So, I just made some hot tea probably 20 minutes ago, and I put it
in my cup, but it’s one of those travel cups.
And I usually put ice in there because right now it is like sipping lava. I forgot. So, what sign do we have? Do we have time for ice? No. I think I’m just going to endure it. Uh,
so hopefully everybody’s having great weather where we’re at right here in Houston. I assume Florida’s the same thing. This is the dog days of summer. It is about a million degrees right now and it is about a million% humidity. So, um, I got to tell you, September can’t come quick enough. So,
these uh these webinars, they’re always more fun. So, I had to go back to the home office last week to do in person for Align Credit Union’s employees, right? Talk about 401ks and the importance of it and and just some just general retirement planning and why you should do it. It’s always nice to meet in person. You know, it’s a lot more interactive. It’s a lot more personal, but these are fun, too.
So, I have one minute till two. It looks like some folks are still joining. So, we’re going to give it another minute or two.
It is good to see some familiar names.
There are a lot of names that I that I’m not familiar with.
Right. I’m thinking let’s see time do we have here
all right I think in the interest of time and we should have plenty of time we’ll go ahead and start because we have to do the housekeeping stuff anyway place as people join. Um, oh, Pennsylvania. I think that’s as far north as I’ve had anyone join. So, we have someone from Pennsylvania. So, I got a sister from Pennsylvania. She lives in uh well, I have nieces and nephews, too. She lives in Lancaster in uh Amish in Amish land. And uh I have nieces and nephews in Philadelphia. So, all right. So um so officially welcome everyone. I appreciate you joining me this evening. It is my pleasure to host these and we’re going to talk a little bit life about life after work and how we create that good life in retirement. Um if you’re joining us for the first time, extra special welcome. I’m Michael Marx, certified financial planner and financial consultant with Alliant Retirement and Investment Services or AIS for short. Stay tuned. And I think we’re doing a rebrand and we might be changing our name. Credit Union is going through a rebrand. Uh we’re going to be changing I think we’re changing our colors, but the logo will still be the same. Uh I live right here in Houston, Texas, and I’ve been doing this for over 30 years. People usually ask if I’m a fiduciary. Yes, I am a fiduciary. Uh my family has been tied to Alliant since the 60s. For those of you that don’t know, it was originally the United Airlines Credit Union uh when we’re here in Houston, so it’s Continental as well. Um so I realize there’s many different channels that some have joined us through. So whether it is through United or Continental, Google, Tesla, CVS, Susie Orman, welcome to you all. Just a bit of housekeeping before we dive in. Uh today’s session is for educational purposes and includes proprietary material to protect both the content and everyone’s privacy. So we ask that attendees please do not record or capture the presentation whether it be by video, audio, screen sharing or AI tools without prior consent. Thank you so much for your understanding.
Again, I am not sure if you joined this webinar via an email directly from us or if you signed up directly on Alliant Credit Union’s website. So, I just want to take a couple of minutes to talk about Aerys. Uh in addition to these weekly webinars that we host, we are a we are the a we’re the full-ervice wealth management and investment planning division of the credit union with a broad variety of investment options and planning strategies and maybe even a little bit of life coaching in there when it comes to your retirement years. Speaking of webinars, we offer multiple webinars throughout the week with different presenters. Each of us usually hosts twice a month. Um, we are very focused on helping you understand the ins and outs of investing, saving for retirement, some strategies, some tax planning, etc. If you have not, I encourage you to take a look at our website. It is a ris.aligncreditun.com.
You can see a list of our weekly webinar topics. You can also access our podcast which is invests savvy um our blog and some other financial resources that are available to you but I would say the best resource that is available to you are the advisors here. Um, you can also find us right on the Alliant. I also
can find us right on the Alliant Credit Union website on the tap on the tab in the upper right hand corner. Retire and Invest. I’m sorry. Someone I just someone just pinged me and said, “Hey.” So, I I grabbed that. Is that okay? That was pretty funny. Thank you for the levity there. Uh so my next so I usually do one webinar in the afternoon and I’ll do one in the evening. So my next webinar will be in the afternoon that is going to be Wednesday September 9th that’ll be uh midday 2:00 central 3:00 Eastern and that is social security a choice of a lifetime. So, we’ll talk about, you know, some eligibility, benefit calculations, spousal survivor benefits, things like that. How claiming ages can impact your uh payments. Uh so, it’s really high level, but I I really think it’s it’s helpful if if you aren’t familiar with that. Uh and even if you are a little bit, you might you might learn a little bit as far as the timing, which is one of the things that you really should look at when you’re doing retirement planning. Um, so the back in the evening will be anatomy of a recession. So that is going to be September 22nd, 6:00 p.m. 700 p.m. Eastern. And we’ll talk about uh well the recession from a historical perspective. Um, and they how they apply to current situation, right? I mean, we have tariffs and lawsuits and midterm elections and wars. Uh we’ll talk a little bit about Fed rate cuts or non-cuts depending on what’s going on. Fed’s going to be meeting soon. Uh some of the impacts on, you know, some of the geopolitical decisions that are going on. Uh not a political commentary, just more matterof fact on that. So today’s agenda, if you’re here, it means you’re probably thinking ahead to retirement and wondering how you’re going to be able to replace that income once your paychecks start coming. So you know, you spent your whole lifetime trying to amass a sizable nest egg, right? Yet there’s still worry that your savings and investments are not enough to support you through the golden years. I can tell you that is the number one worry of retirees. Do I have enough? And really, will I run out of money? Right? That is the biggest thing. So, in the next 30 minutes or so, we’re going to talk about how you manage your piggy banks um to generate that retirement income that you’ll need. And I think this is vital cuz most of us think about our retirement in terms of a nest egg, right? This this big this big account and not as income. So there’s a lot of difficulty when you retire psychologically to say, man, you know, I don’t I don’t I don’t want to take money out. I’m worried that if I take too much money out, um I can outlive my money. And that is a concern. Uh so we’ll talk a little bit about that. Uh so this webinar is titled uh life after work because retirement income really is all about creating a good life for you after you leave your primary job. And it doesn’t mean you won’t necessarily work, right? Uh I would say, well, there’s a little stat there later that many people are planning to continue working in some capacity after they leave their main job, but hopefully the work that you do won’t feel like work, right? The work thing or the retirement thing is getting away from work, right? Life is what you’re moving toward. So, we will talk about, you know, retirement planning. We’ll talk a little bit about some general statistics on where people are. Um you imagine your life in retirement, maybe look at some withdrawal strategies, talk a little about taxes, and then how we get started. Um so I would say if there’s ever a time to plan, you know, retirement, it’s the time right now. So once you leave your primary occupation and you start depending on multiple sources of income, you want to make sure that that income lasts, right? Because nobody wants to go back to work at 80 because they didn’t plan right. So it’s really important to have a plan and retirement income helps you determine how much you’ll need and where that income comes from. Maybe your timing on your social security, whether you want to work or not, whether you can work or not. uh how you time your withdrawals uh and you’ll cover it. You want to make sure that income outlasts your life. Uh and and you know, we plan retirement savings over a 30-year period. I mean, realistically, that depends on the individual. These are really really just general general numbers. And yes, people do live to be 100 or more. The reality is most people do not. Um, so the question is, you know, will you have enough funny? Right. So, I love this piggy bank. Hopefully you can see my cursor. It’s it’s kind of like it’s kind of like parts of an animal, you know, where you would eat or not eat. But, um, but let’s look at this, right? So, our income sources. So, I thought this is really interesting. So, there’s really just a couple that I really want to point out. So, you can see the blue bar. So the dark blue bar is there was a uh a survey right on where they think their income sources will be from. So the dark blue the one above is people who are working and then the lighter blue uh is for retirees and obviously social security is a big one. So if you’ll notice for the most part the workers and retirees are pretty much in line. The two that I want to point out is down here to work for pay. So if you look about three quarters and that is up a few points plan to work in retirement. But of retirees only about a quarter end up doing that. So I think that’s important. So, if retirement, if working in retirement is part of your retirement plan, I think that’s great and I think that’s reasonable. But you want to do stress tests on what happens if you can’t work, right? If all those employers didn’t get the memo and they hire you, whether that’s part-time or whether your health doesn’t allow you to do that. So, so a bit of caution there. Um, the other thing that I thought was really interesting is a product that guarantees monthly income for life, right? You look at workers about 54, retirees, it’s about 28. And and we’ll touch on this for a little bit, but those types of things, you know, are are your social security, they’re your pension, uh maybe you have an annuity out there. So, it is a lot lower for retirees than than what folks had planned. So, just a few headlines. uh how does your retirement plan measure up? So, I’m just going to measure uh talk a little bit about few a few statistics with you out there. So, a little over a quarter of workers have no retirement savings at all. Zip. Um and I assume if you were on this webinar candidly most of these headlines will not apply to you. If they do, hey, we’re here to help. So only a little over a third of American households even have an IRA
and about 16% of Americans age 50 and up actually take advantage of those catchup contributions. We’ll talk a little bit about that. Um so just as you know for your 401k for example for 2026 you can do $24,500. Um, if you are 50 to 59 or age 64 and up, I know that’s a weird one. There is a catchup provision. You can do 8,000 more on top of that. And they added something called a super catchup. Uh, and that is for age 60 to 63 where instead of 8,000 you can do 11,250. So hopefully you are taking advantage of that if you need to. Um, and yes, there is there is saving too much money, you know, especially if it is at the expense of not being able to do some of those things that you would like to do before retirement while your health is maybe a little bit better. So, that’s all part of the planning process, right? It’s easy just to say save, save, save, save, save, but there is really a balance of life. So only 41% of Americans 60 and up think their retirement savings is on track.
For those ages 50 to 59, it’s less. It’s only it’s it’s only 34%. So a little bit over a third there. Now I don’t know if you fall in that category, but I think I think most of us worry about that. So that is the reason why we do why we plan. Um and only about a third of households have more than 250,000 in retirement savings. Is that good or bad? I don’t know. It depends on your goals. It depends on your expenses. It depends on whatever your your income needs actually are. Right? So given all these stats, right? What I would say is are you feeling more maybe less prepared for retirement? Well, that’s what we’re here for today. So, to make you feel more prepared and to show you what you need to do to get ready for retirement. So, imagine your life in retirement. So, we need to take a step back here and visualize what we want our new life to be, right? And I think this is something that you really start looking at seriously. Um 5 years out um depending on the complexity of your retirement, but usually 5 years is good. Even if you want to live overseas, you can start making those plans now. Um if you don’t know where and it’s not wherever you’re living now or wherever you’re joining from, it might be sooner than that. Uh how long will you live? Obviously, nobody knows that, but there are some rules of thumb and you can look at your family, right? If you have those and these are in these are discussions that we have with the members or non-members uh as far as when we do retirement planning. So, some of the things where you want to live. I live here in Texas. I plan to stay here in Texas. Um, if I move, as I tell my better half, the only way I’m moving is if it’s someplace to Montana where we can live on a nice river or creek or something and I can spend my days fishing in quiet and solitude. That would be pretty awesome. Um, but for right now, I’ll just fly to those places. So, uh, now, where do you want to live? So, this is actually really something, right? So, this is something that might take a little bit of planning. So for pre-retirees, the first consideration is where you want to live. And not everybody changes a residence, at least here. Most don’t. They’re about where they want to live. So if you’re not tied to a job though, right, you’re free to live anywhere. Perhaps you want to live close to your children, your grandchildren, or other family members. Or maybe you want to get away from family members. Uh I don’t know. There’s no right or wrong. Um, oftent times if you have, you know, you’re an empty neester now, the kids are older, you might want to downsize, right? And not necessarily just that is a true statement. Someone said, “If I stay in Houston, I’m going to need good healthcare.” Very true. Um, I would argue if we stay anywhere, we’re going to need good healthcare. But with that said, though, um, you might think about, you know, if you want to work, right, then those things matter, right? your employment. Uh if you might have health issues or if that’s a concern, you might might want to be near a major city where you’re near uh major hospitals, something like that, right? You don’t want to be an hour and a half away from something big if if you have regular health issues. So, you plan to do a lot of travel. Maybe you want to live near an airport, right? So, or a major hub. So, again, there’s really no right or wrong, right? look at climate, you look at culture, you look at recreational opportunities. Um, are you an outdoors person? Maybe, maybe not. So, we’ve included this chart that just says, hey, the these are some of the criteria that people who are were retiring, these are the things that they considered. Obviously, this goes back a few years because because the lower risk of COVID was included in this survey.
So, how much home will you need? So, will you downsize? Should you rent? So, this is actually a thing, right, where where folks are saying, “Hey, you know what? I don’t want to I don’t want to live where I’m at. Maybe I want to downsize. Maybe I want to go to a maybe I want to go to a condo. Maybe I want to go to one of those 55 and up retirement communities where all I have to do is sit around, shoot the bull, maybe barbecue, chitchat with people, do some water aerobics, um play dominoes, whatever that might be. Uh, oddly enough, I had a friend who who is early 60s and he’s still working full everything and he moved into a 55 up community and and he said, “Well, one, I’m the youngest person there and it was awesome.” But, um, he’s like, “It is it’s amazing. It’s it’s the things that they do and have everything planned.” So, is it right for him? Yes. Is it right for everyone? No. But, you know, if you’re if you’re kind of unclear about things, what I would say is talk to your friends who are retired. Um, talk to family who’s retired, talk to us. We can tell you what a lot of folks are doing out there. Um, as far as your home, right, there’s a lot of home equity. The average person has over 300,000 in home equity. So, that is another resource that is available to them. So what will you do in that all that free time? Right? Most hobbies cost us money but some can make us money. So if you’re not working anymore, how do you fill your time? Right? So from a financial perspective, right, this is something really important to look at. Is it something like travel? Travel can be really expensive and that’s probably one of the more expensive hobbies out there. Um but even things like golfing or uh I think a more expensive hobby than that but the point is there are and there are other things that are income generating right you might want to start your own business uh that’s a possibility to generate some income maybe you have like a side hobby or you know I make furniture um maybe I could sell that so it’s a hobby and if I can generate some income how great would that be to be able to spend my days getting paid for what I want to do. So, kind of as a rule of thumb,
people can spend almost as much money in retirement as when they worked, right? Because they have those big ticket items or some people, right? They have those big ticket items. So it’s expected to spend about 70% of in your retirement is that when you were working because you don’t have to well you don’t have to save for retirement first and foremost and you don’t have those other things like eating out to lunch, you don’t have to dress, right? We don’t have work clothes, we don’t have commute, all of those things. Um, but I would say the biggest reason why people are retiring and they’re spending their time is spending more time with family and friends and then hobbies and traveling. So, and as you can see, this goes down whether they’re volunteering, caring for a loved one, and that is a whole different webinar in itself and it’s incredibly stressful.
So, how long will you live if we only knew? But here’s some I think this is really interesting though. So these are your average life expectancy, right? So what you can see is most of these is what I always want to point out is when when we’re looking at, hey, we’re planning to 90 or 93 or 95. The reality is that most people do not get there. So, I’m not saying not plan, especially if you have longevity in your family, but I think that calculator that living to 100.com is actually pretty cool. It’s been a while since I did mine. Um, and they say ensure that your money lasts to age 95 or 100. So the risk on that is that if you’re planning for that, right, you have to a lot more money toward that and then you may not be able to do all of those things that you wanted to do in your peak years, right, for health. But that’s one of the things that we account for in our strategy when we plan here at Aerys. What what surprises does life hold? If we knew it wouldn’t be surprises but usually it is health either your own or a family member or some hardship that maybe happens with a family member and then you have to step in uh obviously the economy the market or major disasters. I can tell you probably the biggest one out there is is health right where nursing care or something like that. Um, so Fidelity did this did this uh this study that they say over the average retirement you’ll spend $250,000 in health care. Now for you, but but your insurance and most of that happens in your last two to three years of life. So look, surprises are out there. You can’t plan for everything, but you can plan for a lot of things and flexibility is important, right? Stock market fluctuations happen. We certainly see that this year. We certainly saw that a few years ago. And obviously the major disasters, you know, it seems I’m going to jokingly say this, the world ends, right, with floods and earthquakes and tsunamis and fires. You want to make sure that your insurance is paid up and covered. And I know for those folks in well in Texas and Florida, property insurance, your homeowners insurance is brutal because of all those storms in the past. So this is something how much income will you need? If you haven’t done this, this is actually a good a good thing to do. And the lazy answer is 70 80 to 80% of your current living. Right? So
thinking about how you spend your free time. So so what I would do is is when I tell members when we start working on their weld plan, I have them run a budget worksheet. If you need that, just let me know. We can send that to you. Uh but you want two numbers, right? You want to you want to go, hey, this is about what I’m spending in these categories. And right next to it, if that number is different, write write the different number. For example, um the obvious one is travel, right? If travel’s one of your goals, you know, right now you might say, “Well, you know, I get uh the typical two weeks vacation. We usually don’t do anything big, but when I retire, we’re talking some bigger cruises, maybe some longer trips, maybe 30 days in Europe, maybe one of those river cruises, maybe a cruise around the world, um maybe go live overseas.” So, that might be a little bit more expensive, right? since you have to come back and forth. There isn’t a right answer. This is your answer. And the the nice thing about this budget worksheet is it maybe even if you have a budget in your mind, right? It maybe has it maybe allows you to look at things that you’re like, “Ah, you know, I didn’t even think about that. I forgot about my vehicle that even though I don’t have a car payment, I’m still going to need a new car every 5, 10, 15 years, however often you get a vehicle.” So what we would do is you’d look at those potential sources of income once you get your expenses done, right? And for most of us, our baseline and possibly only line for guaranteed income is social security, right? If you and your spouse are eligible for social security, you want to consider how you claim it, when you claim it, the timing, right? How you maximize your benefits. Do you take it early? Do you take it later? What’s the impact of doing that? Um the second one is pensions if you’re fortunate enough to have one. You have some elections to make. Uh the third, it could be an annuity contract if you have one. Now, these are actually pretty interesting because they provide living living benefit guarantees and they provide you and your spouse some guaranteed withdrawals for life or at least they can depending on what you have. And you know we had talked about this maybe some part-time work assuming you can uh the other thing we had actually talked to someone about this one too just uh rental income right via your investment property. So these are great but one of the things when we do the planning right does that fall into guaranteed incomeish right you have to depend on having a renter in there you have and having a good renter in there. So do they damage the property? If they’re damaging the property and they leave, then you might be out a few months of income and you still have to pay for that expense. So again, we kind of look at those scenarios and say, “Hey, do you want to consider this or the likelihood? How close is this? How much of how much of this is needed? Baseline income.” We help we help rearrange those and take a look at that. Some business interest if you’re selling a business. So let’s talk a little bit about each one of those, right? Because most sources have have pluses and minuses to them. So social security that is our baseline for most the more that you earn the smaller percentage that social security will be you know like if you earn 20,000 a year versus a 100,000 the social security for that 100,000 will not be five times more. So the more income you get the less percentage wise for social security you get. Um, now they do inflation adjusted for income and it is guaranteed for life which is very nice. I will tell you though over decades historically social security does not keep up with cost of living right it does not keep up with inflation. Pensions fixed income guaranteed for life. Oftent times that’s a static payment. So, you know, what looks good at 65 or 67, that same income at 75 or 80 might not be buying as much earnings from work. They’re great if you can get it. They’re not permanent, right? Because they can cease with ill health or just being too old or lack of interest in that. Annuities, you have to manage those for sustainability. There’s different types. And then you know the other things your investment property business interest the rest of it and most of it for many now but there’ll be a little stat that’s really surprising uh usually come from your IAS 401ks 403bs brokerage accounts etc savings accounts I think this is really interesting though so where do retirees say most of their income’s coming from right so social security is hands down the largest The average retiree makes about 50,000 a year. Uh a fair share of that comes from your social security. Now I would say the pensions and as we continue 5 10 15 years down the road that number will probably be smaller and smaller as pensions are going away. I think this is a really interesting number. Right. So, so the 401k, it’s only 10%. So, the question is, is it because they didn’t need it? Is it because they didn’t fund it? Is it because a lot of the folks who who are um being pulled come from a time where pensions were still pretty common. So, you have a pension and your social security. So, that provides a pretty good living in itself. I know a lot of us are retired from Continental or working for United um formerly Continental people. Uh there’s pensions there. So that’s nice. Or you work for the government. So I will I would expect that again as pensions get smaller I would imagine the 401k bar or graph would get larger. So social security. So, the cost of living adjustments average about 2.8%. And if you have not, by the way, if you haven’t determined or done an estimate on social security, you really should. There’s a quick calculator. You can just put SSA quick calculator in Google search and it’ll bring it up. But if you haven’t logged in and created an account with Social Security, you really should. It’s safe. It’s free. And once you log in and create an account, they actually have your reported earnings by year. And they can give you a much much much better estimate of what your social security would be expected at, you know, retiring early or at full retirement age, which would be between 66 and 67 depending on when you were born. So it gives you a really good idea and it really helps you, you can optimize your benefits from there um and come up with a strategy and it gives you a little better idea on that. So pensions, will you get one? Most people would say no, but for those of you who do, that is awesome. So they generate that monthly income for life. But how much would it be? And what are your distribution options? Now, I would say if you’re younger watching this, because we don’t know how old folks, you know, the age of people who are actually watching this, you should always be careful of planning on a pension if you’re younger, right? Because employers can can do away with pensions where they freeze it. So what you’ve earned you get. But if you’re planning on, hey, I’m ex getting this amount, but I’m still 20 years from retirement that this amount might be shrunk to this amount if your company decides to suspend it. Um, if you’re a little bit closer, obviously that risk becomes less earnings from work. So
what I would say on this is what will you do full-time, part-time, what’s that transition? Most people work because it gives them a sense of purpose and a reason to get out of bed. And many of us it defines who we are, right? Not what we do. Uh that is a whole another webinar by the way. But how long can you expect to work? I think is realistic. It’s a realistic question. Oh. Um, the SSA calculator site is is all you have to do is in Google just put SSA quick calculator.
So, look, once you leave your main job, right, there’s a lot of work options that might be available to you. Some become consultants, right? They go to their employer and say, “Hey, can I just maybe reduce my hours and still work right now?” Now, obviously, agism, yes, I know it’s illegal, but it is it’s a thing, right, that companies will eliminate your position, but magically there’s a position that’s pretty similar and someone who is younger. But I do, but what they’re showing now is employers are starting to realize the importance of retirees, right, and the shortage of that. And there’s still some work ethic there. Not that there’s not work ethic with the younger generation because they work hard. It’s a difficult time. Annuities. So, do you have an existing annuity? So, these are actually really good. So, um you’re looking to replace your income. So, these are the options you want to look at if you already have one or if you don’t have one, right? You look at the living benefit writers, how’s that guaranteed income, obviously the fees are associated to it, surrender charges, um and your tax implications. And I would say this, I I alluded to it earlier. So, one of the biggest biggest concerns when you’re retired is, am I going to run out of money? Do I have enough money? And really, do I have enough money is really, am I going to run out of money? Um,
using an annuity is a really, really good way to supplement some of that income. you can you can put that risk off to an insurance company instead of having to manage it yourself because you run the risk of what happens if we have a 2000 followed by a 2001 or a 2002 or a 2008 right there’s something there’s something called um sequence of returns right it is and and I will tell you this so when we do our planning for the members that we work with we stress test portfolios so what happens s if I retire at the wrong time. For the most part, we know when we want to retire within a year or two, right? But we don’t know what the market’s going to look like during that time. Maybe they didn’t get the memo, right? Maybe we have a 2008. It’s rare, but it happens. Are you prepared for it? That’s part of the retirement planning. So these are your sources, right, for your different piggy banks that you stuff with money for different reasons. Some like retirement accounts, some are non-retirement accounts. Um, I would say it’s very nice to have a mix of those, right? Whether you have your tax deferred like those traditional IAS or your 401ks, whether you have tax-free with your Roth IRA or your Roth 401k if your company offers that. Um, and then some of those things that are just taxable, whether it’s a brokerage account or their CDs or savings accounts, they all have a purpose. I would probably say they’re not better or worse. Maybe consider them well, not better or worse. You can actually say good or bad, I would say, would be a better description, right? They’re really purposeful. Some other income sources, right? if you have real estate investments or if you need to tap into your home equity. Now, that is a slippery slope, so I’d always say so some caution to that if you’re thinking about doing that, give us a call. We can talk you through that. Um, fortunately, maybe you’re you’re looking at a a nice sizable inheritance, uh, or maybe you have a trust available to you. Let’s talk a little bit about strategies. So, there are a few different strategies, and I would tell you it might be a combination of them. the um there’s the live off the interest, the 4% rule, the bucket strategy, and then we look at mandatory versus discretionary uh expenses. So, let’s talk a little bit about that.
So,
living off the interest. So, that’s pretty easy, right? So those are accounts like individual bonds or I guess even bond funds um some dividend paying stocks some of the limited partnerships uh even CDs right where your principal remains untouched. So if I have a million dollar and I’m earning 4% I will get $40,000 a year and then as long as that interest rate stays that at that rate I won’t touch my principal. So the second one and this is pretty common for folks uh if you read out there like hey how much should I take out of my nest egg sake right because we’re not looking at his income I said that’s kind of a paradigm shift where it’s like hey this 4% rule um so assets are invested for your total return right so you’ll have stocks bonds not everything does has a dividend to it um there’s actually a stat I want to look at that that I want to read to you because I thought this was really interesting. Um, see if I can find that. I can’t. There we go. Um, so they they there were some studies, right? So, so if you have a million dollars, I’ll use a million dollars because it’s easy math that what you do, I have a million dollar at retirement. I’m going to take 4% of that amount, which is $40,000, and that is going to be my baseline income. And then every year, regardless of what the account makes up or down, I take the 40,000 plus an inflation adjustment every year, so on so forth. Statistically, it should last 30 years, right? Until it doesn’t. This does not guarantee success. The assumption is 50/50 stocks to bonds. This was a formula that came about or at least a strategy came about in the 90s. Uh what I would tell you there are some cautions to that right there might be retire at the wrong time like a 2008 or a 2000 that can impact or even a 2022 where the market was down 15%. This can happen. So I would tell you there’s critics to this. Uh some say that it doesn’t let you spend enough, right? The number now they think is probably closer to five, four and a half, 4.7 because the reality is most people don’t live 30 years. Uh I will tell you statistically the the older you get, I know this sounds really weird, but like at 80 versus 85 versus 90, the chance of running out of money is like 5% and then 10% and then 12%. That’s what I was looking for to see if I can find it. And it was a it was a high enough number that that I’m not really sure anyone was comfortable with that. H you may all have that next time. Um but there are some strategies to that. So the second strategy because this isn’t an all or nothing and this is what I would say this is really really important. The bucket strategy right? So instead of percentage what you do is you think about it in time frames about money to spend. So you have your shorter bucket from 0 to 5 years and then that intermediate bucket 5 to 10 years and then the the long-term bucket which is 10 plus years. And what you do is you live out of the 0 to 5 years. And then as that gets depleted, you take money from the 5 to 10 year bucket and you replace that money into the 0 to 5 years and once the 5 to 10 years, you know, you’re taking money out of there. So you replace that with the 10 plus years. And the reason why that is, I would say, actually pretty effective strategy as a general rule is because you can invest those differently, right? short-term money, bad things can happen in the short term. So, they tend to be on the more conservative, more liquid, but really the range between zero and five years and and the investment range as far as risk is still really really broad. So, so there’s a lot of latitude and a lot of flexibility on on how you manage that 0 to 5 bucket. The 5 to 10 and the 10 plus, there’s a lot of similarities to that. that becomes like a tax efficiency side.
So don’t forget taxes because this is important. Um taxes are a very real part and not just income taxes that I would say, right? So you still have other things like you still have to pay for your Medicare. Uh depending on how much income you make that that amount can change, right? you can get hit with Irma, which is the income related monthly adjusted amount. I always have to look that up, but basically if you make over a certain amount, there is a Medicare penalty and you get to pay more. Um, and it’s not like like income tax, right? If you go a dollar over that 24% or the 32%, it doesn’t go taxes don’t go back to dollar one. You just pay taxes on that extra dollar over. With Medicare, that is not the case. If you go over $1, you’re in for a penny, in for a pound. So, that part of the planning that we do, you know, as far as structuring out goes, when you’re when you’re 5 years plus out, we say, “Hey, you know, these are potential concerns because of RMDs, your required minimum distribution. This is part of your tax strategy and planning or how does that money pass on?” So, we’ll talk a little bit about how retirement income is taxed. For this, we really look at social security. This is kind of a shocker to some that yes, you still have to pay taxes on social security. It’s a bummer. I know you paid into it your whole life, your whole working life, but that’s the brakes. So, most everybody will start will be paying some on your social security. It’s it’s up to 85% of those benefits taxed at your regular tax rate. So if you’re making $1,000 a year, you have to report $850 of that as taxable income. So pensions generally taxable as regular income. Work obviously is ordinary income. Investment income depending on how it’s structured, it can be taxfree in a Roth. It can be taxable only as you take it out as in an IRA, 401k. Um and then like brokerage accounts and things like that, it can be taxed at different brackets. you know, whether it’s a qualified dividend or whether it’s long-term capital gains, those are taxed at lower tax brackets.
So, with all that said, what’s the next step? So, I would recommend an action plan, right? That’s that’s your first and foremost. So
I I recommend that you get some books on like the softer side of retirement planning. Talk to the people about what you want to do for the rest of your life, right? Not so much the financial side of it, but but how do you define the next 20 plus years of your life? Because you can reverse into that, right? I I want to play golf every day. I have a client who actually has a tea time every day, seven days a week, and that’s what he does. As long as it’s not raining. So, by figuring out what your passion is, you can start putting a price to that retirement, right? So, you can buy your retirement. Um, that was one of the things that we had talked about, right? Investing for your retirement. You’re really purchasing your retirement. It’s a big purchase like a house or a car. It’s a major purchase. So purchasing the retirement plan that you want. So the next thing you want to do is is once you do that, then you start getting your resources together. The next thing you’ll do is get your financial information. You want to make sure all of your documents are in order, right? Do you have that AMD, the advanced medical directive? Do you have a power of attorney? Do you have a will? Do you have a trust? Do you need a trust? Um, all of those things can matter, right? Does your family know what your plan is? uh how do you look at downside? What happens if the market happens? What happens if my health is is bad or my spouse is bad and we have to go into a facility or we need help at home? All of these things matter. Again, just a reminder that social securitys.gov is a good resource for that baseline social security to have an idea of what you need for your baseline. And then what we do is it’s called an income gap. You figure out your expenses, you figure out your income, and then that gap is what you need to solve for. And that gap is not always the same, by the way. Um, for example, certain things you will always need, right? Shelter, food, um, utilities, things like that. Um, things that healthcare, things that will change like travel, uh, some of your hobbies. You probably might not do that till the day you die. Travel, you might not do that till the day you die. If you’re spending time with grandkids, they’re eventually going to get older and find you less interesting because they’re too cool. I’m joking about that. I mean, I’m really not, but hopefully I’m joking about that. And hopefully they love you all the way through all the way even through their teen years. Um, and you make a list of questions and any concerns and you write them down, right? Then you can focus more on that over time as far as the solve. And that’s some of the things that we can help you do. So, how we can help, right? We do the complimentary financial planning. So, that’s usually a question comes up. So, we’ll just get ahead of this. So, the two questions that almost always come up is do we charge for the plan? We don’t. It’s just one of the things that we do here as part of a for the members. Um,
am I fiduciary? Yes, I am. I’m a certified financial planner. Some of the advanced planning. So, I think this is really cool too, right? So 5 years out or less, look at how that income is going to be. Come up with a strategy. We can help you through that. I will tell you two of our biggest things that we help on how we help solving for that income gap. We have a very different strategy that can reduce your stress tremendously and reduce some of your taxes. Uh also when we can help with Roth conversions and the timing of your social security and when you should take that. But the Roth conversion can make a huge difference, especially if you have children that are going to inherit money. Um, you know, because there’s two, right? How much taxes we pay and how much taxes are our children, grandchildren pay. Uh, how much those beneficiaries pay. Are things titled correctly? uh briefly
um briefly so we just added this so trust and will services so this is digital uh it’s one of those things that we can offer through erys uh at a discounted rate pricing is pretty good if you’re for our clients who we handle that it’s actually complimentary so it’s like the will trust private attorney some of the basic foundation which really covers most people. Um, you start off doing a little more complex depending on on your net worth or if you have like a special needs uh child or grandchild that you’re really looking after. Um, things like that. Or if you have, and I’m going to jokingly say this, irresponsible children that you just don’t trust handing them over a bunch of money and you’re like, maybe why don’t we just call that a spend thrift provision uh in that if if you think that has to happen over time. So, with that, we’ve come to the end of our presentation. Uh, if you have any questions, I know we have some questions right now. Go ahead and type that into the chat or the Q&A box and we’ll address those. So, while we’re doing that, I’m going to put up a one question poll if you want to schedule some time to see me and talk about your specific situations or specific questions that apply to just you or planning questions or something like that. You can either do that through the poll that I’ll put up um or there’s my contact information or you can that QR code on the right hand side will take you directly to my calendar. Uh, my calendar is regular business hours, but if you do need to meet outside of business hours, just let me know. I’ll do my best to accommodate. Uh, there we go. Let’s see what questions we have. So, I have a friend who is 96 and is running out of money. She owns her own house, is thinking about a reverse mortgage. Uh, what are your thoughts on that? I actually think reverse mortgages can be good. You just have to be careful about those. So, um, if you want, we can kind of look at some of those things, but but you want to be careful, um, as far as what the charge is for that. Like, shop that around a little bit. Uh, and and what they’re expecting, what they’re getting on on the pricing on that and what’s the impact, how long is that for, because the devil’s in the details on that. Um, we can help. And this is a great example of someone who lived in ’96, right? We don’t we don’t plan to live that. But sometimes God has a different plan for us. So hope for the best, right? I would say plan for the worst. But I used I used to say planning is um you plan for rainy days, not floods. But I live here in Houston and we flood a lot. So sometimes you do have to plan for floods. But I mean that metaphorically. So let’s see what other questions we have. Um, if I’m nearing retirement, is there a general guideline on how I should be invested? There there there is on that. Um, so as a general rule of thumb, right, you will re you will invest more conservatively as you get closer to retirement. The caution is, and I’m going to jokingly say this tongue and cheek, you don’t want to become recklessly conservative in your retirement because what can happen is that is that your money does not grow and it does not outpace inflation and then you lose purchasing power over time.
Let’s see what else. You have an old 401k. Should you be paying attention to how those are invested? Absolutely. Especially if it’s an old 401k, right? If you had an old 401k when you were in your 30s and now you’re in your 60s, that probably doesn’t match your risk tolerance. So, that’s important to look at that and update that as a whole. That’s one of the things that we look at. We look at your investments whether we’re managing them or not, right? The part that we’re not, we still take that into account from a holistic side.
65 want to retire in the next two years. Is there a general guideline on how it should be invested? There is. So here’s your general guideline. Again, as I said earlier, the closer you get to retirement, right? We look at the buckets. But the other thing is it depends on your needs, right? So one of the things that you run and we could do this if you want just we can schedule some time and we can look at your cash flow, right? Look at your budget, look at your income sources, look at those expenses and solve for that gap. And and that’s kind of where you would say. So your rule of thumb is take as little risk as you need to to still hit your goals. So not necessarily what earns me the most, right? If a portfolio if portfolio A earns me this much or expected to earn me, portfolio B earns me this much, is this one necessarily better? Well, the problem is is that as you know, the more you can earn potentially, the more chance of something going wrong. So, you want to be cognizant of that, right? So, make sure your risk matches and your downsides protected. How do I know if my annuity is worth keeping? We can take a look at it for you. That’s not a problem. We I’ll take a look at it, see what it is, if it makes sense. We’re futures. I’ll tell you yes, no. Um, keep it. Some of the older ones are actually pretty cool though. They they have some benefits that a lot of them don’t have anymore. So, uh, if I’m close to retirement, is it worth Oh, this is a good one because this is all the rage now, right? Roth conversion. If I’m close to retirement, is it worth doing a Roth conversion or is it too late to make an impact on my financial plan? I would say it’s rarely ever too late to consider that. Now, the difference is the later you are in life or if you’re already retiring, you’re close to retirement. So, we would look at that, right? We’d look at your tax savings and how that would impact um the end of life, right, for your legacy. If you are already deep into retirement, then Roth conversion still might be an option, but it would be more for a legacy plan, right? How how it goes to your beneficiaries versus tax savings because you probably depending on where you are, you might not have that many tax savings years available to you. Uh maybe one more.
What happens social security if you decide to work part-time after full-time and already receiving social security? Uh that’s actually a good question. So social security if you’re still working part-time. Um a couple of things on that, right? It still counts toward your income, but the reality is they look at your last 35 years of of income and they take your highest one. So, if you’re working part-time, depending on how much you’re making part-time, it’s unlikely that it’s it’s really going to make a difference. And and if you are retiring at 57, does that impact it? Yes, it does. Um because they calculated up to 65. So, from 57 to 65, if you stop working, those would be zeros. Uh so, that’s where social security would matter on when you’re going to take that. We can calculate that. That’s one of the things that we calculate if you’re thinking about retiring early. I think that’s Oh, one more here. Is the market overvalued with the recent highs? Um, that’s a trillion dollar question right there. I would say, as a general rule, no. Compared to other times in our history, I I wouldn’t I wouldn’t concern myself as much with the market being at a new high, right? Because there’s always new highs to be made. the market doesn’t move straight up. It’ll move up, it’ll pull back, it’ll move up, it’ll recover, but over time, the trend is up. So, that would be it. Thank you very much for the compliment. If there are any questions, please reach out to me. Other than that, I think we have answered all the questions. I wish everybody a very wonderful rest of their evening and rest of their week. I hope to see you on future webinars. Until then, thank you so much and be safe. Take care. Bye now.