5 Ways to Help Boost Retirement Savings

[00:00:01] Speaker A: You're listening to PTC point of view, brought to you by preferred trust Company, the preferred custodian for all alternative investments. We're here to provide retirement savers like you with the tools you need to succeed. Need a confidence boost when it comes to investing outside of the stock market? Do you want the power to build a tax sheltered nest egg that will last through your golden years? You've come to the right place. Turn up your speakers and turn off cruise control, because we're taking you on the alternate route to investing with your IRA. [00:00:38] Speaker B: Welcome back to another episode of PTC Point of View. Today in the studio I have with me Chris Trembley, director of operations. So today we are going to talk about five ways to help boost your retirement savings. [00:00:55] Speaker C: Sounds like a plan. [00:00:56] Speaker B: Yeah. Very exciting, beneficial, educational topic. So if you're not happy with the progress you are currently seeing in your retirement savings or you're looking for new ways to keep the momentum going, this is the podcast for you. We're going to talk about five different ways that investors have used to help boost their progress towards financial freedom. And the first one is tax free savings. [00:01:25] Speaker C: All right, so I think the most important thing to consider is what would happen, what your advantages would be if you had a Roth Ira. So this is one of the greatest gifts that the government has ever given to the american people, is that option for a Roth IrA. And so even if you haven't started your retirement savings yet, perhaps, perhaps you haven't ever been offered a plan by your employer, and you need to consider it's never too early to start saving. I think sometimes we think, oh, in our twenties, we think, oh, I'll worry about that another ten years from now. And then ten years later, oh, I'll think about that another five years from now. But the truth is, you know, you just never know. You don't know if you're going to have that employer that's going to be able to provide you some kind of retirement plan through your job. And so it's never too early. Even in your twenties, as soon as you have some amount of earned income, it's good to start putting away funds and thinking about retiring. And so I think one of the biggest things is if you've never opened a retirement account before, starting with a Roth account, right? So you're putting in that money, and anything that comes out of it after five years is tax free. So obviously, the whole goal is to wait until you reach retirement age. But imagine, and we're going to talk about ways to boost the income and interest you're earning off of your original contributions and capital in your retirement account later. Just getting started, I think, is so important. And then the other end of that is what happens if clients say, well, I have an old 401K or I have a traditional IRA. Is it too late to get started with a Roth? And the answer is no. You can always convert your traditional holdings to a Roth account. It does take, I think, a little bit of conversation with a tax professional or your CPA to decide when that time is right for you or how much you want to convert. A lot of people are under the impression I have to convert my entire retirement account all at one time, which is not true. You can do portions of it. You can do some each year. So we always recommend talking to your CPA about when and how much, because that is a taxable event. If you have a traditional account and you're converting it to Roth, you are going to pay taxes on whatever amount you convert. So it's important that you realize how much that taxation is going to be if there'll be penalty. Obviously, if you're before age 59 and a half, that type of thing, you want to work through all of those aspects of it, but it's never too late. And then if you have an old 401K, let's say you were employed and the employer provided you a 401K account. Now termination of employment has happened. You've got this 401K sitting there. They're going to force you eventually to transition it over out of their employee employer plan over to your own plan, typically a traditional IRA. But hey, that's also a great time to consider making that conversion to a Roth. So lots of opportunities and it's never too late. [00:04:31] Speaker B: If you're currently working with someone and you have a 401K with them, can you still transfer it over to a Roth or do you have to terminate the employment? [00:04:40] Speaker C: It all depends on the plan. Every employer is a little bit different on how they set up a plan. A lot of employers now offer the 401K with Roth funds as an option. And if that is an option through your employer, take it. [00:04:53] Speaker B: Definitely take it. [00:04:54] Speaker C: Definitely take it. Great option. But if you were in an employer plan that didn't have that option previously, and it's all traditional pretaxed funds, then you're going to need to talk to them and find out what the options are for while you're still employed. They'll give those to you and then just be prepared. If there are no options while you are employed, be prepared down the line. That doesn't mean you can't set up a Roth IRA separately. So you can have a 401K account through your employer and also have a Roth IRA on the side. So great options. [00:05:27] Speaker B: Yeah. Well, as a 25 year old, you mentioned never too late to start, especially in your twenties. It really resonated with me because most people my age, most people I know, most of my friends, none of them have retirement accounts or they've had one and they just took it out. Cause they don't work there anymore. [00:05:48] Speaker C: They spent it. [00:05:49] Speaker B: They spent it. Yep. It went towards their clothes for the week or their meals. So definitely important to get started. It adds up over time. So your twenties is the perfect time to start. [00:06:00] Speaker C: I didn't think about it either. My twenties are long gone, but I didn't think about it in my twenties either. I didn't have an employer that offered a plan in my early twenties right out of college. That wasn't an option, but I should have started saving back then. Now a couple jobs later, then I obviously had an employer that offered that and could get started. So. [00:06:20] Speaker B: Yeah, well, saving is hard when you're young and you're out doing stuff. [00:06:24] Speaker C: It takes discipline. But if you enjoy the way you live in your twenties and you want to continue that through your retirement, your golden years, then you're going to have to start thinking about it now. [00:06:34] Speaker B: Think about the future, people. Tax free savings. So let's move on to the second way you can help boost your retirement, and that is tax shelter business income. [00:06:46] Speaker C: Great. So a lot of people are self employed or they have small businesses, right? It's them and just a couple people. And so a lot of times when you have a small business, the overhead, the cost of having a 401K plan and the administration that goes behind it, it. It's not always feasible for a small employer to have that type of plan. So what the government has allowed for is a simplified employee pension plan, which is, we call it for short, a set plan. And this allows small business owners or people that are self employed the ability to save for retirement through their business at a higher contribution amount. So the maximum, what you can contribute is either 25% of the compensation or 66,000, whatever is the lesser of the two. And this year, that 66,000, that's a huge bump. So the IR's said that contribution limit, it increased from 2022, where it was only 61,000. So that was a $5,000 boost, which is pretty good. And obviously it's a lot higher than a traditional or a Roth account, which is at 6500. So that's a huge advantage for small business owners. And if you have a couple of employees underneath you at your company, it's a great way for you to encourage them to also save for retirement and get started with that for them. [00:08:16] Speaker B: Well, self employment is all the rage these days. [00:08:19] Speaker C: Being your own boss after the pandemic. [00:08:21] Speaker B: Yep, everybody wants to be their own boss. So that's definitely a good option for people who have their own small businesses and they want to save a little extra cash. So let's move on to the third way to help boost your retirement savings, and that is diversification. And to me personally, I think this is one of the most important aspects that a lot of people don't really do or consider. You know, they put all their stuff into one basket. So let's talk about that a little bit. [00:08:52] Speaker C: This is a favorite. We love to talk about this because really, preferred trust company, you know, we're about giving the clients options for alternatives, which you don't get in, obviously, with your standard, your typical big box custodian that is allowing you to invest solely in publicly traded assets. Stocks. Stocks, stocks, bonds, mutual funds, they don't offer those alternatives. And so being a custodian for alternative investments, this offers us the ability to allow people to diversify, which is huge. So like you said, all of your eggs in one basket, not a good thing if the stock market takes a dive, right? So you want to diversify across all types of investments, publicly and privately held. So those alternatives, as far as the IR's allows you, is pretty expansive. There's only a few things that the Ir's says you can't invest in, such things as insurance plans and collectibles, really. So those are the two main things. Everything else is pretty fair game. So you have precious metals, you have digital currency, you have real estate, you have startup companies, oil and gas debt options. There are so many different, different options in the alternative space. And we have clients that are very creative in that space too. So this is a great way to diversify. We're not saying take all of your money out of the stock market, but it's good to have it across the board in different types of investments. We get that question very often when clients want to open an account with us and they want to transfer some funds, let's say from their account at, I don't know, Edward Jones or TD Ameritrade or someplace like that, their first question is, do I have to transfer at all? And the answer is no. You can leave a percentage of it in, in the stock market. And that's a good idea to do that. And so we let them know that they can just transfer a portion of their funds. [00:10:46] Speaker B: Yeah. I've got an example here related to diversifying. So it says, what happens if your ice cream shop only has two flavors to scoop from, let's say 75% stocks and 25% gold? If one of those flavors experiences a shortage, for example, your stocks experience a market correction, then you won't be able to scoop 75% of your ice cream to build your retirement. The other 25% of your other flavor may not be enough to counterbalance the potential losses. Kind of relating diversification to ice cream, which everyone loves. [00:11:22] Speaker C: Yeah. You don't want to just limit yourself to two flavors, chocolate and vanilla. There's so many other flavors out there. Right. So it's kind of the same thing with rotation, retirement dollars and investments. So a good retirement account to us, you know, has the publicly traded and then has different aspects of alternatives such as real estate, a little bit of digital currency, perhaps some precious metals to preserve your wealth. Oil and gas. There's so many things out there. So definitely diversification across the board. And a lot of investments today have a lower barrier to entry, meaning you don't have to have $50,000 invested. You can start with five, you can start with ten. A lot of crowd funders out there, 50 00, 10,000 is their minimum. So it's a good idea to, you can buy precious metals for a lot less than 5000. So it's a good idea to take a look out there and see what there is to offer. [00:12:12] Speaker B: Yeah. And if you are listening and you have any questions or want to learn more about any types of these investments, we do have different investment options listed on our website, preferredtrustcompany.com dot. [00:12:26] Speaker C: We can't give investment advice. We can tell you what you can invest in real estate. For instance, you can invest in real estate in a self directed IRA. Then you have to go out and select what type of real estate. There's all sorts of types you can invest in. You can buy a property and flip it. You can buy a property and hold it for rental income. You can invest in a REIT, you can invest in first trustee notes. There's just so many options out there for real estate. So we give you all of the options that the IR's says is a okay to invest in and then you have to go out there and look for it. Sometimes I think people have really, they know they want to diversify, but there's a big fear because most people are used to having their retirement dollars in the big box companies where they have a financial advisor who's telling them and making recommendations, because that's what they're licensed to do, is telling them, you know, you should invest in X, Y and Z because of your risk tolerance and all these sorts of things. And that really, that's what they're there to do, is to help you along. And in the alternative world, you have to select those investments on your own. There's no investment advisor with you to do that. You are. That's why it's called self directed. [00:13:32] Speaker B: Self directed. [00:13:33] Speaker C: Self directed. You truly are in control of the investments that you select. And so it's really important that you perform your due diligence. Like you mentioned, you're really looking and vetting the companies that are offering these investments, seeing the history of the company, finding out the performance of the company. [00:13:50] Speaker B: Very important. [00:13:51] Speaker C: Very important. And that's why again, we say so don't put all your eggs in one basket. You don't want to find a company, and maybe it's a great company, but don't put 100% of your retirement dollars into that, because what if that for whatever, everything has risk, right? Every investment. What if that company goes under and you lose that investment? Well, hopefully you've only lost a portion and not all of it. [00:14:14] Speaker B: Not all of your retirement. [00:14:15] Speaker C: Right. So you really do want to spend some time doing your research. It is time, you know, you have to have time to do that. [00:14:21] Speaker B: Let's move on to the fourth way to boost your retirement savings, which is contributing often. [00:14:28] Speaker C: Yes. You want to make sure that you contribute annually. So important. So every year the IR's sets limits on how much you can of your personal funds you can contribute to your retirement account. So for 2023, for a traditional and a Roth, it is 6500. And if you're over the age of 50, then they give you an extra thousand. So it's 7500. And then there's that period. Well, we're almost approaching the end of that period, but there's that period between one tax year and the other where if you haven't made your contribution for 2022, you can still do that up till tax day this year. I think the IR's says you have until the 18 April to make that contribution. [00:15:13] Speaker B: Always remember, it takes a couple days for processing, so try and get it. [00:15:18] Speaker C: In, at least sooner rather than later. We say we don't want to be bumping you right up to tax day, but super important to make those contributions and try and max it out and make the max contribution for whatever type of retirement account you have for that year. You can also spread it out throughout the year. You may not have $6,500 in a lump sum to send into your custodian to make your contribution, but maybe you want to make it monthly. For preferred trust company, we can set clients up on recurring contributions, meaning monthly, we actually deduct the amount from a checking or a savings account. So you can spread that $6,500 out over twelve equal payments so that you make sure you make the max for the year, but it's not hitting your wallet all at one time. So there's definitely options. [00:16:07] Speaker B: That's very nice. Yes, automatic payments, automatic contributions. Yes. We love 2023. Everything's automatic here. [00:16:15] Speaker C: Right. And then, you know, once you make that contribution, then you can start getting it to work for you. You know, you just don't want to contribute the money and just let it sit there. Obviously, the whole point is to take your retirement account and make it grow. And so you want to get that money invested. That's why making that lump sum, if you can, is great, because then you can take that and automatically infuse it to an investment. But otherwise, you know, nice to have it in there, even if it is just monthly contributions. [00:16:42] Speaker B: And if you're a PTC client, like we said, April 18 is the last day. So get on our website and we have a contribution form right on there that you can fill out and send it to us, and we can make that happen. Currently. [00:16:55] Speaker C: Yes. [00:16:55] Speaker B: We've got another couple weeks. [00:16:57] Speaker C: Another couple weeks. And then after the 18th, you're looking at just contributing for 2020. [00:17:02] Speaker B: Yep. [00:17:02] Speaker C: But imagine if you made your 2022, let's say you put 6500 in and your 2023, you put your 6500 in. I mean, look at that. You've got $13,000 to work with to, you know. And if the minimum on an investment is 10,000, you can start investing. [00:17:19] Speaker B: Yep. Start earning that passive income. [00:17:21] Speaker C: Passive income, which is kind of what we're going to talk about next. Yeah. [00:17:24] Speaker B: So let's move on to the fifth and final way to boost your retirement, and that is preserving principles. [00:17:30] Speaker C: Yes. So I think one of the important things is to know the difference, especially in the alternative asset world, which investments actually bring in monthly income or dividends interest to your account versus those that. It's kind of like a buy and hold. And until you actually sell the investment, that's when you're going to make your income off of that. So when you're looking at your retirement, it really dependent on how you see your retirement. You know, if when you get to retirement age, you need monthly income because you're not working anymore and you want to get it from your retirement account, then you want to be invested in things that are going to give you income every month. So private placement investments, trustee investments, obviously, it depends on the investment sponsor that you're working with, but many of them pay out interest monthly. And then a lot of our investors take that monthly interest income or dividend income, and then they take recurring distributions every month, and that's how they live through their retirement. So super important, as opposed to precious metals, let's say, also a great option to preserve your wealth. But precious metals are a buy and hold. You have to hold them for quite a while before you're actually going to gain anything. And remember, you're not getting monthly income off of them. [00:18:52] Speaker B: Yeah, it's more of a preserving wealth. [00:18:55] Speaker C: Preserving wealth. [00:18:55] Speaker B: Not really providing income. [00:18:57] Speaker C: Right. Not until you get ready to sell it. And again, you kind of have to look at that and see how long you've held them for. Cause if you don't hold them long enough, then you're not gonna be able to. [00:19:05] Speaker B: What do you think the typical time to hold them is like? What would people recommend? Like 20 years? [00:19:12] Speaker C: So, from the precious metals dealers that we work with and we've spoken to, they recommend, at bare minimum, three years and above. That's what they advise when they're talking to clients. And so we always recommend, you know, that if you are going to get into precious metals, that you do talk to a qualified precious metals dealer about that and discuss that with them. Because if you're buying precious metals today, but you need to take a distribution of your account, I don't know, six months from now, and it's tied up in precious metals, you're probably not going to get back what you purchased for them. So it's important you have those conversations and really kind of look ahead. You know, we like to say, don't put all of your, your eggs in one basket. And sometimes if you're reaching towards that retirement age, you may want to leave some in cash as well. So you have a little bit of liquidity when you might need it. [00:20:02] Speaker B: Yep. In case you need to take it. Required minimum distribution or there's fees. You know, a lot of these accounts, they don't. You can't just put your money in and they work, they work it for free. [00:20:15] Speaker C: Right. [00:20:16] Speaker B: There's fees for everything these days. I mean, like I said, it's 2023. Nothing is free. Have you seen the price of growth? Groceries these days? [00:20:24] Speaker C: Like groceries, gas, everything. [00:20:27] Speaker B: Don't get me started. But, yeah, liquidity. Keep some in there. Don't invest 100% of your money. Very important. [00:20:35] Speaker C: You want to preserve, but you do want to leave a little bit for your. Just in case. Just in case. And if you have that just in case, set aside somewhere else. We try not to have you try not to have you take it out of your retirement account. But unfortunately, what we have seen clients do is invest 100%, let's say, in precious metals. And then less than three years after they've purchased them, they need that money for something, and they're not getting back what they, what they purchased it for. So just long term, you really do want to look at your whole portfolio and kind of going back to diversification. Look at your whole portfolio, look at the options behind the investments you have. You know, are you going to face penalty if you decide to get out of an investment early? Is there an option to come out of an investment early? Some investments, you know, you're in it for maybe six months or nine months, and then if you want to get out of it, there might be a penalty to that from the investment sponsor. So all these things are important to look at. [00:21:33] Speaker B: Read the fine print. [00:21:34] Speaker C: Read the fine print. Always read the details. That's, you know, we try and provide as much information as possible on all of our forms and on our website. And it really is important to stop and take a minute and read everything. [00:21:47] Speaker B: I agree. Yes. So thank you for joining me today. To our listeners, we have some white papers on our website. One of them is called Income and inheritance. We've got lots of information on there if you want to learn about any of the things we discussed today. But if you have any further questions or you would like to utilize one of these five strategies with your IRA at Preferred trust Company, you can give us a call at 888-990-7892 or you can email [email protected] and we would be happy to help you. [00:22:26] Speaker C: Yay. Yes, definitely. [00:22:27] Speaker B: Thanks, Chris. [00:22:28] Speaker C: Thanks so much, Maddie. [00:22:30] Speaker A: Thanks for joining us for another episode of PTC Point of view where retirement savers meet alternative investments. Know someone who's struggling with their retirement strategy? Tell them about our show. Can't wait for the next episode. To learn more, visit our [email protected], or give us a call at 888992.