Top-Heavy 401(k) Plans: Avoid the $45K Surprise

[0:00] JD: Boys, meet in. Oh, we're not going to continue that trend. All right, welcome to episode number seven. [0:25] Chad: Oh, my God. [0:25] JD: You guys are number seven. This will be our final episode for 2015, but get ready for 16, because we're gonna bring it. [0:35] Justin: It's already been. [0:36] JD: All right, I'm gonna go out of the norm, so pay attention, audience. Instead of diving into our subjects, we're gonna go straight into the Quiz of Death. Or what could be called. It's not really always end. Fatality. Sometimes it could be grossness or some type of pain. But we're gonna call it the Quiz of Death. [0:57] Justin: Bring the pain. [0:58] JD: We have a Taser on site. You wanna show the audience our Taser? [1:03] Chad: It's a flashlight in case you're walking at night by yourself. [1:07] Mark: And if someone comes along. [1:11] JD: And we are going to quiz Mr. Chad Johansen on three retirement plan questions in the area of loans and distributions. So if you're a financial advisor out there, one, you get to learn cool, fun facts about loans and distributions. And two, if Chad doesn't get them all [1:34] Justin: in history, Chad Johansson's been speechless. [1:40] JD: Couple of things to clarify. I have decided that the tase will happen on bare skin to the oblique. All right, we get a little bit of assistance from Alyssa, our loan and distribution stud over there, as we go through this. But question number one. [2:04] Mark: Hold on. [2:04] Chad: Does he have to, like, can I trow right now? [2:08] JD: If he gets it wrong, he's not gonna drop trowel, but gonna hit him on the oblique. Question number one, you know where the oblique point? [2:14] Justin: Question number one, it's right there. [2:16] JD: If you're trying to figure out if a plan has a loan provision, name one of two pieces or documents that you would find this to be true. [2:26] Chad: Thank you. [2:28] Justin: Go to. [2:29] Chad: Your adoption agreement has a provision, and [2:31] JD: if not the adoption agreement, where might you look? There you go. Ding, ding, ding, ding, ding. Good, Alyssa got it right. Okay, number two, these are teed up for you. [2:41] Chad: Thank God. [2:42] JD: Number two, what's the maximum amount someone can take as a loan? [2:48] Chad: 50% of your vested account balance, up to 50 grand. [2:51] Justin: Very. [2:52] JD: Yay. And the third and the third and final question. Who was the 13th president? No, no. Third and final question. Name all six reasons that you can take a hardship. [3:12] Chad: I thought there were seven. [3:15] JD: Do we tase them for that? [3:18] Chad: All six. And, Alyssa, you're gonna purchase your primary residence, correct? [3:25] JD: Correct. [3:26] Chad: Medical expenses. [3:27] JD: Correct. [3:29] Mark: I'm feeling good for this one. [3:30] Chad: To avoid eviction. [3:31] Mark: Oh, good. [3:32] JD: He'll stand up. He'll stand up. Avoid eviction. Correct. [3:36] Chad: Um, he's shaking. [3:40] JD: I am, too. [3:41] Chad: College education or higher tuition or higher education? [3:44] JD: There you go. Tuition. I wish we had music playing right now. [3:50] Justin: Like, two laugh. [3:52] JD: Don't do that, Brandon. [3:53] Chad: We're done. Oh, God. [3:56] JD: Editor playing. [3:58] Chad: There's more. That as we do with a home fixing of your primary residence. Whoa. [4:04] JD: Very good. Is that a synonym? [4:06] Justin: Are we good with that, by the way? [4:07] JD: Way I told him this would happen deeper into the show, I just decided [4:10] Chad: to bring it out. I don't know. It's got to be something to do with medical expenses. I'm going with. I'm going with. To. [4:28] JD: Stand up right now. [4:29] Justin: Funeral expenses. [4:31] Chad: Come on. [4:32] JD: No help from the audience doesn't count. For our. For our audience, the seventh is funeral expenses. Chad did not get that right. Correct, Alyssa? [4:40] Justin: No. [4:41] Mark: What's the protocol for how long I leave this? [4:43] JD: Just put it on there and zap them. I'm not. Did you do it? [4:48] Justin: Oh, I'm recording this. [4:50] Chad: Yes, he did. [4:51] JD: Just didn't zap it. [4:53] Chad: Didn't make a sound, but it freaking zapped. [4:56] JD: No, we need another one. [4:59] Chad: Yeah, we need to go get. I didn't even hear it. It wasn't as bad as I thought. [5:03] JD: Here's what I'll do. I'll start it. [5:05] Mark: Start it. [5:10] Chad: All right. Okay, that's enough. [5:14] JD: All right, stay over here. We might need a little editing to make that more climatic. [5:21] Chad: God. Thank you for hitting me quick, though. I didn't have a whole lot of time to think about it. [5:25] JD: All right, now, officially, I want to welcome you too. Episode 7. How Do we start all of our episodes for the taste? [5:34] Chad: By introducing the beer of the episode. These were lined for a reason. Justin's Irish, so you get that one. Mark, you've got brown porter. I've got ipa. So the beer of the episode is Petaluma Hills. One of the folks watching this, one of our advisor partners actually is part of of the Petaluma Hills family. And it's up in Petaluma, close to Laganitas. Got a nice tasting room there. The beer is fantastic, as these guys will be able to vouch for in a minute. So let's pop and let's taste. [6:07] Justin: I think my name is the coolest out of all your guys. It's porter. Luma, I'm glad that you have the [6:13] JD: porter and I don't. [6:15] Chad: Katie asked for the blog. [6:18] Justin: Why did I get boring order? [6:20] JD: I love that we're tying this to one of our advisor partners. [6:23] Chad: And what else are we doing for the first time? Yes. So thank you by the way. Thank you very much. [6:28] JD: Share the love, man. Relax. Calm down. Let Mark. [6:33] Chad: All right. And we've got new mugs for once. Yes, sir. [6:38] JD: We're doing this pro style. [6:40] Chad: We've. We've taken our medicine from folks. [6:44] JD: And here we go. Episode seven, boys. [6:50] Chad: Thank you. [6:51] Justin: Holy cow, this is dark. [6:54] Chad: Mark's got syrup. [6:57] JD: Cheers it up. We also got these gifts, these mugs. [7:00] Justin: Yeah, yeah. [7:01] Chad: Thanks for Tracy, Mark. [7:04] JD: All right. [7:07] Justin: I'm so happy there's a beard on my mug because I cannot physically grow a beard. [7:12] Chad: You look like you have a little shadow at least. [7:14] Justin: It's been like four weeks since I shaved. [7:16] Chad: I'm glad that's out of the way because I can actually think now. [7:18] JD: My beard continues to grow. [7:20] Mark: That was actually a pretty good move, J.D. [7:22] JD: i'm going for the homeless man look in case anyone's. [7:25] Justin: Yeah, I like the. Throwing him off his game and putting it right. Thank you. [7:29] JD: Yeah. Doing it off the bed. So now we go to the real fun stuff. We're gonna start our first subject matter, and I thought it would be cool this time to talk about a real story from the road from out there in our day to day. And I think it also has got a lot of valuable kind of context to it for our audience. So I was down in Southern California actually assisting Justin, and I got a call from a client of ours that had been a client for a while. And they told me that they got a communication from our client account manager here that they were top heavy and that they had to put in, get this, $45,000 of an employer contribution that they were not aware of. This is a very awkward conversation to have. I'm going to be totally honest with our audience. Everyone here, they were upset. You know, they were mad at me. They felt as though we had let them down in some way. And so I thought this is a good conversation for our advisors, even our strategic partners out there, to understand top heavy. And what a deep, vicious pitfall it can be in retirement. Probably the number one bogey to watch out for in retirement plan design. What is it? It's when your key employees, not to be confused with your hces, kind of a different definition. But your key employees have 60% or more of the total plan assets. Now, I thought that this plan had gone over the limit in the course of a year. And here's the bummer of this is as a tpa, when you gather census on a plan, you start to do your work. It's usually long after the end of the plan year. Could be In January, February, March. So you're letting the client know that something's happened that's already gone and there's nothing you can do about it. And I thought that maybe this plan in that year had gone over the 60%. Good news for me and for us still. The bad result for a client was they had been top heavy forever. It's just for the last umpteen years, even before they came to plan design, they had always made a profit sharing contribution. And unbeknownst to them, part of that calculation of that profit sharing was a top heavy mandatory minimum contribution, which is 3%. But now they come to 2014, which is the plan year, and they say we don't want to give a profit sharing anymore. And so they're thinking we're not going to give a profit sharing. We come to them and say they have to because they're top heavy. So this is a bit of a shocker. It's a big ticket, right, to throw that in for a small business. [10:13] Mark: Nothing with a safe harbor in the past or anything like that either. [10:15] JD: They did not have a safe harbor. They do now. They did not have a safe harbor. So another one I wanted for you guys to bring up, which I think is more valuable to our audiences on a new plan. Yeah, you know, touch on a little bit of that. [10:27] Justin: We go back to that case. [10:29] Chad: Yeah, sure. [10:30] Justin: Kind of wrap that up. So the determination was made that they had to give that contribution and it was, it was obviously taken care of at that point. From our perspective as a tpa, what was our service back to them? It was to re engage and tell them ways that they could thus create efficiencies around not having to go through that next year. [10:50] Chad: Right. [10:51] JD: Yeah. So we put in a safe harbor match for them, but you know, they kind of got caught in the middle in terms of removing the profit sharing. [10:59] Chad: Well, and it's not as if we don't make it aware that plans are top heavy throughout each and every year, regardless of having safe harbor in place or not, because it's part of the annual testing, it's part of the disclosure. But more often than not, people don't pay attention to that when you're, when [11:14] Mark: you're not having to deal with it. [11:15] JD: They got a notice every year that said they were at 62%, but they don't know what that means. I want to clarify Mark's point just for our audience. When you put in the safe harbor, that automatically takes care of your, your top heavy. So you're golden there. But what I wanted you guys to talk about is a brand new plan because that's where I think. [11:33] Chad: And this time of year that's so important. Important because so many, so many groups are starting plans for the first time and it is different. So again, the definition 60% of more of the assets belonging to your key employees if at the end of your first year. And for us, when we're setting up these plans, more often than not, when it's a new plan towards the end of a tax year, they're doing it for tax efficiency. They're funding significant dollars to ownership and making it tax efficient. Therefore, the plan by default is going to be top heavy. [12:02] JD: They're trying to get money in the pockets of the big dogs. [12:04] Chad: And so if you have more than 60% in that first year, you're deemed top heavy. The catch is in the first year you're subject to that 3% minimum now in the current year and in the following year. So for two consecutive years, the first year of the plan and the next. So you guys got some creative ways of accomplishing, making sure that they're giving at least the 3% or adding safe harbor next year. [12:30] JD: What I don't want for advisors or partners is they walk into a prospect, the prospect says, I do not want to give an employer contribution. I want to set up a salary deferral only plan. And you say, or they say, not a problem, we can do that. Right. But then you mention to them there's this ADP test that could fail. ADP test in terms of referrals. But if you don't mentioned top heavy, then they go off on their merry way. In November and December, they dump in a bunch of money. The rank and file employees do not. They're top heavy. And then you have to come back to them in January, February and tell them exactly what they told you not to do, which is you got to dump in 45 grand or 15 grand or whatever it is. I mean, that's got to be the worst meeting that could happen to an advisor or a vendor, period. [13:21] Mark: This was, this was in October, right? [13:23] JD: Well, yeah, they hadn't got their census in. Well, yeah, they had been delayed. They have till 1231 to actually make the right. [13:29] Mark: I know, but you know, two months out you're told you get, you know, $48,000. [13:33] Chad: Yeah, we've, we've worked in with advisors on some real creative designs this time of year where I'm getting very technical, but where we put a prior year testing in for first year, which allows the HC to put in 5%? Yeah, for the first year and then they're subject to ADP in future year. Well, if you think about that, if you're not planning to give a company contribution, even if you allow them to do the 5%, you can still be top heavy if nobody else participates. So while we may be able to bypass the ADP with some creative testing, if you don't have a TPA that understands the stuff or you don't have a bundled provider or resource in there, it's a tough test to fail. I always tell folks, failing in ADP is not the end of the world. Failing a top heavy is gonna create some big waves. [14:17] JD: So the moral of the story or the buyer beware that we're trying to get out to our audience is you need to understand the potential pitfalls of a top heavy. It's a big deal. You'd be surprised how often it gets overlooked when people are trying to slam in plans. And we surely don't want our advisors or our partners to have to have that meeting where you go back and let them know that you screwed up. [14:40] Chad: Let me add one thing too creatively for, especially for those watching. What we've been doing here this time of year is we're already past the opportunity to put in a 401k. So we often put in a profit sharing only plan this time of year. Mark and I sat with a great advisor yesterday and I was teaching him that if there's no need for a 401k, it's a construction company, nobody else is going to participate. We're meeting Gateway. So all you have to do is give 5% to the staff and you can max out ownership. Why not leave it just a profit sharing only plan? Because then we avoid any pitfalls of needing to process per pay period contributions. But also, even if you are top heavy, nobody can put in a contribution. So either you're funding profit sharing or you're not. And so that becomes less of an issue. [15:26] JD: It brings up another pitfall. Moving a profit sharing to salary deferral. Adding a 401k to a property sharing, that's a common mistake where they go, oh yeah, not a problem, let's add it. But if you don't look and determine whether they're top heavy or not, then you convert them to a top heavy 401k plan and they're like, what did you do? So these are some of the things, I don't want to turn this into a, to a sales ad or a pitch, but that's why? We want to support our partners and help them make the right decisions. Because there's lots of things that you need to watch out for. [15:57] Chad: Those watching this are partners. So it's okay to do that. Little pitch here and there. [16:01] JD: Okay, Not a problem. [16:02] Chad: And aspa, according to you, aspa's watching this now too? [16:05] JD: Aspa. We're gonna be at ASPA someday. On the stage, everyone. Reach out to ASPA via Twitter email. Let them know that you want the retireholics at their next conference. [16:18] Mark: All right. [16:18] Justin: Hopefully they can afford our entry. They gotta pay us to be there. [16:21] JD: Oh, we do. I didn't know we did. Did that have fees for that kind of stuff? [16:25] Justin: Appearance fees. [16:26] JD: We are going to jump right into the famous wheel of ice. Be quick, down and dirty. But I want to state for the record that we've all agreed that if it does land on Justin, Chad and JD we will drink the Smirnoff Ice for this. [16:46] Mark: Mark. Or does Mark get to watch us? [16:48] Chad: I like Mark. Losing every time. [16:49] Mark: Time. [16:49] JD: We'll see. [16:50] Justin: I think. [16:56] JD: You can spin it. Hand. [17:00] Justin: Repetitive cycle. [17:01] JD: We'll play it legit. We'll play it legit. [17:03] Chad: Can see it. [17:03] JD: Whoever gets it. [17:07] Chad: No, it did. No, it's not. It's on the other side. Well, it depends. Are you going off the arrow or the leather strip? [17:13] Justin: How about you, like me, determine that? [17:15] Chad: All right. [17:15] Mark: That is like, right on the line. [17:17] JD: Actually. Hold on. [17:17] Justin: I say Reese, let me look. [17:19] Chad: Everybody drinks. Everybody drinks. Everybody drinks. [17:23] JD: We only have four. Four of us. [17:26] Chad: JD Is trying to get. [17:28] Justin: I think that's fair. Okay. [17:30] Chad: I think this was a fix. [17:31] JD: And take the wheel out. [17:34] Chad: Let's. Dang. It looked like a pretty honest spin. [17:36] Justin: No, I was going to slap the hand away. [17:38] JD: I'm not going to get on my knee like that. [17:41] Justin: You're kind of. [17:41] JD: I don't think there's room for us all to do, is there? Son of a gun. [17:47] Mark: That's a horrible idea. [17:50] Chad: Alyssa, I blame this on you. [17:51] Justin: I'm putting my knee on the couch. [17:54] JD: Cheers, ladies. This is definitely gonna need to get fast forwarded. [17:57] Chad: Terrible. [17:58] JD: Or do some editing that makes it look like I can pound a spare enough ice because I can't. [18:13] Mark: Are we allowed to burp on the show? [18:14] Chad: Don't have a choice. He's still going. He's still going. You got it. Oh, gosh, Mark, that is not fun. I don't know how you do that every episode. [18:31] Justin: Welcome to my world. [18:32] Chad: I don't know how you do that every episode. [18:35] JD: I'm like crying right now. [18:36] Justin: Hey, at Least it's not the peach flavored one. [18:39] JD: You know what I thought of when we were doing that? I was sitting next to you guys and we were pounding together and I saw the clear bottle and I thought of my father founding this company and how far we've come. Proud moment. I was like, so proud. Is that why you're crying? [18:57] Chad: As I like to articulate, it's not about us. It's about all those people doing all the great work back there. [19:02] Justin: So they're looking at us like we're a bunch of crazies. [19:06] JD: Did we mention on our show that we were interviewed at a broken eggs film.com so our audience should. Should. [19:16] Justin: Because that happened after our last episode. [19:18] JD: I don't know. So we were interviewed on another podcast. It's called broken eggsfilm.com. i forget what episode we are. [19:25] Mark: It's like 23 or hashtag friend franniversary. [19:30] JD: Check it out. It's pretty cool. [19:32] Chad: It's a retirement webcast and I thought [19:34] JD: you guys did a good job. Yeah, webcast. Okay. So the next subject that I'd like to dive into is a common one in terms of the base of it. We're going to talk about target date Funds. [19:47] Justin: But we're going to know that I invented this. [19:49] JD: Yes, yes. Do you know how I invented Target date funds? Those are the funds that you have when you go to Target to buy dates. [20:00] Mark: You buy dates? [20:01] Justin: Yeah, at Target, I buy dates funds. I say by buying discounted dates at Target. [20:09] JD: Discounted dates at Target. [20:10] Justin: Yeah. They're in aisle 16. [20:12] Chad: In case you're wondering. [20:13] JD: We're not going to talk about that kind of tdf, but we're going to talk about the real Target Date fund. [20:20] Justin: Oh, well, I just know what that is. [20:22] JD: And we're gonna put a spin on it. More on how we think our advisors could benefit from a strategy relating to target day funds. Okay, so let's build it out. You go into these point of sales. There's a lot of fund analytics, you know, comparing large cap value to large cap value or passive base passive funds to actively manage funds. And there's all kinds of conversation reports that go around it. But the fact of the matter is, is that within our industry, we know I'm going to make up a percentage here, but 70%, that's pretty close of plan. Assets go into an asset allocation fund like a Target date fund. So we believe that the advisors that we partner with should be cognizant of that and should walk into a point of sale armed to tackle that subject. Right. And be able to talk about things like Glide Pass and equity exposure and alternative asset classes within a target date or is it index based or actively managed or a combination of the two. And I think it's. I don't want to get your guys feedback but I think it centers a lot around and to and through. Sorry, leaving out to and through. Go in with that subject matter, telling a plan sponsor that if this is the most important asset class, let's make sure that we make a good decision around what target date fund to utilize. And not all target date funds are alike. [22:01] Chad: Right. [22:02] JD: We're learning that. [22:03] Chad: So I think we all know I'm pretty darn passionate about this. I've been yelling to advisors for the last year about this topic. In my mind, avoiding this conversation or at least not diving into it is like constructing an NFL team and not paying any attention to who your quarterback's going to be because we know that the majority of the assets are going to flow into them. So why, why do we not put the time and the effort to discuss the options amongst the target ac? And I'll even take it a step further. I don't necessarily think you need to discuss to and through. You need to discuss the methodology behind those individual funds or passive versus active within the target date suite. I think you just need to show that proper time has been put in to determine which suite is right for that client. [22:51] Mark: Talk about the base. You know, just talk about the basics of them and how they can really benefit the people who don't pay attention. I remember years before I started working here when you were already here and you kind of explained the whole concept when you were looking at mite 401k. I didn't know anything about it. The light bulb went off and it's like, man, this is a great place to be. Especially if you don't actively manage this stuff. [23:11] JD: Oh for sure. And you know, the bummer is that most of the participants and the plan sponsors, they think that it's just like a plug and play thing. Like they don't think there's any difference. They did some interviews with them, they thought that it was guaranteed, they thought that it was safe. I mean there's lots. [23:30] Justin: There's a misconception about that. You find out what's under the hood, they're not created equal. They all have a different way of looking at what they're utilizing for the type of funds that they have in there. And secondary to that is for, especially for advisors and who work with us, but partner with A DCIO who can come in and explain those analysis analytics. Yeah, to actually be there to give them that story behind them and more details that they could ever imagine that we can't necessarily provide. [23:58] Chad: More often than not, the Target Date suite that gets chosen is that of the provider that's being chosen because they offer the Target Date suite as well. And I am not saying that's wrong, but what I'm saying is you need to be able to validate why that's the choice. Many of the proprietary target dates that we belong to products are a multi manager target date. Meaning that it's not just chalked with proprietary. That's right. Many of them are sub accounts really. And so being able to have the conversation as to why we chose Vendor X which has this target date solution as the only target date solution and no other options, that's got to be a point of the conversation. So let me say this. I am very passionate about this. You guys have seen that over the last year I've added new slides to some of the presentations that I'm doing that focus on a couple things. Revenue neutrality that goes into the fact that we all spend time reviewing the core menu, yet we seem to just shove whatever Target Date suite we can in there and there's no time or effort spent. So I go into revenue neutrality. I go into the fact that the Target 8 funds should be or asset allocation funds in general doesn't have to be Target date. The asset allocation funds should be the most scrutinized investment inside the plan. And that as an advisor you should have some passion or some conviction about what you're using there because that will differentiate you and it connects back to what you always preach on which is retirement readiness and engaging the employees and all these things. If we know money is going to go in there and we talk about investing majority of rigid. Yeah. And we can bridge it right into people actually achieving what they need to retirement because we have them in the right type of funds. [25:39] JD: Well, I'm glad you brought up the retirement readiness. So there was two things I wanted to make sure that we covered in talking about this. One is I want you to understand or our audience understand that comparing targeted funds is a lot more complicated than comparing large cap value funds. And so that's why it's been an issue and I agree with you. You said usually they go through all their analytics. Is this a good fund, is a bad fund? Do we remove it, do we replace it? Then you slide by tdfs. Right. Because one, it was hard to get rankings on them. So I want to be clear to our audience that those are. Things are changing. Right. So there are a lot of new analytics out there that are offered by dcio. They're offered by different people that will help you compare target dates. It's still a more complicated conversation because it's hard, hard to compare apples to oranges to pineapples, but those analytics are out there. And then the next bigger concept, you said retirement readiness. So I think that our advisors need to walk in armed, prepared and confident to talk about the differences between target date funds. Not only to win more business and to talk about something that maybe the guy or the girl before them didn't talk about. Right. Because they went over the other stuff and it's so important, but to also talk about the fact that if 70% made up statistic close. I'm telling you, if 70% of the money's going in there, then these are Joe, Tom and Mary's accounts. Don't we need to make sure that the methodology fits your demographic and that we're trying to build these people's nesting eggs for the future? This is the retirement readiness concept. Let's put some time, energy, and effort and make sure that the strategy fits [27:26] Mark: with statistics like that. Why are more people not talking about it, though? 60% of assets. [27:32] Chad: 70. I think it's 70. [27:34] Mark: Yeah, he said 60 on the way over here. [27:35] JD: Sorry. [27:37] Chad: I think the reason is, number one, it's very difficult to really break down in terms of putting a side by side together. And some of the DCIO companies have done a great job bridging that gap. The other component is, and I'm just being brutally honest, many providers don't have multiple options. And so an advisor's going in with a belief in the service model and the provider that they're taking into the table, taking into the opportunity. And they know that if they spend too much time on that and the client says, well, I don't like that they don't have a choice with. [28:10] JD: But tell me that that's changing a little bit. [28:12] Chad: It is, it is. [28:13] JD: Most vendors have sub accounts. [28:14] Chad: Most of the vendors that only have one choice, it's a multiple manager target date suite of sub accounts. So it's in its own kind of different breed. It's interesting that, Justin, you asked that question because I literally have been preaching this for a while now, and I have not seen too many people adopt it. Those that have are killing it. Are killing it. Because it is a completely different story than what many of their peers are Coming and doing. They're saying that we're going to spend time focusing on where we need to focus, which is, yeah, Chad and his team, they'll do a great job getting the right amount of participation in the assets and based upon design. But when those assets hit the plan, where are they going to be invested? And that's where we got to spend our time and our effort focusing from an investment perspective. And so it just blows my mind that more people aren't spending time on it. [29:07] JD: So if you are a financial advisor, a retirement plan financial advisor, and you want to take advice from four guys in Christmas sweaters that drink beer, we would highly suggest that you build up your TDF game. Right. [29:24] Chad: So what has always been one of the big points that we bring to advisors in terms of this team right here, which is we sit in a hundred point of sales plus a year, [29:35] JD: they've been there, done that, we test [29:36] Chad: these things, and I'm telling you, it's working. That's why I added slides to some of the conversations that I'm having with these advisors. Because it is impactful. [29:46] JD: Well, of course it works. Because didn't we just say that plan sponsors and participants don't understand that target date funds are different? So if you're a consumer and someone walks into your office and starts to unearth that myth for you, show you that, hey, let me show you under the hood. The way these things are built are different one from the other. And I want to lead you down the path to find the right one you're in. Right? I mean, you're starting to go cheese. Yeah, you're right. I didn't know that. I didn't realize that. [30:15] Justin: And the secondary component I would like to add, obviously is the education to the part participants about those particular funds because they're based upon your targeted date. [30:25] JD: Right. [30:25] Justin: For what age you'll be in retirement from now. But that doesn't necessarily mean you have to invest in that particular fund based upon how those funds are set up. Maybe you need to be on the earlier side or the later side if they're two or three different approaches. So just as long as that education is getting the people who are actually putting their money into it, and especially a lot of people, people use them as defaults now too. Right. So those people who put their money in don't care to do anything with it, it's not sitting in cash like some antiquated plans we've seen in the past. It's going into these funds. So they're prudently Selected for a reason. [31:00] Chad: Yeah, yeah. [31:02] JD: We're just saying make that part of your arsenal. For sure. I think that's good. I think that's solid. We're so serious. We're here in our fun sweaters and drinking beer. I wanna take a selfie. [31:15] Chad: I'm here for the eggnog. [31:16] JD: Add a little more kind of fun to this. So I'm gonna. Improv isn't something that we kind of had on the script, but let's talk about business fashion, Chad. Let's talk about suits and ties and belts and shoes. [31:30] Justin: We had this conversation yesterday, actually, and. [31:34] JD: And one thing in particular I want to talk about is. Is skinny suits. Like, so the old school suits were a little boxy, a little big. And so I want to know what's your take on wearing a, you know, lean, trim, skinny suits? And the reason why I bring this up, I'm not even asking for Chad's opinion. I just want to let you guys know and our audience know that I once asked Chad, like, dude, are you getting any of those skinny suits? And he said to me, I can't wear the skinny suits. I said, why? He's so fit. He's like, my calves are too big. Let's see. [32:10] Chad: I knew. I knew the moment you said that that's where this was going. But it's the truth. I can't fit in skinny suits because my calves don't fit. So I apologize for that. [32:22] JD: If you're an advisor and you don't have fat calves, can I call them fat calves or is that bad? No, they're muscular. [32:28] Chad: Yeah, I'm fine with that. [32:30] Justin: And you don't have girthy calves. [32:32] JD: Can you. Would you recommend that when selling target date funds that they wear skinny suits? No, you're over it. [32:37] Chad: You need a suit that fits you properly. It doesn't have to be a skinny suit. [32:40] Mark: Yeah, let's face it, lean and trim doesn't exactly work on me. [32:43] JD: No. You're not a skinny suit fan either. I've been abandoning this suit all together, so. [32:48] Mark: Except for when we do retireholics, of course. You got the pants on. [32:51] Chad: Yeah. [32:51] Justin: Why are you wearing nice pants today? [32:53] JD: And I see more. Listen, [32:57] Mark: episode seven. You've gradually gotten more professional. [32:59] JD: Do you want to know why? So when your hair and your beard grow longer and you start to appear more like a homeless person, you need to offset that by wearing some nice clothes. [33:11] Justin: I would argue with the popularity of beards nowadays that you actually don't really need to. They people see your beard and they're like, that's a very powerful man. [33:19] JD: I don't know. Chad wants me to cover a meeting for him next week on some 11 million dollar prospect. [33:26] Chad: Every time, every time I bring my beard, that's exactly what he says. Every time I say, hey, you know, I've got this, I've got this. It's overlapping. I really want to help this advisor. He goes, I'm not shaving my beard. [33:38] JD: That's where my priorities fall. He's got 11 million dollar prospect. I'm like, because you can come in [33:43] Justin: and say I'm the CEO. And they're like, oh, okay. You're good. [33:47] JD: Oh, of course. Yeah, Great. We would love to hire you guys. If your CEO looks like home, like, we're in. Jeez, go. We don't even need your presentation. [33:55] Mark: Would you ever consider, like, trimming it at all or not at all? [33:57] JD: No, cuz so my daughter says this all the time. And by the way, my daughter made this sweater for me. [34:03] Justin: Which daughter? [34:04] JD: Gabby. Sorry, Mackenzie. Gabby made this sweater. It's on fleek for sure. That's her. [34:10] Chad: Oh, gosh. [34:11] JD: We used that in previous episode, but [34:14] Justin: I still don't get that at all. [34:16] JD: She said, what were we just talking about? Oh, trimming it. She said, daddy should trim it. I said, no, that's not the look I'm going for. I don't want to have a trimmed, professional beard. I want to have a rugged, surfer, out of control beard. [34:30] Chad: Can I tell the red solo cup story real quick? [34:32] JD: I don't even know what it is. [34:33] Chad: Red solo cup on the surf trip? [34:35] JD: Yes, please. [34:37] Chad: We go on a surf trip. JD's got a full beard, we're driving down the coast, surfing different breaks, and we get done with our second session of the day. We're exhausted. I forget where we were. [34:48] JD: You have to tell the audience. So the rule in the surf trip is that you can't. [34:51] Chad: You can't shower or washer period. Can't shower, can't wash, can't do it. [34:55] JD: That's why, Justin, not a problem when you have no hair. [34:57] Justin: I just don't go. [34:58] Chad: By the time it's day three and you haven't showered or washed and you have a big beard and you get done surfing and your skin's bright, bright red, and you're laying in shorts on the beach and you get done drinking a beer and you fall asleep by the boardwalk with a red solo cup in your hand in the sun, people come put money in your cup. So jd, jd, the CEO of Plan Design Consultants, is getting change As a transient laying on the beer. [35:26] Justin: Did you put that money into a tdf? [35:28] JD: No. [35:30] Justin: You're missing out. [35:31] JD: All right, well, let's. Let's wrap the show. [35:33] Justin: Hey, real quick. Yeah. You guys made a World Series prediction previously. [35:40] Chad: Yeah. [35:41] Justin: You three were all correct. And the winner. But who cares about that? The loser was Mark. And we said sort of a loose bet that if he lost, he would put a 9 volt battery to his. [35:53] Mark: Right. I remember that. [35:54] JD: We're gonna keep dangerous. [35:56] Chad: Yes, we do. [35:57] Justin: I thought I said I wasn't gonna do that. [35:59] Chad: Do it. Justin. Where's the. [36:01] JD: No. [36:01] Chad: I'll do this. [36:02] Justin: Then do it or you. [36:03] JD: No. [36:03] Justin: Okay, okay, okay. [36:05] JD: Stop. [36:07] Chad: It's a 9 volt battery. He lost. [36:10] JD: No, you gotta. [36:11] Chad: And Brandon chimed in on that. [36:12] Mark: Three seconds, five seconds. [36:14] Chad: Just do it. [36:15] JD: Just do it. [36:15] Chad: I used to do that as a kid. It's not bad. I turned out okay. Did you even do it? Yes. So we know who the winner was in terms of the game. I think you were six, right? Did you say six or five? I think you hit it. [36:32] JD: I think you hit it. So you want to do super bowl predictions? [36:36] Chad: No, not yet. We want to know when it gets a little closer. [36:40] Mark: Are we doing a show before Super Bowl? [36:43] JD: Right around there. [36:44] Chad: We'll do a Super bowl show. [36:44] JD: We'll be back in January for episode eight of the year. I want to remind everyone. Social media. Go to retireholics.com you can click on all our social media. There's nothing more fun than watching or checking out Instagram with beer and retirement plan stuff. Right? [37:02] Justin: Word. [37:02] JD: That's cool. Let us know if you got some subjects for 2016 you want us to cover. And everyone says we don't have a wrap. Happy holidays. Hope you have a good holiday. Hopefully we'll get this out quick. But everyone says we don't have a good rap. But I continue to say that Mark is our rap. [37:21] Chad: Yeah. [37:22] JD: And last time was the funniest for me. If you haven't seen episode six with the. It's a repetitive cycle. That's my funniest one. [37:31] Mark: Although when I think my favorite one, when he's filling the coffee cup up with beer and he goes, they think I have coffee in here. [37:37] JD: Yeah. But the last one, I think he was drunk. [37:42] Chad: That was on purpose. He's got a lisp. [37:44] JD: Yeah, he had a kind of a. [37:46] Chad: He does not have a lisp. [37:49] Justin: So it's not my best, not my proudest moment, but I take one for the team. [37:53] JD: Thanks for tuning in. Keep rocking your advisor game out there. Our strategic partners. Keep doing what you do and we'll bring some great stuff to you in 2016. Retirement retireholics out at 15. [38:18] Justin: Do you want to win more? 401k business as 401k. Santa Claus. You have to come talk to me. Sit on my lap, let's discuss that. Doesn't scare me. I'm Santa. I'm like immortal. Sit on my lap in a non creepy way. Tell me to my ear how many plans you'd like to send and we'll get it done. My elves, Chad, JD and Justin, they work year round. I work one out a week.