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Retirement Starts Today Radio

Benjamin Brandt wants to teach you how to retire! Listen in as Benjamin Brandt CFP©, RICP© answers the questions on the minds of the modern retiree, often joined by the top experts in the retirement planning industry. Ask Benjamin a question here: https://retirementstartstodayradio.com/ask-a-question/
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Now displaying: August, 2020
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.

Resources & People Mentioned

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