Planning for Tomorrow: Making Retirement Benefits Work for You
My latest podcast guest experience was on The Liquid Lunch Project show with hosts Luigi Rosabianca and Matthew Meehan, where we discussed the importance of retirement plans for both the employer and employee, among many other topics. They also poked a bit of good-natured fun at the name of our firm, and managed to get me to share how I got into the retirement plan field. You can listen to the episode on their website or on Apple Podcasts, or watch on YouTube. We’ve also got the transcript below if you’re into reading. Enjoy!
Matthew Meehan (00:49):
Hey, what's up everybody? Welcome back to another episode of the Liquid Lunch Project. I am Matthew Meehan, alongside my partner, the professor, Luigi Rosabianca. What's on tap today, Lou?
Luigi Rosabianca (00:59):
Matt, let's let our hair down to our audience. We're having a bit of a challenge right now in our businesses - hiring people, engaging them and then nurturing them is tough. And you know what? There's no better tactic to nurture and keep your current team happy than helping them plan for their retirement. So in that instance, we have the Queen of Retirement Planology, Courtenay Shipley. She's going to walk us through how a small to medium-sized business can implement this planology. I mean, I've never heard of that word, so I love it. You're making up words today. So Courtenay, welcome to the podcast and let's start. What is Retirement Planology?
Courtenay Shipley (01:38):
Retirement Planology, well, we're an investment advisory firm that helps small to medium-sized businesses make smart decisions about employee retirement plans.
Luigi Rosabianca (01:47):
Good branding. Because had you said you're an investment advisory firm, you never would've gone into the door. Great job, a retirement planology. Let's stick with that.
Courtenay Shipley (01:55):
Let's stick with that, right? Yeah.
Luigi Rosabianca (01:57):
So how do you work with business owners?
Courtenay Shipley (02:00):
Well, we are trying to help them with their retirement, obviously, but in a variety of ways. So one is what you just started to mention a minute ago about the recruiting and retention of your employees. Also, business owners need to set some money aside for retirement usually, as well, because it has a tax favorable situation that goes with it for them. And also, everybody's thinking about how they're going to spend their time later in life and hopefully have the luxury of having some choices about how that's going to go.
Luigi Rosabianca (02:30):
Wonderful. So Courtenay, I've heard of a few rumors. One, Americans are not good savers and two, Social Security doesn't pay a lot of money when we do retire. So taking those two instances, how do you do a deep dive into small business and really, really move the needle?
Courtenay Shipley (02:51):
So let's think about this. So Social Security - I also call it Social Insecurity - it's usually between 20 to 40% of somebody's working income. So that's the amount that they'll receive in retirement. But hey, that's a really good solid basis, but we need to build on top of it. So that's typically in America where the retirement plan is coming in, the corporate-sponsored retirement plan of some sort, because it's this vehicle that gives people an easy way to save out of their savings, or, I'm sorry, not out of their savings account, but rather just straight out of their paycheck. And we all know what we don't see, we don't miss typically. So it makes it super easy for people to save. They don't have to go outside to a financial institution and set something up. So that's the other way that…that's the other part of the paycheck usually.
(03:39):
And then people can do planning on their own. Of course, if you're a business owner, you own the business, so you may want to sell that someday as well as part of your retirement. But that's how we should be framing this and thinking about it. And you're right, Americans are not great savers, but they're not terrible savers either. When given the option to sign up for a work-sponsored plan, they're 17 times more likely to save. So it's a good thing if the business can afford to put this kind of plan in place and is willing to deal with the red tape that goes with it.
Luigi Rosabianca (04:13):
So it seems like the root word of planology is planning. So how do you work with either an employee or an employer in implementing that plan? For example, as we get older, we probably don't have colleges to pay for and maybe the mortgage is either done or maybe has a small balance. So maybe the money that we would need on hand when we're 70 is different than the money we need on hand when we're 40 or 50. So how do you help a couple plan, given cost of living increases in inflation and just living in America being expensive?
Courtenay Shipley (04:50):
Yeah, so we're helping in two ways. One is that we are - sorry, I think my director of security is letting me know that the mailman has arrived. There's two ways: we're helping couples and employees to think about how to use the retirement plan to the best of their ability that's being offered to them. And the second thing is we're thinking about, how does the business owner interact with this, both from the business standpoint as well as for their own planning? So like you said, when you're looking ahead in retirement, probably the easiest place to start is just to say you probably need about 80% of your working income today for the reasons you listed. One is you don't have dependents at home, and the other is that you've got your house paid off. If you don't have a mortgage, obviously you can live on less.
(05:39):
With those two big bills gone, most people could live on a little less than what they're making today. Now, that's not always going to be the case. You want to take into account different aspects of your planning and your life and what you want to do in retirement and all that good stuff. But for the business owner as well, they need to think about how the business fits into their picture. So will they continue to work for a long period of time? Are they going to take a step back? Are they going to sell the business to somebody else? So those are the types of conversations that we're having, but there are calculators out there that make this easy so that we can at least get a ballpark or something to aim for, because a lot of those questions we won't be able to answer until we're closer to retirement age and ready. So we try to get close. It's never going to be a perfect math equation.
Luigi Rosabianca (06:26):
Do you ever have a wild and crazy entrepreneur that tells you, ah, don't worry about it. I'm never going to retire. I'm going to work till they nail the coffin in?
Courtenay Shipley (06:37):
Yeah, happens all the time.
Luigi Rosabianca (06:39):
And what do you do for that person? Do you still plan for him due to the tax benefits or do you tell him, call me when you're 90?
Courtenay Shipley (06:46):
No, we still plan because even if you do still want to work in retirement, that's fine, but let's have the option not to. Let's say something happens with your health or, I don't know, there's something that comes up that you want to pursue that's different than your business. That could be another business. It could be a hobby, it could be you want to spend more time with family. This just gives you options. So having that 401k plan in place, not only for yourself as the entrepreneur, but also for your staff and your valued employees, it's just a smart move all the way around no matter what people's plans are.
Matthew Meehan (07:21):
So what size businesses are you working with and what's the smallest size? I know you can set up a solo 401k if you're a business owner, but if you have employees underneath you, you have to offer a 401k plan for the whole company, correct?
Courtenay Shipley (07:36):
Yes. So there's several different plan types that you can offer as a small business, meaning under 100 employees.
(07:44):
So one of those might be your state IRA plan. So some states require businesses of a certain size to have a retirement plan for their employees, and you can just hook onto the state plan. Yep, that's just an IRA, an individual retirement account. Next, you have what's called a simple IRA that steps it up a little bit more. I think the limit is like $16,000 that you can put into that, and it requires a contribution from the business, as well. So they have to either match or they have to put in a contribution - that works pretty well. And then you get into 401k plan space, and that's where typically you're trying to - you as the business owner - are trying to save more. So the limit there is $23,500, unless you're turning age 50 or older, and you can put up to $30,500 in it this year.
(08:37):
So that's kind of a big deal. It's going to depend a lot on the tax savings that you're trying to go after. It's going to depend on if you have profits that you're trying to share with your staff. So when you say what size, I would say typically you want to have at least 10 employees. I would say before you start calling us, you could do other things with maybe your local financial advisor or your bank relationship, something like that. But when you move into the 401k plan area, that's where things start to get a little bit more complicated because you get so many different options that are available to you and how you design the plan.
Matthew Meehan (09:14):
So what are some common mismatches that you see between benefits that employees want and benefits that employers want to give?
Courtenay Shipley (09:21):
Oh my gosh, all the time, right? I think where we go wrong as employers is we forget to ask our employees what kind of benefits would be valuable to them. So that survey is a really good one, but mismatches, I would say, are where they're spending a lot more maybe on health insurance, or the communication with the type of benefits that they're offering is not spot on to matching what kind of messages the employees are receiving. So in other words, they don't understand or appreciate the plan, and that could go for literally any benefit. We've seen situations where people are asking for something like a student loan match or help me pay off my student loans, in other words, or totally missing the boat and saying, well, we'll help pay for education. It's like, well, we've already got our education, now we've got this loan. So what are you doing for those people? Or there's…pretty popular right now is pet insurance. And that's really -
Luigi Rosabianca (10:25):
I never heard of that.
Courtenay Shipley (10:25):
Super popular. You can get creative with these types of benefits and oftentimes they don't even cost employers very much money. If anything, they just need to bring the vendor in to explain it and then see if anyone wants to sign up for it. But other times, there are finite dollars that you have as the employer to spend on your benefits. So getting things in place that people really care about is important, and that's when you need to ask your employees what is important to you and what kind of benefits do you need?
Luigi Rosabianca (10:57):
I'm curious, what kind of pet benefits are we talking about?
Courtenay Shipley (11:02):
Honestly, I don't know. With pet insurance, I mean, it covers vet bills, right?
Luigi Rosabianca (11:09):
The pet may retire. I mean, your head of security may be done barking one day. That's it. The mailman's coming right in, who cares? Yep.
Courtenay Shipley (11:21):
Yep.
Luigi Rosabianca (11:23):
So is there a part of this conversation where education even comes into play, like 529 plans? Or are we limited strictly to retirement planning?
Courtenay Shipley (11:35):
So our firm just does the retirement plans. However, 529s are a big deal for employees, as well. And you can have an employer matching what goes to that, or you can set up a payroll deduction for the 529 plan. That's going to depend a lot on what state you're in, because the 529 plans are state-specific, and you can get certain tax perks for those particular states. So we're in the Washington, DC, area. We don't see it as popular here because you might have people who work in Maryland, DC, or Virginia, and they're crossing state lines to go home. So these are important things to know about. And as far as financial education goes, this is a hot topic. So when you offer just a 401k plan, that's great, but if you can also piggyback financial education on that for financial wellness and be explaining these types of programs, employees are super appreciative of that.
Luigi Rosabianca (12:36):
Can you think of any creative non-government-backed retirement plans? Are you working with, let's say, a CFO at a company and maybe implementing some sort of financial planning or portfolio planning? Because it seems like the entire landscape and all these acronyms are literally government-backed policies. 401k is an IRS code, 529 is an IRS code. If the government doesn't incentivize us, we don't do it.
Courtenay Shipley (13:15):
So yes and no. So what you're talking about, it is a tax code, and the reason that the tax code is there is so that you get the tax perks that go with it. So as a business owner, if I am matching contributions that go into my 401k plan, that's money I don't pay taxes on, I don't pay corporate taxes on. Or as…if I'm sharing my profits in the form of a 401k contribution, again, you get the tax break there. And for employees, as they put their own money in from payroll deduction, they're not taxed on that money either if it's going into that pre-tax bucket. So I understand what you're saying, but on the flip side, for retirement money, getting money set aside, the more you can, the better. So if you're not paying taxes on it right now, that's great. The other thing is the concept of the Roth or after-tax dollars that you have the availability to have, too.
(14:13):
So putting money in after taxes are already paid, and then in retirement, as long as you've had that account open at least five years and you're 59 and a half or older, you can pull it out tax-free. So when you think about how you're constructing your paycheck in retirement, if you're still working, if you're not still working, how is your social security taxed, and then also how do you get the money into your hands and what kind of taxes are you paying on it - that is a pretty important thing to be thinking about. As far as non-governmental, I mean, there's all kinds of ways you could save for retirement. You could have a portfolio of rental homes, you could have a patent that you own that you get royalties for. You could have, I mean, it's any way you can think of to create an income stream for yourself on top of Social Security is a good thing to do, but most people don't stop to think about that. And the 401k plan is a really good stop gap, and it's a really nice - let's call it a vanilla ice cream cone that everybody can enjoy that helps them save for retirement.
Matthew Meehan (15:17):
Yeah, I think where Luigi was going with that was back in the fifties and the sixties, companies gave pensions out there. The 401k plan came around around 1978, and then there was a shift into forcing people into saving for themselves rather than companies giving pensions.
Courtenay Shipley (15:33):
Yeah.
Matthew Meehan (15:34):
So we don't see many pensions out there at all. Right?
Courtenay Shipley (15:38):
They've gone the way of the dodo. Yes.
Matthew Meehan (15:40):
And I think what Luigi was saying was if the employees don't go out there and set these up, most employees aren't going to save on their own. They're going to spend the money that they have. It's not easy enough for them to do, where it's just deducted out of their paycheck and they don't feel it. After a while, they're not going to do it.
Courtenay Shipley (15:55):
Yeah, you're a hundred percent right. You're a hundred percent right.
Luigi Rosabianca (15:58):
That's exactly what I meant to ask.
Courtenay Shipley (16:03):
But yes, those incentives are there to get people to get in the plan and to make it easy. And now they've also had some mandates about automatic enrollment so that you're taking the friction out of the process. It used to be that you needed to fill out your enrollment form, you needed to turn it into HR. They would process it, all that stuff. And now we have it where we're defaulting you in. If you don't want to do it, you can fill out a form putting the friction where you don't want the behavior to go.
Luigi Rosabianca (16:34):
Which comes first, the chicken or the egg? Do employers seek your services and then you set it up for all their employees? Or is it the other way around where you may be working for someone and say, hey, by the way, speak to my boss, I want him to implement this company-wide?
Courtenay Shipley (16:50):
Both. Sometimes companies already have a plan in place, but they don't feel like they're getting enough service to go along with it. They need more support, they need more, like you said earlier, planning. They need more strategy around, how do we make this a meaningful benefit, or we're not working well with our vendors and we just need somebody else to translate what's happening here. A lot of times it's the HR person saying, I know I have fiduciary responsibility for this, and I just need someone else to make sure that we're doing everything we're supposed to do and we're on track. And then a lot of times we just want another place for our employees to be able to bounce ideas around. We don't want to hear about their loans, we don't want to hear about their financial situations. We'd rather keep that confidential. So we want to have an open pipeline for them to be able to go talk about it with somebody. So that's typically when we're brought in.
Matthew Meehan (17:44):
So how did you get into the retirement planning business?
Courtenay Shipley (17:49):
I had a music major in college. I needed a job. I went to the career center. Literally, I kind of fell into it, and this is over 20 years ago now, and I just loved the concept about investing and explaining things to people who really didn't understand it. It seemed unapproachable, and everybody wants to retire someday. So it was a pretty good fit as far as I was concerned. It was very interesting. It was something that I could help people with. So that's…and then I just stayed in the industry. It's weird.
Luigi Rosabianca (18:23):
Are you still playing music?
Courtenay Shipley (18:25):
Yeah.
Luigi Rosabianca (18:28):
You play an instrument?
Courtenay Shipley (18:29):
I was a trumpet performance major. Yeah.
Luigi Rosabianca (18:32):
Oh wow.
Courtenay Shipley (18:34):
Yep. Did some singing too. So yeah…
Luigi Rosabianca (18:36):
Hey, you walk into a conference room with an employer with a trumpet, you're getting that deal.
Courtenay Shipley (18:39):
Oh yeah - maybe!
Luigi Rosabianca (18:46):
Hey, Courtenay, let's say the three of us were to open a business tomorrow, and after we set up marketing and and new hires and pay the rent and paid for the utilities and mopped the floors and did all the fun stuff that business owners do, the very next day, Matt and I say, Courtenay, set up a retirement plan for our 40 employees. What's the first thing you do?
Courtenay Shipley (19:12):
The first thing I ask is, what do you want it to do?
Luigi Rosabianca (19:15):
Well, you're a partner, so figure it out. I know.
Courtenay Shipley (19:19):
I'm going to check in with you guys too. Yeah.
Luigi Rosabianca (19:21):
We're talking aspirational. What should an employer be doing? We're assuming that employers love their employees. We want to grow our team. We want to create good feeling and warmth and comradery, and we want to build a team and we want retention. So what are the checkpoints that we want to fulfill?
Courtenay Shipley (19:41):
So the other questions are around, do we want this to be a mechanism for profit sharing? So do we want everybody to feel like they have a hand in the profits of the company and we're going to reward them in retirement, so depositing it into their 401k versus a cash bonus. So the three of us are going to have those conversations. We're also -
Luigi Rosabianca (20:05):
My reply to…there are…for the high performers, but for the guys that are coming in late and leaving early, no. Can we bifurcate those plans?
Courtenay Shipley (20:15):
We can to some extent, yes, you can do some tricky things with profit sharing where you're trying to guide more towards certain groups of employees maybe than others. We also might even set up a non-qualified deferred compensation plan for just our superstar players that are really hard to replace, and we're trying to keep them employed for a long period of time. So we've got some different things we could do there. We might also think about, do we want to match our employees? So what's our budget to entice them to also participate in the plan and appreciate it? We probably do, because we have recruiting issues. We need quality employees.
Luigi Rosabianca (20:56):
Well, Courtenay, you just taught me that the budget equates to the tax savings.
Courtenay Shipley (21:05):
And we're rolling in profits, right?
Matthew Meehan (21:08):
Let me throw a curve ball at you. Let's say you have some W2 employees and then you have a lot of 1099 contractors. What can you do now?
Courtenay Shipley (21:15):
Well, you can cover those W2 employees pretty easily. The 1099s, you usually don't let those guys participate in the 401k.
Matthew Meehan (21:23):
Okay. So there's no workaround for that unless they…
Courtenay Shipley (21:26):
They’re independent contractors, so they would set up their own thing,
Matthew Meehan (21:29):
Bonuses?
Courtenay Shipley (21:31):
You could do a bonus plan of some sort. Yep. Yep.
Matthew Meehan (21:37):
And then what about equity inside the company?
Courtenay Shipley (21:40):
Okay, so we got a couple ways we could do that. You can do that non-qualified plan I talked about before, and make it an ownership-like experience or do some phantom stock in there. You could also literally have shares of the company inside the 401k plan that people can buy. That's a little trickier. And the IRS does get more involved in your plan and the rules that go with it, but that's something that maybe they could purchase stock within the 401k. Yeah.
Luigi Rosabianca (22:11):
You definitely did a little bit of jazz in your past. I mean, good thinking on your feet. I like the creativity.
Matthew Meehan (22:20):
Yep. Courtenay, why don't you tell everybody where they can find you on the social media or anywhere on the internet?
Courtenay Shipley (22:28):
We're lurking on LinkedIn, so you can find me at www.linkedin.com/in/cshipley. You can also go out to retirementplanology.com/learnmore. We also have a blog out there so you can binge on our content, as well.
Luigi Rosabianca (22:45):
Courtenay, that's not enough. Her content on LinkedIn is superb. She does great educational videos on retirement planology, so definitely connect with her on LinkedIn.
Courtenay Shipley (22:55):
Oh, I really appreciate that. I'm glad. Did you watch them or are you just kidding?
Luigi Rosabianca (23:02):
Your head of security told me to watch it. Yeah.
Courtenay Shipley (23:06):
She wanted treats afterward too, right? Yeah.
Matthew Meehan (23:10):
So Courtenay, other ways to set up a 401k where you can actually take a portion of that money and move it outside of the 401k to a separate advisor like an in-service 401k?
Courtenay Shipley (23:21):
You can. So the way that these plans are set up is in a trust and the company is the owner of the trust. And so there's fiduciary responsibility that goes there. You have to monitor and select the investments that go in the plan that are allowed to go in the plan for people to use.
Matthew Meehan (23:39):
Okay, let's talk about that. What type of investments can go into the plan? This is a big problem that I see when I speak with other entrepreneurs. It's very restrictive, people.
Courtenay Shipley (23:49):
It's kind of restrictive. So due to the tax aspect of things, there's certain types of investments that can't go in, but for the most part, it's stocks, bonds, cash, mutual funds, ETFs, so your normal investment account. You can also attach what's called a self-directed brokerage account. So that goes back to what you were saying before where you can go outside of the menu and have access to other things. You just want to make sure you understand what you're doing when you do that. I hate the concept that this is a kind of a nanny situation. Like, oh, we're making sure our employees don't make terrible mistakes and we give them these 10 options to choose from or whatever. But most people just don't have the time or inclination to keep up with this or do day trading. So those long-term investments are really quite suitable. The do-it-for-me options end up being a really good option for a lot of people. For those who want sprinkles on that vanilla ice cream cone, if you will, they can go out to that self-directed brokerage account.
Matthew Meehan (24:52):
When you guys set up these plans, you become the administrator of these plans for them?
Courtenay Shipley (24:56):
We’re the advisory firm on it, where you take that fiduciary liability on the investment side. So that whole selection and monitoring piece of it, make sure you're doing due diligence. The other piece of where we come in is we're kind of like a quarterback, in that we're helping with all of the service issues. So getting the right vendors in place that fit, and that goes from a technology side as well as employee experience side, all of that. So the HR person is not drowning in all kinds of things that they have to do to keep the plan afloat. The second part is educating the employees on it so they have another place to go besides your HR office or the president's office to say, what do you think I should invest in? Don't answer that question - send them to the advisor. And then the third piece is on meeting those fiduciary responsibilities, just making sure that all the deadlines are met. You've got breadcrumbs for how you made decisions in the past so that if anybody ever questions it, you're good to go. So we're not acting as the administrator, but we are helping get the administrator in place.
Matthew Meehan (25:58):
And then when the employees have questions about the plans that you created, are they calling your firm or do you have a designated person for 'em to speak to or…
Courtenay Shipley (26:06):
Yeah, they'll call our firm. Yep. Our team, they'll either call us or they'll call the recordkeeper. So it just depends on what kind of question they're asking, but yeah.
Matthew Meehan (26:16):
Awesome. Well,Courtenay, thank you so much for being here. We already told everybody where they can actually go and find you. It's on LinkedIn, but you just have great content. I'm going to have to check it out, but we appreciate it. One question before I let you run. What do you think the best asset class is for investing?
Courtenay Shipley (26:39):
Oh, no - the best asset class.
Luigi Rosabianca (26:46):
Tell Matt crypto. That's all he wants to hear. Tell him crypto. It's great.
Courtenay Shipley (26:51):
Not crypto. That's something you can do outside of your plan, in your own brokerage account. You can just go ahead with that. Best asset class? I don't know. I mean, stocks, bonds, cash, right? Those are the three options, depending on how long you have until retirement starts.
Matthew Meehan (27:11):
What'd you say? You have real estate.
Courtenay Shipley (27:14):
Yep, that's true. Yep. I don't know that there's a best one. I think they all play a part.
Luigi Rosabianca (27:22):
Diversification. Is that the answer?
Courtenay Shipley (27:24):
I think it is.
Luigi Rosabianca (27:26):
I saved you. You owe me one. You hate me on that. You're going to hate me. You owe me a trumpet solo.
Matthew Meehan (27:32):
Alright, Courtenay, thank you so much everybody. That's a wrap of the Liquid Lunch Project. We'll see you on the next episode. Thank you for listening.