Ep. 103 – Wine Down – Power of Attorney – 401Ks – Social Security
Do you have a question relating to retirement planning that you’d like answered in a fun way?
In this episode on the Secure Your Retirement Podcast, we have our monthly wine down episode where we answer some of your commonly asked questions about retirement planning in a fun way. We cover questions on social security, 401Ks, power of attorney, and the tax efficiency for a non-IRA account.
Listen in to learn the importance of having a power of attorney and consolidating multiple 401Ks.
In this episode, find out:
- Why do you need to have a durable power of attorney even when you think you don’t need it?
- The difference between a durable and healthcare power of attorney.
- Why you shouldn’t be worried about consolidating all your 401Ks accounts in one place.
- How to approach your multiple 401Ks consolidation.
- How to get your annual social security statement to understand what your benefits look like.
- How we’ve created a variable annuity account to manage non-IRA accounts.
Tweetable Quotes:
- It is not expensive to set up a durable power of attorney, it’s just naming somebody that can be there if you become incapacitated.”– Radon Stancil
“Consolidation is something we believe should be done, it’s something that’s going to make your life much simpler.”– Murs Tariq
Resources:
If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!
To access the course, simply visit POMWealth.net/podcast.
To receive our free book, Get Off the Retirement Rollercoaster, leave a 5-star rating review on Apple Podcasts and send a screenshot to morgan@pomwealth.net.
Here’s the Full Transcript:
Radon Stancil:
Welcome everyone to our monthly wind down, so excited to have you with us today. As we do always, we have along with us, Morgan Dunn, who is going to be talking to us about our wine of the day, which is not wine, well it is wine isn’t it?
Morgan Dunn:
Rose, yeah. It’s actually if you’d like to know it’s a Chandon Brut rose, it is a refreshing fruit expression of Chardonnay and Pinot and war. It’s bright and delicate with the rumors of strawberry and cherry. So we’re closing out the summer with this bad boy.
Radon Stancil:
Yeah. Well, so anyway, we’re, we’re excited to have you with us. We talked about whether or not to continue these wine downs and we thought what we love about it is we get to handle kind of like a short form of different questions that we might have from time to time. We also get to talk about things in a little bit more rapid-fire. I will tell you that we’ve got some good, fun ideas coming up that bring some other folks back in like we’ve had before to get their feedback. And so, anyway, we’ll go ahead and get started. Morgan, can you kind of give us a little bit of a layout of what we’re going to be talking about today?
Morgan Dunn:
Sure, we’re going to cover four topics today. Why do you need a durable power of attorney? How do I consolidate multiple 401(k)’s? How do I get a current estimate for the amount of social security I will receive? And finally an update on tax efficiency for non-IRA accounts.
Morgan Dunn:
And the first one Radon, why do I need a durable power of attorney? This has actually come up quite a lot amongst even my friends in my age group lately. So this is an important topic to me.
Radon Stancil:
Yeah. I think that what made me want to bring this up is because we have had a situation that occurred here recently that I just think amplifies the need of a durable power of attorney. By the way, durable power of attorney is different than a healthcare power of attorney.
Radon Stancil:
A healthcare power of attorney allows somebody to help you make decisions around your health care. If you’re incapacitated. They can, while you’re unconscious, if you were having surgery and there was a question that came up, you basically appoint that person to help you with medical questions. But that’s it, it has nothing to do outside of the medical questions.
Radon Stancil:
A durable power of attorney expands that a little bit and it says, “Hey, if I become incapacitated for some reason, then another person could go and actually sign on my behalf to make transactions occur, to be able to do certain things.”
Radon Stancil:
So let me just walk you through a quick story and then you’ll understand how this can happen. So we have some folks that are 70 and 68. So in this scenario, the man, who was still working still healthy from all aspects, has a stroke one night. And, in that scenario, he is now unconscious. He’s had to be taken to the hospital, obviously. He has in the process of this stroke, lost his ability to speak, lost body movement for half of his body. And at this point, and we’re now about a week and a half into this at this recording, has still not been able to speak, still not had enough activity for a doctor to say that he can actually make a decision. And there is no durable power of attorney. Now, what does that limit then his spouse here, or anybody, to be able to take care of?
Radon Stancil:
Well, first of all, the way the bills were being paid was through an account that was in his name. He was having his paycheck’s going into an account in his name. So at this point, there’s no access to that account.
Radon Stancil:
What about his 401k? What if we needed to make some changes to his 401k investments? Do not have access to that account at this point. I keep saying at this point because there are, legally there is no way to do a durable power of attorney at this point. It’s done, we’re out of that option until he may be, we hope, gets back some capacity to be able to communicate and a doctor can say that he’s able to reasonably make decisions. But until we get to that point, we’re having to scramble and make a lot of decisions or try to figure out how to make decisions for this person. And the spouse, who’s not in the hospital, the stress level is way higher because this durable power of attorney is not in place.
Radon Stancil:
They can’t just focus on trying to be there for her husband in the hospital and just handle that part. She’s now trying to figure out all these other elements that does not have to be there. Does not have to be a part of the conversation. So here is my plea. When Murs and I work with clients, we want to tell you, make sure you have a durable power of attorney. You may think I don’t need one. I’m healthy, but things can change on a dime. So keep that in mind. It is not expensive to set up a durable power of attorney. It’s just naming somebody that could be there if you become incapacitated.
Morgan Dunn:
All right, and our next question is how do I consolidate multiple 401ks?
Murs Tariq:
So I’ll take this one. I actually sat down with someone maybe about a week ago. And one of his biggest things was he had changed jobs a few different times, and he’d been contributing to each one of those 401(k)’s over the years. And next thing you know, after some job changes some rollovers and everything like that. And he said he had somewhere in the realm of 12 to 15 different accounts out there, all spread out between all the major names that you know, Schwab, Vanguard, TD Ameritrade, wherever the 401k was held, he has money there. And so we do get this question quite a bit. It’s very rare that we see someone anymore work for a company for 40 or 50 years before they retire. The world has just evolved to where you are somewhat shifting between companies a few times, at the very least, in your career and that means you’ve got a few accounts out there.
Murs Tariq:
So consolidation is just, it’s something that we believe should be done. It’s something that is going to make your life a lot simpler. And then very quickly the question that comes up with consolidation as well. I don’t want to put all my eggs in one basket. I don’t want to take all my different accounts and put it all over at Fidelity because I’m worried about that. Well, our answer to that is there really is not something to worry about there. You’re not in a situation where you’re losing diversification just because all of your money is going over to Fidelity or to Schwab or TD Ameritrade. All that’s doing is making your life a little bit simpler. And it’s really in the investments that you get to diversify those assets.
Murs Tariq:
So that comes down to your philosophy on how you manage money. Are you working with someone? Are you doing it yourself and everything like that? So I wouldn’t be so worried about having everything at one place.
Murs Tariq:
But the, how do I do it? It’s pretty simple. We’ve done a podcast on it before and ultimately what you’re going to do is you’re going to call up the institution. So say your 401k is held at Fidelity. You’re going to say that, “I would like to do a rollover.” If you’ve left the company, you’re just doing a standard rollover. If you’re still working at the company and you’re over the age of 59 and a half, that is the key. You are eligible to do a rollover even if you’re still working there. You can still contribute to that 401k. You’ll still get the matches that you get, but why would someone do that?
Murs Tariq:
Well, if you roll it over to an IRA, even though you’re still working there, now that opens up your ability to get some professional help. So that someone can help you manage the assets, help you with the overall retirement planning, and everything like that. So essentially what it is, is a phone call over to the company, let them know what you want to do, which is a rollover, make sure they know it’s going to an IRA or Roth IRA. So there aren’t any tax issues. And it’s fairly straightforward. Once again, there is a podcast that we’ve done a few episodes ago that covers us in way more detail, but we get the question all the time and so we thought it’d be good to revisit.
Radon Stancil:
All right.
Morgan Dunn:
The third one is, how do I get a current estimate, the amount of social security that I will receive?
Radon Stancil:
So we wanted to bring this one up real briefly. This is not a long drawn-out ordeal, but whenever a person comes to meet with Murs and I, especially in the beginning, but really throughout the whole process. One of the things that we talk a lot about is building a retirement financial plan. And so what we want in that is we ask a bunch of questions. Where’s your income going to come from? What are the estimates of those incomes? And a major part of financial planning for retirement right now is how much are you going to receive from your social security benefits? Now, used to, and it’s actually kind of, I think, been restarted, but you get this statement in the mail every year. And in that statement, it’s from the Social Security Administration and they will give you those estimates. The problem is you get it once a year.
Radon Stancil:
Very few people want to hold on to that or put it in a place that they know it. So they kind of, they kind of know a general number. They might say, “Oh, I know it’s going to be $2,800 somewhere in that area.” Or they say, “I don’t know where I put that piece of paper.” And so they’re kind of scrambling trying to figure that out. Here’s what you got to do. It’s super, super simple. You can, any day of the week go to ssa.gov, Social Security Administration, but it’s just ssa.gov. And you put your information in there. And that whole statement that you get every year is there on ssa.gov. And you can, at any time you want see a new updated number as to what your social security benefits are going to be.
Radon Stancil:
So if you’re ever trying to get an estimate about that, simply go there, get that, that’s super helpful. Murs and I are always sending people to that website to be able to get that information so that they can provide it to us so that we can help build their retirement financial plan. So hope that helps a little bit.
Morgan Dunn:
And finally, we’re going to have an update on tax efficiency for non-IRA accounts.
Murs Tariq:
Yeah, so this is something we’ve brought to light pretty recently on the podcast. If you haven’t listened to episode 94, I would encourage you to go back and listen, especially if you have non IRA accounts. So that’s really just a straight-up brokerage account that you funded with just cash at some point. So not your 401k. It’s not your IRA it’s just a standard investment brokerage account. And if you have this thought in your head, which is, I like how this account works, but I don’t like how I get taxed on it. Which is you’re getting tax from different dividends that come in from the investments. You’re getting taxed on realized gains or losses, whether or not you are using the actual funds. With an IRA it’s pretty simple. If you take a withdrawal, you’re going to get taxed on that withdrawal with the brokerage account it’s a little bit different. It all depends on what goes on in the account throughout the year. And then you’ll receive a 1099 for next year.
Murs Tariq:
For some clients, that’s been a little bit of a pain in the sense that, that they have this thought. I’m not, I’m not using the money, but I’m paying taxes on it every single year. And so Radon and I, we’re always trying to find what we consider the best option out there to alleviate certain types of situations. And so what we’ve come up with here is essentially creating a tax-deferred brokerage account. And we do that in the form of a variable annuity. It’s a pretty simple deal. It’s essentially a brokerage account that has tax sheltering to it. We’re able to manage it just like we do for our clients at Charles Schwab and what you pick up here is tax defer-ability.
Murs Tariq:
So now that 1099 that you get every single year, essentially it goes away unless you’re making a withdrawal. Key things to consider here is age 59 and a half. If you’re under that, we would want to have a conversation. If you’re interested in the concept, we would want to have a conversation if you’re above 59 and a half then there’s nothing to worry about there. The account is fully liquid, just like your brokerage account is, and really the ability for us to manage it is simple. The process we’ve been moving millions of dollars into this vehicle over the past couple months. And the process is about as streamlined as it gets. A DocuSign, a conference call, and the money moves over into the account, and you still have full access to it.
Murs Tariq:
So if you’re interested in this concept, if you haven’t already heard the episode 94, that we go way more in-depth into this idea, please do so, listen to it. If you have questions, always feel free to reach out to us. Once again, it’s just an idea that we think is worthy enough to bring to our listeners, to our clients. So feel free if you have questions we’re always here to help and answer those questions.
Radon Stancil:
All right, well, we hope this has been helpful by the way, we like to always encourage you go to our website, POMwealth.net. I encourage people to go to the blog page. There’s a new article every single week that hits on these topics that we discuss on the podcast. And it just makes it very easy for you to be able to go back and review and have those different bullet points, as well as action steps that you can take.
Radon Stancil:
Also to the right-hand side of that page. You’ll see there’re two things that are completely free, but one of those is Three Steps to Secure Your Retirement. Make sure that you listen to that if you’ve not been able to do so already.
Radon Stancil:
Thank you very much, Morgan, for being a part of this and ask them the social questions, and most importantly, bringing us our wine. We appreciate that very much.
Morgan Dunn:
Anytime.
Radon Stancil:
All right, everyone have a good day and we’ll talk to you next week.