Trust Matters: An Interview With Correct Capital Wealth Management

Investing, retirement planning, and taxes raise some of the most common questions people have about their financial future. How much should you save for retirement? Should you focus on paying off debt or investing? How do taxes, risk tolerance, and market volatility affect long-term planning?

In this conversation, advisors from Correct Capital Wealth Management answer common financial questions about investing, retirement planning, portfolio strategy, taxes, and risk management. The discussion covers practical topics many investors face, from emergency funds and retirement accounts to diversification and long-term planning decisions.

For more insights on investing and financial planning, listen to our podcast Capital Conversations or view our latest financial planning articles.

Below is a transcript of a recent interview with the Correct Capital advisory team, "Trust Matters: An Interview With Correct Capital Wealth Management."

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Scott Michael Dunn: Welcome back to Hexxen Studios. We have Correct Capital here today, where trust matters.

We're going to talk about financial awareness, financial understanding. And we're going to dig in and figure out who these guys are.

So let's introduce ourselves.

Jordan Korte: Yes, Scott, pleasure to be here today. And I appreciate you all having us.

Scott Michael Dunn: You're welcome.

Jordan Korte: My name is Jordan Korte, and I am an associate advisor at Correct Capital. I'd like to give you a little bit of background about myself and how I found Correct Capital.

My journey started back in 2018. I attended Mizzou (Go Tigers, of course). And ultimately going into Mizzou, I knew that I wanted to pursue a career in the financial industry. I'd always been passionate about finding ways to accumulate wealth, with my personal goal being to have the flexibility to retire early.

So during my journey there, I did the finance and banking program through Trulaske. Started as an intern in my junior year at an RIA firm in Columbia. Gained three really good years of experience there, specializing in helping business owners succeed.

After that experience, I decided that it was time to get back home. And so I made that move and I was lucky enough to find Correct Capital. Ever since then, I've really been engaged with all of our clients, from a variety of different circumstances, crafting personalized plans for them to help them achieve their goals as well.

Scott Michael Dunn: That's fantastic. So you've invested in education experience.

Jordan Korte: Yes.

Scott Michael Dunn: What about family?

Jordan Korte: Family, absolutely. I currently have four siblings and three of them are 18, believe it or not. The last one is actually five years old. So we have quite the spread going on for sure.

Scott Michael Dunn: For sure.

Jordan Korte: I'm currently living in Oakville with my family, with plans to get a little bit closer to Clayton. So really over the next year, I'm going to make that transition. And really, just continue to elevate within the company is my goal.

Scott Michael Dunn: Terrific.

Ryan Potts: Awesome.

Well, I'm Ryan Potts. I'm the Chief Investment Officer at Correct Capital Wealth Management. I appreciate you guys having us out today.

Scott Michael Dunn: For sure.

Ryan Potts: Glad we got to do this as a group because I enjoy working with these guys. So hopefully some of that passion gets to come through today on camera.

A little bit about my background, I'll keep it short and sweet. Similar to Jordan, I've always wanted to work in finance. As a young kid, I kind of looked around and said, “Hey, who are the most successful people that I know in my life?” And it just so happened to be that those folks either worked in finance or owned some form of a business. So I decided, “Hey, maybe I want to make a passion in pursuing those things as well.”

So I went to college at Mizzou as well, studied finance and banking. Also had an emphasis in personal financial planning.

Found out that I really love the relationship side of this business. Really love to get involved in clients’ personal lives, their goals, their objectives. Really find out what makes them happy and why they want their money to work so hard for them.

I really got involved in that in college. Went back to Kansas City, which is where I'm actually from. Spent a year with the firms there and got a ton of experience. A lot of things happened while I was there. And ultimately, long story short, my fiancée and I met at Mizzou and she's from the St. Louis area.

So the good old adage, I'm a transplant and it's because of a woman.

Scott Michael Dunn: Went to see about a girl.

Ryan Potts: Exactly.

I'm so happy that I found Correct Capital and I get to work with two great guys here and the rest of our team back at the office. And really, really excited about seeing what the future holds for us.

Scott Michael Dunn: Yeah, did you pop the question?

Ryan Potts: I did actually. Last March, we went to Napa, which was, long story short — I’ll tie this in as well — got her a bottle from Napa the first month we dated. And so it was kind of a full-circle moment for her.

If you asked her today, she knew it was happening the whole time. I still think I surprised her. But yeah, our wedding's coming up and we're really excited.

Scott Michael Dunn: Congratulations.

Ryan Potts: Thank you.

Johnathan Horman: I’m Jonathan Horman. I'm a lead advisor on the team at Correct Capital. Born and bred, grew up in South St. Louis City. Catholic school boy, blue-collar family.

I knew I wanted to be a business major and a finance major because I wanted to learn about how to save and build my wealth. But I was primarily driven by just being from a hard-working family. Worked very hard in school, went to Truman State University.

I majored in business finance. I had a minor in Chinese. Don't ask me why. I took Chinese in high school and there's only a couple of high schools that even offered it in town. So just carried it through college. I had an East Asian Studies minor. Truman was a great experience.

I wrestled from middle school all the way to the end of college, my undergrad. I'm still wrestling to this day.

Scott Michael Dunn: Oh wow.

Johnathan Horman: I have a seven-and-a-half-year-old son named Elijah, a five-and-a-half-year-old son named Jonah, and their beautiful little sister named Leyna. It's L-E-Y-N-A. Part of a Billy Joel song.

My world is just filled with blessings. My wife Laura, beautiful. I'll be married to her ten years here in May.

I'm a part of this team at Correct Capital, and I'm really passionate about helping people achieve their goals, but also just grow and build themselves up.

I had an entrepreneurial streak. I've been in this industry since 2008. I left the industry. I had a business of my own, so helping small businesses comes naturally because I've lived that in my day-to-day for over four and a half years.

It was a family-owned business with my brothers. We really learned a lot from that experience, and it really relates to what I do at Correct Capital now, helping folks understand what they need for their future but also achieve it and take the steps to get there.

Scott Michael Dunn: Absolutely. Relationships are important.

Johnathan Horman: Yes.

Scott Michael Dunn: Good, strong family. Relationships are important. And I think people appreciate that. Especially if they're looking for something as intimate as their financial future, sustainability of their livelihood.

And it's nice. As I sit with you guys, I feel like it's a really good, positive energy. And this is my personal opinion, right? The viewers can decide however they want.

Ryan Potts: We must have fooled you already.

Scott Michael Dunn: Okay, so yes, you have me fooled, right?

But I don't think so. I think Correct Capital is a great organization. And we're excited to have you here, to be honest. With our ability to reach a greater audience, we can spread this opportunity out to more people to realize that when they walk through the doors at Correct Capital, they're walking into a home and welcomed into a relationship and a sustainable future.

And I think that's amazing. It feels good. It sounds corny, but I get it. But I think it matters. I think it really matters.

So, John, I gotta hear some Chinese.

Johnathan Horman: Some Chinese? [speaking Chinese] (“I've forgotten a lot of words.”) [speaking Chinese] (“My pronunciation is good.”)

Scott Michael Dunn: Oh, that's awesome. So, that sounds good.

Ryan Potts: That’s not bad. I liked it.

Scott Michael Dunn: That's for real, right?

Jordan Korte: I have never tested him on that, so I appreciate you doing that.

Scott Michael Dunn: Oh, I had to. For real, I have to.

Well, let's jump in to just some basics, which is general financial planning.

How much money do I need to retire comfortably?

Jordan Korte: That is an excellent question, and I will go ahead and kick it off here.

The answer to that question varies greatly from person to person. And the main driver from what we find in our detailed plans that we form for all of our clients is that if they want to maintain the same lifestyle that they currently live in retirement, then we need to assess the future cash flows of how long they plan on being in retirement, and also what legacy they want to leave behind when they're no longer here.

So everybody's number is different, and it really depends on their goals for the future. People could either maintain their current lifestyle, they could choose to be more frugal, or they could say, “Hey, I've worked really hard to get to this point. I'm going to step it up a notch and I want to be able to fully enjoy the fruits of my labor at this time.”

Scott Michael Dunn: So that number is a variable number.

Johnathan Horman: Yeah, it varies client to client, but a good rule of thumb just to simplify it is probably somewhere around 15 times to 25 times what your annual take-home pay is.

Rules of thumb work sort of like horseshoes and hand grenades. You can go by rules of thumb, but our process is different. It really is what Jordan said, tailored and detailed to every client's goals and dreams.

We take pride in the level of detail that our team goes into with clients. Whether it's year-to-year cash flow planning or planning for taxes way ahead of the game before the bill comes in April, we're having those conversations with clients. And the process really matters. It's not rules of thumb with us.

Scott Michael Dunn: It's proactive.

Johnathan Horman: Yes.

Ryan Potts: I want to jump in there too to piggyback off the process conversation.

We get that question a lot. It's a very common question. A lot of people want to come to us and say, “Hey, I've got a million dollars. I think I'm ready to retire. What do you guys say?”

Scott Michael Dunn: Uh…

Ryan Potts: Exactly. We kind of give them that blank stare back, like, “We need to know a lot more about it.”

Scott Michael Dunn: So you planning on dying in the next seven years? Is that where you're at?

Ryan Potts: Exactly. I think that’s spot on. What I always tell folks when we talk about everything in our process is that really we need to take it all back to the very beginning. We don't know what your numbers are going to be until we understand what your goals are.

What are you trying to accomplish with your money? What do you want retirement to look like? For some people, it's very minimal. For some people, it's the very opposite. We need to know these things about individuals before we can comfortably tell them, “Hey, baseline, if it's 15 to 25 times or cash flow planning analysis figuring these things out, we need to have a better understanding of who you are as a person before we can even have that conversation about what's that final number.”

Scott Michael Dunn: Yeah, I think it's unclear. To come up with a number and have an understanding of something that you're not familiar with — well, you have to learn what it is exactly that you want.

Ryan Potts: Exactly.

Scott Michael Dunn: Before you can decide what that number would be, which makes sense.

But speaking of how to deal with a calamity or to move forward, is it best that you pay off debt first or just start investing?

Ryan Potts: We would look at that. It depends on where you are in terms of your life stage. So for some folks, debt might be more important to pay off.

Obviously, there's a mathematical answer that makes this very simple. Can you earn more investing than you are paying interest on your debt? It's kind of the simple rule of math.

So the example that I always love to give: back in 2021, when mortgage rates were extremely low, a lot of folks refinanced their homes. I think the average national mortgage rate is somewhere below 4% at the moment. For a lot of folks, they're earning a lot more than 4% in the market or in their investing accounts. At one point, you were getting 5% to 6% in a money market. So it would have made more sense in that time period to actually invest the funds. Again, this is purely mathematically speaking.

Whereas in a market environment where mortgage rates are maybe closer to 7%, well, if you said, “Hey, Ryan, you're the CIO, what are your thoughts on the markets?” I think I'd be hard-pressed to say over the next 30 years that you're guaranteed a 7% rate of return in the market.

So in that instance, it becomes more of a question about what else is going on in your lifetime and what stage of life are you in. Are you trying to accumulate? Are you trying to retire? Are you a stressful person that doesn't want debt? There's a lot of nuances to that question.

Again, the mathematical answer is it just depends on what your rates of return are relative to the debt that you're paying on.

Johnathan Horman: That question brings to mind a case that Jordan and I worked on this year with a client. A pharmacist, high earner, but just a bucket of student loans.

And just navigating the complexity of financial math, to Ryan's point, it's not something that is in everyone's wheelhouse. And that's really truly where we come in. Simplifying the math so that you don't feel overwhelmed by a decision. And this is a husband and wife that were struggling. They were really wanting to know what the way forward was.

And I'll let Jordan talk about the strategy that we used with them. The snowball effect or the snowball method.

Jordan Korte: So essentially in our planning software, we have the ability to gather all of the debt information. As Ryan mentioned, we really prioritize the highest-rate debt first because we know over the long term that's going to be the one that accumulates the most interest that you're sending out.

The first thing we noticed with this client is that a lot of this student loan debt was private and it was financed at double-digit rates. So the amount of pure interest that this couple was paying on a monthly basis was preventing them from freeing up cash flow for a lot of other things, such as starting their retirement savings, which is pretty essential.

So, clearly articulating to them that the first thing we want to attack is the double-digit interest rate. We did recommend that they refinance since they are private loans. And by refinancing, we were able to clear up hundreds of dollars in their monthly budget that they can use for other things. Freeing that up allowed them to make larger payments on the refinanced loans.

And we gave them a timeline, saying, “If you stick this out and we can send you to knock out the highest rate first, you can be debt-free in a matter of seven years when you thought you were never going to make it out of this situation.” And being able to give people confidence and clarity, it goes a long way as far as fulfillment and gaining the trust that we look to build in every relationship.

Scott Michael Dunn: That makes sense. I mean, you walk into it not understanding. We always see the ending, which is subjective and it's all circumstantial. But our endings are different than your endings. And I think that's what's great about getting into this world, into a space that makes sense to better understand the situation so that there's a positive, or there's actually a rainbow here that you didn't realize.

Jordan Korte: Absolutely.

Scott Michael Dunn: Follow this protocol. And I guess the clarity of the question is, “Can they be balanced? Can you have debt and invest? Can you focus on retirement and continue paying off debt?”

Is that something that you can balance?

Ryan Potts: I would say like again, a rule of thumb — and we're not a practice of rules of thumb, so don't think that everything we do comes from this — but I would say it really does make sense a lot of times to balance debt versus investing.

Debt paydown is a lot more of a short-term benefit. And the example that Jordan and Jonathan just gave, this was a seven-year runway for these clients. But really starting day one, that first day they made their debt payment, they probably felt a lot better knowing that they were on track to do something.

What we also like to do is think further out than just a few years. We want to think 10, 20, 30, maybe it's 60 years if we get someone in their 20s. But the comments there are, ultimately, “Yeah, your dollar today is going to be worth less in the future. So how do we balance out the debt versus investing for your future?”

And ultimately, probably the balance is a good combination of the two, because by paying down debt, you're freeing yourself up to do more in the future. And by investing, you're freeing yourself up in the future, just from the accumulation of your investments.

So again, it's a balancing act.

Scott Michael Dunn: Yeah, it makes sense. It's a complicated equation.

So how much should I keep in an emergency fund?

Johnathan Horman: I could take that with another rule of thumb. You hear this often in our industry, that six months is what you need.

But I can also say that from the analytical side, it's much more complicated than that, because everyone's situation is different, and everyone’s timeline for when they need the money is different. Their temperament about investing is different, and the amount of risk that they want to take with their assets is different.

So it's a much deeper conversation when we talk about reserve cash or money on the sidelines to weather a financial storm.

Ryan Potts: I'll piggyback on that one, absolutely. It is very complicated. It depends on where you are in life.

From our perspective too, just to put some facts behind the numbers, the reason we look at six to 12 months of cash in an emergency savings is because on average that's about how long it takes to replace your income. So we're thinking about an emergency savings as someone who's currently 30, 40, 50 years old, employed, still seeking out retirement — they're not quite there yet.

If something were to happen to them, something that they can't control, then ultimately that's what the emergency fund is there for. It's to give them the cushion or the comfort to know, “Hey, I've got a little bit of a runway here to go and replace that job that I maybe just lost.” Or, “This big expense came up and I had to replace a roof.” Whatever the case might be, you want to make sure you've got a buffer of cash there so that you're not worried about market fluctuation, and ultimately letting your long-term dollars continue to compound and not interrupt that by all of a sudden being derailed by a bad situation.

Scott Michael Dunn: So how often should I meet with you to go over my financial plan?

Jordan Korte: Absolutely. What we like to do with our current clients is we believe that a minimum of two touchpoints a year is really kind of our gold standard, if you will.

We realize that for accumulators, it's going to be an entirely different circumstance than savers. Rather than worrying about saving, they're worried about, “Hey, am I reducing my principal? Am I withdrawing at a healthy rate? What are my required minimum distributions this year? Is there an opportunity for me to do Roth conversions?”

And so what I would say is that for the accumulators that we work with, these meetings are more focused on the next big purchase, “What are my optimal saving strategies? How can I be as tax-efficient as possible while I'm allowing my net worth to grow?”

And then on the flip side, when you're working with retirees, it's a lot more in-depth and making sure that they're receiving the income that they need, and that we’re addressing any opportunities that they have available.

I will tell you one of the biggest hot topics that we've dived into recently is the opportunity for Roth conversions for many of our retired clients. Our boss Brian says it very well, but as they were growing up in the ’70s, ’80s, and ’90s, they were constantly informed that they should do the pre-tax savings. So many of our clients saved a majority of their wealth in pre-tax traditional IRAs and 401(k)s.

Well, once you get to retirement and you realize that those distributions are ordinary income taxed, you begin to realize that your tax rate is not as low as you were anticipating. And every dollar that you are taking out of your investment funds is adding on to this issue.

In addition to Social Security, or if you have a pension, an annuity, all of a sudden your taxable income is just as high as it was when you were employed and earning high dollars.

Scott Michael Dunn: Well, that's defeating.

Jordan Korte: It is disappointing that the tax-free saving strategies weren't as pronounced or well-known during that time period.

But at the same time, they were introduced more recently, and really, that's when it started to take off, in the 2000s and beyond.

Johnathan Horman: I'll add to that. What you're talking about there, Jordan, is like an engaged client. As financial advisors, we have to drive that engagement. We have to create a client service model that makes us different. And what really makes us different is that we're promoting a rhythm in your financial life. Whether that is two touchpoints a year, or two to three meetings per year with your advisor, we're coming to those meetings with some meaningful conversations that can help you promote positive actions in your financial life.

So there's a purpose to the madness of us calling on our clients and having them come in that often. That engagement is really what makes us different in this industry, because we want to be a higher level of service that is just not experienced in this industry from a lot of our larger competitors.

Scott Michael Dunn: It seems like, from my perspective, how long can you neglect not being on track?

Ryan Potts: It's a great way to put it.

Scott Michael Dunn: Yeah, how long can you do that? It sounds like six months makes sense just to come back to just check in. And then you get the pat on the back, and you did a great job.

Ryan Potts: That sounds like my doctor's visit the other day.

Scott Michael Dunn: Yeah. You're on track. You're taking good medicine, moving money in the right ways. It sounds like that's very important. And people don't realize that, because it's health. It's financial health.

Ryan Potts: I was joking about the whole thing. But that's really the way we put it. You go see your doctor at least once a year.

Scott Michael Dunn: You're really supposed to.

Ryan Potts: You’re supposed to, hopefully. Hopefully, you're seeing them maybe twice a year, depending on your situation.

But with your advisor, I think we love to have engaged clients. So we would love to see you at least twice a year. But the reason we want to see you is so we can make sure we have a good understanding of what's going on in your life. Not just financially, but also personally, because a lot of times, personal life and financial life are doing the same.

Scott Michael Dunn: They are.

Ryan Potts: But it's very important to have those checkups. And being engaged as a client for us is usually a really good thing, because we can add a lot of value in those relationships.

Scott Michael Dunn: That's important. That’s so important.

Johnathan Horman: I don’t know if you guys want me to talk about what our ideal client is.

Ryan Potts: Oh, I would love that.

Johnathan Horman: So, we do have an acronym. I know it's cheesy, but “IDEAL.” We want a client that's intentional, disciplined. They want to be educated about financial things, because the depth and breadth of the financial world is vast. I mean, it's a lot. And then we want a client that wants accountability, and we want to drive that accountability so that they can leave a legacy.

Now that legacy is different for different people; it depends on your preferences. There's a book out now, Die With Zero, so you could essentially tell us you want to plan to spend everything you got. Or you want to leave it for kids or family.

We really like a client that's engaged. And that's really the premise behind “IDEAL.”

Scott Michael Dunn: Interesting. But if they're not — so not to scare away anyone that's not ideal — the opportunity to morph into “IDEAL.” It seems like everyone would have that opportunity if they're willing.

Johnathan Horman: Yeah. And it's a positive thing. You tell someone not ideal.

Scott Michael Dunn: Well, that's the tricky part, right? You can be ideal. You can be not ideal. But then if the goal is to follow the literal extension of ideal, it's that the goal is to get there eventually.

You can't do it tomorrow. You can't do it today. But there are so many more tomorrows that you can work on getting into that groove.

So here's your favorite question, alright? How are you compensated? Do you charge fees? Is it based on commissions? Percentage of assets? How's that work?

Jordan Korte: I'll start this one off, and then I'm going to allow them to chime in if any corrections should be made.

Scott Michael Dunn: I shall defer.

Jordan Korte: I've got a really good idea of how we're compensated. And that has been really an emphasis of our firm, that we want transparency on exactly how we get compensated and why we do.

So we have transitioned everything that we do into a flat advisory fee or assets-under-management fee. That allows us to really emphasize our IOU approach, which is that we are independent, objective, and unbiased. And really, to summarize that, we want every decision that we make to be known that it is the best decision for you.

We are not attached to certain investments, certain companies that are selling specific funds. We have the ability to create portfolios that we believe are going to align with exactly what you're looking for.

Through that process, we do select a variety of different fund managers that we believe to be the best in their class. There is no one fund manager that is the best across the board, right? If there was, everybody would be using that fund manager.

Scott Michael Dunn: And then they wouldn't be.

Jordan Korte: Right. So we have to take an active approach and say, “Hey, what is, in our mind, the most ideal? Large, small, mid, emerging markets, all these different asset classes that we're involved with?” We proactively look for and find those folks that we want to partner with. And of course, Ryan does an excellent job at managing that.

But to get back to what your initial question was, transparency is key. And that's why we want to keep it at a flat fee directly based on how many assets we're managing on your behalf.

Scott Michael Dunn: Gotcha. That makes sense. That's an easy way to understand it.

Ryan Potts: Transparency, but also making sure the incentives are aligned. So the way that I always like to look at it — it sounds corny — is we're sitting on the same side of the table as the client. So when they do better, we are doing better.

That sounds like a Fisher Investments commercial. But the whole goal there is again, to make sure we're optimizing your wealth. And trying to do what we can do to the best of our ability to make sure that we're growing the pool of assets that we're helping manage. That doesn't mean taking undue risks to do that. It just means, generally, “What's your plan? Tell us what we need to be doing and how can we try to optimize that for you?”

It goes back to the transparency and just making sure all of our clients understand that when we provide them advice, we're not getting additional compensation for the advice that we're giving. It's strictly based on the flat fee that we've agreed upon based on the assets under management.

Scott Michael Dunn: Grow together.

Ryan Potts: Yep.

Johnathan Horman: Yeah, and I just want to key in: we're not driven by a product-driven agenda. We're not motivated by products. And what that means, it's really the “you” in IOU. We are unbiased because of a stated AUM-based fee.

So we steer clear of commission products. It is the part of our industry that is dying, and thankfully so. Because it put an advisor in a position where they would make a decision based on how they were being compensated to make a recommendation. So again, commissions are not something that's a part of Correct Capital Wealth Management.

Scott Michael Dunn: That makes sense. I guess there's a risk tolerance that is negated. So you think you come in, and if they are commission-based, the strategies are based on commissions of my earnings, then I would assume they're going to want me to make more money. But then in turn they make more money. Every time you make more money, it seems like that capitalizes in the wrong direction.

So yeah, the flat rate sounds more comfortable, and then trustworthy. You're not isolated and your stake is not in the wrong place, outside of it in the funds.

Jordan Korte: Yes, and one more thing I will add there, is oftentimes when we are speaking with prospects — we gratefully get referrals from existing clients or whether it be an internet lead that we receive — we often find that they were sold at least one product, if not multiple products. Especially in the annuity or the insurance space that really don't fit the mold of what they're looking for or their goals.

And it makes you question, how is this still occurring in the industry when we're supposed to be looking out for the clients that we serve, and not for our pocketbooks. So it's very nice that we don't take that approach. It makes me sleep well at night. And I can confidently say that when we're giving investment recommendations, it's entirely for the benefit of the client.

Scott Michael Dunn: That's so good. And there's purity in the intent.

Jordan Korte: Absolutely.

Scott Michael Dunn: This is very nice. This is really nice.

Let's talk about investments and portfolio strategy. What kind of investments would you recommend for somebody like me?

Ryan Potts: This is always a good question, and I feel like I'm a broken record every time I answer a question, so apologies there.

It just depends. It's ultimately where I'm at. However, with that in mind, we take a goals-based approach to portfolio construction. So again, not starting with the portfolio, but really ending with the portfolio. Where we want our conversations to start is with the planning process and figuring out what your goals are for your money.

Once we know what your goals are, we can start to align the portfolio to match those goals. The way we think about it, it's called the “bucket approach.” There's different ways to articulate it, but ultimately for us, it's short-term, intermediate, and long-term, or cash, income, and growth. You align your portfolios using these different buckets to make sure that, again, you don't disrupt the compounding of your portfolio because of something that comes up in your life.

We were talking about how much cash you need in an emergency fund. I'll just kind of extrapolate on that a little bit farther to articulate what our bucket approach really looks like. If you have six to 12 months of cash in a money market account or somewhere that's very stable, maybe it's your bank, then you know for certain that for the next six to 12 months, you have cash that's readily available either for your day-to-day living expenses or again for an emergency.

Outside of that, you have income, right? For most folks who are working, their income is genuinely what they're making. It's the paycheck that they receive every two weeks. But for folks who are in retirement, the income might be the distribution that's coming off of the portfolio. That can be in the form of interest, dividends, capital gains, whatever that might look like, but that's really the income that's being derived from your portfolio.

Some folks might know the 4% rule, but essentially, if you have a million-dollar portfolio, utilizing the 4% rule means that we could take $40,000 a year from that million-dollar portfolio, and your money would last into perpetuity, right? So maybe the income portion is that 4% that's coming off the portfolio.

The long-term bucket or the growth bucket are the funds that you don't need within the next decade. And the reason that we utilize a 10-year time frame is because historically speaking over 10 years, the markets don't tend to show a negative performance over that time frame. Meaning that if you were to invest, in theory, at the top of the dot-com bubble, and 10 years passed, yes, your money wouldn't have grown any, but you also wouldn't have lost any or much at all.

So by utilizing these time frames and focusing on the goals of our clients and aligning the portfolio with those goals, we feel like, again, starting with planning, figuring out the goals, and then aligning the portfolio allows us to stick to whatever plan that we've outlined for the client, regardless of what actual investment vehicles we might be utilizing.

I threw out a couple there, but bonds, stocks, money market funds, alternatives (we don't really use those), but there's a lot of different investment vehicles. For us, we think about the portfolio as the engine to the financial plan.

Johnathan Horman: I'll just add there, to Ryan’s point, the size of these buckets matters. That's why planning matters.

He mentioned the moment the market is in a weak point or in a weak season. That's why they matter. Like you have to protect yourself for those weak points. We can all relate to “buy low, sell high.” That's the old adage that everyone knows about investing.

Scott Michael Dunn: Sure.

Johnathan Horman: It's simple. That is true. So we structure these buckets to do that and weather a financial downturn. Because the hardest thing to predict is how long that downturn is going to last.

If you look back, even just over a short glimpse of history, the COVID year 2020, that market downturn was three or four months long. And by the end of the year, we were up 20% off of a 20% low. If we look at 2022, that was a nine-month downturn before we hit that inflection point at bottom to come up.

So that's why sizing matters of those buckets. That's why planning matters. And it's really why financial advice matters, so that we can prevent the panic sell that the client might experience.

Ryan Potts: I want to take a second shot at this too, by the way. I talked about goals, but I want to use a real-world example of exactly how we implement this.

So without using names, I'm just going to think of a client that we've all worked on together, who's in their 40s, recently left a job, but they're looking to build a brand new home. It's a beautiful project. It's really exciting time for them.

But the question ultimately for us was, “Hey Ryan, Jonathan, Jordan, right now my entire portfolio is 100% in the stock market. Does that make sense?” Through our financial planning process, we uncovered that they had these goals, such as building this brand new home. We also uncovered that he was no longer employed and looking to start up a business, right? And so we need to take that into consideration as well.

Ultimately, what we decided upon was, “Hey, let's take some of the funds out of the stock market, put them into a more conservative investment that aligns with the timeframe of you wanting to build this home.” Because there's no builder that you're gonna be able to go to, no lender that you're gonna be able to go to and say, “Hey, I've got money. It's tied up in the market.”

Scott Michael Dunn: Yeah.

Ryan Potts: Right? They want cash. They want more secure investments.

And so that's what we did. We built the buckets saying, “Hey, here's cash for six months that kind of gives you a runway as you start up your new business. Here's your bond portfolio or more conservative portfolio that's going to align with when you look to start that project to build your new home.”

And then everything else — these are young folks — everything else is still for retirement. It's still for accumulation. So leave it in the market and let it continue to appreciate.

Johnathan Horman: Yeah, such a good example of when a rule of thumb does not work. And that client is such a great example of that. Because if he would've just gone and got the cookie-cutter advice, it would've been like, “Everything should be in stocks, you're 40.” So what a great example.

Scott Michael Dunn: The industry talks about things like investment vehicles, buckets. How do you determine my risk tolerance?

Ryan Potts: I'll tackle that one.

Again, we're a detail-oriented shop. We care a lot about our process and how we ultimately get to these kinds of things.

I would say first and foremost, the industry standard is more of a conversation. It's some arbitrary questionnaire that you're going to fill out. And then based on how you answered that questionnaire, coupling that with the advisor's conversation, they're going to tell you, the client, “Oh, that sounds like you're a moderate-aggressive investor.”

Well, Scott, your version of moderate-aggressive and my version of moderate-aggressive are probably two different things.

Scott Michael Dunn: For sure.

Ryan Potts: Who knows, right?

Scott Michael Dunn: Right, right.

Ryan Potts: I have a passion for this. I've done it my whole career. Maybe you're not as interested in it. And so for you, it's like, “Moderate-aggressive? That seems kind of risky. I'm not sure.”

We’ve tried to move away from that. So we've incorporated new technology into our process that allows us to truly quantify what your risk tolerance is. It's a similar questionnaire, like the one you would have taken back in the day on paper. “Answer this one through five based on your numbers, add up the numbers, and that kind of tells you where you fall.”

The beauty of our technology is essentially that you answer the questionnaire, Scott. Let's say it comes back at a risk score of a 60. Well, that's a quantifiable number. You can feel good to know that your risk tolerance is a 60.

The question you'd probably have for me is, “Ryan, what does a 60 mean?”

Scott Michael Dunn: Sure.

Ryan Potts: Which is a fair question.

Scott Michael Dunn: What's an INFJ?

Ryan Potts: Exactly. The beauty of what we do with our technology is that we can take your risk tolerance through our questionnaire, quantify your risk, and then align a portfolio to that risk score.

If you scored a 60, for instance, in the example, we could go out there as advisors and build you a portfolio that has a 60 risk tolerance. So now you can look at it and say, “Hey, I'm a 60 risk, and you guys have presented me a portfolio that's scoring a 60 on the risk score.” So now your risk tolerance and your portfolio risk are actually aligned. Versus the before conversation, which was, “I think you're a moderate-aggressive investor,” and you look at me and say, “Okay.”

Scott Michael Dunn: What does that even mean?

Ryan Potts: Exactly. Right? And me as the advisor, I kind of have this objective ability to say, “Well, this is what it means.” And from advisor to advisor, it means something different.

Scott Michael Dunn: It's the variability and the gray of how much is moderate, how much is aggressive.

Ryan Potts: Exactly. We're trying to eliminate that in our process, and that's really where this technology comes into play.

So yes, it's still a risk tolerance questionnaire. You're still filling out answers. But based on those answers, you're being given a risk score. The advisor and you are going to deliberate and make sure that score makes sense for you.

Scott Michael Dunn: Sure.

Ryan Potts: And then we can sit there and build a portfolio using that score, turn around and show you a proposal — we love doing this, because it's such a cool exercise — showing them a proposal, and “Here's your portfolio that we've constructed. Here's how it's a 60.” And now they know, “Great. My portfolio is right in line.” And the expectation was set early on about what they can experience.

Scott Michael Dunn: Fantastic.

Ryan Potts: That's really the process, yep.

Johnathan Horman: I'll add to that. I know I keep going back to why planning matters.

Ryan Potts: It's important.

Johnathan Horman: Planning matters in this case too, because it's not just about the scientific approach of some software that gives you a risk rating. It's also about risk capacity.

And we talk about this a lot in the office. When you weave the planning details, the short-term cash needs or the short-term home improvement needs, or car purchases, into that risk score that we get from the software, we can now make a more qualitative and quantitative recommendation of where your portfolio actually needs to sit.

I know this is going to be cliché, but there's an art and a science to everything and every decision in life. And we really play on both sides of that. We have the art, we have the ability to understand your situation, but we have the technology to really deliver value to clients.

Scott Michael Dunn: What's the difference between stocks, bonds, mutual funds, ETFs?

Ryan Potts: I'll tackle that really quick.

So ultimately, a stock is a representation of ownership of a company. I'll use Amazon as an example. If you own Amazon stock, you are technically an owner of the company Amazon, right?

Bonds represent debt, either of a company, an entity, a government, really a lot of things, but it's just a representation of debt.

The stocks vary. They move up and down, depending on what the business is doing. A bond is pretty guaranteed, but close to it. When you buy a bond, it might say you're going to earn a 4% yield. That means you're going to earn 4% on that bond. There's more nuance to that, but at a high level, that's the difference between a stock and a bond.

A mutual fund and an ETF are essentially the same thing. And the way that I always like to describe it is, if that stock, Amazon, was one slice of a pie, a mutual fund or an ETF is just the full pie. So you might have 12 — really, it's usually hundreds — of different slices of that same pie. But the mutual fund and ETF are just a grouping or basket of individual stocks or bonds.

Scott Michael Dunn: How do I protect my portfolio from market downturns?

Ryan Potts: We've touched on it already a little bit today, but the bucket approach is really what's most important for us. So, incorporating cash, income, probably using bonds in this instance, and then allowing your growth bucket to continue to ride out the markets.

Scott Michael Dunn: What's the best strategy to rebalance my portfolio?

Ryan Potts: We like to take the guesswork out of rebalancing. A lot of folks think that there's a magic wand that they can time their rebalancing procedures.

The way we like to do it is a very systematic approach. Every quarter we look to rebalance. Typically, what ends up happening though, is based on market movement and fluctuation. We might actually only trigger buys and sells twice a year.

So for us, it's a quarterly cadence. Again, this just takes or eliminates the guesswork out of it. Ultimately, the reason you rebalance is to keep the portfolio in line with your stated risk.

Scott Michael Dunn: Another important topic for folks out there wanting to learn about their financial health is retirement planning. So when should I start saving for retirement?

Johnathan Horman: Immediately.

No, I mean, it makes sense to speak with an advisor and develop a plan. To my point there, you need to start right away, because every second that you lose with inaction is another day that you'll have to work beyond your goal retirement date. So it's really important.

If you haven't had that conversation and you're approaching your 50s, mid-50s, you need to get in and see a planner and get a clear picture of what it's going to look like. What is your retirement income check going to look like?

If you're close to retirement, one year away, you have some time to really develop a plan. But, you have to start right away.

Scott Michael Dunn: How much should I contribute to my 401(k)? IRA?

Jordan Korte: I'll take this one.

We always recommend that if your employer offers a qualified plan, such as the 401(k), 403(b), 457, whatever it is, you always want to take advantage of the full match that they're offering.

The reason for that is because it's essentially free money for you. If you do not contribute up to the full match, you're losing on an annual basis what they'd be putting in for free. That's always the first step that we check for to make sure that they're taking advantage of that.

Second step is that if there is room for additional qualified savings, we want to determine if you can make direct Roth IRA contributions. Or, if your income is above a threshold, then we would recommend doing the traditional IRA, or even in the taxable space with a brokerage account. Plenty of different options out there.

Scott Michael Dunn: What's the difference between a 401(k), Traditional IRA, Roth IRA? Seems like there's a lot of options.

Jordan Korte: To give a summary of the main differences, a 401(k) or 403(b) is a qualified employer-sponsored plan. The distribution limits are different among the qualified employer plans and then your traditional or Roth IRA.

There is no income limit on qualified employer plans. So, despite what you're making, you can make the full contribution to either pre-tax or Roth in those plans. On the flip side, there are contribution or income limits for the contributions that you can make directly to a traditional or a Roth IRA.

The employer plan has that income benefit, where you are not subject to limitations on what you can contribute, and the amount you can put into employer plans is always going to be higher than what you can put into IRA accounts.

Scott Michael Dunn: What are RMDs? Correct me if I'm wrong. I think it's required minimum… something.

Johnathan Horman: “Something Mass Destruction.”

Scott Michael Dunn: Is that what it is?

When do I have to do it? When do I have to take them?

Jordan Korte: The RMD is the Required Minimum Distribution.

Scott Michael Dunn: Ah. That’s it.

Jordan Korte: Yeah, that's it. We hear “RDM” a lot from those that we're talking to.

Those begin at age 73 if you were born on or before 1960. If you were born after 1960, those begin the year that you turn 75.

What those are, essentially, is that the IRS is going to make you begin taking distributions from your tax-deferred dollars. Typically, it starts at around the 4% mark of the entire balance of your tax-deferred assets. Then each year that amount increases slightly, based on mortality tables and calculations that they run.

Once again, we've hit on this, but that's a big reason why we do Roth conversions. Because we want to take the tax-deferred money and transition it to tax-free in the Roth space to reduce the amount that you're required to take when those RMDs kick in.

Scott Michael Dunn: What are the benefits of a 401(k) rollover?

Johnathan Horman: I can take that one.

You have options when you leave an employer. You can take a lump-sum distribution — don't do that without talking to an advisor. You can keep it in the plan, which means you only have certain investment choices, so there's a lack of flexibility inside the plan. Or, you can move it to an account with an advisor and have it professionally managed.

You're offered way more flexibility and investment choices when you move it out to an IRA account. Rolling it out of the retirement plan with your employer to a firm like Correct Capital into an IRA or Roth IRA, depending upon where it was sitting in the plan at the employer.

So again, it really is about flexibility and the opportunity to get advice and understand and be educated about what your options are.

Scott Michael Dunn: If I leave a company, should I take my 401(k) with me? Or does it go with me?

Jordan Korte: Yeah, to address that question, we mentioned earlier that we always take an unbiased approach in the advice that we're giving there.

The first thing we would want to assess is your current investment lineup in the company that you've left. Then, based on your investment allocation, the other investment options they have available, along with the fees that they are going to continue to charge you for leaving that account with their firm, we would determine at that point if there is enough investment flexibility and whether the firm itself is a strong reputable company.

That would help us determine if it would be worthwhile for you to leave your plan with them, roll it into a new plan for the new employer that you're joining, and really getting that balance transferred so you can continue making contributions.

Or, is it in your best interest to roll it into traditional or Roth IRAs to open up the investment landscape flexibility to the entire marketplace rather than being restricted to what offerings they have within their company plan.

Scott Michael Dunn: Should I invest in crypto?

Ryan Potts: That's a tough one.

Should you invest in crypto? I think you need to ask yourself why you want to invest in crypto. Is it because it's done phenomenally well the last 10 years, and everybody looks at that and says, “Hey, just because this thing's gone up 20% per year, I think it's going to keep going up 20% per year”? Because if that's your reasoning, I don't think you should, because the outcome is probably not going to be as rosy as you think it will be.

If you want to invest in crypto as a diversifier in your portfolio, and you want to have something that is maybe outside of the bounds of normal finance — maybe it's DeFi, that's a really popular term — then maybe it does make sense as a diversifier in the portfolio. We tend to stick to the recommendation for our clients that it doesn't necessarily need to be a part of the portfolio. We feel like we can earn attractive rates of return elsewhere throughout the market.

If someone does want to have that exposure, we tend to tell them, “Look, we don't want to take on too much risk to get exposure to crypto.” So the way that we would incorporate it into the portfolio is by a simple allocation. Maybe it's 1% to 5% of your total portfolio value.

Again, as a diversifier, as something that is meant to look and feel different than the rest of your portfolio, not as something that we think you would make 100% per year for the next five years.

Scott Michael Dunn: When it comes to risk tolerance, what’s Correct Capital’s stance on crypto or ETFs? We can dress it up, “Oh, it's okay if you want to.” But what's the real viewpoint that people need to understand about crypto and ETFs?

Ryan Potts: From our standpoint, from our perspective, policies that we have in place, buying directly crypto securities — so think about going and opening up a wallet on a group like Coinbase — we're not doing that for clients. We're not recommending clients go and do that. The way that we get exposure to crypto is through ETFs, exchange-traded funds, that are somehow getting an underlying exposure to said crypto.

I think Bitcoin is the one that most people are familiar with. It's been around the longest. It has the most traction. There's Bitcoin ETFs out there. We have clients that make allocations to these Bitcoin ETFs.

But again, the firm Correct Capital Wealth Management does not recommend cryptocurrencies to most of our clients. That all has to go back to our process and the reasoning why we own certain things in our portfolio. It's not so much that we're anti-crypto; it's just more or less, “Can we achieve your goals and objectives through a less risky vehicle?” And the answer tends to be yes, so we feel like we don't need the exposure.

Scott Michael Dunn: So that's on an average risk tolerance, crypto tends to be a lot higher on the scale of risk tolerance, or lower I should say.

Ryan Potts: Much higher on the scale of risk.

Scott Michael Dunn: Right. How does that scale work, exactly?

Ryan Potts: Most cryptocurrency exposures or investments are on the riskier side if you just look at historical volatility, which is a fancy way of saying, “How much does it move up and down?” It tends to be much larger than your typical investments like stocks and bonds.

Scott Michael Dunn: Sure.

Ryan Potts: Yep.

Scott Michael Dunn: Well here’s an important question: Do I have to have a minimum asset base to go to Correct Capital?

Jordan Korte: That is a great question and one that we encounter pretty often as a firm. Really, the way that we look at it is that we do, of course, want to be able to serve the vast majority that are looking for our services.

In that same breath, there are times where lower-asset individuals that are in early accumulation phase wouldn't get the full experience or value that we can offer as a firm. So, through experience over the years since the firm was founded, we have really set our target at a threshold of $500,000 as being a true level where we can come in and add tremendous value through the planning side, along with the investment management process.

With that being said, we do have the opportunity or the ability to work with cases on a subscription basis. But oftentimes, as I mentioned, we find that we can steer them in the right direction, if they are under that asset threshold, to achieve their goals without the need to pay an advisory or an AUM fee.

As they navigate life and they become more established, we find that we can offer more value once they hit that threshold to help enhance their plan and their situation.

Scott Michael Dunn: That makes sense.

Do you guys service just locally, or do you offer services nationally?

Johnathan Horman: Yeah. Since COVID, everyone's Zooming or using Microsoft Teams. Technology is just expanding every day and every minute. So, we are effective at servicing clients all throughout the U.S. It's really driven by our process, but also how we can make sure that your money is in good hands with Correct Capital.

We partner with Fidelity as a custodian and a record keeper of your assets. So if you open an account with Correct Capital, it's with Fidelity. We are an independent advisory firm, but having a company like Fidelity behind us, for accounts and things like that, really gives clients a sense of confidence and clarity that they can use us for all of their financial needs.

Scott Michael Dunn: The market, like it is, seems like it's undeclared. Maybe people are unsure. It's a good question that comes up often when people are reaching out to us, about you guys, is, “Should I invest in stocks and bonds, or should I buy just gold and silver?”

Ryan Potts: You’d be shocked how often that comes up in conversations.

Scott Michael Dunn: Really?

Ryan Potts: Yes. I think this kind of plays off our conversation about Bitcoin earlier.

Is it a good diversifier in a portfolio? Yes. That's just proven over time in history. There's periods of time where stocks and bonds don't do as well as gold and silver. But historically speaking, and really what drives our investment process at Correct Capital Wealth Management, is one that's rooted in evidence and fundamentals. We really take a long-term approach to the way that we handle our clients' money.

So what we don't do is chase short-term fads. Right or wrong, it's just the way that we operate. What we want to do is make sure that our clients stay the course and are invested for the long term. At the end of the day, all that matters is that they stay invested.

The problems with gold and silver: there’s not a whole lot of fundamental reasons as to why you should always own gold and silver in your portfolio. Those reasons might change. The benefits come and go, right? There’s periods of time where those things can drastically outperform the general markets. But there's also extended periods of time where they drastically underperform, and that is what I call risk, right? The risk of being wrong for a very long period of time, or just the risk that you might have gotten lucky on your timing, made some money, but ultimately that's not consistent and something that you can hold your hat on moving forward.

So instead, what we would do is say, “Let’s focus on stocks and bonds, where we understand the fundamentals that drive long-term returns — rather than relying on someone else being willing to pay a higher price for something we own — and continue to hold a diversified basket of stocks and bonds.” And yes, once in a while, when a client asks that question about gold, we're comfortable owning it in the portfolio.

But it goes back to my comments earlier. “Why are we owning it? What are the purposes?” And if it's for diversification, by all means, we can incorporate it into the portfolio. If it's for the sense that, “Hey, it's gone up a lot recently,” the answer is no. Because the likelihood that you're on the right side of that trade is very low.

Scott Michael Dunn: So the truth is, if you think gold and silver is a tangible, protected, hard asset, it's really just as testy and risky as the market.

Ryan Potts: Right.

Scott Michael Dunn: Right. This is interesting.

Ryan Potts: Absolutely.

Scott Michael Dunn: It’s an interesting fact because you think, “I have these bars,” right? “I bought a storage unit.”

Ryan Potts: Well, it's funny you bring that up, actually, because I do want to touch on that. That is typically the answer that I give to most folks.

Scott Michael Dunn: Really?

Ryan Potts: If they say, “Hey, should I invest in gold or silver?” I ask them, “Would you be willing to buy the physical gold or silver, store it in your house, hold on to it for 20 years, and eventually, whatever price it's at in 20 years, you sell it?” Right? If that's the case.

For most folks, if they look at that, they’ll say, “Probably not. No.” I'm like, “Okay, well, that's what you're doing by putting it in your portfolio.” It's the exact same thing, essentially, but you're getting a lot more volatility through a public vehicle.

So again, it goes back to, would they go buy the physical bars of gold themselves, hold on to them in a safe at your house for 20 years, and be comfortable knowing that the value in 20 years is going to be worth the wait? Most folks come back to me and say, “Probably not.”

Scott Michael Dunn: Yeah, no. I'm pretty much on that too. I would be the same. Where am I gonna put it? We're going to wait until the kids are 18. Maybe if I kick them out, I could put it in their room.

Let's talk about taxes and insurance. It's a pretty important subject. How do I minimize my taxes on investments and retirement income?

Jordan Korte: To address that question, it really comes down to the level of income that you're currently earning, especially in the accumulation years.

There’s a certain income threshold that determines whether it’s more advantageous to contribute pre-tax and reduce your taxable income in the current year, versus making a tax-free contribution and paying the taxes now in order to experience tax-free growth for the rest of your life.

As a general rule of thumb, if you are in the 24% marginal tax bracket or below, and you have over 10 years that you're going to be invested without taking distributions, it's likely advantageous for you to consider making Roth contributions. Going ahead and paying the taxes now so that you can experience the tax-free growth for the remainder of your working and retirement years.

That is sort of a rule-of-thumb answer. But of course, if you have an opportunity in retirement where you're not going to be making much income, you can once again do the Roth conversion strategy and convert that pre-tax money into tax-free money at a much lower rate than you would have been able to in your employment years.

Johnathan Horman: Yeah, and from a high level, to really get ahead of that conversation, I think clients need to recognize that there is a disconnect between the party, the CPA or the EA that files your taxes, and your financial advisor. And finding a way to communicate and connect those two parties in our industry is really where clients need to sit and decide how they're going to be proactive about that. So starting that conversation early in the year, so that you can get ahead of the tax bill the following April.

We're talking about 12 to 13 months of time, that you really have to be proactive about it to connect the dots and understand where you might land in April of the following year.

Scott Michael Dunn: That makes sense.

What kind of year-end moves can I make to minimize my tax burden?

Johnathan Horman: I can take that one.

First step, get ahead of the year-end conversation. Second step, speak with your advisor to understand your year-to-date tax summary. Where do you sit? Ordinary dividends, interest on the account, and realized capital gains.

Then, taking a look at your portfolio to see where there might be opportunity to realize losses on certain positions that will offset gains. That's a concept called tax-loss harvesting. It's a real flashy buzzword in our industry. It is quite simple to really have that conversation: year-to-date tax summary.

And this data is readily available with the firm that you have your investments with. And we're able to have those conversations and make the information meaningful so that we can make decisions at year end. Again, all to head off that tax bill in April.

Scott Michael Dunn: What's the most important thing about managing the liability of tax? What's the most important thing you could tell a client?

Ryan Potts: Tax are inevitable. I think that we always have this conversation. Taxes are looked at as a bad thing. That's not to say that they're not annoying. They frustrate people. But also it means you're making money. And the way that we navigate the tax burden or the liability is just to make sure that the information is accurate. That you're working with a team of not only your advisor, but a CPA or EA to help you file. Also making sure that you are comfortable with the idea of paying some tax. Because at the end of the day, again, paying tax means that you have made some money, which is never a bad thing.

Scott Michael Dunn: No, never.

Let's get into estate and legacy planning. Do I need a will or a trust? And what's the difference between the two of them?

Johnathan Horman: I think the answer to that question lies in the complexity of your situation. Unfortunately, it boils down to the amount of dollars that you have. So, at a most basic level, you do need a will, a power of attorney, health directives power of attorney, or medical power of attorney, and then titling assets appropriately for the simpler cases. You don't necessarily need a revocable trust, but titling assets with transfer-on-death or payable-on-death agreements. It's common on bank accounts, but a lot of clients don't realize they can do that on their investment accounts.

That eliminates the need for a revocable trust. But once you get into the more complex asset levels, as you go up the spectrum of affluency, that's when the more complex estate planning considerations and trusts and the type of trust comes into play.

Also family dynamics. It doesn't just rely on complexity. “I want my son or daughter to have these assets, but what are they going to do with them when they get them? What if they got them now when they're 20 instead of if I die soon or die early?” Because that's much different. How do we protect for that scenario, but also plan for the scenario where it would be a normal, “I passed away in my 80s”?

Family dynamics. Brothers, sisters, there are divorces, remarriage, things like that, where those come into play. And we're there to navigate those conversations with clients about estate planning and legacy.

Scott Michael Dunn: There's got to be a way to differentiate, to understand very simply, “a will does what.” And then if you have a trust, how does that make it different? You mentioned there's intricacies like you can establish specific processes on how the money is distributed.

Just plainly, right? If I wrote a will, what happens?

Johnathan Horman: The key thing that the will is doing is it's a bequeath. It's telling folks and legal parties, judges, the courts, where you want your assets to land and how. But it doesn't avoid probate, for instance.

So that’s what we’re trying to avoid — the kind of stressful situation that only amplifies family dynamics after you’ve passed. That’s why it’s important to have a plan. And that’s why I say this goes one step further than just having a will. In simpler cases, it’s about titling accounts correctly. In more complex situations, that’s when people say, “I need a trust. What type of trust?”

Scott Michael Dunn: How do I make sure my family's financially secure if something — God forbid — happens to me?

Johnathan Horman: I could take that one as well because it really hits on insurance and why you would need it. Especially life insurance.

The premise of life insurance is protection. You're trying to protect income-making ability. This is primarily a conversation that we're having with accumulators that have children, and the husband asks, “What do we do if I pass away?”

And it boils down to: if you have debt, do you want your wife and kids to be debt-free? So paying off the house is a typical thing you would cover with life insurance. The other thing is how long might you want your family to go without you after your passing? How much income would we have to protect? And how many years is that? So if you're a $200,000-a-year earner and you want to protect your income for five years, it's a million dollars in life insurance protection, plus the debt payoff. So if it's a $600,000 house, we're at $1.6 million in coverage.

Our focus is more asset management and investment planning. But we do want to make sure our clients are protected. So, cash-value life insurance: we prefer term over cash value because we can provide protection and really help on the investment management talk for the future.

Ryan Potts: To take that a step further, going back to our process and how important it is: by getting to know you as a client and uncovering your needs, once we’ve solidified a financial plan for the future, the next step in that process is stress-testing the plan — making sure that if something were to happen to you, your family would be financially secure.

And that might be incorporating insurance where it makes sense. We're not insurance sales folks. We don't represent an insurance company. But we do want to make sure that if insurance were to make sense as the ultimate catch-all for a terrible situation, that it's there for you and more or less your family that's left behind.

Also on top of that, making sure you have a second set of eyes looking at all your beneficiaries, making sure that everything is in line with your wishes. Because a lot of folks — something like this happens and they don't know until it's too late that mom and dad's accounts weren't titled correctly. So now the kids have to go to probate and pay additional fees to receive funds that were actually theirs. Or whatever the case might be. But again it goes back to our process and making sure that we're constantly looking out for things that most folks aren't considering.

Scott Michael Dunn: Let's talk about business and employer plans. What retirement plan options are available for a small business?

Johnathan Horman: I can take that one.

In its simplest form, there is the SIMPLE IRA plan. You then move up the line there. For a sole business owner, there's things like solo 401(k), and the creation of a sole-owner cash balance plan or defined benefit plan.

When you take on more employees, you have plans like 401(k)s for small businesses where there's more than just one employee. Then there are other ways for businesses to help their employees save for retirement. There are 457 plans in government entities and nonprofits. The 403(b).

So we're there to navigate these plans with employers. We can really act in a more custom fashion. We're a smaller firm, and we have many partners that we can rely on. So we can really be the partner to help you design a plan that makes sense.

Scott Michael Dunn: How do I set up a retirement plan for my company?

Johnathan Horman: That process starts with talking with a firm like Correct Capital, and us really understanding your goals and your financial situation, especially on the business side.

Can your business afford to make contributions to a retirement plan or not? Because the recommendation changes based on what you can afford to actually contribute. The reason why you would do it is because of the higher contribution limits that it gives participants, not only for the owner of the business but also for the folks working for them. It's a retention move to keep employees engaged in working for that firm.

So there's a lot of things to consider. We have the resources and the knowledge to really help businesses in this regard.

Scott Michael Dunn: How do I cost-manage providing that opportunity to my employees?

Ryan Potts: Working with a third party really helps in this regard. A lot of business owners don't understand the cost of servicing a 401(k) or retirement plan for their employees.

What I would say is, a group like ours, we partner with entities that provide us proprietary knowledge around what the average fee would be for an employer to start a 401(k). The way that we price most of our engagements on this side of the business is that we want to be fair, we want to be transparent. So we use this proprietary data to say, “Hey, on average, a firm like yours” — maybe it's a 20-person marketing shop — we would say, “Hey, on average, that type of business is paying roughly a 1% to 1.5% fee to offer that type of 401(k) plan to their employees.”

Then we would turn around and offer you a solution that is either similar or better in pricing. So you understand as the owner that you're getting a good deal out of all this.

Scott Michael Dunn: Well, how do I choose the right 401(k) provider?

Johnathan Horman: I think it's one that differentiates itself by the education programs that they give employees that will be in the plan. Offering personal financial planning as a part of the engagement that the investment advisor has with that plan. So that's one side of it. Again, engaging with people and understanding their goals, dreams, and desires.

But the other side of it is more, how do we keep track of this thing? How do we pick a third-party administrator? Because you need one of those as well. You need an investment advisor, a third-party administrator, and a record keeper. So there's three parties at play and the business. So it's navigating that complexity and having options, and also having options that make sense in today's world.

Real briefly, a lot of employers just go right to their payroll provider. You've got Paychex, ADP. And they blindly go into these plans without a detailed discussion. And it goes back to our process. We are going to discover your needs before we recommend.

Scott Michael Dunn: How do I improve employee participation in our retirement plan?

Ryan Potts: Education is first and foremost. Most folks don't know that they can contribute to the 401(k) retirement plan. Most folks don't understand the benefits of contributing to a 401(k) retirement plan. And to be frank, most folks just aren't saving for retirement in general.

So, if you can work with and partner with an advisor team that is able to go out and be in front of your employees and educate them on the benefits, the why, the how, the when. Some folks maybe start electing and then realize their paycheck just got reduced. Right?

So there's a lot of intricacies there, but it's ultimately an education exercise with your employees.

Scott Michael Dunn: Do you find that more educated employees are more likely to invest into my company's 401(k) plan?

Ryan Potts: Yeah. The more educated the employee — there's a direct correlation, to answer your question. The more the employees are educated — again, on what a 401(k) plan is, how does it operate? And when does this occur? When do the contributions actually happen? — the more likely they are to participate in the plan.

A side note for business owners: the more educated your employees are, the more likely that they're going to retire on time.

It's very important when you think about the cost structure of a business. When you have older employees who have been around for a very long time, as most business owners understand, those are very expensive employees to have. Not saying the quicker you can get them to retirement, but the better you can help them get to retirement tends to be beneficial for both parties.

Scott Michael Dunn: How do I benchmark our 401(k) plan fees and performance?

Johnathan Horman: I think that it comes down to being open to the conversation.

It's really easy and simple for us, if you give us some simple information, like your plan document. That's a crucial piece of information. And your current cost structure, so that we can take it back and then give you an objective, evidence-based evaluation of your current plan.

And if you don't have a plan, we have the resources. It's the Retirement Plan Advisory Group, who are a part of an organization that helps us deliver value to small business owners and even mid-sized businesses.

So, again, it's all about engaging in the process and really seeking to find the answers that you're looking for.

Scott Michael Dunn: We're so grateful to have you guys. This is such a tricky subject for so many people and so many businesses. Designing the right goals and the process that provides the aptitude to find the way to make those goals come to fruition. The education.

You guys are a part of a family at Correct Capital, and you have families at home that create a connection here, a cohesive connection that I can sense.

I’m grateful that we’re able to sit with you. I’m grateful to be able to share this knowledge and to offer it to those who have the opportunity to view this and see what you have to offer. I’m hopeful this does great things, so more people can realize that this is a meaningful way to reach the community with more than just an offer.

This is a relationship, and they may be going in blind, but it's nice to feel like — I think in my opinion — to feel like if I go in then I won't be unprepared anymore, which is nice. It's really nice.

So I'm grateful. Thank you so much for joining us.

So we'll see you next time on Hexxen Studios. We have Correct Capital with us today. Trust matters.

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The opinions expressed in this program are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security. It is only intended to provide education about the financial industry. To determine which investments may be appropriate for you, consult your financial advisor prior to investing.

As always, please remember investing involves risk and possible loss of principal capital. Please seek advice from a licensed professional. Correct Capital Wealth Management is a registered investment advisor. Advisory services are only offered.

Financial Planning with Correct Capital Wealth Management

Financial planning involves more than picking investments. It includes understanding your long-term goals, managing risk, preparing for retirement, and making informed tax and investment decisions along the way. Working with a financial advisor can help bring clarity to those decisions and create a strategy that aligns with your priorities. You can schedule a meeting with a member of our advisor team, contact us online, or give us a call at 877-930-401(k) to discuss your financial planning questions.