107.3 FM and AM 580 Orlando’s News and Talk. We are live here in the studio and you can join us at 844-580-WDBO. 844-580-9326, 844-580-WDBO. Go ahead and give us a call. Join us live.

Chris:

If you want to hit us up in the meantime though, we’ve got some great things to talk about. I do want to hear a little about Score My Funds before we dive back into Denise’s topic there. So let’s go ahead and start with that.

Joe Bert:

Score My Funds is an opportunity for our listeners to get more information about the quality of the individual mutual funds or ETFs they may hold either in their IRA, their 401k, or in a brokerage account. And what it does is it scores. This is what we provide for our clients on a regular basis.

Joe Bert:

This is how we select the investments and how we monitor them. Looking at each investment, 11 distinct data points, everything from manager tenure, to expenses, to performance at a one, three, and five-year basis, looking at alpha and sharp ratios, style drift, things that really affect the quality of a fund. And give you an idea of… certainly show you where it’s been and kind of give you an idea of whether or not you want to keep it.

Joe Bert:

So if you’d like to have your funds scored absolutely free, we’re doing this for our listeners. Go to scoremyfunds.com, scoremyfunds.com. There’s going to be a pull-down menu and you simply type in the tickers. The ticker is the four or five letter symbol that you might have for the fund. There are three letters for an ETF and you punch it in. And if you don’t know it, there’s a pull-down menu. You just put in the name, it’ll tell you what that ticker is.

Joe Bert:

Put it in there, and we will shoot you a report. On this holiday weekend, we’ll get it to you early next week. No obligation, and it’ll show you exactly what your funds are doing, or how they bend, and how they compare versus their peers, which is the most critical thing you want. And what we’re seeing… I don’t know about you, Denise… how recently you’ve looked at them, but a lot of folks are loaded up on what has done well recently. And that’s Growth, right?

Denise Kovach:

Correct.

Joe Bert:

And we all know what’s going to happen.

Denise Kovach:

It changes.

Joe Bert:

It changes. If you’re all loaded up on one style, when it’s good, it’s great. And when it’s bad you wonder what happened. So what you want is diversification, and we can talk about that as well. We’ll send you what we call an investment questionnaire to kind of point you in the right direction to really determine what kind of investor you are. Whether you’re conservative, or aggressive, or something in between.

Joe Bert:

But it all starts with scoremyfunds.com and you can fill that in. It’s absolutely free. We’ve had a lot of our listeners take advantage of it, and we encourage you to do the same. No obligation. If you’d like to follow up with us as a follow-up, as how you might be able to improve the efficiency of your portfolio and get better investments for lower costs, that’s exactly what we do for our clients working with our clients as a fiduciary. So that’s Score My Funds.

Chris:

And if you want to give a call to the office, by the way, Rodney Ownby’s there taking calls [crosstalk 00:20:33].

Joe Bert:

Yes.

Chris:

If it’s something you don’t want to miss that’s on air.

Joe Bert:

Yes. Thank you for mentioning that. Yes. Rodney, in addition to being a certified financial planner… as all the planners are at Certified Financial Group… he is also a CPA and he’s got a depth of knowledge. He’s there prepared to take calls for you if you want an in-depth question.

Joe Bert:

If he doesn’t answer, it means he’s talking to someone else. So if you will leave your number, he promises to get back to you before the morning is over. So just give him a call right now at 407-869-9800. 407-869-9800, or 1-800-EXECUTE. And if I’m not mistaken, I think Rodney’s doing the workshop on the 24th, Everything You’ll Want to Know About Mutual Funds But Didn’t Know Who to Ask.

Denise Kovach:

I think he is.

Joe Bert:

Yeah. So you’ll get the chance to talk to Rodney if you dial those numbers. And once again, go to our website, financialgroup.com. As Denise said, click on Events and you can register for the workshops. They’re going to be live from 11 to 1. New times right now, and we hope to see you there. So that’s it.

Chris:

All right.

Denise Kovach:

That’s because we’re opening up our new studio in the office.

Joe Bert:

We are. Yes.

Denise Kovach:

While we’re airing from 9 to 10, they don’t want to be having a conference going on. So they’ve changed it to 11 to 1 to accommodate that. So that’s a good thing.

Joe Bert:

Yep. Yep. Good thing. Good thing. So you’ve got some more of your topic here we kind of jumped into because we had the call.

Denise Kovach:

Well, yeah, yeah.

Joe Bert:

Tell me more.

Denise Kovach:

Well, we’re talking about retirement and things that people can do to derail that. Starting off with we needed to determine the type of lifestyle we want to live so we can fund it.

Joe Bert:

Right. Exactly.

Denise Kovach:

Second of all, we got into medical expenses. It’s going to be an expensive and unpredictable expense. And as I know, our bodies begin to break down as we age.

Joe Bert:

Yes it does.

Denise Kovach:

So if you’re fortunate, you might only need a few visits to the doctor. But there’s others that are not so fortunate. And even people who might have a family history of severe illness. So you need to factor that into your retirement. And the best you can do is equip yourself with real good insurance, and budget accordingly. Estimates have medical costs averaging about $250,000 throughout retirement and that’s edging upwards.

Joe Bert:

Yep. Per individual?

Denise Kovach:

Correct. So that’s another. But we need to save now, and not later. Let’s not keep up with the Jones’s and don’t live outside of your means. Differentiate what you need from what you want, and prioritize those expenses by what is essential to you. And find room for a rainy day fund. I talk with people about emergency funds, a rainy day fund. And, “Denise, there’s no earnings there. I can’t make any money there. I don’t want to put my money there.”

Denise Kovach:

Well, that’s not the purpose of it. It would be nice if we could earn 3% or 4%… or whatever… on our money market funds. But the purpose of it is if we lose a job, we’ve got money to pay for our expenses. If we need a new roof, we don’t have to put it on the credit card, or the equity line of credit.

Denise Kovach:

We’ve got a pool that we can get into easily. It’s liquid, and it takes care of the problem. So, if you’re not retired yet, between and six months worth of your expenses should be in an emergency fund. I suggest keeping between one and two years in an emergency fund for those who are retired so that you don’t have to sell your securities in a down market when that happens. Not if, but when that happens.

Denise Kovach:

And don’t wing it. You got to have a plan. And this is something Joe, and I, and the other planners in the office… we do day in and day out. A plan is like a compass. If you use it correctly, you’ll always know where you are and you’ll always know where you’re going. It’ll tell you how much you need from year to year, and where to find that money to replace your paycheck.

Denise Kovach:

It’ll also tell you how long your money will last. It needs to be updated, all right? Because these are projections based on the now, correct? So it will need to be updated every year, or every couple years, or especially when things change and your financial situation. But you need to include inflation assumptions, rate of return assumptions, taxes. So there’s a whole lot more to it. All of these can help keep you on course.

Denise Kovach:

Another situation that I find… unfortunately quite frequently… is a situation where parents with grown children depend on them daily for their expenses.

Joe Bert:

Yes. Bad news.

Denise Kovach:

Or parents are paying off the student loans, or what have you. This can derail your retirement too. And I suggest that… I know all situations are very different, and I mean no disrespect when I talk about the children in this regard… but when it comes to gifting or lending money to your children, always make sure you are okay first.

Joe Bert:

Otherwise, they’ll be taking care of you.

Denise Kovach:

Absolutely. Absolutely.

Joe Bert:

Maybe.

Denise Kovach:

If that’s the case. Your kids have many more years than you do to take care of their retirement dreams. So don’t feel stingy about that, and know that you’re giving your kids a gift. That of financial independence.

Joe Bert:

Exactly. Exactly.

Denise Kovach:

So those are the items I suggest you be cautious about and think about as you near retirement, or as you are in retirement.

Joe Bert:

You mentioned plan and this is what we do for our clients day in and day out. We look at where you are today with your income, with your assets, where it is you want to go, what your lifestyle is. There’s no right or wrong. Everybody wants to maintain their lifestyle and then some in their retirement years. Factoring in inflation, factoring taxes, vacations, buying the condo, all the things that you want to do during your lifetime.

Joe Bert:

And then we show you what it’s going to take to get there. And then we do what-if scenarios. What if we did this? What if we did that? How much do we have to save? How much do we have to earn? All those things go into planning. And oftentimes we’re asked, “Well, what does it cost?” I can tell you that our planning fees are very, very reasonable. But I can also tell you, you don’t want to go with the cheapest.

Denise Kovach:

Well, sometimes you get what you pay for.

Joe Bert:

There’s no doubt about that. We have seen that time and time again. People will offer to do planning for you for free, and if you want to give me a call, I can tell you where the hook is in that deal. But anyway, we’d be glad to sit down with you while we do financial planning. We’ve been doing it now for over 40 years. We’re in the third generation of our clients here in Central Florida.

Joe Bert:

Denise and I, and the 10 other certified financial planners, are required to work with our clients as fiduciaries because we are certified financial planners. There is a distinction, and this is one of the things I think we have to educate the public about, because anybody… as you know… can call themselves a financial planner.

Denise Kovach:

That they can, but they haven’t gone through the rigorous training, and education, and the exams.

Joe Bert:

Code of ethics. [crosstalk 00:27:17].

Denise Kovach:

All of that.

Joe Bert:

All that stuff that’s required.

Denise Kovach:

And code of ethics, that’s huge because the CFP designation takes us to a higher level of being a fiduciary for our clients. And not only are we CFPs, but we’re accredited investment fiduciaries.

Joe Bert:

I keep forgetting to mention that. And I have done the study… because as you know, we’re looking to hire three more certified financial planners in the office and we’re very close to hiring all three… and when we did the study, of course, we had the list of all the certified financial planners in Central Florida, but only a handful of us are both certified financial planners and accredited investment fiduciaries. That’s a unique combination, and I’m proud that all of our folks are both CFPs as well as accredited investment fiduciaries.

Denise Kovach:

And I’m honored that the firm is CEFEX certified.

Joe Bert:

I am too.

Denise Kovach:

Okay. Center for Fiduciary Excellence, which I think less than 1% of the firms nationwide are a member of this organization. And as I said to Joe, I consider it to be an honor because there’s audits that go on on a yearly basis, they come in and look at how we manage money, how we work with our clients, are we being fiduciaries, how our business transacts with you as our clients. And, they’re hardcore. They come in and they get into our books and in our business.

Joe Bert:

They are hardcore. They will be in for their annual audit next month, as a matter of fact.

Denise Kovach:

Oh boy. Am I going on vacation?

Joe Bert:

It’s an annual routine and we’re proud to have that designation. So anyway, that’s what we’re all about.

Denise Kovach:

Absolutely.

Joe Bert:

So I know we’ve got some text questions. Are we up against the clock here, Chris? I can’t see you but you can hear me.

Chris:

Yeah. Why don’t we hit a quick break here and then we can come back and get those text questions in or field a caller at 844-580-WDBO, 844-580-9326. We’re planning tomorrow, today, with the Certified Financial Group on WDBO.

Chris:

(silence).

Chris:

You’re listening to On The Money right here on WDBO. 107.3 FM and AM 580 Orlando’s News and Talk. Final segment here coming at you live 844-580-WDBO, 844-580-9326. If you want to help us close up shop here, 844-580-WDBO.

Chris:

But in the meantime, let’s go back over to Joe and Denise, and let’s go to some of these text questions that we got. Our first one here, “I’m over the age of 59 1/2 and want to start doing Roth conversions from my traditional IRA. I just recently opened a Roth IRA to do the transactions. Can I withdraw the earnings from the Roth immediately tax and penalty free because I’m over the age of 59 1/2?” Great question.

Denise Kovach:

Well, Chris. Yes and no. The Roth IRA must be in place for five years before you can withdraw the earnings without paying taxes on them. However, because this person is over the age of 59 1/2, he or she will not be subject to the 10% penalty. So that’s where that’s at.

Joe Bert:

There you go. And these are the things that we look at when we do financial planning. We have this great software that allows us to do these what-if scenarios, and to show you where your tax bracket is, and how much you can absorb in doing a Roth conversion in the 10% or the 12% tax bracket before you bump up in the 22%.

Joe Bert:

And we’re going to be doing more and more for this clients, as we’re doing reviews, looking at where they are, what the projection is, and how much they can convert this year and still keep them under that 22% threshold. So what you don’t want to do is our first caller, Bill, was wanting to know about doing a Roth… I guess he wasn’t asking about Roth conversions. We were just talking about doing a Roth per se… but you want to be careful about if you can do the conversion that you don’t trip yourself up and end up paying.

Joe Bert:

And really the only way a Roth conversion works is, if you convert the entire amount into the Roth… in other words, you take a $100,000 out. And this is what people do is they take a $100,000 out, withhold the taxes, then only end up with $78,000 to go into the Roth. So you’re down 22%, just before you even start.

Joe Bert:

What you need to do is have the whole $100,000 go in, and pay the $22,000 of the taxes out of other money. And people don’t know that… or don’t understand it… but that’s-

Denise Kovach:

Or they might not have the funds to do that.

Joe Bert:

Well, then you shouldn’t do it.

Denise Kovach:

Right. There’s a lot to it.

Joe Bert:

That’s correct.

Denise Kovach:

Absolutely.

Joe Bert:

If you run the numbers, you’ll never catch up if you don’t pay the taxes outside of the Roth money.

Denise Kovach:

Very true. Very true.

Joe Bert:

Yep. Yep. Yep.

Denise Kovach:

I received a phone call this week… and it’s a very simple question that I received… but actually, “How does the IRS calculate when I’m 59 1/2?” I mean, you think the person out there it’s like, “Well, what does that mean, I’m 59 1/2?” So basically 59 1/2 is the age you can take withdrawals from your IRAs or traditional IRAs, your 401ks, 403bs, etc without paying a 10% penalty.

Denise Kovach:

Think about it like this. It’s the actual date… six months later… after your 59th birthday. So having said that, if you turn 59 on April 1, then you’ll be 59 1/2 on…

Joe Bert:

October 1.

Denise Kovach:

You got it. Right? If you turn 59 on October 9, then you’re going to be 59 1/2 on…

Joe Bert:

March 9.

Denise Kovach:

April 9.

Joe Bert:

April 9, like I said. [crosstalk 00:32:31] No, March. March.

Denise Kovach:

October, November, December, January, February, March, April.

Joe Bert:

Oh, April.

Denise Kovach:

How many fingers does it take two CFPs to…

Joe Bert:

Okay. If you say so.

Denise Kovach:

But having said that, I want to bring up another situation that people need to be aware of. For those people that basically… again, the IRS stipulates a 59 1/2 age for you to take out penalty-free withdrawals… there’s such a thing is a rule of 55.

Denise Kovach:

Basically it allows a person who leaves their employer in the year they turn 55… and leave their plan with the employer… that person can make withdrawals from that plan without that 10% penalty.

Joe Bert:

You still have to pay taxes.

Denise Kovach:

Absolutely. [crosstalk 00:33:22] But that’s something as well, because you don’t have to be 55, or turn 55, just in that year that you turn 55. So that’s a significant thing too, I think.

Joe Bert:

Exactly. And these are some of the things that that our listeners need to be aware of as… some of them are getting early payouts and so on and so forth. You’ve got to be careful because you walk into some of these investments firms say, “Well, let’s roll it over to an IRA.” And they roll it over into the IRA and they’ve lost that opportunity to get out the money before 59 1/2 without the 10% penalty and they may need the money.

Joe Bert:

So here you are at age 56, you need some of the money. “I got to get out of my IRA. But gee, if I left it in the 401k, I wouldn’t have to pay this 10% penalty. Why didn’t that guy tell me that?” Oftentimes, because they don’t know.

Denise Kovach:

Sure. I get that.

Joe Bert:

So you got to be careful out there, folks.

Denise Kovach:

A lot of stuff to think about.

Joe Bert:

A lot of stuff.

Denise Kovach:

And that’s why we’re here.

Joe Bert:

That’s why we’re here. And by the way, Rodney Ownby is in our office right now so if you have any questions about anything that Denise and I have talked about today, if you want to ask Rodney about his upcoming workshop… because I think Rodney is doing that one on July 24… Everything You Want to Know about Mutual Funds and Didn’t Know Who to Ask. That will be at our offices in Altamonte Springs from 11 to 1. He’s going to serve a lunch. Rodney, if you can hear me now, you’re going to be serving a lunch.

Chris:

How did the first 20 person last week go?

Joe Bert:

Oh, it was great. It was great. Yeah, the people loved the office and the state-of-the-art audio visual equipment that we have in the learning center. It’s a very, very good environment. We encourage our listeners to come on up and see us. We’re right there on Douglas [Avenue 00:34:47] right off of I-4. So go to our website, that’s financialgroup.com, financialgroup.com. You can make your reservation right there. We hope to see you. And by the way, Happy Independence Day to all of our listeners.

Denise Kovach:

Happy Fourth.

Joe Bert:

Happy Birthday, America.

Chris:

Absolutely. Another fantastic show in the book here. We’re planning tomorrow…

Group:

…today…

Chris:

with the Certified Financial Group on WDBO.

 

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