Intro: Royal Standley of Oregon Pacific Financial Advisors, offering securities through United Planners Financial Services, member FINRA; SIPC, shares his planning approach to help people toward a place where they may be at peace regarding their financial goals. In this dynamic podcast Royal will share his insights on how to design a retirement plan to help you plan for your future. Now onto the show.
Aric Johnson: Hello and welcome to Life By Design with Royal Standley from Oregon Pacific Financial Advisors. Today I've been given a document. It is basically a document that was sent to me by Royal that has a lot of questions on it and I kind of know what they are. Well, I know what all the questions are because I can read them. But Royal, good morning how are you?
Royal Standley: I'm doing great.
Aric: Royal What is this list of questions I was sent? Where did these come from?
Royal: My staff and I put that together. And those are really some of the most common questions we get asked early on as we begin the process of bringing on a client. So someone finds us through our website or through a client referral they call up and oftentimes these are the questions that are top of mind and are what really these questions are what are driving them into,
Aric: Mm-hmm.
Royal: Meeting with a financial advisor or a financial planner and kind of giving them the motivation of Hey I have this question I need to ask an expert about it.
Aric: Yeah perfect. And these are the ones that are you know happening at the very start of your relationship it looks like as I've read through these. As you work with clients I know they have more questions and more questions come up and you have more answers so that's great. So we'll start here at the beginning and some of the basics. Is that good with you?
Royal: That works, that works.
Aric: All right. Really basic easy question for those that are listening that have never worked with a financial advisor. How can seeing a financial advisor, how can, you know, calling you up help them retire?
Royal: Absolutely. So, the first thing I'm going to do, and I'm guilty of this all the time, is differentiate between a financial advisor and a financial planner.
Aric: Hmm,
Royal: There's a lot of advisors out there who really just focus simply on the investments that you have. They might run a calculation saying ‘hey this is how much money you'll have at 65,’ but that's really where the planning ends. I consider myself a financial planner. We do all the investment things that a financial advisor would. However, my main focus is in coming up with a plan for each of my clients for their future. Now this could be a fully realized financial-planning document and ongoing work or it could be as simple as hey these are the three steps you need to complete in the next two or three years for the next stage of your financial life. What I really try to emphasize with people is how we're different there. We're not going to necessarily worry, especially early on in the meetings, about your allocation to international or emerging markets. What we're going to really focus in on is who are you? What brought you to this point today? What's your family structure look like? What are your goals? What are your dreams? Where are you headed and where would you like to to be headed?
Aric: Mm-hmm.
Royal: Because I think that's that's often when I hear from people is I've been told to do these things because they're good for us but I don't know what that - where it’s really taking me. I know they're probably it's probably a good thing to save in my 401(k). I know it's a good thing not to have a lot of credit card debt, but what does that really mean? That financial planning aspect I think is just so important not just for multi-millionaires and that sort of thing but really I think everybody can really benefit from having a financial plan that they can go back to, back through throughout the year and update and tweak based on their circumstances and events that take place in their lives. And that's really the benefit of working with a financial planner. That financial-planning document is really invaluable to getting to, to where you want to go in life.
Aric: Mm-hmm.
Royal: Now we'll take a step back and just talk about the financial advisor piece and that's really in my mind the investment piece of it. Even if you don't work with a financial planner and you're just working with a financial advisor, a financial advisor who's just focused on the investments. If nothing else it should, if they're doing their job right, they're going to keep you well diversified. They're going to keep you away from kind of the basic mistakes investors make on their own.
Aric: Mm-hmm.
Royal: For instance, you know just, just looking at company’s stock positions, when you work for a company that either uses company stock as a match maybe it has a employee stock ownership plan. Maybe it's just a stock purchase plan that you have. Looking at that saying OK you worked for this company, you rely on this company for an income, should you really have 20%, 30%, I've seen up to 80% of your net worth wrapped up in company stock?
Aric: Mmm.
Royal: Should we look at maybe diversifying you there. So even just working with a financial advisor who's just focused on investments. If they are a fiduciary and they have their client's best interests at heart they will help walk clients through that process of getting diversified and taking off some of those market risks and other risks and mistakes that investors commonly make when they're doing everything on their own or just letting a website do it.
Aric: This kind of leads into the next question because as people are new at their job or new in just in investing or saving. I remember back when I was in my 20s you know I don't even really think of retirement. Yes, I thought of retirement because of, you know, my dad was going to be retiring soon at that point in my life, and he had set himself up really well and I thought OK that's great for him but really not thinking about me or how much I would need in retirement. I would just throw a number out there-- it’d be great I have a million bucks to retire on but no clue right.
[laughter]
Aric: Absolutely no clue. And then as I got older I began to think OK how much do I truly need because that I understood OK there are ups and downs in a market. There are all sorts of different things that can happen to money that's in investments during that time. And it's kind of, a kind of a minefield of how I keep my money while I'm retired and how I can pay myself on a monthly basis and those calculations were just still very difficult for me, so I know this next question addresses that. How can I find out or how do I know how much money I need in retirement or to retire?
Royal: That's a great question and that really comes back to that financial plan that we talked about putting together.
Aric: Mm-hmm.
Royal: That financial plan is, is going to give you the dollar amount specifically of how much money are you going to need to fund from the date you retire until the date we project you're going to pass away? And we'll look at that and we'll we'll factor in how much money of that how much of that money comes from Social Security and pensions. Because I think that's something that people don't really take into consideration much especially early on is what am I going to get for a income from Social Security.
Aric: Mm-hmm.
Royal: There's a lot of worry about Social Security I think some of that, I think people are right to worry about what Social Security will look like.
Aric: Mm-hmm.
Royal: I tell my clients you will always get a Social Security benefit no matter what your age is. It's just a question of what is that Social Security benefit going to look like.
Aric: Yeah.
Royal: We've made so many promises to current retirees and future retirees, it's not like we can go back and say oh we're not going to do that anymore. We have to keep that program going as, as a country. You're always going to get a benefit because we have to keep people paying into that system.
Aric: Mm-hmm.
Royal: So we have to give them a reason to continue paying into that system. But it's factoring that in and what that looks like. And then from any other income sources you have, maybe you have rentals that factor into how much income you you need for your lifestyle. And then we factor in your investments and what they're going to produce and what you're going to need to take from that to fund your lifestyle, as well as what you're going to be required to take out of your tax-deferred accounts like 401(k)s and IRAs. What is, how is that going to affect your income? Because one interesting side effect of saving a whole lot of money in 401(k)s is at 70½, you're going to have to begin pulling money from your, those tax deferred accounts usually starting at about 3.5% at age 70 of the value of those accounts. So for some people that might be way too much income that they weren't even planning on realizing, but that that we need to plan around
Aric: Mm-hmm.
Royal: And that also kind of backs us up into what types of accounts we should be saving in as well. So, to kind of circle back to the question, that financial-planning document will give, give us that roadmap of how much do you need for retirement? As well as how do we plan to get you there?
Aric: Yeah.
Royal: Which I think is really the question most people want. Nobody cares that they're going to need 2.2 million dollars at retirement.
Aric: Mm-hmm.
Royal: What they want to know is are they on the path
Aric: Yeah.
Royal: To get to that 2.2 million dollars?
Aric: How many scratch tickets do I need to buy? Just kidding. That's a terrible plan.
[Laughter]
Aric: Really in my 20s I'm thinking the only way I'm going to retire is a lottery.
Royal: Right.
Aric: But you learn you learn very quickly once you talk to somebody like you, Royal, that no, that is probably not the best idea.
Royal: That's right. That's right. We don't factor in lottery winnings in your financial plan.
Aric: That's not that's not in the document. Got it.
Royal: That's right. You know kind of also brings up another, another thing with our financial plans, we never factor in inheritances either.
Aric: Mm-hmm.
Royal: I've met with a lot of clients over the years who say well when Mom and Dad pass away I'm going to receive this.
Aric: Hmm, yeah well, boy.
Royal: Well unless they're on hospice that could be 10, 20, 30 years down the road.
Aric: Mm-hmm.
Royal: And we just don't want to have to plan around that. We also don't know if they're going to spend their estate during that time or change their estate plan and maybe lower or even remove beneficiaries from that,
Aric: Yep.
Royal: Because they want to do something else with that money which is completely their right. So, we never factor in those inheritances.
Aric: Yeah.
Royal: I just don't think it's realistic. I've seen too many people waiting for mom and dad to pass away because they're waiting to receive kind of their retirement plan because they didn't do the planning for themselves.
Aric: Yikes. Yeah that’s dangerous.
Royal: But Mom and Dad just keep on chugging along. And you know once they’re 102 and you're in your 70s it's kind of a little too late to turn that around.
Aric: Yeah, could be a little awkward too. You know we're celebrating another birthday. The thing you don't want to be disappointed that you're celebrating your parent's birthday, I’ll tell you that.
Royal: That's right.
Aric: And Royal I want to actually go back a little bit to the Social Security issue. A lot of people, especially younger people and well, people you know my age I'm in my mid-40s or so we have those concerns are people are concerned that is Social Security going to be there and you've already addressed that on one level which I completely 100% agree with. But there's one other piece that a lot of people don't think about when it comes to will Social Security be there? Yes it will be there, in my opinion. Obviously just my opinion, but you have to think of it this way, politicians love to get re-elected. And if the politicians let Social Security fail whoever's in in position when Social Security is tanking or is not there, guess who's not getting re-elected. Right?
Royal: That’s right.
Aric: They want to protect their position. They are going to do everything they possibly can because we believe the, the statistics tell us like 10,000 people a day are retiring. Right. So that would that would be pretty close to the same statistic that about 10,000 people a day are beginning to draw Social Security and that's going to happen over the next 10 to 15- 20 years if I'm if I'm not mistaken. So yeah, politicians are going to do everything they possibly can to make sure Social Security is there for everybody because they know they will lose a huge voter base if they let it fail. That's not a big worry.
Royal: Right. I completely agree and I think there's a number of fixes there in Social Security that are on the table. It's one of those things of hey we know we know how to improve this we know how to how to fix it for lack of a better word. It's just let's just wait for a crisis so we don't have to do it.
Aric: Mm-hmm.
Royal: Maybe let the next guy worry about that. So,
Aric: Yep.
Royal: Yeah it is a bit of a conundrum there but sometimes what we'll look at is maybe just reducing down what the estimate is by a certain percentage. So if you're if you're in your 40s and you think well right now my benefit statement says I'll make $2,000 when I retire maybe we'll knock that down to $1,500.
Aric: Mm-hmm.
Royal: Just to kind of take out a little bit of that and just assume there's going to be some reductions there. Most often we're seeing most of those reductions in the inflation factor that they're using
Aric: Yep.
Royal: To basically slow down how quickly Social Security liabilities grow.
Aric: Exactly. Exactly. All right onto the next question unless you have anything else to say about Social Security?
Royal: Let's move on.
Aric: All right. One thing that I see a lot of and everybody sees this is we see commercials for different investment firms, different financial advisors that are out there. There's a guy named Ed that has a lot of commercials out there. And some of the commercials are really, really like way out there. I've seen one where there's a husband and wife sitting in separate bathtubs at the top of a mountain clinking champagne. And number one I look at that go how much does that cost, right? That's a lot of money just to be sitting on top of a mountain in two separate bathtubs. And that's not what I'm going to do anyway. I really don't desire that. But it makes me think that these firms either make a lot of money or whatever if they're advertising as much as they are they must make a ton of money. So that means they have to make money somehow. And then it kind of makes me concerned about how much is it going to cost me to go see this financial advisor or financial planner to even talk to them about my future?
Royal: Mm-hmm.
Aric: There's the question. Does it cost to see a financial advisor and how much does it cost?
Royal: Well it's going to vary between firm-to-firm how much it costs to sit down with a financial advisor. Now, the vast majority of financial advisors will have a first meeting, uh, that's complimentary. A get-to-know-you meeting.
Aric: Mm-hmm.
Royal: And then from there it's really a question of are they going to putting a plan together for you and is there going to be a fee for that? And then from there what fee are they going to charge and what is that going to entail?
Aric: Mm-hmm.
Royal: What is that going to cover? When you come in here to Oregon Pacific Financial, we're very clear on what our costs are for both building the financial plan and our investment management. We'll go over those when you sit down and kind of break those out and say this is what that covers. Now we do charge an upfront planning fee. It does vary somewhat on the complexity of the case because if you're dealing with, you know, a family business let's say,
Aric: Mm-hmm.
Royal: Or a number of estate planning issues, it will take more, more time for us to complete that than someone who has two 401(k)s and a pension-- that's a little bit simpler in most cases of a financial plan. And then the question is how much are they going to charge for management fees.
Aric: Mm-hmm.
Royal: And if if an advisor isn't clear about that or can't say here's what it covers and why, that's probably not the right financial advisor for you.
Aric: Yeah.
Royal: If it’s murky on how they're getting paid, just be concerned about that. If they don't have that your best interests at heart, there's a number of financial advisors and financial planners out there who would. So I just kind of keep shopping there.
Aric: Okay, so let's let's get, I want to drill down on this a little bit more.
Royal: Mm-hmm.
Aric: So, I'm walking into Oregon Pacific Financial Advisors, you're saying that, you know, the, the initial meeting is free it's a get-to-know-you meeting. But that's what I want to know about specifically because I walk in I'm six feet tall, I'm 240 pounds. You get to know me a little bit. I like coffee. I used to kick box. I love the Seahawks. Is that the kind of getting to know you meeting we’re having or are we actually going to talk about the funds that I have the retirement that I have, or not the retirement but the 401(k) that I've got. Maybe some properties. Are you taking a glimpse behind the curtain, if you will, of my finances to be able to say hey this is what we could do for you? Or is it just more of a get to know you as a person kind of meeting?
Royal: So what we'll do is we'll send out our first appointment questionnaire and then ask, ask you to bring in all your statements and your tax return.
Aric: Oh, okay.So it's pretty robust.
Royal: It is. It is. Now we're not going to go into why did you buy this fund versus that fund,
Aric: Mm-hmm.
Royal: Or any of that nonsense. My focus is understanding you as a person.
Aric: Mm-hmm.
Royal: And these things that you've accumulated that you believe will help you in the future. That's really my focus is understanding you and,
Aric: Got it.
Royal: Who you are, how your family is structured, what's important to you. And then we can kind of take a step back and say okay these are these are the tools you've accumulated over your lifetime. Maybe, maybe you've paid off your house. Maybe you have 401(k)s or Roth IRAs maybe you have rentals,
Aric: Mm-hmm.
Royal: Maybe you just have an inheritance you just received. We're just going to look at those and say, how do we build a plan around you the individual using these tools that you've accumulated to get you to where you want to be.
Aric: And obviously Royal this meeting that we're having is a chance for me to get to know you as well and I really really need the answer to one specific question. Are you a Seahawks fan?
Royal: Unfortunately no, I'm not.
Aric: Now come on Royal.
Royal: I decided long ago to throw my allegiance for some horrible reason to the Tampa Bay Buccaneers.
Aric: [Laughter] Okay?
Royal: I've never been to Tampa Bay. I just, I fell in love with them back when Dungy was coaching.
Aric: Oh, okay.
Royal: And I've been stuck with them for the last 20 years.
Aric: I don't I won't hold it against you. We can still work together.
Royal: I appreciate that.
Aric: We just won't watch a whole lot of football together, unless it's, you know, neutral teams or whatever we'll figure it out.
Royal: Exactly.
Aric: Okay. All right. So the next question I'm sure you get quite a bit and this is people that have a friend who tells him hey you need to be doing this. So, they start an IRA right. They find maybe their buddy’s advisor they start a small IRA and they're putting money into it every year or they've never started an IRA and they come to you and say okay I haven't started an IRA ever or I've been doing $50 a month all this year. Now it's December and now it's, you know, toward the end, now it's November whatever time it is. How much can I contribute in total? Because I do have a little extra cash. Maybe I get a Christmas bonus, and I want to up my IRA or I want to start. How much can I actually contribute?
Royal: Yeah. So right now it does depend on the age you are, so,
Aric: Okay.
Royal: For most people, if you're under the age of 50 you can contribute $5,500 into a traditional IRA or a Roth IRA. If you're over the age of 60, or over the age of 50, rather you can put an end an additional $1,000 for $6,500. Now once we cross over into 2019 that's going to go up.
Aric: Oh!
Royal: And that's going to be a $6,000 contribution and it's a $1,000 catch up for people over the age of 50.
Aric: Okay, so you're saying a $7,000 total for over 50.
Royal: Correct. Correct.
Aric: Okay, now,
Royal: The,
Aric: Go ahead.
Royal: Big thing that most people don't realize is you can make your IRA contributions all the way up until April 15 of the next year. So for 2018 you'll have until April 15, 2019 to make that contribution into your IRA your Roth IRA.
Aric: For 2018?
Royal: Yes.
Aric: Oh, so you have an extra few months to pad the previous year?
Royal: Exactly. Exactly. Or if you file your taxes before April 15th that's kind of the cutoff because it needs to be on your taxes for the previous year.
Aric: Got it. That makes sense. OK.
Royal: Yep.
Aric: And do you help with that, Royal, as far as that the tax side of things do you do you have resources or do you have people that you work with or that you would recommend working with as an accountant or CPA?
Royal: Absolutely. So if you already have a CPA that you have a good relationship with or a tax preparer,
Aric: Mm-hmm.
Royal: We work with them all the time. If you don't, we can get you in front of a few different CPAs that will specialize in whatever kind of area you’re in, whether it's, whether it's business or just an individual return, that sort of thing. But yeah we work with taxes and tax-preparers all the time.
Aric: Got it. Okay, so again I'm going to go back to the IRA question real quick. If I've got a buddy of mine that you know he's dabbled or he's you know he's a he's a financial advisor and he's just kind of doing it out of his garage or whatever and we started an IRA and I'm I'm doing $50 or $100 bucks with him. Can I start an IRA with you?
Royal: You can, yes. You can have as many IRA accounts as you want. The limitation there is simply on how much you can put into your IRA per year and no matter how many IRA accounts you have, you can only put in that $5,500 or $6,500, depending on your age.
Aric: Oh, total. Gotcha. So starting in 2019 for anybody under 50 it's $6,000, right?
Royal: Correct.
Aric: So if I were 10 IRA accounts with 10 different people I can maximum put in 600 bucks in each one.
Royal: Yes, but that would be a horrible way of planning your future.
[Laughter]
Aric: Absolutely. I would agree with that. I just I was just curious so. That's very interesting. So it's just a maximum dollar amount that's the main thing.
Royal: Right.
Aric: All right Royal I know that you covered this next question a little bit in the very first question, which was kind of the you know financial planner versus financial advisor, but I know that you guys get this all the time. What do financial planners do? Do you have anything to add to what you said in the first question?
Royal: Let me just talk about the way I approach it. This is, this is sort of my vision statement and it’s actually on the back of my business card.
Aric: Okay.
Royal: And it simply says ‘Elegantly Designing the Future Today’.
Aric: Hmm.
Royal: We want to put together a plan that designs the future that you want for yourself down the road. And that takes into account your wealth but also your relationship with the family, how you communicate with them about money, about what's important to you. That's what we do. We elegantly design the future today.
Aric: That's fantastic. And I have known a lot of financial planners and a lot of financial advisors. And one other caveat if you will too that is I really believe that financial planners have a much deeper and stronger relationship with their clients than financial advisors, that's just my opinion but that's what I've seen. Because you really do get into the nuts and bolts of everything financial with them and relationship with them. When it comes to relationship with their family their friends, the charities they love, so and so forth, to help them plan out exactly what they want to do. Not only in their own retirement but the legacy that they want to leave and how that can be formed. So that's just my observation.
Royal: I couldn't agree more.
Aric: Awesome awesome. All right Royal. I'm excited. The next podcast is going to be more questions because we've got a lot more to cover and I'm encouraging anybody who's listening to this right now. Write in some questions. E-mail Royal. Can you shoot your e-mail address or give the website address where they can drop you some questions?
Royal: Absolutely you can e-mail me at It's just Royal, r-o-y-a-l at opfa.com and then visit our website at www.opfa.com.
Aric: And any questions that come in we will, we will cover in a future podcast or Royal will answer them directly to you. If it's if it's a specific question that's more personal to you that you don't want on a podcast. But we'd love to be able to answer these for the entire audience to learn more. And I'm looking forward the next couple podcasts because a lot of great questions coming up. Royal, thank you so much for your time today.
Royal: Thanks Aric.
Aric: And thank you all for listening to the Life By Design podcast with Royal Standley. If you have not subscribed to the podcast yet please click the subscribe now button below. This way when Royal comes out with a new podcast it’ll show up directly on your listening device. This makes it so much easier to share these podcasts with your friends and family. Thanks again for listening today for everyone in Oregon Pacific Financial Advisors this is Aric Johnson reminding you to live your best day every day and we'll see you next time.
Outro: Thank you for listening to the Life By Design Podcast. Click the subscribe button below to be notified when new episodes become available. The views expressed are those of the presenter and may not reflect the views of United Planner Financial Services. Material discussed is meant to provide general information and is not to be construed as specific investment, tax, or legal advice. Individual needs vary and require consideration of your unique objectives and financial situation. Always seek the advice of your financial advisor or other qualified financial service provider with any questions you may have regarding your investment. Planning advisory services offered through Oregon Pacific Financial Advisors Inc. Securities offered through United Planner Financial Services of America member FINRA and SIPC. Oregon Pacific Financial Advisors Inc. and United Planners Financial Services are independent companies.
