Reducing Expenses for Retirement Without Sacrificing Your Lifestyle | Dr. Mart McClellan & Tim Streid

Reducing Expenses for Retirement Without Sacrificing Your Lifestyle

In the world of traditional financial planning, clients are often put on a budget in order to reduce spending and increase savings for retirement accounts. By cutting out that daily latte you love or eliminating your monthly cable bill and investing that money instead, they say, you’ll end up a millionaire by 65.

We don’t agree with this approach. Part of our philosophy is that you can enjoy life now while at the same time setting yourself up for a very secure – and very comfortable – retirement.

So while we believe in the idea of maximizing your retirement, we don’t believe in cutting out the little pleasures of life to do it. Instead, when you take a holistic approach to planning with the aim of retiring with 100% of your pre-retirement income (yes, it’s possible!), then you’ll find places to cut costs. Here are two that you may not have considered before.

Term life insurance

We don’t recommend term life insurance (except as a short-term solution in select situations) even though it’s less expensive than whole. The problem is that term life costs you in three different ways: the premiums, the associated opportunity costs, and, going by the statistics, the loss of the payout itself (approximately 99% of people outlive their term life policies).

Whole life insurance is a cornerstone of our clients’ Financial Treatment Plan. But for most people, term life isn’t fundamental to their financial plan; it’s an expense in their budget. If you’re paying premiums for term life insurance because you were told to get it but don’t know how it fits in with your retirement plan, then this could be an expense to cut.

Unnecessary fees and commissions

We see far too many dentists paying outrageous fees for financial planning that falls short and/or commissions on products that aren’t a good fit. Many go to a planner, get a fancy plan in a three-ring binder (which then sits on the shelf), and every so often meet with their financial planner to hear about the latest financial product that they absolutely need to get in on now (for a hefty fee, of course).

This is no way to approach retirement planning! Why is it that the financial products suggested two years ago are no longer good products? If the plan had been sound from the beginning and truly created with a long-term view, then the planner wouldn’t call like clockwork every year or two to fundamentally change it. Paying fees and commissions for this type of piecemeal, incohesive retirement planning is not a good use of money and should be cut from your budget.

Enjoy life now

You’re working hard to become the best dentist you can be and build a thriving practice – do you really have to wait decades to enjoy the fruits of your labors? We say no. You can live your life now without sacrificing your lifestyle and build strong retirement accounts. To learn how, check out our book, Your Retirement Smile, or visit our website.

The Spirit of Giving | Tim Streid & Dr. Mart McClellan

The Spirit of Giving

Most of us have an urge to give. We want to share the wealth and do good in the world. More than half of Americans donate to charity every year, and these donations add up to over $1 billion – every single day.

But some people hesitate to engage in charitable financial giving over concerns that if they give too much away, they won’t have enough for retirement.

If you’re a would-be giver, we have some strategies that not only allow for (generous) charitable giving but actually help strengthen your financial position, too. Impossible? Not at all.

More Than One Way to Give

Write a check, deduct the amount on your taxes (if it’s large enough), and that’s the end of it – or so most people think. While this is the most common way to give to charity, it’s not the only way.

In our financial planning philosophy, we believe in getting more than one use out of every dollar you touch. This is how you see financial gains more quickly and with less risk. And it’s not just applicable to building wealth but to charitable giving, too.

So when considering donating to a worthy cause, first rid yourself of the idea that there’s only one way to do it, because that mindset is likely holding you back from giving generously.

Strategies to Strengthen Your Financial Position Through Giving

When we create a Financial Treatment Plan with one of our dentist clients, we have a number of smart financial giving strategies to choose from. Let’s look at a few briefly.

One strategy is to “turbo tithe” where, instead of giving cash, you give in the form of stocks or some other asset while eliminating capital gains taxes. Then you repurchase that same stock or asset, now at a new cost basis that will save you on capital gains taxes in the future when you go to sell. Not only have you given to a worthy cause, but you’ve also saved on capital gains – twice.

For large donations, other options include setting up a charitable remainder annuity trust (CRAT) or a charitable remainder unitrust (CRUT). Trusts are great tools to protect your assets, ensure money goes where you want it to go, potentially save on taxes, and even bring your family or chosen cause a steady income stream. If you decide on a trust, work with a financial professional and an estate planning attorney to make sure it’s set up correctly.

Enjoying Your Money Now

Many people choose to leave money to charity in their last will rather than donate during their lifetime. But wouldn’t you like to see the impact your donation could have in the world now? We believe in enjoying your money now, and that includes enjoying the satisfaction of being a generous donor.

For more about smart financial giving strategies, retiring with 100% of your income, and more, check out our book that helps dentists plan for a rich retirement, Your Retirement Smile, and visit our website.

 

Source for $1 billion statistic in the first paragraph:

https://givingusa.org/giving-usa-2020-charitable-giving-showed-solid-growth-climbing-to-449-64-billion-in-2019-one-of-the-highest-years-for-giving-on-record/

Beyond Social Security and 401Ks - The Real Need for Savings | Tim Streid & Mart McClellan

Beyond Social Security and 401Ks – The Real Need for Savings

Simply put, the most important factor when it comes to building wealth is your ability to save as much money as you can. Even a very high rate of return can’t build significant wealth if the initial investment is too low.

If your goal is to retire very comfortably (and for us, that means planning so our clients replace their current income 100% in retirement), then you need to make savings a priority. Here’s how and why.

The trouble with relying too heavily on 401Ks and Social Security

One of the most common savings vehicles is the 401K retirement account. That, along with Social Security income and proceeds from selling their practice, is what most dentists rely on when it comes time to retire.

However, the problem with 401Ks and Social Security is that the income is not guaranteed. As we saw just 10 years ago with the Great Recession, a recession could unexpectedly wipe out a substantial portion of the savings you were counting on to see you through your golden years. And unless Congress overhauls Social Security soon, the program will run out of excess funds by 2035, meaning there won’t be enough to pay beneficiaries the full amount of the benefits they’re expecting.

While we do believe that 401Ks have a place in retirement planning, we also believe it shouldn’t be the centerpiece.

Savings to combat wealth erosion

When we create a Financial Treatment Plan for one of our clients, one of the first pieces of the puzzle is to establish three foundational elements. One of those three is a disciplined savings rate of no less than 15% of one year’s gross household income. For example, if your gross income is $300,000, we’d like to see you putting aside $45,000 to invest in your Financial Treatment Plan.

Why 15%? Because this is the minimum reliable rate to combat wealth-eroding factors such as taxes and inflation. Wealth-eroding factors eat into your wealth twenty-four hours a day, every day of the year, and will turn your dollars into pennies if you’re not proactive with your retirement planning.

Making the most of your 15%

Now that you’ve saved 15% of your gross annual income, you need to make it work for you. It certainly won’t fight wealth-eroding factors sitting under your mattress.

Instead, we help our clients build wealth by keeping their money in motion. We show them how to get more than one use out of every dollar and how to collect smaller rates of return with lower levels of risk multiple times to build the wealth they want over time.

Plan now to retire well later

Are you ready to reassess your retirement account planning and try something new? Our goal is to help dentists replace 100% of their pre-retirement income so they don’t have to sacrifice during their golden years.

To learn more how you can do the same, visit our website and check out our book on retirement planning written for dentists, Your Retirement Smile

Optimizing Your Financial Life | Dr. Mart McClellan & Tim Streid

Optimizing Your Financial Life

What does optimizing finances look like to you? Maybe you think of putting as much as possible into your retirement accounts, or moving money around to take advantage of certain tax breaks.

We see it differently. To effectively optimize finances, you need a holistic approach that considers all three phases of wealth – accumulation, distribution, and preservation – and creates a plan that builds wealth while giving you the peace of mind that’s absent from traditional financial planning.

Here’s how:

Mindset Shift

The majority of dentists retire with just 50% of their income. Does this sound good to you? While it may be acceptable, we don’t believe acceptable is good enough. We want our clients to retire with 100% of their income. It sounds challenging, yet it’s doable.

Your first step to optimizing your finances is to shift your mindset and believe that yes, it’s possible to retire without a pay cut, and yes, you can retire without a pay cut, too, with the right planning.

Out with the Old

Next, it’s time to let go of the “conventional wisdom” you’ve heard for years from financial gurus and traditional financial planners, such as paying down all debt fast and buying term life insurance. Because if your goal is to build exceptional wealth and retire with a high-income stream, this advice doesn’t work.

We take a different approach to building wealth and some of our recommendations may seem counterintuitive at first, but they work as part of the whole Financial Treatment Plan. For instance: Some debt can be good. Whole life insurance and annuities provide guaranteed income. Distribution is just as important as accumulation.

You will be surprised at what your financial future looks like when you throw off the age-old advice and open your mind to something new.

Gather Your Team

We mostly work with dentists, smart, educated people who work hard for their success. But we see the vast majority of them make the same mistake, and that’s not putting the right team in place to help them with their finances. They may rely on a single financial advisor, or – worse – they try to do it all themselves.

This is a mistake. We recommend you have a team giving you the financial support you need, including an accountant, an attorney, an investment advisor, and so forth, each one an expert in their particular area, plus one macro advisor to advise you on the big picture. We also recommend that any financial advisor you work with is a fiduciary, who is duty-bound to act in your best interest.

Start Now

Too many people let their financial life happen to them, and they end up taking a pay cut of 50% in retirement. However, this doesn’t have to be your financial future. The sooner you start, the better the position you’ll be in to retire with 100% of your income and the peace of mind you want.

Interested in learning more? Check out our book, Your Retirement Smile, or visit our website.

How Much Do I Need to Retire? | Tim Streid & Dr. Mart McClellan | Your Retirement Smile

How Much Do I Need to Retire?

This is one of the most frequently asked questions by people thinking about retirement planning. In order to answer the question “How much money do I need to retire?”, you need to answer these other questions first:

  • What will inflation be like between now and the time you retire?
  • How will tax and retirement plan laws change and how will that affect your financial future?
  • How will your family, lifestyle, and needs change in that time?
  • Will you face any unexpected catastrophes between now and your death?
  • When will you die?

Clearly these questions are impossible to answer. Our point is that the question of how much you need to retire is not as straightforward as it seems. In fact, we think it’s the wrong question to ask in the first place.

The real question is, “How do I best position and utilize my assets so that I can maximize income in retirement?”

Retirement Planning Is More Than Accumulation

One big issue with the question “How much do I need to retire?” is that it’s focused on accumulation. What it’s really asking is, “How big should my nest egg be?”

While you will never get where you want to be without good saving habits, accumulation is only part of the puzzle. There’s another equally important part that’s typically overlooked in most retirement planning, and that’s distribution. Distribution is about planning in advance how you’ll get your money out for steady cash flow in retirement. A retirement plan that overlooks distribution planning can cost you significant amounts of money.

Plus, the typical accumulation-focused retirement planning advice tells you to lock your money away for decades at a time and let it grow without touching it. But when you do this, you get only one use out of each dollar. Instead, with smart planning you can get more than one use out of each dollar in a way that can maximize your wealth.

Is There a 50% Pay Cut in Your Financial Future?

Retirement automatically means having less income. At least, that’s what we’ve been taught to believe.

Most dentists take a 50% pay cut when they retire. A dentist who may be used to taking home $300,000 annually will have to live their golden years on $150,000 – a drastic pay cut, wouldn’t you say? And in the vast majority of cases, that $150,000 isn’t even guaranteed!

Because a decrease in income like this this is “normal,” it’s accepted. But it doesn’t have to be this way. When we create a Financial Treatment Plan for one of our clients, our goal is for them to retire with 100% of their pre-retirement income.

Does this sound impossible? It’s not. It can be done. And it can happen for you, too.

Find out more about how we help our dentist clients retire with more than the standard 50% at retirement and how you can, too, by visiting our website or checking out our book, Your Retirement Smile, today.

Investments: Doubling Your Dollars or Risking Your Resources? | Tim Streid & Mart McClellan

Investments: Doubling Your Dollars or Risking Your Resources?

For many people, investments make up a significant part of their financial portfolio. But with everything going on in the world today, is it still a smart move to commit your financial resources to stocks, bonds, funds, and other investments? Or is it asking for trouble?

The Trouble with Investments

Many people have become wealthy from their investments, there’s no doubt about that. Yet there are some issues to keep in mind.

For one, past rates of return are no guarantee of future returns. We trust and believe that putting money into investments now will grow our wealth in the future, but we don’t know for sure. No one can predict how the market will behave or what interest rates will be in two years, or twenty – no financial advisor, no billionaire investor, no sophisticated algorithm. Pinning future plans on past numbers is risky.

Next, changing interest rates can effectively kill gains from your bonds, and the market’s volatility means you can’t predict how your stocks and funds will behave. Recessions and crashes can wipe out a significant amount of your wealth in a matter of days, if not hours, and potentially delay your retirement date by years.

Taken together, it means that investments can be extremely risky – that is, when they represent too large a percentage of your overall financial plan.

Our Approach to Investments

Like many others in the world of finance, we believe in diversification. Relying too heavily on any one type of financial product puts you at risk. So, investments do have their place in a financial plan, as long as they are balanced with other products and have the right strategy behind them.

We also believe in peace of mind. Our clients are better able to weather the ups and downs of the market and interest rates when they know they will have enough guaranteed income in retirement to cover their basic expenses. Guaranteed income from well-positioned annuities means they don’t have to rely on a never-ending bull market to enjoy their golden years.

Another important part of our approach is keeping money in motion. Getting more than one use out of every dollar you earn helps you build substantial wealth while freeing yourself of the need to chase a higher (read: riskier) rate of return on each individual investment. By keeping your money in motion, you can use your financial resources to get an overall higher rate of return while keeping risk low.

An Important Piece of Your Financial Treatment Plan

Despite market volatility, fluctuating rates, and future uncertainty, we believe investments are still a good idea for most people as they plan for retirement. The key to building a solid financial future and having peace of mind is to know where and how they fit in your overall plan.

To learn how we develop Financial Treatment Plans for our clients, and how you can replace 100% of your income in retirement, check out our book, Your Retirement Smile, or visit our business website today.

Making the Most of Your Money | Tim Streid & Mart McClellan

Making the Most of Your Money

How can you make the most of your money? If you want a secure financial future – and who doesn’t – then you should ask yourself this question.

One common approach to make the most of your money is to ruthlessly cut expenses to the bone and stick to a draconian budget. Another approach is to max out your retirement account every year; yet another is to automatically reinvest interest and dividends you earn.

But when we work with our clients, many of whom are successful dentists, we don’t recommend any of these approaches. Instead, we talk about how the best way to make the most of your money is to keep your money in motion.

What is Money in Motion?

Just as blood needs to circulate in order to keep the body alive, so, too, does money need to stay in motion. Money that stagnates in one place goes stale and prevents you from reaching your full potential when it comes to building wealth.

Yet this is exactly what most people do, because it’s exactly what they’ve been taught. Financial experts almost all say the same thing: take the money you’ve earned and put it into a retirement account that can’t be touched (without incurring a penalty) for years, possibly decades, depending on your age. Or invest it and don’t touch those investments until retirement.

This “set it and forget it” approach is appealing because it requires so little effort. But it means that each dollar you’ve put into that account has now been used just once to build your wealth.

Why is this a problem? Because it’s not the best way to make the most of your money. It’s certainly not how the financial institutions, corporations, and government (which we collectively call “the rainmakers”) make theirs.

How the Rainmakers Do It

When you deposit $10,000 into a savings account, the bank does not literally put your $10,000 into the vault for safekeeping and let it sit there. Instead, it takes your money and makes more money off of it, mainly in the form of loans to other customers. It gives you a very low interest rate while making a lot of money off your one-time deposit, all because it’s keeping that money in motion.

We find it interesting that the institutions that advise individuals like us to lock away our money for our own good for long periods of time are doing the exact opposite – and making a lot of money in the process.

Making the Most of Your Financial Future

Now that you know how rainmakers make money by keeping it in motion, don’t you want to do the same? You can build the wealth and have the retirement you want without resorting to severe budgeting or locking away your money for decades.

You can read more about money in motion and how to set yourself up for retirement without a pay cut in our book, Your Retirement Smile, or visit our website to learn more.

How to Ban Financial Failure

What would you do if you found yourself without the resources you expected at retirement? Unfortunately, the prospect of financial failure at retirement is high – if you don’t plan properly. Here’s how we help our clients avoid financial failure in their golden years and how you can plan ahead to ban financial failure, too. 

Don’t Rely on the Best-Case Scenario

The problem with many financial plans, and much of the financial advice you hear in the media, is that it’s based on the best-case scenario. The underlying assumptions are that the market will keep increasing and give a consistently high rate of return; favorable tax laws won’t change; you will continue to earn the same income you currently do, or more, until retirement; and that until retirement, you and your family won’t encounter a crisis that requires a large amount of money to resolve. 

But we all know that life is unpredictable. We can follow all the rules and do all the right things and still face unexpected challenges that turn our plans upside down. That’s why the best way to avoid financial failure is to have a contingency plan. 

Have a Contingency Plan 

Having a contingency plan assumes that some unexpected things will happen in life. It doesn’t rely on the best-case scenario but instead takes into account the fact that there will be detours along the way. We work with our clients to create a Financial Treatment Plan that is built to be successful under all circumstances. We do this by stress-testing situations before implementing them in order to see if they are a good fit for the Plan. We call it evidence-based financial planning. The best part is, we structure it in a way so that there’s no cost differential compared to a plan that’s built on the best-case scenario only. 

Having this kind of robust plan means our clients don’t have to be reactive when something unexpected occurs, such as a market crash or health crisis. Instead, they have peace of mind knowing they’re still on track for the future. 

Failure Cannot Be an Option

It’s understandable why so much financial advice is doled out based on the best-case scenario – it’s easy to sell. But it’s simply not realistic for many people. None of us have a crystal ball to see what life has in store for us. That’s why we need to take all adverse circumstances into account when planning for the future.

If you want to learn more about how we help dentists plan for their future, you can find out more on our website or in our upcoming book, Your Retirement Smile. You can take control of your financial future – we can help.

The Importance of Wealth Distribution

We are taught by the traditional financial world to focus mainly on the accumulation of money. We are told to save money, place it in accounts such as a 401k, and wait until we reach the age when we can withdraw the money and hope it’s enough to live on during retirement. But wealth accumulation is just one of three phases in your Financial Treatment Plan. Today, we challenge you to look beyond accumulation and consider phase two: wealth distribution.

What is wealth distribution?

We define wealth distribution as the spending and enjoyment of personal assets both today and in the future without the fear of ever running out of money. For most people, this is the ideal situation: have your cake and eat it too. You get to have and enjoy the life you want now, with guarantees built into your plan so you don’t have to sacrifice your lifestyle or take an income cut in retirement. Not to mention that this will also give you peace of mind so that you can avoid retirees’ number one fear of running out of money.

The importance of a distribution strategy

So, how do you position yourself to have maximum retirement income in the future while still enjoying your hard earned money now? It all comes down to strategy. The accumulation of assets by retirement is meaningless if you don’t have exit or distribution strategies in place. Building a solid distribution strategy in to your Financial Treatment Plan will allow you to turn your assets into income streams, and potentially add hundreds of thousands (or even millions) of dollars into your model. 

You should begin thinking about your wealth distribution strategies and desires while you are still working, and continue the rest of your life. When you go to make any investment, think about the long-term benefits, as well as how you will get the money out (or if you will be able to) in the future to enjoy. Work with your financial advisor to implement a distribution strategy, and resist the temptation to put all your money away and simply let it accumulate. We want you to be able to enjoy every part of life, whether you are 20 years from retirement or 5 years in!

You can learn more about wealth distribution and creating a Financial Treatment Plan in our upcoming book, Your Retirement Smile. If you are interested in our services to help set you up financially for the retirement you’ve always wanted, visit our website and get in touch. We’d love to help you achieve financial freedom so you can smile through your retirement!

Take control of your retirement

The Goal Standard of Guaranteed Retirement Income

One of the most important things our clients want is as we go through the financial planning process is guaranteed retirement income. This is a big goal but it’s also an achievable one. We develop a Financial Treatment Plan for the dentists we work with that do just that, built on a solid foundation of three key elements. 

 

Maximum Protection 

Read: insurance. This includes having full auto, homeowners, liability, disability, health, and life insurance in amounts that fully cover you in case something unexpected were to occur. Some dentists we work with balk at this step because they don’t want to spend the money on the insurance premium. However, a single terrible accident or event could wipe out all your financial resources if you’re not insured. That’s why we consider it the first key foundational piece in your strategy for guaranteed retirement income.

 

Savings Rate

This second cornerstone requires discipline. We tell our clients that they must be disciplined and put aside 15% or more of their gross annual income. So if you bring in $300,000 per year gross, you should be saving $45,000. Is that a lot? Yes! But that’s what it takes to create the foundation for guaranteed retirement income. It’s the minimum to offset inflation, taxes, standard of living increases, and other wealth-eroding factors. Ideally, the savings rate would be even higher than 15%. 

 

Cash Liquidity 

Finally, we come to liquid cash in the form of CDs or checking, savings, or money market accounts. It’s important to establish this cash reserve even before putting money into retirement accounts. We advise our clients to have 50% of their yearly gross household income liquid. A dentist who makes $250,000 per year gross, for example, should have $125,000 easily accessible. 

This is just a brief overview of foundational pieces of the Financial Treatment Plans we develop for the dentists we work with. If you’re interested in learning more about planning for guaranteed retirement income, look out for our upcoming book, Your Retirement Smile or visit our website. We help dentists plan for their future and we’d love to help you.