You Need a Smarter Savings Plan


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Transcript

Mike:

You got to start building up streams of income. This is really important. And the sooner you start doing this, this is like anything else. The sooner you start doing it, the easier it is to do

Zach:

W elcome back to Retirement Today. My name is Zach Holcomb and alongside me, we have Michael Reese, the founder of the prosperity planning system, retirement planning, expert, and president and CEO of Centennial Advisors right here in Austin, Texas. On today’s program. We’ve been having a great discussion all around planning for retirement, what that life looks like for you, what you need to do to, you know, financially support yourself when retirement becomes a reality. But we’re going to dive a little more into that in this next segment, right? Mike?

Mike:

Yeah, so we’ve basically said, all right, retirement looks like this and here’s why I need to pay for it. Right. Right. It’s the income that I need. The regular stream of cash flows that I need in order to make work optional. Sure. I love that phrase, work optional.

Zach:

I know, it’s great, right?

Mike:

I’m in the world of work optional right now. I’m working. It’s optional and I love it. In any event now we need to start thinking about, all right, you’ve got all this money you save for retirement. You’re continuing to add to your savings probably for your retirement. Do you need to make some changes as to, you know, what you’ve been doing with your planning? Because here’s the reality to this stage is to this point, very likely all you’ve had to focus on is growth and accumulation. Right? All you’re trying to do is accumulate a nest egg. You’re trying to grow it and make it bigger so that someday you can live off your money, you know, make your money work as hard for you as you’ve had to work for it. Right? Right. That’s the phase or the mindset you’ve been in. But now that you’re starting to, you know, maybe you’re five years out from retirement, maybe a couple of years, maybe eight years, whatever it is.

Mike:

If you’re at least within that 10 year window, you need to start thinking differently. You need to start thinking you still want to grow your money. But at the same time, you need to start thinking, if you want work to be optional, you got to start building up some streams of income that will replace your paycheck. You gotta start building up streams of income. This is really important. And the sooner you start doing this, this is like, anything else, the sooner you start doing it, the easier it is to do, right? It’s like, you know, it’s kinda like okay, so my daughter, Madison, she’s 15. She goes to high school. And I swear that kid, when, if she’s got an exam, she is waiting to the night before to really start studying for it. Right. She’s cramming. And I keep telling her, I’m like, if she’s got a project due, it’s like, okay, project do’s tomorrow.

Mike:

So when does she start working on the project? The night before it’s mom, dad, we got to go get supplies to the store and get supplies. I got this project due tomorrow morning. And, you know, imagine how much of a better job she would do on that project. How much of a bed, how much easier the test would have been if she would just start maybe a week ahead of time, right? Hey, I’ve got a project due, not tomorrow, but next week, Hey, let’s go out today. Let’s get the supplies. Let’s start putting this together a week in advance so that we can really think through it and do it properly. The same is true with your retirement plan. Right? Right. Maybe more than a week out though, but maybe more than a week out. Yes. In your case, you know, more like a few years out, five years out, 10 years out, the sooner you think through this, the better off you are.

Mike:

So, you know, one thing I hear a lot of people I talked to them, they there’s a lot of people out there that own rental real estate, and they’re not making any money on it right now because basically they’ve got money coming in. But between property taxes, insurance and the mortgage, they’re basically breaking. Even maybe they’re making, you know, a couple hundred bucks, but nothing significant, right? Why do they do that? Because they’re thinking, Hey, eventually that mortgage is going to be paid for. And when it is, that’s going to create a really nice stream of income in retirement. That’s an example of thinking about how do I build up streams of income in retirement? You can do that as well with your retirement savings, right? There are tools out there, you know, insurance companies, for example, they have these tools. A lot of people refer to them as private pensions.

Mike:

Now I don’t know that the compliance people really like that phrase, maybe they’re okay with it. Maybe they’re not. It’s a commonly used phrase. I know overseas, or like in Australia, but really what is a private pension? What are they talking about? That’s nothing more than taking a portion of your money, giving it over to an insurance company where they build up that money to create guaranteed streams of lifetime income, similar to social security. When you’re ready to retire, the longer you have to wait, the bigger the income gets, right? So it’s like the income might grow at say 7% a year might be a number just like social security. If you delay taking social security, it grows, it gets like 8% of your bigger, right? Well with these private pension plans or insurance companies, same kind of thing, right? It grows your income and generates guaranteed lifetime income.

Mike:

And that might play a role, right? Everybody’s different though. Right? Everybody’s different. You might use real estate. You might use insurance companies. You might use other tools. But the point is this, if you’re within 10 years of retirement, you got to start thinking about this. You got to start thinking about how do you build this up so that it works for you. Now, let me give you a gotcha something to watch out for something that you’ll read about that people say, Hey, this is a good idea yet. It’s a horrible idea. Okay. You ready for this one? I’m really intrigued. Okay, here we go. If you look at the financial media right now, you know, with interest rates being really low, you can find articles all over the place that say, Hey, you should buy dividend paying stocks because you can build those dividends up. They could be a great stream of income in retirement. You’ll read that. You’ll hear that. This is a huge, huge. Gotcha. And I’ll tell you why you ever hear this guy named Warren buffet. Yeah,

Zach:

I think so. You think so small time investor, right? Yeah.

Mike:

Some he’s done. Okay. Yeah. Do you know what his definition of a dividend is? And by the way, this is the definition of a dividend. Do you know what the definition of a dividend is?

Zach:

Payments?

Mike:

Okay. A dividend is a return of investment. Okay. It’s sharing the earnings of a company. Nowhere in the definition of dividend is the word income. They are never, ever designed for income Warren buffet. When he hears the word dividend, he thinks one thing. And one thing only, oh, that’s money that has to be reinvested and dividends change all the time. Like I’ve a great example of this, both my grandparents. So Zach, both of my grandparents they retired in the seventies. They had the equivalent in today’s dollars of over a million dollars. They’re not big spenders. They were big stock investors though. In those days there were no financial planners or anything like that.

Mike:

Right. They’re big stock investors. And they want, they, both of them, they would research. They want to dividend paying stocks and they would do the research those days. It was in libraries. I mean, it was hard back in those days, but they always wanted to stock that for a 20 or 30 year period had, you know, a history of consistently paying dividends, never missing dividend payments and growing those dividends over time. That’s what they wanted. Right? And it worked really well for them in retirement. They retired counting on those dividends for income. And that worked really well until of course, you know, the markets decided not to cooperate, which happens every now and then. And these companies have been paying dividends consistently for 20, 30 years, suddenly their stock price cratered and went down, they stopped paying dividends. And before you knew it, my grandfathers, both of them, they had to sell stock at depressed values just to get the income that they needed. Right. This created a downward spiral. By the way, this is exactly how people go broke in retirement.

Mike:

Then 2007 guy comes to me names, Chuck, well, that’s not his real name, but we’ll call him. Okay, he’s got the same thing going on. He says, Hey, I bought these, I’ve done the research. I have a stock portfolio of $600,000 for retirement. It’s paying 36,000 a year in dividends. I don’t care what the stock price does. I just want the dividends. Sure. What do you think? I say, here’s what I think here’s what happened to my grandparents. I don’t want to see the same thing happen to you. What I think is you should sell, you need to re readjust this portfolio. You need to take some of that money, put it in income, producing assets and use those income producing assets for your income. And that way you can give time for your stocks to go up and down in value and grow over time.

Mike:

Yeah. He didn’t want to hear that. He didn’t do that. No, he didn’t wanna hear that. He just wanted me to tell him how smart he was.. Well, he wasn’t being smart because I knew from my grandparents, he wasn’t being smart, but a year goes by 2008, his 600,000. He calls me up. Remember me? I’m like, yeah, I remember you. He says, well, I’m grasping at straws. My 600,000 is now worth less than a hundred thousand dollars. My 36,000 annual dividends is down to less than 2000 bucks. What do I do? I said, well, you go back to work. I mean, there’s nothing you can do, right? Don’t count on stock dividends for income, huge mistake. I see people make over and over again. Use, you know, take portions of your portfolio, parts your portfolio, build it and put them in income, producing assets, things that generate income.

Mike:

That’s what you want to do. If you do it the right way, it works every time. And that really brings up, you know, our prosperity planning system, right? Because how you do this is going to be different for each person, but you gotta do it. Right. You gotta do it. Right. We’ve built a system that works in good markets and bad. If you’re with, if you’re retired, if you’re within 10 years of retirement, you want to take advantage. You want to get this knowledge and all you gotta do is call us. Right? The first step gives a phone call, 15 minute phone calls act. What number do they need to call to get that set up.

Zach:

512-886-5850 again, 512-886-5850.

Mike:

You give us a call. 15 minutes. We learn a little bit about you, but we can help you build that system, you know? And it’s free, right? It’s free. I’ll show you. If you talk to me, I’ll say, look, here’s what you need to do. Now. If you want to go do it yourself off you go. If you want some help, I’ll help you. Here’s what I charge. Do you want me to help or not? I mean, it’s pretty straightforward. The key is I want to get this great information out there. I want to see you enjoy the retirement of your dreams. So again, it’s five one, two eight, eight, six 58 50. Give us a call right now. Let’s get that 15 minute call set up five one, two eight, eight, six 58 50. All right, we got to wrap up. We got heartbreak here. Don’t go anywhere. We’re going to come right back. We’re going to continue our discussion on getting ready, planning for your retirement.

Zach:

Hi, and thanks for checking out retirement today. If you like the content we share on our channel, make sure to like comment and subscribe. So you can say notified about all of our latest content and videos. Be sure to share all of our information with your friends and family as well. Thanks for joining us. We’ll see you next time.

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