PPR 26:Michael Canet, TV Show and CEO of Prostatis Financial Advisory Group

Full Transcription:

Kraig: Alright, thank you for the introduction, we are back here on the Personal Pension Radio Podcast, joined on the line by Michael Canet. Michael how are you?

Michael: I am doing absolute wonderful, our weather is better than there in California, but we have sunny days today, it’s humid, nice sunny days.

Kraig: Wow.

Michael: Too wonderful.

Kraig: It is good, when you say that the weather is not that great, you have to remember that you actually have water, correct?

Michael: Well, we have water and we have 4 true seasons, so we don’t go to hot to hotter to hot. So we have 4 seasons.

Kraig: (laughs) Hey, it is only gonna be 98 degrees on Sundays, it is going to be totally balmy 98, so it’s no big deal.

Michael: Wait, so we do have a better weather than you, because we got 90s.

Kraig: Darn straight. (laughs) For those who are listening, Michael is back in Glen Burnie Maryland.

Michael: As we affectionately call “Baltimore”, the T silent, from Baltimore, the T silent from there, I did not know that when I moved. I was telling my friends, I was moving to “Baltimore” (with “T” sound). But evidently it was a silent “T”.

Kraig: Baltimore (silent T), got it.

Michael: Baltimore (silent), see you fit in there.

Kraig: I come from Maine originally, so I can throw away “ey”s and “a”s like that so no problem.

Michael: There you go.

Kraig: Fantastic, well listen, everybody joining us for the first time, Personal Pension Radio, in Corona, and we are brought to you by PersonalPensionRadio.com, you can actually check us out on the rest of our episodes, there on the website, you can also check out the Facebook Page, but just a little bit about what we are all about, our mission here. There is a retirement income crisis here in America, it is absolutely a crisis that folks are rolling into retirement. But now they are looking back on their shoulders, and they are looking on the road at where retirement used to be, and they are longing for that, they are wishing that they have the security of old, and they are going into retirement. Gosh, it is scared to death, I might have a problem just like I do, and you probably hear some folks who are worried as can be, right?

Michael: Well, the difference is that, you know, our parent’s generation, and their parent’s generation had those incredible pensions that when you retire, you were 30 years to 40 years in the company, and you knew that you have some social security, and you knew you were going to have nice little pension, well pensions on the other side, they are fewer and fewer now, now we have to take care ourselves, it is all on us, that must take care of it, and my kid, my son is in college now, but when he was a kid, he came home, I guess he was 13 or 14 years old, he was taking a biology course, he came all excited one day, and said “Dad, check it out man, my generation, medical science is going to be able to keep us alive for a hundred and ten and a hundred twenty years old.” My wife and I looked at each other and like, “Yeah dude, you do not want to live to be hundred and twenty years old, I am telling you right now.” But the point is, we are living longer, you know and every year goes by, and science and technology, and medicine is just keeping us alive longer, and longer, and longer. And so many people when they thought about retirement, there is some of them who is going to say, “When I am going to be 62, and I am going to probably retire from 15 to 20 years, and now turns out, and looks like they are going to retire from 30 to 35..

Kraig: Yeah, absolutely, that is scary part. Yeah, absolutely, it is not a scary prospect, for many folks, depending on the age, because they are not paying attention to it, they are not, we are all about here, and the reason that I have asked Mike to be on the show is that, he has got a great, great, group of people that he works with, but he has put together fantastic wealth of information on this topic, and he is an expert, a published author himself, we are going to have some information, pay attention at the end of the show, we are going to have some very cool, free offers for Mike’s books. But when life throws you that roadblocks or when you finally poked your head to start asking questions about retirement, you are on your own, unless you get help, and that is what we are here for, that is what Personal Pension Radio is all about, bringing together great experts, like Mike, to help us with some of these questions, so before we jump in, in some of my business questions, if you will. Mike, I just always wanted to get a little bit background on you. You are the Managing Director of Prostatis Financial Advisor Group there in Maryland, you got several offices, but tell me a little bit about you on your background, are you a native of Maryland, how did you end up there, family, etcetera.

Michael: Actually, I grew up on the West Coast, in the bay area of California.

Kraig: Got you.

Michael: And I am the epitome of for my generation, the ABC, after-school-movie-of-the-week thing, so I grew up in Foster Care in California, about 3 foster homes, lived in shelters, slight grew up in a dysfunctional lifestyle, it is not that I did not have a family who cared, but just between financial and mental-health issues , it was a very, very difficult childhood and I was actually adopted by a relative when I was 14, and moved to the East Coast with the adopted family. In hindsight, it is one of the things nobody wants to have, a rough childhood, nobody wants to go hungry and nobody wants to be in such.

Kraig: For sure.

Michael: But it was, when I looked back, and it actually put me to where I am right now, so I looked at it as a great adventure, and making sure a great journey, to give me the experience that I have now, but I do not want anybody I know, people I need, I do not want anybody experience, what I have experienced growing up. So, I went to, I got up here, went to school, get some undergrad, did some graduate school, ended up going to law school, decided I like to school so much, I joked around, my wife and I when we got married, I told her I wanted to go to school, she supported it, and she find out for this 4-year school program for me, and 13 and a half years later, I had my masters in Tax, so I am an attorney. And I think that, at this point, adding that financial aspect of it, it gives us a unique approach, a unique view on the whole planning process.

Kraig: Now most definitely. So tell me, who is the most patient wife in the world?

Michael: There you go, does she got a kudos for that?

Kraig: That is awesome.

Michael: So yeah, absolutely, she has been a trouper, and has supported me through thick and thin, for everything that I have ever been, bless her heart, she smiles at me when I come out with some stupid ideas, she says, “Well, you know, we will think about that a little further.” And then she applause me when I come up with a successful idea. So she has been a trouper. I guess we were 33, yesterday was a 34 years, actually 34 years yesterday.

Kraig: Wow, congratulations, that is outstanding. So an old-fashioned guy at heart as well, I love that.

Michael: Well, you know what here is the deal, I joked around with people, you and I understand the whole idea of, if you are still married, or if you have a significant other, when you are turning 65, there is a 50% chance that one of you is going to make it to be 92, 93, and there’s a 25% chance that both of you make it to be 90, right? And I was go on to say that, it does not even matter if you like each other, as long as you have a significant other in your life, that makes all the difference, there is something that is nurturing with relationship, even if it is a difficult nurturing relationship, it still add years to your life, than life to your years.

Kraig: I think my wife will keep me alive, and the reason that the couples sometimes live longer is that the wife tend to warn you before you step off to curb, in front of the bus, because you do not want to lose that social security check, right? (laughs)

Michael: I was going to say, “My wife still likes me.” We still like each other, even if after 33 years.

Kraig: Got you, I got to work on that, just a different perception.

Michael: So that is my social security approach.

Kraig: There you go, before I forget, I always ask, when I can, for a favorite motivational quote, or a favorite quote, that is something that you keep close in your work, and in your personal life, I am not sure if you have that written down in front of you, you have it by memory, but you did have a pretty cool quote, that let us see if you could share.

Michael: Oh uh.

Kraig: I am going to read it then, because it is actually have some information, it has some more of life lessons that have just I think people need to take away. That you had said, “Take the least necessary risk needed to accomplish your goals”, just like you do not use a pediatrician, can you kind of elaborate on that?

Michael: Yeah, it is amazing that the whole financial industry is built around brokerage firms, and mutual fund companies, and every time you turn on the television, every sports program you watch, everything you have pounded, and pounded, left and right, left and right, about keeping your money in the stock market, buy more mutual funds, and they do not spend the whole lot of time than those commercials talking about the fact that you could lose 10 to 40% of your money, they just talked about averages, and all you are going to find 20-40 years, and be absolute fine. If you are going to look at the stock market for over the last 15 years, I am talking January 1st to basically today.

Kraig: Right.

Michael: The down to average is 15% would barely breaking 5. Right, and the dividends you might..

Kraig: Exactly.

Michael: It might be 6 and a half, but it is not that 15% average that they keep telling us, so, to me, going to retirement is no worse than having to hand out smiley faces at Wal Mart because you are running out of money. Because you took more risk necessary, I had a client come in to me a long time ago, and she said she is one of those big wire firms, she was working with some vice president, she was just 24-25 years old, she just graduated even promoted to vice president, and she had about 8 million dollars, and it was in the stock market, and then it was a reasonable diversification, and she is not even in the stock market. And we were sitting down talking, and she said, “Okay, tell me what you think”, and I had a little conversation, what are her goals, because for me it is, “what is the outcome?” The investment does not drive the results, that the goal, that the outcome should be driving the investment. So we were talking back and forth. And she and her husband have a beautiful pension in the government. She and her both have some reductions, they both had a social security coming in, and their income from just 2 sources greatly exceeded, they were frugal, they were smart with their money, they live well within their means, they are strictly legacy for the purposes of their kids.

Kraig: Right.

Michael: And so I looked at her and said, “You want my best advice? The best advice that I could give you, if it is driving you crazy to have a money in the stock market, take it out in the stock market, buy bunch of CDs (Certificate of Deposit), you can go to banks, and say “I have 9 million dollars, I would like to buy CDs”, and they are going to give you better interest rates than that one percent that you can get right now.

Kraig: And they will give you a free parking spot.

Michael: And they will give you free parking spot, and she looked at me and she was horrified, “Why do I need to get it out in the market? What is in the market? They will need to grow.” And I looked at her and said, “Why? Why do you needed to grow?” “Because 8 million dollars for your two girls is not enough.” And she looked and she goes, “Well, yeah, but I mean, we have inflation andtaxes.” And I said, “Fine, I mean you can get 3% of a 5 of your CDs (Certificate of Deposits), you can get 4% on the 10-year CD rates, well 4% is nothing, it is keeping the inflation taxes, what is the problem? If the goal is to have the money there for the kids, and you are stressing about the ups and downs of the market, you do not want to lose 4 or 5 hundred thousand dollars in a week. Why take that risk? Because it is not necessary. And the analogy to the pediatrician, when you were young, you went to the doctor, the pediatrician looks great, I mean he will give you the shot, with a little smiley face on, but then a little smile bandit eye-popped, it was great. I like my pediatrician, Dr. Erickson, I still remember him, he was a great doctor, there was no way in the world, given if he was still alive, that today I would go to him, to have him checked my heart, and my livers, as my body is not in good enough shape at this point that I am 50 years old, I am not going to the pediatrician now. That is not what the pediatrician does, he is not designed and experienced, and trained to take care of people entering into the second half of their lives. That is not what he does. And it is incredible in our industry.

Kraig: I think you said it best, Mike, you said that the advisor that got you to retirement, probably is not the adviser to get you through retirement.

Michael: Absolutely not, and it is such a shock and it is almost against the rules to imply that they can do it. It is like the pediatrician, you do not go to a back doctor if your feet hurts. If you want sushi, you will not go to steakhouse, and I do not think the steakhouse serves sushi, you will not order sushi from a steakhouse.

Kraig: (laughs) My daughter told me I should never get sushi from 7/11 in Hawaii either.

Michael: That is probably very, very good advice. (laughs) I would listen to your daughter if I were you.

Kraig: Where else can you get spam sushi at a 7/11 but in Hawaii? I mean it is just..

Michael: Well you have some great women in your life, you have a wife that tells you not to step off of a curb when a bus is coming, and you have a daughter who tells you to quit buying sushi from 7/11.

Kraig: Exactly.

Michael: You got people who love you, man. That is what the world is all about.

Kraig: That is what it is all about, right there. Here is a question for you, maybe if you could sum this up, if you could, how would you describe your primary focus at Prostatis Financial Advisor? How would you describe that?

Michael: I guess we take a more holistic approach, I do not know if you remember the show, I saw it once when my mom, when I was younger, my parents would never let me watch it with them, remember Chico and the man?

Kraig: Oh yes, it has been a long time, they do not even see that on Netflix. Yes, I remember.

Michael: So the lake party prince, he was the mechanic, and anything that had an engine, anything that is mechanical, brilliant, just anything, but if Jack Albert, when asked him to do anything, other than fixing the cars, Freddie Prince, Chico Cesar might say, “that is not my job”. “Take out the trash”, “sorry man that is not my job.” Change up the toilet paper, and say sorry man, that is not my job.” And so what we do different is yes it is my job, when you go to those financial people, and made you sit down with them, they will make you feel very, very good about how to allocate your money, how much risk you are taking, put this much in your mutual fund or stock or whatever happens to be, that when you look at them, and says “Fine, tell me how does this going to play in my stock market return? Sorry guys, it is not my job, I cannot do that, I might be free to refer you to some CPA, but I cannot help you with this, this is as a matter of fact, these firms would only allow to talk about tax, you cannot even get RMD, Required Minimum Distribution.

Kraig: Right.

Michael:So you have to go talk to that CPA, or that accountant, and you sit down with that accountant, that accountant has a wonderful job figuring out your taxes, here is how much your social security taxable, here is your capital gains for this year, this is your past income and the lost is worth?, or this is how much you make your assessment, tax payments, they do good job with that, and say, “Hey, listen, how about one of these accounts that I have set up with the advisor who sent me to you, and I just wanted to make sure that when I pass away, there is not gonna be in estate tax, nice fluent and easy to my heirs. And say “Sorry man, that is not my job.” And you go talk to an attorney, and you spend all day driving around, and there is not one person who is looking at everything to make sure that, all things work together, that is what we do, it is just different, the fact is that, between my staff, I have, enrolled agents, I have in Maryland, just like in California, you have to be certified by the state as certified tax preparers, I have a Master’s Degree in Tax, and what that means, when the CPA gets stuck and cannot figure something out, he calls the tax attorney, “Yes that is me, I am an attorney. I spent years doing estate planning, and we’re financial planners. So, we are able to look at the whole return, and make sure everything is piecing together correctly. And where it comes to place is, I cannot tell you how many times, that beneficiary designations done correctly. When we say we left them in trust correctly, no beneficiaries at all, for federalemployees, you cannot leave money to non-spouses, because it is an immediate tax event upon your death.

Kraig: You know, Mike actually you just touched an area that we have actually, askeda question or dealt into, give me an example perhaps of a beneficiary designation mistake or two, that you have seen unfortunately, it is an all too common, and kind of give us some ideas of the ramifications of that and affixed on that,

Michael: I mean this just literally happen, we had a client of ours, named Lisa, and she just recently passed, very unfortunate, very young age. But she had a very, very sizable dollar amount in her TSP (Thrift Savings Plan), she might have numerous conversation, getting added, you gotta take the money out from the TSP, because a lot of people are also around to it, for her clearly she had some legitimate reasons for not getting around to it because she was fighting against breast cancer, and 3 days before, she call me, and says, “Mike we need to talk because I had just a couple days to live.” And I said, “Lisa we need to take care of those TSP issue, and so we will set-uptax paper work back and effort”, I mean we were really doing death-bed planning, which is horrible. And had she had something like me, because she came to me from one of those vice-president guys, had she not like something in her life, here is what happens with a TSP, it is a very specific special for federal employees the TSP, the ThriftSavings Plan, it is their own version of 401(k).

Kraig: Right.

Michael: And the way TSP works, is if you are married, you can leave your TSP to your spouse and your spouse can keep the money in the TSP, or the spouse can take the money out of the TSP, and put it an inherited IRA, and you know as well as I do, a spouse can even put it into their own IRA, if they choose to do that.

Kraig: Right.

Michael: But the TSP, because the way it is structured, does not allow you to leave money to anybody else, except for a spouse. Now, I am not saying that you cannot leave money to somebody else. The fact is, you can. Lisa had her mom and dad. She was not married, she had no children, Lisa had her mom and dad on it. The problem is, the TSP rules say, when she passes away, mom and dad are forced to take the money out of the account immediately. They cannot put it into an inherited IRA.

Kraig: An immediate taxable situation, right?

Michael: Think about that, she had almost $600,000 in that account. And she died, $300,000 worth of income coming out to both parents. Now, dad lived in Florida, so only have the federal taxes. But still you are talking about what, maybe when it is all said and done, almost 40% between the Medicare tax and income tax. And then, here in Maryland, it is going to be 43, 44 and a half percent.

Kraig: And that taxable distribution rides right on top of whatever other income sources they are already receiving.

Michael: Correct! Correct!

Kraig: Wow.

Michael: I mean, it is just absolutely, it is a horrific event. I mean, it could have been just absolutely horrible. Another great example, sat down with the client and she was the trustee of a trust. Her friend, her friend of the family, she passed away. The money was in trust for his daughter. And the way the attorney set this up, I do not think the attorney knew what he was doing. Because he had all the qualified money going into to trust for the benefit of the daughter. And he had all, he had some annuities. And that annuities were going into that trust, for the benefit of the daughter. Actually, the annuities had named the estate as beneficiary.

Kraig: Okay.

Michael: So in order to distribute money from an IRA, or any type of qualified account into a trust for the benefit of somebody, you have to have very, very, very specific flow through tax language. Tax language that basically says, “Treated as if it is a person”. Well, she did not have that language in it. And to make matters worse, she had charities. She had charities as contingent beneficiary.

Kraig: Oh, wow.

Michael: Which means, under the rules, all the money has to come out of the IRA and the annuities within 5 years. And again here, we were talking about a $2 million estate. Two-thirds of the money was in the annuities, and…

Kraig: The IRA’s and such.

Michael: The IRA, and the attorney did not realize the ramifications of it, and the adviser that was helping them before me did not realize the ramifications. You know, the first thing we do, when were doing a plan. You have talk about this before. When you do a plan, it seems really silly to me for me to sit down, gather some information over the course of two or three meetings, and meet with you with a 300-page book of stuff about the things you need to do. That is a paperweight. We use a very, very nice binder so maybe you use it a conversation key under the coffee table, but nobody’s going to read 300 pages. So for us, we break it down piece by piece and little by little, we give you information. So, you know, were going to have a conversation about estate funding. Here’s what we need to do. But that includes things like, who are the beneficiaries of that plan? We do a beneficiary routine. And, you know, we talk about the income planning part of it and we talk about the allocations of the rest of the assets that aren’t necessary for income and so on and so forth. But those are couple of examples some really, really horrific, I mean, this woman ends up because trust pay tax in a different rate as we do as individuals.

Kraig: Right.

Michael: I mean, they lost, I guess it was a part of $800,000 in taxes over the course of 5 years.

Kraig: Yes. See, here in California, just speaking from experience, we are winners here in California. The highest tax state in the union. You know, we like to be number one. And that trust, as I understand it, you being in the tax side of things, the trust is really taxed essentially out of corporate rate, whatever that rate might be. It can be really extreme.

Michael: 37-55 percent.

Kraig: Yeah, it’s extreme. And if you never, folks when you are listening to this, it’s so critical. We all, most of us will have some form of a beneficiary designation somewhere in our life. We might have set up an IRA. We set up a 401-K. We have beneficiary designations at our banks. And we have beneficiary designations in our short term and long term disability at work. And it’s critically important to pay attention to those beneficiary designations and the changes that happen along the way. Mike, you mention about income planning. You mention income planning as, you know, as you look at this, whether its income planning for the client or in this case, a beneficiary situation where money is being distributed and income planning is being forced upon them by improper set up of a trust. But, let’s talk about income planning from a retirement sense. When we’ve talked about it in the past, one of the biggest risks that people face with income planning is sequence risks and sequence of returns. Yeah, we’ve talked about it here before but very, very few financial advisors are actually speaking about this. Give us your take on the sequence of returns risk and why it matters.

Michael: Well, it’s actually give us kind of those back to, you know, when we’re talking as the adviser who got you to retirement and this adviser who should get you through retirement. And for this exact reason. You know, the majority of the financial industry out there that says, you know, if you take a well-diversified portfolio and you know, 60 or 70 percent, let’s say 60 percent equities and 40 percent stocks. Just for, I mean, 4 percent ticks, you know, bonds of that sort. Which is fairly conservative, you know by most standards.

Kraig: Right.

Michael: Let’s say it’s 50-50. The problem you have is that the stock market is going up when you retire. Things are great. And you know if you have a million dollars, statistically, Morning Star tells us you can take about $28,000 a year on a million dollar investment. We can’t live on $28,000, not California.

Kraig: No, no. Not for sure.

Michael: And some, most people are going to take somewhere between 4-5 percent withdrawal every year. So let’s use some real numbers. What happens if you retired in 2000, January 1st, 2000?

Kraig: Ouch.

Michael: Yeah, I’m just giving a round numbers. If we are taking 4 or 5 percent out, the market was down 10. So now, you’re down 15 percent from your original starting point. 2001 and the market was down 20. Now, you’re down 40 percent, right? Because you’re down 20 plus the 5 percent you took out, plus the 15 percent from last year. 2003 and the market was down 10 percent again. You’re down 50 percent three years into retirement. And I don’t care what the market says going forward. You can’t make that up. You know, you can’t make that up. You know, you just can’t make that up.

Kraig: You can’t take that much risk. There is no reward that will replace that.

Michael: Yeah, there is no reward that can replace that.

Kraig: Exactly.

Michael: I mean, you should take that. You can’t make enough money to make that up. I mean, if you’re down by 50 percent, you need 100 percent return just to break even. That’s just to break even. And that’s the problem with systematic returns. That’s the systematic withdrawals. I mean, if in the ’80s or ’90s. I mean, you can throw darts at a dart board at the Wall Street journal and you make money. You make 20 percent. It didn’t matter what you did. And so, taking 5 percent out was no big deal. The problem is, is that, any those of us that lived through the ’80s or ’90s in this world, in this investment world, one valuable lesson about 2001, 2 and 3 is that, you know what, it’s stupid to take a systematic withdrawal. Now, here’s a deal. If you have $5, $10 million and you need $50,000, you take 1 or 2 percent out, alright, fine. I understand that. That might be doable for you. I personally still would rather have some sort of structure portfolio where I don’t have to worry about, “Is the market going to crash?”

Kraig: Right.

Michael: I don’t want to stress about it. I don’t want to have to wake up every morning and see what the futures market is doing. I don’t want to have to care, is Russia invading Ukraine? Did the Israel, you know, blow up Iran’s nuclear power plant. I don’t want to have to take any of that stuff. I want to garden. I want to golf. I want to play with the grandkids. I want to travel. And you’re doing systematic withdrawals. And you’re doing, you know, 5 percent based on your investment portfolio. That’s a slippery slope. It’s just you know what’s going to happen.

Kraig: No, no definitely. And I love that idea of security. We talked a lot about here and our practice and on this podcast about the myth of diversification. The typically financial community mainstream advice is diversification equals 5 different mutual funds. That’s, there you go, you’re diversified. But you have a different take on it. That diversification is more than that, it’s the balance of, for example, investments with actuarial assets, annuities and an actual income plan. Have you seen more interest in that conversation lately, as more and more people are realizing that there really is a crisis? And they’re coming up against it.

Michael: Yeah, I see a lot more interest in what it is about. And unfortunately, you and I understand this more than most people do. It’s like used cars. It’s like life insurance salesmen. You know, used cars are pretty cool for a lot of people. But unfortunately, there’s a couple of bad used cars salesmen out there that just make everything look bad for everybody else. Same thing with life insurance.And unfortunately, same thing in our industry.

Kraig: Right.

Michael: I was a believer in securing your income. And securing your income basically mean, get a pension, if you can pension through your work, and give those to security. And to the extent you don’t have a pension, or the extent you don’t have enough money from the pension that you do have. And you’re secured in what you get. There are certain things you get in your life when you retire that you must have. You have to have a roof over your head.

Kraig: Right.

Michael: You have to have food on your plate. You have to have a vehicle. Okay, you know, I lived (happen to live)in downtown San Francisco, I do not need a vehicle. But you understand what I mean.

Kraig: Exactly.

Michael: There are some things that you have to have. Now, there are things that are extras in life. I love playing golf. I love gardening. My wife, we don’t have grandkids yet, but my wife will be all about the grandkids. I know it already. You know, I love to travel. There are things that we like to do, and there are things that we have to do. For me, and for guys like us, the stuff that we have to do, that money has got to be safe and secure. We have to know that money is coming in every month, because I am not handing off smaller organization (business).I am not going to work for Walmart just to make ends meet. So, I want a pension. And I want social security. Unfortunately, I do not have pension. I have always been self-employed. That means I have to create my own pension. I have to come up with a way that I get a steady stream of income,what all pensions are run by insurance companies, so I am going to make a deal with an insurance company. I am going to give them some money, and they are going to guarantee me income every month that I will never outlive and then my wife will not outlive. And the better part about this pension, the nice thing about the way these pensions work is annuities and that is what they are called. These annuities; the nice thing about them is that if I die, if I give my money to the insurance company on Monday, and I get one payment and then my wife and I are killed in a car accident, my kids will get what’s left over. Whatever we didn’t use, the kids get it back. And think about this: your work pension doesn’t work that way.

Kraig: No.

Michael: If your wife died after the day after you get your first pension payment? Insurance company wins. And unfortunately, what happens is there’s so much financial noise out there. There’s so many people out there that an annuity is the solution to everything. You know, flat tire? Get an annuity. You have a broken arm? An annuity will fix that. You know, you have a million dollars in your bank and the annuity, that’s where it should all go. For my perspective, you should use the least money necessary to accomplish your goals. So, if you need a hundred dollars a month, then whatever you need to put into an annuity to get a hundred dollars a month, should you not put it into annuity? Just because you have a million dollars that you can, doesn’t mean you should. If only have to put $10,000 into annuity, that’s the number you should put in there because that will secure your income for the rest of your life. And that’s what it’s all about. Having a safe, secure income stream. Cause you never have to stress it. You never have to worry. It’s there no matter what.

Kraig: That’s a great perspective. The advice from the economist who really know this and experts who know this is that, just like Mike said, the annuity is not the answer. And overall comprehensive strategy and actual plan involves an annuity to the extent necessary to secure a lifestyle, a desired lifestyle, that’s when, that’s how you allocate it. It’s the right perspective. When, how do people know, Mike, how do they determine whether they should hire somebody or work with someone, or go it alone? How does somebody determine that?

 

Michael: Well, you know. So obviously, I’m bias, right? I don’t think anybody should go it alone. I can change my own oil in my car. I don’t, because people have been doing it quicker, faster, and easier. And the problem with going it alone is that you literally have to sit in front of the computer and read and sit in front of the computer half your life. I mean, you and I, we work 40-60 hours a week just doing this.

Kraig: Right. And in your case, and in order, if you’re not working with Mike already, you can get yourself up to speed. It only takes 13 years.

Michael: Thank you! Thank you! And even then, both you and I spend another 4 or 5 weeks a year in continuing education classes and that’s one class plus what we do entirely on our own. You know, reading whatever it is we’re reading. Whatever charts, journals, you know, trends. Everything that we have to do so we can help our clients have the most successful retirement they can imagine. So, I think, everybody should do have a financial planner. For me, there are certain things you should be looking for when it goes to hiring a financial planner. And I am a big believer into the financial planner, wants to be a financial planner, and not a financial broker, financial adviser. Not an adviser, not a senior sales consultant or a senior retirement consultant. A financial planner. And that’s a very specific, a very specific designation, you should be a financial planner. So, that’s one thing. That doesn’t mean you can’t get great advice from somebody who’s not, but the reason I like the financial planner is because if they’re holding themselves up as offering financial planning services. They’re going to talk to you about estate planning issues. They’re going to talk to you about, you know, your insurance, your home, your auto or your long term care, everything. They are going to talk to you about income strategies. They’re going to talk to you about taxes. That’s why I recommend a financial planner. That’s one thing.

Kraig: Okay.

Michael: Two, I like being the fiduciary. I think that it’s that, you want to have somebody that is looking out for your best interests first. And again, it’s not that, the adviser, Wells Fargo, Merrill Lynch. It’s not that guy can’t look out for your best interests first, but we all saw what happened. I mean, and I know I’m paraphrasing, but the Jane Diamonds and the Golden Guys got up in front of congress in 2008 and said, “You know, we do not have to look out for our clients’ interests. We have to look out for our shareholders’ interests”.

Kraig: Right.

Michael: And that is scary. I mean, this whole fake/fraud instant. The whole SUC (Sum Under Consideration). This whole industry. This is fighting back and forth about should we put our clients’ best interest first, or can we just sell them a product that’s suitable. And, you know what, this kinds of go back to the doctor. A pediatrician is a doctor. There is no way a pediatrician should take care of you. And the pediatrician, if you walk in the pediatrician’s office, the pediatrician should say to you, “Sorry, I’m not a family doctor. I’m not an Internal Medicine. I do children. I take care of children. I should not be taking care of you”. And that’s the difference between having an adviser, and somebody that had to finish their duty to look after your best interests.

Kraig: It’s a great perspective. It really is. It kind of, coming from a family medical background, just with my mom and other family members. It goes the other way. You know, the guy who’s an orthopedic surgeon should not necessarily be working on a 5 year old.

Michael: Right.

Kraig: They’re built differently. They are specialists who are surgeons for children. It’s, you have that delineation and it’s critically important. I think that’s a great perspective. We focus on income planning and you actually shared, and just for everybody listening, as always, I’m going to have all the links in the show notes, and Mike and his team, actually also hosting and on the air waves back in Maryland. And you can catch it nationally on the Savvy Investor Radio Show. But Mike’s website and the Savvy Investor Show will be linked in the show notes. But I wanted to catch on something that you have done a great video presentation on income planning lessons. Where you talked about, for example, establishing reasonable income expectations. Taking the least amount of risk and, do you have anything that you would add as far as words of wisdom and tips, cautions, as relates to that income planning conversation that folks can really take away from this and be aware of.

Michael: Well, I think again, going back to the least amount of risk necessary. Have a goal in mind, the outcome is supposed to be there. Keep in mind that there are things that want to have versus the things that you must have and income and assets should be allocated to accomplish first, the must-haves and the I-want-haves. I cannot stress to take the least amount of risk necessary to accomplish your goals. I just cannot stress that enough. Really should be the approach you take. And then, you know, other things that was talking about, you know, talking about income strategies and talking about retirement plan in the general. Talk to your spouse about what retirement’s going to look like. I cannot tell you how it often cost for this. And we sit down and one of the first things, you know, “What does retirement look like to you? What does retirement look like to you? What are you going to do? You’re tired on Monday, what are you going to do on Tuesday?” You know, and the husbands are talking about, you know I’m going to golf, or we’re going to travel or we’re going to do this and the wife looks at him and says, “What are you talking about? I’m not going anywhere. I’m taking care of the grandkids”. You know, it’s just completely two different worlds about what’s going on. So, you know, to me that’s the important part of the retirement planning process. What are you doing today? What are you doing this month? What you guys do this year?

Kraig: Now, that’s actually an excellent perspective. I actually have a couple that I’m working with right now. He’s a pharmacist and he had, on his retirement budget, $20,000 a year for vacation. Because they want to go.Because they want to do this stuff.Because they realized, when they started planning, that their expenses were not going to actually drop in retirement. They might actually go up right?

Michael: Right.

Kraig: So, she looked down and said, “I’m not sure that 20 is the right number”. (Laughs)

Michael: (Laughs) and you and I both know also that people go into retirement with an idea that the numbers have lineal number. How much I need to live on this lineal? And for most of us that we retire, the average American retire is right around age 62, what we’re going to spend actually you’re going to have an increase of needs from about 62 to about 70-ish. Because it’s the bucket list, it’s the honeydew list. All those things, I mean, when you get into retirement, you hear this all the time. You know, I talk to my clients once they retire, they’re like, “Wow! I have no idea how I worked because I’m so busy”. And honestly, so busy doing nothing all day that I don’t have time to think, I can’t believe I worked all those years.

Kraig: Exactly.

Michael: And so, for us, we always plan, “Look, you think you need $5,000 a month of income so let us plan for 6. And if you don’t need it, great, we have extra”. But the time you get to be somewhere between 70 and 75, we do start slowing down. We eat a little bit less. That honeydew list is a little bit smaller. That bucket list has been accomplished or is a little bit, you know, maybe we don’t do it this year. And gosh, by the time you get to be 75 that time is a beautiful setting.

Kraig: Right. And that.Exactly. That time in the, maybe in the late morning, a little bit in the afternoon. (Laughs)

Michael: (Laughs) Exactly, exactly. And then you know, by the time you get to be 80, you’re spending nothing. Because you’re not doing anything. And then, of course, spending time around your house sometime around 80, 85, at 85, 90. I think the average American spends great more than a quarter of a million dollars in the last two years of your life.

Kraig: Right. And then we get into the long term care. Then we get into that long term chronic illness care. Well, I have to say, I just, I love your perspective on the income planning conversation. I love your perspective on diversification. You know, you say for example, “It’s not how much you make, it’s how much you keep”. Folks, keep this in mind, as we wrap up this episode today, we’ve got actually a couple of really cool free book offers. Mike is actually a published author. I believe number 1 for Surviving the Perfect Storm.

Michael: Amazon number one. Actually for both of my books.

Kraig: Really? Successonomics and Surviving the Perfect Storm, both books by Mike. And we’re going to have an offer, actually to be able to get free copies. We’ve got 5 copies of Successonomics to give and we have a free copy offer, I’m not sure how many are wanting to get the two offer up on Surviving the Perfect Storm.

Michael: We do 5 of those as well.

Kraig: Perfect. So, yeah go ahead.

Michael: Let me just interrupt you real quick on this. So, Surviving the Perfect Storm was, I wrote by myself. And I actually wrote it. It wasn’t one of those things that I hired somebody. I put my name on, “I actually wrote this thing”. But the cool thing about Successonomics was I got to contribute to a book with Steve Forbes. We all know who Steve Forbes is right?

Kraig: Yes.

Michael: One of the richest American. Newspaper magazine guy, media guy.Ran for president, flat tax. I got to contribute to a book. And what he did is brought together a bunch of young authors. I was so happy to be called a youngster. Young authors that wanted to offer some insight in various sectors of the economy, and what things we’re doing and the things that we as people should be doing to be more successful in the economy and in our own personal financial world. It’s actually a contribution by several authors in this book.

Kraig: Excellent.

Michael: That it was a great, great thing. And we get to New York and do some speaking with him, do some presentations with him. It was a great, great experience.

Kraig: Oh, a collaborative opportunity with Steve Forbes. How fantastic. Well, congratulations for that. Everybody, we’re going to have a, we have a specific landing page at PersonalPensionRadio.com/giveaways that you’re going to be able to sign up. Make sure that you, as soon as you hear this, don’t do it while you’re driving or while you’re running on the treadmill. Pull over, get to the website, sign up, because the first 5 will go and you’ll miss it. So we’re going to do five on each. We’ll have that set on the PersonalPensionRadio.com/giveaways. We’re also going to have links to the contact information, but Mike, if you could, how do people get in touch with you? And if I may, are you as I think you are, a national, you can talk to people all around the country, is that what I understand?

Michael: Yes, yes. And again, that is one of the advantages of being a investment adviser, a registered investment advisory firm. We have clients probably in 34, 35 states and to be fair and candid about this, you know I have clients in Minnesota and I have clients in Nebraska. I don’t go visit them. But, my client scenarios in California and Florida. If they have a really great golf course and the weather’s beautiful, I go to them in a regular basis. But yeah, we have clients all over the country. And, the best place to really look this up is the SavvyInvestorTV.com, SavvyInvestorTV.com. And you know, people were confused there’s two V’s in Savvy, so SavvyInvestorTV.com.

Kraig: Now, perfect. And it’s going to be on the show notes. And I have to tell you, for everybody listening, an outstanding resource they’re at the SavvyInvestorTV.com. Tons of information, you can really just spend hours, I think with Mike and his team, going through the information they’ve got prepared for you. Mike, this has been awesome and as I expected, fast. Really appreciate the opportunity to have you on and I look forward to perhaps, following up again with another interview in the future.

Michael: Absolutely man. It’s been a great experience and you do, you and I talked about over the last year. And you know, you guys do a wonderful job on your projects as well. So, it’s nice always meeting. You know, one of the things that’s typical about for us being independent, we’re not in some big firm, is that we need each other, to be able to talk to each other about, “Hey, how did you handle this type of situation?” Because you know, great resources like you guys make it easier for people like me.

Kraig: I really appreciate it. Thank you again everybody, this has been Personal Pension Radio and we’ll see you again next week, next episode.

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