June 5, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for June 5, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Does The Rule 100 Work in Retirement?

The conversation around risk is extremely important for you to have an investment structure you’re comfortable with.

Listen in to learn why investment risk is subjective and should be looked at as an individual. You will also hear us perform an exercise to help you understand our numerically driven system that measures risk comfort.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Does The Rule 100 Work in Retirement?

A rule of thumb around risk is the “Rule of 100.”  If you haven’t heard of this rule before, we’ll outline everything for you below so that you have a better understanding of it. Keep in mind that risk in investing is somewhat subjective, and needs to be discussed on a case-by-case basis.

We have people ask, “What is my risk based on my age?” And this isn’t something that we really recommend. The “Rule of 100” is the rule of risk based on age.

CLICK HERE TO READ THE BLOG

Does The Rule of 100 Work in Retirement?

Written by

A rule of thumb around risk is the “Rule of 100.”  If you haven’t heard of this rule before, we’ll outline everything for you below so that you have a better understanding of it. Keep in mind that risk in investing is somewhat subjective, and needs to be discussed on a case-by-case basis.

We have people ask, “What is my risk based on my age?” And this isn’t something that we really recommend. The “Rule of 100” is the rule of risk based on age.

What in the World is the “Rule of 100?”

The Rule of 100 takes your age and subtracts it to help you determine how much risk you can take when investing. For example, let’s assume that you’re 50. The equation would be: 100 – 50 = 50.

In this case, “50” is how much risk you can take.

So, based on this figure, you should keep 50% of your money at risk. If you’re like many 50-year-olds who feel like they have plenty of years left, it doesn’t make sense to stop 50% of your money from its growth potential. You can still have good risk control and keep this 50% of your money growing with relatively little risk.

Now, imagine you hit 70. You take 100 – 70 = 30, so 30% of your money can be at risk and in the market. For some people, this formula works well, but there are many people who want more risk.

You can have two people who earn the same money, accrued the same debts, and are the same age but have different risk tolerance based on their individual situations. One person may be fine with 4% growth per year, while another wants to achieve 12% growth and invest in riskier investments because they want to pay for their grandkids’ education.

What’s right for you?

We’ve adopted our own method of risk calculation that looks at the bigger picture to help you better understand your goals and what risks you must take to reach them.

Walking Through Our Conversation on Risk with Our Clients

Retirement planning is truly unique to each person. You may want to travel the world, while another person wants to spend their golden years tending to their garden. The goals and aspirations that you have for life in retirement must, in our belief, be a major contributing factor to your risk tolerance.

Our system is numerically driven and asks:

  • How do you feel about risk in a six-month window?
  • Say you have $1 million and lose 10%. Are you comfortable losing $100,000 in six months?

Many people believe that they’re comfortable with losing 10% of their investments until they see the hard figure in front of them. Let’s walk through an example of how we help our clients understand and determine their risks.

$1 million Retirement Roleplay

In this example, Radon has $1 million and has just walked into our office. 

Murs

Radon, you have $1 million to work with. We want to set you up for your retirement. We want to take risks and earn you money, but we want to create a portfolio that allows you to sleep well at night. We need to understand what that number is for you because everyone is different. 

If you look at the screen, Radon, we’ve put your million dollars here and have a slide rule in place that allows us to adjust your investment risks.

The slide starts in the middle here, and the middle is 14%. At this percentage, you have a risk of losing $140,000, but you can also have a nice gain, too.

Radon, I am going to move the slide all the way to the left, which is –4%, or $40,000. What I want you to do is, as I start moving the slider to the right, tell me where you think you feel uncomfortable with your losses.

We’re at 7%, or around $68,000 of loss. We’re now at 10%, or a $100,000 loss.”

Note

What we find happens during this example is that the client starts to talk to themselves. For example, they may say that they didn’t feel good about losing 20% in 2022. The person then weighs their risk on what happened last year.

We recommend trying to look forward because the losses last year may never happen again. We often see clients tend to stop at 10% because losing $100,000 is tough to swallow. However, most people realize they need to let the market breathe a bit and can sleep at night with a 10% loss.

We’ve established our baseline at 10% because that’s our initial gut reaction, where we become uncomfortable with any further losses. The screen that is in front of the client will have the 10% in the middle and then have numbers on the left and right, which show lower and higher risk figures.

Now, let’s get back to our example discussion from above.

Radon

Radon, during this discussion, determines that he’s comfortable with a 10% loss on his $1 million, and this is the figure he doesn’t want to pass. 

Murs

Radon, you told me 10% on the downside is your limit, but what if we can improve that? Let me tell you. It’s different for different families. 

  • One person may receive the same reward of 10% while only having a 6% loss potential, or $60,000. This would be the left side.
  • One person may be comfortable with a 10% loss, but what if I can increase my gain potential to 16%? This would be the right side.

Radon, what looks better to you?

Radon

In this case, I think I am comfortable with the risk. I feel confident with a 10% risk, and if I had more reward, I would move to the right.

Note

This exercise is thought-provoking because some people are comfortable with going to the right to have more reward, but others find it a no-brainer to lower their risk.

Keep in mind that Radon wouldn’t mind earning a little more at 10% risk. The software shows us that we can stay where we are at –10% downside, or we can go 16% – 19% growth. However, this would mean a 12% risk, or $120,000 potential loss.

Murs

Radon, which one looks better to you? Would you like to stay in the middle or take a little more risk for a lot more potential?

Radon

The rationale that I’m looking at right now is that I get quite a bit more upside for a little more risk, which is kind of in my comfortable range. Again, I am kind of nervous, but I think I can take it a little higher to make up for some of the losses in 2022. I don’t want to miss out on the potential that’s coming.

Let’s take it up one notch and see what happens.

Murs

Great. Pushing it up one notch, we’ve moved from a –10% to a –12% comfort level. Now, the last one is, what if we can earn better by going to –14% downside in a 6-month window?

Radon

I was already pushing it with the 12% risk, so I think I feel most comfortable staying in this range and not pushing my downside any higher.

Summing Up

These few questions and scenarios show a client the hard figures, which makes it possible to really identify their risk tolerance and the losses they feel most comfortable with in their portfolios.

Using these figures, we can create an investment plan that is within a risk category and create a growth plan that doesn’t exceed the client’s risk tolerance.

We will then use our bucket strategy to allocate all the clients’ funds to help them achieve the growth they want from their retirement accounts. The three buckets include: cash, income and safety, and then a growth bucket.

Risk tolerance allows us to create a one-page investment strategy that we give to our clients that helps them understand exactly how their portfolio will look.

We find that using this type of risk tolerance assessment works much better than saying a “moderately conservative” plan that may be losses of 10% or 20%. Moderately conservative is a subjective term, and we take the subjectiveness out of the equation with the assessment we create.

Click here to schedule a call with us to help you better understand your retirement risk tolerance.

May 8, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for May 8, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast -What Issues Should You Consider Before You Retire?

Listen in to learn the importance of understanding your cash flow needs and budget and building some type of plan for your retirement. You will also learn the importance of budgeting for health insurance if you retire earlier than age 65 and the options to consider for long-term care planning.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – What Issues Should You Consider Before You Retire?

Are you considering retiring? After working your entire life, you’ve come to this beautiful ending where you’ve hit all your milestones to secure your retirement and can pursue the things that you truly love to do. Many companies offer early retirement options to their employees, it’s an important time to consider a few things before retirement.

CLICK HERE TO READ THE BLOG

What Issues Should You Consider Before You Retire?

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Are you considering retiring? After working your entire life, you’ve come to this beautiful ending where you’ve hit all your milestones to secure your retirement and can pursue the things that you truly love to do.

Many companies offer early retirement options to their employees, it’s an important time to consider a few things before retirement.

In our most recent podcast, we go through all the things we think you should consider before retirement. Even if you’ve spent decades on retirement planning, these are things that you need to sit down and think about before transitioning into retirement.

Want a sneak peek at what we’ll be talking about?

  • Cash flow
  • Healthcare
  • Assets and debts
  • Tax planning issues
  • Long-term care

If you’re not considering all these points already, you need to go through them for yourself to better understand each one.

5 Issues to Consider Before Retirement

1. Cash Flow

Cash flow from your own financial perspective will change a lot when you retire. You’ve spent a lifetime working, receiving a check, and enjoying steady cash flow as a result. When you close out your life chapter of working, your cash flow will change.

Instead of cash being given to you for the hours you put in every week, you’ll take money out of the retirement accounts you’ve built up.

You’ll need to consider:

  • Your cash flow needs.
  • Where will the money come from- Social Security, pensions (we’re seeing far fewer of these), retirement accounts, etc.

Often, many of our clients have income from their careers, but do not have a strict budget in place. You need to spend time learning what your true cash flow needs are every month so that you can determine whether retirement is even a possibility.

If you’re lucky enough to have a pension, be sure to know your options:

  • Single life is often the highest payout
  • Spouse benefits

Are you retiring early? Social Security defines retirement as around 67, but there are benefit implications to retiring “early”. If you retire before 59.5, you are penalized on your IRA withdrawals. There are a lot of things to work through to understand what retiring early truly means.

For example, if you retire early, there is an income limit for Social Security that you need to consider. The limit is $21,240 (currently). If you hit full retirement age, the income limit is bumped up to $56,520.

Keep in mind:

  • Retiring before 55 comes with an IRA penalty
  • Retiring at 55 with a 401(k) doesn’t have a penalty

If you’re married, you also need to consider what that means for you and your spouse. You want to consider that one spouse likely has a higher income than the other. If you have a higher Social Security amount, your spouse will get credit if you’re married for 10 years or longer. The spouse, if they never worked, can receive up to 50% of the Social Security benefits that you have. However, if the person did work and their own benefits were higher, then they will receive the benefits they earned.

We recently had a client who didn’t know this and was shocked when they found out that their spouse would also get benefits. Even if you are now divorced but had been married to your ex-spouse for at least 10 years, there may be some benefit there for you in Social Security.

Healthcare is the next big point to consider.

2. Healthcare 

At 65, you qualify automatically for Medicare. Retiring before this age means that you must put a lot of thought into your healthcare because healthcare is very expensive. Medicare will save you a ton of money, but you need to bridge the few years between retirement and Medicare.

We’re seeing costs from $1,000 to $1,500 for people at 62 or so to get private health coverage. That figure is for a single individual and not a couple.

Employers cover your healthcare while you’re working, but when you retire, you’ll need to consider:

  • Dental
  • Vision
  • Healthcare

If you are contributing to an HSA, you will want to think about using this account, too. At age 65, you still need to take IRMAA into account, which is a Medicare surcharge for someone making over a certain threshold. We have a whole episode on this very topic, which you can listen to here or read here. 

3. Asset and debts 

Many of our clients have the majority of their money in an IRA or 401(k). One of the first things we are asked is, “Should I pay off my house?” If you need to take the funds from a 401(k), the answer is likely going to be: no. You need to pay taxes on your 401(k) withdrawals, and paying off your home can have a significant impact on the money you’ve saved. Instead, small distributions to make an extra payment often work better.

Low mortgage rates, such as 2.8 percent, can often be left because you may make more money with the cash in a brokerage account.

Let’s say that you have $100,000 left on your mortgage and your principal and interest payment is $1,200. If you had this $100,000 in a savings account, it might only net you $600 a month. In this scenario, paying off the house is a wise choice.

Bump your mortgage balance to $300,000, and it may not be beneficial to pay off your mortgage.

Beyond mortgage, you also need to consider risk exposure.

Transitioning to retirement means that you need income for 30-something years from the asset accounts that you have. When you retire, you want to have as little risk exposure as you can with your assets because you don’t want to experience a situation like we did in 2020 when some indexes fell 20% – 30%.

Reevaluating your investments and how you’re invested in the market will help you to limit your risk exposure.

4. Tax planning issues 

If you retire prior to 72 or 73, tax planning can save you a lot of money. 

Imagine retiring at 62 and you have $1 million in assets in your IRA growing at a little over 7% per year. By the time you’re 72, you’ll have $2 million and need to take a required minimum distribution of $80,000 or so per year. If you have Social Security and a pension, these distributions can push you into a higher tax bracket.

We can take a strategic approach to retirement by looking at a Roth conversion. We had a client who retired, had cash in the bank and lived on these funds to allow for significant Roth conversions at a low tax bracket.

5. Long-term care

The least fun part of retirement planning is long-term care planning. You never want to think about yourself in a long-term care situation, but it’s a reality that all of us are at risk of being in at some point.

And long-term care is not cheap.

You need to have a scenario in place where you are prepared to pay for this care. We’re seeing a lot of people pay $8,000 a month for long-term care, with durations being 4 or 5 years. This form of care can cost you $400,000 to $500,000 in total.

Can you afford to take on this financial burden?

You can pay insurance premiums out of pocket, or you can go with an asset-based plan. We’re seeing premiums soaring 50% to 70%, causing many people to be unable to pay for their long-term care.

Instead, you can put $100,000 in a long-term care annuity that grows to $300,000 and can be used for your long-term care. You still have access to this money if you need it and can also name beneficiaries on the account. A beneficiary will receive the total of the account if you pass and never use it, or they may receive any unused funds in the account.

If you pay insurance premiums on long-term care insurance, you will not receive any of these funds back. An annuity can be a great option because if you don’t need to use the funds in the account, they aren’t just going to an insurance company.

We also recommend that you have a will in place or review your will and beneficiaries on all accounts before you retire. If you don’t have all of your estate planning documents in place, you are putting a major burden on your family. You want to go as far as confirming all your beneficiaries and loved ones know the types of documents you have and where these documents are just in case you are ever unable to show them.

P.S. We are working off our own internal checklist titled “2023: What issues should I consider before I retire?” Call the office or email us if you would like a copy of this checklist. We also have a checklist for anyone who is updating their estate plan so that you don’t miss any key points along the way.

Click here to schedule a 15-minute call with us to discuss the things to consider before retirement.

April 17, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for April 17, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast -Retirement Withdrawal Strategy

Learn how to determine your spending during retirement and which accounts the money will come from. You will also learn the importance of being flexible to make changes to your strategy as things and priorities shift over time.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Retirement Withdrawal Strategy

If you’re like most people, you’ve worked a lot, put money into retirement and relied on your paycheck to pay the bills. A lot of time goes into retirement planning, and then there’s this cosmic shift where you’ll find yourself spending your retirement money.

You have all of these accounts that have grown as you tried to secure your retirement, and you may be wondering: Which accounts do I take money from? 

CLICK HERE TO READ THE BLOG

Retirement Withdrawal Strategy

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If you’re like most people, you’ve worked a lot, put money into retirement and relied on your paycheck to pay the bills. A lot of time goes into retirement planning, and then there’s this cosmic shift where you’ll find yourself spending your retirement money.

You have all of these accounts that have grown as you tried to secure your retirement, and you may be wondering: Which accounts do I take money from? 

The steps below can help you create a retirement withdrawal strategy that works well for you:

5-step Retirement Withdrawal Strategy

1. Determine Your Retirement Needs

We work and save for so long that when retirement comes, most of us don’t know our needs. You’ve built up a nest egg, and now it’s time to understand your needs:

  • Essential income: What do you need to stay relatively happy? You’re not having all of the fun yet, but you need to pay your mortgage, eat and enjoy life a little bit, such as going out to dinner. Calculate this expense, which may be $3,000 to $4,000 or less and maybe even more, depending on your lifestyle.
  • Wants in retirement: Do you want to travel, play golf, or spoil your grandkids? What will make retirement fun for you? It’s important to come up with your own bucket list and then put a dollar figure on each item.

Social Security is unlikely to cover all of your needs, and this is where the coming steps will help you create a withdrawal strategy.

2. Understand the Different Types of Retirement Accounts

Many people know a lot about their 401(k) accounts because they’ve paid into them for so long. Their employers may have contributed to these accounts, and it is where many people have the bulk of their wealth.

However, you may be involved with:

  • Traditional or Roth IRA
  • Traditional or Roth 401(k)

If you have a traditional IRA or 401(k), there is a rule that you have to take what is known as a required minimum distribution. Currently, at age 72, you need to begin taking withdrawals from these accounts every year. This age is set to increase to over the years, but right now, it’s 72.

We have a few clients who didn’t realize that they needed to take this distribution and don’t need the money. However, since these accounts are traditional, you’ll need to take your withdrawals and pay taxes on this money, creating a lot of interesting scenarios.

For example, you may have to deal with:

  • Health benefit changes that are based on income
  • Paying into a higher tax bracket because your income is now higher

Roth accounts do not require you to take a required minimum distribution. In many cases, we’ll discuss doing things early, such as in your 50s and early 60s, when you still have time to convert the traditional account earlier to avoid potential drawbacks in the future.

Everyone with a traditional or Roth IRA must sit down and figure out the rules of each account type that they have.

3. Figure Out Your Priorities

Year by year, your retirement withdrawal strategy can change. Nothing is set in stone, but we find a yearly strategy provides our clients peace of mind. With that said, you do need to determine your priorities.

For example, you may want to prioritize:

  • Roth conversions to get into a tax-free scenario
  • Tax strategies to lower future taxes

Roth conversions will trigger taxes and can impact you in the future. 

We have one client who is trying to leverage a very low tax year, live on cash in the bank and do a Roth conversion. He plans to live on the cash he has saved so that the Roth conversion can happen at a rate of just 12%.

Since he is converting into a Roth account, he benefits from:

  • Allowing the money in the account to grow
  • Not having to take withdrawals

He is making it a priority to get his money into accounts that can grow tax-free and not have to worry about future withdrawals.

Another priority that we have seen in recent years is staying under IRMAA. IRMAA is a Medicare surcharge, and if you go over a certain threshold, you’ll need to pay higher premiums as a result.

Don’t know what IRMAA is or why it matters? Read through our guide: IRMAA Medicare Surcharges and 

If you never want to go above the IRMAA threshold, this can be a priority and achieved by creating the right withdrawal strategy.

4. Manage Investment Risk

Investment risks can be complicated, but we like to keep it simple with a three-bucket strategy. The strategy includes:

  1. Cash in the bank that you can use as emergency money any time you need it.
  2. Investment bucket, which is the money that you want to grow. Some risk is involved here.
  3. Income or safety bucket. Let’s assume that we have an income or safety bucket, this will cover your expenses and allow your investment bucket to rise and fall without worrying about market downturns.

You can read more about our retirement bucket strategy here.

5. Be Willing the Adjust

The final step in a retirement withdrawal strategy is that you should be able to adjust the strategy at any time. Unfortunately, there is no one-size-fits-all approach or rule of thumb to follow with your withdrawal strategy.

Retirement-focused financial plans are “living and breathing.”

We want to have the ability and flexibility to adjust your plan when it benefits you the most or when priorities change. For our clients, we recommend going through their plans at least once a year.

A quick review helps you understand if you have everything to cover your life for 30+ years in retirement. If you get caught in autopilot, you may miss important changes that need to occur.

If you prioritize your withdrawal strategy, you’ll find that it’s a lot less complex than it is if you scramble to create a strategy too late.

Do you want help with your retirement planning?

Click here to schedule a call with us about your retirement withdrawal strategy.

March 27, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for March 27, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – Implementing Your Retirement Plan

In this Episode of the Secure Your Retirement Podcast, Nick and Taylor return to talk about the retirement plan implementation after the initial process. When you decide to be our client, we ask for all the information needed to open your account with our custodian Charles Schwab.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – Implementing Your Retirement Plan

At this point, a lot of work has been done on both sides of the table: you provide a wealth of information, and we give you a recommendation and insight into your retirement. Now, you have to decide whether or not you want to work with us as a client.

If you love everything and want to work with us to secure your retirement, we will move forward through a new process…

CLICK HERE TO READ THE BLOG

Implementing Your Retirement Plan

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Last month, we started a conversation on the retirement planning process, which you can read here or listen to on our podcast. In that episode, we discussed:

  • Preparing for an introduction meeting with our team
  • Obtaining documents for the meeting (financial statements, retirement statements, etc.)
  • What happens on our end before the second meeting
  • Bucket sheet (cash, safety and growth)

At this point, a lot of work has been done on both sides of the table: you provide a wealth of information, and we give you a recommendation and insight into your retirement. Now, you have to decide whether or not you want to work with us as a client.

If you love everything and want to work with us to secure your retirement, we will move forward through a new process.

Meeting and Figuring Out Any Additional Information We Need

We’ve gathered a lot of information from you up until this point, but there are still some documents we’ll need to open up accounts. For example, we’ll need:

  • Beneficiary information
  • Dates of birth
  • Addresses
  • Phone numbers
  • Contact information

We’ll spend time filling in documentation with all of your information to open up a Charles Schwab account in your name. Once all of this paperwork is signed, we’ll submit it to Schwab. In most cases, it will take 1 – 3 business days to open the account, depending on the type of account in question.

This is when:

  • Transfers take place
  • Nick reaches out to you about the account being opened
  • Verify that everyone can access the new account (including you)
  • Etc.

If you’re already a customer of Charles Schwab, we only need to provide a single form to access the account. 

Understanding Our Relationship with Charles Schwab

It’s crucial for you to understand that we don’t work for Charles Schwab. In fact, we’re not connected with the company in any way other than using them as a custodian. Custodians can be:

  • Fidelity
  • TD Ameritrade (not for much longer as Schwab acquired them)
  • Charles Schwab
  • Vanguard
  • Any place where you have your accounts

Charles Schwab doesn’t have a financial relationship with us.

When we transfer your accounts from your existing custodian to Schwab, something called an “in kind” occurs. This is a simple term, meaning that all of your assets are moved from one account to another and remain unchanged.

We don’t have to sell and repurchase anything when transferring your accounts to Schwab.

Until we come up with a strategy around the investments, nothing changes in your accounts during the transfer. The transfer doesn’t cause tax liability or anything like that.

What Happens If I Transfer My Monthly Distribution from One Custodian to Another?

If you have a custodian account with, say, Fidelity and you’re taking a $1,000 monthly distribution, what happens when you transfer to Schwab? We’ll need to fill out one additional form on your behalf and make sure the same exact thing happens at Schwab for you.

In essence, we’re just changing bank accounts when moving to Schwab, and we replicate everything for you effortlessly.

What Happens with a Company Plan, Such as a 401(k), 403(b), 457, etc.?

If you have what is called a “company plan,” the transfer happens a little differently. We require one less form to file and we’ll need to contact the company, such as the 401(k) company.

When we contact the company, we’ll request that the company send a check for the balance of your account. The check will be made out to Charles Schwab for the benefit of you. The check can be sent to you or to Charles Schwab directly.

The process varies and depends on how fast the company cuts the check.

Note: When we work together, we do a trustee-to-trustee turnover so that you don’t trigger a taxable event. 

Tax Planning Over the Next Few Months

During the first few months of working with us, we’ll dive into tax planning. If you want to secure your retirement, you must not pay a dime more in taxes than is necessary. First, we’ll need your most recent tax return.

We’ll analyze these returns to learn where you can save money.

For example, perhaps you can benefit from a Roth conversion, so we’ll have a conversation around this to see if it’s something you’re interested in doing.

Of course, we may be able to leverage:

  • Qualified charitable distributions
  • Donor-advised funds
  • Any opportunity to lower your taxable income

We want to lower your current taxable income and future taxes, too.

Clients Over the Age of 65

If you’re over the age of 65, you may be concerned about selling something with a gain or a Roth conversion. Clients who are paying Medicare premiums, or will be shortly, need to worry about something called IRMAA.

Don’t know what IRMAA is? Read our guide on it here.

Essentially, once your adjusted gross income reaches over a certain level, there’s a possibility that your Medicare premiums may start increasing. The goal is to keep your premiums at a level where whatever we do on our end, such as a Roth conversion, isn’t negated.

Our clients who work with us, we will:

  • Introduce you to a CPA we work with
  • Help you gather all of your tax forms
  • Ensure that your return is filed on time

Taxes have a lot of moving parts, and we do our best to ensure that we take as much of the burden off of you as we can.

Communication With Clients

On our end, there’s so much going on quickly that it can feel overwhelming and confusing. We communicate as much as we can with our clients so that you’re never left wondering: what’s going on with my accounts?

We provide updates, often via email or a phone call, to tell you about accounts opening, ensure that you have access to each account, transfer estimates and then when the transfer is complete.

We also keep in close contact with you during this time to ensure that if you have any questions, they’re all answered in a timely manner.

401(k) Transfers

If we’re transferring a 401(k), we often do not have an estimated date for this completion. However, we do see when the check is sent to Charles Schwab and when it is deposited into the account.

When the check goes to you, we’ll be in frequent contact with you to ensure everything goes smoothly.

At this point, we’ve done a lot of the process needed for our “45-day meeting.”

45-Day Meeting

In most cases, the 45-day mark is when we have everything in-house, and all of your assets have been properly transferred. We’ll be getting together to:

  • Ask you questions about logging into your account, statements and ensuring that you’re comfortable with the setup in place
  • Finalize anything that is left to talk about for the investment strategy
  • Deliver anything left in the investment strategy to you

We provide you with a one-page document on how everything is laid out for your multiple buckets. These buckets include your cash, safety, and growth accounts. During the visit, you’ll have time to ask us any questions about the way we devised these buckets.

Next, we’ll move on to the important part of estate planning, which will include a few things, such as:

We have a relationship with a partner firm, and we take care of this expense for our clients. The estate plan ensures that your retirement planning accounts for those times when you’re incapacitated or no longer living.

Since so much is going on during the first year of working with us, we will plan on meeting with you quite a bit so that we can get everything in place. You’ll also be able to see all of the work that we’ve done up until each meeting so that you can have peace of mind that your retirement is in good hands.

Do you want to learn more about our approach to retirement planning? Contact us today.

March 20, 2023 Weekly Update

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We do love it when someone refers a family member or friend to us.  Sometimes the question is, “How can we introduce them to you?”   Well, there are multiple ways but a very easy way is to simply forward them a link to this webpage.

Here are this week’s items:

Portfolio Update:  Murs and I have recorded our portfolio update for March 20, 2023

CLICK HERE TO WATCH THE UPDATE

This Week’s Podcast – I’m 66 – Can I Retire?

In this episode of the Secure Your Retirement podcast, Radon and Murs discuss the question of whether you can retire at age 66, using a specific example from an article in Market Watch. They provide insights and advice on retirement planning and financial management.

CLICK HERE TO LISTEN TO THE PODCAST

 

CLICK HERE TO WATCH ON YOUTUBE

This Week’s Blog – I’m 66 – Can I Retire?

Are you 66 years old and wondering, “Can I retire?” You’re Not alone. We have a lot of clients come to us for retirement planning that ask this very question. People want to get out of the ratrace and enjoy life, and we actually read an article on Market Watch with a person asking this exact question.

CLICK HERE TO READ THE BLOG

I’m 66 – Can I Retire?

Written by

Are you 66 years old and wondering, “Can I retire?” You’re not alone. We have a lot of clients come to us for retirement planning that ask this very question. People want to get out of the rat race and enjoy life, and we actually read an article on Market Watch with a person asking this exact question.

Unfortunately, there is no standard answer to give you because the way you secure your retirement may be different than how someone else has planned for their retirement.

We do this every day. We know each element it takes to retire comfortably. Unless you’re working as a financial advisor, it’s not your job to know every little detail that shows you’re ready for retirement.

In our most recent podcast, we walk through the question of can I retire?

Let’s find out what we talked about.

Can I Retire?

What prompted this article is that a man who is 66 wrote into Market Watch, said he has $2 million in retirement and just wanted to retire and golf. We have folks with far less in retirement that have been able to retire and some with far more who have not.

Someone may read this and say:

  • You have $2 million. Of course, you can retire.
  • You have just $2 million? Of course, you can’t retire.

Let’s look at this man’s scenario. He is 66 years old and four months. He has $2 million in retirement, plans to have $3,300 in Social Security very shortly and works as a consultant three days a week and wants to leave his position.

He also has:

  • $1.6 million in retirement accounts
  • $600,000 in his wife’s retirement accounts
  • A daughter who still lives at home
  • A modest home that he owns
  • $9,000 – $10,000 in expenses
  • $6,000 in taxes and insurance
  • Home is paid off

As financial planners, we’re going to say to this individual, “Job well done.” This individual has done a great job paying off his home and saving over $2 million for his retirement.

Ultimately, dollars in and dollars out will dictate if this person is able to retire at 66 or not.

First, we’ll have a conversation with this individual to better understand their:

  • Travel goals
  • Legacy goals
  • Things they’re worried about
  • Health condition

We’ll want to create a retirement-focused financial plan that looks at multiple layers of a person’s scenario to understand if retiring now is possible with what they’ve saved and what they want in their retirement.

If you’ve read our blogs or listened to our podcast, you know that we mention the GPS retirement system a lot.

This system considers:

  • Where you’re going
  • Where you are right this moment

A fact-finding discussion that we have with our clients allows us to know a person’s starting point and where they want to be in the future.

What we’ll do is run a person’s financial plan at a rate of 4% to 5% because we know that if this plan does good, a higher rate of return will just make life easier. We don’t recommend running a plan at a higher rate of return than this because you’ll have to make riskier investments that can cause you to lose a major portion of your retirement.

The other thing we want to look at is why this person’s expenses are $9,000 – $10,000. We often find out that a person is spending $3,000 a month for traveling, so we then create a fun fund for 10 years.

Often, a person will travel for the first 10 years and then it tends to slow down, saving money in the process.

Taxes are also something to consider. If you’re paying a lot in taxes, it can reduce your ability to retire now or stay in retirement over the long term. Tax planning may be necessary for this individual because they may have deferred taxes, which means the $2.2 million in the bank is far less.

Next, we’ll go into scenarios.

What-if Scenarios

If we’re confident that the person can retire, now or in the future, then we can start looking into what-if scenarios. For example, if the person asking if they can retire has medical issues, they may be concerned about long-term care, which is very expensive. We can then consider:

  • Long-term care insurance
  • What would happen to the person’s retirement if long-term care were necessary?

What-if scenarios can be very positive, or they can be negative. Perhaps you want to buy a boat, RV or a second home. This will be considered in a what-if scenario.

We know that the individual in question has a lot of money in retirement accounts and a home paid off. Next, we would run a full retirement plan that shows us:

  • How much money the person has in their accounts every month based on the rate of return and expenses
  • How long the person can be retired
  • What life will be like from a financial standpoint if they reach age 90 or 100

If the person has more than enough money left at 90 in their retirement, we can then consider a long-term care scenario. Using the average cost for long-term care, stay length and so on, we can then find out the cost for the level of care, which is often $400,000 – $600,000.

Then, we will look at the remaining retirement balance when the person in long-term care passes, and we’ll see if they can live until 90 or 100 on the remaining retirement accounts.

We may find that self-insurance is possible, but if we find that you start running low on assets early, long-term care insurance may be a better option.

As you can see, there are many moving parts in retirement that you need to consider. We may be a bit biased, but everyone should sit down with a financial advisor to go through all these scenarios to better understand if you can retire and when.

We want to ensure that if you do retire, you can handle the what-ifs that come your way and have peace of mind heading into retirement.

If you have individualized questions that we haven’t covered just yet, feel free to contact us and we’ll be more than happy to answer them for you.

Click here to schedule a call with us.