Planning for Retirement with Financial Advisor Kenneth Laneaux 

Welcome to another episode of Own Your Genius, where we empower entrepreneurs to use their education and their experience to create dope stuff.  I’m your host, Attorney LaConya Murray. On episode 142, we discussed, starting a business over 40, and one of the main concerns that people had was saving for retirement. When you’re working 9:00 to 5:00, your employer has two that make it easier for you to save for retirement. But what does that look like? Out here in these streets on your own. Today, we have a special guest, financial advisor Kenneth Laneaux, to help answer that question. But before we dive into today’s episode, make sure you subscribe to the podcast, so you don’t miss any insights on how to own your genius. 

Welcome back to the Own Your Genius podcast where we discuss building businesses, growing brands and what else? Only your genius. I’m your host, Attorney LaConya Murray, owner of Off The Mark IP Solutions. Off the Mark is a boutique intellectual property firm representing innovative entrepreneurs aka geniuses who are looking to protect their brand and grow their business with ongoing legal support and business mentorship. We have a good one for you today, so let’s get started. 

Kenneth, thank you so much for joining us today. I’m so excited to have you on the podcast. I know we’ve been talking about it for a while. And yeah, if you can do me a favor, just tell our audience a little bit about yourself.  

Hey, no problem. First of all, thank you for having me on your podcast. I’ll just jump right into it. I am Kenneth Laneaux, I go by Kenny. I am a financial advisor, financial planner, and a wealth manager, currently with a company you might’ve heard of Edward Jones. And this is my career. I’ve been at it for a while now. I hold several licenses to be able to do this and offer my advice as well as the company advice and products to you. So I get asked the question all the time, what do you do? And let me know if I’m jumping ahead of you. 

No, I want to know, like, what do you do?  

That was going to be my question. Okay. What does a financial advisor do?  

I get asked the question all the time. What do I do? So essentially, I like to say it this way. When you and I sit down to talk about how I can help you as an advisor, first off, as an advisor, I’m able to devise a plan or a strategy to help you reach your financial goals. Now that sounds like an elevator pitch, but what that means is products that we have, be it on the investing side, be it insurance, life insurance, annuities, mutual funds, IRAs, everything that you need financially speaking, we have that at our disposal to use for you, for our clientele, for my clients. Perfect. What it looks like is when I sit down with you, I tell everybody I am out of a necessity to do the best job I can for you and to stay within regulations because I have to. Everything’s documented now. We’re all under a microscope in this industry, just like in the legal industry. If I make one misstep, if I get a complaint, I could lose my license. 

I have to know who my client is and what my client needs and what my client wants and then go from there. I tell everybody, when we sit down and have a conversation, I’m going to get all in your business not because I’m nosy, but it’s going to help me help you better. And it’s going to check the box. When it comes to, if there’s a compliance issue, why did I choose to put this client in a mutual fund and I have to have it documented where you and I had a conversation and you know, we went over the goals and the needs and the wants, and this makes sense because X, Y, Z. So there’s a lot of, I’ll say confusion out there, sometimes about what a financial advisor does or about who a financial advisor really is, because quite frankly, there are a lot of people using the title loosely that are not really financial advisors or financial plan. Okay. 

I’m very glad to have you on the podcast because as business owners, one of the challenges we have is retirement. That’s one of the things I hear all the time. Well, that’s the big thing that’s going on now. It’s like when you’re working, you’re nine to five. Your employer is helping you put some stuff together. Now you’re out on your own and it’s like, ah. And at first, and I’ll be honest, when you first start, you don’t even-you’re not even really thinking about retirement. You’re thinking about, okay, how can I get this business off and running and making money now making money? Wait a minute. Do I want to be doing this forever? Uh, I don’t. So how can business owners use, um, investing to save for retirement? Like, what are some things that we can do to save for retirement?  

Lots of things. It’s going to depend on your situation. Um, first off, as you know, starting a business is you’re going to work harder than you’ve ever worked in your life. You’re going to put in more hours, more time. You’re not going to be able to sleep. Often, I run across business owners that are good at the business they started but are terrible with organization, planning and things like that. The business is thriving and here we are. I don’t know what to do outside of my business. 

You know, what do I need to do? You know, how do I do it? And so that’s where I come in as a financial advisor. So one, you do need to save for retirement. Also, you’re going to need to save just for, you know, rainy day purposes. But I tell everyone there’s going to come a time in all our lives where we’re not going to be able to work either because we were blessed enough to choose our retirement date or. We may have a health issue or something, and we just cannot work anymore. But that day is coming for all of us. How do we, are we prepared, and how do we get prepared for that? So investing is a tool that we can use. We can do retirement plans, IRAs, things of that nature, depending on your situation. Just same as if you were working a nine to five, and you had a 401k and you contribute to it and hopefully your employer will match what you contribute to it. Well, as the business owner, you’re the business owner and so we need to set up a retirement plan for your retirement and if you have employees for your employees as well. Okay. Well, let me start with this. Let me just do this then. How can we determine how much we need 

 Typically, you can determine it a few ways. Typically, a general rule of thumb, most people, once they are retired, live on 70% of their income while they were working full time. So, you can use that metric. If you’re making $100,000 a year when you retire, you should be able to live on $70,000 a year. 

It all depends though. Everybody’s situation is different. Let’s look at, you know, am I still paying a mortgage when I retire? Or has my mortgage paid off? Do I have car payments when I retire? Am I going to retire, and I still have adult children that I’m supporting? All depends on how much you need when you retire. Typically, I like to use the 70% rule. If you need that as a target, then let’s do it. If you’re making a hundred thousand, then let’s plan on you living on 70,000 per year in retirement. Okay. And so, but what does that look like though? You’re saying 70,000, but I don’t need to just save $70,000. Like, so what does it mean? That doesn’t really, I don’t understand that. Right. What it means or what it looks like is we need to start saving today. And you hear many people want to save a million dollars, I have a million dollars in my retirement savings to live on. Again, it’s all relative to what your financial picture and financial situation is. So let’s start saving for your retirement today. If you’re 10 years away or 20 years away for retirement, the more that you put in that nest egg, the better because the day you retire, you’re going to have to start pulling back, pulling out of whatever your savings. You said about 70% of your income at the time of retirement, but how do we determine how much, that’s only one part of the factor, right? What’s the other part? We look at, or we have to look at what do you anticipate monthly you’re going to need to live on? And, you know, if you’re, just whatever your finances are, mortgage, car notes, insurance, all of that. If you’re, like I said earlier, if you have, you know, children or adult children or grandchildren you’re helping to provide for, all that takes into account how we come to that number on what you need to live on in retirement. Some people have a lot of stuff on their plate, even their retirement. Some people have very little, so it takes them, that person, not much to live on per month. So, but if we use the 70% rule, then we need to start saving. Let’s say if you’re going to live in retirement, if you anticipate living, whatever the number is, 10, 15, 20, 25, 30 years in retirement, we need to take the 70% rule and multiply it by that many years. That’s how we come to a number. If you live on $70,000 a year and 10 years after you retire, that’s 700,000? Don’t make me laugh. I don’t do that. I know, so. 

That’s how we come with that number because the day that you retire, you’re going to start taking distributions from that beautiful nest egg that you built up. Now, my job as an advisor is to make sure that that money is invested wisely so that it is still growing even though you’re taking distributions out of it monthly, but it is still growing at a rate. Hopefully, it can keep up with your monthly distributions, or at least it’ll prolong the number of years that you have that money. For example, if you’re sitting in a savings account, you’re getting about a half of a percent interest. That’s not doing any of us any good. You’re going to burn through that money pretty quickly. But if we put it somewhere and if it’s invested in a mutual fund or some type of investment vehicle and you’re getting 5%, 7%, 15%, whatever that number is, then we can prolong how many years you have that money at your disposal, even though you’re taking from it to live off.  

Oh, that sounds awesome. One of the things you said is that we should start early. Yes. When we should start taking action, and we should start as soon as possible, what if you start late? Is it ever too late to start saving for retirement? 

It’s not? Okay. What does it look like if you are a late bloomer? The good thing is if you’re a late bloomer, I tell everyone, don’t panic. And you’re not alone. Most people, most Americans, once they hit around late forties, early fifties, first thing that we start thinking about is do I have enough to live on when I retired? Do I have enough saved to retire? How am I going to do that? So, um, the good thing is the IRS has allowed, if you’re people over the age of 50, if you open a traditional or Roth IRA, the contribution limit is $6,000. However, once you reach age 50 and over, you can contribute an additional $1,000 per year to that. So the IRS has allowed an additional $1,000 to kind of catch up. In addition to that, you’re going to have to be really shrewd about your budget and how you spend your disposable income. Okay. To get caught up because if you start late, it’s not impossible. It is still doable. We may just have to change some of our habits to set more money aside. So that we’ll have it. And I’ll just pay off debt and save.  

Okay. Now you mentioned a couple of terms that I need you to explain. You mentioned mutual fund, you mentioned Roth IRA, you mentioned traditional RIA. What is that stuff? Okay, so I didn’t know how far in the weeds you wanted me to go on this podcast, but just a little bit. You don’t have to do a deep dive, but just enough so that we’ll know what our options are. Okay, so let’s start with your individual retirement account, the IRA. There’s two types, traditional and Roth. Typically, your traditional is pretty much the same as your 401k. If you have a 401k through work, that is a traditional IRA. The benefit of having a traditional IRA is the money that you contribute to the traditional is allowed to grow tax deferred until you start to take money out of it. Until you start to take distributions at that time. Then, you have to pay the taxes on it. The other good thing about the traditional is like if you’re working and you have a 401k, that’s a traditional IRA, your contribution to that traditional is used to lower your taxable income. If you’re making 100,000 and you contributed $10,000 to your traditional, well, you’re only going to pay taxes on the 90,000 not the $100,000 because it lowers your taxable income.  

Additionally, it again is allowed to grow tax deferred. No taxes, if you have that traditional 20, 25, 30 years, you’re not going to have to pay taxes on that money until you withdraw the money. Now, the IRS has said that you cannot take a distribution from your IRA until you turn age 59 and a half. Okay. However, if you do have to take a distribution before 59 and a half, you can, but the IRS is going to slap you with a 10% penalty. Plus, you’re going to be taxed at your tax rate, your tax rate when you do your taxes. After 59 and a half, you don’t pay a penalty, but you do have to pay at your tax rate. Now that’s the tradition. Okay. The Roth, which is really what most business owners are going to because that money, the money that you contribute to the Roth IRA, R-O-T-H Roth IRA, that money is paid with after-tax dollars, which means that you’ve already paid taxes on it. So you’re contributing to it with after-tax dollars. So, when you go to take a distribution when you start taking the money out, there’s no taxes. You’ve already paid the taxes. You don’t have to pay taxes on the Roth on the traditional. You do take, you do pay taxes on the distribution. Both have similar or the same contribution limit, 6,000 per year. If you’re over the age of 50, you can go 7,000 per year. And this is all IRS tax rules and the IRS can change it from year to year if they want to. So that’s where we are with that in 2024. Okay, and what about the mutual fund? What is that? Mutual fund is look at it like this. A mutual fund is like you hear about these mutual companies, a mutual fund is, I like to use an analogy, you take a basket, and a mutual fund is like a basket. And in that basket, you’re putting your money in it for it to be invested but it’s not just your money it’s everyone else’s money that is using this mutual fund. The mutual fund is going to be invested in multiple, multiple companies and multiple sectors of the market to make it diverse. I guess long story short, mutual fund, mutual is everybody. All of us, if you work and you have a 401k, the money that we’re putting into our retirement plan is going into a mutual fund. And the mutual funds are managed by a fund manager. And that manager manages the funds in a manner in which it is to grow but mitigate as much loss as possible. When the market has a downturn or bad days, the fund manager watches the market, watches the money, and does what the fund manager is paid to do. And that’s to mitigate losses in that account.  

Okay, you said paid to do, so I’m going to drop down to my other question, which is fees, fees associated with working with the financial advisor, because I know for especially when it comes to like investment, those are some things that we can do on our own. So what are the benefits of working with the financial advisor versus doing it myself? And then what are the fees associated with hiring someone? A lot of us, I’m a do it myself type of person, but I also realized my limits and a lot of people like to try to do things themselves. You can YouTube anything and all that jazz, but you can open an investment account and buy and sell stuff yourself without an advisor. The problem with that is if you are busy, if you work a lot, if you just don’t have time, or if you don’t quite understand what you’re invested in or what the market is doing or how things happen that affect the market, then you’re kind of out there by yourself and you’re like a ship without a sail. And that can be a dangerous place. I know I do not want to play with my money like that. We come in, fund managers come in, companies come in where we say, okay, for a fee, we’re going to manage your money. You manage your business, do what you do best. We’re going to do what we do best. And so I look at it as the same way as if you hire a handyman to come pull up your, put up a ceiling fan, you can probably figure out how to do it yourself, but you either don’t have time or you don’t quite trust yourself or you don’t have a ladder tall enough to get up there. You have to pay for someone’s services to do it. It’s the same thing in our field. Fees are associated with managing the funds so that you don’t have to try and do it yourself.  

Typically, these fund managers are not one person. It is a whole department. Sometimes it is a whole team. Sometimes it is a whole business with multiple people that are managing their funds and typically their job is from eight to five and sometimes longer is to watch the stock market, look at what’s happening in the world at things that can affect the market and manage your money accordingly. So, their whole job is to come to work every day, watch the stock market management. Like your job is to go to work and do legal stuff and do whatever you do. That job is to come and manage the fund that you’re invested in. And so yes, there are fees invested. I mean, they come along with it. Also now, there are also fees if you want to buy and sell stock on your own without the benefit of a manager. Sometimes you may have to pay a, depending on who you use, there may be a commission associated with every buy and sell that you do. You have to look at that as well. Then you must remember tax reasons. If you make money, buy a stock, the value increases, make money and then sell it. 

 Well, once you realize that profit that you made, you just created a taxable event. And uncle, I mean, the IRS is watching and so you’re going to have to pay tax on that money too. So we also come in to play where we can kind of advise you, even though I’m not a CPA and I’m not an attorney on how, you know, fees come in to play with possible taxable events that you may have created for yourself. Okay. And I think a lot of our audience can appreciate, you know, being able to work in their business and letting someone else handle the investment. And one of our, you know, taglines is operating your brand of genius while we operate in ours, because our clients actually believe in letting the dancers dance and the singers sing, they have a business to run, they can’t do all the things. So having someone that they trust to make these decisions for them and talk to them and explain them to them in English could be very beneficial. So I appreciate your answer to that.  

What is one of the things that we can do to diversify our investments? So I know we talked about mutual funds and IRAs and things of that nature. When it comes to investment, should we just pick one thing or should we have several different ways of saving for retirement?  

You want to diversify your portfolio of investments. So, and the reason being is, you don’t want to be just invested company or one area like everybody wants to invest in Apple, right? So, if you’re only investing in Apple, what happens when Apple has a bad day or a bad week? Well, you’ve lost money. We want to diversify. We want to spread our investments. We want Apple, but we also want what we call defensive stocks. Those are companies that are solid. They’ve been around forever. They’re not going anywhere. They are just like, like GE, like craft, Walmart. Those types of companies are, are here. So, and typically those type of, when the, when the market has fluctuations, when it’s going crazy, sometimes it’s going up and then it’s down as up and it’s going crazy. These, these types of companies, they remain solid. They kind of remain the same. They’re not going to have a lot of volatility. Those are the stocks that you want to invest in as well, because they’re going to keep your portfolio kind of stable and it’s not just blowing in the wind sometimes when we have market volatility. Also, you want to look at fixed income, which is a bond. Bonds are fixed income. So those bonds are not stocks. Stocks are equity. Bonds are stable as well. 

When the market has its fluctuations and its volatility, the bonds remain stable and they don’t go down. So you want a good mix of stocks and bonds in your portfolio depending upon how aggressive you are or how conservative you are. If you’re really aggressive, you’re gonna have more stock than bonds. Some people don’t have any bonds at all, just all equity, all stock, super aggressive. We want to spread our investments. Sometimes people want investments from financial institutions, from sectors like energy, from some people want to invest in green initiatives and just all sorts of things. And so, we want to spread it out because if Apple is down, if the communications sector is not doing well, some other sector that you’re invested in is probably going to be doing okay. So it’ll balance out. 

That’s great. That’s great information. And what about, should we just focus on saving for retirement through investing or should we also do other things with our money? Should we do investing and the IRA? Should we do that?  

So I’m sorry, I didn’t mean to cut you off. It’s going to depend on the person. There’s no, doing something is better than doing nothing. As far as real estate goes, you can invest in, a lot of people want to invest in real estate, but you can invest in real estate through the market. You don’t have to go and buy property and be a landlord or go and try to flip houses to be in real estate. You can actually buy, invest in portfolios that invest in real estate. So you’re not actually… a landlord or you’re not trying to flip. It depends on the individual. If you want to buy real estate and do these things, then that’s fine. I have no problem with it. If you want to go to the market. Some people, you know, still like to keep money under a mattress. That’s fine too. But typically, the returns that you’re going to see over the long haul, you’re going to see the best returns typically through the stock market. Over the long haul. Now I’m not talking, sometimes you have a bad week or a bad month. 2022 was a bad year as far as the stock market goes and investing, but typically over the long haul, the history of the stock market, with all of the ups, all of the downs, it’s typically, you’re going to see returns of on average about 7%. Okay. So, and that’s through the depressions and the recessions and through all of that, the market is still going to yield on average about a 7% return. And it is hard to find that kind of return somewhere else outside of the market. 

Oh, okay. Well, I guess my last question would be, because we’re talking about retirement, we’re talking about saving for retirement. What type of lifestyle should we expect, or could we expect, you know, after retirement, based off of our investments? Does that question make sense? I don’t even know. Oh, I want to travel and see my kids. I want to travel and see my grandkids. I want to go around the world and have a bucket list. I want to do, I think you absolutely can. If you plan for it, you can live your best life in retirement.  

If it’s planned for, I tell everybody hope is not a strategy. So you can’t just work and set money aside, uh, in a savings account and hope when I retire that the money, I’ve been putting in my 401k at work for the last 30 years is going to be enough. We have to plan for the things that we want to do in retirement. One of the things when I sit down and talk with people is I’m going to ask you what are your goals? What are your short-term goals, which are from now until now to two years, and then what are your mid-range goals, two to five years, and then what are your long-range goals, five years and beyond? 

 If we are looking at a retirement lifestyle and let’s just say we’re 15 years out from retirement and I want to travel, I want to do all of these things on my bucket list, we can certainly plan for that and then put a strategy together that we can have enough money saved in retirement to absolutely do that. It’s going to entail, one, we’re going to have to be true, we’re going to have to be disciplined from now until we retire about how we spend our money and where we spend it we’re going to have to, you know, make some, probably some decisions and some lifestyle changes to get to where we want to be. But it’s all for the best. So I tell everybody as a general rule of thumb, I do this with my own self. If I go right now and go to lunch, I pull through the McDonald’s drive-through and I spend $12, well, I’m going to take $12 and put it in my savings as well. So that… That’s just what I do for myself to make sure I’m just not spending, spending, spending, spending, spending. I’m also saving. So sometimes I want to stop and I’m like, no, because then I got to go and move money over and save it. So I just won’t spend it, you know? And so that’s just what I do. Everybody does something a little differently, but we can live our best life in retirement. We absolutely can. And I think we should, we shouldn’t work and then stop and then start acting like, you know, I hate to say like we’re old, right.  

All right. So tell us how we as business owners can implement and help our employees save for retirement. Yeah. So if you have employees and you want them to have a retirement, you can absolutely do that. So earlier we talked about the traditional and the Roth IRA. Well, as a business owner, you have the option of having a SEP IRA. which allows you to contribute to your employees retirement plan. And the money that you put into that plan is a write-off on your business taxes. Okay. So you can use that as, so if you have an employee and you contribute $5,000 to their retirement plan, then you can write off $5,000 on your business taxes. That’s called a SEP. Typically ideal for businesses that have 10 or fewer employees.  

Okay. What if you are an employee of one? Can I still do that? Absolutely. You can still do that. So I can basically, I could, is that kind of like the matching thing? Is that what you’re saying? Is it kind of? Yeah. If you have one employee, you’re going to have you and yourself. Actually two, you can. No, just me. What if it was just me? That’s what I’m asking. 

If I just want to do it for myself as if you’re if you’re an S-corporate and you’re classified as an employee What if you like an employee of one you still you can do a set for yourself? So because the the entity is making the contribution to you as the employee. Even I started the entity and set it up the entity is is making the contribution to the employee To the entity is the is the tax write-off for that. Nice. And that’s something that we can do through you and Edward Jones? Yes, we do set up those SEP accounts for absolutely.  

Cool things. Well, that was great information. I’m glad you took some time out to get that in. Because a lot of business owners, that’s a goal of theirs, is to be able to when hire employees and after they hire employees, be able to offer them competitive benefits. And one of the things that most people look for are retirement options and that matching benefit. Yeah, if you have a good employee or you just wanna be good to people, White House might work for you and you can’t help provide for them. Well, listen, I appreciate you coming on the podcast. We’re going to make sure that our guests have your contact information. My other question I have for you, are you able to work with clients outside of Alabama? Are you strictly serving people in Alabama? No, I’m serving in Alabama. I’m licensed in the whole Southeast, Florida, Georgia, Alabama, Mississippi, and Louisiana. And so I have clients spread all over the Southeast.  

Thank you so much for tuning in to this episode of Own Your Genius. Remember, just because you work for yourself doesn’t mean that you can’t save for retirement. I guess financial advisor Kenneth Laneaux, provided some great tips on how to save for retirement. So make sure you take a listen. And matter of fact, Geniuses, what are your takeaways from this week’s episode? If you found today’s episode insightful, share it with fellow entrepreneurs and don’t forget to subscribe, rate, and leave a review.  

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