The New Year Reset

In this episode of "More Living with Jim Brogan," Jim Brogan offers practical financial advice for retirees and those nearing retirement on how to reset their finances for 2026. Key topics include managing cash flow, creating realistic budgets, automating savings, maximizing returns on cash, tax-efficient investing, and adapting to new retirement contribution rules. Brogan also discusses stress testing investment portfolios for market volatility and planning sustainable retirement income to outpace inflation, empowering listeners to build lasting financial security and enjoy their best years. Automatically Transcribed With Podsqueeze Jim Brogan 00:00:03 Your Turned into Boy Living with Jim Brogan, broadcast live from the Brogan Financial studios at Newstalk 98 seven, where old fashioned values, expert knowledge and genuine understanding come together to give you the retirement straight talk you deserve. Jim's a former National Advisor of the year recipient and a financial educator, and he's here today to talk about how you can live out the best years of your life. Jim and the Brogan financial team have been helping retirees and retirees across the southeast for over 20 years in their pursuit of financial independence. You can reach them during the week at 865862 6800. So sit back, relax and get ready to learn because more living with Jim Brogan starts now. Speaker 2 00:00:46 Hello East Tennessee, welcome to More Living with Jim Brogan, where it's all about living the best years of your life, your way. As you listen to Newstalk 98 seven Walker. Please be careful out. good bit of snow. luckily, it's a dry snow, so just I think the main arteries are doing okay, but just stay in tune to reports and if you can stay hunkered down in your home, you know the new year gives us a chance to reset. Speaker 2 00:01:12 We can take a fresh look at our finances and build a plan that can really go the distance. So whether you're approaching retirement or already enjoying it, 2026 presents opportunities where you can strengthen your financial foundation. From optimizing cash flow to stress testing your portfolio against uncertainty. This is the time to make strategic moves that set you up for success. So today we're talking about four critical areas getting your cash flow under control. Understanding your budget. Making smart tax moves early in the year, ensuring your portfolio can weather market volatility, and finally checking in on your retirement income strategy for great topics to dive into for 2026. So we're going to explore how you can create a money reset that can build lasting security, will answer common questions about resetting your finances, and discuss solutions to help you build a stronger financial future. Now is the time to take control of your money. So let's start with cash flow. You know, when we when we think about financial planning, many of us are on state straight to investments, retirement accounts. Speaker 2 00:02:28 Should you buy this fund or that stock or that bond? But the real foundation of financial success is something far, more, far more fundamental. And it's cash flow. You know, whether you run a business, manage a household, or are transitioning into retirement. Understanding and optimizing your cash flow can make the difference between financial stress and financial confidence. And so today we're going to talk about why this is essential for everyone including Affluent planet families as we reset for 2026. You know, I would say that mastering cash flow is arguably the hardest part of all of personal finance in order to master cash flow. Obviously you have to know what you're spending. So there's a two pronged concept. Knowing what it costs to fund your lifestyle, and understanding what you can consistently save and invest. So the second part of that is for those that are not retired yet. Now when you retire, you're not going to be saving investing money anymore. At least most people are not. There are some exceptions, but it's that knowing what it costs to fund your lifestyle, even and and wealthy individuals can really face cashflow challenges when their wealth is tied up in assets rather than liquid cash. Speaker 2 00:03:49 Especially if you own a business, you know your your business asset may be you're far and away your largest asset, but it's not liquid. So without discipline around cash flow, unforeseen events may force you to tap investments earlier than you planned. So one good rule of thumb. Number one, you've got to get your arms around what you're spending. And I think the easiest way to do that is to just track your spending. You know, first off, you could go back to 2025 and you could look at look at your checking account, how much money is coming into your checking account and then how much money is going out. That can kind of give you a big picture. Another great rule of thumb is just start tracking it now. Start January 1st if you can. And look at okay tracking your spending. Where is it going? One of the big parts I find out is, you know, when people come in to see us, if they're still working and they're in their maybe their last 5 to 10 years before they retire. Speaker 2 00:04:57 They're looking at their gross income. And they're they're creating budgets off of gross income. But but gross income is not what's actually providing cash flow. You know, if you've got significant deductions going into your 401 K or 403 B, you know, you're that's not part of your of your cash flow. You've got deductions for health insurance, other insurance items. You have payroll taxes. You know, payroll tax is a significant expense item that goes away when we're retired. And that's 7.65% off every paycheck, up to about $160,000. So that's significant. So it's better to look at how much is actually hitting your bank account, and then how much of that money are you actually spending. That's where you've got to start. And you know, most people when they come in my office, they can tell me how much is hitting their bank account net of those deductions from their paycheck, and then they can tell me whether their bank account is growing or shrinking. Are they spending all that money? So it's not too hard to find out. Speaker 2 00:06:11 to kind of get a good idea for what your budget is and for what you're spending. Now, one good rule of thumb is to, you know, after you pay your essential bills, divide your remaining money into three parts. One third could be for savings, and this could be both your emergency fund and short term goals. Then you could look at one third for everyday spending. This would be groceries, dining out, entertainment, budget, travel, things like that. And then ideally one third for investing, which would be for longer term financial security. 401 says IRAs, brokerage accounts, things that you would be doing for long term growth, and then you can have flexibility to adjust based on priorities like paying off debt or building emergency reserves. So a couple of things to think about for 2026. Create and stick to a realistic budget and just understand where the money is going. Look at what the net deposits are in your checking account, and then how much of that is going out the door. Speaker 2 00:07:19 That'll give you a great idea for what your your true income needs are when you retire. Also, think about automating your savings and investment plan to ensure consistency. Automation is great. Having a certain amount deducted. Now most of us do that with our paychecks, right? We're automatically contributing to our 401 K. You can also do that with your emergency fund. With non IRA investments you can automate that and have X number of dollars automatically a month deducted straight from your checking account and going into your investments. I think it's a great idea to do that shortly after you receive your your paycheck so that it's done, and then you have to live on what's left. review some thoughtless regular spending to find opportunities. this is something that you should work on at least once a quarter, I think. Look at things like subscriptions, things that you're paying every month that maybe you don't need to be paying every month. And then, determine your savings amounts based on your actual cash flow. Then also take an inventory of your personal interest rate environment. Speaker 2 00:08:31 What is your cash that's sitting around? What is it actually doing for you? So review your situation. follow the look at the Federal Reserve. What is the Federal Reserve interest rate adjustments? What are those being made? You know, interest rates have come down steadily over the last several months, but a high yield savings you can still get. 3.3, 3.4, maybe 3.5%. The inflation rate is in the low threes. So you're at least keeping up with inflation. You know assess whether you're maximizing returns on your cash holdings. You just shouldn't have a lot of money sitting at the bank in a checking or savings account not making anything. I know that you've got to have some cash in there, especially in a checking account. But, you know, most banks in the area, if you're not making anything on excess cash, talk to them about high yield savings because they should offer you high yield savings. You ought to be able to at least get get over three. Now, one good resource for excess cash that we direct our clients to is Bankrate.com. Speaker 2 00:09:38 Again, Bankrate.com. They have many, many banks on there. they're typically going to be non brick and mortar banks. they're going to be banks that are you know, more online, but they're they're FDIC insured names, many of them names you've heard of. But you can usually set it up to link it directly with your checking account and just send money back and forth. So it's it's it's liquid. I mean, it might take 24 hours to wire it and have it in your bank account. So it's not quite as liquid as just going to, you know, writing a check or going down to the bank and withdrawing cash. But it's pretty dang liquid. Then consider opportunities to lock in favorable rates. If you have a really, really good emergency fund and you're confident, you know, let's say you've got $50,000 in an emergency fund and you feel like 25 or 30 of that is adequate for short term cash needs. Number one, get most of that 25 or 30,000 earnings over 3%. But then maybe you maybe you latter and you buy a three month CD and a six month CD and you can earn a little bit more money and lock in the rates. Speaker 2 00:10:44 That way, if the Federal Reserve is dropping rates, you know you've locked in a rate and then also you've got to evaluate that cost. Now, I will say most of the people that we work with in retirement don't have a lot of consumer debt. younger folks, or if you're 10 or 15 years from retirement, you know, usually when we had people come in that are 50, 52, 53 years old, we see people oftentimes do have more consumer debt, credit card debt. And so I think it's essential to get your arms around that. you know, you need to still have emergency cash reserves. I see some people make mistakes where they'll pay off their debt and they don't have any cash, really, for cash reserves for emergencies. And then what happens inevitably, if something comes up and it costs several thousands of dollars? And what are you going to do? You don't have the cash. You have to either go back and borrow the money on a credit card at high interest, or you have to pull money out of an investment prematurely, and you can't maximize long term savings on your investments. Speaker 2 00:11:53 And what if we're in a substantial downturn and you have to pull out money when it's while it's down? So I think one of the biggest reasons I think people struggle with cash flow is understanding where the money is going and how much you're actually spending. And then I think it's important to determine the right balance between saving money, spending money, investing money, and paying off debt. And that's something we can help you with at Brogan Financial is help balance that, because you really got to kind of be doing all of those things if you're a younger person. And then automation can be a huge thing in cash flow management, automating your savings, your investments, all of those kinds of things. So I think you should really review and adjust your cash flow plan probably on a quarterly basis. But the first step is you have to know what you're spending in order to know what your fixed income needs to look like in retirement. And again, the best way to do that is to just look at what is actually hitting your bank account from your paycheck. Speaker 2 00:13:00 And then at the end of the day, at the end of the month, how much of that is left over? And you'll have a pretty good idea. We're going to we're going to get to our first break. When we come back, I'm going to talk about tax moves that you need to be aware of. As we as we're in this early 2026, we're already about to head into month two tomorrow of this first quarter. Tax planning is not what we do every year in April, in March and April when we file our taxes. That's tax preparation. How can we truly position ourselves to spend less in taxes and keep more money in our pocket? Stay with us. This is more living with Jim Brogan here on Newstalk 98 seven Wookey. Jim Brogan 00:13:41 Welcome back to Newstalk 98 Seven's broken Financial Studios, where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Speaker 2 00:13:56 Welcome back. This is more living here on news 98 seven Wookey. Speaker 2 00:14:01 We're talking about doing a financial reset for 2026. And we're talking about four key areas we just talked about. Understanding where your money is going and understanding cash flow. Because hard to retire when you have more of a fixed income when you don't know those things. we're going to get into a lot more. We're going to dive in this segment into tax planning. and I do want to invite you. My first set of classes for the year is through the University of Tennessee. And it's financial survival for retirement. It's through their adult education, community outreach. And it's at it's this coming the next two Thursdays, February the 5th and the 12th. It's at 6:30 p.m. both nights at the downtown Conference center. There is free parking across the street in the Locust Street garage, and I'd love to see you there. In that class, we take two two hour sessions and cover just as much stuff as we possibly can that I think everyone needs to know about retirement and wealth management being financially independent, not depending on an earned paycheck. Speaker 2 00:15:04 How do you in retirement? How do you create a paycheck that you feel like can provide for your needs and can grow and last and beat inflation and all those things? So if you want more information, you can go to Financial Survival for retirement.com. And you can download a syllabus and click to register. Again. It's this coming the next two Thursdays, February 5th and 12th, 6:30 p.m. both nights. Now, when it comes to taxes, most people think about them once a year. And typically that's when we need to file our taxes. So we're getting near that time when we get into, you know, you're starting to get your 10.9 nines. You'll probably start. Some of you may prepare your returns this month, many of you mostly to, you know, it's March, maybe early April, but the most. That's tax preparation. You know, when we when we prepare our taxes in March, let's say it's in March. We're looking in the rearview mirror. We're looking at things that happened last year. Speaker 2 00:16:06 If you took a distribution from your 401 to help provide income that's taxable, and there's no way to reverse that. If you had a mutual fund that paid a large capital gain distribution in December, that was a taxable event. If it's not inside of an IRA or 401, you know, if it's a non-qualified account investment account. And once you get once that's done, you get to January, you get that 1099. It's going to go on your tax return. There's nothing you can do about it. The most successful approach to tax planning happens throughout the year, with strategic moves made early and planned for throughout the year. So as we are in 2026, in the first quarter, there are several important tax planning opportunities that can help keep you more, help you keep more of what you earn, and build wealth more efficiently. So today I want to talk about proactive tax strategies you can consider implementing now. So first off let's talk about tax efficient investing. It is critically important to understand the difference tax wise in the account in the investments in your IRA or 401 type account in your retirement account and your non retirement investments that are just in a regular investment account, because that is one of the single most important factors you can control is how you invest your money outside of a retirement account and how it's taxed. Speaker 2 00:17:40 So asset allocation is critical for tax efficiency. Now what is asset location. Where do you hold certain investments. See no matter how you invest your money inside your IRA. When that money comes out it's taxed as ordinary income. And one of the best things Congress has given to us in our Internal Revenue Code is the tax treatment of long term capital gains. This has been a big incentive for a long period of time for people to invest. And for almost everybody, the long term capital gains tax rate is much friendlier than ordinary income. We also have to understand how those taxes are paid and how they're calculated on your tax return. Without getting too complicated, the capital gains on your income. They they're taxed at the very last. They're the last thing to be taxed. So let me use an example. If the if the 22% income tax bracket for 2025 kicks in around $98,000 of taxable income. So in other words, you start making money over the 98,000 roughly, you know, every dollar is taxed over the 20 to 90 8000 to 22%. Speaker 2 00:19:10 Okay. the tax bracket for long term gain up to then is 0%. likewise, if you sell something and you have a capital gain, it goes in after the ordinary income. So here's what that means. If your taxable income is $95,000. Your income tax bracket is 95,000 is, excuse me, 12% if you're a joint filer. So you're in a 12% marginal rate. If you then sold a stock or a house. Let's say you got a rental property or anything for that matter, and you had a $50,000 gain. It does not affect the tax rate on your ordinary income. You know, you look at your tax return, now you've got 100. Let's say you had a $50,000 gain. So you had $95,000 of income. This tax is ordinary income taxable after your deductions. Then you've got $50,000 in long term capital gains. Your marginal tax rate for your ordinary income stays at 12%. And then when you get up over the 98,000, all of that is taxed as a long term capital gain. Speaker 2 00:20:27 And that's 15%. And 15% is better than 22%. And so asset location, you know, understanding where you get capital gains tax treatment, where you don't, you know, tax free municipal bonds provide tax free income. So it's just very, very important to understand those things. I can't tell you how often people come into my office and let's say, you know, they've got a significant investments inside their 401 or IRA, and they've got significant investments outside their IRA or 401. And the thing is, when you have those investments outside the IRA or 401, every dividend that's paid, every interest payment, every capital gain on the sale, or if you had a mutual fund, capital gain distributions in December, everything that happens triggers a potential income tax and triggers at 10.99. Well, I can't tell you how often I see that all the capital investments. Now, what's a capital investment? A capital investment is one where you invest to hopefully see growth in the investment as opposed to an income investment. You know, when we buy a a bond or a CD, you know, we put 100,000 in there. Speaker 2 00:21:50 We're not doing that to grow the principal. We're doing it to make interest. Now, you may you may let the interest accrue into the principal, but you're earning interest and you're not trying to grow the asset. And and this adds that that interest is taxed as ordinary income. Whereas, when you have a capital asset, you're buying a stock or a or a stock mutual fund or something like that, you're investing in that so that the asset price will grow. You know, you put $50,000 in a stock that might be paying a dividend, you know, and then that dividend would be taxed. But then you're hoping that the stock price appreciates. And when that stock price appreciates, you get that long term capital gain. If you've. Held it for more than one year. So it has to be one day more than a year, 366 days. And most a lot of people come into my office. And with asset allocation, almost all, if not all of their capital investment is inside their retirement accounts. Speaker 2 00:23:04 And you don't get long term capital gains tax treatment there. And then their all their non IRA investment is in fixed investments like bonds CDs things like that. Those are not capital investments. You're not investing in them to see asset prices grow. The they grow because of the income they produce. But that's that's not great for income tax purposes because it's ordinary income. So it's important to have For most retirees and investors, it's important to have non IRA holdings that can take advantage of long term capital gains tax rates. So that is critically important. so tell you what. We're going to get to our next break. When we come back I want to hit a little bit more tax efficient strategies. and then we'll kind of dive into stress testing your portfolio for market uncertainty. So stay with us. This is more living with Jim Brogan here on Newstalk 98 seven Wookey. Jim Brogan 00:24:08 Welcome back to Newstalk 98 Seven's Brogan Financial Studios where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Jim Brogan 00:24:17 Get ready to learn and live. Here's your host, Jim Brogan. Speaker 2 00:24:24 This is more living with Jim Brogan. We're it's all about living the best years of your life your way. As you listen to Newstalk 98 seven Wookey. Check us out online. Brogan. Financial comm. We've got a lot of resources. If you click on resources, we've got white papers that you can download for free. We've also got blogs. You can follow us weekly and get our blogs. Get our weekly e-newsletter. Although we're actually starting to go to we're about to go to every two weeks on the e-newsletter. You get timely stuff on how you can make prudent decisions that can impact the quality of your life. So do check us out now. My my next class is through the University of Tennessee. their adult outreach. It's financial survival for retirement. It's the next two Thursdays at 6:30 p.m.. So February 5th and 12th, you can go to Financial Survival for retirement.com. To find out more information and to download a syllabus. Speaker 2 00:25:18 Tax planning is one of those critical areas that I talk about in that class. And and that's our current topic right now. and I do need to get to stress testing a portfolio. But first, you know, I was talking about asset allocation, but then also, you know, how do you need to be making your contributions? So some key things to know for 2026 catch up contributions. Those are those catch ups you can do if you're 50 years old or, or older. if you make more than 150,000 from your employer, that is it doesn't matter what your spouse makes, it's based on what you make from your employer. If you're over 150,000 in 2026, your catch up contributions have to go into a Roth 401 and not a traditional 401. So that's important to know. Now, if you change jobs, what if you change jobs in your new job? You're starting in July and you're going to make over 150,000 a year, but you're not going to make 150,000 in the calendar year from that job. Speaker 2 00:26:29 You're not going to have to put your catch up in the Roth, but it's it's essential to understand this. If your employer plan does not offer a Roth option, you are not going to be able to do those catch up contributions. So just be very, very aware that, of course, contributions to to the traditional 401 and IRA are tax deductible. high earners though increasingly are choosing Roth IRA or Roth contributions for tax free future withdrawals. And I think that's critically important to understand. I don't think it's a bad thing to be taxed now and to be tax free later. Now, certainly your last ten years of working are going to be your typically highest earning years. And so you've got to look at what's your taxable income likely to be in retirement. But you also have to factor in once you're 73 and you're taking minimum distributions from your retirement accounts. What is your taxable income going to look like? I have found most people don't see the type of reduction in taxable income they were maybe thinking about. Speaker 2 00:27:37 You should also be looking at things like your charitable giving strategy. You know if you give an appreciated asset you buy a stock for 5000. It's worth 10,000 if you if you give that to the charity and let them sell it. There's no capital gain tax. But you get the full tax deduction for 10,000. You say well Jim, I may I want to continue to own that stock. Well that's okay. Just buy it right back. And now your tax base is on. The stock is 10,000 instead of 5000. So you've increased your basis with no tax liability. That's a great great thing to consider. Also qualified charitable distributions. If you're 70.5 years of age or older, you can contribute directly to a church or charity from your IRA. And if you're 73 or older, it comes straight off your required minimum distribution. Most people are not itemizing today, and they're not getting the value of those charitable contributions. So all of those things are incredibly important. Again, I do cover this very, very heavily in my class, Financial Survival for retirement coming up this Thursday. Speaker 2 00:28:48 It's a two part class. It's on the fifth and the 12th. Financial survival for retirement. You can go to Financial Survival for retirement.com. To find out more information and to download a syllabus. You can also click to register. Now we've all experienced market volatility. Those moments when the news sends the markets tumbling. And we wonder if our portfolios can weather the storm. You know the best time to prepare for market uncertainty is not during a crisis and not during market volatility. The best time it's a plan is before that happens. Portfolio. Stress testing helps you understand how your investments may perform under various challenging scenarios, so you can make adjustments now while conditions are calmer. So today I want to explore in this segment why stress testing matters and how to ensure your portfolio is properly positioned for what lies ahead, which we don't know. Now, I want to be clear. I'm saying, you know, you can understand how your investments may perform under various challenging scenarios. That was the quote I used. We know when you're in the market, it's unpredictable. Speaker 2 00:30:02 There's no sure thing. When we stress test a portfolio, we're actually looking at statistical data from history, and we can kind of get a feel for if the market does X, what would you expect your portfolio to do? And believe it or not, testing a portfolio that way based on historic risk measurements. Volatility in a portfolio. Things like that is actually a pretty good predictor of future risk. So in other words, you you know, we don't know whether you're going to make money, lose money, how much. But we can have a pretty good idea if the market does X, what can you expect out of your portfolio now you could always get a surprise, but it's a pretty good idea for what the potential volatility is in your portfolio. So stress testing is important to insure your properly position. So we have tools that can examine multiple different scenarios. What happens if we repeat a financial crisis like 070809. What happens if the market what happens in the next bear market? You know, a typical bear market if we go to not back to 1900, bear markets mean the stock market goes down more than 20%, and that's happened about every 7 to 8 years, and the average is about 35 to 40. Speaker 2 00:31:31 Well, we can stress test that and say, hey, let's go back to the last bear market. We have less stress. Test it. Let's take a current portfolio. And look if that happened again, what would we expect you to lose. And you can have a pretty rough idea. Would you lose a, you know or would you lose 80% of what the market loses? You know, if you're in an all stock mutual fund portfolio, no, you'd probably lose closer to 100%. But if you have some more diversification, you might would expect to lose less. Now then that also means hey, let's test it for what happens when we have a really good year. Like 2013, for example, the market was up 32%. What would we expect you to do in a bull market? Because if you don't want to lose as much in the bear market, does it stand to reason that you're probably not going to much as make as much in the bull market. All those things are absolutely true. Speaker 2 00:32:25 So but we can test that. We can test and evaluate how poor, how portfolios are likely to behave if various events occur. And we can identify weaknesses before they become big problems so we can get out in front rather than reacting in in moments of volatility when we react. That's when investor behavior often makes critical mistakes to their investment portfolio. Now, as you know, a higher risk tolerance allows for more volatile assets like stocks or stock funds. A lower risk tolerance suggests more diversification in things that when stocks zig, maybe the other things zag. Now, the most common thing people think, thing people think of as bonds. Bonds typically have more short term stability than stocks. That's not always the case. You know, in 2022, bond funds were down 1,415% when stock funds were down about 18. But as a rule, bond funds usually provide a little bit more balance and stability when markets are down. The problem with bond funds is, you know, over time, they just aren't effective at beating inflation. Speaker 2 00:33:41 They can be effective in short time periods, but over time they're just not effective. But if you have other asset classes, you know, commodities, energy, resources, real estate, foreign investment, there are ways to hedge the dollar with foreign investment. There are just all kinds of things you can do so that when markets are sharply down, you've got some assets that are hopefully holding their own pretty well. Now, that means you're also going to own some things that are not doing as well when markets are sharply up. But again, it's investing is all about balancing risk and reward a lower cost. You know, risk tolerance should be aligned with time Harrison and your financial goals. You know, if you're 32 years old and you have a 401. Do you really care what happens in the stock market this year? I mean, yeah, you probably care. But if the market if we go through a deep bear market in the next 12 months, well, you're not touching your money till you're 60. Speaker 2 00:34:40 You have almost a 30 year investment horizon. If anything, when markets drop, that's the time you can be adding a lot more investment and buying while markets are down. So now if you're retiring in three years, the last thing you'd want to do is have your your income and your one and two of retirement that's designated. You happen to come from stock market type investments. Because what if markets are sharply down? You're probably going to feel like you can't retire. You've got to have assets that you can draw from that are more protected or stable. So very, very important. But, you know, if you measure this stuff ahead of time and the market slides, it's not going to keep you up at night if you know you've got a plan to deal with that. if, if, if your portfolio does keep you up at night worrying about short term market risk, you may need to adjust your plan in your allocation. So near retirees planning to live off a portfolio typically can't stand a it's. Speaker 2 00:35:44 It'd be difficult to withstand a 40% 3,540% loss in the stock market in the short term, whereas someone early in their career can afford that much, much more reasonably. The sooner and more important your spending goal, the less volatility your portfolio can handle. Because one of the top rules of of wealth management don't spend an investment loss. You know it's okay to sell something when it's down and reinvest it, but you don't want to have to sell it and spend it, which means markets are going to be down sharply. And if you need to liquidate to buy something, you're going to compound that loss. It'll never recover because you've spent it. And that's one of the top rules of fundamental wealth management. So create a strategy before your emotions take over during market swings. Avoid that panic selling during down markets. Part of that is understanding the risk you're likely taking and what you can expect, so you don't get an outcome completely out of the range of what you were expecting. And in others understanding, you've got a plan to to be able to support it where you know you're not going to need that money for a while, where you've got time to for it to recover. Speaker 2 00:36:54 Avoid rash decisions based either on fear of loss or greed. That FOMO fear of missing out. You want to get in on the hot investment and then stick to that plan when you're Mark. When markets climb, it's harder to stick to a plan when markets are choppy. This allows you to do all those things. So it's a careful balance between growth and protection. It's diversification across asset classes, sectors of the economy, foreign and domestic everything. Regular portfolio reviews can ensure alignment with your goals, and stress testing reveals whether your current allocation matches your risk tolerance. Now there's two big issues here. How much risk can you afford to take and how much risk are you comfortable with. And both of those questions typically need to be answered. We ask that everybody comes into our office, even in a first meeting where we're just getting to know each other. And you're asking us, you know, Jim, hey, I'm concerned about this or I'm concerned about that. We're asking these questions right up front, right out of the gate, because your comfort level with risk, you know, you you may can we may feel like you've got a plan that can afford more risk, but your comfort level may not. Speaker 2 00:38:14 And we don't either want you to have. You know, the market starts cratering and you're seeing more than you're comfortable with. We don't want you to sell while it's down. But likewise, if you're holding, we don't want you to lose sleep at night. You know, I call it a swan portfolio. Sleep well at night. That's important too. It is important to take risk. We've got to be concerned about inflation and how erodes income in retirement. But it's just important to balance all these things. So we got to determine if your current asset allocation is appropriate. Does your portfolio need to be rebalanced. How should your portfolio strategy changes change as you get closer to retirement and into retirement? What type of diversification do you truly need to protect against short term market volatility? Because we know in the long term, a diversified stock portfolio historically has been the best way to grow wealth. But in the short term, you just don't know what you're going to get. And so you've got to have some Diversification. Speaker 2 00:39:14 If you're not investing for 15, 20 years from now, and then a retiree has to balance the need for growth over the long term to fight inflation with protection in the short term to protect short term income. So all of these things are critically important. Now, when we come back from our last break, we're going to get into income planning. And one of the things I want to talk about is, you know, if you look at the last 30 years and you look at inflation along with the, the, the devaluation of the dollar, it's amazing how much less our money buys now than it did 30 or 40 or 50 years ago. And going forward with our current fiscal situation in the United States, with our federal debt and our deficit spending, I think that's going to become even more important. So how do you grow income and make sure that your income holds up at various checkpoints throughout your retirement? Stay with us. This is more living with Jim Brogan here on Newstalk 98 seven Wookey. Jim Brogan 00:40:18 Welcome back to Newstalk 98 Seven's Brogan Financial Studios, where Jim Brogan is coming to you live with important news and advice to help you achieve your dream retirement. Get ready to learn and live. Here's your host, Jim Brogan. Speaker 2 00:40:52 All right, we're back on the air. My apologies there, Wayne. I accidentally hit the mute button on my headphone set. But anyway, so, thank you for tuning in today. It's Jim Brogan, host of More Living. Let's talk about income planning for retirement. You know, one of the most crucial transition in retirement planning happens when you shift from accumulating assets to distributing or spending those assets. And how much can you safely withdraw each year? How should you coordinate Social Security with your portfolio income? You know what happens if markets decline early in your retirement? That's one of the biggest risks you face. You know, markets may decline substantially in your first year, three to 4 to 5 years of retirement. If you don't have a plan to be able to deal with that potential volatility, it could be catastrophic, quite frankly. Speaker 2 00:41:44 So let's talk about some income checkpoints. What is a safe withdrawal rate. There's becoming more and more talk about this. You know Bill Berg at Bingen. Excuse me, was the person years ago that created the 4% rule. You take your life savings when you first retire, you can start drawing about a 4% rate. So if you had $1 million, you could draw 40,000 a year. And then over time, that increases to fight inflation. He now suggests that with our current interest rate environment, a safe default rate is 4.7%. Now, Morningstar, an independent research firm, they their 2025 research suggests 3.9% as a safe starting withdrawal rate for a 30 year retirement. Now, what is safe? Those types of rates. They assume a 90% probability of the funds lasting throughout your retirement. Now, one of the things I mentioned that is we do want to be careful you're not cheating yourself early in retirement by withdrawing too little. You know we don't want that fear factor. It goes against the grain when you go from spending your money or, excuse me, saving money to then spending it. Speaker 2 00:42:54 You've been taught your whole life. Safe. Safe. Save. And now it's time to withdraw and spend. And many people get uncomfortable with that. And so we don't want you to be uncomfortable with that. And so that's one of the biggest, biggest things about creating a comprehensive plan. then how you. But the biggest thing I want to stress, because we're about out of time today is you've got to have that stability in the short term. But long term, I don't want to underestimate the importance of having growth assets, because when you look at our current fiscal situation, there are different ways to solve this budget issue. We have in the United States and our debt problem. The one thing people think about most often is increasing taxes. And I think in the next ten years, something's probably got to give. But another way is by growing the economy. Some are expecting economic growth of over 5.5% next this year. you know, growing the economy. If the economy grows at a rate faster than the than the interest on the debt, that helps the debt problem go away. Speaker 2 00:44:01 Inflation, it can be a way to you can inflate the date a way. That's exactly what happened in the 50s. And 60s and 70s. Because if the economy is growing through inflation, yeah, we think of that as artificial growth, but is still growing. The economy is getting larger. The debt is getting smaller as a percentage. So I just you've got to have a plan to have your income grow to offset inflation. I think that's one of the greatest risks we face in today's, retirement lifestyle. Thanks for tuning in. We've discussed your wealth because greater wealth provides for more living. So you can live the best years of your life your way. Have a great week. This is Moore living with Jim Brogan here on Newstalk 98 seven. Speaker 3 00:44:43 The views expressed by Jim Brogan and his guests are not that of Cumulus Media. Any discussion of financial, legal and tax planning strategies is not intended to be individualized advice and is general in nature. Always consult with your advisor for advice specific to your needs. Speaker 3 00:44:59 This program's content does not represent a recommendation of any particular security strategy or investment by Jim Brogan or Brogan Financial, Incorporated.