Implementing Your Retirement Plan
In this Episode of the Secure Your Retirement Podcast, Nick and Taylor return to talk about the retirement plan implementation after the initial process. When you decide to be our client, we ask for all the information needed to open your account with our custodian Charles Schwab.
Listen in to learn what the transfer process of your investments from your current custodian to Charles Schwab looks like. You will also learn about the 45-day meeting, which we set up to answer any of your questions, finalize the important parts of the investment strategy, and talk about estate planning.
In this episode, find out:
- Episode #199 – a recap of our retirement planning process.
- The personal information we need to create a client’s account with our custodian Charles Schwab.
- The transfer process of your investments from another firm to Charles Schwab.
- How we can replicate your account from another custodian exactly as it was at Charles Schwab.
- How the transfer process of a company plan differs from an IRA to an IRA transfer.
- The tax planning process to help you lower your taxable income during your retirement.
- How Nick communicates with clients throughout the process to ensure everything is set up.
- The 45-day meeting – answering questions, finalizing the investment strategy, and discussing estate planning.
- “Exactly as it was at the other custodian, it can be replicated right at Charles Schwab.”– Nick
- “For many advisors and us, we don’t work for Charles Schwab; we’re not connected to them in any kind of financial relationship or dictated by them; they’re simply a custodian.”– Radon Stancil
If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!
To access the course, simply visit POMWealth.net/podcast.
Here’s the full transcript:
|Welcome to Secure Your Retirement Podcast. We are excited today. We are going to continue a conversation that we had last month.
|We have our guest back with us. We have Nick Hymanson and Taylor Wolverton. And we are going to break down the financial planning process, Part Two.
|So Morgan, can you bring us up to speed with what our episode today is going to be about?
|Sure. So just to recap our last episode on the retirement planning process, which if you didn’t catch it, it’s episode 199 if you want to go back to watch it. Or you can also read it on the blog page.
|But first of all, we talked about how to prepare for an introductory meeting with our team. How you would gather the data and the accounts that you’d be submitting in regards to your assets, your income information and your expense information, to the extent that you’re comfortable. Whatever you’re comfortable submitting and that we’re able to submit that securely.
|And then in between that first visit and the second visit, it’s all us. We do all the work. So we prepare for the second meeting, and then there we present you. We walk through each step of the retirement planning process. And at the end of that meeting we can give you that information. We can either print it out for you or send it over to you.
|And then on a third visit, that would be considered the strategy meeting. We take some at the time and we come back for the third meeting, which is all about the strategy. We talked about the bucket sheet in the last episode, and it really breaks everything down into three different buckets. Cash, which is the amount that you’re going to be holding. Some people, that’s going to be on a different comfort level. Some people want to have a lot of cash and others don’t.
|Then there’s also the safety bucket, which includes a few different products that will include safe and reliable income during retirement. And then finally, the third bucket is growth. Money that’s in the growth buckets will grow during retirement, do just what it says. And then the funds in this bucket will be liquid, but the goal is to avoid touching this money as much as possible.
|So that will all be discussed during the third visit or the strategy meeting. And then at this point, of course, when you decide to become a client, how do we move forward after that?
|Yeah, so there’s already been some time spent on both sides of the table. The team has done some work to present. The client has taken some time out of their schedule to get to know us.
|So now they know everything about us, how we operate, how we take care of our clients. Some form of a recommendation has been made and now the client says, “Guys, I love everything. I want to work with you.”
|And so Nick, there’s obviously… There’s a bunch of different steps that we implement, especially in the first year to get everything transitioned and transferred over in a comfortable manner. So what is step number one after a client says, “Yes, I want to work with you guys.”
|Yeah, so step number one for us is really getting together and figuring out what information we have and what information might we need to get all of the paperwork together and all of the data to be able to fill in everything that we need to be able to open an account.
|The first step is putting together beneficiary information, dates of birth, addresses, phone numbers, contact information. Making sure we have all of that information that pertains to the specific person and getting all of that information together and creating an account.
|So that process looks like, basically, us filling in this documentation with your personal information. Charles Schwab requires all of the information that we ask for to be able to open that account in the client’s name. So from there, once a lot of that paperwork is signed, typically that’s when our team will take that paperwork and submit it to Charles Schwab.
|That process for them to open the account takes, typically, one to three business days, depending on the type of account and how many accounts we’re opening up. And that’s when transfers will take place. That’s when I will reach out on accounts being opened and making sure that everyone is easily able to access the account and figuring out, making sure that they have the actual access on the website on the Charles Schwab app and making sure it’s all set in stone so that you’re comfortable and able to access the new account.
|And what if your account is already with Charles Schwab? What if you’re already there?
|If you’re already with Charles Schwab, that makes it a whole lot easier.
|So in the case that they’re already accounts at Charles Schwab, it’s a lot less documentation. They already have all of that personal information, so it’s really one form to add peace of mind as being able to access the account.
|I’m sorry, I just wanted to mention here real quick, just so everybody who’s listening calls, obviously people that might have accounts at multiple locations, just so they understand the structure of this idea of Charles Schwab.
|So Charles Schwab, just so everyone knows, for us and for many people, many advisors, we don’t work for Charles Schwab. We’re not connected to Charles Schwab when it comes to any kind of financial relationship. They don’t pay us. We’re not dictated by them.
|They are simply custodians. And a custodian could be Fidelity, it could be TD Ameritrade, not very much longer because Charles Schwab bought them. It could be Charles Schwab, it could be Vanguard. Any place that you have your accounts. Our relationship though, for us to have our custodian, is with Charles Schwab, so that’s why Nick is saying we’re going to get the accounts open there.
|One other little caveat though is that if you could just speak on, Nick, as far as what if somebody says, “Hey, I’ve got all these things. Do you have to sell everything that I’ve got over at Vanguard or sell everything I have over at Fidelity to get it to Charles Schwab?”
|Mm-hmm. So if someone asks that question, the answer is no. We don’t have to sell anything. What happens is that during the transfer process, it’s called in-kind. So all of the securities, all of the holding stocks, bonds, mutual funds, everything that is held at the other firm, whether that be a TD Ameritrade, a Fidelity or Vanguard, that is all going to transfer in-kind, so exactly what it’s currently in over to Charles Schwab.
|And then Charles Schwab will hold those exact funds over in the new account. So nothing there changes until we come up with a strategy around the investments. And so that occurs afterwards.
|And I think that’s important, particularly on non-IRA accounts, where a sale can result in a taxable impact. So it makes it nice and easy for us as an advisor to bring the asset over without any taxable type of impact and then have a good conversation to evaluate a strategy around a potential liquidation strategy or a hold strategy or something like that. Because sometimes people worry about, well, do I have to sell everything? And that’s not the case.
|Nick, another common question that we do get is someone says hey, I’m over at Vanguard and I want to work with you guys, but I have a monthly distribution that’s set up for a thousand dollars a month every single month. Are you guys going to be able to replicate that for me?
|Yeah. So in that case, really it’s just one additional form. We can do the same exact thing over at Charles Schwab. And what it is, is linking the bank account to the new Charlotte Schwab account.
|And so, one additional form there will be able to have your bank account linked to your Schwab account, and then we’ll also be able to set up recurring withdrawals or recur recurring distributions to your bank account from your new Schwab account.
|So, exactly like it was at the other firm or at the other custodian. It can be replicated right at Charles Schwab.
|Yeah. So we’ve talked, and this right here, now, so far, Nick, you’ve kind of explained this idea of somebody moving a brokerage account to a brokerage account, meaning the same account to the same account. Or moving an IRA or a Roth IRA or anything like that, a trust account. We’re moving all of those things. And we talked about being able to just move that money electronically.
|But the steps are just a little bit different for something that is called a company plan, like a 401K, 403B, 457, any of those kinds of plans. How is that process just a little bit different from moving IRA to IRA?
|Yeah, so in that scenario, we will have one less form. So it won’t be a transfer in this case. If it’s from a 401k, what’s going on is really we’re calling over, likely together, to the 401k company and they are required… They can’t send anything electronically, so they’re required to cut a check for the benefit of Charles Schwab… To Charles Schwab for the benefit of you as the person who’s the account owner.
|And so, that check after the phone call is usually cut and sent either to your address, the person’s address who’s the account owner, or we can send it straight to Schwab for them to deposit it right into your account.
|And so, the process is a little different there. And it depends on typically how fast that 401k company cuts the check. But in that case, it’s not electronic, it’s more of a physical check that’s going either to your address as the account owner or straight to Charles Schwab.
|And I think something that’s important to point out here is that anytime someone hears the word, I’m getting a check, and a lot of times it’s 401K money that we’re talking about, 403B money that we’re talking about, which is all pre-tax dollars.
|And if it’s done right, which we always do it right if we’re working together, it’s done as a trustee to trustee transfer, which is similar to a rollover. All that to say is that it’s not a taxable event.
|So even though there is a physical check that is mailed from your 401K plan, if it’s done properly, it’s not a taxable event. So I think that’s important to point out, too.
|So we’ve covered a lot there as far as getting the accounts set up. And then we understand that there’s going to be more steps there, as well. But that process… You gave us a nice timeline there, but there’s another aspect of things than just the accounts.
|There’s the things that we’re going to help folks with on tax planning. So I’m going to ask Taylor. Taylor, could you kind of walk us through what we’re going to try to accomplish, at least in the first few months. And what would be the steps for us to be able to do that analysis when it comes to taxes?
|Yeah. So, we want to start by collecting your most recent tax return that you have filed, and we’ll take a copy of that tax return and look over it for opportunities to do things like potentially Roth conversions.
|If that’s beneficial for your situation, we’ll do an analysis on that and we can have a conversation about the possibility of doing Roth conversions with you if it makes sense. And then, there’s other tax planning strategies that we could use, like if you qualify for qualified charitable distributions. We can talk about that and help you set those types of transfers up.
|And then also we could talk about, in the way of charitable donations, we could also set up a donor-advised fund, if that’s something that you’re interested in and something that would benefit your situation.
|Just looking for any opportunity to lower your taxable income and consequently lower the amount of taxes that you’re going to pay in future years as part of your holistic financial plan in retirement.
|Yeah, I think what’s really nice about this tax scenario that we run through is that it gives us the ability to start playing around with your overall tax situation. And Taylor can go and manipulate the numbers and say, “Hey, what if we did a Roth conversion of 20,000 this year? What’s it really going to cost us?”
|Or even as simple as sometimes… And I think when we’re talking about people that are withdrawing on their IRAs and having cash flow coming in the door, a lot of times we are using withholdings, federal and state withholdings, to start paying the taxes as we take those withdrawals. And sometimes we’re way off on our guess as to, well, how much should I withhold?
|I think a lot of times when I’m talking to someone on the phone and setting this up, they say, well, I have no idea. Just withhold something. Well, with what Taylor can do in this software is that we can actually look at where are you falling in your tax bracket and then it gives us a much better idea rather than just taking a guess in the dark as far as how much should I withhold?
|We have numbers behind it that… Again, a simple conversation, but it’s a really nice part of one of the tools that we have in place here.
|Yeah, and just… Could you speak a little bit, too, about the idea, because we talked about moving things in-kind, whether or not we would sell something that maybe had a gain or do a Roth conversion, or how you look at this idea of…
|Especially for somebody who might be affected with any kind of IRMAA problems and explain what that means. I’ll let you handle the IRMAA part.
|Yeah. So for our clients who are paying Medicare premiums currently over the age of 65 or about to be eligible for Medicare, that’s something that we want to look at. Because once your adjusted gross income goes over a certain level, then there’s possibilities where your Medicare premiums can start increasing.
|And so, that’s something that we’re definitely looking for as well. You can kind of look at it as an extra tax that you have to pay for extra Medicare premiums. So when we’re looking at using these strategies, especially Roth conversions where we’re adding in taxable income in a certain year, we want to make sure we’re not pushing your income into a space where your Medicare premiums are going to go up and it’s going to negate the benefits of the Roth conversion.
|So, we’re definitely looking at… It’s IRMAA, which stands for income related monthly adjustment amount, and that’s related to Medicare premiums.
|Man, I was really hoping that-
|I’m surprised, yeah.
|I was like man, if Morgan asked us what IRMAA stands for, I said, I’m going to be so nervous. I was going to make up something really good, but I’m glad you had the right answer there.
|Hey, real quick. I-
|Oh, and another-
|Oh, go ahead. Go ahead. Sorry.
|I was going to say. Another thing I was going to add, too, just in the way of tax planning, is that for our clients who work with us for our tax preparation services, then we’ll make sure you’re onboarded with one of our CPAs that we work with. And we can also help you gather the tax forms that you have for the accounts that we manage for you.
|So make sure you’re getting all of your 1099s that you need and not leaving out any of those documents so that you can get those over to your CPA and make sure that your return is filed on time.
|So lots of moving parts, as I’m just sitting here listening to it. And it just makes me go, wow, this is a lot.
|Now, I’m on this side, and I can imagine a client who’s on the other side and they’re thinking, man, all this stuff is happening. It’s their life savings. So Nick, what is it that you try to do so that the client is not having to sit and worry, has this been done yet? Is this moving? Where’s this in the whole process?
|What do you do to make sure that the client is completely understanding everything?
|Yeah. What I try to do is communicate as much as I can. So whenever I have an update, whether that’s an account has opened, I’m typically sending out an email letting you know that or giving you a call.
|I’m making sure that you have access to that account. And then after that I’m also… What Charles Schwab does is they give us an estimated completion date for the transfer. And this is when it’s going from another custodian to Charles Schwab. So in that case, I will let you know when that transfer is expected to be completed, and then when it actually has been completed. Sometimes it’s a day or two off. And so I will let you know that, either by phone or email.
|And then answer any questions along the way, whether that’s personal information that you’d like to get added to the account, getting logged in, where to view your accounts, where to see when the funds come in, where to look for it.
|And then from the 401K process, it looks a little different because we don’t have an estimated completion date for that, but we do see if the check has been sent straight to Charles Schwab. We do see when they deposit it into the account. And then I will be basically letting you know exactly when that happens.
|Or, if the check is going straight to your address, we’re typically communicating just to make sure that that gets put straight into your account. So during the whole entire process from account opening, from really signing the documentation to account opening to getting the funds moved, we’re communicating pretty frequently just to make sure that everything’s in place set up and really helping you go through the process and answering any questions for you.
|Hey Murs, could you… Thank you so much, Nick, for explaining that. And Taylor.
|So now here we are, we’ve gotten this process started where the client is… Pretty much, we’ve gotten the accounts open, we’ve gotten some tax information that we’re looking at and analyzing. And then our next step, once we are moving along this because we’re trying to do it piece by piece, is we have what we have called…
|Because it typically works out that we can do it in this timeframe, we call it a 45-day meeting. Can you just maybe take a little bit, Murs, and talk a little bit about that 45-day meeting and what that’s designed for?
|Yeah, so the 45-day meeting is ideally, by then, all the assets have transferred and we’ve got everything back in-house in the sense of we have everything done from the moving part perspective and now we’re getting back together for a couple different reasons.
|One, to answer any questions. To just take a step and take some time to check in and say, “Hey, have you been able to log into Schwab? Are you able to see everything there? Have you gotten any mail from Schwab that you have questions on?” And just take some time to answer questions, because for a lot of our clients it’s a new custodian. They use Fidelity for years, they used Vanguard for years, they were very comfortable with that setup. And now they’re looking at a different one. While they are all very similar, they all have their tiny little nuances. So it’s getting used to something different. So we take time to do that.
|The other part of what we’re going to do is finalize if there is anything left to talk about on the investment strategy or deliver the rest of the investment strategy to them. So, Morgan mentioned what we talked about in the last podcast around this topic was a bucket sheet. It’s not a technical term, but we call it a bucket sheet that breaks down how we have allocated the accounts to cash, safety, and growth.
|And so, we’re finalizing that and giving that to the client so they have a nice one-page document that says hey, here’s how things are laid out. And going over any questions around that.
|Another important piece that we do in this visit is, at this point we know a lot about you and we know a lot about things that may or may not need to be updated. One that is very common in this visit as we’re starting the process for updating that estate plan. Estate plan typically means we’re either going down the path of setting up a brand new will, which comes with power of attorney documents, HIPAA documents, and other important pieces there. Or we could be going down the route of setting up a trust for our clients. All just depends on the conversations that we’re having there.
|And that process, we set it up because of our relationship with the partner firm, we actually have the ability to take care of the cost of that for our clients. And so, that I would say, is the next big step in a year-long process of getting things fully aligned as far as goals go, as far as desires go. That setting up the estate plan is the next big step that we talk about in that 45-day meeting.
|Yeah, so I think that at this point we’ve spent 20 minutes or so just walking through all these different events that occur. But what we want to really have come across here is that the client, the person that’s doing this, they’re not having to worry are these things being taken care of? We have a great team here that’s really making sure all of these different things, all these different moving parts are taken care of.
|Now, I will tell you as we close out, just so you know, we understand this is a lot, so the first year we’re going to meet quite a bit more. But then even ongoing, we meet with our clients in the first part of the year. We are going to meet to make sure that the financial plan is working properly, if there’s any tweaks that need to be done.
|Second part of the year is all about taxes and making sure that we’re on the tax planning part of things. So we want you to know that this process, while it sounds a little bit daunting maybe, it’s not that bad. It actually works very, very smoothly. But you also get a sense of all the work that’s going on behind the scenes.
|So we hope this has been helpful just to help you see how this whole process works.
|Morgan, you did a great job of the opening.
|And I was hoping you would have a lot of questions.
|You guys are so good at explaining things.
|Thank you again, Taylor and Nick, for coming on and walking through all the things you do for us. Again, we hope this has been helpful. We know we went through a lot. There’s a blog that’s written on this that lays all of these steps out.
|You can just go to our website, which is pomwealth.net. Go to the blog page. You’ll see it all there. It’s super easy to be able to navigate.