Hello and welcome back to How to Retire. I’m Jackie Post and I am here with Alex Kal. He’s the senior advisor at… and he’s joining us right here in our Middletown studio. Alex, great to see you again. Great to see you, Jackie. So today we are talking about something that you would normally hear in, say, a doctor’s office. Get a second opinion. How does that relate to financial planning, and should people get a second opinion? Yeah, I encourage everyone to get a second opinion on anything, right? Whether it be a doctor in a health issue or… like an inspection on your house, right? Especially something finance-oriented and something that’s going to involve everyone’s life. You always want to get an idea of, hey, am I in the right spot? Am I doing the right thing? Because there’s never going to be a monopoly on good ideas. Absolutely. And it can change over time. What worked for you, you know, 5, 10, 20 years ago might not be working at this moment in time. So it’s not just do I have an advisor, but do I have the right advisor for where I am now? So let’s go through some of the red flags. So what is the first red flag you should look for? So the first one is always communication, right? Are you getting a response in, you know, an hour? Is it a week? Is it never? Because generally we want if you have a question and it’s, you know, it’s personal to you and, you know, some are more important like, hey, did my money go out or am I OK to still retire? Those are all things that should be answered relatively quickly. Right. So what is quickly? What’s a normal time frame? Yeah, I would say generally 24 to 48 business hours is fair. Right. But if it’s been a week, someone forgot or they just didn’t respond. Yeah. Maybe give them one second chance and that’s it. So what is the second thing to watch for? The second thing is always going to be, do we have a plan? Is it something that is going to be proactively done in the sense that you are on board, you have an idea of where things are going to come out, what tax impacts are going to happen to you? Or is it all just kind of sporadic at all last minute? Or we’re being reactive, especially to the market. are you involved in a lot of those decisions? Or is it just, hey, the advisor tells you it happens and it’s done, right? But generally we want you on board. We want you to have an idea of where things are going to come from. If, hey, that doesn’t work, where do we go to Dext, right? But that way you’re kind of involved more than anything. All right, Alex, and I know there can be, you know, a ton of different scenarios where things pop up that might appear to be a red flag, but what’s a third red flag that you can think of right offhand now that people should watch for? The other thing is if they are only talking about a specific product. Okay. Usually if that is the case, sometimes that is the only thing that they can use, right? And if, say, we have a tool belt and the only thing in my tool belt is just 50 hammers. It’s what I’m going to use, right? And sometimes that’s what they’re limited to. So we might want to look at an advisor who has a different tool belt, right, with different tools so that we can see if one is better to fit into what we’re trying to accomplish. How do some of those follow-up questions play into that? You know, maybe when they want to retire has changed. Are those advisors, should they be asking those questions, asking those follow-up questions to people and making sure they’re on the same track? Every time. It should be, hey, has any of the plans changed? Do you want to retire sooner or later? Like I had one client, for example, that said, I had the worst week ever. I want to be done now. And I said, great. Great. The numbers work. These are the adjustments we would make. This is what it looks like if we left right out. Wow. That’s pretty cool. Yeah. All right. So you have a story about one of the clients that you work with, a family that you work with, who actually talked to six different advisors before they found what they were looking for. What was their experience? I love real stories. Yeah. Well, each one was very different, surprisingly. So a handful, they wouldn’t even want to talk to them. The advisor? The advisor. Yeah. So they called. They said, hey, can we get onto your schedule? They said, yeah, we’ll let you know. And then they’d never heard back. They tried that three or four times, which is very strange because like I’m trying to come to you. And yeah, they never reached back out. Other advisors didn’t want to start doing any type of discussion until they got paid first. Another time, they just didn’t. talk to them. They talked at them. And that’s generally a problem because no one’s getting any benefit there, right? And it’s usually they’re discussing things that don’t matter to the other person either. So it’s just, hey, are we doing the right thing? And are we on the same page more than anything? They’re just spewing financial information at them, so to speak. They’re trying to seem smart. Yeah, exactly. All right. So what does a good second opinion meeting look like if someone’s looking for another financial advisor? Yeah, I always start with what are we looking to talk about? If it’s taxes, great. Let’s focus on taxes. If it’s retirement, let’s focus on retirement. But the idea is I want to cover the things that you’re most interested in and then we’ll talk about if there’s improvements, if we’re on the right track, these are the adjustments we would make because if you do it with us, great. If you take all that info and you go back to your advisor and they make the changes, that’s also a win because it impacts you positively, right? And it gives you a good experience. So as long as there is positive change and things are done for your benefit, then… a win. And I think that’s something to note that people who are looking for a second opinion, they don’t have to switch their advisor, right? They can just come and get kind of an opinion that makes them feel good. And then they can stick with their advisor if they want. Yeah. Well, I do tell some people bad news. Yeah. But it’s the truth, more importantly. So with that said and getting a second opinion, how do you know if you have the right financial advisor for you? Yeah. Other than the few things that we’ve talked about, you know, sometimes it is just a feeling, right? Do you trust that person? Do you mesh well with them? I always like to tell people that, and I jokingly tell them, like, hey, you can like everything that we talked about. I could just not be the right person for you, right? Whether that be the way that I present information, the way that I describe things, or the fact that I have the Harry Potter glasses, right? Either is okay, but… want to create a no-pressure situation because sometimes it isn’t the right fit. And sometimes people just need to feel that, well, okay, it is okay that I do go somewhere else. End of the day, it’s just whatever makes sense for you. And makes you feel good about what you’re doing, I would assume. Yeah, absolutely. All right. I like your glasses. Thank you. We have a lot more to get to. We’re going to talk about some real families and real situations that show exactly why having the right plan and the right advisor makes all the difference. We’ll be right back. This episode of How to Retire is brought to you by Fuchs Financial. If anything we just talked about sounds familiar, if you’ve been meaning to get a second opinion and just haven’t done it yet, give them a call. No pressure, no pitch, just a real conversation. We’ll be back after this. Congratulations, Nancy and Mark. You’ve been chosen to play the retirement. All right, first question. How long will you live? Too slow. Spin the longevity wheel. Nancy, will inflation eat your savings alive? I hope not. Let’s spin the slot machine and find out which strategy will you pick? At Fuchs Financial, we don’t spin wheels. We build real plans. Personalized, adaptable, and clear. Welcome back to How to Retire. I’m Jackie Post here with Alex Kal from Fuchs Financial. Now, before the break, we talked about second opinions and having an advisor who actually hears you. Now we want to get into something even more specific, a real situation that shows exactly what happens when the plan and the goals are not in alignment. Alex, you have a story about this from a family you worked with. Tell me about it. Yeah. So this family has been working with an advisor for about 20, 30 years. They are both single. They are partners. But they own a 200-acre dairy farm. That is really where they want most of the advice around and the estate planning and nursing home side. But they do not get that with their current person, it seems like. So what is happening with their current advisor? Yeah. So the current advisor just isn’t versed on the estate side. or the tax planning side. So all he really does is focus on the investments for them. And so it’s, hey, let’s go over your seedy ladder. How is the performance? How does it relate to a benchmark? And that’s not really what they care about. And it’s things that they’ve brought up a few times, but, you know, things just, they’re not aligned. Now the farm is the goal. So the investments are just one of the tools to get there. The advisor was focused on you know, that tool and kind of ignoring their goals. So what do they do? Realistically, they want to preserve the land as much as possible. They don’t want anyone to build on it. Of course, right now, data centers are a big thing. So their big thing is I don’t want it ever to be built on. I want it to be for land preservation and, you know, for animals and for people. And so there are certain ways we would go about that. It’s just the investments are one area. So what are some of the options for them? Yeah, there’s going to be different easements we can do, or we can definitely look at some trust, whether it be land trust or an irrevocable trust. For them, they want to incur the least amount of estate taxes. So for them, we are looking at actually doing a easement. And what that means is we are essentially designating that no one can ever develop this land. And that does two things. A, that accomplishes what they’re looking to do, but it kind of destroys the property value. Right. Right. But if the goal is, hey, well, we want to take the least tax impact for us. Hey, that accomplishes that. And we don’t personally care so much about the value, more so the preservation. So, you know, that’s just a weighing of the pros and the cons. And are we OK doing this? It is one of the options, but hey, there are still option B or C. This just might do it the best. So Alex, what are some of the challenges of going with the easement plan? Sure. I mean, we’re always going to have IRS scrutiny, especially when we are trying to avoid things like paying taxes or paying less taxes, or we’re trying to hide things from the state for nursing home purposes. there’s always going to be some scrutiny of what is this thing valued at and anytime we are we’re trying to intentionally reduce the value we need some substance to it right some standing especially if the irs comes knocking because i want to have things prepared already so that and and a good reasoning behind each so that we have some leg to stand on rather than us scrambling last minute to say hey we thought we could do this please forgive us And usually that’s kind of where, hey, when we’re going through the options and getting evaluations and appraisals and we have similar land that we can base those numbers off of is one of the ways we would do that. There’s so many moving parts to it. It’s the fun part. People don’t realize it, right? Yeah. Yeah, absolutely. So what is the benefit of doing this right now to this particular family? Yeah. for them since that nursing home is kind of like first and foremost the main concern and the protection it is essentially just starting that clock to get things out of the way because right now if they had to go into a nursing home there’s going to be a five-year look back so the idea is if we can start this now and try to avoid that as much as possible that is just going to put us more into the clear that it is more protected more than anything which is kind of one of the reasons why they’re probably not going to ever get married. That way it’s another separation. So if one does need to go, it’s not a concern and there’s more money preserved. And remind people what a five-year look back is. So a five-year look back just means, hey, if we do need to go to the nursing home, the state and we need state coverage, they are going to look at anything you did in the last five years. Did you give money away? Did you try to move it into trust? Anything and everything, they’re going to try to look under, essentially look under the microscope because they want to know all those things so that you pay for it rather than them coming out of pocket on their end. And so anything that does happen in that time frame, they just assess penalties. I’m curious about, do they have family? Are they worried about that? Are there other things that come into play with this scenario? Yeah, so there’s… getting older, they’re considering, well, hey, if we need the nursing home, they don’t have any kids. So their concern is, well, I just don’t want it to go to a nursing home at the same time because their state is just going to sell it, pay for all their care, and then it’ll probably be sold to the highest bidder at the same time. So for them, it’s just, hey, I want to preserve this legacy as long as humanly possible. The investment’s just kind of almost… help in that sense because we can use the investment returns to pay for the taxes and the insurance on the underlying land at the same time for perpetuity. Isn’t this right up your alley? Don’t you own a farm? It’s a half farm, but yeah, it’s getting there. It’s getting there. It’s kind of a cool, I like that. I like that you have this going on. So what were the options B and C? Because you talked a little bit about some of those other options for them. So one of them is just an irrevocable trust, right? isn’t going to do anything to the property value. It’s still going to give the protection just a little bit more costly along that route. Of course, then we can just donate it to a charity, which is another option, except we just don’t really have a ton of control and it’s going to just be based on how the charity decides to use it. So for them, it’s just, well, hey, we want control. We want protection. We want preservation. Hey, here’s a handful of options that kind of do some of each. What did they decide? They actually decided to do the ease bit. Okay. They want to essentially reduce the value to then protect it forever. And this is about legacy planning, as you mentioned earlier. How often do you see this in your line of work? And it seems like it’s a lot more meaningful than some of the other stuff you might do. people are really committed to a cause maybe? I’ve noticed more recently I’m starting to meet a lot more farmers or people that are wanting to conserve the land, which is great. Sometimes it’s the opposite, which is okay, right? But it’s really just meeting people where they’re at and what they want to do. Awesome. Awesome. I love that story. All right. We have one more segment coming up right after this, Alex. Last one, one real situation and some practical takeaways you can use no matter where you are in the planning process. We will be right back after this. From Fuchs Financial, if this conversation sounds like your family, if you have land, a business, or an asset, your current plan just isn’t protecting, reach out. That’s exactly what they do. No pressure, just good information. We’ll be right back. We know the market is going to get worse from here. This is the biggest monthly decline in 10 years for people’s 401ks. My investments are tanking. My retirement isn’t going as planned. I can’t believe I let my kid talk me into buying crypto. I mean, what is that anyway? This was the fourth worst contraction in history. So how are you two doing? Your financial future doesn’t have to be uncertain. Plan your retirement right. Call now for your own complimentary portfolio review and tax analysis. Welcome back to How to Retire. Alex is here with me and we have one more story. I think this one is going to resonate with a lot of people who work for a large company. We are talking about stock options. And you had a family who ran into this scenario. Tell me about it. Yeah. So anytime that we have stock options, that just generally means you’re going to be for a big company and it’s the company you work for. which is great. You get to participate in a lot of the upside or the downside, right? But it’s always going to be a concern because I tend to see with a lot of these stock options where they’d be restricted stock units, stock awards, incentive stock options. We tend to see too much in one particular company, and it’s the company you work for, which starts to get a little concerning more than anything. I guess it sounds great until it doesn’t really. So what is the downside? Sure. The downside is a lot of our money is tied up in the performance of one. And that’s when we tend to look at like an Enron or a General Electric or a Bear Stearns. I’m not saying that’s going to happen, but that is the concern. Is, hey, if 40% of our money is tied in the one we work for and we don’t have a job. and they’re not doing great, well, 40% of our money is also going to ride that wave with us. Right. So too much concentration is the risk, really, not just a reward. So let’s talk about that. Yeah. So any type of portfolio, when we look at having too much concentration, right, we could be exposing ourselves not only in too much downside, but limiting the amount of upside. Because depending on what that company is trying to accomplish, might not be where we see the most growth in the market. So it’s kind of like that opportunity cost that we’re giving up. Now, some of these plans, we could buy stock on 15% discount. Not bad. But if we’re seeing a lot of momentum in other areas that are probably returning a little bit more with slightly less risk, we might want to kind of divest from those positions and go into new ones. And it’s tough because you can’t sell it all at once. Is that correct? Some correct, yeah. You can’t sell all at once, or there’s certain timeframes that you have to meet first, or even if you’re a big owner, there are blackout periods that you essentially almost have to request to sell at the same time. So what is the, I guess, what is the upside for someone who might be considering this? What is something that’s good about it? Because it sounds like there’s a, it’s a lot of, it’s very managed, it sounds to me. Yeah, a lot of the time it’s… as some of these events happen, right, or like we’re given stock awards, it’s just how are we spreading out the money? What is it actually going to? And actually having a plan for it rather than just letting it happen and then doing nothing more so. Are we, you know, paying taxes? Are there upcoming events that we’re trying to do? Are we replenishing emergency fund money? Is a spouse deciding to stop working? okay are we beefing up the emergency fund right it really comes down to let’s divest let’s spread it all out and let’s kind of revisit what we need to what someone who’s facing this right now what would your best advice be to them who has a large concentration or who is being proposed stock options yeah usually it’s always let’s look at them okay sometimes they are attractive especially if we don’t have any of them in your overall portfolio, they’re a nice value add. Okay. Sometimes it’s just we don’t want too much. Right. All right, Alex, so there’s the ESOP piece. I never love an acronym, but you’re going to tell us what it means, right? I wasn’t planning on it, no. No, you’re just going to leave me hanging. Just a little bit. No, but ESOP or ESOP just stands for Employee Stock Option Plan. Now, that’s generally within… plan or within the 401k structure I usually see it as where the employer puts in like their match so sometimes they are gifting you shares in the retirement plan just so that you have some exposure to it generally sometimes nothing you have to pay for which is really nice but it’s just giving you some benefit of being part of the company and so what’s the value of something like an ESOP yeah so Because a lot of the time I see them as gifted shares and they have something called a basis, which just means what did you put in in terms of value? And if you’re not putting anything in, it’s the employer, your basis is very low or zero. And so when we go to retire, we can always do something called the NUA, which another acronym, always fun, but just stands for net unrealized appreciation. Which just means, hey, I’m going to take my employer stock out. So now it is taxed differently, but with capital gains instead of ordinary income as if it was a 401k plan. Just means that we’re going to pay less in taxes to the government. But for us to do that, we have to pay tax on our starting point or basis. So sometimes if we’re the one contributing to it and that basis is really high, we don’t want to do that. But if it’s something that the employer has given us, we want to take advantage of that because that just means we’ll pay a little bit upfront in tax to take advantage of a lot more tax savings on the back end. So that kind of coupled with, hey, we might want to sell that down in the first few years of retirement because that reduces our risk concentration in one stock, risk overall, and we’re being tax efficient at the same time. All right. So we’re going to play a little quick hitter game. All right. You ready? I’m ready. All right. Fast questions, real answers. All right. Someone has significant company stock in their 401k and they’re approaching retirement. First move. Let’s double check the percentage. How much is in that company stock and what kind of plan is it in? Because there might be some tax advantages. Sometimes if it’s more than 10% or 20%, let’s probably sell some first. All right. Your advisor hasn’t mentioned your estate plan in three years. What does that tell you? They might not be considering it. It’s always good to update beneficiaries, make sure those wishes are still being honored. Are we still within certain limits as laws change? But it’s always worth a conversation to see, hey, are we still on the right track? All right. Someone wants a second opinion but feels guilty, like they’re cheating on their advisor or their barber in your case. What do you say? Which he’s not, by the way. I’m not. No. It’s not necessarily cheating. Rather, it’s just being proactive for your financial future, right? All right, last question. What is the one thing you wish more people knew before they retired? I wish they were just more educated in the options because some people mainly think that, hey, it’s a 60% stock, 40% portfolio, and we just draw 4%. That’s not always the answer, and that doesn’t… fit 95% of people. So it’s always just, hey, let’s get it personalized to you. Let’s fill in the gaps of what you care about and come up with your own plan. What’s the best way to get educated? Just come on and see us. I agree. That’s the show in one sentence, right? I agree. All right, Alex, thank you so much. It’s always fun to chat with you. And that is it for this episode of How to Retire. If anything we talked about today, second opinions, estate planning, concentrated stock, if any of it applies to you, don’t sit on it. Reach out to Fuchs Financial. Remember, no pressure, no pitch, just the right questions and real answers. I’m Jackie Post. Plan smart, retire happy. We’ll see you next time. When was the last time you saw your financial professional? Are you getting the most out of the strategy that was created for you? Although you’ve done a great job finding someone to help plan for your future, are you 100% sure that you were given the right strategy? We can help answer these questions and more with a complimentary second opinion evaluation. We will take a look at what you have in place and then help determine if you’re well positioned to get the most out of your future retirement income. In the event that it is not, we can help by making suggestions and showing you how to get on the right path. You wouldn’t get just one opinion when it comes to a major health decision, so why would you treat your most important financial decision with such disregard? Call today for your no-cost, no-obligation, second opinion evaluation to see if you’re getting the most out of your retirement income plan. Good morning, Ben. Birthday party for Carolyn. Bye. birthday be there be square my quarterly report on slide number 62 we’re trending in the right direction all signs point to a very positive outlook for the next several years if you peel back the onion the work never seems to end until the day it finally does call today to get your free written financial plan so you may live every day to the fullest and enjoy the retirement of your dreams
