It’s Not Scary: Planning for Retirement in Your 20s

[00:00:00] Cody: Hello everyone. And welcome to our webinar series here at BFG Financial Advisors. For those that are new and for those coming back, my name is Cody Niedermeier and I am actually the host of this webinar, which I’m very excited about. And I believe it’s it’s our 10th episode. So I like to pretend that I’m becoming a professional while doing it.

[00:00:21] Cody: But today we’re going to be talking about, it’s not scary planning for your retirement in your twenties, and we’re lucky enough to have Eric Brotman, the founder of BFG, a podcast host of Don’t Retire… Graduate! Excuse me. Welcome back, Eric.

[00:00:37] Eric: Thanks Cody. This is always fun for me. I always I’m enjoying watching you grow into a, a webinar professional host.

[00:00:46] Cody: Oh, we’re both having a good time doing it. And I think I believe the title of today’s webinar is extremely fitting based on the time of the year that we’re in with Halloween right around the corner. And there are a lot of people out there that think it is scary to start thinking about retirement, especially early.

[00:01:02] Eric: Well, it, it, it is scary to think about to think about ourselves in a condition where we’re older and potentially frail and all of that. And I don’t know about you, but when I was in my twenties, I was both immortal and had this incredibly long runway in front of me. And as I’ll be celebrating my 50th birthday soon I definitely have a change in perspective that comes over time.

[00:01:25] Eric: But I’m also incredibly gratified that I got good advice when I was in my twenties and that even starting this practice and this career in my twenties, we were able to get to a point where I’m not overwhelmed personally, by what’s coming down the pike financially. I’m plenty overwhelmed and freaked out about what life might look like at the next chapter.

[00:01:46] Eric: And that’s, that’s part of why I did the book and the podcast is trying to figure out what we want to be when we get. Like, I don’t know why we stopped asking that, but in terms of planning for retirement, retirement is a terrible word to tell somebody 23 to plan for. First of all, that makes no sense because if you talk to somebody 23, they’re like retirement, I’m trying to figure out rent.

[00:02:05] Eric: I got student loans, I got all this other stuff. Why in the world am I thinking about something 40 years from now? When I’ve got all of these these things right in front of me, I have to deal with, and they’re not wrong. There’s the key is to figure out a way to do both. And I know we’re going to talk about some ways to do that.

[00:02:21] Cody: Yeah, I think we’re definitely gonna be able to provide some some people with some tools that are needed to kind of take those steps to be in a situation, you know, like you are currently in and like I’m currently working towards, cause I am an invincible still still still on the edge of the twenties so I still feel that way.

[00:02:35] Eric: I saw you do a Tough Mudder and you didn’t seem invincible to me, sir.

[00:02:39] Cody: A couple of days after I didn’t feel invincible either. Without further ado, I think we get this thing started. Everyone’s favorite disclosure slide that has to be in the presentation. And then kind of just a broad view of what we’re going to talk about today is, you know, why is it important to start so early when you’re thinking about retirement?

[00:03:00] Eric: Well, time is on your side. The earlier you start, the better the outcome is going to be. And there are lots of quantitative studies that have been done about this, but the simplest thing is just think about the rule of 72. Okay. The rule of 72 basically says that, that you can determine how long it will take a dollar or any, any unit of currency to double based upon your, your return.

[00:03:24] Eric: So with a 7.2% return, which we are not promising in this webinar ever, but with a 7.2, just for simple math, that means money would double 72 divided by 7.2 is 10 money would double every 10 years, even at 6% money would double every 12. So if you have the ability to double an extra time by starting a decade earlier, that’s a big deal.

[00:03:49] Eric: And I’ll give you a perfect example. If you start, if you start when you’re 24 years old and money doubles every 12 years, cause you’re doing 6% again, guaranteeing nothing, just using the math. That means that at 36, that dollar will be $2. At 48 it’ll be $4 because the two will have doubled. And at 60 it’ll be $8.

[00:04:13] Eric: So you essentially would be multiplying a, an amplifying that dollar eight times by starting at 24. If you started the same exercise at 36, you would have half as much money because it would only double twice between then and 60. So why is it important to start early? That extra doubling with the rule of 72 is the one that pushes you over the top.

[00:04:38] Eric: And if you wait until you’re 36, that doesn’t mean you can’t get there. It’s still better to start at 36 than 48 in this, in this simple example. But if you can start at 24 and then be consistent about it, it, it, it is a way to generate significant amplified results.

[00:04:56] Cody: Yeah. I think that’s, that’s a perfect segue kind of into getting more specific of how to do those things, but just the broad idea of, you know, starting today, a dollar worth or a dollar today is worth more than a dollar tomorrow and that accumulates over time and will really help you reach your goals once you settled. But I think that goes into the next section of, you know, when we’re talking about 20 year olds, it’s a lot of people getting out of college and just starting in their careers.

[00:05:21] Cody: You already made the point earlier talking about how am I going to pay rent? You know, how am I going to go out to dinner with my friends on the weekend, afford that, and pay my rent and these people that say, I don’t have enough money to start. You know, where can they begin or what they, what should they be looking into to start planning?

[00:05:40] Eric: You know, from a very basic standpoint, in terms of the pecking order of things that you can do, reducing debt is generally, always at the top of that list, because if you’re trying to build a mountain, you know, you’re trying to climb this mountain, having debt means you’re starting in a hole.

[00:05:56] Eric: You’re not starting on the. So debt usually is first. There’s some exceptions to that though. So if you’re a young, a young person you’re out of school a year or two, you’ve got your first job and there’s a 401k being offered by your employer. And let’s just say that the 401k says, if you put 6% of your salary in your employer will put in 50 cents on the dollar, they’ll put in 3% of your salary.

[00:06:20] Eric: Just again, I’m making this up because it’s a simple example. If you don’t do the 6%, you don’t get the three. If you do the 6%, you essentially have gotten a 50% bump on that money the day you made the deposit, as long as you stay with the company, long enough to vest. And that’s a topic we go into a lot in the book and in some of the, some of the other materials, but if you change jobs every two years and you never vest in anything, then all of the employer money that was promised to you that was put in for you is no longer yours.

[00:06:51] Eric: You forfeit it. So it’s important to understand if you’re in a job that you think is really short term, maybe this is less compelling, but if you’re in a job that you’re hoping is going to become a career it makes sense to start early and the dollars that you put away if they’re matched, I would put that match ahead of almost anything else.

[00:07:07] Eric: It is the closest thing to free money I’m aware of. Free money usually doesn’t exist so take it when it’s there. The other thing. The other thing that’s important about this is if you’re a 23 year old and you’re putting money into a Roth IRA or Roth 401k, which means you’re foregoing a tax deduction, because most of us at 23, don’t have a tax problem.

[00:07:27] Eric: We have an income problem. We have a going out to eat problem. We have a student loan problem. We don’t have a tax problem. So at 23, if you fund the Roth 401k, you’re using after tax dollars, but then you can grow that money for the rest of your life without ever having it taxed again, not the principal, not the gains, nothing.

[00:07:45] Eric: And by the way, if you need some of that money for your first home, there are rules that allow you to do some of that as well. So you don’t have to make a decision that I’m putting all of this away for the next 40 years, 50 years. I don’t know what life’s going to be like in three years, there are other ways to access things. So staying flexible matters.

[00:08:03] Eric: Beyond the free money of a match. I would say the only thing other than debt that’s that’s critical is that just have a simple emergency fund. None of us want to feel like we’re one missed paycheck from oblivion. You know, if, if you, if you’re in sales and you’re commissionable, or if you’re if you’re doing something that requires you, you’re, you’re doing landscaping or you’re bartending, or you’re doing something that, that relies on, on tips or on weather or on things where your income is not always stable, if that’s true, having an emergency fund will help make, make sure that when you have a lousy week, that you can still recover from that.

[00:08:39] Eric: If you’re on salary, that’s a little less likely so long as your job is secure. But still, I think it makes sense to have a war chest because life happens. Suddenly you need new tires for your car. Or suddenly you need, you know, a medical bill comes up or something happens and you don’t want to rely on visa every time there’s a crisis like that because you’ll wind up creating a different kind of debt that’s worse than the one you started with.

[00:09:04] Cody: Yeah. No, absolutely. And I think it’s important to address now. I actually just pulled up a question from someone in the audience about their employee contributions to their retirement plans. And the question basically, just to preface it is what is going to happen to my employee contributions if they don’t vest. But I think it’s important to know that employee contributions, the contributions that you make are 100% yours.

[00:09:29] Eric: Oh, always. There’s, there’s no forfeiture of your own money. Now you’re you’re if you’re invested, your account can grow or shrink in value. I mean, some of that is just investment returns, but no, you’re an employer that’s putting money in on your behalf. If you haven’t been there for X number of years, whatever the vesting schedule is, and the plan, would be forfeited but every dollar you put into the plan and whatever it’s grown to become is always yours.

[00:09:51] Cody: Yes, absolutely. I just wanted to make that point.

[00:09:53] Eric: No, that’s a really good question. Cause that would be reason to think about maybe not participating, if you could have this taken away from you, why would you do it? But that’s not the case. Good, great question. Thank you.

[00:10:03] Cody: That’s why I did not want to save that one for the end, but moving on you know, first steps towards, like you said, we have the employer match.

[00:10:10] Cody: Can you talk a little bit just about where you can gain access to the information about your retirement plans or benefits offered through your company? Cause I think that is the starting point. Is you have to understand what is offered. Before you can really start moving forward.

[00:10:24] Eric: Cody you’re right. And I remember my first job you weren’t born actually. It’s very upsetting, but, but I remember my first job, one of the first things that happened was I had this packet of stuff dropped on my desk and it was here. We need these elections by Friday and it might as well have been ancient Greek. I didn’t know what the heck I was looking at.

[00:10:45] Eric: So I did what any logical 22 year old would do? I went and asked my parents what in the world is this? And what should I do? Well, first of all, when you talk about the blind leading the blind, our parents don’t always understand this stuff either, and they certainly don’t know what it is like being a 23 year old in 2021.

[00:11:05] Eric: I mean, there’s a different, the world is, is totally different. Parents are not the best. You certainly don’t want to hit the, the, the elbow, the person in the next cubicle or in the next office and say, Hey, what’d you choose? Because everybody’s lives are different. So and, and by the way, HR departments can help you with, with operational things enrolling, but they can’t advise you on anything.

[00:11:24] Eric: They’re actually not allowed to advise you. So you’re left with this daunting task of where do I turn? And I think one of the things that’s nice about about leveraging a financial advisor, even if it’s your parents’ financial advisor is a lot of times they will at least talk to you and help decipher this.

[00:11:40] Eric: And help you figure out what makes sense for me. And really at that point, you’re choosing health insurance. You’re deciding whether you need dental or vision, which I, frankly, most of the time I could take her leave medicals, critical disability insurance, which in almost all cases we want to buy up because it’s so inexpensive, especially for young people.

[00:11:58] Eric: And with that many years ahead of you, if something goes wrong, if you’re in an accident and something goes wrong, you’re going to need a paycheck or you’re in serious trouble, very, very quickly. The life insurance piece, if you’re young and single and don’t have kids if you get life insurance free from your company, that’s lovely, but there’s no reason to buy it through the employer.

[00:12:16] Eric: And then there’s of course the retirement piece and the retirement piece is, should I contribute to a plan? When am I eligible? And then how do I pick, what do I pick? There are all these funds, like what in the world? I don’t, you’re not expected to know all of that, but you are expected to make an educated decision.

[00:12:32] Eric: And so what a lot of 401k providers have done now, and this is true for 403Bs and other other plans as well, the thrift plan for federal employees. But in a lot of cases, they now have either lifestyle or target funds where you can pick the year at which you think you’re looking to retire.

[00:12:48] Eric: Cody, what year do you plan to retire? I’m asking this rhetorically because you may or may not know, but the reality is it’s too soon in your trajectory to maybe have figured that out. So just choose an arbitrary year when you’re 65 or 70 years old and plan a target around that. You’re just getting started.

[00:13:05] Eric: The decisions you make on your retirement plan. When you’re first getting started are not erratic. You can change them every day, if you want to (please don’t) but you could. And so I, it it’s, it’s just about getting started. So I consider the first round of your employee benefits, making sure you have the right medical insurance, if you’re young and you’re healthy, and there’s a high deductible offered where you can have a low premium and you can fund a health savings account, go for it.

[00:13:32] Eric: That’s a tax. It’s almost a tax boondoggle, but it’s legal and it’s great. And so if you’re in a position where you can do that, do it. But I think one of the first steps in understanding those benefits is getting some advice from somebody who really understands them. And who knows you a little bit.

[00:13:47] Eric: And so if you have parents who are savvy or siblings or co-workers, who are really savvy about that stuff, that’s great, but don’t be the blind asking the blind.

[00:13:56] Cody: And to build off that you know, with 401k plans, let’s say you figured out your 401k plan and you’re gonna put X amount in. The idea of automation and kind of building this habit. Can you speak a little bit to that and how automation of your retirement plan can help you reach those goals?

[00:14:14] Eric: Yes. I think some, some of the idea of automating deposits, withdrawals, transfers, contributions, all those kinds of things. Some of that autopilot is designed to make your busy life easier, but some of it’s also designed to relieve you of psychological torture.

[00:14:30] Eric: And what I mean by that is if you had to decide if you were funding, let’s say you were funding a hundred dollars a check into your 401k and you’re paid 26 times a year, every other Friday. So that’s $2,600 that you’re going to put in during the course of the year. And maybe there’s a match, but that’s, I’m using round, easy numbers.

[00:14:48] Eric: If you were just doing a hundred dollars a check and it happened automatically, whatever you happen to see on the morning news or in the paper about the market, did this, or did that, or the economy did this, or did that, or interest rates, yada, yada, all the noise. You’d be able to tune out a little bit. It really wouldn’t matter very much to you.

[00:15:08] Eric: If on the other hand you were collecting that a hundred dollars in some kind of jar and every December 31st, you had to decide, am I taking $2,600 and putting it into my plan? First of all, this is a silly example. You can’t really do it that way, but even if you could, you would then have to say, well, is this a good time to do that?

[00:15:26] Eric: Am I comfortable with this? What if I don’t? What if I have these other things going on and you would tort you literally torture yourself. It is unhealthy. And it is the best way to do this is to automate it. It is very simple to start at 20 or 40 or $50 a check or whatever it is. And then to say, you know what, I’m ready to go to 60, or I’m ready to go to 70, or I’m going to do 6% now to get the match.

[00:15:48] Eric: But next January, I’m going to, I’m going to have it automatically moved me to 7% of my comp in the hopes that if I get a raise next year, it’ll then be a higher percentage of a larger number, but I’ll still have a better take. And so it won’t affect my bills, but it will affect my savings. And so the more you can automate from that regard the better.

[00:16:08] Cody: Okay. I think it’s kind of thinking out of sight, out of mind, but it’s still something that should be reviewed, you know, two, three times a year, just to make sure that everything’s on track and you’re still making progress towards those goals. Yeah. And then building off benefits that, you know, there are a good amount of employers that are starting to include and I think this kind of sneaks into the conversation about retirement is the idea of estate planning. And kind of the necessary stuff for estate planning, for a younger person who says I don’t need a will, I don’t have anything that is a value or anything like that, but there are other aspects to the estate plan that could definitely come up in conversation once, you know, you come to an age of majority or you turn to stuff like, you know, medical power of attorney or financial power of attorney, a different situation. So can you touch on those?

[00:16:55] Eric: Yeah. The, the short answer is if you don’t have kids or assets, do you need a, will? The answer is not really. I mean, you really, if, if you drop dead tomorrow with no assets and no children, there’s going to be some paperwork done by someone, even if it’s at the courthouse, it’s not the end of the world.

[00:17:09] Eric: But as soon as you are of the age of majority, which in most states is 18. Having your own financial and medical powers make sense because while you’re 17, your parents can step into your shoes and make medical decisions for you. They can talk to a doctor on your behalf. They can make financial decisions and talk to a bank on your behalf.

[00:17:27] Eric: Once you’re 18, they can’t, it’s kind of like when you’re in high school, your parents get your grades, but when you’re in college, you get your own because you’re an adult and they have to, they have to do some things to, to make sure you allow them to see them. It’s the same thing. Once you’re an adult. No one has the ability to make decisions, to step into your shoes, unless you give it to them.

[00:17:47] Eric: And it’s important to name someone who can do that in case you’re in an accident. If you’re in a car accident or something, and you’re in the hospital and you need care and you don’t have these documents typically a physician will do everything in their power to just keep you alive. Well, some people would want that. Other people would be less likely to want to be on, for example, a ventilator and breathing tube or feeding tube for the next five years. And we’ve seen those, those are horror stories, but even something simple, like like you have to sign a new lease for your, for your apartment, but you were in a bicycle accident. You both broke both your wrist and you can’t sign anything, just something silly or, or in, in a better way.

[00:18:27] Eric: You’re traveling. You’re in Italy for three months, you know, it’s, it’s a great trip. You’re backpacking through Italy and there’s some things that have to happen with your bank account. You have to name somebody who can handle those things in your absence, whether it’s because of a tragedy or whether it’s because you’re doing something great.

[00:18:42] Eric: The will itself, if you don’t have children and you don’t have assets, it really doesn’t matter. I think a simple will is usually still a good idea, but once you’ve built any accounts or any assets that don’t have beneficiaries on them, the will becomes important. Your 401k or life insurance, all of those are going to pass as long as you’ve named a beneficiary, they’re going to pass that way. The will is less about property at a given point and more about who’s going to care for important things and buy things. I mean, your kids, not your stuff. Your chafing dishes not is not going to cause world war three in your family. I hope, but if you have a two year old, you need to name the person or people who are going to take care of your two year old.

[00:19:22] Eric: If something happened. And not only to take care of their financials, but to take care of them, to live with them, to get them close, to get them to doctors, to make sure they’re in school. And if you don’t name someone, the state will name someone. And I don’t trust the state to, to do anything properly, not just the state.

[00:19:41] Eric: If you have to rely on the government to do anything, just look at the post office, it doesn’t work. You want to name the right people so that you can control that process, even if you’re not able to do it then..

[00:19:52] Eric: And another

[00:19:53] Cody: important note I think for this is just, it doesn’t need to be complicated. I think these are very simple documents that, you know, if your parents have estate planning, documents, those are conversations you can have with them of, you know, could I work with them or there’s it, shouldn’t break your bank to get these documents done.

[00:20:10] Cody: Oh no, this

[00:20:11] Eric: should not be expensive. And quite frankly, depending on your family situation, You know, if your, if your family is of the type of means where they have a profound estate plan with, with a law firm, that law firm may just do these for the kids gratis to, or, or for a song. So it’s worth, it’s worth that is worth talking to your folks about if, if you’re, if you have that kind of communication with your parents.

[00:20:32] Cody: Yeah, absolutely. And it could be a part of your benefit package, something to look into to see if maybe it’s offered through your employer, that they have some sort of agreement that can help you establish these documents.

[00:20:42] Eric: That’s true. And it’s especially true for folks in the military because folks in the military have access to the legal services and all those kinds of things directly just as, as being military members.

[00:20:53] Eric: And the same, thing’s true with most of the state or federal employees. In the private sector it’s a little bit less likely, but not impossible. And so it’s worth seeing if you have a legal service that can help. And even if you have to find this person yourself, if you ask for a referral to somebody, this is simple stuff. This should not be expensive.

[00:21:11] Cody: Yeah, absolutely. And I apologize to everyone, cause I kind of brought us down a little bit by talking about estate plans and kind of the bad stuff that’ll happen. So I’m going to bring it up a level and let’s talk about setting goals.

[00:21:23] Eric: Yeah. You just brought up a state plans while there was a a tombstone on the slide.

[00:21:29] Cody: Oh, I know. I that’s why I had to be on there. It had to be, it’s one of the things that has to be talked about with, you know, our clients. People in their twenties are looking to retire. It’s part of the conversation.

[00:21:40] Eric: Well, let’s have a little fun. When we start talking about, when we start talking about goals, there are lots of different kinds.

[00:21:45] Eric: Some people look at goals as a bucket list. Like during my lifetime, I want to do these eight things. I tend to discourage the bucket list approach because there’s nothing worse than having a list of eight things you want to do doing them, and then having nothing to do. And I know you could do another bucket list, but people don’t.

[00:22:00] Eric: So to me, there are goals that are various types of life goals. Some of them are financial and some of them aren’t. So if you have a goal that is to take a vacation and to do an African safari, that is both a life goal and they financial goal because it’s going to cost money to do that kind of trip. And so you, you sort of look at that as a short term or intermediate term saving.

[00:22:25] Eric: And it’s good to have a plan around how to get there. You know, the idea of financial independence and retirement is different for everybody. For some people it’s working two jobs instead of three. And for some people it’s a yacht in the Mediterranean so not everybody can use the same definition. Your goals need to be, and you you’ve heard this in business before this sort of SMART goal idea. Are they specific? It’s not, my goal is to take a vacation every year because that doesn’t, that doesn’t move you emotionally. It’s better to list some places or to think about the kinds of vacations you want to take, really visualize it because it makes all your hard work and all your savings efforts better.

[00:23:01] Eric: Same thing with long-term retirement. If, if it is your objective someday to have a home at the beach or a place where your kids and grandkids, if you’re blessed with them, or are able to congregate, or you want to leave a gift to your school or church or, or, or some other organization, these are financial goals.

[00:23:21] Eric: They are big goals. They might be 50- or 60- or 70-year goals, but the more the more you reduce them to writing and the more you really think about it. Not because they’re in concrete, they can change. Our lives change and therefore some of our trajectories, our goals change, but some of them, you know, a really simple goal that I, that I really like is to be debt free.

[00:23:42] Eric: And by debt-free, I mean, debt-free in an adverse way. If you have a house and it’s got a mortgage on it and it’s favorable, that’s not debt. If you have credit cards and student loans and car payments and all of that stuff, to me, that’s, that’s like a, an albatross around your neck. So being debt-free is a great goal.

[00:23:58] Eric: And being debt free by a certain age is reasonable. Now we’re in a, a world where you know, the idea of retirement has changed. It used to be, you worked for the same company for 40 years. You got a gold watch and a party. You, you went off on your own, you watch TV for seven years and you were dead.

[00:24:12] Eric: Which sounds gruesome, but that’s what it was. Today, people change jobs every two to three years, they’re mobile. They move around the country. They do some things remotely. They, they create side hustles and do consulting and do other types of things. And people want freedom. They want independence.

[00:24:27] Eric: And so in most cases it’s determining when you can be financially independent is an incredibly important goal. What will it take and how fast and steep do you want your treadmill to be? Yeah, because you don’t have to replace a hundred percent of your income to live well. If you’re making a whole lot of money and a lot of it’s going to taxes and a lot of it’s going to nonsense and nonsense is a technical term, but if that’s what’s happening, you’re, you’re, you’re setting yourself up for a very heavy lift if you want to continue to do those things. On the other hand, if what you’re looking to do is simplify your life a little bit and figure out what are the, what are the necessities and what are the niceties. If you can do it like that, then you’re in a much better position to reach financial independence.

[00:25:11] Eric: And, you know, if you’ve, if you’ve talked to people about the fire movement, this idea of financial independent, retired early, most of those people want to be able to be in a position to not have to work. Most of them are working. Most of them love what they do, but if you’re working because you love it, not because you need to make rent, it’s a different experience at work.

[00:25:34] Cody: Yeah, no, I could not agree more. I think that’s a great way to break it down and, you know, having those goals. Cause I know one of the first things I did once I started here at BFG was kind of create those measurable goals, have them written down and you know, what steps I could take to reach every single one of them. And it keeps you on track. It really, it keeps you focused. It keeps everything right in front of you that you want and really helps you get there.

[00:25:58] Eric: Well, and, and, and, and I’m of the opinion that, that those goals should not be purely a dollar figure. You know, the idea that I want to have a hundred thousand dollars by such and such an age, or I want to have a million dollars by such and such an age, the problem is because of inflation, the cost of a dollar and the life choices you’re making, a million dollars today is not what it was 50 years ago.

[00:26:18] Eric: And it’s not what it will be 50 years from now. So I would discourage people from saying, I want to have this much money by this date. Hmm, what you really want to do is you want to replace your income, ideally entirely, gross, net of your savings, in an indefinite way. And that’s a mouthful. And, you know, in the, in the book Don’t Retire… Graduate!, we go through those exercises in the workbook. We take folks through that, so that if you want to try and calculate that yourself, it’s, it’s not difficult math, but it would be impossible to describe on a webinar right now. But there are exercises that you can do to sort of figure out what’s that going to take and when.

[00:26:55] Cody: Yeah, no, I think that’s a great point. And you touched on this earlier, but we definitely wanted to hit it over the head of, you know, kind of some examples or from your experience, what you’ve seen from, you know, people who have started in their twenties versus, you know, if I’m to wait another 10 years before I start doing any retirement planning or anything like that, just, you know, differences between those and how they accumulate other than the, you know, 72 rule or the rule of 72, excuse me.

[00:27:24] Eric: Well, and I’m going to flip this, this question back around on you a little bit, because we talked about what if I wait another 10 years in terms of the growth of capital, but I’m also going to say, what if I wait another 10 years to do things that are important to me?

[00:27:36] Eric: Because I think part of this is recognizing that we don’t live in a world that is purely quantitative. This is not just a math problem, it’s our lives. And we only get one go with this. So I’ve, I know a lot of people who say I I’m going to wait 10 years to take that safari because then I’ll have more money.

[00:27:55] Eric: And then they either don’t live 10 years or they’re not healthy enough to enjoy it or their spouse has died and now they don’t want to go without him or her. I mean, all these kinds of things happen or their life has changed. They had triplets and now can’t go. I think it’s, once you have saved the amount of money or invested the amount of money every year, that you need to be on track for independence, how you spend the rest of it is completely up to you.

[00:28:18] Eric: And so I know people who would rather go to a nice steakhouse once a month, then go to a corner restaurant four times. That’s up to you. I know people who would rather not dine out at all. They’d rather eat home because they can spend their money on other entertainment. They want to have hockey tickets, or they want to go to the movies. How you spend your entertainment, your fun money truly is up to you.

[00:28:41] Eric: And it should be the things that make you happiest. You can’t do everything you want to do. But most of us can do anything we want, if it, if it’s the thing that we, that we focus on. So don’t wait 10 years to take the trip. I’m not saying it’ll be frivolous and issue your retirement savings. I’m saying once you’ve put away enough money to be on track for the big thing, how you choose to spend the what’s left, don’t feel the need to squirrel away every penny. Actually think that’s kind of tragic. Yes. I know a lot of people who’ve built a lot of wealth and never enjoy it. And that stinks. I mean, you know, I then know a lot of people who blow every penny on her in deep trouble at a given point. Also there’s a middle ground here. I’m not telling people to go spend everything and hope that the government’s going to take care of us.

[00:29:28] Eric: I’m also not telling people to squirrel away every penny and not to live now. Because you are younger and healthier and more in many cases fit and active than you will be in 10 years or 20 years or 30 years, you should enjoy the things that mean the most to you, whether they’re dining or travel or sports or entertainment or kids or anything. So I would tell you don’t wait 10 years to start the financial journey, but also don’t wait 10 years to live your life.

[00:29:54] Cody: And you kind of gave a good idea. There’s two spectrums of people that you see a lot of, of the people that are afraid to spend anything that they’ve made and you’ve got the people who spend everything.

[00:30:03] Cody: So I think it’s definitely important to spend some time on, you know, who is there to help, who can help you navigate those waters. And if you don’t mind just kind of walking through the process or process of what you should look for in someone to help you as an advisor and what they have to offer to, you know, help you get those ultimate goals.

[00:30:23] Eric: Well, let’s, let’s begin with the an abundantly clear fact, which is that not everyone needs a financial advisor. Absolutely. Right. We’d like to think that we can help anyone. And in lots of cases, I think in many ways we can, however not everyone needs a financial advisor in the same way. Not everyone needs a trainer at the gym.

[00:30:40] Eric: But for many of us, particularly busy people and sometimes goal-driven people or what have you there’s a tendency to benefit from an accountability partner. So even if, even if you don’t need an advisor, because your world isn’t that complicated, sometimes having someone look over those things on a once or twice a year basis, and really keep you on track helps you be accountable to say, yes, I did the things I said I was going to do.

[00:31:05] Eric: Yeah. You know, one of the things that couples fight about most, and that affects marriages adversely the most is money. And it’s it’s because you know, a, to a young couple, you know, you’re used to doing whatever you want, you know, you’ve, you’ve got your income. You’re, you’re living where you want to live.

[00:31:22] Eric: You’re doing what you wanna live. Someday. Someday you come together and now you, you almost have to negotiate it a little bit. If, if I’m buying this piece of clothing, then we can’t also get that kitchen table or, you know, I’m making stuff up. But the reality is it may, it means there’s a yin and yang.

[00:31:37] Eric: It means there’s a push and pull here. So I would say that it is incredibly helpful at a time of life change to consider engaging an advisor. That could be the loss of a parent or grandparent. It could be getting married. It could be having children. It could be getting divorced. It could be moving to a new city or getting a new job.

[00:31:55] Eric: It’s the big life events that cause us to take three steps back and take inventory and say, all right, where are we? Because a lot of change when it happens all at once, there’ll be parts of it that don’t get handled very well. So, you know, I think there, there are lots of different kinds of financial advisors, just like there, lots of different kinds of lawyers or doctors or anybody else.

[00:32:16] Eric: Some financial advisors only want to work with, you know, super high net worth families. Others want to work with only a certain industry or a certain geography or a certain type of executive or whatever it is. I, I think it’s important to find an organization that is right for you. And I think it’s okay to interview a few different ones when you’re exploring is this a good thing for you? Talk to a couple of different firms. Where do you feel the right comfort level? I mean, if you, if you and your spouse and Cody, I know you’re not there yet, but someday. If you and your spouse were to show up at a financial advisor’s office, the conversations you’re going to have together are really personal.

[00:32:58] Eric: And if you aren’t transparent with your spouse or your significant other, and you’re not transparent with your advisor, you’re wasting your time and money. It makes much more sense to say, here’s, here’s what we’re looking at. This is what’s important to me. Make sure you listen to what’s important to your significant other. Figure out how they can work together.

[00:33:18] Eric: Because like I said, you can’t, you can’t do everything, but you can do lots of things. So sometimes that’s a negotiation. There’s a compromise in that situation. That’s. But I think when you go to make a major life change, it’s incredibly helpful to have somebody who has seen this before, maybe a hundred or 200 or 500 times.

[00:33:36] Eric: It doesn’t mean they know what it’s like to be in your shoes. No one does. But it means there are things when you, when you fill out a questionnaire or put together the documents for a financial advisory consultation, in almost every case, the person you’re handing that to has seen absolutely everything before that you’re handing them.

[00:33:53] Eric: What they haven’t seen before is that exact combination. And so how the pieces work together and how you can maximize your outcomes. I think that often requires some advice and I think it also is helpful for you from an accountability standpoint. I, I think as soon as you have positive cashflow and as soon as you have the ability to start making decisions about where to, where to invest, where to put money, it makes sense to have some kind of advice. And if it’s truly just the math, a computer can do that. There are apps that can do that. But if it’s the human element, if it’s, if it’s helping make decisions, you know, a computer doesn’t know what it’s like to save for a house. It can tell you, well, you need this much down payment so go get it. It has no idea what it’ll mean to get the keys to your first home. Or to pay for your son or daughter to go to college, particularly if they’re first in their family to go. Algorithm can’t figure that out. There’s no way a computer can say, wow, that’s really going to mean a lot to what the computer is going to say is, well, that’s a silly way to spend money.

[00:34:56] Eric: You ought to just go do this, or you can get a better return here, but the human side of it is what makes I think the advisor incredibly important because. Because these decisions aren’t made by a calculator, they’re not math. They’re life.

[00:35:10] Cody: Yeah. Building that relationship with someone that you trust. And that goes back to the interviewing process and finding somewhere that, you know, think might be a great fit for you.

[00:35:19] Cody: And you kind of briefly touched on it, but you know, I know I’ve talked to clients before or friends, frankly, that financial advisor and all they think about is investments, investments, investments, like you said, there’s automation for that. There’s systems for that. What other positives can a financial planner bring and what aspects of the world, you know, during the interview process, should we be asking financial advisors that they can help with?

[00:35:50] Eric: Well, I think there are a lot of people out there who, professionals who work with investments, who for whom that’s their bailiwick, that’s their thing. I happen to think most of the time and an investment portfolio is important and people like to talk about it. It’s often the least important piece of the financial plan.

[00:36:07] Eric: And I know that’s hard and I know people don’t expect that, but which growth fund you’re in is generally irrelevant to your outcome. What you’re spending matters, what you’re earning matters, how to manage taxes matters. What to do when there’s a tragedy in the family or what to do when families combine by marriage. What to do when you become a mom or dad. Those are the things that ultimately that’s where financial advisors are most valuable.

[00:36:34] Eric: And that’s where you can’t replace that with just math. So, you know, I don’t want to beat this, this horse too much, but you know, the, the short answer is yes. Investments matter and yes, any financial advisors should be able to do portfolio management as a part of his, or her engagement with you. But if that’s all they’re talking about, if in your first meeting with them, they say, let’s see your statements.

[00:36:55] Eric: My opinion is run. Run don’t walk because that is not the most important thing to you as the client. It might be the most important thing to that person as the so-called advisor. Yes. But if this is about the adviser, instead of about the client run, this should be about the things that are important to you.

[00:37:17] Eric: It should be about financial, but also nonfinancial goals. It absolutely should not be. You know, here, slide me your IRA statement. Let me see, let me see how we should, you know, manage that immediately. That’s that’s, you know, most of the time in our engagements, we don’t even talk about the portfolio until the second or third meeting in, because if it’s not that it’s not important, it’s that it’s not going to change your outcome as materially as almost everything else.

[00:37:43] Cody: Yeah, I think that’s a great point. And you know, we have received a lot of questions during this webinar from a whole bunch of different people that are viewing, do you have any last thoughts based on our PowerPoint before we open up to questions?

[00:37:57] Eric: Absolutely not. Let’s do questions. I always love to hear what’s on people’s minds.

[00:38:01] Cody: Let’s do questions. And then I believe we have Sara, our marketing director on the call who has been orchestrating all those questions. And has pulled some of the ones that she might be, I think are most relevant, which is scary, I know.

[00:38:13] Eric: Our QR code is a lollipop. I love that.

[00:38:15] Cody: That’s Halloween. We’re celebrating.

[00:38:17] Eric: It is, it is.

[00:38:19] Cody: Sara, you there?

[00:38:21] Sara: I am. Can y’all hear me. All right. So one of the questions I think I kind of goes back to an earlier conversation in this webinar. We were talking about employee benefits and things like that. What about the people who are self-employed or entrepreneurs, are there resources for them? Are there ways that they can start planning for retirement without having something like a 401k and a match and all of that?

[00:38:51] Eric: Well, th the short answer is yes, there are a lot of opportunities for entrepreneurs and self-employed people from a retirement plan standpoint. It could be as simple as just funding an IRA for yourself. There are SEP IRAs and simples and all kinds of different plans that are a little beyond the scope of today’s talk.

[00:39:08] Eric: But the short answer is yes, self-employed people can not only build a retirement plan, in a lot of cases, they can build one and customize it to themselves and actually put away more money than you could if you were working for, for somebody else. So there are some true benefits on the retirement front to self-employed.

[00:39:24] Eric: Where self-employment is tricky is when it comes to insurance benefits, because it can be hard to get, if you can’t get group coverage for various things, you can wind up spending a little more money, and that that’s not just in going out and getting your own disability insurance or life insurance, but it’s also getting your medical insurance and you’d have to use your state’s exchange and you’d have to get your, your own coverage, or if you’re married, typically you would jump on your, your spouse’s plan.

[00:39:50] Eric: Which is something that folks should look at once a year, anyways, which plan should we be on? But if you’re, if you’re young and you’re consulting and you’re starting your own thing, and you don’t have health insurance, you need to use the exchange in your state. And I would tell you not to wait another five minutes to do it.

[00:40:09] Sara: Can we go really quick into that? The IRA, cause I know there’s Roths, there’s SEPs. There’s simples. Is there one that is the best option for someone or how much does that really vary?

[00:40:23] Eric: It varies a lot and it matters based on a lot of variables, which is why there’s no real quick answer. And rules of thumb are dangerous.

[00:40:30] Eric: You know, I, I hate to throw out a rule of thumb right now that’s going to sound like advice because I don’t want to do that because I don’t think that’s necessarily helpful. But if, if pressed, what I would say is that the higher your income is, the more you need tax deduction. And the traditional IRA and the SEP IRA and the 401k, all those traditional resources tend to be funded with pre-tax dollars and funding them with pre-tax dollars when you’re in a high income situation is typically wise. That said there are exceptions to that.

[00:41:01] Eric: Particularly if you expect your income to stay that high long-term or you’re going to inherit money, I mean, there’s exceptions to every single rule we can come up with. If your income is more modest and what you have is not really a tax problem then using a Roth option, whether it’s a Roth IRA or a Roth 401k means using after tax dollars and growing them, tax-free for the rest of your working life.

[00:41:22] Eric: In fact, beyond. That is a really powerful tool, especially for young people who tend to be early in their careers and therefore early in their income generation. You, once you get to a certain income level, a you can’t contribute to a Roth. There are rules against that, but B even if you could like a Roth 401k, You might need the tax deduction in order to make your take-home pay work.

[00:41:44] Eric: So I don’t think one size ever fits all. That’s why there’s so many options. I don’t think there’s a rule of thumb we can stick to, like it was gospel. I do think in general, if you’re in your twenties and your income is sustainable to the point where you’re able to make contributions, but it’s not super high where you have a terrible tax bracket, Roth may make more sense than the others.

[00:42:10] Sara: Awesome. I’m just going through this list of questions and if anyone has more that they want to send in, feel free. There should be a question box on your screen.

[00:42:21] Eric: Yeah, it’s great that we have such an engaged group today. What else we got?

[00:42:26] Sara: All right. Another person is an entrepreneur, small business owner. Is there a way to make an advisor a tax deduction?

[00:42:36] Eric: Technically you need to ask the IRS or your CPA. I would say if your advisor is doing some business consulting for you as. As a business person, an entrepreneur, then to me, the answer would be yes, but I am not a CPA. I am not the IRS. And so like, anything else there’s as much art as science to that.

[00:42:54] Eric: I would say that if you’re getting advice on how to handle things like your payroll or your HR or your benefits or things at work, then it’s legitimate business expense. But I think you have to, you have to rely on your CPA to, to navigate those rules. Cody, do you want to add to that or is that, I mean,

[00:43:10] Cody: I, I think that’s pretty spot on, but my mind started going a little bit somewhere else just based on everybody’s favorite question right now about, you know, student loan debt and what should they expect based on taxes you know, in the coming months or what we’ve told, we’re told on forgiveness. So if you could just touch on that, because I know a lot of people listening to this webinar, you know, people in their twenties looking at retirement thinking, should I pay off my debt while it’s not accumulating interest? Kind of what should be my next steps?

[00:43:38] Eric: Okay. Well that, well, there’s a lot of, there’s a lot of politics and a lot of psychology in that question, because there, there are two very distinct camps of thought. There’s the camp of the camp that says you borrowed it, pay it back.

[00:43:53] Eric: And there’s the camp that says you borrowed it as an investment because you were promised something that maybe isn’t real. And so maybe that’s, maybe that’s something we need to find a way around. I’m not taking sides in this debate. That would be a mistake. W w what I will say is, in, in my estimation, it’s usually better to pay back the debts that you take.

[00:44:11] Eric: It’s usually better to structure them in such a way that they don’t become onerous for the, for you. I tell parents and young people to try and avoid student loans in the first place. There’s enough resources and and enough options right now,you can negotiate with, with universities and colleges and a lot of cases and say, look, this is what we’re being offered at school a, if you want us to come to school B, you need to make us a better financial offer. And you know, financial aid offices don’t want the public to know that, but the truth is like anything else you buy, there’s a negotiation. They can always say no, but I think it’s more important to figure out what your, what your sticker price is really going to be.

[00:44:48] Eric: It’s like buying a car, getting into college now. So there’s that. Other thing real fast on student loans. There are a lot of people who say I’m paying so much on my student loan that I can’t afford to put money into my own retirement plan. And there are now programs that that 401ks and other plans can incorporate that will actually allow, if you demonstrate that enough of your income, a large enough percentage is going to student loan debt or payments that your company will actually make a matching contribution or a contribution on your behalf into the 401k, even though you didn’t because you’re paying loans. And so that’s something to ask your HR department about, or check your summary plan description and your employee benefits.

[00:45:27] Eric: But if you have student loans and you’re making the payments, and as a result, you feel like you’re missing out on that 401k and specifically on the match, you may not be, there may be a way to, to navigate that anyway.

[00:45:40] Cody: Yeah. There might be a good opportunity for it. You make another great point. Sara, I think we’ve got time for one more.

[00:45:45] Cody: You have one more for us?

[00:45:50] Sara: All right. So for people in their twenties, people that are young, how important is a credit score and how can you improve yours? If it’s not very good?

[00:46:02] Eric: I think a credit score is incredibly important because so many of the things, some of the decisions we make when we’re adulting involve involve underwriting financially or from a credit standpoint.

[00:46:12] Eric: So whether it’s whether it’s negotiating to buy a car, whether it’s buying a home, whether it’s whether it’s getting it’s amazing that young people can borrow with no, no collateral at all to go to college, but then you need to prove all these crazy things in order to borrow for almost anything else.

[00:46:28] Eric: And I think that’s part of the problem actually with those, but the credit score is important and there are three credit bureaus in the United States. There’s Equifax, there’s Experian and there’s TransUnion. You’re allowed to pull your credit reports from each of those bureaus once a year for free.

[00:46:42] Eric: There are also resources, credit monitoring resources you can, some of them are free. Some of them have a cost to them because they also have some identity protection and other services. If you’re just starting out and there’s no reason to believe you’re going to be a victim of some kind of fraud, you know, you don’t have a family member looking to steal from you or something.

[00:46:57] Eric: Then usually you don’t have to pay for this, but just something simple, like a credit karma can make a difference in terms of tracking that. And it’ll provide you with some, some intelligent advice around things you can do. In general one of the things you can do to make sure that your credit is solid is to make sure as soon as you’re 18, or as soon as you get off this webinar, if you don’t have a major credit card that you get one.

[00:47:19] Eric: And by that, I mean, typically a MasterCard or visa, I’d also include American express in there, but get one, because one of the components of your credit score is the duration of your credit history. And so for people out there, who’ve never borrowed a nickle. And they’re 30 years old and they’ve never, they’ve never had a student loan.

[00:47:38] Eric: They’ve never had a car payment. They’ve never, and now they want to buy a house. Their credit score may be lower by the fact that they don’t have a credit card that they’ve had for 10 years, that they’ve demonstrated they can use responsibly. So it’s an interesting thing. There’s also a. There’s also a lot of junk out there on credit reports.

[00:47:54] Eric: So when you pull them, you might find that you went to some department store or some I, you know, some, some electronic store six years ago, and you, you wanted a 10% discount so you signed up for their card. Well, that’s still on your credit report and that can actually cause problems. So the major ones you want to keep. The minor ones you typically, unless you’re going to use it a lot, you typically don’t want, and there’s so many benefits to credit cards.

[00:48:19] Eric: I mean, and you can customize them for what you want. I know there there’s like a whole industry around how to use points, but if you’re, if you’re into travel, you can choose your airline or you can choose your hotel chain. You know, you can, I mean, I happen to think that the best credit cards, particularly for younger people right now are the cash back cards where you get one or 2% back on everything you do.

[00:48:38] Eric: It’s just a discount in life. The caveat is don’t ever carry a balance. They’re only a good thing. If you pay them in full, if you get behind or you’re in a position where you’re suddenly paying nine or 10 or 12 or 15% interest, you are not doing yourself any favors. So use a credit card. Like it was cash, pay it in full every month and build your credit history.

[00:49:00] Eric: And if you have a major card, whichever one you’ve started with is the one you’re going to keep because it is important to, to maintain that credit history. Now, if you have a card you got when you were 18 and there’s no real benefit. You can go get a second card with the cash back or something and use that one primarily.

[00:49:18] Eric: And that’s fine. Again, just make sure you pay them in full. It will, it will actually help you buy a home if you have more credit history so long as you’re not carrying debt or, or missing payments or, or having issues. That’s a great question. And there there’s actually a whole section on, in, in, in Don’t Retire… Graduate! about that, and about ways to clean that up and what to do if you really get in trouble.

[00:49:39] Eric: I mean, there’s, there’s a lot of resources out there and some of them are free and are really helpful. And some of them have a cost and are really helpful and some of them are fraud and it’s hard to tell the difference. I mean, there are predators out there. So knowing the difference makes sense. And there’s a whole piece in there to try and help folks with that.

[00:49:56] Cody: Well, thank you, Sara, for all those questions that you put together for us, we we really appreciate you keeping track of those during the webinar. And as everyone sees on their screen right now, we have a QR code up where if you actually hold your phone up to it, you can set up a free consultation with one of our lead advisors here at BFG.

[00:50:11] Cody: If maybe we didn’t get to one of the questions that you asked during the webinar, or, you know, you have some other things that you think you might need some help with. Please don’t hesitate, set up a meeting. We’d love to talk to you. And other than that, Eric as always thank you. You know, it’s, it’s, we’re so lucky to have somebody like you to come on these webinars and, you know, provide this advice for people who, you know, don’t know where to find it or don’t know that they even needed it. So once again, thank you for coming on and your reward for that is we’re going to bring it right back now, November 10th, we’re going to have you on for our next webinar where we’re going to be talking about you know, preparing your assets for retirement and the important decisions as you get closer to that date.

[00:50:52] Cody: So as always, thankyou.

[00:50:53] Eric: My pleasure. You nailed it. Thank you, sir.

[00:50:56] Cody: Yeah, of course. And then everyone have a great Halloween and we’ll see you on the next webinar. Thanks.