How to Kick the Government Out of Your Retirement Plan

5.19.23: Audio automatically transcribed by Sonix

5.19.23: this mp3 audio file was automatically transcribed by Sonix with the best speech-to-text algorithms. This transcript may contain errors.

Producer:
Any examples used are for illustrative purposes only and do not take into account your particular investment objectives, financial situation or needs and may not be suitable for all investors. It is not intended to predict the performance of any specific investment and is not a solicitation or recommendation of any investment strategy.

Producer:
Welcome to Safe Money Masters with Greg Castle. Get ready for a full hour of financial information and economic news you can't afford to miss. Greg works hard each and every day to help hard working Americans like you navigate challenges and reach the financial freedom they desire and deserve. So now let's start the show. Here's Greg Castle.

Greg Castle:
Hello and welcome to Safe Money Masters, where we help you become masters of your money and teach you how to keep it safe. I'm Greg Castle. I'll be your host, along with my co-host and producer, Matt McClure. Matt, are you there? Say hi.

Producer:
I am here. I am successfully dialed in and ready to go.

Greg Castle:
Sounds great. Well, you can catch us every Tuesday evening at 6:00 pm on Moneytalk 1010. And on your local radio stations, 92.1 and 103.1 up north. So if you want to learn how to keep your retirement funds safe from market volatility, if you want to create an income stream that you can outlive and or you want to learn how to mitigate taxes and inflation, then you're in the right place. Now, if you happen to miss an episode, you can catch us on SafeMoneyMasters.com or wherever you listen to your favorite podcast. You can also check out our YouTube channel if you choose to and subscribe and see weekly video highlights and special content. We hope that you will do that for us. If you have any questions or comments, feel free to email me Greg at SafeMoneyMasters.com. Or you can actually call me at (813) 430-7100. Well, first of all, Matt, how are you?

Producer:
I'm good, Greg. I'm good. I've had a we were talking a little bit before we went on here. I've had a busy week, but it's it's good. It's been a good kind of busy, a productive kind of busy. I hope. I hope the same is true for you.

Greg Castle:
Yeah, it's been a it's been a very busy week, actually, so it was almost hard to carve out time for the show today. But I'm glad we could do that. Why don't we start off with a quote of the week.

Producer:
And now wholesome financial wisdom. It's time for the quote of the Week.

Producer:
This week's quote comes from the influential American Economist Milton Friedman. Milton, you may know and remember, as a Nobel laureate known for his advocacy of free market capitalism and limited government, he was also a guy who did not mince words. Greg.

Greg Castle:
No, he did not. As a matter of fact, I did a little research on him. And in addition to all of his other accolades, history also seems to regard him as a man with a quick wit and sharp insights. So apparently it was a pretty interesting fellow. But here's his quote that I'll ask for your opinion on it. This quote was The government solution to a problem is usually as bad as the problem. So what do you think about that, Matt.

Producer:
Yeah, you know, sometimes that can definitely be true despite the, you know, some things might happen with the the best of intentions and then kind of things just go go wrong and, you know, and that's just kind of the nature of the beast a lot of the time. I feel it.

Greg Castle:
Is. It is. You know, I've been been part of the government over a couple of tours in my career and also work a lot with federal employees. And some of the issues you run into a lot of times are definitely sort of strange. But for those in the general public, if we take a look at our political environment right now, you know, both sides or neither side can get along with the other when they come up with a solution. It's usually tied to so many other things that we really don't hear about or know about that it creates sometimes as many problems as it cures. So I think it's a very apt and accurate quote for this week, especially considering we're going into the debt ceiling crisis that we'll be talking about later on in the show. So speaking of the show, you know, we've got pretty much a packed show for you today. Time permitting, we're going to talk about things like a market update, which we'll talk about interest rates being on the rise again, plus the national debt and why it matters. You know, why you shouldn't count on Social Security as your retirement plan, as I know many, many people do. And we'll talk about why your benefits are at risk. We'll talk about five steps to master your cash flow and the importance of creating a budget to help you reach your goals. We'll talk about how to set those goals. And then finally, this week in history, famous birthdays in the worlds of music and cinema. And time permitting, we'll take another ask Greg, you know, question from our audience. So, Matt, if you're ready, let's go ahead and jump right in.

Producer:
Yeah, let's do it. Greg, I am I am more than ready for this market update. You know, the interest rates are on the minds of pretty much everybody who wants to buy pretty much anything that you need credit for.

Greg Castle:
Yeah. You know, as most of you know, the Federal Reserve recently raised its key short term interest rates by a quarter percentage point. However, they did signal that they might pause future hikes if inflation continues to ease as expected. So far, it's tamed down from eight something percent down to 5%. It's holding steady at 5% at this point. But in the statement or in a statement, the central bank removed previous guidance that, quote, some additional policy firming rate hikes may be appropriate to lower yearly inflation to a 2% target. Now, again, 2% is a long way from where we are, which we're currently at 5%. Actually, our ten year average at the end of 2022 was 3.27%. So 2% is a pretty lofty goal considering we are. Whether we make it or not, it depends on how well our policymakers can get their act together. You know, instead, the statement basically said the policy making committee that will closely monitor incoming information and assess implications for monetary policy. But you know, what I've found, though, is that and you can agree or disagree is that rising interest rates is a two edged sword. On the positive side, you get higher interest on bank accounts, CDs, fixed annuities and other conservative investment options. And that's great. However, on the negative side, if you've got high credit card balances, you're going to be paying through the nose. Also, you're going to pay more for new home loans and car loans and most everything that you have to finance. So if you're in a situation where you have debt, there's a good probability that high interest rates are not going to be your friend.

Greg Castle:
If you're a retiree, that's debt free or approaching retirement and you're debt free and you have the opportunity or have investments in those things that we talked about of primarily conservative investments like bank CDs, annuities, then you're probably going to be a happy camper at this point and hope the interest rates stay a little bit higher. When interest rates are still the highest they've been in a couple of decades. So if you're a pre-retiree or a retiree and you want to build up a dependable income stream that you can outlive, then give us a call at (813) 430-7100. Consultations are always complimentary. And by the way, we are a non fee based strategy company, so we will never cost you a penny. So feel free to give us a call. (813) 430-7100. Now there are even some interest based income based products, I should say, that also feature upfront bonuses. Bonuses can be a plus. Bonuses aren't always the best thing for you to get. They're a great way for people to sell stuff, but at the same time, down the road somewhere, you may find out that a product without a bonus up front may actually give you a better return on the back end. So it's something that you want to evaluate and see and we'll talk about that. If you give us a call. So we've got the national debt up to date according to the US debt clock, which you can see and be amazed at. Stunned by, frightened by. You can see it at US debt clock.org. And our national debt currently stands at $31.7 trillion and counting.

Producer:
Yeah Greg I always say that that that US debt clock.org. It's a great website to go to if you love to have nightmares.

Greg Castle:
Yeah you don't you don't want to watch that before you fall asleep at night because it'll keep you awake. I mean, it's moving faster than than a jet engine turbine sometimes can go, but it's a it's moving pretty quickly. There are three reasons why we should all be concerned about the national debt. So what's the first one, Matt?

Producer:
Well, the first one here on this list, economic stability and future generations. I mean, you know, it's not just something that obviously we have to worry about right now. It's something that will be a concern for, you know, in future years and future decades and for future generations as well.

Greg Castle:
Right. The national debt puts the nation's economy at risk, the stability of the economy at risk. It can lead to things like increased interest payments, potentially requiring higher taxes or reduced public services. And unfortunately, you know, this burden is going to fall on both current and future generations, which limits the ability to invest in essential areas and hindering economic growth, which can never be a good thing. So that's reason number one. What's reason number two, Matt?

Producer:
Well, reason number two here, interest payments and opportunity costs, those are those are two biggies. They're kind of lumped together as well.

Greg Castle:
High levels of debt result in significant interest payments, and those interest payments consume a substantial portion of the federal budget. Now, these payments divert funds from productive investments in critical social needs, such as things like health care and education. And unfortunately, servicing this debt is one of the the federal government's biggest expenses. Net interest payments on the debt are estimated to be a total of $395.5 billion this fiscal year, or 6.8% of all the federal outlays of of money that comes in. And again, you can see part of this on if you go to US debt clock.org and you'll see all sorts of of different calculations that again will most likely frighten you as opposed to making you very comfortable with our economic situation right now. So we've covered one and two. What's number three, man?

Producer:
Well, number three is impact on future economic growth. Again, looking ahead and seeing what kind of impact this huge national debt that we have and as you say, keeps on growing, what impact that's going to have on the potential for any future growth of our economy.

Greg Castle:
You know, the growing national debt does a lot of things. First of all, it can lead to higher interest rates, which we know is not a good thing for most people. That makes it more expensive for businesses and individuals to borrow money. And most of us, you know, end up borrowing money for something. Most of us borrowed money to get our house. We borrow money to get a car. Some of our listeners may have student debt that's lingered on for years and years. Um, another thing you can do is reduce investment in economic activity, which basically impacts job creation. It impacts wage growth and it negatively impacts overall prosperity of our nation. So impact on future economic growth is not a good thing. So there are some concerning facts about the national debt. Interest payments on the national debt this year. After doing some research, we found out was actually expected to be 100 billion more than the government expects to spend on things like veterans benefits and services. Things like interest payments on the national debt this year are more than the government will spend on elementary and secondary education, disaster relief, agriculture, science and space programs, foreign aid and natural resources, environmental protection combined. So we spent a lot of money and the interest on the payments that we spend limit the ability we have to to fund and keep going. Some of these programs we just talked about.

Producer:
Yeah. And, you know, it's basically it's an unfathomable when it comes right down to it, an unfathomable amount of money that that we're seeing here. And this just really kind of helps put it in perspective. All those things that you listed just the interest payments this year are more than the government spends on all of those different programs and initiatives combined. That's just kind of wild to think, and that's just the interest, because I don't think that we can ever really fathom what $31.7 trillion really is or looks like. It's just sort of not in our everyday realm of understanding. So it's kind of it's wild. It's out there, you know?

Greg Castle:
Right. You know, two of the things that we had on that list, you know, one of the things was veterans benefits and services and being a veteran. And actually, I guess I'm classified as a as a disabled veteran. I'm one of those walking wounded that, you know, you really can't see the issues I've had. But five back surgeries qualify me for that. Anyway, here in Tampa, we seem to have pretty good veteran benefits. But you hear horror stories about some other locations, too, where, you know, veterans are not getting the the benefits and the services that they need or can rely on. And I mean, that's that's just really unfortunate and also irresponsible on our government's part. Yeah, it's the second shame.

Producer:
It's a shame. My dad was a veteran, too, so I'm right there. I'm right there with you.

Greg Castle:
Yeah. The the second thing on this list, too, was actually the third thing we talked about, but elementary and secondary education. It's really hard to believe that we don't put more money toward ensuring that our children have the proper education they need to be productive adults in society when they grow up, and to be able to have the infrastructure and the education they need to be able to to find a good job. Whether or not they go to college, just have the basic skills they need to to move forward and to be able to support themselves and their families as time goes on. And and without money going toward elementary and secondary education, you know, we will fall behind, most likely several other developed countries, Japan, China, some other countries that put a lot more money in education than we do. And that's really unfortunate. So the national debt is preventing us from doing a lot of things that we need to to be able to apply money toward. But we could talk about this for a long we could talk for most of the show, actually, but we should probably move on. So what's next on our list?

Producer:
Matt Well, the next thing that we've got to talk about here on our agenda today, Greg, is kind of along the same lines because, you know, we're talking about national debt. We're talking about things that the government can't afford to pay for because it's paying all these big interest payments on the national debt and and, you know, not making a dent in the actual debt itself. But we're talking about Social Security and and really people not being able to count on Social Security as their retirement plan. I think that that far too many people today. Really do count on Social Security alone as their retirement plan. They see it as as their, you know, their their pension and or their, you know, retirement income stream. And that's that's it. But, you know, when you look at it, a, there's really and truly when you get, you know, depending on what your benefit is, likely not going to be enough to keep you anywhere close to the standard of living that you are used to in in your life. And and number two, you know, it's not something that you can necessarily not not even necessarily a program that you can count on being there for the extended period because of of some issues that we're going to talk about here.

Greg Castle:
Right. A couple of months ago, the Social Security board of trustees released an annual report. And they talked about the financial status of the Social Security trust funds. And for those that are old enough to either be drawing Social Security or are approaching the age where they can apply for Social Security, this. Hopefully won't come as a shock, but it's something you've got to prepare for. In other words, Social Security trust funds. These include trust funds for old age and survivors insurance and disability insurance. According to the report, the combined asset reserves for both the old age Survivor insurance and the disability insurance program will be depleted by 2034 if Congress doesn't act before then. And they really are spending a lot of time on other things that right now are important. But at some point, politicians have got to start addressing this. But if they don't act before then will only be enough revenue to pay for 80% of the scheduled benefits. Actually, 75 to 80%. So the old Age Survivors Insurance Trust Fund, which pays Social Security and also survivor benefits, they're only going to be able to pay scheduled benefits. In other words, what people are currently drawing in a timely manner through 2033. Um, after 2033, only approximately three fourths or basically 77% of the benefits are going to be able to be payable. What this means is that every person drawing Social Security will face anywhere between a 23 and a 33% reduction in their Social Security check. And a lot of folks who depend on Social Security aren't going to be able to make it on that.

Producer:
That's very true. Well, you know, when you look at it to let's say you are still this is just kind of something that popped in my head here. Say you're still working, for example, and let's say that your boss calls you into the office one day and says, You know what? We love you. We think you're doing a great job. Keep doing what you're doing. Oh, by the way, we're going to take away a quarter of your pay. You know, that's that's pretty much it. Yeah. I mean, that's just not. It's kind of the same because it's, you know, we know. Thank you, taxpayer of America. You have done a great job paying into this program your entire working career, but now you're in the in the middle of your retirement. We're going to take away a quarter of your pay. It's just not not a good situation to be in.

Greg Castle:
And there are folks that rural families, particularly my my grandmother, my maternal grandmother, lived to be 100 years old. Um, she passed away at the turn of the century. But the. You know, she was an old farm lady, had really no education. She could barely read and write, but she was very influential in my life. But she grew up in the sticks of Tennessee, I mean, up near the Kentucky border. I mean, literally. There was really nobody around her. She had no phone in the house when I was growing up. Not that I'm that old, but still when I was growing up, you know, she. Had no indoor plumbing. She had. She cooked on a wood burning stove. A cast iron stove. She had a big potbelly stove in her combination living room and bedroom. And that was just the life that she had. So as she got older, she got older. The only income that she had was Social Security. A lot of folks, you know, in that generation and the following generation who, you know, basically were told that Social Security would be there for them and they contributed to it and they had to rely on it. I mean, even then, if that's all the money they had to rely on back before 401. Ks became popular, 403 BS 457 Tsp's That's really what people had outside of investing in the stock market. And a lot of those folks grew up during the Depression when the market collapsed. And so they were very afraid of the stock market and doing things like that.

Greg Castle:
My parents, neither one of them ever had a credit card, which I should have probably taken lessons from, but still, neither one. Neither one of them had a credit card and probably wouldn't know how to use it if they had it. But if they didn't have cash, they didn't use it. And when they retired, their plan was, you know, Social Security. And it did it definitely came in handy. And they had a little bit of savings, you know, saved up. They didn't make a lot of money through their life. So if if their check had to be cut by 25, 30%. You know, they would have been. Financially devastated. And a lot of folks today, you know, obviously education is greater. We're more aware of things that happen. We've had opportunities such as 401. 403 vs 457 Tsp's. But still, you know, it can it can. It's going to hurt a lot of people if this happens or our hopefully our elected officials will. Listen to their their folks that in their districts and their states and take some action to shore up the Social Security trust fund. So what's going to happen if Social Security runs out in the United States, even if the trust fund is depleted? Experts say that Social Security Administration is going to be able to collect payroll taxes from workers and their employers, allowing the program to pay most of the benefits, but not all. We've already talked about the reduction.

Greg Castle:
However, if the program runs out of money, there would be a trust fund deficit so retirees could receive lower Social Security payments, which we've already talked about. It's going to affect millions of people in a negative way. So such cuts could also prove devastating for millions of older Americans, people with disabilities, children who receive benefits and even carry that further. It could also affect a lot of folks who exchange services for Social Security benefits, for example, a lot of assisted living facilities and nursing homes. The first thing they look for whenever they you know, they're looking to find a place for you is a lot of times they will swap their service or space in their facility for Social Security, maybe a little bit more. But Social Security is the first thing they look for. Without that full amount, the burden of paying for a loved one's assisted living, nursing home care, home care is going to fall on relatives, you know, family members, children. So there's going to be a lot of things. It's going to be it's going to be a domino effect if we don't get this resolved. And hopefully we can find a way to get it resolved before the trust fund runs out. As we've already mentioned, you know, the current trajectory seems like that Social Security trust fund is going to run out of money in or around 2033. However, legislators have proposed a number of preventative measures, including things like, you know, raising the retirement age to 70 years and increasing taxes.

Greg Castle:
Many have been critical of Social Security, not helping retirees keep up with the rate of inflation. So when we talk about cost of living adjustments, you know, last year was the biggest cost of living adjustment we've had in decades. So say we, I mean retirees for Social Security. For example, in 2015, there was no cost of living adjustment. 2016, according to the stats we have here. Cost of living went up 0.3%. 2017 they got a 2% increase in cola. Cost of living is cola. 2018 is 2.2. 8%. 2019 1.6%. 2020 1.3%. 2021. 5.9%. And again at 2022, at the end of 2022, Cola increased to sort of an all time high of 8.7%. But even with all of that, Social Security increases or Cola increases are not keeping up with the pace of inflation, so the retirees fall further and further behind. That's all that they rely on. So yeah, if you have any issues about Social Security benefits and strengthening your retirement income plan, by all means give us a call at (813) 430-7100. We would absolutely love to talk to you. We can also provide you with Social Security maximization report and even help you establish your own personal pension plan separate from the government such as Social Security or your workplace retirement plan, which is, you know, basically a pension plan is something that's going to give you a guaranteed income for life. And we call that safe money and it's safe money. Masters We are all for.

Producer:
That sounds like a plan to me.

Greg Castle:
All right. What's up next, Matt?

Producer:
Well, next here, we've got speaking of income, we've got five steps here to master your cash flow and create a budget. We've talked talked a lot today about what the government does and doesn't spend money on. One thing that that not a lot of money is spent on at the state or local level particularly is financial education. Right? So you don't have people who necessarily know when they leave high school or leave college even how to balance a checkbook or balance their bank account these days because not not everybody has an actual physical checkbook to balance or to, you know, just do kind of the everyday financial things. So here at Safe Money Masters, we're going to we're going to try and help educate you about some of these things as our listeners. And so mastering your cash flow, creating a budget is really, really, really important to know where your money is not only coming in from, because generally speaking, people know where their money is coming from. You got a job, you get a paycheck, it goes into your account. Right. But know where your money is going. Boy, that that is essential and not always as easy to determine sometimes, Right?

Greg Castle:
You know, when I was years ago, living in Nashville, Tennessee, which is originally home for me, I went back there after the Air Force for for several years. Anyway, Junior Achievement had a program where they would take business people such as myself, and we would be able to go to and teach an eighth grade class once a week, you know, for an hour at a time. So realizing that this even at the time, this was years ago, back in the late 80s, early 90s, realizing that. That I never had an education of how to handle money whenever I was growing up, not through school anyway. What I did was actually I gave everyone a bank account, you know, just a hypothetical or just a an invisible bank account, for lack of a better term. Then every week I'd make up little slips of paper. I'd teach them how to balance your checkbook. Teach them, you know, expenses and other things. But every week I would put all these little pieces of paper like I'd have, you know, blew a wheel on my skateboard, pay, you know, ten bucks to repair, made money babysitting, collected, you know, five bucks. So they learn how to put whatever they drew out. They had to put in their register. They made money. They lost money, had to pay money, whatever. So at the end of the three months that we've taught this program, what I did was everybody had a balance in their account. And I would occasionally give rewards out for other things for people that I knew who didn't have any money but or didn't have any money in their account. And. I went to all the local businesses and and had them donate prizes, everything from movie tickets to I think one place gave a guitar.

Greg Castle:
Somebody else gave some other stuff. But I had prizes, pretty much everybody. And I made sure that everyone got a prize. But I guess I was part of that early, you know, thing that parents got into. But everybody got everybody got something out of this thing, but they learn how to balance a checkbook. So hopefully that'll help them out in further in life. But going back to to you, our listeners who most likely are adults and most likely older adults, they'll listen to this station. The first thing you got to do is step one is basically you have to assess your financial landscape. In other words, you got to gather all your relevant financial information, including your income, what your expenses are, your debts and your savings. You got to take note of irregular income sources. You know, for example, if you have a part time job that's not regular and any significant financial obligations, you might have your home, your cars, other things, including your money that you that you put into your savings and investment accounts, understand that your current financial standing starts with creating a household balance sheet that's going to serve as a solid foundation for budgeting. In other words, you've got to know what you got coming in. You got to know what you got going out. It goes back to what we were talking about last week between wants and needs. Sometimes if that balance sheet saying that you don't have a lot of discretionary money, you really got to focus on what you need and put off some of those things that you want. So what? Step two.

Producer:
All right. So step one, of course, as you said, was assess your financial landscape, sort of look like this as almost like a financial GPS in a way. You know, it's like, okay, I'm assessing my landscape. I know where I am. Right? Yeah. So then step two is to set clear financial goals. That's the part where you put your destination address in the GPS, right? So. So you know where you are. This is where you're going, right?

Greg Castle:
You know, first of all, when you set goals, you got to know what it is that you want to achieve without knowing that you don't know where to start. No. Years ago, my wife asked me to to. Decorate a nursery for a child that we didn't know what the gender was going to be. And I kept putting it off and putting it off and putting it off. And it wasn't because I didn't want to do it to get around to it. I kept thinking I had no clear picture in my mind of what it was supposed to look like. When I got finished, I didn't know it was going to be pink going. It was going to be blue, a combination of pink and blue, or if it was going to be another color for that matter. But until you get a clear picture in your mind of what it is you want to achieve, you don't know how to budget for it. So reflect on both the short term and long term aspirations, you know, for example. List. Most people have at some point either wanted to exercise more or lose weight or whatever. So let's say, for example, let's combine those two and say that for the long term aspiration, you want to lose £20. Okay. So if you just write down a goal, I want to lose £20. Okay. That's a long term goal. But aspiration. But how are you going to achieve it? How are you going to achieve it? Or those milestone steps that come into play that help you get there? For example, a short term goal, reduce calories from 2500 a day to 1800 a day. Uh, exercise. At least take walks for at least 45 minutes a day, three times per week. Those are things that are measurable.

Greg Castle:
Those things you like, that that will help you lose those £20. Without those short term goals and aspirations, you're never going to achieve that long term goal because it's just too vague. Um, define your specific financial goals with measurable amounts and timelines. A years ago. And a lot of people know this. All my customers know this is that years ago had about a two decade stint where I was a management consultant focused on leadership development, dealing with executive teams, work with a lot of Fortune 100 Fortune 500 companies. One of the things we always worked with management teams for was developing goals. And one of those things we use was an acronym called Smart Smart Goals. Smart. The S stands for specific. It's got to be something specific like we just talked about in the previous example. Measurable, Something that you can actually say, I did it or I didn't do it. I achieved it. I didn't achieve it. That's it. A is achievable. All right. If you're married, it should probably also be that should also probably be agreed upon. It needs to be something that both of you are on the same page on, because if you're not, you're going to fight against each other and probably won't be able to achieve that goal or would be relevant and t would be, you know, time constrained. In other words, you have a timetable for completion. So again, specific, measurable, attainable or agreed upon, relevant and have a timetable for achievement. So that's a smart goal. Goals can include anything from savings for emergencies, paying off debt or even investing for the future. But again, set some goals and do your best to achieve those goals. So. Uh, I think we're running up on step three. Matt. What is step three?

Producer:
Yeah. So step three in this whole process here is to track and categorize your expenses. You know, this one, this one's important because, again, it's all about knowing where your money is going. But but it's also knowing about exactly what and what different categories of things you're spending that money on.

Greg Castle:
That's correct. I mean, tracking, tracking, categorizing expenses is a lot like tracking and categorizing calories. You know, several years ago, I decided that I was going to try and, you know, lose a few pounds. The. Uh, and what I found when I started keeping track of the calories I was eating per day every time I got ready to put that because I have a sweet tooth every time I got ready to grab for that cookie and get ready to eat it. And I would check the package and see how many calories in that one cookie. I'd say, Oh, I better put it back. So a lot of times keeping track of your expenses is exactly the same way. If you keep track of your expenses diligently for at least a month, you will find out that, you know, there are a lot of things that you spend money on that you could have probably found a way to to do less expensively or you should probably shouldn't have done it all. Um, categorize your expenses in a broad categories such as, you know, things like housing, transportation, groceries, entertainment and so forth, because you don't deprive yourself in most cases unless you're really are really, really tight on a budget where you really have no discretionary money at all. But it's really important that you find ways to enjoy life to sort of a work life balance, if you want to call it that, for finances. But you want to be able to to find some entertainment, go to an occasional movie, go out to eat, occasionally, go to to a theater show.

Greg Castle:
I mean, not just a movie theater, but an actual theatrical show. Find something to do, but find I mean, don't don't do those things. It was going to really tear up your budget and prevent you from doing it. Find other ways to get more income coming in. These are identify patterns in areas where you can probably or potentially make adjustments because we always have things that we can adjust. I used to tell people to do a flow chart. Again, going back to my consulting days, do a flow chart of your routine from the time you get up in the morning till the time you get to work. So what do you do? They start with things like, you know, you. Smack my alarm clock off the nightstand and have to get up, pick up the nightstand, do the crazy stuff they would do. But basically step by step, by step, by step by step. As they get finished, I tell them to put time to all that stuff. So they tell me how long it takes to do this, how long to make coffee, how long to shower, how long to dress, how long to do whatever. And so the last part of that exercise would be, okay, now whatever time it took, you go back to your to your flow chart and find a way to cut ten minutes out of that so you can always find ways to make adjustments to do the the spending that you're making by looking at little things. Step four.

Producer:
Matt So step four is allocating your income. So if you, you know the kinds of things that you have been spending money on, if you've categorized, if you've done these things so far in these steps, then now as it's coming down to really allocating your income, as you know, in sort of like priority order, right? Correct.

Greg Castle:
You know, the important things have to come first. You've got to prioritize the essential things like housing, utilities, groceries, debt payments you need to allocate, as we talked before, a specific portion of your income towards your defined financial goals. A lot of you do that. We're allocations to your 401. K for three B's 450 sevens. If you have other discretionary money, you can always put it outside accounts, set aside a designated amount for discretionary spending, you know, while you're maintaining a balance, um, and just basically make sure that there's little buckets for each part of your income, including that discretionary bucket that allows you to enjoy life a little bit. Step five.

Producer:
Matt So step five, this is really sort of where the rubber meets the road here is work that plan and then review and adjust regularly. It's one of those things that were the old infomercial, set it and forget it. You know, it's like set it and forget it. And it was the whole, you know, cooker thing on the on the sits on your countertop. And that guy made a ton of money selling those things. But this is not one of those situations where you can just set it and forget it. It might be you have a plan that's working fine for you the first year, two years, five years even, or maybe it works for the first six months. And then you need to make some adjustments. You know, you got to you got to be willing to do that, right?

Greg Castle:
You know, a lot of folks that I run into that have outside investment accounts or even folks that, you know, handle their own accounts and continually invest, they do a pretty good job of this, too. Check out what they've got and take take broker's advice on when to to reallocate things or when to get out of a particular fund or stock and take a look at something else. Now, the folks that typically are really guilty of setting it and leaving it tend to be the folks that invest in their 401. Four, three, B, or whatever, especially folks that have previous 401 K's from a previous job where they've left that employer. The 401. K is still there. They've done enough with it at all. They have no clue what they've got. They could lose 20% and still don't know it. Occasionally they will look at it and say, Well, I'll do something with this thing. They don't do anything with it. And folks that even with their work plan, it's like they when they first start work and they set up their 401. S or 403 B's or 457 s or Tsp's, you know, they put it into a fund. They'll listen to the local, you know, water cooler expert occasionally, give them some advice and they'll move it, leave it, forget about it until a crash happens or until they find that everybody is making money and they're so conservative in what they're investing that, you know, theirs is just stagnant.

Greg Castle:
They've got nothing. And I run into that a lot with federal employees where they put their money in the G Fund when they first started and never changed it. They've gone, you know, 30 years ready for retirement. They've got a fraction because they missed all the growth of the 14 years of, you know, upward mobility, upward trend we had in the stock market. They still got money. They didn't lose anything, but they didn't gain very much. So there has to be a balance anyway. So you need to, as you say, work your plan, review and adjust regularly, you know, frequently check in on your budget to ensure that it aligns with your goals and financial circumstances. Do things like identify areas for improvement and make necessary adjustments and adapt your budgets as your life evolves, Embracing new opportunities and challenges. You know, for example, any young listeners that we have out there, life could evolve. You know, you could end up getting married one day, getting divorced one day you could have children, you could end up taking care of your parents. You could end up with a lot of situations or even in some cases, inheriting money.

Greg Castle:
And all of a sudden you have a surplus of money that you didn't really expect to have in a lot of cases. But in any of these things, you know, you've got to find a way to review your plan. And adjusted according to to all the things we just talked about, you know, goals, life positive and negative challenges in your life. So do that. So, you know, following these steps will help you gain a clear understanding of your finances. And if you set meaningful goals and make informed decisions and. All these things will help you achieve financial stability and help you on the road to being ready for retirement, which is what really we want to help you do is to make sure that you are prepared for your golden years and can actually enjoy them. So at Castle Financial Solutions Group, you know we can help you review your assets, retirement assets, categorize your expenses, help you establish a budget, and help make sure you have a comfortable retirement. So all you got to do. It's all free. Get in touch with us at (813) 430-7100 and let us help you craft a plan for your specific situation and needs and help you set some of those smart goals we talked about. So what's next, Matt?

Producer:
Well, you know, we've been talking a lot a little bit earlier in the show about government spending and mentioned a little bit of taxes in there and all of that. So this sort of falls in line with the stuff that we've been talking about here today in that there are some reasons related to that as to why your retirement nest egg might be 15 to 37% smaller than you think. You know, you think you've got, oh, I've got this this sum of money or my goal and my plan is to have this particular sum of money, you know, when I retire, then, you know, come retirement time, there may be a wake up call waiting for you.

Greg Castle:
Oh, you just don't know. You know, too often we at Castle Financial Solutions, we meet with people and we learn that almost all of their retirement savings is in tax deferred accounts. You know, we've already talked about these 401 K's 403 B's, 457 plans, Tsp's and IRAs. These accounts allow you to defer paying taxes on contributions until they're withdrawn because the government would rather tax you on the big harvest versus the big bag of seed. Now, what does that all mean? You know, for example, if you're a farmer and, you know, you make your money on on crops, so you go out and you plow the field and you which would you rather do? Would you rather pay for the seed that you've got to plant? Or would you rather or would you rather be taxed on the seed that you plant, the amount you spend on that seed? Or would you rather be taxed on the harvest, the money you make from your crops? All right. So basically, let me give you an example. Client tells me that he's got $1 million. And I say, good for you. But you really don't. You don't. You don't have $1 million. What do you mean? I got a count. I got I got a statement right here. I got $1 million. No, no. You have a partner. That partner is Uncle Sam. Uncle Sam is basically, in this case, you know, the. The primary partner. You're basically a limited partner because Uncle Sam, you don't know how much Uncle Sam is going to charge you at the time you agree to do it, he's going to charge you whatever tax rate is going to be.

Greg Castle:
Now, we've all pretty much agreed on the show that taxes are not going to go down. They've almost got to go up. All right. But let's let's use the current tax rate, the current marginal tax rate for someone that's going to withdraw $1 million. This million dollar county wants to draw it out of his account. If he's going to pull all this million dollars out of his 401. K, 403 B, TSB or whatever at one time, a lot of things are going to happen. Number one is not going to get $1 million. He's basically going to end up with if you take out 36%, which is the marginal tax rate, he's going to end up with, what, $640,000, which is a lot less than he was hoping he was going to have. So that's his that's that's your portion today. $640,000 of that million belongs to you. The other 36 or $360,000 belongs to Uncle Sam. Now, beginning in 2026, whenever that the Tax Act from 2017, you know, ends, that's going to go up to $39,000. Uncle Sam's going to get automatically and you're going to be left with, in this case, you know what, $610,000. So to make matters worse, if you're retirement age and you pull that million dollars out at one time, your Social Security is going to be taxed as well. And when it comes to Medicare, there's something called Maggie, modified adjusted gross income. Your premium is going to be based on what your household, Maggie, is modified, adjusted gross income if you make above a certain amount.

Greg Castle:
It's not going to be the $170 per recipient that it is for right now. It's going to be double, triple, quadruple. You know what? It's going to be what it normally would be, because right now the premium for for Medicare is $170.10 for this year. I think it's actually 160 something this year went down from last year. Last year was one 7010 anyway, so it could be $240, it could be 300 and something dollars depending on what your modified adjusted gross income happens to be. So be careful of drawing all that money out at one time because all that money is not yours. Uncle Sam is is your partner, whether you like it to be or not, if you've got a tax deferred account. So what can you do? First of all, we'd like to encourage all of our listeners to schedule an appointment with us. (813) 430-7100. So we can have a discussion about a Roth conversion plan. Now, a Roth may not be right for everyone, but we need to discuss what your options are anyway. If you have a Roth, if you make a Roth conversion plan, the plan is going to outline how you can convert your money that's currently in a tax deferred bucket and place it in a tax free bucket. Now you have to pay some taxes before you do that. But conversion is possible. But there are only two. Tax free investment options for Americans. One is the Roth. Well, the Roth IRA.

Greg Castle:
And the second is life insurance. Life insurance, according to Ed Slott, who is sort of the premier IRA expert, according to Slott. Life insurance is the single best, most generous gift that IRS has ever given to taxpayers. And the life insurance comes in various different types. You've got just basic life insurance, cash value term. You've also got annuities. Annuities are a life insurance product, and life insurance products basically have the same. Well, if it's if it's non qualified money, if it's not an IRA rollover has the same assurances and protections that that basic life insurance has got. So anyway, so with your money in a Roth IRA, that money is allowed to grow tax free. The distributions are going to be tax free as well, which is pretty important. Additionally, life insurance money or Roth funds won't be subject to RMDs required minimum distributions when the government forces you to start taking withdrawals. Because as we already found out, you know, Uncle Sam has the right to raise taxes as they see fit, as they raise taxes, the amount of money you think you have in your account is not all yours. Uncle Sam is going to take his proportionate share. So, you know, life insurance provides several benefits, all of which are tax advantaged and include excellent choices for things like wealth transfer, avoiding probate, avoiding estate taxes and a lot more. So you need to consider, you know, life insurance options as part of your estate plan, as part of your financial plan for that matter. Also, take a look at Roth conversions.

Producer:
It's this week in history.

Producer:
Let's start with some things that happened back on on May 19th here, May 19th.

Greg Castle:
On this date in 1927, Charles Lindbergh and Amelia Earhart flew over the Atlantic in record setting times, but not on the same year or not in the same year. Lindbergh made the trip to Paris in 33.5 hours. Five years later, Amelia basically became the first female aviator to achieve the same feat flying from Newfoundland, Canada to Londonderry, Northern Ireland in 14 hours and 56 minutes. So she more than cut in half the time that Lindbergh took. And then on May 20th, in pop culture, on this date in 1873, Levi Strauss and Jacob Davis received a patent for blue jeans, which we're all very grateful they got that. Companies based in San Francisco, California, when it comes to cinema. On this date in 1997, actor James Stewart, one of my favorites, passed away at the age of 89. You may not know it, but Jimmy Stewart was also a general. He was a brigadier general in the Air Force Reserves. He played played Aviator quite a few times and played a military man quite a few times in his career. But he actually was a brigadier general. So more power to the veteran. And then finally, on May 21st, pop culture. On this date in 1908, first American horror movie, silent film, Dr. Jekyll and Mr. Hyde premiered in Chicago. Of course, we've seen that time and time again with a number of different adaptations.

Greg Castle:
But anyway, so next week we're going to probably we're not probably we're going to attempt to start something new called Right or Wrong. So if we got a minute left, we'll go into this last little thing from Ask Greg. So this question comes from Kevin in Clearwater What's the best income protection strategy? So basically, it depends. The answer we always give it depends. But we recommend an individual portfolio constructed to meet your projected retirement income needs, which basically allows you to take on the least amount of risk to accomplish your goal. We call this process outcome based planning. The best income protection strategies come from guaranteed sources of income. So always clear in mind what will that be legislated? Government guarantees like Social Security or contractual guarantees like pensions and annuities. You know, ultimately the key to a balanced retirement plan is going to be a blend of a blend of guarantees and growth. So again, we what I would suggest you do is give us a call at (813) 430-7100, or you can contact me at at Greg at SafeMoneyMasters.com. And again, if you want to ask a question that we want to answer online, by all means feel free to send me that email at Greg at Safe Money. Masters.com. So.

Producer:
Matt Well, that is going to just about do it. As I look at the clock on the wall here, I feel like that was that was like an old radio show. As I look at the old clock on the wall, you know.

Greg Castle:
Once again, I appreciate you so much. You've been a not only a producer, but but a great co-host. And I appreciate your insights and participation in our combined show here. Well, the.

Producer:
Pleasure is all mine. Greg really is. And I'm looking forward to doing it again next week.

Greg Castle:
All right. Well, until then, we'll see you next week. As Matt would say, same bat time, same same bat station 6.m.. Money Talk 1010 92.1 103.1. Have a great week, folks.

Producer:
Thanks for listening to Safe Money Masters with Greg Castle. You deserve to work with a financial expert who has a track record of helping clients exceed their financial goals by implementing safe and proven strategies to schedule your free No obligation consultation with Greg. Visit SafeMoneyMasters.com.

Producer:
Not affiliated with the United States government. Greg Castle does not offer tax, legal or investment advice. Consult with your tax advisor or attorney regarding specific situations. Opinions expressed are subject to change without notice. These opinions are not intended as investment advice, nor do they predict future performance of any product. All information provided is believed to be from reliable sources. However, we make no representation or warranty as to the accuracy of any statement. This information is intended to be educational in nature and does not provide a guarantee or specific result. All copyrights and trademarks are the property of their respective owners. Amateur life assumes no responsibility or liability for the content of this message. The information contained herein is provided on an as is basis with no guarantees of completeness, accuracy, usefulness, timeliness or the results obtained from the use of this information.

Producer:
Fixed annuities, including multiyear guaranteed rate annuities, are not designed for short term investments and may be subject to restrictions, fees and surrender charges as described in the annuity contract. Guarantees are backed by the financial strength and claims paying ability of the issuer.

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