Estate Planning – Simplified

Estate planning is a topic we often discuss with our clients. If you’re in the middle of retirement planning and trying to secure your retirement, an estate plan is something you want on your “to-do” list.

Anne Rhodes, the Chief Legal Officer of, joined us on our latest podcast, where she provides a simplified rundown of estate planning for our audience.

What Core Documents Make Up an Estate Plan?

Everyone – no matter the size of the estate – can break their estate plan into two large buckets. 

  • Bucket 1: Passing Away and Death: Who will step into your shoes? Who will help distribute these assets? Where are these assets going?
  • Bucket 2: Incapacity: Incapacitation remains a serious question because if you’re no longer able to make decisions on your own, you can assign someone you trust to assist you in this area.

Documents in a standard estate package should include a will, even if you have a living trust. Both a will and a living trust are key components of an estate plan. Even if you have a living trust, you’ll need a pour-over will.

A pour-over will is what initiates your asset transfer into a living trust at the time of your death if they’re not already in the trust.

You have a whole other set of documents that you need to think about with incapacitation:

  • Financial Power of Attorney: A financial document that allows someone to have signature authority over your matters for any financial documents that you must sign.
  • Advanced Healthcare Directive: This document may be called something else, such as a healthcare proxy or healthcare power of attorney.

HIPAA Form Purpose

A HIPAA document is a great example of a healthcare directive. When it comes to medical privacy, your agent acting on your behalf with an advanced healthcare directive does not have the power to access your private medical records unless the HIPAA is signed.

If your doctor does not have a HIPAA release on file, they cannot share pertinent information with the person that you want to make medical decisions on your behalf.

As you can imagine, if the person handling your healthcare decisions cannot access your medical information, they cannot make the best decisions for you.

Certificate of Trust

A certification of trust, also known as a certificate of trust, accompanies a living trust. This certification accompanies a living or revocable trust. What this certification of trust does is allow your bank to know that:

  • Your trust exists
  • You’re the trustee
  • The trust is 100% legitimate 

A certificate of trust is very important for streamlining your trust and ensuring that there are no issues along the way.

Trust vs. a Will

A living trust and revocable trust are the two most common forms of a trust because they’re a substitute for a will.

If you die without a will, your estate will go through a process called “probate.” Even if you have a will, your estate may still go through probate. A judge will be assigned during probate and must sign off on asset transfers. As you can imagine, involving a judge in every decision can take a while – especially in some states.

Court systems are handling a lot of cases, and if you’re in one of these states, a trust can help you avoid probate.

Probate also goes through the public system, which allows anyone to dig in and find information on what transpired during the probate process. In terms of privacy, you can keep much of your estate planning private with the help of a trust.

You may also have a trust because:

  • You own multiple properties across many states
  • You want to avoid probate in each state where you own property

If you secure your retirement and want to keep your estate out of probate, a trust is one of the best ways to achieve this goal.

Attorney Estate Planning vs (or similar platforms)

Digital platforms allow us to offer a simplified process of estate planning to our clients. Some clients are unsure if using an online platform like is the same as working with an estate planner. provides access to financial planners and similar professionals, streamlining the way that people create an estate plan.

Most people in the US can use and go through the entire estate plan on their own. You must fill in forms online, which can speed up the process to make it much faster than working with a lawyer one-on-one.

Anne’s company,, has had 70+ platform reviews from legal professionals, ensuring everything is accurate.

You can create a trust in 36 minutes with a platform like, breaking down barriers that exist with meeting with a lawyer.

 Can all families be helped with an online platform like

No. There are special case examples where we cannot serve certain families well, such as special needs children. is undergoing a survey to better help these clients. If, during the onboarding process, you answer that you have one of these situations, you will be prompted to find someone who specializes in these areas.

Do online platforms offer any personal help?

You may have one-off questions that you need answered when forming a trust, creating a will, and so on. Many platforms will not provide direct assistance in this area, but they may have an attorney network who will be available to you. vs other platforms

We’ve seen many legal platforms that attempt to help in numerous areas of law, and this is where things can kind of get messy. focuses on estate planning only and has built a team that can help in complex estate matters, whereas many do-it-all platforms cannot.

Since you must connect with financial advisors to use the platform, you also receive additional help you wouldn’t otherwise.

Note: You need to work with a professional advisor, like Peace of Mind Wealth, who grants you access to and can walk you through the process. If you just go to the website, you won’t be able to access the wealth of tools available.

Once you’ve filled out all the estate planning documents, printed them out and notarized them as needed, your estate plan is in place.

If you’re interested in financial planning and want to add an estate plan into the mix, feel free to reach out to us.

Click here to schedule a call with us today.

November 27, 2023 Weekly Update

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 November 27, 2023

Rae Dawson – The Basics About a CCRC in Retirement – Part 2

In this episode of the Secure Your Retirement Podcast, join Rae Dawson as she breaks down the fundamentals of CCRC, covering everything from costs and waitlists to choosing the right time to make the move. Ever wondered about the factors influencing CCRC expenses? Rae delves into that, offering insights on what to consider when evaluating the cost of a CCRC. Now, imagine this: How might being flexible in your requirements help you sidestep a potentially lengthy waitlist, which can stretch anywhere from 4 to 15 years?  

The Basics About a CCRC in Retirement – Part 2

How does the choice of location impact the cost of Continuing Care Retirement Communities (CCRC)?  The expenses associated with CCRC are influenced by the contract type and community location. Living in a sought-after real estate location may come with a higher price tag compared to a more rural setting. As you contemplate the costs of CCRC, it’s crucial to factor in…

The Basics About a CCRC in Retirement – Part 2

Rae Dawson is back with us this week to continue our series on CCRC (continuing care retirement community) and how it fits into your retirement planning. While much of this information is going to relate to your area, it is focused on Raleigh, NC.

Note: If you missed Part 1 of this series, click here to read it. You can also listen to the podcast version here.

To  listen to this Episode CLICK HERE

Triangle Area CCRC Costs

CCRC costs are driven by the type of contract and community location. If you’re in a popular real estate area, you can expect to pay more than if you’re in a rural area. When thinking about the cost of a CCRC, you need to consider:

  • Buy-in
  • Monthly fee

Rental CCRCs are different than traditional ones because they do not have a buy-in, and monthly fees are much higher. Today we will be doing a deeper dive into Traditional CCRC costs.

For a traditional CCRC, you’ll often have 2 contract options: a single occupant contract, or a double occupant contract. The second occupant is often a spouse, friend, or sibling. Typically, no more than two people can live in a residency. 

In the Triangle area, a buy-in for one of these communities ranges from $60,000 for a studio, and up to $990,000 for an extensive contract cottage. A higher buy-in rate for the extensive contract cottage because you’re paying for your higher level of care upfront. The buy-in is a one-time cost.

For double occupancy, your buy-in could be anywhere from $140,000 for a studio to $1,065,000 for a cottage. Why does the studio buy-in jump up for double occupancy? Most communities will not allow double occupancy in a studio.

Often, if your buy-in is on the lower end of the range, the community’s policy is if you leave the community after 15 months, your buy-in return is $0. However, if your buy-in is on the higher end, some communities offer a 100% return of the buy-in to your estate. If you secure your retirement and want to leave money to your heirs, it’s often best to pay the higher buy-in so that they receive the buy-in amount back.

What is a Cottage?

A cottage, in this sense, is a single-family home. The buy-in price is driven by square footage. A larger cottage may be 3,000 square feet, so a 600 square foot studio will cost significantly less. When moving to a CCRC, you have a lot of activities that you can engage in at the common area of the community. You’ll likely spend less time in a cottage by yourself, so downsizing is often a great option.

Different communities may have different names for types of homes. You may hear “duplex”, “triplex”, “apartment”, etc., in addition to studio and cottage. Keep in mind that the buy-in prices are driven by square footage if the different names for types of homes becomes confusing. 

Monthly CCRC Costs

On top of your buy-in costs, you also have monthly fees. For a Traditional CCRC, there are ranges for the monthly fees:

  • Single person studio is as little as $2,150 per month
  • Cottage can run as high as $8,000 per month
  • Double-occupancy, one-bedroom ranges from $4,580 to $9,840 per month

In most cases, some meals, cable television, most utilities, transportation to and from the doctor’s office, gym or pool access, and some other perks may be included in the monthly fee. It’s important to know what amenities are included in the monthly fee, as they vary between communities and are probably things you pay for on an individual basis before living in a CCRC. 

Qualifying for a CCRC

A general rule of thumb when pursuing a Traditional CCRC is that your monthly income should be at least 2 times the amount of the monthly fee. Your assets should be greater than 3 times the amount of your buy-in fee. If you’re moving into a $2,150 studio, your monthly income should be $5,000 to support this.

Traditional CCRCs will feel comfortable with allowing you to move in if you meet these income and asset requirements.

I’m Ready to Go. What’s the Waitlist on a CCRC?

CCRCs often have a waitlist because they’re in high demand and communities aren’t opening up at an adequate rate to meet the demand. It is not uncommon for a waitlist period to be 4 – 15 years. However, if you’re flexible with your floor plan requirements, you may be able to circumvent these long wait times.

In some communities, you can remain on the waitlist for your ideal floor plan and switch to your ideal unit in the future, but it’s often discouraged. What a lot of communities will do is allow you to downsize. Let’s say that you’re in a 3,000-square-foot cottage and one spouse dies. You would rather move to a smaller footprint, and the community may allow you to do this.

However, do not put all your eggs in one basket. Instead, you’ll want to be on multiple waitlists at a time. If you receive a serious diagnosis, you may be prohibited from entering a CCRC. It’s always best to have multiple options.

Joining a CCRC Waitlist

If you want to join a waitlist, there are steps that you’ll need to take to make all this work. You’ll need to:

  • Pay an application fee. It’s typically about $300, and it’s not refundable
  • Provide general financial and health information 
  • Moving from a waitlist to a ready list will involve providing your financial statements

Communities will run a financial assessment before accepting you onto a waitlist, knowing the waitlist period is 4-15 years. You will also need to pay a $1,000 – $5,000 waitlist fee, which is refundable if you choose not to move to that community. If you do move to that community, the fee will be applied to your buy-in.

What Age Should You Start Looking Into a CCRC?

Today, the average CCRC entry age is 75. People are moving into these communities earlier than in the past due to competition and the attractive convenient amenities. The average age of a community may be 80 – 85. People who live in CCRCs often live longer than the normal person, with some living until 90 – 100.

Most communities require 6 months to 3 years of being healthy to move into a CCRC, so you can live more independently for longer.

If you wait too long and fall into bad health, you may not be able to move into one of these communities. Entering a CCRC early allows you to build friends and relationships early on, which is a nice perk of living in any type of community.

How to Decide What to Do

If you decide that you want to move to a CCRC, now you’ll need to choose the right community for you. You’ll want to think about quite a few different points, such as:

  • Family health history. Have your relatives lived through age 90 with few health issues? If so, you may not want to pre-pay for an extensive stay with higher levels of care. 
  • Do you have long-term care insurance? Your insurance may help pay for a higher level of care.
  • Location. If all your friends and family are in one location, you’ll likely want to stay in their area.
  • Cost. It can be challenging to compare contract types and communities without a lot of organization first. 

However, you will find there is one thing that’s even more important than all these points: culture and community. Visit multiple communities and find one that fits you and makes you feel comfortable. If you’re not visiting multiple communities, you may miss out on finding the community culture that is best for you.

Want to reach out to Rae Dawson to learn more about CCRCs? Email

Still working on your retirement?

Click here for our latest book: Secure Your Retirement.

November 20, 2023 Weekly Update

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 November 20, 2023

Andrew Opdyke – 2023 End-of-Year Economic Update

In this Episode of the Secure Your Retirement Podcast, Radon and Murs speak with Andrew Opdyke about a 2023 end-year economic update and the expected shift in the economy in 2024. Andrew is a Certified Financial Advisor and Economist at First Trust Advisor. Listen in to learn about the impact of the concentration of investments in the top ten companies and when the market broadening will happen. You will also learn about things to consider when expanding your investment portfolio in 2024…  

2023 End-of-Year Economic Update

Andrew Opdyke is back with us to get his insight on the broad economy. He’s been on our show multiple times, and he’s returned with his 2023 end-of-year economic update that everyone should listen to at least once. Whether you’re trying to secure your retirement or in the middle of retirement planning, it’s always important to keep a pulse on the market.

2023 End-of-Year Economic Update

Andrew Opdyke is back with us to get his insight on the broad economy. He’s been on our show multiple times, and he’s returned with his 2023 end-of-year economic update that everyone should listen to at least once.

Whether you’re trying to secure your retirement or in the middle of retirement planning, it’s always important to keep a pulse on the market.

October-November 2023 Economic Update

October was an interesting month due to the conflict between Israel and Palestine, and inflation remaining stubbornly high. Economic data came in stronger than anticipated, but there were still some concerns.

November 1st, the Fed’s meeting was a sigh of relief for many when they announced that maybe they’re “done” with trying to tame inflation. Perhaps rate hikes may remain on pause for now.

Rate easing may be ahead in 2024, which is what a lot of economists are hoping will occur.

However, as anyone who follows the market knows, just two weeks prior to these reports, there were just too many concerns that inflation may last a little longer. We just don’t have all the data yet to say if 2024 will see interest rates fall, stay the same, or even go a tad bit higher. Right now, as of mid-November, the New Year looks promising.

We’ll need to watch the data to better understand the ebbs and flows of the market right now.

Concerns of Investors Outside of the Magnificent 7 Stocks in the Market

When looking at the S&P 500, it has performed well this year when you include the stocks that are the “magnificent 7.” What are these stocks? They’re high performers that carry the market and include big names:

  1. Alphabet
  2. Amazon
  3. Apple
  4. Meta
  5. Microsoft
  6. Nvidia
  7. Tesla

If you remove these seven stocks from the market, you’ll notice that the market is down in an equal weight market. The percentage of companies beating the index is at a 20- or 30-year low. Equal weight provides a better picture of what’s transpiring in the market, which would show most stocks are either flat or slightly down.

How much are people paying for the top 10 companies in the index? Many investors are paying a multiple of 25 to 30 for these ten stocks and a multiple of 17 for others.

What does this all mean? The top stocks need to continue performing well for the overall market to recover. Andrew would like to see a broader market rise, in which dozens of stocks are lifting the market, and believes that it will take some time to materialize.

Will the Economy Land or Take Off?

Soft landing. Hard landing. A lot of terms are thrown around for the economy and how it will end up after the pandemic and the high level of inflation that we’ve seen. Some economists are of the mindset that the economy won’t land but will take off.

However, Andrew believes that we’re likely to see a soft landing.

What we saw in the third quarter is that companies have excess inventory, which is due to a slowdown in production after COVID. Companies purchased a lot of inventory due to supply chain issues and are likely to:

  • Slow spending over the next 3 – 9 months
  • Avoid some growth initiatives due to high-interest rates

Will we hit a recession? Who knows? A recession has been six months away for 18 months now. Companies are buying less, building is slowing and if we do go into a recession, there’s a good chance that it will be very shallow.

We need to get back to sustainable interest rates without outside influence and stimulus.

Entering into 2024, we should start to learn more about the strength of the markets and economy without any outside influence building it up.

Building an Investment Portfolio to be Recession-proof

If we enter a recession, will interest rates still remain high? Look at companies that have sustainable cash flow, because even Apple must pay the high interest rates of today when they take out a loan and they add tens of billions in free cash flow quarterly.

Investors will want to dive into balance sheets and see which companies can fund their own projects without loans.

You should also look at:

  • Smaller companies with healthy cash flow
  • Exposure to small- medium- and large-cap stocks
  • Potentially add international stocks

Recalibrating your portfolio to deal with the unknowns and still have exposure to potentially risky technology.

Hamas and Israel Conflict

The United States has been sending money to Ukraine and is now funneling money to Israel. Ongoing events like these play into how the economy will look in the future.

The main risk of this new conflict is in the energy markets.

If Iran or others enter the conflict, it can lead to higher energy markets and a further rise in inflation. Economic repercussions of the Israel and Hamas war are likely to be a lot less than even Ukraine and Russia.

Trade conflicts and fracturing are occurring, and the US is doing a good job by determining who our strong trade partners are and reallocating our investments to these countries. We’re importing less from China and are trading more with:

  • Canada
  • Mexico
  • Japan

We have shuffled back and pulled away from China, pushing them from the first to the third trade partner that we have.

AI and the Hype Around It

Cryptocurrency was a major trend in past years, followed by blockchain. Now, we’re seeing a lot of people harp on the idea of AI. We’re at a point where we were with the Internet first coming about, where companies knew that the landscape of the way we work was changing.

What does AI mean for us?

The environment and world are changing. Some professions may become obsolete, and some new jobs may be created. If you look at the top 10 companies in 1999 and today, only two remain: Microsoft and Exxon.

AI may be won by the biggest companies, but if history repeats itself, we’ll see some companies born out of AI that may change the world. We may see the next Facebook or Meta created, and it may be a company everyone is overlooking.

What are you Most Worried About?

Geopolitical issues that are popping up, and more are likely to be added, are a major risk to the economy right now. China is likely to see a more difficult path in the next 10 – 20 years. We’re also entering an election year, and the negative side of the election can cause market fluctuations.

Escalation of Russia and Poland, Iran entering the Israel and Hamas war or China invading Taiwan can all effect the economy. 

What are You Most Excited About?

AI excites Andrew, and he believes that while the technology is likely to change the world, in the next 24 – 36 months, we may see some major changes thanks to AI. Humanity is “fighting the fight,” with more people being literate and doing some amazing things.

We’re seeing how dementia has been in decline in the last decade, and as a whole, we have more people than ever trying to solve problems that have plagued the world around us.

Andrew is unbelievably excited to see how human potential is being unleashed.

Need help reviewing your retirement plan? Schedule a free 15-minute call with us today.

November 13, 2023 Weekly Update

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 November 13, 2023

Rae Dawson – The Basics About a CCRC in Retirement

In this Episode of the Secure Your Retirement Podcast, Radon and Murs have Rae Dawson to discuss the basics of Continuous Care Retirement Communities (CCRC). Rae is a CCRC expert and spent her original career primarily managing people and projects in high-tech in Silicon Valley for many years before gaining an interest in CCRC. She explains what it means for a facility/community to be a CCRC and why most assisted care facilities are not CCRCs.  

The Basics About a CCRC

Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds. But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.

The Basics of a CCRC

Rae Dawson was a special guest on our podcast this past week, and she was happy to talk to us about a very important topic: CCRC. If you don’t know what a CCRC is, don’t worry. We’re going to cover that in just a few seconds.

But before we do, let’s learn more about Rae and why we’re so excited to have her on our show.

A Little Bit About Rae Dawson

Rae was mentioned to us by one of our clients, and after a great conversation with her on the phone, we knew that we had to invite her onto the show. She had a career in high-tech and worked in Silicon Valley.

She moved to North Carolina when she retired, and she worked with her friend, who taught a class on CCRC until 2021. Her friend eventually moved into a CCRC herself and Rae has been teaching the class on her own ever since.

What is a CCRC?

A continuous care retirement community (CCRC) is not well-defined and there are a lot of opinions on what a CCRC should include. A CCRC, by Rae’s definition, should offer:

Memory care may or may not be offered, but it’s a nice perk of these communities. 

CCRCs offer a continuum of care while staying within the same community. Most residents live in these communities until they pass on. CCRCs are a topic that we cover when discussing retirement planning with clients, but many people are educating themselves on their community options.

What is the Mindset of People Attending Rae’s CCRC Class?

Educating yourself on CCRCs is important. Most people want to age in place and remain in their family home. However, planners take Rae’s class because they want to know:

  • If aging in place is for them and what that looks like
  • If CCRC is something they might prefer, and what criteria must be met before going into a CCRC

CCRCs are regulated and there are nuances that everyone considering these communities must know about beforehand.

Regulations on CCRCs

Note: We’re going to cover a lot here, and Rae has been kind enough to share some slides with us. We’ll be adding these slides to our YouTube channel for you.

A lot of money and resources go into CCRCs. You plan on living in one and ensuring that you receive the care you need in retirement. Regulations are a safeguard that offers you peace of mind and ensures that the community is “following the rules.”

In North Carolina, where Rae and our team are located, CCRCs are regulated by the NC Department of Insurance. Assisted living and skilled nursing facilities are also regulated by the Department of Health and Human Resources.

The NC Department of Insurance is your best resource for understanding the financial stability of a CCRC.

Luckily, in North Carolina, no CCRC has ever gone bankrupt. One almost went under, and the Department of Insurance stepped in to protect residents and help the community get back on the right financial footing.


Residents buy into these communities and make a significant investment to remain in one.

Familiarize Yourself with the Department of Insurance Website

Rae recommends that all her students familiarize themselves with the NC Department of Insurance website because it’s their go-to source for information. You can:

  • Search the site for CCRCs
  • Read through contract types
  • Read through community disclosure documents
  • Learn about the licensing requirements to be a CCRC
  • Access community search tools

Community search tools allow you to use an interactive search engine or download a PDF on all CCRCs.

If you cannot find a community on the Department of Insurance website, it is not a CCRC. Often, nursing facilities may promote themselves as a continuous care retirement community, but they are not if they’re not on the site.

Browsing through the PDFs on the NC Department of Insurance website, you’ll find great information on each CCRC, such as:

  • Buy-in options
  • Refund options
  • Low and high costs
  • Meals on wheels info
  • Waitlist time

A new interactive portal is also available that makes it simple to browse through all of the CCRCs in the state.

Note: If you’re not in North Carolina, you can often find similar information on your state’s website.

Wait List Notes

CCRCs have limited space, which means there’s a waitlist. We’ve had some clients wait six months, two years, or even longer to get into one of these communities. Some communities have a 12-year waitlist!

CCRC Rating Agencies

Rating agencies for CCRCs do exist, and three of the main ones are: Fitch, CARF, and CMS.


Fitch provides primarily financial liability ratings. The main factor in the Fitch rating is the Debt Service viability. When a CCRC is expanding, the community takes on a lot of debt. However, once complete, the community will sell residency and its rating will rise because it’ll pay off the debt.


Rather than focusing on the financial aspects of a CCRC, these agencies will look at the services provided and the quality evaluations. Communities apply for a CARF (Commission on Accreditation of Rehabilitation Facilities) rating and pay for the assessment that is done. 

CMS (Medicare)

Medicare will provide quality of care and staffing service ratings for skilled nursing facilities. Note that not all facilities are Medicare-certified, which may sway your decision to join one facility over another.

Note: Remember, the NC Department of Insurance also has a rating system for each community.

Understanding the 5 CCRC Contract Types

1.  Extensive or Type A

An “extensive” contract is the most popular and requires a buy-in plus a monthly fee. No matter what level of care you’re living in, your monthly fee does not increase. You’re pre-paying with your buy-in with a higher upfront cost but a stable monthly cost.

Moving into a Type A CCRC does mean that your doctor will need to state that you’re likely to remain independent for a longer period of time than with other contract types.

2.  Modified or Type B

A modified contract means that you’re buying in for a higher level of care at a subsidized rate or for a fee for a certain number of days. You’ll have a lower buy-in and monthly fee than an Extensive contract, but you’ll be paying more than our next contract type.

3.  Fee for Service or Type C

Fee for Service contracts are exactly what they sound like. You pay for what you receive. While you live in an independent living facility, you’re paying for this level of care. When going into an assisted living area, you’ll pay the going rate for this type of care.

4.  Rental

Rental communities are growing in popularity in North Carolina and do not have an entrance fee. You may need to provide a deposit of two months of rent. These communities do provide access to higher levels of care at the going rate.

What we do want to point out is that Rental communities are for-profit while the other communities that we’ve mentioned are non-profit.

Traditional CCRCs are beneficial because they will often offer a benevolent fund, which means that if you move into one of their communities and you run into money issues, they will not make you move communities. However, they may require you to move to a smaller footprint within the community that is less expensive.

Rental communities will make you move out of the community if you cannot continue paying.

5.  Equity

An equity contract comes with a real estate transaction because you’re buying the residence that you move into. The real estate transaction allows you to buy the home and contract with the community for a higher level of care services.

The cost of the contract with the community is roughly 10% of the cost of the unit you purchase.

While there is not a structured classification, equity contracts are, more or less, a fee-for-service type of structure for higher levels of care.

Which CCRC Contract is Best?

Rae finds that no single community is best for everyone. If you have long-term care insurance, your choice for a community may be different than someone else’s. Why? Your insurance can help you cover the financial requirements of the facility.

Extensive contracts with long-term care are often a good choice because you may pay less once long-term care kicks in.

A few things to consider when choosing a CCRC contract are:

  • Current level of health
  • Family health history
  • Do you think you’ll need a higher level of care for a long period of time?

Rae’s former co-teacher chose a fee-for-service community because she didn’t want to pay for any services that she may not use.

In terms of quality of care, you’ll find that the quality of care across all contracts is about the same. You will receive the same great care in a Rental community as you will in an Extensive one.

Many residents who are tired of caring for their homes will often go to a Rental community. The community allows them to avoid the buy-in and gives them the freedom to move to another community or move into their kid’s home if they wish.

Rental communities do have a lease that is 12 months, but you will need to pay some costs upfront.

We’ve asked Rae to come back onto our show, because we’ve really just covered the basics of CCRC here. We plan on covering this topic more in-depth in the future, so be on the lookout for more episodes with Rae if you want to learn more about CCRC.

If you want to learn more about CCRCs with Rae, you can contact her directly at

November 6, 2023 Weekly Update

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 November 6, 2023

The Art of a Risk-Adjusted Portfolio in Retirement

In this Episode of the Secure Your Retirement Podcast, Radon and Murs discuss the art of building a risk-adjusted portfolio. When building a risk-adjusted portfolio, it’s important to identify your personal risk preference and choose the best model to structure your investment portfolio. Listen in to learn the key differences between passive and active investment styles and the benefits of each in helping you reach your goals.


The Art of a Risk-Adjusted Portfolio

We’re excited to talk to you about a conversation that we have with every client surrounding risk. Clients who are further away from retirement often don’t mind taking on more risk with retirement planning. However, when you inch closer to retirement age, you want to do everything you can to secure your retirement, and maybe want to take on less risk.

The Art of a Risk-Adjusted Portfolio

We’re excited to talk to you about a conversation that we have with every client surrounding risk. Clients who are further away from retirement often don’t mind taking on more risk with retirement planning.

However, when you inch closer to retirement age, you want to do everything you can to secure your retirement, and maybe want to take on less risk.

A risk-adjusted portfolio is how we perform a balancing act between risk and growth to help you achieve peace of mind in retirement. This is our philosophy, but this doesn’t mean that it’s the right choice for everyone.

How We Determine Risk Tolerance

Imagine this scenario. The stock market goes up and you’re happy with the gains. However, economic issues cause the market or bonds to swing in the other direction and now you’re down 10, 15, or 20 percent.

At which level do you start to lose sleep at night?

Imagine that you have $1 million to invest and want to go with a moderate portfolio. Most clients believe that they would prefer this option. However, are you comfortable with:

  • 20% – 25% losses?
  • How about $200,000 – $250,000 losses?

Often, a percentage doesn’t sound that bad until you see the actual dollar amount. Losing $100,000 or 10% of loss is concerning. You may see these figures and be okay with this level of loss, but most of our clients do not have this much of a risk threshold before they begin to lose sleep.

If you’re uncomfortable with losing money at this level, we’ll recommend a risk-adjusted portfolio.

The Two Styles of Investing

Investing can come in two main styles with a bunch of deviations along the way.

Passive Management

Your passive management, such as a 401(k), is common for a lot of people just starting to think about their retirement. You funnel some money into the account, allot 50% to large caps, 25% to medium caps and 25% to small-cap stocks.

In terms of management, you may make a small adjustment quarterly or annually, but you don’t do much more management than that.

You contribute to the account and bet that, in the long run, the market will prevail. For all intents and purposes, this is a passive management strategy. 

Younger investors may be fine with passive investing because, in 30 years, they may not be retired. When you’re 55 or older, you don’t have the luxury of 30 years for market corrections.

Active Management

An active management strategy is more hands-on and may include active money managers and financial advisors.

Hedge funds may work to actively manage your account to outperform the stock market to the best of their ability. You may also have active management on the side of protecting against significant market drawdowns.

The active manager will make changes to the portfolio to move your money around and reduce your risk of losses.

During the pandemic, we actively managed our clients’ accounts and moved a lot of money to cash while the market suffered losses. Our clients ended up far better thanks to this approach when compared to the significant losses in the stock market.

Every strategy has years where it outcompetes the others and years when it underperforms the other.

We like to have a portfolio that has multiple parts:

  • Tactical, which is risk on and risk off, depending on what’s happening in the market.
  • Core, which is always invested, but what is invested can be rotated throughout the year. Rotations often occur quarterly.

You can cut your risk considerably by having a tactical and core approach. Risk-adjusted portfolios include multiple layers of investment that will help you reach your retirement goals. Our most common portfolio option is moderate growth.

What a Moderate Growth Portfolio Looks Like

Our moderate growth portfolio has many elements, including:

  • Equity element. In the equity element, there are strategic, core and tactical investments. If we go into a period of high volatility, the core will remain invested because things are okay over time. The tactical area will begin to adjust to hedge risk by reducing equity exposure and moving toward fixed asset exposure.
  • Structured notes. If you’re still not comfortable with the risks, we will move into structured notes. These notes are available to our clients due to our buying power. We negotiate with the banks, structure a note, and have a rate of return. Right now, the annualized return for these notes is 7% – 11%, so they’re much better than a CD or money rate. Structured notes have inherent risks, but they’re lower than most other options.

A breakdown of our moderate growth portfolio right now is:

  • 38% in the core sleeve, always investing and rotating based on the equity market
  • 38% in the tactical sleeve, which we can turn risk on and off as necessary
  • 24% (max) in structured notes

Structured notes help smooth out a portfolio, especially when you have ups and downs like we’re seeing in 2023. These notes often include a coupon, which offers interest on the account every month.

If a scenario occurs where we need lower equity exposure, we may move into a moderately conservative portfolio that adds bonds or ETFs as a way to lower exposure. We would likely put 30% core, 30% tactical, 24% structured notes and 16% in fixed income.

Our most conservative portfolio will include:

Clients who don’t want much risk in their portfolio benefit most from this type of portfolio. Many people don’t want 100% risk of the S&P 500, which, over the last 30 years, is a 58% drawdown.

You would lose $580,000 of your $1 million portfolio in the scenario above.

Risk will fluctuate throughout your retirement funding, but when you reach closer to the time when you can finally retire, it often makes sense to mitigate risk as much as possible. You have a dream retirement in mind, and we want to help you reach it.

It takes 15 – 20 minutes for us to have a risk tolerance assessment with you to help you understand what your personal risk preference is because it will let you have the most peace of mind.

Click here to schedule a call with us today to have us run a risk assessment for you.

October 30, 2023 Weekly Update

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 October 30, 2023

Roth IRA – 5-Year Rule – Your Retirement – Part 2 with Denise Appleby

Denise Appleby explains the nuances around two separate Roth IRA 5-year rules and what you need to take distributions from a Roth IRA if you’re aged 59 and a half or below. Listen in to learn the importance of starting your Roth IRA 5-year clock earlier and protecting your records to avoid paying taxes you don’t owe.


Roth IRA – 5-Year Rule – Part 2 with Denise Appleby

In our last podcast (read the blog here), we dove right into one of the most common questions our clients and listeners have: Roth IRAs and the 5-year rule. Well, we decided that we need to cover this topic even more in-depth and brought Denise Appleby on the show to clear up any confusion that you may have.

Roth IRA – 5-Year Rule – Part 2 with Denise Appleby

In our last podcast (read the blog here), we dove right into one of the most common questions our clients and listeners have: Roth IRAs and the 5-year rule. Well, we decided that we need to cover this topic even more in-depth and brought Denise Appleby on the show to clear up any confusion that you may have.

Denise is an expert in all things IRAs and an excellent consultant for these types of questions.

What are the 5-Year Rules?

Denise was quick to point out that it’s not the 5-year rule but the 5-year rules. Two main rules are in place and the challenge is determining which rule applies to you.

First 5-Year Rule

This rule is used to determine if a Roth IRA distribution is qualified. This rule starts January 1 on the first year that you fund your Roth IRA, and it never starts over.

For example:

  • 2010, you contribute to a Roth IRA
  • 2023, you start a new Roth IRA because you cleared out the original
  • When did the 5-year period start? January 1, 2010.

Second 5-Year Rule

The second 5-year rule only pertains to you if you’re not eligible for a qualified distribution. Under this rule, we’re looking at Roth conversions and their distributions. If you withdraw the money that you put in within the first 5 years, you’re subject to a 10% distribution penalty.

However, the rule is very complex because it starts over with each conversion.

For example:

  • In 2020, you perform a Roth conversion
  • You take a distribution in 2023

The distribution would come from the 2020 conversion first before any conversion you do at a later date, if that applies.

This rule can be very hard to wrap your head around without an example.

Whose Responsibility Is It to Track Distributions and the 5-Year Rule?

Each conversion you make has a 5-year rule attached to it. Unfortunately, it’s your responsibility to track these conversions and how long ago they were made. For example, let’s assume that you convert $10,000 over the next 5 years.

The IRA custodian will not track these conversions. The IRS says that if a distribution is made and the IRA custodian doesn’t know the following, the custodian will report it as a non-qualified distribution without an exception:

  • If the person is eligible for an exception, or
  • If the person is eligible for a qualified distribution

It’s your burden to provide your tax preparer with the documentation necessary to show that the distributions are penalty-free. You can do this by keeping documents handy, such as your Form 5498.

You must protect yourself by keeping clear documentation of conversions. If you don’t keep proper records, you’ll pay penalties because there’s no proof that the distributions are non-qualified.

As you can see, there are a few nuances around the 5-year rule that can be complex and a bit tricky. Part of the reason why we’re diving deep into this rule for retirement planning is that you can leverage conversions now for tax planning purposes.

We know that unless there are significant legislative changes made before 2026, tax rates are going to go up.

Converting traditional IRAs to Roth accounts now may be beneficial for you and allow your money to grow tax-free. Most of our clients are doing conversions for future potential use way down the road or they’re doing it for their legacy. In these cases, the 5-year rule won’t matter to them.

With this in mind, let’s consider the following example:

Example 1: 60 Year Old with a Roth Balance of $100,000 that is Well Past the 5-Year Rule

If this person did a conversion last year of $100,000, do they have to wait five years to take distributions on this conversion? No. Because they are over the age 59 and a half, the second 5-year rule does not apply, and they can take a distribution without additional tax or penalty.

Anyone over age 59 and a half doesn’t need to track anything aside from having had a Roth account open for at least 5 years. You’re in a very nice place to be at age 60.

Because of this, we recommend that you establish a Roth account, even with a small contribution, as soon as possible. Why? Your five-year period starts ticking down the moment that the account opens. You could potentially not contribute to the account for years, but that five-year period will be ticking down, allowing you the freedom to do conversions in the future and still take distributions from the account without penalties.

Example 2: 50 Year Old, No Roth Account and Has Opportunity to Do a Roth Conversion

Imagine that this individual begins converting their accounts and assumes that they’ll wait until they’re at least 59 and a half to begin distributions. Life happens, and suddenly, the person does need to take money out of the account before then.

If they haven’t had the Roth IRA for 5 years and aren’t eligible for a distribution, then we need to look next at the ordering rules.

What are Ordering Rules?

Ordering rules pertain to your Roth IRA and distributions. Your distribution is taken from your account in the following levels:

  1. Regular Roth IRA contributions or money rolled over from Roth 401(k), 403(b), 457(b). These contributions come out first and are always tax- and penalty-free.
  2. Conversions from traditional SEPs and SIMPLEs and rollovers from the pre-tax side of 401(k) plans. Unless you qualify for an exception, these distributions will have a 10% penalty because of your age and not meeting the 5-year rule. What are the exceptions? If you converted the account at least 5 years prior, you could take distributions without penalty.
  3. Earnings, which are taxable and subject to the 10% penalty.

If you must take distributions early, you want to avoid taking money from levels 2 and 3. Level 2 money still has the 10% penalty unless you fall under very specific circumstances, and level 3 money is both taxable and comes with a penalty.

Example 3: 50 Year Old with Plans to Convert $10,000 Each Year Until 60, Never Had a Roth Before

Over the 10 years, the person has $100,000 in conversions in the account. The account has been open for five years, so one rule is checked off. The person is also 60, so they can start taking qualified distributions if they wish. Any distribution going forward is both tax-free and penalty-free. They can tap into growth without penalty as well. 

Legislatively, everything is always up in the air. Ages can change for these rules. A few years ago, the government did try to make changes to some Roth provisions, but they haven’t tried to do so recently.

Even the Secure Act 2.0 was very Roth-friendly.

Denise does not believe that Roth accounts are going anywhere any time soon because the IRS wants to be paid upfront. The IRS always wants to be paid as soon as possible, so it’s not likely that Roth accounts will be a major legislative target at this time.

Of course, things can change and new rules can be added, but we’ll keep you up to date on these occurrences.

Does a Roth 401(k) Start the 5-Year Clock?

No. A Roth 401(k) does not start the Roth IRA clock. The time that you’ve had the 401(k) open doesn’t apply to your IRA, which is very unfortunate.

What Should People Think About When It Comes to the 5-Year Rule?

Final points from Denise:

  • Having and contributing to Roth 401(k) is not the same as opening and contributing to a Roth IRA.
  • If a spouse beneficiary inherits a Roth IRA and the spouse treats it as their own, the 5-year period is considered to have begun at the earlier of the two spouse’s first Roth IRA contributions. However, if the funds are transferred to a beneficiary IRA, the accounts inherit the decedent’s period. Do you have documentation on these accounts?
  • Beneficiary IRA accounts allow for $10,000 to be used for a first-time home purchase without penalties.

Clearly, there is quite a lot to think about with Roth IRAs, conversions and the 5-year rule. Having an expert like Denise at your side is extremely beneficial when working on these accounts.

If you have any questions, you can schedule a free 15 minute call with us and we’ll be more than happy to have a conversation with you. We can even consult Denise on any complex questions.

October 23, 2023 Weekly Update

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 October 23, 2023

This Week’s Podcast – Roth IRAs – 5-Year Rule and Conversions in Retirement

Listen in to learn the difference between Roth IRAs’ contributions and conversions and how the 5-year rule applies to each. You will also learn about the five advantages of a Roth IRA: tax-free growth, not subject to RMDs, tax diversification, estate planning benefits, and hedge against future tax increases.


This Week’s Blog – Roth IRAs – 5-Year Rule and Conversions

Roth IRAs are on the minds of many of our clients and listeners. If you’re concerned that taxes may be higher in the future, you may want to learn more about Roth Accounts. In a Roth account, you pay taxes on the money today and can then allow it to grow tax-free. However, you also need to be aware of the 5-year rule for Roth IRA conversions. The rule is a small caveat that is easy to overlook…

Roth IRAs – 5-Year Rule and Conversions

Roth IRAs are on the minds of many of our clients and listeners. If you’re concerned that taxes may be higher in the future, you may want to learn more about Roth Accounts. In a Roth account, you pay taxes on the money today and can then allow it to grow tax-free.

However, you also need to be aware of the 5-year rule for Roth IRA conversions. The rule is a small caveat that is easy to overlook, but it impacts your ability to withdraw your earnings without penalties or taxes.

5-Year Rule for Roth IRA Contribution: Limits and Requirements

You can contribute to a Roth, but there is an income level that you need to be concerned about. We won’t go into these levels in great detail, but a lot of companies are offering Roth 401(k) options to circumvent these income limits – just a contribution limit.

If you contribute money into a traditional Roth IRA, it’s 100% liquid. You can put $10,000 in and take it right back out of the account.

However, the 5-year rule pertains to the interest earned on the account.

Example 1: the 59 ½ Rule

For example, let’s say that I’m 40 years old and I put $10,000 into a Roth IRA. Fast-forward 10 years. Now I’m 50 years old, and the $10,000 I put into the account has swelled to $20,000. You’re past the 5-year rule, but you’re not 59 1/2 yet.

You can take out the $10,000 that you put into the account without penalties, but you cannot touch the interest until you reach the 59 1/2 threshold.

Example 2: the 5-year Rule

Since many of our listeners and clients are past the 59 1/2 age requirement, let’s look at another example of someone who is 60 and contributes to a new Roth IRA. In four years, they gain $3,000 – $4,000 in interest, but since it’s a new Roth, they cannot take the interest out with a penalty based on the 5-year rule.

So, the 5-year rule for a new Roth IRA account has two main components:

  1. 59 1/2 years of age to touch the interest
  2. 5 years to take out the interest without 10% tax penalty and paying taxes on the interest

Even if you’re 65 and just opened the account, you still need to wait five years before you can touch the interest without being concerned about penalties or taxes.

Note: Contributions into Roth IRAs are always penalty-free, as you’ve already paid taxes on the money.

5-Year Rule for Roth IRA Conversions

Conversions and contributions are different. A Roth conversion is not subject to limits, so if you have pre-taxed assets, you can convert $1 million (or whatever amount you like). Let’s say that you have a traditional IRA. You can convert 100% of the account if you like.

However, you will need to pay taxes today on the money that you’re converting into the Roth IRA to leverage this tax-free bucket.

How Does the 5-Year Rule Impact Roth IRA Conversions?

Roth conversions are very powerful and beneficial because your money can grow tax-free. The rules on these conversions are different, so let’s look at an example:

  • This person is 60 years of age
  • $1 million in pre-tax IRA
  • $100,000 converted into a Roth IRA
  • **This is the first time the person opened a Roth IRA

The person is above the age of 59 1/2, so they meet this threshold for taking money out of the account without penalties. However, since this is the first time the person has had a Roth IRA account, they must wait five years before being able to withdraw on the tax-free growth.

Let’s say that if the person comes back in two years and wants to take out $30,000 for a new roof, they can do so because they’re not touching the tax-free growth on the account.

If you’re under the age of 59 1/2 or fall into one of the following categories, there are some exceptions:

  • Disability
  • First-time homebuyer
  • Deceased 

Pro Tips: The clock starts ticking from the moment you open the account. Let’s say that you did a conversion at 55 and a conversion at 60. You don’t need to worry about the 5-year rule. We recommend converting even a small amount into a Roth IRA to get the clock started so that the account is open for 5 years.

Note: Always be sure to consult with a financial advisor before making any distributions to ensure that you follow all the rules and regulations.

Click here to schedule a call with us to discuss your Roth conversions, contributions, or distributions.

Example of the Power of Roth IRA Conversions

In this example, let’s say you’re 60 years old and opening a brand-new Roth account to start doing $50,000 into conversions per year for 5 years. We’re not worried about the 59 1/2 age rule, and we estimate that the account will earn 5% compound interest annually.

Year 1: Conversion of $50,000 + 5% interest ($2,500) = $52,500 total
Year 2: Conversion of $50,000 + 5% interest on ($52,500 + 50,000 = $5,125 = $107,625 total
Year 3: Conversion of $50,000 + 5% interest on ($107,625 + 50,000) = $7,881.25 = $165,506.25 total
Year 4: Conversion of $50,000 + 5% interest on ($165,506.25 + 50,000) = $10,775.31 = $226,281.56 total
Year 5: Conversion of $50,000 + 5% interest on ($226,281.56 + 50,000 = $13,814.08 = $290,095.64 total

Cumulative growth on your money is very powerful. You’ve contributed $250,000 in conversions and earned over $40,000 in interest in just five years.

What happens if, in year four, you need to take a withdrawal?

At year 4, you have an account total of $226,281.56. How much can you take out of the account? You can take out $200,000 because those are your contributions. At the end of year 5, you have 100% access to the money because you hit all thresholds.

Walking you through some math, let’s assume that you don’t need the money and let the $290,095.64 sit for 15 years without any further conversions or contributions. 

Based on 5% interest per year, your $250,000 put into the account would now be $602,998.22.

You’ve earned over $350,000 in interest alone.

Now, you want to take out $350,000 and pay taxes on it. You would need to pay a huge chunk of money if you didn’t pay taxes already. However, since you did a conversion of $50,000 a year, you paid 22% in taxes or $11,000 in taxes per conversion.

You paid:

  • $55,000 in taxes total for all contributions
  • Gained $350,000 in interest that is 100% tax-free

You achieved great tax-free growth and can now withdraw the $350,000 in its entirety.

With that said, Roth IRAs have their advantages and disadvantages.

Advantages of a Roth Conversion

Roth accounts are one of our favorites and we like them so much because of how advantageous they are. You benefit from:

  1. Tax-free growth that grows over time.
  2. Not subject to required minimum distributions. Unlike a 401(k) or other pre-tax accounts, you don’t need to take a required minimum distribution (RMD) on the account. You can keep the money in the Roth for as long as you wish, allowing you to be in more control.
  3. Tax diversification because you have a sizeable tax-free asset. You can blend withdrawal strategies using taxable and non-taxable accounts to minimize taxes.
  4. Estate planning benefits also exist. You can pass the account to your heirs, who can take tax-free distributions over their lifetime. Beneficiaries must withdraw the entire account over 10 years and can allow it to remain in the account for 10 years and still don’t need to pay taxes on the growth.
  5. Hedge against future tax rates because this tax-free bucket will not be subject to higher taxes, which we’re very likely to see in 2026 unless major legislation is otherwise passed.

Disadvantages of a Roth Conversion

While we’re major fans of Roth IRAs for retirement planning, Roth conversions are not ideal for everyone. These disadvantages are things you should keep in mind.

  1. Immediate tax burden. You will need to pay taxes on the conversion, which no one likes. But you benefit from the money growing tax-free.
  2. Potential of lost tax benefit. If you’re at a higher tax bracket today but in the future taxes are lower, you lose the benefit of lower taxes. We don’t know what the tax rate will be in 10, 15, or 20 years from now.
  3. Loss of liquidity. You lose some liquidity with your money because, in many cases, you’ll use outside funds to fund the account, such as cash.
  4. 5-year rule. Of course, you do have to wait 5 years to touch any of the interest in the account.
  5. Potential impact on other benefits. If you’re about to convert at Medicare age, you may have to pay an IRMAA surcharge for a single year of the conversion. 

If you’re looking at this and have questions, it is very overwhelming. However, you can always schedule a call with us right on our website to go over this information in greater detail.

Click here to schedule your call.

October 16, 2023 Weekly Update

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 October 16, 2023

This Week’s Podcast – Required Minimum Distributions in Retirement – Monthly, Quarterly, or Annually?

Listen in to learn the advantages and disadvantages of taking required minimum distributions monthly, quarterly, or annually. You will also learn how the three-bucket strategy income safety and growth buckets can work together to your advantage.


This Week’s Blog – Required Minimum Distributions – Monthly, Quarterly, or Annually?

US tax law requires you to take a certain amount out of your traditional retirement accounts or employer-sponsored retirement plans each year, called a required minimum distribution. If you transferred money into these qualified plans and didn’t pay taxes on it, guess what? The IRS will eventually want you to pay your taxes, which is where RMDs come into the equation…

Required Minimum Distributions – Monthly, Quarterly or Annually?

Required minimum distributions (RMDs) become a very important point of discussion before the end of the year, and there is a lot that you need to consider. You can take your RMDs monthly, quarterly, and annually. 

However, which one is the right choice for you? That’s what we’re going to cover in this post. If you would rather listen to this post, we do have a podcast on this very topic.


What are RMDs?

US tax law requires you to take a certain amount out of your traditional retirement accounts or employer-sponsored retirement plans each year, called a required minimum distribution.

A traditional account is a tax-deferred account, such as your:

  • IRA
  • 401(k)
  • 403(b)
  • 457

If you transferred money into these qualified plans and didn’t pay taxes on it, guess what? The IRS will eventually want you to pay your taxes, which is where RMDs come into the equation.

Basically, you need to take out “roughly” 3.5% of your money each year, but there is a more complex calculation involved that we won’t go into with this post. The most important thing is that you’re required to take these distributions even if you don’t need the money.

Whether you’re in your 50s or 65, it’s important to educate yourself on RMDs and what you are required to do. Developing a plan for your RMD is important because you can incorporate a few strategies to lower your distribution requirements, too.

If you reach a certain age, you must take distributions.

In 2020, once you had reached age 70.5, in the calendar year, you would have needed to take distributions. After the Secure Act, this age has changed to age 73 – 75, depending on your birth year. The year you were born dictates this age:

  • Born in 1951 – 1959, your RMD age is 73
  • Born 1960 and later, your RMD age is 75

In the first year, you can defer your distribution to the next year and take it by April 1st. However, if you do this deferral, you will need to take two distributions, which is uncommon because it will push your tax bracket up.

On a Roth IRA, you have a tax-free bucket that you can use with no RMD requirement during the life of the original owner. Roth accounts are something that we often recommend as a strategy for eliminating or reducing RMDs, but this is something we’ll dive into more shortly.

Quick Note: Inherited IRA accounts work a bit differently. You used to be able to take distributions over a lifetime. Now, the new rule requires you to deplete the entire account over 10 years. There are a few caveats to this rule, but you’ll want to sit down with a financial advisor to discuss these in greater detail. Exceptions do exist for disabled individuals, minor or chronically ill beneficiaries and those who are less than 10 years younger than the original account owner.

Penalty for Not Taking an RMD

We do want to mention that when researching RMDs, you’ll learn that there is a penalty for not taking your distribution once required. The penalty can be 50% of the distribution, which is a lot, but we have never actually seen this applied.

Often, the government will give you a reprieve, but they do want you to take your RMD.

Is It Better to Take Your Required Minimum Distributions Monthly, Quarterly or Annually?

You know what RMDs are and that you can be penalized for not taking them, but one question still remains: at what frequency should you take your RMDs? We’re going to walk you through each of these distribution options.

Everyone has their own line of thinking when it comes to taking their RMDs, and it’s ultimately up to you. Each option has its advantages and disadvantages.

Monthly RMDs: Advantages and Disadvantages

Monthly distributions offer consistent cash flow – just like a paycheck. For example, if you need to take $12,000 per year in distributions, you can rely on $1,000 a month coming into your account.

You also benefit from market volatility.

For example, you are withdrawing the $1,000 when the account is up or down for the month, which can be an advantage or disadvantage. If you have a consistently down market when you’re withdrawing, that can become an issue.

The main advantages are:

  • Monthly cash
  • Less concern about the market
  • Easier to maintain a budget

However, the disadvantages are almost the exact opposite of the advantages. You’re taking money out of the account and missing growth opportunities.

Note on RMD Calculations and Growth Buckets

The IRS calculates your required minimum distribution on the balance of the account at the end of December 31st. If the IRS states that you need to withdraw $12,000 per year, it doesn’t matter if the markets are up or down 100% that year – you still need to take the full distribution.

When offering retirement planning, we often use a bucket strategy

In this article, we’ll discuss the:

  1. Income/Safety bucket
  2. Growth bucket

Why? They offer advantages in a down or up market, helping you mitigate some of the risks your accounts have in retirement.

The income safety bucket often isn’t correlated with the market so:

  • It provides income
  • Protects against stock market volatility

The growth bucket is, in all essence, money in the stock market. Last year, the market was down 20% or more.

When both buckets work together, it helps safeguard against the market. Money comes from the income bucket and the growth bucket is allowed to grow long-term and mitigate retirement accounts being down.

Income buckets buy us time so that we don’t remove money when an account is down.

During a year like 2022, the growth bucket was allowed to recuperate while still having a steady income from the income bucket. If you have all your money in a growth bucket, it leaves you very little room to mitigate losses.

Note on RMDs and Multiple Accounts

For the sake of simplicity, let’s assume that you have 3 IRA accounts and the government states that you need to take a $12,000 RMD annually. Your distribution can come out of one account, a combination of accounts or all your accounts.

You may have $1 million in an IRA and decide to put 50% in an income bucket and 50% in the growth bucket. You can take all the distribution from the income bucket and let the growth bucket grow.

However, if your money is in a 401(k), there are stricter rules. Money in the 401(k) must come out first if multiple other non-401(k) accounts exist.

You can also put money from a 401(k) into an IRA with different strategies, which may be a better option for you.

Quarterly RMDs: Advantages and Disadvantages

Quarterly distributions are middle-of-the-road. You’re between the monthly and annual distributions, and the advantages and disadvantages are very similar to monthly.

For our clients, it’s always a monthly or annual distribution because many people don’t prefer the quarterly option.

Annual RMDs: Advantages and Disadvantages

Annual distributions are ideal for clients who want to keep their money in the market and let it grow as much as possible. Since the account balance may be higher, you’ll benefit from higher returns.

You can also have a down year where you’ve lost money and now need to take it out of the account when you’re in the negative for the year.

  • During up years, you benefit from greater returns
  • During down years, you lose some money

What’s best for you? Consider your personal preference and needs. If you need a monthly paycheck, then the monthly RMD is best. However, if you plan to reinvest your RMDs because you don’t need the extra cash flow, it may be better to go with the annual RMDs.

A retirement-focused financial plan is what we recommend to our clients. The rules of RMDs are general, but your case is always going to be unique. Analyzing financial plans in retirement allows us to optimize income and RMD planning.

We can walk you through how this looks, even if you’re not currently a client of ours. You can schedule a 15-minute complimentary call with us that will allow you to discuss your options with us to have a more personal discussion about your RMDs and retirement plan.

Click here to schedule a 15-minute call with us to discuss your retirement plan and required minimum distributions.