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Retirement Starts Today

Do you want to spend more money in retirement, while paying less taxes? Great news, you're in the right place! I'll also teach you the benefits of retiring TO something, while most retirees only solve half the equation by retiring FROM something. Tune in every Monday morning - hosted by Benjamin Brandt CFP, RICP. Join my "Every Day is Saturday" weekly newsletter for show notes, free book giveaways and other great retirement content: www.retirementstartstodayradio.com/newsletter
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Now displaying: 2020
Dec 28, 2020

Welcome back to another edition of Retirement Rewind -- episodes so good we played them twice! 

Time for travel is by far the number one thing that Retirement Starts Today Radio listeners look forward to in retirement. That’s why I interviewed David Jacoby on to this episode and why it was chosen as a Retirement Rewind. 

David Jacoby is a financial planner and travel expert who specializes in helping travelers and expats. David, himself has lived in 4 different countries and even built his business while living abroad. On this episode, he’ll help us understand the unique aspects of retiring abroad. If travel abroad piques your interest then you won't want to miss this interview.

Outline of This Episode

  • [2:06] The 3 types of people that are interested in travel abroad
  • [5:22] When does traveling extensively turn into living abroad? 
  • [9:10] How to determine where you might want to live?
  • [13:33] How do people plan for their elderly years?
  • [15:26] How does health insurance work when you live abroad?
  • [17:42] What do people neglect to plan for?

The 3 types of people that are interested in travel abroad 

Many people are interested in traveling when they retire, but David Jacoby has found that there are 3 types of people that come to him for his services. 

Digital nomads or globetrotters are people who work remotely or are location independent entrepreneurs. 

Next are people who want to retire abroad for financial or social reasons. They are looking for the right country to move to. 

The last group of people is those who are not quite ready to retire abroad and still live in the U.S. They may be traveling a bit right now to scope out potential locations. 

Would you consider living abroad when you retire?

When does traveling extensively turn into living abroad? 

Traveling abroad and living abroad aren’t quite the same. Rather than living full time in another country, some people would rather keep their house in the U.S. and spend extended vacations in other parts of the world.

Others just want to sell it all and start fresh in exotic locales. However, before this romantic idea sets in, it’s important to do your homework first. David encourages his clients to visit a place 2-3 times in different parts of the year before making any final plans. Renting a place for 3 months or so will give you a better feel for everyday life in your desired location. 

How to determine where you might want to live?

Some people may not know exactly where they want to live, they just have a general idea. They may prefer a tropical climate, be near the ocean, or perhaps they have always wanted to live in Europe. 

David can help his clients consider practicalities when choosing a location. Oftentimes visas and taxes play a huge part in choosing where to settle. For instance, Portugal, Spain, and Italy have easily obtainable visas for Americans while other countries in Europe are more challenging for American citizens to move to.

But what about healthcare?

Have you considered travel health insurance? No matter where in the world you choose to settle you’ll need to think about health care especially since Medicare does not work outside the U.S. Depending on where you live you’ll either rely on the local system of care or pay for private health insurance. 

Some people even chose to forgo health insurance. This sounds crazy but when you consider that the costs of medicine in many parts of the world are 1/10 of what you pay in the U.S. it isn’t that scary. 

You need to understand why you should still enroll in Medicare even if you plan to live abroad for several years, so make sure to listen to this interview with international travel expert, David Jacoby.

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Dec 21, 2020

Welcome to this episode of our Retirement Rewind. Retirement Rewind episodes are so informative that we decided to play them again while I take the month of December to spend a bit more time to enjoy my family.

Estate planning attorney, John Ross from the Big Picture Retirement podcast, joins me to discuss how you can preserve your IRAs for your heirs in the wake of the SECURE Act. Check out this interview to discover how to optimize legacy tax planning, how to utilize an accumulation trust, and learn about the charitable remainder trust.

Outline of This Episode

  • [1:22] How has the loss of the stretch IRA changed estate planning?
  • [4:06] An accumulation trust may be the key to planning your estate
  • [6:44] A new opportunity for state income tax planning
  • [9:22] How to turn a 10-year stretch into a 20-year stretch
  • [16:32] A case study
  • [18:44] You may want to consider a charitable remainder trust

How has estate planning changed with the elimination of the stretch IRA?

The SECURE Act brought about huge changes to estate planning when it effectively killed the stretch IRA. The stretch IRA provided the opportunity for people to name their spouse as a primary beneficiary and their children as secondary beneficiaries. 

Upon inheritance, the IRA could be sent into a conduit trust and the RMDs were sent directly to the beneficiary. Those RMDs were based on the life expectancy of the beneficiary. One benefit of this trust was that it was doled out over a lifetime, another is that the IRA was preserved and protected from creditors. With the SECURE Act in place the conduit trust will no longer set the standard.

What will replace the conduit trust?

Now that the conduit trust is defunct, how should people plan their estate? An accumulation trust may be the key. Inheritors can no longer withdraw those IRA funds over the course of their lifetime. They now have only 10 years to draw on the IRA.

In those 10 years a lot can happen. If your inheritor gets sued, divorced, or has problems with creditors then the IRA is at risk of disappearing. One solution to this problem is to set up an accumulation trust. 

You may want to rethink your beneficiaries

Now that the long-term stretch IRA is gone we need to rethink legacy planning. You may be thinking that 10 years is too short of a window for your inheritors. However, there is a way to stretch that 10-year window into 20. You could stretch these funds into 20 years by leaving your spouse half of your IRA and your kids the other half. Find out how this could work by listening to this interview with Johnn Ross. 

Now is the time to review your estate plan

Instead of thinking of this change in the law as an inconvenience, take the opportunity to review and update your estate plan. Many people set up their estate plan and then never revise it, but a lot can change over the years. When was the last time you reviewed your estate plan? 

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Dec 14, 2020

What would happen if you go over your tax bracket by $1 when doing a Roth IRA conversion? On this Retirement Rewind episode, we’ll explore the best way that you can take advantage of the current tax cuts and get the most out of your money. What will Roth conversion season mean for you? Listen in and find out!

Outline of This Episode

  • [1:22] Why do we wait so long to convert our Roth IRA’s?
  • [3:44] What happens if I go over my tax rate?
  • [6:40] What about Medicare?
  • [13:15] Why are Roth IRA conversions such a big deal?
  • [15:48] How do Duane’s earnings this year affect his Medicare premiums?
  • [17:15] Should Don put 100% of his portfolio in stocks?

Why should you wait until the end of the year to convert your Roth IRAs?

It’s a good idea to wait until the end of the year to convert your IRAs into a Roth. This is because you’ll have a good idea as to how much you will earn during the year. 

The reason that you’ll want to wait until the end of the year to make a Roth conversion is to understand how much you’ll be making this year so you can fill up your tax bracket with the conversions.

Will you take advantage of Roth conversion season?

Why should you bother to convert your traditional IRA into a Roth? 

The funds in your IRA are pretax dollars so when you convert them to a Roth you pay taxes on them. It’s a good idea to convert your IRA into a Roth so that you can pay taxes now rather than later.

Roth conversions are a fantastic way to take advantage of the current tax cuts since it’s better to pay the devil you know than wait until later on in retirement when you’ll have no idea what the tax rates will be like.

Have you been converting some of your traditional IRA into a Roth over the years? If you haven’t now is a great time to start!

What happens if you go $1 over your tax bracket?

You may have the idea that if you go even just $1 over your tax bracket that all of your planning will be for naught. Before you panic too much, let’s talk about marginal income tax rates. 

Those couples who are married and file jointly and earn $79,000 per year will be taxed at a 22% federal income tax rate. However, that doesn’t mean that all $79,000 is taxed at the same rate. The rates are different for different parts of your income. The first $19,400 is taxed at 10%. Then the income from $19,400 to $78,951 is taxed at 12%. So that means only $49 would be taxed at 22%. 

This type of taxation is called marginal income tax. A marginal income tax ensures that if you get a raise your net income won’t decrease.

Hopefully, understanding how marginal income taxes work will help you understand that the sky will not fall if you go over your tax bracket by a few dollars.

What if you go over the income bracket for Medicare?

Unfortunately, Medicare is not as forgiving as the marginal income tax system. Many people don’t realize that Medicare has income-based premiums. If you make over $170,000 then you will no longer qualify for the Medicare Part B standard premium and you will also pay more for the Part D drug plan.

Listen in to hear how much your Medicare premiums could be and find out the answers to our listener questions.

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Dec 7, 2020

Welcome back to the Retirement Rewind! I take the last part of the year off from podcasting to spend more time with my family. But that doesn’t mean that you miss out on your favorite retirement podcast. Actually, I have a treat for you today. This episode is so good this is the 3rd time I’m playing it. Press play to find out which retirement podcasts I listen to in my spare time and scroll down to the bottom of the page to find links to my favorite episodes of those podcasts. 

On this episode, you’ll discover more amazing retirement podcasts to listen to. In addition, you’ll learn about the confusing world of reverse mortgages and whether you should plan for a 20% cut to your Social Security.

Outline of This Episode

  • [2:22] Do you understand reverse mortgages?
  • [8:26] Will you be taking a 20% cut on social security?
  • [12:46] Get retirement ready with my favorite retirement podcasts

Do you find reverse mortgages confusing?

I’m sure you’ve seen the ads for reverse mortgages before, but do you really know what they are? A study done on a focus group showed that most people thought reverse mortgages were a government welfare program. They didn’t realize that there were interest and fees involved and many thought that with a reverse mortgage they wouldn’t have to pay any more property taxes. Do you have questions about reverse mortgages?

What exactly is a reverse mortgage?

Commonly known as a reverse mortgage, a Home Equity Credit Mortgage (HECM) is just like any other mortgage -- it has to be paid back. Reverse mortgages are sometimes taken on by people in retirement who are looking for a lifetime income. 

A reverse mortgage works when the HECM calculates half of your home equity value and they set up a lifetime annuity based on that amount. Reverse mortgages can be complicated, so if you are considering one, make sure you read all the fine print.

My 5 favorite retirement podcasts

If you’re listening to Retirement Starts Today you probably love podcasts as much as I do. I got into podcasting because I realized it would be a fantastic way to share my knowledge with a wider audience without having to be a writer. You may be surprised to learn that I have my own favorite retirement podcasts. 

Learning to save for retirement can be kind of boring since all of us retirement podcasters are essentially saying the same thing. It’s the personality of the podcast hosts that really sets these shows apart from the rest. Here are 5 retirement podcasts that I love to listen to and learn from.

  1. Stay Wealthy with Taylor Schulte
  2. Retirement Answer Man by Roger Whitney
  3. Sound Retirement Radio with Jason Parker
  4. Stacking Benjamins by Joe Saul-Sehy & OG
  5. Retirement Repair Shop by Mary Beth Franklin

Resources & People Mentioned

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Nov 30, 2020

Welcome to Retirement Rewind! Each year I take the holiday season off from podcasting to spend more time with my family. The good news is that I prepare my favorite episodes from the past for you to enjoy. 

This episode is an interview with Fritz Gilbert over at the Retirement Manifesto blog. In this interview, Fritz and I discuss his new book, Keys to a Successful Retirement as well as his firsthand experience now that he has recently retired. If you’ve already listened to this episode before you might be surprised to hear the tidbits that you forgot about and if you missed it the first time around, you won’t want to miss the interview this time.

Outline of This Episode

  • [2:37] Why your first cup of coffee in retirement is the best cup of your life
  • [5:22] Retirement advice for a 38-year-old
  • [9:53] If you only had $500 to spend on retirement education what would you do?
  • [13:28] Are we in the golden era of Roth Conversions?
  • [16:27] A question about chapter 4 of Fritz’s book
  • [20:21] How to create the ideal retirement

You have to experience retirement to really understand it

Fritz spent years leading up to retirement trying to understand what retirement would be like. However, after finally retiring, he realized that it isn’t something that you can explain to others. You have to actually experience it yourself to understand. I like his analogy of having a locked door in front of you your whole life and on the day of your retirement, you are finally given the key. What do you think? Do you think the feeling of retirement can be conveyed to others?

More than half of all people retire before they think they will

Save, save, save! Even if you are one of those people that think they will continue working forever, it is still important to save for retirement. 60% of all people are forced into retirement before they have planned. What if you were forced into retirement tomorrow? Would you be ready? What are you doing now to help yourself prepare for the inevitable time when you won’t be able to work anymore?

What is the biggest bang for your buck for learning about retirement?

I asked Fritz how he would spend his money if he only had $500 to spend on learning about retirement. It’s not a lot of money to spend on such an important topic, but fortunately, there is so much free content available; you can learn just about anything without too much money. YouTube, podcasts, and blogs provide a lot of information for free. 

Fritz would spend his $500 in one of two ways. He loves books and feels like they provide a wealth of information. He also values the money he spent on hiring a CFP for a once over on his accounts. As a DIY investor, the peace of mind of having a professional give him the green light was invaluable. If you only had $500 to spend learning about retirement how would you spend it?

Create your ideal retirement by embracing your passion

Retirement is a fantastic time to devote yourself to the passions that you’ve had to put on the backburner during your working years. Do you have a passion? How will you pursue it in retirement? If you don’t have a passion yet a curious mind can take you a long way to discovering one. Fritz found a passion that he never knew he had. Find out what it is by listening to this interview. 

Resources & People Mentioned

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Nov 23, 2020

Are you worried about what the election means for your retirement portfolio? Many people are tempted to make big changes to their retirement savings to reflect their election concerns. On this episode of Retirement Starts Today Radio, you’ll learn what you can do to your portfolio if you are nervous about the transition. You’ll also hear what the new RMD tables mean and how the Biden proposals could change the entire retirement landscape.

Outline of This Episode

  • [2:12] What do the new RMD tables mean for you?
  • [4:40] How much is the next Medicare Part B premium increase?
  • [7:40] Should you make big changes to your retirement plan because of the election?
  • [11:50] Which Biden proposals could affect you and your retirement?

What do the new RMD tables mean for you?

Since people are living longer than ever before, the IRS has finally decided to acknowledge these longer lifespans by updating their Required Minimum Distribution tables. According to the longer retirement timeline, retirees can take out smaller mandatory distributions and spread them out over a longer period of time. 

What does this mean for you? You can expect to see smaller tax bills and larger IRA balances compounding over time. Listen in to hear the details and learn why this new tax table may seem familiar.

Should you make big changes to your retirement plan because of the election?

Thankfully, we’re not here to discuss politics. You can go just about anywhere else on the internet for that. However, I do want to touch on the changes that may arise due to the election. 

An election year often brings about strong feelings one way or the other and many people feel that they need to make changes to their portfolio based on what they hear on the news. Just because there is an election doesn’t mean that you should make big changes to your retirement portfolio. It’s a good idea to keep in mind that there may be between 4 and 8 presidents in office over the course of your retirement.

Major global policy shifts don’t equal major portfolio shifts

Even if there are major shifts in global policy you only want to make tiny shifts in your portfolio. If you listen in I will give you specific examples of what you can do to prepare for the future transition without changing the essence of your portfolio. 

I do want to clarify that you should never take advice from me or anyone that you find on the internet. Regardless of who is running the country, I want you to have an amazing retirement.

Which Biden proposals could affect you and your retirement?

One of Biden’s proposals could completely change the retirement landscape. How would your retirement plans change if the Medicare age was lowered from age 65 to 60? At this point, it is just a proposal. Stay tuned in to Retirement Starts Today Radio over the coming months to hear the latest on this Biden proposal as well as his plans for Social Security.

Resources & People Mentioned

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Nov 16, 2020

After you finally get Medicare all figured out and everything in place, the last thing you want to do is ever think about it again. But unfortunately, you need to review your Medicare coverage annually. 

Danielle Roberts is back, yet again, to help us understand what we need to do annually to review our Medicare plans. In this episode, you’ll learn what to do if you have a prescription drug change, if your Medicare Advantage plan gets discontinued, and how to change from supplemental plans to advantage plans and vice versa. There’s loads of information in this episode so make sure to pay attention so that you don’t miss any details. 

Outline of This Episode

  • [1:22] What do we need to think about each year when it comes to Medicare?
  • [5:05] What to look for when you receive your annual notice of change
  • [10:01] How to change from a Medicare supplement to an advantage plan?
  • [14:43] Is switching between Medigap plans easy to do?
  • [17:35] What is in store for Plan F?

What is the annual election period?

The Medicare annual election period runs from October 15 - December 7. This is the time when you can enroll in, change, or disenroll from a part d drug plan or a Medicare Advantage plan. 

What to look for when you receive your annual notice of change

When Medicare sends your annual notice of change it will lay out all of the benefit changes for the next year. This is one Medicare notification that you do not want to toss in the garbage. Take some time to go over this document to look for premium changes as well as changes in drug tiers for all of your medications. Even if you are happy with your current plans, it is still a good idea to check your coverage. Listen in to learn what you can learn from the MyMedicare.gov website. 

What if I want to change my Medicare supplement to an advantage plan or vice versa?

If you are looking to change plans you can do so during the open enrollment period which also takes place from October 15 - December 7. It’s quite easy to switch from a supplement to an advantage plan. Simply enroll during the open enrollment period and then cancel your supplement. There are no health questions to answer. However, if you would like to switch from an advantage plan to a Medigap plan, it is more complicated. Discover the order of events that must take place by hearing it straight from Danielle Roberts.

Is switching between Medigap plans easy to do?

Switching between Medigap plans generally requires a health screening and underwriting which is why it is important to wait until you have been approved for a new plan before canceling your old plan. 

Using a broker can help you understand the nuances of Medicare and ensure that you don’t make costly mistakes. Learn more about Boomer Benefits at BoomerBenefits.com

If you haven’t listened to all 4 of the Medicare episodes with Danielle Roberts, I encourage you to head on over to episode 163 to get started. I know I have learned a ton from Danielle’s expertise and you will too. 

Resources & People Mentioned

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Nov 9, 2020

Do you know the difference between a Medicare supplement and a Medicare advantage plan? You’ll need to understand their differences to make an educated decision about which to choose when it is time to sign up for Medicare. Danielle Roberts from Boomer Benefits joins me again to help us wade through the various Medicare supplement choices. Learn how best to fill the gaps that Medicare leaves by listening to this episode of Retirement Starts Today. 

Outline of This Episode

  • [2:12] What is covered by Medicare supplement plans?
  • [8:00] Medicare advantage plans operate through a network of providers
  • [15:02] Switching between plans may not be as easy as you think
  • [20:24] Dental and vision insurance

What is a Medicare supplement or Medigap plan?

One benefit of choosing the original Medicare route is that the federal government will be processing your claims. While this is a positive aspect of choosing traditional Medicare, it also means that there will be deductibles and a 20% out of pocket cost on your claims. For this reason, it is important to consider purchasing a Medicare supplement plan. There are 10 different standardized plans to choose from, although most people choose one of 3 plans. 

  • Plan F is the Cadillac of plans, it was so popular and easy to use that it is actually being discontinued.
  • Plan G is the next most popular plan. However, it doesn’t cover the $198 outpatient deductible.
  • Plan N is a consumer-driven plan. It has a lower premium, but you pay a deductible and some copays for doctors and ER visits.

Find out why Medicare supplements are ideal for customers with some discretionary spending and frequent medical spending. 

Medicare Advantage plans are becoming popular

Medicare Advantage plans are gaining in popularity. The premiums are lower, but there is less choice for the consumer. You must use only the plan’s network of providers and their approved medications. There will also be extra spending on your part in the years that you have more medical spending. 

If you want to switch from a Medigap to an Advantage plan there is no required medical questionnaire to fill out. However, if you would like to switch from an Advantage plan to a Medigap plan there is a possibility that you could be denied based on your health. 

Listen in to hear what questions you need to ask before you sign up for a Medicare Advantage plan. 

What about dental and vision insurance?

Many people are surprised to discover that dental, vision, and hearing are not covered by Medicare. This is because in the 60s when Medicare was created, it wasn’t typical for insurance companies to cover these ancillary medical concerns.

There are a couple of options that seniors have when it comes to dental, vision, and hearing. You could purchase a standalone plan which covers these areas. Or you could choose a Medicare Advantage plan that also covers dental, vision, and hearing. 

There is an important consideration you need to be aware of if choosing the Medicare Advantage route. Find out what it is by listening to this episode of Retirement Starts Today. 

Do you have a rainy day fund?

One last consideration that you need to think of is having a rainy day fund for out of pocket medical costs. If you choose a high deductible plan and then you end up needing cancer treatment that year, you could be hit with a $6500 bill. An HSA is a great way to cover this cost. 

Have you listened to all of Danielle’s episodes? If not, head over to episode 163 to get started from the beginning!

Resources & People Mentioned

Connect with Danielle Roberts

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Nov 2, 2020

Deciding to retire before age 65 can be a tough decision to make. For most people, this decision will result in an extra $1000 or more a month in health insurance expenses. Retiring after age 65 has its pitfalls as well. On this episode of Retirement Starts Today, Danielle Roberts joins me again to discuss the potential landmines that you need to look out for whether you are planning to retire before or after age 65. 

Outline of This Episode

  • [2:22] What about retiring early?
  • [6:29] Which is better, shopping on the exchange or going directly to the insurance company?
  • [9:18] How to manage the risk?
  • [13:25] What are some mistakes people make when they retire after age 65?
  • [20:34] Why you don’t want to miss part D drug coverage. 

Should you work longer just for health insurance?

If you are considering working longer just for the insurance Danielle and I both recommend that you don’t. Instead, compare the cost of insurance through COBRA to the cost through the ACA. If you want to retire there are many plans to choose from through the ACA. One way to lessen the costs of insurance is to sign up for a high deductible plan that includes an HSA. That way you are building a healthcare nest egg at the same time. Discover a creative healthcare solution if you or your spouse is significantly younger by listening to Danielle’s advice. 

Which is better, shopping on the exchange or going directly to the insurance company?

It seems that it would be easy to shop insurance companies on your own these days by browsing through the companies websites. But Danielle recommends using the healthcare exchange at Healthcare.gov instead. She finds this to be a better way to compare carriers and their prices. The options are easier to find and the site will display all the plans that are offered in your area. Have you ever used the healthcare exchange? 

How to manage the risk?

Insurance is all about the transfer of risk. When trying to choose between a high deductible plan vs. a lower deductible plan you’ll want to compare your health concerns with your budget concerns. Consider how you use doctors. Do you have monthly visits with different specialists? Or do you visit the doctor once a year for your yearly check-up? If you only go to the doctor a couple of times a year then you don’t need to have a plan with a copay. 

What are some mistakes people make when they retire after age 65?

Many people delay their coverage of Medicare part B when they are still employed after age 65. This is fine while they are still employed, however, it is important to sign up for Medicare part B and D as soon as possible after leaving their employer-sponsored plan so as not to get stuck with a hefty penalty. Listen in to find out what you need to do to avoid penalties or a lengthy battle with Medicare. 

Make sure you are signed up for the Every Day is Saturday newsletter so that you can respond to it and have a chance to receive a free copy of Danielle’s book, 10 Costly Medicare Mistakes You Can't Afford to Make

Resources & People Mentioned

Connect with Danielle Roberts

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Oct 26, 2020

You asked and I listened. This summer I asked you all for your thoughts on the show and many people responded that they wanted to hear more deep dives into complex subjects. We tried this out with the Living Off Your Savings series and now we’re taking some extra time to discuss Medicare. This episode is the first of a 4 episode series on Medicare. Grab your headphones and press play to begin your Medicare education. 

Since I am not a Medicare expert, I have invited Danielle Roberts with Boomer Benefits to teach us about this nuanced subject. Make sure to stick around until the end of the episode to learn how you can get a free copy of Danielle’s new book, 10 Costly Medicare Mistakes You Can’t Afford to Make.

Outline of This Episode

  • [3:22] When should people start looking into Medicare in earnest?
  • [7:10] Why is Medicare Easy-Pay a good option?
  • [10:03] What will medicare pay for?
  • [12:25] What do your taxes pay for?
  • [17:15] Part D is an optional drug plan

When should someone start thinking about Medicare?

The official Medicare enrollment period begins 3 months before your 65th birthday and this is often the time when people usually begin to start thinking about Medicare. Age 64.5 is a great time to begin to research your Medicare choices. In addition to Danielle’s book, there are plenty of resources online to help you educate yourself. After you listen to this series, YouTube and the Medicare website are good places to continue learning.

What costs are involved in Medicare?

Some people are surprised to find that Medicare is not free. There are costs involved that you need to be aware of to properly plan for retirement. In addition to the monthly fee taken directly out of your Social Security payment, there are deductibles for inpatient and outpatient services as well as copays or coinsurance for doctor visits. Listen in to understand why it’s important to do your research early on to decide on what kind of extra coverage you may need. 

What are the different parts of Medicare?

Medicare Part A is what your Medicare payroll taxes have been paying for all these years and it covers hospital stays. Part B is what gets taken out of your Social Security check each month and this piece covers outpatient care. Medicare Part B pays only 80% so it is important to consider how you will cover the other 20%. This 20% can be supplemented in 2 ways. Listen in to hear what the difference is between Medigap and Medicare Advantage plans. 

How you can receive a FREE copy of Danielle’s book

Danielle is a fountain of Medicare information, so you won’t want to miss this series. On the next episode, you’ll hear what to expect if you retire before or after age 65. If you want a chance to get a free copy of Danielle’s book sign up for the Every Day is Saturday newsletter and respond to that email with a promise to leave an honest review of this podcast and Danielle’s book. So, if you haven’t already signed up for Every Day is Saturday, head over to RetirementStartsToday.com and hit subscribe. 

Resources & People Mentioned

  • Start here to listen to the Living Off Your Savings series 

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Oct 19, 2020

Are you one of the many people still working from home due to the pandemic? What seemed like a phase that would last a few weeks has turned into a trend with no end in sight. While working from home creates exciting possibilities, especially for those considering retirement, it also has its downfalls. Many people have discovered that working from home means the lines between work life and home life are being erased. As long as you are conscious that burnout is a real risk then you can take active steps to keep your home life and work life in balance.

On this episode, I’ll share an Inc. magazine article about avoiding burnout while working from home. We’ll also take a look at a WSJ article on early retirement buyouts. Then we’ll wrap up this episode with a listener question about strategies for those on the cusp of retirement. So, grab your Airpods or your favorite listening device and take a walk with me.

Outline of This Episode

  • [1:02] How to avoid burnout while working remotely
  • [6:30] Should you consider early retirement?
  • [11:55] Are there any one-time financial strategies for those on the cusp of retirement?

Is working from home leading you to burnout?

While the work from home revolution that picked up momentum during the pandemic has opened many doors, it has also revealed its own set of problems. People spend more time actively working and it seems that the 40-hour workweek has gone out of the window. Employees are now spending 25% more time ‘at work’ than before the pandemic. Many have stated that they find they are often sending work-related messages and emails after traditional work hours. Their desire to be productive now puts them at risk of burnout. 

Try taking a virtual commute 

Microsoft has come up with a creative way to help its team avoid burnout while working remotely. Their solution is to bring back the commute. They don’t recommend you jump in the car and drive to your workplace, but rather a virtual commute. The Inc. article recommends a 20-minute meditation commute. I love this idea. However, if you are not a meditator, a walk to work commute might be a better alternative. Before you start working each morning, head out your front door, and walk around the block. You can use this time to get in the right headspace for work and plan your day. 

Working from home could extend your working life

Working from home can create amazing possibilities, especially for those of you considering retirement. The possibility of working from anywhere means that you could extend your work timeline. However, to take full advantage of the possibilities it is imperative to avoid burnout. As long as you are conscious that burnout is a real risk then you can take active steps to keep your home/work life in balance. 

Have you been offered an early retirement package?

Press play and listen in to hear whether you should consider taking an early retirement package. And keep listening until the end to hear the answer to Frank’s question about one-time financial strategies for those on the cusp of retirement. 

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Oct 12, 2020

Are you worried about the seemingly constant news stories which claim that Social Security may run out of money? These articles highlight any problems that the Social Security program is facing which can lead the reader to fret about the future of the guaranteed income source in retirement. Not surprisingly, there are companies out there that want to capitalize on this worry. 

Does Social Security insurance sound like a good idea to you? On this episode of Retirement Starts Today I read from and discuss an article about Social Security Insurance. You’ll learn what it is and how it works and hear my thoughts about this product.

Outline of This Episode

  • [3:22] Make sure there is not a planning solution before rushing out to buy a product
  • [6:37] How does Social Security insurance work?
  • [9:48] What is my opinion on Social Security insurance
  • [12:10] How to begin a migration into bonds

There is a product out there to solve every problem

Investors are always looking for less volatility in their investment portfolios, but oftentimes they don’t realize that proper investment planning is the best way to achieve that. Those who don’t approach their portfolios with an investment plan in place are often looking for a product to buy to solve their problems. The low volatility fund is one product for people who want to buy a risk solution rather than plan. 

Is a low-risk fund all it’s cracked up to be?

Does this low volatility fund end up raising risk in the short run while at the same time reducing risk in the long run? These low-risk funds often paint a distorted picture. While trying to reduce the downside they ultimately limit the upside which leads to less risk yet ultimately fewer returns. Zweig explains it beautifully, “the market loves to make monkeys out of people who think they’ve solved it.”

Solve your investing problems with strategy rather than products

It is important to remember that in investing as well as in other areas of retirement planning there will always be someone there to charge you a fee for a product as a solution to your investment planning problem. So before you rush out to buy the first product that comes along, my advice to you is to think about your own behavior first. Consider if there is a planning or behavior management solution that could replace this product. 

What is a good alternative to Social Security insurance?

If you think that Social Security will run out of money or that you may see your benefits reduced that’s okay. But instead of rushing out to buy a product to hedge against the Social Security problem, be a prudent pessimist. A prudent pessimist doesn’t take a cut on their Social Security benefit by filing early, they wait until age 70 to receive a 32% bonus. That way if there is a cut to your benefit, it will be a cut on the bonus rather than on the reduced benefit. Press play to hear more about Social Security insurance, investment planning, and a listener question about how to migrate into the bond market.

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Oct 5, 2020

If you are listening to Retirement Starts Today, you probably have retirement on your mind. You have probably given thought as to how you will spend your money, where that money will come from, healthcare, and plenty of other subjects. 

But have you put any thought into how much notice you will give your employer? Do you have one of those jobs where you relish the day that you give your retirement notice? Or will your announcement be bittersweet? You may want to put some extra thought into how you want to present your retirement notice, especially during challenging economic times.

Outline of This Episode

  • [1:12] How much notice will you give your employer of your pending retirement?
  • [3:19] A cautionary tale
  • [5:54] Real life examples for you to learn from
  • [11:16] There is no one right answer

A cautionary tale

You may want to give your employer plenty of notice about your retirement. If you have a strong sense of duty, you may feel that it is the right thing to do. I talked to one person who did just that. He was an employee who deeply valued his work and wanted to leave his career better than he found it. But his thoughtfulness didn’t pay off in the end. When the company offered early retirement packages he was passed over since he had already announced his retirement. 

There are a number of different ways to make your retirement announcement

While there are disappointing stories such as that one, there are also positive responses to retirement news. When I asked readers of my Every Day is Saturday newsletter about how they plan to announce the news of their retirement I got several different answers. These answers vary based on the type of work they do and the type of employer they work for. 

What factors should you consider when announcing your retirement?

One listener that has a technical job in IT plans to give 6 months’ notice. He based this number on the amount the time it will take to train his replacement. You may also want to consider the size of the company you work for and your level of responsibility in the organization. Another listener’s 1-month retirement announcement was well received. He also offered flexibility and it ended up paying off. Listen in to find out how that story worked out. 

There is no right answer

So what can you learn from these examples? What is the right amount of notice to give? Unfortunately, like just about everything else in retirement, there is no one size fits all answer. However, we are generally rewarded when we make these decisions with careful due diligence and specific intentions. So how will you give your retirement notice? 

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Sep 28, 2020

Have you seen the news about Tesla and Apple lately? Their stock prices are surging to new highs after the announcement of a stock split. Is this what is supposed to happen with a stock split? Learn more about stock splits and what they mean for you by listening to this episode of Retirement Starts Today. 

After we the Retirement Headlines I answer several listener questions. Have you been wondering about you and your spouse’s Social Security timeline? Should you roll over funds if you are happy with your 401K? Which is better--to dollar cost average or to max fund your retirement as quickly as possible? You’ll hear my take on the answers to these questions by pressing play now. 

Outline of This Episode

  • [1:32] Are stock splits good for stocks?
  • [5:32] Should you run out and buy a stock upon the announcement of a split?
  • [7:01] What factors should be considered when setting up a Social Security timeline?
  • [9:23] Should you roll over your 401K if it is flexible and you are happy with it?
  • [14:44] Should you dollar cost average over a year or max fund your retirement as quickly as possible?

What is a stock split?

Before I share my thoughts about the recent announcement of the Apple and Tesla split, I want to clarify what a stock split is. A stock split is simply dividing the price of a stock. When a stock split happens shareholders double the number of their shares but, essentially, they should hold the same monetary value. So if I own 1 share of Ben Brandt Industries at $10 per share before the split then afterward I’ll own 2 $5 shares that also equal $10. The whole point of a stock split is to bring down the price so that it becomes more affordable for everyday investors. 

Should you buy a stock upon the announcement of a split?

Recently Apple and Tesla both announced an upcoming stock split at about the same time. When they did so their share prices soared. This isn’t a typical market response of a stock split and is actually a surprising outcome. Listen in to discover why you should stay well away from announcements like these and you’ll even learn why stock splits should be obsolete in today’s world.

What factors should be considered when setting up a Social Security timeline?

Are you wondering what the best timeline is for setting up your Social Security benefits? If you have listened to my show at all, you know by now that I am a fan of maximizing the largest of the Social Security checks by delaying those benefits for as long as possible. Grow the larger Social Security check for as long as possible to help you build the foundation of your retirement plan.

But what about the second Social Security check? 

If you are married then you likely have 2 Social Security checks to look forward to. Should you delay taking that benefit until age 70 as well? 

I recommend waiting until full retirement age to file for this benefit, but keep it in your back pocket as a contingency plan. So, in case of a market downturn, you can be ready to turn on this benefit rather than dip into your savings before the market bounces back.

If you enjoy staying up to date on the latest retirement news, make sure to sign up for the Every Day Is Saturday newsletter. 

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Sep 21, 2020

 Have you been wanting to know a bit more about Biden’s tax plan without all the political spin? Me too! That’s why I dug deep to find the best information that I could share with you all. I promise, no politics here; just relevant information to help you best prepare for an amazing retirement. 

In addition to learning how Biden’s tax plan could affect your retirement, I’ll answer a couple of listener questions. You’ll hear questions about TSP’s and Roth IRA conversions. 

Outline of This Episode

  • [2:15] Biden’s first proposal is to repeal the tax cuts
  • [6:41] Biden’s proposal has some tax incentives as well
  • [8:47] Takeaways from these proposals
  • [11:02] The TSP in retirement
  • [14:11] How to structure your Roth IRA conversions

What’s the buzz about Biden’s tax proposal?

There has been a lot of buzz about Biden’s tax plans in the news, but it can be challenging to find what those plans are without all of the political mumbo jumbo thrown in. I had to do some research, but I used the least politicized source I could find, TaxFoundation.org. Joe Biden has planned to raise taxes in several areas for certain groups of people, however, he has proposed a variety of tax incentives as well. Listen in to find out what Joe Biden’s tax proposal entails and how it could affect you.

How could Biden’s tax plan affect your retirement?

At the end of the day, all you want to know is how the proposed tax changes could affect you and your retirement. What I want you all to understand is how important it is to build a flexible retirement strategy. You don’t ever want to jump all in or all out of the stock market. The middle ground will save your retirement in times of uncertainty.

Your retirement is more important than what is going on in Washington. If you have a portfolio consisting of half stocks and half bonds then you can even live off your bonds for an entire presidential term. 

Remember, the stock market doesn’t care who is president. The top companies in the world will continue to succeed regardless of who sits in the Oval Office. 

Taxes will always increase over time 

Another key takeaway that I want you all to remember is to pay the devil you know. Both portfolio values and taxes will likely increase over time. So, if you are newly retired with some tax flexibility it makes sense to pay more taxes now to prevent yourself from paying a lot more later. Remember, pay taxes like a pessimist and invest like an optimist.

What will you learn from our listener questions?

Our listener questions today involve are about Thrift Savings Plans (TSP) and how to structure Roth IRA conversions. I’m not an expert in TSP’s, but if you are a government employee you’ll want to listen in to discover an excellent resource to help you plan your federal retirement. Stick around till the end of the episode to learn how to thread the needle and avoid a hefty tax burden with your RMD’s.

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Sep 14, 2020

Have you ever hear of a bank bail-in? You read that right, bail-in, not a bail-out. I hadn’t heard of this concept until recently and wanted to share it with you so that you understand how it works. Listen in to understand how this buzzword could be used to trick you into worrying about your savings. You’ll also hear the latest about the Fed’s plans for interest rates in the coming years. Stay informed of the latest in retirement headlines on this episode of Retirement Starts Today. 

Outline of This Episode

  • [1:22] Is bail-in a new buzzword? 
  • [6:04] What does FDIC insurance cover?
  • [9:42] What protections are offered for investment accounts?
  • [12:27] The Fed is planning to hold rates at zero for 5 years or more
  • [15:11] What is a bond barbell?

What is a bank bail-in?

We’re all familiar with bank bailouts. These government-funded cash injections designed to prevent the collapse of a failing bank. Bank bailouts are unpopular across the board, from democrats to republicans to everyone in between. 

A bail-in is also a way to prevent the collapse of a failing bank. But rather than being funded by taxpayers, bail-in money comes from deposit holders and creditors. The bank is allowed to convert its debt into equity to increase its capital requirements. How does this affect your money? Listen in to hear why a bank bail-in isn’t as worrisome as you may think.

What does the FDIC insurance cover?

The FDIC insures each bank account up to $250,000 per person per bank. This insurance covers checking accounts, savings accounts, money market accounts, CD’s, etc. However, the FDIC doesn’t cover stocks, bonds, annuities, and life insurance. Generally speaking, the FDIC doesn’t insure anything that is considered to be an investment. 

What is SIPC?

Now you know that investments aren’t covered under FDIC, but are investments covered by any type of insurance? Similar to the FDIC for bank accounts there exists the SIPC for brokerage accounts. SIPC is the acronym for Securities Investor Protection Corporation. SIPC covers up to $500,000 in the event that your brokerage financially fails. It is important to remember that this insurance is not protection against poor investments. Did you know about SIPC?

What do zero interest rates mean for your portfolio?

The Fed announced recently that it was planning on keeping interest rates near zero for five years. So, what does this mean for you? Well, unfortunately, that means that bonds won’t pay much interest in the near future. 

Do you need to drastically change your investment outlook? Obviously I’m not here to give you investment advice, but if you have a Swiss Army Knife portfolio that is adaptable then you should be just fine. Learn why you may want to start using a dynamic withdrawal strategy and how that can help you weather any storm in retirement by listening to this episode of Retirement Starts Today. 

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Sep 7, 2020

You may be wondering why I have invited Shark Tank star, Kevin Harrington on the show today. I often talk about how becoming a mentor in retirement is an amazing way to continue to get fulfillment while still enjoying the benefits of retirement. When I discovered that Kevin has a new book out called Mentor to Millions, I knew that my listeners could learn a lot from this interview. Kevin has mentored many business owners and can help you learn what it takes to become a powerful mentor. 

Outline of This Episode

  • [1:02] A mentor changed Kevin Harrington’s business
  • [5:52] How can you become an amazing mentor
  • [11:10] How to decide on compensation?
  • [13:20] What kind of calculations does he use to make deals on Shark Tank?
  • [19:08] Is there any mentee he is particularly proud of?

A retired mentor changed Kevin’s business

Kevin was already a successful business owner, but he couldn’t figure out how to get banks to loan his business any money. He was struggling to stay on top of inventory since the profits he was making had to go directly back into the business to buy more inventory. He went to every bank he could think of to try to get a business loan, but none would loan him the money he needed for his business. 

That is when he decided to seek the help of a mentor. A retired finance expert took him under his wing and showed him how to make bank presentations. This help changed the course of his business. 

How can you become an amazing mentor?

The mentor-mentee relationship is a symbiotic one. As a mentor, you need to ensure that you find a mentee that fits. Make sure that your skill set matches what the student is looking for. 

It’s also important to clearly understand and define expectations. Ask yourself and your student these questions. What are the terms of this relationship? How often will you communicate? What are the terms of service? What are the deliverables? 

What will you get out of becoming a mentor?

There are many ways of being a mentor. You could provide your services pro bono, you could charge a fee, or even use some combination of the two. If you do decide to charge for your services make sure that the terms of the service are crystal clear. 

There are more than just financial benefits of becoming a mentor. In addition to the fulfillment that you get from helping someone out and passing on your expertise, you could create additional contacts and build key relationships. You never know where the role of mentor could take you.

Check out Kevin’s new book

Kevin’s new book is called Mentor to Millions and is coming out soon and it is now available for preorder. If you order his book through his website KevinMentor.com you can receive 30 days of free mentoring! His book will teach you how to develop a strong mentor-mentee relationship and you’ll even learn about Kevin’s role as a mentor. 

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Aug 31, 2020

Have you thought about what you’ll do with your life insurance policy in retirement? One listener is considering what he should do with his policy. Find out 3 options you have available as well as my opinion on whether you still need to carry life insurance in retirement. On this episode, you’ll also hear a retirement headline about the entrepreneurial boom that’s happening now as well as how you should calculate your home equity when using a retirement calculator. Press play to hear about all of these topics to help you prepare for an amazing retirement

Outline of This Episode

  • [2:02] More people are working for themselves now
  • [4:07] What is the best way to fund a trust for a special needs dependent?
  • [9:32] A thought experiment
  • [12:10] When using retirement calculators how much weight to put into home equity?

Would you delay your retirement to become an entrepreneur? 

According to a recent article in Bloomberg, more Americans have started working for themselves during this pandemic began. Self-employment brings more flexibility so that you can have time for work and play. For those on the cusp of retirement, becoming an entrepreneur could mean extending your work life. The longer you work the less time you will have to live off of your savings. If you were able to have more flexibility in your work, how many more years would you work?

Life insurance in retirement

One listener has a question about his life insurance in retirement. He is considering using it as a trust for a special needs dependent. With life insurance in retirement you have 3 options:

  1. Cancel the policy the day you retire. Term insurance has no cash value, so when you cancel the policy you are done.
  2. Keep paying your premium until the end of the contract. 
  3. Convert the term insurance policy into a permanent insurance policy. If this option interests you, contact your insurance adjuster to see which kind of insurance would best suit your needs. Keep in mind that your premium will change but you may not have to go through a health screening in underwriting. 

Do you really need life insurance in retirement?

Whether or not to keep your life insurance policy is a very personal decision. It’s actually a decision that shouldn’t be made by you. Your life insurance isn’t for you. It’s for your dependents. Since your dependents are the recipients of the policy upon your death they should have a say in this decision.

I personally don’t recommend life insurance in retirement since being retired means being financially independent. If you have a hard time envisioning your life without life insurance, then listen in to hear my thought experiment that explains why I don’t think that retirees need insurance. 

How to use your home equity in a retirement calculator

When using retirement calculators, how much weight should you put into your home equity? While your home equity is a part of your net worth, you don’t necessarily want to include it in your retirement plan. The value of your home functions differently in retirement. It can be used as part of a contingency plan if all else fails, but you shouldn’t use your home’s value as part of the calculations of your retirement funds. Instead, consider your home equity more like a multi-line insurance policy. 

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Aug 24, 2020

Welcome back to another exciting episode of Retirement Starts Today. I want to say thank you to everyone who has participated in the Listener Survey. There is still time until the end of August 2020 to participate in the survey and voice your opinion about what you would like to hear on the show next year. You can fill out the survey here. It will take just a few short minutes of your time. In this episode, we’ve got a couple of listener questions plus you’ll hear about an interesting new addition to your 401K. Press play now to begin to learn how to make your retirement dreams a reality.

Outline of This Episode

  • [2:07] A new lifetime income disclosure rule
  • [7:46] Can you perform a Roth conversion while still contributing to a 401K?
  • [12:32] A Roth conversion tax question 
  • [17:58] Don’t forget to take the listener survey

Lifetime income illustrations may be a new part of your 401K disclosure

The Labor Department has just revealed a new rule for plan administrators of contribution plans like 401Ks and 403Bs. This rule states that the plan administrators must begin to demonstrate how your account balance can be used as an income stream. They will need to illustrate how the retirement plan could realistically provide the account holder with a lifetime income. The goal is to help people understand how their savings could translate to retirement income. 

How will this rule help you plan for retirement?

I think this visualization will be helpful but it misses the bigger picture. Seeing the basic math laid out is helpful for general retirement planning, but it won’t help you put the nuts and bolts together to build a comprehensive retirement plan. It’s important to remember that your retirement income is rarely linear. It changes throughout retirement. These illustrations can simply help you get a birds-eye view of how your savings can turn into retirement income. If you are looking for something a bit more comprehensive, download my Retire Ready Toolkit

Can you contribute to a Roth and a 401K at the same time?

John asks if he can begin contributing to a Roth while also contributing to a 401K. You can make Roth conversions at any time. A Roth conversion is when you send money from your IRA to a Roth IRA and pay the taxes on that money. You can do this at any time since the government is always happy to collect your tax dollars. Press play to hear why I suggest waiting until retirement to start converting your IRA. 

A Roth conversion tax question

Greg has a question on maximizing Roth conversions now to save on taxes in the future. It may make sense for some people to make large conversions this year. My opinion is that it’s better to pay the devil you know. The current tax cuts are set to expire soon so there will probably be tax hikes in the coming years. I like to call this the Golden Era of Roth Conversions. It’s always a good idea to fill up your tax bracket with Roth conversions as well. Having a decent amount of your money in a Roth IRA adds tax flexibility

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Aug 17, 2020

Do you have a lot of stuff? If you said yes, you are not alone. 60% of Americans think that they have too much stuff. We’ll take a look at an article that addresses this problem in the Retirement Headlines segment today. I also have 2 listener questions that I will respond to. But before we get into any of that I would love it if you could help me out and take our annual listener survey. After you take the survey, press play to learn more to help you make the most of the only retirement you’ll get. 

Outline of This Episode

  • [2:42] How to get rid of stuff
  • [10:09] The 5-year conversion rule
  • [15:39] Guyton-Clinger rules

We’re ready to hear your voice with our annual listener survey

Before we get into our Retirement Headline, I would love it if you could help me out and take our annual listener survey. This 10 question survey only takes a few minutes and it helps me guide the topics of the show next year. You can tell me what you love and don’t love about the show. You can also voice your opinion and let me know what kind of topics you’d like to hear more about. I’d love to hear all of your opinions, so please make your voices heard by responding to this survey!

Do you have too much stuff?

I am like most people in America, I feel like I have too much stuff. But with 6 kids at home, I’m just going to have to deal with it for a bit longer. Recently, I came across an article that had an interview with the author of Downsizing. The interview with the “King of Downsizing” highlights why we have so much and what we can do to get rid of it. 

He remarks that early retirement provides a window of opportunity for downsizing and shedding away those things that you don’t need anymore. Once people reach their 70s, 80s, and beyond the ability to stoop and crouch can be limited which can make downsizing much more difficult.

Tips for downsizing

When we finally decide to relinquish our possessions there is a hierarchy of ways to part with them.

  1. Give it away - when we pass on a special object to someone who shares a similar attachment to the item it makes everyone happy.
  2. Sell it - if the item still has some value then selling it is a great option.
  3. Donate it - giving the item to someone who needs it more can still make you feel good. 
  4. Throw it away - this sometimes has an added cost to it. You may need to pay someone else to help you get rid of it. 

Often the downsizing process takes between 2-6 months. The experts recommend giving yourself a deadline to complete the process. This article had some interesting ideas that I hadn’t thought of. Press play to hear advice for receiving your parents’ stuff. 

A 5-year Roth conversion rule clarification

Gerry had a question about Roth contributions and conversions after age 59 ½. We all know that after age 59 ½ we no longer subject to the early withdrawal penalty, but what about the 5-year rule? What triggers the 5-year rule? 

The 5-year rule can be a bit confusing, so here are the basics. At age 59½, you can withdraw both your contributions and your earnings with no penalty provided your Roth IRA has been open for at least five tax years. 

The 5-year rule is triggered by three circumstances: 

  • You withdraw earnings from your Roth IRA
  • You convert a traditional IRA to a Roth IRA
  • You inherit a Roth IRA

Are you curious to find out what you can do to make sure that you have no issues with the 5-year rule? Make sure to listen in to hear the full answer to Gerry’s question and you’ll also learn what kinds of funds you can use to build a Guyton-Clinger model. 

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Aug 10, 2020

Welcome back to Retirement Starts Today! I have long been a proponent of saving in 401K’s, but will this article in Bloomberg make me change my mind? That’s the first article in the Retirement Headlines segment. We’ll also check out an article about the coin shortage and another about how hobbies can improve your financial fitness. Couple that with some listener questions and you’ll gain tons of financial insight. Listen in to continue expanding your financial knowledge. 

Outline of This Episode

  • [1:22] Do 401K’s still made sense?
  • [6:58] Why are coins so difficult to find during the pandemic?
  • [8:55] How can your hobbies make you financially fit?
  • [11:10] A Roth conversion question
  • [14:00] How to describe real estate income in retirement

Do 401K’s still make sense?

The 401K retirement savings plan was authorized in 1978 and began to take hold in the ’80s. Many different employers take advantage of these types of retirement savings plans. Recently there was a Bloomberg article written that questioned whether the 401K still made sense to save in. 

The author argued that today’s low tax rates and the high fees of many 401K’s make it an undesirable vessel for saving. He does make some interesting suggestions on ways to improve the 401K program. 

Listen in to hear whether this article changed my opinion about 401Ks and what I think the best way to save for retirement is. 

Why are coins so difficult to find during the pandemic?

Have you noticed the coin shortage? If you have been just about anywhere lately you have probably seen the signs on various stores and establishments about the shortage of coins. 

I have been wondering why there has been a coin shortage during the pandemic until recently. My hometown newspaper, the Bismarck Tribune, published an article that helped me understand why. Listen in if you are curious why there has been a shortage of coins in circulation lately.

How can your hobbies make you financially fit?

I often tout the benefits of retiring to something rather than away from something. It’s much healthier to keep active with hobbies in retirement, but your hobbies are more than a way to simply keep you busy.

Hobbies can actually help you lower your stress levels. Hobbies can actually get you out of a negative mindset and help you to break away from financial stress. Have you noticed that your hobbies help you reduce stress?

Will I have to pay a penalty for a Roth conversion?

A listener is wondering about converting funds from a 401K to a Roth before the age of 59.5 He knows that he will have to pay taxes on the conversion but he was wondering whether he had to pay the 10% withdrawal penalty as well.

The good news is that you don’t have to pay a penalty for converting funds into a Roth. However, it is important to have money set aside for the tax liability. 

Do you have a question for me? I love answering listener questions on the show, so please send in your questions!

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Aug 3, 2020

So you think you know a thing or two about Social Security? Let’s put it to the test! I came across a Social Security Quiz from CNBC that I thought was fun, so I wanted to share it with you all. Stick around after the quiz to hear some listener questions. You’ll learn how to compare the 4% rule to a dynamic withdrawal rate. You’ll also learn about rolling over an IRA and the tax consequences. Let’s have some fun today, so listen in to find out just how much you really know about Social Security.

Outline of This Episode

  • [1:42] Take this Social Security quiz
  • [9:15] How do the dynamic withdrawal system and 4% rule compare?
  • [14:10] How to draw money from tax-deferred accounts and 
  • [17:35] Do I need a separate IRA to roll over my pension?

Test your social security knowledge

Sure, you are probably more educated about Social Security than the average Joe, but how much do you really know about Social Security? Take this Social Security quiz to test your knowledge. Let’s see how much you really know. Can you get 8 out of 12 correct? You’ll have to listen in to hear the answers. 

  1. If you take benefits before full retirement age, will those benefits be reduced for early filing?
  2. If you take benefits before full retirement age, will your Social Security benefits be reduced if you continue to work?
  3. Once you start collecting Social Security, your benefits will never change. True or false?
  4. If your spouse passes away, will you continue to receive both benefits? 
  5. Can your spouse receive benefits from your record if they have no individual earnings history?
  6. Does the money that you put into Social Security go into a specific account solely for you until you receive Social Security benefits?
  7. Under the current law, is 65 the full retirement age for Social Security?
  8. Could you claim Social Security benefits based on your ex-spouse?
  9. Could Social Security benefits be reduced for everyone in 2035 based on the current law?
  10. If you claim Social Security and have dependents age 18 or younger could they qualify for my Social Security benefits?
  11. Can you continue to get delayed retirement credit increases after age 70?
  12. Do you have to be a U.S. citizen to collect Social Security retirement benefits?

How do the dynamic withdrawal system and 4% rule compare?

I’ve mentioned in the past that by using the 4% rule, 96% of the time people will have more money left over than when they started. Pete is curious about how the dynamic withdrawal system compares to that 4% rule. The 4% rule is easy to assess because you can look backward in time to analyze the data. With a dynamic withdrawal system, the amount of money left at the end would depend on your sequence of returns. Since the dynamic withdrawal system looks forward rather than back, there isn’t the same kind of data to assess. The difference between the two systems is that one is looking backward and the other is looking forward.

How to draw money from tax-deferred accounts and already taxed accounts

One listener has money in tax-deferred accounts as well as in accounts that have already been taxed. He is trying to decide the best way to withdraw money from these in retirement. My advice is to think about what you are trying to solve. Are you interested in paying taxes now or later? When would you prefer to have the least tax burden? It is also important to note that Roth conversions are very appealing right now.

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Jul 27, 2020

Tax expert, Andy Panko, joins me today to discuss taxes in retirement. Andy and I know each other from his Taxes in Retirement Facebook group. I figured he would be the perfect person to have on the show to help me answer several questions about this topic. Retirement is one time in life when you can plan for taxes in the long-term, so you’ll want to do as much tax planning as you can. Listen to hear the different types of tax questions that people have about retirement. 

Outline of This Episode

  • [2:22] Do spouses have to calculate their RMD’s separately?
  • [8:32] An IRMAA question
  • [15:09] Bill wants to know about the 5-year rule
  • [20:36] How do RMD’s work?
  • [25:10] It’s not what you make it’s what you keep

An IRA question

Wouldn’t it be easier to combine a husband and wife’s assets and just take one RMD? If a husband and wife have separate 401K’s and IRA’s even though it would seem easier to take those RMD’s together, they must be taken individually. The RMD is based on your age and each IRA and 401K has its own calculator. 

One way to simplify the various retirement accounts is to take a rollover whenever you leave an employer-sponsored 401K. Remember the RMD penalty is steep, 50% of the required amount. So if you can find a way to simplify your retirement accounts then do it. 

An IRMAA question

The next question is actually from me. Normally I help my clients stay within the $174,000 income limit that IRMAA allows. But I recently discovered a case in which a client should go over that limit. Are there cases where people should deliberately go over the IRMAA limit? 

If you already have a large pot of tax-deferred money it makes sense to pay those taxes now rather than later. We are experiencing all-time lows in tax rates and those rates are subject to change at any point. It may make sense to pay the $70 extra per month in Medicare costs rather than be stuck with a large tax bill later. Listen in to hear what the next IRMAA income cap is. 

What are the rules of converting a Roth IRA? 

If you are already over 59.5 and the Roth account has been open more than 5 years then you are set. You can withdraw funds from that account without penalty. Any money that comes out is a qualified distribution. However, if you do not meet those requirements there could be a penalty. There are further rules and regulations surrounding Roth IRA’s and they can be very confusing. To ensure that you don’t encounter any problems with your Roth IRA, open one as soon as possible and fund it with a rollover. 

How do RMD’s work?

When you save into your IRA you are saving into a tax-deferred account. The RMD is simply there to make sure you pay the income tax on that money. It’s important to remember that the money isn’t entirely yours, you need to split it with Uncle Sam. You want to maximize the amount that you get and minimize Uncle Sam’s portion. 

You and Uncle Sam see your IRA in different ways. You see that account as an asset and Uncle Sam sees it as (untaxed) income. It won’t allow you to put it off paying those taxes indefinitely. The RMD is simply the government’s way of ensuring that you pay the taxes owed on that money. 

Press play to discover the answers to all of these listener questions and help realize all the tax planning opportunities that retirement brings.

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Jul 20, 2020

Have you ever wondered what I sound like on a different podcast? Well, today you get to find out. Since I am attempting a family road trip with 6 kids under 12, I can’t personally be with you all this week. But I am excited to share with you a bit of my interview with my friend Grant Bledsoe on his podcast, Grow Money Business. Listen in to hear my thoughts on several hot retirement topics like the 4% rule, how to set up your income in retirement, and stay tuned until the end to hear people’s biggest problem people in retirement. 

Outline of This Episode

  • [2:12] Our lives are too dynamic for a linear approach to retirement
  • [4:50] How do you adjust your tactics?
  • [8:47] What are Guyten’s guardrails?
  • [12:00 How do you set up your income in retirement?
  • [14:23] What is the biggest thing that people get wrong in retirement planning?
  • [20:10] How much cash should you have on hand in retirement?

Is the 4% rule the best way to plan for retirement?

Most people who are deep into retirement planning are familiar with the 4% rule. The idea that if you take 4% out of your retirement portfolio each year and never run out of money is simple and easy to remember. However, I argue that you need more flexibility than the 4% rule offers. In practice, our lives are too dynamic to take such a linear approach. Your income in retirement may end up changing several times and you need to have a retirement plan that can adjust to the changes that life brings. 

How do you adjust your retirement planning strategies?

So how do you adjust your retirement plan to account for all those life changes? You and I aren’t the only ones with this question. Guyton is a retirement researcher who wanted to figure out another way of not running out of money in retirement. In a nutshell, Guyton’s guardrails state that you can increase your spending when the market is good and decrease your income when the market takes a downturn. Guyton’s guardrails start you off with a higher income at the beginning of retirement. This retirement model takes into account the more human side of retirement planning. Is your retirement plan flexible?

How do you set up your income in retirement?

One of the biggest problems people have about retirement planning is, how do they get their money? I think it is important to stick with what you know. You probably aren’t used to getting one lump sum of money each year, so that may be hard to adjust to. I like to set up distributions once a month. These distributions come from the boring side of your portfolio. I call it the mullet distribution strategy Just like that memorable 80’s haircut your portfolio is business up front and a party in the back. I like to let the exciting stuff ride it out and party while taking from the business end of the portfolio. Listen in to hear more about the mullet distribution strategy.

What is the biggest thing that people get wrong in retirement planning?

The number one problem that I see people having in retirement is that they are retiring away from something rather than towards something. Retirement shouldn’t only be about telling your boss to kiss-off. It’s important to find a meaningful way to spend your time. Find something to do with your newfound time freedom. Take a class, discover a hobby, or mentor someone. Remember you are jumping into a void. You’ll need a way to find contentment outside of the things that are related to money. What will you do after you retire?

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Jul 13, 2020

It’s true, money can’t buy happiness. But does how you choose to spend your money affect your happiness? Today we’ll discuss one article that challenges that old adage. We’ll also discuss a multifaceted question from a listener who just accepted an early retirement package. We’ll help her consider whether to rollover funds into an IRA and figure out what to do with her target-date funds. Listen in to hear the answers to this question and to consider whether money could actually buy happiness. 

Outline of This Episode

  • [1:12] What we spend our money on can give us happiness
  • [4:28] Amy has accepted an early retirement package
  • [9:02] An IRA offers more choices

How we choose to spend our money matters 

Although money can’t purchase a deep, meaningful feeling, how we choose to spend our money matters. What we spend our money on can contribute to our happiness. The Washington Post recently published an article that reported on a study about how money affects our happiness. Having more money can make life better for those who struggle to make ends meet. Once their basics are covered they may have money to spend on things they enjoy.

How to use your money to make you happy

People who spend their money on activities and causes that are important to them are more satisfied with their lives. Rather than worrying about how to make more money, start using your money in ways that benefit your happiness. Let’s think about how your money can buy you happiness. When you do have extra cash think about what you are trying to accomplish. What makes you happy? Don’t buy just something to buy it. Instead, ask yourself whether spending money on a certain product will actually help you lead the type of lifestyle that you want to lead.

Should I roll over my 401K into an IRA after retirement?

The short answer is yes. One reason to move from a 401K to an IRA in retirement is that you will have many more investment options in an IRA than a 401K. A 401K is designed to please the general public as they accumulate their wealth. An IRA can be tailored to your individual needs and offer many more options than a 401K. A properly diversified retirement portfolio will have much more diversity than a 401K can provide. 

What to do about target-date funds in retirement?

I love target-date funds for the accumulation period of life but they don’t work as well in retirement. (If you haven’t listened to the Set It and Forget It episode about target-date funds, bookmark it for later.) Target date funds are great for keeping your savings well balanced and adjusted according to your target retirement date. But in retirement, you’ll want to be more surgical with your investing and slice away at your portfolio as needed. 

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