WEBVTT
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Going to a financial planner is like going to a doctor.
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If you wait until there's a crisis, you're probably going to get bad news.
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You gotta go when you think you don't need it, and that's when you're gonna make sure you probably are in good shape.
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Welcome to the Wealth Development Studio.
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I'm your host, Genevieve George, senior financial advisor and founder of Pelican Financial Planning and Wealth.
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Our goal for this episode is to provide clarity about today's financial topic, inspire you to be brave with your questions, and gain confidence in your financial future.
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So take a deep breath, grab your favorite cup of coffee, and step into the studio.
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Your dose of financial empowerment begins now.
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If you've ever stared at a TIA or other educator retirement statement and wondered whether your money was actually yours, whether you can move it, you're not alone.
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Educators and academics are some of the most underserved people in financial planning, partly because their retirement world looks different from everyone else's.
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Between 403B, 401A plans, defined benefit pensions, sometimes 457s, and the TIAA traditional, which has its own unique liquidity rules and everything that goes into it.
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There's a lot to untangle.
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So today we're getting into all of it.
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My guest has spent years advising inside institutions and then worked inside TIAA before going independent.
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Now he runs a specialized practice with a focus on this population of individuals.
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Please welcome Kevin Rocher.
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I'm so excited to have you here.
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How are you today?
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Thank you.
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I'm doing well.
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How about yourself?
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I'm doing great.
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So I'm just so thrilled to have you.
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Uh I, you know, I think this is such an area I've worked on it in the past and not to your level of uh niche area of your practice, but it is so different.
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You you sit down with somebody in the education system and and their statements look different, their options are different.
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Maybe just kind of talk to us about how how where you saw a need and how you ended up developing this specialization around that need.
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Yeah, yeah.
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It's a great place to start off.
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So I was always very surprised by just the level of complexity that goes into some of these retirement plans.
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Many 403Bs have multiple versions of what are called contracts.
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So these are sub-accounts.
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And you could have somebody who's been at the same institution their entire career and have four or five different versions of the same 403B with different investments and different rules and different nuances.
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And that level of complexity to many folks is overwhelming.
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All of my clients are more educated than me because they're all PhDs.
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None of them feel confident in the understanding of their 403B accounts, fixed annuity, which is referred to as a pension often component, and also just the different layers of contracts within their 403B.
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So helping to, I think, simplify that is really kind of a core of what I do.
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And it does take a lot of effort there too, because while one 401k between two different companies is slightly different, the nature of how it works is is very much similar from one company to another.
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But you're saying with these different layers and different contracts within the institution, it's just it's can it can be very confusing.
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Oh, absolutely.
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Yeah.
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I I I often give the analogy of one of those Russian nesting dolls where you've got one doll instead of another doll instead of another.
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And you know, the first doll, the outside wrapper, is the the IRS rules, right?
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The rules around how 403Bs can be can be constructed.
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And then the next wrapper is the custodian, whether it's TIAA or Fidelity or Vanguard.
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And then the next one is the institution itself, right?
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You know, University of San Francisco versus University of Stanford have completely different retirement options and rules because they're negotiated on a case-by-case basis.
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And then the core of this is the individual.
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And you could have two professors at the same institution who have wildly different portfolios when they happen to join the institution and which contracts they they have as a result of that.
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So it's it's layers and layers of kind of complexity on top of each other that creates these kind of unique challenges for folks.
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You know, what I'm about to say, it almost sounds cliche, but I very much believe in education.
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And by that I mean educating my clients.
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So the first thing that I do with folks before I even ask them whether they want to become a client is to help them understand what they have.
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Now that's really key.
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And so usually most of our conversations start with a review of their accounts, of their statements, and walking through these, in often case very dense stacks of papers where they may think they have one account.
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In reality, they've got four.
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And we'll break it down and we'll look at these and I'll explain what these distinctions mean.
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What makes the TIA traditional group retirement annuity different from the TIA traditional group supplemental plan annuity?
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How do those products have distinct nuances that make them different?
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And really the goal here is for the client to feel empowered enough that they can then make a decision about what to do with these investments.
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Because it's it's almost like when you first sit down to create a puzzle, you gotta dump all the pieces out and then you lay them all out, and you figure out how all the pieces kind of you know look for the corners and the edges, you start putting them together.
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And so that key first step is to look at all the pieces and figure out where do we want to focus.
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Uh and and I think education is is critical to that.
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It's it's helping these folks understand kind of the basics, and then we get into the more complex planning from there.
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But it also And when you say basics, you're you're breaking it down truly to this is how it works, this is how how contributions are being made, whether they're mine or from my employer, and whether they can be rolled over or have to stay where they are, like really the first step, basics, is what you're talking about.
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Absolutely.
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Yeah.
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So let's get into some of those distinctions.
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So you've got the employer versus employee contributions.
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And typically those are going to go into two separate accounts.
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So you'll have the defined contribution plan and get the voluntary contribution plan.
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Between those different accounts, in many cases, they have different investment options.
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Really, the kind of the big one, the most common question I get has to do with the fixed annuity option, which at TIAA is called TIAA traditional.
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And where a lot of folks get confused is there's actually six different variations of TIA traditional.
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Now, three of those are fully liquid, meaning that you can move it into different investments, you can roll it out, you can do whatever you want with it.
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They act a little bit more like a traditional investment strategy.
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Exactly.
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And I would analogize it to almost like a stable value fund or a money market fund where it's getting a fixed rate of return.
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That rate of return, even though it's fixed for the for the amount that you put in at that period of time, that rate of return can vary for new contributions.
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So that adjusts to what your average rate of return is.
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But the liquid ones, I think, are typically that's going to be for the voluntary contributions.
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Those are the ones that you can do something with easily.
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The other ones, the non-liquid ones, those are ones where there is a pretty defined set of rules as to how you can access this money.
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And I don't mean it just as in withdrawing, but if you want to reallocate it somewhere else, if you want to invest in something different, it isn't as simple as just saying, you know, sell this down by 10% and add it somewhere else.
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You have to go through kind of a process, and it typically involves kind of thinking years down the road in order to free up that capital.
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So stuff number one is helping folks understand how much do you have in these different contracts.
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And it's not uncommon for people to have three to four of these types of things.
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And that they maybe don't know that, right?
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Like they just set it up, and that's just where their deferrals were going.
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And that that's exactly it.
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You know until they sit down with Kevin, they're not sure what's going on.
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Yeah, you know, you think about it this way: if you weren't a financial professional and you're focusing on whatever your expertise is, you know, you meet with your HR person once a year and they say, put as much as you can in your retirement plan, and you do that, you're doing the right thing, and and they say, well, set it to your to your risk tolerance, you do that as well.
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You don't necessarily think about the nuances of, well, how much of this is going into each sub-investment?
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And so that has an impact.
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But then what you also generally aren't aware of is that periodically the school and the custodian are going to renegotiate these contracts.
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And so when that happens, it in some cases replaces the old investments, in other cases, creates a new contract.
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So you may have been contributing to the old one for years and years, and you may even have a good understanding of what you're contributing to, but then a new one comes in, and you may not even realize it.
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Now your contributions get rerouted to that, and it's put into a new contract, which has a new set of rules.
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So I met with somebody just yesterday who had been with her institution for 30 years, and she had four different types of contracts.
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And I explained to her, one of them has a five-year liquidity schedule, another has an eight-year liquidity schedule, another has a 10-year liquidity schedule, and one of them's fully liquid.
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So, based upon that, we have to have four different strategies for what we're going to do with this one investment.
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And using that as an example with these different liquidity structures, that plays into her longer-term financial planning.
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Absolutely.
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You know, and and and it might guide where you tell her to put her new contributions if she has control over that, right?
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That's that's precisely right.
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So uh it all kind of starts with kind of getting that lay of the land, understanding where you're at before you can figure out where do we need to go going forward.
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Right.
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I love that.
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Now, when we talk about educators, we're often talking about like this 4-3B plan, which is something that they they can contribute to and all that, but then sometimes they also have a pension.
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So, you know, maybe talk to me about how you uh analyze that and help people understand that from a cash flow standpoint, you know, as you're doing longer-term planning.
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You know, this person you said from yesterday, 30 years with the same institution.
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So she may have a little bit left before she retires, but a pension would change what those numbers are, right?
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Well, yeah, absolutely.
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So a pension is is pretty uncommon in in private sector jobs these days.
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Right.
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Or my grandparents have one, I don't have one.
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Uh you probably don't.
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But you you still see it in you know public sector jobs or public institutions.
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So you think like like the you know, the government pensions or in this case, you know, public schools.
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So when I think of a pension, I think of it as again, it depends on the rules, but in most cases, it's it's like a supplement to social security.
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So when we think about social security, you know, we know we're gonna get this paycheck every month for the remainder of our lifetime.
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And it depends upon how much we've paid into it and when we access it, right?
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Those are the two big variables.
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And it's the same sort of concept of a pension, depending upon how much you've paid into it and when you decide to start drawing from it, that'll impact how much you're gonna get.
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In most cases, most pensions have some sort of cost of living adjustment, not all of them, but often.
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When I think about it in financial planning, this gives us another income stream that both provides for expenses, which is great, but also creates income taxes.
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So if I'm you know speaking with a client who's looking at retiring, let's say they're 65, you know, I'll explain to them Social Security becomes your full retirement age, basically becomes fully vested, as I like to call it, at 67, and then you can wait until 70 to get the maximum Social Security payout.
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That deferral period between 67 and 70, let's say you retire during that point in time, what do you do for income?
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Well, you could you could tap social security, you could tap your pension, but the problem is you're gonna get a smaller number and it's irreversible, but also now you have income taxes coming from this income source that you can't change.
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And so your your taxes are gonna be set at this level and increase over time for the rest of your life.
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Whereas if you defer those and say you've got a 403B pot that you can draw from in the interim, you can control what your taxes look like for that period between when you retire and when you hit age 70.
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So that low tax corridor, as I like to call it, that period between retirement and hitting maximum threshold for Social Security, that's when you can start to do some creative things, like Roth conversions, for instance.
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Or drawing down your, your, your qualified, your 403B, even though you may not necessarily need it because you're trying to reduce what your required minimum distributions are about.
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So all of this, the timing of when we start our pension correlates to when we want to set our taxes at this higher level.
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And if we have other income sources we can draw from in the interim, that gives us flexibility to really try to be strategic about our taxes longer term.
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I love that.
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Yeah, yeah.
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So it's really utilizing that what did you call it, the window?
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The low tax corridor.
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Low tax corridor, I like that.
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Yeah, yeah.
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Uh, that is great.
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And I have worked with some teachers in the past where they were a part of uh a pension program with their school system that disqualified them from Social Security.
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And so how how common is that with the the group that you're looking at and working with?
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Do you see that as a sometimes it's both you have social security and this pension, but in other times relying solely on that pension, it is you're disqualified from secure social security.
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So what you're referring to is either the the windfall elimination provision, or if you're a government employee, the GPO, the government pension offset, if you were subject to the windfall or the WEP, the the WEP, as we refer to it, uh that's no longer something that's going to truncate your social security.
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It used to be if you had this pension that you were receiving from a public institution, that institution typically didn't pay into Social Security.
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And so it was seen as double dipping to be able to get both.
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But I believe as part of the budget bill that was passed last year, that that was was removed.
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So for folks going forward, they can take that both incomes and not have to worry.
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But if they haven't been paying into it, if they're not on record as paying into Social Security because of because of the way it was set up previously, they have to like make up those credits, right?
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They do.
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So they're gonna get a reduced amount, but in the case with the windfall elimination provision, you could have paid into it, you could have had the full benefit, and then you still would get a truncated Social Security amount because of that rule, that offset.
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So now, you know, imagine you work for 10 years in the private sector and then you go to work for a school and you get that pension.
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In the old rule, those 10 years, even though you were qualified for Social Security, you know, would be reduced because of the offset.
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Now you would get to have both.
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You get to have both, but you have to have paid in for your credits.
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Correct.
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Yes, you gotta pay in.
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That's that's always the catch.
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Yes, yeah.
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And let's circle back to that TIA traditional for a minute there.
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I feel like that's one that comes up like where I've seen it in the past and people's statements, and and it really does sort of like it becomes confusing.
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And you you you touched on it already with the different liquidity periods, but can you just sort of break down a little bit more on you know, can you do in-service rollovers or it's it's fully like you have to wait to a certain date?
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Yeah, so uh unfortunately it's pretty rigid in the rules.
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Um you know, in most cases, and the reason I always kind of hedge it is because there's always some exception to the rule.
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Um, institutions can negotiate this with TIAA, so so you know, nine out of ten won't do this, but there's always that one that does.
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In most cases, you're gonna have to wait until 59 and a half before you can do any sort of you know in-service rollovers.
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After that, depending upon what the contract type is, is what's going to dictate the rules.
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So I mentioned there's six of them, and three are liquid, three are not.
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Of the three that are liquid, those are pretty straightforward.
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Those you can you can you know move it to another investment, you could roll it out into an IRA, you could access it and draw on it, take money out, do an in-service distribution if you wanted to.
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For the three that are not liquid, those you can't, at least for the majority of the assets.
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You can typically take out a on the most liquid of the non-liquid, that's the five-year schedule, you can take out one-fifth per year, so 20%.
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And you have to set up what they call a transfer payout annuity.
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So it's a recurring payment every year.
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And once you elect to do this, by the way, it's irreversible.
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So it's it's a you know permanent decision.
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So an example being make sure you're putting a lot of thought in understanding all the pros and cons before you trigger that irreversible five-year payout.
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Right, right.
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And in the five years the shortest, the ten years the longest.
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So it goes five year, eight year, ten year.
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You know, imagine that you're looking at retirement, you're several years down the road, you've got, say, the you know, the 10-year restricted annuity, and and it's called a retirement annuity, by the way.
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It has a little code that says RA.
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And you want to access this money.
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Let's say, let's say you've got you know a third of your net worth in this.
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Well, your options are going to be either you wait until retirement, and then you can decide out you know, at retirement date or later, whether you want to annuitize it.
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And you can either do a lifetime annuity, you can do a fixed payout annuity of 10 years or greater, you know, you can do a joint lifetime for your spouse as well.
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You can leave it until required minimum distributions become an issue, and then you can take the required minimum amount.
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They'll allow you to do that.
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You can do what's called an interest only, where you scrape the interest off the top, and typically the interest on this is gonna be somewhere between about three to five percent, depending upon what prevailing rates are.
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Or you can do the transfer payout option.
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And that transfer payout, in some cases, you have to wait until retirement.
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In some cases, you can do it pre-retirement if you're over 59 and a half, it depends on the institution.
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Most are gonna make you wait until retirement.
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But then what you'd elect to do is you're going to say every year for the next 10 years, give me one-tenth of this until I've completely exhausted.
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And in a lot of cases, folks aren't just taking this as a straight payout, they're taking this as a rollover into an IRA.
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So imagine you had a third of your wealth in this, that means there's a third of your your your portfolio that you can't really draw on.
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Right.
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Let's say interest rates go up and you're stuck at 3%.
00:19:48.640 --> 00:19:49.920
That's not great, right?
00:19:50.000 --> 00:19:54.000
I saw this happen in in 2022 when rates went up.
00:19:54.079 --> 00:20:00.480
And folks were stuck at you know three, three and a half percent, when they could be getting you know five, five and a half, but they're stuck in this investment.
00:20:00.880 --> 00:20:06.960
Let's say you want to be more aggressive with your with your portfolio, where the market last year is up almost 18%.
00:20:08.400 --> 00:20:09.759
And you're stuck at three, three and a half percent.
00:20:11.119 --> 00:20:11.200
Right.
00:20:11.359 --> 00:20:12.400
There's nothing you can do.
00:20:12.720 --> 00:20:21.119
And so this is a common problem I see folks run into where they aren't aware of the restrictions of this investment.
00:20:21.279 --> 00:20:24.400
In many cases, they're not even aware that they're investing in this.
00:20:24.559 --> 00:20:37.359
They're going with the risk tolerance allocation, which then has a portion being allocated to this fixed investment as part of their the QDIA, the qualified default investment allocation.
00:20:38.319 --> 00:20:50.880
And then it isn't until they're on the verge of retirement that they realize that a third of their portfolio is basically unavailable to them unless they want to take it out in these little tiny incremental amounts.
00:20:51.359 --> 00:20:51.599
Right.
00:20:51.839 --> 00:20:52.240
Wow.
00:20:52.400 --> 00:20:58.400
Yeah, so that's it's really important to understand what you have and how it works, right?
00:20:58.559 --> 00:21:08.960
And then with everything that we do, but very specifically to these educators because there are some components that are I don't want to call them permanent, but semi-permanent.
00:21:09.279 --> 00:21:10.079
Yeah, yeah.
00:21:10.480 --> 00:21:12.000
I'd say restrictive, right?
00:21:12.160 --> 00:21:12.480
Yeah.
00:21:12.799 --> 00:21:15.200
There are some people that love the annuity component.
00:21:15.279 --> 00:21:17.200
There's some people that say, hey, this is great.
00:21:17.359 --> 00:21:22.000
I can never outlive my money because I'm going to be getting X amount every year for the rest of my life.
00:21:22.160 --> 00:21:24.400
And and for them, this it's it's a good option.
00:21:24.559 --> 00:21:29.359
The problem is that many people don't understand what they're at.
00:21:30.079 --> 00:21:38.000
And so it's almost as if you're taking medicine or vitamins or some sort of prescription without realizing what are the side effects.
00:21:38.160 --> 00:21:38.319
Right.
00:21:38.559 --> 00:21:39.680
What are the pros and cons.
00:21:40.400 --> 00:21:45.440
And it sounds like that annuity option was put in place for a reason, right?
00:21:45.599 --> 00:21:48.559
There are people that are really going to benefit from that.
00:21:48.799 --> 00:21:49.119
Absolutely.
00:21:49.519 --> 00:21:53.359
Having that guaranteed annuity income once they're in retirement.
00:21:53.519 --> 00:21:54.720
So there was a purpose.
00:21:54.880 --> 00:21:59.759
I don't want to make it sound like it's all bad, but it's just a matter of balancing that with what your goals are.
00:22:00.720 --> 00:22:09.039
Because if there are things in retirement where you need liquidity, we not have it all locked up in illiquidity, right?
00:22:09.359 --> 00:22:09.599
Yeah.
00:22:09.839 --> 00:22:14.799
For folks that have or are comfortable living in a fixed budget, it's great.
00:22:14.960 --> 00:22:18.559
For folks that have variances in expenses, it can be really challenging.
00:22:18.880 --> 00:22:19.279
Yeah.
00:22:19.519 --> 00:22:20.000
All right.
00:22:20.160 --> 00:22:22.319
Well, I I appreciate you breaking that down.
00:22:22.480 --> 00:22:24.799
I feel like that's really important for people to understand.
00:22:25.039 --> 00:22:29.039
I'm curious if you see uh 457 plans.
00:22:29.279 --> 00:22:32.640
Is that something that you see as an option that sometimes people miss?
00:22:33.440 --> 00:22:34.160
Occasionally.
00:22:34.240 --> 00:22:38.319
I think I see it more often with folks that are in in administration.
00:22:38.480 --> 00:22:40.799
So not so much the professors, but the deans.
00:22:40.960 --> 00:22:42.640
They tend to have the 457 option.
00:22:43.279 --> 00:22:45.680
The higher earners within the institution.
00:22:46.160 --> 00:22:46.880
Yeah, yeah.
00:22:47.119 --> 00:22:56.559
I I even remember there was one institution in particular that elected not to do it, even though the folks were asking for it because they felt it created an inequality amongst the staff.
00:22:56.799 --> 00:22:57.839
So they're not as common.
00:22:58.000 --> 00:22:59.519
403B is pretty ubiquitous.
00:22:59.599 --> 00:23:02.720
457 is more kind of it's a case by case.
00:23:03.119 --> 00:23:03.440
Okay.
00:23:04.000 --> 00:23:11.279
And when you see it as an option, that Dean is your teacher or is your client, are you encouraging them to participate in that?
00:23:11.920 --> 00:23:13.039
Yeah, absolutely.
00:23:13.359 --> 00:23:15.599
I mean, I know it's not it's case by case, of course.
00:23:16.400 --> 00:23:17.039
It's case by case.
00:23:17.119 --> 00:23:29.759
But I think that in you know, I'm a big advocate of thinking the phrase I like to use is when we're thinking about our income and our financial planning, our taxes, we want to think about playing chess, not checkers.
00:23:30.079 --> 00:23:34.240
And so thinking through well, how are things going to benefit you down the road?
00:23:34.480 --> 00:23:41.599
And in a lot of cases, if you're a high earner, in theory, you're earning more now while you're still working than you will be when you retire.
00:23:41.759 --> 00:23:44.319
So let's take advantage of some of that tax deferral, right?
00:23:44.400 --> 00:23:49.519
Let's take advantage of trying to push down what our taxes look like when we're in our highest earning years.
00:23:49.680 --> 00:24:02.319
And then when we get into those lower tax years, that low tax corridor, the years between when you retire and when you hit maximum social security age, let's then start drawing money out of our qualified funds at a lower tax rate.
00:24:02.480 --> 00:24:11.359
Versus if I were to take it all and put it in after tax money now, I'm not getting that tax benefit, and I'm probably paying a higher tax rate than I would be later in life.
00:24:11.759 --> 00:24:31.119
Well, and I would think that you're probably very often having to look at, you know, we're talking about the educator and the their plans, but I'm assuming from talking to you that you're talking to maybe both spouses, if the person happens to be married, and that 457 plan, an extra added deferral option, is not something everybody has.
00:24:31.359 --> 00:24:49.599
And so if the spouse happens to be a high earner, there is an option to say, okay, educator spouse, please go contribute to this, and we'll just use the spouse's additional earnings to offset that deferred income because there is an opportunity there that I don't have in the private sector.
00:24:49.839 --> 00:24:50.319
Yeah, yeah.
00:24:50.400 --> 00:24:51.440
You know, it's funny you say that.
00:24:52.000 --> 00:25:03.279
But I I met with a couple last week that they're not married yet and they're debating whether to get married, and there's a big income disparity, and the gal makes considerably more than the guy does.
00:25:03.519 --> 00:25:06.240
And she's she's saying, I wish my taxes come down.
00:25:06.319 --> 00:25:12.319
I said, Well, let me explain kind of the benefits of marriage, you know, that's not to get overly romantic here, but you can spend a lot of money in your taxes.
00:25:12.720 --> 00:25:13.599
Yeah, your tax money.
00:25:14.079 --> 00:25:14.559
Yeah, yeah.
00:25:15.440 --> 00:25:16.799
And and I was explaining that to her.
00:25:16.960 --> 00:25:17.519
She's like, Really?
00:25:17.680 --> 00:25:19.359
So he could he could put money away too?
00:25:19.440 --> 00:25:25.039
And I said, Yes, absolutely, because it's a joint income taxes, and your tax bracket is going to be much greater.
00:25:25.119 --> 00:25:29.680
So you it's it's it's basically as if you you know we're taking this and dividing it by two.
00:25:29.839 --> 00:25:40.880
So there's a lot of benefit to knowing what your spouse is doing with their retirement plan and how you can, as a couple, take advantage of all of the bells and whistles.
00:25:41.119 --> 00:25:45.759
And you know, I often find myself we're trying to solve multiple problems, right?
00:25:46.000 --> 00:25:50.799
So we're in our higher earning years, so it helps to have these tax deferrals.
00:25:50.960 --> 00:26:01.200
Because if that same couple that you're talking about happens to have a rental property or something else creating income, they may not have that core door of lower income taxes, right?
00:26:01.519 --> 00:26:12.640
Yeah, I try to basically think all as far down the road as we can and develop like a roadmap and say if this is the end destination we want to get to, what does ideal look like?
00:26:12.799 --> 00:26:14.079
Let's work backwards from there.
00:26:14.240 --> 00:26:15.599
How can we accomplish that?
00:26:15.759 --> 00:26:18.880
How can we make sure that we're gonna have the highest probability of being there?
00:26:18.960 --> 00:26:22.880
And it's not just about managing income, it's about managing taxes as well.
00:26:22.960 --> 00:26:24.559
It's about managing investments.
00:26:24.720 --> 00:26:34.160
And when we think about pension component, one of the one of the benefits of that, of having a fixed pension, is you're not as reliant on the rest of the portfolio for income.
00:26:34.400 --> 00:26:37.039
That means you could take more risk with the rest of the portfolio.
00:26:37.200 --> 00:26:45.920
So you could be more aggressively allocated, you could get more growth in these other investments, because you're not drawing on them as significantly for income, because you've got this other income source.
00:26:46.000 --> 00:26:53.680
And we could say, hey, let's be really strategic and let's draw down on our savings or our after-tax portfolio and not our retirement portfolio.
00:26:53.839 --> 00:26:59.920
So now we're in a much lower tax bracket, and we can do something like Roth conversions up to a certain tax bracket.
00:27:00.160 --> 00:27:15.599
And I'll actually model this out to say if we were to maximize our Roth conversions up to the top of 22% tax bracket, and later in life, because of RMDs, we would have been bumping up into say the in a much higher bracket, maybe all the way up to the 35%.
00:27:16.319 --> 00:27:18.640
Well, will this bring that down?
00:27:18.799 --> 00:27:20.000
Will it flatten that curve?
00:27:20.160 --> 00:27:36.480
Will it reduce the amount of taxes we pay over our lifetime because we're taking advantage of the years when we're in these low tax bracket periods of time that we're never going to have again, rather than deferring everything until later, or just trying to say, how can I minimize my taxes this year?
00:27:36.640 --> 00:27:39.039
It's about minimizing your taxes over your lifetime.
00:27:39.279 --> 00:27:45.039
And all of this weaves in together with income, with investments, with estate planning as well.
00:27:45.440 --> 00:27:45.759
Yeah.
00:27:46.000 --> 00:27:46.559
All of these things.
00:27:46.880 --> 00:27:47.200
The whole plan.
00:27:47.279 --> 00:27:48.640
The whole thing, the whole thing.
00:27:49.759 --> 00:27:51.119
We just put all the pieces out on the table.
00:27:51.200 --> 00:27:52.079
We got to bring them all together.
00:27:52.400 --> 00:27:52.720
That's right.
00:27:52.799 --> 00:27:53.119
That's right.
00:27:53.279 --> 00:27:53.680
That's right.
00:27:54.000 --> 00:27:55.920
And just to come full circle on that.
00:27:56.160 --> 00:27:57.680
You know, we spend a lot of time.
00:27:57.839 --> 00:28:08.559
I use TIA as the option uh to talk about, but of course, there's other um institutions that that these educators work with, but we still focus a lot on that around educators.
00:28:08.720 --> 00:28:17.039
But I think that these plans, very similar structure, also exists sort of in the nonprofit space, research, government-affiliated companies.
00:28:17.200 --> 00:28:22.720
I know the government itself is use utilizing like the TSP program, which is like a whole nother animal.
00:28:22.960 --> 00:28:31.119
But the there are a lot of non-educator institutions also utilizing the TIA or similar structure.
00:28:31.279 --> 00:28:33.519
Do you run into that type of client as well?
00:28:33.839 --> 00:28:34.960
Oh, yeah, all the time.
00:28:35.279 --> 00:28:38.559
Schools are where I kind of started my upbringing in financial planning.
00:28:38.640 --> 00:28:49.519
But when you start to get more and more involved with universities, you see all of these offshoots to that, in that there are nonprofits that are often involved with universities.
00:28:49.759 --> 00:28:58.240
There are spouses of professors who perhaps work for an endowment, or you see a lot of governmental overlap with universities as well.
00:28:58.480 --> 00:29:07.599
Or hospitals like UC San Francisco has a fantastic hospital that is part of a public hospital retirement plan.
00:29:08.319 --> 00:29:15.680
So a lot of those are are similar, in fact, very similar, but slightly different.
00:29:16.079 --> 00:29:24.880
And things like 401A accounts tend to be very similar to 403Bs, and they tend to have similar type of investment, similar types of structures.
00:29:25.279 --> 00:29:32.559
You don't see as much of the restrictive fixed annuity components, but they're still there.
00:29:32.960 --> 00:29:35.519
It's just not as prevalent, I've found, in some of those.
00:29:35.839 --> 00:29:38.720
Um but uh you still come across them.
00:29:38.880 --> 00:29:55.279
So I would say I would take all of those different types of uh groups and put them into the same bucket of thinking about with retirement in respect to retirement planning, you know, understanding your options because they are going to all be distinct from a 401k.
00:29:55.759 --> 00:29:57.440
Yeah, yeah, that's wonderful.
00:29:57.599 --> 00:30:01.680
And and so how have you seen your your practice evolve?
00:30:01.759 --> 00:30:11.839
I'd love to hear like you you actually worked inside TIAA and then you went independent to making this area of the market an area that you wanted to serve.
00:30:11.920 --> 00:30:14.720
How how have you seen that evolve over your time?
00:30:15.599 --> 00:30:20.480
Yeah, I I think you know TIAA was was a great place to learn.
00:30:20.559 --> 00:30:29.440
It was a great opportunity to meet a lot of really intelligent people, both within the organization and and amongst the clients.
00:30:29.839 --> 00:30:40.079
They gave me a lot of exposure to different institutions, to uh you know, really kind of hands-on working with faculty, they're getting ready to retire.
00:30:40.240 --> 00:30:42.000
And it was a great place to learn.
00:30:42.079 --> 00:30:48.960
But I felt like I I had kind of grown as much as I could within the organization, and what I really wanted to do was holistic financial planning.
00:30:49.119 --> 00:30:53.599
And what TIE focuses on is just the investment part of retirement planning.
00:30:53.920 --> 00:30:56.559
Things like and just that one piece of it, too, right?
00:30:56.640 --> 00:31:01.119
Like if you're meeting with the the uh professor, you're talking about that one account.
00:31:01.759 --> 00:31:02.079
That's it.
00:31:02.640 --> 00:31:03.680
Not their whole life, yeah.
00:31:04.000 --> 00:31:05.039
Right, exactly.
00:31:05.279 --> 00:31:12.000
And you know, I had many clients who have questions about things like taxes, estate planning, insurance.
00:31:12.319 --> 00:31:14.319
We can't talk about estate planning.
00:31:14.480 --> 00:31:16.319
And you're gonna need to contact an estate attorney.
00:31:16.400 --> 00:31:17.279
Here's a referral.
00:31:17.519 --> 00:31:24.160
And I felt like this is something I could do better, frankly, on my own.
00:31:24.400 --> 00:31:27.680
And so I I went and I got my certified financial planners designation.
00:31:27.759 --> 00:31:32.720
I spent years studying to get to the point where I felt confident, being able to advise folks on these things.
00:31:32.880 --> 00:31:41.519
And when I went independent, my pitch, for lack of a better term, is hey, I do everything I was doing before, except now it's inclusive of all these other areas you need help with as well.
00:31:42.160 --> 00:32:04.559
And so I I typically will start with education, but then I'll include education about taxes, education about estate planning, education about insurance, education about real estate, all of these other areas that are important to folks' lives that are not just tangential, but very much involved with investments, but it is not exclusive being the investments.
00:32:04.640 --> 00:32:06.640
The investments are a means to an end.
00:32:06.799 --> 00:32:10.720
And I help them figure out what those ends are, and then we try to connect all those dots.
00:32:11.519 --> 00:32:12.240
I love that.
00:32:12.319 --> 00:32:21.039
And you have said that several times, and I think you and I aligned a lot on this as you lead with education, and I know you've said that you do that in your client engagements.
00:32:21.119 --> 00:32:28.799
You want to make sure they understand what they have, how it's working, what their goals are, and how do we get all these pieces to talk to each other and work towards those goals?
00:32:28.960 --> 00:32:38.559
But I think you also do some education that you put out on a regular basis as well, just to keep people informed of what's going on in the markets and other planning topics.
00:32:38.720 --> 00:32:40.240
Can you can you talk to us about that?
00:32:40.559 --> 00:32:41.920
Yeah, yeah, I'd love to.
00:32:42.160 --> 00:32:48.160
So I write a weekly newsletter, and so I I typically break it into several different pieces.
00:32:48.319 --> 00:32:59.359
There's just a quick update on what happened in the markets this past week, what happened in the stock market, what happened in the bond market, what were the major headlines that moved the markets, what were my thoughts on those?
00:32:59.440 --> 00:33:05.440
And in some cases recently, I've been talking about the war in Iran and oil prices, how that has impacted things.
00:33:05.599 --> 00:33:12.079
Last week I was talking about earnings at say Meta, you know, why Meta was down 9% after hours.
00:33:12.240 --> 00:33:15.920
But then I'll have another piece that has to do with personal finance.
00:33:20.799 --> 00:33:27.279
So I had one client who asked me, you know, what happens if the dollar is no longer the global reserve currency?
00:33:27.359 --> 00:33:28.400
How does this affect me?
00:33:28.559 --> 00:33:30.079
And he was really concerned about this.
00:33:30.240 --> 00:33:31.920
I said, This is a great question.
00:33:32.160 --> 00:33:37.599
And so I spent some time researching that and I wrote up a uh a piece about how does that work?
00:33:37.759 --> 00:33:39.200
What is the global reserve currency?
00:33:39.359 --> 00:33:44.000
Why is the dollar this and how how is this evolving over time and how does this affect you?
00:33:44.880 --> 00:33:52.079
Several months ago, when we're getting ready for tax season, I wrote a bit about how income taxes and capital gain taxes are different.
00:33:52.880 --> 00:33:58.559
Back around the end of the year, I did a whole piece on tax loss harvesting and how it's year-end.
00:33:58.799 --> 00:34:03.200
Take a look at what you have in losses, what you have in gains, try to net that out as much as you can.
00:34:03.440 --> 00:34:06.160
And this is not advice, it's education only.
00:34:06.240 --> 00:34:11.199
But the purpose of this is taking topics that clients have brought up that I think are interesting.
00:34:11.360 --> 00:34:19.360
I hope other people find interesting, uh, and then trying to try to share it with people and say, hey, here's a little bit of knowledge that you might find useful.
00:34:19.599 --> 00:34:24.400
And then lastly, I just recently started partnering with this group called the Longevity Science Foundation.
00:34:24.639 --> 00:34:28.159
And this is a nonprofit, a research grant funnel.
00:34:28.239 --> 00:34:36.639
So people can funnel their charitable donation to specific research projects, and they have a whole wealth of information on different research studies.
00:34:36.800 --> 00:34:47.760
And so I'm going through each week and publishing a summary of different research studies, things like women's health or the benefits of coffee, tea, and red wine, all sorts of different health-related things.
00:34:47.920 --> 00:34:51.519
Because at the end of the day, if you don't have your health, you don't have anything, right?
00:34:51.920 --> 00:34:57.760
And I feel like that's an important little piece of value add I can share with folks is that this is helpful information.
00:34:57.840 --> 00:35:04.159
And if you want to contribute to these causes, here's a group that can help funnel your money to the projects you care about.
00:35:04.480 --> 00:35:05.199
That's incredible.
00:35:05.280 --> 00:35:06.079
Yeah, so I love that.
00:35:06.159 --> 00:35:13.440
So you're just taking information and just trying to put good information out there so people can make more informed financial decisions.
00:35:13.679 --> 00:35:13.920
Yeah.
00:35:14.239 --> 00:35:16.000
About what's one their own life.
00:35:16.880 --> 00:35:21.119
First question related to that: how do people receive your newsletter?
00:35:21.280 --> 00:35:22.800
How can we get them to receive your newsletter?
00:35:23.119 --> 00:35:24.400
Yeah, great, great question.
00:35:24.559 --> 00:35:26.480
Uh I wish I had a better method than this.
00:35:26.559 --> 00:35:27.840
So a lot of it is word of mouth.
00:35:28.000 --> 00:35:30.000
If you're a client of mine, you're on the newsletter list.
00:35:30.079 --> 00:35:34.960
If if you've ever reached out to me and and I said, hey, I want to learn more, you're on the newsletter list.
00:35:35.119 --> 00:35:38.400
I have a website that is very much in its infancy.
00:35:38.480 --> 00:35:40.559
So I'm gonna I'm gonna plug it here for a second.
00:35:40.639 --> 00:35:43.039
But whoever's listening to this, you know, don't judge me on this.
00:35:43.119 --> 00:35:44.960
I'm still I'm still still building it out.
00:35:45.119 --> 00:35:45.760
It is authentic.
00:35:47.199 --> 00:35:47.519
It's fine.
00:35:47.599 --> 00:35:49.039
It doesn't matter what the website looks like.
00:35:49.199 --> 00:35:49.599
Yeah, yeah.
00:35:49.679 --> 00:35:50.239
No, that's it.
00:35:50.320 --> 00:35:54.719
Uh, right now it is literally nothing more than a repository of newsletters.
00:35:55.119 --> 00:35:56.079
Uh that's it.
00:35:56.320 --> 00:35:57.679
It's there's gonna be more to it.
00:35:57.760 --> 00:36:05.840
But for the moment, this is where if you want to read my past newsletters or you want to sign up for future ones, go to authenticity.financial.com.
00:36:06.079 --> 00:36:09.599
So that's that's the name of my my practice is authenticityfinancial.
00:36:09.760 --> 00:36:17.920
And the website is authenticity.financial.com, and you can subscribe through the website and you can look at past newsletters there as well.
00:36:18.320 --> 00:36:23.760
And so now I'm want to read your newsletters and I'm feeling like that's really good information, but now I want to talk to you.
00:36:23.840 --> 00:36:24.719
How do I talk to you?
00:36:25.039 --> 00:36:26.239
Yeah, it's it's really easy.
00:36:26.400 --> 00:36:29.119
Every newsletter has a little link in the bottom with my calendar.
00:36:29.199 --> 00:36:35.360
If you want to click on it, you can you know click that to book a time, or you know, I'm I'm an approachable guy.
00:36:35.440 --> 00:36:36.960
Just hit reply on the newsletter.
00:36:37.760 --> 00:36:38.480
It's that easy.
00:36:38.960 --> 00:36:45.599
I mean, we we met networking, so I can definitely attest to you being uh approachable and and and fun to be around.
00:36:45.679 --> 00:36:48.239
So it'd be it'd be good to have a conversation with you.
00:36:48.480 --> 00:36:55.920
Is there anything else you want to share or you want people to take away from this, particularly your niche market in the educator space?
00:36:56.400 --> 00:37:00.320
Understand what you are invested in and understand what your plan is.
00:37:00.480 --> 00:37:04.880
Don't wait until you get ready to retire to figure out how retirement's gonna work for you.
00:37:05.039 --> 00:37:07.599
It's never too soon to put together a plan.
00:37:07.679 --> 00:37:10.559
It's never too soon to educate yourself.
00:37:10.880 --> 00:37:14.480
And if you don't know where to start, you're more than welcome to reach out to me.
00:37:14.559 --> 00:37:21.920
I'm happy to help people understand things and don't feel like you're gonna get a sales pitch out of me from for this.
00:37:22.079 --> 00:37:29.599
You know, my whole process is about us coming to an agreement together as to where the value is and how you can improve things.
00:37:29.760 --> 00:37:32.719
But the first step is you got to understand where you're at.
00:37:33.039 --> 00:37:34.159
Yeah, I love that.
00:37:34.239 --> 00:37:39.840
And I just love the way that you you approach that and you're just trying to share more information.
00:37:40.000 --> 00:37:41.920
And I particularly enjoyed what you said.
00:37:42.000 --> 00:37:42.639
Don't wait.
00:37:42.880 --> 00:37:45.920
Don't wait to figure out where you're at and what your plan is.
00:37:46.079 --> 00:37:52.079
I I firmly believe that there is an advisor and a planner for everybody at every level.
00:37:52.159 --> 00:38:01.840
And it may not be you or I, but we can at least help make sure you're pointing in the right direction and just go out there and and take a look at where you really are at.
00:38:01.920 --> 00:38:04.320
And don't don't wait is a huge, yeah.
00:38:04.400 --> 00:38:05.360
I I say that a lot.
00:38:05.519 --> 00:38:06.559
There's no reason to wait.
00:38:06.800 --> 00:38:09.519
We wait for perfection, we'll just run out of time.
00:38:09.760 --> 00:38:12.320
You know, going to financial planner is like going to a doctor.
00:38:12.400 --> 00:38:15.440
If you wait until there's a crisis, you're probably gonna get bad news.
00:38:15.679 --> 00:38:16.079
Right.
00:38:16.239 --> 00:38:16.559
Yeah.
00:38:17.039 --> 00:38:22.400
You gotta go when you think you don't need it, and that's when you're gonna make sure you probably are in good shape.
00:38:22.639 --> 00:38:23.599
Yeah, I love that.
00:38:23.760 --> 00:38:24.960
Well, thank you so much, Kevin.
00:38:25.039 --> 00:38:28.800
I appreciate it so much, and uh I'm looking forward to hearing more and reading your newsletter.
00:38:29.039 --> 00:38:29.599
Thank you, Jen.
00:38:29.679 --> 00:38:30.480
I appreciate it as well.
00:38:30.559 --> 00:38:31.440
Thank you so much for having me.
00:38:31.519 --> 00:38:32.559
This has been fun.
00:38:38.239 --> 00:38:42.000
That's it for today's episode of the Wealth Development Studio.
00:38:42.159 --> 00:38:44.239
Remember, financial clarity is powerful.
00:38:44.480 --> 00:38:46.159
Do you need help with your financial plan?
00:38:46.320 --> 00:38:50.079
Go to Pelican Financial Planning.com to schedule a call with me.
00:38:50.239 --> 00:38:51.679
Until next time.
00:00:00.080 --> 00:00:02.160
Going to a financial planner is like going to a doctor.
00:00:02.319 --> 00:00:05.120
If you wait until there's a crisis, you're probably going to get bad news.
00:00:05.280 --> 00:00:10.960
You gotta go when you think you don't need it, and that's when you're gonna make sure you probably are in good shape.
00:00:15.839 --> 00:00:18.239
Welcome to the Wealth Development Studio.
00:00:18.399 --> 00:00:24.800
I'm your host, Genevieve George, senior financial advisor and founder of Pelican Financial Planning and Wealth.
00:00:24.960 --> 00:00:34.560
Our goal for this episode is to provide clarity about today's financial topic, inspire you to be brave with your questions, and gain confidence in your financial future.
00:00:34.799 --> 00:00:39.520
So take a deep breath, grab your favorite cup of coffee, and step into the studio.
00:00:39.679 --> 00:00:42.960
Your dose of financial empowerment begins now.
00:00:46.719 --> 00:00:56.719
If you've ever stared at a TIA or other educator retirement statement and wondered whether your money was actually yours, whether you can move it, you're not alone.
00:00:56.880 --> 00:01:05.439
Educators and academics are some of the most underserved people in financial planning, partly because their retirement world looks different from everyone else's.
00:01:05.599 --> 00:01:18.000
Between 403B, 401A plans, defined benefit pensions, sometimes 457s, and the TIAA traditional, which has its own unique liquidity rules and everything that goes into it.
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There's a lot to untangle.
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So today we're getting into all of it.
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My guest has spent years advising inside institutions and then worked inside TIAA before going independent.
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Now he runs a specialized practice with a focus on this population of individuals.
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Please welcome Kevin Rocher.
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I'm so excited to have you here.
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How are you today?
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Thank you.
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I'm doing well.
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How about yourself?
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I'm doing great.
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So I'm just so thrilled to have you.
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Uh I, you know, I think this is such an area I've worked on it in the past and not to your level of uh niche area of your practice, but it is so different.
00:01:55.439 --> 00:02:01.120
You you sit down with somebody in the education system and and their statements look different, their options are different.
00:02:01.200 --> 00:02:10.800
Maybe just kind of talk to us about how how where you saw a need and how you ended up developing this specialization around that need.
00:02:11.280 --> 00:02:12.000
Yeah, yeah.
00:02:12.560 --> 00:02:13.759
It's a great place to start off.
00:02:13.919 --> 00:02:23.520
So I was always very surprised by just the level of complexity that goes into some of these retirement plans.
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Many 403Bs have multiple versions of what are called contracts.
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So these are sub-accounts.
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And you could have somebody who's been at the same institution their entire career and have four or five different versions of the same 403B with different investments and different rules and different nuances.
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And that level of complexity to many folks is overwhelming.
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All of my clients are more educated than me because they're all PhDs.
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None of them feel confident in the understanding of their 403B accounts, fixed annuity, which is referred to as a pension often component, and also just the different layers of contracts within their 403B.
00:03:05.520 --> 00:03:11.520
So helping to, I think, simplify that is really kind of a core of what I do.
00:03:12.080 --> 00:03:25.439
And it does take a lot of effort there too, because while one 401k between two different companies is slightly different, the nature of how it works is is very much similar from one company to another.
00:03:25.599 --> 00:03:33.199
But you're saying with these different layers and different contracts within the institution, it's just it's can it can be very confusing.
00:03:33.520 --> 00:03:34.240
Oh, absolutely.
00:03:34.400 --> 00:03:34.800
Yeah.
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I I I often give the analogy of one of those Russian nesting dolls where you've got one doll instead of another doll instead of another.
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And you know, the first doll, the outside wrapper, is the the IRS rules, right?
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The rules around how 403Bs can be can be constructed.
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And then the next wrapper is the custodian, whether it's TIAA or Fidelity or Vanguard.
00:03:57.439 --> 00:04:00.319
And then the next one is the institution itself, right?
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You know, University of San Francisco versus University of Stanford have completely different retirement options and rules because they're negotiated on a case-by-case basis.
00:04:10.319 --> 00:04:13.120
And then the core of this is the individual.
00:04:13.759 --> 00:04:24.639
And you could have two professors at the same institution who have wildly different portfolios when they happen to join the institution and which contracts they they have as a result of that.
00:04:24.800 --> 00:04:33.360
So it's it's layers and layers of kind of complexity on top of each other that creates these kind of unique challenges for folks.
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You know, what I'm about to say, it almost sounds cliche, but I very much believe in education.
00:04:39.519 --> 00:04:41.759
And by that I mean educating my clients.
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So the first thing that I do with folks before I even ask them whether they want to become a client is to help them understand what they have.
00:04:49.439 --> 00:04:50.720
Now that's really key.
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And so usually most of our conversations start with a review of their accounts, of their statements, and walking through these, in often case very dense stacks of papers where they may think they have one account.
00:05:04.959 --> 00:05:06.240
In reality, they've got four.
00:05:06.399 --> 00:05:11.199
And we'll break it down and we'll look at these and I'll explain what these distinctions mean.
00:05:11.439 --> 00:05:19.920
What makes the TIA traditional group retirement annuity different from the TIA traditional group supplemental plan annuity?
00:05:20.399 --> 00:05:26.000
How do those products have distinct nuances that make them different?
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And really the goal here is for the client to feel empowered enough that they can then make a decision about what to do with these investments.
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Because it's it's almost like when you first sit down to create a puzzle, you gotta dump all the pieces out and then you lay them all out, and you figure out how all the pieces kind of you know look for the corners and the edges, you start putting them together.
00:05:47.279 --> 00:05:53.519
And so that key first step is to look at all the pieces and figure out where do we want to focus.
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Uh and and I think education is is critical to that.
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It's it's helping these folks understand kind of the basics, and then we get into the more complex planning from there.
00:06:03.600 --> 00:06:22.560
But it also And when you say basics, you're you're breaking it down truly to this is how it works, this is how how contributions are being made, whether they're mine or from my employer, and whether they can be rolled over or have to stay where they are, like really the first step, basics, is what you're talking about.
00:06:22.959 --> 00:06:23.439
Absolutely.
00:06:23.600 --> 00:06:23.839
Yeah.
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So let's get into some of those distinctions.
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So you've got the employer versus employee contributions.
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And typically those are going to go into two separate accounts.
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So you'll have the defined contribution plan and get the voluntary contribution plan.
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Between those different accounts, in many cases, they have different investment options.
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Really, the kind of the big one, the most common question I get has to do with the fixed annuity option, which at TIAA is called TIAA traditional.
00:06:54.160 --> 00:07:01.600
And where a lot of folks get confused is there's actually six different variations of TIA traditional.
00:07:01.759 --> 00:07:08.800
Now, three of those are fully liquid, meaning that you can move it into different investments, you can roll it out, you can do whatever you want with it.
00:07:09.120 --> 00:07:12.639
They act a little bit more like a traditional investment strategy.
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Exactly.
00:07:13.519 --> 00:07:23.120
And I would analogize it to almost like a stable value fund or a money market fund where it's getting a fixed rate of return.
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That rate of return, even though it's fixed for the for the amount that you put in at that period of time, that rate of return can vary for new contributions.
00:07:30.879 --> 00:07:33.759
So that adjusts to what your average rate of return is.
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But the liquid ones, I think, are typically that's going to be for the voluntary contributions.
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Those are the ones that you can do something with easily.
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The other ones, the non-liquid ones, those are ones where there is a pretty defined set of rules as to how you can access this money.
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And I don't mean it just as in withdrawing, but if you want to reallocate it somewhere else, if you want to invest in something different, it isn't as simple as just saying, you know, sell this down by 10% and add it somewhere else.
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You have to go through kind of a process, and it typically involves kind of thinking years down the road in order to free up that capital.
00:08:13.759 --> 00:08:19.920
So stuff number one is helping folks understand how much do you have in these different contracts.
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And it's not uncommon for people to have three to four of these types of things.
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And that they maybe don't know that, right?
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Like they just set it up, and that's just where their deferrals were going.
00:08:32.480 --> 00:08:34.159
And that that's exactly it.
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You know until they sit down with Kevin, they're not sure what's going on.
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Yeah, you know, you think about it this way: if you weren't a financial professional and you're focusing on whatever your expertise is, you know, you meet with your HR person once a year and they say, put as much as you can in your retirement plan, and you do that, you're doing the right thing, and and they say, well, set it to your to your risk tolerance, you do that as well.
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You don't necessarily think about the nuances of, well, how much of this is going into each sub-investment?
00:09:00.799 --> 00:09:02.639
And so that has an impact.
00:09:02.720 --> 00:09:11.519
But then what you also generally aren't aware of is that periodically the school and the custodian are going to renegotiate these contracts.
00:09:11.759 --> 00:09:18.559
And so when that happens, it in some cases replaces the old investments, in other cases, creates a new contract.
00:09:18.720 --> 00:09:27.759
So you may have been contributing to the old one for years and years, and you may even have a good understanding of what you're contributing to, but then a new one comes in, and you may not even realize it.
00:09:27.919 --> 00:09:33.840
Now your contributions get rerouted to that, and it's put into a new contract, which has a new set of rules.
00:09:34.399 --> 00:09:42.159
So I met with somebody just yesterday who had been with her institution for 30 years, and she had four different types of contracts.
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And I explained to her, one of them has a five-year liquidity schedule, another has an eight-year liquidity schedule, another has a 10-year liquidity schedule, and one of them's fully liquid.
00:09:51.600 --> 00:09:58.480
So, based upon that, we have to have four different strategies for what we're going to do with this one investment.
00:09:59.600 --> 00:10:06.080
And using that as an example with these different liquidity structures, that plays into her longer-term financial planning.
00:10:06.799 --> 00:10:07.279
Absolutely.
00:10:07.679 --> 00:10:15.200
You know, and and and it might guide where you tell her to put her new contributions if she has control over that, right?
00:10:15.679 --> 00:10:17.120
That's that's precisely right.
00:10:17.279 --> 00:10:25.279
So uh it all kind of starts with kind of getting that lay of the land, understanding where you're at before you can figure out where do we need to go going forward.
00:10:25.679 --> 00:10:26.240
Right.
00:10:26.799 --> 00:10:27.519
I love that.
00:10:27.679 --> 00:10:38.320
Now, when we talk about educators, we're often talking about like this 4-3B plan, which is something that they they can contribute to and all that, but then sometimes they also have a pension.
00:10:39.279 --> 00:10:49.759
So, you know, maybe talk to me about how you uh analyze that and help people understand that from a cash flow standpoint, you know, as you're doing longer-term planning.
00:10:49.919 --> 00:10:54.240
You know, this person you said from yesterday, 30 years with the same institution.
00:10:54.399 --> 00:11:01.679
So she may have a little bit left before she retires, but a pension would change what those numbers are, right?
00:11:02.000 --> 00:11:02.960
Well, yeah, absolutely.
00:11:03.120 --> 00:11:07.840
So a pension is is pretty uncommon in in private sector jobs these days.
00:11:08.399 --> 00:11:08.639
Right.
00:11:08.879 --> 00:11:11.519
Or my grandparents have one, I don't have one.
00:11:11.759 --> 00:11:12.720
Uh you probably don't.
00:11:14.000 --> 00:11:18.240
But you you still see it in you know public sector jobs or public institutions.
00:11:18.320 --> 00:11:25.200
So you think like like the you know, the government pensions or in this case, you know, public schools.
00:11:25.519 --> 00:11:36.159
So when I think of a pension, I think of it as again, it depends on the rules, but in most cases, it's it's like a supplement to social security.
00:11:36.799 --> 00:11:43.360
So when we think about social security, you know, we know we're gonna get this paycheck every month for the remainder of our lifetime.
00:11:43.519 --> 00:11:47.440
And it depends upon how much we've paid into it and when we access it, right?
00:11:47.519 --> 00:11:49.440
Those are the two big variables.
00:11:49.679 --> 00:11:59.360
And it's the same sort of concept of a pension, depending upon how much you've paid into it and when you decide to start drawing from it, that'll impact how much you're gonna get.
00:11:59.600 --> 00:12:06.240
In most cases, most pensions have some sort of cost of living adjustment, not all of them, but often.
00:12:06.480 --> 00:12:16.240
When I think about it in financial planning, this gives us another income stream that both provides for expenses, which is great, but also creates income taxes.
00:12:16.960 --> 00:12:34.159
So if I'm you know speaking with a client who's looking at retiring, let's say they're 65, you know, I'll explain to them Social Security becomes your full retirement age, basically becomes fully vested, as I like to call it, at 67, and then you can wait until 70 to get the maximum Social Security payout.
00:12:34.480 --> 00:12:40.639
That deferral period between 67 and 70, let's say you retire during that point in time, what do you do for income?
00:12:40.960 --> 00:12:53.919
Well, you could you could tap social security, you could tap your pension, but the problem is you're gonna get a smaller number and it's irreversible, but also now you have income taxes coming from this income source that you can't change.
00:12:54.080 --> 00:13:00.080
And so your your taxes are gonna be set at this level and increase over time for the rest of your life.
00:13:00.399 --> 00:13:14.799
Whereas if you defer those and say you've got a 403B pot that you can draw from in the interim, you can control what your taxes look like for that period between when you retire and when you hit age 70.
00:13:15.200 --> 00:13:26.240
So that low tax corridor, as I like to call it, that period between retirement and hitting maximum threshold for Social Security, that's when you can start to do some creative things, like Roth conversions, for instance.
00:13:26.559 --> 00:13:35.759
Or drawing down your, your, your qualified, your 403B, even though you may not necessarily need it because you're trying to reduce what your required minimum distributions are about.
00:13:36.639 --> 00:13:46.480
So all of this, the timing of when we start our pension correlates to when we want to set our taxes at this higher level.
00:13:46.639 --> 00:13:56.159
And if we have other income sources we can draw from in the interim, that gives us flexibility to really try to be strategic about our taxes longer term.
00:13:57.039 --> 00:13:57.600
I love that.
00:13:57.679 --> 00:13:58.159
Yeah, yeah.
00:13:58.320 --> 00:14:02.000
So it's really utilizing that what did you call it, the window?
00:14:02.799 --> 00:14:04.159
The low tax corridor.
00:14:04.480 --> 00:14:06.080
Low tax corridor, I like that.
00:14:06.320 --> 00:14:06.799
Yeah, yeah.
00:14:07.039 --> 00:14:08.159
Uh, that is great.
00:14:08.320 --> 00:14:18.720
And I have worked with some teachers in the past where they were a part of uh a pension program with their school system that disqualified them from Social Security.
00:14:19.600 --> 00:14:24.799
And so how how common is that with the the group that you're looking at and working with?
00:14:25.039 --> 00:14:35.600
Do you see that as a sometimes it's both you have social security and this pension, but in other times relying solely on that pension, it is you're disqualified from secure social security.
00:14:36.080 --> 00:14:53.759
So what you're referring to is either the the windfall elimination provision, or if you're a government employee, the GPO, the government pension offset, if you were subject to the windfall or the WEP, the the WEP, as we refer to it, uh that's no longer something that's going to truncate your social security.
00:14:53.919 --> 00:15:01.759
It used to be if you had this pension that you were receiving from a public institution, that institution typically didn't pay into Social Security.
00:15:01.919 --> 00:15:04.879
And so it was seen as double dipping to be able to get both.
00:15:05.200 --> 00:15:10.960
But I believe as part of the budget bill that was passed last year, that that was was removed.
00:15:11.279 --> 00:15:17.279
So for folks going forward, they can take that both incomes and not have to worry.
00:15:17.679 --> 00:15:26.720
But if they haven't been paying into it, if they're not on record as paying into Social Security because of because of the way it was set up previously, they have to like make up those credits, right?
00:15:27.039 --> 00:15:27.360
They do.
00:15:27.440 --> 00:15:39.919
So they're gonna get a reduced amount, but in the case with the windfall elimination provision, you could have paid into it, you could have had the full benefit, and then you still would get a truncated Social Security amount because of that rule, that offset.
00:15:40.080 --> 00:15:46.799
So now, you know, imagine you work for 10 years in the private sector and then you go to work for a school and you get that pension.
00:15:46.960 --> 00:15:53.759
In the old rule, those 10 years, even though you were qualified for Social Security, you know, would be reduced because of the offset.
00:15:53.919 --> 00:15:55.440
Now you would get to have both.
00:15:55.840 --> 00:15:58.320
You get to have both, but you have to have paid in for your credits.
00:15:58.559 --> 00:15:58.879
Correct.
00:15:58.960 --> 00:15:59.919
Yes, you gotta pay in.
00:16:00.080 --> 00:16:01.440
That's that's always the catch.
00:16:01.759 --> 00:16:02.720
Yes, yeah.
00:16:03.519 --> 00:16:07.440
And let's circle back to that TIA traditional for a minute there.
00:16:07.679 --> 00:16:15.120
I feel like that's one that comes up like where I've seen it in the past and people's statements, and and it really does sort of like it becomes confusing.
00:16:15.200 --> 00:16:29.440
And you you you touched on it already with the different liquidity periods, but can you just sort of break down a little bit more on you know, can you do in-service rollovers or it's it's fully like you have to wait to a certain date?
00:16:30.159 --> 00:16:35.360
Yeah, so uh unfortunately it's pretty rigid in the rules.
00:16:35.600 --> 00:16:41.600
Um you know, in most cases, and the reason I always kind of hedge it is because there's always some exception to the rule.
00:16:41.679 --> 00:16:49.600
Um, institutions can negotiate this with TIAA, so so you know, nine out of ten won't do this, but there's always that one that does.
00:16:49.759 --> 00:16:55.840
In most cases, you're gonna have to wait until 59 and a half before you can do any sort of you know in-service rollovers.
00:16:56.159 --> 00:17:02.480
After that, depending upon what the contract type is, is what's going to dictate the rules.
00:17:02.720 --> 00:17:06.480
So I mentioned there's six of them, and three are liquid, three are not.
00:17:06.720 --> 00:17:09.680
Of the three that are liquid, those are pretty straightforward.
00:17:09.839 --> 00:17:19.920
Those you can you can you know move it to another investment, you could roll it out into an IRA, you could access it and draw on it, take money out, do an in-service distribution if you wanted to.
00:17:20.160 --> 00:17:26.319
For the three that are not liquid, those you can't, at least for the majority of the assets.
00:17:26.480 --> 00:17:36.000
You can typically take out a on the most liquid of the non-liquid, that's the five-year schedule, you can take out one-fifth per year, so 20%.
00:17:36.960 --> 00:17:40.559
And you have to set up what they call a transfer payout annuity.
00:17:40.640 --> 00:17:42.960
So it's a recurring payment every year.
00:17:43.599 --> 00:17:46.480
And once you elect to do this, by the way, it's irreversible.
00:17:46.559 --> 00:17:49.039
So it's it's a you know permanent decision.
00:17:49.119 --> 00:17:58.480
So an example being make sure you're putting a lot of thought in understanding all the pros and cons before you trigger that irreversible five-year payout.
00:17:58.960 --> 00:17:59.359
Right, right.
00:17:59.440 --> 00:18:02.079
And in the five years the shortest, the ten years the longest.
00:18:02.160 --> 00:18:04.240
So it goes five year, eight year, ten year.
00:18:04.480 --> 00:18:15.519
You know, imagine that you're looking at retirement, you're several years down the road, you've got, say, the you know, the 10-year restricted annuity, and and it's called a retirement annuity, by the way.
00:18:15.599 --> 00:18:17.359
It has a little code that says RA.
00:18:18.160 --> 00:18:19.920
And you want to access this money.
00:18:20.079 --> 00:18:23.680
Let's say, let's say you've got you know a third of your net worth in this.
00:18:24.160 --> 00:18:32.640
Well, your options are going to be either you wait until retirement, and then you can decide out you know, at retirement date or later, whether you want to annuitize it.
00:18:32.720 --> 00:18:40.400
And you can either do a lifetime annuity, you can do a fixed payout annuity of 10 years or greater, you know, you can do a joint lifetime for your spouse as well.
00:18:40.799 --> 00:18:46.480
You can leave it until required minimum distributions become an issue, and then you can take the required minimum amount.
00:18:46.559 --> 00:18:48.000
They'll allow you to do that.
00:18:48.240 --> 00:18:58.480
You can do what's called an interest only, where you scrape the interest off the top, and typically the interest on this is gonna be somewhere between about three to five percent, depending upon what prevailing rates are.
00:18:58.720 --> 00:19:01.440
Or you can do the transfer payout option.
00:19:01.519 --> 00:19:06.319
And that transfer payout, in some cases, you have to wait until retirement.
00:19:06.559 --> 00:19:11.519
In some cases, you can do it pre-retirement if you're over 59 and a half, it depends on the institution.
00:19:11.839 --> 00:19:14.000
Most are gonna make you wait until retirement.
00:19:14.160 --> 00:19:23.359
But then what you'd elect to do is you're going to say every year for the next 10 years, give me one-tenth of this until I've completely exhausted.
00:19:23.759 --> 00:19:30.160
And in a lot of cases, folks aren't just taking this as a straight payout, they're taking this as a rollover into an IRA.
00:19:30.559 --> 00:19:38.640
So imagine you had a third of your wealth in this, that means there's a third of your your your portfolio that you can't really draw on.
00:19:39.839 --> 00:19:40.079
Right.
00:19:42.079 --> 00:19:46.799
Let's say interest rates go up and you're stuck at 3%.
00:19:48.640 --> 00:19:49.920
That's not great, right?
00:19:50.000 --> 00:19:54.000
I saw this happen in in 2022 when rates went up.
00:19:54.079 --> 00:20:00.480
And folks were stuck at you know three, three and a half percent, when they could be getting you know five, five and a half, but they're stuck in this investment.
00:20:00.880 --> 00:20:06.960
Let's say you want to be more aggressive with your with your portfolio, where the market last year is up almost 18%.
00:20:08.400 --> 00:20:09.759
And you're stuck at three, three and a half percent.
00:20:11.119 --> 00:20:11.200
Right.
00:20:11.359 --> 00:20:12.400
There's nothing you can do.
00:20:12.720 --> 00:20:21.119
And so this is a common problem I see folks run into where they aren't aware of the restrictions of this investment.
00:20:21.279 --> 00:20:24.400
In many cases, they're not even aware that they're investing in this.
00:20:24.559 --> 00:20:37.359
They're going with the risk tolerance allocation, which then has a portion being allocated to this fixed investment as part of their the QDIA, the qualified default investment allocation.
00:20:38.319 --> 00:20:50.880
And then it isn't until they're on the verge of retirement that they realize that a third of their portfolio is basically unavailable to them unless they want to take it out in these little tiny incremental amounts.
00:20:51.359 --> 00:20:51.599
Right.
00:20:51.839 --> 00:20:52.240
Wow.
00:20:52.400 --> 00:20:58.400
Yeah, so that's it's really important to understand what you have and how it works, right?
00:20:58.559 --> 00:21:08.960
And then with everything that we do, but very specifically to these educators because there are some components that are I don't want to call them permanent, but semi-permanent.
00:21:09.279 --> 00:21:10.079
Yeah, yeah.
00:21:10.480 --> 00:21:12.000
I'd say restrictive, right?
00:21:12.160 --> 00:21:12.480
Yeah.
00:21:12.799 --> 00:21:15.200
There are some people that love the annuity component.
00:21:15.279 --> 00:21:17.200
There's some people that say, hey, this is great.
00:21:17.359 --> 00:21:22.000
I can never outlive my money because I'm going to be getting X amount every year for the rest of my life.
00:21:22.160 --> 00:21:24.400
And and for them, this it's it's a good option.
00:21:24.559 --> 00:21:29.359
The problem is that many people don't understand what they're at.
00:21:30.079 --> 00:21:38.000
And so it's almost as if you're taking medicine or vitamins or some sort of prescription without realizing what are the side effects.
00:21:38.160 --> 00:21:38.319
Right.
00:21:38.559 --> 00:21:39.680
What are the pros and cons.
00:21:40.400 --> 00:21:45.440
And it sounds like that annuity option was put in place for a reason, right?
00:21:45.599 --> 00:21:48.559
There are people that are really going to benefit from that.
00:21:48.799 --> 00:21:49.119
Absolutely.
00:21:49.519 --> 00:21:53.359
Having that guaranteed annuity income once they're in retirement.
00:21:53.519 --> 00:21:54.720
So there was a purpose.
00:21:54.880 --> 00:21:59.759
I don't want to make it sound like it's all bad, but it's just a matter of balancing that with what your goals are.
00:22:00.720 --> 00:22:09.039
Because if there are things in retirement where you need liquidity, we not have it all locked up in illiquidity, right?
00:22:09.359 --> 00:22:09.599
Yeah.
00:22:09.839 --> 00:22:14.799
For folks that have or are comfortable living in a fixed budget, it's great.
00:22:14.960 --> 00:22:18.559
For folks that have variances in expenses, it can be really challenging.
00:22:18.880 --> 00:22:19.279
Yeah.
00:22:19.519 --> 00:22:20.000
All right.
00:22:20.160 --> 00:22:22.319
Well, I I appreciate you breaking that down.
00:22:22.480 --> 00:22:24.799
I feel like that's really important for people to understand.
00:22:25.039 --> 00:22:29.039
I'm curious if you see uh 457 plans.
00:22:29.279 --> 00:22:32.640
Is that something that you see as an option that sometimes people miss?
00:22:33.440 --> 00:22:34.160
Occasionally.
00:22:34.240 --> 00:22:38.319
I think I see it more often with folks that are in in administration.
00:22:38.480 --> 00:22:40.799
So not so much the professors, but the deans.
00:22:40.960 --> 00:22:42.640
They tend to have the 457 option.
00:22:43.279 --> 00:22:45.680
The higher earners within the institution.
00:22:46.160 --> 00:22:46.880
Yeah, yeah.
00:22:47.119 --> 00:22:56.559
I I even remember there was one institution in particular that elected not to do it, even though the folks were asking for it because they felt it created an inequality amongst the staff.
00:22:56.799 --> 00:22:57.839
So they're not as common.
00:22:58.000 --> 00:22:59.519
403B is pretty ubiquitous.
00:22:59.599 --> 00:23:02.720
457 is more kind of it's a case by case.
00:23:03.119 --> 00:23:03.440
Okay.
00:23:04.000 --> 00:23:11.279
And when you see it as an option, that Dean is your teacher or is your client, are you encouraging them to participate in that?
00:23:11.920 --> 00:23:13.039
Yeah, absolutely.
00:23:13.359 --> 00:23:15.599
I mean, I know it's not it's case by case, of course.
00:23:16.400 --> 00:23:17.039
It's case by case.
00:23:17.119 --> 00:23:29.759
But I think that in you know, I'm a big advocate of thinking the phrase I like to use is when we're thinking about our income and our financial planning, our taxes, we want to think about playing chess, not checkers.
00:23:30.079 --> 00:23:34.240
And so thinking through well, how are things going to benefit you down the road?
00:23:34.480 --> 00:23:41.599
And in a lot of cases, if you're a high earner, in theory, you're earning more now while you're still working than you will be when you retire.
00:23:41.759 --> 00:23:44.319
So let's take advantage of some of that tax deferral, right?
00:23:44.400 --> 00:23:49.519
Let's take advantage of trying to push down what our taxes look like when we're in our highest earning years.
00:23:49.680 --> 00:24:02.319
And then when we get into those lower tax years, that low tax corridor, the years between when you retire and when you hit maximum social security age, let's then start drawing money out of our qualified funds at a lower tax rate.
00:24:02.480 --> 00:24:11.359
Versus if I were to take it all and put it in after tax money now, I'm not getting that tax benefit, and I'm probably paying a higher tax rate than I would be later in life.
00:24:11.759 --> 00:24:31.119
Well, and I would think that you're probably very often having to look at, you know, we're talking about the educator and the their plans, but I'm assuming from talking to you that you're talking to maybe both spouses, if the person happens to be married, and that 457 plan, an extra added deferral option, is not something everybody has.
00:24:31.359 --> 00:24:49.599
And so if the spouse happens to be a high earner, there is an option to say, okay, educator spouse, please go contribute to this, and we'll just use the spouse's additional earnings to offset that deferred income because there is an opportunity there that I don't have in the private sector.
00:24:49.839 --> 00:24:50.319
Yeah, yeah.
00:24:50.400 --> 00:24:51.440
You know, it's funny you say that.
00:24:52.000 --> 00:25:03.279
But I I met with a couple last week that they're not married yet and they're debating whether to get married, and there's a big income disparity, and the gal makes considerably more than the guy does.
00:25:03.519 --> 00:25:06.240
And she's she's saying, I wish my taxes come down.
00:25:06.319 --> 00:25:12.319
I said, Well, let me explain kind of the benefits of marriage, you know, that's not to get overly romantic here, but you can spend a lot of money in your taxes.
00:25:12.720 --> 00:25:13.599
Yeah, your tax money.
00:25:14.079 --> 00:25:14.559
Yeah, yeah.
00:25:15.440 --> 00:25:16.799
And and I was explaining that to her.
00:25:16.960 --> 00:25:17.519
She's like, Really?
00:25:17.680 --> 00:25:19.359
So he could he could put money away too?
00:25:19.440 --> 00:25:25.039
And I said, Yes, absolutely, because it's a joint income taxes, and your tax bracket is going to be much greater.
00:25:25.119 --> 00:25:29.680
So you it's it's it's basically as if you you know we're taking this and dividing it by two.
00:25:29.839 --> 00:25:40.880
So there's a lot of benefit to knowing what your spouse is doing with their retirement plan and how you can, as a couple, take advantage of all of the bells and whistles.
00:25:41.119 --> 00:25:45.759
And you know, I often find myself we're trying to solve multiple problems, right?
00:25:46.000 --> 00:25:50.799
So we're in our higher earning years, so it helps to have these tax deferrals.
00:25:50.960 --> 00:26:01.200
Because if that same couple that you're talking about happens to have a rental property or something else creating income, they may not have that core door of lower income taxes, right?
00:26:01.519 --> 00:26:12.640
Yeah, I try to basically think all as far down the road as we can and develop like a roadmap and say if this is the end destination we want to get to, what does ideal look like?
00:26:12.799 --> 00:26:14.079
Let's work backwards from there.
00:26:14.240 --> 00:26:15.599
How can we accomplish that?
00:26:15.759 --> 00:26:18.880
How can we make sure that we're gonna have the highest probability of being there?
00:26:18.960 --> 00:26:22.880
And it's not just about managing income, it's about managing taxes as well.
00:26:22.960 --> 00:26:24.559
It's about managing investments.
00:26:24.720 --> 00:26:34.160
And when we think about pension component, one of the one of the benefits of that, of having a fixed pension, is you're not as reliant on the rest of the portfolio for income.
00:26:34.400 --> 00:26:37.039
That means you could take more risk with the rest of the portfolio.
00:26:37.200 --> 00:26:45.920
So you could be more aggressively allocated, you could get more growth in these other investments, because you're not drawing on them as significantly for income, because you've got this other income source.
00:26:46.000 --> 00:26:53.680
And we could say, hey, let's be really strategic and let's draw down on our savings or our after-tax portfolio and not our retirement portfolio.
00:26:53.839 --> 00:26:59.920
So now we're in a much lower tax bracket, and we can do something like Roth conversions up to a certain tax bracket.
00:27:00.160 --> 00:27:15.599
And I'll actually model this out to say if we were to maximize our Roth conversions up to the top of 22% tax bracket, and later in life, because of RMDs, we would have been bumping up into say the in a much higher bracket, maybe all the way up to the 35%.
00:27:16.319 --> 00:27:18.640
Well, will this bring that down?
00:27:18.799 --> 00:27:20.000
Will it flatten that curve?
00:27:20.160 --> 00:27:36.480
Will it reduce the amount of taxes we pay over our lifetime because we're taking advantage of the years when we're in these low tax bracket periods of time that we're never going to have again, rather than deferring everything until later, or just trying to say, how can I minimize my taxes this year?
00:27:36.640 --> 00:27:39.039
It's about minimizing your taxes over your lifetime.
00:27:39.279 --> 00:27:45.039
And all of this weaves in together with income, with investments, with estate planning as well.
00:27:45.440 --> 00:27:45.759
Yeah.
00:27:46.000 --> 00:27:46.559
All of these things.
00:27:46.880 --> 00:27:47.200
The whole plan.
00:27:47.279 --> 00:27:48.640
The whole thing, the whole thing.
00:27:49.759 --> 00:27:51.119
We just put all the pieces out on the table.
00:27:51.200 --> 00:27:52.079
We got to bring them all together.
00:27:52.400 --> 00:27:52.720
That's right.
00:27:52.799 --> 00:27:53.119
That's right.
00:27:53.279 --> 00:27:53.680
That's right.
00:27:54.000 --> 00:27:55.920
And just to come full circle on that.
00:27:56.160 --> 00:27:57.680
You know, we spend a lot of time.
00:27:57.839 --> 00:28:08.559
I use TIA as the option uh to talk about, but of course, there's other um institutions that that these educators work with, but we still focus a lot on that around educators.
00:28:08.720 --> 00:28:17.039
But I think that these plans, very similar structure, also exists sort of in the nonprofit space, research, government-affiliated companies.
00:28:17.200 --> 00:28:22.720
I know the government itself is use utilizing like the TSP program, which is like a whole nother animal.
00:28:22.960 --> 00:28:31.119
But the there are a lot of non-educator institutions also utilizing the TIA or similar structure.
00:28:31.279 --> 00:28:33.519
Do you run into that type of client as well?
00:28:33.839 --> 00:28:34.960
Oh, yeah, all the time.
00:28:35.279 --> 00:28:38.559
Schools are where I kind of started my upbringing in financial planning.
00:28:38.640 --> 00:28:49.519
But when you start to get more and more involved with universities, you see all of these offshoots to that, in that there are nonprofits that are often involved with universities.
00:28:49.759 --> 00:28:58.240
There are spouses of professors who perhaps work for an endowment, or you see a lot of governmental overlap with universities as well.
00:28:58.480 --> 00:29:07.599
Or hospitals like UC San Francisco has a fantastic hospital that is part of a public hospital retirement plan.
00:29:08.319 --> 00:29:15.680
So a lot of those are are similar, in fact, very similar, but slightly different.
00:29:16.079 --> 00:29:24.880
And things like 401A accounts tend to be very similar to 403Bs, and they tend to have similar type of investment, similar types of structures.
00:29:25.279 --> 00:29:32.559
You don't see as much of the restrictive fixed annuity components, but they're still there.
00:29:32.960 --> 00:29:35.519
It's just not as prevalent, I've found, in some of those.
00:29:35.839 --> 00:29:38.720
Um but uh you still come across them.
00:29:38.880 --> 00:29:55.279
So I would say I would take all of those different types of uh groups and put them into the same bucket of thinking about with retirement in respect to retirement planning, you know, understanding your options because they are going to all be distinct from a 401k.
00:29:55.759 --> 00:29:57.440
Yeah, yeah, that's wonderful.
00:29:57.599 --> 00:30:01.680
And and so how have you seen your your practice evolve?
00:30:01.759 --> 00:30:11.839
I'd love to hear like you you actually worked inside TIAA and then you went independent to making this area of the market an area that you wanted to serve.
00:30:11.920 --> 00:30:14.720
How how have you seen that evolve over your time?
00:30:15.599 --> 00:30:20.480
Yeah, I I think you know TIAA was was a great place to learn.
00:30:20.559 --> 00:30:29.440
It was a great opportunity to meet a lot of really intelligent people, both within the organization and and amongst the clients.
00:30:29.839 --> 00:30:40.079
They gave me a lot of exposure to different institutions, to uh you know, really kind of hands-on working with faculty, they're getting ready to retire.
00:30:40.240 --> 00:30:42.000
And it was a great place to learn.
00:30:42.079 --> 00:30:48.960
But I felt like I I had kind of grown as much as I could within the organization, and what I really wanted to do was holistic financial planning.
00:30:49.119 --> 00:30:53.599
And what TIE focuses on is just the investment part of retirement planning.
00:30:53.920 --> 00:30:56.559
Things like and just that one piece of it, too, right?
00:30:56.640 --> 00:31:01.119
Like if you're meeting with the the uh professor, you're talking about that one account.
00:31:01.759 --> 00:31:02.079
That's it.
00:31:02.640 --> 00:31:03.680
Not their whole life, yeah.
00:31:04.000 --> 00:31:05.039
Right, exactly.
00:31:05.279 --> 00:31:12.000
And you know, I had many clients who have questions about things like taxes, estate planning, insurance.
00:31:12.319 --> 00:31:14.319
We can't talk about estate planning.
00:31:14.480 --> 00:31:16.319
And you're gonna need to contact an estate attorney.
00:31:16.400 --> 00:31:17.279
Here's a referral.
00:31:17.519 --> 00:31:24.160
And I felt like this is something I could do better, frankly, on my own.
00:31:24.400 --> 00:31:27.680
And so I I went and I got my certified financial planners designation.
00:31:27.759 --> 00:31:32.720
I spent years studying to get to the point where I felt confident, being able to advise folks on these things.
00:31:32.880 --> 00:31:41.519
And when I went independent, my pitch, for lack of a better term, is hey, I do everything I was doing before, except now it's inclusive of all these other areas you need help with as well.
00:31:42.160 --> 00:32:04.559
And so I I typically will start with education, but then I'll include education about taxes, education about estate planning, education about insurance, education about real estate, all of these other areas that are important to folks' lives that are not just tangential, but very much involved with investments, but it is not exclusive being the investments.
00:32:04.640 --> 00:32:06.640
The investments are a means to an end.
00:32:06.799 --> 00:32:10.720
And I help them figure out what those ends are, and then we try to connect all those dots.
00:32:11.519 --> 00:32:12.240
I love that.
00:32:12.319 --> 00:32:21.039
And you have said that several times, and I think you and I aligned a lot on this as you lead with education, and I know you've said that you do that in your client engagements.
00:32:21.119 --> 00:32:28.799
You want to make sure they understand what they have, how it's working, what their goals are, and how do we get all these pieces to talk to each other and work towards those goals?
00:32:28.960 --> 00:32:38.559
But I think you also do some education that you put out on a regular basis as well, just to keep people informed of what's going on in the markets and other planning topics.
00:32:38.720 --> 00:32:40.240
Can you can you talk to us about that?
00:32:40.559 --> 00:32:41.920
Yeah, yeah, I'd love to.
00:32:42.160 --> 00:32:48.160
So I write a weekly newsletter, and so I I typically break it into several different pieces.
00:32:48.319 --> 00:32:59.359
There's just a quick update on what happened in the markets this past week, what happened in the stock market, what happened in the bond market, what were the major headlines that moved the markets, what were my thoughts on those?
00:32:59.440 --> 00:33:05.440
And in some cases recently, I've been talking about the war in Iran and oil prices, how that has impacted things.
00:33:05.599 --> 00:33:12.079
Last week I was talking about earnings at say Meta, you know, why Meta was down 9% after hours.
00:33:12.240 --> 00:33:15.920
But then I'll have another piece that has to do with personal finance.
00:33:20.799 --> 00:33:27.279
So I had one client who asked me, you know, what happens if the dollar is no longer the global reserve currency?
00:33:27.359 --> 00:33:28.400
How does this affect me?
00:33:28.559 --> 00:33:30.079
And he was really concerned about this.
00:33:30.240 --> 00:33:31.920
I said, This is a great question.
00:33:32.160 --> 00:33:37.599
And so I spent some time researching that and I wrote up a uh a piece about how does that work?
00:33:37.759 --> 00:33:39.200
What is the global reserve currency?
00:33:39.359 --> 00:33:44.000
Why is the dollar this and how how is this evolving over time and how does this affect you?
00:33:44.880 --> 00:33:52.079
Several months ago, when we're getting ready for tax season, I wrote a bit about how income taxes and capital gain taxes are different.
00:33:52.880 --> 00:33:58.559
Back around the end of the year, I did a whole piece on tax loss harvesting and how it's year-end.
00:33:58.799 --> 00:34:03.200
Take a look at what you have in losses, what you have in gains, try to net that out as much as you can.
00:34:03.440 --> 00:34:06.160
And this is not advice, it's education only.
00:34:06.240 --> 00:34:11.199
But the purpose of this is taking topics that clients have brought up that I think are interesting.
00:34:11.360 --> 00:34:19.360
I hope other people find interesting, uh, and then trying to try to share it with people and say, hey, here's a little bit of knowledge that you might find useful.
00:34:19.599 --> 00:34:24.400
And then lastly, I just recently started partnering with this group called the Longevity Science Foundation.
00:34:24.639 --> 00:34:28.159
And this is a nonprofit, a research grant funnel.
00:34:28.239 --> 00:34:36.639
So people can funnel their charitable donation to specific research projects, and they have a whole wealth of information on different research studies.
00:34:36.800 --> 00:34:47.760
And so I'm going through each week and publishing a summary of different research studies, things like women's health or the benefits of coffee, tea, and red wine, all sorts of different health-related things.
00:34:47.920 --> 00:34:51.519
Because at the end of the day, if you don't have your health, you don't have anything, right?
00:34:51.920 --> 00:34:57.760
And I feel like that's an important little piece of value add I can share with folks is that this is helpful information.
00:34:57.840 --> 00:35:04.159
And if you want to contribute to these causes, here's a group that can help funnel your money to the projects you care about.
00:35:04.480 --> 00:35:05.199
That's incredible.
00:35:05.280 --> 00:35:06.079
Yeah, so I love that.
00:35:06.159 --> 00:35:13.440
So you're just taking information and just trying to put good information out there so people can make more informed financial decisions.
00:35:13.679 --> 00:35:13.920
Yeah.
00:35:14.239 --> 00:35:16.000
About what's one their own life.
00:35:16.880 --> 00:35:21.119
First question related to that: how do people receive your newsletter?
00:35:21.280 --> 00:35:22.800
How can we get them to receive your newsletter?
00:35:23.119 --> 00:35:24.400
Yeah, great, great question.
00:35:24.559 --> 00:35:26.480
Uh I wish I had a better method than this.
00:35:26.559 --> 00:35:27.840
So a lot of it is word of mouth.
00:35:28.000 --> 00:35:30.000
If you're a client of mine, you're on the newsletter list.
00:35:30.079 --> 00:35:34.960
If if you've ever reached out to me and and I said, hey, I want to learn more, you're on the newsletter list.
00:35:35.119 --> 00:35:38.400
I have a website that is very much in its infancy.
00:35:38.480 --> 00:35:40.559
So I'm gonna I'm gonna plug it here for a second.
00:35:40.639 --> 00:35:43.039
But whoever's listening to this, you know, don't judge me on this.
00:35:43.119 --> 00:35:44.960
I'm still I'm still still building it out.
00:35:45.119 --> 00:35:45.760
It is authentic.
00:35:47.199 --> 00:35:47.519
It's fine.
00:35:47.599 --> 00:35:49.039
It doesn't matter what the website looks like.
00:35:49.199 --> 00:35:49.599
Yeah, yeah.
00:35:49.679 --> 00:35:50.239
No, that's it.
00:35:50.320 --> 00:35:54.719
Uh, right now it is literally nothing more than a repository of newsletters.
00:35:55.119 --> 00:35:56.079
Uh that's it.
00:35:56.320 --> 00:35:57.679
It's there's gonna be more to it.
00:35:57.760 --> 00:36:05.840
But for the moment, this is where if you want to read my past newsletters or you want to sign up for future ones, go to authenticity.financial.com.
00:36:06.079 --> 00:36:09.599
So that's that's the name of my my practice is authenticityfinancial.
00:36:09.760 --> 00:36:17.920
And the website is authenticity.financial.com, and you can subscribe through the website and you can look at past newsletters there as well.
00:36:18.320 --> 00:36:23.760
And so now I'm want to read your newsletters and I'm feeling like that's really good information, but now I want to talk to you.
00:36:23.840 --> 00:36:24.719
How do I talk to you?
00:36:25.039 --> 00:36:26.239
Yeah, it's it's really easy.
00:36:26.400 --> 00:36:29.119
Every newsletter has a little link in the bottom with my calendar.
00:36:29.199 --> 00:36:35.360
If you want to click on it, you can you know click that to book a time, or you know, I'm I'm an approachable guy.
00:36:35.440 --> 00:36:36.960
Just hit reply on the newsletter.
00:36:37.760 --> 00:36:38.480
It's that easy.
00:36:38.960 --> 00:36:45.599
I mean, we we met networking, so I can definitely attest to you being uh approachable and and and fun to be around.
00:36:45.679 --> 00:36:48.239
So it'd be it'd be good to have a conversation with you.
00:36:48.480 --> 00:36:55.920
Is there anything else you want to share or you want people to take away from this, particularly your niche market in the educator space?
00:36:56.400 --> 00:37:00.320
Understand what you are invested in and understand what your plan is.
00:37:00.480 --> 00:37:04.880
Don't wait until you get ready to retire to figure out how retirement's gonna work for you.
00:37:05.039 --> 00:37:07.599
It's never too soon to put together a plan.
00:37:07.679 --> 00:37:10.559
It's never too soon to educate yourself.
00:37:10.880 --> 00:37:14.480
And if you don't know where to start, you're more than welcome to reach out to me.
00:37:14.559 --> 00:37:21.920
I'm happy to help people understand things and don't feel like you're gonna get a sales pitch out of me from for this.
00:37:22.079 --> 00:37:29.599
You know, my whole process is about us coming to an agreement together as to where the value is and how you can improve things.
00:37:29.760 --> 00:37:32.719
But the first step is you got to understand where you're at.
00:37:33.039 --> 00:37:34.159
Yeah, I love that.
00:37:34.239 --> 00:37:39.840
And I just love the way that you you approach that and you're just trying to share more information.
00:37:40.000 --> 00:37:41.920
And I particularly enjoyed what you said.
00:37:42.000 --> 00:37:42.639
Don't wait.
00:37:42.880 --> 00:37:45.920
Don't wait to figure out where you're at and what your plan is.
00:37:46.079 --> 00:37:52.079
I I firmly believe that there is an advisor and a planner for everybody at every level.
00:37:52.159 --> 00:38:01.840
And it may not be you or I, but we can at least help make sure you're pointing in the right direction and just go out there and and take a look at where you really are at.
00:38:01.920 --> 00:38:04.320
And don't don't wait is a huge, yeah.
00:38:04.400 --> 00:38:05.360
I I say that a lot.
00:38:05.519 --> 00:38:06.559
There's no reason to wait.
00:38:06.800 --> 00:38:09.519
We wait for perfection, we'll just run out of time.
00:38:09.760 --> 00:38:12.320
You know, going to financial planner is like going to a doctor.
00:38:12.400 --> 00:38:15.440
If you wait until there's a crisis, you're probably gonna get bad news.
00:38:15.679 --> 00:38:16.079
Right.
00:38:16.239 --> 00:38:16.559
Yeah.
00:38:17.039 --> 00:38:22.400
You gotta go when you think you don't need it, and that's when you're gonna make sure you probably are in good shape.
00:38:22.639 --> 00:38:23.599
Yeah, I love that.
00:38:23.760 --> 00:38:24.960
Well, thank you so much, Kevin.
00:38:25.039 --> 00:38:28.800
I appreciate it so much, and uh I'm looking forward to hearing more and reading your newsletter.
00:38:29.039 --> 00:38:29.599
Thank you, Jen.
00:38:29.679 --> 00:38:30.480
I appreciate it as well.
00:38:30.559 --> 00:38:31.440
Thank you so much for having me.
00:38:31.519 --> 00:38:32.559
This has been fun.
00:38:38.239 --> 00:38:42.000
That's it for today's episode of the Wealth Development Studio.
00:38:42.159 --> 00:38:44.239
Remember, financial clarity is powerful.
00:38:44.480 --> 00:38:46.159
Do you need help with your financial plan?
00:38:46.320 --> 00:38:50.079
Go to Pelican Financial Planning.com to schedule a call with me.
00:38:50.239 --> 00:38:51.679
Until next time.
