Category: Alliant Webinars

Okay, hi everybody. We’re going to go ahead and get started. My name is Kim Kennedy and with me today is Malcolm Horn. We are the financial consultants of Alliant Credit Union. We get asked often if we actually work for Alliant and we do. We work in the Alliant Retirement and Investment Services division of the credit union. Both Malcolm and I are based in Denver. We have offices in the Denver Tech Center and also in Lakewood. If you’re joining from another state or would just prefer a virtual appointment, we’re happy to meet you via Zoom. Lots of people are doing it that way these days. Malcolm’s going to be walking you through our IRA webinar today. Very educational all the different types of IRAs and how all that works. We will take all of your questions from the presentation today at the end. So please enter those in the chat box or the Q&A box. You will receive a follow-up from one of us after the webinar just touching base making sure your questions got answered and we’re going to be inquiring if we could help you with your retirement planning needs at all. We have a few couple webinars coming up for November before Thanksgiving and the first one is on Thursday November 12th. We call it the good, the bad, the ugly annuities. This is just kind of annuities 101. Annuities have lots of bad press out there and they’ve really changed over the last decade and there’s a lot of different ones. This is purely educational. We’re not pitching products. Just trying to teach you about annuities and see if they could be a fit for you. And then the next week we have Medicare IRMAA. This is on Tuesday November 17th. IRMAA income-related monthly adjustment amount. This is Some people don’t even know this exists. This is the process that is used to determine if your Medicare Part B premium will be over and above what the average rate is. You are surcharged based on your income. So, we’re going to walk through the details about that just so you understand how those higher Medicare Part B premiums get calculated. And with that, I believe we’ve got some educational resources. Malcolm and I are not the only advisors doing these webinars. Our colleagues are also doing the same thing as us. You can go to our webpage and click on the events link or page and see all the other webinars that are being hosted. You’re free to attend any of those that you choose. We produce an in-house podcast and we house all of those historical podcasts on the podcast page. So, again, go to our website, click on podcast. If there’s a specific topic that you’re eager to learn more about, it might be there. And last, our website and our blog both have a a wealth of information on various financial topics. So, again, if it’s something you’re trying to learn a little bit more about, you might go there and hopefully we have what you need. And with that, I’m going to turn you over to Malcolm and he’ll walk you through the webinar today. Oh, one more slide. So, we have partnered with a company called Trust and Will. So, if you were to become a retirement or investment client with us. This is not having a savings account at Alliant, but if you do business with us on the retirement investment side of Alliant, you have access to this company called Trust and Will and you can create a basic will, trust, power of attorney, living wills at no cost. So, this is a way to get an estate plan done uh complimentary. So, that’s just something that’s out there if that’s something you haven’t done yet. Certainly important to do for you and your family. Now, I’m going to turn you over to Malcolm and he’s going to walk you through the webinar today. So, thanks a lot, and enjoy the topic. Thanks, Kim.

So, today’s agenda, this is what we’re going to be covering today. And a lot of common questions that we get is how can I still contribute to an IRA, and how much? What type of IRA is right for me? When do I need to withdraw money from IRAs, and how how much do I have to take? How are my IRAs withdrawn? How are IRA withdrawals taxed? What happens when I die? How do the new tax laws impact me? And how can I minimize my taxes? These are the questions that we’re going to be covering today’s webinar. Now, you might be asking, well, why are you doing a webinar on IRAs? Well, IRAs are are a tool that you’re going to be using quite a bit in retirement. If you think about 50, 60 years ago, on the left side, most people had a pension. They received social security, and they really didn’t need to save much for retirement. Their nest egg was kind of small. Well, that’s been flipped over. Nowadays, very few people have pensions anymore. You still have social security, which is the middle piece, but more and more responsibility is with you to save for your own retirement. And then since you’re saving for retirement, most of the time you’re going to be contributing to a 401(k). But once you retire, you move that money out of the 401(k) and put it into an IRA. And so, that’s why today we’re going to be talking about IRAs, and making sure that you understand what they are. The first one we’re going to talk about is traditional IRAs. The contributions that you make to your IRAs at times are deductible. They reduce your tax liability today. The money grows tax deferred, but when you start taking that money out, and as long as you’re over 59 and a half, you avoid that 10%early withdrawal penalty. You when you start taking the money out, you become you get taxed on it then. This year’s contribution is 7,500. If you’re over 50, it’s 8,600. You must have earned income compensation to be able to contribute to the traditional IRA. There is no age limit. There was at one point there was an age limit, but that’s no longer the case. So, if you’re still working and let’s say you’re 75 years old, you are still able to contribute to a traditional IRA. Now, you have up to April 15th of 2027 to make a contribution and have it count for 26.

Traditional IRA contribution rules, you and your spouse are if you and your spouse are active participants in a 401k, there are certain income limits that you have to abide by. So, if you both contribute to a 401k and your income is over $150,000, you are not able to contribute your contribute to a traditional IRA and deduct it. If you’re a single person, it’s 91,000. So, be aware of it. Yes, you’re probably working, you have a 401k. If you try to make a contribution to a traditional IRA and you’re above those income limits, you’re not going to be able to deduct it.

Then you should look at contributions to a Roth IRA. Roth IRA, there’s no deduction for the contribution. Money goes in, grows tax deferred, and those contributions can be withdrawn at any time. When it comes to a Roth IRA, it’s first in, first out. It’s the earnings and interest within that account that needs to stay in there 5 years or and/or 59 and a half. So, if you’re contributing to a Roth IRA and you want those earnings and interest to be tax-free, they have to be in there for over 5 years and 59 and 1/2. Contribution limits are the same as traditional IRAs. $7,500 and if you’re over 50 for the year, $8,600. You must have earned income compensation to be able to contribute to a Roth IRA. Then again, there’s no age limit. There are income limits. Meaning that if you’re a single person and your income is over $168,000, you are not able to do You are not able to contribute to a Roth IRA. If you’re a married couple, it’s $252,000. It’s a modified adjusted gross income, by the way, too. So, if your income’s above this amount, you are not able to contribute to a Roth IRA. Now, one thing that people do forget to do is that if you’re a married couple and one spouse is already retired, sometimes people say, “Well, I’m already retired. I can’t contribute to a Roth IRA or traditional IRA.” But if your other spouse is still working and you have earned income and you’re below those income limits, then yes, you are able to contribute to a traditional IRA or Roth IRA, even though you might have retired or or no longer working, as long as the other spouse is still has earned income. Now, you might say, “Well, $8,000 doesn’t really make a a dent in regards to retirement savings.” Well, I beg I beg the difference because if you look at this chart, and this is someone contributing $8,000 for the next 10 years earning a 6%rate of return, you could see that money start compounding. So, by year 15, you have $150,000. By year 20, it’s over 200,000. So, the more money you have in those accounts, the more it starts to compound. So, it can make a mean it can make a difference when it comes to retirement planning. Make sure you’re taking advantage of your employer-sponsored plans. Like I said, most of the time today, the it’s in your hands to save for retirement. They offer a 401k. Most of the time that 401k offers some kind of matching opportunity. You put in 3%, they’ll match 3%, 5 or 5, whatever the case is. So, make sure you’re contributing to those 401k’s. In 2026, the maximum contribution if you’re under 50 is 24,500. If you’re over 50, it’s 32,500. Also, if you’re between the age of 16 and 63, there’s this this additional special contribution, which allows you to do 11,250. So, that would put the maximum contribution at 35,750. Now, something that changed for this year is if your income was over $150,000, any catch-up contributions now are going to be going into an after-tax bucket. So, it’s something to be aware of that if last year’s income was over $150,000, not all of that money is now going to go in pre-tax. Some of it’s going to go in the the normal contribution will go in pre-tax. pre-tax, but the catch-up contribution will go in after-tax. So, it’s something to be aware of. Going back to the employer-sponsored plans, most of the time employers now have a Roth 401k contribution or a Roth 401k bucket. Meaning that if your income is over a certain amount and you can’t contribute to the Roth IRA, but you still want to put money into a Roth bucket, look at your employer plan because you might be able to put money into the Roth 401k 401k. So, all the money goes in after-tax. So, as long as you’ve had the account for 5 years, you’re over 59 and a half, all earnings and interest is tax-free. There is no income limit when it comes to the Roth 401k. So, it’s just be aware of.

This chart just shows your taxable income. So, let’s say you’re a single person and you’re kind of debating to do I contribute to a Roth, do I contribute to a do I contribute to a Roth 401k or a traditional 401k? Sometimes you can look at the bracket and say, “Hey, if my income was $110,000, based on this bracket, like some of my income is going to be taxed at 24%.” So, you can put money in pre-tax, lower your tax liability. Just be aware that again, any money you put in pre-tax, at some point, when you take that money out, it’s going to be taxed down the road. Now, you can look at taxes and say, “Historically, we’re in a low tax environment.” This is a This chart represents the top marginal income tax rate going all the way back to 1913. So, you can see in the ’40s and’50s, we saw top marginal tax rate at 90%. Right now, we’re sitting at 37%. Considering the amount of US debt that we have, you could make an assumption that maybe at some point taxes will go up. We don’t know. I mean, we haven’t really seen a tax increase since the the ’80s. Now, there was this thought that taxes were going to increase for 2026, but then the one big beautiful bill was signed into law uh in 2025 and basically made the current tax code permanent. Now, the tax code permanent, when I say permanent, it doesn’t mean it’s actually permanent. It just means it does not have an expiration date. At some point down the road, Congress could come in and make changes to the current tax code. But, there’s no expiration date on it. But, the big beautiful bill came in and prevented taxes going up in 2026 and they expanded some of the deductions and deductions for families and seniors. Now, when we’re all when we’re talking about withdrawing money from IRAs and knowing that that money is going to be taxed when we withdraw money from traditional IRAs and 401ks, you need to be aware of certain side effects. The first one we’ll talk about is something called a net investment income surtax. When your income as a single person is over 200,000 or a married couple company uh married couple over $250,000. If your income’s over this these amounts, you’re going to be subject to something called a net investment income tax of 3.8%and this tax applies to dividends, interest, rental incomes. So, be aware like if all of a sudden you retire and you start taking more and more money out of your IRAs and you start going above these limits, some of your interest is going to be taxed at that 3.8%. You might watch out for certain phase out of deductions that you might receive. Your part B, which we’ll talk a little bit later about, your Medicare part B premiums might increase based on the amount of income you’re receiving. The more income you have, your part B premiums increase. Maybe more of your social security is going to be subject to tax or you eliminate the ability of financial aid that your child is receiving or even you lose the ability to contribute to a Roth IRA. So, there are certain side effects when you’re taking money out of traditional IRAs or 401ks. Now, at some point, if you like it or not, you’re going to be required to start taking money out. It’s either going to be 73 or 75 depending on when you were born. So, all these years you’ve been contributing to the traditional 401k and you’re retired. If you don’t need the money, IRS doesn’t care. They’re saying, “Hey, once you reach 73, you have to start taking money out because we want to start collecting taxes.” Now, if you decide, “Hey, I’m not going to take any money out.” they can come in and penalize you 25%of whatever your RMD was. So, if your RMD was $10,000, they can come in and penalize you $2,500 for not taking that money out.

Now, how they determine your required minimum distribution, they look at it what your account value was at the the end of the prior year and then divide that by a life expectancy number. So, at 73, they’re expecting you to live another 26.5 years. And when you do the calculation, it works out to be about 3.78%. The older you get, that percentage increases. So, if you look at someone that’s 85, their RMDs are 6.25%of whatever the account values are. Now, we do see mistakes occasionally when it comes to RMDs. And these are probably the most common mistakes. The first one is aggregating in RMDs between different retirement plan types. So, when it comes to a 401k and an IRA, those are different plan types. So, the IRS looks at them differently. So, you have to satisfy your RMD from each of the plan. So, if you came in and said, “Hey, my RMD is $10,000 for my 401k and 10,000 for my IRA, so it’s a total of 20,000. I’m going to take 20,000 out of my IRA.” Well, IRS can come in and say, “Wait a minute, you didn’t take any money out of the 401k. That’s a separate retirement plan type. So, because you didn’t take any money out, we could come in and penalize you for not doing so.” So, when you have different plan types, make sure you’re satisfying the RMD from each plan type. Now, it it doesn’t matter if you have 15 different IRAs, IRS doesn’t care that you took your RMD from one IRA because they’re all the same plan types. Second mistake that we see is aggregating between spouses. So, let’s say Bob and Mary both have RMDs of $10,000. Well, Bob took $20,000 out of his IRA and says, “Mary, don’t don’t worry about taking any money out of your IRA. I’ve already satisfied the RMD for the year.” Well, IRAs stand for individual retirement accounts. Mary still needs to take her own RMD, even though Bob took $20,000 out of his his IRA. So, make sure that each individual is satisfying the RMDs from each of their IRAs. Third is just a common mistake we see. They just forgot to take the RMD. You know, maybe they had health issues, they’re traveling, they completely forgot about it. That’s what we see often is, “Hey, I just forgot to take it out.” And there’s ways to correct it. You just satisfy your RMD for the year and work with your accountant and say, “Hey, I forgot to do this. I know there’s a way that we can avoid that penalty. How do we go about doing this?” So, talk to your accountant about doing that. So, make sure to avoid these mistakes when it comes to RMDs.

All right, let’s talk about a couple different strategies when it comes to IRAs. So, if you don’t need the money that’s in your IRAs, the one strategy you have is, “Hey, I’m not going to take any money out. I don’t need the money.” So, by doing so, that money stays within IRA, continues to grow tax-deferred, none of that money is landing on your taxable income for the year, and you avoid some of the side effects. The downside of that is that your IRA, if it continues to grow, your RMD gets bigger and bigger. And what happens when your RMD gets bigger and bigger? The IRS takes more of it. So, sometimes it might make sense to say, “Hey, even though I don’t need it, maybe I I take a little bit of money out to stay within certain tax brackets to keep my IRA at a minimum.” And also, I don’t know what taxes are going to look like. I don’t know what taxes are going to look like in 10 years, 20 years. But, if they’re going to be higher, maybe it makes sense to pay the current tax code if you’re okay with it. Also, some of the side effects by not taking money out and just allowing the money to continue to defer is maybe more of your social security is going to be subject to tax. And your Part B premiums increase because all of a sudden your RMD is much bigger than what you expected.

We talked about this quite a bit and then we think this is a very effective strategy to consider is Roth conversions. Roth conversions is when you’re taking money out of your traditional IRA and moving it over to a Roth IRA. Whatever money you move over, you pay today’s taxes on on it. So, Jill converts $100,000. 100,000 is added to added to her income today. Based on her total income, she pays taxes at whatever rate she is at that time. But by doing these cross Roth conversions, you’re paying today’s taxes and you let the money sit for the next five five years plus years and all earnings and interest is going to come out tax-free. So, again, as long as you’ve had the account for five years, you’re over 59 and a half, all earnings and interest are tax-free. Now, if you decide, “Hey, I’m 60 years old. I’m going to convert today.” Well, you have to wait till 65 and 65 for all earnings and interest to come out tax-free. Even though you’re over 59 and a half, you avoid that 10%penalty, you still have to wait that five-year time horizon. If you wait if you’re 50 years old and you do a Roth conversion today, well, you actually have to wait till 59 and a half for you to avoid that 10%penalty and have all earnings and interest come out tax-free. Now, who can do Roth conversions? There’s no age limit. I I think the oldest person I’ve done it for is 94, 96. She was in a nursing home and she based on all of her medical expenses, we were able that money, and then she still had access to it access to that money for her to use, but if she passed away, that money passes on to the beneficiaries all tax-free. There’s no income limits. There used to be a point where if you made over $100,000, you weren’t able to contribute to a you weren’t able to convert a Roth IRA. That’s not the case anymore. And there’s no requirement to work. So, anybody can do Roth conversions. Now, ultimately with Roth conversions, you’re reducing the risk of raising rising rates. Again, I don’t know what tax is going to be look like in 5 years from now. Taxes could be higher than they are. So, if taxes are concerned to you, maybe paying today’s taxes might make sense. And then also, if you think about it, if you converted all of your money that was were in 401ks or IRAs to Roth IRAs, chances are none of your social security is going to be subject to tax, and you’re you don’t have to worry about Part B premiums increasing.

Roth IRAs have flexibility, too. What I mean by that? There’s no requirement on the distributions. You can leave that money in there as long as you want. You decide when you want to take the money out. You can let that money continue growing for the next 30 years. You can let this money pass on to your beneficiaries all tax-free. So, Roth IRAs provide some flexibility. Now, I’m not saying everybody should go out and do Roth conversions. I think it’s really kind of understanding does it make sense or not. Everybody’s situation is completely different. Now, I still bring this up because of this is really important for you to be aware of. Prior to 2018, you used to be able to do a Roth conversion, and if the market dropped 20%, you could say, “Whoa, I don’t want to pay taxes on that higher amount. I’m just going to undo it and treat it as it never happened.” That’s no longer the case. Now, if you do a Roth conversion, even if the money drops, even if the market goes down 20%, you can’t undo it. You are stuck with doing the Roth conversions. So, make sure you understand what the tax liability is going to be on that Roth conversion. You understand if you’re going to be phased out of certain credits, so you’re aware of that. Make sure that you understand if the investments drop, it is what it is. And if you decide to change your mind that 6 months down the road you’re like, “Aha, I shouldn’t have done that Roth conversion.” Well, it’s too late. So, have a general sense of some of these questions before you do Roth conversions. Ask yourself, do you have a rough idea of what the tax liability is going to be on the Roth conversion? Do you have a plan to pay the taxes? Do you have a reasonable expectation of the benefits of prepaying your taxes, and does it make sense for your overall goal? If you’re able to answer yes to each of these questions, maybe it makes sense. So, doing Roth conversions take a little bit more time to really understand does it make sense to do or not. One strategy that we come across that we talk about is filling up the bracket. I just talked to someone today. She’s retired, and we, after looking at her tax liability, social security, pension, what she’s already taking out for the year, she could take another $15,000 out and still stay within a 12%tax bracket. That’s filling up the bracket or filling up the bucket. Now, you have the option of, “Hey, we can convert about $15,000. You pay 12%in taxes, and now it’s all tax-free for you at some point down the road.” Or you can say, “Hey, take that money out, throw it in my savings, and I’m going to use it.” So, everybody’s situation is completely different. But, looking at filling up the bracket or the bucket does make sense when it comes to doing Roth conversions. Also, maybe look for a years when you’re doing Roth conversions. Let’s say you’re a business owner and you just didn’t really have a good year. Maybe a Roth conversion this year, pay the lower tax on it, makes might make sense. Maybe you retire and you’re going to delay Social Security till age 70. You have this like 5-year gap where you’re like, “Hey, I’m my tax is really low.” Those are good years to do Roth conversions. Or maybe you have a medical a mother or father that’s in a nursing home and has all these medical expenses. Maybe working with them to do Roth conversions because you’re able to deduct up to over 7.5%of your medical expenses. So, if your income was a over if your income was $50,000 up or let’s let’s make the math easy. Your income is $100,000 and 7.5%of that is $7,500. You’re able to deduct anything above that $7,500. So, if they’re in a memory care spending $10,000 uh $10,000 a month, that’s a lot of medical expenses that you can deduct to reduce your taxable income by maybe looking at Roth conversions.

All right, let’s move on to a different strategy. Making sure you understand how you move money between different plans cuz there’s two types of plans, an indirect and trustee to trustee. An indirect rollover is when you’re taking money out of your IRA or 401k. Let’s let’s use a 401k. Let’s say you take money out of a 401k. They will automatically withhold 20%in taxes and you have up to 60 days to put that money back into an IRA to make sure all of that is not subject to taxes. I dealt with a client that without my knowledge, she took all of her money out of the 401k. They withheld 20%in taxes and it was going to push her into a 32%tax bracket. The way we rectified that is we put in all that money back into an IRA within the 60 days and we had to put that 20%that they withheld back into the IRA for all that money to be tax-deferred. Now, at the end of the year when they filed her taxes, she got that 20%that the 401k withheld back. But, this is considered an indirect rollover. When you’re taking possession of the money, even though you’re at the end of the day, the intent is to put that money back into the IRA. You’re only able to do this once a year.

Let’s talk about direct rollovers or trustee to trustee transfers. This is when you call your 401k company and say, “Hey, I’m going to move my money to ABC company and we want to roll this money over to ABC.” And then they say, “Okay, fine. We’re going to cut a check payable to ABC and it’s going to be deposited into that IRA.” You will avoid the 60-day rollover, you will avoid the 20%withholding, and you can do as many of these as you want throughout the year. This is what a check kind of looks like. It’s It’s ABC or in this case company X, company X FBO your name. And this is a direct way to transfer money between plans.

Now, when it comes to the fourth strategy, make sure you’re coordinating your IRA with everything else in your financial picture. IRA is just one piece of the puzzle. You still need to think about how am I going to create income in retirement? What about taxes? How about planning to pay for my kids’ education? Your overall financial plan. So, this is again, IRA is just one piece of the overall puzzle. The other thing that you need to know of is strategically allocating assets to help you reduce your tax liability. Here’s an example. Let’s say you have $100,000 in an IRA, $100,000 in a non-IRA account. You’re in a 24%tax bracket. You have $100,000 that’s invested in CDs or bonds paying 4%and you have $100,000 that’s invested in dividend stocks that are paying about 4%. Now, you can come in and say, “Okay, I’m going to own my dividend stocks within my IRA.” Now, and if you want that $4,000, so in this case you have $100,000 invested in dividend stocks paying $4,000 of income. That money you take out of the IRA is considered ordinary income and you’re paying 24%tax on it. Where on in the non-retirement accounts, you invest in bonds or CDs and interest or CD interest is taxed at ordinary income. It So, you pay 24%tax on that also. So, your total tax liability on this is almost $2,000. Now, there might be a better tax-efficient way to structure this. If you own the CDs and you choose to within your IRA, you still take the 4% out. It’s still going to be considered ordinary income and you pay 24%. But, if you have $100,000 invested in qualified dividend stocks, qualified dividend stocks qual-qualified dividends are taxed at 15%versus 24%. So, qualified dividends are taxed at a different rate. So, in this case we’re able to reduce your tax liability to about $1,600. That’s around $400 that you get to keep in your pocket by by strategically allocating assets to different accounts.

Let’s talk about Social Security and IRA coordinating IRA planning. So, a common question that we get is hey, should I take money out of my IRA and delay Social Security until 70? Or should I just take Social Security now and let that money continue to grow. When it comes to Social Security, Social Security does offer a cost of living adjustment. They have survivor benefits. And so, there is some trade-offs in between the two scenarios. So,

Social Security, if you like it or not, is an annuity. It’s an annuity that’s going to provide you a guaranteed income for the rest of your life. And fifth, right now, 15%of that Social Security is tax efficient, meaning 50% of your Social Security is tax free to you. So, there are so are some benefits by delaying Social Security. Now, everybody’s situation is completely different. Here’s an example of a client that I worked with. She’s single, not married, and she was debating, do I delay my Social Security till 70 or do I take it now when I retire at 66? Okay, let’s run a couple different scenarios. The blue represents her delaying her Social Security till 70. And then the gray is kind of laid on top of that, her taking her Social Security at 66. When you look at these two different scenarios, her break-even point was 93. Meaning that for you to benefit waiting till 70, you have to live beyond age 93 to really benefit from it. Well, she’s not married, she has no kids. It did not make sense to delay till 70. So, she ended up taking her Social Security at 66. Now, everybody’s situation is completely different and it’s somewhat of a personal choice. I mean, I can show you the numbers and show you a break-even analysis, but if you want to delay your benefits till 70, it’s a personal choice. Do it.

Let’s talk about IRA planning and estate planning. Now, at times we see people forgetting to update beneficiary forms on the 401k’s and IRAs. When it comes to IRAs, you would name the beneficiary. You name who inherits that money.

And so, there’s different types of IRA beneficiaries. You have an eligible designated beneficiary, non-eligible designated beneficiary, and non-designated beneficiary. And we’ll we’ll go through each of these different types of beneficiaries. The first one we’ll talk about is a non-designated beneficiary. These are non-living people. So, if you come in and say, “Hey, I’m going to name my estate as my beneficiary.” What happens is when you pass away, this money goes into an estate, probate has to be opened, and then depending on your age of passing, depends on how that money comes out. So, let’s think about this. Let’s say you pass away at age 75. Or let’s say let’s say you pass away at age 80. So, you’re past the RMD age, goes into a state, probate has to be opened, someone finds a will, goes to court, and says, “Hey, this money should come to me.” And of course, they say, “Okay, yep, everything looks good. Money is yours.” And after because you passed away after the age of required minimum distribution, this person that inherits the money has to continue taking that money out over your single life expectancy age. Now, let’s say that you passed away at age 65, and you named your state also. Well, in this case, goes through the same process, probate, will, judge says, “Yeah, it goes to this person.” Now, you inherit this money. Because you passed away before the required minimum distribution age, this person now has to take the money out over a five-year period. So, make sure you’re naming a beneficiary, especially if you want this money to go to your sister. I I just talked to someone the year that her sister named her state instead of naming her other sibling. So, they went through probate, money comes to the the living sister. Now, she has to take this money out over a 5-year period. It caused her to pay more taxes than expected. Non-eligible designated beneficiaries are non-spouse beneficiaries. This is where you come in and say, “Hey, I’m going to name my siblings or or friends to be the beneficiaries.” When they inherit this, you used to be able to stretch it over your life expectancy, but now you have to take it out over a 10-year period. So,

yeah, non-spouse beneficiary. Now, some of you still have the ability to stretch the bene-stretch the distribution over your life expectancy. If you’re a disabled person, chronically ill, you’re within 10 years of the descendant’s age, or minor children. If a minor children inherits an IRA, at the age of majority, they would have to switch over to a 10-year distribution if they’re not disabled. So, just know that nowadays when you name a non-spouse, that person has to take the money out over a 10-year period. You can name a trust as a beneficiary, but it can be complex and it could cost complex and costly. But, this is where you’re coming in and saying, “Hey, I want to take control of how they get the money out.” So, let’s say you set up a trust. The money goes into the trust, and lot of times this is where you have specific instructions. They’re only getting a certain amount of money, or some of this money is going to go to charities, or whatever the case is. That’s when you may name a trust as a beneficiary in an IRA. Speak to an estate planning attorney if you want to go down this path. Options when it comes to spousal beneficiaries, you have two options. You can roll the money into your name or you can remain as beneficiary. When you roll this money into your name, you’re basically taking full control of this money. So, let’s say Bob passed away, Mary’s going to move everything into her name and treat it as her own. Now, re-re-remember though that if your husband or wife passed away at age 50 and you move that money into your name, you’re going to still be subject to that 59 and 1/2 rule and be subject to that 10%. But, if you’re So, the other way about that is remain as beneficiary. So, if your spouse passed away at age 50, you you remain as a beneficiary. That allows you to start taking money out of that IRA and avoid that 10%penalty. So, there are couple different options when it comes to when you inherit an IRA from your spouse, what are your options? A lot of times sometimes if there’s an age difference, we might come in and say, “Hey, remain as beneficiary because based on your age, like uh you’re you’re not going to be subject to RMDs at a at a certain point.” So, just talk to us or talk to your advisor. Make sure, “Hey, my spouse passed away. What should I do? Should I move it into my IRAs or should I remain as beneficiary?”

Okay. I know I covered a lot of information and there’s probably a lot more out there to cover, but we’re here to help you. We are employed by by the credit union. Me and Kim both have probably over combined over 50 years of experience helping people plan for retirement. But, we can answer questions regarding tax efficient withdrawal strategy. Does it make sense to take money out of your IRAs and delay social security? Does it when does it make sense to do Roth conversions? There’s multiple things that we can help you with when it comes to your financial life. And think about climbing a mountain. Climbing a mountain sometimes we refer to as retirement. You know, you’re climbing the mountain, climbing up, you get to the top, you’re like, “Yay, I did it. I’m retired.” But sometimes going down the mountain is the most dangerous point. And same with retirement. Once you hit retirement, there’s certain things that you have to kind of think about that you previously didn’t think about. You didn’t think about longevity, You didn’t think about health care costs. You didn’t think about the market being up and down. While you’re working, you just invested more money when the market was down. You didn’t think about inflation. These are all things that now you have to think about in retirement. And a lot of the planning that Kim and I do covers this. And let me show an example. So, Richard and Deborah Human saw us. They’re going to work till 66, 67, 65. Richard has some health issues, so we’re using a shorter life expectancy for him. They both have 401ks. They have money in savings. Their house is completely paid off. They have income coming in. We know what their social security looks like, their PBGC is that they’re going to be receiving. They want to live on $5,000 a month in retirement with built-in health care costs, they built-in a travel budget, and we’re looking at federal and state taxes. They’re both contributing to a 401k, maxing it out, and receiving a match. So, first thing that we did is we just put all these pieces together and say, “Hey, based on where you’re at today, are you able to meet your specific goals?” So, the blue is them working, the dark blue is social security, the teal is a pension, the yellow is taking money out of their savings, the dark red is a required minimum distribution. So, yeah, based on this, like, you’re a little bit over 2 million remaining at age 95 based on the path you’re going to spend.

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Computer just froze. Sorry. Oh, there it goes. Uh let’s look at taxes. You know, we know that right now with you working you’re in about a 24%tax. One spouse stops working retires, taxes go down. You have this window where you really don’t pay any taxes at all. Taxes come back in the picture because of required minimum distribution. And then when one spouse passes away, your taxes would go up again and at that point. So, let’s think about we can run Roth Roth conversion scenarios and say, “Hey, let’s consider doing Roth conversions when you’re retiring and stay within a 12 12%tax bracket.” The yellow represents the tax liability uh the yellow represents how much we can convert in those years. And what’s the benefit? The benefit is that you save a little bit over $100,000. That’s $100,000 that you’re not giving to the IRS, that you get to keep in your own pocket. So, we’re able to help you reduce your tax liability in those years when one spouse has passed away. We can consider like, “Hey, let’s Does it make sense to delay Social Security till 70?” You know, the break even is 79. Well, if Dever’s going to live beyond 79, then it probably makes sense to delay Social Security till 70. If he wants to Richard wants to retire early at 62, does that make sense? And we’re able to run that and even at 62 it says, “Yeah, if you want to retire earlier, you have the ability to do so. You’re just not leaving as much to the kids.” So, our planning that the planning that we do can really get very detailed and run different scenarios for your situation and give you a clear idea like, “Hey, what what is the best way to go when it comes to my financial situation?” All right. With that, I’m going to open up to questions. Before I open up questions, I’m going to turn on a poll. The poll just says, “Hey, if you’d like us to reach out to you, you’d like to schedule a meeting with us, please let us know. We’ll make sure to reach out to you and and go from there. Let’s see here. Oh, interesting. Um Did the poll show up, Malcolm? There it is. Okay. There it is. Okay. Cool. Now I see it. All right. All right, perfect. Perfect. Well, what questions do we have? Let’s see. Uh echo Okay, that’s not really a question. Sorry about that. Uh For aggregating different plan types for the RMD, are there other plan types besides 401k and IRA? So, there’s so many. Uh Well, there’s not so many. I mean, you Yeah, you have a 403b’s, 403b’s, 457’s, 401k’s, and then the the IRA’s. Um SEP IRA’s. Yeah. Yeah. Hm.

Okay. Um did you say that if your IRA beneficiary is your estate rather than a person or a nonprofit, it has to go through probate? Yeah. Yeah. Because if it goes to your estate, I mean, it goes to your estate and then probate’s going to I mean, they don’t know who your beneficiary is going to be unless I mean, they’re going to have to go look at the will. And then the will will indicate who your assets go to. But if then there’s no will, then it’s probably the next of kin that’s going to step up and say,”Hey, I’m next of kin and I should inherit this money.”It just gets complicated, so it’s best to name beneficiary, so the money goes directly to whoever you name as you want to receive this money. I I can give you an example about I had a client clients, husband and wife. The wife was the husband’s beneficiary. The wife died. The husband never told me that she died and then he died. So, it was a mess across two estates. It was their next of kin that had to step up, but it required lawyers and court documents and testamentary trust and it is it’s a mess. Um, so, yes, name a beneficiary. Uh, here’s a question around that. If your beneficiary is a trust, does it go to probate? No, I mean the trust has specific instructions on how the money’s going to be dispersed. So, the trust you can name a trust and the trusts avoid probate. It’s a named beneficiary. Okay, let’s see. What else? That’s all I see out there for questions.

See, oh, here’s another one. Another one pop up. Can I take my job’s monthly 401k contributions and put that money with most of my salary into a 401k Roth? So, you’re talking about the employer match, I think. I’m not sure. Yes. Yeah, I mean you you check with the plan because every plan document is a little bit different, but they should allow you to move 401k over to the Roth and you might have to pay taxes on whatever that pre-tax bucket of money is. But, if it’s after tax and you’re converting it to Roth, there shouldn’t be any tax liability. talking She’s asking about con-or he is asking about contributions. Okay. Match with salary. Yeah, so your own contributions obviously you can shift from the pre-tax to the Roth. The match, the employer match generally, I have not seen employers allow the match to go to a Roth. Have you, Malcolm? No, but that’s part of the Secure Act 2.0 that like you’re going to have the ability to choose. I, I don’t know how many 401k providers are up to up to code with that new new, but basically how it’s going to work if you once I get it up and running and if you decide,”Hey, I want my matching to go into a Roth,” you can indicate that. And whatever that tax liability is, you pay the tax liability, cuz the corporation’s always going to want the tax write-off, so they’re just not going to be like, “Okay, yeah, let’s put it in the Roth.” There’s going to be some kind of tax liability gets that gets pushed to you to pay for doing that Roth match contribution. Yeah you’re paying tax on your employer match if you want it to go to the Roth. Yeah. Um I heard some people can put even most of their salary you don’t need a 401k Roth. I heard something every every plan is going to be a little bit different so yeah so some plans offer the kind of non-qualified 401k where you put after-tax money in and you’re able to convert it every plan is a little bit different so you just have to check with your plan plan and say hey what what do I have access to?

Everybody’s got different rules so if you make 200,000 and only need 50 to live on does that mean you can put 150 into the 401k Roth? So, there are certain contribution limits. And so, when it comes to the 401k, there is still a contribution limit but, the the company at times offers a separate plan, which is considered a non-qual, that allows you to put much more into. Again, every employer is a little bit different what they have to offer, so I’m not saying like,”Yeah, you can do that,”because you may not have a plan that offers that ability.

Uh what else everybody have anything any other questions for us?

I think that’s it all good questions. Thank you for joining us today and hopefully you learned something new or at least raised some questions that you need to go chase down with your plan provider. So, thanks everybody and we’ll look forward to talking with you again soon. Yep. All right.

Before I get going on the presentation, I do want to let you know that we cannot record these or I can’t uh give out the actual presentation or the deck it’s termed. Uh so for compliance per reasons I I’m not able to share that or to record this and we do ask that if someone uh that you cannot record either and distribute these. It has happened in the past. Uh so these cannot be recorded and then redistributed. So, uh, also I do have some other presentations coming up. I have IRA planning coming up in, uh, November 3rd at 6:00 PM here, Central time. Uh, talking about different types of IAS and planning that, what should you be having, uh, or creating or, you know, funding as you get closer to retirement or maybe in retirement, what types of accounts are the best for you moving forward for tax reasons. another presentation, the good, the bad, and the ugly on annuities, talking about different types of annuities, which there are many different types of annuities out there. Uh some uh that I would certainly recommend, some that I probably would not recommend uh in various reasons uh or situations. So, uh again, there are many different types there. Learn a little bit about that. So, I’d love to see you on Wednesday, November 18th on that one. that will be at 2 pm central time for that presentation as well. Uh you do also have some access to some educational resources for uh webinars to see what else is uh coming up uh that you would like to listen to and invest savvy podcast that you have access to to hear and also our AIS website and blog mean Aerys meaning Alliance Retirement and Investment Services. That’s what ARIS stands for there. And you can see check out our website uh see bios of all of us on on this team and see what types of products and services that we do offer which I’ll be talking about that at the end of the presentation as well. So digging into an estate plan. What is an estate plan? It’s a basically it’s a map. It’s a it’s a way to get from where you are now to where you would like to be in retirement um and you know at the end of life basically. So, how are you going to pass things during your lifetime, maybe to other family members, generations, or after death? How do uh things pass um the way you would like them to? It reflects a way that you want your personal and financial affairs to be handled in case of incapacity or death. Who needs an estate plan? Most likely you. So it’s not just for ex you know extreme wealth although that’s even a different level of estate plan that would be needed if you are uh do have uh higher wealth and we’ll talk about some estate uh tax levels of what type of an estate uh you would have to have for additional taxes on there. Uh so without an estate plan you can’t control what happens to your property if you die or become incapacitated. An estate plan makes your wishes clear. Um things need to be documented in an estate plan. Uh many times you might tell a person, I’m going to leave you something, but if it’s not documented, it may not be honored. Uh proper estate planning can preserve assets and provide for loved ones. especially needed if your spouse isn’t comfortable with um estate matters or financial matters. If you have minor children that need to be cared for, that does need to be documented on what the wishes are. And if your net worth exceeds, again, here’s where I was talking about some more extreme wealth. If you have an estate uh of more than 15 million, that’s where the transfer uh tax exclusion uh ends. That’s where uh that is up to 15 million. If you have, let’s say, a $16 million estate, the first 15 million is not subject to estate taxes, but anything above that, that 1 million would be subject to the estimated 40% estate tax. And as I go through this as well, there is a big difference between estate tax and uh income tax of things that would be taxable is if you inherited that you might have to pay income taxes on. But that is very different from the estate tax which is what this is referring to this up to 15 million if you own property in more than one state and financial privacy is a concern. Uh the reason the financial privacy because if an estate does go through probate that is public information. So your estate uh information can be out there of uh when you passed away who beneficiaries may be and uh someone could come out of the woodwork and say hey that person was going to leave me something. Uh you know but it does need of of course to be documented but it’s certainly public information.

basic estate planning concepts, uh planning for incapacity,

uh health care, property management, uh planning for death, uh wills and probate, uh tax basics, lifetime gifting, and life insurance and trusts. Uh these are all big parts of the estate plan. Do you need some of this or do you need all of these? planning for incapacity and can strike anyone at any time. Uh failing to plan uh to plan means you could have uh to appoint a guardian. And one of the things as I go through this uh screen on here is uh if you remember a a case back in the ‘9s, Terry Shybo uh Terry Shybo in the state of Florida was a 26-year-old um went into a coma from a heart uh condition and was incapacitated for a very long time. They she was on a feeding tube and her husband eventually after a long period of time wanted to remove her from the feeding tube and let her go naturally. Her parents got involved and said no, do not do that. And so the courts got involved on who had to say so first. Was it the parents or the spouse of this person? And it went on for I believe it was about 14 years total where the court said remove the feeding tube. Then the higher court said, “No, do not re put the feeding tube back in.” And it was just a big uh legal mess, but planning for incapacity is ultra important. Even if you are younger or older, it’s still something that needs to be planned for. and that 14-year process. I don’t know how much attorneys they uh that cost both sides for the spouse and uh the parents, but uh what a mess because things were not documented. Planning for incapacity for healthc care d uh directives is uh first of all having a will uh durable power of attorney for health care. These are important documents that if you are incapacitated and cannot make decisions on your own uh and who’s going to sign off, if there needs to be surgeries or anything that needs to be done on your behalf, who’s going to be able to sign off legally on these things. And having these documents is vital. It’s very important to have um you know the will with a power of attorney and do not resuscitate orders. My mother-in-law who lived with me and my wife uh for the last three years of her life uh did actually have that in her uh directives that uh if you know if she her heart did stop they can take certain measures CPR but they had a do not intubate and if something and they had a do not resuscitate. Uh so um that is certainly something that is important because uh my wife’s sister who was the healthc care power of attorney is the one who could authorize what measures to take. So your living will puts your instructions in writing uh lets you designate an agent or someone to act on your behalf to make medical decisions or healthc care uh decisions and do not resuscitate. uh directs that uh uh resuscitative measures be withheld or withdrawn. Again, as I go through the presentation, if you do have any questions on any of these slides, please go ahead and type it in in the question and answer the Q&A or the chat box, and I will get to those at the end. Planning for incapacity property management tools. So, joint ownership, power of attorney for financial, this is different than power of attorney for healthcare. I’ve seen that situation where someone had come in and uh to uh to actually it was a bank that I was working at and said uh his mother was in the hospital. I have power of attorney. I need to help her pay her bills. Who do I speak to or how do what do I do with this power of attorney? And it turned out he had the healthc care power of attorney not the financial power of attorney. So it’s very important to know which documents are for health care or for property uh or financial. But uh joint ownership first is something that you would put to have joint people on your account. Maybe it’s a spouse, maybe it’s adult children or a another trusted adult that can uh have access to your funds. Uh and if they are joint ownership, they do have 100% access to your assets on whatever they are joint on. So hopefully it is a trusted person that uh has access but they can easily pay bills for you, do any financial transactions uh of accounts that they have access to. Durable power of attorney is they don’t have uh full access but they do have uh you know they can actually make withdrawals on your behalf. They can write checks on your behalf if they do have power of attorney. a living trust. Uh a trust might be something that is important. A trust uh is what you would be what’s called the trustee on your trust. If you have um typically what you would name is if you pass away or are incapacitated in your trust documents, you would pre-name a successor trustee who would take over of all the assets that are in that trust. they can act on whether you are living but incapacitated or if you pass away they automatically become the trustee and would have access to all of those assets. What happens if you die without an estate plan? Some property passes automatically if you do have joint ownership or if you have beneficiaries designated on accounts like IAS, other retirement, life insurance, uh anything, you know, if you have a savings or checking account here at Alliant, we highly recommend that you have either joint owners or beneficiaries named on each of your accounts that you have. Whether you have savings or CDs or IAS, make sure you have beneficiaries named on all of those. Not just uh you can’t just name one beneficiary across the board. You have to name it on your savings and checking. You have to name it separately for your IRA. And if you open up CDs, you have to add beneficiaries on those as well. Uh so it’s very important to know what you have, what types of accounts do you have and are there beneficiaries named on these. So if you have um you know it you know automatically passes to if you pass away if you have a joint owner on uh these joint accounts that joint person automatically owns the assets if you do pass away. If you do pass away with uh IAS or anything that has beneficiaries named, there’s a couple of documents needed. Number one, like a death certificate that we would need or a financial institution would need. Uh and sometimes it’s a letter of instruction or some type of beneficiary form to complete to get those assets. And those do pass without going through probate. As long as you have beneficiaries named or joint ownership, these do not go through probate and which is uh what you see on all other property generally passes according to state intestasy laws which is basically going through probate. What happens if you do die without uh an estate plan and it goes through intestasy or uh probate? Intesty laws vary for each state. I went through this with my parents when my father passed away first in 2015. Uh my mother was diagnosed with cancer very soon after within weeks of him passing uh and she passed away in 2016. So they passed away about 15 months apart. And when we found out uh you know that after she passed and we were starting to go through everything uh looking for statements on anything, did she have any credit cards that need to be paid? Uh there was a credit card that she paid off every month but had about a 2250 $250 balance uh that we had to pay. Uh so and some debts need to be paid, you know, if someone passes away. And then you also have to make sure that there’s beneficiaries or how do these things pass. So we did find out from my uh mothers going through everything and we actually saw an attorney that she updated her will after my father passed away. She did update the will but we found out she didn’t get to everything. There was two accounts, two savings accounts, one with the CD um and one uh bank had a CD and a savings, but that was a total of about $80,000 that did not have beneficiaries named or no joint owners. And we also she had her condo in uh Florida. So her condo was valued at about at the time about 220,000. So no beneficiary named on a on a condo. The condo was just in her name. She did take my father’s name off of the condo, but uh she didn’t take any other uh further steps. Again, she was diagnosed with cancer very soon after my my father passed away. So now we have about a $300,000 estate, $220,000 in the condo and 80,000 in the savings and CD. So $300,000 estate goes through probate. So, Florida law is waiting for about six, seven months to pass by. Probate is open. The attorney takes the will again, which was updated even though she instructed in the will that everything is divided by five and goes to the five kids. I’m one of five uh children. And so, that’s all the instruction was there, but a will goes through probate. A will opens up probate. So, we go through all the process on there. And finally, six, seven months later, a judge stamps and says, “Okay, probate is closed. Go ahead and put all the accounts in the five kids’ names.” So, we could put the condo in our names, all five of us. And then we can uh end up closing out the savings and CD that uh that were there and that 80,000 became available. But as we’re going through all this and speaking with the attorney on and off and my sister was the executive of this estate and uh you know just working with this attorney for the six seven months of this probate time. Everything is closed. We got the accounts. We got the condo in our names which we ended up selling. Uh but then we get the bill from the attorney. Little over $9,000 for the for probate. Um and we did most of the work on that. That’s what the uh uh the big part is on that. We did a lot of the leg work on it and uh a little over $9,000 attorney bill. So, how much could we have saved or it could have been saved if uh joint ownership uh even, you know, maybe even on the property? Are the beneficiaries uh making sure everything is in order? Boy, there could be a big difference. Sometimes people need a trust, a trust and wills. And if you go to an attorney, maybe it might be a couple thousand dollar, but it is going to be a lot less than fixing it all later and going through probate. So, sometimes biting the bullet on that. If you do need an attorney and as I end this presentation today coming up in in a little bit that I will put up that survey, please say yes and you and I can have a one-on-one conversation to see what is your situation. Do you need to speak to an attorney? And we’ll certainly go through it first.

So, what happens if you die without an estate? Here’s another example of husband passes away and there’s an account in his name or just some asset in the husband’s name and there’s a spouse and two children. Typically, maybe that uh husband would have said, “Of course, if I pass away, just everything goes to my wife.” But in some state law, it could be that if there is no estate plan or no beneficiaries named that the state going through probate might say 50% goes to the spouse and the other 50% go to the surviving children when his wishes may were not to give the children assets yet. Uh but uh just give everything 100% to his wife. Uh but because there was no directive on there, there could been that state law that says this may have happened. Wills and probate. Again, a will is a cornerstone of the estate plan. Directs how your property will be distributed. Again, that’s what my mother did have. Names an executive, which she did as well. Uh can accomplish other estate planning uh goals, written, signed, and witnessed. Uh most wills must be probated. Again, that’s that long waiting period where again, it’s public information. Someone can come out of the woodwork and say, “Hey, if that person was going to leave me something, of course, there needs to be documentation.” Uh, but if there is, you know, could that delay or even extend that probate period if it is contested? It certainly could. And then now we’re talking more fees, more lawyers, more uh just legal things going through a process. Uh the will is filed with the probate court. Again, when my mother passed away and we see the attorney, he took the will and he filed that with the court and now probate opens and it becomes public record. The executive collects the assets, pays the debts and that’s what again what my sister at the time did. We did file one final tax return for my mother uh when she passed away in 2016. So 2017 before April 15th, we did file her final taxes. Uh typically process lasts several months to a year or longer if it is contested. Pros and cons when we talk about the first one here, time and costs are modest. The cost of the actual probate might be modest in the time. Uh court supervision protects against creditors. So uh if there are is extensive debt um that things can be frozen during the probate period when maybe you can’t get assets yet. Uh so there is protection from the court on those things. Cons uh that can be time consuming especially if it’s a complex estate. Uh title transfer delays. Now we’re talking the fees of attorney fees and things like that. That’s the over 9,000 that we had paid. And then ancillary probate if there’s uh anything ancillary probate maybe if it was done uh maybe created in another state but they live in uh a different state now uh so there could be some uh state issues on that uh depending where a will or um uh you know trusts were created and I do recommend that if you did live in one state let’s say you lived in Illinois which is where I am now if you live in Illinois now, but you moved to, let’s say, Florida and but you did all your documents in Illinois. I would see an attorney in Florida just to make sure everything is uh is okay, up to date, and maybe the term reciprocal. What was done in Illinois would be honored still in Florida, but it would be recommended to at least see somebody on making sure that everything is in order from moving from one state to another.

Uh sorry if I can go back. Uh all right. So and again it is public record wills and probate. Avoiding probate. Can you avoid probate? Yes, you certainly can with an estate plan and making sure that you have beneficiaries named. Uh things that don’t have a beneficiary. Uh a lot of things that come up is what about my house? Can I can I add a beneficiary on a house? Some states you can. Uh you can go into to the county and you can record a deed with a beneficiary. Um check you know you might have to you know do some AI search on that to see what state you are in. If the state allows you to add a beneficiary on a home if it is not how do you how does a house not go through probate then? Maybe it’s creating a trust or adding joint people on your home. Here’s a, you know, an example of if, let’s say, a mother says, I want to add my adult son on my house. Can I do that? Yeah, you can record a deed. Add your son on the house. Uh, certainly something that can be done, but now your son does have access to this house. He is an owner on this house. Um, and there’s also, you know, some of the protection things of what if the son in this example had some legal issue, intentional or not intentional, doesn’t matter, but what if there was some type of legal issue, maybe gotten an accident and is going to be sued for whatever reason? your home is now part of that uh potential asset that could be seized or something. If um if there are uh some legal issues on that because your son is owner on the house, maybe it could be subject. Now, that’s where seeing an attorney would hopefully uh protect a lot of these things. But, uh just know that adding joint people on could give them access to an asset that maybe you don’t want someone else to have an uh uh access to. But yes, certainly the estate uh can avoid probate, making sure you have beneficiaries named, maybe a trust, making sure your wills are updated, uh you know, uh powers of attorney, again, all of these documents. So, own property jointly with rights of survivorship, complete beneficiary forms for all of your accounts, uh and life insurance, uh maybe a potential trust, and start to make gifts if you would like to start gifting money away. uh while you’re living. Some people say, “I wish I could give the money to my kids while I’m alive so I could see them enjoy whatever they’re going to use it for.” That certainly can be, but uh there might be some limits on what you can gift. So, transfer taxes. Um if you start to give money away, there’s a federal gift tax imposed on transfers you make during your life. And then there is a federal estate tax imposed on transfers made after you die. So during your life, federal gift tax after you pass away, it is a federal estate tax. Federal um uh there’s also what they call a generation skipping tax uh that you can also gift to grandchildren and below. So not going directly to your children but maybe to grandchildren.

So, lifetime transfers for the federal gift tax. This is giving while you are still alive. Gift tax applies to transfers made during your life. Now, you can there is an exclusion that you can gift $19,000 per person uh to not be taxed. And so if you are a single person and you want to if you have let’s say three children you can give each of them 19,000 without going through any type of issue for taxes on any for anyone. So you can give that 19,000 per person. If you are married filing joint you can each gift 19,000 per child. So you can give 38,000 to each child uh each year if you wanted to uh up to $15 million. So this uh you can gift this $15 million for a combination of while you are living and after you pass away you can give up to 15 million without going through the estate tax. The 15 million exclusion is the largest it’s ever been. uh transfer on death, federal estate tax. Now, we’re talking after death. Uh estate tax applies to transfers made at death. Generally does not apply to transfers made to your spouse or charity. So, if it’s to your spouse, that is not a taxable event. Even if it’s more than the 15 million, 15 million is excluded from all uh transfers, gifts, and estates combined in 2026. So what that means is that if you gifted while you were alive over your lifetime, if you gifted $5 million and after you passed away, if your estate is under $10 million remaining, that is a total of 15 million. So those are a combination of what you gift during your lifetime and after you pass away, you can gift up to $15 million combined. any portion of exclusion used for gifts uh will be unavailable to the estate.

Uh important consideration for married couples that these are what is called portable. What that means is that each of you can have a $15 million estate. If the husband let’s say in as as an example the husband if let’s say they have two separate estates the husband has 20 million and the wife has 10 million. If the husband passes away his 20 million can go to the wife tax-free even though it exceeds that 15 million because it’s going to the spouse and if the spouse passes away for with an estate of 30 million then it is fine. it it does not go through the estate tax um because there’s you know that portability is a total of $30 million that can be left. There is also the generation skipping tax. Um this is where it goes to grandchildren or below. This is actually an additional 15 million that can be done. uh as I was researching this is that the uh the you know the estate tax and the gifting up to that 15 million the generation skipping has an additional 15 million. If you have questions on that see an attorney you if you have an estate that is going to be subject to some of these uh I would highly recommend speaking with an attorney on that. So, there’s a $15 million for the generation skipping tax uh and or for the exclusion for that. Uh unlike the gift uh tax, this is not portable. Meaning, if you have um you know that you’re going to do that, that $50 million does not carry from husband to wife in that same example. Uh it does not do that for the generation skipping. So, here’s where what estate taxes look like. So going back from 2024, 25, and 26, uh you could see how it’s in increased a little bit. Now we’re at $15 million for the uh for the exclusion. If you have again a $16 million estate, if you are a single person and you leave $16 million, that first $15 million is not taxed. That million above that will be taxed at 40%. even though it could be money that was already taxed. Uh maybe it’s all in savings and it was already money that was earned and taxed already. Uh there’s an additional estate tax if it’s over 15 million. Now, as I said earlier that there is a difference between estate tax and income tax. So what might a beneficiary have to pay in income tax? Uh basically anything that has not been taxed yet. For example, an IRA. Let’s say mom has an IRA. Let’s say it’s $400,000. And an IRA that maybe she’s been doing some required distributions on, taking money out over time, passes away with this $400,000 traditional IRA in this example, and has a son who is a 100% beneficiary. Uh, so that son now inherits this $400,000 traditional IRA. And again, this is money that has never been taxed yet. So it has not been taxed. So the son has to pay tax on that $400,000. But does he have to pay it all at one time? Can he spread it out over a period of time? If that son inherits that, now we’re talking he has 10 years to liquidate that IRA. So say 40,000 plus interested growth over that 10-year period on average is what he would have to uh take out and pay taxes on. So that is based on income tax that would be taxed at the son’s tax bracket. But again that is different than the estate tax. So that’s an example of what might a beneficiary have to pay in income taxes. Lifetime gifting allows you to see the recipient enjoy your gift allows you to uh minimize transfer taxes by taking advantage of the $19,000 annual gift exclusion and that is per person. Removes future appreciation of your uh property. So, if you gift uh you know at you know $19,000 maybe that’s um and they invest that the people that inherit you don’t have to pay taxes on any of that growth because you gifted it away. No step up in basis in your property. So, if you um have not gifted this money uh or if you did gift it, there’s not a step up in the cost basis. Here’s an example of what stepped up cost basis means. If you have a stock, let’s say a brokerage account that is not an IRA, and I’ve seen this example many different times, but here’s an example of let’s say someone had a stock account or a brokerage account with individual stocks in there of stocks that someone owned for years, maybe let’s say like Exxon Mobile or something that’s been around a long time. And let’s say that stock was purchased for $30,000 and it’s still in this brokerage account and it is now worth $150,000. It is appreciated, you know, a lot. If the person sells that stock while living, they will have to pay capital gains tax on from the 30,000 up to that 150,000. If that person passes away and there’s a beneficiary named on that account, the beneficiary owns that stock as if it was purchased at 150,000. So if that beneficiary sells the stock at 150,000 right after death after receiving those that asset, there is no taxes paid. That is stepped up. the cost basis is stepped up from 30,000 up to 150,000 and it is not a taxable event. So again an example of what stepped up basis means lifetime gifting uh transfers uh excluded from the gift tax you can gift 19,000 or if you are married you can each gift so 38,000 per year per person. So again, if you have three children, husband, wife, give three children, $38,000 each per year, they can do it again next year. And every couple years that that $19,000 does increase. I remember when it was 11,000 uh not that long ago, and it’s been just increasing over the years. Uh I do see that there are uh a good number of questions on here. So again, just a reminder, if you have not asked a question yet and you do have one, go ahead and type it in Q&A or the chat box and I will get to those at the end of the presentation. Uh if you’re contributing to a 529 plan, what is a college savings plan and you want to do that uh gift it to someone, you cannot gift it to a child to put it in their college saving plan. you can do directly to the 529 savings plan and you can gift up to 95,000 or 190,000. That is a lifetime amount that you can do. You can’t do that one per year. Um that you can gift 95,000 or 190,000 taxfree. And if you’re also going to uh help with tuition, uh you can pay a school or you know the uh education uh directly, but you can again do not gift directly to the person to pay tuition. You have to pay. And so no gift tax on amounts paid directly to a uh school for tuition and no gift tax on if you are going to help someone pay medical bills. Again, you can’t gift it to someone to pay their medical bills. You can pay the medical bills directly and that is not taxed. Creating a trust, it’s a versatile uh estate planning tool. Uh can protect against incapacity or uh avoids probate. So when you have assets in a trust, one of the terms that they use is what they you might have heard when they call it a living trust. Uh basically what that means is if people can die, the trust can keep on going. When you are a trustee of your own trust and you if you passed away, you would again pre-name successor trustees. So a trust can keep on going and going and you can name an order of successor trustees. Now sometimes uh trust might be dissolved after someone passes away and the successor trustee becomes a trustee sells all the assets and distributes it to the beneficiaries. But sometimes there are cases when a trust would need to remain open. Maybe it’s to spread out payments to beneficiaries over a long period of time. Maybe it’s for special needs purposes of a special needs person that is inheriting something that is going to be spread out over a long period of time. That trust needs to stay there. So successor trustees. Now if the successor trustee passed away, maybe there’s got to be someone else named who would take over after that. So a trust can keep on living even after people die. It can protect against incap incapacity, probate, and minimize taxes. Allows professional management of your assets. Provides safeguards to minor children, elderly parents, and other beneficiaries. Can protect assets from future creditors, and control over the property. What is a trust? It’s a legal entity. Uh parties, uh you would have a trust, a granter, a trustee, a beneficiary. Who are all these people? You and I can certainly have that one-on-one conversation of what’s a what’s a granter? what’s a trustee or all these different things we can certainly go over if we do have this uh one-on-one conversation. Uh there’s a difference between what is called a revocable trust and an irrevocable trust. A revocable trust is probably 99% of the trusts that I see most of the time people are they create a trust. They are their own trustee. They name their kids or family members or charities as beneficiaries and they control it and they can make changes. Revocable meaning they can change things. Uh remove beneficiaries, add beneficiaries. They have all the power to to do that as a trustee. An irrevocable trust actually takes this assets out of their estate. more wealth transfer is used for um in an irrevocable trust. An irrevocable trust, the person who who has the money has to name someone else as the trustee and that trust or trustee would c control the assets for someone, but the money is removed from their estate. Again, most likely for these estate tax purposes of this 15 million that we were talking about, life insurance. So, someone might say, I don’t have any assets. Um, I don’t own a home. I’ve haven’t been able to save for whatever reason. And but if you have a life insurance policy, that is does create an estate. You have something to leave to someone. It can provide needed estate liquidity. life insurance proceeds are included in your estate. So, if you have, let’s say, a $13 million estate of assets and you have a $3 million life insurance policy, that is a $16 million total estate. Now, where that 1 million above that 15 million could be subject to the estate taxes. So, life insurance proceeds are part of that estate. Uh key issues of ownership is a policy. Again, is it revocable? Is it irrevocable? Uh here’s what a a life insurance for in an irrevocable life insurance trust. An eyelet is what that’s referred to is you have an insured. So you the insured, so you’re the person with the assets. Uh you create an irrevocable trust and name someone else as the trustee. Again, you cannot be a trustee of your own irrevocable trust. Uh so you’re going to name trustee and who’s going to get the assets? The beneficiaries. The trustee purchases a life insurance policy for your life. So someone else has to buy this for you, the trustee of the irrevocable trust. And then again, beneficiaries would be named. you can make cash gifts to pay the premiums for this uh for this life insurance. Um beneficiaries could potentially have some access to cash value um in the policy. Uh trustees can use uh cash gifts to pay the premium. So you can gift money to the trust uh trustee of that to pay the premiums for your own uh insurance at death. If you pass away, uh the uh irrevocable life insurance trust, the eyelet receives the proceeds from the insurance policy. Uh proceeds are sub are not subject to estate tax because again it’s outside of your estate. Proceeds distributed according to the terms of the trust. Whoever you name as beneficiaries and beneficiaries receive the proceeds free from estate tax. So, in conclusion, as I go through uh the end here, uh again, I see some questions. I’m going to be taking those in just a moment. I’m going to put up the survey here in just a few moments. But if you if you have not implemented some type of plan, please say yes when I put the survey up and we can at least go through that conversation to see what do we think is needed. Some people will just say, do you think I need a trust based on here’s what I have? Um, or should I just get the make your will powers of attorney? I would always recommend there actually are some online sources that you can do. If you’re a do-it-yourselfer type type of person, there are online sources that you can create um your own uh legal documents over maybe wills, trusts, even powers of attorney. Uh much less of a cost. There would be a slight cost on some of these. Again, you’re not getting the uh the big advice from an attorney. So, so many times that answer might be I think you should talk to an attorney and get this done properly. If you have a complicated estate, I would highly recommend uh you know, speaking with someone. So, are you going through any of these questions? Have you imple implemented a plan? Do you have a valid will? Again, maybe you opened it up or started your will in one state, but you moved to another state. I would certainly recommend that that’s up to date. Are transfer taxes a planning concern for you? Again, over that 15 million, uh, does your overall estate plan reflect your current wishes and circumstances? Life happens, things change, people come into your life, people go out. Uh, some people are passing away before you, uh, babies are born and your beneficiaries might change over time or just your wishes might change. Even if you have a will, a trust, all those documents, uh what if your power of attorney that you named passed away? Do you have someone else named after that? All of these important documents are so important to have. So, as I go through the questions here, I’m going to put up a couple of things here. First of all, I’m going to leave this on the screen if you want to take a picture of it. And there’s a um a trusted will u estate plan. This is kind of a one of these do-it-yourselfer opportunities. Uh if you want to take a picture of this and then we can again if we do have a one-on-one conversation, we can certainly talk about this uh a little bit more. Also going to put up here here’s some of the uh products and services that I offer here. I’m uh I do offer full financial services as a financial adviser here at Alliant. Um sometimes it’s the plan. So you might say, “Here’s what I have. Here’s what I want. Did I save enough? Did I do enough? Am I How much can I spend in retirement? What about inflation? What about how much is my social security going to be? What about if you have a pension from anything? How much can I spend in addition to that? And be assured I’m not going to run out that full financial plan. It is complimentary. We do not charge for this. It certainly then we can go to the next step. If you would like more investment management, we can talk about what uh do you want to be ultra ultra-conservative? Do you want to be more aggressive somewhere in between or a variety of different accounts depending on the different types of assets that you own? I’d be happy to go with uh through all of that with you. Again, if you say yes, I will we can certainly have that conversation. Uh here’s my information up on the screen as I go through questions. I’m going to leave this right here. Uh, if you would like to, if you have your phone handy, you can put your camera on, hover it over that QR code, and if you do want to set up a time, whether it’s right now, uh, you can hover over, click on that little yellow thing that pops up, and you can have access to my calendar, and you can schedule that appointment actually right now if you so choose. So, I’m going to go through the questions here, and I am going to put up the survey here right now. So, you should hopefully see that up on your screen. Uh, so check yes, not at this time or no on here. And hopefully, again, you and I will have a one-on-one conversation. So, I’m going to go through the questions here. So, and might not be in the order uh exactly, but I’ll try to get through all of these. Uh, what are um what are the tax ramifications on a transfer on death for beneficiaries? Uh, so depends on the type of an account. um for taxes if it is a savings checking CDs where you have money in a bank or a credit union and you’re going to um if you passed away that is money that’s already been taxed throughout the years. All the interest has been you receive a 1099 those the principal balance has already been taxed. So, the only thing that’s going to be subject is when they when your beneficiaries file your final tax return and then those taxes are paid and your estate. Um, the things that are going to be taxable to the beneficiaries are things like IAS, traditional IAS, 401ks. The things that are taxable to you upon withdrawals will be also taxable to the beneficiaries. That’s the main things that are going to be taxable to beneficiaries. But just think if you have savings, checking, CDs, those types of things. Um, not going to be the principal is not going to be taxed unless it’s over 15 million for the estate. Then there certainly could be the estate taxes. But as far as income taxes are concerned, very minimal or no uh taxes on some of these. Uh remember the the home. If someone inherits your home, again, remember that stepped up basis that we me my brother uh brothers and sister got an appraisal on my mom’s condo for 220,000. We got that for even though she bought it initially at 130,000ish or so. And we did not have to pay any capital gains because we sold it for what we bought uh what the appraisal was. So, we did not have a taxable event on selling the property. uh if uh there is a living revocable trust do the assets go into that which is uh not probated and then the personal items go into the will? I have heard uh that the probate can be avoided. So yes, if you create a trust, you have to put those accounts in the trust or retitle. So, if someone has, let’s say, $100,000 savings here at the credit union and they create a trust. So, they go to an attorney, they have a trust, and they uh call us and say, “Hey, I have this trust. I have this personal account. We’re going to add or create a trust savings account, and then we would transfer that 100,000 to the trust.” Uh, if you pass away, your trust says who the beneficiaries are, and that will avoid probate. Uh anything else if you don’t have a trust anything everything else needs to have beneficiaries named. Um so if you have any personal items that you just said it uh that would go into the will. So personal items might mean what about the car? Car could be um you know especially if it’s an expensive car could potentially be probated uh if there’s no beneficiary or other person on the car. Um, what about artwork? What about things hanging on the wall? What about jewelry? All those things would be in the will. Um, things that don’t have account numbers basically, uh, would go through the will and typically are not probated. I mean, they’re not going to probate, you know, it’s not going to go in and start digging through the drawers and look for any, you know, necklaces or rings or anything like that. But, uh, but personal items, um, would be in the will. And I highly recommend documenting. I’ve heard people talking about like there’s, you know, little things, knick-knacks on the table and if you lift it up, there’s a one of the kids’ names is under there. They’re already claiming it even while mom and dad are still alive. So, um, but document on who gets what and typically in the will. Uh, do you work with people in Wisconsin or just Illinois? I am licensed probably in about uh at least half of the states, about 25 states I am personally licensed in, and Wisconsin is one of those. So yes, I do. Uh is TOD uh uh transfer on death on house taxed? Again, that is that stepped up cost basis. Hopefully you got that out of that even maybe after you type that question in. Uh but with the stepped up basis, it is not taxed. There is a stepped up cost basis on the property on that house. Uh let’s see. My husband is 42 and refuses to consider getting a will uh due to his age despite me bringing it up several times. We don’t have a prenup. What can I do to protect your myself? Um well, you can certainly do these things yourself and I would highly recommend doing something. Um but uh with the prenup situation, maybe there’s one of you has more assets than the other. Uh so but uh even at age 42 again that Terry Shyo situation is it rare? Yes. Is it possible that it could something medically could happen? Absolutely. Uh so but at least you know a will powers of attorney those are cheap and not too too expensive. You can do those yourself even. Um but uh at least having some of those whether it’s trust and beneficiaries and extensive estate things that might be a harder issue for you getting him to do that. But uh um but having a will and powers of attorney um we got those when my kids were very young and uh we got those when we were going on a long trip and you know it was one of our first big trips without kids and what if something happens to us? So we before that trip we went to an attorney and did our will and uh powers of attorney. Uh we didn’t have much assets way back then but uh uh but we made sure that things were um in place for that. So even and we were probably around that age uh maybe a little bit younger even. Um so but uh protect yourself and at least start looking at things that you specifically own. Of course, you can’t make him do something. Uh, but, uh, at least do these things for yourself or at least see if you can get if it’s a if it’s conversation that you and I would like to have, I would if he’s involved or would like to at least talk about that, maybe we could talk about some of the basic estate planning things. Uh, I have a trust and will made in Arizona but moved to Illinois. Do I need to update and redo in Illinois? I would recommend speaking to an attorney about that. Um I can’t guarantee that. Yes, it you absolutely have to make changes in that but uh it certainly with legal documents I would have someone look at that for sure. Uh what is the cost for a consultation with you? Zero. Um you know now we do some like I said some investment management and certainly some things um that might have some you know fees attached to it. Not everything. Some of them do. Many things I do don’t have fees. But the consultation, the initial complimentary. If you want to do the full retirement financial plan, which is very comprehensive, you’re not going to pay a dime for that either. Uh are the online trust and will companies uh worth it? Uh such as uh trustandwill.com, which cost roughly 500. Attorneys are much more expensive. So they can be worth it if you do not have a complicated estate and you just need the basic documents even when you go to an attorney. Here’s where I know many documents are a template. You know, I wish to leave blank blank, you know, you know, things like that. It’s just filling in the blanks, which you can certainly do. Uh if it’s not complicated, you can absolutely use one of the online sources for those and they can be worth it. Some of them might be a couple hundred bucks. Some of them might have an ongoing uh and I’ve heard a hundredish dollars a year for document storage. So even if you create it up front, it’s it’s all e documents uh you know electronic documents. So sometimes those are all kind of still available through the site and you will pay a an annual fee to keep that up. Nominal call it a hundred bucks a year but very so much so it can be worth it. Uh what is your fee? Do you operate on a flat fee or for percent of investable assets? Um to do the plan, nothing. You’re not going to pay for anything. If I do certain things, let’s say someone just wants a guaranteed interest rate for a period of time, I don’t charge a dime for that either. You’re not going to pay a fee. Now if we have like an advisory account that has uh stock bond ETFs and things that are kind of bought sold bought sold there could be a percentage call it a oneish one plus or minus uh of that uh p of what we have invested with you not of your total assets just what’sever in that advisory account you will pay that oneish percent um on that one of the things that I do not do which is available some but I’m choosing not to do is if you have assets somewhere else and you say Joe we want to pay you um you know an annual fee just to tell us what to do with the stuff that’s over there somewhere else I do not do that I can do that but I choose not to um you know just pay a you know receive a fee for assets that I don’t have access to. Um, so but if it’s an advisory account, if you have, let’s say, a $250,000 uh IRA that you want to transfer over and put it in stock bond, you know, ETFs, things like that, uh, that I am certainly managing. If it’s that 1ish percent, uh, then that’s what that fee would be just based on that account. Uh, what percent uh, or what uh, what parent on Medicare? I don’t know what that means. Um, I just see what parent on Medicare. Um, if you are still on if you maybe you type something else in there. I’m still scrolling. Uh, do you work with people in Wisconsin? Yes. Uh, what should all of the paperwork uh be stored? Example, at our home uh deposit box at a bank uh with a family member. Um, that’s a good very good question on that. I’ve seen, you know, uh, you know, safety deposit boxes at banks. if you have some type of uh we have a kind of like a fireproof box that we have documents in um at the at the house. So, yes. Um but to family members or beneficiaries or successor trustees, if you have a trust and there’s trust documents, uh having a copy to the successor trustee is not a bad idea or at least access for that successor trustee to find these documents if you did pass away. um somewhere where other people know where these are. And I know many times there’s privacy issues. I’ve talked to many different clients where they say my kids have no idea what I have uh and I don’t want them to know yet. So sometimes, you know, giving access to these documents might disclose dollar amounts and things like that that you don’t want. But at least if you passed away, do they have access to those documents then to help figure these things out? but they can be stored anywhere. But safety deposit box is not a bad thing. Um, as long as you can get to those uh pretty quickly. What if something happens and you don’t have a power of attorney for healthc care um and someone goes in the hospital over the weekend and you can’t get to the bank uh to get to that safety deposit box. So maybe copies at least uh at home as well. Uh let’s see if there is I had one parent who passed away. uh he was on uh Medicaid. He passed away in 2021. Mom is alive. Uh what are her options? She’s also on Medicaid. So I’m assuming on Medicaid is that they have limited or minimal assets um if anything. So um I have your name and your information here. So if uh one parent passed away and the other is on Medicaid now, do you have powers of attorney? Do you have those things? Um, I’ll email you separately on that. Maybe we could if we’re not going to chat, maybe we can at least email back and forth on on that. Uh, what happens to their house? Um, they have uh paid it off. So, if they are on Medicaid, do they still does uh is the house still owned? Um, or did they have to, you know, are they in a Medicaid situ? Um, so yeah, I have many questions on that actually on what needs to be done with Medicaid cuz I know typically if there’s a spousal situation or if it’s just one person on Medicaid on what assets they can own to be on Medicaid and did you go through an estate attorney on maybe, you know, starting to gift away other assets and things like that. So, I do have some other questions for you on that that I will certainly email you. Um, I think that’s all the questions. Uh, wait, uh, there’s one I put my put on my calendar to make an appointment with you in March. Uh, thank you. Okay, so yep, I’ll speak to you in March. And that’s it. That’s all the questions that I have. Thank you all so much for your time and attention, and I will hopefully be speaking with you very soon. Thanks. Have a great rest of the day.

All right. Evening everyone. Hope you all are doing well. We still have a couple of minutes. People are joining.

So, we’ll give them a couple of minutes.

I’m not sure what states everyone are joining me from, but in Texas we just started early voting yesterday for our midterms.

So, hopefully everyone’s getting out there, at least planning to get out there and vote.

So, I have this right at 6:00. We’ll have some time today, so we will uh give it a couple more minutes as people are still joining us. It’s always good to see some familiar names on here, a lot of new ones.

Is anyone coming uh joining me from up north? Like anything north of Well, say north of Texas, but where the weather’s actually cold. We’re finally getting really, really nice weather here in Texas. I assume Florida and I assume Florida is the same. Where where we’re in the 50s in the morning and today was in the 80s, so it was really kind of a glorious time. North Carolina, yeah, okay. Vermont. Ah. I bet. So, are the So, in Vermont, are the leaves turning right now?

Cuz that is spectacular to see. Yes. Yeah, that’s something that is something to behold if people have never seen that. That was actually pretty cool to do that.

All right. We’ll give it maybe 1 more minute or so and then we’ll get started.

Yeah, my sister my sister lives in Pennsylvania. Out in Lancaster, so like my nieces and nephews are in Philadelphia, but they are but she’s she’s in Lancaster in Amish land, so supposed to go out there and visit everybody next month. She’s like, “Hey, you’re going to bring a coat?” I actually had to turn the heater on. Like, “All right. I’m pretty sure I was going to bring a coat well before you decided to turn your heater on, but um My family’s originally Hawaii. So, when they would come to the mainland, they would always talk about how freezing cold it is in Southern California and I always thought that was funny, right? Weather is always uh

it’s always so subjective.

All right. I have 6:02. Uh and it looks like folks are still joining, but we are we’re going to go ahead and begin in the interest of time. We still should have plenty of time to go through this and some time at the end for Q&A. Uh, but officially, I want to welcome everyone. And if this is your first time joining me, then an extra special welcome. Uh, I’m Michael Marks, certified financial planner or CFP. I’m one of the uh financial consultants with Alliant Retirement and Investment Services or ARIS, A R I S for short. I live here in Houston, Texas. Um I have been affiliated with the credit union since longer than I’ve been alive. Uh, so my family, who came from United, and as you know, Alliant is United’s credit union. We changed our name because we added Google and Tesla and CVS and Suze Orman and other things. So so it’s a little bit broader, but we’ve been around for over 90 years. So for those of you who have come through us from different channels, welcome everyone. Today, we’re going to talk about the uh fragile decade. And that’s that’s the five years before retirement and the five years after retirement.

So before we do, my usual quick housekeeping item. Today’s session is for educational purposes and includes proprietary material. So to protect both the content and everyone’s privacy, we ask that attendees please do not record, capture, or capture the presentation, whether it’s by video, audio, screen sharing, or AI tools without prior consent. We appreciate your understanding. And with that, let’s dive on in. Though um I’m not sure if you joined this webinar via an email that you received directly from our division, uh or if you signed up directly through the credit union’s website. Uh so you might be familiar with Align Credit Union, but not so much ARIS. So maybe we’ll take a couple of minutes and just talk to you about ARIS. So in addition to the weekly webinars we host, we are a full-service wealth management and investment planning division of the credit union. Um So we do the whole thing as far as the complimentary in addition to these, we do the complimentary financial planning, like I said, we’re fiduciaries, I’m CFP, uh estate planning, as you’ll see on another slide, we recently added trusts and will services, power of attorney, uh advanced medical directives, etc. As far as products go, it’s full range, many of which are uh without a fee. So advanced planning, Roth conversions, you name it, we probably do it.

So speaking of our trusts, this is something that we’ve just recently added. Uh so if you don’t have those in place, right? Not everybody necessarily needs a trust, but everybody should at least have a will. If you don’t have a will, that means the state that you live in wrote one for you. So you do have a will. So hopefully it would be by having one, it would be under what your desire is for your assets after you pass away. So whether it’s a will, trust, power of attorney, living will, that HIPAA authorization, we’d be happy to help you with that. Um so regarding our webinars, you can find a list of our weekly webinars, and we do these throughout the week with different topics and different presenters. Uh you can find me directly at our website, which is aris.aligncreditunion.com. Uh or you can just go directly to the credit union website, and then our tab is in the upper right-hand corner, and it says retire and invest. But there you can find our blog, which is Invest Savvy Savvy, sorry. Uh and some other financial resources on there.

So, we normally do two a month as far as each advisor. So, my next one I’ll do one in the evening and one in the afternoon. So, obviously this is my evening one. And my next one will be November 4th on a Wednesday at 2:00 Central 3:00 p.m. Eastern. And we’ll be talking a little bit about long-term care and and this is actually uh I don’t know how exciting this topic is, but it’s actually pretty interesting, you know, and I think this is probably one one of the biggest potential hazards, right? That could de-derail your retirement plan. Nobody loves talking about this, but I do think it’s pretty important. And whether you decide to have any or not, this is not a pitch to sell long-term care insurance to anyone, but there are many different types of plans and actually self-insuring is a plan. So, back in the evening on November 17th, that’s a Tuesday, we’ll be back there or I’ll be back at 6:00 Central time and we’ll talk to you about trusts and why you may or may not want to consider them as part of your estate plan. The quick disclosure, this presentation’s for general information and educational purposes only. It is not a recommendation.

So, this is today’s storyboard. So, this is what we’re going to cover today. So, what’s the fragile decade? Why it matters. And how to make it work. So, what’s fragile decade? So, first, let me take a step back and share with you how this fragile decade concept came together, right? So, the company that this together, they had worked on this for a year, and what they did was they sifted through retirement articles, surveys, research documents, etc. Literally thousands of pages of research on retirement planning. And when they laid this out in front of us, you can see, right? There There’s just many different titles uh on 10 things you need to do when you retire, the 10 biggest mistakes, happy retirees do this, retirees, etc., etc. I’m sure you’ve heard of those very same articles. Now, there’s this commonality in all of those, but there’s some huge disconnects as well. So, what we did was we needed to find it, maybe synthesize it, make it a little more productive for the members here. So, whether the major life transitions, you know, like retirement, divorce, widowhood, inheritance, like selling a business, etc.

The foundation for putting this together, right, in a structure, is understanding the four phases of life transitions. And so, no matter what that life transition is, there’s this distinct pattern on how we internalize and respond to each one of these milestones or life-altering transitions. So, the four phases here are anticipation, ending, passage, and the new normal. So, obviously, in the event for this one is going to be retirement, right? So, your your anticipation is the moment you become aware of the possibility of the event, and your personal narrative begins to shift, right? You’ve entered that anticipation phase. So, the ending, that’s some aspect of your life as you know it that’s really come to an end. So, passage, we’re going to we’re going to refer to it as numbness or shock um or something be a sense of awakening, right?

situation is either gone or changed significantly. Um And this And this part is really about the adaptation. And And frankly, a lot of people have a very difficult time with this when it comes to retirement because we’ll talk a little bit a little more specifics on this. But But it’s one of those things that we’re defined Many of us were defined by our job, right? That’s who we are. Um And this is the time we have to let go of those old ideas about your life and explore new ones, right? And you And you’re kind of inching forward toward a new normal. And this doesn’t happen overnight. This can take weeks or months or for some it’s even years. But this is the longest stage of these transitions. So, once you get through that, you arrive at the new normal where you know, you’re living your new life, you’re fully integrated in the events post transition. Um And you’ve kind of arrived at let’s just say the best possible outcome, right? And accepted the event as part of your new personal narrative. So, these phases are important to understand and to consider when you’re working through this process, right? Or at least being cognizant of this process. So,

So, because the tran-the transition that we’re talking about today is retirement, I would say the best way to view retirement is it’s really not a destination, right? People are like, “Hey, I’m working and then I’m retired.” And And then what happens? But it’s more of a journey. So, it’s how you prep before that and how you transition into your new journey. So, when you look at it that way, I think you’ll We can look at it how it aligns with the four phases. So, with that in mind, welcome to the fragile decade. Right? And it’s simply defined as the 5 years before retirement and the five years after your retirement. And the reason that we’ve titled it the fragile decade is that in when you look at the research and the studies, investor interviews, that this is the period where people feel the most financially and emotionally fragile. Right? As they enter that anticipation stage, there’s a lot of angst. Do I have enough? Is this the right timing? What will I do? You know, what’s the sense of purpose? So, there’s some distinct commonalities of this. And that unknown is what causes a lot of anxiety. And hence the fragile mindset. So, this this evening is really designed to help you prepare for probably one of the biggest transitions of your life. No pressure there, right?

So, let’s talk about understanding it from this perspective, why it matters.

So,

it’s a fragile transition for all involved, right? So, not just you, but your spouse, your family. So, what stat really caught our our attention was a depression stat. So, clinical depression goes up by 40%after retirement. Right? So, these years are really precious, right? So, that depression, we kind of look at it as often times it’s associated with the a loss purpose. So, that’s why being able to prepare for this five years before, it makes the transition much, much smoother, far less difficult. I’m not sure if you’ll be 100%prepared for retirement, but at least being prepared most will make that transition much easier. Right? So,

when you look at actuarial mortality tables, right? People entering retirement today can expect to live 20, 25, 30 years. That’s, you know, it could be like a 30-year lifetime. But that also means that 2/3 of your life has passed. So, if you put that in perspective, if you were a 65-year-old who retired in the 1960s, right? Does anyone know on average how many years you would have lived in retirement? So, that’s a 65-year-old who retired in the 1960s. So, have that answer in your head? So, the answer is 4 and 1/2 years. So, if you retired in the 1960s, your average retirement was 4 and 1/2 years. So, when you think about it from that perspective to now, when we’re looking at 20 to 30 years, and pensions have long since gone by the wayside for most of us. You can understand where that angst going into retirement might might weigh pretty heavy on people. So, helping you plan your lives in retirement is really beyond just the money aspect of it. That other aspect is really just as critical. Right? Money’s important, but what are you going to do when you’re there?

So, what we’re doing is we’re seeing a shift on how we work with clients in retirement. It isn’t really just a,”Hey, this what your allocation is. This is what you should do. Make these changes. Buy this, sell this, etc.” All right? It’s more of a experience-centric approach with your clients. Um you’re really going from like an investment consultant to more of like this life coach. Um and it’s not really just helping them with their assets, but whether it’s okay to do those things, how to develop that sense of purpose, how do you manage that change? So, it’s really become not a business of products, right? Stocks, bonds, etc. It’s really more of a business of people and then you work in you back in the products to match those goals, right? What kind of stocks, what kind of bonds, what kind of UIT, what kind of trust, etc. So, this conversation goes from making sure you’re financially ready for retirement to what you can do in retirement. So, for example,

what are your top priorities, right? Let’s help you check off that bucket list. So, to help add some context to your financial planning goals,

you probably a good place to start is is what’s that bucket list, right? What are those things you’ve always wanted to do? Maybe you want to see the northern lights. You know, maybe you want to go see the Hoover Dam.

Maybe you want to go back and look at where your ancestors came from, right? So, we’re not really your travel agent in that respect, but although I’ve done a lot of traveling and there are pretty good resources that we could be helpful on that. But, it’s really more about what you want to do when you stop working. And and this type of planning really helps those goals become relevant.

You should always talk about things that you want to do or create in retirement, right? Now, I can’t stress this enough. Not wanting to do is fine as long as that’s what you want to do. What we don’t want is for you not to have thought about that before, because this is a major part of your planning, right? So, it might be the creative something, right? Where you’re doing a vlog or sculpting, writing a novel. Maybe working with your hands, science and custom furniture. Whatever that is, there’s no right or wrong, but this helps organize your thoughts and then will help organize your plan and your goals on how you prep for your retirement.

So, maybe it might be something more in service, right? Volunteering more often, maybe doing mentorship, running to get your bond, grandkids, you know, maybe they’re close. Start a new charity, volunteering more, raising money. Maybe do little or nothing at all, work in your garden, tinker in your garage. Again, there’s no right or wrong. But, we do know this. So, there’s something that are called pillars of happiness.

And this matters, because this is the foundation of your happiness throughout your retirement. And there are four. So, the first one is money and it’s specifically income. Second is your health. Third is staying connected. And fourth is a sense of purpose. So, money, income. We’ll look at the first pillar. So, studies have found that people in retirement who have pre- protected income are happier, like social security. If you’re fortunate enough to still have a pension, that’s great. Some type of annuity. The Wall Street Journal came out with an article that they read, you know, the secret to a happy retirement is Well, the happiest people in retirement are surrounded by friends, family, and a protected income for life. And when it comes to your money and happiness in retirement it’s almost solely tied to income. And this matters, right? Because this is a really big transition for people to go from an accumulation phase to a distribution phase. So and people have a difficult time spending because they’re worried about running out. So they’ve had these studies on that show people with assets they gain, they lose, they gain, they lose, they’re a lot less happy than someone who just has like a pension or something like that. Because people are associating those losses with it will affect my lifestyle or something bad happens it can affect my retirement altogether. But the reality is you lose money in oil, you lose money in gas, you lose money in Tesla, maybe some kind of crypto, and then you gain. But those people I’m going to jokingly say are miserable, right? Because they’re living this day-to-day and they’re worried about the day-to-day movement. So the focus is on the loss or what you don’t have. So assets themselves

can kind of make people miserable in retirement if they focus too much on the daily value. So the focus should really be more on the income, not the asset. Because the asset will provide your income. Know that that asset will fluctuate. So because when you retire, your regular paycheck stops. So you want a source of income that you cannot live. And that’s really where the angst is, right? The up and down. So a little bit shorter, so health, right? Obviously, the better your health is, the more likely you’re you’re willing to say that you’re having a happy retirement. So, 80 80%of people who rated their health as excellent said they were satisfied with their retirement compared to 20%26% whose health was poor. So, when people have that potential to live 20, 30 years plus in retirement, you want to make sure that you’re healthy and you’re able to enjoy it. Now, obviously, some people we don’t have a say in that, right? Maybe there just are some general health conditions, but what I would say is, if you know this and you still have time, maybe you start working on things now and not waiting until you retire to say, “You know what? I’m going to get in better shape. I’m going to walk more. I’m going to eat a little bit better.” Start training for your retirement now. Not wait until you get until you retire. That healthy lifestyle is a quality of life so you can enjoy your life in retirement. So, staying connected. And it’s not necessarily through social media, right? But, not having much of a social life is really bad for your health, right? So, they’ve linked that low social interaction that is a greater risk of heart disease, uh increased risk of cognitive decline and dementia. So, stay happy and healthy in retirement. You should focus your ability to or your available the availability of maybe new relationships, nurturing existing ones, especially if your social life was revolved around work, right? Because what I’ve seen over the decades is that many people who retire, they have their work friends, and when they retired, they really thought those friends were always going to be around, but we found that maybe those relationships maybe weren’t as strong as they were and all that they had in common were work. So, kind of cultivate that. And it doesn’t necessarily have to have mean you have to find new best friends, right? But it’s being around people and interacting with people. So, the happiest people keep their family and their friends around. So, a sense of purpose. So, retirement frees up your schedule, right? And for some, that unstructured time can be a little overwhelming. So, if you’re not careful, having a lack of sense of purpose, right? Or that sense of responsibility, it can lead to boredom, which can lead to depression, and relationship stress. So, it can be especially true for those people who closely identify to their careers, right? Purpose is what we get out of bed in the morning. You know, we don’t we don’t want to confuse what we do with who we are. Especially when it comes to retirement, because what you do can cease to exist. I’m a financial advisor. That’s what I do. That’s not who I am, right? I’m a researcher, I’m a teacher, I’m a gatherer of information gatherer of knowledge. Um, I’m someone who’s curious about how the world works. So, being an advisor allows me to bring those things into something that I enjoy doing and being productive about it. The same thing is true when you go into retirement, right? Not what you do, who you are. What are those things that you enjoy and what are those types of activities that you can find during retirement that will give your retirement meaning. So, let’s put a timeline to this. So, we have a 5-year countdown. Let me add on time. Perfect. This is your conversational blueprint designed as a year-by-year countdown in checklist form. So, people live their life by checklists. Checklists make people feel organized when you create them and accomplish when you complete them, right? You got a list, you’re knocking that list out. So, once you enter this anticipation stage, and that age, obviously, as you can see, it’s 50 to 65. So, depending on when you retire, depending on what your retirement looks like, this can take a decade or so. For others, it could be relatively quick. So, we’re going to say 5 years, but this conversation can be much sooner.

So, you start your income plan conversation. You look for ways to help protect your profits if you’re about 5 years out.

Let’s review the average American’s budget and build one.

And then, you start annual spending audit and that spring-cleaning of that checklist, right? So, you read through the income plans. And And so, some plans, by the way, are best served opening certain types of accounts to use later down the road. So, So, that’s why we say,”Hey, 5 years out.” You want to start planning the sequence of your income, right? Whether it’s going to be Roth, whether it’s going to be cash, whether it’s going to be semi-tax deferred, like your 401k, maybe my brokerage accounts. And you know, there is this There’s this You spend Normally, it was you spend your your cash first, and then your taxable accounts, and your tax deferred. And that is not always the case. So, So, there’s a lot of moving parts to this in the sense that you still want to look at how the taxing of the taxation of your social security is going to impact you. The taxation and penalties associated with with with Medicare um or Irma, right? So, the taxation during your retirement, how you position those during that retirement as well as passing that on to your legacy, right? Your kids, your grandkids, whomever that is. Um and you know, that might be your withdrawal plan, right? Whether that’s that 4%, the bucket, the interest only, the hybrid strategy hybrid strategy, etc. Protecting profits, are we hedging against loss? Like I can’t tell you how many times I’ve heard a client say,”My account’s making money. I’m happy.”Okay. Well, what happens when, not if, the market goes down and down significantly? Are you unhappy? Right? So, you remember the earlier slide when we talked about people’s happiness being tied to the market or the unhappiness being tied to the market if it’s down. So, you want to insulate in that. You don’t want your happiness being tied to day-to-day movements on the valuations of your account. Just know that’s going to happen. So, you have different buckets.

So, 4 years to go.

Maybe looking at that long-term care, right? What that What’s that plan? Um hopefully you already have one in place. Um and and not having long-term care again could be a plan as long as you’ve evaluated your assets to assume that you’re just going to self-insure.

Some of those health care options, right? How’s that look? You know, if you’re not a government employee or or something like that, if you’re just going from the private sector, you’re going to need to start looking at what kind of Medicare supplement am I going to have? Cuz you definitely want one. Having Medicare on your own, generally speaking, it does not cover what most people are used to or would want. So, you’re also looking at those pre-needs, the estate planning, etc.

If I could get the slide to change. There we go. Um you know, this is when you’re starting to look at your ideas for the future, too, right? What are those goals? How do you position yourself for those goals? Are we going to be moving somewhere, right? Maybe we need to start looking to see I live in Houston, maybe I want to retire in the Keys, which I don’t, by the way. Um maybe I need to start scouting that out or maybe I want to move down to Costa Rica. My buddy started building a house down there because he thinks that’s where he wants to retire. So, so whatever that plan is, that plan might take a few years to get into place. So, be mindful of what that plan is for you. So, 3 years to go.

That’s where you look at where you want to live. Right? Are you staying where you’re at or I’m going um

if I have a medical condition, do I need to be near a hospital? Do I like that kind of weather? Am I going to stay there year-round? If I’m just going to stay here, are there major repairs? Does my house need a new roof? Does it need a new AC unit? Um do I need a new vehicle? Right? So, these are things where you might want to start looking at taking care of while you’re still working. And obviously, you keep doing your spring cleaning. And you rerun and you review your retirement income plan. Two years out. So So this has two years out where you start looking at your tax strategies. Now, I would say your tax strategies might start start much sooner than that, but we’re going to go with the case just for two years cuz that’s the average person is, right? So this might be something like your phased retirement. Call that practice retirement. And and that and that plan is do I go from 40 to 60 hours or whatever you normally work during the week to zero. Right? Is this something that are you ready to do something like that? You know, maybe you can talk to your boss um or your employer to see if that’s an option to say,”Hey, is there a phase down? You know, I still want to work here full-time, but maybe in a few years I might not want to do that or a couple years.”Obviously, proceed with caution, right? Because you don’t want them replacing you before you’re ready. Um but you know, that’s easing into retirement. The other thing you do during practice retirement is that you start looking at your cash flow. If this was your income goal, right, during retirement, see if you can live like that. See if that actually works.

Again, keep doing your spring cleaning, rerun and review your retirement income plan. Laws change every year. The market changes every year. Politics change every year. Well, politicians change every two years, right? Depending on where we’re at, but we certainly have elections every two years. So that final year, right? This is where you’re finalizing your health insurance needs. This is where you’re looking at your emergency fund, right? Any of those basic needs for given time, keep up that spring cleaning.

And again, this is something different, right? We want to review the dates to turn on that protected income source, right? Did you file for Social Security? Did you file that start date? Did you file the date for your pension, if you have something? Have you started looking at if you say,”Hey, you know what? An annuity is going to be part of my income.” What I do that? How do we get that in position? Some of them you have to wait a year before you start your income. So again, rerun, review your retirement income plan, and then review those last 5 years and see if you’ve missed anything, all right? Now, here we go.

That ending, throw yourself a retirement party. So, now that you’ve entered the ending phase, also known as retirement, now it’s about the next 5 years. So, it’s all about touchpoints, right? And navigating that passage phase, and continuing to look forward to your new normal. I would say this one’s important, right? Track your spending. Not for the first few months, for the first year, because money can be can be cyclical in how you’re spending, especially when you’re early on, right? How was your estimate? Were you close? Do you need to revisit your plan?

When you look at retirement, so not only just in that in that year, right? On how you spend. Through your retirement cycle, it doesn’t it isn’t flat, right? It’s it’s I mean, the best way I can describe it is kind of like an S-curve. So, in the very beginning, we find that your spending increases, right? You have more time, you have things that you wanted to do, but didn’t have the time to do them. So, your spending increases and your health is still relatively healthy, hopefully very healthy. So, then as you knock those things out, right? You’ll see some of your spending start to level off and maybe go down a little bit because you’ve done a lot of those things that you wanted to do. But then, just like everything else, your health and all the maintenance, house, cars, things like that, your spending will go back up again. So, it’s up, levels down a little bit, and then will tick back up. That’s a normal S curve on how you on how spending looks.

Now, I would say one of the things that you can do is if you have a mentor that, you know, maybe some people that you still kept in touch with from work, or some of those retirees, or parents, in-laws, whomever that might be, your older neighbor who’s already retired, talk to them. See if there’s something that that you’re like, man, they have a great retirement. What are they doing right? And And I’m a big fan of learning from others if you can, right? You learn from other people’s mistakes, so you don’t have to endure those. So,

So, the start an idea jar, I think it’s just one of those like, hey, these are things that I wanted to do, right? Start that happy retiree journal. And And look, journaling isn’t right for everybody, the idea jar isn’t maybe not right for everybody, but you know, talking about your thoughts with your family and your friends, and frankly, this is one of those things that you should talk to even before that, right? Um I had I had a member that we were talking to on on the things that she wanted to do in retirement. They were revolved around her kids. And I was like, well, and And she was describing the lives of her kids. I was like, wow, that They sound really busy. Have you talked to them? You know, as far as going on these family trips and things. And she’s like, yeah, you You I was like, this is really important that you might want to make sure that they are available to be able to do that with you. So, if your plan involves others, talk to those others and make sure one it’s in their plan and if it is, then then also they have the time. So, at this point, right? We’ve entered that ending phase.

So, whether it’s volunteering, whatever. This is where you want to constantly work on that and evolve on that, right? And and by the way, those plans might not be a forever thing. It might be, hey, you know, I’ve wanted to learn how to do this and fill in the this. And that might really be just a 3 to 5-year project or a 1-year to 2-year project. So, it could be little milestones, it could be different goals that you’re working uh simultaneously. So, this is kind of how you view this, but it is important to have those goals and have those dreams, right? Having that plan and having that dream will help that plan be more effectively realized, right? And then you reverse reverse into that with your assets and how to protect it, etc. So, I always like this. Every relationship requires a little TLC, right? Time, listening, and communication. So, we we can start working with you early, right? Going into that retirement as well as if you’re already there, and helping you ask good questions. But right, I think one of the biggest things on the wealth management side that we help our members do is that answer those questions that you didn’t know needed to be asked, right? Oh, I hadn’t considered that and thought about that. We can draw upon hundreds, if not thousands of different resources because of all of our collective clients that we’ve seen through this retirement phase. So you ask good questions, you sit back, you listen, communicate wisely and effectively. The TLC formula is a process. So how can we help?

I’ll just take a couple minutes here. And it might be something as life planning, right? Questions to help you imagine your life in retirement, we can kind of help you put that together. Your budgeting, where we determine some of that cash flow. Help you Have you forgotten this? Have you considered this? Obviously the account maintenance part, right? The Roth rollovers, the Roth conversions, how we look at taxation on that. Are there more effective tax strategies to pay less taxes during your retirement? And certainly less taxes if money gets passed on to children, grandchildren. Um establishing that effective income plan or that withdrawal plan, right? That is the biggest angst for people. People’s biggest fear in retirement is running out of money, and that is ranked ahead of death. Right? If you’re dead, you don’t have any problems. If you’re alive and you have no money, that is a problem. So hopefully that is none of you. I never wish that on anyone, but I can tell you proper planning can help you either minimize and avoid that all together. Obviously the portfolio management is what we do, right? That’s investment pro like the investment products and tax considerations.

So

I would say this, I think the biggest value add for us is strategy, right? Obviously portfolio management return is important, but in addition those tax implications before and during retirement, income structure strategies, protecting your downside, they help you sleep at night. So we’re at the Q&A part. So if you have any questions, please type those questions in the Q&A box or the chat box. I’ll give you a minute or two. While we’re waiting for that, I want to thank everyone for attending. I hope you found this information helpful. Um while you’re submitting these questions, I’m going to put up a one question survey. If you want an appointment to discuss your particular situation or review your particular situation, again, if you haven’t looked at Social Security structuring, timing, Roth conversions, your impact on that Irma and Medicare, right? What’s that reviewing that retirement income strategy, hedging losses in that portfolio going into retirement, schedule an appointment. So, let’s do some Q&A. Well, I guess I should put that appointment up. Uh That would probably be helpful. All right. Questions. What questions do we have?

If I am close to retirement, is it worth doing a Roth conversion or is it too late to make an impact on my financial plan? Um the short answer is no. A lot of the Roth conversions actually happen during your retirement. Usually it’s during your retirement but before your required minimum distributions happen. For most on this, well, I don’t know who’s on this call age-wise. Um but if you’re born 1960 or after, your RMD is is 75 years old. So, that that depends and that’s what we’d look at. But we do look at conversions, the timing of the conversions, and how much and what kind of tax savings you’re looking at and the impact on on on your social security as well. Uh a question two, I’m an IT professional. What do you recommend to those getting laid off at age 60? Put in for over 50 jobs and no interviews. I think people are discriminating because of my age. I would tell you that is a 100%fact of life that I know it’s illegal, but people absolutely discriminate on your age. So, this is what we could do. Right, first and foremost, uh if you haven’t you said no, I would say take my information down QR code. We can schedule some time to talk about it in specifics, but I’ll give you a general answer. Right, the first is looking at your assets and seeing where you’re positioned from 60 to retirement, right? And then looking at at that situation on on in between and then what networks do you have? Or what is your shortfall at retirement? So, to make to see where you are from a hard number wise or at least from that perspective, um

and then from there you kind of reverse engineer or say,”Okay, this is what I’m looking for. This is my shortfall.” Because that might be something where you’re like,”Look, I might be doing something outside of the IT world. It might be something that’s just part-time. It’s something to look while you’re while while your actual while your job hunt continues, you know, what kind of networks do you work?”But if you haven’t, schedule some time we can talk about it or give me a call um and then we can talk a little bit about that. Um

and I am sorry about that if you have I I hear that story unfortunately often. The best place to look for health insurance after retirement but before age 65? Um Well, usually it’s it’s usually the um Affordable Care Act, right? That ACA. Depending on where you live, uh it can help you with the pricing. It’s income-based. That is one of those ways you can look at. Generally speaking, if you’re trying to keep it and I guess depending on how old you are, how long that bridge is, right? Are you retiring at 64 and you have to do 65? Maybe something as simple as Cobra. Maybe you compare it to the Affordable Care Act because they still look at your income and your income-based.

So, next question.

When do you start adjusting your portfolio prior to retirement? 10 years? 5 years? Question. Uh so, adjusting your portfolio. So, so let me kind of give you the general Well, that’s going to be a broad brush stroke. But as a general rule, as you get closer to retirement, your portfolio becomes a little more conservative. And so on and so forth. But it doesn’t go all the way to I’m going to jokingly say this, recklessly conservative because as again we had talked about this, you could be retired for 20, 25, 30 years, right? So, inflation happens. You still need to plan for that. Um I would say that would be one of those things that depending on where you’re starting and what you do, that’s one of the things when we look at plans. We look at where you’re at. We give you a baseline for your risk modeling. And then from there, we take that down or if you’re already conservative to begin with, you might not be backing down at all. You might just stay all the way through.

Should you consider long-term care insurance? Um Maybe. Uh at least some long-term care plan, right? And that might not be one at all. So, depending on your assets, depending on where you live, depending on the resources that are available, this is something that we look at. The easiest thing to look at your particular situation is to schedule some time and we’ll kind of get a feel for your situation we can help you narrow down some of the options or even if you want to have that at all. Um we help we help a lot of members a lot on that situation where it’s like, “Hey, you know, is it that traditional long-term care insurance?” Maybe. There there’s a lot that are just hybrids that they’re actually tied to investments that you’re already doing out there. So, it kind of depends. There but it’s a very broad range. It’s not that usual,”Oh, I’m just going to buy long-term care insurance.” Same here. So, I don’t need to ask. I’m an unemployed IT guy, can’t find anything there. Looking at other stuff, but as a 63-year-old, no need to answer this. Thanks for all the good information on these webinars. And again, I am so sorry that you’re going through this. Definitely the IT side and the tech side, there are cutbacks. I those were one of the um from the sector-wise for the year, they were they were one of the last sectors. And and the reason for this, right? They went through COVID and companies companies laid people off because they were worried about things. And then, as we’re coming back from COVID, those people that they had laid off have moved on. And it may became filling those back filling those positions become become became very difficult. So, companies, as a result of that, were holding on to their labor. Right? Because they Because just in case, right? What happens if? But as we see we’re going through the cycle with AI, etc. Um some of companies coming under stress, right? With these build-outs, profitability. They’re having to make some of these these decisions. And you know, we look at this from a data perspective and and I understand these the data is then real people, right? Jobless, jobless claims, those are difficult. So, my heart goes out to anybody doing that. Uh Maybe one more question.

Is the market overvalued at the recent highs? Uh um Wow. Uh

So, the recent highs in the market or the index are kind of a tricky thing, right? Because the S&P 500 Well, you don’t know, it’s the largest 500 companies in the US, right? That’s Standard&Poor’s 500. But they’re they’re not equally weighted. So, the bigs have a much much much bigger impact on that index. They’re really kind of s- tech focused out. So, um So, with that said even though it’s at a high, it’s a lot of those companies that we’re starting to see a little bit of pullback. But because of those build-outs and investment, you’re seeing a lot more volatility. There’s been a lot of volatility certainly this year. And I would tell you just because something is at a new high from the index I that in itself I wouldn’t be worried about. Um there’s really a lot more fundamentals that are tied to that. So, I think that is it. I want to thank everybody for answering those questions. They were great questions. Thank you so much. Um for those who have gotten laid off, look, I mean schedule some time. Let’s take a look where you’re at and and see what you have to do to bridge the gap. I know it’s kind of difficult and I am sorry about that, but but maybe maybe there is some silver lining to these dark clouds that you’re all experiencing. But with that, I want to thank everybody for attending. I wish you all have a very, very happy and a healthy evening and take care and I hope to see you on future webinars. So with that, take care. Bye now.

Okay, sorry for the technical difficulties. Can somebody just give me a thumbs up or a that you can hear me? Or put something in the chat that you can hear me okay?

Yes, okay, perfect. Okay, well, sorry for the technical difficulty. Of course, IT doesn’t check with me in terms of when when we need to do a software update. But anyway, so we’ll get started. Thanks for your patience. My name is Kim Kennedy and I am one of the financial consultants with Alliant. You should be able to see the screen now. Let me just get this I’m going to just take this off. This out of the way. Okay, so we get the question often do Malcolm and I really work for the credit union and we do. We happen to work in the Alliant Retirement and Investment Services division of Alliant. We are both located in Denver. We have offices in the tech center and out on the west side of town in Lakewood. If you’re joining from another state or would prefer a virtual appointment, we’re we’re good at that and we’re happy to do that for you. I’m going to be walking you through the details of the annuities presentation today. You will get a follow-up communication from either Malcolm or I. But if you have any questions during the presentation, enter them in the chat and I’ll be sure to take all of those questions at the end. So we have a couple upcoming webinars. The next one is October 8th, which is a Thursday and it’s called seven principles for a successful retirement. Just the various different categories that you need to think about as you’re preparing to retire. So if that’s an interest to you, watch for the emails and sign up. And then we have a Roth IRA conversion webinar on Tuesday, October 20th. Roth IRA conversions get lots of talk. So, just understanding how that works and the timing of that and the tax implications. So, again, take a look for that. Um and we have some other educational resources. Malcolm and I aren’t the only consultants doing webinars. Our colleagues also are doing webinars across the country. So, if you go to our webpage, aristotlecu.com, and click on the events page, you can see all of those other webinars that are out there and you’re free to sign up for any of those that you like. We produce a in-house podcast and we store all those historical recordings out on our podcast page. So, if you’re looking for information on a specific topic, um check out that that spot. You might find something that is helpful to you. And last, and certainly not least, both our website and our blog both just have a host of information. So, again, if you’re trying to get smart on a specific financial topic, that might be a place that can help you do that. We recently partnered with a company called Trust&Will. And anybody who becomes a retirement or investment client with us, not just on the bank, but on the investment side, you have access to this Trust&Will company, which you can basically create an estate plan for free. And you can see on the slide there’s quite a few things that that includes. So, if that’s something you’re interested in, maybe that’s a an additional factor for selecting us to as your advisors. Um okay, so we’re going to jump in and get started since I’m already late thanks to technology. The title of today’s presentation is called the good, the bad, the ugly with annuities. You know, what are they and who would want one? I’m I’m not going to be pitching a product. This is really educational. Annuities over the years have gotten a terrible reputation, but they’ve really changed over the last decade. You know, the feds have stepped in and the regulators and they’ve really changed and there there might be one that’s of interest. So, let’s just jump in. Here’s our overview. What is an annuity? What are the different types? But I heard they’re bad. How does the taxation work? What’s in it for them? Do I get a free meal with that? How do I know if the annuity I have is any good? And can I get out of my existing annuity? And who can benefit from them? So, number one, what is an annuity? The definition is an annuity is simply a contract between you and an insurance company where you contribute money up front and then receive payments over a period of time. You can choose to receive those payments in a number of ways including a lump sum or an income stream that lasts your whole life. And some of the reasons people would actually buy an annuity is they’re looking for principal protection. They want a fixed rate of return. Maybe you’re looking for long-term growth. Perhaps you’re looking for long-term growth with some downside market protection. You need income for life. Or you’re looking for tax deferred growth.

So, there’s a couple types. There’s immediate annuities and deferred annuities. An immediate annuity is funded with a single lump sum of money and in exchange for that, you get a guaranteed monthly payment. So, you give you give your pot of money to the insurance company and they run through an algorithm based on your age and they say, “Okay, well, we’ll give you X amount of money for the per month for the rest of your life.” That income is it’s an income now story. They usually start that income within 30 days of doing the immediate annuity and you get to choose how you receive that income. Do you want it over your lifetime or there are certain time frames, you know, 5, 10, 15 years that you can choose to receive that income. You’re able to use IRA and non-IRA monies to purchase an immediate annuity. And there’s something else out there called a QLAC and that stands for a qualified longevity annuity contract. So, this would be used for somebody that’s got a bunch of IRA money and it allows you to put some of your IRA money into the QLAC and it defers your required minimum distributions until age 85. Now, there’s a limit. The most you can put in is $210,000. On the deferred side of annuities, these are more focused on accumulation and income. And there’s several types: a fixed annuity, fixed index annuity, variable, and structured. So, let’s look at each of those. So, a fixed annuity is it provides you a guaranteed rate for a specific period of time, 3, 5, 7, or 10 years. Your money is principal protected. Interest earned is deferred until you withdraw the money. There’s no fee. Again, you can use IRA or non-IRA money. And if you uh pull out of the annuity before the end of the term, there’ll be a penalty. And all annuities um have an IRS penalty uh if you’re taking money out before the age of 59 and 1/2. So, the best example of a fixed annuity or comparison is it’s like a CD, right? Where you put money away for a certain period of time and they guarantee you an interest rate for that period of time. So, right now, I think Allianz paying 4.1 or 4.15 for a jumbo CD for 1 year. Fixed annuities, you know, the shortest term is usually 3 years. We have seen, due to the inflation caused primarily by the energy, we’ve seen interest rates tick up. So, I can get a five for $100,000 or more, if you can tie some money up for 5 years, I can get you in California a guaranteed interest rate of 5.8%and if you’re outside of California, 5.85%. So, yes, you have to be able to withstand some illiquidity on your money, but if you want to take advantage of why while interest rates are high and you can withstand that, um that those are great rates. I mean, we’re we’re approaching 6%again. Uh the difference though with a CD is you’re going to get a 1099 from Allianz in every January and you’re going to pay tax on the interest that you’ve earned. With a fixed annuity, that interest earned is deferred. So, let’s say you took money out of your savings account at Allianz and you bought one of these 5-year annuities that I’m giving you the example of, and you didn’t touch it and you waited for the 5 years; you’re not going to pay tax on any of that interest until you decide to take it out at the end of the 5 years. And if you don’t want to do that, you can pull the interest out along the way, and you’ll get a 1099. So, here’s an example of compounding. Obviously, the rates are really low on this slot this slide, but let’s just say for 5 years, uh you put in $100,000 at a 4%rate of return, you can see in 5 years that 100,000 would be about 122,000. Clearly, it would be more if you’re getting 5.8 or 5.85. The next type of deferred annuity is a fixed index annuity. These generally have time periods of 5, 7, or 10 years. These also are principal protected. You have your protected from any market downturn. Now, this type of annuity does not have a guaranteed interest rate, but the interest you earn is based on a market index like the S&P 500. You’re capped on the upside, meaning you’re you’re not going to get all of the market upside. You’re going to get a max. Um and there’s a reason for that, which I’ll explain in a minute. Same thing on the interest is tax deferred until you withdraw it, and there’s no fee on this, either, unless you decide to add an additional feature like income like a lifetime income or a death benefit, and those features come with a cost. So, let me explain it. So, let’s say today, you bought a fixed index annuity. So, the way it works is let’s say you put a hundred grand in today, today, they would take a snapshot of where the S&P 500 is. You would wait a whole year. Your account balance would not change for a whole year, but on your 1-year anniversary, they would take a snapshot of the S&P at that point. Let’s say the market was up 12%on your year. Well, you’re capped on the upside. Right now, the best rate I have is 10 and 1/2%. So, if the market’s up 12 in my example, you’re only going to get 10 and 1/2 of that, and that would be credited for year one. And then they do the same thing in year two. Let’s say the market was up eight, you get eight. But let’s say in year three, the market is down 25%. Well, you don’t get any interest earned in that third year. But more importantly, you do not lose a penny of what you put in or the interest you earned in the prior 2 years. So, the concept of a fixed index annuity is you are willing to accept part of the market gains in exchange for never taking a market loss. And here’s kind of a chart that explains that. So, in years one and two, you see how the the you locked in the gains. And then going into year three, you see the dotted line, that’s the market that went down. But you had the fixed annuity, so you stayed fixed index annuity, so you stayed level. Uh you do get to reset at that lower index value at year three, which, you know, without taking the the hit on the downside, you’ve got a really good opportunity for um making money on on the subsequent year. So, we definitely have seen rates come up on those. So, variable annuities is the next type, and this is usually the one that has caused the negative connotation with annuities. But these range from 3 to 10 years. You are able to invest in multiple stock and bond investments. What I mean by that, within one annuity, you might be able to pick a Vanguard fund, a Fidelity fund, a T. Rowe Price fund, an Invesco fund, all within one investment. You have risk to your principal based on the investment performance. So, you get all of the upside of those different investments, but you also get all of the downside of those investments. And with variable annuities, there’s a built-in death benefit. So, the way that works is let’s say you put in a hundred grand, and let’s say the market tanked and that hundred grand became fifty thousand dollars and you passed away, your beneficiary would get a hundred. The death benefit on a variable annuity is you your beneficiary receives the greater of the current value when you die or what you originally put in. And it sounds great and it is, but you pay a fee for that. Same thing, the gains are tax deferred until you withdraw. Several fees apply to this type of annuity and I’m going to get to a fee slide in a bit, so I’ll defer, but that’s usually the the rationale. You you pay a fee to have those multiple investments and you pay that fee for the death benefit. The fourth type of deferred annuity is something we call a structured annuity or they call them buffer or floor annuities. These are six-year time periods. It’s kind of a blend between the fixed index and the variable. And you have the ability to invest in market indexes like the S&P 500. You have the ability to earn market-like returns and there is downside market risk. However, there is some protection that helps you on the downside. Gains are tax deferred until withdrawn just like the other ones. No annual fee on this one. So, unless you add one of the additional features like lifetime income or death benefits. So, let me give you an example of how these buffers and floors work. So, So, here’s an example of the index was positive. So, in example A, let’s say the um the market return Let’s say the cap rate is 10 and 1/2 in my example, and the market returned eight. So, the market returned eight in the blue, so your account is credited eight. In example B, let’s say the market returned 12 and 1/2, so you can see that blue blue bar is above the cap rate of 10 and 1/2, so your account was only credited 10 and 1/2. So, you’re giving up some of the upside, potentially, in in a structured annuity. And here is an example of when the market is negative. So, let’s say in example C, the buffer or the protection is at 10%. So, the market’s down 8%, you lose nothing because the market is not down more than 10. In example D, let’s say the market’s down 15%in the turquoise bar, so that’s below the 10%buffer. So, your account is only down five because the insurance company covers the first 10%in losses. So, the way I look at this is, you know, lots of people say, “Yeah, I’m just going to invest in the S&P 500 and let it roll.” Um this is a way to invest in the S&P 500 with a safety net because there’s no fee. So, it makes sense if you’re an S&P investor to have some downside protection. And you have a lot of different options you could select. They’re six-year contracts, but you could pick a one-year, a three-year, a six-year. And you There’s more indices you can choose from than just the S&P 500, but it’s a great way to be in the market with protection and for no fee. Uh the other option within a structured annuity is something called a participation rate. Now, this slide is old. The terms are not this good, but on the slide it says you can get 130%of what the S&P does over a six-year period. So, if you look at the example, if the market did 10%over the six years, that’s 60%over six years, you actually get 130% of that, so your account would have earned 78%. So, it’s a way to do better than the actual index does. And these options still have the buffer that provides some level of protection, you know, There There are choices that provide give you 10, 15, 20, 30% protection, and the more protection you pick, the less upside you get, right? The less protection you pick, um the more upside, you know, the more risk you’re willing to take, the more you’re going to be rewarded for that. And a lot of the companies now, um are offering what’s called a performance lock feature. Let’s say you’re four and a half years into the six-year contract, and the market has just been on fire, and your account is way up. A lot of the companies offer you the ability to lock in your performance and either move to cash for the remainder of the six-year term, or to lock and move to another option that might have a 30%protection on the downside, so your your risk goes way down. Um so, the options are constantly changing, uh but they’re they’re kind of creative these days. So, this slide we put in just to show you the power of having that participation rate. If we just look at the first bar, if you’re down 10% in 1 year, people think, “Well, I just need 10%to break even the second year.” But, you really need 11.2%, right? Because you only have 90%of your money working for you. So, you need 11.2%the second year to break even from a 10% loss. And if you jump down to, you know, a big loss like a 30%loss, the next year you need 42.9%to break even after 1 year. So, when those participation rates are well over 100%, they can really help you catch up. Today, the rates are not as rich as 130%. I think they’re around 130, 105%.

So, this chart shows you the different types of annuities and how they fit in line with other investments that you might be more familiar with. So, on the very left, the lowest risk, cash, money markets, CDs, fixed annuities, fixed index annuities, and then you see the gray line. Anything to the left of that gray risk line, your premium or your principal is protected. You can’t lose anything that you put in in there. To the right of the gray line, the next investment that has risk is bonds, and then variable annuities, and then mutual funds, and stocks, and commodities, and crypto, and all those things that go even further to the right. And what’s not on this chart are those structured annuities, and I would say they fit somewhere between the bonds and the variable annuities because there is some some level of downside protection. So, it just gives you a visual of how these fit in with other types of investments. Well, I heard annuities are bad. I mean, they There are fees associated with some annuities. Um there are holding periods or a surrender where you’d have a penalty. They call it a surrender charge, right? I sold you 3, 5, 6, 7 years. And they’ll keep all my money. Well, let’s walk through all of these one by one. So, the first is the fees. This is that variable annuity example I was referring to earlier. This is what I think gives um annuities a a bad rap. That Remember I mentioned the built-in insurance that if you put in 100 and the market tanked to 50 and you passed away, your your beneficiaries would get 100. That’s true, but that’s called a mortality and expense, and you pay This chart says 1 and 1/4. I would say 1 to 1 and 1/4%every year to have that built-in insurance. And a subaccount fee, that’s the ability to have options from Fidelity and Vanguard and T. Rowe Price all packaged together within one investment, and they charge a fee for that. Bond They call them subaccounts, but think of them like mutual funds. A bond subaccount is going to be less than one, an international subaccount is going to be more than one, but on average, that’s a 1%fee per year, also. And then the rider charges, if you were to add lifetime income or an enhanced death benefit, those range anywhere from, you know, 1 to 1 and a quarter also. So, just on this slide, that’s a total of 3 and 1/2% in fees every year. And some of these fees, like the first two, you wouldn’t even see if you owned one of these investments because it comes out of the performance. So, if the if the investment actually did a 12 and a quarter, you would only see 10 because the M&E and the subaccount fee just comes out of the performance. You would see a deduction on your statement for the rider fees, the lifetime income, but the other two you don’t even see. And in years when the market’s on fire and it’s up 20%, you might not even notice 3 and 1/2%coming off. But what about the years where the market’s down 20%? You’re really down 23 and 1/2%. So, the fees, the variable annuity is the one that has the most fees and the highest fees. Number two, that holding period. They call it a contingent deferred surrender charge. And what it means is it’s the amount of time that you’re required to stay invested in the investment before you can walk away without a penalty. So, here’s an example if they’re using a 5 year. So, if you were to bail in the in the first year, they ding you a 5% penalty. And each year it declines a little bit. And they these aren’t accurate numbers, but for example purposes, it starts higher and the closer you get to the end of the term, it goes lower. And there’s all kinds of annuities out there that can be anywhere from 3 to 15 years. Uh Malcolm and I are generally on the the thick side three to five years. Some people want seven if they can lock in a higher rate for longer and just live off the interest. We’re not selling anybody a 15-year annuity. And even if you agree to tie your money up for, you know, three, five, or six years, almost every single company that we work with allows you to take out 10%per contract year without a penalty. So, you do have some liquidity or access to this money and clearly we wouldn’t want to put all of anyone’s money in this type of an investment or any type of investment for that for that purposes. Diversification is certainly certainly key, but you do have some access to your funds. Number three, they’ll keep all my money. Well, that’s not really true. Um deferred annuities equals a walk away value. If you agree to a five-year fixed annuity and collect your 5.85%at the end of the five years, you walk away with your money and all of the interest you earned. Um if the income products, where you’ve added lifetime income or joint lifetime income, those are contracts that you put money in and somewhere down the road you turn on lifetime income, and that income lasts for the rest of your life. And what you’re betting on here is longevity. You’re going to live a long time. If you turn on the income in one of these products, your account value will most likely go to zero or be depleted in 12 to 14 years. And if you’re living beyond that, your account value is zero, but the insurance company is on the hook for continuing to send you that lifetime income um for the rest of your life. You can pick different time periods, you know 10 or 20 years and a lot of the companies give you an option to pick a level income, so you start at X amount per month or year, and it stays the same forever; or, you can agree to start at a lower amount and then have that increase over time. But the bottom line, they don’t keep your money, your account value minus anything you’ve taken out is what you can walk away with, or it also becomes your death benefit. Let’s talk a little bit about taxes. So, think about you know, money in an Alliance savings. If you were to put it in an annuity of some sort, you’re not going to get a 1099 every year, and it’s kind of like triple compounding. You’re getting earnings on your principal, you’re getting earnings on your earnings, and you’re getting earnings on the taxes that you’re not paying. So, it might make sense to do this, especially if you’re trying to keep your income lower for a period of time, or you just like the rate. And at the end of the term, let’s say you did the 5-year at 5.85, and you didn’t need the money at the end of the end of the 5 years, and you didn’t want to bring it back to the credit union, there’s a provision out there called a 1035 exchange, and you can move it to another annuity, and there’s no tax liability. The best correlation I can think of to that is anybody who has done anything in investment properties, you may have heard about a 1031 exchange. You know, you go to sell one of your rental properties, and you roll that money into another rental property, you don’t have to pay taxes on any of those gains. Well, this is the same concept, but with annuities. So, you just move it to the next one, and it moves forward with no tax liability. And as I mentioned earlier, if you don’t want the tax deferral, you can just withdraw the earnings each year and that’ll create a 1099 kind of like you did a CD. So, that’s one way to keep that in check if that’s your desire.

So, what’s in it for the insurance company? Well, if you buy an annuity with a fee, um obviously they’re collecting the fees, right? That M&E fee, the rider fees, the sub account or investment fees. And there is that surrender schedule, that CDSC. So, they know that if you uh bail early, if you bought a 5-year fixed annuity and you decided you’re going to yank all the money out in year three, they’re going to get a penalty. They’re going to collect a penalty out of your out of your money. But the biggest thing that’s in it for the insurance companies company is your time. All right? I mean, when I set these up for people, we are not planning on yanking the money out early, right? This is just a piece of the overall strategy. This might be the safe piece, potentially. So, if you give them, let’s say $100,000, they’re going to take that $100,000 and they’re going to go buy a bond that’s probably paying six or six and a half percent while they’re paying you out 5.85. So, they’re collecting that money for the whole time that you’re inside the annuity contract.

Um no free lunch. This has to do with people that, you know, you may have received in the mail postcards to come to some dinner seminar at some fancy steak place and they’re pitching can’t lose products, double in 10 years. If it sounds too good to be true or doesn’t quite pass the smell test, just be on alert. Generally, those types of products have a longer surrender periods. They’re usually 10 years or longer. Um they pay high commissions to the advisor and generally they have high fees. So, just be on the lookout of that situation. Well, I have one. Now what? So, Malcolm and I will offer to you a no obligation review and recommendations about the annuity that you currently own. Annuities have changed dramatically over the last decade. As I mentioned earlier, regulators have stepped in and they’ve really put a higher emphasis on accumulation products. They’ve tried to significantly reduce and standardize fees. So, that’s something to think about. Um you may be in a situation where you’ve had an annuity for 25 years and you’re paying a fee and it might make sense to move it somewhere else and it would reduce your costs and give you a higher benefit. And if you have an annuity that has one of those lifetime incomes, you know, maybe it makes sense to start it. And if you’re have it and you are never you’re not in a situation to need the income, maybe you need to move out of it because you’re paying for a benefit that you might not use. And as I mentioned before, there’s that 1035 exchange provision which allows you to move from one to the other without incurring top taxes. So, basically just kind of a cost-benefit analysis of what you currently own.

Well, who can benefit from these types of products? Well, if you’re somebody who’s looking for tax deferral, uh I had a clients that um lived in northeastern Colorado and they were selling their farm. So, they knew in the first year they were going to have a lot of gains on selling the farm. In the second year they were going to sell all the farm equipment. And in the third year they were going to sell all the crops. So, they knew they were going to have three to four years of very high taxes. So, they wanted to invest their money in a way that would def- would provide tax deferral. So, we structured a number of things to have them come available after. And maybe it’s something like you’re selling a business. That could be somebody. Or you’re just earning a lot of money and you’ve got a lot of money in Alliance savings or elsewhere and you just want to reduce the tax hit that you’re getting every January on the 1099. Or maybe you’re somebody that’s looking for a higher fixed rate. As I mentioned, Alliance CDs are 410 or 415. If you can tie up some money, get 580 or 585 and take advantage of while we’ve got this higher inflation and lock in those higher rates for longer, maybe that makes sense. If you are interested in trying to grow your money, but you want some downside protection, you want to be in the market, but you don’t want to bear 100% of the downside risk, maybe a structured annuity makes sense for you. Guaranteed income, maybe you’re somebody that says you’re going into retirement and you you need to kind of create your own income stream. Death benefit, I had a client that was diagnosed with a very rare lung disease and he was only expected to live two to three years. So, he wanted to take some of his money and put it in an annuity that had the highest death benefit. So, the death benefit would ratchet up higher than potentially the market gave him. And that way when he passed away, he could pass on the most he could to his two daughters, which did happen and it did work the way he intended. Um or if you’re somebody that wants to avoid probate. Um all these annuities have beneficiaries and they pass directly to the beneficiary without going through probate. Um is an annuity right for you? They aren’t right for everybody, but they can be an interesting part of a diversified portfolio. You know, especially if you need lifetime income to help cover your essentials. I mean, meaning if your income stream in retirement is social security, but that’s not enough to cover your basic living expenses, maybe an annuity with income stream can help shore up that gap. Or if you’re somebody that’s got longevity in your family and you think you might live longer than your money last, you know, these lifetime annuities with income last as long as you do, even if the account goes to zero. Or if you’ve got everything in your 401k and it’s in the market and you’re ready to retire and you just want to reduce the risk on part of your portfolio, that might make sense for you.

Okay, facts versus fiction. They’re too expensive. I hear that all the time. Um then I’ve just alluded to several types that have zero fees. Zero fees. I mean, your fee is your time, right? You’re going to sit in it for three or five, six years. Um they have hidden fees. And as I mentioned, the the Fed and the state regulators have stepped in and all of that has to be very transparent. And all of that is explained if you’re working with somebody who’s trustworthy, anyway. Um they have high commissions and that that’s that’s not true. I mean, ask how we’re compensated. I mean, we we do get paid on these, but it doesn’t come out of your money. Uh, the commissions are typically paid by the insurance company, not you. So, if you put in a hundred grand, a hundred grand goes to work for you. I can’t touch that money. And as I mentioned earlier, nearly all of the annuity companies that we work with allow you to withdraw some of the money during that surrender period, you know, that five three, five, or seven-year period. Usually, it’s 10%penalty-free per year. And lastly, they’re too confusing. Yep, there are a few of them out there, uh, but that’s where we come in, where we can help look at somebody’s overall picture and decide whether this makes sense for you for a variety of different reasons. So, Malcolm and I offer a complimentary retirement plan for for all of you. We we don’t charge for that. I’m going to run you through kind of a quick example of how it works. So, this is Richard and Deborah. They’re both 62. Richard wants to retire at 67, Deborah at 65. Richard has some health health issues. He thinks he’s only going to live till 85, but Deborah thinks she might make it to 95. They’ve got, um, they’re contributing to their 401ks. They’re each contributing the max and their employer is giving them a match of 3%. They each make about 150 a year. Richard’s social security at his retirement would be about 41,000 and Deborah, when she retires early at 65, hers is about 35,000. And Richard has a pension of about 9,500 a year. We take a look at all of the expenses. Their living expenses are about 90k a year and in addition to that, there’s health care for each of them and travel and we break certain things out because we use a different rate of inflation or it’s not going to last your entire lifetime. Um our software pulls in the actual IRS tax tables. We can pull in the state tax tables also in this example. I’ve used the state of Colorado. This is the cash flow screen and this is showing us that um on the very left, Deborah and Richard are working. That’s the teal blue and 3 years in when Deborah retires, you see the income drop down, the teal blue. That’s Richard and Deborah’s social security kicks on. That’s the two navy blue boxes. And then in 2030 when Richard retires, now we have social security in dark blue. His pension in the mint green and then you see the yellow. And these are the bars that are leading up to the planned expenses. That’s the red line that’s going across the page. So the yellow means that you’re going to have they’re going to have to withdraw from one of their accounts or multiple of their accounts in addition to social security and pension to cover what they plan to spend. And then if you jump out about 7 years, you see the orange and that’s the required minimum distribution. Um most people I think realize that their pre-tax money inside 401ks and traditional IRAs and 403bs hasn’t been taxed yet. So uh at some point at age 73 or 75 depending upon when you were born, you have to start paying your least favorite Uncle Sam. And then you can see right around 2040s or right around 49, I guess, the social security drops off and that’s when Richard is passing away. Um but there’s still money left for Deborah. So this gives you an idea. The secure income screen, what this is showing us is that their essential expenses, which is the red line, are covered at about 59%and their total expenses, including travel, is covered at 49%, which really only gives them a probability of success of about 74%. So let’s do some what ifs. So let’s consider repositioning some of the assets that they have in their 401k into a lifetime income annuity. Does that help give them a little more security? So by doing that, now you can see that the we’ve added that secure lifetime income, which is the dark green. Um now their essential or basic expenses are covered at 80%and total expenses at 68%and now now they have a 99%chance of probability of success. So a little more comfort that those basic expenses are covered. So it’s just a peace of mind and security that um people look at that. So I am, since I was late getting started, I’m going to skip my little thing here and just jump towards the end. So ways we can help you, you know, certainly we do the complimentary foundational financial planning. That’s kind of what I just showed you, kind of a quick example. We can do some advanced planning also with Roth conversions and take a look at taxes and cash flow analysis, estate planning. Like I said, we have that relationship with the Trust&Will company. And investment management, what that is what Malcolm and I do is build retirement plans and strategize on the different investment choices that you have available. So, the credit union has checking and savings and CDs. On the retirement and investment services department, we have quite a bit that we have available to you. Pretty much anything you can dream up, we have available. So, I I’ll kind of stop where we started. That Trust&Will slide is basically, if you become a client of ours on the retirement side, you would have access to this Trust&Will situation for free. Um, okay. So, let me open it up for questions. Uh, before I do that, let’s see. Poll.

Let’s see. How do I launch this? Give me a sec.

Okay. So, I’m going to launch a poll. If we’re going to reach out to everybody anyway, but if you are interested in meeting with us and you want to do that sooner than later, feel free to put yes on our survey and we’ll reach out to you first, basically. Um, but with that, I’m going to open it up to questions. So, I’m going to come back on. Maybe. There I am. Um, and then let’s see if we have some questions. See, Q&A. Um, first question, is it possible to invest in an annuity from an IRA or a 401K to defer RMDs? Well, the only way you can do that is if you use that QLAC annuity that I mentioned in the very beginning and there is a a limit to that. The max you can put in is $210,000 and what that does is allow you to defer RMDs on that amount of money from let’s say 75 to 85. So, you get a a 10-year um break on that. Um okay, what else? You’ve guys got to have more questions to that than that. It’s the only question I see right now. What else? You got to have something.

Was it interesting? Did you learn something about annuities that you didn’t know before?

It’s hard to know when I can’t see anybody. So, feedback is always appreciated. Good, I learned a lot. Thank you. Thank you. And it it is somewhat interesting. I mean, that I I hear people as they get closer to retirement, they say, “You know, Kim, I’m less concerned about hitting a 20%return and more concerned about preserving what I’ve worked my whole career to save.” So, you know, you start thinking about how can you preserve the money you’ve saved and reduce risk? A lot of times an annuity might be part of that situation to help help in that. I use a four-bucket approach like the protection, the income, the growth and income and growth. So, that protection bucket is where you don’t have any downside risk and what can we do to give you some growth? Um Okay, another question. If I have an annuity that matures this December with another insurance company, can I roll it over to another one? Sure. I mean, we should certainly take a look at that and make sure, you know, all the ducks are in line and depending on whether it’s IRA money, you can certainly just transfer it to another one, no problem. And if it’s non-IRA money, we just want to make sure we do it correctly through that 1035 exchange process so you do not run into any taxation. Whatever you’ve earned in the current one, we want to move that forward so you don’t have a tax hit along the way. Um somebody said, “I’ve learned way more about annuities than I ever knew before this webinar.” Thank you. I appreciate that. Um and it is certainly worth considering, you know, down the road at some point. If you’re a fixed investor, if you’re chasing CDs and Treasuries and you want interest rate, now is a pretty good time. You know, we have inflation up because of the energy costs and all of that and we’ve seen them pop up. I mean, 5.85%. I’ve got another company that’s um said I’ve already seen an email that they’re going to increase their rates on October 1st. So, if you’re a fixed interest investor, for sure now is a pretty good time to kind of look at it. And even, you know, these rates are obviously based on inflation, but volatility in the market drives some of the other rates. So, if you think about that fixed index annuity that I talked about, that doesn’t have a stated interest rate, but it’s tied to the market. So, the market’s been pretty volatile in the last few weeks, right? So, think about if you bought it today, you know, the the Dow was at what, 54,000? Now we’re down to about 51,000. So, our starting point is lower and you sit on it for a year and then on the anniversary, if the market’s gone back up, you have an upside max of 10 and 1/2%. I mean, if you got 10 and 1/2%in a no risk, no fee investment, uh people would trade stock market risk for that all day long, right? I mean, that’s a that’s a pretty interesting perspective, but um anyway, so let me see. Let me check questions one more. No more in the chat. Let’s see, here’s another one. A couple more, okay. Uh very interesting. I’m sure it varies by circumstance, but do you consider annuities making up a certain percentage of a strong portfolio? Any rules of the road? You know, um there isn’t really rules of the road. Um it’s a lot about your comfort level with risk um and access to the money, right? If you think about a triangle, and I have liquidity at the top, risk and reward on the other two points. Generally, with any investment, I can give you two of the three, right? If you want low risk and a high return relative to interest rates, you need to give up your liquidity and be willing to tie that up. So, depending on how much you have, determines whether you’re in a position to do that or not. I mean, I generally most people, I won’t say all, but most people do not want to throw 100%of their money in the market and just let the market rock and roll them through retirement. I usually see maybe a quarter to a third. People want some of their money safe. So, that would be the best I have for that question. Um what info do you need to review an existing annuity? Basically, just a current statement. And you can email that to me, and we can set up an appointment to talk about it, and um just take a look, and I’ll give you the pros and cons, or Malcolm will give you the pros and cons of what you currently own. Is a non-qualified It’s non-qualified and I can’t afford to pay all the taxes at once. So, yeah, that’s the idea of the um of the 1035 exchange. If you transfer from an annuity to a money market, um you’ve Let’s see, there’s a couple questions from the same person. Hi, Christine. Um So, if let’s say you leave it in the annuity for 3 years and you’ve got the tax deferral on the earnings that you’ve earned in the 3 years. And then at the end of the 3 years, you want to move it to a money market, then absolutely, you’re going to pay tax in that year on that 3 years of interest. But if you don’t need it and you can roll it to another annuity, you can you can just roll that forward. Um and if you don’t want to have that big tax hit at the end of the 3 years or 5 years, then you just do a withdrawal each year and you would get the 1099 on that. Um let’s see. Is there an advantage to delaying an annuity purchase to a later age to have guaranteed income in older years when you’re less able to manage finances? Would it take less of an investment to cover a shorter lifespan? Sure. I mean, the, you know, the longer you’re willing to wait if on those income annuities, um, a lot of them will say you put your money in and your cash might earn you a 3 to 5%. But then they have this income account that might roll up by 10%a year for 15 years. And the sole purpose of that income bucket is where they calculate that lifetime income from. So, again, now with interest rates the where they are, we’re seeing a lot of these companies either increase those roll up rates or um increase the withdrawal rate. So, if you put some money away and let it cook for, you know, 8 or 9 years and it’s growing by 10%a year and you’re going to be older by that point, so your withdrawal rate will be higher. Sure. Yeah, and we can kind of back into that, too. If you’re looking for a certain dollar amount at a certain point in time, we can back into it and see how much you need to get that amount of income by a certain age. Um what else would I say? Oh, a lot of those income annuities now, let’s say for example, you’re getting 20 grand a year from the income, a lot of them will double that income for a long-term care-related expense. It’s clearly not long-term care insurance. It is not going to cover a nursing home, but if you had an extra 20 grand a year, in my example, could that help cover some home health care costs? Absolutely, it could. So, um so, there’s some different things out there that um as people get older and get closer to retirement that they’re concerned about. Um let’s see. I have a defined pension from work. Would it be better to take it as opposed to buying an annuity? There would be no fees and a straight payout. I have the option for the lump sum as well. So, yeah, that’s a great question. So, a defined pension plan, so that’s a pension that you have with your company. Let’s say you’re single and you decide to take that pension plan from your company and they’re going to give you X amount of money for the rest of your life and when you die, they keep the money. So, let’s say, God forbid, you turn the pension on and you get hit by a bus in year three or four, that money goes back into, you know, the United coffers or whoever your your company is. And if you’re married, you probably pick joint, so if something happens to you that pension continues. Um, we’ve also seen some things with pensions where companies have changed them. So, a lot of times people want to at least explore if they took the lump sum and bought an annuity to do the same thing as the defined pension plan does, what’s the delta? What’s the difference between taking it from your company versus moving it to an A-rated insurance company and maybe picking up a beneficiary or picking up a doubler for, you know, long-term care related expenses. It a lot of times it’s not as much as the defined pension plan, but sometimes it’s worth a look. You know, I’ve had people say, “Yeah, I really don’t want to leave my money in the Kaiser pension.” Or if they’ve worked for they saw what happened to United Airlines and if they’re a Carp, you know, a Continental person, they clearly don’t want to leave it in Carp. They saw what happened to United. I mean, think about Enron and, you know, some of those were the pensions kind of evaporated. So, you know the strength of your company better than I do, but that is sometimes the reason why people will look outside of of their defined pension. Um, let me see if I’ve got everybody.

I think I have everyone’s questions. Um, so, thank you for sticking around. I appreciate you waiting for the technical difficulty. Of course, it’s a we’re going to update you in 3 minutes and you don’t have a choice of deferring it and, you know, it just says, “Oh, and we may reboot three or four or five times.” So, I appreciate you hanging in there and uh coming back on with me to go through annuities. So, look forward to talking with you all within the next week or so and thanks for joining me. Have a great rest of your day.

a month. If you could wait until you were at $2,000 a month, 2%of that is 40,000 or excuse me, $40 a month. So again, wait as long as you possibly can to take out social security. Now, it all depends on your age and everything. So there’s many other factors that go into play that, but that’s typically what I recommend. Now, for the majority of people at 65, your your full retirement age is 65 to 67 years old, but at 65, everybody [clears throat] should sign up for Medicare Part A. Medicare Part A is free. It doesn’t cost anything to have. It’s hospitalization. Medicare Part B and D, those cost extra. So if you’re covered under group plan, typically you won’t sign up for Medicare Part B and D, but you do need to sign up within 3 months of your 65th birthday to sign up for Medicare Part A. Now, at 67, everybody’s going to hit their full retirement age. It’s either before that or afterwards. And then at age 70, anywhere from your full retirement age 65 to 67 up until age 70, if you don’t take out your your social security, you get what’s called delayed credits. You get an 8%bump up until you start taking it out. Okay? Now, everybody’s going to have to start doing RMDs anywhere from 73 to 75 years old. So if you are not 73 by the year 2033, your full retirement excuse me, your RMD age is is going if you are if you are 73 by the year 2032 or less, your RMDs are going to start at age 73. If you are not 73 by the year 2033, then your RMD is going to start at age 75. Why they keep changing the goal posts, and know about that, but it used to be 70 and a half, then they jumped it up to 72, then they jumped it up to 73, and then again, if you’re not 73 by the year 2033, it’s going to jump up to 75. I have not heard of anybody moving that to down the road later than that. I I haven’t heard anything, but anyway, that’s when you have to start taking out your RMDs. And the RMD starts out roughly about 4% for the year. Okay? So, what they do is take the the total dollar balance you have in your traditional IRA on December 31st of the year prior to reaching 73 or 75. And then based on your age, uh again, you’re going to have to take about about 4%out the first year. It’s a little bit more than that, but roughly about 4%. And then every year thereafter, the percentage that you have to take out will slowly increase every year. Okay? So, just some things to take a look at. Uh dates and ages to take into consideration as you’re looking to plan your retirement. Now, what you want to do with number two here is take aim at your retirement target. So, I’ve got three rules of thumb here to to take a look at here. Rule of thumb number one, if you can save enough money to generate anywhere from 70 to 90%of your pre-retirement income. Now, that’s a good rule of thumb. I’ll be honest with you, the majority of people don’t have that, and that’s okay. But, if you can do that, then you should feel very comfortable that your retirement is going to be um that you you will be comfortable in retirement. Now, there’s some costs that probably will go down once you do retire. Your mortgage, hopefully, will go down. Hopefully, you don’t have um a mortgage anymore. Transportation, if you’re unfortunate and don’t work from home, as I mentioned I do, uh then transportation should go down. Clothing, you don’t have to buy these nice shirts anymore. And food should go down because you’re not out needing to go to lunch with co-workers, going out to dinner afterwards or whatever. You will have time to be able to prepare food at home and that obviously is a lot cheaper than than eating out. Now there’s some costs that may go up. Healthcare, especially if you’re covered under a group plan, your healthcare may go up depending on how much your company pays for it. Travel may go up. You You know, I’ve got a buddy of mine from Australia and he says that either he has all the time in the world to go back and back and visit family or friends, but he has no money. That’s when he was been unemployed. Or he has all the money in the world but no time. That’s when he’s been employed. So hopefully in retirement, you’ll have all the time in the world to be able to go do that. And hopefully you’ll have enough money to be able to do that as well. Your utilities should go up. May go up. You’ll be at home more often. You’ll have the TV on more often. You’ll have lights on more often. And so your utilities will go up. Home maintenance. In my case, I can almost guarantee you that’s going to go up. I’ve got grandkids. I’ve got five grandkids. And if I’m home, they will probably come over more often. And I just caught my grandsons, they’re six and four. Those are the oldest oldest two. They thought it was really cool to throw dirt in my air conditioning unit with the fan going on. [laughter] I got to love them. I got to love them. Now things that may go away, costs that may go away. Social Security payroll taxes. If you’re retired, you don’t have an income anymore. And so you don’t have that cost anymore. And then also contributions, if you’re not working, you can’t contribute to a retirement account. So that will go away as well. Again, if you can plan and and earn anywhere from 70 to 90%of your pre-retirement income, you should feel very confident that your retirement is going to be that you’ll have plenty of money in retirement. So, rule of thumb number two of three is save a multiple of your salary based upon your age. Again, this is a rule of thumb. So, let’s say that you earn $100,000 and you’re age 55, so you should have anywhere from six to eight percent six to eight times of your salary as saved up for retirement. So, that’s $600,000 to $800,000. I’ll be honest with you. I know many people that are retired with less than that. Okay? Again, these are just good rules of thumbs. If you can do this, then you should feel very comfortable in retirement. And then based upon your your age is here will determine how much you should multiply your income on to have the amount set aside for retirement. So, rule of thumb number three, save enough to generate a 4%with with withdrawal rate. So, if we take a look at that here, and let’s say that you want to withdraw 4%from your assets over the next 20 years, and you want to have a 25, 50, or $100,000 income coming in of that 4%uh coming in, if you get a 1.5%return, then you’d have to have about a half a million dollars in in uh savings or in in retirement. About a million dollars if you want 50,000. If you want 100,000, you’d need about a little over two million dollars in there. Shameless plug, Alliant, our savings account is paying double that 1.5% return right now. I’m just kind of saying, as I’m sure you all are aware of that. Now, if you get a little bit better of returns, say you have 5% return. Again, a 5%return is not being aggressive at all. It’s still considered very uh very um uh uh conservative. So, if you want if you’re getting a 5%return and you want $25,000 for the you know, withdraw 4%to get $25,000 over the next 20 years, you need 391,782 if you want 50,000. If you want a a $100,000 in uh in income, you need about 1 and 1/2 million dollars in retirement. Now, what do you need to do if you just want to withdraw over the next 40 years? Okay? Again, if you have a 3%return with the same desired income, you need 476 for 25,000, uh 952,000 uh if you want 50,000 in retirement, and if you want a 100,000, you need 1.9 million dollars. Now, again, if you want a six or if you have a 6%return, again, the bigger return you get, obviously, the less amount that you need. And again, 6%is not being aggressive at all whatsoever. Uh it’s just kind of on the low end of a balance, but you need 365, 730, or a little under uh 1 and 1/2 million dollars if you want $100,000. Okay? So, just some numbers to take into consideration if you’re if you’re doing this. Okay? Now, let’s maximize your nest egg. Let’s say that you have kind of started late. If you take my father-in-law for example, my wife is from Ireland. Uh my father-in-law was able to come to the States uh a couple of years after my wife and I were married um just through a immigration system back then. They came through. Um when he came to the States, he had nothing. He could not bring any money with him. And so, he had to start late in life and be fairly aggressive. So, let’s say that you’re kind of in the same situation or you’ve maybe started a little bit later in life. Let’s take a look at uh the possibilities and let’s look at a hypothetical example here. Okay, so we have two people both age 50 years old. Let’s say the wife is a retired school teacher, but now she just volunteers her time at a historical society. Let’s say the husband is an engineer and he makes $150,000 a year. So, his company offers him a 401k and here’s the maximum contributions for anybody in a 401k. It’s at 24,500. And let’s say that his company matches that at 3%. So, they’re putting in $4,500 a year on top of that. Now, because he is 50, as I mentioned earlier, you can start to contribute more into 401ks and IRAs. And in a 401k, if he’s 50 years old, he can do a maximum of eight $8,000 into that. So, let’s say he maxes out the eight $8,000. Okay, now he can contribute to a traditional and a Roth IRA because he’s working. He can contribute to the Roth IRA because his income is less is $150,000 and so he can do that. As I mentioned earlier, the maximum contribution for anybody and everybody in 2026 is $7,500, but because he’s 50, he can do an additional $1,100. So, that’s $8,600 that he can contribute into that. Now, even though his wife is not working, she volunteers in two a historical society there, but because he is working, she can do a maximum contribution into an IRA account on her for herself based upon his income. So, she contributes the maximum into her 401 or excuse me, into her IRA account as well. Now, if you add all of these up every single year, the maximum contribution you can do into um your retirement accounts is uh $54,200. Well, let’s say they just do $51,000, okay? They don’t quite max out everything. And again, since they’re 50, he’s looking at retiring at 65 years old. Let’s say again, not being ultra aggressive, he’s fairly a balanced investor and he gets a 6%return. Over those 15 years, his nest egg could increase by $1.2 million. So, it’s never ever too late to start contributing. It’s better late than never. So, if you’re in a situation where you think you’re behind the eight ball, don’t panic. Let’s just get a game plan going and uh make sure that uh we can do the very best that we possibly can. So, what you want to do every single year is do a a portfolio checkup. Okay, the average worker switches jobs 12 times in their lifetime. One of my sons is probably got that half of that already. Um 63%of workers have access to some sort of defined contribution plan through their work. And for any new people that are starting starting jobs, 69%of uh companies have an automatic enrollment, which is kind of nice. You have to kind of opt out if you don’t want to do it. But, let’s take a look at perception and reality. Let’s say you have previous uh well, right now that you’re working, you’re getting closer to retirement and you can see I’ve got plenty of gray hair. Um I still have a number of years left. I’m 58. Uh so, I joke with my boss all the time that he’s stuck with me for the next 12 years, whether he likes it or not, and so far they like it. Um which is a good thing. Uh so, let’s say your current retirement plan, you want to be a little bit more on the balanced side, 60%stocks, 40%bonds. But, if you looked at previous jobs that you had when you were younger, you might have been more aggressive because you had more time on your side to ride out the waves of the market, the ups and the downs. So, if you had a couple of previous jobs, your first job was very aggressive, your second job was fairly aggressive, but now that you’re in your your current job, you want to be a little bit of a balanced investor. If you combined all three of those, you might be more aggressive than what you actually want to be. So, you want to take a look at old 401(k)s, IRAs out there, and just see how are you allocated according to what you were wanting to do at this point time. So, let’s take a look at some scenarios here, some real-life scenarios, and say, “Okay, let’s say you have a goal of retirement in 3 years, and you’ve got $900,000 in a in your retirement account, and you want to have a million dollars when you retire in 3 years. Okay? If you get an 8%return over those 3 years, you’ll have $1.1 million in your retirement accounts. Okay? But, let’s say that happened in 2019 Excuse me, 1999, the tech bubble burst. If you were 100%stocks back then, the tech the stock market was down 3 years in a row, the S&P was negative for 3 years in a row because the tech bubble burst, your $900,000 would have dropped down to 584,000. Quite a drastic difference. But, if you reallocated before all that happened, and let’s say you were 50%stocks, 50%bonds, your $900,000 would have dropped down to 850 871. Barely a glitch. If you stayed where you were at, didn’t make any adjustments or changes, 12 months later, your 50/50 stocks and bonds would have been over the million dollars that you wanted to. Your 100%stocks would have taken you almost 4 years to get back up to where you wanted to be at. Okay? Over the million dollars. Okay? Now, let’s see what happens when people panic and get out of the market. So, again, let’s say you were looking at retiring in 3 years. My father-in-law was a perfect example of this. His goal was to retire in 2008. We all know what happened in 2008. But, if we take a look at this, let’s say you’re at 900 and 900,000 dollars and you’re at 2005 and your goal is to retire with a million dollars 3 years later. If you were 50/50 stocks, your 900,000 would have dropped down to 700,000 dollars. If you panicked at that point in time, which unfortunately many people did, they saw their account value go down and down and down. They panicked and they took it out of the stocks and bonds and they moved it over to T-bills. You know, by the time after 1 year, it went down to that at 700,000 dollars. It in 2 years later, you would have been at 713. If you didn’t panic and you left things as they were at 50/50, you would have been back up to your million dollars in 3 years later. Okay? If you kept it in the T-bills and never got out, cuz unfortunately a lot of people just got nervous and didn’t trust the market, it would have taken you over 10 years, uh close to 15 years to even get back up to the million dollars that you were hoping for. So, again, do not panic. Get a good game plan going. Know that the market’s going to go up. know that it’s going to go down. Understand that the market is up on average 75%of the time, it’s negative 20 uh 12 uh 25%of the time. And when it’s up, it’s up quite a bit. When it’s down, it’s usually not down that much on for the most part. There’s We’ve had the big drops, I get it. Uh the Great Recession. Um the Great Depression. Hopefully, nobody’s on the on the webinar here that went through the Great De-Depression. Um but we’ve had other other time frames, the tech bubble burst at the turn of the century and everything. Again, get a good game plan going. Know that the market’s going to grow. Know it’s going to fall at some at some point in time. But there’s always time for it to come back up again. Okay? As long as you maintain and stay where you were currently at. Now, you definitely want to take a look at beneficiaries. Okay? I’ll give you a personal example on that. Uh my mom passed away in 2016. And my dad got remarried about a year later. Uh a little over a year later at at the end of 2017. So, he had a new wife. Uh he started to get sick in in 2024. Uh my brother and I, we were trustees on his account. So, before he passed away, we’re taking a look at a lot of his uh of his accounts and stuff. And we noticed that he had an old uh IRA account out there that still had my mom as a primary beneficiary and my only one brother as a as a contingent beneficiary. So, prior to him passing away, we were able to change the beneficiary around to go into his trust. So, he created the trust with some ben- fits of my stepmom. And uh picture or if you have young children or grandkids,

uh uh

Uh

with a will, your assets will go through probate probate debate, and it’s just so much better. It’s more locked into into stone and a trust. Um so, I recommend that you do a trust look at get a local attorney to do a trust. Or they’ve got the online trust accounts uh that you can set up uh that way. Those are typically a lot cheaper, um but uh take a look at any of those to do that. So, five out of the seven uh create a social security strategy. Now, when I talk about social security, I I hear all the time,”Oh, no, social security’s going to go bankrupt. We’re not going to get anything.”That is not the case. I’m going to tell you right here and right now that is not the case. We will always have some social security. May not be as much as we uh currently have, but here’s how social security works. For those of us who are working, we’re paying into it every single month uh when we’re every paycheck that we get, we’re paying into the social security trust fund. And then those that are currently on social security is taking that money out. So, up until 2021, there was more money going into social security than what was coming out. And then in 2021, things changed. Baby boomers to retire, and they have all the right in the world to be able to retire. So, since 2021, there is now more money coming out of social security than what’s going in. The thing that may go away is that surplus. Okay, in 2023 or excuse me, 2033, the surplus is expected to go away. So, that unless the government does something then people may only get 78%of what their current benefits are are are at. I highly highly doubt that the government, whoever’s in charge at that time, that the government of that time is going to allow uh Social Security to or people to get less than what they’re currently getting. I just don’t see that happening, to be honest with you. There are some things that they could do to stop that, and one of the things is increasing taxes. Nobody likes to say it, but that is a possibility, one of the things that they could do. Uh if they increased taxes by 3.65%, that would solve the Social Security problems, uh and then allow people to continue on with the same benefits that they are currently getting. Okay? There’s a couple of other things that they could do, um but this is just one of the options. And in true government fashion, nobody is tackling that issue now. Nobody’s getting ahead of it. They’re kicking the the the can down the road, so that somebody else has to deal with it. Sadly, unfortunately, that’s what’s happening. Okay? Now, as I’ve mentioned earlier, full retirement age, here’s the different full retirement ages uh based upon your your the the year that you were born. So, if you were born prior to 1956, you’re in uh full retirement age currently. ’57, ’58, ’59, it’s 66 and so many months. And if you were born in 1960 or or or after that, your full retirement age is 67 years old. Um and it’s just So, again, you can delay Social Security up until age 70, and from it, I’m in the 67 years old, uh I would get a delayed credit, an 8%bump up each of the 3 years if I delayed it till age 70. I often get the question is, what is the maximum amount of social security that you can get. Okay, so here’s the maximum amounts at different ages if you contributed into social security the most this is what you would get. The average though is quite a bit less. Okay, so for example at 67 let me back up the maximum is $4200. The average is 26. Okay, that’s quite a bit of a difference. If you had had an average wage and it contributed into social security you would get that. Um next slide is so social security depending on what your your income was prior to retiring and it social security may only cover a small portion of that income. So if your income at retirement was at 50 excuse me at $50,000 social security would cover about half of that. If your income was at $100,000 social security is only going to cover about 40%of that. So then again if you want anywhere from 70 to 90% you’ve got to come up with the other 30 to 50% of income. And then again the more that you earned prior to going on retirement then the the less of a percentage social security is going to cover that.

Now you want to build a retirement income stream in any income stream in retirement. [gasps] So let’s say you have a half a million dollars and you put it into a typical money market account earning 0.22 again shameless plug for Alant Credit Union savings but anyway at 0.22%you’re going to get interest every single month of about $93. And you’re welcome. Now again if you’re a little bit more aggressive not much more aggressive but a a bit more aggressive and you get uh double that at roughly about uh half a percent, your income on a monthly basis is going to give you it was going to net you um uh $214. Now, I again, if you be a if you’re a little bit bonds. Now, again, bonds can go down in value um if you hold individual bonds, they typically go don’t go down, but if you do like a mutual fund of bonds or an ETF of bonds or have those in mutual funds or ETFs, then they can go down in value based upon interest rates and stuff. But, if you’re, you know, let’s say you get a municipal bond with an average return of 3.94%, you’ll get an additional $1,600 a month. Okay? So, again, you don’t have to be uh very much more aggressive in retirement to get a substantial different return. [gasps] Now, let’s say you want to take out systematic withdrawals from your retirement account. You want to take out $1,500 a month, and let’s say you have an individual um uh stock of a company, and it’s uh currently selling at $5 a share. So, if you want $1,500 a month, you’ll have to sell 300 shares at $5 uh to get that $1,500. If the stock goes up to $6, then obviously, you’re selling out less number of shares at 250 uh uh shares to get your $1,500. But, if that stock goes down to $4, then you have to sell more shares to get the same $1,500. Okay? Now, I turning retirement savings into retirement income. If you invest in income-producing products, so mutual funds, stocks, bonds, ETFs that pay a dividend, then you’re there’ll there’ll no uh of your original savings amount, but your income may fluctuate because not all dividend paying uh investments pay out the exact same amount of dividends. If you want a more consistent, you’ve got a budget going on, and you want a consistent dollar amount return, then your income is going to remain consistent, but it may dip into your principal amount that you originally put in there. Now, the last item here is look beyond the money. Okay? In 2020 20 and in 2010 they they they put out a poll to see the economist put out a poll to see what is the the average happiness of people at different ages in life. And from 50 to 55, well, 45 to 55, that’s when people are least happy. I don’t want to say they’re miserable, but that’s when people are least happy. Uh they’ve got their children that are maybe going off to college and they’re stressed out about helping out pay for college, or they’ve got a a parent that’s maybe coming up with some health issues and stuff, or they’re looking at their retirement accounts and said,”I have not done enough. I need to want to do more.” The great news about all that is once you’re at 55 and thereafter, your happiness typically starts to increase. And then can increase for a number of different reasons. Number one, if your health is good, you know, we have a we have a lot better understanding of how to maintain and be healthy uh by based on the foods that we eat, based on the exercise that we that we do. Friendships is very important. And it’s important to me. Um I love to hang out with my friends. My family, uh my mostly, that’s primary, but uh friends are very important to me as well. As I mentioned, family also here is a big factor in me. Again, as I mentioned, I got five grandkids, got three kids, I’ve got five grandkids, and hanging out with them is just an absolute blast. I I I I realize that I am very lucky. All three of my kids get along very well. They haven’t always, but lately they’ve been getting on uh very well, and um and I get along with them. My wife gets along great with them as well. So, we’re I know that we’re uh very blessed that way. And so, that just adds a really a lot to uh the happiness factor that we have. Now, the island of Okinawa has got uh you know, they’re they’re known for longevity uh lifestyle, and they live many, many years and beyond the average uh for the rest of the world. And they have something based there that they called ikigai. Ikigai basically translates into something to live for. So, when you can find out what you love to do, and figure out if the world needs that, and how you can be paid for that if you if you want to, or find out things that you are good at, all those contribute to your ikigai. All those contribute for uh things to live for. Now, find out in retirement what is best for you. You may want to contribute to a cause. I talked to a client earlier today, and she volunteers a lot of time up at the local hospital. Visiting and friends local, traveling to go away, uh that’s always a great thing to do. Pursue a hobby. You know, again as I mentioned earlier, in retirement, you’re going to have a lot more time to do it, hopefully. I mean, my I’m sure my grandkids are going to take up a lot of that time, which is fine. Um but uh pursue a hobby and to to enjoy. You’ll have hopefully have the time to be able to do that. Travel. I talked to people, and they love to travel in retirement. If you want to start a business at that point in time, that’s not what I would do, but if you want to start a business, absolutely. Or I hear, you know, on the news uh quite often that a a grandparent um um or even a parent may uh graduate with their child or whatever, which I think is absolutely fantastic. [gasps] Now, some people that didn’t take uh didn’t slow down in retirement. So, Peter Roget, he developed a thesaurus at age 73 is when he came out with that. Colonel Sanders opened his first first KFC at 65 years old. Madonna Buder is known as the triathlon nun. She started uh doing triathlons and finished her the most uh recent one or the latest one at age 82. Uh Grandma Moses started painting uh when she was 76. And Yuichiro Miura, he uh he set a world record to be the oldest person at age 70 to climb Mount Everest, and then he did it again at age 80. I couldn’t do that now, and I think that’s absolutely fantastic. So, again, an unknown author once said, “Retirement is wonderful if you have two essentials: much to live on and much to live for.”So, uh hopefully in retirement you’re able to um save enough money to that that you can do those things in retirement. You can have things to live for uh and have things to live on. So, to kind of recap the seven things that to do before uh retirement in the decade before retirement, these are just some of the things that you ought to take a look at and to be able to do. [clears throat] Now, I always encourage you to work with a financial professional. With a financial professional, you can create a plan into retirement. If you don’t have a plan, then all you have is a wish. And I strongly encourage that everybody has a plan going into retirement. We do have a plan available here at Alliance Credit Union. It’s complimentary. It doesn’t cost anything for uh for you to do. And it’s something that we offer. It’s It’s fairly new. We’ve started offering this fairly recently. But let’s take as uh an example of what we can look at uh in this plan. You know, we put information in here and this is for Bob and Mary and we put some information in here. The dark blue is their social security as they get that in retirement in in their retirement. Uh the light blue there, that’s uh maybe a pension plan that they got. The red line there is that is their uh expenses. And then the orange is their RMDs. So, we can tailor a or we can take a look to see do you have enough set aside to have enough income in retirement? So, a couple of other things here will tell us a calculate what taxes that you will pay over your lifetime. Okay, in this scenario here uh Bob and Mary will pay $832,000 in taxes. And then based upon the information that they had put in here, they would have $4.2 million in a portfolio to be able to pass on uh to beneficiaries. One thing that we do here in this Wealth Vision This plan is called Wealth Vision is we take a look at Roth conversion. That’s kind of a really big topic lately is can you do a Roth conversion and and and if so, well, anybody can, but if you do a Roth conversion, what is the best way to do it? And we can we can set up this uh report here to run a couple of different ways. In this particular way uh [laughter] what they’re taking a look at here of doing a Roth conversion for what would that do to excuse me, both number one, taxes, and then number two, um portfolio. In this particular situation, it would reduce their overall taxes over the lifetime by $140,000. And it would also increase their total portfolio to pass on to beneficiaries by by $826,000. $828,000. So, in this situation, that kind of a Roth conversion would make sense on uh both for them and for beneficiaries. Then if we take a look at another example here, David and Sarah, this one here, their social security and their other uh income they would have to take out of their assets uh to meet their expenses, the red line. And then their RMDs kick in. And and then this scenario here, we have one of them passing away 4 years prior to retirement uh prior to the second one passing away or 3 years prior to the second one passing away. And what would this uh what would this cause? You know, again, their total assets in this scenario here at $3.4 million to be able to pass on to beneficiaries. And we can see that assets can continue to grow in retirement depending on how you invest it and and things like that. In this uh scenario here, we do a Roth conversion uh and fill it up for 5 years. But this one here, we just fill it up to the next tax bracket or the the current tax bracket. So, in this scenario here, it’s filling it up to stay within the uh 22% tax bracket for the next 5 years. What does that do to the overall portfolio? And for this one here, it would save them $116,000 over their lifetime in taxes and increase our portfolio uh to pass on to beneficiaries by $250,000. Now, that uh by doing that Roth conversion, that $250,000 then would probably be all tax-free to pass on to the the beneficiaries, which is kind of nice. So, if you inherit, you’re the one that’s going to pay for taxes on it. Um if you inherit a Roth IRA, nobody’s going to pay taxes on it, which is kind of the nicest thing to do. Okay? Uh again, it uh we can determine by doing a Roth Roth conversion uh this scenario here would save them that uh money in taxes and going forward. So, why ARIS? Why Alliant Retirement Investment Services? Well, I many, many different plans that are available. One of the things that many other places do out there is they charge you a set dollar amount for everything that you have with them. Uh I don’t have that philosophy. I look for uh uh accounts that don’t have the fees. If the account doesn’t have a fee, we don’t add anything onto that account either. So, I look for as many as we can with no fees or very reduced fees. Um but we don’t charge for everything in there. Um we take a look at uh your assets, make sure that you have enough income for the rest of your life. We can look at dividend portfolios so that you have an income stream coming in if you would like to, if you need it. If not, then we just we can just reinvest that into uh back into the investment. Now, how can we help you? First of all, number one, what we want to do is we want to get to know you and design a plan specifically for your situation. Then, we use a team approach to uh take a look and see what we can do out there to design it for what your your needs are. And we want to build a lasting relationship for the rest of your life. So, with that being said, thank you very much again. Here’s my contact and I’ll get into the questions here. This is my contact information, so if anybody is on the phone here or on this webinar on the phone, my direct contact is 773 462 8612. That rings directly onto my desk. And with that being said, my my uh email address is [email protected]. I again, I am an actual employee of the credit union. Uh so, with that being said, let’s get into this. Uh let me uh if you would like to have a one-on-one conversation with me and continue this or if you’d like to have that that wealth vision um uh report run for you, uh answer yes to this. I’ll reach out to you. Now, I will tell you uh I will be out of the office the rest of this week. I do have a funeral that I uh have got to go to. Uh so, I if you answered yes to this, I will reach out to you next week. And uh I’ll call you first. If I don’t get you on the phone, then I’ll shoot you an email. And with my email, you can uh you have access to my calendar and you can schedule a Zoom meeting that way. And that way, we’re not playing phone tag back and forth. But, here is um uh let’s get into this. So, uh Uh question number one here, do rules of thumb include Social Security or just 401k? Uh it includes uh it includes Social Security. If you’re looking for that income, uh the 70 to 90%of your income, that does include the Social Security obviously because that would be income. If that’s what you were referring to, uh then yes, it does include Social Security. Uh I have heard that the bond market is not behaving like it used to. It is not so reliable as a uh counterpoint to stocks. Yeah, so the bond market recently has gone down. Again, the bond market will go up and it will go down. Uh to be honest with you, bonds are they kind of move in opposite directions of interest rates. Uh when interest rates rise, bonds are going to go down. When interest rates fall, bonds are going to go up. That’s a really about the only consistent. Bonds and stocks have nothing to do with each other, but I will uh be honest with you, lately, uh the last couple of years, the bond market has not returned very well. But, on the other hand, it hasn’t fallen. Uh you know, I I should say it won’t fall like the stock market will fall. Okay, so there is that. Um Your internet is making your sound like a robot. I’m sorry about that. Uh I’ve been having today, Goofy, hopefully the sound is better uh better today or better now on that. Um Uh oop. Uh another question, can you put up the slide again that shows the maximum amount of Social Security you can receive based on the age you start withdrawing? Let me get into that. That was up earlier, right here. Here is the maximum that you can contribute or that you would get if you contributed to the 401k. Or into Social Security. The maximum you would contribute into 401k. And

Uh another question here, in your retirement Oh, if your retirement age is 67 and you choose to wait until age 70 to take social security. Do you need to be working between 67 and 70 to get that bump up? No, you don’t need to be working. You don’t need to be working at all. You can um get that bump up regardless of whether you’re working or not. The 8%per year. Uh another question here, can you discuss long-term care insurance? Uh sure, I’ll briefly discuss it. I’ll give it a 30,000-ft overview. Uh so, long-term care insurance, should you ever need to go into a nursing home or a a rehab for a long period of time, it will pay a set dollar amount a month for a set period of time. It’s not like insurance where it’s unlimited. Um you do need to qualify for long-term care. Okay, so it’s not something that just anybody and everybody can get. And to be honest with you, the older you are, number one, the the less likelihood you’re going to qualify for it. And and if you do qualify for it, the older you are, the sooner you’re going to probably need it statistically wise. It’s going to be extremely expensive for you. But, long-term care will cover you should you need to go into a nursing home. Uh if it tip it you know, it you can set it up a number of different ways. Sometimes it doesn’t start to kick in until six until you’ve been in there 6 months. Other times it’s 3 months or you got to cover the first three to six months. Um hopefully that answers your question without getting uh too much into this. And that is all the questions that I had. So, thank you everybody for joining me today. Again, for those that do want me to reach out to you, I’ll reach out to you early next week. Um and uh I just will be out of the office the next Uh, the next 2 days this week here, and I hope everybody has a wonderful day and a great weekend, and we will talk to you soon. Take care, everybody. Bye.

Good everyone. It’s now 2 minutes past the hour. I know for you folks on the East Coast it’s 7:00, so thank you. I know we’re going to we’re in dinner time right now, but try to get this one quickly done today, so everybody can get back to what they’re doing and hopefully you leave well, a little more knowledgeable and knowing more than you knew before today. So, good evening everyone. My name is Baptiste Bruner and I’m a Texas-based financial consultant with Reliant and part of a team of financial professionals. We have a team of professionals at the credit union, and we really just give a lot of educational webinars to just educate our members, help them understand how to retire better, maybe different things that they can come across in retirement as far as Medicare, Social Security, annuities, how to invest best. And I’m going to just start by thanking all of you for taking the time to learn more about Roth conversions today, how to potentially save a lot in taxes, and ways to give tax-free money to your heirs, and find out if you may be a potential candidate for a conversion. Uh presentation’s about an hour long. I will make it as quick as possible. There’s some parts where we can cut through a little quicker, and as always we’ll reserve time at the end to answer any questions you may have. And when that time comes, you can go ahead and ask your questions in the chat section. I’ll be sure to get to them. There’s both a chat and a Q&A section in here. So, whichever one you prefer, to each their own.

And we have to make a note of this now, but now that there’s AI note-takers, we just have to make it known, look at you. I can’t stop you guys from taking photos of anything on the screen today. I’m not going to be mad about that, but please, if you have an AI note-taker in here, please remove them. Uh this is proprietary information, I guess, and they just don’t want those AI note-takers in here, but please keep that guy out. Feel free to take photos. I can’t stop you. And coming up what, 2 weeks? Going to be doing another webinar here on designing your retirement income blueprint. That’s coming up Thursday, October 29th, 2 Central, 3 Eastern. Uh this one was okay. It really I’m going to change it up a bit to really go through maybe withdrawal strategies, different ways to create different incomes, etc., etc. But going to make this one a lot better. So join here, too, if you want to figure out, “Hey, how am I even going to source my retirement outside of social security and drawing from my IRA or 401k?” We’ll go through that here.

Then next, how to get rollover ready. If you have a 401k, you’re going to retire, how do you roll it over? Most people move their funds out of their 401k and put it into their IRA to have a much more expansive investment selection offered to them because at your 401k with your company, probably only have 20 25 different investments available to you. It’s an IRA, you have all the investments that are available throughout that firm. So it gives you better investment selection, possibly find ways to save more in fees, open yourself up to better diversification, you know, not trying to put all your eggs in one basket like in one spider fund or one index fund or one fixed income fund. These are things that we can discuss here. That’s going to be Tuesday, November 10th at 6 Central, 7 Eastern.

But of course, our team here at Alliant Retirement Investment Services, we’re focused on helping you, our members, understand the ins and outs of investing, you know, saving for retirement, and much more than that, of course. Go ahead and take a look at our website. That’s ARIS, A R I S, .alliantcreditunion.com. Throw in a slash for events to see our webinar schedule. It’s not just me, we have a whole team. So you’ll plenty of webinars going on throughout the week. We also have our podcast Invest Savvy, plethora of information to be learned there. That’s airusfcu.org/podcast. And we also have our website and our blog. There’s a resource center on there, a couple calculators. Look, I’ll leave this up here for another few seconds. Take a photo of the screen. There There are a lot more resources available to you through the credit union than you may know. Go check them out. It’s at no extra cost. We put these up here to help you guys, our members.

And you know, on that note,

there’s a lot of other ways that we can help you at the credit union aside from giving you an interest rate on a CD or holding on to your money for you or giving you a We do full-scale financial planning. We will help you figure out your estate planning, investment management, advanced planning, financial planning. We will help you figure out your investment selections. We are a team of dedicated financial consultants that are here to assist you, our members. Difference between credit unions and banks. Banks are owned by stockholders. Credit unions are owned by members. I E, you are part owner of this credit union. You’re my boss. I’m here to help my boss in this case. Let’s just think of it that way.

Couple of semantics and disclosures. We can go back if anybody really wants to see those or read through them. Let’s get into today’s topic. So if approached correctly, a Roth IRA conversion can be an effective strategy in an effort to keep as much after-tax or tax-free money as possible. And today we’re going to look at a few important issues that have to be considered if you want to consider a Roth IRA conversion. So, first, what are the basics behind a Roth IRA conversion? We’ll get into who the original owner of that IRA Roth IRA about that Roth IRA. We’ll talk about the surviving spouse of the Roth IRA owner. And then the different types of beneficiaries cuz there’s few different types of beneficiaries. Um and the different classification calls for different rules. We’re going to get into those. That’s where things are going to get a little busy and I might just break it down real quickly so everybody can get to dinner quicker.

But to start off, let’s just go with the basics. Sounds right. So, Roth IRA conversions may help some of you manage the taxes paid on IRA values and in the end, just end up keeping more of your money. And if the Roth IRA owner’s current tax rate is lower than the tax rate when withdrawals required, whether their RMD or the surviving spouse’s RMD, beneficiaries required distribution, etc. Roth IRA conversions will create an advantage even if the taxes are paid from the IRA itself.

And just be aware of some of the considerations of Roth IRA conversions. There’s no income limitations. You might not be able to contribute to an IRA right now or a Roth IRA right now because of your income. There that does not matter when it comes to a conversion. And let’s just get this one out of the way early, too. There are There’s a massive difference between contributing to an IRA and converting an IRA. Contributing to an IRA, you’re held down by your income limits. You can only contribute $8,600 a year if you’re over 50. That doesn’t apply here. You can convert as much as you want. If you have half a million dollars in a 401k or an IRA, you can contribute or you can convert all of it tomorrow. You shouldn’t. We’ll talk more about why you shouldn’t, but well, you can. So, there’s no income limits here. And it will be taxed at ordinary income tax rates. And the deadline is not come tax day, but you can contribute to your IRA for 2026 by April 2027, but that doesn’t apply here. So, the deadline for this one is December 31st of the year you’re in. There’s no pre-age 59 and 1/2 additional taxes. And just be aware, there can be unintended consequences of a Roth IRA. So, make sure that you work with a financial professional before going through one.

And forgive me, folks. I’m working with one screen today. My catalytic converter was stolen out of my truck, so I had to work from home.

Now, let’s look at a hypothetical example of someone over age 59 and 1/2 considering a Roth IRA conversion of $10,000. We’re going to assume that the marginal tax rate now is at 12%. The tax rate later when it’s taken out will be at 24%. Now, if this individual doesn’t complete a Roth IRA conversion and just continue to let the pre-tax money grow for another 10 years at a 5%per year return, they would have $16,289. Then if they take the money out and pay the income tax 24%, they would have $12,380 left over. However, if they chose to complete a Roth IRA conversion, they’d have to pay 12%of the money in taxes and would have only $8,800 in in the Roth IRA. So, assuming annual growth of 5%per year for 10 years, they’d have $14,334 that they can access income tax free. Cuz the Roth IRA owners over age 59 and a half and they met that 5-year requirement. So, that’s potentially almost $2,000 more or about 16%more if they complete the Roth IRA conversion and pay the income tax now instead of keeping that pre-tax money in the retirement plan or IRA the traditional IRA and pay the income tax later when they withdraw that money.

And this chart can help clients understand how a Roth IRA conversion might help given various tax brackets both now and later. And we we don’t know what they’re going to be in the future. More than likely tax rates will go up in the future. So, right now is not a bad time to take advantage of it. But as you can see moving across the top is where you’ll find the current marginal tax bracket. And let’s just say it’s 12%. Now, if we move down from there, you can see how much a Roth IRA conversion might help. And later this money will be taxable at 24%. A Roth IRA conversion can help a client end up with a possible 15.8%with 15.8% more money than in after-tax income.

So, whenever a Roth IRA conversion is an option, you have to consider at least two tax scenarios. First one is how the future tax situation might play out with without a conversion. The second is how the conversion will impact today’s situation. You have to look at income taxes. You have to understand your Medicare premiums. And keep in mind if you are pulling enough money and you’re earning enough in your investments, might have another 3.8%tacked on to your taxes in your net investment income tax. That’s a sneaky one. It’s had the same limits on it, too, since 2013 when it was implemented. It’s been 200,000 single, 250,000 married. Hasn’t changed since even we know what inflation’s done since then. So, these are all pitfalls that you might fall into. Well, again, consider that we have lower taxes right now. We’ve had two tax bills in the past decade that have lowered taxes. They’re bound to go up eventually. So, consider that you could be paying 22%or 12%on a conversion today, whereas tomorrow those same tax brackets might go from 12 to 15 or 18 or from 22 back to 28 where they were.

Before we move into a few hypothetical examples, we should review the latest tax changes from the one big beautiful bill. Some provisions are permanent changes, you know, current tax rates effective after December 31st, 2025. There’s a higher standard deduction. There’s the elimination of the personal exemptions, so on and so forth. There are some temporary changes in there. Um there’s that senior bonus deduction, the salt tax deductions were increased. Uh car loan interest deduction as well, if you bought an all-American car, I think it really only applies to Tesla and maybe some foreign and Chevy models, but look into it if that maybe we look deeper into that one if you’re interested. There’s the tip deduction over time and those savings accounts as well.

But, it’s important for clients to watch for an opportunity to reduce the taxes paid on retirement. And reducing the amount of tax paid may mean more money for retirement expenses or for passing along to your beneficiaries if that’s what’s important to you. So, again, I encourage everybody to speak with a financial professional and a tax professional when looking into this and we can help look into a financial planning and see if this applies to you. We’d be happy to do that. But, in this case, we see how much ordinary income a married couple, both over age 65, they can absorb in the various tax brackets after the passage of that one big beautiful bill act. The standard deduction, the additional one big beautiful senior the senior deduction that’s added into there. There’s a phase out at 1.2. There’s a few more things in here.

Pardon me. But, the standard deduction 2026 is $32,200 when you’re married filing joint. Plus, if you’re over the age of 65, it’s $1,650 per person in addition to that per person. Plus, a $6,000 senior deduction per person. So, this adds up to a lot more. Your your standard deduction went from $32,200 to $47,500 if you fall within all the income limits there.

There is a special rule for Social Security recipients called the hold harmless rule. And that ensures that Social Security benefits will not decline from one year to the next because of increases in Medicare Part B premiums. And whether this rule comes into play in a particular year depends on the amount of COLA or cost-of-living adjustment and the Medicare Part B premium increases. And the hold harmless rule will apply in 2026 for those people who had been paying the standard Part B premium if their Medicare Part B was increased. But, the Social Security cost-of-living adjustment amount was not large enough to cover the full amount of their increased premium. And the hold harmless rule applies to a few Social Security recipients in 2026 except for those who pay more than the standard Part B premium amounts and including individuals turning 65 in 2026 and starting Medicare in 2026. So, individuals ages 65 and older who were not on Medicare in 2025, but starting Medicare in 2026. Individuals ages 65 and older on Medicare in 2025 but not yet receiving Social Security benefits.

And higher income Medicare beneficiaries are not held harmless and they have been paying more for their Medicare Part B and Part D coverage for several years in the form of income related monthly adjustment amounts. And the Medicare Access and CHIP Reauthorization Act back in 2015, otherwise known as the Doc Fix law, enacted new modified adjusted gross income tier brackets that went into effect starting with 2018 Medicare premiums. So, the 2024 tax return is used to set the 2026 income related monthly adjustment amount payments. That’s called IRMAA right there. Using the new tiered system to determine Medicare Part B premiums. These are all things we have to keep keep in consideration when doing a Roth conversion. Why? Cuz if you fall within just $1 into the next bracket, you’re paying a lot more for your Medicare. So, you might be wondering, why are we talking about Medicare during Roth conversion times? It’s because you have to keep in consideration your Social Security, your Medicare, and your federal and possible state income tax brackets when considering if you if a Roth conversion is right for you. It’s not just if your federal income tax brackets there are going to be a problem. It’s also your Medicare itself. All right. So, let’s move on to the original IRA owner. Now, since the RMD age is now increased to 73 if you were born before January 1st of 1960, at 75 more than likely for those who are born after in 1960 or later. It’s increased then. It may be tempting to just simply delay all IRA withdrawals until then. And while not everyone will be able to do this, those that can should be aware of rapidly growing distributions that might then move them into a much higher tax bracket. So, you can see that here in this chart. It’s just assuming that the initial IRA balance is at a age 65 and it earns 5%per year. If you’re not touching it, you see how much more it grows and the bigger your pre-tax position is, the more Uncle Sam’s going to force you to take out when you hit your required minimum distribution age at 73 or 75 or somewhere in between.

In this graph, it Pardon me. This graph illustrates the increase in RMD amounts when compared to inflation. And it assumes that the initial IRA balance is a million dollars at age 73 and it earns 5%a year. And this assumes the RMD is taken at the end of the year. And if we assume that tax brackets and deductions are adjusted at the rate of inflation, the RMD amount is increasing faster than inflation. It could push the taxpayer into a higher tax bracket. And if this seems likely, Roth conversions and other strategies should be examined closely as part of a drawdown strategy.

So, we’re going to move on to the surviving spouse here.

And in this hypothetical case, we see a couple married a married couple, they’re filing jointly. And assume they have $58,332 of ordinary income from IRAs and or pensions and $64,000 of Social Security retirement income. Well, in their married filing joint tax status, they pay $7,332 or $7,332 in federal income tax.

Now, if we look at the example at the same at this example with spouse A filing as a single taxpayer, they could lose a Social Security check and need to withdraw $101,451 to pay the increased taxes and keep the after-tax income the same. So, here the IRA withdrawal would increase 74%and the taxes would increase 152%. While spouse B was alive, they were in the 12%marginal tax bracket, and with spouse B now gone, A has now jumped into the 24%bracket. And if A increases IRA spouse A increases IRA withdrawals to keep the same after-tax income, they’ll need to withdraw 74%more and taxes would increase 152%. It’s something that we call the widow’s penalty or the survivor’s penalty. When you go from that column joint married married filing jointly to single, you’re going to jump tax brackets possibly. And one way to avoid that is a Roth conversion. You already paid the taxes on it. There’s no more RMDs, and all money you pull from that Roth is tax-free. So, no jumping tax brackets.

And overall, this leaves spouse A with an income reduction of $43,119. This type of dynamic change after the first death can reduce the surviving spouse’s probability of success. And if the first death came after a costly long-term care event, situation could possibly be even worse.

All right. So, moving the beneficiaries to finish our discussion with this part here.

So, there have been some rule changes. It happened a couple years back back in 2018. Let’s just look at a hypothetical example of Cammie here. She’s 45. Assume she just inherited a a dollars of a traditional IRA from her deceased mother. And she doesn’t need the money now and doesn’t want to increase her taxable income. But under the old rules, she could stretch the withdrawals and would only need to take $25,773 in RMDs in the first year.

But under the new rules, if she were to withdraw evenly over 10 years, she’d take out $123,328. Now, I don’t know if anybody has their tax brackets in front of them, but you definitely jumped a couple of them by just taking out these RMDs from your IRA but your beneficiary IRA. So, if you are looking to do a Roth conversion for estate planning purposes, take care of your spouse, that’s great. You’re going to make sure that she’s not going to jump that tax bracket. She’s not going to fall into this um widow’s penalty. And if you’re looking into it for your kids or other beneficiaries, let’s say that they’re doing well. They’re making six figures. Well, you could have probably converted a lot of your traditional funds that 12% or 22%tax rate, but now that your kids inherited it, they might be paying 32 and 35%instead. And now the funds that you were hoping to give to your children to take care of your grandchildren and for them to take care of themselves, Uncle Sam is smiling because he gets to take a whopping 1/3 plus of that inheritance because they’re now in a higher tax bracket and they have to withdraw everything over a 10-year period.

And in this next hypothetical example, let’s look at the taxes on this inherited IRA assuming Cammie is single and has taxable income of 90 grand a year. Without the inherited IRA distribution, Cammie is square in that 22%tax bracket.

But when Cammie adds $123,338, that inherited amount, to a taxable income, she’s now filling up the 24%tax bracket, as well as adding income in the 32%tax bracket, as I just mentioned. So, in this simplistic example, Cammie would pay about $322,000 on the inherited IRA over the 10-year over that 10-year period of that distribution. Whereas, keep in mind, if you were able to convert at 12%rate, you would have paid 1/3 the amount that your kids would have paid in that case.

So, here’s one more. Mom and Dad here, they have an IRA that will most likely go to their son as a beneficiary. And they’re thinking about converting 50 grand a year for the next 5 years in their 12%federal tax bracket. And their son is in a 12 24%bracket and will likely stay there.

So, in this example, we see that without the conversion, Mom and Dad will have access to more money than their beneficiaries because their tax bracket is lower. If, however, Mom and Dad do the conversion at the 12%tax bracket, their access remains the same, but the beneficiaries’values has then increased cuz the tax was paid in a lower bracket. And after 10 years, the converted values for the beneficiary are about $56,000 more than the uncover unconverted values. And after 20 years, this increases to about $110,000.

And let me make another point here, folks. When your kids inherit your pre-tax funds and they have to withdraw it, let’s say you tell them, “Look, you have to pull it out over 10 years. Don’t spend it. Be wise with it. Reinvest it.” Great. They reinvest it. They put it in a brokerage account, which is essentially their only option, and it grows, they still have to pay taxes on capital gains on the funds that are growing. And [snorts] it’s not a retirement account anymore, it’s in a brokerage account. Whereas, if you put it in a Roth conversion, and like Cammy, who doesn’t need it in her in this situation, you can just let it sit there, grow tax-free forever, and if your kids don’t need it, well, they can give it to your grandkids. And now you just created generational wealth by just doing a couple of conversions through a couple of years over a period of time. And you have all this tax-free money that gets to grow tax-free, be withdrawn tax-free. It’s an incredible estate planning tool, on top of being a way to have tax-free money for yourself while you’re still here with us.

And another thing that we can talk about, let’s talk about how you could potentially use an annuity might help you hedge tax risks.

So, there’s plenty of them out there that can help you provide a reliable source of income to cover essential expenses to help meet your long-term retirement goals. And annuities offer tax-deferred growth potential if you’re using pre-tax dollars. And they also offer a death benefit during the accumulation phase, sometimes during the income phase at certain periods, and but they also offer a guaranteed income stream of income at retirement. And they can also help supplement your Social Security income allowing the rest of the portfolio to add value elsewhere. This is one thing that I do a lot with my current clients. We see where the current where they are, what are your income streams? You have a pension, you have Social Security, and that covers about 70-75%of what you need, and you have plenty of money sitting around in your IRA and in your other 401(k)s and other investment accounts. Well, if you were able to fill in your income gap to where all you have to do is just go to the mail for the rest of your life to grab your annuity check, your pension check, and your social security check, well, then the rest of your funds get to just keep growing. If we’re looking at this from an estate planning need. But, on top of that, you can use those funds that are still sitting in your investments, your income’s covered, the other 75%of your income is still invested, and now you can sit back and just convert those funds, turn it into tax-free money while living off of your other income streams that you’ve created.

And this is a different version of the Roth conversions webinar today. I did another one that was a little bit lengthier a few weeks back. We can talk more about it in depth in a one-on-one. So, the fact we are at the end, folks. But, today we discussed the basics of Roth IRA conversions, the original IRA owner, the surviving spouse, and the beneficiaries.

And again, this is what we do here at at Alliant. We’re here to assist our members, teach you more about how Roth conversions work, how investments work, what you should do better to plan for retirement. Heck, I just got off the phone with someone before this, and they thought they’d have to work seven or eight more years, and they can retire tomorrow if they wanted to. Have a financial plan created. We do it at no cost. We’re here to assist our members. We also offer, for those that do investments with us and do become clients within the credit union, not members, but become clients as far as investment strategies go, we offer an estate planning tool here as well. It’s called Trust&Will, trustandwill.com. It’s at no cost to our clients. If you need a will done, a trust, power of attorney, any kind of legal documents, we can give you access to that to assist you, so you can sleep better at night, knowing that if anything were to happen to you, your estate’s taken care of. Here’s my ugly mug right here. I am down 50 lb since then, so please don’t judge that photo. I need to get a new one done. I’m going to send out a poll here. If you want to learn how Roth conversions work better, if you want to see if you’re a good candidate for it, go ahead and answer this poll. If you want to say no, that’s fine. It’s not going to hurt my feelings, but if everybody could answer the poll, I would truly appreciate it. Just makes me look good with the boss that hey, everybody stuck around and answered the poll. Please go ahead and answer that. But look, one thing we’ll do is financial planning. We’ll look into seeing if a Roth conversion is a good strategy for you. But on top of that, we’ll show you how much money you can save in taxes and how much more you can grow your accounts by turning it into tax-free rather than keeping it pre-tax. Our software is fantastic. It It shows everything. It’s some of the most sophisticated financial planning software I’ve seen and I’ve been in the industry for 10 years. So, please let us know how we can help there. If everybody could answer the poll, truly would appreciate it. Let’s start off with some questions here. Uh I’ll start pulling those up here in just a second.

All right. Some about 10 more people need to answer the poll. Please get to that if you don’t mind. I do appreciate it. Again, not going to be offended if you say no or not at this time. If you say yes, to those who did say yes and I look forward to meeting with all of you, I will send you an email hopefully by tonight, if not tomorrow, and I’ll follow up with a phone call. But I’m here to assist all of our members. All right. And with that, there’s two areas. There’s the Q&A section and there’s the chat section. Let’s get into some questions here, folks.

How many times can I convert to Roth per year and lifetime? As much as you want. As mentioned earlier, you can convert as much as you want. Is there an upper limit of age to convert? There is not. You can convert as much as you want in a year. You can do it when you’re 90. you can do it today if you’re 50. There’s no problem. There’s no 10%early withdrawal penalty from a conversion either. Thing is is that you might think, okay, well, I’m going to put every and and we already covered this, but I’m going to say it again. If you have $100,000 that you want to convert, maybe it is good to depending on who you are and what you want to do and what your goals are. Everybody’s different. There’s no cookie-cutter strategy. But you might not want to do that. If you’re making $100,000 and you’re going to jump the next tax bracket after 20,000 more, maybe just fill that bucket and convert 20,000 that year. If you’re going to retire at 65 and you have till 75 until RMDs kick in, you have 10 years to convert a lot easier. Now, you can still convert even after you’ve hit your required minimum distribution age. It just makes it a little bit harder cuz you have to pull funds already. So, it’s best to really do it. That sweet spot when to start converting is during lower earning years. If you’re a business owner and you’re having unusually low sales, if you took a year off from work, but really it’s those years between retirement and your RMDs is when we can really do some work. And heck, it might make some sense to do a little conversions to try to get some of it out of the way while you’re still working. It comes from a self-assessment and I will help you with that. You just have to reach out. There’s the Q&A code or there’s that QR code over there. I’m sorry. Again, I’m working with two screens, so I don’t have a few things up on here. I hope there’s no gray boxes in the way. Um but feel free to email me. I’m a resource here to you. If you are sitting around at work and something comes to mind about finances, shoot me an email. You are a member of this credit union. I will respond to you as promptly as I do my own boss cuz you guys own this place.

Can you explain the five-year rule? I would be happy to. So, with a Roth IRA, let’s say even for myself, once you hit 59 and a half, you can pull funds from your from your Roth, no problem. But, they have this five-year rule on there to where I’m 36. If I opened [clears throat] up my Roth when I was 25 and I put 20 grand in it then and I haven’t contributed anything else, I can pull money out of it, but the earnings will be taxed if I take out within five years. But, after five years, all those funds that have been in there for five plus years, I could withdraw at 36 tax-free right now. I’m not going to cuz I’m going to save them for retirement and I want to buy a boat tax-free one day. But, there’s that five-year rule. I hope that explained it.

Ooh, good question. I know how to see the fed federal tax brackets. How can I find the Medicare and other hits by converting? Okay. One, schedule a meeting with me because I keep all of those brackets on my screen all day so I can run through them with clients and members. But, Humana has a really good um graph on their website. So, if you just type in Google right now, Humana, the medical uh the insurance company, Humana Irma brackets, Irma is I R M A A, igloo, rhino, May, April, April, it’s right there. Very easy. The one thing to know, though, Medicare Irma brackets are not marginal brackets. Federal tax brackets are marginal. So, the first 10 grand you make is taxed at 10%, then the next thousand few thousand dollars you make is taxed at 12, and anything you make outside of that bracket is then taxed at 22 and so on and so forth. With Irma and Medicare, it’s $109,000 is the limit for single, 218 joint is the lowest bracket. Anything below that, you’re paying the cheapest amount of Medicare. But, if you make 109 and $1 single or 218 and $1 joint, you’re in the next bracket. So, that’s why it’s really important to work with a financial professional whenever you’re considering doing a Roth conversion cuz you surely do not want to throw yourself into another Irma bracket unnecessarily because you wanted to convert a couple extra bucks more. That’s why you work with a team of with a financial consultant and with a CPA whenever you’re doing this.

I think I already answered this, but we’re going to go over it again anyway. If you’re already taking RMDs, can you convert the RMD into a Roth or would those be separate transactions, a Roth conversion amount and an RMD amount? Correct. You can’t in that case. Whatever you take out, you’re already going to be paying taxes on anyway, and you can’t really double dip it. They’re going to be watching for that. So, you can’t just take that out and then move it over. You have to pay the taxes on that, and you’re done in that case. But, you can convert while you’re already taking RMDs. If they’re telling you you have to take out 20 grand this year, but you want to convert 30, and it makes sense from a financial standpoint after running some analysis, making sure you’re not going to be thrown into another Medicare bracket, federal tax bracket, and the taxes are not going to be a massive hit, these are all things we can cover. I’d be happy to show you that one, too. Send me an email.

This is a long question, but you give me a second here. I like this one so far.

Um I’m just going to say your first name. I don’t want to announce it, but Kathy said of a meeting with me, let’s go into this one in further depth. So, these questions, unfortunately, I can’t go into everybody’s specific situation in a [clears throat] public forum. Um, but this is an interesting case here. So, uh, doesn’t have to great pension, doesn’t need to touch their IRA or their Roth IRAs. Uh, they’ll be done converting next year. They have one account that’s a pre-tax that’s an could be income in the future. They have a brokerage account, which they can’t convert. It’s non-qualified money. But, they’re thinking of not renewing an annuity when it comes due and if it’s a good strategy or not. And it could be, but maybe not. There’s a lot of things you have to consider here cuz it sounds like that annuity is going to be taxable funds. And you have 230, depending on how long you have it. That that could be some great income that you have. I mean, not all of us are going to avoid taxes completely. Okay, so annuity is going to be taxable. It’s pre-tax money. I’d want to run analysis on that. I’d like to know what your social securities are, what your incomes are, how much you need in a given year. And we go from there because if you’re going to be done converting next year, and then technically you just have $230,000 more to convert once that annuity is out of surrender, maybe it doesn’t make sense to to turn it into income or let it sit there and continuously grow into a pre-tax issue. Where it goes from 230 to 500k over a you know, seven or eight-year period. And now it’s 500k that your RMDs are based off of rather than nothing because you converted that 230 rather than let it sit there and grow. I’d be happy to go through that one with you though. Let’s do a let’s do a financial planning meeting, but I I I don’t mind it. Let’s just see that one though.

No, you you you can’t though. That’s the thing. That like they’re not going to just say, “Well, you paid taxes on it for your RMD and you can’t switch it around like that.” It it It’s a logical thought. It absolutely is, but it can’t work that way. Great. Look forward to meeting with you, too. Should I pay taxes out of converted funds? Most of the time that is folks’ only option. But if you have nice chunk of change sitting in a bank account or CD, you want to typically pay tax rule of thumb. And I’ll show you in in financial planning what makes most sense for you. Cuz you should have cash. If you’re expecting to pay 100 grand in taxes over a 5-year period of converting and you have 100 grand, generally speaking, it makes sense to use that cash to pay for those taxes. That will help you out the most rather than dwindling your IRA more. So, if you wanted to convert 100 grand, then let’s just say you had to pay 20 grand in taxes on it, well, then you have to pull not just 120 grand out, you have to pull 125. Cuz now you have to pull out tax money, that 20 grand on the 100, but now you have to pull out additional five to pay the taxes on the additional 20. See how it adds up there? But sometimes that’s folks’only only option. Not everybody has six figures of money sitting around to pay tax bills with. [snorts] If you do, generally it makes sense. But sometimes it doesn’t because, well, it’s good to have cash. Cash is still king, even though it’s losing 4 to 5 to 6%in value every year in inflation. Cash is still king. It’s always good to have some cash. So, I appreciate that question. That’s a great one right there. It depends on the person, like most of my answers to these questions and my apologies for that. It comes down to learning more about you and I can give you a more informed decision advice. But I can help you out with that one, too. But generally speaking, it makes sense to pay it with cash on hand rather than reaching deeper and deeper into your IRA to pay tax bills. But you can still do it. You can still pay tax bills with funds from your pre-tax account on top of that.

I am not yet in my late 50s, but based on your experience, when should I be having a meeting with an advisor? Everybody should be meeting with an advisor. Everybody should have an advisor. Unless you’re already I mean, I’m an advisor and I have an advisor. You know, it takes my personal sentiment out of it though and I have somebody else my colleague looking over it for me. Everybody should have an advisor. Most important reason why is think about what happened in 2020. And I have [clears throat] a lot of good stories and a lot of bad stories, too, about it. But people were saw the the cliff falling, COVID, the sky’s falling, the world’s ending, the Dow and the S&P and the Nasdaq are down 30 and everybody’s selling. If you sold and you didn’t get back in, you would have been down 30%in the year and you would have missed out on about another 50%in growth in just that year alone. The from the dip to where we ended in 2020 was about a 50%growth. About more than that to be honest with you. You want an advisor to talk you off the ledge, but to also show you more than what’s just out more than what’s available to you in your 401k or your IRA or just basic S&P spider funds. I don’t get me wrong. I love my S&P index funds. I really do. But there’s so many more options out there that you can only find or only through you can only purchase through an advisor. Like I love structured notes. They’re CDs that track the S&P and have 100%downside protection and are fully FDIC insured and they don’t cost anything. I love them. I love them for long-term money. I love using them for Roth funds, too, cuz now, okay, you have all this tax-free money. 100%protected, tracks the S&P futures. In fact, it actually does 20%better than the S&P futures right now. So, always meet with an advisor. Learn what’s out there. There’s no problem with being educated further and further. Meet with more than one, too. I mean, everybody has their own different Everybody in this practice uh has different ways of doing things. Find one that you can trust. Find one that you like, one that you can handle, one you can deal with. Keep in mind, you know, you’re putting a lot of trust in this person. Interview.

If married, filing jointly in the 22% tax bracket, still working, does it make sense to convert or wait until one or both retire? That’s a great question. And there’s a lot of There’s a lot of space between that 22%bracket. But also, what is 22 to 24? Cuz that’s the next bracket. So, if you’re in the 12, converting into the 22 doesn’t make sense cuz you’re going, you know, you’re increasing your taxes by about 45%going from 12 to 22. And then, if you’re in the 24, it doesn’t really make sense to jump all the way up to the 32 cuz that’s another 30%increase in taxes. This is where things are going to probably change whenever they hike taxes in the future, 22 and 24%cuz they’re really close together. It makes sense in some scenarios to fill your 22%bracket and convert some in the 24 because it’s 2%more. It makes sense in some cases. And again, I can show you if it makes sense for you by just doing a financial plan. It’s not the hard to do. Most fun part of this job is what I’m doing right now, presenting to you guys. My second favorite part of this job is making financial plans. Don’t mean to come off like a nerd like that, but I really do like making them and showing people you can retire early, you can save this much money in taxes, you can grow your portfolio by this much, you can fill in your income gap. I love doing that. So, please make my day better, schedule a meeting with me, and we’ll see if it makes sense to convert or not. You might not be a candidate at all. You might be a perfect candidate. I’d be happy to show you that.

Okay. Great question here. Is there a financial formula or a website that I can visit to determine the what my RMDs will be given my current financial state? So, first you’re going to need the crystal ball that tells you what your account’s actually going to be worth whenever that day comes. But, you can find out essentially what it would You can find out what it would be should you have RMDs this year starting. And it’s just called the mortality table. It’s on the IRS’s website. If you type in mortality table for 2026, it changes every year. But, all you do is you take your final value from Dece- if you were trying to calculate your RMDs for this year, you base it off of last year. So, your final statement from your accounts from last year, December 31st, 2025, you’re going to take that final total on that year, divide it by the mortality table uh rate that they put in there based on your age. So, I think it’d be like 28.3 if you’re 75. Divide your total by 28.3, there’s your RMD for the year. It’s pretty simple and straightforward. If you need help with it, again, there’s all my information. Send me an email. We can review your If you just want to show like send me your rough balance amounts, I could tell you what they would be. If you’re 5, 6, 7 years out from RMDs, let’s go ahead and make a hypothetical and just say, “Okay, you had a half a You have a half a million dollars. Let’s assume 7%growth over the next 7 years. It would be X amount. X amount turns into this.” But also, our financial planning software shows that, too. We go ahead and it breaks everything down. It shows you what your RMDs should be in the future, what you could expect them to be based on certain assumed growth rates, too.

Paying the taxes out of the new year sounds great. Okay, Kathy, I look forward to meeting with you about that one, too. Is it a good idea to convert some of the traditional IRA into a Roth IRA? I’m still working and I’m about 10 years before I retire. It can be. And I said this earlier, so forgive me, everybody, but it can be beneficial to start now. It depends on what tax bracket you’re in right now. So, if you’re in the 12%and you got plenty of room before the 22, yeah. And even if it is only 10, 15, 20 grand that you convert before jumping tax brackets, and we’re avoiding jumping tax brackets, it makes sense. Why not? Get it out of the way. You’re 10 years before you retire, that’s 10 more years of your funds growing tax-free. You know, whenever we’re looking at two different accounts, and we have 100,000 in a Roth IRA and 100,000 in a traditional, which one’s worth more? And it’s the Roth, cuz it’s truly $100,000 tax-free money, whereas this traditional is anywhere from $90,000 to $70,000 in truth because of the taxes that’ll be taken out. And on the flip side, we had 5%growth on this Roth or 5% growth in this traditional, well, the Roth actually had 5%growth cuz it’s 5%tax-free growth. Whereas the traditional, you’re going to really get 3 and 1/2, 4%of that growth cuz Uncle Sam’s going to take his 20%. He’s going to take his cut.

Do more Roth contributions though. Uh that’s what I and that’s a general rule that I’ll tell you, but I I really would like to meet with you to give you a better answer and just show you what might be best. That’s what I can do for you though. I’d be happy to help.

Well, that’s great. Good, I’m glad you manage your own accounts. It sounds like you do. You’ve done all your conversions and everything yourself. That’s great. Well, all right, folks. Doesn’t look like we have any other questions today. Promise to get everybody back for dinner. Uh we got 10 more minutes to go. So, listen, I’m going to stick on here for about 2 more minutes. If there’s any other questions, we’ll get to it. But other than that, join me for my upcoming webinars. We’re going to go over income stuff. Yeah, a couple of weeks. We’re going to review incomes. Check out our other webinars. But look, we are a resource here to you through the credit union. This is how we try to establish ourselves differently from our competition. We like to educate our members. We’re here to assist you guys. We appreciate you doing your doing business with us. We truly do. So, thank you all very much for joining us today. I hope you have a wonderful day. Um gen- more than likely everybody in here is from either Texas or Florida or somewhere in the East Coast or somewhere in between. Thank God we’re getting better weather, right? So, everyone enjoy it. There’s a cool front coming through. Enjoy it. Enjoy your time with your family. Have a great dinner tonight. Thank you all very much. Thank you all very much for the kind words in here, too. I’m looking forward to meeting with you. And if we do set up a meeting, just come as well prepared as possible. Have a good idea of your financial positions, what you have, Roth IRA, traditional 401k. Understand your balances. Bring your Social security statements. That’s important. Got to factor that in there. Spend those Social Security dollars first before you reach into anything else. So, we’ll go through that. Thank you, everyone. Have a wonderful day. And again, I’ll stick back for any other questions. I’m glad. Thank you very much, Mike.

Of course, thank you.

Are there charges for your services if we meet with you to talk about these things? No. It’s no cost financial planning. We are here to assist you guys. Now, we’re going to show you some solutions and if you want to go through with them, we might get paid. You know, it might be at a charge. And that generally comes from managed money, which is like what everybody’s kind of going towards these days. Like Fisher Investments love to say, we do better when you do better, which really just means we make you more money so we can charge you more. I don’t fall for that rap fee lingo, where give me a million dollars, I’m going to put a 1%fee on all of your money and charge you that every year. As you grow, I get to make more money off of you. I find that terrible. It’s just a strategy that has been marketed to everyone recently and that’s the new norm is managed money. I don’t like to use it all that much. I do need to use it because everybody needs to have liquid money. People should have some managed money, but putting everything into managed, no. Because it’s just as prone and susceptible to market upturns and downturns. Say I put you in some managed accounts that track the S&P. S&P goes up, you go up, but when the S&P goes down, you go down. I like to use a lot of no fee products with downside protection. Uh back to structured notes like I mentioned. That saves my clients a fortune. An absolute fortune. And it’s what’s right. If I can use products that I don’t have to charge for money for, I use them. And I make sure that we have everything split up right to where you never have to worry about liquidity purpose liquidity needs either. So, where we can save you money, we will save you money. We’re not doing no fee products in that case. But I’d be happy to show you how all that works, too. Really interesting products that not a whole lot of people use right now. Just they don’t make as much money off of it. That’s why a lot of other financial advisors don’t use them. So, it’s sad how it works out though. But you know, as Saint Thomas once said, greed is what money is the epitome of all evil. And here I am in the financial services industry. So,

All right, folks. Well, I’m going to hop off now. Everyone have a wonderful evening. Thank you again.

everything around us is going to continue to increase and there’s nothing we can do about it and so the cost of goods increase. Here’s another way to think about this. If you have $100,000 in the future, let’s say in 20 years from now, if we saw an average 4% inflation, that $100,000 would be able to replace would be able to purchase only $44,000 of goods.

If it’s a 2% inflation rate, that same 100,000 that we’re able to spend today is only going to allow us to spend $66,000 in 20 years from now. So, we need to take into account inflation when we’re projecting spending. You know, we might be spending 10,000 today, but in 15 in 10, 20 years, we need to be spending more to keep up with the same type of spending. Now, you might hear this say, “Oh, well, we’re going to invest in stocks, but because stocks keep up with inflation.” Well, yes and no. This chart is showing you that the dot is the inflation for the year and what the S&P 500 returned in that year. So, if you look at 22, we saw almost 9% inflation, but the market declined almost 18%. So there are years when the market keeps up with inflation, but then there’s also years where inflation the market does not keep up with inflation. So it’s making sure you’re properly allocating your assets to hey, how do we keep up with inflation but also minimizing some of the risk that you take within your portfolio. Let’s talk about taxes. You know, even in retirement, you’re going to be paying taxes. And what are all the various types of taxes? Well, this chart is showing the historical income tax rates. So, right now the top marginal tax rate is 4 40.8%. That’s 37 plus the additional 3.8% for the um Medicare search charge. But going back to the 40s and 50s, the top marginal tax rate was almost 90%. So over time taxes actually have come down to the top marginal tax rates. Now if you look at the last 40 50 years with all these different tax codes that we’ve seen over time sometimes we get standard deductions sometimes we’re able to deduct certain things but the average effective tax rate if you’ve been in the top marginal tax rate has been about 22%. So the biggest thing to kind of again kind of understand is that we are still going to pay taxes in retirement. There was this thought that taxes were going to go up in 26, but the big beautiful bill was signed last year that basically kind of kept the same tax code in place going forward. Now this is a per this was a permanent this was permanently put in place. All that means is there’s no expiration date. Congress could come in and still make changes to the tax code, but so we’ll see what happens and you know, we’ll see what happens in the midterms. We’ll see what happens in 28, 32, and so on, what taxes are going to look like going forward. But right now, they they came in and kept the same tax code as what we saw in 2017. They also increased the same deduction um for joint and single filers and they also came in and provided a bonus deduction for seniors over 65. So what this is is you get an additional 6,000 standard deduction if you’re a single person and your modified adjusted gross income is below 75,000. If you’re a joint filer, you need to be below $150,000 to receive that $6,000 additional standard deduction. Now, this bonus deduction that you’re getting is temporary. This does expire in 2028. So, you know, again, permanent verse temporary. This is a temporary deduction that will expire. Social Security is still subject to taxes. You’re looking at something that’s over 40 years old. That’s never changed. Now, when it comes to how social security is taxed, they look at provisional income, which is your adjusted gross income plus half of your social security benefit and any tax exempt interest. Whatever that adds up to determines how much of your social security is added to your adjusted gross income. So, if you’re a married couple and your modified your provisional income is over $44,000, good chance is 85% 85% of your social security is going to be included in your adjusted gross income. Now, it’s not a 50% tax or 85% tax. It just means that portion of your social security is subject to tax and depending on what your other adjusted gross income is determines how much your tax liability you pay on your social security. But social security is still subject to tax. They did come in and kind of add this boner deduction to help people reduce taxes on social security. But at the end of the day, social security is still subject to tax. Now, something also that you need to be aware of is that if you’re a married couple, there’s some kind of widows penalty. And what that means is if one spouse passes away like while you’re married you get to file marriage filing jointly but when one spouse passes away the other spouse at that time be is filing at a single rate. So upon the first death of uh upon the first sorry upon the death of the first spouse you know one social security stops there’s a reduction in retirement income you go from a joint to a single filer you lose one standard deduction um and your Medicare premium is now based on a single filer also. So you can see how going from married finally jointly and then one spouse passes away, chances are your tax liability could increase at that time. Here’s another way to look at this. This is uh some of the this is a plan that we’ve done for a client and it just lays out the tax liability. Every line represents a different tax bracket for them. So, while they’re married filing jointly, you we know that they’re in a 12%. When RMDs kick in, they’re going to be in a 22. But when one spouse passes away, the surviving spouse is going to be in a 24% tax tax liability. And we call that the widow’s penalty. Now, a lot of planning around tax planning has been going on regarding talking about Roth conversions. Roth conversions are a way to help you reduce your future tax liability. So that’s when you’re coming in and saying, “Hey, I want to pay in the taxes on money that I have in my IRA, convert it to a Roth IRA that’s going to allow that money to grow taxfree.” So going going back to that example, you say, “Hey, like I still have like $20,000 in a in my 12% bracket. That’s what I can convert pay 12% on and it’s going to help my reduce future tax liability down the road. So this chart kind of lays out, hey, should you or should you not do Roth conversions? First, do you think taxes are going to be higher or lower in the future? If you think taxes are going to be lower, maybe you shouldn’t do Roth conversions. But if you think your taxes are going to be much higher, then maybe considering Roth conversions. Depending on the time horizon you’re going to need to use this money will kind of determine if you do Roth conversions or not, too. Because if you’re going to use that money in the next year, like well then take it out, pay the taxes, and put it in savings because there’s no point in doing a Roth conversion and then next year just taking the money out of the Roth. You want to convert. Let the money sit there and continue to grow all taxfree for a long period of time. Availability of funds paying the taxes again Roth conversion is when you’re taking money out of IRA. You’re convert you’re moving it over to a Roth. Whatever you move is becomes taxable in that year. So you have to kind of figure out like what is my tax liability? If I do this, how much additional taxes do I will I owe and how do I pay the taxes? If you have money in savings, use the money in savings to pay the taxes.

Also, it’s a great way to for estate planning. If you know your kids are in a much higher tax bracket than you, maybe it makes sense to say, “Hey, I’m going to pay the taxes on this. That way, when you inherit my money, it’s going to be all taxree for you and you don’t have to worry about t paying the tax liability.” So there there are various reasons why someone might do Roth conversions to help reduce taxes. But again, it does not make sense for everyone to go out and do Roth conversions. All right, let’s talk about social security. When it comes to retirement, social security is a decision that you’re going to have to make. If you have not retired yet and you’re kind of looking at social security, maybe this will give you some general information on like, hey, when should I take it? Now, this is looking at social security in kind of a a vacuum. So, we know depending on the year you’re born determines how much of your benefit, like at what age you have to be to receive 100% of your benefit. So, if you were born prior to 1954, your full retirement age is 66. That’s when you’re receiving 100% of your benefit. If you’re born after 1960, your full retirement age is 67. Between 54 and 60, it’s 66 and some months. So, if you are born in 1957, your full retirement age is 66 and 6 months. That’s when you’re eligible to receive 100% of whatever that stated benefit is. Now, you could take your benefit as early as 62, but if you take it as 62 and depending on what age you’re what year you’re born, it’s going to be a reduction. So, if you were born in 1965, you can take your benefit as early 62, but you’re only going to receive 70% of that benefit. That’s a 30% reduction in your benefit. And you’re not going to it’s there’s you’re not that 30% is a permanent reduction. It’s not like, hey, I’ll make it up some some time down the road. No, it’s a permanent reduction. Now, on the flip side, if you decide, hey, I’m going to wait until age 70, every year you wait, you’re going to get an 8% increase. So again, for anybody born after 1960, if you wait till age 70, you’re going to receive 124% of whatever your benefit is. So you can take it early, it’s going to be a discounted. You can take it late later and they’re going to give you more. So question is that we get is what’s my break even point? meaning how long do I have to live to make or what’s my break even point? Let’s start start there. What’s my break even point? So, this is looking at someone that has the same social security benefit and they’re trying to decide, do I take it at 62 or do I take it at my full retirement age, 67? So, if you claim at 62, you’re going to get about $2,900. If you wait till full retirement age, you’re going to get $4,200. the break even analysis which the cumulative benefits you know if you add those two scenarios up is age 77 meaning that hey if you live beyond 77 you should probably wait till your full retirement age to collect your benefit. If you don’t see yourself living to age 77 yeah maybe take it at 62. Now we can look at the same scenario when it comes to 67 verse 70 and the break even analysis is 81. So, if you live beyond age 81, it says, “Hey, maybe you should wait till age 70 to take your benefit, but you also not only have to kind of think about yourself. If you’re married, you have to think about the surviving spouse, too.” Because maybe you have a short life expectancy, but you know, your wife is going to live to age 100. And if you have the highest benefit, maybe it makes sense then for you to delay your benefit till 70. So that way when one spouse passes away, she gets the key to the greatest benefit. And when you look at this and say, okay, at age 81, if you’re a married couple, there’s a 85% probability that one of you will reach that age. So it’s not sometimes you need to do a little bit more analysis when it comes to when is the best time to take social security. This chart kind of shows that and this is some of the planning that Kim and I do also. We can come in and build a plan specifically for your situation. This this happened to be a single single client and she retired at 67. She said, “Hey, or sorry, she retired at 66.” She said to him, “I’m debating to take my social security or wait till age 70. She’s not married, has no kids. And I said, “Okay, well, let’s run a scenario with you taking it at 66, and we’ll run another scenario where you taking it at 70 and overlap it on each other.” And so the blue, the dark blue represents her waiting till 70. So you can see that she has to spend her own money to get to age 70. The gray represents her just taking her benefit. Now her break even when we run those two scenarios is 93 based on her situation her pension social security assets you name it what she wanted to spend was 93 meaning that hey if you live beyond age 93 yeah waiting till 70 makes sense she was like no I’m not doing that so again when it comes to social security it is a personal choice. We can show you whatever math you want or we can run the scenar any scenario you want but at the end of the day it’s a personal choice. If you want to delay till 70 then do it. If you want to take it early then do it. But you know maybe at times it does make sense to say hey let’s do a little bit more analysis and kind of figure out what’s the best for your situation. All right, let’s talk about health care costs. While you’re working, you’re getting health care benefits, but when you retire, and depending on what age you retire depends on what the cost is. So, if you decide to work, if you decide to retire before 65, then that means that if you don’t have any like retire health care benefits, you have to go out to the exchange and find health care. Well, depending on what your income is depends if you get credits to your healthcare or not. So, this is someone single person age 60 um using an average and they have $50,000 of income. Well, the premium for a silver plan is $1,300 a month. $1,326 a month for the self silver coverage health plan. But because your income was $50,000, they are giving you $900 credit to help against that premium, your out-ofpocket cost is $415 to have private health insurance. Now, this is all going to change probably come January. This is what we know right now. Come January, this is probably all going to completely change. But the biggest thing to kind of take away from this slide is that hey, if you retire before 65, you’re going to need to get private health insurance. And it could range anywhere from $1,000 to $1,500 a month depending on the type of coverage you want. And you need to make sure you’re planning for that expense. Once you hit 65, you’re able to sign up for Medicare. You can sign up for part A, part B, and then you pick up a supplement. And there’s a couple different options when it comes to Medicare. You can choose option one, which is original Medicare. You pick up part A, part B, part D is in dental, or sorry, yeah, D is in dental, which is your prescription drug plan. And then you pick up a metagap plan. Medigap plan basically covers everything that Medicare doesn’t pick up. Or the second option is you get a Medicare Advantage plan. Medicare Advantage plan is kind of a combination of all of that. Metagap Part D, vision, dental, and hearing. So, there’s a couple different directions you can go when it comes to Medicare. So, again, when you retire and as long as you’re 65, you’re able to sign up for Medicare. And then you go through kind of couple different options of which direction you want to go. I would say talk to someone that specializes in Medicare and let them walk you through what are the option, what makes the most sense for your plan. Sometimes people come in and choose a Medicare a Medicare supplement plan based on the doctors they’re currently seeing. But when it comes to health care costs, even when you’re on Medicare, if you look at, hey, there’s a there’s a supplement, you have out-ofpocket expenses, you have part B D premiums, and maybe some uncertainties, you’re looking at almost $600 a month. And if you include a 6% inflation to that, in 20 years, that could be almost $1,700. We do use a higher inflation for healthcare because we we’ve consistently seen health care costs go up much higher than normal inflation. And also don’t forget that your part B premium is based on a certain amount of income. So the more income you make in retirement, the more your part B is. So this is called Irma and Irma states that hey if you’re a married filing jointly person and your income is between say say your income is $300,000 modified adjusted gross income is $300,000 that means that your monthly premium is $405 and then which is almost a $200 increase to the normal part B. So, it’s something to be aware of when it comes to one looking at Roth conversions. Watch out for these brackets because if you’re going to do Roth conversions and you convert and add that money to your other taxable income, it could push you into a higher income bracket which causes your part B premium to increase.

If you’re still working and if you have access to an HSA, make sure you’re contributing to that health sav. a health savings account. And the reason I say that is that the money you put into the HSA goes in pre-tax, corros tax deferred, and when that money comes out, you can use it all tax-free for healthcare expenses. So, it’s something to look at to if you have access to it, I would highly encourage you to contribute to them. Now, also the other big cost of healthcare when it comes to retirement is long-term care planning. Now, I’m not going to go into the statistics of it, but what in essence what long-term care is, and we take this for granted on a daily basis, long-term care planning is when you can’t do two of the six ADLs, activities of daily living. And if you think about it, you do this every day. You don’t even think about it. You know, you get out of bed by yourself. You take a shower by yourself safely. You use the bathroom by yourself safely. You dress yourself and you by yourself. You feed yourself safely. And you’re making decisions for yourself. If you can’t do two six of those activities at daily living, then you may need some type of long-term care. and that could erode that could be this additional cost that you didn’t weren’t planning for. Now, when it comes to long-term care planning, there are multiple ways for you to pay for it. One, you could rely on family and friends to help support you during that time. But, you know, times it becomes stressful stressful, you could use your savings and spend your assets to pay for that type of care. You can go out and get a a long-term care policy. There’s a traditional or hybrid. Traditional is kind of like car insurance. You pay into it, pay into it. Has great benefits, but if you never use it, the insurance company kept your money. The hybrid policy is it’s a permanent policy. You pay into it. It’s you have benefits for you to use if you need it, but if you never use it, there’s a tax-free death benefit to beneficiaries. There’s these life plan communities where you buy into a community. Maybe you’re independent living and over time if you need more help with certain things they move you up to different levels. It’s this whole community base. Lastly is you could just use your your equity the equity that you have in your home. Your home is completely paid for and if it comes to like, hey, if I need long-term care, I’m just going to sell my house. use those proceeds to pay for that type of care. But when it comes to any government assistance, Medicaid, you have to have less than 2,000 in assets for them to come in and help with those types of uh benefits. So again, long-term care, if you think that Medicare is going to cover it, it’s not. Medicaid will help pay for long-term care, but that you need that means that you have less than $2,000 of assets.

All right, let’s talk about time to your advantage. Oh, so retirement income management is critical. And when I say this, you know, the priorities of I want to spend with confidence and I want flexibility and some key questions to consider. How much income should I receive? How long will my money last? How much risk should I take? And will I have access to my money? These are all questions to kind of think about when it comes to creating income in retirement. And also, you have to kind of think about, well, hey, what kind of investor may be I what what’s my goal when it comes to what I’ve accumulated? Do I want to increase my wealth and pass on as much as possible to the kids? Do I I I just want to be conservative and protect every other thing I have and just live off the interest that my portfolio will generate or do I want to come in and I kind of die broke meaning I want to spend everything I have and if I die with a dollar in my bank account hey that’s what I want. So, it’s coming in and saying what kind of person or what what’s your end goal when it comes to this money you’ve accumulated and looking at what is the best strategy for that. So, you know, if you’re a person that says, “Hey, I kind of want to preserve my principal.” You could come in and say, “Hey, let’s use some type of bucket strategy where we come in and say, hey, let’s have a lowrisk bucket, you know, 1 to 5 years.” You have a moderate risk bucket where it’s money that you’re going to use 6 to 10 years or you have a high and you have a high risk bucket that’s 11 years plus. So it it’s a way to kind of manage some of the unknowns. So market risk, sequence of returns, investor behavior, investor behavior risk. So, it’s just a way to manage some of the money because at the end of the day, like if you have this bucket that will create income for you over the next 5 years and there’s a downturn in the m in the market, you can wait that the downturn out.

And when you look at these different types of goals, short-term, medium, or long-term, like statistics have shown like the longer you wait invested within the markets, like you get a better return. So like if you look at a one-year period within the markets, like historically going back over the last 74 years, the best the market’s done is almost 52%. And the worst it’s done is 37%. where if you look over a, you know, 10 year rolling period, the worst the market’s done is down one or up 20. So, you know, if you’re coming in and saying, “Hey, I’m going to buy a car in the next year,” you may not want to put your all your money in the market because yeah, if the market did 52%, great, you won. But on the flip side, if the market goes down 37%, you have 37% less money for you to use to buy a car. So again, kind of attaching specific goals to your money and when you’re going to use it. There’s a study that was done that where asked different ages of people, you know, what their risk tolerance was. And that’s what this chart is. You know, when they asked a lot of 30-year-olds, you can assume like, hey, majority of them, a good portion of them said they’re aggressive and moderate aggressive. they have time on their side to invest in the market and and deal with the ups and downs within the market. But the older you get, you start to be a little bit more conservative. Now, at times with questions like, well, how much I should have how much should I have in the market or how much I should have in conservative? A lot of times it’s just a matter of your risk tolerance. We’ve worked with people that have had a they’re in their 60s and they have a 100% of the money in the market because and then at the end of the day they don’t need to use that and they can let that money grow for the kids. So again, it’s going to be tied into well do you need to create income off of your assets or not? any kind of projection you do a lot of times they’ll use a straight line projection meaning that hey this green line you’re looking at this in this chart is just showing hey over the next you know 30 years we’re going to get an 8% rate of return and based on that you know we’re able to meet your goals well the market doesn’t perform that way the market’s going to go up the market’s going to go down and if you come in and say hey let’s think about a static withdrawal Let’s say you have your money in a like a 2025 fund, target date fund, and you’re withdrawing money from that. Well, when the market’s down, you’re selling shares at a lower price. Market’s up, like, yeah, you’re selling less prices. But this is what this is showing where it’s like if you do do a static withdrawal, you do have the risk of running out of money much sooner than even a straight line or a dynamic with withdrawal. Dynamic withdrawal is when you’re kind of creating two different buckets. One bucket is really conservative uh money. One bucket is aggressive. So if the market’s doing really well, yeah, maybe you take money out of that to live on. But if the market’s not doing so well, take it from your conservative bucket.

You might have heard of sequence of returns. sequence of returns in accumulation phase doesn’t really matter what if we started with a down year or we started with a upyear and that’s what this chart is showing in the accumulation of sequence of returns. If you started with a down year and you you have a down the first three years are down and then you start to see the market recover like you have $150,000 $153,000 at the end. If you start with a up year, the first three years are up years and then at the end you have bad years. In essence, you get to the same spot. But in distribution, it’s very important to understand in distribution, it does not work that way. So when I talk about distribution, you’re using your money. You’re withdrawing money from your investments. So, if we test that same scenario, but now we’re withdrawing money, you can see client one, they started in a down year. They’re withdrawing money and at the end of that 10year period, they have $63,000 left. Now, client B, client two, client B started when the market was doing really well. They took out the same amount of money, but at the end of that 10-year period, they saw the last 3 years of being down, but you can see their value is $107,000. So, sequence of returns and withdrawing money is a little bit different than in the accumulation phase. So, again, it’s really important to kind of think about, hey, in retirement, how am I going to withdraw money? Okay, let’s talk about the plan for retirement. And think about retirement is kind of climbing the mountain. Sometimes people think about, hey, I’m going to go climb a mountain. You climb the mountain, you get to the top, and you’re like, yeah, I did it. But sometimes going down the mountain is the most dangerous. It’s not going up, it’s going down. And so if you think about this in terms of retirement, like yeah, you’ve worked and saved, worked and saved, worked and saved all your years, but now you’re in retirement and sometimes it could be the most dangerous part because there’s certain things that you’re not necessarily aware of or or just didn’t think about in retirement that you did while you were working. You didn’t think about sequence of returns. You didn’t think about health care costs. you didn’t think about, you know, if you needed to go from a two-level house to now a onele house. I mean, there’s all these different things that are different in retirement than they are in uh while you’re working. So, this is some of the planning that Kim and I do, you know. So, the Richard and Deborah came and saw us and they’re both 62. You know, Richard has some health issues. is going to work till 67, but we’re using a 85 as a life expectancy. Deborah’s going to retire at 65, but we’re using a much longer life expectancy for her. They both have money in 401ks, has money in savings, and their house is completely paid off. We know what their incomes are. We know what their social security benefits are going to look like when they retire. And then Richard has a pension also. They wanted to live on $5,000 a month. We included health care on top of the 5,000 and they were we taking account federal and state taxes for their scenario. They’re both contributing to the 401k and they’re receiving a match. So the first thing we do is put these pieces together to kind of create this cash flow. Cash flow is just basically saying based on what you want to spend and based on what’s coming in, are you able to meet your goals? So you can see that bluish color is them working. The dark blue or black is social security that’s coming in. The teal is the pension they’re going to be receiving. The yellow is withdrawing money from savings. The dark orange is required minimum distribution. And you see like a little bit of cliff in like 20 2048. That’s when Richard passes away. So, we can look at this and say, hey, based on what you’ve accumulated, based on your income, based on what you want to spend, you’re able to meet your goals and still have, you know, quite a bit left over to pass on to the beneficiaries. Let’s look at taxes. You know, yeah, while you’re both working, you’re in about a, you know, 24% tax bracket. When uh Deborah retires, you’re going to be in a 22. In retirement, there’s this window where you pay no taxes at all. RMDs kick in. You’re going to be paying a little bit more in taxes. Um, when one spouse passes away, you’re going to be in a 22% tax liability. So, it gives us kind of a projection of what taxes could look like going forward. Based on this, it does make sense for you to think about doing Roth conversions. We’re able to model that and come in and say, “Okay, if you retire, when you retire, let’s look at doing conversions for about 6 years. stay within a 12% tax bracket and see what the benefit would be. Well, the benefit of doing that, which is the yellow, represents what we can convert, pay taxes on it, and is there any benefit doing so? Well, the benefit is we’re able to save over $100,000 in taxes. Meaning, that’s the amount of money that you’re not giving to Uncle Sam. That’s what money you’re keeping in your pocket. We’re also able to increase your net worth. So doing Roth conversions makes a lot of sense when it comes to his situation. We can also look at hey what happens if Richard delays his social security till 70? Is that of any benefit? Well, we know by doing so his break even is 79. Now we know then possibly he’s going to live beyond 79, but we also think that Deborra is going to have a much longer life expectancy. So it may make sense for him to delay social security till 70. What happens if because of the health issues he says look I just want to retire earlier enjoy life travel do the things I want to do can I retire at 62 is that possible based on that yeah absolutely if you want to retire at 62 you’re able to do so and you still have money left over to pass on to the kids so you’re able to retire earlier so these are all different scenarios that were run for for members for clients to really put a plan together this is a meeting that Kim and I always hold with our members. There is no cost to do so to do this type of planning, but we’re also here to help you with also a lot of different various things. We can help you create withdrawal strategies. We can also help it look at how do you maximize your rate of return, but also reduce your risk, create uh Roth scenarios for you, you know, make sure money is passed on to the beneficiaries properly. There’s so many different things that we’re able to help you with. Also, for anybody joining that are current clients of AIS or line retirement investment services, um, if you have not done your wills, power attorney kind of basic estate plan, make sure to reach out to us. This is a service that we just recently added. So, if you are a client of you need to get that done, we’re happy to set you up at no cost to get this done for you. It is kind of a do-it-yourself program, but it’s a way to create a will, power of attorney, medical, financial, and some other estate planning documents. Okay, I know that was a lot of information and there’s probably a lot more to cover, but happy to answer any questions you have regarding retirements. We do have a question. You want to start that? Oh, oh, oh, yeah. Yeah, yeah. I wasn’t done. Calm down. Calm down. Calm down. Calm down. Um, I am going to put a poll out there. So, if you would like us to reach out to you, set up an appointment with you, please indicate that on the poll. We’ll contact you, put you on the calendar, and and start the process. Or if there’s any questions you have, just let us know. Okay. What questions do we have, Kim? We’re we’re going to call you anyway, but we’ll call you first and just say yes on the poll. Um, let’s see. Somebody’s asking, “Hi Kim, are you also a CFP?” Nope, I am not. Uh, next question. What about self-employed? I get no help. Single 54, pay 664 a month for bronze with HSA. Is it a high deductible? I don’t know what all that means, but yeah. um you’re going to have to call that specific plan that if you’re in the bronze, you’re going to have to call the marketplace or call whoever is offering that bronze and ask if that’s a high deductible plan. What is the latest age I must make an IRA withdrawal? There is no age in regards Well, so sorry, let’s RMD. So RMD Yeah. So um depends on what year you’re born. If you were born prior to 1960, it is 73. After 1960, it’s 75. Um, somebody’s asking if there’s a transcript of our webinar. No, there isn’t. How about a condensed version? No. But when we reach out to you, if there’s a specific question you want us to review, we’re happy to do that. Um, next question. I’m 65 years old. One year, one year my cash management account will be zero. I need to replenish my cash management account. 74K a year until social security starts at 70. We have 30,000 in stocks and a million in tax deferred accounts and a two and a quarter in Roth. Do I withdraw from a combination of accounts or should I start social security? So the planning that I showed you. So that’s a great example of we can answer those questions, but we need to do a little bit more planning. If we’re able to put all those pieces into our planning software, we can answer a lot of those questions for you and really come up with a game plan for you. Yeah, we don’t know until we see all your situation and your tax situation and your expenses and everything. Um, if one is retired but still has a high deductible health plan and not yet on Medicare, I’m only 61. Then I thought one need not be working to continue contributing to an HSA. So you just have to have a high deductible healthare plan to be able to contribute to an HSA. But also at the same time, like I guess there’s no I mean if you have no if you’re not working, you have no income. I mean the only benefit doing the HSA is the taxfree growth because if you have no income then no taxable income there’s nothing to deduct from. Yeah. Yeah. Um how much do you charge for this type of planning and help? Yeah. We don’t char at this at the moment we don’t charge for we don’t charge to do any type of the we don’t charge to do any of the planning. It’s just a service that we provide our members. Okay. Let’s see. Here’s a couple new ones. Let me go here. Followup clarifi clarifying question. Healthc care question was related to your analysis which only seemed to be about employed. Bronze is a high deductible plan. I was wondering how to fit into analysis with the government help. Says government helps. It does not. I’m not quite sure that makes sense to you, Malcolm.

Yeah, I don’t I’m not sure. We’re gonna have to just hang on to your question when we reach out to you. Um Claire, we’ll we’ll work through the details. Uh next one. I’m not married. What are the rules of common law relationship? It depends on what state you live in. And I would just say Google that that information because we’re not we’re not really versed on every state when it comes to common law relationships. So, but I know like nowadays you can just Google that within the state you live in and it’ll give you a pretty good summary of common law relationship. I think I don’t know if it’s related to healthcare or social security. I’m not sure what the question relates to, but I believe with social security uh common law counts as married. Again, I don’t know if that’s the question or not, but but we’ll t we’ll we’ll answer that when we reach out to you. Let’s see. Um, I have a pre-tax retirement account and a Roth. When I start withdrawals, do I have to withdraw from both simultaneously or can I withdraw from the pre-tax and only withdraw from the Roth at a later date? That’s a good question.

I mean again it comes down to the planning that we do to really kind of understand what makes the most sense and we’re able to model that to say hey do you do pre-tax or do you do after tax and which which one gives you the most the best kind of ending scenario. Generally there’s no requirement to withdraw from a Roth. So you definitely do not have to withdraw from both of them simultaneously. conventional wisdom. And again, to Malcolm’s point, it depends on your situation. Most people like to leave the Roth if they can, and they’re building a tax-free bucket of money that they can use down the road. Um, and it passes to your heirs tax-free. Um, so again, without knowing your situation, um, this goes back to the fact that we don’t charge since there’s no charge for this type of planning and help. How do you get paid? Just an alliance salary. regardless. Yeah, let’s talk about this a little bit. Um, we do get a as advisors with the lion, we do receive a salary, but also at the same time, we do this not only to help our members with the planning, but there’s times when the members decide to become clients of ours, but this is kind of a process on both sides. We’re kind of interviewing you to see if this this is someone that we want to work with and you’re interviewing us to see if this is someone you want to work with. I mean, so there are certain things that we might implement where there are fees associated with it where we get paid something else for doing that. But at the end of the day, like both Kim and I have been doing this for over 20 years. We hold ourselves to a fiduciary responsibility. And so, you know, um we will fully disclose if you decide, hey, what are your recommendations? We will fully disclose these are the fees associated with implementing this if you wanted to move forward. We are not the advisors that are going to come in and be like, “Hey, I’m going to put every all your money into annuities and get the most commission possible and then move on.” No, not at all. So, you know, we will tell you upfront what the cost is when it comes to managing a person’s assets or whatever recommendations we put in place for you. I don’t know if you want to add anything else, Kip. So, you know, I would say that we’re we’re doing these educational webinars to obviously help you and provide knowledge and kind of demonstrate that we know what we’re talking about. And yes, we will run a plan for you, complimentary. And certainly our goal is that through those series of meetings of the planning that you do think we know what we’re talking about and you do get a chance to know us and see if we are somebody that you could see yourselves working with and trust us with your retirement assets. But certainly that’s our goal to help you with your retirement plan and investments. And the the planning tool that Malcolm showed you, that’s not just a oneanddone to make decisions. We use that for every client we have as part of their review. We we update the plan every time. We obviously run through investments. We update taxes. I mean, that’s kind of the road map to get you through retirement. We have clients that call us and say, “Kim, Malcolm, I want to buy an RV. Should I finance it or withdraw the money?” Or, “We need to replace our car. or we want to take out money for our daughter’s wedding. We run all those life situations through your plan and help you decide on uh the right way or the best way to do it for your situation. And we use that plan for RMDs and for taxes. So, we kind of help you through not only getting you to retirement, making good decisions around pensions and social securities, but through through retirement, investing appropriately for those retirement years. I think I heard Malcolm mention earlier that might have a bucket of conservative money and some uh market money when it gives us options when it comes time for RMD. So that’s kind of the whole package and the costs come in based on if you decide to let us work with some of your retirement assets or savings assets. It depends on the the product or the solution that we put in place. And as Malcolm said, that’s when we would disclose what the cost of those different products are. And we’ll show you. We have I’ll call it a menu, but it’s not really a menu, but just kind of some products and types of products that we highlight that we have found over the years work really well for retirees. Okay. A couple more real quick. Can you use HSA funds to pay for medical premiums?

Yes. I want to say yes. I mean, yeah. Yeah, you can. Um, somebody said, “I’m in Colorado. Do you do in-person visits?” Yeah, we do. We have an office in the tech center at I25 in Belleview and one in Lakewood up off of second in Union. So, we we’ll do that either way, in person or virtual. And I think, let me check one more time. I think that’s it. Hopefully, we got everybody. And if you come up with any other questions and when we reach out to you, we’ll be happy to walk you through it. Anything else, Malcolm?

Don’t think so. I don’t think so. Uh, thank you for the thank you, Lisa. We appreciate that. It’s kind of hard to know what the feedback is. You know, we used to do these events in person, so you could kind of talk with people on the webinar. You’d never have any idea how it’s going. So, we we appreciate the Thank you. Okay, take care. Look forward to talking with you or seeing you on the next one. Thank you.

Hello and good evening. It is just about six o’clock here, Central time. I’m going to get started and in just another minute or two, I just want to make sure people have a chance to get logged in. I will be right back with you. Thank you. Well, good evening everybody. Thank you so much for joining me tonight to talk a little or learn a little bit about long-term care. Uh we’ll discuss some uh some information, general information on this. Hopefully uh after this presentation, what I’m what I’m going to be doing is putting up a survey at the end just to see if you would like to have a one-on-one conversation just what this all means for you and your plan, your retirement plan, your health plan. Uh and hopefully again you and I will have a conversation about this. So, we will let me see there’s a big echo on my voice. Let me see if I can switch my microphone uh change on here. How is that any better? Can someone let me know if the echo has improved there? Hopefully there’s a little better but still echoing. I only have three options. Let’s see if the third option does something different. Um but yeah, I’m getting some no echoes. Uh so hopefully I’ll just leave it right where it is. Hopefully there’s no echoing for for most of you. I don’t know uh what that is for uh you specifically there. So anyway, I will get going on here. Uh so we’re learn a little bit about again about a long-term care today. Before I do get started, I will let you know that I uh that we are not able to record these uh presentations and this is for compliance reasons uh that we cannot record, we cannot have listeners record and distribute these as well. Um so just so you know that we are not able to record or even send out the deck or the uh the presentation. We cannot send that out either. So I do have some other presentations coming out up uh so estate planning a lot of the differences between a will and a trust and those important documents of a power of attorney for health care a power of attorney for financial and all those different things that you might need to start planning making sure you have beneficiaries named. Basically, if you are not here uh in the future, who gets your stuff, how does it pass and what is the best things especially when we talk about taxable situations and things like that. So hopefully uh you’ll join me to learn a little bit about estate planning. Then I will be doing IRA planning a little bit more about traditional IRA, Roth IAS, the different tax uh things that might uh be affecting many different people and what types of IAS might be good for you. Maybe you’ve been doing 401ks or traditional IAS. Maybe we should start thinking about Roth IAS if you have not done so already. Conversions from a traditional to a Roth IRA. learn a little bit how that works in your plan. I do have some educational resources available for you. You can see what other webinars are coming up on on uh presentations. Uh whether it’s in your specific area. I am here in Illinois. Maybe you’re in a different state and there might be something more different time zones, things like that that might be convenient for you. You can listen to our invests podcast or Aerys website and blog. Aerys meaning Alliant Retirement and Investment Services. That’s what the Aerys stands for there. But uh again, you do have some um things available to learn a little bit about who we are, what we do. Our commitment is to provide some good advice for you. The biggest thing that I do, the third one there, offer a comp complimentary no obligation retirement plan, you know, estate plan, whatever is important to you for the future of here’s what you have, here’s what you want. Are you on the right path? Is there something that we can do to put you on that path if you are not there now? And learning a little bit about more about investments and uh you know, interest rates. Interest rates, by the way, have really risen a lot lately. And there’s some very interesting things going on right now uh with, you know, economic with the Federal Reserve raising interest rates. I do have some very good interest rate options available. If you are a safe safe investor or have that safe money for some of the terms that I do offer, I do offer some three-year and fiveyear terms. very attractive rates. Uh if it’s a h 100,000 or more, I can get you a three-year interest rate at about 5.6ish. If it is a 5-year guaranteed interest rate you might be looking for, I’m at 6% I just hit. And uh you know, take advantage of some of these. And again, when I put up the survey at the end of the presentation, please say yes if you want to talk a little bit more about that learning a little bit more about the long-term care and we’ll dig in for you specifically. So, please say yes at the end of this of this presentation. My name is Joe Gaspari. I am one of the financial adviserss here with Alliant with the Alliant Retirement and Investment Services team. I do these presentations pretty much every other week, every, you know, twice a month. And it might be in the afternoon, it might be in the evening, just like this one. I might do a topic on long-term care like we’re doing. I’m going to talk about retirement planning, investing in general, estate planning, and all these various topics. I do these presentations and as well do other people on my team. We have about 10 of us that do these presentations around the country. And if you’re going to look up some various topics, what might interest you, you might hear different speakers. Uh hopefully again, I will see you on some of my future ones. So talking about the assessing the risk, people turning age 65 today have a nearly 70% chance of needing some type of care. 20% of 65 year olds uh or older might need care for 5 years or more. 8% 40 to 50 ages 40 to 50 might need some you know with some type of disability might need some type of long care services. So this is not just uh in the later years that we need some care could be you never know what could happen. That’s what this is going to be all about is what is your plan should something medically if you’re still here but if you need assistance who’s going to pay for this how are you going to pay and what’s uh you know how do we you know not take advantage of our family members. You know, sometimes family members have the best of intentions and would love to help mom and dad, but are they capable? Do they have the time and things like that to do that for you? What is long-term care? Ongoing services and support needed because of a chronic health condition. A lot of times it could be cognitive impairment like Alzheimer’s and, you know, many different things. Maybe it was a car accident or anything that could happen, some type of disability that someone might need some care or assistance in those years. Levels of care. We’ll talk about some skilled care. Now, we’re talking with this round the clock. You need someone watching you constantly. Intermediate care, maybe it’s not round the clock, but you might need some skilled nursing or something like that. Custodial care is just maybe help around the house. Maybe you’re still in your home, but you need help with these ADLs, the activities of daily living, eating, dressing, bathing, toileting, transferring continents. These things we’re going to see a few times on here. And I’ll talk about this because these are the item or these uh activities that if you do have a long-term care policy by chance, and how does one qualify to get money out of that? What to be in claim? they call that and that’s typically you might not be able to do two of these six daily things. So if you are having uh trouble doing two of these six a doctor’s note basically saying that you cannot do these you might be in claim and then you can start to get income from your long-term care policy but it’s typically about two of the six daily things that you cannot do that would make you qualify for long-term care. As I go through the presentation here, if you do have any questions about any of these slides, I’ll get to these at the end of the presentation. But if you do think of a question, go ahead and type it in the chat box or the Q&A box, and I will get to those at the end. When you think of it, type away. Those will hold there till the end. Where can you receive care? Many people, the one of the biggest questions if someone’s going to get some type of long-term care policy, do I have to be in a nursing home? Can I be in my own home? That’s many times an option. So maybe you want care in your home. Maybe it’s some type of assisted living facility. It could be adult daycare facility, you know, a 9 to5. Maybe someone drops you off when they go to work and then they pick you up after work. Uh and then sometimes it could be a nursing home. Common misconceptions. I’ll never need long-term care. it won’t be that expensive and we’re going to see some numbers and that it sure certainly can be expensive. Medicare or Medicaid will cover the cost. That’s is certainly a common mis misconception. Medicare does not cover long-term care. Uh Medicare, I’ll say, is a short short-term care. I will certainly uh bring that up here, but medica Medicare is not going to be your long-term care. Medicaid can cover maybe some of the costs, but we’ll talk about how do you qualify for Medicaid. Uh family will take care of you. That’s another misconception is that uh my kids will take care of me. Uh we had a good situation where me and my wife took in my mother-in-law before she passed away. She lived with the two of us for three years. It wasn’t so much of the long-term care. Part of it was financial and part of it was just have someone around for her. Uh we did a lot of the cooking for her, things like that. But uh thankfully we had a home where we were able were able to do that. We have her master bedroom was on the main floor. We had three bedrooms upstairs. And it certainly did work out for us specifically, but that’s not the case for everybody. Caregiving challenges. 41 million people provide unpaid care for their family members. 61% of that is typically women and 34% of caregivers are age 65 or older. They might be retired themselves and there could be even the next one still doing a full-time job helping someone else. So 34.7 hours per week. Four in 10 caregivers consider their caregiving situation to be highly stressful. So this is where do we want to be? Do I want to be a burden on my children or can I plan to have a system set up that if I do have some type of care needed uh if I don’t have enough assets to cover that do I have some type of coverage or insurance for that? Why is it important to have a long-term care strategy? Help protect assets from potentially uh devastating costs. And that’s one of those even some people say, “I think I’m self-insured. I think I can be self-insured. I have enough assets to pay for this.” But long-term care, depending on the length of that long-term care, can be an asset deple uh depending on where and how serious uh the situation is, and it could be anywhere from, you know, 3,000 a month up to 10 or 12,000 a month for for more skilled care. And again, 12,000 a month, that’s $144,000 a year. Even if you had $1.4 million in 10 years, that’s gone. Now, we talk about long-term care. As far as the typical is a 2 to threeearish on an average of someone that might need that skilled care or something. You know, sometimes it’s toward the end of life and maybe it’s not toward the end of life, but uh that typical need is around that 2 to threeyear time period.

Today’s focus number one, we’re going to talk about the potential costs of care in different settings. So looking at just some national, you know, and now this is a few years old on here that we don’t have updated numbers. We’ve tried to get some updated uh numbers for this presentation, but as of a few years ago, homemaker services, someone helping cook, clean, uh almost $5,000 a month. It’s almost $60,000 a year. Uh home health aid, adult day health care. Um that’s the cheapest. That’s the drop off and pickup. Maybe during the, you know, during the 9 to5 hours, maybe just an adult daycare. That’s the cheapest of all of these. Private room and in an assisted living, a semi-private room in a nursing home, and then a private room in a nursing home. Now, we’re talking $9,000 a month, $108,000 per year on some of these costs. So depending on that level of care needed is certainly there’s a varying level of costs on these annual cost of a nursing home care. So where we said that semi-private room was about 94,900 a year. If costs were to rise at a 4% annual rate, sometimes it goes higher than that even that average rate. Uh but you’re looking in 10 years uh you know in 2031 at 141,000 a year uh 2041 now we’re talking over 210,000 a year for that same care but just with inflation on how much these costs rise over time uh cost depending on where you live. This is a big difference on what state you live. You know, when we look at Texas versus uh California on the first one, Texas a little under 48,000, you see Ohio, Florida, uh in California, the highest in this case is $63,000 a year. Uh when we look at the median cost for a semi-private room in a nursing home, now we’re looking at New York is the highest here. It’s well over double of what uh Texas is in this. though again where you live has a is a big difference of what these costs could potentially be. What to look for in a nursing home or other senior living facility. Ask people you trust. Uh there’s a site, you know, medicare.gov. Uh searching for nursing home information on there. Uh compare different facilities, you know, visit them, talk to the residents and their families if possible. Again, if there’s I’m sure there’s some privacy things that you would have to worry about there, but uh just, you know, if you know anyone that has been subject to caring for someone else or a family member that needed some type of long-term care, how did they handle this? Where did they go? What were the costs and things like that? Just to find out where, you know, where should, you know, I how should I be planning this for myself. Again, I’ll throw out that if you do have some questions, go ahead and type them in and I will get to those at the end of the presentation. Uh, looking at methods to pay for long-term care. So, looking at now, we’re talking at around that 50/50ish, maybe a little bit more than 50% saying that they are very confident or somewhat confident during their working years is that ah, down the road I think I’ll be okay. I’m pretty confident I’ll be able to pay for long some type of long-term care myself or maybe it’s already been planned for with insurance. And then we’re talking about 46% saying not too confident or not confident at all that if something catastrophic happens that I might be running out of assets. Then retirees, it’s a little bit more saying not too confident or not confident at all. Now we’re looking at about 48% but again half and half. Half say, “I think I’m okay.” Half say, “I don’t think I’m okay.” So, where are you on that 50/50ish split? How will you pay pay for the potential costs? Sometimes someone might say, “I think I can do it myself. I’ll pay out of pocket uh using just whether it’s income, uh whether it’s investments, savings, you know, things maybe, you know, we’re going to talk a little bit about a reverse mortgage. Uh is that an option?” I think sometimes that might be a last resort for some people, but it is certainly an option. Relying on government programs with like Medicare or Medicaid. Uh Medicaid is probably the largest payer of long-term care, and we’re going to talk about that in a little bit. Purchase a long-term care insurance policy. So, having sub some type of coverage. I’ll talk about a few different uh options available out there. Whether you want to have a policy and make monthly premiums or annual premiums, maybe you have enough assets that you could do a lump sum. I’ll talk about the differences on some of these and what the benefits are. Uh add a long-term care rider to a life insurance or annuity product. Uh there are many of those. A lot of what we call hybrid policies are very much more popular than they were 20 25 years ago when I started in this business over 20 years ago about actually about 23 years ago and doing some long-term care policies at a different firm and the big players back then were like GE John Hancock were big players for long-term care and if you’re going to do a policy you might be paying 2300 a monthish at that time. I could say that many of those old old policies like that either they couldn’t keep up with, you know, the companies would say we don’t have enough uh built up in this policy. Either your premium has to go up or we’re going to be lowering your benefits or a combination of both of those. If you do happen to have a long-term care policy and you’ve been making monthly or annual premium payments, has that ever happened to you where you’ve received something from the long-term care uh provider company, the insurance company, saying that benefits might go down or premiums might go up or a combination of both of those? So, are you going to pay out of pocket? Are you going to rely on government program? Are you going to get some type of long-term care insurance or some type of hybrid policy with long-term care riders paying out of pocket or self-funding? You can, if you can afford it, you can do whatever you want. You can be at home, maybe go into a home or some type of assisted living. Uh maybe ideal if you can afford to pay for care indefinitely, but uh you must be willing to liquidate assets. Um, it may impact your ability to pass more money on to your family. You’re dwindling down the inheritance if that’s important to you. If you run out of money, relying on family members or the government may be the only option. Then using a reverse mortgage, basically a reverse mortgage is if you have significant equity in your home or maybe even no mortgage on your home, you’re doing a what’s called a reverse mortgage. Instead of doing a typical mortgage where you borrow a lump sum and then you make monthly payments, now you don’t get a lump sum, but you get monthly income from the equity of your home. So that’s an an option to say, I can use the home equity that I have and get a monthly income to help pay for some of these things. Allows you to borrow against the equity in your home. Can use the proceeds to hire caregivers or make home modifications. no mortgage payments. You’re not making payments. You’re actually getting payments, but the loan must be repaid when you vacate the home. So, if you leave the home or if you pass away, that’s got to be paid back. A reverse mortgage takes part of the equity in your home and converts it into payments made to you. You can use these payments to receive or pay for long-term care services um you need, or you can continue living. so you can continue living in your home. Drawbacks on that is it may not be suitable if you if you’re only going to be in the home for a short period of time. Typically, this might be for a few years because the reason they say not for a short period of time is because of the cost, fees, and expenses that are attached to those. It can be very expensive to get some of these reverse mortgages. Uh loan must be repaid when you move out or sell your home or die. So, you can’t hold a reverse mortgage and go live in a nursing home. You have to be it’s got to be an owner occupied home. Uh amount that you borrowed is typically much less than the actual value of the home. You won’t get 100% of your equity out for this. It involves substantial fees, origination fees, closing costs, servicing fees over the life of the mortgage. So, the the mortgage companies that offer these don’t do it for free. Uh yes, it’s certainly an option to maybe get income, but as if you have that for a year or two or three or four or five or however long it lasts, they are getting fees for that whole time as well. Interest is added to the balance and adds up over time and that again has to be paid back. If you run out of equity, you can run out of income. It’s not a lifetime or guaranteed forever income. This is with based on how much equity you have, how much income you can get. There is an expiration of how long that will last as well. Relying on government programs. So, true or false, Medicare will cover all of your health care expenses in retirement. Medicaid will cover care in a nursing home. Medicare. So Medicare is a federal health insurance program that covers most people who are age 65 and older. It’s composed of different parts. So typically you have Medicare A and B. And if you want to dig into Medicare, look out for one of our Medicare presentations. It gets much more detailed uh as I talk about how Medicare A B if you have the advantage plan, what the difference is on these. We can dig into that on that presentation. But your traditional uh Medicare is the original part A covers your hospital bills. Part B is your doctor visits and just your medical insurance. You might opt for the Medicare Advantage plan, which is Medicare Part C. And then you have to you would add on your prescription coverage, which is Medicare Part D. Medicare does not pay for personal care or custodial care. It’s health insurance. It’s not long-term care insurance. Home health benefits are limited on uh with Medicare. Medicare skilled nursing. Here’s one I said earlier. Short short short-term care. You can get uh for the first 20 days. If you are admitted in the hospital of a for a 3-day hospital stay, you could qualify for 1 to 20 days of skilled nursing care. can be 100% covered and you pay nothing but after that after 20 days from days 21 to 100 it’s partial coverage 100 days after 100 days there is no coverage so Medicare is not long-term care it is very short-term care is and this is uh only when it relates to skilled nursing care Medicaid very different than Medicare Medicaid is a state/federal joint funding uh for uh you know for basically you have to qualify for Medicaid by not having assets or very minimal assets. Uh Medicaid is a joint federal state program that assists lowincome uh individuals. Medicaid is the largest payer of long-term care. You could see the chart on the right. 54% of long-term care is paid through Medicaid. How do you get into Medicaid? First of all, it’s means-based. You have to have limited or no assets uh to qualify for Medicare. I have worked with some uh some of my clients and their families over the last years of, you know, getting elder care attorneys. An elder care attorney will kind of walk through how do you qualify for Medicare if you do have assets? How can you gift things away legally? If you have a spouse still living, uh you can certainly transfer things to the spouse. You can still have a home. Um but you cannot own a home if you are a single person to be on Medicaid. So Medicaid limits where you can receive care. Uh if you go to a nursing home and say, you know, this is a Medicaid situation, can a person stay here? They might be say, “Well, we do take Medicaid patients, but we only have three beds available out of the 100 beds that we have.” Uh, they may only have very limited space. Uh, so Medicaid might do that and you might have to go to a farther uh facility. Each state establishes establishes its own eligibility rules. A few state Medicaid programs may allow applicants who to self-direct their own care. uh check with the Medicaid uh site medicaidplanningass assistance.org to learn a little bit more about that. And again, if you think you might have to go to some type of Medicaid situation, again, an elder attorney or many estate planning attorneys might be able to assist in this that you’re not breaking any rules you have to follow. You can’t just give everything away all at once. Uh there are certain rules on uh how do you spend down your assets? Medicaid eligibility in most states an individual’s income must be less than the cost of care. Uh income uh cap applies in some states. Asset limit is in most states is $2,000 is what you can own. The cap of what you can own. Again, limits might be higher if you are married. So, some assets are not counted. If you have a home, if your spouse is still living, if your spouse is still living in the home, yes, you can own a home, then you can have one car, you can’t have two cars. Uh, household and personal belongings, you can certainly have. You can have term life insurance, but it cannot be a whole life or universal life with significant um uh let’s say cash value in there. Uh, only term insurance. Medicaid compliant annuity, a single premium immediate annuity. So, it’s something that you can just get income, but you don’t have a lump sum. It’s just a future income uh uh annuity. Uh burial plots and funeral expenses can be owned, but again, you’re looking at very limited assets that you can have uh by uh qualifying for Medicaid. strategies may be in included using assets that count, using your uh savings to purchase assets that don’t count, maybe using uh you know savings to get a term insurance policy uh if you qualify for that. Transferring assets into an irrevocable trust when we talk about the estate planning and join that one if I when I do have that presentation coming up. There is a big difference between a revocable trust and an irrevocable trust. An irrevocable trust you do not control. A revocable trust you do control if you are the trustee. So if you have an irrevocable trust, someone else has to be the trustee. Someone else manages that money on your behalf, but you are getting all of those assets out of your personal estate. You can start to give away assets legally. There’s certainly an legal way to do that. Distributing or protecting your assets in advance may help you qualify for Medicaid. Medicaid uh uh benefits uh and drawbacks benefits. Qualify for Medicaid as soon as possible if you want to start planning that and start gifting or giving money away. Protect a healthy spouse. Uh preserve assets for loved ones. And again, sometimes an attorney might be needed to plan some of these things. Drawbacks are ethically problemat problematic for some. Uh basically saying that, you know, as far as how to give money away, uh living off of the government, you know, sometimes those things some people might have an issue with. Uh may require you to give up rights to your assets. Medicaid laws are pretty complex and again per state. Um, it’s state and federal kind of working together on those. I know we do have a few questions on here, but uh if you do have some other uh questions, please type away and again I will get to those at the end of the presentation. Medicaid planning example. If you own if you transfer ownership of your house to your son. So this is as people are planning to give money away and give assets away. You plan uh transfer the ownership of the house to your son. The fair market value of the house is 400,000. The average cost of a nursing home care in your area is 8,000 a month. So what they’re doing is dividing 400,000 divided by 8,000 and that is 50 months. So it’s a little over 4 years, call it four years and 2 months uh that you are not eligible for Medicaid because of when you gifted that. there’s a waiting period for you to uh to say that I qualify for Medicaid. In this case, it’s a 50month waiting period. Then, so again, working with an attorney might help on giving some of these assets away. Last one on these three benefits of long-term care insurance that we’ll talk a little bit about. So, looking at long-term care insurance, in exchange for premiums you pay, long-term care insurance pays a contractual daily or monthly benefit for covered services up to the policy limits if care is needed. So, basically, you’re going to make monthly or annual premium payments if you go into claim. And again, if you cannot uh do two of the six daily living, feed yourself, dress yourself, bathe, bathe yourself, bathroom, those things. If you can’t do two of the six and it’s a doctor’s note saying that you cannot do those, then you can start to get income from this insurance policy. So, you’ve been paying premiums into it and if something happens, then you can start to get income out up to the policy limits. And how do these limits work? Basically, uh, sometimes they might say, there’s a few terms that will come up in the next couple of screens, is if I go into claim, can I get income right away from my policy? Well, there might be what they call like an elimination period. It might be a 30-day, 60-day, or 90day waiting period that if you go into claim, you’re on your own dime for the first 30 days, 60 days, or 90 days. Then the benefits will kick in after that. How long once you start to get these payments, how long do they last? It could be typically a four or a six-year income that you’re getting from your policy. Sometimes there are some lifetime options out there uh that’s much more expensive for those types of things, but a typical average of policies that I’ve seen and done is that 4 to sixyear income from the policy. So especially valuable for middle American in uh middle inome Americans who want to preserve financial independence and quality of life, preserve freedom to choose where you receive care, helps protect accumulated assets, and avoids the need to spend down your own assets. So if it is something that is affordable or you’re able to do the this first option of a long-term care is I just make a monthly or annual premium to this. I get some type of guarantee or you know for benefit down the road and I can eventually get income from it if I am in a long-term care need. So that’s uh certainly one of the options. How does the care insurance work? Uh you must be reasonably in good health to get the policy. So a big question sometimes people will ask is when should I get long-term care insurance? When you don’t need it. That’s the first part. Same thing with life insurance. Should you start planning life insurance when you’re ill or you have a serious uh serious illness or condition, uh you might not qualify for it then. So, when you’re well, that’s when you have to start looking for either long-term care or even life insurance. Uh premium is based on your age and the features and benefits you choose. So the younger you are, the cheaper the payments would be, the premiums would be, and depending on what type of benefits. If you want the the Cadillac of benefits, you’re going to get anything and everything. It’s going to be more expensive than if you had more modest benefits. Uh benefit is typically triggered when you become uh chronically ill or uh cognitively impaired. That’s basically Alzheimer’s, things like that. or you cannot do two of those six daily living things that we mentioned. Well, once the elimination period or that waiting period, that 30 days or 60 days or 90day waiting period is satisfied, benefits are paid as long as necessary until the policy limits are reached. And it could be a total dollar amount. It could be a 4-year term or a six-year term if you are still here and you’ve gotten that. Let’s say it was a six-year term guaranteed to get this income. Uh if you are here 6 years and 1 month, that one month you the the income stops. So they are capped on how long those payments will go out typically. Five key features of long-term care insurance. First is the benefit. How much can you receive on a monthly basis to help pay for your care? The benefit period. How long does that last? Is that four years, 6 years, or potentially longer? The elimination period again is how long do you have to wait to start that after you qualify for it? Is it that 30 days, 60 days, or 90day waiting period? Where can you get care? Sometimes people can would prefer to be in the comfort of their own home. Does that policy cover home care or do you have to be in a nursing home or some type of assisted living? Uh inflation protection. What if you bought a policy now and you don’t need this care for 10 years or 15 years or 20 years? What someone might pay 5,000 a month for right now. How much is that going to cost in five or 10, 15 or 20 years down the road? It’s going to be a much higher and is there some type of inflation protection on that?

Managing uh the uh the cost of long-term care insurance. The younger you are again is when you buy long-term care, the less expensive the premium. Uh make sure you can afford the premium now and in the future. So if you’re going to be retiring and income goes down, can you still continue to make those premium payments? Uh buying from a reputable company. And when I do long-term care insurance for people, uh you know, anytime I do insurance, I am given a list of companies that I can basically solicit. uh you know quotes from and they are all highly rated companies. You know uh I have a broker dealer that we are partnered with here at Alliant. Our firm is called LPL Financial. Through LPL Financial, we have an insurance services uh team. And when I get quotes and different types of policies, things like that, every company has to be highly rated and they are all pre-approved companies that I am able to get these quotes from. Uh, choose features and benefits wisely. So, what type of benefits are you looking for? And the more benefits you want, the higher that cost could potentially go. Take advantage of tax incentives. So, if you’re going to make monthly premium payments or annual payments, there could be some federal tax deductions uh for some of those long-term care premium payments. Possible state deductions. Uh, check with uh your qualified tax advisor if you do have questions on that partnership. uh policies that help you qualify for Medicaid.

Key policy features to consider again the benefit uh amount, how much do you get every month? Benefit period, is that going to last four years, 6 years? Benefit triggers, can’t do two of the six daily living or cognitive impairment, uh what are those things that uh are going on in your life that qualify you to get income from your policy. The waiting period again, types of facilities included, nursing home, assisted living facility, or in the comfort of your own home. Is there inflation protection? Waiver of premium. What that waiver of premium means is that if you are in a policy making monthly or annual premiums, if you are in claim and you’re getting money out, you don’t have to pay those monthly premiums anymore as long as you’re in claim. and is it guaranteed renewable? As long as you’re making premium payments, is that policy going to be active? Other insurance options. So, here’s what we do quite a bit of these days. Long-term care has changed a lot over the last 20 plus years. Um, there’s probably more hybrid policies than we’ve done than standalone long-term care insurance policies. The typical old school long-term care policy is when you’re looking at making a monthly or annual premium into this. Basically, if you pay into a policy for 5 years, 10 years, 15 years, 20 years, you’ve been paying into a policy. If you never go into a claim, if you’ve never had a long-term care need and you passed away after all that time, or just said, “Cancel the policy, don’t want it, don’t need it,” it’s gone. all the premium payments are spent and there’s nothing back to you. So, hybrid policies are very popular now because there’s some type of uh money’s going somewhere. So, a hybrid life insurance/l long-term care policy. Sometimes you can do this making a uh a monthly or annual premium. Meaning that if you’re paying into this and if there’s a long-term care need, let’s say there’s a bucket of $300,000 available based on how much you’re paying into. Let’s say there’s a $300,000 either death benefit if you pass away. Beneficiaries get the 300,000. If it’s a long-term care need and you’re still living, you didn’t pass away, but that same 300,000 could be used for long-term care needs divided by, however, if it’s a 4year period or a six-year period. And if you’re in a long-term care claim and you get money taking out of that, let’s say you’ve taken $200,000 out of the policy and you passed away, $100,000 is still available for the death benefit. So, it’s not all lost. So, and if you never went into a long-term care claim and just passed away, that 300,000 goes to the death benefit to your beneficiary. So, something is going to someone in these situations. That’s why we do a lot more hybrid policies. There’s also deferred long-term care annuity contracts. What that means, it’s called a fixed annuity with a long-term care writer. A fixed annuity is just an interestbearing account. It could be on average the gross interest rate, I’ll say gross interest rate is around 5ish%. 5-ish% is what you’re earning. But then depending the age that you purchase this now with the cost of the long-term care insurance comes out of that and you might net three, three and a half somewhere maybe even close to four again depending on your age. you’ll get a net interest rate after little long-term care and it’s just an interestbearing account growing growing growing over time and it’s got a the death benefit is whatever your cash value is. So if you put a lump sum this is a lumpsum option. Uh let’s say you are you’re able to fund a h 100,000 in this type of a policy. you put 100,000 in, it’s earning interest. And typically that long-term care, if you put a h 100,000 in, the immediate long-term care benefit is up to 300,000, even up to three times of what you put in. So you put in 100,000, that’s your cash value earning interest. And then but the benefit is 300,000. So you have the long-term care kind of covered. If something happens, even immediately, you’ve already put that 100,000 in. But if you pass away, that money that you put in is earning interest, and that goes to your beneficiaries. So, there’s a couple of different options of do you want to have a death benefit, a higher death benefit, or do you just want access to your asset? The annuity option is down the road. What if you’ve been holding it for 10 years, and you say, “Never mind. Don’t want it. Don’t need it. take your cash value back plus interest and that’s certainly an option. So there’s uh again something is going to someone a hybrid life insurance uh it’s a uh it’s a linked benefit again either long-term care or life insurance. Uh it’s got the you know might be a a life insurance first and with a long-term care rider uh chronic illness or critical illness acceleration rider. Um, it might have if someone says if a doctor says you’re not going to live more than 12 months, it might have an accelerated death benefit, meaning the full death benefit pays out even while you’re still living if you have a um if you again a doctor says you’re not going to live more than 12 months. Possible pros and cons of a hybrid. Positives are premium is guaranteed and won’t increase. So there are options of getting just doing this as a monthly or annual premium or if you have enough assets that you can just fund it one time with a lump sum that is certainly an option. Uh flexible uh premium payment options may be easier to qualify for than your regular traditional long-term care policy. Uh might allow you to pay a family member. Uh and I’m going to talk about two ways of how to get payments out of here in just one moment. uh permanent life insurance uh life policy builds cash value. The negatives provides less coverage for long-term care. Now you have two insuranceances that you’re purchasing. You’re purchasing a death benefit and long-term care coverage. So instead of just buying a long-term care policy with a higher long-term care benefit, now that long-term care benefit might be a little bit lower because we increased the death benefit. So you’re because you’re paying for two insuranceances now. uh limited availability and uh to be customized for individual needs. May not include inflation protection. Some of them do. Uh not eligible for state state Medicaid if you own this with cash value in there. Payouts reduce cash value or death benefit of life insurance policy. So, when I talk about how to get payments out of a policy, there’s typically two ways that insurance companies will pay you if you are in claim. One is called indemnity and the other is either receiptbased or reimbursement. So, a receipt-based or reimbursement is that you if you qualify for long-term care and maybe you have someone coming to the home, let’s say a company like Visiting Angels or something like that is coming to your home. Uh, sometimes those are nurses that are coming and they’re helping and assisting around the house and that’s a reputable company. they they charge you, let’s say it’s $5,000 a month for whatever time they’re giving you, and you have to pay that $5,000, get the receipt from them, go to the insurance company, and get the 5,000 back from the insurance company if you qualify for that much. So, it is receipt-based and it’s got to be a reputable company uh for for this type of uh process and you get reimbursed for and it might last four years, 6 years. Again, the other type is what we call indemnity payment, which means the insurance company gives you 5,000 a month, use it for whatever you need. If you need to take some of that money and build a ramp for wheelchair access, use some of it. You can use it for whatever. If you want to have a family member now come to your home and help cook, clean, you can pay family members, friends, relatives, neighbors, uh because you’re just getting 5,000 a month, you are covered. Go use it for whatever you need it for and you can pay anyone. So, but if you do have the receipt based or reimbursement, you can’t have family members, you can’t have friends, relatives, neighbors just come and pay them. They have to be a reputable company. uh you know so uh to pay that would give you a receipt deferred long-term care annuity here’s that one that interestbearing account that I mentioned earlier uh generally paid with a single upfront premium to the insurance companies uh payments for the long-term care expenses usually based on a multiple of the cash value that’s what I said before of if you put a 100,000 in it’s worth three times that or 300,000 for long-term care benefit the long-term care portion of the annuity uh premium may qualify for a tax deduction. Uh just a portion of that, speak to your qualified tax advisor about uh more information if you had one of those policies. Annuity value uh not used for long-term care can be passed to the heirs. Again, if you passed away and didn’t use, you know, all of your cash value for a long-term care need, that goes to your beneficiaries. Medicaid counts deferred annuities as assets. If as long if it’s a spendable asset, you cannot own this to go onto Medicaid. So, you would do this instead of Medicaid. Tax-free HSA distributions. If you have a se health savings account, maybe a high deductible health plan that you’re eligible to contribute to an HSA account, you can use HSAs to get to draw out tax-free and you can even sometimes make premium payments to long-term care uh to invest uh longerterm vehicles with growth potential. You can invest that money. Sometimes uh account funds accumulate tax deferred tax-free HSA withdrawals can be used to pay qualified health expenses including out-of- pocket long-term care expenses. So you can even use this for improvements made to your home uh premiums uh paid uh to Medicare like A and B. You can use these uh HSA uh withdrawals uh tax-free to pay for premiums. And uh there’s HSA contribution limits. You can see on the right side there. If you have an HSA plan um with some balances in there, yes, you can use some of that toward your long-term care needs. Begin planning today while you’re healthy enough to take advantage of all the options. Again, if you’re going to be looking and I hope you say yes at the end of this presentation when I put up that survey and we can start to talk about what is important to you, what type of care are you? Do you think you’re self-insured? Can you pay for this yourself? If you’re looking for some type of coverage, what does a long-term care policy look like? What if you wanted to make monthly or annual premiums? If you are blessed with assets that you can put some of those assets in a lump sum premium into some type of policy, I could let you know here’s what you would qualify for for that lumpsum deposit, what you would qualify for future long-term care needs. Um, and so while you have enough time to plan for Medicaid and accumulate funds in a health savings account uh to relieve your family of the burden of making these decisions. So, checklist, explore services and costs in your area, assess your finances, compare options, prepare health care directives, and talk to your family about your plans. Uh, so do it yourself. I would love to have that one-on-one conversation with you. Uh, don’t put this off. What we have on here, this is a list of the products and services that I do offer. One of the biggest uh, things down at the bottom left where it says advanced planning. Uh we do a full comprehensive retirement plan that might include uh tax advantage situations where you can do Roth conversions maybe in the future. Um you know talking about making sure you have beneficiaries on all of your accounts. Do you need to speak to an attorney about trust services or anything like that? Wills, power of attorney, uh all of those different things. This is all complimentary stuff that we do offer. So we do not charge for any of these services. Now, we do certainly investment management. There’s not fees for everything. Some things might have some investment fees, but not everything does. When I was talking about those interest rates earlier, that 5.6 for a 3year, 6% for a 5year, no fees, no costs, no expenses. Please have that conversation with me and we can certainly talk about what’s important to you. I’m going to go through the questions here now. Uh, as I do that, you see on the screen, here’s my information if you want to take a picture of that. Uh, or if you have your phone with your camera handy, you can uh hover over the QR code on the upper right there and you can just hover click on that little yellow thing and my calendar is available for you to look at to set up an appointment. If you want to do that right this second, you can schedule an appointment with me right now or simply respond to the survey that I’m going to put up in just a moment. And as I go through the questions, if you want to click away on the survey, so that is going to be up on your screen, it should be there right now. So see, yep, say yes if you would like to have a one-on-one conversation, and we’ll certainly schedule that. Uh so with that I will get to some of the questions here. Uh let’s go to uh does that include your 401k? I’m assuming your your assets that you own. If you yes your 401ks, traditional IAS, Roth IAS, anything like that is all uh included in assets that you own that you would not qualify for Medicaid. You have to spend pretty much everything down. So, yes, that does include 401k. I’m assuming that’s what you were referring to. If Medicaid makes up 54 54% of payers for long-term care services, why are there so few beds in the nursing homes? Uh, it’s a, you know, because nursing homes are looking to make a profit. They make a lot more by charging you 6,000 8,000 10,000 a month for that. And sometimes they’re mandated that they have to have some type of uh beds available, but uh it’s up to them if they want to. While we have very limited, unfortunately, it’s a profit um scenario and they make more money with that. Now there are other facilities that are strictly maybe for Medicaid or low income but uh it’s unfortunate yet that uh you know if you want a nice facility they might have very limited uh beds available for Medicaid purposes. Uh I’ve heard that if you are in your mid50s it’s already too late uh to get long-term care insurance because it’ll be too expensive. Not necessarily. I’ve done long-term care, you know, even in the 50s where the here’s where ages come into difference and what what would qualify, what would not qualify. Uh probably more people doing it in their 50s. Um some people say if I’m in my 40s, I might be paying premiums for 30 years on this uh before I need it. And sometimes that sweet spot is late 50s, early 60s. Once you start to let’s say some of these hybrid policies that I do typically there’s no um there’s no medical coming out to your home and doing you know height weight blood pressure and draw blood uh those types of things. Many times that is not part of the qualification. It’s a medical questionnaire that you would go through and it is a background check. It’s a HIPPO form that you would sign. Many times it’s what medications you’re on. If you are on like a standard blood pressure or you know something like that, cholesterol and things are controlled with these medications, you would most likely still qualify. Uh so some of those but if you’re on some type of transplant medication because you had a some type of organ transplant, uh that maybe not qualify. Type 1 diabetes might not qualify. um type two might qualify if it is just medication and not subject to um dependent on insulin shots. Uh so there’s many things that would qualify would not qualify. Where some of the ages come in is typically when I do these types of applications if someone is under the age of 70 it goes through that process that I just mentioned medical questionnaire. If you answer no to a lot, you know, to all of these, you would most likely qualify for that long-term care. If you are 70 or over, there might be one le another step uh to the process. Sometimes it’s the insurance company giving you a phone call. They will do a sometimes or 10 to 15 minute phone call. Cognitive uh is what they’re looking for on this specific thing. Sometimes there are questions of uh they might na name 10 things. They might say tree, car, house, you know, 10 things and they’re going to say repeat back what you heard on those 10 things. Now, they’re not looking for all 10 things exactly in the same order that they’re doing. But if you can’t name any of them or if you’re confused about the question or something like that, then they’re going to start to think there might be more of a cognitive thing. So, it’s a pretty much a cognitive phone call. Again, that is age 70 up to age 75. Some policies may not qualify for over age 75. If you are 76 or older, you might not be able to get this at all. Uh so, but it’s certainly something worth for me to check that out for you. So, mid-50s I would say is still a certainly a doable age. Uh let’s see. I have how long do you have to be have to hold your deferred annuity without any penalties though? So the deferred annuity is a it’s a nine I want to say a 9-year I think the year 10 is when you can draw out take the whole thing out without penalty. So this specific one is geared for long-term care. So, it’s much longer term than like my 3-year or 5-year. Um, but if you’re looking for the long-term care annuity, that’s a 9 or a 10year hold for that long-term care one. When I was talking about this, like I have a three-year fixed annuity and a 5-year fixed annuity. That’s not long-term care. I was just sharing some interest rates that I have available. Uh, that’s either a threeyear or a 5year period. If you’re talking about the long-term care annuity, that is a 9-year hold on that year 10 and beyond. If you want to cancel, take your money and run plus interest, 9 years is that hold period. Uh what type of medical appointment is required for a hybrid life insurance? Um many times not, some some do. Uh but if it’s a like our lumpsum one that we do, in fact, one of my companies is Bright House that I use for a hybrid life insurance/l long-term care. This is one of the lumpsum options, not the monthly premium or annual premium option. It’s one of the lumpsum where you’ put 50,000 in 100,000 in depending on what you could afford. Uh those are just a questionnaire and maybe a phone call depending on your age and you could qualify maybe within 24 48 hours is what you could potentially qualify for. Now there are certainly some that uh if it’s like some of the monthly premiums uh if you’re doing more traditional long-term care where the pyramid comes out to your home and does the blood draw and you know certainly blood pressure, height, weight, and things like that. and getting some stats on those types of things. That is certainly possible, but not all of them. Some of them are just the medical questionnaire. Uh if you have a current life insurance policy, can it be converted into a hybrid? Yes, I’ve done those where someone might have a uh cash value policy. In fact, one example 100 thou about a 100,000 in cash value in this um whole I think this was it was a whole life policy and I’m actually doing another one of those that I’m going through right now. uh is that basically you have this death benefit. Maybe it’s a $300,000 death benefit, but there’s a h 100,000 in cash value. You can convert or it’s called a 1035 exchange. That’s the tax code exchange where you take this life insurance cash value transfer to this long-term care/life insurance policy and that 100,000 in cash value is used to fund this long-term this hybrid policy. So yes, that can be done. Uh very popular that we do if you have current life insurance. And that’s one of those I don’t have to front other money. I can actually just use a policy that I already have to convert it more for a long-term care need instead of just a death benefit. Hybrid policies aren’t as dependent on uh qualification. Correct. Let me see. I have your information here. Hybrid policies aren’t as dependent on qualification. Uh so hybrid policies, they’re I’ll say they’re typically easier to get um because it’s not a paramed, it’s just a questionnaire and uh and going through. But yes, uh it’s um I would say it’s not as dependent on qualification. Uh so I would agree with you on that. Hopefully I have your information. If you’re looking for a little bit more, let’s dig into that question a little bit. I would love to have that conversation with you. Uh but let’s see. I think that is all the questions for now. Thank you so much everybody for your time. We’re just right at an hour here. So thank you for your time and attention tonight. If you did say yes, I look forward to speaking with you very soon and we’ll dig into your specific situation. I look forward to speaking with you. Thank you all. Have a great rest of the night.

All right, it is 10:00 a.m. sharp and uh we will go ahead and get started and and let uh while the some of the stragglers uh log in. But uh good morning everyone. My name is Sean Fuesca and I am one of the financial consultants here at Alliant Retirement and Investment Services. And again, thank you so much for joining our discussion today which will be on the topic of social security which is the choice of a lifetime. Now

before we dive in, I just want to share a quick housekeeping item here. So today’s session is for educational purposes only and it includes proprietary material. So to protect both the content and everyone’s privacy, we please ask that attendees please do not record or capture the presentation whether by video or audio screen sharing or AI tools without prior consent. And uh with that being said, we appreciate your understanding and and so glad you’re here. So now our team at Alliant Retirement and Investment Services is really focused on helping you understand the ins and outs of investing, saving for retirement, and so much more. So please take a look at our website aris.allcreditun.com alliancreditun.com to see our list uh our yeah our list of weekly webinars, our podcast which is called Investsavvy, our blog as well as other financial resources. Today’s presentation is focused on how to maximize what is for many the single most important monthly paycheck they’ll ever receive in retirement, their Social Security retirement benefits. I also want you to come away knowing that social security benefits provide a protected level of income that you can never outlive. And before we get into some of the details about what we’re going to talk about today, I just want to say that social security planning can be complicated. So you are not alone if you feel that way.

All right. So when you decide to claim social security can make a huge difference regarding the lifetime income you receive. So in this example, assuming one earns $54,000 a year and their full retirement age is 67. If they start benefits earlier at age 62, you can see that their benefit income will be $1,465

per month. compared to waiting at age 70, which then their income benefit is $2,634 a month. That is a whopping difference of 77% in income per month depending on when you decide to start Social Security. So, in this presentation, I’ll talk about why planning on when to begin social security is just so important and should be part of your overall retirement planning strategy.

So, here’s our agenda for today. I’ll discuss why Social Security is considered the choice of a lifetime. I’ll talk about social security basics as well as guidance built for you in terms of the resources available here to you at Alliant to help you with the social security planning process. So let’s talk about why social security can be the choice of a lifetime.

So you can apply for social security as early as age 62, which many people do with the maximum amount received at age 70. Now, a little background on the age group of 63 and 65, a fair amount of people that fall into that category did not plan on retiring that early, but were forced out due to health reasons, whether it’s their own or a loved one, or they were laid off. Now, these people were planning to wait until full retirement age, but unfortunately could not. So, this is just a cautionary tale when it comes to retirement planning. the whatif scenario. What if I am forced to retire earlier than planned?

So, let’s take a look and dive in at an example of a married couple, Pat and Kelly. Here, we’re going to compare the scenarios if they took their Social Security benefit at the earliest age versus their optimized age. So the earliest age is the uh blue bar uh box there to your left and we’ll compare the optimized age there on the right. So if Pat and Kelly took their benefit at full retirement age or FRA, that’s how I’ll refer to it. Pat and Kelly would have cumulative optimized benefits of 1 million781,000

over their expected lifetime. Now while if they filed for benefits as soon as possible on the left here they would have given them uh social security would have given them a benefit of 1,551,000 over their expected lifetime. So you can see that Pat and Kelly would have lost a cumulative amount close to 230,000 by filing early. And obviously this decision isn’t that black and white and and certainly it’s not a one-sizefits-all model. And while this is important, nobody really knows exactly when they’re going to die. So again, while important, I think there are other factors you’ll want to consider when looking at the timing of your social security. Now these are things like your retirement plan, your cash flow, assets, how your assets are allocated, your health, the health of your spouse and age, taxation and etc. That’s one of the many benefits of working with a financial consultant or an adviser just to help with putting all of these variables together to come up with an appropriate plan.

Now, here’s a different scenario. Let’s meet Mary, someone who is not married and approaching retirement. And again, this is just an example of the range of what your total benefit amount received from Social Security can be. If Mary files early at 62, her cumulative benefit over her lifetime will be 353,452.

Now, if she waits until her full retirement age of 67, she’ll receive 432,600.

And if Mary waits at her optimal age of 70, she’ll receive 478,728.

So you can see that by Mary taking her benefit at 62 versus 67, she is losing a cumulative benefit of just over 79,000. And by taking her benefit at 62 versus age 70, she’s losing a cumulative benefit of just over 125,000. Now, when we use the word lost, quote unquote lost in these examples regarding total dollars received, that’s what they’re referring to, the total dollars received. But you do gain the use of these dollars if you decide to claim earlier to either reinvest in something potentially lucrative or you can spend it making memories with your loved ones while your health permits. Everyone’s different. So for example, my mother who retired, you know, 10 years ago, for example, decided to take her benefit early at age 62 because that’s when she retired from nursing after almost 50 years. And she had the mindset that she wanted to enjoy these benefits as soon as she could, as soon as she retired, and wanted it as soon as possible. So again, it’s it’s going to be very subjective based on your your situation.

And I do not want to minimize the importance of having a social security withdrawal plan. As you can see, for most people, social security makes up the lion’s share of their retirement income when compared to other retirement income like you can see here, such as pensions, retirement account income coming from your portfolio, or or maybe rental income. That’s why it’s so important to have a withdrawal plan before you retire, which we’ll talk about later in this presentation.

All right. So, let’s talk about some of the basics with a little history lesson here as well.

So, what does social security actually offer? It offers guaranteed lifetime income. So, you will not run out of income. This income is also indexed for inflation. So many of you have probably heard of the word COLA, the cost of living adjustment which is associated with this. Social Security also offers survivor benefits if you or a spouse passes away. And it also offers preferential tax treatment in which some or none of your social security uh income is taxed depending on your total income. Now, these federal tax tears, which is not on this board, uh I’m just going to let you know that you can take note of. If you’re single and head of a household, if you make under $25,000, 0% of your social security is taxable. If you make between 25 to $34,000, up to 50% of your social security is taxable. If you make over 34,000, up to 85% is taxable. And for married couples filing jointly, under 32,000 as a joint household, 0% of your social security uh tax. If you both make 32 to 44,000, up to 50% is taxable. And for those of you who are married and making over 44,000, that’s when up to 85% is taxable. And again, it’s not up here on the on the presentation, but just wanted to give you a feel for the the preferential tax treatment associated with social security. I like this slide. Now, Social Security wasn’t always around. It’s actually less than 100 years old. And if you remember learning at some point about the crash of 1929 and the great depression, that event created the law which is called the socially uh social security act of 1935 which created social security. That was 11 years later on January 31st, 1940. And this lovely woman you see here, this is Ida May Fuller. She was the first recipient of social security, believe it or not. And you can’t see the amount on the check there that she’s holding, but it was $22.54. First social security check ever. $22.54. So, just a little social security uh security trivia that you probably never heard knew about, but now you know.

So what determines someone’s primary insurance amount or what’s called PIA? It is their highest 35 years up to a maximum amount each year which in 2026 that amount was $184,500 in in income. So again it is your highest 35 years of earnings up to a maximum each year. So for many if not most of you you probably know that FICA tax on your payub FICA that FICA tax comprises a total of 15.3% that comes out of your paycheck. Of that 15.3% 7.65 of that is paid by you and 7.65 65 of that is paid by your employer, which is that 15.3% total. Now, well, of that 7.65 paid by you, 6.2% of that is for Social Security.

And for those of you who haven’t done so, I encourage you to sign up with Social Security directly so you can see your benefits as reported over your working life. It will show how much income you’ve earned in your working years as well as your projected benefit amounts. So again, I’m sure a lot of you have done this, but for those of you who haven’t done so, I strongly recommend you do it. It’s secure, it’s free, and you can sign up at ssa.gov/myacount.

So, this report which or the statement is something they used to send out regular uh regularly by mail uh in the past. Now, you’re going to have to look online if you are age 60 or younger to see this statement. For those of you who are over 60, you would receive them annually right around your birthday. So again, a very good statement to give you an idea of of what to expect so it can help you in the planning process down the line or if it’s coming up in the next few years. Now, here’s a look at the age chart for full retirement age or what I’ve been referring to as FRA. This uh this is the amount that you would receive without a penalty and you are allowed to work without a potential reduction in benefits for those that retire early. And like I said earlier, for most of you uh on this webinar at least, your FRA is probably age 67.

All right. So this slide highlights one of the most important concepts in my opinion in social security planning. It’s the age at which benefits are claimed that can have a significant impact on your monthly benefit amounts received. And in this example, the chart illustrates how benefit levels change depending on the age your benefits begin. So the percentages shown represent the portion of a worker’s primary insurance amount insurance amount or PIA that may be received at different claiming ages. The PIA is the benefit amount a worker is generally eligible to receive at full retirement age. Now, under current Social Security rules, claiming benefits before full retirement age generally results in a permanently reduced monthly benefit. I’m going to repeat that. If you claim benefits before your full retirement age, it generally results in a permanently reduced monthly benefit. Now, conversely, if you delay those benefits beyond full retirement age, this may result in delayed retirement credits, which can increase the monthly benefit up to age 70. Now, as shown here in the example, a person with a full retirement age benefit of $2,000 per month could receive approximately $1,400 per month by claiming at age 62 compared to approximately $2,480 per month by claiming at age 70. So, this example just demonstrates how claiming later may increase the monthly benefit amount. And this equates to essentially an 8% raise pay increase each year that you delay claiming social security at your full retirement age up to age 70. Now, however, it’s important to recognize that a higher monthly benefit does not automatically mean that delaying benefits is the right choice for everyone. The decision should take into account things like your individual circumstances, including your health, your life expectancy, employment status, cash flow needs, marital uh marital considerations, and other retirement income sources. Social Security claiming isn’t solely about maximizing a monthly payment, although that’s what it seems like. Rather, it involves evaluating the tradeoffs and determining how Social Security fits within an individual’s broader retirement income strategy. And again, we’ll we’ll talk about this later, and I’ll show you how this uh can be affected. The purpose of this illustration is just to help demonstrate how filing age may affect benefit amounts and to encourage thoughtful consideration of the available options before making your claiming decision.

Now, let’s take a look at filing rules for these following different scenarios. We’ll look at surviving spouses. We’ll look at spouses and diverse sp uh divorced spouses.

So, a spouse may be eligible for benefits based on the earnings record of a current spouse. So, in general, eligibility for spousal benefits begins at age 62, although claiming before full retirement age may result in a reduced monthly benefit. So to qualify, a couple generally must have been married for at least one year and the worker whose record is being used must have filed for their own social security retirement benefit before their spousal benefits can be paid. Again, to qualify, a couple must be married for at least one year, and the worker whose records being used must have filed for their own social security uh retirement benefit before spousal benefits can be paid. Now, for eligible spouses, the maximum spousal benefit is generally up to 50% 50% of the worker’s primary insurance amount or that PIA. The PIA is the benefit the worker would receive at full retirement age. And it’s important to note also that the 50% calculation is based on the worker’s PIA, not on any increased benefit that may result from delayed retirement credits.

Now, a surviving spouse may be eligible for survivor benefits if the marriage lasted at least 9 months before the worker’s death. Although, there are exceptions to this rule in certain situations. Eligibility requirements can vary, so it’s it’s important to review individual circumstances carefully. Now, one important distinction is that survivor benefits have different rules than spousal benefits. A surviving spouse may be eligible to begin receiving survivor benefits as early as age 60. However, claiming before full retirement age generally results in a permanently reduced monthly survivor benefit. Now, if a surviving spouse who remaries after age 60 may still remain eligible for survivor benefits based on a deceased spouse’s earnings record. And again, different rules may apply if remarage occurs before age 60. But in terms of benefit amounts, an eligible surviving spouse may receive a benefit based on the deceased spouse’s earning earnings record. A lot of people didn’t know that this amount can reflect delayed retirement credits that the deceased worker earned by delaying those benefits beyond full retirement age. And another important planning consideration is that survivor benefits and an individual’s own retirement benefit can be evaluated separately. So depending on eligibility and benefit amounts, some individuals may have options regarding the timing of claiming these benefits. and the Social Security Administration are the ones who can definitely help determine which benefits are available and the amount payable under those current rules. That’s uh again, you can just see how complicated this can get. So that’s why Social Security is such a great resource for you to contact directly to start uh planning in advance your specific situation. And again, as always, Social Security claiming decisions should be evaluated based on each person’s unique circumstances, including things like your age, your marital history, and health considerations, um, and as well as overall retirement income needs.

And lastly, let’s talk about Social Security benefits that may be available to divorced spouses. I get a lot of questions on on the divorced spouse uh benefits. Now, under Social Security rules, an individual may be eligible to receive benefits based on a former spouse’s earnings record if certain requirements are met. Now, generally, the marriage must have lasted at least 10 years. That’s the number, 10 years. and the divorced individual must currently be unmarried at the time they apply for divorced spouse benefits. If the divorce has been final for at least 2 years, a former spouse may be able to claim benefits even if the expouse has not yet filed for social security provided both individuals otherwise meet eligibility requirements established by the SSA. Now, it’s also important to understand that claiming benefits on a former spouse’s record does not reduce or affect the benefit that the former spouse receives. So, in addition, benefits paid to a divorced spouse generally do not count toward the family maximum that can apply to benefits paid on a worker’s record. And depending on circumstances, an eligible divorce uh divorced spouse may qualify for spousal benefits while the former spouse is living and may also be eligible for survivor benefits if the former spouse passes away. So eligibility and benefit amounts can vary again based on individual situations, your age, filing status, and other factors.

So, how does continued work impact social security benefits? If you want to keep working and if you are under full retirement age for the full year, $1 will be withheld for every $2 above the annual limit. In this case, $24,480 is what you can earn. If you are working in the year of full retirement age up to your FRA month, $1 will will uh will be withheld for every $3 above the annual limit. In this case, the most you can make is $65,160.

And if you are still working at your full retirement uh full retirement age and beyond, no limits. no limits on earnings and no uh nothing is withheld in terms of earnings and then earnings are returned. So just a reminder if you decide to keep working after beginning social security and if you’re subject to a reduc uh reduction of benefits SSA will recalculate the loss due to the reduction as a makeup at your full retirement age. So your loss is not permanent. Keep that in mind. Okay, now let’s look at an example of how a social security claiming strategy may be presented with a personalized analysis. And this example moving forward is very uh practical to what I do here and what we do here at Alliant as financial consultants and and financial planners. This is the type of analysis that we do uh for our members and and it’s very powerful. So in this illustration, the report estimates an expected life uh lifetime family benefit based on a specific set of assumptions and claiming decisions. Again, we’ll refer back to Pat and Kelly. This example shows one individual delaying benefits until age 70, which is Pat, and then Kelly waits until a uh claiming uh this uh benefit at age 66. Based on the assumptions used in this analysis, the software projects a specific lifetime benefit amount. And it’s important to understand what this figure represents. So the projected lifetime benefit is not a guaranteed outcome. Rather, it’s an estimate generated by our software using information provided by the participants from you, actuarial assumptions and current social security rules in effect at the time that these uh types of analysis are prepared. And the purpose of this type of illustration is to demonstrate how different filing ages can affect projected household benefits over time. Delaying benefits may increase monthly payments for some people, while other factors such as income needs or health considerations, employment plans, and family circumstances may influence a different decision. So, when reviewing these type of reports, it’s important to focus less on a a specific dollar amount and more on understanding the tradeoffs associated with each claiming strategy that we we were talking about. Now, this analysis provides a framework for evaluating available options and considering how social security fits into an overall retirement income plan. Because like I said, every individual’s situation is unique and a strategy that appears appropriate for one household may not be appropriate for another. So the goal is to help individuals better understand their choices and make informed decisions based on their own circumstances. So again, this example is intended to illustrate the planning process and to demonstrate how the analytical tools we use can be used to compare potential outcomes under different assumptions. Okay. So beyond evaluating claiming strategies, another important aspect of retirement planning is understanding how social security fits into this overall income needs picture. Right? So this report includes an income gap analysis that compares projected social security benefits with estimated retirement income goals. So this chart here illustrates the relationship between projected income sources and the desired spending levels throughout retirement that a retire retiree might want. And the purpose of this analysis is to help identify periods where maybe expected income may be lower than expected expenses or desired lifestyle needs. But recognizing these potential gaps can provide just an opportunity to explore various planning considerations and evaluate those available resources. So, it’s important to remember that social security is typically only one component of that overall retirement income strategy. And like I mentioned before, those other income sources may include employer sponsored retirement plans, IRA, taxable investment accounts or pensions, uh p personal savings, part-time employment. So, there’s a lot of things that can come into play. The analysis can also highlight how income needs may change over time. For example, retirement spending patterns often evolved due to factors such as health care expenses, inflation, your lifestyle changes, or the loss of a spouse. So, reviewing these changes can help individuals better understand future cash flow considerations. As with all financial projections, the figures shown are estimates based on assumptions and information provided at the time this report is prepared. So again, actual income needs, expenses, investment results, social security benefits, and future economic conditions may differ from projections. And the goal of this analysis is not to predict again future incomes, but rather to provide a framework for evaluating potential retirement income sources and identifying areas that may warrant additional planning or discussion.

So, as we wrap up, it’s important to remember that social security claiming is often one of the most significant financial decisions individuals make during retirement. Hence our topic title the choice of a lifetime. The decision is not simply about choosing a filing age. It also involves understanding the various benefit categories that may be available including retirement benefits, spousal benefits, divorce spouse benefits, and survivor benefits. So each option has its own eligibility requirements and potential implications. And because social security benefits can represent a substantial source of retirement income, taking the time to understand available choices may help you make more informed decisions. However, there is not a one-sizefits-all solution. And so, the most appropriate approach depends on again your specific circumstances.

So throughout this presentation, we’ve discussed tools and resources that can help individuals evaluate different scenarios and understand how claiming decisions may affect retirement income over time. And these resources are intended to support the planning process and provide educational insights into those available options. So the key takeaway here is that social security should be considered as part of a comprehensive retirement income strategy rather than a standalone decision. So by understanding the rules from a high level and exploring available options, you can make decisions that align with your unique situation and retirement objective. Okay. So again, my role here and our role at Alliant is to help educate and provide resources so that you can better understand your options. And now before a personalized social security analysis can be prepared, it’s important to gather this accurate information. You know, you probably are asking, well, how do we, you know, do this calculation for ourselves? Because it’s all about your individual current situation. And that’s where what’s our factf finder comes in. So our factfinder document serves as a data collection tool that helps capture key information needed to prepare a accurate and personalized social security assessment. So this information may include things like you see here uh you know 401ks your IAS uh we need to get your social security benefit estimated amounts. uh we look at your retirement goals, your employment information and other details that can affect these claiming strategies and your personal income planning. So the more accurate and complete the information provided, the more meaningful this result analysis may be. And because social security claiming decisions can be influenced by factors obviously like age and earnings history, marital history, retirement timing. Having this complete information helps ensure that the analysis that we do reflects your circumstance as accurately as possible. And just to be clear, the factfinder is not an application for social security benefits and does not constitute a recommendation of, you know, any kind. Instead, it serves as an information gathering resource used to create an educational analysis of available options under current social security rules. Okay. So once the information is collected, the analysis can be used as the basis for a conversation about retirement income planning, social security claiming considerations, and how social security may fit alongside other retirement resources because I I get this question all the time from clients over the last 20 years is when do I know when to start social security? And I wish I had just a simple answer for that. But in this presentation, it is a culmination of different things that affect your retirement that will help in deciding when you should claim you and which strategies to implement. Okay. So the objective for this process is really again to help you understand your options and provide a framework for making informed retirement planning decisions.

And again, as we wrap up, I’d like to share this last part of our retirement analysis that in my opinion is a powerful slide. This is taken from our actual financial plan. And another benefit of a comprehensive social security analysis is the ability to look beyond benefit amounts and evaluate how those benefits may contribute to your retirement cash flow needs over time. So you can see that here. Not only does this analysis take into account social security, this is going to show you how your income is going to change over time with other sources of income with uh income taxes and expenses. Uh, so I would love to help you get started with creating this retirement planning strategy that can help not only determine what’s the best time again to begin social security, but to discuss how that’s going to affect your overall retirement situation moving forward. So, in a minute, I’m just going to ask all of you to answer a quick poll after this presentation because that really helps me with my efforts to educate our clients and members on financial planning topics. Social Security being just one of many. And when you complete the poll, there is a section that will ask if you would like a follow-up meeting with me personally. This is strictly complimentary. There’s no obligation. It’s a service that we offer where during our meeting, we can talk about your specific retirement and savings needs and how Social Security fits into this next chapter of your life. And during that meeting, we identify where you and your family stand in regard to preparing for that retirement. We review your timeline. We identify key retirement planning issues uh that you need to anticipate. And that comes along with deciding when to start social security income. And so coming out of that meeting, we can act as your resource moving forward and help you at least look in the right direction when it comes to social security. Now, naturally, we can help you with the key financial planning and investment advice as it relates to your situation, too. But at the end of the day, we just want you to be prepared, bottom line, and organized for this aspect of your life so that you and your family can have peace of mind knowing that you’ve got a plan. So, again, if you can please help and answer the poll, I would greatly appreciate it. And with that being said, that concludes my presentation and would love to open up for Q&A. So, let’s get started on these wonderful questions. And again, my information is up there. If there are questions that I cannot answer, uh I will be more than happy to look into that uh for you as well offline. Um, but I’m going to start with the questions. Number one, let’s see what we got here.

How far in advance can I apply for Social Security retirement benefits? Great question. You can apply up to 4 months before the date you want benefits to start, but you must be at least age 61 and 9 months to apply. So, great question.

If I choose to semi-retire after age 67, which is my FRA, and keep working on a part-time basis, how will this affect my social security income? Again, uh I’ll refer to my presentation. If you retire after age 67, no uh there will be no penalties for you to do that, no withholdings. it is if you start to work at before your prior uh your FRA, that’s when benefits are reduced. But if you continue to work at your full retirement age, you’re going to be good to go. And uh there are no earnings limits. It will not reduce or stop your social security benefits regardless of how much you earn. All right. What counts as earnings for social security calculation? Great question. Only active work income, earned income. So, uh that’s income from wages, uh employment. So, salaries, bonuses, commission, if you’re in service industry, if you have tips, uh and your self-employment income. So, anything like that will count towards social security. uh earnings for their calculation. So, great question.

All right, I like this one. Is there a maximum amount that Social Security pays no matter what individuals have made? For instance, if a millionaire applies, is there a maximum amount they can receive no matter what they have contributed? That’s another great question. And the amount is yes. Uh, if you earn, hold on a second, I just lost my screen here. The maximum amount at age 62 is $2,969. No matter how much you make at full retirement age, the maximum amount of benefit is $4,152. And if you wait until age 70, that maximum amount of social security that can be claimed is 5,181. So yes, uh Michael, there is a limit to how much uh you’re going to receive no matter how much income you’ve worked uh in that 35 year earnings history. All right. Here

question. After a full retirement age, does social security website benefit amount only twice a year before FRA every month? Sorry, don’t understand that question. My benefit amount has stayed the same for 6 months or so. I am past FRA. So, if I’m understanding you correctly, once you start your benefit, uh that should only increase if there is a cost of living adjustment for that year. So, there have been years where Social Security has made a uh what is this? A 7% raise for COLA, remember? Uh during COVID, but now, you know, it’s usually about a 3.2% cola increase. Uh but besides that that is the only amount that is going to affect your uh your income benefits there uh pandering. So hopefully that answers your question. Annette I will be 70 at the end of the month and purposely waited to receive the maximum amount. Kudos to you Annette. How long will it take for a benefit to be received? I am still working part-time. So, if you apply for a social security benefit, uh I want to say that amount or that time frame depends. Okay, I wish I had a uh an answer a, you know, hard clear answer for you, but usually it takes about 2 to 4 weeks. So, it it it’s not going to be crazy long that you have to wait, but your first check will typically arrive within 2 to four weeks after your application process. Alrighty.

So I have a question here. I will be 70 at the Oh, that was the same question. So let’s see here.

It looks like those are all of the questions on the Q&A. Oh, here’s one right Matt. Do the payment projections that you provided in the previous examples use any COLA adjustment adjustments? Yes. So all the um uh previous I guess uh incomes it won’t doesn’t really have a you know the specific cola adjustments but it does have the typical average COLA met of 3.2%. Um, so that’s what it uses and we can adjust that with our uh software. We can adjust cost of living adjustments for you if you’d like. So I have that’s a great point that you bring up. When I do these retirement um analysis, we can go ahead and change cola to be 4%. We can do it to be, you know, 2.8, 3.2, whatever that is. But yes, we can adjust the percentage of cola uh based on what your feelings are about uh how that’s going to change in the future. So um the examples in the that I provided are definitely uh you know cola is adjusted and we usually start that at 3.2 to 3 and a half%.

All right, here.

Let’s see here. All right. I know social security can be a a very uh hairy beast, I like to call it. I mean, there’s so many different scenarios uh within social security and I am by far, you know, not an expert at all when it comes to all of this, but what I’ve learned in in the 20 years of of financial planning is that, you know, social security, um, and I I I always alluded to this in the presentation, it’s not a one-sizefits-all model. So, you know, there are so many components that we have to assess before we can give you guidance on when to take, you know, social security. Um, I’m sure when, you know, I’ve heard from clients who are retired when when they were, you know, first claiming trying to uh apply for social security, when you actually go to the Social Security office, you know, they’re more cut and dry. I’ve I’ve heard that, you know, you tell them, you know, when you want to take it and that’s what they help you with in terms of the application. But when it comes to taking into account your comprehensive picture in retirement, that’s not something they do. And again, I think that’s the value of what we bring here at Alliant is we can take a look at that for you um in that analysis that I recommended. And again, it is it is complimentary. We don’t charge to do that initially. Uh so you know take advantage of that because it again it will give you a good uh blueprint uh to for what to expect if you’re looking to retire you know in in the coming years

and sorry here Doug let me check Q&A here which let’s say my wife is receiving her own earned benefit of 2,000 per month and I’m receiving my own earned benefit of $2,500. 00 per month. When I die, she will begin to receive the higher of the two benefits, but not both. Doug, that’s correct. So, she is going to either take the higher of her own benefit or 50% of what yours is. Whichever is higher, but not both. That’s a great question. Um, and sorry, the the qu the Q&A uh chat got hidden from me on here. So, uh that’s a great question, Doug. Uh Jay, didn’t start my benefit yet. I was looking at benefit estimates the last six months. It has stayed the same. Now, that can be uh uh because of a few things. Number one, remember they’re going to take the 35 highest years of your employment. So, if your work record in for the past 35 years has stayed the same, you’re not going to see much change, you know, especially in the last six months. So, you know, I’m not sure if that’s the case, but uh again, your social security benefits will change due to uh your uh highest, you know, month years of of earnings. Joseph, if you are divorced and former spouse died after divorce, what benefit should surviving spouses apply for? Joseph, great question. When you go to the social security office, if again if unfortunately your former spouse dies and uh you know after divorce, they are going to let you know exactly uh what type of benefits to apply for. But the the fact is you have benefits to apply for. Uh so again, I would suggest going to the Social Security office or contacting Social Security to apply for those divorced uh or survivor benefits because you are eligible for that. And I’ve had numerous clients over the years who are unaware that you can file for those benefits if you are divorced. So

all right, looks like those are the only questions and if there are other questions folks that come up that I again you thought of and I you know or I didn’t wasn’t able to answer please let me know and you feel free to contact me anytime. that’s what I’m here for um in in assessing social security uh you know options and not only that but again any general retirement questions that you have you know my we specialize here in in at retirement and investment services is the whole comprehensive financial planning aspect of of everything encompassing retirement whether that’s your 401k IRA investments whatever that is that’s what I’ve been doing here at Alliant for the past 17 years uh I’ve been in the business since for 20 years at at JP Morgan prior to this. So, this is all I know as as boring as it can sound. Uh, you know, I’m here as a resource for you. And again, I appreciate all of your time today. Uh, hope you have a great weekend coming up here. I just got back from Mexico with my family last night and uh I don’t know where all of you are at, but here in Chicagoland, we are in a dense, hazy advisory uh from smoke from Canada, so I have to deal with that. But hopefully you all are not having to deal with that. But again, uh look forward to seeing you all again. And uh again, reach out to me if you have any other questions. I appreciate you all. Thank you so much.

Okay, we’re going to go ahead and get started. My name is Kim Kennedy and with me today is Malcolm Horn and Malcolm’s going to be walking you through the Roth IRA conversion webinar today. Uh, but before we jump into that, just want to answer a couple questions. We get asked all the time if we actually work for the credit union, and we do. We work for Alliant Credit Union. We happen to be in the retirement and investment services division of Alliant. Malcolm and I are based in Denver. We have an office in the tech center and also over in Lakewood. We are happy to do virtual appointments if you’re joining from another state or if you are in Colorado and would prefer that would be fine as well. I’m seeing a lot of comments about a echo. I’ve seen a couple people that have joined twice. I don’t know if that’s the problem. I’m going to turn my mic down. Um, we will take all your questions at the end of the webinar today. So, please enter them in the Q&A or the chat box. You will get a follow-up communication from Malcolm or I just making sure your questions got answered and seeing if you need some help with your retirement planning efforts. We have a few webinars coming up to round out this month. The first one is

there we go. Thursday, July 23rd. We’re going to be talking about IRA planning, just all the different IRA types and how you utilize those in retirement. And then the next one, the following week on

there we go, Tuesday, July 28th, tax planning. just how your taxes change in retirement and we’ll go through all of that. And then lastly, we do have some resources available. Our website just has a ton of things on our events page. You can see the webinars not only that Malcolm and I are hosting, but what our colleagues are also hosting across the country. You are free to attend any of those that you’re interested in. We produce a in-house podcast and we store all those historical podcasts on our podcast page. So, if there’s a specific topic you’re wanting to get smart on, check that. It might be there. And then lastly, both our website and our blog just have a ton of financial information. So, again, if you’re trying to get smart on a specific topic, uh, go ahead and look there. And with that, I’m going to turn you over to Malcolm and he’s going to walk you through the webinar today. Thanks for joining. Thank you everyone. Um before we do get started, if you do hear a echo, you might be signed in twice. Um so just double check that. I don’t hear echo on my side, so I’m not sure exactly what’s going on. But anyways, let’s talk about today’s topic is we’re going to talk about Roth conversions. But before we jump into kind of Roth conversions, you might be asking, well, why are we talk why why are you doing webinars on Roth conversions? Well, one, we think Roth conversions can be a very important kind of strategy when it comes to a person’s financial situation, especially with kind of the environment that we’re in. And because if you think about this, let’s first talk about make sure we’re okay. Let’s first talk about the national debt. I pulled this number up last night. Currently, the US has $39 trillion. Think about that. $39 trillion in in debt. Well, just like anybody’s debt, how do we pay off debt? We either make more money to pay off our debt or we budget properly and save money and pay off our debt. So, if you think about the US national debt, if they’re going to increase their um if they’re going to try to pay down this debt, they’re going to increase their revenues, which is increasing taxes. But if you look over the last 5 years, they’ve been running a deficit. and a deficit. The simple way to think about this is if you make $50,000 but you spend $70,000, you’re in a $20,000 deficit. And you look at the US government and right now they’re in a 1.5 rough estimate deficit each year. So we are spending more than they’re collecting. And it’s projected that come 2031 that the revenues that they have coming in is just going to cover the um come 2031 the revenues are just going to cover the social security, Medicare, Medicaid and debt interest payments. Um snooze sorry I got a noticing my computer was going to be reset. Um sorry about that. So think about this. Come 2031, if all the revenue is coming in and just covering social security, Medicare, Medicaid, and debt interest payments, they have no other money to cover defense spending, infrastructure, or those other items that we rely on. Now, last year, there was this thought that in 2026 taxes were going to go up, but that did not occur. They came in and signed the one big beautiful bill act and they came in made some permanent changes. They came they kept the current tax hurts the same. They increased standard deduction. They eliminated some of the personal exemptions. They gave us a higher mortgage interest deduction. Um they also expanded some of the qualified business income deductions. And then they also put in some temporary changes. temporary changes for the senior bonus deduction, the salt deduction, car loan interest deduction, and you can see in this list. Now, when it comes to permanent changes, that just means there’s no expiration date on this. The temporary changes mean yes, there is an expiration date on that. So, just know the difference between these two. Now, come 2028 or 2032 or sometime down the road, they could change these permanent changes, but it has to be an act of Congress. So, again, as I mentioned, we thought taxes were going to go up, but they ended up staying the same for 26 and going forward. But if you look also at the top federal income tax rate yearbyear, you can see that you know back in the 70s the top marginal tax rate was 78%. Today is 37%. So you couldn’t make the argument that we are still in a low in low tax environment. And will that tax environment will they start taxing us more? Who knows? No one necessarily knows what’s going to happen down the road. But when you think about Roth conversions and thinking about we’re in a low tax environment, it might make sense to think think about this strategy. There’s a guy uh Ed Slot. He’s been talking about talking about taxes are going up, taxes are going up. He’s been talking about taxes going up for the last probably 15 20 years. And he’s been talking about doing Roth conversions all these years. And you can say, well, taxes have not gone up. His argument on the flip side of that is, well, look what the market has done over the last 20 years. So, another benefit of the Roth Roth IAS is the tax-free growth within that vehicle. So, think about it. 20 years ago, if you had that money invested in the market, 20 years ago, back in 2006, the S&P 500 was probably around a thousand. currently is trading almost at 70 a little bit over 7500. So that growth that you saw the last 20 years has been all now tax-free to you. So

let’s dig into Roth conversions and it’s you might hear about hey asset allocation have a little bit of money in each category of the market. Well, let’s talk about tax diversification, too. And think about these three different buckets. You have tax now, tax later, tax never. The things that are in the tax now bucket are if you’re invested in stocks, um, and you’re receiving a dividend or you sold a stock at a capital gain, you’re going to be paying taxes on that today. CDs, the interest you receive, you pay taxes on that when you receive that interest. tax later items are IRA, 401ks, or even non-deferred uh annuities. Basically, you’re saying, “Hey, I want the benefit today. I don’t want to pay taxes on it today, but at some point down the road, I’m going to have to pay taxes on it.” The tax never bucket is Roth IAS, MUN bonds, and HSAs, health savings accounts. These are buckets of money that will never be taxed. So again, when we’re talking about diversifying our investments, let’s diversifying our our money with these different buckets. So again, we’re here to talk about Roth IRA conversions, and that’s what we’re going to do today’s agenda. We’re going to talk about the basics of it. We’re going to talk about the original owner, IRA owner, the benefit of that benefit to that person, the benefit to a surviving spouse, and benefit to the beneficiaries when it comes to Roth conversions. So, let’s talk about the basics and then we’ll kind of progress over time. The basics, Roth IRA, what is it? The money you put in is not deductible. So you’re putting after tax money into it. The money grows tax deferred and as long as you’ve had that account for 5 years and you’re over $59 and a half, all earnings and interest come out taxfree. Now the contribution limit for this year is $8,600. If you’re over 50, if you’re under 50, it’s $7,500. There is no age limit. There used to be an age limit, but now that is no longer the case. Now, you have to have earned income to be able to contribute to a Roth IRA. So, if you’re 80 years old and you’re still working, still have earned income, you can contribute to a Roth IRA. Now, there are income limits, meaning that if you make a certain amount of income, you are not able to contribute to that. So, as a single filer, if your income is over $168,000 modified adjusted gross income and or and if you’re a married couple and or a married couple and your income is over $252,000, you are not able to contribute to a Roth IRA. But if you’re below the 153 and below the two $242,000, you are able to contribute to a Roth. Now, one thing that people do forget about is a spousal contribution. Spousal Roth IRA contribution. And that’s where, let’s say you’re a married couple. One spouse is already retired. The other spouse is still working. You come in and say, “Well, I can’t contribute to a Roth IRA because I don’t have any earned income.” But you are married to someone that has earned income. And if that’s the case, then you can still contribute to that Roth IRA. Now, you have you still have to meet the the income limitations, but if you’re below those income limitations, then you are able to contribute to a Roth IRA. Now, I’m not going to get into a a very much detail of this, but another way to put money into a Roth IRA if you are over those certain income limits is something called a backdoor Roth IRA. They at one point talked about closing this door, closing this loophole. They’ve never closed it. And what a backdoor Roth IRA is, if let’s say you you’re over those li income limits and you can’t traditionally put money into a Roth IRA, there’s something called the back door where you put money into a a traditional IRA. You don’t deduct it and then you turn around and convert it to a Roth IRA. Well, the money you put into the traditional IRA, you didn’t deduct. So when you convert that amount, you pay no taxes on it. But now all of a sudden, the contribution that you put into that traditional IRA and converted over to the Roth IRA is now sitting in the Roth IRA. Now the one thing to be watch out for, there’s this kind of gray area. It’s called a proa rule. If you do a backward or Roth IRA and you have other IAS, there’s this calculation the IRS requires you to do to determine you might still have to pay a little bit of taxes on that amount. But if you have if you’re a person that all of your money’s in the 401ks and you have no other IAS, a backdoor Roth IRA is very uh very efficient, very efficient. Okay. So, again, Roth conversions, it’s when you have money in a traditional IRA that usually is all pre-tax. You’ve kind of deducted that money and all that money is pre-tax. You move it over to a Roth IRA and the amount of money that you move over, you pay taxes on. So, the example Jill converts $100,000 in IRA to a Roth IRA. that $100,000 that she moved from her traditional IRA to the Roth IRA is now added to her taxable income. Depending on what her other taxable income is determines what her tax liability is on that $100,000.

Um, if a person is under 59 and a half and you do a Roth conversion, that 10% early withdrawal penalty is waved. So, be aware of that. So again, you do a conversion as long as you’ve had that account for 5 years, you’re over 59 and a half, all earnings and interest are going to come out tax-free. Now it’s 5 years and 59 1/2. So even if you’re let’s say you’re 61 61 years old and you decide, hey, I’m going to do a Roth conversion, you still have to wait 5 years for all earnings and interest to come out taxfree. So if you convert at 61, you have to wait till 66 for all earnings and interest to come out taxree. If you convert at age 50, you have to wait till 59 and a half to be able to take that money out all taxfree. So the time frame is a little bit longer. So again, it’s 59 and 5 years. 5 years and 59. Who can do Roth conversions? There’s no age limits. There’s no income limits. And there’s no requirement to work. At the end of the day, when you do a Roth conversion, the government collects taxes on that conversion. Now, they like collecting those taxes. Don’t get me wrong. They like collecting those taxes. And this could be one of the biggest mistakes that they ever make because 30 years down the road, you’re going to have these Roth IAS that are going to be massive. And the government’s not going to be able to tax any of that because they come in and said, “Hey, let’s collect the tax today on doing that Roth conversion. Fine, we’ll let them have that tax-free growth. We’re okay with it.” Now, something that I still bring up that was changed in the Tax Cuts and Jobs Act, um, was that there was a rule that had to do with Roth conversions. Prior to 2018, you used to be able to do you used to be able to do a Roth conversion and then decide later on to say, “Hey, I shouldn’t have done a Roth conversion and I just want to undo it.” And kind of treat it as it never happened. Well, the Tax Cuts and Jobs Act eliminated that your ability to do that. So now going forward whenever you do a Roth conversion it is done you that conversion is done you there is no redoss. So again just be aware that when you do a rough conversion even down the road if you’re like oh man I didn’t I didn’t plan taxes properly or whatever the case is market went down and you want to do it you can’t do it. The other benefit of Roth IAS is there’s no required minimum distributions. Meaning that you decide when you want to take money out. You can allow that money to grow taxree for the rest of your life. This money can also be passed on to your beneficiaries taxfree. So again, you have a lot of flexibility when it comes to Roth IAS and how you use that money versus traditional IAS. You’re required to take the money out at a certain point.

Also, with doing Roth conversions, it helps reduce the risk of raising rising taxes. Again, I don’t know what taxes are going to look like in 5 years, 10 years, 15 years, but if you’re a betting person, chances are taxes are probably going to go up. So, if you know what the current tax code is today and you’re comfortable with paying the taxes, it’s a hedge against rising rates and you’re paying today’s tax rate. But you can also manage yourself ma help manage reduce some of the tax liability on social security and Medicare Part B premiums. Let’s talk about that a little bit. Whenever you take money out of IAS, all of that money is going to be considered taxable. It’s included in your provisional income, which determines how much your social security is going to be subject to tax. It’s also included in your modified adjusted gross income for determining what your Medicare Part B and D premium is. When it comes to Roth IRA income, it’s not taxable. As long as you’ve had it for 5 years, you’re over 59 and a half. It’s not included in provisional income. It’s also not included in your modified adjusted gross income for Medicare pricing. So, if you think about it, if all of your money is in Roth IAS and you start creating income off of your Roth IAS, chances are you’re going to be very paying very little or none, no taxes on your social security benefits. So, again, it’s a huge benefit. Now, again, I’m not telling everybody go out and do Roth conversions. Me and Kim have definitely sat down with people and said it doesn’t make sense. It does not make sense to do Roth conversions. It just doesn’t. So, everybody’s situation is completely different. Now, I’ve talked about not necessarily knowing knowing what taxes are going to look like down the road, but we do have the ability to hypothetically kind of run a plan for your situation to understand what is your current tax create tax rate today and if taxes stayed the same, what does it look like? And this chart shows that this is someone that is going to retire at 70. So they have two more years of where they’re going to work. Their effective tax rate is in the 20s, but once they retire, they’re paying very little taxes. And when RMDs kick in, required minimum distributions kick in, their taxes increase. So, we do have the ability to kind of run this hypothetical about, hey, where are you at today regarding taxes and where could you possibly be down the road in regards to what your tax liability could look like? And again, there’s always these two tax perspectives when it comes to Roth conversions. You know, if you think you’re going to be in the same or higher tax bracket in retirement, you know, maybe Roth conversions make some sense. If you’re thinking you’re going to be in a lower tax rate in retirement, maybe it doesn’t make sense. So, you have to think about every moving piece when it comes to Roth conversions. What are your income taxes? What do you think your Medicare premiums are going to be? There’s something called a net investment income tax. If you’re a single person over $200,000 or if you’re a married couple with income over $250,000, there’s this additional tax called net investment income tax that basically taxes passive income, dividends, interest, rental income. So again, by doing some Roth conversions, maybe it helps you lower some of the tax liability you have down the road and reduces some of the net investment tax that you would be subject to.

Let’s talk a little bit about kind of brackets and how much income before you jump into the next tax bracket. So this is the tax bracket for someone that’s under the age of 65. Married filing jointly under the age of 65 and just uses this standard deduction. The first 32,200 is your standard deduction if you don’t itemize. That’s the amount of income that you can have and not have any tax subject to it. You can have an additional 24,000 almost $25,000 and be within a 10% bracket. So you could have a total of $57,000 and be in a 10% bracket. You can go all the way up to $133,000 and be in a 12%. and then you can go all the way up to 243,600 and still be in a 22% bracket until you go into a higher tax bracket. Now, one of the new changes that we saw a temporary change when it comes to the tax code is they added the senior bonus deduction. So, anybody over the age of 65, it’s a temporary deduction, expires at the end of 28. It says, “Hey, we’re going to give you an additional $6,000 per person for this additional senior bonus deduction.” Now, if you make over a certain amount of money, that that bonus deduction is completely phased out. So, as a single person, it’s 175. If you’re married, it’s over $250,000. So again, if you look at this, if you’re a per uh let’s see here, a single person below that $75,000 or no, this is a married couple. Sorry, married couple and you’re below the $150,000 and you’re over the age of 65. You get the standard deduction 32,200. You get over the age 65, another 3,300. You get the 6,000 times 2, so additional 12,000. So you can have a total of $47,500 of taxable income and not be subject to any taxes on that with this senior deduction. As a single person, it increases to 24,150. So again, going back to that example for married couple over the age of 65, if you’re just using the standard deduction with the senior bonus deduction, you you do not go into a higher tax bracket until you’re over 72,300. 12 148 and then as a 20 in a 22% or 148,300 in the 12%. Anything above that, you’re going into a 22. So why I bring those up is because when we talk about one of the strategies when doing Roth convergences, you can fill up a bucket. So going back to this example and let’s say let’s say hypothetically you’re earn $120,000 of taxable income. You have another $28,000 that you could convert and still be in a 12% bracket. And that’s something called filling up the bracket or filling up the bucket. when you do a conversion up to that top tax bracket. Now, one thing to be aware of, and that’s why in this last example, I didn’t show you a 22, is that as a married couple, when you go into a 22% tax bracket, you will see your PartB premium increase. Part B and D premium increase because of Irma. Irma is always a two-year look back. They’re looking at what your income was 2 years ago. And so if your income as a married couple and they look at modified adjusted gross income was 220 two years ago, your part B is $284. So again, when you’re looking at doing Roth conversions, not only do you look at the tax bracket, but you also need to look at the Irma bracket and understand, hey, if we do a conversion up to this amount, we could be paying higher part B and D premiums for Medicare. So again, it’s just something to be aware of kind of that side effect when doing Roth conversions. You also should look for a hunt for low income years to do bigger Roth conversions. Let’s say you retire at 65 and you’re going to delay social security to 70. Well, you have five years where you might be in a low tax bracket and maybe it makes sense to do Roth conversions in those years and pay lower taxes. Maybe you’re a business owner and you had a slow year. Maybe it’s a good year to do Roth conversions in those years. Um, maybe you have non-recurring medical bills that will help you reduce your taxable income. And this is a really good example like looking at is that right now when it comes to medical expenses, you can deduct over 7 12% of your adjusted gross income when it comes to medical expenses. So, let’s use an example of a mom. You know, let’s use an example. 80-year-old widow in a nursing home. It’s cost her $120,000 a year to to be in kind of a memory care facility. Her adjusted gross income is $60,000. She has 500,000 in IRA. She has $500,000 in a non-qualified account, investment account. So her income is $60,000. She’s able to deduct anything over 7.5% of her adjusted gross income. So her her medical expense deduction is $115,000500. So with that case, she pays no taxes. Now, if you came in and said, “Hey, let’s think about doing a Roth conversion. Let’s do $60,000 Roth conversion.” So her total income is $120,000. She she’s able to do a medical expense deduction and also take advantage of the enhanced standard deduction deduction. So, it’s a total of $117,000 that she’s able to deduct. So, her taxable income is $3,000. So, she pays $300 on taxes on basically almost $120,000 of income. So, again, with high nonrecurring medical expenses, it’s worth looking at that to help reduce your reduce your tax liability, but also do Roth conversions. she still has access to that money in that Roth IRA if she needs to use it at some point. But if she never needs to use this money, that passes on to the beneficiary taxree versus just letting the money sit in the IRA and becoming taxable, the beneficiary having to pay taxes on it. Okay, let’s talk about the IRA owner and the benefits of doing Roth conversions.

Now, as a IRA owner, you’re subject to required minimum distributions, meaning that at 73 or 75, you’re going to be required to take money out of your IAS. Now, depending on how much your accounts grow to, depending on how much you have to take out, the first year is around 3.77%.

If you don’t take that money out, the IRS could come in and say, “We’re going to penalize you 25% of whatever that amount was.” So, if your RMD was $10,000, they could come in and say, “Hey, since you did not take that out, we’re going to penalize you $2,500 for that.” Now, whenever you take money out, required minimum distributions out, it becomes taxable to you. Also, when it comes to RMDs, they do increase each year. Every year, that percentage increases because of a couple things. your life expectancy. The RMD is based on your life expectancy and what the account value was worth the prior year on December 31st. Every year you get a little bit older. So the IRS comes in and says you need to take a little bit more money out because you have a shorter life expectancy. So someone age 90 has to take out 8.2% of whatever the IRA balance is. Now, if you hypothetically at age 65 get a 5% rate of return on your IRA and you have a million dollars in your IRA, at age 73 when you’re required to take money out, that’s close to $56,000. A little bit over $56,000. At 83, it’s $85,000. At 93, it’s over $113,000 that you’re going to have to take out of that IRA. And that money is added to your taxable income. added to your modified adjusted gross income. So, it could put you into a higher tax bracket. Now, think about it this way. If if your 5% actually increases with inflation also and you’re getting more like 7 12% over that time frame, your R&Ds are even higher than what we’re estimating, which is possibly causing you to pay more taxes. So, Roth conversions might help you reduce what you’re going to be required to take out of those IAS.

So, again, could be a viable strategy when it comes to using Roth IAS to help you reduce your RMDs to help you reduce your taxable income down the road. Here’s an example of Bob and Mary. met with Bob and Mary and based on the social security and their pensions they’re receiving that they’re not even spending all of that money and they’re we’re just living on social security and the pensions we receive. But at 73 which is this dark orange that shows them what they’re required to take out. And it’s amazing how many people actually don’t know what their RMD is going to look like. And when you plug this in and run this analysis and look at this, it’s coming in and saying, “Yeah, you basically pay no taxes at all because social security is very tax efficient. Um, social security is tax efficient, but when you when you turn on RMDs, your tax liability increases.” So he said, “Okay, let’s consider something. Let’s do a Roth conversion for the next 8 years. Let’s just look at $60,000 and see if there’s any benefit in doing so. Yes, their taxes increase in those eight years that we’re doing these Roth conversions, but all which is the red, but all the gray represents the reduction in taxes they see. So, when you look at this and say, “Hey, what was the benefit of me doing those Roth conversions?” Well, over your lifetime, you save over 140 about $141,000. That’s $141,000 that you are not giving to the IRS. You are keeping within your portfolio and increasing your net worth.

All right, let’s move on to surviving spouse. When it comes to surviving spouse, you know, again, I’m focusing on a married couple. If you’re a married couple and you let’s use an example, married couple, you’re you have pension and IRA distributions of $58,000. Both of you receiving social security of $32,000 each. Your after tax income after taxable after paying tax is about $115,000. So you’re in a 12% marginal tax bracket and you pay a little bit over $7,000 in taxes. the as a married couple the reality of it is at what at some point in time one of you is going to pass away and when that occurs you that person now will have to file a single tax. So now look at that situation. When one spouse passes away, if we want to keep the same amount of income, $115,000 coming in, that means that we need to take more out of IAS to satisfy your your your income goal. You lose a social security benefit and your in your taxes increase by 152 thou 152%. So now you’re in a 24% marginal tax bracket. And this is this is the reality. You know, again, I don’t know what the probability of a married couple passing away at the exact same time, but what I’ve seen even with like my mom or my wife’s mother is the husband passed away first and now suddenly they’re filing taxes as a single verse married filing jointly. This is a reality. Even if we saw taxes stay the same, your taxes will increase if you’re a married couple and one spouse passes away.

This is an interesting chart just to show you is it’s a compression of taxes, a compression of the tax brackets. So, as a married couple married filing jointly, if your income is around $200,000, you’re in a 22% tax bracket. But if you’re in the $200,000 with filing single, you’re actually in a 32% tax bracket. So you can see the compression of the tax brackets going from married to filing single. This is a great example. If if someone’s, like I said, in the $250,000 range as a married filing jointly, you’re in a 24% marginal tax bracket. But if you keep that same, you know, 200, we we’ll use the 300,000. 300,000 300,000 you’re in a 35%. So 300 as a married filing jointly, you’re in 24%. 300 as a single person, you’re in a 35% tax bracket.

Let’s move on to beneficiaries. So there we used to have the ability to stretch IAS, meaning if you’re a non-spouse, you inherited IRA, you had the ability to stretch that IRA out over your life expectancy. So in this case, Carrie um inherits a million dollar IRA. She has $90,000 of uh earned income. And in the old rules, she would just add $25,000 to her taxable income cuz she’s going to stretch that over her life expectancy. Well, now with the new rules, she has to take that money out over a 10-year period. So, if you spread that out over a 10-year period, she has to take $123,000 out each year to make sure by the 10th year that inherited IRA is completely liquidated. So, you can see like at 90,000 if you add 23,000 to it, like yeah, she’s in a 24%. But now with the 10-year rule, adding $123,000 puts her puts some of her income at a 32% rate.

So, let’s think about an example. Mom and dad, they have a son. uh they have a IRA that’s 250 $255,000 in it and they’re going to convert $50,000 over the next 5 years and they’re using a 7% rate of return. Mom and dad are in a 12% bracket, the son’s in a 24% bracket. So ultimately, you just look into this face level, you know, it probably makes sense for the parents to pay the taxes on it because when the son inherits it, there he’s going to have to pay a lot more taxes than they would. So when you look at this and say the green line is the owner. So if the owner passes away and the son inherits it after paying taxes, they’re going to get much less. But if you come in and say hey let’s convert it which is the owner which is a yellow line and then the blue line is the beneficiary if the dad passes away what they would receive. So you can see like over time in year 15 that with doing the Roth conversions upfront that in year 15 when they pass away the son gets the exact same amount and it’s all going to them tax-free. Now, so there’s $56,000 benefits in year 10 and over 110,000 benefits in year 20. Now, the mom and dad still has the ability to use that Roth IRA if they needed to. So, it’s not that they’re not reducing liquidity for themselves, but they’re coming in and saying, “Hey, this is this makes a lot of sense to pass this money on to the son tax-free so he doesn’t pay have to pay the higher taxes.”

Okay. Some considerations when it comes to Roth IAS. There’s no income limits. The amount you convert is added to your it’s taxable at ordinary income tax rates. the deadline to do it is September 31st to be added in that year’s taxable income. So if your intention was, hey, in 26 I want to do a conversion, but you don’t get around to doing it until March of next year. Well, March of next year, it’s going to be taxable in 27. It’s not like the contribution limits, contribution rules. contribution rule says that hey you have up to April of next year to make a contribution to the IRA and count it for 26. That’s not the case when it comes to conversions. If you want that money to be added to your to the yearly taxable income, you need to do it within that year. There is no pre-age 59 and a half additional tax for doing conversions if you’re below 59 and a half. Uh and just be aware of unintended consequences when it comes to Roth conversions. you know, maybe you pay more taxes on social security over or your Medicare premiums increase. And of course, there’s no guarantees that the Roth conversions will meet your objective. Now, let’s use an example of Richard and Deborah. And this is some of the planning that Kim and I do. So, Richard and Deborah came in. Uh they’re going to retire in the next year. Richard said has some health problems. So, you know, we’re using a life expectancy of 85 for him. Deborah’s going to have a long life expectancy. We’re using 95 for her. They have assets, you know, 401ks. The house is completely paid off and they have money in savings. They they have income in last year of income is around 300,000. So, they can’t contribute to a Roth IRA. This is their social security amounts. We plugged that in. Richard used to work for United, so he’s going to be collecting PBGC um amount. They want to live on $5,000 a month in retirement. We need to take into account the cost of health insurance and they’re going to do some travel and we’re looking at federal and state taxes for their situation. They are maxing out their 401ks and could receiving a match. So once we put these pieces together for them, we have a clear idea of what their cash flow looks like, you know, yeah, the first year they’re working, so it covers all their expenses. The next year, social security, the pension, and they have to take a little bit of money out. So social security is the dark blue, the teal is the pension, and the yellow is like they’re taking a little bit of money out to cover their total expenses. The dark red is required minimum distribution. So you see anything above that red line is excess income that they’re just excess income that they’re reinvesting. And even when Richard passes away, we lose the social security, but based on the RMD that’s coming in, we’re still able to replace Deborah’s income throughout retirement up to age 95. Their assets continue growing and that’s what they want. They want to grow their assets and pass it on to beneficiaries. So we said okay let’s let’s let’s consider Roth conversions for the next 3 years and stay within a 12% bracket. By doing so we get a general idea of like how much we can convert and get a sense of what is the benefit if we wanted to stay within a 12% bracket. So by staying within a 12% bracket we’re actually saving over $100,000 in taxes. That again, that means that’s $100,000 that you’re not giving the IRS for them to spend any way they want. It’s money you actually get to keep and increase your net worth, which was one of their goals. Yes, the red is additional taxes that they have to pay, but that 100,000 is taking that into consideration, but all the gray is the reduction taxes that they’re not going to have to pay because by doing Roth conversions, we’re reducing what they’re going to be required to take out.

So, you know, in conclusion, and again, kind of going back to this, this is some of the planning that Kim and I do when we work with our members of the credit union to give them a full comprehensive plan to say, “Hey, yeah, you don’t have any concern about running out of money.” Great. But let me show you the amount of taxes that you’re going to have to pay if you don’t watch out for certain things when it comes to in the future. Our accountants will always look backwards and say, “Hey, I’m going to do your taxes and we’re going to look backwards.” We want to look forward and say, “Hey, how do we reduce your tax liability?” So, we don’t know what the taxes environment is going to look like in the future. Chances are taxes are going to go up. So, Roth conversions can be a ve very effective tax tool diversifying tax allocations. They’re not subject to RMDs. A very taxefficient way to leave money to hairs. Um, so it is a Roth conversion is a very important consideration when it comes to retirement strategies. So ultimately we’re here to help. We are part of the retirement investment services division. We do comprehensive planning and we’re able to answer a lot of the financial questions you have in regards to like, hey, should I do Roth conversions? What’s the best way to create income? Should I spend IRA money instead of delaying should I spend IRA money and delay social security? to a later point. What is the best way to pass money on to beneficiaries? So, there’s a lot that we can help you with when it comes to your financial situation.

The other thing I want to mention, this is something new for clients that are part of the retirement investment services division. Um, we do have the ability to help you get your estate planning done at no cost. And that basically is a will, trust, power of attorney, living will, HIPPA, authorization. We have tools where it’s an online tool. You go in, plug in all the information you want in regards to who’s going to be your POA, what do you want to happen if something happens to you. This is something that we are offering to our uh clients that are part of the part of the retirement investment services division of the credit union. Okay, with that I’m going to open it up for questions. I am going to post a poll out there. So, the poll is just saying, hey, if you’d like to schedule a meeting for with one of us, um, please indicate that. We’ll reach out to you, put something on the calendar to help you kind of help you with going down the financial planning process. Uh, with that, um, we do have some questions. Questions. Let me just get through all the echo comments. Is it better to do a backdoor IRA the year you retire or later if you’re a high income earner?

So when doing the backdoor IRA, you still need to have earned income. So, if you’re a high earnner, um I guess it’s just a the backdoor IRA is just a way to put money into the Roth. So, it doesn’t really matter when you do it as long as you have earned income that allows you to do it. I don’t Yeah. Would you add anything to that, Kim? No. Well, I mean, if your goal is to get money in the Roth after you retire, you could do a conversion and maybe get to do more than just the backdoor Roth that would be limited to the contribution amount. Um, does the amount we take out of the traditional IRA become part of your AGI for eligibility?

Repeat that question. Does the amount that we take out of a traditional IRA become part of our AGI? And then it says for eligibility.

So yeah, so whenever you take money out of your IRA and if it’s all pre-tax, it’s going to be part of your adjusted gross income. I think she says meaning the max amount contributing for a Roth. So yeah, when you’re pulling out of your traditional and going to the Roth, that’s a conversion, not a contribution. Mhm. I’m not sure. Um, also, should you do a lump sum or an amount I think I will need five years down the road?

A lump sum for what? I’m sure a Roth conversion, if they’re talking about five years down the road, I would assume. Yeah. I mean, when it comes to Roth conversions, it’s just a matter of how much are you willing to pay taxes on? I mean, that’s I think that’s really when it comes down to it. I mean, I could show you the the best best Roth conversion strategy ever. But the biggest hang-up that we see is people writing the check to the IRS. When I come and tell you, you need to write a check for $45,000 to the IRS, people say, “Oh, I don’t want to do that.” In my career, I’ve had one client that had a child, one child, and they didn’t really need the money and they just wanted to convert the IRA for their kid and she moved a half a million bucks and paid tax on it. But that is the exception for sure. Yeah. Um, and kind of on that, she asked, “If I make a h 100,000 and I take out a hundred, is that too much to open a Roth?” Again, there’s not it’s all about how much you’re willing to pay tax on. So, if you can do it, do it right. If it makes sense. What is the process and cost of joining Alliant Retirement and Investment Services? What is the process and cost? Yeah. So, let’s talk about the process. Um, Kim and I always start with the plan first. And our first initial meeting is gathering information. We would send you an email giving you a list of questions to kind of think about and a list of things to gather so that our first meeting is very productive. We’re asking a lot of questions when it comes to your situation, getting all the information that we need to build a comprehensive plan. Then we would review that plan with you and show you what’s good, what’s bad, how do we improve, what are things that we need to watch out for. And then at that point, we’re going to decide, hey, do you want to hear recommendations or not? Up to that point, there is no cost in doing any of that. But if you decide, hey, yes, I do want to hear recommendations, see what you have for me, we would talk about recommendations and the cost associated with it, implementing that based on the planning that we’ve done for you. And so, everybody’s situation is completely different and everybody’s situation is a little bit different in regards to what they want to accomplish. But it it’s it’s a person byperson situation when it comes to, you know, what is the cost and what’s the recommendations. It it just varies. And the word recommendation means we’re putting together an investment proposal to show you how if you had your money with us, how we would invest it and how we would invest it differently than what you’re currently doing for a couple reasons, right? Do you need better diversification? Do you need less risk? Do you need more income? you know, all those things come into play and then we would uh make the case for why we selected the investment we selected and talk about, you know, fees associated if there are fees. And then at that point, you say, “Yeah, Kim, or Malcolm, we want to work with you.” Or, “Thanks, but no thanks.” Or, “We like this piece, but not that piece.” Or, “We’re willing to do this portion, but not the whole the whole farm.” So, that’s kind of how the process works. Um, next question. Your example for Richard and Deborah showed they made 300,000 in income and you said they were not eligible for Roths, but your recommendation was to do Roth conversions over the next few years. Thought you said they were not eligible since they made 300. Please clarify. Yeah. So the 300 since they were over 300, they weren’t able to contribute to Roth IAS. But based on doing Roth conversions, anybody can do Roth conversions and there’s no income limit to do Roth conversions. So when I mentioned that it was had to do with making contribution to Roth IAS, two sets of rules. Yeah. Roth contribution rules are different than Roth conversion rules. Okay, let me get to this page. Uh did you say an inherited IRA is taxable? So when you inherit a traditional IRA, majority of the time that money is all pre-tax. So when you start taking the money out, you do have to pay taxes on it. If you inherit an if you inherit a Roth IRA, then there is no tax liability because it’s a Roth IRA. Uh, somebody’s asking if this webinar is recorded and no, we don’t record, but we do have about six or seven topics that we run through. So, we will do Roth conversions again. Just watch your emails and you can sign up again. Uh, I have a question about the five-year rule on conversions. If I’m over 59 and a half years and have held original Roth accounts more than five years and I’ve made several conversions since the five years, does each conversion have its own five-year waiting period? Yeah, you’re over 59 and a half. So that fiveyear waiting period is it throw it out the window. It it doesn’t apply anymore. Um as long as you’ve had that Roth IRA for five over five years, then you know all earnings and interest come out taxree. Now now think about this. Think about this. If you put money in, let’s say you started the Roth IRA in 2021, so 2026 is now here. you’re you’re 5 years in. So earn all earnings and interest come out taxree. The money that you put in like last year, there’s probably not much earnings on it. It’s just one year of earnings. So, you know, again, the 5-year rule doesn’t come to play because you it all it’s all based on when you started that Roth. It’s not a rolling it’s not a rolling period. Fiveyear period. Yeah. If you’re 59 and a half, that rolling thing goes away. One Roth IRA open at least five years. Any conversions you do after that, whether you drop it in that Roth or not, same thing. No fiveyear. Okay, next question. Um, I’m 46. I’m converting a million dollars from a traditional 401k to an IRA to have wider investment options. Not really a conversion, that’s a rollover. From here, my plan was to start a Roth 401k from now until retirement. Um, upon retirement, is it best to withdraw from the IRA before the Roth? What’s the best strategy for withdrawals? Yeah, we need to run your plan to tell you that we, you know, a lot of that’s going to depend on your expenses and your tax liability. Uh, general wisdom is people spend the Roths last, right? That’s nice to have a bucket of money that’s taxfree. somewhere down the road you want to buy a car and you don’t want to increase your taxes, you pull it out of there. Uh but we our software can we can run it and and actually optimize which type of money you should spend first. Um next question. What if you have a stock account? What if you have stock accounts called Roth IRA? I’m not sure what the question is. Yes, you can have a Roth IRA and have whatever you want in it. It could be stocks. It could be bonds. It could be mutual funds. whatever stock accounts called Roth IRA. Not sure what that question is. Um, can you withdraw from your Roth the basis, not the income within the first 5 years over 59 and a half? Yeah. The cool thing about Roth IRA is it’s first in first out. So, if you think about it, if you’ve contributed to a Roth IRA, let’s say, you know, you’re 25 years old and you contribute to a Roth IRA uh for a couple years and you need that money for to help purchase a house. Well, you could take your contributions out. It’s because you’ve put it’s after tax money you’ve put into it. It’s the earnings and interest that would be subject to tax liability if you’ve had not if you hadn’t if you don’t have that account for 5 years or 59 and a half. So yeah, first in first out what your contributions that you put in can be taken out any time and not have any tax liability. Same is true for the converted dollars.

Go ahead. Never mind. I’ll just go to the next question. Are the rules the same for 401k conversions to Roth 401ks?

Are the rules the same for Yeah. Yeah. There’s the the rules are the same. Check with your plan. I mean, sometimes the plans have different rules and don’t allow it, but in terms of taxation and such, it’s all the same. Uh, I’ve been retired for a year now. Most of my money is in tax deferred 401ks. Do you handle this situation? We sure do. Yep. Sure do. Uh what are the fees for recommendations dur discussing Roth conversions and what would be appropriate in our situation? Yeah, we don’t char So right now and the way the credit union you know again we’re part of a line credit union. We’re employed by a line credit union. We’re a nonprofit. We do not charge financial planning fees to help people with their financial situation. Could we? I mean, I guess we could, but I mean, a current CEO wants to provide additional value to members of the credit union. So, we we don’t charge Yeah. We don’t financial. We don’t. But clearly our hope is is as we go through this planning process and model these Roth conversions and investment strategies and different things is that you know you think you you think you can get a sense that we have an idea of what we’re talking about and maybe we could be the ones to help you do the investments for your monies as well. Uh,

it is easy to wonder at 3:00 a.m. while I’m lying awake, oh man, I wonder if I if I had just not done a Roth conversion, would I have more money? Now, can you speak to the situations in which this worry would be valid?

I mean, at the end of the day, we tell people all the time, I mean, not all the time, but we do tell people it doesn’t make sense to do Roth conversions. So, it there has to be a a benefit for us to come in and and tell someone to do Roth conversions or not. I mean, at the end of the day, you still need to do the Roth conversion. You’re still the one paying the taxes on it, but there’s no benefit for us to come in and be like, “Hey, there’s no benefit, but I’m going to recommend you do it.” Like, there’s no we’re going to come in. We we hold ourselves to a fiduciary responsibility to do what’s best for the client. That’s our our main objective. And if Roth conversions make sense, we’re going to talk about it. It’s going to be up to you if you want to do it or not. I think I think where that question, you know, how I might answer that is, you know, if you did, let’s say you did a Roth conversion now, you know, and you paid taxes, let’s just say 100 grand, and then the market tanked, right? Clearly, it would have been what better to do the Roth conversion when the market tanked and you were paying tax on 70 grand instead of 100. But, you know, that’s just a risk that you have to take because there’s no way to undo that. There used to be, but there they took that rule away. Uh, there’s a couple more. Let me go back over here. Are you 100% fee only fiduciary planners? Do you act in the client’s best interest? I think Malcolm asked that, answered that already. Do you make any commissions off any of the recommendations you might offer? So, we’re not 100% fee only. We do have investments that uh do pay a commission to us. They generally don’t come out of your investment money. Uh but it really just depends on what’s appropriate for your situation. You may be in a situation where everything you have should be in just 100% fee only and some people may not. kind of depends on risk and liquidity and what you’re trying to do. More and more we get people that are close to retirement and they they’re less worried about making a 20% return and more worried about keeping what they’ve accumulated. Uh is there a max amount for conversions?

Just the amount you’re willing to pay. Yeah, write that check to Uncle Sam. Uh, do your what if calculations include Medicare increases and if going into the next tax bracket makes sense dollar-wise? We we have um run so our software doesn’t necessarily like automatically um increase the Medicare premium once you go into a higher tax bracket. But we when we look at the planning and we look at this, we do take that into consideration based on the taxable income that we see down the road. So that is something that we do look at when we do these plans for members. Yeah, we we just add an extra expense for Irma. Uh but to about the next tax bracket and if it makes sense, absolutely you can compare one scenario to another scenario and compare tax brackets. you can see how much more or less you’d pay cumulatively in taxes and what the impact is on your overall portfolio over time. Um, one more question. When you have medical expenses of 120K, you mentioned for memory care, does that 120 lower your AGI by almost 120 or does it lower it by much less? For this example, let’s say your AGI as a married couple is 275. So that 7 12% medical expense you the first thing you do is you take your 275,000 of your adjusted gross income and multiply that by 7.5%. That’s going to give you 20,625. So everything above that you’re able to itemize. So, if your memory care is $120,000 minus the 20,625,

that means you’re able to do a itemized deduction of $99,375.

So again, it’s 7 12%. Anything above 7.5% of your adjusted gross income is what you’re able to itemize. So in this case, if your your adjusted gross income was 275, you’re able to deduct 99. So it’s going to drop your taxable income now down to 175,000. So it’s not a dollar fordoll reduction. Still good though if you’re paying, right? Okay. Uh I am currently 63 years old and retired with a pension of 74K a year. I work part-time, pushing my total income to about 160. I want to start converting money in my IRA to my Roth. Should I stop working part-time so I can do bigger Roth conversions? And I want to limit my income to avoid Irma li and limit my income to avoid Irma limits. The first question I would ask is, do you like your your part-time job? I mean, I’m not going to tell anybody to quit their part-time job to do with bigger Roth conversions. I mean, if you there might be a reason why you’re working part-time. Maybe you like it. Maybe you like being active. I mean, that you’re the only one that’s going to be able to answer that. Um, so, but I mean, we can run multiple situations and say if you worked if you continue working part-time, this is what it looks like. If you stop working part-time, this is what it looks like. So, I mean, we can run through different scenarios for you. And I’d add one thing about the Irma, right? I mean, we hear all the time people just want to avoid Irma to the nth degree. I mean, if you didn’t do any Roth conversions, you’re not going to hit Irma till you’re RMDH, right? And maybe you got a big RMD and your Irma jumps up multiple multiple steps. But sometimes, you know, paying Irma for a year to convert a big chunk of money might be worth it, right? Because whatever Medicare uses, it’s one year. I mean, it’s a two-year lag, but you’re only using that for one year. So, sometimes people don’t want to do Roth conversions because they want to avoid Irma. Well, they’re not going to avoid it anyway by the time they get to RMDs. So, it may be better to hit take the Irma hit one year for a big conversion to lower your RMDs for the long haul, if that makes sense. But, okay, I think we have everybody’s questions. Awesome. Great questions everybody. Thanks for sticking around and asking those and we look forward to talking to you soon. Malcolm, anything else you want to add? No, that’s it. Okay. Appreciate it. Thanks everybody. Enjoy the rest of your day.