Today’s podcast has three parts: first, a simple question to help you gain clarity; second, a common financial mistake we see—and how to fix it; and third, practical investing moves you can take right now.
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Articles, Links & Resources:
Arthur Brooks The Science of Happiness – YouTube
IRA Distribution Calculator: Net to Gross – Retirement Budget Calculator
Investment Panel: Investing In Retirement – Vanguard, Dimensional, Parker Financial – YouTube
Transcript:
460 What Do You Want?
Welcome back America to Sound Retirement Radio, where we bring you concepts, ideas, and strategies designed to help you achieve clarity, confidence, and freedom as you prepare for and transition through retirement. And now here is your host, Jason Parker. America, welcome back to another round of Sound Retirement Radio.
You’re listening to episode number 460. The title is What Do You Want? Today’s podcast has three parts. First, a simple question to help you gain clarity. Second, a common financial mistake that we see and how to fix it. And third, practical investing moves that you can make right now. We recently hosted an investing conference with Natalie Marvi, Romeo from Vanguard, and uh, Weston Wellington from Dimensional, and I’m gonna share a few highlights.
Then if you wanna watch the full panel discussion on YouTube, I’ll include a replay link in the show notes. But before we get into today’s episode, let’s start the day by renewing our mind. This verse comes to us from Colossians chapter two, verse two. My goal is that they may be encouraged in heart and united in love, so that they may have the full riches of complete understanding in order that they may know the mystery of God, namely Christ.
What’s a cat’s favorite dessert? Mice cream. What do you call a pig Who knows Karate? pork chop.
Okay, let’s start with clarity. Clarity I’ve found is a lot more about asking good questions than having all the answers. Recently I asked myself one question that’s simple to say, but life shaping if you take it seriously, and here’s the question. What do you want? I’m gonna share a simple process that I use to answer it and how it’s guiding my next steps.
The best part was asking my wife the same question over lunch. If you want to try this with someone you love, ask it and then be quiet. Don’t interrupt. Just listen. Okay, so let’s start with vision. Start with a big picture. Vision. What do you want for your life? Who are the most important people to include in your vision?
What do you want for those people? What is the impact you want to have on others? Who are the people you’ll spend time with? And when you are with them, what will you do? When you answer those questions, you’re going to be defining your vision. Now that you have a vision, the next step is to create a framework for evaluating your actions.
Are your thoughts, words, actions, moving you closer to or further from your vision? And I heard Arthur Brooks recently say that if you can only focus on four areas of your life. Have been shown to create the biggest increase in happiness. So if you want more happiness, more joy, more content, more fulfillment, here are the four areas to focus on and the question to ask for each action that you’re considering.
Number one, faith. Will this move you into a deeper sense of faith? Number two, family. Will this strengthen your family? Number three, friends. Will this enhance my friendships? Number four, service or work. Will this improve how you serve others? By using the simple framework, it will help you live more intentionally and make sure you’re moving in the right direction to achieve your vision and increase fulfillment, increase happiness, increase joy.
Finally, make a list of things you want to increase in your life, for example. Happiness, fulfillment, contentment, peace, joy, gratitude, generosity, awe, wonder, enthusiasm, encouragement, and prayer. And then be sure to make a list of the things you want to decrease in your life. Discontent, worry, fear, disbelief, discouragement, bad attitude, anger, entitlement, negative self-talk, screen time.
And if you go through these exercises, you’re gonna have three really important things. Number one, you’re gonna have a vision for the future because where there is no vision, the people will perish. Number two, you’re gonna have a framework for happiness to help you evaluate your thinking, your words, and your actions.
Number three, you know what you want more of and what you want less of. And this is really important because how can we know if we’re making progress if we don’t know what we want? So again, the question is what do you want? Now that we have the heavy lifting of clarity squared away, the second part of today’s podcast has to do with a simple calculation, but it’s a common mistake that we see people make all the time.
Remember when you take money out of your 401k or IRA, you’re most likely gonna have a tax liability when you fill out the forms to request the distribution, you need to decide how much taxes you want withheld, and I see a lot of people miscalculate their gross distribution from their IRAs when they have a specific net after tax amount that they need.
For example, let’s say you wanna take a net after tax distribution of $5,000 from your IRA and you’re in a 28% tax bracket. You wanna calculate how much your gross distribution should be so that you end up with a net after tax distribution of $5,000. Here’s how people do this the wrong way. They start with the net distribution.
In this case, they want $5,000. And then they multiply it by the tax rate, so in this case, 28%. And if you do this, you get $1,400. Then they add that $1,400 plus the $5,000, and they come up with $6,400. The problem is that if you request a distribution of $6,400 and have 28% withheld for taxes, you end up with a withholding of $1,792, and you end up with a net distribution of $4,608.
Which was not the $5,000 net distribution that you wanted. So here’s the correct way to gross up the net distribution. A 28% tax bracket would be represented in decimals as 0.28. So first you subtract one minus 0.28 on your calculator, and you get 0.72. Then you take the net distribution you would like, so in this case $5,000 and you divide it by 0.72, which equals $6,944 and 44 cents.
So if you take a distribution from your IRA for $6,944 and have 28% or $1,944 and 32 cents withheld for taxes, you would net $5,000 after tax from your IRA $6,944 was the gross distribution, minus 1000 944 32 was the 28% tax withholding, and that gives you your $5,000 net IRA distribution after tax. Now we made things really simple by creating a free online calculator that you can use so that you don’t have to remember the formula, and I’ll include a link to the calculator as well as the formula in the show notes.
Finally, I wanna recap the investment panel that we recently held. I’m gonna share a few highlights from the conference, and I’ll include a link to the YouTube recording so that you can watch the discussion in its entirety. Here are a few of the questions that we address during this event. Number one, what are the opportunities to capture in today’s environment?
Number two, what are the risks that we should be aware of? Number three, what should we think about global diversification? Number four, how do we pursue higher expected returns in our investments? Number five, our gold and Bitcoin investments that we should hold in retirement. And these were just a few of the questions that we tackled during the entire event.
For now, I’m gonna share with you a few highlights as we get into this section. Remember, this is not individual investment advice. Everyone’s situation is different. And be sure to talk to an advisor before making any changes. Okay, so here’s the first highlight. This was from Natalie Marvi Romeo. She’s with Vanguard, and she called this the second chance, rebalance the core idea after this year’s dip, you remember in April when the market tanked almost 20% and then it snapped back.
She said Investors got a rare second chance to rebalance, trim. What ran. Add, wear your light and right size risk. She noted three practical moves. Number one, rebalance and diversify beyond us large cap tech. Add international and value for balance number two. She said bonds are back and lock in durable yield.
That doesn’t swing like stocks. And number four, she said, don’t over park in cash. When the fed cuts that yield disappears. So match your time horizon with bond duration instead. So try this. Check your allocation today. If your plan calls for 30% bonds, but you’re at 20%. And you’re heavy in US growth rebalance towards quality bonds and add some international or value exposure to help spread risk.
The second highlight was from Weston Wellington, who’s a vice president at Dimensional, and he, his core concept, or one of the things he said was, he said, have a philosophy, not a forecast. The core idea is that markets are priced by millions of participants, and prediction is not a reliable edge. Start with a global market cap portfolio.
Then make only the minimal intentional tilts you can live with through good and bad cycles. When he talks about tilts, he’s meaning like tilting towards small cap and value and profitability. And for fixed income, he said, treat it as a risk reducer and hedge currency on foreign bonds. So foreign currency moves versus US dollar don’t add unnecessary volatility.
Try this. Write down any urge to tweak your portfolio based on the recent headlines. If the reason isn’t durable a year from now, don’t do it. Keep the equity. Tilt small and rules based and keep your bonds boring. That was one of the highlights from Westin. I was on that panel and the. Primary thing that I was trying to emphasize with our audience was that you wanna have a good plan first and then a portfolio.
So the core idea is that retirement success is driven by cashflow planning, not products segment money by time horizon. So near term money, you wanna have more secure and longer term money can be invested more aggressively. So that volatility in your growth bucket, the money that we don’t need for 10 years, doesn’t jeopardize your spending in the near term bucket.
Avoid fear and greed traps. Use your plan to decide when to spend what to rebalance and how to handle taxes. Try this map out two to three years of essential withdrawals and safe short duration assets. Keep a midterm asset allocation and let equities work for the long run model taxes across your lifetime before considering conversions, or even when considering when to claim social security.
In summary, we deliver three things. Clarity, define what you’re trying to accomplish, what matters the most, and the purpose of your money. Number two, confidence. We wanna help you reduce mistakes, know your numbers, and we do that through education. You’re listening to Sound Retirement Radio. We do that through software, the retirement budget calculator so that you can model and run what ifs.
And we do that through advisory. Fiduciary investment management to align your portfolio with your plan. And number three is freedom. A coordinated plan, disciplined investment strategy, implementation, monitoring, ongoing optimization education so that you can focus on living your best life. Thank you for tuning in to Sound Retirement Radio.
For articles, links, and resources from today’s show, visit sound retirement planning.com. If you enjoy the podcast, share it with a friend and give us a five star review. Ready to kickstart your retirement planning head over to retirement budget calculator.com. Need assistance with an. Investment management explore our services@parkerfinancial.net.
Information and opinions expressed here are believed to be accurate and complete for general information only. It should not be construed as specific tax, legal, or financial advice for any individual and does not constitute a solicitation for any securities or insurance products. Please consult with your financial professional before taking action on anything discussed in this program.
Parker Financial, its representatives or its affiliates have no liability for investment decisions or other actions taken or made by you based on the information provided in this program. All insurance related discussions are subject to the claims paying ability of the company. Investing involves risk.
Jason Parker is the president of Parker Financial LLC, an independent fee-based wealth management firm. Located at 9 2 3 0 Bayshore Drive Northwest Suite 2 0 1, Silverdale, Washington. For additional information, call 3 6 0 3 3 7 2 7 0 1 or visit us online@soundretirementplanning.com.
