Posts Taged ask-an-advisor

Ask Jake: What is FIRE (Financial Independence, Retire Early)?

When it comes to discussing retirement planning, it’s hard to overlook trends that come in this area. One current trend that’s getting attention in the financial world is financial independence, retire early (FIRE).

Today, we’re talking to Jake Sturgill about the FIRE trend, which investors might qualify for FIRE, and some takeaways that can strengthen any retirement plan, regardless of investor age.

How Early is FIRE Retirement?

Financial independence, retire early. Investors who choose the FIRE route want to retire earlier, rather than later. For some, this could be extremely early, say, in their 30s or 40s, but the goal to become financially independent and retire early certainly isn’t limited to younger investors.

FIRE is more about how you approach retirement planning than when you retire. It’s a lifestyle choice that shapes your entire approach to financial planning. When you choose to set a goal to retire early, you choose to save aggressively to achieve that early financial independence and set aside savings to see you through an extended retirement.

Typically, people who choose FIRE are higher income earners who opt to live a minimalist lifestyle in order to save even as much as 50-80% of their incomes annually until they achieve their retirement savings goals. If you are able to maintain this lifestyle and desire to leave the workforce early, the strict savings required can pay off with that early retirement date.

Even if, for reasons of age, income, or other life circumstances, FIRE isn’t a reasonable retirement objective, it doesn’t mean that ambitious savings goals and a desire to prepare your lifestyle for retirement aren’t for you.

In fact, if anything, the FIRE movement should inspire you to re-evaluate your retirement savings plan and determine whether it is aligned with your desired retirement age — even if it’s a more traditional one.

I Missed the FIRE Truck. Do I Have Other Options?

Maybe you think you’re beyond the point of saving for an early retirement. You missed the boat… Or in this case, you could pardon the pun and we could even call it the “FIRE truck”. I think my toddler, who frequently plays fireman, would appreciate this phrase!

Truly, it’s never too late to consider your financial future and look for ways to double down on important savings goals. If your goal is early retirement, you want to work your way back to the present moment and evaluate how you can balance your investments, savings rates, and lifestyle choices to enable your future self the option to reduce the number of years you “have” to work.

If your goal isn’t early retirement, or if that’s not a realistic goal, provided your age and/or circumstances, there are still ways that FIRE thinking can apply to your retirement planning, especially when you consider how your current lifestyle plays into your financial future.

It’s all about balance.

Whether you are aiming for early retirement or want to explore options for a more traditional retirement, you want the scope of your financial planning to encompass the things that are important to you personally. Your career, your family, your desired retirement lifestyle… All of these are factors to bear in mind when strategizing for the future.

Retirement planning typically isn’t something that you finalize in one session and recognize within the next year or decade. Yes, FIRE is an attractive option, but it’s not the only route that leads to a satisfying, well-funded retirement. At the end of the day, you and your financial planner need to be on the same page about planning a retirement that makes sense for you, your priorities, and your ideal financial future.

Want to learn more about retirement planning? Have another burning financial question? Reach out to Jake Sturgill today with your financial questions or for an in-person consultation!

Ask an Advisor: How Much Do I Need for Retirement?

Transcript

David: 00:08

Hello, I’m David Hemler, and we’re here with Jake Sturgill on our Ask An Advisor series with Puckett & Sturgill Financial Group. And Jake, one of the questions that I know you’re often asked as well as I am is: how much do I need to retire?

Jake: 00:23

Saving for retirement is an incredibly complex decision and conversation. And, to your point exactly, it’s got to be one of the most common questions that we’re asked. And there’s a lot of rules of thumb out there. But, at the end of the day, it’s an incredibly personal decision, and there’s no ‘one size fits all’ approach.

David: 00:42

Those rules of thumbs, they can be both a benefit and maybe, at times, a detriment as well. Yeah.

Jake: 00:48

Especially if you don’t understand the decisions and the pros and cons involved with all the decisions. Some basic tenets that you are going to want to consider and then really factor into this decision-making framework are: what sort of lifestyle do you want to live? In other words, how much money do you think you’d like to spend? When would you like to retire? And how long do you think you’re going to need that money to last? Because, at the end of the day, nobody knows when their final day will be. There’s no way of predicting that, but these are all critical elements.

David: 01:19

A lot of pieces to the puzzle to put together, figuring it all out.

Jake: 01:24

Absolutely, but I think if you’re like most people, you don’t want to necessarily live a lesser standard of living, you want to maintain your standard of living throughout retirement.

David: 01:34

I know I’ve read and see a lot of things in the literature in financial planning about this 60 to 80% of your preretirement income needed in retirement. Would you agree with that rule of thumb? Does that fit into the picture a lot?

Jake: 01:47

Certainly, and I think it’s well-documented that you don’t necessarily need to replace all of your income in retirement. Because, after all, in retirement you’re not going to be saving for a retirement. You might pay a little bit less in taxes, and you might even spend less or just spend differently than you were in those years saving up to retirement.

David: 02:05

Mm-hmm (affirmative). Where do we go from here then, Jake?

Jake: 02:08

I would encourage you to meet with your financial advisor to get an objective opinion and look at things like: how much have you accumulated so far? What’s your asset allocation? What’s your savings rate? And what’s your time to retirement?

David: 02:22

Mm-hmm (affirmative). So, a lot of pieces to this puzzle for us to figure out. And we, the folks here at Puckett & Sturgill, the advisors, we’re happy to help you. Just give us a call, or click on our email and send us a question of your own. Thanks.

It’s Your Turn to Ask

Ask an Advisor: What Do I Need to Know About Social Security?

Transcript

Jake: 00:08

Hi, I’m Jake Sturgill, with Puckett & Sturgill Financial Group, and our Ask An Advisor series. Today, I’m going to be asking Paul Sorenson about Social Security, and the things that our clients need to know about Social Security.

Paul: 00:24

Social Security, Jake, as you know, is one of the first things that many clients ask us about, is, “I know I have a decision to make at some point in the future, whether it’s now, or 20 years from now, or next year, or I already made a decision.” It’s something that we get asked about a lot.

Paul: 00:41

The bottom line is, everybody’s circumstance is different when it comes to Social Security. So the planning surrounding Social Security is very specific, and there’s a lot of complexity involved with that decision. It’s something we talk about regularly. And as a part of that, people ask us, “When should I start thinking about it?” With our clients, we start thinking about it, no matter their age, we at least add it as a part of the plan. Because we do approach things from a holistic standpoint. So it’s always top of mind as a part of our planning, as a baseline, a foundational piece of the planning that we do for a client.

Jake: 01:12

Right, and so if we’re starting and incorporating it into the planning process, really as soon as possible, when should people start to think about actually taking it or claiming Social Security?

Paul: 02:28

Right. Just because you can start at 62 doesn’t mean you should do it as early as possible.

Paul: 02:33

Yeah, yeah. You may have a whole pool of assets that help you delay that decision, or help change that decision for you. It’s a very individual decision.

Jake: 02:41

It’s such an important decision, because pensions are, as I’m sure you’ve seen with your clients, largely going away. Maybe fewer and fewer people have them. So Social Security is becoming such a foundation and core component of a retirement income plan. Taking all these factors into consideration, there’s a lot that goes into that process, and it’s unique to everybody.

Jake: 03:06

If you have any questions about Social Security or your retirement income plan, please contact us. Visit our website, email us, give us a call at the office. We’re always just a phone call or an email away.

It’s Your Turn to Ask

Ask an Advisor – Nonqualified deferred compensation

Different parts of the retirement planning equation have different benefits and are better suited to some individuals than others. To understand which parts are more ideal for your planning, it’s important to understand how different plans work.

Today, we’re going to talk to advisor Paul Sorenson about nonqualified deferred compensation (NQDC) plans. He’ll tell us some of the important items to consider when looking at NQDC plans and how they might fit into an existing retirement plan.

What are NQDC plans?

Nonqualified deferred compensation plans (NQDC) are offered by employers to employees to set aside tax-deferred compensation to be paid out at a later date. For employees who maximize contributions to their current employer-sponsored retirement plans like a 401(k) or 403(b) an NQDC represents an opportunity to save more for a future goal or retirement in a tax-deferred manner. Not all employees have the chance to participate in an NQDC plan but if you have the opportunity, it may be worth looking into this benefit a look to see if it might have a place as a part of your financial plan.

Unlike other qualified employer-sponsored plans, such as a 401(k) or 403 (b), NQDC plans usually allow you to defer receiving a portion of your compensation over and above what is allowed into a qualified plan. When you elect to participate, you choose how much to defer to the plan and your employer then segregates the chosen potion of your salary into a trust which is invested on your behalf. Since the compensation is not paid to the employee currently it is not taxed until some future date when it is actually paid out to the employee. 

There are many reasons employers offer NQDC plans but among the most common are their ability to help retain and attract talented employees as well as helping high-earning employees save enough of their current compensation to meet future needs. Typically high-earning employees are unable to save enough in a pre-tax 401k or 403b account to meet their retirement goals in full.

NQDC participation: Some important items to consider

NQDC plans can vary widely depending on what your employer offers but here are general items to think about:

  1. Do I currently contribute the maximum to my current employer-sponsored qualified plan such as a 403(b) or 401k? If you do not maximize contributions to your qualified accounts, you may want to consider this option first, since these plans are tax-deferred and protected under the Employee Retirement Income Security Act (ERISA).
  2. Do I believe my employer is financially secure? Should your employer fall into bankruptcy, the funds in NQDC plans might be accessible to the organization’s creditors which could mean your deferred compensation might not be paid.
  3. Can I afford to set aside a portion of my compensation knowing that I won’t be able to access it until a date in the future? NQDC plans do not have loan provisions like other employer-sponsored plans, so accessing the compensation which has been set aside is not an option prior to the distribution date that has been set.
  4. How does participation in an NQDC plan fit with the rest of my financial plan? Every NQDC plan is different so it is important to understand the distribution options, investment options, vesting options and service requirements available to you and along with the risks. Once you understand these risks these details the NQDC should become a part of your full financial plan. 

Every NQDC plan is different and it is important to understand the details and risks of your employer’s plan before choosing to participate. For many, NQDC plans present a possible option to ramp up their savings for the future, but for others investing in accounts outside of their place of employment or combining multiple savings vehicles might be a better option.

No matter what you decide, working with a financial professional, like a CERTIFIED FINANCIAL PLANNER™ professional, who can help you understand the options and set a strategy to pursue your needs, wants and wishes for today and well into the future is a good place to start.

If you are trying to understand how an NQDC plan might fit into your financial picture or are just ready to get started with a well thought out financial plan, contact Paul Sorenson at Puckett & Sturgill Financial group today!

This material was created for educational and informational purposes only and is not intended as ERISA, tax, legal or investment advice. If you are seeking investment advice specific to your needs, such advice services must be obtained on your own separate from this educational material. 

Ask an Advisor: What’s a CFP?

Transcript

Jake: 00:10

Hi, I’m Jake Sturgill with Puckett and Sturgill Financial Group in our Ask an Advisor Series. Today I’m with David Hemler. David, one of the questions that we’re often asked, what’s a CFP, and why does that matter?

David: 00:23

Yes, it is a great question, and I take the time when I first meet with clients to educate them about the CFP letters. And so, CFP stands for certified financial planner professional. And it’s a designation, it’s awarded in recognition of an individual who was passed through a rigorous process that’s set forth by the CFP board of standards that outlines the four E’s that really kind of show the public what the CFP letters really entail for the individual who is using that credential.

David: 01:02

And the four E’s are, they stand for education, examination, experience and ethics. And so, the public can feel very confident when they’re working with an individual who has attained the CFP designation, that that person has competency in all the dynamic levels of financial planning. And so, they can feel very good about the person they’re working with has, actually has oversight, constant level of oversight to a rigorous body of education that they had to go through, as well as the examination and the experience levels that are required in order for us to use the designation in.

Jake: 01:46

So, it sounds like it’s really about taking more of a broader holistic approach, looking at everything and going above and beyond just having something to be able to sell you something.

David: 01:57

By all means the CFP professional is somebody who actually has spent at least a year of classroom work at the graduate level. And again, it encompasses a body of financial planning. We’re educated in many, many areas, estate planning, taxation, risk management, investment planning, all of the different dynamic approaches that are necessary in order for us to build sensible financial planning outcomes on behalf of our clients. And we’re very proud at Puckett and Sturgill to be five individuals who’ve given the dedication to ourselves to provide guidance to the folks that we meet with and our clients as a certified financial planner professionals.

Jake: 02:42

Differences do matter. And so, thank you for answering that question, David. And we welcome any future questions from our clients. So, please feel free to shoot us an email, give us a call, visit our website. We’ve got tons of great content there. We’re always just a phone call or email away.

It’s Your Turn to Ask

Ask an Advisor: What Do I Do With My 401k?

Transcript

Paul Sorenson: 00:09

Hi, welcome to the Puckett and Sturgill Ask An Advisor segment. We’re glad you joined us. I’m Paul Sorenson, financial planner with Puckett and Sturgill Financial Group. I’m here today with David Hemler, certified financial planner professional. David, we’re here to ask today, and discuss, I have a 401k plan. This is one of the questions we get almost every day. I have a 401k plan. What do I do with my 401k plan? Can you help me?

David Hemler: 00:33

That’s a great question, and yes, we can help you. The first thing is to define, are we talking about a former employer plan or a current employer plan? For the former employer plan, you have four options there. Those options are to leave it with the current custodian. To withdrawal it, which is called a distribution. To roll it into your current employer, if that current employer plan offers roll ins, and many do. Or, move it to an IRA. That’s the four options with a former employer plan. With your current plan, the key ingredients for you to understand are what is the matching program so that you can fully gain access to 100% of the match that’s available to you. If there’s a match available, not every 401k has to offer you a match, so that’s an important piece of the summary plan description, which governs that, that you want to understand. And we can help you to discern through that, to get those types of answers on behalf of your plan. Getting 100% of the match, and also understanding your allocation and how it aligns to your risk acceptance and your time horizon for the goals that you have for those retirement assets.

Paul: 01:46

Great, great. I think that answers a lot of it. For a former plan, we’re looking at keeping it where it’s at, rolling it into another 401k plan, potentially diversifying it into an IRA. Those are all great options. I think that’s …

David: 02:02

A lot of complexity there too, so our best advice would be to talk to a professional advisor. Get some guidance before you make a final decision on an old employer plan.

Paul: 02:12

Great. That’s really helpful, David. Thank you so much. We look forward to hearing from you, should you have any additional questions, and please feel free to submit additional questions to us online.

It’s Your Turn to Ask

Ask an Advisor: Common Estate Planning Mistakes

Transcript

Jacob Sturgill: 00:09

Welcome to Puckett and Sturgill Financial Group’s Ask An Advisor segment. I’m Jake Sturgill and today, I’m interviewing Deborah Williams about common estate planning mistakes we oftentimes see clients make.

Deborah Williams: 00:20

That’s right. We do, as partly because of what we, as advisors, what we help clients with. They will seek us out for help with estate planning. But I would say the first common mistake that I see a lot is not having any estate plan in place. There’s no will. There’s no living will, no power of attorney.

Jacob: 00:38

See that often.

Deborah: 00:39

Right. That’s easy for us to fix because we have relationships with attorneys, so we can put the client in touch with that attorney and then, they can draw up the legal documents that are needed and we can be involved in that plan and make sure that everything is coordinated so that assets will transfer as the decedent wishes.

Jacob: 00:59

Yeah, I think it’s really important to work as part of a team and utilize our network if clients don’t have existing relationships or if they have existing relationships, continue to work with their existing relationship and really integrate it as part of a holistic financial planning team.

Deborah: 01:15

Absolutely. That’s how we can avoid other mistakes. One of the easy things that we can do is make sure that beneficiaries are named on retirement plans or other accounts. Transfer on death beneficiaries are popular now. That’s another area that we see common mistakes happen, when there’s either a missing beneficiary or an out of date beneficiary, like an ex spouse.

Aaron: 01:12

Yeah. We want to see that they’re educated and that they are extremely competent.

Jacob: 01:39

Right?

Deborah: 01:40

That it was overlooked in the divorce and it was never removed.

Paul: 01:43

Sometimes the simplest things to fix can be pretty costly in the end. In the state of Maryland, if you don’t have a named beneficiary or don’t have your estate planning documents in order, it’s not you that is dictating, it’s the state of Maryland and other statutes.

Deborah: 02:00

Right. It’s the laws of the state that dictate where your assets go, which may not be what the decedent wished. If you have no beneficiary listed on your retirement plan, then your estate is assumed to be the beneficiary and if you have no will, then it would just be divvied up according to that state’s laws.

Jacob: 02:17

Exactly. Really great point. Thank you for going into more detail on that. If you have any questions, we’re here to help you. Please visit our website, send us an email or give us a call. We’re here to help.

It’s Your Turn to Ask

Ask an Advisor: What does the future look like for Puckett & Sturgill Financial Group?

Transcript

Paul: 00:08

Hi. Welcome to Puckett & Sturgill Financial Group Ask An Advisor segment. I’m Paul Sorenson, financial planner with Puckett & Sturgill Financial Group, and I’m here today with Aaron Puckett. Aaron, what’s the future for this firm look like? They’re, they’re creating a relationship with our firms, so what’s the future look like for Puckett & Sturgill?

Aaron: 00:26

Boy, I wish I could tell the future. I wish I had a crystal ball. I could just, but yeah, I think to understand my best guess anyway as to what the future of our firm will look like, is to really look at what are the core parts of our firm that have been there since the beginning. And there are some things that haven’t changed. Those are, I think three main things.

Aaron: 00:50

First of all, we really value advisers that have credentials and experience, and are very competent and qualified people.

Paul: 00:57

Sure.

Aaron: 00:58

And so as we think about our firm going forward and possibly continuing to grow, I think we’re only going to be looking for advisors that kind of fit that mold of what we’ve done.

Paul: 01:11

Educated folks.

Aaron: 01:12

Yeah. We want to see that they’re educated and that they are extremely competent.

Paul: 01:17

Absolutely.

Aaron: 01:18

The second thing is I think the team element of our firm is something that is very special. And so I think advisors that buy into that idea that they want to be part of a team, they don’t want to operate in a bubble, you know?

Paul: 01:32

Not sitting on an island by themselves trying to figure it out.

Aaron: 01:34

They value each other. I know you do, and I know I do. We value the advice and the camaraderie that we experience as part of that team.

Paul: 01:43

Sure.

Aaron: 01:44

I think it’s better for clients too when the advisor is operating as part of a team. So I could see that being something that’s a characteristic of our firm in the future.

Aaron: 01:54

And then the last thing, which I think is probably the most important, and that is that we all of us have a very strong ethical commitment to our clients. We really care about them. Our families have been in the community a long time. We want to do what’s right for people and we really care, and that’s the culture.

Aaron: 02:15

No matter how many people are working with our company or what lines of business have changed and how the industry has changed, I think those are the key components, the parts of our value proposition that will continue, be competent advisors working together as a team with their sole focus on taking care of their clients, doing what’s right for them that they can because they care.

Paul: 02:39

Excellent. Excellent. Well thanks, Aaron. That was really helpful and I think it really gives a look towards the future of what Puckett & Sturgill will be and currently is. Thanks for joining us today and watching the Ask An Advisor segment with Puckett & Sturgill Financial Group. We hope that if you have additional questions, you’ll reach out to us via the website or give us a buzz. So thanks a lot and we’ll see you next time on Ask An Advisor.

It’s Your Turn to Ask

Ask David: What Steps can I Take Today to Impact My Retirement Plan?

It seems like there’s a day or a week or even a month that’s dedicated for some well-intentioned cause or another. Sometimes, these dedications are helpful reminders to check up on important issues. For example, did you know that October was National Financial Planning Month?

Even if you missed checking in on your retirement plans during the month of October, it’s never too late to get to work on your retirement planning! Today, we’re talking to our own David Hemler about some steps that you can take today to make a positive impact on your retirement plans for tomorrow. So grab a cup of coffee and read on to learn David’s three steps to take today!

Step One: Take Charge Today

Are you preparing for your financial future? If you’re not, then who is? It’s time to take charge of your financial life goals.

It’s not just a cliché when you hear the words, “the sooner, the better”. But some things may be too overwhelming to tackle all at once, procrastination sets in and time flies past our best intentions.

As a professional advisor, I spend a good portion of my work hours guiding folks in their journeys to define a path that will help them strive to get to a day when they will no longer have to work for money. Ahh yes, that day when we get to choose what pleasures we want to enjoy!

Can you see it? How are you going to get there?Start. Saving. It doesn’t have to be anything extreme. Start with taking just a share off the top — enough to make it hurt a wee bit. This is a good beginning. As time moves along, investors who make this choice and commit to their savings plans find the pain of discipline far outweighs the pain of regret. 

Step Two: Educate Yourself on Financial Planning for Retirement

Next, consider reading a book or two written by a successful author on the subject of financial success planning. I can recommend a couple: if you email me, I’ll be happy to share a few titles with you!

The point is to get educated and get some help. Maybe you’re the DIY type and the help you need is self-help because you enjoy working toward this important effort. Or perhaps that’s not your cup of tea. In this case, find a guide to help you.

There are many well educated financial professionals all around you — probably way more than you realize. Find a trusted advisor to help you navigate the retirement planning process. There’s no shame in getting help! In fact, even professional athletes at the top of their games have coaches and guides to strengthen their efforts. 

Step Three: Establish a Long-Term Plan

If you start with these simple beginning steps, you will be on your way to creating a solid retirement plan. And remember, your plan doesn’t have to be over-the-top complicated to get you where you want to go.

I’m fond of reminding myself that I don’t have to eat the whole elephant at once, but rather, one bite at a time. When it comes to retirement planning, this mentality is key. You don’t need a complete financial solution for your entire life circumstance right out the gate; although for most investors, having that long-term plan should eventually be an end-game goal.

For now though, ask yourself, “do I know how much money I’ll need saved when I choose to no longer work for my money?” Get the answers unique to you and your financial situation. A skilled financial professional can help you discern that basic financial planning answer in about fifteen minutes or so, simply by guiding you through a conversation about your views and life goals.

Want to learn and know more about retirement planning? Have another burning financial question that you’d love to see answered here? Reach out to David at 410-871-4040 or fill out a contact form today!

Ask an Advisor: How do we get paid?

Transcript

Deborah: 00:008
Hi, I’m Deborah Williams. We’re with Puckett & Sturgill Financial Group, and Aaron Puckett is going to talk about our financial advisor series question. How do you get paid?

Aaron: 00:18
That’s a good question. You know, every client when they walk in the door it’s lingering in the back of their mind. They want to know how am I going to pay this person? How does that work?

Deborah: 00:27
Right.

Aaron: 00:28
One of the things that surprised me over the last 17 years of doing this, I know, probably the same with you, is how many people we talk to that maybe have been working with an advisor or have used some sort of financial products, and they had no idea, how that person was paid.

Deborah: 00:47
And sometimes the fees are high, and they had no idea still.

Aaron: 00:48
Yeah, I know. It’s surprising. I mean, I think our industry is trying to do a better job of making compensation more clear.

Deborah: 00:57
I agree.

Aaron: 00:57
But every firm and every advisor, I think maybe has a different way of talking about compensation, and so it is confusing to people. I think it’s a great question to ask.

Deborah: 01:10
Right, it’s hard to compare apples to apples.

Aaron: 01:13
Yeah. So I guess the way I usually talk with people about it in that first meeting is I’ll explain, in our industry generally you’ll find that people are either being paid a commission and that’s where a product has compensation for the advisor already built into it. Or they might be being paid on some sort of fee basis. Maybe it’s an hourly fee or a flat fee, or sometimes they’re being paid a fee that’s based upon the assets under management where there’s some sort of percentage fee that’s built in.

Deborah: 01:47
That’s transparent, that they can see on their statement.

Aaron: 01:49
Yeah, and I mean, that’s a generalization, but I think that that captures the way most firms work. There isn’t really one type though that’s best for every single client situation. You know? As we do with our clients at our firm, we look at their situation first and then we can see which model makes the most sense.

Deborah: 02:15
Right, which is the best fit for their situation.

Aaron: 02:17
Yeah. So usually in a second or third meeting, we’re coming back to them and saying, “Okay, here’s what we think works best for you, here’s why,” and make sure that they understand and that it’s clear. At the end of the day, no matter what the fee arrangement or compensation model is, the most important thing is that the clients know this was built specific to their situation and that they’re clear and they understand the engagement.

Aaron: 02:43
Then also, we don’t charge for initial consultations or going through those first few meetings, which I think is important for clients to know

Deborah: 02:49
That’s right. Yeah, they’re complimentary and then we can define the scope of the engagement.

Aaron: 02:55
That’s right. That’s right.

Deborah: 02:56
Thanks for listening. Let us know if you have any other questions

Aaron: 02:59
Yes. Please don’t hesitate to email, call or post a question on our website.

It’s Your Turn to Ask