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Going Long Podcast Episode 251: Understanding The Cashflow Aspect of Qualified Plans
In today’s solo show you’ll learn the following from Billy himself:
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Billy Keels 00:00
Today's conversation is sponsored by first generation Capital Partners. If you're an accredited investor, and you want to know about how we're helping other accredited investors keep more of their income, go to first gen cpe.com forward slash going long.
You're listening to the going long podcast with Billy keels, the number one podcast for long distance real asset investing.
Billy Keels 00:22
Welcome to the gold long podcast, we're back once again to continue to help to educate you so you feel much more comfortable as well as confident investing beyond your backyard. And yes, I'm your host, Billy keels, and we are back for another solo episode. Really looking forward to this one, I am Wow. And you know what the more and more that we do these solo episodes, I'm really enjoying them. And based on the feedback that you're providing, you're enjoying them too. So we may just start to do this a lot more frequently. Let's see. And if you haven't left your honest review and rating, you want to do that, because I'm going to share one of them. By the way, right now, it's going to be heard once again, for people in over 30 countries 10s of 1000s of downloads. And I want to start out, because today we're going to finish the second part of the conversation that we started last week. And if you haven't gone had a chance to listen to that you're going to want to go back to listen to episode 249. But today, we're going to continue that conversation around the qualified plans the defined contribution plans. And specifically today I want to talk a little bit about that cash flow aspect. But before we do that, let's recognise somebody else. Today we're recognising the writer is Michael B. l Pepe. So Michael B. L. Pepe says, I love this. This was my first podcast and I loved it. It was so easy to understand. And Billy keels is so down to earth and makes you feel like he's speaking directly to you keep it up. And I look forward to seeing more. Well, thank you, Michael B. LP That's very kind of you and really like that. And I'm glad that you'd love this. And hopefully a lot of the others that are part of the going along family love it as well. And they're going to be leaving their honest written review as well as ratings so that they can be have their name read across 30 different countries, which is kind of cool, as well as 10s of 1000s. So listen, I want to get back into the conversation, I do want to keep this relatively brief, I've mentioned to you before, I want to keep these brief, I don't want to I want to try to keep them as brief as possible, so that you can listen to them, get the content and be able to put it into action. So the last time we were talking about the defined contribution plan, and just the whole concept of placing your capital somewhere and not being able to you personally not being able to use it for 40 years. And you know, that is just one of the things that I find very interesting. But you know, even beyond that I went to because I decided that I wanted to like check this out, I wanted to see something. So I actually went to this article, this is a cnbc.com you can find it CNBC article that the article is called, nearly two thirds of Americans are confused about this simple way to save for retirement. So what I found interesting was last week, we talked about, you know, just being able to, to be able to understand the concept of putting your money somewhere that you will not be able to touch for 40 years without penalty or fear of something negative happen. When you think about today, I think there's roughly 87 million Americans that are that are part of the qualified plans. And roughly 66 63% of them two thirds. So I want to read this article, this article is multiple 2019. But you can check it out. Like I said, it's on CNBC, it's called nearly two thirds of Americans are confused about the simple way to save for retirement. And it starts off by saying, If you can't define a 401 K plan, that is a defined contribution plan. You're not alone. Though, it's one of the most common retirement savings vehicles, 63% of Americans don't understand exactly how it works. And the article goes on to tell a little bit more about it, and cetera, et cetera, et cetera. So you can check it out if you want to do that. But I just want to come back to the to the concept that we were talking about before, right? It is this whole thing of providing you're putting your capital somewhere putting your currency somewhere your money, and you're not going to be able to touch it for a while. That's one thing. But the other thing, if you think about it, it's pretty staggering that you're doing that, and 63% of people based on this survey, don't even understand what's going on. So sometimes if you don't understand what you don't know, can and frequently does. And I mentioned that before, does hold you back or can hurt you. And so if you're like the other 63% of Americans who are placing their capital without really understanding it, that's not necessarily a good thing. I'm sure many of you are not because you're here and you're part of the globe family. And these are the things that we talk about, so that you can have more control. But let me also put another concept out there just for today's conversation, and I want to look at it from that point of the cash right, because what are you doing with that cash? Because eventually, the thing is, is you're placing this capital somewhere where you are giving broad indications as to what you want it to be able to do if you are in a small cap fund or you are in a global fund or whatever the case may be. They give you something they tell you if it's higher risk, lower risk and what you can expect it to do. But the fact of the matter is, number one, you have been placing this capital in a place where you have a complete lack of control, you give general indications, but it's you're doing and I guess always look at it from the perspective of where you're what you're doing every day, you are working really, really hard, you are putting in loads of hours. And one of the the elements of compensation is this 401k. But if you're placing it in something that you don't understand, you don't get to touch it for 40 years. And at the same time, you don't have much control over it. That's pretty much the opposite of what has made you great at doing what you do every day, more than likely in your role in your corporate job in your business. Because in your business, you have high control, you're in touch, you understand you have the right people on board. And yes, of course, you I'm sure you have the right financial advisor on board, but how frequently are you in touch with the financial advisor that is actually managing your livelihood in the future. Speaking of the future, one of the things is you're at your age, you're at the age of retirement and you've wasted you've, you've waited, waited, you've waited 40 years to be able to touch that capital. And the thing is, at that point in your life, I guess I always ask, now that you're going to have more time, do you plan on doing less, because if you plan on doing less, then that's okay. But the reality is most of the people that I know are very, very active, and I'm sure you're very active as well. And so when you have more time, you will want to do more things, especially, you will want to spend more time with your grandkids, you may want to do more travelling, you may want to go to that place that you've always wanted to do or buy that thing you waited, you're waited most of your life to be able to buy. And so the thing that you want to keep in mind is you don't want your lifestyle to decrease. You want your lifestyle to maintain, but more than likely increase in terms of financial resources, because you're going to want to do more, you're going to want to treat those people that that are your children or your grandkids or children or even yourself, or this Bob, play more golf, do whatever. And so think about the vehicles, like this defined contribution plan when you are withdrawing more money, you are also one of the things you're going to be taxed at the highest rates. Most people also don't talk about that these defined contribution plans. If you're drawing, let's imagine you I don't know you have half a million dollars a year you're withdrawing that money, you're probably going to be taxed if you're lucky enough to live in a state like California or over on the east coast in New York, almost 50%. So hopefully, if you have a $500,000 lifestyle, then you at least have a million dollars that will in your 401k that will be worth one year. So just to put things into perspective, right, because these are a lot of times things that we're not talking about, or you may not be thinking about the fact you're going to have more time, you're going to want to do more things, when you want to do more things, it's going to cost you more financial resources. And typically, that is going to come at a higher tax rate. So you need to have even more money in there. Once again, not a tax advisor, not any of that kind of stuff, just a guy who's sharing ideas and concepts. And so definitely take the things that we're talking about, share it with your family, friends, ticket, talk to your financial advisor, and then see what see what's going on there. And then lastly, it just one other thing to keep in mind. Usually, when I am talking to people, especially those of you that are that you like alternative investments, quote unquote, alternative investments, ie, things like real estate, energy equipment, and all this kind of kind of stuff, you typically like to understand and know the team, and also know where your asset is. So when you are asking your 401k advisor, where your asset is, it's usually over like 10,000 things. So if it's over 10,000, different companies, et cetera, et cetera, is it really anywhere? Or is it as easy as saying, Well, it's actually at 123 main street, or it's at this specific transmission line? Well, when you know exactly where it is, that's very specific. And usually that tends to help you feel more comfortable, versus saying it's spread across 10,000 Different companies, and you have to dial one 800 number to get that answer from somebody. So anyway, I don't want to get on a soapbox, I just want to give you a couple of things to think about. It's once again, it's the cash flow. And it's thinking about that cash flow, when you have more time, you're probably going to want to do more things. When you are doing more things, it's going to cost you more because you're usually going to take out more money, which is going to be taxed at a higher rate when you take it out, and then also having the specificity of understanding exactly where your money is. Well, I know it can be kind of concerning. But the reality is, is there's a really simple solution to this to these kinds of challenges. Number one, you're already listening here. So you're taking the first step, take this conversation, share it with others, as mentioned before, share it with your financial adviser, have the conversation so that you can actually just have more control because this is at the end of the day. It's very simple for you to have more control. It's about taking the step to get more educated, you're already here you're listening, go check out the article that I mentioned before, or just start looking up, you know, what are the tax implications when you take out your 401 K money, your defined contribution plan? Because we're talking about the non Roth, I should have said that in the beginning, in the beginning, the non Roth plans, right, so the traditional, more traditional type of IRAs or 401, K's. And so when you start to get educated, you start to ask questions, you begin to do the math, then, as you do the math, that math is going to help direct the different decisions that you're going to make moving forward. So it's not as complicated as it sounds. And it's easier to find and have the conversation with people I know people are connecting with me through LinkedIn. And hey, listen, I heard you talking about such and such on another podcast. And is it possible for us to get some time as much as I can, I'd actually absolutely love to be able to talk about this, especially for those of you who are those accredited investors, high wage earners, because there's something that specifically that we can do to help you not only to create more consistent returns moving forward, but also to help you to keep more of your your money by being able to keep Uncle Sam out of your pocket, and paying the right size of income tax that you need to do. And for those of you that are accredited investors, you want to find out more about this, we made a really super simple guide, you can pick that up at first gen cpe.com forward slash going along. Once again, that's first gen cpe.com forward slash going long. You can pick that up. And listen while you are thinking about these concepts, talking about them with family and friends. I'm going to be here preparing the very next conversation this next solo episode. So until then go out and make it a great day. And thank you very much. Press Did you enjoy today's conversation and once again, today's conversation was sponsored by first generation Capital Partners. If you're an accredited investor want to find out more about how we're helping accredited investors to gain their personal freedom even faster. Go to firstgencp.com forward slash going long.