Jude Wilson  00:39

Hey, my man. I’m doing great. How are you?

 

Marc Killian  00:41

Doing good. Doing good. Looking forward to chatting with you. You and I were just having a little off conversation before we hit the record button about aging and aging siblings and all that weird thing that comes with it. And and it kind of made sense for us to transition and talk about these 5d’s things to know, you know, before you retire because one of them is just duration, or AKA longevity, right? So I jumped around on the list because I wanted to use that as my transition. It’s number two on this list, but I’m going to make it number one for a second because duration, you know, is it’s a big killer of of many things when you think about your finances, right? The longer we’re here, the more things we got to pay for, the more things we got to deal with, right? So, of these five Ds, let’s start with duration. It’s all about making it last as long as you do.

 

Jude Wilson  01:30

Yes, because when I talk to people, the number one fear I hear most of the time is running out of money. I don’t want to have to go back to work. I don’t want to have to be a Walmart greeter, nothing against Walmart greeters. I don’t even think they

 

Marc Killian  01:44

do it anymore, actually. But yeah,

 

Jude Wilson  01:46

yeah. In fact, I have clients who are in their retirement and and and are Walter greeters just because they want to do something. It’s one thing to to have to do it versus needing to do it. Yeah, but duration it it is important. I’m gonna give you an example. In in my family, my grandmother on my dad’s side lived to be 100 years old, and so we, as technology improves, as medical advancements improve, there’s a higher likelihood that if you’re married right now, that one of you will live into age 90, and so if your plan isn’t stress test for duration, it’s one of the biggest mistakes that I see when people come and see me, who might have been working with a financial advisor or doing things on their own. They’ve never stressed the fact that what if I do live a long time, and so we need to plan for for potential increases in taxes. We need to plan for inflation. Duration is very important.

 

Marc Killian  02:49

Yeah, I mean you got you got short term bucket needs. You got mid term life bucket needs. You got long term growth needs, right? And then of course to your point, right? You you know it’s the great risk multiplier of everything. The longer you hear, the longer more market volatility risk you’re exposed to, more taxation risk you’re you’re exposed to, you know, all inflation risk to your point that you’re exposed to, right? So duration is a big one of the five Ds. So then that walks us to diversification, Jude. So more than just owning different mutual funds, which you guys, you and I have talked about multiple times, you need good diversification amongst a lot of things. So talk to me about that, D.

 

Jude Wilson  03:29

Diversification is equally as important because there’s basically two phases of of your life. There’s the accumulation phase where you’re saving money. I like to kind of use the analogy. It’s like going up a mountain. The first time you’re able to save $1, you’re at the the bottom of the mountain, and every dollar you save gets you closer and closer to the top of the mountain, which I refer to as financial freedom. Then the next phase of your life, you’re in the distribution phase, and you’re using all of that money that you’ve accumulated to now provide you a replacement for your paycheck, so the mentality of investing when we were in the accumulation phase was just I want to I can I want to save as much money as I can and I want to make as much money on my investments as I can as safely as I can. Well, now with switching gears, you really need to have our three bucket strategy: safety money, income money, and growth money. And each one of them combined gives you a certain level of diversification. When we’re looking at all of your dollars, the the the money is specifically set aside, and each bucket has a specific goal to accomplish. It’s not just you know do I have a stock mutual fund versus a bond mutual fund. It’s how do all of these pieces work together to give you that diversification and enhance the potential duration of your portfolio. See what I. Yeah, yeah, I like that. Yeah, I like

 

Marc Killian  05:02

that. That was a good job. It’s like you’ve done this once or twice. Well, you know, and again, so these five Ds are pretty crucial, really, when you think about these. And we were kind of talking about, you know, are they necessary? And I think, yeah, most so so far they definitely are. So that walks us into number three. Okay, so you’re diversified. You’re worried about duration. You’ve got some plans there, and part of that should be concerned with downside protection. Because again, the longer you’re here, the longer you’re exposed to volatilities. And you know, when we’re younger, Jude, it’s easy to shrug off lots of things, right, including market downturns. But when we’re older, obviously, we need some downside protection.

 

Jude Wilson  05:38

Absolutely, when we’re younger, volatility is kind of your friend when you’re putting money systematically in your 401k. When when a downturn happens, I call it the the Kmart blue light special. You’re buying investments at a lower price and you’re riding the market back up. But when you’re in the distribution phase, a downturn in the market could be catastrophic to your portfolio because now you’re taking money to live off of, and simultaneously the market has gone down, so your portfolio is less. So it’s hard to rebound from something like that if you don’t have the proper diversification. So I’m wrapping them all together. Yeah. So downside protection is part of a really good plan put together. Having something that you know within your with within the three buckets that has a high probability of not being affected by the market. So that’s part of the strategy.

 

Marc Killian  06:41

Yeah. I mean, you have to ask yourself, how am I protecting myself against downturns? Do I have that in my strategy? Talking to your advisor about that, or not working with an advisor and saying, you know, do I even understand this stuff myself as a DIYer? Probably not, and that’s okay because you don’t do this every day, right? So again, these are the importances of working with a financial professional. And to Jude’s point, he’s you know all three of these things are so far are you know playing and interacting together of the 5d. So that brings us to to D number four here, Jude. And you know, so I’m going to throw you under the bus a little bit with our with our viewers and listeners have some fun. You just got back from Barbados with some with some brothers, a little outing with the brothers, had a good time with your family, and so and I’m tying this into that by discretionary income, because you maybe had you know a few rum punches along the way, you know. So, but discretionary income, right? It’s tempting when we go to put our our budget together, Jude, or when we go to talk with an advisor and say, “Well, here’s what we spend each month. It’s $5,000, right? Whatever number, and you know that’s the car, and that’s the mortgage, and that’s the utilities. But it’s the discretionary stuff, the rum punches in Barbados that catch up with you, right?

 

Jude Wilson  07:50

This is my favorite D because I love to be able to go to a client in our annual review and say, you know what, we’ve looked at your three buckets, we’ve done so well this year that, hey, instead of the normal cost of living adjustment, if you need more income, we could provide more income and not not risk the longevity, the duration of your plan. Now, vice versa, if something has happened in their life where there needs to be adjustment, you know, we have to have those tough conversations. But I’d rather have the tough conversation and make the adjustment than increase the the fear factor of running out of money or not being able to take care of the things that are most important to them. But the discretionary income that is my favorite because you’ve worked so hard all your life, and now’s the time to benefit from all that hard work. So we plan it into the plan a portion that is the foundation of the plan that pays for all the necessities, and then part of the plan is that discretionary income. But it’s also always joyous to be able to say, you know, you got one big problem with your money-you’re not spending enough. I love to say that to a client.

 

Marc Killian  09:06

Yeah, absolutely. And unfortunately, you know, the downside is you could be the other way, right? So, I mean, you want to be in the “Hey, you’re doing great. We’ve got extra, so enjoy yourself a little bit more. The downside is, you know, sometimes you have to have those stern conversations, Jude, where it’s like, okay, look, we’re doing a little too much with the discretionary income, so we’ve got to make a few adjustments. And again, these are what the updates and the reviews and the check-ins are all about, right? I wish somebody had

 

Jude Wilson  09:32

told me I was doing a little too much with the rum punch, but that’s a whole other conversation. Your brain’s kind of telling

 

Marc Killian  09:37

you the next day a little bit, right? It’s funny how it waits till the next day to tell us we need something, right? Yeah. And the final one, the final D here, Jude, is it’s a drag. It’s because basically anything, and this is what it’s referring to, is anything that drags down your retirement. And there’s a lot of things out there that can drag us down, and that can kind of uh. You know, make it tougher for us to accomplish those goals.

 

Jude Wilson  10:03

One of the big one, and you’re absolutely right. And one of the big one is taxes. Yeah, you know, it it just recently came out that we’ve hit an all all new high on the on the deficit on the federal deficit, and so my belief, and and and this is just my crystal ball. Is that taxes will probably have to go up in the future, and so part of our planning is looking at what we can do to be proactive instead of reactive when it comes to reducing legally reducing our taxable liability or being able to to counteract taxes going up in the future-that is one of the biggest potential drags to the situation, and so that’s why it’s so important to work with a professional that’s not just looking at your investments, but looking at one of our pillars, which is taxes.

 

Marc Killian  10:57

Yep, and and fees too, Jude. Right, inflation. Right, these are things that can drag down on your retirement, and this is why you have to, you know, be running through those strategies, getting a plan together. Or if you’re not working with somebody, Jude, again, one of the things that a lot of people find out when they come in for the first time for a consultation is the amount of fees they’re paying. They’re like, “Oh, I, you know, my guy or gal was only charging me 1% and it’s like, yeah, they might have been, but the the products that you’re in are killing you potentially.

 

Jude Wilson  11:27

One 100% and that’s part of the analysis piece that we that we do in the beginning is to look at what you’re currently invested. One of the things that I see notorious for having high fees is variable annuities. Now, I’m not saying all variable annuities are bad. The fees have to be commensurate with the value that you’re receiving, but oftentimes what I find is that they’re not. And so part of our evaluation is to see, you know, are there excess fees that are not producing value to your life?

 

Marc Killian  11:59

Sure, mutual funds is another one, right? A lot of times, people go and they they want to be diversified, kind of tying these D’s together, Jude, and they go out and buy five or six mutual funds from different places, and a think it’s got them you know diversified, which oftentimes they’re all large cap and there’s a lot of overlap. B they wind up having a lot of fees associated with it, right? So again, dissecting and doing that that critical analysis of your portfolio is highly important, and it’s part of the pillars.

 

Jude Wilson  12:28

100% And and looking at all the D’s, they fit so well with our five pillar strategy. Looking at each one of the pillars and making sure, kind of like a gear shift, that all of the pillars are working together to provide you the highest probability of a very successful retirement.

 

Marc Killian  12:45

Yeah, there you go. 5d’s1, plan. The goal is to build a retirement that holds up over the long haul, right? Because again, duration. So if you want to run through the five Ds for your very own and you want to see how things are for it, that’s what Jude and the team are here for. So reach out to them online, get yourself some time onto the calendar. We’ve got the number on the screen. It’s also in the show details down below. So there’s lots of things for you to check out: tools, tips, resources. Just click on one of the links and get started today with the folks at Sentrust Financial Strategies, Jude and his team. Jude, thanks for hanging out and breaking it down, buddy. I’ll let you go relax a little bit now and recoup from the the rum punch.

 

Jude Wilson  13:21

Hey, hey! A little bit of trivia I found out in Barbados. Barbados is the official birthplace of rum. I did not know that.

 

Marc Killian  13:29

Well, see, there you go. That’s why that’s why you had a good time with it. So, well, enjoy everybody. Have yourself a great day. Don’t forget to subscribe to us on Apple, Spotify, or YouTube. And we will catch you next time here on the Roth Guy with Juke Wilson.

 

Speaker 1  13:46

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