By Jimmy Megahern
As co-founders of the retirement planning firm URA Group AZ (formerly United Retirement Advisors Group), Steve Mallory and John Kieber like to kick off initial client consultations with a quick rundown of what they call the three stages of retirement: “Go-go, slow-go and no-go.”
“In the ‘go-go’ stage, you spend the money that you’ve accumulated while you still can,” Mallory says. “Travel, if that’s what you want to do, spend it on the grandkids, make a new purchase—whatever.”
In the “slow-go” stage, maybe you’re not as active, you can’t travel as much, but people are living longer. The key to a successful retirement is living the “go-go” stage to the fullest while not sacrificing financial quality of life later in the “no-go” stage.
Operating in the Scottsdale Airpark, Mallory says they see a lot of people in that first stage.
“The majority of our clients are in the Scottsdale/North Phoenix area. But once they retire, we have clients who live on a boat in San Diego, we have clients who live in high-rises in Houston. They’re taking advantage of the go-go stage—especially the ones living on a boat in San Diego,” he says with a laugh.
Helping such clients transition from the fast lane to a slower, more deliberate pathway is a challenge that the two SEC Series 65 fiduciaries address each day at their firm. Along with Office Manager Roseann Sharp, they were recently awarded “Best Financial Planning Services” by Scottsdale Progress for the second consecutive year (2019 and 2020). It’s a fertile market, particularly for the Airpark’s key demographic. According to the latest research, baby boomers are retiring in record numbers, about 10,000 per day. Yet 45% of that group are entering that stage with no retirement savings, according to the Insured Retirement Institute.
Kieber—like Mallory, a former Midwesterner who settled in the Valley about 20 years ago—says he got into financial advising after he signed up for his first 401(k) at a previous job and discovered he lacked the knowledge he needed to make smart tax and investing decisions.
“That’s why I do this,” he says. “Because nobody got in front of me back then and gave any advisory expertise on basic concepts such as was it best to use a traditional 401(k) or was it better to use a Roth 401(k) option. That concept could lead to a lifetime of tax-free growth in the proper situation. It wasn’t even about what to invest in (although that is important as well). It was more about not getting educated on the effect of the decisions I was making at the time. Nobody really had the capability to provide a complete financial overview of all aspects of my life, not even my financial planner.”
Together with now-retired adviser Garry Madaline, Mallory and Kieber created and developed the C.O.R.E. process, shorthand for “Comprehensive Objective Retirement Engineering.”
Essentially a comprehensive “retirement blueprint” designed to educate older adults how best to transition from what the team calls “the accumulation to the distribution stage of life.” The process looks at everything retirees may encounter in today’s complex financial world and combines them all in one plan so all aspects are working together to achieve retirement goals.
Concepts such as tax status of accounts, maximizing available income streams, what order to spend down retirement accounts, and defensive positioning of stock market assets are all considered interdependently of each other.
“Most people, and many advisers, understand all the concepts individually but tend to make decisions in ‘a vacuum’ for each,” Kieber says. “Unfortunately, when meshed as an overall plan, this approach lacks the synergy essential for a truly efficient plan. We take all of the concepts on in a collaborative manner with each client so they understand why specific actions are recommended.”
Before the team delves into all that, however, it starts with a consultation aimed at understanding the client’s goals and retirement objectives.
“We have a program we use called a retirement analyzer, and we plug everybody’s information into that,” Mallory explains. “Things like how long you’re planning to work, what your salary is and what kind of monthly expenses you have. Then we arrive at a baseline of what it’s going to cost you when you step away from your job and no longer have that salary coming in.”
From there, the team starts developing an individualized plan for each client. That’s when the true value of Mallory’s and Kieber’s combined experience really comes into play. Their website notes there are many different strategies on how to take your Social Security payments.
“All kinds of variables that go into making those decisions,” Mallory says. “But a lot of people don’t understand what financial opportunities are available to them. Our job is to educate them on what those variables are so that they can make the best decision possible.”
The team also keeps up on the ever-shifting financial landscape.
“There has been a change in the laws that affect retirees exclusively that just went into effect at the end of December,” Mallory says. “It’s called the SECURE Act (Setting Every Community Up for Retirement Enhancement), and what it did was it moved the age at which an individual must begin taking required minimum distributions (RMDs) from 70 1/2 to 72, which is when the government forces you to take out distributions on your tax-deferred accounts—your 401(k), your IRAs, your 403(b), your 457. But in return, they took away what they call the inherited or stretch IRAs, which made it possible to leave money behind to beneficiaries—kids, anybody other than your spouse. They used to have a lifetime that they would be able to take it out. Now, it has to be done in 10 years.”
Moreover, the COVID-19 pandemic that has crippled the world over the last 10 months has frightened people who had retirement in their sights.
“The reality of the stock market has come front and center to many over this past year,” Mallory says. “Markets can’t go up forever, so if you don’t have a comprehensive investment plan, you’re really asking for unwanted stress.
“Look at how long it took the economy to recover from the financial crisis of 2007-08. If you’re 30 or 40 years old and you have a paycheck coming in every two weeks, you have the time to wait until it recovers. It’s considerably different when you’re 65 or 70 years old and you need to live off your portfolio so keeping its value intact is paramount.”
Very simply put, a different approach should most likely be taken when investing in retirement versus investing while you are working. Accepting this is critical in beginning to design a retirement plan.
Additionally, retirees face expenses they never had earlier in life. “70% of people in their retirement years will face a long-term care need,” says Mallory, quoting current figures from the U.S. Department of Health and Human Services.
“And right now, the average cost of a semi-private room in a long-term care facility is around $6,800 per month. How are you going to address that cost if you need it? Even if you don’t, the average retiree spends around $4,300 per year on out-of-pocket health care costs. You have to work things like that into your plan.”
Kieber adds, “Routinely, we are asked about basic concepts to 401(k) plans that may help make more informed decisions. Most times it has very little to do with actual investment advice and much more about using the options available to you in the best way tax wise.
“We just say, ‘Fire away. What are you curious about? What did you read about that you’re unsure of? What do you need to know to be more confident about your retirement planning?
“If these past few months haven’t proven that a financial plan is essential, I’m not sure what will. We’ve been living through one of the more unpredictable times our world has ever seen. Back in April, I’m not sure any of us knew where we were going. Now, with promising vaccine reports, things are looking up. However, our concern is what things will look like when we must start repaying the debt we’ve incurred as a country fighting this disease.”
Mallory says now, more than ever, is the time for us all to think about becoming as tax efficient as possible.
“People we work with are very educated, smart individuals who have done very well for themselves,” he says. “They do, however, lack information to make such important decisions, mostly due to the complexities of all the factors that need to be considered. That’s where we can help, providing the most up-to-date information so you can make the best educated decision possible.
“The arrival of the COVID-19 virus and the resulting dilemmas impacting society spotlight the necessity for addressing the uncertainty of our immediate and future financial health in these uncertain times. Let us partner with you to navigate the best road forward toward your retirement destination.” ν
URA Group AZ
14300 N. Northsight Boulevard,
Suite 122, Scottsdale