Hello, Doug. Hi, Jay. So before we start, I want to make this clear that we're recording before anything has been announced with the tariffs and most likely you out there. Are listening are listening after that information's been released so but I think it may still be prudent to talk about, you know, chasing shiny objects and the.

At least, right?

Pitfalls that can come with that, and you know, even if you can predict predict the future, right? Is it really? That's.

It right? Yeah, exactly. So we we covered that in insights this week, just this idea that you know if you let's take the example of tariffs right, let's just dive in we we're a couple hours away. So let's say you did know exactly what was going to happen and not only did you know.

Yeah.

Exactly what was going to happen. Let's say you know, you knew that, you know, there's going to be. An influx of investment in US manufacturing, but then, you know, unemployment goes down, wages go up, prices go up. You know, all of these things and you know that, you know which industries are going to be impacted positively, which negative. And so you set your portfolio up to take advantage of that. Two days later, everything changes right. So. Yeah. The geopolitics begins. Countries started talking. Things start changing, and now your portfolio is positioned positioned entirely wrong. So you just can't try to predict these things even if you think you know what's going to happen.

Yeah, it's really interesting and the. Kind of the topic of preparation versus prediction, right? And just knowing that.

OK.

It's gonna be volatile no matter what, right? Change is inevitable. Things happen. And just being prepared for that in the long term. And I know we probably sound like. On repeat. But I mean that's, that's the thought. Whole philosophy.

Here, right. Yeah. Exactly. If we take last week, for example, so last week we had the latest numbers coming out of the latest inflation numbers coming out, so PCE inflation is the one the Fed tends to focus on. They want to see that getting all the way down to 2%. Last week it was, I guess, analysts were hoping or expecting it to be 2.7%, which would have been flat month on month. That bumped up to 2.8. So going in the wrong direction, which the market did not receive well. So stocks stocks declined. If I look at our portfolio. What did best last week? It was gold, which tends to be a hedge against inflation, and it was. Tips, treasury inflation, protected securities design specific to specifically to be a hedge against inflation. So it's important, not again not that we predicted that yeah, but we have a portfolio that's going to benefit from different scenarios. And then the rebalance of course takes advantage of of those ups and downs.

Yeah. And and.

So.

You know, maybe this is the wrong way to look at it, but it just as a question. It's not from from our philosophy, it's not that we are predicting certain areas, it's just that we're diversified enough that we're hedging our bets against other things going down by things going up or vice versa.

Right. Yeah, generally. If you think about the long term, you want to benefit from what the market has to. So historically, US equities, international equities, they've gone up and they've provided an attractive return. You want to balance the risk in your portfolio by making sure you have the right amount of fixed income and you're getting the return you deserve there. And we add other things in there for diversification benefits. Again, we mentioned tips. You mentioned goal. Build within international emerging markets, so you're getting that diversified exposure you want to make sure you're getting that at a minimum, right? That's our starting point. And then where we add that value on top of that is the tactical rebalancing, it's tactical positioning. If we see a big like. Valuation opportunity open up. And the evidence suggests to us that now is a good time to be overweight this versus that. Then we're going to take advantage of it. But what we're not doing is speculating about what's going to happen in the.

Future. Yeah. And I think that's great. And so as we look out to the rest of this week, a lot of lot of activities this week. We have the jobs report and other things coming out.

Yeah.

I know the answer, but you know, you know what are what are I guess, what are some of the other things outside of the jobs reports that we'll be keeping an eye on?

That are coming, right? Yeah. It's interesting. We, you know, we we like to talk and insights about what's coming up right. The jobs report and inflation report, whatever it happens to be, we are not again making any predictions about what happens here. What we're more interested in, not just the number, but how does the market react? And does that reaction warrant a tactical opportunity for us? So I You know the jobs number in itself. You know, again, I don't have an opinion on what it's going to come out at, but if it is market moving, I want to know if that's opening up an opportunity for us. So that's what we're doing day-to-day as these.

Right.

Various pieces of information come out, you know, give an example that you know, one where we tend don't tend to be interested in so consumer confidence, right. That's always a big one. The media loves to cover it. Consumer confidence was really low last week, much lower than expected.

Yeah.

Consumer confidence tends to follow the stock market. So is.

The stock, so there's right. Right. Yeah, right. That makes sense. Yeah. Right.

Goes down. Guess what? The confidence goes down. That's. Yeah, that's not helping us. Right? Right. But if if something comes out like the PCPC report last week, the inflation report that surprised on the downside and that move in the market opens up an opportunity for us. That's what we're watching out.

For so it's a very positive look into the future when we look at these things, it's not let's predict what that is. It's when it happens, it's going to happen. We don't know which way it's going to happen, but afterwards if there's opportunity that presents, then we'll take advantage where?

We can right exactly, yeah.

I think that's great. All right. Well, thanks, Doug. That's Ed. And we'll talk to you.

Next week. All right. Thanks, Jay, take. Care.

All right, we're back to the life by design podcast this week we have Aaron Evans, a senior advisor and partner here at strategic, and we're going to talk a little bit about retirement and getting ready for retirement. So Aaron is a CF A which is a chartered financial analyst and a certified. Financial planner as well here.

Yeah, do a lot of tests taking back. In the day.

Yeah, yeah, those are very, yeah. Then every time we have someone new, get a get a CFP, it's like, oh, yeah, they they went through some tests for that. And then Aaron, you also have a background in engineering, right.

Yeah. So right out of college, my career was in electrical engineering, in the defense industry in particular. For about a decade. And then made a pretty unique transition over into the world of finance and in particular financial planning.

Oh.

What was it? What? Was it that intrigued you and enticed you to come over to financial planning?

Sure.

Sure. So it it started with just within the world of engineering doing a lot of project management. Getting involved in the financial aspects of large scale defense programs and then I actually ended up studying my Masters degree in business and finance. It happened to coincide with 2008 and 9 where there was a pretty widespread financial crisis here in the United States. And that intrigued me even more, just kind of what was happening in the world. So that in combination with just kind of a general desire to help people, a better understanding of finances and realizing it's not as complex as maybe it needs to be. And that led me to, you know, meeting the fine people here at strategic and. The rest is history I.

Guess. Yeah. And I think that's something special about strategic is that you know, we're always talking about good people helping good people. And part of that is bringing in folks that have different backgrounds and and training them in the ways of strategic and and showing them how how we do it here and that that helps, I think when you come from.

Sure.

You know a life beyond financial planning. So you, you. Have an understanding of what clients are going through and what their.

Day-to-day looks like. Yeah, I was there for sure. I was an engineer. Who? Do little about personal finance and certainly a little less about the world of investments and financial planning. And then over time, build that knowledge. So I I can empathize and put myself in that position of a. Lot of people who. Are overwhelmed by kind of some of this content.

Yeah, well, that helps too. Like, you know, we're going to do that a little bit in the next couple episodes. But is being able to. Break it down and explain. Pain. You know, there's a lot of jargon and a lot of in every every expertise has a lot of jargon. And. And so being able to like explain that on a on a one to one basis so that someone understands and I think you know I do that a lot here. I'm like what explain that to me in layman terms. What does that actually mean?

Yeah, yeah, for sure. And that and now we live in a world where there's just information overload. So now you don't even know who to trust. What's right. It can be even more confusing than maybe it needs to be. Yeah. So a lot of that is how we approach keeping things simple. Uh, doing it the right way, making sure our clients understand and give them some clarity and and hopefully confidence in where.

They're headed. Yeah, I think that's perfect. Yeah. And I think part of that and what we're going to talk about over the next several episodes. So we did a series. With Greg Macola on behavioral finance and I wanted to talk about retirement and getting ready for that and really our our plan here is today on this episode, we're just going to do an overview. Of getting ready and thinking about some of the key fundamentals of planning for retirement. Then next episode we'll talk about, hey, I'm I'm in my 30s, forties. I want to get ready, which what vehicles should I be looking at for retirement savings? And then our third one will be I'm 10 years out. What you know or closer here I am.

Maybe even closer. Yeah, yeah.

I'm. I'm on the precipice of retirement. What do I? Do now. So.

It's and the reason we're focusing on this, it's it's a very pivotal moment in most people's plan. They're planned early on and you know they might run into some life events, a job change, family, all those things. But this becomes a very pivotal moment in most people's plans and a lot of things to decide. A lot of uncertainty around that moment. So I think there's some good content for us to.

Yeah.

Discuss. Yeah. And I think it's. You know, hopefully, if you're younger like I guess I say younger, but like around our age, you know, in your late 30s or early 40s. Like it's something that seems so far off, and like obscure that you're like. I don't even. I don't know. I don't even know what I'm going to be doing. And. Like that's half my. Life away. And so when we talk about starting and thinking about retirement and what my plan is, what are some of those? Key fundamentals that I need to be thinking about to get myself prepared.

Yeah, I think the first thing is just acknowledging what you said, where it might seem way, way out there and sort of this obscure thing that might never happen. But if you don't start thinking about it early and the more you put it off, you will get closer and closer to that date and really feel underprepared if not unable to retire so early on. It's as simple as just acknowledging that this is maybe one of the biggest goals in your overall financial plan and they have to. Acknowledge it and do something, and then we'll get into the details as you approach it around all of the smaller portions of of the nuance of different things that impact your ability to retire. But again, at the onset, it's really just acknowledging, hey, I can't put this long term goal off at the sacrifice of all these near term thing.

Right.

So just taking some action and and baby steps towards that, that retirement plan are really important. Getting educated on some of the things we're going to talk about and how I can influence my own plan for retirement. But with the younger generation, really, if you can just get started.

Yeah.

Early on and take a little bit of action, it makes a world of difference down the road.

So so for that and talking to those folks, how how do you explain that balance of saving versus living right, like I, you know, it's we both have kids and we you have all these expenses and hockey tournaments and you know plays or whatever. And so there's all these expensive. Expenses that I have. How am I balancing that and understanding like I gotta pay the bills? Still, I gotta eat.

Yeah.

Like feed these kids. It's like, how do I it's you save.

It's even compounded by now. This kind of you know, this FOMO generation, right? Fear of missing. You know, and social media where you're just constantly seeing all the things that you can do with your money, whether it's travel or buying this new thing or you know, you're seeing what everyone else is spending their money on. You used to not have visibility into that. So it's a really big challenge. And I know you spoke to Greg about behavioral biases to sort of not.

Yes.

Again, sacrifice that ultimate long. Term by overspending in the near term and at the same time, I do appreciate that mentality of hey, tomorrow's not promised right when we get to our I'll give it to our early 40s as you put me in that category, you do start to see our parents getting older and you do start to think about longer term and you know the the end at some point. So it is an important balance. So it starts with education. Very simple at the very beginning, we like to talk to people and show young people about the power of long term investing. And you see examples. If I just put a little bit of money away every month, just the simple analysis of compound returns over time and recurring savings over time, just giving them those simple examples really shows the power of. Hey, maybe making a little bit of sack. Twice you know, 2 trips to Starbucks every week makes a difference. You know, for the amount of money you might spend on going out to dinner twice a month, you can start to really make an impact on your long term plan if.

Yeah.

You do it.

Earlier. Yeah. And I think for me, one of the things that helped me when I was younger too was if if you have the option. To do it through your employer that they it's like you don't see it cause it just comes out of your paycheck. It's pre tax, so it's just it goes and off it goes and I you know, for me as someone who's dealt with, that's like I. Don't even think about it. Sure.

Sure it is. Thankfully, we are in a world where there are these 401K defined contribution plans have become. More normal than maybe they were for the generation before us. The pension generation and really now everyone kind of knows about that feature. It is one of the one or two things when you're looking for a job that you think about and it is a great way to again take those baby steps or at least participate early on towards your ultimate retirement.

Yeah.

And those plans now have auto enrollment features, auto escalation features. Target date investments, things that make it really easy for people at the onset of their employment to really get into those plans. And as you say, potentially set it and forget it a little bit. We don't encourage that, but at least they get to be in a point where they can participate and maybe not think about it day-to-day as how it's impacting their their lives.

Well, and I guess I meant from not so much the long term investment piece of it, but more of the.

Yeah. It's out of my budget. It's out of my out of my.

Yeah, it's. It's already taken out of my weekly like thoughts of what I have to pay this week, right? Yeah.

Out of sight. I can't spend there. Yeah. Sure, sure. And and that's great and and so. Again, auto enrollment auto escalation is, hey, if I make more money, more money is going into that plan or if I set a trajectory where it will automatically increase my contributions annually, all those things are making it easier for people to get involved earlier on. And you could you add on to that the education piece, sort of the power of that over time and and we're getting we're seeing more people. Becoming retirement plan millionaires or 401K millionaires. It's gonna be more common than certainly generations ahead.

Of us so in in that regards, you know something that I found very interesting when I started working here and like understanding net worth is that some retirement plans and some things are are. Vehicles for savings are considered in my net worth. So when we think about that or when I'm thinking about saving. Like how? How can I contextualize that as as someone who's like building that out?

Yeah, I think. Because of what you said earlier, it's sort of out of sight out of mind. Yeah, people often don't think about that as part of their overall investment plan and and also because you really are setting that money aside for all intents and purposes, for retirement. So you don't think about it when you're 25. Dirty when? Really. You're. You're not touching that money until you're about 60 years old. And so we see. A lot of. People who one have these plans from previous employers that they don't even remember that they have. Oh yeah, I found another 401K plan from the five years I spent at this company and there's $100,000 in it. Oh, my goodness. To just thinking about the dollars that they have to spend today. So it is a really important piece of their overall net worth. It is certainly something they need to face.

At least.

They're in and again it is intended for retirement. So when we plan for retirement, it's even more important factor and and a more important piece of their.

Overall plan. Yeah. And I think that's always interesting, right. And if you want to speak to that a little bit, is that if you worked somewhere else and you moved to a new company and you may have a 401K that was with that. Company. So how does that work as far as? What should I do with it? Like what? What can I?

Do with it. Yeah. You'll hear us touch on getting organized a lot. Whether you're early on or ultimately getting towards that retirement moment in your in your life. And part of getting organized is just knowing where those things are. Right. And again, we've had conversations with so many people where they go, oh, yeah, I just found this account. So the the options for an old employer 401K plan or retirement plan. It might be something called something different. We'll get into that or you can leave it there. They may be able to force you out of the plan depending on the the specific aspects of that. Plan, but you can roll that into a new plan. So some of your your current employer plans might allow you to roll old plan balances into the new plan or you have the option to convert it to an IRA, really retaining the tax structure of that account. If it's a pre tax account or we'll get into the weeds, it might be a raw 401K.

Yeah.

Maintaining the tax structure but getting it into an. Account in your. Own name. So there's options to do that, but more importantly to consolidate. So the last thing you probably want to have is 3 different old retirement plans sitting out there. On three different websites where you don't really know where where they are, what they're invested in, and you can consolidate that either again into your current employer plan or into an IRA where you have a little bit more visibility and consolidation and organization.

Yeah. And to touch on that a little bit, because this is something that it's. From a maths perspective right, this pre tax money versus post tax money and if I'm investing, if I put into my, you know, my employers plan it's before taxes. So actually I'm probably going to make around the same money. It's like it's a very nebulous kind of concept and so.

Sure. Yeah.

What is the, you know, the high level of how that works and why it works that way?

Sure. So the the bulk of traditional 401K plans are encouraging people to save money on a pre tax basis, meaning take money out of your paycheck before all those lovely taxes come out. And that was specific to be an advantage for people who are saving for retirement. Hey, you're you're setting aside money for retirement because you're doing that. The government's giving you a little bit of a break on taxes. So you can set aside money pre tax for retirement. And it also has an additional tax advantage where if it grows, it grows tax free. Until you retire, so both you're saving pre tax before your taxes come out and growth is tax free. Ultimately down the road in that traditional environment. When you then go to take the money out, you have to pay taxes at that time. The opposite of that would be the option for, not the opposite, but the counter to that would be the option for after tax savings. And we're seeing more and more retirement plans offer a Roth option, so this is now money that's been taxed upfront from your paycheck. Similarly, the growth in that account will not be taxed again as long as you.

3.

Hold it until retirement. There's a lot of little nuances there, but ultimately then, when you go to take it out.

Yeah, sure.

The income tax has already been paid, so no income tax. When you distribute those funds to you. And we get the question a lot. What should I do? Should do traditional Roth and you can model this based on where your taxes are now. The unknown is what are the tax laws gonna be when you retire? You and I are always away. Those could change this week, let alone 20 years from now. Right. And what tax bracket might you be in when you retire?

Right, right.

So it's hard to say. I think ultimately you'll hear us talk about tax diversity in terms of your asset mix when you plan for retirement having some pre tax assets. Again, that might be the only way for people to contribute right now. So that's what they're going to do. Having some of those Roth assets where you really have great tax benefits both. In growth and ultimately tax free when you retire and then just having some other investments that aren't in a a retirement account building, what we call after tax wealth to make sure that you can spend money between now and retirement and have a little bit of tax diversity in your plan when you when it comes time.

Yeah.

To retire. Yeah. And we're going to. The next episode we're in dive deep into all those different vehicles in order to save for retirement, for your retirement plan. But the tax situation is very interesting and. This is something similar but kind of sides that I just learned this week that for instance with crypto, every time you buy a new asset or trade into a new asset, that's taxable. And so there's all these tax things that end up happening in all kinds of financial planning and finances. And so one of the interesting ones that we talked about that was news to me and I think news to a lot of people we had this. Really cool retirement Summit that we're having every year. Master class. Yeah. To learn about retirement was the one that shocked me the most. And a lot of our feedback on our survey was that Social Security is taxed when you retire. And so just, you know, I wanted to touch on that a little bit and and have you.

Yeah, yeah.

Like like what else that could be taxed? And like there's all these like.

Sure.

Items. Yeah, there's when when it comes ultimately to that retirement tax planning is a very key portion. Of how we plan for retirement, whether it's understanding what's going to be taxed and planning a a distribution schedule of your assets right, we don't have a paycheck. Now. We have to make sure you have money to live off of. What's the most optimal way to do that for you from a tax perspective? So yes, social securities tax, pension. Income may be taxed. Those traditional or pre tax investments that we haven't paid income tax on our tax. And then how do you merge that with maybe some Roth or after tax assets to manage your income tax situation, but also key one that comes up and I know came up in the retirement summit was your taxes will ultimately impact your Medicare premiums, which is the way that the majority of our retirees are getting their healthcare so?

We have.

How does that impact those premiums and putting it all together is is again difficult, but something that we really focus on and partner with our clients on. And then there's the advanced strategies. Can I shift some of my pre tax assets to post tax assets doing things like Roth conversion? So there's all different ways we can help clients around modeling our taxes and take and most tax advantage taking advantage of tax advantage, ways to distribute or or reposition assets into retirement. There's a lot there.

Yeah. And, you know, in a couple episodes, we're in deep dive that a little bit more, but it's just something interesting to to think about now it's kind of this episode as we kind of prime into retirement. Is one of the other sticking points for me too that I never really like. It's it's common sense it really is, but it's not something you think about until you really start talking about it is, hey, you like you have a budget you like, you still have to have maybe some bills, maybe food, like transportation, like health care. Like you're still going to have expenses. When you retire like those don't just go away when you retire. So that's really what you're thinking about is almost how you're paying yourself back during retirement to four year expenses. Yeah, it's.

Sure.

When we sit down to to sort of prepare a full retirement plan and and talking now more about the cash flow portion of it, do I have enough to live off of? And I will often come back with well, how much? Do you want? To spend right, it sounds a little cliche, but $1,000,000 might be all someone ever needs for retirement because they have a pension and Social Security and all these other things. And they don't live very, you know, you know, expensive lifestyle. But that might be about a money that someone else might blow through in the first three or four years of the retirement. So ultimately we need to get organized. The easy part for most people is OK, what income sources do I have Social Security? Pension. Maybe you have a side gig or a rental property. Everyone has a good handle on that. What assets do I have to live off of? OK, we've. Generally identified what those are, whether it's your accounts, cash savings, maybe you might sell a piece of real estate down the road, but the really hard part for people is just what you said. What am I spending? And while you are working and living, you kind of know. OK, I make enough money to pay the bills and save a little bit, but you may not have done the deep dive of what am I actually spending? Yeah. And it's a hard thing for people to go back and do. And it it's a really crucial piece of their plan to understand what their living expenses are. What are the discretionary things I think people will go, I I that's the way I spend that much money every month. Well, when you factor in the trip and then the home repair and all these other things are the unforeseen expenses. We do a deep dive to make sure we plan for what we expect, but also the unexpected and it's it's a difficult exercise for some people, but a really important one because. That will make or break a plan if we don't have that dialed in. You may be on the cusp of having enough, or maybe you know eroding your assets in the future and then. Just to touch on one other thing that you have to be thinking about inflation as we know those expenses aren't getting cheaper and we plan for that to make sure we understand that things will likely be more expensive when you and I retire than them even when we live further into our retirement.

Yeah.

Right.

Yeah, right.

Well, and it's, you know and and to that point, you know you mentioned in there. The amount of money each person will need or for for what we call their great life, right. And so really if you're listening to this now, if you're around our age or even if you're, you know, going to be one of our audience members who's going to be listening intently to, I'm 10 years out, I really encourage and this something I've been thinking about lately to is like. Closing my eyes, thinking about 65 or 70 and what my day-to-day life is. That look like and what that great life is and what that means is like, hey, I'm. I'm going to be in, you know, content just spending time with my grandkids at home. Like, I don't plan on doing anything flashy or maybe I want to take the family out on a vacation once a year or twice a year. Like what? What does that look like? And I think when you come to your financial planner.

Sure. Is.

And you, you know, to Aaron and you have that, like, here's what I think and it's going to shift as you grow older. But like, here's what I think. My great retirement life looks like. Then he can go. OK, great. Let's work up to that and and build out the.

Yeah.

Plan from there exactly. And that's every relationship we have. It's strategic starts with that conversation. What's most important to you and ultimately we will get to that retirement vision and what does that look like? Is it buying a second home in a vacation area and? Moving is it just traveling around the world? Is it? Hey, I just wanna. Sit at home and maybe visit my kids once or twice a year, and now more and more. We're seeing people say I'm probably going to do something in retirement. I don't want to fully retire, so they may pick up a small job or volunteer, but that conversation has to be had. That's those are the goals where we can assign some values to and start to build a plan and understand. We on track for that plan or not and then ultimately when we do retire, is this plan sustainable in my retirement? Yeah.

And I think the last topic here we'll talk about and we'll wrap it up is. Is when we're thinking about retirement, when we're thinking about that great life and and what we're doing right. I think a lot of us just think about the number 65 or 70 that I'm gonna retire and that's what I'm saving for is that date. But really, we need to be thinking about what our full life expectancy is going.

Yes.

To be, yeah.

We we touched on this at the Retirement Summit where. There is this mentality that if I can just get to that point, I'm done. Yeah. And in reality, we hope that our clients are living a long, healthy life beyond that and life expectancies are are expected to grow and go higher with the advances in medical technology and and just medicine in general. So we talk about, yes, that might be the date at which you retire, but your retirement plan is well beyond that. So we have to make sure that we aren't getting too conservative once we retire, saying, hey, I've, I've got to this point and I'm just going to kind of pack it in and don't lose. We just talked about, I might want to travel, I might want to live and do. Do things and. Expenses will grow through that retirement time period, so our plans have to extend well beyond that. And when we do those analysis for clients, we probably go even beyond where they think their life expectancy is just to make sure right that that plan is is very much on track and solid for them.

Yeah, because yeah, right. Life is unexpected in in both directions. Sure. So yeah, but yeah. So. So that was great. The great overview, Aaron and I think join a, you know, I think next week when we when we talk about the vehicles for saving for retirement, we'll talk, we'll break down all the different kinds and then the following.

Sure.

Episode will breakdown. Him close to retiring 10 years, maybe closer. What should I be doing? What should I be thinking about? We kind of touch high level on some of those. But we'll break them down for you.

Yeah, absolutely. And we have kind of a a little bit of a money journey that we use here at strategic in terms of where do I allocate my dollars efficiently to make sure I'm on track for. That ultimate retirement goal, yeah.

Yeah. So thank you, Aaron, for coming on and I look forward to our next couple of episodes. All right. Thanks for educational.

Boy, this part.

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