Words: Artie Bernaducci, Retirement Income Advisory Group, LLC
Photo: CartoonStock, johnnyscriv
When I started in the masonry business in 1979, I did so because my father, my uncles, and my grandfather were all masons. Growing up Italian, it seemed like it was a requirement for a son to take on the work his father did – especially given that I was already familiar with the profession and could dive right in!
Knowing the benefits and the struggles that masons face in their day-to-day careers and with planning ahead financially for the future, I entered the financial services business in 1991 and placed a focus on helping masons with their retirement planning.
It was in that very first year that I decided to learn more about the Masonic Lodge. So, I joined one that was near where I lived in New Jersey. It was fascinating to learn about Masonic history, and I came to appreciate what I had done the previous 12 years on a different level.
What I didn’t know anything about was “financial stuff” – and certainly not about my retirement, because that was years away and I had plenty of time to think about it.
Now, if you’re reading this, you are probably a Mason. You know that a house can’t stand on something that doesn’t have a good footing. The same holds true with your financial planning. Without a good, solid base or foundation, the entire structure could collapse at any time…particularly if it faces strong wind and/or other incidents that you have no control over.
This article focuses on building and maintaining a strong foundation for your retirement plan. So, it is broad in content since it is the premier one. Future articles will go more in-depth with strategies designed to protect the structure of your portfolio while also allowing it to grow and expand. Consider this your initial retirement plan “blueprint.”
Oh, and by the way, I like to talk about things from a big picture view first, then move toward a more detailed one later on when discussing a specific topic. However, I always lean toward avoiding financial industry mumbo jumbo that would cause your eyes to glaze over and your head to fall off – and I don’t want to hit you with “a ton of bricks” right off the bat!
So, let’s dive in…
When I was in my 20s and doing masonry work, I got a lot of satisfaction out of creating and adding to structures, and then standing back and admiring the finished project. In fact, being a Mason was also a lot of fun.
Working with your hands and building something that you’re proud of is likely a similar feeling for you. Like me, you may have an artistic satisfaction from creating something out of nothing, no matter how basic or intricate it may be, like a brick fireplace with a triple arch around the firebox or a plain 8-inch basement block wall.
From the physical side of it, I always remember the feeling of strength, especially from doing heavy work in one form or another. When I met other construction guys along the way, they would always say masonry was the hardest job physically as compared to all the trades.
As time went on and I entered into my 30s, I figured that I should start paying attention to my future, since I had a young family to think about and the need to start acting on both short- and longer-term financial goals.
I figured that if I was thinking this way, it was likely that others in the masonry profession were doing that, too. So, this is one of the main reasons I got into the financial services business and have stayed in it for almost 30 years as of this writing.
There was a saying I heard years ago that I have seen be true hundreds of times:
“People plan more for a vacation than they do for planning their retirement.”
The fact that masons put in foundations should naturally let them consider the title of this article better than anyone else and plan as early as they can! But because everyone’s objectives can differ, there are a lot of different ways to save for retirement – and even if one of your co-workers uses a certain strategy for building and protecting assets, that same method may not be right for you.
I’m not going to venture into all of them here because it’s very easy to get into the weeds with these subjects and discussing all of the “moving parts” can actually make things more confusing than they really need to be. However, when the subject matter requires it to help understand the concepts, I will go more in-depth.
For this article, I thought of starting with some financial concepts, based on what I have seen over the years…
The first thing to know is that you can have a lot of money saved up when you retire and still go broke. That’s because the ultimate success of a financially worry-free retirement is about the income you get and not just about the pile of money you have. And, in order to have the income, you need to have a plan.
Many people believe their portfolio is their plan. It’s NOT! Your portfolio is part of a plan and the tools that are included in that plan are what determines how you can (or can’s) create the future income that you need. So, going back to this article’s title, it depends upon the quality of the financial foundation you have laid down.
It’s great when the stock market is up, and you get good returns. However, just the opposite is true, as well. You can also lose a great deal of money in the market. So, when you actually put a plan together, your risk tolerance needs to be established in order to find out how much volatility you can handle. Knowing this, along with your objectives and your time frame, can help to create a plan that is specifically custom-designed for you.
If you start planning your retirement when you are younger, you are going to look at it completely different than someone who is in their mid-60s. A general rule of thumb is that when you are young and have more time on your side, you can tolerate more risk. When you are older, though, you tend to become more conservative in order to minimize the chances of losing what you have built.
With that in mind, you may have a large sum of money when you go into retirement, but how you spend it will determine how long your savings and income will last. For this reason, it is necessary to create a retirement income plan…NOT to be confused with an investment plan. The income plan uses the investment plan to give you the income you need.
So, what exactly does a true retirement income plan tell you?
- First – it should tell you exactly when the “paychecks” you create for yourself will begin, and which “bucket” of money you’ll be tapping into for that income stream.
- Second – it should tell you in what order you’ll tap into those buckets of money.
- Third – the plan won’t stay static because it needs to keep pace with inflation and grow over time.
- Fourth – it should have built-in provisions for what should happen if you or your spouse, if applicable, should become incapacitated or need long-term care.
- Fifth – it should mathematically be able to show you exactly how long your money will last
During your active working years, regardless of whether your retirement is 30 years away or 3 years away, there is always a need for some type of financial protection. The way I see it – specifically for mason contractors – is that the biggest need is protecting your income in case anything happens to you and you can no longer work and earn an income.
This is where personal disability insurance can come into play. We consider it because Social Security and State disability insurance are either hard to get or are limited in scope – or both. Disability protection will pay you an income stream if you become injured, such as being taken out by a 12-inch block that falls off a scaffold and hits you in a way that sidelines you for a year. If this scenario (or hundreds of other situations like it) happens, you’ll be very glad to have a disability insurance policy.
The other kind of insurance protection to consider is life insurance. If you have a family, it’s pretty important to make sure that they are protected financially in case something happens to you. While many people don’t like to talk about the unexpected, it is far better to be prepared ahead of time.
There are all kinds of life insurance that you could get depending upon your situation. If you are single, you might think you don’t necessarily need it, however, there are some creative reasons to use the flexibility of life insurance from a tax standpoint. We can discuss that at another time.
In addition, we all have to pay the taxman no matter how young or old we are. So, knowing how to play in this arena can be important so you can potentially save on FUTURE TAXES, and reducing the tax man’s cut of your income can put more money in YOUR pocket to spend or save.
For anyone who is in their 50’s or 60’s, you may have been paying into your retirement savings for many years – and that’s great. We always like to get a tax deduction to minimize our income, right? Of course. However, there is a “phantom” cost that you may not see.
For instance, all of the years that you received a tax deduction for the money you were saving in your IRA or 401k, you were doing MICRO Tax planning. That is saving on taxes in the current year, but still having to pay them in the future. Because of that, you need to think about the concept of MACRO Tax planning which is saving you the most tax possible over your lifetime.
How do you do that? Well, that’s one of the things that I’ll be talking about in future articles. So, be sure to check back often for a deeper understanding of strategies to help grow and protect your financial future.
If you have any questions, my contact info is below.
Advisory services are offered through Retirement Income Advisory Group LLC, a Registered Investment Advisor in the state of New Jersey. Insurance products and services are offered through The Retiring Baby Boomer Group LLC, an affiliated company. Retirement Income Advisory Group LLC, and The Retiring Baby Boomer Group LLC, are not affiliated with or endorsed by the Social Security Administration or any government agency.