Making the Most of Your Golden Years with Strategic Planning

Unlock the secrets to a fulfilling retirement as we sit down with Michael Shelton from Summit Wealth Group's Memphis office. Have you ever wondered how you'd spend a Saturday free of obligations? Michael’s holistic approach to retirement planning encourages clients to envision just that, helping you craft a clear picture of your financial goals. We cover essential retirement accounts like 401(k)s, 403(b)s, and Roth options, stressing the importance of employer matches as "free money."

We wrap up by emphasizing the emotional satisfaction advisors feel when helping clients achieve their retirement dreams. Don’t miss out on this episode loaded with valuable insights—share it with friends and subscribe for more expert advice on reaching your financial summit!


Show Notes

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●      Summit Wealth Group: Website

●      Contact: info@summitwealthgroup.com

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Chapters

• 0:02 Navigating Retirement Planning and Guidance
• 15:37 Achieving Retirement Goals Together
• 24:39 Supporting the Reach for Summit

Transcript

Jessica : 0:02

Welcome to the Reach, your Summit podcast, where we help you navigate the path to a better, more secure future. We're brought to you by Summit Wealth Group and I'm your host, Jessica Magnuson.

Michael: 0:25

Thank you, Jessica. I'm happy to be here. Thanks for carving out some time.

Jessica : 0:29

Yeah, absolutely, can you just introduce yourself a little bit, tell us who you are and what you do here?

Michael: 0:35

Yeah, thank you so much. So I am a Memphian born and raised and I've been in the financial industry doing investment management for just over four years now. I really try to focus on just three key areas in my life. So I have a son who's about to turn six. He's about to start kindergarten.

Michael: 0:59

So, yeah, thank you. Time flies. I won't be cliche in saying that they grow up faster than you can expect, but I definitely have seen that in my life. Really, the three main things I focus on number one, taking care of my family, so taking care of my wife and my son. Two, taking care of my clients, which is something that we do very well at Summit, both at the local level and all of our offices and also just as a higher level organization. And then three, just taking care of myself, so love to exercise, love to be as healthy as I can, nice.

Michael: 1:33

And like to flex my creative muscle. Really trying to focus on those three areas in my life is what gives me total fulfillment.

Jessica : 1:42

That's awesome. Well, we are here to talk about retirement. So when I asked you to be on the podcast you mentioned, you wanted to chat about retirement and all the questions that come along with that, everything that goes into retirement planning and what do you do once you're retired, all of that stuff. And I was really looking forward to that because I think you take a great approach. Summit as a whole takes a really holistic approach to retirement planning and guidance to our clients.

Jessica : 2:14

You fit right into that. So we are going to cover all stages of retirement. So if you are still planning, if retirement is right around the corner for you, or if you are already in those retirement years, we're going to cover a lot of different topics here to kind of alleviate questions and, you know, make sure your golden years are truly golden. Let's start from kind of the beginning with if you meet with a client and they start to talk to you about retirement planning, how do you approach that conversation and kind of, like I want to say, cast a vision for what does retirement mean to them? What do they want out of this?

Michael: 3:00

Casting a vision is a really good way to articulate how we want to help our clients just create a space where they can start thinking about these things, Because I think a lot of times in our busy daily lives we're not taking the time to really sit down, carve out distractions and really think about this. So one thing I ask clients and I would ask people who are listening to also ask themselves and this might sound like an odd question, but this really helps me figure out what's most important to people. So I will ask people let's take a moment. Let's imagine that it's a Saturday. You have no plans on the schedule.

Michael: 3:43

If you have children, they're away at camp. You don't have any obligations whatsoever. Okay, so you have the entire day, whether it's with yourself, your partner, whatever. Tell me, how would you spend that day. Walk me through exactly what that day looks like. Yeah, I think that's a good question to cast a vision, because when we think of freedom, andparticularly inancialfreedom f f p p p pone one day, what would that look like? That can kind of give you perspective into what's important to you and how you want to spend those years in retirement when you're financially independent and don't have to work anymore to produce an income to support that.

Jessica : 4:37

That sounds awesome. That is such a great way to approach that, to really figure out what's the most important, I feel like, to people and what they really enjoy spending their time doing. So if we just back up, maybe, I guess, and start with the basics of retirement for anyone that may not be familiar with where you even start or what retirement planning means, what are different retirement accounts and which ones do you always recommend people have or see the most often, maybe?

Michael: 5:24

Most people who are employed by an organization probably have access to a 401k or a 403b. Those are essentially the same types of accounts. A 403b is essentially the non-profit version of a 401k. These are really beneficial accounts because you have the ability to put income that's pre-tax into these accounts and, ideally, your employer will also provide some level of match compensation, which is just a simple way of saying free money on the table. Okay, yeah, and what's great now is a lot of these plans also offer a Roth option within there, which is after-tax money that is then tax-free in retirement. I always recommend clients, if they have the availability to save into a 401k or a 403b and get free money from their employer, to take advantage of that. There are other plans that smaller businesses will offer. One is called a simple IRA. It's a very similar type approach, so on the employer side, those are the three main accounts that I see that I recommend people find out if they have access to and make sure that they're putting as much in there as they can. Outside of that, for self-employed individuals so sole proprietors, sole business owners there's also what's called a SEP IRA, and that's beneficial if you have the ability to save more than is what allowed each year into a 401k, which this year is $22,500. Than is what allowed each year into a 401k, which this year is $22,500. So SEP IRAs will let high earning business owners put a lot more into that so they can start socking away more for retirement. So this year it's a maximum of 66,000. So that helps them save more.

Michael: 7:02

Yeah, and then, outside of employer provided plans, I recommend clients look at traditional IRAs or Roth IRAs and there's different rules that go into those. But essentially traditional IRAs there's no income limit, so it doesn't matter how much you make. You can contribute the max amount to that each year. And then Roth IRAs are accounts that you can save into that are tax-free in retirement, but the IRS sets a certain allowable income limit and after that you can't contribute to that anymore. However, you can still find strategies around that Not to shamelessly plug myself or Summit. That's why it's very beneficial to work with a professional, because it's very difficult to work a full-time job, potentially raise a family and make sure that you understand all the rules and regulations and be as efficient as you can with your retirement accounts. So that's a really brief, high-level overview of kind of what I see and what I typically recommend.

Jessica : 8:00

For these accounts and when you're talking about kind of casting vision for retirement people deciding what they want to vision for retirement people deciding what they want to do in retirement, when they want to retire how is someone supposed to know how much money they're supposed to save? How do you even start that conversation with them?

Michael: 8:20

I don't have a great recommendation for people doing that on their own. What I'll do is I'll sit with clients and we will use a calculation that this is not going to mean anything to anybody not in the financial industry but it's called a time value of money exercise and essentially what we're doing there is we're figuring out, based on someone's lifestyle today, how much they spend to live today. Based on someone's lifestyle today, how much do we feel like we want to maintain the same kind of lifestyle in retirement, meaning spend about the same type of level of money in retirement? Do we want to live more frugal, more of an active lifestyle? And so we'll kind of take how much do we think it's going to cost you to live on a monthly basis? And then we'll factor in inflation and then we'll essentially run financial planning projections to help them figure out how much money do they need to save each month starting now and what is the lump sum amount they need to have on day one in retirement so that they don't run out of money in retirement.

Michael: 9:30

I offer this as a free service to prospects. I know a lot of other advisors in Summit do that as well, because I learned that from other advisors, and so I think if someone is looking for an advisor who they want to trust, help them make these decisions. I think it's good to find someone who is willing to sit down with you, ask these questions and run through this basic exercise with you without charging you an arm or a leg to get there, and so that's something that I know, I do and that Summit does for a lot of clients, and I think it's really helpful for them to figure out kind of backing it out how much do they need to save each month and where do they put those investments to reach that goal.

Jessica : 10:08

100% and I feel like talking about how you go about this with clients and kind of promoting Summit, there's no way to separate the two, because Summit does take, like I mentioned, this holistic approach to managing assets and to helping you reach your goals. All the advisors at Summit are looking at the bigger picture of what are you wanting, where are you wanting to go? It's hard to do that without a financial advisor. It's hard to do that without someone kind of holding your hand and showing you the way to get there, the steps that you need to take. I'm always like promote away, because that's kind of what we're doing here is trying to show people what Summit is capable of helping and in what realms.

Michael: 10:52

I really enjoy doing this. This is the fun part of working with clients is helping them articulate these things and then putting together a simple, understandable action plan that they can actually move forward on and move forward through.

Jessica : 11:06

Yeah, so when you are kind of helping people figure out how much they are going to be needing to save for their retirement, do you generally feel like a workplace plan or, if you are in one of these jobs that miraculously still gets a pension, is that going to be enough for retirement once you get there, or should you be doing more than just that?

Michael: 11:32

Great question. I don't think it's enough, because there's really kind of three main buckets that you want to go into retirement having, and when we're thinking of buckets, we're thinking of the taxability on those buckets. And so, just to paint the picture, if someone is putting all of their retirement savings into a company plan like a 401k that is before tax and maybe they're also putting some into their Roth 401k that's after tax, we want them to build those kind of tax benefit retirement savings. However, there's a third bucket that a lot of people miss and that's what's called the taxable bucket or the non-qualified bucket, and non-qualified just means it doesn't qualify for a tax benefit.

Michael: 12:26

One reason why I tell people is that we want to go into retirement having the taxable bucket, the pre-tax bucket and the tax-free bucket, and you can accomplish the pre-tax and the tax-free most likely through your company plan, but you can't accomplish the taxable bucket. You have to do that outside of those plans and do that on your own. Two reasons why that's important is one you want to have flexibility when you are pulling from your investments to produce an income in retirement. You want to have flexibility on how that's taxed and when it gets taxed. And lastly I'd say because I know, especially in my generation I'm 38, I'm certainly getting older, but I know in my generation there's been this big fire movement financially independent retiring early and I think that's good for people to try to accomplish in their lives.

Michael: 13:16

But one thing that people will forget is company plans, 401ks, IRAs. If you need to get to that money before you are 59 and a half years old, there will be a 10% IRS penalty that will get charged if you have to pull that money out. And if I have a client who has the capability to retire early like, let's say, 55, and all of their money is in company plan, then they're going to have to pull money out at a 10% penalty until they reach that age. So we really, if we want to get clients and if retiring early is important to clients, we want them to also be building up this taxable bucket so that they can draw from that in the early years before they have to draw from the company plan and not take that unnecessary IRS penalty. And so that again, Jessica is thinking of long-term. How are we casting a vision? How are we making responsible decisions now with how our money is going to be taxed in the future? And really thinking about putting ourselves ahead and potentially have the ability to retire early.

Jessica : 14:20

I didn't know that there was this FIRE acronym for this, but I definitely have seen a lot of people because I am also in my 30s and a lot of people being like I'm trying to retire early, I am not trying to work until I am 65 or 70 or any of this, and so I would have never thought about the penalties from the workplace plan, and I think that that's probably something that a lot of people don't initially realize in this planning. That is great to know. I want to shift to maybe something that could be a little harder situation. What if they didn't start early? Because I think that that's one thing that a lot of people hear about retirement. It's like we may not know how much we need to save, we may not know where it needs to be saved entirely, but we know we need to start this early and as early as possible. Right, but what if you didn't start early?

Jessica : 15:16

What if you are nearing retirement and you have not gotten to where maybe you necessarily want to be for retirement income.

Michael: 15:26

Yeah, that's a great question, Jessica. It's something that we talk to a lot of people. Summit as a whole talks to a lot of people and we see this a lot. It's a very real-world scenario. That is the more difficult part of our job and also a much, very difficult situation on the client's end. It sounds cliche, but I think it's a universal truth that the best time to plant a tree was 20 years ago. If you didn't do that, the next best time to plant a tree is today. The present moment is the only place where we can take action on anything in our lives is right now.

Michael: 16:00

If someone hasn't done the proper saving early in life, just the fact that they're carving out time to sit down and talk with a professional means that they're already on the right path.

Michael: 16:11

I think, taking a hard look at if they haven't saved enough for retirement, there's still flexibility there. There's the ability to potentially work a little bit longer and maybe, if they're not happy in their job or they're not fulfilled with what they're doing, maybe trying to find something that is fulfilling, that they can kind of use as fuel to continue working later on in life. There's also the ability to spend less in retirement and maybe find a way to maybe embody a more simple lifestyle and find joy in the small things and maybe adapt and be flexible about what they thought their future was going to be like. And then also, just a lot of people might not have saved enough, but they saved something, but their money might not be invested the right way. And so another thing is just looking at what you've currently done, working with someone who has your best interests at heart and who you can trust, to say, okay, let's look at what's already in place, let's see if we need to change that to potentially accelerate your ability to retire later in life.

Jessica : 17:13

No, that's a great point, because I think that maybe the only place you've put money is into a workplace plan I think that there's the annual allocations, your review for it but if you don't have someone advising you or telling you what you should be doing there, you could be missing a huge opportunity to kind of catch up, in a way, or make the most of what you have saved so far, absolutely.

Michael: 17:40

I articulate those as blind spots. There are blind spots that we have that just sitting down with someone else and having a different pair of eyes on it can help uncover.

Jessica : 17:48

So, for those of our listeners that maybe are already in retirement or just starting their retirement journey, phase of life, how do you feel, like you tell clients about balancing what they want to enjoy living to the fullest in their golden years this time they worked so hard for while also making sure that their retirement is going to last them through the rest of their lives?

Michael: 18:20

I think, outside of just the numbers and the money aspect of it, to me, I encourage clients to have open communication with us and regular communication with us, and I also make sure that clients are okay with me regularly communicating to them as well.

Michael: 18:41

To me, the deepest work that we can do together is when there is a solid, understood relationship together and so open lines of communication.

Michael: 18:51

So I think meeting regularly with clients to check in on the balance sheet, check in on how they're feeling, check in on, maybe, habits that have developed over time that we might be able to address together, and so to me, communication with their advisor is, first and foremost, really important, and then also understanding how to invest correctly, and that's where, again, working with the financial professional can help.

Michael: 19:14

When we're looking at retirement, you can make everything as complex as you need to be, and life is certainly complex and retirement is certainly complex. But at the end of the day, what we're doing when we're making retirement simple for clients is we're ensuring that our clients' money outlives them and not the other way around. And so the way that we do that, when our clients are living on a fixed income and we have inflation, which we know the cost of goods and services are going to increase every day for the rest of our clients' lives. We want to make sure that they understand that their investments are going to be able to outpace the rate of inflation. And if we do that correctly and live the right kind of lifestyle within our means, our clients will never run out of money.

Jessica : 20:10

Also, just sticking to the plan, I feel like a huge part of what you guys do is you lay out this financial plan for people according to what they're explaining they want for their lives, and then a client's part in that is okay, we have sat down, we've gone through everything with this. Now we just need to do the plan. You know to let the plan work Because you know you guys have figured out exactly what they need to do and they just have to follow along Absolutely.

Michael: 20:42

Yeah, that's a great point. Really, a lot of what we do, I would say, is behavioral and lifestyle coaching. And so, to your point, when we put a plan in place, a plan is designed to take the emotion out of what needs to be done, because we are very emotional people and sometimes emotions can drive us to make incorrect decisions or poor decisions with our money. And to your point, Jessica, when we have a plan, when we're sticking to the plan, when it's well thought out, when it's well prepared on the client's behalf, we can say, okay, we might be feeling one way, but this is what the plan shows. So how can we make sure that we're staying on course with the plan?

Jessica : 21:21

The last thing I just want to hear you touch on just briefly, because I feel like for a lot of advisors, seeing their clients reach retirement and be able to kind of live out their plan and do the things that they've been wanting to do in retirement is like the ultimate goal. How do you feel when you get to tell someone yeah, you can retire at whatever age that they're wanting to retire at, like what does that feel like?

Michael: 21:55

I like to ask clients exactly what you just asked me. Perfect example we had a client recently, 59 years old. Based off of her assumption and just what people told her, she thought that she needed to work until she was 70 years old. People in her family had worked until 70. She had just heard, because things are getting more expensive, because investments aren't doing as well anymore, all of the incorrect things that she heard from people who were not professionals and no disrespect to them made her feel like she needed to work to 70. That's the number she came in with and we did a comprehensive financial plan for her and we identified in a very clear way that she could retire at 65. So five years sooner than what she thought. I mean.

Michael: 22:46

To me that is the ultimate reward in regards to helping people become financially independent. But I asked the same question you asked me, Jessica. As we ran through the numbers, we identified it, we showed her the rationale behind why and I just said how do you feel? And it was a very rewarding moment for both of us, I believe, because I could tell there was kind of a um, a sense of invigoration that she did not come into the office with that. So I'd say the most rewarding thing to me is getting clients there, but I think even more rewarding than that is helping a client figure out that they can actually do it sooner than they thought.

Jessica : 23:41

Oh my gosh, that is so cool. I mean, yeah, that's, I feel, like the ultimate dream for a client and for an advisor to hear.

Michael: 23:51

Yes, for both of us absolutely.

Jessica : 23:52

That is so cool. Well, that wraps up this episode on retirement planning with our advisor, Michael. As always, we hope that this was very informative for all of our listeners and you learned some new things. If you do still have questions, though, which is totally fine there are so many more complex things that you could dive into and things that are specific to each person's situation. If you do have more questions, you can contact us on any of the socials @ Summit Wealth Group, or email us at info@ summitwealthgroup. com, or you can always meet with an advisor. Any of them would be very happy to do so, either virtually or in person, and you can find them on our website, wwwsummitwealthgroup. com. Thanks again, Michael, for being here, and we'll see you next time.

Michael: 24:44

Thank you, great to see you.

Jessica : 24:48

Thanks for listening to the Reach, your Summit podcast, brought to you by Summit Wealth Group. If you enjoyed this episode and would like to help support the podcast, please share it with others and subscribe so you don't miss an episode. If you have any questions or topics that you'd like us to cover, please email us at info@ summitwealthgroup. com.