Business Innovators Radio - Interview with Renée Kennedy, President of AAA Life Solutions Discussing Biggest Retiree Regrets

Episode Date: January 29, 2024

Renée Kennedy brings over 25 years of industry experience to the table. Their priority is always their clients and their financial stability, which is why they listen to their objectives and design innovative, personalized strategies that meet their unique needs.The focus is on customizing employee benefits plans for businesses to reduce or eliminate costs while offering tax savings. They also specialize in life insurance strategies, 401(k) rollovers, and more to help individuals and businesses build tax-free retirements, secure long-term care and death benefits, and more.At AAA Life Solutions, They always put clients first, with excellent customer service and up-to-date insurance strategies tailored to their individual needs. They do their due diligence to ensure that they make the right decisions for their clients, knowing that their choices will affect them for a lifetime.They provide peaceful solutions in uncertain times.Learn More: https://aaalifesolutions.com/Influential Entrepreneurs with Mike Saundershttps://businessinnovatorsradio.com/influential-entrepreneurs-with-mike-saunders/Source: https://businessinnovatorsradio.com/interview-with-renee-kennedy-president-of-aaa-life-solutions-discussing-biggest-retiree-regrets

Welcome to influential entrepreneurs, bringing you interviews with elite business leaders and experts, sharing tips and strategies for elevating your business to the next level. Here's your host, Mike Saunders. Hello and welcome to this episode of Influential Entrepreneurs. This is Mike Saunders, the authority positioning coach. Today we have back with us, Renee Kennedy, who's the president of AAA Life Solutions and we'll be talking about biggest retiree regrets. Renee, welcome back to the program. Thanks, Mike. Glad to be here.

You know, we always like to hear about regrets because if I can hear about someone else's regret and figure out how I cannot have that, that's a good thing. But it's such a punch in the gut for someone to go, oh, I wish I hadn't or I wish I had done this. So get it started a little bit with what is your perspective on regrets that retirees are experiencing? Well, we talk with retirees every day, and so many of them have these big dreams, and we want them to have those dreams. We want them to go on those vacations, go on that golf trip, you know, whatever it is that they've been working their whole life for. What we see in reality, though, is that people get to retirement, and they make some big purchases that they regret later. And it just is kind of heartbreaking. And one of the first ones that we see is that moms and dads in their 50s and early 60s,

you know, little Johnny will come and say, hey, I want to start a business or I want to buy a franchise. And so mom and dad take loans out of their 401ks or out of their savings because they trust little Johnny. And little Johnny is the apple of their eye. they know that, you know, they want to help them and they want to help their grandkids. And there's nothing wrong with that. But what we have seen is that sometimes little Johnny doesn't pay his taxes, right. You know, they have the big dream of owning a business. But the reality is, if they don't pay their taxes, they go out of business. Well, little Johnny didn't sign a promissory note with mom and dad. Mom and dad just eat it, right? And that could be $100, $200,000, $500,000.

that people invest in their family members or children or whatever, and they don't see a return on that investment. So that is the number one thing. And so, you know, one of the things I suggest to people in that position are, well, what else has little Johnny done to get the money from somewhere else? Well, little Johnny was in prison because he robbed a bank and he's out now and he's changed his life, which is wonderful, but he can't get a loan because of that. And I'm like, okay, well, has little Johnny talked to the person that he's working for to see if that person

might consider sweat equity or putting so many dollars a year like deferred compensation into an account for little Johnny so he can save the money that way? And they just don't think about this because it's just, you know, Johnny needs help. Let's write a check. And, And then they have a conversation. And maybe there's ways to help Johnny, but also with some levels and layers of protection for mom and dad. Right, right. Yeah.

And that's a huge thing. And so people, they have an open heart. They have a true heart and they do it out of love. But then they regret it later on because they think they're going to work as long as they can. And then they're just going to die in their sleep. And I know so many people that wish that work the case, but I'm sure. they're taking care of elderly parents and kids or green kids are all three, you know. And it's a, huge responsibility for the baby boomer generation that we all struggle with. But there are lots of

things people can do. Just the independence alone that you can teach and give your kids is just, it's priceless. So don't be so quick to bail people out with a check. Because what if your account goes down by 60% in the next year. Now you need the money and you can't get it because basically it's gone. And it's not counted as an asset when you loan somebody money, right? And so it's gone. Because it could then cause family turmoil because now you need it. They can't give it. So there's there's a lot of domino effect there. What about what about other purchases that you've seen people, you know, assume or think that they wanted and then kind of regretted it later. Well, one thing is that people think they're going to buy some property, move out in the country, and build their dream home. Now, I had a client that came in

that had, you know, he was a business owner. He had been single for many years. He married and this was his second marriage. And so they were going to buy some property and build their dream home out by the river and get the boat and all that stuff. And they were only out there after they got the house finished, it took them about two years. After they got the house finished, both of them were sick. They had to sell the house and the property for cents on the dollar to move closer to family in town where they had more resources like doctors, visits, hospitals, that kind of thing. So, you know, maybe you may not be in your dream home right now, but maybe the thing to do is consider building a home or buying a home that all your bedrooms are.

are not upstairs, you know? I've learned that because when Steve got sick, I ruptured my Achilles tendon. I had to have surgery and all of our bedrooms were upstairs. And when we bought this house, my mom said, you're not going to last five years in that house. And I'm like, why? And she goes, because all the stairs. And I'm like, oh, mom, we'll buy one of those little chairs that goes up like an elevator chair. And I was kidding.

But literally, it was five years that. I had to have surgery. I had a knee scooter upstairs, a knee scooter downstairs, and I was having to crawl up and down the stairs with a boot. Oh, my word. And so you don't think about those things. And so, you know, maybe in your 40s and 50s, you don't want to buy a house with all the bedrooms upstairs, you know? And, you know, having that dream car is probably great too. But, you know, what are your chances of it being, what are you going to have to insure it for, first of all? Yeah. Where are you going to to put it and what is that going to cost in storage or insurance and maintenance costs and things like that. So I'm not all about the money. I want people to enjoy life. You know, this is a wonderful

time to be alive. And it is a wonderful perspective that we have on the way back from the hotel after a conference, I got into a lift car. And this driver was from Afghanistan. And he spoke good English and he was very sweet and I started talking to him about his family. And when he started talking about what it's like to live in Afghanistan, I was so humbled by the beauty and the wealth and the resources that we are surrounded by. And, you know, when he said something about corruption, I said, yeah, we have corruption here. And he goes, no, you don't understand. No, you don't have corruption. You can vote. And I just thought, wow, okay. Yeah. It just kind of, it was very sobering, you know. And then when he said that he worked for the army and he bought this car so that he could be a

lift driver. And I'm not saying that that's what people should do, but it was a beautiful car. And I had no qualms getting in the car, you know, and then I'm like, wow, he spent everything. He took every risk he could take because someone was going to bomb his home in Afghanistan if they didn't leave because he helped the army. And it was just such a sobering, sobering thing. And I'm like, you know, maybe we need to focus more on helping the poor and the needy instead of this materialistic, you know, carryover from the 80s and 90s and change. I think a lot of us are changing. I don't think it's like that anymore. I couldn't agree more. And I think that when we kind of get in. into our own little world and like, yeah, yeah, but I need that thing. Do you really? And you mentioned

about the dream car and insurance. I think that sometimes people don't think of those side aspects of, oh, I can afford the car or the payment or I've got the money stuck away. But what about the insurance? And what about the other things? You know, you think about other tangible things like a boat or an RV. You know, same thing. You know, you've got the, you know, where are you going to put it? Where you're going to keep it in the off season? And what about the insurance? And then, And what I've always said about those kind of things is, how often are you really going to use it really? You know, like, you know, and I know that some people would go, oh, I'd live on the boat. Okay, good.

Then use the boat and get used out of it. But so many times people, like after the first season or two, it's like, oh, we took it out twice. Well, it's so expensive up front and to maintain it. Just go rent the best boat you can ever dream of renting two times in a year and save an unbelievable amount of money. So I think it's, I think what you described there with the lift driver. that applies to your perspective. Yeah, it does. And you have people that buy these, you know,

$400 million RVs, and then they realize what a pain in the butt they are to drive, you know. And you've got to pull a car behind it, so you don't have to drive this thing everywhere when you go to your dream vacation. And, you know, I don't know how many of our listeners have ever taken a travel trailer out or an RV out and really spent some time

the woods, when you have to set up, crank everything out, you know, make sure it has the gas, and then when you leave, go by the dumper on the way out. Yeah. It's not that glamorous. It's work. Yeah. Yeah. It might sound good tooling around the highways and going where you want, when you

want, but then the actual work of, like you said, set up, tear down, and all of that, it's grueling. It could be grueling. I've not done it, but I can only imagine. Well, and imagine you have a bad. back and you've got a need that you heard in football when you were younger. And, you know, then all of a sudden, everything becomes this decision of, are we up for it, you know? And we've had travel trailers. It's a great way to experience family time. And we did that when our kids

were at home. And we graduated from tents to a pop up to a travel trailer. And we loved it. But then it got to the point. And then we had a pontoon boat and we had a ski boat. But none of those, we didn't buy any of those brand new. Number one, because we couldn't afford it. But number two is because, you know, as soon as you drive it off the lot, it's like that brand new car that you buy and you drive it off the lot and it depreciates. Well, there's something wrong with that. So maybe you buy the car that's a year old and maybe you pay cash for one that's three years

old or four years old and you keep yourself from having this huge car note, this seven or $800 car note that is more than some retirement. house notes, you know, depending on how one they've had. And we've even had people that have bought like a second home or a cabin. Here's what I see happen is mom or dad retires. All the kids decide, now that mom and dad are retired, let's buy that little place on the lake that we liked because we got a boat, you know, and we could go out there and we could just have the biggest time. So mom or dad takes money out of their 401. which they have to pay taxes on, mind you.

And depending on when they retired, it might be taxes on the income when they were still working half a year and taxes on what they took out of their 401k at that same income level or higher. You know, we try to always make sure it doesn't bump somebody into another tax bracket and do half this year, half next year. But, you know, they buy this property and that's wonderful. but then they got to buy the renovations, you know, because it's not up to standards. And then they have to make sure most of them, if they're way out in the country on these lakes,

they can't even get insurance for them. You know, they're not insured. It might be in a floodplain. They might be in an earthquake. You know, you just don't know, you know, what you're getting until you get there. And then you've got to have jet skis. And then you've got to afford the little podunk hotel down the way when the whole family gets together. because we all won't fit, you know?

And so it's like all these things. So rent the cabin, rent the RV, rent the boat, and that way you have a good idea of really how much work it is. And save yourself some money. I mean, it's a lot cheaper to spend 20 grand on a house, you know, with three stories down on the beach than it is to buy a half a million dollar RV that not everyone can fit in. And now you've got this huge,

It's wonderful. They're beautiful. I mean, they are so amazing, but just rent it or borrow it or something. I don't know. And then if you rent it two, three, four, five times and think this is the life. Okay. Now you're going into it well prepared because you did it the smart way. You know, you mentioned taxes.

Talk a little bit about, you know, maybe taxes aren't really a regret because they're inevitable. but the regret could be, are people surprised at how much they have to pay in taxes? And then they regret they spent money on all these things. And now they're not prepared for taxes that they're dealing with in retirement. Right. There's something called required minimum distributions that we still have people call us and they've never heard of it. And they might have missed it for four or five years.

Well, the penalty on that is a 50%, I think it went down to 25. It used to be 50% penalty. And now with the new law, it's gone down. on to, oh, you only have to pay 25% penalty plus taxes on what you took out when you didn't pay the required minimum distributions, right? So that's a huge problem for people is they don't plan. Okay, if you've got all of your money and qualified assets, which are your IRAs, 401Ks, four, three Bs, anything with a four, okay, that means that you're going to have to pay taxes on it. Now, if it's a Roth, you don't, but you're limited on how much you can put in there.

But guess who knows everything? Just like this Fed coin that can come out soon, the government is going to be able to know everything. Well, they already know the 401k market. And that's how come they try to get the market up as high as they can at the end of the year because guess what? Retirees have to pay their required minimum distributions based on that last statement in December's amount, not what it fell to by 20% in February. So they're still paying RMDs on the higher amount, even though they might have a loss

in the next quarter or two. So they can take it out monthly. They can take it out annually. And usually the companies that they take it out from will pay the taxes for them. But you can count on 20% minimum that they will require you to withhold. And then if you don't have enough write-offs and you took out more money than you were supposed to, like to buy a boat, let's say a boat's $180,000, which this just happened last year. So she paid $180,000 for this boat. And then we had to estimate what her taxes were going to be not only the taxes on the individual boat like sales tax, but she had to also plan for the income taxes that she was going to have to pay.

to make matters more urgent, she wanted this boat because her mom wanted her ashes to be spread over this particular place, which is her favorite place in the world. And the daughter wanted to take her mom on the boat to this island and have one more day, one more day in the sun before she passed. And so there was a sense of urgency and there was this emotional aspect to it that, you know, sometimes making financial decisions in an emotional way can lead to a lot of pain later on. And we all know that making life decisions about anything emotionally is a very difficult place to be. Sometimes we have a choice and sometimes we don't. And she felt like she didn't have a choice that this was, you know, and I was saying, you know, things like, well, don't you want to rent a boat and just take her?

She goes, no, then she'll know it's not my boat because I showed her picture of it. And I was like, oh, man. Oh, man. And, you know, logically you could come back and you know what you wish you could say, but you can't refute things like that when they're feeling that emotion. Yeah. Well, and it's their money, you know. And honestly, we try to help people make the best decisions and then help them get their wishes and dreams and hopes and all those things come true.

you know, if they're willing to pay the price later, and then we move heaven and earth to make sure that they can sprinkle those ashes or whatever, but it ended up that her mom was not able to get on the boat at all. They did take the earn on the boat to the place and sprinkled her ashes there, which was very sacred and holy, I'm sure. but she wasn't able to put the money aside that we had taken out also for the taxes the next year. She had to spend some of that on medical expenses. And so when tax time came, she had to get more money out to pay the taxes that she did aside before then. So it's like this domino effect. And so sometimes we make these decisions based on emotion. Like if a man's dream or woman's dream is to have a boat, they're going to get that boat. Yeah. Then we just make the best of it. You know, they're going to do it. Now you just got to make

the best of it. And like you mentioned about, oh, we didn't think about this tax we have to pay. So we got to take out some more to get that. Oh, but that means we now got to pay taxes on what we took out. And it just becomes this never-ending cycle. And there's things that I know that people don't realize that even can be taxable. Like I know a common thing is Social Security. So talk a little bit about that misconception that retirees face? Well, social security can be taxable up to 85%. So if someone is working and they start their social security, a lot of times they think, well, you know, that's my Social Security. I've already paid taxes on that. But that's not true. It's based on, you know, we have like a marginalized tax bracket system. So it's not 100% of the Social Security is taxed at the

highest rate, it's sort of done an increment so much at this amount, so much at that amount. But the problem is, you know, I think the new threshold is 44,000 per couple without you having to pay taxes on your Social Security. But that doesn't mean that you shouldn't work. You know, don't let paying taxes on your Social Security because what if you use the Social Security for some investment or you make it grow? I mean, there's a lot of things you can do that can utilize that Social Security in a way because we honestly don't know how long it's going to be there with the 100% benefit. So if someone has health issues that run in their family, a lot of times I'll tell them, hey, tell me about your mom and dad.

Tell me about your grandma and grandpa. How are you? What are you dealing with? What medicines are you taking? And then we can say, okay, well, you know, Uncle Johnny died, dad died, mom died, all by a certain age. I'm going to dive in too. And so we mitigate that, but we also plan for the best. You know, we plan for the worst and hope for the best.

And so that way they know, okay, well, your Social Security is going to be taxable, but you need that extra money to finish out being able to afford your hopes and dreams. Because with the lady with the boat, it also reduced her monthly income by a considerable amount. So when she took out there, the money, she didn't have plans to take the money out. So it was in a place where if she took it out, then it would cost her to do that. And so she did that. But it also cost her the opportunity cost of not having that same income every month for the next 30 years, you know, because it was reduced by a third. And that was money that she was counting on, you know. So the other thing is disability,

you know, like some people file for disability, and then they can't work. And then they let that paying taxes on there or being, you know, getting their disability canceled, which is why you need more disability options. You need short-term disability. You need long-term disability just with what we're dealing with with my husband. And thank goodness we have it, you know. And so we don't have to worry about that. And but there are taxes on everything that.

we do. And there's really not a lot we can do about it if we don't plan. You have to mitigate taxes just like you mitigate risk. And people don't mitigate taxes. They just think, I guess there's still that ostrich mentality. I was literally thinking the word ostrich. Yeah. Yeah. It's just, you just think it's it, what am I going to do? It's too, you know, confusing for me to think about now, but then it's going to be too painful to deal with if you didn't plan. So, which is the less pain. Yeah, right. And hope is not a strategy. You know, if you close your eyes and you hope it all works out because you've worked hard, you're going to be screwed and you need to be prepared. If you are hoping and you're not working to make sure you've mitigated risk and mitigated

taxes, then you're going to be in for some rude awakenings in retirement. And we want to protect people from that. We want you to have peaceful financial solutions in uncertain times. And uncertain times can be market times. It can be personal tragedy times. It can be, you know, you can't work. I mean, you just have so many different things that can happen. And I'm not a, I'm not a doomsayer. I just want people to to really look at their history, look at their family, look at where they are. And maybe they work a year or two longer, you know, that can make a huge different sometimes. And don't put all your money in qualified accounts. If that lady had had a tax free or some taxes paid, that could have saved her like, you know, 120 grand, you know? So it was just crazy how much money it cost her over time and opportunity cost. And people don't think about that. So what are some other things that people can do to plan to mitigate these things? Because like you said, we can't avoid. taxes, but we can mitigate or lessen them.

But you mentioned, you know, if she had put it into a tax-free account, what are some other things that people should understand? Well, they need to think about before they sign the paperwork to put mom and dad in a nursing home, they need to really think about that. They need, even if they've got power of attorneys, some of those documents are worded that that holds them responsible for any leftover cost. So that can be huge. they need to have a good attorney, which we have CPAs and attorneys and certified financial planners

and people on our staff that we really use and utilize. And we call it a multidisciplinary approach. So you've got capital gains taxes. You've got estate taxes. You've got to do, there's something called a half loaf, like spend down a half loaf. So if mom and dad have money and one of them needs to go in a home, but they have this retirement account. You have to spend down half of it. You know, the surviving spouse can stay in the home. But then if they utilize any of the government programs, they can have a lien on their house. So the house doesn't go to kids and grandkids as it gets tied up and probate and it's just a mess. So there's a lot of things that people can do to not have those issues. But they can't wait until they need it. They've got to do it beforehand.

Plan ahead. Yeah. You can't be driving a car with no car insurance and then wreck it and then call some car insurance carrier and say, I need to insure my car. I just wrecked my car. At that point, it's too late. Yeah, exactly. Well, I think that sometimes people go, yeah, but, but if I do some of these things, then I'm going to be at risk of volatility and losing money. So what about some of the safe peace of mind type of accounts that, you know, might even have a guarantee. Are those things possible to help with this situation of, you know, making some of those plans? Absolutely. And a lot of those types of accounts come with a doubling factor on the income if you need long-term care. And there's no underwriting. So, for instance, now these are hybrid, they're hybrid accounts. And that means they

have sort of a fixed, they have an uncapped interest potential. They have usually have bonuses. They have guaranteed roll-up rates on the income side. So depending on what the person needs, the first thing we try to decide is help them decide what is the purpose for this money. What is the job that this money is supposed to do? So this money has a job to do and we make sure that it does that job. Now, if there are extenuating circumstances, you can get to the money. You can get to all of it. It just depends on what is going on. but you can't put it in today and take it out tomorrow. So if people really understood how these accounts work,

they would just be just so excited to understand them. But there's so much negative propaganda out there from different investment firms because they don't want people to know about these. They don't want that they're other options. There are tax-free retirement accounts. If you're in good health, you can get those. And then there are there are, or income accounts that you can set up with no underwriting.

You just have to have cash or roll over a 401k or an IRA. And there's no taxable situation when you roll it because it would go same to same. So if it's an IRA there, it's an IRA here. But what it does is, number one, right away, it eliminates losing. And when I ask you today, how much are you willing to lose? if you tell me zero and you tell me you're at a brokerage firm, I'm going to tell you you're in the wrong place. Yeah.

And that's for you. That's not for me. Because you can stay there all you want and keep living that myth. And they're going to keep taking advantage of you. But I was a stockbroker. I was in that business. I worked for Wall Street firms, big names, Goldman Sachs, Morgan Stanley. I understand the game.

I'm just not willing to play it anymore because it's too. important to the people that I help and care about. Well, I think that is such a wonderful spot to stop the conversation on these retirement risk and taxes. And I'm envisioning in my mind this big question mark. You know, the big question mark of what do you do? And everybody's situation is different. And you're not going to make the same recommendations to every single person.

But if someone is interested in having you take a look at their situation, what's the best way they can reach out and connect with you? Just go to the website, AAALifesolutions.com, or they can email me, Renee, R-E-N-E-A-A-A-A-Lif Solutions.com, and put in the reference, just put a question mark, help, and we can just do a discovery call and see if there's something that we can do. We do want people to have, and there are many peaceful financial solutions in these uncertain times, And that's our motto. If people understood that, I'm not, I'm not selling anything. I'm just talking about what can bring you peace and joy and happiness in your life is not to have the stress and trauma of what's going to happen to my money if the market goes down again.

And we do take care of that. We get rid of that question. So I appreciate you so much, Mike. Thank you so much. You are welcome. Thanks again for coming back on, Renee Spend. a real pleasure. You too. Bye-bye. You've been listening to Influential Entrepreneurs with Mike Saunders.

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