Why Saving More Isn’t Enough: The Truth About Retirement Planning

Episode Description - Why Saving More Isn’t Enough: The Truth About Retirement Planning

If you could potentially save over a million dollars in taxes when you retire by making a few changes in your retirement planning strategy now, would you do it? Karen Stawicki and Samantha Irish, a dynamic mother-daughter financial planning team with over 50 years of combined experience, are betting you would … if you knew how! 

Samantha and Karen are on a mission to revolutionize retirement planning. They’ve identified a critical flaw in conventional retirement planning: the assumption that simply saving enough money and getting good returns will guarantee a comfortable retirement. 

While that strategy makes sense on the surface, it ONLY makes sense if you’ve factored taxes into the equation. That’s exactly what Karen and Samantha do for their clients. 

Through their innovative "Power of 3" approach, Karen and Samantha are helping clients maximize income, reduce risk, and minimize taxes so they can retire with confidence.

For those approaching retirement or going through a divorce (or doing both!) this podcast can be the difference from being able to retire in comfort and ease, and not being able to retire at all.

Show Notes

About  Karen and Samantha

Karen Stawicki and Samantha Irish are the powerhouse mother-daughter team behind Compass Financial, a boutique wealth solutions firm based in Charleston, SC. With over 50 years of combined experience, they’re on a mission to revolutionize retirement planning. Through their innovative “Power of 3” approach, they empower clients to maximize income, eliminate risks, and slash taxes, granting you smooth sailing into your golden years.

Connect with Karen and Samantha

You can connect with Karen on LinkedIn at Karen Stawicki and with Samantha at Samantha Stawicki Irish and on Facebook at Compass Financial.  You can follow Karen and Samantha on Instagram at Compass Financial and on YouTube at Navigate Your Wealth.  To find out how to work with Karen and Samantha and have them assist you with your retirement planning, visit their website at Compass Financial.  And grab a copy of their new book The Power of Three.

Bonus

Navigating Divorce Checklist These 17 points can help you take control of this aspect of your divorce and plan for a more secure future.

Key Takeaways From This Episode with  Karen and Samantha

• Karen Stawicki and Samantha Irish, a mother-daughter team with 50+ years of combined experience at Compass Financial, who focus on revolutionizing retirement planning and whose nickname is "The Tax Terminators"
• Karen and Samantha developed the "Power of Three" approach, which assigns dollars to three specific jobs: providing income, maintaining liquidity, and growing assets.
• Traditional retirement planning often fails because it doesn't account for the different rules in the "distribution phase" versus the "accumulation phase" of retirement.
• The "retirement red zone" (five years before and after retirement) is critical - negative market returns during this period can devastate retirement planning.
• For guaranteed expenses in retirement, they recommend using guaranteed income sources: pensions, Social Security, and guaranteed income annuities.
• Modern annuities protect principal and beneficiaries, unlike older versions where insurance companies kept remaining funds after death.
• The team specializes in tax planning, showing clients how to avoid optional taxes through strategies like Roth conversions (potentially saving over $1 million in taxes).
• During divorce, assets are not created equal - retirement accounts worth $1M on paper might only be worth $600-700K after taxes, compared to a $1M house.
• Their strategies work best for clients with $1-6 million in assets, a group they believe is underserved by traditional financial advisors.
• A traditional 4% withdrawal rate from retirement savings only provides a 70-80% chance of success, which they consider too risky compared to guaranteed income strategies.  A million dollars only generates about $40K/year at 4% withdrawal rate (with 70-80% success rate).

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Transcript

Why Saving More Isn’t Enough: The Truth About Retirement Planning

SUMMARY KEYWORDS

 annuities, retirement red zone, distribution 

SPEAKERS

Karen Covy,  Karen McNenny

Karen Covy : 0:10

Hello and welcome to Off the Fence, a podcast where we deconstruct difficult decision-making so we can discover what keeps us stuck and, more importantly, how we can get unstuck and start making even tough decisions with confidence. I'm your host, Karen Covy, a former divorce lawyer, mediator and arbitrator, turned coach, author and entrepreneur. And now, without further ado, let's get on with the show

With me  today. I have two guests. I have Samantha Irish and Karen Stawicki, and they are a powerhouse mother-daughter team behind Compass Financial, a boutique wealth solutions firm based in Charleston, South Carolina, with over 50 years of combined experience. They're on a mission to revolutionize retirement planning. On a mission to revolutionize retirement planning Through their innovative Power of Three approach, they empower clients to maximize income, eliminate risks and slash taxes, granting you smooth sailing into your golden years. Samantha and Karen, welcome to the show.

Karen Stawicki: 1:18

Thank you so much, Karen. I appreciate being here and it's going to be a fun conversation. I already know that.  

Karen Covy : 1:26

And welcome to you too, Samantha. And the bio that I read, which was very short, I don't think it does you justice either one of you. So if you could just fill in a couple of sentences about what you do, how long you've been doing it and maybe even why financial services.

Karen Stawicki: 1:48

Yeah, Samantha, I'll start, okay, coming up to my 45th year doing this. It started as a default position. I wanted to be a bookkeeper and I found that financial planning was a lot more fun. And over the last four decades I have seen a lot of changes. Obviously, the stock markets changed, taxes have changed, the way people save money and all of that. It's just changed so much and it's been a revolution for me. But I have to tell you 10, now 11 years ago, when Samantha joined me as my business partner, she truly revolutionized our business. I thought I was going to retire, train a rep, three to five years, exit stage left. I'm having so much fun. We've got a book, we've got a TV show, we've got all kinds of fun stuff going on, and it's all thanks to her genius. And I told her she's going to have to carry me out feet first in a box because I'm not going anywhere.

Samantha Irish : 2:48

That's amazing, well, and I am very much okay with her not going anywhere, because I think that I bring new perspective and a vigor for really moving forward with the financial times and also just the world that we live in.

Obviously, when I first started working with mom, every client had a binder that all of their information was in and I was like, okay, can we please make something digital? But growing up in the financial industry, obviously I had mom and dad both of them with this knowledge and so I just always assumed I want to be in finance. I want to be in finance, but I don't think I truly understood the impact that I was going to be able to have on people's lives, and that's the best part about this. When we sit down with a client from the first meeting until their first annual review a year later, what we get to see and the changes and the confidence that is built is so rewarding. I know why she doesn't want to leave, because now it's fun again and she gets to see that passion in our clients and we get to do it together, which is always really fun.

Karen Covy : 4:02

That is so beautiful, and the reason that I wanted to have the two of you on the show aside from the fact that you are amazing human beings and very knowledgeable is that you approach financial planning, or the financial industry, very differently than a lot of let's call them retirement planners right, you have a different approach, so can you tell the audience about that?

Karen Stawicki: 4:29

You know, the financial industry has really done a disservice, sadly, to the public. They told you, save enough money, get a good rate of return and you'll be fine, and nothing could be farther from the truth. You know the way I operated my practice in the 80s and 90s had to change because we were making double digits 25% a year return. I would do a systematic withdrawal, which meant you take a percentage off of what you earned and you're good. At that time we were doing a 7% systematic withdrawal. A client had a million dollars. I gave him $70,000 of income. They were happy. Their portfolio went up to $1.4 million. I did the math and said I'll give you $84,000. They were happier.

Karen Stawicki: 5:25

The market in large was down 50% over those three years because 2000 was followed by 9-11 in 2001. And 2002 just decided to follow suit and be a bad year. Well, you can imagine that $1.4 million dropped to $9 and then $7. And I can't take $84,000 off of a $700,000 portfolio. So now I'm going back and saying we're going to have to cut your income. They didn't like that and I realized at that time I was never going to go back to a client and be in a position where I had to have that conversation. So that is when we started looking at different tools. That is when we realized that when you're earning your money, when you're saving and growing, that's called the accumulation phase, and the rules are very different. When you retire, you enter the distribution phase and the rules change. It's a completely different game.

Karen Covy : 6:25

Wow, Samantha, can you tell me what rules changed?

Samantha Irish : 6:31

The rules are different during distribution because of the way that averages work. Remember, when you are in accumulation you can go forwards and backwards in a 10-year period of time 2, 4, 9, 12. It doesn't matter where the numbers come from During those 10 years. You add them all together and divide by 10. That's how average works. But in distribution the timing is so important Because if you have a positive year, then no harm, no foul to your income. It just grew and you get to take your distribution. But if you find yourself with a negative year, now your account balance has been impacted and if you try to take the same distribution that you took previously let's say it was 4% now the impact to your overall account value may be 6% or 8%, so you're not actually taking any more money, but the impact to your balance is significantly larger.

Karen Covy : 7:38

So if I'm tracking right and, trust me, math has never been my strong suit, but if I'm tracking right, then from the minute your portfolio takes a hit, from that point forward, you've got less to draw from. You've got a smaller income.

Karen Stawicki: 7:55

You know we didn't coin this phrase, Karen Prudential did, I'll give them the credit. But it's called the retirement red zone and, honestly, the five years before you retire and the five years right after you retire is the 10 most critical years in your entire life. Because it matters. And here's an example. I love using analogies. My clients tell me my stories, help them like grasp it. So while you're working, you're saving. You're saving, you're running the bases. It's a baseball game and now you're getting close to retirement. You are standing on third looking at home. Home is retirement. You are so close you can taste it right. This is what I tell my clients. If that's where you are, if retirement is right there, within reach, this is not the time to play chicken with the third baseman and the catcher Right Like. This is not the time. And that's what happened.

Karen Stawicki: 8:48

So in the late 90s the market had been doing so well for two decades that everybody said I just I can make this money double one more time and then I can retire. And I actually had a client that called me three years after 2000. He wasn't a client at the time. He called me and he said I retired from AT&T with $2 million three years ago. I now have a million and I don't know what to do. And he got stuck. When that negative hits in the front end, you can never recover. He went back to work. We worked with him. He retired again and he's been retired for 20 years and he's very happy. And he's been retired for 20 years and he's very happy and he's still my client. But at the time he had not been given that advice and he was taking money out and the market was going down. So we have the double whammy.

Karen Covy : 9:36

Okay, first of all, I don't think I've ever heard this put this way before, so OMG, right. And second of all, before I jump out the window, tell me how to fix this. I mean, if people are nearing retirement right, what should they be doing or thinking about? How do you help them avoid this double whammy?

Samantha Irish : 10:04

I'm going to jump in here really fast, because I think that what is so important to understand is that it was an evolution, right? This was not a oh my gosh. This strategy isn't going to work. We have to flip the switch. But what mom was able to do from 2000 to 2010, and then really from 2010 to 2020, was to assess what was actually happening in the marketplace.

Samantha Irish : 10:34

We recognized that your money has to have job descriptions and there's only three jobs that dollars can do. They can be liquid, which means that they're accessible. They can provide income, which means that they're money in your pocket, or they can grow. Those are the three things. That's what your dollar can do. Most people are asking their dollars to do all three. They're putting it in the market. They're asking for growth. They're taking a withdrawal. They're asking for growth. They're taking a withdrawal, so they're asking for income. And when the vacation comes up, they're asking for more income and they are hoping that it's liquid, so they are potentially selling when the market is down. They are exposing themselves to unnecessary risk. So we go back to those original job descriptions and we say every dollar will only have one job.

Karen Stawicki: 11:32

When we engineer a retirement strategy for our clients, we begin with the end in mind, right, we reverse engineer what does retirement look like for you? How much income will you need? What do you want to be doing? Are you going to be traveling more? Are you going to be spending more time with the grandkids? Are you philanthropic? So we get all of that information and of those three job descriptions. That is the power of three, that is the proprietary model that we created and that is the book that we wrote, the Power of Three, which outlines how to assign each dollar the proper job. And when we begin with the end in mind, the very first job description that we're going to assess is income. How much income do you need in retirement? Great. How much is coming from a pension? None or something. It's one or the other, right? Not very many people have one today, but for those who have one, good for you. And so we put that number down zero or whatever it is.

Karen Stawicki: 12:36

The next guaranteed income is social security. How much social security will you have? And that is a big one. That our firm does that no other financial advisor, in my opinion, does as well. We think outside the box when it comes to social security, it is not a one answer fits all situation, but I'm telling you out. We've got some tricks up our sleeve and we talk about one of them in the book about how to use your Social Security to pay for Roth conversions, but I digress.

Karen Stawicki: 13:09

The second guaranteed income pension Social Security. Now, we believe that if you have expenses coming in retirement that are guaranteed to be there, that you should cover it with guaranteed income. Not hoped for income, not should be income, not if the market does well income, but guaranteed income. And there are only three. I named the first two. The third one is a guaranteed income annuity, and I know annuities are the A word, but let me tell you what your social security and your pension are. Annuities, yeah, because it's a guaranteed income for life from your company, from the government and in this case.

Karen Covy : 13:53

Let me stop you for a second, just in case there are people listening who don't know what an annuity is. Can you explain that ?

Karen Stawicki: 13:59

Absolutely, Sam. You want to explain.

Samantha Irish : 14:03

Yeah, so an annuity is really a vehicle and a tool created by the insurance company that provides either a guaranteed stream of income or a guaranteed growth vehicle. There's two different. There's a lot of different types of annuities, but ultimately those are the two jobs that it does. It can either give you growth that is guaranteed, or it can provide you income that is guaranteed, and you can either pay into it with a lump sum of money or you can make monthly payments to it a lump sum of money, or you can make monthly payments to it In most cases, and how we use it as a tool is by taking a lump sum and putting it into an annuity that generates guaranteed income that you can never outlive. We like to say that with an annuity, if you use it and design it correctly, you'll actually tap into other people's money OPM and that's the kind of money we like to use.

Karen Covy : 15:00

Yeah, that sounds good to me, but let me ask you a question. If let's say and I'm going to make up numbers here let's say you put $100,000 into an annuity and that annuity is guaranteed to pay you I don't know $10,000 a year for life, what have you? And you die the next day? What happens to your hundred?

Karen Stawicki: 15:22

So when you first of all, you wouldn't get $10,000 off of a hundred because that would be a 10% return. They're closer, depending on your age and the product. They're closer to between four and six and a half percent. However, however, it's a great question because people say I don't like annuities because if I die, the insurance company keeps the money. Those are old school. They don't sell those anymore.

Karen Stawicki: 15:44

When you take your first payment out, when they send you your first payment, it does get deducted from your money and so each year your money is going down. But remember they made a commitment and a guarantee to pay you forever. So what Samantha was just talking about is we, when we run out of money, we're going to get into other people's money because they have to keep paying us, and social security is just like that. You know we pay into FICA and when we make our, when we get our first social security payments, we are getting our money back. Now the goal is to live long enough to get OPM other people's money. But here's the difference with social security when you die, if you are married, your check or your spouse's check goes away, whichever is the smaller one.

Karen Stawicki: 16:37

With an annuity, you can set this up to be a joint distribution. So if you die, we will miss you, but your spouse is still going to get a check. And if you are single and it's just in your name when you die, if there is still money in the bank that can be, or in the bucket, that will be dispersed to your beneficiary. So if you that they made one payment to you and you got hit by a bus, I'm so sorry for your loss, but your family is going to get the money. The insurance company does not keep it.

Karen Covy : 17:10

Wow, I love this. I have not. This is, this is all new to me, so this I'm  getting excited here.

Karen Stawicki: 17:17

Well, Karen, you know the. Here's the thing. I want to paint this picture because, again, we're just starting with this one piece. We're figuring out I want $10,000 a month, $15,000 a month, whatever the number is right If pension is going to provide 50,000 and social security is going to provide 30,000, and I need 200,000. Well, that's 80. So now I've got a gap of 120. So now I go to the assets and say how much do I need to generate $10,000 a month? See, now, once that job is done, once I know my income is covered, now I go to the next bucket, which is the liquidity and access for emergencies and opportunities. And then the third bucket is the growth bucket, which is the stock market.

Karen Stawicki: 18:09

Now here's the thing when you're retired, people say oh, you know, you have to have a 70-30 portfolio with stocks and bonds, or 60-40. Some people may have heard those kind of terms whatever. No, that's baloney. Bonds are not going to help you. That is not what you need. What you need is to know that you can put your head on your pillow at night, sleep like a baby and wake up knowing that your income is covered. You need to put your head on your pillow at night, sleep like a baby and know that you've got a liquid access bucket for emergencies and opportunities and you've got to put your head on your pillow at night. Sleep like a baby and know that you've got money in the market, because the market over time always wins. The key is when you have your income needs covered. You never have to sell the stocks on a bad day to pay a utility bill.

Karen Stawicki: 18:59

Yeah so it doesn't matter if it goes down today, and that's what our clients love. When we build this out for them, they have all of their needs met and they wake up not only with a good night's sleep, but they're not afraid to turn on the TV, because there's no bad news that makes so much sense, especially because, for anybody who's paying attention to the markets everybody's talking about, they're due for a correction, recession, all the things.

Karen Covy : 19:28

And the challenge is nobody knows the timing of it, right? So all the economists can say is well, we're due. Is it this year, next year, 10 years from now? We don't know. And so all you can count on is that what goes up comes down and the trend over time might be up. But if you to your point, Karen, if you have to sell, if you need that money, and you have to sell on a down day, it's not a good thing.

Karen Stawicki: 19:56

So we take that off the table so that never has to happen.

Samantha Irish : 19:59

And I think it's important to recognize that most people's participation in the market is motivated by their emotions. Fear and greed are the two factors that most people use to guide them two factors that most people use to guide them. And when you have the power of three strategy because your income is guaranteed and you have the liquidity that you need now, all of a sudden, you get to participate in the market like you're in your 20s. You've got nothing but time. You don't have to let fear and greed get in the way. You get to play like you're in Vegas and you are on a winning streak. So that's the type of empowerment and excitement we want for our clients not being constantly in the news, wondering, is the correction going to come tomorrow? Because if you take your money out of the market and the correction doesn't come for three years now, you've missed a huge opportunity.

Karen Covy : 20:55

Right, yeah, that's true. So you know, speaking of fear and greed a lot of. As you both know, I work in the world of divorce and marriage and relationships and you know when a marriage is starting to fray at the edges or crumble, or it's done completely, there's a lot of fear. So when somebody is facing a divorce, there's so much fear around that event, especially for people who may be going through it in their 50s or 60s, and I mean earlier in life too, but the later you get, the more you're assuming you're going to retire sometime soon, right?

Karen Covy : 21:35

So I know the two of you have put together some points that people who are going through a divorce should think about. Would you mind sharing a few of those?

Karen Stawicki: 21:45

Yeah, you know the interesting thing thank you, Karen and they can get a copy of this. It's a 16 bullet point piece of things that you don't know right, it's all these things that we put together that you know you don't think about. Like, cancel your joint accounts is obviously an obvious one, but your cell phone coverage or, you know, looking at your spending and your income, you know income was coming in probably with two people and now it's only going to be one. You know one person out of the house doesn't cut the expenses in half. Also, retail therapy, while it may be fun, can be very dangerous. So we want to be careful, obviously, of that.

Karen Stawicki: 22:29

But you know the big things on there are. Assets are not created equal. So, retirement accounts, you know, we had a client one time actually go through a divorce and she said my husband said he's going to keep the house and I can have the retirement account. They're both a million dollars. Is that a good deal? And I said under no circumstances, because he can sell that million dollar house today for a million dollars and your IRA is a joint account with the IRS. It's not worth a million, I promise you.

Karen Covy : 22:58

Okay, so you and I I mean all of us on the call understand why that's true, but that gets into taxes. Samantha can you explain that to listeners why a million in the house is not worth a million in retirement?

Samantha Irish : 23:13

The million in retirement. Mom just said it. It's a joint account with the IRS, which means that that account, while the paper statement value might be one million, taxes have never been paid on that account, which means that when you take the money out of that account, it will be at whatever your tax bracket is at the time. So now you're taking a million-dollar paper statement and you're hoping that it's worth a million. But we can guarantee you it won't be, because there will be some version of taxes.

Samantha Irish : 23:45

But if you know that your taxes are 30% right now, then your million-dollar account is actually closer to a $700,000 account. But what if you waited a few years because you're not of retirement age so you can't access that money right now? And when you wait the five additional years before you can access the money, now taxes are higher and now not 30% but 40%. You went from what you thought was a million dollar account to a $700,000 account to now a $600,000 account. So the spouse who took the house sold it, broke even and walked away with almost a million dollars is laughing that you now have a $600,000 account and you felt confident that you were getting an equal split.

Karen Covy : 24:34

Yeah, and that's something that is so important for people to know, because I think if people are listening to this conversation right now, I know that there are some people who are thinking my head is spinning. I don't understand this. Oh my gosh. Oh my gosh, which to me says, yeah, that's why you need to talk to Karen and Sam, but can you for those people who are tracking? I mean, the point is, taxes are important and understanding. It's not important that you as a human understand them. If you've got a financial advisor who does and I know taxes are a place where you two shine. You are amazing in what you do in saving people money in retirement through tax strategies. Could you share something with us? I mean just for my own personal selfish interest. I want to know.

Karen Stawicki: 25:30

You know we thank you for that, Karen, and for those that are listening. If you are mind blown right now and saying I can't digest all of this, it's too much, I you know, and you're running scared or you're nervous or you're shutting down, don't do that. We promise you. If you reach out to us, we take it slow. This is a podcast. I'm getting excited about these stories and I'm going on and on and on.

Karen Stawicki: 25:52

But believe me, when we sit with our clients, we take it one story, one step, one strategy at a time. It is not going to be drinking from a fire hydrant, it is truly going to be a drink of water, and then another drink of water and another drink of water. But you're right, Taxes are really our specialty and you know, Sam and I have been nicknamed the tax terminators because we have some, you know, real strategies, and the tax burden analysis is a tool that we do. See, most people, the biggest asset that they have is their retirement account and they don't realize that it's a joint account with the IRS and they don't realize that as they let that account grow, they're growing the taxes as well. And so we'll take a tax, an IRA.

Karen Stawicki: 26:44

There's an example I did the other day $1.4 million. The woman was 58 years old and we put it into the calculator and it showed that if she took that $1.4 million and converted it over five years, her tax buckle your seatbelt if you're driving, hold on to the steering wheel is $500,000. I know, oh my God, but wait till you hear the rest of the story. So $500,000 if she pays it over five years, that's five checks $100,000 payable to the IRS. It's painful, $500,000.

Karen Stawicki: 27:22

That's their share, that's their share. Okay. Now if she doesn't do that and this is the purpose of showing them this tax burden analysis If she kicks the can down the road, says I don't need the money, I'm going to let it stay in there. But then the government rings the bell when they hit required minimum distribution age. RMDs, which used to be 70 and a half, they pushed to 72, 73, 74. Most people are 74 right now.

Karen Stawicki: 27:51

And if this woman died at 90, I don't know why the calculator kills you at 90, now but it does. So if she kicked the can down the road and said I'm not doing that stupid Roth conversion, I don't want to pay the taxes on it, the first thing she's got to know is she can run but she can't hide. You will pay the taxes on it one way or another, but in the take the government's method plan, holy heavens. Yeah. So 500,000 or 1.6, take your time. Which would you rather pay? Don't answer right away.

Karen Covy : 28:29

Oh my gosh. So let me see it just for the audience, if you're tracking it. So if she waits until she's 74 and she has to take it, she has no choice. And from 74 to 90, she just takes the required minimum distribution that she has no choice about. Instead of losing 500, she loses over a million.

Karen Stawicki: 28:50

One point six A lot over more than she started with. But here's why, Karen, the account grew to 74. Then the RMDs came out and the tax was on that. And then the balance, when she dies, is still taxable to her heirs. Like you cannot get out alive, like they're getting everything. And then the balance, when she dies, is still taxable to her heirs. Like you cannot get out alive, like they're getting everything. So when I show this story and I can run this tax burden analysis for anyone In fact we have a website, Sam I this is $1.1 million of optional tax.

Karen Covy : 29:31

Optional tax. I don't think I've ever heard those two words put together.

Karen Stawicki: 29:35

It's optional because you chose to take that path. See, the 500,000 was required. There's no way to get it out without paying, and that was at 30% whatever. So that's what the tax was. So it's interesting when I tell people they have to pay $500,000, they have the look that you had when I told you that number. But when I say 1.6, they're like how can I pay the $500,000?

Karen Covy : 29:55

Yeah, yeah, that is just amazing to think about that. So when people are like, let's go back to the divorce analogy so people are thinking about divorce and they've got a house and a retirement Like what do they do?

Karen Stawicki: 30:16

Give them the retirement. No, I'm kidding.

Samantha Irish : 30:30

No, but I think that the biggest thing that needs to be factored in is understanding what the tax implications of those decisions are. You can't just go into it blindly and say, well, the paper value of this is X, because there are ways when, either like creating distributions for alimony and spousal support, where you could use guaranteed income annuities you could use different strategies to help. It all depends on the assets that you have. Right, if you don't have bucket of liquid asset, then creating an annuity is not a good strategy for you. But if you have a large asset that we could turn on to create a distribution, maybe we do it as a Roth-style distribution so that it's tax beneficial.

Samantha Irish : 31:12

Again, each case when you're going through your divorce, it's personal right, it's unique and it's your situation. Your divorce will never look exactly like your next-door neighbor's divorce. The same is true about your financial plan. We have to customize it and we have to figure out what makes the most sense for you. When you're going through a divorce, we want to be kind and responsible to whatever the other party deserves, but we also want to make sure, at the end of the day, you are in control of your dollars. You are the one that has to figure out how to use them in your now single life. So we need to make sure that we're giving you the best advantages that you have. When we talk about taxes, one of the factors that most people don't consider is that when you're married, most people file their taxes married, filing jointly. When you go through a divorce, you now will be filing as a single tax filer. So what does that look like? What impact does that have? The numbers all change from what it was to what it is.

Karen Covy : 32:20

Yeah, this is, I mean, what I'm hearing through all of this, which, by the way, is brilliant, but what I'm hearing is that, for the average person, what they really need is someone like the two of you who can help walk them through that, through this, because the other thing I, as a lawyer, know about taxes which isn't a lot, but it's that they change every year. The legislature changes, the rules change, the numbers change, the everything changes. So to a certain extent, you're dealing with future, and only someone who is immersed in this world could understand what are the rules now and what are they likely to become. So people really need you, and I would say, even after they're divorced whether you're single, married, divorced not, you know or not divorced, like people need to know this stuff.

Karen Stawicki: 33:16

Yeah, you hit the head of the nail right on, because legislative risk is what you just mentioned and people talk about interest rate risk, stock market risk, longevity risk, all of these things which are critically important, but legislative risk is up for election every two years and they write the rules with a pencil. They have an eraser, like they change stuff all the time, so we are constantly up on that stuff. We have a team that handles all that. We just got a post-election update of things that look like they're going to be coming and changing. So it's important that we have that knowledge so that we can equip our clients with the proper advice.

Karen Stawicki: 34:06

You know they say with taxes oh I dodged a bullet. Well, we don't believe in that. We say get out of the line of fire, like let's take those assets and make them tax-free so that they no longer have a claim. In the story I told about 1.6 versus 500,000, I also tell it this way Paying that 500,000 is like ripping off a Band-Aid it's going to hurt and there may even be blood. But paying 1.6 million over your lifetime is death by a thousand paper cuts. And it could be worse because if you live longer than 90, that number is going to be bigger. And if they raise taxes, that number is going to be bigger. And if they raise taxes, that number is going to be bigger. Why would you put yourself in a position where you don't have control? That is what we are all about. We want to give our clients as much control as possible, because the IRS is the IRS is the IRS, you know, and that brings up a really good point.

Karen Covy : 35:07

I mean, these strategies are. They're amazing and I can see how they would make a huge difference to a lot of people. But the more money you have, the more difference this is going to make. And I know the two of you can't work with everybody in the world because, as brilliant as you are, you're still. There's still only two of you. So who do you work with? Like, what is your sweet spot of people where your strategies can do the most good?

Samantha Irish : 35:39

You know, with 40 years of 40 plus years of experience with mom and then an additional 11 years with me, we've really kind of tried and true, tested where does this work the best? And when we were writing the Power of Three book, it really became clear that those clients that come to us with between a million and $6 million of assets, the Power of Three works most optimally. If you have more than that, the strategies behind the power of three can work, but you're getting into larger assets and different distributions and different regulations that you may need to be focusing on as far as transfer of wealth and making sure that your legacy lives on. With less than a million dollars, you have to be more selective about how you implement the elements in the power of three, because if you follow the idea that your guaranteed expenses should be covered by guaranteed income, if you have less than a million dollars, you may not have the assets to be able to execute the liquidity and the market bucket in the same way, in the same capacity.

Karen Stawicki: 36:53

So I'm sorry. I would just add to that that the reason it's funny, because people go a million to six. That's an odd number and here's what I would say about that. Samantha pointed out less than a million it makes it tough, and more than a million we can help them. But I truly believe that having that amount of assets and hating paying taxes is the true little secret sauce to what we do.

Karen Stawicki: 37:15

But I believe that those individuals in that realm are underserved, because there's a lot of advisors that can help people with 100 or 300 or 500,000, and they're not afraid to help you. And there are lots of advisors who can help you with 20 and 30 and 40 million, and they have lots of advisors. And so I think the kitchen is a little cramped, crowded, but the one to six or even, you know, $8 million client is underserved because, no, you know, the big guys, you're too small, and the small guys, oh, you scare me, but with 40 years, 50 years experience, whatever I mean, this is really who we, we really can serve.

Karen Covy : 37:58

Yeah, that makes a lot of sense. And the other thing is that you know it used to be and I'm going to date myself here but when I was growing up, a millionaire sounded like it was almost an unreachable goal. They had so much money. Well, now I don't know how many millionaires there are in of money, but when you're talking about a retirement account and you've been adding into it and saving for, you know, a decade, two decades, whatever, it's really not as much money as you might think. And there's, it's a lot. It's not like today's millionaire. You know, today's billionaire was yesterday's millionaire, right, exactly.

Samantha Irish : 38:42

You're not saying you're a millionaire. Yeah, Karen, I would love to actually share a story about what a million dollars could produce for you. Yes, I think that most people don't have a true understanding of this. So many people said if I could get a million dollars in my retirement account, I will be good. And with traditional financial strategies, most people would take that million dollar assets and take an annual distribution from it. It's called a withdrawal Right.

Samantha Irish : 39:13

The normalized number that people believe that they can take is 4% distribution. So off of a million dollars, that would be able to generate $40,000 a year. If I'm telling you could have $40,000 a year, you don't feel like a millionaire. Yeah, but I'm actually going to make this a little bit worse because at four percent, you actually only have a 70 to 80 percent chance of success. Now, when it comes to retirement, a lot of people are willing to take that risk. But I would like to invite you on a flight with me to Hawaii and we get on the plane and we sit down and we have our cocktail and the pilot says ladies, we are on our way. We have a 70 to 80 percent chance of landing in Hawaii and not the Pacific Ocean, you are getting off the plane. It's a bad percentage.

Karen Stawicki: 40:10

You know that 4% is what's called a systematic withdrawal and it used to be the bulletproof rate. But today's bulletproof rate, if you do the traditional way of doing that I did in the 80s and 90s remember I did seven, but today the bulletproof rate is 2%. So again, a million dollars can only generate 20,000. I can't retire on 20,000, even if I get a Social Security check, there's no way I could retire on 20,000. So, again, as you said, a million dollars and, Karen, you and I are the same age. We already talked about this. This is, you know, a million dollars. Back then was a lot of money. But you know what else? Back then, everybody retired with a pension, so you didn't need to save as much. And the last thing I'd say about that that we didn't mention before is we help our clients buy back their pension.

Karen Stawicki: 41:02

You have a 401k at work. Your employer set it up. They give you a match. You're putting the money in. You retire with a big bag of money. Why not take that money and buy yourself a pension? What is a pension? A guaranteed income, annuity? Yeah, doesn't mean you can't have one, we're just going to get it a different way. You saved, you did a good job. They helped you, they did a match. Let's convert it to a guaranteed income for life. You do have a pension.

Karen Covy : 41:32

That's brilliant and that makes all the sense in the world. And, ladies, I could continue this conversation for another two hours, but in respect for our listeners' time, I think we're going to call this a wrap right now. Thank you so much. You have shared so many nuggets of wisdom and, for those who are listening, we are going to link to all the things in the show notes so you can get the power of three. You can find Karen and Sam, but just for those who are listening, oh, you can also download. You can get a link where you can go and download the divorce, the 16 points for those who are going through divorce, what they need to think about. But just for those who are listening, maybe they're driving or they're not on the website right now. Where's the best people, best way for people to find you?

Samantha Irish : 42:25

Where should they go? Honestly, the best place to find us is on our website, www.navigateyourwealth.com, and there you'll have access to all the guides. You'll have access to the tax burden analysis so you can run your own numbers. All of our socials are there. You can watch our TV shows and get access to the book. We want to just continue to educate people as much as possible. If you are not our right fit client, that doesn't mean that we don't want to share our knowledge and resources with you. So please go to our website, get as much information as you can. We have a YouTube channel with over 150 videos that talk about this in small, consumable bites.

Karen Stawicki: 43:10

And that is also Navigate your Wealth. So our TV show is Navigate your Wealth. The website is www.navigateyourwealth.com. Everything is Navigate Your Wealth. And, Karen, I cannot thank you enough for the work that you do that helps so many men and women navigate this challenging time in their life.

Karen Covy : 43:32

Well, thank you so much for that, and I think that you have just leveled up what these people can do in terms of financial savvy. In terms of financial savvy, financial investment, all the things, and I don't know. I still say your tax strategies are like they're game changing and I think they can be for a lot of people. So, thank you so much for being here, both of you. I really appreciate you, I appreciate your time, and, for those of you who are listening or those of you who are watching, if you enjoyed today's episode, if you'd like to hear more of it, please do me a big favor. Give this a thumbs up, like subscribe everywhere. It makes more of a difference than you know, and I look forward to seeing you again next time. Thank you.