This week on the Oakley Podcast, host Jeremy Kellett welcomes Jay Strickland, Partner and Senior Wealth Manager at Legacy Capital Wealth Partners. During the episode, Jeremy and Jay discuss financial planning for independent contractors, particularly truck drivers. They emphasize the importance of separating personal and business finances, working with a CPA, and understanding insurance needs, especially disability insurance. Jay highlights retirement savings options like solo 401(k) plans and the benefits of pre-tax contributions. The episode aims to provide practical advice on managing finances, investing, and preparing for retirement, empowering independent contractors to achieve financial freedom and secure their futures, and so much more.
Key topics in today’s conversation include:
- Jay’s Background in Financial Planning (1:20)
- Understanding Independent Contractors (3:26)
- Importance of Separating Finances (7:06)
- Working with a CPA (8:02)
- Investing Basics (10:52)
- Compounding Interest (14:55)
- Retirement Savings Strategies (17:29)
- Solo 401(k) Options (18:46)
- Contribution Limits and Roth IRA (22:32)
- Required Minimum Distributions (25:44)
- Investment Strategies for Beginners (27:53)
- Understanding Index Funds (29:50)
- Avoiding Investment Complexity (31:01)
- Retirement Income Strategy (35:51)
- Withdrawal Rate Guidelines (37:50)
- The Importance of Wills (40:39)
- Investment Returns and Inflation (42:39)
- The Role of Insurance in Financial Planning (44:01)
- It’s Never Too Late to Start Saving and Final Thoughts (46:38)
Oakley Trucking is a family-owned and operated trucking company headquartered in North Little Rock, Arkansas. For more information, check out our show website: podcast.bruceoakley.com.
Transcription
Jeremy Kellett 00:12
Thanks for tuning in to the Oakley podcast, trucking business and family. My name is Jeremy Kellett, and I’m your host for this podcast, which is brought to you by Oakley trucking, located in North Little Rock, Arkansas. Our goal is to inspire, educate and provide resources for our owner operators as well as outside truck drivers that may be interested in becoming a part of the Oakley family. So sit back, relax and keep your eyes on the road as we start this week’s brand new episode. We’re talking today about one of my favorite topics, money and investing. I love talking about money and investing, but more importantly, we’re talking about a path for independent contractors. You know that the goal here is to give our listeners some good financial suggestions, advice on what to do if you’re an independent contractor, and how to plan for the future. Plan for now and for the future. And of course, I got J Strickland, Certified Financial Planner, here to help me with this, because, as you know, I couldn’t do it. I couldn’t tell you what to do. But Jay does it for a living. Jay, welcome to the podcast. Man, thanks, man, I appreciate you. Bet No. Glad to have you appreciate it. Tell us a little bit about yourself. Well. J
Jay Strickland 01:25
Strickland, I live in Conway, so pretty close to here, relatively well, I’ve been in the business since 2004 and I work with legacy capital wealth partners here in Little Rock across the river, when we were what they call an independent advisor. So we’re not affiliated with like a Merrill Lynch or a Edward Jones, and we work with the custody clients account. So we hold the client accounts at Schwab, Charles Schwab, and then we just have the ability to trade on their behalf and administer the accounts on their behalf. That’s kind of our relationship with them. And so we do everything, really, we do everything from investment management to financial planning, which is broad, it can be. And I say that because usually, you know, you hear about, you know, these 80 page financial plans that people get, and it just glaze over on page four, or whatever it is, those are all good. But usually people don’t do 80 pages worth of financial planning in one month. They do it over time, whether it’s a death in the family or a kid going to college and, you know, changing jobs after retirement. So you kind of do financial planning throughout your whole life. And so that’s what we do. We cover basically everything. But we also, we work primarily with high net worth families, just kind of the nature of our business. And then what we do is we also work with 401, K plans. We do life insurance, we’re not attorneys or CPAs, but we work closely with a lot of them. And we have, you know, we have people on staff, advisors. We have a lot of expertise with former CPAs. We’ve got former attorneys. They don’t practice anymore. So we’ve got a lot of resources, yeah, and if you know, we can’t give legal and tax advice, but we know the right questions. We know what, where to send, you know, where to send people, and how to get the answers they need, and the solutions I
Jeremy Kellett 03:26
need, which is some of the questions, you know, I got, I sent you some of them, you know, to kind of get, and because this, you know, when we’re talking independent contractors, is not just truck drivers. I mean, there’s a lot of independent contractors, yeah, and, you know, in the world, but it’s, you almost have to. We try to simplify it, you know, we do too, you know, be as simple as we can
Jay Strickland 03:48
today. Our slogan is making the complex simple. Yeah, I like that. I like that. Family, family. I have a wife, three kids, three boys, 20. I’m going to round up because two of them are having birthdays. So yeah. So you got one turning 20 tomorrow, 22 next March, and then have the one that just turned eight. So they all three still live at home, that the two oldest are in college, obviously. But good, it sounds bad, but it’s worse than it sounds. That’s what I tell people. It’s yeah, no, it’s not bad. So I say that it’s fun, but no, it’s neat to see your kids. You know, because a lot of kids move as soon as they go to college or whatever, they usually move away, or even in New York. Yeah, I like to live vicariously through co Yeah, me too. I wanted to do that when I was his age. I just didn’t have the courage, right? Ya know, it’s, it’s, it’s a neat dynamic to see your kids become adults. What’s your hobbies, man? You know, I’ve got a few. I like to, believe it or not, I like woodworking. After that, in our garage, I’ve kind of got a three car garage, so the third stall is, I climate control it. It’s not big, but it’s. Fun to get out there and make stuff. And what am I? What? What do you make? Whatever my wife tells me is the example she needs. No, I’m kidding, but I did. I made her a big project. I made her a hutch. That was a big project, literally and physically. But, you know, all kinds of stuff you can make, you know? Yeah, I’m amazed
Jeremy Kellett 05:19
by furniture. Yeah, a four lamp is what I’m working on. Now. I’m amazed by the woodworking, really. I mean, you see it. I mean, it takes some thinking. It takes some precise
Jay Strickland 05:30
it does your twice cut once. That kind of applies to finance and woodworking.
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Jeremy Kellett 06:06
So let’s get started with some of this, how to plan, you know, for financial freedom as an independent contractor. Because just may not, of course, you know, but I’ll put it in perspective here, that our we got 900 independent contractors, and, you know, truck drivers, and they’re all, they’re a lot, it’s all, you know, they’re paid 1099, gross pay. And we’re always trying to give them some help to be successful and plan for the future, yeah, to be able to take care of themselves. Because, you know, when you’re self employed. A lot of times you’re not preparing for that. I think, you know, I think you just kind of think you’re going to work all to, you know, the rest of your life and be a truck driver the rest of your life, which some of them do. But I want them, I want you, to kind of set it up and help them understand that there is a path, yeah, of getting to this financial freedom too, so say, Yeah, you know, and what’s the best way? Where do you start? Jay
Jay Strickland 07:04
man, that’s, that’s a broad question. And before I get into that, I would say there’s nothing wrong with working forever, yep, but you don’t want it to be because you have to do it. That’s right. You want it to be because you really like what you’re doing. But, you know, starting out as an independent contractor is, you know, it’s kind of a blessing and a curse because you’re your boss, but the curse is, you also your boss, and you’re in charge of those decisions financially and whatever. You know, generally speaking, I would say the key things are to make sure that you you keep your finances separate, you know, your personal stuff and your business stuff, you know, most people, and I don’t know how your drivers do it, they probably set up like an LLC, or some of them, a lot of do, yeah, and I think that’s smart. And, you know, it costs a little money on the front end, but it can save you a lot of money. I always recommend, if you’re getting into it, at least in the beginning work, if it’s not too complicated, you might be able to do it on your own, but in the beginning, work with a CPA, because, you know, it’s been years, but I know I’ve had friends that have started businesses and just wanted, thought they would just do it on their own, and they did fine, but then they realized when they did hire an accountant, they had missed a lot of deductions that they could have taken or paid too much. And so I always say, you know what it’s unless you really know what you’re doing on the front end. Work with someone that can help you make sure you’re maximizing your deductions and paying as little tax as you have to. Yeah, and you know, quarterly taxes are a big deal because you have to set that aside and pay that. So you always want to, you have to, you know, on w2 it’s withheld for you. But when you’re 1099, that’s a budget item. That’s a line item in your expenses. So you can’t forget to pay the tax. And then, you know, and you also have to think about your insurance. You know, life insurance, health insurance, things like that, even disability. That’s one thing I think, probably the most overlooked, in my experience, insurance is disability insurance. Because, you know, you think life insurance is great and you need it. But in almost every single case, unless you’re single and start now, have no dependents or something like that, you may not immediately, but you know you’re, you know there’s, I forget the stat. I think it’s, there’s a, I guess, a 16 or 18% chance that you might need disability insurance in a lifetime, and so,
Jeremy Kellett 09:43
yeah, we see a bunch of that, yes. And we try to, I mean, during orientation, even I try to tell these guys, it’s something’s gonna go down. Hopefully it’s not a full time disability, but at some point your truck’s gonna go down and you’re gonna have to be off for a couple months. Yeah, we’ve seen that or. Your health is going to go sideways, and you’ll be down and can’t work. So you want to be prepared. So that’s good advice to have that disability.
Jay Strickland 10:06
Yeah. And the key is, if you pay that can work two ways. If you pay for it, then if you ever have to file a claim, that income or that money you get from that is not taxable if an employer or somebody else pays for it, which usually, if you’re an independent contractor, you’re paying for out of your own pocket. If you were a W2 employee working for a company, and you’re in your company paying that premium for your disability, then, then it is taxable. Street is taxable if you ever have to go into language. So just something to keep in mind, most, most contractors are going to be paying for it anyway, right? So, but yeah, what’s
Jeremy Kellett 10:45
some of the first things? I mean, you know, yeah, maybe an LLC gets with a tax accountant for sure. Know your insurance. But how they invest is, it’s kind of a scary term to a lot of people that’s never done it, and it’s like, well, I’m not smart enough to do that. I can’t figure all that out. That’s way above me. I don’t, you know, and I know that because I used to be there and thinking that I couldn’t do it. But you really have to, I mean, to invest regularly. You kind of need to know something about it. I mean, how do you help? I mean, how do you mean, you know, instead of just turning it over to Jay and Jay, you take care of me. I mean, they really need to know a little bit about it. You know, investing, how can you make it where it’s not so scary?
Jay Strickland 11:32
Well, that’s another big, broad question. We go a lot of ways with that. I would say to start out, though, whether you have a ton of interest in investing or no interest, or you’re really knowledgeable, or you have no knowledge, or it’s not scary, or it is scary. Everyone needs to save for retirement. And so you know, most clients that work with us, they either lack the interest or they don’t have the time to devote to do it. And then as you are and I’m jumping ahead a little bit, but as your assets grow, as your retirement savings grow, things start to get more complex. And then there’s more investment opportunities out there to be more diversified and do different things. And so at that point, it makes sense to work with an advisor, not to say it doesn’t from day one, but certainly at that point, it helps to have trusted advisors, both accountants and financial guys and insurance guys, to work with, because the industry changes so much and so quickly. But I would say starting out, you know, there’s a couple rules of thumb, is be diversified. Because, you know, and I would say, before, I mean, before I jump into that, knowledge is kind of the best. Is the antidote to fear. If you know and understand something, it’s less scary. But with that said, I think, you know, a lot of times we’ll have clients, not a lot, but especially when markets are volatile, things are going on. You know, if you watch the news, they’re really, broadly speaking here, they’re wanting people to watch and they’re wanting ad revenue. And so not that they’re being dishonest all the time or but they can talk about markets in a way that makes them scary, and so I always tell people limit your consumption of that, or choose wisely. And one of the blessings and courage of the internet is that there’s a lot of information out there. So any kind of financial information you want to get it from a source that you know is reputable.
Jeremy Kellett 13:40
Yeah, yeah. Well, it’s, you know, being able to create that investing mindset and wanting to plan for the future the best that you can. Because, you know, it’s not easy for everybody to do. I mean, I think first we probably got ahead of the game, but first they need to limit debt as much as possible, yeah, because your income can work for you. Then yes, and then not be, you know, try to get out of debt as quickly and as possible, and that way your income can work for you. And in planning for the future and investing stuff that you’re comfortable with, maybe that you learn a little bit about. I mean, yeah, you know, the advisor sure does all that. But I tell you, what simplifies it for me is I’ll go on to one of those calculators, yeah. And you know that I go to my financial advisor once in a while, and he’ll remind me, we’ll go to this calculator, yeah. And it’ll simplify if I put in, you know, $500 a month, and for 20 years, 30 years, 10 years, whatever. And the, you know, average rate of return is 8% whatever that it’s been, you know, over the years. And bam, this is what you have. And you’ll be like, That’s how compound interest works, you know, that’s how making money, yeah, over years. And that really simplifies it for. Me, because I can understand putting, you know, just creating that, you know, habit of putting in every every month, or whatever it is every year. Yeah,
Jay Strickland 15:08
and to that point when you talk about compounding, the earlier you start, the easier it gets later because of compounding. So, you know, a lot of times when guys are starting out and or girls, guys are girls, right? They are. You know, usually in your early 20s, that’s not when you’re at your financial peak, right? In life, you’re probably eating peanut butter sandwiches. And, yeah,
Jeremy Kellett 15:33
I’m trying to, I mean, off the subject these days. I’m trying to beat in my son’s head clay, you know me and him, we he’s great, but I try to tell him, Son, if you’ll just start now, yeah, just a little bit. They don’t have to, you know, it’s not, not asking you to take away from what you’re doing, because he wants to live now. You know, like, I understand. I’m not asking you to spend, invest at all. I mean, just to just a portion to get that habit going. Yeah, son, and you’re 24 years old. I mean, my gosh, if you just started doing some every month, yeah. And that’s a, you know, really good for us because Jay, we do a lot of first time owner operators here, yeah. So they buy a truck, you know, they may come from a company job, and they’re buying their first truck and their first own company, and those aren’t cheap. And it’s, they’re not cheap, and it’s overwhelming to them a lot of times, but so that it’s, you know, it’s something that they got to think about. Because, yeah, I never thought about that. But they go from the w2, and, you know, maybe the 401, K and all that stuff into an independent contractor status. And now I’ve got to learn all this stuff. So that’s what a lot of them, our listeners, are doing right now. And
Jay Strickland 16:43
one of the things that that that retirement saving, whether it’s in a 401, K, Ira, whatever, talking about traditional IRA, not Roth, but pre tax savings, is those are the best kind of deductions for income you can have because they’re above the line, and so dollar for dollar, it reduces your taxable income. You know, the below the line deductions are great, you know, the things you can expense, but money you’re setting aside for retirement pre tax is $1 for dollar reduction on your taxable income. Yeah. So you’re getting the savings, but your net taxes you’re paying are going down proportionally as well, because your incomes can go lower than you’re reporting. Yeah, and
Jeremy Kellett 17:29
there’s a lot of not to get too sidetracked, but there’s a lot of debate about whether traditional or Roth, yeah, you know which? You know our independence. I guess they can do that on their own, right? They can invest into that. Yeah,
Jay Strickland 17:44
there, there’s a there’s several really good options. And, like, let’s talk
Jeremy Kellett 17:49
about that. Yeah, let’s talk about some of the options that they need to look into. Maybe that’d be good for,
Jay Strickland 17:53
like, I mentioned before that the industry is both insurance and investments. It’s always evolving. And so now you’ve got the ability to, and probably some of your listeners already do this. Have a solo 401 K, you know, a traditional 401 k like Oakley has where you’ve got a bunch of w2, employees in there, and there’s a lot, there’s a lot of moving parts. You know, those are the traditional 401 Ks, like the ones for big corporations. That’s not really feasible for a solo employee or solo person entity, but now you’ve got the ability to throw pretty much, I think any major custodian, Al Schwab and fidelity for sure. There’s many others. You can set up your own 401 k plan, if it’s just you, and that’s why they call it a solo, okay. And you know, up until you hit, you know, $250,000 it’s very simple, because you don’t have to pay, you know, to file 5500s every year, or to do the accounting work, you know, inside the plan. And so you get the benefits of the limits of the 401, K, the savings without the expense. It can come with, okay,
Jeremy Kellett 19:06
so, independent contractors can do a solo 401, k. Now, is that a traditional or Roth? Either one they could do.
Jay Strickland 19:14
You know, it’s in it for a while. It used to be traditional only, but now more, I’ve seen more and more custodians now will let you do a Roth, 401 k as
Jeremy Kellett 19:24
well. And what are they? Are the limits the same as Yeah? So 23,500
Jay Strickland 19:31
Yep. A year under Yeah, under 50. And then it jumps up to 3031. Year. 30,000 jumped up. What is it? I wrote it down because 31,000 changes messed me up. Yep, so, and now there’s a new provision. Now, if you’re between ages 60 and 63 you can, they call it the catch up contribution is, it’s up to 11,002 50 on
Jeremy Kellett 19:54
top of the 23
Jay Strickland 19:55
Yes, exactly. So, yeah,
Jeremy Kellett 19:58
catch up, quick.
Jay Strickland 19:59
Then you can, yeah, and you know, you might, somebody starting out may say, I’m not going to put that much in there now, but someday you might, that’s the goal, right? So if you can do a for a solo 401, K, and there’s no expenses that you’re paying on the front end, sometimes it’s easier just to set that up, to start out and go with it. I was
Jeremy Kellett 20:21
listening to go with it. I should say, yeah, there you go. I was listening to podcasts another day. I can’t remember what it was now, but they got into it by talking about a SEP for independent contractors that they thought was the best option for an independent contractor. What do you think about that? Or what is that? First of all,
Jay Strickland 20:41
a SEP it’s a Simplified Employee Pension Plan. It’s just an IRS type of savings retirement savings account that you can use, kind of like a simple IRA or 401, K or Roth or a traditional IRA. It’s designed for small businesses. Usually, the one thing that that you have to factor into that, though, is, you know, like a 401, k will allow for employee, and like, you can contribute as the employee, and then the employer can match, right or, and when you’re a solo, you are the employer and the employee, so you’re matching yourself. But the SEP IRA is employer contribution only, and generally speaking, there’s formulas, and you know, nuance to it, IRS stuff, but it’s 25% of your compensation you can put in as the employer and so so you know, for until solo one, solo 401, KS became more common place. Steps were probably the best option, okay, but, but now I think, and they could still be a good option, but, but solo, four, one ks are worth looking at as well, just because you’ve got the you’ve got the ability to contribute as an employee and employer, both, in my opinion, now,
Jeremy Kellett 21:58
so yeah, go in there and all right, I contact somebody, you know, a financial advisor, and I say, hey, I want to open up an account, and I want to start a solo 401, K. And they go, okay, of course, you have to contribute some money, whatever you know, to get started. Yeah. But what then? What do you do? Because you need to, what are you gonna put it into? You know, yeah, what am I gonna invest in, actually? Yeah, what I mean, somebody that doesn’t know a whole lot about it. What do you suggest to them? Jay, well, let’s,
Jay Strickland 22:33
I want to come back to one, okay, before we jump into that. Okay. As far as options for saving, if you are, if your income limits allow for it. You can also pair one of those with, say, a Roth IRA. So if you add a traditional solo 401, K, but you’re under the income thresholds. It varies depending on if you’re married or single, and they’re relatively high. It’s your modified adjusted gross income. I always have to write this down, because it changes constantly, but it’s, yeah, 150,000 or less, single, 236,000 or less, married. Okay, so in other words, if you’re under those income limits, you can also contribute to a Roth. And then you get what’s the max on that? 7000 Okay, 50, under 15 and it’s 8000 it’s an extra 1000 up above that, yeah, and so, you know, you don’t get the tax benefit this year. You do that with a Roth, but it still grows tax deferred, just like a traditional that’s what’s that to later. Comes out tax free, yes, if you know, if you do it right, meaning you don’t take it out before. Yeah, 59 and a half. It’s been there for five years or longer. Yeah.
Jeremy Kellett 23:45
And both of these, the solo and the Roth, are 59 and a half. You can’t touch it, but it’d be a penalty. Yes, both of them, 59
Jay Strickland 23:53
Now, some, I will say this, some solo, four, one Ks, because it still is a retirement plan. It’s just, it’s lack of better word simplified, you still have it, depending on what custodian you’re using, Schwab fidelity, whoever there they there could very easily be provisions in there that you can’t take it out before 59 and a half, yeah, unless maybe they allow for hardships, which most of them don’t, to my knowledge, but just something to be aware of. A Roth, on the other hand, all your contributions that go in because it’s after tax, the contributions can come back out without penalties or taxes, but I don’t recommend that sometimes when all else fails, and you know, if you have a Roth that that can be kind of a last resort type, yeah. Option,
Jeremy Kellett 24:41
yeah, yeah. And I really like the Roth because it grows. I mean, when you get it out, you don’t pay any taxes on it. You’ve already paid the taxes, yeah, on it, so that money, and you don’t pay the taxes on what the growth of it is, yeah, you know, on the money you’ve made. So that,
Jay Strickland 24:58
I really like Ross. Yes, and I know we kind of deviated, yeah, that’s, I like Ross for younger people, because generally speaking, that’s when you’re going to be in your lower income years. As far as that you’re earning your earnings years. And so you don’t really need the tax deductions as much as you do when you’re making more, and you’re looking for any tax deduction you can get. And so, yeah, and the power of compounding. You put money in that Roth when you’re younger. May not feel like a lot, but over the years, you can really see it grow.
Jeremy Kellett 25:31
Do you know, I heard this too on there, the Roth, you can it doesn’t have the RMDs, the correct Yeah. What’s that stand for? I forget the required minimum
Jay Strickland 25:44
distribution. Yeah, that’s where the government says, time to pay us. Yeah, on your
Jeremy Kellett 25:48
traditionally at some point you got to take so much out. How much is it you have to take out, just like a percentage is a formula. Gotcha? You
Jay Strickland 25:56
Now, they have the life expectancy table, and there’s a number. They call it a factor that’s associated with your age, and so it’s designed that as you get older, you have to take a little bit more percentage wise out per year.
Jeremy Kellett 26:08
Man, I just don’t get you money. Yeah,
Jay Strickland 26:11
As a rule of thumb, it’s the first year you have to do it. It’s roughly 4% of your account. So it’s not a significant piece, but it’s enough to, I say, be annoying. You don’t need it, or you’re not already taking money.
Jeremy Kellett 26:24
Yeah, Roth, sounds like the way to go. You know, it is both, yeah, I guess in certain and I always
Jay Strickland 26:31
recommend to clients of mine that have two kinds of buckets or pools of money. It’s great to have some tax free money or, you know, but also you don’t want to, you know, if you’re or if you’re in a higher income bracket when you’re working. Why not take that tax deduction if you can, or get an employer match if you’re w2 if you can, if you’re in that type of way? Yeah.
Jeremy Kellett 26:53
Good suggestions. Good suggestions. Jay at
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Jeremy Kellett 27:53
So did you cover what you wanted to go back to the kind of investments, yeah, on one day of mutual funds or, Oh yeah, you mean something, types of investments, yeah, yeah, types of things. That’s where you were. That’s where they derailed you. Yeah, that’s good. So we’re used to getting derailed. We, for y’all don’t know that me and Jay go to church together Sunday school class a lot of the time he teaches too. And we get derailed. We go off the rails. We go off the rails in Sunday school class, but it’s, but I think it’s fun, though, and it’s always Riffel. I mean, it’s always, he always ties it back to the lesson. So yeah,
Jay Strickland 28:29
well, I know it’s time to get back on topic when my wife’s eyes are rolling
Jeremy Kellett 28:33
out, but she’s like, Come on, let’s go. Let’s move it. Or the first bail ring, the first. So yeah. I mean, is there any kind of for a first time investor, any kind of investments they need to look for? That’s, you know, I don’t, I wouldn’t say safe, but yeah, easy to understand.
Jay Strickland 28:53
Yeah, yeah. And, and, I guess there’s a lot of things I would hit on there, and I’ll try to quickly. There’s an Albert Einstein quote where he said, at some point in his life, I don’t remember when, but said, If you can’t explain it to a six year old, then you probably don’t understand it well enough yourself. I don’t know if six is probably a little bit too low of an age, but maybe a 10 year old. No, that works for me. Yeah. And I say that kind of to be funny, but it is true. And the concept is true in that if you can’t, if you don’t understand the investment, or you couldn’t explain it in plain words, even to yourself, then it’s not necessarily a bad investment, but it’s probably not right for you, because you want to understand and be comfortable with what you’re buying and selling and investing in but starting out it really don’t. I always say, Don’t over complicate things, because it can get super complex really fast, and with all the different mutual funds and exchange traded funds, and there’s what they call leveraged ETFs exchange traded funds, which is. It is like this. You can buy the market index, but it’s double or triple leverage, meaning, if the market goes down 1% that fund could go down 3% Yeah, and those are pitfalls, because these you have to remember, this is your saving for retirement, so you don’t want to be, you know, a riverboat gamble are out there trying to hit stop, pick and things like that. So starting out, I always say the cheapest and best way to do it is buy what they call index funds, which is just, it’s just designed to track a broad index like the S p5 100, or the Dow Jones or the NASDAQ, which is mostly technology stocks, that’s generally in the by one that tracks the bond index. There’s a lot of different things that I call, what that, what I was calling indexes, ETFs, and so on, they’re really cheap, expense wise, and you get a really broad market exposure. And you know, there’s always you hear, and probably everybody is familiar with target date funds, asset allocation funds, which is aggressive or moderate or whatever, yeah. And those are, you know, the norm in a big corporate retirement plan. But you can get those anywhere. You don’t have to get those inside a traditional, you know, company for 1k you can buy those types of mutual funds and ETFs on your own, okay, yeah. And usually, you know, those are if you kind of know how you need to be invested, but don’t want to have to look at it on a regular basis, meaning, like, you know, every week or month or something like that. Those are great, because it’s kind of a way to put it on autopilot, but stay allocated how you should, and not get off the rails eventually. So those are good to start out, and as you do grow your accounts, and you do get more educated with the markets and things like that, and you know, another rule of thumb is be quick to learn but slow to be influenced. Because you know, you hear about, you know, if your neighbor is a stock picker, and he tells you he made 80% on something last month, well, he’s probably not telling you about the things he lost 80% on the same month. And so you want to fight the urge to over concentrate yourself in one or two stocks, or, you know, Bitcoin or things like that. Yeah,
Jeremy Kellett 32:26
you want to be, I mean, you want it to work for you. You don’t want it to consume you, right, and where you’re looking at it every week. I mean, it needs to be something you have confidence in that it’s got a track record of, you know, this mutual fund, or index fund, has made this much, you know, percentage over the history of its life. Then I feel good about, you know, hey, sending some money every month and getting that habit of sending it and investing it, and, yeah, moving on. And then I’ll look at it every year, maybe, right? Yeah, that’s what you want. I mean, you want to build.
Jay Strickland 33:00
And if you do, you know, as your assets grow, and you do want to maybe buy some individual stocks or things like that, I always tell people to limit that, you know, don’t take a, you know, 40% stake in Tesla in your 401, k, right. Limit. It may be, you know, 5% or less, because I’ve seen that in the past. It can get sideways quickly on people, and it’d be great. More times than not, it can backfire.
Jeremy Kellett 33:30
And that’s probably the thing a lot of people, you got to have the, I say, the stomach, to ride the roller coaster up and down, because it’s going to go up and down. Yeah? But you can’t. You’re in it for the long haul, yeah, you know. And you have to be able to mentally know that if it’s going down, well, it’s gonna come back, it’s just gonna take a little bit, you know. And you gotta be able to handle that mentally, I think is a hard is a hard part for a lot of people,
Jay Strickland 33:56
yes, and especially when you are saving for retirement. And I always use this as an example with clients. But during COVID, 2020 the market dropped from the s, p5, 100, the broad index peak to trough in about a six week window, dropped 30. I think it was 34%
Jeremy Kellett 34:20
Was your phone ringing? Yes, I
Jay Strickland 34:23
I think some clients were afraid to call because they didn’t want to hear what I had to say about that. Because I, you know, nobody had any answers during COVID In the beginning anyway, and so. But it was really fast and if you had opened your statement on January 1 that year, but didn’t look at it again till the end of the year. Your account, if you were just in the s, p5, 100, you were up over 10% for the year, because it recovered so quickly. And I always and it’s, there’s so many studies that show this, but trying to time the market is a giant pitfall. Yeah, and. Uh, get, you know, getting out of the market when it feels uncomfortable, because the market is over 100 years old. If you look at it on those big charts that cover the century, it does. You do have corrections and recessions and bear markets, but it always recovers and then some, and it’s missing, you know, usually those recoveries start when people least expect it, or they follow a pretty sharp downturn immediately after. And if you have gotten on the sideline, if you’re out of the market and you miss the long term results, just like you talked about compounding. Yeah, it can compound the wrong way. Yeah, you can. It can really make an impact on your long term results. If you try to get in and out of the market,
Jeremy Kellett 35:43
get in it, stay in it. Yeah, ride it out. But when I’m getting ready to retire, I need to be a little more conservative. Maybe yes
Jay Strickland 35:51
Well, I say yes, usually yes. I mean, you know, not many we’ve got a handful of clients that are in their 90s, that are in 100% stocks. Because, you know, everything depends, right? Yeah, if you’ve got, you know, depending on what your goals are for your inheritance to your kids or grandkids, or, you know, maybe you’ve got other, you know, pensions and Social Security and other things, and you’ve got so much income from your retirement other outside retirement income sources, maybe you don’t need to pull a lot of income from your IRA, and so you can be more growth oriented so but generally speaking, yes, but it’s not that’s not kind of the rule of thumb. And the other thing you don’t want to do is get so conservative that your growth doesn’t keep up with your income distribution. I think
Jeremy Kellett 36:48
a lot of people think that when I retire, then my amount is going to start dwindling, you know, I’m going to start taking it down. And that’s not what it should be. You should be, I would think, and I will open my eyes about this if you’re going to make more money after you retire. You’re going to continue, yeah, to make money in investing, you know, with it, because it’s going to keep working for you. You’re not just, you’re not going to quit. Yeah, you know, we’re going to keep going, Yeah, whether you’re not working or not. I mean, your investments are still working for you, exactly. And
Jay Strickland 37:20
I know, I’m sure you’ve talked about this with other people here before. Here before, but you know the 4% rule, the withdrawal rule that, and this is my opinion, I think that number is a little bit antiquated, just because of how many options there are now and how the industries have evolved to generate more income and different types of things like private credit and private equity and things like that that are becoming more and more available to invest in a traditional portfolio. But kind of my rule of thumb is four to 6% okay? And it doesn’t mean if you, for whatever reason, get above four or 6% withdrawal rate. Meaning, I guess, to explain that just real quick, that’s the percentage of your balance that you’re taking out every year. So if you have a million dollars and you’re pulling $40,000 a year, that’s 4% got you but I say if you’re because
Jeremy Kellett 38:14
The rule is, that way you never touch the million dollars. Yes, right? Yeah, it continues, yeah, to be in there if you’re just taking 4% because the market’s gonna correct more than that. So yeah, that’s the plan. Yeah. I’m sure everybody knows that, but I want to explain it, yeah,
Jay Strickland 38:32
yeah. And I use those kind of as guidelines and guard rails at four to six, because if you’re in that range, for me, that’s I’m comfortable with that with my clients, for sure, it doesn’t mean if you get above six, like if you’re pulling 8% out, it doesn’t mean your plan is going to fail or you’re going to zero out at some point. But if you stay up there, you know habitually, so everybody’s going to have a roof that they have to replace or need a new car, and that’s expected, right? And but you don’t want to be spending above those levels for that long. But on the flip side, if you’re spending less than 4% you may not be having enough fun with your retirement money. And I’ve had those conversations with clients to say, hey, take that vacation. Or, yeah, that’s what you save for your whole life. How you can enjoy
Jeremy Kellett 39:21
it. Yeah, it’s what you want to do, enjoy retirement. Yeah, I have one last question, because we need to go. And this is a, I didn’t even put this on your list, but I got to thinking about it. This is true too. This I had an owner operator, one of our owner operators, retire, and I was having a conversation with him, and he, you know, we got off into the retirement and money and what you’re gonna do? And he said, You know, I just be honest with you, I got, I got $100,000 and we got Social Security, and I feel like we’re gonna be okay now, you know, and he’s probably 7072 years old, something like that. So what would you tell somebody? Me that says, Hey, I got 100,000 and they were just gonna put it in, like a CD or something. Yeah, he’s got $100,000 to his name, yeah, and he’s got Social Security, yeah. What should he and he 72? What should he do with that? What
Jay Strickland 40:14
What do you think? Well, everybody’s retirement goals and outlook is different, right, right? But in your example, I would say, I mean,
Jeremy Kellett 40:22
he’s not want to travel the world or anything like that. He’s pretty, you know, pretty tiny, pretty going,
Jay Strickland 40:27
I would say, and I’m going to go a little bit broader on this, outside of investments, a little bit, you know, one thing that happened with my dad. As far as estate planning goes, he died without a will. And you know, when that happens, probate court becomes, you know, that becomes a big part of your life for a while, and especially if you have to have administrator work. Work with that. Not saying the administrator is not your friend, but they’re that they’re doing a job, yeah. And so everybody needs a will. So I’d say, haven’t done it, do it and the money, you know, it’s an expense, but it’s much cheaper to have a will, and it really is for the benefit of your spouse and your children and grandchildren. Are you, right? But it’s you who saves more than they will spend on probate and dealing with that and the cost. So we always say that, first, not everybody needs trust. Everybody needs a will, and generally speaking, and then, you know, everybody you’ve worked your whole life to save. You know it’s your money. What do you want to do with it? What do you want to do? What are your goals in retirement? Do you want to travel? If you do? I always tell people, if you do travel earlier in retirement, because I’ve had, I’ve seen this before with clients where it’s kind of the blessing and the curse, it’s they were able to save as much as they did because they were savers, but they couldn’t flip the switch mentally to then start spending and enjoying it some. And then things happen. You get sick, you get, you know, old. Can’t try to get old. Yeah, yeah. And so I always tell people, within moderation, enjoy it. Don’t just sit on it. When you get to retirement,
Jeremy Kellett 42:11
there’s people out there right now going, that’s what I’m talking about. J Let’s spend it.
Jay Strickland 42:17
You’re gonna get me in trouble. Yeah? Within reason, four to 6% Yeah. So, so yeah, no, I and yeah, and stay invested. You know, that may look different, because you may be more conservative now than you were when you
Jeremy Kellett 42:31
so he should invest that 100,000 into something he’s got confidence in to where it’s making a return of, yeah,
Jay Strickland 42:39
The best example of that was in 2022 when inflation took off and it peaked, year over year, right? Over 9% right? Because that is a that you have to net that out, because, you know, if I’ve been this is general, but if things cost 9% more now than they did a year ago. Well, are you making 9% on your savings investments to keep up with the increase and the difference there is called the real return. So if your investments made 6% inflation is four, you have what they call a 2% real return. That means what is above and beyond inflation. So that’s why it’s so important to stay invested in something that’s going to give you some kind of competitive returns, but it’s appropriate for your risk tolerance. And then I would say the last thing is, and sometimes this can be a misconception, sometimes not, but insurance, it’s very likely that some kind of insurance needs to be a part of your permanent plan. Term. Insurance is great when you’re young, because it’s cheap and it’s a lot of coverage, and it protects against if you die and you know your spouse loses that source of income or what you know, especially if one spouse works, the other one doesn’t. But when you get older, you know, some people use that as part of their legacy planning. It’s a way to pre-fund an inheritance to your kids, you know, a permanent life insurance policy. Because, you know, as long as you pay the premiums and keep it, you know, keep everything current, that death benefit is going to go to somebody someday. But the other thing to think about, too, is, for a lot of people now, is long term care, yeah, and it’s expensive, and not all long term care facilities and situations are equal, yeah? And you know, if you can be in a private facility, that’s better, generally speaking. So for a lot of people, and to have options, or to have options for to stay home in home care, but if most of your money is in a 401 K, or in an IRA, or for 1k if you have to pay for that, it’s not only are you paying for it out of there, but you’re paying taxes on what you’re paying for. And so you know. Insurance can play a role there. Yeah,
Jeremy Kellett 45:01
That’s almost a whole another episode, idiot, long term care, because that’s going to happen. I mean,
Jay Strickland 45:07
That’s most people I would say. You know, obviously running out of money is at risk, yeah, but that can contribute to it really quickly, because it can snowball if you don’t have a way to help offset or offset that expense. Potentially,
Jeremy Kellett 45:20
we might just have to get you back on here. Man, I found the road, and we’ve been sitting here. How long has it been? You know, we wanted, we want, yeah, yeah, so, and we still didn’t cover it all and I but, you know, I mean, I just want to give our owner operators a path and some encouragement, yeah, and a lot of them probably are way ahead of us. You know, they could probably sit here and give us a lesson on retirement and on saving money, yeah, being prepared. And I’m sure they are, as we’ve got some really smart guys, smart owner operators out there, but, you know, just a little bit of advice that we can help them with and to talk about. I mean, it’s stuff you got to think about. Yeah, the sooner you think about this, the better you off you’ll be Yeah, so, and don’t
Jay Strickland 46:03
get discouraged. Don’t get discouraged when the markets go down, it’s easy to get discouraged. But, and don’t watch TV as of today, yeah, hopefully they’re not watching it while they’re driving, yeah, but, but yeah, you’re probably listening to it to some degree. But, yeah, I think that’s the key. It’s a marathon and not a sprint, and don’t get discouraged and have goals and plans and to just keep saving, because it may not feel like it now, but later you’re going to see it. Yep, the results pay
Jeremy Kellett 46:33
off. That’s another thing we can talk about next time. It’s not too late to start. That’s right, never too late to start. It’s not Jay, I appreciate you sitting down with me, coming over here. Yeah, man, good conversation and everything. So I appreciate our listeners out there. I mean, you guys are awesome. Tuning in every week. You know, we got a new one that comes out every Wednesday. We got some good ones in the pipe, so be sure and check them out and share it with you. With your friends, let them know about the Oakley podcast. We appreciate you. We’ll talk to you next week. Thanks for listening to this episode with Oakley podcast, trucking, business and family. If you enjoyed this episode, be sure to rate or review the show and the podcast platform of your choice and share it with a friend. We love hearing from our audience. So if you got a question, comment or just want to say hello, head over to our website, the Oakley podcast.com and click the leave a comment button, we’ll get you a response soon, and may even share some of the best ones here on the show. We’ll be back with a fresh episode very soon. Thanks for listening.