Ep. 140 – 2022 Retirement Issues to Consider

Are you wondering what you can do now at the beginning of this year to prevent you from scrambling at the end of it?

Whether you’re in the retirement or accumulation phase of your life, it is important that you have goals for the new year. Writing down your goals increases your chances of achieving them.

In this episode of the Secure Your Retirement podcast, we talk about your 2022 financial goals to help you maintain an active retirement plan. We cover why topics on cash flow, emergency funds, taxes, and debt should be considered as part of your 2022 issues to look into.

In this episode, find out:

●     Take a moment and write down the top 3-5 goals you have this year.

●     Consider how your goals will affect others even as you think of how they’ll affect you.

●     Set attainable short-term goals not to overwhelm yourself.

●     Documenting your goals makes it easier to hold yourself accountable and accomplish them.

●     The things to think about to get your cash in order when you’re in the accumulation phase.

●     The strategies to consider with your RMDs and QCDs as a way of managing your cash flow.

●     Reevaluate your emergency fund when it overgrows and invest in an earning account.

●     Review your risk tolerance and understand that you can become more or less risky at any moment.

●     Take advantage of the current low tax environment and look into mortgage refinancing.

●     Come up with a plan to attack any debt you have unless it’s a mortgage.

●     Plan and be ready to file your taxes in April on the normal tax date.

●     Review your estate plan and ensure you have a power of attorney and healthcare power of attorney in place.

Tweetable Quotes:

●     “Really understand what your risk tolerance is and realize that it can change, you can become riskier and you can become less risky.”– Radon Stancil

●     “You never want to miss an RMD; there’s a significant penalty for missing an RMD, so if you’re above age 72, think about your RMD.”– Murs Tariq


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.

Here’s the Full Transcript:

Radon:Welcome everyone to Retirement In Action. I tell you, it’s just amazing every time I think about this, that here we are in 2022, this being our very, very first Retirement in Action for 2022. And as you know, we went to this new format. The new format is that we’re going to pick a topic and have one podcast a week. That might be an interview like we had last week. It might be a Retirement in Action like we’re doing this week and I’m just excited about it. This one is actually around issues to consider at the beginning of the year. Now you might think, well, we just had an end of year. Well, most of the times, when you think about an end of year, you’re scrambling at the end of the year to make sure you got everything put together.  
 And so you can move forward. This one’s much more along the lines of what do I do now at the beginning of the year in January that will help me have a year so that when I get to the end of the year, I’m not scrambling. And so we want to go through with you some different topics, some different things to think about. We’re going to talk about personal things you need to think about, cash flow, asset and debts, taxes, insurance, and then legal issues. Just to give you a list of things to think about and consider. Now, I want to remind you as we’re going to go through these topics, we’re going to have a blog article that just came out the same day as this podcast on our website, pomwealth.net, and you’ll have all this information there. Let’s go to the personal side and think about here you are.  
 You’re sitting in the 1st of January. Maybe you’ve got a goal that you want to lose weight. Maybe you’ve got a goal that you want to eat better. Well, how about let’s have some retirement planning goals and now there’s two different categories you could be in. You could be in a category where you are close to retirement, getting ready for it. Maybe you’re 10 years out, maybe you’re five years out, or maybe you just retired and this is your first year of retirement. And if that’s the case, congratulations, we’ve got some of those in our practice. Folks that just retired and they’re excited. And then maybe you’ve got the folks that’s been retired for a little bit. There’s going to be different goals depending upon on where you are, but no matter where you’re at in that, why not just take a moment, maybe right after you listen to this podcast, maybe it’s your next time you have a cup of coffee or your cup of tea, and just write down a couple of goals that you would like to accomplish this year.  
 It could be financial. It could be personal, maybe a place or a person you want to visit. Whatever it might be, just take a moment, write down maybe your top three to five goals. And by the way, I think it’ll be interesting of those goals that you write down, what’ll be interesting is at the end of the year, see how many of those you accomplished. And what’s amazing is if you write down goals, sometimes it’s amazing how many of those that you actually accomplish. Let’s just say that you are a person that’s thinking you’re going to retire in four or five years. Well, maybe it’s a savings goal. Maybe you just retired and it’s an income goal. What is it we’re going to spend this year? Or maybe it’s a hobby you want to take on, or maybe you’ve been retired for a little bit.  
 And maybe you’re thinking about what you want to do with family. Whatever that might be, make sure that you take a moment and write down those goals. Now, the other thing is that when you think about all these different aspects of goal and what you’re going to and how it’s going to affect you, you might want to think about how these goals affect other people. I know this is starting this thing off and saying, oh my goodness, are you going to make me go to work? But this is reality. Just take a moment. It’ll make you feel so much better if you hit one or two of those goals throughout the year. You got anything else on that, Murs?  
Murs:No, I think the only thing I would add is this is the time of year to do goal setting. And if you set 1,000 goals, well, you’ll get overwhelmed and you won’t be able to accomplish probably nothing because it’s just overwhelming. Set goals that are reasonable and attainable and they can be in short periods of time. They could be in, Hey, I want to accomplish this this month. One thing, or it could be a quarterly goal to do something. Don’t do anything too overwhelming, but yeah, it’s always good to set goals and start working towards them. And then what’s nice is you can look back and see where you started when you started this whole goal setting plan. You can look back and look at where you are today or in the future and see what you’ve accomplished.  
 Documenting and doing all that, it makes it so much easier and so much simpler, but I’m going to talk a little bit about something that is very big and when we’re talking about year-end or the beginning of the year, and that’s getting essentially year cash flow in order. A lot of things that revolve around cashflow, whether you are in, what we would call, the accumulation phase of life, where you’re still saving, or you’re even in the retirement phase of life where you’re drawing on your assets. Let’s start with the accumulation side. Maybe you need to think through what is your household income going to be like this year? And is it going to change at all? Did you get a raise last year? Do you have different work opportunities? Whatever it is, are you expecting any extra income or less income this year for some reason?  
 Make note of whether or not you think anything is going to change on the income side, but also cashflow is also what’s going out the door, so your expenses. Are there expenses that are going to be shifting around? Maybe you just had a kid graduate from college and you’re no longer going to be having that financial burden if you were helping out. That’s huge. Maybe you just paid off a mortgage. That’s huge. And so always be reevaluating. What are my expense expenses going out the door, but also what’s coming in the door? Once you know that, then you can really make a plan around your cashflow and start thinking about, well, how am I going to be saving now that I know what’s coming in and how much is going out then you know what’s left over and you can really work with that. That goes into, if you’re still working. Your contribution plans.  
 Your 401ks, your 403Bs, your IRAs, your Roth accounts if you’re eligible. You want to make sure that you, especially in the 401ks, let’s say, for example, maybe you just got a raise last year and you have the ability to contribute more. The ultimate goal, usually, not for everyone, but for the majority is to get to this goal of maxing out your 401k. That’s roughly in the realm of 19 to $26,000 a year that you can put in as salary deferral. Take a look at where you are at that number and see if there’s any way that you could potentially upgrade that number. IRA contributions, look to see if you can actually contribute to an IRA and let that be tax deductible on the IRA side, on the pre-tax IRA side. If you have a spouse that does not work, they can actually contribute to an IRA as well, based off of your income, as long as you’re married, filing jointly, and there’s earned income to cover you both.  
 Sometimes that one gets overlooked. Think about that. The Roth, as far as a Roth IRA, that is a very, very advantageous type of account to start building up. And if you qualify, there are income limitations roughly in that $200,000 range of income. If you’re below that, then you have the ability to contribute to a Roth, so be thinking about whether or not you want that. That’s tax free growth that will continue to be tax free in the future. And so any dollars that you can get into that can be very beneficial in the future. There’s some other things here. When we’re talking about cashflow, you’ve got other parts of your expenses, or let’s talk about maybe your benefits. As far as maybe maxing out an HSA, if you use an HSA plan. Some people have what’s called FSAs, which is a flex spend account that you actually have to use by a certain part of 2022.  
 Make sure you’re utilizing that money because that’s one of those types of accounts where if you don’t use it all, it goes away. And then the bigger ones, this is shifting over into the retiree area, is RMDs and QCDs. RMDs, required minimum distributions. If you’re above the age 72, you have to take what’s called RMDs. That means the government is going to require you to take out a certain amount of money from your pre-tax assets, your IRAs, your 401k type money. You got to take that out in the year that you turn 72, and there’s a formula to that. All the financial institutions actually calculate that number for you. And they’re all right around the first couple weeks of January that you have that number. Once you have that number, think about how you want to use it. Do you want to start taking it monthly?  
 Do you want to take it quarterly? Do you want to take it annually at the beginning of the year, at the end of the year, because we never want to miss an RMD. There’s a significant penalty for missing an RMD. If you’re above age 72, definitely think about your RMDs. And what ties into that really nicely is this thing called QCDs. If you give charitably throughout the year, whether it’s to a religious organization or a nonprofit or whatever charity that you give to, and you’re also above 70 and a half, you can do what’s called a qualified charitable distribution, which means you can take money from your IRA, take the withdrawal. Normally you would pay taxes on that withdrawal, but if you’re giving it to an institution like a charity, then you can actually give it to them tax free and it satisfies part of your RMD. That’s a huge, huge strategy that you would want to be considering as well. I think that’s quite a bit on cashflows there, Radon. Is there anything that I’ve left off?  
Radon:No, I think you covered that really well, which takes me over into this idea of now assets, looking at our assets, looking at different aspects of it. And so the first thing I’m going to talk about, which I think is a very personal one, is your emergency fund. Now, if you’re still working, that might be a different number than if you’re retired. But a lot of times where we find, because our clients are good savers, is that they get to the end of the year or now the beginning of the year and they look and they go, “Wow. My reserves that I had in cash in the bank is actually grown and I’ve got more money in the bank than what I think I should have. My goal was to have this amount, whatever that is. And now it’s double that or it’s 75% more.”  
 And the reason why is because you just accumulated money throughout the year. And so you might want to think about reassessing that and saying, “Should I take some of the money that’s in the bank, that’s earning zero and maybe put that into an account that can earn something?” And that could be a brokerage account where you maybe invest the money. Yes, it’s going to have some risk on it, but at least you’ve got it working. We’ve got quite a few folks that we’ve talked to in the last few months that just over time, they have accumulated now and they got 150, $200,000 in the bank and they’re thinking, what do I do with this? I want to have it to work. Reevaluate it. Look at your savings and go do I have more there than what I need to have?  
 The other one is, and this I think is extremely important, and most times people don’t think about it, but review your risk tolerance. Now I always liken risk tolerance is something that is a moving emotion. It’s a moving viewpoint. And the reason why is because life changes it. I would usually tell people think about this. Let’s suppose you got into a wreck in your automobile. After the wreck, you always are driving with two hands on the steering wheel. You don’t really try to even listen to the radio. Wouldn’t even dare pick up a mobile phone, never would even text. Well about a month out, what happens? Well, you’re taking your hand off the steering wheel, maybe you’re driving with one on the steering wheel. Maybe you’re picking up a drink. Now you actually are playing with the radio a little bit.  
 Go about six months. Now you’ve got one hand with a hamburger in it, one hand with a drink in it. You’re driving with your knee. You’re also turning on the radio and you’re taking a text. All of a sudden our risk tolerance is changed because we got further from the event. Well, we are now a long time, in the world of stock market, from our last major event, which was the pandemic beginning back in March 2020. People now have gotten more bold. You know what? I want to take more risk. I want to take more risks, but before you start saying, I want to take more risk. Let’s take a step back and talk about what that really means. Murs And I work people through a risk conversation and it goes a little something like this. If you have $100,000 dollars and now it loses 10%, are you okay with that?  
 And a person says, “Yeah, I’m okay with that,” until we put it to a dollar value. Now move that and let’s say you got a million dollar investment and we tell you you’re down 100,000. People go wait a minute. Now that feels way different than saying 10%. Really understand what your risk tolerance is. Realize that it can change. You can become more risky and you can become less risky. We had a client who lost their spouse. All of a sudden now, they want to be way less risk. Why? Because this is a major event. They don’t want to think about losing. They don’t want to think about risk because their life has changed. Okay, fine. A couple years down the road, maybe they want to take more risk. Now, as you think about this, that’s going to correlate to your investment strategy.  
 Maybe you have for years been in this idea of what we call a buy and hold strategy. You just put your investments in. You don’t worry about it. You don’t think about it, but then you live through something like the pandemic. You hung in there. It came back, but you go, “I don’t want to do that again. Can I look at a different strategy?” Well, let’s think about that. What other strategies are out there? Well, Murs and I talk about ours all the time, which is an actively managed account, which means take action when the market starts to have problems. We’ve got many episodes where we’ve talked about that, so if you are new to the podcast, go back and find those episodes that talk about buy and hold and those kind of things. I think ultimately that’s helping you think through those assets. I hope that gives you a little picture there. Do you have anything left on that Murs at all?  
Murs:No. I think you handled the assets well. The only thing I would say to add into that is more on the debt side of the equation. We’re in a very uniquely low interest rate environment that is potentially going up here in the next year or two. And so if you haven’t already taken advantage of or refinancing, if you still have a mortgage, I would still look into that. I know I get letters every single day from all types of lenders in my mailbox. And I end up just ripping them all apart because I did the refi thing a while ago. And I still constantly will evaluate that. Hey, does it make sense to do another refi? Always be asking that question. I think that’s a good one. And then, we started this whole podcast off talking about goals and goals can be around like what Radon said, physical goals, mental goals, and savings goals, but also debt reduction is a big part of building your wealth.  
 If you have any debt out there, that’s outside of the mortgage, that’s been bugging you, come up with a plan to take care of that, or come up with a plan to really start attacking that. Maybe that’s a credit card debt, or even a student loan debt that’s been lingering for a while or a car payment that you’ve been wanting to take care of. Come up with a plan around that and set the goal and take care of it. But those are really, the other major things that I’ve got there. Now, as we approach April, here we sit on in January, but the next thing that’s coming is tax time. And there’s tax issues that we want to be thinking about. Of course, the number one most important is you got to file your taxes.  
 April 15th, I believe is the date. And we got an extension because of the pandemic back in 2020. I doubt we’ll get that again. Be ready to file on the normal tax day. Things you need to be thinking about there is that all the institutions will be sending out their 1099 documents right around, well technically they have until the end of February to get those to you. If you have a brokerage account, a Schwab, TD, Fidelity, wherever it’s at, expect a 1099 to be coming in. Gather all of your W-2s, all of your other 1099, all of your business stuff. Get that all together so that you’re not scrambling at the very last minute and you end up having to do an extension. All those documents are very important. And then when we’re talking about taxes, if you did do any donations or you did any giving, make sure you’ve got the documentation there, so you can actually take advantage of it on your return.  
 What’s nice about IRA contributions is a lot of things you have to do by 12/31, but IRA contributions, I’m talking pre-tax or tax free in the Roth. You can actually do that up until your tax filing date. For a lot of you, that’s going to be in April. If you didn’t do it last year in 2021, and you see an opportunity, definitely run it by your tax person to see if it’s advantageous to put some money in to a pre-tax. Do you qualify? Do you qualify for the Roth? You can actually do that up until your tax filing deadline. That’s a big one there. And then just keep an eye on if you have taxable accounts and maybe you liquidated some here and there throughout the year, those accounts are taxed based off of gains. Don’t let that surprise you. Always keep a track of, Hey, what are I realized gains for the year?  
 What am I going to owe the tax guy come next year, if I’m selling stuff this year and do I have any losses to offset some of that? That can be something that can surprise people if you’re not ready for it or if you’re not aware of what’s going on in your taxable investment accounts, but that’s really all I’ve got there for taxes. Oh, I did leave off Roth conversions. We talk about Roth conversions all the time. And that is one that needs to be done by 12/31. The Roth conversion is basically taking money from your IRA, paying the taxes, and putting it into a Roth account. Can be very, very beneficial. It’s also a little expensive. You got to pay some taxes. We got to make sure we’re thinking that through. Start thinking about it now, rather than waiting until December and scrambling with your advisor, scrambling with your tax person, because they’ve got a lot going on in December. Think about it if it makes sense for you. If you want to have a conversation around a Roth conversion, we’re happy to do that, but that’s a big one as well.  
Radon:All right. Let’s conclude here with our last topic, which is legal issues. And I’m just going to boil this one down to what is one of my biggest things that I think people need to think about, and that is their estate plan. And I think that it’s very, very important that you review and make sure that your estate plan is in order. Now, I’m going to talk about some documents in this that I think are extremely important. And that is your power of attorney and your healthcare power of attorney. If you are married for example, or not, doesn’t matter, and you have an IRA or a 401k, those cannot be joint accounts. If you do not have a power of attorney and you become incapacitated for some reason, and your spouse now needs to go make transactions on that account, if you do not have a power of attorney, they’re going to be restricted and not be able to access those accounts.  
 Having the power of attorney in place now, and always remember nobody can plan when that event is going to take place. We had a couple of situations happen this very past year where some of our friends and clients had massive health conditions that took them and put them into a place where they could not communicate. They could not be able to deal with these things. And there was not a power of attorney in place. Power of attorney is extremely important. Obviously a will is important. A will, a power of attorney, a HIPAA form. A HIPAA form allows for someone else to be able to get your medical information so that you can have that pulled because if we’re incapacitated, again, that stuff is locked up. Review that and you want to make sure that your power of attorney is up to date. You want to make sure that it’s in place. It’s really good if you want to as well, whatever institution you’re with, they sometimes have their own power of attorney that will put the other person on there that makes it super convenient.  
 Because now it’s filed with the institution, say Charles Schwab, TD Ameritrade, Fidelity, whatever that might be. And now you can call up and they got it right there in their computer system. “Oh yes, we know exactly. We got the documentation. It’s right here.” I know sometimes with an estate plan, the easiest thing to do, especially if we get to a topic that is difficult, is to procrastinate. I get it. But don’t procrastinate. Take action. If you are wanting to know how to be able to do this, we had a great episode where we talked all about the estate plan. We talked about ways that you can do it, easy ways you can do it just to take action. Doing something is better than doing nothing. Even if it’s not 100%, the way that you don’t have it all figured out yet. Don’t let 2022 go by and not get your estate plan in place. That’s my concluding comment. Anything you got there, Murs, on that?  
Murs:No, I think that was great. I think definitely by the end of this episode, we’ve given people a lot to think about, a lot to plan for. Now, it’s just time to make that list and start checking off those boxes.  
Radon:All right, everyone. We appreciate you listening to us. We’re excited about 2022. We’re excited about this new format to be able to bring you the best possible content we can, every single Monday. We would love to hear from you. If you’re listening to this and you’re thinking, man, I’d love for you to handle this question, this topic, please reach out to us. You can go to our website, pomwealth.net. You’ve got a couple of different ways you can contact us there in the top right hand corner. You can schedule a phone call if you’d like to answer any questions you’ve got, but we would love to hear from you. We are so excited that you’re continuing to listen to this podcast. And if you’re new, we certainly do appreciate you being here. Please make sure you subscribe or enlist and making sure you get everything on a regular basis. We hope you have a great week. We’ll talk to you next Monday.