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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: November, 2021
Nov 29, 2021

Since travel is on many soon-to-be retirees' must-do lists I have created this summer travel series with various travel experts. Danielle Desir from the Thought Card podcast joins me today to discuss how to travel to any destination on a budget. Recognized by Flight Network as one of the best travel hackers in the world, Danielle has figured out how to travel to bucket-list destinations on a dime. Are you ready to learn how to plan your next big trip on any budget? Listen in to discover how.

Outline of This Episode

  • Danielle’s journey to bucket list budget travel
  • Identify the things that you value
  • Take an individual approach 
  • Danielle’s top destinations
  • How to choose to repeat a destination
  • Jet lag tips
  • Where to learn more about travel hacking with Danielle

If you’re on a budget, don’t settle for inexpensive destinations, think big!

Many people think that if they are on a budget they can only travel to budget-friendly places, but Danielle Desir takes a different approach. As a travel hacker, Danielle has learned how to make travel to bucket-list destinations more affordable. She describes using an abundance mentality as a way to make affordable travel work. She recommends getting creative when planning, “take what you have and make it work.”

Identify what matters to you

The first step in becoming a financially savvy traveler is to identify what you value in travel. Is it important to you to be comfortable on a flight? Do you like to eat out and try the best local cuisine? Do you want to see everything you can in one location? Do you prefer luxury accommodations? 

Once you have identified what the most important aspects of travel are to you then you will understand where you can be flexible in your spending. If eating out isn’t important to you then you can save money by packing a sack lunch each day. If a fancy hotel room isn’t important then you could save money by staying in a hostel or an inexpensive Airbnb or motel. 

Understanding what you value in travel will help you save money and ensure that you have an amazing time on your trip. 

Make a game of saving money

Another way to save money is to gamify your planning experience. By making a game of saving money you can compete with yourself to see how much money you can save each time you travel. You can cut costs in a variety of ways by looking for inexpensive accommodation, saving on flights, or by using travel points. Gamifying your travel costs allows you to get creative and save more. 

Communication is key when it comes to couples’ travel

When traveling with your significant other it is important to take into account what they value as well. Make sure to communicate with them so that you are both on the same page. They may value different things about travel so it is important not to skimp in the areas that matter to them. 

You should also be understanding of your partner's travel experience. There may be one partner that is more travel savvy than the other. That means that the travel-savvy partner needs to be patient and explain the importance of the things that you do to save money when traveling. 

It is also important to remember that traveling in retirement will be much different than traveling for work. You are out there to have fun. Listen to this episode with travel expert Danielle Desir to hear how you can travel to any destination affordably. 

Resources & People Mentioned

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Nov 22, 2021

Now is a great time to start financial and tax planning for the next year. To do so, you must first look at any changes that were made to tax laws. We’ll do that by exploring 2 articles from Forbes and CNBC which take a closer look at any imminent changes to the tax code.

Then we’ll dive into the main segment with an article from Investment News which claims that fewer retirees are claiming Social Security at age 62. Listen in to hear if there will be any tax and retirement planning changes that affect you and to hear why fewer people are claiming Social Security early. 

Outline of This Episode

  • [1:42] Changes in tax planning for 2022
  • [5:12] Changes in retirement savings plans for 2022
  • [8:08] Fewer retirees are claiming Social Security at 62

Tax updates from Forbes

Despite all the news media clamoring that there might be significant tax changes in 2022, there haven’t been many changes. According to an article from Forbes, marginal tax rates will rise slightly. The standard deduction will rise to $12,950 for individuals and $25,900 for married couples filing jointly. Capital gains rates remain unchanged for the next year, however, the brackets moved slightly to keep pace with inflation. Unfortunately, the charitable deduction that was available to nonitemizers in 2021 did not carry over to 2022. The SALT tax cap could possibly increase from $10,000 to a significantly higher number, but as of this recording, it is not yet official. 

Retirement plan changes in 2022

Do you max out your 401K? I’m always shocked when I realize how few people actually maximize their savings. Only 8.5% of workers save the maximum allotted amount. 

Even though the vast majority of people do not max out their 401Ks, savers will have the opportunity to save even more next year. The employee contribution limit for tax-deferred retirement savings plans will increase to $20,500 which is up $1,000 from 2021. On the other hand, Roth IRA limits will remain unchanged at $6,000. 

So despite the dramatic headlines in the financial media earlier this year, very little has changed for tax and retirement planning from 2021 to 2022. We’ll keep you posted if anything new arises. 

Fewer retirees are claiming Social Security at age 62

If you are curious about the effects of the baby boom consider this: the number of men who turned 62 has more than doubled between the years of 1997 and 2019. This shocking number makes it easy to be fooled by the number of people who claim Social Security early since the number of people who claim Social Security has risen, but when you look at the percentage of people who claim early the statistics have declined greatly. According to a study at Boston College by the Center for Retirement Research (CRR), the percentage of 62-year-olds who claim Social Security early at age 62 has decreased in the past 20 years. 

How has the Covid pandemic affected Social Security claiming age behavior? 

Although we won’t have hard data for another year, it looks like some older workers who lost their jobs may have turned to Social Security to help make ends meet. Early evidence shows that the effects of Covid have not pushed large numbers of people into early retirement. This could be because those most affected cannot afford to stop working.

I’m encouraged that folks are waiting to collect Social Security and in doing so growing the guaranteed income portion of their retirement income. Hopefully, this is due to retirees actively making the decision to defer, rather than deferring because they are having to work longer. Whether it is planned or unplanned, deferring will result in a larger benefit for those retirees. 

This is our last original episode of 2021 so that I can spend more time over the holidays with my family. We’ll close out the year with a list of my favorite episodes from 2021. Enjoy the holiday season, and we’ll meet again in 2022!

Resources & People Mentioned

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Nov 15, 2021

Have you ever filled out a questionnaire at your financial advisor’s office? If you have, it was probably a risk tolerance questionnaire. I have my own opinions about them, but you’ll have to wait until the end of this episode to hear what it is. 

On this episode of Retirement Starts Today, we’ll explore an article from AdvisorPerspectives.com written by Dr. Wade Pfau and Alex Murguia which argues that risk tolerance questionnaires (RTQs) don’t work. You’ll hear new retirement slang and acronyms as well as a discussion of retirement income sourcing. 

Dr. Pfau has also developed his own tool to use that can help you select the best deaccumulation approach. Don’t forget to stick around until the end to hear my thoughts. 

Outline of This Episode

  • [2:22] How risk tolerance questionnaires are used
  • [5:45] The different approaches
  • [10:35] Two different styles
  • [12:58] My personal criticisms of risk tolerance questionnaires

What are risk tolerance questionnaires used for?

RTQs are a tool that help financial advisors identify the amount of volatility that clients can handle in their investment portfolios. These tools generally consist of 9 questions and they are designed to establish a baseline so that the advisor can rank the investor on a scale of 1-5 from conservative to aggressive. These documents are especially helpful for advisors to stay compliant as they choose portfolio recommendations.

Why retirement investing is different

RTQs work best in the accumulation stage of people’s lives, but when it comes to retirement they fall flat. In retirement, a person must shift their way of thinking from accumulation to decumulation and this can be a challenging adjustment in mindset. Viewpoints on funding daily expenses inevitably change when one is completely dependent on living off one’s investment capital without the luxury of human capital to cushion the blows of a bear market. 

Retirement brings added risks

In addition to a change in mindset, there are unavoidable spending shocks that arise in retirement. This means that retirees need to consider how much of their assets they need to keep on hand for these unexpected events and market downturns. 

Not only are there the everyday expenses that come along, but retirement brings on further risks. There is constantly the risk of outliving your money and becoming a burden to others since no one knows their own longevity. Another retirement risk is lifestyle risk. To maintain a comfortable lifestyle in retirement it is important to ensure enough discretionary income to fully enjoy retirement. 

Why RTQs don’t work 

RTQs work better for people in the accumulation stage of life because they weren’t designed to handle the broader questions that retirement brings. They can play a small role in helping to decide asset allocation, however, they cannot be used in place of a retirement plan. 

It is important to come up with a retirement income strategy based on goals first. By beginning a retirement plan with a questionnaire you end up boxing yourself into a strategy that may not be in alignment with your ultimate retirement goals. Listen in to hear why I think RTQs are a poor excuse for proper retirement planning. 

Resources & People Mentioned

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Nov 8, 2021

Do you let news headlines affect your choices? The Center for Retirement Research at Boston College wanted to learn more about this question, so they conducted a study to find the answers. In this episode of Retirement Starts Today, we’ll take a look at the findings of this study and analyze how people’s misconceptions can influence their life choices in retirement. After checking out the retirement headline, I’ll clarify a Rule of 55 question from Dave. Listen in to hear how headlines may be affecting your decisions.

Outline of This Episode

  • [2:32] Media coverage of Social Security could affect claiming age
  • [7:21] Don’t let scary headlines plan your retirement for you
  • [9:40] A tricky Rule of 55 question from Dave

Do sensational headlines affect people’s retirement decisions?

I found an article written by Emile Hallez at Investment News titled Media Coverage of Social Security Could Affect Claiming Age which piqued my interest since, as a financial advisor, this is exactly what I don’t want to hear. 

In this age of social media, we are used to immediate gratification which means that many people don’t dig past a news story’s headline to learn more. The Center for Retirement Research at Boston College studied this phenomenon in relation to Social Security benefits and retirement age. Articles on Social Security often emphasize the trust fund depletion date which leads people to believe that the entire Social Security system is insecure. 

Check out the episode where we recently reviewed an article similar to the ones shown in this study.

How did people react to the experiment?

To analyze how people reacted to headlines, researchers showed several types of headlines on Social Security to participants and then asked them a series of questions about their confidence in the Social Security system. The researchers studied how the type of headline affected people’s decisions regarding their own retirement plans. 

They discovered that workers shown headlines that emphasized the Social Security depletion date decided to claim Social Security a year earlier than those in the control group. Learn more about how the study was conducted and the results by pressing play.

Don’t let alarming headlines plan your retirement

A careful retirement plan should be created based on what is right for you and your family. You’ll want to consider your financial future in the long term and how it will affect your life. Shocking headlines incite many to act on fear, but this would be short-sighted. Once you have a retirement plan in place, you can refer back to it when making any decisions about your retirement rather than a knee-jerk reaction. 

Rules of thumb for claiming Social Security

If you are listening to a retirement podcast, hopefully, you aren’t easily swayed by sensational Social Security headlines, but how should you plan on claiming Social Security? If you are married then I suggest deferring the larger benefit for as long as possible. You can collect the smaller benefit whenever you need the income. By deferring the larger benefit, you will be deferring income longer which will leave room to do Roth conversions if needed and the larger benefit will grow to serve the spouse that lives the longest. It doesn’t matter who earned the larger benefit because upon the first death the smaller benefit expires and the larger one continues. 

Resources & People Mentioned

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Nov 1, 2021

Our chances of death are 100%, so that means at some point in your life you will probably experience the death of a loved one, and you’ll need to prepare for your own passing. Choosing the right executor can make a traumatic time more bearable. The role of executor is not an easy one, which is why it is important to choose wisely. 

In this episode of Retirement Starts Today, you’ll hear an interview with executor expert, David Edey. David has recently written a book titled How to Pick an Executor and Avoid Family Fights. After listening to this interview you’ll be able to choose and become an exemplary executor. 

Outline of This Episode

  • [2:32] How to prepare your executor
  • [4:37] Should you hire a 3rd party or ask a family member
  • [10:15] How to be the world’s best executor
  • [15:34] More about David’s book

What you can do to prepare your executor

David learned how to be a rock star executor from his own challenging family experience. It took him 7 years, 10 court appearances, and $50,000 in lawyers’ fees to settle his parents' estate and they both had a will!

Everyone seems to know someone with an executor horror story which is why he decided to write his book. David wants to teach others how they can choose or be a fantastic executor.

If you ask someone to become your executor, you must ensure that they have all the tools they need to perform their duty. Make sure to have an up-to-date will in place. Talk with your beneficiaries so that they know what to expect when the time comes. Your digital assets and files should be organized and easily accessible. No one wants to be looking around for missing paperwork when they are dealing with the loss of a loved one. Make it as easy as possible for the executor to get the job done. 

How to choose an executor

Families can fall apart when it’s time to settle an estate which is why it is important to carefully choose an executor. You could choose a family member, a friend, or a third party. If you choose to hire a third party there will be many fees involved. If you choose one of your children over another it is important to communicate with both the chosen executor and the other children to ensure that you help to keep the family harmony after you pass. 

There is no one right way to choose an executor, but you should consider the health and age of the chosen executor. It is important to choose someone who can keep the dynamic that you want to set for the estate and that can get the job done. 

How to be a fantastic executor

If you have been chosen to be an executor you need to ask plenty of questions. It is important to understand where important documents, passwords, and information are. Insist that the will is up to date and that everything is labeled in an easy-to-find location. David’s book has a wealth of resources that can walk you through the process of being an executor. He explains the protocols for shutting down social media, bank accounts, and other online accounts. You can also check out David’s Executor Help podcast. 

Family dynamics can fall apart when a loved one passes. Doing the proper preparations for your passing may be challenging now, but it will pay off in the long run. Doing so will ensure that you leave a legacy and not a mess. 

Connect with David Edey

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