Making Financial Decisions For Today and Tomorrow amid Crisis

A Cyberside Chat Live - Making Financial Decisions For Today...

SUMMARY KEYWORDS

businesses, virus, participants, withdrawal, robert, loan, plan, money, remote, parts, year, business owner, 401k, employee, bit, furloughs, pay, matching, act, market

SPEAKERS

Robert Young, Jess Coburn

Jess Coburn  00:47

Morning I'm Jess Coburn CEO replied innovations and this is another episode of fireside chats. Today I have with me Robert Young Robert, could you talk a little bit about

Robert Young  00:58

money thanks guys for having me on. I'm Robert Young. I'm the principal investment manager and actually compliance officer for ra called young financial services. We're essentially a hedge fund, we have two parts of our practice. We manage money privately for individuals, but we also have a corporate side that we manage corporate pension plans. And that's, I think, what has more bearing on today's conversation than the private money management side. There's some exciting things happening that could help business owners and that I'm sharing with you. 

Jess Coburn  01:32

So you've been doing this for a while, Robert,

Robert Young  01:34

over 25 years, had the old practice before then, like most advisors came up through a training program or training system, licensed through 766 and then eventually reached a point in the amount of money that we managed. We go directly and be registered with the SEC and through FINRA, so that's it.

Jess Coburn  01:55

For a business that has a 401k What is it exactly that you do?

Robert Young  02:00

So on a 401k side, we manage the investments in the available for participants. We analyze those and make sure that they're operating against their peers in the lowest cost or best performance, then we also act as fiduciaries. we oversee a number of back office parts of the plan. And then we educate participants and we use some of the information for private money management side, and just give that to participants to help them and advise them on the best strategy to reach their goals. So that's really it. And that brings us some things happening today that you might be aware.

Jess Coburn  02:38

Yes, I'm curious. I know there's been a ton of changes. I'm curious how that impacts, let's say the business owner, let's start there.

Robert Young  02:44

Alright, so actually, we'll start with the business owner and then business owner slash participants. Perfect. So the first thing is, with course the virus is shutting down and throwing businesses, although we're reopening. I think there's a lot of trepidation on moving forward there, simply furloughs still going on, not every business is rolling out. and business owners are finding we're finding that some are having some challenges on revenue and some concerns about cash flow. So the first and most important thing that was now available to a business owner is if you have a 401k and you are using a match a safe harbor metric 3% match or better, you can suspend that or you can lower that matching rate. Normally, you couldn't do that in a year that could really helping a cash flow or expenses that businesses is being impacted by definitely. So

Jess Coburn  03:47

probably gonna say and then if you needed to do that, it's fairly straightforward and easy to do it well.

Robert Young  03:53

Yes, it is easy now normally wouldn't be that their plan amendments have to be done and With your every platform out there from paychecks and ADP to john Hancock empowerment and power and Transamerica, all of them are making it user friendly for a trustee to be...

A Cyberside Chat Live - Making Financial Decisions For Today...

SUMMARY KEYWORDS

businesses, virus, participants, withdrawal, robert, loan, plan, money, remote, parts, year, business owner, 401k, employee, bit, furloughs, pay, matching, act, market

SPEAKERS

Robert Young, Jess Coburn

Jess Coburn  00:47

Morning I'm Jess Coburn CEO replied innovations and this is another episode of fireside chats. Today I have with me Robert Young Robert, could you talk a little bit about

Robert Young  00:58

money thanks guys for having me on. I'm Robert Young. I'm the principal investment manager and actually compliance officer for ra called young financial services. We're essentially a hedge fund, we have two parts of our practice. We manage money privately for individuals, but we also have a corporate side that we manage corporate pension plans. And that's, I think, what has more bearing on today's conversation than the private money management side. There's some exciting things happening that could help business owners and that I'm sharing with you. 

Jess Coburn  01:32

So you've been doing this for a while, Robert,

Robert Young  01:34

over 25 years, had the old practice before then, like most advisors came up through a training program or training system, licensed through 766 and then eventually reached a point in the amount of money that we managed. We go directly and be registered with the SEC and through FINRA, so that's it.

Jess Coburn  01:55

For a business that has a 401k What is it exactly that you do?

Robert Young  02:00

So on a 401k side, we manage the investments in the available for participants. We analyze those and make sure that they're operating against their peers in the lowest cost or best performance, then we also act as fiduciaries. we oversee a number of back office parts of the plan. And then we educate participants and we use some of the information for private money management side, and just give that to participants to help them and advise them on the best strategy to reach their goals. So that's really it. And that brings us some things happening today that you might be aware.

Jess Coburn  02:38

Yes, I'm curious. I know there's been a ton of changes. I'm curious how that impacts, let's say the business owner, let's start there.

Robert Young  02:44

Alright, so actually, we'll start with the business owner and then business owner slash participants. Perfect. So the first thing is, with course the virus is shutting down and throwing businesses, although we're reopening. I think there's a lot of trepidation on moving forward there, simply furloughs still going on, not every business is rolling out. and business owners are finding we're finding that some are having some challenges on revenue and some concerns about cash flow. So the first and most important thing that was now available to a business owner is if you have a 401k and you are using a match a safe harbor metric 3% match or better, you can suspend that or you can lower that matching rate. Normally, you couldn't do that in a year that could really helping a cash flow or expenses that businesses is being impacted by definitely. So

Jess Coburn  03:47

probably gonna say and then if you needed to do that, it's fairly straightforward and easy to do it well.

Robert Young  03:53

Yes, it is easy now normally wouldn't be that their plan amendments have to be done and With your every platform out there from paychecks and ADP to john Hancock empowerment and power and Transamerica, all of them are making it user friendly for a trustee to be able to make those planned amendments, and then be able to engage or initiate a reduced matching program. And again, if you're somebody who's used to paying out 10 1520 $100,000 a month in matching, suddenly you get to eliminate that. There is a caveat though, of course, it's no good deed goes unpunished, right. So, at the end of the year, if you choose to suspend that your plan would now go under testing or top heavy testing and there's a possibility that people who are used to putting in the maximum amount may have had some of that redistributed back to them because the plan doesn't meet certain IRS RQL or labor criteria. So But you need cash flow today, you willing to maybe have some people get some money back in the future? It's an option.

Jess Coburn  05:08

Yeah, definitely an option. Definitely something to look at. Now, as a participant, what's my options there?

Robert Young  05:14

Alright, so I'm glad you went. Thank you. So we now have two things for participants. Typically, when a participant, there's a caveat to that, and I'll get to in a second, when a participant wants to take a loan now, their limits have always been 50% of the current value up to $50,000. So rounding numbers, to get the 50, you have to at least have an account value of $100,000. And then when you take that loan out, there's some there's some restrictions on that. That has been eliminated, you can now take 100% of the account value up to 100,000. So basically, everything becomes double. So if you have an account value of $100,000, you can now take that out as long as you pay yourself with the course next five years. So that's one of the most significant parts of loans. And then there's a withdrawal change has been made, it's probably a little bit more exciting. If I touch on that, please. So on the withdrawal side, if somebody has to take money out, the virus is now considered a catastrophic event. Typically, you couldn't take a withdrawal out, unless you're in Florida hurricane came through or you're about to lose your home for economic reasons. You have now mounting, excuse me, get mountain that's mounting as a result of medical expenses. The virus is now considered one of those tragic events. So someone could take him to draw out, draw them out, they can now take up to $100,000 out. But here's the exciting part. The mandatory 20% tax withholding for the federal government has been waiting to not have to withhold 20% of that hundred thousand I use that as a round number also So if you're under 59 and a half, you're no longer currently 10% of the drop, empty. And then finally, what's best is to not incur all the taxes on that withdrawal. And that current tax year, you can spread that out over three years. So using the example of 100,000, you could put 33,000 this year on your tax report next year 33. And then the final year 34,000. It's also important is, let's say take the withdrawal out, and somewhere in the next three years, you come back into 100,000, you can pay yourself back that hundred and walk away without any penalty at all. No taxes paid.

Jess Coburn  07:40

So you have three years that you could you could withdraw from your fun and pay it back over here. 

Robert Young  07:46

Withdraw this year, you have three years to pay back the taxes. So let's say you said Okay, you know what, I'm going to take the hundred thousand out this year. But I know by the third year, I'm willing to gamble, I'll have all hundred thousand back I could put it back in so I'm not going to pay taxes for the next two years, I'll wait to the third year 2023 to count that hundred thousand. But in the next 24 to 36 months, you put that hundred back. You're free and clear. 

Jess Coburn  08:13

That's I mean, that's fantastic. Right, that's a excellent opportunity to get access to funds that you normally wouldn't have access to. And then with the loan, so you could actually do a loan to yourself as well from your funds.

Robert Young  08:27

That's right, you've always been able to, but the limit is now been increased from 50 to 100,000.

Jess Coburn  08:33

And is that taxable as well,

Robert Young  08:35

it's not you're paying yourself back the loan rate since the Fed fed Fed funds rate is around zero. Your loan rate could be anywhere from point four and a half 2% just depends on what your plan platform dictates. And you'd look at those individually.

Jess Coburn  08:53

Now, is this the right time to be taking money out of your 401k though,

Robert Young  08:57

if you're furloughed, out of work and you need funds for, I guess that's really up to the individual. Exactly in their MBA tax plan. Now,

Jess Coburn  09:10

Robert, let's kind of switch gears a little bit. So a lot of people are focused on the stock market right now. Right? It's starting to come back. Is this the time to buy? Is this the time to sell what's going on in the market?

Robert Young  09:23

So my opinion, not to be confused with facts.

Jess Coburn  09:26

Fair enough. Fair enough. We'll even give you the the ticker banner there. Thank you. 

Robert Young  09:31

So we believe in value investing. And we also believe that the idea that the market has priced in the worst case scenario of economic news that you hear in the, I guess, financial stages, we don't believe that that's natural. We think that there may be a possibility of another dip. Definitely the Markets be choppy. So if I were going to enter back into the market if I went to cash a long time ago, do it slowly and pick and choose where you want to go. And I'll give you some free advice. So yeah, stick with the basics. Good, good, solid stuff and check the technology, right stick with healthcare, keeping utilities, secret, the things that make common sense. Maybe, even though some areas are very sexy right now, like financials or energy or biotech, I think I would stick with some of the leaders not only in the recovery, but also the future. Okay, fair enough.

Jess Coburn  10:39

Let's let's talk a little bit about going remote. I imagine that young financial services you've all gotten remote.

Robert Young  10:47

Not really, you know, unfortunately, you see behind me, files, Manila files and folders. We're actually exploring now because of this like most businesses, and that is Again, just gives credit to what we're talking about with technology. You know, I think every business is going to be looking to see if they do they need as much office space. Can things I know, for example, Florida Power and Light is rethinking how their HR department is being utilized. Because now they've been into remote for last 30 days. Now they're wondering if they need to bring them back in to the HR department, can they still maintain remote status? So we're not, but that's something we have to explore because our future clients, the ones that don't know that they're gonna be clients yet. We need to be able to access them and they may not be in a position to to meet us in a traditional way.

Jess Coburn  11:49

You know, I had an interesting conversation the other day with a gentleman that specializes in commercial real estate and he pointed out that a lot of them Businesses now some of them are going to want to go remote. And initially I thought while we're going to see this huge exodus of commercial office space as more and more employees go remote, and businesses look to reduce costs, and he pointed out that they're going to need actually more space for their employees, because in a call center, they're going to need six feet between each employee in order to maintain, you know, safe distances, they're going to need to expand hallways and make hallways wider. And that there's been this consistent decrease in the amount of space per employee that was being leased. And now they're going to expand that out, because each employee is going to need more space. So while there, while there may be fewer employees in the office, they made that occupying the same or even more space, I thought that was really, really interesting.

Robert Young  12:50

Right, right. You know, that's why like we do, I bring together experts in their field, because you get this this information as input You would not normally consider, I think what you're doing is very important, because it does educate people on what the future could look like.

Jess Coburn  13:07

Well, I'm not the only one that does it, you do a fair bit of video and commentary yourself.

Robert Young  13:12

Mind usually related to having to explain why something went down so severely or in those rare occasions, we've actually picked up that goes up very, you know, very well.

Jess Coburn  13:23

But that's important, though, right? In your business, you're constantly advising your customers on what they should or shouldn't do, or maybe not necessarily telling them what they should or shouldn't do. But giving them more information so that they can make that decision as an informed decision.

Robert Young  13:40

Right. So, you know, we speak to everybody when we send out a newsletter each month. We speak to everybody each quarter, we see somebody minimum twice a year, but during this virus, our corporate clients, especially, were spent the entire week just from nine o'clock til Oh, dark hundred. Just calling everybody client to make sure that they're aware of which one of the cares act and discussing their options. So absolutely, we want to make sure. I think that's what an advisor does.

Jess Coburn  14:09

Yeah. Fantastic. Robert. Robert, is there anything you wanted to add or that we didn't touch on? There's thanks important.

Robert Young  14:15

Just I can't think other than that. Just warn everybody about this part of it. The new levels with the Coronavirus, the limits are some very exciting, but of course, everything comes at a cost. So there is a prerequisite, you know, a participant does have to show that they are being directly affected by the virus or spouse or they have to have homecare for a child that's directly affected as a result of the virus. So there's some prerequisites for that. And if anybody has any questions, I'm more than happy to field any questions. Certainly. I think we're all here to support each other during this time, and any other time and you cannot act as a just an information resource. That's it.

Jess Coburn  15:00

I appreciate it. I appreciate you coming on. If you don't mind if you could share your contact information for those that are listening certainly

Robert Young  15:06

suggests you'd like to reach me at 561-427-6767. Again, that's 561-427-6767 that's my phone number does actually go to my cell phone the evenings or weekends, you can always reach me anytime every client notice that or just my website, young fs.com.

Jess Coburn  15:26

Thank you for Robert, I appreciate you taking the time to meet with me and have our cyber side chat. I know we had scheduled to go live a little bit later and we jumped the gun and went early. But hey, it was a fantastic chat. Thank you so much. I appreciate it. I'm gonna throw up your contact information here for anyone that might want it And with that, I'll say thank you again.